As a result of legislation just passed, Chicago will soon have an even more generous paid time off workplace policy than the one set to take hold in Illinois. One champion of the bill referred to it as “the most progressive paid leave policy in the United States of America.” As of December 31, 2023, city-based workers will be entitled to 5 days of paid time off (PTO) and 5 paid sick days.
How Did We Get Here?
After several rounds of negotiations, the “Chicago Paid Leave and Paid Sick and Safe Leave Ordinance" was passed in a rare evening session by the full City Council on Thursday, November 9th. An earlier proposal included a cap of 15 paid days off per year, which was amended to 12, before it was eventually negotiated down to 10 days per year, which is still twice the current Chicago requirement of 5 paid sick leave days.
The Chicago Federation of Labor, various other union groups, and ARISE Chicago, a faith-based workers’ rights advocacy organization, supported the push to obtain more paid time off in the city. Advocates claimed that the new legislation would enhance productivity and retention, as well as racial and gender equity, since women of color often serve as the primary breadwinner for their families.
Although many small business advocates were eventually won over, certain BIPOC-run restaurant owners voiced concerns late into negotiations, as did other independent restaurants and even hospitals. Larger business groups have continued to remain opposed to the new requirements, including the Chicagoland Chamber of Commerce and the Illinois Restaurant Association. Business advocates have called the new measure “anti-business,” claiming it only adds to the many issues already facing businesses, such as “supply chain and labor challenges, persistent crime, and skyrocketing property taxes.”
What Does the New Law Change?
The City of Chicago already requires up to 5 days of paid sick leave for workers. The new ordinance now adds 5 days of PTO to the sick leave requirement, bringing the total number to 10 days of paid leave. The new ordinance does not interfere with Illinois’ paid leave changes that will go into effect at the same time.
Earlier in 2023, Illinois enacted the Paid Leave for All Workers Act (PLFAW), which will take effect on January 1, 2024. The PLFAW mandates a minimum of 40 hours of paid leave for employees per 12-month period, generally the equivalent to 5 work days of PTO. The PLFAW does not apply to businesses already subject to municipal or county laws that require paid leave, so its passage did not affect Chicago, except for inspiring certain lawmakers who wanted to surpass the state requirements.
The new Chicago ordinance covers employers who work for at least 2 hours within the geographic boundaries of the City of Chicago within any 2-week period. Outlined below are particular requirements for administering PTO and sick leave.
What Are the PTO Requirements?
- Number of days: Most businesses must allow for 5 days of PTO per year. For businesses with 10 or fewer employees, however, they must offer 2 PTO days per year in 2024, and then offer 5 PTO days per year starting in 2025.
- Accrual period: Workers accrue 1 hour of paid leave for every 35 hours worked, which is capped at 40 hours total in a 12-month period, the equivalent of 5 work days, unless an employer wants to offer a more generous policy. Workers begin to accrue PTO days upon hire. Employers also have the option of providing the full number of leave days from the start of employment.
- First use: Employees can start using their PTO days on the 90th day of employment (unless the employer allows for an earlier date).
- Notice: Employers may require employees to request PTO as much as 7 days in advance and to obtain pre-approval. They can require notice as soon as practicable if the need for leave is not foreseeable. Businesses may not, however, require that an employee provide a reason for requesting PTO leave.
- Roll-overs: At least 16 hours, or 2 days, of PTO must be allowed to be rolled over from one year to the next. Businesses do not need to allow for roll-overs, however, if they offer the full 5 days of PTO to employees from the beginning of the year, without instituting an accrual period.
What Are the Paid Sick Leave Requirements?
- Number of days: Businesses must allow for 5 paid days of sick leave per year.
- Accrual period: Workers accrue 1 hour of paid sick leave for every 35 hours worked, which is capped at 40 hours total in a 12-month period, the equivalent of 5 work days, unless an employer wants to offer a more generous policy. Workers begin to accrue paid sick days upon hire. Employers also have the option of providing the full number of leave days from the start of employment.
- First use: Employees can start using their paid sick days on the 30th day of employment (unless the employer allows for an earlier date).
- Notice: Employers may require employees to request sick leave as much as 7 days in advance, and to require notice as soon as practicable if the need for leave is not foreseeable. Employers may require a doctor’s note if an employee uses more than 3 consecutive days of sick leave.
- Roll-overs: 80 hours, or 10 days, of sick leave can be rolled over annually.
Unused Leave Payouts
Under the new law, employers do not have to pay out unused sick leave when an employee separates from an employer. Businesses are generally required, however, to pay out unused PTO days.
Employers with more than 100 employees will be subject to this requirement as soon as the law takes effect. They will be required to pay up to 7 days (or 56 hours) of unused PTO. For employers with 51 to 100 employees, they are required to pay up to 2 days of unused PTO in 2024. Starting in 2025, they will have to pay out all unused PTO days up to 7 days.
Employers with 50 or fewer employees are exempt from this requirement—they are not required to pay out any unused PTO.
Penalties for Violations
The Department of Business Affairs and Consumer Protection is responsible for enforcing the new ordinance. Employers who violate the law’s requirements may face fines between $1,000 and $3,000 per day for each separate offense. They may additionally be liable for damages of 3 times the amount of the leave denied or lost because of the violation, plus interest, in addition to costs and reasonable attorney’s fees.
The new ordinance provides workers a private right of action against their employers for denying them sick leave as soon as the law takes effect. Workers must wait until January 1, 2025, to be able to sue employers for violations of PTO requirements.
As both supporters and opponents noted, it is best for workers and their employers to internally resolve wage and paid leave disputes.
What Should Chicago Employers Do?
This new ordinance is bringing several new changes and businesses have a short window for preparing themselves to implement them. Here are a few suggestions to get ahead of the game.
- Prepare HR and payroll. Ensure that your HR department is ready to handle leave requests and to track leave time. Your payroll department must also be ready to calculate and pay out unused leave, according to the requirements.
- Develop a system for approving leave requests. Leave requests are likely to rise in the coming year, so a smooth process for handling them will be key. Develop a plan now so you are ready once those requests start coming in.
- Update your handbook. Your employment handbooks, and any other statements of your policies, should be updated to reflect these new changes. If questions arise during your onboarding process, the appropriate managers or HR representatives should feel confident providing explanations of the leave requirements.
- Speak to your advisors. Don’t be shy about reaching out to your employment counsel, external HR advisors, or accountants on how to best prepare for and manage these changes.
Whether employer or employee, we can all hope the new requirements will make employees’ lives easier, thereby increasing job satisfaction and retention. As always, if you run into obstacles, contact your trusted employment attorneys.