New Jersey Paid Sick Leave Act: What Employers Need to Know to Comply

On October 29, 2018, the New Jersey Paid Sick Leave Act will become effective, requiring any employer with an employee working in New Jersey to provide eligible employees with one hour of paid leave for every 30 hours worked, with up to 40 accrued but unused leave hours being eligible for carryover each benefit year.

Importantly, the Act preempts all local ordinances mandating employers to provide paid sick leave and prohibits localities from adopting future ordinances. Therefore, employers with New Jersey employees will no longer be required to comply with any local ordinances.

Coverage

The Act applies to any person, firm, business, educational institution, non-profit agency, corporation, limited liability company, or other entity that employs employees in the State of New Jersey, including temporary help service firms.

All individuals working in New Jersey who are engaged in service to an employer for compensation are eligible, with the exception of (i) construction industry employees working under a collective bargaining agreement; (ii) per diem health care employees who meet certain requirements; and (iii) public employees already provided with fully paid sick leave under any other New Jersey law, rule, or regulation.

Accrual and Permitted Employer Policies

Eligible employees working in New Jersey must accrue one hour of paid leave for every 30 hours worked, up to a maximum of 40 hours. Unless the employee has accrued earned sick leave under the employer's already-existing policies or pursuant to now-preempted local law prior to the Act's October 29 effective date, paid leave will begin accruing on the later of either the effective date or the employee's first day of employment, and employees can begin taking the paid leave earned under the Act on the 120th calendar day after they begin accruing the leave.

Leave accrual and use is tied to a “benefit year,” which is defined as any consecutive 12 month period established by the employer during which an employee may accrue and use paid leave. Therefore, under the Act, a benefit year can be the calendar year, but it could be a fiscal year.

If an employee does not use the hours earned by the end of the benefit year, the employers must allow the employee to carry over to the following benefit year up to a maximum of 40 unused hours. In lieu of carrying over unused days, however, employers may permit eligible employees the option of being paid for some or all of their accrued but unused leave during the final month of a benefit year. If an employee desires to be paid for the accrued unused leave offered by the employer, employees must opt into the buyout within 10 days of the offer and decide whether they wish to receive either (i) full payment or (ii) 50 percent payment with the remainder carried over to the next benefit year. However, an employee is free to decline payment and have the unused accrual carried over to the next benefit year, subject to the 40-hour cap. Any payment amount must be based on the same wage rate that the employee receives at the time of the payment.

Additionally, in lieu of using the 30hour accrual method, an employer may front-load the leave employees with the full 40 hours at the beginning of the benefit year. In that event, the employer may offer to pay the employee for their accrued but unused leave during the final month of a benefit year, or carry over up to 40 unused hours. However, the employer can use the payout option only if, in the next benefit year, the employer credits the employee with the full 40 hours at the beginning of the year.

It is important to note that an employer must notify the New Jersey Department of Labor and Workforce Development of any changes to its benefit year that the employer intends to make. The Commissioner can impose restrictions or its own benefit year if the employer's changes would unlawfully prevent any employee's use or accrual of paid leave.

Proper Leave Uses

The paid leave may be used for the following purposes:

Diagnosis, care, treatment, or recovery from a mental or physical illness, injury, or other adverse health condition or preventive medical care for an employee or employee's family member, which is defined broadly to include, but not limited to, an employee's child, grandchild, sibling, spouse, domestic or civil union partner, parent, or any other individual related by blood to the employee, or whose close association with the employee is the equivalent of a family relationship.
For specified purposes if the employee or employee's family member is a victim of domestic or sexual violence, including, but not limited to, obtaining related medical treatment, seeking consultation, relocation, or participation in related legal services.
Closure of employee's place of business, a child's school or place of care, or need to care for a family member due to a public health emergency.
Attendance at a school-related conference, meeting, function, or other event requested or required by a school administrator, teacher, or other professional staff member responsible for the employee's child's education, or a meeting regarding care provided to the child regarding the child's health conditions or disability.

Separation and Reinstatement

Under the Act, employers need not payout any unused paid leave upon termination of employment. However, if rehired within six months, previously accrued unused leave must be reinstated and can be used immediately. Similarly, if an employee is transferred to a different division, entity, or location within the employer's corporate structure, the employee will retain and be entitled to use all accrued leave time.

Notice Requirements

The Act mandates that all employers provide written notice to all new employees immediately upon the commencement of employment and to all existing employees by November 29, 2018. These written notices must be conspicuously posted by the employer in English, Spanish, and any other language for which a notice is available and is the first language of a majority of the employer's workforce (please refer to the following New Jersey Department of Labor website page for the notice provided in various languages: NJ Employer Notice Posters). Currently, an employer may satisfy these notice requirements by email or internet posting.

Employers may reserve the right to require advance notice up to seven days for foreseeable leave, including the employee's intent to use leave and the expected duration of the leave. Additionally, employers may require employees to take reasonable efforts to schedule the use of paid leave in a manner that does not unduly disrupt the employer's operations. Employers are also permitted to prohibit the use of foreseeable paid leave on certain dates, and may require reasonable documentation if unforeseeable leave is taken on those dates. Where the need for paid leave use is unforeseeable, employers may require notice from the employee as soon as practicable; however, the employer must provide the employee with advanced notice (e.g., through its employment handbook) of this unforeseeable paid leave requirement.

Recordkeeping Requirements

Employers must maintain paid leave records for up to five years. Any failure to maintain or retain adequate records creates rebuttable presumption that employer violated the Act, absent other clear and convincing evidence. However, under the currently proposed rules, an employer is not required to keep records for employees who are exempt under the Fair Labor Standards Act (FLSA) or New Jersey law and for whom the employer front-loads leave or assumes works 40 hours per week.

Anti-Retaliation

For employee absences of more than three consecutive days, employers may reserve the right to require reasonable documentation verifying that paid leave was used for a permissible purpose. An employer is permitted to take disciplinary action against any employee who uses paid leave for purposes other than those permitted by the Act and/or by the employer's policies. However, retaliation against the employee for lawful use of paid leave is prohibited and there is a rebuttable presumption of retaliation if adverse employment actions are taken within 90 days of protected conduct.

Potential Liability

Failure to comply with the requirements set forth within the Act give rise to an employee's private right of action by either filing a complaint with the New Jersey Department of Labor or a civil lawsuit. In addition to other remedies, successful employees can recover actual damages for the violation; liquidated damages in an amount equal to actual damages; litigation costs; and reasonable attorneys' fees. The employer may also be subject to civil penalties for retaliation.

Employers' Next Steps

By October 29, 2018, employers with employees working in New Jersey must ensure that its paid-time off (PTO), vacation and sick leave policies and practices for eligible employees are compliant with the Act. An employer's existing PTO policy may remain in place if it allows employees to accrue and use leave on terms at least equivalent to paid leave provided in the Act.

By November 29, 2018, employers must provide all of their existing New Jersey employees with written notice of the statewide mandatory paid leave law.