Employment Law Update

Maryland has joined the wave of states and municipalities that have enacted mandatory paid sick/safe leave.  The General Assembly had considered proposed sick/safe leave legislation for more than five years before passing the Healthy Working Families Act (“HWFA”) during its 2017 session.  The HWFA is similar to sick and safe leave laws passed in the District of Columbia in 2008 and in Montgomery County in 2016 in requiring covered employers to provide paid leave that employees can use during an absence due to illness or an incidence of domestic violence affecting the employee or a family member.   

The HWFA was to take effect on January 1, 2018, but in May 2017 Governor Hogan vetoed the legislation. The General Assembly overrode the veto on January 12, 2018.  Under Maryland law, the HWFA will take effect on February 11, 2018, thirty days after the override vote.   The Maryland Chamber of Commerce and other business interests have indicated that they will ask the legislature to postpone the effective date to allow businesses more time to implement the law.  The fate of those proposals, however, is uncertain and all Maryland employers should begin immediately to consider the steps they will have to take to come into compliance. 

Below is a list of “Fast Facts” about the HWFA, followed by a detailed summary of the law’s major provisions, as well as an outline of suggested first steps employers should consider.

Fast Facts

• Employers of 15 or more employees must provide paid sick and safe leave as required by the law.

• Employers of 14 or fewer employees must “at least” provide employees with unpaid sick or safe leave at the levels required by the law.

• Most employees who regularly work more than 12 hours a week are eligible for leave.

• Covered employers must provide leave at a rate of at least 1 hour for every 30 hours an employee works, up to 40 hours of paid leave in a year.

• Employees must be allowed to accrue up to 64 hours of sick and safe leave at any one time, and use up to 64 hours of earned sick and safe leave in a year.

• Employees must be allowed to carry over up to 40 hours of their earned sick and safe leave to the following year, unless the employer awards the full amount of leave at the start of each year.

• Employers are not required to pay out unused sick and safe leave upon termination of employment.

• An employee may use earned sick and safe leave to cover an illness or injury, or an incidence of domestic violence, sexual assault, or stalking of the employee or a family member. Leave may also be used for maternity/paternity.

• “Family members” include the employee’s spouse, parents (and the parents of the employee's spouse), children, grandparents, grandchildren and siblings.

• Eligible employees begin to accrue leave upon hiring, but employers may prohibit use of leave during the first 106 days of employment.

• Existing PTO plans may be used so long as the policy meets the HWFA’s minimum accrual requirements and permits employees to use paid leave as required by the law. 

• Employers are prohibited from interfering with an employee’s exercise of his or her rights under the HWFA, or taking any adverse action against an employee because the employee exercises rights under the law.

• The law requires employers to provide employees with written notice of their rights under the law, and notice of their leave balance each pay period.

• The Commissioner of Labor and Industry may enforce the law and impose civil penalties and employees may bring a civil action to enforce the Commissioner’s order.

• Owners and managers who formulate or implement employer practices that affect an employee's rights under the law may face individual liability.

Which Employers are Covered?

All Maryland employers are covered by the law.  Employers of 15 or more employees must provide paid sick and safe leave as required by the law.  Employers of 14 or fewer employees must “at least” provide employees with unpaid sick or safe leave at the levels required by the law.  The number of employees is determined by calculating the average monthly number of employees employed by the employer during the preceding year.  All employees – full-time, part-time, temporary and seasonal – are included in determining coverage, regardless of whether an employee would be entitled to paid leave under the law.

Which Employees Are Eligible for Leave Benefits Under the Law? 

All employees are eligible for sick and safe leave under the law except for the following:

• Employees who regularly work less than 12 hours a week.
• Individuals who are recognized as independent contractors under the so-called “ABC” test set forth in the Maryland unemployment law. 
• Certain licensed real estate salespersons or licensed associate real estate brokers who are compensated solely on a commission basis and qualify as independent contractors.
• Individuals who are under 18 years of age before the beginning of the year.
• Certain individuals employed in the agricultural sector.
• Individuals employed by a temporary services agency to provide temporary staffing services to another person if the agency does not have day-to-day control over the work assignments and supervision of the individual while the individual is providing the temporary staffing services.
• Individuals directly employed by an employment agency to provide part-time or temporary services to another person.
• Employees in the construction industry who are covered by a collective bargaining agreement under which the requirements of the HWFA are expressly waived.  However, janitors, building cleaners, building security officers, concierges, doorpeople, handypersons, or building superintendents, however, cannot be excluded under the terms of a bargaining agreement.  
• Employees who are called to work by an employer on an as-needed (PRN) basis in a health or human services industry, if the employee:
  
  • can reject or accept the shift offered by the employer;
  • is not guaranteed to be called on to work by the employer, and;
  • is not employed by a temporary staffing agency.

Rules on Leave Accrual and Use

Covered employers must provide sick and safe leave at a rate of at least 1 hour for every 30 hours an employee works, up to 40 hours of paid leave in a year.  An employer may award the full amount of earned sick and safe leave that an employee would earn over the course of a year at the beginning of the year, rather than using an accrual system.

Employees must be allowed to accrue up to 64 hours of sick and safe leave at any one time, and use up to 64 hours of earned sick and safe leave in a year.

Employees must be allowed to carry over up to 40 hours of their earned sick and safe leave to the following year, unless the employer awards the full amount of leave at the start of each year, or the employee is employed by a nonprofit entity or government employer under a grant which is limited to one year and not subject to renewal.

Employers are not required to allow employees to accrue sick and safe leave during any:

• 2-week pay period in which the employee works fewer than 24 hours.
• 1-week pay period if the employee worked fewer than a combined total of 24 hours in the current and immediately preceding pay period.
• Pay period in which the employee is paid twice a month regardless of the number of weeks in a pay period and the employee worked fewer than 26 hours in the pay period.

Sick and safe leave begins to accrue on an employee’s first day of work; however, employers may prohibit the use of earned sick and safe leave during the first 106 calendar days that an employee works for the employer.

Employers must provide employees paid sick and safe leave at the same pay rate as the employee normally earns.  

Tipped employees must be paid at least the state minimum wage (currently $9.25/hr.; $10.10/hr. beginning July 1, 2018) for each hour the employee uses earned sick and safe leave.

In calculating the leave accrual rate for an employee who is exempt from the overtime provisions of the federal Fair Labor Standards Act, an employer must assume the employee works 40 hours each workweek, unless the employee’s normal workweek is less than 40 hours, in which case the number of hours in the normal workweek must be used.  

Employers are not required to pay out unused sick and safe leave upon termination of employment.  The rule may differ for employers that provide for sick and safe leave in combination with other forms of leave under a paid time off (PTO) or similar policy, instead of establishing a separate sick leave account.   Under Maryland’s Wage Payment and Collection Law, vacation leave must be paid out upon termination unless the employer has a written policy restricting the payment of such leave at termination, and the policy was given to the employee at the time of hiring.   As a result, where an employer uses a general PTO system for sick and safe leave purposes, instead of establishing a separate sick and safe leave account, the payment of the leave upon termination will be governed by the employer’s written policy and the wage payment law.  

Any unused sick and safe leave earned by an employee who is rehired within 37 weeks after leaving employment must be reinstated unless the leave was paid out upon termination of employment.

For What Purposes Can Paid Sick and Safe Leave be Used? 

An employee may use earned sick and safe leave:

• To care for or treat the employee's mental or physical illness, injury, or condition.
• To obtain preventive medical care for the employee or the employee's family member.
• To care for a family member with a mental or physical illness, injury, or condition.
• For maternity or paternity leave.
• If the absence from work is due to domestic violence, sexual assault, or stalking committed against the employee or the employee's family member and the leave is used by the employee or family member to obtain medical attention, services from a victim services organization, or legal services related to the domestic violence, sexual assault, or stalking, or during a time when the employee has temporarily relocated due to domestic violence, sexual assault, or stalking.

Employees may take earned sick and safe leave in the smallest increment that an employer's payroll system uses to account for absences or work time; however, an employee may not be required to take earned sick and safe leave in an increment of more than four hours.

Who is a “Family Member” for Purposes of Using Sick and Safe Leave?

The list of individuals included as “family members” for purposes of the HWFA is substantially broader than the definition of “family member” under the federal Family and Medical Leave Act and includes the following categories of individuals:

• A child, including biological, adopted, foster, or stepchild of the employee, or one for whom the employee has legal or physical custody or guardianship, or for whom the employee stands in loco parentis, regardless of the child’s age.
• A parent, including biological, adoptive, foster, or stepparent of the employee or the employee's spouse, the legal guardian of the employee, or an individual who acted as a parent or stood in loco parentis to the employee or the employee’s spouse when the employee or the employee’s spouse was a minor.
• The spouse of the employee.
• A grandparent, including biological, adopted, foster, or a step grandparent of the employee.
• A grandchild, including a biological, adopted, foster, or a step grandchild of the employee.
• A sibling, including a biological, adopted, foster or step sibling of the employee.

Employee Notice of Leave/Leave Denial

Employers may require employees to provide seven days’ advance notice when the use of earned sick and safe leave is foreseeable.   Where the use of leave is not foreseeable, the employee must provide notice as soon as practicable.  Employees may also be required to comply with the employer’s regular notice and procedural requirements for requesting or reporting leave so long as those requirements do not interfere with the employee’s ability to use sick or safe leave.

Employers may deny a request to take sick and safe leave if the employee fails to provide required notice and “the employee’s absence will cause a disruption to the employer.”  What constitutes a “disruption” to the employer, however, is not defined by the law.

An employer licensed by the state to provide services to developmentally disabled or mentally ill individuals may deny a leave request if the need to use leave is foreseeable, the employer is unable to secure a replacement after exercising reasonable efforts to do so, and the employee’s absence will cause a disruption in service to at least one individual with a developmental disability or mental illness.

Certification

Employers may require an employee who uses sick and safe leave to provide verification that the leave was used appropriately when the leave is used for more than two consecutive scheduled shifts.

The law permits an employer to require verification for an absence of two days or less for new employees who use sick and safe leave during the period between the first 107 and 120 days of employment, but only if  the employer and employee “mutually agree” to that requirement at the time of employment.  To comply with this requirement, employers will have to include a provision allowing such verification during the hiring or orientation process.

If an employee fails to provide a required verification, the employer may “deny a subsequent request to take earned sick or safe leave for the same reason.”   The law does not define what “the same reason” means, so it is unclear, for instance, whether a subsequent absence for the employee’s own illness is enough, or whether it has to be the same cause of illness.

Replacements and “Make-Up” Work

Employers may not require employees who request or use sick and safe leave to find a replacement to work in their place.  The employer and employee may “by mutual consent” agree that the employee will work additional hours or trade shifts with another employee during the same or following pay period in which the leave is used to make up hours that the employee took off as sick and safe leave.  If the employee works the additional hours, or trades shifts, the employer may not deduct the absence from the employee’s accrued sick and safe leave balance.   Note: if allowing a non-exempt employee to work additional shifts results in the employee working more than 40 hours in a work week, the employee must be paid overtime.

Special rules apply to tipped employees in the restaurant industry that permit the employer to offer the employee the choice of being paid the minimum wage or working an equivalent shift of the same number of hours in the same pay  period or the following pay period.  If the employer does not offer the choice, then the employee must be allowed to take earned paid leave.

How Does Sick and Safe Leave Work With Existing Employer Leave Policies?

Employers can comply with the HWFA by adopting or retaining a general paid leave policy, such as a paid time off (PTO) or sick leave policy, so long as the policy meets the HWFA’s minimum accrual requirements and permits employees to use paid leave as required by the law.

Interference and Adverse Action Against Employees Prohibited

An employer may not interfere with an employee’s exercise of his or her rights under the HWFA, or take any adverse action against an employee because the employee exercises rights under the law.  In addition, the law prohibits the use of any employer policy that penalizes an employee for using earned sick and safe leave.  The restriction is aimed in particular at so-called “no fault” policies, under which points are assessed to account for employee absences, regardless of the reason for the absence, and penalties imposed when specified limits on absences are exceeded.  Employers are already prohibited from penalizing employees for absences covered under the federal Family and Medical Leave Act and the Americans with Disabilities Act.  The new restriction under the HWFA will likely have a significant impact on the future effectiveness of “no fault” and similar policies that penalize employees for absences.  Nevertheless, the HWFA does allow employers to enforce rules that prohibit the improper use of sick and safe leave.

Notice to Employees of Their Rights Under the HWFA

Employers must provide employees with a notice of their rights under the HWFA, including:

• A statement of how earned sick and safe leave is accrued.
• The purposes for which an employee may use sick and safe leave.
• A statement setting forth the prohibition against the employer taking an adverse action against an employee who exercises his/her rights under the law and against employees who make a complaint or file an action in bad faith.
• Information regarding the right of an employee to report alleged violations of the law to the Commissioner of Labor and Industry or to file a civil action.

The Commissioner of Labor and Industry is required to create a model poster and notice, as well as a model sick leave policy, or similar guidance, for employers to use in implementing the requirements of the law.

Notice to Employees of Their Current Leave Balance and Recordkeeping

Each time wages are paid, an employer must provide a written statement to eligible employees regarding the amount of earned sick and safe leave that is available for the employee’s use.  This requirement may be satisfied by providing an online system through which an employee can obtain the information.

Employers must also keep a record for at least three years of the following:

• Earned sick and safe leave accrued by each employee.
• Earned sick and safe leave used by each employee.

Employers that fail to keep such records (or refuse to make them available for inspection when requested by the Commissioner of Labor and Industry) are subject to a rebuttable presumption that the employer has violated the law.

Preservation of Montgomery County Law/Preemption of Future Local Sick/Safe Leave Laws

The HWFA preserves the more generous provisions of the sick and safe leave law passed by Montgomery County in 2016, but preempts the authority of any other Maryland jurisdiction to enact new sick and safe leave laws.  Aspects of the Montgomery County law, including maximum leave accrual, employee eligibility, and verification requirements, differ from the HWFA.  Covered employers will have to comply with both laws.

Complaints, Enforcement and Civil Actions

The Commissioner of Labor and Industry is authorized to conduct investigations to determine whether the HWFA has been violated upon receipt of a written complaint from an employee.

The Commissioner is required to investigate within 90 days and attempt to resolve the dispute informally through mediation.  If the Commissioner is unable to resolve the dispute and determines that the employer has violated the law, the Commissioner is required to issue an order directing payment of any unpaid earned sick and safe leave and any actual economic damages sustained by the employee.  The Commissioner also has the discretion to award up to three times the employee’s hourly wage for each violation and a civil penalty of up to $1,000 for each employee with respect to whom the employer is not in compliance.  If an employer does not comply with the order within 30 days, the Commissioner may ask the Maryland Attorney General to bring an action on behalf of the employee, and may bring its own action to enforce the order for a civil penalty.

In addition to action by the Commissioner, an employee may bring a civil action to enforce the Commissioner's order within three years after the date of the order.  If the employee prevails, the court may award up to three times the value of the unpaid sick and safe leave, punitive damages, reasonable attorneys’ fees and costs, and injunctive or other relief as appropriate.

Potential Individual Liability for Owners and Managers

The law broadly defines “Employer” to include “a person that acts directly or indirectly in the interest of another employer with an employee.”  Similar language in other wage laws has been found by the courts to be broad enough to impose liability upon owners and managers who formulate or implement employer practices that affect an employee's rights under the law.

Future Guidance

The Department of Labor Licensing and Regulation is authorized to adopt regulations governing implementation of the HWFA, but has not yet done so.

Next Steps for Employers

Employers that do not currently offer sick leave need to develop policies and procedures that comply with the new law.

Employers that currently offer sick leave must carefully examine their sick leave policies and practices to determine the changes that will be needed to bring their practices into compliance with the HWFA. We suggest that employers begin by answering the following questions:

• Are there any employees who are not entitled to earn leave under the HWFA?
• Does leave accrue at the required rate under existing policies?
• Do current polices allow carry over of earned leave as required?
• Is leave available for all of the purposes required under the HWFA?
• Do any requirements for doctor’s notes/certifications comply with the HWFA’s limits and requirements?
• Are there any policies or practices that penalize employees for the use of leave – even if done on a “no-fault” basis?
• Is there a mechanism internally or through the company’s payroll service to provide the required notice of leave balance in a form accessible by employees?
• What do current polices provide regarding the payout of leave at termination?

Once these basic questions are answered, employers can develop an action plan for implementing changes to their policies and practices - including educating HR staff and supervisors.

If you have questions about the Healthy Working Families Act or need assistance reviewing or revising your company’s sick leave policies or procedures, contact: