The Paid Leave for All Workers Act
- Illinois’s new paid leave law, PLAWA, affects every employer with an employee in the state and goes into effect January 1, 2024.
- PLAWA allows employees to accrue up to one week a year of paid leave.
- This paid leave must be able to be used for any reason.
- More generous municipal ordinances, such as Chicago’s upcoming paid leave ordinance, take precedence.
In March 2023, the Illinois legislature passed and Gov. Pritzker signed the Paid Leave for All Workers Act (PLAWA). This law introduces some big changes that will affect Illinois business’ vacation time, sick leave, paid time off (PTO) and Family and Medical Leave Act (FMLA) policies.
All employers with employees in the state should review and update their leave policies to ensure they are complying with these new requirements. However, be aware that local governments may enact stricter requirements than the PLAWA – Chicago and Cook County have already done so.
Small business owners across the state have questions about how the PLAWA applies to their business and what steps they need to take to make sure they stay compliant. Keep reading! We answer the most pressing ones below.
When does the PLAWA go into effect?
Illinois’s Paid Leave for All Workers Act takes effect on January 1, 2024.
What businesses must comply with the Paid Leave for All Workers Act in Illinois?
All employers with employees in Illinois are subject to the PLAWA, whether they have part-time, full-time, or seasonal employees. Businesses subject to a local ordinance providing any type of paid leave that was in effect prior to the passing of PLAWA, or that provides for equal or greater benefits to employees, must comply with those requirements. This includes the Chicago and Cook County ordinances. (820 ILCS 192/15p)
The PLAWA applies to both private and most public employers. It also includes staffing agencies that provide day and temporary laborers.
Of note, anyone who hires domestic workers must comply with the PLAWA, regardless of whether the domestic workers would otherwise be classified as independent contractors. Domestic workers are very specifically included in the definition of “Employee” under the PLAWA. (820 ILCS 192/10)
The Act does include some exceptions to the PLAWA for employees who are covered by collective bargaining agreements.
How does Illinois’s Paid Leave for All Workers Act Affect a Business’s Vacation, Sick Leave, PTO, and FMLA policies?
The biggest change for employers is that this new law requires employers to allow employees to accrue and take:
- Paid leave (1 hour of paid leave per 40 hours worked, up to 40 hours minimum per year)
- For any reason
- That does not have to be paid out upon termination.
Since this law is brand new, it hasn’t been fully interpreted yet. We especially have questions about how the “for any reason” and employee separation payout components will be interpreted. We provide an in-depth analysis of each of these topics in this article, based on the information we have so far.
Do you just want to know what to do to get your business compliant?
If you’re not interested in an analysis of the law and just want to know what you need to do, we cover that in the last section of this article. You can also reach out via our contact form to ask about some hands-on guidance:
Really? Employees can take paid leave for any reason in Illinois?
According to the strict language in the statute, employers cannot require employees to provide a reason for the leave or submit proof of such reason.
(e) Paid leave under this Act may be taken by an employee for any reason of the employee’s choosing. An employee is not required to provide an employer a reason for the leave and may not be required to provide documentation or certification as proof or in support of the leave. (820 ILCS 192/15e)
Despite not being able to require an employee to provide a reason for taking paid leave, the statute does allow employers to implement a policy requiring employees to provide 7 calendar days’ notice of the leave if the leave is “foreseeable”. For leave that is not foreseeable, the policy can also require employees to provide notice as soon as practicable after the employee is aware of the necessity for the leave (820 ILCS 192/15h) . This policy would need to be written and posted pursuant to the requirements in Section 20 of the PLAWA (see the requirements for creating and posting a paid leave policy below).
Based on some of the answers in the FAQs released by the Illinois Department of Labor (IDOL), the PLAWA may end up interpreted in a way that allows an employer more control over when employees can take leave than the plain reading of the statute might suggest.
For example, the 9th question asks “Can I deny an employee use of paid leave under this law?”
The answer says “Nothing in the Act prohibits an employer from adopting a policy that establishes some parameters for taking leave, and limited reasons the employer may deny leave for operational necessity.”
The IDOL also mentions that they will provide further clarity on this issue in rulemaking.
Employers whose business would be harmed by employees unexpectedly taking leave will want to closely follow the IDOL’s rules as the IDOL releases them to determine what type of policies employers can put in place to deny leave if operationally necessary.
How much Paid Leave is required in Illinois?
The PLAWA requires employers to provide up to 40 hours (1 standard workweek) of paid leave per year, or a proportional amount to employees who work less than full-time. Regardless of whether employees are full-time or part-time, they earn 1 hour of paid leave for every 40 hours worked. Employers are not required to provide more than 40 hours of paid leave per 12-month period under the PLAWA, but they can choose to provide additional paid leave and local ordinances can require more. (820 ILCS 192/15)
As an example, if you have an employee who works 10 hours per week, they will work 520 hours per year and earn 13 hours of paid leave in a 12-month period (10 hours x 52 weeks / 40 hours = 13 hours). Put another way, they will earn 1 hour of paid leave every 4 weeks in which they work 10 hours.
Any employees exempt from the overtime requirements of the Fair Labor Standards Act, if they regularly work 40+ hours in a workweek, will have that rounded down to 40 hours for purposes of paid leave time accrual. If such an employee works less than 40 hours in a regular workweek, their paid leave time accrues based on the number of hours they regularly work.
Employees must begin to accrue this paid leave time on January 1, 2024 or on their first day of employment.
Does this leave carry over?
Employees can carry over unused leave from one year to the next, but the employer has no obligation to offer more than 40 hours of paid leave off in a year. An employer may offer more than the 40 hours off if they choose. (820 ILCS 192/15i)
Can the paid leave be frontloaded instead?
Employers may frontload the paid leave time if they choose, meaning it can all be awarded at the beginning of the year. However, this slightly changes for part-time employees. If an employer frontloads the leave based on the average hours worked by a part-time employee, the employer must monitor and adjust if the employee ultimately works more hours during a 12-month period. The employer also cannot take back or recoup hours if the employee works less than expected. An employer cannot require an employee to pay back frontloaded paid leave if the employee leaves before the end of that 12-month period.
Do employers have to pay for paid leave time upon employee termination?
No, employers DO NOT have to pay out earned paid leave time upon employee termination under the PLAWA. Because of this, some employers may want to reclassify some of their employees’ vacation time or PTO as “paid leave”. If an employer does reclassify some vacation or PTO time as paid leave, they must provide employees with written notice of the change because it affects an employee’s right to final compensation. (820 ILCS 192/15l)
Although payout is not required under the PLAWA, local governments may require employers to pay terminated employees for accrued paid leave time. Additionally, the IDOL and Illinois courts may interpret the law differently than our reading of it. We recommend that an employer discuss with an attorney any issues that come up related to this question.
Vacation Time and PTO vs. Paid Leave
Paid leave differs from vacation time in a key way under the PLAWA. Paid leave accrued under the PLAWA is not considered “final compensation” that must be paid to an employee upon termination of that employee’s employment:
(j) Nothing in this Section or any other Illinois law or rule shall be construed as requiring financial or other payment to an employee from an employer upon the employee’s termination, resignation, retirement, or other separation from employment for paid leave accrued under this Act that has not been used. Nothing in this Section or any other Illinois law or rule shall be construed as requiring financial or other reimbursements to an employee from an employer for unused paid leave under this Act at the end of the benefit year or any other time. (820 ILCS 192/15)
This differs from “earned vacation”, which is considered “final compensation” under the Illinois Wage Payment and Collection Act (820 ILCS 115/), and therefore must be paid to a separated employee as part of their “final compensation”. When an employer combines vacation time and sick time into one category of “PTO”, that is also considered “final compensation” that must be paid out upon employee termination.
Should employers re-classify some Vacation Time as Paid Leave?
Since employees may take paid leave “for any reason”, they are permitted to use the paid leave under the PLAWA for vacations. Businesses may want to consider whether they want to reclassify some of their “vacation” time as “paid leave” under the PLAWA. On the one hand, paid leave is not required to be paid out upon employee separation. On the other hand, employers have more flexibility in requiring longer notice periods and approval mechanisms with vacation time versus paid leave time. Employers should also consider what classification their employees most value. Businesses in Chicago and Cook County (and perhaps additional municipalities in the future) should be aware that there may be additional requirements to pay separated employees for their paid leave time under those local ordinances.
How does the Paid Leave for All Workers Act work with city or county rules, including Chicago?
If a municipality had a paid leave law prior to the enactment of PLAWA, that municipality’s rule would still apply. If a municipality passes a new law that requires employers to provide employees with paid leave equal to or greater than the requirements of PLAWA, and that leave can be used for any purpose, the municipality’s rules will take precedence. However, a municipality cannot override PLAWA with a new law that allows for less leave than PLAWA (820 ILCS 192/15p). You can read more about how these laws interact here.
For instance, the city of Chicago recently passed an ordinance (and, as of the writing of this article in December 2023, may be replacing that ordinance at any moment) that significantly complicates the information we’re providing here. We’ll discuss Chicago’s requirements in a separate post.
Since these laws are all so new, it is not completely clear yet how they will work together, and whether local governments will pass even stricter requirements down the line. We are continuing to monitor how these requirements are being interpreted by the various government agencies and courts. We highly recommend that you speak with an attorney to determine which laws and requirements apply to your business.
What are the penalties for noncompliance with the PLAWA?
An employer who violates the PLAWA is subject to a civil penalty of $2,500 for each offense and can also be held liable for damages to any affected employee. An employee’s damages can include actual underpayment, compensatory damages, and a penalty of $500-$1,000. The employee may also be entitled to equitable relief and is entitled to attorney and other reasonable costs associated with collecting the damages.
An employer may not retaliate against an employee who (1) exercises or attempts to exercise their rights under the PLAWA, (2) opposes practices that the employee believes to be in violation of the Act, or (3) supports the exercise of such rights by another person. Specifically, an employer cannot “consider the use of paid leave by an employee as a negative factor in any employment action that involves evaluating, promoting, disciplining, or counting paid leave under a no-fault attendance policy.” An employee who has been unlawfully retaliated against is entitled to recover all legal and equitable relief as may be appropriate. (820 ILCS 192/25)
What do Illinois Employers Need to Change in their vacation, sick time, PTO, and other leave policies based on the Paid Leave for All Workers Act?
Employers need to take some practical steps to comply with the PLAWA, which include:
- Post the IDOL’s poster and include it in a written document by March 31, 2024. The poster will be available here by January 1, 2024. Employers must post this poster with the other required posters. In addition, employers need to include the poster in a written document, such as the employee manual. (820 ILCS 192/20d)
- Update or create written leave policies. Employers need to ensure that their written policies provide the minimum amount of paid leave required and that employees can take it for any reason, with no documentation required. The written policies should also include procedures for how employees should provide notice to the employer for leave both when the leave is foreseeable and, if the leave is not foreseeable, as soon as is practicable after the employee learns of the need for the leave, pursuant to (820 ILCS 192/15h). As discussed above, some employers may also want to update their written policies to re-classify vacation time or other leave as paid leave. Employers should also check that the policies align with the additional requirements in the statute, such as when employees must be able to start taking the leave, in what hourly increments they are permitted to take the leave, and that employees are not required to find a replacement worker when taking leave.
- Provide written notice of changes to policies. Employers must provide written notice of any changes to any vacation or PTO policies that affect an employee’s right to final compensation. (820 ILCS 192/15)l Within 5 calendar days, they must provide employees with written notice of any changes to the paid leave policy notification requirements. (820 ILCS 192/15)h
- Make and preserve records. Employers must document each employee’s hours worked, paid leave accrued and taken, and the remaining paid leave balance. They must preserve these records for at least 3 years. (820 ILCS 192/20a) If you have a payroll provider, they may be able to track this paid leave for you.
Written notice required under the PLAWA can be communicated electronically, including through email, text message, or electronic storage. (820 ILCS 192/10)
So that’s the Paid Leave for All Workers Act! It’s a big change in Illinois employment law, and there’s not too much time to make the necessary amendments. If you’re unsure whether you’ll be in compliance come January 1st, 2024, G & G Law can do a review of your current policies and agreements and provide recommendations on updates.
We can help make it a bit easier by:
- Reviewing or creating an employee handbook that includes a paid leave policy that complies with the PLAWA. In the process, we can also discuss with you whether you want to change your vacation, sick leave, or other PTO policies based on the new requirements. Throughout this process, we will also determine whether other, stricter requirements apply to your business, such as the new Chicago paid leave ordinance.
- Reviewing or creating employee contracts and offer letters to ensure that the leave time you are promising employees complies with the PLAWA and other leave requirements. During this process, we can also discuss how you want any leave you offer to employees to be classified, how you want it to accrue, and ensure you understand what leave must be paid out at the time of employee termination.
- With either of the legal projects above, ensuring that you provide the correct written notice to your employees of any changes.