This year has started with a bang for Illinois employers. Days into 2023, the legislature passed the Paid Leave for All Workers Act (the “Act”), which would require Illinois employers to provide most employees with a minimum of 40 hours of paid leave per year to be used for any reason at all–not just for sick leave. Governor Pritzker has announced he looks forward to signing the legislation. If he does, Illinois will join Maine and Nevada and become the third state to require paid leave for employers for “any” reason. If signed, the bill will take effect January 1, 2024, and will apply to all employers with at least one employee working in Illinois.

Here’s what Illinois employers need to know now.

Who is covered–and who is not

Under the Act, an employee who works in Illinois is entitled to earn and use up to a minimum of 40 hours of paid leave (or a pro rata number of hours) during a 12- month period.

The Act looks to the Illinois Wage Payment and Collection Act to define “employer” and “employee” (with some additions and carve-outs), but essentially applies to all employers with at least one employee in Illinois and employees in Illinois with some notable exceptions:

• Independent contractors under Illinois law
• Individuals who meet the definition of “employee” under the federal Railroad Unemployment Insurance Act or the Railway Labor Act
• College or university students who work part time and on a temporary basis for the college at which they are enrolled
• Individuals who work for an institution of higher learning for less than two consecutive calendar quarters and who do not have an expectation that they will be rehired by the same institution
• Employees working in the construction industry covered by bona fide collective bargaining agreements (CBAs)
• Employees covered by CBAs with an employer that provides services nationally and internationally of delivery, pickup and transportation of parcels, documents, and freight.

Also, the Act does not apply to any employer that is covered by a municipal or county ordinance in effect on the effective date of the Act that requires employers to give any form of paid leave to their employees, including paid sick leave or other paid leave. Thus, for instance, employers covered by the Chicago Paid Sick Leave Ordinance or Cook County Earned Sick Leave Ordinance won’t be required to provide paid leave under the Act.

When and how paid leave accrues under the Act

Paid leave accrues for employees at the rate of one hour of paid leave for every 40 hours worked, up to a minimum of 40 hours of paid leave per 12-month period (or a greater amount if the employer chooses to provide more than 40 hours of leave).

An employee would begin to earn paid leave on their first day of their employment (or the first day of the 12-month period, see below)–or on the effective date of the Act, whichever is later.

Employees who are exempt from the overtime requirements of the federal Fair Labor Standards Act (FLSA) will be deemed to work 40 hours in each workweek for purposes of paid leave accrual unless their regular workweek is less than 40 hours, in which case paid leave accrues on a pro-rata basis based on the employee’s regular workweek.

The “12-month period”

The 12-month period can be any consecutive 12-month period designated by the employer in writing at the time of the employee’s hire.

The employer can change the 12-month period if the employer gives notice to employees in writing prior to the change, and the change does not reduce the eligible accrual rate and paid leave available to the employee. If the employer changes the designated 12-month period, the employer must provide employees with documentation of the balance of their hours worked, paid leave accrued and taken, and their remaining paid leave balance.

Employees can start using paid leave after 90 days of employment (or the Act’s effective date)

Employees can begin using paid leave 90 days after the commencement of their employment or 90 days following the effective date of the Act, whichever is later-but employers can allow employees to use paid leave earlier.

Employees determine how much paid leave they need to use, but employers can set a reasonable minimum increment for the use of paid leave not to exceed 2 hours per day. If an employee’s scheduled workday is less than 2 hours a day, the employee’s scheduled workday will be used to determine the amount of paid leave.

Employer notice and posting requirements

IDOL will prepare a notice which employers will be required to post summarizing the requirements of the Act and information pertaining to the filing of a charge. The notice must be posted in a conspicuous place on the employer’s premises where notices to employees are customarily posted, and must be posted 90 days following the effective date of the Act (or upon commencement of employment, whichever is later).

If the employer’s workforce is comprised of a significant portion of workers who aren’t literate in English, the employer must notify IDOL, who will prepare a notice in the appropriate language.

In addition, notice must be included in a written document, or written employee manual or policy if the employer has one.

Steps for when employees are seeking to take paid leave

Employers can have “reasonable” paid leave policy notification requirements in place, which can include:

• A requirement that employees request paid leave through oral or written request in accordance with the policy
• For paid leave that is foreseeable, a requirement that the employee provide 7 calendar days’ notice before the date the leave is to begin
• If paid leave is not foreseeable, a requirement that the employee provide such notice as soon as is practicable after the employee is aware they need to take leave–but an employer requiring notice when leave is not foreseeable must provide a written policy containing procedures for the employee to provide notice in this circumstance

Employers must provide employees with written notice of the paid leave policy notification requirements by posting them in a conspicuous place on the premises where notices to employees are customarily posted–and within 5 calendar days of any change to the employer’s reasonable paid leave policy notification requirements.

Though employers can require employees provide notice of their need to take paid leave under the Act, employees are not required to provide a reason they are using paid leave, or any documentation or certification as proof or in support of paid leave. And employers cannot require employees to search for or find a replacement worker to cover the hours they are taking paid leave.

In addition, whether an employee uses paid leave provided under the Act prior to using any other leave provided by the employer or Illinois law is the employee’s choice. Employers cannot require employees to use paid leave under the Act before using other forms of leave.

Pay rate for paid leave

Employers must pay employees their hourly rate of pay for paid leave. Employees who are engaged in occupations in which gratuities or commissions have customarily been part of their pay must be paid at least the full minimum wage rate in the jurisdiction where they are employed when they take paid leave–which becomes their “regular rate of pay” for purposes of the Act.

Carryover of unused paid leave

Paid leave carries over annually to the extent not used by the employee, but employers are not required to provide more than 40 hours of paid leave for an employee in the 12-month period unless the employer agrees to do so.

If an employee is transferred to a separate division, entity, or location within the employer the employee is entitled to all paid leave accrued at the prior division, entity, or location.

And separation from employment doesn’t necessarily mean loss of accrued paid leave under the Act. If there is a separation from employment and the employee is rehired within 12 months of separation by the same employer, the employee’s previously accrued unused paid leave is reinstated, and the employee is entitled to use the accrued paid leave at the time employment begins again.

Unused paid leave–payment (generally) not required

Employers are not required to pay employees for unused paid leave accrued under the Act at the end of the benefit year–or at any other time–including upon an employee’s termination, resignation, retirement, or other separation from employment.

However, if employers allow paid leave to be charged or otherwise credited to an employee’s paid time off (PTO) bank or employee account (which can only occur if the employer’s policy permits such a credit), any unused paid leave must be paid to the employee upon the employee’s termination, resignation, retirement, or other separation to the same extent as vacation time under existing Illinois law. And the Act does not limit an employee’s right to final compensation for promised and earned but unpaid vacation time or PTO under the Illinois Wage Payment and Collection Act. If an employer changes the employer’s vacation time, PTO, or other paid leave policies that affect an employee’s right to final compensation for such leave, employers must provide employees with written notice of the changes.

Insurance coverage while employees take leave

During any period an employee takes leave under the Act, the employer has to maintain the same level of coverage for the employee and any family member under any group health plan for the duration of the leave that would have been provided if the employee had not taken the leave. The employer must notify the employee that the employee is still responsible for paying the employee’s share of the cost of health care coverage, if any.

Collective bargaining agreements

The Act does not affect the validity or change the terms of bona fide CBAs in effect on January 1, 2024 (the Act’s effective date if signed), but after that date, the Act’s requirements can be waived in a bona fide CBA only if the waiver is set forth explicitly in the agreement in “clear an unambiguous” terms. In addition, going forward, the paid leave requirements of the Act can be waived in a bona fide CBA if the waiver is set forth explicitly in the agreement in “clear and unambiguous” terms.

Employers must keep records–and other employer responsibilities

Employers will have to maintain records (and must allow IDOL to access them) documenting hours worked, paid leave accrued and taken, and the remaining paid leave balance for each employee for a period of not less than 3 years. In addition, the records must be preserved for the duration of any pending claim under the Act.

An employer that provides paid leave on an accrual basis must provide notice of the amount of paid leave accrued or used by an employee upon employee request, in accordance with the employer’s reasonable paid leave policy notification provisions.

Already have a paid leave policy in place?

An employer who provides any type of paid leave policy that satisfies the minimum amount of leave required under the Act is not required to modify their policy if the policy offers an employee the option, at the employee’s discretion, to take paid leave for any reason.

Rearranging work hours, retaliation and waiver of rights prohibited

Employers are prohibited under the Act from interfering with, denying, or changing an employee’s work days or hours to avoid providing paid leave to an employee.

And retaliation is prohibited. Employers cannot threaten to take or to take any adverse action against an employee because the employee:

• Exercises rights (or attempts to exercise rights) under the Act,
• Opposes practices the employee believes to be in violation of the Act, or
• Supports the exercise of another’s rights under the Act.

Employers also cannot consider the use of paid leave as a negative factor in any employment action that involves evaluating, promoting, disciplining, or counting paid leave under a no-fault attendance policy.

In addition, employers cannot seek a waiver of employee rights under the Act, as any such waivers are void on public policy grounds.

Violations and penalties

IDOL is authorized to administer and enforce the Act, which provides for civil penalties, including $500 for the first notice and posting violation, $1,000 for each subsequent notice and posting violation, and $2,500 for each other separate offense.

In addition, an employee may file a complaint with IDOL alleging violations of the Act within 3 years after the alleged violation. Employers can be liable to any affected employee for damages in the form of the actual underpayment, compensatory damages, and a penalty of not less than $500 and no more than $1,000. Employees may be entitled to equitable relief as appropriate, in addition to reasonable attorney’s fees, reasonable expert witness fees, and other costs of the action, which must be paid by the employer to the employee.

Employer Takeaways

Employers should review the bill and watch for developments. Governor Pritzker has stated his support for the law, and is expected to sign it. If signed, employers will need to comply by January 1, 2024. In the meantime, employers should review any existing paid leave policies and determine what changes would be required to comply with the Act given the expectation that it will be signed into law. If the bill becomes law, employers should keep an eye out for updates from IDOL, which would likely to provide regulations or other guidance before the Act’s effective date.

For help with your employment needs in Illinois, across the nation or around the globe, contact your Baker McKenzie employment attorney.