Illinois Paid Leave Law: What Employers Need to Know

Beginning January 1, 2024, a new law in Illinois will provide employees with the right to accrue and utilize Paid Leave for any purpose. We'll explore the applicability of the law, accrual and carryover rules, frontloading options, permitted use of Paid Leave, notice requirements, penalties for non-compliance, payout considerations, and the interaction with existing policies. Let's dive into the details.

Applicability of the New Illinois Paid Leave Law

The new Paid Leave law applies to employers of all sizes, and nearly all employees are covered, with some limited exceptions. Employers already required to provide paid sick leave under the sick leave laws in Chicago or Cook County are exempt from this legislation.

Accrual and Carryover Rules for Paid Leave

Employees will accrue Paid Leave at a rate of one hour for every 40 hours worked. Employers can calculate the accrual for exempt employees based on a 40-hour workweek (even if the employee typically works more) or the employee's standard workweek if it's less than 40 hours.

Accrual can be capped at 40 hours per year, and any unused Paid Leave must be carried over from year to year, allowing employees to accumulate their leave balance over time.

Frontloading Options 

Instead of using an hour-by-hour accrual system, employers can frontload an employee's Paid Leave bank with 40 hours at the beginning of each year. In this case, there is no requirement to allow carryover of unused Paid Leave.

Permitted Use of Paid Leave under the New Law

Employees can begin using their accrued Paid Leave on March 31, 2024, or after 90 days of employment, whichever comes later. Employers have the right to set a cap on Paid Leave at 40 hours per year.

Importantly, employees can use their Paid Leave for any reason, and employers are prohibited from requesting documentation to support an employee's request for Paid Leave. The employee retains the right to determine how much Paid Leave they wish to use, although employers can establish minimum increments of two hours or the entire workday if shorter.

Notice Requirements for Paid Leave

 Employers are required to provide notice about their employees' Paid Leave rights. This includes displaying a poster at each worksite, providing individual notice to each employee, and incorporating the information into their handbook or policy manual. The Illinois Department of Labor (IDOL) will create the required notice, which employers must ensure is readily available to employees. 

Penalties for Non-compliance

Failure to comply may result in Civil penalties of $500 for an initial posting violation and $1,000 for each subsequent violation, and general civil penalties of $2,500 for each offense, all of which would be deposited into the state’s Paid Leave for All Workers Fund.

Regarding leave scheduling, employers can require employees to provide seven days' notice for foreseeable leave and as much notice as practicable for unforeseeable leave.

Payout Considerations for Unused Paid Leave

 Employers are not obligated to pay out unused Paid Leave when an employee quits or is terminated. However, if an employee is rehired within 12 months of separation, their unused Paid Leave must be restored.

Interaction with Existing Policies

Employers can use their existing vacation or paid time off policies to fulfill their obligations under the new Paid Leave law, provided that the benefits offered are equal to or better than what is required. However, in such cases, unused vacation or paid time off must be paid out when an employee separates from employment, as mandated by state law.

How to Prepare for Illinois' Paid Leave Law

As January 1, 2024, approaches, employers in Illinois should familiarize themselves with the upcoming Paid Leave law. By understanding the applicability, accrual, carryover rules, frontloading options, permitted use, notice requirements, payout considerations, and interaction with existing policies, employers can ensure compliance and effectively manage their workforce. Stay informed and prepare for this important change to provide employees with valuable Paid Leave benefits while meeting legal obligations