City of Chicago Enacts Expansive Paid Leave Ordinance Effective December 31, 2023

Accrual and Use

Beginning January 1, 2024, or on the first day of employment thereafter, employees working at least two hours within the City of Chicago in any two-week period will accrue one hour of Paid Leave for any reason and one hour of Paid Sick Leave for every 35 hours worked. Thus, covered employees include not only those working on-site at an employer’s facility in Chicago, but also remote employees residing in Chicago and working from home, regardless of the employer’s location. This may also potentially cover employees who conduct regular business in Chicago, such as weekly meetings or regular deliveries, regardless of the employer’s location. 

Employers with at least one employee working within Chicago must begin tracking the accrual for both types of leave. Employers can cap accrual at 40 hours of Paid Leave and 40 hours of Paid Sick Leave in any 12-month period. Employers must provide the accrual in hourly increments. 

Employees are permitted to use any accrued Paid Sick Leave 30 days after beginning employment, and any accrued Paid Leave 90 days after beginning employment. Employers can require employees to use their leave in minimum increments, provided they do not exceed four hours for Paid Leave or two hours for Paid Sick Leave per day.

Carryover and Payout

Carryover

Employees can carry over into the following calendar year, or the employer’s chosen 12-month accrual period, two days (16 hours) of unused Paid Leave and 10 days (80 hours) of unused Paid Sick Leave. Employees are not entitled to compensation for any unused paid time lost due to inability to carry excess time over. Employers that maintain unlimited paid time off policies are not required to carryover any unused paid time off. Employers that frontload the paid time off are not required to carry over employees’ unused Paid Leave but are required to carry over up to 80 hours of unused Paid Sick Leave.

Payout

While employers are not required to pay out Paid Sick Leave upon termination of employment, Paid Leave does need to be paid out at separation. Employers with 51-100 employees are provided a ramp-up period through December 31, 2024, during which they are only required to pay out 16 hours of Paid Leave upon separation. Starting January 1, 2025, these employers will be required to include all unused Paid Leave as part of an employee’s final compensation. Small employers with 50 or fewer employees are exempt from paying out unused Paid Leave upon an employees’ separation. 

Eligible Reasons and Notice to Employer When Utilizing Leave

Paid Sick Leave

Employees can take Paid Sick Leave for illness, medical appointments, caring for a family member, addressing domestic violence, or public health emergencies. If the leave is foreseeable, an employer can require up to seven days’ notice before the leave is taken. If the leave is not foreseeable, notice must be provided as soon as practicable. When an employee misses more than three consecutive days for sick leave, the employer can require documentation such as a note from a doctor, a court document, a signed statement from an attorney, or other evidence supporting the reason for leave.

Paid Leave

Employees can use Paid Leave for any reason and are not required to provide a reason or documentation for taking leave. Employers can require reasonable notice for taking Paid Leave, which cannot exceed seven days, and can also require pre-approval for taking leave to ensure the “continuity of business operations.”

Recordkeeping and Posting

Employers maintaining a business facility within the City of Chicago must post a notice regarding employees’ rights to paid time off under the law, as prepared by the City Commissioner. Employers that do not maintain a business facility in Chicago are exempt from the facility posting requirement.

Employers must also provide employees with notice of their rights to paid time off under the law with their first paycheck and then annually within 30 days of July 1. 

Employers also are required to provide employees with notice of their Paid Leave and Paid Sick Leave balances each pay period. This notice must include:

• The amount of accrued paid time off used since the last notification,
• The amount of used paid time off since the last notification, and
• Any unused paid time off available for use. 

Employers can provide this information either through paystubs or an online system where employees can access their leave balances. 

Employers must maintain records for all covered employees for at least five years, including:

• Employees names and addresses,
• Hours worked,
• Pay rates,
• Wage agreements,
• Number of paid time off hours earned each year,
• Dates when time off was taken and paid, and
• Any other “records necessary to demonstrate compliance” with the law. 

Policies

Employers must have a written Paid Leave and Paid Sick Leave policy explaining the rate of accrual. They must provide the policy to employees within five days of beginning employment, and within five days of any changes made to the policy. If an employer makes changes to any policy affecting an employee’s right to final compensation for leave, employers must provide employees with 14 days’ notice of the changes.

Penalties and Damages

Employers that violate the Ordinance may be subject to a fine ranging from $1,000 to $3,000 per offense. Violations of the notice provision will incur a $500 penalty for the first violation, and a $1,000 penalty for each subsequent violation with each day that a violation continues constituting a separate violation. 

The Ordinance provides employees with a private right of action. Employees may be entitled to damages equal to three times the amount of any leave denied or lost, interest on that amount, and attorney’s fees for any violation. For violations of the Paid Sick Leave provisions, the private right of action will become available on December 31, 2023. For Paid Leave provisions, the private right of action will not be available until January 1, 2025. 

Coordination With Illinois Paid Leave for All Workers Act

On January 1, 2024, the Illinois statewide paid leave law, the Paid Leave for All Workers Act (PLAW), becomes operative. PLAW mandates that employers provide up to 40 hours of leave for any reason. 

For more information, please refer to our previous alert on PLAW. The Illinois Department of Labor recently published proposed regulations (starting at page 256) to PLAW with the comment period closing December 18, 2023.

Employers within the City of Chicago are exempt from PLAW, which does not apply to employers covered by a municipal or county paid leave ordinance, such as the new City of Chicago Paid Leave and Paid Sick Leave Ordinance. However, Illinois employers that are not located in Chicago may be faced with implementing both PLAW and the new Chicago Paid Leave and Paid Sick Leave Ordinance, depending on where their employees physically work.

AFS attorneys are available to answer questions and assist employers in complying with both the state and local obligations.