Employer Alert: Chicago Institutes New Mandatory Paid Leave Requirements Beginning January 1, 2024

November 21, 2023

On November 9, 2023, the City Council enacted the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance to expand paid leave for Chicago workers to include five days of paid time off in addition to five sick days annually, which replaces the prior paid sick leave act and goes into effect January 1, 2024.

Set forth below are the key takeaways from the new ordinance:

Application of the new ordinance¹

• Any “Employer” who employs at least one Employee is subject to the ordinance.
• “Covered Employees” include any Employee who within any two-week period performs at least two hours of work within the geographic boundaries of Chicago (not including commuting time).²

General requirements

• 40 Hours Paid Sick Leave / 40 Hours Paid Leave. Employers are required to provide up to 40 hours of Paid Sick Leave and 40 hours of Paid Leave per 12-month period.
• Accrual. For every 35 hours worked, a Covered Employee shall accrue at least one hour of Paid Sick Leave and one hour of Paid Leave up to a cap of 40 hours of Paid Sick Leave and 40 hours of Paid Leave in a 12-month period (unless the Employer allows more).
• Carryover. At the end of the 12-month period, Covered Employees shall be allowed to carry over to the following 12-month period up to 80 hours of Paid Sick Leave and 16 hours of Paid Leave.
• Payout at Termination with regard to Paid Leave.³ Subject to the exceptions below, upon termination of employment or transfer out of Chicago, the Employer shall be required to pay all unused, accrued Paid Leave as part of the Covered Employee’s final compensation.
  • Small Employers (i.e., Employers with 50 or fewer employees) shall not be required to pay unused, accrued Paid Leave.
  • Up until December 31, 2024, Medium Employers (i.e., Employers with between 50 and 100 employees) shall be required to pay a maximum of 16 hours of Paid Leave (unless the Medium Employer sets a higher limit).
  • On or after January 1, 2025, Medium Employers shall be required to pay all unused, accrued Paid Leave.
  • A Covered Employee may also request payout of unused, accrued Paid Leave if they have not received a work assignment for 60 days.
• No payout required for Paid Sick Leave. Upon termination of employment, the Employer is not required to compensate the Covered Employee for unused, accrued Paid Sick Leave.
• Front Loading. As an alternative to the Accrual method, Employers may choose to provide 40 hours of Paid Sick Leave and 40 hours of Paid Leave at the start of the 12-month period or upon hiring. If an Employer does so, then Employer is not required to carry over an Employee’s unused Paid Leave. The Employer is, however, required to carry over up to 80 hours of unused Paid Sick Leave.
• Unlimited Paid Time Off. Employers with unlimited paid time off policies are not required to carry over an Employee’s unused paid time off to the following year. However, upon termination of employment or transfer out of Chicago, the Employer will be required to pay the monetary equivalent of 40 hours of paid time off minus the hours of paid time off used by the Covered Employee in the last 12-month period. If the Covered Employee used more than 40 hours of paid time off during the 12-month period, then the Employer shall not owe the Covered Employee any compensation. This means that Employers who provide unlimited paid time off will be required to keep track of time off taken by Employees.

Leave Policies

• Existing Policies: PTO policies may comply if they allow employees to accrue and use leave (both personal and sick leave) on terms at least equivalent to the new ordinance.
• Paid Sick Leave Policies. Employers must allow Paid Sick Leave to be used for certain designated purposes (e.g., illness of Covered Employee or a family member; if the Covered Employee or a family member is victim of domestic violence; closure of the Covered Employee’s place of business or a family member’s school, class, or place of care due to a public health emergency; or an order from the Mayor, Governor, Public Health Department, or healthcare provider requiring Covered Employee to isolate or quarantine). Employers may establish policies that require specified amount of notice in certain circumstances and certification for more than three consecutive Paid Sick Leave days. In addition, Employers may discipline Covered Employees who take Paid Sick Leave for purposes other than those permitted by the ordinance.
• Paid Leave Policies. Paid Leave may be used for any reason and an Employer cannot require a Covered Employee to provide a reason. Employer may establish reasonable policies which require Covered Employee: to give reasonable notice (not to exceed seven days prior); and to obtain reasonable preapproval from the Employer before for the purpose of maintaining continuation of Employer operations.

Additional Provisions

• Posting and Notice. Employers are required to post notice of Covered Employees’ rights to Paid Sick Leave and Paid Leave and to include such notice in the Covered Employee’s first paycheck and annually thereafter. Employers are also required to provide written notice of the Employer’s paid time off policy, including any notification requirements, as well as notice of any changes to such policies. Finally, Employers are required to provide updated information regarding the amount of Paid Sick Leave and Paid Leave to which the Covered Employee is entitled each time wages are paid.
• Retention of Records. Employers shall be required to retain records for at least 5 years, or the duration of any claim, civil action, or investigation pending related to this ordinance.
• Penalties/Remedies. Employers may be fined between $500 and $3000 per offense for violation, and liable to Covered Employee for damages equal to three times the full amount of any leave denied or lost by reason of the violation, interest at the prevailing rate, costs, and reasonable attorneys’ fees.

NEXT STEPS

Employers should review their current paid sick time policies and paid time off policies to ensure that starting January 1, 2024, Employers are providing to Covered Employees the required Paid Sick Leave and Paid Leave.

Please contact any of the following individuals if you would like assistance to make sure that your company’s policies meet the requirements of the new law.

¹ The ordinance is not intended to interfere with or diminish any rights provided to Employees as part of a collective bargaining agreement.
² Covered Employees includes employees of the City of Chicago and its Sister Agencies, but not does not include individuals who work for other governmental agencies.
³ Pursuant to the Illinois Wage Payment and Collection Act, Employers are required to pay Employees for any accrued and unused vacation upon termination of employment for any reason. The ordinance does not change this requirement.