Hiring and Firing Not Sufficient to Be A Managing Agent for Corporate Punitive Damage Liability

-- Issues Raised

-- Remedies

-- Employer Options

-- Assembly Bill No. 109

The New Requirements

California's new family sick leave law is set forth in Labor Code § 233, a copy of which is attached. Generally speaking, the statute requires an employer to permit an employee to use up to half of his or her annual sick leave accrual to attend to an ill child, parent or spouse. Moreover, the law prohibits an employer from denying an employee the right to use this family sick leave, or from retaliating against an employee for doing so.

Issues Raised

• For which family members can an employee take family sick leave?

  The new family sick leave mandate extends only to an employee's "child, parent or spouse," which includes stepchildren, adopted or foster children, wards, stepparents, foster parents and guardians (but not the parents of the employee's spouse). The term "spouse" is undefined but probably excludes domestic partners.

• When may family sick leave be taken?

  Employers must extend family sick leave to permit an employee to "attend to an illness" of an eligible family member, but the new law does not explain what either "attend to" or "illness" means.

  Theoretically, the "attend to" requirement would permit an employer to refuse to allow employees to take family sick leave solely because a family member is ill. Although an employer could limit family sick leave to employees who will be using the leave time actually to care for or to be with sick family members, few employers are likely to vigorously enforce such a limitation, because doing so would be difficult, intrusive and risky.

  The "illness" requirement obviously mandates that employees be given family sick leave to attend to an ill family member, but it is unclear whether it also requires that employees be given family sick leave to attend to a family member with a physical condition, such as pregnancy, or who is receiving preventive care, such as a routine dental checkup. Although a reasonable argument can be made for interpreting "illness" as not covering the latter, employers probably should not limit family sick leave availability to a greater extent than employee sick leave.

• What restrictions are permissible?

  The new statute provides that "all conditions and restrictions placed by the employer upon the use by an employee of sick leave shall also apply" with respect to family sick leave.

  Thus, for example, if an employee is required to provide a doctor's note evidencing his or her own illness, a doctor's note could be required with respect to the family member for whom the employee takes sick leave. Similarly, an employer can impose the same notice requirements for family sick leave usage as apply to employee sick leave. Moreover, if employee sick leave is not allowed as to certain illnesses, (e.g., gum disease, smoking or obesity) family sick leave probably can be limited to the same extent.

• How much family sick leave can an employee take each year?

  The maximum number of days of family sick leave that an employee is entitled to use each calendar year is the lesser of (1) all of the employee's accrued unused sick leave, or (2) the sick leave that would be accrued during six months at the employee's then-current rate of entitlement. Nothing in the law requires employers to apply the second option, however, and some employers will not do so, particularly if they have employees who have accumulated a significant amount of sick leave.

• What about sick leave that does not accrue continuously?

  Because employers can limit family sick leave availability to the number of days of sick leave an employee will accrue during the next six months, sick leave plans under which sick leave does not continuously accrue pose special issues.

  For example, consider a plan under which employees accrue 10 days of sick leave every December 31. During the first half of each calendar year, employees arguably do not accrue any sick leave; hence, they arguably need not be given any family sick leave during the first half of the year. This result makes little practical sense and is probably indefensible. When sick leave does not continuously accrue, the accrual rate limit normally should be applied as if all sick leave for the calendar year accrues ratably throughout the year. The government is likely to adopt this interpretation of the statute.

  Some employers discontinue sick leave accrual when an employee has accumulated a specified number of days of unused sick leave. When this happens, again California's new sick leave statute literally could be read as precluding the employee from taking any family sick leave. Because the employee is no longer accruing sick leave, no family sick leave arguably need be made available. Again, most employers that cap accruals probably should ignore the cap in determining how much family sick leave employees can take. The government is likely to take this position as well.

  There is at least one situation, however, in which some employers may want to take advantage of this quirky accrual rate rule, and that is in delaying the transition from their current sick leave policies to their new ones. For example, it appears that an employer that gives all employees a year of sick leave accrual on December 31, 1999 (or when hired in 2000), but no accruals thereafter, will be able to defer family sick leave compliance until it resumes sick leave accruals in 2001 or later.

• May family sick leave be taken into account in determining whether to terminate an employee for excessive absenteeism?

  California's new family sick leave law precludes an employer from terminating an employee for taking family sick leave. Nevertheless, family sick leave absences probably can be counted in determining excessive absenteeism as long as they are not accorded more weight than employee sick days. Proving this may be difficult, however and, thus, taking family sick leave into account in such termination decisions may be risky. In effect, the legislature has created a vast new protected class: employees who have used family sick leave.

• Must family sick leave be ignored in making good attendance awards?

  Some employers have programs that reward good attendance. The prohibition of family sick leave retaliation arguably precludes counting family sick leave against the employee's attendance record in making good attendance awards, under the theory that the use of family sick leave is immunized. The better analysis, however, appears to be that employers cannot treat family sick leave absences more adversely than employee sick leave absences. This is consistent with the statutory provision "that all conditions and restrictions placed by the employer upon the use by an employee of sick leave shall also apply" with respect to family sick leave.

• Must family sick leave be provided with respect to every kind of sick leave?

  No. The law does not apply to:

  • Unpaid employee sick leave. Thus, unpaid family sick leave need not be provided (except to the extent required under the Family and Medical Leave Act).

  • Sick leave paid other than from the employer's general assets, including sick leave paid through an ERISA welfare benefit plan or an insurance contract.

  • Unemployment compensation disability or workers' compensation sick leave.

Remedies

An employee who believes that he or she has been denied family sick leave rights or retaliated against for using family sick leave may bring a claim with the Labor Commissioner or file a lawsuit. An employee with a valid claim is entitled to reinstatement and (1) actual damages, or (2) one day's pay (whichever is greater) and appropriate equitable relief. The court also may award reasonable attorneys' fees if the employee prevails. The statute is silent as to the employer's right to recover attorneys' fees if it prevails.

In addition, workers who believe they were fired for using family sick leave might pursue "public policy" wrongful discharge claims, for which they potentially could recover unlimited compensatory and punitive damages.

Employer Options

First, employers should assess their present sick leave policies to determine whether granting family sick leave will result in excessive usage. Employers who determine that their current policies are too generous have two options:

• Reduce the annual rate of employee sick leave accruals, which will proportionately reduce the family sick leave they must make available.

• Provide all or a portion of sick leave through an exempt sick leave arrangement, such as an insured or ERISA plan.

Second, employers need to decide how to bring their plans into compliance with the new law. For example, do they want to treat domestic partners as family members? Do they want to give family sick leave to employees outside of California?

Third, although the new law does not expressly require employers to advise employees as to their family sick leave rights, employers that must make family sick leave available should notify employees of any changes before they take effect.