California’s Mandatory Paid Sick Leave: How to choose an accrual method, tips that can save money for your business!
Written by Eli Hamblet - January 23, 2025
California’s mandatory paid sick leave law, codified under Labor Code Section 246, has been a cornerstone of worker protection in the state. Enacted through the Healthy Workplaces, Healthy Families Act of 2014, the law requires employers to provide paid sick leave to employees, marking a significant shift in the landscape of employee rights. This article will explore the intricacies of Section 246, how it has been applied in recent case law, and the legal challenges that employers should be aware of to maintain compliance.
Overview of Labor Code Section 246
- Labor Code Section 246 used to mandate that employers provide employees with a minimum of 24 hours (or three days) of paid sick leave per year. However as of January 1st of 2024 SB 616 (2023) – Increased Accrual and Usage Limits for Paid Sick Leave:
- SB 616, which took effect on January 1, 2024, increases the minimum amount of paid sick leave that employees are entitled to under California law. The law raises the accrual cap from 48 hours or six days to 80 hours or 10 days. Additionally, it increases the minimum amount of paid sick leave that employers must provide at the beginning of each year from 24 hours or three days to 40 hours or five days. This change ensures that employees have more time available for illness or to care for family members.
There are two primary methods that employers can use to comply with the accrual requirement:
- Accrual Method: Employees accrue one hour of paid sick leave for every 30 hours worked, which can carry over to the next year. However, employers can cap the carryover at 80 hours (or ten days).
- Lump-Sum Method: Employers can provide the full amount of paid sick leave (40 hours or five days, whichever is greater) at the beginning of each year.
What is the practical difference between the two methods?
If your business has substantial turnover with employees working less than 30 weeks on average, you will find the accrual method to be more cost effective. If employees work more than 30 weeks on average the lump sum method will be more cost effective. Over a year the accrual method will provide a 40 hour a week worker with an extra 3.5 days (69.3 hours) of sick time as opposed to the 40 hours given by the lump sum.
Very often we will advise employers who are very careful about scheduling employees to avoid additional costs with regard to overtime, however many employers will overlook the additional three plus days of pay included in their choice of sick leave accrual method. A business without any turnover could save as much as $500 per employee per year by switching to the lump sum method.
Hourly Wage | Hours Saved | Annual Wage Cost | Annual Wage Cost with Taxes |
$ 16.00 | 29.3 | $ 468.80 | $ 501.62 |