Governor Newsom Enacts SB95, Obligating Most Public Employers to Provide COVID-19 Supplemental Paid Sick Leave to their Employees

On March 19, 2021, Governor Newsom signed into law Senate Bill (“SB”) 95[1], codifying at Labor Code section 248.2[2] new obligations on public agency employers to provide COVID-19 Supplemental Paid Sick Leave[3] to employees who are unable to work or telework and have certain enumerated qualifying reasons for such paid leave. SB 95 provides a new employee entitlement to such leave retroactive to January 1, 2021[4] and effective through September 30, 2021.[5],[6] The urgency legislation[7]will go into effect 10 days after enactment, or on March 29.

The purpose of this special bulletin is to explain the new obligations on public agency employers, and to describe how certain key provisions of the recently-enacted American Rescue Plan Act (“ARPA”) may provide financial relief for public agencies to offset costs associated with the provision of COVID-19 Supplemental Paid Sick Leave under SB 95.

I.  New Employer Obligations under SB 95

As provided above, SB 95 codifies at Labor Code section 248.2 significant new obligations on employers related to the provision of paid leave to employees for reasons related to COVID-19. This section discusses several important provision of SB 95, including the following: (1) employee eligibility for COVID-19 Supplemental Paid Sick Leave; (2) the qualifying reasons for provision of such paid leave; (3) employer-provided paid sick leave benefits; (4) the obligation to retroactively apply the new obligations; and (5) employer notice requirements.

A. Employee Eligibility for COVID-19 Supplemental Paid Sick Leave

Under Labor Code section 248.2, employers that employ more than 25 employees[8], including public agencies[9], must provide COVID-19 Supplemental Paid Sick Leave to any employee who is unable to work or telework due to one of the qualifying reason discussed in the next section.[10]

As a result, any public agency employer that employs more than 25 employees should immediately begin to prepare a COVID-19 Supplemental Paid Sick Leave policy that will provide the paid leaves discussed herein to qualified employees.

B. Qualifying Reasons for COVID-19 Supplemental Paid Sick Leave

In order for an employee to qualify for COVID-19 Supplemental Paid Sick Leave, the employee must be unable to work or telework due to one of the following qualifying reasons:[11]

1. 1. The employee is subject to a quarantine or isolation period related to COVID-19 as defined by an order or guidelines of the State Department of Public Health (“CDPH”), the federal Centers for Disease Control and Prevention (“CDC”), or a local health officer who has jurisdiction over the workplace.[12]
   2. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.[13]
   3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.[14]
   4. The employee is caring for a family member[15] who is subject to a quarantine or isolation order or guidelines described above, or who has been advised to self-quarantine by a health care provider.[16]
   5. The covered employee is caring for a child[17] whose school or place of care is closed or otherwise unavailable for reasons related to COVID-19 on the premises.[18]
   6. The employee is attending an appointment to receive a vaccine for protection against contracting COVID-19.[19]
   7. The employee is experiencing symptoms related to a COVID-19 vaccine that prevent the employee from being able to work or telework.[20]

While Labor Code section 248.2 does not expressly provide a qualifying reason for employees excluded from the workplace as a result of a “close contact” exposure in the workplace, the law provides that an employer may require that an employee use COVID-19 Supplement Paid Sick Leave for such purpose.[21] As discussed at greater length below, because public agency employers are required to provide paid leave to employees for such purpose under the Cal/OSHA COVID-19 Emergency Temporary Standards (“COVID-19 Regulations”),[22] public agency employers may consider adopting a policy that expressly provides that employees may use paid leave for such purpose.

As a result of these new leave rights, any public agency that employs more than 25 employees should immediately begin to develop a policy to account for and provide paid leave for, at minimum, the seven qualifying reasons enumerated above. Public agency employers may also, as a matter of policy, provide COVID-19 Supplemental Paid Sick Leave for employees who are seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID–19 after such employee has been exposed to COVID–19 or the employee’s employer has requested such test or diagnosis, an additional qualifying reason for expanded EPSL not included in Labor Code section 248.2. Lastly, as is discussed in more detail below, employers should also begin calculating leaves provided to employees after January 1, 2021 in order to determine which prior employee leaves may qualify for payment under Labor Code section 248.2.

C. Benefits under COVID-19 Supplemental Paid Sick Leave

1. Leave Amounts

Employees who qualify to receive COVID-19 Supplemental Paid Sick Leave will be entitled to up to 80 hours of such paid leave if they are full-time employees.[23],[24] Part-time employees will be entitled to a prorated amount of such leave based on their normally scheduled work hours over a two-week period.[25]

Labor Code section 248.2 expressly provides that COVID-19 Supplemental Paid Sick Leave is to supplement, and not run concurrent to, paid sick leave entitlements provided to employees under the state paid sick leave law.[26] Therefore, where an employee qualifies for COVID-19 Supplemental Paid Sick Leave, the employer should not reduce the amount of other statutory paid sick leave that the employee earned or accrued under Labor Code Section 246.

While Labor Code section 248.2 provides that “[a]n employer shall not require a[n] employee to use any other paid or unpaid leave, paid time off, or vacation time provided by the employer to the covered employee before the covered employee uses COVID-19 [S]upplemental [P]aid [S]ick [L]eave or in lieu of COVID-19 [S]upplemental [P]aid [S]ick [L]eave,” SB 95 is silent as to whether the employer may treat COVID-19 Supplemental Paid Sick Leave and contractual paid sick leave as interchangeable, and whether, as a result, an employer may run contractual paid sick leave concurrent with COVID-19 Supplemental Paid Sick Leave. Given that the Labor Commissioner (the state agency responsible for enforcing this statute) has not provided guidance on the permissibility of drawing down contractual paid sick leave concurrent with COVID-19 Supplemental Paid Sick Leave, public agency employers should understand that there are potential legal risks in doing so at this time. Employers that elect to draw down contractual paid sick leave concurrent with the provision of COVID-19 Supplemental Paid Sick Leave should be mindful to provide all full-time employees the 80 hours of COVID-19 Supplemental Paid Sick Leave to which they are entitled under Labor Code section 248.2.

2. Compensation for Leave

In the same manner as EPSL, employees who qualify to receive COVID-19 Supplemental Paid Sick Leave under Labor Code Section 248.2 will be compensated for each hour of such leave at their “regular rate of pay” up to $511 per day and $5,110 in the aggregate.[27],[28]

Public agency employers should consult with their payroll administrators and any payroll service providers to ensure that COVID-19 Supplemental Paid Sick Leave will be provided at the appropriate pay rate, subject to the statutory cap for employees. Labor Code section 248.2, subsection (b)(3)(A) provides that each hour of COVID-19 supplemental paid sick leave shall be compensated at a rate equal to the following:

(i) For nonexempt covered employees, by the highest of the following:

(I) Calculated in the same manner as the regular rate of pay for the workweek in which the covered employee uses COVID-19 supplemental paid sick leave, whether or not the employee actually works overtime in that workweek.

(II) Calculated by dividing the covered employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.

(III) The state minimum wage.

(IV) The local minimum wage to which the covered employee is entitled.

(ii) For exempt covered employees it shall be calculated in the same manner as the employer calculates wages for other forms of paid leave time.

D. Retroactive Application of Paid Leave Obligations

The paid leave obligations provided under Labor Code section 248.2, and described above, are retroactive to January 1, 2021.[29] As such, employers must calculate and be prepared to compensate employees who took leave between January 1, 2021, and the date that the employer adopted a COVID-19 Supplemental Paid Sick Leave policy moving forward.

While Labor Code section 248.2 requires employers to provide a retroactive payment upon the oral or written request of the employee,[30] public agency employers may consider adopting a more proactive approach. Under such an approach, prior to receiving any employee request, the employer would calculate employees’ qualified leave usage and, after such leave usage is confirmed, provide the required compensation. Employers that elect to take such approach may consider having employees execute a waiver stating that the amount of qualified leave used by the employee and retroactive compensation provided by the employer is accurate and represents the total leave used and compensation owed.

Public agency employers that elect not to take a more proactive approach should note that the retroactive payment must be paid on or before the next full pay period after the employee’s request.[31]

Regardless of the approach taken by public agency employers to comply with the retroactive application of the paid leave obligations, the employer may count the retroactive COVID-19 Supplemental Paid Sick Leave provided against the total amount of COVID-19 Supplemental Paid Sick Leave to which the employee is entitled.

E. Employer Notice Obligations

Labor Code section 248.2 requires employers to post or electronically submit a model notice related to COVID-19 Supplemental Paid Sick Leave. The Labor Commissioner is developing a model notice that employers may use to satisfy the notice requirements concerning employee entitlement to COVID-19 Supplemental Paid Sick Leave.[32]

As many public agency employers have not yet reopened all worksites and facilities to their employees or returned all employees to such worksites and facilities, employers should post the model notice in a prominent location at all agency worksites and facilities and transmit the notice to all employees by the electronic means by which the employer communicates to employees about employment-related matters (e.g., email) in order to ensure that teleworking employees receive such notice in a timely manner.

II. Interaction between COVID-19 Supplemental Paid Sick Leave and the American Rescue Plan Act (“ARPA”)

The obligations set forth under Labor Code section 248.2 interact with two important provisions of the recently-enacted ARPA that may provide financial relief to public agencies that must provide COVID-19 Supplemental Paid Sick Leave: (1) payments available to local governments under the Coronavirus Local Fiscal Recovery (“CLFR”) Fund; and (2) the extension of payroll tax credits to public employers that provide Emergency Paid Sick Leave (“EPSL”) between April 1 and September 30, 2021.

In the section below, we explain how the obligations set forth under Labor Code section 248.2 interact with these provisions of the ARPA, and how public employers may use the federal relief provided thereunder to offset some, if not all of the costs, incurred because of the new obligations related to the provision of COVID-19 Supplemental Paid Sick Leave.

A. Coronavirus Local Fiscal Recovery (“CLFR”) Fund Will Provide Payments for Costs Incurred by Public Agency Employers related to the Provision of COVID-19 Supplemental Paid Sick Leave

1. Purposes Covered by CLFR Fund Likely Cover COVID-19 Supplemental Paid Sick Leave Costs

The ARPA established a $130 billion Coronavirus Local Fiscal Recovery (“CLFR”) Fund[33] to provide funds for cities, counties and special districts[34] in order to mitigate the fiscal effects stemming from the public health emergency caused by COVID-19.[35]

The Act provides four (4) general purposes for which local governments may use CLFR Funds:

1. 1. To respond to or mitigate the public health emergency related to COVID-19 or its negative economic impacts;
   2. To cover the costs incurred as a result of such emergency;
   3. To replace revenue that was lost, delayed or decreased as a result of such emergency after January 27, 2020; or
   4. To address the negative economic impacts of such emergency.

The first two purposes for CLFR Fund payments likely cover the costs related to the provision of COVID-19 Supplemental Paid Sick Leave. As a result, local governments that elected to provide some of the leaves provided under SB95 on a voluntary basis after January 1 may qualify to be reimbursed for such costs, and local governments that did not provide such paid leave, but now must do so, will likely receive payments for such costs.[36]

2. Applying for CLFR Payments to Offset Such Costs

In order for a local government to apply for CLFR payments, the local government must apply to either the federal government or the state, depending on the type of governmental entity that is applying for such funding. In our March 8 special bulletin, we describe the appropriate authority to which different types of local governmental entities should apply in order to receive CLFR payments.

As a result of the significant amount of CLFR funds available for COVID-19-related reasons, local governments, regardless of the type, should begin preparing to apply for such funds to cover the costs associated with providing COVID-19 Supplemental Paid Sick Leave. Liebert Cassidy Whitmore recommends that local governments immediately undertake the following steps: (1) assemble finance, and other relevant, staff members in order to determine the scope of COVID-19 Supplemental Paid Sick Leave costs incurred or that will be incurred as a result of the enactment of SB 95 and its retroactive application; (2) assess all such costs; and (3) prepare records of such costs to substantiate any claims for CLFR payments.

B. ARPA Payroll Tax Credits May Be Used to Offset a Certain Amount of the Costs Related to the Provision of COVID-19 Supplemental Paid Sick Leave

Labor Code section 248.2 also implicates the payroll tax credit for which public agency employers are now eligible under the ARPA.

The ARPA expanded payroll tax credit eligibility for employers that provide EPSL benefits to their employees to include public employers. Previously, under the FFCRA and the Consolidated Appropriations Act of 2021 (“CAA”), public employers were expressly excluded from receiving such tax relief.

Under ARPA, employers that provide expanded EPSL to their employees will receive payroll tax credits to offset the employer’s share of the employee’s Social Security tax (i.e., 6.2%) and employer’s share of the employee’s Medicare tax (i.e., 1.45%).

a. Qualifying for the Receipt of Such Tax Credits

While public employers are now eligible to receive payroll tax credits, in order to qualify for receipt of such credits under the ARPA, the employer must provide its employees EPSL leave between April 1 and September 30, 2021 for each of the qualifying reasons provided for under the ARPA.

The ARPA expanded the qualifying reasons for which an employee may receive EPSL and employers may receive payroll tax credit, supplementing the five (5) qualifying reasons initially provided for under the FFCRA^[37] with three (3) new qualifying reasons.

As a result of the expansion, if a public agency wants to receive a payroll tax credit, it must provide its employees paid leave if they are unable to work or telework due to any of the following eight (8) qualifying reasons:

1. 1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
   2. The employee has been advised by a health care provider to self-quarantine related to COVID-19;
   3. The employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
   4. The employee is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
   5. The employee is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19;
   6. The employee is obtaining immunization related to COVID–19; or
   7. The employee is recovering from any injury, disability, illness, or condition related to such a COVID-19 immunization’ after medical diagnosis; or
   8. The employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID–19 and such employee has been exposed to COVID–19 or the employee’s employer has requested such test or diagnosis

As provided above, the first seven (7) qualifying reasons for expanded EPSL closely align with the qualifying reasons for COVID-19 Supplemental Paid Sick Leave provided for under Labor Code section 248.2, but the eighth (8^th) qualifying reason provided for under ARPA is absent from the Labor Code.[38] Below is a chart for comparing the specific statutory language used to describe the qualifying reasons for COVID-19 Supplemental Paid Leave required under Labor Code section 248.2 and the paid leaves for which an employer may qualify for payroll tax credit under the ARPA:

Given that Labor Code section 248.2 now requires that employers provide COVID-19 Supplemental Paid Sick Leave for the first seven (7) qualifying reasons, public agency employers may consider providing their employees paid leave for the eighth (8^th) qualifying reason for expanded EPSL in order receive payroll tax credits for the provision of such leave between April 1 and September 30, 2021.

b. Misalignment of Effective Dates for Paid Leaves under the American Rescue Plan Act and SB 95

Employers that are considering expanding the paid leave provided in order to qualify for the payroll tax credits should note that the timing of the paid leaves under the ARPA and Labor Code section 248.1 do not align, and that the misalignment may cause issues with the administration of such leaves. Under the ARPA, in order for an employer to qualify for payroll tax credits, it must provide qualified full-time employees up to 80 hours of leave to be used between April 1 and September 30, 2021.[41] However, under Labor Code section 248.2, employers must provide qualified employees COVID-19 Supplemental Paid Sick Leave up to 80 hours of leave effective January 1, 2021.[42] Because of the misalignment of effective dates for two leaves, employers that wish to receive payroll tax credit may need to provide certain employees who have used COVID-19 Supplement Paid Sick Leave between January 1 and March 31, 2021 additional leave in order to ensure that such employees have 80 hours of expanded EPSL on April 1, 2021.

Employers should contact a certified public accountant (“CPA”) or tax counsel in order to evaluate whether the receipt of the payroll tax credits is worth the time and expense of administering a leave program that will require that the employer provide employees additional paid leave rights on April 1, 2021. Employers should also consider the fact, as described above, that they will likely qualify for the receipt of payment from the CLFR Fund and may not require payroll tax credits in order to minimize the costs incurred as a result of providing COVID-19 Supplemental Paid Sick Leave and complying with Labor Code section 248.2.

c. Availability of CLFR Funds to Cover Remaining Costs Incurred as a Result of Providing COVID-19 Supplemental Paid Sick Leave After Receipt of Payroll Tax Credits

Relatedly, public agency employers that are entitled to payroll tax credits as a result of providing qualified employees expanded EPSL between April 1 and September 30, 2021 may nevertheless incur costs associated with the provision of such paid leave, and, as described above, may qualify for and be eligible to apply for payment from the CLFR Fund.

Employers that receive payroll tax credits should apply for payment from the CLFR Fund in order to offset any remaining costs incurred as the result of the provision of paid leave provided to employees for reasons related to COVID-19 in the pertinent time period.

Liebert Cassidy Whitmore attorneys are familiar with obligations set forth in Labor Code section 248.2 and the operation of that law in conjunction with provisions of the ARPA. Should your agency have any questions about Labor Code section 248.2 and its potential effect on your agency’s leave policies and practices, please do not hesitate to contact the firm.

We are developing a COVID-19 Supplemental Sick Leave Model Policy that will be available to Liebert Library subscribers and for purchase by non-subscribers.

Lastly, the firm will be conducting a training with our tax counsel on the relief provided under the ARPA on March 31, 2021, that we recommend public agency employers attend in order to learn more about the operation of the important provisions of the law.