Reed Smith Client Alerts

Despite vetoing similar proposed ordinances in 2011 and 2013, Philadelphia Mayor Michael Nutter signed the City Council’s February 12, 2015, “Promoting Healthy Families and Workplaces” Ordinance (Ordinance or Law). The Ordinance generally requires that employers with 10 or more employees grant their Philadelphia-based employees up to 40 hours of paid sick leave in each calendar year—leave time that accrues in increments of one hour paid leave time for every 40 hours worked. (Employers with nine or fewer employees must provide unpaid leave time under the same terms.) Also included in the Law are prohibitions against adverse employment actions taken because of employees’ use of Law-prescribed leave time and acts related to Law-protected rights, as well as new notice and record-keeping requirements.

Here are the important points for employers.

Who Is Covered

Employees. The Law covers all full- and part-time employees—defined as individuals who perform at least 40 hours of work in a year in Philadelphia, unless specifically excluded. Specific exclusions are: independent contractors (as defined by the federal Fair Labor Standards Act (FSLA)); seasonal workers; adjunct professors; interns (insofar as the work they perform is for the educational institution where they attend); health care professional “pool” employees; state and federal employees; employees hired for a term of less than six months; and employees covered by a collective bargaining agreement (CBA).

  • The Ordinance is silent as to whether it covers union-represented employees who currently lack an initial or negotiated successor CBA. Employers and unions appear free, however, to agree to provide less (even no) paid sick leave time for CBA-covered employees.

Employers. Any employer of at least 10 employees who work for at least 40 weeks in a year (including full-time, part-time, and temporary employees, regardless of where their work is performed), must provide paid sick leave under the Law. So, too, must all “chain establishments” with 15 or more locations nationwide that have Ordinance-defined employees.

Notwithstanding the foregoing, any employer with a paid leave policy that makes available an amount of paid leave (including but not limited to vacation days, sick days, short-term disability benefits, floating holidays, parental leave, personal days, or PTO), that is sufficient to meet or exceed the Law’s accrual requirements—where that paid leave may be used for the same purposes and under the same conditions as the accrued Leave provided for in the Law—is not required to provide additional sick time as a result of the Law.

When and How Paid Sick Leave Accrues and May Be Used Paid sick leave will begin to accrue on the earlier of: (1) May 13, 2015, for any employee who is employed as of that date; or (2) the date employment commences, for any employee who becomes employed after May 13, 2015. All employees not entitled to paid leave under the Law are entitled to unpaid leave under the same terms.

Employees accrue (i.e., “earn”) at least one hour of paid sick leave (“Leave”) for every 40 hours worked in Philadelphia, up to a maximum of 40 hours per calendar year (unless the employer selects a higher limit).

  • FLSA-“exempt” employees are assumed to work 40 hours/week for purposes of Leave accrual, unless their normal work week is fewer than 40 hours, in which case Leave accrues based on the hours in that normal work week.

Leave may be used not only (1) in connection with an employee’s own “health condition,” but also in connection with (2) care for the “health condition” of a “family member,” and (3) absences necessary because of “domestic abuse,” “sexual assault,” or “stalking” (hereinafter collectively, “Abuse”), under certain specified conditions set forth in the Law. (An employee who takes Abuse-associated Leave may, after accrued paid Leave is exhausted, take unpaid leave as otherwise provided in the City Code.)

Employees may begin using accrued Leave (i.e., by taking off from work) as of the 90th calendar day following commencement of employment. After that 90th day, employees may use Leave as soon as it is accrued. (In their discretion, employers may, but are not required to, “loan” Leave time to employees in advance of accrual.)

Accrued Leave may be taken in the smaller of: (1) hourly increments, or (2) the smallest increment that an employer’s payroll system permits.

  • This provision makes the Law similar to the federal Family and Medical Leave Act (FMLA), which may entitle employees to take “intermittent” (though unpaid) leave for certain events set forth in that statute.

Employee Advance-Notice & Medical Certification Requirements An employee may take accrued Leave upon his or her oral or written request. When possible, the employee shall provide the expected duration of the absence.

  • When an employee knows in advance of the need for Leave, such as for a scheduled appointment with a health care provider, as defined in the Law (hereinafter, an “HCP”), the employee shall provide the employer with notice of the need for Leave “in advance,” and shall make a “reasonable effort” to schedule the Leave so as not to unduly disrupt employer operations. (The Law does not define, or further describe, what is meant by “in advance” or “reasonable effort.”)
  • For all other absences, the employee shall provide the employer with notice before the start of the employee’s scheduled work hours, or as soon as practicable if the need for Leave arises immediately before or after the employee has reported to work.

Only in the case of Leave taken for more than two consecutive days may an employer require reasonable documentation that the Leave is for a purpose permitted by the Law.

  • For Leave associated with a health care condition of the employee or a family member (hereinafter, “Health-Related”), documentation signed by an HCP indicating that absence from work is necessary shall be considered reasonable.
  • For Abuse-associated Leave, each of the following is considered reasonable: documentation signed by an HCP; a police report indicating that the employee was a victim of Abuse; a court order; or a signed statement from a victim services organization representative that affirms that the employee was a victim of Abuse.
  • An employer may not require that the documentation explain the nature of the illness or the details of the violence. (It is not clear from the Law whether this provision applies only to Abuse Leave, or also to Health-Related Leave.)

Payment & Carry-Over Provisions When an employee uses accrued Leave, the employer must pay him or her for the time off from work at the same rate and with the same benefits, including health care benefits as if the employee were working.

There is no requirement that an employer pay a departing employee the value of any unused, accrued Leave time upon his or her employment termination. The Law does, however, provide for carry-over: an Employee’s unused, accrued Leave time carries over to the following calendar year, unless the employer provides, at the beginning of each calendar year, at least 40 hours of “sick time” (a term not clearly defined in the Law); but, employers may prohibit employees from taking more than 40 hours of Leave in any calendar year.

Prohibited Conduct The Ordinance makes it unlawful for an employer: (1) to deny the right to use accrued Leave; or (2) to discharge (or threaten to), demote, suspend, or in any manner discriminate against any employee for: using or attempting to use accrued Leave, filing a complaint with the Agency or alleging a violation, cooperating in an investigation or prosecution of an alleged violation, or opposing any policy or practice that is prohibited by the Law.

The Law creates a rebuttable presumption that an employer has automatically committed unlawful retaliation if the employer takes any adverse action against an employee within 90 days of that employee: filing a complaint or alleging a violation of the Law (“Violation”); informing “any person” about any alleged Violation; cooperating with an investigation or prosecution of an alleged Violation; or opposing any policy, practice, or act that is unlawful under the Law.

Employer Notice, Posting & Record-Keeping Requirements Employers must notify their employees of the new rights guaranteed by the Law. The following information must be included: the entitlement to paid Leave, the amount of such Leave, and the terms under which such Leave may be taken; that retaliation for requesting or using Leave is prohibited; and that each employee has the right to file a complaint or commence a civil suit if an Employer denies Law-provided Leave or retaliates against an employee for requesting or taking Leave (collectively, the “Information”).

Employers may fulfill their notice obligations by either: (1) supplying each employee with a notice in English (and in any language that is the first language spoken by at least 5 percent of the employer’s workforce (“Other Language”)) that contains the Information; or (2) displaying a poster in a conspicuous and accessible place in each establishment where such employees are employed that contains the Information in English and the Other Language. (The Law directs that an agency office to be designated by the Mayor (“Agency”) will create and make available to employers, posters that can be used for compliance under subsection (2).) The Information must also be included in any employee handbooks distributed to employees.

Finally, employers must commence recording, maintain for two years, and make available to the Agency (for purposes of monitoring compliance with the Law’s requirements) certain documentation that sets forth: the hours employees work, the amounts of Leave taken, and the payments the employer makes in connection with that Leave. Understand that these new record-keeping requirements have teeth: if an issue arises regarding an employee’s entitlement to Leave under the Law—where the employer has not maintained or retained “adequate records,” or denies the Agency reasonable access to such records—it will be presumed that the employer is guilty of a Violation, absent “clear and convincing evidence otherwise.”

Recommendations: What Employers Should Do Now Organizations with employees who perform work in Philadelphia should consider taking the following steps now to prepare for the Law’s May 13, 2015, effective date:

  • Assess existing paid sick leave/PTO policies and procedures to evaluate whether they will suffice to meet the Law’s new mandates—with special attention to the Law’s reticulated provisions regarding accrual rates, carry-over rules, notice/posting requirements, and anti-retaliation prohibitions—and, if not, to decide what revisions should be made.
  • Ensure that timekeeping, payroll, and benefits systems properly calculate, track, and detail the accrual and use of Leave under the Law, and that this documentation is accessible in the event of an Agency inquiry.
    • If a third-party payroll processor is used, notify it of the new requirements and obtain certification that it has systems in place to ensure compliance (or will do so)—including that itemized wage statements or other written notices provided at the time of employee payments specify the amounts paid for time during Leave.
  • Create addendums to any employee handbooks to include the Information. Consider creating additional acknowledgement forms (similar to those maintained for employer policies against workplace harassment) to protect against future claims by employees.
  • Finally, keep watch for the Agency’s anticipated poster—use of which should facilitate compliance with the Law’s new notice requirements—and also decide whether (and if so, where), notice of Information will be required in an Other Language, in addition to English.

Concluding Thoughts The Law’s impact on Philadelphia employers will be primarily financial and should, in most respects, be straightforward (albeit logistically burdensome in the short term). That said, undoubtedly there will be uncertainties caused for some employers by ambiguities in the Law language (such as what it means to work “in Philadelphia,” and/or to do so “for at least 40 hours”). Particularly at issue in this regard will be employers that are based outside Philadelphia that have employees who live—and telework—within city limits, as well as regional employers with mobile workforces that include employees who work both in and outside the city). Unfortunately, for now, employers are best advised to err on the side of inclusion. We will keep you posted as any further guidance is provided by the Agency and eventually worked out through the court system.


Client Alert 2015-041