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‘Paid Leave for All’ becomes law: The good, the bad, and the concerning

Illinois Gov. JB Pritzker shows off the signed Senate Bill 208 on March 13, 2023 during a ceremony to celebrate the legislation’s enactment. SB 208, aka ‘Paid Leave for All’ Act, guarantees up to 40 hours of paid leave annually for all employees, including part-time workers, with limited exceptions. (Melissa Crockett Meske/Illinois Business Journal)

By MELISSA CROCKETT MESKE
macmeske@ibjonline.com

On Mar. 13, 2023, Illinois Gov. JB Pritzker signed Senate Bill 208 into law, ensuring at least 40 hours of paid leave annually for all employees, including part-time workers. 

Illinois becomes the third state in the nation to guarantee paid leave, affecting approximately 1.5 million workers throughout Illinois. Nevada and Maine are the other two states currently that require paid time off for all workers, while 14 other states have some type of legislation in place concerning sick time.

Effective Jan. 1, 2024, workers throughout the state will begin to earn paid leave on their first day at a rate of one hour of leave for every 40 hours worked, up to 40 hours of paid leave each year. Employees will have the option to use their paid time off either after their first 90 days of employment (if employment begins after Jan. 1, 2024) or 90 days after the new law takes effect (if already employed without guaranteed PTO).

“Working families face so many challenges, and it’s been my mission to alleviate those burdens in every way I can,” Pritzker said during the bill signing ceremonies. “Employers benefit from allowing employees to tend to the urgent personal matters of their lives. Workers’ productivity increases, and the often gain greater passion for their job when they can manage the stresses they face outside of work.”

“I’m exceptionally proud that labor and business came together to recognize the value of this requirement to employees and employers alike,” Pritzker added.

The new law applies to every employee working for an employer in Illinois, including domestic workers, but does exclude independent contractors. The measure also does not apply to employees subject to collectively bargained contracts. Time off for this employee category would be subject to negotiations between their union and the employer.

Among those also speaking in support of “Paid Leave for All” during the press conference:

Rob Karr, President & CEO of the Illinois Retail Merchants Association (IRMA): “This measure, the result of compromise and collaboration, provides what employers and employees want – consistency and simplicity.” 

Mark Denzler, President and CEO of the Illinois Manufacturers’ Association: “This legislation strikes the right balance between ensuring employees receive the time off they need and providing businesses flexibility to implement these policies.” 

Tim Drea, President of the Illinois AFL-CIO: “No one should ever be faced with having to decide between their job, family or their physical or mental health. Now, workers in our state will have a guaranteed, minimum amount of paid time off that they can use for any reason – whether it is visiting a doctor, attending a parent-teacher conference, caring for a family member, or recovering from domestic violence.”

This legislation passed through both chambers during the lame duck session of the 102nd General Assembly earlier this year. Prior to the act’s passing, workers in Illinois were not always guaranteed paid time off from employers for sick leave, childcare, medical appointments, or other reasons. 

Ultimately, the measure received few Republican votes in the House, and passed the Senate with only Democratic support.

In January, when SB 208 was debated on the floor, a key point of opposition introduced to the conversation was the burden it might impose upon small businesses by raising costs. Maybe not ‘bad,’ but undoubtedly concerning.

Rep. C.D. Davidsmeyer (R-Jacksonville) said, on the House floor, “My major concern are the little guys. It’s the mom-and-pops that have 5, 10, maybe 13 employees, that this has a significant impact on their budgets.” 

But Gov. Pritzker pushed back against this. “Just like bigger businesses, small businesses want their workers to be more productive, to be able to deal with their stresses, emergencies at home, so they can be better and more productive at work,” said Pritzker.

Davidsmeyer is still not alone in his concerns. 

Marc Voegele is the owner and certified professional staffing franchisee with Express Employment Professionals in Glen Carbon. His agency provides staffing solutions to employers throughout the region. His firm is in a unique position as both an employer and employee services provider. 

Voegele noted: “I think this is the latest in cost increases to businesses that, large or small, get passed onto the customers. While the workforce will view this as a benefit, I envision at least two unintended consequences. This will add another reason for Illinois based companies to consider leaving and companies exploring moving to Illinois to hesitate. In addition, the language in the bill that codifies allowing absences ‘for any reason’ will not help the mindset of a workforce already struggling with improving soft skills.”

For many, the mandated paid time off isn’t necessarily what’s of major concern for businesses; more so, it’s the “for any reason.”

In a story reported by the Associated Press and published recently by MarketBeat.com, Sandy and Dave Schoenborn, who own the Lincoln Theatre in Belleville, said this state mandate that begins in 2024 is of major concern already.

 “I’m pretty worried,” Sandy Schoeborn said to the Associated Press. “Unless business gets better, it’s gonna be a strain.”

“I can’t say no. If I have a big event coming up and everybody decides to take off, I’m in a world of hurt,” Schoeborn further noted.

Doug Knight, co-owner of Knight’s Action Park, a Springfield, Ill., amusement park located just a bit north of the St. Louis Metro East region, mainly employs seasonal employees not covered by the measure. But the company will have to provide mandated paid leave for its 10 year-round workers. 

Knight said he does his best to take care of his employees without the mandate in place. “If they have a reason, they can take off a day,” Knight told AP. “Car broke down, mom’s sick, gotta take the dog to the vet… they’re all important to the staff. But you can’t close your business because everybody wants to take off cause there’s a concert.”

The pandemic, inflation, utility prices — “it just all seems to be piling up,” and mandatory paid leave is now another hurdle for business owners. “It just drives the cost up, drives the prices up, and the consumer pays the bill,” Knight pointed out further. 

Michael LeRoy, a University of Illinois labor professor, told the Champaign News-Gazette that he thought the law went “too far” with its open-ended paid leave provision and its potential impact on small employers. 

LeRoy told the Champaign publication that he was concerned that the new law might further “aggravate the problem of employees being reclassified as independent contractors – resulting in those employees not only losing the new paid-time-off guarantee but also falling outside such current legal protections as earning at least minimum wage and entitlement to workers compensation.”

Attorney-at-Law Thomas E. Berry with the St. Louis-based firm Jackson Lewis P.C. echoed the concerns shared here in his deep dive of SB208’s ultimate impact for the IBJ. 

“On first blush, it may be seen (and portrayed) as not creating much of a new burden on employers,” Berry shared, “because most employers already provide either vacation days, sick days and personal days, or, alternatively, combine all such available benefits into a general bank of paid time off (“PTO”) hours, to their full time employees that exceed more than 40 hours of time during a 12-month period. 

“There are a number of other statutory requirements to the Illinois paid leave time that exceed most employer policies,” he shared further. “For instance, an employer must front load all 40 hours on Day One of the benefit year if it wants to require employees to use such leave time during the year or lose such hours at the end of the year. 

“If an employer does not front load the full 40 hours, i.e., requires the employee to accrue one hour of paid leave time for every 40 hours worked, then such employees are allowed any unused hours to roll over to the next year even though they are precluded from using more than 40 hours of Illinois paid leave during the next benefit year,” Berry continued.

“Thus, employees can potentially roll over year after year a number of unused Illinois paid leave hours, which potentially can grow to a large bank of time that potentially would have to be paid out in cash to an employee at the time of separation, whether voluntary through resignation or retirement or involuntary through layoff or termination.”

Berry then addressed the “for any reason” verbiage: “…the Illinois paid leave hours may be taken by the employee for any reason. Further, the employer cannot mandate that the employee state a reason for wanting to use any of the accrued Illinois paid leave nor can an employer mandate that the employee must document the need for such Illinois paid leave…an employee has a right to use Illinois paid leave ‘no questions asked.’ Relatedly, the employee has the right to use Illinois paid leave prior to using any other employer provided paid leave hours (whether vacation, sick, personal hours or PTO hours).

Employers will likely need to amend or revise existing policies regarding vacation, sick, personal hours or PTO in order to correlate with the Illinois-mandated paid leave, Berry further noted. “The temptation may be to combine both into a single bank for paid time off. If an employer does so, it will likely have to pay out all accrued but unused hours to the departed employee. If the employer maintains a separate bank of time for Illinois paid leave hours and vacation, sick, personal hours or PTO hours, then it may not have to pay out the accrued but unused Illinois paid leave hours. 

“Maintaining separate banks of time, however, will create additional administration responsibilities for employers in order to navigate the separate Illinois statutory requirements for final wage payments along with payment of accrued but unused vacation time of PTO hours if the employer maintains a combined bank of time under its existing policies,” Berry explained further. 

Berry also reiterated that this statutory requirement applies to practically all employers. It is not limited to small employers, e.g., employers with less than 15 employees. “Any employer with one or more employees is covered by these requirements,” he said. “It is undoubtedly rare for a true small employer to have a robust human resources department or HR professional in the organization that is adept to navigate through the seemingly contradictory requirements.”

Another note that Berry touched upon regarding Illinois’ “Paid Leave for All” was that, not only does the statutory requirements to provide Illinois paid leave apply to all employers, large and small, such employers must provide Illinois paid leave benefits, whether or not such employees are full-time employees or part-time employees.  

“While an employer working 10 to 20 hours a week will be unable to accrue a full 40 hours each year, this individual is still entitled to accrue Illinois paid leave on the same basis, i.e., one hour of paid leave for every 40 hours worked and can still use paid leave for any reason after working 90 days with the employer,” Berry said.

The Illinois version of the “paid leave for all” is more far-reaching than in the other two states where it already exists. In Illinois, the mandate will apply to all sizes of companies.

Berry concluded our conversation with these additional insights: 

“The fact that the Illinois paid leave Act was rushed through the lame duck session created the potential situations for many unintended consequences for all Illinois employers as they try in good faith to administer and implement the requirements of the Act. The fact that Illinois is only the third state on enact paid leave time only exacerbates the problem because there is not any meaningful precedent from other states to review as employers try to administer and implement the requirements of the Act.  And of course, imposing a number of administrative requirements on practically all employers in the state will only result in small employers invariably running afoul of the statutory requirements without any bad intent or motive. Many small employers simply lack the internal resources to successfully navigate the statutory requirements.”

(EDITOR’S NOTE: This story also appears in the April 2023 print edition of the Illinois Business Journal.)

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