Illinois Paid Leave for All Workers Act

Compliance, Employee Benefits

On March 13, 2023, Illinois Governor Pritzker signed the Paid Leave for All Workers Act (PLFAW) into law. Under this new law, a majority of employees working in Illinois will be eligible to earn 1 hour of paid leave for every 40 hours of work, with employees being able to earn a minimum of 40 hours of paid leave in a 12-month benefit year. The PLFAW Act will be effective as of January 1, 2024 and what follows is an overview of the new law.

Covered Employers

PLFAW applies to a majority of employers with employees working in Illinois. Given the breadth of the law, it is easier to highlight which employers are not covered by PLFAW. Excluded employers are:

  • School districts organized under the Illinois School Code;
  • Park districts organized under the Illinois Park District Code; and
  • Any employer covered by a municipal or county ordinance that is effect on January 1, 2024 that requires employers to offer paid leave to their employees.

Covered Employees

PLFAW covers most employees working in Illinois. Below are employee categories that the new law does not apply to:

  • Employees as defined by the Railroad Unemployment Insurance Act or Railway Labor Act;
  • Students enrolled and attending college/university who are employed on a temporary basis at less than full time by that college/university;
  • Short-term employees employed by an institution of higher education for less than 2 consecutive calendar quarters who does not have a reasonable expectation of being rehired for the same job in the next calendar year;
  • Employees in the construction industry who are covered by a bona fide collective bargaining agreement; and
  • Employees covered by a bona fide collective bargaining agreement with an employer that provides services nationally and internationally of delivery, pickup, and transportation of parcels, documents, and freight.

Benefits Provided

The law mandates the following benefits to eligible workers effective January 1, 2024:

  • Accrual: Under PLFAW, covered employees earn 1 hour of paid leave for every 40 hours they work. At a minimum, employees are able to earn 40 hours of paid leave during a 12-month benefit year, though employers can choose to allow an employee to earn more. Employees exempt from overtime under the Fair Labor Standards Act are treated as working 40 hours a week unless their regular work week is less than 40 hours.
  • Use: Paid leave can be taken by an employee for any reason with a minimum use increment of 2 hours. An employer may require a 7-day advance notice to use paid leave if the use of paid leave is foreseeable.
  • Rate of Pay: While on leave, employees are paid their hourly rate. Employees who work for gratuities or commissions must be paid at least the minimum wage in the jurisdiction where they work.
  • Start date: Employees can begin using their paid leave under PLFAW 90 days after the start of their employment or 90 days after January 1, 2024, whichever is later. Employers can choose to “frontload” benefits by providing the minimum number of required paid leave hours on the first day of employment or the first day of the 12-month benefit year.
  • Carryover: Unused paid leave carries over between 12-month benefit years, though employers are not required to provide more than 40 hours of paid leave during a year. Employers who frontload the required minimum amount of paid leave at the beginning of the 12-month benefit year are not required to carry over unused leave.

Employer Obligations

The law creates the following obligations for employers operating in the State of Illinois:

  • Timeline: Employers must establish a 12-month benefit year which will be used to calculate paid leave accrual. Employers are free to choose any 12-month period as their benefit year as long as they disclose the 12-month period in writing at the time of hire. Employers can change the 12-month benefit year if they give written notice to employees in advance and the change does not reduce the amount of available paid leave.
  • Posting requirement: Employers must post a notice in a conspicuous place where other notices are customarily posted that summarizes PLFAW and an employee’s rights under the law. The Illinois Department of Labor is preparing a notice that can be used for this purpose.
  • Recordkeeping: Records pertaining to PLFAW must be retained for at least 3 years. The records must document the number of hours an employee worked, the amount of paid leave accrued and taken, and any remaining paid leave balance.
  • Benefits: Employees on paid leave are to have group health coverage maintained for themselves and their family as if they were actively at work.
  • Unused time: Employers are not required to pay out any earned but unused paid leave under PLFAW when an employee terminates employment or at the end of a 12-month benefit year. However, if an employer credits PLFAW paid leave towards an employee’s paid time off bank or paid vacation amount, then earned, but unused, paid leave must be paid out per the Illinois Wage Payment and Collection Act.

Key Takeaways:

Employers with employees located in Illinois would be well-served to review their current paid leave policies to determine if any changes are necessary to comply with the PLFAW. Employers may already have paid leave policies in place that meet requirements of PLFAW and will need to take minimal action to comply with the law. Employers without a paid leave policy may need to take more drastic steps to come into compliance with PLFAW and would be well-served to determine what steps they need to remain compliant with state law.

The information provided is a summary of laws and regulations relating to employee benefit plan compliance. This information should not be construed as legal advice. In all cases, employers should consult with their own legal counsel.

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