Windy City Employers: Prepare for a gust of additional changes in paid leave obligations, starting July 1

Since January 1, employers across Illinois have been figuring out how to ensure that their paid time off policies meet the requirements of the Illinois Paid Leave for All Workers Act that went into effect at the beginning of the year. For the unfamiliar, the Illinois Act mandates that all employees receive at least 40 hours of paid time off per year, which can be used for any reason, and which accrues at a rate of at least 1 hour for every 40 hours the employee works. Now, for Illinois employers with employees located within the City of Chicago, the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance will double the minimum amount of paid leave that employees must get. The Chicago Ordinance, which was passed by the Chicago City Council on November 9, 2023, and subsequently amended on December 14, 2023, goes into effect on July 1, 2024, so employers have just a few weeks to make sure they are prepared.

In contrast to the Illinois Act, the Chicago Ordinance introduces two distinct categories for paid time off: Paid Leave days and Paid Sick Leave days. Under the Chicago Ordinance, employees must accrue one hour of each type of leave for every 35 hours worked, with the mandate for each type of leave capped at 40 hours over a 12-month period. The flexibility of Paid Leave allows it to be used for any reason, while Paid Sick Leave can be used for the employee’s own illness, to take care of a family member, to address domestic violence and for public health emergencies, such as a pandemic.

There are other significant differences between the two types of leave under the Chicago Ordinance that will require some effort by Human Resources professionals and payroll departments to make sure they are handled properly. If an employee does not use all of the allotted 40 hours in a given year, the employer must allow up to 16 hours of accrued Paid Leave to carry over into the following year, and up to 80 hours of Paid Sick Leave. If an employee has accrued and unused time available upon separation from employment, large employers (defined as having at least 101 employees) must pay out all unused Paid Leave, but there is no requirement to pay out unused Paid Sick Leave. For medium employers (meaning those with 51-100 employees), only 16 hours of unused Paid Leave will need to be paid out upon separation from employment. However, starting July 1, 2025, medium-sized employers will be required to pay out all unused Paid Leave to separated employees. For small employers (those with fewer than 50 employees), there is no requirement in the Chicago Ordinance that unused Paid Leave is paid out, but depending on how the employer’s policies are written, payout may be separately required under the Illinois Wage Payment and Collection Act.

Employers are encouraged to review their existing leave policies to ensure compliance with these laws. As always, Constangy will diligently monitor any developments and new interpretative guidance or rules that are issued, to field questions that arise from our clients.