On January 1, 2018, five changes to the Oregon Sick Time law will go into effect. While the overall requirement of the sick time law is pretty simple—employees are entitled to up to forty hours of protected sick time each year—there have been questions about how to calculate sick pay for commissioned and piece-rate workers, what limits can be placed on accrual and use of sick time, what constitutes an employer’s location, when owners and family members are exempt from sick pay and how to handle Paid Time Off policies that are used to satisfy the sick time law requirements. This past legislative session, the Oregon Legislature passed Senate Bill 299 to address these questions and hopefully provide clarification to employers.
Paid Time Off Policies
The original sick time law permitted employers to satisfy the statutory requirements for sick time with paid time off and vacation policies if they were substantially equivalent to or more generous than the minimum requirements of the sick time law. However, there has been confusion whether employers who offer more generous policies must track if paid time off is used for absences qualifying as sick time versus vacation or other personal reasons.
SB 299 clarifies that paid time off policies must, at a minimum, comply with the requirements of the sick time law for the first forty hours that the employer’s policy provides per year and need not comply with the law beyond that. Accordingly, once an employee uses the first forty hours of paid time off in a year, any remaining paid time off is not protected and need not comply with the sick time law requirements. This also means that employers are not required to track whether paid time off is used for qualifying absences under the sick leave law versus vacation. However, they may decide that such tracking is useful for purposes of calculating total employee remuneration for workers’ compensation premiums or to track time off under other laws such as the Oregon Family Leave Act or the Family Medical Leave Act.
Accrual and Use Limits
As originally written, some questioned whether the sick time statute allowed sick time accrual to stop after an employee accrued forty hours in a year. The legislature has clarified that, yes, sick leave accrual may be limited to forty hours per year.
Additionally, as originally written, the sick leave statute stated that employers could adopt a policy that limits an employee to accruing no more than eighty hours of total sick time or adopt a policy that limits an employee to using no more than forty hours of sick time in a year. The legislature clarified that it intended to allow employers to implement both of these limits and it did not intend for them to have to choose one or the other. With SB 299, the “or” has became an “and” and, effective January 1, 2018, employers can impose both of these limits.
If an employer has ten or more employees in Oregon, sick time is not only protected, but it is also paid. However, if the employer is located in Portland, the requirement to provide paid sick time kicks in with just six employees. In good news for smaller employers based outside Portland, the legislature clarified that an employer is not located in Portland if it only maintains a seasonal farm stand or a trailer that is used temporarily on a construction site for office purposes only.
Commission and Piece-Rate Employees
The original sick time law stated that commissioned and piece rate employees must be paid at their regular rate of pay. The Oregon Bureau of Labor and Industries defined the regular rate of pay for these employees as the rate of pay agreed upon by the employer and the employee. In the absence of a previously established regular rate of pay, the BOLI regulation stated that sick time must be paid at a rate no less than the applicable statutory minimum wage.
SB 299 provides clarification on two points. First, it clarifies that employees paid on a commission or piece-rate basis must be paid no less than the applicable minimum wage and the reference to regular rate has been eliminated. Second, SB 299 explains that employees who receive both base pay plus commissions or piece rate are to be paid their base rate or minimum wage, whichever is greater.
Owners and Family Members
The final statutory fix impacts small family-owned businesses in determining who must be provided protected sick leave and whether sick leave must be paid or unpaid. As originally written, the sick time law states that an “employee” does not include “an individual employed by that individual’s parent, spouse or child.” A strict reading of that language led to the conclusion that this exclusion only narrowly applied to unincorporated sole proprietors because corporate entities do not have parents, spouses, or children.
SB 299 clarifies that the definition of “employee” does not include owners or their parents, spouses or children if the owner is one of the following:
• A director of a corporation who has a substantial ownership interest in the corporation
• A member of a limited liability company who has a right to vote on or consent to any matter submitted to a vote or requiring the consent of the members of the LLC, and a substantial ownership interest in the LLC
• A partner of a limited liability partnership who has a substantial ownership interest in the LLP, or
• A sole proprietor of a business
A substantial ownership interest is defined as a percentage of ownership equal to or greater than the average percentage of ownership of all owners but not less than 15 percent.
Any individual who fits in one of the above definitions need not be provided sick time. Additionally, these individuals are not included in an employer’s employee count when determining whether the employer has ten or more employees (six or more employees in Portland) for purposes of whether sick time must be paid.
While this article provides an overview of the Oregon sick law updates, employers should consult with counsel regarding nuances for their workplace and update their policies to ensure full compliance in 2018.
Amy Angel, a partner at Barran Liebman LLP in Portland, frequently advises employers on leave law compliance, including the Oregon Sick Law, the Oregon Family Leave Act, the Family Medical Leave Act and the Americans with Disabilities Act.