November 1, 2016

The New Oregon Sick Leave: Policy Update Pitfalls and a Wrinkle for Prevailing Wage Work


This article originally appeared in the October 24, 2016, edition of the Daily Journal of Commerce

As you likely know, as of this year Oregon law mandates that sick leave benefits be provided to employees working in the state.  For employers with 10 or more employees in Oregon or more than 6 employees in Portland Metro Area, it is paid leave.  For employers with less than the minimum threshold, the leave is unpaid.  The law exempts employees who are covered by a collective bargaining agreement, hired through a hiring hall or similar referral system, and who already receive such benefits through a joint multi-employer-employee trust or benefit plan. 


The law allows the sick leave benefit to be satisfied by a substantially equivalent vacation, sick leave, or paid time off (PTO) policy, and an overwhelming majority of the employers we have encountered this year are in that boat.  A note of caution to those of you who are assuming that just because the company’s existing policy provides for at least 40 hours of paid leave, it doesn’t need updating:  This is unlikely to be true. 


In fact, many pre-existing policies actually have gaps, contrary provisions or other procedural requirements that conflict with the new law and require updating for compliance.  Here are some that we have encountered:

  • Eligibility is too narrow.  Many pre-existing policies provide leave only to regular, full-time employees, and often only after a certain time period.  The new law requires that leave begins to accrue immediately upon hire, and irrespective of whether the person is exempt or non-exempt, full or part time, or seasonal/temporary or regular.  Note, that it does permit an employer from prohibiting the use of accrued leave until the 91st day of employment, however. 
  • Accrual isn’t clear or complete.  This mandatory sick leave must accrue for all employees at a rate of at least 1 hour for every 30 worked, up to a total of 40 hours per year.  As an alternative to the hourly accrual method, employers are permitted to frontload the entire amount of leave at the beginning of the year.  For new employees who have not yet worked a full year, that amount can be pro-rated.  The rules also permit employers to adopt different accrual methods for different classes of employees, provided the classification is established by the employer for reasons other than sick leave administration.  For example, you may opt to use the accrual method (i.e., 1 hour for every 30 worked) for hourly non-exempt employees and the frontload method (a lump sum of 40 hours or more) for exempt (salaried) employees.  You may also draw the distinction between regular full-time and part-time or temporary, or do both.  Either way, your written policy should be clear and cover all applicable classifications.
  • Too much notice is required.  The Oregon law allows employers to require no more than 10 days’ notice of need for leave when the need is foreseeable.  Pre-existing policies or rules that require more than 10 days’ notice need to be updated accordingly. 
  • The policy includes an outdated list of permissible uses.  What must be excused and not counted against an employee under the new sick leave law is broader than just an employee’s personal illness or medical care.  If your current policy lists specific reasons that leave can be used for, it should be updated to include: time off for family member health issues, absences protected by Oregon’s Domestic Violence Leave laws, absences due to school closures resulting from a public health emergency or other related public health concerns, time needed for attending/making arrangements for funerals and related absences, and any other reasons required under the new law.
  • Verification is required for situations that no longer permit it.  Absent reasonable suspicion of abuse, medical or other documentation of the need for sick leave cannot be required unless the absence exceeds 3 days or is foreseen.  Just as under the Oregon Family Leave Act (“OFLA”), the employer is required to pay the cost of any medical verification that is not covered by insurance or another benefit plan. 
  • Carry-over is not clearly addressed.  The law requires that up to 40 hours of unused accrued sick leave be permitted to carry over into the next year.  Employers can avoid carryover only by cashing out accrued leave at the end of the year and immediately frontloading the entire annual amount at the beginning of the next year. 
  • Forfeiture is not addressed.  Employees sometimes have the misconception that accrued sick leave must be paid out at termination.  That is not true under current Oregon law, so we strongly recommend that if an employer does not plan to cashout the sick leave benefit at the end of employment, they clearly state that in their policy to avoid confusion or misunderstandings.  Also, be aware that the full amount of previously accrued leave be credited back to an employee if they are rehired within 180 days.  You do not necessarily need to include that in your policy, but you do need to be sure to comply if it applies.



There is a new “wrinkle” for employers who do state public works projects or other prevailing wage work that needs special attention: the paid leave benefit mandated by the Oregon Sick Leave Law may NOT be credited toward fringe benefits because prevailing wage laws only allow credit for sick leave benefits NOT mandated by law.  That means for employers that only offer the 40 hours of paid benefits required by law, that amount now cannot be credited toward fringe.  However, if you offer additional benefits beyond 40 hours, or if you are an employer only required to provide unpaid sick leave but opt to make it a paid benefit, it can be credited toward fringe.  This interplay was recently clarified in an updated resource published by BOLI online here


For employers working federal contracts, an Executive Order that will impose a similar sick leave requirement is also scheduled to go into effect on January 1, 2017, but with a higher accrual cap at 56 hours.  The DOL issued the Final Rule at the end of September and confirmed that the same interpretation will be applied in the context of the federally mandated sick leave.  That is, only sick leave in excess of what will be mandated by the Executive Order (or Oregon law, if applicable) will count toward Service Contract Act (SCA) or Davis Bacon Act (DBA) fringe benefit obligations. See, Frequently Asked Questions published by the DOL’s Wage and Hour Division here.


We hope that this brief summary has been useful.  Of course, it is merely intended to highlight some unique practical considerations related to the new sick leave law and related employer policies, not to replace independent legal advice for any particular situation or proposed policy.  

For more information on this topic, please contact or call (888) 598-7070.

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