The Golden State just got a little more golden. On July 1st, 6.5 million Californians were granted paid sick leave for the first time in our state’s history. California’s momentous “Healthy Workplace, Healthy Families Act” officially went into effect this month, granting sick leave compensation for an estimated 40 percent of our state’s employees. With the passing of Assembly Bill 1522 and the subsequent amendment via Assembly Bill 304, California is now one of three states that require paid sick leave for all workers, regardless of whether they are part-time or full-time. This piece of legislation makes us extremely proud and is a great step forward in championing the people and companies that call California home.

Like with any new law, ABs 1522 and 304 raise a bunch of questions. In this case, the people impacted are the new legion of employees who are now able to benefit from sick leave for the first time, along with the business owners who have to interpret and follow the new set of rules. Luckily, we’re here to help explain. Keep reading to learn exactly what the requirements are all about, along with detailed instructions on how you can use Gusto to stay compliant.

The basics

It’s important to note that ABs 1522 and 304 apply to all employees that work in California, even if they are a non-resident and their company is headquartered out of state. To comply with the new law, businesses must:

  • Enable their employees to take no less than 24 hours of sick time per 12-month period (around three days for most folks). Employees are entitled under the law to begin accruing sick time on July 1st or 30 days after their hire date, whichever comes later.
  • Allow employees to accrue at least one hour of paid sick leave for every 30 hours worked. That number could translate to around eight days per year for full-time employees. Alternatively, the law permits employers to use a different accrual method from the above, provided that the accrual is on a regular basis. Under the law, the employee can have no less than 24 hours of accrued sick leave or PTO by either the 120th calendar day of employment, each calendar year, or in each 12-month period.
  • Permit employees to carry over their unused sick leave from the previous year. However, keep in mind that employers are allowed to cap accrual by designating a maximum sick leave balance of 48 hours at any one time for their workers.
  • Tell employees how many hours of used and remaining sick leave they have every pay period. Our check stubs make this easy to do!
  • Make sure they prominently display this poster in the office.

One important part of California’s sick leave law is that it allows employers to cap the use, accrual, and carryover of sick time. Here are some more details about each of those elements:

The three-day limit

Under the new law, businesses can (but don’t have to) limit the use of sick leave to 24 hours or three days a year; whichever scenario would be more generous to the employee. This limit can only be enforced if an employee works more than eight hours a day on average. Employers commonly cap the amount of sick time workers can take to prevent people from 1) stockpiling hours and 2) taking off an exorbitant amount of time. With the new law, employers can impose a ceiling as long as it remains at or above the 24-hour minimum requirement.


Carryover and accrual caps

Employers can also choose to cap how much leave a person can save up. ABs 1522 and 304 allow employees to carry over all of their unused sick time into the next policy year, but employers can restrict the amount of available sick hours in balance to 48 hours or six days (whichever is more generous). For example, let’s say an employee accrues 48 hours of sick time. The employee may carry over that entire available balance into the new year, but until they use a chunk of that time they will not be able to earn additional leave. Once the employee uses some sick leave and their balance drops below the balance cap, they resume accruing time as usual until they reach the limit again.

Businesses can be exempt from the carryover requirement if they “front load” sick time at the start of the policy year and the employee receives no less than 24 hours of leave to use immediately. For instance, an employee could be given 24 hours (or more) of sick leave on July 1st each year. They must be allowed to use as much of this time as they like when they like — as long as their use adheres to the organization’s time-off policy and satisfies the requirements of the law. Under this arrangement, an employer could choose to disallow the employee from carrying over any unused hours, since their balance would reset to the full allotted balance at the beginning of the year.

Good news: Generous policies are compliant!

California is famous for encouraging generosity. If an employer wants to go above and beyond the minimum sick leave requirements, they are allowed (and encouraged!) to do so. While the state permits employers to limit sick leave use and accrual, companies are by no means required to stick to those restrictions. For example, even though a company is allowed to restrict their employees to using no more than 24 hours of sick leave a year, they could choose instead to limit sick time use to 40 hours a year, 80 hours, or forego installing any cap at all. California believes in empowering employers to take care of the health and wellness of employees and their loved ones.

Calculating paychecks for employees? We’ll do the math for you with our California paycheck and payroll calculator.

So, how can I make sure I’m following the rules?

With Gusto, you’re already set. Log into your account and head over to the Sick Time Off Policy section. Once there, select the “Time can vary, depending on hours worked” option, which directly follows the law’s primary accrual method of “one hour per 30 hours.” Gusto also automatically carries over balances from the previous year, which adheres to the carryover part of the law. If you choose to impose a maximum balance, make sure the limit you set is equal to or greater than 48 hours (or the equivalent of six days, if that would be more beneficial to your employees).


Thanks to ABs 1522 and 304, a whole new group of people can reap the benefits of paid sick leave. We couldn’t be prouder to call our home state home.

Have any other questions about the California sick leave law? Flip through this FAQ for answers or reach out to us anytime at [email protected].

Michael Effertz Michael Effertz is a compliance researcher at Gusto, where he works on making compliance simple and intuitive for small businesses across the country.
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