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The Potential Impact of the Proposed Portland Paid Sick Leave Ordinance

Following a trend in other West Coast cities, the Portland City Council is working on passing a paid sick-days ordinance. This proposed ordinance, which is expected to be modeled after the Seattle and San Francisco ordinances currently in effect, would apply to all Portland businesses and all employees. These businesses would be required to give employees one hour of paid sick leave for every 30 hours of work.  The employees would also be allowed to carry over up to 40 hours of sick time for the next calendar year.

The significance of this ordinance for Portland businesses, particularly those in the food service and lodging industries, can’t be understated. An employer could be impacted both financially in providing paid sick leave under the ordinance, and indirectly with increased administrative burdens. Indeed, some Seattle employers have found that dealing with administrative policies and procedures can be onerous; however, getting the policies and procedures in place is essential in order to comply with the city’s recently enacted Paid Sick Leave Ordinance. 

If a sick leave ordinance that is similar to Seattle’s is passed in Portland, you would see an impact in the following areas:

Personnel policies would need to be reviewed and may need to be revised in order to bring them into compliance with the ordinance. Ask yourself the following questions:
• Does your policy meet the minimum requirements under the proposed ordinance?  
• Does your company have a current sick leave or PTO policy that requires an employee to “use it or lose it” before year end? That is, employees may not carry over any unused time off from year to year, or carryover is limited to a certain number of hours or days. If so, the policy will need to be revised to allow the minimum of sick or PTO hours under the ordinance to be carried over to the following calendar year.  
• Does your policy have a qualification period before an employee begins accruing paid leave (e.g., the employee must work for the employer for at least six months)? If so, your policy will need to be amended if hours under the proposed ordinance begin accruing from the employee’s first day of work.  
• Does your policy also impose certain conditions that must be met before allowing the paid leave (e.g., a doctor’s note or other form of verification)? If so, this policy may not be allowed under the proposed ordinance.
Rather than sorting out the rules and regulations on their own, companies may need to seek the advice of professionals to review their policy for compliance.

This is another area where companies may choose to seek the advice of professionals. Payroll processing systems should be evaluated to determine if sick leave hours accrued, paid and rolled forward to the next calendar year can be tracked, accounted for and reported accurately. As the proposed ordinance currently stands, only employee hours worked in Portland would count toward accrual, and an employer is only required to permit use of the paid sick leave for work an employee performs in Portland. Therefore, if a company has employees who also work in other cities besides Portland, complications in tracking hours earned and used can occur if the payroll time entry system does not separately account for employee hours worked in Portland.
Accounting policies and procedures should be in place to ensure that sufficient documentation exists to support hours worked by employees, accrued sick leave hours earned, and paid sick leave hours taken.  The bookkeeping requirements can be daunting and the rules get complicated especially for businesses that have employees who work at different job sites both inside and outside city limits.

Finally, companies should prepare for the impact, if any, on financial reporting for the accrual of employee sick leave hours earned. The proposed ordinance permits employees to carry over unused sick hours to the next calendar year but does not require the employer to compensate for unused paid sick hours upon an employee leaving their job.
Under generally accepted accounting principles, an employer is not required to accrue a liability for an employee’s rights to receive sick pay benefits based on these conditions. However, if the company’s policy combines vacation, sick time and personal time into a single bank of days for employees to use to take paid time off from work (PTO policy), the employer must accrue a liability for accumulated employee sick hours earned. This accrual will affect financial results and should be considered in developing the annual budget.

The proposed Portland Paid Sick Leave Ordinance represents a major policy change with a huge impact on all concerned. The proper investment of time, money and resources will need to be made in order to ensure compliance with the ordinance. | JULIE EISENHAUER, CLARK NUBER

Julie is a principal at Clark Nuber P.S. in Bellevue, Washington. She can be reached at 425.451.7235. Clark Nuber is an associate member of ORLA.

Julie Eisenhauer - JEisenhauer@ClarkNuber.com