NJ’s Sick Leave Law May Be A Poison Pill For Restaurants

November 25, 2014Articles Law360

Reprinted with permission from Law360. (c) 2014 Portfolio Media. Further duplication without permission is prohibited. All rights reserved.

New Jersey’s sick leave lawseems to be gaining momentum after several New Jersey municipalities, including Passaic, Paterson, East Orange and Irvington passed paid sick leave laws in the last few months. In the November election, voters in Trenton and Montclair overwhelmingly passed ballot initiatives requiring the passage of paid sick leave ordinances.

Following their lead, New Jersey may soon mandate all employers provide their employees with paid sick leave. On Oct. 27, 2014, the New Jersey Assembly’s Labor Committee voted 6-3 to approve New Jersey’s proposed sick leave law (A2354/S785). The Labor Committee did make some minor amendments to the proposed law, the most notable being the exemption from the protections of the bill of construction workers who are covered by a collective bargaining agreement. If the bill is passed and signed into law by Gov. Chris Christie it would make New Jersey the third state in the country, after Connecticut and California, to require employers to offer paid sick leave.

If enacted, New Jersey employers of all sizes would be required to make available one hour of earned sick leave for every 30 hours an employee works. Employers that had, on average, fewer than 10 employees (including part-time and temporary workers) during the preceding calendar year would have to allow employees to accrue up to 40 hours of paid sick leave per calendar year. Employers that had, on average, 10 or more employees (including part-time and temporary workers) during the preceding calendar year would have to allow employees to accrue up to 72 hours of paid sick leave per calendar year.

Employees would be able to use paid sick leave for any of the following reasons:

  1. Time needed for diagnosis, care or treatment of, or recovery from, mental or physical illness, injury or other adverse health condition (including preventative medical care).
  2. Time needed to aid or care for a family member during diagnosis, care or treatment of, or recovery from, the family member’s mental or physical illness, injury or other adverse health condition (including preventative medical care).
  3. Absence necessary due to the circumstances resulting from the employee, or family member of the employee, being a victim of domestic or sexual violence.
  4. Time during which the employee is not able to work because of a closure of the employee’s workplace, or the school or place of care of a child of the employee, due to an epidemic or other public health emergency.


Many business groups have already expressed concerns about the effect that the bill, if passed, will have on businesses. Cited among the concerns is the financial burden that the Act will place on employers. Proponents of the bill not only will get a boost from the fact that now New Jersey’s three largest cities have sick leave laws, but also from the recent panic over the Ebola virus. The public’s response to health crises such as Ebola and SARS reignited beliefs by the public at large that they do not want “sick people” waiting on them at restaurants or providing other services. Interestingly, the proposed law may have some of the most significant impact on the food services industry.[1] The reason for this is, in part, because of the commonly held belief that sick people should not be around food. This belief can lead patrons to become very vocal about the fact that sick people should not be working. These types of comments can lead employees to take more sick days, which from a public health standpoint may not be a bad thing, but from an employment standpoint may lead to coverage issues and increased operating costs.

The main reason why the proposed law may have more of an impact on the food service industry is how large and small employers are defined under the law. The bill presumes that a large employer is one with 10 or more employees. As was noted above, large employers are required to provide up to nine days of paid leave per year. As with many other small businesses, it is not uncommon for restaurants, delis and other food service establishments to use a combination of part-time and full-time employees to serve their staffing needs.

This is especially true for smaller food service employers who have peak rush periods during meal times who may need to staff up only during those hours with part-time employees. It is not unusual for these part-time workers to be students, people with other full-time jobs, or parents who want to work during school hours. In short, these part-time workers are individuals with limited working hours and restricted schedules. As a result, a small restaurant may easily have upwards of 10 employees simply because certain employees may only be available a few hours per week or during limited windows of time.

In these same establishments, full-time employees may earn almost two weeks of sick leave. Accommodating nine days of sick leave per year is likely far easier for an employer with 10 full-time employees than an employer with five full-time employees and five part-time employees who can only work three or four hours per week.

Another reason that the food service industry may be more significantly impacted than other industries is the new minimum wage law in New Jersey. Thanks to a 2013 constitutional amendment passed by New Jersey voters, the minimum wage was increased to $8.25 at the beginning of 2014. The amendment also provides guaranteed annual cost of living increases. Beginning on Jan. 1, 2015, the new minimum wage will be $8.38 per hour.

According to the Pew Research Center, the vast majority of Americans who make minimum wage are in the food services industry. In 2013, 47 percent of Americans earning the federal minimum wage worked in the food services industry. Rising costs associated with the new minimum wage will be aggravated by the paid sick leave costs that will arise if the law is passed.

Further aggravating this issue for the food service industry is the “tip credit” that employers can take toward their minimum wage obligation for tipped employees. Currently, under federal and state law, employers must directly pay tipped employees at least $2.13 an hour. Employers can then take a tip credit for the difference between $2.13 per hour and the applicable minimum wage. Although the increase in New Jersey’s minimum wage did not increase the minimum payment that must be made to tipped employees, there is a bill currently pending in the New Jersey Legislature (A857) that would increase that minimum required hourly rate and reduce the amount of the tip credit. If that bill is passed, in the second year after enactment, employers would be required to pay at least 69 percent of New Jersey’s minimum wage to tipped employees. Currently, employers may pay tipped employees approximately 25 percent of the minimum hourly wage and possibly take the tip credit for the rest.

Even if bill A875 is not passed, the increase in the minimum hourly wage may increase payroll costs for tipped employees. This is because if the tips actually received by the employees do not equal the tip credit, the employer must make up the difference to insure that employees receive the applicable minimum wage.

It is far from certain that the proposed sick leave bill, even if passed by the Legislature, will be signed by Gov. Christie, as he has already expressed reservations about the law. It is also not yet clear if there might be additional amendments or political compromises that significantly alter the bill's provisions. Even if there are some amendments, it is unlikely that the bill's basic provision, that employees earn one hour of sick time for every 30 hours worked, will be changed. This is because every sick leave law already passed in New Jersey provides for this accrual rate.

The amount of sick leave that must be offered annually under the proposed bill is different from the other municipal New Jersey ordinances, which generally provide that the maximum amount of leave that must accrue in a year is 40 hours not 72 hours as proposed in the bill. At this point, there appears to be no movement to alter the amount of the annual accrual under the proposed bill. This could change as the bill winds its way through committees.

If the bill is going to be enacted, employers should hope for at least one amendment to it. As it reads now, the bill does not preempt any of the eight municipal sick leave ordinances that have been passed in New Jersey. Employers would benefit from an amendment that explicitly preempts the local laws. The reason for this is not mere simplicity.

Under the proposed bill, leave may be used for four reasons, one of which is for victims of domestic or sexual violence. However, under all of the eight municipal sick leave ordinances, that is not a permissible reason to use leave. If the bill does not preempt the local laws, then employees in any of the eight municipalities with sick leave ordinances may be able to earn up to 14 days of paid sick leave.

This is because an employee of a “large” employer could use their nine sick days provided under the bill for reasons related to being the victim of domestic or sexual violence. That employee would still have time accrued under the local ordinances that could be used for his or her own illness or that of a family member. It is hard to imagine that legislators envision that employers with as few as 10 employees would have to provide nearly three weeks of paid sick leave.

Now that the Labor Committee has approved the bill, it is currently before the Assembly Budget Committee. It may take several months for the bill to come to full vote before the Legislature. In the meantime, employers should monitor the status of the bill to be ready if it is passed.

Reprinted with permission from Law360. (c) 2014 Portfolio Media. Further duplication without permission is prohibited. All rights reserved.