December 1, 2015

Do you have employees who work within the City of Tacoma? Effective February 1, 2016, Tacoma’s Paid Leave Ordinance becomes effective for all employees who work over 80 hours in a calendar year within the Tacoma city limits.

Employers under this ordinance will be required to provide 1 hour of paid leave for every 40 hours worked by an employee in the City of Tacoma. Employees can begin using their accrued paid leave 180 days after their hire date. Under the Paid Leave Ordinance, employees can use paid leave for their needs or the care of a family member for medical reasons, domestic violence, bereavement or public health closures at school, childcare or business.

The full ordinance and resources can be found at the City of Tacoma’s website.

We encourage all employers with employees who work in the City of Tacoma to prepare now in order to ensure compliance with the ordinance.

Review Personnel Policies

Do your current personnel policies meet the minimum requirements of the ordinance? The Tacoma Paid Leave Ordinance requires that a minimum of 24 hours of accrued and unpaid hours be carried over to the next year. If your current sick or paid time off (PTO) policy requires an employee to “use it or lose it” before year-end, you will need to revise the policy to be in compliance. If you are an employer with employees who also work in Seattle, consider adopting separate paid leave policies or simplify recordkeeping by developing a policy that incorporates the most employee beneficial requirements of the Tacoma and Seattle paid leave ordinances combined.

The Tacoma ordinance also includes optional policies that an employer can incorporate, including requiring documentation of absence, allowing shift swapping, payout of accrued leave and others. These options must be documented in a written policy and be made readily available to employees.

Accounting Documentation

The ordinance includes requirements to maintain certain records for a minimum of three years. This documentation must include the hours worked by employees in the City of Tacoma, accrued paid leave, and paid leave used.

Employees must also be notified of their paid leave time they have available. Does your payroll processing system allow for the accurate tracking of hours worked in Tacoma and recording of paid leave accrued and used? Can this information be provided to the employee on their pay stub? Employers have the option to streamline their paid leave policies by establishing a PTO policy that includes all paid leave (i.e., sick, vacation, paid leave under this ordinance, etc.) into one policy. The minimum requirements of the ordinance must still be met under a PTO policy, including the tracking of paid leave and record-keeping; however, the accounting for the hours accrued and used by each type of leave is not necessary.

The Tacoma ordinance also includes a Premium Pay Program option that, if elected, may alleviate some of the payroll administration burden of tracking accrued and used paid leave. Under the Premium Pay Program, the employer can elect to pay employees covered under the ordinance a higher rate of pay instead of providing them paid leave. Applications for the Premium Pay Program must be submitted for review at least 90 days in advance of the intended start date. The Premium Pay will be evaluated based on how the proposed extra pay compares to the value of benefits offered in the Paid Leave Ordinance.

Financial Performance

How will the implementation of the Tacoma Paid Leave Ordinance affect your company’s financial performance? The ordinance permits employees to carry over at least 24 hours of unused paid leave hours to the next year but does not require the employer to compensate for unused paid leave 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 right to receive sick leave benefits based on these conditions. However, if the company establishes an optional policy to pay out accrued leave or establishes a comprehensive PTO policy allowing an employee to use accrued paid leave hours for all types of absences from work and carry hours over to the next year, the employer shall accrue a liability for employee’s earned paid leave hours. Depending on the number of employees covered under the ordinance, the accrual of this benefit may have a significant impact on a company’s bottom line.

Also, it doesn’t matter where your home office is located. If you have employees who perform work in the City of Tacoma, this Paid Leave Ordinance may apply to you. Now is the time to prepare before the ordinance becomes effective on February 1, 2016. We are here to assist you in evaluating how the ordinance may affect your business. Contact your Clark Nuber professional.

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This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.