Starting July 1, 2022, the New Mexico Healthy Workplaces Act (the Act or HWA) requires private employers with a single employee working in New Mexico to provide a maximum of 64 hours of earned sick leave (ESL) for employees to use annually. The midyear effective date does not make for an easy compliance transition especially for those employers that already offer paid time off (PTO) or paid sick leave. While the HWA affords employers the option to frontload or accrue ESL, an employer opting for the ease of frontloading must provide all employees (full-time, part-time, temporary and seasonal) with the full allotment of 64 hours on July 1, 2022. Further, any leave that an employer provided to its employees since Jan. 1, 2022, under an existing PTO or paid sick leave does not satisfy the HWA even if it was used for a purpose covered by the Act or if it remains unused.
Covered employers need to make a few key decisions regarding compliance which include determining:
Whether an existing PTO policy complies with the HWA
Whether to frontload or use the accrual method for ESL
Whether to include accruals and usage of ESL on the pay statement or comply with the quarterly statement requirement
See below for additional details to ensure compliance with the HWA.
Who does the HWA cover?
All private employers in New Mexico are covered without regard to the number of employees. An employer with a single employee working remotely in New Mexico must provide that employee with ESL. An employee cannot opt out voluntarily in exchange for higher wages. Other employees who are covered, not covered and may be covered are identified as follows:
Covered:
Employees of private employers
Employees of charitable, religious and nonprofit organizations
An individual performing services for a sole proprietor for remuneration
Individuals (not sole proprietors) performing services in peoples’ homes for compensation
Not covered:
Independent contractors and subcontractors
Volunteers at charitable, religious and nonprofit organizations
Sole proprietors
Individuals performing services outside of New Mexico or on tribal land
State and federal government employees
Employees of a New Mexico city, county or agency
Employees of an employer subject to Title II of the federal Railway Labor Act
Employees as defined in the Railroad Unemployment Insurance Act or the Federal Employers’ Liability Act
May be covered:
Corporate officers and company owners
How much ESL are employees entitled to?
Employees are entitled to use a maximum of 64 hours of ESL per 12-month period. While usage is capped at 64 hours, an employee may earn more than 64 hours depending on the total number of hours worked in a year. Employers can establish the twelve12-month period in which an employee can use the ESL using the calendar year; any fixed 12-month leave year; the 12-month period measured forward from the date an employee first uses of ESL; or a rolling 12-month period measured backward from the date ESL is used.
An employer can choose to use a different method for different categories of employees. For instance, an employer can frontload the ESL for full-time, exempt employees and use the accrual method for other classifications. Regardless of the chosen method, all employers must keep records of each employee’s hours worked, ESL accrued, and ESL used.
Lockton comment: While employers have options for establishing the 12-month period, the calendar year may be the easiest from a compliance perspective for most employers. Certainly, the July 1 start date complicates this for the initial six-month period but moving forward to Jan. 1, 2023, it should simplify the tracking to be consistent with other tracking. However, for employers without other PSL laws to contend with, using July 1-June 30 as the 12-month period may be feasible. The forward-looking and rolling periods would be the most complex for an employer to track.
For purposes of the July 1, 2022, effective date, employers may not offset the 64-hour requirement with leave employees already earned or used since Jan. 1, 2022. Details on the accrual and frontloading methods are discussed below.
Accrual
Beginning July 1, 2022, employers who do not frontload 64 hours of ESL must accrue one hour of ESL for every 30 hours an employee works. This applies to all employees – full-time, part-time, seasonal and temporary. Exempt employees are assumed to work 40 hours per week for purposes of accrual unless they normally work fewer hours in which case their leave accrual is based on their normal workweek hours. For hourly employees working overtime, hours worked in excess of 40 hours during the work week also accrue sick leave at the same rate. Employees hired after July 1, 2022, start accruing ESL on their first day of work..
If an employer’s policy or a collective bargaining agreement provides that employees accrue more than one hour per every 30 worked, the use of a more generous accrual rate will comply with the HWA. Just note that, the Labor Relations Division (LRD) will enforce the terms of the employer policy even if it is more generous than the law requires.
Frontloading
Employers opting to frontload the ESL effective July 1, 2022, must frontload the full 64 hours regardless of an employee’s status as full-time, part-time, temporary or seasonal. Thereafter, employers using the calendar year may frontload the full 64 hours of ESL on Jan. 1 and frontload a pro-rata share for employees hired after Jan. 1.
It is noteworthy that frontloading 64 hours of ESL does not mean an employer is compliant with the HWA in all instances. This amount represents 1,920 hours worked (30 x 64 hours of ESL). An employee who works more than 1,920 hours in a year must continue to accrue ESL at the rate of one hour for every 30 hours worked. Employers must track hours worked and add ESL to an employee’s leave balance as necessary to be in compliance with the HWA. The 64 hours is not an accrual cap. It violates the HWA to establish an accrual cap. The 64 hours is the cap on usage only.
Lockton comment: Given the absence of flexibility for the frontloading option starting July 1, 2022, an employer may want to initially use the accrual method and switch to frontloading beginning Jan. 1, 2023, for full-time employees but use the accrual method for job classifications working fewer than 40 hours a week. It is a business decision that will depend on factors including job classifications, practices relating to paid sick leave in other states and localities, and the ease of administering one method versus the other (or potentially using both methods).
Carryover
Regardless of whether an employer uses the accrual method or frontloads the ESL, any accrued and unused ESL up to 64 hours must be carried over each year.
Lockton comment: If an employer frontloads ESL on July 1, 2022, and the employee does not use any, the 64 hours would carry over to Jan. 1, 2023. If the employer frontloads ESL again, the employee’s balance on Jan. 1, 2023, would be 128 hours. The employee would only be entitled to use 64 hours of ESL in 2023, but employers may permit employees to use more than 64 hours.
Employers cannot permit employees to “cash out” ESL at the end of the year to avoid the carryover requirement. An employer can choose to “cash out” ESL in excess of 64 hours, but there is no “cash out” requirement for those excess hours.
What pay rate is used for ESL?
ESL is compensated at the employee’s usual hourly rate (which must be at least the applicable state or local minimum wage) with the same benefits as the employee normally earns during hours worked. If an employee’s hours vary from week to week, the employer must average the number of hours worked by the employee in the preceding two weeks to determine what ESL may be due. If an employee who already worked 40 hours in one week and is scheduled to work overtime calls in sick, the employer must pay the employee according to the regularly scheduled weekly hours even if greater than 40. Employers must pay the ESL on the same scheduled payday as regular wages.
Special situations should be handled as follows:
Payment based on task, piece, or commission basis: Employees must receive the greater of their hourly or salary rate or the applicable state or local minimum wage.
Per diem and indeterminate shift lengths: Employees may use the ESL for hours they were scheduled to work or for hours they would have worked absent the use of ESL. The employee must base the hours of ESL used upon the hours the employer used a replacement worker for the same shift or, absent a replacement worker, the hours worked by the employee when most recently working the same shift.
When can employees begin using ESL?
There is no waiting period. Once accrued, the ESL can be used in hourly increments, or the smallest increment the employer’s payroll system uses to account for absences or use of other time.
What reasons qualify for the use of ESL?
An employee can use accrued ESL for:
The employee’s own or a family member’s treatment or diagnosis of a mental or physical illness, injury or health condition or preventative medical care
Meetings at the employee’s child’s school or place of care to discuss the child’s health or disability (e.g., IEP meeting)
Absences necessary because of domestic abuse, sexual assault, or stalking suffered by the employee or their family member
The HWA defines family member broadly to include:
An employee’s spouse or domestic partner
An employee’s or an employee’s spouse or domestic partner’s biological, adopted, or foster child, a stepchild or legal ward, or a child to whom the employee stands in loco parentis
A biological, foster, step or adoptive parent or legal guardian, or a person who stood in loco parentis when the employee was a minor child
A grandparent or grandchild
A biological, foster, step or adopted sibling
A spouse or domestic partner of a family member
An individual whose close association with the employee or the employee’s spouse or domestic partner is the equivalent of a family relationship.
Lockton comment: To date, the regulations don’t address what information, if any, an employer can request to determine whether an individual meets the “close association” definition of family member. Other states with similar provisions permit employers to require an employee provide a signed written statement describing and verifying that the employee’s relationship with this person is equivalent to a family member. Absent guidance from the LRD restricting a New Mexico employer from seeking this information, employers should be on solid ground making this request but may want guidance from an employment attorney.
What can employees be required to do in order to use ESL?
Employees must make an oral or written request to use ESL or have an individual acting on their behalf make the request. When requesting ESL, employees should identify the expected duration of the absence. When an employee’s need for ESL is foreseeable (known seven or more days in advance), the employee should make reasonable efforts to provide advance notice to the employer and schedule the ESL so it does not disrupt the employer’s operations. But, if the need to use ESL is not foreseeable, the employee is only required to notify the employer as soon as practicable.
An employer cannot require employees to find a replacement worker when using ESL. While an employer may prescribe procedures for calling off work, an employee’s failure to provide advance notice in unforeseeable situations does not permit the employer to deny leave. Further, an employer cannot require employees to use other paid leave before using their ESL for a covered reason.
Can an employer require documentation to support the use of ESL?
Employers can require reasonable documentation verifying the ESL was used for a covered purpose if the employee uses two or more consecutive workdays of ESL. An employee has up to 14 days from the date they return to work to provide this documentation. All information an employer receives related to an employee’s ESL must be treated as confidential and not disclosed without the employee’s consent or as necessary to validate an insurance disability claim, ADA accommodation or court order.
For an absence related to the employee’s or a family member’s treatment or diagnosis of a mental or physical illness, injury or health condition or preventative medical care, a document signed by a healthcare provider (not necessarily a doctor) which confirms that the ESL taken is necessary is “reasonable documentation.” An employer cannot require an explanation of the nature of any medical condition.
For absences of two or more consecutive workdays related to domestic abuse, sexual assault or stalking, an employee may provide a police report or court-issued document. As an alternative, the employee can provide a signed statement affirmatively stating that the employee took the ESL for a purpose identified in the HWA. Details cannot be required. The statement does not need to be notarized and it can be in the employee’s native language.
How do changes in employment impact ESL?
An employee who is transferred to a new position within the same employer keeps all accrued ESL. If a different employer succeeds or replaces an existing employer, all employees remaining with the successor employer keep their accrued ESL for use with the successor employer.
If an employee has accrued and unused ESL and terminates their employment but returns within one year, the employer must reinstate their full ESL balance as of their termination. The only exception is if the employee chose to be paid out all unused hours to when they left the company (and the employer’s policy permitted). In that case, the state considers the hours deemed “used” when cashed out upon separation. There is no cash-out requirement on termination.
If the ESL requirement is satisfied through an employer’s PTO policy, unused PTO that is accrued or earned may be payable upon separation according to an employer’s particular PTO policy, any applicable collective bargaining agreement, or as otherwise required by law. Employees who do receive a pay out of all unused leave upon separation will be deemed to have used that leave. Those employees will not be eligible to have leave restored if they return to the company within 12 months.
How does the HWA interact with other federal, state or local laws?
State law, including the HWA, supersedes federal law where the protection afforded to an employee under the state law offers greater protection to the employee than the federal law. Similarly, to the extent that a municipal or county ordinance provides for greater employee protections than state law, an employer must comply with the provisions most protective to employees.
For leave covered by the federal Family Medical Leave Act which also qualifies for use of ESL, an employer can require that the employee use the ESL concurrently with the family medical leave.
The Bernalillo County Employee Wellness Act requires employers with a physical presence and at least two employees in the unincorporated parts of the county to provide at least one hour of paid leave that can be used for any purpose for every 32 hours worked. Since the HWA requires paid leave at a greater accrual rate than the Bernalillo ordinance, compliance with the HWA alone likely suffices for employers covered by both laws; however, neither the state nor the county has confirmed this to be true so we recommend you consult with an employment attorney for guidance.
What are an employer’s recordkeeping responsibilities when implementing the HWA?
Notice
There is a mandatory poster that employers must display in a conspicuous and accessible place in each establishment. For fully remote businesses, the poster may be posted on the employer’s website, intranet, sent via email, or some other form of electronic communication easily accessible by employees. The notice must be in English, Spanish or any language that is the first language spoken by at least 10% of the employer’s workforce, as requested by an employee.
The poster is available in two sizes on the state’s website (opens a new window) or a free copy can be requested by contacting the Labor Relations Division at 505.841.4400.
Covered employers must also provide written or electronic notice of employee rights and the HWA’s terms and provisions to an employee at the start of employment. Providing employees with a copy of the mandatory poster satisfies this requirement.
Quarterly statements
At least once every calendar quarter, employers must provide employees with an accurate written year-to-date summary of ESL accrued and used. Employers may satisfy this requirement electronically through email, a website or mobile application, or other reasonable method. While accrued and used ESL is not required to be identified on an employee’s pay statement, employers that do so will be in compliance with the quarterly statement requirement.
Record retention
Employers are required to maintain records of the hours worked by employees and the ESL accrued and used for a period of four years. Employers must produce these records for inspection upon request by the LRD.
What is the impact of collective bargaining agreements or other paid time off policies?
Collective bargaining agreements
The ESL required by the HWA is in addition to any PTO provided pursuant to a collective bargaining agreement (CBA) unless employees may use the PTO for the same purposes under the same terms and conditions as specified in the HWA. A CBA can grant more generous amounts of leave accrual and usage than required by the HWA. Employers are permitted to use a different 12-month period for benefits to be used for employees covered by a CBA than for employees not covered by a CBA.
Existing employer paid time off policies
The state created a checklist identifying 17 requirements that an employer’s existing policy must contain to be compliant with the HWA. This checklist can be found here (opens a new window). An employer that chooses to have a compliant PTO policy should make it clear to employees that they have a single bank of PTO that can be used for any reason and they will not have paid sick leave available if they exhaust their PTO balance. Employers must remember that the PTO policy is subject to the same usage, accrual, carryover and other requirements of the HWA.
An employer offering unlimited time off which can be used for all of the same purposes and under the same terms and conditions of the HWA will be compliant. Employers with an unlimited PTO policy will still need to track time used by employees for HWA purposes.
What else should employers be aware of?
No retaliation
As with any paid sick leave law, retaliation against employees for exercising their rights in connection with the ESL is prohibited. Under the HWA, an employer may be sued and liable for monetary damages for engaging in acts of retaliation.
Lockton comment: While an employer can discipline an employee for fraudulently using ESL or for not providing documentation in a timely manner, employers should proceed with caution to ensure the action is not deemed retaliatory. Discipline should relate to violations of company policy that do not conflict with the HWA.
Complaint process
Employees claiming a violation of the HWA can file a complaint with the New Mexico Department of Workforce Solutions, Labor Relations Division, by phone, online or in person. Employees have three years from the date of the alleged violation to file a complaint or a civil action. The LRD will investigate complaints and determine if the employer’s actions or inactions violate the HWA.
If an employer policy provides more generous accrual, usage or carryover and the employer fails to comply with its own policy, the employer can still be found in violation of the HWA. The Division requires employers to honor their own policies and will enforce those policies with more generous provisions.
Steps to take now
Employers covered by the HWA need to decide whether their existing policy satisfies the law and, if not, make necessary revisions. For purposes of the July 1, 2022, effective date, employers must determine whether they will frontload ESL on July 1 or begin accruing the ESL. Covered employers need to post the mandatory poster and provide a copy to New Mexico employees. If employers want to avoid the mandatory quarterly reporting requirement, they should reach out to their payroll provider to determine whether the ESL accruals and usage can be incorporated into the regular pay statement.
Check out the New Mexico Department of Workforce Solutions website (opens a new window) for additional resources including a guide, HWA Policy Compliance Checklist, the mandatory poster and FAQs. Reach out to your Lockton account team with any additional questions.
Read full alert (opens a new window)Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's HR Compliance Consulting group are not privileged under the attorney-client privilege.
