Chicago Revises Paid Leave Rules Effective June 2026

On May 15, 2026, the Chicago Department of Business Affairs and Consumer Protection (BACP) Office of Labor Standards (OLS) adopted revised rules under the Paid Leave and Paid Sick and Safe Leave Ordinance.

The revised rules do not create a new leave framework but clarify existing obligations in key areas, including joint employment, notice and posting, tipped employee pay, childcare-related leave use, paid sick leave abuse, combined Paid Time Off (PTO) policies, accrual for exempt and non-exempt employees, benefit year administration, and successor employer obligations.

This update applies to Chicago employers subject to the Paid Leave and Paid Sick and Safe Leave Ordinance. The rules were published on May 18, 2026, and took effect on June 1, 2026.

What Employers Need to Do

• Review current leave policies, PTO design, and payroll accrual settings to confirm alignment with the revised rules, particularly for non-exempt employees whose accrual now clearly includes overtime hours.

• Evaluate staffing agency, Professional Employer Organization (PEO), lead agency, and similar arrangements for potential joint employment, including counting jointly employed workers for employer-size thresholds and payout obligations.

• Confirm that required posting and annual notice practices meet the rules’ specifications, including paper postings printed on paper no smaller than 11 inches by 17 inches and annual notice delivered with a paycheck issued within 30 days of July 1.

• Update policies for tipped non-exempt employees to reflect payment at the higher of the base hourly wage or the applicable minimum wage, without applying tip credit.

• Document objective, patterns-based standards for addressing paid sick leave abuse and ensure successor employer and benefit year change processes align with the revised rules.

Overview

Joint Employment

• Joint employment exists when two or more entities control the essential terms and conditions of an employee’s work. When joint employment exists, all joint employers are individually and jointly responsible for compliance.

• Covered employees jointly employed by more than one employer must be counted by each employer, even if the worker does not appear on that employer’s payroll, which may affect employer-size thresholds and payout obligations.

• Can arise in temporary staffing, lead agency, Professional Employer Organization (PEO), and similar arrangements.

Coverage and Accrual

• Covers employees who work at least 80 hours for an employer in Chicago within any 120-day period, regardless of immigration status. Day laborers are covered if they meet the hours threshold.

• Employees accrue one hour of paid leave and one hour of paid sick leave for every 35 hours worked. Non-exempt employees accrue on all hours worked, including overtime; exempt employee accrual is capped at 40 hours per workweek.

Notice and Posting

• Employers must post the required notice through their usual methods of communication. Paper postings must be printed on paper no smaller than 11 inches by 17 inches, and the rules provide examples of acceptable posting locations, including bulletin boards, breakrooms, display monitors, and employee swipe-in areas.

• Annual notice is required with a paycheck issued within 30 days of July 1.

Tipped Non-Exempt Employees: Non-exempt employees who receive gratuities must be paid the higher of their base hourly wage or the applicable minimum wage, without applying a tip credit.

Childcare-Related Use of Paid Sick Leave: A child’s “place of care” includes formal settings, such as childcare centers, after-school programs, and summer camps, and informal caregivers, such as babysitters, family members, or friends who supervise the child while the employee works.

Paid Sick Leave Abuse: Employers may discipline misuse or abuse of paid sick leave, including patterns such as unscheduled sick leave near weekends, holidays, vacation days, or after a different leave request was denied. Discipline should rely on objective, documented patterns rather than isolated incidents.

Combined PTO Policies: Employers may use a single PTO bank instead of separate paid leave and paid sick leave banks, but the policy meets the ordinance’s accrual, carryover, usage, and other requirements.

Benefit Year Administration: Employers may use different types of benefit years, including calendar year, hire-date year, fiscal year, tax year, or contract year. Written notice is required at least 14 days before a benefit year change and leave entitlements may not be reduced.

Successor Employer Obligations: When a business is sold, transferred, or assigned and an employee continues working in Chicago, accrued but unused leave generally must continue to be recognized as required by the ordinance.

Why This Matters

The revised rules clarify high-friction compliance areas that drive many Paid Leave and Paid Sick and Safe Leave disputes, including joint employment, PTO design, tipped employee pay, and accrual for overtime-heavy workforces.

Combined with the existing private right of action and the July 1, 2026, sunset of the temporary Paid Leave pre-suit waiting period, employers face increased litigation exposure when leave administration practices are not aligned with the ordinance and its rules.

Key Risks for Employers

• Employees denied a benefit under the ordinance may recover three times the leave denied or lost, plus interest, costs, and reasonable attorney’s fees, exposing employers to litigation costs well beyond the underlying leave dispute.

• Employers face City fines of $1,000–$3,000 per offense, with each day of a continuing violation treated as a separate offense — meaning penalties can accumulate rapidly for ongoing non-compliance.

• Employers using staffing agencies, PEOs, or lead agencies may face shared liability for the above penalties, and both employers can be pursued for the same violation under the joint employment provisions.

• Disciplining employees based on isolated incidents of paid sick leave use, rather than objective, documented patterns, may support retaliation or interference claims, which carry the same damages multiplier and attorney’s fee exposure.

• In business sales or transfers, failing to recognize accrued but unused leave may expose both the original and successor employer to the ordinance’s damages and penalty structure.

Additional Information

Certification may be required when an employee uses paid sick leave for three or more consecutive scheduled workdays. Pay for non-exempt employees is generally calculated using the average wage for hours worked during the prior 90 days.

Source References

• City of Chicago Rules – Chicago Paid Leave and Paid Sick and Safe Leave Rules (May 15, 2026)

This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.