On June 21, 2022, New Mexico’s Department of Workforce Solutions (DWS) published final regulations implementing the Healthy Workplaces Act (HWA), which will take effect throughout most parts¹ of the “Land of Enchantment” on July 1, 2022. The HWA will allow all private-sector employees to accrue paid leave that they can use for sick time, safe time, or other reasons for themselves or to care for or assist a broad list of family members. Although the final regulations do not summarize the public comments DWS received and its responses to the comments, employers should not be too surprised with some positions DWS takes in the regulations because FAQs and other guidance documents DWS had published on its HWA page, and updated semi-regularly, did, in some respects, forecast its position. In this article we will not go over every rule or piece of guidance DWS issued, but we will highlight and discuss the key items that could have a more dramatic effect on employers’ compliance efforts.

No Cap on Accrual, But Employers Can Cap Carryover: The HWA is silent concerning whether employers can cap accrual annually or overall. Per the DWS FAQs, although employers can cap the annual use of HWA leave to 64 hours per year, they “can never cap an employee’s PSL accrual,” and “it is illegal to cap the number of hours an employee can accrue” (emphasis in original). As to why there is no accrual cap, DWS says, “[t]hat is how the Act is written. To resolve this discrepancy, the Legislature would need to address it through statutory amendment.”

The HWA is similarly silent concerning whether employers can cap how much unused leave employees can carry over into the next year – providing only that “accrued unused earned sick leave shall carry over from year to year” – but a new regulation provides that employers are not required to permit employees to carry over into the next year more than 64 hours of unused time.

The introduction of a carryover cap allows employers to exert some control over the amount of HWA leave an employee may possess at any time – 64 hours (of carried over leave) plus whatever an employee would accrue in the subsequent year – but could hamper some employers’ ability to assign a finite number to an HWA leave bank’s overall accrual cap.

No Frontloading to Avoid Carryover (and Other Frontloading Developments): Under the HWA, rather than have employees accrue HWA leave incrementally throughout the year, “an employer may instead elect to grant employees the full sixty-four hours of earned sick leave for the upcoming year” (emphasis added). Given the HWA’s use of “full” to complement 64 hours, and because the HWA allows employers to implement an annual use cap of 64 hours, many employers expected DWS to allow them to “frontload” 64 hours at the beginning of each year and not carry over into the next year unused “frontloaded” leave. Unfortunately, that is not the position DWS takes. Instead, FAQs say an employer would need to provide additional leave to employees who work more than 1,920 hours per year – essentially, treating “frontloaded” leave as an advance on accrual – and that “frontloaded” leave is subject to HWA carryover requirements.

The DWS takes a unique approach to the “frontload” issue for the remainder of 2022 for employers that use a calendar use to comply with the law. Per DWS, “[e]mployers who want to frontload to comply with the HWA for the rest of 2022 must frontload the full 64 hours, even though there will only be 6 months in the cycle for employers who choose to follow the calendar year.” Though it is not uncommon for a paid leave enforcement agency to take a “no pro-rata frontloading” position, the tradeoffs some employers are willing to make in jurisdictions that permit frontloading without carryover – providing employees with access to an amount of leave sooner than if they accrued it, and possibly more leave than they could accrue in a year, to avoid tracking hours worked and carryover – are removed from the equation, which might result in fewer employers providing leave up front.

No Counting Leave Accrued or Used Before July 1, 2022: With a mid-year start date, and the ability to comply using a calendar year system, many employers offering paid leave benefits already were curious whether paid leave they provided, or employees earned, in 2022, before the law officially takes effect, can count toward its 2022 HWA obligations, and whether paid leave employees used before July 1, 2022 could count against the annual use cap the HWA allows employer to implement and enforce. DWS, in the FAQs, says they cannot: “Employers may not offset this requirement with leave employees already earned or used since January 1, 2022.”

This has a particularly painful effect on employers that frontloaded more generous PTO benefits on January 1 compared to having those PTO benefits accrue over the course of the calendar year. It also presents challenges for employers with an accrual-based PTO plan that allowed their employees to borrow against the time that they would have accrued in the second half of 2022.

More Generous Policies: The HWA, like other paid sick and safe leave laws, sets minimum standards for job-protected paid leave and does not prohibit employers from offering benefits that are more generous than the law requires. Employers offering more generous benefits and using those to comply with the HWA, however, should take note of the DWS FAQs that suggest the department could attempt to apply the law to the portion of a paid leave bank that exceeds what the HWA requires, e.g.:

• “If an employer allows accrual of more earned sick leave than the minimum required by the Act but still characterizes it as paid sick leave accrued or earned pursuant to the Act, then the Act’s rules and requirements will apply.”
• “[T]he Division will require employers to honor their own policies and we will enforce those more generous provisions. Employers in violation could face assessments of improperly denied leave pay, statutory damages, and interest.”

Paystubs: The HWA does not contain an express requirement that employers display HWA leave on paystubs. A new regulation, however, requires employers to provide employees with a year-to-date summary of HWA leave accrued and used at least once every calendar quarter. Employers can comply with this requirement by including the information on pay records or paystubs given to employees on their normal payday, or by sending this information electronically, e.g., email, website, mobile application, or other reasonable method.

Additionally, the FAQs answer a question many employers had concerning how HWA leave interacted with the pre-HWA, generally applicable paystub law that requires paystubs to display “benefits earned.” Per DWS, earned HWA leave is a “benefit earned,” so it must be on regular paystubs.

Employee Notice for Foreseeable Absences: The HWA requires employees to make a reasonable effort to notify their employer of the need for leave in advance of use when the need for leave is “foreseeable,” which a new regulation defines to mean an employee is aware of the need to use leave seven or more days before use. Unlike other similar paid leave laws that allow employers to require multiple days’ worth of notice when employees know well in advance that they will need to be absent from work, DWS, in regulations and FAQs, does not discuss how much notice employees must provide when they know they will be absent, but not seven days in advance (e.g., if they know six days in advance).

Timeframe for Employees to Provide Supporting Documentation: Pursuant to the HWA, upon an employer’s request for reasonable documentation to support an absence when employees use HWA leave on two or more consecutive workdays, employees must provide such documentation in a “timely manner.” A corresponding regulation provides that employees must be given 14 days from the date they return to work to provide such documentation.

No Requiring Employees to Use Leave: Under the HWA, employers cannot require employees to use other paid leave before they use HWA leave. The FAQs also now prohibit employers from requiring employees to use HWA leave, even when they are absent for a covered reason: “PSL may only be used upon the employee’s oral or written request. If the employee does not request use of PSL for a condition that may qualify for use under the Act, that is the employee’s choice, even if it results in no pay for the employee.”

Rate of Pay: Under the HWA, employers must pay employees for leave they use at the same hourly rate and with the same benefits, including health care benefits, as employees normally earn, but not less than the applicable minimum wage. The regulations, largely identical to the FAQs, detail how certain employees must be paid. “Tip credit” employees must be paid the full state or local minimum wage when they use leave. Employees paid on task, piece, or commission basis must be paid their hourly or salary rate or the state or local minimum wage, whichever is greater. For employees paid solely via commissions, however, the FAQs say these employees must receive at least the minimum wage. For salaried employees, employers must convert their salary to an hourly rate by dividing their weekly salary by the number of hours in their normal workweek (for exempt employees working 40 or more hours, divide by 40). Finally, a new regulation requires employers to pay employees who use HWA leave on the same payday as regular wages.

Prohibitions: A new regulation provides that employers cannot deem an employee’s hours to be “cut” to a lower number due to taking earned sick leave. When this was proposed, many were uncertain what it meant. In its recently revised A Guide to New Mexico’s Paid Sick Leave Law, DWS explains that employers cannot reduce an employee’s hours when they learn employees will need to use leave, e.g., employers cannot respond to an employee’s request to take a week off for a covered reason by reducing an employee’s scheduled hours for that week from 40 to 30 hours.

Recordkeeping: Under the HWA, employers must keep records documenting hours worked and HWA leave taken by employees for 48 months. A new regulation additionally requires records to include HWA leave accrued or earned. Notably, in A Guide to New Mexico’s Paid Sick Leave Law, DWS says employers must track hours worked by a salaried exempt employee who works fewer than 40 hours per week.

Accrual-Related Guidance: The HWA requires that employees accrue one hour of paid leave for every 30 hours worked. FAQs from DWS say that leave accrues proportionally, meaning that even if an employee does not work 30 hours in a workweek, they will accrue some leave for the hours they do work: “[A] part-time employee who works 20 hours each week will accrue 0.67 hours of paid sick per week.” The FAQs also state that accrual need not occur when employees use paid leave like HWA leave or vacation, because, as DWS notes, HWA leave accrues only on hours “actually worked.” Additionally, the FAQs address situations where the outcome will depend on specific facts, like on-call shifts and travel time.

Next Steps: With around a week before the HWA takes effect, the clock is ticking for employers that need to revise their paid leave policies and practices to align with the final regulations and DWS guidance. However, for employers that had been monitoring the DWS page on the HWA and designing (or anticipating) plans based on the department’s informal guidance, there might not be a mad dash to July 1. In either case, now that the regulations are final, it is likely DWS will receive new questions from employees and employers about what they mean, or topics they do not cover, so it could continue to update its FAQs and other guidance, meaning employers should start, or continue, to monitor the HWA page, where they can also find copies of the mandatory poster.