Chicago Paid Leave Rules Take Effect: Employers Should Review PTO Policies and Leave Procedures

Effective June 1, 2026, the City of Chicago’s updated rules under the Paid Leave and Paid Sick and Safe Leave Ordinance provide additional guidance for employers on paid leave compliance. The Ordinance generally requires covered employers to provide eligible employees with up to 40 hours of Paid Leave that may be used for any reason, and up to 40 hours of Paid Sick and Safe Leave each year.

The updated rules clarify several important issues, including the use of combined PTO policies, permissible leave uses, discipline for misuse, joint employer obligations, and treatment of accrued leave in business transfers. Employers with employees in Chicago should review their handbooks, PTO policies, payroll systems, leave administration procedures, and staffing arrangements to ensure continued compliance.

If your company employs workers in Chicago or other jurisdictions and would like assistance reviewing paid leave policies, PTO programs, employee handbooks, joint employer risks, or wage-and-hour compliance, please contact the ILS team at contact@consultils.com. We assist employers in updating internal policies, improving leave administration practices, and reducing potential employment law exposure.

1. Combined PTO Policies Are Permitted, but Must Satisfy All Ordinance Requirements

The updated rules confirm that employers may use a single PTO bank instead of maintaining separate banks for Paid Leave and Paid Sick and Safe Leave. However, a combined PTO policy must still satisfy the Ordinance’s accrual, carryover, use, and other technical requirements.

Employers should not assume that a general PTO policy automatically complies with Chicago’s rules. Companies using a combined PTO policy should review whether employees can accrue the required amount of leave, whether unused leave is carried over properly, and whether the policy language allows employees to use leave for all purposes protected under the Ordinance.

2. Childcare Closures May Qualify for Paid Sick and Safe Leave

The Ordinance permits employees to use Paid Sick and Safe Leave when a child’s place of care is closed unexpectedly. The updated rules clarify that a “place of care” may include informal childcare arrangements, such as babysitters, family members, or other individuals who regularly supervise a child.

As a result, employers should avoid limiting qualifying childcare-related leave only to school or licensed daycare closures. Leave requests should be evaluated based on the employee’s actual childcare arrangement and the circumstances of the closure.

3. Employers May Discipline Misuse, but Should Proceed Carefully

The updated rules confirm that employers may take disciplinary action, including termination, when an employee uses Paid Sick and Safe Leave for reasons not covered by the Ordinance or otherwise abuses the leave.

Potential examples of misuse may include repeated use of sick leave adjacent to weekends, holidays, or vacation days; use of sick leave after another leave request has been denied; or use of sick leave to avoid work duties. However, employers should carefully evaluate the facts before taking disciplinary action and should apply policies consistently to reduce the risk of retaliation, discrimination, or interference claims.

4. Joint Employer and Business Transfer Issues Require Attention

The updated rules also address joint employment. Where two or more entities control the essential terms and conditions of an employee’s work, both may be responsible for compliance with the Ordinance. This may be particularly relevant for employers that use staffing agencies, temporary workers, professional employer organizations, or other shared workforce arrangements.

The rules also address business transfers. When employees transfer to a successor employer following a merger, acquisition, or similar transaction, accrued and unused Paid Leave and Paid Sick and Safe Leave may need to be preserved. Both the original employer and the successor employer may face liability if leave balances are not handled properly.

5. Accrual Calculations and Leave Administration Should Be Updated

The updated rules further clarify accrual calculations. For non-exempt employees, Paid Leave and Paid Sick and Safe Leave generally accrue based on all hours worked, including overtime hours. For exempt employees, employers may calculate accrual based on a maximum 40-hour workweek.

Employers also may not require an employee using Paid Sick and Safe Leave to appear in person at a worksite or administrative office. Employers that still rely on in-person leave procedures should update their internal processes accordingly.

What Employers Should Do Now

Chicago employers should consider reviewing the following:

• Employee handbooks, PTO policies, and leave request procedures;

• Whether any combined PTO policy satisfies accrual, carryover, and permitted-use requirements;

• HR and manager training on qualifying Paid Sick and Safe Leave reasons;

• Agreements and practices involving staffing agencies, PEOs, temporary workers, or other potential joint employment arrangements;

• Treatment of accrued and unused leave in mergers, acquisitions, business transfers, or employee transitions;

• Payroll systems for proper accrual calculations, especially for non-exempt employees;

• Documentation and consistency when responding to suspected misuse of Paid Sick and Safe Leave.

Conclusion

Chicago’s updated paid leave rules reinforce that leave compliance involves more than providing the correct number of hours. Employers must also account for policy design, accrual calculations, permitted uses, leave administration, joint employment, business transfers, and discipline practices.

Employers with employees in Chicago, or with operations across multiple jurisdictions, should update their handbooks, payroll systems, and internal leave procedures to reduce wage-and-hour, leave interference, retaliation, and employee claim risks.

If your company employs workers in Chicago or other jurisdictions and would like assistance reviewing paid leave policies, PTO programs, employee handbooks, joint employer risks, or wage-and-hour compliance, please contact the ILS team at contact@consultils.com. We assist employers in updating internal policies, improving leave administration practices, and reducing potential employment law exposure.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Managing Partner at ILS, Richard Liu ranks among the leading U.S. attorneys in corporate, employment, and regulatory law. He is known for crafting legal strategies aligned with clients’ business objectives and advising Fortune 500 companies, startups, and executives on corporate transactions, financing, privacy, and employment matters across the technology, healthcare, and financial sectors.

Before founding ILS, Richard practiced at top defense firms, where he developed a reputation for anticipating risks and designing strategies that balance protection with growth. He has secured favorable outcomes in contract and intellectual property disputes, represented clients in state and federal courts, and is recognized for combining large-firm expertise with boutique-firm agility. Richard is also a frequent speaker at industry and legal conferences.

Email: contact@consultils.com | Phone: 626-344-8949