Chicago Paid Leave Ordinance 2026 Rule Updates for Employers

Chicago Issues New Paid Leave Guidance for 2026

Chicago employers should review their paid leave policies following the City’s updated rules for the Paid Leave and Paid Sick and Safe Leave Ordinance. The revised guidance took effect on June 1, 2026, and provides additional direction on how covered employers should administer leave, calculate accruals, manage combined PTO programs, and address employee misuse.

The ordinance generally requires covered employers to provide eligible employees working in Chicago with up to 40 hours of Paid Leave and up to 40 hours of Paid Sick and Safe Leave each year. While the 2026 rules do not replace the core leave requirements, they clarify several areas that have created compliance questions for employers.

Joint Employer Liability Clarified

One of the most important updates involves joint employment. The revised rules explain that more than one business may be considered responsible for compliance when multiple entities share control over an employee’s work conditions.

This clarification is especially relevant for businesses using staffing agencies, temporary workers, professional employer organizations, subcontractors, or similar workforce arrangements. Joint employers may be held responsible for meeting ordinance requirements, and shared employees must be counted when determining applicable employer coverage thresholds.

Employers should review third-party staffing and vendor relationships to confirm which entity is responsible for tracking, providing, and administering paid leave benefits.

Leave Accrual Rules for Exempt and Non-Exempt Employees

The updated rules also provide more detail on how leave accrual should be calculated.

For non-exempt employees, Paid Leave and Paid Sick and Safe Leave must accrue based on all hours worked, including overtime hours. For exempt employees, employers may calculate accrual based on a maximum 40-hour workweek, even if the employee works more than 40 hours in a week.

This clarification may require employers to review payroll systems, timekeeping practices, and leave tracking tools to ensure accruals are being calculated correctly.

Paid Sick Leave May Cover Informal Childcare Disruptions

The 2026 guidance expands practical examples of when Paid Sick and Safe Leave may be used due to childcare disruptions. Employees may use Paid Sick Leave when a child’s place of care is unexpectedly unavailable.

Importantly, “place of care” is not limited to schools, daycare centers, camps, or formal childcare providers. It may also include informal care arrangements, such as babysitters, relatives, friends, or other caregivers who supervise a child while the employee is working.

This clarification means employers should be careful when evaluating leave requests related to sudden childcare cancellations or unexpected caregiver unavailability.

Combined PTO Policies Remain Allowed

Chicago employers may use a single paid time off policy to satisfy the ordinance, but the policy must meet all legal requirements.

A combined PTO bank must allow covered employees to accrue up to 80 hours of leave annually and must comply with applicable rules for accrual, carryover, usage, notice, and access. Employers that use a single PTO policy should confirm that the policy does not unintentionally restrict employee rights under either the Paid Leave or Paid Sick and Safe Leave portions of the ordinance.

A general PTO policy may not be enough if it does not fully satisfy Chicago’s specific requirements.

Successor Employer Obligations After Business Transfers

The revised rules also address employer obligations in the event of a sale, merger, acquisition, assignment, or other business transfer. When employees continue working for a successor employer, they must retain accrued and unused leave.

Failure to properly transfer or recognize leave balances may create liability. The updated rules indicate that both the original employer and the successor employer may be responsible for violations, depending on the circumstances.

Businesses involved in mergers, acquisitions, restructuring, or ownership changes should include paid leave balances in due diligence and transition planning.

Employer Discipline for Sick Leave Misuse

The 2026 rules confirm that employers may take disciplinary action when an employee misuses Paid Sick and Safe Leave or uses leave for reasons not permitted by the ordinance.

Examples of potential misuse may include repeated unscheduled absences around weekends, holidays, vacations, paydays, undesirable shifts, or after another leave request was denied. Discipline may include termination where appropriate.

However, employers should apply these rules carefully. Any disciplinary action should be based on objective evidence, consistent policy enforcement, and proper documentation. Employers should avoid taking action simply because an employee used protected leave.

What Chicago Employers Should Do Now

Chicago employers should use the 2026 rule clarifications as an opportunity to review their current leave programs and administrative practices.

Key action steps include:

Review PTO and sick leave policies to confirm they meet Chicago’s accrual, usage, carryover, and notice requirements.

Check payroll and timekeeping systems to ensure non-exempt employees accrue leave on overtime hours.

Evaluate combined PTO banks to confirm they provide up to 80 hours of compliant leave annually.

Review staffing agency, PEO, subcontractor, and vendor relationships for possible joint employer obligations.

Include accrued leave balances in merger, acquisition, and business transfer planning.

Train managers and HR teams on childcare-related leave requests and proper documentation of suspected sick leave misuse.

Final Takeaway

Chicago’s 2026 Paid Leave and Paid Sick and Safe Leave rule updates do not eliminate existing employer obligations. Instead, they provide clearer direction on how those obligations should be applied in real workplace situations.

Employers with workers in Chicago should review policies, payroll practices, vendor arrangements, and business transfer procedures to reduce compliance risk and ensure employees receive the leave protections required under the ordinance.