2025 Chicago Paid Leave: Payout & Private Cause of Action

As of July 1st, the 2025 Chicago paid leave rules underwent significant changes to payout and private cause of action. Under the updated ordinance, any employee who works more than 80 hours within a 120-day period for an employer with at least one employee in Chicago is now eligible for both general paid leave and paid sick and safe leave. This includes remote workers whose work is performed within Chicago’s geographic boundaries.

The latest ordinance builds on the original law passed in 2024 and is designed to improve work-life balance, ensuring all workers have access to time off for both personal and health-related reasons. Key updates include expanded accrual rates, carryover provisions, mandatory payouts for certain employers, and new enforcement rights for employees.

Understanding How Chicago Paid Leave is Accrued and Used in 2025

Under the 2025 Chicago paid leave ordinance, eligible employees accrue one hour of paid time off for every 35 hours worked. Employees may earn up to 40 hours of general paid leave and 40 hours of paid sick and safe leave during a 12-month benefit period, for a total of 80 hours per year.

Paid sick and safe leave becomes available after 30 days of employment. It can be used for medical appointments, mental health needs, recovery from illness or injury, domestic violence, or public health-related reasons. General paid leave must be available no later than the 90th day of employment and may be used for any personal reason, such as vacation, errands, or rest.

Leave carryover depends on how the benefit is administered. If leave is accrued over time, employees may carry over up to 16 hours of general paid leave and up to 80 hours of paid sick and safe leave to the next benefit year. If the full balance is frontloaded at the start of the benefit year, employers may not be required to allow carryover. This flexibility ensures employees have ongoing access to time off, while also giving employers options in how they structure the benefit.

Termination Payout Rules for Medium Employers

One of the most significant changes introduced under the 2025 Chicago paid leave ordinance affects medium-sized employers. For this definition, a medium-sized employer constitutes those with 51 to 100 covered employees. As of July 1, 2025, these employers are now required to pay out the full amount of unused, accrued general paid leave when an employee leaves the company. This marks a sharp increase from the previous requirement, which only obligated employers to compensate for up to 16 hours of unused leave upon termination.

Under the new rule, medium-sized employers must now pay out as much as 56 hours of general paid leave at the time of separation. This includes resignations, layoffs, and terminations. The payout must reflect the employee’s final hourly rate of pay. For example, if a departing employee has 40 hours of unused general paid leave, the employer must compensate them for all 40 hours. If the employee has more than 56 hours accrued, the maximum required payout is capped at 56 hours.

It is essential to note that this payout rule applies only to general paid leave, not to paid sick and safe leave. Employers are not required to pay out unused sick leave upon separation, regardless of company size.

These enhanced payout rules aim to protect employees who may not have had a chance to use their earned time off before their employment ended. For medium-sized businesses, this change highlights the importance of accurately tracking leave balances and maintaining updated termination procedures to remain compliant with Chicago labor law.

Private Cause of Action and 16-Day Cure Period

Under the 2025 Chicago paid leave ordinance, covered employees now have the right to take legal action if their employer violates the paid leave provisions. This includes failure to allow time off, denial of accrued leave, or refusal to issue a proper payout at termination. The ordinance creates a private cause of action, allowing employees to file a civil lawsuit directly against their employer without first going through a government agency.

If successful, employees may recover up to three times the value of the denied paid leave, plus interest, court costs, and reasonable attorneys’ fees. This provision significantly increases the financial risks for employers that fail to comply with Chicago’s paid leave requirements.

However, the ordinance includes a temporary safeguard for employers: a 16-day cure period. This grace period runs from July 1, 2025, through June 30, 2026. During this time, employees must give their employer up to 16 days to correct the violation before filing a lawsuit. The countdown begins when the violation occurs and ends either on the next scheduled pay period or after 16 calendar days, whichever comes first. If the issue is resolved within this window, a lawsuit cannot proceed.

After June 30, 2026, the cure period expires. At that point, employees will no longer be required to give advance notice before pursuing legal remedies. This transition gives employers a limited opportunity to improve compliance and resolve disputes internally before facing litigation. Businesses should use this time to train managers and ensure leave policies and tracking systems meet all legal standards.

Chicago 2025 Paid Leave Notice and Posting Responsibilities for Employers

To comply with the ordinance, employers must post a labor notice in a visible area at each Chicago job site. This notice must include the current minimum wage, paid leave rights, Fair Workweek information if applicable, and protections against wage theft. In addition to the physical posting, employers must also provide a written notice with the first paycheck for every new hire.

This same notice must be reissued annually, with a paycheck distributed within 30 days of July 1 each year. These requirements apply even if a company does not have a physical facility in Chicago, as long as the employee performs work within city boundaries. Businesses that fail to comply with these rules risk penalties from the Office of Labor Standards.

Navigate the 2025 Chicago Paid Leave Changes with O’Malley & Madden, P.C.

Employers with workers both inside and outside Chicago must also consider overlapping leave laws. The Illinois Paid Leave for All Workers Act and the Cook County Paid Leave Ordinance may impose different or additional requirements. For example, Cook County’s ordinance applies to suburban municipalities that have not opted out, while the state law mandates paid leave for most workers across Illinois.

To avoid legal exposure, employers should conduct internal audits and clearly define which rules apply to each employee, ensuring that these rules are consistently enforced and applied. It is critical to align company policies with all relevant ordinances to ensure compliance, particularly when managing a geographically diverse workforce.

For legal guidance pertaining to the 2025 Chicago paid leave updates, contact the civil rights and employment law firm of O’Malley & Madden, P.C.