Seyfarth Synopsis: In 2021, West Hollywood joined the growing ranks of California cities with their own local sick leave and/or minimum wage requirements. West Hollywood enacted an ordinance that created paid and unpaid time off mandates as well as minimum wage obligations and mandates for the distribution of service charges, which went into effect for most employers on July 1, 2022. In May 2023, the City published amended regulations that made a few impactful changes to the Ordinance, including setting a specific threshold of compensated leave that could be designated for paid sick leave purposes only, adjusting accrual rates for compensated leave, and changing the waiting time period for use of leave.
On November 15, 2021, West Hollywood enacted an Ordinance that permits employees to accrue up to 96 hours of compensated leave per year for sick leave, vacation, or personal necessity, and up to 80 hours of uncompensated leave which can be used for employee or family member sick leave after compensated leave is fully exhausted. The Ordinance also set a schedule for increasing the City’s minimum wage. On May 16, 2022, West Hollywood amended the Ordinance to clarify some of its more confusing provisions. Most recently, in May 2023, the City amended the regulations on this Ordinance.
West Hollywood also publishes administrative materials, such as required posters regarding the minimum wage and the time off provisions.
How to Get Four Stars for Compliance
Employers need to make sure they stay on script with the key components of the Ordinance:
- Different Effective Dates for Hotel Versus General Employers: For hotel employers, the Ordinance took effect on January 1, 2022. For all other employers, the Ordinance took effect on July 1, 2022.
- Two Hours of Work Creates a West Hollywood “Employee”: “Employee” includes any person who performs at least two hours of work within the geographic boundaries of West Hollywood for an employer in a particular week, and is entitled to minimum wage (i.e. is nonexempt).
- Broad Definitions of Employers and Hotel Employers: Employers are defined broadly. “Hotel employers” broadly encompasses hotels, as well as entities that own or control leased or sublet premises connected to the hotel (for example, a spa or restaurant).
West Hollywood Takes PTO to the Big Time
The City’s compensated time off (“PTO”) provisions enable employees to accrue compensated time off that can be used for sick leave, vacation, or personal necessity.
- Up to 96 Hours of Compensated Time Off: Full-time employees are able to accrue up to 96 hours of compensated time off per year. Part-time employees must receive a pro-rated amount. Employers must not “unreasonably deny” an employee’s request to use accrued leave.
- Employers Can Separate Paid Sick and Vacation/Personal Time: The regulations explain that employers can separate the 96 hours of compensated leave into separate buckets for sick time and vacation/personal time. However, at least 50% of the compensated time (48 hours) must be available for use for vacation or personal necessity. Any paid sick leave component must comply with both the California State paid sick leave law (which was amended effective January 1, 2024, by SB 616) and West Hollywood standards. Any personal necessity or vacation time must be treated as vacation time under California law (meaning no “use it or lose it” and accrued, unused time must be paid out upon termination).
- PTO Allotment and Accrual: The May 2023 regulations provide that all employees, including part-time and temporary employees, who work at least 30 days within a year for the same employer, must receive at least 24 hours of compensated leave that can be used for sick leave purposes beginning on the 90th calendar day of employment. The 24-hour allotment of sick leave is part of employees’ total allotment of compensated time off per year. Full-time employees are still able to accrue up to 96 hours, inclusive of the 24-hour sick leave allotment, and part-time employees shall accrue a pro rata amount of time.
- Accrual Rate for Paid Sick Leave in Excess of 24 Hours: The May 2023 regulations appear to require that the first 24 hours of compensated leave classified as paid sick leave accrue at an accelerated rate of .046 hours of sick leave per hour worked. Once an employee has accrued 24-hours of paid sick leave, any additional paid sick leave can accrue at a rate of no less than 0.033 hours of sick leave per hour worked (i.e. 1 hour of paid sick leave for every 30 hours worked). In comparison, the prior regulations set an accrual rate of 0.047 hours per hour worked for the entire bank of compensated leave, up to 96 hours per year, and an accrual rate of 0.039 hours for employees’ bank of uncompensated leave up to 80 hours per year. The new regulations generally provide that compensated and uncompensated leave can accrue at a rate that ensures full time employees receive 96 hours of compensated leave and 80 hours of uncompensated leave by the end of the 12 month period (which can be prorated for part-time employees).
- Carryover: Unused, accrued compensated time off must be allowed to carry over until the time off reaches a maximum balance of 192 hours, unless the employer’s established policy is more generous. The maximum balance for uncompensated time off is 80 hours, which carries over from year to year.
- Cash-Out Not Required: The original Ordinance required covered employers to provide a cash payment to employees for any accrued compensated time above 192 hours every 30 days. However, the amended version deletes the 30-day cash-out provision.
- Rate of PTO Pay: Unlike California’s state-wide PSL, the rate of pay for compensated time off is based solely upon the base rate of pay. Employers who seek to have West Hollywood paid sick leave or any payout of PTO at termination comply with state requirements will need to tread carefully.
- Uncompensated Time Off: Employers must also permit full-time employees to take at least eighty (80) additional hours per year of uncompensated time off to be used for sick leave purposes where the employee has exhausted their compensated time off for that year. Full-time employees should accrue 80/52 hours of uncompensated time off per week, or receive a frontload of time up to the 80 hour maximum. Part-time employees receive a proportional amount. Unused, accrued uncompensated time off will carry over until the time off reaches a maximum of 80 hours, unless the employer’s established policy is more generous. Uncompensated time off does not accrue in excess of 40 hours in a given week.
- Credit Where Credit Is Due. Though the ordinance is not crystal clear on this point, the regulations suggest that only the hours worked within the City count towards accrual.
- 90-Day Waiting Period. According to the May 2023 regulations, employees are eligible to use uncompensated leave and any accrued compensated leave after the first 90 days of employment, or consistent with company policies, whichever is sooner. The prior iteration of the regulations had a much lengthier six-month waiting period for uncompensated time off (although uncompensated time off cannot be used until the employee has exhausted compensated time off).
- No Unlawful Practices or Retaliation: As with similar ordinances, employers are prohibited from reducing hours or benefits in order to pay wages less than the established minimum wage, and they are prohibited from retaliating against employees for exercising their rights under the Ordinance.
- Liability for Civil Penalties and Lawsuits: The Ordinance provides for administrative penalties and creates a private right of action for aggrieved employees.
- Rehire Obligations: Like regular California paid sick leave, if an employee is rehired within a year, the previously accrued and unused compensated leave (designated as sick leave) and uncompensated sick leave must be reinstated.
Minimum Wage Requirements
In addition to the paid time off components as described above, West Hollywood’s Ordinance contains a minimum wage component, raising the minimum wage above the levels set by the state and other local areas. Starting July 1, 2023, the citywide minimum wage for all businesses became $19.08. This rate will remain in effect until June 30, 2024, and will then increase based on the Consumer Price Index.
The City will announce the adjusted rates annually on or before each April 1st and publish a bulletin announcing the adjusted rates, which will also take effect on July 1st of each year.
- Notice and Posting: Every employer shall post the City’s poster in a conspicuous place at any workplace or job site where covered employees work. Notices shall be posted in English, Spanish, and any other language spoken by at least five percent (5%) of covered employees. At hiring, employers are also required to provide notice of the employer’s name, address, and telephone number in writing. Employers should also inform their employees of the possible right to the earned income tax credit under state and federal law.
- Record Retention: Similar to state requirements, employers need to retain payroll records pertaining for no less than three years.
Service Charge Requirements in the Limelight
Employers are required to distribute Service Charges to employees who performed services (excluding managers and supervisors). The Ordinance defines a Service Charge as something that is not a gratuity, but is a separately-designated amount charged and collected from customers for service, or is described in such a way that customers might reasonably believe that the amount is for those services or is otherwise to be paid or payable directly to employees, including those charges designated on receipts, invoices, or billing statements under the term “service charge,” “table charge,” “porterage charge,” “automatic gratuity charge,” “healthcare surcharge,” “benefits surcharge,” or similar language.
Can We Exit Stage Left?
The ordinance provides an avenue for businesses that would experience hardship to seek a waiver, which requires specific notice provisions to employees. The provisions in the Ordinance can also be waived through a collective bargaining agreement, but only where the waiver is set forth in clear and unambiguous terms.
As the paid leave landscape continues to expand, companies should reach out to their favorite Seyfarth attorney for solutions. To stay up-to-date on paid leave developments in California and beyond, click here to sign up for Seyfarth’s Paid Sick Leave mailing list.
Edited by Coby Turner