Minimum Wage Ordinance

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Seyfarth Synopsis: After hitting some major roadblocks, the San Diego Earned Sick Leave and Minimum Wage Ordinance has now been enacted. The Ordinance is to take effect this summer, most likely by the end of July. The Ordinance adds another perplexing piece to California’s paid sick leave patchwork.

After taking a nearly two-year hiatus, the San Diego Earned Sick Leave and Minimum Wage Ordinance was finally enacted on June 7, 2016, by San Diego voters. The Ordinance, originally approved by the San Diego City Council on August 18, 2014, hit a major snag when opponents sought a referendum. The City Council responded by suspending the Ordinance pending voter approval. The voters have now spoken.

San Diego joins six other California municipalities—San Francisco,[1] Oakland, Emeryville, Los Angeles,[2] Santa Monica,[3] and Long Beach[4]—that now supplement California sick pay law with additional paid sick leave entitlements. Because the statewide paid sick leave law does not supersede local ordinances, employers must comply with both the state and local laws, whichever most favors employees.

While the Ordinance’s effective date is currently unclear, signs point to a July 2016 effective date. We, of course, will keep you posted on any developments. In the meantime, employers should take steps now to ensure their policies and practices comply with the impending law.

Below is a detailed summary of the Ordinance and the key obligations it imposes on employers. Most notably, the Ordinance does not set a cap on either the amount of earned sick leave that employees can accrue in a year or the amount of unused earned sick leave that employees can carry over from year to year. The Ordinance also increases the minimum wage that San Diego employers must pay. The minimum wage will increase to $10.50 once the Ordinance goes into effect and will increase to $11.50 per hour on January 1, 2017. Starting January 1, 2019, the minimum wage will increase to an amount correlating with the cost of living.

Which Employers Are Covered by the Ordinance?

The Ordinance will cover all employers with at least one eligible employee working in San Diego, and defines “employers” as any person (including any association, organization, partnership, business trust, limited liability company, or corporation) who exercises control over the wages, hours, or working conditions of any employee, who engages an employee, or who permits an employee to work. Employers do not include persons who receive in-home supportive services care, under state law.

The Ordinance notes that covered employers need not provide additional earned sick leave where they provide their employees with an amount of paid leave under either a paid time off or other paid leave policy that meets or exceeds the Ordinance’s minimum standards and requirements, including the protected conditions and reasons for using sick leave.

Which Employees Are Covered by the Ordinance?

The Ordinance broadly defines a covered employee as one who performs at least two hours of work within the City of San Diego in one or more calendar weeks of the year and who qualifies as an individual entitled to minimum wage under California minimum wage law.

The following individuals are not subject to earned sick leave or the minimum wage increase:

  • Individuals authorized to obtain less than the minimum wage under a special license pursuant to California Labor Code sections 1191 or 1191.5.
  • Persons employed on a publicly subsidized summer or short term youth employment program.
  • Any student employee, camp counselor, or program counselor of an organized camp.
  • Independent contractors.

Earned Sick Leave Overview

How Much Sick Time Can Employees Accrue, Use, and Carry Over?

Employees accrue one hour of paid, earned sick leave for every 30 hours worked, at the same hourly rate or other measure of compensation that the employee earns. Accrual for employees exempt from California’s overtime laws is based on a 40-hour workweek, unless the employee’s regular workweek is less than 40 hours, in which case accrual is based on the regular work week. Employees will begin accruing earned sick leave on the later of the Ordinance’s effective date or the employee’s commencement of employment, and employees can begin using their accrued time 90 days thereafter.

Employers may limit use of sick leave to 40 hours in a 12-month period and can set a reasonable minimum increment for using sick leave, not to exceed two hours. Importantly, and as noted above, while the Ordinance sets an annual usage cap, accrual itself cannot be capped. In other words, employees must be allowed to accrue as much earned sick leave as possible based on their hours worked. Making matters worse for employers, unused leave, in whatever amount, must be carried over at year-end. In essence, employees can carry over an unlimited amount of accrued, unused sick leave, but may be limited to using 40 hours per calendar year. This accrual provision of the Ordinance is much more expansive than California’s statewide paid sick leave law, which provides that employers may cap the amount of accrued leave at 48 hours or six days, whichever is greater.

This distinction is problematic because it increases the risk of employee confusion. California law requires employers to provide employees with notice of their available number of sick leave hours either on the employees’ pay stubs, or in separate writings issued the same day as the employees’ paychecks. An employee who has, for example, 140 hours of accrued leave may not understand why only 40 hours of leave is available to use within a 12-month period.

The Ordinance’s unlimited accrual and carryover caps also make it risky for employers who seek to front-load earned sick leave in the form of an annual lump grant. Unlike the California statewide sick leave law, the Ordinance is silent on whether front-loading removes an employer’s accrual and year-end carryover obligations. As a result—and barring any future guidance from the City—this alternative sick leave delivery method may be unavailable to San Diego employers.

Under What Circumstances May Employees Use Sick Leave?

Qualified employees may use their earned sick leave for any of the following reasons:

  • If an employee is physically or mentally incapable of performing duties because of an illness, injury or medical condition, or is absent for the purpose of obtaining professional diagnosis or treatment of a medical condition or for other medical reasons, such as pregnancy or obtaining a physical examination.
  • If an employee is absent from work due to a family member’s[5] need to obtain treatment or professional diagnosis of a medical condition, or to provide care or assistance to a family member with an injury, illness or medical condition.
  • If, under certain circumstances, the employee or the employee’s family members are absent because of domestic violence, sexual assault or stalking.
  • If, by order of a public official because of a public health emergency, there is a closure of the employee’s place of business or the employee’s child’s school or child care provider.

What Notice Must Employees Provide When Using Sick Leave?

If the use of earned sick leave is foreseeable (e.g., scheduled doctor’s appointments), then an employer may require employees to provide up to seven days’ notice. But if use of sick leave is not foreseeable (e.g., a sudden illness), then an employer may require only as much notice as is practicable.

What Documents Can Employers Ask Employees to Provide When Using Sick Leave?

If employees are going to be absent for more than three consecutive work days then an employer may require employees to provide reasonable documentation that the employee used earned sick leave for a permitted purpose. Employers must accept doctor’s notes or other documentation signed by licensed health care providers indicating the need for the amount of leave taken. An employer however, may not require that the note specify the nature of the injury, illness or medical condition.

Is an Employer Required to Pay Unused Time upon Employment Separation?

No. Employers are not required to pay an employee for unused accrued sick leave upon termination. However,when an employee is rehired within six months of separation, the employer must reinstate the employee’s previously accrued, unused sick leave that was not paid upon separation, and the employee is entitled to use said leave.

Minimum Wage Increase Overview

What is the New Minimum Wage and When does it Go Into Effect?

Employees must be paid a minimum wage of $10.50 an hour upon the Ordinance’s effective date, which, again, we anticipate will occur in July 2016. Starting January 1, 2017, the minimum wage will increase to $11.50 an hour. Starting January 1, 2019, the minimum wage will increase by an amount corresponding to the prior year’s increase, if any, in the cost of living, as defined by the Consumer Price Index. If however, California or federal laws provide a higher minimum wage rate, then the minimum wage under this Ordinance will be increased to match the higher California or federal wage, effective on the same date that the increased California or federal wage takes effect.

Employer Obligations under the Ordinance

Employer Notice Requirements

Employers must post notices published by the City in a conspicuous place in the workplace informing employees of the current minimum wage, their right to the minimum wage, and their right to earned sick leave. The notice must also include information about the accrual and use of sick leave, the right to be free from retaliation, and the right to file a complaint with the designated enforcement office. The posted notice must be in English, Spanish and any other language spoken by at least five percent of employees at the employer’s job site.

In addition, at the time of hire or on the Ordinance’s effective date, employers are required to provide employees with written notice of the employer’s requirements under the Ordinance, and the employers name, address, and telephone number. Electronic notice is permitted.

Records Maintenance Requirement

Employers must create written or electronic records documenting employees’ wages earned, and accrual and use of sick leave, and retain these records for at least three years.

Prohibitions

Employers are prohibited from (1) requiring employees seeking to use their sick leave to search for or find a replacement worker, (2) disclosing the medical condition of the employee or his or her family member unless ordered to do so by the employee or authorized by federal or state law, and (3) retaliating against an employee who exercises his or her rights under the Ordinance.

Remedies/Penalties

An employer that violates any requirement of the Ordinance is subject to a civil penalty for each violation of up to, but not to exceed, $1,000 per violation. An employer failing to comply with the notice and posting requirements is subject to a civil penalty of $100 for each employee who was not given appropriate notice, up to a maximum of $2,000. Additionally, employees may file a complaint with the designated enforcement office or in court. Notably, filing a complaint with the enforcement office is not a prerequisite to filing a claim in court.

What Should Employers do Now?

With the Ordinance’s effective date looming, San Diego employers should take steps now, including the following, to achieve compliance:

  • Review existing sick leave policies and either implement new policies or revise existing policies so that they satisfy the Ordinance.
  • Post the required notices in all applicable languages.
  • Prepare notices in all applicable languages to provide to employees at the time of hire or once the Ordinance is implemented.
  • Review policies on attendance, anti-retaliation, conduct, and discipline.
  • Train supervisory and managerial employees, as well as HR, on the new requirements.
  • Ensure that payroll records adequately reflect accrual and use of earned sick leave and the increase in minimum wage.

[1] On June 7, 2016, San Francisco voters approved an amendment to the San Francisco Paid Sick Leave Ordinance.  The amended San Francisco law becomes effective on January 1, 2017.

[2] As discussed here and here, the Los Angeles City Council in April 2016 voted for 48 hours of paid sick leave for Los Angeles employees as an amendment to an LA City minimum wage ordinance. The LA ordinance is effective July 1, 2016.  Further, certain hotel employers must comply with additional compensated time off obligations set forth in the Los Angeles Citywide Hotel Worker Minimum Wage Ordinance.

[3] The Santa Monica paid sick leave law is effective January 1, 2017.

[4] Long Beach Resolution No. RES-12-0049 establishes paid sick leave and minimum wage requirements for certain hotel employers.

[5] Family members include an employee’s child, spouse, parent, grandparent, grandchild, sibling (including step-siblings), whether biological or not, or the child or parent of a spouse.

Seyfarth Synopsis:  Santa Monica has amended its Minimum Wage Ordinance to postpone implementation of its paid sick leave entitlements, now starting January 1, 2017 instead of July 1, 2016, and create a two phase implementation process for both small and large employers.

Like many a trip to the beach, the journey of the paid sick leave portion of Santa Monica’s Minimum Wage Ordinance[1] has hit some last-minute snags. On Tuesday, April 26, the City Council accepted a package of amendment proposals. Within those proposals, instead of rushing to a July 1, 2016 implementation date of the previously adopted San Francisco-like 72-hour sick leave cap, the Council has decided that everyone should just chill out. The amended Ordinance will allow implementation to roll in like the tide, with the first wave of changes delayed to January 1, 2017, and a second wave coming in on January 1, 2018.

Under the first wave, small businesses (employers with 25 or fewer employees) must allow a rolling cap of 32 hours of paid sick time for employees, with larger businesses capped at 40 hours. The second wave will increase these caps to 40 hours for small businesses and 72 hours for larger businesses. Until January 1, 2017, Santa Monica employers can relax and continue to follow California law.

The accrual rate remains the same as required under California law (one hour for every 30 hours worked), but these accrual caps act as “point in time” caps, similar to the San Francisco ordinance. That is, Santa Monica employers would no longer be able to limit employee annual use to 24 hours after Jan 1, 2017. Instead, they will have to allow the use of whatever an employee has in his or her bank at any given time. The Ordinance also does not eliminate an employer’s obligations to follow the California statute where the California statute is more generous. So, at least until January 1, 2018 (when the accrual cap will increase to 72 hours for large employers), Santa Monica employers who provide sick time by the accrual method should still follow the 48-hour minimum accrual caps under state law. The updated proposal does imply that some kind of frontloading would be acceptable, but it’s not apparent yet how that would work. We hope that once the Ordinance itself is published, this issue will be made clear.

The Council has also reduced the period of time in which retaliation against an employee for exercising rights under the Ordinance will be presumed. The time, once 180 days, will now be 90 days (that that’s still three times longer than under the California law). So employers should be very cautious in taking actions against employees who take sick days, no matter how totally bodacious the surf report was for that day.

Please see here and here for more information.  We expect the amended Ordinance to be available at any moment.  In the meantime, please see your most tubular Seyfarth attorney for more information.

[1] The Ordinance is entitled “An Ordinance of the City Council of the City of Santa Monica Adding Chapter 4.62 to the Santa Monica Municipal Code Requiring a Minimum Wage for Employees, and Adding Chapter 4.63 to the Santa Monica Municipal Code Requiring a Living Wage to Hotel Workers.”