United States: San Francisco Becomes First U.S. City To Require Employer-Funded Paid Parental Leave

This month, the San Francisco Board of Supervisors unanimously approved an ordinance that provides six weeks of parental leave for bonding with a new child at 100% of the employee's rate of pay (subject to certain caps).  The ordinance which will take effect beginning January 1, 2017, will make San Francisco the first U.S. city to require employer-paid parental leave.

The new ordinance will go above and beyond the California state mandate, which currently provides covered employees six weeks of paid family leave at 55% of their pay for baby bonding or to care for a sick family member.  That paid leave is funded by the employee who is taking the leave, through regular payroll contributions to the California State Disability Insurance ("SDI") program.  The new ordinance requires covered San Francisco employers to pay the remaining 45% of a covered employee's wages during the six weeks of paid parental leave.

The law's effective dates are staggered as follows:

Effective Date Size of Employer
January 1, 2017 50 or more employees regardless of the employees' location.
July 1, 2017 35 or more employees regardless of the employees' location.
January 1, 2018 20 or more employees regardless of the employees' location.

Covered Employers

In determining the size of a covered employer, the ordinance looks at the size of an employer's total workforce, regardless of the actual location of the employees.  Accordingly, an employer may be subject to the ordinance even if it does not employ 50 (or 20) employees within the city of San Francisco.

The City and other governmental entities are not covered employers under the ordinance.

Covered Employees

Employees (including part-time and temporary employees) are eligible for the fully paid leave if they meet all of the following criteria:

  • Are employed for at least 180 days prior to the start of the leave;
  • Work at least 8 hours per week in San Francisco;
  • Work at least 40% of their weekly hours in San Francisco; and
  • Are eligible for California Paid Family Leave for baby bonding.

Notably, employee eligibility is based on the number of hours the employee works in San Francisco, regardless of his or her residence and regardless of the employer's work location.

Union employees are not covered if (1) their collective bargaining agreement expressly waives the requirements under the ordinance in clear and unambiguous terms, or (2) the collective bargaining agreement was entered into before the ordinance's effective date.

How Much Do Employers Need to Pay?

The new ordinance requires covered employers to pay 45% of the employee's weekly gross wages, up to a maximum of $924 per week, for six weeks.  This cap is based on the California Paid Family Leave program's 55% wage replacement provision, which is capped at $1,129 per week.  Between the two programs, covered employees should receive 100% wage replacement for a six-week parental leave, up to a total of $2,053/week.

What if the Employee Works for Multiple Employers?

If the covered employee works for more than one employer, the 45% supplemental compensation amount is apportioned between or among the covered employers based on the percentage of the employee's total weekly wages received from each employer.  For example, if the employee earns $800 per week from Employer A and $200 per week from Employer B for a combined total of $1,000, Employer A pays 80% of the supplemental compensation and Employer B pays 20% of the supplemental compensation.

Can the Employer Require the Use of Vacation?

An employer can require employees to use up to two weeks of unused, accrued vacation to help meet the employer's obligation under the ordinance.  This vacation time can be counted toward the six-week paid parental leave period.

Anti-Discrimination/Retaliation Provision

Employers may not interfere with, discriminate, or retaliate against employees for exercising their rights under the ordinance.  Terminating a covered employee within 90 days of their request or application for California Paid Family Leave, or taking adverse action against an employee within 90 days of their filing a complaint based on the new ordinance, will raise a rebuttable presumption that such action was taken to avoid the employer's obligations under the law.

Notice and Posting

Employers will be required to post in a conspicuous place, at any workplace where a covered employee works, a notice informing employees of their rights under the ordinance.  The notice must be in English, Spanish, Chinese, and any other language spoken by at least 5% of the employees at the workplace or job site.

Employer Records

Employers must retain for three years records documenting the supplemental compensation paid to its employees, and make the records available to San Francisco's Office of Labor Standards Enforcement ("OLSE") upon request.  Failure to do so will raise a rebuttable presumption that the employer has violated the ordinance.

Damages and Penalties for Violations

The ordinance provides for remedies through the OLSE and through the courts.  The OLSE or "a person or entity acting on behalf of the public as provided for under applicable state law" may bring a civil action in court for alleged violations of the ordinance.

If the OLSE (after an administrative hearing) or court determines that the employer has violated the ordinance, the employer may be required to pay:

  • the total supplemental compensation withheld,
  • penalties to the employee of $250 or three times the amount of supplemental compensation withheld (whichever is greater),
  • penalties of $50 per day to each employee whose rights were deemed violated (e.g., in the instance of a failure to post a notice, this may be several employees per workday),
  • interest, and
  • in the event of a lawsuit, the plaintiff's attorneys' fees and costs.

Courts may also provide injunctive relief.  In addition, the OLSE may require the employer to pay the City penalties of $50 per day per "employee or person as to whom the violation occurred or continued."

Takeaways

Paid leave is an area gaining increasing attention from state and local governments.  San Francisco's new law comes on the heels of New York state's enactment of a new paid family leave law and California's Assembly Bill No. 908 which, beginning in 2018, will raise California's current family leave pay rate from 55% to 60% or 70% depending on the employee's wage rate.  The U.S. Department of Labor has also set requirements for federal contractors to provide their employees with paid sick leave.

While San Francisco has gone farther than any other jurisdiction in what it requires employers to provide to new parents, employers should expect similar legislation in more jurisdictions across the U.S. in the years to come.

Employers with employees who work in San Francisco are highly encouraged to review the new ordinance carefully and to consult with an employment attorney to begin exploring what steps they may need to take now to ensure they are able to comply with the law upon its enactment.

We will continue to monitor the increasing and various city, state, and federal laws surrounding paid leave and provide additional analysis and guidance on compliance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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