United States: Los Angeles And San Diego Set To Increase Minimum Wage And Paid Sick Leave For Employees Effective July 2016

In July, employers operating in Los Angeles and San Diego will be required to comply with increased minimum wage and paid sick leave requirements under new ordinances recently approved by each municipality.  The Los Angeles ordinance goes into effect July 1, and the San Diego ordinance will likely take effect one week later on July 7. Employers should review their pay and leave policies now in order to ensure compliance on day one.

Minimum Wage Increase

In Los Angeles, the minimum wage will increase incrementally for private sector, non-hotel industry employees as follows:

  • Beginning on July 1, 2016, for employers with 26 or more private sector, non-hotel industry employees the minimum wage will be $10.50 per hour, and will increase annually to US$12.00 (July 1, 2017), US$13.25 (July 1, 2018), US$14.25 (July 1, 2019), and US$15.00 by July 1, 2020. The ordinance sets a similar time schedule for private sector, non-hotel industry private employers with 25 or fewer employees, but increases will start one year later, on July 1, 2017, and will reach US$15.00 per hour by July 1, 2021.
  • Starting on July 1, 2022, and continuing every year thereafter, the minimum wage will increase in conjunction with the Consumer Price Index, with adjusted rates announced every February 1st.

In San Diego, the minimum wage is set to increase on a similar, but different time schedule:

  • US$10.50 per hour on the effective date of the ordinance (likely July 7, 2016), and will increase to US$11.50 per hour effective January 1, 2017.
  • Beginning on January 1, 2019, the minimum wage will increase each year in accordance with the Consumer Price Index.

The current minimum wage in California is US$10.00 per hour. That is scheduled to increase to US$11.00 per hour effective January 1, 2017, and will increase thereafter by US$1.00 per year each of the next four years, resulting in a minimum wage of US$15.00 per hour effective January 2, 2021.

Paid Sick Leave Increase

California's paid sick leave law currently provides that:

  • Employees accrue paid sick leave at the rate of one hour per every 30 hours worked.
  • Employees may carry over accrued sick leave from year to year. 
  • Employers may cap the amount of accrued sick leave at 48 hours. 
  • Employers may limit the amount of paid sick leave used by an employee in a year to 24 hours. 
  • Employers may provide 24 hours of available paid sick leave up front in any given year to avoid the accrual and carry-over requirements. 
  • If the employee is rehired within one year, he or she is entitled to reinstatement of accrued but unused sick leave. 
  • Employers are not required to pay out accrued but unused sick leave upon termination.

The new ordinances in Los Angeles and San Diego largely mirror these requirements, but provide different and increased standards in the areas of accrual cap, use and up front payouts:

 Requirement      State Law  Los Angeles Ordinance  San Diego Ordinance
Accrue one hour for every 30 hours worked Yes Yes Yes
Accrued leave must carry over from year to year Yes Yes Yes
Accrual cap 48 hours 72 hours None
Use cap permitted 24 hours 48 hours 40 hours
Reinstatement of accrued but unused leave upon reinstatement If rehired within one year If rehired within one year If rehired within six months
Payout of accrued sick leave on termination No No No
No additional sick leave plan required if present PTO plan meets minimum requirements Yes Yes Yes
Provision of available sick leave up front to avoid Yes (24 hours) Yes (48 hours) Silent

Notice and Posting Requirements

The Los Angeles ordinance does not have express notice or posting requirements. So employers operating in Los Angeles will need to continue following the notice and posting requirements under state law. In San Diego, however, employers must provide each employee written or electronic notice of the new requirements at the time of hiring or the law's effective date, whichever is later, at any workplace or job site where any employee works within the city. The notice must be in English and any other language spoken by at least 5% of the employees at the employees' job site. Employers must also retain records relating to this new law for at least three years.

Enforcement and Penalties

The Los Angeles ordinance does not have any express provisions concerning penalties or enforcement. It instead indicates the Los Angeles Office of Wage Standards of the Bureau of Contract Administration will promulgate guidelines implementing the new ordinance. Those guidelines have yet to be announced.

The San Diego ordinance, however, provides specific enforcement guidelines:

  • An employer that violates any requirement of the new San Diego ordinance may be subject to a civil penalty for each violation up to, but not to exceed, $1,000 per violation.
  • An employer failing to comply with the notice and posting requirements may also be subject to a civil penalty of $100 for each employee who was not given appropriate notice, up to a maximum of $2,000.
  • Aggrieved individuals in San Diego will also be able to file a complaint with the city-appointed enforcement agency, which has yet to be announced. The San Diego City Council is scheduled to adopt an "implementing" ordinance on July 11 that is expected to task the city's treasurer's office with enforcement. Submitting a complaint under San Diego's ordinance will neither be a prerequisite nor a bar to bringing a private claim against an employer. 
  • Remedies available on an action for violation of San Diego's ordinance include: (1) payment of wages owed; (2) an additional amount equal to double back wages withheld as liquidated damages; (3) damages for the denial of the use of accrued sick leave; (4) reinstatement or other injunctive relief; and (5) reasonable attorneys' fees and costs.

Final Thoughts

Impacted employers should immediately begin to review their current policies to ensure compliance by the anticipated effective date of July 1 for Los Angeles and July 7 for San Diego by:

  • Reviewing and revising, if necessary, paid sick time and/or PTO policies and procedures to ensure they meet the new ordinance requirements.
  • Reviewing attendance and disciplinary policies to avoid potential interference and retaliation claims.
  • Reviewing timekeeping, payroll and benefits systems to ensure compliance with the new ordinance requirements.
  • Reviewing hourly rates of employees to ensure compliance with the new ordinance requirements.

Dentons' Employment and Labor team is available to help in this effort, and will continue to monitor the developments relating to each ordinance as they develop.

Footnotes

1 The Los Angeles ordinance was approved by the Los Angeles City Council on June 1, 2016, and was approved the next day by the Los Angeles mayor on June 2, 2016.

2 The San Diego ordinance was originally approved by the San Diego City council, but was placed on referendum which was approved by city voters on June 7, 2016.  The ordinance will become effective upon the certification of the election results, which is likely to be July 7, 2016.

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