United States: San Diego Minimum Wage And Paid Sick Leave Ordinance Effective July 11: Employers Need To Act Quickly!

Last Updated: July 13 2016
Article by Annie Macaleer

With Assistance from Kera Harkins, Research Services Coordinator

On June 28, 2016, we alerted employers about the San Diego Earned Sick Leave and Minimum Wage Ordinance ("Ordinance"), cautioning employers that the "original" Ordinance had an uncertain effective date of sometime in mid-July and that the "implemented" Ordinance might include major substantive changes. Last night, the City Council approved certification of the results from the June 7 election that passed the original Ordinance, which means the original Ordinance is effective immediately (i.e., July 11, 2016). To clarify, only the terms of the original Ordinance are effective as of July 11. The terms of the implemented Ordinance, which are still being finalized, will be effective on or around August 11.

City Council Makes Significant Changes to Implemented Ordinance

The implemented Ordinance contains the following critical changes, among others (the full text of the revisions as of July 11 is available here1):

  • The effective date for the paid sick leave ("PSL") and minimum wage requirements is defined as July 11, 2016.
  • Employers may impose a cap on an employee's accrual of PSL of 80 hours (or twice the annual use limit). This means that employers that were using PTO policies to comply with PSL requirements can continue to do so, as long as those PTO policies impose a cap of at least twice the employee's annual accrual rate.
  • Employers may comply with the PSL provisions by using a lump sum, allotment, or frontloading option.
  • The Office of Enforcement will publish the notices and posters that employers are required to provide to employees pursuant to the Ordinance by September 1, 2016, although the Office of Enforcement has indicated that these materials might be available as early as later this week. Employers are required to provide the individual notices to employees by October 1, 2016. Employers are encouraged to periodically check the Office of Enforcement's website for updates regarding these materials.
  • The rate at which an employer must pay PSL to a non-exempt employee is now aligned with the California PSL law ("at the same regular rate of pay for the workweek in which the Employee uses" the PSL).
  • The implemented Ordinance significantly strengthened the retaliation, enforcement, and penalty provisions for violations. In fact, an employer's adverse action against an employee within 90 days of an employee exercising his or her rights under the Ordinance "creates a rebuttable presumption" that the employer acted in retaliation against the employee. Employers are cautioned to consult counsel before taking adverse action in these circumstances.

Compliance Task List for Employers

For those employers operating within the City of San Diego or with employees working within the City of San Diego, below is a critical "to do" list:2

  • All employers must ensure that they increase their minimum wage for affected employees to $10.50 per hour worked, effective July 11.
  • Employers with accrual PSL policies need to ensure that their policies are modified to allow for a higher use limit (40 hours) and a higher cap (80 hours).
  • Employers with allotment policies need to increase the PSL allotted to employees to 40 hours every 12-month period.
  • Employers using PTO policies need to ensure that their policies are modified to allow for a higher cap of at least twice the employee's annual accrual rate. It is still unclear from the Ordinance (and the Office of Enforcement's FAQs) whether PTO policies must be converted to an hours worked model (rather than a pay periods or months worked model).
  • Employers using unlimited time off policies do not appear to need any further modifications to their policies other than minimally modifying their policies to include additional references to the Ordinance and certain technical requirements.

Employers are strongly encouraged to consult their legal counsel when implementing these changes to ensure compliance.

Footnotes

1 The City Council is currently considering additional revisions, such as exclusions for employers with valid collective bargaining agreements that provide adequate paid sick leave to covered employees.

2 These recommendations are based on the terms of the implemented Ordinance. Although these terms are still being finalized and the effective date is not until on or around August 11, the Office of Enforcement has indicated that the 80-hour cap and the allotment terms will not be changed and that an employer's good faith reliance on the terms of the implemented Ordinance will be considered. In addition, the Office of Enforcement's agenda will primarily be complaint-driven for the foreseeable future as opposed to proactive enforcement.

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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