Introduction

On November 7, 2006 more than 61% of San Francisco voters passed Proposition F, mandating extraordinary paid sick leave entitlements for employees working in San Francisco. In fact, with passage of the Paid Sick Leave Ordinance, San Francisco became the first city in the state to require all employers to provide paid sick leave.

Although Proposition F supporters largely focused their electioneering efforts on low-wage workers, this new law requires that employers provide broad entitlements that apply to virtually all employees working in San Francisco, including temporary employees hired through temporary agencies and part-time employees. Employers with workers in San Francisco are covered by this new law, a summary description of which is provided below.

When Does The Law Become Effective?

The operative date of the new requirements is February 5, 2007, which is 90 days after election day. The law has prospective effect only.

Which Employers And Employees Are Covered?

The new law applies to all "employers" who employ persons employed within the geographic boundaries of San Francisco, including part-time and temporary employees. The law broadly defines "employers" as any person, including corporate officers or executives, who directly or indirectly or through an agent or any other person, including through the services of a temporary services or staffing agency or similar entity, employs or exercises control over the wages, hours or working conditions of an employee. For those employers, the mandated requirements apply only to the workers assigned to work in San Francisco.

What Is The Required Sick Leave Accrual Rate?

The required accrual rate is 1 hour of paid sick leave for every 30 hours worked by an employee. If an employee works 40 hours per week for 52 weeks in the year (a total of 2080 hours, with no time off due to vacation or other absence), the employee would accrue a total of 69.33 hours per year of paid sick leave. The same employee who took two weeks of vacation, and ten paid holidays, would accrue 64 hours of paid sick leave in that year.

The mandated rate of accrual may not be easily compatible with many payroll systems. In addition, employers do not routinely track hours worked by exempt employees. For these reasons, employers may want to simply adopt an accrual formula (such as 8 or 9 days per year, prorated for part-timers) that will meet the minimum accrual rate.

Employers may adopt an accrual cap of 72 hours, at which level further accrual stops. Employers that qualify as a "small business" (fewer than 10 employees) may adopt an accrual cap of 40 hours of paid sick leave. The ordinance does not on its face prorate the accrual cap for part-time employees.

An important feature of the new law is that new hires starting after February 5, 2007 need not begin to accrue paid sick leave until after an initial 90-day waiting period of employment. This 90-day waiting period permits employers to withhold paid sick leave from short-term temporary employees, including those retained through a temporary personnel agency.

Accrued sick leave must carry over from year to year, and employers cannot enforce a "use it or lose it" policy. No payout of accrued and unused sick leave is required upon termination of employment.

What Are The Permitted Uses Of Paid Sick Leave?

Employees are able to use any amount of their accrued paid sick leave for their own illness, injury, or to seek their own medical care, treatment, or diagnosis. Employees may also use paid sick leave to aid certain family members who are ill, injured, or seek medical care, treatment, or diagnosis. In addition to the family members covered by "kin-care" (spouse, child, parent, registered domestic partner, or child of a registered domestic partner) the ordinance also permits use of paid sick leave to aid the employee’s sibling, grandparent, or grandchild, or a "designated person."

This unique feature of the law permits employees without a spouse or registered domestic partner to use paid sick leave in order to aid or care for a certain "designated person" who does not otherwise meet the family category. Once an employee has completed the first 30-hour accrual period (i.e., 30 hours of work after the 90-day waiting period has elapsed) the employee has 10 work days to designate the extra person for whom the employee may use paid sick leave. Thereafter, the employer must annually provide another 10-work day window of opportunity to make such a designation or to change a previous designation. While the law does not require the designation to be in writing, for practical and compliance reasons employers should ensure that these designations are made in writing or otherwise documented.

Note that the ordinance—in addition to expanding the category of other persons for whom the employee may use paid sick leave—also is more generous than "kin-care" in that it permits all of the paid sick leave to be used for other individuals’ needs, whereas "kin-care" permits employees to be limited to up to one half of their annual accrual for such use.

What Are The Enforcement Mechanisms For The New Law?

The law provides both administrative enforcement through the San Francisco Office of Labor Standards Enforcement, and a right to bring civil actions against employers that can be exercised by employees and the San Francisco City Attorney. Provided remedies include but are not limited to administrative penalties equal to three times the amount of paid sick leave withheld from the employee (or $250 if greater), additional administrative penalties in certain circumstances, reinstatement, back pay, payment of any sick leave unlawfully withheld, interest, and attorney’s fees and costs.

The law prohibits employers from discharging, threatening to discharge, demoting, suspending or in any manner discriminating or taking adverse action against any person in retaliation for exercising rights under the law. Significantly, the law contains specific provisions relating to retaliation, including a provision that a rebuttable presumption of retaliation will arise if an employee suffers an adverse employment action within 90 days after exercising any rights under the law (including filing a complaint, raising questions about the employer’s compliance with the law, cooperating with any investigation, or prosecution of any alleged violations, and the like).

The law also prohibits an employer’s absence control policy from counting paid sick leave as an absence leading to discipline, discharge, demotion, suspension, or any other adverse action.

Posting And Records Retention Requirements Of The New Law

By February 5, 2007 the San Francisco Office of Labor Standards Enforcement will publish a mandatory notice of rights for employers to post in San Francisco workplaces.

Employers are required to retain records documenting hours worked and paid sick leave taken by employees for a period of 4 years, longer than the general California retention period of 3 years for pay and timekeeping records.

What Are The Recommended Next Steps?

Employers with workers in San Francisco should immediately review their current sick leave policy to determine whether it complies with the new law. If the current policy, whether it is designated as sick leave or as combined Paid Time Off ("PTO"), complies with the requirements of the law, no action is required. Employers with non-compliant policies, or no policy, have until February 5, 2007 to adopt or revise a policy to conform to the new law. If payroll and timekeeping procedures must be changed, those changes should be in place by February 5, 2007.

Employers with PTO programs should consider establishing separate sick leave programs (with or without a parallel vacation program) for certain employees, where the alternative arrangement would prove advantageous. Conversely, some employers facing implementation of Paid Sick Leave may obtain advantages by combining separate vacation and sick leave programs into a PTO program. The analysis will differ, depending on the employer’s current programs and potentially eligible categories of employees.

Employers with workers located both in San Francisco and in other locations must consider whether to have a compliant paid sick leave policy limited to San Francisco workers, or to voluntarily extend the same paid sick leave entitlements to workers elsewhere.

Employers using temporary staffing agency workers in San Francisco should require the agency to comply with the ordinance as to workers dispatched to the employer, and review the terms of the agency contract to minimize risk. In addition, such employers should analyze their usage patterns to determine whether risk could be reduced in other ways.

We would be glad to discuss the above points further, or to answer your questions about the Paid Sick Leave Ordinance.

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.