USA: Parental Leave Laws in San Francisco: City Adopts Full Pay for Certain Parental Leaves
Asinta’s US partner, Alliant Insurance Services, regularly posts US compliance updates. Below is an April 5 alert regrading San Francisco’s parental leave ordinance that certain San Francisco employers must offer their employees. This ordinance does not apply to the entire State of California.
On April 5, 2016, the San Francisco Board of Supervisors adopted an Ordinance requiring certain employers to supplement existing state wage replacement programs covering baby bonding time. Under the Ordinance, Qualifying Employees of Covered Employers will receive 100% of their wages (55% from the state and 45% from their employer) during six weeks of baby bonding time. This requirement begins in January 2017 for larger employers (50+ employees) and expands to smaller employers (20+ employees) in July 2017. The details of the Ordinance are discussed below.
Background
In addition to state and federal leave entitlements,[1] the California Paid Family Leave (PFL) program provides for partial wage replacement for employees while taking time off from work to bond with a newborn baby, newly adopted child, or new foster child. PFL provides up to six weeks of 55% wage replacement each year funded by employee payroll contributions. Notably, PFL does not create an independent leave entitlement but is a wage replacement program for employees on unpaid leave for baby bonding either required under state law or otherwise authorized by the employer.
Paid Parental Leave Ordinance Requirements
The Ordinance requires San Francisco employers with 50 or more employees to provide additional partial wage replacement to employees covered under the California PFL program. It requires employers to provide the remaining portion (45%) of the employee’s normal gross weekly wages (Supplemental Compensation) during the six-week leave period. In essence, this requirement gives Covered Employees a combined 100% wage replacement during this time, funded partially by the state and partially by the Covered Employer. On July 1, 2017, the wage replacement requirement will expand to employers with 20 or more employees.
As is the case with the various San Francisco employer ordinances, the definitions of Covered Employer and Employee are critical to understanding the reach and requirements of this new law. Those definitions are:
“Covered Employee” – An person employed by a Covered Employer, including but not limited to part-time and temporary employee, who: (1) commenced employment with the Covered Employer at least 90 days prior to the start of the leave period, (2) performs at least eight hours of work per week for the employer within the geographic boundaries of the City or County of San Francisco, (3) has at least 40% of total weekly hours worked for the employer are within the geographic boundaries of the City or County of San Francisco, and (4) is eligible to receive paid family leave compensation under the California PFL law for the purpose of bonding with a new child.
“Covered Employer” – Effective January 1, 2017, an employer with 50 or more employees, regardless of location. Effective July 1, 2017, an employer with 20 or more employees, regardless of location. Governmental entities, including the City and County of San Francisco, are exempt.[2]
Use of Unused, Accrued Vacation Leave
To be eligible to receive Supplemental Compensation under the Ordinance, an employer may choose to use up to two weeks of the employee’s unused, accrued vacation leave to help satisfy the employer’s obligation to pay Supplemental Compensation during the leave period. The California PFL program allows an employer to require an employee to use up to two weeks of vacation time. If the employer exercises that option under State law, the employee must first take two weeks of vacation before starting the six-week family leave period, resulting in a total of eight weeks of leave (assuming 2 weeks of vacation time and 6 weeks of additional unpaid leave). Given the interrelated nature of California PFL and the Ordinance, the Ordinance essentially provides that the employer can use that vacation time or PTO as a credit against the 45% wage replacement it would owe under the Ordinance. Additional clarifying or confirming guidance on how these provisions are intended to interact would be welcome.
Fluctuating Hours or Wages
Where someone’s weekly hours fluctuate, whether they meet the eight-hour and 40% threshold requirements is determined using an average of weekly hours worked for the Covered Employer during the three monthly pay periods, six bi-weekly or semi-monthly pay periods or 12 weekly pay periods immediately preceding the start of PFL. If the person was on unpaid leave during any of those pay periods, they do not count towards the average. Instead, additional earlier corresponding pay periods must be factored in (but not pay periods earlier than 26 weeks prior to the PFL period).
If a Covered Employee’s weekly wage fluctuates, the employee’s normal gross weekly wage is calculated based on an average of the employee’s weekly earnings from the Covered Employer during the three monthly pay periods, six bi-weekly or semi-monthly pay periods, or 12 weekly pay periods immediately preceding the start of PFL. If the employee was on unpaid leave, those pay period(s) do not count towards the average. Instead, the average is calculated using additional earlier pay periods (but not pay periods earlier than 26 weeks prior to the PFL period).
If the PFL amount the employee is receiving is based on earnings from a calendar quarter during which the employee did not work for the Covered Employer or during which the employee earned a higher weekly wage from the Covered Employer than the employee is receiving at the time of leave, the Supplemental Compensation amount is calculated to provide 100% of the employee’s normal gross weekly wage in his or her current position.
Multiple Employer Responsibility
If an employee has multiple Covered Employers, the Supplemental Compensation amount will be apportioned between or among the Employers based on the percentage of the employee’s total gross weekly wages received from each employer. If an employee works for a Covered Employer and a non-Covered Employer, the Covered Employer is only responsible for its percentage of the employee’s total gross weekly wages.
Maximum Weekly Benefit Limitation
California PFL places a cap on the 55% weekly benefit amount for higher-earning workers. As of January 1, 2016, the State’s “maximum weekly benefit amount” is $1,129, which represents 55% of a person’s weekly wages based on an annual salary of approximately $106,740. Employees who earn more than $106,740 per year therefore do not receive the full 55% of their salary under the State program. An employer’s Supplemental Contribution obligation under the Ordinance is proportionally capped by reference to the State maximum weekly benefit amount. Using the 2016 State rates, an employer’s maximum weekly Supplemental Compensation amount under the Ordinance would be $924 per week.[3]
Reimbursement
Under the Ordinance, an employee can be asked to sign a form agreeing to reimburse the full amount of Supplemental Compensation received from any Covered Employer(s) if the employee voluntarily separates from employment within 90 days of the end of the employee’s leave period and if the Employer requests reimbursement in writing.
Prohibited Retaliation
Retaliation is expressly prohibited by the Ordinance. The Ordinance specifically provides that reducing an employee’s wages during the leave period or within 90 days of the employee applying for PFL would give rise to a rebuttable presumption that it was done for purposes of reducing the amount of Supplemental Compensation required under the Ordinance. Terminating an employee within 90 days of the employee applying for PFL would also give rise to a rebuttable presumption that it was done for purposes of avoiding the employer’s Supplemental Compensation obligation under this Ordinance. Lastly, if an employer terminates an employee during the leave period, the employer is required to pay Supplemental Compensation for the remainder of the leave period.
Collective Bargaining Agreements
The Ordinance does not apply to employees covered by a bona fide collective bargaining agreement (CBA) if such requirements are expressly waived in the agreement. In addition, the Ordinance does not apply to CBAs entered into before the effective date of the Ordinance until the CBA is either extended or expires. Employers should review any prospective collectively bargained agreements accordingly.
Recordkeeping, Notice Requirements, and Enforcement
The Office of Labor Standards Enforcement (“OLSE”) is tasked with implementing and enforcing the Ordinance. Employers are required to retain records pertaining to the payment of Supplemental Compensation for three years and make records available to OLSE on request. Employers will also be required to post a notice in the workplace informing employees of their rights under the Ordinance. In addition to civil enforcement actions, OLSE is authorized to issue penalties to Covered Employers. If Supplemental Compensation was unlawfully withheld the employer must pay the dollar amount of Supplemental Compensation withheld from the employee multiplied by three, or $250.00, whichever amount is greater. In addition, if another violation occurs, such as a failure to post the required notice or an act of retaliation, the penalty will include an additional $50.00 paid to each employee or person whose rights were violated for each day.
Conclusion
This is a significant new requirement for Covered Employers with far reaching financial and administrative implications. Employers should work with employment counsel to build policies and procedures to comply with the Ordinance. Note that subsequent guidance is likely to be issued very soon to flesh out employer requirements in advance of the initial January 2017 compliance deadline.
If you need assistance with US employee benefits or have further questions regarding this ordinance, Asinta’s US partner can help.
[1] The California Family Rights Act (CFRA) provides a 12 week unpaid leave entitlement for qualifying employees of covered employers to bond with a newborn child or a child placed in the employee’s family for adoption or child care. The federal Family and Medical Leave Act (FMLA) also covers baby bonding time but will generally be exhausted by the period of disability for the child bearing parent or will run concurrently with CFRA for the non-child—bearing parent. A full discussion of these leave is outside the scope of this Alert. CFRA (and FMLA) also provide for unpaid leave for the serious health condition of the employee’s child, parent or spouse or for the employee’s own serious health condition.
[2] Note that San Francisco City and County employees already receive a similar benefit.
[3] The State’s maximum weekly benefit amount of $1,129 is 55% of $2,053 and 45% of $2,053 is $924.