New Los Angeles Ordinance Provides for Paid Sick Leave and Increased Minimum Wages

 

By Brett Thomas
June 27, 2016

Joining the ranks of five other municipalities in California (including Santa Monica), the city of Los Angeles recently enacted a new paid sick leave ordinance that imposes requirements more stringent than those required under California law. The Los Angeles Minimum Wage Ordinance (“Ordinance”) provides little time for employers to comply with its new requirements – being that it was passed on June 1 and becomes effective July 1, 2016 for most employers. As set forth in detail below, the Ordinance doubles the amount of paid sick leave an employer is required to provide and increases the group of people for whom an employee may use paid sick leave to provide care. The Ordinance also provides a schedule of minimum wage rates for employers from July 1, 2016 through the year 2022.

To enforce the new Ordinance, the city also passed the Los Angeles Office of Wage Standards Ordinance, which creates a new Office of Wage Standards (“OWS”) under the Bureau of Contract Administration that is charged with enforcing the Ordinance and establishes the framework for enforcing the Ordinance.  As of the time of this publication, the OWS has prepared draft rules and regulations implementing the Ordinance, but has yet to post the final version.

Paid Sick Leave

Coverage

The Ordinance requires employers with more than twenty-five (25) employees to provide sick leave benefits by July 1, 2016. According to the OWS’s draft regulations, employers with twenty-five (25) or fewer employees have a one-year deferral until July 1, 2017, to provide sick leave benefits.

The Ordinance applies to every employee who on or after July 1, 2016, (a) works in the city of Los Angeles for at least thirty (30) days within a year from commencement of employment, and (b) works at least two (2) hours in any particular week in the city of Los Angeles. As a result, the Ordinance will cover employees based outside of Los Angeles who occasionally work in the city (e.g., service technicians, delivery personnel, film and television production crews). Presumably, the ordinance only applies to an employee in those weeks when she or he works two (2) or more hours in the City.

According to OWS’s draft regulations, the Ordinance does not apply to the following types of individuals:  (a) individuals who perform all work outside of Los Angeles; (b) an individual employed by his parent, spouse or child; (c) volunteers; (d) individuals traveling through Los Angeles who do not make any employment-related or commercial stops within Los Angeles (except for refueling); (e) disabled individuals working under a special license; and (f) independent contractors.  Unlike the state law, the Ordinance does not provide an exemption for employees subject to a collective bargaining agreement that provides for paid sick leave. For the many California employers who negotiated new sick leave provisions in their collective bargaining agreements to become exempt from state law, the Ordinance places the employers back in the onerous position of having to comply with the intricate requirements of a paid sick leave law.

Amount of Sick Leave That May Accrue and Be Used

Under the Ordinance, an employer may adopt either of two methods for providing sick leave to employees. First, an employer may adopt a lump-sum method whereby it provides at least forty-eight (48) hours of paid sick leave at the beginning of each year, which may be measured in any twelve (12) month increment.  Second, the employer may adopt an accrual method whereby an employee accrues one (1) hour of paid sick leave for every thirty (30) hours worked in Los Angeles. According to the OWS’s draft regulations, if an employee performs work in and out of the city’s boundaries, the employer will need to track the amount of hours the employee works within the city to determine the amount of sick time accrued under the Ordinance.  The draft regulations provide a list of suggested methods of tracking employees’ geographic hours worked.  If tracking the geographic location of where the employee performs work is too burdensome, the employer may adopt a more generous policy of accruing sick leave based on the total amount of hours the employee works, regardless of whether the hours are worked in the city.

Under either method, an employer must allow employees to carry over accrued, unused sick leave from one twelve (12) month period to the next. An employer may place a cap of seventy-two (72) hours on the amount of sick leave an employee can accrue (as compared to the permissible cap under state law of six (6) days or forty-eight (48) hours, whichever amount is greater). An employer also may limit an employee’s use of sick leave to forty-eight (48) hours in each year of employment, calendar year or twelve (12) month period, whereas state law establishes a lower, minimum amount of sick leave of three (3) days or twenty-four (24) hours, whichever amount is greater.

An employer is not required to provide sick leave under the Ordinance if it already provides paid time off or compensated time off of at least forty-eight (48) hours annually.  If an employer has a compensated time off policy that does not meet the accrual rate and eligibility deadlines of the Ordinance, the OWS may allow the employer’s policy to remain in place if it determines that the policy is otherwise more generous than what is required under the Ordinance.  The OWS will consider a variety of factors in analyzing whether the policy is more generous, including, but not limited to, whether the employer pays more than twice the minimum wage, offers health benefits at no cost to employees, offers a retirement package, offers flexible schedules, and offers paid compensated time off such as holidays, paid vacation days, and the like.

When Sick Leave Accrual Begins and May Be Used

The Ordinance, like state law, mandates that accrual begin on the date of hire, but an employer may preclude an employee from using accrued sick leave until the ninetieth (90th) day of employment or    July 1, 2016, whichever date is later. Under the OWS’s draft regulations, an employer may not deny an employee’s request to use sick leave if the employee provides notice to the employer more than one (1) hour before the beginning of his or her shift in a manner consistent with the employer’s normal method of communication.

Permissible Uses of Sick Leave

While the Ordinance incorporates California law with respect to permissible uses of sick leave (i.e., sick leave may be used (a) in connection with the diagnosis, care or treatment of an existing health condition of, or preventative care for, the employee or the employee’s family member; or (b) for the purpose of obtaining legal, medical and related assistance by an employee who is the victim of domestic violence, sexual assault or stalking), it expands the permissible uses of sick leave in two ways.

First, employees not only are allowed to use sick leave to care for a “family member” as allowed under California law (“family member” being defined to include an employee’s child, parent, parent-in-law, spouse, registered domestic partner, grandparent, grandchild and sibling), but the Ordinance also authorizes an employee to take sick leave to care for “any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.” Second, although the Ordinance is unclear, it appears that an employee may use sick leave if a family member or an equivalent is the victim of domestic violence, sexual assault or stalking (whereas state law only allows such use if the employee is the victim).

The Ordinance allows an employer to require an employee to provide “reasonable documentation” when he or she has used or will be using sick leave. According to OWS’s draft regulations, such documentation is allowed only if the employee uses sick leave for three (3) consecutive days.  State law is silent on whether an employer may require documentation, and a risk exists that doing so could constitute unlawful interference with an employee’s right to use sick leave under state law. Accordingly, employers should use caution before requiring an employee to provide documentation to substantiate the use of sick leave.

Other Provisions

Consistent with state law, the Los Angeles Ordinance does not require payout of accrued unused leave upon termination of employment, and it requires an employer to reinstate unused, accrued sick leave to an employee who is rehired within one (1) year.

The Ordinance prohibits retaliation and creates a rebuttable presumption that retaliation has occurred when an employer takes adverse employment action against an employee within ninety (90) days of exercising his or her rights under the Ordinance.

Unlike the state law that allows employers to require a two (2) hour minimum for the use of sick leave, the Ordinance does not include a right for an employer to impose a minimum time limit requirement.

Minimum Wage Provisions

Applicable Rates

 The Los Angeles Ordinance also raises the minimum wage for employees who work two (2) or more hours in any particular workweek within the city of Los Angeles. The applicable new minimum rates for work performed in the city vary depending on whether the employer has more or less than twenty-five (25) employees as follows:

Effective Date – July 1 If 26 or more workers If 25 or fewer workers
2016 $10.50
2017 $12.00 $10.50
2018 $13.25 $12.00
2019 $14.25 $13.25
2020 $15.00 $14.25
2021 $15.00
2022 INDEXED* INDEXED*

 

*Increases will track the Consumer Price Index. The city of Los Angeles will announce the new rates on February 1 of each year, becoming effective on July 1 of that year.

**While the Ordinance provides the applicable minimum wage throughout the city of Los Angeles, Los Angeles still retains a special minimum wage for certain hotel workers of $15.37, which will remain effective until July 1, 2017.

Employers may not use tips or gratuities earned by employees to offset the minimum wage due.  However, the Ordinance authorizes employers to pay certain minors eighty-five percent (85%) of the minimum wage, rounded to the nearest nickel, during the first 160 hours of employment. After the minor has worked more than 160 hours, he or she is entitled to the full minimum wage.

The Ordinance also allows non-profit employers with twenty-six (26) or more employees to apply to the city for a deferral rate for the increased minimum wage. If approved, the non-profit employer may apply the lower minimum wage rate applicable to employers with less than twenty-six (26) employees.  Employers of transitional employees, as defined under the Los Angeles Administrative Code, may also apply for special exemptions.

Required Notices

Employers are required to post a notice published by the Office of Wage Standards informing employees of the Los Angeles minimum wage rates, sick leave benefits and other rights. The notice must be posted in English, Spanish, Chinese (Cantonese and Mandarin), Hindi, Vietnamese, Tagalog, Korean, Japanese, Thai, Armenian, Russian, Farsi and any other language spoken by at least five percent (5%) of employees at the particular workplace or job site.

Employers also must provide every employee with written notice upon hire (or on July 1, 2016 for existing employees) of the employer’s name, address and telephone number. If the information changes at any point, the employer must provide employees with updated information within ten (10) days of the change.

Remedies and Penalties

An employer who violates the Ordinance is liable to the aggrieved employee for wages unlawfully withheld, sick leave benefits withheld, and an additional penalty of up to $120 per day that the violation occurred. The employee also may obtain reinstatement or other injunctive relief, attorneys’ fees and costs, as well as treble damages if the employee was subjected to unlawful retaliation. The employer also will be required to post a “Notice of Correction” that, among other things, lists the provision(s) of the Ordinance that the employer violated. The employer may be assessed an administrative penalty of $50 per day of the violation and administrative fines of up to $1,000 per day of violation. If an employer is issued a Notice of Correction and subsequently violates the same Ordinance provision within three (3) years, the city may increase the administrative fine cumulatively by fifty percent (50%).

Similar to the California Private Attorney General Act (PAGA), the Ordinance also permits private parties to enforce the law “on behalf of the public.” Those bringing an action on behalf of others may recover equitable, injunctive and/or restitutionary relief, plus attorneys’ fees and costs.

Ask MSK

How does the Los Angeles minimum wage increase compare to the recent minimum wage increase passed in Santa Monica?

The new minimum wage rate amounts, and schedule for when the rates are increased, are identical for the two municipalities. The Santa Monica Paid Sick Leave and Minimum Wage Ordinance differs from the Los Angeles Ordinance in that it does not become effective until January 1, 2017.

If my company revised its sick leave policy last year to comply with state law, will the company need to make any additional changes to the policy?

Yes, if it employs anyone who works two (2) or more hours in any week in the City of Los Angeles. In such case, if the current policy complies with only the minimum requirements of state law, the most significant changes the company will need to make for covered employees will be increasing the amount of sick leave that may be used to forty-eight (48) hours per year, expanding the cap on sick leave to seventy two (72) hours and modifying the definition of family members to include those individuals whose relationship with the employee is akin to a familial relationship.

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