Category: Counseling & Compliance Training

Operative July 3, 2015, companies located in San Francisco who are “Formula Retail Establishments”  must comply with additional wage and hour requirements under the Retail Workers Bill of Rights (a combination of two ordinances, Ordinance 236-14 and Ordinance 241-14), the country’s first-ever such legislation.

Supporters claim that this new law is intended to improve life for retail employees which, according to some accounts, include more than 40,000 workers at 1,250 locations in the City of San Francisco.  In passing the bill, the San Francisco Board of Supervisors found that Formula Retail Establishments are a major employment base and stated that the City has a strong interest in ensuring that jobs at these establishments allow employees to meet their basic needs and achieve economic security.  An overview of this onerous and extensive legislation follows.

Formula Retail Establishments

The new law applies to companies who employ 20 or more employees in 20 or more locations worldwide and who operate a Formula Retail Establishment in San Francisco.  Other than the number of locations, “Formula  Retail Establishments” borrow from the definition of “Formula Retail Use” in  The San Francisco Planning Code and generally have standardized merchandise, facade, worker apparel, interior design, signage and/or trademarks.  Of course retail stores are included, but so are many businesses that one would not commonly think of as retailers.  For example, hotels, restaurants, bars, movie theatres, certain financial institutions, and “Property Services Contractors” such as janitorial and/or security services contractors.   For a full listing, click here.

Part-Time Employee Preferences and Retention After Ownership Change

Under this new law, employers are generally required to:  (a) offer additional hours of work to current part-time employees before hiring new employees or subcontractors; and (b) retain employees (i.e., by the successor employer) for 90 days upon change in ownership control of the business.

Initial Estimate of Minimum Hours

Prior to the start of employment, employers must provide new employees with a good faith estimate in writing of the employee’s expected minimum number of scheduled shifts per month, and the days and hours of those shifts. The estimate must not include on-call shifts. This is a non-binding estimate.  It is not a contractual offer.

Two Weeks’ Notice of Work Schedules & Predictability Pay

Employers must give employees at least two weeks’ advance notice of employees’ work schedules.  Changes on less notice requires employers to issue additional “predictability pay” for each previously scheduled shift that the employer moves to another date or time or cancels, or each previously unscheduled shift that the Employer requires the employee to come into work:

• With less than seven days’ notice but 24 hours or more notice to the employee, one hour of pay at the employee’s regular hourly rate
• With less than 24 hours’ notice to the employee, two hours of pay at the employee’s regular hourly rate for each shift of four hours or less
• With less than 24 hours’ notice to the employee, four hours of pay at the employee’s regular hourly rate for each shift of more than four hours

There are exceptions to predictability pay requirements, such as an employer request that an employee work overtime or fill in for another employee who is out due to sickness or discipline.

Pay for On-Call Shifts

Employers must provide employees with the following compensation for each on-call shift for which the employee is required to be available but is not called in to work:

• Two hours of pay at the employee’s regular hourly rate for each on-call shift of four hours or less
• Four hours of pay at the employee’s regular hourly rate for each on-call shift of more than four hours

Equal Treatment to Part-Time Employees

Employers must generally provide part-time employees with equal treatment in the hourly wage, access to pro-rated time off, and eligibility for promotions.

Impact of Non-Compliance

The San Francisco Office of Labor Standards Enforcement (OLSE) is authorized to take appropriate steps to enforce and coordinate enforcement of this new law, including the investigation of any possible violations, and order any appropriate relief, including, but not limited to, requiring an employer to offer additional hours of work to part-time employees, reinstatement, penalties, payment of lost wages and the payment of an additional sum as an administrative penalty that does not exceed the amount of the award for lost wages. Further, to compensate the City for the costs of investigating and remedying the violation, the OLSE may also order the employer to pay the City’s enforcement costs.

Conclusion

While this new law will take effect in January 2015, it does not become operative until July 3, 2015. As such, employers affected by the Retail Workers Bill of Rights have some time to determine how to best comply.  This is an opportune time to review with counsel your employment and hiring practices, including the manner in which your company schedules employee shifts and changes them to ensure compliance by July 2015.

Should you have questions about this alert, please contact the authors or any other member of Drinker Biddle’s Labor & Employment Group.

According to a November 17, 2014 article in LAobserved.com highlighted by the Los Angeles Business Journal, exempt non-union Los Angeles Times employees as of January 1, 2015 will no longer be able to accrue vacation days, sick days or floating holidays.  Instead, a new Discretionary Time-Off policy will reportedly allow those employees time off, “subject to their professional judgment and to the performance expectations of their supervisor that apply to their job.”  In theory, says the article, an employee can take more time off than under an accrual system, but Times’ employees are wary.

From some who caught this story, we have been asked if this kind of policy is legal. Well, in short, it can be.

Private employers generally do not have to provide paid vacation, sick or holidays under California Law.  Those benefits are so customary that many think they must be required.  An employer can lawfully end accruals for the future; but, it must allow use or pay out of vacation (or PTO) that has already been accrued.  This is because California law treats accrued vacation as a form of wages that cannot be taken away once earned.  By contrast, California law has not treated sick day accrual as wages and sick day accrual can be lost if not used.   Collective bargaining agreements often lay out different rules for union employees.

The Times policy reportedly ends future vacation accruals and allows exempt employees time off (with their regular pay continuing) if their supervisors approve the time off.  Employers go with a no accrual policy to save costs, particularly at termination of employment when unused vacation accruals must be paid in cash to the exiting employee. This strategy works legally and it can eventually end vacation accrual financial liability; but, it can be a morale problem to a workforce who may be wary that management may only infrequently approve time off.  Management does, however, have an incentive to handle requests fairly if it wants to attract and retain great employees.

A no accrual policy needs to be integrated with state and local laws in California which require minimum paid sick day accruals. Effective July 1, 2015, for example, AB 1522 requires that most employee be provided at least three paid sick leave days. Cities such as San Francisco already have similar laws.

Before changing to a no accrual policy, employers should, with the help of counsel, plan a policy that is both compliant with the California wage and hour laws and takes into account the impact it may have on the existing workforce and on recruiting.