Laborsphere

The Defend Trade Secrets Act’s Seizure Provisions and What They Mean for Employers

It’s an employer’s worst nightmare: you discover that a former employee has stolen a company trade secret. You know you must act immediately to keep this extremely important and sensitive information from being disseminated or risk losing important intellectual property protection. However, protecting a misappropriated trade secret is very difficult, particularly in situations where the suspected misappropriator is unlikely to follow a court order. Thankfully, the recently passed Defend Trade Secrets Act (“DTSA”) includes helpful seizure provisions an employer may use to recover and prevent dissemination of trade secrets from suspected misappropriators.

What Is The Defend Trade Secrets Act?

President Obama signed the DTSA into law on May 11, 2016. This new law is effective immediately and provides a nation-wide civil cause of action for misappropriation of trade secrets. Although companies may still pursue trade secret litigation under state causes of action, the DTSA permits companies to prosecute their claims in federal court, thus allowing them to avoid the complexity and cost of pursuing trade secret claims in multiple jurisdictions simultaneously.

What Are The DTSA’s Seizure Provisions?

Significantly, the DTSA includes an ex parte seizure provision allowing “the seizure of property necessary to prevent the propagation or dissemination” of trade secrets, meaning the employer may seize property through court order without providing notice to the other party. See DTSA § 2(b)(2). To receive a court order allowing such seizure, the employer must:

• Allege specific facts showing that the suspected misappropriator would “evade, avoid, or otherwise not comply with” other extraordinary relief, such as a temporary restraining order, and would “destroy, move, hide, or otherwise make [the property to be seized] inaccessible to court” if notified of the seizure proceedings;

• Be able to show that the employer would suffer “immediate and irreparable injury” if the requested seizure were not occur, and that such injury would be greater than any to be suffered by the suspected misappropriator or any third parties if the seizure request is granted;

• Be able to show that the suspected misappropriator has actual possession of the trade secret and either misappropriated or conspired to use improper means to misappropriate that trade secret;

• Describe, with reasonable particularity and to the extent reasonable, what is to be seized and where it is located; and

• Not have publicized the requested seizure.

See id. § 2(b)(2)(A)(ii). Orders of seizure are executed by a Federal law enforcement officer. The employer may not participate in the seizure, although the law enforcement officer may request to be accompanied by an unaffiliated technical expert. Any materials seized will be held in court custody until a hearing can be held, although a motion to encrypt seized material may be made at any time. See id. § 2(b)(B), (D), and (H).

What Does This Mean For Employers?

The good news is that now if a trade secret is misappropriated, employers may be able seize it and halt its dissemination before irreparable harm has occurred. In our modern world where information can be copied and transported across state lines (or international boarders) in mere moments, this is very important. However, there are a number of cautions employers should be aware of:

• Seizure under the DTSA is extraordinary relief only. The DTSA’s drafters contemplated it would be used in instances such as when “a defendant is seeking to flee the country or planning to disclose the trade secret to a third party immediately or not otherwise amendable to…the court’s orders.” Rep. No. 114-220 at 9 (2016). Accordingly, seizure will be permitted only in the most extreme situations.

• The DTSA requires an employer seeking seizure to provide security “determined adequate by the court for the payment of the damages that any person may be entitled to recover as a result of a wrongful or excessive seizure.” DTSA 2(b)(B)(vi). This security will not act as a cap on damages if it is later determined that property was wrongfully seized.

• The DTSA’s drafters struggled with handling misappropriated trade secrets contained in electronic files. If, for example, an employee downloaded files containing trade secrets from her company computer onto a flash drive, the court could seize that flash drive. The situation becomes more murky, however, when an employee transmits files containing trade secrets to himself via his personal email (thus leaving a copy on the server of the email provider), or uploads company files to a third party cloud service. In order to protect these unintended recipients, the DTSA’s drafters included carve outs prohibiting seizure from innocent third parties (although injunctions prohibiting disclosure are permitted). Accordingly, until the employer can obtain other relief, the trade secret will remain on the third party’s server, potentially vulnerable to misappropriation from bad actors engaged in cyberespionage.

On balance, the DTSA is a helpful piece of legislation that will greatly assist employers in protecting trade secrets under certain circumstances. However, as with any new piece of legislation, it is unclear how these provisions, particularly those concerning electronic information, will be applied in practice.

If you would like to discuss best practices for keeping trade secrets secure or need help dealing with potentially misappropriated trade secrets, please contact the author or any member of our Labor and Employment Practice Group.

DOL Exemption Rules to Take Effect December 1, 2016

Making good on a 2014 directive from President Obama “to modernize and streamline” existing overtime regulations, the Department of Labor (DOL) today published its highly anticipated Final Rule Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees. As expected, the Final Rule (which becomes effective December 1, 2016 ) more than doubles the current $455 weekly minimum salary required for employees to qualify for “white collar” exemptions to the minimum wage and overtime requirements under the Fair Labor Standards Act (FLSA). The DOL expects its new Final Rule to extend minimum wage and overtime protections to more than 4.2 million Americans and increase employee wages by $12 billion over the next 10 years.

Key Changes under the DOL’s Final Rule

The FLSA requires that covered employees be paid minimum wage for all worked hours and overtime at a rate not less than one and one-half their regular rate of pay for all hours worked in excess of 40 hours in a single workweek. To qualify for exemption from the FLSA’s minimum wage and overtime requirements, an employee must be paid a predetermined minimum weekly salary (not subject to reduction based on variations in quality or quantity of work) and primarily perform certain job duties qualifying for one or more of the standard executive, professional or administrative “white collar” exemptions to the FLSA.

In June 2015 the DOL issued a Proposed Rule which gave employers a preview of the likely revisions to the exemption regulations. Today’s Final Rule differs from the DOL’s 2015 Proposed Rule in certain key areas.

Significant changes under the DOL’s Final Rule include the following:

Increase in the Salary Basis Requirement.

The Final Rule increases from $455 to $913 (or $47,476 annually) the minimum weekly salary level necessary for employees to qualify for a white collar exemption under the FLSA. This minimum weekly salary automatically will adjust every three years to a rate equaling the 40th percentile of full-time salaried workers in the nation’s lowest-wage Census region (currently the South). Minimum salary adjustments under the Final Rule will be published at least 150 days before their effective dates, with the first adjustment being effective January 2020. The minimum salary increase in the Final Rule is slightly lower than that contemplated in the Proposed Rule, with the DOL citing to public comments expressing concerns that the regulations should account for salaries paid in lower cost-of-living regions.

Increase in the Salary Requirement for the Highly Compensated Employee (HCE) Exemption.

The Final Rule increases from $100,000 to $134,004 the minimum total annual compensation necessary for a “highly compensated employee” to qualify for exemption under the FLSA. This minimum annual compensation also automatically will adjust every three years to an amount equal to the 90th percentile of full-time salaried employees nationally. Although the compensation increase in today’s Final Rule is larger than contemplated in the Proposed Rule, the change simply is due to an increase in the 90th percentile threshold from 2013 to the fourth quarter of 2014.

Automatic Triennial Updating.

The Proposed Rule contemplated updating the salary thresholds annually using either a wage index (i.e., a fixed-percentile approach using Current Population Survey data) or a price index (i.e., the CPI). As noted above, the Final Rule has adopted the fixed-percentile approach, with updates to occur every three years rather than annually. Employers that submitted comments said they “strongly opposed” using a fixed-percentile method, arguing that it would result in the “ratcheting” of salaries – that is, with each successive salary update, employers would be expected to convert lower-earning exempt employees to hourly status; those employees would be removed from the CPS data; and the salary threshold would thus rapidly accelerate with each increase. The DOL largely discounted these concerns, finding a lack of historical evidence of “ratcheting” in analyzing data from the last salary increase in 2004. Nonetheless, the DOL did respond to employer comments that an annual update would be unduly volatile and would not provide sufficient notice, and instead adopted triennial updating.

Inclusion of Nondiscretionary Bonuses, Incentive Payments, and Commissions in the Salary Level Requirement.

Employers now will be allowed to use nondiscretionary bonuses and incentive pay to satisfy up to 10 percent of the DOL’s new salary standard, provided such bonuses/incentives are paid on at least a quarterly basis. Employers also will be able to “catch-up” by quarterly bonus and incentive payments the salary of any exempt employee that falls short of the minimum salary requirement by an amount of up to 10 percent.

Duties Tests.

Surprisingly, the DOL’s Final Rule makes no substantive changes to the standard duties tests required for the executive, administrative and professional exemptions. Although the DOL sought public comments on this issue, the DOL ultimately declined to adopt any changes to the standard duties tests.

Over the next six months, covered employers will need to review exempt positions to ensure compliance with DOL’s new standards. A few suggestions include:

Review Salary Minimums.

Employers may choose to increase the salaries of employees who fall below the DOL’s new $917 weekly minimum, or reclassify employees as nonexempt and take steps to ensure employees are paid a minimum wage and overtime premium in accordance with FLSA standards.

Review Employer Criteria for Establishing Exemption Status.

Employers can expect DOL enforcement initiatives in 2017 (and beyond) to focus on exemption status. Employers are well advised to use the DOL’s Final Rule as an opportunity to review the exemption classifications of all exempt positions to ensure compliance with FLSA standards.

Provide Education and Training to Key Employees.

Employers should consider investing in education and training of front-line managers and human resources representatives tasked with implementing new exemption standards. Employers also should consider development of a communication strategy and action plan for reclassification of affected employees.

A Notable Week Indeed – From OSHA to Trade Secrets to ADA Accommodations and Transgender Rights!

It’s been a busy and, let’s say notable, week in the area of employment law. Here’s a quick recap, with more to come in future posts, of what you may have missed if you were focused elsewhere this week.

First, OSHA published a new injury Rule this week. While it does not take effect until January 1, 2017, employers should not wait until then to begin thinking about what changes may be necessary to ensure full compliance in the new year. The rule changes create a new cause of action for employees if they suffer retaliation for reporting a workplace injury, and employers are expected to ensure that policies addressing safety do not discourage employees from reporting such injuries. Large employers will also have some additional reporting requirements to OSHA. And, significantly, and in line with the current administration’s agenda of transparency, OSHA will begin making injury data accessible to the public, after removing any personally identifiable information regarding employees. That’s just a summary, with more to come in a future blog post. Stay tuned.

Second, did you hear that President Obama signed into law the Defend Trade Secret Act of 2016? Yes, that’s right, claims for trade secret misappropriation are not just limited to what the applicable state law provides. The new law creates a federal cause of action for the theft/misappropriation of trade secrets that are “related to a product or service used in, or intended for use in, interstate or foreign commerce.” The law also creates a new mechanism for a court to order the civil seizure of property, ex parte, if an employer can meet certain stringent standards for such an order.

Third, not to be overshadowed by either the President or OSHA, the EEOC published its own resource document this week regarding employer duties to provide leave as a reasonable accommodations in the workplace. While the new resource tracks what the EEOC has been saying for many years (or what we, as employment attorneys, know from tracking EEOC litigation and publications), the new resource delves a little deeper into how employers should be analyzing an employee’s request for leave and may be a helpful resource for employers who may still be under the mistaken impression that simply applying a leave policy (or workplace rule) the same to everyone is acceptable under the ADA (hint: we know that employers must modify policies for individuals with a disability if doing so could be a form of reasonable accommodation). Our mantra of no more “automatic termination” policies can no longer be ignored. This is serious stuff. Lots more to come on this topic.

Fourth, the EEOC was also busy issuing a new fact sheet on bathroom access for transgender employees. The fact sheet is brief, essentially reciting the few decisions issued on the topic, and reiterating for employers that transgender employees must be permitted to use the bathroom that corresponds with their gender identity (not biological sex) and cannot be conditioned on an employee having undergone reassignment surgery. Also, employers beware, providing a separate, single-user bathroom for a transgender employee is a form of discrimination (although you can provide a single-user bathroom for use by all employees). A transgender employee must have equal access to the common bathroom that corresponds with their gender identity, regardless of whether it makes other employees uncomfortable.

These are just a few of the many things that happened this week. Stay tuned for further analysis on these topics and more (including the much-anticipated DOL overtime regulations that could be published as early as next week).

New York City Earned Sick Time Act Amended Effective March 4, 2016

The New York City Earned Sick Time Act, originally enacted in June 2013, has been amended effective March 4, 2016. The Earned Sick Time Act generally requires employers with five or more employees in New York City to provide eligible employees up to 40 hours of paid sick leave each year for themselves or eligible family members. The new rules clarify parts of the Earned Sick Time Act, establish requirements to carry it out and meet its goals, and provide guidance to covered employers and protected employees.

Written Sick Time Policies

Employers may no longer distribute the Notice of Employee Rights promulgated by the Department of Consumer Affairs in lieu of distributing or posting their own written sick time policies. But it is important to note that distribution of the Notice of Employee Rights is still required.

The Amended Act further requires that an employer’s written sick time policies state, at a minimum:

The employer’s method of calculating sick time. If, on the first day of the calendar year, the employer provides employees with an amount of sick time that meets or exceeds the requirements of the Act by the employee’s 120th day of employment (known as “frontloading”), the written policy must specify the amount of frontloaded sick time to be provided. If the employer does not frontload, the policy must specify when accrual of sick time starts, the rate at which an employee accrues sick time, and the maximum number of hours an employee may accrue in a calendar year.

The employer’s policies regarding the use of sick time, including any limitations or conditions. Written policies must now include: (1) any requirement that an employee provide notice of a need to use sick time; (2) any requirement for written documentation or verification of the use of sick time, and the employer’s policy regarding consequences if an employee fails to provide such documentation; (3) any minimum increment or fixed period for the use of sick time; and (4) any policy on employee discipline for misuse of sick time.

The employer’s policy regarding carry-over of unused sick time at the end of an employer’s calendar year.

If an employer fails to provide an employee with a copy of its written policy, the employer cannot deny sick time or payment of sick time to the employee based on non-compliance with the policy.

Employer Recordkeeping

Employers are now required to maintain records demonstrating compliance with the requirements of the Earned Sick Time Act, including records of any policies required by the Act, for a period of three years. Employers must also maintain contemporaneous and accurate records that show, for each employee:

The employee’s name, address, phone number, employment start date, employment end date (if any), rate of pay, and whether the employee is exempt from overtime requirements;
The hours worked each week by the employee, unless the employee is exempt from overtime requirements;
The date and time of each instance of sick time used by the employee and the amount paid for each instance;
Any change in the material terms of employment specific to the employee; and
The date the Notice of Employee Rights was provided to the employee and proof that the Notice of Rights was received by the employee.

There is a penalty involved if an employer fails to follow these much more detailed requirements. An employer’s failure to maintain, retain or produce a record that is “relevant to a material fact” alleged by the Department in a notice of hearing or these rules, creates a “reasonable inference” that such fact is true.

Minimum Increments and Fixed Intervals

Employers may now set fixed periods of 30 minutes or any smaller amount of time for the use of accrued sick time beyond the minimum increment (not to exceed four hours per day) and may require fixed start times for such intervals. The Notice of Adoption of Rule issued by the Department of Consumer Affairs provides the following example: An employer maintains a four-hour minimum sick time increment and now requires that employees use sick time in 30 minute intervals that start on the hour or half-hour. An employee who is scheduled to work 8:00 a.m. to 4:00 p.m. schedules a doctor’s appointment for 9:00 a.m. and notifies the employer of her intent to use sick time and return to work the same day. If the employee does not return to work until 12:17 p.m., the employer can require the employee to use four and a half hours of her accrued sick time and require her to begin work at 12:30 p.m.

Temporary Help Firms

The Act also now defines the term “temporary help firm,” as an organization that recruits and hires its own employees and assigns those employees to perform work or services for another organization to: (i) support or supplement the other organization’s workforce; (ii) provide assistance in special work situations including, but not limited to, employee absences, skill shortages or seasonal workloads; or (iii) perform specific assignments or projects. When a temporary help firm places a temporary employee in an organization, the temporary help firm is now solely responsible for compliance with all of the provisions of the Earned Sick Time Act for that temporary employee, regardless of the size of the organization where the temporary help firm places the employee.

Penalties

If the Department finds that an employer has a policy or practice of not providing or refusing to allow employees to use paid sick leave required under the Act, employers now will be subject to penalties for “each and every employee” affected by the policy.

Employer Considerations

In light of these recent amendments and the increased penalties for non-compliance with the Act, New York City employers should ensure that part of their “spring cleaning” involves a thorough review of their existing written sick time policies and recordkeeping practices. Such a review with counsel should include preparation of compliant employee notice materials and recordkeeping forms.

Accessibility of Retailer Websites Under the Americans with Disabilities Act (ADA)

Title III of the ADA provides that “no individual shall be discriminated against on the basis of disabilities in the full and equal enjoyment of the goods, services, facilities, privileges, advantages or any accommodations of any place of public accommodation….” 42 U.S.C. §12812(a). When the ADA was enacted in 1991, Congress contemplated physical access to places of public accommodation, such as hospitals, schools, housing, restaurants, and retail stores. At that time, Congress did not foresee the rise of the internet or the proliferation of sales of goods and services through retail websites, and therefore did not provide any guidance as to whether or the extent to which retail websites were governed by the ADA’s accessibility requirements.

Originally initiated by the National Federation for the Blind and other advocacy groups, a cottage industry has sprung up challenging accessibility to retail websites by the blind and visually impaired. Every major retailer has been or will soon be subject to these claims. The plaintiffs’ law firms that regularly bring these cases use a handful of blind or visual impaired individuals on a repeating basis.

These lawsuits, which have been filed against retailers such as Sears, Footlocker, Target, and Toys R Us, allege that experts working on behalf of their blind and visually impaired clients have investigated the company websites and have identified limitations and obstacles in the ability of a blind or visually impaired individual to navigate the websites effectively with screen readers or other assistive devices. The failures include the failure of the website to provide alternative explanations of “non-text content,” such as illustrations, and alternatives to non-text prompts or navigational features. The plaintiffs allege that websites are in fact places of public accommodation under the ADA and seek attorneys’ fees and broad remedial relief that requires significant changes to the website’s format, program and content that permit access by the blind and visually impaired.

But the “fix” is easier said than done. First, the courts have not definitely ruled that websites are places of public accommodation covered by Title III, and even presuming they are, there are no current regulations defining the level of accessibility. The plaintiffs’ bar has assumed that the Web Content Accessibility Guidelines (WCAG) AA 2.0, published by the World Wide Web Consortium, are the appropriate compliance standard under the ADA because the United States Department of Justice has adopted the WCAG standards for federal agencies and federal contractors. Also, the Department of Justice has indicated that it intends to issue proposed rules for the private sector, but this proposed rulemaking, now scheduled for July 2016, has been postponed several times in recent years, and many believe that it will be delayed again.

Second, the WCAG’s are themselves vague, subject to broad interpretation and, in many cases difficult to implement. This problem is further compounded when one attempts to apply these standards under the ADA’s language that speaks to “reasonable access,” “alternative means of compliance,” and “under burden.” The truth is that the vast majority of websites are not 100 percent compliant, and none will be because the websites are constantly changing and adding additional content. For example, retailers are increasingly using third-party content, which is often not accessible to the visually impaired.

To illustrate this point, the websites of the National Federation for the Blind (NFB) and the law firms that bring these cases are themselves far from 100 percent compliant. Software programs that are used to conduct preliminary evaluations of websites typically give the website a score or grade. NFB’s website scored a “C+” at one time but has since improved. No website of which this author knows has scored an “A.” Given that 100 percent compliance is not practical, what level of compliance is sufficient? The courts have yet to address this question because very few cases have been litigated on the merits.

When litigating these lawsuits, retailers should consider the appropriate level of achievable compliance and the timeframe involved. Engaging with knowledgeable internal IT personnel or with external IT consultants is important to do at the outset. The cases are as much or more about the technical aspects of website compliance and implementation as they are about the law.
In these lawsuits, the plaintiffs typically propose broad remedial relief that includes development of compliance policies, training, on-going monitoring, and appointment of outside consultants. Each of these individual components has to be considered carefully.

These lawsuits are often brought as individual actions, presumably to permit a quick settlement and to avoid the challenges posed by Rule 23 class certification standards and court approval. Nonetheless, as individual actions, there is no legal bar to additional lawsuits by other individuals. However, the settlements can be confidential.

These lawsuits are not just about remedial relief; they are also about legal fees. In some cases, plaintiffs’ counsel proposes an attorneys’ fee award that is based on the number of URLs or websites, rather than on the reasonable amount of attorney time that would be involved in bringing the case to settlement, which is the appropriate legal standard. Their theory is that the plaintiffs’ attorneys have to pay for future monitoring of the website(s) to ensure compliance with the settlement terms.

Given the nuances of such claims, retailers are well-advised to use experienced counsel that is familiar with these lawsuits to handle the defense.

Takeaways

Seemingly, the courts will likely eventually find that private retail websites are places of public accommodation under the ADA, even though such a result was never considered by Congress when the ADA was enacted.
Although the plaintiffs’ bar has “assumed” that the courts will require compliance with the WCAG 2.0 AA, it is far from clear what will constitute compliance in a particular case.
Retailers that have not faced this issue should conduct evaluations of their websites to determine their levels of compliance, the costs, and the realistic time frames for any remediations. Retailers should use the appropriate legal and IT expertise.
Latent privacy claims may surround notice and acceptance of the websites’ terms and conditions of use.

Although some retailers are currently being assailed, the claims will no doubt expand to the education, finance, professional services, and healthcare industries, all of which should conduct a similar analysis of their websites.

Paid Parental Leave: San Francisco Will Require Employers to Provide Paid Leave and California Will Increase Benefits Available Under State Law

On Tuesday, April 5, 2016, the San Francisco Board of Supervisors unanimously approved legislation that would require private employers in the city to provide partial compensation to employees taking leave to bond with a newborn child under the California Paid Family Leave (“PFL”) program. In practice, when combined with existing partial wage replacement from the PFL program, employees who earn up to a maximum of $106,000 annually will receive complete wage replacement during a covered parental leave as a result of the legislation. If the ordinance is signed into law, San Francisco will become the first municipality in the United States to enact such a program.

Before becoming law, the proposed legislation will need to be approved in a second vote by the Board of Supervisors and signed by Mayor Edwin Lee. At this point, these procedures are considered formalities, and the proposed ordinance is widely expected to take effect in its present form.

Under existing state law, employees in California who contribute to the California SDI fund are entitled to six weeks of partial pay (55%) each year while taking leave to care for a seriously ill family member or new child under the state’s PFL program. When such leave is taken to care for a newborn child, newly adopted child, or new foster child, the new San Francisco ordinance would require employers to make up the difference by providing employees with the remaining 45% of the employee’s normal gross weekly wage for up to six weeks. Once the wage replacement rate paid under the California PFL program increases, as it is expected to do in 2018, the San Francisco ordinance would require employers to pay the remainder of an employee’s gross weekly wage based on the new state rate.

When Will the Legislation Take Effect, and Who Will It Cover?

If signed into law in its present form, the legislation will take effect in three phases. Starting on January 1, 2017, San Francisco employers with 50 or more employees will be required to pay employees at least 45% of their regular gross weekly wage during the six-week leave period. On July 1, 2017, the legislation will expand to include San Francisco employers with 35 or more employees. Finally, on January 1, 2018, it will apply to employers with 20 or more employees.Employers will only be required to provide the 45% wage replacement to employees who (1) have worked for the employer for at least 180 days; (2) work at least eight hours per week; (3) spend at least 40% of their total weekly hours within the city limits of San Francisco; and (4) are otherwise eligible to receive paid family leave under the PFL program for the purpose of bonding with a new child. In addition, the legislation establishes a maximum cap on wage replacement. The maximum weekly benefit is defined by reference the maximum benefit available under the state PFL law. Thus, under existing regulations, San Francisco employers would be required to pay a maximum of $924 per week (which equals 45 percent of an annual salary of $106,740).

Employers will only be required to provide the 45% wage replacement to employees who (1) have worked for the employer for at least 180 days; (2) work at least eight hours per week; (3) spend at least 40% of their total weekly hours within the city limits of San Francisco; and (4) are otherwise eligible to receive paid family leave under the PFL program for the purpose of bonding with a new child. In addition, the legislation establishes a maximum cap on wage replacement. The maximum weekly benefit is defined by reference the maximum benefit available under the state PFL law. Thus, under existing regulations, San Francisco employers would be required to pay a maximum of $924 per week (which equals 45 percent of an annual salary of $106,740).

San Francisco Employers Will Be Required to Cover a Smaller Portion of Employees’ Wages When Benefits Paid Under the California PFL Law Increase in 2018.

Based on state legislation signed by Governor Jerry Brown this week (A.B. 908), starting on January 1, 2018, the wage replacement rate paid under the California PFL program will increase from 55% to 60% for employees who earn more than 33% of the California average weekly wage. The rate will increase to 70% for employees who make up to 33% of the average weekly wage in California. Once the higher PFL rates take effect, the net payment obligation of San Francisco employers will fall by a corresponding amount. Thus, starting January 1, 2018, San Francisco employers’ wage replacement obligation will decline from 45% to either 30% or 40% of each covered employee’s weekly wages, depending on the size of the relevant employee’s weekly earnings relative to the state average.

Employees Who Quit Within 90 Days of Returning from Leave Are Required to Reimburse the Employer for the Supplemental Income They Received During Their Leave.

As a precondition to receiving supplemental wage replacement during their leave, covered employees under the San Francisco legislation will be required to sign a form agreeing to reimburse the full amount of supplemental compensation paid by their employer if (1) they voluntarily quit within 90 days of the end of their leave period; and (2) the employer requests the reimbursement in writing.

Employers May Require Employees to Exhaust Some Paid Vacation to Satisfy Their Wage-Replacement Obligations.

If the San Francisco legislation takes effect in its current form, employers, if they wish, may require the employee to exhaust up to a maximum of two weeks of unused, accrued vacation time to help satisfy the employer’s obligation to provide supplemental wage replacement during the leave.

Penalties for Non-Compliance.

An employee alleging non-compliance with the ordinance may file a complaint with the San Francisco Office of Labor Standards Enforcement (“OLSE”). In addition, in its current form, the ordinance authorizes “the City” or “any person or entity acting on behalf of the public as provided for under applicable State law” to bring a civil action in a court of competent jurisdiction for the non-payment of replacement wages and corresponding civil penalties.