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Employer
Alert: Final Guidelines Released for Complying with the San
Francisco Paid Sick Leave Ordinance
By Michelle
D. Fife and Stuart
W. Miller
[June 2007]
In December 2006, we issued an Employer
Alert explaining the requirements of Proposition F, the
San Francisco Paid Sick Leave Ordinance (PSLO). Beginning on
Feb. 5, 2007 the PSLO requires all employers to provide paid
sick leave to virtually every employee who performs work in
San Francisco, including part-time and temporary workers hired
through agencies. Paid sick leave accrues at the rate of one
hour for every 30 hours worked. For employees working for an
employer on or before Feb. 5, 2007, paid sick leave began to
accrue on that date. For employees hired after Feb. 5, 2007,
paid sick leave begins to accrue 90 days after the employee’s
first day of work.
On June 4, 2007, the San Francisco Office of
Labor Standards Enforcement (OLSE) released final guidelines
(“Rules”) for the Paid Sick Leave Ordinance. The
Rules complement “frequently asked questions” (FAQs)
issued by the OLSE. The eight Rules and their corresponding
FAQs are discussed below.
RULE 1: EMPLOYEE NOTIFICATION OF PAID SICK LEAVE USE
May employers require employees to provide
advance notification for use of paid sick leave?
An employer may require employees to give reasonable
notification of an absence from work for which paid sick leave
is or will be used; however, an employee need not explicitly
request the use of paid sick leave to have the absence covered
by the PSLO. The employer’s notification requirements
must not be so onerous that they deter employees from legitimate
use of paid sick leave.
For example, an employer may reasonably require
advance notification of a pre-scheduled or foreseeable absence
from work, such as a doctor’s appointment or an ongoing
injury or illness. Policies or practices that require notification
as soon as practicable for an unforeseeable absence are generally
considered reasonable. It is generally also reasonable for an
employer to require notification of an unforeseeable absence
two hours, or a time period less than two hours, before the
start of the employee’s work shift, recognizing that there
are emergency situations during which a two-hour notification
requirement would be unreasonable. Advanced notification requirements
of greater than two hours are presumptively unreasonable, absent
demonstration of a compelling justification for the longer advance
notice requirement.
RULE 2: EMPLOYER VERIFICATION OF PAID SICK LEAVE USE
May employers require a doctor’s
note or other verification of an employee’s use of paid
sick leave?
Yes, an employer may take reasonable measures
to verify or document that an employee’s use of paid sick
leave is lawful.
For example, while abiding by applicable federal,
state and local medical privacy laws, after an employee has
used paid sick leave, the employer may confirm that the employee’s
use of paid sick leave was for a proper reason and for a permitted
person.
Employers may require a doctor’s note or
other medical documentation for paid sick leave of more than
three consecutive work days (whether full or partial days).
Requiring such verification for paid sick leave of three or
fewer consecutive work days is deemed unreasonable. In a case
of suspected sick leave abuse, an employer may reasonably review
the employee’s sick leave use with heightened scrutiny.
An employer may require a doctor’s note
or other documentation for the use of paid sick leave to attend
a medical appointment, or if there is a clear instance or pattern
of sick leave abuse, even if the use of paid sick leave was
for three consecutive work days or less.
RULE 3: OTHER EMPLOYER REQUIREMENTS PERTAINING TO THE
AMOUNT OF PAID SICK LEAVE TAKEN
Can an employer require its employees
to use paid sick leave in one hour increments?
Yes, but an employer may also allow employees
to use paid sick leave in less than one-hour increments.
Can an employer require an employee to
take off a full day to use accrued paid sick leave?
Generally, a requirement that an employee take
off more hours than requested to receive medical care, treatment
or diagnosis would be unreasonable. However, an employer may
require an employee to use more hours of paid sick leave than
the employee needs or requests if the employer can verify that
it had to pay for a replacement employee for the longer period
of time.
RULE 4: BREAKS-IN-SERVICE
When do employees begin to accrue paid
sick leave?
All employees working for an employer on or before
Feb. 5, 2007 began to accrue paid sick leave on that date. Employees
hired after Feb. 5, 2007 begin accruing paid sick leave 90 calendar
days after their first day of work.
Are employers required to pay employees
for unused paid sick leave when they quit, retire, or are fired?
No. However, if employers use Paid Time Off (PTO)
or vacation pay to comply with the PSLO, they need to comply
with other applicable laws that require the payout of PTO or
vacation pay upon separation from employment.
An employee who worked for an employer before
Feb. 5, 2007, was separated from employment before that date
and is rehired after Feb. 5, 2007, must complete the 90-day
eligibility period before accruing paid sick leave. For employees
who began work after Feb. 5, 2007, were separated from employment
before becoming eligible to accrue paid sick leave and are rehired
by the same employer within one year of separation, the earlier
period of employment counts towards the 90-day eligibility period.
An employee who separates from employment after beginning to
accrue paid sick leave and is rehired within one year is not
subject to the 90-day eligibility period, but the employer is
not required to reinstate the employee’s previously accrued
paid sick leave hours.
RULE 5: RATE OF PAY – PIECE RATE AND COMMISSIONED
EMPLOYEES
What is the sick leave rate of pay for
employees who are paid an annual salary rather than an hourly
wage?
The sick leave rate of pay for employees who
are paid an hourly wage is the employee’s hourly wage.
However, when an employee is paid an annual salary rather than
an hourly wage, the sick leave rate of pay is determined as
follows: first, divide the annual salary by 52 to get the weekly
salary. Then, divide the weekly salary by the number of hours
the employee is regularly scheduled to work to determine the
hourly pay rate. For employees who are not exempt from the overtime
requirements of the federal Fair Labor Standards Act and California
law, the weekly salary must be divided by 40 or fewer hours,
even if the non-exempt employee regularly works more than 40
hours per week. For exempt employees, the weekly salary should
be divided by 40 hours, unless there is evidence that the exempt
employee’s regular work week is less than 40 hours. In
such instances, the weekly salary should be divided by the number
of hours worked during a regular work week.
Should tips be included when calculating
the sick leave rate of pay for tipped employees?
No. The sick leave rate of pay is based only on
compensation paid by the employer.
When must employees be paid for sick leave?
Generally, sick leave must be paid no later than
the payday for the next regular payroll period after the sick
leave was taken by the employee. However, if the employer has
a reasonable verification requirement, it is not obligated to
pay sick leave until the employee has complied with the verification
requirement.
What is the sick leave rate of pay for
employees paid by a piece rate or commission?
For those employees, the sick leave rate of pay
is calculated by dividing the employee’s total earnings
in base wages and commissions or piece rates for the prior calendar
year by the total hours worked as a commissioned or piece rate
employee during the prior calendar year. If the employee does
not have a prior calendar year’s work history, divide
the employee’s total earnings in base wages and commissions
or piece rate since the employee’s date of hire by the
total hours worked as a commissioned or piece rate employee
since that date. For commissioned or piece rate employees who
are exempt, base the sick leave rate of pay on a 40-hour work
week absent evidence that the employee’s regular work
week is less than 40 hours. Alternatively, employers who keep
records of hours worked by exempt employees may calculate the
employee’s sick leave rate of pay based on actual hours
worked.
In these calculations, the employer is not required
to pay a sick leave rate of pay greater than two times the San
Francisco minimum wage.
RULE 6: ALTERNATIVE AND LIMITED SAN FRANCISCO WORK SCHEDULES
If an employer is based outside of San
Francisco but has employees who perform work in San Francisco,
do the employees accrue paid sick leave for hours worked in
San Francisco?
Yes. All employees who work in San Francisco,
including on a part-time or temporary basis, accrue paid sick
leave for those hours worked in the city, regardless of where
their employer is located. However, employees who work in San
Francisco on an occasional basis or only to attend or present
at conventions or conferences are not covered by the ordinance
if they do so for fewer than 56 hours within a calendar year.
Employees who live in San Francisco and perform
work for an employer from home, including telecommuting, are
covered by the PSLO for all hours that they perform work from
home, so long as they perform 56 or more hours of work in San
Francisco within a calendar year.
Employees who work outside of San Francisco and
who travel through San Francisco, but do not stop in the city
as a purpose of their work, are not covered by the PSLO. However,
employees who travel through San Francisco, and stop in San
Francisco as a purpose of their work (e.g., to make pickups
or deliveries), are covered by the PSLO for all hours worked
in San Francisco, including travel within the city to and from
the work site, so long as the employee performs 56 or more hours
of work in San Francisco within a calendar year.
RULE 7: SMALL BUSINESS DEFINITION: FLUCTUATING BUSINESS
SIZE
How does an employer determine whether
it qualifies as a small business (less than 10 employees) if
its number of employees fluctuates throughout the year?
A “small business” is an employer
for which fewer than 10 persons, including part-time and temporary
employees, work for compensation during a given week. Under
the PSLO, small businesses in San Francisco may cap the accrual
of sick leave hours at 40 hours of paid sick leave per employee,
while employers with 10 or more employees may cap sick leave
accrual at 72 hours per employee. (When an employee uses some
of the capped sick leave, the employee resumes accruing sick
leave, up to the cap.) In situations in which the number of
employees fluctuates above and below 10 per week over the course
of a year, the OLSE calculates business size for the current
calendar year based upon the average number of persons who worked
for compensation per week during the preceding calendar year.
For new employers, the OLSE calculates business size for the
current calendar year based upon the average number of persons
per week who worked for compensation for the first 90 days after
its first employee began work.
RULE 8: ACCRUAL OF PAID SICK LEAVE – EXEMPT EMPLOYEES
Does sick leave accrue on overtime hours
worked?
Paid sick leave accrues on all hours worked, including
overtime hours worked, for non-exempt employees. However, paid
sick leave accrues for exempt employees based on a 40-hour work
week, absent evidence that the exempt employee’s regular
work week is less than 40 hours. If there is evidence that the
exempt employee’s regular work week is less than 40 hours,
paid sick leave accrues based upon that regular work week.
EMPLOYERS’ TO DO LIST:
What steps should employers take right
now?
It is critical that employers re-evaluate their
current sick leave policies and how they classify their employees
to be certain that they comply with the PSLO and its Rules.
- Review policies regarding notification and verification
of paid sick leave use.
- Determine whether current policies provide the required
accrual rates for new hires and employees with breaks in service.
- Calculate the proper sick leave rate of pay for employees
who are paid an annual salary, rather than an hourly wage.
- Determine when current policies require that employees
be paid for sick leave.
- Calculate the proper sick leave rate of pay for employees
who are paid in whole or part by a piece rate or commission.
- If your company is based outside of San Francisco, determine
whether you have employees who work in San Francisco on a
part-time or temporary basis who are covered by the PSLO.
- Determine whether your business qualifies as a “small
business.”
- Determine which employees accrue sick leave hours for overtime
hours worked.
For further information
regarding the San Francisco Paid Sick Leave Ordinance and the
Rules implementing it, please contact:
Davis Wright Tremaine has employment
and labor lawyers in Alaska, Oregon, Washington state,
California and Washington, D.C. We represent many clients nationally.
For a specific referral for a DWT employment and labor attorney
in your state, please contact the above attorney. Thank you.
This
advisory
is a publication of the Employer Services Department of Davis
Wright Tremaine LLP. Our purpose in publishing this advisory
is to inform our clients and friends of recent developments
in employment law. It is not intended, nor should it be used,
as a substitute for specific legal advice as legal counsel may
be given only in response to inquiries regarding particular
situations.
Copyright
© 2007, Davis Wright Tremaine LLP.
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