Update on San Diego Sick Pay and Minimum Wage Law

San Diego Sick Pay and Minimum Wage Law Now Effective, but Implementing Ordinance Expected to Address Open Questions Not Anticipated until September

On Monday, San Diego’s Earned Sick Leave and Minimum Wage Ordinance (“Ordinance”) took effect.  This means that effective July 11, 2016, employees who perform at least two hours of work within the geographic boundaries of the City of San Diego in one or more calendar weeks of the year must be paid at least $10.50 per hour and must accrue one hour of paid sick time for every 30 hours worked within the City of San Diego. 

As passed, the Ordinance provides that while employers can cap use of sick pay to 40 hours within a benefit year, sick pay must continue to accrue indefinitely.  Additionally, the Ordinance currently does not allow for a front-loading or deposit method of providing sick pay.   Both of these issues present challenges for employers as they attempt to align their current paid time off and sick pay policies with new San Diego requirements.

Proposed Implementing Ordinance

Fortunately, the San Diego City Council is attempting to address these challenges and, on July 11, 2016, approved an Implementing Ordinance at a first reading that will provide much needed clarification and flexibility for employers with San Diego employees.  The Implementing Ordinance will go to a second reading on July 25, 2016.  The Mayor will then have 10 calendar days to approve, veto or not sign it.  The Implementing Ordinance will take effect 30 calendar days after the Mayor approves or does not sign it, which will likely be sometime in mid-September.
If the Implementing Ordinance becomes effective, it provides the following key changes: 

• It allows employers to comply with the sick pay law by depositing or “front-loading” San Diego employees with 40 hours of sick pay at the beginning of each benefit year.  Employers who don’t wish to front load the time, especially for part-time employees, may choose to comply with the law through the accrual method.

• Employers who use the accrual method may cap accrual of sick pay at 80 hours.  This means that employers would be able to continue to limit an employee’s use of sick pay to 40 hours each year and also cap accrual of paid sick time at 80 hours.

• Employers who provide an employee with an amount of paid leave, including paid time off, paid vacation or paid personal days, of at least 40 hours each year, and who allow such time to be used for the same purposes and under the same conditions as the Ordinance, do not need to provide additional sick pay to employees.  Similarly, employers who provide greater paid time off through a contract, collective bargaining agreement, employee benefit plan, or other agreement will be deemed in compliance even if they use a different method of calculating, paying or using sick pay.

• Employers have additional time to meet the Ordinance’s notice and posting requirements.  The Ordinance requires employers to post a notice in the workplace informing employees of, among other things, the minimum wage and their rights to sick pay accrual.  Under the proposed Implementing Ordinance, the City’s Enforcement Office will have this notice poster available for employers by September 1, 2016.  Additionally, under the proposed Implementing Ordinance, employers must issue a notice to each employee, by October 1, 2016 or the time of hire, whichever is later, that provides information on how the employer complies with the Ordinance, including the method of sick pay accrual, and provides the employer’s legal name, address (including any fictitious business address) and telephone number in the employee’s primary language.  This notice must be provided to both exempt and non-exempt employees and may be provided through electronic communication.  Under the proposed Implementing Ordinance, the City’s Enforcement Office will have a template notice available to employers by September 1, 2016.

• Finally, the proposed Implementing Ordinance establishes strong anti-retaliation provisions, provides increased damages and civil penalties and outlines enforcement procedures. 

Next Steps

The Ordinance is now effective, which means immediate compliance steps need to be taken, including ensuring all covered San Diego employees receive a minimum wage of $10.50 per hour as of July 11, 2016.  However, since the law is in flux on key sick pay issues such as caps and accrual rates and favorable employer changes are anticipated, it would be smart for covered employers to consult with legal counsel to craft a customized compliance solution. 

For questions or other information on the San Diego Ordinance, please contact Lisa Frank or Brenda Kasper.