News

June 14, 2016

On June 2, 2016, the Mayor of the City of Los Angeles signed into law Ordinance 184320 (“LA Ordinance”) which amended the City’s minimum wage law (set to increase to $10.50 per hour on July 1, 2016) to include a new paid sick leave benefit for employees within the City of Los Angeles. A few days later, on June 7, 2016, San Diego city voters approved Proposition I (“SD Ordinance”), which both increases the minimum wage to $10.50 immediately, once the election results are certified, and provides a new paid sick leave benefit for employees within the City of San Diego.

As California employers are aware, the State of California already has a state minimum wage (currently $10.00 per hour) higher than the federal minimum wage, and the California Healthy Workplaces Healthy Families Act (“State PSL”) already provides for paid sick leave benefits. To be legally compliant in San Diego and Los Angeles, to the extent there are discrepancies between the state and local laws, these employers must follow the applicable legal provisions that give employees the greatest benefit. As a result, employers in Los Angeles and San Diego must quickly review and update their paid sick leave policies and hourly pay rates to ensure they comply with these local ordinances that will be effective in July 2016.

Minimum Wage

Pursuant to the SD Ordinance, employees who work within the boundaries of the City of San Diego will be entitled to be paid a minimum of $10.50 per hour, provided they work two or more hours per week, in one or more calendar weeks of the year, within San Diego. This change will be effective as soon as the results of the June 7, 2016 election are certified; this is expected to occur on or before July 7, 2016. On January 1, 2017, the SD Ordinance will raise the minimum wage again, to $11.50 per hour. Elsewhere in San Diego County (as well as for nonexempt employees in California, other than in areas subject to a more generous local ordinance), the minimum wage will remain at the state mandated $10.00 per hour until January 1, 2017. On January 1, 2017, the California state minimum wage will increase to $10.50 per hour and the San Diego City minimum wage will increase to $11.50 per hour.

In the City of Los Angeles, the Los Angeles Minimum Wage Ordinance requires that employees who perform at least two hours of work within the geographic boundaries of the City of Los Angeles for an employer with 26 or more employees, and that is not otherwise not exempt from the California minimum wage law, must be paid a minimum of $10.50 per hour beginning July 1, 2016. The LA minimum wage increases to $12.00 on July 1, 2017. The City of Santa Monica also has a similar minimum wage law with increases for employees of employers with 26 or more employees to $10.50 per hour on July 1, 2016, and to $12.00 per hour on July 1, 2017. For smaller employers (those with 25 or fewer employees), and in other parts of Los Angeles County, and in Orange County, the minimum wage will remain at the state mandated $10.00 per hour until January 1, 2017, when it will increase to $11.00 per hour.

Paid Sick Leave

The SD Ordinance and the LA Ordinance both enact a paid sick leave law similar, but not identical, to the State PSL. (A paid sick leave benefit will become effective for employees in the City of Santa Monica beginning January 1, 2017: further details are beyond the scope of this article but are available upon request.) Under both the SD and LA Ordinances and the state PSL, employees will be entitled to receive one hour of paid sick leave for every thirty hours worked. Paid sick leave begins to accrue on July 1, 2016 for employees in LA and on the effective date for employees in San Diego, or, in the case of later hired employees, when employment starts. There is a 90-day waiting period before an employee may use the paid sick leave.

Under the SD Ordinance, employers may limit the use of paid sick leave to forty hours in a twelve-month period, and accrual cannot be capped. Under the LA Ordinance, employers may limit the use of paid sick leave to 48 hours per year, and accrual may be capped at 72 hours. In contrast, under the State PSL, employers may limit use of paid sick leave to 24 hours or three workdays, and accrual may be capped at 48 hours or 6 workdays. Under all three laws, unused sick leave (up to the permitted cap, if any) must be carried over from year to year. Upon termination of employment, employers are not required to pay out accrued but unused paid sick leave, but any unused time not paid out must be reinstated immediately if – in San Diego, the employee is rehired within six months – and in Los Angeles and under state law, the employee is rehired within 1 year.

Both the SD and LA Ordinances and State PSL allow paid sick leave to be used when an employee is unable to work due to illness, injury, or a medical appointment for the employee or specified family members (spouse or domestic partner, child, parent, grandparent, grandchild or sibling and child or parent of the employee’s spouse or domestic partner). The benefit may also be used for “Safe Time” (time away from work necessary to handle certain matters related to domestic violence, sexual assault, or stalking). The LA Ordinance also extends the use of PSL benefits to any individual related by blood or affinity whose close association with the employee is equivalent to a family relationship. The SD Ordinance extends the use of PSL to instances when the employee’s place of business or school or child care provider is closed due to a public health emergency.

Action Items

This article is intended as a summary of the new San Diego and LA local ordinances. Employers in San Diego and LA should do the following as quickly as possible to prepare for the new laws:

  • Check your employee rosters to make sure all employees are being paid at least $10.50 per hour (or will be by July 1, 2016 in LA and Santa Monica for employers with 26 or more employees or for all City of San Diego employers, on the effective date of the SD Ordinance)
    • Plan to increase the minimum hourly rate in SD to $11.50 by January 1, 2017.
    • Plan to increase the minimum hourly rate in LA and Santa Monica to $12.00 per hour for employers with 26 or more employees and to $10.50 for smaller employers by July 1, 2017.
    • Review in more detail the requirements of the applicable local city ordinances and, if necessary, modify your paid sick leave policies.

All California employers are also reminded of the amended FLSA regulations which have increased the salary threshold for “white collar” exemptions. Beginning December 1, 2016, to qualify for the executive, administrative or professional exemptions, employees must be paid a minimum salary of $47,476 per year and satisfy the applicable duties tests. As a result, employers nationwide will need to decide whether to increase salaries that are below the new federal salary threshold, or reclassify certain exempt employees and train them on proper timekeeping and meal and rest break practices, when applicable.