Alerts and Updates

Highlights of New San Francisco Sick Leave Ordinance: Impact Is National

February 2, 2007

Does your business have employees in San Francisco? If so, are you aware that San Francisco has a new sick leave law that impacts all employees within the city limits? The San Francisco Sick Leave Ordinance is proving troublesome even to employers that currently provide paid sick leave, as it may be broader in scope and benefits than anticipated. Even employers without workers in San Francisco may want to take note, as similar laws have been considered on the federal level and the law is likely to serve as a model for other cities and towns in the future.

General Overview of the Law

The San Francisco Sick Leave Ordinance, which takes effect February 5, 2007, applies to all employees in the City and County of San Francisco. Every business, regardless of size, with employees within the geographic boundaries of the City must provide paid sick leave to those San Francisco employees. Under the law, employees accrue a specified amount of sick leave, based upon the amount of time they work.

The law broadly defines when sick leave can be taken. Employees can use it when they are ill or to care for someone else who is ill, namely a parent, child, spouse, registered domestic partner, sibling, grandparent, grandchild, or other designated person.

The new ordinance requires employers to provide employees with sick leave accruals of one hour for every 30 hours worked. The law sets a cap on accruals at 40 hours for employers of fewer than 10 employees and 72 hours for all other employers. However, the ordinance also allows employers to provide higher caps than the minimum imposed by law.

Employers are required to post notice of the new law and are forbidden from interfering with or retaliating against an employee who tries to take advantage of the law. Employers who do not comply are subject to action and penalties.

The ordinance provides minimum requirements pertaining to paid sick leave, but employers are permitted to provide for greater accrual, caps or use by employees. It is highly recommended that employers take a close look at their existing policies, create policies that comply with each of the new requirements, post the required notice, prepare the required forms, and uniformly enforce the policies.

Frequently Asked Questions

Because the law is so new, there are no guarantees how it will be interpreted. Several questions have arisen thus far; they are set forth below along with our reasoned responses based on the wording of the ordinance.

1. How do we know if the law applies to our business?

If your business employs individuals who work in the City or County of San Francisco, your business is covered by this law. Small, medium and large businesses are all included. The law was written very generally to apply to businesses "benefiting from the opportunity to do business" in the City. Employers are defined as those who employ or exercise control over the wages, hours, or working conditions of an employee.

2. What if our business uses a temporary or staffing agency, does the law still apply to our business?

Yes. The law expressly defines employers to include those who directly or indirectly employ personnel through the services of a temporary services or staffing agency or similar entity.

3. How do we know which employees are covered?

The law does not differentiate between employees. If they are employed by your company as of February 5, 2007, they are all presumably covered by the law.

4. Do we have to provide paid sick leave to employees who begin work after February 5, 2007?

Yes. Employees hired after February 5, 2007, accrue paid sick leave, but not until 90 days after they commence work with your company.

5. Are temporary workers covered?

Yes. The law specifically includes temporary workers. They must work 30 hours, however, before they accrue any leave. See answer to question number 11 below.

6. Are part-time workers covered?

Yes. The law specifically includes part-time workers. They must work 30 hours, however, before they accrue any leave. See answer to question number 11 below.

7. Do we have to provide sick leave to non-exempt employees?

Yes. The law makes no distinction between exempt and non-exempt employees.

8. Does the law apply to our business if we have some employees who work in San Francisco and some who do not?

The ordinance does not address this exact situation. It expressly covers employees working within the geographic boundaries of the City. Thus, your employees working in San Francisco are covered. The law does not require employers to adopt a similar policy for workers outside of San Francisco, and it is unlikely employers could be pursued for failing to adopt such a policy. However, if economically feasible, employers are encouraged to evaluate the adoption of a uniform policy for their entire workforce to avoid morale problems and potential discrimination claims, and to bolster the defense of potential claims that could arise.

9. Do we have to provide paid sick leave to independent contractors who work for our company?

The law does not address independent contractors. It applies to "employees," who are broadly defined as persons employed within the geographic boundaries of the City by an employer. Employees expressly include part-time and temporary workers, and participants in a Welfare-to-Work Program when the participant is engaged in work activity that would be considered "employment." "Employers" are defined as those who employ or exercise control over the wages, hours or working conditions of an employee. An employer that can demonstrate that it does not exercise control over the wages, hours, or working conditions of a worker could argue that the worker is not covered by the law and that it is not obligated to provide that worker paid sick leave. The new law provides incentive for independent contractors who need paid sick leave to argue that they have been improperly classified.

10. How long does an employee have to work for our business to be entitled to sick leave?

The law does not set forth any length of service requirements. An employee who has worked for your business for just one day is just as entitled to take advantage of the law as an employee who has worked for your business for 20 years. All employees who are employed as of February 5, 2007, are covered. Those who begin employment later are subject to a waiting period. See answer to question number 4 above.

11. How much sick leave does our business have to provide?

The amount of paid sick time owed to a particular employee depends on how much leave they have earned. The law requires a minimum accrual rate. Employees earn one hour of paid sick leave for every 30 hours they work. Depending on the size of the employer, employees who work 40-hour weeks for each of the 52 weeks per year accrue 69.33 hours, i.e., 8.66 eight-hour days, of paid sick leave each year.

12. If our employees are hourly, how do we calculate the accrual?

Employees earn one hour of paid sick leave for every 30 hours they work. However, leave can only be accrued in hour-unit increments. Further, employers are expressly forbidden from calculating the accrual in fractions of an hour increments. Thus, an employee who has worked 30 hours and then becomes ill would have accrued one hour of paid sick leave. An employee who has worked between 31 and 59 hours when he or she becomes ill is likely to be considered as having accrued two hours of paid sick leave.

13. Are we allowed to place a cap on how much an employee accrues?

Yes. Employers may cap sick leave accrual, and the ordinance specifically provides that "there shall be a cap." The size of the cap depends on the size of the employer. The ordinance provides a cap for employers with fewer than 10 employees of 40 hours, i.e., five 8-hour days; the cap for those with 10 or more employees is 72 hours, i.e., nine 8-hour days. These are statutory minimums, and employers are permitted to provide for higher caps. Employers are urged to review their policies and specifically set forth in writing caps that comply at a minimum with the law's mandatory requirements.

14. Do we have to advance paid sick leave to employees who request it?

The ordinance does not refer to the issue of advancing sick leave. Under the law, employees are only entitled to take and be paid for sick leave that they have accrued to date. They are not entitled to the 40- or 72-hour cap when the law takes effect. Accrual does not begin until February 5, 2007, and is earned incrementally. The ordinance, however, does not prevent employers from adopting a policy of advancing paid sick leave to those who request it. To avoid potential problems, employers may want to fully evaluate the issues raised by the leave law, adopt a complete policy, and enforce it uniformly.

15. Does our company have to carry over sick leave from year to year?

Yes, the law provides that accrued paid sick leave for employees carries over from year to year, whether calendar year or fiscal year, subject to the caps.

16. For what purpose can the employee use the paid leave?

The law is very broad as to how the employee can take the leave. It can be taken by the employee for his or her own "medical reason," which expressly includes caring for himself or herself because he or she is ill, injured, or suffers from a medical condition. It can also be used by the employee if he or she needs the time to be diagnosed or treated.

The employee can also use the paid leave to provide care or assistance to other persons with an illness, injury or medical condition or who need medical diagnosis or treatment. This expressly includes caring for or assisting a parent, child, spouse, registered domestic partner, sibling, grandparent, grandchild, or a designated person in the event the employee is unmarried. It includes not only biological relationships but also relationships resulting from adoption, step-relationships, and foster care. Children are defined to include those who are children of a domestic partner and a child of a person standing in loco parentis. The extent of coverage is far broader than federal or state unpaid leave law currently provides (e.g., FMLA and CFRA.)

17. If our employees want to designate someone to care for pursuant to their sick leave, do we have to allow it?

The law provides that employees who do not have a spouse or registered domestic partner may designate one person for whom they will use paid sick leave to aid or care for. To take advantage of the "designated person" rule, the employee must designate the person no later than the date that he or she has worked the 30 hours qualifying him or her for the leave. The employer must provide the employee with a 10-day window to make the designation and allow employees to change the designation annually.

18. How much does our company have to pay employees who are out sick?

The law does not expressly state how much an employer has to pay an employee who calls in sick. To err on the side of caution, employers who pay their sick employees at the same rate they are usually paid are less likely to be faced with a claim.

19. Can we require our employees to find a replacement if they plan to take sick leave?

No. The ordinance expressly forbids employers from requiring employees to find replacements as a condition of taking paid sick leave.

20. How do we make sure our employees are not abusing the law?

Employers are allowed to require employees to give reasonable notification of an absence from work for which paid sick leave will be or is being used. Employers are also permitted to take "reasonable measures" to verify or document that the employee's use of the leave is lawful. "Reasonable measures" are not defined by the ordinance. The law does not prohibit an employer from disciplining an employee determined through "reasonable measures" to have abused the privilege.

The law prohibits employers from counting absences taken pursuant to the sick leave policy as an absence that could lead to discipline, discharge, demotion, suspension, or any other adverse action. Further, there is an anti-retaliation component to the law. Employers and "any other person" (which could be construed as managers, supervisors, and coworkers) are forbidden from interfering with, restraining, or denying an employee who tries to take advantage of the law.

Employers may not discharge, threaten to discharge, demote, suspend, discriminate against, or take adverse action against any employee in retaliation for exercising his or her sick leave rights.

Employers should be especially careful in how they respond to employees who file complaints, as there is a rebuttable presumption that retaliation has occurred if an adverse action takes place within 90 days of the filing of the complaint.

21. If our business has a paid time-off policy, do we have to change it to a sick leave policy?

The answer to this question depends on the wording of your Paid Time Off ("PTO") policy. The law allows an employer to use a PTO policy in place of a separate sick leave policy and provides that employers need not provide a PTO policy plus a separate sick leave policy. However, the PTO policy must allow the employee to use the PTO for the same purposes required by the San Francisco Sick Leave Ordinance and the accrual rate and cap must be at least as generous as the City ordinance requires.

22. Do we have to pay employees for accrued but unused sick leave at the time of their termination or resignation?

No. Employers do not have to pay employees for accrued but unused sick leave at the time of their termination or resignation of employment. This is contrary to the rule regarding accrued but unused vacation in California. Thus, some employers are rethinking whether to separate sick, vacation, and personal leaves of absence policies.

23. What notice must be provided?

Employers have to post notice in a conspicuous location at the workplace where the employee works. The notice must be posted in English, Spanish, Chinese, and all languages spoken by more than 5% of the employer's San Francisco workforce. A form notice is now available.

24. Do we have any record-keeping requirements?

Yes. Employers are required to retain records documenting hours worked by employees and paid sick leave taken for a period of four years. A failure to keep records will be a presumption that the employer has violated the law.

25. What happens if our business does not comply?

The law provides for the Office of Labor Standards Enforcement to implement and enforce the ordinance. That Agency may investigate possible violations and order relief, which may include reinstatement, back pay, the payment of any sick leave unlawfully withheld, and interest. Further, it is authorized to order penalties in the amount of three times the dollar amount withheld or $250, whichever is greater, plus a $50 administrative penalty. The Agency, the San Francisco City Attorney, any person aggrieved by a violation of the law, or anyone acting on behalf of the public may bring a civil action as well.

26. If our company is governed by a collective bargaining agreement, does the law apply?

Maybe. The answer depends on the terms of the collective bargaining agreement. The law provides that the requirements of the law may be expressly waived in the collective bargaining agreement in clear and unambiguous terms.

27. How does the new law relate to other leave of absence laws?

The new ordinance does not address its impact on existing state and federal health-related leave laws. Employers should consider the applicability of the Family Medical Leave Act, California Family Rights Act, Americans With Disabilities Act, and Fair Employment and Housing Act, as well as the Workers Compensation Act when a request for a health-related leave of absence arises.

28. What should we do to make sure our policy complies with the new law?

All employers with workers in San Francisco should take a hard look at their existing PTO and/or sick leave policies to make sure that they are compliant with the new law. If you do not have a policy yet, you should create one. Your policy should incorporate each of the issues raised by the new law to avoid ambiguities and potential problems. You should also notify your employees about the new law, post the required notice, prepare a standard designation form, and enforce your policy uniformly. You are welcome to consult with Duane Morris employment attorneys to review or draft policies, prepare necessary forms, answer specific questions, advise regarding problems that arise with employees requesting health-related leaves, or for any other issue, including the impact of the new law on compliance with existing laws.

For Further Information

If you have any questions about this Alert or would like more information, please contact Lori Ocheltree in the Duane Morris San Francisco office or any of the other attorneys in our Employment & Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.