Is the Country’s Most Complicated Paid Sick Leave Law Finally Clearer?

Developments in the Rules Interpreting San Francisco’s Paid Sick Leave Ordinance

First, what we know: San Francisco’s Paid Sick Leave Ordinance (“PSLO”) requires employers to provide sick leave to all employees who work in San Francisco. Specifically, covered employees must earn one hour of paid sick leave for every 30 hours that they work – just like they do under the larger state paid sick leave law.

Last month, new rules went into effect interpreting specific provisions of the PSLO and providing further amendments, which is where things are trickier. San Francisco’s Office of Labor Standards and Enforcement (“OLSE”) stated that it developed these new rules to fulfill the legislative intent of the PSLO, provide clearer guidance for employers and employees, and strive for equity and practicality.

The original PSLO was enacted in 2007, well before the state law, and was amended recently—in 2017—to include further employee protections. 

In May 2018, the OLSE published its new rules, without much fanfare, which can be read here. The rules went into effect on June 7, 2018. Please see a summary of the key provisions below:

Which Employees are Covered?

The PSLO applies to all employees working in San Francisco, including part-time and temporary employees. Previously, the PSLO covered employees who performed 56 or more hours of work in San Francisco within a calendar year, even if they performed that work on an “occasional basis.”

The revised PSLO now generally applies to any employees who perform 56 or more hours of work in San Francisco, without any reference to whether that work is “occasional” or not. This clarifies that the law covers employees who live in San Francisco but perform their work at home, and employees who work outside of San Francisco but stop in the city to work—as long as they perform at least 56 or more hours of work in San Francisco over the course of the year.

Am I a Covered Employer?

The PSLO also applies different sick leave accrual caps and carryover requirements for employers depending on their size; employers with 10 or more employees can cap sick time balance at 72 hours, while those with fewer than 10 employees can cap sick time balance at 40 hours.

The new rules clarify how those businesses with fewer than 10 employees should determine their number of employees, if the number of persons working for compensation per week fluctuates. The new rules provide that if the number of employees fluctuates above 10 per week over the course of a year, the OLSE will calculate business size for the current calendar year based on the average number of persons who worked for compensation per week during the preceding year. For new employers, the OLSE calculates business size based on the average number of persons per week who worked for the first 90 days after its first employee began work.

The new rules also provide that a “controlled group of corporations,” as defined by the Internal Revenue Code, is considered to be a single employer under the PSLO. Non-incorporated businesses are counted as working for one employer if the company satisfies the definition of “controlled group of corporations” under the Code.

In addition, the new rules provide that the OLSE looks to California law when assessing whether an employee is jointly employed. If an employee is found to be jointly employed and at least one employer is covered by the PSLO, each employer has an obligation to ensure compliance with the PSLO. This is especially important to understand for small companies who staff employees through larger companies.

What Kind of Documentation Can I Require? And What Exactly is “Reasonable”?

The PSLO allows employers to require employees to give reasonable notification of an absence from work for which paid sick leave is, or will be, used. In doing so, the employer must establish a procedure for employees to communicate their absences to the employer – and whether an employer’s notification system is reasonable depends upon the totality of the circumstances.

Employers may also verify if the employee is using paid sick leave for lawful reasons by taking “reasonable measures.” A measure is considered unreasonable if it requires the employee to disclose more information than necessary to allow the employer to make that determination.

For example, the OLSE sets forth that while it might be reasonable for an employer to require an employee to provide a doctor’s note stating that the employee will be unavailable for work due to a “medical operation,” it would be unreasonable for the employer to require the employee to provide any additional detail, such as the type or purpose of the operation. The OLSE also clarifies that an employer requiring an employee to provide a doctor’s note or other documentation for the use of paid sick leave of three or fewer consecutive work days is considered unreasonable. The only exception to this would be if the employee is using paid sick leave to attend an appointment.

The new rules also clarify that employers must treat all information received from employees regarding their use of paid sick leave consistent with all federal, state, and local privacy laws. That’s a big responsibility, so employers really need to understand how to comply with those laws, especially if they’ve never done it before.

How is Paid Sick Leave Calculated?

The new rules also attempt to clarify how to calculate employees’ rates of pay for their used sick leave. In accordance with well-established California law, the rules require different calculations to determine an employee’s regular rate of pay depending on whether the employee is exempt or non-exempt—specifying that (1) paid sick leave for “non-exempt employees” shall be calculated in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick leave; and (2) paid sick leave for “exempt employees” is calculated in the same manner as the employer calculates wages for other forms of paid leave time for that employee.

The PLSO also now clarifies that non-exempt workers accrue paid sick leave on all hours worked, including overtime hours worked. For exempt employees, the PLSO confirms that paid sick leave accrues based on a 40-hour work week, absent evidence that their regular work weeks are less than 40 hours.

The PSLO still does not define “regular rate of pay,” and instead defers to the California Division of Labor Standards Enforcement for calculating the regular rate of pay. The new rules do confirm, however, that an employee’s exempt or non-exempt status is based on whether the employee is exempt from overtime pay under the FLSA and California labor law.

What if My Employee Had a Break in Service?

In general, the PSLO provides that paid sick leave accrues on the first day of an employee’s employment. It further provides that an employer may require a 90-day waiting period before an employee begins to use his or her accrued paid sick leave.

The new rules clarify an employer’s obligation to employees who previously departed the company and are subsequently rehired. Specifically, the rules state that if an employee separates from employment before his or her 90th day of work and is rehired within one year from the date of separation, all prior days worked shall count toward the 90-day waiting period, after which the employee may begin using paid sick leave as it is accrued.

What’s the Takeaway?

Employers may be frustrated that the new rules only subtly amend the PSLO, without clarifying the Ordinance in as much detail as they could have. Besides minor amendments in 2017, this is the first attempt to interpret the PSLO since its enactment over ten years ago.

Nonetheless, employers must be aware of the minor changes and clarifications, especially when hiring new employees, determining business size, and calculating the amount of sick leave owed.

If you have any questions about the new rules or the PSLO in general, do not hesitate to reach out to an MLG attorney to discuss your concerns.

Author: Kymberly LeGolvan, Associate.

The Maier Law Group helps companies ensure that their policies and practices comply with the relevant workplace regulations.  Please contact us at info@maierlawgroup.com for more information.

This article has been prepared for general informational purposes only and does not constitute advertising, solicitation, or legal advice. If you have questions about a particular matter, please contact the Maier Law Group directly.