California and San Francisco Paid Family Leave Update
Earlier this week, California's Governor signed into law AB 908, which, beginning January 1, 2018, increases the wage replacement rate for employees receiving disability insurance and/or paid family leave benefits through the state. Currently, the maximum wage replacement is about 55% of the employee's compensation. Effective January 2018, this amount will increase to 60 or 70 percent of the employee's compensation, depending on the employee's income level. The new law will also eliminate the 7-day waiting period for receipt of paid family leave benefits. A copy of the new law is available here.
Meanwhile, as we reported last week, San Francisco's Board of Supervisors passed an ordinance on April 5 (finally approved on April 12) that will require most employers with employees in San Francisco to start bridging the gap between an employee's paid family leave benefit and the employee's regular compensation. This only applies to leave taken to bond with a new child (for which the employee is eligible for and receiving paid family leave benefits through the state) and is for up to 6 weeks. This ordinance will apply to employers with 50 or more employees (anywhere) effective January 1, 2017, to employers with 35 or more employees effective July 1, 2017, and to employers with 20 or more employees effective January 1, 2018. Employees will be eligible for this paid leave benefit if (1) they have worked for the employer for at least 180 days; (2) they perform at least 8 hours of work per week in San Francisco; and (3) at least 40% of their total weekly hours are worked in San Francisco. There are prescribed means for determining employee eligibility where an employee's work hours fluctuate. There are also prescribed means for determining the amount of supplemental compensation to pay the employee where the employee's pay fluctuates.
Under the San Francisco ordinance, employers can require an employee to apply up to two weeks of accrued, unused vacation to help the employer meet its obligations. If the employee refuses to use vacation, then the employee is not eligible for any supplemental compensation from the employer.
As a condition of receiving pay from the employer, the employee also must agree to reimburse the employer for the full amount of paid leave paid by the employer, if the employee voluntarily terminates employment within 90 days of the end of the leave and the employer requests such reimbursement in writing.
The ordinance's requirements do not apply to employees covered by collective bargaining agreements if the agreement expressly waives the provisions of the ordinance, or if the agreement was entered into prior to the ordinance becoming effective. However, if an agreement expires or is extended, then the ordinance will apply unless its provisions are expressly waived.
Finally, the ordinance provides for both administrative enforcement and the possibility of private civil actions. A required notice will be made available for posting by January 1, 2017. Employers must keep records of supplemental compensation paid under the ordinance for 3 years.
Employers with San Francisco employees should review the ordinance to ensure they fully understand the detailed requirements for compliance. Although the ordinance still needs to be signed into law by San Francisco Mayor Lee, he has already indicated that he will sign the ordinance.