San Francisco’s Paid Parental Leave Ordinance

The City of San Francisco has enacted a Paid Parental Leave Ordinance requiring employers to provide supplemental compensation to employees who are receiving California Paid Family Leave (“PFL”) benefits for purposes of bonding with a new child. Employers are advised to review and update their leave policies in anticipation of the law taking effect, starting in 2017.

Employer Coverage and Compliance Dates

The ordinance will take effect on a rolling basis:

The threshold number of employees includes all employees regardless of location.

Covered Employees

The ordinance applies to all employees (including part-time and temporary employees) of covered employers who meet the following requirements: (1) commenced employment with the employer at least 180 days prior to the start of the leave period; (2) perform at least eight (8) hours of work per week for the employer in San Francisco; (3) at least 40% of the employee’s total weekly hours worked for the employer must be in San Francisco, and (4) eligible to receive paid family leave benefits under the California Paid Family Leave program for the purpose of bonding with a new child.

Supplemental Compensation

The ordinance provides that when an eligible employee receives PFL benefits for the purpose of child bonding, a covered employer must provide Supplemental Compensation in an amount such that the total of the PFL benefits and the Supplemental Compensation equals 100 percent of the employee’s gross weekly wage.

Currently, under the PFL program, employees taking leave to bond with a new child generally receive 55 percent of their normal wages for up to 6 weeks (subject to a maximum weekly benefit cap, discussed below). The San Francisco ordinance would require employers to pay the other 45 percent of the employee’s wages during such leave.

On April 11, 2016, California Governor Jerry Brown signed legislation that will increase the benefits paid by the PFL program beginning January 1, 2018. Assembly Bill 908 will increase the level of benefits from the current level of 55 percent of an employee’s base wages to 60 percent (for those who make more than one-third of the California average weekly wage) or 70 percent for low income earners (those who make one-third or less of the California average weekly wage). When the benefit amounts under the PFL program increase in 2018, San Francisco employers’ Supplemental Compensation payments will decrease to 40 percent (30 percent for low income workers) of an employee’s wages, rather than the 45 percent they are currently scheduled to provide.

The PFL program places a cap on the weekly benefit amount for higher-earning employees. As of January 1, 2016, the PFL “maximum weekly benefit amount” is $1,129, which represents 55 percent of an employee’s weekly wages based on an annual salary of approximately $106,740. Employees who earn more than $106,740 per year therefore do not receive the full 55 percent of their salary under the PFL program. An employer’s Supplemental Compensation obligation under the San Francisco ordinance would be proportionally capped by reference to the California PFL maximum weekly benefit amount.

Use of Accrued Vacation During Leave

The ordinance provides that an employee must allow the employer, in the employer’s discretion, to apply up to two weeks of unused, accrued vacation at the start of the PFL leave period to help meet the employer’s obligation under the ordinance to provide Supplemental Compensation during the leave period.

The ordinance specifically clarifies that the preceding requirement does not prevent an employer, in the employer’s discretion, from also requiring an employee to take up to two weeks of unused, accrued vacation prior to the employee’s initial receipt of PFL benefits, as allowed under the PFL program.

Additional Employee Requirements

As a precondition of receiving Supplemental Compensation, an employee must either (1) provide the employer with a copy of the employee’s Notice of Computation of California Paid Family Leave Benefits from the EDD or other legally authorized statement, or (2) provide the EDD with written authorization to disclose the weekly benefit amount to the employer.

In addition, as a condition of receiving Supplemental Compensation from the employer, the employee must agree, by signing a form prescribed by the San Francisco Office of Labor Standards Enforcement (“OLSE”), to reimburse the full amount of the Supplemental Compensation received from the employer if the employee voluntarily separates from employment with the employer within 90 days of the end of the employee’s leave period and if the employer requests such reimbursement in writing.

Existing Paid Parental Leave Policies

The ordinance does not require employers to provide Supplemental Compensation if the employer’s existing policy provides the employee with at least six weeks fully paid parental leave within any twelve-month period for purposes of bonding with a new child, whether or not such paid leave includes PFL benefits. Unless the employee elects otherwise, the six weeks fully paid parental leave benefits must be provided as six consecutive weeks.

Reducing Employee Wages or Termination of Employment

If an employer terminates an employee while the employee is taking leave pursuant to the PFL, the employer would be required to pay Supplemental Compensation for the remainder of the leave period.

Furthermore, the ordinance provides that reducing an employee’s wages during the leave period or within 90 days of the employee’s requesting or applying for PFL will give rise to a rebuttable presumption that it was done for purposes of reducing the amount of Supplemental Compensation required under the ordinance. Similarly, terminating an employee within 90 days of the employee’s having made a request or application for PFL creates a rebuttable presumption that the termination was taken to avoid the employer’s obligation to pay Supplemental Compensation under the ordinance.

Retaliation Prohibited

It is unlawful for an employer to discharge, threaten to discharge, demote, suspend, or in any manner discriminate or take adverse action against any person in retaliation for exercising rights to Supplemental Compensation under the ordinance. Such rights include, but are not limited to, the right to engage in the following: receive Supplemental Compensation, file a complaint or inform any person about an employer’s alleged violation of the ordinance, cooperate with the OLSE in its investigation of alleged violations, and inform any person of his or her possible rights under the ordinance. Furthermore, taking adverse action against an employee within 90 days of the employee engaging in protected rights mentioned above shall raise a rebuttable presumption that such adverse action was taken in retaliation.

Notice, Posting, and Recordkeeping Requirements

Employers are required to post in a conspicuous place at any workplace or job site where a covered employee works a notice (which will be published by the San Francisco OLSE) informing employees of their rights under the ordinance.

Covered employers are required to retain records documenting Supplemental Compensation paid to employees for a period of three years. If the employer fails to maintain or retain adequate records, it shall be presumed that the employer has violated the ordinance, absent clear and convincing evidence otherwise.