SF Employers Face Tough New Laws

July 16, 2015

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Employment Law Update





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Evelin Bailey

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Evelin Bailey counsels management on anti-discrimination laws,
retaliation, wrongful termination, employee relations, and other
aspects arising from the employer-employee relationship. She also
implements immigration compliance initiatives in connection with non-prosecution agreements such as annual Form I-9 audits, training to prevent liability arising from ID fraud issues and employee investigations. 


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SF Employers Face Tough New Laws


San Francisco employers subject to the new "Retail Workers Bill of Rights" must review their company practices to avoid mistakes and pitfalls under the new laws.  Businesses outside San Francisco may wish to monitor these new laws as other Bay Area and California cities are likely to try to follow in San Francisco's footsteps.  The Bill of Rights, which became effective July 3, 2015, creates new restrictions and requirements with respect to scheduling of part-time employees, sending part-time employees home early due to lack of business and retaining part-time employees upon the sale of a business to a new owner. The Bill of Rights will apply to many businesses including "chain" restaurants, retail stores and franchises, and covers part-time workers who work less than 35 hours per week. Recent amendments in the laws, passed on July 7, 2015, reduce some of the stringent requirements imposed on San Francisco employers and reduce the number of employers that will be subject to the new laws.


Importantly, these "Bill of Rights" cover "Formula Retail Establishments" in San Francisco, which may include restaurants, retail stores, bars, drive-up facilities, liquor stores, restaurants (i.e., fast-food, self-service, and service), tobacco stores, massage establishments, movie theatres, video stores, amusement and game arcades, personal service and financial service establishments. The Bill of Rights also applies to the janitorial companies, security companies, and other subcontractors that provide services to "Formula Retail Establishments."


The recent amendments increased the number of stores or establishments that must be owned by a company in order for a store or franchise to fall under the new laws. Prior to the recent amendments, the law applied to employers with 20 stores or establishments worldwide and now employers must have at least 40 stores or establishments worldwide and 20 or more employees in San Francisco. The amendment also now permits employees to waive protections under the Bill of Rights through collective bargaining agreements.


Under the Bill of Rights, covered employers must provide employees with an initial estimate of their work schedule, a two-week notice of work schedules, predictability pay and premium pay for on-call shifts.  Employers subject to the Bill of Rights will need to review and possibly change their document practices, which will become very important to prove compliance with the laws and defend against potential claims and avoid predictability pay when an exception applies.  An employer who fails to maintain or retain records as required by the new laws will be presumed to be in violation of the new laws. For example, employers must now offer current part-time employees more hours before hiring or contracting new workers, document those efforts or be subject to penalties. Specific requirements of the new laws follow.


Covered Employee.  Part-time employees that perform at least two hours of work in a week within San Francisco are protected by the Bill of Rights. Covered employees also include individuals scheduled for an On-Call Shift for at least two hours within San Francisco, regardless of whether the individual is required to report to work for such shift.


Additional Hours.  Employers must offer any extra work hours to current qualified part-time employees in writing before hiring new employees or using contractors or staffing agencies to perform additional work at the location where the hours become available. A qualified employee is someone 1) who is qualified to do the additional work, as reasonably determined by the employer and 2) the additional work is the same or similar to work the employee(s) has performed for the business.


Recent amendments now provide that part-time employees have three days (72 hours) to accept any additional hours offered to them by the employer, after which time the employer may hire new workers. The 72 hours starts either when the employer notifies its current employees of the offer of additional hours by posting a notice in a conspicuous location in the workplace or offering the hours in writing directly to the employee, whichever is later. The amendment requires employees who wish to accept additional hours to do so in writing. Employers should save this written offer and any accompanying acceptances, and include information such as the method of distribution, time the notice was distributed and time the offer for additional hours expires.


Employee Retention.  If a covered employer sells its business, the new employer (the "Successor Employer") must retain, for 90 days, eligible employees who worked for the former employer for at least six months prior to the sale. The employer must post a notice of the "change in control" and provide employees with a notice of their rights. Both the former and Successor Employer should retain the "change in control" notice, a list of eligible employees with dates of hire, and other documentation demonstrating compliance.


Initial Estimate of Work Schedule.  New employees must receive a good faith written estimate of the employee's expected minimum number of scheduled shifts per month and the days and hours of those shifts. This estimate can be included in the Wage Theft Protection Act Notice required by California Labor Code Section 2810.5. Employers should maintain a copy of the written estimate provided to new employees.


Two Weeks' Notice of Work Schedules.   Employers must provide employees with their schedules two weeks in advance. Schedules may be posted in the workplace or provided electronically, so long as employees are given access to the electronic schedules. The employer should maintain a copy of the schedule in its original form and include information demonstrating when the schedule was originally posted or published. Any subsequent changes to the schedule should also be made in writing and include information as to why the schedule was changed, a date, and who requested the schedule change.


Predictability Pay for Schedule Changes.  If changes are made to an employee's schedule with less than seven days' notice, the employer must pay the employee a premium of 1 to 4 hours of pay at the employee's regular hourly rate (depending on the amount of notice and the length of the shift.) Per the amendment, on-call employees are now entitled to predictability pay if the employer modifies the scheduling of that shift with less than seven days' notice.


Pay for On-Call Shifts.  If an employee is required to be "on-call," but is not called in to work the employer must pay the employee a premium of  2 to 4 hours of pay at the employee's regular hourly rate (depending on the amount of notice and the length of the shift).


Exceptions.  Pay is not required if operations cannot begin or continue due to threats to employees or property, a public utility fail, an Act of God or other cause not within the employer's control (such as an earthquake), another employee previously scheduled to work that shift is unable to work and did not provide at least seven days' notice, another employee failed to report to work or was sent home, the employer requires the employee to work overtime, or the employee trades shifts with another employee or requests a change in shifts.


The employer must closely document all schedule changes to avoid payment of premium wages. For example, Joe is scheduled to work four hours on Monday. When he arrives, the employer tells him he will need to work another two hours to cover Jane's shift, who called in sick before her shift was to begin. If the employer does not document that the reason Joe worked an additional two hours on Monday was due to Jane calling in sick, the employer may have to pay Joe an additional two hours of predictability pay at Joe's hourly rate for providing Joe less than the required notice period of the need to work longer hours.


Equal Treatment for Part-time Employees.  Employers must provide equal treatment to part-time employees, as compared to full-time employees at their same level, with respect to (1) starting hourly wage, (2) access to employer-provided paid time off and unpaid time off such as vacation, paid time off, bereavement leave, jury duty leave and paid sick leave, and (3) eligibility for promotions. Hourly wage differentials are permissible if they are based on reasons other than part-time status, such as seniority or merit systems. Further, employees' time off allotments may be prorated based on hours worked.


Recordkeeping Requirements.  Employers must keep the following records for no less than three years and provide San Francisco Office of Labor Standards Enforcement ("OLSE") with access to:

  • Work schedules and employment and payroll records for current and former employees;
  • Copies of written offers to current and former part-time employees for additional hours;
  • Copies of contracts with Property Services Contractors described in Section 3300F.3;
  • A copy of offers of employment to eligible employees after a change in control (Successor Employers); and,
  • The retention list of eligible employees entitled to employment for the 90-day transition period between owners (Successor Employers).

Notice. The Formula Retail Employee Rights Notice is available on sfgsa.org. Covered employers must post the notice in a conspicuous place at any workplace or job site where any of its covered employees work. Note that this notice will be updated based on the recent amendment. 


Enforcement.  It is illegal for an employer to take adverse action against any person in retaliation for exercising his or her rights under these new laws. Employees are able to file complaints with the OLSE. The City may recover payment of lost wages, civil penalties, reinstatement of employment, and reasonable attorney's fees and costs. An employer who fails to maintain or retain records as required by the new laws (discussed below) will be presumed to not have complied with the ordinances. The recent amendment provides some relief to employers trying to implement processes to comply with the new laws. During the first three months, the OLSE will only issue warnings and notices to correct employers who have violated the Bill of Rights.


This article is presented for informational purposes only and is not intended to constitute legal advice. Located in San Francisco, Oakland, Los Angeles, and Nevada, Burnham Brown serves our clients' needs across the nation. If you wish to receive any additional information regarding the changes in San Francisco's employment laws, please contact Cathy Arias or Andrew Shalauta, partners in the Labor & Employment Law Department.