The San Diego City Council announced that the increase in the minimum wage and paid sick leave requirements were effective July 11, 2016. The council also announced its consideration of an ordinance allowing the city to enforce the voter-approved ordinance and change some of the paid sick leave requirements.

As we reported in Tax Alert 2016-1171, San Diego's paid sick leave and minimum wage ordinance passed in 2014, but was on hold until voters favorably decided its fate on June 7, 2016. The measure passed with more than 62% of the vote.

Notice requirements

Employer must post a minimum wage notice and a paid sick leave notice where information is accessible by employees. See also FAQs for more information on the San Diego paid sick leave and minimum wage ordinance.

Current paid sick leave requirements

Under the sick leave portion of the voter-approved ordinance, an employer must allow employees to accrue one hour of paid sick leave for every 30 hours worked and employees will be able to use the accrued sick leave after a 90-day waiting period. Employers may limit use of the leave to 40 hours in a 12-month period, but accrual cannot be capped and unused leave must be carried over. Upon an employee's separation, employers do not have to pay unused leave, but must maintain it for six months in case the employee returns.

An employee is defined as "any person who, in one or more calendar weeks of the year, performs at least two hours of work within the geographic boundaries of the City for an employer, and who qualifies for the payment of minimum wage under the State of California minimum wage law. Employees do not include independent contractors as defined by the California Labor Code, or people who have been issued a special license by the state to be employed at less than minimum wage, certain youth employees in publicly subsidized summer or short-term employment programs, and certain counselors at organized, outdoor camps."

Leave can be used if an employee is physically or mentally unable to work due to illness, injury, or a medical condition; for "safe time" (time away from work necessary to handle certain matters related to domestic violence, sexual assault, or stalking, when the employee or a specified family member is a victim); for medical appointments; and to care for or assist certain family members with an illness, injury, or medical condition.

The San Diego ordinance differs from California state law in that while the state allows an employer to limit an employee's use of paid sick leave to 24 hours per year (with an accrual cap of 48 hours), while a San Diego employee's use of accrued sick leave is limited to 40 hours in a benefit year, but employers must allow employees to continue to accrue sick leave hours with no cap.

Increase in minimum wage

The San Diego ordinance also increases the minimum wage to $10.50 an hour effective July 11, 2016. Beginning January 1, 2017, the minimum wage will increase to $11.50, and beginning January 1, 2019, will increase by an amount corresponding to the prior year's increase in inflation. If the state minimum wage is at any time greater than the San Diego minimum wage, the state minimum wage will apply.

As we reported in the April 2016 issue of Payroll Perspectives, the California state minimum wage, currently at $10 an hour, will increase to $10.50 effective January 1, 2017 and $11 effective January 1, 2018 for businesses with 26 or more employees, and then increase by $1 each January 1 until it reaches $15 in 2022. (For businesses with 25 or fewer employees, the bill delays the increases by one year, increasing the minimum wage from $10 to $10.50 effective January 1, 2018 and $11 effective January 1, 2019, and then by $1 each year until it reaches $15 in 2023.)

City Council implementation ordinance

The City Council is presently in the process of considering an ordinance that will implement the sick leave and minimum wage ordinance. The implementing ordinance will, among other things, designate an enforcement office and enforcement official, establish a system to receive and adjudicate complaints and to order relief to cases of violations, amend the remedy for violations, amend the accrual requirements for paid sick leave, and clarify language.

The City Council conducted the first reading of the implementing ordinance on July 11, 2016, and plans to conduct a second reading on July 26, 2016. If the implementing ordinance takes effect it will also:

— Allow employers to cap an employee's total accrual of sick leave at 80 hours

— Allow employers to front load no less than 40 hours of sick leave to an employee at the beginning of each benefit year

— Clarify the enforcement process including a civil penalty cap for employers with no previous violations

— Clarify language regarding the award of sick leave to be more consistent with state law

— Require that the city publish employer notices by September 1, 2016, with 2016 information; December 30, 2016 with 2017 information, and by October 1 of each year thereafter

— Require every employer to provide to each new hire written notice of the employer's legal name and any fictitious business name, address and telephone number, and the employer's requirements under the ordinance. This notice can be made electronically

— Employers must keep written or electronic records that document employees' wages and use of paid sick leave for a minimum of three years, and must provide these records to employees on a regular basis, plus allow city enforcement personnel access to the records upon request

— Impose civil penalties and awards of back pay to employees for employers that violate the provisions of the ordinance

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