On November 25, 2014, the City and County of San Francisco’s Board of Supervisors unanimously approved (with one member absent) two ordinances that will affect “Formula Retail Establishments” and that proponents refer to as the “Retail Workers’ Bill of Rights.” The Board’s votes would add “Hours and Retention Protections for Formula Retail Employees” and “Fair Scheduling and Treatment of Formula Retail Employees” to the San Francisco Police Code.

The ordinances are one more effort by San Francisco to regulate the employment relationship and must be considered along with San Francisco’s hourly “living wage” (which jumps to $11.05 on January 1, 2015 and increases to $15.00 by January 1, 2018), its Paid Sick Leave and Family Friendly Workplace ordinances, and its mandatory health insurance requirement. The ordinances likely will have substantial impact on Formula Retail Establishments’ management and scheduling of part-time workers. They even could affect a covered business’s obligations under the Affordable Care Act.

The ordinances will apply to the San Francisco operations of all Formula Retail Establishments as defined by San Francisco. The Formula Retail Establishment must have 20 or more retail establishments in the world and maintain at least two of the following: a standardized array of merchandise, a standardized facade, a standardized decor and color scheme, uniform apparel, standardized signage, and a trademark or a servicemark.

San Francisco considers all of the following to fall within the definition of “Formula Retail Establishment”: retail trade; food services, including restaurants and bars; financial services, including banks and credit unions; personal services; and movie theaters.

The ordinances also will apply to “Property Service Contractors” that provide janitorial and/or security services to Formula Retail Establishments. Although these providers frequently are unionized in the city, the ordinances do not permit employers and unions to collectively bargain away the ordinances’ protections.

The ordinances now go to Mayor Ed Lee for disposition. The mayor may sign one or both ordinances, veto them, or return them unsigned to the Board. If the mayor vetoes either or both ordinances, the Board of Supervisors will have an opportunity to override the veto. Given the unanimous votes approving the ordinance, the Board likely would do so.

The ordinances will become operative 180 days after their effective date. The effective date (but not operative date) is 30 days after the mayor signs the ordinance, returns it unsigned to the Board of Supervisors, or the Board overrides the veto. Practically, this means that employers will have approximately seven months to prepare for compliance.

Briefly, the ordinances impose the following requirements:

  • Additional hours requirementCovered establishments must offer additional hours to current part-time employees before hiring new employees or using staffing agency employees. The ordinances define “part-time” as employees working under 35 hours per week, and the employer only must offer enough hours to bring the part-time employee up to 35 hours a week. The employer can divide the extra hours among part-time employees. Importantly, the employer must make offers of additional hours in writing and also must maintain a record of the written offers for three years.
  • Successor employer responsibilities in a change in controlIf the retail establishment goes through a change in control, the successor employer must retain existing employees who have worked for at least 90 days for another 90 days after the change in control. The employer must have good cause to discharge employees during the 90-day transition employment period. If the employer reduces headcount during the 90-day transition period, it must do so by seniority. The good cause requirement does not apply to managerial, supervisory, or confidential employees.
  • Good faith written estimate of work hours to new employees. Before an employee even begins work, the employer must provide the employee with a written “good faith estimate” of the number of shifts the employee can expect to work, with days and hours. This estimate does not include “on-call” shifts, which the ordinance defines as shifts in which the employee must call in or wait for the employer to call the employee to work less than 24 hours before the shift begins. The employer is not bound by the good faith estimate. The new employee can ask the employer to modify the shift.
  • Notice of Biweekly Schedule and “Predictability Pay” for Scheduled ShiftsEmployers must provide all employees with at least 14 days’ notice of their schedule for the next two weeks, including on-call shifts. The employer must notify the employee of any shift that the employer changes to another date or time or adds a shift.
    • If the employer provides less than 7 days’ but more than 24 hours’ notice, the employer must pay the employee one hour of extra pay for each changed shift.
    • If the employer provides less than 24 hours’ notice, the employer must pay two additional hours of pay for each shift that is changed that is four hours or less and four additional hours of pay for each shift that is changed that is more than four hours.
  • Predictability Pay for On-Call ShiftsUnless the employer gives the employee 24 hours’ or more notice that the on-call shift has been cancelled or moved to another date or time, the employer must pay the employee two hours’ pay for each on-call shift of four hours or less and four hours of pay for each on-call shift of more than four hours.
  • Exceptions to Predictability Pay ObligationsAn employer is excused from providing “predictability pay” under certain circumstances, including the following:
    • “Acts of God” (such as natural disasters) or other factors outside the employer’s control
    • A previously-scheduled employee takes paid or unpaid time off (such as sick leave, vacation, or PTO) and does not provide the employer with at least 7 days’ notice
    • A previously-scheduled employee does not report to work;
    • The employer fires, sends home, or tells to stay home a previously-scheduled employee because of disciplinary reasons
    • Mandatory overtime
    • Employee-initiated changes, such as shift trades
  • Equal Treatment for Part-Time EmployeesEmployers must provide part-time employees with the same starting hourly wages as full-time employees unless the employer can provide a business reason for the differential. The employer also must provide part-time employees with the same access to paid and unpaid time off that it provides to full-time employees, though the employer may do so on a pro-rata basis. In addition, the employer must offer part-time employees the same promotional opportunities it offers full-time employees, although it may condition the promotion on full-time availability.

The ordinances impose the following employer notice requirements:

  • Employers must post a Notice of Change in Control for “at least 30 days.”
  • Employers also must post a Notice of Employee Rights (which the City will draft) that explains to employees their rights under each ordinance. The employer must post the Notice in all languages spoken by at least 5 percent of the employee population at the particular worksite.
  • Employers also must include in their janitorial and security service contracts a provision that requires the property service contractor to comply with the ordinances. The employer also must provide the property service contractor with a copy of each ordinance. The law is unclear as to a formula retail establishment’s obligations if the employer leases space and the landlord and/or property management company is the entity that contracts with the property service contractor. In such situations, we think that a prudent formula retail establishment will include in its own contract with the landlord/property management company a provision that obligates the third party to contractually require the property service contractor to comply with the ordinances.

In addition, the ordinances obligate employers to retain the following records for a period of three years:

  • All written offers of additional hours to part-time employees
  • All written offers of employment to the prior employer’s employees during a change in control
  • The list of employees entitled to retention during the 90-day employment transition period during a change in control
  • Work schedules and payroll records
  • Copies of contracts with janitorial and security service providers

If the employer does not maintain the required records, the City will presume that the employer did not comply with the ordinances.

The ordinances establish the following claims and enforcement procedures:

  • The ordinances prohibit employers from retaliating against employees for exercising their rights under the ordinances. Employers are presumed to have retaliated if they take an adverse employment action against an employee within 90 days of the employee exercising his or her rights.
  • The City’s Office of Labor Standards Enforcement (OLSE) is responsible for administering and enforcing the ordinances. During the first six months the ordinances are in effect, the agency can issue only warnings and notices to correct.
  • After the first six months, the OLSE can issue a Determination of Violation and order specific remedies, including but not limited to lost wages and reinstatement. The OLSE also can order the employer to pay a penalty equal to the amount of lost wages and to reimburse the City for its enforcement costs.
  • The OLSE also has the authority to impose a $500 administrative fine, multiplied by the number of eligible employees for the employer’s failure to comply with notice and record-retention requirements.
  • The OLSE can order the employer to pay an administrative fine of $50 per employee who is affected by an employer’s violation of the scheduling and predictability pay ordinance.
  • The City can bring a civil lawsuit against an employer for violating either ordinance. Even if the City does not, an affected current or former employee can bring his or her own private lawsuit against the employer. In addition to economic damages, the City and/or employee can recover liquidated damages in an amount equal to lost wages and also attorneys’ fees.
  • These remedies are not exclusive. An employee also could bring a common law claim for wrongful termination in violation of public policy based on either ordinance.

We recognize that these ordinances will impose substantial compliance burdens on retail formula establishments and their property service contractors. We will keep you updated as to the ordinances’ final disposition, and will inform you know about any administrative regulations that the Office of Labor Standards Enforcement issues. In addition, we will prepare a Frequently Asked Questions memorandum as we receive questions about the ordinances.