On April 5, the San Francisco Board of Supervisors unanimously approved a city ordinance requiring businesses which have employees working in the City to offer those employees six weeks of supplemental paid parental leave. If signed by Mayor Ed Lee, San Francisco will be the first city in the country to require this benefit.

Current and Proposed Law

Currently, California employees are eligible to take six weeks of partially-paid leave under California’s Paid Family Leave (PFL) law to bond with a newborn child or newly placed child for adoption or foster care, among other reasons. Payment is made from a worker-funded state disability program and calculated as a percentage of the employee’s wages (55 percent) subject to the maximum weekly benefit amount set by the PFL program.

Under the proposed San Francisco ordinance, for up to six weeks employers must bridge the gap between the amount the employee receives in PFL and one-hundred percent of the employee’s gross weekly wages (referred to as “Supplemental Compensation”) for parental bonding purposes.  In other words, the employer must pay the remaining forty-five percent of the employee’s gross wages. However, if the employee is already receiving the maximum weekly benefit under the PFL law, the employee’s gross weekly wage is calculated by dividing the maximum weekly benefit amount by the percentage rate of wage replacement provided under the PFL.

Covered employers

The ordinance will eventually cover all employers that regularly employ twenty or more individuals if any of those persons are regularly employed in San Francisco. The ordinance will be phased in, starting with companies that employ 50 or more employees in January 2017. Companies with 35 to 49 employees must comply starting in July 2017, and companies with 20 to 34 employees will have until January 2018 to comply.

The ordinance does not apply to federal, state or municipal government entities.

Covered employees

The Supplemental Compensation benefit has four eligibility requirements. It applies to new mothers and fathers who: (1) have been employed at least 90 days prior to starting leave; (2) are eligible to receive PFL compensation from the State of California; (3) perform at least eight hours of work per week for the employer within the city of San Francisco; and (4) at least forty percent of their total weekly hours worked for the employer are within the city of San Francisco. Part-time and temporary employees and employees of staffing agencies are expressly included.

The employee must agree to allow the employer, in its discretion, to apply up to two weeks of the employee’s unused vacation leave to help meet the employer’s obligation to provide Supplemental Compensation. If the covered employee does not agree, the employer is not required to provide Supplemental Compensation.

Anti-Retaliation

The ordinance prohibits covered employers from discriminating or taking, threatening to take, any adverse action against any person in retaliation for exercising rights to Supplemental Compensation. This includes discharging, threatening to discharge, demoting, suspending, filing a complaint with the Office of Labor Standards Enforcement, or cooperating in any prosecution or investigation of an alleged violation of the ordinance. The ordinance imposes a rebuttable presumption of retaliation, shifting the burden of proving non-retaliation to the employer by clear and convincing evidence.

Employee Verification

There are no provisions in the ordinance permitting an employer to require the employee to provide verification of the need for leave.

Termination of Employee on Leave

If an employee is terminated during leave, the employer must continue paying Supplemental Compensation to the employee for the remainder of the California Paid Family Leave period. The ordinance does not contain any exception which creates a very unusual situation where the employer might be required to make payments to an employee terminated for misconduct.

Records  Required

Employers are required to keep records of Supplemental Compensation paid for three years. Although not stated in the ordinance, to comply with the Labor Code, employers should make a notation of any Supplemental Compensation payment on the employee’s paystub.

Further Thoughts

As has been the case with other progressive San Francisco employment-related ordinances, there are many questions to be resolved about how this new law will be applied. We anticipate that the City’s Office of Labor Standards Enforcement will issue some form of guidance for employers in advance of the first effective date of the ordinance. We also anticipate that employers will discover more ambiguities and uncertainties in the ordinance as they more toward developing policies for compliance. We will keep our friends and clients advised as developments warrant. As is always the case with San Francisco employment law, stay tuned!