On April 21, 2016, San Francisco became the first city to impose a mandatory paid parental leave ordinance. Under the new law, certain covered employers must provide supplemental compensation to employees who are receiving California Paid Family Leave (PFL) for purposes of bonding with a new child. Employers should be mindful of these new obligations, which are likely to expand to other cities and possibly the entire State of California in the future.

Under previously existing law, no California city required that employers provide paid parental leave for bonding with a new child. Employers were only required to notify employees of their rights under the state’s PFL program. The PFL program is a component of the California State Disability Insurance (SDI) program and entitles employees who have paid into SDI to receive up to 55% of their lost wages when they must take a leave of absence to care for a child, parent, parent-in-law, grandparent, grandchild, sibling, spouse, or registered domestic partner. Benefits are capped at six weeks in a 12-month period, and benefits are funded entirely by the SDI program. (Note that California Governor Jerry Brown recently signed legislation that will increase the benefits paid by the California PFL program for eligible leaves from 55% to 60% (or 70% in some cases) beginning on or after January 1, 2018.)

Effective January 1, 2017, under the new ordinance, San Francisco employers with 50 or more employees must provide the remaining portion of an employee’s lost wages under PFL for purposes of bonding with a new child (typically 45% of an employee’s weekly wages). On July 1, 2017, the requirement extends to employers with 35 or more employees, and on January 1, 2018, the requirement again will extend to employers with 20 or more employees. For purposes of calculating the number of employees, the ordinance considers the total number of employees employed by the employer, regardless of location. Thus, an employer who employs even one employee in San Francisco may still be affected by the ordinance if it employs a total of 50 or more employees in other locations.

If an employee has unused, accrued vacation at the time of the request for eligible leave, the ordinance permits the employer to elect to require the employee to use up to two weeks of his or her accrued vacation to help satisfy the employer’s obligation to pay supplemental compensation during the leave period. Note, however, that the California PFL program itself also allows an employer to require an employee to use up to two weeks of accrued but unused vacation as a precondition to the employee’s initial receipt of PFL (e.g., during the initial waiting period). If the employer elects this option, the employer must allow the employee to take the two weeks of vacation before starting the six-week family leave period, resulting in a total of eight weeks of paid leave.

The ordinance does not, however, require that supplemental wages be paid to every employee who takes leave and is eligible for PFL. For an employee to be eligible for benefits under the ordinance, the employee must meet four separate criteria: (1) the employee must have worked for the covered employer for at least 180 days before taking leave; (2) the employee must work at least eight hours each week within the city; (3) the employee must work at least 40% of his or her total weekly hours within the city; and (4) the employee must be eligible to receive funds under the California PFL program for baby bonding purposes. The ordinance does not consider whether the employee lives in San Francisco.

If an employee voluntarily separates from employment within 90 days of the employee’s leave period, an employer may obtain reimbursement for any supplemental compensation paid by the employer to the employee. To obtain reimbursement, the employer should have the employee sign a form agreeing to the terms and then request the reimbursement in writing.

Covered employers must post a notice of employee rights under this ordinance in a conspicuous place and in any language spoken by at least 5% of the workforce at the worksite. If an employer fails to comply with the provisions of this ordinance, San Francisco’s Office of Labor Standards Enforcement may order that supplemental compensation be withheld and an additional amount be awarded to the employee that is the greater of $250 or the supplemental compensation amount times three.

California employers should be particularly mindful of these types of ordinances, as they are likely to spread like wildfire. For instance, after various California cities passed paid sick leave ordinances, the State of California passed a similar state-wide mandate. It would not be surprising, then, for California to likewise pass a state-wide law requiring employers to provide paid family leave, particularly since New York, only two days earlier, passed its own state-wide paid family leave law, which requires employers to provide up to 12 weeks of paid family leave.