On November 8, 2016, voters in the City of San Jose approved the “San Jose Opportunity to Work Ordinance.” The Ordinance is well-intentioned, but open to significant interpretation. This is important, given the potential exposure to steep penalties and legal liability for failure to comply. Here, we break down what you need to know, and identify some of the highlights of the new measure:

What is the Ordinance?

The Ordinance, previously Measure E on the ballot, will take effect on March 13, 2017. Section 4.101.040 of the Ordinance provides:

Before hiring additional Employees or subcontractors, including hiring through the use of temporary services or staffing agencies, an Employer must offer additional hours of work to existing Employees who, in the Employer’s good faith and reasonable judgment, have the skills and experience to perform the work, and shall use a transparent and nondiscriminatory process to distribute the hours or work among those existing Employees.

Which employees are “qualified” to perform the work and therefore eligible for the additional hours is a decision left to the employer, so long as any decision is exercised in good faith and in a reasonable manner.

Further, the Ordinance requires employers to maintain the following records for four years:

  1. Work schedules and employment and payroll records pertaining to current and former Employees;
  2. Copies of written offers to current and former part-time employees for additional work hours (the Ordinance does not appear to require the offer be written, but this provision suggests employers ought to ensure all offers are, in fact, made in writing); and
  3. Any other records the Office of Equality Assurance may require that Employers maintain to demonstrate compliance.

Finally, employers must post a notice informing employees of their rights under the Ordinance.

Who does the Ordinance affect?

The Ordinance applies to part-time employees, defined as any person who (1) performs at least two hours of work for an employer, and (2) is entitled to payment of the minimum wage under California law. Executive, administrative, and professional employees are not covered by the ordinance.

Employers affected by the Ordinance include any person (or business) who (1) directly or indirectly, including through a staffing agency, employs or controls the wages, hours, or working conditions of any employee, (2) is either subject to the Business License Tax Chapter 4.76 of the San Jose Municipal Code or has a place of business in the City of San Jose that is exempt under state law from the tax imposed by Chapter 4.76, and (3) employs 36 or more employees. The 36 employee-threshold is assessed by counting all part-time and full-time employees at all of the employer’s locations (except for executive, administrative, and professional employees, as defined by the California Department of Industrial Relations).

What is an Employer’s Liability?

A first violation of the Ordinance is subject only to a warning by the San Jose Office of Equality Assurance. However, any subsequent violation may expose an employer to substantial civil penalties, and even civil litigation. Remedies available to individuals harmed by a violation include: (1) the right to sue in court to enforce their rights; (2) award of back wages; (3) civil penalties of $50 per day to each harmed employee; and (4) recovery of reasonable attorneys’ fees and costs. These fines can add up quickly, and the availability of statutory attorneys’ fees creates a strong incentive for employees (and the plaintiff’s bar) to test the scope of the ordinance. On the other hand, the extremely subjective nature of deciding which employees are “qualified” to perform the additional hours of work, may create a high bar for proving any violation.

Can a Business Be Exempt from the Ordinance?

The short answer is yes, but in very limited circumstances. The Ordinance creates a narrow, twelve-month hardship exception for employers who demonstrate that they have undertaken all reasonable steps to comply with the Ordinance, and full and immediate compliance would be impracticable, impossible, or futile. Exemptions are made on a case-by-case basis, and may be extended. Generally, a hardship exemption will be granted where the work or need is unpredictable, or the work requires a specialized skill and there is a need to have employees on call.

Additional information about the Ordinance has been provided by the City of San Jose via a list of Frequently Asked Questions. Employers should take precautionary measures and develop a protocol to address the Ordinance and its obligations before it becomes effective on March 13.