On December 6, 2018, the Philadelphia City Council passed the Fair Workweek Employment Standards Ordinance, to become effective on January 1, 2020.1 Under the Ordinance, large retail, hospitality and food service establishments will be required to: (1) give existing employees the right of first refusal to work additional hours before hiring new employees; (2) post and provide advance written notice of work schedules; (3) provide predictability pay for any departures from the posted schedules; and (4) permit a rest period of nine hours between shifts. It is estimated that these new requirements will impact 130,000 workers in Philadelphia.

Philadelphia is the eighth jurisdiction in the United States to enact a predictable scheduling law. San Francisco passed the first such law in November 2014. Several years later, other jurisdictions followed, including San Jose and Emeryville in California; Seattle and SeaTac in Washington; Oregon; New York City.2 During December 2018, industry groups filed a lawsuit challenging the New York City ordinance as beyond the regulatory authority of the city and as preempted by state law.3

Twelve states have passed legislation since 2015 preempting local laws governing employee scheduling, including: Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Michigan, North Carolina, Oregon (which then passed a state-wide predictable scheduling law), Tennessee, and Wisconsin.4 Preemption legislation is being re-introduced in Pennsylvania as H.B. 861, after failing to pass in the last legislative session.5

Employers in Philadelphia that will become subject to the Ordinance should plan in advance so as to be in a position to comply with these significant new hiring restrictions and scheduling requirements.

Covered Employers: Large Retail, Hospitality and Food Service Establishments

Under the Philadelphia Ordinance, “Covered Employer” is defined as an “Employer” that is a Retail Establishment, a Hospitality Establishment, or a Food Services Establishment that employs 250 or more employees, regardless of where they work, and has 30 or more locations worldwide.6 This definition includes chains or franchises associated with a franchisor, or a network of franchises, that employ 250 or more employees in aggregate.7 The number of employees for coverage purposes includes all full-time, part-time, and temporary workers. If that number fluctuates, the number of employees is determined based on the average number of employees who worked for compensation per week during the preceding calendar year.8

The term “Employer” is defined broadly to sweep into the definition of “Covered Employer” any entity or person acting directly or indirectly in the interest of the employer in relation to the employee.9 The definition notes that one entity may be the “employer” if employment by one employer is not completely disassociated from employment by the other.10

“Retail,” “Hospitality” and “Food Services” Establishments are defined with reference to North American Industry Classification System (NAICS) Codes. Retail Establishments are those covered by NAICS Codes 441 through 454. Hospitality Establishments include hotels and motels covered by NAICS 721110. Food services establishments include food services contractors; caterers; mobile food services; drinking places (alcoholic beverages); full service restaurants; limited-service restaurants; cafeterias, grill buffets, buffets, and snack and nonalcoholic beverage bars, as defined under the 2012 and 2017 NAICS Code 722.11

The Philadelphia Ordinance is similar to the Oregon statute, which covers larger retail, hospitality, and food service employers. In contrast, San Francisco covers only formula retail establishments; Emeryville and New York City cover only fast-food restaurants and retailers; Seattle covers only large food service and retail employers; and SeaTac covers only large hospitality employers and transportation employers. The San Jose Ordinance does not single out any industry for coverage, but has an exemption for small businesses.

Covered Employees: Non-Exempt Workers Providing Retail, Food Or Hospitality Services

Covered employees include all non-exempt full-time, part-time, seasonal and temporary employees who provide retail trade services, food services or hospitality services at a covered employer in Philadelphia.12 While the Ordinance applies only to employees and not to independent contractors, an employer covered by the Ordinance bears the burden of proof that an individual is an independent contractor under applicable law.13

Hiring Restrictions: Employees’ Right of First Refusal for Additional Hours

Under the Ordinance, employees must be provided with a right of first refusal to work additional hours before such hours are offered to new workers. Employers must provide written notice at least 72 hours in advance of the available work shifts, unless a shorter period is necessary to timely perform the work. The notice must be in English and any other primary language of the employees in the workplace14 and must be conspicuously posted and available to all, and distributed electronically if the employer customarily communicates scheduling information in this way.15 The notice must describe the position and its required qualifications, the schedule of available shifts, the length of time for which coverage is needed, and the process for notifying the employer of the desire to work the offered shifts.16

The employer must first offer the shifts to employees who regularly work at the location where the shifts are available.17 If it is the regular practices of the employer to schedule employees across multiple locations, the employer must then offer the shifts to employees who work at other locations.18 If it is not the employer’s regular practice to schedule across locations, then offering the shifts to employees at a different location is optional.19 The employer must distribute shifts as per the criteria in the notice of available hours to an employee(s) who accepted and who, based on a good faith determination, is qualified to perform the work.20 The Ordinance prohibits distributing hours in a way that discriminates against employees based on enumerated protected classes, defined to include those with “family caregiving responsibilities” or status as a student, and specifically notes that employers may not distribute hours to avoid application of the Affordable Care Act.21

The employer may only hire a new employee directly (or through a subcontractor, temporary service or staffing agency) once: (a) no employee accepts the offer of available work shifts within 24 hours of the end of the 72-hour posting period; or (b) the employer receives written confirmation from eligible employees that they are not interested in accepting the available work shifts; or (c) existing employees have accepted only a subset of the available shifts.22 Importantly, the Ordinance does not require employers to offer overtime to existing employees.23

Employers should evaluate how this new requirement will impact employee eligibility for health and welfare benefits under employer plans as well as the Affordable Care Act.

New Employees: Scheduling Notices and Interactive Process

At the time of hire, a covered employer must provide an employee with a written, good faith estimate of the employee’s work schedule, which must contain: (1) the average number of work hours the employee can expect to work each week over a typical 90-day period; (2) whether the employee can expect to work any on-call shifts; and (3) a subset of days and a subset of times or shifts that the employee can typically expect to work, or days of the week and times or shifts on which the employee will not be scheduled to work.24 The employer must revise the good faith estimate if there is a significant change due to changes in the employee’s availability or the employers’ business needs.25

At the time of hire (and within 24 hours of any change), employers also must provide written notice of, and post conspicuously, their policy for offering and distributing work shifts. The notice must explain: (1) where employees can access the written notices of available work shifts; (2) how to notify the employer of the desire to accept the shifts; and (3) the criteria for distributing work shifts among qualified and interested employees.26

Before an employee begins work, a covered employer must provide the employee with a written work schedule that runs through the last date of the currently posted schedule.27 Thereafter, notice must be provided as described below for existing employees.28

The Ordinance provides employees with a right to make work schedule requests without fear of retaliation, including requests: (1) not to be scheduled for work shifts during certain days or times or at certain locations; (2) not to work on-call shifts; (3) for certain hours, days or locations; or (4) to work more or fewer hours.29 The Ordinance “encourages” employers to engage in an “interactive process” with new employees regarding requests for schedule modifications, but the employer may grant or deny such requests for any lawful reason.30

Existing Employees: Advanced Notice of Schedules and Right to Decline Changes

The Ordinance imposes an obligation to provide employees with advance written notice of schedules, including the employees’ shifts at that worksite, whether or not they are scheduled to work or be on-call.

  • Timing of Notice. During the first year of the new Ordinance (January 1 through December 31, 2020), the employer must post and provide written notice of work hours no later than 10 days before the first day of any new schedule. Beginning on January 1, 2021, the written notice must be provided no later than 14 days before the first day of any new schedule.31
  • Location of Notice. The work schedule must be posted in a conspicuous and accessible location where employee notices are customarily posted. If the employer posts the notice electronically, on-site access must be provided to all employees.32
  • Written Notice. “Written” refers to communication by print or electronic means, including email, text, use of scheduling applications or other form of communication that can be saved in original format.33
  • Content of Notice. The posted work schedule must include the employees’ shifts at that worksite, whether or not they are scheduled to work or be on call that week.34
  • Schedule Changes. As promptly as possible and before the change takes effect, employers must provide notice of any proposed changes to the work schedule, and post the change within 24 hours.35

Employees may decline to work hours or additional shifts not included in the posted work schedule.36 If the employee voluntarily consents to work them, such consent must be written.37

Predictability Pay for Schedule Changes

For each employer-initiated change to the posted work schedule that occurs after the required advance notice, the employer must pay predictability pay in addition to the employee’s regular pay for hours actually worked as follows:

  • Schedule Additions/Changes With No Loss of Hours: One hour at the employee’s regular rate of pay, when the employer adds time to a work shift or changes the date, time or location of a work shift, with no loss of hours.38 There is a 20-minute grace period around shift start and end times.39
  • Schedule Reductions: At least one-half the employee’s regular rate of pay per hour for any scheduled hours the employee does not work, when a regular or on-call shift is cancelled or shortened.40

Evidently anticipating the difficulty in computing the regular rate for a tipped employee (particularly for shifts not worked), the City intends to define how to compute the regular rate for tipped employees by regulation.41

Predictability pay is not due in the following circumstances:

  • A change to posted work schedule within 24 hours of commencement of employment;
  • A written request by an employee to change his or her schedule;
  • An employee volunteering to work additional hours due to another employee’s inability to work scheduled hours in response to a mass written communication offering the hours that makes it clear that accepting additional hours is voluntary;
  • Voluntary shift trades or coverage arrangements, subject to any employer policies;
  • Schedule changes due to changes in a ticketed event or hotel banquet that occur after the schedule is posted and are due to circumstances outside the employer’s control;
  • Emergency conditions including threats to the employees or the employer’s property, failure of a public utility, or the shutdown of public transportation; a fire, flood or other natural disaster; a state of emergency; or severe weather posing a safety hazard;
  • Disciplinary suspensions due to documented incidents; or
  • A reduction of hours that is due to termination of employment.42

The Right to Rest for 9 Hours Between Shifts

The Ordinance permits employees to decline, without penalty, any work hours that are within nine hours of the end of the prior day’s shift or an overnight shift.43 An employee may agree to work such shifts, if consent is provided in a writing that is revocable at any time; however, the employer must pay the employee $40 for each such shift.44

Anti-Retaliation Provision and Presumption of Retaliation

The Ordinance prohibits interference with or retaliation for exercising rights under the Ordinance.45 Significantly, the Ordinance creates a “rebuttable presumption” of retaliation in the case of adverse employment action (broadly defined) that occurs within 90 calendar days of the employee’s exercise of rights under the Ordinance. An exception is made if the adverse employment action was due to disciplinary reasons and for just cause, with the underlying incident documented in writing.46 This rebuttable presumption extends to seasonal employees whose employment ends before the 90-day period from the exercise of rights under the Ordinance expires and who are not rehired to work in the same position at the next opportunity for work.47

Recordkeeping and Posting Requirements

The Ordinance also mandates that employers maintain records for two years that show compliance with the Ordinance, including good faith estimates of work schedules, modifications thereto, written consent to work shifts, offers of work shifts to existing employees and responses to those offers, as well as payroll records showing predictability pay.48 Such records must be produced if requested by an employee or the enforcement agency to be designated.49 If the employer fails to maintain those records, the Ordinance creates a presumption that the employer violated the Ordinance “absent clear and convincing evidence otherwise.”50

The City will publish a poster summarizing the rights and responsibilities under the Ordinance that must be posted in a conspicuous place.51

Impact on Collective Bargaining Agreements

The Ordinance provides that its provisions may be waived in a collective bargaining agreement, but “only if the waiver is explicitly set forth in such agreement in clear and unmistakable terms and only so long as the agreement is in effect contractually.”52

Enforcement of the Proposed Ordinance

The Ordinance provides for enforcement by an agency not yet named, that will receive and investigate complaints, conduct mediation where appropriate, and provide remedies including reinstatement, restitution of lost wages, benefits and predictability pay. The agency will also be authorized to impose penalties and fines ($1,000 per violation, except $2,000 per retaliation violation), and to award presumed damages to be set by regulation.53 The Ordinance creates a private right of action for those aggrieved by violations of the Ordinance, and does not require exhaustion of administrative remedies.54 It provides for a two-year statute of limitations, and allows prevailing plaintiffs to recover attorneys’ fees and costs.55

Practical Guidance

Regulations further clarifying the Ordinance will be forthcoming in the coming months. The rulemaking process will provide employers an opportunity to comment on how the Ordinance will impact their operations and to seek clarification as to how the Ordinance applies.

Meanwhile, retail, hospitality and food service establishments operating in Philadelphia should evaluate coverage and begin to prepare required notices and to implement required changes to their scheduling and hiring processes. Covered employers with collective bargaining agreements should consider seeking a waiver of the Ordinance requirements. Covered employers also should evaluate health and welfare benefit plan and ACA eligibility criteria, including how increasing hours worked for current employees may affect eligibility.