Chain stores, restaurants, banks, janitorial, security and other retail sales or service providers operating in San Francisco take notice: The City of San Francisco’s new “Formula Retail Workers Bill of Rights” becomes effective July 3, 2015, requiring “formula retail employers” to take action when hiring, scheduling and paying employees in San Francisco. While the new legislation is intended to provide more predictable and fair schedules for hourly workers, it is likely to cause headaches and unintended expenses for employers accustomed to making last-minute schedule changes or hiring workers to fill temporary needs without restriction. Those using part-time employees in particular will be affected. 

Although San Francisco is the first to enact such legislation, New York, Washington, D.C., Minnesota, Delaware and Michigan are considering similar legislation.

Formula Retail Establishments and Property Services Contractors

Businesses with at least 20 formula retail establishments worldwide and 20 or more employees in San Francisco are covered by the law if they engage in retail sales or services and they maintain at least two of the following: (1) a standardized array of merchandise, (2) a standardized façade, (3) a standardized décor and color scheme, (4) uniform apparel, (5) standardized signage, or (6) a trademark or service mark. An amendment to the law, not yet enacted, could narrow the number of businesses affected.

Businesses that supply janitorial and security services to formula retail establishments (i.e., “property service contractors”) are direct targets of the law. Formula retail establishments are required to provide notice and take certain action with respect to these property service contractors, regardless of the size of those businesses.

Predictable Scheduling, Fair Treatment, Hours and Retention Protections

Under the new law, formula retail establishments must provide their employees with:

  • A Good Faith Initial Estimate of Minimum Hours: Prior to hire, employers must provide new employees with a good faith estimate of the employee’s expected minimum number of scheduled shifts per month and the days and hours of those shifts.
  • Two Weeks’ Notice of Schedules: Employers must provide all employees with two weeks’ advance notice of work schedules (“Biweekly Schedules”). 
  • Notice of Schedule Changes: Employers must also provide advance notice of any changes to employees’ Biweekly Schedules subject to certain limitations. 
  • “Predictability Pay”: For each schedule change the employer makes on less than seven days’ notice, the employer must compensate the impacted employee, in addition to the employee’s regular pay, as follows: (a) one hour of pay for each shift change made with less than seven days’ notice but 24 hours’ or more notice, and (b) between two and four hours of pay, depending on the duration of the shift, for each shift change made with less than 24 hours’ notice. 
  • On-Call Shift Pay: For each on-call shift for which the employee is required to be available but is not called in to work, the employer must provide between two and four hours of pay, depending on the duration of the on-call shift.
  • Equal Treatment for Part-Time Employees: Part-time employees must receive the same rights as full-time employees, including starting hourly wages (although prorated), access to employer-provided time off and eligibility for promotions, subject to certain qualifications.
  • Offer of First Refusal to Part-Time Employees: Under certain circumstances, formula retail employers must first offer in writing to existing part-time employees any additional hours of work before hiring new employees or using subcontractors or a temporary services or staffing agency to perform work, subject to certain conditions and limitations.
  • Posting Requirements/Records Retention: Applicable businesses must post certain notices and retain employee work schedules and payroll records for three years. Failure to maintain or retain adequate records results in a presumption that the business failed to comply with the regulation.

There are numerous exceptions to the ordinance, relating to shift changes, emergencies outside the employer’s control, or changes caused by other employees.

The ordinance further provides, among other things, detailed directives pertaining to changes in ownership and successor employers.

Enforcement and Penalties

Businesses that fail to comply may be ordered to offer additional hours or pay lost wages to affected employees and/or may be hit with penalties by the Office of Labor Standards Enforcement or face a civil action by the City Attorney. The law also provides for joint and several liability between covered businesses and the janitorial and security services with whom they contract.

What This Means for Employers

Together, these new ordinances impose additional requirements on certain businesses operating in San Francisco. Employers meeting the definition of “formula retail establishments” should review their current hiring, scheduling, promotion, pay and document retention practices to determine what changes, if any, need to be made to comply with these new laws. Covered businesses should also post required notices.

Applicable businesses that contract with security or janitorial service providers should consider sending appropriate notices to those contractors to comply with the law and should also consider amending any applicable service contracts to protect against unintended consequences if a contractor does not comply.