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Employer Obligations Under the New San Francisco Paid Parental Leave Ordinance

On April 12, 2016, the San Francisco Board of Supervisors voted to finally pass the “Paid Parental Leave Ordinance,” setting San Francisco on the path to becoming the first U.S. city to require fully paid parental leave (up to a maximum weekly benefit amount).  The Ordinance is expected to be signed by Mayor Edwin Lee soon and become operative on January 1, 2017.

Under the Ordinance, eligible San Francisco employees will be entitled to receive 6 weeks of fully paid leave to bond with a newborn baby, newly adopted child or new foster child (“bonding leave”).  Currently, California employees may receive up to 55% of their total normal gross weekly pay (subject to a maximum weekly benefit limitation) for 6 weeks in any 12-month period for bonding leave or to care for a seriously ill family member under the California Paid Family Leave (“PFL”) program.  The San Francisco Paid Parental Leave Ordinance requires employers to pay the 45% remainder not provided by PFL so that employees who are taking bonding leave receive 100% of their total normal gross weekly pay for 6 weeks (subject to a maximum weekly benefit limitation).

Covered Employers.  Paid parental leave will be phased in over 12 months.  Beginning on January 1, 2017, San Francisco employers with at least 50 employees must begin complying with the Ordinance.  As of July 1, 2017, the Ordinance will apply to employers with at least 35 employees, and employers with at least 20 employees will be subject to the Ordinance beginning on January 1, 2018.  For purposes of determining an employer’s size, all employees are counted, regardless of location.

Covered Employees.   An employee (including a part-time or temporary employee) is eligible to receive paid parental leave if he/she:

  • Is employed by a covered employer;
  • Started working for the covered employer at least 180 days prior to the start of the requested leave period;
  • Performs at least 8 hours of work per week for the covered employer within San Francisco;
  • Performs at least 40% his/her total weekly hours for the covered employer within San Francisco; and
  • Is eligible to receive PFL benefits from the State of California for the purpose of bonding leave.

Maximum Weekly Benefit Limitation.  The PFL program places a cap on the weekly benefit amount higher-earning workers may receive.  The Ordinance places a proportionally similar cap on weekly paid parental leave benefits an employee may receive.  For example, under the current 2016 PFL rates, an employee’s maximum weekly benefit amount is $1,129, which represents 55% of a person’s weekly wages based on an annual salary of approximately $106,740 (or $2,053 per week, rounded to the nearest dollar).  Using these same rates, a San Francisco employer’s maximum weekly paid parental leave obligation would be $924 per week (45% of $2,053, rounded to the nearest dollar).

Impact of New Legislation Signed by California Governor Jerry Brown, AB 908:  On April 11, 2016, Governor Jerry Brown signed legislation that will, as of January 1, 2018, increase the wage replacement rate under the State Disability Insurance and Paid Family Leave programs from its current level of 55% to 60% or 70%, depending on the employee’s income.  Once the higher wage replacement rates take effect, the employer paid parental leave obligation will decrease by a corresponding amount.

Required Use of Accrued Vacation. An employer may require that an employee use up to two weeks of unused, accrued vacation as an offset to the employer’s obligation to provide paid parental leave.  Employers are currently permitted under California law to require an employee to use up to two weeks of unused, accrued vacation as a precondition to the employee’s initial receipt of PFL benefits.  If the employer exercises that option under State law, the employee must first take two weeks of vacation before starting the six-week family leave period, resulting in a total of eight weeks of leave.  The Ordinance would not prevent an employer from exercising that option, but would provide another option for the employer in addition to, or in lieu of, the State option, depending upon the amount of unused vacation leave that the employee has accrued.

Employee Obligations.  As a precondition to receiving paid parental leave, the employee must provide the employer with either a copy of the employee’s Notice of Computation of California Paid Family Leave Benefits (or other legally authorized statement) or provide the State of California with written authorization to disclose the weekly benefit amount to the employer.  Failure to comply with this requirement relieves the employer of the obligation to provide paid parental leave.

Termination Prior to or During Leave Period.  If an employer terminates an employee prior to the start of the employee’s leave period, but within 90 days of the employee requesting or applying for PFL, there is a rebuttable presumption that the employee was terminated in order for the employer to avoid its paid parental leave obligations.  Unless the employer rebuts the presumption with clear and convincing evidence that the termination was solely for a reason other than to avoid its paid parental leave obligation, the employer must pay the terminated employee parental leave benefits during the leave period.  In addition, if an employer terminates an employee while he/she is receiving paid parental leave benefits, the employer must continue to pay paid parental leave benefits for the remainder of the leave period.

Reimbursement.  As a precondition to receiving paid parental leave, the employee must sign a form (to be provided by the Office of Labor Standards Enforcement) agreeing to reimburse the full amount of the paid parental leave benefits received if the employee voluntarily separates from employment within 90 days of the end of the employee’s leave period and the employer requests such reimbursement in writing.

Posting and Records Retention.  The Ordinance directs the OLSE to draft a notice informing employees of their rights under the Ordinance.  Beginning January 1, 2017, covered employers must post the notice at any workplace or job site where a covered employee works. Covered employers must retain records documenting paid parental leave benefits provided to employees for a period of 3 years.

Enforcement and Penalties. The Ordinance provides for both administrative and civil enforcement.  Administrative enforcement by the OLSE may include (without limitation): payment of the parental leave benefits unlawfully withheld and an administrative penalty of at least $250 or three times the amount of paid leave benefits unlawfully withheld, whichever is greater. In addition, if a violation results in harm to or violates the rights of anyone under the Ordinance (such as the failure to post the required notice), the OSLE may order the employer to pay an administrative penalty of $50 to each aggrieved person for each day that the violation occurred. 

The OLSE, an aggrieved employee, or any person acting behalf of the public may bring a civil action for legal and equitable remedies, including reinstatement, back pay, damages, liquidated damages equal to the administrative penalties detailed above, attorney’s fees and costs.

For a full text of the Ordinance, please click here.

Please note that this summary is not intended to constitute legal advice. 

If you have questions regarding compliance with the San Francisco Paid Parental Leave Ordinance or other employment laws, please feel free to contact either Kristin Pedersen or Maki Daijogo at Daijogo & Pedersen, LLP through our website, www.dpemploymentlaw.com, or by calling us at 415.924.9400.

Legal Disclaimer

Legal Disclaimer and Notice:
These updates have been prepared by Daijogo & Pedersen, LLP for informational purposes only and are not legal advice. Transmission of this information is not intended to create, and receipt does not constitute, an attorney-client relationship. Information on this website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.