San Francisco has just given the employees of its resident companies quite the baby shower gift. On April 5, 2016, San Francisco passed its Paid Parental Leave law. The local ordinance will leverage off of the California Paid Family Leave law passed in 2004, which allows employees to take time off to bond with a newborn baby, newly adopted child, or newly placed foster child. California Paid Family Leave currently entitles workers to receive 55 percent of their pay for up to six weeks through payments made by the California State Disability Insurance (SDI) fund, a fund financed by the payroll contributions of workers. San Francisco will now require private employers to make up the remaining 45 percent of the parent’s full pay to ensure they receive 100 percent of their normal wages over the six weeks’ leave period.
Paid parental leave has become a hot topic in U.S. employment law over the past few years, as evidenced by New York’s approval of parental leave legislation just last month. San Francisco’s law gives additional volume to the national conversation by passing a measure that requires employers to provide six weeks of fully paid parental leave for mothers and fathers, including same-sex couples, to spend time at home with their newborns.
Employees, both mothers and fathers, who have been employed for at least 180 days, work as least eight hours a week, and spend at least 40 percent of their workweek in San Francisco, qualify for this benefit. The six weeks off can be taken at any time during the newborn’s first year or the first year following placement of an adopted or foster child.
The regulation will be rolled out in a staggered format beginning in January 2017. Business with 50 or more employees will have to comply with this new regulation starting in January 2017, while businesses with 35-49 workers will have until July 2017 to comply, and businesses with 20-34 workers will have until January 2018 before the regulation applies to them. Employers with fewer than 20 workers and public employers are not covered by this regulation.
San Francisco’s Board of Supervisors did provide employers with some safeguards. First, as a precondition to receiving the additional benefit, employers may request that employees sign a form agreeing to reimburse the employer for all supplemental compensation provided by the employer if the employee “voluntarily separates from employment” within 90 days of returning to the job. However, along with this additional protection for employers comes additional scrutiny for any adverse action taken against the employee during this 90-day period, as any deduction in pay or termination will require the employer to overcome a rebuttable presumption that such action was done for purposes of avoiding the requirements of the ordinance. Moreover, the requirement is for employees to “reimburse,” and employers should not take this as license to make unlawful deductions that could violate the Labor Code.
Second, employers may be relieved to learn that higher-earning workers (in 2016, workers earning more than $106,740 annually) have a cap placed on the weekly benefit amount they can receive. Under California Paid Family Leave, such workers can only receive the state’s “maximum weekly benefit amount” (which currently sits at $1,129), and San Francisco’s ordinance will be proportionally capped to treat the state’s “maximum weekly benefit amount” as if it was 55 percent of the employee’s salary.
Third, an employer may choose to use up to two weeks of an employee’s unused, accrued vacation leave to help satisfy the employer’s obligation to pay supplemental compensation to make the employee whole while out on parental leave.
Finally, this week, California state legislators brought some slight relief to San Francisco employers by passing legislation to increase the amount of wage replacement that will be available to workers statewide beginning in 2018. On Monday, Gov. Brown signed A.B. 908, legislation that increases the amount of wage replacement workers will be able to receive from California Paid Family Leave. Beginning in January 2018, workers making less than one-third of the state average quarterly wage will be able to recover 70 percent of their wages through Paid Family Leave, and all other workers will be able to recover 60 percent of their wages. San Francisco employers only need to provide whatever supplemental compensation is necessary to make the worker whole. As a result, when the amounts available through Paid Family Leave increase in 2018 to 70 percent or 60 percent of an employee’s wages, then San Francisco employers will only need to contribute 30 percent or 40 percent of an employee’s wages, rather than the 45 percent they are currently scheduled to provide.
While this new measure will make it much easier for new parents to take important time off to spend with their newborns, it will ramp up additional pressure on San Francisco employers who already need to deal with rising minimum wages, flexible scheduling requirements, and mandatory health care contributions as a result of city ordinances.