City’s Enforcement Guidelines Attempt to Make Sense of the Confusion

Beginning July 1, 2016, the City of Los Angeles’ (City’s) Minimum Wage Ordinance (MWO) imposes higher paid employee sick time benefits than the statewide level. For definitions of covered “Employers” and “Employees” and other details, see: City of Los Angeles New Paid Sick Leave Requirements Effective July 1, 2016, Ordinance Requires Double the Benefits California Law Currently Specifies (June, 2016) as well as the City’s Minimum Wage and Sick Time Benefits: Frequently Asked Questions (FAQ) (July, 2016). As detailed below, Employers with 25 or fewer Employees may delay providing the MWO’s sick leave benefits until July 1, 2017.

The City will enforce the MWO’s paid sick time benefits through the Office of Wage Standards (OWS) via Rules and Regulations (specifically, Regulation No. 4, pp. 9-11) published July 22, 2016. Regulation No. 4 covers many key points on the City’s paid sick leave mandate, including:

Methods of providing paid sick time benefits. Regulation No. 4 restates that Employers subject to the MWO must provide paid sick time benefits either by: i) providing 48 hours of paid sick leave to the Employee at the beginning of each employment year, calendar year, or 12-month period; or ii) providing one hour of paid sick leave for every 30 hours worked. See Rules and Regulations (p. 9).

Carry-over of paid sick time. The OWS now clarifies that unused paid sick time accrued by an Employee under either of the above two methods shall carry over to the following year of employment and may be capped at a minimum of 72 hours. Employers may also set a higher cap or no cap at all. See Rules and Regulations (p. 10).

Re-hired employees. Under MWO section 187.04 (I) if an Employee is rehired within one year of the date of separation from employment, accrued and unused paid sick time must be reinstated. However, the Rules and Regulations state that if an Employer previously compensated an Employee for all accrued and unused sick time benefits upon separation from employment, the Employer is not required to reinstate the Employee’s paid out sick time benefits upon such a rehiring.

Providing a more generous compensated time off policy. The OWS may determine that an Employer’s established policy is more generous than what the MWO requires and, after considering the “totality of the circumstances,” allow an Employer’s established compensated time off policy to remain in place even if it does not meet the MWO’s accrual rate and eligibility requirements. See Rules and Regulation (p.11).

Small business deferral form. Employers with 25 or fewer Employees may defer providing the MWO’s paid sick time by one year, i.e., until July 1, 2017. However, OWS requires all such Employers interested in the deferral to complete and retain Form MW-2. See City’s FAQs Nos. 39-45 and Rules and Regulations (pp. 16-18) for more information. Also see, Los Angeles Moves to Enforce City Minimum Wage Ordinance Required Forms Now Available (September, 2016).

Exempt-from-overtime employees. The City’s FAQ No. 9 ambiguously states that the MWO does not apply to exempt-from-overtime “white collar” employees because such workers would not qualify for the California minimum wage. This of course is clear regarding the MWO’s higher minimum wage levels. Overtime exempt workers are paid salary, not by the hour. However, read literally, FAQ No. 9 also exempts overtime exempt workers from the MWO’s higher level paid sick leave provisions. This makes no sense.  After all, such workers are eligible for the statewide sick pay benefits.  Unless and until OWS provides further guidance on this issue, the better practice is to provide paid sick time benefits at the MWO level to overtime exempt Employees as well as hourly non-exempt Employees.

If you would like further, more detailed information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth

October 6, 2016