On June 22, 2016, the City of Los Angeles adopted new minimum wage and paid sick leave requirements. These new requirements are effective as of July 1, 2016.
New Minimum Wage Requirement
The new ordinance requires employers with 26 or more employees to pay a new minimum wage per hour for all non-exempt employees working at least two hours in the City of Los Angeles during a work week.
Impacted employer must pay non-exempt (hourly) employees $10.50 per hour, effective July 1, 2016. There will be subsequent wage increases until the minimum wage is increased to $15.00 per hour effective July 1, 2020.
Employers with 25 or fewer employees have a 1-year grace period to implement wage changes. Employer with 25 or fewer employees therefore are not required to pay non-exempt (hourly) employees $10.50 per hour until July 1, 2017.
New Paid Sick Leave Obligations
The ordinance also requires new paid sick leave requirements, which are also effective as of July 1, 2016. Unlike the minimum wage provisions, paid sick leave requirements do not have a grace period for small employers. ALL EMPLOYERS are impacted by the new paid sick leave requirements.
Under the new paid sick leave requirements, employers must permit employees who work at least 2 hours per work week in the City of Los Angeles to accrue up to 48 hours of paid sick leave per year. This is double the current State of California requirement to provide up to 24 hours of paid sick leave per year.
Sick leave can be provided in 1 of 3 ways:
- Accrual Method – Employees accrue at least 1 hour of paid sick leave for every 30 hours worked, starting on the first day of employment or as of July 1, 2016 (whichever is later). Employers can cap accruals at 72 hours (as opposed to 48 hours under State of California requirements) and can limit annual usage to 48 hours (as opposed to 24 hours under State of California requirements). Paid sick leave hours must be carried over from year to year, subject to any annual accrual cap. Accrued but unused hours are not considered compensation, and do not need to be paid out at the time of termination – however, if an employee is terminated and re-hired within 1 year, the accrued but unused hours must be reinstated.
- Lump Sum Method – Employees can be provided with a lump sum of 48 hours of paid sick leave (as opposed to 24 hours under State of California requirements) at the beginning of employment, calendar year, or 12-month period. Rollover of hours to the next year is not required. Accrued but unused hours are not considered compensation, and do not need to be paid out at the time of termination – however, if an employee is terminated and re-hired within 1 year, the accrued but unused hours must be reinstated.
- Existing Plan – If you have a paid time off policy that already provides for at least 48 hours of compensated time off, no additional time off is required under the City of Los Angeles ordinance. If you do not distinguish between vacation time and sick time in your compensated time off program, all hours are considered to be vacation time and must be paid out at the time of termination. If you do distinguish between vacation time and sick time, only vacation time needs to be paid out at the time of termination; sick leave does not need to be paid out, but must be reinstated if the employee is re-hired within 1 year.Under any method, employers may prohibit use of paid leave during the first 90 days of employment, although paid leave hours must be accrued or provided in lump sum at the time of hire.The Los Angeles ordinance also provides more flexibility of use that the current State of California policy. Paid sick leave may be taken by either oral or written request, to care for the employee; for a family member; or for any individual related by blood or affinity whose close association with the employee is equivalent to a family relationship.
Next Steps
First, you will need to post notice of the new Earned Sick Leave and Minimum Wage Ordinance at your worksite, in the same location as your other wage and hour posters. You must post in English and in any language that is spoken by at least 5% of the employees at the job site. The notices are available at this website, free of charge, in English, Spanish, Cantonese, Mandarin, Hindi, Vietnamese, Korean, Japanese, Thai, Armenian, Russian, and Farsi: http://wagesla.lacity.org/. These posting notices are required for ALL EMPLOYERS.
Second, you will need to review your employee salaries and schedule minimum wage increases for any non-exempt (hourly) employees, to ensure they are making a minimum hourly wage of at least $10.50 per hour, no later than July 1, 2016, or July 1, 2017 (depending on the size of the employer).
Third, you will need to review your paid sick leave and make changes to reflect the new requirements. Revisions for paid sick leave are required for ALL EMPLOYERS.