July 12, 2016

UPDATE 08/4/16: The San Diego City Council passed the final minimum wage implementation ordinance on July 26 and it was signed by the Mayor on August 3. The implementation ordinance, which will take effect on September 3, includes enforcement and compliance regulations for the local minimum wage increase. For more information, please see the Treasurer’s page on the City’s website.

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The San Diego City Council voted to certify the results of the June 7, 2016 election which included the Earned Sick Leave and Minimum Wage Ordinance passed by voters. The certification of the results on July 11 requires businesses to immediately comply with this ordinance which increased minimum wage to $10.50 per hour, and requires for all employees – regardless of wage – to receive a minimum of five days of Earned Sick Leave to be provided either upfront, or accrued at a rate of at least one hour for every 30 hours worked.

The clarifications and amendments most likely to be of great importance to your business that occurred since this item was presented to the Council Committee were:

• Employers were permitted to cap the accrual of Earned Sick Leave at 80 or more hours.
• Employers were provided the option to “frontload” 40 hours of sick leave at the beginning of a benefit year.
• For first-time offenders, a $10,000 cap on penalties was included for each type of violation.
• It was specified that an employer may comply with the Earned Sick Leave requirement through an agreement to provide greater paid time off benefits as calculated using an alternative methodology.

This is how the regulation currently stands:

Businesses Subject to Ordinance:

• The new ordinance applies to the hours worked within the geographic boundaries of the City of San Diego.
• The new ordinance applies to all employees who work at least two hours within the geographic boundaries of the City of San Diego in any given week throughout the year.

Minimum Wage

• Employers are required to pay a minimum rate of $10.50 per hour.
• The minimum rate of pay increases to $11.50 per hour on January 1, 2017.
• The minimum rate of pay increases to account for inflation each year starting on January 1, 2019.

Earned Sick Leave

• Employers are required to provide a minimum of 5 days of Earned Sick Leave either upfront, or accrued at a rate of at least 1 hour for every 30 hours worked.
• The Earned Sick Leave pay rate is required to be the same as the regular pay rate.
• An employer may cap the use of Earned Sick Leave at 40 or more hours within a benefit year.
• Unused Earned Sick Leave must be allowed to roll over from one year to the next, and cannot be capped at less than 80 hours.
• Employers are not required to pay out unused Earned Sick Leave when a term of employment ends.
• This requirement is not in addition to the State-mandated 3 days, but will satisfy the State requirement.
• Other forms of paid time off may be substituted for Earned Sick Leave as long as they may be used as Earned Sick Leave.
• An employer may comply with the Earned Sick Leave requirement through an agreement to provide greater paid time off benefits as calculated using an alternative methodology.

Enforcement & Penalties

• An employee may file a complaint with the City, which has the authority to assess penalties, and/or bring a cause of action against an employer in a court of competent jurisdiction to enforce the ordinance and may be entitled to back wages, damages, and legal fee recovery.
• Each day a wage below minimum wage is paid constitutes a separate and distinct violation.
• Each day the earned sick leave requirements aren’t met constitutes a separate and distinct violation.
• The same type of violation affecting multiple employees is counted as multiple violations.
• The penalty for the first violation is between $500 and $1,000, and the minimum and maximum penalties are increased by 50% for each subsequent violation.
• Penalties for first-time offenders are limited to $10,000 for each type of violation.
• Failure to provide notice and/or post as required by the ordinance subjects an employer to a penalty of $500 for each employee up to $2,000.