Oakland Passes Minimum Wage, Paid Sick Leave, Hospitality Service Charges Measure

Executive Summary

Coverage:  All clients with employees working in California.

Effective Date: The provisions raising the minimum wage and requiring paid sick leave will go into effect March 2, 2015.  The provision tendering payment of service charges is currently in effect.

Overview:   A city of Oakland ballot measure increasing the minimum wage for most employees requiring paid sick leave and mandating payment of employer-levied service charges to employees has passed with over 80 percent of the vote.

Action Required: Hospitality clients should ensure service charges are paid to employees as required.  We will alert clients when the city releases an official notice of sick leave rights and will be providing clients with a model sick leave policy prior to the effective date.

The Details

Minimum Wage Increase

Employees working at least two hours per week within the city of Oakland must be paid at least $12.25 an hour for all such work beginning March 2, 2015. Each January 1 thereafter, the required minimum wage will be adjusted for inflation.

The minimum wage obligation extends not only to an employee’s formal employer, but also to any person “who directly or indirectly (including through the services of a temporary services or staffing agency or similar entity) employs or exercises control over the wages, hours or working conditions of any employee.”  However, the law does not apply to employees who are exempt from state minimum wage requirements.

Hospitality Service Charges

Employers in the hospitality industry (defined to mean owners and operators of restaurants, hotels, and banquet halls within the city of Oakland) are required to pay all service charges to the “hospitality workers” delivering the service. Service charges are defined as separately designated amounts collected by an employer that are for services provided by a hospitality worker or which might be reasonably interpreted to refer to services provided by a hospitality worker, such as service charges, delivery charges, and porterage charges.

Hospitality workers do not include supervisors, unless a supervisor is not supervising but actually providing service to customers. In that event, the supervisor may receive only an amount equal to the average of what other employees receive for providing the same service.

Service charges must be paid to employees no later than the payroll following when the service was provided or the charge is paid by the customer.

Paid Sick Leave

Accrual, Carry-Over and Caps

Up to nine days (72 hours) of paid sick leave may be accrued by eligible employees at the rate of one hour of paid leave for every 30 hours worked. Employers who normally employ fewer than 10 employees per week (including any employees working outside of Oakland) need only permit up to 40 hours of accrued paid sick leave. Unused paid sick leave carries over from year to year, but is subject to the applicable accrual cap. Unused time does not need to be paid out at time of separation from employment.

Employees are eligible to accrue paid sick leave if they work at least two hours per week in the city of Oakland and are not exempt from state minimum wage requirements. Unlike the new state of California paid sick leave law that goes into effect July 1, 2015, there is no basis under this law to grant paid sick leave at the beginning of each calendar year.  The law, however, provides that employers who already make available sufficient paid time off to their employees to meet the requirements do not need to provide additional time off.

Accrual and eligibility for use of paid sick leave begins immediately on the March 2, 2015, which is the effective date for existing employees. Employees hired after March 2 begin accruing paid sick leave upon hire, but they are not eligible to use any accrued time until they reach 90 days of employment.

Use of Sick Leave

Paid sick leave can be used not only for an employee’s own illness or medical diagnosis or treatment, but also to aid or care for the employee’s child, parent, legal guardian or ward, sibling, grandparent, grandchild, and spouse or registered domestic partner or other designated person who is ill, injured, or requires medical diagnosis or treatment. Under the law, the familial relationship extends not only to biological relationships, but also relationships resulting from adoption, step-relationships, and foster care relationships. “Child” includes a child of a domestic partner and a child of a person standing in loco parentis.

The Oakland law mirrors the San Francisco Paid Sick Leave Ordinance in permitting a covered employee without a spouse or registered domestic partner to designate one person for whom the employee may use paid sick leave to provide aid or care. An employee must be permitted to make such a designation no later than the date on which the employee first accrues an hour of paid sick leave (e.g., the employee has worked 30 hours after paid sick leave begins to accrue). The employee has 10 work days in which to make the designation. Annually thereafter, an employee with no spouse or registered domestic partner must be provided a 10-day window to make a designation, including the opportunity to change any previous designation.

Employee Notice of Use

An employer may require an employee to provide reasonable advance notice of the need to use paid sick leave. The law, however, does not define what constitutes “reasonable notice.” The law clearly provides that an employee cannot be required to find a replacement worker when taking paid sick leave. Finally, an employer may take only reasonable measures to verify or document that an employee’s use of paid sick leave is lawful, and may not require an employee to incur expenses in excess of five dollars to show his or her eligibility for such paid leave.

Employee Notice, Record Keeping Requirements

Every employer must give written notification of employees’ rights under the law to each current eligible employee and to each new employee at the time of hire. The written notice must be in all languages spoken by more than 10 percent of the eligible employees and must be posted prominently in areas of each work site where it can be seen by all employees. The law authorizes the City Administrator to prepare sample notices and an employer’s use of such notices will constitute compliance with the requirements.  We will notify clients after the city publishes such notices.

Employers also must maintain for at least three years for each covered employee a record of his or her name, hours worked, pay rate, paid sick leave accrual and usage, and, if applicable, service charge collection and distribution. Employers must provide an employee with a copy of the records relating to the employee upon the employee’s reasonable request.

As always, please contact your HR Business Partner if you have any questions.