New Wage and Paid Sick-Leave Requirements in Oakland in 2015

City of Oakland Voters Approve Ballot Measure to Raise Minimum Wage, Require Paid Sick Leave, and Pay Service Charges to Hospitality Workers

On November 4, 2014, voters in the City of Oakland approved Measure FF, a ballot initiative that will require all Oakland employers to implement the following policies for their employees: (1) raise the minimum wage to $12.25 per hour; (2) provide at least five days of paid sick leave per year; and (3) pay hospitality workers the entirety of any service charges paid by customers for the specific services provided by those workers. The changes to the law will take effect on March 2, 2015.

Factual Background

Measure FF was promoted by a group called Lift Up Oakland, which conducted a comprehensive campaign to garner support for the ballot initiative. The group estimated that an average of forty-percent of employees in Oakland would benefit from the proposed changes, with a particularly significant impact among minority populations who were not currently provided with any sick leave benefits. The group’s campaign eventually led to eighty-one percent of Oakland voters voting “Yes” on the measure in last November’s election.

Despite the overwhelming public support, many Oakland business owners expressed concern for the rising costs of labor in the City, prompting some to increase prices or plan new locations in other cities. To address the potentially adverse effects to Oakland’s competitiveness, some people, including Berkeley mayor Tom Bates, are calling for a minimum wage increase across the entire East Bay Area.

Measure FF’s Provisions

Measure FF amended Title 5 of Oakland’s Municipal Code to add Chapter 5.92, entitled “City Minimum Wage, Sick Leave, and other Employment Standards.” The provisions of the new law apply to any employee who works at least two (2) hours per week within the geographic boundaries of Oakland. The following is a summary of the new law’s key provisions affecting Oakland employers.

Minimum Wage

The law mandates that beginning on March 2, 2015, employees shall be paid no less than $12.25 per hour. The law provides that the minimum wage may increase on January 1 every year thereafter in order to account for increases in the cost of living.

Paid Sick Leave

Beginning on March 2, 2015, all existing Oakland employees must begin to accrue one (1) hour of paid sick leave for every thirty (30) hours worked. For employees hired after March 2, 2015, the employee will begin to accrue paid sick leave after ninety (90) calendar days of employment. Sick leave accrues only in hour-unit increments; fractions of an hour are not permitted.

Employers are prohibited from requiring employees to search for or find a replacement worker as a condition to taking paid sick leave. However, an employer is permitted to require the employee give reasonable notice of the absence or take reasonable measures to verify that the use of paid sick leave is lawful, so long as such measures do not require the employee subject to the verification to expend more than five dollars ($5.00) to demonstrate eligibility for taking paid sick leave.

If the employer is a small business that normally employs fewer than ten employees, the employer may cap the accrued sick leave at forty (40) hours. Other types of employers may set the cap at seventy-two (72) hours. Accrued sick leave will carry over from year to year, though the total hours accrued can be subject to a permissible cap, as described above. Employers can also set a higher cap or have no cap at all. Upon separation from employment, an employee is not entitled to be paid out for any accrued, unused sick leave.

The Oakland law goes beyond the definition of “Paid Sick Leave” as defined in California Labor Code § 233(b)(4), in that employees can use it not only for their own illness or medical needs, but also to care for immediate or extended family members. Additionally, if the employee does not have a spouse or registered domestic partner, the employee must be given a window of ten days after the first hour of sick leave is accrued in order to designate one person as to whom the employee may use paid sick leave in order to provide care for that person. This ten day window must be provided on an annual basis and shall include the opportunity to change a previously made designation.

If an employer already has a paid leave policy, such as a paid time off policy, that meets the minimum requirements of the new paid sick leave law, the employer does not need to implement an additional paid sick leave policy.

Service Charges

Beginning on March 2, 2015, Oakland employers such as hotels, restaurants, or banquet facilities that charge customers a separately-designated amount for “service charges” must pay those charges “in their entirety” to the employees who actually perform the services incurring the charge. For example, service charges for room service must be paid to the employees who actually deliver the food and beverage associated with the charge. The employees performing such services that incur a service charge are defined as “hospitality workers,” which does not include any managerial employee or supervisor, unless those managerial employees are performing nonsupervisory work serving customers.

The law mandates hospitality workers must be paid any incurred service charges “not later than the next payroll following the work or collection of the charge from the customer, whichever is later.” Service charges are considered separate and apart from any tip or gratuity provided by the customer for the hospitality worker over and above the amount due for the service charge. Managerial employees or supervisors who may qualify for payment of service charges cannot be paid at a rate higher than that normally paid to hospitality workers.

What the New Law Means for Oakland Employers

The provisions of the new law cannot be waived by an individual employee, except pursuant to a valid collective bargaining agreement. Employers must also give written notice to existing employees and all new hires moving forward of their rights under Chapter 5.92 of the Oakland Municipal Code. Notices must be provided in all the languages spoken by more than ten percent (10%) of the employer’s employees. Additionally, the notices must be posted in a prominent area where it will be seen by all employees.

Compliance with the law can be forced on Oakland employers in the following ways: (1) City of Oakland enforcement proceedings; (2) private lawsuits brought by employees; and (3) consideration of the employer’s record of compliance when the employer is seeking City contracts or land use approvals. Employers will be required to keep records of their compliance with the law for at least three years.

Given the serious liability implications, employers should review and revise their policies and procedures to make sure they conform to the strict standards provided by the law. In particular, employers should review the sample notices provided by the Oakland City Administrator to guide their compliance with the notice provisions.

Moreover, it may be appropriate to revise employee handbooks and other employment material to quote the precise language of the law with respect to the definitions of eligible employees, the scope of paid sick leave and its accrual rate, and policies regarding service charges, if applicable.

Finally, employers should also provide proper training for management and payroll personnel to ensure accurate administration of the new policies and retention of records of compliance.

An FAQ on Measure FF is available from Oakland City Attorney’s office here.