The rapid changes of 2016 have kept San Diego employers on their toes! Here is a quick way to determine which Paid Sick Leave mandate applies to your business, along with a highlight of the new FLSA changes regarding salaried exempt employees, effective 12/01/16.
San Diego City Minimum Wage and Earned Sick Leave Ordinance
To determine if San Diego’s Earned Sick Leave mandate applies to your business, examine these factors:
The City of San Diego allows an employer to choose how to provide “Earned Sick Leave.” You may provide employees with a lump sum of Paid Sick Leave hours up front (at least 40 hours per year) and not bother with accruals and annual carry-over of unused time. You may also implement an accrual method providing one hour of paid sick leave accrued for every 30 hours worked or use a more generous plan provided it meets all minimum requirements of the City ordinance. Any new policy must be stated in writing for employees to read and understand. The Ordinance covers nearly all employees in all industries, including full-time, part-time, project, and temporary employees. The ordinance is clear that unused time does not “cash out” at termination, but it does require reinstatement of unused time if the same employee is rehired by the same business within six (6) months.
If you currently offer Paid Sick Leave or Paid Time Off, review your current program and allowed usage restrictions in the context of the new rules. You may be able to continue with only a few changes bringing your program into compliance with the San Diego Ordinance. Some of the more common changes we have seen are:
- Ensure all employees are covered at hire (or on 7/11/2016, if already on payroll) including those working less than full-time;
- Update your definitions of sick time and usage restrictions to align with the San Diego Ordinance;
- Realign the elements of your program’s accruals/grants, usage caps, and maximum accrual/grant caps, ensuring they are equal to or greater than the mandates in the ordinance;
- Define your grant/accrual year (calendar, seniority, fiscal, etc.).
Remember, unused PTO is generally paid out at termination, where Paid Sick Time is not.
To implement the City of San Diego Minimum Wage and Paid Sick Time Ordinance:
California Paid Sick Leave
If you are outside of San Diego City boundaries and don’t perform work within San Diego City boundaries, you will need to comply with California’s Paid Sick Leave mandate. You may recall this was passed in 2014 and enacted in 2015; therefore, you may have complied with this mandate before the passage of the San Diego Ordinance. When passed, this was titled the Healthy Workplace Healthy Families Act of 2014.
Like the City of San Diego, California allows an employer to choose how to provide Paid Sick Leave: Either by providing an employee with a lump sum of sick leave hours up front (at least 24 hours or 3 days per year) or by using the accrual method, providing one hour of paid sick leave accrued for every 30 hours worked or a method providing a greater amount than 1 hour earned per 30 hours worked covering all employees (FT, PT, Temp, etc.). If your existing program is already more generous, you may also adapt it to comply with California Paid Sick Leave.
Using the accrual method, accruals may be capped annually at the greater of 48 hours or 6 days per year. Usage may be capped at the greater of 24 hours or 3 days per year. New hires may be required to complete 90 days of employment prior to using California Paid Sick Leave. Employers need not pay out unused Paid Sick Leave at termination, but must reinstate any unused balance immediately if the employee is rehired within one year. The law states that an employer is not obligated to inquire into, or record, the purposes for which an employee requests or uses paid sick leave (for example, requiring a doctor’s note or other “office visit” documentation).
To implement California Sick Leave:
Department Of Labor Increases the Exempt Salary Minimum to $47,476 per Year
On December 1, 2016, the U.S. Department of Labor (DOL) raises the minimum salary requirement for exempt employees (known as the exempt “salary test” from $41,600 per year to $47,476 per year. This equates to $3,956 per month/$913 per week/$22.825 per hour. As an unusual twist, the Federal level has been set at a greater amount than the California level (no less than two (2) times the state minimum wage). Therefore, all California employers must comply with the greater number.
Both California and Federal regulations require employees to pass both a “salary test” as well as a “duties test” - this has not changed. California employers will continue to comply with the stricter California duties test. The US DOL will review the Federal salary test in three years and may increase the salary level again at that time. As the state’s minimum wage continues to increase, California’s exempt salary test (no less than two (2) times the state minimum wage) may eventually create a greater exempt salary in time. If that happens, the California minimum exempt salary test will again be the standard to follow rather than the FLSA minimum exempt salary test.
Management needs to ensure that each exempt position in their company passes both the exempt new “salary test” of no less than $47,476 annually and the existing “duties test” regarding control and autonomy under California standards. The most common types of exemptions to overtime in California include Administrative, Executive/Managerial, Computer Professional, Outside Sales, Commissioned Inside Sales, and National Service Programs (such as AmeriCorps).
To Prepare for the FLSA Exempt Salary Increase: