New York and California Increase the Minimum Wage; New York and San Francisco Enact Paid Family Leave Laws

New York State Enacts Phased-In $15 Per Hour Minimum Wage

On April 4, 2016, New York Governor Andrew Cuomo signed legislation enacting a statewide $15 per hour minimum wage plan. Under the legislation, New York’s minimum wage ultimately will rise to $15 per hour for all workers in all industries statewide. 

The increase will be phased in over time and at a varying pace depending on location and, in New York City, on employer size:

• In New York City, employers with at least 11 employees must increase the minimum wage to an hourly rate of $11 on December 31, 2016, $13 at the end of 2017 and $15 at the end of 2018. Employers with fewer than 11 employees must increase the minimum wage to an hourly rate of $10.50 on December 31, 2016, $12 at the end of 2017, $13.50 at the end of 2018 and $15 at the end of 2019.
• In Nassau, Suffolk and Westchester Counties, regardless of employer size, the minimum wage will rise to $10 per hour at the end of 2016, and then rise by another $1 at the end of each of the next five years. The $15 per hour minimum wage would be reached on December 31, 2021.
• In the rest of New York, regardless of employer size, the minimum wage will increase to $9.70 per hour at the end of 2016, followed by an annual increase of seventy cents at the end of each of the next four years, reaching $12.50 per hour on December 31, 2020. Thereafter, the rate will continue to increase to $15 per hour on an indexed schedule to be set by the state.

The legislation includes what the governor’s office has described as a “safety valve” to the increases. Beginning in 2019, the director of the Division of Budget will conduct (and submit to the Department of Labor) an annual analysis of the economy in each region and the effect of the minimum wage increases statewide to determine whether a temporary suspension of the scheduled increases is necessary.

This legislation followed prior state measures to increase the minimum wage for workers in the fast food industry (at chains with 30 or more locations nationally) to $15 per hour by the end of 2018 in New York City and in the rest of the state by mid-2021. As a result of those measures, on December 31, 2015, the minimum wage rate for such fast food workers increased to $10.50 per hour in New York City and to $9.75 per hour in the rest of the state – higher than the current $9 per hour New York minimum wage that went into effect at the end of 2015.

New York State Implements Paid Family Leave Law

The state budget bill signed by Governor Cuomo on April 4, 2016, also amends New York State’s existing Disability Benefits Law to add the New York PFL Benefits Law (PFL Law) that ultimately will require employers to allow employees to take up to 12 weeks of paid leave per year for certain qualifying events. The amount of paid leave available and level of pay to be provided will be phased in over four years starting in 2018.

Coverage

Commencing January 1, 2018, the PFL Law will provide both male and female employees employed for 26 or more consecutive weeks with paid leave initially for up to eight weeks within a 52-week calendar period at a rate of 50% of the employee’s average weekly wage (capped at 50% of the state average weekly wage):

• to bond with a new child (including adopted or foster children) within the first 12 months after birth, adoption or placement;
• to participate in providing physical or psychological care for a child, parent, grandparent, grandchild, spouse or domestic partner with a serious health condition; or
• for qualifying reasons under the federal Family and Medical Leave Act arising out of the fact that the employee’s spouse, domestic partner, child or parent is on active duty (or has been notified of an impending call or order to active duty) in the U.S. Armed Forces.    

The PFL law will be funded entirely by employee contributions (made through payroll deductions) to the New York State’s Temporary Disability Insurance program. Employees are eligible to receive the paid leave benefits starting from the first full day of qualifying leave. Employers will not be required to fund any portion of the paid leave benefits.

The PFL law also provides job protection for all employees taking qualifying paid family leave by requiring employers to restore eligible employees to the same or comparable position held when the leave commenced and prohibits retaliation against an employee for exercising rights under it. In addition, the employer is required to maintain any existing health benefits for the duration of the employee’s leave.

Duration and Amount of Leave; Posting

Under the law, an employee may take the paid leave as a continuous period or intermittently during the 52-week period in full day increments (or one-fifth of the weekly benefit). Employers are permitted to require paid leave under the PFL Law to run concurrently with any unpaid leave to which the employee is entitled under the federal Family and Medical Leave Act.

The amount and duration of the leave and wage replacement benefits will be phased in between January 1, 2018, and January 1, 2021, from eight weeks per 52-week calendar period at 50% of the employee’s average weekly wage (but not to exceed 50% of the state average weekly wage) to 12 weeks per 52-week calendar period at 67% of the employee’s average weekly wage (but not to exceed 67% of the state average weekly wage).

Employers will be required to post a notice regarding the PFL Law in a conspicuous location in the workplace and must provide employees with written notice of their rights after seven consecutive days of leave.

California Moves to $15 Per Hour Minimum Wage

On April 4, 2016, California Governor Jerry Brown signed a new California law to increase the statewide minimum wage to $15 per hour over the next six years.

For employers with 26 or more employees, the new minimum wage effective January 1, 2017, is $10.50 per hour, increasing by $0.50 annually to $15 by January 1, 2022. For employers with 25 or fewer employees, each yearly scheduled increase comes one year later, i.e., the first wage increase to $10.50 per hour will occur on January 1, 2018, and the $15 target will be reached by January 1, 2023.

From 2018 until the minimum wage reaches $15 per hour, each wage increase must be justified annually by the director of finance certifying that the economic condition of the state will support the next scheduled increase. Additional provisions allow the governor to pause the scheduled annual wage increases by finding poor economic conditions exist. Each time that the governor suspends a planned wage increase, the timetable for reaching the $15 minimum wage will be delayed by a year. The governor may only suspend the scheduled increases a maximum of two times. The initial increase to $10.50 per hour is not subject to such a potential delay.

Once the $15 per hour level has been reached by all employers in 2023, the California Department of Finance thereafter will impose annual minimum wage increases at the lesser of 3.5% or the rate of change in the average of the preceding year’s U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI). Each such adjusted minimum wage will continue to take effect on the following January 1. There will be no annual increase in the minimum wage if that year’s CPI is negative. After the minimum wage reaches $15 per hour in 2023, the governor may no longer pause the annual increases.

San Francisco Adopts Paid Parental Leave Ordinance

Under California’s existing paid family leave insurance program (California PFL), the state of California pays for six weeks of partial wage replacement to male and female employees who are on leave for, among other things, bonding with a newborn child, newly adopted child, or new foster child (Parental Leave). On April 5, 2016, the San Francisco Board of Supervisors unanimously approved the Paid Parental Leave Ordinance (the Ordinance) requiring San Francisco employers to make payments supplementing California PFL benefits (Supplemental Pay) during that six-week period of Parental Leave.

Covered Employers

Employer coverage under the Ordinance is based on total employee count, regardless of location:

• Employers with 50 or more employees:  January 1, 2017
• Employers with 35-49 employees:  July 1, 2017
• Employers with 20-34  employees:  January 1, 2018

Employers with fewer than 20 employees are not covered by the Ordinance.

Covered Employees

An employee—whether male or female, and full-time, part-time, or temporary—is entitled to receive Supplemental Pay upon meeting all of the following conditions:

• At least eight hours of work per week and 40% of total weekly hours worked are within the City of San Francisco;
• The employee commenced employment at least 180 days prior to the start of the Parental Leave;
• The employee takes the Parental Leave within 12 months of the birth, adoption or placement triggering the Parental Leave;
• The employee receives California PFL benefits during the Parental Leave;
• The employee verifies receipt of California PFL benefits by either providing the employer with state-issued Notice of Computation of California PFL benefits or authorizing the state to disclose to the employer the amount of the employee’s weekly California PFL benefit; and
• The employee signs a form to be prescribed by the San Francisco Office of Labor Standards Enforcement (the OLSE) agreeing to reimburse the employer for the full amount of Supplemental Pay if the employee voluntarily resigns from employment within 90 days after the Parental Leave ends.

The Ordinance does not apply to unionized employees covered by a collective bargaining agreement if (1) the collective bargaining agreement expressly waives the requirements under the Ordinance, or (2) the agreement was entered into before May 5, 2016. The second exception is no longer available once the collective bargaining agreement has been amended or extended or has expired after May 5, 2016.

Duration and Amount of Supplemental Pay

Employers must pay the Supplemental Pay for the six-week Parental Leave period during which the employee is receiving California PFL benefits.

The Supplemental Pay benefit is in a weekly amount equal to 45% of the employee’s gross wages, currently capped at $924 per week (although the cap is subject to increase). The other 55% of the employee’s weekly gross wages (subject to a similar cap) is paid for by the state under the California Paid Family Leave benefits program. Based on the separate passage of California Assembly Bill 908 on April 11, 2016, those percentages will change effective January 1, 2018, with the California Paid Family Leave benefits cap increasing to 60% or 70% (based on the level of the employee’s gross wages), and the employer’s Supplemental Pay cap correspondingly decreasing to 40% or 30%. Assembly Bill 908 also removed the seven-day waiting period for California PFL benefits.

For purposes of calculating Supplemental Pay, the employee’s normal gross weekly wages are determined by averaging the employee’s weekly earnings during the three-month period immediately prior to the commencement of the employee’s receipt of California PFL benefits.

Substitution of Vacation for Supplemental Pay

Employers may elect to require employees to use up to two weeks of accrued but unused vacation during the first two weeks of the six-week Parental Leave period, thus reducing the employer’s six-week payment obligation by such vacation amount. If an employee refuses to use such vacation in accordance with the employer’s requirement, the employer is not obligated to provide Supplemental Pay.

Alternatively, employers may elect to require employees to use up to two weeks of accrued but unused vacation prior to receiving a full six weeks of Supplemental Pay.

Presumption of Unlawful Termination

If an employer terminates the employment of an employee within 90 days of the employee’s request or application for California PFL benefits, there is a presumption that the termination was made to avoid the employer’s Supplemental Pay obligations under the Ordinance. The employer may rebut that presumption only by providing clear and convincing evidence that the termination was solely for a reason other than avoiding its obligations.

Remedies for Violations of the Ordinance

Remedies for violations of the Ordinance include: (1) if the employer unlawfully terminated the employee, reinstatement and back pay; (2) payment of any Supplemental Pay unlawfully withheld; (3) liquidated damages in the amount of $50 to each employee who was unlawfully denied rights under the Ordinance; (4) if the employer unlawfully withheld Supplemental Pay, an additional payment in an amount that is the greater of $250 or three times the amount of the Supplemental Pay withheld; and (5) reasonable attorneys’ fees, costs and interest.

Other Requirements

Employers will be required to (i) post a notice to be prescribed by the OLSE in a conspicuous location in the workplace and (ii) retain records documenting Supplemental Pay to employees for three years and make such records available to the OLSE upon request.