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How Can My Property Comply With All These New Minimum Wage & Sick Leave Laws?

Article originally appeared in Hotel Association of Los Angeles (HALA) Newsletter.

In order to ensure compliance with the California Paid Sick Leave Law (CA Sick Leave), Los Angeles Minimum Wage Ordinance (City Ordinance), Los Angeles County Minimum Wage Ordinance (County Ordinance) and Los Angeles Citywide Hotel Minimum Wage Ordinance (Hotel Ordinance), Southern California hotel owners should carefully review their time-off policies and procedures, as the new requirements are quite comprehensive. Given the patchwork of different regulations and various current business challenges faced by hotel owners, this can be daunting. Although the majority of attention is typically given to the increased minimum wage component of these laws, there are numerous “time off” requirements that employers must adhere to. The below primer highlights key changes to local and state law that should be taken into consideration when reworking employee compensation and benefits packages to comply with these various laws.

Statewide Trend

California currently requires employers to provide at least three days of paid sick leave annually, but some California cities — including San Francisco, Oakland, Emeryville, and Santa Monica — have passed stricter rules affording workers as many as nine days off. With the passage of its own minimum wage ordinance, Los Angeles now adds its name to this group, as does San Diego. Currently, more than two dozen other cities and counties nationwide have also mandated that employers provide a minimum amount of paid sick days and increased minimum wages.

LA City Minimum Wage Ordinance

LA-based hotels with fewer than 150 rooms should take note of the time off requirements of the new LA Minimum Wage Ordinance, which took effect July, 1 2016 for businesses with over 26 employees; those with 25 or fewer have until 2017 to comply. The City Ordinance requires businesses with more than 25 workers to increase their minimum wage from the state-mandated $10 to $10.50 per hour. Under the new law, the minimum wage will reach $15 per hour in 2020, with future increases tied to the Consumer Price Index. Employers with 25 or fewer workers have until July 2017 to adjust to the new city wages, with the minimum wage reaching $15 per hour by 2021.

With respect to the sick leave component of the City Ordinance, employees who work two or more hours during a particular week in the City of Los Angeles will be entitled to up to 48 hours of paid sick leave per year, nearly twice the amount mandated under CA Sick Leave. Employers have the option of using an accrual-based method or “frontloading” the time each year. If an employer uses an accrual method, employees must accrue time at the rate of at least one hour for every 30 hours worked. Employers may cap accrual at 72 hours and may limit annual use to 48 hours.

A quick note on the San Diego law, as it may affect certain operators with locations throughout the Southern California region: The San Diego Earned Sick Leave and Minimum Wage Ordinance was enacted on June 7, 2016, by San Diego voters. Under the San Diego law, which became effective on July 11, 2016, employees accrue one hour of paid sick leave for every 30 hours worked, but employers may limit use of sick leave to 40 hours per year.

LA County Minimum Wage Ordinance

Notably, Los Angeles County recently implemented a minimum wage law comparable to that of the City of Los Angeles, but it does not include a comparable paid sick leave requirement.  The County law applies to employees working in unincorporated areas of Los Angeles and requires that employers with 26 or more employees provide a minimum of $10.50 per hour (beginning July 1, 2016) and increasing to $12.00 per hour on July 1, 2017. Owners with fewer than 26 employees have until July 1, 2017 to raise wages to $10.50 per hour, then to $12.00 per hour on January 1, 2018.

The LA Hotel Ordinance

The Hotel Ordinance has been written about at length, with much attention paid to the minimum wage increase to $15.37 per hour (currently effective for all hotels with 150 rooms or more). However, the law also makes significant changes to paid time off (PTO) policies. Specifically, the Hotel Ordinance requires accrual of 96 hours of PTO per year for full-time employees, with a proportional accrual for part-time employees. Such time must be available for vacation, sick, or personal use. Under the Hotel Ordinance, hotels must also recognize accrual of unpaid time off (up to 80 hours) for any sick leave needed upon exhaustion of accrued PTO.

The Hotel Ordinance went into effect for hotels with more than 300 rooms on July 1, 2015. For hotels with 150 or more rooms, the law recently took effect on July 1, 2016. For hotels of this size, the Hotel Ordinance pre-empts state, county and local law regarding sick leave, because the Ordinance is more generous to employees. Notably, for LA hotels with 149 or less rooms, the Hotel Ordinance does not apply, meaning that the hotel is subject to the City Ordinance. Similarly, if a hotel operates outside of Los Angeles city limits, CA Sick Leave will apply (unless the hotel operates in a municipality with its own set of regulations). This can become complicated when a hotel chain operates at locations both within and outside the City of Los Angeles.

Hotel employers should take the following steps now to achieve compliance:

  • Review existing  time off policies and either develop new policies, or revise existing policies, so that they comply with the Hotel Ordinance or LA Sick Leave, as appropriate
  • Post the required notices in all required languages
  • Revise employee handbooks and provide notices in all applicable languages to employees at the time of hire or once new laws take effect
  • Review indemnification provisions in outside vendor agreements to ensure compliance and reduce liability relative to workers on hotel property
  • Train supervisory and managerial employees, as well as HR, on the new requirements related to PTO and/or paid sick leave
  • Ensure that payroll records properly reflect accrual and use of earned sick leave and/or PTO, as well as previously accrued vacation and/or sick leave under prior policies

Hotels, particularly those with multiple locations across California, face an assortment of regulations related to minimum wage, PTO and sick leave. It is critical that you work closely with experienced employment counsel to ensure that your properties are in full compliance in order to protect the underlying business interests for your properties.

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.