On July 1, 2016, employers who have more than 25 employees performing some work in the City of Los Angeles (the "City") will need to provide higher minimum wages and six paid sick days per year. Employers with fewer workers in the City will need to expand sick leave benefits by July 1, 2016, but they will not be subject to minimum wage hikes until the same day next year.

Earlier this month, the City Council passed the Los Angeles Minimum Wage Ordinance (Ordinance No. 184320) (the “City Ordinance”) requiring employers to pay a higher minimum wage and provide more sick leave benefits than state law. A summary of the City Ordinance is below, but employers with questions regarding compliance should contact their employment counsel.

Minimum Wage Increases

The City Ordinance raises the minimum wage as follows:

On July 1, 2022, and every following year, the minimum wage will increase based on the Consumer Price Index for Urban Wage Earners and Clerical Workers for the City's metropolitan area. Beginning in 2022, the City's Office of Wage Standards of the Bureau of Contract Administration will publish additional minimum wage increases on February 1 of each year, with the increases taking effect on July 1 of each year.

Notably, this new law defines "Employee" as a person who: (1) "in a particular week performs at least two hours of work within the geographic boundaries of the City for an Employer"; and (2) qualifies as an employee entitled to receive the state-mandated minimum wage. The average number of Employees, as defined above, for the previous calendar year will be used to determine the size of an employer. Any new employer must count the total number of Employees, as defined above, during its first pay period. 

The City Ordinance requires increases to the minimum wage sooner than the anticipated raises in California’s state-wide minimum wage, which will be set for employers with more than 25 employees to $10.50 on January 1, 2017, with gradual increases to ultimately $15.00 per hour on January 1, 2022. For smaller employers (25 employees or less) the gradual increases in state-wide minimum wage (much like the City Ordinance) will be delayed one year. Employers with exempt employees, however, should note that local minimum wage hikes (such as the City Ordinance) do not affect the minimum salary requirements to qualify for various wage and hour exemptions under state law. For example, the executive, administrative and professional exemptions—which permit employers to pay certain qualifying employees a salary instead of hourly wages with overtime—require a minimum monthly salary equivalent of at least twice the state-wide minimum wage.

The law also contains special provisions for nonprofit and transitional employers as well as for employers with employees who are 14 to 17 years old.

Expansion of Paid Sick Leave

The ordinance also provides six paid sick days (instead of the state-mandated three days) to Employees who, on or after July 1, 2016, work in the City for the same employer for 30 days or more within a year from his or her employment start date. The main requirements include:

• Paid sick leave must accrue on the first day of employment, or July 1, 2016, whichever is later;

• An Employee may use paid sick leave beginning on the 90th day of employment, or July 1, 2016, whichever is later;

• An Employee may take up to 48 hours (i.e., six work days) of sick leave for themselves, a family member, or "any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship" in each year of employment, calendar year, or 12 month period; 

• Employers must provide paid sick leave either by: (1) granting the entire 48 hours to an Employee at the beginning of each year of employment, calendar year, or 12-month period; or (2) using an accrual rate of one hour of paid sick leave for every 30 hours worked; 

• If an employer has a paid leave or paid time off policy (or provides payment for compensated time off) that is at least 48 hours, no additional time is required;

• Accrued unused paid sick leave must carry over to the next year, but employers may implement a cap of at least 72 hours;

• An employer may require an Employee to provide reasonable documentation of the reason for sick leave (though employers still must be cautious of state medical privacy laws);

• Like state law, accrued unused paid sick leave is not payable upon termination of employment; and

• If the Employee separates from employment and then is rehired within one year, then the employer must reinstate the Employee's previously accrued and unused paid sick leave.

A separate but related ordinance (the Los Angeles Office of Wage Standards Ordinance, Ordinance No. 184319) passed by the City provides for restitution and additional penalties for failure to comply with the above standards, and it also requires every Employer to post the notice published each year by the Office of Wage Standards. The notice must be in English, Spanish, Chinese (Cantonese and Mandarin), Hindi, Vietnamese, Tagalog, Korean, Japanese, Thai, Armenian, Russian and Farsi, and any other language spoken by at least five percent of the Employees at the workplace. This notice can be found online at: http://wagesla.lacity.org/.