The Ordinances impose significant new obligations regarding hiring and day-to-day operations of certain retail and service establishments that do business in San Francisco.

The San Francisco Retail Workers Bill of Rights (also referred to herein as the Ordinances) goes into effect on July 3 and imposes detailed regulations on the hiring, scheduling, promotion, payment, benefits, and equal treatment of full- and part-time employees at “Formula Retail Establishments.” The term “Formula Retail Establishment” applies to businesses that maintain at least two of the following features:

(1) a standardized array of merchandise

(2) a standard façade

(3) a standardized décor and color scheme

(4) uniform apparel

(5) standardized signage

(6) a trademark or servicemark

Retailers that have at least 20 Formula Retail Establishments worldwide^[1] and 20 or more employees^[2] in the City and County of San Francisco^[3] will be subject to the Ordinances.

This LawFlash discusses the obligations that the San Francisco Retail Workers Bill of Rights will impose on subject retailers and provides recommendations to ensure compliance.

Prerequisites for Hiring Additional Labor

Under the Ordinances, covered employers may need to offer work to existing part-time employees before hiring any new full^[4]- or part-time employees, contractors, or temporary employees to handle additional anticipated work. This hiring prerequisite is triggered when

• one or more part-time employees work less than 35 hours per week;

• an employer “reasonably determines” that an existing part-time employee is qualified to perform the additional anticipated work; and

• the additional work is the “same or similar to” the existing employee’s work.

The offer must be made in writing and be retained no less than three years. An employer need only offer an existing employee enough hours to give him or her 35 hours of work per week, and the employee may decline the offer.

Equal Treatment for Part-Time Employees

Under the Ordinances, subject employers must provide equal treatment to part-time employees as they do to full-time employees with “the same job classification”^[5] at the same level. This equal treatment applies with respect to (1) starting hourly wage, (2) access to employer-provided paid time off and unpaid time off, and (3) eligibility for promotions (subject to certain qualifications). Part-time employees will be entitled to earn the same starting hourly wage as full-time employees hired into jobs “that require equal skill, effort, and responsibility.” Hourly wage differentials are permissible if they are based on reasons other than part-time status, such as seniority or merit systems. Employee time-off allotments may be prorated based on hours worked.

Scheduling

Prior to employment, employers must provide a new employee with a good faith written estimate of the employee’s expected minimum number of scheduled shifts per month and the days and hours of those shifts. The estimate need not include “on-call” shifts. Employers must consider requests from an employee to modify the proposed schedule, but the employer retains sole discretion to grant or deny such requests and must notify the employee of the decision.

Once employment begins, subject employers will be required to provide employees with their work schedules two weeks in advance. Schedules may be posted in the workplace or provided electronically, so long as employees are given access to the electronic schedules at work. Employers must retain employee work schedules and payroll records for at least three years. Further, employers must provide employees with notice of schedule changes (a “schedule change” is defined as changing the date or time of a scheduled shift, canceling a scheduled shift, or requiring an employee to work when he or she was previously unscheduled).

Predictability Pay

If an employer makes changes to an employee’s schedule with fewer than seven days’ notice but more than 24 hours’ notice, the employer must provide the employee with one hour of pay for each shift change at the employee’s regular hourly rate. If the employer changes the employee’s schedule with less than 24 hours’ notice, the employer must provide—at the employee’s regular hourly rate—two hours of pay (if the changed shift is four hours or less) or four hours of pay (if the changed shift is longer than four hours).

If an employee is required to be “on-call” but is not called in to work, an employer must provide the employee with two hours of pay (if the on-call shift lasted four hours or less) or four hours of pay (if the on-call shift exceeded four hours). If the employer provides at least 24 hours’ notice that the on-call shift has been canceled or moved to another day, then the employer will not be required to provide this compensation to the employee.

Employers do not have to provide “predictability pay” or payment for on-call shifts if any of the following conditions apply:

a) Operations cannot begin or continue because of threats to employees or property.

b) Operations cannot begin or continue because public utilities fail.

c) Operations cannot begin or continue due to an “act of God” (such as an earthquake).

d) Another employee previously scheduled to work a shift is unable to work and did not provide at least seven days’ notice.

e) Another employee failed to report to work or was sent home.

f) The employer requires the employee to work overtime.

g) The employee trades shifts with another employee or requests a change in shifts.

Obligations of Successor Employers

If a Formula Retail Establishment is sold, the successor employer must retain, for 90 days, all employees who worked for the former employer for at least six months prior to the sale. If a successor employer determines that it needs fewer employees, it must retain the employees based on seniority. This requirement does not apply to supervisory or managerial employees. The successor employer must post a public notice of change of control at the establishment within 24 hours of the date that ownership is transferred. In addition, the successor employer must provide written notice to retained employees about their rights.

If a successor employer determines that it requires fewer eligible employees than were employed by the previous employer, the successor employer will be required to retain eligible employees by seniority based on the date of hire by the former employer, or, if there is an applicable collective bargaining agreement, pursuant to that agreement.

Property Services Contractor

The scheduling and equal treatment rules will also apply for “property services contractors” of Formula Retail Establishments covered by the Ordinances, which include contractors that provide janitorial and/or security services. Service contracts with contractors for janitorial or security services must include (1) a provision requiring a contractor to comply with the Ordinances and (2) a copy of the Ordinances. Covered retailers must also retain the contracts with these individuals for at least three years post-termination.

Retaliation Prohibition

The Ordinances prohibit adverse action against any employee in retaliation against the exercise of rights protected under these new rules. The Ordinances create a rebuttable presumption that any adverse action within 90 days of exercising such rights is an act of retaliation.

Posting of Mandatory Notices

The city’s Office of Labor Standards Enforcement (the Agency) will publish language regarding the new Ordinances on or before their operative date. Covered employers should plan to post this language in a conspicuous area where other mandatory notices to employees are found.

Enforcement

The Agency is vested with authority to enjoin suspected violations pending a complete investigation. It may impose fines of $500 per eligible employee per violation and award additional penalties of $50 to each affected employee for each day his or her rights were violated. In addition to these penalties, the Ordinances empower the Agency to fashion “appropriate relief” (which includes, without limitation, awards of lost wages to affected employees and injunctive relief) for violations.

Employers will have an opportunity to respond to allegations before being issued a formal notice of violation and will have the burden on appeal of showing that an Agency determination was improper. The Agency may also promulgate new rules or guidelines that pertain to the Ordinances’ enforcement.

Failure to comply with a notice of violation can result in civil action by a city attorney to obtain legal and equitable relief, including lost wages, injunctions, and attorney fees.

Recommendations

To ensure compliance with the San Francisco Retail Workers Bill of Rights, covered employers should

• review local hiring, promotion, time-off, and wage policies to ensure that part-time employees are treated similar to full-time employees, or are treated differently on the basis of some distinct characteristic other than part-time status or job title alone;

• review local scheduling practices to prepare for compliance with the advance posting and notice requirements established in the new rules;

• review local on-call staffing practices and evaluate any potential costs for continuing policies that regularly cause cancellation or rescheduling of on-call shifts;

• assess how the new requirement for offering additional work to existing part-time employees may affect existing company policies of, for example, establishing benefits eligibility at or below 35 hours worked per week;

• ensure that procedures are in place to comply with new recordkeeping requirements;

• begin drafting compliant work schedule notices that can be distributed to employees once the new rules become operative, and monitor the Agency’s publication of mandatory postings; and

• educate managers, payroll, and human resources personnel about these new rules, and ensure that employee and manager handbooks include language reflecting that scheduling, promotion, and other policies implicated by these rules will conform with applicable local law.

Other Legislation Specific to San Francisco Employers

Employers with operations in San Francisco City and County should also take this opportunity to review compliance with other regulations unique to the area, such as the following:

Minimum Wage—The minimum wage jumped to $12.25 on May 1. Employers should update practices and postings accordingly.

Paid Sick Leave—Employers generally must provide one hour of paid sick leave for every 30 hours worked by employees in San Francisco, including temporary and part-time staff.

Commuter Benefits—Employers must provide pretax transportation deductions, employer-paid transportation benefits, and/or employer-provided transportation.

Healthcare Security—Employers must make certain required expenditures on employees’ healthcare services or reimbursement of the cost of such services.

Fair Chance Ordinance—Employers must follow strict rules governing the use of applicants’ and employees’ arrest and conviction records.

Family Friendly Ordinance—Employers must provide qualifying employees with flexible and predictable working arrangements to care for young, seriously ill, and elderly family members, unless there are legitimate business reasons for refusing to do so.

_{[1] An amendment scheduled for a vote on June 10, 2015 proposes changing the number of retail sales establishments worldwide a business must have to be covered by the ordinances from 20 to 40 . An additional amendment to be considered on June 10, 2015 would allow collective bargaining agreements covering employees of formula retail establishments to waive the protections of these ordinances.}

_{[2] This baseline includes corporate officers and executives, temporary employees retained through a staffing agency, or any other individual for whom the employer “exercises control over the wages, hours, or working conditions.”}

_{[3] Because the Ordinances encompass both the city and county of San Francisco, retailers with storefronts at San Francisco Airport should also prepare for compliance with these new rules.}

_{[4] A full-time employee is defined as one who works 35 or more hours in a week.}

_{[5] Neither the enacted ordinances nor prior drafts specify what constitutes a “job classification,” and leave open questions as to, for example, whether two employees with different job titles can share a classification.  Employers should use caution when relying on job titles alone when drawing distinctions between full- and part-time employees in the context of, for example, promotions and benefits.}