New York & California Legislation Update: NYC Amends Paid Sick Leave Rules; New York Budget Includes Paid Sick Leave and Wage Minimum Increases; California Enacts $15 Minimum Wage

New York state and New York City employers should be aware of significant employment law developments regarding the issuance of the final amended New York City Earned Sick Time Rules and the passage of New York state’s 2016-2017 budget, which includes provisions for paid sick leave and minimum wage increases. Employers should also take note of California’s new minimum wage laws. These legislative developments are discussed below.

New York City Earned Sick Time Act Rules

As we previously reported, on June 26, 2013, the New York City Council enacted the Earned Sick Time Act (the Act) and, in February 2014, voted to expand the Act’s protections. The Act, as amended, went into effect April 1, 2014. Recently, New York City’s Department of Consumer Affairs (DCA), the agency charged with enforcing the Act, adopted the final amended Earned Sick Time Act Rules (the Rules). The Rules, which went into effect March 4, 2016, clarify a number of issues under the Act and impose additional requirements on employers:

• Number of Employees for Coverage – The business size for businesses operating for less than one year will be determined by counting the number of employees performing work per week at the time an employee uses sick leave, unless such number fluctuates between five or fewer employees and five or more employees per week, in which case the business size will be determined based on the average number of employees per week during the 80 days preceding the date the employee uses sick time. The business size of businesses operating for more than a yearwill be determined by the number of employees working per week at the time the employee uses sick leave, again unless such number fluctuates, in which case size will be determined based on the average number of employees per week during the previous calendar year.
• Joint Employers – An employer is considered a joint employer when two or more employers have some control over the work or working conditions of an employee. Employees of joint employers must be counted by both employers when determining business size. Joint employers are individually and jointly responsible for compliance with the Act. Notwithstanding the foregoing, temporary help agencies are responsible for compliance with the Act with regard to specific temporary employees.
• Covered Employees – An employee is protected under the Act if he or she works, including telecommuting, for more than 80 hours in a calendar year while physically located in New York City. The employer for whom an employee works need not be located in New York City.
• Sick Time Increments – Employers may determine the amount of sick time an employee may use at a given time, however, the minimum increment of sick time use cannot exceed four hours per day and must be “reasonable under the circumstances.” Employers may also set fixed periods of 30 minutes or less for the use of sick time beyond the four-hour minimum increment. As an example, the Rules state that an employer can require an employee who arrives to work at 12:17 p.m. after a doctor’s appointment to start at 12:30 p.m.
• Carry Over – Employees may carry over up to 40 hours of unused sick time from one calendar year to the next. Employees may be prohibited from carrying over unused sick time only if an employer has a policy of paying employees for unused sick time at the end of the year and meets or exceeds the minimum requirements under the Act.
• Employer Notification – Employers are required to post or distribute, in a manner that reasonably assures employees receive, written sick time policies. At minimum, such policies should include the employer’s method of calculating sick time (i.e., frontloading or accrual), the limitations and conditions placed on the use of sick time, and whether or not unused sick time may be carried over.
• Employee Notification – Employers may require employees to provide reasonable notice of the need to use sick time where foreseeable. Employers may also require employees to provide notice as soon as practicable where the sick time is not foreseeable. Employers cannot require employees to provide notice more than seven days prior to the start of sick time.
• Medical Documentation – Employers may require reasonable written documentation that an employee’s use of sick time was for an authorized purpose when an employee is absent for more than three days.
• Employee Abuse of Sick Time & Retaliation – Employers may discipline employees who use sick time for unauthorized purposes. Nonetheless, employers are prohibited from taking any action that is reasonably likely to deter an employee from exercising rights under the Act.
• Sick Time Pay – Employers must compensate employees using sick time at their regular rate of pay, except that employers need not pay employees an overtime rate of pay if an employee uses sick time during hours that would have been designated as overtime. Sick time must be paid no later than the payday for the next regular payroll period following the sick time.
• Employer Records – Employers are required to maintain records demonstrating compliance with the Act for a three-year period, including: each employees’ name, address, phone number, dates and period of employment, rate of pay, and exempt status; the hours worked each week for non-exempt employees; the date and time of each instance of sick time used and the amount paid for each instance; any change in the material terms of employment; and the date the employee received a Notice of Rights. Employers shall provide the DCA with access to these records upon appropriate notice.

The full text of the Rules can be found here.

New York State 2016-2017 Budget: Minimum Wage Increases and Paid Sick Leave

On April 4, 2016, New York Governor Andrew Cuomo signed legislation as part of the state’s 2016-2017 budget, enacting a plan to increase the statewide minimum wage to $15 and provide for 12-week paid family leave, which will be funded by a payroll deduction on employees.

Paid Family Leave
The New York state budget agreement includes a paid family leave program, to be phased over time. When fully phased-in, employees will be eligible for 12 weeks of paid family leave when caring for an infant, a family member with a serious health condition, or to relieve family pressures when someone is called to active military service. Benefits will be phased-in beginning in 2018 at 50 percent of an employee’s average weekly wage, capped to 50 percent of the statewide average weekly wage. Benefits will be fully implemented in 2021 at 67 percent of an employee’s average weekly wage, capped to 67 percent of the statewide average weekly wage. Employees are eligible to participate after having worked for their employer for six months.

$15 Statewide Minimum Wage
For workers in New York City employed by large businesses (those with at least 11 employees), the minimum wage would rise to $11 at the end of 2016, then another $2 each year after, reaching $15 on December 31, 2018. Other types of workers would have the following wage increases:

• For workers in New York City employed by small businesses (those with 10 employees or fewer), the minimum wage would rise to $10.50 by the end of 2016, then another $1.50 each year after, reaching $15 on December 31, 2019.
• For workers in Nassau, Suffolk, and Westchester Counties, the minimum wage would increase to $10 at the end of 2016, then $1 each year after, reaching $15 on December 31, 2021.
• For workers in the rest of the state, the minimum wage would increase to $9.70 at the end of 2016, then another .70 each year after until reaching $12.50 on December 31, 2020 – after which it will continue to increase to $15 on an indexed schedule to be set by the Director of the Division of Budget in consultation with the Department of Labor.

Further, the bill provides a safety valve to the increases. Beginning in 2019, the state Division of Budget Director will conduct 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.

More information on the New York 2016-2017 budget is available here.

California Minimum Wage

On April 4, 2016, California Governor Jerry Brown signed a minimum $15 wage legislation, Senate Bill No. 3. The bill takes effect on January 1, 2017, and provides minimum wage increases on an annual basis for almost all California minimum wage workers.

For employers with at least 26 employees, the minimum wage will increase to $10.50 per hour in 2017; $11 per hour in 2018; $12 per hour in 2019; $13 per hour in 2020; $14 per hour in 2021; and $15 per hour in 2022. Thereafter, the state director of finance will apply a formula to determine additional annual minimum wage increases based on changes in the Consumer Price Index. For employers of 25 or fewer employees, these same wage increases will go into effect one year later than the effective date for larger employers.

The California law also requires the state director of finance to analyze various California financial conditions and report annually whether economic conditions can support a scheduled minimum wage increase, as well as certifying that determination to the governor and California legislature. The governor is in turn empowered to make “a final determination on whether or not to temporarily suspend a minimum wage increase”—although the governor may only do so “no more than two times.”

Employers should note that they may still be subject to any municipal ordinances that call for higher minimum wages than the state law. For example, the Los Angeles Minimum Wage Ordinance set to take effect on July 1, 2016 calls for higher minimum wages sooner than those set forth in new statewide legislation.

Additional information about the California’s minimum wage law can be found here. The text of the Bill can be found here.

Significantly, the movement to adopt a $15 minimum wage is likely to spread to other states and cities. New Jersey and the District of Columbia may include a $15 minimum wage proposal on upcoming ballots. Several U.S. cities and counties, including Los Angeles, San Francisco, and Seattle, have already approved a $15 wage minimum.

Recommendations

Given these regulatory updates and latest guidance, employers should: (1) review sick leave policies and procedures to ensure compliance with New York state and New York City regulations, as well as any other applicable jurisdictions; (2) conduct annual internal pay audits, with close attention to minimum wage workers, and ensure compensation levels are adjusted to comply with the new thresholds; and (3) continue to monitor minimum wage requirements set forth by any applicable local ordinances to ensure compliance with unique minimum wage requirements that exceed even the new state standards.