Starting July 1, 2016, all employers in the Los Angeles area are required to pay employees a new minimum wage rate of $10.50 per hour and paid sick leave. The minimum wage rate will be adjusted every year according to the Los Angeles Minimum Wage Ordinance Section 187.02. Certain exemptions and deferrals may be available. Employers should review their pay and leave policies now in order to ensure compliance on day one.
Minimum Wage Increase
In Los Angeles, the minimum wage will increase incrementally for private sector, non-hotel industry employees as follows:
- Beginning on July 1, 2016, for employers with 26 or more private sector, non-hotel industry employees the minimum wage will be $10.50 per hour, and will increase annually to $12.00 (July 1, 2017), $13.25 (July 1, 2018), $14.25 (July 1, 2019), and $15.00 by July 1, 2020. The ordinance sets a similar time schedule for private sector, non-hotel industry private employers with 25 or fewer employees, but increases will start one year later, on July 1, 2017, and will reach $15.00 per hour by July 1, 2021.
- Starting on July 1, 2022, and continuing every year thereafter, the minimum wage will increase in conjunction with the Consumer Price Index, with adjusted rates announced every February 1st.
The current minimum wage in California is US$10.00 per hour. That is scheduled to increase to $11.00 per hour effective January 1, 2017, and will increase thereafter by $1.00 per year each of the next four years, resulting in a minimum wage of $15.00 per hour effective January 2, 2021.
Paid Sick Leave Increase
California’s paid sick leave law currently provides that:
- Employees accrue paid sick leave at the rate of one hour per every 30 hours worked.
- Employees may carry over accrued sick leave from year to year.
- Employers may cap the amount of accrued sick leave at 48 hours.
- Employers may limit the amount of paid sick leave used by an employee in a year to 24 hours.
- Employers may provide 24 hours of available paid sick leave up front in any given year to avoid the accrual and carry-over requirements.
- If the employee is rehired within one year, he or she is entitled to reinstatement of accrued but unused sick leave.
- Employers are not required to pay out accrued but unused sick leave upon termination.
Notice and Posting Requirements
The Los Angeles ordinance does not have express notice or posting requirements. So employers operating in Los Angeles will need to continue following the notice and posting requirements under state law. The notice must be in English and any other language spoken by at least 5% of the employees at the employees’ job site. Employers must also retain records relating to this new law for at least three years.
Enforcement and Penalties
The Los Angeles ordinance does not have any express provisions concerning penalties or enforcement. It instead indicates the Los Angeles Office of Wage Standards of the Bureau of Contract Administration will promulgate guidelines implementing the new ordinance. Those guidelines have yet to be announced.
- An employer failing to comply with the notice and posting requirements may also be subject to a civil penalty of $100 for each employee who was not given appropriate notice, up to a maximum of $2,000.
Impacted employers should immediately begin to review their current policies to ensure compliance by the anticipated effective date of July 1st by:
- Reviewing and revising, if necessary, paid sick time and/or PTO policies and procedures to ensure they meet the new ordinance requirements.
- Reviewing attendance and disciplinary policies to avoid potential interference and retaliation claims.
- Reviewing timekeeping, payroll and benefits systems to ensure compliance with the new ordinance requirements.
- Reviewing hourly rates of employees to ensure compliance with the new ordinance requirements.