If Pain (Or Anything Else), Yes Gain—Part 100: Lights, Camera, . . .West Hollywood, CA Local Paid Time Off Ordinance

Seyfarth Synopsis: West Hollywood, California enacted a general, non-COVID paid time off mandate with a minimum wage component. Effective January 1, 2022, for “hotel employers” and July 1, 2022, for other employers, this mandate includes compensated time off and uncompensated time off components. Various aspects of the city’s leave mandate make it an outlier as compared to the California State Paid Sick Leave Law (“PSL”)  and other municipal paid sick leave ordinances in California.[1] On May 16, 2022, West Hollywood amended the Ordinance. The city also has recently released regulations, model notices, and other administrative guidance in advance of the July 1, 2022, effective date that impacts non-hotel employers.

On November 15, 2021, West Hollywood, California[2] enacted an Ordinance requiring employers to allow accrual of up to 96 compensated hours per year for sick leave, vacation or personal necessity to full-time employees, and instituting a number of other requirements.[3] On May 16, 2022, West Hollywood amended the Ordinance, and recently released regulations and administrative materials, such as required posters regarding the new minimum wage and the time off components.

Here are the key components of the time off mandates:

• Different Effective Dates for Hotel Versus General Employers: For hotel employers, the Ordinance took effect on January 1, 2022. For all other employers, the Ordinance takes effect on July 1, 2022.
• Definition of “Employee”: The Ordinance defines “employee” as any person who in a particular week performs at least two hours of work within the geographic boundaries of West Hollywood for an employer, and is entitled to minimum wage under the California Labor Code and associated wage orders (i.e., is nonexempt). The regulations explain that even if an employer’s place of business is not physically located within the City, the Ordinance applies, but employees of employers outside the City shall only be paid the West Hollywood Minimum Wage for time worked within the City of West Hollywood. In addition, employees who do not spend all of their time in the City only accrue time off based on the time worked within the City.
• Definition of “Employer”: West Hollywood defines an employer as “any person, including a corporate officer or executive, association, organization, partnership, business trust, and limited liability company or corporation, who directly or indirectly, or through an agent or any other person, including through the services of a temporary service or staffing agency or similar entity, employs or exercises control over the wages, hours or working conditions of any Employee.”
• Definition of “Hotel Employer”: “Hotel employer” means “any person who owns, controls, or operates a Hotel in the city, and includes any person or contractor who, in a managerial, supervisory, or confidential capacity, employs Hotel Workers to provide services at a Hotel in conjunction with the Hotel’s purpose.” This includes a person or entity who owns, controls, or operates any contracted, leased, or sublet premises connected to, or operated in conjunction with, the Hotel’s purpose, or a person or entity who provides services at the Hotel.
• Definition of “Hotel Worker”: “Hotel Workers” are defined as any individuals whose primary places of employment are at one or more hotels and who are employed directly by the Hotel Employer, or by a person who has contracted with the Hotel Employer to provide services at the Hotel. This includes an employee who works in a restaurant or food and beverage service at a Hotel, regardless of whether the restaurant is Hotel-owned or operates out of a contracted, leased, or sublet space in a Hotel.
• “Paid Time Off” (Compensated Time Off): The Ordinance defines paid time off (“PTO”) as “paid sick leave, vacation, or personal necessity.”
• Provision of Paid Time Off: The Ordinance states that employers must “provide at least ninety-six (96) compensated hours off per year for sick leave, vacation, or personal necessity to full time employees.” That said, the City’s corresponding regulations and FAQs indicate that this compensated time off standard can be interpreted to mean that employers must allow eligible full-time employees to accrue up to 96 compensated hours off per year based on their hours worked and the Ordinance’s established accrual rate (see below). Part-time employees must receive a pro-rated amount. Employers must make this time available at the employee’s request.
• Time Can Be Compartmentalized: The regulations explain that multiple buckets of compensated leave are permissible. In other words, employers can separate paid sick time and paid vacation time. However, if an employer uses multiple buckets, “at least 50% of the time must either be vacation or personal necessity leave.” To further complicate matters, any paid sick leave component will need to comply with both the California State PSL and West Hollywood standards. Any personal time or vacation time will need to be treated as vacation time under California law (and paid out upon termination).
• Accrual: After the first six months of employment, full-time employees (those working at least 40 hours per week or whom the employer deems full-time, whichever is more generous) shall accrue at least 96/52 hours of compensated time off each week (which the regulations note means no less than 0.047 hours of compensated time off for each hour worked) in a calendar year that the employee has been employed by the employer. Compensated time off does not accrue for work in excess of 40 hours in a given week.
  • Part-time employees must accrue compensated time off in increments proportional to that accrued by someone who works 40 hours per week.
• Lump Sum Permissible. Employers can opt to use a single lump sum of PTO of at least 96 hours per year.
• Carryover: Accrued, unused, compensated time off will carry over until the time off reaches a maximum balance of 192 hours, unless the employer’s established policy is more generous.
  • No Cash-Out: The original Ordinance required covered employers to provide a cash payment to employees every 30 days for any accrued time above 192 hours. However, the amended version of the Ordinance and regulations establish the 192-hour maximum balance cap (i.e., point-in-time accrual cap) and delete the 30-day cash out provision. Thus, employers are not required to provide cash payments to employees who reach the maximum accrued compensated time off.
• Sick Leave (Uncompensated Time Off): Employers must also permit full-time employees to take at least 80 additional hours per year of uncompensated time off to be used for sick leave where the employee has exhausted their compensated time off for that year. Part-time employees receive a proportional amount.
  • Additional Rules for Uncompensated Time Off:
    • Employees are eligible to use accrued uncompensated time off after the first six months of employment or consistent with company policies, whichever is sooner.
    • Accrued, unused, uncompensated time off will carry over until the time off reaches a maximum of 80 hours, unless the employer’s established policy is more generous.
  • Rate of PTO Pay: Unlike California’s statewide PSL, per the FAQs, the West Hollywood Ordinance’s rate of paid time off is based solely upon the base rate of pay. Employers who seek to have paid sick leave comply with both state and local requirements will need to ensure that employees are paid at the highest applicable rate.
  • Exemption: Government agencies are exempt from this Ordinance. Additionally, Transitional Employers (“Nonprofit Corporations that provides Transitional Jobs for the long-term unemployed, and that have been certified by the City as a Transitional Employer”) are exempt.
  • Availability of Waiver: To mitigate against potential reduction of employment or work hours for employees, the City Manager may grant a waiver from the requirements of this Ordinance if the employer can demonstrate that compliance would force the employer, in order to avoid bankruptcy or a shutdown of the employer’s business, to reduce its workforce by more than 20% or curtail its employees’ total hours by more than 30%.
    • Notice of Waiver to Employees: If an employer seeks a waiver, it must provide (1) advance written notice to all employees of such application for waiver; and (2) written notice to all employees of the City Manager’s, or a designee’s, determination within three business days after such determination.
  • No Unlawful Practices: As with similar ordinances, this Ordinance prohibits employers from reducing hours or benefits of, or refusing to hire employees in order to pay wages less than the minimums established by the Ordinance. Furthermore, employers cannot fund the wages and benefits required by the Ordinance by reducing an employee’s pension, vacation, or other non-wage benefits, or by increasing charges for parking, uniforms, meals, or other work-related materials or equipment.
  • No Retaliation: Employers cannot take adverse action against employees for exercising rights protected by the Ordinance.
  • Penalties: Violators of the Ordinance are subject to administrative penalties.
    • Civil Remedies: Aggrieved employees may file a civil action against their employer. Prevailing, aggrieved employees are entitled to legal and equitable relief, including the payment of penalties up to $100 for violations per each day that the violation occurred or continued. Aggrieved employees can also recover reasonable attorneys’ fees and costs. Willful violations may result in treble damages.
  • Payout Upon Separation: Although the Ordinance is silent with regard to the issue of payout upon separation, the regulations explain that “any portion of Compensated Leave classified as vacation or personal necessity leave shall be paid out at the Employee’s regular wage rate upon termination” under the Labor Code. Portions allocated to sick leave do not need to be paid out upon termination. However, like regular California PSL, the West Hollywood regulations state that if an employee is rehired within a year of separation, previously accrued and unused paid sick leave, as well as uncompensated leave, must be reinstated.

We will continue to monitor and provide updates on West Hollywood paid leave developments as the Ordinance’s effective date approaches and on any subsequent changes.

As the paid leave landscape continues to expand, companies should reach out to their Seyfarth contact for solutions and recommendations on addressing compliance with this Law and sick leave requirements generally. To stay up-to-date on paid leave developments, click here to sign up for Seyfarth’s Paid Sick Leave mailing list.

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[1] In addition to the California statewide PSL law, there are local non-COVID-19 paid sick leave mandates in the following California municipalities: (1) Berkeley; (2) Emeryville; (3) Los Angeles; (4) Oakland; (5) San Diego; (6) San Francisco; and (7) Santa Monica. In addition, both Long Beach and Los Angeles have industry-specific paid sick leave ordinances affecting certain hotel employers.

[2] West Hollywood joins Maine, Bernalillo County, NM, and Nevada in enacting a paid time off law, rather than a law that is limited solely to paid sick and safe leave.

[3] In addition to addressing paid and unpaid leave for different employment groups, as described below, this Ordinance addresses other substantive topics such as surcharges and minimum wage.  Please reach out to your Seyfarth contact for more information.