Retail Chain Establishments Face New Wage-and-Hour Requirements in San Francisco

January 07, 2015

BY JEFFREY D. WOHL & C. YEWLEH CHEE

Starting July 3, 2015, retail chain establishments operating in San Francisco will need to comply with new requirements affecting the work schedules and terms of employment of their employees. The Predictable Scheduling and Fair Treatment of Formula Retail Employees Ordinance (Ordinance No. 241-14, available here) and the Hours and Retention Protections for Formula Retail Employees Ordinance (Ordinance No. 236-14, available here)—together known as the “San Francisco Retail Workers Bill of Rights”—require more predictable work schedules; establish new protections for part-time employees; create new liabilities for short-notice schedule changes, on-call shifts that do not result in actual working hours, and violations of the ordinances; and impose retention requirements for employees affected by a company’s change in control. The ordinances are estimated to affect approximately 1,250 formula retail establishments in San Francisco, accounting for 12% of all retailers operating in the City.

To Whom Do the Requirements Apply?

The ordinances apply to employers that:

own or operate a “formula retail establishment,” which includes not only retail companies, but also restaurants, banks, movie theaters, bars, and other businesses that fall under the San Francisco Planning Code’s definition of “formula retail use”*;
have at least twenty retail sales establishments worldwide; and
employ at least twenty people in San Francisco.

The ordinances also largely apply to contractors or subcontractors that provide janitorial or security services at a covered employer’s San Francisco location.

Notice of and Compensation for Work Schedule Changes

Before a new employee begins working at a “formula retail establishment,” the employer must provide a non-binding estimate of the number of shifts the employee can expect to work per month, and the days and hours of those shifts. An employee may request a modification of the proposed work schedule, and the employer must tell the employee whether it will accept or reject the request prior to the employee’s start date.

Employers must provide employees with their work schedules at least two weeks in advance, either by (1) posting the schedule in a readily accessible location at the workplace, or (2) sending the schedule electronically, as long as all employees have access to the electronic schedule at the workplace.

If an employer changes an employee’s schedule, it must provide notice by in-person conversation, telephone call, e-mail, text message, or other electronic means. For each previously scheduled shift the employer moves to a different date or time, or cancels, the Predictable Scheduling and Fair Treatment of Formula Retail Employees Ordinance requires the following compensation:

For between 24 hours’ and seven days’ notice, one hour of pay.
For less than 24 hours’ notice, if the shift is four hours or less, two hours of pay.
For less than 24 hours’ notice, if the shift is more than four hours, four hours of pay.

In addition, for each shift an employee is required to be on call, but is not actually called in to work, an employer must provide two hours of pay for each on-call shift of four hours or less, or four hours of pay for each on-call shift of more than four hours.

The extra compensation rules for schedule changes and on-call shifts do not apply if the employee requests a schedule change, or if another employee is unable to work due to illness, vacation, or disciplinary action, among other exceptions.

Treatment of Part-Time Employees

The ordinances also contain a number of provisions relating to part-time employees. The new laws require covered employers to offer additional hours to part-time employees before hiring new employees or using contractors or a temporary services or staffing agency. Employers must also provide part-time employees with the same starting hourly wage, same access to time off, and same promotion opportunities as similarly-situated full-time employees.

Changes in Control

Under the Hours and Retention Protections for Formula Retail Employees Ordinance, if a company undergoes a change in control, the new employer must retain workers under the same terms of employment with respect to job classification, compensation, and number of work hours for 90 days. During this 90-day period, the new owner cannot terminate a retained employee without cause. Furthermore, if the new owner decides that it needs fewer employees than did the previous employer, it must retain employees based on seniority or an applicable collective bargaining agreement. The provisions regarding changes in control do not apply to “managerial, supervisory, or confidential” employees, or to janitorial or security service contractors providing services at a covered establishment.

Anti-Retaliation Provisions

Both ordinances make it unlawful to take adverse action against any person in retaliation for exercising protected rights, including the right to file a complaint with the San Francisco Office of Labor Standards Enforcement (“OLSE”), the right to inform any person of his or her rights under the ordinances, and the right to cooperate with the OLSE or other persons in the investigation or prosecution of alleged violations of the ordinances. The Hours and Retention Protections for Formula Retail Employees Ordinance creates a rebuttable presumption of retaliation if an employer takes an adverse action within 90 days of a person exercising a protected right.

Remedies for Violations

The ordinances authorize the OLSE to investigate possible violations of the new laws. If the OLSE determines that a violation has occurred, it may issue a Determination of Violation setting forth appropriate relief. Under the Hours and Retention Protections for Formula Retail Employees Ordinance, the OLSE may require an employer to offer additional hours of work to part-time employees, reinstatement, payment of lost wages, and payment of an administrative penalty in an amount up to the award of lost wages. Violations of certain enumerated requirements may result in a further administrative fine of up to $500 per employee. For violations of the Predictable Scheduling and Fair Treatment of Formula Retail Employees Ordinance, “appropriate relief” may include lost wages and a $50 administrative penalty for each employee. Both ordinances also provide for payment of the OLSE’s enforcement costs.

Neither ordinance includes a private right of action, but the City Attorney may bring a civil action against an employer under both ordinances. Remedies include the payment of lost wages, a civil penalty up to the amount awarded for lost wages, reinstatement, injunctive relief, and attorneys’ fees and costs.

Notice, Posting, and Recordkeeping Requirements

The ordinances require the OLSE to publish notices informing applicants and employees of their rights under the new laws. An employer must post the notices at every workplace, job site, or other San Francisco location under its control that its employees frequently visit. The ordinances set forth a number of other notice, posting, and recordkeeping requirements. For example, employers must:

retain work schedules and payroll records for three years;
keep copies of written offers to part-time employees for additional work hours for three years;
post public notice of any change in control at the affected establishment; and
include in its contracts with janitorial and security service contractors a provision requiring the contractors to comply with the ordinances (with the exception of the requirements relating to changes in control), and retain copies of the contracts for three years following the expiration or termination of the contracts.

Next Steps

These new ordinances merit close review—now—by all retail chain establishments operating in San Francisco to ensure full compliance starting this July. They also should be viewed as a possible harbinger of what other municipalities, and perhaps some states, may implement in the future on behalf of retail workers.
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* Section 303.1 of the San Francisco Planning Code defines “formula retail use” as a type of “retail sales or service activity or retail sales or service establishment” that maintains two or more of the following features: a standardized array of merchandise, a standardized façade, a standardized décor and color scheme, uniform apparel, standardized signage, or a trademark or servicemark. “Retail sales or service activity or retail sales or service establishment” includes the following uses as defined in the San Francisco Planning Code: bar; drive-up facility; eating and drinking use; liquor store; sales and service, other retail; restaurant; limited-restaurant; take-out food; sales and service, retail; service, financial; movie theater; amusement and game arcade; service, limited financial, except certain ATMs; service, fringe financial; tobacco paraphernalia establishment; massage establishment; and service, personal.

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