Employment Alert: San Francisco Formula Retailers Will Soon Face New Requirements for Hourly Workers

Haight Brown & Bonesteel LLP
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On November 18, 2014, the San Francisco Board of Supervisors unanimously passed two separate pieces of legislation, collectively referred to as the "Retail Workers Bill of Rights," during its first vote on the measure. The legislation is expected to pass a second vote by the board and be signed into law in the coming weeks. The new law will have wide-ranging implications for chain retailers doing business in San Francisco.

The legislation applies to "formula retail" businesses in San Francisco, and establishes certain mandates regarding work schedules for part-time employees. Specifically, the new law requires employers to pay their employees for four hours of work if an employee is either on-call or sent home early; requires businesses to offer available additional hours of work to current part time workers before hiring new employees; and mandates successor employers retain employees for 90 days upon a change in control of the business. It also directs retail stores to provide employees with: 14 days advance notice of work schedules, extra pay for changing a schedule at the last minute, the same starting rate of hourly pay, access to time off, and eligibility for promotions, that the business provides to full-time employees.

The legislation, which will go into effect six months after its final passage, will affect "formula retail" businesses in San Francisco with 20 or more employees in the City. "Formula retail" is presently defined as retail stores, restaurants and hotels with more than 11 locations. After the Board of Supervisors voted against a proposal to raise that limit to 19 locations, an amendment was made to apply the ordinance to formula retail stores that have more than 20 locations.

"Formula retail" businesses include large stores such as Target, Costco and Trader Joes, as well as fast food franchises and restaurants like McDonald’s, Taco Bell, IHOP and TGI Fridays. However, the present formula retail definition also encompasses a wide group of franchise owners and others who are categorized as formula businesses but operate on a small level, such as 7-Eleven and Subway franchises that have few employees, as well as local chains like Philz Coffee, Blue Bottle Coffee and San Francisco Soup Co. The law also applies to “Property Services Contractors,” defined as contractors or subcontractors of Formula Retail Establishments that provide janitorial and/or security services to Formula Retail Establishments.

The penalties do not appear to be finalized but the nature of the penalties currently under consideration are significant. An employer who violates this ordinance may be subject to penalties including, but not limited to, being forced to offer additional hours of work to part-time employees, reinstatement of employees, payment of lost wages to the employee or person whose rights were violated, and the payment of an additional sum in the form of an administrative penalty that does not exceed the amount of the award for lost wages. The City is also entitled to costs incurred in enforcing such violations. Other penalties may include an administrative fine of up to $500 per eligible employee for violating other procedural requirements of the ordinance such as posting notice of the rights of employees, making payroll records available and offering additional hours in writing, among others.

The City Attorney may also bring a civil action against an employer for violating any requirement of the ordinance. If the City Attorney prevails, remedies include the payment of lost wages, the payment of an additional sum as a civil penalty not to exceed the amount awarded for lost wages, and reinstatement in employment and/or injunctive relief. The City Attorney shall also recover reasonable attorneys’ fees and costs.

The effects of the "Retail Workers Bill of Rights" will be felt far and wide considering that as of September 2014, approximately 1,250 formula retail establishments were operating in San Francisco, accounting for 12% of all retailers. San Francisco employers meeting the definition of "formula retail," especially those with seasonal businesses or unpredictable employment needs, will need to be attentive in order to ensure compliance with the new mandates imposed by this law or face potentially expensive administrative proceedings, penalties and/or lawsuits.

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