Updated 03/02/23: SF OLSE released FAQs on the Military Leave Pay Protection Act. The below article has been updated with key clarifying guidance from the FAQs.
In January 2023, San Francisco passed the “Military Leave Pay Protection Act” (Ordinance), which requires large private employers to provide paid military leave to military reservists called to active duty. The Ordinance, which goes into effect on February 19, 2023, requires employers with 100 or more employees worldwide to pay San Francisco employees the difference between their military pay and the amount they would have received from their employer while working their regular schedule.
Below we discuss the requirements of the new Ordinance.
Covered Employers & Covered Employees
Employers are subject to the Ordinance if they:
- Directly or indirectly or “through an agent or any other person, including through the services of a temporary services or staffing agency” exercise the control over the wages, hours, or working conditions of a covered employee; and
- Regularly employ 100 or more employees worldwide (if an employer’s headcount fluctuates, they should calculate business size based on the average number of employees per pay period in the preceding year).
Covered employees are those that work within the geographic boundaries of San Francisco (including part-time and temporary employees), who are a member of the “reserve corps of the United States Armed Forces, National Guard, or other uniformed service organization of the United States,” and are called to active duty.
The Ordinance does not apply to employees covered by a collective bargaining agreement that expressly waives the Ordinance’s requirements.
Supplemental Military Pay
As a reminder, federal law requires employers to provide protected unpaid military leave. Under San Francisco’s new Ordinance, effective February 19, 2023, covered employers must also provide covered employees the difference between the employee’s gross military pay and the amount of gross pay they would have received working their regular schedule, excluding overtime (unless overtime is “regularly scheduled”). In addition, all benefits, including but not limited to, health care, retirement, and profit-sharing benefits must be paid as if the employee had worked their regular work schedule.
- Gross Military Pay: An employee’s gross military pay includes the basic pay rate which can be assessed for the federal Armed Force at www.dfas.mil, which lists the current basic pay rates according to the employee’s rank. An employee’s gross military pay may also be stated on their written orders. Gross military pay does not include military pay allowances, such as combat, clothing, or housing.
- Gross Pay During Employee’s Regular Work Schedule: This includes compensation an employee would have received if they worked their regular schedule (does not include tips for tipped employees). If an employee does not work a regular schedule (e.g., 40 hours/week), their “regular work schedule” can be determined by looking at the pay periods in the 3 months immediately preceding the relevant period of leave. This calculation should not include pay periods where the employee was unpaid or partially paid.
Supplemental military pay can be offset by any other amount paid pursuant to law or the employer’s policy.
Duration: Employees can take military duty paid leave in daily increments, for 1 or more days at a time, up to 30 days in any calendar year.
Timing of Pay: Employers should make a good faith effort to provide the supplemental compensation no later than the payday for the payroll period when the employee’s military leave began.
Failure to Return to Employment After Active Duty: If an employee receives supplemental military pay, is fit for employment after being released from military duty, and does not return to their position with their employer within 60 days of being released, their employer may treat the supplemental military pay as a loan with interest. The interest may then accrue 90 days after the employee’s release from military duty, or return to fitness for employment, whichever is later. The loan will then be payable in equal monthly installments, not to exceed 5 years.
Employers may require employees to provide “reasonable” advance notice of the need for supplemental military pay, but only if military duty is foreseeable, such as scheduled trainings.
Employers must notify an employee of their right to supplemental military pay within a reasonable time of being notified of their call to active duty. Further, if an employer publishes an employee handbook that describes other leaves available to employees, the employer must include a description of the rights to supplemental military pay in the next edition of the handbook published after February 19, 2023.
Covered employers must keep records that document employees’ schedules, hours worked, and military leave for at least 4 years.
If requested, covered employers must allow the San Francisco Office of Labor Standards Enforcement (OLSE) to access these records. If an employer fails to maintain accurate records (or fails to allow OLSE access) and an issue arises regarding entitlements to supplemental compensation, it will be presumed the employer violated the Ordinance absent clear and convincing evidence otherwise.
The San Francisco Office of Labor Standards Enforcement (OLSE) can take steps to enforce the Ordinance, including initiating investigations and ordering appropriate relief, which may include the payment of unlawfully withheld supplemental military compensation and administrative penalties of up to $250 plus $50 per impacted employee per day.
The City, aggrieved individuals, and entities acting on behalf of the public can also bring a case for civil action and may be able to collect supplemental compensation, liquidated damages, attorney’s fees, and other equitable relief.
To prepare for the new Ordinance, employers may want to:
- Determine whether they are covered under the new Ordinance; and
- If covered, review current policies on wage replacement during a military leave, and if necessary, set up a process for providing supplemental military compensation to covered employees.
Covered employers should also be on the lookout for forthcoming implementation guidance.
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