Effective January 1, 2017, San Francisco is scheduled to become the first city in the United States to require fully paid parental leave. The Paid Parental Leave Ordinance (the Ordinance) was passed unanimously by San Francisco’s Board of Supervisors, and promptly signed by Mayor Edwin Lee on April 21, 2016. Under the new law, employers must provide covered employees with six weeks of fully paid leave to bond with their new child in the first 12 months following birth, adoption, or foster care placement. The Ordinance phases in this paid leave requirement based on the employer’s size, with employers with 50 or more employees starting January 1, 2017, employers with 35 or more employees starting July 1, 2017, and employers with 20 or more employees starting January 1, 2018. The Ordinance does not apply to employers with less than 20 employees.

The Ordinance supplements the state’s already existing California Paid Family Leave law. Under that state-wide law, employees currently receive 55% of their pay, up to a maximum $1,129 per week, for six weeks of leave. That payment comes from the State Disability Insurance (SDI) program, and to be eligible an employee must have had SDI deductions withheld. Notably, Governor Jerry Brown signed a new measure on April 11, 2016 to raise coverage to up to 70% of an individual’s pay for those earning close to minimum wage, with workers making up to $108,000 annually receiving 60% of their pay. These new rates take effect in 2018. California’s paid family leave runs concurrently with the Family and Medical Leave Act (FMLA) and the California Family Rights Act (CFRA), which provide twelve weeks of unpaid leave.

The Ordinance will require employers to pay the 45% gap currently left open under California’s Paid Family Leave law. When the new state law raises the coverage rate above 55%, the employer’s obligation to pay the remaining wages will decrease proportionately. The Ordinance caps the amount an employer is required to pay if the employee has reached California’s maximum weekly cap. Thus, for example, under the 2016 rate an employer’s maximum weekly contribution under the Ordinance would be capped at $924 per week. An employer may require that an employee first use up to two weeks of the employee’s unused vacation to cover its paid leave obligations.

To be covered under the Ordinance, the employee must have begun employment with the employer at least 180 days prior to the start of the leave period, must be performing at least eight hours of work per week, at least 40% of which are within San Francisco, and be eligible under the Paid Family Leave law.

Should an employee voluntarily leave his or her employment within 90 days after their leave ends, the employer may request in writing that the employee reimburse the full amount received under the Ordinance.

The Ordinance also provides that reducing an employee’s wages or terminating an employee within 90 days of a request for leave gives rise to a rebuttable presumption that it was done to reduce or avoid the employer’s payment obligations. Thus, in a wrongful termination, retaliation, discrimination, or accommodation lawsuit, the employer would bear the burden to demonstrate that the wage reduction or termination was not to avoid payment of these wages.

Employers should prepare to implement the terms of the Ordinance by identifying whether they are a qualifying employer and, if so, identifying the workforce eligible for these benefits. Covered employers must be ready to implement these policies and benefits by the phase-in date, as determined by its number of employees. Employers are encouraged to seek guidance from employment lawyers to ensure full compliance with the Ordinance.