Question: What are the requirements to meet the SF PPLO “existing paid parental leave policies” exemption by providing full pay to SF employees on new child bonding leave?

Short Answer: Employers must provide full pay to SF employees (up to the weekly cap) for at least the CA PFL new child bonding period (up to eight weeks) without integrating with other available benefits.

SF PPLO General Rule

The San Francisco Paid Parental Leave Ordinance (SF PPLO) requires employers who have employees working inside the geographical boundaries of San Francisco to provide Supplemental Compensation to certain employees who are receiving California Paid Family Leave (PFL) benefits to bond with a new child, so that the employees receive 100% of their normal weekly wages, up to a weekly maximum benefit, for up to eight weeks of parental leave.

There are two new child bonding partial wage replacement benefits that employees may access:

• The PFL law, where the benefit is paid by the State of California’s Employment Development Department (EDD); and

• The SF PPLO, where the benefit is paid by the employer.

PFL is a California state benefits program that provides eligible employees with partial wage replacement for up to eight weeks to bond with a newborn, newly adopted child, or foster child. The weekly benefit amount (WBA) is 60% or 70% (depending on income) of wages earned 5 to 18 months before the claim start date up to a maximum weekly benefit amount ($1,357 in 2021).

Under the SF PPLO, employers are required to provide employees receiving PFL for new child bonding with “Supplemental Compensation” equal to the difference between the employee’s PFL benefit amount and the employee’s normal gross weekly wages such that the employee receives 100% of their weekly wages, subject to a weekly maximum benefit amount ($905 in 2021).

• For more details on the SF PPLO generally, see our San Francisco Paid Parental Leave Ordinance (PPLO) Guide.

• For more details on Federal, California, and San Francisco leave laws generally, see our Newfront Leave Chart for Federal, California, and San Francisco.

SF PPLO Supplemental Compensation Exemption: Existing Paid Parental Leave Policies

The SF PPLO has an “existing paid parental leave policies” exemption that eliminates the requirement that the employer pay Supplemental Compensation (i.e., the remaining 30%-40% not paid by PFL during the new child bonding period).  Under the exemption, the employer must pay 100% of covered employees’ pay (at least up to the weekly cap) for at least eight weeks during the 12-month leave period.  Employers utilizing this exemption must provide the fully paid parental leave as eight consecutive weeks, unless the employee elects otherwise.

This 100%-pay approach under an existing paid parental policy disregards any other benefit available to the employee (e.g., from SDI/STD/PFL).  In other words, it cannot be integrated with other available partial wage replacement benefits in the same manner that standard SF PPLO Supplemental Compensation is integrated with PFL during the new child bonding leave period.

The reason for the exemption is to recognize that the employer has already been extra generous by paying the employee’s full pay during that period—when it could have integrated with PFL and paid only the remaining 30%-40% of PPLO Supplemental Compensation.  It makes sense intuitively that the employer should not also have to pay Supplemental Compensation if the employee subsequently takes PFL.

Many employers choose to take this exemption route even though it costs more (as a result of the inability to integrate with PFL or other benefits) because the administrative simplicity and enhanced employee experience can prove worth the additional cost.

Summary of Existing Paid Parental Leave Exemption:

• Advantages: Administrative simplicity for employer, easier for employees, new birthing mothers may receive full pay during disability (SDI) period prior to transition to new child bonding (PFL).

• Disadvantage: Extra cost because of inability to integrate with other available benefit streams.

SF PPLO Existing Paid Parental Leave Policy Requirements: Amended to Reflect Expanded Eight-Week PFL New Child Bonding Benefits

Effective July 1, 2020, PFL benefits expanded from six weeks to eight weeks for all claims, including new child bonding claims.  Per the existing SF PPLO terms that track PFL, this automatically extended the requirement for employers to provide Supplemental Compensation (i.e., the remaining 30% – 40% not paid by PFL during the new child bonding period) from up to six weeks to up to eight weeks.

• For more details, see our prior alert: California PFL Expands to Eight Weeks July 1, 2020.

The prior SF PPLO terms did not track PFL modifications for purposes of the existing paid parental leave policy exception.  To address this, the San Francisco Board of Supervisors amended the SF PPLO in April 2020 to provide that the duration of any existing paid parental leave policy must be at least the number of weeks PFL requires, including any PFL amendments to expand the duration in the future.

Accordingly, the SF PPLO requires that employers previously meeting the existing paid parental leave policy exemption by providing only six weeks of 100% pay must now extend the duration to eight weeks of 100% pay (at least up to the weekly cap) to meet the exemption for existing paid parental leave policies.

The amendment also will accommodate all future PFL expansions.  A task force is developing a proposal to further expand PFL to 12 weeks, which could be adopted as soon as the next state budget on July 1, 2021.  If that occurs, the SF PPLO Supplemental Compensation requirement and existing paid parental leave policy exemption will also automatically extend to 12 weeks.

SF PPLO Existing Paid Parental Leave Policy Requirements: Poster and Handbook Rules Still Apply

The SF PPLO requires employers to notify employees of their rights via a poster and the employer’s handbook.

Employers must post the SF PPLO poster in a conspicuous place at any worksite or job site where any covered employee works, or provide electronically for remote employees.  We confirmed with the OLSE that the poster requirement still applies even for employers utilizing the SF PPLO existing paid parental leave policy exemption.  The exemption only applies to avoid the requirement to provide Supplemental Compensation to employees—not the employee notification requirements.

Furthermore, if the employer maintains an employee handbook that describes personal or parental leave to its employees, they must also include a description of the employee’s PPLO rights.  This update was required for any edition of the handbook published on or after December 23, 2016 (the date the PPLO regulations were finalized).  This requirement will also continue to apply for employers meeting the existing paid parental leave policy exemption.

We recommend employers utilizing the existing paid parental leave policy exemption include a short and simple statement following the description of their new child bonding leave policies in the employee handbook stating that the policy meets this SF PPLO exemption.

• Sample Provision: The Company’s Parental Leave Policy satisfies the San Francisco Paid Parental Leave Ordinance pursuant to San Francisco Police Code Sec. 3300H.4(d) as an Existing Paid Parental Leave Policy.

SF PPLO in the Work-From-Home Era

The SF PPLO applies to “covered employees” meeting the following qualifications:

• Commenced employment at least 180 days prior to the start date of the leave;

• Performing at least 8 hours of work per week in San Francisco;

• At least 40% of the employee’s total weekly hours for the employer are in San Francisco; and

• Eligible for California PFL for new child bonding.

Where the employer’s San Francisco offices are closed or mostly closed, or opened only on a reduced basis, this could greatly reduce the number of employees who are SF PPLO covered employees.

Employees who are working exclusively from a home office outside of San Francisco (or any other non-SF place) in the three-month look-back period will not be a SF PPLO covered employee because they will a) not have performed at least 8 hours of work per week in San Francisco, and b) not have performed at least 40% of their total weekly hours for the employee in San Francisco.

Note that employees who are working from a home office in San Francisco will still be covered employees.  Hours worked from a home office in San Francisco are no different from a SF PPLO perspective than hours worked in a traditional San Francisco office.

• For details on the similar effect of the remote workforce on SF HCSO compliance, see our prior post: SF HCSO Compliance in the Work-From Home Era.

• For more details on the SF PPLO generally, see our Newfront San Francisco Paid Parental Leave Ordinance (PPLO) Guide.

• For more details on Federal, California, and San Francisco leave laws generally, see our Newfront Leave Chart for Federal, California, and San Francisco.

Regulations

San Francisco Police Code §3300H.4(d):

https://codelibrary.amlegal.com/codes/san_francisco/latest/sf_police/0-0-0-48848#JD_3300H.4

(d)   Existing Paid Parental Leave Policies. This Article 33H does not require a Covered Employer to provide Supplemental Compensation under Section 3300H.4 to a Covered Employee if the employer’s existing policy provides the employee with fully paid parental leave for at least the number of weeks paid leave is required by the California Paid Family Leave law, as amended from time to time, within any twelve-month period for purposes of New Child Bonding, whether or not such paid leave includes California Paid Family Leave benefits. Unless the Employee elects otherwise, the fully paid parental leave referenced in the prior sentence must be provided as consecutive weeks.