California Employment Law Update

As if Employers are not already reeling under the burden of new California Wage and Hour Laws, cities like Los Angeles, are now adding an additional layer of concern with a broad and complicated minimum wage and sick time ordinance singling out the Hotel Industry, as well as studying the possibility of additional, broader proposals for minimum wage increases across the board in 2015.

Los Angeles now has one of the highest minimum wages in the country, but (for now) it only affects one industry.  The city council passed a minimum wage increase to $15.37 per hour for workers in “large” hotels (more than 150 rooms).  Although the media has focused on the minimum wage hike, this new law is not just a minimum wage law; there are also sick time and tip provisions explained below.

It is important for all city employers to know that the City Council and Mayor are considering a city-wide minimum wage for everyone.  That law is expected to raise the minimum wage to $13.25, or more, within the City of Los Angeles, and is coming, likely in 2015.  It is not yet known if the city-wide minimum wage law will replace this hotel worker minimum wage.

Hotel worker minimum wage

The minimum wage must be paid to all workers in the hotel (including restaurants and shops within the hotel, even if sub-leased or contracted to another company) except managerial, supervisory or confidential employees.  The new requirement will be phased in; it will take effect on July 1, 2015 for hotels with 300 or more rooms, and July 1, 2016 for hotels with 150 or more rooms.  Starting on July 1, 2017, the hotel worker minimum wage will be adjusted every year for inflation.  Provisions of the ordinance prevent hotels from closing rooms to avoid its effects.

The new law does apply to airport zone hotels and, as of July 1, 2015, replaces the existing living wage law for airport zone hotel workers.

Exemptions

The new law exempts hotels that enter, or already have, collective bargaining agreements (“CBA”) with their employees, even if the CBA provides for a lower wage, if the CBA has certain provisions.  This exemption would only apply to the union employees in the hotel, and employers should consult counsel to ensure their CBA satisfies the other requirements for the exemption.

The City Controller also may grant a waiver for only one year, on application, to hotels that can prove the new requirement would force them into bankruptcy or force them to reduce their workforce by 20% or work hours by more than 30%.  Expect this waiver to be granted only in exceptional circumstances.

Service Charges

The ordinance also states that service charges (including room service and porterage service) cannot be kept by the hotel, and must be paid to the employee performing the service, and not supervisory or managerial employees.  Tips, service charges, and bonuses the worker might receive cannot be counted towards the minimum wage.

Sick time

The ordinance also requires hotels to give full time employees (those working 40 hours per week or more) at least 96 hours per year of compensated time off, accruing weekly, which can include sick, vacation, and/or personal time.  Accrual may stop at 192 hours, but after that, cash payments must be given for paid time off accrued over the maximum, so the 192 hours is not really a “cap.”  A proportional amount of time off, determined by hours worked, must be given to part time employees.  Additionally, if an employee’s paid time off is exhausted, the ordinance requires hotels to allow an employee to take unpaid sick leave of up to 80 hours per year to use for the employee’s own illness or the illness of an immediate family member.

Steps to take

  • Prepare to pay the applicable minimum wage for your hotel size by July 1, 2015 or July 1, 2016.
  • Pay attention to the yearly increases in the minimum wage.
  • Implement, or change, sick time/PTO policies to meet the high requirements of this ordinance.

Ensure service charges, if you charge such fees, go to the employees providing the services.

By: Brian E. Ewing, Esq.

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