Employers looking to gain a foothold in San Francisco should carefully survey the terrain. San Francisco businesses are subject to local employment ordinances in addition to the many federal and state requirements. Even small businesses must comply with the host of mandates that do not apply outside the county borders. Here are the principal San Francisco ordinances that generally govern private-sector employers. Employers in specific industries may be subject to additional or different requirements.

San Francisco has its own minimum wage, adjusted annually for inflation. It is currently $9.79 per hour for private sector employers. The state minimum is only $8.00. The local wage applies to all employees who work in San Francisco for more than two hours per week. Employers must post an official notice stating the local minimum wage in six languages. Employers also must maintain wage records for four years.

All employees in San Francisco are entitled to no less than one hour of paid sick leave for every 30 hours worked, beginning 90 days after their first day of work. Even employees who spend only part of their working time in San Francisco earn sick leave. Employees are allowed to carry over leave from year-to-year, capped at 72 hours for employers with more than 10 employees.

Employees may use sick leave to provide care for a dependent, spouse, domestic partner, or other designated person. Employers may not require workers to find a substitute as a condition of taking paid sick leave. Employers may request reasonable verification that an employee dependent was sick. Various poster, recordkeeping, and non-retaliation requirements also apply.

All San Francisco employers must register and pay a payroll tax of 1.5 percent. Generally, all payroll is taxed, but some credits and exclusions apply. For example, payroll for employees who work in San Francisco during part of their working hours can be apportioned. Under a new ordinance, certain partnership and other “pass-through” income may be subject to the tax.

San Francisco requires for-profit employers of more than 20 persons to spend a minimum amount of money on health benefits for employees. For 2010, employers of more than 99 employees must pay at least $1.96 per hour to satisfy the requirement ($1.33 per hour for employers of 20-99 employees). The figures increase each year.

The requisite health expenditures can be provided in the form of insurance, reimbursements for medical expenses, Health Spending Accounts, or through the city’s Healthy San Francisco program.

Employers with 20 or more employees anywhere must provide employees in San Francisco working an average of at least 10 hours a week in the previous calendar month with one of the following options: a pre-tax deduction program, such as “Commuter Checks,” to allow employees to pay pre-tax dollars for transit or vanpool expenses; a monthly subsidy for transit or vanpool expenses equivalent to the value of a San Francisco MUNI Fast Pass (currently $55 per month); or free shuttle service on a company-funded bus or van between home and place of business. The employer must register with the San Francisco Dept. of the Environment and post a certificate of compliance.

San Francisco’s local anti-discrimination ordinance includes the same protected categories as federal law and California’s Fair Employment and Housing Act. In addition, San Francisco prohibits employment discrimination on the basis of height and weight. A San Francisco business must make “readily achievable modifications” required to accommodate height and weight. Readily achievable modifications could include providing uniforms or safety equipment in a wider range of sizes, and seating that accommodates heavy or tall individuals.

The anti-discrimination ordinance is enforced by the San Francisco Human Rights Commission, which investigates aggrieved individuals’ complaints. The ordinance applies both to employees and customers in places of public accommodation.

San Francisco prohibits employers from forbidding or preventing employees from engaging or participating in personal relationships, organizations, activities, or otherwise restricting their freedom of association, unless those relationships, activities, or associations have a direct and actual impact on the employees’ ability to perform their assigned responsibilities. This rule does not prohibit rules preventing conflicts of interest, and is largely consistent with state law.

Every San Francisco employer must have a drug free workplace policy. However, drug tests are only allowed when “the employer has reasonable grounds to believe that an employee’s faculties are impaired on the job” and the employee is in a position where “impairment presents a clear and present danger to the physical safety of the employee, another employee, or to a member of the public…..” Random testing is expressly prohibited. But the ordinance does not preclude drug testing required by federal or state law or regulation or by a collective bargaining agreement.

A state-licensed, independent lab must perform permitted testing. The employee must receive an opportunity to explain or rebut the test results and must pay to re-test the sample if desired.

In certain circumstances, San Francisco ordinances guarantee re-employment to displaced employees. For example, users of contracted janitorial and security firms must require that successor contractors retain employees who were employed by the previous contractor for eight months or more. Certain employees of “grocery establishments,” parking lot attendants and sanitation truck workers also are protected from displacement by changes in ownership.

All private security services in San Francisco must register with the Chief of Police. It is unlawful for a business to contract with an unregistered guard service. Unarmed employees of the employer need not register, but may have to be licensed by the state. Any person who carries a firearm in the course of employment must register with the Chief.

Organizations that do business with the city and county (including in some cases leasing city-owned real estate) must meet additional requirements. For example, certain government contractors and lessees must pay a “prevailing wage,” which is higher than even the local minimum wage. The required health care contributions also are higher for city contractors. Lessees at the airport also must pay mandated higher wages.

Contractors that supply certain goods to the city (including uniforms and bulletproof vests) must certify their products are produced without child labor, slave labor, or labor under conditions that routinely violate the labor laws of the country where the merchandise is produced.

Thousands of businesses cannot be wrong: it pays to do business in San Francisco. At the same time, San Francisco businesses must pay to do business. Employers benefiting from access to a skilled, educated workforce, proximity to transportation hubs, and high disposable incomes should invest in learning how to comply with the labyrinth of local laws and regulations governing their businesses. Failing to do so can result in unplanned expenses, including penalties and litigation costs.

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