San Jose’s Opportunity To Work municipal ordinance takes effect this Monday, March 13.

Retailers, franchises and chains with employees in the city need to be ready. The OTW is one of the latest “predictive scheduling” measures being enacted by local governments across the country, in an effort to provide more working hours and financial gain to the workforce – part-time workers in particular. The San Jose measure was enacted on the heels of the San Francisco Formula Retail Employee Rights Ordinance, which was passed on January 26, 2016.

The San Jose ordinance could be an administrative catastrophe for employers who are subject to its provisions.

The ordinance, approved by 60 percent of the city’s voters last November, requires an employer to offer additional work hours to current qualified part-time employees before hiring any new employees, subcontractors or temporary workers, or staffing agencies. An employer may use good faith and reasonable judgment in determining whether a part-time worker has the skills and experience to perform the work, and it may use a transparent and nondiscriminatory process to distribute the hours or work among qualified employees.

The basic provisions of the OTW are as follows:

Definition of “employer.” The ordinance defines “employer” very broadly. An “employer” is a person, corporate officer or executive who directly or indirectly employs or exercises control over the wages, hours, or working conditions of an employee. To be an “employer,” the individual or entity must also (1) be subject to San Jose’s business license tax, or (2) maintain a place of business within the city of San Jose that is exempt from the business tax by state law. Thus, an individual as well as a business can be an “employer.”

Application. The OTW applies to “employers” who have at least 36 non-exempt employees, including full-time and part-time employees. If the employer is part of a chain that is not owned by a franchisee, the threshold number of employees is met by counting all employees at every location where the chain operates. For example, a supermarket with three locations would be required to count all employees at all three locations, even if some of those locations are outside San Jose. If the employer is a franchisee, the number is based on the number of employees at every location owned by that franchisee and operated under the same franchise, whether or not located within the city.

Employers can be comforted by the fact that the OTW has no application to exempt (executive, administrative and professional) employees. The ordinance applies only to part-time employees who perform at least two hours of work in a calendar week for an employer, and who are entitled to payment of the minimum wage under California law.

Employer rights. Only employees who receive minimum wage are included in the threshold count and are required to be offered additional work hours. The OTW cannot be used as a means of compelling an employer to offer an employee additional hours if doing so would result in the payment of any premium.

Penalties. Violation of the OTW will result in a warning for a first offense, but subsequent violations may result in substantial civil penalties. There is also a private right of action for employees who claim damages by a violation, including the right to file a lawsuit with the potential to recover back pay, civil penalties of $50 a day for each employee harmed, and attorneys’ fees and costs. The availability of attorneys’ fees is expected to draw the attention of the plaintiffs’ bar.

Exemptions. An employer can receive a 12-month exemption from the OTW if it can demonstrate that it has taken all reasonable steps to comply, but that full and immediate compliance would be impracticable, impossible, or futile. Determinations will be made on a case-by-case basis, and extensions are possible if deemed appropriate.

A hardship exemption can be granted for unpredictable work circumstances, or where the work requires specialized skills and there is a need to have employees on call.

Analysis. The OTW is premised on a belief that companies use part-time workers to avoid healthcare and other job-related benefits. Thus, the ordinance seeks to ensure that workers have enough hours to earn adequate income and benefits for themselves and their family members. Regrettably, the measure ignores the fact that some workers themselves desire and require more flexibility of hours. Although the measure does not prohibit employees from turning down the offered hours, it places a stranglehold on fair-minded employers, requiring them to

  • constantly monitor and adjust employees’ work schedules,
  • determine and document which employees are “qualified” for additional work assignments,
  • determine whether the hours are to be considered “additional hours,” and
  • create new processes to offer and distribute work hours.

The San Jose Office of Equality Assurance has created a Notice and other compliance materials, which employers should immediately begin to post and follow. Starting Monday, employers must carefully review their staffing schedules and update recordkeeping requirements, in compliance with the new ordinance. More information is available on the city’s website.

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