ORLA Files Its Request for En Banc Review in Tip ‎Pooling Case ‎

April 12, 2016

On February 23, 2016, the Ninth Circuit Court of Appeals issued a decision in Oregon Restaurant and Lodging v. Perez that reversed a long-standing practice of many Oregon restaurant owners to pool the tips received by employees and redistribute the amount to all employees, including those who do not customarily earn tips, such as the kitchen staff. The decision’s result sent shock waves through the restaurant industry in Oregon. For more information on the earlier decision, refer to article: New Restrictions on Tip Pooling.

As expected, on April 6, 2016, the Oregon Restaurant and Lodging Association (“ORLA”) filed a petition in the Ninth Circuit Court of Appeals requesting a rehearing by the panel that decided Perez, or alternatively, requesting an en banc review. The ORLA argues that the Court upheld DOL regulations “that have the perverse and unlawful effect of creating a class of singularly favored employees with rights greater than those of other workers in the country, contrary to what Congress intended” when it enacted the Fair Labor Standards Act.

Oregon restaurant owners and others that are still pooling tips after the Perez decision’s release must now pay very careful attention to whether the Ninth Circuit grants an en banc review. If the Court denies review, then business owners will have only seven days to revise their tip pooling practices.

Update on Salary Increase for the FLSA White Collar Exemptions

April 4, 2016

By Jean Back

Update on Salary Increase for the FLSA White Collar Exemptions

On March 17, 2016, Representatives Walberg and Kline proposed a new bill, HR 4773 entitled “Protecting Workplace Advancement and Opportunity Act,” which is intended to nullify the proposed Department of Labor (“DOL”) rule that is set to raise the salary basis from $23,660 per year to $50,440 per year.

The bill asks Congress to make the following findings:

1)         That the new salary requirements would be:

a) a 113 percent increase during the first year after the final rule takes effect from the salary threshold in effect on February 29, 2016; and

b) an increase that would set the federal minimum salary threshold 20 percent higher than the minimum salary threshold under any state law effective on the date of enactment of this Act;

2)         That the cost of compliance with the July 6, 2015 proposed rule was underestimated.

3)         That the initial regulatory flexibility analysis of the proposed rule “failed to adequately identify the number of small entities affected by such rule and failed to address how such rule would affect regions with lower costs of living and differences in certain industries.”

Specifically, comments to the proposed rule asked the DOL to:

  • Reanalyze “‘the economic impact of the rule on small businesses,’ to ‘provide a more accurate estimate of the small entities impacted by [the proposed rule],’and to ‘include an analysis of industry sub-sectors, regional difference, and revenue sizes.’”
  • Reanalyze the “‘number of small non-profit organizations and small governmental jurisdictions * * * that are affected by this rule and the economic impact of this rule on these entities’”; and
  • “Provide greater transparency with respect to ‘compliance cost data’ and to ‘utilize data provided in the comment process to accurately estimate the human resources and financial management costs of this regulation.’”

4)         The DOL did not consider the impact of the new rule on the ability of employees who are reclassified from exempt to non-exempt employees to participate in workplace flexibility arrangements and programs.

5)         The DOL did not analyze the potential impact of the rule on companies that operate in multiple states with different cost of living and salary scales, and the costs and unique complications for these employers associated with reclassifying employees in multiple states.

6)         The DOL does not have authority to increase the salary basis on a yearly basis without participating in notice and comment rulemaking with respect to each change.

7)         Any change in the duties test in the Final Rule that was not previously vetted with the public by providing notice and comment for the specific revisions would violate the notice and comment provisions of the U.S. Code.

The bill was recently introduced and is currently before the U.S. House Committee on Education and the Workforce. One person who testified in favor of the new bill was Nancy McKeague, SHRM-SCP, senior vice president and chief of staff at Michigan Health and Hospital Association (MHA). She noted the significant problems that this large and sudden salary increase would have on employers. As reported by SHRM, one issue that she raised was that the new increased salary amount “will likely cause compression issues with entry-level and midlevel employees’ salaries nearing the level of their managers.”

Keep a lookout for further news on this bill, as the DOL has stated that it is targeting July 2016 as the release date for the rule. Once the final rule is issued, if this bill is unsuccessful, then employers will have 60 days to comply with the new rules.

New Restrictions on Tip Pooling

March 4, 2016

By Jean Ohman Back

On February 23, 2016, the Ninth Circuit Court of Appeals decided Oregon Restaurant and Lodging Association v. Perez, which validated a new Department of Labor (DOL) regulation that limits the tip pooling practices of employers who do not take a “tip credit.” The effect of this ruling is that whether or not an employer takes a tip credit, they may no longer pool their employees’ tips and distribute them among all employees, including those who do not customarily earn tips, such as the kitchen staff. Tip pooling is still allowed among employees who customarily receive tips.

This decision effectively reverses a previous Ninth Circuit Court of Appeals case, Cumbie v. Woodie Woo, 596 F.3d 577 (9th Cir. 2010), that found an Oregon employer who did not take a “tip credit” could have a tip pooling arrangement that pooled all tips, and distributed them among its waitstaff, who customarily earned tips, and its kitchen staff, who did not earn tips.

What exactly happened and what does this mean? To understand this decision, it is necessary to understand the legal terminology related to the payment of tipped employees.

Tip Credit – A tip credit is a practice allowed under the Fair Labor Standards Act (“FLSA”) where the employer can utilize some or all of the employee’s tips to assist in providing the employee with a minimum wage payment. In order for an employer to take advantage of the tip credit, the regulation requires that the employee retain tips (i.e., the employer does not take possession of the tips), and the employer inform the tipped employee that the employer is going to use a tip credit in order to pay the employee.

Tip Pooling – The same regulation that allowed for a tip credit also provided that it was legal to have a tip pooling arrangement among employees who customarily and regularly receive tips. This regulation did not mention including employees who do not customarily receive tips in a tip pooling arrangement. In the 2010 Cumbie decision, the Ninth Circuit Court of Appeals ruled that the tip pooling regulation that allowed tip pooling only among employees who customarily received tips applied only to employers who took tip credits. The Court found that an employer who paid the full minimum wage without taking a tip credit could therefore pool the tips of its employees and distribute them to all employees, tip earning and non-tip earning. However, the Department of Labor took issue with the Cumbie decision and promulgated a new rule to clarify that tips earned by an employee are the property of the employee. The 2011 Rule states:

Tips are the property of the employee whether or not the employer has taken a tip credit under [the FLSA]. The employer is prohibited from using an employee’s tips, whether or not it has taken a tip credit, for any reason other than that which is statutorily permitted under [the FLSA]: As a credit against its minimum wage obligations to the employee, or in furtherance of a valid tip pool. 29 C.F.R. § 531.52 (emphasis added).

This new rule prohibits an employer from use of a tip pool that includes employees who do not customarily earn tips, such as kitchen employees, whether or not the employer actually takes advantage of the tip credit.

After issuance of this rule, the Oregon Restaurant and Lodging Association filed a lawsuit to enjoin its enforcement, claiming that it was not valid. In addition, after the rule became effective, a group of casino dealers who earned tips sued their employer to oppose the employer’s tip pooling practice, which required the casino dealers to share tips with non-customarily tipped employees, i.e., kithchen staff and casino floor supervisors. The district courts that decided these cases relied on the Cumbie decision and ruled that employers who did not take tip credits were permitted to have a tip pooling arrangement that distributed tips to all employees including those who did not customarily receive them.

The losing parties in both cases appealed to the Ninth Circuit Court of Appeals, which resulted in the new Perez decision. The Ninth Circuit held that the Cumbie decision “did not foreclose the DOL’s ability to regulate tip pooling practices of employers who do not take tip credits.”

What does this mean? Employers who do not take a tip credit are foreclosed from having a tip pooling arrangement where employees who do not customarily earn and receive tips share tips with customarily tipped employees. However, under the Perez decision, while an employer cannot force tipped employees to share their tips with non-tipped employees in a tip pool, nothing in the law would prevent tipped employees on their own accord, without involvement of their employer, from forming a tip pool to share their tips if they wished. The point of the 2011 DOL rule and the new Ninth Circuit decision is that the employer may not redistribute the property of its tipped employees in a tip pool to employees who did not earn the tips.

The Advantages of Pooling SCA and Non-SCA Benefit Claims ‎Should Not Be Overlooked by Federal Contractors

February 16, 2016

By Walter Miller, Attorney at Law

Insurance carriers subsist largely due to risk pooling. Under an insurance arrangement, an employer or other party pays premiums to an insurer, and the insurer pays claims from the pool of premiums it collects from everyone it insures. The insurer’s financial risk is thus spread evenly among a large number of contributors.  In the case of group health insurance, the pooling approach smooths out the financial risks associated with adverse health interventions.

The key fringe benefit provided by federal contractors under the Service Contract Act (SCA) is medical coverage. Many federal contractors choose to avoid the additional ancillary costs of providing medical coverage to an insurance policy by providing the benefits on a self-insured basis. The self-insured arrangement is permitted under the SCA regulations, provided that the contractor’s fringe benefit contributions are paid irrevocably to a trustee or third person pursuant trust or other funded arrangement. 29 CFR §4.175(b).

Federal contractors that choose to self-insure the medical benefits for SCA employees should not overlook the advantages of risk pooling, and would be wise to consider funding the claims of the contractor’s non-SCA employees through the same risk pool maintained under the SCA trust. Any notion that the risk pooling is not permitted is false.  The SCA fringe benefit regulations require that a plan describes a definite formula for determining the benefits for each of the covered SCA employees, and, as stated above, be held in a trust fund that precludes a contractor from recapturing any of the contributions paid to the trust or diverting the trust funds for its own use.  The SCA regulations do not require that the trust fund be maintained solely for the payment of benefits for SCA employees, and in fact, contemplate the payment of benefits for non-SCA employees (such as those who are temporarily not performing work on an SCA contract).

Funding the benefit claims of both SCA and non-SCA employees is similar to, and offers the same risk pooling advantages as, claims funded through a paid insurance policy. These advantages include the following:

  • A claims pooling arrangement can provide better security for covered employees through the spreading of financial risk and economies of scale;
  • The claims pooling arrangement also provides greater portability of benefits and eligibility for employees who move from SCA to non-SCA positions;
  • Reporting under the Affordable Care Act can be simplified through a pooling arrangement;
  • With a greater number of covered individuals for whom claims are paid, benefit and administrative costs can be better stabilized;
  • Experienced trustees and administrators specializing in benefit plan operations can be retained on a more cost-effective basis; and
  • The scope of ERISA fiduciary responsibilities can be narrowed by the delegation to a more limited number of advisers.

A pooling of claims does not alleviate the contractor’s general obligations under the SCA. A contractor must maintain records evidencing SCA hours, and if applicable, segregating the period for hours spent on non-covered work. The contractor must also maintain appropriate records separately showing amounts paid for wages and amounts paid for SCA fringe benefits.

An SCA fringe benefit trust managed by professional administrators provides security to covered employees.  A contractor that chooses to self-insure its medical fringe benefits for SCA employees should consider extending the trust to include the funding of the benefits to non-SCA employees. This pooling of claims to a common trust will result in benefits to the contractor and covered employees from the economies of scale and the spreading of financial risk.

City of Portland Passes More Restrictive Ban the Box Ordinance

December 4, 2015


By Jean Ohman Back

On November 25, 2015, in a 5-0 vote, the City of Portland passed a ban the box ordinance that is more restrictive than the new ban the box law recently passed by the Oregon legislature. The Oregon state bill restricts an employer from asking about an applicant’s criminal history on a job application, but allows employers to inquire about an applicant’s criminal history in the initial interview. The City of Portland’s ordinance is more restrictive. Employers within the city limits who perform background checks should take heed. Here are the particulars of the Portland ordinance:

When does the Ordinance take effect: The Ordinance and its administrative rules are scheduled to go into effect on July 1, 2016. The City Attorney for the City of Portland will draft the administrative rules and the public will have an opportunity to provide written and oral testimony with respect to the administrative rules.

Who does it apply to? The Portland ordinance applies to all employers within the Portland city limits who have six or more employees. The U.S. government and the State of Oregon are excluded from the definition of an employer.

Are there exceptions? Yes, the ordinance does not apply where a federal, state or local law or regulation requires or authorizes the consideration of a person’s criminal history, including but not limited to:

  • Law enforcement employment in the criminal justice system;
  • Private security employment where a license is required by the state of Oregon;
  • Employees who have direct access to or provide services for children, the elderly, persons with disabilities, persons with mental illness, or individuals with alcohol or drug dependence or substance abuse disorders;
  • Employees who are required to be licensed, registered, or certified by the State of Oregon.

What does it do? The ordinance codifies aspects of the Equal Employment Opportunity Commission’s (EEOC) guidance on performing background checks that was released in 2013.

First, it limits the ability of an employer to access or make inquiries into an applicant’s criminal history until after making a “Conditional Offer of Employment.”

Second, if an employer decides to rescind the Conditional Offer of Employment based upon the applicant’s criminal history, an employer must “determine that a specific offense or conduct has a direct relationship to a person’s ability to perform the duties or responsibilities of the employment.” This means that there must be some connection between the employee’s job duties and the conviction.

  • For example, an applicant with a conviction of theft, fraud, embezzlement, or the like and whose job duties include working with finances, sensitive information, or cash would have a direct connection. Similarly, an applicant who must work in close contact with other employees, or the public, but who has a conviction related to a violent offense would also have a connection that might justify a rescission of the job offer.
  • In order to determine whether there is a connection between the job duties and the conviction, an employer must conduct an “individualized assessment” that includes the following inquiries:
    • The nature and gravity of the offense;
    • The time that has elapsed since the offense took place; and
    • The nature of the employment held or sought.

In addition, the Portland ordinance specifically indicates that an employer may not consider the following:

  • An arrest not leading to a conviction, except where the crime is unresolved or where charges are
  • Convictions that have been judicially voided or expunged; or
  • Charges that have been resolved through the completion of a diversion or deferral of judgment program.

Third, if an employer determines that there is a relationship between the job duties and the conviction, then the employer must provide a “Written Notice of Adverse Employment” decision, similar to what is required by the Fair Credit Reporting Act, and must provide information about the criminal history report, and provide the employee with an ability to request a reconsideration of the decision in the form of an “individualized assessment,” which reviews a variety of specific factors to determine whether the employee has been rehabilitated.

Who is responsible for enforcement? Portland will contract with the state Bureau of Labor and Industries (BOLI) to enforce the Ordinance. If you have any additional questions regarding this ordinance, the attorneys in Schwabe, Williamson and Wyatt’s employment group are ready to assist.

European Court of Justice Judgment Finds U.S.- EU Safe Harbor Framework Inadequate for Protecting Data

October 20, 2015

By Colin Folawn and JoAnn Lee Kohl

On October 6, 2015, the European Court of Justice invalidated the European Commission’s prior finding that the U.S.-EU Safe Harbor Framework was an adequate means for protecting data transfers between the European Union and the United States. For thousands of United States companies that self-certified as complying with the Safe Harbor, and European companies with whom they do business, this raises significant questions about whether they are in compliance with the various laws of the EU countries.

What to do? There are a variety of options. Deciding how to respond will depend upon the unique circumstances of the company, the data that it transfers, and the EU countries from which the company collects data. A good Safe Harbor program can serve as a starting point for developing a more robust privacy program that complies with the specific EU-country laws. Companies might consider executing, implementing, and carefully following standard contractual clauses issued by the European Commission. Large multinational companies might consider adopting binding corporate rules to internally regulate data transfers within a corporate group. Companies should also consider whether any derogations apply (e.g., unambiguous consent by the data subject).

Although the ECJ’s ruling poses a new challenge to United States companies, it is not insurmountable. Companies seeking to update their privacy policies or confirm compliance should consult with foreign and domestic privacy lawyers of their choice.

National Labor Relations Board Drastically Revises ‎Standards for Determining Joint-Employer Status

August 31, 2015

by Thomas M. Triplett, Attorney at Law

The National Labor Relations Board in Browning–Ferris Industries of California Inc. has drastically revised the standards for determining if an employer–user of the employees of a temporary agency, is a joint employer of the temporary employees. This decision represents a dramatic change for employers who are franchisors, employers who subcontract part of their operations, and employers who use staffing agencies, to name a few. Prior to this ruling, companies had to actually exercise “direct and immediate control” over another company’s workers in order for a joint–employer situation to exist. Now it appears that the NLRB wants to apply an “economic realities” test, in which the main factor in determining whether an employer–employee relationship exists is whether the company has a potential to exercise control over a worker’s wages and working conditions. This ruling has brought uncertainty to the outcome of future cases by dismissing a simpler to prove test and adopting legal principles that cannot be accurately applied by employers. Employers must now evaluate even the most routine business decisions, like whether to fire a contractor or how to structure operations, in terms of how the decision might affect union organizing efforts.

BFI is a waste disposal company. At its sorting operation, it contracted with Leadpoint, to provide sorters and on–site supervision. In the agreement between BFI and Leadpoint, BFI reserved the following rights:

  • No employee assigned to BFI sorting would be paid more than a BFI employee performing the same work. Within that cap, Leadpoint was free to establish wages and fringe benefits.
  • All Leadpoint employees would have to be drug tested.
  • Leadpoint was paid on a cost plus basis.
  • Leadpoint was to exercise reasonable effort not to assign an employee who had previously been fired by BFI.
  • Leadpoint was solely responsible for recruiting, interviewing, testing, selecting, hiring, and discipline of its employees.
  • Leadpoint would employ site supervisors to supervise its employees deployed on the site.
  • BFI established the facility’s work schedule, including when the conveyors would stop for facility–wide rest breaks.
  • Each day the site managers of both companies would meet to coordinate daily activities.
  • Leadpoint performed initial training of its employees, but BFI occasionally provided pointers and tips.

The NLRB (though very divided along party lines) ruled that joint employment would be found if the business entities, while separate, share or codetermine those matters governing the essential terms and conditions of employment. Critically, the majority held that it was unnecessary to find that BFI had actually exercised its rights reserved in the agreement; rather, the mere existence of the right sufficed. Further, it held that the alleged joint employer need have no direct and immediate control; rather, indirect control would suffice. 

Unfortunately, the majority does not clarify for employers whether possession of any one of the elements of control was sufficient to find joint employment. Is the mere fact that BFI had the right to exclude a Leadpoint employee from the premises decisive or merely one of a number of factors to be considered? The decision does not provide an answer. The failure of the Board to provide clear direction on these key issues leaves them to future case-by-case determinations, a most unsatisfactory result for employers. 

Further, the decision does not explain how joint employers are to bargain. What if they are joint employers on a single construction site, but not at other sites? How do the joint employers bargain? Together? Separately? The Board suggests the duty to bargain will depend upon who has the power of decision on a particular issue. Collective bargaining is difficult enough without coping with this artificial construct. If there is a silver lining, the Court of Appeals will likely overturn this very impractical decision, though unfortunately that will be at least eighteen months from now.

New Paid Rest Break Ruling Burdens Washington Agriculture — Oregon May Be Next?

August 3, 2015

By Stephanie Berntsen and Jean Ohman Back, Attorneys at Law

In a closely watched decision, Demetrio v. Sakuma Bros. Farms, Inc., Washington’s Supreme Court has held that agricultural workers paid on a piece rate basis must be paid for rest breaks. Workers must be paid for their rest breaks — likely 10 to 20 minutes — each day plus their piece rate. The Court soundly rejected Sakuma’s argument that payment for rest breaks is covered by the piece rate. The Court reasoned that when workers are paid on a piece rate basis, they are incentivized not to take breaks because they do not make money during that time.

The Court looked specifically at the Washington regulation that says: “Every employee shall be allowed a rest period of at least ten minutes, on the employer’s time, in each four-hour period of employment.” And, it concluded that “on the employer’s time” means the employer must pay for rest breaks.

To determine pay for breaks, the Court directed employers to calculate the worker’s regular rate of pay. Employers must tally the total piece rate earnings and divide those earnings by the hours the worker worked (excluding rest breaks). The employer must then pay the worker for rest breaks at that rate of pay, or the applicable minimum wage, whichever is greater.

While this calculation may sound simple, it significantly complicates payroll for agricultural employers who have workers earning different rates of pay each week depending on the crop and harvest schedules. The Court’s direction requires employers to calculate the rate of pay for each worker each week.

Oregon courts have not ruled on this issue, but Oregon’s rest break regulation contains a similar concept. It states, in part, “Every employer shall provide to each employee … a rest period of not less than ten continuous minutes during which the employee is relieved of all duties, without deduction from the employee’s pay.” Workers who are paid on a piece rate basis would arguably make less because they would harvest less during their ten minute break. In light of the Sakuma decision, Oregon agricultural employers could face a similar challenge on rest breaks for piece rate workers.

It’s Time (It’s Really Time!) to Evaluate Independent-Contractor Classifications

July 20, 2015

by Jean Ohman Back, Brian K. Keeley, Thomas M. Triplett, Attorneys at Law

Does your business or organization use independent contractors? Do you report any payments using Form 1099? Does your business have “owners,” “partners,” or “members of a limited liability company” who receive payments as distributions in those roles but not compensation as employees? If so, your business or organization might want to re-evaluate (or evaluate) those relationships in light of new guidance issued by the U.S. Department of Labor’s Wage and Hour Division (US DOL WHD).

On Wednesday, July 15, 2015, the WHD provided an “Administrator’s Interpretation” about employers’ classification of workers as independent contractors. This guidance document by David Weil, the Administrator of the WHD (the highest-ranking person in the division) explains why the WHD takes the position that “most workers are employees” under the laws that the WHD enforces. These laws include the federal Fair Labor Standards Act (FLSA), the federal minimum wage and overtime law; the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), the federal law regarding payment for many or most agricultural workers; and the federal Family and Medical Leave Act (FMLA), the federal law that provides job-protected unpaid leave for workers to address their own or their family members’ health conditions.

The FLSA does not define the term employee. However, the WHD Administrator defines “employ” to mean “to suffer or permit to work,” and thus a person suffering or permitting a person to work is an employer. The WHD and courts interpreting the FLSA have applied an “economic realities” test to determine whether a particular worker is “employed” and therefore covered under the FLSA, or is instead an independent contractor to whom the FLSA does not apply. The “economics realities” test is intended to determine whether a worker is economically dependent on the employer (and therefore an employee) or whether a worker is in business for himself or herself (and therefore an independent contractor, and not an employee). The test involves several factors to be considered and weighed in each case, in a non-mechanical, non-formulaic way, in an effort to answer the ultimate question of whether a worker is economically dependent on the employer. The WHD discussed the factors that it does consider to be important:

1)  Is the work an integral part of the employer’s business?

2)  Does the worker’s managerial skill affect the worker’s opportunity for profit and loss?

3)  How does the worker’s relative investment compare to the employer’s investment?

4)  Does the work performed require special skill and initiative?

5)  Is the relationship between the worker and the employer permanent or indefinite?

6)  What is the nature and degree of the employer’s control?

The WHD’s interpretation suggests that the control factor, which has over time been given less and less weight, might now be given so little weight that a worker could be deemed an employee even if the employer exercises almost no control over the worker. And the WHD noted, as it has historically done, that an independent-contractor label that an employer gives a worker or the existence of a contract between an employer and a worker that designates or describes the worker as an independent contractor is irrelevant to this analysis, and not even considered as a factor.

The WHD’s explanation of these factors is here:


The WHD looks to continue its focus on workers who have been classified as independent contractors and increase its enforcement efforts on this area. Businesses should remember that the WHD shares information with the IRS and with state enforcement agencies in a number of states, including Washington and Oregon, about businesses that it determines are incorrectly classifying workers as independent contractors. Given the WHD’s apparent increased emphasis on this area and these information-sharing agreements, employers should be prepared for a greater possibility of audits by the WHD or state agencies. The financial risk of misclassification is substantial: the employer may be required to pay back income tax withholdings and payroll taxes with interest and penalties, or may be required to pay workers additional compensation above minimum wage or for overtime, along with penalties and possible attorney fees.

Any business or nonprofit organization that engages any person as an independent contractor should consider evaluating those relationships against this guidance document and assessing whether any independent-contractor relationships should be characterized as employment relationships. In addition, businesses and organizations with independent contractors should take care to ensure that the independent-contractor agreements document as thoroughly as possible the reasons why those relationships are consistent with the WHD’s interpretation. Your Schwabe employment lawyers can help you navigate this tricky area.

Oregon Paid Leave Bill Passed – Employers Required to Provide Employees with Leave

June 24, 2015

Sick leave

By Leora Coleman-Fire, Attorney

Employers with any employees in Oregon will now be required to provide sick leave to employees starting next year. Nearly all of the Senate’s Democrats and none of the Senate’s Republicans voted on June 10th in favor of the sick leave bill. The House voted 33-24 late Friday, June 12, in favor of the bill, sending it to Governor Kate Brown, who is expected to sign the bill. The bill is detailed, lengthy, and in many respects replicates pieces of the Portland Protected Sick Time Ordinance. The following provides a brief overview of what the new law will require and a few exceptions:

1. All businesses will be required to provide their Oregon employees with up to 40 hours of protected leave per year.

2. However, the law does not apply to properly classified independent contractors, a limited group of employees whose terms and conditions of employment are covered by a collective bargaining agreement, and certain home care workers.

3. Businesses with 10 or more employees will be required to provide workers with paid leave. Businesses with fewer than 10 employees will be required to provide employees with unpaid leave.

4. Adding complexity, for employers located in Portland, the threshold number that requires employers to provide paid leave will be 6 employees. In other words, employers located in Portland will be required to provide paid leave to workers if they have 6 or more employees working anywhere in Oregon. If a Portland employer has fewer than 6 employees working in Oregon, it will only be required to provide unpaid leave. This requirement comes directly from the Portland Protected Sick Time Ordinance, which you can Click Here to read more about.

5. Employees will accrue 1 hour of leave for every 30 hours that they work. Employers can avoid the administrative hassle of accrual calculations if they choose to “front-load” employees with their total sick leave for the year as soon as the employee is eligible to use sick leave and at the start of each subsequent year.

6. Employees are eligible to use sick time on the 91st calendar day of their employment regardless of the number of hours worked in the interim, so long as it exceeds 30.

7. The law will cover much more than “sick leave.” Employers generally must allow employees to take time off for everything from a family member’s illness to a regular doctor’s visit to assisting a family member with a domestic violence situation.

8. Employees may take sick leave in increments as small as one hour, unless this causes an undue hardship on the employer and the employer allows employees to take at least 56 hours of paid leave per year in increments as small as four hours for any of the reasons allowed by the new law.

9. Employers are not required to pay out accrued but unused sick time at an employee’s termination from employment. However, if employees return to the same employer within 180 days, the employer will have to restore the employee’s progress toward eligibility and any accrued but unused sick time.

10. Employers with paid time off (“PTO”), paid vacation policies, or other similar paid time off programs that are substantially equivalent to or more generous than the requirements of the new law will be deemed to be in compliance with most of the requirements of the law. In addition, if employees use all of their PTO, the employer is not required to provide additional leave based on this law (although other laws may require that an employee receive unpaid leave).

11. Employers can require that employees follow certain policies and procedures for requesting leave and providing medical verification, but there are strict limitations on when and how this is done.

12. Employers will be required to provide at least quarterly notice to each employee of the amount of accrued and unused sick time available for use by the employee.

13. Employers are prohibited from denying, interfering with, restraining, or failing to pay sick time or taking any steps to discriminate or retaliate against an employee who requests or takes sick leave.

14. The law will preempt all local sick leave laws. Thus, when this law becomes effective, neither the ordinance in Eugene nor the ordinance in Portland will remain enforceable.

There is no need to take action on this new law quite yet. It will become effective on the 1st day of January, 2016. However, well before the end of the year, you should review your handbook and other policies regarding employee leave. In reality, all employers with Oregon workers will need to make some adjustments to their policies and provide new notices and postings. This new law is complicated. Consult your trusted legal advisor to ensure that you are prepared for next year. We are closely following the development of sick leave laws in the Pacific Northwest and will continue to keep you informed.

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