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.

In 2008, San Francisco enacted an ordinance (Ordinance) requiring private employers with 20 or more employees, as defined more completely below, to offer employees "subsidized" commuting benefits.1 The Ordinance became "effective" for implementation on January 19, 2009. It requires employers to provide employees at least one of the following three options: (1) allow employees to elect to deduct commuting costs from pre-tax wages to purchase transit passes or vanpool rides (but not parking); (2) the employer may pay no less than $45 per month (raised to $55 on July 1, 2009) for transit passes or reimburse employees for a portion of carpool or vanpool expenses; and/or (3) the employer may operate a vanpool, bus, or similar multi-passenger shuttle-type service at no cost to employees.

San Francisco’s Health Care Security Ordinance (“Ordinance”), which became effective in 2008, requires covered employers operating in San Francisco to spend a minimum amount on health care for covered employees and to file an annual report form (“ARF”). Employers must file the first report (for 2008 expenditures) by April 30, 2009.

A new San Francisco Ordinance went into effect January 20. It requires employers with 20 or more employees (regardless of where they are located) to provide incentives for their San Francisco employees to use public transportation. The San Francisco based employees must work at least 10 hours per week to qualify.

In what may become a trend statewide, or even nationwide, the San Francisco City Council passed what is called the Health Care Security Ordinance (HCSO). The purpose of the ordinance is to require employers to pay certain monetary amounts for health care, based on the number of persons employed.

San Francisco recently passed an ordinance (Ordinance) requiring San Francisco non-governmental employers to offer employees "subsidized" commuting benefits.1 The Ordinance, scheduled for full implementation on January 19, 2009, requires employers to provide employees at least one of the following three options: (1) allow employees to elect to deduct commuting costs from pre-tax wages to purchase transit passes or vanpool rides (but not parking); (2) the employer may pay (no less than $45 per month) for transit passes or reimburse employees for a portion of carpool or vanpool expenses; and/or (3) the employer may operate a vanpool, bus, or similar multi-passenger shuttle-type service at no cost to employees. The Ordinance's stated purpose is to reduce air pollution and carbon dioxide emissions in San Francisco to 20 percent below the city's 1990 levels by the year 2012, by encouraging the use of public transportation or vanpooling. Whether or not the environmental goals can be met, the Ordinance complicates doing business in San Francisco. The Ordinance adds yet another (and sometimes conflicting) layer to subsidized employee commuting benefits that are already provided for under federal tax law as Qualified Transportation Fringe Benefits (QTFB).2 This article discusses the new Ordinance as well as its interplay with QTFBs and California laws allowing employees to cash out employers' subsidized parking for additional wages under the California Air Resources Board's "Parking Cash-Out Program."

Employers anywhere in the United States are required to spend specified minimums on health care benefits for any of their employees working in San Francisco under a local ordinance recently upheld by the Ninth Circuit Court of Appeals (see San Francisco Health Care Law Survives ERISA Preemption). Employers may face significant penalties for failing to comply with the San Francisco Health Care Security Ordinance, which went into effect this year.

Employers with 20 or more employees on average will be required as of December 20, 2008, to establish a mass transit commuter program for their employees who work 10 or more hours per week in San Francisco.

San Francisco's Health Care Security Ordinance has been reactivated by a federal appeals court order issued January 9, 2008, and the City of San Francisco may begin enforcement. The Ordinance is a local measure that requires certain San Francisco employers to spend a specified minimum amount to provide health care coverage, from $1.17 to $1.76 per hour paid to each employee working within the City.

In a widely anticipated ruling, a United States District Court Judge sitting in San Francisco granted summary judgment on December 26, 2007, in favor of a local restaurant association that had challenged the employer funding provisions of the San Francisco Health Care Security Ordinance. While recognizing that providing health care coverage to the citizens of San Francisco is a laudable goal, the court nonetheless found the employer funding provisions of the Ordinance to be preempted by ERISA (Employee Retirement Income Security Act) since the Ordinance's provisions have an impermissible connection with employee benefit plans and make unlawful reference to employee benefit plans.

Hard on the heels of San Francisco's paid sick leave law (Proposition F), which became effective February 5, 2007, employers will face another challenge in 2008, when employer health care spending mandates found in the San Francisco Health Care Security Ordinance ("HCSO") go into effect - unless the courts intervene. A decision in a year-old lawsuit by a restaurant employers' association to block the ordinance on ERISA preemption grounds is expected before the end of 2007.

Resulting from a ballot measure passed by voters in November, San Francisco, California has just become the first city in the country requiring all employers to provide paid sick leave to employees. This is the second of a “one-two” punch that impacts San Francisco employers this year. The “one” was when the minimum wage for employees in San Francisco rose to $9.14 per hour starting January 1, 2007.

Workers in San Francisco will begin accruing paid sick leave on February 5, 2007 despite numerous uncertainties raised by the San Francisco Sick Leave Ordinance. Donna Levitt, Division Manager of the Office of Labor Standards Enforcement (OLSE), the administrative agency in charge of enforcing the Ordinance, took time last week to meet with concerned business owners at two public hearings and addressed some of the outstanding issues.

On November 7, San Francisco voters approved the first law in the nation mandating that employers provide paid sick leave to all employees. The law is effective February 5, 2007. Proposition F provides an important benefit to employees, but poses several vexing and unresolved questions certain to give employers headaches.