On Friday, November 29, 2019, the Philadelphia Mayor’s Office of Labor postponed the effective date of the Philadelphia Fair Workweek Employment Standards Ordinance from January 1, 2020 to April 1, 2020.¹ The Ordinance imposes significant new predictable scheduling obligations and hiring restrictions on large retail, food services, and hospitality employers and franchisees operating in the City of Philadelphia.² The Mayor’s Office of Labor has issued proposed regulations,³ and is now considering stakeholder comments.  A report and final regulations are expected by late December 2019.  The three-month postponement of the Ordinance’s effective date will relieve employers from having to roll out and adjust to burdensome new scheduling obligations and hiring restrictions during the busy holiday season and will provide more time to ensure compliance with the forthcoming final regulations.

This Insight article provides an update on the Ordinance and proposed regulations, and what might change with final regulations. 

Coverage

Covered Employer and Co-Employers

Covered Employer is defined in the Ordinance as an employer that is a retail, hospitality or food services establishment (under specified NAICS codes) that employs 250 or more employees (including part-time and temporary workers) anywhere and has 30 or more locations worldwide.⁴ This definition includes chains or franchises associated with a franchisor, or a network of franchises, that employ 250 or more employees in aggregate.⁵ 

Consistent with state and federal wage and hour laws, the Ordinance defines employer to include any “entity or person acting directly or indirectly in the interest of the employer in relation to the employee.”⁶  Proposed Regulation 2.3 defines co-employers generally the same as FLSA joint-employer regulations.⁷ The U.S. Court of Appeals for the Third Circuit, which encompasses Philadelphia, has interpreted the federal joint-employer regulations in the context of a parent-subsidiary relationship and held that joint employment turns on the degree of control that the putative joint employer has or exercises over the essential terms and conditions of employment, determined by a multi-factor test.⁸  The U.S. Department of Labor is in the midst of rulemaking to update the FLSA’s joint-employment regulation.⁹  In sum, determining whether an employer is a Covered Employer by virtue of joint employment involves a fact-intensive legal analysis.  

Covered Employees:  Non-Exempt Workers Providing Retail, Food or Hospitality Services

Covered Employees include all non-exempt full-time, part-time, seasonal and temporary employees who provide retail trade services, food services or hospitality services at a Covered Employer in Philadelphia.¹⁰  Proposed Regulation 2.2 provides that Covered Employees include  non-exempt greeters, floor managers, delivery drivers who complete sales, receivers and other back-of-the-house staff, but exclude non-exempt administrative and professional employees such as human resources, payroll and receptionist positions (who do not greet or provide service to customers).  The Ordinance applies only to employees and not to independent contractors; however, the employer bears the burden of proof that an individual is an independent contractor under applicable law.¹¹ 

The Mayor’s Office of Labor has indicated that it will consider employer and employee coverage questions presented to it on a case-by-case basis. 

Good Faith Estimate of Work Schedule

Initial Good Faith Estimate

The Ordinance provides that “upon hiring an employee, a Covered Employer shall provide such employee with a written, good faith estimate of the employee’s work schedule.”¹² According to the Mayor’s Office of Labor, the final regulations will postpone enforcement of the good faith estimate requirement beyond April 1, 2020 to July 1, 2020; however, it will be extended to existing employees.¹³

The good faith estimate must be a fact-based prediction based on forecasts, prior hours worked by similar employees, or other information, but it is not a binding contractual offer.¹⁴  A good faith estimate is not required during a training period, but the training period must be based on a reasonable business practice that the employer may be called upon to substantiate with documentation.¹⁵ For employees who are co-employed by two or more employers (including temporary services, staffing agencies or franchisee-franchisor sharing arrangements), each employer is individually and jointly responsible for providing a good faith estimate at the beginning of each distinct assignment for a Covered Employer.¹⁶ 

The good faith estimate must specify:  (1) the average number of work hours the employee can expect to work each week over a typical 90-day period or a term-limited seasonal period with a clear end date; (2) whether the employee can expect to work any on-call shifts; and (3) a subset of days and times or shifts that the employee can typically expect to work or not work, the total of which cannot exceed 1.5 times the expected average hours.¹⁷  For employees who work on average 32 hours or more, a maximum of two alternating good faith estimates are allowed and do not have to strictly alternate, but the employee needs to be informed which schedule will apply in a given week.¹⁸  Proposed Regulation 3.2 provides examples.

Employee’s Right to Make Work Schedule Requests

The Ordinance provides employees with the right to make work schedule requests without fear of retaliation, including requests:  (1) not to be scheduled for work shifts during certain days or times or at certain locations; (2) not to work on-call shifts; (3) for certain hours, days or locations; or (4) to work more or fewer hours.¹⁹ The Ordinance “encourages” employers to engage in an “interactive process” with new employees regarding requests for schedule modifications, but the employer may grant or deny such requests for any lawful reason.²⁰   

Notice of a Significant Change in the Good Faith Estimate

A revised good faith estimate must be provided to the employee as promptly as possible if there is a significant change in the employee’s availability or the employers’ business needs.²¹ A significant change due to the employer is triggered if in three out of six consecutive workweeks any of the following occurs not due to an employee-initiated change: 

1. the actual number of hours worked differs by 20% or more from the good faith estimate (this appears to refer to the average hours worked); or
2. the days of work differ from the good faith estimate at least once per week; or
3. the start and end times of at least one shift per week differ from the good faith estimate by at least one hour (or, if shifts have been identified, start and end times of shifts differ by at least one hour from the range by which the shift was identified).²²    

Schedule changes for the following reasons do not count toward a significant change:  (1) documented voluntary changes by the employee including addition or subtraction of hours, use of sick leave, vacation leave or other leaves, or a mutually agreed upon shift trade or coverage arrangement between employees; (2) changes because the Covered Employer’s operations cannot begin or continue, for example, due to a health or safety concern that involved a 911 call, a gas leak, flooded streets, violence at the place of business, pipe bursting inside the business, etc.; (3) changes due to a documented Hotel Banquet exemption, or (4) changes due to a documented Ticketed Event exemption.²³ As discussed below, schedule changes for these reasons do not trigger predictability pay either.   

Employers are subject to presumed damages of $200 per employee for a good faith estimate that is incomplete or lacks a good faith basis.²⁴ 

Advance Notice of Work Schedules

On or before the commencement of employment, a Covered Employer must provide the employee with a written work schedule that runs through the last date of the currently posted schedules.²⁵ After the employee is hired, the written schedule must be posted no later than 10 days before the first day of any new schedule (and 14 days before the first day of any new schedule as of January 1, 2021).²⁶  For example, if the workweek runs from Sunday to Saturday, and an employee is hired on Friday, April 10, the employer must provide the employee’s schedules for:

• the remainder of the week of April 5-11;
• the week of April 12-18 (which was posted by Thursday, April 2); and
• the week of April 19-25 (which was posted by Thursday, April 9). 

The employee will be able to see his schedule for the week of April 26-May 2 when the schedule for the employees at his worksite is posted by Thursday, April 16. 

Written refers to communication by print or electronic means, including email, text, use of scheduling applications or other form of communication that can be saved in original format.²⁷ The written posting must be in a conspicuous and accessible location where employee notices are customarily posted, and also posted electronically if that is the customary method of notice in the workplace.²⁸  It must show the work schedule for all of the location’s employees, even if they are not scheduled to work or to be on call that week.²⁹ The posting must be time-stamped with the date of posting.³⁰ Failure to provide or post the work schedule as required subjects the employer to presumed damages of $50 per impacted employee per pay period in which the violation occurs or continues.³¹ 

Schedule Changes and Predictability Pay

Notice of Schedule Changes

As promptly as possible and before the change takes effect, the employer must provide notice of any employer-initiated change to the work schedule that occurs after the required advance notice.³²  Notice must be provided by in-person conversation, telephone call, email, text message, or other accessible electronic or written format.³³ The posted work schedule must be revised in writing to reflect the change within 24 hours.³⁴  Notice is not required for changes to the work schedule that are initiated by the employee (e.g., because of sick leave, other paid or unpaid time off, shift trades, or other voluntary additions or subtractions of hours initiated by the employee).³⁵ Failure to provide prompt notice of changes to the posted work schedule subjects the employer to presumed damages of $25 per impacted employee per pay period in which the violation occurs or continues.³⁶ 

Employee Right to Decline to Work Hours Not Included in Posted Work Schedule

Employees may decline to work hours or additional shifts not included in the posted work schedule.³⁷ If the employee voluntarily consents to work them, such consent must be in writing and relate to a specific shift and not be a general or long-term statement of availability.³⁸ Failure to secure written consent for added work hours subjects the employer to presumed damages of $100 per impacted employee for each pay period in which the violation occurs or continues.³⁹

Predictability Pay

For each employer-initiated change to the posted work schedule that occurs after the required advance notice, the employer must pay predictability pay as follows:

• Schedule Additions/Changes With No Loss of Hours:  One hour at the employee’s regular rate of pay, in addition to the employee’s regular pay for the hours worked, when the employer adds time to a work shift or changes the date, time or location of a work shift, with no loss of hours.⁴⁰ Proposed Regulations 5.0 and 5.1 provide examples.  
• Schedule Reductions: At least one-half the employee’s regular rate of pay per hour for any scheduled hours the employee does not work when a regular or on-call shift is cancelled or shortened.⁴¹ Proposed Reg. 5.1 provides examples.  

The regular rate of pay is defined the same as under the Pennsylvania Minimum Wage Act regulations.⁴² However, for tipped employees, the regular rate is defined by regulation.⁴³ Proposed Regulation 5.1 provides that if the employee is paid at least $7.25 per hour, the regular rate of pay shall be the hourly amount paid to the employee by the employer.  If the employee is paid less than $7.25 per hour (via the tip credit), then the regular rate is the numerical average of the averages stated in the PA Occupational Wage Survey for Philadelphia County for job codes 35-3011 (bartenders), 35-3031 (waiters/waitresses), and 35-9011 (dining room attendants, etc.), as they change each year.⁴⁴ As of May 2018, the average hourly rate of these job codes is $11.31 per hour. 

An employer is not required to provide predictability pay or obtain the employee’s voluntary written consent to work different hours from those in the timely posted work schedule in the following circumstances:

• 24-Hour Schedule Posting Grace Period.  A change is made to the posted work schedule within 24 hours of the required advance notice (10 days before the first day of the new schedule and 14 days as of January 1, 2021).⁴⁵ The final version of the posted work schedule must be time-stamped to document that it was issued within the 24-hour window.⁴⁶  Proposed Regulation 6.0(a) refers to “24 hours after the initial posting.”  Commenters pointed out that this fails to take account of early posting, for example, 13 days before the first day of the new schedule, whereby under the language of the Ordinance, a change could be made up to 9 days before the first day of the new schedule.  This might be clarified in the final regulations.
• 20-Minute Shift Start/End Grace Period.  An employee begins or ends work no more than 20 minutes before or after the scheduled start or end time of the shift.⁴⁷  
• Employee Written Request/Shift Trades.  An employee’s voluntary written request to change the schedule including voluntary shift trades or coverage arrangements between employees, recorded as soon as possible.⁴⁸ Proposed Reg. 6.0(b) provides examples. 
• Covering for Call Out in Response to Mass Communication.  An employee volunteering to work additional hours due to another employee’s inability to work scheduled hours (e.g., calling in sick) in response to a mass written communication offering the hours that makes it clear that accepting the additional hours is voluntary.⁴⁹ Proposed Reg. 6.0(c) provides examples.  
• Safety Threat.  Emergency conditions including threats to employees or the employer’s property, failure of a public utility, or the shutdown of public transportation; a fire, flood or other natural disaster; a state of emergency; or severe weather posing a safety hazard.⁵⁰
• Disciplinary Suspension/Termination.  Hours are reduced due to a documented multi-day disciplinary suspension or termination.⁵¹ 
• Ticketed Event.  A public ticketed event is cancelled, scheduled, rescheduled, postponed, increased in expected attendance by 20% or more, or increased in duration due to circumstances outside the company’s control after the posting of the work schedule with the required advanced notice.⁵² Proposed Regulation 6.0(f) provides more details regarding this exception.
• Hotel Banquet Department Event. A hotel banquet department has an event scheduled due to circumstances outside the hotel’s control after the employer provides the posted work schedule with the advance notice required.⁵³ Proposed Reg. 6.0(e) provides more details regarding this exception.

The Right to Rest for Nine Hours After Prior Day's or Overnight Shift

The Ordinance permits employees to decline without penalty “any work hours that are scheduled or otherwise occur (a) less than 9 hours after the end of the previous day’s shift, or (b) during the 9 hours following the end of a shift that spanned two days.”⁵⁴  An employee may agree to work such shifts if consent is provided in a writing that is revocable at any time; however, the employer must pay the employee $40 for each such shift.⁵⁵

Proposed Regulation 7.0 prohibits requiring an employee to “commence a shift sooner than nine hours after the completion of a previous shift,” without reference to the previous shift being on the previous day or spanning two days.  As drafted, it would cover back-to-back shifts in the same workday.  The Mayor’s Office of Labor has indicated that this will be corrected in the final regulations. 

Offer of Work to Existing Employees Before Hiring New Workers

Providing Notice of and Distributing Available Hours

At the time of hire (and within 24 hours of any change), employers must provide written notice of, and post conspicuously, their policy for offering and distributing available work hours or shifts.⁵⁶  The notice must explain:  (1) where employees can access the written notices of available work shifts; (2) how to notify the employer of the desire to accept the shifts; and (3) the criteria for distributing work shifts among qualified and interested employees.⁵⁷  Failure to provide this notice subjects the employer to presumed damages of $50 per employee for each pay period in which the violation occurs or continues.⁵⁸

Providing Notice of Available Hours to Existing Employees

Before hiring new employees from an external applicant pool or through a contractor, notice of the available work hours must be given to all existing employees (regardless of their position or the number of hours they have been scheduled in prior weeks), and the hours first must be offered to any existing employee(s) who are qualified to perform the work.⁵⁹ This requirement applies, for example, to instances in which additional hours become available due to employee resignations or terminations, increased sales activity, seasonal fluctuations or special promotions.⁶⁰  Employers must provide written notice at least 72 hours in advance of the available work shifts unless a shorter period is necessary to timely perform the work (in that event an existing employee may be given the opportunity to work the shift temporarily for the 72-hour notice period).⁶¹

The notice must be in English and any other primary language of the employees in the workplace (a language spoken by at least 5% of existing employees), and must be conspicuously posted and available to all, and distributed electronically if the employer customarily communicates scheduling information this way.⁶² The employer must honor requests by existing employees to translate the notice.⁶³ The notice must describe the position and its required qualifications, the schedule of available shifts, the length of time for which coverage is needed, the process for notifying the employer of the desire to work the offered shifts, and specify if the notice is being posted for less than 72 hours.⁶⁴

Failure to provide written notice of available work hours as required by §9-4605(2) subjects the employer to presumed damages of $50 per impacted employee for each pay period in which the violation occurs or continues.⁶⁵

Offering Available Hours to Qualified Existing Employees

The employer must distribute shifts per the criteria in the notice of available hours to employees who express interest in the available hours and who, based on a good faith determination, are qualified to perform the work.⁶⁶ The employer must first offer the shifts to any qualified employee(s) who regularly work at the location where the shifts are available and who express interest in working the hours.⁶⁷ If no qualified employee at the location expresses interest in the hours, and if it is the regular practice of the employer to schedule employees across multiple locations, the employer must then offer the shifts to any qualified employee(s) who work at other locations.⁶⁸  If it is not the employer’s regular practice to schedule across locations, then offering the shifts to employees at a different location is optional.⁶⁹ 

There is no obligation to offer hours to an existing employee if doing so would result in that employee working overtime.⁷⁰ The Ordinance prohibits distributing hours in a way that discriminates against employees based on enumerated protected classes, defined to also include those with “family caregiving responsibilities” or status as a student, and specifically notes that employers may not distribute hours to avoid application of the Affordable Care Act.⁷¹  Acceptance of the additional work hours may trigger predictability pay if acceptance occurs inside the advance notice required and no exception applies.⁷²  Proposed Regulations 8.6 to 8.8 provide examples. 

Failure to award available work hours as required by §9-4605(4) of the Ordinance subjects the employer to the highest level of presumed damages under the regulations—$1,000 for each impacted employee for each pay period in which the violation occurs or continues.⁷³

When a New Employee Can be Hired to Work Available Hours

The employer can hire a new employee directly or through a subcontractor, temporary service or staffing agency only if: (a) no qualified employee(s) accepts the offer of available work hours within 24 hours of the end of the 72-hour posting period; or (b) the employer receives written confirmation from eligible employees that they are not interested in accepting the available work hours; or (c) existing qualified employees have accepted only a subset of the available hours.⁷⁴ The new employee may only be offered the job and the hours that were advertised in the notice to existing workers.⁷⁵ If the job or hours have changed, then the process must be repeated.  

Anti-Retaliation Provision and Presumption of Retaliation

The Ordinance prohibits interference with, or retaliation for, exercising rights under the Ordinance.⁷⁶ Significantly, the Ordinance creates a “rebuttable presumption” of retaliation in the case of adverse employment action (broadly defined) that occurs within 90 calendar days of the employee’s exercise of rights under the Ordinance.⁷⁷ An exception is made if the adverse employment action was due to disciplinary reasons and for just cause, with the underlying incident documented in writing.⁷⁸ This rebuttable presumption extends to seasonal employees.  If they exercise rights under the Ordinance, and their  employment ends less than 90 days later, there will be a rebuttable presumption of retaliation if they are not rehired to work in the same position at the next opportunity for work.⁷⁹  Employers will want to document the underlying legitimate, non-retaliatory business reasons if it determines that a terminated employee who may assert a claim under the Ordinance is ineligible for rehire. 

Recordkeeping and Posting Requirements

The Ordinance also mandates that employers maintain records for two years that show compliance with the Ordinance, including good faith estimates of work schedules, modifications thereto, written consent to work shifts, offers of shifts to existing employees and responses to those offers, as well as payroll records showing predictability pay.⁸⁰

Such records must be produced if requested by an employee or by the enforcement agency—the Office of Benefits and Wage Compliance in the Mayor’s Office of Labor.⁸¹ The records must be provided electronically in a format that is commonly used and at no cost to the employee.⁸² If the employee requests hard copies, the employer may charge the employee no more than the actual cost to produce the records.⁸³ The employer has 30 days to respond to such requests, and may require that such requests be made in writing, in which case the 30-day period begins upon receipt of the written request.⁸⁴ If the employer deems the request to be overly burdensome or harassing, it may notify the agency within two weeks of the request for a determination.⁸⁵ If the employer fails to maintain these records, the Ordinance creates a presumption that the employer violated the Ordinance “absent clear and convincing evidence otherwise.”⁸⁶ 

The Mayor’s Office of Labor will publish a poster summarizing the rights and responsibilities under the Ordinance that must be posted in a conspicuous place.⁸⁷  

Impact on Collective Bargaining Agreements

The Ordinance provides that its provisions may be waived in a collective bargaining agreement, but “only if the waiver is explicitly set forth in such agreement in clear and unmistakable terms and only so long as the agreement is in effect contractually.”⁸⁸

Enforcement of the Proposed Ordinance

The Ordinance provides for enforcement by the Office of Benefits and Wage Compliance in the Mayor’s Office of Labor.⁸⁹ The Office will receive and investigate complaints, conduct mediation where appropriate, and provide remedies including reinstatement, restitution of lost wages, benefits and predictability pay.  The agency will also be authorized to impose penalties and fines ($1,000 per violation, except $2,000 per retaliation violation), and to award presumed damages set forth in each section above, and triple damages in the case of repeat offenders.⁹⁰

The Ordinance creates a private right of action for those aggrieved by violations of the Ordinance, and does not require exhaustion of administrative remedies.⁹¹  It provides for a two-year statute of limitations, and allows prevailing plaintiffs to recover attorneys’ fees and costs.⁹²

The Philadelphia Ordinance is complex and imposes more obligations on employers than predicable scheduling ordinances in other jurisdictions.  Once the final regulations are issued later this month, covered employers should finalize applicable policies, forms and processes and train staff well before the April 1, 2020 compliance deadline.