San Francisco’s Office of Labor Standards Enforcement (OLSE) published FAQs concerning the new Military Leave Pay Protection Act (MLPPA), which took effect on February 19, 2023 and requires employers with 100 or more employees (worldwide) to supplement covered employees’ pay during a covered employee’s qualifying military leave for up to 30 days each calendar year. These FAQs are likely just the beginning, as we anticipate OLSE will continue to expand its list of questions and answers pertaining to the MLPPA, and will adopt regulations implementing the ordinance. In the interim, the FAQs should help covered employers better understand their MLPPA responsibilities so they can process requests for supplemental compensation that may occur during the first days or weeks after the ordinance takes effect.

For employers subject to the Paid Parental Leave Ordinance, a separate San Francisco ordinance that requires “supplemental compensation,” the standards in the FAQs will look familiar. Similarly, for employers subject to San Francisco’s numerous other employment-related ordinances, many FAQs mirror those under other ordinances concerning OLSE’s approach to interpreting the law, such as how to calculate business size, and what is and is not considered “San Francisco.” Accordingly, below we limit our discussion to the more notable MLPPA FAQs.

Calculating & Paying Supplemental Compensation. The FAQs provide employers with answers about questions surrounding the calculation and payment of supplemental compensation generally, and how to calculate supplemental compensation due and the timing of supplemental compensation payments specifically.  

How to Calculate Supplemental Compensation Due: Per OLSE, “gross military pay” is the employee’s basic pay rate for military service, excluding any military pay allowances for things like combat, clothing, housing, or aviation. To determine the amount of supplemental compensation due, employers subtract “gross military pay” from “gross pay” the employee would have otherwise received from the employer (including overtime) had they worked instead of performed military service.

The FAQs also provide that “benefits, including, but not limited to, health care, retirement, and profiting sharing benefits must be paid as if the employee had worked their regular work schedule.” OLSE says that employers should not include tips when calculating “gross pay” from private employers, however.

OLSE references a 2023 pay table from the Defense Finance and Accounting Service (DFAS), and suggests an employee’s military orders will reference how much the military will pay the employee. Employers should understand, however, that OLSE’s guidance may over-simplify things. While OLSE explains, for example, “gross military pay will differ depending on the employee’s rank,” both rank and years of service determine a servicemember’s basic pay rate.  As shown in DFAS’ 2023 pay table, a Captain (0-3) with 6 years of service has a basic pay rate of $6,780.30 a month compared to a Captain (0-3) with 16 years of service whose basic pay rate is $7,890.60 a month.  The latter is possible when a servicemember was previously enlisted and later became an officer. Military orders will typically reference a servicemember’s rank, but they will not frequently include the member’s total number of years of military service or pay rate.

Accordingly, as the FAQs suggest, employers should consider requesting employees provide a leave and earnings statement verifying their gross military pay. Having the actual pay information, compared to an estimate, will help reduce the likelihood of under- and/or over-compensating employees and then later needing to reconcile payments. Similarly, although the FAQs do not yet address this issue, some employers may want to know whether employees have more than one private sector job, and if they will be receiving supplemental compensation from their other private employer.

For employees without a regular or predetermined work schedule, the FAQs provide an employer must “look[] at the three monthly pay periods, six bi-weekly or semi-monthly pay periods, or 12 weekly pay periods immediately preceding the relevant period of military leave” to determine a “regular work schedule.” Employers should not include “any pay periods during which the employee was on unpaid or partially paid leave” when conducting the lookback calculation.

Finally, the FAQs note employers need not provide supplemental compensation for the hours an employee would have worked outside of San Francisco.

By When to Make Payment: Per OLSE, employers “should make a good faith effort to provide the Supplemental Compensation no later than the payday for the payroll period when the Employee’s military leave began” (emphasis added). If employers do not have all of the necessary information to calculate supplemental compensation by the time the employee’s military leave begins, however, employers may have difficulty making proper payment on OLSE’s timeline. It is hoped future FAQs will address this specific scenario.

Employee Notice Obligations: In the FAQs, OLSE says that, for foreseeable absences, employers may require employees comply with “reasonable” notice procedures, but it does not yet provide examples of such procedures or define “reasonable” notice.

Employer Notice Obligations. The ordinance is silent on what notice, if any, employers must provide employees concerning their MLPPA rights and responsibilities. The FAQs help fill that gap by stating, “Covered Employers should provide employees with notice of their right to Supplemental Compensation within a reasonable time after the Employee tells the employer they received written military orders and will require time off work.” Additionally, for covered employers with employee handbooks, the FAQs require those employers to “include a description of the rights to Supplemental Compensation under the MLPPA” in the next handbook edition. Finally, OLSE notes it will include an MLPPA notice in the annual poster mailings it sends employers.

Recordkeeping. Per the FAQs, employers must keep records concerning an employee’s schedule, hours worked, and military leave taken for four years.

Legal Protections. The ordinance does not contain any provisions prohibiting discrimination, interference, or retaliation against employees for exercising their MLPPA rights. This differs from the PPLO, which does contain such express prohibitions. In the MLPPA FAQs, San Francisco’s OLSE acknowledges the absence of any express job protections in the ordinance, while noting the federal Uniformed Services Employment and Reemployment Rights Act (USERRA) prohibits employers from discriminating and retaliating against employees for taking military leave.

Next Steps. Employers now have more information to help them process requests for MLPPA supplemental compensation. Employers should continue to monitor OLSE’s MLPPA webpage for future updates to the FAQs, anticipated regulations, a notice poster, and/or possibly a model supplemental compensation request form. In the interim, employers with questions about pay or processes the FAQs do not yet address should consider discussing the matter with knowledgeable counsel.