Seyfarth Synopsis: PAGA reform was officially introduced in the state Assembly and Senate! The language of the bills were released detailing the most substantive changes to PAGA in its 20-year history, and Governor Newsom signed them into law on July 1, 2024. The bills have numerous provisions that benefit California employers, including imposing more restrictive standing requirements for plaintiffs, codifying the need for manageability of PAGA claims, and reforming the penalty structure, along with several other changes detailed below.

On the evening of June 21, 2024, Assembly Bill 2288 and Senate Bill 92 were introduced, collectively proposing significant reforms to the Labor Code Private Attorneys General Act of 2004. Governor Newsom signed these bills into law on July 1, 2024. We look at each of the key changes below:

Standing Required

  • Personal Experience: Plaintiffs will now need to personally experience the Labor Code violation(s) they are seeking to recover on a representative basis. Following the decision in Huff v. Securitas Security USA Services, Inc., employee-plaintiffs could pursue penalties affecting other employees, even if not personally affected by the violations affecting other employees—the plaintiff just needed to prove a single Labor Code violation to sue on any other Labor Code violation. This meant that plaintiffs had a very low burden in order to essentially unlock a wholesale audit of an employer’s wage and hour practices having nothing to do with them personally. But, under the new bills, plaintiffs must prove that they experienced the same Labor Code violations they seek to pursue on behalf of other employees.
    • Note: PAGA actions brought by nonprofit legal aid associations that have been involved in PAGA litigation for at least 5 years are exempt from this new provision. Accordingly, the Huff concept of standing in PAGA actions will remain in actions brought by nonprofits.
  • Statute of Limitations: Since Johnson v. Maxim Healthcare Services, Inc., plaintiffs have argued that there is no time limit on when they could have experienced a Labor Code violation in order to bring a PAGA claim. AB 2288 makes clear that the PAGA statute of limitations applies to the personal Labor Code violation that a plaintiff must experience—one year—to have standing to bring the PAGA action.

These provisions will go a long way in limiting the scope of broad PAGA actions from the outset. Employers can argue that the plaintiff’s claims should be adjudicated first in order to determine the appropriate scope of the claims for the representative group. It also makes the arbitrations of individual PAGA claims more important, as the results of arbitration will define the scope of the potential representative action once the representative PAGA action proceeds in Superior Court.

Manageability Officially Set

One of the more recent battles in PAGA litigation has been manageability (or lack thereof) of PAGA claims. This culminated with the California Supreme Court’s decision in Estrada v. Royalty Carpet Mills, Inc., which held that trial courts do not have the inherent authority to strike a PAGA claim on manageability grounds, but a trial court can, and should, use its full tool box of case management procedures to ensure that a PAGA claim is effectively and manageably tried.

AB 2288 explicitly enforces the courts’ power to determine manageability over PAGA claims, and provides that it may limit the evidence to be presented at trial or otherwise limit the scope of any claim filed to ensure that the claim can be effectively tried.

Changes To Structure Of Civil Penalties

AB 2288 makes several changes to the structure of penalties available under PAGA. As a reminder, under current Labor Code section 2699, employers may be subject to a civil penalty of $100 for each aggrieved employee per pay period for an initial violation, and $200 for each subsequent violation. The new penalty structure is more complex:

  1. 15% Cap on Penalties For Employers Who Take Reasonable Steps For Compliance: If an employer demonstrates that it “has taken all reasonable steps to be in compliance” with the law prior to receipt of a PAGA notice or a request for personnel records, then the available penalties are capped at 15% of the penalties sought.
    • Examples of such reasonable steps include, but are explicitly not limited to, conducting periodic payroll audits, and taking action in response to the results of the audit, disseminating lawful written policies, training supervisors on applicable Labor Code and wage order compliance, or taking appropriate corrective action with regard to supervisors as needed.
    • Whether the 15% cap is applied will be left to the discretion of the court as to whether the employer took reasonable steps to achieve compliance.
  2. 30% Cap on Penalties For Employers Who Take Steps For Compliance After Receipt Of PAGA Notice: AB 2288 provides that if an employer “has taken all reasonable steps to prospectively be in compliance with all provisions identified in the notice,” then the available penalties are capped at 30%. Like the application of the 15% cap, this is a test to be applied by the Court considering the totality of the circumstances.
  3. Cap On Penalties For Wage Statement Violations That Do Not Cause Injury:  Huge penalties for innocuous wage statement violations was a posterchild for the PAGA ballot initiative. The bill provides that if a wage statement violation under Labor Code § 226 does not cause harm to the plaintiff, then the available penalty is capped at $25. Additionally, AB 2288 confirms that penalties for Labor Code § 226 violations are the only penalties available for wage statement violations, foreclosing arguments by plaintiffs that they can double-dip on wage statement claims and seek penalties under Labor Code § 226.3 as well.
  4. Limitations On When $200 Penalty Available: Since PAGA’s inception, there had been plenty of disagreement as to when the $200 penalty for a “subsequent violation” could be awarded. Now, AB 2288 sets forth two circumstances in which that higher penalty may be considered:
    • A $200 penalty for a subsequent violation is available if there has been a court or agency determination within the last five years that the employer had an unlawful policy or practice that caused the violation; or
    • If a court determines that the employer’s conduct which caused the violation was malicious, fraudulent, or oppressive. (This is the same standard for imposition of punitive damages in California.)
    • Ultimately, the bill does not create any increased or higher penalties under PAGA than which previously existed. And, the threshold to attain the higher $200 penalty is more precisely defined and ultimately harder for plaintiffs to attain.
  5. No Derivative Penalties: Another cause of the large possible exposure to employers under PAGA was the penalties for derivative Labor Code violations—meaning plaintiffs would seek a penalty for underpayment of wages, and also penalties for derivative violations of other Labor Code provisions such as § 203 (failure to pay the underpayment at time of termination), § 204 (failure to pay the underpayment in the pay period it was earned), § 226 (failure to list the underpayment on the wage statement for the pay period), etc. As a result, a single violation could result in numerous penalties. The bill makes clear that penalties cannot be awarded for derivative claims.
  6. Cap On Penalties For Isolated Errors: Where violations occur for less than 30 days, or four consecutive pay periods, the maximum penalty available is $50.
  7. Court’s Discretion To Assess Penalties Is Codified: It has long been accepted that the Court has discretion, based on the facts and circumstances of the case, to reduce the penalties to be imposed on employers to avoid an award that is unfair under the circumstances. The Court’s discretion to adjust the amount of penalties awarded based on the circumstances of the case has been codified in the bill.
  8. Employers With Weekly Pay Periods Get Relief: PAGA imposes penalties on a pay period basis. This meant that if an employer operated on a weekly pay period, they were exposed to twice as many potential penalties than if they operated on a biweekly pay period. The bill addresses this unfairness and provides that any penalty amount for an employer operating on a weekly pay period is reduced by half.
  9. Employees Receive Greater Portion of Penalties Awarded: Previously, any award under PAGA was distributed 75% to the Labor & Workforce Development Agency and 25% to the affected employees. The bill increases the employees’ share of penalties to 35%.

New Cure Provisions

PAGA previously had an extremely limited “cure” provision which allowed employers to cure or fix the alleged Labor Code violations included in a plaintiff’s PAGA notice. This mechanism was seldom used by employers, as any attempt to cure was typically ignored by plaintiffs, and the PAGA claims would still proceed in Court. The new bills overhaul PAGA’s cure provision, allowing more violations to be cured, and introduce new mechanisms that employers can take advantage of to capitalize on curing violations.

  • What Can Be Cured? SB 92 now allows violations of Labor Code § 226 (wage statements – previously, only certain parts of wage statement violations could be cured), § 226.7 (failure to pay meal/rest period premiums), § 510 (overtime), and § 2802 (expense reimbursement) to be cured. This expansion includes some of the most frequently alleged violations under PAGA.
  • Options for Small Employers Wanting To Cure: Small employers (defined as under 100 employees during the relevant period), can notify the LWDA that they would like to cure the alleged violations. The agency will then arrange a settlement conference with the plaintiff and employer in an attempt to reach an early resolution for the matter, like the conferences held by the Labor Commissioner for individual wage claims.
  • Options for Large Employers Wanting To Cure: Employers with more than 100 employees may file a request for a stay and Early Neutral Evaluation with the court, which requires the court stay all discovery and responsive pleading deadlines. The neutral will then review the employer’s plan for curing violations, monitor compliance with the plan for a cure, and consider the employer’s efforts in limiting potential penalties. An employer may also file a motion for the court to approve a cure, even if the plaintiffs or neutral do not agree a cure has been sufficient.

While it remains to be seen how the courts will handle these new requests for Early Neutral Evaluations, it will likely put an onus on plaintiffs to provide more than boilerplate allegations in their PAGA notices. Employers should be given sufficient notice to be afforded the opportunity to cure and the Early Neutral Evaluations (and their associated stays) will provide an early opportunity for employers to highlight any vague or conclusory allegations in plaintiff’s PAGA notices, and force unreasonable plaintiffs to an early bargaining table.

Injunctive Relief Is Now A Potential Remedy

Previously, the only available remedies under PAGA were civil penalties and attorneys’ fees. The bills add injunctive relief as an available remedy. This permits PAGA plaintiffs to seek injunctive relief in any circumstances where the LWDA could seek injunctive relief.

The legislation specifies that it is effective as of June 19, 2024, even though it was not signed until after that date, and applies to any proceedings (or LWDA notices) initiated on or after that date.

Workplace Solutions

Stay tuned as your favorite Seyfarth attorneys monitor the outcomes from this groundbreaking legislation and the subsequent methods for dealing with defending PAGA suits following its passing.

Edited by Coby Turner

Seyfarth Synopsis: On June 20, 2024, the first day of summer, the Cal/OSHA Standards Board turned the heat up on employers and unanimously voted to approve Cal/OSHA’s indoor heat rule. Employers should be prepared to comply with the rule as early as August 1, 2024.  

After years of delay, the Cal/OSHA Standards Board unanimously adopted Cal/OSHA’s indoor heat illness prevention rule. Not wanting to be left in the dust, on June 21, Cal/OSHA published various guidance documents, including a model written program and FAQs on the new requirements, for California employers to rapidly come into compliance.

It’s Getting Hot In Here For Almost All California Workplaces

The new rule applies to most indoor work areas in California when the indoor temperature equals or exceeds 82°F when workers are present. It does not apply to:

  • Prisons, local detention facilities, and juvenile facilities;
  • Places of employment where workers are teleworking that are not under the employer’s control;
  • Emergency operations directly involved in the protection of life or property; or
  • Incidental heat exposures where a worker is exposed to temperatures at or above 82°F and below 95°F for less than 15 minutes in any 60-minute period (but this exception does not apply to vehicles without effective and functioning air conditioning, or shipping or intermodal containers during loading, unloading, or related work)

Controls Needed When The Heat Is On

Additionally, employers must implement engineering and administrative controls when one of the following conditions exists:

  • The temperature or heat index indoors is at least 87°F when workers are present;
  • Workers wear clothing that restricts heat removal and the temperature is at least 82°F; or
  • Workers work in a high radiant heat area and the temperature is at least 82°F.

In these higher-heat conditions, employers must take steps to reduce the temperature and heat index to below 87°F (or temperature to below 82°F for employees working in clothes that restrict heat removal or high radiant heat areas).  Engineering controls should be the first step, including cooling fans or air conditioning, increasing natural ventilation, and cooled benches. Administrative controls are a second line of defense, such as modifying work schedules and requiring mandatory rest breaks.

Access to Water and Cool Down Areas When Employees Are Feeling Hot, Hot, Hot

Employers must provide at least one quart of free, potable, fresh, and suitably cool drinking water to all workers in covered workplaces and working conditions per hour for the entirety of their shifts. If the full-shift quantity of drinking water is not available to workers at the start of a shift, the regulation requires written procedures for replenishing sufficient quantities of drinking water throughout the shift.

Not only must employers provide water, but they also must remind and encourage workers to drink it throughout their shifts and emphasize the importance of drinking water in training sessions.

Employers must also provide and maintain at least one cool down area at all times when workers are present. A cool down area must satisfy certain safety requirements, be blocked from direct sunlight, be shielded from high-radiant heat sources, and either be open to the air or have ventilation or cooling. These areas must be large enough to accommodate all workers on recovery, rest, or meal periods, and allow workers to sit in a normal posture without having to touch other workers.

It Feels Like Summertime, But How Hot Is It?

Under the new regulation, employers must measure the temperature and heat index, and record whichever is greater when the temperature or heat index reaches 87°F (or temperature reaches 82°F for employees working in clothing that restricts heat removal or high radiant heat areas).

Temperature must be measured in the immediate area where workers are located using a thermometer that is exposed to the air but shielded from radiant heat sources (the sun, hot surfaces, hot liquids, and fire).

Heat index, on the other hand, can be determined in two ways:

  1. Use a heat index monitor that measures both temperature and relative humidity and utilizes National Weather Service heat index equations to determine the heat index.
  2. Calculate the heat index by measuring the indoor temperature with a thermometer and relative humidity with a hygrometer, then use the chart found in Appendix A of the new regulation, Title 8, section 3396.

Hot Town, Summer in the City (or Not) – Employers Must Observe New Workers

Acclimatization is another key to compliance with the new rule, i.e. the process by which the body adjusts to increased heat exposure. Acclimatization is typically achieved within 4 to 14 days of regular work involving at least 2 hours per day in the heat. For the first 14 days of an assignment a supervisor or designated worker must closely observe workers who have been newly assigned to any of the following:

  • A work area where the temperature or heat index, whichever is greater, reaches at least 87°F;
  • A work area where the temperature or heat index, whichever is greater, reaches at least 82°F where workers wear clothing that restricts heat removal; or
  • A high-radiant-heat area where the temperature reaches at least 82°F.

Additional requirements will apply during a heat wave (i.e., any day when the predicted outdoor temperature will be at least 80°F and at least 10°F greater than the average high daily outdoor temperature for the five preceding days) where no effective engineering controls are in use to control the effect of outdoor heat on indoor temperature.

Implementing Emergency Response Procedures for Employees Feeling the Heat (Wave)

To mitigate the risk of harm to employees from heat-related exposure, the new rule, and its corresponding guidance requires employers to have effective emergency response protocols that:

  • Ensure that supervisors and workers are trained to recognize the signs and symptoms of heat illness;
  • Provide basic first aid (such as cooling towels and shade);
  • Obtain emergency medical services; and
  • Not allow a worker with signs or symptoms of heat illness to be left alone or sent home without being offered onsite first aid or provided with emergency medical services.

Employers must be prepared to transport workers safely to a place where they can be reached by an emergency medical provider when necessary. The goal is to stop the rapid progression to more serious illness.

Put It in Writing Before The Heat Of The Moment

As many California employers are already aware, Cal/OSHA is keen on requiring its safety plans to be memorialized in writing. Not surprisingly, the new indoor heat rule requires employers to have a written heat illness prevention plan that includes procedures for:

  • Providing sufficient water;
  • Providing access to cool down areas;
  • Measuring the temperature and heat index and recording whichever is greater;
  • Identifying and evaluating environmental risk factors for heat illness, and implementing control measures;
  • Emergency response protocols; and
  • Acclimatization.

Cal/OSHA has already published a model written plan that employers can use as a starting point. However, Cal/OSHA cautions that a heat illness prevention plan must be specific and customized to an employer’s operations to satisfy the standard.  Employers must also train workers and supervisors so they understand and can implement the employer’s plan.

What’s Next on These Summer Nights?

While for some, its summertime and the living’s easy, the Office of Administrative Law (OAL) has 30 days to review the indoor heat rule for compliance with the California Administrative Procedure Act and integrate it into the administrative rules. The Standards Board informally requested the OAL to expedite finalization of the regulation. The Cal/OSHA Deputy Chief noted that he will request immediate enactment of the regulation upon OAL approval, though immediate enactment is not guaranteed.

If the OAL approves the rule but does not make it effective immediately, employers can expect an effective date of October 1, 2024. If the OAL makes it effective immediately, employers can expect an effective date as early as August 1, 2024.  

Workplace Solutions

Employers should prepare to comply with the indoor heat rule in the next 30-60 days. But don’t sweat it, the authors, your favorite Seyfarth attorney, or any member of the Workplace Safety and Health (OSHA/MSHA) Team are here to advise on compliance with these new requirements.

Edited by Cathy Feldman, Coby Turner & Elizabeth Levy

Seyfarth Synopsis: Are you ready for it? The record-smashing icon, Taylor Swift, may have taken her tour to Europe, but that doesn’t stop new laws from cropping up back home. The Los Angeles County Board of Supervisors passed the Fair Work Week Ordinance on April 9, 2024, which is set to go into effect on July 1, 2025, for retail employers located in the unincorporated areas of Los Angeles County. But we’ve seen this remix: it closely tracks the City of Los Angeles’ Fair Work Week Ordinance.

Long Story Short

Fair Work Week Ordinances have cropped up in almost as many locations as Taylor Swift’s Eras tour, including Oregon, Chicago, New York City, Philadelphia, Seattle, and several California cities such as Berkeley, San Francisco, Emeryville, and Los Angeles. The Los Angeles County Fair Work Week Ordinance will be the first county-wide ordinance in California.

The Who’s Who of Who Is Covered

I think we’ve seen this film before. The “Retail Employers” definition in the Ordinance mirrors the definition in the LA City Fair Work Week Ordinance, which encompasses entities identified as retail businesses in the North American Industry Classification System (NAICS)’s retail trade categories, and subcategories 44 through 45, that employ at least 300 employees worldwide. Individuals employed by staffing agencies and certain subsidiaries and franchises count toward the 300-employee threshold.

Under the Ordinance, “Retail Employees” includes individuals who:

  • Perform at least two hours of work within the unincorporated areas of Los Angeles County,
  • Qualify for minimum wage under California law, and
  • Are assigned a primary work location and duties that support retail operations (like retail stores or warehouses).

Don’t Make Employees Wait And Wonder If You’re Ever Coming Around

This Ordinance will require covered employers to provide estimates and advance notice of work schedules.

  • Good Faith Scheduling Estimate. To avoid bad blood, employers must provide a good faith estimate of work schedules to prospective employees before hire (and include a Notice of Retail Employee’s Workweek Rights), and to current employees within 10 calendar days of a request.
  • Advance Notice. Covered employees must receive their work schedule a fortnight, or 14 calendar days in advance of the work period, and they have a right to decline any hours not included in it. If an employer changes the work schedule after the 14-day period, it must have documented consent from impacted employees.
  • Right To Speak Now About Schedule Changes. The Ordinance codifies employees’ right to request preferred hours, times, or locations of work. Employers are not obligated to grant these requests, but must accept or deny the requests in writing.

Predictability Pay We Know All Too Well

Just like the LA City Fair Work Week Ordinance, employees will be entitled to “predictability pay” for changes made to their work schedule within the notice period under certain circumstances. Employers will owe one hour of compensation at the regular rate of pay for any change to a scheduled date, time, or location that results in no loss of hours or results in adding more than 15 minutes of work.

Both the Ordinance and the LA City corollary require employers to pay half an employee’s regular rate of pay when an employer changes the start or end time of a shift resulting in a loss of more than 15 minutes.  However, the Ordinance requires payment of this amount under several additional circumstances, including when (1) time is subtracted from a shift before or after the employee reports to work; (2) the employer changes the date of a shift; (3) the employer cancels a shift; or (4) the employer schedules the employee for an on-call shift if the employee is not called in.

The exceptions to predictability pay are the same under this Ordinance and the LA City Ordinance:

  1. Employee-initiated schedule changes;
  2. Employees who accept a schedule change due to another employee’s absence;
  3. Changes due for violating any law or policies;
  4. Work operations are compromised pursuant to law; or
  5. When employees accept additional hours or work extra hours that require payment of overtime.

Employers Must Stay Stay Stay With Current Employees

Employers must offer additional hours to current qualified employees at least 72 hours before hiring a new employee, contractor, or temporary hire (unless doing so would require the employer to pay overtime fees).

Blank Space Between Shifts

The Ordinance matches the LA City prohibition of employers scheduling employees to work shifts that start less than ten hours from an employee’s last shift without written consent and payment of time and a half for each hour of that subsequent shift.

Who Uses Typewriters, Anyway? – Posting and Notice Requirements

Employers must post the required Notice in a conspicuous place in English, Spanish, and any other language spoken by at least 10% of the employees at a workplace.

Employers must also maintain current and former employees’ records (including work schedules, copies of written offers to employers for additional work hours, and good faith estimate work schedules) for three years.

Penalties If You Do Something Bad

Employers who violate the Ordinance could be subject to penalties up to $500 per violation (and up to $1,000 for retaliating against an employee who complains of violations) payable to the employee. Unlike the LA City Ordinance, violations of this Ordinance do not accrue daily penalties. However, employers could be subject to daily administrative penalties up to $20,000 annually per violation per employee—with the exception of a retaliation violation, which has a maximum annual penalty and fine of $30,000 per employee.

Workplace Solutions

Retail employers in the unincorporated areas of Los Angeles County should closely examine their scheduling practices and record retention procedures to confirm they are ready to comply with this new law by July 2025. Covered employers should also ensure their payroll departments are ready to handle predictability pay. Unlike Taylor Swift, you don’t have to do it with a broken heart. If you have questions regarding compliance, please reach out to the authors or your favorite Seyfarth attorney.

Edited by Cathy Feldman and Coby Turner

Update: On May 31, 2024, Governor Newsom passed S.B. 828, which delays implementation of S.B. 525, the health care minimum wage law signed by Governor Newsom on October 13, 2023. S.B. 828 delays all of the minimum wage adjustments in S.B. 525 by one month. This means that S.B. 525, which was set to take effect on June 1, 2024, will instead take effect on July 1, 2024. It further means that the minimum wage increases scheduled to take place after 2024 will take place on July 1, rather than June 1, of each year.

Seyfarth Synopsis: On September 14, 2023, the California legislature passed S.B. 525, which will raise minimum wages for health care workers across the state. The bill includes five separate minimum wage schedules for covered health care employees depending on the nature, size, and structure of the employer’s business. Unless Governor Newsom vetoes the bill (which is not expected), the bill will take effect on June 1, 2024.

Grey’s Anatomy might be set in Seattle, but now it’s all eyes on California’s health care workers. Starting June 1, 2024, S.B. 525 will raise minimum wages for health care workers across the state to a minimum of $18 per hour, or up to $23 per hour, depending on the applicable wage schedule, and based on the nature, size, and structure of an employer’s operations.

From Grey Sloan Memorial Hospital To The Denny Duquette Clinic – Most Health Care Employers Are Covered

The bill’s provisions will apply to “Covered Health Care Employers,” as that term is defined under the soon-to-be newly added Labor Code sections 1182.14 and 1182.15, including:  

  • Hospitals: licensed general acute care hospitals, licensed acute psychiatric hospitals, and other special hospitals.
  • Clinics: specialty care clinics, dialysis clinics, community clinics, psychology clinics, government run clinics, rural health clinics, and urgent care clinics.
  • Psychiatric and Mental Health Facilities: mental health rehabilitation centers, county mental health facilities, and psychiatric health facilities.
  • Licensed Skilled Nursing Facilities: including those that are owned, operated, or controlled by a hospital or integrated health care delivery system or health care system.
  • Home Health Care: including licensed home health agencies and a patient’s home when health care services are delivered by an entity owned or operated by a general acute care hospital or acute psychiatric hospital.
  • Licensed Residential Care Facilities for the Elderly
  • Integrated Health Care Delivery System Work Sites
  • Ambulatory Surgical Centers Certified for Medicare Participation
  • Physician Groups
  • County Correctional Facilities Providing Health Care Services

The term “Covered Health Care Employers” expressly excludes: (1) hospitals owned, controlled, or operated by the State Department of State Hospitals; (2) tribal clinics exempt from licensure; and (3) outpatient settings conducted, maintained, or operated by a federally recognized Indian tribe, tribal organization, or urban Indian organization.

The Scrub Nurse, The Chief, And More Are Included

The term “covered health care employee” is also defined broadly under both the new Labor Code section 1182.14 and section 1182.15 to include employees who provide patient care, health care services, or services supporting the provision of health care. Examples span from nurses and physicians to clerical workers, gift shop workers, janitors, schedulers, and billing personnel.

Contracted and subcontracted employees are also included if they:

  1. Perform contracted or subcontracted work primarily on the premises of a health care facility to provide health care services or services supporting the provision of health care;
  2. Are employed by an employer that contracts with the health care facility employer, or with a contractor or subcontractor to the health care facility employer, to provide health care services, or services supporting the provision of health care; or
  3. Perform work for a health care facility employer that directly or indirectly, or through an agent or any other person, exercises control over the employee’s wages, hours or working conditions.

Covered Health Care Employees will be able to enforce their rights under this new law through civil action, in the same manner they can currently enforce other minimum wage requirements.

The Anatomy Of Employers’ Minimum Wage Obligations

The bill includes five separate minimum wage schedules, but the minimum wage rates set forth under two of these schedules are identical. Thus, Covered Health Care Employers will fall within one of the four following groups:

1. Group 1: Covered health care facilities with 10,000 or more full-time equivalent employees, covered health care facility employers that are part of an integrated health care delivery system or health care system with 10,000 or more full-time equivalent employees, covered dialysis clinics, and covered health facilities that are owned, affiliated, or operated by a county with a population of more than 5,000,000 as of January 1, 2023.

  • June 1, 2024 to May 31, 2025: $23 per hour.
  • June 1, 2025 to May 31, 2026: $24 per hour.
  • June 1, 2026 to August 1, 2027: $25 per hour.

2. Group 2: Covered hospitals with high populations of Medicare/Medicaid patients, covered rural independent health care facilities, and covered health care facilities that are owned, affiliated or operated by a county with a population of less than 250,000 as of January 1, 2023.

  • June 1, 2024 to May 31, 2033: $18 per hour with 3.5 percent increases annually.
  • June 1, 2033 to August 1, 2034: $25 per hour.

3. Group 3: Covered primary care community or free clinics that are open for limited services of no more than 40 hours a week and that are not conducted or maintained by a government entity, covered community clinics along with any associated intermittent clinics exempt from licensure, covered rural health clinics, and covered urgent care clinics that are owned by or affiliated with a community clinic.

  • June 1, 2024 to May 31, 2026: $21 per hour.
  • June 1, 2026 to May 31, 2027: $22 per hour.
  • June 1, 2027 to August 1, 2028: $25 per hour.

4. Group 4: all other covered health care facilities

  • June 1, 2024 to May 31, 2026: $21 per hour.
  • June 1, 2026 to May 31, 2028: $23 per hour.
  • June 1, 2028 to August 1, 2029: $25 per hour.

Following these minimum wage increases, the Director of Finance will calculate an adjusted minimum wage on or before August 1 of the following year, and on or before each August 1 thereafter – seemingly in perpetuity. The calculation will increase the minimum wage by 3.5% or the rate of change in the averages for the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers, whichever is lower.

Even The New Residents Might Be Entitled To A Salary Increase

Notably, the minimum wage requirements summarized above will impact a Covered Health Care Employer’s exempt California employees as well, to the extent those employees qualify as Covered Health Care Employees. These employees will have to earn a monthly salary equivalent to no less than: (1) 150% of the applicable health care worker minimum wage or (2) 200% of the State’s generally-applicable minimum wage—whichever is greater—for full-time employment in order to qualify as exempt under California’s laws.

Any Other Changes Next Season?

In one small piece of consolation to employers, the new legislation provides that no city, county, city and county, including charter cities, charter counties, or charter cities and counties can enact any ordinance, regulation, or administrative action relating to wages or compensation for Covered Health Care Employees before January 1, 2034. So, at least local ordinances won’t be weighing Covered Health Care Employers down and requiring complicated and varied compliance.

Workplace Solutions

Health care employers should reach out to the authors or your favorite Seyfarth attorney for solutions and recommendations on addressing compliance with the new Labor Code sections 1182.14 and 1182.15 before June 1, 2024.

Edited by Cathy Feldman and Coby Turner

Seyfarth Synopsis: California lawmakers have introduced legislation that would give employees the right to ignore communications from their employers that are received outside the contours of their “working hours,” which must first be agreed upon, in writing.

If signed into law, AB 2751 would add a section to the Labor Code that would require employers to establish a workplace policy that would give employees the right to disconnect from employer communications during defined “nonworking hours.”

Who Gets to Unplug?

Under the newly proposed legislation, an employer may only contact a covered employee during non-working hours when there is:

(1) an emergency situation, which is defined as an “unforeseen situation that threatens an employee, customer, or the public; disrupts or shuts down operations; or causes physical or environmental damage”; or

(2) a change to a work schedule within 24 hours.

As currently drafted, the legislation would not apply to employees covered by a collective bargaining agreement. Beyond this limitation, the bill applies broadly to public and private employers and exempt and non-exempt employees. However, AB 2751 is in its infancy, and will likely undergo amendment to further clarify its scope. In fact, the first committee to analyze the bill recommended considering carving out exempt professionals and other amendments to clarify the definition of “employer,” “contact,” and “emergency.”

If You Don’t Turn Off That Computer Right Now…

Importantly, the bill does not afford a private right of action. Instead, employees could file a complaint with the California Labor Commissioner if there is a “pattern” of violations (i.e. three or more documented instances of their employer communicating with them outside of working hours). A pattern of such violations are punishable by a fine of no less than $100 (and the bill is currently silent on maximum penalties).

Is Anyone Else Changing the Channel on Workplace Communications?

While no other state has advanced comparable legislation, several countries have implemented laws similar to AB 2751, such as Belgium, Germany, France, Italy, and most recently, Australia. In 2018, New York City unsuccessfully attempted to pass a measure that would have prohibited retaliation against employees for refusing to respond to after-hours employer communications.

Supporters assert that this legislation is necessary to account for a so-called “cultural shift” in the U.S. workforce. The bill’s author, Assm. Matt Haney, defends his proposal on the grounds that the rapid rise of remote work and the use of smartphones has caused many employees to feel “tethered to the office.”

Opponents, such as the California Chamber of Commerce, believe that the bill is a step backwards for workplace flexibility. Rather than promoting the separation of work and home life, critics state that the bill will effectively subject all employees to a rigid working schedule and prohibit communication between employers and employees absent an emergency.

Workplace Solutions

Employers do not need to take any steps towards compliance yet. We will continue to keep you apprised of developments with this and other California legislation through the September 30, 2024 bill signing deadline. Our blog will provide a deep dive of the bills that ultimately pass and will affect your California workforce. Please check back in with us here at Cal Peculiarities, and you can also check out our Policy Matters podcast and newsletter for regular check-ins on California (and national) policy and legislative updates.

Edited by Cathy Feldman, Coby Turner, and Elizabeth Levy

Seyfarth Synopsis: California healthcare employers are facing primetime levels of costly litigation alleging claims based on miscalculation of the regular rate of pay. Healthcare employers are often targets because non-exempt healthcare employees may be paid myriad different incentives—premiums, bonuses, differentials, on-call pay, and more—that may need to be included in the regular rate of pay, as we explain below.

The regular rate of pay in the California healthcare system is about as easy to understand as the plot twists in Grey’s Anatomy. The regular rate of pay is at its core the product of a fraction – but you want to ensure you don’t Nip/Tuck anything you shouldn’t, that the dollar numbers on the top and hours number on the bottom of the fraction for each workweek are correct, and that the resulting numbers are correctly included on wage payments.

It Starts With the Workweek

Just like under federal law, in California a “workweek” for overtime and regular rate purposes doesn’t necessarily start at the same day or time for everyone. The workweek is any seven consecutive days starting with the same calendar day each week. The workday is any consecutive 24-hour period beginning at the same time each calendar day.

For most employers, the workday and workweek are the same defined period for all non-exempt employees (like Sunday at 12 a.m. to Saturday at 11:59 p.m.). But particularly with healthcare employers, different non-exempt employee populations may have different workweeks and workdays, based on their regular work schedule. For example:

  • Night shift employees may not have a 12 a.m. workday start time like the day shift population, but instead have workday/week that begins at noon.
  • Some hospitals and residential care establishments may have an exception to normal overtime rules, where non-exempt employees are on an “8 and 80” schedule, which results in a fixed period of 14 consecutive days as the period for calculating overtime.

This means there may be several different workweeks to account for throughout a healthcare employer’s departments and operations when figuring out the regular rate of pay.

Then How Do We Figure Out the Regular Rate of Pay?

The regular rate of pay is the weighted average rate of (almost) all forms of pay for work performed by non-exempt employees in the workweek. It can also include monies earned after the fact that relate back to a workweek (such as a quarterly bonus). This means you add up all these forms of compensation associated with work or performance covering that workweek, and this total generally is divided by the total hours worked by that employee in the workweek.

So, when a non-exempt employee earns compensation in addition to the base hourly rate, the regular rate of pay will be higher than the employee’s base hourly rate. It’s this higher rate that is used to calculate the amount paid for overtime and double time premiums, California paid sick leave, meal and rest period premiums, and reporting time pay.

In a General Hospital, What Hours Count for the Regular Rate Calculation?

Some types of hours do, some don’t (and make sure to check any CBAs for exceptions to the usual rules). Here are some examples:

What’s In

  • Regular hours
  • Education hours
  • Controlled standby time

What’s Out

  • Meal and rest period premiums
  • Unworked reporting time pay hours
  • Uncontrolled standby time
  • Vacation, sick pay, PTO, etc.

And How Do We Treat Different Types of Pay for the Regular Rate?

Unfortunately this is where things can get a bit tricky. Here are some common examples of types of pay that would be in (or out) of the regular rate of pay calculation:

What’s In

  • Preceptor pay
  • Hazard pay
  • Shift differentials
  • Extra shift bonuses
  • Standby pay
  • Commissions
  • Non-discretionary bonuses
  • Attendance bonuses
  • Bonuses designed to incentivize workers to work harder or more efficiently

What’s Out

  • Overtime (the premium [e.g., the .5])
  • Premium pay for work on weekends, holidays, or other special days (if premium is at least 1.5x base rate).
  • Discretionary bonuses (spot bonuses or other unexpected bonuses)
  • Gifts not based on hours worked, production, or efficiency and that aren’t pursuant to an agreement
  • Percent of total earnings bonuses
  • Payments to profit-sharing plans or trusts
  • Contributions to employee benefit plans

Is This Prescription the Same for Flat-Sum Bonuses?

No! A flat-sum bonus is generally speaking a bonus that does not increase in rough proportion to hours worked. And, how to deal with flat-sum bonuses may be as surprising to healthcare employers operating in California as the diagnoses in House.

Instead of following federal law, in California, for regular rate purposes, flat-sum bonuses are divided by straight-time hours only (i.e. not necessarily all hours worked) to determine the addition to the regular rate. This amount is multiplied by 1.5 for each overtime hour and 2.0 for each double time hour in the applicable pay period in order to calculate the regular rate of pay adjustment.

Up To Your Scrubs in Regular Rate Calculations – Now What?

First, don’t assume that your payroll provider is getting it right. Payroll providers need specific instructions about what to include in the regular rate of pay calculations. The healthcare industry often utilizes more pay codes than the “normal” employer, so the regular rate calculation and how different categories of pay appear on the wage statement will need to be reviewed and directed by the employer.

Second, evaluate your payroll codes to make sure they are configured correctly in the underlying system, and that they show up the way you expect on a wage statement. Run test scenarios with different pay types and codes to ensure your system is operating as it should with holiday pay, shift differentials, bonuses, etc. This is technical and will take a lot of time and understanding, but it’s important.

Third, don’t be shy to ask for support. Seyfarth has a team of attorneys and analytics professionals who specialize in the healthcare industry. Whether it’s a one-off question, an audit of pay codes or the regular rate calculation and application, or defending litigation, we have a team of subject matter experts who can help.

Workplace Solutions

Figuring out the regular rate doesn’t mean your Private Practice needs to end up in court. Check out our prior healthcare webinar series for additional helpful compliance tips, and tune into our new series on wage and hour tips for healthcare employers in California for even more useful insights. And, as always, please don’t hesitate to reach out to the authors or your favorite Seyfarth attorney for help with all your regular rate questions and needs.

Edited by Cathy Feldman and Coby Turner

Seyfarth Synopsis:  The reporting deadline for the 2023 California pay data reporting cycle is only six weeks away. Employers with at least 100 employees with at least one California employee must file their Pay Data Report with the California Civil Rights Department (CRD) by May 8, 2024.  While the reporting requirements are largely the same as the 2022 reporting requirements, the CRD now requires information on remote workers and labor contractor demographic data. 

With California’s May 8, 2024, pay data reporting deadline right around the corner, California employers should ensure compliance with the CRD’s reporting requirements.  To help with these obligations, here is your helpful summary of the CRD’s recent changes requiring reporting on remote workers and labor contractor demographic data that you did not have to deal with the last time around. 

What Do I Need to Know About Remote Workers?

New for the 2023 reporting cycle is a requirement that both payroll and labor contractor employee reports include information regarding the number of employees per employee group who worked remotely. Specifically, the data templates ask for:

  1. the number of employees that do not work remotely,
  2. the number of remote employees located within California, and
  3. the number of remote employees located outside of California.

This has been a sizable undertaking for many employers who do not necessarily maintain this information in an easily accessible format.

The recently published CRD Frequently Asked Questions define a “remote worker” as “a payroll or labor contractor employee who is entirely remote, teleworking, or home-based, and has no expectation to regularly report in person to a physical establishment to perform work duties.”

Many workplaces utilize hybrid working models in which employees split time between the physical office and their home.  For hybrid employees or those who are in a “(partial) teleworking arrangement,” a common question that has arisen is how to approach reporting and whether the individual qualifies as a remote worker. The FAQs explain that “employees in hybrid roles or (partial) teleworking arrangements expected to appear in person to perform work at a particular establishment for any portion of time during the Snapshot Period would not be considered remote workers for pay data reporting purposes.”  Therefore, the key consideration is the employee’s status and work location during the Snapshot Period (i.e. a single pay period between October 1, 2023 and December 31, 2023).

Do I Need Labor Contractor Demographic Data This Year?

The short answer to this common question is, “yes.” Last year, the CRD granted an exception that permitted using “unknown” for race, ethnicity, or sex of labor contractor employees. However, “unknown” is no longer an acceptable response and demographic data is now required for labor contractor employees.

The CRD provides a few options for collecting this information, the preference being voluntary self-identification. If a worker declines to provide the information, employers must use one of three other options provided by the CRD: (1) current employment records, (2) other reliable records or information, or (3) observer perception. The CRD explicitly acknowledges the risk of inaccurate data using the observer perception, and instructs employers that observer perception should be a last resort.

What Are The Penalties?

There are a number of enforcement mechanisms for employers who fail to comply with the pay data reporting requirements.  The CRD is actively pursuing non-filers and has already issued fines to companies that fail to file the required reports.  To that end, the Department has the authority to seek:

  1. Civil Penalties:  Employers who fail to file a required report can be assessed  penalties of $100 per employee. The penalties increase to $200 per employee for a subsequent failure to file a required report and  may also assessed against a labor contractor for failing to timely provide pay data necessary to complete the required filing.
  2. An Order to File:  The CRD may seek an order requiring an employer to file a required pay data report;
  3. Recovery of Costs:  The CRD may recover its costs in any enforcement action.

Accordingly, employers should take care to timely file the required reports.

CRD Pay Reporting Resources

As we previously wrote, the CRD has made several resources available to assist employers with their pay reporting obligations, including:

Workplace Solutions

Given the new reporting obligations, covered employers should ensure they have all required categories of data ready to submit for the upcoming deadline.  Please contact the author or your favorite Seyfarth attorney with any questions about complying with California’s pay reporting requirements.

Edited by: Cathy Feldman and Coby Turner

Seyfarth Synopsis: Senate Bill 553, signed into law by Governor Gavin Newsom, requires nearly all employers in the State of California to prepare a Workplace Violence Prevention Plan, train employees on how to identify and avoid workplace violence, and maintain a violent incident log by July 1, 2024. On March 7, 2024, Cal/OSHA published the long-awaited model Workplace Violence Prevention Plan.

Governor Newsom has signed SB 553, a first of its kind workplace violence prevention law, which requires nearly all California employers to create, adopt, and implement written Workplace Violence Prevention Plans that include numerous elements, annual workplace violence prevention training, violent incident logs, and the creation and retention of various records.

Interestingly, the Division of Occupational Safety and Health (Cal/OSHA) in collaboration with various stakeholders has been working on a general industry workplace violence standard since 2017. Now, SB 553 requires the Division to start enforcing new workplace violence requirements that are largely modeled on Cal/OSHA’s existing draft standard. Under the new law, the Cal/OSHA Standards Board is required to adopt workplace violence standards codifying SB 553 no later than December 31, 2025. But regulations or not, Cal/OSHA is empowered and directed to start enforcing SB 553 on July 1, 2024.

The model Cal/OSHA Workplace Violence Prevention Plan complies with the full slate of requirements for a written Plan, and using this Plan will reduce the likelihood of a programmatic Cal/OSHA citation.

Who is Covered?

The requirement for a Workplace Violence Prevention Plan applies to all employers and employees in the State, with a few limited exceptions:

  • Employers already covered by Cal/OSHA’s Violence Prevention in Health Care standard
  • Employees who telework from a location of their choosing that’s outside the control of the employer
  • Locations not open to the public where fewer than 10 employees work at a given time
  • Department of Corrections and Rehabilitation and law enforcement agencies

Defining “Workplace Violence”

“Workplace violence” is defined broadly as any act of violence or threat of violence that occurs in a place of employment. The law also defines 4 specific types of workplace violence.

The definition includes, for example, verbal and written threats of violence and incidents involving use of firearm or dangerous weapon regardless of whether an employee sustains an injury.

However, the definition also captures acts that some might think waters down the meaning of workplace violence, such as a threat against an employee that results in or has a high likelihood of resulting in, injury, psychological trauma, or “stress,” regardless of whether the employee sustains an injury. This means there’s no “reasonable person” test; the definition is subjective. A seemingly innocuous comment to some might be considered workplace violence based on the perception of an employee.

What Must be Included in a Workplace Violence Prevention Plan?

Workplace Violence Prevention Plans must be in writing and easily accessible by employees. The Plans can be included as a stand-alone section within an existing injury and illness prevention plan (IIPP) or they can be maintained as a separate document.

The model Workplace Violence Prevention Plan published by Cal/OSHA includes all of the required information necessary for compliance including identifying the individuals responsible for implementing the Plan, and the following procedures for:

  • Involving employees in the development and implementation of the Plan
  • Coordinating implementation of the Plan and training with other employers such as staffing agencies.
  • Accepting and responding to reports of workplace violence, and prohibiting retaliation against reporting employees
  • Ensuring employees comply with the Plan
  • Communicating with employees about: (1) how to report violent incidents, threats, or workplace violence concerns to employer or law enforcement and (2) how concerns will be investigated and results communicated
  • Responding to actual and potential workplace violence emergencies
  • Identifying and evaluating workplace violence hazards
  • Post incident response and investigation
  • Reviewing Plan effectiveness annually, when deficiency is apparent, or after a workplace violence incident

Training Requirements

SB 553 also requires employee training. Employers must provide employees with initial training when the Plan is first established and continue to conduct annual trainings thereafter. Training needs to cover the following topics:

  • The employer’s Plan and how employees can obtain a free copy of the Plan
  • How to report workplace violence hazards and workplace violence incidents
  • Corrective measures the employer has implemented
  • How to seek assistance to prevent or respond to violence
  • Strategies to avoid physical harm
  • Information about the violent incident log and how employees can obtain a copy

Additional training is required when new or previously unrecognized workplace violence hazards are identified, or when there are changes to the Plan.

Employers must retain training records for at least 1 year.

Recording and Reporting Requirements

Employers are required to record every workplace violence incident in a violent incident log including:

  • Date, time, and location of the incident
  • Detailed description of the incident
  • Classification of who committed the violence
  • The violence type including whether it was a physical attack or threat, whether weapons or other objects were involved, or whether it was a sexual assault
  • Consequences of the incident including whether security or law enforcement was contacted and whether actions were taken to protect employees from a continuing threat

Employers must retain the log for 5 years and omit personal identifying information. Employees are entitled to view and copy the log within 15 calendar days of a request.

Other Recordkeeping Requirements

Unlike the IIPP standard, which has a 1-year retention period for records of implementation, SB 553 has a lengthy 5-year retention requirement for workplace violence hazard identification, evaluation, and correction records. Records of workplace violence incident investigations (which may not include medical information) are also subject to the 5-year retention requirement.

Changes to Existing Rules On Seeking Temporary Restraining Orders on Behalf of Employees

Finally, SB 553 changes California’s Code of Civil Procedure by adding several employee-friendly protections to the process by which employers may petition for temporary restraining orders (TROs) and orders after hearings (i.e. restraining orders that are often in place for three or more years) on behalf of employees.

California Code of Civil Procedure Section 527.8 previously allowed employers to petition for a Workplace Violence TRO on behalf of their employees who had “suffered unlawful violence or a credible threat of violence from any individual, that can reasonably be construed to be carried out or to have been carried out at the workplace” to seek protection from an individual; often a former employee or member of the public who is violent and/or threatening the employee at their workplace. This was a helpful, albeit limited, remedy for employers seeking to protect the workplace.

SB 553 expands Section 527.8 and authorizes collective bargaining representatives, not just employers, to petition for TROs on behalf of employees, allowing even more relief for employees faced with threats and violence. SB 553 also provides for employee names to be withheld from the TRO papers, providing anonymity for victims who otherwise might have hesitated on supporting a TRO for fear of retaliation from the individual at issue.

SB 553 also expands upon the actionable conduct necessary to give rise to a TRO and amends Section 527.8 to allow employers to seek a TRO on behalf of their employee where the employee suffers harassment––and not simply violence or threats of violence.

Workplace Solutions

Employers should reach out to the authors or your favorite Seyfarth attorney to strategize about how to create and roll out compliant Plans, and modify existing policies to conform to the new SB 553 requirements before July 1, 2024.

Edited by Cathy Feldman and Coby Turner

Seyfarth Synopsis: Collaborations with athletes, actors, and singers have always been a great way for companies to grow their brand recognition and create profitable products. Similar to celebrity-filled ads in the Super Bowl, collaborative relationships between influencers and companies on social media continue to be prevalent. With California’s unique laws on classifying independent contractors, including how “work made for hire” language is interpreted in California, businesses should pay attention to best practices for a successful partnership.

Like Patrick + Brittany and Travis + Taylor: Partnerships Are Key

Nowadays, celebrities and social media influencers are more business savvy. In the past, famous people simply served as the face of a brand or endorsed a product in a short advertisement. However, celebrities and even their family members, as well as budding social media influencers, are increasingly involved with brand collaborations. This includes providing input on package or product designs and colorways, and overseeing the production process. Whether it is Kansas City Chiefs’ quarterback Patrick Mahomes creating a clothing line with Adidas, or a clothing collection curated by Patrick’s off-the-field partner, Brittany, with Vitality (the commercial even features Patrick and Brittany’s daughter, Sterling Skye, after whom the line was named), the possibilities are endless. Even the mere appearance of a singer, athlete, or influencer in commercials or ads for businesses unrelated to sports or music can create brand associations, like Travis Kelce and Pfizer, Taylor Swift and Capital One, Christian McCaffrey and Xfinity, or Charli D’Amelio and Dunkin’ Donuts. But what if the collaboration results in the creation of legally protectable intellectual property rights? Who owns the copyright? The answer to this question often turns on the celebrity’s or influencer’s legal relationship with the business.

Instant Replay—Is the Celebrity an Independent Contractor or Employee under California Law?

The difference between employees and independent contractors is critical in California. If a worker is an employee, the business must report the worker’s earnings to the Employment Development Department (EDD) and must pay employment taxes on those wages. Thus, companies have a clear interest in ensuring that the freelancers they occasionally contract with are deemed independent contractors, not employees. Companies also benefit under federal copyright law if the celebrity or influencer can be classified as an independent contractor. The U.S. Copyright Act provides that certain specially ordered or commissioned works can be considered “works made for hire” and, when created by an independent contractor, the commissioning party is considered the author of the work and holder of the copyright. As a result, companies often include “work made for hire” clauses in contracts with independent contractors to ensure that the company owns all copyrights in the contractor’s work. But even if the contracted work qualifies as a work made for hire under federal copyright law, companies must still consider California law, which complicates the possibility of contractor status.

Call Reversal Where California’s View Of Work Made For Hire Effects Employment Status

Normally, the determination of whether an independent contractor should be classified as an employee in California is governed by AB 5 and its successor legislation AB 2257, which address the three-part ABC test for employment classification. But different rules apply when an independent contractor agreement includes work made for hire language.

According to California Labor Code section 3351.5(c) and California Unemployment Insurance Code section 621(d) and 686, an “employee” includes any person, including independent contractors, who enters into a written agreement to create a specially ordered or commissioned work of authorship stating “the work shall be considered a work made for hire.” This essentially means that by including a simple “work made for hire” clause in a contract, an otherwise independent contractor is deemed an employee under California law by statute. This arguably dispenses with the ABC test for these type of employment classification assessments. The independent contractor’s level of involvement in the project does not matter, because the inclusion of the work made for hire clause itself determines the employment status.

Avoiding a Flag on the Play: What Companies Can Do To Adjust and Win the Game

The employment status of their celebrity and social media partners may be more startling to California companies than the 49ers’ muffed punt in the 2024 Super Bowl. To avoid pitfalls, including penalties, companies with such partnerships and work made for hire contractual language, can properly classify these workers as employees.

Alternatively, companies considering partnering with a celebrity or influencer may opt to work with an individual who has created a corporation, LLC, or other business entity (excluding sole proprietorships), and contract with the business entity as opposed to the individual. This is a common approach for celebrities who contract through an entity on a loan-out basis. Entities are not considered employees in California and this strategy may allow a company to avoid the work made for hire employment classification risk. However, whether a loan-out company will survive an EDD audit remains an unanswered question.

Some celebrities and most influencers are unrepresented by a formal legal entity. When facing this kind of situation, companies may opt to omit the “work made for hire” clause and instead acquire the requisite rights through another mechanism, such as an assignment or license. This will allow the company to appropriately utilize the work. Ultimately, when dealing with an independent contractor in California, it is crucial to devise a game plan and consider the company’s end goal. Businesses seeking to own intellectual property created by a celebrity or influencer or as a result of such a collaboration should consider an assignment of rights or a license from the content creator to avoid needing a work made for hire clause and risking employment status. This approach is not without its own risks; grants of rights in copyright can be terminated after a period of time, which could result in the rights reverting back to the independent contractor.

Workplace Solutions

If you have questions or would like to strategize regarding compliance with this facet of California law, “works made for hire” generally, or other intellectual property and employment-related pitfalls that arise when working with celebrities, social media influencers, or independent contractors, don’t hesitate to reach out to your Seyfarth lawyer or the authors of this blog.

Edited by Coby Turner and Cathy Feldman

Seyfarth Synopsis: Employees have a right to request their employment records, but which records can they request? And how quickly do employers have to produce them? And who should they be produced to? And is there a way for employers to actually use these requests to their advantage? We offer guidance on these questions and more below.

Hollywood’s annual award season is upon us with its usual glitz and glamour. Less glamorous? Producing employee personnel files and other employment records. But everybody knows that it’s the behind-the-scenes work that really makes the stars shine on the big night. Read on to learn more about how you can make sure your practices are camera-ready when the bright lights hit.

Learn Your Lines

You can’t deliver an Oscar-worthy performance without knowing the script cold. So you get a request for an employee’s personnel file. Line?

First, check who the request is from. Employees have the right to request a copy of their own records, but often employers receive requests from someone claiming to act on the employee’s behalf. Under Labor Code section 1198.5(e), employers have the right to take reasonable steps to verify the identity of a current or former employee, or their authorized representative before producing records.

Second, check what the request is for. Personnel files? Payroll records? Both? Or some dramatic rendering of the employee’s history of employment? Delivering a performance that your director didn’t ask for isn’t going to score you a nomination here. As we previously addressed in detail, Labor Code sections 1198.5, 226, and 432, and particular Wage Orders, only require you to produce specific information in response to specific requests. And Section 1198.5 says you don’t have to produce personnel records where an employee has filed a lawsuit against their employer. There is no need for you to ad lib and volunteer more!

Third, check the date of the request and know your response deadline. Payroll records must be produced to an employee within 21 days, and personnel records must be produced within 30 days, unless another date is agreed upon. While movie releases are often delayed, employers who miss a record request deadline can be subject to a $750 penalty and attorneys’ fees under Labor Code sections 1198.5 and 226.

Hitting the Red Carpet

Your performance is a hit of Barbenheimer magnitude and you’ve made it to the red carpet! Now its time to get to know the other stars, but  just like when you’re producing personnel and payroll records, you’ll want to spend most of your time on the A-listers.  While there is no statutory definition of what comprises “personnel records,” according to the DLSE the file should include:

  1. Employment applications;
  2. Arbitration agreements;
  3. Signed policy acknowledgments;
  4. Offer letters;
  5. Payroll authorization forms;
  6. Records of employee performance, including performance reviews and written warnings;
  7. Notices of layoff, leave of absence, vacation, or termination;
  8. Notices of wage garnishment;
  9. Education and training notices and records; and
  10. Wage records (i.e., wage statements, or a computer-generated report showing the information required on the wage statements by Labor Code section 226), assuming the employee has asked for them.

Watch too for requests specifically calling out Labor Code section 432—this statute requires you to produce anything that an employee signed related to obtaining or holding employment.

As a matter of practice, you’ll generally want to avoid your seat-fillers. For example, email communications generally should not be included in an employee’s personnel file unless there is a special reason (e.g., documenting a performance-related conversation). Similarly, medical records should be kept in a separate and confidential medical file rather than the personnel file.

You’ll also want to watch for documents that are black listed—documents that are expressly excluded from production by the relevant statutes, or otherwise should not be produced. Records related to the investigation of a possible criminal offense, letters of reference, and records obtained prior to an employee’s employment or obtained in connection with a promotional examination are not covered by the rules requiring the production of employment records. The names of any nonsupervisory employees contained within an employee’s personnel file can (and generally should) be redacted before the file’s production as well. Also make sure to not produce anything subject to attorney-client privilege.

The Winner Is …

Employers?

Well, kind of.

Most HR personnel are probably as excited about a request for employment records as they are for a glass of lukewarm champagne. Responding to a request can be an administrative headache, and often a request is a precursor to a demand letter or complaint. 

However, there can be a silver lining in even the biggest snub or upset. An employer pulling a file for production has the chance to audit that file for any issues that could turn into litigation on an individual or even a class action basis.

If you’re pulling an employee’s wage statements anyway, check them to ensure they contain all categories of information required by Labor Code section 226. If the employee has an arbitration agreement, check to see when it was last updated and consider whether it comports with the latest guidance from the U.S. and California Supreme Court. Do you see an agreement discussing employee uniform costs or usage, a non-compete, or some background check or drug testing forms signed last year that are on templates dated from the prior decade? Check with your Seyfarth attorney about whether you need to revisit those documents.

Workplace Solutions

Responding to a request for employment records doesn’t have to take a Marvel-movie budget or be as confusing as Mulholland Drive. Train your frontline employees to recognize these requests so they don’t sit in a stack of papers until after the deadline to respond has passed. Consider what is being requested and to whom it ought to be produced. And, consult this checklist and talk with your favorite Seyfarth attorney to evaluate what to include and exclude in the production!

Edited by Coby Turner and Cathy Feldman