Seyfarth Synopsis: Halloween was last week, and you probably thought all the scary ghouls and goblins were going to rest for another year. Do not relax just yet! This week, we discuss another process that can be scary for California employers—wage claims filed with the Labor Commissioner. We discuss the process below with the hope of providing some clarity.

I Got This “Notice of Claim and Conference”…What Do I Do Now?

The first communication from the Labor Commissioner typically is a somewhat confusing document called a “Notice of Claim and Conference.” Getting such an official notice from a government agency can be unnerving—especially if you do not know what it means. But fear not! It is a lot simpler than it looks.

This ominous-seeming document is just to tell you that an employee has filed a wage claim and that the Labor Commissioner is going to hold a meeting to discuss the claim. That meeting is called the conference. Not all cases have a conference. In those that do, the Deputy Labor Commissioner (“Deputy”), usually a non-lawyer, will usually do three main things: (1) determine the nature of the claim (to ensure there is jurisdiction); (2) determine the amount of the claim; and (3) attempt to settle the claim.

What do you do to get ready? Gather (as best you can) the information about the claim and be prepared to discuss it as needed with the Deputy. Pay special attention to what the employee is saying about the case, because often this is the first time you will hear why the employee feels entitled to more money. Remember that the conference is not a trial, so do not expect the Deputy to “throw out” the claim at the conference—even if it is completely meritless!

If the case does not resolve at the conference, then the Deputy will set the case for a hearing on the merits. The hearing will usually be a few months down the road. At this stage of the process, there are only two ways to avoid a hearing: (1) settle the claim (you can often work with the Deputy who handled your conference) or (2) send a check for the employee in the amount claimed directly to the Labor Commissioner.

What Happens Next?…The Hearing.

You decided not to settle. What now? The next step, the hearing, is the big show in this process. But it might not feel like one since you may be in a small office-like room with just two tables, some chairs, and a tape recorder. No matter how informal it might feel, you should still treat it seriously. The testimony is under oath, and the Labor Commissioner can enforce any award against an employer the same way as a judgment in court!

At the hearing, there will be a hearing officer, who functions as the judge. The hearing officer is often a lawyer (though historically has not always been required to be one) and most likely will be a different person than the Deputy who presided over the conference. Once the hearing starts, the hearing officer will first allow the employee to testify, present documents, and call witnesses. Do not worry, you will get your chance, too. The hearing officer proceeds in this order because the employee has the burden of proving the claim. You or your attorney can cross-examine the employee (and any other witness). And, after the employee finishes, the employer also gets to present its own evidence.

Do not be surprised if the hearing officer considers “everything,” because the formal rules of evidence do not apply here. “Relevancy” is the only limiting standard. This is because the hearing process with the Labor Commissioner is intended to be streamlined and efficient. At any rate, once the hearing is over, the hearing officer will issue an “Order, Decision, and Award” or “ODA,” which is a written ruling of the hearing officer’s findings. That is where you find out who won or lost.

I Lost. What Can I Do?

You open your mail from the Labor Commissioner to read the ODA, which says that the employee has prevailed and that you owe money. Yikes! Are there any options for you? Of course there are—especially if you disagree with the award. First, if you want the situation to simply be over, you can pay the amount of the award to the Labor Commissioner by the date listed in the ODA.

There are other options. You can also file an appeal of the ODA in the superior court and continue the big show of the hearing into a second act! To file an appeal, the employer must file both a notice of appeal and either (1) a bond in the amount of the judgment or (2) a cashier’s check in the amount of the judgment. Do not wait to do this. You only have 10 days after the ODA is served to file the appeal and the bond/cashier’s check!

After you file an appeal, there are two options: (1) try to settle the case with the employee and (2) go through with the appeal process.

The “appeal” is a bit different than the normal court process, and there are some risks associated with it. First, the good news. The appeal is actually a whole new trial in front of a judge.  The decision of the Labor Commissioner is given no weight, and the formal rules of evidence and trials apply. This means that there are more limitations on the evidence that can be presented and other more formal procedures must be followed.

Now for the potential downsides. If you lose (meaning that the employee is awarded any money at all), you can be liable for the employee’s attorneys’ fees. The employee may also be able to add claims that were not asserted before the Labor Commissioner, and you may have to respond to discovery (though neither is a given). In some cases, the Labor Commissioner may even appoint one of its own attorneys to represent the employee!

After the trial, there are options to appeal if you get another bad outcome. Depending on the amount of the award, the appeal may be to the appellate division of the superior court or to the Court of Appeal.

I Won, But The Employee Appealed. Now What?

You opened your mail from the Labor Commissioner and the ODA awarded the employee nothing. You won! But then, 10 days later, you get a notice of appeal from the employee. This can feel like having the rug pulled out from underneath you.

In this situation, the process is very similar, but there are some differences. The employee does not need to file a bond in order to appeal (there is no judgment against the employee). If you go through with the trial and win, the employer can actually get its attorneys’ fees! And losing employees are responsible for retaining their own counsel, too, because the Labor Commissioner does not represent employees who lost at the hearing.

Workplace Solutions

Wage claims before the Labor Commissioner can be expensive and daunting. The best way to avoid them in the first place is to have solid wage and hour practices in place. Auditing your practices and staying informed with new laws is the best way do to this. Once a claim has been filed, an attorney can be helpful to talk through the claims and any strategy involved. Attorneys are required, alas, if you proceed in court! If you would like help reviewing your wage and hour practices or need help with a recently filed wage claim, please reach out to your favorite Seyfarth attorney.

Seyfarth Synopsis: When faced with wildfires or natural disasters, California employers must keep calm, carry on, and continue to meet their obligations under California law.

Be Prepared.

All employers, not just those in California, must have an Emergency Action Plan (“EAP”) and Fire Prevention Plan (“FPP’).

California regulations state that an EAP should include (1) procedures for emergency evacuation, (2) procedures to follow for employees who remain to operate critical plant operations before they evacuate, (3) procedures to account for all employees after emergency evacuation has been completed, (4) procedures to follow for employees performing rescue or medical duties, (5) the preferred means of reporting fires and other emergencies, and (6) names or regular job titles of persons or departments to contact for further information or explanation of duties under the plan.

Employers must also establish an employee alarm system and ensure that a sufficient number of employees are trained to assist in a safe evacuation in the event a disaster strikes.

To the extent employers offer safety kits and rations for emergency situations, employers should regularly inspect and update them.

Do Employers Have To Pay For Work Missed Due To Fires?

Exempt Employees. Even without a natural disaster, employers must compensate exempt employees for a full week’s salary for any week in which any work is performed without regard to the number of days or hours worked.

For example, if a business closes in the middle of a workweek, it must pay exempt employees their full week’s salary. But if the business closes for an entire workweek and employees do not perform any work (including remote work) during the closure, there is no need to pay the week’s salary—unless the employee uses available paid leave.

Vacation, PTO, and Sick Time. Employees may choose to use PTO, vacation time or sick time, if applicable. If employers decide to provide any additional paid leave in light of a natural disaster, then the parameters of the leave available should be clearly communicated to all employees and applied consistently.

Remote Work. If employees weather the firestorm from home, employers must be mindful of the potential pitfalls of remote work. As we have noted, there are particular concerns regarding issues ranging from accurately recording time to reimbursing expenses.

Reporting Time Pay. Generally, nonexempt employees must be paid for reporting to work. Under the Wage Orders, employees who report to work for a scheduled shift, but who are sent home with less than half of the scheduled day’s work, must be paid for half of that day’s work at their regular pay rate.

These reporting-pay obligations do not apply if business operations are disrupted by such circumstances as (1) threats to employees or property, (2) public utilities failure, or (3) Acts of God. Note, though, that there is no reporting-pay exceptions for a rattled employer that shuts down the business on its own accord.

Predictive Scheduling. As we have previously reported, some California cities (including several in Northern California) have enacted predictive scheduling ordinances. While these ordinances generally include exceptions for circumstances beyond an employer’s control (e.g., an Act of God or a failure of public utilities), voluntarily closing up shop may trigger obligations under local ordinances.

On Call Requirements. Employees who must remain on an employer’s premises may be under an employer’s control and thus entitled to pay for the time on premises. The same holds true if an employee remains under the employer’s control, but is not on the employer’s premises.

Split Shifts. Employers must also consider whether they have employees working split shifts during interrupted business operations and must ensure the appropriate wages are paid.

Are Employers Required To Provide Leave?

Volunteer Firefighter and Emergency Rescue Personnel Leave. California law protects employees who serve as volunteer first responders. Other than certain healthcare workers, employees who serve as volunteer firefighters, emergency rescue personnel, or reserve peace officers do not need to provide advance notice to employers if they are taking off work to perform first-responder duties. An employer cannot discharge or discriminate against an employee for taking time off to perform volunteer emergency duties.

Employers with 50 or more employees must allow employees to take temporary leaves of absence, not to exceed an aggregate of 14 days per calendar year, to engage in fire, law enforcement, or emergency rescue training.

CFRA/FMLA/Paid Sick Leave/Local Sick Pay. The California Family Rights Act and Family and Medical Leave Act afford protections to employees who have—or whose family members have—suffered serious injury or illness (including any injury or illness resulting from a natural disaster). Employees may also qualify for paid sick leave under California’s Healthy Workplace Healthy Families Act or the myriad of local paid sick leave ordinances.

School-Related Activities. California employers with 25 or more employees must provide up to 40 hours of unpaid time off for employees to cope with school-related issues, including if an school or child care facility is closed due to a natural disaster.

California Employers Have New Special Duties To Cope With Poor Air Quality.

In July 2019, Cal/OSHA enacted an emergency regulation, Protection from Wildfire Smoke.  This regulation applies to outdoor and semi-indoor employees when the Air Quality Index for airborne particulate matter (PM 2.5) is 151 or greater, and where employers should reasonably anticipate that employees could be exposed to wildfire smoke. Read more about these requirements here.

Avoid The Heat.

California employers must ensure their emergency response policies and practices are legally compliant. Don’t hesitate to reach out to Seyfarth to help you determine how to stand on firm ground when disaster strikes.

Edited by Elizabeth Levy

Seyfarth Synopsis: California’s ban-the-box law strictly regulates how employers may obtain and consider background check information when hiring and making personnel decisions. What’s more, Los Angeles and San Francisco have their own ban-the-box ordinances. These ordinances and the California Labor Code create a patchwork of rules that put employers at risk when checking whether an applicant has a criminal record. Here are some tips on when and how may consider criminal histories in employment while avoiding liability themselves.

Before 2014, when San Francisco enacted a city-wide ban-the-box law, criminal history background checks were largely unregulated in California, except for a handful of Labor Code provisions that barred consideration of certain types of criminal records. Then, Los Angeles and the State of California joined San Francisco with their own ban-the-box laws, which markedly differ from San Francisco’s.

This blog highlights the substantive rules restricting what criminal records can be considered as well as the procedural steps employers must take if they intend to reject an applicant or dismiss an employee with a criminal record. Our blog discussing the process for ordering the background check in the first instance can be found here. As litigation against employers in this space continues to skyrocket, it is critical that California employers understand the basics of all laws affecting employment screening programs and determine what changes to policies, forms, and practices will ensure compliance and reduce the risk of claims.

How Does an Employer Know If a Criminal Record is Disqualifying?

Employers no longer can reject job applicants or discharge employees simply because they have a criminal record. More and more laws now require employers to carefully evaluate the criminal record and assess whether it relates to the position.

California’s statewide ban-the-box law (Gov’t Code § 12952) requires employers with five or more employees (subject to few exceptions) to conduct an individualized assessment of an applicant’s conviction to determine whether it has a “direct and adverse relationship with the specific duties of the job that justify denying the applicant the position.” The Los Angeles ordinance requires that as part of the assessment the employer consider the following factors, taken from the Equal Employment Opportunity Commission’s guidance:

  • the facts or circumstances surrounding the offense or conduct;
  • the number of offenses for which the individual was convicted;
  • age at the time of conviction or release from prison;
  • evidence that the individual performed the same type of work, post-conviction, with the same or a different employer, with no known incidents of criminal conduct;
  • the length and consistency of employment history before and after the offense or conduct;
  • rehabilitation efforts, e.g., education and training;
  • employment or character references and any other information regarding fitness for the particular position; and
  • whether the individual is bonded under a federal, state, or local bonding program.

Unlike the Los Angeles ban-the-box ordinance, the California law does not require employers to provide the applicant with their assessment.

A wide range of criminal records are off-limits to California employers (unless the employer qualifies for very narrow exceptions identified in the Labor Code). Records that cannot be used are:

  • arrests that did not lead to a conviction;
  • non-felony marijuana convictions that are older than two years;
  • juvenile records; and
  • diversions and deferrals.

In San Francisco, covered employers are barred from considering a separate group of criminal records, even though these records are not off-limits in other California cities. These include (i) infractions, (ii) convictions that are older than seven years (measured from the date of sentencing), and (iii) any conviction that arises out of conduct that has been decriminalized since the date of the conviction, measured from the date of sentencing (which would include convictions for certain marijuana and cannabis offenses).

What Steps Must Employers Take to Disqualify Applicants with a Criminal Record?

Once an employer decides that a criminal record is potentially disqualifying, the minefield of potential hazards grows. At the federal level, the Fair Credit Reporting Act mandates a highly technical notice process. First, before an employer relies on a background check report to take an “adverse action” (e.g., rescinding a conditional job offer or discharging an employee), the employer must provide the individual with a “pre-adverse action” notice, and include with it a copy of the report and the Consumer Financial Protection Bureau’s Summary of Rights. This notice gives the individual an opportunity to discuss the report with the employer before the adverse action. Then, once the employer is prepared to take the adverse action, it must give the individual an “adverse action” notice, containing certain FCRA-mandated text.

In California, employers that rely on criminal information for employment purposes must also consider state and local laws. Statewide, employers that believe a criminal record is disqualifying must do the following:

  • Notify the applicant of any potential adverse action based on the conviction history. The notice must identify the conviction, include a copy of any conviction history report (regardless of the source), and state the deadline for the applicant to provide additional information, such as evidence of inaccuracy, rehabilitation, or other mitigating circumstances.
  • After waiting the requisite time period, notify the applicant of any final adverse action, of any existing procedure the applicant has to challenge the decision or request reconsideration, and of the applicant’s right to file a complaint with the Department of Fair Employment and Housing.

California goes beyond the FCRA. FCRA notices are required only if an adverse decision is based on information obtained from a background check company (“consumer reporting agency).” California requires notices no matter where or how the employer learns of the criminal history (i.e., applicant self-disclosure, Google, etc.).

In addition, for jobs in the City of Los Angeles, the city’s ordinance imposes the following onerous steps on employers who have considered criminal history (regardless of the source):

  • Perform a written assessment that “effectively links the specific aspects of the Applicant’s Criminal History with risks inherent in the duties of the Employment position sought by the Applicant.” The assessment form that contains the relevant factors can be found on the city’s website.
  • Provide the applicant a “Fair Chance Process”—giving the applicant an opportunity to provide information or documentation the employer should consider before making a final decision, including evidence that the criminal record is inaccurate, or evidence of rehabilitation or other mitigating factors. As part of this process, the employer must include with the pre-adverse action notice a copy of the written assessment and any other information supporting the employer’s proposed adverse action.
  • Wait at least five business days to take adverse action or fill the position. If the applicant provides additional information or documentation, the employer must consider the new information and perform a written reassessment, which is at the bottom of the form mentioned above. If the employer still decides to take adverse action against the applicant, the employer must notify the candidate and attach a copy of the reassessment with the adverse action notice.

California Workplace Solutions

Class actions against employers for failing to follow hyper-technical requirements for background checks have come to dominate the news. Employers in California and elsewhere will want to conduct (privileged) assessments to strengthen their compliance with the myriad laws that regulate use of an individual’s criminal history. Suggested next steps include:

  • Assess coverage under the California, Los Angeles, and San Francisco ban-the-box laws.
  • Review job advertisements and postings both for unlawful and mandatory language regarding criminal history.
  • Review job application and related forms for unlawful inquiries regarding criminal history.
  • Train employees who conduct job interviews and make or influence hiring and personnel decisions, regarding inquiries into, and uses of, criminal history, including best practices for documentation and record retention.
  • Review the hiring process to ensure compliance, including the timing of criminal history background checks, the distribution of mandatory notices, and the application of necessary waiting periods.

Edited by Christopher J. Truxler

Seyfarth Synopsis: While paying employees in California is often a challenge, the regular rate of pay presents a minefield of different formulas for employers to navigate. From what amounts to include, to how the calculation should be performed, determining an employee’s overtime pay rate can be a very complicated task. We provide an overview of some regular rate basics below, although employers should be aware that more specific issues can arise depending on the industry, types of employees, and method of compensation used.

The “regular rate of pay” is the basis for overtime compensation under the FLSA and California law. Some employers may be deceived by this simple-sounding term into thinking that there is anything “regular” or straightforward about this concept. Do not be one of them!

The regular rate of pay often is a complex formula that includes all “remuneration” provided for hours worked, such as hourly pay, shift differentials, salaries, piece rates, commissions, and most bonuses. It can even include meals! The regular rate also includes amounts paid for being available to perform a duty, such as time spent on call, even where the on-call hours are not considered hours worked.

Luckily, certain amounts may be excluded from the regular rate, such as sums paid as gifts, payments for vacations, holidays, or illnesses, certain “discretionary” bonuses, and meal and rest period premiums. Below are some examples illustrating how to incorporate some common forms of pay into an employee’s regular rate of pay.

Hourly Rates / Hourly Shift Differentials

When an employee is paid on an hourly basis only, the overtime premium is calculated as 1.5 times that hourly rate of pay. That one is easy! But don’t relax just yet; it gets harder.

The calculation becomes more complicated where the employee is paid multiple forms of pay, such as different hourly rates for different types of work, or hourly pay plus an hourly shift differential for some hours. In these situations, the regular rate is calculated using the weighted average of the two rates.

Under that method, each hourly rate is multiplied by the hours worked at that rate. The total earnings from each rate are added together and divided by the total hours worked. That number is then multiplied by a half-time premium of 0.5 (which is used because the employee has already received straight-time compensation for all hours worked, including overtime). The resulting overtime rate is multiplied by the number of overtime hours worked to calculate additional overtime pay due to the employee. Remember, the overtime premium rate is doubled for overtime hours compensated as double time!

For example, if an employee works 30 hours at $15/hour, and an additional 12 hours at $16/hour (because these hours include a $1 per hour night shift differential), overtime is calculated as follows: (1) calculate total earnings: (30 hours * $15/hour) + (12 hours * $16/hour) = $642; (2) divide total earnings by total hours: $642 / 42 hours = $15.29; (3) calculate the additional overtime premium due: $15.29 * 0.5 half-time premium = $7.65; (4) calculate additional overtime pay: $7.65 * 2 overtime hours = $15.30.

Commissions and Other Production-Based Incentives

Let’s make it harder. Not all employees are paid only at hourly rates. Employees paid piece rates, commissions, or production-based (non-flat sum) bonuses will have variable earnings depending on their productivity. How do you calculate the regular rate in this situation?

For employees earning a combination of hourly pay and production-based incentives, the regular rate is calculated by dividing the total earnings for the week (including earnings during overtime hours), by the total hours worked during the week (including overtime hours). This amount is then multiplied by 0.5 to determine the additional half-time premium that must be paid for all overtime hours (the full amount of the premium is paid for overtime hours compensated as double time). As above, the half-time premium is used in this calculation because the employee has already received straight-time compensation for all hours worked in the form of commission or piece rate earnings (including all overtime hours worked).

Employers that pay employees on a commission or piece rate basis also need to ensure that employees are paid for rest period (and, when applicable, recovery period) time and any non-productive time at the correct rate.  While many employers choose to pay underlying hourly rates of pay for all hours worked to ensure minimum wage compliance for these employees, a special formula applies to rest and recovery period time for employees paid on a piece rate basis.

Salary

In the example above, the regular rate was calculated based on all hours worked. The calculation is different for non-exempt employees paid on a salary basis.

Unlike an employee paid by piece rate, commission, or non-flat sum bonus, under California law, non-exempt employees paid by salary are not receiving additional pay through their salary for any overtime hours that they work. For this reason, the regular rate of pay for salaried employees is calculated based on a maximum 40-hour workweek, rather than all hours worked. Additionally, overtime is calculated at one-and-one-half times the regular rate of pay for each overtime hour worked, instead of the half-time premium used in the example above. See Cal. Lab. Code § 515(d).

Thus, if an employee is compensated by a weekly salary of $1,000 and works 50 hours in a week, overtime pay is calculated as follows: (1) $1,000 / 40 hours = $25; (2) $25 * 1.5 overtime premium = $37.50; (3) $37.50 * 10 overtime hours = $375 in overtime compensation.

Flat-Sum Bonuses: The Latest Challenge

Had enough yet? Now we turn to the one most peculiar to California! For California employees, the additional overtime premium due for flat-sum bonuses (for example, attendance bonuses) is different than the formula applicable to production-based incentives (that increase in rough proportion to hours worked).

Instead of using the total hours worked during the bonus earning period in the denominator of the calculation, the regular rate for flat-sum bonuses is calculated by dividing the bonus by the number of non-overtime hours worked during the bonus earning period. Alvarado v. Dart Container Corp., 4 Cal. 5th 542 (2018). This amount is multiplied by 1.5 (not 0.5) and is paid for each overtime hour worked. Unfortunately for employers processing payroll for employees in multiple states, this formula differs significantly from the FLSA formula. In contrast to the California approach of dividing by the total straight-time hours and multiplying by 1.5, the FLSA formula uses the total hours worked in the denominator and requires payment of only a half-time premium. As a result, the additional overtime due on a flat-sum bonus in California is more than three times the amount due under the FLSA!

For example, an employee may work 40 regular hours in a week with two additional hours of overtime. The employee is compensated at $15/hour for the 42 hours of work and also receives a flat-sum bonus of $60 for the work done in that workweek (for a total of $690). The additional overtime premiums are calculated separately for hourly pay and the flat-sum bonus as follows:

(1) hourly pay overtime premium:  $15.00 x 0.5 = $7.50 x 2 hours = $15

(2) flat-sum bonus overtime premium:  $60/40 = $1.50 * 1.5 * 2 overtime hours = $3.00.

Thus, under California law, the total overtime pay is $18.00.  Under the FLSA, the formula would be $660/42 hours worked ($15.71) * 0.5 = $7.86 * 2 hours = $15.72.

Workplace Solutions

Your brain might be spinning after all these formulas. The important thing to remember is that the regular rate can be complicated by many factors, especially where employees receive multiple types of compensation for a given pay period. California employers must pay special attention to how they calculate overtime rates because of these regular rate complexities, as errors can lead to underpayments and severe penalties.

If you would like to learn more about the regular rate of pay, please contact a Seyfarth Shaw attorney for assistance.

Edited by Michael Wahlander

Seyfarth Synopsis: Governor Newsom has approved some of the bills most feared by employers, including bills to ban employment arbitration, extend FEHA administrative deadlines, codify the Dynamex ABC test, and create San Francisco-style lactation-accommodation requirements. Governor Newsom also vetoed a few bills that we might expect to be re-introduced in the same or similar form during 2020.

Governor Newsom acted before the stroke of midnight and under a full moon on his October 13 deadline to veto or approve bills passed during the first year of the 2019-2020 Legislative Session. Unfortunately for employers, he did not yield his veto pen as effectively as Governor Brown once did. Instead, Governor Newsom approved most of the bills feared by employers.

The parade of horribles for California employers is set to begin on January 1, 2020. Will a new moon bring constitutional challenges to the notorious AB 51? Will amendments during 2020 somehow make the new laws more palatable? Meanwhile, we summarize the new laws below—from the truly frightening to the merely annoying, with one or two examples of laws that arguably are welcome. Thereafter, we summarize bills that, while not making the cut this year, may come back to life next year. All new laws are effective January 1, 2020, unless otherwise noted.

APPROVED

Arbitration Prohibition. For agreements entered into, modified, or extended on or after January 1, 2020, AB 51 will prohibit any business from requiring that a job applicant or employee waive any right, forum, or procedure for a violation of the FEHA or Labor Code, including any requirement that an individual “opt out” or take affirmative action to preserve such rights. AB 51 will make actionable any threatened or actual retaliation against an individual who refuses to consent to the forbidden requirements. AB 51 will authorize injunctive relief and attorney’s fees to any plaintiff who proves a violation. These provisions of AB 51 are very similar to part of last year’s AB 3080, which was vetoed due to its likely preemption by the Federal Arbitration Act, and this bill includes a severability clause in an attempt to avoid preemption. This attempt is arguably illusory, and will likely find itself challenged as another unconstitutional attempt by the California Legislature to forbid arbitration agreements. As the result of some unclear drafting, and although the author of the bill has claimed to the contrary, AB 51 may call into question the use of traditional settlement and severance agreements.  Read our discussion of AB 51’s scary implications here.

Settlement Agreements Future Employment Restraints. AB 749 will prohibit settlement agreements that restrict an employee right to seek employment with the employer with whom the employee is settling a claim.

Independent Contractors Worker Status. AB 5 codifies the California Supreme Court’s 2018 decision in Dynamex Operations West, Inc. v. Superior Court, while also specifying some heavily-lobbied-for exemptions. See our in-depth analysis of it here and here. Governor Newsom signed the bill into law on Wednesday, September 18, 2019.

Independent Contractors Worker Status. AB 170 slides another exemption into AB 5, via a separate bill, for a newspaper distributor working under contract with a newspaper publisher and a newspaper carrier working under contract with either a newspaper publisher or distributor, until January 1, 2021.

Arbitration Agreement Fees/Costs. SB 707 will require an employer or drafter of an arbitration agreement to pay the costs and fees associated with the arbitration. Failure to pay the fees could constitute material breach of the arbitration agreement, or the employee could withdraw the claim from arbitration, or be entitled to attorney’s fees and costs. The bill will also require a private arbitration company to collect and report aggregate demographic data regarding the ethnicity, race, disability, veteran status, gender, gender identity, and sexual orientation of all arbitrators.

Lactation Accommodation. Borrowing from provisions of a San Francisco lactation ordinance, SB 142 will expand California lactation-accommodation law by requiring employers to provide a lactation room for employees that meets the following requirements: not a bathroom; in close proximity to the employee’s work area; shielded from view; free from intrusion while the employee is lactating; safe, clean, and free of hazardous materials; containing a surface to place a breast pump and personal items; containing a place to sit; with access to electricity or alternative devices (e.g., extension cords, charging stations) that may be needed to operate an electric or battery-powered breast pump; and with access to a sink with running water and a refrigerator suitable for storing milk. If a multipurpose room is used for lactation and other uses, lactation must take precedence over the other uses.

The bill will make a denial of lactation break time or space a violation under rest period laws, and subject the employer to a $100 penalty per violation. The bill contains an anti-retaliation provision and will also require an employer to develop and implement a policy regarding any lactation accommodations, and make it readily available to employees. This inordinately comprehensive bill is a repeat of SB 937 (2018), which Governor Brown vetoed given his approval of a less onerous lactation accommodation law, AB 1976. The new law has an undue hardship exemption for employers with fewer than 50 employees.

Penalties for Failure to Pay Wages. AB 673 will authorize an employee to pursue a private right of action to recover penalties for the late payment of wages through the Private Attorneys General Act, and will remove the authority for the Labor Commissioner to recover civil penalties in an independent civil action. The bill will prohibit the employee from also recovering statutory penalties for the same violation.

FEHA Administrative Exhaustion Extension. A repeat of 2018’s AB 1870, vetoed by Governor Brown, AB 9 will extend the period within which an aggrieved person may file a complaint with the DFEH from one year to three years.  (It does not revive lapsed claims.)

Labor Commissioner Citations. SB 229 will expand the appeal and enforcement mechanisms available when the Labor Commissioner cites an employer for violating the Labor Code’s anti-retaliation provisions. The bill will establish procedures and deadlines to follow when adjudicating or contesting a citation. SB 688 will expand the Labor Commissioner’s citation authority to include citations for failures to pay contract wages when the employer had paid an employee below minimum wage.

Organ Donation Leave of Absence. AB 1223 will require employers to grant an employee an unpaid leave of absence—in addition to the existing 30 days in a one-year period paid leave—for the purpose of organ donation. The bill will require a public (not private) employee to first exhaust all available sick leave before taking the unpaid leave.

Sexual Harassment Training. As we reported, SB 778 extends the deadline for non-supervisory employee training from January 1, 2020 until January 1, 2021 and confirms—in a much needed clarification—that those supervisors who received 2018 training need not be trained again until 2020.

Hairstyle Discrimination. SB 188, the Crown Act, expands the FEHA’s definition of race to include traits historically associated with race, such as hair texture and “protective hairstyle” (e.g., braids, locks, and twists). The bill aims to chip away at “Eurocentric” professional norms by addressing “workplace dress code and grooming policies that prohibit natural hair, including afros, braids, twists, and locks.” The Legislature has concluded that these policies “have a disparate impact on Black individuals as these policies are more likely to deter Black applicants and burden or punish Black employees than any other group.”

Reporting Occupational Injuries and Illnesses. AB 1804 will require employers to report serious workplace injuries, illnesses, or death immediately by telephone or through an online platform to be developed by the Division of Occupational Safety and Health. Until the online platform is available, employers are permitted to make these reports by telephone or email. Noncompliance carries a $5,000 civil penalty.

Civil Action Damages: Gender, Race Ethnicity. SB 41 aims to narrow the consequences of observed differences in the pay of groups defined by gender or ethnicity. This bill will apply to personal injury and wrongful death cases, and will forbid any reduction in damages resulting from an estimation, measure, or calculation or past, present, or future damages for lost or impaired earning capacity that is based on a person’s race, ethnicity, or gender.

Paid Family Leave Expansion & Task Force. Under SB 83, beginning July 1, 2020, the California Paid Family Leave benefit will be eight weeks instead of six weeks, paralleling an increase in San Francisco’s Paid Parental Leave benefit. The bill requires the Governor’s Office to convene a task force to develop a proposal by November 2019 to extend the duration of paid family leave benefits to six months by 2021-22 for parents to care for, and bond with, their newborn or newly adopted child. The November 2019 proposal will also address job protections for workers and the goal of providing a 90 percent wage replacement rate for low-wage workers utilizing the Paid Family Leave program to bond with a child. Approved by Governor Newsom on June 27, 2019, the bill became effective immediately.

Workplace and School Gun Violence Restraining Orders. Beginning September 1, 2020, AB 61 will authorize an employer, or a coworker who has had substantial and regular interactions and approval of their employer, to file a petition for an ex parte, one-year, or renewed gun violence restraining order.

Industry-Specific Laws

Collegiate Athlete Compensation. AB 1518 will allow student athletes to contract with agents without losing their student athlete status—provided the contract complies with the student’s educational institution’s requirements and the bylaws of the NCAA—and to receive compensation. The Fair Pay to Play Act, SB 206, will among other things, beginning January 1, 2023, allow student athletes to more easily earn compensation from endorsements. While LeBron James and Draymond Green have praised the bill, the NCAA has strongly opposed it, stating in a letter to the Governor that it has the potential to kill amateur athletics and “erase the critical distinction between college and professional athletics.”

Employment of Infants in the Entertainment Industry. AB 267 will expand the definition of “entertainment industry” beyond a movie set or location to include motion pictures, theater, television, photography, recording, modeling, rodeos, circuses, advertising, and any other performance to the public. The bill will require that all qualifying entities receive—as a prerequisite to employment of an infant under one month of age—a licensed, board-certified pediatrician’s certification that the infant is at least 15 days old, was carried to full term, was of normal birth weight, is physically capable of handling the stress of working in the entertainment industry, and has sufficiently developed lungs, eyes, heart, and immune system to withstand the potential risks.

Employment of Motion Picture Production Workers. SB 271 will allow temporary or transitory employment performed outside of California to count towards unemployment benefits as long as the individual is a California resident, is hired and dispatched from the state, and intends to return to the state to seek reemployment following the outside-California work.

Payment of Wages for Print Shoot Employees. SB 671, the “Photoshoot Pay Easement Act,” authorizes payment of wages to “print shoot employees”—defined as individuals hired for a limited duration to render services relating to or supporting a still-image shoot for use in print, digital, or internet media—on the next regular payday after the employment ends, rather than subjecting the employer to liability for failure to pay final wages on the last day of employment. In another break for employers, the final wages can be mailed to the employee or made available to the employee at a location specified by the employer in the county where the employee was hired or performed labor and the payment is deemed to have been made on the date of mailing or being made available to the employee at the specified location. The bill thus creates an exception mirroring the one existing for motion picture employees. The bill’s urgency clause—making it effective immediately upon its September 5, 2019 signing—highlights what a relief its passage will be to businesses that use short-term models and that have faced legal actions threatening sometimes huge potential liability under the prior law.

Sexual Violence and Harassment Prevention Training for Janitorial Workers. AB 547, the Janitor Survivor Empowerment Act, will require the Director of the Department of Industrial Relations to organize a training advisory committee that will generate a list of qualified organizations and trainers that janitorial employers would be required to use to provide biennial, in-person sexual violence and harassment prevention training for janitorial workers. This requirement is in addition to the Property Service Workers Protection Act that kicks in on January 1, 2020, which we previously covered here.

Occupational Safety and Health for Valley Fever. AB 203 will require construction employers operating in counties where Valley Fever—a microscopic fungus which lives in the top few inches of the soil in many parts of California—is “highly endemic,” to provide effective training on the disease to employees annually and before an employee is anticipated to cause substantial dust disturbance.

Continuing Education: Implicit Bias in the Medical Field. AB 241 will require, by January 1, 2022, that continued education for physicians, surgeons, nurses and physician assistants include courses on implicit bias. The bill will require the Board of Registered Nursing and the Physician Assistant Board to adopt regulations requiring implicit bias training by January 1, 2022.

California Family Rights Act: Flight Crews. AB 1748 amends the California Family Rights Act to conform flight deck and cabin crewmember eligibility requirements with the federal Family and Medical Leave Act, which has special hours of eligibility for airline flight attendants and other cabin crew. Flight attendants are eligible for FMLA if, during the previous 12 months, they have worked at least 504 hours and have been paid at least 60% of the monthly guarantee, which means that they worked 60% of the minimum number of hours which the employer scheduled the employee for any given month.

Sexual Harassment Training: Construction and Temporary Employees. SB 530 will extend the date by when seasonal, temporary, or other employees that are hired to work for less than six months must begin receiving mandatory sexual harassment training to January 1, 2021, and incorporate special training provisions for construction industry employers that employ workers pursuant to a multiemployer collective bargaining agreement.

VETOED

Sexual Harassment Retaliation Protection. Very similar to AB 3081 (2018), AB 171 would have amended the Labor Code to add sexual harassment to the prohibitions on an employer from discriminating or retaliating against an employee because of the employee’s status as a victim of domestic violence, sexual assault, or stalking. The bill would have also created a rebuttable presumption of retaliation if the employer takes an adverse action against the employee within 90 days of notice of the employee’s status as a victim. In vetoing the bill, Governor Newsom wrote that while he supports the “Legislature’s efforts to strengthen workplace protections for all survivors of harassment and abuse,” he thought this bill would create “a standard for a particular form of sex-based discrimination different from applicable standards for other forms of discrimination that could weaken, rather than strengthen, existing worker protections.” He correctly recognized that incorporating sexual harassment into the Labor Code “duplicates, and in some crucial respects, weakens existing law” under the FEHA, which already provides a protections and remedies sought through this bill, and this bill could create overlapping claims with the DFEH and the Labor Commission, which “could create confusion and potentially limit workers’ rights.”  He concluded by encouraging the Legislature and DFEH to work together to “evaluate if and how the FEHA can be enhanced to better protect survivors of sexual harassment against unlawful employment practices.”

Division of Labor Standards Enforcement for Complaints. AB 403 would have extended the statute of limitations for complaints alleging workplace retaliation from six months to two years, and would authorize attorney fees to any employee who successfully sues for retaliation based on whistleblowing. In vetoing the bill, the Governor acknowledged the Legislature’s other anti-retaliation measures, which provided greater authority to the Labor Commissioner, as recognition that action by the Labor Commissioner is likely more effective than extending a statute of limitations period past one year.

Unfair Immigration-Related Practices. AB 589 would have imposed penalties on an employer that withholds an employee’s immigration-related documents and would create a Worker’s Bill of Rights concerning the employee’s freedom of movement and the payment of wages. The Governor wrote that the bill’s “requirement that every employer in the state provide each employee with an enumerated list of rights” attracted his veto, as “overly burdensome for law-abiding employers” and because it “may not actually help workers who are the targets of trafficking.”  He did cite the bill’s provision that would levy a hefty fine on employers who engage in document abuse to commit trafficking as a “step in the right direction.”

Leave Rights: Private Cause of Action. AB 1478 would have amended Labor Code section 230 to authorize a private right of action (as an alternative to the existing remedy of filing a complaint with the Labor Commissioner) by an employee who takes time off for jury duty, for legal proceedings relating to being a victim of a crime, and for retaliation for being a victim of domestic violence, sexual assault, or stalking. The bill would also have made the same changes to Section 230 as AB 171 (discussed above) if AB 171 is approved and AB 1478 is approved after AB 171 (to ensure that AB 171’s provisions also become law).  The Governor vetoed AB 1478 as “unnecessary” because current law already authorizes “survivors of domestic violence, sexual assault or stalking” “to file a retaliation claim through the [Labor Commissioner’s] Office or through a PAGA action, and to see reinstatement and reimbursement for lost wages and benefits.”

Local Government Enforcement of FEHA. SB 218 would have amended the FEHA to allow local governments within the County of Los Angeles to enact and enforce their own antidiscrimination laws that are at least as protective as the FEHA, removing these claims from the sole jurisdiction of the DFEH. In vetoing the bill, the Governor cited other bills he approved as evidence of his commitment to eradicating discrimination, but noted he does not support this bill’s effort to lift a decades-long preemption which could create confusion, inconsistent enforcement of the law, and increased costs, without increased worker protections, and ambiguity regarding local governments’ ability to enforce both local ordinances and the FEHA.  He invited the Legislature to try again “with a measure that makes it clear that local enforcement measures are exclusively focused on local ordinances.”

Call Center Protections. AB 1677 would have required any employer with a call center currently in the state intending to relocate the call center to notify the Labor Commissioner at least 120 days before the relocation or face a civil penalty. In his veto message, the Governor noted that while he supports efforts to protect jobs in the state, but this bill might have the opposite effect – “dissuad[ing] businesses that have no intention of moving operations from making any further investments in California.”

Workplace Solutions

Please do not hesitate to reach out to your favorite Seyfarth counselors to discuss how to approach these new developments for your company.

Edited by Elizabeth Levy

Seyfarth Synopsis. On Thursday, September 5, 2019, the Legislature passed AB 51. This bill would ban mandatory arbitration agreements with respect to claims under the Labor Code and the Fair Employment and Housing Act while simultaneously disclaiming any intent to invalidate any agreement protected by the Federal Arbitration Act. Is this bill California’s latest clever—but predictably unsuccessful—effort to discriminate against arbitration agreements, in violation of federal law?

The Peaceful Prelude

Under current law, California employers can insist that employees agree to resolve disputes through a neutral arbitrator instead of a judge and jury, and also waive participation in class actions. Because public policy favors arbitration, courts have rejected wrongful termination claims by employees fired for refusing to sign arbitration agreements. The FAA, meanwhile, declares that states must enforce arbitration agreements to the same extent that they enforce contracts generally. Federal law, which thus protects arbitration agreements from discrimination, preempts any state law that is hostile to arbitration.

The Rising

Yet California continues to resist. Its public officials are recidivists when it comes to making unconstitutional attacks on arbitration agreements. On no fewer than five occasions the United States Supreme Court, invoking the U.S. Constitution’s Supremacy Clause, has struck down California statutes or judicial decisions that have discriminated against arbitration agreements.

Last legislative session saw the passage of Assembly Bill 3080, which we characterized here as a quixotic attempt to invalidate arbitration agreements that the FAA protects. AB 3080 sought to forbid businesses to impose arbitration agreements on employees or independent contractors, even where those individuals could opt out of the agreement. And AB 3080 had a strong bite: it would have authorized FEHA lawsuits against businesses that require arbitration agreements, and would have added a Labor Code provision that subjects violators to criminal prosecution.

Governor Brown, in his veto message, spoke of AB 3080 as if it were a dead man walking, doomed for FAA preemption: “This bill is based on a theory that the [FAA] only governs the enforcement and not the initial formation of arbitration agreements and therefore California is free to prevent mandatory arbitration agreements from being formed at the outset. The Supreme Court has made it explicit this approach is impermissible.”

Haven’t We Seen This Movie Before?

Yet, like zombies who refuse to stay dead, efforts to ban arbitration agreements continue to rise, in different forms. The latest incarnation is AB 51, passed September 5, 2019, and now awaiting Governor Newsom’s approval or veto. AB 51 would create a new Labor Code provision (section 432.6), the violation of which would be a crime and also actionable as an unlawful employment practice under the FEHA. AB 51 obviously aims to gut arbitration agreements: it forbids employers to require employees or job applicants to “waive any right, forum, or procedure for a violation” of the FEHA or the Labor Code—and that, of course, is just what arbitration agreements do.

But how could this attack on arbitration agreements be compatible with the FAA? AB 51 cleverly proclaims: “Nothing in this section is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act … .” Yet this assurance rings hollow. The promise not to invalidate any agreement would still permit opponents of an arbitration agreement to challenge its formation, on such grounds as a lack of true consent.

If you think this distinction is too clever by half, then read the Senate Judiciary Committee report on AB 51. The report admits that AB 51, “if enacted, … would be challenged in court and there is some chance … that it would be found preempted,” yet AB 51’s proponents still argue that it “does not conflict with the FAA and thereby avoids preemption.” How is that? The proponents say two main things: (1) “AB 51 simply gives the worker the option of whether or not to form the contract in the first place.” (2) “[N]othing in AB 51 selectively calls out arbitration contracts as such; the bill applies to contracts requiring waiver of any forum.”

Do these defenses of AB 51 stand up? Consider this. First, the notion that AB 51 simply gives employees a choice runs counter to the reality that courts enforce contracts presented on a take-it-or-leave-it basis, so long as they are not unreasonably one-sided, and arbitration agreements can meet that test. Accordingly, courts invoke the FAA to protect arbitration agreements imposed as a condition of employment, regardless of whether the agreements are called “mandatory” or “voluntary.”

Second, the FAA preempts any state law that “stands as an obstacle” to enforcing arbitration agreements. (This rationale inspired the Supreme Court to foil California’s attempt to ban class-action waivers in arbitration agreements.) AB 51 would create an enormous obstacle. It would threaten to turn employers into criminals—and to subject them to oppressive discrimination lawsuits—merely for making arbitration a condition of employment. How could creating that in terrorem effect for employers not create an obstacle? Why should employers be required to risk criminal sanctions or a lawsuit, or both, if they want to insist that employees agree to a form of dispute resolution that can be fair while also being cheaper and quicker than formal litigation?

What Happens Next?

Last year, Governor Brown heard the concerns of the employer community and rebuffed the pleas of plaintiffs’ lawyers. His veto killed AB 3080. AB 51 is its reanimated corpse. Will Governor Newsom now assign AB 51 to its condign fate, or allow it to roam among the living? He has until October 13 to decide whether an undead law will be haunting employers this Halloween.

Post-publication update. After we went to press, Governor Newsom signed AB 51 into law. We will now see if Governor Brown was right in predicting that such a law will not withstand constitutional scrutiny.

Workplace Solutions

Note one treat buried among AB 51’s tricks: even if signed by the Governor, it would not go live till January 1, 2020, so any arbitration program an employer might have in mind now can safely be in place by then. Meanwhile, look out for employer groups to mount legal challenges that will seek to have the new law declared unconstitutional before it wreaks too much havoc.

Also note that AB 51 is not confined to arbitration agreements. Among its other horrors are vague provisions that draw into question the use of traditional severance agreements. These are subjects for another blog.

Edited by Christopher J. Truxler

Seyfarth Synopsis: California Labor Code § 221 states it is “unlawful for any employer to collect or receive from an employee any part of wages … paid … to said employee.” In other words, employers cannot just take money back to correct an overpayment of wages. But what if you discover you’ve accidentally overpaid an employee?

It’s not a back to school special—it’s a windfall (and a shopping trip)! No, actually, it is an employer overpayment of an employee’s wages. It happens and unfortunately, enough employers have gone about recovering overpayments the wrong way, leaving a trail of court cases and waiting-time penalties.

So, as an employer, can you recover an overpayment of wages to an employee? The answer is a resounding … maybe!

Get Into the Black Friday: Can I Deduct the Overpayment from the Regular Paycheck?

No. Employers often run afoul of California law when they automatically deduct wages from an employee’s paycheck or final pay to recover an overpayment of wages. Even if an employee orally agrees that the employer can withhold an overpayment—either as a lump sum deducted from the next paycheck or in installments deducted from several paychecks—the employer may be violating the law. It is highly recommended to get any repayment agreement in a writing signed by both the employee and employer.

Try to Strike A Deal

When an employer discovers an overpayment of wages, it is best to first approach the employee and explain it. Perhaps the employee has not noticed the overpayment and is agreeable to writing a check to return the overpayment. More often, employees will find it more convenient to make good on overpayments over time, and often through payroll deductions. This practice is acceptable so long as the agreement is in writing, is voluntary, and is signed by the employee. Also, if an employee leaves the company with remaining repayment installments, the employer cannot deduct the remaining balance from an employee’s final pay, absent a fresh written agreement. See Barnhill v. Sanders, 125 Cal. App. 3d 1 (1981).

Outstanding amounts owed by an employee at separation can be difficult to recover and may require the employer to file in court. Many amounts can be recovered through small claims court but amounts over $10,000 must be recovered in Superior Court. Court actions to recover overpaid wages may be cost prohibitive, but an employer successful in court can obtain a judgment and garnish the employee’s wages (from the next employer) to recover the overpayment.

Watch Out for Minimum Wage!

When you enter into a recovery agreement with an employee for an overpayment, be careful that any payment does not result in the employee’s wages dipping below minimum wage for that pay period.

Unlawful Deductions Can Lead to More Free Money!

If an employer makes an unlawful deduction from an employee’s paycheck to recover a wage overpayment, the aggrieved employee can file a wage claim with the DLSE or file a lawsuit. A finding against an employer could expose the employer to penalties and the employee’s attorney’s fees. Employees may also succeed in retaliation claims if they are discharged or suffer other adverse employment action for filing a claim with the DLSE or for complaining about an unlawful deduction.

What if an Employee Refuses to Repay the Overpayment?

Employees who defy their obligation to repay overpayments can be discharged, absent special circumstances. And if an employee is exhibiting dishonesty by refusing to repay money obtained in a windfall, then even the EDD may think twice, and deny unemployment benefits.

Workplace Solutions

  • Develop a written policy in your Handbook to address procedures for overpayment of wages.
  • Review the remedies for overpayment to employees with your payroll personnel.
  • Be mindful of finding a repayment option that will not cause financial hardship for the employee.
  • When in need, contact your favorite Seyfarth lawyer to draft a repayment agreement for you.

Edited by Christopher J. Truxler

Seyfarth Synopsis: The United States Department of Labor (DOL) released its final overtime rule on Tuesday, September 24, 2019, increasing the minimum salary level for exempt status to $35,568 per year for a full-time employee under the federal Fair Labor Standards Act (FLSA) effective January 1, 2020. But California employers must meet higher minimum salary requirements and other nuances that employers subject only to the FLSA need not.

Game On!

On Tuesday, the DOL released its final overtime rule, increasing the minimum salary threshold for exemption from overtime under the FLSA to $35,568 per year. According to the DOL, an estimated 1.3 million American workers currently classified as exempt under the FLSA must begin receiving overtime pay based on current pay rates. Thus, employers should take stock of the potentially newly eligible receivers on their roster to be prepared for the blitz: the final rule is effective January 1, 2020.

The final rule also allows employers to include annual nondiscretionary bonuses, incentives, and commissions to meet up to 10% of an employee’s minimum salary level for exempt status. If an employee’s nondiscretionary bonus or incentive payments in a particular 52 week period are too low, the new rule permits a “catch-up” payment within one pay period of the end of the 52-week period to maintain exempt status. Talk about 4th and inches!

The final rule says that:

  • The standard salary level from the currently enforced level will be raised from $455 to $684 per week (amounting to $35,568/year for a full-year employee)
  • The total annual compensation level for highly compensated employees to be considered exempt will be raised from $100,000 to $107,432
  • Employers may use nondiscretionary bonuses and incentive payments to meet salary exempt levels, including commissions, in recognition of evolving pay practices, so long as employees are paid at least annually to satisfy up to 10% of the standard level
  • The special salary levels for employees in the U.S. territories and in the motion picture industry are likewise increased

But California Employers Play By West Coast Offense

California employers must take heed, for the Golden State has its own rules for exempt status, and these new federal rules will not impact the California employer’s playbook.

As to minimum salary, California’s current minimum already is higher than the FLSA rate will be next year, and California’s minimum will continue to climb over the next few years as the state minimum wage rate incrementally rises to $15 per hour for all workers by 2023. And California does not subscribe to the new FLSA rule allowing employers to include 10% of nondiscretionary bonuses and incentive compensation to meet the minimum salary threshold.

Here is a helpful chart California employers should flag to stay between the hashmarks for the coming years on both federal and California salary exempt thresholds:

Year Federal                         California
Up to 25 employees 26+ employees
2019

$455/week

$23,660/year

$880/week

$45,760/year

$960/week

$49,920/year

2020

$684/week

$35,568/year

$960/week

$49,920/year

$1,040/week

$54,080/year

2021

$684/week

$35,568/year

$1,040/week

$54,080/year

$1,120/week

$58,240/year

2022

$684/week

$35,568/year

$1,120/week

$58,240/year

$1,200/week

$62,400/year

2023

$684/week

$35,568/year

$1,200/week

$62,400/year

$1,200/week

$62,400/year

Additionally, Left Coast employers beware—no salary caps here! Simply earning $107,432 or more per year does not get you to the end zone for exemption in California. Such high earners still must meet the substantive requirements for one of the California exemptions to be ineligible for overtime pay, as there is no highly compensated exemption out west.

We have previously blogged about many of the other substantive peculiarities with exemptions in the California here (creative exemption), here (executive exemption), and here (administrative exemption), and California employers must comply with all state exemption rules to avoid a fumble.

And What About Employees Who Cross The Line Of Scrimmage Into California?

If an employee who normally works outside of California and qualifies as exempt under federal law comes to California for work, but does not meet California’s exemption standards, a flag may be thrown. The employer likely must play by the California rules, including overtime pay requirements, for the period the employee works in California. While the California Supreme Court still is pondering the full extent of this issue, employers should exercise caution to minimize potential exposure to a California penalty for employees temporarily working in California.

Workplace Solutions

For more on the DOL final order, check out our One Minute Memo here. And if you have any questions about the potential applicability of California exemptions to your team members, don’t throw a Hail Mary—Seyfarth is here to help both your offense and defense.

Edited by Coby Turner

Seyfarth Synopsis: The California Legislature has passed a series of bills for Governor Newsom to consider. He now has until October 13 to approve or veto bills such as a Dynamex codification bill and a San Francisco-inspired lactation accommodation bill.

Friday, September 13th marked the Legislature’s last day to pass bills to Governor Newsom’s desk for approval in the first year of the 2019-2020 Legislative Session. The most notorious employment bill has been AB 5, the Dynamex codification (and exceptions) bill. A more stringent lactation accommodation bill has also made its way to the Governor’s desk, as have leave of absence, anti-arbitration, and various industry-specific bills. Bills that did not make the cut may resurface in January in the second part of the two-year session. Below are the most significant employment-related bills of 2019 that the Governor has already approved or that await his action by the October 13th deadline. All approved bills will be effective January 1, 2020, unless otherwise noted.

APPROVED

Independent Contractors Worker Status. The bill creating the greatest buzz has been AB 5, which would codify the California Supreme Court’s 2018 decision in Dynamex Operations West, Inc. v. Superior Court, while also specifying some heavily-lobbied-for exemptions. See our in-depth analysis of it here and here. Governor Newsom signed the bill into law on Wednesday, September 18, 2019.

Sexual Harassment Training. As we reported, SB 778 will extend the deadline for non-supervisory employee training from January 1, 2020 until January 1, 2021 and confirms—in a much needed clarification—that those supervisors who received 2018 training need not be trained again until 2020.

Hairstyle Discrimination. SB 188, the Crown Act, will expand the FEHA’s definition of race to include traits historically associated with race, such as hair texture and “protective hairstyle” (e.g., braids, locks, and twists). The bill aims to chip away at “Eurocentric” professional norms by addressing “workplace dress code and grooming policies that prohibit natural hair, including afros, braids, twists, and locks.” The Legislature has concluded that these policies “have a disparate impact on Black individuals as these policies are more likely to deter Black applicants and burden or punish Black employees than any other group.”

Collegiate Athlete Compensation. AB 1518 will allow student athletes to contract with agents without losing their student athlete status—provided the contract complies with the student’s educational institution’s requirements and the bylaws of the NCAA—and to receive compensation. The Fair Pay to Play Act, SB 206, which passed both houses unanimously and next awaits the Governor’s approval or veto, would, among other things, beginning January 1, 2023, allow student athletes to more easily earn compensation from endorsements. While LeBron James and Draymond Green have praised the bill, the NCAA has strongly opposed it, stating in a letter to the Governor that it has the potential to kill amateur athletics and “erase the critical distinction between college and professional athletics.”

Reporting Occupational Injuries and Illnesses. AB 1804 will require employers to report serious workplace injuries, illnesses, or death immediately by telephone or through an online platform to be developed by the Division of Occupational Safety and Health. Until the online platform is available, employers are permitted to make these reports by telephone or email. Noncompliance carriers a $5,000 civil penalty.

Employment of Infants in the Entertainment Industry. AB 267 will expand the definition of “entertainment industry” beyond a movie set or location to include motion pictures, theater, television, photography, recording, modeling, rodeos, circuses, advertising, and any other performance to the public. The bill will require that all qualifying entities receive—as a prerequisite to employment of an infant under one month of age—a licensed, board-certified pediatrician’s certification that the infant is at least 15 days old, was carried to full term, was of normal birth weight, is physically capable of handling the stress of working in the entertainment industry, and has sufficiently developed lungs, eyes, heart, and immune system to withstand the potential risks.

Employment of Motion Picture Production Workers. SB 271 will allow temporary or transitory employment performed outside of California to count towards unemployment benefits as long as the individual is a California resident, is hired and dispatched from the state, and intends to return to the state to seek reemployment following the outside-California work.

Payment of Wages for Print Shoot Employees. SB 671, the “Photoshoot Pay Easement Act,” authorizes payment of wages to “print shoot employees”—defined as individuals hired for a limited duration to render services relating to or supporting a still-image shoot for use in print, digital, or internet media—on the next regular payday after the employment ends, rather than subjecting the employer to liability for failure to pay final wages on the last day of employment. In another break for employers, the final wages can be mailed to the employee or made available to the employee at a location specified by the employer in the county where the employee was hired or performed labor and the payment is deemed to have been made on the date of mailing or being made available to the employee at the specified location. The bill thus creates an exception mirroring the one existing for motion picture employees. The bill’s urgency clause—making it effective immediately upon its September 5, 2019 signing—highlights what a relief its passage will be to businesses that use short-term models and that have faced legal actions threatening sometimes huge potential liability under the prior law.

Civil Action Damages: Gender, Race Ethnicity. SB 41 aims to narrow the consequences of observed differences in the pay of groups defined by gender or ethnicity. This bill, applying in personal injury and wrongful death cases, will forbid any reduction in damages resulting from an estimation, measure, or calculation or past, present, or future damages for lost or impaired earning capacity that is based on a person’s race, ethnicity, or gender.

Paid Family Leave Expansion & Task Force. Under SB 83, beginning July 1, 2020, the California Paid Family Leave benefit will be eight weeks instead of six weeks, paralleling an increase in San Francisco’s Paid Parental Leave benefit. The bill requires the Governor’s Office to convene a task force to develop a proposal by November 2019 to extend the duration of paid family leave benefits to six months by 2021-22 for parents to care for, and bond with, their newborn or newly adopted child. The November 2019 proposal will also address job protections for workers and the goal of providing a 90 percent wage replacement rate for low-wage workers utilizing the Paid Family Leave program to bond with a child. Approved by Governor Newsom on June 27, 2019, the bill became effective immediately.

AWAITING THE GOVERNOR’S APPROVAL

Independent Contractors Worker Status. AB 170 attempts to slide another exemption into AB 5, via a separate bill, for a newspaper distributor working under contract with a newspaper publisher and a newspaper carrier working under contract with either a newspaper publisher or distributor, until January 1, 2021.

Lactation Accommodation. Based upon the very similar San Francisco lactation ordinance, SB 142 would require employers to provide a lactation room for employees that meets the following requirements: not a bathroom; in close proximity to the employee’s work area; shielded from view; free from intrusion while the employee is lactating; safe, clean, and free of hazardous materials; containing a surface to place a breast pump and personal items; containing a place to sit; with access to electricity or alternative devices (e.g., extension cords, charging stations) that may be needed to operate an electric or battery-powered breast pump; and with access to a sink with running water and a refrigerator suitable for storing milk. If a multipurpose room is used for lactation and other uses, lactation must take precedence over the other uses.

The bill would make a denial of lactation break time or space a violation under rest period laws, and subject the employer to a $100 penalty per violation. The bill contains an anti-retaliation provision and an undue hardship exemption for employers with fewer than 50 employees. The bill would also require an employer to develop and implement a policy regarding any lactation accommodations, and make it readily available to employees. This inordinately comprehensive bill is a repeat of SB 937 (2018), which Governor Brown vetoed given his approval of a less onerous lactation accommodation law, AB 1976.

Sexual Harassment Retaliation Protection. Very similar to AB 3081 (2018), AB 171 would amend the Labor Code to add sexual harassment to the prohibitions on an employer from discriminating or retaliating against an employee because of the employee’s status as a victim of domestic violence, sexual assault, or stalking. The bill would also create a rebuttable presumption of retaliation if the employer takes an adverse action against the employee within 90 days of notice of the employee’s status as a victim. If signed, the bill would become effective January 1, 2020, and these provisions would become operative July 1, 2020.

Sexual Harassment Training: Construction and Temporary Employees. SB 530 would extend the date by when seasonal, temporary, or other employees that are hired to work for less than six months must begin receiving mandatory sexual harassment training to January 1, 2021, and incorporate special training provisions for construction industry employers that employ workers pursuant to a multiemployer collective bargaining agreement.

Leave Rights: Private Cause of Action. AB 1478 would amend Labor Code section 230 to authorize a private right of action (as an alternative to the existing remedy of filing a complaint with the Labor Commissioner) by an employee who takes time off for jury duty, for legal proceedings relating to being a victim of a crime, and for retaliation for being a victim of domestic violence, sexual assault, or stalking. The bill would also make the same changes to Section 230 as AB 171 (discussed above) if AB 171 is approved and AB 1478 is approved after AB 171 (to ensure that AB 171’s provisions also become law).

Organ Donation Leave of Absence. AB 1223 would require employers to grant an employee an unpaid leave of absence—in addition to the existing 30 days in a one-year period paid leave—for the purpose of organ donation. The bill would require a public (not private) employee to first exhaust all available sick leave before taking the unpaid leave.

Local Government Enforcement of FEHA. SB 218 would allow local governments within the County of Los Angeles to enforce, administer, and establish penalties for claims arising under local antidiscrimination laws that also fall under the FEHA, removing these claims from the sole jurisdiction of the DFEH. As if dealing with the downtown L.A. traffic maze weren’t enough, this bill would force employers who do business within Los Angeles to navigate a new network of municipal laws.

FEHA Administrative Exhaustion Extension. A repeat of 2018’s AB 1870, vetoed by Governor Brown, AB 9 seeks to extend the period within which an aggrieved person may file a complaint with the DFEH from one year to three years.

Division of Labor Standards Enforcement for Complaints. AB 403 would extend the statute of limitations for complaints alleging workplace retaliation from six months to two years, and would authorize attorney fees to any employee who successfully sues for retaliation based on whistleblowing.

Labor Commissioner Citations. SB 229 would expand the appeal and enforcement mechanisms available when the Labor Commissioner (“LC”) cites an employer for violating the Labor Code’s anti-retaliation provisions. The bill would establish procedures and deadlines the LC, court, and employers must follow when adjudicating or contesting a citation. SB 688 would expand the LC’s citation authority to include citations for failures to pay contract wages when the LC determines an employer had paid an employee below minimum wage.

Penalties for Failure to Pay Wages. AB 673 would authorize an employee to pursue a private right of action to recover penalties for the late payment of wages through the Private Attorneys General Act, and would remove the authority for the Labor Commissioner to recover civil penalties in an independent civil action. The bill would prohibit the employee from also recovering statutory penalties for the same violation.

Arbitration Prohibition. For agreements entered into, modified, or extended on or after January 1, 2020, AB 51 would prohibit any business from requiring that a job applicant or employee waive any right, forum, or procedure for a violation of the FEHA or Labor Code, including any requirement that an individual “opt out” or take affirmative action to preserve such rights. This bill seems to be another unconstitutional attempt by the California Legislature to forbid arbitration agreements.

AB 51 would make actionable any threatened or actual retaliation against an individual who refuses to consent to the forbidden requirements. AB 51 would authorize injunctive relief and attorney’s fees to any plaintiff who proves a violation. Possibly because much of AB 51 could be held preempted by the Federal Arbitration Act, AB 51 contains a severability clause by which the rest of the law will remain in effect if a court finds certain sections invalid. These provisions of AB 51 are very similar to part of last year’s vetoed AB 3080.

Arbitration Agreement Fees/Costs. SB 707 would require an employer or drafter of an arbitration agreement to pay costs and fees associated with the arbitration. Failure to pay the fees could constitute material breach of the arbitration agreement, or the employee could withdraw the claim from arbitration, or be entitled to attorney’s fees and costs. The bill would also require a private arbitration company to collect and report aggregate demographic data regarding the ethnicity, race, disability, veteran status, gender, gender identity, and sexual orientation of all arbitrators.

Settlement Agreements Future Employment Restraints. AB 749 would prohibit settlement agreements that contain a provision restricting an employee from working for the employer against which the employee filed the claim.

Unfair Immigration-Related Practices. AB 589 would impose penalties on an employer that withholds an employee’s immigration-related documents and would create a Worker’s Bill of Rights concerning the employee’s freedom of movement and the payment of wages.

Workplace and School Gun Violence Restraining Orders. Beginning September 1, 2020, AB 61 would authorize an employer, or a coworker who has had substantial and regular interactions and approval of their employer, to file a petition for an ex parte, one-year, or renewed gun violence restraining order.

Call Center Protections. AB 1677 would require any employer with a call center currently in the state intending to relocate the call center to notify the LC at least 120 days before the relocation or face a civil penalty.

Industry-Specific Bills Awaiting Approval

Continuing Education: Implicit Bias in the Medical Field. AB 241 would require, by January 1, 2022, that continued education for physicians, surgeons, nurses and physician assistants include courses on implicit bias. The bill would require the Board of Registered Nursing and the Physician Assistant Board to adopt regulations requiring implicit bias training by January 1, 2022.

California Family Rights Act: Flight Crews. AB 1748 would amend the California Family Rights Act to conform flight deck and cabin crewmember eligibility requirements with the federal Family and Medical Leave Act, which has special hours of eligibility for airline flight attendants and other cabin crew. Flight attendants are eligible for FMLA if, during the previous 12 months, they have worked at least 504 hours and have been paid at least 60% of the monthly guarantee, which means that they worked 60% of the minimum number of hours which the employer scheduled the employee for any given month.

Sexual Violence and Harassment Prevention Training for Janitorial Workers. AB 547, the Janitor Survivor Empowerment Act, would require the Director of the Department of Industrial Relations to organize a training advisory committee that will generate a list of qualified organizations and trainers that janitorial employers would be required to use to provide biennial, in-person sexual violence and harassment prevention training for janitorial workers. This is in addition to the Property Service Workers Protection Act that kicks in on January 1, 2020, which we previously covered here.

Occupational Safety and Health for Valley Fever. AB 203 would require construction employers operating in counties where Valley Fever—a microscopic fungus which lives in the top few inches of the soil in many parts of California—is “highly endemic,” to provide effective training on the disease to employees annually and before an employee is anticipated to cause substantial dust disturbance.

Workplace Solutions

These bills are affecting businesses across the spectrum, and Seyfarth is following their passage (and potential passage) closely. We will continue to keep you informed of new developments as they arise, and please do not hesitate to reach out to your favorite Seyfarth counselors to discuss how to approach these new developments for your company.

Edited by Coby Turner

Seyfarth Synopsis: California’s hotly contested and closely followed AB 5 independent contractor bill, which would extend the ABC test beyond Wage Order claims, just passed the California Senate, and now heads back to the State Assembly for reconciliation before going to Governor Newsom’s desk for his expected signature.

Tell Me What You Think About Me: The Destiny of AB 5

The California Senate has just passed a landmark bill, Assembly Bill 5 (“AB 5”), affecting how many businesses will relate with their contractors. Under this bill, workers who have long thought they “depend on no one else” may now be treated as employees. AB 5 now heads back to the State Assembly for reconciliation before it returns to Governor Newsom’s desk for his expected signature.

AB 5 codifies the “ABC” test for employee status adopted by the California Supreme Court’s 2018 decision in Dynamex v. Superior Court. Dynamex, as we previously reported here, which held that a worker hired by a business who then sues the business on claims arising under California’s Wage Orders is the defendant’s employee unless the defendant proves (A) the worker is free from control and direction of the hirer in connection with performing the work, both under contract and in fact, (B) the worker performs work outside the usual course of the hiring entity’s business, and (C) the worker customarily engages in an independently established trade, occupation, or business of the same nature as the work performed for the hirer.

While many businesses and independent contractors thought it was bad enough to “get down with that,” AB 5 would expand Dynamex by applying the “ABC” test to all claims brought under the Labor Code, the Unemployment Insurance Code, and the Wage Orders. So, post-AB 5, the ABC test will apply to a host of additional causes of action, such as claims for failure to reimburse necessary business expenses (under Labor section 2802) or to provide accurate wage statements (under Labor Code section 226), that the ABC test did not apply to previously.

Also, AB 5 would broaden potential business liability by allowing the State Attorney General and certain city attorneys to pursue injunctions against businesses suspected of misclassifying workers.

‘Cause I Depend On Me: Exemptions From the ABC Test

Perhaps not surprisingly, given the intense lobbying efforts by businesses trying to preserve the status of workers traditionally considered independent, AB 5 contains numerous statutory exemptions from the ABC test, including:

  • A “business-to-business” exemption that applies to “business service providers” that contract to provide services to another business (provided that certain criteria are met).
  • A “service providers” exemption in certain fields, including graphic design, photography, tutoring, event planning, moving, home cleaning, pool and yard cleanup, animal services, web design, and dog grooming and walking.
  • An exemption for certain “professional services” such as jobs in marketing, human resources administration, travel agents, graphic designers, grant writers, fine artists, agents licensed to practice before the IRS, payment processing agents, photographers and photojournalists, freelance writers, editors or cartoonists, and professionals providing cosmetic services (e.g., licensed barbers and manicurists).
  • Certain other occupational exemptions, including (but not limited to) certain medical professionals, attorneys, architects, engineers, private investigators, registered securities brokers and dealers, commercial fishermen, real estate agents, construction subcontractors, and individuals providing roadside services pursuant to a contract between a motor club and a third party business.
  • And, assuming a pending companion bill to AB 5 is also passed into law, newspaper carriers will be exempted from the ABC test until 2021.

What’s Next?

AB 5, if signed into law, would become effective January 1, 2020, and surely would prompt a spike in litigation challenging independent contractor classifications. It is anticipated that the law will be subject to numerous legal challenges.

Workplace Solutions

The status of AB 5, its many legal challenges, and its impact on businesses and workers is evolving by the minute. So if you “truly feel” us, and want to know the latest on some of the most pressing wage and hour issues arising in the marketplace space, Seyfarth will be covering the topic in various ways for employers around the country. Choose the one that’s right for you! Or join our webinar, specifically developed to cover AB 5, which will take place soon. To get on the list for these upcoming events, click here.

We are also covering the topic as a part of a broader roundtable discussion on wage and hour issues. These roundtables are designed for in-house counsel and are taking place in San Francisco (10/23) and Boston (11/5). If you are in the Houston area, you can also find us chatting about AB 5 (10/10). For more information on these regional programs, click here.

Edited by Coby Turner