2015 Legislative Updates

Seyfarth Synopsis: The California Legislature sent a number of employment bills to the Governor, including bills that would expand the Fair Pay Act to race and ethnicity and prohibit salary history inquiries; require overtime pay for agricultural workers, extend family leave protections to employees of small businesses, and much more!  We will update you on what received the Governor’s approval after his for September 30 deadline.

The California Legislature adjourned in the wee hours yesterday, Wednesday, August 31st, having reviewed over 100 bills in the single day, bringing the second half of the 2015-2016 Legislative Session to a close. Several employment-related bills have been sent to Governor Jerry Brown for his consideration by the September 30th deadline to either veto or sign the bills. Below is a summary of what made the Legislative cut, bills the Governor has already signed, and those that did not make it to his desk. Of particular interest, bills that would have doubled pay for large grocery and retail employees on Thanksgiving did not pass the legislature, while bills allowing overtime pay for agricultural employees and expanded parental leave are in the Governor’s hands. Which bills will further complicate our already peculiar California laws? Stay tuned…

PENDING BILLS

Fair Pay Act: Prior Salary. AB 1676 would prohibit employers from considering prior salary to justify any disparity in compensation. Before the amendments, the bill would have prohibited employers from seeking an applicant’s salary history information just as its predecessor, AB 1017, attempted to do last year. In vetoing AB 1017, Governor Brown stated that we should wait and see whether last year’s momentous Fair Pay Act, SB 358, addressed the pay equity issue before making further changes. Has one year been enough time for the Governor to believe the Fair Pay Act has or has not been effective?  Will he think it is time to keep up with other governments that have recently pursued similar legislation? On August 2, 2016, Massachusetts passed a law prohibiting Massachusetts employers from requesting the compensation history of a prospective employee prior to making an offer, unless the prospective employee has “voluntarily” disclosed such information; and on August 16, the New York City Council followed suit, introducing a bill that would prohibit employers from inquiring about a prospective employee’s salary history on a job application, or at any other stage in the employment process.

Fair Pay Act: Race/Ethnicity. SB 1063 seeks to expand the provisions of last year’s Fair Pay Act — at the time the strictest gender pay equity law in the country — to race and ethnicity, and responds to critics of the Fair Pay Act that the pay equity issue is not limited to gender. Specifically, it would prohibit employers from paying employees a wage less than the wage paid to employees of a different race or ethnicity for substantially similar work. This bill would also make the prior salary prohibition change proposed in AB 1676 if both bills are signed by the Governor and this bill is signed last. If AB 1676 is not signed into law, this bill would not incorporate the prior salary prohibition.

Parental Leave. SB 654 would, beginning January 1, 2018, significantly expand California’s parental leave laws by requiring employers with 20 to 49 employees to provide up to six weeks of job-protected parental leave to bond with a new child within one year of the child’s birth, adoption, or foster care placement. Existing law, the California Family Rights Act (Gov. C. § 12945.2), applies only to employers with 50 and greater employees, and provides for at least 12 weeks of job-protected parental leave. This bill — dubbed the “New Parent Leave Act”— would impose many of the same requirements as CFRA: to be eligible, an employee must have worked 1250 hours in the preceding 12-month period; the employer must guarantee reinstatement of the employee to the same or comparable employment at the conclusion of the leave; the employee is entitled to use accrued paid time off during the time off; and the employer must maintain and pay for coverage under a group health plan for employees while taking this leave. This bill applies to private and state and local government employers except for school districts, county offices of education, and community college districts. SB 654 was given new life as a mellower gut and amend version of SB 1166, which failed to pass in committee in June.

Agricultural Workers. AB 1066AB 2757 failed to pass the house of origin in June. Undeterred, author Assembly Member Lorena Gonzales resurrected it with that handy legislative “gut and amend” trick, putting its contents into a bill formerly relating to educational employees. On August 30, the much-publicized AB 1066 was sent to Governor Brown’s desk, where it currently awaits his action.  The bill would delete an exemption for agricultural workers from the entire chapter of the Labor Code relating to working hours, and enact the “Phase-In Overtime for Agricultural Workers Act of 2016”, which would require employers to pay agricultural workers overtime over a four-year phase-in process. Beginning January 1, 2019, employers would be required to pay overtime for any hours worked above 9.5 hours per day or 55 hours per workweek. Each year the hours worked triggering overtime pay will reduce, until reaching 8 hours per day, 40 hours per week beginning January 1, 2022. Also beginning on January 1, 2022, any employee who works over 12 hours per day must be paid at a rate no less than double his or her regular rate of pay. The Governor may temporarily suspend the scheduled overtime requirement but only if the minimum wage increases are suspended as well. Employers that employ 25 or fewer employees are given an extra three years to comply with the phase-in and must begin paying overtime by January 1, 2022.

Property Service Workers. AB 1978 would create the Property Services Workers Protection Act by establishing various requirements for the janitorial industry, including registering annually with the DLSE, to protect janitorial employees from wage theft and sexual harassment. The provisions of this bill would apply to employers that employ at least one or more “covered workers” that enter into a contract, subcontract, or franchise agreement to provide janitorial services. This bill would also require the DLSE to maintain a database of property service employers and to develop a biennial sexual harassment and violence prevention training. This bill would also prohibit an employer from registering or renewing its registration if it has not fully satisfied any final judgment for unpaid wages or made appropriate tax contributions. “Successor employers” would also liable for any wages and penalties owed to the predecessor’s employees.

Minimum Wage Violation Challenges. AB 2899 would require that any employer, prior to filing an appeal of a decision by the Labor Commissioner relating to a violation of wage laws, file a bond with the Labor Commissioner that covers the total amount of any minimum wages, liquidated damages, and overtime compensation owed. The bill would require that the bond be issued in favor of the unpaid employees. The bill would also provide that the total amount of the bond would be forfeited to the employee if the employer fails to pay the amounts owed within 10 days from the conclusion of the proceedings.

Criminal History. AB 1843 would prohibit employers from asking an applicant for employment to disclose any information regarding juvenile convictions. The bill would also prohibit employers from seeking or utilizing any information related to juvenile arrests, detentions, or court dispositions as a factor in their employment determination. The bill does specify that an employer at a health facility can inquire into an applicant’s juvenile criminal background if a juvenile court made a final ruling or adjudication, that the applicant had committed a felony or misdemeanor relating to sex crimes or certain controlled substances crimes within five years prior to applying for employment. Still, these employers cannot inquire into an applicant’s sealed juvenile criminal records. Read more about existing California law on background checks here.

Transportation Network Companies, Background Checks: AB 1289 would require a transportation network company (“TNC”; i.e., Uber) to conduct, or have a third party conduct, criminal background checks on each participating driver. This bill follows a 2014 lawsuit that accused TNC’s of misleading customers by suggesting their background checks were the toughest in the industry. The bill would also prohibit an TNC from contracting with a driver who is currently registered on the DOJ’s National Sex Offender Public Website; has been convicted of specified felonies within the past seven years; and/or has been convicted, within the past seven years, of misdemeanor assault or battery, domestic violence, or driving under the influence of drugs or alcohol.

DLSE Enforcement. AB 2261 would provide the Department of Labor Standards Enforcement (DLSE) with new independent authority to, with or without an employee complaint, bring an action against an employer who it suspects may have terminated or otherwise discriminated against an employee in violation of any law under the jurisdiction of the Labor Commissioner. The authors of this bill argue that despite laws providing employees protection and encouragement to report abuse, the reality is that many workers do not report out of fear of losing their jobs. AB 2261 builds upon AB 970, which the Governor signed into law last year, and which we wrote about here.

Unfair Immigration-Related Practices. SB 1001 is a redux of 2015’s AB 1065, which was held in committee (and which we reported here). SB 1001, like AB 1065, would make it an unlawful employment practice to request more or different documents than required under federal law to verify that an individual is not an unauthorized immigrant, or to refuse to honor documents tendered that on their face reasonably appear to be genuine, refuse to honor documents or work authorization based on specific status or term that accompanies the authorization to work, or to attempt to reinvestigate or re-verify an incumbent employee’s authorization to work using an unfair immigration-related practice. Assembly amendments have removed this year’s bill provision that would have allowed a private right of action for job applicants and employees who suffer an “unfair immigration-related practice.” Instead, those job applications and employees can file a complaint with the DLSE for enforcement. The bill provides that a violation of these provisions could result in a penalty of up to $10,000.

Employment Protections. AB 2337 this bill would expand the notice requirement employers must give their employees regarding domestic violence protections. Specifically, this bill provides that an employer must inform each new employee, and to other employees upon request, of the rights protecting employees affected by domestic violence in writing.

Employment Contracts—Choice of Law and Forum. SB 1241 would allow an employee to void a contract provision that requires the employee to adjudicate a claim outside of California, or require the employee to waive their protections under California law. Specifically, this bill prohibits an employer from requiring an employee, who resides and works in California, as a condition of employment, to agree to a provision that would either require the employee to adjudicate outside of California a claim arising in California or deprive the employee of the protection of California law with respect to a controversy arising in California. The bill also provides that any contract that violates these provisions is voidable by the employee. A court may award an employee reasonable attorney’s fees, among other remedies, for enforcing his or her rights under the act. This bill would not apply to employee who are represented by legal counsel during the contractual negotiations.

Employment of Minors, Agricultural Packing Plants. SB 702 would extend a Lake County-specific exemption of child labor law that allows minors to work during the peak agricultural season when school is not in session.

BILLS SIGNED BY THE GOVERNOR

Paid Family Leave Expansion. AB 908, which the Governor signed on April 11, 2016, increases the amount of benefits paid to employees on paid family leave and state disability leave. Read our report on AB 908 here.

Talent Services. AB 2068 updates the Talent Service Act’s existing communication and contractual protections to include new technologies, such as mobile applications. Specifically, AB 2068 updates the protections for an artist’s information or image to include information posted on an online service, online application, mobile application, or website. AB 2068 also updates the communication and advertisement protections between talent agencies and artists by including communication through the use of a telecommunication device, in print, on the Internet, or through the use of a mobile or online application or other electronic communication. AB 2068 also adds “text message” and other “electronic communication” to the list of methods by which an artist may ask for photographs and other information about the artist be removed from a Web site, online service, online application, or mobile application owned or serviced by the talent service.

Work Experience Education. AB 2063 provides an additional option for a student, at least 14 years old, to participate in work experience education. The bill also increases the number of hours per week a student may participate in job shadowing from 25 to 40 hours per semester if the principal of the school where the student is enrolled certifies that it is necessary for the student’s participation in a career technical education program.

Itemized Wage Statements. AB 2535 comes on the heels of the recently decided federal case, Garnett v. ADT, LLC, and clarifies Labor Code section 226. This bill specifies that employers are not required to list the number of hours worked on wage statements for any exempt employee whose compensation is solely based off of salary and the employee is exempt from overtime wages.

BILLS THAT DIDN’T MAKE THE CUT (i.e., “it coulda been worse”)

Double Pay on the Holiday—2016 Edition. The Double Pay on Holiday Act of 2015 failed to make its way to the Governor for the second year in a rowAB 67 would have required retail and grocery store establishments, as well as restaurants located within them, to pay at least twice the regular rate of pay for employees who work on Thanksgiving.

Employee Time Off. AB 2405 would have required an employer to provide an employee at least eight hours annually of paid, job-protected, time off for an absence under the Family School Partnership Act. This bill came on the heels of SB 579, chaptered in 2015, which expanded the authorized reasons an employee can take job-protected time off under the Act and specified the definition of ‘family member” under California’s Kin Care. Read our report on SB 579 here.

Work Hours. SB 878 was similar to AB 357, the Fair Scheduling Act of 2015, which did not make it out of the Assembly. SB 878, the Reliable Scheduling Act of 2016, would have required that restaurant, grocery, and retail employers provide non-exempt employees with a 21-day work schedule in advance of their first shift on that work schedule. SB 878 would have required at least seven days advance notice. SB 878 would have required employers to pay “modification pay”—defined as compensation in addition to regular pay (the hourly rate calculated based upon 90 days prior)—if any scheduled shift is canceled, moved, or added, and for each shift for which an employee is required be on call but is not called into work.

California Workplace Flexibility Act. SB 985, SB 368’s predecessor, would have allowed employees to submit a written request for a flexible work schedule of up to four 10-hour days per week without obligating the employer to pay overtime for the 9th and 10th hours worked per day. The employer would have still been obligated to pay overtime for any hours worked over 10 hours per workday or 40 hours per workweek.

Meal and Rest or Recovery Periods. AB 1948 would have provided a statutory remedy for an employer’s failure to provide a meal or rest or recovery period. The bill would have specified that the entire “penalty amount” was an additional hour or pay for each day that a meal or rest or recovery period was not provided to the employee.

Employee Safety. AB 2895 would have required an employer to keep at each worksite with three or more employees a complete, updated copy of the currently required written injury prevention program and make it available for inspection by any employee or by the Division of Occupational Safety and Health upon request. This bill also required an employer to inform each employee of the availability, and employee’s rights, to inspect and receive a copy of the written injury prevention program. Additionally, an employer that received a written request for a copy of the injury prevention program would have to comply within a specified timeframe. The bill would have also entitled the employee to injunctive relief if the employer did not timely respond to the request.

Employment Arbitration Agreements Discrimination. AB 2879, the “Service Member Employment Protection Act,” brings back the language of 2015’s AB 465, which the Governor vetoed (read our summary here), but would have limited the application to military service members, similar to USERRA. Specifically, the bill would have prohibited employers from requiring service members to waive any Labor Code protections, including the right to file and pursue a civil action or complaint, and would have prohibited employers from requiring service members to accept private arbitration, as a condition of employment, unless the waiver was voluntary.

Human Trafficking Training. AB 1595 would have required public and private mass transportation providers (bus, train, light rail, etc.) to provide human-trafficking training to their employees who are likely to interact with victims of human trafficking. AB 1942 would have required the same training but is specific to hotels and motels that provide lodging services.

Sexual Offenses Against Minors. AB 2199 would define a two-year sentence enhancement where a defendant who committed a sex crime against a minor held a position of authority over the minor. The bill specifically provided that a person in a “position of authority” included, but was not limited to, a stepparent, foster parent, partner of the parent, youth leader, recreational director, athletic manager, coach, teacher, counselor, therapist, religious leader, doctor, or employer, or employee of one of the aforementioned persons.

PAGA. AB 1317. This bill expanded on last year’s bill, AB 1506, which was signed by the Governor, that gave employers a limited right to cure certain wage-statement violations before an aggrieved employee could sue under PAGA. This bill would have provided an employer a right to cure any violation of the Labor Code before an employee could sue and would have provided an appropriation to the Labor and Workforce Development Agency to establish new positions to review and investigate PAGA cases. This bill was stuck in the Senate committee on rules.

PAGA Reform. None of the bills in this year’s five-bill Private Attorneys’ General Act (PAGA) reform package made it out of the Assembly. Those bills were:

  • AB 2461 would have limited violations an aggrieved employee was authorized to bring and required specific procedures before bringing an action.
  • AB 2462 would have provided employers with a right to cure before an employee brought a civil action.
  • AB 2463 would have established a penalty cap of $1,000 for each aggrieved employee.
  • AB 2464 would have authorized a court to dismiss an action if the court found the aggrieved employee suffered no appreciable physical or economic harm.
  • AB 2465 would have required the Labor and Workforce Development Agency to investigate alleged violations and determine if there was a reasonable basis for a civil action.

Independent Contractors. AB 1727 would have established rights for independent contractors to organize and negotiate with “hosting platforms.” This bill would have provided a right for independent contractors to engage in “group activities” in an effort to negotiate through activities such as withholding work and boycotting or critiquing. The bill would authorize an independent contractor or a representative of independent contractors claiming a violation under this bill to bring an action in superior court.

Workplace Solutions.

We will continue to monitor and report on these potential sources of annoyance, as well as any other significant legislative developments of interest. Let your favorite Seyfarth attorney know if you have any questions.

Seyfarth Synopsis: A court has temporarily suspended the deadline for employers to elect the statutory “safe harbor” for purposes of complying with recent legislation that makes it even more difficult for employers that pay with a piece rate rather than an hourly rate for any portion of an employee’s work.  

As we previously reported, the California Legislature’s enactment of AB 1513 (commonly known as the “piece rate pay law”), which became effective on January 1, 2016, has created significant challenges for California employers that pay employees on a piece-rate basis for any part of their work. This new law requires employers to pay piece-rate employees separately for rest and recovery periods and for “other non-productive time,” based on a specific formula, and requires detailed disclosures in wage statements.

AB 1513’s “Safe Harbor” for Past Violations

AB 1513 creates an affirmative defense to wage claims for employers that follow the law’s very specific “safe harbor” provisions. To come within the safe harbor, employers must (1) provide written notice of their intent to utilize the safe harbor procedures by no later than July 1, 2016, and (2) pay employees for all previously uncompensated rest and recovery periods and other non-productive time, plus interest, for the period from July 1, 2012, through December 31, 2015, by December 15, 2016.

Challenge to the Piece Rate Pay Law

An agricultural employer group, Nisei Farmers League, filed a lawsuit challenging AB 1513 on constitutional grounds. The lawsuit argues that AB 1513 is unconstitutionally vague, fails to provide employers with fair notice of its requirements, and is impermissibly retroactive. The League sought to enjoin enforcement of certain provisions of AB 1513, including the safe harbor, pending a trial of their claims.

On June 30, 2016, one day before the deadline to elect the safe harbor, the court entered an Order to Show Cause re Preliminary Injunction and Temporary Restraining Order. This Order restrains the Department of Industrial Relations from enforcing the deadline until at least July 18, 2016, the date of the hearing on the Order to Show Cause. If the court enters a preliminary injunction at the hearing, the DIR will be enjoined from enforcing the deadline until thirty days after the preliminary injunction expires, and from enforcing the payment requirement until 197 days after the preliminary injunction expires. If the court does not enter a preliminary injunction, then the deadline will become effective ten days later (on July 28, 2016).

What Does This Mean for Piece Rate Employers?

The Order provides piece-rate employers with some additional time (at least until July 28, 2016, and longer if the court enters a preliminary injunction) to decide whether to invoke the safe harbor if they have not already done so. Employers that already made this election may have additional time to comply with the back-pay requirements if the court enters a preliminary injunction on July 18. In either case, the many California employers struggling to comply with the unclear and burdensome requirements of AB 1513 should watch this legal challenge closely.

Seyfarth Synopsis: Pending new bills that have now passed their house of origin would (i) expand DLSE enforcement authority, (ii) impose advance scheduling requirements on restaurant, grocery, and retail employers, (iii) extend Fair Pay Act provisions to additional protected classes, (iv) require employers to disclose pay scales to applicants while prohibiting employers to ask about salary history, (v) forbid employers to obtain or consider certain criminal history in their employment decisions, (vi) require retail and grocery establishments to pay double wages on Thanksgiving, (vii) forbid employers to require extra documents to verify authorization to work and create a new right of action for victims of “unfair immigration-related practices,” and (viii) expand the scope of parental leave. We will continue to monitor these bills to see if they reach the Governor’s desk.

Gideon Tucker, a 19th century jurist, once famously observed: “No man’s life, liberty or property are safe while the Legislature is in session.” Can California employers be blamed for harboring similar sentiments now? Friday, June 3rd, marked the last day for bills to pass out of their house of origin in the California Legislature. Here is a summary of some key employment bills that made it through (followed by some significant bills that did not). Each will pose further challenges to California businesses if it becomes law.

DLSE Enforcement Actions. AB 2261 would grant the Department of Labor Standards Enforcement (DLSE) new independent authority to, without an employee complaint, bring an action against an employer who terminates or otherwise discriminates against an employee in violation of any law under the jurisdiction of the Labor Commissioner. AB 2261 builds upon AB 970, which the Governor signed into law last year, and which we wrote about here.

Work Hours. SB 878 is similar to AB 357, the Fair Scheduling Act of 2015, which did not make it out of the Assembly, and which sought to build upon the San Francisco Retail Workers’ Bill of Rights.  SB 878, dubbed the Reliable Scheduling Act of 2016, would require that restaurant, grocery, and retail employers provide non-exempt employees with a 21-day work schedule in advance of their first shift on that work schedule. While AB 357 would have required 14 days’ advance notice, SB 878 would require at least seven days advance notice. SB 878 would require employers to pay “modification pay”—defined as compensation in addition to regular pay (the hourly rate calculated based upon 90 days prior)—if any scheduled shift is canceled, moved, or added, and for each shift for which an employee is required be on call but is  not called into work. The bill would require employers to post a poster—to be created by the Labor Commissioner—publicizing this right to modification pay.

Pay Equity Expansion. SB 1063, which we discussed here, is dubbed the “Wage Equality Act of 2016.” The bill would build upon the gender-based amendments to Labor Code section 1197.5 made by last year’s highly publicized Fair Pay Act. The bill would extend Fair Pay Act provisions, virtually verbatim, to pay differentials relating to race and ethnicity. As such, SB 1063 would prohibit employers from paying employees a wage rate less than the rate paid to employees of a different race or ethnicity for “substantially similar work”— as determined by skills, effort, responsibility, and working conditions—unless the employer demonstrates the wage differential is based entirely upon one or more specifically enumerated factors.

Salary Information. AB 1676 is a redux of 2015’s AB 1017, which the Governor vetoed (and we discussed here). AB 1676, just like the vetoed bill, would prohibit employers—including state and local governments—to seek an applicant’s salary history information.The Governor’s veto message on AB 1017 stated that we should wait to see if the Fair Pay Act addresses the issue, and that he did not think AB 1017’s broad prohibition on employers obtaining relevant information would have any effect on pay equity. AB 1676 not only calls the Governor’s bluff in this game of legislative poker; AB 1676 would also raise the stakes by requiring employers—other than state and local governments—to, upon reasonable request, disclose to job applicants the pay scale for a position being filled. If AB 1676 makes its way to the Governor’s desk, then we will see if he has had a change of heart. Similar provisions appear in new and pending pay equity legislation in Maryland and Massachusetts.

Criminal Records. AB 1843 would prohibit an employer from asking an employment applicant to disclose, or from utilizing as a factor in determining any condition of employment, information concerning specific juvenile court actions or custodial detentions.  Read more about existing California law on background checks here.

Double Pay on Holiday – 2016 Edition. As we reported, the Double Pay on the Holiday Act of 2015 failed passage out of the Assembly. Its author, Assembly Member Gonzalez, ordered it to the inactive file. It now has lurched back into life.  AB 67 is moving again, with one limb removed. The Double Pay on the Holiday Act of 2016 eliminates the prior version’s proposed application to Christmas and now would apply only to Thanksgiving. AB 67 would require retail and grocery store establishments, as well as restaurants located within them, to pay at least twice the regular rate of pay for employees who work on a “family holiday,” defined as the fourth Thursday of November of each year. Most of us know that day as Thanksgiving.

Unfair Immigration-Related Practices. SB 1001 is a redux of 2015’s AB 1065, which was held in committee (and which we reported here). SB 1001, like AB 1065, would make it an unlawful employment practice to request more or different documents than required under federal law relating to verification that an individual is not an unauthorized alien, or to refuse to honor documents tendered that on their face reasonably appear to be genuine, or to attempt to reinvestigate or re-verify an incumbent employee’s authorization to work unless required to do so by federal law. New in this year’s bill would be a private right of action for job applicants and employees who suffer an “unfair immigration-related practice.”

Parental Leave. SB 1166 would prohibit state and local governments and small private employers (those with as few as ten employees) from refusing to allow employees to take up to 12 weeks of parental leave to bond with a new child within one year of the child’s birth, adoption, or foster care placement. This bill would also prohibit employers from refusing to maintain and pay for coverage under a group health plan for employees who take this leave. This bill comes on the heels of AB 908, signed by the Governor earlier this year, which increases the amount of benefits paid to employees on paid family leave and state disability leave. Read our report on AB 908 here.

Significant Bills Stuck in The House of Origin

Employment Arbitration Agreements Discrimination. AB 2879, the “Service Member Employment Protection Act,” brings back the language of 2015’s AB 465, which the Governor vetoed (read our summary here), but would have limited the application to military service members, similar to USERRA. Specifically, the bill would have prohibited employers from requiring service members to waive any Labor Code protections, including the right to file and pursue a civil action or complaint, and would have prohibited employers from requiring service members to accept private arbitration, as a condition of employment, unless the waiver is voluntary.

Human Trafficking Training. AB 1595 would have required public and private mass transportation providers (bus, train, light rail, etc.) to provide human-trafficking training to their employees who are likely to interact with victims of human trafficking.

PAGA Reform. None of the bills in this year’s five-bill Private Attorneys’ General Act (PAGA) reform package made it out of the Assembly.  Those bills were:

  • AB 2461 would have limited violations an aggrieved employee is authorized to bring and would have required specific procedures before bringing an action.
  • AB 2462 would have provided employers with a right to cure before an employee brings a civil action.
  • AB 2463 would have established a penalty cap of $1,000 for each aggrieved employee.
  • AB 2464 would have authorized a court to dismiss an action if the court finds the aggrieved employee suffered no appreciable physical or economic harm.
  • AB 2465 would have required the Labor and Workforce Development Agency to investigate alleged violations and determine if there is a reasonable basis for a civil action.

Workplace Solutions.

We will continue to monitor and report on these bills, as well as any other significant legislative developments of interest. Let your favorite Seyfarth attorney know if you have any questions.

Seyfarth Synopsis:  Starting Jan 1, 2018, the amount of benefits paid to employees on paid family leave and state disability will increase substantially, depending on an employee’s income level.

The Legislature and Governor have been keeping very busy. On April 11, 2016, Governor Jerry Brown signed into law AB 908, which will, though effective January 1, 2017, increase, for periods of disability commencing on or after January 1, 2018, the benefits provided to individuals in the Paid Family Leave (PFL) and State Disability Insurance (SDI) programs. The new law will increase the level of benefits from the current level of 55 percent to either 60 or 70 percent, depending on the applicant’s income. The new law will also remove, effective January 1, 2018, the seven-day waiting period before which individuals would be eligible for family temporary disability benefits.

The PFL program provides up to six weeks of wage replacement benefits to workers who take time off work to care for a seriously ill or injured family member or to bond with a minor child with one year of birth or placement of the child in connection with foster care or adoption. The SDI program provides benefits to individuals who are unable to work because of their own illness or injury.

In his press release, Governor Brown was quoted as saying: “Families should be able to afford time off to take care of a new child or a member of their family who becomes ill.” The press release further touted the legislation as improving “an individual’s ability to take up to six weeks off to bond with a new child or care for an ill family member.”

The Paid Family Leave program affected by this legislation was enacted in 2002. It is funded through worker contributions and is administered by the Employment Development Department in tandem with the State Disability Insurance program.

This legislation comes on the heels of Governor Brown last week signing legislation raising California’s minimum wage, in a series of annual steps, to at least $15 per hour statewide.

On April 4, 2016, Governor Jerry Brown signed SB 3, increasing the statewide minimum wage to $15.00 per hour. The increase will be phased in over the next six years.

First introduced in the state Senate by Senator Leno on December 1, 2014, SB 3, was subject to contentious debate on both the Assembly and Senate Floors on March 31st. Those interested in watching legislators argue for and against the wage hike can watch the Assembly debate here and the Senate debate here.

SB 3, which amends Section 1182.12 of the Labor Code, increases the minimum wage according to different schedules, depending on the number of employees. Here is the schedule of new minimum wages applying to employers who employ 26 or more employees:

  • January 1, 2017 – $10.50
  • January 1, 2018 – $11.00
  • January 1, 2019 – $12.00
  • January 1, 2020 – $13.00
  • January 1, 2021 – $14.00
  • January 1, 2022 – $15.00

For an employer who employs 25 or fewer employees, each yearly scheduled increase comes one year later, beginning with January 1, 2018 and capping out on January 1, 2023.

After $15.00 has been reached, the Department of Finance will continue to calculate a yearly minimum wage increase at either a rate of 3.5% or the rate of change in the averages of the preceding year’s U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers (U.S. CPI-W), whichever is the lesser amount. The adjusted minimum wage will continue to take effect on the following January 1st. The minimum wage will stay the same if that year’s U.S. CPI-W is negative.

A feature of the new law of particular interest is that the Governor can pause the wage hikes based on economic conditions. The law requires “the Director of Finance to annually determine whether economic conditions can support a scheduled minimum wage increase and certify that determination to the Governor and the Legislature.” The Governor may suspend the scheduled increases a maximum of two times. The Assembly Bill Analysis can be found here and the Senate Bill Analysis here.

We previously reported here  (when the $10 state-wide minimum wage went into effect on January 1, 2016) on the impacts that an increasing minimum wage has on various other compensation determinations, such as the salary threshold for the white collar exemptions under California law. If you have any questions about how forthcoming minimum wage increases will affect your business, please reach out to our California Workplace Solutions team or any member of Seyfarth’s Labor and Employment Group.

Edited by David Kadue and Colleen Regan.

With March Madness in full swing, we interrupt your crumbling tournament brackets to ensure you’re aware of a truly maddening development. California law now makes individuals potentially liable for employer violations of many often-convoluted wage and hour rules.

That’s right—individuals, not just companies, may be liable for wage and hour violations.

We mentioned this legislation here last Fall, when it was part of “A Fair Day’s Pay Act” (SB 588).  We described it there as what it is: an enhancement to the Labor Commissioner’s enforcement authority. The bill’s introductory summary explained that the “bill would authorize the Labor Commissioner to provide for a hearing to recover civil penalties against any employer or other person acting on behalf of an employer … for a [wage and hour] violation.” The Senate Bill Analysis opined that the bill targeted “willful” wage theft and would give the “Labor Commissioner” additional avenues to enforce its judgments. The Senate Bill Analysis can be found here, and the full text of the bill can be found here.

Even though the limited purpose of the new law is clear, enterprising members of the plaintiffs’ bar have recently sought to read the new law as authorizing a private right of action against individual managers. These lawyers have seized upon a legislative oversight. Although 12 of the 13 bill’s enactments refer to the Labor Commissioner, the 13th provision—Section 558.1 of the Labor Code—does not expressly mention “Labor Commissioner.” These lawyers have seized upon this obvious oversight to argue that Section 558.1 goes further than its 12 companion provisions and somehow creates a private right of action against individuals.

The personal liability language of Section 558.1 is not complex: any employer or “other person acting on behalf of an employer” “may be held liable as the employer for” violations of the directives in the Wage Orders and in various provisions of the Labor Code. Thus, the Labor Commissioner may now hold individuals liable for certain wage and hour violations, including California’s big six: unpaid overtime, unpaid minimum wage, denied meal/rest breaks, untimely termination pay, inadequate wage statements, and failure to reimburse for employee business expenses.

The Legislature defines “other person acting on behalf of an employer” as “a natural person who is an owner, director, officer, or managing agent of the employer.” The “managing agent” definition mirrors that found in California’s punitive damages statute. Under that statute and case law, “managing agents” are all employees who exercise substantial independent authority and judgment in their corporate decision-making such that their decisions ultimately determine corporate policy.

But while this statutory language thus creates the potential for individual liability at the hands of the Labor Commissioner, none of the foregoing statutory language nor anything in the legislative history of the bill’s enactment creates a private right of action. As the California Supreme Court has explained, it takes more than statutory silence in a Labor Code provision to create a private right of action: the statute must contain “clear, understandable, unmistakable terms, which strongly and directly indicate that the Legislature intended to create a private cause of action”; and if the statute lacks that language, the statute’s legislative history must be examined. Applied here, that analysis would show that the plaintiffs’ lawyers are out of line, and should seek their easy pickings elsewhere.

We expect courts to remedy the plaintiffs’ interpretive overreaching. Meanwhile, however, the new statute remains significant for high-level managers regardless of who is empowered to enforce it. What’s clear is that now, more than ever, employers and their corporate policy-makers may have a personal stake in ensuring that the company’s wage and hour house is in order and ensuring that employees are paid properly. Employers would be well-advised to take proactive measures to ensure compliance with California’s unique wage and hour landscape, such as auditing current pay practices and policies.

If you would like assistance in ensuring your company’s wage and hour compliance, or if have questions regarding the issues raised in this post, then please do not hesitate to contact the authors or any other member of Seyfarth’s Labor and Employment Group.

From high profile cases in Hollywood to the Silicon Valley, to high-profile legislation, gender pay equity has been top of the news in the past year.  On January 1, 2016, the California Fair Pay Act — widely publicized as the toughest (gender) pay equity law in the nation — became effective.  Other states (Massachusetts, New Jersey, New York) and even the EEOC have since pursued similar action, through various means.  Just as companies are struggling to get a handle on the new gender pay equity requirements, the California Legislature (not unexpectedly) is looking to expand the law further.

Just two days ago, on February 16, 2016, California Senator Isadore Hall (D-South Bay) introduced Senate Bill 1063, dubbed the “Wage Equality Act of 2016,” which seeks to extend last year’s Fair Pay Act amendments virtually verbatim to Labor Code section 1197.5 to race and ethnicity. As such, SB 1063 would prohibit employers from paying employees a wage rate less than the rate paid to employees of a different race or ethnicity for substantially similar work.

The Fair Pay Act was billed as the  toughest equal pay law in the U.S. — but it only addressed gender.  Senator Hall noted that despite last year’s legislation, “the 65 year old California Equal Pay Act fails to include one of the largest factors for wage inequity — race and ethnicity.”  The Wage Equality Act of 2016 is again being touted as creating (an even stronger) strongest wage equality law in the nation.

In support of the bill, Senator Hall press release cites a “2013 study by the American Association of University Women [which] revealed that Asian American women make 90 cents, African American women make 64 cents, and Hispanic or Latina women make just 54 cents for every dollar that a Caucasian man earns. The wage gap isn’t only between men and women, as African American men earn just 75% of the average salary of a Caucasian male worker.”

The bill’s sponsor is the California National Organization of Women (“NOW”) — a group that opposed last year’s Fair Pay Act because it did not include protections for wage discrimination for categories such as race, ethnicity, LGBTQ, and disability status, that are protected under other anti-discrimination laws.  Since the California Equal Pay Act places a different of burden of proof on employers, CA NOW thought it wrong to deny certain employees full protections under the new legislation.

The bill may be acted upon after March 18, 2016.  We’ll continue to monitor it and other new legislation through the process and keep you, loyal readers, posted.

As 2015 drew to a close, the DLSE issued several publications regarding California’s new piece-rate legislation, AB 1513, reminding California employers that it is now even more difficult to pay employees on a piece-rate basis.

As we previously blogged here, AB 1513 added Section 226.2 to the Labor Code, effective January 1, 2016. This new law imposes significant new burdens on employers that pay employees on a piece-rate basis. Those employers now must:

  • Pay piece-rate employees for rest and recovery breaks (and all periods of “other nonproductive time”) separately from, and in addition to, their piece-rate pay. The new law specifies a formula for calculating the required pay rate for rest breaks.
  • Provide piece-rate employees with wage statements that include the employee’s total hours of compensable rest and recovery breaks, the rate of pay for those breaks, and the gross wages paid for those breaks during the pay period.
  • List the total hours of other non-productive time, the rate of compensation for that time, and the gross wages paid for that time during the pay period, if the employer does not pay a base hourly rate for all hours worked (in addition to piece-rate wages).

The DLSE’s new Fact Sheet and Frequently Asked Questions are here and here. While the DLSE’s guidance is likely not the last word, it offers some further direction (and creates new questions) for employers seeking to comply. Here are some highlights:

  • Employers may not realize they have “piece rate” employees. The DLSE seems to think the new law applies to employers that pay employees only partly on a piece-rate basis. For example, an employer may pay piece rates on certain days of the work week, and pay an hourly wage on the remaining days. The DLSE’s wage-rate calculation examples indicate that during a week where an employee performs piece-rate work on some days but not others, the employer must (1) include earnings from days in which no piece-rate work was performed in calculating the average hourly wage for the week, and (2) pay the average hourly wage for all rest breaks during the week, even if the employee performed no piece work on a given day. This guidance arguably deviates from the intent of the statute, because on days where the employee performs no piece-rate work, there should be no need to have rest breaks paid at a higher hourly rate.
  • Commissions are (mostly) not “piece rates.” The DLSE offered some comfort to employers by clarifying that the new law does not apply to commissioned employees. Employers with commission plans should still consult counsel, however, as the DLSE warns that some payments labelled as “commissions” may actually constitute piece-rate pay, such as where the employee receiving “commissions” is not principally involved in selling the product or service or where the payment is not a percentage of the product or service sold.
  • Another “regular rate” trap for the unwary. The DLSE’s guidance on how to calculate the “total compensation” for the work week both creates a potential pitfall for piece-rate employers. The DLSE advises that all “remuneration” that is included in calculating the regular rate of pay for purposes of overtime premium pay (e.g., the value of meals, lodging, and other non-monetary remuneration) should also be included in determining the total compensation and average hourly rest-break rate for piece-rate employees. This DLSE advisory adds a further layer of complication to employers that were hoping to look only to the total hourly and piece rate pay in determining the average hourly rest break rate. Employers may, however, exclude payments that are not included in the regular rate of pay, such as vacation payments, gifts, and travel expenses.
  • Rest period time need not be separately tracked. Providing some relief to employers from the potential burdens of the new law, the DLSE advises that employers need not separately track actual rest break time taken by piece-rate employees. Instead, employers must pay for all compensable (legally required) rest breaks at the specified rate, and record these minutes on the wage statement. The employer need not record the actual number of minutes taken as rest break time by the employee or report the actual minutes on the employee’s wage statement.
  • New “safe harbor” election form. The DLSE issued a new form for employers to submit to the DLSE by July 1, 2016, if they wish to qualify for the “safe harbor” affirmative defense. This “safe harbor” would protect employers against claims for wages, damages, and penalties for a failure to pay for rest and recovery breaks and other nonproductive time. To come within this safe harbor, the employer would have to use one of the specified formulas for compensating piece-rate employees for all previously uncompensated rest and recovery breaks and other nonproductive time for the period from July 1, 2012 through December 31, 2015. This payment would have to be made to current and former employees by December 15, 2016.

The DLSE’s focus on the statute’s “safe harbor” provisions highlights the compliance challenges for piece-rate plans and underscores the point that employers should carefully consider this option for avoiding potential back-pay liability. If you have questions regarding these issues, then please contact a member of Seyfarth’s Labor and Employment Group.

The $10 state-wide minimum wage that hits us on January 1, 2016, will complicate things even more than the last increase.

We previously reported here and here on the two-step legislation aimed to increase minimum wage from $8 to $10 by way of two $1 incremental raises. The first $1 increase took effect July 1, 2014. Now it’s time for the second $1 increase, effective January 1, 2016.

That means Happy New Year for some, budget-busting headaches for others.

The obvious employer takeaway from the new minimum wage hike is that now it’s time to pay more:

  • Pay more hourly wages. As in 2014, the increase in minimum wage will increase what employers must pay for regular and overtime wages.
  • Pay more in salary. To maintain salary-exempt status for administrative, executive, and professional employees, employers must now pay a higher minimum salary (calculated at two times the current minimum wage). The salary minimum will thus increase from $37,440 to $41,600.
  • Pay more in commissions. To maintain overtime-exempt status for commissioned salespeople (in retail and service establishments, with the threshold calculated as 1.5 times the current minimum wage), employers must now pay a higher minimum earnings threshold—$15.01 per hour—and over one-half of that amount must consist of commissions, so commissions might have to be increased accordingly.

And, of course, employers, under the Wage Theft Prevention Act, must notify non-exempt employees in writing of any changes to their new rate of pay within seven calendar days from the time of the change (i.e., by January 7, 2016).

While these implications are all readily apparent, the new minimum wage has more subtle implications as well, particularly for employers of unionized employees. Among possibly other implications are these to consider as the new year looms:

  • A Sick Pay Impact? California’s new sick pay law, discussed here, here, and here, provides that most employees will earn at least one hour of paid leave for every 30 hours worked. Certain unionized employees covered by a qualifying CBA are exempt from this sick pay requirement, but the hike in minimum wage will raise the qualification bar: CBA-covered employees are exempt only if their regular hourly pay is at least 30 percent more than the minimum wage.
  • An Overtime Impact? California employees under a qualifying CBA are exempt from state overtime law. Here, as with the sick pay law, a CBA, to qualify, must provide for regular hourly pay that is at least 30 percent more than the minimum wage.
  • A “Non-Productive” Time Piece Rate Calculation Impact? As discussed here, effective January 1, 2016, employers paying employees on a piece-rate basis must pay for “other non-productive time” (when the employee is under the employer’s control but is not engaged in the piece-rate activity). The hourly rate calculation for that time must be no less than the minimum wage, which will increase to $10 on January 1st. Note that this law also applies to unionized employees.
  • An Impact On Meal And Lodging Credits? Wage orders in virtually every industry or occupation allow the value of meals and lodging furnished by the employer to be credited toward the employer’s minimum wage obligation up to specific amounts. Employers who use this form of compensation as part of their wage obligations must adjust accordingly to ensure that they are meeting the increased minimum wage obligations.

If you have any questions about how the new minimum wage will affect your business, you can always reach out to the author and our California Workplace Solutions team.

The California Legislature seems intent on ending piece-rate pay as we have known it. A law effective January 1, 2016, goes beyond the previously discussed Bluford and Gonzalez decisions to mandate that employees who earn piece-rate wages be paid a special, separate rate for rest and recovery periods, as well as for all “other non-productive time.” Further, that rate will require special calculation and the itemized wage statement must report additional information (number of hours of each activity and the corresponding rates of pay). But don’t take our word for it. Read it and weep here.