Seyfarth Synopsis: As recent triple-digit temps have shown, California is still one of the hottest places to be—literally. Today’s post reminds all employers, especially with employees who work outdoors or in open-air environments, that OSHA, Cal-OSHA, and the California Labor Code all prescribe protections from the heat.

California rest and recovery breaks.

California employers must provide non-exempt employees with a paid 10-minute rest break for every four hours worked or major fraction thereof. Refresh your recollection of the rest-break requirement here. And employers in certain industries should recall their additional obligations to help outdoor workers avoid heat-related illnesses by providing water, shade, and additional rest breaks, as required by California’s regulations.

The heat illness prevention regulations

Who is subject to heat illness prevention regulations? Anyone with outside workers, but the list of industries commonly affected includes:

  • Agriculture
  • Construction
  • Landscaping
  • Oil and gas extraction
  • Transportation or delivery

What does California require regarding outdoor places of employment? Employers must establish, implement, and maintain an effective heat illness prevention plan for outdoor workers. The Department of Industrial Relations offers detailed instructions and tips to help employers comply with state laws. Below are some main concerns:

Drinking Water. In addition to mandatory break periods, employees must have access to potable water that is “fresh, pure, suitably cool, and provided free of charge.”

Shade. If temperatures exceed 80° F, employers must maintain an area with shade at all times that is either open to the air or provides ventilation or cooling.

High-heat procedures. When temperatures exceed 95° F, employees in the industries specifically listed above must be given a minimum 10-minute cooldown period every two hours. These breaks may be concurrent with meal or other rest periods when the timing aligns properly.

What should I do if a worker suffers from heat-related illness? If a worker shows any signs of heat-related illness, a supervisor should be prepared to respond with first aid or other medical intervention—and should not permit a worker showing any symptoms of heat-related illness to resume working until the worker has sufficiently recovered from the symptoms.

Federal OSHA guidance

Federal laws and regulations, of course, also apply in California. The attached Management Alert contains some timely information about the four types of heat illness and what you can do to protect yourselves and your employees from this hazard.

Workplace Solution: Stay aware of the potential for heat illness in the workplace, and the steps needed to reduce the danger. Please feel free to reach out to your favorite Seyfarth lawyer if you have any questions, and as you continue to enjoy the summer.

Seyfarth Synopsis: California is rife with regulation of how employers may obtain and consider background check information for use in hiring and personnel decisions. The relatively new California ban-the-box law (effective January 1, 2018) and the older Los Angeles and San Francisco ordinances and amendments to the California Labor Code set strict rules on when and how employers can consider criminal and credit histories in employment. Many details to follow.

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. And California employers were stripped of their ability to use credit checks for hiring and other personnel decisions in 2012, by amendments to the Labor Code that restricted the use of credit checks to very narrow circumstances. Los Angeles and the State of California have now joined San Francisco with their own ban-the-box laws, which markedly differ from San Francisco’s.

This blog highlights the laws concerning criminal and credit history background check reports in California, after briefly discussing the decades-old federal Fair Credit Reporting Act (“FCRA”). As the number of class actions alleging FCRA violations 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.

FCRA Basics

Generally speaking, before an employer may obtain a consumer report (aka a “background check report”)—which may include criminal or credit history, from a third-party background check company (“consumer reporting agency” or “CRA”)—the employer must make a clear and conspicuous written disclosure to the individual, in a document that consists “solely” of the disclosure, that a background check may be done. California’s fair credit reporting statute also requires a separate, stand-alone disclosure, which cannot be combined with the FCRA disclosure. The applicant or employee must provide written consent for the employer to obtain a background check report. There are other requirements for “investigative consumer reports” (those based on interviews of the individual’s friends, neighbors and associates) and employers regulated by the Department of Transportation.

Before an employer relies in whole or in part 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 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 employer takes adverse action.

Once the employer is prepared to take the adverse action, it must then give the individual an “adverse action” notice, containing certain FCRA-mandated text.

California employers that rely on criminal and credit history information for employment purposes must also consider state and local laws that impose additional compliance obligations, regardless of whether the information is obtained from a CRA.

Employers May Order “Credit Reports” Only for Certain Positions

As noted, California employers have been hampered in their ability to order credit checks since 2012. Labor Code section 1024.5 states that employers, except for financial institutions, may order a credit check only if the individual works (or is applying to work) in certain positions:

  • a managerial position (as defined in California Wage Order 4);
  • a position in the State Department of Justice;
  • a sworn peace officer or law enforcement position;
  • a position for which the employer must, by law, consider credit history information;
  • a position that affords regular access to bank or credit card account information, Social Security numbers, and dates of birth (all three are required), so long as access to this information does not merely involve routine solicitation and processing of credit card applications in a retail establishment;
  • a position where the individual is or will be a named signatory on the bank or credit card account of the employer or authorized to transfer money or authorized to enter into financial contracts on the employer’s behalf;
  • a position that affords access to confidential or proprietary information; or
  • a position that affords regular access during the workday to the employer’s, a customer’s or a client’s cash totaling at least $10,000.

Setting aside state and federal disclosure and authorization requirements discussed above, any California employer that intends to order a credit check on a position identified above must notify the individual in writing why the employer is using a credit report (e.g., the individual is applying for or holds a position that affords access to confidential or proprietary information).

California’s State and Local Ban-the-Box Laws Restrict Use of “Criminal History”

California’s statewide ban-the-box law (Gov’t Code § 12952), as of January 1, 2018, requires employers with five or more employees (subject to few exceptions) to follow certain procedures when requesting and using criminal history information for pre-hire purposes. Specifically, regardless of the source of the criminal history information, employers must:

  • Wait until after a conditional offer of employment to inquire about criminal history, which means asking applicants directly whether they have been convicted of a crime, ordering a criminal history background check, or making any other inquiry about an applicant’s criminal history.
  • 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.” Unlike the Los Angeles ban-the-box ordinance (discussed below), the California law does not require employers to provide the applicant with their assessment.
  • 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.

In contrast to the FCRA pre-adverse and adverse action notices—required only if the adverse decision is based on information obtained from a background check report from a CRA—the California notices are required even if the employer doesn’t order criminal background check reports from a CRA, but learns of the criminal history from a different source (such as an applicant self-disclosure).

Substantively, 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.

Although complying with California law can be challenging, employers that hire in the cities of Los Angeles and San Francisco must also look to the ban-the-box ordinances in these jurisdictions, which exceed the requirements found in the FCRA and the California ban-the-box law.

The Los Angeles Fair Chance Initiative for Hiring Ordinance

The Los Angeles ordinance, effective January 22, 2017, applies to any “employer” located or doing business in the City of Los Angeles and employs 10 or more employees. An employee is any person who performs at least two hours of work on average each week in the City of Los Angeles and who is covered by California’s minimum wage law. The ordinance also applies to job placement and referral agencies and is broad enough to cover other types of work, including temporary and seasonal workers and independent contractors.

The L.A. ordinance goes beyond California-imposed requirements by imposing the following onerous steps on employers when considering 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.

Los Angeles also states that all solicitations and advertisements for Los Angeles opportunities must state that the employer will consider qualified candidates with criminal histories in a manner consistent with the law.

Moreover, employers must post, in a conspicuous workplace that applicants visit, a notice that informs candidates of the Los Angeles ordinance. Copies of the notice must be sent to each labor union or representative of workers that has a collective bargaining agreement or other agreement applicable to employees in Los Angeles. This notice can be found on the City’s website.

San Francisco’s Fair Chance Ordinance

San Francisco, as of August 13, 2014, became California’s first city to enact a ban-the-box law. Because the new California ban-the-box law provided greater protections to job applicants, the City and County of San Francisco Board of Supervisors (on April 3, 2018) amended the Fair Chance Ordinance (Article 49) to align (in some respects) with the California law. However, employers with five or more employees working in San Francisco that intend to inquire about and consider criminal history (regardless of the source) also must:

  • Provide the applicant or employee with a copy of the Office of Labor Standards Enforcement’s (“OLSE”) Fair Chance Act Notice before inquiring about criminal history or ordering a criminal history background check.
  • Post the OLSE Notice “in a conspicuous place at every workplace, job site, or other location in San Francisco under the Employer’s control frequently visited by their employees or applicants,” and “send a copy of this notice to each labor union or representative of workers with which they have a collective bargaining agreement or other agreement or understanding, that is applicable to employees in San Francisco.” The posted Notice must be in English, Spanish, Chinese, and any language spoken by at least 5% of the employees at the workplace, job site, or other location at which it is posted. The Notice currently is on the OLSE’s website.

Covered San Francisco employers are barred from considering the following types of criminal records (even though these records are not off-limits in other California cities), subject to narrow exceptions: (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).

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 and credit history. Suggested next steps include:

  • Assess coverage under the California, Los Angeles, and San Francisco ban-the-box laws, and California’s law restricting use of credit reports.
  • 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, credit and 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.

Seyfarth Synopsis: After hitting some major roadblocks, the San Diego Earned Sick Leave and Minimum Wage Ordinance has now been enacted. The Ordinance is to take effect this summer, most likely by the end of July. The Ordinance adds another perplexing piece to California’s paid sick leave patchwork.

After taking a nearly two-year hiatus, the San Diego Earned Sick Leave and Minimum Wage Ordinance was finally enacted on June 7, 2016, by San Diego voters. The Ordinance, originally approved by the San Diego City Council on August 18, 2014, hit a major snag when opponents sought a referendum. The City Council responded by suspending the Ordinance pending voter approval. The voters have now spoken.

San Diego joins six other California municipalities—San Francisco,[1] Oakland, Emeryville, Los Angeles,[2] Santa Monica,[3] and Long Beach[4]—that now supplement California sick pay law with additional paid sick leave entitlements. Because the statewide paid sick leave law does not supersede local ordinances, employers must comply with both the state and local laws, whichever most favors employees.

While the Ordinance’s effective date is currently unclear, signs point to a July 2016 effective date. We, of course, will keep you posted on any developments. In the meantime, employers should take steps now to ensure their policies and practices comply with the impending law.

Below is a detailed summary of the Ordinance and the key obligations it imposes on employers. Most notably, the Ordinance does not set a cap on either the amount of earned sick leave that employees can accrue in a year or the amount of unused earned sick leave that employees can carry over from year to year. The Ordinance also increases the minimum wage that San Diego employers must pay. The minimum wage will increase to $10.50 once the Ordinance goes into effect and will increase to $11.50 per hour on January 1, 2017. Starting January 1, 2019, the minimum wage will increase to an amount correlating with the cost of living.

Which Employers Are Covered by the Ordinance?

The Ordinance will cover all employers with at least one eligible employee working in San Diego, and defines “employers” as any person (including any association, organization, partnership, business trust, limited liability company, or corporation) who exercises control over the wages, hours, or working conditions of any employee, who engages an employee, or who permits an employee to work. Employers do not include persons who receive in-home supportive services care, under state law.

The Ordinance notes that covered employers need not provide additional earned sick leave where they provide their employees with an amount of paid leave under either a paid time off or other paid leave policy that meets or exceeds the Ordinance’s minimum standards and requirements, including the protected conditions and reasons for using sick leave.

Which Employees Are Covered by the Ordinance?

The Ordinance broadly defines a covered employee as one who performs at least two hours of work within the City of San Diego in one or more calendar weeks of the year and who qualifies as an individual entitled to minimum wage under California minimum wage law.

The following individuals are not subject to earned sick leave or the minimum wage increase:

  • Individuals authorized to obtain less than the minimum wage under a special license pursuant to California Labor Code sections 1191 or 1191.5.
  • Persons employed on a publicly subsidized summer or short term youth employment program.
  • Any student employee, camp counselor, or program counselor of an organized camp.
  • Independent contractors.

Earned Sick Leave Overview

How Much Sick Time Can Employees Accrue, Use, and Carry Over?

Employees accrue one hour of paid, earned sick leave for every 30 hours worked, at the same hourly rate or other measure of compensation that the employee earns. Accrual for employees exempt from California’s overtime laws is based on a 40-hour workweek, unless the employee’s regular workweek is less than 40 hours, in which case accrual is based on the regular work week. Employees will begin accruing earned sick leave on the later of the Ordinance’s effective date or the employee’s commencement of employment, and employees can begin using their accrued time 90 days thereafter.

Employers may limit use of sick leave to 40 hours in a 12-month period and can set a reasonable minimum increment for using sick leave, not to exceed two hours. Importantly, and as noted above, while the Ordinance sets an annual usage cap, accrual itself cannot be capped. In other words, employees must be allowed to accrue as much earned sick leave as possible based on their hours worked. Making matters worse for employers, unused leave, in whatever amount, must be carried over at year-end. In essence, employees can carry over an unlimited amount of accrued, unused sick leave, but may be limited to using 40 hours per calendar year. This accrual provision of the Ordinance is much more expansive than California’s statewide paid sick leave law, which provides that employers may cap the amount of accrued leave at 48 hours or six days, whichever is greater.

This distinction is problematic because it increases the risk of employee confusion. California law requires employers to provide employees with notice of their available number of sick leave hours either on the employees’ pay stubs, or in separate writings issued the same day as the employees’ paychecks. An employee who has, for example, 140 hours of accrued leave may not understand why only 40 hours of leave is available to use within a 12-month period.

The Ordinance’s unlimited accrual and carryover caps also make it risky for employers who seek to front-load earned sick leave in the form of an annual lump grant. Unlike the California statewide sick leave law, the Ordinance is silent on whether front-loading removes an employer’s accrual and year-end carryover obligations. As a result—and barring any future guidance from the City—this alternative sick leave delivery method may be unavailable to San Diego employers.

Under What Circumstances May Employees Use Sick Leave?

Qualified employees may use their earned sick leave for any of the following reasons:

  • If an employee is physically or mentally incapable of performing duties because of an illness, injury or medical condition, or is absent for the purpose of obtaining professional diagnosis or treatment of a medical condition or for other medical reasons, such as pregnancy or obtaining a physical examination.
  • If an employee is absent from work due to a family member’s[5] need to obtain treatment or professional diagnosis of a medical condition, or to provide care or assistance to a family member with an injury, illness or medical condition.
  • If, under certain circumstances, the employee or the employee’s family members are absent because of domestic violence, sexual assault or stalking.
  • If, by order of a public official because of a public health emergency, there is a closure of the employee’s place of business or the employee’s child’s school or child care provider.

What Notice Must Employees Provide When Using Sick Leave?

If the use of earned sick leave is foreseeable (e.g., scheduled doctor’s appointments), then an employer may require employees to provide up to seven days’ notice. But if use of sick leave is not foreseeable (e.g., a sudden illness), then an employer may require only as much notice as is practicable.

What Documents Can Employers Ask Employees to Provide When Using Sick Leave?

If employees are going to be absent for more than three consecutive work days then an employer may require employees to provide reasonable documentation that the employee used earned sick leave for a permitted purpose. Employers must accept doctor’s notes or other documentation signed by licensed health care providers indicating the need for the amount of leave taken. An employer however, may not require that the note specify the nature of the injury, illness or medical condition.

Is an Employer Required to Pay Unused Time upon Employment Separation?

No. Employers are not required to pay an employee for unused accrued sick leave upon termination. However,when an employee is rehired within six months of separation, the employer must reinstate the employee’s previously accrued, unused sick leave that was not paid upon separation, and the employee is entitled to use said leave.

Minimum Wage Increase Overview

What is the New Minimum Wage and When does it Go Into Effect?

Employees must be paid a minimum wage of $10.50 an hour upon the Ordinance’s effective date, which, again, we anticipate will occur in July 2016. Starting January 1, 2017, the minimum wage will increase to $11.50 an hour. Starting January 1, 2019, the minimum wage will increase by an amount corresponding to the prior year’s increase, if any, in the cost of living, as defined by the Consumer Price Index. If however, California or federal laws provide a higher minimum wage rate, then the minimum wage under this Ordinance will be increased to match the higher California or federal wage, effective on the same date that the increased California or federal wage takes effect.

Employer Obligations under the Ordinance

Employer Notice Requirements

Employers must post notices published by the City in a conspicuous place in the workplace informing employees of the current minimum wage, their right to the minimum wage, and their right to earned sick leave. The notice must also include information about the accrual and use of sick leave, the right to be free from retaliation, and the right to file a complaint with the designated enforcement office. The posted notice must be in English, Spanish and any other language spoken by at least five percent of employees at the employer’s job site.

In addition, at the time of hire or on the Ordinance’s effective date, employers are required to provide employees with written notice of the employer’s requirements under the Ordinance, and the employers name, address, and telephone number. Electronic notice is permitted.

Records Maintenance Requirement

Employers must create written or electronic records documenting employees’ wages earned, and accrual and use of sick leave, and retain these records for at least three years.

Prohibitions

Employers are prohibited from (1) requiring employees seeking to use their sick leave to search for or find a replacement worker, (2) disclosing the medical condition of the employee or his or her family member unless ordered to do so by the employee or authorized by federal or state law, and (3) retaliating against an employee who exercises his or her rights under the Ordinance.

Remedies/Penalties

An employer that violates any requirement of the Ordinance is subject to a civil penalty for each violation of up to, but not to exceed, $1,000 per violation. An employer failing to comply with the notice and posting requirements is subject to a civil penalty of $100 for each employee who was not given appropriate notice, up to a maximum of $2,000. Additionally, employees may file a complaint with the designated enforcement office or in court. Notably, filing a complaint with the enforcement office is not a prerequisite to filing a claim in court.

What Should Employers do Now?

With the Ordinance’s effective date looming, San Diego employers should take steps now, including the following, to achieve compliance:

  • Review existing sick leave policies and either implement new policies or revise existing policies so that they satisfy the Ordinance.
  • Post the required notices in all applicable languages.
  • Prepare notices in all applicable languages to provide to employees at the time of hire or once the Ordinance is implemented.
  • Review policies on attendance, anti-retaliation, conduct, and discipline.
  • Train supervisory and managerial employees, as well as HR, on the new requirements.
  • Ensure that payroll records adequately reflect accrual and use of earned sick leave and the increase in minimum wage.

[1] On June 7, 2016, San Francisco voters approved an amendment to the San Francisco Paid Sick Leave Ordinance.  The amended San Francisco law becomes effective on January 1, 2017.

[2] As discussed here and here, the Los Angeles City Council in April 2016 voted for 48 hours of paid sick leave for Los Angeles employees as an amendment to an LA City minimum wage ordinance. The LA ordinance is effective July 1, 2016.  Further, certain hotel employers must comply with additional compensated time off obligations set forth in the Los Angeles Citywide Hotel Worker Minimum Wage Ordinance.

[3] The Santa Monica paid sick leave law is effective January 1, 2017.

[4] Long Beach Resolution No. RES-12-0049 establishes paid sick leave and minimum wage requirements for certain hotel employers.

[5] Family members include an employee’s child, spouse, parent, grandparent, grandchild, sibling (including step-siblings), whether biological or not, or the child or parent of a spouse.

Quintessential early adapters and always on the go, we Californians love change, and we start trends. That’s good. There has been plenty of change this past year in the world of California labor and employment law. As Father Time prepares to tender his timekeeping duties to Baby New Year, let’s take a moment off the clock to look back at the old year’s most significant legal developments.

2015 saw changes in wage and hour law (notably how to compensate piece rate workers), the continued battle over enforceability of arbitration agreements, and expanded kin care leave rights. But the biggest news was an increase in fundamental employee workplace rights and protections, such as equality in pay and entitlement to paid time away from work. The State Legislature also gave us a new definition of what it means to be a “joint employer” (as opposed to a contractor or other user of task or project-based services), which will likely have long-term ramifications.

What is not new is that California remains the most challenging jurisdiction in which to employ workers. Read on for a brief round-up of what we see as the most trend-making changes of the past year.

California Fair Pay Act

Effective January 1, 2016, the California Fair Pay Act, which commentators have called the nation’s most aggressive equal pay law, will require employers with California-based employees to increase their vigilance to avoid discriminating in pay and benefits based on sex. Discussed previously in more detail here, the Fair Pay Act expands upon existing state and federal laws that prohibit gender-based pay discrimination, and essentially blows the discriminatory intent and disparate impact tests out of the water.

The Fair Pay Act permits the direct comparison of pay of employees of different genders who work in different locations, even if they do not hold the same or substantially equal jobs. As long as workers are engaged in “substantially similar work, when viewed as a composite of skill, effort and responsibility, and performed under similar working conditions,” their pay and benefits must be the same. Unless, that is, the employer can demonstrate that any pay differences are based on seniority, merit, quality or quantity of production, or on a bona fide factor other than sex (such as education, experience, or training, so long as the other factor is job-related and consistent with business necessity).

Note: The phrases “job-related” and “consistent with business necessity” are familiar to most employers from the state and federal protections for disabled employees. That is, an employer can inquire about a disabled employee’s medical condition or require a medical examination to determine ability to perform a job only if it is “job related and consistent with business necessity.” We could conclude that the California Legislature intended the fair pay analysis to use the same meanings of these terms when considering whether a “bona fide factor” other than sex is sufficient to avoid a finding of illegal discrimination.

In any event, if you have not already done so, now may be the time to conduct a fair pay audit to ensure appropriate distribution of your company payroll among the workforce.

Paid Sick Leave Implementation and Amendments

Beginning on July 1, 2015, California employees began using the new mandatory paid sick time and many employers began experiencing nausea over it. They discovered, as many had feared, that if you give employees a right, they will use it. Whether the paid time sick is conferred in an annual grant or per the accrual method, employees are tending to use it as soon as it becomes available, wreaking havoc on work schedules, especially in occupations or industries that rely heavily on shift workers.

California is hardly alone in implementing mandatory paid sick time (now required in several other states and cities), but it was still one of the first. Eventually, we will forget that there was ever a time when employees did not get paid sick time. But until then, it is one more item to consider in the already heavy cost of doing business in the Golden State.

Joint Liability with Labor Contractors

2015 also brought us a statutory change in the manner in which companies that either are, or who do business with, temporary staffing agencies relate to one another and their employees. As of January 1, 2015, Labor Code section 2810.3 requires “client employers” to share liability with “labor contractors” (e.g., payroll, temporary staffing, or employee leasing agencies) for payment of wages of non-exempt workers, and for providing them with workers’ compensation insurance. The California Legislature was concerned that workers supplied by shady or underfunded agencies would end up getting stiffed for work they performed. But the new law has left some “client employers” wondering exactly what benefits or protections they get from using contingent workers rather than direct hires. Contractual indemnification clauses are on the rise.

What about 2016 and beyond?

Time will tell what else the California lawmakers and courts will dream up for 2016. We predict renewed efforts to increase the minimum wage, grant additional leave rights to all employees, and improve the lot of the unemployed. We can also always count on the plaintiffs’ employment bar to be cooking up some new theories of liability for workplace class actions. Until then, we wish you each a very happy and successful New Year, and look forward to sharing next year’s California peculiarities with you.

(Illustration) ProfileBy Laura Maechtlen and Dana Howells

As of January 1, 2015, new California Labor Code section 2810.3 requires a “client employer” to share civil liability with “labor contractors” (aka payrolling, temporary staffing, or employee leasing agencies) for (1) payment of wages of the contract employees, and (2) failure to procure worker’s compensation coverage. Client employers will also have non-delegable responsibilities for worksite occupational health and safety.

What Does The New Law Provide?

  • No Shifting Of Liability, But Indemnity Allowed. Although a client employer cannot shift away all liability to a labor contractor for either wage payments or workers’ compensation, client employers may seek contractual indemnity against a labor contractor for liability that the labor contractor creates.
  • Workplace Safety Compliance Cannot Be Shifted. Client employers cannot contractually make the labor contractor solely responsible for workplace safety compliance.
  • 30-Day Notice Requirement Before Filing Civil Action. A worker or his or her representative must notify the client employer of specified violations at least 30 days before suing the client employer. Because of this notice provision, client employers may want to include language in contracts requiring a process in which the labor contractor must attempt to remedy any violation, before a civil action is filed, within the notification period. Client employers should also consider language that allows the client employer to step in and remedy during the notice period, while reserving its right to be reimbursed by the labor contractor.
  • No Retaliation. Neither the client employer nor the labor contractor can take action against a worker for providing the 30-day notice or for filing a claim or civil action.
  • Records Inspection. While the client employer’s records are subject to inspection by state enforcement agencies, the law also expressly “does not require the disclosure of information that is not otherwise required to be disclosed by employers upon request by a state enforcement agency or department.”
  • Exempt Employees Not Covered. The statute excludes from the definition of contracted “workers” those exempt under California’s executive, administrative, or professional exemptions (see Labor Code Section 515).

What Can Client Employers Do To Minimize Liability Under This New Law?

To try to protect against potential liability under the new law, client employers can: Continue Reading How Do We Treat the Leased Among Us? New Law on Joint Liability With Labor Contractors

By Brian P. Long

When you dismiss an employee for poor performance, or when he beats you to the punch by quitting on you, you rarely feel the urge to rush that slacker his final check. But you should. Under the California Labor Code, you must pay all wages due at the time of an involuntary termination. And you must pay resigning employees within 72 hours if they suddenly quit on you. Further, if they are kind enough to toss at least 72 hours’ notice of resignation your way, then you must pay final wages to the resigning employee on the last day of employment.

Because these rules sometimes get lost in the heat of a termination moment, now seems the time to provide some reminders:

If an employee is terminated mid-pay period, can’t I just treat the former employee like everyone else and pay him in the regular payroll cycle?

No. Welcome to another California peculiarity; employers must pay wages to terminated employees on their last day of employment, even if that’s smack dab in the middle of the payroll cycle, or even the very next day after the last paycheck.

This may seem like an unnecessary trouble, but recall that Labor Code Section 203 imposes daily penalties for any willful failure to pay according to the schedule we described above. The penalty is measured in terms of the amount of daily wages, from the date the final wages were due until the date they are paid, up to a total of 30 days.

What kind of money are we talking about?

Suppose an employee who made $20 per hour is fired after working only two hours into the new payroll period. And suppose the employer then observes the normal payroll cycle and waits 13 days to pay the $40 in earned wages. The penalties for this seeming trivial infraction could be a startling $2,080 ($20 per hour x 8 hours per day x 13 days). In other words, waiting less than two weeks in this situation to pay the final wages could ultimately cost more than 50 times what the employee was actually owed. And yes, all days of delay are counted, including weekend days. The penalties just keep on rolling.

I fired an employee and now she claims she is due additional wages for dates that she did not actually work. I don’t want to face these pesky waiting time penalties, but do I have to pay?

Not necessarily. You need only pay the wages you concededly owe. If you have a good faith dispute as to whether you actually owe wages, then you have a defense to a claim for waiting time penalties. This is because assessment of the penalty is not automatic, and a “good faith dispute” that any wages are due is a defense to a penalty claim.

An employee on his way out the door just handed me 27 pages of business expense reimbursements. There’s no way I can verify and process these in 72 hours! Will I owe waiting time penalties?

No. The penalty is for failing to pay “wages.” A wage is money owed for labor performed. Expense reimbursements are not wages. Obviously, you don’t want to drag your heels on paying any expenses you owe. But no waiting time penalties should accrue while you work that number out.

An employee who just quit says, “Oh, by the way, I was denied meal breaks.” Will waiting time penalties accrue if I do not pay premium wages for missed meal breaks?

Some might argue Yes, but the best answer is No. While some argue that waiting time penalties can accrue solely for a failure to make premium payments for missed meal or rest breaks, the California Supreme Court, in Kirby v. Imoos Fire Protection, Inc., 53 Cal. 4th 1244, 1255 (2012), undermined that argument. The Kirby court said that meal and rest payments are not “wages” for the purpose of Labor Code section 218.5, which permits recovery of attorney’s fees in an action brought for nonpayment of wages. Rather, Kirby said, those payments are a form of a penalty, for purposes of that statute. Kirby’s language supports an argument that premium payments, if not “wages” for purposes of Section 218.5, are also not “wages” for purposes of Section 203. At least some courts have recognized the common sense of applying Kirby’s language in this context. Accordingly, employers have at least a good-faith argument that non-payment of meal and rest premiums would not be non-payment of “wages,” and a good-faith argument is all you need to avoid penalties under Section 203.

Workplace solutions:  If it’s been a while since you’ve checked in on those who process your California terminations, it’s a good idea to remind them of the rules and the consequences for ignoring them. Also, ensure you have a practice in place whereby you can process a payroll the same day, just in case an immediate termination occurs. And, of course, if you have any questions about any final pay issues, reach out to your favorite member of the California Workplace Solutions team.

Regarding the Title: In apologizing for this obscure temporal allusion, we invite the culturally challenged to consult http://en.wikipedia.org/wiki/Time_Is_on_My_Side.

Edited by Chelsea Mesa

By Mark Grajski and Maya Harel

In theory, the California Labor Code and the Wage Orders allow employers the freedom to do what employers traditionally have done: pay employees solely with commissions or solely with piece rates. This idea of incentive pay—you reap what you sow— has been around a long time!

But a wave of California judicial court decisions has eroded the once-solid foundations of traditional incentive pay systems. In response, employers have been moving towards complicated hybrid compensation systems.

So what do you need to know when deciding to use one of these incentive or hybrid compensation systems?

Beware: Averaging Earnings Over the Pay Period Is Not Allowed to Satisfy Minimum Wage

Federal law allows employers to average wages over a pay period to meet minimum wage requirements (dividing total compensation by total number of hours worked). California does not. Courts have read California’s minimum wage statute to require employers to pay the minimum wage separately for each hour worked.

The tension between this requirement and traditional commission and piece-rate pay systems became apparent in 2005 in the California Court of Appeal decision in Armenta v. Osmose. In Armenta, employees earned their pay solely through piece rates. The Armenta court held that while the piece rate compensated employees for their “productive time”—time spent actually working on piece-rate tasks—the piece rate did not compensate them for their “non-productive time”—time spent doing anything else.

  • What Kinds of Pay Systems Have Employers Used In Response, and Do They Pass Legal Muster?

In an attempt to comply with Armenta, many employers created complicated hybrid hourly and incentive compensation systems. Unfortunately, even these laudable efforts to comply with California law may still expose well-intentioned employers to liability.

For example, in Bluford v. Safeway, the employer paid its truck drivers a certain figure to each mile driven, a piece rate for certain non-driving tasks, an hourly rate for other tasks, and a different hourly rate for unexpected driving delays. Even so, an unsympathetic Court of Appeal held that Safeway’s system violated the Wage Order because the system did not provide separately for an hourly rate for rest breaks, which the Wage Order designates as “hours worked.”

By Nicholas Clements and Kerry Friedrichs

Well-intended employers often lament the various gotchas that await them down the dark and winding road that is the California Labor Code. Perhaps no turn in the road is more treacherous than the one at Wage Statement Junction. Here one crosses at extreme peril, for the California Legislature, in Labor Code section 226, has planted legal land mines that can blow up at the slightest provocation.

A Common Sense Question With a Less-Than-Intuitive Answer:  “Can’t I avoid hazards if I just pay them the right amounts and on time?” Sadly, no, there’s much more to it. Labor Code section 226(a) lays out a long list of other requirements, some more sensible than others.

Not so Simple. Timely paychecks must be accompanied by a “simple” wage statement at least semi-monthly, and the wage statement must include nine distinct pieces of information for each employee: Continue Reading Time to Revisit Your Pay Stubs?