Seyfarth Synopsis: Effective January 1, 2019, California’s minimum hourly wage goes up to $12.00 for large employers, and many local minimum wages will go higher still. Don’t forget that the statewide change will affect salary thresholds for white collar exemptions, as well.

Effective January 1, as New Year’s bells toll, California’s minimum hourly wage will increase to $12.00 for employers of 26 or more, and $11.00 for employers of 25 or fewer.

This latest statewide adjustment is part of a series of adjustments mandated by a 2016 statute that, by 2020, will raise the statewide minimum wage to $15.00. The latest adjustment obviously increases what employers must pay for regular and overtime wages for employees currently earning the minimum. And the new, higher minimum wage also will automatically increase the threshold salary employers must pay to maintain salary-exempt status for administrative, executive, and professional employees: the threshold salary is twice the state minimum wage for a 40-hour week. The new annual salary minimum for large employers as of 2019 will thus rise to $49,920 (2 times $12/hour times 40 hours/week times 52 weeks/year).

In addition, to maintain overtime-exempt status for commissioned salespeople (in retail and service establishments, with the earnings threshold calculated as exceeding 1.5 times the current minimum wage), employers must now pay a higher earnings threshold—$18.01 per hour—and over one-half of the earnings 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.

On top of the statewide change, the following California cities will be sending their own New Year’s greetings for minimum-wage earners:

Belmont: Employers who are subject to the Belmont Business License Tax or who maintain a facility in Belmont must pay—to each employee who performs at least two hours of work per week in Belmont—a minimum wage of $13.50. This requirement applies to both adult and minor employees.

Cupertino: Employers who are subject to the Cupertino Business License Tax or who maintain a facility in Cupertino must pay—to each employee who performs at least two hours of work per week in Cupertino—a minimum wage of $15.00. Covered employees are entitled to these rights regardless of immigration status.

El Cerrito: An employee who performs at least two hours of work in a particular workweek within the geographic limits of the City of El Cerrito must be paid a minimum wage of $15.00. This minimum wage applies regardless of the size of the employer, and applies to both part-time and full-time employees.

Los Altos: Employers who are subject to the Los Altos Business License Tax or who maintain a facility in Los Altos must pay—to each employee who performs at least two hours of work per week in Los Altos—a minimum wage of $15.00. This requirement applies to both adult and minor employees.

Mountain View: Employers who are subject to the Mountain View Business License Tax or who maintain a facility in Mountain View must pay—to each employee who performs at least two hours of work per week in Mountain View—a minimum wage of $15.65. This requirement applies to both adult and minor employees.

Oakland: Employers in the City of Oakland must pay a minimum wage of $13.80 to employees who perform at least two hours of work in a workweek within the geographic limits of the city. This requirement applies to both part-time and full-time employees.

Palo Alto: Employers in Palo Alto must pay a  minimum wage of $15.00 to any employee who works two hours per week within Palo Alto.

Redwood City: Redwood City’s local minimum wage of $13.50 will apply to all business operating within the geographic boundaries of Redwood City and any employee working at least two hours per week.

Richmond: All employers in the City of Richmond must pay a minimum wage of $15.00 to employees who work at least two hours per week within the geographic boundaries of the city. This requirement applies to both minor and adult employees.

San Diego: Employers must pay all employees who perform at least two hours of work in one workweek within the geographic boundaries of the City of San Diego a minimum wage of $12.00. This requirement applies to both minor and adult employees.

San Jose: Employers who are subject to the San Jose Business License Tax or who maintain a facility in San Jose must pay—to each employee who performs at least two hours of work per week in San Jose—wages of not less than $15.00 per hour. This requirement applies to both minor and adult employees.

San Mateo: Employers who are subject to the City of San Mateo Business License Tax or who maintain a facility in the city must pay a minimum wage of $15.00. Tax-exempt nonprofit organizations must pay a minimum wage of $13.50. This requirement applies to adult and minor employees.

Santa Clara: Employers who are subject to the Santa Clara Business License Tax or who maintain a facility in Santa Clara must pay—to each employee who performs at least two hours of work per week in Santa Clara—a minimum wage of $15.00 per hour. This requirement applies to both minor and adult employees.

Sunnyvale: Employers who are subject to the Sunnyvale Business License Tax or who maintain a facility in Sunnyvale must pay—to each employee who performs at least two hours of work per week in Sunnyvale—a minimum wage of $15.65. This requirement applies to both adult and minor employees.

Below is a handy “at a glance” chart detailing these municipal increases.

City Minimum Hourly Wage Effective January 1, 2019
Belmont $13.50
Cupertino $15.00
El Cerrito $15.00
Los Altos $15.00
Mountain View $15.65
Oakland $13.80
Palo Alto $15.00
Redwood City $13.50
Richmond $15.00
San Diego $12.00
San Jose $15.00
San Mateo $15.00
Santa Clara $15.00
Sunnyvale $15.65

Finally, still more cities (including Los Angeles and San Francisco) will impose higher minimum-wage requirements next July 1. Be sure to check this space in mid-2019 for those updates.

Seyfarth Synopsis: Although there’s no right or wrong time to do a handbook update, we recommend them annually. Might as well take the opportunity when operations are typically slower, summertime, to give your handbook a shine. We’ve highlighted a few areas upon which to focus when you do so.

Ah, the joys of summer. Maybe it’s the heat, but everything seems a little harder in the summer. The sun is melting everything in sight, and sometimes it seems everyone is on vacation, leaving a little opportunity for the rest of us to have some *gasp* free time? This is the time of year, after all, when everything just seems to slooooooooooooooow dooooooooooooooooooown.

But because we’re all looking for an excuse to spend a little more time in nice air conditioned comfort, and we need to cure that summer boredom, when was the last time you updated your handbook?

Here are a few areas you may want to check while you enjoy that recycled air:

Did you update when the FEHA Regulations were amended last year?

As we discussed here, the FEHA Regulations now include many new requirements for employer policies on harassment, discrimination, and retaliation. If you haven’t had an opportunity to do so, we recommend you dust off those old policies and go through the amended regulations with a fine-toothed comb to see where improvements can be made.

How about breaks?

As we reported here, the end of 2016 saw some developments in the world of rest breaks. Some traditional policies may exert a little too much control over how employees take breaks. We’d definitely use that occasional summer thunderstorm as an excuse to spend time carefully perusing that policy.

What am I wearing?

If your dress code includes gender-specific information, now is a good time to review and make some potential modifications in light of the FEHC regulations on transgender rights, described here.

Sick of sick time yet?

Not that anyone gets sick in the summer, but if your company operates in multiple jurisdictions, it’s a great time to make sure no new sick law affects your employees. California now has six jurisdictions (San Francisco, Oakland, Emeryville, Santa Monica, San Diego, and Los Angeles, summarized here) with sick leave laws for private employers, with Berkeley right around the corner. Take this time to compare these ordinances and the state law with your current policy to make sure you’re in great shape for the upcoming flu season.

It’s also a great opportunity to spruce up your attendance policies to make sure you’re not punishing your employees from properly taking absences covered by these or other leave laws.

Who’s on leave?

A few years back, the California Legislature expanded those activities covered by the Family School Partnership Act, described here. So if you haven’t taken a look at this policy in a while, might as well get that out of the way before school starts up this fall.

For your San Francisco folks, if you haven’t had an opportunity to put together a policy/protocol covering the responsibilities of the San Francisco Paid Parental Leave Ordinance, described here, now is as good a time as any.

Also, as we discussed here, we know the law requiring the notice and posting on Domestic Violence issues became effective on July 1. Perhaps now would be a good time to consider implementing a policy on this if you don’t already have one in place.

Workplace Solution?

Although not every change in the law will make you toss out that old handbook, we do think an annual review, whether over a relaxing summer break or as you shiver indoors this winter, is a great opportunity to ensure you’re complying with the ever-evolving California and local laws. It can also serve as a reminder to compare your handbook with any benefit documents referred to inside.

Go ahead and spend a few minutes with a nice icy glass of lemonade and curl up with your favorite summer read: the company handbook! And contact your favorite Seyfarth counselor to get yours in ship shape before the kiddos come home from camp, and everything gets crazy for back to school.

Seyfarth Synopsis: Sustained cuts to California’s court system have strained access to justice across the state, and not enough is being done to fix the situation.  But, you can help!

Since the “Great Recession” of 2008, California’s court system has seen unprecedented reductions in funding, further straining the resources of an already overburdened court system.  A 2013 report from the California Judicial Council (“CJC”) estimated that the budget crisis had resulted in the closing of 50 courthouses, 175 courtrooms, and more than 25 branch courts. Accompanying these closings were 4,000 staff layoffs, imposition of furlough days and reduced hours of service, and significant other service reductions, affecting self-help services and the availability of  court reporting services (in civil cases), and court interpreters.

As a result, those seeking access to justice during the last eight years have found themselves waiting longer to get all kinds of cases heard and filings processed. The matters affected have included motions for summary judgment to resolve cases without trial, restraining orders, family court mediations, and even criminal trials. The CJC estimates that more than two million Californians have lost access to justice in their communities. Attorneys report waiting several months for hearings that could be heard in 16 court days under the Code of Civil Procedure, and sometimes find that their first available hearing date is a date after the date set for trial. Some attorneys have been in trial for weeks in matters that called for only a number of days, because of shortened court hours and increased judicial caseloads. One retired judge predicted that, without additional funding, cases filed in 2014 could take 5 years to get to trial.

Other courts have decaying infrastructure and facilities that can create unsafe environments, including infestations of rats, mold, ADA access issues, and shootouts due to inadequate security.

Counties that have decided to improve facilities despite the Great Recession have found themselves scrambling to pay for construction after court revenues declined and state funding was withdrawn. And even where courts can find the money, it has not been that simple…The Santa Clara County Superior Court recently saw its 400 employees strike for 8 days because they had gone eight years without a raise. The strike effectively paralyzed the court. Employees criticized the County for going forward with a $208-million-dollar Family Justice Center courthouse instead of increasing their pay.

Some modest improvements in court operations have occurred since the CJC’s report, but most courts still operate under a significant budget shortage. Details for each county are available in County Budget Snapshots.

What’s being done to fix this situation? The CJC has instituted measures to manage the impact of underfunding on the courts, but the major “fix” involves taking from “donor” counties who already have scarce resources. The “Workload Allocation and Funding Methodology,” instituted by the CJC in April 2013, allocates practically unchanged amounts of funding to counties pursuant to a formula based on case quantity, type, staffing needs, operating expenses, special expenditures, and “unique factors.” A recent budget proposal to similarly reallocate vacant but needed judgeships in Alameda and Santa Clara County to San Bernardino and Riverside counties was rejected, as was a bill that would have funded 12 new judgeships throughout the state.

In the recently passed 2016-2017 California Budget, the courts obtained $146.3 million in new funding, some of which was allocated to boost the number of court interpreters and replace case management systems in Orange, Sacramento, San Diego, and Ventura counties.

Regardless of how creative judges and legislators might get, the bottom line is that the funding of the state’s courts need to be substantially increased. The Judicial Branch budget makes up just over 1% of the funds allocated from the state’s General Fund— as Chief Justice Tani Cantil-Sakauye stated, “a penny on the dollar is insufficient to provide justice.”

So, what can I do? If you believe the courts should have more funding so that individuals, businesses, and employers have more access to have their cases timely heard and decided, you can contact Governor Jerry Brown here, and find the contact information for your  local legislators in the State Assembly and Senate.  The Bar Association of San Francisco also has templates and talking points for advocating for improved and adequate funding for California’s courts.

Further information regarding the 2016-17, and prior years’, California Budget can be found here.

Edited by Coby M. Turner.

Seyfarth Synopsis: We’ve regularly reported on California’s peculiar paid sick leave laws. Not counting industry-specific paid sick laws (e.g., the Long Beach and Los Angeles ordinances regulating hotel employers), there are now six California city ordinances mandating paid sick leave.[1] This week’s focus is on changes to the San Diego law, effective September 2, 2016.

The San Diego ordinance, originally proposed in 2014, had been put on hold pending a voter referendum. Voters passed the referendum on June 16, 2016. As passed, the referendum lacked key details. Conspicuously absent were permissible caps on annual accrual and carryover. As passed, the referendum did not allow employers to “front load” sick leave once per year (in an “annual grant”). The California Healthy Workplaces, Healthy Families Act of 2014 made annual front-loading a popular option. The referendum also failed to state an effective date.

By action of the S.D. City Council, the effective date became July 11, 2016. On that same day, the City Council passed the first reading of a 21-page Implementing Ordinance available here making amendments and clarifications. The Implementing Ordinance did not go into effect immediately, but faced the normal implementation process: a second reading, mayoral signature, and a 30-day waiting period before taking effect. The Implementing Ordinance was signed by the mayor on August 3, 2016, and will become effective on September 2, 2016.

The Good News. Effective Friday, September 2, 2016, San Diego will:

  • Allow employers to cap an employee’s total accrual of sick leave at 80 hours (80 hours is the maximum carryover);
  • Allow employers to front-load no fewer than 40 hours of sick leave at the beginning of each “benefit year” (a regular and consecutive twelve-month period, determined by the employer);
  • Clarify the enforcement process, including a civil penalty cap for employers with no previous violations. The Office of the City Treasurer has been designated as the enforcing agency.

The Implementing Ordinance language seemingly still provides for carryover of earned sick leave for up to 80 hours. The Implementing Ordinance provides: “Employers may limit an Employee’s use of Earned Sick Leave to 40 Hours in a Benefit Year, but unused, accrued Earned Sick Leave must be carried over to the following Benefit Year.” An FAQ available here states that carryover is not required if the employer uses an annual grant (frontloading). The FAQ states:

Can an employer “front load” 40 hours of sick leave rather than award it through the accrual method?

The ordinance provides only for the accrual of paid sick time at the rate of one hour of sick time for every 30 hours worked. The ordinance does not provide for any other method of awarding earned sick leave; however, the Implementing Ordinance, once effective on September 2, 2106, will allow employers to front load no less than 40 hours of sick leave to an employee at the beginning of each benefit year. Front loading at least 40 hours of leave each benefit year will excuse an employer from the accrual and carryover provisions of the Ordinance.

Under this FAQ interpretation, life would be easier for San Diego employers who administer sick leave via annual grants. Carryover will not need to be tracked and annual grants can be uniform.

The Bad News. Ambiguity remains in the San Diego Ordinance, including on the issue of how employers comply in the gap period between the effective date of July 11, 2016 and the effective date of the Implementing Ordinance (September 2, 2016). Also, there are open issues on the rate of pay. On the one hand, it seems that San Diego intended to swing closer to the California paid sick law. On the other hand, San Diego appears to be at odds with the state law on the rate of sick leave pay. Per the Implementing Ordinance, non-exempt employees are paid “at the same regular rate of pay for the work week in which the Employee uses Earned Sick Leave.” Does “regular rate of pay” mean the “regular rate of pay” for the purposes of the overtime laws (a legally complex calculation that includes certain types of bonuses, different rates of pay, commissions, etc.), as required by California law? Per the FAQ, it appears San Diego’s intent is to require pay at the hourly rate in effect at the time the sick pay is used, not the more complex “regular rate of pay” used for overtime. The FAQ says: “Employees accrue leave by the hour, not by a specific wage rate. When used, these hours must be paid at the hourly rate the employee earns at the time the employee uses the earned sick leave.” Unfortunately for employers subject to The California Healthy Workplaces, Healthy Families Act of 2014, San Diego is at odds with how the Division of Labor Standards Enforcement has interpreted the California paid sick leave law for non-exempts. DLSE’s FAQ, available here, says the employer may either:

Calculate your regular, non-overtime rate of pay for the workweek in which you used paid sick leave, whether or not you actually worked overtime in that workweek (in general terms, this is usually done by dividing your total non-overtime compensation by the total non-overtime hours worked), or

Divide your total compensation for the previous 90 days (excluding overtime premium pay) by the total number of non-overtime hours worked in the full pay periods of the prior 90 days of employment

Even on sick leave pay for exempt employees, there is a San Diego peculiarity, although it is probably not consequential for most employers. For exempt employees, the San Diego Implementing Ordinance says to pay sick time at the “same rate and in the same manner as the Employer compensates working time.” The DLSE, in contrast, says to pay California sick leave at the rate paid for time off: “For exempt employees, paid sick leave is calculated in the same manner the employer calculates wages for other forms of paid leave time (for example, vacation pay, paid-time off.)” The DLSE’s FAQ is available here. This picayune peculiarity could, in some cases, make a difference in exempt pay.

Our practical suggestion: pay San Diego sick leave at whichever rate is more generous. For non-exempts, the state calculation will be more generous in most cases. For exempts, base salary will work in most, but not all, cases.

[1] Here are the six:

  • San Francisco (Proposition F, passed in November 2006)
  • Oakland, summary here
  • Emeryville, with paid sick time to care for guide dogs, signal dogs and service dogs, summarized here
  • Los Angeles, summary here
  • San Diego, summary here
  • Santa Monica (coming in 2017), summary here

Edited by Colleen Regan and David Kadue.

By Joshua Seidman

Last week, San Diego became the latest jurisdiction to catch the paid sick leave and minimum wage bug that has been spreading throughout the country in 2014.  Specifically, on Monday, July 28, 2014, the San Diego City Council gave final approval to the City of San Diego Earned Sick Leave and Minimum Wage Ordinance (the “Ordinance”). While San Diego Mayor Kevin Faulconer has indicated an intention to veto the Ordinance, it is still likely to be implemented since the City Council can override a veto with six votes, and the Ordinance passed by a vote of six to three.

Minimum Wage

As suggested by the Ordinance’s name, San Diego’s minimum wage is set to undergo significant changes, increasing incrementally to $11.50 by 2017.  The Ordinance will raise the local minimum wage to $9.75 per hour on January 1, 2015, then to $10.50 per hour on January 1, 2016, and finally reaching the $11.50 mark a year later.  It also provides that beginning on January 1, 2019, and each subsequent year thereafter, the city’s minimum wage will be indexed to inflation.

Currently, San Diego’s minimum wage is connected to the California state minimum, which, as we previously reported, was raised last month from $8 to $9 per hour.

Paid Sick Leave

The paid sick leave portion of the Ordinance requires employers, regardless of the number of employees, to provide one hour of paid sick leave for every 30 hours of paid work performed in San Diego, up to a maximum of 40 hours (5 calendar days) of sick leave in a year. Notably, employers that maintain a paid leave policy equal to or more generous than the Ordinance’s requirements need not offer additional leave to employees, provided that time off can be used under the same conditions.  The Ordinance makes San Diego the second city in California to have passed a paid sick leave law, following the lead of San Francisco, which has mandated paid sick leave since February 5, 2007.

If Mayor Faulconer and the City Council hold true to form, San Diego employees will begin accruing paid sick time on April 1, 2015, or the commencement of their employment, whichever is later.  Employees are then entitled to start using their earned sick leave 90 days after they begin their employment or on July 1, 2015, whichever is later.  Employees will also be able to carry over up to 40 hours of accrued, but unused paid sick time to the next year.  However, employers are not required to provide an employee with more than 40 sick leave hours in any single year, thereby preventing employees from “stockpiling” sick leave hours from one year to the next.

The Ordinance creates a private right of action for individuals claiming harm under the earned sick leave law.  Claimants are entitled to all legal and equitable relief, including, but not limited to, the payment of back wages, damages for an employer’s denial of the use of accrued earned sick leave, reinstatement of employment or other injunctive relief, and reasonable attorney’s fees and costs.  Furthermore, employers could face various civil penalties—capped at $2,000—for violating the Ordinance’s provisions.

For more details on San Diego’s mandatory paid sick leave law, including a) the circumstances employees can use the paid sick leave, b) employer rights and limitations under the law, c) notice and posting requirements, and d) record retention requirements, please see our previous Management Alert.