California Employment Law Update 2016

In 2015, the California Legislature passed several new laws affecting employers. Below is a review of some of the significant employment-related laws that will affect employers in the coming year and suggestions on what employers should do to prepare for the impending changes. Unless otherwise indicated, each new law will become effective as of January 1, 2016.

Piece-Rate Pay

Assembly Bill 1513 greatly alters the piece-rate pay requirements for California employers. The new law requires employers who compensate employees on a piece-rate basis for any work performed during a pay period, to pay those employees for rest and recovery periods and “other nonproductive time” at or above specified minimum hourly rates, separately from, and in addition to, any piece-rate compensation. Under the new law, piece-rate employees are to be compensated for rest and recovery periods at a regular hourly rate that is the higher of either the applicable minimum wage rate or the average hourly rate for the workweek derived from total compensation, not including the time spent during rest and recovery periods and overtime. A different standard applies for those employers who pay their piece-rate employees on a semimonthly basis. In those cases, employers are to compensate their piece-rate employees at least at the applicable minimum wage rate for the rest and recovery periods together with other wages for the payroll period during which the rest and recovery periods occurred. The new law defines “other nonproductive time” to mean “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.” Piece-rate employees are to be compensated for other nonproductive time at an hourly rate that is no less than the applicable minimum wage rate. Other non-productive time may be calculated either through actual records or the employer’s reasonable estimates, on an employee-by-employee basis or a group basis.

Assembly Bill 1513 also imposes new wage-statement obligations on employers who compensate employees on a piece-rate basis. Specifically, employers must include the following information on the wage statements of employees compensated on a piece-rate basis: (1) the total hours of compensable rest and recovery periods, (2) the rate of compensation for rest and recovery periods, and (3) the gross wages paid for rest and recovery periods during the pay period. In certain circumstances, employers must also include: (4) the total hours of other nonproductive time, (5) the rate of compensation for nonproductive time, and (6) and the gross wages paid for all nonproductive time during the pay period. As a result of these new obligations, employers may find it increasingly difficult to administer piece-rate compensation.

The new law pairs new employer obligations with a safe harbor provision that gives employers an opportunity to retroactively correct improper compensation to piece-rate employees. Under the law, an employer has an affirmative defense to any claim for wages, damages, or penalties based solely on the employer’s failure to timely pay compensation due for rest and recovery periods and other nonproductive time for time periods prior to and including December 31, 2015, if the employer complies with various enumerated requirements by December 15, 2016. Employers should assess whether piece-rate compensation continues to be a viable practice, update piece-rate compensation practices to satisfy new statutory requirements, and ensure that all piece-rate employees are provided with the required wage statement information.

California Fair Pay Act

Senate Bill 358, the California Fair Pay Act, amends Labor Code Section 1197.5 to provide more expansive protections against pay inequity and expands existing state and federal laws, such as the federal Equal Pay Act and Title VII of the Civil Rights Act of 1964, that already prohibit sex-based wage discrimination. The new law lowers the evidentiary hurdle for employees by removing an existing requirement that wage differentials be within the “same establishment.” Employees can now be compared to persons of the opposite sex even if they do not work within the same establishment, as previously required under existing law. Additionally, the new law allows for a comparison of “substantially similar” jobs as opposed to the “same” job. Employers are now prohibited from paying any of their employees at wage rates less than those paid to employees of the opposite sex for “substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.” The new law places the burden on employers to show that pay differentials are justified entirely and reasonably by one or more of four enumerated factors: (1) a seniority system, (2) a merit system, (3) a system that measures earnings by quantity or quality of production, and (4) a bona fide factor other than sex, such as education, training, or experience.

The new law also requires that employers maintain records of the wages and wage rates, job classifications, and other terms and conditions of employment for three years (amending the previous two-year requirement). Employers should, in conjunction with their attorneys, review their current California compensation structure to ensure compliance with the new law.

Expansion of Family School Partnership Act & Kin Care Law

Senate Bill 579 expands on the currently protected reasons employees may take time off from work under California’s Family School Partnership Act (Labor Code Section 230.8). Currently, California’s Family School Partnership Act requires that employers with at least 25 employees permit employees to take off up to 40 hours (of unpaid time) per year to participate in activities of the school or licensed child day care facility, if the employee is a parent, guardian, or grandparent having custody of a child in a licensed child day care facility or in kindergarten or grades 1 through 12. The new amendment to the law modifies references to licensed child day care facility to refer instead to a licensed child care provider. The amendment also expands the scope of the law to include protections for (1) finding, enrolling, or reenrolling a child in a school or with a licensed child care provider, and (2) addressing a child care provider or school emergency, if the employee gives notice to the employer. The statute also amends the definition of “parent” to include employees who are stepparents, foster parents and those who stand in loco parentis to a child.

Senate Bill 579 also amends California’s Kin Care law (Labor Code Section 233) to more closely reflect the protections provided under California’s paid sick leave law (Healthy Workplaces, Healthy Families Act of 2014). Currently California’s Kin Care law requires employers who provide sick leave for employees to allow those employees to use in a calendar year an amount not less than the sick leave that would be accrued during six months to attend to an illness of a child, parent, spouse, or domestic partner. The new law expands the use of kin-care leave to include not only illness but also preventive care. Additionally, the list of individuals for which an employee can use kin-care leave has expanded to include a grandparent, grandchild or sibling. It should be noted that the definition of parent under California’s paid sick leave law includes an employee’s parent-in-law; therefore, the amendment incorporates that definition into the California’s Kin Care law.

Employers should review and update their leave policies to include the expanded protections.

PAGA Cure Window

Assembly Bill 1506, effective October 2, 2015, amends California’s Labor Code Private Attorneys General Act of 2004 (“PAGA”) to grant employers a limited right to cure wage-statement violations under Labor Code Section 226. Labor Code Section 226 requires that employers provide itemized wage statements to their employees with very specific and detailed information, including, but not limited to: (1) gross wages earned; (2) total hours worked by the employee, except for any employee whose compensation is solely based on a salary and who is exempt from payment of overtime under subdivision (a) of Section 515 or any applicable order of the Industrial Welfare Commission; (3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis; (4) all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item; (5) net wages earned; (6) the inclusive dates of the period for which the employee is paid; (7) the name of the employee and only the last four digits of his or her social security number or an employee identification number other than a social security number; (8) the name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name and address of the legal entity that secured the services of the employer; and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee and, beginning July 1, 2013, if the employer is a temporary services employer as defined in Section 201.3, the rate of pay and the total hours worked for each temporary services assignment. An employer’s failure to comply with each of the enumerated requirements may result in civil penalties entitling the aggrieved employee to the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4,000). The employee is also entitled to an award of costs and reasonable attorneys’ fees.

The new law provides an employer 33 calendar days from the postmark date of the notice to cure any alleged violation of wage statement requirements concerning “the inclusive dates of the period for which the employee is paid” or “the name and address of the legal entity that is the employer.”

In order to “cure” a wage-statement violation, pursuant to the new law, an employer must issue fully compliant wage statements to employees for a three-year period. Additionally, the statute limits an employer’s ability to cure wage statement violations to one time in a 12-month period.

E-Verify

Assembly Bill 622, codified in the new Labor Code Section 2814, expands the definition of “unlawful employment practice” and prohibits employers from using the federal E-Verify system to check the employment authorization status of an existing employee or an applicant who has not been offered employment at a time or in a manner not required under federal law or not authorized under any federal agency memorandum of understanding governing the use of the E-Verify system. However, the new law also specifies that it does not prohibit an employer from utilizing the federal E-Verify system, in accordance with federal law, to check the employment authorization status of a person who has been offered employment.

The new law further requires that employers provide employees with any tentative nonconfirmation notice or any other notification it receives from the Social Security Administration or the United States Department of Homeland Security regarding the employee’s specific E-Verify case. The bill provides for a civil penalty in the amount of $10,000 for each violation. Whether this bill will withstand federal preemption challenge remains to be seen.

Unruh Civil Rights Act Expansion

Existing law provides that all persons in California are entitled to full and equal accommodations in all business establishments regardless of their sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, or sexual orientation. Senate Bill 600 extends the protections of the Unruh Civil Rights Act to prohibit discrimination by business establishments based on an individual’s citizenship, immigration status, or primary language. The new law expressly states that it does not require the provision of services or documents in a language other than English, beyond that which is otherwise required by existing law.

Statute Expands Labor Commissioner’s Enforcement Capabilities in Local Jurisdictions

Assembly Bill 970 amends the Labor Code to expand the citation authority of the Labor Commissioner. The new law authorizes the Labor Commissioner to issue citations and penalties for violations of local laws related to overtime hours and minimum wage provisions, provided that the local entity has not already issued a citation for the same violation.

The statute also authorizes the Labor Commissioner to issue citations and penalties for employer violations of the expense reimbursement provisions in Labor Code Section 2802. Labor Code Section 2802 requires employers to indemnify their employees for all necessary expenditures or losses incurred by their employees in direct consequence of the discharge of their duties.

New Protections for Grocery Workers Following a Merger

Assembly Bill 359 prevents a successor grocery employer, following a change of ownership, control, or operation of a grocery store, from terminating certain grocery workers during a 90-day period without cause. The statute applies to grocery establishments in California that are over 15,000 square feet in size and sell primarily household foodstuffs for offsite consumption.

The new law requires the incumbent grocery employer to provide the successor grocery employer with the name, address, date of hire, and employment occupation classification of each eligible grocery worker within 15 days after the execution of the transfer document. The successor grocery employer has to maintain a preferential hiring list of eligible grocery workers identified by the incumbent grocery employer and hire from that list for a 90 day period after the grocery establishment is fully operational and open to the public under the successor grocery employer. At the end of the 90-day period, the successor grocery employer is required to prepare a written performance evaluation for each eligible grocery worker and consider offering continued employment, under the terms and conditions established by the successor grocery employer, to those eligible grocery workers who performed satisfactorily.

Additionally, the new law provides that parties to a collective bargaining agreement may provide that the collective bargaining agreement supersedes the requirements of the law.

Health Care Employees are Permitted to Voluntarily Waive Meal Period

Senate Bill 327, effective October 5, 2015, was enacted in response to uncertainty caused by a recent appellate court decision, Gerard v. Orange Coast Memorial Center, 234 Cal.App.4th 285 (2015). Generally, per Labor Code Section 512, employees who work more than 10 hours must receive two meal periods. However, employees are allowed to waive their second meal period if the total number of hours worked in their shift is no more than 12 hours. Industrial Welfare Commission Wage Orders 4 and 5 provide an additional exception for healthcare employees that was challenged by the Gerard decision. The Wage Orders permit covered healthcare employees who work shifts in excess of 8 total hours in a workday to voluntarily waive their second meal period. The statute clarifies that health care employees, covered by Industrial Welfare Commission Wage Orders 4 and 5, who work shifts in excess of 8 total hours in a workday may voluntarily waive their second meal period.

State, County, and City Minimum Wage Increases

The state of California has a current minimum wage of $9.00 per hour. The state minimum wage will increase to $10.00 per hour, as of January 1, 2016. In addition to an increase in the state minimum wage, employers within the city of Los Angeles who have 26 or more employees will be affected by a newly passed measure to raise the minimum wage to $10.50 per hour as of July 1, 2016, with incremental increases each year thereafter, through July 1, 2020, as follows:

Employers in the city of Los Angeles with 25 or fewer employees will not have to comply with the new city minimum wage requirements until July 1, 2017. Nonprofits with 26 or more employees also have the opportunity to defer the application of the wage increase for a year by applying for a deferral through a procedure set out in the wage ordinance. While this particular increase affects only those employers within the city of Los Angeles, and therefore will not affect employers in cities such as Santa Monica and Pasadena, many other cities (such as San Francisco and Berkeley) have their own minimum wage ordinance or have proposed legislation to increase the current minimum wage. Furthermore, an entirely separate wage increase passed by the Los Angeles County Board of Supervisors applies to unincorporated areas of Los Angeles County.

Similar to the city increase, the increase affecting unincorporated areas of Los Angeles applies to employers with 26 or more employees and requires these employers pay their employees an hourly wage of at least $10.50, starting July 1, 2016, and ultimately landing at $15.00 per hour by July 1, 2020. Employers with 25 or fewer employees have a one year deferral, requiring them to pay their employees an hourly wage of at least $10.50, starting July 1, 2017.

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Employers are encouraged to review their policies, procedures, practices and employment-related agreements in light of these legislative changes. Please contact your SFSS&W attorney to ensure compliance with these new laws, or should you have any questions regarding these or other labor and employment law matters.

Millicent N. Sanchez, Ext.8203

Janet I. Swerdlow, Ext.8202

David A. Wimmer, Ext.8201

Lori M. Yankelevits, Ext.8205

Karen E. Rhodes, Ext.8206

Kari Haugen, Ext.8208

Emily G. Camastra, Ext.8213

Allison R. Musante, Ext.8207

Kathiana Aurelien, Ext.8204

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