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Another Sunny Year Awaits California Employers!

With holiday parties behind us and companies settling back into their normal routines, it’s the perfect time to highlight some recent changes in California employment law that may require your attention. Some of the laws outlined below, including the California Fair Pay Act, changes to piece-rate compensation requirements, and expanded anti-retaliation protections, may necessitate revisions to existing company policies or creation of new policies. 

Unless otherwise indicated, the new laws discussed below went into effect on January 1, 2016.

California Minimum Wage Increase

The statewide minimum wage in California increased to $10 per hour. This will also raise the salary threshold for exempt employees who must be paid at least twice the full-time equivalent of the minimum wage.

California Equal Pay Law

California’s Fair Pay Act requires male and female employees performing “substantially similar” work to be paid equal wages, even if the employees have different job titles or work in different offices. This modifies the prior standard of “equal work,” which was strictly interpreted by California courts. Importantly, the statute expressly clarifies that the employer bears the burden of demonstrating that any wage differential falls into one of four enumerated categories. The law also contains an anti-retaliation provision that allows employees to ask other employees about wages to determine if they have an equal-pay claim without fear of retaliation. The Fair Pay Act modified Labor Code section 1197.5.

Modifications to California Paid Sick Leave Law

On July 1, 2015, California’s Paid Sick Leave (PSL) law took effect. Unsurprisingly, the law required a number of immediate changes and clarifications after employers tried to implement the expansive new benefit. These modifications to the PSL law took effect on July 13, 2015, but are worth considering as employers review their policies at the start of 2016. Changes to the law include:

  • Clarifying that only employees who worked for the same employer for 30 or more days in California within a year of their start date are eligible for PSL;
  • Allowing alternative accrual methods for leave banks;
  • Providing a “safe harbor” for PSL plans existing as of January 1, 2015;
  • Allowing alternative methods for calculating sick leave pay;
  • Clarifying that employers with unlimited PSL plans can satisfy the notification requirement by stating that PSL is “unlimited” on the relevant pay stub; and
  • Clarifying that employers are not required to reinstate accrued PSL to an employee who is rehired within one year of separation if the accrued leave was paid out at the time of separation.

These modifications amended sections 245.5, 246, and 247.5 of the Labor Code.

PAGA Amendment Provides Limited Right to Cure

On October 2, 2015, the Labor Code’s Private Attorneys General Act of 2004 (PAGA) was amended to provide an employer with 33 days to cure violations stemming from a failure to provide employees with wage statements containing inclusive pay dates and the employer’s identity. In order to cure these PAGA violations, the employer must provide employees with fully compliant, itemized wage statements for each pay period for the past three years. However, employer’s only have the right to cure such violations once in a 12-month period. These PAGA modifications amended sections 2699, 2699.3, and 2699.5 of the Labor Code and became effective immediately upon passage of AB 1506.

Expanding the Scope of Retaliation Liability

California law currently protects individual employees and applicants from discrimination, retaliation, or other adverse employment action in response to the employee or applicant’s own protected activity. Amendments to Labor Code sections 98.6, 1102.5, 2810.3, and 6310 extend anti-retaliation protections to an employee who is a family member of a person who engaged in, or is perceived to have engaged in, protected activity.

Request for Accommodation is Protected Activity

California employers must now treat an employee’s request for a reasonable accommodation based on religious beliefs or disability as protected activity, and an adverse employment action taken in response to such a request can support a claim for retaliation under the FEHA. This is true regardless of whether the request for accommodation was ultimately granted. This law amends Government Code section 12940 and overturns a portion of a California Court of Appeal decision.

Expanded Labor Commissioner Enforcement Powers

The Labor Commissioner is now authorized to assist an employee in collecting on a judgment for unpaid wages against an employer by levying any credit, money, or property belonging to the employer and/or placing a lien on the employer’s real estate. The Labor Commissioner is also authorized to impose a stop order prohibiting an employer from conducting business in California until the judgment is satisfied. And, an employer, owner, director, officer or managing agent of an employer who fails to observe a stop order may be charged with a misdemeanor.

Anyone acting on behalf of an employer who violates an IWC order may also be held liable as the employer, and a $150,000 bond may be required of an employer who does not promptly pay judgments for unpaid wages.

SB 588 added Code of Civil Procedure sections 690.020-690.050, amended Labor Code section 98, and added Labor Code sections 96.8, 238, 238.1 – 238.5, and 558.1.

The Labor Commissioner now also has the authority to issue citations to enforce local minimum wage and overtime laws. This includes issuing citations against persons acting on behalf of an employer related to reimbursements of expenses. These changes appear in amended sections 558, 1197, 1197.1, and 2802 of the Labor Code.

Small Businesses Required to Make Unemployment Insurance Payments by Electronic Fund Transfer

Starting in January 2017, employers with 10 or more employees must make all unemployment insurance premium payments via electronic fund transfer.  Those small businesses will also be required to file all reports and returns electronically with the various California agencies, and impose penalties on employers who fail to file electronically without good cause. In January 2018, these regulations will expand to all employers. This law added Unemployment Insurance Code section 1112.1, and amended sections 1088, 1110, 1112, 1114, 13002, and 13021.

Changes to Piece Rate Compensation Laws

Employees being compensated on a piece-rate basis must now be paid for rest and recovery periods and “other nonproductive time,” separately from any piece-rate compensation. These additional sources of compensation must also be included in the employee’s itemized wage statement. This law clarifies some recent California state and federal court rulings on these issues. Importantly, however, the new law provides an affirmative defense and safe harbor to employers who fully compensate piece-rate employees for all under-compensated or uncompensated rest periods, recovery periods, or nonproductive time between July 1, 2012 and December 31, 2015. Employers must take action by December 15, 2016 to qualify for protection under amended Labor Code section 226.2.

Employees Entitled to Job-Protected Time Off to Handle School and Child Care Emergencies

The Family School Partnership Act (Labor Code section 230.8) was amended to expand the reasons for which an employee can take job-protected, unpaid leave without fear of discrimination or discharge. Employees must now be given time off to find and/or enroll a child in school or a licensed child care provider, or address a child care provider or school emergency.

Limitations on Use of E-Verify

A new California law expands the definition of “unlawful employment practice” to prohibit an employer from using the E-Verify system to confirm the employment authorization status of most existing employees, or applicants who have not yet been offered employment. Employers using E-Verify must also comply with certain employee notification procedures. Violations of this new law can result in civil penalties of up to $10,000. AB 622 added Labor Code section 2814.

These summaries are intended to inform employers about recent developments, but do not fully explore the details of each. Please contact us with any questions about how to ensure compliance with these new California laws and best mitigate any impact on your business.

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