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California Legislative Updates 2016

Increase to California Minimum Wage

Effective January 1, 2016, the minimum wage increased from $9/hour to $10/hour. This wage increase also affects the salary requirement for Exempt employees, which requires (in part) that in order for an employee to meet the salary exemption the employee must be paid at least two times the minimum wage for full-time employment.

Assembly Bill 1506 (amendments to Private Attorney General Act (“PAGA”)

Effective October 2, 2015, this legislation changes Labor Code section 2699 (PAGA law). Under the old law, if there was a defect in an Employee’s wage statement, Plaintiff’s counsel could pursue a cause of action for inaccurate paystubs under PAGA, without the employer being provided the opportunity to correct its deficient paystubs in order to avoid a claim for PAGA penalties for failure to provide an accurate wage statement. Under PAGA, an employee can recover penalties for himself and former/current employees for wage/hour violations. For the Labor Code provisions that do not set forth a penalty for that violation, PAGA has a catchall provision that allows each aggrieved employee to recover $100 per pay period for an initial violation, and $200 per pay period for each subsequent violation. Although PAGA penalties can only go back one year, the resulting penalties an employer could face for PAGA penalties could be detrimental to an employer. PAGA also allows for the recovery of attorneys’ fees and costs.

The old law provided that before an employee could pursue a PAGA claim, that he/she needed to submit a notification letter to the Labor Workforce Development Agency (“LWDA”) detailing the alleged wage/hour violations that the Employer had committed. The old law also provided the Employer (upon receipt of this notification letter to the LWDA) had 33 days to cure the alleged wage/hour violation. However, under the old law, the cure provisions did NOT apply to wage statement violations. Hence, an employer when notified that its paystubs were inaccurate (for example, because the paystub did not provide the ending date of the payroll week, or did not contain the employer’s address), even if they corrected their paystubs within the 33 days of the LWDA notice, could not prevent a PAGA claim for inaccurate paystubs from being lodged against it. Furthermore, due to changes to Labor code section 226, which took effect in 2013, employees no longer had the burden to show any actual injury as a result of a violation of Labor Code section 226, whether technical or not. Due to this change in the law, more employee attorneys have pursued a cause of action for failure to provide accurate wage statements, and have tacked on a claim for PAGA penalties due to the inability to cure a paystub violation.

Under the new law, an employer who is notified that its wage statements are inaccurate due to a technical violation of Labor Code section 226(a)(6) or (8) has the right to “cure” the defects, and upon proper notification to the LWDA, can avoid a PAGA claim for inaccurate wage statements for these technical violations. A technical violation of this section is where the employer does not provide in a paystub the dates of the period for which the employee is paid, or the name and address of the employer.

What are the cure/notice requirements for an employer who has violated Labor Code section 226(a)(6) or (8)? What the new PAGA provision states is that within 33 calendar days of the LWDA notification of the inaccurate paystubs, the employer needs to show that it has provided a fully compliant itemized paystub to each affected employee for each pay period for the three-year period prior to the date of the written notification letter sent to the LWDA. It is unclear why this new law requires the employer to go back and fix three years worth of employee paystubs when PAGA claims can only go back one year.

It is important to note that this new law only affects an employer’s exposure to PAGA penalties. This new law does not prohibit an employee from pursuing a claim (or class action) for failure to provide accurate paystubs under Labor Code section 226(a), regardless of whether or not the violation is technical. The statutory penalties for this violation are set forth in Labor Code section 226(e).

Senate Bill 358- California Fair Pay Act

SB 358 amends California Labor Code section 1197.5 which currently sets forth the law on equal pay. What the new law does, however, is lesson the burden of proof required for employees who complain that they are not paid the same as their opposite gender. Specifically, before this new amendment, under section 1197.5, an employee had to demonstrate that they were not paid the same rate as a member of the opposite sex who worked in the “same establishment” “for equal work on jobs the performance of which requires equal skill, effort, and responsibility….” Per the amendment, “same establishment” has been deleted, and the employee only needs to show that he/she is not being paid at the same rate for “substantially similar work.” “Substantially similar work” is to be viewed as a “composite of skill, effort, and responsibility, and performed under similar working conditions….”

The new amendment also now requires that the employer affirmatively demonstrate that the wage difference is based upon one of more of the following factors:

  1. A seniority system;
  2. A merit system;
  3. A system that measures earnings by quantity or quality of production; or
  4. A bona fide factor other than sex, such as education, training, or experience.

While the above four factors are set forth in the prior law, this new law sets forth the requirements as an affirmative burden. In addition, the new law also added a caveat to the fourth factor, which diminishes its application. Specifically, in order to meet this four factor, the employer has to demonstrate that it is not derived from a sex-based differential in compensation, is related to the position in question, and there is an overriding “business necessity” justifying the wage difference. Moreover, the business necessity defense shall not apply if the employee demonstrates that an alternative business practice exists which would serve the same business purpose without producing the wage differential.

Under the new law, the employer must further demonstrate that it reliance on any of the factors is applied reasonably, and that one or more of the factors relied upon accounts for the entire wage differential.
The new law also added in a prohibition from discharging, discriminating or retaliating against an employee who invokes their own rights under this statute, or assists others in invoking their rights under the statute.
In addition, the new law added in a provision which prohibits an employer from restricting employees from disclosing their wages, discussing the wages of other, inquiring about other employee’s wages, or aiding or encouraging other employees to exercise their rights under the statute.

Finally, the new law also amended the provision that requires employers to maintain records containing employee’s wages, wage rates, job classifications, and other terms and condition of their employment from two years to three years.

This law took effect January 1, 2016.

Senate Bill 432: Removal of “Alien” from the California Labor Code

This new law removes the definition of the term “Alien” from the California Labor Code. This term was defined as any person who is not a born or fully naturalized citizen of the United States. This bill repeals a section of the Labor Code which set forth a prescribed order for the issuance of employment under public works contracts in the limited instance of extraordinary employment. That section provided a preference first to California residents, then to other states’ residents living in California, and finally to those defined as “Aliens.”
This law took effect January 1, 2016.

Senate Bill 501: Modification to Wage Garnishment Restrictions

This bill repeals the law relating to wage garnishments, and adds Section 706.050 to the Code of Civil Procedure. This new law reduces the prohibited amount of an individual judgment debtor’s weekly disposable earnings which are subject to levy under an earnings withholding order from exceeding the lesser of 25% of the individual’s weekly disposable earnings or 50% of the amount by which the individuals’ disposable earnings for the week exceed 40 times the state minimum hourly wage (or local minimum wage if higher) in effect at the time the earnings are payable.

This law is effective July 1, 2016.

Assembly Bill 304: Clarification to Sick Leave Law

This bill clarifies the accrual and limitations set forth in California’s sick leave law (Healthy Workplaces, Healthy Families Act of 2014), which was operative on January 1, 2015. This bill amends the Act in several respects. One, it clarifies that an employee must work 30 days for the same employer in California in order to be eligible for sick leave. Second, this bill provides for two additional accrual methods to accrue sick leave- (1) the employee will earn 24 hours of paid sick leave by the date the employee’s has worked 120 calendar days, or (2) where the employer has a PTO policy, the employee will accrue 8 hours of leave within 3 months, and can earn at least 24 hours of leave within nine months. Third, if the employer has an unlimited PTO policy, the written notification requirement can be satisfied by setting forth “unlimited” on the employer’s notice of the new law to employees, or the employee’s wage statement. Fourth, it clarifies that employers can pay out sick leave to hourly employees at either the regular rate of pay for the workweek in which the sick leave is used, or by dividing the employee’s total wages by their total hours worked during the entire pay periods of the prior 90 days of employment. Fifth, it clarifies that that an employer need not reinstate accrued sick leave previously paid out to an employee upon their termination of employment, when the employee is reinstated. Sixth, it clarifies that no accrual or carryover is required if the employer provides the full amount of leave at either the beginning of each calendar year, at the year of employment, or on a 12-month basis.

The amendments to the Sick Leave law went into effect on July 13, 2015.

Assembly Bill 1509: Anti-Retaliation Provision against Family Members of Employee Whistleblowers; Joint Liability Exclusion

This bill amends Labor Code sections 98.6, 1102.5, and 6310, and prohibits employers from retaliating against an employee for being a family member of an employee who has or is perceived to have engaged in protected conduct or made a complaint which is protected.

This bill also clarifies that household good carriers are subject to the same exemption from joint liability as provided to motor carriers with respect to labor contractors who fail to pay wages (amendment to Labor Code section 2810.3).

This law became effective January 1, 2016.

Assembly Bill 1513: Piece Rate Compensation Relief

This bill created California Labor Code section 226.2 which follows recent case authority regarding the compensation of piece rate employees for non-productive time. Specifically, this new law states that piece rate employees are to be compensated for rest and recovery periods at a regular hourly rate of pay that is no less than the higher of (1) an average hourly rate determined by dividing the total compensation for the workweek (exclusive of compensation for rest and recovery periods and overtime) by the total hours worked during the work week except for rest/recovery periods; or (2) the applicable minimum wage in effect which is the highest (i.e., federal, state, or local).

An employer who commits a good faith error in calculating the amount of non-productive time can avoid liability for civil penalties or liquidated damages, however must still pay the amount of non-productive time owed.
This bill also creates an affirmative defense for an employer who is accused of failing to pay rest and recovery periods and other non-productive time for time periods up to December 31, 2015, if the employer compensates its employees for the rest/recovery periods or non-productive time owed for the time period from July 1, 2012 to December 31, 2015, and provides notice to the Department of Industrial Relations by July 1, 2016 of its intent to compensate employees for this time.

This law became effective January 1, 2016.

Assembly Bill 970-Expansion of Labor Commissioner’s Powers

This law amended several provisions of the California Labor Code. Labor Code section 558 is amended to now give the Department of Labor Standards Enforcement Labor Commissioner’s power to issue citations for violations of local overtime laws, in addition to issuing citations for Labor Code and Industrial Welfare Commission Order violations. Labor Code section 1197 and 1197.1 are also amended to allow the Labor Commissioner to issue citations for violations of any state or local minimum wage laws, in addition to investigating violations of the Industrial Welfare Commission set minimum wage. Labor Code section 2802 is also amended to allow the Labor Commissioner to issue citations against employers who do not properly indemnify employees for incurred expenses. These amendments prohibit simultaneous issuance of citations by both the Labor Commissioner and a local agency for the same violations.

This law became effective January 1, 2016.

Senate Bill 588-Enforcement of Judgments by Labor Commissioner

This bill expands the authority of the Labor Commissioner to enforce judgments, and amends Labor Code section 98 in addition to adding a handful of Labor Code sections. The Labor Commissioner now has the power to issue a lien on employer’s property for amounts owed to employees, such as for unpaid wages, penalties, other compensation, and even interest. This bill also allows for liens against an employer’s real or personal property, or levy against the employer’s credit, money, or related property after a judgment has been entered against the employer. This law allows the Labor Commissioner, acting on behalf of the employees, to obtain the lien or levy against the employer. If an employer fails to satisfy a judgment within 20 days of receiving notice of a levy, this bill requires the employer to cease its business operations in California, or obtain a surety bond of up to $150,000 (depending on how much of the judgment is unsatisfied). In addition, this law also holds businesses that contract with certain “property services” jointly and severally liable for wage violations of the service contractors (assuming the business is named in the underlying complaint).

Under this new law, wage liability is also extended to individuals who act “on behalf of an employer, who violates, or causes to be violated, any provision regulating minimum wages or hours and days of work in any order of the Industrial Welfare Commission, or violates, or causes to be violated” specific sections of the Labor Code including those relating to wages, overtime, willful failure to pay wages, and paystubs. Individuals who can be liable are those persons who are owners, directors, officers, or managing agents of the Employer.

This law was effective January 1, 2016.

Assembly Bill 622- E-Verify Misuse

This bill adds Labor Code section 2814, and prohibits employers from conducting an E-Verify check of employment applicants who have not been extended an offer of employment, or those existing employees of the employer (unless doing so is required by federal law, or as a condition of receiving federal funds). E-Verify is an internet based system that allows employers to check the employment authorization status of individuals. Employers can now only check the employment status of those individuals for whom it has extended a job offer. Further, an employer is required to notify the potential employee immediately if the E-Verify system does not confirm that the individual is authorized to work in the United States.
A violation of this statute will result in a $10,000 penalty for the employer.

This law was effective January 1, 2016.

Assembly Bill 987: Accommodation Request=Protected Activity

This Bill amended the California Fair Employment & Housing Act (FEHA) to now provide that employees who request accommodations for religion or disability constitutes legal activity and protected activity. Hence, an employer cannot retaliate against an employee who requests an accommodation for religious or disability reasons. This new amendment overturns the Court’s decision in Rope v. Auto-Chlor System of Washington, Inc (2013) 220 Cal.App.4th 635.

This law was effective January 1, 2016.

Senate Bill 579: Time Off for School Activities

This Bill amends California Labor Code section 230.8 and 233. Under existing section 230.8, which applies to Employers with 25 or more employees, an employer is prohibited from discriminating against or terminating an employee (who is parent, guardian, or grandparent) who takes up to 40 hours of unpaid time to participate in school activities for a child in a licensed “child day care facility,” in kindergarten, or grades 1 to 12. The amendment changes “child day care facility” to “child care provider,” allows time off to address a school emergency, and defines parent to include parent, guardian, stepparent, foster parent, grandparent, or person who stands in “loco parentis” to a child.

Under section 233, which applies to all Employers, an employer is required to allow an employee to use one-half of their accrued sick leave to care for a “family member” per the Healthy Workplaces, Healthy Families Act (“Act”) of 2014. Under the Act, a family member includes a child of any age, parent, parent-in-law, siblings, etc…

This law was effective January 1, 2016.

Assembly Bill 583: Employment Protections for National Guard Members

This bill amends state law relating to employment protections provided to National Guard Members who are called into state service by the California Governor, or federal service by the President of the United States due to an emergency, or reservists called to active duty. This bill extends the protections to members of the National Guard of other states, who work for a private employer in California, and are called to military service by their respective Governor of the other state, or by the President of the U.S.

This law was effective January 1, 2016.

Changes to California Family Rights Act (“CFRA”)

  • The California Fair Employment and Housing Council’s made updates to the CFRA, which went into effect on July 1, 2015. Some of the updates include the following:
  • Definition of “covered employer” has been changed to now include successors in interest and joint employers. While a joint employer relationship is to be viewed on the “economic realities of the situation,” the revised regulations provide various factors that need to be analyzed to determine if a joint employer relationship exists.
  • The definition of worksite is expanded to include “either a single location or a group of contiguous locations.” Moreover, the definition of fixed worksite was also defined to be (1) the worksite to which employees are assigned as their home base; (2) the worksite which their work is assigned; or (3) the worksite to which they report.
  • An employee not eligible for leave because they have not met the requisite 12 months of employment, may become eligible for CFRA leave while on leave because leave to which an employee is otherwise entitled counts towards their length of service for coverage purposes.
  • The definition of “spouse” now includes registered domestic partners and same-sex partners in marriage.
  • The amendment adds additional detailed requirements that an employer must meet in order to defend a refusal to reinstate on the basis that an employee is a “key employee.”
  • An employer now has an express defense that an employee who fraudulently obtains or uses CFRA leave is not protected by CFRA’s job restoration or maintenance of health benefits provisions.
  • An employer must designate the measuring period in which the computation of time is made for purposes of determining whether the employee is eligible, and if the employer changes its measuring period, it must provide 60 days notice.
  • If an employee’s work schedule varies from week to week, a weekly average of the hours scheduled over the 12-month period prior to the commencement of the CFRA leave is used to calculate the employee’s 12-week entitlement.
  • If it is physically impossible for an employee to use intermittent leave, or work a reduced schedule, then the entire period that the employee is absent must be designated as CFRA leave and count against the CFRA entitlement. However, if the employee is able to perform other aspects of his/her work, those duties must shorten the time designated as CFRA leave.
  • The employer’s required response date to any CFRA leave request is changed from 10 calendar days to 5 business days after receiving the request.
  • An employer may not contact a health care provider for any reason other than to authenticate a medical certification. An employer must have a “good faith, objection reason” to doubt the validity of a medical certification, and request a second opinion.
  • The regulations expand the use of accrued vacation time or other paid accrued time off for an otherwise unpaid portion of CFRA leave.
  • Covered employers are required to post a notice of the CFRA’s new provisions and information concerning the procedures for filing complaints of violations of the CFRA in conspicuous places where it can readily be seen.

ABOUT THE AUTHOR: Ms. Silva is a graduate of University of the Pacific. She is Director of Employment Practices in the firm’s Employment Practices Group. She is a former prosecutor and has considerable trial experience. Contact her at rsilva@tysonmendes.com

Download Article Here: California Legislative Updates 2016