The California Legislative Report – April 2015
LEGISLATIVE RECAP
Another busy California legislative session is well under way, with nearly three dozen employment bills heading towards initial committee votes, and a June 5th deadline for such bills to pass their chamber of origin. These include bills that would:
- Increase California’s minimum wage beyond the already contemplated 2016 increase, and to $13.00 per hour by 2017 (SB 3);
- Amend the Paid Sick Leave bill passed in 2014 (AB 304);
- Require employers provide double pay on Thanksgiving and Christmas (AB 67);
- Require food and retail establishments provide two weeks’ notice of schedules (AB 357);
- Allow individual employees to request “alternative workweek schedules” without obtaining full work-unit approval (AB 1038);
- Provide an overtime exemption for certain highly-compensated non-exempt employees (AB 1470);
- Target gender-based wage differentials (SB 358);
- Expand the California Family Rights Act to apply to employers with more than five employees (instead of 50) and expand the class of family members for whom leave may be taken because of a serious health condition (SB 406);
- Prohibit advertisements discouraging the unemployed or public employees from applying (AB 676 and AB 883);
- Allow employers to provide a preference to veterans during hiring decisions (AB 1383);
- Amend the Fair Employment and Housing Act (FEHA) to treat accommodation requests as protected legal activities for retaliation purposes (AB 987); and
- Amend the FEHA to prohibit employers from engaging in work eligibility-related violations and to limit when employers may use E-Verify (AB 1065 and AB 622).
In the interim, listed below and largely by subject matter are the key employment bills of potential general application.
PENDING BILLS
Additional Minimum Wage Increase Proposed (SB 3 and AB 1007)
Even though California’s minimum wage is already scheduled to increase to $10.00 per hour on January 1, 2016, SB 3 proposes several additional increases. Specifically, California’s minimum wage would increase to $11.00 per hour on January 1, 2016, and to $13.00 on July 1, 2017. After January 1, 2019, the minimum wage would also be annually adjusted based on the California Consumer Price Index (CPI) and rounded to the nearest five cents. This bill also provides that it would not preclude the Industrial Welfare Commission (IWC) from increasing the minimum wage beyond that required by the CPI formula, but would preclude the IWC from adjusting it downwards even if the CPI was negative for the preceding year.
While California overwhelmingly increased a two-step minimum wage increase in 2013 (AB 10), that increase had specifically omitted annual CPI-based increases, and a very similar bill to SB 3 (SB 935) stalled in committee last year.
A second bill (AB 1007) proposes to increase the minimum wage to an unspecified amount but “at the amount necessary to keep a family of three above the supplemental poverty level established by this United States Census Bureau.”
Status: SB 3 is scheduled to be heard in the Senate’s Labor and Industrial Relations Committee on April 8th. AB 1007 is pending in the Assembly’s Labor and Employment Committee but no hearing has been scheduled.
Double Pay on Certain Holidays Proposed (AB 67)
Entitled the Double Pay on the Holiday Act of 2015, this bill would require employers to pay employees at least twice the employee’s regular rate of pay for any work on any “family holiday.” New Labor Code section 511.5 would define “family holiday” as December 25th (Christmas Day) or the fourth Thursday of November of each year (Thanksgiving). While “employer” is broadly defined to include any person employing another under any arrangement or contract of hire, including public entities, it would exclude employees covered by a collective bargaining agreement containing specifically-enumerated provisions, including a minimum wage 30 percent higher than the state minimum wage.
Status: This bill has passed the Assembly’s Labor and Employment Committee and has been referred to the Assembly’s Appropriations Committee.
Tip-Credit Proposed (AB 669)
While many states authorize a “tip credit” against an employer’s minimum wage obligations for certain employees, California presently does not. Accordingly, this bill would establish the minimum wage for a “qualifying tipped employee,” on or after January 1, 2016, at $9 per hour (rather than the $10 per hour currently scheduled). This bill would amend Labor Code section 1182.12 to define “qualifying tipped employee” as an employee who regularly receives income from “wages” at a rate equal to at least $15 per hour. “Wages,” in turn, would use the same definition as Unemployment Insurance Code section 13009, and include all remuneration for services performed by an employee for the employer, including tips received in the course of employment.
However, if in any month a qualifying tipped employee receives income at a rate of less than $15 per hour, the employer would have to pay the employee an amount equal to the difference between the minimum wage for such tipped employees ($9 per hour) and the state minimum wage, multiplied by the total number of hours worked by the employee during that month.
This bill would also include language in Labor Code section 1182.12 superseding any local minimum wage laws to the extent they would require a higher minimum wage for qualifying tipped employees, unless the local ordinance specifically references this section and an intent to establish a higher minimum wage for qualifying tipped employees.
Status: This bill is scheduled to be heard in the Assembly’s Labor and Employment Committee on April 22, 2015.
Cheerleaders to be Considered Employees of Professional Sports Teams (AB 202)
Recently, there have been several high-profile wage and hour class actions filed by cheerleaders or dance teams of professional sports franchises. This bill would add new Labor Code section 2754 to require California-based professional sports teams that employ professional athletes (as defined in Section 3600.5(g)) and that utilize cheerleaders during games, to provide those cheerleaders with all the rights and benefits afforded to its employees under the Labor Code, regardless of the terms and conditions under which the cheerleader performs. Under this new section, cheerleader will be defined as “an individual who performs acrobatics, dance, or gymnastic exercises in promotion of a professional sports franchise.”
Status: This bill is scheduled to be heard in the Assembly’s Labor and Employment Committee on April 8, 2015.
Scheduling Predictability Bill Required for Food and General Retail Establishments (AB 357)
Entitled the Fair Scheduling Act of 2015, this bill would require that “food and general retails establishments” provide employees with at least two weeks notice of their schedules, and would entitle employees who do not receive such advance scheduling notice to additional pay. Under proposed new Labor Code section 518, “food and general retail establishments” would be defined as a retail sales establishment that has 500 or more employees in California, 10 or more retail sales establishments located in the United States and two or more of the following: (1) a standardized array of merchandise; (2) a standardized façade; (3) a standardized décor and color scheme; (4) uniform apparel; (5) standardized signage; and (6) a trademark or a service mark.
Covered establishments would also be required to provide an employee with additional compensation per shift for each previously scheduled shift that is moved to another date or time or is cancelled, and for each previously unscheduled shift the employer requires an employee to work. Specifically, the employer would be required to provide one hour of pay at the employee’s regular rate if the employer provides less than seven days notice but more than 24 hours notice. If less than 24 hours notice is provided of any change, the employer would be required to provide two hours of additional compensation if the employee’s shift is less than four hours, and to provide four hours of additional compensation if the employee’s shift is more than four hours.
Covered employers would also be required to provide compensation for each “on-call shift” the employee is required to be available but is not called in to work. Employers would be required to provide two hours of pay at the employee’s regular rate for on-call shifts of four hours or less, and four hours of pay for on-call shifts of more than four hours.
However, employers would not be required to pay additional compensation in certain specified circumstances, including where: (1) the change results from an unexpected absence (i.e., less than seven days notice) of an employee previously scheduled to work; (2) where an employee scheduled to work has not reported on time, or is terminated or sent home from work for disciplinary reasons; (3) an employee trades shifts with another employee or requests a change in his or her work schedule. It also specifies that additional compensation would not be required where operations cannot begin or continue due to: (1) threats to employees or property, or when civil authorities recommend work not begin or continue; (2) a failure of public utilities or sewer system; or (3) acts of God or other emergencies (e.g., earthquakes) beyond the employer’s control.
This bill would also add Labor Code section 519 to prohibit food and general retail establishments from discharging or discriminating against an employee who receives CalWORKS cash aid or has custody of a child that receives CalWORKS cash aid, or is a person who receives CalFresh food assistance. This new Labor Code section would also require food and general retail establishments to allow employees who receive CalWORKS or CalFresh benefits to take unpaid time off to attend required appointments at the county human resources agency if reasonable advance notice is provided.
Status: This bill is scheduled to be heard in the Assembly’s Labor and Employment Committee on April 22, 2015.
Individual Alternative Workweek Schedules Contemplated (AB 1038).
While California authorizes “alternative workweek schedules” whereby non-exempt employees can work up to ten hours daily without receiving overtime, it is often difficult to obtain the two-thirds work-unit approval required under Labor Code section 510. Known as the Workplace Flexibility Act of 2015, this bill would permit an individual non-exempt employee to request an “employee-selected flexible work schedule” providing for workdays up to ten hours within the forty-hour workweek, and would allow the employer to implement this schedule without the obligation to pay overtime compensation for those additional hours in a workday. Employers would be required to pay overtime at the rate of one-and-a-half times the regular rate for daily hours worked in excess of ten hours, and double-time for work performed in excess of twelve hours per workday and in excess of eight hours on a fifth, sixth or seventh day in the workweek.
To address concerns employers might impose these schedules upon employees, AB 1038 enumerates certain criteria that must be contained in a “flexible work schedule.” Specifically, the agreement must be in writing and signed and dated by the employee and the employer, and it must describe the agreed-to flexible work plan and inform the employee of their entitlement to overtime if working more than ten hours in a day or forty hours in a week.
Although employee survey polls frequently comment favorably upon such added flexibility, similar bills have stalled in recent legislative sessions.
Status: This bill is scheduled to be heard in the Assembly’s Labor and Employment Committee on April 22, 2015.
Paid Sick Leave Amendments (AB 304)
This bill is intended to clarify several provisions of last year’s paid sick leave bill (AB 1522), which takes effect July 1, 2015. For instance, while Labor Code section 246 currently provides that an employee need only work 30 or more days in California to be eligible, this bill would specify that the employee must work 30 or more days for the same employer to be eligible.
While Labor Code section 246(d), currently specifies that no accrual or carryover is required if the employer provides the full amount of leave at the “beginning of each year,” it does not specify how “each year” is determined nor does it contain the language in other subsections allowing an employer to use a “calendar year, year of employment or 12-month basis.” This bill would cure this discrepancy and specify that no accrual or carryover is required if the employer provides the full amount of leave “at the beginning of each calendar year, year of employment or 12-month basis.” It also would specify that “full amount of leave” means three days or 24 hours.
The bill would also provide greater flexibility to employers who provide “paid time off” (PTO) and wish to be exempt under section 246(e) from providing additional paid sick leave. For instance, it would permit employers to use a different accrual method other than providing one hour per every 30 hours worked, provided the accrual is on a regular basis so that the employee has no less than 24 hours accrued sick leave or PTO by the 120th calendar day of employment or each calendar year or each 12-month basis. Proposed new subsection (3) would also provide that “an employer may satisfy the accrual requirements of this section by providing not less than 24 hours or 3 days of paid sick leave that is available to the employee to use by the completion of his or her 120th calendar day of employment.”
While Labor Code section 246(f)(2) presently states that an employer need not pay out unused sick time upon termination but must reinstate any prior balances if rehired within one year, this bill clarifies an employer need not reinstate accrued sick leave that was previously paid out upon cessation of employment.
Labor Code section 246(h) presently requires employers to provide written notice to employees of available paid sick leave balances, either through the itemized wage statements required under Labor Code section 226 or a separate writing provided on the designated pay date. Responding to employer concerns about how to track balances and provide these notices if the employer provides “unlimited” paid sick time, this bill would specify that an employer may satisfy this notice obligation by indicating “unlimited” on the notice or wage statement.
Labor Code section 246(k) presently states that paid sick leave shall be paid at the employee’s hourly wage, but articulates a very confusing formula for determining this rate if the employee has received different hourly rates in the preceding 90 days before paid sick leave is used. This bill deletes this formula and would provide that if an employee received different hourly rates in the pay period when paid sick leave is taken, then the rate of pay shall be calculated in the same manner as the regular rate of pay for overtime purposes.
Lastly, this bill would slightly expand the otherwise narrow exemptions from this paid sick leave mandate set forth in section 245.5(a). For instance, in addition to the four current exemptions, it would also exempt a retired annuitant of a public entity and a worker covered by the Railroad Unemployment Insurance Act.
As a reminder, the Division of Labor Standards Enforcement has published the poster and updated Wage Theft Prevention Act Notices (including in multiple languages) employers may use, plus several sets of “Frequently Asked Questions.” These items and other resources related to AB 1522 are available at www.dir.ca.gov/dlse/ab1522.htm.
Status: This bill is scheduled to be heard in the Assembly’s Labor and Employment Committee on April 22, 2015. Since this clean-up bill is proposed by the author of AB 1522 (Assemblywoman Lorena Gonzalez), at least some of these changes are likely to be enacted.
Paid Sick Leave to Include In-Home Support Service Workers (AB 11)
In a last-minute amendment to avoid a potential veto by Governor Brown, “in-home support services” employees were specifically excluded from the definition of employee from last year’s Paid Sick Leave bill (AB 1522). While this amendment avoided imposing certain costs upon the State of California and helped AB 1522 become enacted, several lawmakers were upset that in-home support services employees were not entitled to paid sick leave under this new law. This bill would revise the definition of employee in Labor Code section 245.5 as of July 1, 2016, to include providers of in-home support services employees, as defined in the Welfare and Institutions Code.
Status: This bill has passed the Assembly’s Labor and Employment Committee and has been referred to the Assembly’s Appropriations Committee.
Overtime Exemption for Highly-Compensated Employees Proposed (AB 1470)
While Labor Code section 510 requires overtime be paid to non-exempt employees who work more than a certain number of hours per day or per week, this bill would codify an overtime exemption for certain highly-compensated employees who customarily perform exempt duties but may not satisfy the “primary duties” test in Labor Code section 515.
Under proposed new Labor Code section 510.5, an employee with a total gross annual compensation of at least one hundred thousand dollars ($100,000) would be presumed exempt from section 510 if the employee also “customarily and regularly” performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee as defined by the IWC.
However, this exemption would apply only to employees whose primary duty includes performing office or non-manual work. It also would specifically not apply to non-management production-line workers and non-management employees in maintenance, construction and similar occupations, or to employees who perform work involving repetitive operations with their hands, physical skill and energy, regardless of the amount of their compensation. This bill would also not apply to employees covered by a valid collective bargaining agreement.
To satisfy the $100,000 “total gross annual compensation” threshold, the employee would need to receive at least one thousand dollars per week on a salary or fee basis. The total gross annual compensation may also include commissions, nondiscretionary bonuses, and other nondiscretionary compensation earned during a 52-week period. However, the total gross annual compensation would not include board, lodging and other facilities, or payments for medical or life insurance, contributions to retirement plans and the cost of other fringe benefits.
The employer would be able to utilize any 52-week period as the year, including a calendar, a fiscal or anniversary of hire year, but if it does not identify some other year period in advance, the calendar year will apply. If the employee’s total gross annual compensation does not meet $100,000 by the last pay period of the 52-week period, the employer may make a final payment during the final pay period or the last month to achieve the required total. An employee who fails to work a full year, either because the employee is newly hired after the beginning of the year or ends employment before the end of the year, would still be exempt if they received a pro-rata share of the $100,000 based upon the number of weeks the employee will be or has been employed. An employer may similarly make one final catch-up payment within one-month after the end of employment to reach this pro-rata amount to maintain the exemption.
Status: This bill is scheduled to be heard in the Assembly’s Labor and Employment Committee on April 22, 2015.
Changes Proposed for Wage Theft Prevention Act Notices Issued by Temporary Service Providers (SB 702)
Labor Code section 2810.5 requires employers to provide written notices to new hires containing specifically-enumerated items (e.g., pay rate, regular payday, etc.), and requires “temporary service providers” to provide additional specific information, including the name, physical address and telephone number of the legal entity for whom the employee will work. This bill would amend section 2810.5 to require temporary service providers to also provide in their Wage Theft Prevention Act Notices the email address the temporary service provider has on file of the legal entity for which the employee will work.
Status: This bill is scheduled to be heard in the Senate’s Labor and Industrial Relations Committee on April 8, 2015.
Cure Period Proposed Under PAGA for Wage Statement Violations (AB 588)
California’s Private Attorneys General Act of 2004 (PAGA, Labor Code section 2699 et seq.) authorizes aggrieved employees to bring civil actions to recover civil penalties that the Labor Commissioner could otherwise have collected for specified Labor Code violations. PAGA affords the employer an opportunity to cure certain violations before the employee may bring a civil action, while for other violations the employee may immediately bring an action after following specified procedures.
Labor Code section 226 requires an employer to provide its employees with itemized wage statements containing statutorily-enumerated information, and enumerates specific penalties per employee per violation. While PAGA presently lists section 226 amongst the statutes for which an employee may immediately bring a civil action, this bill would amend PAGA to provide employers with the right to cure a violation of Labor Code section 226. This bill appears intended to address situations involving a technical violation of section 226 (e.g., a minor mistake regarding the legal employer’s name, etc.), but similar bills have stalled.
Status: This bill is scheduled to be heard in the Assembly’s Labor and Employment Committee on April 22, 2015.
Gender Wage Differentials Targeted (SB 358)
Echoing the Paycheck Fairness Act (S. 84) pending at the federal level, this bill proposes to amend several Labor Code provisions to address perceived gender-based wage gaps in California. For instance, Labor Code sections 232 and 232.5 presently prohibit employers from precluding employees from disclosing the amount of their wages or their working conditions. This bill would amend both sections to also protect employees who discuss or inquire about wages or working conditions, as opposed to simply protecting employees who disclose such items. It would also require employers to post a copy of sections 232 and 232.5 in a conspicuous location frequented by employees during the workday.
It would also significantly amend Labor Code section 1197.5, which presently prohibits gender-based wage differentials except in certain specifically-enumerated situations (e.g., a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex). For instance, this bill would eliminate the requirement that the pay differential be within the same establishment, and would replace the terms “equal” work and “equal” skill/effort with “comparable” work and “comparable” skill/effort.
It would also substantially revise and recast the permissible exceptions to require the employer to affirmatively demonstrate that a pay differential is based on one or more specified factors, and it would replace the more general “any bona fide factor” defense with two very specific exceptions (i.e., work is performed at different locations, or work is performed on different shifts or at different times of day). As revised, the employer would bear the burden to demonstrate any wage differential between employees of the opposite sex performing comparable work is based upon at least one of the following factors: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; (4) work is performed at different geographic locations; or (5) work is performed on different shifts at different times of day. In addition to demonstrating at least one of those factors, the employer must also satisfy two new criteria: (a) that each factor relied upon is applied reasonably; and (b) the one or more factors relied upon account for the entire difference.
Status: This bill is scheduled to be heard in the Senate’s Labor and Industrial Relations Committee on April 22, 2015.
Equal Pay Certifications for Certain State Contractors (AB 1017 and AB 1354)
Entitled the Equal Pay for Equal Work Act of 2015, AB 1354 would amend Government Code section 12990 which presently identifies criteria for employers who wish to become a contractor for public works, including agreeing to California’s non-discrimination laws and submitting a non-discrimination program to the Department of Fair Employment and Housing (DFEH) for approval and certification. This bill would require employers with more than 100 employees, prior to becoming a contractor or subcontractor with the state, to submit an income equality program to the DFEH for approval and certification, and to submit periodic reports of its compliance with that program. The income equality program to be submitted would include the collection of summary data on the compensation paid to employees, including data sorted by race and gender, and policies designed to insure income equality and prevent unlawful discrimination.
AB 1017 would make similar amendments to section 12990 and impose similar reporting requirements, but also authorize a civil penalty of at least $10,000 if the DFEH determines a contractor or subcontractor has violated section 12990. This penalty would be deposited in the to-be-established “Fair Employment Fund” for the DFEH.
These proposed reporting changes appear similar to the August 2014 federal Department of Labor OFCCP’s notice of proposed rulemaking to require covered federal contractors and subcontractors with more than 100 employees to submit an annual equal pay report on employee compensation.
Status: Both AB 1017 and AB 1354 are scheduled to be heard in the Assembly’s Labor and Employment Committee on April 22, 2015.
Expansions to the California Family Rights Act (SB 406)
This bill proposes to materially expand the number of employers subject to California’s Family Rights Act (CFRA, Gov. Code § 12945.2 et seq.), and to expand the bases for employee leave, thus potentially creating further differences between CFRA and the federal Family Medical Leave Act (FMLA). For