LEGISLATIVE SUMMARY

With the expiration of the June 3rd deadline for bills to pass their legislative chamber of origin, the mid-point of the 2016 legislative session has arrived.  This active session has already produced a new law that will increase California’s minimum wage to $15.00 per hour by 2022 (SB 3), another law increasing Paid Family Leave benefits (AB 908), and new workplace prohibitions regarding smoking, including e-cigarettes and vaping (ABx2 6 and SBx2 6).

For good measure, the City of San Francisco has also enacted a Paid Leave Ordinance requiring employers to pay for six weeks the difference between an employee’s weekly wage and benefits paid from California’s Paid Family Leave program.

A number of other significant employment-related bills have passed the first legislative chamber and will now proceed to the second chamber, including bills that would:

• Require almost all employers to provide 12 weeks of job-protected “parental leave” (SB 1166);
• Expand California’s Equal Pay Act to target race and ethnicity-related wage differentials (SB 1063);
• Require employers to provide double pay for work performed on Thanksgiving (AB 67);
• Expand the prohibitions regarding “immigration-related practices” (SB 1001);
• Prohibit hiring-related inquiries concerning juvenile convictions (AB 1843);
• Prohibit hiring-related inquiries about salary history (AB 1676);
• Expand California’s heat illness regulations to include indoor employees (SB 1167); and
• Require employers to either provide or make available for inspection policies regarding sexual assault/domestic violence leave rights and an employer’s Illness and Injury Prevention Program (AB 2337 and AB 2895).

There were also some bills that failed passage, including bills that would have amended the Private Attorneys General Act (AB 2461-AB2465), required employers to provide eight hours paid-time-off for school-related activities (AB 2405), required employers to provide 21-days advance written notice of schedules (SB 878), precluded the so-called “stacking” of various Labor Code penalties for meal/rest period violations (AB 1948), allowed “gig” economy employees to unionize (AB 1727), or imposed new human trafficking training requirements (AB 1595 and AB 1942).

There are also two holdover bills, one that would allow individual employees to adopt an alternative workweek schedule (SB 985) and one that would allow private employers to utilize a veterans hiring preference (AB 1383), that face key committee votes on June 21 and 22, 2016 respectively.

Looking ahead, the deadline for bills to pass the second legislative chamber is August 31^st, and Governor Brown will then have until September 30^th to sign or veto any bills that make it to his desk.

In the interim, discussed below are the key employment bills of potential general application.

NEW LAWS ALREADY ENACTED

San Diego Raises Minimum Wage and Heightens Sick Leave Entitlement

San Diego’s Proposition I—formally the “Referendum of Ordinance Regarding Earned Sick Leave and Minimum Wage” (the Ordinance)—received over 63 percent of the votes on the ballot measure on June 7, 2016.  To give some history, the City Council had previously approved the Ordinance on August 18, 2014, after which a referendum petition qualified the measure for the ballot, and the Council subsequently voted to place it on the ballot in 2016.

The new Ordinance will take effect as soon as election results are certified, but no more than 30 days after election day.

Who is Affected?

The Ordinance defines employers and employees broadly. 

Employers are defined as any “person or persons, including associations, organization, partnerships, business trusts, limited liability companies, or corporations, who exercise control over the wages, hours, or working conditions of any employee, engage an employee, or permit an employee to work.”  Note, a narrow exception to this definition includes aged, blind, or disabled people who receive in-home supportive services. 

Eligible employees are defined as “any person who, in one or more calendar weeks of the year, performs at least two hours of work within the geographic boundaries of the City for an employer, and who qualifies for the payment of minimum wage under the State of California minimum wage law.”  To determine if an employer is within the geographic boundaries of the city, visit here:  City of San Diego Council Districts and Community Planning Areas.

San Diego’s New Minimum Wage

The passing of Proposition I will now boost the current minimum wage from $10 per hour to $10.50 per hour.  Looking forward, starting January 1, 2017, the minimum wage will become $11.50 in the City of San Diego, and starting January 1, 2019, the minimum wage will increase “by an amount corresponding to the prior year’s increase, if any, in the cost of living, as defined by the Consumer Price Index.” 

Unlike the California minimum wage, these wage rates will not affect the exemption salary tests in California.  Rather, the minimum wage rate used to calculate this amount must be the state minimum wage and not municipal.

San Diego’s New Sick Leave Entitlement

California law currently requires employees who work in California for 30 or more days within a year from the beginning of employment to be entitled to use 3 days or 24 hours of sick leave per year, whichever is greater, with a possible cap and carry-over of that time at 48 hours. 

San Diego now requires that these same employees, working within the boundaries of the City of San Diego (as discussed above), must receive up to five days or 40 hours of sick leave per year.  Employees must receive one hour of paid sick leave for every thirty hours worked.  Note, the San Diego Ordinance does not provide the alternative accrual methods laid out in the more general California law.

The rate of pay for San Diego sick leave is defined as “the same hourly rate or other measure of compensation that the employee earns.” The rate definition differs greatly from the California sick leave law, as the California law requires sick leave be paid out at the employees’ regular rate of pay, or allows for a 90-day look back average calculation.  As the more general law requires a potential greater rate than that described in the San Diego Ordinance, employers should be aware of the nuance and perhaps pay all San Diego sick time at the rate defined by the California law. 

Also in line with the California law, the San Diego Ordinance states that sick leave must begin to accrue when employment starts, but employers need not allow employees to use it until they have been employed for 90 days. 

Employers may limit the use of sick leave to 40 hours in a twelve-month period, but “accrual cannot be capped and unused leave must be carried over.”  Unlike the general California law, which allows a 48-hour accrual cap, there is no such specific cap under the San Diego Ordinance. 

Leave under the new Ordinance may be used under several circumstances:

(1)       if an employee is physically or mentally unable to work due to illness, injury, or a medical condition;

(2)       for “Safe Time” defined as time away from work necessary to handle certain matters related to domestic violence, sexual assault, or stalking;

(3)       for medical appointments; and

(4)       to care for or assist “certain family members” with an illness, injury, or medical injury—note, “family members” are not defined

The Ordinance states that notices and maintenance of records are also required, without further  description, and that the City will establish an enforcement office, perhaps to provide greater detail on these additional notice and recordkeeping requirements in the future. Finally, the Ordinance states that violators will be “subject to civil penalties for violations,” which are not yet defined. 

For more information on California’s state-wide sick leave law, see Wilson Turner Kosmo’s 2015 Special Alert here:  California Amends Recently-Enacted Paid Sick Leave Law, Effective Immediately.

California’s Minimum Wage to Increase to $15.00 by 2022 (SB 3)

To preclude votes on two union-backed statewide initiatives regarding the minimum wage, Governor Jerry Brown and his Democratic caucus introduced, quickly passed and enacted this law increasing California’s minimum wage to $15.00 an hour by 2022.  For employers with more than 25 employees, the minimum wage will increase according to the following schedule:

For employers with 25 or fewer employees, the minimum wage will increase on a slightly slower schedule, as follows:

This new law also contemplates annual subsequent increases after the final scheduled increase, generally tied to consumer inflation, which the Director of Finance will determine by August 1^st of each year with the increase, rounded to the nearest ten cents, to become effective the following January 1^st.  Once this formula is applied, the minimum wage may increase or stay the same, but it will not decrease.

Beginning in July 2017, the Director of Finance will be required to determine whether economic conditions can support the next scheduled minimum wage increase and, if not, the Governor would have the authority through a proclamation to temporarily suspend the next increase.  The Governor would not be permitted to temporarily suspend scheduled minimum wage increases more than two times, and if the Governor does temporarily suspend a scheduled minimum wage increase, all remaining scheduled increases shall be postponed by an additional year.

As noted above, these increases to the hourly minimum wage will also impact the salary level needed for exempt employee purposes, with the salary level ultimately increasing to $62,400 when the $15.00 level is reached in 2022.

Lastly, this new law amends Labor Code section 245.5 to remove the exemption from California’s Paid Sick Leave requirements for in-home supportive service employees.  Accordingly, beginning on July 1, 2018, in-home supportive service employee who work 30 or more days in California within a year from commencement of employment will be entitled to accrue and use paid sick leave, albeit on a slightly different schedule enumerated in new subsection (e) to Labor Code section 246.

Status:  This bill has already been signed into law, and the first scheduled minimum wage increase, from $10.00 to $10.50 per hour for employers with more than 25 employees, will take effect January 1, 2017. 

Increased Paid Family Leave Benefits (AB 908)

Under California’s family temporary disability insurance program, employees may receive up to 6 weeks of wage replacement benefits when taking time off work to care for specified persons (e.g., child, spouse, parent, etc.) or to bond with a minor child within one year of the birth or placement of the child in connection with foster care or adoption.  Citing a concern that the relatively low wage replacement rate dissuaded employees from using this benefit, this newly-enacted law amends Insurance Code section 3301 to increase the wage replacement benefits.  Specifically, it modifies the formula for calculating these benefits to ensure a minimum weekly benefit of $50, and to increase the wage replacement rate from the current 55% to 70% for most low-wage workers, and to 60% for higher wage earners.

Beginning January 1, 2017, this bill also removes the 7-day waiting period for these family leave benefits.

Status:  This bill has already been signed by Governor Brown and takes effect January 1, 2017. 

New Workplace Smoking Prohibitions Take Effect June 9^th (ABx2 6 and SBx2 6)

Labor Code section 6404.5 prohibits smoking of tobacco products inside an enclosed space at a place of employment and enumerates fines for violations of these protections.  ABx2 6 amends this section to use the new definition of “smoking” (contained in amended Business and Professions Code section 22950.5) that includes “the use of an electronic smoking device that creates an aerosol or vapor, in any manner or in any form, or the use of any oral smoking device for the purpose of circumventing the prohibition of smoking.”

SBx2 6 also expands these prohibitions to include so-called “owner-operated businesses” (i.e., those with no employees and the owner-operator is the only employee).  It eliminates most of the specified exemptions that permit smoking in certain work environments, such as hotel lobbies, bars and taverns, banquet rooms, warehouse facilities, and employee break rooms.

Status:  Governor Jerry Brown has already signed these bills and because of their unique procedural history and subject matter, they will take effect June 9, 2016, rather than January 1, 2017.

San Francisco Enacts Paid Parental Leave Ordinance

San Francisco recently enacted its Paid Parental Leave Ordinance (Ordinance no. 160065), which will require beginning on January 1, 2017, employers with 50 or more employees to pay to an employee on “parental leave” (as defined) the difference (so-called “supplemental compensation”) between their gross weekly wage and the Paid Family Leave Benefits paid from the state of California under its Paid Family Leave program.  (Employers with 35 or more employees would need to make such payments beginning July 1, 2017, and employers with 20 or more employees would need to make such payments beginning January 1, 2018). 

Please note also, in contrast with the pending bill that would require employers to provide unpaid parental leave to employees who worked 1,250 hours in the preceding 12 months (SB 1166 [discussed below]), the San Francisco Ordinance applies to any employee who (1) began employment with the “Covered Employer” (as defined) at least 180 days prior to the leave period; (b) performs at least eight hours of work per week for the employer in San Francisco; (c) at least 40% of those total weekly hours worked for the employer are in San Francisco; and (d) who is eligible to receive paid family leave compensation under the California Paid Family Leave law for the purpose of bonding with a new child.

As noted, the Ordinance requires the “Covered Employer” to provide “supplemental compensation” to an employee on leave representing the difference between the amount paid from the California Paid Family Leave fund and the employee’s “gross weekly wage.” Where the employee has multiple Covered Employers, this supplemental compensation can be apportioned between or among the employers based on the percentage of the employee’s gross weekly wages received from each employer.  However, in cases where an employee works for a Covered employer and a non-Covered Employer, the Covered Employer is responsible only for its percentage of the employee’s total gross weekly wages. 

The Ordinance also notes that an employer’s Supplemental Compensation obligation may also be proportionately capped by reference to the State maximum weekly benefit amount, depending on income levels.

As with many recent statutes and ordinances, this Ordinance requires the employer to post a poster to be developed by the San Francisco Office of Labor Standards Enforcement, it requires the employer to retain “Supplemental Compensation” records for three years, it prohibits retaliation, and authorizes agency enforcement.

More information about the San Francisco Ordinance can be found on the San Francisco’s Office of Labor Standards Enforcement website (sfgov.org/olse) or at sfgov.org/olse/paid-parental-leave-ordinance).

PENDING BILLS

Parental Leave Protections (SB 1166)

Entitled the New Parent Leave Act, this bill would add new Government Code section 12945.6 to require employers to provide up to 12 weeks of job-protected parental leave for an employee (male or female) to bond with a new child within one year of the child’s birth, adoption or foster care placement.  Unlike the California Family Rights Act (CFRA, Government Code section 12945.2) and the Family Medical Leave Act (FMLA), which apply only to employers with more than 50 employees, this bill would define “employer” as either an entity employing 10 or more persons “to perform services for a wage or salary,” or the state of California or any of its political or civil subdivisions.  However, as with CFRA and the FMLA, an employee would need to have worked more than 12 months for the employer, and to have worked at least 1,250 hours during the previous 12-month period.

As with CFRA, an employer shall be deemed to have refused to provide this job-protected leave unless on or before the leave’s commencement the employer guarantees reinstatement in the same or comparable position.  This bill would also authorize the employee to use accrued vacation pay, paid sick time, other accrued paid time off, or other paid or unpaid time off negotiated with the employer during this parental leave.

Employers would also be required to maintain and pay for medical coverage under a group health plan for an eligible employee who takes parental leave during the duration of the leave, not to exceed 12 weeks over the course of a 12-month period.

This parental leave would run concurrently with CFRA and the FMLA, except for leave taken because of disability due to pregnancy, childbirth or related medical condition.  The bill states the aggregate amount of leave taken under this new section, CFRA, or the FMLA, or any combination (except for pregnancy/childbirth-related disabilities) shall not exceed 12 workweeks in a 12-month period, apparently to address concerns an employee for a larger employer might be entitled to 24 weeks leave (12 weeks under this section, and 12 weeks under the CFRA and FMLA).

Status:  This bill has passed the Senate along a party-line vote and is pending in the Assembly.

Assembly Passes Bill Requiring Double Pay on Thanksgiving (AB 67)

Entitled the Double Pay on the Holiday Act of 2016, this bill would add Labor Code section 511.5 to require certain large employers (with more than 500 employees) to pay non-exempt employees twice their regular rate of pay for working on Thanksgiving.  Unlike last year’s version which would have applied to almost all employers, this law would only apply to employees working in “retail store” or “grocery store” establishments, and specifically would not apply to restaurants except for restaurants located within a retail store establishment or a grocery store establishment.  “Retail store establishments” would be defined as those having a physical store within the state with more than 50 percent of its revenue generated from merchandise subject to the state’s sales and use tax, but specifically would not include stores located in a hotel, amusement park, movie theater or motor vehicle dealers.  “Grocery store establishments” would be defined as those having a physical store within the state that sells primarily household foodstuffs for offsite consumption. 

This requirement would only apply to non-exempt employees, and would not apply to employees covered by a collective bargaining agreement that expressly provides for the wages, hours of work, and working conditions of employees, and expressly provides for holiday premium pay, premium wage rates for overtime pay, and a regular rate of pay of not less than 30 percent above the state minimum wage.

Status: This bill failed passage last year, but narrowly passed the Assembly despite bi-partisan opposition.  It is presently pending in the Senate’s Labor and Industrial Relations Committee.

No Duty to Track “Hours Worked” on Itemized Wage Statements for Exempt Employees (AB 2535)

While Labor Code section 226 presently requires employers to provide written wage statements containing specifically-enumerated information, including identifying the total hours worked, it contains an exception from the reporting the total hours worked for employees who are paid solely on salary and are exempt from overtime.  Responding to concerns that there are many employees who are exempt from overtime, in which case employers may not track hours worked, but whose compensation is not “solely based on a salary” (e.g., salespersons paid on commission, high-ranking executives partially compensated with stock options, etc.), this bill would amend section 226 to expand this exception.

Specifically, in addition to the current language exempting tracking hours for those compensated solely on salary, new subsection (j) would eliminate the need to show hours worked for employees exempt from minimum wage and overtime under a specified exemption for: (a) executive, administrative, or professional employees; (b) the “outside sales” exception; (c) salaried computer professionals; (d) parents, spouses, children, or legally-adopted children of the employer provided in applicable orders of the IWC; (e) directors, staff, and participants of a live-in alternative to incarceration rehabilitation program for substance abuse; (f) crew members employed on commercial passenger fishing boats; and (g) participants in national service programs.

Status:  This bill unanimously passed the Assembly and is pending in the Senate’s Labor and Industrial Relations Committee.

Equal Pay Regardless of Race or Ethnicity (SB 1063)

Following up on last year’s amendments to California’s Equal Pay Act regarding gender-based wage differentials (SB 358), the Wage Equality Act of 2016 would enact nearly identical language to preclude wage differentials based on race or ethnicity.  Specifically, it would amend Labor Code section 1197.5 to prohibit employers from paying an employee at wage rates less than the rates paid to employees of another race or ethnicity for substantially similar work when viewed as a composite of skill, effort, and responsibility and performed under similar working conditions.

As with gender, the employer would bear the burden to demonstrate that the wage differential is based upon one or more of the following factors: (a) a seniority system; (b) a merit system; (c) a system that measures earnings by quantity or quality of production; or (d) a bona fide factor other than race or ethnicity, such as education, training, or experience.  As with the “bona fide factor” exception following SB 358’s enactment, the employer would be required to demonstrate that the factor is not derived from a race or ethnicity-based differential, is job-related to the position in question, and is consistent with a business necessity (i.e., an overriding legitimate business purpose that cannot be achieved through an alternative business practice).  The employer would be required to demonstrate that each factor relied upon is applied reasonably and the one or more factors relied upon account for the entire wage differential.

Lastly, because SB 1163 amends section 1197.5 generally, it would also prohibit employers from discriminating against employees who report or assist with concerns about race/ethnicity-based wage differentials, it would provide the same enforcement mechanisms, and it would incorporate its protections for employees to disclose, inquire, or discuss wages.

Status:  This bill passed the Senate on a party-line vote and is pending in the Assembly.

Equal Pay Certifications for Certain State Contractors (AB 1890)

Entitled the Equal Pay for Equal Work Act of 2016, this bill 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.  For instance, while California presently states the DFEH “may require” a non-discrimination plan to be submitted, this bill would require employers with more than 100 employees in the state and a contract with the state of 30 days or more to submit a description of its non-discrimination program and to submit periodic reports, no more than annually on a schedule to be determined by the department, of its compliance with this program.  Employers with less than 100 employees in the state or a contract less than 30 days may also be required to submit a non-discrimination program and, if so required, to comply with the same requirements applicable to employers with more than 100 employees in the state.

A non-discrimination program would need to include policies and procedures designed to ensure equal employment opportunities for applicants and employees, an analysis of employment selection procedures, and a workforce analysis.  This workforce analysis would need to include: (a) the total number of workers within a specified job category identified by race, ethnicity, and sex; (b) the total wages required to be reported on a W-2 for all workers within that job category identified by race, ethnicity, and sex; and (c) the total hours worked on an annual basis for all workers in a specific job category identified by race, ethnicity, and sex.  Exempt employees would be presumed to work 40 hours a week for purposes of this reporting requirement.

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.  As a reminder, the federal Equal Employment and Opportunity Commissioner is presently considering proposed changes to its EEO-1 Report, which would apply to all employers with more than 100 employees (not just federal contractors) and would require the submission of payroll data broken down by race/ethnicity, not just gender.

Status:  This bill passed the Assembly and is pending in the Senate.  Governor Brown vetoed a very similar bill (AB 1354) in 2015.

Individual Alternative Workweek Schedules Proposed (SB 985)

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 2016, this bill would permit individual non-exempt employees to obtain an “employee-selected flexible work schedule” providing for workdays up to ten hours without daily overtime between eight to ten hours worked, and to do so without completing the more detailed alternative workweek schedule procedure in section 511 when implementing a work-unit-wide alternative schedule.  This bill would retain the general daily overtime rule for empl