LEGISLATIVE SUMMARY

With the expiration of the September 30^th deadline for Governor Jerry Brown to sign or veto bills, California’s 2016 legislative session drew to a close.  Although the overall number of new employment laws appears down slightly compared to recent years, there were still a number of new laws enacted in 2016 for employers to consider, including laws that will:

• Increase California’s minimum wage to $10.50 in January 2017 and to $15.00 by 2022 (SB 3);
• Expand California’s Equal Pay Act to target race and ethnicity-related wage differentials (SB 1063);
• Amend California’s Equal Pay Act to preclude prior salary history from justifying gender-related wage differentials (AB 1676);
• Prohibit hiring-related inquiries concerning juvenile arrests (AB 1843);
• Expand the prohibitions regarding unlawful “immigration-related practices” (SB 1001);
• Require employers to provide written information regarding the employee’s sexual assault/domestic violence leave rights (AB 2337);
• Preclude employment contract provisions requiring California employees agree to non-California venues and non-California law for future disputes (SB 1241);
• Phase-out the overtime exemptions for agricultural workers (AB 1066);
• Amend the wage statement requirements to remove the duty to track hours worked for many exempt employees;
• Expand California’s heat illness regulations to include indoor employees (SB 1167); and
• Require employers without private retirement plans to develop programs to enable employees to participate in California’s new state-sponsored retirement program (SB 1234).

Amongst the bills that failed passage this year but may resurface in 2017 were those that would require smaller employers to provide “parental leave” and would require employers to post work schedules by certain deadlines.

Things were also active at the municipal level with many cities enacting either or both their own minimum wage increase and paid sick leave laws.  This trend will likely also continue in 2017, and other cities may attempt to emulate San Francisco’s laws regarding so-called “predictive scheduling” or providing paid family leave.

Discussed below are the new state laws enacted in 2016 with general application to private employers, followed by both an overview of the more significant municipal-level developments, as well as a discussion of the Department of Labor’s recently passed sick leave regulations regarding federal contractors.  Unless otherwise indicated, these new laws generally take effect January 1, 2017.

NEW LAWS STATE LAWS ENACTED OR EFFECTIVE IN 2016

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

In June 2016, the California Legislature quickly introduced and passed this law increasing the state-wide 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:

As a reminder, the federal Department of Labor is presently slated to increase the salary threshold for overtime exemption purposes to $47,476 on December 1, 2016 which may require some California employers to consider both the federal and state salary tests for overtime exemption purposes.

SB 3 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.

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

While Labor Code section 226 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 law amends 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) eliminates 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.

Salary History by Itself not a Bona Fide Factor Justifying Gender-Based Wage Differential (AB 1676)

In 2015, California enacted SB 358, substantially revising its Equal Pay Act protections, including materially revising the standard when attempting to justify a gender-related wage differential.  Citing a concern that salary history potentially institutionalizes prior discriminatory pay practices, this law originally proposed to add new Labor Code section 432.3 to prohibit any employer from seeking salary history information about an applicant for employment.

However, facing substantial opposition and since Governor Brown had vetoed a very similar bill in 2015 (AB 1017), this law was materially amended during the legislative process.  As a result, rather than creating a new Labor Code provision prohibiting salary history discussions, it instead amends California’s Equal Pay Act (Labor Code section 1197.5) to provide that “prior salary shall not, by itself justify any disparity in compensation.”

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 enacts nearly identical language to preclude wage differentials based on race or ethnicity.  Specifically, it amends 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 bears 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 must 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 must also 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 1063 amends section 1197.5 generally, it also prohibits employers from discriminating against employees who report or assist with concerns about race/ethnicity-based wage differentials, it provides the same enforcement mechanisms, and it incorporates its protections for employees to disclose, inquire, or discuss wages.

“Immigration-Related Practices” Protections Expanded (SB 1001)

California has made immigration-related abuses a legislative priority, including last year’s bill enacting a new $10,000 penalty for E-Verify violations (AB 622), the 2014 amendment to FEHA prohibiting discrimination against drivers licenses issued to undocumented workers (AB 1660), and the 2013 bills prohibiting retaliation for “immigration-related practices” (AB 263 and SB 666).  Continuing that trend, this law adds new Labor Code section 1019.1 to broaden the protections from “unfair immigration-related practices” beyond the retaliation context and extend them to any employee or applicant regardless of whether they have made a complaint.  The law’s author states it is intended to expand the current law to include applicants, and also to provide a state law remedy in addition to the currently-existing federal remedy for such violations which, in the author’s estimation, operate too slowly.

Lastly, the law’s author had expressed concern that immigrant workers who have been provided temporary legal status and the ability to apply for work authorization under President Obama’s Executive Orders, including the Deferred Action for Parents of Americans of United States Citizens (DAPA) and the Deferred Action for Childhood Arrivals (DACA), may be subject to abuse.  To address these concerns, this new section specifies that it shall be unlawful for an employer, in the course of satisfying federal law requirements for eligibility determinations (8 U.S.C. § 1324(b)) to: (1) request more or different documents than required under federal law to verify eligibility; (2) to refuse to honor documents that on their face reasonably appear to be genuine; (3) refuse to honor documents or work authorization based upon the specific status or term of status that accompanies the authorization to work; or (4) attempt to reinvestigate or re-verify an incumbent employee’s authorization to work using an “unfair immigration practice” (defined in Labor Code section 1019).

This section also authorizes an employee or applicant (or their representative) to file a complaint with the Division of Labor Standards Enforcement, and authorizes the Labor Commissioner to award a penalty up to $10,000 and equitable relief.

Removing the Wage/Hour Exemption for Agricultural Employees (AB 1066)

Known as the Phase-In Overtime for Agricultural Workers Act of 2016, this law phases in additional daily and weekly overtime requirements for agricultural workers (as defined in Wage Order 14-2001) over the course of four years, beginning in 2019 (but with a three-year delay for employers with less than 25 employees).  Under new Labor Code section 862, employers with more than 25 employees must pay daily and weekly overtime under the following schedule:  (1) beginning January 1, 2019, agricultural workers are entitled to one-and-a-half times their regular rate for hours worked over nine and one-half hours daily or 55 hours weekly; (2) beginning January 1, 2020, agricultural workers are entitled to one-and-a-half times their regular rate for hours worked over nine hours daily and 50 hours weekly; (3) beginning January 1, 2021, agricultural workers are entitled to one-and-a-half times their regular rate of pay for hours worked over eight and one-half hours daily and 45 hours weekly; and (4) beginning January 1, 2022, agricultural workers are entitled to one-and-a-half times their regular rate for hours worked over eight hours daily and 40 hours weekly.  Beginning January 1, 2022, agricultural workers are entitled to double their regular rate of pay for hours worked beyond twelve hours daily.

As mentioned, employers with fewer than 25 employees have a three-year grace period, meaning these phase-in requirements do not commence until January 1, 2022, and the requirement to pay double-time commences January 1, 2025.

Beginning January 1, 2017, and except as otherwise expressly specified, all other existing California provisions regarding overtime compensation shall apply to agricultural workers.

The Governor will have the discretion to temporarily suspend a phased-in overtime requirement if the Governor also suspends a scheduled phased-in increase in the state minimum wage for specified “economic conditions” (as defined in SB 3).  If the Governor temporarily suspends a phased-in increase, all implementation dates will be postponed by an additional year, and the Governor’s suspension authority shall end upon no later than January 1, 2022.

Lastly, the law directs the Department of Industrial Relations to update IWC Wage Order 14-2001 regarding agricultural workers to be consistent with this new law’s requirements, except that any existing provisions providing greater protections to agricultural workers shall continue to apply.

Overtime Provisions for Domestic Worker Employees (SB 1015)

In 2013, California enacted the Domestic Worker Bill of Rights (AB 241) which added Labor Code section 1454 and amended Wage Order 15-2001 to entitle a domestic work employee working as a personal attendant (as defined) the right to daily overtime after nine hours worked and weekly overtime after 45 hours worked.  Entitled the Domestic Worker Bill of Rights of 2016, SB 1015 removes the prior January 1, 2017 sunset provision for section 1454, thus making those overtime provisions permanent.

“Foreign Labor Contractor” Requirement Update (SB 477)

As a reminder, in 2014, California enacted SB 477 to strengthen its regulations regarding “foreign labor contractors” who recruit foreign workers to relocate to California.  For purposes of SB 477, “foreign labor contracting activity” is defined as “recruiting or soliciting for compensation a foreign worker who resides outside of the United States in furtherance of that worker’s employment in California, including when that activity occurs wholly outside the United States.”  However, foreign labor contracting for purposes of SB 477 does not include recruiting activities undertaken directly by the employer to locate workers for the employer’s own use, and is also limited to the recruitment of non-agricultural employees (since farm labor contractors are subject to other regulations).

In light of SB 477’s focus on unscrupulous traffickers, by July 1, 2016 all foreign labor contractors were required to register with the Labor Commissioner.  By August 1, 2016, the Labor Commissioner was required to post on its website the names of all registered foreign labor contractors, as well as a list of the labor contractors who were denied renewal or registration.

Although this law focuses on foreign labor contractors rather than employers, it has several implications for employers.  First, new Business and Professions Code section 9998.2(c) precludes employers from knowingly entering into an agreement for the services of an unregistered foreign labor contractor.  While employers are not subject to these registration requirements for their direct recruitment efforts, and SB 477 specifically exempts from joint and several liability those employers who use a registered foreign labor contractor, this liability exemption for the contractor’s tortious activities only applies if the employer works with a registered foreign labor contractor.

Second, new Business and Professions Code section 9998.2(a) requires by July 1, 2016, an employer using the services of a foreign labor contractor to disclose to the Labor Commissioner the contact information of the employer’s designated person to work with the foreign labor contractor, and submit a declaration consenting to jurisdiction if the employer’s contact person has left the jurisdiction or is unavailable.

Lastly, the employer must be mindful that Business and Professions Code section 9998.6 precludes any person from discriminating or retaliating against a foreign worker or their family members because they have exercised any rights under this new law.

Expanded Protections for Janitorial Service Workers (AB 1978)

Known as the Property Service Workers Protection Act, this law enacts numerous measures to protect janitorial industry employees from sexual assault and other Labor Code violations.  Amongst other things, it requires the Department of Industrial Relations to develop by July 1, 2018 training materials for both supervisors and workers regarding sexual harassment and sexual violence, and to establish requirements for such training.  It also directs Cal-OSHA to require janitorial industry employers to include this training as part of its injury and illness prevention plans.  It also establishes a system of janitorial contractor registration to encourage labor standards compliance and to establish prompt and effective sanctions for violating this part.

Employers to Provide New Hires with Written Information about Time-Off Related to Sexual Assault, Domestic Violence or Stalking (AB 2337)

Labor Code section 230.1 prohibits employers with more than 25 employees from discriminating or retaliating against employees who are victims of domestic violence, sexual assault, or stalking from taking time off from work for specified purposes to address the domestic violence, sexual assault, or stalking.  This law adds new subsection (h) to require employers to provide written information regarding these rights under section 230.1 and rights under Labor Code section 230, subsections (c), (e) and (f) prohibiting retaliation and requiring employers to reasonably accommodate victims of domestic violence, sexual assault or stalking.  Employers will be required to provide this written information to new employees upon hire and to other employees upon request.

By July 1, 2017, the Labor Commissioner must post on its website a form employers can use, and employers need not comply with these notice requirements until the Labor Commissioner posts the form.  Alternatively, employers may develop and use their own notice provided it is “substantially similar in content and clarity” to the Labor Commissioner’s form.

Prohibition on Inquiring About Juvenile Court Actions (AB 1843)

Consistent with the “ban the box” trend advancing nationwide, Labor Code section 432.7 prohibits employers from requesting applicants to disclose, or from using as a factor in determining employment conditions, information concerning an arrest or detention that did not result in a conviction, or information concerning a referral to or participation in a pre- or post-trial diversion program.  Since 2014 (SB 530), California employers have also generally been prohibited from inquiring about or using information related to a conviction that has been judicially dismissed or ordered sealed.

This law amends Labor Code section 432.7 to provide similar protection related to juvenile-related arrests as it currently provides for adult criminal histories.  Specifically, new subsection (a)(2) precludes employers from requiring applicants to disclose, verbally or in writing, or from utilizing as a condition of employment, information concerning an arrest, detention, processing, diversion, supervision, adjudication or court disposition that occurred while the person was subject to the process and jurisdiction of juvenile court law.

New subsection (a)(3) further provides that “conviction,” for both subsections (a)(1) dealing with adults and (a)(2) dealing with juvenile courts, shall not include any adjudication by a juvenile court or any other court or action taken with respect to a person who is under the process and jurisdiction of juvenile court law.

Currently, section 432.7 authorizes health facilities to inquire of applicants seeking specific types of positions for information about certain crimes, notwithstanding this general prohibition applicable to most employers.  This law retains this ability for convictions but imposes new limits regarding inquiries about juvenile-related offenses.  Specifically, new subsection (f)(2) prohibits inquiries from health facilities about juvenile-related arrests, detentions, adjudications, etc. unless the information relates to a juvenile court conviction of a misdemeanor or felony for specific crimes within five years of the application.  An employer seeking such disclosures will be required to provide the applicant with a list of the specific offenses under Health and Safety Code section 11590 or Penal Code section 290 for which disclosures are sought.  However, even health providers are precluded from inquiring into an applicant’s juvenile offense history that has been sealed by the juvenile court.

Non-California Venue Provisions in Employment Agreements (SB 1241)

This law adds new Labor Code section 925 prohibiting an employer from requiring an employee, who primarily resides and works in California, as a condition of employment to agree to a provision that would require the employee to adjudicate outside California a dispute arising in California, or deprive the employee of the protection of California law with respect to a controversy arising in California.  For purposes of this new law, “adjudication” includes litigation and arbitration.

Any such choice of law or venue provision would be voidable at the request of an employee. If the court invalidated such a provision, the matter would be adjudicated in California and under California law, and the prevailing employee would be entitled to recover reasonable attorneys’ fees incurred enforcing this provision.

This new law will not apply to an employee who is individually represented by legal counsel in negotiating the terms of an agreement to designate either the choice of venue or law provisions.

This section applies to any contract entered into, modified or extended on or after January 1, 2017.

FEHA Protections Extended to Handicapped Employees Hired Under Special Licenses (AB 488)

While the Fair Employment and Housing Act (Government Code section 12940 et seq.) generally prohibits harassment or discrimination against “employees,” Government Code section 12926 had excluded from the definition of “employee” individuals employed by their parents, spouse or children, and also excluded “individuals employed under a special license in a non-profit sheltered workshop or rehabilitation facility.”  In 2014, California expanded FEHA to protect unpaid interns and volunteers (AB 1443), and this new law continues that expansion trend by ensuring individuals with disabilities hired under a special license for sheltered work are provided the same protections as other employees under FEHA.

New Government Code section 12926.05 provides that individuals employed under a special license under Labor Code section 1191 or 1191.5 (regarding hiring employees with physical or mental handicaps) may bring an action for harassment or discrimination under FEHA.  If so, the employer may establish an affirmative defense by showing that (1) the challenged activity was permitted by statute or regulation; and (2) the challenged activity was necessary to serve employees with disabilities under a special license pursuant to Labor Code sections 1191 and 1191.5.  This new section further specifies that it shall not be disability discrimination for employers to pay less than the state minimum wage to disabled employees employed pursuant to sections 1191 or 119.5.

DFEH Authorized to Investigate and Prosecute Human Trafficking Complaints (AB 1684)

Since 2005, Penal Code section 236.1 and Civil Code section 52.5 have authorized human trafficking victims to pursue civil and criminal claims against traffickers.  However, citing a concern these remedies are rarely utilized, this law amends Government Code section 12930 to authorize the DFEH to receive, investigate, conciliate, mediate and prosecute human trafficking complaints on behalf of a human trafficking victim.  The law further provides that any damages recovered will belong to the victim but costs and attorney’s fees awarded in such action will belong to the DFEH.  This law unanimously passed the Legislature without opposition.

PAGA Amendments

As part of the 2016-2017 Fiscal Year Budget Change Proposal, the Governor passed several amendments to PAGA—purportedly intended to reduce litigation costs for employers and improve outcomes for employees.  The LWDA states on its website that the following procedural changes to PAGA are in effect as of June 27, 2016.

• A $75 filing fee is required with new PAGA claim notices and any employer responses to an initial claim (including any employer cure).  This fee is waivable for those qualified as in forma pauperis.
• PAGA claim notices must now be filed online to the LWDA, with written notice (certified mail) to the employer. Similarly, employer cure notices and/ or employer responses to a PAGA claim must also be filed online, with a copy sent to the aggrieved employee by certified mail.
• The LWDA’s timeframe to review notices extends to 60 days. (Formerly 30 days.)
• Alleged aggrieved employees filing in court must provide a file-stamped copy of their PAGA Complaint to the LWDA (for any case filed on or after July 1, 2016).
• Court approval is required for any settlement of a PAGA civil action, whether or not the settlement includes an award of PAGA penalties.
• Proposed PAGA settlements are to be submitted to the LWDA at the same time they are submitted to the court.
• A copy of any court judgment, and any other order that awards or denies PAGA penalties, must be provided to the LWDA.

These are essentially procedural changes and less-impactful than some of the broader, more substantive changes contained in the original proposal.  For example, the original proposed amendments included an amnesty program for invalidated “commonplace industry practices” and a provision allowing the LWDA to object-to or comment-on proposed PAGA settlements.  Nonetheless, the actual amendments may be a precursor to more sweeping reform, and the legislative environment surrounding PAGA actions deserves close attention.

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., chi