LEGISLATIVE SUMMARY
The California Legislature worked overtime to pass bills before the September 11th deadline closing the 2015 regular session. As expected, a number of employment bills of potential interest to many California employers surmounted this final legislative hurdle, including bills that would:
- Expand the California Family Rights Act by adding additional family members for whose serious health condition leave may be taken (SB 406);
- Preclude employers from requiring that employees agree to arbitration as a condition of employment (AB 465);
- Target gender-based wage differentials by expanding California’s Equal Pay Act (SB 358);
- Allow employees to take time-off for “childcare or school emergencies” (SB 579);
- Prevent employers from seeking salary history information from applicants (AB 1017);
- Prohibit advertisements discouraging the unemployed from applying (AB 676);
- Amend the Private Attorney Generals Act to allow employers an opportunity to cure certain wage statement violations (AB 1506); and
- Provide new enforcement powers to the Labor Commissioner for wage and hour violations (AB 970 and SB 588)
Governor Jerry Brown has until October 11th to sign or veto these recently-passed bills.
Governor Brown did not wait for the legislative session to close to begin working through bills forwarded by the Legislature. For instance, Governor Brown signed a bill (SB 623) amending California’s workers’ compensation to ensure that, regardless of citizenship or immigration status, an injured employee may receive benefits under the Uninsured Employers Benefits Trust Fund or the Subsequent Injuries Benefits Trust Fund. Additionally, Governor Brown vetoed a bill (AB 272) that would have expanded California’s Fair Employment and Housing Act to include certain “peace officers” (as defined) within its definition of “employee.” Governor Brown’s decision to veto AB 272 despite it having unanimously passed both legislative chambers underscores his fairly pragmatic and sometimes unpredictable approach to these bills.
While most attention has focused on the bills that survived and were forwarded to the Governor, there were several bills that did not survive but may re-emerge in future sessions. The most notable of these was SB 3 which would have increased California’s minimum wage to $11 an hour in January 2016, to $13 by July 2017, and with annual inflation-based increases beginning in 2019. As a reminder, California’s minimum wage is scheduled to increase from $9 an hour to $10 an hour on January 1, 2016, and a number of municipalities have enacted or are considering even higher minimum wages. Second, a bill that would have allowed employees to receive up to eight weeks (rather than the current six weeks) of Paid Family Leave benefits (AB 908) was pulled by the author at the last minute despite passing both legislative chambers, but is likely to re-emerge last year.
Listed below are the new laws that have already been enacted, followed by an overview (largely by subject matter) of the more significant employment bills Governor Brown is considering.
NEW LAWS SIGNED BY GOVERNOR BROWN
Workers’ Compensation Coverage Expansion for Immigrants (SB 623)
Under California’s Workers’ Compensation laws, if an employer fails to pay required compensation, an injured employee may apply for recovery from the Uninsured Employers Benefits Trust. If a permanently, partially disabled employee receives a later, compensable injury resulting in additional permanent disability, then that employee may recover compensation from the Subsequent Injuries Benefits Trust Fund. This bill adds new Labor Code sections 3733 and 4756 to ensure that regardless of their citizenship or immigration status, an injured employee is not precluded from receiving benefits under the Uninsured Employers Benefits Trust Fund or the Subsequent Injuries Benefits Trust Fund. This bill states it is declaratory of existing law, meaning it applies retroactively.
BILLS SENT TO GOVERNOR BROWN
Arbitration Agreements Targeted (AB 465)
This bill would create a new Labor Code section (section 925) to provide that any waiver of rights, penalties, remedies, forums and procedures established by the Labor Code, including the right to file a claim with the Labor Commissioner or a civil action in court, may not be required as a condition of employment. It would also preclude the waiver of any rights that cannot be waived under state or federal law, and require that any waiver be knowing and voluntary, in writing, and expressly not made as a condition of employment. It would also require the party seeking to enforce the waiver to prove that it was made voluntarily and knowingly and not as a condition of employment. Otherwise, any such waiver will be deemed involuntary, unconscionable, against public policy and unenforceable.
It would further prohibit employers from threatening, retaliating or discriminating against any person who refuses to waive such rights. It would also allow a plaintiff who successfully challenges such agreements to obtain injunctive relief (e.g., an invalidation of the agreement) plus reasonable attorney’s fees.
The provisions of this bill would not, however, apply to persons registered with a self-regulatory organization in the securities industry or to an individual represented by legal counsel in negotiating the agreement’s terms.
This bill would apply to any such waivers, including private arbitration agreements, entered into, altered, modified, renewed or extended on or after January 1, 2016. However, perhaps anticipating an almost-certain legal challenge if enacted (including on grounds of Federal Arbitration Act preemption, a recent amendment added a severability provision stating that if any particular provision is invalidated, the other provisions will still take effect.
Outlook: This bill narrowly passed the Legislature despite bi-partisan opposition, and has been sent to Governor Brown for signature or veto. Although loosely modeled on a similar bill that was enacted last year (AB 2617 [imposing limits on contractual waivers regarding the Unruh Act]), even if enacted, AB 465 will almost certain face judicial challenge on the grounds of Federal Arbitration Act preemption.
Expansions to the California Family Rights Act (SB 406)
This bill proposes to expand the bases for which leave may be taken under California’s Family Rights Act (CFRA, Gov. Code section 12945.2 et seq.), thus potentially creating further differences between CFRA and the federal Family Medical Leave Act (FMLA). For instance, it would expand the definition of “child” to include children of a domestic partner or for persons to whom the employee stands in loco parentis, and would remove the current age (i.e., under 18 years old) and dependent status restrictions. If adopted, CFRA leave would be permitted for the serious health condition of a “child,” as defined, regardless of age and for adult children regardless of whether that child is dependent upon the employee. It would also expand the definition of “parent” to include “parents-in-law.”
More significantly, while CFRA presently authorizes employees to take leave for the serious health condition of a child, parent or spouse, this bill would expand this entitlement to include leaves for the serious health condition of a grandparent, grandchild, sibling or domestic partner.
Lastly, under Government Code section 12945.2(q)’s current language, where both parents are employed by the same employer, the employer may limit their combined leave rights in connection with the birth, adoption or foster care placement of a child to 12 weeks. This bill would delete this subsection in its entirety, suggesting both employees employed by the same employer would each be entitled to 12 weeks of leave, assuming they are otherwise eligible. As a reminder, although completely deleting this aggregation ability would create a material difference between CFRA and FMLA (since FMLA would still permit aggregation), these two statutes already currently differ in that FMLA permits aggregation only if both the “husband and wife” work for the same employer, while CFRA permits aggregation where both parents (whether married or not) work for the same employer.
Notably, this bill initially proposed to reduce the threshold number of employees for an employer to be subject to CFRA from 50 employees to 25 employees, but this proposal was deleted by a last-minute amendment in the Assembly, even though it had previously passed the Senate.
Outlook: This bill faces heavy opposition, and passed both legislative chambers along party-lines votes.
Amendments to the Family-School Partnership Act and to Kin Care Leave (SB 579)
This bill expands the reasons for which an employee may take job-protected leave under the Family School Partnership Act, currently codified at Labor Code section 230.8. Presently, section 230.8 requires employers with 25 or more employees to allow employees to use up to 40 hours of unpaid time (limited to eight hours in any calendar month) to participate in school or childcare related activities. This bill would expand this provision to also allow employees to take job-protected time off to find, enroll or reenroll their children in a school or with a licensed child care provider.
More significantly, it would also allow employees to take time off to address a “child care provider or school emergency.” New subsection (e) would define this as meaning a child cannot remain in a school or with a child care provider due to one of the following: (1) the school or child care provider has requested the child be picked up, or it has an attendance policy (excluding planned holidays) that prohibits the child from attending or requires the child be picked up; (2) behavioral or discipline problems; (3) closure or unexpected unavailability of the school or child care provider, excluding planned holidays; or (4) a natural disaster, including but not limited to, fire, earthquake or flood.
While section 230.8 presently provides such job-protected leave to parents, guardians and grandparents, this bill would re-define parent in new subsection (e)(1) to extend these protections to stepparents, foster parents or an employee who stands in loco parentis to a child.
This bill would also amend California’s “kin care” provision (Labor Code section 233), which requires employers to allow employees to use one-half of their accrued sick leave to care for a “family member” (as defined), to permit an employee to use sick leave for the purposes specified in the Paid Sick Leave law (Labor Code section 245 et seq.). In other words, rather than attempting to copy over a number of the Paid Sick Leave law’s provisions and definitions into the kin care law, this much simpler approach would modify the kin care law to specify that its definition of “family member” and grounds for sick leave is consistent with the Paid Sick Leave law. This means that employees would be able to use kin-care leave for the illness or preventative care for a child, parent, spouse, registered domestic partner, grandparent, grandchild or sibling.
Outlook: This bill passed the Senate and Assembly on a near unanimous basis, and seems likely to be enacted by Governor Brown.
Amendments to California’s Equal Pay Act (SB 358)
Echoing the Paycheck Fairness Act (S. 84) pending at the federal level, this bill proposes to amend California’s Equal Pay Act to target gender-based wage gaps, including by incorporating many provisions proposed in the federal version.
For instance, Labor Code section 1197.5 presently prohibits employers from paying less to members of the opposite sex who perform equal work in the same establishment. This bill would eliminate the “same establishment” requirement, and revise the “equal work” requirement to instead prohibit paying less for “substantially similar work, when viewed as a composite of skill, effort and responsibility” performed under similar working conditions. The bill’s author indicates this change is intended to reflect the fact it is difficult to demonstrate any two positions are completely equal “in the modern, highly differentiated workplace.”
It would also amend the statutorily-enumerated exceptions in section 1197.5, which presently are 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. Specifically, while it would retain the first three exceptions, it would significantly revise the “bona fide factor other than sex” exception to require the employer prove a wage-differential is not based on or derived from a sex-based differential and is consistent with a “business necessity,” such as a difference in education, training or experience that is job-related with the position in question. It would also specify that “business necessity” means “an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purposes it is supposed to serve.” However, this bill would also provide that this defense shall not apply if the employee demonstrates that an alternative employment practice exists that would serve the same business purpose without producing the wage differential.
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 accounts for the entire wage difference. While the bill’s author contends the current law implicitly requires the employer to prove a wage differential is justified rather than an employee having to prove a wage differential is unjustified, this bill clarifies the burden of proof is on the employer to demonstrate the existence of legitimate factors, other than the sex of the employee, for any wage disparity.
This bill would also amend section 1197.5(d) to expand from two years to three years an employer’s obligation to retain records of the wages and wage rates, job classifications and other terms and conditions of employment for employees.
This bill would also add new subsection (j) to prohibit employers from discharging, or in any way discriminating or retaliating against, any employee who takes action to invoke or assist in any manner the enforcement of California’s Equal Pay Act. Under this new subsection, employers would also not be able to prohibit an employee from discussing the employee’s own wages, discussing the wages of others, or inquiring about another employee’s wages, or aiding or encouraging any other employee to exercise his or her rights under this section.
The bill would extend the existing enforcement mechanisms for wage discrimination to claims for retaliation and would provide a one-year statute of limitations for retaliation claims. In addition to Labor Commissioner enforcement, this bill would also authorize an employee who has been discharged, discriminated or retaliated against to pursue a civil action for reinstatement and reimbursement of lost wages, and would require that such civil actions be commenced no later than one-year after the cause of action accrues.
Outlook: Governor Brown has signaled he intends to sign this bill which overwhelmingly passed the Senate and Assembly.
Limits on Salary-Related Inquiries during Hiring Process (AB 1017)
Citing a concern that prior salary history information perpetuates gender-based inequality, this bill would impose new limits on an employer’s ability to obtain salary history information. Specifically, this bill would enact new Labor Code section 432.3 and prohibit employers from seeking salary history information, including compensation and benefits, about an applicant for employment. This section would not apply, however, to salary history information disclosable to the public pursuant to federal or state law.
This new section would also provide that Labor Code section 433, which makes any violation of “this article” (Article 3 – Contracts and Applications for Employment) a misdemeanor, would not apply to any violation of new Labor Code section 432.2.
While this bill initially would also have prohibited employers from releasing salary information about current or former employees, this provision was deleted by a late amendment.
Outlook: This bill narrowly passed the Senate and Assembly and faces bipartisan opposition, so its prospects are unclear.
Prohibition against Employers Advertising that Unemployed Applicants “Need Not Apply” (AB 676)
This bill responds to concerns about discrimination against the unemployed by limiting an employer’s ability to screen applicants based on “employment status,” which would be defined as an “individual’s present unemployment, regardless of length of time that the individual has been unemployed.” Specifically, beginning July 1, 2016, this bill would add new Labor Code section 432.4 to prohibit an employer from: (1) publishing advertisements or announcements stating or indicating that an unemployed person is not eligible for the job; or (2) asking an applicant to disclose orally or in writing their “employment status” until the employer has determined that the applicant meets the minimum employment qualifications for the position, as stated in the published notice for the job. This bill would define “employment status” as an individual’s present unemployment, regardless of the length of time that the individual has been unemployed.
The proposed bill would not prohibit employers from publishing job advertisements setting forth the lawful qualifications for the job including, but not limited to, the holding of a current and valid professional or occupational license, or requiring a minimum level of education or training, or professional, occupational or field experience. It also would not prohibit advertisements for job vacancies stating that only applicants who are currently employed by that employer will be considered (so-called “internal” hiring).
In addition, the bill would not prohibit employers from: (1) obtaining information regarding an individual’s employment, including recent relevant experience; (2) having knowledge of a person’s “employment status” or from inquiring about the reasons for an individual’s unemployment; (3) refusing to offer employment to a person because of the reasons underlying an individual’s employment status, or (4) otherwise making employment decisions pertaining to that individual. In other words, this bill seems to allow employers to consider the reasons for an individual’s unemployment but prohibits them from initially screening out applicants simply because they are unemployed.
Outlook: Governor Brown has already vetoed two very similar versions of this bill in 2012 and 2014 (AB 1450 and AB 2271, respectively), and he seems likely to do so again.
Retaliation Protections for Family Members (AB 1509)
While California law presently prohibits retaliation against employees who engage in protected legal activities (i.e., filing a wage-related complaint), this bill would extend these protections to address several perceived gaps in coverage, particularly for low wage earners. For instance, to address the situation where multiple family members work for the same employer, it would prohibit an employer or a person acting on their behalf from retaliating against an employee because they are a family member of someone who has engaged in or was perceived to have engaged in protected activity.
Another cited concern involves retaliation in the temporary staffing context or in the construction/contractor context, where the entity ordering the alleged retaliation is not the direct employer (e.g., the general contractor ordering the subcontractor to dismiss a complaining employee). Accordingly, this will would provide that “employer” or “person acting on their behalf” includes “client employers” or a “controlling employer” (as defined in the Wage Theft Prevention Act [Labor Code section 2810.3]) and in Labor Code section 6400(b) regarding multi-employer worksite obligations to provide a safe place of employment.
These specific changes would be made to the following Labor Code provisions regarding whistle-blowing: (1) Labor Code section 98.6 (regarding complaints made to the Labor Commissioner); (2) Labor Code section 1102.5 (regarding complaints made about legal violations); and (3) Labor Code section 6310 (regarding complaints made about unsafe working conditions).
For purposes of the amendments to section 98.6 relating to Labor Commissioner complaints, it would also specify that it would not apply to claims arising under Labor Code section 96(k), which prohibits employers from retaliating against employees who engage in lawful off-duty conduct, unless the activity involved the exercise of employee rights otherwise covered by section 98(a).
This bill also makes a minor amendment to a bill enacted in 2014 (AB 1897) that had made “client employers” jointly liable with labor contractors for the failure to pay wages or to obtain valid workers’ compensation services. Specifically, it amends newly added Labor Code section 2810.3 to clarify that “household goods carriers” (as defined) enjoy the same exemption from joint liability as afforded to “motor carriers” (as defined).
Outlook: This bill passed the Assembly and Senate on largely party-line votes, and its prospects with Governor Brown are unclear.
Limited “Cure Period” for Wage Statement Violations (AB 1506)
California’s Private Attorneys General Act of 2004 (PAGA, Labor Code section 2699 et seq.) authorizes employees to file civil actions against employers for Labor Code violations to recover civil penalties otherwise assessed or collected by the Labor and Workforce Development Agency. PAGA specifically enumerates Labor Code violations for which the employer is afforded an opportunity to cure a violation before suit may be filed, and also enumerates Labor Code violations for which no cure period exists. One provision for which no cure period is currently allowed is Labor Code section 226, which requires employers to provide an itemized wage statement containing nine specifically-enumerated items, including gross wages earned, employee name, etc.
Responding to employer concerns of frivolous class actions based on hyper-technical violations (i.e., an employer’s name was misspelled) that caused no actual injury to an employee, this bill would amend PAGA to provide a limited ability to cure certain wage statement violations before a PAGA civil action may be filed. Specifically, this bill would allow an employer 33 days to cure any alleged violation of wage statement requirements concerning “the inclusive dates of the period for which the employee is paid” or “the name and address of the legal entity that is the employer.” (Labor Code sections 226(a)(6) and (8) respectively). However, the bill specifies that “cure” means that the employer must issue fully compliant wage statements to employees for the entire statutory period (three years), and it limits an employer’s ability to cure these pay statement violations to one time in a 12-month period.
This bill contains an urgency provision and would take effect immediately if enacted.
Outlook: This bill has considerable bi-partisan support and is expected to be signed into law by Governor Brown and will take immediate effect.
Expanded Labor Commissioner Enforcement Powers (AB 970)
This bill would amend several Labor Code provisions to expand the citation authority of the Labor Commissioner. For instance, while Labor Code section 558 presently authorizes the Labor Commissioner to investigate Labor Code or Industrial Welfare Commission (IWC) orders regarding wages, this bill would also authorize the Labor Commissioner to issue a citation for violations of applicable “local” overtime laws. Similarly, it would amend Labor Code sections 1197 and 1197.1, which presently authorize the Labor Commissioner to investigate violations of the minimum wage set by the IWC to issue a citation for violations of any state or local minimum wage laws.
This bill would also amend Labor Code section 2802 to authorize the Labor Commissioner to issue citations and penalties against employers who fail to properly indemnify employees for expenses incurred in employment. The bill’s author indicates the amendment to section 2802 is intended to address concerns that employers are improperly deducting charges for tools or equipment necessary to perform the job, but the amendments are worded more broadly to any violation of section 2802.
In each instance, the Labor Commissioner may cite the employer if the local agency has not done so, and if the Labor Commissioner does issue a citation, the local agency shall not cite the employer for the same violation.
Labor Commissioner Judgment Enforcement (SB 588)
Citing a concern that employees are often unable to collect upon judgments for unpaid wages, this bill would provide the Labor Commissioner a number of additional mechanisms to enforce judgments. For instance, it would enable the Labor Commissioner, on behalf of an aggrieved employee, to file a levy against any credits, money or other property of an employer to collect on a judgment for unpaid wages. As another example, if an employer failed to satisfy a judgment within 20 days of receiving a notice of levy, the employer may be required to cease business operations in California or obtain a surety bond of $150,000. Third, businesses that contract for certain “property services” may be jointly and severally liable for the wage violations of the service contractor, so long as the business was named in the underlying complaint.
The bill’s author states that it materially differs in several respects from two bills (AB 1164 and 2416) that also proposed wage enforcement measures but stalled in 2013 and 2014. First, according to the author, while those earlier bills would have permitted pre-judgment liens (i.e., an ability to tie up an employer’s assets before any finding of wrongdoing), this bill authorizes a levy or lien only after a judgment has been rendered against the employer. Second, while the earlier bills proposed a lien against the real or personal property of an offending employer, this bill only authorizes a levy against the employer’s credit, money or related property (other than real property). (Even under the current version (SB 588), a lien can be obtained against real property but only after the employer fails to satisfy a notice of judgment and continues to operate without complying with the surety bond requirement). Third, while the earlier bills would have authorized the employees to directly file a lien, this bill vests that ability in the Labor Commissioner acting on behalf of the employees.
Outlook: Since this bill is heavily opposed and Governor Brown has previously vetoed bills expanding wage enforcement measures, its prospects are unclear.
E-Verify Misuse Targeted (AB 622)