LEGISLATIVE SUMMARY

There was a considerable amount of activity as legislators raced to meet the June 30^th deadline for bills to pass policy committee votes, and to begin the July 4^th weekend.  Accordingly, a number of employment bills advanced, including bills that would:

• 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);
• Preclude salary history from justifying gender-based waged differentials (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).

However, a number of other bills failed passage, including bills that would require  almost all employers to provide 12 weeks of job-protected “parental leave” (SB 1166); allowed individual employees to obtain so-called “alternative workweek schedules” (SB 985); and allowed private employers to exercise a veterans hiring preference (AB 1383).

Governor Brown was also fairly active, signing a budget amending the Private Attorneys’ General Act, but vetoing a bill that would have enabled employers and co-workers to obtain gun violence-related TRO’s (AB 2607).

At the municipal level, minimum wage and paid sick leave ordinances remain popular, with the City of San Diego enacting Proposition I requiring up to five days of paid sick leave and immediately increasing its minimum wage to $10.50.  As discussed below, the San Diego Ordinance initially conflicted with the California Paid Sick Leave law in many respects, including as to accrual caps and accrual methods, but was substantively amended regarding those issues and became effective on July 11^th.  On July 1, 2016, the first phase of Los Angeles’ Paid Sick Leave ordinance took effect for employers with more than 25 employees(the second phase for smaller employers takes effect July 1, 2017), requiring employers to provide up to six days of paid sick leave.

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 that have already been enacted or have taken effect in 2016:

NEW LAWS ALREADY ENACTED

San Diego’s Minimum Wage and Paid Sick Leave Ordinance is in Effect and Amendments to be Formally Enacted Soon 

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.

Since San Diego voters passed the measure, the City drafted an updated Amended Ordinance modifying substantive portions of the new rule, as discussed below.  This final Ordinance was passed by the City Council on July 11, 2016, and much of the substantive portions of the law are effective as of this date.  Despite the need for a formal second reading, as well as mayoral approval, both of which are imminent, the City’s informal messaging is that the Amended Ordinance will be effective and employers who comply with the amendments as currently drafted will not suffer any negative consequences. The City itself has capped its own leave benefits at 80 hours, which was not allowed under the original Ordinance, as discussed below.

The original Ordinance definitions, as well as the use and eligibility sections within the sick leave portion of the law remain largely unchanged, as does the $10.50 minimum wage increase and the mandatory forty (40) hours of paid sick leave for employees, both of which are effective as of July 11, 2016.  What has changed are the ways in which employers may implement sick leave policies, the rate at which sick leave must be paid out, the posting and notice deadlines, as well as the way in which the City plans on enforcing these new rules, as discussed below.

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.

San Diego’s New Minimum Wage

Proposition I increases 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’s Ordinance requires 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.  

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.

Leave under the new Ordinance may be used under the following 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;

(4)       to care for or assist “certain family members” with an illness, injury, or medical injury; and

(5)       a place of business is closed by order of a public official due to a Public Health Emergency, or an employee is providing care or assistance to a child, whose school or child care provider is closed by order of a public official due to a Public Health Emergency.

Please note, the ability to use Paid Sick Leave for school/child-care-related closures and emergencies differs from the California law.

Alternative Accrual Methods, Including “Frontloading,” and a PTO Exception 

As with the California law, the default accrual rule under the San Diego Ordinance is that employees must receive one hour of paid sick leave for every thirty hours worked.

While the San Diego Ordinance initially did not recognize any alternative accrual methods, the Implementation Ordinance will amend this and allows the “lump sum” or “frontloading” method that is allowed for under the general California sick leave law.

Section 39.0105(b)-(c) of the Amended Ordinance now states:

(b)       Employers must provide an Employee with one hour of Earned Sick Leave for every 30 hours worked by the Employee within the geographic boundaries of the City, but Employers are not required to provide an Employee with Earned Sick Leave in less than one-hour increments for a fraction of an hour worked. Employers may cap an Employee’s total accrual of Earned Sick Leave at 80 hours.

(c)        An Employer may satisfy the accrual and carry-over provisions of this section if no less than 40 hours of Earned Sick Leave are awarded to an Employee at the beginning of each Benefit Year for use in accordance with this Division, regardless of the Employee’s status as full-time, part-time, or temporary.

Employers utilizing the lump sum or frontloading method may not differentiate between classes of employees (e.g., part-time, full-time, temporary, etc.) with regard to the amount they bank at the beginning of the benefit year, as defined within the Ordinance.

Unlike the California sick leave law, the San Diego Ordinance also initially did not make clear that employers providing so-called “personal time off” (PTO) plans would not be required to provide additional sick leave.  Responding to concerns this omission would create conflict with the state law and discourage PTO plans, Section 39.0105(g) of the Amended Ordinance specifies:

(g)       An Employer who provides an Employee with an amount of paid leave, including paid time off, paid vacation, or paid personal days sufficient to meet the requirements of this section, and who allows this paid leave to be used for the same purposes and under the same conditions as the Earned Sick Leave required by this Division, is not required to provide additional Earned Sick Leave to the Employee. An Employer who provides greater paid time off, either through a contract, collective bargaining agreement, employment benefit plan, or other agreement, than that required by this Division, is deemed to be in compliance even if the Employer utilizes alternative methodology for calculation of, payment of, and use of Earned Sick Leave or other paid time off that can be used as Earned Sick Leave.

As a reminder, the San Diego Ordinance allows sick leave to be used for slightly different purposes than the state law, so employers wishing to rely upon this PTO exception from the San Diego Ordinance should compare their plan to ensure it allows PTO to be used “for the same purposes and under the same conditions” as the San Diego Ordinance.

While the San Diego Ordinance initially did not allow employers to cap sick leave accrual, the amendments will allow employers to cap accrual at 80 sick leave hours, the theory being that an employee may accrue enough to use the full amount in one year, and have enough ready to carry-over to the next year and begin using immediately.  (As reminder, under the California law, employees may accrue up to 48 hours, or double the 24 hours of usage allowed).

Sick Leave Paid at Employee’s Regular Rate of Pay

Similar to the California sick leave law, the rate of pay at which employers are charged with paying out sick leave is at the employee’s regular rate of pay, as opposed to their base rate of pay.  For employers with a non-exempt workforce who utilize different rates of pay, commissions, structured bonus plans, or any other wage that may require adjustment of their overtime rate, must be cognizant of this and revise their payment practices for sick leave or paid time off accordingly.

Updated Posting and Notice Deadlines

Under the amended Ordinance, the City is responsible for providing bulletin and notices by September 1, 2016.  These will include a bulletin announcing the adjusted minimum wage for the upcoming year, a notice for employers to post in the workplace informing employees of the minimum wage and sick leave entitlement, and a “template notice” suitable for use by employers in compliance with this section.

Employers are charged with disseminating this notice, which must include the employer’s name, contact information, and information on how the employer satisfies the requirements under the Ordinance, to all employees by October 1, 2016.  This differs slightly from the California sick leave law, which requires notice via the Wage Theft Prevention Act, and which is only required for non-exempt employees.  Theoretically, an updated and disseminated sick leave or paid time off policy, which also includes the requisite employer information, should suffice.  There is nothing within the Ordinance which requires acknowledgment or signature of this notice.  However, employers are urged to keep a record of this for purposes of potential audits by the City’s Enforcement Office, as defined within the Ordinance.

Recordkeeping Requirements and Enforcement

Employers are required to create contemporaneous records documenting their employees’ wages paid and accrual and use of sick leave.  Employers are already required to provide such a record on their employees’ wage statements under the general California sick leave law.  Under the City’s Ordinance, employers must also “allow Enforcement Official[s] reasonable access to these records in furtherance of an investigation conducted” pursuant to the Ordinance.

The lengthiest and most detailed update to the Ordinance is within section 39.0113, which outlines the authority and duties of the City’s newly developed Enforcement Office, including investigatory rights, access rights, the ability to promulgate regulations, and implementation of the complaint process.

The Take Away

Employers are urged to review and update their sick leave and/or paid time off policies and practices to ensure they are compliant, raise the minimum wage of anyone working within the City of San Diego to at least $10.50 per hour, watch for the notice and posting requirements from the City, and maintain appropriate records as discussed within the Ordinance.

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. You may also review the City’s Frequently Asked Questions and informational web page on the subject here.

Reminder: Phase I of Los Angeles’ Paid Sick Leave Law and Minimum Wage Increase Took Effect July 1^st

Somewhat similar to the San Diego and California minimum wage increases, beginning July 1, 2016, the minimum wage for Los Angeles employers with more than 25 employees increased to $10.50, and will continue to increase each July 1^st, reaching $15.00 on July 1, 2020.  For employers with 25 or fewer employees the minimum wage will increase in a similar format, starting to $10.50 on July 1, 2017 and reaching $15.00 on July 1, 2021.

On July 1^, 2016, the Los Angeles Paid Sick law took effect for employers with more than 25 employees, and the law will take effect for employers with 25 or fewer employees on July 1, 2017.  While the Los Angeles version more closely tracks the California version than the San Diego version, there are several key differences, including that employees are entitled to use six days of paid sick leave and accrue up to 72 hours (compared to three days and 48 hours respectively), and there is no exemption for collective-bargaining level employees. 

The City of Los Angeles has issued the required poster providing a general overview of the minimum wage increase and sick leave law at:

http://wagesla.lacity.org/sites/g/files/wph471/f/MW%20Sck%20Time%20poster_0.pdf

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.

PAGA Amendments

As part of the 2016-2017 Fiscal Year Budget Change Proposal, the Governor proposed several amendments to PAGA—purportedly intended to reduce litigation costs for employers and improve outcomes for employees.  Wider sweeping changes were eventually whittled down, and although (as of this writing) the ‘16/17 budget has not been signed, 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., 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

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 would not apply to “retail food facilitie