The California Legislative Report – March 2015
The February 27th deadline for new bills to be introduced has expired, thus bringing the 2015 legislative session into greater focus. As expected, there are once again a number of significant employment-related bills introduced, including bills that would:
There were also numerous “spot bills” introduced suggesting that changes are being contemplated regarding the new Paid Sick Leave bill, meal periods, overtime, California’s “kin care” law, and employment arbitration agreements. The March 16th deadline to amend these so-called spot bills should provide further clarity regarding these items, so employers will want to stay tuned.
In the interim, listed below and largely by subject matter are the key employment bills of potential general application.
Pending Bills
Additional Minimum Wage Increase Proposed (SB 3)
Even though California’s minimum wage is already scheduled to increase to $10.00 per hour on January 1, 2016, this bill proposes several additional increases. Specifically, California’s minimum wage would increase to $11.00 per hour on January 1, 2016, and to $13.00 on July 1, 2017. After January 1, 2019, the minimum wage would also be annually adjusted based on the California Consumer Price Index (CPI) and rounded to the nearest five cents. This bill also provides that it would not preclude the Industrial Welfare Commission (IWC) from increasing the minimum wage beyond that required by the CPI formula, would preclude the IWC from adjusting it downwards even if the CPI was negative for the preceding year.
While California overwhelmingly increased a two-step minimum wage increase in 2013 (AB 10), that increase had specifically omitted annual CPI-based increases, and a very similar bill to SB 3 (SB 935) stalled in committee last year.
Double Pay on Certain Holidays Proposed (AB 67)
Entitled the Double Pay on the Holiday Act of 2015, this bill would require employers to pay employees at least twice the employee’s regular rate of pay for any work on any “family holiday.” New Labor Code section 511.5 would define “family holiday” as either December 25th (Christmas Day) or the fourth Thursday of November of each year (Thanksgiving). While “employer” is broadly defined to include any person employing another under any arrangement or contract of hire, including public entities, it would exclude employees covered by a collective bargaining agreement containing specifically-enumerated provisions, including a minimum wage 30 percent higher than the state minimum wage.
Tip-Credit Proposed (AB 669)
While many states authorize a “tip credit” against an employer’s minimum wage obligations for certain employees, California presently does not. Accordingly, this bill would establish the minimum wage for a “qualifying tipped employee,” on or after January 1, 2016, at $9 per hour (rather than the $10 per hour currently scheduled). This bill would amend Labor Code section 1182.12 to define “qualifying tipped employee” as an employee who regularly receives income from “wages” at a rate equal to at least $15 per hour. “Wages,” in turn, would use the same definition as Unemployment Insurance Code section 13009, and include all remuneration for services performed by an employee for the employer, including tips received in the course of employment.
However, if in any month a qualifying tipped employee receives income at a rate of less than $15 per hour, the employer would have to pay the employee an amount equal to the difference between the minimum wage for such tipped employees ($9 per hour) and the state minimum wage, multiplied by the total number of hours worked by the employee during that month.
This bill would also include language in Labor Code section 1182.12 superseding any local minimum wage laws to the extent they would require a higher minimum wage for qualifying tipped employees, unless the local ordinance specifically references this section and references an intent to establish a higher minimum wage for qualifying tipped employees.
Cheerleaders to be Considered Employees of Professional Sports Teams (AB 202)
Recently, there have been several high-profile wage and hour class actions filed by cheerleaders or dance teams of professional sports franchises. This bill would add new Labor Code section 2754 to require California-based professional sports teams that employ professional athletes (as defined in Section 3600.5(g)) and that utilizes cheerleaders during games, to provide those cheerleaders with all the rights and benefits afforded to its employees under the Labor Code, regardless of the terms and conditions under which the cheerleader performs. Under this new section, cheerleader will be defined as “an individual who performs acrobatics, dance, or gymnastic exercises in promotion of a professional sports franchise.”
Scheduling Predictability Bill Contemplated (AB 357)
Entitled the Fair Schedule and Pay Equity Act, this bill contemplates new rules regarding work hour scheduling for employees of food and general retail establishments. The bill’s authors have not yet identified the exact proposed language, but the bill’s current declarations and findings concerning part-time and female employees suggest it contemplates changes similar to those contained in San Francisco’s recently enacted Retail Workers Bill of Rights.
Individual Alternative Workweek Schedules Contemplated (AB 1038).
While California authorizes so-called “alternative workweek schedules” whereby non-exempt employees can work up to ten hours daily without receiving overtime, as a practical matter it is often difficult to obtain the two-thirds work-unit approval required under Labor Code section 510. Known as the Workplace Flexibility Act of 2015, this bill would permit an individual nonexempt employee to request an employee-selected flexible work schedule providing for workdays up to ten hours within the forty-hour workweek, and would allow the employer to implement this schedule without the obligation to pay overtime compensation for those additional hours in a workday. Employers would be required to pay overtime at the rate of one-and-a-half times the regular rate for daily hours worked in excess of ten hours, and double-time for work performed in excess of twelve hours per workday and in excess of eight hours on a fifth, sixth or seventh day in the workweek.
To address concerns employers might impose these schedules upon employees this year’s version enumerates certain criteria a “flexible work schedule” agreement must contain. Specifically, the agreement must be in writing and signed and dated by the employee and the employer, and it must describe the agreed-to flexible work plan and inform the employee of their entitlement to overtime if working more than ten hours in a day or forty hours in a week.
Although employee survey polls frequently comment favorably upon such added flexibility, similar bills have stalled in the last couple legislative sessions.
Paid Sick Leave to Include In-Home Support Service Workers (AB 11)
In a last-minute amendment to avoid a potential veto by Governor Brown, “in-home support services” employees were specifically excluded from the definition of employee from last year’s Paid Sick Leave bill (AB 1522). While this amendment avoided imposing certain costs upon the State of California and helped AB 1522 become enacted, several lawmakers were upset that in-home support services employees were not entitled to paid sick leave under this new law. This bill would revise the definition of employee in Labor Code section 245.5 as of July 1, 2016, to include providers of in-home support services employees, as defined in the Welfare and Institutions Code.
Overtime Exemption for Highly-Compensated Employees Proposed (AB 1470)
While Labor Code section 510 requires overtime be paid to non-exempt employees who work more than a certain number of hours per day or per week, this bill would codify an overtime exemption for certain highly-compensated employees who customarily perform exempt duties but may not satisfy the “primary duties” test in Labor Code section 515.
Under proposed new Labor Code section 510.5, an employee with a total gross annual compensation of at least one hundred thousand dollars ($100,000) would be exempted from section 510, if the employee also “customarily and regularly” performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee as defined by the IWC.
However, this exemption would apply only to employees whose primary duty includes performing office or non-manual work. It also would specifically not apply to non-management production-line workers and non-management employees in maintenance, construction and similar occupations, or to employees who perform work involving repetitive operations with their hands, physical skill, and energy, regardless of the amount of their compensation. This bill would not apply to employees covered by a valid collective bargaining agreement.
To satisfy the $100,000 “total gross annual compensation threshold, the employee would need to receive at least one thousand dollars per week on a salary or fee basis. The total gross annual compensation may also include commissions, nondiscretionary bonuses, and other nondiscretionary compensation earned during a 52-week period. However, the total gross annual compensation does not include board, lodging and other facilities, or payments for medical or life insurance, contributions to retirement plans, and the cost of other fringe benefits.
The employer would be able to utilize any 52-week period as the year, including a calendar, a fiscal or anniversary of hire year, but if it does not identify some other year period in advance, the calendar year will apply. If the employee’s total gross annual compensation does not meet the $100,000 by the last pay period of the 52-week period, the employer may make a final payment during the final pay period or the last month to achieve the required total. An employee who fails to work a full year, either because the employee is newly hired after the beginning of the year or ends employment before the end of the year, would still be exempt if they received a pro-rata share of the $100,000 based upon the number of weeks the employee will be or has been employed. An employer may similarly make one final catch-up payment within one-month after the end of employment to reach this pro-rata amount to maintain the exemption.
Notably, under proposed subsection (c), if an employee is paid a total gross annual compensation of at least one-hundred thousand dollars, there will be a rebuttable presumption that the employee is exempt from the overtime provisions of section 510.
Changes Proposed for Wage Theft Prevention Act Notices Issued by Temporary Service Providers (SB 702)
Labor Code section 2810.5 requires employers to provide written notices to new hires containing specifically-enumerated items (e.g., pay rate, regular payday, etc.), and requires “temporary service providers” to provide additional specific information, including the name, physical address and telephone number of the legal entity for whom the employee will work. This bill would amend section 2810.5 to require temporary service providers to also provide in their Wage Theft Prevention Act Notices the email address the temporary service provider has on file of the legal entity for which the employee will work.
Cure Period Proposed Under PAGA for Wage Statement Violations (AB 588)
California’s Private Attorneys General Act of 2004 (PAGA, Labor Code section 2699 et seq.) authorizes aggrieved employees to bring civil actions to recover civil penalties that the Labor Commissioner could otherwise have collected for specified Labor Code violations. PAGA affords the employer an opportunity to cure certain violations before the employee may bring a civil action, while for other violations the employee may bring an action after following specified procedures.
Labor Code section 226 requires an employer to provide its employees with itemized wage statements containing statutorily enumerated information, and enumerates specific penalties per employee per violation. While PAGA presently lists section 226 amongst the statutes for which an employee may immediately bring a civil action, this bill would amend PAGA to provide employers with the right to cure a violation of Labor Code section 226. This bill appears intended to address those situations involving a technical violation of section 226 (e.g., a minor mistake regarding the legal employer’s name, etc.), but similar bills have stalled recently.
Gender Wage Differentials Targeted (SB 358)
Echoing the Paycheck Fairness Act (S. 84) pending at the federal level, this bill proposes to amend several Labor Code provisions to address perceived gender-based wage gaps in California. For instance, Labor Code sections 232 and 232.5 presently prohibit employers from precluding employees from disclosing the amount of their wages or their working conditions. This bill would amend both sections to protect employees who discuss or inquire about wages or working conditions, as opposed to simply protecting employees who disclose such items. It would also require employers to post a copy of sections 232 and 232.5 in a conspicuous location frequented by employees during the workday.
It would also significantly amend Labor Code section 1197.5, which presently prohibits gender-based wage differentials except in certain specifically-enumerated situations (i.e., a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex). For instance, this bill would eliminate the requirement that the pay differential be within the same establishment, and would replace the terms “equal” work and “equal” skill/effort with “comparable” work and “comparable” skill/effort.
It would also substantially revise and recast the permissible exceptions to require the employer to affirmatively demonstrate that a pay differential is based on one or more specified factors, and it would replace the more general “any bona fide factor” defense with two very specific exceptions (i.e., work is performed at different locations, or work is performed on different shifts or at different times of day.). As revised, the employer would bear the burden to demonstrate any wage differential between employees of the opposite sex performing comparable work is based upon at least one of the following factors: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; (4) work is performed at different geographic locations; or (5) work is performed on different shifts at different times of day. In addition to demonstrating at least one of those factors, the employer must also satisfy two new criteria: (a) that each factor relied upon is applied reasonably, and (b) the one or more factors relied upon account for the entire difference.
Equal Pay Certifications for Certain State Contractors (AB 1354)
Entitled the Equal Pay for Equal Work Act of 2015, 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. This bill would require employers with more than 100 employees, prior to becoming a contractor or subcontractor with the state, to submit an income equality program to the DFEH for approval and certification, and to submit periodic reports of its compliance with that program. The income equality program to be submitted would include the collection of summary data on the compensation paid to employees, including data sorted by race and gender, and include policies designed to insure income equality and prevent unlawful discrimination.
This proposed change appears 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.
California Family Rights Act Expansions Proposed (SB 406)
This bill proposes to materially expand the number of employers subject to California’s Family Rights Act (CFRA, Gov. Code § 12945.2 et seq.), and to expand the bases for employee leave, thus potentially creating further differences between CFRA and the federal Family Medical Leave Act (FMLA). For instance, while CFRA presently defines “employer” as a person employing 50 or more employees, this bill would redefine employer to include any person employing five or more persons. Similarly, while CFRA presently authorizes even covered employers (i.e., 50 or more employees) to deny a qualifying leave if the employer has less than 50 employees within 75 miles of the employee’s worksite, this bill would restrict this small employer exemption to employers that employ fewer than five employees within 75 miles of the employee’s worksite.
This bill would also alter the definitions regarding the circumstances for which CFRA leave may be taken. For example, 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.”
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 also include leaves for the serious health condition of a grandparent, grandchild, sibling or domestic partner.
Lastly, under Government Code section 12945.2(q), where both parents are employed by the same employer, the employer may presently limit their combined leave rights in connection with the birth, adoption or foster care placement to 12 weeks. This bill would delete this subsection in its entirety, suggesting that both employees employed by the same employer would each be entitled to 12 weeks of leave, assuming they otherwise qualified for leave. 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.
Kin-Care Leave to Include Childcare or School Emergencies (SB 579)
Labor Code section 233 requires that an employer permit an employee to use up to half of their annual sick leave entitlement to attend to the illness of a family member, and it prohibits retaliation against employees who exercise this right. This bill would expand this entitlement to require employers to permit an employee to use sick leave to address a “childcare or school emergency.” Childcare or school emergency would be defined as meaning a child cannot remain in a school or child care facility due to (a) the illness of, or injury to, the child; (b) behavioral or discipline problems; (c) closure of the facility; or (d) a disaster or extreme weather conditions, including, but not limited to, fire, earthquake or flood. The bill would also expand Labor Code section 233’s retaliation protections to include leave for these new purposes.
Expanded Labor Commissioner Enforcement Powers (AB 970)
This bill would amend several Labor Code provisions to expand the powers of the Labor Commissioner in enforcing those provisions. 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 investigate 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 investigate violations of any state or local minimum wage laws.
Labor Code section 2802 requires an employer to indemnify an employee for expenses or losses incurred during employment and authorizes a private right of action to enforce this right. This bill would amend section 2802 to also authorize the Labor Commissioner to enforce these indemnification rights by issuing citations and penalties to non-complying employers.
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 is 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 sections 1045 to 1048 to prohibit an employer, unless based upon a bona fide occupational qualification, from: (1) publishing advertisements suggesting an individual’s current employment is a job requirement; or (2) affirmatively asking an applicant to disclose orally or in writing his or her current 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. The law would impose fairly similar prohibitions upon employment agencies or persons who operate Internet websites for posting positions in California.
The proposed bill would not prohibit employers or employment agencies 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. 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, employment agencies, or website operators from: (1) obtaining information regarding an individual’s employment, including recent relevant experience; (2) from having knowledge of a person’s “employment status;” or from inquiring about the reasons for an individual’s unemployment; or (3) from refusing to offer employment to a person because of the reasons underlying an individual’s employment status. 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.
This bill would not create a private right of action, but would authorize the Labor Commissioner to enforce and seek penalties of $1,000 for the first violation, $5,000 for the second violation, and $10,000 for each subsequent violation.
Governor Brown vetoed very similar versions of this bill in 2012 and 2014 (AB 1450 and AB 2271, respectively).
Discrimination Based on Public Employee Status Prohibited (AB 883)
This bill would add new Labor Code section 432.6 to ensure private and public employers do not discriminate in hiring decisions against current or former public employees. Specifically, this bill would prohibit any employer from advertising or communicating in such a manner to suggest that an applicant’s former or current public employee status would disqualify them from the position sought. It would also prohibit employers from making an employment decision based on an applicant’s current or former employment as a public employee. The bill would similarly prohibit persons that operate an Internet Web site for posting jobs to publish a job announcement that includes provisions suggesting public employees need not apply.
Accommodation Requests to Constitute Protected Legal Activity for Retaliation Purposes (AB 987)
California’s Fair Employment and Housing Act (FEHA, Gov. Code § 12940 et seq.) prohibits harassment and discrimination based on various protected classifications, and prohibits retaliation against employees who protest or oppose such unlawful employment practices. The FEHA also requires employers reasonably accommodate an employee’s medical condition or religious beliefs, and it has been unclear whether who requests such accommodation may state a FEHA retaliation claim in addition to a failure to accommodate claim based upon such requests.
Several recent California appellate court decisions have held an accommodation request does not constitute a “protected legal activity” for FEHA retaliation purposes reasoning that treating accommodation requests as protected legal activities would blur the distinctions between two conceptually different FEHA theories of recovery. (See e.g., Rope v. Auto-Chlor Sys. of Washington, Inc. (2013) 220 Cal.App.4th 635; Nealy v. City of Santa Ana (2015) ___ Cal.App.4th ___, 2015 Cal.App.LEXIS 139.) This bill responds to these cases and would amend FEHA to prohibit an employer or covered entity from retaliating or otherwise discriminating against a person for requesting accommodation for a disability or religious beliefs, regardless of whether the accommodation request was granted.
FEHA to Prohibit Work Eligibility Violations (AB 1065)
While immigration reform has seemingly stalled at the federal level, the California legislature has recently enacted several immigration-related protections in the employment context. For instance, in 2013, California enacted a law (AB 263) prohibiting employers from engaging in “unfair immigration-related practices” (e.g., contacting immigration-related authorities following an employee’s complaint). In 2014, California enacted AB 1660, which amended FEHA to prevent discrimination against individuals because they possess drivers licenses issued to undocumented workers.
This bill would add Government Code section 12952 to make it an unlawful employment practice for an employer to request more or different documents than are required under federal law to verify work eligibility. It would also prohibit employers from refusing to honor such documents that on their face reasonably appear to be genuine, or to attempt to reinvestigate or re-verify an incumbent employee’s authorization to work unless required to do so by federal law or authority.
E-Verify Use Targeted (AB 622)
Administered by the United States Citizenship and Immigration Services, the federal E-Verify Program enables participating employers to verify that the employees they hire are authorized to work in the United States. However, California law prohibits the state, a city, county or special district from requiring an employer to use E-verify except when required by federal law or as a condition of receiving federal funds. This bill would state the Legislature’s intent to extend this prohibition to prohibit any employer or employment agency from using the E-Verify program for employment applicants, except where required by federal law or as a condition of receiving federal funds. It would also state the legislature’s intent to expand the definition of “unlawful employment practice” to prohibit an employer or employment agency from using any electronic employment verification system on an applicant.
This bill seemingly continues California’s expansion of employment protections in the immigration context, including prohibiting immigration-related retaliation practices (AB 263), and prohibiting discrimination against employees possessing drivers licenses issued to undocumented workers (AB 1600). However, a similar bill (AB 1236) stalled in 2011.
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 would add new Labor Code sections 3733 and 4
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