LEGISLATIVE SUMMARY

The 2016 legislative session has already produced a new law that will increase California’s minimum wage to $15.00 per hour (SB 3), the highest state-wide level in the nation, by 2022, and another law increasing Paid Family Leave benefits (AB 908).  For good measure, the City of San Francisco has also enacted a Paid Leave Ordinance requiring employers to pay for six weeks the difference between an employee’s weekly wage and benefits paid from California’s Paid Family Leave Program.  On the other hand, bills that would have amended the Private Attorneys General Act to require a reasonable basis for a civil suit to be filed (AB 2465) and would have precluded the so-called “stacking” of various Labor Code penalties for meal/rest period violations (AB 1948) failed passage in committee.

The California Legislature is also presently considering a number of other significant employment-related bills, including bills that would:

• Require almost all employers to provide 12 weeks of job-protected “parental leave” (SB 1166);
• Require employers to provide up to 24 hours of paid time off for school-related activities (AB 2405);
• Enable individual employees to obtain alternative workweek schedules without obtaining work-unit approval (SB 985);
• Require certain employers to provide advance notice of employee schedules and provide “modification pay” for any subsequent changes (SB 878);
• 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);
• Authorize private employers to utilize a veterans’ preference during hiring  (AB 1383);
• Prohibit hiring-related inquiries concerning juvenile convictions (AB 1843);
• Prohibit hiring-related inquiries about salary history (AB 1676);
• Amend California’s Private Attorneys General Act (PAGA) (AB 2461-2464);
• Expand California’s heat illness regulations to include indoor employees (SB 1167); and
• Expand the workplace prohibitions against smoking, including to electronic cigarettes (ABx2 6, ABx2 7 and SBx2 6).

Most of these pending bills have passed initial key committee votes, but the June 3^rd deadline for bills to pass their house of origin should also help narrow the number of bills likely to make it to Governor Jerry Brown’s desk.

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

NEW LAWS ALREADY ENACTED

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 signed into law a bill to increase 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 over $60,000 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.  It is anticipated the unions will soon withdraw the statewide ballot initiatives they had introduced to raise the minimum wage to $15.00, which had been scheduled for vote in November 2016.

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. 

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 Contribution 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 also requires the employer to post a poster to be developed by the San Francisco Office of Labor Standards Enforcement, it requires the employer to retain “Supplemental Compensation” records for three years, it prohibits retaliation, and authorizes agency enforcement.

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

PENDING BILLS

Parental Leave Protections (SB 1166)

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

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

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

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

Status:  This bill passed the Senate’s Labor and Industrial Relations Committee and is scheduled to be heard in the Appropriations Committee in early May 2016.

Paid Time Off for School-Related Activities (AB 2405)

California’s Family School Partnership Act, codified at Labor Code section 230.8, presently requires employers with more than 25 employees at the same location to allow parents (as defined) to take up to 40 hours each year to participate in school related activities, enroll children in child care, or attend to child-care or school-related emergencies.  It also presently authorizes employers to require employees to use accrued vacation or paid time off when taking time off under this section and otherwise authorizes the use of unpaid time off.

This bill would amend section 230.8 to require employers to provide an employee at least 24 hours of paid time off for planned absences under this section, unless otherwise provided in a collective bargaining agreement entered into before January 1, 2017.  Labor Code section 230.8 presently authorizes employees to take unpaid time off without regard to length of time or the number of hours worked, and AB 2405 does not identify any such limitation before an employee would be entitled to paid time off for school or child-care related activities.

It would also allow an employee to use vacation or paid time off when taking time off under section 230.8 if they elect, rather than allow an employer to require such usage.

While section 230.8, subsection (d), presently authorizes employees who have been retaliated against for invoking these rights to pursue a civil remedy to seek reinstatement and recover lost wages, this bill would expand this subsection to allow employees who have simply been denied time off to pursue “appropriate equitable relief”(presumably an order requiring time off).  It would also add new subsection (e) to allow employees who have been discriminated or retaliated against for taking time off to file a complaint with the Labor Commissioner.

Lastly, new subsection (f) would require employers to display a poster, which the Labor Commissioner would develop, advising employees of their right to request and use 24 hours of paid time off for their child’s school-related activities and identifying the employee’s remedies for any discrimination or retaliation.

Status:  This bill passed the Assembly’s Labor and Employment Committee and is pending in the Appropriations Committee.

Scheduling Predictability Bill Re-Introduced (SB 878)

Entitled the Reliable Scheduling Act of 2016, this bill would require grocery stores, restaurants and retail stores to provide employees advance notice of their schedules, and would require employers to provide “modification pay” for any changes made with less than seven days’ notice.  Specifically, new Labor Code section 510.5 would require employers to provide employees at least seven days’ notice of the first day on the work schedule, with the work schedule required to identify all scheduled shifts for at least 21 consecutive days.  Employers would be permitted to create separate work schedules for each department as long as all hours have a designated beginning and ending time.

Employers would also be required to provide “modification pay” per shift for each previously scheduled shift that the employer cancels or moves to another date or time or for any previously unscheduled shift that the employer requires an employee to work.  Specifically, the employer would be required to provide one hour of pay at the employee’s regular rate of pay if the employer provides less than seven days but more than 24 hours’ notice of any change.  If less than 24 hours’ notice is provided, the employer shall provide “modification pay” equal to or greater than half of that shift’s scheduled hours at the employee’s regular rate, but not less than two hours or more than four hours.  For each on-call shift that the employee is required to be available but is not called in, the employer would be required to provide modification pay equal to or greater than half of that shift’s scheduled hours.  Modification pay shall not apply to any changes in meal, rest or recovery periods, and will not apply to any shifts for which the employee is compensated with reporting time pay per an Industrial Welfare Commission wage order.

Notably, proposed subsection (c)(5)(B) defines “modification pay” as an employee’s hourly wage, but then for employees who had different hourly rates in the preceding 90 days, uses the same complicated formula initially contained in the Paid Sick Leave law (AB 1522) that was subsequently amended in 2015 (AB 304).

However, an employer would not be deemed to have violated these notice provisions if the changes occur because: (1) operations cannot begin or continue due to threats or civil agency order; (2) operations cannot begin or continue due to disruption in water or electrical supply; (3) operations cannot begin or continue due to acts of God or natural disaster; (4) another previously scheduled employee failed to show up or became ill; (5) another previously scheduled employee was disciplined/terminated; (6) two employees have mutually agreed to trade shifts; or (7) the employer requires the employee to work overtime.

Employers would also be required to post a poster containing specified information, including information about these deadlines and an employee’s modification pay rights, and require the Labor Commissioner to develop this poster.  Employers would also be required to retain for three years records documenting the hours worked and modification pay awarded, and allow the Labor Commissioner or an employee to inspect these records.

It would also preclude an employer from retaliating or discriminating against any employee for filing a complaint or alleging a violation of these requirements, and would create a rebuttable presumption of retaliation if any adverse employment action occurred within 30 days of an employee’s complaint, opposition, or cooperation in an investigation.

This bill would also authorize the Labor Commissioner to enforce these requirements, including to investigate, mitigate, and order relief for violations.  It would also authorize the Labor Commissioner to impose statutorily-enumerated administrative fines, and would authorize the Labor Commissioner or any aggrieved employee to recover specified civil penalties, as well as attorneys’ fees, costs, and interest.

This bill appears loosely modeled on San Francisco’s Retail Workers’ Bill of Rights, which took effect in 2015.  However, while the San Francisco Ordinance only applies to larger employers (e.g., those with at least 500 employees and 10 locations in California), SB 878 appears to apply to all covered employers regardless of size.

Status:  This bill passed the Senate’s Labor and Industrial Relations Committee and is pending in the Appropriations Committee.  A similar bill (AB 357) that would have applied to larger employers (500+ employees in California) stalled in committee last year.

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

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

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

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

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

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

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

Status:  This bill unanimously passed the Assembly’s Labor and Employment Committee and is pending in the Appropriations Committee.

Equal Pay Regardless of Race or Ethnicity (SB 1063)

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

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

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

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

Equal Pay Certifications for Certain State Contractors (AB 1890)

Entitled the Equal Pay for Equal Work Act of 2016, this bill would amend Government Code section 12990 which presently identifies criteria for employers who wish to become a contractor for public works, including agreeing to California’s non-discrimination laws and submitting a non-discrimination program to the Department of Fair Employment and Housing (DFEH) for approval and certification.  For instance, while California presently states the DFEH “may require” a non-discrimination plan to be submitted, this bill would require employers with more than 100 employees in the state and a contract with the state of 30 days or more to submit a description of its non-discrimination program and to submit periodic reports, no more than annually on a schedule to be determined by the department, of its compliance with this program.  Employers with less than 100 employees in the state or a contract less than 30 days may also be required to submit a non-discrimination program and, if so required, to comply with the same requirements applicable to employers with more than 100 employees in the state.

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

These proposed reporting changes appear similar to the August 2014 federal Department of Labor OFCCP’s Notice of Proposed Rulemaking to require covered federal contractors and subcontractors with more than 100 employees to submit an annual equal pay report on employee compensation.  As a reminder, the federal Equal Employment and Opportunity Commissioner is presently considering proposed changes to its EEO-1 Report, which would apply to all employers with more than 100 employees (not just federal contractors) and would require the submission of payroll data broken down by race/ethnicity, not just gender.

Status:  This bill passed the Assembly’s Labor and Employment Committee and is pending in the Appropriations Committee.  Governor Brown vetoed a very similar bill (AB 1354) in 2015.

Individual Alternative Workweek Schedules Proposed (SB 985)

While California authorizes “alternative workweek schedules” whereby non-exempt employees can work up to ten hours daily without receiving overtime, it is often difficult to obtain the two-thirds work-unit approval required under Labor Code section 510.  Known as the Workplace Flexibility Act of 2016, this bill would permit individual non-exempt employees to obtain an “employee-selected flexible work schedule” providing for workdays up to ten hours without daily overtime between eight to ten hours worked, and to do so without completing the more detailed alternative workweek schedule procedure in section 511 when implementing a work-unit-wide alternative schedule.  This bill would retain the general daily overtime rule for employees who did not elect such schedules, and would also retain daily and weekly overtime for work performed beyond the hours contemplated in the sched