Every year, the California Legislature seems to present gifts and challenges, depending on one’s perspective. This year’s most notable new law with potentially far-reaching impact is the Fair Pay Act. Other significant bills include clarifications ranging from triggering events for retaliation claims to piece rate compensation. The following are highlights of significant new California employment laws, most of which will take effect on January 1, 2016. All of the new laws are accessible at www.leginfo.ca.gov.
Expanded Discrimination and Retaliation Protections
1. The Fair Pay Act Expands Gender Pay Equality Requirements. Citing the continued gender wage gap in California in which a woman working full time earns an average of 84 cents to every dollar a man earns, the Fair Pay Act (SB 358) has been enacted to strengthen existing gender-based equal pay protections found in the California Labor Code (§1197.5). The Legislature noted that although California has prohibited gender-based wage discrimination since 1949 to redress the segregation of women into historically undervalued occupations, the law has been rarely utilized due to its restrictive requirements.
Current law prohibits employers from paying employees of one gender less than employees of the opposite sex for equal work requiring equal skill, effort, and responsibility, when the work is performed under similar working conditions in the same establishment. The Fair Pay Act eliminates the “same establishment” language and instead prohibits employers from paying employees of one gender less for “substantially similar” work, when viewed as a composite of skill, effort, and responsibility. Employers must establish that gender-based wage differentials are based on one or more factors, including a seniority system, a merit system, a system that measures earnings by quantity or quality of production or a bona fide factor other than sex, such as education, training, or experience. In order to establish such a “bona fide factor,” the employer must demonstrate that the factor is not based on or derived from a sex-based differential in compensation, is job related with respect to the position in question, and is consistent with business necessity. “Business necessity” is defined as an “overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve.” The employer must demonstrate that each factor relied upon was applied reasonably and accounts for the entire differential. However, this defense will not apply if the employee demonstrates that an alternative business practice exists that would serve the same business purpose without producing the wage differential.
The Legislature noted that pay secrecy contributes to the gender wage gap because women cannot challenge wage discrimination that they do not know exists. Although California law already prohibits employers from banning wage disclosures and retaliating against employees for doing so, many employees are unaware of these legal protections. Thus, the Fair Pay Act also makes it unlawful for employers to prohibit employees from disclosing their own pay, discussing the pay of others, inquiring about another employee’s wages, or aiding or encouraging other employees to exercise their rights under this law. However, the Act does not require an employee to disclose wages if asked.
2. FEHA Retaliation Protections for Requesting Disability or Religious Belief Accommodations. The California Fair Employment and Housing Act (“FEHA”) requires employers to reasonably accommodate qualified employee’s disabilities and religious beliefs and prohibits discrimination and retaliation against employees for engaging in protected activity (such as filing a complaint). AB 987 clarifies that when an employee requests a disability or religious accommodation, the employee has engaged in protected activity regardless of whether the accommodation request is granted. Thus, if an adverse employment action occurs after an employee’s accommodation request, the employee may contend that he or she was retaliated against because of the request.
3. Whistleblower and Anti-Retaliation Protections Strengthened. AB 1509 prohibits employers from discharging or discriminating, retaliating, or taking any adverse action against a family member of a person who engaged in, or was perceived to engage in protected conduct, such as complaining about unpaid wages. Furthermore, AB 1509 expands these prohibitions to entities that are considered joint employers, which is extended to “client employers,” namely companies that contract for labor.
Time Off Protections
1. School Activities Parental Time Off. For many years, employers with 25 or more employees were required to allow employees who are parents or guardians of a child in a licensed day care center or kindergarten through grade 12 to take up to 40 hours of unpaid time off per year to participate in school activities. SB 579 expands this law to include time off to find, enroll or reenroll a child in a school or with a licensed child care provider as well as time off to address a child care provider or school emergency (e.g., when the child must be picked up due to illness).
2. Time Off for National Guard Service. California law currently provides job reinstatement protections for employees who are ordered to active National Guard service. AB 583 extends these protections to National Guard members of states other than California who are called to active duty causing them to leave their employment in California.
Wage and Hour Obligations
1. New Compensation Minimum for Computer Professional Overtime Exemption. The Department of Industrial Relations has announced that, effective January 1, 2016, the minimum hourly rate for computer software professionals to qualify as exempt from overtime has been increased from $41.27 to $41.85 per hour. The monthly salary exemption for these employees has been raised from $7,165.12 to $7,265.43, which equates to an annual salary of $87,185.14.
2. New Rules for Piece Rate Employees. Various court cases have addressed requirements for paying employees for non-productive time and for rest and recovery periods when they are otherwise paid on a piece rate basis. AB 1513 requires that rest and recovery periods and other nonproductive time must be paid at a regular hourly rate formula specified by the statute or the applicable minimum wage (defined as the highest of the federal, state, or local minimum wage that is applicable to the employment). “Other nonproductive time” is defined as time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.
AB 1513 sets up a “safe harbor” for employers who have not already adhered to these specific requirements, meaning that employers would be protected from liability. To be eligible, employers must, among other things, pay its piece rate employees for previously uncompensated rest and recovery periods and other nonproductive time from July 1, 2012 to December 31, 2015 using a specific formula provided by the statute. This “safe harbor” compliance must be completed by December 15, 2016.
In addition, AB 1513 requires itemized paycheck statements to separately state the total hours of compensable rest and recovery periods, the rate of compensation, the gross wages paid for those periods, the total hours of other nonproductive time, the rate of compensation, and the gross wages paid for that time.
3. Employers’ Rights Increased Under Private Attorneys General Act For Certain Itemized Wage Statement Violations. The Labor Code Private Attorneys General Act of 2004 (“PAGA”) allows an aggrieved employee to bring a civil action to recover specified civil penalties that would otherwise be assessed and collected by the Labor and Workforce Development Agency on behalf of the employee and other current or former employees. Employers have the right to cure certain violations before the employee may bring a civil action under PAGA. AB 1506 now gives employers the right to cure certain itemized wage statement violations, namely the requirement that an employer provide its employees with the inclusive dates of the pay period and the name and address of the employer’s legal entity, before an employee may bring a civil action under PAGA. Employers may exercise this right to cure once in a 12-month period. This law went into effect on October 2, 2015.
4. Labor Commissioner Enforcement Powers Expanded. The California Labor Commissioner has certain legal authority to collect wages and penalties that have been adjudicated to be owed by employers. SB 588 authorizes the Labor Commissioner to use any of the existing remedies available to a judgment creditor and to act as a levying officer when enforcing a judgment. This bill also authorizes the Labor Commissioner to issue levies and liens on the employer’s property and to issue “stop orders” which prohibit the employer from using any employee labor, with certain limited exceptions. This bill also authorizes the Labor Commissioner to recover civil penalties not just from the employer, but also personally from any individual acting on behalf of the employer who violates certain provisions of the Labor Code, including minimum wage and overtime requirements.
5. Professional Cheerleaders Are Employees. Well-publicized lawsuits by Oakland Raiders cheerleaders regarding pay practices have led to a new law. AB 202 requires that cheerleaders for California-based professional sports teams during exhibitions, events, or games are to be classified as employees for purposes of all California employment laws, including the Labor Code, the Unemployment Insurance Code, and the California FEHA.
Immigration Law Requirements
1. Use of E-Verify Limited. Participating employers may voluntarily use the federal E-Verify system to ensure that employees they hire are authorized to work in the United States. AB 622 prohibits employers from using the E-Verify system at a time or in a manner not required by federal law to check the employment authorization status of an existing employee or an applicant who has not received an offer of employment, except when it is required by federal law or as a condition of receiving federal funds. There is a civil penalty of $10,000 for each such violation. Employers, however, are still allowed to use E-Verify to check the employment authorization status of an individual who has been offered employment.
- Analyze employees’ wages based on gender and job classification. Determine whether jobs with different job titles or classifications are “substantially similar” and if any gender wage differentials exist. Ensure any wage differentials for substantially similar work are based on proper factors.
- Carefully evaluate disability and religious accommodation requests and clearly document the interactive process and determination. Ensure that the employee is not mistreated or retaliated against after making an accommodation request.
- Review and update your Employee Handbook. As necessary, update your School Activities Parental Time Off policy.
- Ensure your California-based computer software professionals are paid at least the new minimum amount to ensure their overtime exemption status.
- If any employees are paid on a piece rate basis, ensure that nonproductive time and rest breaks are properly compensated.
- If your business uses E-Verify, review procedures and ensure its use is consistent with California legal requirements.
For more information or assistance with employment law compliance matters, please contact Ms. Topliff at email@example.com.