Client Alert: 2016 California Employment Law Summary

December 30, 2015

Client Alert

2016

California Employment Law Summary

Contact Information

Andrew Shalauta

(510) 835-6708

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Mr. Shalauta provides labor and employment counsel to businesses on California and federal labor and employment laws including FEHA, NLRA, TitleVII, FMLA, CFRA, PDL, ADA, FLSA, ADEA, Labor Code, Wage Orders, and PAGA. He has been litigation counsel on multiple wage and hour class actions involving claims for unpaid overtime, meal and rest breaks, and off-the-clock time. He counsels employers on company policies, wage and hour compliance, executive compensation, employment agreements, independent contractor agreements, and labor disputes.

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Eugene Lee

(510) 835-6811

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Eugene Lee is an associate at Burnham Brown. Mr. Lee practices commercial and employment law, and defends employers in business disputes and in employment claims. He represents retail, corporate, and public entity clients. He is also a member of the Korean American Bar Association of Northern California's Pro Bono Committee.

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Office Locations

Oakland
Los Angeles
San Francisco
Nevada

As the calendars turn to 2016, a new slate of state laws will come into effect that will impact both public and private employers. State legislators were busy last year, and a review of the new legislation indicates that Sacramento intends to add more workplace regulation that will need to be monitored by employers in the coming year and going forward. Additionally, starting January 1, 2016, the California state minimum wage is set to increase from $9.00 to $10.00. The minimum wage increase will also increase the required salary threshold for exempt employees under California's Wage Orders. Finally, it appears that California will be at the forefront of court decisions in 2016 regarding workers in new 'transportation' companies such as Uber or Lyft. These court decisions will help shape how technology companies and transportation evolve in the coming years in California and the United States, and whether Uber and Lyft 'drivers' will be treated as regular employees or independent contractors.

New Laws for 2016

Paid Sick Leave

Assembly Bill (AB) 1522 created California's paid sick leave obligations for most California employers, with its provisions taking effect on July 1, 2015. The new changes to the paid sick leave law include requirements that an employee who works for thirty or more days within a year from the beginning of employment is entitled to paid sick leave. The law additionally expands paid sick leave to employees who formerly were not eligible. These employees-including part-time and temporary employees-will earn at least one hour of paid sick leave for every 30 hours worked. These accrued paid sick leave days may be used starting on the 90th day of employment. As such, employers should consider modifying their current policies to implement the new provisions set forth by AB 1522, and coordinate their time keeping and payroll to ensure that such hours are properly tracked. (Amended Labor Code §§245.5, 246, and 247.5.)

Meal Period

With SB 327, Labor Code Section 516 is amended to determine that health care employees meal period waiver provisions are valid. Specifically, Labor Code Section 512 requires two meal period for work periods of more than 10 hours, but employees normally are allowed to waive their second meal period of the total hours worked in the shift is no more than 12 hours. However, health care workers who works shifts in excess of 8 total hours are permitted waive their second meal period. SB 327 reaffirms this provision and clarifies a recent decision in Gerard v. Orange Coast Memorial Medical Center. (234 Cal.App.4th 285 (2015)).

Equal Pay

Senate Bill (SB) 358-commonly known as the Fair Pay Act-mandates equal pay for "substantially similar work." The Fair Pay Act does this by modifying California's equal pay statute to lower the burden of proof for plaintiff's claims-and inversely increase the burden of proof for an employer's defenses-as well as enabling employees to coordinate with each other regarding their wages for the purpose of determining a factual basis for a equal pay claim. The legislation additionally increases the employer's recordkeeping requirements from two years to three years. As such, employers are advised to review their compensation systems and record retention policies to ensure that they are compliant with the new law. (Amends Labor Code §1197.5.)

PAGA Suits

AB 1506 amends the Labor Code's Private Attorneys General Act of 2004 (PAGA) and provides employers with a limited right to cure violations, such as missing information on employees' wage statements. However, the new law does not prevent employees from seeking statutory penalties, and employers are only permitted to cure such violations once within a 12 month period. In light of these changes, employers are advised to include the requisite name and address of the employer's legal entity and the dates of the pay period and ensure compliance with all wage statement requirements, as well as prepare to cure any violation in a timely manner. (Amends Labor Code §§2699, 2699.3, 2699.5.)

Whistleblower Protection for Family Members

California whistleblower protections will be expanded in 2016 to include the family members of whistleblowers. With AB 1509, employers will be prohibited from discharging, discriminating, retaliating, or taking adverse action against any employee who is a family member to anyone perceived to be engaged in protected conduct. Furthermore, under AB 1509, Labor Code section 2810.3 is amended to exclude certain household goods carrier employers from the joint liability program imposed between the client employer and a labor contractor. (Amends Labor Code §§98.6, 1102.5, 2810.3, and 6310.)

School Activities

Starting on January 1, 2016, California law will be expanded through SB 579 to allow employees to take unpaid time off to participate in their children's school or daycare activities. The new law expands the grounds for taking unpaid leave to include time (1) to find or enroll their children in a school or day care and (2) to attend to a day care or school emergency. The latter extends to many different situations, such as behavior issues or the unexpected unavailability of school or childcare provider. Additionally, the new law expands the unpaid time-off benefits to stepparents, foster parents, or stand in parents.(Amends Labor Code §§ 230.8 and 233.)

Wage Garnishment Restrictions

Sacramento also enacted further restrictions on wage garnishment. SB 501 amends, repeals, and adds Section 706.050 of the Code of Civil Procedure and reduces the prohibited amount of an individual judgment debtor's weekly disposable earnings. The new law will provide additional protections to debtors and limit the amount that creditors can pursue from their wages. (The prohibited amount is subject to levy under an earnings withholding order from exceeding the lesser of 25% of the individual's weekly disposable earnings or 50% of the amount by which the individual's disposable earnings for the week exceed 40 times the state minimum hourly wage, or applicable local minimum hourly wage, if higher, in effect at the time the earnings are payable)

Piece-Rate Compensation

AB 1513 elaborates new obligations from employers to compensate for "non-productive" time. The new law covers employees paid on a piece-rate compensation system. With the new law, these employees must now receive a separate hourly rate for non-productive time, which accounts for non-piece-rate tasks or idle time. The new law also states a formula for calculating rest and recovery time. The law also includes affirmative defense and safe harbor provision to employers who, by December 15, 2016, fully compensate their specified employees for all under-compensated or uncompensated rest periods, recovery periods, or unproductive time between July 1, 2012 and December 31, 2015. Employers that us piece rate compensation systems must ensure they are complying with the new law and take steps to audit and compensate employees if required by law for any past violations under the safe harbor provision. (Adds and repeals section 226.2 of, and repeals sections 77.7, 127.6, and 138.65 of, the Labor Code.)

E-Verify System

AB 622 prohibits employers from using the E-Verify system to check the employment authorization status of existing employees or applicants who have not received an offer of employment, except as required by federal law. Employers should still be able to utilize E-Verify in accordance with federal law to check the employment authorization status of a person who has been offered employment. Under the new law, employers who receive any notification from the Social Security Administration or Department of Homeland Security containing information regarding any discrepancies in an employee's E-Verify case must provide notification to the employee as soon as possible. Finally, there are penalties for up to $10,000 for employers who violate the E-Verify laws.

Protecting Reasonable Accommodation Requests

The California Assembly passed AB 987 midway through 2015 and provided additional protections for employees against retaliation from employers when individuals request a reasonable accommodation under the California Fair Employment and Housing Act (FEHA). This protection exists regardless of whether the request was actually granted. Prior to AB 987, employers were able to terminate employees who requested reasonable accommodations and left employees without a legal recourse. AB 987 clarifies the holding of Rope v. Auto-Clor System of Washington, Inc. 220 Cal. App. 4th 635 (2013), a Second District case that addressed the issue of retaliation against reasonable accommodation requests under FEHA. (Amends Government Code section 12940.)

The Labor Commissioner: Wage Theft and Other Matters

In 2015, the State Legislature passed legislation that increased the authority and ability of the Labor Commissioner to regulate and enforce wage-related matters.

First, SB 588-otherwise known as the Fair Day's Pay Act-empowers The Labor Commissioner to take action in order to assist employees in collecting unpaid wages. The new law is a huge boost to employees pursuing delinquent employers who violates provisions involving wage theft or other liabilities. A bond of up to $150,000 may be required of an employer who does not promptly pay a judgment for unpaid wages. (Adds sections 690.020-690.050 to the Code of Civil Procedure; amends section 98 of the Labor Code, and adds sections 96.8, 238, 238.1, 238.2, 238.3, 238.4, 238.5, and 558.1.)

Additionally, the Labor Commissioner now has the expanded authority under AB 970 to issue a citation to enforce local minimum wage and overtime laws, including against an employer or person acting on behalf of an employer for violations of existing law related to reimbursements for expenses. These expansions signal a turn towards more employee-friendly directives from Sacramento and indicate the state's willingness to enforce local employment laws. (Amends Labor Code sections 558, 1197, 1197.1, and 2802.)

Public Works

The State Legislature also addressed employment regulations in the public sector, most notably by expanding the definition of "public works" within the scope of the Labor Code. For example, AB 219 expanded the definition of "public works" to include the hauling and delivery of ready-mixed concrete and AB 852 expanded "public works" to include any construction, alteration, demolition, installation, or repair work done under private contract on a general acute care hospital. (Adds Labor Code section 1720.9 and 1720.7.)

Miscellaneous Changes

There have been some other changes and clarifications to various terms under the Labor Code. Under SB 667, the duration of the "disability benefit period" is extended from 14 days to 60 days. SB 432 deletes two statutory provisions containing the term "alien," used to describe any person who is not born in or a fully naturalized citizen of the United States, from the Labor Code. (Amends, repeals, and adds sections 2608 and 2627 of the Unemployment Insurance Code.) (SB 432 specifically repeals the definition of "alien" through Labor Code §§1725 and 2015.)

Beginning on January 1, 2017, AB 1245 will require an employer with 10 or more employees to file all reports and returns electronically, and remit all contributions for unemployment insurance premiums by electronic funds transfer, except as provided in the law. Beginning on January 1, 2018, these electronic filing and fund transfer requirements will be extended to all employers.

The bill would authorize the granting of a waiver from these requirements. Additionally, the new law would impose a penalty of $50 on those employers who fail to file a quarterly return electronically without good cause. (Amends sections 1088, 1110, 1112, 1114, 13002, and 13021 of the Unemployment Insurance Code, and adds section 1112.1.)

Misclassification of Uber and Lyft Drivers

Many lawsuits and legal decisions occurred in 2015 that will continue to frame the legal debate over the distinction between an employee and an independent contractor in the scope of the shared-economy world. First, in June 2015 the Labor Commission ruled that an Uber driver is considered an employee-not an independent contractor-and thus ordered Uber to provide work-related expenses. Similarly, in August the California Employment Development Department determined that a former Uber driver was an employee and thus was entitled to unemployment benefits. In September, the federal court in San Francisco ruled that Uber drivers could proceed as a class in a class action suit against Uber regarding lost tips.

While the determination of workers in a shared economy as employees has not yet been settled by the state court system, California will continue to at the forefront of this litigation in 2016.

Conclusion

Employers doing business in California must ensure their wage and hour practices comply with the new set of laws going into effect in 2016. As always, employers should consider updating employee handbooks, internal policies and procedures, and advise any supervisors or managers of the new changes in recordkeeping, responsive deadlines, and other related matters.