Employment Law Update 2016

It is good to annually review your employment policies and practices to make sure you are keeping up to date with California’s ever-changing employment laws.  The following is a summary of the key updates over the past year affecting California employers.  Take a moment to review the new laws, and consider whether there are areas of your business that may be affected.  As always, please don’t hesitate to contact Dan Gardenswartz, Bill Whelan, or Tanya Schierling (our Labor and Employment partners) if you have any questions or concerns.

Minimum Wage Increase

Effective January 1, 2016, California’s minimum wage is $10.00 per hour.  Note that this will also affect the minimum annual salary for employees to be eligible for exempt status.  In 2015 employees had to make at least $37,440 to be eligible for exempt status, in 2016 that number jumps to $41,600 annually.

Paid Sick Leave Amendment (AB 304)

New for 2015 was California’s Healthy Workplaces, Healthy Families Act of 2014 (the “Act”).  The Act requires employers to provide employees with paid “sick” leave, accruing at a rate of one hour of paid leave for every 30 hours worked.  The Act went into effect on July 1, 2015.  On July 15, 2015, Governor Brown signed AB 304 into law, requiring employees to work at least 30 days for an employer before becoming eligible for the new paid sick leave schedule.  AB 304 also validated alternative accrual methods so long as the employee has 24 hours of paid sick leave available by the 120th calendar day of employment.  For more details on this new law and to ensure policy compliance, please contact one of our Labor and Employment partners.

Misuse of E-Verify System now a Labor Code Violation (AB 622)

Many employers use the federal E-Verify system to ensure their employees (or applicants who have received an offer of employment) are able to work legally in the United States.  Federal law prescribes the times and purposes for which the E-Verify system may be used. AB 622 adds Section 2814 to the Labor Code, which subjects an employer to a civil penalty of up to $10,000 for misusing the E-Verify system (that is, using it for a purpose other than that prescribed in the federal law).  The bill also imposes a duty on employers to provide affected employees with any notices issued by the Social Security Administration or the U.S. Department of Homeland Security.  Employers using the E-Verify system should ensure their use is within the provided limits to avoid these new potential penalties.

More Enforcement Power for Labor Commissioner (AB 970)

Existing law requires employers to reimburse employees for business expenditures (Labor Code Section 2802).  AB 970 amends Section 2802 to allow the Labor Commissioner to issue citations and penalties for failure to comply with 2802, in addition to the employer’s established duty to reimburse the employee.  AB 970 also authorizes the Labor Commissioner to enforce existing overtime and minimum wage laws.  Employers who have been cited by local authorities will not be subject to additional citations from the Labor Commissioner.  (See also SB 588, below.)

Requesting an Accommodation is Protected Activity (AB 987)

The 2013 case of Rope v. Auto-Chlor System of Washington Inc., 220 Cal.App.4th 635 (2013) held an employee’s request for accommodation was not itself a protected activity under California’s Fair Employment and Housing Act (Gov’t Code Section 12940, et. seq.).  In response, the California Legislature enacted AB 987, clarifying that a request for reasonable accommodation for a disability or religious belief is protected activity, regardless of whether the accommodation is actually granted.  Employers should have policies in place to deal with accommodation requests, and ensure they are engaging in the interactive process and providing accommodations where required by law.

New Cure Period for PAGA Claims (AB 1506)

The California Private Attorney General Act, Labor Code section 2699 et seq., allows an aggrieved employee to file suit personally and on behalf of other similarly-situated employees for various Labor Code violations.  The employee can recover penalties normally collected by the Labor Commissioner. Since the enactment of PAGA, the proverbial “floodgates” have opened, leading to what the Legislature has determined to be an excess of claims.  To curb the volume of PAGA claims, AB 1506 gives employers the ability to cure a limited number of wage statement violations under Labor Code 226(a) within 33 days of being notified by the potential plaintiff.  If the employer cures the violation, the plaintiff will not be able to file a PAGA claim on that violation.

Discrimination/Retaliation Based on Family Member Activity (AB 1509)

Existing law prohibits employers from discriminating or retaliating against someone who engages in protected conduct under the Labor Code (e.g., complaining about a safety issue, “whistleblowing,” complaining about wage violations, etc.).  AB 1509 expands existing protection to prohibit employers from taking any adverse employment action against an employee based on the protected activity of that employee’s family members.

Piece-Rate Compensation Modification (AB 1513)

Some employers compensate their employees on a piece-rate basis.  Existing law permits such compensation, though not without hurdles.  AB 1513 codifies an issue previously decided by the courts, requiring employees to be separately compensated at an hourly rate for all nonproductive time.  “Nonproductive time” includes rest breaks and other time spent under the control of the employer but not actively engaged in piece-rate work.  The bill includes a formula for calculating the proper hourly rate based on the employee’s piece-rate compensation. All California employers still using a piece-rate system are well advised to consult with their Labor and Employment counsel.

Gender Pay Disparity (SB 358)

California Labor Code 1197.5 prohibits an employer from paying an employee less than what is paid to the opposite sex for “equal work.”  SB 358 changes the requirement from “equal work” to “substantially similar work.”  Substantially similar work is determined by the “composite of skill, effort, and responsibility performed under similar working conditions.”  The bill also provides a private right of action for employees to enforce the bill’s equal pay requirements.

Expanded Parental Rights for Time Off (SB 579)

Existing law requires employers to allow parents of school-aged children to take up to 40 hours of time off each year for school-related activities (Labor Code 230.8)  SB 579 expands 230.8’s coverage to cover employees who are step-parents, foster parents, or otherwise have legal “in loco parentis” status.  Employers are prohibited from taking any adverse employment action against such parents, relatives, or guardians.

Expanded Enforcement Power for Labor Commissioner, Part 2 (SB 588)

SB 588 enables the Labor Commissioner to enforce judgments for nonpayment of wages through any means available to judgment creditors.  The Labor Commissioner may now put liens to property, credit, and money, and act as if pursuant to a writ of execution.  SB 588 also holds managing agents, directors, officers, and owners individually liable for the willful failure to pay wages.

Expanded Unruh Act Coverage (SB 600)

California’s Unruh Civil Rights Act prohibits businesses from providing unequal accommodations to individuals based on sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, or sexual orientation.  SB 600 expands coverage under the Act to protect individuals from unequal accommodation based on immigration status, citizenship, or primary language.  The bill does specify, however, that it does not require businesses to provide their services (or written documents) in languages other than English.

Workers’ Compensation for Undocumented Workers (SB 623)

Existing law prohibits an undocumented worker from applying to receive funds from the Uninsured Employer’s Fund or the Subsequent Injuries Benefits Trust Fund—state insurance funds set up for employees who are injured on the job, but whose employers do not have workers’ compensation insurance.  SB 623 adds Labor Code Section 3733 to extend the availability of these benefits to undocumented workers, prohibiting the benefits from being denied on the basis of citizenship or immigration status.

NLRB Update

In Browning-Ferris Industries v. Sanitary Truck Drivers and Helpers Local 350, the National Labor Relations Board further expanded employer liability by holding a company may be liable as a “joint employer” if it exerts even “indirect” control over another entity’s employees.  The precise level of control required is still unclear, but employers in potential “joint employer” scenarios have an additional reason to exercise extreme caution.

EEOC v. Abercrombie & Fitch Stores, Inc.

The United States Supreme Court issued a major decision in July of 2015, reversing a 10th Circuit ruling that Abercrombie had not discriminated against a Muslim applicant by refusing to hire her based, in part, on the fact that she wore a head scarf.  The Court held, in an 8-1 decision, that the plaintiff needed only to show that the need for religious accommodation (wearing the head scarf at work) was a motivating factor in Abercrombie’s refusal to hire.

O’Connor v. Uber

The Northern District of California issued an important ruling late this year in the Uber drivers class action case.  Uber drivers filed a class action based on Uber’s alleged failure to reimburse drivers for business expenses and improper collection/retention of tips.  Uber challenged the action on procedural grounds, arguing the claims were subject to arbitration.  The applicable arbitration agreement contained a PAGA waiver, which courts have consistently invalidated.  The court ruled that because the PAGA waiver could not be grammatically stricken from the arbitration agreement, the entire arbitration agreement was void and unenforceable.  The decision is a reminder to employers to ensure their arbitration agreements are carefully drafted to avoid common pitfalls which, as in this case, can void the entire arbitration agreement.