Employment Law Update 2018

As we enter the new year, now is a good time to review your employment-related policies and procedures and update them as needed to reflect the newest employment law developments.  Several new laws become effective on January 1, 2018.  In addition, courts issued several key decisions in 2017 that also affect employers and their employees.

The following are some of the more significant changes of 2017 that may be of interest to you and your Company.  Of course, this is not an exhaustive list.  You are encouraged to ask specific questions and to conduct further investigation with respect to any laws that may govern how to properly initiate, maintain, and—where appropriate—terminate the employer/employee relationship.  Our team is prepared to help.

California Minimum Wage Hike

As of January 1, 2018, the California minimum wage will increase to $11.00/per hour.  That increase not only affects hourly wage earners but other employees whose overtime exempt status may depend on how much over the minimum wage they earn (i.e. managers, inside sales, etc.).  Note also that various other cities, including San Diego, Los Angeles, and San Francisco, already have minimum (sometimes called “living”) wage requirements that exceed this statewide threshold.

Prohibition on Salary History Inquiries/Requirement to Disclose “Pay Scales” (AB 168)

As of January 1, 2018, employers may not ask applicants about their prior salary.  As such, all companies should ensure that no application forms request any information regarding prior salary, compensation, or benefits.  Interviewers should be trained regarding the law as well. Salary history cannot be asked about – either in writing or orally – nor relied upon when deciding whether to offer a job or deciding how much to pay an applicant.  The only exception is if prior salary information is voluntarily and without prompting disclosed by the applicant, it can be considered.

In addition, under the same law, employers must provide the “pay scale” for a position to applicants upon reasonable request.  So if you don’t have a pay scale for a given position, and assuming there is more than one person occupying that position, you should consider creating one.

No Inquiry about Convictions Until  a Conditional Offer is Made (AB 1008)

“Ban the Box” is an initiative promoted by civil rights groups to persuade employers to remove the check box that asks applicants about their criminal background. “Ban the Box” laws typically forbid employers from inquiring about an applicant’s criminal background until after a conditional offer of employment had been made.  In recent years, “Ban the Box” statutes have been enacted by municipalities such as Los Angeles, San Francisco, and New York.

Effective January 1, 2018, California’s “Ban the Box” Legislation [Assembly Bill No. 1008 (“AB 1008”)] will become effective state wide.

AB 1008 will amend the Fair Employment and Housing Act (“FEHA”) and will prohibit employers with five or more employees from inquiring about or considering an applicant’s conviction history, until a conditional offer had been given to that applicant.

AB 1008 also forbids employers from considering, distributing, or disseminating information related to an applicant’s arrest(s) not followed by conviction, referral to or participation in a pretrial or post trial diversion program, and convictions that have been sealed, dismissed, expunged, or statutorily eradicated.

Similar to the “Ban the Box” ordinance adopted in Los Angles, AB 1008 requires that employers follow a “fair chance” process before rejecting an applicant based in whole or in part on the applicant’s conviction history.

Individualized Assessment

The first step of the fair chance process is an individualized assessment of the applicant’s conviction history. The employer must assess whether the applicant’s conviction history has a direct and adverse relationship with the specific duties of the job, which would justify denying the applicant the position.

Written Notice

Once the employer makes a preliminary decision that the applicant’s conviction history disqualifies the applicant, the employer must provide the applicant a written notice of the decision and include a copy of the conviction history. The notice must also explain the applicant’s right to respond.

Waiting Period

After receiving the written notice, the applicant will have at least five business days to respond, before the employer may make a final decision. If the applicant disputes the accuracy of the conviction report and informs the employer that the applicant is taking steps to obtain evidence, the applicant will have another five business days to respond to the notice.

Final Decision

The employer must consider information submitted by the applicant. If the employer makes a final decision to deny because of the applicant’s conviction history, the employer must provide written notice of (1) the final denial, (2) any existing procedure the employer has for the applicant to challenge the decision or request reconsideration, and finally (3) the right to file a complaint with the Department of Fair Employment and Housing (“DFEH”).

Remedies for applicants who suffer a violation of AB 1008 will include all remedies available under FEHA, which include compensatory damages (e.g. lost wages), possible punitive damages, and attorneys’ fees.  An applicant may also pursue other rights and remedies that the applicant may have under any other law, including any local ordinances.

Additional Requirements for Mandatory Harassment Training (SB 396)

FEHA already requires employers with 50 or more employees to provide supervisory employees with two or more hours of sexual harassment training every two years. In addition to the recent “anti-bullying” training requirements, beginning January 1, 2018, this law will be amended to add training about harassment based on gender identity, gender expression, and sexual orientation as a component of the required two hours of training. The amendments enacted by Senate Bill 396 will also require employers to display a DFEH-developed poster regarding transgender rights in a prominent location in the workplace

Employers wishing to update their harassment training to comply with Senate Bill 396 (and if necessary the anti-bullying law already on the books) are encouraged to contact us with questions. Our experienced team is also well-qualified to provide compliant harassment training upon request.

Parental Leave Requirements – Small Employers (SB 63)

The New Parent Leave Act extends the California Family Rights Act requirement to offer up to 12 weeks of child-bonding time to qualified employees to employers with 20 or more employees within a 75-mile radius. The time requested can be within one year of a birth of a child, adoption, or foster care placement.

Eligible employees include those with 12 months of service and at least 1,250 hours of service to the company during those 12 months. If both parents share an employer, the employer need not give more than a total of 12 weeks between the two employees.

Employers cannot refuse to maintain and pay for group health plan coverage for employees on this leave.  However, if an employee fails to return to work after the leave because of a reason other than a serious health condition or circumstances beyond the employee’s control, the employer can recover the costs of the health plan.

Additionally, employers cannot discriminate against employees that choose to take this leave, nor can employers interfere with or deny this right.

New Prohibitions Relating to Immigration Enforcement (AB 450)

Beginning January 1, 2018, California employers cannot voluntarily consent to immigration officials’ entering nonpublic areas of the place of employment, or to immigration officials’ accessing employee records, unless the agent has a judicial warrant or a subpoena. These prohibitions apply unless federal law otherwise requires. Penalties for violating these provisions are from $2,000 up to $5,000 for a first violation, and from $5,000 up to $10,000 for each subsequent violation.

The law provides an exception for immigration officials’ review of I-9 Employment Eligibility Verification forms for which a Notice of Inspection is provided. In such cases, no subpoena is required. However, employers who receive a notice that an immigration agency will inspect I-9 Employment Eligibility Verification forms or other employment records must post a notice to employees of the upcoming inspection within 72 hours of receiving the notice of inspection, unless otherwise required by federal law.

Construction Contractor Liability for Wages (AB 1701)

Assembly Bill No. 1701 (“AB 1701”) (Labor Code Section 218.7) will hold construction contractors (general contractors) jointly and severally liable with their subcontractors “at any tier” for any unpaid wages, benefits, or contributions, including interest.  Note that this liability is imposed on general contractors even if the agreements with their subcontractors are considered valid independent contractor agreements.

AB 1701 applies to all private works contracts entered into on or after January 1, 2018. The general contractor’s liability will be limited to unpaid wages, fringe or other benefits payments/contributions, including interest. AB 1701 does not include penalties or liquidated damages. However, attorney fees may be awarded.

No Private Right of Action

In the one bit of good news for general contractors, AB 1701 does not provide a private right of action for employees of subcontractors. However, the Labor Commissioner, labor-management cooperation committees and third parties that are owed fringe or other benefits payments on the employee’s behalf (these are typically Unions) may bring claims against the general contractor. These entities are subject to a one year statute of limitation.

General Contractors’ Right To Request Payroll Information and Right to Withhold

Upon the general contractor’s request, subcontractors of all tiers must provide payroll records. The payroll records must contain enough information to apprise the general contractor of the subcontractor’s payment status in making fringe or other benefit payments or contributions to a third party on the employee’s behalf. If the subcontractor does not “timely” provide the information requested, the general contractor may withhold as “disputed” all sums owed. However, “timely” is not defined by AB 1701 and will likely be litigated.

Considerations

AB 1701 essentially places a burden on general contractors to monitor their subcontractors’ payroll. General contractors should also take caution before withholding from subcontractors, as work stoppage and increased costs could result. General contractors should consult with their counsel prior to signing any contracts with subcontractors, as there are strategies to mitigate some of the tough effects of AB 1701.

2017 Cases of Note

The following is a small selection of cases decided last year that may affect employers

Arbitration Agreements: Esparza v. KS Industries, L.P., 13 Cal. App. 5th 1228 (2017); Valdez v. Terminix Int’l Co. Ltd. P’ship, 681 Fed. Appx. 592 (9th Cir. 2017).

In a shift in interpretation of California law, both a California Court of Appeal and the federal Ninth Circuit ruled that at least certain claims under the Private Attorneys General Act (“PAGA”) are subject to an agreement to arbitrate. In Esparza, the California Court of Appeal ruled that claims for unpaid wages under Labor Code §558 are not “civil penalties” under PAGA and therefore may be subject to arbitration.  In Valdez, the Ninth Circuit held that individual employees can agree to arbitrate PAGA claims, notwithstanding the California Supreme Court’s Iskanian decision. That said, California’s state courts regularly refuse to apply “predispute” arbitration agreements to PAGA claims, including in the recent Julian v. Glenair, Inc. decision issued by the Court of Appeal, Second District on November 27, 2017 (case no. B277064).  Employers should regularly have their arbitration agreements reviewed by counsel to ensure they are up-to-date.

Vacation time policies: Minnick v. Automotive Creations, Inc., 13 Cal. App. 5th 1000 (2017).

The California Court of Appeal validated an employer’s policy of not beginning vacation accrual until after an employee’s first year of work.  The policy providing the waiting period was clearly stated to employees at the outset, and was enforceable.

This case highlights the importance of having a clear leaves of absence policy, and how the interplay between vacation, sick leave, and/or PTO policies continues to vex employers.  Employers  should regularly have their policy documents reviewed by counsel to ensure they are up-to-date.

WARN Act Expansion:  Boilermakers v. NASSCO, No. D070620 (Fourth Dist., Nov. 30, 2017).

On November 30, 2017 a California Court of Appeal drew a distinction between the federal and California versions of the “WARN” act.  In this case, the Court ruled that NASSCO violated that act by not giving the required 60 days’ advance notice when it merely furloughed about 90 workers for four to five weeks, but did not terminate their employment.  Indeed,  NASSCO continued to pay for health benefits for these employees; and some employees used vacation pay during the temporary layoff.

While this case may or may not be appealed, any employer of 50 or more employees who may be considering a “holiday shutdown” or similar furloughs may want to seek advice regarding the potential impact of this case.

Case to Watch

Class Action Waivers in Arbitrations Agreements

Supreme Court decision expected earlier this year, the United States Supreme Court heard oral argument in three cases involving whether class action waivers as part of arbitration agreements will continue to be  enforceable.  A decision is expected before June of 2018.  The cases are NLRB v. Murphy Oil USA, Inc., Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris.

Conclusion

These are only some of the many changes that continue to affect California employers, and we will continue to monitor developments in this area of the law.  To the extent that any of these changes affect your business, we suggest that you amend your policies, practices, and procedures accordingly.  If the need arises, we look forward to assisting you with any questions or concerns you may have with respect to your employment practices.