EMPLOYMENT LAW UPDATE: 2018 Brings Major Changes for California Employers

Several important new California employment laws took effect on January 1, 2018. These new laws will impact California employers from the pre-hiring stage through the entire employment relationship.

Restriction on Obtaining Salary History

Effective January 1, 2018, Assembly Bill 168 went into effect, which prohibits all California employers from:

  • Directly or indirectly inquiring into a job applicant’s salary history, compensation or benefits
  • Using such salary history information in determining whether to extend a job offer or in deciding what salary to offer the applicant.

Note that AB 168 does not prohibit applicants from disclosing wage history information “voluntarily and without prompting.” If an applicant makes a voluntary disclosure, then the employer may use it to determine whether to extend a job offer and/or to decide the compensation to offer. Further, upon request from an applicant, employers must disclose pay scales for a position. The new law also does not prohibit obtaining or using pay history information disclosable to the public under federal or state law.

This law (and new laws like it in other states and cities) constitutes a major change that employers need to be aware of and have training in. In addition, an employer’s form application and other documents should be reviewed for compliance (for example, by deleting any request for information about prior salary).

Expansion of Parental Leave to Employers with 20 or More Employees

California Government Code Section 12945.6 has expanded the “baby bonding” protections of the California Family Rights Act (“the CFRA”) to smaller employers. Previously, employers with 50 or more employees have been required to comply with the obligation to provide baby bonding leave under the CFRA. Effective January 1, 2018, employees who have at least 1,250 hours of service with the employer during the previous 12‐month period and who work at a worksite in which the employer employs 20 to 49 employees within 75 miles will be permitted to take up to 12 weeks of unpaid parental leave to bond with a new child.

The parental leave must be taken within one year of the child’s birth, adoption, or foster care placement. While on leave, the employee may use accrued vacation pay, paid sick time, other accrued paid time off during the leave. The employer is required to maintain health coverage under a group health plan under the same conditions that would have been provided to the employee if the employee were not on leave (not to exceed 12 weeks over the course of the 12‐month period following commencement of the leave). The employer must guarantee reinstatement of employment for the employee in the same or comparable position at the end of the leave.

Limitations on Using Conviction Records

As of January 1, 2018, per AB 1008, which adds Government Code Section 12952 to the Fair Employment and Housing Act (“FEHA”), California employers with five or more employees are prohibited from:

  • Including any question seeking disclosure of a job applicant’s conviction history on an employment application;
  • Asking orally or in writing for an applicant’s criminal conviction history prior to a conditional offer of employment to the applicant; and
  • Considering, distributing, or disseminating information about the following while performing a background check after a conditional offer of employment: (a) certain arrests not followed by a conviction, (b) referral to or participation in a pre-trial or post-trial diversion program, and (c) convictions that have been sealed, dismissed, expunged, or statutorily eradicated pursuant to law.

When an employer intends to deny an applicant a job offer based on an applicant’s conviction history, the new law requires the employer to make an individualized assessment and comply with certain notice procedures before denying employment. However, note that in particular circumstances, employers may consider conviction history after a conditional offer is made. Further, if specific steps are taken, an employer may rescind a conditional offer of employment due to conviction history.

New Tax Law Makes Settlements for Harassment Claims Non-Deductible

Employers have generally been able to treat settlement amounts and legal fees as tax deductible. The new Tax Cuts and Jobs Act prohibits deductions of amounts paid in confidential settlements made after December 22, 2017 involving sexual harassment or abuse. This now presents a challenge for employers who are attempting to resolve these types of claims out of court.

The new tax law, codified in Section 162(q) of the Internal Revenue Code, disallows deductions for sexual harassment or sexual abuse where the settlement is made pursuant to a nondisclosure agreement or confidentiality limitation. This denial of deductions applies not only to settlement payments, but also attorneys’ fees related to the claim. Employers may find themselves faced with two undesirable options: disclosing a settlement and preserving their available deductions, or entering into a confidential settlement and losing the ability to deduct the amounts they have paid to settle a sexual harassment claim. Careful drafting of any applicable settlement agreement is critical to avoid this dilemma; for example, a sexual harassment case often involves multiple claims and settlement allocations between the claims (with a legitimate factual basis) can support an allocation that maximizes available deductions.

Harassment Prevention Training Regarding Gender Identity, Gender Expression, and Sexual Orientation

Senate Bill 396 (the Transgender Work Opportunity Act) amended the FEHA on January 1, 2018 to require California employers to expand the required sexual harassment prevention training to include issues of gender identity. Previously, FEHA has required employers with 50 or more employees to provide 2 hours of sexual harassment prevention training to all supervisory employees within 6 months of their assumption of a supervisory position and once every 2 years thereafter. SB 396 expands the prevention training requirement to include training regarding gender identity, gender expression, and sexual orientation. A poster will also be developed by the Department of Fair Employment and Housing regarding transgender rights, which must be posted in an accessible and prominent location in the workplace.

Expanded Rules for Retaliation Complaints

Senate Bill 306, effective January 1, 2018, enables the California Labor Commissioner to investigate suspicions of retaliation that arise in the course of matters within the Labor Commissioner’s jurisdiction, even without receiving a complaint by the affected employee. Previously, the Labor Commissioner was permitted to investigate alleged retaliation claims only after receiving an employee complaint. Now, the Labor Commissioner can proceed without a complaint in cases where suspected retaliation has occurred during adjudication of a wage claim, during a field inspection, or in instances of suspected immigration-related threats.

In addition, SB 306 expands the remedies that the DLSE may impose if retaliation is found. For example, the Labor Commissioner can now petition a court for injunctive relief “during the course of an investigation,” meaning before an investigation has been completed and before any finding of violation has been made. Further, the Labor Commissioner will be entitled to injunctive relief simply by establishing that “reasonable cause” exists to believe an employee has been unlawfully discharged, retaliated against, or subjected to an adverse action.

DOL Reinstituted 17 Bush-Era Advisory Opinion Letters on Various Wage Issues

On January 5, 2018, the U.S. Department of Labor (“DOL”) re-issued approximately 17 advisory opinion letters that were published late in former President George W. Bush’s administration, but later withdrawn when former President Barack Obama took office. Through opinion letters, employers can ask the DOL for formal answers to their compliance questions under the Fair Labor Standards Act (“FLSA”), and responses constitute an important form of guidance for employers and employees as to compliance with the FLSA and other applicable laws. These reinstated advisory opinion letters cover a wide range of topics, including whether various employees qualify for exemptions from the FLSA’s minimum wage and overtime requirements and whether certain job bonuses must be included in an individual’s regular pay rate.

New Increase of the State Minimum Wage Effective January 1, 2018

The California minimum wage increased on January 1, 2018, from $10.50 an hour to $11.00 an hour for employers of 26 or more employees, and from $10.00 an hour to $10.50 an hour for employees of 25 or fewer employees. Exempt employees, in addition to meeting exempt duties requirements, must be paid a weekly salary of no less than two times the minimum wage, meaning $880 weekly and $45,760 annually ($840 weekly and $43,680 annually for employers of 25 or fewer employees).
All employers should also determine if their local municipalities and cities have minimum wage requirements that exceed California’s requirements.

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We invite you to contact SV Employment Law Firm PC for additional details on any of the above new employment laws.