Employment Law Update: What’s In Store for California Employers in 2017 and Beyond?

In 2016, California Governor Jerry Brown signed numerous laws that will affect California employers. Here are some of the new laws that employers need to be aware of:

Employers Are Not Required to State Hours Worked on Wage Statements of OT Exempt Employees

AB 2535 clarifies the wage statement requirements for tracking hours worked for exempt employees. The bill was passed following the federal court decision in Garnett v. ADT, LLC, which held that employers must include total hours worked on pay stubs for exempt outside sales employees and executives because they received bonuses and stock options. Under the new law, employers are not required to provide itemized wage statements to employees if the “employee’s compensation is solely based on salary and the employee is exempt from payment of overtime,” or the “employee is exempt from the payment of minimum wage and overtime under …any applicable order of the Industrial Welfare Commission” and specified statutes.

Labor Code Section 226 was amended on July 22, 2016 to include:

“(j) An itemized wage statement furnished by an employer pursuant to subdivision (a) shall not be required to show total hours worked by the employee if any of the following apply:

(1) The employee’s compensation is solely based on salary and the employee is exempt from payment of overtime under subdivision (a) of Section 515 or any applicable order of the Industrial Welfare Commission.”

Single-User Bathrooms Can’t Be Gender Specific

AB 1732 requires employers with single-user restrooms to identify the facilities as “all gender” facilities, rather than as male or female facilities. The California Health and Safety Code Section 118600 was amended to define a “single-user restroom” as “a toilet facility with no more than one water closet and one urinal with a locking mechanism that is controlled by the user,” and will become effective March 1, 2017.

FPA Amendments

The California Fair Pay Act (“FPA”) contains two new amendments.

AB 1676 mandates that an employee’s prior salary cannot be used as the sole reason for a compensation disparity at the time of hire. Amendment to Section 1197.5 of the California Labor Code represents a modification of the original bill which removed a provision prohibiting employers from asking the candidate for their prior salary history. The practical effect of this amendment is to prevent the continued suppression of wages based solely on past suppression; i.e., eliminating the “Goodyear effect.”

SB 1063 (Labor Code section 1199.5) expands the FPA to prohibit wage differentials based on an employee’s race or ethnicity in addition to gender.

Increased Paid Family Leave and State Disability Insurance Benefits and Elimination of the 7-day Waiting Period

Commencing in January 2018, AB 908 (Unemployment Insurance Code section 2655) increases the benefits provided to individuals in the Paid Family Leave and State Disability Insurance programs for periods of disability starting on or after January 1, 2018. The level of benefits increase from the current level of 55% to 60% or 70%, depending on the applicant’s income. Significantly, after January 1, 2018, the often confusing and burdensome (from an employer’s point of view) 7-day waiting period (the time individuals must wait for benefits eligibility) for family temporary disability benefits will no longer apply.

Employees Cannot Be Compelled to Disclose Prior Juvenile Court Convictions.

AB 1843 (Labor Code section 432.7) prohibits employers from asking about, or taking into consideration, applicants’ juvenile arrests and criminal convictions. Specifically, the law states, “employers [are prohibited] from asking an applicant for employment to disclose, or from utilizing as a factor in determining any condition of employment, information concerning or related to an arrest, detention, processing, diversion, supervision, adjudication, or court disposition that occurred while the person was subject to the process and jurisdiction of juvenile court law.”

Bill to Prevent and Reduce Instances of Assault by Transportation Network Company Drivers

In light of increasing incidents of sexual assaults allegedly occurring in transportation network companies (TNC) (companies “operating in California that provide[ ] prearranged transportation services for compensation using an online-enabled platform to connect passengers with drivers using their personal vehicles” i.e., Uber and Lyft), AB 1289 (Public Utilities Code section 5445.2) mandates that TNC conduct or have a third party vendor conduct local and national criminal background checks on each participating driver. Transportation network companies (as defined) are barred from contracting with or retaining a driver who is: (1) currently registered on the U.S. Department of Justice’s National Sex Offender Public Website; (2) has been convicted of certain terrorism-related or violent felonies; or (3) within the past seven years, has been convicted of misdemeanor assault or battery, domestic violence, or driving under the influence. The bill additionally provides that a transportation network company that violates, or fails to comply with, its provisions is subject to a penalty of not less than $1,000 nor more than $5,000 for each offense.

Agricultural Workers Are to Receive Overtime Pay/Meal & Rest Periods

AB 1066 (Labor Code sections 554 and 857) eliminates the exemption from wage and hour, and meal and rest break requirements, for agricultural workers. It phases in overtime compensation requirements for these workers over a four-year schedule that varies with the employer’s size.

The DLSE Can Prosecute an Employer For Discrimination or Retaliation Without Receiving an Employee Complaint

AB 2261 (Labor Code section 98.7) authorizes the Division of Labor Standards Enforcement (“DLSE”) to bring an action against an employer who terminates or discriminates against an employee in violation of any law under the Labor Commissioner’s jurisdiction. Most notably, the DLSE will be able to bring an action with or without an employee complaint. The legislators acknowledged that despite labor laws prohibiting discrimination and retaliation, many workers do not report Labor Code violations out of fear of losing their jobs.

New Domestic Violence Protection Notice Requirements

AB 2337 (Labor Code section 230.1) requires employers with 25 or more employees to provide written notice of employees’ rights under California’s domestic violence protections laws to new employees upon hire and to other employees on request. Employers do not have to provide the written notice (which may be done by posting or revisions to an employee handbook or policy manual) until the California Labor Commissioner develops the content of the notice, which it must do by July 1, 2017.

Employer Cannot Increase I-9 Burden or Unfairly Reinvestigate Existing Employee’s Authorization to Work

SB 1001 (Labor Code Section 1019) will prohibit employers from: (1) requesting more or different documents than only those required under federal law; (2) refusing to honor documents that reasonably appear to be genuine on their face; (3) refusing to honor documents or work authorization based upon the specific status or term of status that accompanies the authorization to work; and (4) attempting to reinvestigate or re-verify an incumbent employee’s authorization to work using an unfair immigration-related practice (for instance abusing E-Verify). This law also provides that an applicant for employment or an employee who is subject to an act that is prohibited by this law, or his or her representative, to file a complaint with the DLSE. The law further provides that a violation of these provisions shall subject an employer to a civil penalty of up to $10,000 per violation.

Minimum Wages Are On the Rise in California

SB 3 (Labor Code section 245.5) establishes minimum wage step-increases over the next three years. Beginning Jan. 1, 2017, employers with 26 or more employees must pay non-exempt employees a minimum wage of $10.50 per hour, with the rate reaching $15.00 per hour in 2022. Smaller businesses are not required to begin the scheduled increases until 2018.

A significant impact of this change involves the minimum salary required to be paid to exempt employees. The California requirement has long been, and remains, two times the minimum hourly wage based on a 40 hour workweek (regardless of how many hours the exempt employee actually works). Thus, for larger employers, beginning Jan. 1, 2017, the California minimum salary for exempt employees is $840 per week, or $43,680 per year. By 2022, the amount will increase to $62,400 per year.

Because the federal salary threshold for exempt employees will be higher than the California minimum salary for the next few years, most employers will need to adhere to the federal minimum. Effective Dec. 1, 2016, under the federal Fair Labor Standards Act, the minimum salary required for exempt status was scheduled to jump to $47,476. This minimum will set the floor for employers covered under the FLSA until the California minimum again exceeds it. As of the posting of this article, this increase is currently being litigated, and has not yet taken effect, given a recent federal court decision declaring it invalid.

Forum Selection Clauses Cannot Specify Foreign Venue for California Contract Disputes

SB 1241 (Labor Code section 925) prohibits employers from requiring employees who “primarily work and reside in California” to agree to non-California choice-of-law or venue provisions for disputes arising in California, either in litigation or arbitration, as a condition of employment. Such contract provisions may be voided by the employee so that all matters can be adjudicated in California and under California law. There is one caveat: This provision does not apply to employees who were represented by legal counsel in negotiating an agreement designating a non-California venue or choice-of-law provision. The new law will be codified as California Labor Code section 925, and will apply only to new contracts entered into, modified, or extended on or after January 1, 2017.

Local Paid Sick Leave Ordinances Multiply

The California state-wide sick leave law became effective on Jan. 1, 2015 (with accrual beginning on July 1, 2015). Following the trend of San Francisco’s local sick leave ordinance, the following California cities now have sick leave ordinances applicable to some or all of the employees working within their boundaries: Berkeley, Emeryville, Oakland, Long Beach, the City of Los Angeles, the County of Los Angeles, San Diego, San Francisco, and Santa Monica. Also, please take note that San Francisco’s sick leave ordinance has been revised.

Be Prepared for Mandatory Employee Retirement Savings Plans Coming Soon

SB 1234, the “California Secure Choice Retirement Savings Trust Act” (the “Act”), will require employers to:

  1. Either offer an employer-sponsored retirement plan or enable their employees to make a direct payroll contribution to the employee’s personal state-sponsored Secure Choice Retirement account;
  2. provide state-developed information about the program to their employees; and
  3. transmit a payroll contribution to a state-selected third-party administrator.

The Act creates the California Secure Choice Retirement Savings Investment Board, an entity that will administer the program. Although employers will not be required to enroll their employees in the program automatically, they will be required to provide employees with information about the program. Before they are enrolled, employees must acknowledge, in a manner to be determined by the Board, that they understand that an automatic payroll contribution will be made unless they choose to opt-out.

Look to see this implemented in or after 2018. Until then, no action is required by employers.


If you would like to discuss these issues further, or have any questions about this blog, please contact us.