The legislature has given employers reasons to be nervous in 2014 and 2015.  In recent sessions, it has created new obligations and pitfalls – from mandatory statewide paid sick leave to increased minimum wage.  Compliance-minded employers must keep abreast of these developments to ensure their policies and practices remain in accord with applicable law and best practices.

Below, we have outlined some of the key changes that went into effect in 2014 and are slated for 2015.  While this list is not exhaustive, it covers many of the topics of concern to employers, such as paid sick leave, expanded coverage of the Fair Employment and Housing Act, new wage and hour obligations.[1]

Changes To California Wage and Hour Law

Minimum Wage Increase to $9.00/Hour (AB 10)

Effective July 1, 2014, the California minimum wage is $9.00 per hour.  It will increase to $10.00 per hour on January 1, 2016.  Employers must be cognizant of how this affects employees’ exempt status.  Exempt employees must generally earn a monthly salary of no less than two times the state minimum wage for full-time work.  Thus, employers should review employee compensation to ensure they retain exempt status.

Liquidated Damages for Minimum Wage Violations (AB 442)

AB 442 authorizes the Labor Commissioner to recover liquidated damages (in addition to existing penalties) based on a citation for failure to pay minimum wages.  Previously, the Labor Commissioner could only recover liquidated damages through a civil action or administrative wage claim hearing

Employer Liability for Labor Contractors’ Wage and Hour Violations (AB 1897)

AB 1897 applies to employers with 25 employees who utilize services of more than 5 workers supplied by a labor contractor.  The law makes the so-called “Client Employer” jointly liable for a labor contractor’s wage payment violations, and for failure to obtain workers’ compensation coverage.  While “Client Employers” can include indemnification provisions in labor service contracts, they may face an uphill battle when seeking recovery against a thinly capitalized labor contractor.

Employers that obtain workers from labor contractors – even on a temporary or seasonal basis – should review service contracts to ensure they are protected from liabilities resulting from the labor contractor’s violations.  Employers should also vet companies to ensure they are scrupulous in complying with applicable law, and are sufficiently capitalized to cover potential liabilities.[2]

Protections for Domestic Workers (AB 241)

The Domestic Workers Bill of Rights (effective January 1, 2014) provides overtime protection to certain employees performing “domestic work.”  Specifically, “a domestic work employee who is a personal attendant” is entitled to overtime for hours worked in excess of 9 in a workday or 45 in a workweek.  The law excludes various classes of employees, including but limited to: (1) a person who is the parent, grandparent, spouse, sibling, child, or legally adopted child of the domestic work employer; (2) a person under 18 years of age employed as a babysitter for a minor child in the employer’s home; or (3) a person employed as a “casual babysitter” for a minor child in the employer’s home.  The law is set to expire in 2017.

Individuals utilizing the services of certain home-based workers should determine if AB 241 applies, and if so, implement policies to ensure they properly compensate employees.

Penalties for Failure to Provide “Recovery Periods” (SB 435)

Cal/OSHA requires that employees who work outside have access to a shaded area to take a cool down or recovery period of at least five minutes as needed to protect from overheating.  Cal/OSHA has traditionally enforced this requirement as part of its heat illness prevention standards.  However, as of January 1, 2014, the penalty provisions of Labor Code section 226.7 (meal and rest breaks) apply to employers who fail to provide recovery or cool-down periods.

Additional Leave Requirements; Criminal Background Inquiries

Mandatory Paid Sick Leave – Healthy Workplaces, Healthy Families Act of 2014 (AB 1522)

Effective July 1, 2015, millions of California employees will be entitled to paid sick leave.  The law applies to employers of all size, and to employees who work 30 or more days in California within a year of the commencement of employment.  Employees can use paid sick time to care for themselves or specified family members.  Note that the he law defines “family member” broader than many other leave statutes.[3]  Employers can limit employees to the use of three paid sick days per year to be used after completing 90 days of employment.[4]

Employers can satisfy obligations under the law in two ways: (a) by providing one hour of paid sick leave for every 30 hours worked; or (b) providing three days of paid sick leave to employees at the beginning of each year of employment.  Employers adopting the former approach must permit carryover of unused sick time and may not impose a cap of less than 48 hours.  Note that existing paid time off (“PTO”) policies may satisfy an employer’s obligations under the new law.  However, the plan must comply with the accrual and carryover requirements, and allow employees to use PTO for the reasons specified in the new law.  The law also prohibits retaliation against employees for requesting or using paid sick leave.[5]

Additionally, the law contains various recordkeeping and posting requirements.  Employers must keep at least three years of employee records related to the accrual and use of paid sick leave; and the amount of available sick leave must appear on the employee’s paystub.  Failure to maintain records will result in a presumption that the employee “is entitled to the maximum number of hours accruable…unless the employer can show otherwise by clear and convincing evidence.”  Finally, as of January 1, 2015 (prior to the leave provisions), employers must post notice describing employees’ rights under the new law.[6]

Employers should review existing PTO and sick leave plans to ensure they comply with this groundbreaking law.

Limitation On Criminal History Inquiries (SB 530)

SB 530 prohibits employer inquiries and reliance on criminal convictions that have been judicially dismissed or ordered sealed.  The law does not apply if the employer is required by law to obtain the information; the applicant would be required to possess or use a firearm in the course of his or her employment; an individual convicted of a crime is prohibited by law from holding the position sought; or the employer is prohibited by law from hiring an applicant who has been convicted of a crime.  This change comes on the heels of EEOC guidance on the use of criminal background information and San Francisco’s limitation on criminal inquiries. Employers should review their employment applications and criminal background check policies to ensure they do not make prohibited inquiries.  Employers should also ensure that they do not receive overbroad disclosure from third parties that perform background checks on their behalf.

Additional Leaves of Absence Requirements (SB 288, SB 400, and AB 11)

The law granted time off or expanded leave protection to certain small categories of workers, including victims of certain crimes (SB 288 and SB 400), and peace officers and emergency personnel (AB 11).

New Retaliation Protections and Expanded Coverage Under The Fair Employment And Housing Act (“FEHA”)

New Protected Categories Under the Fair Employment and Housing Act; Expanded Definition of Harassment (AB 556, AB 1443 and SB 292)

The legislature continues to expand the Fair Employment and Housing Act to cover new categories of employees.  This year, the legislature added “military or veteran status” as a protected category.  (AB 556).  It also made clear that FEHA protections generally apply to unpaid interns and volunteers.  (AB 1443).  Finally, the legislature further clarified that unlawful sexual harassment need not be motivated by sexual desire (SB 292).[7]

Employers should review existing policies and equal opportunity statements to ensure inclusion of military and veteran status.

Expanded Definition of National Origin (AB 1660)

AB 1660 makes it a violation of FEHA (by expanding the definition of national origin) to discriminate based on an individual’s holding of a California driver’s license granted to a person unable to demonstrate lawful presence in the United States.  It also prohibits employers from requiring presentation of a driver’s license unless doing so is “required by law or is required by the employer and the employer’s requirement is otherwise permitted by law.”

Given these limitations, employers should only request to view an employee’s or applicant’s driver’s license when its possession is required by the job (e.g., driving is a condition of employment).

Additional Immigration-Related Protections (AB 262, AB 524, and SB 666).

AB 263 prohibits certain “unfair immigration-related practices” based on an employee’s assertion of rights under the Labor Code or applicable local ordinance.  An employee is deemed to assert rights when s/he makes a good faith complaint of a legal violation; seeks information to determine whether the employer is in compliance with applicable law; or assists a person in the assertion of his or her rights under the labor code or local ordinance.

The law broadly defines “unfair immigration-related practice.”  It includes, but is not limited to, threatening to contact or contacting immigration authorities; threatening to file or filing a false police report; and overbroad use of the federal E-Verify system.

The legislature has also enacted other protections aimed at the undocumented, including:

  • Prohibiting discrimination or retaliation because an employee updates his or her personal information. (AB 262).
  • Permitting the suspension or revocation of the business license of an employer that reports or threatens to report an employee’s (or his or her family’s) immigration status because s/he makes employment-related complaints. The law also allows disbarment or suspension of attorneys who engage in such conduct toward witnesses.  (SB 666).
  • Clarifying the penal code to make it clear that it may be criminal extortion to threaten to report the immigration status or suspected immigration status of an individual or his or her family. (AB 524).

Whistleblower Protection for Employees Who Report Violations of Local Rules or Regulations (AB 496)

Labor Code section 1102.5 and California common law protect employees who report alleged violations of federal or state law or regulations.  SB 496 expands these protections to include employees who make good faith reports of non-compliance with a local rule or regulation.  The law also imposes liability on an employer who takes an adverse action based on the belief (even if mistaken) that the employee disclosed or may disclose such information.  As always, employers must proceed with caution when taking an adverse action against an employee who discloses – internally or externally – potential legal violations.

Retaliation Includes Written and Oral Complaints (AB 263)

In addition to the immigration-related protections described above, AB 263 also prohibits an employer from retaliating against any employee or applicant because s/he has made a written or oral complaint that he or she is owed unpaid wages.