On October 4, 2017, Governor Brown signed SB 306 into law. The new statute, which was sponsored by the California Labor Federation, significantly expands the California Labor Commissioner’s power to investigate retaliation and certain discrimination complaints—including California pay equity claims—and to obtain preliminary injunctive relief during those investigations. The law, which takes effect on January 1, 2018, also empowers employees in whistleblower cases to obtain injunctions under a relaxed standard. These changes create additional risk for employers facing pay equity, retaliation, or whistleblower claims (among many others).

Prior version of Section 98.7: SB 306 primarily amends California Labor Code section 98.7 et seq. Section 98.7 authorizes the Labor Commissioner to investigate complaints of “any person who believes that he or she has been discharged or otherwise discriminated against in violation of any law under the jurisdiction of the Labor Commissioner.” Cal. Lab. Code § 98.7(a)(1). Many laws fall within the Labor Commissioner’s jurisdiction, and a full list is located here. Those laws include California's pay equity law, its whistleblower laws, and laws prohibiting employers from retaliating against employees who make wage-related and workplace health and safety complaints. The Labor Commissioner’s jurisdiction does not include discrimination complaints under California’s Fair Employment and Housing Act for workplace harassment or non-pay-equity discrimination.

Until now, the Labor Commissioner could issue its “determination” on the merits of an employee’s complaint, but needed to turn to the courts for enforcement and/or to seek injunctive relief. SB 306 changes those limitations on the Labor Commissioner’s powers, among others.

Labor Commissioner’s Expanded Ability to Pursue Injunctive Relief: SB 306 grants the Labor Commissioner broad injunctive relief powers. For both discrimination and retaliation complaints, the Labor Commissioner may seek a preliminary injunction during an investigation if the Labor Commissioner has “reasonable cause” to believe a violation has occurred. Cal. Lab. Code § 98.7(b)(2)(A). The law does not define “reasonable cause.” The new law also creates a more permissive injunction standard than a court would ordinarily apply to a private action in which a plaintiff seeks preliminary injunctive relief. See id. § 98.7(b)(2).

An injunction under section 98.7 remains in effect until the Labor Commissioner issues a determination or a citation, or completes the citation review process discussed below, whichever is later. Cal. Lab. Code § 98.7(b)(2)(E). That gives the Labor Commissioner a powerful tool in the form of injunctive relief during the pendency of a retaliation or discrimination investigation. Since there is no time limit on these investigations, employers may face the prospect of having their business operations restricted for extended periods.

New Self-Executing Citation Process: Before SB 306, the Labor Commissioner needed to enforce its “determinations” in court. SB 306 now puts the burden on employers to vacate the Labor Commissioner’s findings.

This new process is called the “citation” process. After an investigation, the Labor Commissioner may issue a citation that includes “appropriate relief,” which can include an order “directing the person cited to cease and desist from the violation and take any action necessary to remedy the violation, including, where appropriate, rehiring or reinstatement, reimbursement of lost wages and interest thereon, and posting notices to employees.” Cal. Lab. Code § 98.74(a). The employer then has 30 days to seek review. Id. § 98.74(b). If the employer does so, the Labor Commissioner must hold a hearing within 90 days and issue a decision within 90 days after the hearing. Id. § 98.74(c). If the Labor Commissioner affirms the citation, the employer has 45 days to seek a writ of mandate in the appropriate Superior Court and to post a bond. Id. § 98.74(d).

New Sua Sponte Investigations: SB 306 also allows the Labor Commissioner to proceed with a retaliation investigation even without a formal complaint from an employee if the Labor Commissioner suspects retaliation during a hearing under Labor Code section 98 (for wage-related claims), during a field inspection pursuant to section 90.5, or in instances of certain suspected immigration-related threats. Cal. Lab. Code § 98.7(a)(2).

New Availability of Employee-Initiated Injunctions in Whistleblower Actions: SB 306 also adds Labor Code sections 1106.61 and 1106.62. These new sections permit an employee to directly seek a preliminary injunction in the Superior Court if the employee is prosecuting a civil or administrative complaint under California’s whistleblower protection law, Cal. Lab. Code § 1102.5. These new provisions generally incorporate the rules for retaliation-related injunctions sought by the Labor Commissioner under section 98.7. See Cal. Lab. Code § 1106.62.

Practical Implications for Employers: The Labor Commissioner’s limited investigation and litigation resources may lessen some of SB 306’s impact. Nonetheless, the new provisions emphasize the need for employers to act carefully in dealing with claims that fall within the Labor Commissioner’s jurisdiction.

  • Pay Equity Claims: SB 306 allows the Labor Commissioner to seek potentially broad pay-equity injunctive relief on a relaxed standard, and such injunctions could significantly disrupt an employer’s operations. The risk of such an injunction provides yet another reason for employers to conduct a proactive, privileged pay equity analysis. We frequently guide employers through that process, and we have developed proprietary analytical tools to help employers of all sizes.
  • Retaliation Claims: If an employee engages in protected activity that falls within the Labor Commissioner’s jurisdiction, the employer should carefully document the lawful reason for any adverse action and, where appropriate, seek advice from experienced employment counsel before taking the adverse action. Doing so will increase the employer’s chances of persuading the Labor Commissioner and a court that no “reasonable cause” exists to support an injunction pending an investigation because the adverse action was taken for reasons unrelated to any alleged protected activity.
  • Labor Commissioner Investigations and Employee Whistleblower Claims: Employers facing Labor Commissioner investigations or an employee-initiated whistleblower claim after January 1, 2018, should retain experienced employment counsel, given the increased risks presented by SB 306.