Certain California cities and counties are increasing the minimum hourly wage for nonexempt employees effective July 1st! Please see the list below to determine if your business or California-situated employees are affected. Many regulations differentiate between businesses with 25 or fewer employees and those with 26 or more employees.

Location                          25 or fewer employees    26 or more employees

California statewide

(no change)                      $11.00                               $12.00

Los Angeles city              $13.25                               $14.25

Los Angeles county         $13.25                               $14.25

Malibu city                      $13.25                               $14.25

Pasadena city                   $13.25                               $14.25

San Diego (no change)    $12.00                               $12.00

San Francisco                  $15.59                               $15.59

Santa Monica                   $13.25                               $14.25

Palo Alto                          $15.00                               $15.00

What Employers Should Do

• Make sure that, by July 1st, your nonexempt employees are paid at least the minimum wage applicable to your California city or county.
• Make sure that any employees you classify as “exempt” are properly classified, based on the applicable state and federal criteria. If in doubt, consult with your qualified employment law counsel.
• Be aware that, out-of-state employers with in-state employees must comply with California state, as well as any applicable county or city laws for those in-state employees.

Effective April 1, 2016, significant amendments to the California Fair Employment and Housing Act (FEHA) will take effect. These impact every employer, including out of state employers, with at least 5 workers in California. Here are the critical highlights of these amendments.

Mandatory Written Anti-Discrimination/Harassment Policy

Of greatest import, the amendments require every covered employer to have a written policy that:

• Lists all FEHA protected categories (race, religious creed, color, national origin, ancestry, physical/mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation and military and/or veteran status).
• Specifies that employees are protected from discrimination or harassment from any workplace source, including third parties (vendors, customers).
• Provides a confidential complaint process that ensures a timely response, impartial investigation by qualified personnel, documentation and tracking, appropriate remedial actions and resolutions, and timely closure.
• Provides avenues for complaint other than to a direct supervisor.
• Requires supervisors to report complaints to a designated employer representative.
• States that employees will not be exposed to retaliation for making a complaint or participating in a workplace investigation.

In order to ensure that employees receive the written policy, employers may publish the policy through various means. These include: providing a copy to existing employees and during the hiring process, posting it in the workplace, and obtaining a written acknowledgement. Translation of the policy is required into every language that is spoken by at least 10% of the workforce.

Definitions

The amendments also contain definitions that are important in the context of gender discrimination.

• Gender expression = a person’s gender-related appearance or behavior, whether or not stereotypically associated with the person’s sex at birth.
• Gender identity = a person’s identification as a male, female, a gender different from the person’s sex at birth, or transgender.
• Transgender = a term for a person whose gender differs from the person’s sex at birth.
• Sex stereotyping = relying on assumptions about a person’s appearance or behavior, or making assumptions about an individual’s ability or inability to perform certain kinds of work based on a myth, social expectation, or generalization about the individual’s gender.

Recordkeeping Requirement

Employers with 50+ employees are required to provide sexual harassment prevention training to supervisors at least every 2 years. The amendments require employers to retain materials related to this training, including sign-in sheets and course materials, for at least 2 years.

What Employers Should Do

Covered employers (5+ employees) should immediately review their policies to ensure they are in compliance with the amended regulations before April 1^st. If you have any doubt whether your business is in compliance, we recommend you contact your qualified employment law counsel.

Each new year brings challenges for employers and their Human Resources management, as a slew of new laws take effect, creating new traps for the unwary. 2016 is no exception. Here is a list of four new laws (or amendments) that can impact virtually every California employer.

The New Minimum Wage is $10.00

At first, this doesn’t seem like real news, as almost everyone has known the California minimum wage has been climbing since 2014. The information important to many employers, however, is the role the enhanced minimum wage plays in classification of salaried exempt vs. non-exempt employees.

Remember that an exempt employee in California must be paid a salary that is no less than two times the state minimum wage for full-time employment. Accordingly, as the state minimum wage increases from $9.00 to $10.00 per hour, the minimum annual salary for an exempt employee increases from $37,440 to $41,600. What you should do: Review compensation for all salaried exempt employees to ensure it equates to at least $41,600 annually.

Changes to Piece-Rate Compensation Requirements

Are some or all of your employees paid according to a piece-rate method? A business school definition of piece-rate compensation is: A wage determination system in which the employee is paid for each unit of production at a fixed rate. It is common in the automotive repair and garment industries, among others.

Assembly Bill 1513 added section 226.2 to the California Labor Code. It requires employers to pay piece-rate employees a separate hourly wage for “nonproductive” time, as well as “rest and recovery” periods. These hours and pay must be separately itemized on employees’ paystubs.

An additional challenge created by the new law relates to determination of the correct rate of pay. For “rest and recovery” breaks, employees must be paid the greater of (1) the minimum wage, or (2) the employee’s average hourly wage for all time worked (exclusive of break time) during the work week. For “nonproductive” time, the employee must receive at least minimum wage. What you should do: If you have employees paid on a piece-rate basis, make sure you understand and comply with the above. If not, contact your employment lawyer to get in compliance.

California Fair Pay Act

Senate Bill 358, amends California Labor Code Section 1197.5, which prohibits an employer from paying employees of one sex less than employees of the opposite sex for “substantially similar work.” Prior to the amendment, an employee seeking to prove unequal pay had to demonstrate that he or she was not being paid at the same rate as someone of the opposite sex at the same establishment for “equal work.” As amended, an employee need only show he or she is not being paid at the same rate for “substantially similar work” as measured by a composite of skill, effort and responsibility performed under similar working conditions.

Additionally, the amended law makes it unlawful for employers to prohibit employees from disclosing their wages to others, discussing their wages or inquiring about the wages of another employee. It also creates a new private cause of action whereby an employee may bring suit in court seeking reinstatement and reimbursement for discrimination or retaliation. What you should do: Audit your compensation structure to ensure both genders are paid equally for substantially similar work. Where changes are required, you may only increase the underpaid employee. Involve your employment lawyer if you need clarification or help.

Requesting Reasonable Accommodations is a Protected Activity

Assembly Bill 987 amends the California Fair Employment and Housing Act (FEHA) to expand the protections for employees who request a reasonable accommodation for disabilities or religious beliefs, regardless whether the request is granted. This means that, once an employee has requested a reasonable accommodation for a disability or religious belief, the employer may not take an adverse employment action (i.e., discipline, reduction in hours or pay, termination) in retaliation for the accommodation request. What you should do: Be sensitive to an employee’s request for accommodation, even if s/he does not use the term “reasonable accommodation.” If an employee tells you (or you perceive) s/he is disabled or has a particular religious belief/preference that requires accommodation, take the situation seriously. It may be a good idea to consult with your employment counsel.

Conclusion

Employers should remain mindful of these changes as we embark upon a satisfying and, hopefully, productive new year!

On October 6, 2015, California Governor Jerry Brown signed Senate Bill 358, amending California’s Equal Pay Act, which prohibits an employer from paying employees of one sex less than employees of the opposite sex for “substantially similar work.” This Bulletin briefly discusses this amendment and how it could impact California employers.

What is required for an employee to prove unequal pay?

Prior to the new law, an employee seeking to prove unequal pay had to demonstrate that he or she was not being paid at the same rate as someone of the opposite sex at the same establishment for “equal work.”

The new law, effective January 1, 2016, relaxes this standard, making it much easier for an employee to prove unequal pay. Under the new law, an employee need only show he or she is not being paid at the same rate for “substantially similar work” as measured by a composite of skill, effort and responsibility performed under similar working conditions. It is not necessary that the employees of opposite sexes perform the same or equal work.

What can an employee recover?

Employees have the option of pursuing a claim through the Labor Commissioner or filing a civil lawsuit. An employee who prevails through a claim with the Labor Commissioner may recover pay differential plus an equal amount as liquidated damages. An employee who successfully sues in court may recover pay differential damages, interest, litigation costs and attorneys’ fees.

How can an employer defend a claim or suit?

Even if there is a gender-based wage differential, an employer can escape liability if it can show that the differential is based on:

• A seniority system;
• A merit system;
• A system that measures earnings by quality or quantity of production; or
• Some other bona fide factor other than sex, such as education, training or experience.

These factors were included in the law, as it existed prior to the October 6th amendment. However, the fourth factor has been changed to require an employer to show with competent evidence that any difference in compensation is not sex-based, is related to the position in question and there exists a “business necessity” for the wage differential. A “business necessity” is an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is intended to serve.

Additional “Wage Transparency” requirement

As amended, the law makes it unlawful for employers to prohibit employees from disclosing their wages to others, discussing their wages or inquiring about the wages of another employee.

Extended record keeping period

The amendment extends the time period for employers to keep records pertaining to employees’ terms and conditions of employment (including wages and job classifications) from two to three years.

What Should Employers Do?

Commentators suggest this amendment may cause a significant uptick in claims and lawsuits alleging unequal pay–this remains to be seen. However, there are unquestionably steps employers should take to protect themselves against an unequal pay claim:

• Review employee compensation to ensure that instances of gender-based pay differential are minimized and/or defensible under the criteria set forth above.
• Ensure that individuals making compensation decisions are familiar with the amended law.
• Review policies, in handbooks and elsewhere, to ensure they do not violate the “wage transparency” requirement.

If you have questions about this amendment, you should consult with experienced employment law counsel.

California’s new Paid Sick Leave Law, the Healthy Workplaces, Healthy Families Act of 2014 (“Act”), took effect January 1, 2015, with leave benefits to accrue starting July 1, 2015. Although the Act was already in effect, the California legislature passed additional amendments, which were signed into law by Governor Jerry Brown on July 13, 2015.

Here are some of the key amendments:

Accrual

In addition to the accrual method in which an employee gains one hour of paid sick leave for every 30 hours worked, employers have the option to use their own accrual method, provided accrual is (1) on a regular basis; and (2) the employee will have 24 hours of accrued sick leave by his or her 120th calendar day of employment.

Employers who already have their own PTO policy

Employers who had a preexisting Paid Time Off (“PTO”) policy as of January 1, 2015, may continue that policy provided: (1) PTO/PSL accrues regularly; (2) employees accrue at least one day/eight hours of PTO/PSL within 3 months of employment each calendar year; and (3) employees accrue at least 3 days/24 hours PTO/PSL within 9 months of employment.

Rate of pay for Paid Sick Leave

For nonexempt employees, pay during PSL can be calculated using one of two methods: (1) the “regular rate of pay” for the workweek in which the employee uses paid sick leave; or (2) by dividing the employee’s total wages, not including overtime premium pay, by the total hours worked in the full pay periods of the prior 90 days of employment.

Other Amendments

• If an employer provides unlimited PSL or PTO, the employer may satisfy its notice obligation by indicating “unlimited” on the employee’s wage statement.
• An employer is not required to reinstate accrued PSL to an employee who returns to the company after less than one year, if the employee was “cashed out” for unused PSL at the time of separation. (Recall there is no obligation to “cash out” accrued, but unused PSL, though there is for PTO.)
• PSL is only available for employees who have worked at least 30 days within the last year for the same California employer.

Again, California employers are encouraged to consult with their employment law counsel to ensure they are in compliance with all aspects of the new Paid Sick Leave law.

The Division of Occupational Safety and Health (DOSH), better known as CalOSHA, protects workers from health and safety hazards in almost every workplace in California. The amendments to certain CalOSHA regulations, effective May 1, 2015, will impact any business that includes an “outdoor place of employment.” The amendments require action by employers, including (1) revision of written policies covering heat illness prevention; (2) updates to training protocols and materials; and (3) adoption of expanded workplace procedures, practices and protections to better prevent heat illness from occurring.

A key amendment relates to the temperature at which shade must be provided. Previously, the regulation required a shaded area when the temperature reached 85 degrees. The threshold is now 80 degrees.

Certain industries, including agriculture, construction, landscaping, oil and gas extraction, and transportation or delivery of agricultural, construction or other heavy materials, face an even heavier burden when the temperature reaches 95 degrees. These include (1) conducting paid pre-shift safety meetings to go over the company’s high-heat procedures; and (2) implementing effective heat illness monitoring, defined as having a supervisor assigned to observe 20 or fewer employees, a mandatory buddy system, regular communication with each employee, and a designated person at the worksite authorized to call emergency services in the event of a heat illness.

Employers must also provide adequate fresh, pure and suitably cool water, at no cost, located as close as practicable to the areas where employees are working. Employers must encourage employees to take cool-down periods of at least five minutes (10 minutes every 2 hours for agricultural workers at 95 degrees).

Finally, employers must establish a written heat illness prevention plan in English and any other languages that will be understood by employees. This plan must be made available at the worksite.

California’s meal period rules generally prohibit employers from having employees work more than 5 hours without providing a meal period of at least 30 minutes. However, the Wage Orders do recognize an exception to this rule where (1) the nature of the work performed by the employee prevents him/her from being relieved of all duty; and (2) the employee and employer agree in writing to an “on-duty” meal period.

It is important to bear in mind this is not a waiver of the meal period. A couple of additional points:

• The written agreement must clarify that the employee will be paid for his/her “on-duty” meal period.
• The written agreement must expressly state that the agreement may be revoked by the employee at any time. I would also include the buzzword “voluntary” in any agreement that I drafted.

A persistent question is when does “the nature of the work” performed prevent the employee from being relieved of all duty for at least 30 minutes. Department of Labor Standards Enforcement (DLSE) opinion letters and case law suggest this determination must be made on a case-by case basis. Employers who avail themselves of this meal period exception should be wary of any kind of “blanket” application of the “on-duty” meal period for all employees, restricting its use to only those situations in which the employer can make a colorable argument that a normal, “off-duty” meal period is unrealistic.

Politicians in several states have been lobbying for years to make “bullying” in the workplace illegal. While Tennessee is the only state with such a law currently on its books, California took a step closer when Governor Brown signed AB 2053, which will require certain employers to provide “abusive conduct” training as a component of already mandatory sexual harassment prevention training for supervisory employees.

The existing requirement, found in Government Code section 12950.1, applies to employers with 50 or more employees and requires supervisory employees receive two hours of sexual harassment prevention training, within six (6) months following their assumption of a supervisory role. Follow up training is required every two years.

Here is what the amendment adds to Section 12950.1:

• Training must now include a component on the “prevention of abusive conduct.” This need not necessarily extend the length of the training beyond two hours.
• “Abusive conduct” is “conduct with malice that a reasonable person would find hostile, offensive, and unrelated to an employer’s legitimate business interests.”
• “Abusive conduct” may include repeated infliction of verbal abuse (e.g., derogatory remarks, insults, and epithets), verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating, or the gratuitous sabotage or undermining of a person’s work performance.
• “Abusive conduct” need not be based on any otherwise protected classification, such as race, age, gender, disability or religion.
• A single act does not constitute “abusive conduct” for purposes of the training, unless it is especially severe or egregious.
• The amendment takes effect January 1, 2015.

What Employers Should Do – Employers with 50 or more employees should immediately consult with their regular employment attorneys to update training to comply with the new law.

California employers should be aware of significant new state laws which take effect on January 1, 2014. These include:

Protected Categories Expanded to Include Military and Veteran Status. – Assembly Bill 556 adds “military and veteran status” to the list of categories protected from employment discrimination.

Prohibition of “Unfair Immigration-Related Practices” – Assembly Bill 263 prohibits employers from engaging in “unfair immigration-related practices,” which could include contacting or threatening to contact immigration authorities, because an employee asserts protected rights under the California Labor Code. Other immigrant protection legislation effective Jan. 1, 2014 includes SB 666 (business license revocation for threatening to report immigration status), and AB 524 (authorizes criminal extortion for threatening to report immigration status).

Domestic Worker Bill of Rights – Assembly Bill 241 creates a Domestic Worker Bill of Rights. This provides specific overtime pay for a “domestic work employee who is a personal attendant.” The bill has many specific definitions and exclusions.

Heat Illness Recovery Periods – Senate Bill 435 expands meal and rest break prohibitions to include “recovery” periods necessary to prevent heat illness. Penalty mirrors premium for failing to provide meal or rest breaks (i.e., one additional hour of pay for each workday that meal, rest, heat illness recovery period not provided). Unlike the meal and rest period rules which provide a clear guidance on timing, however, the need for a heat illness recovery period is subjective and determined by the employee. Employers with outdoor workers need to ensure their Heat Illness Prevention programs comply with Cal-OSHA regulations.

Leaves Required for Victims of Certain Crimes – Two important new laws. Senate Bill 288 provides protections for victims of certain crimes (including solicitation for murder and vehicular manslaughter while intoxicated) who take time off from work to appear in court proceedings. SB 400 extends protections for victims of domestic violence or sexual assault or victims of stalking, including time off to appear at legal proceedings and to seek medical/psychological treatment. This law adds a reasonable accommodation requirement—which can include implementation of safety measures—for victims of domestic violence, sexual assault or stalking.

Expanded Scope of Whistleblower Protections – California Labor Code Section 1102.5 already provides protections for employees who report violations of federal or state statutes. Senate Bill 496 expands this protection to include suspected violations of a local rule or regulation, and will include reporting violations to “a person with authority over the employee or another employee who has authority to investigate, discover or correct the violation.”

As the ink from California Governor Jerry Brown’s pen dries on Assembly Bill No. 10, which will raise the hourly minimum wage in our state to $9.00 effective July 1, 2014 (and again to $10.00 on January 1, 2016), employers need to consider the ramifications of this change beyond the obvious increase in take-home pay of hourly workers.

Here are key areas that will be impacted by the increase:

Salary Basis Test For “White Collar” Exemption – In addition to meeting other criteria to qualify as an exempt employee under one of the “white collar” exemptions (i.e., executive, administrative or professional), exempt employees must earn a salary that is at least twice the minimum wage for full-time employment. This minimum increases in July, 2014 to $37,440, and to $41,600 beginning in January, 2016.

Commissioned Sales Employee Exemption – To qualify for this exemption, employees must earn in excess of 1.5 times the minimum wage for all hours worked. This rate will increase to $13.50/hr on July 1, 2014, and $15.00/hr on January 1, 2016.

Employees Who Furnish Own Tools or Equipment – When employees are required to furnish their own tools or equipment necessary to their performance of the job, they must be paid twice the state minimum wage. This rate will increase to $18.00/hr on July 1, 2014, and $20.00 on January 1, 2016.

Calculation of Overtime, Vacation, Sick Leave, Paid Time Off and Meal and Rest Period Premiums – Employers must adjust how these are calculated to reflect the minimum wage increase.

Employer-Required Split-Shift Premiums – If an employer requires an employee to work a split-shift, the employer must pay the employee a premium, of one hour’s pay at minimum wage, in addition to the employee’s regular earnings paid for that shift. (If hourly wage exceeds state minimum wage, difference may be credited toward split-shift premium.)

Voluntary Crediting Agreements – Employers with written agreements with their employees for crediting meals or lodging expenses against the minimum wage will need to adjust this crediting to reflect the increase.

Posting The New Wage – Employers will be required to conspicuously post the new wage in an area frequented by employees where it may be easily read during the workday.

Cities With Higher Minimum Wage – Certain California cities, including San Francisco and San Jose, may impose a higher minimum wage and/or adjust their minimum wage more frequently. Employers should ensure they comply with all applicable federal, state and local laws.

Now that I’ve used every word that begins with “C” in the title, here’s the post:

On July 11, 2013, a California appellate court, in Beaumont-Jacques v. Farmers Group Ins., affirmed summary judgment in favor of an insurance company on the question whether a District Manager was properly classified as an independent contractor and not an employee. In so holding, the court provided clarification on the proper analysis for determining this important issue.

Why is this important?

California employers that misclassify workers as independent contractors face potential liability, which can include compensatory damages, stiff penalties and attorney’s fees.

What happened in the Beaumont-Jacques case?

A former District Manager, Erin Beaumont-Jacques, sued Farmers Insurance on various theories all of which hinged on a determination that she was a Farmers Insurance employee. In support of her position, Ms. Beaumont-Jacques pointed out that: (1) she was bound by a contract to only represent Farmers in recruiting and training sales agents; (2) she could train such agents only to sell Farmers’ insurance products; (3) the applicable contract required her to “conform” to Farmers’ “normal business practices” and “goals and objectives”; and (4) Farmers enjoyed the option to terminate her contract without cause.

In affirming the trial court’s granting of a motion for summary judgment brought by Farmers, the California Court of Appeal for the Second Appellate District clarified that, even where other factors may suggest an employment relationship, it was sufficient for independent contractor classification that Ms. Beaumont-Jacques “exercised meaningful discretion with reference to her efforts” undertaken on behalf of Farmers. Specifically, the Court said: “While [Farmers] . . . had input over the quality and direction of [her] . . . efforts, they did not have sufficient ‘control over the details’ with respect to those efforts” to render the relationship one of employment rather an independent contractor.

What is the takeaway?

The paramount consideration in determining whether a worker can be properly classified as an independent contractor under California law is whether the worker maintains the right to control the means by which she accomplishes her duties.