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.

The cities of Los Angeles and San Diego approved ordinances that will increase the minimum wage and mandatory Paid Sick Leave starting this month.

Los Angeles

Los Angeles Mayor Eric Garcetti signed an ordinance that increases the minimum wage of employees who work in the City of Los Angeles for at least two hours in a particular week. Employers with 26 or more employees will pay $10.50 per hour effective July 1, 2016. Employers with fewer than 26 employees will continue to pay the state minimum wage of $10.00 until July 1, 2017, when their applicable minimum wage will climb to $10.50.

Los Angeles employers must also provide Paid Sick Leave up to 48 hours per year, which can be provided in a “front load” method, or an accrual method, accruing 1 hour of PSL for every 30 hours worked. This is twice the annual PSL required under California state law. Additionally, Los Angeles employers must allow employees to carry over accrued, but unused, sick leave up to a limit of 72 hours. Unlike the statewide PSL law, the Los Angeles ordinance expressly allows employers to require reasonable documentation of an absence from work for which PSL will be used.

There are stiff fines for noncompliance, including a $500 fine for failing to post the required notice.

San Diego

On June 7^th, voters in San Diego voted to increase the city’s minimum wage to $10.50 immediately upon certification of the election results by the San Diego City Clerk, which could occur anytime. The minimum wage will increase to $11.50 per hour effective January 1, 2017. Further increases, keyed to San Diego’s Consumer Price Index, will occur beginning Jan. 1, 2019.

The ordinance also requires employers to provide employees with one hour of Paid Sick Leave for every 30 hours worked within the city limits. While employers may limit an employee’s use of PSL to 40 hours per year, they may not cap sick leave accrual.

As with Los Angeles, there are stiff penalties for noncompliance. Employers who fail to comply may face a civil penalty of up to $1,000. Failure to comply with the notice requirement face a penalty of $100 per employee, up to $2,000.

What you should do: Employers with any employees in the cities of Los Angeles or San Diego should immediately ensure their pay practices, sick leave practices and posted notices comply with the new ordinances. Your employment law counsel can help.

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!

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.