New Laws In 2016


California enacted many new laws that will affect the day-to-day operations of California businesses in 2016.  Below is an overview of some of the most noteworthy new laws from the California Legislature.  Unless specified, all legislation took effect January 1, 2016.

Increase in Minimum Wage

Minimum wage in California is increasing to $10 per hour, due to legislation that was approved two years ago.  This is the last mandatory increase from that law.

This is important not only because it affects companies that employ lower-wage workers, but also because it affects the standard for exempt status.  For example, in order to be exempt from being paid overtime under the executive, administrative and professional exemptions, the employee must be paid at least twice the minimum wage per month.  This means that in 2016 the minimum annual salary to be considered an exempt employee in California will rise to $41,600. 

Fair Pay Act

SB 358 (the Fair Pay Act) revised California’s equal pay law to make it the most aggressive in the country.  Prior to the Fair Pay Act, employers were only prohibited from paying opposite sex employees differently when they did equal work at the same establishment. 

The Fair Pay Act revises and expands this prohibition.  For example, the Fair Pay Act has deleted the “same establishment” requirement, and now prohibits wage differentials for opposite sex employees doing substantially similar work in any of the employer’s establishments.  Further, an employer is prohibited from paying any of its employees less than employees of the opposite sex for “substantially similar work, when viewed as a composite of skill, effort and responsibility.”  In addition, the legislation places specific requirements on employers to affirmatively show that any wage differential is not unlawful but is instead based entirely and reasonably upon one or more of the acceptable listed factors, including seniority and merit systems or other bona fide factors coupled with a showing of “business necessity,” as defined.

The Fair Pay Act also prohibits employers from terminating, discriminating or retaliating against an employee who exercises his/her rights under the Act or assists others in exercising their rights.  Employers cannot prohibit employees from disclosing their wages, discussing the wages of others or asking about another employee’s wages.  However, the Act does not obligate anyone to disclose wages when asked.

Recommendations:  To minimize the risks of equal pay claims, employers should audit employee job duties, responsibilities and pay across the company; review all pay and compensation-related policies and procedures to ensure that the criteria for base compensation, bonuses, and raises are as objective as possible; and review all policies related to confidentiality, discussion and discipline associated with disclosure of pay information. Employers will need to provide internal training on how to cross-reference employee compensation across the company and may need to create a record keeping system that stores any and all documentation that relates to pay decisions.

Remedying PAGA Violations

AB 1506 amends PAGA (the Private Attorney General Act – which gives a private citizen the right to pursue fines that would normally only be available to the State of California) to allow employers a limited right to correct two types of itemized wage statement violations before an employee may bring a civil action under PAGA.  An employer will now be allowed to correct violations involving: (i) a failure to provide employees with an itemized wage statement that contains the inclusive dates of the pay period; or (ii) a failure to provide employees with an itemized wage statement that contains the name and address of the legal entity. An employer only has the right to cure alleged violations once in a 12-month period.

This law was an urgency measure that went into effect October 2, 2015, as a response to a growing number of lawsuits brought against employers based on technical violations of Labor Code Section 226 that did not cause actual injury to any employees.

Recommendations:  Any employer who has received a PAGA letter may potentially avoid liability by immediately reviewing its wage statements to ensure compliance.  If any issues are discovered, employers should move quickly to revise their wage statements so that they can confidently avoid the problem. As coordination must take place between the employer’s record keepers, third-parties vendors who issue paychecks and statements, and counsel, immediate action is necessary.

Piece-Rate Compensation

AB 1513 sets forth new rules for employers with piece-rate employees.  The law requires employers to pay piece-rate workers for rest and recovery periods and other non-productive time at specified minimum hourly rates, separate from the piece-rate compensation.

The law also mandates that specific information, such as the total hours of compensable rest and recovery periods, must now be included on a piece-rate employee’s itemized wage statement (pay stub).

AB 1513 also contains a “safe harbor” provision for employers who, in the past, may not have properly paid piece-rate workers for rest and recovery periods or non-productive time and face liability. 

Effect:  This is an intimidating piece of legislation for employers who have utilized piece-rate pay.  The real battleground will be the question of “is an employee engaged in a rest and recovery period” or “under the control of the employer” to warrant non-productive time pay. This will require intense analysis and review of employee conduct and work patterns.  The safe harbor should provide the employer with an opportunity to limit the potential risks and revise its practices to ensure compliance in the future.

Recommendations:  Employers should examine their use of piece-rate practices by looking over and establishing specific “rest and recovery” periods and building in “non-productive” time into employee schedules, to the extent possible and predictable, from experiences and past patterns. Employers should create new work plans and schedules that make business sense and comply with the new law.  The law also requires employers to revise their existing wage statements to add new categories of pay, so as to comply with Labor Code 226.

Enforcement of Employee Claims by the Labor Commissioner

AB 970 provides the California Labor Commissioner with authority to enforce local ordinances and rules regarding overtime hours or minimum wage provisions, and to issue citations and penalties for violations.  AB 970 also empowers the Labor Commissioner to issue citations and penalties when employers fail to reimburse employees for employer-required expenses.

Effect:  By expanding the Labor Commissioner’s authority to issue citations and penalties for local ordinance violations and ability to enforce reimbursement and indemnification rights, it reduces the burden an employee faces when seeking his right to local overtime, minimum wage, indemnification and reimbursement and provides a “one-stop” shop to seek enforcement.

Recommendations:  Employers should always research local ordinances when conducting or expanding their business in specific localities, including immediately becoming familiar with local labor ordinances.  We also recommend revising overtime, reimbursement and indemnification policies to ensure that they are in compliance with the state and local laws, and recommend training managers on any changes in these policies.

Judgment Enforcement by the Labor Commissioner

SB 588 provides the California Labor Commissioner with additional means to enforce judgments against employers arising from nonpayment of wages, such as filing a lien on real estate, placing a levy on an employer’s property, or imposing a stop order on an employer’s business in order to assist an employee in collecting unpaid wages.

If a final judgment against an employer remains unsatisfied after a period of 30 days after the time to appeal the judgment has expired, the employer cannot continue to conduct business unless the employer has obtained a bond of up to $150,000 and filed a copy of the bond with the Labor Commissioner.  The bond shall be effective and maintained until satisfaction of all judgments for nonpayment of wages.

Effect:  The law intends to speed up the payment of any unpaid wages, and possibly speed up the resolution of any unpaid wage disputes by requiring such a large bond.  These extraordinary measures reflect a significant expansion in the Labor Commissioner’s duties and authority.

Recommendations:  Employers should timely respond to any unpaid wage judgment to stop any potential interference with day-to-day operations and seek out resolutions to help them avoid facing the extraordinary relief the new law creates.

Employees’ Time Off to Organize Child Care

SB 579 expands an employee’s right to take time off work to enroll her/his child in school or with a licensed child care provider, or to address a child care provider or school emergency.  This law only applies to employers with 25 or more employees, and it also protects employees from discrimination, discharge, or retaliation for taking the time off.

Recommendations:  Employers should make sure all leave policies are up-to-date and include the new leave law in their handbooks and policies.  Furthermore, since this law is a protection against discrimination and retaliation, it is important that the message is communicated to managers that this is a protected leave, and employees should never suffer any negative consequences for requesting or taking the leave.

Protections for Family Members When an Employee Engages in a Protected Activity

AB 1509 prohibits employers from retaliating against family members of employees or applicants who complain of discrimination or unsafe working conditions or engage in whistleblowing.

Recommendations:  When an employer’s workforce has multiple members of the same family, the appropriate management training and supervision is necessary to ensure that one family member is never held accountable for any activity of another, even when suspected of jointly participating.  Personnel files should limit references to one family member and their actions.  Employers should be cautious in seeking information from family members about another, so as to avoid the appearance of a conflict with the new law.

Discrimination and Retaliation Related to Disability or Religious-Belief Accommodations

AB 987 prohibits employers from retaliating or otherwise discriminating against an employee for requesting an accommodation for a disability or religious belief or observance, regardless of whether the accommodation request was granted.

Recommendations:  Reasonable accommodations policies should be revised to reflect that retaliation or any adverse act based on the mere request is not allowed.  Even when the accommodation is denied, employers must train managers to be cognizant of how they treat the requesting employee following such rejection.

E-Verify System

AB 622 establishes that it is not acceptable for employers to use the E-Verify system to check employment authorization status of existing employees.  Nor can employers use E-Verify for applicants who have not received an offer of employment, except as required by federal law or as a condition of receiving federal funds.

AB 622 also requires employers who use E-Verify to comply with specific employee notification requirements when they receive notice from a federal agency that the submitted E-Verify information does not match federal records.

There is a penalty of $10,000 for each violation.

Maximum Wage Garnishments

Under SB 501, the maximum amount of disposable earnings of an individual judgment debtor for any workweek that is subject to levy under an earnings withholding order must not exceed the lesser of (1) 25% of the individual’s disposable earnings for that week, or (2) 50% of the amount by which the individual’s disposable earnings for that week exceed 40 times the state minimum hourly wage in effect at the time the earnings are payable.  This amendment is effective July 1, 2016.

Effect:  Employers should be aware of these new parameters when making withholdings pursuant to an earnings withholding order.

If you have any questions regarding these new laws or any employment related matter, please feel free to contact Ross Schwartz, Dick Semerdjian, Kevin Cauley, John MootSarah Evans or Sierra Spitzer.