2017 Labor & Employment Law Update for California Employers

1. Exempt executive, administrative, or professional employees consistent with the applicable IWC Wage Order;
2. Outside salespersons as provided in the applicable IWC Wage Order;
3. Exempt, salaried computer software professionals;
4. Parents, spouses, children, or legally adopted children of employers;
5. Participants, directors, and staff of a live-in alternative to incarceration rehabilitation programs with special focus on substance abusers;
6. Crew members employed on certain commercial passenger fishing boats; and
7. Employees participating in national service programs as provided in any applicable IWC Wage Order.

AB 2899: EXPANDED BOND REQUIREMENTS FOR MINIMUM WAGE VIOLATION CHALLENGES

Assembly Bill No. 2899 expands the requirement that employers post a bond upon appeal of wage violations under California Labor Code Section 1971.1. Existing law requires employers to file a wage bond only for appeals in cases where an employee files a wage claim with the Labor Commissioner for unpaid wages. AB 2899 applies the bond requirement to appeals for cases that were initiated by the Labor Commissioner for violations of wage laws. It also requires that employers post a bond with the Labor Commissioner prior to filing an appeal of a decision by the Labor Commissioner relating to violation of minimum wage laws. The bond must cover the total amount of minimum wages, liquidated damages, and overtime compensation owed to employees. The total amount of the bond is to be forfeited to the employee if the employer fails to pay the amounts owed within 10 days from the conclusion of the proceedings.

SB 3: MINIMUM WAGE INCREASES AND PAID SICK LEAVE EXPANDS FOR IN-HOME SUPPORTIVE SERVICES WORKERS

Senate Bill No. 3 increases the minimum wage for all employers with 26 or more employees to $10.50 per hour, effective January 1, 2017. The law establishes annual increases in the minimum wage for the next seven years (up to $15.00 per hour as of January 1, 2022). Thereafter, subsequent increases will be calculated by the Director of Finance based on the consumer price index. For employers with 25 or fewer employees, the minimum wage increase will be delayed for a year beginning January 1, 2018. The law does not bar counties and cities from enacting a minimum wage that exceeds the state's minimum wage.

Effective July 1, 2018, SB 3 also removes the Paid Sick Leave exemption for In-Home Supportive Services workers. The revised statute establishes a different definition of "full amount of leave" for these employees:

• Eight hours or one day in each year of employment, calendar year, or 12 month-period beginning July 1, 2018;
• Sixteen hours or two days once the minimum wage reaches $13; and
• Twenty-four hours or three days once the minimum wage reaches $15.

SB 269: CERTAIN BUSINESSES NOW HAVE A SAFE HARBOR PERIOD AND A LIMITED EXEMPTION IN CONSTRUCTION-RELATED ACCESSIBILITY CLAIMS

Effective earlier this year, on May 10, 2016, Senate Bill No. 269 created a rebuttable presumption that certain technical violations do not cause an individual to experience "difficulty, discomfort or embarrassment," which would otherwise entitle him or her to statutory damages in a construction-related accessibility claim. This rebuttable presumption is available only to businesses that employ 25 or fewer employees on average over the past three years and have average annual gross receipts of less than $3.5 million. The presumption arises when: (1) the defendant has, within 15 days of service of a summons and complaint asserting a construction-related accessibility claim or receipt of a written notice, whichever is earlier corrected, all of the technical violations that are the basis of the claim; and (2) the claim is based on one or more of the technical violations listed in Cal. Civil Code Section 55.56(e)(1)(A)-(G). SB 269 also exempts businesses that employ 50 or fewer employees from liability for statutory damages if the structure or area of the alleged violation was inspected by a Certified Access Specialist or "CASp" before a claim was filed and all required corrections were completed within 120 days of the inspection.

SB 1001: LAWS TOUGHEN ON UNFAIR IMMIGRATION-RELATED PRACTICES

Senate Bill No. 1001 amends existing law regarding unfair immigration-related practices by an employer. Under existing law, an employer is prohibited from engaging in or directing another person to engage in an unfair immigration-related practice against a person for the purpose of or intent to retaliate against any person for exercising a protected right. Unfair immigration-related practices are defined as requesting more or different documents than are required under federal law, or refusing to honor documents tendered that on their face reasonably appear to be genuine.

SB 1001 amends the existing law to make it unlawful for an employer to: (1) request more or different documents than required under Section 1324a(b) of Title 8 of the United States Code to verify that an individual is not an unauthorized immigrant; (2) refuse to honor documents tendered that on their face reasonably appear to be genuine; (3) refuse to honor documents or work authorizations based on specific status or term that accompanies the authorization to work; or (4) attempt to reinvestigate or re-verify an incumbent employee's authorization to work using an unfair immigration-related practice. An employee who suffers an unfair immigration-related practice can file a complaint with the Division of Labor Standards Enforcement. The bill also provides that a violation of these provisions can result in a penalty of up to $10,000.

SB 826: LEGISLATURE AUGMENTS SPENDING AUTHORITY TO MEET HIGHER PERSONNEL COSTS RESULTING FROM MINIMUM WAGE INCREASES

Senate Bill No. 826 (Budget Bill) authorizes appropriations for the state government for the 2016-2017 fiscal year. In light of 2016 Senate Bill No. 3, which imposes on companies with more than 25 employees an increase in the minimum wage to $10.50 per hour as of January 1, 2017, the Budget Bill authorizes an attendant increase in state departmental expenditure authority. Such funds will be used to finance the increased costs for personal service contracts and other personnel resulting from the increased minimum wage.

SB 1167: INDOOR HEAT ILLNESS REGULATIONS COMING TO CALIFORNIA SOON

Senate Bill No. 1167, which will be codified as California Labor Code Section 6720, requires the Division of Occupational Safety and Health (the "Division") to propose heat illness and injury prevention regulations regarding employees who work indoors. By January 1, 2019, the Division must propose these regulations to the Occupational Safety and Health Standards Board for review and adoption. The law permits the Division to limit certain high heat provisions to certain industries.

SB 1241: EMPLOYEES CAN VOID FORUM SELECTION CLAUSES IN CONTRACTS

Senate Bill No. 1241, codified as California Labor Code Section 925, permits employees who primarily reside and work in California to void forum selection or choice of law clauses in most agreements with their employers that are entered into, modified, or extended after January 1, 2017. Section 925 provides that, for all employment agreements required as a condition of employment—such as arbitration agreements, executive agreements, and commission agreements—an employee has the unilateral right to void any contractual provision that would:

• Require an employee who “primarily resides and works in California” to adjudicate claims arising in California in any locale outside the state; or
• “Deprive [such an] employee of the substantive protection of California law with respect to a controversy arising in California.”

An employee may void only the specific provision, however, not the entire agreement. Also, the statute does not apply where the employee was represented individually by counsel in negotiating the terms of the agreement in which the forum selection clause or choice of law clause is contained. Section 925 permits a reviewing California court to enjoin reliance on the prohibited provision, declare it unlawful, and/or award reasonable attorneys’ fees.

SB 1342: WAGE LAW ENFORCEMENT SHARED BETWEEN STATE AND LOCAL AGENCIES

Senate Bill No. 1342, which will be codified as California Government Code Section 53060.4, permits cities and counties to work with the California Division of Labor Standards Enforcement to enforce wage payment laws. The stated intent of the new measure is to give local wage enforcement programs the necessary tools to conduct successful wage claim investigations to recover unpaid back wages. It permits a city or county to delegate its administrative subpoena authority to city or county officials in order to investigate and enforce local laws or ordinances, including local wage laws.

UPDATE: REVIEW BY U.S. SUPREME COURT SOUGHT BY ERNST & YOUNG IN CASE STRIKING DOWN CLASS ACTION WAIVER

In August 2016, the U.S. Court of Appeals for the Ninth Circuit, in Morris v. Ernst & Young, struck down as illegal a "concerted action waiver" (i.e., a waiver of class, collective or other group actions) in an arbitration agreement. In doing so, the court contradicted the California Supreme Court and widened a split among federal appellate courts on whether the National Labor Relations Act (NLRA) prohibits enforcement of an agreement requiring an employee to arbitrate claims against an employer on an individual, rather than a collective or class, basis. Since then, the defendants in the Ernst & Young case, as well as in a similar appellate decision in another circuit, Lewis v. Epic Systems Corp., filed petitions for certiorari asking the U.S. Supreme Court to resolve the issue. In addition, the National Labor Relations Board has asked the U.S. Supreme Court to resolve the same issue in a similar case. Employers should continue to monitor these federal appellate decisions and consult legal counsel in managing issues arising under their arbitration agreements.

NEW FEDERAL REGULATIONS MAY AFFECT EXEMPT CLASSIFICATION OF CALIFORNIA WORKERS

New Fair Labor Standards Act (FLSA) regulations—adopted by the U.S. Department of Labor (DOL) to be effective December 1, 2016—increase the minimum salary levels for certain exemptions. Together with anticipated future increases to California's minimum wage, California employers have much to consider in complying with both federal and state wage and hour laws. However, on November 22, 2016, a federal judge in Texas issued a nationwide injunction prohibiting the new regulations from going into effect.

Should the injunction be lifted and the new DOL regulations become effective, they will affect employers with California employees because both federal and state wage and hour laws apply to them. California is widely known for wage and hour laws more stringent than their federal counterparts. Up until the adoption of the new DOL regulations, however, California employers could take comfort in the notion that compliance with California exemption requirements generally would mean compliance with the FLSA (but not vice versa). The new DOL regulations now require California employers to revisit the exemption requirements under the FLSA.

The DOL regulation significantly increases the compensation required to meet the minimum salary standard to qualify for exempt status under the FLSA. Specifically, it requires a minimum salary threshold based on the 40th percentile of earnings of full-time salaried employees in the lowest-wage Census Region. Currently, this means that the minimum salary for a white collar exemption is $913 per week or $47,476 per year. The DOL regulation also permits the salary threshold to update every three years, beginning on January 1, 2020, to maintain the 40th percentile level noted above. Before the DOL regulation, the Salary Basis Test under the FLSA required a minimum salary of $455 per week or $23,660 per year.

To help meet the new salary requirements, the DOL regulation now permits employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new salary requirements (i.e., up to $4,747.60). Notably, the use of such bonuses and commissions, however, can be risky because the bonus and commission amounts can fluctuate. Moreover, employers cannot use any such bonuses and commissions toward meeting the Salary Basis Test under California wage and hour laws.

The new DOL regulations also increase the total annual compensation requirement for highly compensated employees from $100,000 to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which on December 1, 2016, will be $134,004. The DOL regulations permit this minimum threshold to update every three years, beginning on January 1, 2020, to maintain the 90th percentile statistic. The increase in salary for the high-compensated employee exemption, however, generally does not have much affect for California employers because the high-compensated employee exemption has no counterpart under California state wage and hour laws. Thus, California employers cannot solely rely on this federal exemption and still must meet one or more of California's state law exemptions. The highly-compensated exemption, however, would be relevant for employers in California on federal enclaves or in areas where only federal law applies.

EEOC ISSUES NEW GUIDELINES ON NATIONAL ORIGIN DISCRIMINATION AND HARASSMENT

On November 21, 2016, the Equal Employment Opportunity Commission (EEOC) issued new guidelines on "national origin" discrimination and harassment. The new guidelines will be helpful to employers confronted with various hiring, firing, and discipline issues related to language abilities, citizenship, and origin-related harassment in order to avoid violations of Title VII of the Civil Rights Act of 1964. Many of the guidelines track California case law on similar topics, such as:

• The place of origin can be a country, former country, or geographic region closely associated with a particular national origin group.
• National origin discrimination includes discrimination based on:
• • Ethnicity: A person can be discriminated against because he or she either belongs, or doesn't belong, to a particular ethnic group.
  • Physical, linguistic, or cultural traits: Subjecting a person to adverse employment action due to his or her accent, style of dress, or other traits associated with a certain origin may constitute discrimination.
  • Perception: Regardless of a person's actual origin, if he or she is discriminated against due to the belief that he or she is of that origin.
  • Association: A person's association with someone of a particular national origin (for example, his or her spouse or child) can
• The EEOC warns against hiring practices that may result in perpetuation of the historical makeup of a workforce. For example, "word of mouth" recruiting can lead persons of one national origin to recruit, promote or hire similar persons of the same national origin. Similarly, an apprenticeship program that only admits candidates who are sponsored by existing employees could lead to few minority hires if the industry or workplace is not diverse.
• Employers must ensure they have legitimate business reasons for making language-based employment decisions.
  • Accents: A decision cannot be based on accent unless (1) the ability to communicate in spoken English is required to perform job duties effectively; and (2) the individual's accent materially interferes with job performance.
  • Fluency: Fluency may be required if it is necessary for the effective performance of the position.
  • "English-only" policies: Language-restrictive policies are unlawful unless they are required to promote safe and efficient job performance or business operations, and are only enforced for those purposes.
• Employers cannot use United States citizenship requirements as a pretext for discrimination in hiring. The Immigration Reform and Citizenship Act of 1986 makes it illegal for an employer to discriminate based upon an individual's citizenship or immigration status. Unless the law requires an employer to do so based on the specific industry, an employer cannot limit its employees to U.S. citizens or lawful permanent residents, and should not consider immigration status in hiring.
• Employers do not have to accommodate national origin traditions or practices. However, national origin often overlaps other protected classes, such as religion, in which accommodations may be required.

Read the full guidelines.