2015 California Employment Legislation Update

It is again that time of year—when employers learn about the new legal hurdles they will face as a result of legislation enacted by the Legislature and signed by the Governor.

Fortunately, unlike 2013 (when the Legislature increased the state’s minimum wage) and 2014 (when it enacted the paid sick leave law), the majority of employment-related bills enacted in 2015—the most important of which are summarized below—were aimed at clarifying or amending existing laws.  Except for AB 1506 and AB 304, both of which were enacted as emergency legislation and are therefore effective immediately, all of these laws take effect on January 1, 2016.

Employers Must Pay Both Genders Equal Wages for Substantially Similar Work (SB 358)

Existing California law (Labor Code section 1197.5) prohibits employers from paying different wages to employees of the opposite sex “in the same establishment for equal work on jobs” that require “equal skill, effort, and responsibility, and which are performed under similar working conditions.”  The law provides exceptions where the payment is based on “a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex.”  SB 358 makes the following changes to Labor Code section 1197.5:

  1. Removes the requirement that the wage differential be within the same establishment, therefore prohibiting an employer from “paying any of its employees at wage rates less than those paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibilities.”
  2. Heightens the employer’s burden for establishing a defense to wage discrimination claims, as the employer must establish that the wage differential is reasonably and entirely based on one or more enumerated factors, such as “a seniority system, a merit system, a system that measures earnings by quantity or quality of production,” or a bona fide factor that is not based on or derived from a sex-based differential in compensation and that is consistent with business necessity.
  3. Makes the employer’s defense inapplicable if the employee can demonstrate that an “alternative business practice exists that would serve the same business purpose without producing the wage differential.”
  4. Prevents the employer from retaliating against an employee who enforces these provisions of the law and provides a private right of action via a civil lawsuit for employees who have been subjected to retaliation.
  5. Prohibits an employer from preventing employees from disclosing their own wages, discussing the wages of others, inquiring as to other employees’ wages, or assisting another employee in asserting his or her rights under Labor Code section 1197.5.

Employers Have a Limited Right to Cure Certain Wage Statement Violations (AB 1506) – Effective Immediately

Under existing law (Labor Code section 226), employers are required to provide employees with specific information on the employees’ paychecks.  This includes the name and address of the legal entity that is the employer and the inclusive dates for the pay period.  Prior to the enactment of AB 1506, if an employer failed to provide this information accurately (even if the error was inadvertent), employees could sue under the state’s Private Attorney General Act (“PAGA”) on behalf of him or herself and all other affected employees without first giving the employer a chance to correct the deficiency.  In such a lawsuit, the employee could be awarded as much as $200 in penalties per paycheck and per employee (in addition to penalties provided in other sections of the Labor Code).  Under the new law, before filing a lawsuit, the employee must give the employer an opportunity to “cure,” or fix, problems with the paychecks that have to do with the inclusive dates for which the employee is being paid and the name and address of the legal employing entity.  The employer can only cure violations once in a 12-month period.  In order to cure the violation, the employer must “provide a fully compliant, itemized wage statement to each aggrieved employee” for the three years preceding the violation.

Clarifications/Amendments to the Paid Sick Leave Law (AB 304) – Effective Immediately

Less than six months after the Healthy Workplaces, Healthy Families Act of 2014 (HWHFA), also known as the Paid Sick Leave law, went into effect, the Legislature passed AB 304, which amends and is intended to clarify the original statute.  The major clarifications/changes are as follows:

  1. Employees must work for the same employer for at least 30 days to be entitled to paid sick leave.
  2. With respect to the rate that is paid to nonexempt employees who take paid sick leave, employers can either “divid[e] the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment” or pay the employee at the regular rate of pay for the workweek in which the employee took paid sick leave.  For exempt employees, the paid sick time rate should be calculated “in the same manner as the employer calculates wages for other forms of paid leave time.”
  3. Employers can calculate paid sick leave accrual on a basis other than hours worked (for example, per month or per pay period) provided that the accrual is regular and employees have at least 24 hours of accrued sick leave available by the 120th day of employment or the 120th day of each calendar year.
  4. Employers who had a paid leave or paid time off (“PTO”) policy prior to 2015 can continue using that policy to meet the requirements of the law so long as the policy makes PTO available for the same purposes and under the same conditions as the HWHFA, and the policies comply with the HWHFA’s requirements on accrual, carryover, and use of paid sick leave.
  5. Under the “up-front method” for giving employees paid sick leave (which allows employers to give employees 24 hours, or 3 days, at the beginning of each “year”), the term “year” is defined as each year of employment, the calendar year, or any other designated 12-month period.
  6. Employers with an “unlimited” paid sick leave or PTO policy can satisfy the requirement that they notify how much paid time off employees have available by showing the paid sick leave balance on the employee’s wage statement as “unlimited.”
  7. Employers who want to satisfy the requirements of the HWHFA with a PTO policy are not obligated to inquire into or record the purposes for which an employee uses PTO.\
  8. For employees rehired within one year from the date of separation, an employer who paid the employee for unused PTO does not need to reinstate the employee’s PTO.

Requests for Reasonable Accommodations Constitute “Protected Activity” for Retaliation Claims (AB 987)

In order to establish that an employer committed retaliation in violation of the Fair Employment and Housing Act (FEHA), an employee must first prove that he/she engaged in “protected activity” (such as filing a complaint of harassment or discrimination or otherwise exercising his/her rights under the FEHA).  By enacting AB 987, the Legislature made it clear that “protected activity” includes an employee’s request for reasonable accommodation based on religion or disability, thereby overturning a 2014 appellate court decision to the contrary.

Employers Must Pay Piece-Rate Workers a Separate Hourly Wage for Time Spent on Non-Piece-Rate Work (AB 1513)

AB 1513 requires employers to pay piece-rate workers a separate hourly wage for rest and recovery periods and “other nonproductive time,” in addition to time spent on their piece-rate work.  For rest and recovery periods, the worker must be paid no less than the higher of either (1) the minimum wage or (2) the worker’s average hourly rate, which is determined by dividing the total compensation for the workweek by the total hours worked, not including rest and recovery periods.  For other nonproductive time, workers must be paid no less than the minimum wage.  “Other nonproductive time” is defined as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.”  AB 1513 also requires that employers who have piece-rate workers provide certain information (including the total hours of compensable rest and recovery periods and other nonproductive time and the rate of compensation and gross wages for each category of time) on the employees’ wage statements.

Employers Cannot Retaliate against Family Members of Whistleblowers (AB 1509)

Employees who “blow the whistle” on an employer’s illegal conduct (by, for example, filing a claim with the Labor Commissioner) are protected from retaliation under current law.  AB 1509 expands that protection to the whistleblower’s family members.

Employees Can Take Unpaid Time Off to Participate in Certain School Activities (SB 579)

Existing law allows parents, grandparents, or guardians who work for an employer that has 25 or more employees to take unpaid time off from work to participate in certain activities at a child’s school or day-care facility.  SB 579 expands the leave to include time taken off from work to (1) address a school or child care provider emergency and (2) handle enrollment of a child in a school or with a child care provider.  SB 579 also expands the law to apply to stepparents, foster parent and employees who stand in the place of a parent to a child.

An Employer’s Use of the E-Verify System is Subject to Certain Restrictions (AB 622)

Under federal law, companies can only employ individuals who are legally authorized to work in the United States.  Existing California law allows employers to use the federal E-Verify system to confirm that new employees meet the requirement.  AB 622 clarifies that employers can only use the E-Verify system, in compliance with federal laws, to confirm the status of a person who has been offered employment.  AB 622 prohibits employers from using the E-Verify system to check the status of (1) an existing employee or (2) an applicant who has not received an employment offer.  Additionally, if an employer receives any notifications from the Social Security Administration or the U.S. Department of Homeland Security in regards to a specific employee, the employer must provide the notification to the employee.

The Labor Commissioner has Expanded Authority to Enforce Certain Wage Violations (AB 970)

AB 970 authorizes the Labor Commissioner to investigate and enforce local laws regarding overtime hours and minimum wage provisions if requested by the local entity and if the local entity has not already done so.  The new law also authorizes the Labor Commissioner to enforce Labor Code section 2802, which requires employers to reimburse employees for work-related expenses.