United States: Recent Changes In California Employment Law

Article by Sabrina L. Shadi, Jeffrey C. Bils, and Hannah Bloink (Summer Associate)

As 2016 approaches, we wanted to highlight the following changes to California law for the new year.

PAGA Amendment Provides Chance to Cure Certain Paystub Violations

Assembly Bill 1506 amends the Private Attorneys General Act ("PAGA") to rein in actions asserting noncompliance with itemized wage statement requirements contained in California Labor Code Section 226(a). Section 226(a) requires, among other things, that employers provide their employees with wage statements that contain the inclusive dates of the period for which the employee is paid, as well as the name and address of the legal entity that is the employer.

Pursuant to this amendment, employers have 33 calendar days after the postmark date on a written notice describing an alleged violation to "cure" such wage statement problems and avoid a PAGA lawsuit. To take advantage of the amendment, employers must give fully compliant itemized wage statements to all allegedly aggrieved employees for each pay period in the three years prior to the date of the written notice. However, the bill limits an employer's right to cure such problems to once in a 12-month period. In addition, while the amendment allows an employer a window of time to cure noncompliant statements before an employee may bring a PAGA claim, it does not affect an employee's ability to seek statutory penalties under Section 226(e) for the same wage statement deficiencies.

Piece Rate Compensation

Assembly Bill 1513 creates the new California Labor Code Section 226.2, which requires employers to pay employees who are compensated on a piece-rate basis for rest and recovery periods and "other nonproductive time" separately from any piece-rate compensation. Employers will be required to compensate employees for rest and recovery periods and "other nonproductive time" at the following rates:

Rest and Recovery Periods: No less than the higher of minimum wage or an average hourly rate, which is determined by dividing the total compensation for the workweek (not taking into consideration compensation for rest and recovery periods or any premium compensation for overtime) by the total hours worked during the workweek (not including rest and recovery periods).

Other Nonproductive Time (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): No less than the minimum wage. However, an employer who pays an hourly rate of at least the applicable minimum wage for all hours worked, in addition to any piece-rate compensation, will be considered compliant with Section 226.2.

The new law also requires that the itemized wage statements employers provide to employees compensated on a piece-rate basis include the following items: 1) the total hours of compensable rest and recovery periods, as well as the rate of compensation and gross wages paid for such periods; and 2) the total hours of other nonproductive time, along with the rate of compensation and the gross wages paid during such periods.

Moreover, the new law provides that employers have an affirmative defense for any claim for recovery of wages, damages, liquidated damages, statutory penalties, or civil penalties based solely on the employer's failure to pay the employee compensation for rest and recovery periods and other nonproductive time for periods prior to and including December 31, 2015, if the employer satisfies the following requirements by December 15, 2016:

  • The employer makes payments to each of its current and former employees for the amount of break and other nonproductive time not separately compensated as now required by the statute during the period July 1, 2012, through December 31, 2015.
  • These payments may be calculated using either of the following methods (at the employer's election):

    1. The actual amount of wages due for the break and nonproductive time that must be separately compensated, plus interest; or
    2. Four percent of the employee's gross earnings during that period. If the employer paid additional amounts to cover some of what is now considered other nonproductive time, those amounts (up to 1 percent of gross earnings) may be deducted from the payments, for a minimum payment of 3 percent of gross earnings.
  • The employer provides notice to the Department of Industrial Relations, which will be posted on the Department's website until 2017, and provides employees with a document that states the payment is being made pursuant to Labor Code section 226.2 and provides the calculations being used to determine the payment.

California Fair Pay Act

The California Fair Pay Act ("CFPA") is slated to be the newer and tougher equal pay law in California and a model for other states. The CFPA will amend California's Equal Pay Act (Labor Code Section 1197.5) and is intended to address what have been perceived by some as its "loopholes." The CFPA will take effect on January 1, 2016, and includes the following key changes.

Substantially Similar Work. The CFPA will amend California's Equal Pay Act to require that employees be compensated equally for "substantially similar work" in terms of skill, effort, and responsibility when performed under similar working conditions. In contrast, California's current Equal Pay Act requires that employers pay employees of the opposite sex equally for "equal" work, which requires similarly equal skill, effort, and responsibility.

Justifying Wage Disparities. Currently, employers are able to defend disparities in wages based on one or more of several factors, including a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or a bona fide factor other than sex. However, under the CFPA, while employers may still defend disparities using such factors, employers will also be required to demonstrate that each factor relied upon is applied reasonably, and further, that the factors so relied upon account for the entire wage disparity. In addition , if an employer relies on the bona fide factor other than sex defense, a burden-shifting framework similar to that under Title VII is initiated. Namely, the employer must demonstrate that the factor is not based on sex, that it is job-related, and that it is consistent with business necessity, after which the burden shifts to the employee to demonstrate that an alternative business practice exists that would serve the same business purpose without resulting in the wage disparity.

Same Establishment. The CFPA will eliminate the requirement now present in the Equal Pay Act that the alleged discrimination is based on a comparison of wages of employees located in the "same establishment." With the elimination of the same establishment requirement, the employer need only have been the same and the work substantially similar.

Anti-Retaliation Provisions. Under the CFPA, employees will be given increased protection against retaliation for seeking to enforce the CFPA. In particular, an employer may not prohibit an employee from disclosing his or her own wages, discussing the wages of other employees, inquiring about another employee's wages, or aiding or encouraging any other employee to exercise his or her rights with respect to the CFPA. However, it should be noted that although an employee's act of inquiring about another employee's wages is a protected action, the CFPA will specifically hold that it is not creating an obligation to disclose wages [Section 1197.5(j)(1)]. Those suffering from retaliation may seek reinstatement and reimbursement for lost wages and work benefits, including interest, as well as appropriate equitable relief [Section 1197.5(j)(2)].

Recordkeeping Requirements. The CFPA will increase the length of time that an employer is required to maintain records relating to wages and job classifications, and other conditions of employment of the employees, from two years to three years [Section 1197.5(d)].

Expansion of Scope of Potential Liability for Retaliation

Existing law (specifically California Labor Code Sections 98.6, 1102.5, and 6310) protects an individual employee or applicant from an employer's discrimination, retaliation, or other adverse action in response to the employee's own protected conduct as defined in these statutes. Assembly Bill 1509 extends these anti-retaliation protections to an employee who is a family member of a person who engaged in, or was perceived to engage in, the protected conduct.

Request for Religious or Disability Accommodation Deemed a Protected Activity

Assembly Bill 987 provides that an employee's request for a reasonable accommodation based on religion or disability is a "protected activity" that can support a claim for retaliation under California's Fair Employment and Housing Act ("FEHA"), regardless of whether the request was granted. The law, AB 987, goes into effect January 1, 2016.

The law overturns a Second District Court of Appeal holding that a mere request for an accommodation does not constitute a protected activity sufficient to support a FEHA retaliation claim. In Rope v. Auto-Chlor System of Washington, Inc. (2013) 220 Cal.App.4th 635, the court stated: "[W]e find no support in the regulations or case law for the proposition that a mere request—or even repeated requests—for an accommodation, without more, constitutes a protected activity sufficient to support a claim for retaliation in violation of FEHA." Rather, the court noted, "case law and FEHA's implementing regulations are uniformly premised on the principle that the nature of activities protected ... demonstrate some degree of opposition to or protest of the employer's conduct or practices based on the employee's reasonable belief that the employer's action or practice is unlawful."

The Rope holding had provided courts with authority to grant summary judgment in favor of employers when a request for reasonable accommodation had been the basis for a FEHA retaliation claim (as happened, for example, in Nealy v. City of Santa Monica, (2015) 234 Cal.App.4th 359, 381). Under AB 987, however, a request for reasonable accommodation based on religion or disability may support a FEHA retaliation claim "regardless of whether the request was granted."

Special Meal Period Waivers for Health Care Industry Employees Validated

Senate Bill 327, effective immediately, clarifies that the health care industry employee meal period waiver provisions contained in California Industrial Welfare Commission Wage Orders No. 4-2001 and No. 5-2001 § 11(D), which allow employees in the health care industry who work shifts in excess of eight hours to waive one of two meal periods in order to end their shifts earlier, were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable.

Protected Time Off for School and Child Care-Related Activities and Emergencies

Existing law (Labor Code Section 230.8) prohibits employers with 25 or more employees working at the same location from discharging or discriminating against an employee who is a parent, guardian, or grandparent having custody of a child in a licensed child day care facility or in kindergarten or grades 1 to 12, inclusive, for taking off up to 40 hours each year for the purpose of participating in school activities, subject to certain conditions. Senate Bill 579 expands the coverage of this law by (1) revising references to a "child day care facility" to refer to a "child care provider"; (2) including the addressing of a child care provider emergency or a school emergency, as defined, and the finding, enrolling, or reenrolling of a child in a school or with a child care provider as activities for which a parent having custody of a child may not be discriminated against or discharged; and (3) redefining "parent" as a parent, guardian, stepparent, foster parent, or grandparent of, or a person who stands in loco parentis to, a child.

Labor Commissioner's Enforcement of Judgments and Individual Liability for Certain Wage Violations

Under existing law, the parties to a matter decided by the California Labor Commissioner are authorized to seek review of an order, decision, or award by filing an appeal to the superior court, where the appeal is required to be heard de novo. Under Senate Bill 588, beginning 20 days after a judgment is entered by a court of competent jurisdiction in favor of the Labor Commissioner, or in favor of any employee pursuant to an appeal, the Labor Commissioner may, with the consent of any employee in whose favor the judgment is entered, collect any outstanding amount of the judgment by mailing a notice of levy upon all persons having in their possession, or who will have in their possession or under their control, any credits, money, or property belonging to the judgment debtor employer or who owe any debt to the employer at the time they receive the notice of levy. Any person who surrenders to the Labor Commissioner any credits, money, or property or pays the debts owed to the judgment debtor employer will be discharged from any obligation or liability to the judgment debtor to the extent of the amount paid to the Labor Commissioner as a result of the levy. In addition, any person noticed with a levy who fails or refuses to surrender any credits, money, or property or pay any debts owed to the judgment debtor employer will be liable to the Labor Commissioner for an amount equal to the value of the credits, money, or property or in the amount of the levy, as provided.

The new law also provides that if a final judgment against an employer arising from the employer's nonpayment of wages for work performed in California remains unsatisfied after a period of 30 days after the the time to appeal has expired and no appeal is pending, the employer will be prohibited from continuing to conduct business in California unless the employer has obtained a bond from a surety company and has filed a copy of that bond with the Labor Commissioner. Alternatively, an employer could provide the Labor Commissioner with a notarized copy of an accord reached with an individual holding an unsatisfied final judgment. The law also provides for civil penalties to be issued against an employer who continues to conduct business without satisfying the bond requirement. In addition, if an employer continues to conduct business in violation of this law, the Labor Commissioner may issue a stop order prohibiting the employer's use of labor until the employer complies.

An employer, owner, director, officer, or managing agent of an employer who fails to observe a stop order issued and served upon him or her pursuant to this law will be guilty of a misdemeanor.

Employment of Grocery Workers by Successor Employer

Beginning January 1, 2016, when a "grocery establishment" undergoes a change in control, the incumbent grocery employer must prepare a list of specified eligible grocery workers for the successor grocery employer, and the successor grocery employer must hire from this list during a 90-day transition period. A "grocery establishment" is defined as a retail store in the state of California that is over 15,000 square feet in size and sells primarily household foodstuffs for off-site consumption, including the sale of fresh produce, meats, poultry, fish, deli products, dairy products, canned foods, dry foods, beverages, baked foods, or prepared foods. A grocery establishment does not include a retail store that has ceased operations for six months or more.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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