United States: Employment & Labor Law Client Alert - December 2015

In 2015, the California Legislature enacted numerous employment-related laws. California employers should take note of these new laws to ensure that their policies and procedures are in compliance. Below is a summary of the most significant new laws affecting the workplace.

All laws are effective January 1, 2016, unless otherwise noted. Our office is available to assist employers with the implementation of these new laws.

Wage and Hour

PAGA Claims
AB 1506, amending California's Private Attorneys General Act (PAGA), provides employers the right to cure certain technical violations of the California Wage Statement Law before an employer can be sued. The bill aims to ensure employees are provided accurate wage statements while also safeguarding employers against PAGA lawsuits involving minor wage statement violations. The bill gives employers 33 days to fix these errors and sets forth specific steps that must be taken before a technical violation can be cured. An employer can take advantage of this provision only once for the same violation of the statute during each 12-month period. This bill was signed on October 2, 2015, and became effective immediately.

Prevailing Wages for Public Works
AB 852 expands the definition of "public works" for purposes of provisions relating to the prevailing rate of per diem wages. Under AB 852, for purposes of the prevailing rate of per diem wages, "public works" includes any construction, alteration, demolition, installation, or repair work done under private contract on a project for a general acute care hospital when the project is paid for with the proceeds of conduit revenue bonds issued on or after January 1, 2016.

Wage Garnishment Restrictions
SB 501 provides some relief to low income judgment debtors, as it changes the formula for calculating the percentage of disposable income subject to a wage garnishment. Current law requires employers to withhold 25% of an employee's disposable income but the bill provides that an earnings withholding order cannot exceed the lesser of 25% of the individual's weekly disposable earnings or 50% of the amount by which the individual's disposable earnings for the week exceed 40 times the state minimum hourly wage (or applicable minimum wage if higher) in effect at the time the earnings are payable.

Piece-Rate Employees
AB 1513 requires employers to pay piece-rate employees rest and recovery periods and nonproductive time separately from their piece-rate compensation. Employers must pay a piece-rate employee for rest and recovery periods at an average hourly rate, which is determined by dividing the employee's total compensation for the workweek (excluding compensation for rest, recovery periods, and overtime) by the total hours worked during the workweek (excluding rest and recovery periods). Employers must pay piece-rate employees for other nonproductive time at an hourly rate no less than minimum wage. If an employer pays an hourly rate for all hours worked in addition to piece-rate wages, it does not need to pay any additional hourly rate for nonproductive time. Finally, employers must specify additional categories of information on a piece-rate employee's itemized wage statement.

Labor Commissioner: Judgment Enforcement
SB 588 makes changes to the Labor Code pertaining to the Labor Commissioner's enforcement authority. More specifically, it authorizes the Labor Commissioner to file a lien on an employer's California property for unpaid wages, other compensation, penalties, and/or interest owed to an employee.

Expansion of Labor Commissioner Enforcement Authority
AB 970 amends Labor Code sections 558, 1197, and 1197.1 to authorize the Labor Commissioner to enforce local laws regarding overtime and minimum wage provisions. The bill also authorizes the Labor Commissioner to issue citations and penalties for violations if the local entity has not already cited the employer for the same violation. The bill also authorizes the Labor Commissioner to issue citations and penalties to employers who violate the expense reimbursement provisions of Labor Code section 2802.

Public Works: Concrete Delivery
AB 219 includes several provisions which apply to public work contracts awarded on or after January 1, 2016. The bill expands the definition of "public works" in employment contracts involving any state agency to include the hauling and delivery of ready-mixed concrete. The bill requires the entity hauling or delivering the concrete to enter into a written subcontract with the worker and provide the employee with payroll and time records. The employee's wage rate must be the rate for the geographic area in which the concrete factory is located.

Leaves of Absence

Paid Sick Leave
AB 304, effective July 13, 2015, amends provisions of the Healthy Workplaces, Healthy Families Act of 2014 codified in Labor Code sections 245.5, 246, and 247.5. Previously, the law required employees to accrue paid sick leave at the rate of 1 hour for every 30 hours worked. The new amendment allows employers to use a different accrual method as long as accrual is on a regular basis so that employees have at least 24 hours of accrued sick time or other paid time off by the 120th day of employment each calendar year or other 12 month basis.

Additionally, under the amendment, the employee must work for the same employer for at least 30 days within the previous 12 months to be eligible to accrue paid sick leave with the employer. The amendment also uses a new way to calculate an hourly rate for paid sick leave for employees with a fluctuating pay rate. Finally, the amendment no longer provides the employer with an obligation to inquire into or record the purposes for which an employee uses sick leave or paid time off.

Kin Care
SB 579 expands California's Kin Care law to allow employees to use accrued sick leave to provide care for a family member's illness. The bill protects parents from being discriminated against for addressing a child care provider emergency, which is broadly defined by the bill and includes the finding, enrolling, or reenrolling of a child in a school or with a child care provider. The bill also extends protections to an employee who is a step-parent or foster parent who stands in loco parentis to a child.

Sick Leave for Veterans with Service-Related Disabilities
Existing law allows full-time state officers or employees to accrue paid sick leave at a rate of 1 day for each calendar month of service. SB 221 provides state officers or employees hired on or after January 1, 2016 with additional paid sick time if they are military veterans with a disability rated at 30% or more by the US Department of Veterans Affairs. Additionally, the entire credit is available to such officers or employees on the first day of their employment and is available for the following twelve months of employment. It does not, however, carry over after twelve months.

Insurance and Benefits

Insurance Committee
AB 1514 makes minor technical changes to the California Training Benefits (CTB) program and updates the reporting requirements of the Employment Development Department (EDD). More specifically, the bill requires the EDD to automatically qualify individuals participating in an employer sponsored training program for benefits through the CTB Program.

Workers' Compensation Benefits
Existing law generally requires an employer to compensate an employee for an injury sustained on the job or during the course of employment, regardless of the employee's negligence. If an employer fails to pay this required compensation, an employee may apply to receive the funds he is entitled to from the Uninsured Employers Fund or the Subsequent Injuries Benefits Trust Fund. SB 623 provides that a person will not be excluded from receiving benefits under either of these funds based on his citizenship or immigration status.

Unemployment Insurance: Electronic Reporting and Funds Transfers
AB 1245 requires an employer with 10 or more employees to file all reports (i.e. reports of contribution and reports of wages paid) and returns (i.e. quarterly returns and annual reconciliation returns) electronically and make all unemployment insurance premiums payments by fund transfer starting January 1, 2017. This requirement will extend to all employers beginning on January 1, 2018. The bill authorizes the granting of waivers from these requirements for certain employers but also imposes a penalty of $50 on those employers who fail to comply without good cause.

Disability Insurance: Waiting Period for Eligibility
SB 667 amends the Unemployment Insurance Code and provides that the 7-day waiting period for receiving benefits does not apply to subsequent applications for benefits if the applicant met the 7-day waiting period on the initial application for benefits. Additionally, whereas existing law provides that 2 consecutive periods of disability benefits are considered 1 disability benefit period if they are separated by no more than 14 days, this bill expands that separation period to 60 days.

Health Care Coverage: Rate Review
SB 546 requires additional data collection and review of health care rates in the large-group market. More specifically, the bill requires large-group health care service plans and health insurers to file with the respective department prior to implementing any rate increase, all required rate information for any product with a rate increase if certain conditions apply. The bill also provides procedures and time frames for department action on such increase requests. The bill additionally requires the plan or insurer to file additional aggregate rate information with the respective department.

Discrimination, Retaliation, and Harassment Protections

Unlawful Employment Practices: Discrimination
The California Fair Employment and Housing Act requires an employer to provide reasonable accommodation of a person's disability and religious beliefs and prohibits discrimination against any person on these grounds. AB 987 expands this protection and clarifies that a request for reasonable accommodation based on religion or disability constitutes protected activity. This change to Government Code section 12940 overturns the California Court of Appeal's interpretation in Rope v. Auto-Chlor Sys. of Washington, Inc., 220 Cal. App. 4th 635 (2013), that an accommodation request is not a protected activity.

Persons with Disabilities: Examination for Service under LEAP
Existing law requires the Department of Human Resource to administer the Limited Examination and Appointment Program (LEAP) to provide an alternative to the traditional civil service examination and appointment process to facilitate the hiring of people with disabilities. SB 644 permits a person with developmental disabilities to either complete a written examination, readiness evaluation, or an internship to qualify for service under LEAP. The bill requires on-the-job support and financing of the internship or a position under LEAP with specified funding.

Civil Action for Gender Violence
AB 830 allows a person who has been subject to sexual orientation violence to bring a civil action for damages against any responsible party. The Unruh Civil Rights Act prohibits discrimination based on a person's sex, race, religion, or sexual orientation and specifies that sex includes gender, which includes a person's gender identity and gender expression.

Gender Wage Differential
SB 358 strengthens existing law that prohibits paying women less than men for performing the same job. While existing law required equal pay for equal work, SB 358 requires equal pay for "substantially similar work, when viewed as a composite of skill, effort and responsibility." The bill allows differences in pay based on certain enumerated factors (i.e. based on a system of seniority or merit) but requires that it be consistent with business necessity. The bill prohibits retaliation against employees for invoking this law and requires employers to maintain records for 3 years instead of 2.

Employer Liability: Employee Family Member Protected Complaints & Labor Contractor Joint Liability
California law prohibits retaliation against employees who engage in legally protected activities. AB 1509 extends this protection by prohibiting employers from retaliating against employees for being a family member of an employee who has, or is perceived to have, engaged in activities protected under the Labor Code (i.e., making complaints about working conditions or pay, or whistleblowing). The bill also amends Labor Code section 2810.3 to impose joint liability on client employers for employees supplied by a labor contractor to exclude law client employers that use Public Utilities Commission-permitted third-party household goods carriers, as specified.

Removal of the Term Alien from the Labor Code
SB 432 removes the term "alien" to describe foreign-born workers from the California Labor Code. The bill also repeals Labor Code provisions which prefers US citizens over individuals who are not born in this country.

Lawsuits, Liens, and Other Encumbrances
AB 1267 prohibits a person from filing or recording, or directing another person to file or record, a lawsuit, lien, or other encumbrance against any person or entity, knowing it is false, with the intent to harass the person or entity. It similarly prohibits a person from influencing or hindering a public officer or employee in his or her discharging of official duties. AB 1267 imposes a civil penalty for violations, not to exceed $5,000.

Transportation

Drayage Truck Operators
AB 621 establishes the Motor Carrier Employer Amnesty Program pursuant to which a motor carrier performing drayage services may be relieved of liability for statutory or civil penalties associated with the misclassification of commercial drivers as independent contractors if the motor carrier enters into a settlement agreement with the Labor Commissioner prior to January 1, 2017, whereby the motor carrier agrees to convert all of its commercial drivers to employees and the settlement agreement contains prescribed components including, but not limited to, an agreement by the motor carrier to pay all wage benefits and taxes owed, if any.

Transportation Network Companies
AB 1422 requires Transportation Network Companies such as Uber and Lyft to participate in the Department of Motor Vehicles' Employer Pull Notice Program to regularly check the drivers' records, regardless of whether the driver is an employee or independent contractor.

Business

Limited Liability Companies
Existing law, the California Revised Uniform Limited Liability Company Act, governs the formation of a limited liability company, the disassociation of a member from an LLC, and the effects of disassociation. AB 506 specifies that a person's right to vote as a member of the LLC terminates upon dissolution. If a member dies, his executor, administrator, guardian, conservator, attorney-in-fact, or legal representative may exercise all of the member's rights for the purpose of settling the member's estate or administering the member's property.

Additionally, AB 506 requires that profits and losses of an LLC be allocated among members according to the operating agreement, or if the operating agreement does not so provide, then in proportion to members' contributions. The amendment eliminates the requirement that consent be obtained from all members of an LLC to approve a merger or conversion or to amend the operating agreement. Under the amendment, an LLC that has filed a certificate of cancellation continues to exist for purposes of winding up its affairs and prosecuting and defending actions by or against it. AB 506 also covers an LLC's duty to indemnify an agent who successfully defends a claim on the merits. AB 506 limits the applicability of existing law to acts or transactions by an LLC occurring on or after January 1, 2014.

Unlawful Business Practices
SB 386 adds to the list of unlawful practices prohibited under the California Legal Remedies Act. The bill includes advertising, offering for sale, or selling a financial product or service that is illegal, including a cash payment for the assignment to a third party of the consumer's right to receive future pension or veteran's benefits. The bill also adds an additional prohibition against advertising, offering, or entering into an agreement with a pension beneficiary that would involve an assignment of pension benefits.

State Programs

Grant Program for Supervised Population Workforce Training
AB 1093 revises the criteria for the Supervised Population Workforce Training Grant Program (which aims to provide workforce training to formerly incarcerated individuals) and allows grant applicants to address the education and training needs of those who have some postsecondary education or individuals who require basic education. This bill also helps local jurisdictions reduce recidivism rates and aims to create safer communities and bolster local economies. This bill took effect on May 7, 2015.

California Workforce Innovation and Opportunity Act
AB 1270 was enacted to transform the state's existing set of workforce and education programs to conform with the new Federal Workforce Innovation and Opportunity Act. The bill requires the board to assist the Governor in the development of a State Plan. The bill also changes membership requirements and the duties of state and local boards. It also transitions youth councils established under WIOA to standing committees of local boards.

Apprenticeship Programs
AB 1308 strengthens the state's apprenticeship system by establishing basic procedures for the approval of new apprenticeship programs. The bill clarifies that existing programs cannot be found to lack the capacity or willingness to dispatch apprentices unless contractors actually request apprentices.

California Workforce Investment Board: Responsibilities
Existing law requires the California Workforce Investment Board to assist the Governor in targeting resources to specified industry sectors and providing guidance to ensure that services reflect such needs. SB 342 additionally requires the board to assist the Governor with implementing policies that encourage the attainment of marketable skills relevant to current labor market trends for purposes of helping individuals with barriers to employment achieve economic security and upward mobility.

Miscellaneous

Cheerleader Employee Status
AB 202 requires California-based professional sports teams to classify and treat cheerleaders who perform during their exhibitions, events, or games, as employees instead of independent contractors. This bill applies to cheerleaders who are either directly or indirectly employed (i.e., through a labor contractor).

90-Day Retention of Grocery Workers Following Change of Ownership
AB 359 adds Labor Code sections 2500-2522 and requires a successor grocery store employer to retain current grocery workers for 90 days upon the "change in control" of a grocery store. The new law also prohibits the successor grocery employer from discharging those workers without cause during the 90-day period and requires the successor grocery employer to consider offering continued employment to those workers upon the end of the 90-day period. Governor Brown noted in his signing message an ambiguity in how the law applies if an incumbent grocery employer has ceased operations and noted the author and sponsor have committed to clarify that the law would not apply to a grocery store that has ceased operations for 6 months or more.

The Legislature responded with AB 897, which excludes from the definition of "grocery establishment" a retail store that has ceased operations for 6 months or more.

E-Verify System
AB 622 adds section 2814 to the Labor Code and prohibits an employer from using E-Verify to check the employment authorization status of an employee or job applicant, except as required by federal law or as a condition of receiving federal funds. The bills imposes a $10,000 fine per violation to each employer that uses E-Verify in violation of this amendment.

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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