United States: California Employment Law Update—What's Coming In 2016

Last Updated: December 22 2015
Article by Laura P. Worsinger

Increase in the Minimum Wage—Not So Simple With the California Multiplier Effect

On January 1, 2016, California's minimum wage will increase to $10 per hour from the existing minimum wage of $9 per hour. As a result, numerous other pay practices will be affected by the increase:

Overtime Rate

The minimum wage rate change affects overtime. Effective January 1, 2016, employees who work for minimum wage and perform work that qualifies for overtime must be paid $15 per hour for time-and-a-half, or $20 per hour for double-time.

This is an increase from the pre-January rates of $13.50 per hour (time-and-a-half) or $18 per hour (double-time).

Exempt/Nonexempt

The increase also affects classification of employees as exempt versus nonexempt.

To qualify for the "white collar" exemption from overtime (the commonly used administrative, executive or professional exemptions), an employee generally must earn a minimum monthly salary of no less than two times the state minimum wage for full-time employment, in addition to meeting all other legal requirements for the exemption.

Effective January 1, 2016, the minimum salary requirements for these exemptions will increase to $3,466.67 per month (or $41,600 annually) from $3,120 per month (or $37,440 annually).

Certain commissioned inside sales employees may be eligible for an overtime exemption, if the employee earns more than one-and-a-half times the minimum wage each workweek, and more than half of the employee's compensation represents commission earnings. (Outside salespeople do not need to meet the minimum salary requirements.)

Piece-Rate Employees

The minimum wage increase also affects piece-rate employees. Piece-rate workers must receive at least minimum wage for each hour worked. Legislation effective January 1, 2016, requires payment of rest and recovery periods or other nonproductive time at specified hourly rates.

Exempt Computer Software Professionals

New Minimum Compensation for Exempt Computer Software Professionals (Labor Code § 515.5). For computer software professionals to be considered exempt, they must (among other things) be paid a minimum of $41.85 per hour or $87,185.14 per year.

What to do?

  • Display a poster that includes the current official Minimum Wage Order (MW-2016).
  • Update any necessary payroll documentation.
  • Review exempt classifications to make sure that the employees will still meet the minimum salary requirements on January 1, 2016.
  • Revise itemized wage statements in a timely manner when wages are paid and ensure the statements accurately reflect the wage increase.
  • Provide employees affected by the minimum wage increase with an appropriate wage notice showing the change in the rate of pay, if required.
  • Review any piece-rate compensation systems to ensure compliance with the new minimum wage standard and new legislation.
  • Confirm that those employees who are required to provide and maintain their own hand tools and equipment earn at least two times the minimum wage (which will equal $20 per hour effective January 1, 2016).
  • Remember that local ordinances may affect your minimum wage obligations. For example, San Francisco currently requires a minimum wage of $12.25 per hour and San José currently requires a minimum wage of $10.30 per hour. Note, however, that exempt/nonexempt classification is based on the state minimum wage, not local ordinances.

California's Fair Pay Act

California's equal pay statute, first enacted in 1949, was significantly modified to lower the burden of proof for plaintiff's claims, to greatly increase the burden of proof for an employer's defenses, and to allow employees to ask other employees about the amount of their wages for the purpose of ascertaining whether there may be a factual basis for an equal pay claim.

Where existing law requires that men and women working at the same location receive equal pay for equal work, the new law requires that they receive equal pay for substantially similar work even if they work in different locations. In addition, if there are disparities, the burden is on the employer to show that the entire disparity is justified by such factors as education, training and experience. Systems that base compensation on seniority, merit and production are also acceptable.

The law contains anti-retaliation provisions and provides a private right of action to enforce its provisions.

The law creates a new cause of action, eases the burden on employees to establish a prima facie case, and makes it more difficult for an employer to demonstrate that wage differences are justified.

What to do?

Employers should:

  • Audit their salary structure and recordkeeping practices and policies to ensure compliance with the law.
  • Make sure that job descriptions contain details that reflect legitimate reasons for any pay differentials.
  • Review pay policies and practices across all locations to determine whether any wage differentials exist among "substantially similar jobs."
  • Train managers not to restrict (or give the appearance of restricting) employees from discussing wages.
  • Ensure that there is no prohibition against the discussion of wages in company documents (e.g., Employee Handbooks), and that these documents contain appropriate anti-retaliation provisions.
  • Ensure that they are maintaining records of employee wages and wage rates, job classifications, and other terms and conditions of employment going back three years.
  • Given the new requirements, employers should also identify and consider which documents justify pay scale decisions and will assist in providing one or more of the defenses provided by the statute.
  • If wage differentials exist among substantially similar jobs, make sure you have a justification to support the differential that (1) is not based on sex or any other protected category; (2) relates to the job at issue; and (3) serves a substantial business purpose.
  • Review and update training of any individuals who make compensation decisions and remind them of the appropriate job-related factors on which pay may be based.

Limits Placed on Employer's Use of E-Verify

Employers are required to verify that the workers they hire are authorized to work here. This law adds Labor Code section 2814 and takes effect January 1, 2016. It will prohibit employers from using E-Verify to check the status of existing employees or employees who have not received an offer. Unless required by federal law or as a condition of receiving federal funds, employers can only check the status of applicants who have received an offer but have yet to start work.

Also, if an employer using the E-Verify system receives notice from Homeland Security or the Social Security Administration that the employee does not match what is in the federal database (the "No-match letter"), the employer must notify the employee of that fact as soon as practicable.

The penalty for each violation of the new statute, Labor Code § 2814, is a hefty $10,000 fine. Another legal hurdle for California employers to clear with excessive penalties for noncompliance.

What to do?

Employers still need to verify the status of workers they hire and E-Verify provides a convenient mechanism to do so. But unless required by federal law or as a condition of receiving federal funds, employers can only check the status of applicants who have received an offer but have yet to start work. In addition, the employer needs to notify the worker promptly if the E-Verify system doesn't confirm that an individual is authorized to work in the U.S.

Expansion of Individual Liability for Wage Violations

Benignly named "A Fair Day's Pay Act," this new law is intended to help employees collect judgments because their employers change their names or hide their assets. But the bill allows the Labor Commissioner to conduct hearings to determine whether a "person acting on behalf of an employer" should be held personally liable for an employer's violations. The Labor Commissioner would also be able to levy those individuals' accounts or property to enforce a judgment and seek payment from successor employers under criteria that are extremely vague.

The new law also provides that a new business will be considered the "same employer" for purposes of liability if (1) the employees of the successor employer are engaged in "substantially the same work in substantially the same working conditions under substantially the same supervisors," or (2) the new entity "has substantially the same production process or operations, produces substantially the same products or offers substantially the same services, and has substantially the same body of customers."

What to do?

Hold your breath—this law may turn out to be a blessing for good corporate citizens and a nightmare for "fly by nights" who go in and out of business and try and leave joint employers and guarantors holding the bag.

It's All in the Family—Relatives of Whistleblower are Granted Protections

Effective January 1, 2016, this law prohibits employers from retaliating against an employee who is a family member of an employee who made a protected complaint. The law extends the protections to an employee who is a family member of a person who engaged in, or was perceived to engage in, the protected conduct or made a complaint protected by the law.

What to do?

Under this law, if a married couple is working for the same employer, and the husband complains of discrimination, that's not a legal basis to take action against the wife. Be extra careful when employing relatives. Keep them separate—at least in the workplace.

Amendment of the Labor Code's Private Attorneys General Act of 2004 (PAGA)

The Labor Code requires employers to provide certain specific information on the pay statements it provides to its employees with their wages, such as their gross and net wages, total hours worked and deductions PAGA does not currently provide a cure period with respect to an employer's failure to include any of this required information on the pay statements of its employees.

The law has been amended to provide an employer with a limited right to cure a violation of failing to provide its employees with a wage statement containing the inclusive dates of the pay period and the name and address of the legal entity that is the employer. A violation is considered to be cured upon a showing that the employer has provided a fully compliant, itemized wage statement to each aggrieved employee.

What to do?

Pay attention. Correct errors immediately when brought to your attention. This is an opportunity.

And 2015 Laws...Keep in Mind

California Sick Leave

Beginning July 1, 2015, California employers were required to begin providing paid sick leave benefits to their eligible employees.

A key question: Do I need a written paid sick leave policy that I hand out to employees? The answer is "yes."

A written policy allows you to specifically describe and clearly communicate your company's approach to providing the mandatory benefit. But more important, the Labor Commissioner has specifically stated that if an employer provides any additional terms such as caps on maximum use, the employer must inform employees of those additional terms.

  • Without a written policy, your company will be stuck using the statutory mandated accrual rate of one hour of sick pay for every 30 hours worked. This can result in a full-time employee potentially accruing more than 69 hours of paid sick leave per year and being allowed to carry that over to the next year, and so on. This is nearly nine days per year if the employee works a 40-hour workweek.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.