United States: California's Employment Law Class Of 2016: The Laws, Their Effects And Our Recommendations For Compliance

Last Updated: December 29 2015
Article by L. Julius M. Turman

Co-author: Eric M. Walder

Each year, the California legislature – historically the most active of state regulators – reexamines the relationship between employers and their workforces and emerges with a multitude of employment law protections. 2015 was no exception. Lawmakers created novel and expansive measures, affecting companies throughout the state in varying degrees. Some of the laws, most of which take effect January 1, 2016, are reactions to cases decided, while others are sweeping remedies to historic and longstanding issues.

As we close out 2015, we prepare for 2016, by providing an overview of specific areas of employment law (discrimination/anti-retaliation/discharge; wage and hour; leave laws), the effect the new laws will have on employers, and some basic recommendations to help prepare for compliance. Our recommendations are limited, as the impact of these new laws are yet unknown.


SB 358 – Fair Pay Act (Effective January 1, 2016)

NEW LAW: SB 358 revised California's equal pay law to make it the most aggressive in the country. Previously, an employee had to show that s/he was being paid less than an opposite-sex colleague who was performing "equal work." But the law now requires the employee to show that the colleague performed "substantially similar work."

Also, where employees used to be compared only with colleagues in the "same establishment," employers are now potentially liable for pay disparities for employees who work in and under "similar working conditions,'" which could have implications across the country. While the revised law still allows employers to provide a bona fide defense by showing that a wage gap is based on specific factors other than sex, an employee will now have the opportunity to overcome that defense by proving that an alternative business practice exists that would serve the same business purpose without producing the wage gap.

The law also prohibits employers from preventing employees from disclosing their own wages, or disclosing or asking about the wages of others; provides significant penalties for discrimination, termination and retaliation based on employees exercising their rights to wage transparency; and requires employers to maintain past records of employee wages and job classifications for three years.

EFFECT: Employers will need to be prepared for possible claims from employees who compare themselves with colleagues in a different division, business unit, or department, including colleagues in a different geographic location or parts of the company. Furthermore, the law creates a burden-shifting framework that may make it more difficult for employers to assert an affirmative defense.

Reed Smith RECOMMENDS: To minimize the risks of equal pay claims, employers should audit employee job duties, responsibilities and pay across the company; review all pay and compensation-related policies and procedures to ensure that the criteria for base compensation, bonuses, and raises are as objective as possible; and review all policies related to confidentiality, discussion and discipline associated with disclosure of pay information. Employers will need to provide internal training on how to cross-reference employee compensation across the company and may need to create a record keeping system that stores any and all documentation that relates to pay decisions.

AB 1509 – Protections for Family Members When an Employee Engages in a Protected Activity (Effective January 1, 2016)

NEW LAW: AB 1509 prohibits employers from retaliating against family members of employees or applicants who complain of discrimination or unsafe working conditions or engage in whistleblowing. The law also extends joint liability to client employers, such as employers who use subcontractors or staffing agencies to obtain workers. However, the law includes a specific exclusion from joint liability for client employers that use Public Utility Commission-permitted third-party household good carriers.

EFFECT: Where multiple family members work for the same employer, employers should be aware of these relationships and carefully monitor interaction with all family members whenever an issue arises.

Reed Smith RECOMMENDS: When an employer's workforce has multiple members of the same family, the appropriate management training and supervision is necessary to ensure that one family member is never held accountable for any activity of another, even when suspected of jointly participating. Personnel files should limit references to one family member and their actions. Employers should be cautious in seeking information from family members about another, so as to avoid the appearance of a conflict with the new law.

AB 987 – Discrimination and Retaliation Related to Disability or Religious-Belief Accommodations (Effective January 1, 2016)

NEW LAW: AB 987 prohibits employers from retaliating or otherwise discriminating against an employee for requesting an accommodation for a disability or religious belief or observance, regardless of whether the accommodation request was granted.

EFFECT: This law is a legislative overturning of a California Court of Appeal decision (Rope v. Auto-Clor Systems of Washington) that a request for an accommodation by itself is not engaging in protected activity by an employee seeking accommodation for a disability or religious belief or observance. This law is intended to clarify that employers are indeed prohibited from retaliating against employees who make such a request, regardless of whether the request was ultimately granted.

Reed Smith RECOMMENDS: Reasonable accommodations policies should be revised to reflect that retaliation or any adverse act based on the mere request is not allowed. Even when the accommodation is denied, employers must train managers to be cognizant of how they treat the requesting employee following such rejection.

AB 622 – E-Verify System (Effective January 1, 2016)

NEW LAW: AB 622 establishes that it is not acceptable for employers to use the E Verify system to check employment authorization status of existing employees. Nor can employers use E-Verify for applicants who have not received an offer of employment, except as required by federal law or as a condition of receiving federal funds. In addition to other remedies available, an employer who violates this new law may be liable for a civil penalty not to exceed $10,000 for each violation, and each unlawful use of the E-Verify system on an employee or applicant constitutes a separate violation.

EFFECT: The use of E-Verify is optional except when required by federal law or as a condition of employment. However, there is concern that employers have been using the E-Verify system to discriminate against potential employees who may have actually been authorized to work in the United States by checking their status prior to offering employment, and then not following the required notification procedures to allow the potential employee to remedy any lack of confirmation. The new law indicates that added attention will be placed on ensuring employers follow the required employee notification procedures when a search returns a result that cannot confirm someone's eligibility to work.

Reed Smith RECOMMENDS: Any employer who uses E-Verify to confirm the legality of its workforce should become familiar with the new strict parameters regarding its use, and establish acceptable policies and training for human resources, as well as documenting their actual use of it. Furthermore, employers should be cognizant of the employee notification requirements when a prospective employee's authorization status cannot be verified by E-Verify, and make sure to provide the potential employee with an opportunity to remedy the situation.


AB 1506 –Remedying PAGA Violations (Effective October 2, 2015)

NEW LAW: AB 1506 allows employers to cure a PAGA violation by failing to include the inclusive dates of the pay period and the name and address of the legal entity that is the employer on the itemized wage statement. An employer has 33 calendar days from the postmark date of the notice it receives to cure the alleged violation by providing employees with appropriately itemized wage statements and showing such to the Labor and Workforce Development Agency. An employer only has the right to cure alleged violations once in a 12 month period.

EFFECT: This law was an urgency measure that went into effect October 2, 2015, as a response to a growing number of lawsuits brought against employers based on technical violations of Labor Code Section 226 that did not cause actual injury to any employees.

Reed Smith RECOMMENDS: Any employer who has received a PAGA letter may potentially avoid liability by immediately reviewing its wage statements to ensure compliance. If any issues are discovered, employers should move quickly to revise their wage statements so that they can confidently avoid the problem. As coordination must take place between the employer's record keepers, third-parties vendors who issue paychecks and statements, and counsel, immediate action is necessary.

AB 1513 – Piece-Rate Compensation (Effective January 1, 2016)

NEW LAW: AB 1513 requires employers to separately compensate piece-rate employees for rest and recovery periods and "nonproductive" time. When a piece-rate employee is on a rest and recovery period before re-starting work, the employee must be paid the applicable minimum wage or his or her average hourly rate (not including overtime), whichever is higher. Also, for any nonproductive time – time when the employee is under the employer's control but not directly related to the activity being compensated – the employee must be paid the applicable minimum wage. Importantly, the new law requires that additional information be added to wage statements, including (a) the total hours of compensable rest and recovery and "nonproductive" periods, (b) the rate of compensation for those periods, and (c) the gross wages paid for those periods during the pay period.

For employers who have recently been sued for piece-rate compensation practices, the new law provides a limited safe harbor, an affirmative defense for any cause of action based solely on the employer's failure to pay for rest and recovery periods and other nonproductive time for periods prior to January 1, 2016. If an employer seeks to assert this affirmative defense, then it must satisfy a specific set of requirements by December 15, 2016, that includes paying all previously undercompensated employees with all compensation due and accrued interest.

EFFECT: This is an intimidating piece of legislation for employers who have utilized piece-rate pay. The real battleground will be the question of "is an employee engaged in a rest and recovery period" or "under the control of the employer" to warrant nonproductive time pay. This will require intense analysis and review of employee conduct and work patterns. The safe harbor should provide the employer with an opportunity to limit the potential risks and revise its practices to ensure compliance in the future.

Reed Smith RECOMMENDS: Employers should examine their use of piece-rate practices by looking over and establishing specific "rest and recovery" periods and building in "nonproductive" time into employee schedules, to the extent possible and predictable, from experiences and past patterns. Employers should create new work plans and schedules that make business sense and comply with the new law. The law also requires employers to revise their existing wage statements to add new categories of pay, so as to comply with Labor Code 226.

AB 970 – Enforcement of Employee Claims by Labor Commissioner (Effective January 1, 2016)

NEW LAW: AB 970 provides the California Labor Commissioner with authority to enforce local ordinances and rules regarding overtime hours or minimum wage provisions, and to issue citations and penalties for violations, except when the local government has already issued a citation for the same violation. More importantly, AB 970 empowers the Labor Commissioner to issue citations against an employer for violating an employee's right to indemnification and reimbursements for business expenses or losses according to Labor Code Section 2802.

EFFECT: By expanding the Labor Commissioner's authority to issue citations and penalties for local ordinance violations and ability to enforce reimbursement and indemnification rights, it reduces the administrative and, to some degree, the evidentiary burden an employee faces when seeking his right to local overtime, minimum wage, indemnification and reimbursement. The new law empowers the Labor Commissioner to interpret local law and places these claims in a historically plaintiff-friendly forum, and provides a "one-stop" shop to seek enforcement.

Reed Smith RECOMMENDS: Employers should always research local ordinances when conducting or expanding their business in specific localities, including immediately becoming familiar with local labor ordinances. We also recommend revising overtime, reimbursement and indemnification policies to ensure that they are in compliance with the state and local laws, and recommend training managers on any changes in these policies.

SB 588 – Judgment Enforcement by Labor Commissioner (Effective January 1, 2016)

NEW LAW: SB 588 provides the California Labor Commissioner with additional means to enforce judgments against employers arising from nonpayment of wages, such as filing a lien on real estate, placing a levy on an employer's property, or imposing a stop order on an employer's business in order to assist an employee in collecting unpaid wages.

If a final judgment against an employer remains unsatisfied after a period of 30 days after the time to appeal the judgment has expired, the employer cannot continue to conduct business unless the employer has obtained a bond of up to $150,000 and a copy of the bond with the Labor Commissioner. The bond shall be effective and maintained until satisfaction of all judgments for nonpayment of wages.

EFFECT: The law intends to speed up the payment of any unpaid wages, and possibly speed up the resolution of any unpaid wage disputes by requiring such a large bond. These extraordinary measures reflect a significant expansion in the Labor Commissioner's duties and authority.

Reed Smith RECOMMENDS: Employers should aggressively pursue their rights and advocate their position in wage claim hearings to protect their rights upon notification. Also, employers should respond to any unpaid wage judgment to stop any potential interference with day-to-day operations, and seek out resolutions that should help them avoid facing the extraordinary relief the new law creates.

SB 327 – Wage Orders: Meal Periods (Effective October 5, 2015)

NEW LAW: SB 327 is a legislative override to the appellate court's decision in Gerard v. Orange Coast Memorial Medical Center, which allows health care workers to waive their second meal period if the total hours worked in their shift is no more than 12 hours. Currently, Labor Code Section 512 requires two meal periods for work periods of more than 10 hours, but employees are allowed to waive their second meal period if the total hours worked in their shift are no more than 12 hours. Wage Order 5, Section 11(D), allowed health care industry employees to shorten the work-hour requirement to shifts in excess of eight total hours in a workday to waive their second meal period.

EFFECT: The law reverses the court decision that invalidates Section 11(D) of Wage Order No. 5 and cures the conflicts with Labor Code Section 512.

Reed Smith RECOMMENDS: As many health care organizations were already complying with Section 11(D) of Wage Order 5, such compliance will be fairly achievable. Employers should clarify that health care workers are entitled to and able to waive a second meal period, should their shift exceed eight hours. This should be documented with the proper policy mandates, notices to employees and complaint waiver forms.


SB 579 – Employees' Time Off To Organize Child Care (Effective January 1, 2016)

NEW LAW: SB 579 expands an employee's right to take time off work to enroll her/his child in school or with a licensed child care provider, or to address a child care provider or school emergency. This law only applies to employers with 25 or more employees, and it also protects employees from discrimination, discharge, or retaliation for taking the time off.

EFFECT: SB 579 creates yet another protected leave for employers to be aware of.

Reed Smith RECOMMENDS: Employers should make sure all leave policies are up-to-date and include the new leave law in their handbooks and policies. Furthermore, since this law is a protection against discrimination and retaliation, it is important that the message is communicated to managers that this is a protected leave, and employees should never suffer any negative consequences for requesting or taking the leave.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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