United States: Out With The Old; Ring In The New

Quintessential early adapters and always on the go, we Californians love change, and we start trends. That's good. There has been plenty of change this past year in the world of California labor and employment law. As Father Time prepares to tender his timekeeping duties to Baby New Year, let's take a moment off the clock to look back at the old year's most significant legal developments.

2015 saw changes in wage and hour law (notably how to compensate piece rate workers), the continued battle over enforceability of arbitration agreements, and expanded kin care leave rights. But the biggest news was an increase in fundamental employee workplace rights and protections, such as equality in pay and entitlement to paid time away from work. The State Legislature also gave us a new definition of what it means to be a "joint employer" (as opposed to a contractor or other user of task or project-based services), which will likely have long-term ramifications.

What is not new is that California remains the most challenging jurisdiction in which to employ workers. Read on for a brief round-up of what we see as the most trend-making changes of the past year.

California Fair Pay Act

Effective January 1, 2016, the California Fair Pay Act, which commentators have called the nation's most aggressive equal pay law, will require employers with California-based employees to increase their vigilance to avoid discriminating in pay and benefits based on sex. Discussed previously in more detail here, the Fair Pay Act expands upon existing state and federal laws that prohibit gender-based pay discrimination, and essentially blows the discriminatory intent and disparate impact tests out of the water.

The Fair Pay Act permits the direct comparison of pay of employees of different genders who work in different locations, even if they do not hold the same or substantially equal jobs. As long as workers are engaged in "substantially similar work, when viewed as a composite of skill, effort and responsibility, and performed under similar working conditions," their pay and benefits must be the same. Unless, that is, the employer can demonstrate that any pay differences are based on seniority, merit, quality or quantity of production, or on a bona fide factor other than sex (such as education, experience, or training, so long as the other factor is job-related and consistent with business necessity).

Note: The phrases "job-related" and "consistent with business necessity" are familiar to most employers from the state and federal protections for disabled employees. That is, an employer can inquire about a disabled employee's medical condition or require a medical examination to determine ability to perform a job only if it is "job related and consistent with business necessity." We could conclude that the California Legislature intended the fair pay analysis to use the same meanings of these terms when considering whether a "bona fide factor" other than sex is sufficient to avoid a finding of illegal discrimination.

In any event, if you have not already done so, now may be the time to conduct a fair pay audit to ensure appropriate distribution of your company payroll among the workforce.

Paid Sick Leave Implementation and Amendments

Beginning on July 1, 2015, California employees began using the new mandatory paid sick time and many employers began experiencing nausea over it. They discovered, as many had feared, that if you give employees a right, they will use it. Whether the paid time sick is conferred in an annual grant or per the accrual method, employees are tending to use it as soon as it becomes available, wreaking havoc on work schedules, especially in occupations or industries that rely heavily on shift workers.

California is hardly alone in implementing mandatory paid sick time (now required in several other states and cities), but it was still one of the first. Eventually, we will forget that there was ever a time when employees did not get paid sick time. But until then, it is one more item to consider in the already heavy cost of doing business in the Golden State.

Joint Liability with Labor Contractors

2015 also brought us a statutory change in the manner in which companies that either are, or who do business with, temporary staffing agencies relate to one another and their employees. As of January 1, 2015, Labor Code section 2810.3 requires "client employers" to share liability with "labor contractors" (e.g., payroll, temporary staffing, or employee leasing agencies) for payment of wages of non-exempt workers, and for providing them with workers' compensation insurance. The California Legislature was concerned that workers supplied by shady or underfunded agencies would end up getting stiffed for work they performed. But the new law has left some "client employers" wondering exactly what benefits or protections they get from using contingent workers rather than direct hires. Contractual indemnification clauses are on the rise.

What about 2016 and beyond?

Time will tell what else the California lawmakers and courts will dream up for 2016. We predict renewed efforts to increase the minimum wage, grant additional leave rights to all employees, and improve the lot of the unemployed. We can also always count on the plaintiffs' employment bar to be cooking up some new theories of liability for workplace class actions. Until then, we wish you each a very happy and successful New Year, and look forward to sharing next year's California peculiarities with you.

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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