United States: Return Of The Living Dead: Could Unsuccessful California Bills Haunt Employers In 2018?

As discussed in our prior article, Governor Jerry Brown recently signed several significant labor and employment measures into law in California, including a statewide ban-the-box provision1 and an expansion of parental leave requirements to smaller employers.2

While employers are still wrapping their heads around those new developments, it is worth noting what Governor Brown did not approve—especially because the bills he killed this year could come back to life. In California, measures proposed in 2017 can carry over into 2018 for further consideration. Zombie bills are not unusual and can make real progress if reintroduced. Indeed, Governor Brown vetoed a bill prohibiting salary history inquiries in 2016, only to sign a similar measure this year.3

So which bills might return to scare employers in the Golden State? A handful of employment-related proposals could resurface, either in the same form or as an amended Frankenstein-like version. While we cannot yet predict the fate of any resurrection, employers may want to keep their eyes peeled for movement on these (currently dead) topics.

Publication of Gender Pay Differentials. At the eleventh hour, Governor Brown vetoed the Gender Pay Gap Transparency Act (AB 1209), which would have required large employers (with 500 or more employees in the state of California) to begin collecting and providing the Secretary of State with information relating to "gender pay differentials." Specifically, a large employer would be required to identify the difference between the mean and medial salary of male exempt employees and female exempt employees, by each job classification or title. Similar information would be required for male and female board members. The bill mandated that the information be published on or before July 1, 2020, on a website available to the public. Biennial updates would be required thereafter.

AB 1209 garnered popular support in the legislative chambers. Nonetheless, Governor Brown returned the bill without his signature over concerns that the proposal was ambiguous and would not gather data that would meaningfully contribute to the state's efforts to ensure equal pay. In his veto statement, Governor Brown also expressed his worry that AB 1209 would be exploited to bring about more litigation rather than pay equity.

Opportunity to Work. The California assembly considered a measure, AB 5, that would have required employers with 10 or more employees to offer additional available hours of work to current nonexempt workers before hiring more help. This obligation would have extended to employees who, in the employer's reasonable judgment, have the skills and experience to perform the work. For qualified workers, AB 5 would have required the employer to implement "a transparent and nondiscriminatory process to distribute the additional hours of work among existing employees." The bill did not obligate an employer to offer such additional hours where they would entitle the employee to overtime compensation. AB 5 also would have imposed workplace posting and recordkeeping duties. The proposal also prohibited retaliation against employees who exercise their rights under this law and authorized aggrieved employees to file complaints with the state labor agency and to initiate civil actions.

The purpose of this Opportunity to Work measure was to enable employees to achieve full-time employment if desired. Although the bill languished in the committee process, these types of laws and other predictive scheduling proposals are gaining momentum across the country.4 Opportunity to Work in California might be down, but don't count it out.

Disclosure to Unions of Home Care Aide Contact Information. Both chambers passed an amendment (AB 1513) to the California Home Care Services Consumer Protection Act, which governs the licensing and registration of home care organizations. Under the existing law, the State Department of Social Services maintains a registry of home care aides and applicants on its website. Although consumers can use this registry to confirm that a particular aide is licensed, an aide's personal contact information is not available to the public.

AB 1513 would have required disclosure of certain information, however, to labor organizations. If AB 1513 had taken effect, the department would have provided an electronic copy of a home care aide's name and available home and cell phone numbers to unions, upon request. This provision would have kicked in on September 1, 2018, with advance notice written to home care aides and applicants beginning in July 2018. Under the bill, aides could opt-out by requesting that contact information not be shared. Unions that received contact information would be forbidden from disclosing it to other parties or using it for reasons other than organization and representation of employees.5

Governor Brown vetoed AB 1513, expressing concern about the release of contact information for aides who joined the registry without knowing that this information could be subject to disclosure. He did not address any specific perceived flaws with the disclosure notice provision included in the bill. Home care employers had characterized the bill as nothing more than a labor grab and praised the governor's decision.

Salary Basis for White Collar Exemptions. Under current California law, employers are not obligated to pay overtime to executive, administrative, and professional employees if those employees perform certain types of duties and earn a monthly salary of not less than double the state minimum wage for full-time employment. A bill proposed this past year, however, would have expanded the coverage of these white collar exemptions.

AB 1565 would have added a specific monthly salary level of $3,956 to the exemption test, along with the existing threshold of no less than double the state minimum. Accordingly, workers performing the requisite tasks would be entitled to overtime unless they earn a monthly salary exceeding one of these amounts, whichever is larger. According to legislative analysis of AB 1565, the express purpose of the proposal was to adopt the U.S. Department of Labor's (DOL) intended increase to the salary basis, which has since been nullified, announced during the Obama administration.6 The goal was to plug the gap between the state's current exemption threshold ($41,600 for smaller employers and $43,680 for larger employers), and the higher DOL threshold ($47,476), until the state threshold surpasses that level in 2020 as a result of annual scheduled increases to the state minimum wage.7

Opponents of AB 1565 argued that it unnecessarily accelerated the increase in the salary level and applied to all employers, regardless of size. The bill did not make it out of the state senate but had solid support in the assembly. It is unclear whether AB 1565's sponsors will renew their efforts in 2018, particularly as the bill's terms would be rendered meaningless in 2020.

Gig Economy Tips. The California assembly passed a measure (AB 1099) that would have altered how gig economy businesses accept and pay tips to workers. AB 1099 required entities that permit payment for services by credit or debit card to accept those forms of payment for payment of tips. The proposal also entitled workers to their tip payments no later than the next regular payday following the consumer's authorization of the tip. Supporters emphasized that many workers rely heavily on tips and, moreover, that these workers can be deprived of significant income when consumers are unable to give tips electronically, particularly because fewer people today regularly carry cash.

On the other hand, opponents argued that the use of credit cards should be determined by the competitive marketplace, a position taken by Governor Brown when he vetoed related legislation in 2016.8 They also pointed out that the bill might give consumers the impression that a tip was expected for services that are not normally subject to gratuity. Detractors further contended that AB 1099 created a risk that workers would be deemed "employees" (rather than independent contractors, a classification commonly asserted in the gig economy) and that the new rule would spawn costly litigation. While AB 1099 stumbled in a senate committee, gig economy issues will not fade away anytime soon. Nonetheless, bills like AB 1099 may not succeed, if at all, until a new governor takes office in January 2019.

Universal Single-Payer Health Care. As uncertainty over federal health care regulation lingers, the state senate passed a sweeping measure (SB 562) that would have established the Healthy California program. This program would have provided universal, single-payer health care, as well as a cost-control system, to benefit all state residents. Every resident would have been eligible to enroll for coverage. Private health plans and insurers could not offer competing benefits but could offer benefits for services not covered by the program, including for non-residents. Even if enacted, SB 562 could not have become operative until revenues exist to fund the costs of implementing the program.

SB 562 did not make much headway in the assembly. But with the state of health care in flux, the California legislature may again take matters into its own hands in the future.

The California legislature reconvenes in January. We will continue to monitor developments on labor and employment measures, including any zombie bills. For now, employers can enjoy the candy corn and hope for all treats, and no tricks, in the coming session.

Footnotes

1 Rod Fliegel & Allen Lohse, California Statewide Ban-the-Box Law Signed By Governor, Littler Insight (Oct. 16, 2017).

2 Alexis Sohrakoff, California Will Require Small Businesses to Provide 12 Weeks of Unpaid, Protected Leave for Baby Bonding Purposes, Littler ASAP (Oct. 13, 2017).

3 See Bruce Sarchet, New California Law Prohibits Salary History Inquiries, Littler ASAP (Oct. 13, 2017).

4 See, e.g., Deidra Nguyen, Who Could Have Predicted? Fair Scheduling Requirements Pose Compliance Challenges for Retail, Restaurant and Other Employers, Littler Insight (Sept. 18, 2017).

5 Attorneys with Littler's Workplace Policy Institute, representing a group of Home Care providers, provided a legal opinion to Governor Brown indicating that the bill would constitute an unconstitutional invasion of privacy, would be preempted by federal law – the National Labor Relations Act, and would also violate the equal protection clauses of the federal and state constitutions.

6 Sean McCrory et al., Federal Court Invalidates New Overtime Rule, Littler ASAP (Sept. 5, 2017).

7 See Assembly Comm. on Labor & Emp't, Bill Analysis of AB 1565 (4/17/17).

8 The governor vetoed SB 896 last year, which would have imposed similar requirements on nail salons.

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