The California Legislature recently concluded its legislative session, and a number of new wage-related bills signed by the Governor will significantly affect California employers. This article summarizes some of those laws below. We do not address laws specific to government employers, or to certain occupations or industries.
AB 304/Paid Sick Leave
AB 304 primarily clarifies ambiguities in the Healthy Workplaces, Healthy Families Act, the 2014 law mandating employers provides sick leave to all employees. In addition to other changes, the new law explicitly addresses the rate at which employers must pay sick leave. For exempt employees, employers must pay at the rate used to calculate wages for other forms of paid leave. For non-exempt employees, employers must pay sick leave at either the “regular rate” (the rate used to calculate overtime, taking into account most nondiscretionary forms of compensation in addition to the hourly wage) or by dividing the employee’s total wages (excluding overtime premium pay) by the employee’s total hours worked in the full pay periods in the previous 90 days.
Because AB 304 passed as urgency legislation, it went into effect in July 2015.
AB 970/DLSE Investigations
AB 970 expands the California Labor Commissioner’s authority to investigate and enforce local overtime and minimum wage laws, like those in San Francisco and neighboring localities. It also authorizes the Labor Commissioner to issue citations and penalties to employers who violate California Labor Code 2802, which requires employers to indemnify employees for business expenses.
AB 1506/PAGA Amendments
AB 1506 amends the Private Attorneys General Act to provide an employer with the right to cure certain violations of California’s mandatory wage statement law, Labor Code section 226. Now, an employer who does not include the inclusive dates of the pay period or its name and address can “cure” the violation by amending the wage statements and providing them to the affected employees (those working in the past three years). The employer can only utilize the cure provision one time during each 12-month period. Also, the window for curing the violation is only 33 days, which is the period from date on which the employer receives notice of a claim until the employee can file a lawsuit.
Again, because this bill passed as urgency legislation, it is already in effect.
AB 1513/Piece Rate Compensation
A new law, AB 1513, makes it significantly more difficult for employers to pay employees by “piece-rate” compensation. Now, in addition to the piece-rate already paid, employers must also pay piece-rate workers for rest and recovery periods and other “nonproductive time” (time under the employer’s control, not counting rest and recovery periods, that is not directly related to the piece-rate activity), at minimum wage or higher. In addition, the employees’ wage statements must show the total hours of rest and recovery periods, the rate of compensation paid for them, and total gross wages. The new burdens imposed by this law, as well as the ambiguities about what constitutes “nonproductive time,” will likely result in fewer employers utilizing piece-rate compensation.
SB 327/Meal Periods for Healthcare Workers
Until recently, under the applicable IWC Wage Orders, certain healthcare employees were able to voluntarily waive their right to one of two meal periods on a shift longer than eight hours. In early 2015, however, a California appellate court held that these waivers contradicted the California Labor Code, which requires meal periods, but does not explicitly allow the waivers.
SB 327 amends the Labor Code to include an explicit provision permitting such waivers. As urgency legislation, it has already taken effect.
SB 358/Equal Pay
California’s new “Equal Pay Act” is broad legislation intended to eliminate the gender wage gap. It prohibits employers from paying employees at wage rates less than rates paid to the opposite sex for “substantially similar work.” Unlike existing law, it does not require that the employees work at the same “establishment” to be comparators. While the law includes exceptions for a seniority system, a merit system, or a system that measures earnings by quantity or quality of production, a differential based on any bona fide factor other than sex must be job-related and consistent with “business necessity,” such as a difference in education, training, or experience.
The law also prohibits employers from preventing employees from “inquiring about another employee’s wages” or “aiding or encouraging any other employee to exercise his or her rights” under the law. Finally, it extends related recordkeeping obligations by one year, from two years to three years.
SB 501/Wage Garnishments
The legislature passed SB 501, which decreases the amount of an employee’s wages that can be subject to garnishment to the lesser of 25% of the employee’s weekly earnings, or 50% of the amount by which the employee’s earnings for the week exceed 40 times the minimum wage.
SB 588/DLSE Enforcement
Under SB 588, the Labor Commissioner has increased authority to enforce judgments for wage-related violations. For example, it can issue a lien on an employer’s property for amount owed to an employee.
Tips for Employers
Given the multitude of changes, employers should review these laws carefully and discuss them with legal counsel. In particular, the Equal Pay At may require some changes to recordkeeping, as well as auditing of current pay practices and disparities.