The 2015 Legislative Update for California Employers

 

This last legislative session in California has produced over 20 new employment laws mostly slated to take effect on January 1, 2015.  These laws run the gamut, from mandating paid sick leave to expanding coverage under the workplace discrimination and harassment laws.  California cities have waded into the employment arena as well by increasing the minimum wage and enacting other employment ordinances such as San Francisco’s Retail Workers Bill of Rights and local measures by the Cities of Los Angeles and Oakland impacting the hospitality industry. 

 

Mandatory Paid Sick Leave

 

California’s paid sick leave law (AB 1522), dubbed the “Healthy Workplaces, Healthy Families Act of 2014,” has caused employers perhaps the greatest consternation.  This law provides that beginning July 1, 2015 employees will accrue paid sick leave at the rate of one hour for every 30 hours worked.  Although the right to accrue and use sick pay does not take effect until July 1, the law is effective January 1, 2015. 

 

Significantly, the paid sick leave law applies to all employees who have worked more than 30 days within a year in California and includes part-time and temporary employees.  The law exempts only employees covered by collective bargaining agreements with specified provisions, providers of publicly-funded In-Home Supportive Services and certain individuals employed by air carriers.

 

Accrual v. Advance Method

 

Employers have the option of adopting the accrual or advance (upfront) method for providing paid sick days.  Under the accrual method, employees accrue paid sick leave at the rate of one hour for every 30 hours worked, and the accrual carries over to the following year of employment.  The employer may limit an employee’s use of paid sick leave to 24 hours or 3 days in each year of employment and cap the employee’s total accrual at six days or 48 hours.   The “year of employment” for this purpose is measured from the date the accrual begins or the first day of employment if hired after July 1, 2015. 

 

Alternatively, in lieu of tracking the accrual of paid sick leave, employers may provide all employees 24 hours or three days of sick leave in a lump sum at the beginning of each year.  Under this advance method, the full amount of paid sick leave must be available for use from the beginning of the year and the accrued sick leave does not carry over from year to year.  

 

Under both the accrual and advance methods, employees are not eligible to use paid sick leave during the first 90 days of employment.  It is important to note that this new law establishes minimum requirements and an employer may provide paid sick leave through a paid time off (PTO) policy as long as that policy satisfies the accrual, carryover and use requirements of the paid sick leave law.   

 

Permitted Use and Manner of Payment

 

Employees are permitted to use paid sick leave for diagnosis, care or treatment of an existing health condition, or preventative care, for an employee or an employee’s child, spouse, domestic partner, parent, grandparent, grandchild or sibling.  Employees who are victims of domestic violence, sexual assault or stalking may also use paid sick leave for related time off. 

 

Employers may set minimum increments of two hours or more for the use of paid sick leave.  Reasonable advance notice may be required for employees to use paid sick leave, but the law is silence on whether doctor’s notes or other medical verification may be requested.

 

As for the payment of sick leave, the law provides that employees must be paid at their hourly rate in the next payroll period after the leave is taken.   If the employee receives commissions or has different rates of rates, the regular hourly rate is calculated by dividing the total wages (excluding overtime) for the previous full pay periods of the previous 90 days by the total regular hours worked.

 

Employers are not required to pay employees for accrued, unpaid sick leave upon termination of employment.  However, if an employee separates and is rehired within one year, the unused sick pay must be reinstated.

 

Notice Requirements

 

The paid sick leave law requires that effective January 1, 2015 an updated Wage Theft Notice with information about this sick pay entitlement be provided to non-exempt new hires.  Effective January 1, employers must also place a posting on the paid sick leave law in a conspicuous place in each workplace.  The updated Wage Theft Notice and workplace posting may be found on California Labor Commissioner’s website at http://www.dir.ca.gov/dlse/resource.html

 

Apart from these requirements, employers must disclose on itemized paystubs or otherwise in writing upon payment of wages the amount of available sick pay. 

 

Broad Legal Remedies for Noncompliance and Retaliation

 

An aspect of the paid sick leave law that is likely to cause major repercussions through an uptick in litigation is its broadly worded prohibition against retaliation of employees for using accrued sick days, exercising the right to use accrued sick days, or for filing a complaint alleging a violation of this law.  The law’s paid leave entitlement and anti-retaliation protection will be enforced by the California Labor Commissioner and California Attorney General, as well as by collective actions brought under the California Private Attorney General Act.  Potential remedies include job reinstatement, back pay, and payment of sick days unlawfully withheld and penalties, as well as the recovery of attorney’s fees in any court action.   Given the remedies available to an employee claiming wrongful termination, we may very well see retaliation claims more feverishly pursued than claims alleging a failure to provide this paid leave entitlement.

 

Local Ordinances Complicate Compliance Obligations

 

The paid sick leave law clearly states that it reflects “minimum requirements” and does not affect other laws providing “greater accrual or use by employees.”  Consequently, any employer with employees working in cities such as San Francisco, Oakland and San Diego adopting paid sick leave ordinances will need to comply with aspects of local law that are more generous to employees.  Requiring employers to weigh competing provisions in the state and local laws to determine which apply is an unnecessary burden. 

 

Harassment and Discrimination Laws Extended

 

The California Fair Employment and Housing Act (FEHA) prohibits discrimination of employees and applicants for employment based on specified characteristics.  AB 1443 expands the protections under the FEHA to the “selection, termination, or other terms or treatment” of unpaid interns or persons in a limited duration program providing unpaid work experience.  The new law also protects unpaid interns and volunteers from workplace harassment. 

 

Presently, employers with 50 or more employees must conduct sexual harassment training for supervisors at least every two years and within six months of their assumption of a supervisory position.  A new law (AB 2053) now requires that this mandatory harassment training include a component on the prevention of “abusive conduct,” defined as “conduct with malice, that a reasonable person would find hostile, offensive and unrelated to an employee’s legitimate business interests.”  The impact of this new law is limited in that it does not expand the scope of the FEHA's anti-harassment provision to ban abusive conduct or bullying per se. 

 

Another law (AB 1660) further extends the reach of the FEHA by defining “national origin” discrimination to include discrimination for possessing a drivers’ license issued by the state to individuals unable to submit satisfactory proof of authorized presence in the United States.  This legislation was enacted after the state changed existing law to allow undocumented residents to obtain drivers’ licenses.  California also passed AB 1792 prohibiting employers from discriminating against employees who enroll in the Medi-Cal program and from refusing to hire a beneficiary because that individual is enrolled in the Medi-Cal program.  This legislation also requires employers to report data concerning employees receiving public assistance and then seeks to publicly shame employers with low wage earners by allowing the state to identify employers that employ 100 or more beneficiaries of public assistance in the state. 

 

Joint Employer Liability for Contracted Labor

 

This new California law (AB 1897) targets businesses that obtain workers to perform labor within its usual course of business from staffing agencies and other labor contractors.  Businesses are exempt from this law, however, if they have fewer than 25 workers (which by definition excludes exempt employees), or are supplied five or fewer workers by labor contractors at any given time.

 

Once this law becomes effective, private employers will be unable to deny liability for a labor contractor’s failure to pay all required wages or to secure valid workers’ compensation coverage for contract workers.  Employers using the labor services will now “share with the labor contractor all civil legal responsibility and civil liability for all workers supplied” to the company.  The statute defines “labor contractor” as an individual or entity that supplies a client employer with workers to perform labor within the client employer’s usual course of business. 

 

This liability is imposed without consideration for whether the business had knowledge about the purported violations and irrespective of whether the client employer and labor contractor are joint employers.  Thus, it is advised that covered employers develop a process for conducting due diligence when selecting staffing agencies and ensure that the agencies are maintaining workers’ compensation coverage and paying all wages due.

 

Workplace Safety – Cal/OSHA

 

This new law (AB 1634) significantly changes an employer’s obligation to abate safety hazards in California and reduces the ability of the Division of Occupational Safety and Health (the Division) to make modifications to civil penalties.  Existing law authorized the Division to propose modifications concerning the characterization of violations and corresponding modification of civil penalties for violations.  

 

The Division will now be prohibited, in the case of serious violations, from granting proposed modifications to civil penalties for abatement or credit for abatement, unless the employer has done one of the following three things: (1) abated the violation at the time of the initial inspection; (2) abated the violation at the time of re-inspection (prior to a citation being issued); or (3) submitted a signed statement under penalty of perjury with supporting evidence to show the violation has been abated (which must be received by the Division within 10 working days of the date fixed for abatement). 

 

This new law also provides that the filing of an appeal to the California Occupational Safety and Health Appeals Board (appeals board) of a final decision that classifies a citation as serious, repeat serious or willful serious will no longer stay or suspend the requirement to abate the violation, unless the employer demonstrates by a preponderance of the evidence that a stay or suspension of abatement will not adversely affect the health and safety of employees.  The employer must affirmatively request a stay or suspension by a “written, verified petition with supporting declarations” to the appeals board within 10 days after issuance of the decision.  Requiring employers to specifically contest abatement where it would otherwise be stayed essentially creates two separate appeals. 

 

Minimum Wage Increases

 

This past year numerous cities have increased the minimum wage above the state’s minimum of $9 per hour.  Both San Francisco and Oakland passed ballot initiatives this last election increasing Oakland’s minimum wage to $12.25 and San Francisco’s to the same rate effective May 2015.  The City of Richmond passed an ordinance increasing its minimum wage to $9.60 per hour effective January 2015 with step increases up to $12.30 by 2017.  Berkeley’s minimum hourly wage will increase to $11 per hour on October 1, 2015, San Jose’s minimum wage increased to $10.30 effective January 1, 2015, and San Diego has adopted a minimum wage of $9.75 effective January 1, 2015.

 

Los Angeles has passed the Citywide Hotel Minimum Wage Ordinance, which mandates a minimum wage of $15.37 per hour for hotels with 150 plus guest rooms, and is considering a city-wide minimum wage.

 

Other Significant New Local Laws Taking Effect

 

San Francisco’s Retail Workers Bill of Rights

 

On December 5, 2014, San Francisco passed the Retail Workers Bill of Rights requiring Formula Retail Establishments to offer additional hours of work to existing part-time employees before hiring new employees or using contract workers.  This offer of additional hours of work must be made in writing and retained for at least three years.  The ordinance applies to Formula Retail Establishments that have 20 or more locations worldwide and employ 20 or more employees in San Francisco.  The ordinance also requires that successor employers continue to employ individuals from these retail establishments following a change in ownership.

 

The ordinance prohibits retaliation and provides administrative remedies before the San Francisco Labor Standards Enforcement Agency, with the right of appeal to the Superior Court.  The San Francisco City Attorney may also bring civil actions against employers seeking enforcement.  This law is operative July 3, 2015. 

 

Los Angeles and Oakland Regulate the Hospitality Industry

 

On October 6, 2014, the City of Los Angeles passed the Citywide Hotel Minimum Wage Ordinance that applies to hotels with 150 or more guest rooms.  In addition to mandating a minimum wage increase and paid time off for hotel workers, the ordinance requires that “service charges” be distributed entirely to employees performing services to the customers from whom the service charges are collected. 

 

Similarly, the City of Oakland passed a ballot measure this last election that requires that owners and operators of restaurants, hotels and banquet halls pay all service charges to “hospitality workers” delivering the services.  The ballot measure also includes a minimum wage increase and paid sick leave law patterned after the San Francisco Paid Sick Leave Ordinance (which has been in effect since 2007).

 

Andrew J. Sommer

Partner

415.757.3446

asommer@connmaciel.com

 

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