We write a lot about minimum wages. That’s not because we’re unimaginative. We’re very imaginative. We can imagine things that you couldn’t even imag… But I digress.

Our own Tyreen Torner, who gave you a handy summary of all of California’s paid sick leave rules, has now created this chart summarizing all the minimum wages that apply in California for the next four years. How, you ask, can anyone put so much useful information on a single page? One word: Imagination!

It’s time once again for the annual roundup of new California employment laws. Since we’ve discussed many of these laws when they were enacted, I’m including links to those earlier discussions.

  • Stop asking about salary history – AB 168 bars employers from asking job applicants about their previous salary. The legislation’s goal is to narrow the gender gap by preventing employers from basing offers on prior salary and thus, presumably, perpetuating historical discrimination. This will also remove the perceived gap in negotiating power between an employers and employees who must disclose their prior salary. Employers should ensure that their job applications don’t seek prohibited information and that those interviewing applicants know not to ask these questions.
  • More employers must offer parenting leave – SB 63, officially titled the Parental Leave Act, requires employers with between 20 and 49 employees to offer parenting leave that mirrors the Family Medical Leave Act. The new Act allows employees who work for a covered employer to take 12-weeks of unpaid, job-protected leave if they have worked a minimum of 1,250 hours in the 12-months prior to taking leave.  Employees can take leave only for the purpose of bonding with a newborn child, adopted child or foster child within a year of the birth or placement. Covered employers will also need to maintain health coverage under the same terms as an active employee. The Act also prohibits discrimination and retaliation against an employee for taking parental leave.The Parental Leave Act does not require employers to pay any portion of the leave but requires that employees be able to use accrued sick and vacation time. Employees can apply to have a portion of the parental leave paid for through the state’s Paid Family Leave program.  As we’ve previously explained, San Francisco requires some employers to pay a remaining portion of parental leave.
  • Expanded harassment training – California requires at least biannual harassment training for supervisors in companies with 50 or more employees. Having given a dozen sessions of the  training in the last month, I can assure you that there’s no shortage of material to talk about. But as of January 1, 2018, SB 396 requires that the training include information on gender identity, gender expression, and sexual orientation. If your handbook doesn’t specifically prohibit discrimination and harassment on those bases, you’re overdue for a revision.
  • Ban the box – Following the leads of San Francisco and Los Angeles, AB 1008 prohibits employers with five or more employees from:
    • Asking on employment applications about criminal convictions;
    • Asking applicants about criminal convictions before making a conditional offer of employment;
    • When conducting background checks on applicants, considering, distributing, or disseminating information about prior arrests not leading to conviction, participation in diversion programs, or convictions that have been sealed, dismissed, expunged, or otherwise nullified.

Employers who wish to rely on criminal conviction information to withdraw a conditional job offer must notify the applicant of their preliminary decision, give them a copy of the report (if any), explain the applicants right to respond, give them at least five business days to do so, and then wait five more business days to decide when an applicant contests the decision. There are exceptions for employers who operate health facilities hiring employees who will have regular access to patients or drugs.

  • Minimum wage increases – On January 1, 2018, the California state minimum wage goes up to $11.00 per hour for businesses with 26 or more employees and $10.50 per hour for smaller companies. The inimitable Sahara Pynes discusses which cities are raising their minimum wages here.

Takeaway: The burdens of employing people in California continue to increase. As a result, it becomes increasingly important for employers to be proactive in determining before they get sued where they’re vulnerable. In terms of time, expense, stress, disruption, and damage to a company’s reputation, an audit of HR practices is way cheaper than a lawsuit.

Takeaway 2: Happy 2018!

I’m having a hard time believing December is here, perhaps partly due to our unseasonably warm temperatures here in LA. The holidays will be quickly upon us and the turn of the new year brings increases in the minimum wage across the state.  On January 1, 2018, the California state minimum wage goes up to $11.00 per hour for businesses with 26 or more employees and $10.50 per hour for smaller companies. Below is a list of the local minimum wages with January 1st increases:

 City  26+ Employees  25 or Fewer Employees
 Cupertino  $13.50  $13.50
 El Cerrito  $13.60  $13.60
 Los Altos  $13.50  $13.50
 Mountain View  $15.00  $15.00
 Oakland  $13.23 $13.23
 Palo Alto  $13.50 $13.50
 San Mateo $13.50 $13.50
Santa Clara $13.00 $13.00
Sunnyvale $15.00 $15.00

Stay tuned for additional updates for 2018 compliance!

In recent years, California and federal agencies have highly scrutinized independent contractor status.  While that scrutiny may be abating somewhat on the federal level, it is still alive and well in our golden state.  In fact, the issue has been popping up quite a bit lately in the context of audits by the Employment Development Department (EDD).

Copyright conceptOne issue that trips up many employers involves a standard provision many companies include in their independent contractor agreements to protect their intellectual property rights.  The standard language involves a statement that any work product developed by the contractor is deemed a “work made for hire“ under the meaning of the US Copyright Act, and is therefore owned exclusively by the company.  In lay terms that means that the company retains the intellectual property rights to works developed under contract.

Unfortunately, under California Unemployment Insurance Code Section 686, that language also means that the contractor is presumed to be an employee.  Yes, that’s right.  Even if the contractor meets none of the common law factors of an employee (i.e. works independently, the company doesn’t control how they do the work, they are paid by project, etc.), and wants or even requests to be a contractor, California’s EDD requires that the contractor be deemed an employee for purposes of unemployment and state disability taxes.

When and if the company is audited, the EDD will ask for copies of all independent contractor agreements, and if those four words are in there, “work made for hire,” the EDD will find the contractor (or group of contractors) should be taxed as employees.  That translates into back taxes, penalties and interest, as well as the potential of a pretty unhelpful precedent for related legal claims.

There is a possible work-around for this language — to use very specific assignment language instead; although this could have serious copyright implications under the “termination of transfer” provisions of the Copyright Act, so please consult a copyright lawyer before going forward with such a work-around.  Companies can also be proactive and remind departing contractors that they are not entitled to unemployment, which might dissuade a contractor from inadvertently triggering an audit.

For companies that rely on independent contractors, including consulting and entertainment businesses, it is especially important to review your contractor agreements for those four “work made for hire” words.  Oh, and if you use independent contractors and don’t have a signed contractor agreement on file, well you have much more risk than just an EDD audit on this one four-word technicality!

 

Governor Brown is in that final flurry of signing and rejecting bills sent to him at the end of the legislative session. Two of those bills that we have been following involved pay equity issues. The Governor approved one, and vetoed the other.

The Governor signed into law AB 168, which bars employers from asking job applicants about their previous salary. The stated goal of the legislation is to narrow the gender gap by preventing employers from basing offers on prior salary and thus, presumably, perpetuating historical discrimination. This will also remove the perceived gap in negotiating power between an employer and an employee who must disclose her (or his) prior salary.

The Governor used the veto pen on AB 1209 that would have required large employers (500 or more employees) to report “gender wage differentials” to the Secretary of State for publication. The legislation seemed to presume that a comparison of “mean wages” and “median wages” between men and women would result in a “differential.” This legislation would have been a powerful weapon in the hands of plaintiffs’ lawyers who are bringing cases under the California Fair Pay Act where employers bear the burden of proving that a “differential” is not the result of gender discrimination. The Governor expressed this very concern, explaining that ambiguities in the bill “could be exploited to encourage more litigation than pay equity.”

We will continue tracking and reporting on new legislation.

Tyreen Torner has just updated this CA State & Local PSL Chart. It summarizes the Paid Sick Leave laws for California and the eight cities that have their own rules (LA, SF, San Diego, Oakland, Berkeley, Santa Monica, and Emeryville).

Have you ever wondered how the accrual cap rules in Santa Monica compare to the accrual cap rules in San Diego? Of course you have! Don’t be embarrassed. Are you curious about how the definition of sibling in San Francisco compares to the definition of sibling in San Diego? Just look it up. It’s all right there at your fingertips. All thanks to Tyreen!

 

The California Legislature has completed its work for this session, and three bills concerning employment issues survived the process and have been sent to Governor Brown for his consideration and possible signature. All three of these prospective laws have been labeled “job killers” by the California Chamber of Commerce which is lobbying heavily against the bills. Opposing the Chamber on these issues are the state’s unions and the organized plaintiffs’ bar.

AB 1209 would require employers to report wage payments by gender. Such reporting would fuel the fires of lawsuits under the state’s recent Fair Pay Act under which a “pay gap” is presumed to be a result of illegal discrimination.

SB 33 would outlaw arbitration clauses in certain consumer agreements. This legislation is another example of the hostility of the California courts and legislature to arbitration agreements, including in the employment context. This new bill seems contrary to binding U.S. Supreme Court precedent, and would likely not survive a judicial challenge.

SB 63 would extend employee parental leave protections to employers with 20 or more workers. Currently the law applies only to employers with 50 or more workers. This law would obviously be a burden on smaller employers.

We can expect many of the bills that did not pass the legislature this year – such as required predictive scheduling for retailers and restaurants (SB 878), and universal health care — to reappear in the next session. This ever-vigilant blog, of course, will keep you posted.

Guest blog post by Mikella Wickham:

They say location is everything in business.  How about classification of workers?

In certain industries, workers have a unique combination of specified skills and

Fit people working out
Copyright: wavebreakmediamicro / 123RF Stock Photo.

relative freedom to do their job.  As a result, small businesses are stuck between a rock and a hard place when deciding whether their workers are employees or independent contractors.  Of the many small businesses that want to pay their workers fairly and legally, it is becoming harder to do so without going out of business altogether.

Take fitness companies, for example.

Fitness instructors are not the average employees.  They may have input on their schedules (because they only want to work mornings or weekends).  They may work at several different studios, or work more than one job.  Often they teach in their own style, and even impact how many customers attend the classes.  Very often customers are loyal to a studio based on their rapport with a particular instructor.  Does the fitness company pay that person as an employee or as an independent contractor?

Let’s say the employer pays the instructor as an employee, on an hourly basis.  That worker becomes much more expensive for the business because she is covered by workers’ compensation insurance, gets paid sick leave, is paid at least the minimum wage (which keeps going up), and gets overtime, meal breaks and paid rest breaks.  Given all of that, how does the employer incentivize the instructor to bring more customers in the door to offset the additional costs incurred?

Alternatively, if a company pays a fitness instructor as an independent contractor (as many do), but still controls aspects of what the instructor does (such as what she wears, the music she plays, or the moves she teaches), it risks a misclassification claim.  Defending such lawsuits can mean death to a small business.

With no law designating a “dependent contractor” middle ground category, businesses are left to choose from a pick-your-poison set of options.

Standing next to larger brand name fitness companies, smaller fitness companies who can afford to pay employees well, or eat losses at smaller studios for the larger corporate good, can find themselves disadvantaged in a David and Goliath battle to simply have a place in the market.

As we have suggested, perhaps the law will carve out an exception for businesses in this category.  The future will tell.  In the meantime, small businesses have a tough decision to make: pay up now, or, perhaps, pay more later.


Mikella P. Wickham is a summer associate, based in the firm’s Los Angeles office.

There’s a saying that “Bad facts make bad law.” At least that’s the way I was taught it. A different version: “Hard cases make bad law” has its own Wikipedia entry. While the wording is different, the meaning is the same. When the facts are extreme, they serve as a poor basis for defining general legal principles.

Here are the bad facts:

A dairy hired an employee even though it knew he was not authorized to work in the US. When he told them after two years that he had a better offer from another dairy, his employer threatened that, if he left, it would report the other dairy to federal immigration authorities. So he stayed.

Nine years later, he sued his employer for a variety of workplace violations, including failure to pay overtime or to provide meal and rest breaks. Ten weeks before the case is going to trial, the employer’s lawyer schedules a deposition of the plaintiff but arranges to have US Immigration and Customs Enforcement (ICE) take him into custody and deport him. There’s even an e-mail from the lawyer to ICE letting them know the employee “will be attending a deposition next week. If there’s an interest in apprehending him, please let me know so that we can make the necessary arrangements…” Apparently, the employee got wind of the plan and agreed to settle his case. To make matters worse, the lawyer had used this ploy on at least five other plaintiffs who were suing his clients.

Copyright: cherezoff / 123RF Stock Photo

The plaintiff then sued the attorney for retaliation under the Fair Labor Standards Act. He chose that statute because it allows such claims against “any person acting directly or indirectly in the interest of an employer in relation to an employee.” The federal district court dismissed the claim because the lawyer did not exercise any control over the plaintiff’s employment. However, the 9th Circuit Court of Appeal reversed. In doing so, it rejected the need for any economic control. It said that, while only employers can be responsible for not paying employees correctly, anyone acting on behalf of the employer can be liable for retaliation.

What the lawyer did was wrong. There are ethical rules that state that an attorney in California “shall not threaten to present criminal, administrative, or disciplinary charges to obtain an advantage in a civil dispute.” Lawyers who violate that rule or otherwise abuse their power, can be sanctioned, suspended, and even disbarred. There are also civil claims available for abuse of process and malicious prosecution. So there are penalties for this type of behavior already. However, giving plaintiff’s the right to sue their employer’s lawyers for retaliation will lead to far more problems than it will solve. Litigation is inherently contentious. Parties tend to dislike the lawyer on the other side. But in every other situation I know of, courts have ruled that there’s no right to sue the other side’s lawyer and that allowing such suits will lead to a multiplicity of litigation. The Ninth Circuit, dealing with an extreme situation, held otherwise. Like the saying goes, bad facts make bad law.

The case is Arias v. Raimondo. You can read the opinion here.