A Fair Day's Pay Act

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We’ve written throughout the year about new employment laws that take effect in California in 2016. But as the year winds down, here’s a handy list of the most significant ones (with links to our earlier entries). Unless noted otherwise, the laws take effect on January 1, 2016.

  1. California’s Fair Pay Act (SB 358; Labor Code § 1197.5): Where existing law requires that men and women working at the same location receive equal pay for equal work, the new law requires that they receive equal pay for substantially similar work (whatever that means) even if they work in different locations. In addition, if there are disparities, the burden is on the employer to show that the entire disparity is justified by such factors as education, training, and experience. Systems that base compensation on seniority, merit, and production are also acceptable. This one has the potential to open the proverbial floodgates of litigation. You can read more here.
  2. Restrictions on E-Verify Use (AB 622; Labor Code § 2814):  U.S. employers must verify that the workers they hire are authorized to work in this country. But this new statute restricts their ability to use the E-Verify system to do so. Unless required by federal law or as a condition of receiving federal funds, employers can only check the status of applicants who’ve received an offer but have yet to start work. In addition, the employer needs to notify the workers promptly if the E-Verify system doesn’t confirm that they are authorized to work in the U.S. You can read more here.
  3. New Minimum Compensation for Exempt Computer Software Professionals (Labor Code § 515.5): Effective January 1, 2016, for computer software professionals to be considered exempt, they must (among other things) be paid a minimum of $41.85 per hour or $87,185.14 per year. You can read more here.
  4. Scaling Back Certain PAGA Claims (AB 1506; Labor Code §§ 2699, 2699.3, and 2699.5): California’s Private Attorneys General Act (or PAGA) allows private employees to sue to recover penalties that the state labor commissioner could have collected. Under the new law, an employer would have an opportunity to cure a PAGA violation based on failure to include the beginning and end dates of the pay period and the employer’s proper name and address. This one took effect October 2, 2015. You can read more here.
  5. Expansion of Individual Liability for Wage Violations (SB 588; Labor Code §§ 690.020 et seq.): The benignly named “A Fair Day’s Pay Act“ purportedly intends to help employees who can’t collect judgments because their employers change their names or hide their assets. But the bill isn’t limited to those situations. It allows the Labor Commissioner to conduct hearings to determine whether a “person acting on behalf of an employer” should be held personally liable for an employer’s violations. The Labor Commissioner would also be able to levy those individuals’ accounts or property to enforce a judgment and seek payment from successor employers under criteria that are entirely too vague to understand or apply. You can read more here.

    Copyright: grafvision / 123RF Stock Photo
    Copyright: grafvision / 123RF Stock Photo
  6. Removal of the Term “Alien” from the Labor Code (SB 432): Other than removing a term from a statute that causes offense, this is a mostly symbolic gesture. You can read more here.
  7. Clarification of Paid Sick Leave Requirements (AB 304): This bill, which took effect in July, clarifies how to calculate the rate of pay for purposes of paid sick leave. You can read more here.
  8. Meal Periods for Healthcare Workers Who Work More than 12 Hours (SB 237; Labor Code § 516): This bill maintained the status quo by abrogating the holding of Gerard v. Orange Coast Memorial Medical Center. You can read more here.
  9. Piece-Rate Compensation (AB 1513; Labor Code § 226.2): We’ve discussed problems that arise when employees paid on a piece-rate basis are not paid for every hour they work. Under this bill, no matter how much employees are paid per piece, they must also be paid for rest periods and other “nonproductive time.”
  10. Protection for employees when a relative working for the same employer engages in protected activity (AB 1509). Under this law, if a married couple is working for the same employer, and the husband complains of discrimination, that’s not a legal basis to take action against the wife.
  11. Protection for Requesting Accommodation (AB 987): This bill amended the Fair Employment and Housing Act to clarify that employers can’t retaliate against employees for requesting accommodation for a disability or religious observance. (I thought that was pretty clear before.)
  12. Minimum Wage Increase: The minimum wage increases to $10/hr effective January 1, 2016.

Takeaway: The burdens on operating in California continue to become more onerous. 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.

Governor Brown vetoed AB 465. This bill would have disregarded federal law and banned mandatory agreements to arbitrate employment claims. In a veto message, he noted the lack of proof that arbitration was unfair to employees and the likelihood of the measure being struck down.

The governor also vetoed AB 1017, which would have prohibited asking job applicants about their salary histories. As discussed, there are a number of legitimate reason to ask such questions.

The Governor did, however, sign SB 588. This bill allows the Labor Commissioner to conduct hearings to determine whether a “person acting on behalf of an employer” should be held personally liable for an employer’s wage and hour violations. The Labor Commissioner would also be able to levy those individuals’ accounts or property to enforce a judgment and seek payment from successor employer’s in various situations.

As described here, I don’t object to this bill being used to pursue employers who illegally try to avoid paying their workers. But the threat of civil and criminal penalties for individual managers should not be used to pressure well-intentioned employers to resolve claims they would otherwise fight.

Copyright: pixelrobot / 123RF Stock Photo
Copyright: pixelrobot / 123RF Stock Photo

So the burdens on employers who operate in California continue to expand. But, as is often the case, it could have been worse.

A bill passed by the legislature and awaiting the governor’s signature [Update: He signed it.] would drastically expand individual and successor liability for wage and hour violations. SB 588 (which its sponsor, Senate President pro Tem Kevin De León, would like you to call “A Fair Day’s Pay Act“) purportedly intends to help employees who can’t collect judgments because their employers change their names or hide their assets.

But the bill isn’t limited to those situations. It allows the Labor Commissioner to conduct hearings to determine whether a “person acting on behalf of an employer” should be held personally liable for an employer’s violations. The Labor Commissioner would also be able to levy those individuals’ accounts or property to enforce a judgment.  It also allows the Labor Commissioner to seek payment from a successor employer if:

  1. It does “substantially the same work in substantially the same working conditions under substantially the same supervisors;” or
  2. It “produces substantially the same products or offers substantially the same services, and has substantially the same body of customers.”

That’s an awfully tenuous link between companies and one that would have led to widespread litigation even with four fewer substantiallys.

In the long-term care industry, failure to pay a judgment for wages or to obtain a bond can lead to a facility’s license being denied.

Copyright: heywoody / 123RF Stock Photo
Copyright: heywoody / 123RF Stock Photo

I don’t oppose any law that holds accountable companies that victimize their employees. But as I’ve said before, not understanding ridiculously complicated payroll laws is not “wage theft.” These draconian measures should not be used to pressure legitimate employers into resolving questionable claims to avoid their executives being subjected to levies and criminal penalties.