Pay Equity, Sick Leave Among Key Issues For Calif. Employers in 2016

By Toni Vranjes Jan 26, 2016
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In the new year, California HR departments will tackle a wide array of issues, including revisions to the state’s complicated paid-sick-leave law, and an ambitious new law that aims to fight gender pay discrimination.

Other predominant issues in 2016 include minimum-wage increases and the proper classification of workers. These were among the topics discussed at a seminar in Los Angeles earlier this month, one of a series presented by the California Chamber of Commerce in January.

At the seminar, two speakers from the chamber reviewed key laws and cases, and discussed best practices for employers.

Gender Pay Equity

In response to the ongoing problem of the gender wage gap, California last year enacted the Fair Pay Act, Senate Bill (S.B.) 358. Author of the bill Sen. Hannah-Beth Jackson, D-Santa Barbara, said that it will strengthen California law by requiring equal pay for “substantially similar” work. Under the new legislation, any pay differential must be justified by seniority, merit, quantity or quality of production, or a “bona fide factor other than sex.” The bona fide factor must be job-related and based on business necessity.

Under the Fair Pay Act, employers can’t prohibit workers from discussing their wages, according to Erika Frank, the chamber’s general counsel and vice president of legal affairs. But employers also aren’t required to disclose that information, she added. The law includes new protections against discrimination and retaliation. Also, companies must maintain relevant records for three years.

The Fair Pay Act took effect on Jan. 1. To ensure compliance, it’s a good idea for businesses to audit their payroll practices. If an employer plans to do an audit, it should do so with the help of a lawyer, according to Frank.

Paid Sick Leave

California’s paid-sick-leave law, Assembly Bill (A.B.) 1522, generally requires employees be allowed at least 24 hours or three days of leave annually. To address concerns and confusion, the state amended the law last year by passing A.B. 304.

In one change, employers now have greater leeway regarding the accrual method of providing leave. Under the accrual method in A.B. 1522, an employee earns one hour of paid leave for every 30 hours worked.

With the revisions, companies have additional accrual options:

  • A business can use a method that provides a minimum of 24 hours paid sick leave by the 120th calendar day of employment, or each calendar year, or in every 12-month period.
  • A company can offer at least 24 hours or three days of paid sick time that is available by completion of the 120th calendar day of employment.

Under the amended law, there are two approaches for calculating paid sick leave for nonexempt employees, according to Erika Pickles, the chamber’s employment law counsel. The two options are:

  • Using the employee’s regular rate of pay.
  • Using a 90-day “look back” approach. This involves dividing total wages (excluding overtime pay) by total hours worked during the previous 90 days of employment.

For exempt employees, sick-leave pay must be calculated in the same way it’s determined for other types of paid leave, Pickles said.

A.B. 304 also includes other clarifications, and the California Labor Commissioner has issued guidance to provide the most up-to-date information.

Independent Contractors

The issue of whether some employees are being misclassified as independent contractors has been a huge topic of debate, with Frank citing the legal battle over Uber’s drivers as an example.

This issue has been receiving greater scrutiny from the federal government, Frank emphasized. In July, U.S. Department of Labor Administrator David Weil issued guidance stating that most workers are employees under the definitions in the Fair Labor Standards Act. According to the guidance, employers should use an “economic realities” analysis to help determine proper classification.

Minimum Wage

On Jan. 1, California’s minimum wage rose to $10 an hour. It’s the second increase arising from A.B. 10, which passed in 2013. As Frank noted, the increase also affects the minimum salary provided to exempt employees.

At the federal level, final overtime rules are expected this summer. President Barack Obama has proposed raising the salary threshold for exemption to $50,440 annually—higher than the current level under California law. The aim is to increase the number of people eligible for overtime.

Meanwhile, California businesses should keep track of local ordinances that raise the minimum wage, Frank said.

Other 2016 Laws

Among the other major laws taking effect this year are ones pertaining to:

  • The E-Verify system: A.B. 622 prohibits unlawful use of E-Verify, a federal program that enables companies to determine work eligibility. In general, employers are barred from checking an applicant’s eligibility until a job offer has been made.
  • Wage theft: Under S.B. 588, state regulators have a wider range of tools to combat wage theft. The law permits the labor commissioner to place a lien on an employer’s property to enforce judgments. Also, an employer that fails to pay wages can be barred from doing business unless bond is posted.
  • School activities leave: California law provides protected leave for eligible workers to participate in school activities, like field trips and sporting events. S.B. 579 expands such activities to include addressing a school emergency or a child care emergency, and the “finding, enrolling or re-enrolling of a child in a school or with a child care provider.” It also broadens eligibility by allowing stepparents, foster parents and people who are “in loco parentis” to qualify. The law applies to companies with 25 or more employees.

Significant Legal Cases

Key employment disputes from 2015 include those about:

  • Security Checks: In Frlekin v. Apple, a federal district court judge ruled on whether employees should be paid for time that is spent on workplace bag searches. The court ruled that the time isn’t compensable because the company doesn’t require employees to bring bags to the workplace. The case is on appeal.
  • Independent Contractors: In Noe v. Superior Court, several food-and-beverage vendors sued Anschutz Entertainment Group, Levy Premium Foods and Canvas Corp., alleging violations of Labor Code Section 226.8. In this class action, the court examined whether a joint employer can be held liable for “willful misclassification” under the Private Attorneys General Act, according to Frank. The court ruled that Section 226.8 “extends to any employer who is aware that a co-employer has willfully misclassified their joint employees and fails to remedy the misclassification.” But it also held that Labor Code Section 226.8 can’t be enforced through a direct private action.

Toni Vranjes is a freelance business writer in San Pedro, Calif.

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