Key New California Laws for 2018: What Employers Should Know

Governor Jerry Brown signed several laws in 2017 that will impact California employers next year. A summary of some of the key new laws follows, in numerical order by Assembly Bill (AB) and/or Senate Bill (SB). All of the laws outlined below are effective beginning January 1, 2018.

Continue reading “Key New California Laws for 2018: What Employers Should Know”

Bill Strengthens Enforcement Powers of Philadelphia Commission on Human Relations

By Matthew A. Fontana

Philadelphia is poised to strengthen the enforcement powers of the Philadelphia Commission on Human Relations (“PCHR”), the City’s primary civil rights and anti-discrimination agency.  Under legislation that passed City Council on May 8, 2017, the PCHR would have the authority to issue cease and desist orders—closing a business’s operations for an unspecified length of time—if the agency determines the business has engaged in “severe or repeated violations” of the Philadelphia Fair Practices Ordinance (“the Ordinance”).  The authority to shut down a business’s operation is an unheard of remedy for employment related civil rights violation and—given the significant ramification for employers— it is critical for Philadelphia employers to be aware of the potential consequences of the PCHR’s enhanced powers for  their business operations

The Ordinance prohibits discrimination based on age, ancestry, color, disability, ethnicity, gender identity, sexual orientation, national origin, race, religion, and sex.  The Ordinance is enforced by the PCHR.  The PCHR’s enforcement powers are limited to traditional remedies for employment discrimination, including back pay, emotional distress damages, punitive damages and orders to eliminate or redraft a policy found to be discriminatory.  Prior to using its enforcement powers, the PCHR encourages parties to mediate their dispute or to reach a voluntary settlement.

In response to concerns about a pattern and practice of racial discrimination at bars and restaurants in the gayborhood—a neighborhood in Philadelphia that derives its name from its historic association with LGBTQ residents—Councilman Derek Green proposed legislation that would strengthen penalties against Philadelphia businesses found to discriminate against their employees, as well as against tenants or customers.  The bill gives the PCHR the authority to order a business to cease operations for an undefined “period of time” when the PCHR has issued a finding that the business has engaged in severe or repeated violations of the Ordinance and the business has refused to resolve the case by mediation or settlement.  While Rue Landau, executive director of the PCHR, provided some solace to employers by stating that “it would only be implemented under egregious circumstances after a full hearing by the PCHR,” he also stated that “[t]he law sends a strong message to business that the City will not tolerate discrimination … .”

The bill, which Philadelphia’s Mayor signaled he will sign into law, certainly sends a strong message.  The authority to shut down the operations of a business as a remedy for employment related civil rights violations is unprecedented.  No other employment civil rights agency has this type of authority.  Given the unique power being vested in the PCHR and its lack of any precedent, it is likely that the measure will be challenged in court.  However, until that happens, Philadelphia businesses need to be aware that a PCHR investigation can lead to serious consequences, particularly if the PCHR believes a pattern of discrimination is present.

The employment lawyers at Drinker Biddle will continue to monitor the implementation of the PCHR’s new cease and desist powers and provide any updates so that you can stay ahead.

 

The Most Important Questions to Ask During Internal Investigations Into Employment-Related Issues

Bill Horwitz published an article for HR Dive titled, “The most important questions to ask during internal investigations into employment-related issues.” In the article, Bill discusses internal investigations and the key questions an investigator should always ask.

Bill states the most important questions in a witness interview come toward the end and suggests an investigator always ask, “Is there any other information that you think would be helpful for my investigation?” as well as “Other than what you’ve already identified, are you aware of any documents bearing on any of the issues we discussed?”

When interviewing the accuser, Bill encourages asking if he or she has any other complaints, allegations or concerns, while tailoring the question to the situation. If the individual provides any response other than “no,” he advises repeating the question before concluding the interview.

“An individual who has a full and fair opportunity to voice all of his or her concerns to the investigator cannot credibly raise additional allegations in the future, such as in a lawsuit,” Bill writes.

Read “The most important questions to ask during internal investigations into employment-related issues.”

Appellate Decision May Prompt New Jersey Employers to Seek Jury Waivers Instead of Arbitration Agreements

By William R. Horwitz

Earlier this month, the Superior Court of New Jersey, Appellate Division, issued a decision that may cause employers considering mandatory arbitration agreements to consider jury-waiver agreements instead. In Noren v. Heartland Payment Systems, Inc., 2017 WL 476216 (App. Div. Feb. 6, 2017), the Court invalidated a jury-waiver provision’s application to statutory employment claims, but explained that, worded properly, such waivers are enforceable.  Litigating in court without a jury has certain advantages and New Jersey employers considering arbitration programs may also want to consider jury waiver provisions as another possible option.

The Facts

Defendant Heartland Payment Systems, Inc. (“HPS”) hired plaintiff Greg Noren (“Noren”) as a Relationship Manager in April 1998.  In that position, Noren sold debit and credit, payroll and other processing card services to merchants.  In 2002, HPS terminated Noren’s employment but then rehired him.  In connection with his rehiring, Noren signed an agreement that contained a jury-waiver provision.  In 2003, he signed another agreement containing an identical jury-waiver provision.  Both jury-waiver provisions provided that HPS and Noren “irrevocably waive any right to trial by jury in any suit, action or proceeding under, in connection with or to enforce this Agreement.”  In June 2005, HPS terminated Noren’s employment.

Trial Court

Noren filed a lawsuit asserting claims for breach of contract and violation of the New Jersey Conscientious Employee Protection Act (“CEPA”).  Noren requested a jury trial, but the court denied the request in light of the jury-waiver provisions.  After a bench trial, the judge dismissed Noren’s lawsuit.  Noren appealed.

Appellate Division

On appeal, the Appellate Division reversed the judgment of the trial court.  In reaching its decision, the Appellate Division observed that both the New Jersey Constitution and the statutory language of CEPA guarantee the right to a jury trial.  Thus, according to the Court, the issue was whether the jury-waiver provision to which Noren and HPS agreed “is a legally enforceable waiver of this constitutionally and statutorily guaranteed right.”  Based upon “customary principles of contract law,” the Court explained that such a waiver must be clear and unmistakable.  No magic language is required but, the Court explained, “to effect a waiver, the language must clearly explain (1) what right is being surrendered and (2) the nature of the claims covered by the waiver.”

Applying these principles, the Court held that the language of the jury-waiver provisions in Noren’s agreements was deficient.  According to the Court, the contractual language “made no reference to statutory claims and did not define the scope of claims as including all claims relating to Noren’s employment.”  The Court also noted that the reference in the jury-waiver provisions to “this Agreement” limited “the category of disputes for which a jury trial is waived.”  Thus, the Appellate Division concluded that the jury-waiver provisions “fail[ed] to clearly and unambiguously explain that the right to a jury trial is waived as to a CEPA claim.”  The Appellate Division remanded the CEPA claim to the trial court for a jury trial.

Practical Takeaways

The practical implication of this decision is that New Jersey courts are likely to treat a properly-worded jury trial waiver similar to a mandatory arbitration provision.  Courts have long recognized a federal policy favoring arbitration based on the Federal Arbitration Act.  In light of this policy, New Jersey courts generally enforce properly-crafted arbitration agreements.  No such federal policy favors jury-waiver provisions.  However, in its decision in Noren, the Appellate Division did not reference this distinction and instead analyzed the enforceability of jury-waiver provisions by applying the reasoning of caselaw addressing the enforceability of arbitration provisions.  In other words, the Court held jury-waiver provisions to the same standard as arbitration provisions.  Thus, in New Jersey, jury waiver provisions appear to be as enforceable as arbitration provisions.  Accordingly, employers considering arbitration agreements should also consider whether jury-waiver agreements are better suited to meet their needs.

For employers, arbitration offers many potential advantages over litigating in court with a jury.  For instance, an arbitrator is less likely than a jury to award a plaintiff a surprising and unwarranted multi-million dollar verdict.  And, arbitrations are generally private, with no public filings unless a party moves to enforce an arbitration award.  Moreover, the employer plays a role in selecting the arbitrator.  However, arbitration has drawbacks.  For instance, an arbitration award is generally not appealable and the cost of arbitration (which, for the employer, includes paying the arbitrator’s fees) can be exorbitant.  Litigating in court without a jury does not have these drawbacks.  The employer can appeal a judge’s rulings and is not responsible for paying the judge’s fees.  Plus, judges are typically more inclined than arbitrators to dismiss a plaintiff’s claims on summary judgment.

In short, there are advantages and disadvantages to resolving employment disputes in court with a jury, in court without a jury, or in arbitration.  New Jersey employers seeking an alternative to court litigation should consider arbitration agreements but, in consultation with counsel, may also want to consider whether jury-waiver agreements would be a more suitable alternative to meet their goals.

What Retailers Need to Know About the California Transparency in Supply Chains Act

By Daniel H. Aiken, Carol F. Trevey and Brendan P. McHugh

Retail sellers and manufacturers across the country that conduct a threshold amount of business in California must comply with the California Transparency in Supply Chains Act (“Supply Chains Act” or “Act”). CAL. CIV. CODE § 1714.43. The Act, which became effective in January 2012, requires those retailers and manufacturers to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains. Id. § 1743.43 (a)(1). Specifically, those companies must disclose on their website to what extent they: (1) engage in verification of product supply chains to evaluate and address risks of human trafficking and slavery; (2) conduct audits of suppliers; (3) require direct supplies to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the countries in which they are doing business; (4) maintain accountability standards and procedures for employees or contractors that fail to meet company standards regarding slavery and human trafficking; and (5) provide employees and management training on slavery and human trafficking. Id. § 1743.43 (c).

By its terms, the Act does not require manufacturers and retailers to take affirmative action to detect or prevent slavery or human trafficking in their supply chains. It requires only that the company make the mandated disclosures. Nevertheless, manufacturers and retailers should be aware of the potential for attorney general enforcement actions, as well as enterprising litigation by consumers, based on violations of the statute.

Requirements of the Supply Chains Act

The Act applies to any company that does business in California, has worldwide annual revenues in excess of $100 million, and is either a “manufacturer” or “retail seller” as reported on the entity’s California tax return. CAL. CIV. CODE §§ 1714.43(a)(1)–(a)(2). A retail seller or manufacturer located outside of California may be considered to be “doing business in California” if it satisfies one of the following conditions: the retail seller or manufacturer in a tax year (1) has business sales in California that exceed $500,000 or 25% of the businesses’ total sales, whichever is lesser; (2) has retail property and tangible personal property in California that exceeds $50,000 in value or 25% of the business’ total real property and tangible personal property value, whichever is lesser; or (3) pays compensation in California that exceeds $50,000 or 25% of the total compensation paid by the business, whichever is lesser. Id. § 1714.43(a)(2)(D); CAL. REV. & TAX. CODE § 23101(b). Retailers and manufacturers subject to the Act are identified each year using data provided to the California Attorney General by the state Franchise Tax Board. See CAL. REV. & TAX. CODE § 19547.5.

Retailers and manufacturers subject to the Act must disclose their efforts in the following five areas: verification, audits, certification, internal standards, and employee training. In 2015, the California Attorney General issued non-binding guidance to assist companies in complying with the statute. See California Department of Justice, “The California Transparency in Supply Chains Act: A Resource Guide,” at 3 (2015) (“Resource Guide”). According to the Attorney General’s guidance, disclosures should include the following:

  • Verification. Manufacturers and retailers subject to the act must disclose whether they verify “product supply chains to evaluate and address risks of human trafficking and slavery.” CAL. CIV. CODE § 1714.43(c)(1). This disclosure should include whether a third party conducts the verifications, a description of the verification process, and whether the company assesses potential risks related to labor-brokers and third-party recruiters in its supply chain. See Resource Guide at 11–12.
  • Audits. Manufacturers and retailers subject to the act must disclose whether they audit their suppliers’ practices. CAL. CIV. CODE § 1714.43(c)(2). This disclosure must specify whether audits are independent and unannounced. Id. It also should include statistics regarding the timeline, frequency, and number of audits. See Resource Guide at 14–15.
  • Certification. Manufacturers and retailers subject to the act must disclose whether they require direct supplies to certify that materials “comply with the laws regarding slavery and human trafficking of the . . . countries in which they are doing business.” CAL. CIV. CODE § 1714.43(c)(3). This disclosure should describe the company’s certification requirements, the consequences to the supplier of any violation, and any additional action the company takes to encourage direct suppliers to comply with relevant laws. See Resource Guide at 16–17.
  • Internal standards. Manufacturers and retailers subject to the act must disclose whether they maintain “accountability standards and procedures for employees or contractors [that] fail[] to meet company standards regarding slavery and human trafficking.” CAL. CIV. CODE § 1714.43(c)(4). This disclosure should describe the company’s standards and procedures, identify the persons tasked with monitoring these standards and procedures, and identify the company’s code of conduct related to supplier standards. See Resource Guide at 18–19.
  • Employee training. Manufacturers and retailers subject to the act must disclose whether they provide “employees and management . . . training on slavery and human trafficking, particularly with respect to mitigating risks within the supply chains of products.” CAL. CIV. CODE § 1714.43(c)(5). This disclosure should identify what positions receive training and provide a description the training, including the topics presented, duration, and frequency. See Resource Guide at 20–21.

Companies subject to the Supply Chains Act must make the above disclosures on their website’s homepage “with a conspicuous and easily understood link to the required information.” CAL. CIV. CODE § 1714.43(b). The California Attorney General has suggested that to be “conspicuous and easily understood,” a link should be placed at the top or bottom of the company’s homepage and include a relevant title, such as “California Supply Chains Act,” that plainly alerts consumers to its content. See Resource Guide at ii, 5. If a company subject to the Act does not maintain a website, such company must provide a written disclosure to any consumer request within 30 days. CAL. CIV. CODE § 1714.43(b).

A. Exclusive Remedy for Violations of the Act and Uses of the Act In Litigation

The exclusive remedy for a violation of the Supply Chains Act is an action brought by the California Attorney General for an injunction. Although the Attorney General has filed few cases under the statute, it has called upon consumers to report suspected violations. In 2015, the Attorney General requested companies that may be subject to the Act’s requirements to submit information voluntarily about their current disclosures. See Press Release, California Office of the Attorney General, Attorney General Kamala D. Harris Issues Consumer Alert on California Transparency in Supply Chains Act (April 13, 2015); Informational Letter.

B. The Supply Chains Act as a Predicate of California Unfair Competition Law, False Advertising Law, or Consumer Legal Remedies Act Claims

Although the sole remedy provided for under the Supply Chains Act is an Attorney General action for injunctive relief, the Act provides that it does not “limit [other] remedies available for a violation of any other state or federal law.” CAL. CIV. CODE § 1714.43(d). Some plaintiffs have therefore attempted to rely on violations of the Supply Chain Act as predicates for liability under California’s consumer protection statutes, the Unfair Competition Law (UCL), CAL. BUS. & PROF. CODE § 17200 et seq., the False Advertising Law (FAL), CAL. BUS. & PROF. CODE § 17500 et seq., and the Consumer Legal Remedies Act (CLRA), CAL. CIV. CODE § 1750 et seq.

For example, in Sud v. Costco Wholesale Corp., the plaintiffs attempted to bring UCL, FAL, and CLRA claims based on Costco’s alleged failure to disclose on its packaging that its prawns were “derived from a supply chain tainted by slavery, human trafficking and other human rights violations.” No. 15-CV-03783-JSW, 2017 WL 345994, at *1 (N.D. Cal. Jan. 24, 2017). The plaintiffs argued that this was an “unlawful” practice under the UCL, in part because it violated the Supply Chains Act. The Northern District of California dismissed the plaintiff’s claims, holding that “[t]he Supply Chains Act does not clearly speak to product labels.” Id. at *8. The court additionally held that “to the extent Plaintiffs are attempting to suggest” that Costco’s Supply Chains Act disclosure on its website did “not comply with the requirements of the Supply Chains Act . . . Plaintiffs lack[ed] statutory standing” because they had not alleged that they “read or relied on” the disclosure. Id. at *5, *8. Because the court focused on plaintiffs’ failure to allege an actual violation of the Supply Chains Act and their failure to allege that they relied on the disclosures required by the Act—as opposed to ruling that there was no private cause of action under the Supply Chains Act—Sud leaves open the possibility that inadequate Supply Chains Act disclosures could be a basis for successful UCL, FAL, or CLRA claims.

C. The Supply Chains Act as a Defense to California Unfair Competition Law, False Advertising Law, or Consumer Legal Remedies Act Claims

Defendants have also attempted to use their compliance with the Act to defeat claims under the UCL, FAL, and CLRA. California law recognizes a “safe harbor” defense to UCL, FAL, and CLRA claims where the California legislature has either clearly permitted certain conduct or “considered a situation and concluded no action should lie.” See Loeffler v. Target Corp., 324 P.3d 50, 76 (2014). Companies defending against UCL, FAL, or CLRA actions have, therefore, successfully pointed to their compliance with the Supply Chains Act as precluding plaintiffs from pursuing UCL, FAL, or CLRA claims based on alleged human trafficking or slavery in a company’s supply chain. In several cases, the District Court for the Central District of California has determined that the Act creates a safe harbor under the UCL because the California legislature specifically considered “how much companies should disclose to consumers about the possibility of forced labor in their supply chains.” Wirth v. Mars, Inc., Case No. 1:15-cv-1470, 2016 U.S. Dist. LEXIS 14552, at *3 (C.D. Cal. Feb. 5, 2016) (concerning cat food products that may have included ingredients from forced labor); See also Barber v. Nestle USA, Inc., 154 F. Supp. 3d 954, 961 (C.D. Cal. 2015) (same).

The Northern District of California, however, has expressed skepticism toward this argument. Without reaching the merits, in McCoy v. Nestle United States, Inc., the court questioned whether the Supply Chains Act creates a “safe harbor” because the Act is merely a disclosure statute that neither bars nor clearly permits conduct. 173 F. Supp. 3d 954, 971 (N.D. Cal. 2016). Similarly, in Hodsdon v. Mars, Inc., the court, in dicta, questioned whether adequate Supply Chains Act disclosures, which cover only “human trafficking” and “slavery,” preclude liability under the UCL, FAL, or CLRA based on child labor. The Hodsdon court commented that it would be “anomalous” if businesses earning more than $100 million worldwide (the Supply Chains Act threshold) would have access to such a “safe harbor” defense while smaller businesses would not. See Hodsdon, 162 F. Supp. 3d at 1029.

* * *

Manufacturers and retailers subject to the Supply Chains Act, or who may become subject to the Supply Chains Act, should consider whether their existing disclosures comply with the Act as interpreted by the California Attorney General. However, because of the limits of the safe harbor doctrine, compliance with the Act might not be sufficient to avoid consumer protection claims based on alleged human trafficking or slavery in supply chains. If you have any questions about best practices or other aspects of the Supply Chains Act, please do not hesitate to contact the authors or your usual Drinker Biddle contacts.

Laboring Under New Laws

By Mark E. Terman

*Originally published by CalCPA in the January/February 2017 issue of California CPA — the original article can be found here.

Few things in this world can be certain, except that the California Legislature will expand regulation of employers each year and the sun will come up tomorrow. In an apparent pendulum swing, 569 bills introduced in 2016 mention “employer,” compared to 224 in 2015 and 574 in 2014. Most of those bills did not pass, and of the ones that did, most were not signed into law by Gov. Brown. Essential elements of selected bills that became law affecting private employers, effective Jan. 1, 2017, unless otherwise mentioned and organized by Senate and Assembly bill number, follow.

California Minimum Wage Ascending to $15
SB 3 sets a state minimum wage for non-exempt employees that will escalate annually over the next several years. As of Jan. 1, the state minimum wage at employers with 26 or more employees increases to $10.50 per hour, and then increases 50 cents per hour on Jan. 1 of each following year until and including 2022, when the rate will reach $15 per hour. For employers of 25 or fewer employees, state minimum wage will remain $10 per hour until Jan. 1, 2018, when it will increase to $10.50, and then escalate 50 cents per hour each year until and including 2023 when the rate will arrive at $15 per hour.

Beginning July 1, the state director of finance is to determine each year whether economic conditions can support the next scheduled increase. If conditions cannot support an increase, the governor can—no more than twice—temporarily postpone the increase schedule for a year. After the final scheduled escalation year, the state minimum wage can remain the same or increase based on any increase in consumer inflation as determined by the director.

Changes in state, but not local, minimum wage also impact classification of most exempt workers. In addition to strict“duties tests” for administrative, executive and professional wage and hour exemptions, a salary of at least twice the state minimum wage must be paid to meet the “salary basis test.” As of Jan. 1, the annualized salary rate that employers with 26 or more employees must pay to meet the exempt salary requirement will advance to $43,680, up from $41,600.

For employers with smaller workforces, the $41,600 amount of the exempt salary requirement will remain in place until Jan. 1, 2018, when it will move up to $43,680. With each escalation, the required salary also will rise. At a $15 state minimum wage, the exempt salary requirement will be $62,400.

Also affected by SB 3 is the retail, inside-sales exemption, which requires employees be paid at least 1.5 times the state minimum wage, and at least half of their other earnings be from commissions.

At the same time, the trend of municipalities creating and increasing their own minimum wage for companies that have employees working in their jurisdiction continues. For example, by July 1, the city and the County of Los Angeles require employers with 26 or more employees to raise the local minimum wage to $12 per hour, up from $10.50, and then comply with other scheduled annual increases up to $15 per hour by July 1, 2020. Los Angeles employers with fewer employees, or nonprofit corporations who obtain approval to pay a deferred rate, do not start paying more than the state minimum wage until July 1, 2018.

Minimum wage for employees in San Francisco will increase to $14, up from $13, on July 1, 2017. Many other cities—including Berkley, Oakland, Malibu, Santa Monica, El Cerrito and San Diego—have enacted local minimum wage laws. In addition, living-wage laws may require higher minimum wages be paid as a condition of contracting with local, state or federal agencies. Employers should monitor each of the requirements to assure compliance.

As of press time, a federal court enjoined implementation of a new federal rule that would have increased by Dec. 1, 2016, the salary basis requirement for exempt workers status under the Fair Labor Standards Act to $47,476. This would have been higher than the California exemption salary amount will be for at least two years. For now, California employers are not legally required to either increase salaries to satisfy this federal exemption rule or to reclassify employees as non-exempt.

No Sunset on Overtime Pay for Personal Attendant Domestic Workers
The Domestic Worker Bill of Rights (AB 241) added Labor Code Sec. 1454, effective Jan. 1, 2014, (and caused amendment to Wage Order 15-2001). It entitles a domestic work employee who is a “personal attendant” overtime pay at the rate of one-and-one-half times their regular rate of pay for hours worked in excess of nine hours in any workday or more than 45 hours in any workweek. A domestic worker who spends at least 80 percent of his or her time supervising, feeding and dressing a child or person who needs assistance due to advanced age, physical disability or mental deficiency is considered a personal attendant. SB 1015 removes a Jan. 1, 2017, sunset provision from the law. As such, these overtime rules will remain in effect into the future.

Immigration Related Unfair Practices Expanded
SB 1001 adds Labor Code Sec. 1019.1 to existing prohibitions of unfair immigration practices. This bill constrains employers, who are verifying that workers have the necessary documentation to lawfully work in the United States, from requesting of such workers more or different documents than are required under federal law, refusing to honor documents tendered that on their face reasonably appear to be genuine, refusing to honor documents or work authorization based upon the specific status or term of status that accompanies the authorization to work, or reinvestigating or re-verifying an incumbent employee’s authorization to work using an “unfair immigration practice.” Applicants and employees may file a complaint with the Division of Labor Standards Enforcement. Any person who is deemed in violation of this new law is subject to a penalty imposed by the labor commissioner of up to $10,000, among other relief available.

Wage Anti-discrimination Law Now Applies to Race and Ethnicity
Under the Fair Pay Act in effect since Jan. 1, 2016, employers are prohibited from paying an employee at wage rates less than the rates paid to employees of the opposite sex in the same establishment for equal work on jobs the performance of which requires equal skill, effort and responsibility, and which are performed under similar working conditions.

The Fair Pay Act provides for exceptions such as, the wage differential is based upon one or more of the following factors:

  1. A seniority system;
  2. A merit system;
  3. A system that measures earnings by quantity or quality of production; and
  4. A bona fide factor other than sex, such as education, training or experience.

The later factor will apply if the employer shows that the factor is not the result of a sex-based differential in compensation, is job related to the position, and is consistent with business necessity.

SB 1063 amends Labor Code secs. 1197.5 and 1199.5 to expand requirements of the Fair Pay Act to employees’ race or ethnicity, in addition to gender. In other words, the same rules now apply to prohibit wage differential based on race or ethnicity. Like existing Fair Pay Act sex-based prohibitions, the amendment bans employers from discriminating or retaliating against employees who report or assist with others’ affected by race or ethnicity-based wage differentials; provides the same enforcement rights; and includes protections for employees to disclose, inquire or discuss wages.

AB 1676 amends the Fair Pay Act (Labor Code Sec. 1197.5) to provide that an employee’s “prior salary shall not, by itself, justify any disparity in compensation” under the bona fide factors above.

Non-California Choice of Law and Forum in Employment Contracts Voidable
SB 1241 adds Labor Code Sec. 925 to prohibit employers from requiring an employee who primarily resides and works in California, as a condition of employment, to enter into agreements (including arbitration agreements) to:

  • Adjudicate claims arising in California in a non-California forum; or
  • Deprive the employee of the substantive protection of state law during a controversy arising in California.

Any provision of a contract that violates this new law is voidable by the employee, the dispute will be adjudicated in California under California law and the employee is entitled to recover reasonable attorneys’ fees incurred enforcing Sec. 925 rights. This section applies to any contract entered into, modified or extended on or after Jan. 1, 2017.

There’s an exception to Sec. 925: It does not apply to any contracts with an “an employee who is in fact individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated or the choice of law to be applied.” Thus, in the case of more executive-level employees, who often retain independent counsel to negotiate employment agreements, employers may still be able to make use of forum-selection and choice-of-law provisions.

Workplace Smoking Restricted Further
California law already prohibited smoking of tobacco products inside an enclosed place of employment for certain employers. ABX2-7 amends Labor Code Sec. 6404.5 to expand that enclosed space prohibition to all employers of any size, including a place of employment where the owner-operator is the only employee. “Enclosed space includes covered parking lots, lobbies, lounges, waiting areas, elevators, stairwells and restrooms that are a structural part of the building.” A “place of employment” does not include:

  • 20 percent of the guestroom accommodations in a hotel, motel or similar transient lodging establishment;
  • Retail or wholesale tobacco shops and private smokers’ lounges;
  • Cabs of “motortrucks” or truck tractors;
  • Theatrical production sites, if smoking is an integral part of the story in the theatrical production;
  • Medical research or treatment sites, if smoking is integral to the research and treatment being conducted;
  • Private residences, except licensed family day care homes; and
  • Patient smoking areas in long-term health care facilities.

Violations are punishable by a fine not to exceed $100 for a first violation, $200 for a second violation within one year and $500 for a third and for each subsequent violation within one year.

Overtime Pay Increasing for Agricultural Workers
Existing law affords ag workers who work more than 10 hours per day overtime pay at one-and-one-half times the regular rate of pay. AB 1066 (Phase-In Overtime for Agricultural Workers Act of 2016) amends Labor Code Sec. 554 to, among other things, provide a gradual phase-in of overtime pay expansion to agricultural workers.

For employers with 26 or more employees, beginning Jan. 1, 2019, and continuing until Jan. 1, 2022, the phase-in provides for annual reduction of the daily overtime threshold by a half-hour per day until reaching eight hours, and the weekly overtime trigger by five hours per week until reaching 40 hours. As such, on Jan. 1, 2019, agricultural workers working more than 9.5 hours per day or in excess of 55 hours in any one workweek are to receive overtime pay at one-and-half times their regular rate of pay.

By Jan. 1, 2022, the annual phase-ins will conclude with agricultural workers working more than eight hours per day or in excess of 40 hours in any one workweek receiving overtime pay at one-and-half times their regular rate of pay. In addition, beginning Jan. 1, 2022, agricultural workers working more than 12 hours per day are to receive overtime pay at twice their regular rate of pay.

Finally, this bill authorizes the governor to delay the implementation of the phase-in schedule if he or she also suspends the implementation of the scheduled increase in the California minimum wage (see, Minimum Wage Ascending, above). For employers with 25 or fewer employees, the phase-in schedule begins on Jan. 1, 2022, and continues annually through Jan. 1, 2025.

All-gender, Single-user Restrooms
By March 1, 2017, AB 1732 requires all single-user toilet facilities in any business establishment, place of public accommodation or government agency to be identified with signage as all-gender toilet facilities. For the purposes of this section, “single-user toilet facility” means a toilet facility with no more than one water closet and one urinal with a locking mechanism controlled by the user. This bill also allows inspectors, building officials or other local officials responsible for code enforcement to inspect for compliance.

More Restriction on Criminal History Inquiry of Job Applicants
Under existing law, an employer cannot ask an applicant about an “arrest or detention that did not result in conviction, or information concerning a referral ;to, and participation in, any pretrial or post-trial diversion program, or concerning a conviction that has been judicially dismissed or ordered sealed pursuant to law.”

AB 1843 amends Labor Code Sec. 432.7 to prohibit employers from asking applicants to disclose, or using as a factor in determining any condition of employment, information concerning or related to “an arrest, detention, process, diversion, supervision, adjudication or court disposition that occurred while the person was subject to the process and jurisdiction of juvenile court law.”

This bill also alters the definition of “conviction” to exclude “any adjudication by a juvenile court or any other court order or action taken with respect to a person who is under the process and jurisdiction of the juvenile court law.” In addition, this bill contains some exceptions for health care facilities involving final adjudications of recent sex crimes and specified controlled substances crimes.

More Talent Services Act Artist Protection
AB 2068 amends Labor Code secs. 1703 and 1703.4 to provide further protect of artists’ information and photographs in any form of communication, such as “an online service, online application, or mobile application of the talent service or one that the talent service has the authority to design or alter.” AB 2068 also requires:

  • The talent service to act, within 10 days, on requests of the artist made by any form of electronic communication, including text messages, to remove information or photographs from the talent service’s website, online service, online application or mobile application (collectively “electronic medium”) or an electronic medium the talent service has the authority to design or alter; and
  • That the artist may cancel the contract within 10 business days from the date of the talent service contract or the date on which the artist commences utilizing the services under the contract, whichever is longer.

Domestic Violence, Sexual Assault or Stalking
By July 1, 2017, AB 2337 requires employers with 25 or more employees to provide specific information in writing to new employees upon hire, and to other employees upon request, of their rights to take off time from work and not suffer adverse employment action from doing so under Labor Code Sec. 230.1 (relating to victims of domestic violence, sexual assault or stalking). This bill also requires that, on or before July 1, 2017, the labor commissioner develop and post on its website a compliant form of notice that employers may elect to use. Employers are not required to comply with the notice requirement until the labor commissioner posts the form.

Wage Statement Requirement for Exempt Employees
Labor Code sec. 226 requires employers to provide their employees along with each paycheck an accurate itemized statement in writing containing information listed in the statute, including hours worked, unless the employees are paid solely a salary and are properly exempt from overtime.

AB 2535 clarifies that hours worked are not required to be recorded on wage statements of employees exempt from minimum wage and overtime under a specified exemption for: executive, administrative or professional employees; the “outside sales” exception; salaried computer professionals; parents, spouses, children or legally-adopted children of the employer; directors, staff and participants of a live-in alternative to incarceration rehabilitation program for substance abuse; crew members employed on commercial passenger fishing boats; and national service program participants. This bill does not change the requirement to include total hours worked by non-exempt employees in their itemized wage statements for each pay period.

Bond Required to Contest Minimum Wage Citation
Labor Code Sec. 1197.1 authorizes the labor commissioner to issue, upon inspection or investigation, a citation against an employer who has paid its employees less than the minimum wage. The citation must specify the nature of the violation, and the labor commissioner is to take steps to enforce the citation and to recover the civil penalty assessed, wages, liquidated damages and waiting time penalties.

An employer can contest a citation through the superior court. AB 2899 amends the statute to require that, prior to contesting a citation, the employer must post a bond with the labor commissioner in an amount equal to the unpaid wages assessed under the citation, excluding penalties. The bond must be in favor of the employee and will be forfeited to the employee if the employer fails to pay the amounts owed within 10 days from the conclusion of the proceedings if the citation is not reversed.

What’s Next?
Employers should consider how these new laws impact their workplaces, and then review and update their personnel policies and practices with the advice of experienced attorneys or human resource professionals.