California Cracks Down on Employers’ Use of Criminal Background Information

By Kate S. Gold and Jessica A. Burt

California employers using employees’ criminal convictions to make employment-related decisions should be aware of the recent flurry of new regulations and pending state legislation that place increased limitations on employers’ use of such information.

New FEHC Regulations Prohibit Consideration of Criminal History When Doing So Has An Adverse Impact On Individuals in A Protected Class

California’s Fair Employment and Housing Commission (FEHC) issued new regulations on employers’ use of criminal background information when making employment decisions, including hiring, promotion, discipline, and termination. The new regulations take effect on July 1, 2017, and are intended to clarify how the use of criminal background information may violate the provisions of the Fair Employment and Housing Act (“FEHA”).  The regulations prohibit employers from seeking or using any criminal history information that has an adverse impact on an individual within a protected class, such as race, national origin or gender. The new regulations provide that an adverse impact may be established through the use of state or national level statistics or by offering “any other evidence” that establishes an adverse impact.

If an employee or job applicant can demonstrate that an employer’s criminal background check policy or practice creates an adverse impact, the burden shifts to the employer to prove that the policy or practice is nonetheless justifiable because it is: (1) job-related and (2) consistent with business necessity. The criminal conviction policy or practice must bear a demonstrable relationship to successful performance on the job and measure the person’s fitness for the specific position, not merely evaluate the person in the abstract.  An employer must demonstrate that the criminal background check policy is “appropriately tailored” to the job, taking into account: (i) the nature and gravity of the offense; (ii) the amount of time that has passed since the offense and/or since the sentence for the offense was completed; and (iii) the nature of the job the employee holds or seeks.

An employer can demonstrate that its policies or practices are “appropriately tailored” to the job by either: (1) conducting an individualized assessment of the circumstances and qualifications of the applicant or employee and providing the individual with notice (before any adverse action is taken) that he or she has been excluded based on a conviction and affording the individual an opportunity to show that the criminal history exclusion should not apply due to their particular circumstances; or (2) demonstrating that a “bright line” rule regarding conviction disqualification can distinguish between those employees who actually pose an unacceptable risk and that the convictions being used to disqualify, or otherwise adversely impact the status of the employee or applicant, have a direct and specific negative bearing on the person’s ability to perform the duties or responsibilities necessarily related to the position.

The new regulations further provide that any bright-line policy that includes conviction-related information that is seven or more years old is subject to a rebuttable presumption that the policy is not specifically tailored to meet the job-related and consistent with business necessity defense.

Under the new regulations, even if an employer’s background check policy meets the new stringent standard, employers may still be liable if an individual employee can demonstrate that there is a less discriminatory policy or practice that serves the employer’s goals as effectively, such as a more narrowly targeted list of convictions or another form of inquiry that evaluates job qualification or risk as accurately.

Employers that are required to comply with federal or state laws or other regulations that mandate a criminal history screening process or require an employee or applicant to possess or obtain a required occupational license can rely on the applicable laws as a defense to an adverse impact claim.

The Regulations Require Employee Notification of an Adverse Action and Opportunity to Present Evidence of Factual Inaccuracy

The federal Fair Credit Reporting Act currently requires employers to provide notice to employees or job applicants when an adverse employment decision is made based on information obtained by an employer through a background check. In addition, the FEHC’s new regulations require that employers notify an employee or applicant of the disqualifying criminal conviction if the information was obtained from any source other than the applicant or employee (e.g., through a consumer report or internally generated search).

Under the regulations, the employee or applicant must be given a “reasonable opportunity to present evidence that the information is factually inaccurate,” and the criminal record may not be considered if the employee establishes that the information is inaccurate.

Similar Pending California Legislation

Employers should also note that pending Assembly Bill (AB) 1008 goes even further than the FEHC regulations and would make it unlawful for a California employer to: (1) include on any job application questions that seek the disclosure of an applicant’s criminal history; (2) inquire or consider an applicant’s prior convictions before extending a conditional offer of employment; and (3) when conducting a criminal background check, to consider, distribute, or disseminate information on (i) an arrest not followed by conviction, (ii) referral to or participation in a pretrial diversion program, (iii) convictions that have been sealed, dismissed, expunged, or statutorily eradicated pursuant to law, (iv) misdemeanor convictions for which no jail sentence can be imposed, or (v) misdemeanor convictions for which three years have passed since the date of conviction or felony convictions for which seven years have passed since the date of conviction.

If passed, AB 1008 would also require California employers that intend to deny employment to an applicant because of prior convictions to perform an individualized assessment of whether the applicant’s criminal history has a direct and adverse relationship to the specific job duties. The employer must then notify the applicant of the reasons for the decision and provide the applicant with 10 days to respond and challenge the accuracy of the information or provide evidence of rehabilitation, which the employer must then consider before making a final employment decision.

The bill is scheduled for a hearing before the California Committee on Labor and Employment on May 3, 2017.

Best Practices for California Employers Conducting Criminal History Checks

California employers that screen applicants and employees for criminal convictions should review and evaluate their criminal conviction policies, background check policies, and job applications for compliance with the new regulations and, potentially, for compliance with pending AB 1008.

Philadelphia Wage Equity Ordinance On Hold … For Now

By Alexa E. Miller and David J. Woolf

Earlier this year, Philadelphia became the first city to pass a law prohibiting employers from inquiring about a job applicant’s wage history and restricting their ability to consider wage history in setting new employee compensation. The pay equity ordinance was enacted to halt the perpetuation of gender discrimination in compensation practices.

As has been widely reported, the Philadelphia Chamber of Commerce filed a lawsuit on April 6, 2017 to challenge the ordinance, which was scheduled to go into effect on May 23, 2017. The Chamber also filed a motion for a preliminary injunction, asking the Court to enjoin the enforcement of the ordinance while its lawsuit is pending, on the grounds that the ordinance violates businesses’ free speech rights under the First Amendment and is unconstitutionally vague.  The City of Philadelphia’s apparent first response has been to question whether the Chamber of Commerce even has standing to bring a lawsuit challenging the ordinance.

On April 19, Judge Mitchell Goldberg issued an order temporarily staying the enforcement of the ordinance until he can decide the Chamber’s preliminary injunction motion. Briefing on the standing issue will extend until at least May 12, with the Court’s decision on standing and possibly additional briefing related to the ordinance itself to follow.  Thus, it is unlikely that the ordinance will go into effect on May 23 as originally planned.

Although Philadelphia employers may be tempted to delay implementing changes to their hiring practices, we recommend that they remain alert and ready to comply. Legislation restricting employers’ ability to rely on a job candidate’s wage history in setting compensation is the latest trend in equal pay laws.  We predict that this trend will continue to gain momentum in other cities and states across the country.  Most recently, the New York City Council passed similar legislation amending the New York City Human Rights Law to prohibit employers from inquiring about an applicant’s wage history, which Mayor de Blasio is expected to sign shortly.  Prudent employers should review their hiring practices (e.g., update job applications and train managers about appropriate interview questions) and be prepared to comply with the law if the Chamber’s challenge is unsuccessful.

Additional background about the ordinance is available here.  We will continue to monitor the status of Philadelphia’s wage equity ordinance and update this site as developments occur.

Recruiting and “Off-Limits” Questions about Salary History – What Employers Need to Know

By Lynne Anderson

By October of 2017, NYC employers – and their recruiting agencies – will no longer be allowed to ask about an applicant’s salary and benefits history during the interview process due to a recent amendment to the NYC Human Rights Law. This law follows Executive Orders signed in November 2016 by Mayor de Blasio, and in January 2017 by Governor Cuomo, banning questions about salary history for NYC and NY state public-sector applicants prior to a conditional offer of employment. In addition, private employers in Philadelphia as of May 2017, and Massachusetts as of July 1, 2018, will also be banned from asking applicants about their compensation history. These laws are intended to help break the perpetuation of salary inequities by prohibiting reliance on prior, possibly inequitable compensation levels, as a means to set salaries and other compensation for incoming employees. Public Advocate Letitia James co-sponsored the NYC bill after a study conducted by her office found that women in New York earn $5.8 billion less in wages than men every year, or 87 cents for every dollar that men make, and the wage discrepancies were worse for minority females.

What does the NYC law prohibit?

It will be a discriminatory employment practice to do the following.

(1) Ask an applicant, or their current/prior employer – either in writing or during the interview process – about the applicant’s wage, benefits or other compensation history. This prohibition extends to inquiries made by search firms on behalf of the prospective employer. However, applicants can be asked about their historic productivity metrics, such as their level of revenue or sales at their current or prior employers.

(2) Conduct internet or other searches of public records in an effort to determine the candidate’s salary history. Employers are still permitted to conduct background checks of applicants, but if the background check discloses an applicant’s salary history, the employer may not rely on such disclosure for purposes of determining an applicant’s compensation.

(3) Rely on the compensation history of an applicant in determining what to offer the applicant with regards to salary, benefits or other compensation, unless the applicant “unprompted” and “willingly” discloses that information. However, this exception is not necessarily that helpful as employers can expect that the issue of whether a disclosure was truly “willing and unprompted” to be the subject of much debate.

What are the penalties for violations?

The NYC Commission on Human Rights will enforce the prohibition, and may impose a civil penalty of up to $125 for an intentional violation, and up to $250,000 for an “intentional malicious violation.” Plaintiffs’ employment lawyers will also file private cause of actions, and will likely seek discovery related to recruiting practices in an effort to ferret out potential violations they will cite to as evidence in support of disparate impact sex discrimination claims.

What should employers do now?

Employers are watching to see if these laws will be challenged before implementation. For example, Philadelphia’s law is currently being challenged in a federal lawsuit filed in early April by The Chamber of Commerce for Greater Philadelphia seeking to block implementation of the law on ground of violation of First Amendment rights. The NYC law is also expected to face a challenge from industry groups, although the Bronx Chamber of Commerce has publicly supported the new law.

Until a challenge is successful, employers should consider the following action items with regards to the NYC law:

  • Remove salary history questions from job applications, including online applications.
  • Provide notice, in writing, to recruiting agencies and background check companies, to exclude salary history inquiries as part of their process, and direct them not to provide salary history information to your company as the potential employer. You can also work this into contract renewals and any Statement of Work or recruiting search request, along with an indemnification obligation if a lawsuit ensues due to an agency’s failure to comply.
  • Train HR, internal recruiters and other employees who interface with job applicants not to ask about salary/benefits/compensation history, but to explore other permissible areas. For example, the NYC law allows employers to discuss an applicant’s compensation expectations, including with regards to unvested equity or deferred compensation that an applicant would forfeit if they left their current employer to accept a new job offer. Interviewers are also still able to ask questions to probe the candidate’s level of experience and proficiency such as performance results, management experience, etc.
  • Train these same individuals about the need to document, in writing, when a candidate makes an unprompted disclosure of his/her salary history.
  • Consider posting salaries, or salary ranges, for open jobs. The new NYC law does not require this, but the bill suggests to businesses that they post salaries for jobs instead of relying on salary history to set compensation.
  • Don’t ignore ongoing obligations to audit to protect against potential pay inequities. As we have been discussing, all private employers with 100 or more employees will likely have to report pay data broken down by gender and race as part of the new federal EEO-1 reports due in March 2018 for 2017 data, and California employers must comply with record keeping requirements imposed by California’s Fair Pay Law in effect since 2016. California’s Fair Pay Law was also amended, effective January 1, 2017, to provide that prior salary will not, by itself, justify a disparity between the salaries of similarly situated employees.

Also, keep in mind that while removing prior salary history from the hiring process may help limit perpetuation of wage gaps, the practical reality is that a candidate’s ability to negotiate a higher salary will likely still drive salary differentials. Employers will need to protect against unintended pay inequities resulting from the recruiting process.

Get Ready to Comply: All Signs Point to Enforcement of the Enhanced EEO-1 Form and Reporting Obligations

By Alexa E. Miller and Lynne A. Anderson

For approximately fifty years, the Equal Employment Opportunity Commission (“EEOC”) has collected workforce data about race, gender, ethnicity and job category from all businesses with 100 or more employees, using the EEO-1 report.  In an effort to combat pay discrimination, last year the EEOC announced that it finalized regulations expanding the information collected in the annual EEO-1 report to include pay data.

The revised EEO-1 form requires employers to collect aggregate W-2 earnings and report the number of employees in each of the twelve pay bands (spanning from $19,239 and under to $208,000 and over) for the ten EEO-1 job categories (Executive/Senior Level Officials and Managers; First/Mid Level Officials and Managers; Professionals; Technicians; Sales Workers; Administrative Support Workers; Craft Workers; Operatives; Laborers and Helpers; Service Workers) and classified by race, sex and ethnicity.  The revised EEO-1 form has been largely criticized by employers claiming that the collection of W-2 earnings, without any context to explain legitimate non-discriminatory reasons for pay disparities (e.g., education, training, experience, tenure, merit, etc.) will unnecessarily open the door to increased scrutiny and investigations.  To make matters worse, the EEOC has not been very forthcoming about how the information would be analyzed and used, other than as a “screening tool” to identify pay discrimination.

With the post-election transfer of power completed, many practitioners were unsure whether the EEOC would move forward with collecting summary pay data under the new administration.  Indeed, one of President Trump’s first actions was to issue a government-wide regulatory freeze halting any new and pending regulations from taking effect.  Moreover, the newly appointed acting chair of the EEOC, Victoria Lipnic, confirmed that the revised EEO-1 forms are precisely the intended regulations targeted by Trump’s directive to halt and re-evaluate new and pending rules.  That stance coupled with the President’s executive order requiring that for every new federal regulation implemented, two must be rescinded, left many within the employment law community predicting that the new EEO-1 form would fall victim to the new administration’s chopping block.

However, with the passage of time, it appears that the revised EEO-1 form is likely here to stay.  Unlike some other agencies, the EEOC operates by majority vote.  Acting Chair Lipnic voted against the new pay data reporting requirements, but she was outnumbered 3 to 1.  Therefore, any changes to the new EEO-1 report would require a majority vote from the commission.  Trump will have an opportunity to nominate two more Republican commissioners later this year, which, if the nominees are confirmed by the Senate, could tip the balance in favor of rolling back the revised EEO-1 form.  However, that type of ideological shift among the EEOC commissioners would not occur until at least the Fall of 2017.  Although Lipnic indicated that the enhanced pay data collection requirements may be re-evaluated in the future, she has also stressed that equal pay remains a priority for the EEOC.  Given the timing of any new appointments and the upcoming filing deadline (March 31, 2018), it’s more likely that we will see a proposal to modify the revised EEO-1 form, rather than a complete repeal of the collection of pay data.

Thus, employers with more than 100 employees would be wise to gear up for compliance. The EEOC recently issued guidance to assist companies with the new reporting obligations by answering questions from the agency’s employer webinars about the revised EEO-1 report. The EEOC’s guidance instructs employers to reference an employee’s wages as reported in his or her W-2, Box 1 for the calendar year, which includes wages, tips and other compensation, to identify the correct pay band.  The EEOC clarified that employers cannot reference gross annual earnings instead of W-2, Box 1, earnings.  Employers should then count and report the total number of employees in each pay band for the job category on the new EEO-1 form.

The revised EEO-1 form also requires employers to report the total hours worked during the year, which will help explain partial year or part-time employment. The new EEO-1 form follows the Fair Labor Standards Act (FLSA) definition of hours worked.  Therefore, employers are not required to include paid leave, such as sick leave, vacation leave, or paid holidays as hours worked.  For non-exempt employees, employers should use the number of hours worked under the FLSA during the reporting year.  For exempt employees, employers can choose to either report the designated proxy hours of 40 per week for full-time employees or 20 hours per week for part-time employees multiplied by the number of weeks worked that year, or, alternatively, report actual hours worked, as defined by FLSA, if the employer already maintains such records.  Employers are not required to create or retain any new records of hours worked for exempt employees.

Other noteworthy changes in the new EEO-1 report include the new workforce snapshot period, which was previously a pay period in between July 1 and September 30, but is now a pay period between October 1 and December 31, and the new filing deadline every March 31, beginning March 31, 2018 and continuing thereafter. Employers are reminded to report pay and hours worked for the entire year for employees who are on the payroll during the workforce snapshot period.  The job categories and demographic data remain the same.

“Ensuring equal pay protections for all workers” remains a substantive priority for fiscal years 2017-2021, as set forth in the EEOC’s Strategic Enforcement Plan. Therefore, it is important that employers are fully ready to comply with the new reporting obligations.  Prior to compiling and reporting its 2017 EEO-1 data, we recommend that companies conduct an internal audit to identify any pay disparities and then consult with legal counsel to analyze the bona fide business reasons for any discrepancies.

Paid Sick Leave Law in Morristown, New Jersey Became Effective on January 11, 2017

By: Vik C. Jaitly and Dan H. Aiken

This Ordinance, which was passed in September 2016, requires employers in Morristown, New Jersey to provide a certain amount of paid sick time per year depending on the size of the employer. Generally, employees who work more than 80 hours a year in Morristown will be covered under this Ordinance. The Morristown Ordinance is the 13th local paid sick leave ordinance enacted within New Jersey, following similar ordinances in the towns and cities of Bloomfield, East Orange, Elizabeth, Irvington, Jersey City, Montclair, Newark, New Brunswick, Passaic, Paterson, Plainfield, and Trenton.

The below chart provides the amount of paid sick time that employers are required to provide under this Ordinance:

Total No. of Employees Amount of Time Maximum
10 or more employees 1 hour of paid sick time for every 30 hours worked 40 hours a year
Fewer than 10 employees 1 hour of paid sick time for every 30 hours worked 24 hours a year
Exception: Regardless of the number of people employed by the employer, if the employee is a child care worker, home health care worker, or food service worker 1 hour of paid sick time for every 30 hours worked 40 hours a year

The Ordinance also specifies when, how, and for what purpose an employee may use any such paid sick time.  For example, an employee may use this time for his or her own mental or physical illness, injury, health condition, need for medical diagnosis care or treatment of a mental or physical illness, or an employee’s need for preventative care.  This time can also be used to provide care for a family member with a mental or physical illness.  Family members include an employee’s child (biological, foster, step, adopted, or legal guardianship), grandchild, spouse, domestic partner, civil union partner, parent, grandparent, and sibling.

Finally, the Ordinance also contains certain notice, recordkeeping, and anti-retaliation provisions.  All employers are required to give a written notice to each new employee regarding their rights under the Ordinance.  Such notice must describe the employees’ rights under the paid sick time ordinance, and the notice must be provided in English and in the primary language of at least 10% of the employer’s workforce.  The Ordinance also requires employers to display the notice in a conspicuous and accessible place at the workplace.  The Town of Morristown released a sample Notice that includes these above requirements, which can be found here.

To provide additional information on this Ordinance, and to assist employers and employees understand their rights and obligations, the Town of Morristown has also released an FAQ page, which can be found here.

It is crucial for employers to understand that this Ordinance applies to any employee who works 80 or more hours in the Town of Morristown, regardless of where your business is registered or located.  Therefore, employers will need to put in place a recordkeeping system that accurately tracks accruals and usage of paid sick leave time for employees that are covered under this Ordinance.  Additionally, employers should ensure compliance with the notice and posting requirements as outlined above.

 

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.