California Employers: What You Need to Know for 2014 – Wage and Hour Laws and Penalties

A new year means new legislation and regulations for employers with operations in California. This four-part series will take a look at some of the new laws and regulation affecting private employers doing business in California.

Wage and Hour Laws and Penalties

Minimum wage increase.  AB 10 raises the state-wide minimum wage from the current $8 per hour to $9 per hour, effective July 1, 2014, and then to $10 per hour, effective January 1, 2016.  Employers should note that employees currently classified as exempt must still meet the salary basis test to qualify for the particular exemption claimed.

Minimum wage penalties.  Under Labor Code section 1194.2, employees who have not been paid minimum wages may recover liquidated damages through civil actions or administrative wage hearings before the Labor Commissioner.  AB 442 extends the authority of the Labor Commissioner to award liquidated damages to affected employees through the labor commissioner citations process.  Thus, affected employees will be able to recover liquidated damages in an amount equal to the wages unlawfully unpaid plus interest thereon through either a civil action, an administrative hearing, or a citation issued by the Labor Commissioner.

Wage claim attorneys’ fees.  Labor Code section 218.5 awards attorneys’ fees and costs to the prevailing party in any action for nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, regardless of whether the prevailing party is the employer or employee.  Under SB 462, a prevailing employer may only recover attorneys’ fees and costs if the court determines that the employee filed suit in bad faith.

Domestic worker overtime.  AB 241 enacts the Domestic Worker Bill of Rights, which provides that a “domestic work employee who is a personal attendant” will be eligible for overtime at 1.5 times his or her regular rate of pay if he or she works more than nine hours in any workday or more than 45 hours in the workweek.  Individuals and entities employing in-home help should determine whether they or their employees qualify for an exemption.

Heat illness recovery periods.  Under Cal/OSHA regulations, employees that work outdoors in temperatures exceeding 85 degrees Fahrenheit must be allowed, and encouraged, to take a cool-down rest for at least five minutes when they feel the need to do so in order to avoid overheating.  SB 435 now adds this “heat illness recovery period” to the requirement in Labor Code section 226.7 that employers provide employees with meal and rest breaks.  Thus, an employer’s failure to provide a heat illness recovery period to non-exempt employees will now result in penalties under Labor Code section 226.7 amounting to one additional hour of pay at the employee’s regular rate of compensation for each workday that the recovery period is not provided.

Criminal withholding.  Labor Code section 218.5 makes it a crime for an employer to willfully fail to remit agreed-upon payments to health and welfare funds, pension funds, or other various benefit plans, with failure to remit more than $500 constituting a felony.  SB 390 amends section 218.5 to include an employer’s failure to remit withholdings from an employee’s wages made for state, local, or federal tax purposes.

Prevailing wages.  Employers who provide services or construction work for any public entities must pay current prevailing wages, which are usually significantly higher than the minimum wage.  Prevailing wage laws have been updated for 2014 in the following ways:

  1. AB 1336 and SB 377 amend the process and timeline for assessing prevailing wage violations.  Under these provisions, a notice of completion of a public work filed with a county recorder must also be given to the Labor Commissioner, and the awarding body or political subdivision which accepts a public work must also provide notice of that acceptance to the Labor Commissioner.  The new laws then extend the deadline for the Labor Commissioner to serve a civil wage and penalty assessment alleging a violation of the prevailing wage law from 180 days (roughly six months) to eighteen months after the filing of a valid notice of completion with the applicable county recorder, or after acceptance of the public work, whichever occurs last.  Moreover, if notice is not given in a timely manner to the Labor Commissioner, the deadline to serve an assessment shall be tolled for the length of the delay.
  2. AB 1336 also amends prevailing wage law to allow a court to award liquidated  damages and civil penalties, whereas such relief was previously recoverable only in an administrative action brought by the Labor Commissioner.
  3. Existing  law requires affected contractors to keep detailed payroll records  relating to public works and produce these as necessary, with names and  social security numbers redacted, to a joint labor-management committee.  AB 1336 amends this rule to require redaction of social security numbers only.
  4. SB 377 also establishes specific deadlines for the Director of the Department of Industrial Relations to respond to a request for a determination of whether a specific project or type of work is a public work within the meaning of the prevailing wage law.
  5. SB 7  prohibits a charter city from receiving or using state funding or financial assistance for a construction project if the city has awarded, within the prior 2 years, a public works contract without requiring the contractor to comply with prevailing wage provisions.  Small project exemptions apply.  SB 7 was enacted on the heels of a decision by the California Supreme Court holding that, under the California Constitution, the wage levels of workers employed by charter cities on locally funded public works projects are a municipal affair not subject to state regulation.  Thus, the constitutionality of this new law may be the subject of future litigation.
  6. SB 54  extends prevailing wage requirements to privately financed refinery construction projects.
  7. SB 776 prohibits contractors from counting payments for monitoring and enforcing prevailing wage laws towards their obligation to pay prevailing wages.

Unless otherwise noted the laws and regulations discussed above go into effect on January 1, 2014.  These summaries are not exhaustive, so employers who may be affected by California’s new laws should contact their attorneys to ensure that they are prepared for compliance and to update their employee policies and manuals as appropriate.