New California Employment Laws: Preparing

for 2017 Changes to Fair Pay Act, Leave and

Wage Laws, Background Checks, and More

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WEDNESDAY, DECEMBER 14, 2016

Presenting a live 90-minute webinar with interactive Q&A

James A. Goodman, Member, Epstein Becker & Green, Los Angeles

Mark S. Spring, Partner, Carothers DiSante & Freudenberger,

San Francisco & Sacramento, Calif.

Emily Vicente, Partner, Hunton & Williams, Los Angeles

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CA LABOR & EMPLOYMENT LAW YEAR IN REVIEW KEY DEVELOPMENTS FROM 2016 &

TIPS TO PREPARE FOR 2017

DECEMBER 14, 2016

JAMES GOODMAN – EPSTEIN BECKER GREEN – LOS ANGELES

JGOODMAN@EBGLAW.COM, WWW.EGBLAW.COM

EMILY BURKHARDT VICENTE - HUNTON & WILLIAMS LLP – LOS ANGELES

EBVICENTE@HUNTON.COM, WWW.HUNTON.COM

MARK S. SPRING – CAROTHERS DISANTE & FREUDENBERGER LLP

NORTHERN CALIFORNIA

MSPRING@CDFLABORLAW.COM, WWW.CDFLABORLAW.COM

Disclaimer: Although this presentation may provide information concerning potential legal issues, it is not a substitute

for legal advice from qualified counsel. This presentation is not created nor designed to address the unique facts or

circumstances that may arise in any specific instance. You should not, nor are you authorized to, rely on this content as a

source of legal advice.

New Laws/Statutes

Administrative Agency Developments

Significant Judicial Decisions

Recommendations

Today’s Agenda

5

New California Laws/Statutes

6

Legalization of Marijuana

Approved by voters on November ballot.

Recreational use of marijuana legalized in

CA.

Does NOT require change to drug-free

workplace policies/practices – can still

fire/refuse to hire employee/applicant for

positive drug test (marijuana).

SHOULD review policies to ensure that they

make clear that applicants/employees who

test positive for illegal Schedule 1 drugs

under federal law (including medicinal and

recreational marijuana).

7

AB 1843 - Juvenile Criminal History Inquiries

Amends California Labor Code section 432.7 to

expand prohibitions on employers from inquiring

about, or from utilizing as a factor in determining

any condition of employment, information relating to

convictions, arrests, or similar actions under the

jurisdiction of a juvenile court.

8

Itemized Wage Statements

AB 2335 – Amends Labor Code section 226 to

clarify that hours worked information for employees

who are exempt from overtime need not be

included on itemized wage statements.

9

Heat Illness Prevention

SB 1167 - Requires

Cal-OSHA, by

January 1, 2019, to

propose standards

for heat illness

prevention for

indoor workers,

similar to those

currently in place

for outdoor

workers. 10

All-Gender Restrooms

AB 1732 – Effective

March 1, 2017, all single-

user toilet facilities in any

business establishment

must be identified as

“all-gender” toilet

facilities.

Employers are not

required to add single-

occupancy restrooms.

11

Paid Family Leave Benefits

Effective January 1, 2018, the amount of paid

family leave benefits an employee can receive is

increased to 60 or 70 percent of earnings (up from

55%), depending on level of income.

Also eliminates 7-day waiting period for receipt of

benefits.

12

Paid Sick Leave Expansion

SB 3 – Expands California’s paid sick leave law to cover in-home supportive care workers beginning July 1, 2018.

Amount of paid sick leave different than for other types of workers.

8 hours or 1 day per year beginning July 1, 2018.

16 hours or 2 days per year when state minimum wage reaches $13/hour.

24 hours or 3 days per year when state minimum wage reaches $15/hour.

13

Equal Pay Laws

SB 1063 - Expands California’s equal pay law, which

currently prohibits wage differentials based on gender,

to also prohibit employers from paying employees of

one race or ethnicity less than similarly situated

employees of a different race or ethnicity.

AB 1676 – Amends equal pay law to expressly provide

that prior salary alone is not a sufficient justification for

a pay disparity.

14

PAGA Amendments

Passed as part of budget bill in June 2016 (effective immediately);

The Labor Workforce Development Agency (LWDA) now has 60 days to review a PAGA notice (increased from 30 days) and up to 180 days to conduct an investigation (increased from 120 days);

A plaintiff cannot file a lawsuit alleging a PAGA violation until at least 65 days (up from 33 days) after sending the PAGA notice to the LWDA (unless the LWDA provides earlier notice [in less than 65 days] to the plaintiff that it does not intend to investigate, in which case the plaintiff could then proceed with filing a lawsuit at that time);

15

PAGA Amendments, Cont.

For PAGA cases in which the LWDA notice is filed on or after July 1, 2016, the plaintiff must, within 10 days of filing a lawsuit, provide the LWDA with a file-stamped copy of the complaint;

The LWDA must be provided with a copy of any proposed settlement of a PAGA claim at the time it is submitted to the court for approval;

A copy of the court’s judgment and any other order that awards or denies PAGA penalties must be provided to LWDA within 10 days; and

PAGA claim notices and employer cure notices or other responses must now be filed online, along with a $75 fee for any claim notice or initial employer response.

16

SB 3 – Minimum Wage Increase

January 1, 2017 – CA minimum wage increases to $10.50 per hour for employers with 26 or more employees (employers with less than 26 employees must comply by Jan. 1, 2018).

Also affects minimum salary for exempt commissioned salespersons (inside sales) whose earnings must exceed 1.5 times state minimum wage, and minimum salary for white-collar overtime exemptions in CA – increases to $43,680/year.

Note: FLSA overtime rule would increase this to $47,476/year. Rule currently blocked.

Also may impact CBA-based exemptions from numerous California laws; to be exempt, employees covered by CBA generally must be paid a regular hourly rate that is at least 30% more that state minimum wage.

17

Local Minimum Wage Ordinances

(2017 rates)

Berkeley - $12.53 (increases to $13.75 on 10/1/2017)

Cupertino - $12.00

El Cerrito - $12.25

Emeryville*

55 or fewer: $12.25 (increases to $14.00 on 7/1/2017)

56 or more: $14.44

Los Altos - $12.00

Los Angeles (city and county)*

25 or fewer: $10.00 (increases to $10.50 on 7/1/2017)

26 or more: $10.50 (increases to $12.00 on 7/1/2017)

Malibu – same as Los Angeles

Mountain View - $11.00

* Also have local paid sick leave ordinances

18

Local Minimum Wage Ordinances

(2017 rates)

Oakland* - $12.25

Palo Alto - $12.00

Pasadena - same as Los Angeles

Richmond - $12.30

San Diego* - $11.50

San Francisco* - $13.00 (increases to $14.00 on 7/1/2017)

San Jose - $10.50 (includes employers with 25 or less employees)

San Mateo - $12.00

Santa Clara - $11.10

Santa Monica* - same as Los Angeles

Sunnyvale - $13.00

* Also have local paid sick leave ordinances 19

Salary Threshold for CA Exempt Computer Professionals and Hourly Physicians

RAISED ANNUALLY

Effective Jan. 1, 2017

Hourly Paid Physicians &

Surgeons

At least $77.15 per hour

Computer Professionals

Hourly rate of at least $42.35

Monthly salary of at least $7,352.62

Annual salary of at least $88,231.36

20

Agricultural Worker Overtime

AB 1066 – Overtime Pay Required for Agricultural Workers, Phased in Over Several Years.

Employers with More Than 25 Employees:

1/1/19 - Time and one-half for hours worked over 9.5 per day or 55 hours per week.

1/1/20 - OT for hours worked over 9 per day/50 per week.

1/1/21 - OT for hours worked over 8.5 per day/45 per week.

1/1/22 - OT for hours worked over 8 per day/40 per week.

Employers with 25 or fewer employees – phase in begins 1/1/22.

In addition to OT requirements, AB 1066 eliminates exemption for agricultural workers from California’s one day’s rest in seven requirement.

21

Immigration Verification Protections

SB 1001 – Adds section 1019.1 to Labor Code.

Unlawful employment practice for an employer, in the course of verifying an applicant’s authorization to work, to (1) request more or different documents than are required under federal law; (2) refuse to honor documents tendered that on their face appear to be reasonably genuine; (3) refuse to honor documents or work authorization based upon the specific status or term of status that accompanies the authorization to work; or (4) attempt to reinvestigate or reverify an incumbent employee’s authorization to work using an unfair immigration-related practice.

An applicant or employee subject to a violation of this law is entitled to file a complaint with the Department of Labor Standards Enforcement and recover a penalty of $10,000 per violation.

22

Contesting Labor Commissioner

Citation re Minimum Wage

AB 2899 – Makes it more

costly to challenge a Labor

Commissioner citation for

failing to pay minimum

wage.

Employer must now post a

bond equal to the amount of

unpaid wages plus

liquidated damages,

excluding penalties.

23

SB 1241 – Choice of Law and Forum

Clauses

Adds section 925 to Labor Code.

Prohibits employees who primarily reside and work in California from being required, as a condition of employment, to agree to a forum outside California for adjudication of disputes.

Also prohibits employees from being required to agree to a choice of law provision stating that the laws of a state other than California will govern a dispute between the employer and the employee, if the choice of law provision would deny the employee a substantive protection of California law.

Any such provision voidable by employee and employee may recover attorneys’ fees to enforce rights under new law.

24

Smoking Prohibitions

ABX2-7 expands prohibitions

on smoking in enclosed places

of employment to all

employers of any size.

Eliminates prior exemptions for

certain areas.

Smoking now prohibited in all

covered parking lots, break

rooms, warehouses, and

gaming clubs. 25

Employee Notice of Rights – Domestic Violence,

Stalking, Sexual Assault

Existing law requires employers with 25+ employees to

allow employees to take time off from work for specified

purposes associated with being a victim of sexual assault,

domestic violence, stalking.

AB 2337 requires employers to give written notice of these

rights to all new hires and to existing employees upon

request.

Labor Commissioner required to create form notice for

employers to use by 7/1/17; employers need not comply

until form is created.

26

Administrative Law

Developments

27

New FLSA Overtime Exemption Rule

Increases minimum salary for white-collar overtime-exempt employees to $47,476 (up from $23,660), with a mechanism for the minimum salary to automatically increase further every 3 years.

Highly compensated employee exemption – minimum salary increased to $134,004 (up from $100,000).

Employers may use nondiscretionary bonuses and incentive compensation to satisfy up to 10% of the new salary level.

New rules slated to take effect December 1, 2016 but have been blocked on a nationwide basis by a Texas court.

28

New I-9 Form

New I-9 Form released by USCIS on November 14, 2016.

Employers can use old version until January 21, 2017;

must use new form beginning January 22, 2017.

New form available at www.uscis.gov.

29

California Fair Employment and Housing

Council (“FEHC”)

New FEHA Regulations (April 2016) Requiring Employers to Adopt a Discrimination/Retaliation/Harassment Prevention Policy that:

Is in writing;

Lists all current protected categories covered under FEHA;

Indicates that the law prohibits coworkers and third parties, as well as supervisors and managers, with whom the employee comes into contact from engaging in conduct prohibited by the Act;

Creates a complaint process to ensure that complaints receive: (A) An employer’s designation of confidentiality, to the extent possible; (B) A timely response; (C) Impartial and timely investigations by qualified personnel; (D) Documentation and tracking for reasonable progress; (E) Appropriate options for remedial actions and resolutions; and (F) Timely closures.

30

Cal. FEHC (cont.)

Provides a complaint mechanism that does not require an employee to complain directly to his or her immediate supervisor.

Instructs supervisors to report any complaints of misconduct to a designated company representative, such as a human resources manager, so the company can try to resolve the claim internally.

Indicates that when an employer receives allegations of misconduct, it will conduct a fair, timely, and thorough investigation that provides all parties appropriate due process and reaches reasonable conclusions based on the evidence collected.

States that confidentiality will be kept by the employer to the extent possible, but not indicate that the investigation will be completely confidential.

Indicates that if at the end of the investigation misconduct is found, appropriate remedial measures shall be taken.

Makes clear that employees shall not be exposed to retaliation as a result of lodging a complaint or participating in any workplace investigation.

31

California Labor Commissioner

New Opinion Letters (www.dir.ca.gov/dlse/opinions)

October 16, 2016 – clarification of calculation of paid sick leave for commissioned employees and exempt employees

Exempt employees – regular salary; bonuses not included.

Commissioned employee – can calculate based on either (1) regular rate for pay period in which PSL taken, or (2) average of total non-overtime earnings for prior 90 day period.

March 23, 2016 -- Quarterly bonus programs and forfeiture on termination of employment

Ok to have non-discretionary bonus program that pays out on quarterly basis tied to quarterly goals (rather than each pay period).

Provisions calling for forfeiture of bonus in event of termination of employment prior to end of quarter OK if (1) voluntary termination, or (2) termination for cause, but not if employee terminated without cause (conduct of employee).

Be sure to put employee on advance notice of forfeiture conditions and use caution in applying forfeiture in involuntary termination cases (even for cause) because issue of “cause” likely to be disputed .

32

Key Judicial Decisions

33

Arbitration Agreements with Class Action Waivers

Lewis v. Epic Systems (7th Circuit), Morris v. Ernst & Young (9th Circuit) – both agreed with NLRB DR Horton doctrine that provisions requiring employees to waive right to bring claims on a class or representative basis violate employees’ Section 7 right to engage in concerted activity for mutual aid and protection.

Creates split of authority among circuit courts – 2nd, 5th, and 8th Circuits have rejected DR Horton and upheld enforceability of class action waivers.

4 Petitions for review pending before U.S. Supreme Court; issue likely to be taken up.

What should employers do now? What about allowing employees choice to opt-out of arbitration agreement?

34

Arbitration Agreements – Who Decides

If Class Arbitration Is Allowed?

Sandquist v. Lebo Automotive (Cal. Supreme Ct.)

Arbitration agreement silent about whether class claim can

be brought in arbitration (which generally means it cannot)

Agreement did not say whether court or arbitrator decides

this issue

Cal Supreme– arbitrator gets to decide because the

agreement generally and broadly says that the parties

agree to arbitrate all disputes that otherwise would be

decided in court

35

Tip Pooling

Oregon Restaurant and Lodging v. Perez; Cesarz v.

Wynn Las Vegas (9th Circuit):

Under FLSA, tip pooling may only include employees who

customarily and regularly receive tips – only those directly

involved in service of table (e.g. waiter, busser, host), not

back of house workers (e.g. cooks, dishwashers).

Contrary to California law where courts have held that it is

permissible for back of house employees to participate in tip

pool because contribute to diners’ experience.

Petition for review pending before U.S. Supreme Court.

Cal employers must comply with FLSA where more protective

of employees.

36

Time Rounding and De Minimis Time

Corbin v. Time Warner Advance Newhouse (9th

Circuit)

Upholds practice of rounding employee time

entries to nearest quarter hour (under FLSA and

California law).

Upholds doctrine that de minimis time worked

need not be compensated (under FLSA and

California law).

Caution: Rounding policies still carry risk; must be

applied in a neutral manner that over time does

not result in employees not being compensated

for time worked. Issue of de minimis doctrine

pending before Cal Supreme Ct in Troester v.

Starbucks

37

Calculating Regular Rate of Pay for Overtime Purposes

Flores v. City of San Gabriel

(9th Circuit)

Cash-in-lieu of benefits

payments must be included in

regular rate calculation for

overtime purposes.

Failure to include all required

forms of compensation in

regular rate calculation is an

increasing focus of wage and

hour claims.

38

Suitable Seating

Kilby v. CVS; Henderson v. JPMorgan Chase Bank (Cal Supreme Court) – clarifies CA suitable seating requirements,

Standard – employees must be provided with suitable seats when nature of work reasonably permits use of seat,

“Nature of work” assessed at each location (e.g. stock room, cash register) where employee performs work and is based on totality of tasks done at that location; seat may be required at one location but not another,

Qualitative assessment based on nature of tasks, feasibility of going back and forth between sitting/standing, physical layout of space, employer business judgment as to whether quality/effectiveness requires standing,

Can’t consider physical characteristics of particular workers.

39

Electronic Signatures on Employment Agreements/Policies

Espejo v. Southern California Permanente Med. Group

(Cal. Ct. App.)

Employer has burden to prove by preponderance of

evidence (more likely than not) that employee is the one

who signed the document.

Company witness must be able to explain how

e-signature process works and how it utilizes security

measures (e.g. individual passwords) to show how

e-signature must have been made by person whose

name is reflected.

40

Recommendations

Ensure compliance with state and local minimum wage increases and posting requirements

Review regular rate of pay calculation methods (overtime)

Consider internal equal pay audit

Ensure compliance with California requirement to have harassment/discrimination/retaliation prevention policy

Review employment contracts/arbitration/non-disclosure agreements re choice of law/choice of forum provisions and revise as needed

Review employment applications to ensure they do not seek juvenile conviction info

41

Recommendations (cont.)

Assess possible revision of arbitration agreement to provide opt-out right

Comply with single-user toilet facility gender neutral signage requirement

Update, as necessary, smoking policies/postings

Monitor status of FLSA overtime exemption rule and prepare for possible compliance with new salary levels

Use new I-9 form and prepare for compliance with new EEO-1 pay reporting

Review/revise drug-free workplace policies to be consistent with Employer desires related to medicinal/recreational marijuana

42

Questions?

43