Once again California will ring in the New Year with a number of new laws affecting employers and employees in the Golden State. Much of this new legislation clarifies existing laws to provide guidance to employers or grant additional protections to employees. Below are some of the most notable employment laws that go into effect when the ball drops on December 31st:
Minimum Wage Increase
SB 3 increases California’s minimum wage incrementally over the next few years. On January 1, 2017, the minimum wage for businesses with 26 or more employees will increase from the current $10 per hour to $10.50 per hour. On January 1, 2018, it will rise to $11 per hour. Each January 1st thereafter, the minimum wage will increase by $1 until it reaches $15 per hour in 2022.
The new law delays implementation until 2018 for “small employers,” those with 25 or less employees. Thus, for 2017, small businesses are required to pay workers at least the current minimum wage--$10 per hour. On January 1, 2018, the minimum wage will increase for small employers to $10.50 per hour. In 2019, it will be set at $11 per hour and will increase by $1 each year thereafter until reaching $15 per hour in 2023.
Remember that the new schedule for minimum wage increases will have a considerable effect on which employees are considered exempt from overtime requirements. This is because California’s test for whether an employee is properly classified as exempt is tied to the state’s minimum wage. For more information about how new wage laws impact employee classification, click here.
Challenges to Minimum Wage Violations
AB 2899 amends Labor Code section 1197.1 to require the posting of a bond with the Labor Commissioner prior to an employer’s appealing a citation for minimum wage violations. The bond must be equal to the amount of unpaid wages, excluding penalties, and will be forfeited to the employee if the employer fails to pay the amounts owed within 10 days of the conclusion of the proceedings.
Itemized Wage Statements for Exempt Employees
Labor Code section 226(a) requires employers provide employees with specific information regarding their wages at the time of payment, including the total number of hours worked. AB 2535 clarifies that employers are not required to include the total number of hours worked on the itemized wage statements of exempt employees.
Choice of Forum and Law in Employment Contracts
SB 1241 adds section 925 to the Labor Code to forbid an employer from requiring an employee who works in California, as a condition of employment, to agree to a provision that would require the employee to (1) adjudicate outside of California a claim arising in California or (2) deprive the employee of the substantive protection of California law with respect to a controversy arising in California. A provision in any employment agreement that violates this new law is voidable by the employee and the agreement would be adjudicated in California under California law. The prohibition does not apply to employees that were represented by counsel when the agreement was reached. The new law also provides that courts may award reasonable attorney’s fees to employees enforcing their rights under this section.
Expanded Protections of the Fair Pay Act
The California Fair Pay Act, which created gender pay equality, became effective on January 1, 2016. The Act generally prohibits employers from paying an employee less than the rates paid to employees who perform “substantially similar work, when viewed as a composite of skill, effort, and responsibility.” AB 1676 expands the Fair Pay Act’s protections by specifying that an employee’s prior salary alone cannot justify a wage differential. SB 1063, also passed in 2016, extends the requirements of the Fair Pay Act to include race or ethnicity, in addition to gender. Thus, employers are now prohibited from paying employees of one race or ethnicity a different wage than employees of a different race or ethnicity if those employees perform substantially similar work.
In light of the expanded protections of the Fair Pay Act, employers should ensure they are not relying on prior salary alone to justify a disparity between the salaries of similarly situated employees. Employers should also consider extending pay equity audits to include a review of wage disparities based on race and ethnicity, in addition to gender.
If you have questions about any of these new laws or how they will affect your business, consult your attorney.
Hilary Weddell is an attorney with McManis Faulkner whose practice focuses on employment law. She relies on her business background to help counsel and represent clients ranging from small businesses to Fortune 500 companies in a wide variety of industries.