California Employers: Know and Comply With New Laws Affecting Your Business in 2018

Following its pattern in recent years, in 2017 the California legislature enacted many new laws affecting California employers.

The new laws address several topics, including:

• Broader gender-related discrimination, pay equity and anti-retaliation protections
• Expanded authority for investigations and enforcement by the Division of Labor Standards Enforcement
• Ban on compensation history inquiries
• Limitations on the use of applicants’ criminal histories
• Worksite immigration enforcement protections
• Expansion of parental leave to employers with 20-49 employees

All employers with operations in California should be aware of these new laws, understand how these laws may affect their operations, and consult with counsel to address any compliance questions. All laws are effective January 1, 2018, unless otherwise noted.

Laws Regarding Discrimination, Harassment and Retaliation

Harassment Prevention Training: Gender Identity, Gender Expression and Sexual Orientation

• SB 396, the Transgender Work Opportunity Act, requires California employers with 50 or more employees to expand the two hours of sexual harassment prevention training such employers are already required to provide under the Fair Employment and Housing Act to supervisors every two years (or within six months after an employee becomes a supervisor) to include training on gender identity, gender expression and sexual orientation harassment.
• Employers must prominently display a poster on transgender rights developed by the Department of Fair Employment and Housing (DFEH).
• Compliance Tips
  • Ensure required supervisor trainings cover harassment based on gender identity, gender expression and sexual orientation.
  • Prominently display the new transgender rights in the workplace poster.
  • Comply with all poster requirements, including:
    • Displaying the following notices (each of which was updated by DFEH in 2017, although versions issued by DFEH in prior years may remain compliant): The Facts About Sexual Harassment, California Law Prohibits Workplace Discrimination and Harassment, Rights and Obligations as a Pregnant Employee, and CFRA/Pregnancy Disability Leave
    • Posting required DFEH posters at all locations where employees work, located in a conspicuous place where employees and applicants can easily see them (electronic posting is permitted as long as the notice is posted in a conspicuous place or places where employees would tend to view it in the workplace)
    • Displaying the posters at all locations where they have employees, including warehouses, stores and all branches.
    • For covered employers whose workforce at any facility or establishment is composed of 10 percent or more persons whose spoken language is not English, translating the notice into every language that is spoken by at least 10 percent of the workforce.

Retaliation: Expanding The Labor Commissioner’s Authority

• SB 306 authorizes the Division of Labor Standards Enforcement (DLSE) to investigate an employer – “with or without receiving a complaint” – when the Labor Commissioner suspects retaliation or discrimination against a worker during a wage claim or other investigation.
• The Labor Commissioner will also be allowed to seek injunctive relief (that the employee be reinstated pending resolution of the claim) upon a mere finding of “reasonable cause” that a violation of the law has occurred. That injunctive relief, however, would not prohibit an employer from disciplining or firing an employee for conduct that is unrelated to the retaliation claim.
• The Labor Commissioner will also be authorized to issue citations directing specific relief to persons determined to be responsible for violations and to create certain procedural requirements.
• Compliance Tips: The DLSE previously had to file a civil action to enforce a cease and desist citation. Because of the DLSE’s broader and streamlined capabilities under the new law, take any DLSE investigation or complaint very seriously.

Fair Pay Act Expansion

• AB 46 extends California’s Fair Pay Act – which prohibits wage discrimination on the basis of gender, race and ethnicity – to cover public employers; existing law only covers private employers.
• Compliance Tips:
  • Continue to monitor pay practices and ensure that compensation-related decisions are not made based on gender, race or ethnicity, and that compensation decisions do not adversely affect employees based on their gender, race or ethnicity.
  • Before conducting any sort of pay equity audit, carefully consider developing a plan to appropriately address privilege, the findings from any such audit, and consult with legal counsel.

Employment Discrimination: Gender Neutral Terms

• AB 1556 revises California’s Fair Employment and Housing Act by deleting gender-specific personal pronouns (such as “female,” “she” and “her”) in California’s anti-discrimination, anti-harassment, pregnancy disability and family/medical leave laws and replacing them with gender-neutral terms such as “the person” or “the employee.”
• Compliance Tips:
  • Consider reviewing and revising employment policies to remove gender-specific personal pronouns
  • In light of this new law, and other new laws addressing gender-related discrimination, consider specific gender-related training for management employees, including educating leaders about the use of pronouns for cisgender, transgender gender neutral and gender inclusive employees.

Gender Identification: Female, Male or Nonbinary

• SB 179 allows California residents to choose from three equally recognized gender options – female, male or nonbinary – on state-issued identification cards, birth certificates and driver’s licenses.
  • For changes to birth certificates, the law is effective September 1, 2018.
  • For changes to driver’s licenses, the law is effective January 1, 2019.
• It will also become easier for individuals to change their gender on legal documents, effective September 1, 2018.

Laws Regarding Hiring Practices and Enforcement

Employers Prohibited From Making Pre-Employment Salary History Inquiries

• AB 168 bars employers from requesting, orally or in writing, the pay history of job applicants (either directly or through an agent, such as a third-party recruiter).
• In addition, employers may not rely on salary history information as a factor in determining whether to hire the applicant or how much to pay the applicant.
• Employers are required to provide applicants the pay scale for a position upon request.
• Applicants may voluntarily and without prompting disclose their salary history to a prospective employer.
• Similar prohibitions are contained in San Francisco’s “Parity in Pay” Ordinance, which is effective July 1, 2018.
• Compliance Tips:
  • Revise all job applications and interview outlines that directly or indirectly seek disclosure of the applicant’s pay history.
  • Educate all employees involved in recruiting, interviewing or hiring about this new law.
  • Although applicants may voluntarily and without prompting disclose their salary history, train recruiters and interviewers to not ask follow-up questions that would violate the new law.
  • Consider developing new questions that do not violate the law but elicit similarly helpful information (such as “did your performance at your last job lead to any special recognition, such as inclusion in the ‘President’s Club’ for sales or something similar”).
  • Recognize that generic salary range statements such as “commensurate with experience” may not be adequate and prepare basic informational forms that identify the pay scale for open positions so these are available upon request.
  • This requirement, coupled with potential exposure private employers could face under AB 46 for pay disparities based on gender, race or ethnicity, justify employers considering conducting one or more pay equity audits.

Limitations on Use of Conviction Records (“Ban-the-Box” Law)

• AB 1008 prohibits employers with at least five employees from asking, orally or in writing, job applicants about criminal conviction histories until a conditional offer of employment has been made. There are limited exemptions for certain positions, such as those where a criminal background check is required by federal, state or local law.
• California employers also are prohibited from considering, distributing or disseminating information about any of the following while conducting a background check following a conditional offer of employment:
  • An arrest not followed by a conviction, except that employers at health facilities may ask applicants for positions with regular access to patients to disclose an arrest under the Sex Offender Registration Act, and may ask applicants seeking positions with access to drugs and medication to disclose an arrest under certain sections of the California Health and Safety Code.
  • Referral to or participation in a pre-trial or post-trial diversion program.
  • Convictions that have been sealed, dismissed, expunged or statutorily eradicated pursuant to law.
• Once an employer has made a conditional offer of employment, it may seek certain criminal history information. However, before denying employment because of a criminal conviction, these specific steps must be followed:
  • The employer must first conduct an individualized assessment to determine whether the conviction has a “direct and adverse relationship with the specific duties of the job that justify denying the applicant the position.” This individual assessment must consider the nature and gravity of the criminal offense, the time that has passed since the offense and the completion of the sentence, and the nature of the job sought.
  • If the individualized assessment leads to a decision that the applicant’s conviction history is disqualifying, then the employer must provide written notice which goes beyond what the federal Fair Credit Reporting Act (FCRA) requires, including but not limited to:
    • The conviction at issue
    • The applicant’s right to respond to the notice before the employer’s decision becomes final
    • An explanation that the response may include evidence challenging the accuracy of the conviction history and evidence of rehabilitation or mitigating circumstances
  • If an employer then makes a final decision to deny employment based on conviction history, a second written notification must be provided to the applicant, which must include the final decision and notice of any existing procedure to challenge the decision or request reconsideration, and the right to file a complaint with the Department of Fair Employment and Housing (DFEH).
• Compliance Tips:
  • Revise initial employment applications to remove boxes or questions that ask applicants to disclose criminal convictions.
  • Train employees involved in recruiting, interviewing and hiring to understand the individual assessment and notice provisions of the law.
  • Review and revise pre-adverse action and adverse action letters to ensure such letters not only comply with FCRA but also comply with AB 1008.
  • Employers in Los Angeles and San Francisco are also required to comply with the local “Fair Chance” ordinances, which have additional or broader requirements.

Worksite Immigration Enforcement and Protections

• AB 450, the Immigrant Worker Protection Act, provides workers with protection from immigration enforcement while on the job and imposes varying fines from $2,000 to $10,000 for violating its provisions.
• AB 450’s provisions include the following:
  • Employers cannot give federal immigration enforcement agents access to non-public areas of a business without a judicial warrant.
  • Employers cannot provide these enforcement agents access to employee records without a subpoena or judicial warrant. This prohibition does not apply to Form I-9 or other documents for which a Notice of Inspection was provided to the employer.
  • Employers must follow specific requirements related to Form I-9 inspections. Those requirements are to:
    • Post a notice to all current employees informing them of any federal immigration agency’s inspections of Form I-9 or other employment records within 72 hours of receiving the Notice of Inspection. This notice must also be given to the collective bargaining representative, if any.
    • Provide a copy of the Notice of Inspection to an affected employee upon reasonable request.
    • Once the inspection is over, provide each “affected employee” and the employee’s collective bargaining representative a copy of the inspection results and a written notice of the employer’s and employee’s obligations arising from the inspection. This must be done within 72 hours of receiving the results. An “affected employee” is one identified by the inspection results as potentially lacking work authorization or having document deficiencies.
  • The bill also makes it unlawful for employers to re-verify the employment eligibility of current employees in a time or manner not allowed by federal employment eligibility verification laws.
• Compliance Tips:
  • Establish clear policies that ensure proper collection of employment eligibility information, while also ensuring additional requests that go beyond legal requirements are not made.
  • Designate certain employees to manage any inquiries from an immigration enforcement agency, and train such employees on the requirements of AB 450.
  • Review and update (or develop, if not yet adopted) company policies addressing procedures to follow in responding to any inquiry from an immigration enforcement agency.

Laws Regarding Leaves of Absence and Benefits

Parental Leave for Small Employers.

• SB 63, the New Parental Leave Act (NPLA), requires small businesses with 20 or more employees to provide eligible employees up to 12 weeks of unpaid, job-protected leave to bond with a new child – leave that must be taken within one year of the child’s birth, adoption or foster care placement.
• If both parents are employed by the same employer, the cumulative NPLA required for both parents is 12 weeks.
• The New Parental Leave Act has the greatest impact on employers with 20 to 49 employees who are not currently required to provide baby bonding leave under the federal Family and Medical Leave Act or the California Family Rights Act.
• If an employee takes this leave, an employer must maintain and pay for coverage under a group health plan at the same level and conditions that coverage would have been provided if the employee had continued working.
• Before the leave starts, an employer must provide the employee with a guarantee of reinstatement to the same or comparable positions. Failure to provide the guarantee will be deemed a violation of the law, as if the employer refused to provide leave.
• Compliance Tips:
  • California employers, particularly those with 20-49 employees, should review and update current policies addressing parental leave.
  • Employers with 20-40 employees also should think proactively about how to best manage absences by employees who opt to use some or all of the job-protected leave now available to them under the NPLA.

Wage and Hour Laws

Minimum Wage Increase

• Under the Fair Wage Act – SB 3 – on January 1, 2018, the state minimum wage increases to $10.50 per hour for employers with 25 or fewer employees and to $11 per hour for employers with 26 or more employees. Specific jurisdictions within California may have higher minimum wage requirements.

New Exempt Classification Rates

• New rates take effect for the computer software employee exemption and the licensed physician and surgeon exemption.
  • For the computer software employees’ exemption:
    • The minimum hourly rate of pay will increase from $42.35 to $43.58
    • The minimum monthly salary will increase from $7,352.62 to $7,565.85
    • The minimum annual salary exemption will increase from $88,231.36 to $90,790.07
  • For the licensed physician and surgeon exemption:
    • The minimum hourly rate of pay will increase from $77.15 to $79.39.
  • These rates are tied to the California Consumer Price Index (CCPI) for Urban Wage Earners and Clerical Workers. The 2018 rate changes reflect the 2.9 percent increase in the CCPI.

Increased Liability for Construction Contractors

• AB 1701 imposes liability onto general contractors for any unpaid wages, benefits or contributions that a subcontractor owes to a laborer who performed work under a private construction contract.
• The law applies to contracts entered into after January 1, 2018, for the erection, construction, alteration or repair of a building, structure or other work between direct contractors and subcontractors. General contractors will not, however, be liable for penalties or liquidated damages.
• Only certain parties are authorized to pursue enforcement of this law:
  • The Labor Commissioner
  • A third party owed fringe or benefit payments
  • A joint labor-management cooperation committee

Barbering and Cosmetology

• SB 490 allows workers licensed under the Barbering and Cosmetology Act to be paid a commission in addition to a base hourly rate if certain conditions are met.
• AB 326 requires Board of Barbering and Cosmetology schools to include information on physical and sexual assault awareness in the required health and safety course for licensees beginning July 1, 2019.

Laws Regarding Workplace Safety and Worker’s Compensation

The Cleaning Product Right to Know Act of 2017

• SB 258, the Cleaning Product Right to Know Act of 2017, relates to the safety of designated cleaning products, including general cleaning, air care, automotive, or polish or floor maintenance products used primarily for janitorial, industrial or domestic cleaning provisions.
• The bill requires manufacturers of the designated cleaning products to disclose the chemicals in those products and create product safety data sheets.
• Employers that have these designated cleaning products in their workplace must obtain the safety data sheets from the manufacturers and make them available at the workplace.

Workers’ Compensation

• AB 44 requires employers to provide immediate support from a nurse case manager to employees injured in the course of employment by an act of domestic terrorism, but only when the Governor has declared a state of emergency. The Division of Workers’ Compensation will adopt regulations on, among other things, the scope of the employer’s obligations and the contents of the notice that employers shall provide to claimants.
• SB 189 (effective July 1, 2018) clarifies when owners, officers of businesses, members of boards of directors, general partners in a partnership and managing members of LLCs may be excluded from workers’ compensation laws.
• SB 489 extends the billing deadline for providers of emergency treatment services from 30 days to 180 days from the date the service was provided.

Additional Laws in 2018

Alcohol Servers

• AB 1221 requires the Department of Alcoholic Beverage Control, on or before January 1, 2020, to develop, implement and administer a curriculum for the Responsible Beverage Service (RBS) Training Program.
• Beginning July 1, 2021, the bill requires that alcohol servers successfully complete an RBS training course offered or authorized by the department. The course must be designed to instruct and educate alcohol servers on responsible practices regarding the sale and service of alcoholic beverages.

Prohibited Discrimination Against Veterans

• AB 1710 expands the current protections for members of the armed services by prohibiting discrimination in all “terms, conditions, or privileges” of employment. This legislation conforms state law to the federal Uniformed Services Employment and Reemployment Rights Act (USERRA) by protecting service members in civil jobs from hostile work environments.

LGBT Rights for Long-Term Care Facility Residents

• SB 219 enacts the Lesbian, Gay, Bisexual, and Transgender (LGBT) Long-Term Care Facility Residents’ Bill of Rights.
• Among other things, the bill makes it unlawful, except as specified, for any long-term care facility to take specified actions wholly or partially on the basis of a person’s actual or perceived sexual orientation, gender identity, gender expression or HIV status, including, among others, willfully and repeatedly failing to use a resident’s preferred name or pronoun or denying admission to a long-term care facility.
• Facilities are required to post a specified notice about the protections along with its current nondiscrimination policy in all places and on all materials where the nondiscrimination policy is posted.

Data Collection: Sexual Orientation

• The Lesbian, Gay, Bisexual, and Transgender Disparities Reduction Act requires specific state departments, in the course of collecting certain demographic data, to collect voluntary self-identification information pertaining to sexual orientation and gender identity. Existing law prohibits these state departments from reporting demographic data that would permit identification of individuals or would result in statistical unreliability and limits the use of the collected data by these state departments. Existing law requires these state departments to comply with these provisions as early as possible, but no later than July 1, 2018.
• AB 677 expands the list of state entities that must comply with these reporting requirements, and would require those entities to comply as early as possible, but not later than July 1, 2019.

Harassment Prevention Training: Farm Labor Contractors

• SB 295 affects the sexual harassment prevention training that must be provided to receive a farm labor contractor’s license. The bill now requires that training be conducted or interpreted into a language understood by the employee, and that the Labor Commissioner receive a complete list of all materials or resources utilized to provide the training as well as a list of the total number of agricultural employees trained.

Health Care Facilities: Increased Whistleblower Protections.

• Section 1278.5 of California’s Health and Safety Code prohibits a health facility from discriminating or retaliating against a patient, employee, member of the medical staff or any other health care worker of the health facility because that person has presented a grievance, complaint or report to the facility, as specified, or has initiated, participated or cooperated in an investigation or administrative proceeding related to the quality of care, services, or conditions at the facility, as specified.
• AB 1102 amends Section 1278.5 to increase the maximum fine for a person who willfully violates the aforementioned provisions from $20,000 to $75,000.

Human Trafficking

• AB 260 extends the list of businesses that must post a notice containing information related to slavery and human trafficking to include hotels, motels, and bed and breakfast inns. A model human trafficking notice is available for download from the California Attorney General’s website.
• Additionally, SB 225 requires all businesses that must post a human trafficking information notice to include in that notice a telephone number for those who wish to send text messages to access support and services, effective January 1, 2019.