New Year's Resolution for California Employers: Know New Laws Affecting Your Business in 2017

The California legislature enacted many new laws in 2016 affecting California employers, many of which are summarized below. All employers with operations in California should be aware of these new laws and consult with counsel if they have questions about how these laws may affect their operations.

Material New California Laws in 2017 (effective January 1, 2017, unless otherwise noted)

Laws Regarding Discrimination and Retaliation

• Amendments to California’s Fair Pay Act Expanding Wage Equality Laws
  • SB 1063 amends Labor Code Sections 1197.5 and 1199.5 and expands protection for equal pay for “substantially similar work” beyond gender to include race and ethnicity. Employees who perform “substantially similar work” under similar working conditions must be paid equally, unless the employer can demonstrate that the wage differential is based on either: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quality or quantity of production; or (4) a bona fide factor other than sex, race or ethnicity (such as education, training or experience. Employers are required to demonstrate that these factors account for the entire pay differential.
  • AB 1676 amends the Labor Code Section 1197.5 to provide that an employee’s “prior salary shall not, by itself, justify any disparity in compensation.”
• Laws Toughen on Unfair Immigration-Related Practices
  • SB 1001 creates Labor Code Section 1019.1, which addresses unfair immigration-related practices. Employers in the process of verifying that workers have the necessary documentation to work in the United States are prohibited from: (1) requesting more or different documents than are required under federal law; (2) refusing to honor documents tendered that on their face reasonably appear to be genuine by an employer; (3) refusing to honor documents or work authorizations based on the specific status or term of status that accompanies the authorization to work; or (4) reinvestigating or re-verifying an incumbent employee’s authorization to work. Under this new law, employees who suffer an unfair immigration-related practice can file a complaint with the Division of Labor Standards Enforcement (DLSE), and a violation can result in a penalty imposed by the Labor Commissioner of up to $10,000.
• Harassment Prevention Training
  • AB 1661 adds Article 2.4.5 (commencing with Section 53237) to Chapter 2 of Part 1 of Division 2 of Title 5 of the Government Code, which requires local agency officials, including local elected officials, to receive sexual harassment prevention training and education whenever they receive any type of salary or stipend.
• Revised Definition of Employee
  • AB 488 adds Section 12926.05 to California’s Fair Employment and Housing Act (FEHA), expanding the definition of “employee” to include any individual employed under a special license in a nonprofit sheltered workshop, day program or rehabilitation facility. A special license permits the employment of individuals with disabilities at a wage less than the legal minimum wage. The law authorizes such individuals to bring an action under FEHA for any form of harassment or discrimination prohibited by the act.
  • The new law provides employers with an affirmative defense: they can prove, by a preponderance of the evidence, that the challenged action was permitted by statute or regulation and was necessary to serve the employee. An example of an action necessary to serve the employee is where an inquiry is made as to the nature or severity of the employee’s disability in order to utilize that information to make necessary adjustments to the employment arrangement.
• “All Gender” Restrooms (effective March 1, 2017)
  • AB 1732 adds Article 5 (commencing with Section 118600) to Chapter 2 of Part 15 of Division 104 of the Health and Safety Code, prohibiting businesses from labeling any “single-user toilet facility” as either “male” or female,” requiring signage that identifies the facility as “all gender.” A “single-user toilet facility” is defined as a “toilet facility with no more than one water closet and one urinal with a locking mechanism controlled by the user.”

Laws Regarding Leaves of Absence and Benefits

• Employment Protections for Victims of Domestic Violence, Sexual Assault or Stalking (effective July 1, 2017)
  • AB 2337 amends Labor Code Section 230.1 and 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 leave under Labor Code Section 230.1 (relating to victims of domestic violence, sexual assault or stalking). This law also requires that the Labor Commissioner develop a form that employers may elect to use to comply with these provisions and to post it on the Labor Commissioner’s website. Employers are not required to comply with the notice of rights requirement until the Labor Commissioner posts such form.
• School Employee Parental Leave Clarifications, Amendments and Extension
  • AB 2393 expands paid parental leave to all elementary, middle and high school employees – not just K-12 teachers – including classified employees and community college faculty.

Wage and Hour Laws

• Minimum Wage Increase
  • The Fair Wage Act. SB 3 provides for six-stepped annual statewide increases of the current minimum wage of $10 per hour to $15 per hour for all employees working for an employer of 26 or more employees. The new minimum wage as of January 1, 2017 is $10.50 per hour.
• Challenges to Minimum Wage Violations
  • AB 2899 amends Labor Code Section 1197.1 (the minimum wage violations law) and requires an employer seeking a writ of mandate contesting a citation by the Labor Commissioner regarding failure to pay minimum wages to post a bond with the Labor Commissioner in an amount equal to the unpaid wages assessed under the citation, excluding penalties.
  • The law requires that the bond be issued in favor of the unpaid employee such that, if the employer fails to pay the amounts owed within 10 days from the conclusion of the proceedings, the proceeds of the bond will be forfeited to the employee.
• Itemized Wage Statement Exception to Total Hours Requirement
  • AB 2535 amends Labor Code Section 226, clarifying that employers are not required to include in itemized wage statements the total number of work hours by employees exempt from the payment of minimum wage and overtime. Employers must continue to include the total hours worked by non-exempt employees in the itemized wage statements for each pay period.
• Payroll
  • AB 1847 amends Sections 19851, 19852, 19853 and 19854 of the Revenue and Taxation Code, requiring employers who must notify employees of their potential eligibility to receive federal Earned Income Tax Credit (EITC) to also notify these employees that they may be eligible for the California EITC, which provides a refundable credit to very low-income families – for example, those earning below $13,870 for a family of four.
• Local Wage Enforcement
  • SB 1342 adds Section 53060.4 to the Government Code, granting local officials or department heads the power to issue subpoenas and to report noncompliance with employment-related ordinances, such as local minimum wage ordinances, to superior court judges. The intent behind this new law is to pave the way for a statewide mechanism to combat wage theft that occurs at the local level.
• Domestic Workers
  • SB 1015 extends the Domestic Worker Bill of Rights (Labor Code Sections 1451-1453), which was to be repealed on January 1, 2017, and mandates overtime pay for domestic workers who work more than nine hours a day or more than 45 hours per week.
• Overtime for Private Elementary or Secondary School Teachers (effective July 1, 2017)
  • Existing law exempts from overtime provisions an individual employed as a teacher at a private elementary or secondary academic institution if specified requirements are met, including, among others, that the employee earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.
  • AB 2230 amends Labor Code Section 515.8 and prescribes a revised earnings standard for exemption from overtime provisions that will look at the comparable salaries offered to public school teachers in the school district or county, rather than the state minimum wage.

Laws Regarding Worker’s Compensation

• Changes to Liens Filed After January 1, 2017, and Amended Requirements for Physician Reporting and Authorization Requests
  • SB 1160 and AB 2503 require the Administrative Director of the Division of Workers’ Compensation to adopt regulations requiring employers to provide employees with notice that they may access medical treatment outside the workers’ compensation system following the denial of their claims.
  • These new laws also impact liens filed after January 1, 2017 – for example, lien claimants will be required to file declarations under penalty of perjury, the failure of which will result in lien dismissals – and amend the reporting and request for authorization requirements for physicians who attend to ill or injured employees.
• Prompt Suspension of Providers for Medi-Cal/Medicare Fraud/Abuses
  • AB 1244 amends Section 4906 of, and adds Section 139.21 to, the Labor Code, and amends Section 14123 of the Welfare and Institutions Code. The law requires prompt suspension of physicians, practitioners or providers from participating in the workers’ compensation system if convicted of fraud or abuses of the Medi-Cal or Medicare programs or the workers’ compensation system.
• Business Owner/Officer Exclusions From Coverage
  • AB 2883 amends Sections 3351 and 3352 of, and repeals Section 6354.7 of, the Labor Code, requiring that all business workers’ compensation insurance policies, including in-force policies, cover certain officers and directors of private corporations and working members of partnerships and LLCs that may have been previously excluded from coverage.
• Provider Bill Submissions to Employers
  • SB 1175 amends Sections 4603.2, 4603.4 and 4625 of the Labor Code and requires providers to submit bills for medical services to the employer within one year of the date of service.

Laws Regarding Background Checks

• Juvenile Criminal History in Applications for Employment
  • AB 1843 amends Labor Code Section 432.7 to prohibit employers from asking applicants to disclose, or from utilizing as a factor in determining any condition of employment, “juvenile offense history:” information concerning or related to “an arrest, detention, process, diversion, supervision, adjudication or court disposition that occurred while the applicant or employee was subject to the process and jurisdiction of a juvenile court.
  • Health care facilities:
    • Are exempt to the extent that an inquiry into an applicant’s juvenile offense history concerns an adjudication by a juvenile court in which the applicant was found to have committed a felony or a misdemeanor offense relating to certain sex or controlled substances crimes within five years preceding the employment application.
    • May not inquire about an applicant’s juvenile offense history that has been sealed by a juvenile court.
• Los Angeles “Fair Chance” Ordinance
  • Although this is not a statewide law, it will significantly impact employers doing business in Los Angeles. Beginning January 1, 2017, Los Angeles employers with at least 10 employees that work two or more hours each week within the City of Los Angeles are prohibited from asking or requiring disclosure of a job applicant’s criminal history prior to a conditional offer of employment, including asking any question that seeks the disclosure of a job applicant’s criminal history, such as a criminal history box on a job application or a question during an initial job interview.
    • Los Angeles employers covered by the ordinance also must engage in a “Fair Chance Process” before withdrawing a conditional offer of employment based on the applicant’s criminal history, which includes: (1) a notification and “written assessment” process, (2) providing the applicant five business days to respond, (3) a “written reassessment” if the applicant provides any documentation or information in response, and (4) retaining records of job applications, including the written assessments and reassessments, for three years.
    • The Fair Chance Ordinance also prohibits retaliation against an employee or applicant for reporting any alleged violation of the Ordinance or for participating in the Fair Chance Process.
    • In addition, covered employers must: (1) state in every advertisement seeking applicants for employment that they will consider qualified applicants with criminal histories, (2) prepare and post a notice informing applicants of the Fair Chance Ordinance’s provisions in a conspicuous place at any location job applicants may visit, and (3) send copies of the posted notice to every labor union with which they have a collective bargaining agreement.
    • Generally, there are no exceptions to the ordinance, unless the employer is required by law to inquire about criminal history or prohibited by law from hiring individuals who have committed certain criminal offenses, or the position requires use of a firearm.
    • Although the Fair Chance Ordinance will go into effect January 1, 2017, monetary penalties will not be imposed until July 1, 2017.

Laws Regarding Contracts With Employees

• Choice of Law and Forum Provisions in Employment Agreements
  • As discussed in our previous client alert, SB 1241 creates Labor Code Section 925, which prohibits employers from requiring California-based employees to agree, as a condition of employment, to (1) litigate or arbitrate claims that arise in California in a non-California forum; (2) waive the protection of California law as to a controversy arising in California.
  • Any contract, or provision therein, that violates these restrictions is voidable by the employee; any dispute arising thereunder shall be adjudicated in California under California law; and the employee is entitled to recover reasonable attorneys’ fees.
  • If, however, an employee is represented by legal counsel in negotiating the terms of an agreement with respect to choice of law or forum, this law will not apply.

Additional Statewide Laws in 2017 (effective January 1, 2017, unless otherwise noted)

• Comprehensive Background Checks on Drivers
  • AB 1289 adds Section 5445.2 to the Public Utilities Code, requiring transportation network companies like Uber and Lyft to conduct criminal background checks for each participating driver.
  • Failure to do so can subject companies to fines of up to $5,000 per offense.
• Expansion of Smoking Ban in the Workplace (effective June 9, 2016)
  • ABX2-7 amends Labor Code section 6404.5, expanding its smoke-free workplace protections to owner-operated businesses (places of employment where the owner-operator is the only employee) and eliminating most of the previous exemptions that allowed for smoking in certain work environments. For example, hotel lobbies, bars, taverns, gaming clubs and warehouse facilities are no longer exempt and are now considered “places of employment.”
  • The law also eliminates the ability of employers to have designated smoking break rooms for employees as well as the exception for small businesses with a total of five or fewer employees.
  • Finally, the smoking ban includes the use of e-cigarettes and vaping devices that contain nicotine.
• New 2017 Exempt Classification Rates
  • California’s Department of Industrial Relations (DIR) announced hourly rate increases for the computer software employee exemption and the licensed physician or surgeon exemption.
• Agricultural Exemption Change
  • AB 1066 eliminates an important existing exemption for agricultural employers that was included in Labor Code Section 554. Effective January 1, 2017, agricultural employers are no longer exempt from the provision which requires providing one day’s rest within every seven days worked; therefore, employers can no longer cause agricultural employees to work more than six days in seven.
• New Recordkeeping Requirements for Covered Janitorial Employers
  • AB 1978 adds Part 4.2 (commencing with Section 1420) to Division 2 of the Labor Code and requires janitorial employers to make and keep records with basic employee data for three years, including names and addresses, daily hours worked, wage information and other conditions of employment.
• Human Trafficking
  • AB 1684 amends Section 12930 of the Government Code, authorizing the Department of Fair Employment and Housing to receive, investigate, conciliate, mediate and prosecute complaints alleging, and bring civil actions for a victim of, human trafficking. Any damages awarded in a civil action brought by the department are to be awarded to the victim of human trafficking.
• State Contracts and Anti-Discrimination Certification
  • AB 2844 adds Section 2010 to the Public Contract Code and requires any person that submits a bid or proposal to, or otherwise proposes to enter into or renew a contract with, a state agency with respect to a contract of $100,000 or more to certify their compliance with the Unruh Civil Rights Act and FEHA.
• Licensure Requirements for Hair and Nail Salons (effective July 1, 2017)
  • AB 2437 adds Section 7353.4 to the Business and Professions Code, and adds Section 98.10 to the Labor Code, relating to barbering and cosmetology. AB 2025 amends Sections 7312, 7314, 7314.3, 7337, 7347, and 7389 of the Business and Professions Code, relating to professions and vocations. The new laws require any establishment that is licensed by the Board of Barbering and Cosmetology (BBC) (hair salons, nail salons, estheticians, etc.) to post a notice regarding workplace rights and wage-and-hour laws by July 1, 2017. The Labor Commissioner must create the model notice. Failure to post the notice will result in a fine.

Additional Laws Taking Effect in 2018

• Under the Fair Wage Act, SB 3, scheduled increases of the current minimum wage will begin on January 1, 2018, for employers with 25 or fewer employees.
• Effective January 1, 2018, AB 908 increases State Disability Insurance (SDI) and Paid Family Leave (PFL) benefits from 55 percent of a participant’s wages to either 60 or 70 percent, depending on income. The bill also eliminates the seven-day waiting period for PFL benefits.
• SB 1160 and AB 2503 will change the utilization review process for workers’ compensation claims with respect to injuries occurring on or after January 1, 2018.
• AB 2886 extends the time to appeal a disability benefits determination to an administrative law judge from 20 days to 30 days from the date of mailing or personal service of the determination notice, commencing March 1, 2018.
• Effective July 1, 2018, SB 3 extends paid sick leave to qualifying in-home supportive service (IHSS) workers.
• Under AB 1978, janitorial employers will be required to register with the DLSE beginning July 1, 2018. They will not be able to continue conducting business without complying with that obligation. In addition, the DLSE must develop sexual violence and harassment prevention training for janitorial employees by January 1, 2019. Until the training is developed, covered employers will have to start giving employees the sexual harassment prevention pamphlet from the Department of Fair Employment and Housing (DFEH) beginning July 1, 2018.