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New Laws Place Heavier Burden On California Employers And Increase Potential Exposure For Employee Claims

Published by on November 17, 2016

California-based employers and out-of-state employers with employees in California should immediately review their policies, procedures, and practices to ensure compliance with the new laws, most of which will be effective January 1, 2017.

California’s annual legislative term ended on September 30, 2016, meaning California employers should once again start preparing to comply with the nearly twenty new employment-related laws signed by California Governor Jerry Brown that will go into effect in 2017. As usual, these new laws will, for the most part, place a heavier burden on California employers and increase their potential exposure for claims by employees.

Unless otherwise indicated, the new laws take effect on January 1, 2017, which means employers should start preparing for the changes now. Below is a summary of the new laws, grouped by category.


SB 1001 (Discrimination against Immigrant Applicants and Employees) —- Effective January 1, 2017

New Labor Code section 1019.1 will make it an “unfair immigration practice” to do any of the following in the course of verifying a person’s eligibility to work: (1) request more or different identity and work authorization documents than what are required under the federal I-9 process; (2) refuse to accept documents tendered that on their face reasonably appear to be genuine; (3) refuse to accept documents based upon the specific status or term of status that accompanies the authorization to work; or (4) attempt to reinvestigate or re-verify an incumbent employee’s authorization to work using an “unfair immigration practice” as defined by Labor Code section 1019.

The drafter of SB 1001 stated that this law is intended to expand the current immigration-related law to include applicants, and also to provide a remedy under California law since, according to SB 1001’s draft, the federal remedy for such violations takes too long. The law authorizes an employee or applicant to file a complaint with the California Labor Commission and an employer can be subject to an award of statutory damages of up to $10,000 per violation, and liable for equitable relief to the applicant or employee.

For more information, click here.

SB 1063 (Expansion of Fair Pay Act to Race/Ethnicity) —- Effective January 1, 2017

The California Fair Pay Act was enacted last year to prohibit employers from paying employees wage rates less than what they pay employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions. SB 1063 extends the protections of the California Fair Pay Act and amends Labor Code section 1197.5 to prohibit employers from paying employees wage rates less than what they pay employees of another race or ethnicity for substantially similar work when viewed as a composite of skill, effort, and responsibility and performed under similar working conditions. Proponents of this new law relied on a 2013 study that showed that Asian American women make 90 cents, African American women make 64 cents, and Latina women make just 54 cents for every dollar that a white man earns, and that African American men earn just 75% of the average salary of a white male.

As with gender, the new law imposes a significant burden on employers defending against race/ethnicity wage discrimination claims to show that the wage differential is based on one of the following factors: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; or (4) a bona fide factor other than race or ethnicity, such as education, training, or experience. To demonstrate that the wage differential is based upon a bona fide factor other than race or ethnicity, the employer must show that it is not based on, or derived from, a race/ethnicity-based differential, is related to the position at issue, and is consistent with business necessity (i.e. “overriding legitimate business purpose”). The employer must also demonstrate that each factor relied upon is “applied reasonably,” and that one or more of the relied-upon factors account for the entire wage differential.

SB 1063 also extends the enforcement mechanism and penalties under the Fair Pay Act to wage differentials based on race or ethnicity. It also amends Labor Code section 1197.5 to prohibit employers from retaliating against employees who report or assist with concerns about wage differentials based on race or ethnicity and protects employees who wish to discuss wages.

For more information, click here.

AB 488 (Disability Discrimination —- FEHA Protections Extended To Mentally And/Or Physically Handicapped Individuals Employed Under Special Licenses) —- Effective January 1, 2017

Pursuant to Labor Code sections 1191 and 1191.5, a special license can be issued to a nonprofit organization, such as a sheltered workshop or rehabilitation facility, authorizing the payment of less than the minimum wage to individuals who are mentally or physically handicapped. Such individuals, however, were not considered “employees” of the nonprofit organization under the Fair Employment and Housing Act (Government Code section 12940 et seq.) (“FEHA”) for the purpose of protection from employment discrimination and harassment.

AB 488 was enacted to extend the protection of the FEHA against employment discrimination and harassment to individuals employed under a special license in a nonprofit sheltered workshop or rehabilitation facility. Pursuant to new Government Code section 12926.05, an individual employed under a special license under Labor Code sections 1191 or 1191.5 may bring an action under the FEHA for any form of harassment or discrimination prohibited by the FEHA. Employers may establish an affirmative defense to such an action by proving, by a preponderance of the evidence, that the challenged activity (1) was permitted by statute or regulation, and (2) was necessary to serve employees with disabilities under a special license pursuant to Labor Code sections 1191 and 1191.5.

For more information, click here.

AB 1676 (Prior Salary Cannot Be Sole Justification for Wage Differential) —- Effective January 1, 2017

In 2015, Governor Brown vetoed AB 1017, which would have prohibited an employer from seeking salary history information about an applicant for employment. In the process of drafting AB 1676 this year, the California Legislature amended California’s Fair Pay Act (Labor Code section 1197.5) to provide that “prior salary shall not, by itself justify any disparity in compensation.” The California Legislature explained its rationale as follows: “[S]eeking salary history from job applicants and relying on prior salary to set employees’ pay rates contribute[s] to the gender wage gap by perpetuating wage inequalities across the occupational spectrum” and “[w]hen employers make salary decisions during the hiring process based on prospective employees’ prior salaries or require women to disclose their prior salaries during salary negotiations, women often end up at a sharp disadvantage and historical patterns of gender bias and discrimination repeat themselves, causing women to continue earning less than their male counterparts.”

Although AB 1676 does not prohibit inquiries into an applicant’s prior salary history, employers should be cautious about inquiring into and considering an applicant’s prior salary history for the purpose of determining compensation. If an employer does consider prior salary, it must also establish that a bona fide factor such as education, training, or experience justifies any disparity in compensation between workers of the opposite sex, race, or ethnicity.

For more information, click here.

AB 1732 (All-Gender Toilet Facilities) —- Effective March 1, 2017

Commencing March 1, 2017, all single-user toilet facilities in business establishments, places of public accommodation, or state or local government agencies must be identified as all-gender (rather than as male or female) facilities and designated for use by single occupants, families, and people who require assistance. Pursuant to new section 118600 of the California Health and Safety Code, “single-user toilet facilities” are defined as those with no more than one water closet and one urinal that have a locking mechanism controlled by the user. The bill also provides that local code enforcement officials must inspect for compliance.

For more information, click here.

AB 1843 (Prohibition Of Inquiry Regarding Juvenile Criminal Background) —- Effective January 1, 2017

Similar to other “ban the box” laws enacted across country, California Labor Code section 432.7 prohibits employers from asking an applicant to disclose, or from using as a factor in determining any condition of employment, information concerning: an arrest or detention that did not result in a conviction; a referral or participation in any pretrial or post-trial diversion program; or a conviction that has been judicially dismissed or ordered sealed.

AB 1843 extends the scope of Labor Code section 432.7 to provide similar protection to applicants with juvenile-related arrests and convictions. Specifically, employers may not ask an applicant to disclose, verbally or in writing, or use as a factor in determining any condition of employment, information concerning an arrest, detention, processing, diversion, supervision, adjudication, or court disposition that occurred while the person was subject to the process and jurisdiction of juvenile court law. The bill further provides that “conviction” does not include an adjudication by a juvenile court or any other court order or action taken with respect to a person who is under the jurisdiction of the juvenile court law.

Labor Code section 432.7 authorizes health facilities to ask applicants seeking specific types of positions to disclose information about certain crimes listed under Health and Safety Code section 11590 and Penal Code section 290. This amendment prohibits inquiries from health facilities about juvenile-related arrests, detentions, adjudications, etc. unless the information relates to a juvenile court conviction of a misdemeanor or felony for specific crimes within five years of the application.

For more information, click here.

AB 1978 (Mandatory Sexual Harassment Prevention Training and Business Registration for Janitorial Services Employers) —- Effective July 1, 2018

AB 1978, otherwise known as the Property Service Workers Protection Act, was supported by unions seeking to protect janitorial workers from sexual assault, exploitation and other Labor Code violations. The new law requires janitorial industry employers to provide their employees with the Department of Fair Employment and Housing’s pamphlet on the prohibition against sexual harassment in the workplace by January 1, 2018, and to establish a biennial in-person sexual harassment and violence prevention training that will be developed by the Labor Commission by January 1, 2019. The law also establishes a janitorial business registration process through the Labor Commission to encourage labor standards compliance within the janitorial industry. A civil fine can be imposed on the janitorial employer for violating this law or failing to register with the Labor Commission. Notably, the new law subjects any person or entity that contracts with an unregistered janitorial service employer to a civil fine of not less than $2,000 nor more than $10,000 for a first violation, and a civil fine of not less than $10,000 nor more than $25,000 for a subsequent violation.

For more information, click here.

AB 2337 (Notice to Employees Regarding Domestic Violence Protections) —- Effective July 1, 2017

California Labor Code section 230.1 prohibits an employer with 25 or more employees from discharging or in any manner discriminating or retaliating against an employee who is a victim of domestic violence, sexual assault, or stalking. AB 2337 expands the notice requirements to require employers to provide written information to each new employee —- and other employees upon request —- about their rights under sections 230.1 and 230(c), (e) and (f) prohibiting retaliation and requiring employers to reasonably accommodate victims of domestic violence, sexual assault or stalking. Employers are required to comply with this new notice requirement until the Labor Commission posts a template notice form on its website, which the Labor Commission must do on or before July 1, 2017.

For more information, click here.

Wage and Hour

SB 3 (Minimum Wage Increases for All Employees and Paid Sick Leave for In-Home Supportive Service Workers) —- Effective January 1, 2017

SB 3 increases the current $10 per hour minimum wage each year over the next seven years for employers with more than 25 employees, starting with $10.50 per hour on January 1, 2017, and ending with $15 per hour on January 1, 2022.

January 1, 2017 $10.50 $43,680
January 1, 2018 $11.00 $45,760
January 1, 2019 $12.00 $49,920
January 1, 2020 $13.00 $54,080
January 1, 2021 $14.00 $58,240
January 1, 2022 $15.00 $62,400


For employers with 25 or fewer employees, each of the fixed minimum wage increases is delayed one year so these employers will have to comply with the $10.50 minimum wage starting January 1, 2018. After the final scheduled increase to $15.00 on January 1, 2022, the California Director of Finance will determine annual increases, generally based on consumer inflation, by August 1st of the year preceding the increase. California employers should also be aware that the salary threshold for federal overtime exemption is scheduled to increase to $47,476 on December 1, 2016, barring any injunctions.

This new law also removes the exemption for In-Home Supportive Services workers (caregivers) from California’s paid sick leave (Healthy Workplace, Healthy Families Act of 2014) requirements. Accordingly, after January 1, 2018, in-home caregivers who work in California for 30 or more days within a year are entitled to paid sick days on the same basis that currently exists for other employees, i.e., three days or 24 hours of paid sick time off per year.

For more information, click here.

AB 2063 (Employment of Minors) —- Effective January 1, 2017

The California Education Code authorizes school districts that maintain high schools to establish work-based learning or work experience programs for the purpose of providing students with skills, experience, and understanding necessary for success in employment. Such programs may include work experience education, community classrooms, cooperative career technical education programs, and job shadowing. AB 2063 lowers the minimum age for participation in work experience education programs from 16 to 14 years, and increases the number of hours a student can participate in job shadowing experiences from 25 hours to 40 hours per semester, if the principal of the school in which the student is enrolled certifies that it is necessary for the student’s participation in a career technical education program.

For more information, click here.

AB 2535 (No Duty to Track Hours Worked Information on Wage Statements of Exempt Employees) —- Effective January 1, 2017

Employers are required to provide their workers with written wage statements (or pay stubs) with accurate information in nine specific categories identified by California Labor Code section 226(a). One of these categories is the total hours worked in the pay period by the employee. Section 226(a), however, did not require an employer to report on the wage statement the total hours worked for employees who are paid solely on salary and are exempt from overtime. Pursuant to the plain language of this exception, employers technically were required to track the hours of employees who were exempt from overtime, but whose compensation was not “solely based on salary” (e.g. commission, stock options).

Accordingly, AB 2535 amends section 226(a), and extends the total hours worked exception to all employees who are exempt from the payment of minimum wage and overtime under a specified exemption for: (a) executive, administrative, or professional employees; (b) the “outside sales” exception; (c) salaried computer professionals; (d) parents, spouses, children, or legally-adopted children of the employer provided in applicable orders of the IWC; (e) directors, staff, and participants of a live-in alternative to incarceration rehabilitation program for substance abuse; (f) crew members employed on commercial passenger fishing boats; and (g) participants in national service programs.

For more information, click here.

AB 2899 (Bond Requirement for Challenge to Labor Commissioner Citation) —- Effective January 1, 2017

California Labor Code section 1197.1 authorizes an employee to file a wage claim with the Labor Commission for unpaid wages. AB 2899 amends this law to require that any employer, before appealing a decision by the Labor Commission relating to a wage and hour violation, must file a bond in favor of the unpaid employee with the Labor Commission that covers the amount of wages awarded. If the initial award is affirmed on appeal and the employer fails to pay the amount it owes to the employee within 10 days from the conclusion of the proceedings, the amount of the bond will be forfeited to the employee.

For more information, click here.

Employment Contracts and Arbitration

SB 1007 (Use of Shorthand Reporter During Arbitration)

This new law adds section 1282.5 to the California Code of Civil Procedure, providing that a party to an arbitration has the right to have a certified shorthand reporter transcribe any deposition, proceeding or hearing as the official record. The party requesting a certified shorthand reporter must make the request in a demand, response, answer, or counterclaim related to the arbitration, or at a pre-hearing scheduling conference at which a deposition, proceeding, or hearing is being calendared. The party requesting the transcript bears the expense of the certified shorthand reporter, except as specified in a consumer arbitration. SB 1007 also authorizes a party whose request has been refused by the arbitrator to petition the superior court for an order to compel the arbitrator to grant the request to have a certified shorthand transcribe any deposition, proceeding, or hearing, and for an order to stay any deposition, proceeding, or hearing pending the court’s determination of the petition.

For more information, click here.

SB 1078 (Avoidance of Conflicts of Interest by Arbitrators) —- Effective January 1, 2017

Code of Civil Procedure section 1281.9 governs arbitration in civil proceedings and provides ethical rules for arbitrators, including the disclosure of all matters that could cause doubt as to the proposed neutral arbitrator’s impartiality. Currently, section 1281.9 requires the disclosure to include, among other things, whether or not the proposed neutral arbitrator has a current arrangement concerning prospective employment or other compensated service as a dispute resolution neutral with a party to the proceeding, or is participating in, or has participated within the last two years in, discussions regarding such prospective employment or service.

SB 1078 adds section 1281.65 to the Code of Civil Procedure, which prohibits an arbitrator, from the time of appointment until the conclusion of the arbitration, from entertaining or accepting any offers of employment or offers of new professional relationships. The bill also adds required disclosures an arbitrator must make in consumer arbitrations.

For more information, click here.

SB 1241 (Limitation on Choice of Law Provisions in Employment Contracts) —- Effective January 1, 2017

Current case law allows an employer and employee to specify that their employment and/or arbitration agreement will be governed by and decided under another state’s law, even when the employee lives and works in California. The enactment of SB 1241, however, now means that an employer is prohibited from requiring, as a condition of employment, that an employee who resides and works in California agree to a provision that would either require the employee to litigate or arbitrate employment disputes (1) outside of California, or (2) under the laws of another state. The only exception is where the employee was represented by legal counsel in negotiating the terms of an agreement. The bill provides that any contract that violates these provisions is voidable by the employee. A court may award an employee reasonable attorney’s fees, among other remedies, for enforcing rights under the act.

For more information, click here.

Worker Safety

SB 1167 (Extension of Heat Illness and Injury Prevention Standards to Indoor Workers) —- Effective January 1, 2019

Current law requires employers, with some exceptions, to establish, implement and maintain an effective Injury and Illness Prevention Program. In addition, employers in specified industries with outdoor workers must provide rest and recovery periods and take other steps to help prevent heat-related illnesses.

SB 1167 provides that the Division of Occupational Safety and Health shall propose to the Occupational Safety and Health Standards Board a standard that minimizes heat-related illnesses and injuries of indoor workers, such as warehouse and factory workers, by January 1, 2019. This bill is partially in response to a 2012 OSHA case where a staffing company and warehouse operated were fined for the heat-related illness of an employee working inside a metal freight container in over 100 degree heat.

For more information, click here.

State Disability Insurance Benefits

AB 908 (Paid Family Leave Expansion) —- Effective January 1, 2017, but benefits increases for periods of disability commencing on or after January 1, 2018

California’s State Disability insurance program (“SDI”) provides benefits to individuals who are unable to work because of their own illness or injury. The Paid Family Leave benefit is a part of the SDI program and provides up to six weeks of wage replacement benefits to workers who take time off work to care for a seriously ill or injured family member or to bond with a minor child with one year of birth or placement of the child in connection with foster care or adoption. Prior to AB 908, individuals were eligible to receive a wage replacement benefit of 55% of their base wages after a seven day waiting period through these programs.

AB 908 increases the benefits individuals may receive from SDI and Paid Family Leave for periods of disability commencing on or after January 1, 2018. As a result of AB 908, individuals will be eligible to receive either 60% or 70% of their base wages. If an individual earns less than 33% of the California average weekly wage, he or she will receive 70% of their base wages, whereas individuals who earn more will receive 60% of their base wages. Under the new law, the seven day waiting period for benefits is removed.

For more information, click here.

Workers’ Compensation

SB 1160 (Modification of Utilization Review Process for Workers’ Compensation)

California has a workers’ compensation system to compensate employees for injuries sustained in the course of employment. The law requires every employer to establish a utilization review process to determine whether a prescribed treatment by an injured worker’s physician is medically necessary. SB 1160 amends California Labor Code section 4610. These amendments ease the requirements of utilization review process within the first 30 days of a worker’s injury, and require that all utilization review process entities meet the best practices of the industry, such as accreditation by an independent, nonprofit organization to certify that the utilization review process meets specified criteria, a voluntary peer-to-peer process between doctors in the event of a medical dispute, and a prohibition on the use of financial incentives to deny or modify medical care.

For more information, click here.

AB 1643 (No Gender-Related Factors in Apportionment of Permanent Disability Conditions) —- Effective January 1, 2017

AB 1643 amends Labor Code section 4660.2 to prohibit apportionment of permanent disability, in the case of a physical injury occurring on or after January 1, 2017, from being based on gender-related conditions of pregnancy, menopause, osteoporosis, or carpal tunnel syndrome. The bill also prohibits apportionment of permanent disability, in the case of a psychiatric injury occurring on or after January 1, 2017, from being based on psychiatric disability or impairment caused by any of those conditions. For injuries on or after January 1, 2017, AB 1643 also mandates that the impairment ratings for breast cancer and the aftereffects of breast cancer will not be less than comparable ratings for prostate cancer and its aftereffects.

For more information, click here.

Welter Insight

California-based employers and out-of-state employers with employees in California should immediately review their policies, procedures, and practices to ensure compliance with the new laws, most of which will be effective January 1, 2017. Employers should also update any training provided to human resources personnel and managers to include these new employment law. California employers should consider conducting pay equity audits regarding wage differentials based on race and ethnicity in addition to gender.

California employers should also remain abreast of employment issues that were not enacted as new laws, but may resurface in 2017. One vetoed bill that will likely remain an issue for the legislature in 2017 was SB 654, which would have significantly expanded California’s parental leave by requiring employers with 20 to 49 employees to provide up to six weeks of unpaid, job-protected parental leave and paid health benefits to bond with a new child within one year of the child’s birth, adoption, or foster care placement. Another bill, SB 878, would have required restaurant, grocery, and retail employers to provide non-exempt employees with a 21-day work schedule at least seven days in advance of their first shift on that work schedule. It is likely that we will see a similar proposals in the coming year.

If you have any questions concerning any of these issues, we encourage you to contact a Welter lawyer in our California office.

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