California Corner
2017 California Legislative Update

December 22, 2016

The California Legislature and Governor Jerry Brown were busy in 2016. The state legislature sent 1,059 bills to Governor Brown to sign, and he signed 898 of them, leaving him with a veto rate of about 15 percent. Of the 898 bills that he signed, many will directly affect California employers and employees. Below is a summary of some of the key employment-related legislation that will go into effect in 2017.

Forum Selection Clauses and Choice of Law Provisions in Employment Contracts Are Voidable (Effective January 1, 2017)

SB 1241 adds Labor Code Section 925, which prohibits employers from requiring employees who primarily reside and work in California to sign forum selection or choice of law provisions as a condition of employment. The law applies to claims that arise primarily in California and to agreements entered into, modified, or extended on or after January 1, 2017.

Any provision of a contract that violates the new law is voidable by the employee. Thus, if a California employee signs an agreement containing either a forum selection clause that designates a forum outside of California or a choice of law provision designating a law other than California law, those provisions are not enforceable unless the employee agrees to them during the course of the subsequent lawsuit, and the employee can recover attorneys’ fees regarding the dispute over such provisions. Nonetheless, the law does permit an exception for employees who are individually represented by counsel while negotiating employment contract terms and conditions. In other words, when negotiating an employment agreement for a high level management position, it would be advantageous to have the signature of the employee’s attorney on the agreement, or a similar attestation if possible, to have an enforceable forum selection clause or choice of law provision.

Fair Pay Act Protections Expanded to Prohibit Wage Discrimination on Account of Race and Ethnicity And To Limit The Use of An Employee’s Prior Salary History (Effective January 1, 2017)

The Fair Pay Act, which became effective last year (January 1, 2016), prohibits an employer from paying any of its employees at wage rates less than the rates paid to 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, unless the employer demonstrates that specific, reasonably applied factors account for the entire wage differential.

SB 1063 amends Labor Code Sections 1197.5 and 1199.5 to expand the Fair Pay Act’s protections to employees who are paid less than other employees of another race or ethnicity.

AB 1676 modifies the Fair Pay Act by prohibiting an employer from using an employee’s prior salary, by itself, to justify any disparity in compensation.

Employers Prohibited From Asking Applicants About Criminal History While a Juvenile (Effective January 1, 2017)

Two bills limit an employer’s ability to inquire about an applicant’s criminal history while the applicant was a juvenile.  AB 1843 amends Labor Code Section 432.7 by prohibiting employers from asking applicants to disclose information concerning or related to “an arrest, detention, process, diversion, supervision, adjudication, or court disposition that occurred while the person was subject to the process and jurisdiction of juvenile court law.”  That means that even crimes of murder, rape, or mayhem may not be disclosed to an employer if those crimes were adjudicated by a juvenile court of law.

Similarly, AB 1843 prohibits employers from seeking from any source, or using as a factor in determining any condition of employment, any record concerning or related to an arrest, detention, processing, diversion, supervision, adjudication, or court disposition that occurred while a person was subject to the process and jurisdiction of a juvenile court law.

Minimum Wage Increases (Effective January 1, 2017)

SB 3 increases California’s minimum wage each year on January 1, from 2017 to 2022, for employers with 26 or more employees (or 2018 and thereafter for employers with fewer than 26 employees). Beginning January 1, 2017, the state minimum wage for employers with 26 or more employees will be $10.50 per hour. Because most exempt employees in California must earn no less than 2 times the state minimum wage for full-time employment (defined as 40 hours per week) to be exempt, employers with 26 or more employees must pay their exempt employees at least $3,640 per month ($43,680 annually) to maintain those overtime exemptions.

All-Gender Bathrooms Required (Effective March 1, 2017)

Effective March 1, 2017, business establishments are prohibited from labeling any “single-user toilet facility” as either “male” or “female.” AB 1732 defines “single-user toilet facility” as a “toilet facility with no more than one water closet and one urinal with a locking mechanism controlled by the user.” The law authorizes inspectors, building officials, or other local officials responsible for code enforcement to inspect for compliance with these provisions during any inspection.

Employers Required to Provide Written Notice of Domestic Violence Leave and Accommodation Rights (Effective July 1, 2017)

Pursuant to AB 2337, employers with 25 employees or more must provide written notice of the time off and accommodation rights afforded by Labor Code sections 230 and 230.1 to victims of domestic violence, sexual assault and stalking. The written notice must be provided to all new employees and any current employee upon request. The law also requires that, on or before July 1, 2017, the Labor Commissioner shall develop a form that employers may elect to use to comply with these provisions. Employers are not required to comply with the notice requirement until the Labor Commissioner makes such form available to employers online.

Employers Not Required to List “Total Hours Worked” on Itemized Wage Statements for Certain Exempt Employees (Effective January 1, 2017)

Existing law requires that employers provide employees written, itemized wage statements containing the nine pieces of information specified in Labor Code Section 226, which includes stating the “total hours worked.” AB 2535 clarifies that itemized wage statements need not state the “total hours worked” for any employee who is exempt from overtime by any applicable Wage Order, including outside sales representatives, computer professionals, and other exemption categories.

Employers Required to Post Bond Before Contesting Citation for Failure to Pay Minimum Wage (Effective January 1, 2017)

AB 2899 amends Labor Code Section 1197.1 by requiring an employer to post a bond before appealing a Labor Commissioner’s citation for failure to pay a minimum wage. The employer must post the bond with the Labor Commissioner in an amount equal to the unpaid wages assessed under the citation (excluding penalties). The bond must also be issued in favor of the unpaid employee, as it will be forfeited to the employee if the employer loses the appeal, withdraws the appeal, or settles the dispute and fails to pay the amounts owed within the time periods specified in the statute or settlement agreement.

New Unlawful Employment Practice Related to Immigration and Work-Authorization Documents (Effective January 1, 2017)

SB 1001 adds Labor Code Section 1019.1, which makes it an unlawful employment practice (1) to request more or different documents than required under federal law; (2) to refuse to honor documents tendered which on their face reasonably appear to be genuine; (3) to refuse to honor documents or work authorization based on specific status or terms that accompanies the authorization to work; or (4) to attempt to reinvestigate or re-verify an incumbent employee’s authorization to work using an unfair immigration-related practice.

Job applicants and employees who suffer any of these unlawful practices may file a complaint with the Division of Labor Standards Enforcement. The applicant or employee, or the Labor Commissioner, may recover a penalty of up to $10,000 for violation of this statute.

Tougher Cell Phone Restrictions While Driving a Vehicle (Effective January 1, 2017)

AB 1785 amends Vehicle Code Section 23123.5 to prohibit anyone from operating a cell phone, or similar device, while driving a motor vehicle unless the cell phone is used in a voice-operated and hands-free mode. Additionally, a driver may use his or her hand to operate a cell phone while operating the vehicle only if both of the following conditions are met: (1) the cell phone is mounted on a windshield, dashboard, or center console in a manner that does not hinder the driver’s view of the road; and (2) the driver’s hand is used to activate or deactivate a feature or function “with the motion of a single swipe or tap of the driver’s finger.” Violations are subject to a $20 fine for the first offense and a $50 fine for each subsequent offense.

Case to Watch --> Christopher Mendoza v. Nordstrom, Inc.

In Mendoza v. Nordstrom, Inc., the former employee accuses Nordstrom of violating California labor law by permitting employees to work seven or more days in a row. The case is pending in federal court, and the Ninth Circuit has asked the California Supreme Court to answer three questions:

(1) California Labor Code section 551 provides that “[e]very person employed in any occupation of labor is entitled to one day's rest therefrom in seven.” Is the required day of rest calculated by the workweek, or is it calculated on a rolling basis for any consecutive seven-day period?

(2) California Labor Code section 556 exempts employers from providing such a day of rest “when the total hours of employment do not exceed 30 hours in any week or six hours in any one day thereof.” Does that exemption apply when an employee works less than six hours in any one day of the applicable week, or does it apply only when an employee works less than six hours in each day of the week?

(3) California Labor Code section 552 provides that an employer may not “cause his employees to work more than six days in seven.” What does it mean for an employer to “cause” an employee to work more than six days in seven: force, coerce, pressure, schedule, encourage, reward, permit, or something else?

Most California employers have operated under the assumption that they could assign work to employees for seven or more consecutive days so long as they paid the overtime premiums mandated by the applicable Wage Orders. For example, an employee who worked on the seventh consecutive day of a workweek was presumed to be entitled to overtime for the first eight hours worked on the seventh day and double time for any additional hours worked (in excess of eight hours) on the seventh day.

The plaintiffs in Mendoza have challenged that assumption and postulate that any work on the seventh consecutive day constitutes a violation of the Labor Code, which triggers penalties under the state Private Attorneys General Act. We do not expect a ruling on this issue before 2018; however, the implications of the Court’s decision will be significant for California employers, and employers may want to review their seven-day work practices to determine whether to avoid or reduce such schedules before a decision is issued. Stay tuned.

The case is Christopher Mendoza v. Nordstrom Inc., Case No. S224611, pending before the California Supreme Court.

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