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Its The Law

The state legislature seems to be working overtime to write, revise, refresh and get bills passed that secure the trend toward better pay, benefits, equality and hiring practices for employees—which could be bad news for employers. Currently, five new pieces of legislation have been working their way through the state legislature this year and are at various stages of approval or revision.

These bills aim to correct inequities or improve conditions for certain employees and applicants including women, non-exempt employees, people with criminal records, and families needing time with new babies or other immediate family. Most of them are not new, but “upgrades” designed to expand the protective measures in bills are already on the books to adjust these inequities. If you’re an employee, you’ll be happy to see any of these bills passed and the principles they represent preserved.  If you’re an employer, you may agree or disagree with the intentions or provisions of the bills, but you’ll be concerned about how to stay abreast of compliance.

 Here’s a brief overview of the bills and advice from attorneys whose practices center around employer-employee legislation.

Why so many bills?

Valorie Bader is an attorney with Spaulding, McCullough & Tansil LLP, whose expertise includes evaluating current employer-employee practices, identifying risks and developing compliance strategies for North Bay employers. Why are so many new bills proposed that address issues when there is legislation already on the book? Lawmakers are responding to individual situations that arise and not the bigger picture, she says.

“The legislature has seen fit to respond to every newsworthy employment situation, even if it means punishing all employers for one bad apple. Although lawmakers mean well, employers struggle to keep up with changes from new laws, in addition to trying to run a business. Most employers do their best,” she says. This may sound like a recipe for a nightmare, but if we look at a few of the new bills that are in various stages of approval or revision, we start to see that the intention behind the various bills is not to make it harder for employers (though it might), but to make it fair for employees.

AB 1565: Increased salary threshold

Bader points out that some new laws limit employers’ ability to be flexible with their employees. And with a new administration, some federal laws that were in effect are now uncertain. For example, the minimum yearly salary that an exempt employee must earn under federal law to qualify for the exemption from overtime and other protections such as meal and rest breaks, was implemented under the old administration effective December 2016. Many employers raised their exempt employees’ salaries to comply with the federal increase, only to learn that the new administration rescinded the increase immediately on taking office in January. These employers have to face a difficult decision: Do they return to the previous salary level, as the new executive order would allow? Or, do they retain the level adjusted by the previous administration?

Gina Roccanova, a partner at Meyers Nave, chair at the Labor and Employment Practice Group, provides counseling, advice, training and defense of clients on a panoply of California and federal legal requirements around employment. She acknowledges that employers complain about doing business in California, but California is like a different world. “California is not like any other state in terms of the number, scale and breadth of employee protections,” she says. “And yet companies keep coming here to do business because it’s where the people are.”

We will keep that in mind, when looking over five of these new bills, and suggest that employers keep an eye on them as they go through their process and become revised, passed or tabled.

AB 1008: The Fair Chance Act.

In 2013, the state passed a Ban the Box law, which would eliminate the check box asking if you have a criminal record in order to help eliminate employer discrimination of people with criminal records. AB 1008 would prohibit an employer from including any question about a possible criminal record on the employment application form and also prohibit an employer from asking an applicant about a possible criminal record until a job offer has been presented and would impose a process for informing the applicant.

Assembly member Kevin McCarty, who drafted the bill with four others, says the bill gives people a shot out of the gate. The motivating idea is that in California, where one in three working-age adults have an arrest or conviction record, the research shows that more than half of the people who do their time, pay their debt to society and can’t find a job. They end up back to jail.

However, only 16 percent of people who find and stay in jobs after completing their time go back to jail. “We want to give people a fair chance in the initial stages of employment,” says McCarty. “We spent a lot of time working with the business community,” says McCarty. “We had about 50 business groups lined up for our first hearing, opposing us, including the California Chamber of Commerce, and we worked with them for many months to come up with something doable.”  They made it easier for employers to notify an applicant if they would not be accepted, which was one of the more onerous parts of the bill. “We got them to move their opposition. I’m really proud of that.”

What’s the process when a criminal record turns up after an offer has been made? “The law doesn’t require an employer to hire anybody,” says Gina Roccanova. “It provides an order and a process under which you can inquire and consider the information.” All employment issues are important but this one may have an additional edge as lives, not just livelihoods may be at stake.  But is there a risk for employers? “With additional legislative requirement, there’s always the risk of a lawsuit,” says Roccanova. “We’re in a litigious society. What I think employers have to be concerned about is getting the right process. They have less to fear about having to hire people they don’t want, than about getting the right process.”

AB 1565: Overtime bill

This bill increases the salary threshold to $47,472 for white-collar exempt employees. That means if an upper level manager, a director-level person, is not earning twice the state minimum wage, they’re not exempt. A person who is exempt does not qualify for overtime. A person who is non-exempt must get overtime if extra hours are worked. The purportedly exempt person, to truly qualify, would have to receive a raise if they don’t meet the salary requirement. If not, and they’re an hourly, non-exempt employee, they must get overtime for any extra hours they work.

“Philosophically, this gets back to the state’s paternalistic way of looking at employee classifications,” says Gina Roccanova. “These categories were developed in the Industrial Age, where you had the manager, and people on the factory floor. The people on the factory floor were being abused, being made to work long hours and being deprived of using the rest room.

That led to these rules. For example, you have to give employees breaks and pay them extra if you’re going to make them work longer than eight hours in a day. You can’t work employees seven days a week, 12 to 15 hours in a day.” According to Roccanova, there’s an assumption that everybody is better off being nonexempt, but that’s not necessarily true. The legislature has continued to err on the side of the protection of employees.

AB 63: New Parent Leave Act

Under existing law, an employer must grant female employees a reasonable leave for pregnancy, childbirth or related medical condition of up to four months. This bill applies to employers with more than 20 employees within 75 miles and employees with more than 12 months service and at least 1,250 hours of those within the last 12-month period. The employer must also maintain and pay for a group health plan for an employee who takes that leave. AB 63 would allow the employer to recover insurance costs under specific circumstances. Existing law (California Family Rights Act (CFRA) already grants any eligible employee three months unpaid protected leave for: 1) arrival of child (born, adopted or fostered); 2) necessary care for employees parent or spouse; or 3) employee’s own health renders him or her unable to perform the job. Bader sees this bill as particularly onerous for small employers. “The law currently requires employers with five or more employees to allow any pregnant employee who is disabled by her pregnancy up to four months of leave with paid medical insurance,” says Bader. “This bill would extend additional leave to employers who are new parents to employers with 20 or more employees. (Currently, this bill applies to employers with 50 or more employees.) These employers would be required to hold jobs open and continue paying the employer’s portion of health insurance for new parents (both men and women) for up to three months.”

If this new law passes, an employer with only 20 employees may be obliged to hold open a job with health insurance for up to seven months, as combined pregnancy disability leave and new parent leave. Bader suspects this type of law impedes economic growth, since it discourages most employers from adding onto their payroll beyond 19 employees simply to avoid the hassle.

AB 1209: Gender pay differentials

According to the Legislative Counsel’s Digest, this requires an employer with 500 employees to file a statement of information with the Secretary of State in California, specifying information on gender pay differentials. This includes the difference between the mean salaries of male exempt employees and female exempt employees by each job classification or title, and the difference between mean compensation between male and female board members. “This means if you have 500 or more employees, you must file a report with the Secretary of State,” says Bader. The report shows how the salaries and benefits of male and female employees and board members compare, and will publicize the information on a public website.

AB 168: Salary History

Two years ago, the Equal Pay Act was amended and changed to the Fair Pay Act. Under the act, restrictions required that pay had to be equal for both a man and woman for the same position in the same location. It was amended to mean you could look at a broader set of circumstances. One of those circumstances was the employee’s previous salary, which may have been lower (because the employee was a woman or other minority) than the pay scale for that job. Now, as Bader explains, this bill is an amendment to existing law, which prohibits an employer from paying women or minorities less than a man for similar work. The amendment provides that no female or minority applicant is required to disclose past salary information. “The new bill is meant to avoid a new employer perpetuating past discrimination by offering the same wages of a former employer who underpaid their female and minority employees,” says Bader. (AB 168 and AB 1209 serve to tweak additional requirements onto an existing law.)

“The intention behind this bill is to try to chip away at the historic and persistent under-compensation of women,” says Christian Burkin, spokesman for Assemblymember Susan Eggman, who drafted the bill. “The effect on employers is that they’ll have to pay women more,” he says. “They can’t low-ball women because they’re under-compensated in another job because she’s a woman, or because she’s been in a job that’s historically under-compensated because it’s seen as a woman’s job.” For example, if employers have a job and the pay scale indicates $50 an hour, they must offer that to a women who qualifies, regardless of what she may have been earning before.

Is this necessary? Statistics show that women are paid roughly 75 cents to the dollar, within the same job description, says Burkin. In addition, they tend to be in jobs that are historically paid less. Asking for their salary history perpetuates the inequity. “People who oppose the bill do so because they expect it will force employers to pay employees more,” says Burkin. “This is fairly direct evidence that they’re paying women too little, and they know it.”

Employer advantages

Using the example of the Salary History bill, Roccanova says there’s a certain advantage to be considered. “The most immediate advantage to not asking that question is risk management,” she says. “If you have a practice of basing salary offers on previous salary history, that could show up in a disparate impact suit or a challenge under the Equal Pay Act.” For example, if you compare your men’s salaries and women’s salaries, or salaries of white employees vs. your Latino or African American employees, and find a disparity, the lesser-paid employees can take the employer to court. If that happens, the employer would have to put together a defense showing that the disparity was job-related.  “That’s not something you want to deal with as an employer,” says Roccanova. Nevertheless, compliance with this law could be tricky for small businesses. “If you’re an employer with a chain of small retail stores, and you only have a few employees in each location, the law makes it a lot harder to justify disparities in salaries based on location and cost of living,” says Roccanova. “Small businesses don’t typically have the resources, the funds, or the time to do proper analyses,” she says. “They risk overlooking details, making mistakes and then having to defend against a lawsuit when they do not comply.”

The bottom line: compliance

 How do employers stay compliant? “That’s the perennial question,” says Gina Roccanova.  She advises joining the local Chamber of Commerce. “They have a terrific desk reference, and they keep their members up to date.” She also suggests joining the Society for Human Resource Managers (SHRM), which she says keeps their members apprised of new legislation, new requirements and new case law. “It’s important to have some source of information that you can subscribe to, and stay up to date. You can have legal counsel on hand or some other resource because these are tricky requirements sometimes, and it’s hard to figure out what applies, what doesn’t apply.” Just staying up to date on which laws apply to how many employees is a challenge, she says. “Some laws apply to employers that have five employees. Some apply to those who have 25, 50 or more, and it is no joke trying to keep up with that.”