Keeping up with the Californians: Part II

California workers protest for higher minimum wages.

If states are laboratories of democracy, some have experimented with a light touch when it comes to regulating issues such as wage-growth, pay equity and employee privacy. The idea is that less stringent regulation will create a climate that is friendly to business and will draw jobs to the states. 

California, on the other hand, is at the opposite end of the spectrum. It is at the vanguard of the national push for higher minimum wages and has created tough pay equity laws and some of the strongest worker privacy protections in the country. For employers operating in California, one thing is for certain—there are a lot of moving parts to keep track of.   

Chelsea Mesa and Andrew McNaught, California partners in Seyfarth Shaw’s Labor & Employment Department, presented June 16 on recent developments in California employment law. As mentioned in an earlier blog post—Keeping Up with the Californians: Part I—the presenters addressed the California Fair Employment and Housing Act as well as state disability and leave laws. Part II will cover updates on the California Fair Pay Act and developments in state wage-hour and employee privacy law.

Time for a Pay Analysis 

The California Fair Pay Act, effective January 1, represents “a significant expansion” upon existing laws prohibiting gender-based pay discrimination, Mesa said. Under this new law, employees can be comparators even if they don’t work at the same location or hold the same or substantially equal jobs. 

Employers have the burden to explain the entire amount of any pay differentials and to link the amount to permitted factors, such as seniority, merit, education, experience or geographic differences. For this reason, Mesa strongly recommends that employers “do pay analysis and work with statisticians [to] do this the right way so they can identify what the factors are that go into why a decision was made to pay an employee a certain amount and what we can do if there are adjustments that are necessary.”

Although there is no express obligation for employers to disclose wages under the Act, they may not prohibit employees from disclosing or discussing wages, Mesa noted. Further, the Act includes an anti-retaliation provision and, according to Mesa, it’s “one that I do feel like we’re going to see a lot of action on.” 

Equal pay claim record-keeping requirements also have been expanded from two to three years. However, employers should keep all wage-related records for at least four years, Mesa said.

Minimum Wage is a Relative Thing

It’s no secret that wages are on the rise in California. McNaught observed that raising the state minimum wage to $10.00 per hour on January 1 has had “ripple effects,” including an increase in the threshold for California’s white-collar exemptions, which are set at two times the minimum wage (currently $41,600). 

But even with this ripple effect, the California white-collar salary threshold for exemption is now lower than that required under the U.S. Department of Labor’s final rule on overtime exemptions (set at $47,476), which takes effect on December 1, he said. 

This situation is interesting because it’s “the reverse of how things usually are,” McNaught remarked. For this reason, he cautioned employers to make sure they are meeting not only state but also federal salary requirements for exempt employees. 

That’s not all. McNaught also mentioned that SB 3, signed by the Governor in April, schedules step increases to the state minimum wage depending on the number of employees, with rates capping out at $15.00 per hour in 2022 for employers with 26 or more employees and in 2023 for smaller employers. 

As with leave law, California’s cities have been incredibly active in setting their own minimum wages. San Francisco, for instance, will reach a $13.00 minimum wage by July 1. “There are actually approximately 30 different jurisdictions in California now that have their own local minimum wage ordinance or requirements, so make sure you’re paying attention not only to the state minimum wage and those increases . . . but also you’ve got to drill down on what jurisdiction you’re in,” McNaught said.

The Long Arm of Enforcement

Another key development the presenters addressed is the expansion of the California Labor Commissioner’s enforcement authority. The Commissioner now may enforce local overtime and minimum wage laws and may issue citations and penalties for violations thereof, McNaught said. 

Of all the various changes to enforcement authority, most significant is the Labor Commissioner’s authorization to file a lien on employers’ property in the state for unpaid wages, interest or penalties. 

Perhaps just as troubling to employers, the new Labor Code § 558.1 creates personal liability for “owners, directors, officers and managing agents” for violations of various code sections, including minimum wages, overtime and unpaid reimbursements. 

McNaught said the provision doesn’t specify a private right of action but likely is intended by the legislature to serve as another potential enforcement tool. “We’ll probably see as time goes on more steps in the direction of the legislature allowing personal liability on the part of high-level managing agents,” he said.

Employee Privacy

McNaught reminded employers that California has a constitutional right to privacy that restrains both public and private employers. In addition to other privacy protections such as limitations on employee drug testing and video surveillance, he noted that current “huge issues” include the proliferation of so-called “ban the box” ordinances, which limit or prevent employers from asking about applicants’ criminal history, and an uptick in cases brought under the Fair Credit Reporting Act related to limitations on the use of background checks and credit reports. 

What else should employers watch out for this year in the realm of employee privacy? McNaught suggested the Fair Employment Housing Commission’s proposed “Consideration of Criminal History in Employment Decisions Regulations,” which would significantly curtail or disallow the use of certain criminal history records.

Bloomberg Law® helps labor and employment law practitioners provide rapid, accurate and complete advice to clients by bringing together trusted, market-leading Bloomberg BNA content like Daily Labor Report® and treatises like Covenants Not to Compete: A State-by-State Survey and The Developing Labor Law, with a fully integrated, innovative legal research platform. Click here to request a free trial.