California has one of the most proactive legislatures in the nation with respect to labor and employment matters. The coming year will bring several significant changes, new laws and obligations of which businesses with California operations should be aware. We hope you find the below summary informative and look forward to working with you to ensure compliance as you move into 2014.

Increased Minimum Wage

Effective July 1, 2014, the minimum wage will increase to $9/hour. It is likely that municipalities with living wage ordinances (such as San Francisco) will raise their minimum pay requirements as well. This also means that the minimum salary rate required to preserve exempt status will increase as of July 1, 2014. Because exempt employees must be paid at least twice the minimum wage, the minimum monthly salary will rise to $3,120 (a 2.9 percent increase). Because many employers review compensation only annually, this required mid-year increase may pose operational challenges.

Immigration Status Irrelevant to Wage Rights

AB 263 and SB 666 create new rights for employees to complain about unpaid wages free from retaliation, and the bills establish penalties of up to $10,000 per violation, regardless of immigration status. Employers also are prohibited from retaliating against employees who provide information or testimony to any investigative body or at hearing. Significantly, the bills also specify that an employee need not exhaust administrative remedies to enforce a Labor Code provision unless the provision at issue specifically requires exhaustion.

AB 263 further provides that no employer may engage (or direct another to engage) in an unfair immigration practice (such as requesting additional documentation, using E-Verify when not authorized, threatening or filing police reports, or threatening to contact immigration authorities) in retaliation for an employee's exercise of any right under the Labor Code. There is a rebuttable presumption that, if any employer engages in any such conduct within 90 days of an employee's protected Labor Code activity, such conduct is retaliatory. Prevailing employees are entitled to seek equitable relief, damages, and penalties, and to recover attorneys' costs and fees.

SB 666 subjects an employer's business license to suspension if the employer has been found to have violated these new provisions (balancing harm to employees via the suspension and the employer's good-faith efforts to resolve any alleged violations of the Code). The legislators specifically addressed the possibility of employers using counsel for an improper purpose by also subjecting attorneys to suspension if they threaten to or do report any suspected immigration issues to the authorities regarding a witness or party to a civil or administrative action (or that person's family member) because the witness/party has exercised a right related to his/her employment.

Farm Labor Successor Liability for Wage Violations

This new provision indirectly provides further protection for immigrant workers by holding successor farm labor contractors responsible for unpaid wages and penalties of their predecessors, if the successor entity: (1) uses substantially the same facilities or workers to provide substantially the same services; (2) meets successor standards as to ownership, control of workforce, management of business and interrelations between operations with the predecessor entity; (3) employs a manager who directly or indirectly controlled the wages, hours or working conditions of the employees owed wages or penalties by the predecessor; or (4) is an immediate family member of any owner, partner, officer, licensee or director of the predecessor or of anyone having a financial interest in that entity.

Liability for Wage Violations Now Includes Double Damages

AB 442 expands the potential liability for minimum wage violations to include liquidated damages equal to the wages that should have been paid to the employee(s). It will be codified at Labor Code Sections 1194.2 and 1197.

Liens Against Employer Property Available Without Entry of Judgment

Revised Section 98.2 of the Labor Code will make it simpler for employees to collect damages awarded via a Labor Commissioner ruling by allowing a lien against an employer's real property that will remain for up to ten years (or until satisfied or released). The impact of this is that the process no longer requires court-entry of a judgment against an employer before enforcement efforts may commence. Thus, a lien might be applied against an employer's property before the Company has even received notice of the Commissioner's order.

General Prohibition Against Employer Recovery of Defense Costs in Wage Claims

Amended Labor Code Section 218.5 now states that an employer may not recover defense costs unless it proves an employee's claim for unpaid wages was brought "in bad faith." From a practical standpoint, this simply codifies the general reality of most California proceedings.

Change to Pre-Employment Inquiries Regarding Criminal History

California employers were not previously allowed to ask about arrests or detention that did not lead to conviction, or that led to diversion or involved older marijuana convictions. With the new amendments to Labor Code Section 432.7, California employers may not ask applicants to disclose (or use as a factor in any employment decision) information concerning a sealed or judicially dismissed conviction, with the following exceptions: (1) if the employer is required by law to obtain such information (for example, for licensing or regulatory reasons); (2) if the applicant will possess or use a firearm in the course and scope of employment; (3) if the applicant is otherwise ineligible for the position; and (4) if the employer is prohibited by law from hiring an applicant who has been convicted of a crime. The exceptions are narrowly tailored and will likely be difficult to defend. This amendment continues the trend of restricting use of prior criminal records for employment decisions, and it warrants taking a closer look at hiring practices and the use of background checks.

Military Service and Veterans Status Formally Become Protected Classes

AB 556 formally adds military service and veterans status to the Fair Employment and Housing Act as protected classes. However, it also states that "Nothing in this section shall be interpreted as preventing the ability of employers to identify members of the military or veterans for purposes of awarding a veteran's preference as permitted by law." (Emphasis added.) Because the "law" in this arena is typically related to government contractor status, and the EEOC has opined that veteran preferences can have a disparate impact on women, this legislation is likely to place further scrutiny on hiring standards and language in employment applications.

Paid Family Leave Expands

The family disability wage replacement program operated by California's Employment Development Department will, effective July 1, 2014, expand its definition of "family" for the purpose of wage replacement eligibility to include grandparents, grandchildren, siblings and parents-in-law who are seriously ill. Notably, this program offers only wage replacement; it does not create an employee leave or reinstatement right where such would not otherwise be available under state or federal law or employer policy.

Leave of Absence for Volunteer Firefighters, Peace Officers, Rescue Personnel

Via AB 11, employers with 50 or more employees must allow an employee who serves in any of the above capacities to take a temporary leave of absence for the purpose of providing such services.

Time Off for Victim Testimony and Reasonable Accommodation for Stalking Victims

Employers may not take adverse action against "victims" of certain crimes who take time off to appear in court to be heard at any proceeding concerning the rights of the victim, provided reasonable notice is given. "Victim" includes the employee, spouse, parent, child, sibling or guardian. The subject crimes include those involving death, acts of violence sexual assault, as well as solicitation for murder and stalking. The bill specifically lists police reports, court orders and medical documentation as forms of proof that the employer may consider to justify the absence. These changes will appear as amendments to Labor Code Section 230.5.

Revisions to Labor Code Sections 230 and 230.1 require employers to engage in an interactive process to explore reasonable accommodations to provide safe workplaces for victims of stalking, domestic violence or sexual assault. As with accommodation analyses in other contexts, employers must grant such accommodations, barring undue hardship. The obligation is triggered by an employee's disclosure of his/her victim status. The employer may require certification of victim status for the reasonable accommodation. Some careful balancing will be required to comply with this statute while still honoring individual employee privacy rights.

Harassment Does Not Require Desire

As of January 1, 2014, employees alleging sexual harassment need not show it was motivated by sexual desire. This means that sexually offensive statements or gestures could form the basis for harassment charges where they previously would not have.

"Recovery Periods" Added to Break Provisions

Labor Code Section 226.7 has been further expanded to prohibit work during "recovery periods," which are defined as cooling-down periods offered to help employees prevent heatstroke. The new provision does not specify parameters for such "recovery periods," but we anticipate that these factors will come soon.

Overtime for Home Health Workers

This legislation is also known as the "Domestic Worker Bill of Rights" and it applies to home health care workers. AB 241 requires that overtime compensation be paid for all hours worked over nine in one day or 45 hours in one week. This new legislation will be codified in California’s Labor Code, starting at Section 1450.

Increased Car Wash Bond Requirements

Effective January 1, 2014, via AB 1387, car wash operators must post a bond of $150,000 (up from $15,000) to cover potential wage violations, unless the employer has a collective bargaining agreement in place that expressly establishes working conditions and includes a dispute resolution process. The legislation will appear as an amendment to Labor Code Section 2055.

San Francisco Health Care Security Ordinance Rates for 2014

The rates for 2014 are $2.44 per hour for employers with more than 100 employees; $1.63 per hour for employers with 20–99 employees.