Minimum Wage Increases Timeline!

December 30, 2016

Under the new California law, the minimum wage will increase for employers with 26 or more employees as follows:

  • January 1, 2017 — $10.50 per hour
  • January 1, 2018 — $11.00 per hour
  • January 1, 2019 — $12.00 per hour
  • January 1, 2020 — $13.00 per hour
  • January 1, 2021 — $14.00 per hour
  • January 1, 2022 — $15.00 per hour

For employers with less than 26 employees, the minimum wage will increases will occur one year later on the following schedule:

  • January 1, 2018 — $10.50 per hour
  • January 1, 2019 — $11.00 per hour
  • January 1, 2020 — $12.00 per hour
  • January 1, 2021 — $13.00 per hour
  • January 1, 2022 — $14.00 per hour
  • January 1, 2023 — $15.00 per hour

After 2022/2023, the minimum wage will automatically increase by up to 3.5 percent based on CPI.

City of San Diego.

July 7, 2016, employers must pay covered employees at least $10.50 per hour for each hour worked in the City.  Effective January 1, 2017, the local minimum wage will rise to $11.50 per hour.  Beginning January 1, 2019, the minimum wage will be adjusted in accordance with the CPI.  In October of each year, the City will publish a bulletin announcing the adjusted minimum wage for the next year.

City the Los Angeles and unincorporated areas of Los Angeles County

This $10.50 hourly rate is an increase from $10.00 per hour for employers with 26 of more employees.  For employers with 25 or fewer employees, the minimum wage rate will not increase to $10.50 until July 1, 2017.  Thereafter, the minimum wage rate increases will following the below schedules:

For employers with 26 or more employees:

  • July 1, 2017: $12.00 per hour
  • July 1, 2018: $13.25 per hour
  • July 1, 2019: $14.25 per hour
  • July 1, 2020: $15.00 per hour

For employers with 25 or fewer employees:

  • July 1, 2018: $12.00 per hour
  • July 1, 2019: $13.25 per hour
  • July 1, 2020: $14.25 per hour
  • July 1, 2021: $15.00 per hour

Despite the identical minimum wage rate increase schedules, the City of Los Angeles and Los Angeles County wages ordinances include some differences.  For example, under the City of Los Angeles wage ordinance, it permits nonprofit organizations with more than 25 employees to apply for coverage under the small business schedule.  Additionally, by example, beginning in July 1, 2022, the minimum wage rate increases will be determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in the Los Angeles metropolitan area under the City of Los Angeles wage ordinance.  Under the Los Angeles County wage ordinance, increases will be determined by an adjusted CPI measure.

Happy New Year! I hope the year will bring success and prosperity (not to mention less frivolous allegations) to all!

No Criminal Background Checks Until…

December 29, 2016

On December 9, 2016, Los Angeles Mayor Eric Garcetti signed the “Los Angeles Fair Chance Initiative for Hiring,” the “Ban the Box” ordinance that bars certain City of Los Angeles employers from asking job applicants about their criminal history.  Ban the Box goes into effect January 1, 2017, and Los Angeles becomes the fifteenth locality in the nation to adopt it.  The ordinance will be codified as Article 9 to Chapter 18 of the Los Angeles Municipal Code.

This ordinance applies to all city contractors and private employers with ten or more employees who perform at least two hours of work on average each week within the geographical boundaries of the City of Los Angeles.  Some exceptions apply for fields such as child care and law enforcement.

In effect, employers may not have a “box” on job applications to seek information about a prospective employee’s criminal history.  However, once a conditional offer of employment has been made, the employer may assess an applicant’s criminal history.  Employers performing a written assessment shall, at a minimum, consider the factors promulgated by the United States Equal Employment Opportunity Commission (“EEOC”) as well as any other factors set forth by the rules or guidelines of the Department of Public Works, Bureau of Contract Administration (“DAA”) to evaluate and determine linking specific aspects of the applicant’s criminal history with the inherent risks in hiring the applicant.

If, following an assessment, an employer does not hire the employee, the employer may not fill the position for a period of at least five business days after the applicant is informed of the proposed adverse action.  During this period, the applicant may choose to engage in the Fair Chance Process whereby he or she may present any information for the employer’s consideration and the employer will complete a written re-assessment of the proposed adverse action against the applicant.  Following the re-assessment, if the employer sticks to its guns, then the employer shall notify the applicant of its decision and provide a copy of the written re-assessment.

Penalties and administrative fines for violations of this ordinance will be enforced by the DAA.  On July 1, 2017, monetary penalties of $500 for the first violation, up to $1,000 for a second violation, and up to $2,000 for third and subsequent violations will be in effect.  Prior to July 1, 2017, the DAA will issue written warnings to employers that will later be used to prove that employers were on notice of the new ordinance.

In addition, Ban the Box requires posting, notification, and record retention requirements.  And, employers now must state in all hiring advertisements that the employer will consider qualified applicants with criminal histories consistent with the ordinance.  Furthermore, employers are required to post a notice in a conspicuous place at every workplace, job site, or other location in the City of Los Angeles under the employer’s control and visited by job applicants.  The employer is also required to send a copy of the notice to each labor union with which the employer has a collective bargaining agreement.  Finally, employers are required to retain job applications, assessments, and any re-assessments for three years.  Violations of the positing, notification, and record retention requirements will result in fines up to $500 for each violation.

California Supreme Court: Rest Breaks…

December 27, 2016

The California Supreme Court issued a surprising and unfortunate decision in Augustus v. ABM Security Services, Inc., holding that employers cannot require employees to remain “on-call” during rest breaks, even though these short breaks are part of the employees’ paid hours worked.  The Court held that the same standard that applies to off-duty meal breaks applies to paid rest break time.  More specifically, California law requires that during unpaid, off-duty meal breaks, employees must be relieved of all duties and free from employer control as to how they spend their time.  The Court held that this is also true for paid rest break time and that an employer does not comply with this standard if it requires employees to remain “on-call,” i.e. vigilant and available for possible interruption during rest breaks.  This ruling results in the potential reinstatement of a $90 million verdict against the security company, whose security guards remained on-call during rest breaks and carried radios or other communication devices in the event they needed to return to work.  Even though the record showed that breaks were rarely interrupted and that this on-call requirement was tied to the nature of the work as a security guard, the Court held that the on-call requirement invalidated the rest breaks.

The Court reasoned:

Because rest periods are 10 minutes in length (Wage Order 4, subd. 12(A), they impose practical limitations on an employee‘s movement. That is, during a rest period an employee generally can travel at most five minutes from a work post before returning to make it back on time. Thus, one would expect that employees will ordinarily have to remain onsite or nearby. This constraint, which is of course common to all rest periods, is not sufficient to establish employer control. But now add to this state of affairs the additional constraints imposed by on-call arrangements. Whatever else being on call entails in the context of a required rest break, that status compels employees to remain at the ready and capable of being summoned to action. Employees forced to remain on call during a 10-minute rest period must fulfill certain duties: carrying a device or otherwise making arrangements so the employer can reach the employee during a break, responding when the employer seeks contact with the employee, and performing other work if the employer so requests. These obligations are irreconcilable with employees‘ retention of freedom to use rest periods for their own purposes.

In my humble opinion, the Court’s decision is unreasonable and impractical, and serves only to further the onslaught of shakedown lawsuits against California employers for alleged violations of meal and rest break laws.  A rest break is 10 minutes worth of time and it is paid.  Because rest break time is so limited, employees necessarily remain on the employer’s premises and subject to the employer’s control by virtue of remaining subject to the employer’s workplace conduct policies.  Simply being required to be available via cell phone (or some similar method of contact) during a rest break in case a work need arises does not mean that the employee cannot use the rest break time to “rest” or conduct personal business.  It just means that the rest break time might get interrupted on occasion.  Under the Court’s reasoning, the rest breaks are not valid rest breaks even if they are not, in fact, interrupted.  The mere requirement to remain available for interruption invalidates the rest break – even though the employee is being PAID by the employer for this time.  With all due respect Court, this is going too far — even in California.  Furthermore, the decision is contrary to precedent.  California Labor Code section 226.7 simply says that employees cannot be required “to work” during rest breaks.  It does not say that employees must be relieved of all duty and free from employer control.  Moreover, even if this was the standard, the California Supreme Court in Brinker v. Superior Court previously acknowledged that what may suffice to provide compliant breaks may vary from industry to industry and that an employer’s basic requirement is to provide employees a “reasonable opportunity” to take breaks.  Being required to remain on-call is not the same thing as being required to work (particularly on a factual record showing that that even though employees are on-call during rest breaks, their rest breaks are in fact rarely interrupted) and does not deprive employees of a reasonable opportunity to rest – particularly in the context of the security industry where guards commonly have idle time throughout the day.  The Court of Appeal agreed with this reasoning, but the California Supreme Court rejected it.  Justices Kruger and Corrigan thoughtfully dissented.

My opinions aside, the Court’s decision is of course now the law in California.  That means employers cannot have policies requiring employees to remain on-call (or to otherwise perform any work) during paid rest breaks.  Policies exerting other types of “control” over employees’ activities during rest breaks may also come under fire under this new decision.  One exception is requiring employees to remain on the premises – the Court appears to have acknowledged that this is still okay.

Now, let’s be clear about what the decision does not mean.  It does not mean that a rest break can never be interrupted or denied.  This can still happen.  You just can’t require your employees to remain “on-call” and available for interruption.  Of course, if you interrupt an otherwise valid rest break before the employee has completed the full 10 minutes or you tell an employee he or she cannot take a rest break due to work demands, you have to pay the employee one hour of pay for the missed break or, in the case of an interrupted break, allow the employee to re-start their rest break once the interruption is completed.

Update:California Employers & Exempt Status

December 19, 2016

This article was written by Art Silbergeld, a Labor & Employment partner and has been reprinted with the permission from the Los Angeles Daily Journal. We have still been receiving calls regarding the exempt status law that was to go into effect on December 1, 2016. See below for a detailed update.

California employers are directly affected by a decision of a federal district court in Texas enjoining the implementation of the Department of Labor (DOL) minimum salary guideline for employees. State of Nevada v. U.S. Dept. of Labor, 4:16-CV00731 (ED. TX, Nov. 22, 2016). This decision applies nationwide and will continue in effect until a final ruling modifying or reversing it on appeal. The appeal process, as well as the continued viability of the proposed regulation, may be impacted by the change in DOL administration in a manner that would invalidate the proposed regulation.

While the State of Nevada decision holds that the federal Fair Labor Standards Act does not authorize the DOL to set a minimum salary, California employers face a different set of issues.

Effective Jan. 1, 2017, the California minimum wage is $10.50. In order to qualify as an exempt employee in California, an employee must:

  1. Be compensated at two times the minimum wage;
  2. Be paid on a salary basis; and
  3. Under the decision in Ramirez v. Yosemite Water Co., 20 Cal. 4th 785 (1999), perform exempt duties more than 50 percent of the time.

The California compensation standard equates to an annual salary of $43,680. To avoid paying overtime and the risks of litigation for failing to do so, an employer must pay exempt employees that minimum effective Jan. 1, notwithstanding the ruling of the Texas court.

While it was expected that the California minimum salary for exempt employees would be subsumed by the higher federal standard ($47,476) in the DOL guidelines and that some significant number of exempt employees would be converted to hourly, the Texas decision eliminates that development. Most California employers now are expected to simply absorb the additional salary cost of exempt employees who were paid at exactly the minimum salary level under California law in 2016.

Next steps

In deciding how to proceed, an employer might look at a hypothetical. Assume that an exempt employee now making the minimum salary of $41,600 must be paid $2,080 more in 2017, in order to continue meeting the minimum salary standard. If the employer converts that employee to an hourly employee, the employee would earn $15.75 for every overtime hour worked in a day or for every hour over 40 per week (and double time for working more than 12 hours in a day). Given these factors, the employee, now paid on an hourly basis, would have to work 132.06 hours of overtime in 2017 before the cost of converting the employee to hourly would exceed the increase in annual salary if the exempt status were retained.

Alternatively, assume that an exempt employee is paid a salary halfway between $41,600 and $43,680. The cost of maintaining that employee’s exempt status is only half of the $2,080 increase. Converting that employee to hourly might not be cost effective: At the new hourly overtime wage of $15.75, the employee would only need to work 66.03 hours before the cost of converting the employee would exceed the increase in annual salary were the exempt status retained. The closer the salary of an exempt employee gets to $43,680, the fewer overtime hours that individual needs to work in order to make the employer’s decision to covert an employee to hourly status counter-productive.

Since most employers in 2016 and before did not require exempt employees to record their actual hours of work, many employers will not be able to determine with precision the cost/benefit of converting a California employee to hourly status. Accordingly, a more senior supervisor or manager should observe each exempt employee’s actual hours of work throughout December 2016, focusing on those earning between the 2016 minimum of $41,600 and the 2017 minimum of $43,680.  The observation and report to human resources may assist the employer in deciding whether to convert or to bear the salary increase as of Jan. 1. If an employer decides to convert an exempt employee to hourly status, it must provide a thorough orientation to the time recordation procedures. Moreover, the employer must ensure that the itemized pay statement requirements of California Labor Code 226(a) are met in order to avoid future litigation and liability.

It is difficult to determine how many employees might be impacted by a mass conversion from exempt to hourly. According to the Social Security Administration, the average net compensation of American workers was $46,119 in 2015. Exempt employees are a small percentage in the average workforce, suggesting that most exempt employees earn well above the minimum salary. If the same small percentage applies to any specific company’s California workforce, that employer will have fewer employees to evaluate for possible conversion.

Deciding how to address the impact of compliance with the new minimum exempt salary requires special care. An exempt employee earning $41,600 at the bottom of the narrow range who is converted to hourly could, in theory, earn more in 2017 than an exempt employee earning $43,640 at the top of the range or more, creating morale problems. Moreover, converting employees from exempt to nonexempt status may itself be demoralizing, creating its own tensions.

Additionally, converting some employees in a job classification and not others potentially presents serious legal issues. And an employee’s compliance with the employer’s daily time recordation practices often creates issues that result in individual or class action wage litigation, the costs of which far outweigh the benefits of converting exempt employees to hourly status. You should of course consult your labor counsel before embarking on any changes.

New Laws and Other Updates

December 12, 2016

The Los Angeles City Council has approved a ban the box ordinance that would bar employers with ten or more employees from asking about criminal history on a job application.  The ordinance would still permit employers to inquire about criminal history after a conditional job offer has been made, but not beforehand. The Ordinance is not final yet, and is being reported that the Council is going to vote on it again because the first vote was not unanimous (there was a lone dissenter).  However, it is expected that the Ordinance will be finally approved and will take effect early next year.  We will keep you posted of developments in this regard.

The Department of Labor filed an appeal from the Texas district court order enjoining the new overtime exemption rules.  The appeal is pending before the Fifth Circuit Court of Appeals, and the DOL has asked for an expedited briefing schedule (which may or may not be approved).  It is difficult to predict how long it will take for the appellate court to resolve the appeal or how the court ultimately will rule on the merits.  However, it is highly unlikely that anything substantive will happen before the Trump administration takes over next month.  At this point, it appears more likely than not that the rule fares little chance of revival.

Next, San Francisco employers are reminded that the City’s Paid Parental Leave Ordinance takes effect January 1, 2017 for employers with 50 or more employees and requires these employers to provide partial wage replacement for employees taking leave to bond with a new child under California’s Paid Family Leave program.  The Ordinance will apply to employers with 35 or more employees on July 1, 2017, and to employers with 20 or more employees as of January 1, 2018.  The San Francisco Office of Labor Standards Enforcement has issued proposed rules detailing and clarifying the Ordinance’s requirements. Employers with employees working in San Francisco should familiarize themselves with the proposed rules.

New I-9 Form Effective January 1, 2017

December 5, 2016

Yes, believe it or not, there is now another new I-9 form. On November 14, 2016, United States Citizenship and Immigration Services (“USCIS”) published a revised version of Form I-9, Employment Eligibility Verification (“Form I-9”).

Established by the Immigration Reform and Control Act (“IRCA”), Form I-9 is used to verify the identity and employment authorization of all individuals, including U.S. citizens, hired for employment in the United States. All U.S. employers, regardless of size, must ensure proper completion and retention of Form I-9 for each new employee hired after November 6, 1986.

Beginning on January 22, 2017, employers must only use the revised Form I-9 version dated November 14, 2016. USCIS has allowed a grace period through January 21, 2017 when employers may continue to use the Form I-9 version dated March 8, 2013. The new form may be found on the U.S. Citizenship and Immigration Services website.

Generally, the revisions made to Form I-9 were designed to make it more user-friendly, to reduce errors and to enhance form completion using a computer. Some of the most notable changes include:

  • Informational prompts are included on the form;
  • Employees only need to provide “other last names used” in Section 1, Employee Information and Attestation, rather than all “other names used”;
  • The employee certification in Section 1 is streamlined for certain foreign nationals;
  • There is an addendum page to enter multiple preparers and translators, when applicable; and
  • In Section 2, Employer or Authorized Representative Review and Verification, there is a dedicated area to enter additional information that employers have previously been required to notate in the margins of the form.

Further enhancements were made to the Form I-9 that will appear when completing it electronically on a computer. Users will see:

  • Checks to certain fields to ensure information is entered correctly;
  • Drop-down lists and calendars;
  • Instructions on the screen that users can access to complete each field; and
  • Buttons that will allow users to access the instructions electronically, print the form, and clear the form to start over.

The Form I-9 instructions have been updated to include a field-by-field guide to completion, and to address common issues that arise during completion. The revised instructions have also been separated into a distinct document from the revised Form I-9, in line with USCIS’ general practice.

While USCIS has indicated it will soon issue a revised M-274, Handbook for Employers, Guidance for Completing Form I-9, it has yet to do so. In the meantime, USCIS refers users to the revised Form I-9 instructions, found on its website for the most up-to-date information.

Notably, the list of acceptable documents that the employee may present in order to establish identity and employment authorization remains the same. 

While the Form I-9 may seem relatively straightforward to employers, its completion can be complex and the rules surrounding it constantly evolve, which leads to large fines and other penalties for not completing and retaining the forms correctly.

For this reason, we recommend reaching out to the professionals when or if you have any questions regarding the new form.

Note: You only have to use the new form for anyone hired after January 1, 2017.