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How the New California Laws Will Impact Your Business in 2014 and Beyond, Part 1: Wage and Hour Legislation

In 2013, Governor Jerry Brown signed into law approximately 9 out of 10 bills presented to him. This three-part blog series summarizes the new legislation and captures the key employment law related bills that are likely to affect the most private employers in California. The first part of this series focuses on the newly-signed wage and hour legislation in California. Parts two and three will focus on the EEO, disability, leave, and immigration-related bills that the governor recently signed. Unless otherwise specified, all of the newly enacted legislation will become effective on January 1, 2014.

1.                  AB 10:  State Minimum Wage Increase

AB 10 amends section 1182.12 of the Labor Code to increase the minimum wage to $9 per hour as of July 1, 2014 and to $10 per hour as of January 1, 2016. Since the new minimum wage dictates the minimum salary requirements for employees who are exempt under California’s “white collar” exemptions (professional, administrative, and executive), employers must ensure that exempt employees earn a minimum salary of two times the applicable minimum wage.  As of July 1, 2014, the minimum annual salary for employees covered by these exemptions will be $37,440; as of January 1, 2016, the minimum annual salary for employees covered by these exemptions will be $41,600. The minimum wage increases impact the Commission Sales exemption contained in Wage Orders 4 and 7. Effective July 1, 2014, to be exempt from overtime, commissioned sales employees must earn at least $13.50 per hour and $15.00 per hour effective January 1, 2016.

Note: Some California cities have already raised the minimum wage that employees in those cities receive. The city of San Jose’s new minimum wage of $10.15 will go into effect on January 1, 2014. Last January, the city of San Francisco’s minimum wage increased to $10.55 per hour, making San Francisco’s the highest minimum wage in the country.

What Employers Should Do

  • Review the minimum salaries of exempt employees to ensure that the minimum salary requirement is met.
  • Review commission agreements for Commission Sales employees to ensure that the minimum wage requirement is met. Note that these agreements must be in writing as of January 1, 2013.
  • Ensure that the changes have been made by your payroll department and/or vendor.

2.                  AB 241:  “Domestic Worker Bill of Rights”

AB 241 adds section 1450 to the Labor Code and requires that individuals in household occupations (such as nannies, housekeepers, and individuals providing care for the elderly or disabled within a household) be paid overtime compensation at a rate of 1.5 times their regular rate for hours worked in excess of 9 hours per day or 45 hours per week. This new law excludes “casual babysitters” whose work is irregular and intermittent, babysitters under the age of 18, and residential care facility employees.

Impact On Employers

While this new law will not have a direct effect on the workplace, it may result in an increase in requests for flexible or reduced work schedules as employees seek to lower their child care or elder care expenses.

3.                  AB 442:  Liquidated Damages for Unpaid Wages

AB 442 amends Labor Code sections 1194.2 and 1197.1 and subjects employers that fail to pay minimum wage to liquidated damages in addition to criminal and civil penalties, as well as the payment of restitution to the employees.

What Employers Should Do

There has been an increase in class action litigation on the issue of whether employers are properly calculating the “regular rate” for minimum wage and overtime purposes. Employers should conduct internal audits of their companies’ payroll and wage payment policies and practices to ensure compliance with state and federal law.

4.                  SB 435:  “Recovery” Periods

SB 435 amends Labor Code section 226.7, which mandates that employers pay an additional one hour of pay to employees who are required to work through a legally mandated meal period or rest break. SB 435 extends this requirement on employers to pay an additional hour of pay to situations in which employers fail to provide any “recovery” periods required by Division of Occupational Safety and Health (DOSH also known as Cal/OSHA) regulations. A “recovery” period is a cool down period afforded to employees who work outside to prevent heat illness.

What Employers Should Do

If your company employs outdoor workers who are subject to Cal/OSHA’s Heat Illness Prevention regulations, conduct spot audits to ensure that these workers are being provided with the required “recovery” periods or are being paid the one hour penalty. Cal/OSHA’s site provides more information on these regulations, including the four steps employers are required to take to prevent heat illness.

5.                  SB 462:  Attorneys’ Fees

SB 462 amends Labor Code section 218.5 and provides that an employer may only recover attorneys’ fees and defense costs as a prevailing party in an action brought by an employee for unpaid wages if the employer can prove that the employee brought the action “in bad faith.”  The employer will have the difficult burden of proving that the employee knowingly brought a baseless or frivolous claim.

What Employers Should Do

This new law makes it very difficult for employers to recover attorneys’ fees and costs when they prevail in litigation and reinforces the old adage: “An ounce of prevention is worth a pound of cure.” Employers should regularly audit their payroll practices and personnel policies and the manner in which they are being implemented by managers and supervisors to ensure compliance with state and federal laws.

6.                  AB 533:  Artistic Employment Contracts

AB 533 applies to employers that employ minors under artistic employment contracts as extras, background performers, or in a similar capacity (including actors, dancers, musicians, comedians, singers, stunt-persons, voice-over artists, or sports players). The new law exempts these employers from the requirement that the employer set aside 15 percent of the employee’s gross earnings in trust for the benefit of the minor employee.

What Employers Should Do

Employers should audit their artistic employment contracts to ensure that the provisions comply with this new state law.

The next post in this series, “How the New California Laws Will Impact Your Business in 2014 and Beyond, Part 2: EEO, Disability, and Leave Legislation,” will cover the newly-signed bills related to employees’ disability and leave rights.

Betsy Johnson is the managing shareholder of the Los Angeles office of Ogletree Deakins. Betsy will be discussing these and other California laws at an upcoming breakfast seminar, “New York Employers Doing Business in California.” The program will be held at the Harvard Club in New York City on November 14, 2013. You can register for the seminar here.

October 30, 2013 | TAGS: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , .