On May 12, 2022, Governor Newsom announced that the state minimum wage could increase to $15.50 per hour on January 1, 2023 due to inflation.  However, many California employers are already facing minimum wage increases much earlier – as many local jurisdictions throughout California are raising their minimum wage rates on July 1, 2022.  Here is a list of some local city and counties in Southern California that are set to increase minimum wage rates on July 1, 2022:

Local Government

Minimum Wage Rate as of July 1, 2022

Resources
Los Angeles City $16.04 https://wagesla.lacity.org/

 
Los Angeles County $15.96 https://dcba.lacounty.gov/minimum-wage-for-businesses/

 
Santa Monica $15.96 https://www.santamonica.gov/minimum-wage

 
Malibu $15.96 https://www.malibucity.org/793/Minimum-Wage
Pasadena $16.11 https://www.cityofpasadena.net/planning/code-compliance/minimum-wage-ordinance/

 
West Hollywood $16.50 for employers with 50 + employees; $16.00 for employers with fewer than 50 employees; $18.35 for hotel employees https://www.weho.org/business/operate-your-business/minimum-wage

 

As a reminder, the City of San Diego raises its minimum wage rate on January 1 of each year.  Since January 1, 2022, the City of San Diego’s minimum wage is set at $15.00 per hour.  More information about San Diego’s minimum wage rate can be found here: https://www.sandiego.gov/compliance/minimum-wage.  Also, employers throughout California must review their local requirements – this is just a summary of Southern California increases.

Here are five items employers should consider prior to the July 1 deadline:

  1. Map locations to ensure the company is paying the required minimum wage.
  2. Ensure employees who travel and work in other cities/counties are being paid the appropriate minimum wage.
  3. Ensure pay stubs reflect the increased minimum wage (as well as other requirements).
  4. Update posters to ensure compliant posters are used in the workplace.
  5. Update notices to employee to reflect increased wage rates.

Notices to Employee required under Labor Code section 2810.5 must be issued to all nonexempt employees when they start work.  The wage information section must reflect the higher minimum wage for minimum wage workers as of July 1, 2022.  Accordingly, the overtime rates of pay section of the Notice must also be updated to reflect the higher rates as a result of the higher minimum wage requirements.

On April 21, 2022 the Board for Cal/OSHA approved a third readoption of the Emergency Temporary Standards (ETS) that governs employer’s duties to prevent the spread of COVID-19.  The ETS applies to most employers in California not covered by Cal/OSHA’s Aerosol Transmissible Diseases standard. The new version of the ETS will replace the current version, which expires today (May 6, 2022), and the new requirements are expected to remain in effect until December 31, 2022.

The new ETS relaxes and eliminates some of the existing COVID-19 requirements, incorporates the current masking, quarantine, and workplace exclusion requirements by the California Department of Public Health (“CDPH”), and adds some new definitions and overall provides more flexibility in dealing with the changing landscape of COVID-19. Cal/OSHA is expected to provide guidance on this new ETS in the form updated FAQs. Below are a few noteworthy changes in the revised ETS affecting almost all California employers.

  • CDPH guidance now governs exclusion and return-to-work criteria for close contacts.
  • Fully vaccinated definition is eliminated entirely. Requirements previously limited to unvaccinated employees now apply to all employees. By way of example, the new ETS requires employers to provide respirators to all employees upon request, while the prior version only required respirators be provided to unvaccinated employees upon request. Likewise, the prior ETS only required employers to make testing available to unvaccinated symptomatic employees, while the new ETS requires employers to offer testing to all symptomatic employees regardless of vaccination status. Be mindful that the distinction between vaccinated and unvaccinated may still apply to local public health rules that are more restrictive than the new ETS.  Plan for potential increased testing costs.
  • New Returned Cases definition added: The new ETS creates a limited exemption for testing for COVID-19 cases in the 90 days after the initial symptom onset, or first positive test, if asymptomatic.
  • Return-to-work testing may be self-administered and self-read. The result must include additional independent verification, such as a time-stamped photograph.
  • Face Coverings. The “light test” for cloth face masks (“not let light pass through when held up to a light source”) has been eliminated. In the few remaining situations were face masking is required, the protocols are to be consistent with current CDPH’s requirements.
  • Physical distancing (except during major outbreaks) and physical partitions requirements have been eliminated.
  • Cleaning and disinfecting protocols have been eliminated.

California employers should familiarize themselves with the new ETS requirements and update their written policies to ensure compliance with the new requirements. Given the incorporation of the CDPH guidance, employers should regularly monitor CDPH’s guidance, and watch for  Cal/OSHA’s updated FAQs. Employer also need to stay abreast of local public health regulations that may be more stringent than the ETS and CDPH. Lastly, while many of the ETS requirements have been eliminated or modified, many requirements, including exclusion pay requirements, remain in place through the end of the year.

My firm has officially announced its new service for helping update California employers about new legal developments and trends: Text Brief (subscribe here).  It is a way to share employment law updates with California employers, CEOs, human resource professionals, in-house counsel, any anyone else who needs to stay informed.  Here are five reasons why you should subscribe to Text Brief:

1. It’s free.

Do I need to say anything else?  By the way, when was the last time you heard a lawyer say this?

2. Valuable and exclusive content.

We plan on sending about one text update per week – covering topics such as new case law, upcoming deadlines facing CA employers, proposed legislation, and other updates.  There will be times when major developments warrant more than one text per week, but we will not overload your phone with irrelevant information.  We aim to provide curated content on major California employment updates each week.  Plus, we will be providing exclusive access to information and updates for Text Brief subscribers.

3. Short texts help you decided if you need to learn more or not.

I hear the objections already – why do I need to have a text message sent to my phone?  Well, if you struggle with having email overload, struggle with finding key emails that you want to refer back to, or plan on reading later and never get to it, Text Brief is the solution.  Plus, our short text descriptions about the topic can allow you to decide to continue learning, or simply wait until next week for a topic that you would like to learn more about.

4. Timely updates.

Have a hard time making time to stay up to date on California employment law developments?  Then subscribe.  We are not guaranteeing that you will understand the entire California Labor Code (if this is even possible), but by subscribing you will take a step towards becoming more informed about major developments.

5. You can unsubscribe at any time.

It is as easy as texting back “Stop” at anytime to unsubscribe.

We hope you will join: subscribe to Text Brief here.

Do employers need to have a computerized timekeeping system to comply with their requirements under California law?  With technological advances, it is hard to remember that just 10 years ago these questions were on top of everyone’s mind, but today it is sometimes assumed that it must be legal to keep these records electronically.  However, these inquiries raise good questions about employers’ obligations under the Labor Code to create and maintain time records.  Surprisingly (or maybe not so – depending on your views on how slow the law is in adapting to technological advances), the Labor Code does not address this issue right on point.  Yet, there are some governing principles employers can review in making the decision on what practices are best for their business. This Friday’s Five covers five key obligations employers should consider when setting up time keeping systems:

1. Are employers required to use a particular type of timekeeping system?

California law does not require the use of any electronic type of timekeeping system or time clocks.  Employers may elect to use paper and pen in recording an employee’s time.  As explained below, the records should be “indelible,” meaning that the time entries cannot be erased, removed, or changed.  However, even with just a handful of employees, many employers find it more efficient to use an electronic timekeeping system.  Moving towards an electronic time keeping system can reduce mistakes in the recording and calculation of time worked, make it easier to track changes, and could make a review of the time entries easier should there ever be a challenge by the employee about their pay.  Most timekeeping software today will also help monitor meal break compliance and will automatically flag any violations for a manager’s review.

2.  Can time records be kept electronically?

California Wage Orders require that employers maintain the employees time records “in the English language and in ink or other indelible form.”

The Division of Labor Standards Enforcement (“DLSE”) issued an Opinion Letter on July 20, 1995 stating that “storage of records by electronic means meets the requirements of California law if the records are (1) retrievable in the State of California, and (2) may be printed in an indelible format upon request of either the employee or the Division.”

The DLSE issued another Opinion Letter on November 10, 1998 advising employers that the electronic time record data could be maintained outside of the State of California “as long as a hard copy of the records was maintained at a central location within California.”  While the DLSE’s opinion letters are not binding legal precedent, they are given pervasive authority in court.  Thus, employers need to be careful about relying too heavily on these opinions.  In addition, these two Opinion Letters contradict each other.  As set forth below, the Wage Orders require time records “shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California.”  Therefore, employers should consider maintaining a copy of employee time records, either electronically or on paper, within the State of California.

Similar language is also found in Labor Code section 226 pertaining to the information required to be provided to employees on pay stubs:

The deductions made from payments of wages shall be recorded in ink or other indelible form, properly dated, showing the month, day, and year, and a copy of the statement or a record of the deductions shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California.

On July 6, 2006, the DLSE issued an Opinion Letter permitting employers to issue electronic pay stubs to employees if certain requirements were met.  The DLSE stated:

The Division in recent years has sought to harmonize the “detachable part of the check” provision and the “accurate itemized statement in writing” provision of Labor Code section 226(a) by allowing for electronic wage statements so long as each employee retains the right to elect to receive a written paper stub or record and that those who are provided with electronic wage statements retain the ability to easily access the information and convert the electronic statements into hard copies at no expense to the employee.

The DLSE approves electronic wage statements if the employer incorporates the following features:

  1. An employee may elect to receive paper wage statements at any time;
  2. The wage statements will contain all information required under Labor Code section 226(a) and will be available on a secure website no later than pay day;
  3. Access to the website will be controlled by unique employee identification numbers and confidential personal identification numbers (PINs).  The website will be protected by a firewall and is expected to be available at all times, with the exception of downtime caused by system errors or maintenance requirements;
  4. Employees will be able to access their records through their own personal computers or by company-provided computers.  Computer terminals will be available to all employees for accessing these records at work.
  5. Employees will be able to print copies of their electronic wage statements at work on printers that are in close proximity to the computer or computer terminal.  There will be no charge to the employee for accessing their records or printing them out.  Employees may also access their records over the Internet and save it electronically and/or print it on their own printer.
  6. Wage statements will be maintained electronically for at least three years and will continue to be available to active employees for that entire time.  Former employees will be provided paper copies at no charge upon request.

This same analysis would likely apply to the time records employers are required to maintain under California law.  However, employers need to approach this issue with advice from counsel, as there are no clear court decisions that have approved of the DLSE’s position.

3.  Length of time electronic records should be kept

Employers should also note that the statute of limitations for many wage and hour class actions in California can extend back to four years under Business and Professions Code section 17200; and, therefore should consider keeping wage statements and other documentation required to defend against claims going back the previous four years.

4. Items time records must report (be careful, it is more than just start and stop times)

The Wage Orders require that California employers keep “[t]ime records showing when the employee begins and ends each work period. Meal periods, split shift intervals and total daily hours worked shall also be recorded. Meal periods during which operations cease and authorized rest periods need not be recorded.”  IWC Wage Order 5-2001(7)(a)(3).

Additionally, Labor Code section 1174 requires employers to keep time records showing the hours worked daily and the wages paid, number of piece-rate units earned by, and the applicable piece rate paid.

5. Records must be maintained in California

These records must be maintained in the state or at the “plants or establishments at which employees are employed.”  The records must be kept for at least three years.  Labor Code section 1174(d).

The Wage Orders likewise require that employers keep records “at the place of employment or at a central location within the State of California.” As mentioned above, if employers have electronic records, a copy of the electronic data should be maintained within the state just as a precaution.

As mentioned above, the statute of limitations for wage claims can extend back to four years, so employers generally keep the records for four years.  Employers need to ensure that the data being saved is the actual time records of the employees and can be reproduced in format that is accurate and easy to read, should the records ever be requested or needed to defend litigation.

Employers should remember to take time to review their employee documentation, retention policies, and how this information is being saved on a periodic basis.  Here are five record retention issues employers should audit as of April 2022:

1. Are employee time records maintained for at least four years?

The statute of limitations can reach back four years in wage and hour class actions under California law, and time records will be the primary issues in most cases.  California law requires employers to track start and stop times for hourly, non-exempt employees. The law also requires employers to record the employee’s thirty-minute meal periods. The time system needs to be accurate.  Employers need to be involved in the installation and setup of the system and not simply use the default settings for the hardware and software. Understand what the system is tracking and how it is recording the data.  Employers should also have a complaint procedure in place and regularly communicate the policy to employees in order to establish an effective way to remedy any issues.

2. Are pay stubs and schedules backed-up and saved by the employer? 

Under Labor Code section 226, employers are required to provide employees with pay stubs “semimonthly or at the time of each payment of wages.”   Section 226(a) requires that employers keep a copy of the pay stubs for “at least three years.”  As mentioned above, because the statute of limitations for labor code violations can extend back four years, many employers retain these records for a four-year period.

In addition, employers should also review where and how the pay stubs are being saved.  Electronic copies of the pay stubs are permitted under section 226 as long as the electronic backup accurately shows all of the information required to be on the pay stubs.

Employers should not rely upon their payroll company to retain copies of these documents.  First, the obligation falls on the employer do retain these, and many payroll companies do not necessarily save this information.  Second, if the company changes payroll companies, it may be difficult to access the payroll information from the former payroll company.

Often overlooked, but critical in defending wage and hour lawsuits, are copies of employee schedules.  Given the four-year statute of limitations for wage claims, many employers are also maintaining copies of employee schedules for four years.

3. Are employee files maintained confidentially and for at least four years?

In 2021, California passed SB 807 that amended California’s Government Code section 12946 to require employers to maintain personnel files, among other records for at least four years.  Government Code section 12946 requires that employers “maintain and preserve any and all applications, personnel, membership, or employment referral records and files for a minimum period of four years after the records and files are initially created or received, or for employers to fail to retain personnel files of applicants or terminated employees for a minimum period of four years after the date of the employment action taken.”  While many employers were maintaining personnel files for four years prior to the passage of SB 807 since many wage and hour statute of limitations can extend back four years under California law.

California law does not define the terms “personnel records” or “personnel file,” and this creates considerable ambiguity about what documents should be kept in an employee’s personnel file.
While not legally binding on employers, there is some guidance from the Division of Labor Standards Enforcement(“DLSE”) setting for the following:

Categories of records that are generally considered to be “personnel records” are those that are used or have been used to determine an employee’s qualifications for promotion, additional compensation, or disciplinary action, including termination. The following are some examples of “personnel records” (this list is not all inclusive):
1. Application for employment
2. Payroll authorization form
3. Notices of commendation, warning, discipline, and/or termination
4. Notices of layoff, leave of absence, and vacation
5. Notices of wage attachment or garnishment
6. Education and training notices and records
7. Performance appraisals/reviews
8. Attendance records

Employers should also consider placing the following documents in personnel files:

  • Signed arbitration agreements
  • Sexual harassment compliance records for supervisors
  • Sign acknowledgements of policy by employee (for example, confidentiality/proprietary information agreements, meal and rest break acknowledgments, handbook acknowledgments)
  • Wage Theft Protection Act notice for non-exempt employees
  • If commissioned employee, written commission agreement signed by both the employer and employee beginning January 1, 2013.
  • Warnings and disciplinary action documents.
  • Performance reviews
  • Documents of any grievance concerning the employee
  • Documents pertaining to when the employee was hired
  • Records pertaining to last day of work and documenting reason for departure from employment

Also, remember that employers must keep records of sexual harassment training for supervisors and employees required under California law for at least 2 years. 2 Cal Code Regs §11024(b)(2).

4. Are Forms I-9 being maintained long enough and in a manner that is easily retrievable?

Employers must keep I-9 forms for three years from the employee’s date of hire, or one year after termination, whichever is longer. Employers have at least three business days to produce Forms I-9 during an inspection.  More information about the Form I-9 can be read here.

5. Are managers and supervisors trained about the company’s forms/documents available to them, what must be documented, and who is responsible for saving the documents?

Even if the employer has valid policies about document retention, it is irrelevant if the managers and supervisors are not also trained about the policies:

    • Do supervisors understand which forms are available to them to document discipline, employee absences, and other routine issues?
    • Who is involved in reviewing disability accommodation requests and how are these documented?
    • Do the managers have standard forms for the following:
      • Employee discipline and write-ups.
      • Documenting employee tardiness.
    • How are employee absences documented?
    • How is the employee documentation provided to Human Resources or the appropriate manager?
    • Who is responsible for saving the document in the paper file or electronically?

As we start April 2022, here are five new California employment law developments that California employers need to know about:

1. Court rules California’s law requiring corporate board diversity is unconstitutional.

California passed AB 979 which enacted Corporations Code section 301.4 in 2020.  The law requires corporations with their principal executive offices located in California to have set number of board members from an “underrepresented community” on its board by the end of 2021.  The law sets forth that a “’Director from an underrepresented community’ means an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender.”

The court ruled that:

Corporations Code § 301.4 violates the Equal Protection Clause of the California Constitution on its face. The statute treats similarly situated individuals – qualified potential corporate board members – differently based on their membership (or lack thereof) in certain listed racial, sexual orientation, and gender identity groups. It requires that a certain specific number of board seats be reserved for members of the groups on the list – and necessarily excludes members of other groups from those seats.

The court’s opinion in Crest v. Padilla can be read here.

This case illustrates an issue that faces many companies implementing diversity and inclusion programs – no matter how well intended these efforts are, California law specifically prohibits treating applicants or employees differently based on a protected characteristic, such as race, gender, or sexual orientation.

2. Cal/OSHA proposes new language for revised emergency temporary standards (ETS).

The current ETS regulations are set for expire on May 6, 2022.  This week, Cal/OSHA published the language for the revised ETS that would be voted on by Cal/OSHA on April 21, 2022, and if approved, would be in effect until December 31, 2022.  The revised language still contains many of the existing requirements facing California employers, such as exclusion pay, and requiring to notify employees of positive cases at the workplace.  We will be covering the potential changes to the ETS closer to the April 21 vote, so subscribe to the blog to not miss any updates.

3. LA Times article explains employees working from home are seeking reimbursement for not only businesses expenses, but missed revenue the employees could have made for renting out their office instead of using it for work.

As we have detailed on this blog before, California Labor Code section 2802 requires employers to pay for necessary business expenses incurred by employees.  However, as the article reports, plaintiffs are alleging that not only should employers have paid for their printers and computers, but also for missed revenue the employee could have received for renting out their home office.  It will be interesting to see how plaintiffs would prove that they lost revenue from rent because they had to work from home.  A lot of workers were required to work from home during the pandemic, and many were not fortunate enough to have separate office to work in (nor was it likely that employers made this a requirement for the employees), and for the fortunate employees who did have a separate office in their house to now claim that their employer owes them for missed rent will be difficult to prove.

4. California drafts regulations regarding the use of artificial intelligence in the hiring process.

The California Fair Employment and Housing Council (FEHC) published draft regulations concerning automated decision-making systems used by employers and agents of employers, such as recruiters, payroll, and staffing agencies.  The draft regulations state that it would be unlawful for an employer or its agents to “use qualification standards, employment tests, automated-decision systems, or other selection criteria that screen out or tend to screen out an applicant or employee or a class of applicants or employees on the basis of a characteristic protected by this Act,” unless the employer can show job-relatedness and is a business necessity.   The Council met on March 25, 2022 to discuss the proposed regulations, but did not take any specific action, leaving the issue open for now.  Employers who use software, or who rely upon third parties that utilize software for applicant screening need to closely monitor for any further developments.  The draft regulations can be found here.

5. Proposed law would implement a 32-hour workweek in California.

AB 2932 is a proposed bill that would change the 40-hour workweek in California to a 32-hour workweek for employers with 500 or more employees.  The effect of this would mean that large employers would need to pay overtime for all work performed over 32 hours in a week.

Five reminders about the timing and location requirements for providing final wages to employees in California:

  1. An employee who is discharged must be paid all of his or her wages, including accrued vacation, immediately at the time of termination.
  2. An employee who gives at least 72 hours prior notice of quitting, and quits on the day given in the notice, must be paid all earned wages, including accrued vacation, at the time of quitting.  An employee who quits without giving 72 hours prior notice must be paid all wages, including accrued vacation, within 72 hours of quitting.
  3. An employee who quits without giving 72-hours’ notice can request their final wage payment be mailed to them. The date of mailing is considered the date of payment for purposes of the requirement to provide payment within 72 hours of the notice of quitting.
  4. Final wage payments for employees terminated (or laid off) must be made at the place of termination. For employees who quit without giving 72 hours’ notice and do not request their final wages be mailed to them, the final wages must be made available at the office of the employer within the county in which the work was performed.
  5. The Labor Commissioner takes the position that employers may not rely upon the employee’s prior authorization for direct deposit for final wage payment.  The authorization by an employee for direct deposit is immediately terminated when and employee quits or is discharged, and the payment must be made as set forth above.  However, the employee can voluntarily agree to accept payment of final wages by direct deposit, but this must be agreed to by the employee.

For any employer who willfully fails to pay any wages due a terminated employee can subject the employer to “waiting time penalties” under Labor Code section 203. Waiting time penalties accrue at an amount equal to the employee’s daily rate of pay for each day the wages are not paid, up to a maximum of 30 calendar days.  The court in Mamika v. Barca (December 1998) explained that waiting time penalties continue to accrue on a daily basis:

Under this scheme, unpaid wages continue to accrue on a daily basis for up to a 30–day period. Penalties accrue not only on the days that the employee might have worked, but also on nonworkdays. (Cf. Iverson v. Superior Court (1985) 167 Cal.App.3d 544, 548, 213 Cal.Rptr. 399 [unless otherwise specified, “days” mean “calendar days”].)

The California Supreme Court ruled in Pineda v. Bank of America (November 2018) that the statute of limitations for recovering waiting time penalties under Labor Code section 203 is three years.  California employers need to review the obligations to timely pay employees their final wages to reduce this potential liability in the form of waiting time penalties, which can add up to a significant amount, even for minimum wage earners.

In Mendoza v. Trans Valley Transport, the California Court of Appeal held that an arbitration agreement contained in an employee handbook was unenforceable by the employer because the parties did not enter into a binding agreement to arbitrate.  The appellate court’s analysis in Mendoza illustrates some problems for employers who place arbitration agreements in employee handbooks instead of having a standalone arbitration agreement.

Placing arbitration agreements within employee handbooks creates greater risk that the agreements may be found unenforceable. 

Employee handbooks typically contain language that the handbooks do not create a contract with the employee and that the employer can revise the employee handbook at any time.

In Mendoza, the court noted that other courts have not enforced arbitration agreements in employee handbooks when other language in the handbooks or acknowledgement forms indicate that (1) the handbook was intended to be informational, not contractual, (2) could be changed by the employer at any time, or (3) did not create a contract of employment.  Oftentimes employee handbooks contain this type of language to avoid creating employment actual or implied in fact contractual obligations arising from the employee handbook.  But as the court in Mendoza explained, employers need to be careful to clearly set out the arbitration agreement if contained in the handbook, and explain that the arbitration agreement is a binding contract.

Therefore, it is best to use standalone arbitration agreements with employees.  Another benefit of using a standalone arbitration agreement is that only the agreement has to be entered into the public record to enforce the agreement, instead of placing the entire employee handbook into the record.  However, if employers do place arbitration agreements in their employee handbook, it must be carefully reviewed to ensure that no other language within the handbook contradicts the employer’s attempt to create a binding contract to arbitrate all employment claims.

Employers must make arbitration agreements clear, should provide signature lines for the employee and employer, and follow-up to ensure that the parties signed the agreement. 

In Mendoza, the employer did not ask the employee to sign the arbitration agreement, or initial that portion of the employee handbook that contained the arbitration agreement. The employer instead relied upon the employee’s signature on the employee acknowledgement of the handbook.  This, however, was not enough for the court to uphold the agreement because the acknowledgment forms signed by the plaintiff did not mention the arbitration policy or incorporate it by reference.  Moreover, the employer’s arbitration policy was “not highlighted in a table of contents and did not stand out from other sections of the Handbook”, and the employer’s language that the arbitration agreement was a “condition of employment” was not explicit enough and failed to state that plaintiff “would be deemed to have consented to arbitration by accepting the employment if he failed to sign an arbitration agreement.”  Having a signature line for the employee and the employer on an arbitration agreement, and ensuring that both the employee and employer signed the agreement will alleviate any potential argument that there was not mutual consent.  As the court explained, “…there must be more than a boilerplate arbitration clause buried in a lengthy employee handbook….”

The use of electronic signatures are fine, as it is often easier to document and follow-up to ensure the parties signed the agreement.  However, the issue will come down to employers making sure that there is clear evidence that the employee and the employer agreed to arbitration.

Lessons from the Mendoza case:

The issues raised in Mendoza highlight some best practices for California employers when implementing arbitration agreements:

  1. Avoid placing arbitration agreements into employee handbooks.
  2. Set forth arbitration agreements in stand alone documents with signature lines for the employee and the employer.
  3. Ensure that the employee and a representative from the employer sign the document.
  4. Electronic signatures are acceptable, but employers must review how the electronic signature is recorded and ensure this could be documented in a manner that will be upheld in court when enforcing the arbitration agreement.
  5. If the arbitration agreement is voluntary, implement a system to track who has signed and not signed the agreement.
  6. Implement a system to securely store signed arbitration agreements. This can be a manual or electronic system, but it needs to be audited routinely to ensure that the agreements are store in a usable format, are backed up, and the appropriate people have access to these saved documents.

Pay equity and transparency laws are being considered within the United States and by many countries.  For example, internationally, Europe is reviewing a potential law requiring all wages to be published, Iceland requires companies to prove pay equity since 2018, and a similar law in Canada has passed for employers with 10 or more employees.  Here in California, employers face a number of regulations under California and Federal law pertaining to employees’ ability to discuss wages, prohibition on salary history inquiries, the nation’s first “pay transparency” requirement, and equal pay requirements.  Here is a summary five critical equal pay laws California employers must understand:

1. Right for employees to discuss pay.

Employers cannot limit employee’s discussion of their wages and workplace environment.  For example, employers cannot prohibit employees from discussing or disclosing their wages, or for refusing to agree not to disclose their wages under Labor Code Sections 232(a) and (b). In addition, employers cannot require that an employee refrain from disclosing information about the employer’s working conditions, or require an employee to sign an agreement that restricts the employee from discussing their working conditions under Labor Code Section 232.5.

2. Employers may not ask applicants about prior salary.

Effective January 1, 2018, Labor Code section 432.3 prohibits California employers from relying on salary history information of an applicant in determining whether to make an offer to the applicant, and in determining the pay to offer.  The law applies to all employers, regardless of size.  Employers may not seek salary history information, which includes compensation and benefits, about the applicant.

In addition, upon a reasonable request, an employer must provide the “pay scale” for the position to an applicant.  California was the first state in the nation to require this “pay transparency” disclosure.  However, nothing in the law prohibits employees from voluntarily disclosing salary history to a prospective employer.  Finally, an employer may ask an applicant about their salary expectations for the position, which is different than asking the applicant about earnings in the past.

3. California’s Fair Pay Act.

California’s Fair Pay Act, Labor Code section 1197.5, is directed at ensuring equal pay across genders and race.  The law became effective January 1, 2016.  While it was illegal to pay employees different wages based upon their gender or race already under California law, this law expanded the protection to workers who do “substantially similar” work.  If challenged, employers can justify different pay if the employer can show it is based on one or more of the following factors:

  1. A seniority system
  2. A merit system
  3. A system that measures earning by quantity or quality of production
  4. A bona fide factor other than sex, such as education, training, or experience.

The law also requires that employers maintain records of the wages and wage rates, job classifications, and “other terms and conditions of employment of the person employed by the employer” for three years.

The statute of limitations requires that a plaintiff bring a case no later than two years after the cause of action accrues, exempt that if the violation is “willful” a three year statute of limitations applies.

Employees who bring a lawsuit under the law can recover the balance of the wages, including interest thereon, and an equal amount as liquidated damages, costs of the suit and reasonable attorney’s fees, notwithstanding any agreement to work for a lesser wage.

The law also prohibits employers from restricting employees from disclosing their wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging others to exercise their rights under the new law.

4. Fair Employment and Housing Act.

The Fair Employment and Housing Act (FEHA) applies to public and private employers.  FEHA prohibits discrimination of applicants and employees for employers with five or more employees based on a protected category, such as race, religion, or gender.  Therefore, FEHA prohibits employers from paying employees differently based on a protected category.  Unlike the Fair Pay Act, FEHA requires the employee to prove discriminatory intent.

5. The National Labor Relations Act.

The National Labor Relations Act (NLRA) protects employees to discuss wages and working conditions by providing employees with the right to discuss the terms and conditions of their employment with other employees.  The NLRA can apply to workplaces that are not unionized and protects employees who are not involved in a union if they are involved in a “concerted activity.”  Concerted activity includes discussing wages, benefits, and other working conditions.

As California’s April 1, 2022 pay data reporting deadline approaches, we are dealing with many questions about when remote employees, teleworking employees, and traveling employees must be included in the report.  A private employer (any employer that is not a government employer) is required to file a pay data report to the Department of Fair Employment and Housing (DFEH) if the employer has 100 or more employees during the Snapshot Period chosen by the employer or who regularly employed 100 or more employees during the Reporting Year. Employees located inside and outside of California are counted when determining whether an employer has 100 or more employees. When reporting to the DFEH, employers must include their employees assigned to California establishments and/or working within California, including employees who work remotely or telework. An employer with no employees in California during the Reporting Year would not be required to file a pay data report with the DFEH.  Below are various scenarios that arise with remote or teleworking employees and whether these employees must be included in the employer’s pay data report:

1. Remote Employees Assigned to a California Establishment

Employers must report on their employees assigned to a California establishment, whether or not teleworking. This means that employees working remotely from a residence outside of California, or at a client’s site outside of California but assigned to a California establishment must be included in the reporting to the DFEH.

  • For example, if an employer has a single establishment in Riverside, California with 500 employees working from that location, the employer would submit a report covering all 500 employees. If 25 of the 500 employees were working remotely (in California or beyond), the employer’s report would still cover all 500 employees.
  • Likewise, a multi-establishment employer with establishments only in California will include all employees (including any employees outside of California) whether or not teleworking. For example, if an employer has 5,000 employees working across 10 establishments in California, the employer’s report would cover all 5,000 employees, reported by establishment. If 100 of the 5000 employees were working remotely (in California or beyond), the employer’s report would still cover all 5,000 employees, and the 100 remote employees would be assigned by the employer to their associated establishment.

2. Employees Assigned to a Non-California Establishment Working Within California

Employer must include establishments outside of California if any employee at the non-California establishment is working from California during the Snapshot Period. Hence, any employee that works within California even if the employee is not assigned to a California establishment must be reported on.

  • For an establishment outside of California, the employer’s reporting would cover either only those employees teleworking from California and who are assigned to a single establishment outside of California or all employees assigned to that establishment outside of California.

3. Employers are not required to report on any employee who lives in California but physically works at an establishment outside of California.

However, if the employee teleworks from California, the employee would be included in the report.

4.  Employees Who Are Entirely Remote

For employees who are entirely remote, the employer must first determine which establishment(s) the employees are assigned to. If the employees are not assigned to any establishment, the employer would report the employees at the employer’s headquarters.

  • If assigned to a California headquarters or establishment, the employees must be reported on regardless of whether the employees are working remotely in California or beyond.
  • Non-California headquarters or establishment, the employees must be reported on only if they are working remotely from a residence in California or physically at a worksite in California.

5. Employees Located All Over the United States

An employer that has employees who are located all over the United States would report on any employee during the Snapshot Period that performed work in California and/or was assigned to a California establishment or headquarters, whether or not teleworking from California or beyond or physically working at a site outside of California.

For more information see sections III.D and E of the DEFH’s FAQs found here: https://www.dfeh.ca.gov/paydatareporting/faqs/