As we approach 2025, California employers need to be aware of several key legislative changes that will impact workplace policies and operations. These laws have been passed and will take effect in 2025, shaping the employment landscape in the state. Here are the top five new laws that employers should prepare for:

1. AB 3234: Social Audits and Child Labor Reporting

Effective January 1, 2025, AB 3234 introduces new reporting requirements for employers who have voluntarily undergone a social audit. This law is aimed at increasing transparency, particularly regarding the employment of child labor. Under this law, employers must post a clear and conspicuous link on their website to provide the following information:

  • Audit details: The year, month, day, and time the audit was conducted, and whether it took place during a day or night shift.
  • Child labor: Whether the employer engaged in or supported the use of child labor.
  • Policies and procedures: A copy of any written policies or procedures the employer has regarding the employment of children.
  • Workplace hazards: Whether children were exposed to hazardous or unsafe working conditions that could affect their physical or mental health and development.
  • Work hours: Whether children worked during regular school hours or night shifts.
  • Auditing company statement: The law requires a statement clarifying that the auditing company is not a government agency and is not authorized to verify compliance with state or federal labor laws or health and safety regulations.

This law reflects California’s continued focus on the protection of vulnerable workers and its commitment to labor transparency.

2. California Worker Freedom from Employer Intimidation Act: SB 399

The Governor also signed, SB 399, also called the California Worker Freedom from Employer Intimidation Act, that protects employees from being forced to participate in employer-sponsored meetings or communications that convey the employer’s opinions on religious or political matters. Under this bill, starting January 1, 2025:

  • Employers are prohibited from retaliating or threatening retaliation (including discharge, discrimination, or any adverse actions) against employees who refuse to attend or participate in such meetings.
  • If an employee refuses to attend these meetings, they must still be paid for the time.
  • A civil penalty of $500 will be imposed on employers who violate this provision.

This law aims to ensure that employees have the freedom to make decisions regarding their involvement in employer-initiated discussions about religious or political issues without fear of reprisal.

3. SB 1100: Driver’s License Requirements in Job Advertisements

SB 1100 introduces new restrictions on including driver’s license requirements in job postings. Employers may only list a driver’s license as a job requirement if:

  • Driving is an essential function of the position.
  • Alternative transportation methods are not feasible for the job. This law aims to reduce discriminatory practices in hiring by ensuring that job postings are more inclusive for applicants who may not possess a driver’s license but can perform the job using other means of transportation.

4. SB 1340: Local Discrimination Enforcement

SB 1340 permits local governments to enforce employment discrimination laws, provided these laws are at least as protective as the state’s Unruh Civil Rights Act. This new law opens the door for a more localized enforcement of discrimination policies, which could lead to a patchwork of requirements across different regions in California. Employers will need to stay informed about local ordinances to ensure compliance with both state and local anti-discrimination laws.

5. AB 2499: Expanded Protections for Victims of Violence

AB 2499 expands protections for employees who are victims of violence or who have family members that are victims. This law:

  • Prohibits retaliation against employees who take time off to address violence-related issues, including seeking medical care, safety planning, and attending court proceedings.
  • Expands paid sick leave to cover absences related to violence.
  • Requires reasonable accommodations for employees who may face safety concerns at work. Employers must update their handbooks and provide notice of these expanded rights to employees at the time of hire, annually, and upon request.

Preparing for 2025

With these new laws, and others, on the horizon, California employers should take proactive steps to review and update their policies, employee handbooks, and training programs. Compliance will not only protect employers from legal risks but also foster a safer, more equitable workplace.

With California’s recent reforms to the Private Attorneys General Act (PAGA), employers now have an unprecedented opportunity to significantly reduce their potential liability for labor code violations. One of the most crucial changes under the reformed PAGA is the introduction of penalty caps for employers who demonstrate good faith efforts to comply with labor laws. However, to fully take advantage of these reductions, employers must be proactive in auditing their payroll, timekeeping, and labor practices. Regular audits not only ensure compliance but are essential in building the evidence needed to qualify for reduced penalties under the reformed PAGA. In this article, we’ll explore why conducting audits is now more critical than ever for California employers looking to protect their businesses from costly litigation and maximize the benefits of PAGA’s revised penalty structure.

Under the reformed PAGA, penalties have been significantly reduced to provide relief to employers.  The reformed PAGA applies to newly filed cases after June 19, 2024. Any PAGA claims filed on or after this date will be subject to the new rules and penalty structures introduced by the reform. Cases filed before June 19, 2024, will continue to be governed by the old PAGA regulations. Below is a list of penalties and their respective reductions under the reformed PAGA:

1. Good Faith Compliance Penalty Caps:

  • Old Penalty: No cap on penalties if violations were found.
  • New Penalty:
    • 15% of the applicable penalties if the employer took all reasonable steps to comply before receiving a PAGA notice or a records request.
    • 30% of the applicable penalties if the employer took all reasonable steps to comply within 60 days after receiving a PAGA notice.
  • Reduction: Penalties are reduced by 85% in the first case and 70% in the second case, depending on the timing and good faith efforts.

2. Wage Statement Violations:

  • Old Penalty: $100 per employee, per pay period.
  • New Penalty: $25 per employee, per pay period (if the employee can still determine accurate information from the wage statement, or if the only violation is related to the employer’s name and address, and the employee is not confused about the employer’s identity).
  • Reduction: 75% reduction from $100 to $25.

3. Penalties for Isolated Violations:

  • Old Penalty: $100 per employee, per pay period.
  • New Penalty: $50 per employee, per pay period for violations lasting fewer than 30 consecutive days or four pay periods.
  • Reduction: 50% reduction.

4. Derivative Violations (Stacking Penalties):

  • Old Penalty: Multiple penalties for labor code violations arising from the same underlying conduct.
  • New Penalty: No stacking of penalties allowed. Only one penalty is imposed for the underlying violation.
  • Reduction: Complete elimination of stacking.

5. Subsequent Violation Penalties (Aggravated Penalties):

  • Old Penalty: $200 per employee, per pay period.
  • New Penalty: $200 per employee, per pay period, but limited to cases where:
    1. The employer had a prior finding or determination of unlawful practices within the last 5 years by the LWDA or a court.
    2. The violation was determined to be malicious, fraudulent, or oppressive.
  • Reduction: This applies only to aggravated cases, limiting the application of the $200 penalty.

6. Penalties for Employers Paying Weekly:

  • Old Penalty: Employers paying weekly were exposed to double the penalties because there were twice as many pay periods.
  • New Penalty: Penalties are reduced by 50% for employers paying weekly, ensuring that weekly pay cycles do not result in disproportionately high penalties.
  • Reduction: 50% reduction.

These penalty reductions are aimed at incentivizing employers to comply with the Labor Code while offering relief from excessive penalties for technical violations and giving them more opportunities to mitigate liability under PAGA.

Zaller Law is actively helping clients navigate the complexities of PAGA compliance by providing comprehensive payroll and labor practice audits. These audits are essential for employers seeking to minimize their exposure to PAGA claims and benefit from the newly reduced penalties under the reformed law.

A well-structured process for onboarding new employees is a common practice, but equally important—and often overlooked—is having a clear procedure for when employees leave the company. Ensuring that all company property is returned, providing any required documentation, and taking steps to mitigate potential legal risks are crucial when an employee departs. Here are five key steps California employers should include in their separation process:

1. Ensure All Necessary Documents Are Provided to the Departing Employee

Just as with new hires, there are several essential documents that need to be provided to employees at the time of separation. Employers should prepare a termination packet that includes mandatory documents such as:

  • Notice of Change in Relationship
  • COBRA and Cal-COBRA notices
  • Health Insurance Premium (HIPP) notice

In addition, employers should create their own forms to request the return of company property (e.g., laptops, keys, parking cards) to ensure everything is accounted for before the employee leaves.

2. Issue the Final Paycheck on Time

California law has strict requirements for when final paychecks must be issued:

  • If an employee is terminated, all wages, including accrued vacation, must be paid immediately at the time of termination.
  • If an employee gives at least 72 hours’ notice of their resignation, all wages must be paid on their last day of work.
  • If an employee quits without providing 72 hours’ notice, the employer has 72 hours to issue their final paycheck.
  • If the employee requests, the final paycheck can be mailed, and the date of mailing is considered the date of payment for compliance purposes.
  • Final pay must included all accrued but unused vacation.
  • Final wages for terminations must be provided at the location where the employee was dismissed. In the case of a resignation without notice, the final paycheck can be picked up at the employer’s office within the county where the employee worked.

3. Consider Whether to Conduct an Exit Interview

Exit interviews can provide valuable insights but aren’t always appropriate. If the departure is tense or the situation is highly emotional, an exit interview might escalate tensions. On the other hand, it could be an opportunity to leave things on a more positive note. Employers should assess each situation individually and not rely on a blanket policy.

4. Determine If a Severance Agreement Is Appropriate

While severance pay is not required in California, there are situations where offering it can be beneficial. Employers might offer severance during layoffs, to fulfill executive contracts, or to mitigate the risk of potential legal disputes. If severance is offered, it’s crucial to have the agreement reviewed by legal counsel to ensure it includes a broad release of claims, protecting the employer from future litigation. Learn more about severance agreements in our previous post here.

5. Establish a Clear Policy for References and Internal Disclosure

To protect against claims of defamation, privacy violations, or misrepresentation, many employers limit the information they provide about former employees to confirming job titles and employment dates. If a former employee authorizes it, their final pay rate may also be disclosed. When sharing any further information—whether with external contacts or internally within the company—employers should proceed cautiously and consult legal counsel to ensure compliance with privacy laws. Additionally, it’s important to remind managers and staff not to disclose the reasons behind an employee’s departure unless they have a legitimate need to know.

By following these five steps, employers can reduce legal risks and ensure a smoother transition when employees leave the company.

While California law does not require employers to offer severance pay, providing it in exchange for a release of claims can be a strategic move to avoid future litigation when parting ways with employees. For at-will employees, where no contract mandates severance, an employer may still benefit from offering a severance package in specific situations to mitigate legal risks. Though severance agreements can be complex, this article highlights five key considerations employers should keep in mind when drafting such agreements to protect their interests and minimize costly disputes.

1. Release of claims

The idea of the severance agreement is to have some certainty that there will not be litigation following the employee’s separation from the company.  Employers may seek a general release of known and unknown claims if it is specific and easy to understand.  Courts have held that “a written release extinguishes any obligation covered by the release’s terms, provided it has not been obtained by fraud, deception, misrepresentation, duress, or undue influence.”  (Skrbina v. Fleming Cos., 1996).

Release of Unknown Claims

The employee (and employer for that matter) can waive all known claims. However, in California, for any party to release unknown claims, the agreement needs to be clear and advise the party that they are releasing unknown claims. Ideally, the agreement should set forth that the employee is waiving all rights under California Civil Code section 1542, and to specifically quote section 1542 in the agreement, which provides:

A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.

2.  Choice of law and venue

California Labor Code section 925 prohibits employers from requiring an employee who primarily resides and works in California, as a condition of employment, to adjudicate claims outside of California that arose in California and deprive the employee of “substantive protection of California law.”  Section 925 does not apply to any contracts negotiated when the employee is represented by legal counsel.  Section 925 only applies to contracts entered into, modified, or extended on or after January 1, 2017.  However, since a severance agreement is being entered at the end of the employment relationship, employers may have the argument that section 925 does not apply to severance agreements because it is not being entered into “as a condition of employment.”  Employers should approach this issue carefully, and to the extent there is a need to provide for a state other than California’s law to apply to the severance agreement, or for the venue to be set outside of California, employment counsel needs to be consulted.

3. No re-hire

Beginning January 1, 2020, an employer may not include a no re-hire provision in the severance agreement under certain circumstances.  Code of Civil Procedure section 1002.5 prohibits and invalidates any provisions in settlement agreements entered into on or after January 1, 2020 that prevent workers from obtaining future employment with the settling employer or its affiliated companies.

The law applies to any employees who have filed a claim: (1) against the employer in court, (2) before an administrative agency, (3) in an alternative dispute resolution forum, or (4) through the employer’s internal complaint process.  Therefore, if the employee has complained internally, and a severance agreement is reached with the employee without any litigation being filed, the employer would still be restricted from placing a no-rehire provision in the severance agreement.

The law does not prohibit or otherwise restrict an employer from preventing an employee from obtaining future employment if the employer has made a good faith determination that the person engaged in sexual harassment or sexual assault.

4. Confidentiality

Severance agreements may a contain limited confidentiality provision where the employee agrees not to disclose the amount paid or the terms of the agreement.  The confidentially provision can set forth the limited number of people the employee may make disclosures to, such as legal or tax advisors, family members, or as required under the law.  However, California employers need to be careful about confidentiality provisions,  as California law prohibits confidential settlement agreements or disclosure of allegations related to unlawful acts in the workplace.

Employers may still contain non-disparagement provisions and confidentiality clauses in agreements with employees, but the following notice must be included in the document:“Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.”

5. Special provisions

When drafting severance agreements, it’s important to include a range of key provisions to ensure compliance with legal requirements and to protect the employer’s interests. Some of the critical provisions to consider are:

  • Older Workers Benefit Protection Act (OWBPA): Provides protection for employees aged 40 or older, ensuring that they receive certain rights and protections under severance agreements.
  • Non-waivable claims: Certain claims, such as workers’ compensation and unemployment insurance claims, cannot be waived by the employee.
  • No prevailing party and attorney’s fees: Ensure that the agreement does not include provisions that would allow either party to claim attorney’s fees if legal disputes arise.
  • Return of company property: A clause requiring the employee to return any company-owned equipment or materials upon separation.
  • Non-competition, non-solicitation, and non-disclosure terms: These provisions can help protect the company from competition, solicitation of clients or employees, and disclosure of proprietary information.  However, California law is highly restrictive when it comes to non-competition agreements, generally prohibiting them except in limited circumstances, such as the sale of a business or dissolution of a partnership, making it essential for employers to carefully craft these terms.
  • Job reference: Address how future job references will be handled, including the possibility of neutral or positive references.
  • Integration clause: Ensures that the written agreement constitutes the entire understanding between the parties, superseding any prior discussions.
  • Severability clause: Provides that if any part of the agreement is found to be invalid, the rest of the agreement will remain enforceable.
  • Arbitration clause: Allows disputes to be resolved through arbitration rather than litigation, which can be a faster and less costly option for employers.

Incorporating these provisions helps create a comprehensive severance agreement that minimizes potential risks and complies with legal standards.

Effective September 3, 2024, a new ordinance in Los Angeles County offers additional protections for individuals with criminal records seeking employment. The Fair Chance Ordinance builds upon California’s Fair Chance Act (AB 1008), codified in Government Code section 12952, which prohibits employers from asking about criminal records before extending a job offer. The new ordinance applies to businesses operating in unincorporated areas of LA County that employ five or more employees regardless of location.  The ordinance applies to employees, or applicants to a position that will involve, performing at least two hours of work on average each week within the unincorporated areas of Los Angeles County. Below are five key takeaways for employers:

1. Prohibition on Criminal Background Inquiries Pre-Offer

Employers cannot inquire about criminal history before extending a conditional job offer. Any mention of criminal background checks in job advertisements, interviews, or application forms is prohibited. For example, the Ordinance requires employers to include language in all job advertisements “stating that qualified Applicants with arrest or Conviction records will be considered for Employment in accordance with the Los Angeles County Fair Chance Ordinance for Employers and the California Fair Chance Act.”  Employers are prohibited from using language that excludes or discourages applicants with criminal histories from applying and using phrases like “No Felons” or “No Convictions” (though they can mention that a background check is required). If laws restrict hiring based on certain criminal histories, those specific restrictions must be clearly stated. Additionally, if a criminal history review is part of the hiring process after a conditional offer, job ads must list all “material job duties of the specific job position which the employer reasonably believes that Criminal History may have a direct, adverse and negative relationship….”  If employers do plan to perform background checks after a conditional offer, they must notify applicants in writing, including a justification for the review.

2. Conditional Offers Required Prior To Background Check

Employers must provide written notice to the applicant or employee stating that the offer is contingent on a criminal history review before conducting a background check. The employer must also provide a written justification for the review, which cannot rely solely on general safety concerns. Justifications may include risks to the business or safety concerns for staff and the public. Additionally, if other background information (e.g., education, social media history, employment history, motor vehicle or driving history, reference checks, credit history, license or credential verification, drug testing, or medical examinations) is being reviewed, it must be listed. Employers cannot request criminal history details from the applicant before receiving the official background check report, and a copy of the report must be provided to the applicant before discussing any findings.

3. Individualized Assessments Required

Before withdrawing a job offer or taking any adverse action based on an applicant’s criminal history, employers must conduct an “individualized assessment.” This involves reviewing whether the applicant’s criminal record directly impacts their ability to perform the job and considering mitigating factors, such as rehabilitation efforts, time passed since the offense, and the nature of the job.

4. Notice and Opportunity to Respond

If an employer intends to deny employment based on criminal history, they must first send a “Preliminary Notice of Adverse Action.” The applicant then has five business days to respond, either challenging the accuracy of the background check or providing evidence of rehabilitation. If additional time is needed, applicants may request an extension of up to 10 business days.

5. Record Retention and Posting Requirements

Employers are required to retain records relating to the hiring process, including job postings, applications, assessments, and notices for a minimum of four years.

Additionally, employers must post a required notice about the ordinance at workplaces and on their websites, informing employees and applicants of their rights.  The notice can be downloaded here: https://dcba.lacounty.gov/wp-content/uploads/2024/08/FCOE-Official-Notice-Eng-Final-8.30.2024.pdf

The service industry in California constantly grapples with the complexities surrounding tips, tip pooling, and mandatory service charges. Recently, on August 23, 2024, a federal appeals court blocked the Department of Labor’s (DOL) controversial 80/20/30 rule in Restaurant Law Center, Texas Restaurant Association v. United State Dept. of Labor. This rule, which created significant compliance burdens for hospitality employers who do not have a more stringent state law (like California), has been vacated by the Fifth Circuit U.S. Court of Appeals, offering immediate relief to employers subject to federal law in the Fifth Circuit, and potentially to all employers, even outside of the Fifth Circuit. The court’s decision aligns with a recent Supreme Court ruling that limits federal agency power, marking a significant shift in the regulatory landscape by limiting the DOL’s regulatory authority. However, California employers must still navigate a different set of state-specific rules. Here are five crucial points every California employer should understand about tips, tip pools, and service charges.

1. Employee Ownership of Tips
Under California law, any voluntary tip left by a customer is the sole property of the employee. Employers are prohibited from taking or sharing any portion of these tips. According to Labor Code section 351, tips belong exclusively to the employee for whom they were intended. But mandated tip pooling agreements can be implemented as discussed below.

2. Legality of Employer-Mandated Tip Pooling
California law allows for employer-mandated tip pooling as long as the process is fair, reasonable, and excludes managers, owners, or supervisors. The courts have upheld tip pooling arrangements where tips are shared among employees in the chain of service, provided that the distribution is reasonable. For example, courts have approved scenarios where a percentage of tips is allocated to waitstaff, busboys, and bartenders, as long as the distribution reflects the actual service contribution of each role.

3. No Tip Credits Towards Minimum Wage
Unlike some other states as discussed above, California law does not allow employers to use tips as a credit toward meeting the minimum wage requirement. This departs from the FLSA that permits employers to credit tips towards an employee’s wages to a certain amount. However, because this is not permitted in California, regardless of the amount of tips an employee receives, the employer must pay the full state, local minimum wage or the minimum wage required for fast-food restaurants under AB 1228. Tips cannot be counted towards satisfying the minimum wage obligation.

4. Eligibility to Participate in Tip Pools
Employees who are part of the “chain of service” can be included in a mandatory tip pool. This includes not just waitstaff, but also kitchen staff, bartenders, and dishwashers who contribute to the service experience. However, managers, owners, and supervisors generally cannot partake in the tip pool. An exception exists in specific cases where a service employee, who also acts as a supervisor, can share tips left in a collective tip box. Employers should approach this exception cautiously to avoid legal liability.

5. Distinction Between Tips and Mandatory Service Charges
It’s essential for employers to distinguish between tips and mandatory service charges. While tips are voluntary and belong to the employee, mandatory service charges are set by the employer and belong to the business. Employers have discretion over how to distribute these charges, but must include them when calculating an employee’s regular rate of pay for overtime purposes. Failure to do so can result in costly legal repercussions.

    By understanding these five key points, California employers can navigate the complexities of tip-related regulations more effectively, ensuring compliance with state laws while fostering a fair and transparent workplace for their employees.

    As a business owner or HR professional, staying informed on the latest in employment law is crucial to protecting your company. However, with the daily demands of running a business, it’s easy to overlook some of the valuable resources that are available to you—especially the ones that are free and designed specifically to help you navigate the complexities of employment law.

    Here’s a quick reminder of the free resources Zaller Law Group published that you may not be fully utilizing. These tools are designed to keep you updated, informed, and equipped with the knowledge to handle various employment law issues with confidence.

    1. Subscribe to Our YouTube Channel

    If you’re not already subscribed to our YouTube channel, you’re missing out on a wealth of video content that dives deep into various aspects of employment law. From quick tips to in-depth discussions on hot topics, these videos are a convenient way to stay informed. You can subscribe here.

    2. Follow Our Blog: The California Employment Law Report

    Our blog is a go-to source for the latest news, updates, and expert analysis on California employment law. Whether you’re dealing with wage and hour issues, employee discipline, or new legislation, my blog provides timely insights that can help you stay ahead of the curve. Don’t miss out—subscribe to the blog here.

    3. Download Essential White Papers

    To help you manage your workforce more effectively, we’ve published several white papers that offer practical advice on critical topics. Two of the most popular are:

    • Termination Checklist: Ensure that your termination process is thorough and legally compliant by downloading the checklist here.
    • Best Practices When Conducting Employee Discipline: Learn the best practices for handling employee discipline to avoid legal pitfalls and maintain a fair workplace. Download it here.

    These white papers are excellent resources to have on hand, so make sure you’ve taken advantage of them. We have published additional white papers regarding best practices for meal and rest breaks, arbitration agreements, and use of daily wage and hour attestations. Feel free to contact us if you are interested in access to these resources.

    4. Get Notified About Upcoming Seminars/Webinars

    In addition to written content, Zaller Law and its attorneys also host regular monthly seminars and webinars that provide in-depth training on various employment law topics. These sessions are invaluable for staying up-to-date with the latest developments and understanding how they apply to your business. You can subscribe to receive notices about these events here.

    5. Stay Updated with Our Podcast

    If you prefer audio content, our podcast is the perfect way to stay informed on the go. Each episode covers a range of employment law topics, offering insights and practical advice that you can apply in your business. Don’t miss out on new episodes—subscribe here.

    One last item—make sure you subscribe to receive text message alerts for important, timely legal developments. This is the fastest way to stay informed about critical changes that could impact your business, ensuring you’re always up to date, no matter where you are. Subscribe to Text Brief here.

    Don’t let these free tools go to waste—start utilizing them today, and you’ll be better prepared to handle whatever employment law challenges come your way.

    Have a great weekend!

    As we reach the midpoint of 2024, it’s essential for California employers to take note of a few key legal updates that could impact their businesses. From increased minimum wages to new workplace safety requirements, the first half of the year has introduced important legal updates that require attention. This mid-year review offers five reminders on what employers should keep in mind to stay compliant with the latest laws and regulations:

    1. Private Attorneys General Act (PAGA) Reform

      California employers will be receiving immediate relief under the new Private Attorneys General Act (PAGA) reform law.  The California Legislature passed AB 228 and SB 92 on June 27, 2024, and Governor Newsom signed both bills into law on July 1, 2024.  Our analysis of the reform is set forth in our previous article here.  This article focuses on what steps California employers should be considering in light of the new reform law.  Because the new law applies to any PAGA cases file on or after June 19, 2024, employers should consider taking steps to limit the penalties that are available under PAGA (read our prior article here to learn more). 

      2. Naranjo v Spectrum Security Services, Inc. – California Supreme Court ruling in favor of employers

      The California Supreme Court’s decision in Naranjo v. Spectrum Security Services, Inc. represents a significant win for employers across the state, providing much-needed clarity on wage statement requirements and the categorization of premium pay for missed breaks. While this ruling alleviates some of the complexities surrounding California’s stringent labor laws, it also serves as a reminder that vigilance in wage and hour issues remains crucial.  The California Supreme Court ruled that if an employer reasonably and in good faith believed it was providing complete and accurate wage statements in compliance with section 226 of the Labor Code, then it has not knowingly and intentionally failed to comply with wage statement requirements.

      3. Fast food minimum wage increase July 1, 2024

      The minimum wage for California’s fast-food operators will increase to $20 per hour on April 1, 2024 under AB 1228.  The new law applies to national fast food chains, which are defined as “limited-service restaurants consisting of more than 60 establishments nationally that share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products, and services, and which are primarily engaged in providing food and beverages for immediate consumption on or off premises where patrons generally order or select items and pay before consuming, with limited or no table service.

      4. Many local cities and counties across California increased their minimum wage requirements on July 1, 2024

      For example, here is a list of a few local cities and counties new minimum wage requirements effective July 1, 2024:

      • West Hollywood – $19.08
      • Los Angeles City – $17.28
      • Los Angeles County – $17.27
      • Malibu – $17.27
      • Pasadena – $17.50
      • San Francisco – $18.67
      • Santa Monica – $17.27

      See here for full list of the city and county minimum wages across California. 

      5. July 1, 2024 – Deadline for California employers to implement workplace violence prevention plan

      As of July 1, 2024, California employers are required to implement additional measures for workplace safety. This legislation compels most non-health care related businesses to review and develop certain workplace violence measures by mandating the creation, execution, and ongoing maintenance of a Workplace Violence Prevention Plan (WVPP).  For more information, read our prior article about the new requirement here. 

      I am attending VeeCon this week, which is taking place in Los Angeles from August 9 – 11.  VeeCon, the idea of Gary Vaynerchuk, is described as a conference that is a mix between Davos and South by Southwest. Today, a panel discussion titled “Is It Time For Another Look at Blockchain?”  The panel discussed how the blockchain can be used by brands to engage their community of customers through Web3 technologies.  The employment lawyer in me started thinking about whether it would be legal for employers to pay employees in cryptocurrency.  While the interest and attention on the blockchain, web3, and cryptocurrencies has waned over the last couple of years, I’m still bullish on the technology and believe it will be impacting employers in the next couple of year.s Here are five issues employers should understand about cryptocurrencies and the blockchain, and how it will likely impact the employment setting in the next few years:

      1. What is a cryptocurrency and the blockchain?

      Cryptocurrencies, such as Ethereum and Bitcoin, are virtual currencies that exits on the blockchain.  A blockchain is a type of database, but by using blockchain technology it is much more secure than a standard database and allows many different people to access and record transactions at the same time.  At the time of publishing this article, Bitcoin and Ethereum are the two largest cryptocurrencies (“crypto”) by market capitalization.  More information about cryptos can be read here.  A very detailed explanation about cryptos and how blockchains work can be read here.

      2. Can employers pay wages in forms other than U.S. currency, such as in Bitcoin or Ethereum?

      Paying employees in crypto could be used to attract talent or make payments to employees located around the world easier for a multinational company.  But would it be legal?  Under federal law, the Federal Labor Standards Act (“FLSA”) mandates “payments of the prescribed wages, including [minimum wage and] overtime compensation, in cash or negotiable instrument payable at par.” 29 CFR § 531.27(a).  Presumably, one could make the case that a payment to an employee in crypto would be a payment “at par” as long as the conversion rate was equal to the applicable minimum wage rate or other required salary amounts to meet the definition of an exempt employee.  Indeed, the Department of Labor has stated in the past that employers could combine the value of U.S. Dollars and foreign currency “in order to satisfy the minimum salary requirement for the application of the Fair Labor Standards Act (FLSA) executive, administrative, and professional exemption.”  If crypto is accepted as a valid currency, it seems reasonable that crypto should be treated similarly to foreign currencies in this regard.

      Under California law, Labor Code section 200(a) defines wages as “all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.” There is no specification that wages must only be paid in U.S. Dollars.  California courts have also held that wages are “not only the periodic monetary earnings of the employee but also the other benefits to which he is entitled as a part of his compensation.” Wise v. Southern Pacific Co. (1970).  Wages can include money, room, board, clothing, vacation pay (a form of deferred compensation) and sick pay.

      California Labor Code section 212 also prohibits employers from paying employees in “script, coupon, cards, or other thing redeemable, in merchandise or purporting to be payable or redeemable otherwise than in money.”  This section was designed to make it illegal for employers to pay employees with a coupon that was only redeemable at the “company store”, a past practice documented in the song “Sixteen Tons” written by Merle Travis.

      A California court explained, “The accepted purpose of Labor Code section 212 is to prevent employers from paying wages by giving orders … payable only in goods, or orders of an indefinite nature not payable on demand, but at some future time, or paychecks which cannot be honored because of the drawee’s insufficient funds.”  Brown v. Superior Court (2011).  However, since cryptocurrency is a form of “money,” and Labor Code section 212 does not specifically require U.S. currency, there is an argument that section 212 does not prohibit payment of wages in cryptocurrency.  As set forth above, “wages” under California Labor Code section 200 can take many forms, not just fiat currency.

      Until there is further guidance on this issue under the FLSA and California law, employers who are looking to pay employees in crypto could take a hybrid approach.  The employer could avoid many of these foundational issues by paying the employee minimum wage or the required salary needed to meet an exemption in U.S. Dollars, and then offer the employee additional payment in crypto.  While employers considering this type of hybrid approach would still need to be careful not to run afoul various federal, state, and local regulations, the approach would remove some of the more fundamental issues that the legal system will need time to develop regulations to catch up to the technology.

      3. California’s additional restrictions on forms of wages.

      Employers considering paying employees in crypto would also need to navigate other areas of the California Labor Code.  For example, Labor Code section 212 California requires that wages must be payable without discount.  Therefore, any transaction fees that an employee must pay to redeem or access the cryptocurrency would violate this provision.  Moreover, Labor Code section 212 requires payments by “order, check, draft, note, memorandum, or other acknowledgement of indebtedness” to show the name and address of an establishment within California where the instrument can be redeemed.  Since crypto is virtual, it is an open question regarding how this requirement would apply to payments made to employees.  It also raises the potential argument that since crypto currency is not “negotiable and payable in cash, on demand…at some established place of business in the state,” it is not a valid form of “money” to make payments to employees.  On the other hand, it could be argued that crypto is redeemable anywhere in California with an internet connection, and an employee can “cash” their crypto into their bank account almost instantaneously.

      4. Value fluctuation issues.

      With the volatility of cryptocurrency, there could also be potential issues regarding the value of the cryptocurrency in terms of when it is paid to employees.  Given the volatility of crypto, there could be wide valuation fluctuations even from the end of the payroll period to the time that the employee receives the payment.  There would also be potential calculation issues regarding the appropriate conversion rate employers would need to make if an employee was owed past unpaid wages, or premium wages for missed meal or rest breaks.  What if the crypto currency increased in value over 500% since the time it is determined that an employee was owed a premium wage for a missed meal break?  Could the employer pay the employee the value of the crypto at the time the missed meal break occurred, or would the employer need to pay the current increased value of the crypto?

      5. Future potential of the blockchain in the employment setting.

      Beyond cryptocurrency, the blockchain technology will likely become a part of everyday life and will have many applications in the employment context.  Since a blockchain is like a database that can store private information, the blockchain could be used by employees to prove educational history, work history, and the attainment of certain certifications.  In 2017, Massachusetts Institute of Technology has issued students virtual diplomas recorded on the blockchain, that the students can securely share with whomever they choose.  Likewise, employers could utilize the technology to issue titles, internal certifications, and record dates of employment to create a digital record that employees could chose to share the information with when searching for another job or verifying salary for a loan.

      Parties involved in litigation should always keep an open mind about mediation at every stage of litigation.  Cases that resolve without having to go through a trial or arbitration can potentially save the parties a lot of time and money in litigation.  This article touches on five items employers involved in litigation need to understand about mediation.

      1. Mediation is non-binding.
      Mediation is a voluntary process in which litigants (or even parties prior to litigation) agree to use a private third-party to help settle the case. People sometimes confuse mediation with arbitration. Arbitration is when parties agree to use a private third-party to hear their case, much like a judge, to make decisions about the case, and eventually decide the case. Arbitration can be binding on the parties, and the arbitrator actually decides who is right and wrong as a matter of law. Alternatively, in a mediation the mediator is not deciding any issues about the case, but is simply hearing both sides’ positions, and then works with the parties to see if there is a potential resolution that both parties would agree to. The mediator has no ability to decide issues of the case, or make any binding rulings about the case. The mediator is only an unbiased third-party attempting to get the parties to consider a possible resolution to the case.

      2. Mediation takes place with a private mediator, usually not the court.
      The parties voluntarily agree upon the selection of a mediator. Usually the mediator has expertise in the area of the law that the case involves so that he or she can move quicker into the substance of the parties’ disagreement. There are many retired judges or lawyers that work as mediators. Some mediators are active practicing lawyers that also work as a mediator.
      The mediation usually takes place at the mediator’s office, but since COVID, the trend is to conducted meditations remotely with software like Zoom. When the mediation is in person, the mediator has the parties in separate rooms, and the mediator walks between the two rooms. When conducted remotely, the mediator will usually have each party in a separate Zoom meeting room. Often times the parties will not see other side during the mediation.

      3. Negotiations during the mediation are privileged and cannot be used against either party during litigation.
      California law prevents any of the negotiations or potential admissions made during mediation from being brought up in court or during litigation. The rationale for this rule is that the courts want people to be able to negotiate during mediation, this involves some give and take. Therefore, in order to assist the mediation process, any of the discussions or negotiations during mediation are prevented from being used against the other party. This allows parties to discuss items more freely during mediation in hopes of having a better chance at resolving the case. However, it should be noted that if a party makes an admission during mediation, the other party can still conduct discovery after the mediation and bring that admission into the case through the standard discovery process. So parties should follow their counsel’s advice about which facts to share during the mediation process. But rest assured, the fact that one party agreed to offer a certain amount to settle the case during mediation cannot be brought up to the jury later in the case as a way to establish liability.

      4. The mediator’s only role is to get the case settled.
      The mediator is not there to make friends, tell you if she believes you more than the other side, or make a value judgment about the case or people involved. His or her role is simply to get the case resolved. This usually means that a successful mediator is able to have each party questioning the strength of their case. A successful mediation usually means that both sides are unhappy with the resolution.

      5. Even if the case does not settle at mediation, it could still be a successful mediation.
      The parties need to understand that mediation is a process and it is hard to settle cases in one day – even a long day – of mediation. Sometimes it is clear during the mediation that the parties cannot settle the case. Sometimes it takes the mediator working with the parities for weeks after the mediation to arrive at a settlement. If the case does not settle, it is also beneficial for the parties to realize that maybe they are still too far apart to agree to a settlement and there needs to be further discovery and/or motions filed to narrow down the issues that are being litigated.