As California employers already know, noncompliance with the numerous employment regulations can result in serious legal consequences, monetary penalties, and damage to an organization’s reputation. One of the most effective ways for employers to ensure compliance with employment laws is by using checklists. Checklists are useful tools that can help employers keep track of their compliance obligations and reduce the risk.  It has been established that checklists reduce accidents when used by pilots and doctors, there is no reason why common employment law matters should not have checklists to work from.  This Friday’s Five covers five reasons why employers should use checklists for employment law compliance, and some recommendations for checklists:

1. Ensuring consistency and standardization

Checklists help employers ensure that all their employees are treated equally and fairly by applying the same standards and policies across the board. By creating a standard checklist for disciplinary actions, employers can be sure that all employees receive the same treatment and that no one is inadvertently left out or given preferential treatment.

2. Reducing risk of noncompliance

California employment law can be complex and confusing, with numerous regulations and requirements to keep track of. By using checklists, employers can systematically ensure that they are complying with all the relevant regulations and avoid the risk of noncompliance. Checklists also help employers stay up-to-date with changes to employment laws, which can be especially important when operating in multiple states or across various local city and county requirements across California. 

Some topics we generally recommend employers develop checklists for include:

  1. new hires and on boarding employees
  2. records and retention policies
  3. wage and hour issues
  4. meal and rest break issues
  5. end of employment issues
  6. employee training requirements

3. Improving communication and collaboration

Checklists can be shared among different departments, facilitating communication and collaboration across the organization. This can help ensure that all managers are aware of compliance requirements and can work together to ensure compliance. By involving multiple departments in the compliance process, employers can increase the likelihood of catching any compliance issues before they become serious problems.

4. Supporting audits and investigations

Employers who use checklists for employment law compliance are better prepared for audits and investigations. Checklists can help employers quickly and easily gather the information needed to respond to inquiries and requests from government agencies, such as the California Labor Commissioner, Department of Labor, or the Equal Employment Opportunity Commission. By having all the necessary information in one place, employers can minimize the disruption and stress of an audit or investigation.

5. Demonstrating good faith efforts

Finally, using checklists for employment law compliance can demonstrate an employer’s good faith efforts to comply with regulations. This can be especially important in the event of a legal dispute or investigation. By showing that they have taken reasonable steps to comply with the law, employers can potentially mitigate the consequences of potential penalties.

By implementing a standard checklist for employment law compliance, employers can save time, reduce costs, and protect the organization from legal and financial consequences.  Looking for some example outlines of audits, feel free to email me, I would be happy to share an example template to help start the process.

California law starts from a presumption that all employees are non-exempt employees, meaning that they are not exempt from the Labor Code requirements, such as overtime pay, meal and rest breaks, and minimum wage. Exempt employees are designated as such because they are “exempt” from certain wage and hour requirements due to their duties and pay. However, the employer bears the burden when classifying an employee as exempt, and simply providing a title to an employee does not make them exempt.

This week, the U.S. Supreme Court issued a decision in Helix Energy Solutions Group, Inc. v. Hewitt that examined the issue of the “salary basis” test under federal law.  As explained below, because California does look to federal law when interpreting its wage and hour laws, the decision needs to be understood by California employers and is a good reminder of the heightened requirements California employers have to meet the exemption requirements under California law. 

1. Overview of federal and California white-collar exemptions

The Fair Labor Standards Act (FLSA) exempts employees employed as in an executive, administrative, or professional capacity (these exemptions are often referred to as the white-collar exemptions).  The Department of Labor issued regulations that set forth the requirements for employees to meet these exemptions, generally looking to (1) the employee’s duties, (2) how much the employee is paid, and (3) how the employee is paid, such as by salary, wage, commission, or bonus.

Likewise, California law recognizes certain exempt categories (including the executive, administrative, and professional) of employees for purposes of overtime and other wage and hour requirements.  California Labor Code section 515 and California’s Wage Orders set forth the requirements for exempt employees in California.  It is important to note that while California and federal law are similar in some regards, and sometimes California looks to federal law when interpreting its own laws, there are significant differences that employers must be aware of for any exempt analysis under California law. 

2. California looks to federal law when interpreting its Wage Orders

The federal Fair Labor Standards Act of 1938 (29 U.S.C. § 201 et seq.) applies a “salary basis test” to determine whether employees who are classified by their employers as “salaried,” and therefore exempt from minimum wage and overtime requirements, are in fact properly subject to exemption. California state law must meet or exceed standards adopted under federal law, and California follows the federal salary basis test to a substantial degree. See Kettenring v. Los Angeles United School Dist. (2008). 

In Negri v. Koning & Associates, a California Court of Appeals explained that the “Division of Labor Standards Enforcement (DLSE) construes the IWC wage order to incorporate the federal salary-basis test for purposes of demining whether an employee is exempt or nonexempt.” (referring to DLSE Opinion Letter No. 2002.03.01 (Mar. 1, 2002).  The Court in Negri acknowledged that while the DLSE opinion letters are not controlling, they are instructive on the wage orders, and therefore look to federal law on the definition of “salary.” 

3. Salary basis test under the FLSA

At issue in Helix Energy Solutions Group, Inc. v. Hewitt, was whether the employee was paid on a salary basis.  Plaintiff worked as a “tool-pusher” for Helix Energy Solutions Group on an offshore oil rig.  He would work 12 hours a day, seven days a week, for a 28-day “hitch.”  Then he would have 28 days off.  Helix paid plaintiff on a daily-rate basis, which started at $963 per day and increased to $1,341 per day, which amounted to more than $200,000 on an annual basis.  Plaintiff claimed that because he was paid on a daily basis, he did not meet the salary basis requirement to be exempt, and therefore should be paid for his overtime. 

Federal regulations provide that “An employee will be considered to be paid on a ‘salary basis’ … if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. … [A]n exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.” (29 C.F.R. § 541.602(a).)

The U.S. Supreme Court held that plaintiff was not paid on a salary basis.  The Court explained, “A daily-rate worker’s weekly pay is always a function of how many days he has labored.  It can be calculated only by counting those days once the week is over – not, [as the regulations require], by ignoring that number and paying a predetermined amount.”  The Court noted that the definition of “salary” refers to “fixed compensation regularly paid, as by the year, quarter, month or week,” which is distinguishable from “wages” for “[p]ay given for labor’ at ‘short stated intervals.’” (citing Webster’s New International Dictionary).

4. Salary basis test under CA Law

The California Court of Appeals in Negri v. Koning & Associates examined the same issue as reviewed in Helix, but under California law.  The case was decided in 2013, and reviewed the issue of whether an insurance claims adjuster who was paid $29 per hour with no minimum guarantee qualified as an exempt employee under California law. 

As the Court in Negri explained, “Exemptions from the overtime pay requirement are proper only where ‘the employee is primarily engaged in the duties that meet the test of the exemption, customarily and regularly exercises discretion and independent judgment in performing those duties, and earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.’ (Lab. Code, § 515, subd. (a).)”  The Wage Orders also govern, and the Court explained that while they do not define salary, the term “salary” “is generally understood to be a fixed rate of pay as distinguished from an hourly wage.” The Court held that because defendant stipulated that it never paid plaintiff a guaranteed salary and that if plaintiff worked fewer claims he made less money, therefore “plaintiff was not paid ‘a predetermined amount’ that ‘was not subject to reduction based upon the quantity of work performed.’”  Since plaintiff was not paid a salary, defendant did not prove that he qualified as an administrative exempt employee under the Wage Orders. 

5. Rational for the salary basis test

The Court explained in Helix, that the overtime laws were “designed both to ‘compensate [employees] for the burden’ of working extra-long hours and to increase overall employment by incentivizing employers to widen their ‘distribution of available work. Employees therefore are not ‘deprived of the benefits of the [overtime compensation] simply because they are well paid.”  The salary basis test “create a compensation system functioning much like a true salary – a steady stream of pay, which the employer cannot much vary and the employee may thus rely on week after week.” 

The Court also explained that Helix could comply with the salary-basis requirement in two ways:

  1. Add to plaintiff’s per-day rate a weekly guarantee that satisfied the requirements; or
  2. Could convert plaintiff’s compensation into a straight weekly salary for time spent on the rig.

Remember, the salary basis test is only one aspect of the federal and California exemption test.  Employers still must show that the employee earned the required salary level and meets the duties test in order to qualify for the applicable exemption.  More information about common exemptions under California law and the requirements to meet the exemptions can be read here.

One last note for wage and hour practitioners: Justice Kavanaugh raised an interesting point in his dissenting opinion about whether the Department of Labor’s regulations that set out the salary basis and level requirements could be challenged in the future as being inconsistent with the FLSA.  He noted that the FLSA statute only “focuses on whether the employee performs executive duties, not how much an employee is paid or how an employee is paid” and may not survive a challenge.  He notes, “But I am hard-pressed to understand why it would matter for assessing executive status whether an employee is paid by salary, wage, commission, bonus, or some combination thereof.” 

California law presumes that all employees are non-exempt employees, meaning that they are not exempt from the Labor Code requirements, such as overtime pay, meal and rest breaks, and minimum wage. Exempt employees are designated as such because they are “exempt” from certain wage and hour requirements due to their duties and pay. However, the employer bears the burden when classifying an employee as exempt, and simply providing a title to an employee does not make them exempt. The employee must meet very specific requirements for each applicable exemption, and if the requirements are not met the employer must comply with all wage and hour requirements – such as overtime pay, etc…. It is also important to note that some exemptions only exempt the employee from specific Labor Code provisions (for example, the inside sales exemption only exempts the employee from overtime pay requirements, but the employer is still required to provide meal and rest breaks).

Looking to learn more about exempt employee classifications?  My firm is hosting a webinar on Wednesday, February 28, 2023 at 10 a.m. PT: Understanding Exempt v. Non-Exempt Classifications Under California Law.  Registration is here.

Below is a review of some common exemptions that arise in a workplace under California law and the requirements to meet each one:

1. Executive/managerial exemption
In order to meet the executive (managerial) exemption, the employee must meet all of the following requirements:

  1. Employee’s duties and responsibilities involve the management of the enterprise in which he or she is employed or of a customarily recognized department or subdivision of the enterprise;
  2. Employee customarily and regularly directs the work of two or more other employees;
  3. Employee has the authority to hire or fire other employees, or whose suggestions and recommendations as to the hiring or firing and as to the advancement and promotion or any other change of status or other employees is given particular weight;
  4. Employee customarily and regularly exercises discretion and independent judgment in performing his or her duties;
  5. Is “primarily engaged” in duties that meet the test of the exemption;
  6. Earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.  With the increase to the California minimum wage, effective January 1, 2023, the minimum annual salary to meet the exemption increases to $64,480 ($5,373.34 per month).

The term “primarily engaged in” means that more than one-half of the employee’s work time must be spent engaged in exempt work and differs substantially from the federal test which simply requires that the “primary duty” of the employee falls within the exempt duties. Therefore, to qualify for this exemption, the employee must spend more than 50% of their work time on exempt duties.

2. Administrative exemption
To meet the administrative exemption, an employee must meet all of the following requirements:

  1. Employee spends more than one-half of their work time performing office or non-manual work directly related to management policies or general business operations for the employer or the employer’s customers;
  2. Employee “customarily and regularly” exercises discretion and independent judgment in carrying out job duties as to matters significant to the employer’s business;
  3. Performs his or her job only under general supervision and works along specialized or technical lines requiring special training, experience, or knowledge; and
  4. Is paid a salary equivalent to no less than two times the state minimum wage. With the increase to the California minimum wage, effective January 1, 2023, the minimum annual salary to meet the exemption increases to $64,480 ($5,373.34 per month).

3. Computer professional exemption
To be an exempt computer professional, the employee must meet the following requirements:

1. The employee is primarily engaged in work that is intellectual or creative and requires the exercise of discretion and independent judgment.

“Primarily” is defined as requiring more than 50% of the employee’s work time be spent on these types of duties.

2. The employee is primarily engaged in duties that consist of one or more of the following:

  • The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications.
  • The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to, user or system design specifications.
  • The documentation, testing, creation, or modification of computer programs is related to the design of software or hardware for computer operating systems.

3. The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering.

4. The employee’s hourly rate of pay, or annual salary if paid on salaried basis, meets a minimum threshold amount set by California’s Division of Labor Statistics and Research (DLSR). Effective January 1, 2023, a computer software employee’s minimum hourly rate of pay exemption from $50.00 to $53.80, the minimum monthly salary exemption from $8,679.16 to $9,338.78, and the minimum annual salary exemption from $104,149.81 to $112,065.20.

4. Commissioned inside sales exemption
To qualify as an exempt commissioned inside sales employee, an employee must meet the following requirements:

  1. Employee’s earnings must exceed one and one-half times the California minimum wage; and
  2. More than half of the employee’s compensation must be commissions.

Employers must note that this exemption is only for the overtime requirement, and other wage and hour requirements such as minimum wage, meal and rest breaks, time recording requirements still must be met.

5. Outside salesperson exemption
To qualify as an exempt outside salesperson the employee must:

  1. Be at least 18 years old;
  2. Must customarily and regularly work more than 50% their work time away from the employer’s place of business; and
  3. Must be engaged in selling tangible items or obtaining orders or contracts for products, services, or use of facilities.

There are many exemptions, and many nuances to each exemption, so employers should perform this analysis very carefully and receive advice from an experienced attorney or HR professional when classifying employees as exempt.  Hope you can join us on February 28, 2023 for our webinar discussing this topic in more detail. 

There is a lot to report on a state and on the Los Angeles local level as we start February 2023.  This Friday’s Five covers updates on Cal/OSHA ETS, and LA City and County supplemental paid sick leave updates and newly announced minimum wages:

1. Los Angeles City COVID-19 supplemental paid Sick leave (SPSL) expires February 15

Los Angeles City COVID-19 Supplemental Paid Sick Leave set to expire on February 15, 2023. The Los Angeles City’s website provides the following:

“As a result of Mayor Garcetti and the City Council’s actions to end the COVID-19 Emergency Declaration on February 1, 2023, Mayor Garcetti’s Public Order regarding Supplemental Paid Sick Leave will expire two weeks after February 1, 2023.”

More information can be found on the City’s website here.

2. Los Angeles County’s COVID-19 emergency declaration remains in place, with no clear indication of when it will be lifted

Unlike the City, Los Angeles County has not lifted its COVID-19 emergency declaration, and employers with employees in the County still must comply with the County’s SPSL requirement.  For more information about the County’s SPSL requirements, see our prior article here.

When will the County lift its emergency?  There is no indication, and Los Angeles County Public Health Director Barbara Ferrer told the LA Times recently, “We’re not lobbying to extend the emergencies. What we are doing is taking a hard look at what protections are offered by the emergency declarations and, if things go away, what would be put in place to mitigate any unanticipated or unintended consequences.”

3. Cal/OSHA Emergency Temporary Standards (ETS) expired, and is replaced with COVID—19 Prevention Non-Emergency Regulations

On the state level, on Friday, February 3, Cal/OSHA’s COVID—19 Prevention Non-Emergency Regulations became effective replacing the Emergency Temporary Standards.  These regulations replace the Emergency Temporary Standards.  One of the biggest changes is the elimination of “exclusion pay” for employees who cannot work for certain COVID-related reasons.  The new regulations remain effective for two years, except for the record keeping requirements that will remain in effect for three years.  Cal/OSHA’s website setting forth updated fact sheets, FAQs, and an updated COVID-19 model written program is available here.

The new non-emergency regulations can be found here.

4. Los Angeles City Minimum Wage Increase Announced: $16.78 on July 1, 2023

On February 1, 2023, the City of Los Angeles announced that its minimum wage will increase to $16.78/hour on July 1, 2023. More information and the required updated poster is available on the City’s website.

5.  Los Angeles County Minimum Wage Increased Announced: $16.90 on July 1, 2023

County of Los Angeles maintains its own minimum wage, and the county recently announced that as of July 1, 2023, its minimum wage will increase to $16.90/hour. The County’s website with more information and updated workplace posters is available here.

Employers with employees in Los Angeles City and County need to start planning for the increased minimum wage now.  Learn more about key items employers need to consider for compliance with the state and local minimum wage requirements for California in our article here.

As an employer in California, it is important to be aware of the state’s vacation policies that are unique to California. Below are some regulations in California that employers need to be aware of to remain compliant with California law.  This Friday’s Five is a reminder of five issues on vacation policies that can create traps for California employers:

1. No use-it-or-lose-it policies permitted
Under California law, vacation is treated the same as earned wages and vest as the employee performs work. Because vacation is earned proportionally as the employee works, policies requiring employees to lose vacation already earned is illegal under California law.

2. Reasonable caps are allowed
While employers cannot implement “use-it-or-lose-it” policies, they can place a reasonable cap, or ceiling, on vacation accrual. The DLSE explains:

Unlike “use it or lose it” policies, a vacation policy that places a “cap” or “ceiling” on vacation pay accruals is permissible. Whereas a “use it or lose it” policy results in a forfeiture of accrued vacation pay, a “cap” simply places a limit on the amount of vacation that can accrue; that is, once a certain level or amount of accrued vacation is earned but not taken, no further vacation or vacation pay accrues until the balance falls below the cap. The time periods involved for taking vacation must, of course, be reasonable. If implementation of a “cap” is a subterfuge to deny employees vacation or vacation benefits, the policy will not be recognized by the Labor Commissioner.

3. Vacation is a form of earn wages that must be paid out according to final pay requirements
An employee who is discharged must be paid all of his or her wages, including accrued but unused vacation, immediately at the time of termination. See Labor Code Sections 201 and 227.3.  More information about the timing and payment of final wages can be read here.

4. Deductions not allowed from employee’s final wages for unaccrued vacation time
Vacation is treated as a form of wages under California law, and by allowing employees to take vacation time before it is earned is similar to providing a loan.  Employers may not utilize self-help remedies to recover debts from the employee’s final paycheck, including deducting wages owed to an employee to cover vacation that time was used but had not yet been accrued by the employee.

5. “Cliff vesting” policies are problematic
Employers may set probationary periods or waiting periods during which times employees do not accrue vacation time. However, the DLSE maintains that employers may not maintain a policy that grants employees a lump sum of vacation upon reaching certain dates (for example, such a policy would grant the employee five days of vacation at the employee’s one year anniversary of work, but not permit the employee to take any vacation prior to the anniversary date).

The DLSE’s view on this type of “cliff vesting” is that the employer is attempting to provide for accrued vacation, but at the same time is attempting to limit its liability of having to pay out a pro rata share of the accrued vacation if the employee does not work until the date the vacation is granted to the employee.  Many employers avoid these potentially problematic lump sum grants of vacation, and simply set a time period (i.e., the employee’s first six months of employment) that the employee does not accrue vacation.

California law regarding vacation policies is vastly different than federal law and other states. It is essential for employers to understand these obligations to avoid falling into legal traps. As we start 2023, it’s a good time to review and update your company’s vacation policies to ensure compliance.

The hiring process in California can be confusing: there are various required federal and state documents that must be reviewed and signed for new employees. It is imperative for California employers to familiarize themselves with the requirements for their local jurisdictions and industries to minimize their legal risk.

Here are five key categories of documents for new hires:

1. Offer Letter

An official offer letter can be the best way to communicate with the new candidate to avoid misunderstanding about the job, salary and other terms and conditions of employment.  Offer letters should at least address the following items:

  • Terms of employment
  • The employee’s at-will status
  • Duties of the position
  • Start date
  • Exempt or non-exempt status
  • Wage or salary
  • Benefits, if any
  • Other conditions of employment (for example, applicant must pass a medical exam, drug test or background check)

2. I-9, Employment Eligibility Verification

Federal law requires completion of Form I-9 to verify employee’s identity and employment authorization. The USCIS has not yet released the updated I-9 Form in 2023, but the current USCIS I-9 can be used until an updated version is available.

3. Federal and State Tax Withholding Forms

Both Federal W-4 Form and California DE 4 Withholding Certificate must be provided to newly hired employees. 

4. Required Pamphlets

Generally speaking, most employers in California are required to provide the following documents with new employees upon hire:

  • Time of Hire Pamphlet
  • Sexual Harassment Pamphlet (DFEH-185P)
  • EDD Disability Insurance Pamphlet (DE 2515)
  • Paid Family Leave Pamphlet (DE 2511 )
  • Rights of Victims of Domestic Violence, Sexual Assault and Stalking Pamphlet
  • Wage and Employment Notice to Employees (Labor Code section 2810.5) (DLSE-NTE ). This form is only required for non-exempt employees, and more information about the form can be read here.
  • New Health Insurance Marketplace Coverage Options and Health Coverage Form (OMB No. 1210-0149)
  • General Notice of Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage rights (if 20 or more employees and employer offers health plan)
  • Work Permit for Minors (if applicable) (CDE Form B1-4)

These documents are routinely updated each year – so employers need to update the documents provided to employees on at least an annual basis.

Note that many of the state forms listed above must be given to the employee in their primary language.  Employers need to also check their local cities and counties to ensure that they are providing any other required documents, and certain industries have specific required disclosures as well. 

5. Other Important Documents

Other documents often recommend that employers provide to new hires include:

  • Meal and rest break acknowledgment
  • Employee’s meal period waiver for shifts less than six hours
  • Employee handbook acknowledgment
  • Arbitration agreement
  • Confidentiality/non-disclosure agreement

As we start 2023 it is a perfect time for companies to conduct a California employment law practices audit to ensure that policies are compliant, managers are properly trained, and the company is maintaining the required records for the necessary length of time.  Here are five topics to review in conducting an audit and a few suggested questions for each topic:

1. Hiring Practices

  • Are applications seeking appropriate information?
    • Ensure compliance with state and local ban the box regulations.
  • Are new hires provided with required policies and notices?
  • Are new hires provided and acknowledge recommended policies?
    • For example: meal period waivers for shifts less than six hours
  • Are hiring managers trained about the correct questions to ask during the interview?
  • Does the company provide new hires (and existing employees) with arbitration agreements that comply with California law?

 2. Records

  • Are employee files maintained confidentially and for at least four years?
  • Are employee time records maintained for at least four years?
  • Are employee schedules maintained for at least four years?
  • Do the managers have set forms for the following:
    • Employee discipline and write-ups
    • Documenting employee tardiness
  • How is the employee documentation provided to Human Resources or the appropriate manager?
  • Who is involved in reviewing disability accommodation requests?
  • How are employee absences documented?

3. Wage and Hour Issues

  • Does the company have its workweeks and paydays established?
  • Are paydays within the applicable time limits after the pay period as required under the law?
  • Are employees provided with compliant itemized wage statements?
  • Are employees provided a writing setting out their accrued paid sick leave each pay period?
  • Are employees properly classified as exempt or nonexempt?
    • For exempt employees, review their duties and salary to ensure they meet the legal requirements to be an exempt employee.
  • Any workers classified as independent contractors, and if so, could they be considered employees under AB 5?
  • Are nonexempt employees properly compensated for all overtime worked?
  • Is off-the-clock work prohibited?
    • Policy in place?
    • Are managers trained about how to recognize off-the-clock work and what disciplinary actions to take if find employees working off-the-clock?
  • Does the company’s time keeping system round employee’s time?
    • If so, is the rounding policy compliant with the law? (note that meal breaks cannot be rounded pursuant to Donohue v. AMN Services)
  • Are meal and rest period policies set out in handbook and employees routinely reminded of policies?
    • Does the company pay “premium pay” for missed meal and rest breaks? If so, how is this documented on the employee pay stub?
    • Do employees record meal breaks?
    • Are managers trained on how to administer breaks and what actions to take if employees miss meal or rest breaks?
    • Are employees provided attestations to document the reason if the employee missed, took a short, or a late meal break? (See Donohue v. AMN Services)
  • Is vacation properly documented, tracked, and is unused vacation paid out with the employee’s final paycheck?
  • Are all deductions from the employee’s paycheck legally permitted?
  • Are employees reimbursed for all business expenses, such as uniforms, work equipment, mileage for work, and for expenses incurred for working from home (such as internet, cell phones, etc.)?

 4.End of Employment Issues

  • Are employees leaving the company provided their final wages, including payment for all accrued and unused vacation time?
  • Are final paychecks provided to employees within the required deadlines?
  • Does the employer deduct any items from an employee’s final paycheck?
    • If so, are the deductions legally permitted? (Use caution, very few deductions are permitted under California law.)

5. Anti-harassment, discrimination and retaliation

  • Are supervisors provided with sexual harassment training every two years? (If employer has 50 or more employees, supervisors are legally required to have a two-hour harassment prevention training that complies with California law.)
  • Are there steps in place to provide nonsupervisory employees with 1-hour sexual harassment prevention training and once every 2 years thereafter? (Required for employers with 5 or more employees.)
  • Are supervisors and managers discussing the company’s open-door policy to employees at routine meetings with employees? Is this being documented?

Update (September 11, 2023): A deal was reached by labor organizations and a business group that would repeal the FAST Act and implement some aspects of the law – most notably the minimum wage for some fast-food owners will increase to $20 per hour on April 1, 2024 and the regulations establishing joint-employer liability for franchisors and franchisees is removed. Our latest update on the law can be read here.

Update (January 2023): A Sacramento Superior Court Judge granted a preliminary injunction preventing the FAST Recovery Act from going into effect. As a result, the FAST Recovery Act will now be on the 2024 ballot for voters to approve or deny.  

AB 257, termed the Fast Food Accountability and Standards Recovery Act or the FAST Act, proposes to establish a Fast Food Sector Council to regulate California’s fast food restaurants.  The law was signed by Governor Newsom on September 5, 2022.  However, the following day, a coalition in opposition to the law started the process for a referendum of the Act.  On December 5, 2022, the coalition submitted over 1 million signatures in support of the referendum to qualify for the November 2024 ballot. 

Despite the signatures being submitted to the state, the Department of Industrial Relations said on December 27, 2022 that would continue to implement and enforce the law on January 1, 2023.  The coalition challenging the law filed a lawsuit seeking to stop the enforcement of the law while the signature verification process is underway. 

On January 13, 2023, the Superior Court of Sacramento held that the state could not proceed with enforcing the law while the referendum process was underway.  The court found “there is very little harm” to the state and the public in staying the implementation of AB 257 until the signature verification process is completed. The court explained, “The harm to California citizens and electors, in contrast, is great given the Court’s duty to ‘jealously guard’ the people’s right to referendum and the confusion that would occur if AB 257 were temporarily implemented while signatures were verified, and the confusion and uncertainty that could occur if the provisions of [AB 257] were to go into temporary effect.”

As noted by the court, the verification process of the signatures in support of the referendum is estimated to take until between January 27, 2023 and March 13, 2023.  The court’s injunction will remain in place until:

  1. The county elections officers and the Secretary of State determine that the referendum petition failed to contain sufficient valid signatures to qualify for the ballot or
  2. If the referendum qualifies for the ballot, AB 257 is approved by a majority of California voters at an election (which would be November 2024).

A copy of the court’s order can be read here: https://hrlaw.io/FastAct

The FAST Act is a paradigm shift on how regulations are implemented for an industry.   As we have explained previously, the council would be composed of 10 members who are not elected, but are appointed by the Governor, Speaker of the Assembly, and the State Rules Committee.  The council would have the power to set standards for minimum wages, working hours, “and other working conditions related to the health, safety, and welfare of” fast food establishments.  The council would be able to implement regulations more frequently than legislation, the council would only need 6 out of 10 people to pass regulations, and would be subject to less public oversight. Even if the FAST Act eventually becomes law, there are questions regarding whether the legislature has the power to delegate this authority to an unelected council. 

ChatGPT launched on November 30, 2022, and is quickly gaining attention as an AI-based chat platform that responds to natural language inputs.   ChatGPT opens AI up to nearly everyone to use by using a simple chat-based format.  GPT stands for Generative Pre-training Transformer, and it was designed to simulate a conversational format based on chat type of inputs from users.  In addition, there are generative visual Ais, such as DALLE•2 that can create images based on text inputs (which I used to create the image for this post).  The employment lawyer in me began to wonder how employers could utilize AI to help train managers and manage their workforce.  Below are five different tests on how AI could be used by employers in the near future (if not immediately):

1. Training managers

I used ParagraphAI and asked it to explain what the best practices for mangers are.  The software provided the following response:

Best practices for managers involve creating a positive work environment, setting clear expectations, and encouraging open communication. It is important to ensure that all employees feel respected and valued, and that their opinions are heard. Managers should provide consistent feedback and support, and be willing to listen to ideas from their team. Additionally, managers should strive to create an atmosphere of trust, where employees feel comfortable speaking up and voicing their concerns. Finally, managers should be proactive in addressing any conflicts that arise, and ensure that all employees are treated fairly and with respect. By following these best practices, managers can create a productive and successful work environment.

This is not a bad start for some basic manager training. With some modification by employer, one could easily see how the AI could help develop a training program for managers. 

2. Issuing written warnings to employees

Issuing written warning to employees is critical in creating a record of performance issues as well as providing guidance to employees of expectations and how to improve.  AI can assist managers in creating timely written warnings for employees.  For example, I asked ParagraphAI to write a warning to employee for violating an employee handbook policy about fighting with other employees, and it provided this response:

This is to inform you that your recent behavior of fighting with other employees is in violation of the employee handbook policy and is unacceptable. This behavior is disruptive to the workplace and will not be tolerated. As a result, you are receiving a written warning. If there is any further violation of this policy, you will be subject to further disciplinary action, up to and including termination.

A company could easily modify this response slightly, add a few specific details, and then have this warning automatically issued to the employee and place a copy of the warning in the employee’s electronic file. 

3. Documenting performance issues with employees

AI could also assist managers in documenting performance issues among their workforce.  ParagraphAI provided this response to my request to document an employee’s attendance issues:

This employee’s attendance has been a problem for some time now. They have been late to work on multiple occasions, and have even missed days without notifying anyone. This behavior is unacceptable, and it is necessary for the employee to make a change in their attendance habits. It is important for the employee to be punctual and reliable in order to maintain a successful work environment. Going forward, it is essential for the employee to be on time and to notify the appropriate people if they are unable to make it in for any reason.

I also asked ParaphraphAI to write a performance review telling employee to improve teamwork with other workers, and it provided this response:

It is important that all employees work together as a team in order to achieve our common goals. As such, it is imperative that you make an effort to collaborate and cooperate with your co-workers. This could involve actively engaging in conversations, listening to others’ ideas, and offering constructive feedback. Additionally, it is important to be open to different perspectives, and to be willing to compromise and find solutions that work for everyone. By working together as a team, we can ensure that our workplace is a productive and positive environment.

Again, a manager would need to add some specifics and modify this review a bit, but the AI has done much of the work already. 

4. Drafting offer letters and other employment documents

When asked to write an offer letter to a California employee with an at-will provision and an integration clause, the AI provided this response:

Dear [Name],

We are pleased to offer you the position of [Position] at [Company] in California. This position is an at-will employment relationship, meaning that either you or [Company] may terminate the employment relationship at any time, with or without cause or notice.

This offer is contingent upon the successful completion of a background check.

This offer letter, along with any other documents that you may receive from us, constitutes the entire agreement between you and [Company], and supersedes any prior agreements or understandings, whether written or oral. This agreement may not be modified or amended except in writing signed by both parties.

We look forward to having you join our team.

While this draft is requires some additional information, it is a decent start to an offer letter.  Could employers use AI in the hiring process? Possibly, but California has already published draft regulations regarding the use of AI in the hiring process.

Do I expect that AI could draft employment documents at some point in the near future?  While many are predicting that this will put hard working employment lawyers out of business, I expect that there will still need to be some analysis and modification of policies for employers.  For example, there is software available to create employee handbooks currently, and based on responses to prompts, the software recommends certain policies.  However, drafting the language for various policies is not the difficult part of preparing an employee handbook, it is analyzing which options are available for the employer and the best option to chose for their workforce.  I see lawyers being able to utilize AI to assist in creating employment documents, but there will still need to be some review and input from an actual lawyer (at least for now). 

5. Ask AI what it can offer to help employers

Impressed with the responses provided to me through the AI, I had to ask it one last question: Which ways could employers use AI to help manage employees?  It provided this response:

– Automate time tracking

– Automate attendance tracking

– Automate payroll processing

– Automate employee scheduling

– Automate performance reviews

– Automate recruitment processes

– Automate employee onboarding

– Automate employee engagement surveys

– Automate employee feedback surveys

– Automate employee recognition programs

Artificial intelligence (AI) is quickly becoming a vital tool for employers to manage their employees. AI can be used to automate mundane tasks, provide insights into employee performance, and increase overall efficiency. With the right implementation, AI can help employers better manage their workforce and create a more productive and successful workplace.

AI has a place in the workforce, and in law, but as the responses illustrate above, there is still some human input that is required for the time being.  It will be interesting to watch how this technology develops over the next year, and how enterprising employers (and lawyers) put it to use. 

Fundamentally, the work environment has not changed much over the last 100 years, and I believe we are on the verge of major changes and disruptions.  These changes are deeper than the issues that COVID raised.  Even if remote work is here to stay, this development does not impact many industries, such as the service industry, sales industry, and hospitality industry.  Moreover, how open states are to these changes will drastically shape the legal environment and how fast these and other changes will take place.  I make the following five predictions that I believe will change the work environment over the next decade:

1. Shared workforce among multiple employers. 

Currently, each company is independent and is a silo by itself.  I predict that employers will utilize technology to create a shared workforce between multiple companies.  There are benefits for the employees and the employers in setting up a shared employment arrangement.  The gig economy is just a start of this process, and companies are recognizing the efficiencies in utilizing a shared workforce.  For employees, some benefits include more predictable, consistent work, as well as less risk because the employee will not be reliant upon only one company.  Employers would benefit from a more stable workforce, the ability to attract a more skilled worker by guaranteeing more hours, and recognizing efficiencies in hiring by sharing this cost among multiple employers. 

Sharing of employees could also be utilized in industries that require the employee to be physically present, such as a restaurant.  Local restaurants could coordinate where the employees are needed on certain days.  Obviously, this will be limited to a smaller geographic location, but technology could make this a possibility.

A key concern employers would need to navigate is potential joint employer legal liability by utilizing the same employees.  However, future legislation and indemnity agreements between the employers could potentially address this concern. 

2. Automatic time clocks.

For hourly, non-exempt employees, the time clock has not changed much over the last 100 years: the employee waits in line to clock in and out on the employer’s time clock.  For some employees in the office setting, they may track their own time on a computer, spreadsheet, or some other digital format, but the fundamental process has for the most part remained the same.  With technology developing to recognize people more easily through facial recognition or other means, companies will be utilizing automatic time clocks that will be more accurate, harder to defraud, and could provide video evidence of the actual time spent working by the employees should it be challenged in litigation. 

3. Daily pay and use of cryptocurrencies as a form of payment.

Some employers have already started paying employees at the end of each day as a benefit to employees.  With payroll technology advancing, processing payroll can be done on a daily or more frequent basis.  While employees are paid faster, the technology would also save administrative time for processing payroll, if done properly. 

Also, as I’ve written about previously, some employees may prefer to be paid in cryptocurrency in the near future. 

4. Resumes on the blockchain and work credentials. 

Blockchain technology will likely have far reaching implications, especially in employment and human resources.  There are many applications in human resources, including the use of the blockchain to digitally record and prove employment history through an on-line resume.  Moreover, employers and employees can record digital certifications required by law (such as sexual harassment prevention training, or other industry specific certifications) on the blockchain.  This can act like LinkedIn but will provide a more accurate record and is less susceptible to be manipulated. 

5. Increase in privacy concerns. 

With the development and implementation of technologies such as biometrics, facial recognition, and work histories recorded on the blockchain, certain privacy issues will need to be addressed.  Some states already legislate the use of biometric information in the consumer and employment context.  For example, as I’ve previously written about, Illinois, Texas and Washington have statues that require notice and voluntary consent before biometric information is collected by a private company. 

While there are benefits to having certifications and work histories recorded and verifiable on the blockchain, the libertarian in me has some concerns.  How are errors corrected?  Can employees challenge an employer’s record on the blockchain?  And this raises another question: Who manages the blockchain records – the employer, the employee, or maybe a third party? 

Recording employment work histories, certifications, and even work performance on the blockchain as a public record could lead to a true “employment file” that stays with the employee as they change jobs.  However, there are many concerns and questions that must be addressed as this technology inevitably develops.