The 2007 session of the California Legislature produced a number of new laws which will impact the state's private sector employers in the coming year. Below is an overview of those laws we view as most significant. The laws will become effective January 1, 2008, unless noted otherwise. This year's legislative session was perhaps most noteworthy for the sizeable number of employment-related bills vetoed by Governor Arnold Schwarzenegger. Many of those bills would have burdened employers with substantial new requirements or potential liabilities. Because it is possible the Legislature may reintroduce one or more of the vetoed bills for consideration again next year, we review them here as well.
New California Laws For 2008
Minimum Hourly Pay Requirement For Computer Professional Exemption Lowered (SB 929)
Senate Bill 929 amended California Labor Code section 515.5 to lower the minimum hourly rate of pay that an employee must earn to qualify as exempt from overtime pay requirements as a computer professional. Effective January 1, 2008, the required minimum hourly rate (or its annualized full-time salary equivalent) will decrease from $41 to $36. These rates are subject to annual adjustments for inflation based on percentage increases in the state's Consumer Price Index for Urban Wage Earners and Clerical Workers. Thus, the current adjusted rate is about $49 per hour, and a new minimum rate for 2009 will be set by the state in October of 2008. Note that even if an employee meets the hourly pay requirement, he or she still must satisfy the duties requirements of Section 515.5(a)(1) and (2) to qualify as exempt. However, based on the reduced hourly rate requirement, this bill effectively expands the number of employees who may be eligible for the computer professional exemption from overtime.
Prevailing Wages on Public Works Projects (SB 929)
Senate Bill 929 also amended Labor Code section 1773.9, pertaining to prevailing wages for workers on public works projects. Current law requires contractors and subcontractors on public works projects to pay their workers the general prevailing rate of per diem wages for the locality in which the work is performed. The per diem wage rate includes both an hourly wage and a payment for employee benefits, and is determined by the Director of Industrial Relations ("DIR") by reference to collective bargaining agreements ("CBAs"), data from unions and employer associations, and other sources. Section 1773.9, as amended, provides that whenever the DIR's prevailing wage determination contains a predetermined change (based on a rate already established by a CBA)-but does not specify how the change will be allocated between hourly wages and employee benefits-contractors and subcontractors may make their own allocation equal to the change for up to 60 days after the DIR publishes the specified allocation, without being subject to liability under the prevailing wage law.
Leave for Military Spouses (AB 392)
Assembly Bill 392, effective as of October 9, 2007, added Section 395.10 of the Military & Veterans Code. This law requires employers with 25 or more employees to provide up to 10 days of unpaid leave to employees who are spouses of qualified military service members while the service member is home on leave. A "qualified" service member is defined as member of the United States Armed Forces, National Guard or Reserves deployed during a period of military conflict to a combat theater or zone.
Employees are eligible for leave provided they work an average of at least 20 hours per week. Employees must provide notice of their intent to take the leave within two days of receiving official notice that their spouse will be coming home. They also must provide copies of official documentation certifying that the spouse will be home during the days for which leave is requested. The taking of military spousal leave under this law does not affect an employee's eligibility for other types of leaves, or his or her rights to other employee benefits provided by law. While this bill only expressly covers "spouses," the California Domestic Partnership Act, Family Code section 297.5, extends the same rights and privileges of spouses to couples registered with the state as domestic partners. Therefore, employers are advised to grant military spousal leave equally to qualified employees with a domestic partner in the military.
Expanded Whistleblower Protection For Health Care Workers (AB 632)
Assembly Bill 632, effective as of October 14, 2007, amended Health and Safety Code section 1278.5, which provides protections for "whistleblowers" against health care facilities. The statute as amended prohibits such facilities from discriminating or retaliating against any patient, employee, facility medical staff, or any other health care worker of the facility because that person (1) presented a grievance, complaint or report to an entity or agency responsible for accrediting or evaluating the facility or to any other government agency; or (2) initiated, participated, or cooperated in an investigation or administrative proceeding related to the quality of care, services, or conditions at the facility. The statute provides that a rebuttable presumption of discrimination is established if: (i) responsible staff at the facility or its owner-operator had knowledge of the actions, participation or cooperation of the employee; and (ii) the discriminatory action occurred within 120 days of the filing of the grievance or complaint by the employee. An employee who has been discriminated against in violation of the statute is entitled to reinstatement, lost wages and benefits, "legal costs associated with pursuing the case," and any other remedy deemed warranted by the court pursuant to statute or common law.
Notification of Eligibility for Earned Income Tax Credit (AB 650)
Assembly Bill 650 amended Section 19850 and subsequent provisions of the Revenue and Taxation Code, to require all employers covered by the Unemployment Insurance Code to provide employees with a special notice of their potential eligibility for the federal Earned Income Tax Credit. Section 19854 of the Revenue and Taxation Code provides the exact language of the notice which must be given. A sample notice may be downloaded from the California Employment Development Department's website. This notice must be either hand-delivered or mailed to the employee within one week of the date the employee is provided his or her annual wage summary, e.g., IRS Form W-2 or Form 1099. The employer's posting of the notice on the internet or an electronic bulletin board, or sending it through office mail, will not satisfy the notice requirement.
2008 Increases in State and Federal Minimum Wage Rates
We remind employers that, effective January 1, 2008, the minimum wage in California will increase from $7.50 to $8.00 per hour. On July 24, 2008, the federal minimum wage will increase from $5.85 to $6.55 per hour. The rise in California's minimum wage rate impacts numerous other wage rates and overtime-exempt classifications under state laws. For a detailed discussion of these impacts, please see the Alert posted on our website entitled, California Raises Its Minimum Wage to $8.00 Per Hour" (September 15, 2006).
Increase in IRS Standard Mileage Reimbursement Rate
The Internal Revenue Service has announced that, starting January 1, 2008, the optional standard mileage rates used to calculate deductible costs of operating a vehicle for business purposes will increase from 48.5 cents to 50.5 cents per mile. This increase is significant for California employers based upon the requirement in Labor Code section 2802 that they reimburse employees for all work-related expenses, including travel expenses, necessarily incurred in the course of performing their job duties. Earlier this year, the California Division of Labor Standards Enforcement issued proposed regulations interpreting Section 2802. These proposed regulations, which have not yet been adopted, provide that the IRS mileage rate is a reasonable rate which employers may use to reimburse employees for vehicle expenses they incur in connection with work.
Bills Vetoed by Governor Schwarzenegger
Governor Schwarzenegger made frequent use of his veto pen to strike down a number of significant employment-related bills passed by the California Legislature in its recent session. These bills included the following:
Familial Status Added As Protected Classification Under FEHA (SB 836). This bill would have expanded the classifications of workers protected against discrimination, retaliation and harassment under the California Fair Employment and Housing Act (FEHA) to include employees subject to such conduct because of their "familial status," defined as "an individual who is or who will be caring for or supporting a family member."
Misclassification of Workers As Independent Contractors (SB 622). This bill would have prohibited employers from engaging in "willful" misclassification of employees as independent contractors, and would have authorized the state's Labor and Workforce Development Agency to assess civil penalties for violations.
Non-California Choice of Law and Venue Provisions (AB 1043). This bill would have nullified as void and unenforceable as against public policy all non-California choice of law and choice of venue provisions in employment agreements, handbooks, or other employment policies.
Mandatory Employer-Provided Health Care (AB 8). This bill would have required employers by January 1, 2009, to either (1) pay for health care costs of employees and their dependents in an amount equal to 7.5% of the employer's total social security wages; or (2) elect to have health care coverage provided through a state program with a minimum payment and establish for employees an Internal Revenue Code Section 125 cafeteria plan.
Expanded Protections Under California Family Rights Act and Paid Family Leave Law (AB 537 and SB 727). These bills would have expand the existing protections afforded by the California Family Rights Act, and coverage under the Paid Family Leave law, to include employees who care for a seriously-ill child (even if not a minor dependent), parents-in-law, grandparents, siblings, grandchildren, or domestic partners.
Bereavement Leave (SB 549). This bill would have prohibited employers from discriminating against an employee for inquiring about, requesting or taking up to four days of bereavement leave upon the death of a spouse, child, parent, sibling, grandparent, grandchild or registered domestic partner.
Restitution for Crimes Related To Lockouts In Labor Disputes (AB 504). This bill would have required employers convicted of a crime involving fraud, misrepresentation or misconduct related to a lockout in response to a labor dispute to make restitution to affected employees for lost wages and benefits.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
