United States: New California Laws Impacting Employers In 2007

The 2006 session of the California Legislature produced several new bills which will impact the state’s private sector employers in the coming year. Below is an overview of the bills, signed by the Governor, which we view as the most significant. These laws will become effective January 1, 2007.

Assembly Bill 1835 raises the state's existing minimum wage rate over a two-year period, from the current $6.75 per hour to $7.50 per hour on January 1, 2007, and to $8.00 per hour on January 1, 2008. The Governor vetoed a more expansive proposal, Senate Bill 1162, which would have required automatic annual increases in the minimum wage rate indexed to inflation. Notably, these increases have the effect of increasing the minimum "salary basis" requirement to satisfy certain overtime exemptions (e.g., the administrative and executive exemptions) under California law.

For more information about these latest minimum wage increases and their consequences for California employers, see our article entitled, "California Raises Its Minimum Wage to $8.00 Per Hour."

Assembly Bill 2095 amends Government Code section 12950.1 to clarify the extent of the mandatory sexual harassment training required under that statute. The current law provides that employers must train their "supervisory employees." Confusion arose as to whether supervisors located outside of California who supervise employees within the state were subject to the training requirements. This amendment clarifies that only supervisors located in California must receive the mandated training. As a practical matter, however, employers should consider including all supervisory employees, wherever they are located, in harassment training programs to prevent workplace incidents which may give rise to liability.

Assembly Bill 2095 amends Labor Code section 204, which specifies the periods required for payment of wages. The existing statute provides that all wages earned by employees are due and payable twice each calendar month on days designated by the employer; however, "wages earned in excess of the normal work period" (e.g., overtime wages) may be paid by no later than the next consecutive payday. This statute is inconsistent with Labor Code section 226(a), which requires that employers provide each employee at the time of each payment of wages an itemized statement showing, among other things, the total hours worked by the employee during that pay period. AB 2095 reconciles these two conflicting requirements. The amendment essentially provides that an employer is in compliance with the above-mentioned provision of Labor Code section 226(a) if overtime hours worked in a current pay period, but paid in the next consecutive period, are "itemized as corrections on the paystub for the next regular pay period." The amendment further requires that such corrections state "the inclusive dates of the pay period for which the employer is correcting its initial report of hours worked."

Assembly Bill 1806 amends Government Code section 12950 to require that the California Department of Fair Employment and Housing (DFEH) make available online its employment discrimination poster (Form 162) and sexual harassment information sheet (Form 185). Under existing law, employers must post the poster in a prominent and accessible location in their facilities, and distribute the harassment sheet to all employees. These materials may be downloaded from the DFEH Web site.

A number of other bills of significant interest to California employers were passed by the Legislature, but vetoed by Governor Schwarzenegger. These bills include the following:

• AB 2555—Increased Penalties For Gender Pay Equity Violations. This bill would have increased the civil penalties to employers for violating gender pay equity statutes, and also would have required employers of 50 or more employees to provide employees with a written statement setting forth their job title, wage rate, and an explanation as to how the their wages are calculated.

• AB 1884—Unemployment Compensation for Strikers. This bill would have allowed strikers and employees locked out as a result of a labor dispute to receive unemployment insurance benefits.

• SB 1745—Anti-Discrimination Protection for Domestic Violence Victims. This bill would have prohibited an employer or its employees from subjecting a victim of domestic violence, sexual assault or stalking to harassment or discrimination in employment because of that status.

• SB 840 & 1414—Employer-Funded Universal Health Care. These two senate bills would have established a single-payer universal health care system in California, funded in part by contributions from large employers.

Additional information about all California bills and statutes passed this year is available online at the Official California Legislative Information Web site.

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.