New Employment Laws for California in 2019

The Top 10 Things Every Employer Needs to Know

Earlier this year, UBF Consulting hosted a webinar on the new employment laws specific to California and how it affects employers. This webinar was presented by Stephen J. Hirschfeld, founding partner and co-managing partner at Hirschfeld Kraemer LLP. Here are the top 10 things that every employer should know:

(1) Wage and hour changes

a. Clarification of salary history ban

As you may already know, California prohibits employers from asking job applicants for salary history information and relying on this information when they make a job offer. Also, employers are required to provide information on pay scale after a “reasonable request.”

A new law for 2019 was passed that clarifies that this salary history ban only applies to external job applicants. For internal applicants, employers have information on salary history, and internal candidates are not entitled to information on pay scale. Also, this law clarifies that “reasonable request” means after the initial interview.

b. “Rounding” and other time clock issues

The use of rounding when logging an employee’s work time is still okay. Rounding must be fair and neutral, “without an eye towards whether the employer or the employee is benefitting from the rounding.” The rounding policy will not be evaluated on an individual employee basis, but must result in “a net surplus of compensated hours and a net economic benefit to employees viewed as a whole.”

However, the de minimis doctrine does not apply in California. Unlike the federal doctrine applied under the FLSA, non-exempt employees in CA must be paid for every minute worked. An easy solution that is often recommended is to stress to non-exempt employees to not work outside of normal working hours. This includes checking emails or voicemails on a smartphone during non-working hours.

c. Minimum wage

Minimum wage is increasing in CA, according to the following schedule:

d. Overtime calculation

Bonuses must be included when calculating an hourly employee’s regular overtime rate of pay. California employers cannot use the FLSA’s method of calculation, but instead, they must apply the formula set out in the DLSE Enforcement Manual. If an employee is given a bonus, the amount of a flat sum bonus is to be divided by only the employee’s actual non-overtime hours worked, then multiplied by 1.5 to calculate the employee’s overtime rate (or 2.0 for double time).

What this means is that employers must go back and review past pay practices to ensure compliance. This law is effective retroactively. Also, please review the DLSE Enforcement Manual, and check with HR, UBF Consulting, or legal counsel with any questions.

(2) Workers’ compensation liability

You may be aware that if an employer is audited by Cal/OSHA and found that a workplace injury occurred in the last six months that was not recorded, then the employer can be cited. As of January 1, 2019, Cal/OSHA can now cite employers for unrecorded workplace injuries that occurred up to five years prior to the audit.

The take-away message is: OSHA records must be up-to date. This is likely to be aggressively enforced, so please review your recordkeeping now in order to avoid liability, as they can “look back” to before the statute was enacted.

(3) NDAS and non-compete agreements

In California, NDAs and non-competes continue to be unlawful. These cannot be enforced in any manner. For employers located outside of California, with California employees, these usually are also unenforceable except in very limited circumstances. Employers may wonder how to get around NDAs and non-competes. California law does allow for an unfair competition agreement. This agreement can be set forth at the initial stages of employment whereby the employer and employee agree upfront what is considered to be proprietary, what can be used during employment, and what shall at no time be used for the employee’s own gain, during or after employment.

(4) #MeToo/Time’s Up – legislative reactions and changes for 2019

Sexual harassment impacts the workplace in the following ways:

• Divisiveness within the work environment
• Negatively impacts effective communication
• Creates loss of respect for peers and those in a position of authority
• Creates fear
• Reduces productivity and morale
• Absenteeism and turnover
• Tarnishes the company’s brand
• Results in costly and unnecessary administrative and legal proceedings

Effective 2019, there is a new standard for sexual harassment:

“Harassment is unlawful if it disrupts the victim’s emotional tranquility in the workplace, affects the victim’s ability to perform the job as usual, or otherwise interferes with and undermines the victim’s personal sense of well-being.”

Gone is the “reasonable person” standard. The law is now more “vague,” making it more difficult to defend against. There is no requirement to show that productivity declined, only that the harassment altered the working conditions sufficiently to make it more difficult for the victim to perform their job.

Previously, a single instance of harassment would not likely constitute harassment. Now, the new law clearly states that harassment can occur in one single instance. In other words, the new law expressly states that a random stray remark may be considered harassment. What this means for you as an employer: Update your policies and handbooks to reflect this new standard.

Biggest change: There is a new training requirement regarding sexual harassment for ALL employees, not only supervisory employees. Previously, this requirement applied only to employers with 50 or more employees. Now, employers with five or more employees are required to provide classroom or other effective interactive training regarding sexual harassment by January 1, 2020, to both supervisory and non-supervisory employees. This training must be updated every 2 years.

(5) Board room composition

By the end of 2019, any corporation registered in California or non-California registered publicly held corporation headquartered in California must have at least one female on the Board. By the end of 2021, this number is increased to two if it is a five-member Board or three if the Board has six or more members.

(6) Independent contractor definition updated

The IRS is cracking down on employers that hire independent contractors. There is a new standard called the ABC test, in defining independent contractors and all three factors must be met:

1. The worker must be free, in everyday tasks, from the hirer’s control and direction;
2. The work performed must be outside the usual course of the hiring entity’s business; and
3. The worker must be customarily engaged in an independent occupation or business of the same type as the work he or she is performing for the hiring entity.

As an example, an employer whose sole business is to provide IT support should not have independent contractors who provide IT support. If the IT company uses an independent contractor for graphic design/marketing work, that would be considered lawful under the ABC test. The surprise ruling handed down from the US Supreme Court in April 2018 under the Dynamex case is believed to upend many employers that rely on independent contractors such as Uber and Lyft. There are two competing laws in place, and this case is expected to be in the news during much of 2019.

(7) ADA leave of absence

We, at UBF Consulting, are often asked by employers, “How often do we have to keep employees on the books while they are on a leave?” The California legislature has now made it clear that an indefinite leave of absence is considered unreasonable. The 9th Circuit Court also stated that if there is any indication that there may possibly be a return in the foreseeable future, then an accommodation should be made. Short of that, an indefinite leave of absence is still considered unreasonable.

(8) Handbook updates for 2019

Two updates that employers should make to their handbooks are:

• Lactation accommodation: Employers are required to provide a room other than a restroom for employees who wish to express breast milk. Previously, the law stated “other than a toilet stall.”
• Sexual harassment: Include new definition of harassment. Harassment may be a single instance or occurrence. A discriminatory remark, even if not made directly in the context of an employment decision, and even if uttered by a non-supervisory employee, may be discrimination (i.e. a “stray remark”).

(9) Union employee interviews

The burden is on the employer, not the employee, to ensure that a union representative is at a meeting between employer and employee.

(10) How to mitigate risk

• Review your policies (sexual harassment, bullying, alcohol, fraternization).
• Revise as necessary and publicize reporting options for harassment and discrimination.
• Implement a privileged pay equity audit.
• Conduct wage/hour audit.
• Address any needed change in culture: create an environment that encourages people to speak up.
• Get your resources lined up (PR, inside and outside investigator).
• Review your investigation process. Ensure that you have skilled and trained investigators. Act promptly and appropriately.
• Update and implement a high-quality, interactive sexual harassment training program for your team.
• Review and update NDAs and ICAs.
• Review and update arbitration agreements and severance agreements.

We are here to help.

If you would like a personal consultation on the implications of these legal changes for your organization, please e-mail or call us at 1-800-UBF-8868.

Michelle Cheuk
Michelle Cheuk has her B.A. in Sociology from Wellesley College and M.A. in Sociology/Demography from University of North Carolina, Chapel Hill. At UBF, she is focused on marketing, business development, and project management. In her spare time, she enjoys parenting, going to the gym, and volunteering.