HR Management & Compliance

California HR Trends for 2017—Don’t Get Burned!

It’s practically impossible to try and cover everything that will change in California for both 2016 and 2017. So many midyear and other upcoming changes make it a difficult year. Why? Because it’s California, of course! Jonathan A. Siegel, partner at Jackson Lewis P.C., feels the pain of HR pros.

Presenting at the recent Society for Human Resource Management (SHRM) Conference and Exposition in Washington, D.C., Siegel alerted attendees to several potential “sunburns” California HR professionals need to protect themselves against regarding their sunny state’s complex labor laws.

Sunburn #1: New Wage and Hour Regulations

The new overtime regulations under the Fair Labor Standards Act (FLSA) are a hot topic for everyone in HR, but how do these changes in the salary basis test for white collar overtime exemptions impact California?

Siegel notes that it’s the first time the feds have a higher threshold than the Golden State. Both the minimum salary and highly compensated employee (HCE) thresholds for exempt status are increasing, and increases are planned for the near future, too.

But, there are two key distinctions for California, Siegel says:

  1. California has not and does not adopt the FLSA highly compensated overtime exemption; and
  2. California does not permit incentive compensation to partially meet the “white collar” (i.e., exempt) salary basis test.

 

Of course, California never wants to be outdone by the feds when it comes to wage and hour legislation! Governor Brown signed Senate Bill (SB) 3 into law on April 4, 2016, and it addresses the California state minimum wage, says Siegel. This bill sets the hourly minimum wage at $10.50 in 2017, $11 in 2018, and then $1 increases every year until it reaches $15 in 2022.

Siegel says the bill also impacts:

  • The California white collar salary basis test (an exempt salary must be twice the state minimum wage); and
  • The partial collective bargaining exemption from overtime (these employees must receive 30% more than the state minimum wage).

 

Under SB 3’s structure, California is going to surpass the federal FLSA exempt salary minimums again in 2019, says Siegel. In 2020, when the minimum exempt salary in California increases to $54,080, the state’s threshold will continue to outpace the federal minimum (which is planned to be set at $51,168 in 2020).

Siegel notes that for employers with 25 or fewer employees, the increase to $15 per hour is more gradual. Minimum wage increases for these smaller employers will begin 1 year later, starting January 1, 2018.

“There’s one aspect of California wage and hour law flying below the radar,” warns Siegel. “This is the proliferation of city minimum wage laws.” Keep an eye on your local regulations—some of these wage increases take effect midyear (July 1, 2017), while some are even earlier. For example, Berkeley is going to implement its minimum wage hike in October 2016 (“Why? Because it’s Berkeley, man!” Siegel said to laughter from the audience).

Sunburn #2: AB 1513 Complicates Piece-Rate Compensation Rules

If you have piece-rate compensation at your organization, Assembly Bill (AB) 1513 is going to make things even more complicated. “All employers who pay employees by piece-rate must review their compensation systems and revise them accordingly,” says Siegel. “But what is piece-rate? Do you know?”

Piece-rate is often confused with commissions or bonuses. Commissions are strictly regulated in California, says Siegel, and bonuses are a bit more flexible if you meet the right definition. “If you think something’s a commission or bonus, it may actually be a piece-rate,” Siegel says. Here are some of the key differences noted by Siegel:

  • Commission: This must be a sales situation.
  • Bonus: Bonuses are paid to reward extraordinary effort or work.
  • Piece-rate: This is based on being paid for completing a particular task or making a particular piece of a good or product. Payment for a specific task is likely a piece rate.

 

“Maybe you think you’re not paying a piece rate,” says Siegel. “But clarify your comp plans now.”

Sunburn #3: New Developments in Leave and Disability Management

“What is going on with all these paid sick leave laws?” asks Siegel. There so many state leave laws, and now there are city leave laws as well. Ensure you have your required policies in order for:

  • Family and Medical Leave Act (FMLA)/California Family Rights Act (CFRA)
  • Pregnancy Disability Leave (PDL)
  • Paid Family Leave (PFL)
  • Paid sick leave

 

One key difference between FMLA and CFRA, and probably the most important one, is that an “employer cannot ask for a medical diagnosis under CFRA,” says Siegel. “Do not use the DOL WH 380 (an FMLA form) in California without modification.”

When it comes to pregnancy disability, there are so many problems surrounding this in California, says Siegel. What employers need to know is that:

  • You must have a policy if you have five or more employees.
  • Employees are entitled to up to four months of PDL.
  • Regulations came into effect on April 1, 2016, that have some hidden PDL revisions—be sure you’re up to date.

 

While on these various forms of leave, you get health benefit continuation in California. When you add it all up between FLMA and CFRA, says Siegel, there is a total of seven months of protected—but unpaid—leave under state law. “As an employer you think it’s terrible,” admits Siegel. “Until you have a kid yourself.”

“But there are a ton of other ones [beyond those listed here],” Siegel continues. “You don’t have to have a policy, but your counsel will recommend that you should, because claims can still be brought under these laws … Even if you have a great paid [rather than required unpaid] leave program, you still need to be on top of compliance with these laws.”

Other tips and news from Siegel regarding California leave policy include:

  • Never, ever, ever tell an employee he or she can come back “when you’re 100%” or “up to full speed or duty” (that is, nonspecific blanket policies). “You tell them they can come back when they can perform the essential functions of the job, with or without a reasonable accommodation,” says Siegel. “That’s all you care about.”
  • Don’t forget your interactive dialogue/process concerning leave, either—it could be a California Fair Employment and Housing Act (FEHA) obligation. “It means you’ve got to work harder … because it’s California!” says Siegel.
  • One case, currently under appeal and not citable, is suggesting that “an association with a physically disabled person is itself a disability under the FEHA,” says Siegel. Watch for developments.

 

Other Issues to Be Aware Of

Siegel also reminded his audience of ongoing trends and requirements in California. For example, regarding harassment and discrimination policies and training, “you better have reviewed and updated [them] by April 1 [of 2016]!” says Siegel. They must be revised for the new regulations under AB 1825. The law is so specific that pretty much everyone needs to revisit this and update their policies, says Siegel. It’s especially critical to update your training presentations!

The Equal Employment Opportunity Commission’s (EEOC) Ban the Box movement—which seeks to prohibit employers from asking about criminal records in the hiring process—is spreading to California cities. San Francisco (of course) was the first to follow suit. Other cities considering such legislation are Carson, Compton, and Richmond, says Siegel. On a similar topic, don’t forget about California’s regulations regarding credit checks!

California employers also need to remember their obligations to keep employees informed of their rights with notices, posters, and formal policies. “You need to educate employees on how to sue you!” jokes Siegel. “It’s California, baby!”

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