California has always kept employers on their toes when it comes to changing employment laws. This year is no exception. Here is our roundup of the top 10 developments California employers need to know. (And scroll down to see what’s on the horizon!)

  1. Minimum Wage Increases

Effective January 1, 2022, the California state minimum wage increased to $15.00 per hour ($14.00 per hour for employers with 25 or fewer employees). As a result, the minimum monthly salary for California exempt employees increased to $5,200, or $62,400 on an annual basis (which is two times the state minimum wage for full-time employment).

For computer software employees, their minimum hourly rate of pay increased to $50.00 and the minimum monthly salary increased to $8,679.16 ($104,149.81 annually).  And for licensed physicians and surgeons, the minimum hourly rate of pay increased to $91.07 .

Some counties and cities have imposed their own higher minimum wage rates, including Los Angeles, where a $15 minimum wage for all employers took effect in July 2021. The following local minimum wages took effect on January 1, 2022, regardless of employer size:

City Required Minimum Wage (as of Jan. 1, 2022)
Cupertino $16.40 per hour
Menlo Park $15.75 per hour
Mountain View $17.10 per hour
Oakland $15.06 per hour
Palo Alto $16.45 per hour
Redwood City $16.20 per hour
San Jose $16.20 per hour
San Mateo $16.20 per hour

Employers should review the compensation paid to exempt and non-exempt employees and confirm all employees still meet the requirements for their status. Employers also should  make sure that minimum wage postings are updated appropriately to reflect state and local increases.

  1. New Criminal Penalties for Wage Theft (AB 1003)

Starting in 2022, the intentional theft of wages, including tips, in an amount greater than $950.00 from a single employee or $2,350 from two or more employees during any consecutive 12-month period is punishable as grand theft. Independent contractors are included in the definition of “employees” who are protected by the law, and hiring entities that retain independent contractors are “employers” who can be charged with wage theft.

  1. Meal and Rest Period Premiums Must be Paid at the “Regular Rate” Rather Than the Base Rate of Pay

In Ferra v. Loews Hollywood Hotel, LLC, the California Supreme Court unanimously held that premium payments for missed meal periods, rest breaks, and recovery periods must be paid at the employee’s “regular rate of pay,” instead of their base hourly rate. The regular rate of pay may be higher than the base hourly rate because the regular rate of pay must include all nondiscretionary payments, such as most bonuses, commissions, and shift differentials. The ruling in Ferra is retroactive, and employers may now face liability for the previously legal practice of paying premiums at the base rate of pay.

To help California employers confirm they are paying the correct rate for missed break premiums, our team put together a practical step list to address the calculation. Please connect with your Baker attorney to obtain a complimentary copy.

  1. Amended COVID-19 Notice Requirements

Before October 2021, employers were required to report  COVID-19 outbreaks in the workplace to local public health agencies within 48 hours. AB 654 adjusts the timeline to 48 hours or one business day, whichever is later. The new law also clarified who must receive COVID-19 workplace exposure notifications, including that employer must provide information on COVID-19 employee-related benefits to employees who were on the same premises as a positive COVID-19 case within the infectious period.

The new law also expands the list of employers exempt from the COVID-19 outbreak reporting requirement to include, for example, community clinics, adult day health centers, community care facilities, and child day care facilities.

This law took effect as an urgency statute on October 5, 2021.

  1. Record Retention Requirements Lengthened

Previously, employers were required to maintain personnel records for two years. This requirement increased to four years by SB 807. Where litigation has been filed, such records must be maintained until the applicable statute of limitations has run, or until the conclusion of the litigation, whichever occurs later.

California law does not clearly define “personnel records” and thus there is some ambiguity about what must be retained. Labor Code section 1198.5 requires employers to make available for inspection “personnel records” that the employer “maintains relating to the employee’s performance or to any grievance concerning the employee.” Guidance from the Division of Labor Standards Enforcement (DLSE) takes a more expansive view of “personnel records, and includes those that are used to determine an employee’s qualifications for promotion, additional compensation, or disciplinary action, including termination.

The following are examples of “personnel records” under the DLSE definition (this list is not all inclusive):

  • Application for employment
  • Payroll authorization form
  • Notices of commendation, warning, discipline, and/or termination
  • Notices of layoff, leave of absence, and vacation
  • Notices of wage attachment or garnishment
  • Education and training notices and records
  • Performance appraisals/reviews
  • Attendance records

Employers should clearly define what they will keep (or will not keep) in an employee’s personnel file so that management understands which documents should be placed in the personnel file of an employee and where to locate documents pertaining to employees. Employers should update their record retention policies and train HR managers to comply with SB 807.

  1. In-Laws Included in the California Family Rights Act

AB 1033 amends the California Family Rights Act (CFRA) (Government Code Section 12945.2) to include parents-in-law in the type of “family members” for which an employee can take leave. This follows the passage of SB 1383 last year, which expanded CFRA to cover any employer with 5 or more employees and made other changes to the CFRA.

Employers should ensure their family leave policies and employee handbooks are updated to ensure they are compliant with AB 1033. Note that while the law adds a new category of person for whom an employee may take family care time, it does not expand the total amount of leave an employee is entitled to take per 12-month period.

  1. Further Limits on Employer’s Ability to Negotiate Employee Silence in Settlements

SB 331 imposes a number of new restrictions on settlement, separation and nondisclosure agreements.

In 2018, as the #MeToo movement gathered strength, California limited non-disclosure provisions in settlement agreements for lawsuits and administrative agency charges involving allegations of sexual harassment. The law also limited the use of non-disclosure provisions in exchange for a raise or a bonus, or as a condition of employment or continued employment. SB 331, known as the “Silenced No More Act,” expands this prohibition to include other acts of workplace harassment, discrimination, or retaliation, including those that are not based on sex. Now, employers may not contractually prohibit current or former employees from disclosing the facts underlying alleged workplace discrimination on the basis of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation, or veteran or military status.

In a settlement agreement involving a previously-filed lawsuit or charge, SB 331 still allows for the identity of the claimant and all facts that could lead to the discovery of the claimant’s identity to remain confidential, at the request of the claimant. The law also does not prohibit parties from agreeing to keep confidential the amount paid in settlement of a claim.

Under SB 331, any provision in a settlement agreement entered into on or after January 1, 2022 contrary to these restrictions is void as a matter of law and against public policy. (Recall that the restriction of non-disclosure agreements in sexual harassment cases became effective on January 1, 2019.)

Be aware of important new notification obligations. Employers offering an employee or former employee an agreement related to that employee’s separation from employment must notify the employee that the employee has a right to consult an attorney regarding the agreement and must provide the employee with a reasonable time period of not less than five business days in which to do so. Thus, employers must revise applicable settlement and separation agreements to comply with SB 331.

  1. New California Employee Privacy Rights

California has one of the nation’s most stringent privacy laws and the first that applied to employees. To understand your compliance obligations under the California Consumer Privacy Act (CCPA), read more here.

  1. New State-wide COVID-19 Right to Recall Limited to Certain Industries and Effective Through December 2024

In April, Governor Newsom signed a state-wide right to recall law (Senate Bill 93). SB 93 is similar to the Los Angeles City recall ordinance and the San Francisco right to reemployment legislation. (Local ordinances will remain in effect to the extent they are more generous than the state law.) It became effective immediately and remains in effect through December 31, 2024.

Like the local ordinances, the state law is time-limited and directed to the industries with workforces most impacted by COVID: hotels, event centers, private clubs, airport hospitality operations, airport service providers and janitorial, maintenance and security services for commercial buildings. Through December 31, 2024, employers in these industries must notify employees laid off for COVID-19-related reasons about newly-available positions, and offer the new positions to the laid-off employees based on a qualification-based preference system before offering them to new hires. Post-layoff changes in ownership, the form of the organization, or the location of the business will not excuse an employer from these recall protocols, as long as the business conducts the same or substantially similar operations as it did before the pandemic.

Important details about the law can be found here.

  1. California DFEH: Watch for Aggressive Pursuit of Systemic Complaints

The California Department of Fair Employment and Housing (DFEH) is the largest state civil rights agency in the country. It first gained authority to file lawsuits to pursue violations of the state’s anti-discrimination laws in 2013. Part of its broad power to sue California employers includes the ability to launch state-wide investigations for systematic or large-scale violations of the state’s civil rights laws.

Systemic complaints from the DFEH are not filed in court, but often look like a civil pleading, allege very broad, generalized claims and include sweeping document requests and interrogatories. These discovery requests often lead to further investigation and depositions. And without a formal case pending in court, California employers often face the difficult situation of responding to extensive and burdensome discovery requests without court intervention or oversight. There is a unique statutory scheme for these complaints that allows the DFEH one year to decide if the complaints are systemic and then another year to file suit.

We expect that SB 973 (the legislation making California the first state to require employers to submit employee pay data by race and gender) will enable DFEH to investigate and file claims under the Equal Pay Act. Indeed, the DFEH website states: “Employers’ pay data reports will allow DFEH to more efficiently identify wage patterns and allow for effective enforcement of equal pay or anti-discrimination laws, when appropriate. DFEH’s strategic vision is a California free of discrimination.” Accordingly, it is essential that California employers partner with counsel to plan their reports, and to regularly conduct pay equity audits.

In 2022, we recommend the following;

  • Consider proactive risk mitigation assessments. These can come in many forms such as policy audits, reviews of hiring practices, pay and promotion reviews, etc.
  • The heightened emphasis on systemic discrimination means employers should consider that every charge has the potential for company-wide ramifications.
  • Exercise care in responding to the charge and any RFIs to highlight the individualized nature of the charging party’s situation, to the extent possible, and appropriately limit information and data to that which is relevant to the charging party’s claims.
  • Be thoughtful in the selection of comparators, ensuring that they are truly similarly situated.
  • If you receive a request for information from the EEOC, the DFEH or any other government agency, consult with your Baker McKenzie employment counsel who can assist in preventing the agency from overreaching.

What’s On the Horizon?

 We’re keeping an eye out on a number of hot topics and landmark cases. Here’s a peek of some the issues we’re tracking closely . . .

  • The fate of Biden’s vaccine requirements for large private employers and certain health care facilities. (The emergency temporary standard issued by the US Department of Labor’s Occupational Safety and Health Administration requires businesses with at least 100 employees to either adopt a COVID-19 vaccination mandate or have workers submit to weekly tests. And, the stricter regulation promulgated through the Centers for Medicare & Medicaid Services requires employees working in specified health care facilities that participate in Medicare and Medicaid to be inoculated against COVID-19 with no option for periodic testing.) After weeks of intense litigation and numerous challenges to the mandates, the US Supreme Court iheld oral argument on January 7 to determine whether each rule can be enforced.
  • Also, in December, the US Supreme Court agreed to review whether California Private Attorneys General Act (PAGA) claims can be forced into arbitration.  In granting the petition for certiorari brought by Viking River Cruises, Inc., in the case of Viking River Cruises Inc. v. Moriana, the Court agreed to resolve the specific question of whether the Federal Arbitration Act (FAA) “requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under PAGA.” Essentially, if the Court rules in the employer’s favor, the case could allow employers to limit PAGA representative claims by entering into arbitration agreements containing representative and class action waivers with their employees.