Employment Law Commentary, October 2016

Now that the dust has settled on the California 2016 legislative session, it is once again time to round up and review the new laws impacting California employers. Although there were not any major surprises, there were enough changes affecting existing law that employers—and employees—ought to set aside the time to get up to speed. This Commentary will guide you through the new hoops and potential hurdles California employers will have to navigate in the coming year. Among the more significant bills are changes to the state's minimum wage law and restrictions on forum and choice of law provisions in employment contracts. All newly enacted laws are effective January 1, 2017, unless otherwise noted.

SB 1241 - Forum (Un)Selection and Choice of Law Provisions

Forum selection and choice of law clauses have long been staples of California employment contracts. New legislation chips away at an employer's right to enforce such provisions. The law grants employees who reside and work primarily in California with the unilateral right to void any provision that would require an employee to adjudicate claims arising in California in any outside forum or that would "[d]eprive [such an] employee of the substantive protection of California law with respect to a controversy arising in California." Employees who sue to successfully void such provisions may recover reasonable attorneys' fees under Labor Code § 925(e). SB 1241 applies to all employment agreements entered into, modified, or extended after January 1, 2017. While potentially farreaching, there are still a number of significant limitations: (1) it does not apply to existing agreements; (2) it only applies to employees who "primarily" live and work in California; (3) it does not apply where the employee was represented by counsel; (4) it only applies if the employee's employment is conditioned upon the agreement; and (5) the employee must demonstrate that underlying claims "arise in California." The impetus for the new law is a legislative concern that California employees are being required to enforce contract rights in out of state forums and under state laws that may lack many of the employee protections otherwise provided for under California law. Employers should review their standard employment agreements containing forum selection and choice of law provisions, as well as severability clauses, to determine whether revision is necessary in light of the new legislation.

SB 3 - Minimum Wage Increase

California joins New York in being the first states in the nation to enact a plan to raise the statewide minimum wage to $15. California's current $10 minimum wage will incrementally increase to $15 by 2022. The bill is a partial end-around a competing ballot measure that, if passed, would have increased the minimum wage to $15 a year earlier than SB 3. The new bill also provides the governor with the authority to postpone a wage increase in the event of an economic downturn. For businesses with 26 or more employees, effective January 1, 2017, the minimum wage will increase to $10.50. From 2018 to 2022, the minimum wage is scheduled to increase by $1 each year. Wage increases for businesses with 25 or fewer employees will follow the same incremental scale as that of larger businesses but will be delayed by one year. The minimum wage for such businesses, will increase to $10.50 in 2018 before culminating in $15 in 2023. Counties and cities retain the discretion to enact their own minimum wage laws that are higher than the state's minimum wage. Other jurisdictions have passed legislation calling for a $15 minimum wage on a much faster timeline: San Francisco (7/1/18); Emeryville (7/1/18); Mountain View (1/1/18); El Cerrito (1/1/19); Los Angeles (7/1/20); Santa Monica (7/1/20); Pasadena (7/1/20); and unincorporated areas of Los Angeles County (7/1/20).

SB 836 - Private Attorney General Act Filing Provisions

Passed as part of the state budget package last July, SB 836 makes a number of revisions to the Private Attorney General Act (PAGA). At the governor's request, the bill expands the role of the Labor and Workforce Development Agency (LWDA) in PAGA claims in a stated effort to reduce congestion in state courts. Whether the bill will have the intended effect remains to be seen. The changes ultimately results in a lengthened administrative process and an increase in filing fees. As an initial matter, all PAGA claim notices, and employer cure notices, must be filed online and accompanied by a $75 filing fee. The LWDA now has 60 days (up from 30 days) to review a PAGA notice, and 180 days (up from 120 days) to conduct an investigation. Before filing a lawsuit, a plaintiff now must wait 65 days after sending a PAGA notice to the LWDA. The previous wait-to-file period was 33 days. A plaintiff may still file in court sooner if he or she receives notice from the LWDA that the agency does not intend to investigate. Plaintiffs now must provide the LWDA with a number of court documents. After filing a lawsuit, a plaintiff must provide the LWDA with a conformed copy of the complaint within 10 days of filing. Additionally, the parties must provide a copy of any proposed settlement of a PAGA claim to the LWDA at the time it is submitted for approval to the court. Copies of the court's judgment or any orders awarding or denying PAGA claims must be submitted to the LWDA within 10 days.

AB 1676 & SB 1063 - Wage Discrimination

California's Fair Pay Act, highlighted in last year's Employment Law Commentary, amended Labor Code § 1197.5 to prohibit an employer from paying an employee at a wage less than the rates paid to employees of the opposite sex within the same establishment for equal work on jobs that require equal skill, effort, and responsibility to perform, and that are performed under similar working conditions. Exceptions to the Act's equal pay requirements include situations where the wage differential is based on a) a seniority system, b) a merit system, c) a system that measures earnings by quantity or quality of production; or d) a bona fide factor other than sex. AB 1676 provides that a prior salary cannot, by itself, justify any disparity...

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