Legislative Update: Fair Pay Act, Right to Cure Wage Statement Defects, Paid Sick Leave, and More
As California’s current legislative process heads into its final days, we have a few updates on employment-related matters relating to paid sick leave, wage statement violations, meal period waivers in the health care industry, and the Fair Pay Act.
Paid Sick Leave – “24 Hours or 3 Days”
This is not newly signed legislation, but an update on a new opinion letter recently issued by California’s Department of Labor Standards Enforcement (“DLSE”). As all California employers should know, California passed legislation last year that required all California employers to begin providing paid sick leave to employees beginning in July of this year. The statewide law requires that employers provide a minimum of 24 hours or 3 days of paid sick leave to employees. Employers can choose to “frontload” this paid leave at the beginning of an employee’s anniversary year, calendar year, or year beginning July 1; or employers can allow employees to accrue paid sick leave at the rate of one hour for every 30 hours worked, with an allowable cap on accrual of 48 hours or 6 days. This seems straightforward enough (particularly for employees who work a standard full-time schedule of 8 hours per day/40 hours per week), but in practice it has led to much confusion. One area of confusion involves employees who do not work a standard 8 hours per day/40 hours per week schedule – in other words, employees who work regular schedules of more than 8 hours per day pursuant to an alternative workweek schedule (“AWS”—which generally involves a 4/10 or 9/80 schedule), and employees who work part-time schedules (e.g. 6 hours per day). It is not clear from the statutory text whether the employer is required to provide 24 hours of leave to these groups of employees, or whether the employer is required to provide 3 days of leave to these employees (which would be 18 hours of leave for the part-time employee and 30 hours of leave for the 10-hour per day employee working an AWS).
The DLSE has issued a new opinion letter clearly stating that in the DLSE’s interpretation, the statute requires employers to provide the greater of 24 hours or 3 days to employees (under the frontload method). This means that a part-time employee working a regular schedule of 6 hours per day would be entitled to 24 hours of paid sick leave (even though this is more than 3 days of leave for this employee), and an employee working an AWS of 10 hours per day would be entitled to 30 hours of paid leave (even though this is more than 24 hours of leave for this employee).
If an employer uses the accrual method for paid sick leave, employees simply accrue 1 hour for every 30 hours worked. However, the employer can impose a cap on accrual of 6 days or 48 hours. The DLSE’s employee-friendly interpretation affects the accrual cap as well, meaning that whether the cap is 6 days or 48 hours depends on the employee’s regular schedule (i.e. an AWS employee working more than 8 hours per day would have to be allowed to accrue 60 hours of paid sick leave and a part-time employee working 6 hours per day would be allowed to accrue 48 hours of paid sick leave).
The DLSE’s opinion letter is here.
Wage Statement Violations – Limited Right to Cure
On Friday, California’s Governor signed into law AB 1506, which provides a bit of shelter to California employers who are preyed upon by the plaintiffs’ bar for technical violations of California’s wage statement law (Labor Code 226 (a)). AB 1506 is effective immediately and provides that employers who are put on notice of a wage statement violation have a right to cure in some circumstances and cannot be sued for the violation if cured during the prescribed cure window. As California employers know, California law requires that specific information be included on employee pay stubs, including but not limited to, the name and address of the employer and the inclusive dates of the pay period. Employers who violate this requirement can be (and many have been) sued for massive penalties under California’s Private Attorneys General Act (“PAGA”). However, before an employee can sue an employer under PAGA, the employee must give the employer and California’s Labor and Workforce Development Agency (LWDA) written notice of the alleged violations (the purpose of the latter notice is to give the LWDA the opportunity to take direct action against the employer, which basically never happens). If the LWDA provides notice that it does not intend to take action against the employer (or does not respond to the letter within 33 days) then the employee can file a court action against the employer for penalties on behalf of all aggrieved employees.
AB 1506 amends PAGA to include a limited right on the part of an employer to cure certain wage statement violations that are asserted in an employee’s LWDA letter. This right to cure is limited to alleged violations of Labor Code section 226(a)(6) and (8) – the provisions requiring that pay stubs include the inclusive dates of the payroll period and the employer’s name and address. To avail itself of the right to cure, the employer has 33 days from the postmark date of the notice to issue fully compliant pay stubs to all aggrieved employees for each pay period for the three-year period preceding the postmark date of the notice. The employer must give written notice, via certified mail, to the complaining employee (or his or her representative) and to the LWDA that the violations have been cured. If cured, the employee cannot file an action for penalties against the employer. Importantly, the employer can only avail itself of this right to cure once within any 12-month period for the same violation(s) alleged in the notice, regardless of the location of the worksite.
Meal Period Waivers in Health Care Industry
Yesterday, California’s Governor signed into law SB 327, which addresses meal period waivers in the health care industry. SB 327 was a “gut and amend” bill that had nothing to do with wage and hour law until last month when the bill was suddenly re-written to address health care employee meal period waivers. By way of background, from 1993 to 2000, the Industrial Welfare Commission Wage Orders (Orders 4 and 5) have contained provisions allowing employees in the health care industry to validly waive one of their two meal periods for shifts over 12 hours. In 2000, the IWC adopted regulations allowing those rules to continue in place. However, this year a California court held that the Wage Order provision was invalid in Gerard v. Orange Coast Memorial Hospital. Although the California Supreme Court subsequently granted review of that decision, in the meantime the decision left health care employers uncertain about the validity of practices allowing meal period waivers to covered employees. SB 327 addresses this by declaring that on an after October 1, 2000, the meal waiver provisions of the Wage Orders were, and continue to be, valid and enforceable. The law was enacted as urgency legislation that is effective immediately and is expressly declared to be a clarification of existing law.
Fair Pay Act
Today, California’s Governor signed into law SB 358, California’s Fair Pay Act. Under existing law (Labor Code 1197.5), employers are already generally prohibited from paying an employee at a wage rate less than the rates paid to employees of the opposite sex in the same establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions. SB 358 eliminates the limitation on the pay differential being “within the same establishment.” The bill also imposes an affirmative burden on the employer to demonstrate that any wage differential it believes is permissible actually is justified based on valid considerations specified in the statute. More specifically, SB 358 amends Labor Code 1197.5 to now provide that an employer shall not pay any of its employees at wage rate less than the rates paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions, except where the employer demonstrates that the wage differential is based upon (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; and/or (4) a bona fide factor other than sex, such as education, training, or experience. This last factor shall only apply if the employer demonstrates that the factor is not based on or derived from a sex-based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity.
Employees who believe their rights have been violated may file a complaint with the DLSE and/or a court action to recover the balance of the wages owed, plus interest, together with an equal amount as liquidated damages, as well as attorneys’ fees and costs.
The Governor has until October 11 to sign or veto bills that are still outstanding, including the bill to prohibit mandatory agreements to arbitrate Labor Code claims. We will keep you posted of further developments.