In 2018, California businesses will continue to face an array of challenges in the workplace arising from new state laws, on-going compliance with wage and hour and EEO laws, and managing threats of litigation from regulatory agencies and private litigation. This article highlights some of these key challenges.

NEW CALIFORNIA STATE LAWS THAT WILL AFFECT THE WORKPLACE IN 2018

Below are highlights of select California state laws that will affect the workplace in 2018.

• SB 3 – Minimum Wage Increase: California’s minimum wage for employers of 26 employees or more will increase from $10.50 to $11.00, and California’s minimum wage for employers of 25 employees or less will increase from $10.00 to $10.50. The minimum annual salary for exempt employees will also increase: $45,760 with businesses of 26 or more employees; and $43,680 for business of 25 employees or less.

• AB 1701 – New Wage Liability for Direct Contractors: Direct contractors will now be liable for debt owed to wage claimants, such as wages, by subcontractors at any tier.

• SB 63 – Baby Bonding for Eligible Employees of Small Employers: Protected baby bonding leave (12 work weeks) will be extended to eligible employees of small businesses with 20-49 employees.

• AB 1008 – “Ban the Box": This law imposes substantial restrictions on employers with five or more employees when requesting and considering criminal history when making employment decisions, such as prohibiting those employers from seeking conviction history on an employment application.

• AB 168 – Limitations on Seeking and Using Applicant Salary History: As a general rule, employers will not be able to rely on or seek an applicant’s salary history in determining whether to offer employment.

• SB 306 – Increased Retaliation/Discrimination Investigative Authority for the California Labor Commissioner: The California Labor Commissioner will have increased authority to investigate an employer suspected of retaliation/ discrimination, without first needing to receive a retaliation/discrimination complaint.

• AB 46 – Clarification that Public Entities are Included as “Employers” under California’s Equal Pay Law: This law, effective October 14, 2017, clarified that public and private entities are considered “employers” for purposes of California’s equal pay laws.

• AB 1710 – Increased Discrimination Protections for Service Members: This law will make it illegal to discriminate against service members with respect to employment terms, conditions, or privileges.

• AB 450 – Restrictions on Employer Cooperation with Federal Immigration Enforcement Authorities and I-9 Checks: This law prohibits employers from giving consent to immigration enforcement officers without a warrant to enter any non-public areas of the workplace, except as required by federal law. Employer generally also may not voluntarily consent to immigration enforcement officials’ request for access to employee records except as authorized by federal law. Employers will have to provide notice to certain employees that are the subject of immigration agency inspection, and employers may not re-verify employee eligibility of a current employee at a time or in a manner not required by federal law.

• SB 396 – Supervisor Training for Gender-Based Harassment: Employers with 50 or more employees must, as part of the California-required sex harassment training for supervisors, include training for harassment based on gender identity, gender expression, and sexual orientation. Posters developed by the Department of Fair Employment and Housing (“DFEH”) on transgender rights must be posted in the workplace. Now is the time to update workplace conduct policies as well as internal complaint, investigation and resolution procedures. Although mandated training requirements cover larger employers, given individual liability of co-workers and supervisors for harassment, all employees should be advised of their obligations under workplace conduct policies especially sex harassment and anti-bullying policies.

NOTABLE U.S. SUPREME COURT AND CALIFORNIA SUPREME COURT CASES TO WATCH IN 2018

Below are select cases to monitor in 2018, the outcomes of which should have significant impact on labor and employment laws across various industries:

• Epic System v. Lewis (16-285); Ernst & Young v. Morris (No. 16-300), and National Relations Board v. Murphy Oil USA (16-307): Argued on October 2, 2017, in these consolidated cases, the U.S. Supreme Court will examine whether mandatory collective/class action waivers in arbitration agreements are enforceable under the Federal Arbitration Act, despite the provisions of the National Labor Relations Act (“NLRA”).

• Encino Motorcars, LLC v. Navarro (No. 16-1362): The U.S. Supreme Court will examine whether car dealership service advisors are exempt from overtime under the Fair Labor Standards Act (“FLSA”). Argument set for January 17, 2018.

• Janus v. American Federation of State, County, and Municipal Employees, Council 31 (No. 16-1466): The U.S. Supreme Court will examine whether Abood v. Detroit Board of Education, 431 U.S. 209 (1977) (which approved of mandatory union fees in the public sector for bargaining and administering a resulting contract) should be overruled and public sector agency fee arrangements be declared unconstitutional under the First Amendment. Argument not yet set.

• Alvarado v. Dart Container Corp. of California (S232607): Argued December 7, 2017, the California Supreme Court is expected to issue a decision in early 2018 addressing what law—California or federal—governs how overtime is calculated when employees receive hourly wages and a non-discretionary flat sum bonus.

OTHER DEVELOPMENTS IMPACTING LITIGATION RISKS AND COMPLIANCE

• Labor Code Violations: The California Labor Commissioner will continue actively to pursue businesses for alleged violations of the Labor Code, especially in the area of “wage theft” based on misclassification of employees as independent contractors or as salaried exempt employees instead of hourly wage employees.

• California’s Private Attorneys General Act (PAGA): In Williams v. Superior Court, 3 Cal. 5th 531 (July 13, 2017), the California Supreme Court established expansive discovery rules in PAGA lawsuits which will impact how PAGA cases are litigated. Under PAGA, one plaintiff—standing in the shoes of the State of California— can bring a representative action as an “aggrieved employee” on behalf of every other alleged employee who worked during the applicable one year statute of limitations period. Now, a PAGA plaintiff can more easily discover information that has customarily been available only through class action litigation. Defenses to such discovery must meet the high bar set by the Court in order to defeat the plaintiff’s discovery rights.

• Labor Code section 558.1 – Individual Liability for Wage Claims: Aligning California with the FLSA, Section 558.1 establishes individual liability on the part of “an owner, director, officer, or managing agent of the employer” for certain Labor Code violations. Although effective in 2016, the impact of this law is increasingly apparent as individuals in these positions are named as defendants in Labor Commissioner and wage and hour actions. As Section 558.1 increases the risk for wage and hour claims, including PAGA claims, insurance policies covering such clams should be reviewed to secure coverage for these individuals.

• Federal Regulatory Changes: The effort to roll-back Obama-era U.S. Department of Labor administrative regulations and guidance is expected to continue. In June 2017, the DOL withdrew Interpretative Bulletins limiting use of independent contractors (2015-1) and the expansive application of joint-employer status (2016-1), which were the subject of widespread criticism in the business community. On December 4, 2017, the DOL issued a Notice of Proposed Rulemaking to remake tip regulations under the FLSA so that tips are no longer just for wait staff. Comments to the proposed rule are due by January 4, 2018, though this comment period may be extended by 30 days.

As 2018 fast approaches, these new compliance challenges and litigation risks should be addressed with a proactive review of policies and procedures governing employees and contractors.

Linda Auerbach Allderdice (Partner), John H. Haney (Associate), and Samuel J. Stone (Associate) are attorneys at Holland & Knight LLP. For more information, visit www.hklaw.com.

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