More Employer Considerations: An Update on Recent California Legislation


In the recent General Election, California's voters were faced with numerous ballot measures ranging from the use of plastic bags, to determining the extent to which a corporation should be allowed to provide political contributions. While the most-recent ballot allowed citizens of the state to steer the course of California's future by exercising their right to vote, the California Legislature was busy preparing over one hundred bills for consideration by Governor Brown before their adjournment on August 31, 2016. As with any Legislative Session in California, employers were again the target of new requirements and regulations which Governor Brown had to sign or veto by September 30, 2016. This article identifies a few major changes impacting employers of workers in California.

Expansion on California Equal Pay Act

Last year, the California Legislature passed the California Fair Pay Act which prohibits an employer from paying any of its employees wage rates that are less than what it pays employees of the opposite sex for "substantially similar work". The Act defines "substantially similar work" as work that is mostly similar in skill, effort, responsibility, and performed under similar working conditions. Furthermore, the Act prohibits implementing or enforcing a policy that prevents employees from disclosing their wages, discussing the wages of others, or inquiring about others' wages.

This year, the governor signed AB 1676 and SB 1063, a pair of co-dependent bills which expanded upon the California Equal Pay Act of 2015. The bills were crafted in a manner which required that if both bills were not passed, neither bill would become effective. AB 1676 states that an employer is prohibited from using prior salary history, by itself, to justify a disparity in compensation of employees who perform "substantially similar work." At its core, AB 1676 was passed under the belief that there is a deep and pervasive history of discrepancy in compensation between the sexes. As such, in order to fulfill the goal of the California Equal Pay Act and establish equal compensation, an employer should be prohibited from using prior salaries as a basis for paying one employee less than another. On the other hand, SB 1063 prohibits an employer from paying any employees a wage rate less than rates of other employees based on race or ethnicity for "substantially similar work". In essence, SB 1063 extended the California Equal Pay Act from gender inequality to racial inequality.

Both AB 1676 and SB 1063 become effective January 1, 2017.

Expansion of Heat Regulations to Indoor Workers

Cal-OSHA is a regulatory agency that sets forth standards aimed at protecting workers' health and safety in varying industries. One such area Cal-OSHA has a long history of regulating is in relation to heat illness prevention for workers required to perform labor outdoors. In this regard, Cal-OSHA requires that employers meticulously monitor the temperature of any outdoor work projects, provide extensive training in heat illness prevention to all level of employees, and, among other requirements, mandates that the employer make shade available for use by workers under certain circumstances. However, prior to SB 1167, such heat illness prevention programs were only needed by employers with employees who had to perform labor "under the sun". By signing SB 1167, Governor Brown is now tasking Cal-OSHA to prepare a regulatory model and enforcement of heat illness prevention programs for indoor workers. Specifically, this bill requires that Cal-OSHA propose a heat illness prevention standard applicable to workers working in indoor places of employment by no later than January 1, 2019. Cal-OSHA is to set the standard based upon due consideration of "environmental temperatures, work activity levels, and other factors." Unfortunately, the bill does not specify that regulation will be for specified work performed indoors, in essence allowing for heat regulation of establishments ranging from restaurants to office spaces.

Choice of Forum/Choice of Law in Employment Contracts

The premise of contracts in the legal system has been "bargain for exchange." At one point in time, the courts of the United States enforced all contracts based on the notion that each term was understood, contemplated, and agreed upon by the signatories. However, with more and more employment contract terms being found to be unconscionable (i.e. arbitration provisions) in California, SB 1241 certainly is in line with the trend of limiting what an employee in California can contract for.

SB 1241 adds Section 925 to the California Labor Code and prohibits the ability of employers to require contracted employees who work in California to agree to adjudicate disputes outside of California, or agree to apply law in such proceedings besides the law of California. In essence, California has determined that individual signatories should not be allowed to determine the terms of their employment relationship because an employee is in lesser bargaining position. With California having the most employee-friendly laws on the books, SB 1241 creates an issue for multi-state employers with employees contracted to work in California. SB 1241 is a serious concern for out-of-state employers who will have to concede to jurisdiction and application of California employment laws if wanting to maintain a presence within the state. The only exception carved out of the bill is regarding those employment contracts whereby the contracting employee enters into a choice of forum/law with the advice of independent counsel.

SB 1241 applies to all contracts between employers and California employees that are entered into, modified, or extended on or after January 1, 2017.

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