“Oh, the weather outside is frightful . . . “ While these traditional holiday song lyrics don’t always ring true in sunny California, the climate for business owners in the state has continued a steady decline into downright frigid temperatures in recent years. 2018 has, once again, seen a number of legislative, administrative and judicial decisions change the landscape for those who choose to do business in this very employee-friendly state. The following is a brief review of a few of the key legal changes that have business leadership bracing for a long, cold winter:
INDEPENDENT CONTRACTOR RELATIONSHIPS
As reported in greater detail here, the California Supreme Court sent shockwaves throughout the employment world with its decision in Dynamex Operations West, Inc. v. Superior Court. The Court clarified the previously murky waters defining who would qualify as an independent contractor under California law. The decision set forth a new “ABC Test,” which put the burden of proof squarely on employers to establish all of the following factors in order to establish that the worker is an independent contractor:
A) The worker was free from control and direction of the hirer in connection with the performance of the work, both under the contract for performance of such work and in fact;
B) The worker performed work that is outside the usual course of the hiring entity’s business;
C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
If the business is unable to prove, through a preponderance of the evidence, that each of these statements is true and accurate, the worker “defaults” back to an employee and must be afforded all of the protections and privileges of the California wage orders.
Currently, the Dynamex ruling only applies to violations of the California Wage Orders (see, Garcia v. Border Transportation Group). However, all indications point to a widespread application of the ABC Test on all issues involving the independent contractor vs. employment relationship standard. Most believe that the change in the law will result in a significant enforcement effort by the statewide administrative agencies, as the number of “misclassified” workers took a sudden leap under the Dynamex standard.
EVEN DE MINIMUS WORK MUST BE PAID
In another somewhat surprising move, the California Supreme Court eliminated the traditional, and long-standing rule that provided that employers had a proverbial “grace period” for small amounts of work that were not compensable. Prior to the Court’s ruling in Troester v. Starbucks Corporation, an employer was not required to compensate employees for work performed, if the time spent was simply de minimis (Latin for “from the smallest”). In Troester, the plaintiff was a former Starbucks shift supervisor, who was required to clock out before completing her final work duties in closing the store. The additional tasks would require anywhere between four to ten minutes each day (including turning off computers, setting an alarm and locking the store for the evening). The total “unpaid time” over plaintiff’s 17-month employment period equaled $102.67. The Supreme Court unequivocally held that, even though federal law indicates that there is no penalty for the employer’s failure to compensate for this sort of de minimis work, the California Labor Code and wage orders have NOT adopted the federal de minimis standard. As such, the effective result of the Troester decision is that employers are required to pay minute-to-minute and ANY underpayment for work performed by the employee is a violation of California law.
Although not specifically addressed by the Court, it is likely that any “rounding policy” used by employers when paying employees will now be seen as a violation of California law, exposing the employer to liability for unpaid wages, civil penalties, Private Attorneys’ General Act penalties and those pesky attorneys’ fees awardable to plaintiff’s counsel. When applied to all employees across an employer’s payroll, a relatively small violation can cost a business hundreds of thousands of dollars.
SEXUAL HARASSMENT LIABILITY EXPANDED
On the heels of the nationwide “#metoo” and “Time’s Up” campaigns, the California Legislature enacted several bills to change the landscape for employers dealing with claims of harassment. Among the highlights:
SB 1343 – Extends the requirement to provide mandatory, supervisor sexual harassment prevention training to employers with 5 or more employees (previous law only applied to employers with 50+ employees). The bill also adds a brand new requirement that employers of 5+ employees provide training to non-supervisors, as well! Failure to provide training exposes employer to potential liability for failing to take all steps to prevent harassment from occurring.
SB 820 – Prohibits parties to include confidentiality requirements in any settlement agreement for sexual assault, sexual harassment, or sex discrimination or retaliation.
SB 1300 – Expands potential employer liability by making evidence of a single incident of harassment or discrimination sufficient for a claim to proceed to trial.
SB 3109 – Voids any provision in a contract or settlement agreement that waives a party’s right to testify in an administrative, legislative, or judicial proceeding concerning alleged criminal conduct or sexual harassment
OTHER HOT EMPLOYMENT TOPICS
Enforcement of fully “duty free” rest periods has begun! 2018 saw a notable increase in claims addressing the Augustus v. ABM Security standard to provide all employees with rest periods free of any control by the employer. Re-read our article on this issue here.
… and please don’t forget that the statewide minimum wage increases to $12.00 per hour for employers with 26 or more employees, meaning that the minimum annual salary for an exempt employee also jumps from $43,680 annually to $49,920. Complicating matters, though, are the state's largest cities/counties which are also scheduled to increase minimum wages during the 2019 calendar year, on their way to a $15.00/hour minimum wage by 2020. A table explaining the different minimum wage rates throughout L.A. County can be found here.
Now more than ever, businesses need to have competent legal counsel to help them navigate through the perilous terrain of California employment laws. Be sure to coordinate an annual “checkup” with your friendly, neighborhood attorney to ensure that your business is prepared to survive the long, cold winter!