Overview of California Employment Laws
The landscape of California employment law is both vast and intricate. While the laws in California are a patchwork of both federal and state regulations, they generally fall into three primary categories: wages and hours, anti-discrimination, and worker safety. First and foremost, California’s wage and hour laws govern the payment of workers, including minimum wages, overtime compensation, and meal and rest breaks. California has one of the highest minimum wage rates in the nation and a substantial body of law regarding overtime pay, which occurs when an employee works more than eight hours in a day or 40 hours in a week (and after 12 hours in a day). Meal and rest breaks must also be provided or a penalty wage is owed to the employee.
Second, and as important as any other aspect of California employment law, California’s anti-discrimination and leave laws impose strict rules and requirements on employers regarding the treatment of all employees within the workplace . Employers are prohibited from discriminating against employees based on a variety of protected statuses, including, among others, the employees’ race, color, ancestry, religion, national origin, marital status, medical condition, physical or mental disability, sex, age, and sexual orientation.
Most recently, the California Fair Employment and Housing Act ("FEHA") has expanded to include protections for transgender individuals, as well as limiting employer inquiry into an applicants’ criminal background history.
Third, California employers are required to maintain a safe workplace for their employees. Although California has stringent safety regulations, the most basic underlying principle is that an employer has a responsibility to protect its employees from unsafe conditions within the workplace.
Employment Laws for Small Businesses
Small businesses in California – generally defined as those with up to 15 employees – are afforded certain exceptions and simplified requirements not available to larger businesses. Employees such as owners, directors, and managers are generally exempt from many of the laws governing wages, workplace health and safety and break periods. For example, these individuals are not entitled to meal and rest breaks since the provision of those breaks is the responsibility of the employer. Your small business may qualify for a number of exemptions under federal and state wage law, depending on the circumstances. California law also exempts small businesses with up to five workers from the pay slip regulations requiring them to provide itemized wage statements along with each paycheck and post notices of the places employees can access rates of pay and other information about their employment.
Note that there are no exemptions from the federal laws prohibiting discrimination in the workplace or requiring accommodations for disabled employees. As well, state laws governing workplace violence can apply to small businesses.
What Mid-Sized Companies Need to Comply With
For mid-sized companies (those with 16-49 employees), the number of obligations grows again although none are unique to mid-size employers. At this size, most of California’s employment statutory regulatory system applies to Mid-sized employers. The payroll laws of California such as minimum wage, overtime, meal and rest periods apply. Also covered are non-exempt employee issues such as safety, leave laws, and generally, discrimination prohibitions.
By this number of employees, the employer now has almost all of the obligations of larger employers. Even the recent workplace violence law applies to mid-sized employers. An exception is that with fewer than 50 employees, no California family care leave obligation attaches (but you must comply with federal leave laws if any are applicable, since not all of them are).
The exception in place for small employers for the duty to prevent harassment is now gone for mid-sized employers. Of course, all employers must now be aware of the expanding obligations include sexual harassment training, expanded employer duties to investigate complaints, and so forth. The most notable item is an expansion of the usual workplace violence statutes to apply to a broader class of persons creating a threat of violence, and the corresponding obligations toward them. The broadest duties of course, apply when the person is an employee.
The following may be among the unique compliance obligations expected of a mid-sized employer. This employer by size is now subject to the management training requirements in the CAT law. However, the CAT law only applies to employers where there are 5 or more employees in total – meaning everyone irrespective of their location at the workplace, so the extra effort is required even if an office of 5 or more employees is far removed from the main offices. This means that even if your headquarters has only 10 employees, but your larger delivery/staff area has 20 employees, the combined 30 employee person count triggers the training requirements. We survey the requirements in more detail elsewhere.
The COTEA law also comes into play if your workplace has over 5 employees.
Employment Laws for Large Companies
Large employers in California, generally those with 50 or more employees, must comply with an array of regulations. In this section we will discuss Federal employment laws and regulations that large employers in California must comply with. While many of the Federal employment laws are familiar, what is not always clear is the varying applicability of Federal employment laws depending on the number of employees employed by the company.
The Family Medical Leave Act ("FMLA") expressly applies to employers who employ 50 or more employees. An employer meets the minimum threshold of 50 employees when (1) at least 50 employees are employed within a 75 mile radius of the worksite, and (2) the employer is subject to FMLA coverage in the sense that it employs 50 or more employees during each working day of 20 or more calendar work weeks in the current or preceding calendar year. There are two methods for determining FMLA coverage based on these requirements. Of course, if the employer employs 50 or more employees regardless of whether they are located within a 75 mile radius or if the employer employs at least 50 employees within a 75 mile radius regardless of whether the employer employs 50 or more employees during each working day of 20 or more calendar work weeks in the current or preceding calendar year, then the FMLA applies.
Federal law requires an employer with 100 or more employees to apply for Worker Adjustment and Retraining Notification ("WARN") Act coverage. The WARN Act sets forth specific notice requirements for employers planning to layoff or terminate 50 or more employees from a single facility. The notice requirement under the WARN Act is triggered by an employment loss at a single facility including: (1) plant closure (defined as the termination of employment for more than 50 employees during any 30-day period), and or (2) mass layoff (defined as a reduction of the workforce during any 30-day period at a single site of employment, of at least 33% of the active employees for employers normally employing 100 or more employees, at least 500 employees at the single site of employment, or at least 50 employees at the single site of employment if the employer has between 100 and 300 employees total).
Employers with 100 or more employees, including public and private employers, must comply with the Uniformed Services Employment and Reemployment Rights Act, which governs the rights and duties of employers and their employees with respect to military service leave.
Employers with 250 or more employees, except for small businesses with fewer than 15 employees and churches and other religious institutions, must comply with Federal Equal Employment Opportunity laws and regulations, including Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Genetic Information Nondiscrimination Act.
Big Differences in California Company Laws
Statistics show that California companies employ a mix of full-time, part-time, and seasonal employees, many with diverse levels of compensation, and nearly all significantly subject to California employment law. However, once a business passes certain thresholds, it can face additional scrutiny under numerous "large-employer-only" laws, which will be explained here.
For example, under the Family Rights Act ("CFRA"), California employers with 50 or more employees (at least 20 weeks of employment in the current or preceding calendar year) must provide California CFRA leave to eligible employees, which is an extension of the federal Family Medical Leave Act ("FMLA"). On the other hand, smaller businesses are not required to allow employees to take CFRA leave. While the FMLA applies to California employers with 50 or more employees, these 50 employees do not need to be located within a 75 mile radius of where the employee works. These requirements may prompt certain small employers to consider constructing future labor strategies in hopes of avoiding costly penalties for non-compliance. However, if the potential employer willfully employs 50 or more people in California, and those employees are "employed within 75 miles" of the worksite, the employer must comply with the CFRA and FMLA even if a small portion of the workforce is California based, instead of in another state.
The California Equal Pay Act imposes on employers a duty to pay all employees the same wage rates for "substantially similar" work unless the employer can prove that differential treatment results from any one of four broad exceptions. See Labor Code § 1197.5. Labor Code Section 1197.5 applies to all employers , but only those that employ 26 or more workers must include pay rates for employees in personnel records upon request by other employees. For at least this reason, the pay rates of those businesses that are obligated to report on their payroll broadly must do so in order to remain transparent.
In addition to several other provisions, the California Paid Sick Leave Act ("PSL Act") requires California employers that regularly employ "more than 25 employees" in California to provide paid sick leave to each of them. Employees cannot be compelled to work on a day for which that particular employee is eligible to use sick leave, nor can an employee with accrued and available sick leave be compelled to take a different type of paid or unpaid leave.
Further, California minimum wage laws impose higher base rates of pay than federal minimum wage. Prior to 2016, California minimum wage laws required employers to pay employees who worked in certain areas, including the State Capitol, more than the federal minimum wage, depending on the wage rates prescribed by city or county. However, the above statistics do not reflect the newer increased rates of pay minimum wage laws passed on April 4, 2016 which established rates higher than prior laws.
Recently regulated areas such as Drug and Alcohol Testing have also raised new issues for California employers. California practically bans employers from drug testing without cause. Medical and employment marijuana are recognized in California, although a drug-free policy is also legal. Further there are strict requirements; Legal requirements dictate that employers must be able to prove compliance with theory or fact.
Recent Changes in Employment Laws
On September 29, 2018, Governor Brown signed into law AB 2770, which exempts employers with fewer than 50 employees from the protections of Labor Code section 1197.5, which provides that if an employer in the publicly funded health care sector pays its employees based on their prior salaries, then it also must provide those employees with a differential in pay on the basis of sex or race if such a differential is found to persist after one year of employment. The bill limits the application of Labor Code section 1197.5, and also exempts employers with 15 or more employees from the protections of Labor Code section 432.3, which protects employees from being asked about their prior salary history.
Best Practices for Employee Compliance
Regardless of size, businesses in California must take proactive steps to ensure they are compliant with the various employment laws.
Companies large and small, regardless of employees or revenue, should implement best practice approaches to California employment law compliance. Every business should start by training their managers and human resources personnel about employment law issues, including keeping an eye out for harassment, discrimination and retaliation. Human resources professionals should also be trained to follow proper procedures, including maintaining a clear written policy regarding time tracking and breaks. Companies should consider hiring a third-party auditor to conduct regular audits of employee documents, such as I-9s, payroll records and other documents. Performing regular audits will help ensure the company is prepared for a Department of Fair Employment and Housing or Department of Labor Standards Enforcement audit.
Employers of all sizes should conduct regular audits of their employees’ files and make sure that all documents are properly completed. For example , audits should establish that all employee files contain properly completed I-9s. If not, the company should conduct an internal I-9 audit. Similarly, for the time tracking aspect of the meal and rest period requirements, audits should ensure that the necessary employee data and time records are being maintained and are accurate.
Regular audits of the audit of the companies 1-9s and of the meal and rest period requirements, as well as training of management and human resources personnel are just a couple of the best practices that should be implemented by all California companies, regardless of size. Implementing these best practices will help ensure compliance with California employment laws and, ultimately, reduce the risk of an audit and substantial liability.
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