Client Alert

  New Employment Laws and Requirements for 2017

By: Dwayne McKenzie

The California Legislature and electorate was active this year in enacting and amending state laws affecting employment and the workplace.  The following is a partial list of laws that will affect many employers’ day-to-day operations and may require review of employer policies and procedures to ensure continued compliance.

Proposition 64 – Recreational Use of Marijuana.  Proposition 64 legalizes recreational use of marijuana for individuals age 21 or older.  Employers or employees may therefore question the continued application of employer drug use policies.   However, marijuana remains an illegal substance under the federal Controlled Substances Act, and Proposition 64 provided that employers could continue to maintain drug-free workplaces and are not required to accommodate marijuana use in the workplace.  Nevertheless, employers should avoid ambiguities in their policies regarding alcohol and drug use in order to avoid potential legal issues and should also be mindful of the interaction between such policies and rights of persons with disabilities under state and federal law such as the Americans with Disabilities Act and the Fair Employment and Housing Act.

The California Fair Pay Act Extended to Race and Ethnic Wage Disparities (SB 1063).  Last year, the legislature passed SB 358 which addressed the gender pay gap by expanding protections against wage disparities.  Under SB 358, an employer may not pay an employee less than 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 when the disparity is based on a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or is based on a bona fide factor, such as education, training, or experience. 

SB 1063 extends the California Fair Pay Act to address racial and ethnicity pay disparities by prohibiting employers from paying employees less than the wage rates paid to employees of another race or ethnicity for substantially similar work.  To ensure that past gender, race or ethnicity-based wage disparities do not persist, SB 1063 also makes clear that prior salary levels cannot, alone, justify a pay disparity, thereby requiring employers to account for pay differences based on employee requirements, expectations, and qualifications.  Employers may need to conduct wage evaluations to determine whether their employee compensation complies with the Act.

Protection of Victims of Domestic Violence, Sexual Assault, or Stalking  (AB 2337).  Labor Code section 230.1 prohibits employers with 25 or more employees from discharging, discriminating or retaliating against an employee who is a victim of domestic violence, sexual assault or stalking and provides such employees additional protections.  AB 2337 requires employers to provide notice of rights under section 230.1 to employees at hire and upon request.  The Labor Commissioner is required to prepare a form of notice by July 1, 2017.  Although employers will not be required to provide the notice until the Labor Commissioner issues the form, they should be prepared to implement this new notice requirement, particularly in their new-hire packages.

Additional Immigration-Related Protections (SB 1001).  Employers must verify employee eligibility to work in the United States (using the federal I-9 Form).  SB 1001 makes it a violation of state law for an employer to request more or different documents than are required under federal law, to fail to honor documents that appear to be genuine, to fail to honor documents or work authorization based upon the specific status or term of status of the work authorization, or to reinvestigate or reverify a current employee’s authorization to work.  Importantly, SB 1001 provides a penalty of up to $10,000 against an employer who violates the Act.

Increase in Minimum Wage (SB 3).  Beginning January 1, 2017, SB 3 phases in annual increases to the state minimum wage to reach $15 an hour in 2022.  Beginning January 1, the minimum wage increases to $10.50 per hour for employers with 26 or more employees, with an additional 50 cents in 2018, and additional dollar increases thereafter until 2022.  For employers with 25 or fewer employees, the same increase schedule will apply beginning in 2018.

Minimum wage increases have additional implications for employees exempt from overtime pay requirements under the executive, administrative and professional exemptions.  For an employee to qualify under these exemptions, the employee must be paid at least twice the minimum wage per month.  With the minimum wage increase in 2017, the minimum annual salary to be considered an exempt employee will increase to $43,680 for employers with 26 or more employees.

Federal Overtime Rules.   In May, the U.S. Department of Labor (“DOL”) announced changes to the federal overtime rule under the Fair Labor Standards Act (“FLSA”).  The rule increased the minimum salary threshold that must be met before an employee could be treated as exempt from overtime under the executive, administrative and professional exemptions.  The annual salary threshold was increased to $47,476, which is greater than California’s current minimum salary threshold for these exemptions under state law.  The rule was scheduled to go into effect on December 1, 2016.  However, on November 22, a federal court in Texas issued a preliminary injunction blocking the enforcement of the rule nationwide.  On December 1, the DOL appealed the order to the U.S. Court of Appeals for the Fifth Circuit on an expedited basis.   Employers who may be affected by the DOL rule should watch for updates on the status of the injunction and the potential effective date of the rule if the injunction is lifted.

Single-User Restrooms (AB 1732).  AB 1732 requires that signage for all single-user toilet facilities in any business establishment, place of public accommodation, or state or local government agency identify them as “all-gender” toilet facilities.  Local officials and building inspectors are authorized to inspect for compliance. 

Earned Income Tax Credit Notice (AB 1847).  Employers are required to notify employees of their eligibility for the federal Earned Income Tax Credit.  AB 1847 requires employers to also notify their employees that they may be eligible for the California Earned Income Tax Credit, and it amends the required notice language contained in Revenue and Taxation Code section 19854.

Additional enactments will impact employers after 2017: 

Paid Family Leave Benefits (AB 904).  Paid Family Leave is a state program funded by employee contributions that provides short-term benefits to workers who experience a loss of wages while caring for a seriously ill family member or to bond with a new child.  Effective January 1, 2018, AB 908 increases the amount of paid family leave benefits an employee may receive from the current rate of 55 percent of earnings up to 60 or 70 percent, depending on the employee’s income.  Effective January 1, 2019, AB 908 also removes the seven day waiting period before an employee may receive paid family leave benefits.  Employer human resource personnel should be advised of these changes so they can continue to properly communicate with employees and coordinate PFL benefits.

Expansion of Heat Illness Prevention Standards to Indoor Workplaces (SB 1167).  The Division of Occupational Safety and Health (Cal/OSHA) has enacted heat illness prevention standards for workers in outdoor workplaces.  SB 1167 requires the Division to propose heat illness prevention standards for indoor places of employment by January 1, 2019.  The standards will likely affect workers in various industries and, like the outdoor standards, can be expected to impose rest period requirements.  Affected employers must comply with the new standards to avoid premium pay liability for failing to provide required rest breaks.  


If you have any questions concerning the subject of this article, please contact a member of our Labor & Employment group:

Dwayne McKenzie at 310.284.2279 or
Charles Noneman at 310.284.2236 or

Cox, Castle & Nicholson LLP is a full service law firm offering comprehensive legal services to the business community and specialized services for the real estate and construction industries.  Reproduction is prohibited without written permission from the publisher.  The publisher is not engaged in rendering legal, investment, business or insurance counseling through this publication.  No statement is to be construed as legal, investment, business or insurance advice.

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