California’s New Employment Laws

For employers in California, the beginning of 2018 ushered in a plethora of new employment laws designed to bolster employee rights. These laws—which range from a higher minimum wage to new requirements for the hiring process—apply to nearly all employers in both the public and private sectors. Complying with the new laws may be particularly onerous for small and medium-sized businesses, which often lack the resources needed to manage a heightened administrative burden as effectively as large corporations.

For California-based CPA firms and other businesses in the accounting industry—as well as numerous additional organizations—understanding the requirements of these sweeping new laws is the first step in ensuring compliance. Consequences for violations may include lawsuits, hefty fines, or even criminal sanctions. Therefore, it is essential that employers in California familiarize themselves with the following employment law changes that went into effect on January 1, 2018:

Higher minimum wage. The state minimum wage increased by 50 cents to $10.50 per hour for organizations with 25 or fewer employees, and $11 per hour for those with more than 25 employees. This increase is one of the annual steps in California’s plan to raise the minimum wage rate to $15 per hour by 2023.
Salary history information (AB 168). With a goal of narrowing the gender wage gap, AB 168 prohibits employers from seeking information about a job applicant’s salary history, compensation, or benefits—even through a third party, such as a recruiting firm. However, if an applicant “voluntarily and without prompting” reveals information about his or her past salaries, the employer may consider this information. AB 168 also requires organizations to provide applicants with a pay scale for the position in question, if requested. (https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB168)
Fair Chance Act (AB 1008). In an effort to help individuals with criminal histories overcome barriers to employment, this new “ban-the-box” initiative prohibits organizations with five or more employees from inquiring about an applicant’s prior convictions—at least until a conditional offer of employment is made. Since 2013, California has imposed the same prohibition on state and local government employers, but the Fair Chance Act extends “ban the box” to private sector organizations. Under the new law, employers that opt to rescind a conditional job offer after learning of an applicant’s criminal record must notify the applicant in writing, including detailed information about how they arrived at their decision. The applicant may challenge the adverse decision, and the Fair Chance Act requires the employer to review the challenge. (https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180AB1008)
Expanded harassment training (SB 396). Preexisting California law required organizations with 50 or more employees to provide supervisors with at least two hours of harassment prevention training every two years. SB 396 expands this training, stipulating that it must cover topics such as sexual orientation and gender identity and expression. These components of the training must include specific examples of prohibited behavior and be led by knowledgeable trainers with expertise on sexual orientation-related matters. Additionally, SB 396 requires organizations to display a Department of Fair Employment and Housing (DFEH) poster on the rights of transgender individuals. (https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB396)
Expansion of Labor Commissioner’s authority to investigate retaliation claims (SB 306). In a significant victory for labor, SB 306 changes certain standards surrounding investigations of alleged retaliation or discrimination against employees. Previously, the Labor Commissioner could only seek injunctive relief against an employer after completing an investigation and determining that unlawful retaliation had occurred. Under the new law, such relief may be sought while an investigation is still ongoing—which means that an employer could be required to reinstate a terminated worker or take a similar action, even if the Labor Commissioner has not yet found that retaliation did, indeed, occur. Additionally, an employee complaint is no longer required for the Labor Commissioner to initiate an investigation; mere suspicion of retaliation or discrimination is sufficient to start the process under SB 306. (https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB306)
Immigrant Worker Protection Act (AB 450). In contrast to federal initiatives to penalize undocumented immigrants and their employers, California’s new Immigrant Worker Protection Act is designed to shield employees from immigration enforcement while at work. The law requires employers to deny agents from Immigration and Customs Enforcement (ICE) access to employee records or the non-public areas of the business without a warrant or subpoena. In addition, organizations must notify employees of a Form I-9 or other employee records inspection within 72 hours of receiving notice that an inspection will take place. Organizations that fail to comply with this new law may be subject to fines of up to $5,000 for a first violation and up to $10,000 for subsequent violations. (https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180AB450)
New Parent Leave Act (SB 63). Previously, California law required organizations with 50 or more employees to offer twelve weeks of unpaid, job-protected family leave to allow new parents time to bond with a baby or child within one year of the child’s birth, adoption, or foster care placement. The New Parent Leave Act extends this requirement to organizations with 20 or more employees, which will greatly increase the number of California employees to whom this benefit is available. However, to qualify for family leave under the new law, an individual must have worked for the employer for more than 12 months, completed at least 1,250 hours of service over the previous 12 months, and work at a site where the organization employs at least 20 people within 75 miles. (https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB63)

With these extensive laws now in effect, how can employers ensure that they are compliant—and thereby avoid the risk of costly penalties? Here are a few important steps:

Review job applications, interview questions, and other steps in the hiring process, and eliminate anything that could be perceived as seeking information about an applicant’s salary history or criminal record. Train hiring managers on the new laws to ensure that they do not ask prohibited questions.
Update employee handbooks and harassment training programs to include content on sexual orientation, gender identity, and gender expression. In light of the recent epidemic of high-profile sexual harassment cases, employers should also ensure that their workplace policies and training materials clarify what constitutes prohibited behavior and define consequences for violations.
Verify that all workplace posters required by state and federal law are up to date and displayed in a location where they are clearly visible to employees.
Check for more restrictive employment laws at the city or county level. For example, several cities in California—including San Francisco, Los Angeles, and San Diego—have higher minimum wages than the state rate.
Review employment practices and policies with an HR expert. As laws continue to change, imposing strict new requirements on businesses in the accounting industry and numerous other industries, the best way for employers to minimize liability and the risk of penalties is to consult an experienced HR professional.