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California Wage and Hour Update: Upcoming Changes in 2015

As California employers know, the state has very specific and strict wage and hour laws that relate to minimum wage, overtime, meal and rest periods, and wage statement requirements, to name a few. A violation of any of these laws, even if inadvertent, can expose an employer to penalties. The ramifications of these penalties can be monetarily significant, depending on the particular violation, the number of employees involved, and how far back the violation goes.

To ensure your company is up-to-date, below is a summary of important changes to California wage and hour laws taking effect in 2015. Unless otherwise indicated, all laws take effect January 1, 2015.

Rest Periods for Heat-Illness Prevention Recovery

In a covered industry (which includes agriculture, construction, landscaping, oil and gas extraction, and transportation/delivery of agricultural products) with outdoor employment, the law mandates that employers provide recovery periods to allow employees time to cool down and prevent heat illness. SB 1360 amends Labor Code section 226.7 and clarifies that the required heat illness prevention recovery is a paid rest period and counted towards hours worked.

Employer Take Away:

¨ If you are an employer of a covered industry with an outdoor place of employment, ensure you provide employees with access to shade for at least 5 minutes of paid time in which to cool down;

¨ Ensure employees are accurately paid for all time worked, including cool down rest periods, and evaluate if these rest periods will implicate payment of overtime wages.

Increased Waiting Time Penalties

AB 1723 will amend Labor Code section 1197.1 and expand the penalties for an employer's willful failure to pay the wages of a discharged or resigned employee and permit the Labor Commissioner to issue waiting time penalties. Previously, waiting time penalties were only available as part of an administrative hearing or civil action, but in 2015, these penalties will be available through the Labor Commissioner's citations. Waiting time penalties are in addition to the civil penalties, restitution, and liquidated damages that the Labor Commission can authorize.


Employer Take Away:

¨ Evaluate post-separation procedures to ensure former employees are timely paid all outstanding wages and accrued vacation;

¨ Audit your wage and hour practices to ensure you are paying at least minimum wage, overtime, applicable rest periods, and ensure proper employee classification so that upon separation, employees are fully paid for their work.

Liquated Damages for Unpaid Wages

Where an employer fails to pay minimum wage, an employee may seek to recover the unpaid wages, as well as liquidated damages pursuant to Labor Code section 1194.2. Liquated damages are an "amount equal to the wages unlawfully unpaid and interest" and are in addition to reasonable attorney's fees and costs permitted by Labor Code section 1194. AB 2074 will amend the existing law to clarify that an employee may bring a claim for liquidated damages against an employer at any time prior to the expiration of the statute of limitations applicable to the underlying action for unpaid wages, which in California is three years.

Employer Take Away:

¨ Ensure employees are paid the legal minimum wage and applicable overtime pay. Currently, California's minimum wage is $9.00 an hour and will increase to $10.00 an hour on January 1, 2016 (but see note below). The minimum salary test for Executive, Administrative, and Professional overtime exemptions is $37,440 annually, and will increase to $41,600 on January 1, 2016.

¨ Stay informed of increases your city's mandated minimum wage above California's minimum requirement: San Francisco's minimum wage is $10.74 and on January 1, 2015 will increase to $11.05, and then to $12.25 on May 1, 2015, with additional increases through 2018; San Jose's minimum wage is $10.15 an hour and will increase to $10.30 an hour January 1, 2015; Oakland's minimum wage will increase to $12.25 on March 2, 2015; San Diego will vote on whether to increase minimum wage in the June 2016 municipal election.

Joint Liability of Wage and Hour Violations of a Labor Contractor

Employers that use labor contractors (such as staffing or temp agencies) to supply workers to perform regular and customary work of a business, will share with the contractors all civil legal responsibility and liability for their workers, starting January 1, 2015. Under the law, if a labor contractor does not pay an employee all required wages, or secure valid workers' compensation insurance, the employer will be jointly liability with the contractor for the violations.

Given the range of penalties an employer can face for failing to pay wages, this new law opens the door to potentially significant employer liability for a labor contractor's errors and omissions. For additional details on the law and employer strategies to protect its business, read our article dedicated to this issue entitled, Employers Face Increased Liability for Labor Contractors in 2015.

New Requirements for Using Foreign Labor Contractors

SB 477 will amend and add sections to California's Business and Professions Code relating to foreign contractors. Foreign labor contractors outside of the U.S. that recruit foreign workers to work in California will have to register with the Labor Commissioner by July 1, 2016 and California companies are prohibited from using foreign labor contractors unless they are registered. Additionally, foreign labor contractors must pay a registration fee as well as post a bond. In an effort to curb "unscrupulous" practices, foreign labor contractor will have to disclose the employment terms to the employee and prohibit the imposition of a fee on the employee.

Child Labor Protection Act of 2014

Labor Code section 1311.5 will be enacted to provide heightened protections against child labor. There are several aspects to the new law: (1) any action by a minor against an employer for violating child labor laws is tolled until the individual reaches the age of majority (18 years of age); (2) an employee who alleges violations of child labor laws and is retaliated against or subject to adverse employment action, will be entitled to treble damages; and (3) increased penalties of $25,000-$50,000 for violations of child labor laws involving a minor 12 years of age or younger for Class "A" violations, enumerated in Labor Code section 1288.

For more information on upcoming changes to California's wage and hour laws in 2015, contact Simpson Delmore Greene, LLP.

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