Key Legal Updates All California Employers Should Know for 2024

Employment laws in California are always changing, and it is important for employers in California to keep up with these changes to ensure their policies and practices are compliant. This blog post provides key updates to the California employment laws that all employers should know for this year.

Minimum Wage Increase

Beginning January 1, 2024, the state minimum wage for all employers has been increased to $16.00 per hour. This rate reflects a 3.5% increase from this year’s minimum wage based on the law’s provision that allows this increase if the national Consumer Price Index (“CPI”) is over 7%. All employers must post the current minimum wage rate in a common area where employees can easily view it.

With this new rate of $16.00/hour, the minimum salary for exempt employees in 2024 has also increased to $66,560.00/year. Note that the minimum salary is tied to the state minimum wage rate, not individual municipalities.

Employers should also check if there is a higher minimum wage in any city or municipality where they have employees working (typically 2 hours/week is the minimum). For example, the minimum wage in Santa Rosa has increased to $17.45/hour.

Increase in Paid Sick Leave Amount to 5 Days

As of January 1, 2024, the amount of paid sick leave that must be provided to employees under the Healthy Workplaces, Healthy Families Act increased to five (5) days, or 40 hours, per year. Employers can still choose to either provide paid sick leave in a lump sum each year or allow employees to accrue paid sick leave based on hours worked.

The minimum accrual rate is still one (1) hour for every 30 hours worked. If paid sick leave is accrued, employees must now be allowed to accrue up to a cap of at least ten (10) days, or 80 hours. However, employers can limit employees’ actual use of accrued sick leave to five (5) days, or 40 hours per year.

Reproductive Loss Leave Required for All Employers with 5 or More Employees

Beginning January 1, 2024, private employers with five (5) or more employees are required to provide all employees who have worked for the employer for at least 30 days with five (5) days of unpaid, protected leave following a reproductive loss event, which includes a failed adoption, failed surrogacy, miscarriage, stillbirth or an unsuccessful assisted reproduction.

The five days of leave do not have to be taken consecutively but must be completed within three months of the reproductive loss event. This new leave is available for each qualifying reproductive loss event; however, employers have the right to limit the maximum amount of leave under the policy to no more than 20 days in a 12-month period.

Off-Duty Cannabis Use Added as a Protected Class Under FEHA

Starting January 1, 2024, off-duty cannabis use was added as a protected class under the state’s Fair Employment and Housing Act law (“FEHA”). The law specifically prohibits any adverse employment actions taken against an employee for off-duty cannabis use and prohibits an employer from drug screening for cannabis. Employers may still prohibit on-duty possession, impairment, or use. Additionally, the law does not apply to employees in the building or construction trades, or employees that work in positions that require federal background investigations or security clearance under federal law.

Non-Compete Agreements With Employees Still Prohibited in California

Under existing law in California, non-compete agreements with employees are and have been void and unenforceable. Nonetheless, the state has passed two new laws regarding post-employment non-compete agreements that both went into effect on January 1, 2024.

The first law confirms existing case law and voids all unlawful noncompete agreements contained in employment contracts. Under this law, employers are required to individually notify all current employees, and former employees who were hired after January 1, 2022, whose employment contracts include a noncompete clause or who were required to sign a noncompete agreement that such clauses or agreements are void. The notice must be given in writing by no later than February 14, 2024. The notice can be by email, but it must be an individualized communication to each employee or former employee.

The second law confirms that all noncompete agreements are void and unenforceable regardless of where and when the contract was signed. Even if the contract was signed in another state with an employee who was working outside of California, it cannot be enforced in California. The law also makes it a civil violation for employers to enter into or try to enforce unlawful noncompete agreements. Further, the law gives employees the right to bring a civil action against an employer that attempts to enforce an unlawful noncompete agreement, which allows the employee to seek damages and attorneys’ fees and costs in addition to injunctive relief.

New Presumption of Retaliation for Adverse Actions Taken Within 90 Days of Protected Activity

Starting January 1, 2024, if an employer takes any adverse action against an employee within 90 days of the employee engaging in so called “protected activity,” it will create a rebuttable presumption of retaliation under the law. An employer who violates this provision will be liable for a civil penalty of up to $10,000 per employee to be awarded to the employee(s) that was retaliated against. “Protected activity” is defined broadly and includes, among other things, employees who make an internal complaint about working conditions, wages, harassment, etc., an employee who files a suit or complaint with an agency against the company and an employee who testifies in a proceeding against the employer.

NLRB Decision in Stericyle Requires Employers to Review Their Handbook Policies

In 2023, the National Labor Relations Board (“NLRB”) issued a decision in Stericycle, Inc. and Teamsters Local 628 regarding workplace policies and the effect they have on employee rights under the National Labor Relations Act (the “NLRA”). The decision states that workplace policies cannot infringe on employees’ rights under the NLRA, either directly or indirectly. This includes policies that could discourage employees from engaging in protected activities under the NLRA. Employees’ rights under the NLRA, which are protected, include: the right to form or join unions, the right to engage in protected, concerted activities to address or improve working conditions and the right to refrain from engaging in these activities.

Employers should review their handbook policies and make sure they are drafted so that their policies do not “chill” employees’ exercise of their rights under the NLRA.

Additional Updates and Reminders

Updated Wage Theft Notice (Required for all Non-Exempt Employees Upon Hire)

The Notice to Employee required under Labor Code Section 2810.5 – also referred to as a “Wage Theft Notice” – has been updated for 2024.  All employers are required to use the new form. You can access the revised Wage Theft Notice here.

Updated Harassment Poster

The California Civil Rights Department (CRD) has updated their “California Law Prohibits Workplace Discrimination and Harassment” poster. Employers are required to display this poster in a common area where employees can easily view it. You can access the new updated poster here.

IRS Mileage Reimbursement Rate Increase

Starting January 1, 2024, the Internal Revenue Service (IRS) has increased the standard mileage rate by 1.5 cents per mile for 2024 to 67 cents per mile.

Overtime Change for Small Agricultural Employers

For employers with 25 or fewer employees, the phase in for overtime rules for agricultural workers continues in 2024 with daily overtime for any hours worked in excess of 8.5 hours in a day and 45 hours in a week.

Workplace Violence Prevention Plan Required by July 1, 2024

Starting July 1, 2024, all employers are required to establish and maintain a workplace violence prevention plan as part of their Illness Injury Prevention Plan (“IIPP”), which will include maintaining a violence incident log and providing effective training on the workplace violence prevention plan. We will be doing a more detailed blog post on the requirements for the new plan in the Spring.

Employers should reach out to their workers’ compensation carrier for assistance with updating their IIPP accordingly.

For more information reach out to the DP&F Employment Law partners Jennifer E. Douglas and Marissa E. Buck.

COVID-19 Updates for California Employers

On January 9, 2024, the California Department of Health (CDPH) issued an order changing COVID-19 related definitions. These revisions apply to the Cal/OSHA Non-Emergency Regulations, which are still in place until February 3, 2025 and must be followed by all employers in California.

The questions and answers below reflect the updated rules and definitions that currently apply in the workplace. You can read more about the changes on Cal/OSHA’s FAQ page here, which is updated regularly.

COVID-19 Updates for California Employers as of January 2024

What is the current definition of the “infectious period” for employees who test positive for COVID-19?

For COVID-19 cases with symptoms, the “infectious period” is a minimum of 24 hours from the day of symptom onset. Under the current regulations, there is no infectious period for COVID-19 cases with no symptoms.

If an employee tests positive, are they required to be excluded from the workplace?  

If an employee tests positive for COVID-19 and has symptoms, they must be excluded from the workplace for a minimum of 24 hours from the day of symptom onset.

Symptomatic COVID-19 cases may return to work after 24 hours if:

  • 24 hours have passed with no fever, without the use of fever-reducing medications and;
  • Symptoms are mild and improving.

If an employee tests positive for COVID-19 and is asymptomatic, there is no infectious period for the purpose of isolation or exclusion, which means they are not required to be excluded from the workplace. If symptoms develop, the above criteria will apply.

All employees who test positive for COVID-19 must wear a mask around others for 10 days from the date of the positive test or symptom onset.

Are employees allowed to come to the workplace if they had a “close contact” with someone with COVID-19?

Yes – employees do not have to be excluded from the workplace unless they test positive.

If employees have had a “close contact,” they are no longer required to test; however, the CDPH still recommends testing for:

  • All people with new COVID-19 symptoms; and
  • Close contacts who are at higher risk of severe disease or who have contact with people who are at higher risk of severe disease.

Are masks still required in the workplace?

Masks are only required in the workplace in the following situations:

  • Employees who test positive for COVID-19 must wear a mask while around others for 10 days from the positive test or symptom onset;
  • In an outbreak or major outbreak all employees in the exposed group must wear a mask; and
  • If a local ordinance requires it, such as places like healthcare facilities and skilled nursing facilities.

Close contacts are no longer required to wear masks; however, it is still recommended that close contacts wear masks around others for 10 days following the last contact.

What is a “close contact”?

The regulation defines a “close contact” as sharing the same indoor airspace as a COVID-19 case for a cumulative total of 15 minutes or more over a 24-hour period during a COVID-19 case’s infectious period.  Spaces that are separated by floor-to-ceiling walls (e.g., offices, suites, rooms, waiting areas, bathrooms, or break or eating areas that are separated by floor-to-ceiling walls) are considered distinct indoor airspaces.

What is the current definition of an “outbreak”? 

The new outbreak definition requires at least three COVID-19 cases within an exposed group during a 7-day period (previously it was a 14-day period).

Is an employee paid if they test positive and are unable to work?

Possibly. The COVID supplemental paid sick leave program has expired. However, an employee may be eligible for compensation if they have accrued sick time and/or vacation time, or through disability insurance.

Note that the Workers’ Compensation Presumption expired on January 1, 2024, which means the presumption that an employee’s work-related COVID-19 illness is an occupational injury and eligible for workers’ compensation is no longer available.

Does an employer still need to send a notification to employees when there is a workplace exposure?

If an employer becomes aware of a potential COVID-19 exposure in the workplace, they are still obligated to notify all employees who may have had close contact with a COVID-19 case in the workplace. The notice must be in writing and must be provided within one business day of discovering the potential exposure.

Is an Employer still required to maintain a COVID Prevention Plan (CPP)?

Yes. To comply with the Non-Emergency Regulations, an employer must either develop a written COVID-19 Prevention Program or ensure its elements are included in an existing Injury and Illness Prevention Program (IIPP).

Does an employer still need to provide COVID-19 testing to employees?

Regardless of CDPH recommendations, employers must continue to make COVID-19 testing available at no cost and during paid time to all employees who had a close contact at work with a person with COVID-19 during their infectious period, except for asymptomatic employees who recently recovered from COVID-19.

In workplace outbreaks or major outbreaks, the COVID-19 regulations still require testing of all close contacts in outbreaks, and everyone in the exposed group in major outbreaks. Employees who refuse to test and have symptoms must be excluded for at least 24 hours from symptom onset and can return to work only when they have been fever-free for at least 24 hours without the use of fever-reducing medications, and symptoms are mild and improving.

For more information reach out to the DP&F Employment Law partners Jennifer E. Douglas and Marissa E. Buck.

FTC Issues Proposed Non-Compete Ban To Spur Employee Mobility, Aligning with Existing California Law

Thursday, January 5, 2023, the FTC issued its proposal to prohibit non-compete clauses in employment agreements in an effort to boost wages and competition, citing worker mobility as essential to a thriving U.S. economy. California has long prohibited such clauses pursuant to Business and Professions Code Section 16600. The FTC’s proposed rule is shining a light on the issue, which makes it a good opportunity to focus California and non-California employers’ attention on what can be done to protect their businesses from unlawful competition.

The rule flows from President Biden’s 2021 Executive Order Promoting Competition, which directed the FTC to address unfair use of non-compete and similar agreements to stifle employee mobility and depress wages. Like California’s law, the proposed rule would invalidate existing non-compete agreements in place and would provide exception for the sale of certain types of businesses. If promulgated, the new FTC rule would supersede and preempt inconsistent state laws, and employers will be required to issue notice to employees, rescinding existing employment agreements to remove objectionable non-competition clauses.

Similar to California, under the proposed FTC rule, nondisclosure and non-solicitation agreements would also be scrutinized, e.g., as to whether such agreements are invalid in that they so broad as to effectively function as noncompete agreements.

The rule is currently open for public comment until March 6, 2023, and employers will be subject to enforcement 180 days after final publication.

For workers, the rule provides more flexibility to pursue future employment in a worker’s area of expertise, to market one’s talents and seek increased compensation. For employers, this rule is another wake-up call for the need to safeguard and secure trade secret assets of the business to which an individual has access.

Given the reality of increased mobility, employers should be ensuring that:

  1. Employees with access to sensitive information are covered by up-to-date confidentiality and lawful non-solicitation obligations; and
  2. Employers must redouble efforts to keep organized, diligent records of the existence, inventory and location of any employer assets or property, including devices and customer lists, so as to expediently secure such assets should an employee or contractor depart on short notice.

We continue to monitor developments and will make ourselves available to concerned clients to discuss what can be done to favorably address business impacts and requirements flowing from the new FTC rule and California’s existing non-compete prohibitions. For more information as to how this will impact IP rights, contact Chris Passarelli. For more information about how this will impact your employment agreements, contact Jennifer Douglas.

Ninth Circuit Rules Time Booting Up Computer Before Clocking In Is Compensable

The Ninth Circuit Court of Appeals issued a decision earlier this week holding that employees who worked at a call center were entitled to compensation for the time spent booting up their computers at the start of the work day prior to clocking in. The call center employees conducted the majority of their jobs using their computers, thus the Court determined that turning on and booting up the computers was “integral and indispensable” to the workers’ duties. Under the FLSA, duties that are “integral and indispensable” are considered principal activities and must be compensated.

For employers in California, this is another sign that both state and federal courts are moving towards requiring employers to compensate employees for time spent prior to clocking in where employees are completing tasks that are required by the employer or indispensable for their jobs. Some examples include: booting up computers, cleaning and preparing tools, and putting on a uniform or safety equipment.

Employers should review the tasks that non-exempt employees undertake prior to clocking in each day to determine if those duties are related to their jobs and should be compensated. If employees are completing tasks that are “integral and indispensable” to their jobs prior to clocking in, employers should determine the average amount of time the tasks take to complete each day and add that amount to employees’ paychecks.

For those who are interested in reading the full decision, the case is Cariene Cadena and Andrew Gonzales v. Customer Connexx, LLC and Janone, Inc., case number 21-16522.

If you have any questions about this or any other employment related matters, please contact Marissa Buck, Jennifer Douglas or any member of DP&F’s Employment Law team.

Flexible Workplace Options for Employers

As more employees return to the workplace, employers are searching for ways to retain existing employees and attract new talent in a changing landscape where remote work and shorter workweeks are becoming more common. This article looks at two options for employers who are seeking to give employees greater flexibility in their schedules and how to remain compliant with California labor laws in the process.

Alternative Workweek Schedule

One option for employers is to implement an alternative workweek schedule (“AWS”), which provides greater flexibility by allowing employees to work longer shifts on less workdays. The AWS also permits non-exempt employees to work more than 8 hours in a day without incurring daily overtime. The most common AWS is the 4/10, where employees work 4 days a week for 10 hours each day.

Under an AWS, no overtime is required for a regular schedule of not more than 10 hours per workday within a 40-hour workweek. If employees work longer than 10 hours a day on an AWS, they are entitled to overtime pay at one-and-one-half times their regular rate of pay for all time worked between 10 and 12 hours, and double their regular rate of pay for any hours worked over 12 hours. Additionally, employees are entitled to overtime for all hours worked on any day that is not included in the AWS at one-and-one-half times their regular rate for the first 8 hours and double their regular rate of pay for any hours worked over 8 hours.

An AWS can be used for an entire company, or any identifiable “work unit” including a department, a shift, or a particular location. The AWS must be approved by a secret ballot election of at least two-thirds of the affected employees in the work unit. Employers can propose one schedule for all employees in the work unit or provide a menu of schedule options that each employee can choose from.

Once the work unit and AWS is determined, employers should follow the steps below to implement the AWS.

  1. Notice. Send a notice to all employees in the work unit regarding the proposed schedule change and describe how the change will affect their hours, wages, and benefits.
  2. Pre-Election Meeting and Disclosure. Employers are required to hold a pre-election meeting at least 14 days before the secret ballot election to discuss the proposed alternative workweek schedule. Employers must also provide all employees with a written disclosure that includes the information discussed at the meeting. If at least 5% of the employees in the work unit speak a language other than English, employers must provide the disclosure in that language as well.
  3. Secret Ballot Election. Hold the election at the worksite during regular work hours. If some employees in the work unit are not present for the election, they can provide an absentee ballot upon their return.
  4. Notify DLSE. If the AWS is approved by the employees in the work unit, the election results must be mailed to the Department of Industrial Relations. Employers should follow the instructions on the DLSE website regarding where to send the notice and what information to include:
  5. Implement Schedule: Employers may not require employees to work the new AWS for at least 30 days after the final results of the election.

Employers must also make reasonable efforts to accommodate a schedule with 8-hour work days for employees who voted in the election but are unable to work the AWS, employees who have a religious belief or observance that conflict with the AWS, and employees who are hired after the date of the election and are unable to work the AWS.

Hybrid Work Schedule

While remote work has gained popularity amongst employees and employers, for many companies it is necessary to have employees physically present in the workplace. One option for employers is to create a hybrid remote work schedule that allows employees to work remotely part of the time. Employers can require a certain number of days at the workplace each week, or create set schedules designating the specific days of the week on which employees will work remotely.

Employers should have a written policy in place that describes which employees or groups of employees are eligible for remote work, how to request a remote work schedule and who needs to approve it, and the expectations for employees when working remotely.

If remote work is provided as a purely voluntary option for the benefit of the employee, and it is not a requirement of their job, employers are not obligated to reimburse employees for expenses incurred in working remotely.

We recommend working with counsel to implement either an AWS or a remote work policy to ensure compliance with all California labor laws.

If you have any questions about this or any other employment related matters, please contact Marissa Buck or any member of DP&F’s Employment Law team.

COVID-19 Supplemental Paid Sick Leave: New California State COVID Leave Law Applies to all California Employers with 26 or More Employees

On February 9, 2022, Governor Newsom signed the new COVID-19 Supplemental Paid Sick Leave law (SB-114), which is retroactive to January 1, 2022 and extends through September 30, 2022.

Similar to the previous law that provided COVID-19 supplemental paid sick leave and expired last year, the new COVID-19 Supplemental Paid Sick Leave law requires employers in California with 26 or more employees to provide up to a total of 80 hours of paid sick leave to employees for certain COVID-19 related reasons. While we expect updated FAQs on the new law from the DIR soon, the key details from the statute are included below.

  • 26+ Employees: The law requires employers with 26 or more employees to provide supplemental paid sick leave for certain COVID-19 related reasons.
  • Retroactive to January 1 and through September 30: The requirement to provide the paid sick leave will take effect on February 19 (10 days after the law was signed by the Governor), at which point it will be retroactive to January 1 and extend until September 30, 2022. Employers are required to provide retroactive payments to any employees who were provided with an unpaid leave for qualifying reasons since January 1 at the request of the employee (either orally or in writing). The retroactive payment must be paid on or before the payday for the next full pay period after it is requested by the employee.
  • Two Categories of Paid Leave (up to 40 hours each): The new supplemental paid sick leave is split into two categories – the first allows employees to take up to 40 hours of leave for COVID related reasons similar to the prior law, and the second allows employees to take an additional 40 hours of leave if they or their family member test positive for COVID-19.
  • First Category: Employers must provide up to 40 hours of supplemental paid sick leave for employees that are unable to work or telework due to any of the following reasons:
    • Employee is subject to quarantine or isolation order or guidelines due to COVID-19;
    • Employee is advised to quarantine or isolate by heath care provider;
    • Employee is attending an appointment for themselves or a family member to get a vaccine or booster and/or experiencing symptoms from a vaccine or booster or caring for a family member who is experiencing symptoms from a vaccine or booster (limit of 24 hours per vaccination/booster – see below);
    • Employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
    • Employee is caring for a family member who is subject to quarantine, or has been advised to isolate;
    • Employee is caring for a child whose school or child care is closed or unavailable due to COVID-19.
  • Second Category: Employees who test positive for COVID-19, or have to care for a family member who tests positive, are entitled to an additional 40 hours of supplemental paid sick leave. Employers can request proof of a positive test for the employee or family member prior to providing the supplemental paid sick leave. If an employee refuses to get tested or provide test results to the employer, employers are not obligated to provide the additional 40 hours of supplemental paid sick leave. Employers can require documentation of a positive COVID test for retroactive payments requested by the employee as well. Employers are required to pay for the test for employees, but it is unclear if employers will also be required to pay for tests for family members of employees.
  • Amount of Leave: Full-time employees that work at least 40 hours per week on average are entitled to 40 hours of supplemental paid sick leave under each category, for a total of 80 hours of supplemental paid sick leave. Other non-full-time employees are entitled to the average amount of hours they normally work over a 14-day period.
  • 24-hour Limit for COVID Vaccine/Booster: Employers can limit the supplemental paid sick leave an employee can use for each vaccine or booster and any related side effects, for themselves of a family member, to three days (24 hours), unless the employee provides verification from a healthcare provider that the symptoms are continuing after three days.
  • Amount of Pay: Supplemental paid sick leave should be paid at the employee’s regular rate of pay, up to a maximum of $511 per day and no more than $5,110 total per employee. An employee’s regular rate includes any commissions or non-discretionary bonuses.
  • Must List Amount Used on Wage Statements: The COVID-19 Supplemental Paid Sick Leave is a separate entitlement from other paid sick leave provided by the employer and must be listed separately on the written notice or wage statement provided to employees each pay period. However, instead of listing the available balance of supplemental paid sick leave, employers are only required to list the amount of leave that has been used to date. If an employee has not yet used any leave, their statement should list “zero.”
  • Cannot Require Substitution of Other Leaves: The supplemental paid sick leave is in addition to other paid leave. Thus, employers cannot require employees to substitute their vacation, PTO, or other paid sick leave when using supplemental paid sick leave.
  • Distinct from Cal/OSHA ETS Exclusion Pay: Employers cannot require employees to first exhaust their supplemental paid sick leave when exclusion pay is required to be paid under the Cal/OSHA ETS. Based on this, it appears employers cannot apply these hours toward the exclusion pay obligation when employees are required to be excluded from the workplace due to a workplace exposure to COVID-19 but we expect clarification on this requirement in the forthcoming FAQs.
  • Notice Requirement: The Labor Commissioner is required to make a model notice available for employers to send to employees, which should be available shortly. The notice should be posted in the workplace and must be emailed to employees who do not frequent a workplace.

If you have any questions about this or any other employment related matters, please contact Marissa Buck or any member of DP&F’s Employment Law team.

COVID-19 Leave: Employer Obligations After September 30

State and Federal COVID-19 Leave Laws Are Set to Expire on September 30, 2021

As of the date of this article, both the federal and the California COVID-19 leave laws are set to expire on September 30, 2021 and it does not appear that either the State or Federal legislatures will be extending these provisions. The California law, SB-95, requires employers with 26 or more employees to provide up to 80 hours of supplemental paid sick leave for COVID-19 reasons from January 1 to September 30, 2021. The American Rescue Plan Act, which was passed by Congress earlier this year, extended the ability of employers to take a tax credit against their payroll taxes for offering leave to employees for COVID-19 reasons through September 30, 2021. Additionally, the optional COVID-19 related leaves under the federal law, Emergency Paid Sick Leave and Emergency FMLA, both expire on September 30.

After September 30, 2021, employers with 26 or more employees will no longer be required to provide the COVID-19 supplemental paid sick leave under California law. Employers of any size may still choose to put their own COVID-19 policies in place that provide pay for employees who miss work for COVID related reasons, however, employers will no longer receive a tax credit for those payments.

California’s law required employers to initially give notice to employees regarding the availability of the COVID-19 supplemental paid sick leave and the time period of the leave. However, employers may want to remind employees that the leave is expiring on September 30. Note that if an employee is already taking COVID-19 supplemental paid sick leave at the time the leave expires on September 30, they are permitted to take the full amount of leave that they are entitled to even if it extends past September 30.

Employer Pay Obligations After September 30

Although employers will no longer be required to provide separate supplemental paid sick leave for COVID-19 purposes after September 30, under the Cal/OSHA Emergency Temporary Standards (“ETS”) employers must maintain all pay and benefits for employees who are required to be excluded from the workplace due to COVID-19 and otherwise able to work. Employees may choose to use their regular paid sick leave during the exclusion period; however, employers cannot require employees to use their regular paid sick leave.

The exclusion pay is only required for cases of workplace exposure to COVID-19, therefore, if employers are able to show that an employee’s exposure to COVID was outside the workplace no exclusion pay is required in that case. Employers also do not have to pay an employee that receives disability payments or worker’s compensation during the exclusion period. For more information on the Cal/OSHA ETS exclusion pay you can access the DIR’s FAQ page here.

Additionally, many employers are now requiring vaccinations and/or regular COVID-19 testing as a condition of employment. If employees are required to receive the vaccine as part of their job, employers must pay for the cost of the vaccine, if any, and the time it takes the employee to get vaccinated. Further, the DIR issued an FAQ on COVID-19 testing that states that employers must pay for the cost of COVID-19 testing if it is a requirement of the job. This includes paying for the test itself, the time it takes the employee to get tested (including any travel time), and reimbursing employees for travel expenses if the testing location is not at their regular workplace. You can read the DIR’s full FAQ on COVID-19 testing here.

Employee Leave Options After September 30

Even though the State and federal COVID-19 leaves are expiring on September 30, many employees will still need to take time off from work for COVID-19 related reasons. Unless their employers have their own COVID-19 policies in place, much of this time off work may be unpaid.

If an employee is sick with COVID-19 symptoms or is caring for a family member who has COVID-19 symptoms, they can use their regular California paid sick leave if they have accrued time available. Employees can also take family and medical leave under CFRA to care for themselves or their family members if their symptoms rise to the level of a serious health condition. Leave under CFRA is unpaid but employees may qualify for disability insurance from the state.

If you have any questions about this or any other employment related matters, please contact Marissa Buck or anyone on the DP&F Employment Team.

Regular Rate Blues: California Supreme Court’s Decision on Premium Payments and Other Pay Practice Reminders

On July 15, 2021, the California Supreme Court decided in Ferra v. Loews Hollywood Hotel, LLC that employers must pay premium payments to employees for missed meal, rest, and recovery breaks at the employee’s “regular rate of pay” instead of the employee’s base hourly rate, as many employers were doing. The ruling is retroactive, and employers should audit their practices to determine if a true-up payment is necessary.

Under California wage and hour laws, an employer must provide and permit nonexempt employees who work more than five hours in a day an unpaid duty-free meal period of at least 30 minutes in length starting no later than the end of the fifth hour of work. Employees who work no more than six hours in a day may waive the meal period upon written agreement between the company and the employee. In addition, nonexempt employees who work at least three and one-half hours in a day must be provided and permitted a paid 10-minute duty-free rest period for every four hours of work or major fraction thereof, and a second rest period if working up to six hours a day. Employees who work outdoors are entitled to cool-down recovery periods in fixed, shaded areas whenever needed to prevent heat illness.

If an employer doesn’t provide compliant meal, rest, or recovery periods, the employer must pay the employee one additional hour of pay as a “premium” for each workday that the meal, rest or recovery period was not provided. (Labor Code § 226.7.) Before the recent ruling, it was unclear whether this premium should be paid at the employee’s base hourly rate or their “regular rate of pay” which includes all nondiscretionary incentive payments such as bonuses and commissions. The Court settled this issue: the premium must be paid at the regular rate of pay, not the base rate. This is bad news for employers that acted in good faith by paying premium pay at the base hourly rate.

How To Calculate “Regular Rate of Pay”

Regular rate calculation requires employers to include all compensation for hours worked and divide that number by the total hours worked. “All compensation” includes hourly wages, nondiscretionary bonuses, shift differentials, on-call pay, and commissions. In general, most bonuses are considered nondiscretionary and include any bonus that employees know about and expect such as: production bonuses, bonuses for quality of work, bonuses to induce employees to work more efficiently, attendance bonuses, and safety bonuses. Thus, if nonexempt employees are paid a commission, non-discretionary bonus, or other incentive payment, such payment must be factored into the employees’ regular rate in order to compute any applicable overtime or break premium compensation.

Different Rule for Flat Sum Bonus: Note that California law requires the use of a different rule for calculating “regular rate of pay” when employees earn a non-discretionary, flat sum bonus. A flat sum bonus is typically a bonus paid for working a shift that is not tied to any measure of production or efficiency, for example a flat sum bonus for working on a weekend. When calculating the regular rate of pay from a flat sum bonus, the bonus is divided by only the regular, non-overtime hours worked in the workweek instead of all hours.

For examples showing regular rate calculations you can review the Labor Commissioner’s website here.

When To Use Regular Rate

The regular rate of pay is used when calculating overtime, California paid sick leave (see sick leave section below) and now meal and rest pay premiums.

Overtime “True Up” Calculations

If the employees’ bonus or commission is paid out on a weekly basis, the calculation is simple and the additional pay is added to all other wages earned in the workweek and then divided by the total hours worked in that workweek to come up with the regular rate. However, the majority of bonuses and commissions are not paid on a weekly basis and are more often earned and calculated on a monthly or quarterly basis.

If employees earn nondiscretionary bonuses or commissions on a monthly, quarterly, or other non-weekly basis, the amount of the bonus or commission earned must be spread out over the period it was earned by the employee for purposes of the overtime calculation. Employers must apportion the bonus or commission payments to each workweek during the period the amount was earned on a pro rata basis. Once that is done, employers must then recalculate any additional overtime amounts that may be owed over the period the bonus or commissions was earned, and “true up” the amount by paying the employee the difference.

The true up process for overtime or premium payments should be done whenever the bonus or commission payments are made to employees. Any additional overtime or premium amount owed to employees should be paid at the same time as the bonus or commission or in the following pay period. If you have questions regarding the method of calculating the regular rate or “truing up” payments, you should work with legal counsel to ensure employees are being compensated appropriately.

Paid Sick Leave Pay for Hourly Employees Is Also Regular Rate

An often-overlooked provision of California’s paid sick leave law is that the rate of pay for paid sick leave for hourly (non-exempt) employees is also the regular rate, not the straight hourly rate of employees. This is different than how an employer usually pays vacation or PTO time, so it can often slip by even the most seasoned of HR professionals and payroll personnel.

Nonexempt employees must be paid their regular non-overtime hourly rate for the amount of time taken as paid sick leave. To determine the rate of pay for nonexempt employees taking sick leave, the employer may either:

  • Calculate the regular rate of pay for the workweek in which the employee used paid sick leave, whether or not they actually worked overtime in that workweek (see above; this is calculated like the “flat sum” bonus), or
  • Divide your total compensation for the previous 90 days (excluding overtime premium pay) by the total number of non-overtime hours worked in the full pay periods of the prior 90 days of employment

For exempt employees, paid sick leave is calculated in the same manner the employer calculates wages for other forms of paid leave time (for example, vacation pay or PTO).

Take Away

This is a good time for employers to review their pay practices and contact their legal counsel to determine what, if any, corrections should be made. Because the ruling is retroactive, there may be an increase in litigation surrounding meal and rest breaks. It is important to be proactive in evaluating risk.

If you have any questions about this or any other employment related matters contact Sarah Hirschfeld-Sussman or anyone on the DP&F Employment Team.

U.S. Supreme Court Rules Against Union Access to Agricultural Employer’s Land

On June 23, the U.S. Supreme Court held that a California regulation allowing union organizers to enter an agricultural employer’s property is unconstitutional. The regulation, on the books since the mid-1970s, requires farms to permit unions to speak with and recruit farmworkers in the hour before and after work and an hour during lunchtime for up to 120 days each year. (Cedar Point Nursery v. Hassid (U.S., June 23, 2021, No. 20-107) 2021 WL 2557070.)

In the case, a strawberry plant nursery and a fruit shipment company sued the California Agricultural Labor Relations Board arguing that the regulation gave farmworker unions an easement to enter and conduct business on their land without authorization or compensation. The Court agreed, holding that the regulation took away the agricultural employer’s right to exclude trespassers from its private property, amounting to a “taking” of company property without “just compensation” in violation of the Fifth Amendment.

With the regulation essentially gone (barring the unlikely scenario that the government or the unions decide to pay farms for access to their workers), labor unions will have to find alternative means to communicate with and recruit agricultural union members. This ruling is hailed as a resounding victory for agricultural employers. For more information about this contact Sarah Hirschfeld-Sussman or anyone on DP&F’s employment team.

More Hoops: EDD Wants Employers to Report AB 1513 Safe Harbor Payments For All Past Quarters

Employers who paid safe harbor payments under AB 1513 are facing a new vexing, last minute challenge.  Although the payments were taxable wages to employees and former employees for the tax year 2016, the California Employment Development Department (“EDD”) recently issued a notice that employers who made these payments must report the back payments for the quarters for which they were made.  The EDD is expecting employers to not only submit a DE 9 (Quarterly Contribution Return and Report of Wages) and pay the contributions for the 2016 quarter that the back pay was made, but also submit a DE 9c for the quarters in which the employees earned the back pay and should have been paid (back to July 2012).  To add insult to injury the forms cannot be electronically filed.  Employers must mail the forms to a specific address.  The EDD’s notice is attached here.

For more information on this and other AB 1513 issues contact Jennifer Douglas Phillips.