Employment Law

New Laws in 2017 Affecting California Employers

By Patrick J. Goode, II

Photo of Patrick J. Goode, II
Patrick J. Goode, II

Each New Year brings fresh enthusiasm and excitement. However, for employers in California, the New Year also brings a spate of new employment laws that can have an impact on their business practices. While there are dozens of new laws in 2017 that affect employers in California, the following is a brief summary of four key new issues:

Minimum Wage

Most employers know that California’s minimum wage is scheduled to gradually increase to $15.00 per hour over the next several years. Effective January 1, 2017, employers with 26 or more employees must pay a minimum wage of $10.50 per hour. The minimum wage for employers with 25 or fewer employees is still $10.00 per hour until January 1, 2018. In addition, local municipalities may have even-higher minimum wages; for example, San Diego’s minimum is currently $11.50 per hour and Emeryville’s minimum wage is currently either $13.00 or $14.82 per hour depending on the size of the business.

Employers must also keep in mind that the increased state minimum wage impacts the salary threshold for those employees classified as exempt from overtime, especially in light of the uncertainty surrounding the implementation of the Department of Labor’s new federal overtime rules. In addition to the applicable duties tests, employees must also meet the salary test to be properly classified as exempt. In California, an employee generally must earn a salary of at least two times the state minimum wage for full-time employment (40 hours per week). Accordingly, employers with 26 or more employees must now pay an annual salary of $43,680 to meet the salary test, whereas employers with 25 or fewer employees are still only required pay an annual salary of $41,600 in 2017.

Fair Pay Act Expanded

The Fair Pay Act, which already prohibited pay discrepancies between employees of the opposite sex, was expanded to prohibit pay discrepancies between employees of another race or ethnicity. The prohibition applies to “substantially similar work” unless the employer can demonstrate legitimate business reasons for the discrepancy. Another new provision in 2017 specifically dictates that an employee’s prior salary cannot, by itself, justify a disparity in compensation.

Notice of Rights Regarding Domestic Violence, Sexual Assault, and Stalking Protections

Labor Code section 230.1 already prohibited certain employers from discharging or otherwise discriminating or retaliating against any employee for taking time off from work for specified purposes related to domestic violence, sexual assault, or stalking. Under the amended law, employers will be required to provide employees with written notice regarding their rights under this section. While the law is effective as of January 1, 2017, the obligation to provide notice does not begin until the Labor Commissioner develops a sample notice form and posts it on commissioner’s web site, which the Labor Commissioner must do by July 1, 2017. Employers are advised to closely monitor the commissioner’s web site between now and July 1st.

Prohibition of Choice-of-Forum and Choice-of-Law Provisions in Employment Contracts

Subject to certain exceptions, covenants not to compete are generally prohibited in California. Some employers, especially those with headquarters outside of California, have attempted to develop a work-around (with varying success) by using forum-selection and choice-of-law provisions to have employment disputes decided in their home state and/or under their home state’s laws. Labor Code section 925 generally invalidates any such provisions for any employment contracts entered into, modified, or extended on or after January 1, 2017. Specifically, for claims or controversies arising in California, an employer can no longer require an employee that primarily resides and works in California to agree to litigate or arbitrate claims in another state or submit to the laws of another state (if such laws would deprive the employee of the substantive protection of California law). Notably, an exception was written into the law making it inapplicable when the employee is represented by legal counsel in negotiating the venue or forum terms of the contract.

Even the best-intentioned and well-drafted laws are sometimes difficult to interpret and apply to every unique business situation. Klinedinst PC encourages employers to seek legal counsel regarding compliance with both new and existing employment laws. Please contact the Klinedinst Employment Counseling and Advice Group for assistance with any specific questions that may arise.

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