With Democrats having supermajorities in both California legislative chambers, Governor Newsom is pursuing his previously announced agenda. Although fewer bills passed in 2021 compared to 2020, representatives have voted on many changes to the state’s employment laws and policies that employers must implement starting in 2022. As expected, the California Department of Health will handle a significant portion of Covid-19-related lawmaking.

If you have any questions regarding any policy that may affect your situation as an employee or employer, we recommend that you speak to an experienced employment attorney.

Minimum Wage Increase

As of January 1, 2022, California minimum wage has increased to:

• $15.00 per hour for employers of 26 or more employees
• $14.00 per hour for an employer of 25 and fewer employees

After the state minimum wage reaches $15.00 per hour, the rate will adjust for inflation on an annual basis, based on the consumer price index for urban wage earners and clerical workers. The law does not allow for a lowering of the wages even if this index is negative. This policy also caps any increase in the minimum wage at 3.5 percent in a given year.

Minimum Wages for Persons with Disabilities

Senate Bill 639 prohibits the Industrial Welfare Commission (IWC) from issuing new special licenses after January 1, 2022. Before this ruling, the IWC could issue a special license to an employee who was mentally and/or physically disabled, which authorized the individual’s employment for up to one year for compensation below the minimum wage.

SB 639 requires the State Council on Developmental Disabilities, in consultation with stakeholders and relevant state agencies, to develop a multiyear phaseout plan with stakeholder involvement, by January 1, 2023, to ensure that individuals with a mental and/or physical disabilities are not paid below minimum wage.

This bill allows the renewal of these special licenses for existing holders who meet requisite benchmarks. However, the law makes this lesser wage inoperative on January 1, 2025, or according to the upcoming multi-year phaseout plan.

Garment Manufacturing Current Law

According to Governor Newsom, Senate Bill 62 aims to “protect marginalized low-wage workers, many of whom are women of color and immigrants, ensuring they are paid what they are due and improving workplace conditions.”

SB 62 includes the following provisions:

• Expands the definition of garment manufacturing to include dyeing, altering a garment’s design, and affixing a label to a garment.
• Prohibits any employee in garment manufacturing from being paid by piece rate, except as specified.
• Imposes compensatory damages of $200 per employee against a garment manufacturer or contractor, payable to the employee, for each pay period in which each employee receives payment by the piece rate.
• Brand Guarantors, the person contracting for the performance of garment manufacturing, share liability for wage violations of garment manufacturers or contractors even if the seller was unaware of said violations.
• Requires every garment manufacturing employer and brand guarantors to keep all contracts, work orders, invoices, purchase orders, style or cut sheets, and any other documentation according to which garment manufacturing work was, or is being, performed for 4 years.
• Requires the Labor Commissioner to disburse the mandatory $75 deposit of each garment manufacturer registration fee only to persons they have determined were harmed by the failure to pay wages and benefits by a garment manufacturer, brand guarantor, or contractor.
• Expands the provisions relating to the preclusion of records not earlier produced to also preclude the introduction of records not provided to the Labor Commissioner in an administrative proceeding relating to the payment of wages for garment manufacturing.

Paid Family Leave Weekly Benefit Amount

Assembly Bill 123 passed the Assembly and the Senate without a single “no” vote, but the Governor vetoed it. The bill would have applied the revised formula only to the first 12 weeks of benefits for disabilities outside of the paid family leave program.

Between January 2023 and before January 2025, the proposed law would have redefined the weekly benefit amount to be equal to 65% or 75% of the wages paid to an individual for employment by employers during the quarter of the individual’s disability base period in which these wages were highest, divided by 13, but not exceeding the maximum workers’ compensation temporary disability indemnity weekly benefit amount established by the Department of Industrial Relations. Starting in January 2025, this weekly benefit amount would have increased to 70% or 90%.

Wage Theft: Grand Theft

Assembly Bill 1003 expands the definitions in the Grand Theft statutes to include independent contractors. This bill also increases criminal penalties.

Grand Theft now includes the intentional theft of wages, including gratuities, in any amount greater than $950 from a specific employee, or $2,350 from an aggregate of two or more employees by an employer in any consecutive 12-month period.

This new bill permits that:

• A Grand Theft conviction results in either a misdemeanor punishable by county jail time for up to a year or a felony accompanied by a county jail sentence from 16 to 36 months.
• Employees recover wages, gratuities, benefits, or other compensation as restitution in the event of prosecution of the employer that committee Grand Theft.

Newspaper Distributors and Carriers AB5 Exemption Extension

Assembly Bill 1506 extends the exemption for newspaper distributors working under contract with a newspaper publisher and newspaper carriers from January 1, 2022, to January 1, 2025. This ruling requires every newspaper publisher or distributor that hires or directly contracts with newspaper carriers to submit specified information related to their workforce to the Labor and Workforce Development Agency on or before March 1, 2022, March 1, 2023, and March 1, 2024.

Levanoff v. Dragas

California law does not mandate the use of the weighted average method for the purpose of overtime calculations. The Court stated that the defendants’ dual-rate employees generally received net greater overtime pay under the rate-in-effect method than they would have received under the weighted-average method.

Kao v. Joy Holiday (2020)

The court ruled that considering officers of a corporation alter egos of a closely held corporation depends on whether there is such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist, and whether adherence to the fiction of separate existence would promote fraud or injustice.

The Court determined that a trial court may consider:

• Comingling of funds and other assets
• Treatment by an individual of the assets of the corporation as their own
• Failure to maintain adequate corporate records
• Sole ownership of all stock in a corporation by members of a family
• The use of a corporation as a mere shell for an individual’s single venture business
• The concealment of personal business activities
• The use of a corporation as a subterfuge for illegal transactions

International Brotherhood of Teamsters v. Federal Motor Carrier Safety Administration (2021)

The Ninth Circuit ruled that the Federal Motor Carrier Safety Administration (FMCSA) can determine whether federal law preempts California’s meal and rest break rules as applied to drivers of property-carrying commercial vehicles. Although the FMCSA only has the authority to evaluate for preemption state laws and regulations on commercial vehicle safety, the Court did not contest the FMCSA’s assessment that enforcement of California’s meal and rest break rule “would cause an unreasonable burden on interstate commerce.”

Vazquez v. Jan-Pro Franchising International, Inc. (2021)

The Court determined that applying Dynamex retroactively was consistent with due process because the district court had no opportunity to consider whether the plaintiffs were employees under the Dynamex standard. Additionally, neither party had the opportunity to supplement the record about the Dynamex criteria.

Clarke v. AMN Services, LLC (2021)

According to the Ninth Circuit, the per diem benefits functioned as compensation for work rather than as a reimbursement for expenses incurred. As such, the benefits were improperly excluded from the plaintiff’s regular rate of pay for purposes of calculating overtime pay.

Donohue v. AMN Services, LLC (2021)

The vote ruled that an employer cannot round an employee’s time punches for meal periods because it is inconsistent with the purpose of the Labor Code provisions. The court also determined that a judge could consider time records showing non-compliant meal periods as a rebuttable presumption of meal period violations.

Parada v. East Coast Transport, Inc. (2021)

The Court concluded that the Federal Aviation Administration Authorization Act does not preempt the application of the ABC test to motor carriers. The ABC test does not mandate the use of employees, but rather is a law that helps determine whether a person is an employee or an independent contractor.

Magadia v. Wal-Mart Associates, Inc. (2021)

The vote ruled that there was no violation of the wage statement law. No hourly rate was in effect during the pay period because Walmart retroactively calculated the bonus based on work from multiple pay periods, keeping the company in compliance with the wage statement law.

Ferra v. Loews Hollywood Hotel, LLC (2021)

Employers must compensate premium pay for non-compliant meals, rest, and recovery periods at the employee’s regular rate of pay. Employers must calculate overtime and sick leave in the same manner. This ruling is retroactive for up to four years.

The regular rate of pay should consider the base hourly rate of pay and all other forms of non-discretionary compensation the employee earned during the pay period, like non-discretionary bonuses, commissions, and shift differentials.

Mauia v. Petrochem Insulation, Inc. (2021)

The vote ruled that California labor laws do not apply on the Outer Continental Shelf under the Outer Continental Shelf Lands Act because federal law already addresses those issues. The Outer Continental Shelf is all submerged lands lying seaward of state coastal waters under U.S. jurisdiction.

Morales v. Factor Surfaces, LLC (2021)

The ruling states that a former employee should have their regular rate of pay calculated by the number of hours worked. If the number of hours worked is unclear, the calculation should divide the former employee’s weekly compensation by 40 to establish the regular pay rate.

Gulf Offshore Logistics, LLC v. Superior Court (2020)

The vote ruled that California law applies to non-California residents working off of the California Coast. There is no preemption by federal law because it does not contain any provisions that conflict with California law.

Bernstein v. Virgin America (2021)

The vote ruled that California law applies to employees who do not perform all of their work in California, as long as the employee does not perform the majority of their job duties in any specific state.

The Ninth Circuit determined that payment in blocks of time does not violate California’s minimum wage law. The fact that pay is not specifically attached to each hour of work does not make the system illegal.

The votes regarding Bernstein v. Virgin America (2021) are pending an opinion by the Supreme Court of the United States.

Department of Industrial Relations v. Bult Pacific (2021)

The vote ruled that Civil Code Section 1671(b) does not apply to a judgment entered according to a civil wage penalty assessment because the judgment is entered under the Labor Code rather than a contract.

Contact Klein DeNatale Goldner today at (661) 485-2100 to schedule an appointment with our labor and employment law attorneys in San Joaquin Valley!