Legal changes affecting business owners

If you are a small business in California, you should be aware of new mandates for 2017 that could affect your personnel practices.

For larger employers, the HR department will absorb the extra work created by the new requirements. But small employers in California often don’t have the luxury of a dedicated HR department. For these employers, several new mandates will create additional administrative burdens. Employers need to be aware of significant changes in key areas, such as the state minimum wage. Other new laws make small changes to different parts of existing law or may relate only to specific industries.

Unless specified, all new legislation went into effect on January 1, 2017. This year, many bills feature delayed or phased-in implementation.

1. New State Minimum Wage Depends on Employer Size

Effective January 1, 2017, businesses with 26 or more employees must pay a minimum wage of $10.50 per hour. These businesses will reach $15 per hour in 2022.

Small businesses with 25 or fewer employees are required to pay $10 per hour — the same as the 2016 rate. The scheduled increase for small businesses does not begin until 2018, and small businesses will have until 2023 to reach the $15 per hour rate.

The minimum wage increase requires all employers, regardless of size, to post a new Minimum Wage Order. The minimum wage increase also has an effect on other pay practices, such as the overtime rate.

*Once the minimum wage reaches $15 per hour for all businesses, wages could then be increased each year up to 3.5 percent (rounded to the nearest 10 cents) for inflation as measured by the national Consumer Price Index.

Businesses also need to pay close attention to rapidly multiplying local ordinances which impose minimum wage rates separate from, and higher than, the state rate. Eligibility rules vary from city to city. Moreover, the minimum wage rates in these cities may change at any time; employers should closely monitor them.

Check with your local city government as to whether any local minimum wage ordinance might apply to your workforce.

2. Important Payroll Change

Small businesses already know about the laundry list of required employee forms and these requirements keep increasing.

A new law effective January 1, 2017, requires employers who must notify employees of their eligibility for the federal Earned Income Tax Credit (EITC) to now also notify these employees that they may be eligible for the California EITC.

The specific language for the required notice regarding the federal and California EITC is contained in the statute. The notice must be provided one week before or after, or at the same time, the employer provides an annual wage summary, including but not limited to a Form W-2 or a Form 1099.

3. New Form I-9 and Immigration-Related Protections

Federal law requires employers to verify an employee’s eligibility to work using the Form I-9 process.

The U.S. Citizenship and Immigration Services recently published a revised version of the Form I-9. Employers are required to use only the version dated 11/14/2016 N.

Several changes were made to the Form I-9 to help reduce technical errors and also to make it easier for the user to download and complete on a computer. In addition, the instructions for completing the Form I-9 are now separate from the form itself and contain instructions for completing each field.

In addition, a new state law strengthens immigration-related protections. Under federal law, it’s unlawful for employers to ask for more or different documentation than is required by the Form I-9, refuse to accept documents that appear genuine on their face or engage in other types of
document abuse.

The new law makes this type of conduct unlawful under state law as well. Violators may be subject to a penalty of up to $10,000.

4. All-Gender Restrooms and Signage Requirement 

If your business has single-user toilet facilities, you need to be aware of a new law that became effective March 1, 2017, requires all single-user toilet facilities in any business establishment, place of public accommodation or government agency to be identified as “all gender” toilet facilities.

A “single-user toilet facility” is defined as “a toilet facility with no more than one water closet and one urinal with a locking mechanism controlled by the user.” Businesses will need to check their signs for compliance and make sure that the signs comply with Building Code Standards relating to all gender or unisex signs.

Be careful; many online retailers sell signs that might not comply with the law. In addition, some pictograms can be considered offensive.

5. Fair Pay for Employees

California’s Fair Pay Act applies to all employers, regardless of size, and provides protections against wage discrimination. Significant amendments
(effective in 2016) were made to California’s equal pay laws to address gender wage inequality and also to address “pay secrecy.”

For 2017, two new bills expand California’s Fair Pay Act.

The first of the two acts prohibits an employer from paying any of its employees at wage rates that are less than the rates paid to employees of another race or ethnicity for substantially similar work.

The second specifies that, under the Fair Pay Act, prior salary cannot, by itself, justify any disparity in compensation. The law is intended to “help ensure that both employers and workers are able to negotiate and set salaries based on the requirements, expectations, and qualifications of the
person and the job in question, rather than on an individual’s prior earnings, which may reflect widespread, long-standing, gender-based wage
disparities in the labor market.”

This new law doesn’t specifically prohibit an employer from asking about prior salary, but does prohibit the use of that information as a sole factor
to determine compensation. Accordingly, when determining starting pay for a new hire, prior salary history should not be the sole determining factor.

6. New Smoking Rules

California generally bans smoking in the workplace, and a package of bills effective last year expanded already-existing smoke-free workplace protections.

In part, the new legislation:

• Expands the workplace smoking ban to include owner-operated businesses and to eliminate any small business exception. Prior law exempted employers with five or fewer employees.
• Treats the use of e-cigarettes and other nicotinedelivery devices, such as vaporizers, as “smoking” — thus extending existing smoking bans to cover such products.
• Expands smoke-free workplace protections by getting rid of most of the existing exemptions that permitted smoking in certain work environments,
such as bars, hotel lobbies and warehouse facilities.
• Eliminates the ability to have employer-designated smoking break rooms.

7. Legalization of Recreational Marijuana

In November 2016, California joined several other states in legalizing recreational use of marijuana by adults. Proposition 64, also known as the Adult Use of Marijuana Act, legalized the recreational use of marijuana for adults 21 years old and over.

Proposition 64 maintains the status quo for employers seeking to maintain a drug- and alcohol free workplace. In other words, employer policies related to drug possession, use and impairment as well as testing are not compromised with the legalization of marijuana use under Proposition 64.

Proposition 64 explicitly states that it is intended to “allow public and private employers to enact and enforce workplace policies pertaining to marijuana.”

Therefore, even with the passage of Proposition 64, employers may continue to prohibit use, possession and impairment at work and may continue to test for use when appropriate. Proposition 64 is not intended to interfere with these workplace policies or practices.

8. Use of Juvenile Criminal History Information

Employers conducting criminal background checks in California are limited in terms of the information that can be obtained and how it can be used. A new law, further restricts the type of information that can be obtained.

The new law prohibits employers from inquiring into an applicant’s juvenile criminal history information or using such information as a factor in determining any condition of employment.

Also, please be aware of local ordinances that may ban employers from asking applicants about any criminal convictions on the employment application. Both Los Angeles and San Francisco have such ordinances.

9. Notice of Domestic Violence, Sexual Assault and Stalking Protections

Adding to growing employee paperwork requirements, AB 2337 requires employers with 25 or more employees to provide employees with written notice about the rights of victims of domestic violence, sexual assault and stalking to take protected time off for medical treatment or legal proceedings.

A required form must be given to all new employees when hired and to current employees upon request. 

The Labor Commissioner is required to develop the form on or before July 1, 2017.

Employers are not required to comply with this notice requirement until the Labor Commissioner posts the new form on its website.

10. Paid Family Leave Benefit Changes in 2018

Effective January 1, 2018, AB 908 increases the amount of paid family leave (PFL) benefits an employee can receive from 55 percent of earnings to
either 60 percent or 70 percent of earnings, depending on the employee’s income. There still will be a maximum weekly benefit on the amount received.

The new law also will remove the current seven-day waiting period that exists before an employee is eligible to receive PFL benefits.

Remember that PFL is a partial wage replacement program. PFL does not create the right to a leave of absence or guarantee reinstatement rights unless already mandated by another law.

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Compliance Tips for Small Businesses in California

• Make sure you are using the correct minimum wage rate. Also examine how the minimum wage rate affects other practices.

• Provide required notices and stay on top of change, such as the new EITC notice that must contain language regarding the credit under both federal and state law.

• Review your company’s practices on criminal background checks to make certain that they comply with legal requirements, including a review of your job application forms.

• Review all policies and practices to make sure they are current.

• Notify employees of any policy changes by sending out a new or revised policy or by sending out an entirely new employee handbook, when warranted. For instance, review your smoking and drug and alcohol policies.

• If you have single-user toilet facilities, comply with the new signage requirement and make certain that these restrooms can be used for all genders.

• Check with your local city/county government to see if any local ordinances apply to your practices.

• Don’t just revise policies; put them into practice and apply them consistently.