2007 Legislative Update

The employment related legislation in 2006 was relatively sparse. Nonetheless, employers need to be aware of recent legislation that either creates new laws or modifies existing laws. The following is a synopsis of the more notable laws that were enacted or modified in 2006.

California Law

AB 1835 – Minimum Wage Increase
On September 12, 2006, Governor Schwarzenegger signed into law AB 1835, which increases the state minimum wage to $7.50 per hour effective January 1, 2007, and to $8.00 per hour effective January 1, 2008. This law also requires the Department of Industrial Relations to upwardly adjust the permissible meal and lodging credits by the same percentage as the increases in the minimum wage and to amend and republish the Industrial Welfare Commission’s wage orders. Additionally, this law requires employers to post written notice of the new rates in their facilities. Aside from the direct changes made in AB 1835, the increase in the minimum wage will impact other wage rates and overtime exemptions under state law, including the following:

  •  Employees subject to the executive, administrative, and professional overtime exemptions must be paid, at a minimum, an annual salary of $31,200 ($2,600 per month) in 2007 and $33,800 ($2,773.33 per month) in 2008 in order to preserve their exempt status.
  • Exempt employees covered by collective bargaining agreements must be paid, at a minimum, $9.25 per hour in 2007 and $10.40 per hour in 2008 in order to preserve their exempt status.
  • Employees paid on commission who are exempt must be paid more than $11.25 per hour in 2007, and more than $12.00 per hour in 2008, in order to preserve their exempt status.
  • Employees who work split shifts must be paid a total wage equal to at least the minimum wage plus $7.50 in 2007, and at least the minimum wage plus $8.00 in 2008.

SB 1441 – Discrimination
This bill adds sexual orientation to the list of protected classifications under an existing law that prohibits discrimination based on race, national origin, ethnic group identification, religion, age, sex, color, or disability against any person in any program or activity that is conducted, operated, or administered by the state or by any state agency or that is funded directly by or receives any financial assistance from the state. The terms “sex” and “sexual orientation” are defined as set forth in the California Fair Employment and Housing Act. Additionally, the definition of discrimination is expanded to include a perception that a person has any of the enumerated characteristics or that the person is associated with a person who has or is perceived to have any of those characteristics.

AB 2440 – Child Support/Wage Deductions
This bill imposes liability on any person or business entity that knowingly assists someone who has an unpaid child-support obligation to escape, evade, or avoid current payment of those obligations. Prohibited actions include the following: a) hiring or employing a person obligated to pay child support without timely reporting to the Employment Development Department’s New Employment Registry; b) retaining an independent contractor who is obligated to pay child support and failing to timely file a report of that engagement with the Employment Development Department; and c) paying wages or other forms of compensation that are not reported to the Employment Development Department. The penalty for violating this law is three times the value of the assistance that is owed, up to the total amount of the entire child-support obligation owed.

AB 2095 – Sexual Harassment Training
This bill modifies existing law requiring employers to provide mandated sexual harassment training to supervisors by limiting the required training to supervisors physically located in California.

AB 1553 – Arbitration
This bill provides that, if an agreement requires arbitration of a controversy to be demanded or initiated within a set time period, the commencement of a civil action within the specified time period tolls the applicable time limitations in the arbitration agreement from the date the civil action is commenced until 30 days after a final determination by the court that the party is required to arbitrate the controversy, or 30 days after the final termination of the civil action that was commenced and that initiated the tolling, whichever date occurs first.

AB 2068 – Workers’ Compensation

This bill expands an employee’s right to be treated by his or her personal physician for an on-the-job injury. Specifically, this law provides that a “personal physician” who may be pre-designated as the primary treating physician for workers’ compensation purposes includes a corporation, partnership, or association of licensed doctors of medicine or osteopathy.

SB 1613 — Cellular Phone Use While Driving
Effective July 1, 2008, it will be illegal to drive a motor vehicle while using a wireless telephone unless the phone is equipped to allow hands-free listening and talking and is used in that manner while driving. The penalty for violating this law will be $20 for the first offense and $50 for each offense thereafter. This law does not apply to a person who is using a cellular telephone to contact a law enforcement agency or other public-safety agency for emergency purposes or to an emergency service professional operating an authorized emergency vehicle.

San Francisco — Paid Sick Leave Ordinance
Effective February 5, 2007, all employees who are employed within the city limits of the City of San Francisco must be provided with paid sick leave. Such sick leave must accrue at the rate of one hour for every 30 hours worked. Employers may adopt an accrual cap of 72 hours, at which level further accrual stops. The ordinance does not specify that the accrual cap may be prorated for part-time employees. The accrued leave must carry over from year-to-year. However, no pay out of accrued but unused sick leave is required upon termination of employment. For new hires starting after February 5, 2007, a 90-day waiting period is allowed before paid sick leave begins to accrue.

Employees may use their accrued sick leave for their own illness or to care for a spouse (or registered domestic partner), child, parent, grandparent or other specifically “designated person” if they do not have a spouse or registered domestic partner. Note that this ordinance is more generous than California law, in that it permits all of the accrued sick leave to be used for caring for other individuals, whereas California law only allows one-half of the employee’s annual accrual to be used for such purposes. If an employer has a policy combining sick leave and vacation as paid time off (PTO) and the policy provides at least the amount of sick leave required under the ordinance, no further leave is required.

Federal Law
Preservation of Electronically Stored Information

As of December 1, 2006, various amendments to the Federal Rules of Civil Procedure took effect with regard to electronic discovery. For the first time, the Federal Rules of Civil Procedure recognize electronically stored information (“ESI”) as a distinct category of discovery. At this point in time, the scope of producible electronic discovery under the amendments is not clearly defined. However, it is likely that the scope of producible electronic discovery will be very broad, including not only items such as employee emails, but other ESI created or received by the company’s electronic information system.

The new amendments require companies to maintain and produce ESI the same way that hard copy documents are maintained and produced. However, given the nature of technology and the fact that many electronic information systems automatically overwrite or discard files after some time period, the new amendments provide for a “safe harbor.” Under the new amendments, there is limited protection against sanctions for a party’s failure to provide ESI in discovery if the information has been lost as a result of the routine operation of a electronic information system, as long as that operation was in good faith. Given this requirement, it is unlikely that the safe harbor will apply if a company allows relevant ESI to be discarded when someone knew or should have known that the ESI would automatically be discarded by the company’s electronic information system. Such action is likely to be viewed as “virtual shredding” and beyond the protection of the safe harbor.