Most California employers must adhere to both federal and state minimum wage laws.  Recent developments at the state and local level have ushered in new changes to California minimum wage laws. At the state level, California raised the minimum wage to $16.00, subject to certain industry- and locality-specific requirements.  This new minimum wage—which applies to most California employers—took effect on January 1, 2024

California also imposed two new industry-specific minimum wage requirements this year.  A new minimum wage requirement for the fast food industry took effecton April 1, 2024.  Another minimum wage requirement for healthcare workers takes effect July 1, 2024.  

Local entities such as cities and counties can establish higher minimum wage rates within their jurisdictions. When conflicting requirements arise, employers must follow the stricter standard, which is usually the standard that most benefits employees. Many localities follow California’s practice of adjusting their minimum wage at the start of the year, however, the following localities will raise their minimum wage on July 1, 2024:

LocalityCurrent Minimum WageNew
Minimum Wage
Alameda$16.52$17.00
Berkeley$18.07$18.67
Emeryville$18.67$19.36
Fremont$16.80$17.30
City of Los Angeles$16.78$17.28
County of Los Angeles (unincorporated areas only)$16.90$17.27
Malibu$16.90$17.27
Milpitas$17.20$17.70
Pasadena$16.93$17.50
San Francisco$18.07$18.67
Santa Monica$16.90$17.27
West Hollywood$19.08$19.61

Do you have any questions about California minimum wage compliance or related issues? Contact a Jackson Lewis attorney to discuss.

In 2019, California enacted Senate (SB) Bill 707, a law codified as California Code of Civil Procedure sections 1281.98 and 1281.99, that automatically deems an employer’s failure to pay fees required for the commencement or continuation of arbitration within 30 days of the payment’s due date a material breach of the arbitration agreement. A finding of material breach allows the employee to take unilateral action to move the case to court and seek sanctions against the employer.

Since SB 707’s enactment, California courts have consistently upheld the law as consistent with, and therefore not preempted by federal law. However, in a recent decision, Hernandez v. Sohnen Enterprises, Inc., the Second Appellate District of the California Court of Appeal concluded that an arbitration agreement governed by the Federal Arbitration Act (FAA) is not subject to California’s law requiring a finding of a material breach due to an employer’s failure to pay arbitration fees. In other words, when an agreement falls within the scope of the FAA and does not expressly adopt California arbitration laws, the FAA preempts the provisions that mandate findings of breach and waiver.

Underlying Action

Sohnen Enterprises and its employees executed arbitration agreements that specifically stated that the FAA governed the agreement and any arbitration proceeding conducted pursuant to the agreement. The agreement referenced the FAA and federal law in several areas and made no mention of California arbitration law. For example, the agreement stated that the agreement “is governed by the [FAA],” a party could “seek court appointment of an arbitrator pursuant to the FAA,” discovery and motions during the arbitration would be conducted in accordance with the Federal Rules of Civil Procedure, and the parties waived class actions “to the fullest extent permitted by the FAA.”

On July 16, 2021, Massiel Hernandez initiated a civil action against the company for alleged disability discrimination, Labor Code violations, and related claims.  However, four months later, the parties stipulated to arbitrate the claims pursuant to the arbitration agreement described above. Accordingly, the trial court entered an order consistent with the terms of the parties’ stipulation, including the statement that the company must pay the arbitration costs on or before any deadline specified by the arbitrator.

Hernandez subsequently initiated arbitration, and on April 7, 2022, the arbitration provider sent an invoice to the parties stating the filing fee ($1,750) was due upon receipt. The company paid the filing fees on May 13, 2022 – more than the 30 days allowed by SB 707.

Hernandez then filed a motion in the trial court to withdraw from the arbitration based upon the company’s failure to pay the arbitration fees timely. The trial court ruled that pursuant to California law, the company had breached the arbitration agreement and granted the motion to withdraw. The trial court held that the FAA did not preempt California’s law deeming an employer’s failure to pay fees timely as a material breach of the arbitration agreement. 

The Court of Appeal disagreed and reversed the trial court’s decision. The Court of Appeal held that SB 707 is preempted and invalidated by the FAA because California’s law treats arbitration agreements less favorably than other contracts.  Whereas a breach of a contract generally requires a factfinder to evaluate potential defenses such as “substantial compliance,” breaches of arbitration agreements under California law do not.  Rather, under California law, the breach is deemed automatic as a matter of law without any room for defenses. This, according to the Court of Appeal, “make[s] it harder to enforce arbitration agreements,” in violation of the FAA.

Notably, the Court of Appeal acknowledged that five other California appellate courts have reached the opposite conclusion – i.e., that the FAA does not preempt SB 707.  But the Court of Appeal was not persuaded by the reasoning of those courts and stressed its conviction that “[i]mposing a higher standard for enforcement of arbitration agreements in consumer and employee disputes is contrary to the FAA’s policy to ensure arbitration agreements are as enforceable as other contracts.”

Finally, the Court of Appeal held that the company did not violate the trial court’s stipulated order, which stated that the company must pay the arbitration costs on or before any deadline specified by the arbitrator.  The Court of Appeal held that the court order did not set a deadline for payment that the company violated, the arbitrator provider’s invoice itself was ambiguous as to the payment’s deadline, and the court order did not reasonably advise the company of the consequences for violating any payment deadline.

 Takeaway

This is potentially good news for employers. The consequences for failing to pay arbitration fees on time can be harsh, even if the untimely payment was unintentional or not otherwise the employer’s fault. This decision, however, is unlikely the final word on the issue.  As noted above, this decision splits with other appellate decisions on the issue and could be appealed now, or through a different case later, to the California Supreme Court. Therefore, employers should continue to follow developments in this area closely.

Jackson Lewis will continue to track developments related to arbitration agreements in California. If you have questions about this case or related issues contact a Jackson Lewis attorney to discuss.

On May 31, 2024, Governor Newsom signed Senate Bill (SB) 828, which delays the effective date of the healthcare minimum wage statute by one month.

Last October, Governor Newsom signed SB 525, which enacted a multi-tiered statewide minimum wage schedule for healthcare workers. However, in light of a significant budget shortfall, the Governor called for changes to the statute including a delay in the effective date.

Although the law was set to take effect June 1, the legislature only proposed a potential delay on May 20th, which was quickly moved through the legislature to the Governor.

Under SB 828, the initial effect date of June 1, is changed to July 1, 2024. And thereafter all increases would occur on July 1, instead of June 1.

The bill has an urgency clause and therefore takes effect immediately.

If you have questions about SB 828 or the health care minimum wage, contact a Jackson Lewis attorney to discuss.

With a state as large and diverse as California, it appeals to businesses. However, the state’s unique employment law requirements can pose challenges to employers new to the state. The following are some action items employers need to complete before their first employee starts working in California.

California Employer Identification Number (EIN)

All employers in California must obtain an EIN by filing a DE-1 Registration Form with the Employment Development Department (EDD). The EIN serves as the state equivalent of the federal tax identification number. The EIN is essential for reporting employment taxes and complying with other state requirements.

Workers’ Compensation Insurance Coverage

California requires that all employers either have workers’ compensation insurance or be authorized to self-insure. Failure to comply with this requirement may subject an employer to penalties. 

Required Registration, Certification, or Licensing for Certain Industries

In California, certain industries require employers to be registered, certified, or licensed through various state agencies prior to operating a business. The California Division of Labor Standards Enforcement provides licensing or registration for the following industries:

If you have questions about expanding into California as an employer, contact a Jackson Lewis attorney to help ensure you are taking all appropriate steps under the law.

Recently, the Los Angeles County Board of Supervisors passed the Fair Workweek Ordinance, similar to the ordinance passed by the City of Los Angeles last year.

The ordinance takes effect July 1, 2025.

Covered Employers

The ordinance applies to retail employers who:

  • Are identified as a retail business in the North American Industry Classification System (NAICS) within the retail trade categories and subcategories 44 through 45; or any business, including non-profit organizations, whose revenues are generated mainly from the sale to end users of tangible products that are primarily for personal, household, or family purposes, including, but not limited to, appliances, clothing, electronics, groceries, and household items;
  • Directly, indirectly, or through an agent or any other person, including through the services of a contractor, temporary service, or staffing agency, exercises control over the wages, hours, or working conditions of any retail employee; and
  • Employ 300 or more employees globally.

Covered Employees

The ordinance applies to retail employees who:

  • In a particular workweek performs at least 2 hours of work within the unincorporated areas of the county for a retail employer (check the County’s page to determine whether a workplace is in unincorporated areas of the county);
  • Qualifies as an employee entitled to payment of a minimum wage from a covered employer under the California minimum wage law as provided under California Labor Code section 1197 and wage orders published by the California Industrial Welfare Commission; and
  • Is assigned a primary work location and duties that support retail operations, including, but not limited to, a retail store or warehouse.

Obligations of Covered Employers

Per the ordinance, covered employers must provide the covered employee with a written good-faith estimate of a work schedule before hiring. The good faith estimate must include a notice of rights under the ordinance.

If a covered employee’s hours, day, location, or shifts worked substantially deviate from the good faith estimate, the employer must have a documented, legitimate business reason, unknown at the time the estimate was provided.

A covered employer must provide notice of a covered employee’s schedule at least 14 days before the start of the work period either by posting or transmitting by electronic means.

Before a retail employer may hire new employees or use a contractor or similar, the retail employer must first offer work to current employees if:

  • One or more employees are qualified to do the work and
  • The additional work hours would not result in the payment of a premium rate under California law.

Covered employers must not schedule covered employees to work a shift that starts less than 10 hours from the end of their last shift unless they obtain written consent from the employee and pay the employee a premium of time and a half for each hour of the second shift.

Predictability Pay

Covered employers must provide Predictability Pay under the following conditions:

  • Compensate a covered employee with one additional hour of pay at the employee’s regular rate for each change to their work schedule that results in no loss of time to the employee or results in additional work time that exceeds 15 minutes.
  • Compensate a covered employee at one-half the employee’s regular rate of pay for the time the employee does not work for the following reasons if occurring after the advanced notice required under the ordinance:
    • Subtracting hours from a shift before or after the employee reports for duty;
    • Changing the start or end time of a shift results in a loss of more than 15 minutes;
    • Changing the date of a shift;
    • Cancelling a shift; or
    • Schedule the covered employee for an on-call shift in which the employee is not called in.

Whereas, Predictability Pay is not required under the following conditions:

  • A covered employee requested a schedule change;
  • A covered employee accepts a schedule change initiated by the employer due to the absence of another employee;
  • The employee accepts additional hours offered under the ordinance; or
  • The employee’s hours are reduced due to the employee’s violation of an existing law or policy.

Notice and Recordkeeping Requirements

Retail employers must post notice of the covered employee’s workweek rights which will be published by the Department of Consumer & Business Affairs.

Retail employers must retain all records required under the ordinance for both current and former employees for 3 years.

If you have questions about the Los Angeles County Fair Workweek or related issues, contact a Jackson Lewis attorney to discuss.

For the second time, the California Supreme Court issued a ruling in Naranjo v. Spectrum Security Systems in May. In May 2022, the California Supreme Court issued its first decision in Naranjo v. Spectrum Security Systems, which considered the issue of whether failure to pay premium wages for meal and rest period violations gave rise to claims for waiting time penalties or violations of wage statement requirements.

The underlying action was a class action brought by former and current employees of Spectrum Security for meal period violations. The class sought waiting time penalties and penalties for failure to provide accurate wage statements.

The case was remanded to the California Court of Appeal on two issues:

  1. Whether the trial court erred in finding Spectrum Security had not acted “willfully” in failing to timely pay employees premium pay, which barred recovery of waiting time penalties.
  2. Whether Spectrum Security’s failure to report missed-break premium pay on wage statements was “knowing and intentional” to allow recovery of penalties for failure to provide accurate wage statements.

The Court of Appeal concluded as to the first question that the substantial evidence supported the trial court’s finding that Spectrum Security presented defenses at trial in good faith for its failure to pay meal premium to departing employees and therefore its failure was not “willful” to entitle employees to waiting time penalties. As to the second question the Court of Appeal held that because Spectrum Security had a good faith belief that it complied with wage statement requirements, the trial court was precluded from finding the violation was “knowing and intentional” and awarding penalties.

In its second opinion on Naranjo issued on May 6, 2024, the California Supreme Court stated, “[o]n remand, the answer to the question of Labor Code section 203 penalties was clear. Under long-established law, an employer cannot incur civil or criminal penalties for the willful nonpayment of wages when the employer reasonably and in good faith disputes that wages are due…”

However, as the California Supreme Court noted in its decision, the courts have been divided over whether an employer’s good faith belief will also bar Labor Code section 226 penalties for a “knowing and intentional” failure to report the same unpaid wages or any other required information, on a wage statement.

The California Supreme Court agreed with the Court of Appeal below that if an employer reasonably and in good faith believed it was providing a complete and accurate wage statement in compliance with the requirements of section 226, then it has not knowingly and intentionally failed to comply with the wage statement law.

This decision is a bright spot for employers trying to comply with the myriad of California wage and hour laws. While the language of the statute has always stated that penalties could only be recovered for “knowing and intentional” violations, in light of this decision, employers that can demonstrate a good faith belief in the accuracy of their wage statements now can forcefully argue that there was no failure to comply with wage statement law, and thus no penalty should apply.

If you have questions about the latest decision by the California Supreme Court or related issues, contact a Jackson Lewis attorney to discuss.

In 2022, the City of Inglewood passed a healthcare worker minimum wage ordinance. The new $25.00 minimum wage applies to private-sector healthcare employees who work in hospitals, integrated health systems, and dialysis clinics in Inglewood.

The new minimum wage applied to clinicians, nurses, certified nursing assistants, aides, technicians, maintenance workers, janitorial or housekeeping staff, groundskeepers, guards, food services workers, laundry workers, and pharmacists but does not include managers or supervisors.

The California Hospital Association challenged the law and recently the district court struck portions of the ordinance as preempted by the National Labor Relations Act. The judgment strikes sections 8-152 (c) – (d), which prohibits the employer from funding the minimum wage increases required by the ordinance by:

  • Reducing premium pay or shift differentials
  • Reducing benefits such as vacation and healthcare
  • Reducing hours worked
  • Laying off workers
  • Increasing charges to workers such as for parking.

It is possible the City of Inglewood could appeal the decision of the Court, though no appeal has been filed to date.

Meanwhile, the Governor’s push to delay the state-wide healthcare minimum wage is still in limbo. To date, the healthcare minimum wage increase statewide will take effect June 1.

Jackson Lewis will continue to monitor developments related to the healthcare worker minimum wage ordinances and statute. If you have questions about the Inglewood ordinance or related issues with healthcare minimum wage contact a Jackson Lewis attorney to discuss.

Employers covered by San Francisco’s Fair Chance Ordinance or Health Care Security Ordinance are required to submit the Employer Annual Report Form to the San Francisco Office of Labor Standards Enforcement (OLSE) by May 3, 2024. The purpose of the Annual Report Form is to provide OLSE with a snapshot of the employer’s compliance with either of these two San Francisco ordinances. Covered employers who fail to submit the form by the deadline may be subject to a penalty of $500 per quarter.

Instructions and resources for employers who are required to report are on the OLSE’s website.

Which Employers Must Comply With The Fair Chance Ordinance?

San Francisco’s Fair Chance Ordinance (FCO) applies to employers with five or more employees worldwide, as well as employers of any size who contract with the City and County of San Francisco. Similar to the State of California’s Fair Chance Act, the FCO prohibits covered employers from asking job applicants for positions that require at least eight hours of work per week in San Francisco about arrest or conviction records until after a conditional offer of employment is issued.  In addition, the FCO prohibits covered employers from considering certain facts during the application process, including whether a job applicant’s history includes an arrest that did not lead to a conviction.

The annual reporting requirements include disclosing the number of employees the employer hired to work in San Francisco in 2023, whether the employer conducted background checks of job applicants, and whether the employer hired anyone who had a conviction history.

Which Employers Must Comply with the Health Care Security Ordinance?

The Health Care Security Ordinance (HCSO) applies to private and non-profit employers who employ any individual in San Francisco, and twenty or more workers, or in the case of non-profits, 50 or more workers, inside or outside of San Francisco.  Under the HCSO covered employers must spend a minimum amount set by law on healthcare for each employee who works eight or more hours each week in San Francisco.

The reporting requirement includes disclosing the number of individuals employed in each quarter of 2023, the number of employees covered by the HCSO in each of those quarters, the employer’s total spending on healthcare, and the types of healthcare coverage the employer offered to employees.

If you have questions about reporting requirements for or your organization’s compliance with, the FCO or HCSO, reach out to a Jackson Lewis attorney to discuss.

On April 1, 2024, the new fast-food minimum wage took effect. At the end of March, California’s Labor Commissioner issued an FAQ regarding the new minimum wage. It includes the following sections:

  • Overview of the Minimum Wage Increases
  • Who is covered by the law
  • The role of the fast-food council in addition to minimum wage

The FAQ highlights important aspects of the new fast-food minimum wage statute:

Posting Requirements

There is a supplemental posting to the minimum wage order that must be posted by covered employers. The supplemental posting is available on the Labor Commissioner’s page.

Covered Employees

The FAQs reiterate the definition of “fast-food restaurant employees” as follows:

 The law applies only to employees of “fast food restaurants.” To be considered a fast food restaurant, the restaurant must meet ALL of the below criteria:

  1. The restaurant must be a “limited-service restaurant” in California. A limited service restaurant is one that offers limited or no table service, where the customers order food or beverage items and pay for those items before the items are consumed.
  2. The restaurant is part of a restaurant chain of at least 60 establishments nationwide. An establishment is a single restaurant location offering food or beverages to customers. Off-site business locations (geographically separate from a restaurant location), at which employees perform administrative, warehouse, or preparatory food production tasks, are not counted as “establishments” toward the 60 establishment minimum.
  3. The restaurant is primarily engaged in selling food and beverages for immediate consumption.

Employees who work at different locations of the same fast food restaurant chain may not both be covered if one of the locations is exempt from the law, such as if just one location produces bread on-site.

Importantly, the FAQs confirm that the minimum wage set by the statute impacts the minimum salary threshold to be an exempt employee under California law. Under state law, the minimum salary threshold is currently $66,560 but it is now $83,200 for restaurant employees. However, if the exempt employee is working at a larger store with a fast-food component and other aspects, the FAQs provide that a blended rate may be appropriate between the fast food and non-fast food work calculated on a weekly basis based on the percentage of time spent on those tasks. An example is provided in the FAQs but employers should consult counsel if they decide to move forward with this blended rate approach.  

Fast Food Council

Though the minimum wage has been the most highly publicized aspect of the law, the Council will also meet regularly to develop other minimum employment standards for the fast food industry in California.

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If you have questions about California’s fast food minimum wage or related issues, contact a Jackson Lewis attorney to discuss.

California’s pro-employee employment regulations are often compared to those of the European Union. Recently, the California legislature borrowed another European idea for a proposed bill, “the right to disconnect from work.”

Assembly Bill (AB) 2751 would mandate that employers establish policies that allow employees to disconnect from employment communications during non-working hours.

Under the proposed law, employers would not be permitted to contact the employees outside of working hours except in the event of an “emergency” or “scheduling.”

Under the bill, an emergency is defined as “an unforeseen situation that threatens an employee, customer, or the public; disrupts or shuts down operations; or causes physical or environmental damage.”

Employees could file complaints with the California Labor Commissioner for alleged violations, and a pattern of violations would be punishable as a misdemeanor and a fine of not less than $100.00.

In its current form, the bill does not apply to employees covered by a valid collective bargaining agreement.

AB 2751 is still in the committee stages of the legislative process with this year’s legislative session ending on August 31, 2024.

Jackson Lewis will continue to track this and other legislation that affects employers in the Golden State. If you have questions about AB 2751 or related issues, contact a Jackson Lewis attorney to discuss.