Business in California is About to Change: Here is What California Business Owners Need to Know Before January 1, 2018

A flurry of new laws will sweep California starting on January 1, 2018, impacting California businesses of all sizes. These laws run the gamut, affecting parental leave, hiring, minimum wage and expanded harassment training. Let’s dive in to a few of these changes in more detail and what you need to know to prepare.

New Parent Leave Act

The New Parent Leave Act essentially expands the protections of the federal Family and Medical Leave Act (FMLA) and the California Family Rights Act (CFRA) (which already provide 12 weeks of unpaid, protected leave for baby bonding purposes to eligible employees of businesses with at least 50 employees) to companies in California with as few as 20 employees. 

The Act applies to private, state and municipal employers who employ 20-49 employees within 75 miles of each other. The 12 weeks of leave are in addition to the up to four months of California Pregnancy Disability Leave available to women who work for employers with five or more employees.

To be eligible to take leave, employees must have over 12 months and at least 1,250 hours of service during the previous 12-month period with the covered employer.

To be compliant with this new law, covered employers must make sure they: 

• Grant the 12 weeks of parental leave to any eligible employee within one year of the child’s birth, adoption or foster care placement.
• Allow employees to use any accrued paid time off, such as paid vacation and sick leave, during the parental leave.
• Provide a guarantee that the employee will return to the same or a comparable position upon the termination of the leave. This guarantee must be provided on or before the commencement of parental leave.
• Maintain and pay for the employee’s continued coverage under a group health plan at the same level and under the same conditions that coverage would have been provided had the employee continued to work. 

Salary history inquiry ban

The salary history inquiry ban is new legislation that applies to every California employer, regardless of number of employees. It prohibits a company from seeking an applicant’s salary history, including compensation or benefits, or using their previous salary as a factor in deciding whether to hire them or in setting salary. Additionally, employers must provide the pay scale for the position if the applicant makes a reasonable request. 

Minimum wage

The minimum wage will increase again in January to $11 per hour for companies with more than 25 employees and $10.50 per hour for companies with 25 or fewer employees. The increases are in line with a law passed in 2016 that requires the state’s minimum wage to reach $15 an hour by 2022. The latest changes increase the minimum salary for exempt employees to $45,760 for companies with more than 25 employees and $43,680 for companies with 25 or fewer employees. 

Harassment training

The important topic of harassment in the workplace is the subject of much discussion right now and a new California law reflects this. 

Employers with 50 or more employees—who are already required to conduct harassment training of all people managers within six months of assuming their role and every two years after that—must now include content on harassment based on gender identity, gender expression and sexual orientation in their harassment prevention training materials.  

We’ve talked in the past about discrimination of protected classes in California but, in addition to that information, employers should make sure to do the following as of January 1: 

• Make all harassment prevention training materials include harassment based on gender identity, gender expression and sexual orientation, and plan to educate all supervisors with these updated training materials.
• Display an updated California Fair Employment and Housing Act (FEHA) poster on discrimination in employment, as well as a new poster by the FEHA on transgender rights. These posters should be placed, along with other federal and state-required posters, in a prominent and accessible location in the workplace (such as a breakroom). 

Your HR services provider can help you review and revise all training materials, as well as ensure all supervisors are up to speed with their anti-harassment training. TriNet will be sending updated and new posters to our clients who are affected by changing laws. 

Ban-the-box

The last major development coming to California businesses in the new year is the ban-the-box bill that was recently signed into law. Businesses that perform background checks on applicants and/or employees will need this information in order to maintain compliance and avoid lawsuits. 

Existing law prohibits state and local agencies from asking an applicant to disclose conviction information until the applicant is determined qualified for the position. The new law going into effect January 1, however, extends this prohibition to all employers in California with five or more employees. 

The new law makes it unlawful for these employers to: 

• Include on any application for employment any question that seeks the disclosure of an applicant’s conviction history (i.e., it eliminates the check box asking them if they have ever been convicted of a felony).
• Inquire into or consider the conviction history of an applicant before the applicant receives a conditional offer of employment.
• Consider, distribute or disseminate information about any of the following while conducting a criminal history background check in connection with any application for employment:
• • most arrests that did not result in a conviction
  • referral to or participation in a pretrial or post-trial diversion program
  • convictions that have been sealed, dismissed, expunged or statutorily eradicated pursuant to law

Once a conditional offer of employment is made, an employer can consider an applicant’s criminal record. An employer cannot deny an applicant a position solely or in part because of conviction history until the employer performs an individualized assessment. This assessment must justify denying the applicant the position by linking relevant conviction history with specific job duties of the position sought. In particular, the assessment would have to consider: 

• The nature and gravity of the offense and conduct.
• The time that has passed since the offense or conduct and completion of the sentence.
• The nature of the job held or sought.

Once the employer makes a preliminary decision that the applicant’s conviction history is disqualifying, the employer must notify the applicant of this preliminary decision in writing. The employer is not required to justify or explain to the applicant its reasoning for making the preliminary decision, but the employer must:

• Provide the written notice of the disqualifying conviction or convictions that are the basis for the preliminary decision to rescind the offer.
• Include a copy of the conviction history report, if any.
• Provide an explanation that the applicant has the right to respond to the notice within at least five business days and that the response may include submission of evidence challenging the accuracy of the conviction record or evidence of rehabilitation or mitigating circumstances or both.

The employer cannot make any final determination based on conviction history during this five business day period. If the applicant provides timely notification to the employer in writing that he or she is disputing the conviction history and is taking steps to obtain evidence to support this, the employer must provide five additional business days to respond to the notice. The employer must also consider any additional evidence or documents the applicant provides in response to the notice before making a final decision.

And if the employer ultimately decides to deny an applicant based on the conviction history, the employer must notify the applicant of this in writing and include notification of any existing procedure the employer has to challenge the decision, as well as notification of the applicant’s right to file a complaint with the FEHA.

Again, your HR services provider or an employment attorney can help review of all of your various policies, procedures and other documents related to the screening process (e.g., job applications, offer letters, guidelines for recruiters, etc.). Relatedly, if not done already, employers in California should consider updating all documents related to federal and California fair credit reporting act compliance, including background check authorization and disclosure forms and “adverse action” notifications.

State, local and federal laws and regulations are constantly evolving, making it increasingly difficult for business owners of every size to maintain compliance. If you are facing these changes alone, now is a good time to consider partnering with TriNet.

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.

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