Employers Feel the Heat from Summer Legal Updates — Minimum Wage Increases, Arbitration Enforcement, and New COVID Safety Definitions
Local Minimum Wage Increases Go Into Effect on July 1, 2022
On July 1, 2022, a number of local governments throughout California will raise their minimum wage. In the City of Los Angeles, the new rate is $16.04/hour ($18.17/hour for hotel employees at hotels with 150 or more guest rooms).
The new rate for employees in Malibu, Santa Monica, and unincorporated areas of Los Angeles County is $15.96/hour ($18.17/hour for hotel employees in Santa Monica).
Below is a summary of the local minimum wage rates which are increasing on July 1, 2022:
Employers whose employees work in localities that have not set their own minimum wage must continue to apply the State of California’s minimum wage requirement, which is currently $15/hour for employers with 26 or more employees and $14/hour for employers with 25 or fewer employees.
As we shared in our 2021 year-end client alert, an increase in the municipal/local minimum wage does not affect the minimum wage that is to be used for the salary-basis test for California’s exemption classifications. Employers should continue to use the state’s minimum wage for the purpose of determining whether employees are earning at least twice the minimum wage.
U.S. Supreme Court Ruling Allows Employers to Enforce Arbitration of Individual PAGA Claims
In Viking River Cruises, Inc. v. Moriana, released on June 15, 2022, the United States Supreme Court ruled that waivers of employees’ individual claims under California’s Private Attorneys General Act of 2004 (PAGA) are enforceable. The decision changes the landscape for California employers, who have been unable to enforce PAGA waivers in arbitration agreements since the California Supreme Court’s 2014 decision in Iskanian v. CLS Transportation Los Angeles, LLC.
Under PAGA, employees can act as “private attorneys general” and bring representative actions that include claims for alleged California Labor Code violations (e.g. unpaid overtime, missed breaks, etc.), both on their own behalf and on behalf of other employees. Seventy-five percent of civil penalties recovered in PAGA actions are remitted to the state, with 25 percent reserved for the employees.
The Court in Viking River reasoned that PAGA plaintiffs essentially have two PAGA claims—one for any violations they individually suffered, and one for penalties arising from violations alleged on behalf of other aggrieved employees. As to individual PAGA claims, the Court found that the Federal Arbitration Act (FAA) preempted the Iskanian holding that waivers are unenforceable. As such, employees are free to agree to arbitrate (and waive) their own PAGA claims. Once doing so, the Viking River Court found, the employee lacks standing to bring PAGA claims on behalf of others, which must be dismissed. (However, we note that Justice Sotomayer pointed out in her concurring opinion that California could change the PAGA statute to allow a PAGA plaintiff standing to assert the phantom claims of other employees while his or her individual claims are being arbitrated.)
Viking River provides employers an opportunity for additional protection against future PAGA lawsuits. Businesses should consult with their employment counsel on the nuances of the Viking River decision summarized above, in conjunction with the following potential action items:
- Review and revise arbitration agreements to ensure compliance with Viking River (including provisions re PAGA claims, representative action waivers and severability)
- Determine whether to issue new agreements to entire workforce or limit to new hires
- Consider implementing arbitration agreements for additional protection if not in place
- Evaluate benefits of voluntary arbitration, especially in light of pending legal challenges to California’s statutory ban on mandatory arbitration in Labor Code § 432.6 (AB 51)
California Department of Public Health Changes Definitions of “Close Contact” and “Infectious Period”
Pursuant to a June 8, 2022, order by the California Department of Public Health (CDPH), the definitions of a “close contact” and “infectious period” have changed. The new definitions impact employers because they are incorporated into Cal/OSHA’s third revised Emergency Temporary Standard (ETS), which we previously discussed here, and supersede the prior definitions. The definitions are relevant to an employer’s obligation to identify and provide notice of exposure to close contacts when there is a COVID-19 case in the workplace and to determine when an employee may be eligible to return to work after having COVID-19.
The new definition of a close contact is “someone sharing the same indoor airspace for a cumulative total of 15 minutes or more over a 24-hour period during an infected person's (laboratory-confirmed or a clinical diagnosis) infectious period.” The prior definition did not refer to the same indoor airspace. Rather, it was limited to someone who was within six feet for a cumulative total of 15 minutes or more over a 24-hour period during the infectious period. The CDPH order provides there three examples of what the “same indoor airspace” means: home, clinic waiting room, airplane.
The new definition of infectious period is as follows:
- For symptomatic infected persons, 2 days before the infected person had any symptoms through Day 10 after symptoms first appeared (or through Days 5-10 if testing negative on Day 5 or later), and 24 hours have passed with no fever, without the use of fever-reducing medications, and symptoms have improved, OR
- For asymptomatic infected persons, 2 days before the positive specimen collection date through Day 10 after positive specimen collection date (or through Days 5-10 if testing negative on Day 5 or later) after specimen collection date for their first positive COVID-19 test.
The CDPH order also states that for the purposes of identifying close contacts and potential exposures, infected persons who test negative on or after Day 5 and end isolation are no longer considered to be within their infectious period. Such persons should continue to follow CDPH isolation recommendations, including wearing a well-fitting face mask through Day 10.
CalSavers Deadline Approaching
As we previously reported, June 30, 2022, is the deadline for all businesses with five or more employees in California to have a qualified retirement plan or register with CalSavers, which will provide employees with Roth IRAs. If an employer has a qualified retirement plan, the employer needs to request an exemption at the following website: calsavers.com/exempt. If an employer does not have a qualified retirement plan, then it must register with CalSavers at calsavers.com/start.
Qualified retirement plans include:
- 401(a) – Qualified Plan (including profit-sharing plans and defined benefit plans)
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) - Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) - Simplified Employee Pension (SEP) plans
- 408(p) - Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA Plan
- Payroll deduction IRAs with automatic enrollment