Ninth Circuit Court: Changes Federal Pay Equity Rules
The U.S. Court of Appeals for the Ninth Circuit recently ruled on Rizo v. Yovino, a case that originated in California. Through its latest interpretation of the Equal Pay Act of 1963, it found that state employers can’t use prior salary history to justify a pay differential between male and female employees performing similar work.
There are exceptions for determining wages, but in general, U.S. employers must choose “a differential based on any other factor other than sex” to rationalize pay differences for similar work. The Court did not deem salary history a justifiable exception. This opinion overrules Kouba v. Allstate Ins. Co., in which the Court had found that candidates’ previous salary was a factor employers could consider when determining a current wage.
How Does This Decision Affect California Employers?
Under California’s Pay Act (2015), employers are already prohibited from paying different wages for male and female employees who perform “substantially similar work.” California also enacted a statewide law prohibiting employers from asking applicants about salary history information.
The Ninth Circuit Court also presides over employers in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington who will now need to remove salary history from consideration when setting pay structures.
Additional Compliance Considerations:
- Conduct an internal audit using reputable legal counsel and review pay structures within specific positions and job levels. Pay special attention to pay equity issues in the workplace regarding any salaries that may have been based on prior wage history.
- Train everyone involved in your hiring professes on what questions they can and cannot ask applicants.
- Audit your pre-screening questions to ensure prior salary information is eliminated.
1099 or W2? Big Change in How You Classify Independent Contractors
In light of Dynamex Operations West, Inc. v. Superior Court, California employers must now issue an “ABC test” when classifying 1099 workers.
Someone is considered to be a 1099 independent contractor only if:
A) The company doesn’t control or direct what the worker does.
B) The worker performs tasks outside of the hiring entity’s usual course of business.
C) The worker is in an independently established trade, occupation, or business. The court will look at factors of whether the individual’s business is incorporated or licensed, and whether they have issued advertisements offering their services to other potential customers.
Employers have the burden of analyzing all 3 factors before classifying an individual as an independent contractor. Since this decision is likely to cause a big shift for many California employers, review whether all of your 1099 employees currently providing services to your business meet the ABC test.
Meal & Rest Period Obligations Under California Law
Lawsuits regarding inadequate breaks and pay are stacking up in California, and it’s important for employers to take note of current meal and rest periods requirements.
In California, employees are entitled to:
- One 30-min off-duty break upon their 5th hour of work.
- If employees work over 10 hours, they must be provided a second 30-min break.
- Employees must also receive a 10-minute rest period for every 4-hours worked.
- Review your policies for meal and rest periods.
- Encourage employees to alert management if they are prevented from taking breaks.
- Provide training during your onboarding that covers meal and rest breaks.
- Check that employees have signed acknowledgment forms that they have been informed about your meal and break policies.
- Update agreements for third parties in compliance with state and local laws.
San Francisco’s “Ban the Box” Law
San Francisco’s existing Fair Chance Ordinance or ban the box law (2014), now more similarly resembles California’s Fair Chance Ordinance that took effect in January 2018. The statewide ban restricts employers from inquiring into applicants’ criminal background histories during the hiring process. San Francisco’s new rules take effect on October 1, 2018, and impose steep penalties for non-compliance.
- No 7-year limitation. Previously, employers, housing providers, contractors, and subcontractors could base hiring decisions on “decriminalized behavior” that was 7 years old or less. However, in October, there will be certain offenses employers can no longer inquire about, including convictions more than 7 years old. In addition, San Francisco employers will need to analyze applicants’ conviction histories (including marijuana offenses) to evaluate whether the conviction is job-related.
- Expanded definition of “employer” now applies to organizations, partnerships, corporations, etc. with 5+ employees. Previously, the definition only pertained to employers with 20+ employees.
- Penalty increase. An employer’s first violation can result in a $500 penalty and the second violation can result in $1,000. Additional violations can result in fines of up to $2,000.
- Multiple violations. If multiple people are impacted by the same violation at the same time, it will be treated as multiple violations. Previously, these scenarios were processed as a single violation.
- Payment of violations. Employers will pay penalties directly to the individual impacted by the offense, not the city or state.
- Legal rights expanded. Any employee or applicant whose rights have been violated can sue for damages. They are no longer required to first go through the City Attorney and Office of Labor Standards Enforcement.
- Offer must be made before an inquiry. Employers must issue a conditional offer of employment before inquiring about an applicant’s conviction history. Doing this inquiry after a live interview is no longer permitted.
Additional San Francisco Ordinances
Parity in Pay Ordinance: In July 2018, San Francisco jumps on the bandwagon to ban employers from asking about applicants’ salary histories. The ordinance is meant to combat gender pay wage discrepancies.
Increased Alternative Sick Leave Accrual: The change to employer’s sick leave accrual method now requires no less than 40 hours of accrued sick leave or paid time off by the 200th calendar day of employment. There are no obligations for employers to exceed 80 hours or 10 days. Under current law, employers are required to permit sick leave to carry over to the following year, but they may limit the carryover amount to 24 hours or 3 days. Going forward, employees may now use up to 5 days or 40 hours of paid sick leave annually.
Since California’s paid sick leave laws went into effect 3 years ago, several cities have mandated their own requirements, including Los Angeles, Santa Monica, San Diego, Emeryville, Berkeley, and Oakland.
Between local and state ordinances, employers are advised to follow the policy that offers the greatest benefit to employees.