Legal Expert at Human Resources Conference Breaks Down Hot Topics in California

On June 25, 2024, Jonathan A. Siegel, Principal at Jackson Hewitt Orange County, delivered a presentation at the annual Society for Human Resource Management (SHRM) conference in Chicago, providing valuable insights into the latest developments in labor and employment law in California.

The presentation covered numerous recent and upcoming legal updates affecting California employers in 2024 through 2025, including reforms to PAGA litigation, increased wage theft enforcement, paid sick leave policies, and various city/county ordinances, emphasizing the need for employers to stay compliant with the complex and ever-changing employment law landscape in California.

PAGA Reform

On July 1, 2024, California Governor Gavin Newsom signed two Private Attorneys General Act (PAGA) reform bills into law that apply to actions brought on or after June 19, 2024. These actions are the first changes to PAGA since its enactment.

“The PAGA law has been a scourge of employers in California for years now and it’s a law that plaintiffs’ lawyers use to sue for technical violations of the labor code,” Siegel started. “[T]here’s been tremendous abuse of it and employers have been…littered with these kinds of PAGA cases and they’re very hard.”

One of the most impactful modifications is the stricter standing requirement, where aggrieved employees can only pursue claims for Labor Code violations they personally experienced within the one-year statute of limitations. This change aims to limit the scope of PAGA actions from the outset.

“So, if you have a technical violation [and] I’m not personally subject to it, I can still sue for it,” Siegel said of the pre-reform PAGA law. “They 1721140381 need to have personal damage by the violation to bring the case…so that’s going to hopefully help a lot,” he added about how the amendments may benefit employers.

The reforms also revise the penalty scheme, introducing exceptions that may increase, decrease, or eliminate penalties based on various factors. For instance, there’s now a reduced $25 penalty per pay period for certain wage statement violations, down from the previous $100.

Additionally, the law expands cure rights for employers, allowing them to address violations related to wage statements, meal and rest breaks, minimum wage, overtime, and expense reimbursement claims.

“I want to cure these right away, that way I can decrease liability,” Siegel explained. “If you do cure things, then any possible damages for the things you haven’t cured or cannot cure will be less, so the percent of damages will go down if you take good faith efforts.”

Enforcement trends

Increased wage theft enforcement. In February 2024, the California Department of Industrial Relations and Labor Commissioner’s Office launched an $18 million Workers’ Rights Enforcement Grant Program to combat wage theft. The program aims to enhance labor law enforcement, deter employer violations, and ensure fair compensation for California workers.

“Wage theft enforcement is going to increase,” Siegel stated. He discussed the benefit of California offering the required wage theft notices on the DLSE website that must be provided to employees upon hire but also cautioned to make sure the notices are current and to be aware of form changes.

Beginning January 1, 2024, additional information is required on wage theft notices regarding the increase in paid sick leave and information about any federal or state emergency or disaster declaration.

Off-the-clock work claims. Siegel highlighted that off-the-clock (OTC) claims continue to be a significant concern for employers in California. These claims arise when employees perform work-related tasks outside their scheduled hours without compensation. Siegel said that OTC claims have increased dramatically, particularly in scenarios involving boot-up time for computers and walk time to time clocks.

“All of you should be off-the-clock investigators,” Siegel said to the room of attendees. “You want to look for any potential OTC because that’s where the litigation is going down.” He explained that OTC is particularly important in California because several years ago the state abandoned the de minimis doctrine under the federal Fair Labor Standards Act (FLSA).

“California said, no, we don’t follow that anymore,” Siegel said about how the state wants employers to “pay for every second of work.” He focused on the cost-benefit analysis of installing additional time clocks to prevent potential lawsuits by providing a hypothetical scenario to illustrate how a seemingly expensive investment in time clocks can actually save a company millions in potential litigation costs around OTC claims.

Remote and hybrid employee compliance

Potential city law triggers. Siegel noted that remote and hybrid work arrangements in California are creating significant compliance challenges for employers, particularly regarding city-specific labor laws. “The number one noncompliance with hybrid employees, remote employees, and employees who are regional, on the roads, route drivers, salespeople, is that your employees are in cities triggering city laws that you’re not complying with,” he stressed about the various local laws such as sick leave, fair work ordinances, and minimum wage requirements.

“I’m seeing a lot of noncompliance in city law because you don’t know what city laws you should be complying [with],” Siegel said. He added that a strategic review of employee locations can help ensure compliance with varying municipal requirements.

There are more than 40 localities in California with minimum wage ordinances and several with sick leave and other wage and hour-related requirements that can differ from one jurisdiction to another.

Paid Sick Leave and PAGA

At the beginning of the year, paid sick leave requirements were expanded. Employers must generally provide five days or 40 hours of paid sick leave to their employees in California. Siegel explained the expansion of the leave and also noted a new case involving paid sick leave and PAGA technical violations.

“Let’s say your sick leave policy, you didn’t update the reasons for taking sick leave to include time off for a designated person being ill, you could be sued under the PAGA law now,” Siegel said. He added that before this case, there was not an individual right to sue on PAGA for violations of California paid sick leave.

Minimum wage and overtime

Overtime exemption tests. Siegel explained that due to the increases in California’s minimum wage, the state’s salary test for exempt employees under the administrative, executive, or professional overtime exemptions has also increased. “That means that the minimum wage salary test has gone up because it’s always two times the state minimum wage times 28,” he said. The 2024 minimum wage in California is $16.00 per hour and the salary test threshold is $66,650.

Union employees and wage increases. Siegel noted another component to consider when the state minimum wage increases in California is that it affects collective bargaining agreements (CBAs) with union employees. He said that there are several exemptions from California wage and hour laws for CBAs, with the most popular being the ability to negotiate custom overtime rules.

“Literally, they could agree to anything you want with overtime, as long as everyone makes at least 30% above the state minimum wage, which is currently $20.80 [per hour],” Siegel noted.

If an employer is not relying on these CBA exemptions and simply following California law, they don’t need to meet this 30% above minimum wage threshold. Siegel said that it’s important to note that these exemptions only apply when specifically relying on the CBA provisions, not when following standard California labor laws.

Guidance resources

Siegel closed his presentation with a discussion about California guidance resources. He explained that employers have to navigate various mandatory and recommended policy requirements. Mandatory policies can include paid sick leave, family rights, pregnancy leave, paid family leave, and lactation accommodation. Recommended policy requirements can be contingent on company size, with different triggers at 50, 25, 15, 10, 5, and even one employee, in California.

Siegel recommends that employers include those recommended policy requirements in their guidance resources as a best defense to litigation. “Exhibit A in your defense to these kinds of policy litigation, is your policy,” he stressed.

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