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General Counsel Corner – California Labor Laws From a General Counsel’s Perspective

Written by Lee R Goldberg, Esq.
www.callawyers.com
March 8, 2021

All California businesses that “hire” the services of an individual, notwithstanding the industry, have at least one similar business challenge to address. That business challenge is compliance with California’s labor laws.

California’s labor laws are myriad, complex, and continually changing. There are even different/additional regulations that may apply to your business based upon the specific city or county in which you operate. The larger the employment base for your business, the more regulated the labor environment becomes, starting with five or more employees.

These statutory rules and regulations address and govern just about everything in the employer/employee relationship, from fair hiring practices, to employee health and safety, to minimum wage, required benefits, overtime payment, meal and break regulations, to termination requirements (yes, even in an “at-will” state). In the last two years, California has seen a great many additional requirements added to the expansive list of regulatory requirements, including but not limited to: (1) a seismic change in the classification of who actually is an employee vs. 1099 contractor (AB-5); (2) Coronavirus Prevention Plan requirements (California Code of Regulations, Title 8, Section 3205(c)); (3) Anti-sexual harassment training requirements (California Government Code §12950.1); (4) Pay data reporting requirements (Government Code section 12999 enacted in SB 973.); and (5) most recently, time rounding restrictions applied to meal periods (Donohue v. AMN Services, Inc.). All of these, and many more requirements, are a hornet’s nest of potential problems for the unwary or, in particular, the uncaring company.

So, why is it so important to strictly comply with all of these regulations? After all, with such a complex regulatory structure some technical violations here and there are understandable and accepted, right? The truth is – no. A company’s failure to strictly comply with ALL of the regulatory requirements of California’s labor laws can be extraordinarily costly.

Besides various potential Labor Department or Franchise Tax Board (FTB) audits, unhappy employees tend to file complaints with the regulatory authorities. Cal OSHA violations can cost in the tens of thousands (and can be in the hundreds of thousands on serious violations). Labor Commissioner and FTB charges and penalties can also be extraordinarily expensive, in addition to the employee compensation that may be ordered. And this does not even account for the cost of legal and accounting representation in connection with those types of proceedings.

However, the highest exposure by far to any company that is not in compliance with California’s labor laws are the potential class action and PAGA claims (Private Attorney General Actions) that arise as a result of what plaintiff’s lawyers salivate over – Patterns of Practice. These claims typically arise when a company is not in compliance with the very complex meal/break, wage, or overtime regulations over a period of time, and as to all employees. Even the defense of these type actions can be in excess of $500,000 in litigation costs. The damage awards (and settlements) can run into the millions. I have recently been advised by experienced employment defense counsel in this field that their experience is that less individual claims, and more and more of these attorney-driven class action/PAGA claims, are being filed these days.

So, how do businesses protect themselves from this significant exposure? Certainly good employment insurance (EPLI/Worker’s Comp) is a must. However, I believe most importantly, any California company with employees must engage a certified HR specialist either in-house or as an outside consultant. I have been quoted many times in stating that, “If you have California employees and do not have a certified HR specialist in-house, or as an engaged outside consultant, you are operating in violation of California labor laws.”

To give an example, there are probably 10-12 notices, documents and other handouts that are required to be given, or obtained from, every new-hire in California. This does not even include your employee handbook, at-will employment agreement, and other matters you will want to handle from the very start of employment, including various recommended on-boarding procedures, compensation and break structures, and benefits. Good HR consultants know the value of getting all of this correct from the start (not to mention, fixing any issues that already exist with the company’s established labor force).

Experienced HR professionals will have standardized schedules and checklists for new-hire onboarding. In addition, these experienced professionals can assist at any point in the employment process, and with the (hopefully) rare termination. Some HR companies can even assist with company culture, employee loyalty, and employee incentive programs. If using an outside HR professional, choose the HR company that best suits your company’s needs and can help your company every step of the way.

When the employment is started correctly with new-hires, and a company has professional HR counseling for its ongoing employment processes and procedures, it will receive a number of measurable financial benefits. These financial benefits include: (1) lower operating costs; (2) higher profitability; (3) significantly lower exposure to regulatory and class action challenges; and (4) a happier and more productive workforce (i.e., fewer employment complaints – less sick days, etc.).

Remember, it always costs less, in the end, to be proactive and intentional, than to have to react and be on the defensive. This is a simple equation and view from the desk of general counsel. Be well – and do good business out there.

If you’re looking to hire a new employee in California and don’t know what’s needed, we can help! We have a few resources that you can utilize, we have A Step By Step Guide to Hiring Your First California Employee and New Hire Forms available on our website.

Another good resource to help you is Us! You can reach out to us here.