Of all the things I hope for in the New Year, the first is the complete overhaul of California labor law.
For California employers, labor law is not just shifting sands, it’s a sinkhole. Try squirming around even a little to gain your footing as a business in the Golden State, and you find your business sinking even deeper into the mire.
To use another analogy, reading California labor law is like a good zombie horror flick: it is fascinating in a grotesque sort of way. You are at once completely repulsed and very impressed by its sheer ridiculousness, so that you cannot look away. Although the plot is impossible to follow (or so easy that you find yourself nervously anticipating a sudden twist), you remain in your seat, albeit on its edge.
For those who are casually watching this TV rerun from home as you pop in and out of the living room going about your domestic duties, you might get a few good laughs out of the poorly written, yet professionally produced nightmare. But for those of us in the theater, despite the unbelievable plot, there are moments when we’re scared stiff.
1. Incomprehensible Meal Break Regulations
A consequential problem with California labor law is that it is typically incomprehensible. Indeed, among the 21 new labor laws Gov. Jerry Brown signed recently, were two clarifications of a law passed the year before. Apparently it’s acceptable to pass a law, then decide what exactly was meant by it later.
Not all sections of the labor code are expressly clarified by the legislature, however. Consider meal breaks, for instance. For several years, neither the courts nor the Assembly could settle on a definition of “provide” in the following excerpt: “If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the Industrial Welfare Commission…”
Does “provide” mean “make available,” or does it mean “ensure it is taken”? In 2012, the California Supreme Court finally settled the matter, ruling that employers do not have to police meal breaks, but only to “relieve…employees of all duty, relinquish control over their activities and permit them a reasonable opportunity to take an uninterrupted 30-minute break.”
For some employers, the distinction and legality of on-duty meal breaks is a point of even greater contention. If an employer has not provided its employees with a complete relief of duty during their breaks, which includes the ability to leave the work premises, the law says the employer hasn’t really provided a break, even if the both parties are under the impression that it has. There’s a costly penalty for this misunderstanding: for every missed off-duty meal break, the employer owes the worker one hour’s pay at his regular wage.
Both parties can sign a voluntary agreement to have paid on-duty meal breaks, provided the nature of the work fits the “objective criteria” set forth by the law. But employees can revoke such an agreement at any time. So what if the employee declines to sign the agreement, or revokes it? It would be in the employee’s financial best interest to skip the off-duty break. So the employer must pay an extra hour’s wages for every single “missed” meal break. Those expenses add up quickly.
Either the purpose of the law was to make it more expensive to operate in some industries, and to essentially give those employees a raise in a very roundabout, obfuscated fashion, or the whole tangled web of legalese can be chalked up to legislative incompetence.
Given that the various mandates of labor law are prescriptive and specific, the state legislates toward its vision of the most common business model, such as retail employers, restaurants, and traditional offices (think Dunder-Mifflin). The meal break mandate, for instance, makes the most sense if applied to business models where providing a break is largely a matter of proper scheduling and staffing.
2. Mandatory Paid Sick Leave
Another example of incomprehensibility is the brand new mandatory paid sick leave law, which requires all employers to grant at least 24 hours of paid sick leave to employees each year. Peculiarly, the law requires either a lump total of 24 hours of sick leave, or an accrual rate of 1 hour for every 30 hours worked amounting to no less than 24 hours sick leave annually. This means that even if my employee is set on an accrual basis and works for two hours a day for 30 days, I owe her at least 24 hours of sick pay.
A question remains, though, that if a part-time employee accrues at a slow rate, say 10 hours per week (16.6 hours total over 50 weeks), at what point in the year does she receive the full 24 hours? If it isn’t until, say December 31, that would defeat the purpose of the law. Additionally, if an employee works a 40-hour week for 50 weeks out of the year, the total accrual is more than double, although it can be capped at exactly double the 24-hour lump sum. If that is the case, then why would any employer, assuming they want to minimize the financial burden of this law (kudos to those that are able to provide more than the minimum), set their accrual rate for full time employees at 1 hour for every 30 hours? Why not just pay half that and be done with it?
Or take another example of complicated insensibility: multiple pay rates. In some industries, multiple pay rates are the norm, such as in healthcare staffing. You might easily have four or five different pay rates established at various facilities one works at, yet the same employer pays for the work done at all. California law requires employers to provide a “Notice to Employees” upon hiring them, which must state their pay rate. So which pay rate would the employer put? The initial pay rate for the first facility the employee begins working at, or an expected average of pay rates (as is the calculation for providing sick pay)? Must they reissue the Notice to Employees every time they receive a new pay rate?
3. The Bathroom Throne of California Justice
The sick leave law also illustrates how the State of California micro-manages businesses. If trends continue, one shouldn’t be surprised to find that the state has enacted a virtually uniform standard for all benefits and expanded its control over minimum wages to maximum wages, and everything in between.
Perhaps my favorite instance of state micro-management is the law governing the temperature of your workplace bathroom: “A temperature of 68 degrees must be maintained in toilet rooms, resting rooms, and changing rooms when they are in use.”
Yes, California is the arbiter of how chilly your toilet seat can be.
4. State-Approved Wallpaper
Naturally, California (along with the federal government) also decides what employers must post on walls, in a “conspicuous space,” including a Payday Notice, an Emergency Phone Numbers poster, a California minimum wage poster, a Pregnancy Disability Leave poster, and an Unemployment Insurance Benefits poster, among others. That does not include municipality-specific posters.
Of course, how these are at all useful for out of state or remote in-state employers, particularly contractors who send employees to work on client premises, remains a mystery. Yet the law dictates that not only is your toilet a throne of workplace temperature justice, but that the infinite wisdom of the Division of Occupational Safety and Health, and various other departments and agencies must be posted for you to ponder while upon your throne.
5. Making Exceptions to Laws for Labor and Hollywood
California frequently makes labor law exceptions for collective bargaining agreements and the film industry, when there’s no apparent reason why. At least three exceptions exist in the 21 new labor laws Brown signed, all of which are transparently the work of special interests. Among them are: AB 2743 (Waiting-Time Penalties for Theatrical and Concert Event Venue Employees), AB 1650 (Prohibition Against Requesting Criminal Conviction Information for Certain Jobs), and Healthy Workplaces, Healthy Families Act of 2014 (mandatory paid sick leave).
One of my favorite preferential laws is the “hot food and drinks” provision: “Under IWC Order 12-2001 for employees in the motion picture industry, hot meals and hot drinks must be provided for employees who are required to work after 12 o’clock midnight.” But not for the retail store manager working the night shift? Why ever not?
I was under the impression that labor codes were meant to ensure fair and equal treatment for all workers. I suppose I was wrong. Clearly, unions have the ear of those issuing their edicts from on high. I say “on high” because, from the ground floor of business, it seems the Assembly, together with California judges, are on some higher plane of existence, in which they are ever so vaguely cognizant of the reality of doing business, such that they are not easily moved to sympathy over the plight of the small people below.
6. Anti-Employer Provisions, Such as Wage Suit Laws
It would be easy to chalk up the jumbled mess of labor law to sheer incompetence and ignorance (although there is that), but there’s reason to believe this is not the main problem. The rate at which California produces new regulations and increases its penalties for violating them, and its legal structure, all serve to frame the employer as an abuser and exploiter, simply for being an employer.
For instance, if your employee brings a wage suit against you, and they lose, they aren’t liable to pay your attorney’s fees unless it can be proven that the suit was brought in “bad faith.” Employers are set up to lose either way: either you lose the suit and pay whatever sum the court orders to your employee, or you win, and still lose the money you’ve shelled out to get that win.
7. Naming Employers with Workers on Handouts
Consider another novel new rule: the “Law Prohibiting Discrimination Against Employees Receiving Public Assistance.” Based on the tired line touted by leftists everywhere, which is that employers like Wal-Mart are a “net drain” on taxpayers, the bill reasons, “when low wages and a lack of benefits leave workers unable to make ends meet, they turn to public assistance programs for health care, food, and other basic necessities, [and] [e]mployers that pay low wages and offer no benefits shift the costs of doing business onto taxpayers.”
The Employment Development Department and Department of Finance are now to publish annually the names of employers that have more than 50 employees who receive public handouts, in addition to calculating the aggregate cost of these public benefits to the state. The implication, of course, is that this cost is the employer’s fault. With laws such as this, the State of California has, in essence, turned employers into State Enemy No. 1, when it doesn’t have to be this way. It is the state that has cultured the adversarial relationship when the vast majority of employers are only trying to go about their business in good faith.
The reality is that some employers cannot afford to offer their employees compensation that isn’t “low,” according to California lawmakers. A business that employs 50 people, the minimum it would take to make this list, is not a giant corporation, which are usually the national targets for public scorn and allegations of exploitation. The state-sponsored shaming of employers has expanded from the Wal-Marts of the world to employers of many more shapes and sizes.
The regulatory burdens, of course, affect all employers by pushing them into an escalating spiral of guilty until proven innocent. The more burdensome the regulations, the more the employer is at risk of violation, instances of which “prove” one’s guilt, and so the cycle of more regulation to curb the fancied greed and exploitation of the capitalist begin all over again.
8. California’s ‘Call My Lawyer’ Syndrome
Meetings with lawyers for labor matters are more like divinations. Often, the question is not, “What does this law mean and how does it apply to my business model?” But “how will the courts interpret this law, and will it be in my favor?” Contrary to the beliefs of labor activists, the manner in which the California Assembly produces laws puts the real control in the hands of judges, not the people. When the true meaning of the law is unknown to both the employer and the employee, how can one hold himself and the other party accountable to it?
What is more, there is no guarantee that one court ruling will stand as definitive, or won’t be challenged by a different ruling on a similar case. On top of that, one can expect a steady stream of new regulations, some of which may alter old ones or change their meaning. In 2013, Brown signed 13 new labor bills into law, and the year before saw at least eight. In other words, if you’re a square peg, the problem is not just that you must fit yourself into a round hole—it’s that the hole remains obscured, and on top of that, it keeps moving.
The square peg predicament brings us to an important intersect on “Main Street”: the crossing of what is legal, and what is business. In the pursuit of profit (there, I said it), and the maintenance of viability, small businesses (as in, ones without the capital that allows for keeping lawyers on retainer, or insurance that covers million-dollar lawsuits) must sometimes deal with business matters that force a decision: to pursue compliance first and profit second, or to pursue profit first and compliance second. To be clear, the choice is never on the level of doing business above or below board, or choosing to pay employees below the minimum wage instead of above, or some other despicable choice. But a businessman I know put it quite succinctly when he said compliance is as much a business decision as it is a legal one.
The Golden State’s labor code is prescriptive without being clear, mandatory without accounting for an array of working relationships, and burdensomely superfluous without producing significant benefit to the workers it claims to protect. Indeed, it sometimes works against them. One wonders how a business can survive under the burden of California’s regulations, and indeed, if for many businesses choosing to ignore them makes it possible to travel the sands of the Golden State without sinking completely.
