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Employment Practices Coverage is a very important part of any risk portfolio. This is especially true in California where employment laws are numerous and ever changing. Employment Practices coverage protects companies from claims brought by employees for discrimination, wrongful termination, harassment and even failure to promote. Studies have shown that smaller and medium sized companies can be especially vulnerable to these types of suits due to having smaller Human Resource or legal departments and these claims have increased in the Silicon Valley tech space. Defense costs alone can cost up to $300,000 (Advisen, 2015) and the length of suits can last up to 2 years.  Some top claims trends specifically in California are wage and hours claims, Pregnancy discrimination, illegal background checks and unpaid interns.

If you are in charge of your Company’s insurance or a Human Resource Manager, it’s important to keep up with the new laws enacted in 2016. These laws are not only important from a compliance standpoint, but also to protect a company from litigation and keep your EPL coverage affordable. California, in particular, has one of the highest EPL claims rates in the country, which are solely due to how active litigation is here, and how many laws need to be complied with.

There were 23 new laws enacted, but I will focus on what I view as the most impactful ones.

Disclaimer: This information is not meant to be relied upon as legal reference and is only an informal overview and perspective.  You can find many sites online that go through each law in detail and how to stay compliant.  Note also that the descriptions below may not capture every component of the law, and either a legal resource or researching every law is recommended.

Some of the following laws were enacted into legislation in 2016:

Paid Sick Leave:  (AB 34) This law will have an impact on almost every company due to the fact it allows paid sick leave for temporary and part-time employees.  In addition, the law requires proper tracking of a Company’s PTO policy and making sure there is enough PTO to cover sick leave.   Paid sick leave can remain part of a Company’s total PTO.  It is also very important to train Management on these changes since they are likely the ones approving PTO.  Finally, there are certain cities in California in which the local ordinances may grant additional time.  Those cities include San Francisco, Oakland, Emeryville, Los Angeles and San Diego.

E-Verify Use is Restricted: (AB 622) E-Verify is more commonly known as the I-9 form that new employees are asked to complete.  It is managed by Homeland Security, Citizen and Immigration Services and Social Security. This new law restricts the use of E-Verify to Applicants who received an offer of employment.  Previously, companies were allowed to run E-Verify during the application and interviewing process.  A very important piece of this legislation is that if E-Verify comes up with a flag, the Employer must advise the applicant right away.  The penalty for non-compliance is $10,000.

Gender-Based “Fair Pay Act” Enacted:  This is a new hard-hitting law compelled by preventing gender pay discrimination between men and women.  The law was enacted on January 1, 2016, and requires that no matter what the title, if a male and female are doing similar duties, the woman must be paid as much as the man.  The last anti-discrimination law was enacted in 1963, but statistics state that females are still paid .84 cents for every dollar a man brings in.  California has one of the toughest laws currently to address this.

Labor Commissioners Enforcement Capabilities Expanded:  One of the most frequent claims that arise in the State of California are wage and hour violations.  The claims activity has become so ugly that many insurance companies will not offer this coverage.  This new law likely will not help that situation. The legislation itself is fairly complicated, but, in a nutshell, provides the Labor Commissioner the following powers:

They can now issue “stop work” orders against any company who currently has a judgment against them for non-compliance.  This can extend to even freezing an employer’s bank account.   The second tier of this law grants power to the commissioner to pursue both criminal and personal liability against certain individuals for labor code violations, which includes owners, officers, and directors.

PAGA is also a new law may be a benefit to employers and provides 33 days to correct errors in a wage statement.

New Protected Classes Added to Unruh Civil Rights Act: (SB600) This Act is expanded to protect discrimination based on citizenship (which couples with the new E-Verify changes) primary language and immigration status.

In addition to the laws discussed, the following were also passed.  This list is not exhaustive and there are many legal and informational resources you can consult with on all laws :

  • Grocery Workers Protections Clarified
  • PAGA Cure Period Provided: this was briefly discussed
  • Retaliation Against Family Members of Whistleblowers Prohibited
  • Piece Rate Compensation Requirement Changed
  • Meal Period Waiver Rules for Health Care Employees Clarified
  • School Activity and Sick Leave Protections Expanded
  • Labor Commissioner Enforcement Authority Broadened, Liability for Managing Agents Expanded

Employers in California do need to keep up with the ever-changing landscape.  It is important to be aware of the changes and how they impact both the Company and employees.  Employment Practices coverage can also provide you peace of mind in knowing that you are covered should a job applicant or employee bring a charge against you.

Sources Utilized for this Post:

Nolo California Employment Law, Cal Chamber.com, National Law Review