With a new year comes new compliance obligations for employers. Here are some of the most important State, local, and federal updates for employers to be aware of in 2017.

State and Local Developments Effective January 1, 2017

Minimum Wage Changes 

With the passing of Senate Bill 3 earlier this year, Governor Brown approved an incremental increase to the State minimum wage to $15.00 per hour by 2022. Effective January 1, 2017, California employers with 26 or more employees will be required to pay employees a minimum wage of $10.50 per hour. Smaller businesses, with fewer than 26 employees, are not subject to this increase until 2018. Other localities with increases to their minimum wage ordinances effective January 1, 2017 include:

  • San Jose: $10.50 per hour
  • Santa Clara: $11.10 per hour
  • Sunnyvale: $13.00 per hour
  • Mountain View: $13.00 per hour
  • Cupertino: $12.00 per hour
  • Palo Alto: $12.00 per hour
  • Los Altos: $12.00 per hour
  • Oakland: $12.86 per hour
  • San Mateo: $12.00 per hour
  • San Diego: $11.50 per hour

Exempt Employee Classification Changes

The California Department of Industrial Relations released rate increases for the computer software employee exemption and the licensed physician or surgeon exemption. Employees who are classified under the computer software employee exemption will now need to be paid $42.35 per hour or $7352.62 per month. Those employees classified under the licensed physician or surgeon exemption will need to be paid a minimum hourly rate of $77.15. Employees classified under the administrative, executive, and professional exemptions will need to receive a salary of $3,640.00 per month to meet the new salary threshold caused by the increase to the State minimum wage.

Wage Discrimination

Assembly Bill 1676, approved by Governor Brown on September 30, 2016, prohibits an employer from using an employee’s previous salary alone to justify a disparity in their compensation.

Applicant’s Juvenile Criminal History

Under this new California law, employers in the State are prohibited from asking about or taking into consideration a job applicant’s juvenile convictions. Employers should review their application process to ensure that applicants are not asked to disclose any arrest or adjudication that occurred in the juvenile court system. 

Choice of Law and Forum Provisions

California employers will no longer be able to require in-state employees to submit to out-of-state adjudication as part of its employment agreement. Employers who utilize arbitration agreements with their in-state employees should review these agreements for any provision that selects a state other than California as either the choice of law or venue, and should make appropriate changes prior to January 1.

State-Sponsored Retirement Plan for Private-Sector Workers

Signed by the Governor in 2016, this new State law creates a California-sponsored retirement plan for private-sector workers who are not offered a retirement plan by their employer. Though implementation will begin in 2017, employer action will likely not be required until future years, which may consist of enrolling employees in the State-sponsored plan and facilitating pay withholdings.

San Francisco Paid Parental Leave Ordinance

Covered employers with 50 or more employees will be required to provide supplemental compensation of 45% of an employee’s normal gross weekly wages to employees who are receiving wage replacement through California’s Paid Family Leave program for the purpose of bonding with a new child. This requirement is scheduled to be phased in for smaller employers on July 1, 2017 and January 1, 2018.

On the Federal Radar

Patient Protection and Affordable Care Act

As a result of the 2016 federal election, the future of the Patient Protection and Affordable Care Act (ACA) is largely unknown. While at least some revision to the ACA is expected, Applicable Large Employers should continue to meet their obligations under the law in 2017, including ACA reporting and offering affordable, minimum value coverage to full-time employees (and their dependents).

Overtime Rule

Intended to take effect on December 1, 2016, the U.S. Department of Labor’s final overtime rule hit a roadblock in November when a U.S. District Judge issued an injunction to delay the rule from taking effect. Until a full hearing is heard, the Overtime Rule will be suspended. Employers should remain alert in 2017 for the next developments with this law.

The New Fiduciary Rule

Beginning April 2017, the U.S. Department of Labor’s new fiduciary rule will go into effect. This new rule expands the definition of an investment advice fiduciary and impacts the compliance obligations of employers who sponsor a 401(k) plan. Employers should review the new rule and make any changes to their 401(k) plan in advance of April.