In O’Reilly v. Daugherty Systems, the U.S. Court of Appeals for the Eighth Circuit[1] ruled that, for purposes of the Equal Pay Act (EPA) claim, greater experience can serve as a legitimate reason for a pay differential on March 29, 2023. Affirming the district court’s grant of summary judgment for the defendant, the Eighth Circuit held that differences in skillset and experience between a plaintiff and a single comparator can establish that a pay disparity between them was based on a factor other than sex, an affirmative defense to an EPA claim. The recent decision adds one more notch in the developing question of what constitutes a legitimate reason for pay differences under the EPA.

On March 3, 2023, New York Governor Kathy Hochul signed into law an amendment to New York State’s pending Pay Transparency Law, which will become effective on September 17, 2023. A summary of the amendment can be found here.

Illinois Governor Jay Pritzker signed into law the Paid Leave for All Workers Act (PLFAW) on March 13, 2023, adopting the bill that the Illinois General Assembly passed on January 10, 2023. The law guarantees all Illinois workers at least 40 hours of paid leave (or a pro rata amount, depending on the number of hours worked) in a 12-month period starting January 1, 2024. Further details can be found here.

As previously discussed here, the California Supreme Court determined that “missed-break premium pay constitutes wages” for purposes of waiting-time penalties pursuant to California Labor Code Section 203 in Naranjo v. Spectrum Security Services, Inc. The Supreme Court also found that employers must include missed-break premium pay on wage statements. It then remanded the case to the California Second District Court of Appeal, Division Four, to determine (1) whether the trial court erred in finding the employer acted “willfully” in failing to timely pay employees premium pay and (2) whether the failure to include missed-break premium pay on a wage statement was “knowing and intentional.”

On remand, the Court of Appeal held that (1) the employer’s failure to pay meal premiums was not “willful” pursuant to Labor Code section 203 and (2) “because an employer’s good faith belief that it is in compliance with section 226 precludes a finding of a knowing and intentional violation of that statute, the trial court erred by awarding penalties, and the associated attorneys’ fees, under section 226.” Had the Court of Appeal held otherwise, the Labor Code could have subjected the employer to significant penalties, including, for example, penalties equivalent to 30 days’ wages under California Labor Code section 203 and additional penalties under California Labor Code 226(e) for knowingly and intentionally failing to provide a complete and accurate wage statement.

Although the Court of Appeal’s decision was based on the facts presented in the case, employers facing wage-and-hour class actions may wish to refer to the Court of Appeal’s analysis regarding “willfulness” and “knowing and intentional” violations.

In Camp v. Home Depot U.S.A., Inc., H049033, the California Court of Appeal for the Sixth District analyzed legal authority regarding an employer’s rounding practices as they pertain to timekeeping. Specifically, in Camp, the trial court granted summary judgment for the employer after determining the employer had a facially neutral rounding policy, which policy would not result in a failure to compensate employees for overtime. On appeal, the Sixth District reversed and remanded the trial court’s order granting summary judgment. In doing so, the court determined that “in relying on its quarter-hour time rounding policy, [the employer] fails to meet its burden to show that there is no triable issue of material fact regarding whether [the plaintiff] was paid for all the time he worked.” In effect, the Camp court overturned prior precedent, which approved facially neutral rounding policies that did not result in underpayment of employees for overtime.

In November 2024, California voters will have the opportunity to pass a ballot initiative to repeal the California Labor Code’s (Labor Code) Private Attorneys General Act of 2004, Cal. Lab. Code § 2698, et seq. (PAGA). PAGA allows an “aggrieved employee” to sue their employer on behalf of themself and other current and former employees to recover civil penalties for Labor Code violations (assuming the aggrieved employee follows the preliminary perquisites to filing the lawsuit). Prior to PAGA, only the California government could recover such civil penalties through enforcement actions brought by the California Labor and Workforce Development Agency (LWDA). Accordingly, in PAGA actions, a plaintiff who initiates an action serves as an “agent” or “proxy” of the California government. If an aggrieved employee recovers civil penalties, the aggrieved employees receive 25% of the recovery, with 75% of the penalties going to the state. 

The ballot initiative, termed the California Fair Pay and Employer Accountability Act (FPEAA), seeks to eliminate an individual employee’s ability to initiate private actions to obtain civil penalties for purported violations of the Labor Code. Instead, the FPEAA requires employees to report purported Labor Code violations to the Division of Labor Standards Enforcement (DLSE) to obtain the civil penalties they currently seek under PAGA.

The FPEAA aims to impose various other changes, such as allowing employees to recover 100% of the penalties and eliminating the recovery of attorneys’ fees.

Given the potential changes, California employers should monitor the results of the 2024 ballot initiative.