As we enter 2025, California businesses face a rapidly changing legal landscape marked by new laws, increased compliance demands, and significant judicial rulings. Employers must act swiftly to update their practices and policies, ensuring they are prepared to meet these challenges head-on while protecting their operations.
At the Law Offices of Paul Cheng & Associates, we understand how daunting it can be for businesses to navigate California’s ever-evolving employment laws. Below, we provide a comprehensive analysis of the key developments taking effect in 2025 and practical steps to safeguard your business.
Wage Increases and Salary Thresholds
California’s minimum wage increases to $16.50 per hour statewide starting January 1, 2025. However, businesses must also adhere to local ordinances, which often set higher minimum wages. For example:
- West Hollywood: $19.65 per hour
- San Francisco: $17.70 per hour
- Los Angeles: $17.27 per hour
The minimum salary threshold for exempt employees will increase to $68,640 annually, or $5,720 monthly, to meet the “exempt employee” test. Additionally, specific industries, such as fast food and healthcare, face unique minimum wage requirements:
- Fast-Food Workers: $20 per hour minimum, with the state’s Fast Food Council retaining the power to raise this rate further.
- Healthcare Workers: A minimum of $23 per hour effective October 2024, increasing to $24 by mid-2025 and $25 by 2026.
What This Means for Employers:
- Regularly audit payroll systems to ensure compliance with new wage laws at both the state and local levels.
- Verify that exempt employees meet updated salary thresholds and job duties requirements.
- Adjust pay scales for non-exempt employees to reflect increased minimum wages and associated costs such as meal premiums, waiting time penalties, and split-shift premiums.
Expanded Paid Leave Protections
Effective January 1, 2025, California’s paid sick leave and family leave laws will expand in several key areas:
- Sick Leave Expansion: Employees can now use sick leave to assist family members who are victims of violent incidents or threats. This expansion extends beyond domestic violence, sexual assault, and stalking to a broader range of scenarios.
- Paid Family Leave (PFL): Employers can no longer require employees to use accrued vacation time before accessing benefits under California’s PFL program.
Recommended Actions:
- Update employee handbooks and leave policies to reflect these changes.
- Train supervisors and HR personnel on the expanded scope of leave protections to prevent retaliation claims.
- Consider adopting a “don’t ask-don’t tell” policy regarding employees’ reasons for using paid leave to maintain confidentiality and avoid legal risks.
Captive Audience Meetings Ban
Under the “California Worker Freedom from Employer Intimidation Act,” effective January 2025, employers are prohibited from mandating employee attendance at meetings that discuss political, religious, or union-related topics.
Employer Takeaway:
Focus on maintaining a neutral workplace environment and avoid using meetings to influence employees’ personal beliefs or political stances.
Job Posting Restrictions
Starting January 1, 2025, employers cannot require applicants to possess a valid driver’s license unless the job explicitly requires driving as an essential duty, and alternative transportation is impractical.
Action Steps:
- Audit job postings and hiring materials to ensure compliance.
- Remove unnecessary license requirements to broaden the pool of qualified applicants and reduce discrimination risks.
Freelance Worker Protection Act
California continues its push to protect independent contractors. The Freelance Worker Protection Act mandates written contracts that clearly define services, payment terms, and timelines. Non-compliance could result in increased damages.
Tips for Compliance:
- Implement standard contract templates for freelance agreements.
- Establish clear internal policies to ensure timely payment and transparency in freelance arrangements.
Wage-and-Hour Reforms Under PAGA
Reforms to the Private Attorneys General Act (PAGA) provide much-needed relief for employers. Starting July 2024, penalties for minor violations are reduced, and businesses have opportunities to cure certain wage-and-hour violations before facing penalties.
Key Changes:
- Plaintiffs can only file claims for Labor Code violations they personally experienced.
- Employers may avoid penalties by addressing issues like meal breaks, overtime, and wage statement errors promptly.
Employer Recommendations:
- Conduct proactive compliance audits and correct potential violations swiftly.
- Maintain detailed records to support a “good faith” defense against penalties.
Key Judicial Decisions Impacting Employers
Wage Statements: Naranjo v. Spectrum Security
California’s Supreme Court ruled that employers acting in “good faith” can avoid penalties for minor wage statement errors. This decision provides a significant defense against technical violations.
Defining "Hours Worked": Plaintiff v. Employer Electrical
The court clarified what constitutes compensable work time, including activities such as waiting for security checks on employer premises. Employers must pay employees for time spent under employer control.
Discriminatory Transfers: Muldrow v. City of St. Louis
This federal ruling lowers the threshold for proving discriminatory transfers, requiring only evidence of “some harm” to employment conditions. Employers should document decisions involving employee transfers to avoid claims of discrimination.
Preparing Your Business for 2025
Compliance is more than avoiding fines—it’s about creating a workplace that attracts talent and minimizes risk. Here’s how we recommend preparing for these changes:
- Policy Audits: Review your employee handbook, wage-and-hour practices, and leave policies to ensure compliance with new laws.
- Training Programs: Educate managers and HR staff on the nuances of new legal requirements to foster a culture of compliance.
- Legal Support: Partner with experienced employment attorneys to address complex issues, conduct compliance audits, and manage disputes effectively.
At the Law Offices of Paul Cheng & Associates, we offer personalized legal solutions to help your business thrive in California’s challenging regulatory environment. Contact us today to learn how we can assist you with compliance, risk mitigation, and strategic planning for the year ahead.