A California Chamber of Commerce-opposed bill that unfairly targets two classifications of employers, increases their costs, and creates a competitive disadvantage by forcing them to recognize Thanksgiving as a “family holiday” and compensate all employees with double the regular rate of pay for work performed on that day awaits action by the Senate.
Discriminates Against Two Classifications of Employers
Supporters of AB 67 (Gonzalez; D-San Diego) say this bill is necessary to compensate employees who are forced to give up their family time to work on Thanksgiving.
The most recent amendments to AB 67 indicate otherwise. Specifically, AB 67 now targets only two industries – retail store and grocery store establishments – to force them to pay double the “regular rate” of pay on a “family holiday” defined as Thanksgiving. Any other employer who opens on Thanksgiving can continue to pay its employees at the rate it normally would use.
In fact, the amendments specifically exempt certain industries from the bill’s provisions, thereby allowing such industries to continue to operate on a “family holiday” without the cost of double pay. This discriminatory treatment of only two classifications of employers demonstrates that AB 67 is intended to punish retail and grocery stores, rather than compensate employees for time away from their family on Thanksgiving, as the author has argued.
Creates Competitive Disadvantage for California Employers
AB 67 would unilaterally increase the cost of doing business only for those employers who have a “physical store” in California, thereby automatically placing them at a competitive disadvantage with online retailers and out-of-state businesses that would not be subject to this costly mandate. Out-of-state employers that sell their merchandise online could still do so under AB 67 without the increased cost, yet a California-based employer cannot.
Recently, the Legislature tried to even the playing field between online retailers and brick-and-mortar stores in the sales-tax arena. AB 67 would further distort this playing field by increasing the cost of doing business for local employers, as opposed to online and out-of-state retailers, who would not have to comply.
Employees in These Industries Generally Receive Higher Compensation for Working on Thanksgiving
Many of the “retail store establishment” employers surveyed confirmed they voluntarily pay their employees time-and-a-half for work performed on Thanksgiving. Notably, most of these employers open for only a limited time on Thanksgiving and, therefore, the hours any employee is required to work are minimal. Numerous grocery store establishments covered by AB 67 also pay increased compensation to their employees on Thanksgiving, as negotiated through the collective bargaining process, yet still would be subject to AB 67 as they do not qualify for the bill’s collective bargaining exemption.
Despite this general industry standard of higher compensation, AB 67 seeks to increase these employers’ costs even further by mandating double the “regular rate” of pay. If these targeted employers change their behavior and open at 12:01 a.m. on the Friday following Thanksgiving, employees will lose out on the extra compensation they are currently receiving for work performed on this day. It should be noted that numerous employees even volunteer for shifts on Thanksgiving to earn additional compensation that is offered.
Regular Rate of Pay and PAGA Enforcement
AB 67 does not require double payment of the employee’s hourly rate, but rather double the employee’s “regular rate” of pay. This difference is significant. Determining the regular rate of pay of many employees requires a detailed calculation that goes beyond just an employee’s hourly pay.
As defined by the Division of Labor Standards Enforcement (DLSE), the “regular rate of pay includes a number of different kinds of remuneration—for example, hourly earnings, salary, piecework earnings, commissions, certain bonuses, and the value of meals and lodging.” (DLSE Enforcement Policies and Interpretations Manual, Section 49.1.1.) Although this calculation is performed for overtime purposes, it is subject to good faith errors as to what types of “remuneration” should be included in the calculation.
Due to being included in Section 511.5 of the Labor Code, the provisions of AB 67 are subject to the Private Attorneys General Act (PAGA; Labor Code Section 2698 et seq.). As set forth in the April 16, 2014 Los Angeles Daily Journal article titled “An Alternative to Employee Class Actions,” PAGA lawsuits in California have increased more than 400% between 2005 and 2013, given the ease of filing such cases without satisfying class action requirements and the potential financial windfall. The Governor’s Proposed Budget for 2016 indicates there were more than 6,000 PAGA notices filed with the Labor and Workforce Development Agency in 2014. Good faith errors made in calculating the regular rate of pay or failure to comply with other provisions of AB 67 would be subject to PAGA and add another threat of litigation against California employers.
Provides Preferential Treatment for One Day Out of Year That Not All Recognize as Family Holiday
AB 67 provides that employers shall compensate an employee at no less than twice the employee’s regular rate of pay on a “family holiday,” defined as “the fourth Thursday of November of each year,” commonly referred to as Thanksgiving. Although the recognition of this holiday may seem acceptable to some persons, other individuals may believe that different days of the year deserve the same state recognition as a “family holiday.” Providing preferential treatment for one holiday and elevating its significance by labeling it in state statute as a “family holiday” may be offensive to employees or employers that recognize or believe other days within the year deserve that same recognition.
AB 67 is on the Senate Floor. The CalChamber is asking members to contact their senators and urge them to vote “no” on AB 67.
Staff Contact: Jennifer Barrera