Job Creator Bill Targets Loophole in State Law

JobCreatorThe California Chamber of Commerce has identified a “job creator” bill that will address a loophole in state law and help limit frivolous class action litigation against California employers that are creating highly paid jobs.

CalChamber-sponsored/supported AB 1470 (Alejo; D-Salinas) is similar to federal law. The bill will create a rebuttable presumption that employees who earn at least $100,000 a year performing nonmanual labor, and have at least one exempt duty are exempt from overtime.

Federal law has recognized for more than 10 years that employees performing nonmanual labor and annually receiving at least $100,000 are likely properly classified as exempt.

Although such employees also must perform at least one exempt duty, such as supervising other employees or exercising independent judgment and discretion, courts have a “relaxed” analysis of the duties if the employee is highly compensated.

In an appellate case (Anani v. CVS RX Services, Inc., 730 F.3d 146 (2d Cir. 2013)), the court said, “A high level of compensation is a strong indicator of an employee’s exempt status, thus eliminating the need for a detailed analysis of the employee’s job duties.” The court cited the Code of Federal Regulations (29 CFR 541.601 (c)).

AB 1470 seeks to create a similar exemption at the state level.

Class Action Litigation in State

In the last few years, there have been multiple examples of California employers that are creating highly compensated jobs, yet are being subject to class action litigation based upon the allegation that such employees are misclassified as salaried, exempt workers.

Although such claims cannot proceed under federal law, courts have no choice but to allow these costly actions to proceed under state claims, given California’s lack of conformity on this issue.

Although similar to federal law, AB 1470 actually differs in that it would create only a presumption that the employee is exempt, thereby allowing an employee who believes he/she has truly been misclassified to still challenge his/her status as a salaried employee.

Not Covered

Notably, AB 1470 would not apply to:

• employees performing manual labor, no matter how much they are paid;

• employees covered under a collective bargaining agreement; or

• the following specific occupations: nonmanagement production-line workers and nonmanagement employees in maintenance, construction, and similar occupations, such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers, laborers, and other employees who perform work involving repetitive operations with their hands, physical skill and energy, regardless of the amount of their compensation.

AB 1470 is limited to employees who are actually performing exempt, nonmanual labor duties and being highly compensated.

Action Needed

AB 1470 will be considered by the Assembly Labor and Employment Committee on April 22. Contact committee members and your Assembly representatives and urge them to support AB 1470.

For background information, see the 2015 CalChamber Business Issues and Legislative Guide article on Labor and Employment.

Staff Contact: Jennifer Barrera

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Jennifer Barrera took over as president and CEO of the California Chamber of Commerce on October 1, 2021. She has been part of the CalChamber team since 2010 and stepped into the top position after serving as CalChamber executive vice president, overseeing the development and implementation of policy and strategy for the organization, as well as representing the CalChamber on legal reform issues. Barrera is well-known for her success rate with the CalChamber’s annual list of job killer legislation, efforts to reform the Private Attorneys General Act (PAGA) and leadership working with employers on critical issues, including most recently those arising from the COVID-19 pandemic. In addition, she advises the business compliance activities of the CalChamber on interpreting changes in employment law. Barrera earned a B.A. in English from California State University, Bakersfield, and a J.D. with high honors from California Western School of Law. See full bio