Mandatory Employee Benefits in California

The Basics of Employee Benefits in California

California has a variety of state-specific employee benefits, alongside the federal requirements. It is crucial for employers to be aware of the mandates that apply to their business so that they can fulfill all obligations and avoid fines and lawsuits. It is also important for employees to know their entitlements under California workplace laws. Typically, most Californians are familiar with their federally mandated rights under the employer obligations set forth within the Employment Retirement Income Security Act (ERISA). Many employees are unaware of other obligations their employer may have under other laws and company policies. This lack of knowledge can cause employees to miss out on additional employee benefits , such as a parental leave policy or additional wage practices that would increase their income. The following sections will break down mandatory employee benefits under California law, separating what is required by employers into two sections: wage-related benefits such as required wages and mandated time off for sick days and other leaves and then non-wage-related such as insurance options and retirement plans.

Health and Insurance Coverage Benefits

The healthcare coverage laws have been rapidly changing in California over the past few years in a myriad of ways. All applicable employers should be familiar with the following important health care coverage rules.
1- Health Insurance Coverage/Affordable Care Act (ACA) The ACA requires large employers (more than 50 employees) to provide affordable coverage to all of its full-time employees, effective January 1, 2016. Minimum essential coverage must be provided. For additional information about how many employees you have, or what premiums you can charge, consult the ACA guidelines or your professional advisor.
2- Paid Sick Leave Under California’s Healthy Workplaces/Healthy Families Act ("HWHFA"), all employers who employ 1 or more employees in the state must provide at least 3 days or 24 hours of paid sick leave in a calendar year to employees who meet certain requirements. Employers subject to the HWHFA include government entities and private sector employers regardless of their size. To qualify for sick leave, the employee must be employed for more than 30 days within the state for the same employer. Employees are eligible for sick leave after 90 days of employment. If an employer already provides unlimited paid sick leave, or paid leave such as PTO that is unpaid, it may not need to provide additional sick leave.
3- Wage Parity for Health Related Benefits Under California’s Wage Parity law (Labor Code § 234), where a health benefit plan provides coverage for qualified employees and their fully dependent children for generally catastrophic health care services including hospitalization and physician services, benefits provided by the plan to a full-time employee must be made available to part-time employees on a pro rata basis based on hours worked per week. See Labor Code § 233(b). The state Department of Insurance, with input from the Department of Managed Health Care, may exempt one or more health benefit plans from this pro rata coverage if the Department of Insurance makes certain determinations on a plan-by-plan basis. See Labor Code § 233(c).
4- Healthy Workplaces, Healthy Families Act of 2014 On July 15, 2015, California’s Governor Brown signed into law Assembly Bill 304, which amends the California Healthy Workplace, Healthy Families Act of 2014 (Labor Code §245 et. seq.), which had gone into effect on July 1, 2015, to expand and clarify the requirements. The HWHFA requires California employers to provide a minimum of 3 days (or 24 hours) paid sick leave for each employee to attend to "Preventive care or diagnosis or treatment for existing health conditions or for the health condition of an employee’s family member." This includes time for preventative care, diagnosis, or treatment of an existing health condition or preventative care for a family member. Family members is broadly defined to include spouses, registered domestic partners, parents, siblings, children, grandchildren, grandparents, and parents’ "next of kin." Leave can be used for employees and/or family members, or both, as well as for absences under the California Family Rights Act. Sick leave cannot exceed 3 days (or 24 hours) within a 12-month period. Unused accrued leave can be carried over to the next year. Prior accrued paid sick leave earned or accrued under any other law, employer policy, or collective bargaining agreement shall be applied to the requirements of the law. Under AB 304, all employees must now be eligible for paid sick leave, regardless of how long they have worked for the employer. In addition, AB 304 clarifies the law’s provision that allows in the first year of employment, employers may limit the use of paid sick leave to 3 days or 24 hours, and allows limited accrual caps for part-time workers in smaller increments. Employers must now also pay out cash equivalent upon separation from employment of accrued, but unused, paid sick leave. Other aspects of sick leave under AB 304 remain the same.

Sick and Family Medical Leaves

Sick leave and Family Medical Leave: While most employers are familiar with the federal Family and Medical Leave Act, only a minority are aware of California-specific requirements. California law requires employers to provide paid sick leave (the Paid Sick Leave Law) and also imposes additional family medical leave obligations on employers who have 50 or more employees in a 75-mile radius.
California Paid Sick Leave
Under the Paid Sick Leave Law, employers must provide paid sick leave to employees who work in California for at least 30 days within a year. Eligible employees can request and use paid sick leave to care for themselves or their family members.
Use of Paid Sick Leave
An eligible employee can use paid sick leave to:
To Qualify as a Family Member, the Individual Must Be:

* Family members include biological, adopted and fostered children, stepchildren, grandchildren, grandparents, siblings, domestic partners, and parents.

Paid Sick Leave Cannot Be Used For the Following:
All of the following are exempt from the Paid Sick Leave Law:
When Paid Sick Leave Is Available to Employees
Paid sick leave is available to employees starting on their 90th day of employment. However, this entitlement does not accelerate the rate at which an employee can accrue paid sick leave. Thus, for the first 90 days, employees cannot use any of the paid sick leave they have accrued. Thus, for example, an employee has worked for eight months and earned 15 days of paid sick leave; the employee may not use any paid sick leave until his or her 90th day of employment, and may only use paid sick leave in the amount accrued.
Notification to Employees
On July 8, 2015, Governor Brown signed into law Senate Bill 579. This law amends Labor Code § 245.5 and requires employers to provide written notification to employees of the Paid Sick Leave Law and notify of the use of an employee’s sick leave if the employee works for the employer in two or more separate legal entities.

Workers Compensation Obligations

While most California employers are well aware they must provide their employees with certain mandatory benefits, many do not understand the specifics of each required benefit or the proper manner for providing them. In this post, we discuss the requirements and purpose of workers’ compensation in California.
Like virtually every other state, California law requires employers to either provide private workers’ compensation insurance or become self-insured. Workers’ compensation insurance provides coverage for employees who are injured or become ill while working for their employer. In nearly every case involving a work-related injury or illness, the injured employee will be entitled to workers’ compensation without regard to the employer’s fault. Indeed, workers’ compensation is often regarded as the "no-fault system." It is designed to pay covered employees for:
If the employer chooses to purchase workers’ compensation insurance, they simply select an insurance provider and submit their employees to the insurance company for risk assessment. The employer pays monthly or quarterly premiums based on the size of the workforce and the nature of their work. If the employer becomes self-insured, they are required to obtain licensure from the State to do so and to establish a reserve fund to pay claims. Self-insured companies must also have an approved Third Party Administrator who has experience in complying with California workers’ compensation laws. There are several exceptions to the workers’ compensation system. Not only do most employees have no right to maintain an action outside of the workers’ compensation system, but there are also limited circumstances in which workers’ compensation does not apply. For example, the injury was not caused by any condition or circumstance in the workplace. Also, if the employee was intoxicated when they were injured, their workers’ compensation claim may be denied. Obviously, these exceptions can be quite complex and it is therefore suggested you contact an attorney should you have questions specific to your situation.

Wages and Wage Theft Protections

California has a statewide minimum wage law that prohibits employers from paying less than the minimum wage to their employees. Also, specific employees may be exempt from this requirement if they are in a professional capacity, perform administrative duties, or have a particular education. All wage rates, including overtime rates, must be listed in the employee’s wage statement. Employers must maintain accurate records of all wages, hours worked, and benefits for at least three years.
In addition, California law provides that employees may not be required to work more than eight hours a day, unless the extra hours are compensated at one and a half times the employee’s regular rate of pay, except in certain limited circumstances such as healthcare facilities , public agencies, and certain fairs. Further, employees must be given a minimum 30-minute meal break if they work more than five hours in a day, and a second meal period (typically 30 minutes) if the employee works more than ten hours. If the employee is required to work during a meal period, then the employer is required to pay the employee at double the usual rate of compensation.
Employers are strictly liable for unpaid wages, and any state-mandated benefits, and penalties (including attorneys’ fees and costs) arising from employee’s claims for noncompliance. Further, employees can sue personally for any wage as well as attorney fees, costs, and liquidated damages equal to the amount of unpaid wages.

Unemployment Compensation

California Unemployment Insurance is funded through an employment tax paid solely by employers. The amount of the employment tax is based on the employer’s "experience rating." Employers that have a history of laying off employees and contributing to job loss will pay a higher rate than those that have employed their workforce over a longer period of time, without interruption.
Employees are generally eligible for unemployment benefits if they are:
• Unemployed and actively seeking work.
• They were not personally at fault for the reason they left their job (e.g. was laid off for lack of work).
• They were employed in California for at least 18 months (26 months for federal employees) within the past 5 years and earned a minimum amount of compensation from that employment.
• They are able and available for work.
• And, they are mentally and physically capable of work.
An employee who has exhausted his or her unemployment benefits within the past 12 months must be re-determined eligible for unemployment before beginning a "new" benefit year.

Disability Coverage Programs

The State Disability Insurance ("SDI") program provides cash benefits to disabled employees irrespective of the whether the injury or illness is work-related. SDI does not cover medical costs. All California employees are covered by the SDI program unless they are state workers exempt under a written collective bargaining agreement. Cal. Unemp. Ins. Code § 2606. Employees must contribute to the program through payroll deductions. Id. § 2650. The State Labor Commissioner is responsible for ensuring that employers in California comply with their obligations under the Richardson-Enniskillen Act and for administering the contributions collected. Each year, 1.2% of an employee’s salary is deducted.
Covered employees are entitled to SDI benefits if they suffer a loss of wages as a result of a mental or physical illness or injury. Id. § 2601. An employee must be unable to "perform his or her regular or customary work" to be eligible for benefits. Id. § 2626. Benefits are payable during the first six months of the disability, but begin only after seven days have elapsed. Id. § 2702(c). Payouts are limited to 52 weeks. Id. § 2702(a).

Conclusion: Compliance

To ensure compliance, employers should review all employee benefit plans and policies to determine if the plans provide the minimum benefits required by California law. In addition, employers must remember that most California laws and regulations also apply to employees who are not working in California, but performing services for California employers. Failure to provide the benefits required by law may expose an employer to liability in California in the form of extra-contractual damages, primarily based on damages arising out of the delay or failure to provide benefits under the California law. Failure to comply with any requirement of law, or provide benefits that exceed the minimum requirements of the California law , or failure to follow California’s claims and appeals procedures may result in claims of unfair or unlawful business practices. Employers can be liable for a civil penalty of up to $250,000 per violation, and in some cases, individual suits may be maintained for wrongful denial of care, including medical care previously paid for by the insurer of an applicable self-funded plan. At times, there may be confusion as to what California’s requirements provide and whether an out-of-state insurance administrator should administer the employee benefit plan. To increase the likelihood of compliance, we recommend that employers reach out to legal counsel with specialized knowledge in California employment laws that impact employee benefits so that all aspects of a plan can be addressed effectively.