San Francisco Apartment Association


Key Changes in Employment Law for 2006

by Margaret J. Grover

California employment laws change regularly. This year, a few laws were passed that will actually make it easier for employers to comply with payroll requirements. This article discusses major changes in California that have become effective in the past two years or will become effective in the future. The key areas of change are the increase in San Francisco minimum wage, changes for direct deposit, compensation of exempt computer professionals and recent developments in imposing liability for sexual harassment.

This article summarizes key points in the recent legislative and regulatory changes, and provides employers with practical tips to avoid running afoul of the new laws.

San Francisco’s Minimum Wage
As of January 1, 2006, the minimum wage for employees in San Francisco is $8.82 per hour. Employers with 10 or more employees are required to pay the San Francisco minimum wage and to post an updated poster. The mandated poster can be obtained at The San Francisco minimum wage, which is designed to increase annually, can have a significant impact on resident managers’ salaries and hours. For those employees who receive a free apartment, or a fixed wage each month, the increased minimum wage means that building owners will have to reduce the number of hours the employee may work before being paid additional compensation. An employee who receives a free apartment in San Francisco may now work only 43.2 hours per month, unless she also receives some other compensation.

The San Francisco Living Wage Ordinance includes a $50 penalty for each day or portion of a day in which an employee was underpaid. These penalties can add up very quickly. To prevent significant claims, review all of your employees’ agreements. If you are not meeting the new minimum-wage obligations, change your agreements promptly and quickly remedy any inadvertent underpayment.

Direct Deposit Laws
Under previous law, employers may pay wages through direct deposit, provided the employee has voluntarily authorized the deposit. However, existing law only authorizes direct deposit for accounts in banks, savings and loan associations or credit unions in this state. Effective January 1, 2006, an employer may deposit wages in an account in any one of those financial institutions, so long as they have a place of business in this state.

Under previous law, when an employee left a company, any direct-deposit authorization the employee has granted was deemed terminated. As a result, final wages could not be sent through direct deposit. Effective January 1, 2006, employers will be authorized to pay final wages through direct deposit, so long as the employee has voluntarily authorized a direct deposit. The employer must, however, continue to comply with all existing laws relating to payment of wages when the employment relationship terminates.

Exempt Computer Professionals
Existing law permits employees in the computer-software field to be classified as exempt from the wage and hour law requirements if certain conditions are met, including a requirement the employee be paid no less than $41 per hour. Under the new change, computer software professionals may be exempt if they are paid an annualized full-time salary equivalent to the rate of $41 per hour and all other requirements for the exemption are met.

Sexual Harassment Decisions
In 2005, the California Judiciary decided several cases in the areas of discrimination and harassment. Employers should be aware of the potential impact of two of these cases, in particular, and take steps to assure that their policies and practices comply with the articulated standards.

The California Supreme Court provided some guidance on when an employer can be liable for favoritism in the workplace based upon consensual sexual relationships. At one California prison, the warden, over a period of several years, had sexual affairs with at least three subordinate female employees (Miller v. Department of Corrections). Because of these relationships, the warden promised and granted these three women unwarranted favorable treatment, including special assignments, preferential promotions and other work privileges. Eventually, other female employees complained about the preferential treatment; the warden refused to intervene and retaliated against the complaining employees. In response, two female former employees sued the California Department of Corrections, claiming that the warden’s favoritism constituted sexual harassment in violation of California’s Fair Employment and Housing Act.

The Supreme Court of California concluded that an employee may establish a claim of sexual harassment under FEHA by demonstrating that widespread sexual favoritism, in itself, was so severe and pervasive that it altered working conditions and created a hostile work environment (that is a demeaning message is conveyed to female employees that they are viewed by management as “sexual playthings” or that the way required for women to get ahead in the workplace is for them to engage in sexual conduct with their supervisors or management).

Another important sexual harassment case decided in 2005 showed that individual supervisory employees could be held liable for their acts of harassment (Page v. Superior Court). Penne M. Page worked for 3NET Systems, Inc. as an assistant controller. Page complained to the company president and chief executive officer that she had been repeatedly subjected to sexual harassment from the vice president of the company. 3NET failed to take any action to prevent this behavior after Page reported it.

In considering the personal liability of supervisors, the Court held that: “[T]he policy of deterring and eliminating harassment and retaliation in employment is served by holding a supervisor liable for his own acts that are violative of [FEHA] in accordance with the plain language of FEHA.”

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the San Francisco Apartment Magazine. The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. Margaret J. Grover is a partner in the San Francisco office of Haight, Brown & Bonesteel, LLP. She represents employers in a wide range of employment-related matters. Copyright 2006 by San Francisco Apartment Magazine. All rights reserved.