BILL ANALYSIS Ó SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS Senator Tony Mendoza, Chair 2015 - 2016 Regular Bill No: AB 67 Hearing Date: June 8, 2016 ----------------------------------------------------------------- |Author: |Gonzalez | |-----------+-----------------------------------------------------| |Version: |May 19, 2016 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Alma Perez-Schwab | | | | ----------------------------------------------------------------- Subject: Double Pay on the Holiday Act of 2016 KEY ISSUES Should the Legislature require retail and grocery store establishments of 500 or more employees to pay their employees at twice the regular rate of pay for working on Thanksgiving Day? Should the double pay for work on Thanksgiving Day requirement exclude restaurants, except for restaurants that are located within retail or grocery store establishments? ANALYSIS Existing law: 1) Defines a full workday as 8 hours of labor, and 40 hours as a workweek. Any additional hours worked must be compensated with the payment of overtime wage rates. (Labor Code §510) 2) Requires the payment of overtime compensation as follows: AB 67 (Gonzalez) Page 2 of ? Work in excess of 8 hours a day, and over 40 hours in a workweek, and the first 8 hours worked on the 7th day of a workweek shall be compensated at the rate of no less than 1 times the regular rate of pay; Work in excess of 12 hours in one day shall be compensated at the rate of no less than twice the regular rate of pay for an employee; Work in excess of 8 hours on any 7th day of a workweek shall be compensated at the rate of no less than twice the regular rate of pay of an employee. 1) Provides that the overtime compensation requirements do not apply to certain executive, administrative and professional employees that meet specified criteria for exemption. 2) Any person who violates these overtime wage provisions is guilty of a misdemeanor. This Bill would enact the Double Pay on the Holiday Act of 2016 that would require an employer to pay at least two times the regular rate of pay to an employee for work on a family holiday, as defined. Specifically, this bill: 1) Requires any work performed at a retail or grocery store establishment on a family holiday to be compensated at no less than twice the employee's regular rate of pay. 2) Defines "family holiday" as the fourth Thursday of November of each year. 3) Defines "retail store establishment" as a physical store within the state with more than 50 percent of its revenue generated from merchandise subject to the state's sales and use taxes, including, but not limited to, electronics, appliances, clothing, furniture, sporting goods, health and personal products, or a limited line of food products for onsite consumption. A "retail store establishment" does AB 67 (Gonzalez) Page 3 of ? not include a store located in a hotel, amusement park, movie theater, or a new motor vehicle dealer, as defined. 4) Defines "grocery store establishment" as a physical store within the state that sells primarily household foodstuffs for offsite consumption, including, but not limited to, the sale of fresh produce, meats, poultry, fish, deli products, dairy products, canned foods, dry foods, beverages, and baked or prepared foods. Other household supplies or products are secondary to the primary purpose of food sales. A "grocery store establishment" does not include a store that occupies 5,000 square feet or less of floor space and that sells transportation fuels in conjunction with, and at the same physical location as, household foodstuffs for offsite consumption. 5) Provides that "employee" does not include the following: a. An employee covered by a valid collective bargaining agreement that meets specified criteria, including the payment of holiday premium pay and a regular hourly rate of pay of not less than 30 percent more than the state minimum wage. b. An employee who is exempt from the payment of overtime under the executive, administrative, and professional employee exemption under current law. c. An employee who is employed by an employer with 500 or fewer employees 6) Specifies that these provisions do not apply to restaurants, except for restaurants that are located within retail or grocery store establishments. COMMENTS AB 67 (Gonzalez) Page 4 of ? 1. Background: Black Friday on Thanksgiving Day Black Friday, the day following Thanksgiving Day in the United States, and the sales that many stores offer to entice customers has set the beginning of the holiday shopping season in motion for many decades. Black Friday has routinely been the busiest shopping day of the year; with stores opening their doors to customers as early as 4:00am. However, in recent years there has been a changing trend of starting the Black Friday specials early - on Thanksgiving Day. Several large retailers have started opening their doors as early as 5:00pm on Thanksgiving Day and staying open overnight in an attempt to appeal to the sale seeking shoppers. Although appealing to many, these retail practices come with several consequences including that of making high demands on staff who are needed in order to keep such long open hours, and especially for those required to work on Thanksgiving Day. Additionally, both customers and employees face health and safety risks due to insufficient staff for the high number of consumers walking in the door. Even as many stores stretch their hours into the holiday, there has been some push back from several retailers who have decided to do the opposite and close their stores completely on Thanksgiving Day giving their employees the opportunity to spend the day with their families and friends for the holiday. For many minimum wage workers all hours of work are welcomed to help provide for their families, including work on federally recognized holidays. According to various news accounts, workers who refuse to work on holidays often face intimidation or fear the loss of their jobs. This increasing commercialization of the holiday season has generated significant public backlash, including petitions asking retailers not to open their stores on Thanksgiving Day, media criticism and worker protests. 2. Need for the bill? California law does not require that an employer provide its employees with paid holidays, that it close its business on any holiday, or that employees be given the day off for any particular holiday. Hours worked on holidays, Saturdays, and Sundays are treated like hours worked on any other day of the AB 67 (Gonzalez) Page 5 of ? week. Employers are free to create their own policies regarding holidays and can choose to give their employees time off from work with pay, but nothing in the law requires such a practice. Additionally, there is nothing in the law mandating that an employer pay an employee a special premium for work performed on a holiday, Saturday, or Sunday, other than the overtime premium required for work performed in excess of eight hours in a workday or 40 hours in a workweek. According to the author, the recent trend of Black Friday shopping deals spreading into the Thanksgiving holiday is forcing workers to miss out on celebrating the holiday and spending time with their families in order to keep their jobs. In some cases, this work has become mandatory and as such, the author believes that employees should be fairly compensated for the undue hardships associated with working on the traditional family holiday. This bill would require retail and grocery store employers to pay at least two times the regular rate of pay to an employee for work on Thanksgiving Day. 3. Work Restrictions in Other States: Much like California, the federal Fair Labor Standards Act (FLSA) does not require payment for time not worked, such as vacations or holidays. These benefits are generally a matter of agreement between an employer and an employee. This bill would appear to establish the first law in the nation that would require double pay for working on specified holidays. However, other state laws prohibit work from being performed on specified holidays or restricts the types of work that may be performed on certain days, usually Sundays. Currently three states (Massachusetts, Rhode Island, and Maine) actually prohibit most retail stores, including grocery stores, from opening on Thanksgiving and Christmas. In Massachusetts, state law also prohibits stores from opening on the mornings of Columbus Day and Veterans Day without state permission. Maine allows certain sporting goods stores to remain open, an exemption that allows Maine-based outdoor retailer L.L. Bean to operate on a year-round basis. Many states and local jurisdictions have laws on the books that restrict work (or certain types of work) from being performed on Sundays. These laws are generally referred to as "blue laws." For example, more than 30 counties in the South AB 67 (Gonzalez) Page 6 of ? have "blue laws" restricting the hours stores can open on Sundays. For instance, Aiken, South Carolina has a "blue law" that bans most stores from opening their doors before 1:30 on Sunday afternoons. Maine was the last New England state to repeal laws that prohibited department stores from opening on Sundays, a law ended by referendum in 1990. Recent efforts to overturn the laws restricting automobile dealerships from opening on Sunday have died in committee in the Maine legislature. In addition in Maine, alcohol sales remain restricted between the hours of 1 a.m. and 7 a.m. Monday - Saturday and 1 a.m. and 9 a.m. on Sunday. In the past, certain state "blue laws" have been challenged on constitutional grounds. However, in the 1961 case of McGowan v. Maryland, 366 U.S. 420, the U.S. Supreme Court held that Maryland's laws violated neither the Free Exercise Clause nor the Establishment Clause of the First Amendment. It approved the state's blue law restricting commercial activities on Sunday, noting that while such laws originated to encourage attendance at Christian churches, the contemporary Maryland laws were intended to serve "to provide a uniform day of rest for all citizens" on a secular basis and to promote the secular values of "health, safety, recreation, and general well-being" through a common day of rest. That this day coincides with the Christian Sabbath is not a bar to the state's secular goals - it neither reduces its effectiveness for secular purposes nor prevents adherents of other religions from observing their own holy days. 4. Proponent Arguments : According to proponents, in recent years, Black Friday shopping deals have increasingly spread into the Thanksgiving holiday, forcing workers to miss out on celebrating the holiday with their families in order to keep their jobs. In some cases this work has become mandatory, forcing workers to give up their holiday or risk losing their jobs. According to the author, polling by consumer research advisors at Loyalty One found that half of Americans think that it's a bad idea for stores to be open on Thanksgiving, and despite talk about consumer demand, data shows that opening earlier didn't actually boost overall sales. The author and proponents argue that this bill simply seeks to provide employees with double pay in order to meet the AB 67 (Gonzalez) Page 7 of ? increase in demand of consumers on Thanksgiving Day and "pre"-Black Friday shopping. It is no surprise that the increasing commercialization of the holiday season has created significant public backlash, including petitions, media criticism and worker protests. Proponents believe this bill would guarantee that employees are fairly compensated for the undue hardships associated with working on the traditional family holiday of Thanksgiving. 5. Opponent Arguments : A coalition of opponents argue that this bill unfairly targets two classifications of employers, retail and grocery store establishments, increases their costs, and creating 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 on that day. Any other employer who opens on Thanksgiving can continue to pay their employees minimum wage. In fact, recent amendments specifically exempt certain industries, something they argue is discriminatory treatment intended to punish retail and grocery stores, rather than compensate employees for time away from their family on Thanksgiving. Opponents also argue that this bill unilaterally increases 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 not subject to this costly mandate. Additionally, opponents argue that many of the "retail store establishment" employers surveyed confirmed they voluntarily pay their employees time and a half for work on Thanksgiving. They also note that numerous grocery store establishments also pay increased compensation on Thanksgiving, as negotiated through the collective bargaining process, yet would still be subject to the provisions of AB 67 as they do not qualify for the collective bargaining exemption in the bill. Also of concern to opponents is the requirement that employers pay double the employee's "regular rate" of pay rather than double the "hourly rate," a significant different, they argue, as the determination of the regular rate of pay requires a detailed calculation that goes beyond just an employee's hourly pay. They argue that good faith errors made in calculating the regular rate of pay or failure to comply with AB 67 (Gonzalez) Page 8 of ? other provisions of AB 67 would be subject to Private Attorneys General Act (PAGA) and add another threat of litigation against California employers. Lastly, opponents argue that this bill provides preferential treatment for one day out of the year that not all recognize as a family holiday and may be offensive to those that believe other days within the year deserve that same recognition. A restaurant specific point of opposition comes from the California Restaurant Association which argues that recent amendments, although exempting a share of the restaurant community, leave many subject to the double-pay requirements based on the mere fact that they operate within a retail or grocery establishment. They argue that these restaurants are separate, independent from the stores they are located within. Furthermore, they argue that these restaurants will face unfair competition as they will be forced to pay double hourly pay to its employees while locations not located within a retail or grocery store, but in the same shopping center or across the street do not. SUPPORT United Food & Commercial Workers, Western States Council - Sponsor California Conference Board of the Amalgamated Transit Union California Conference of Machinists California Employment Lawyers Association California Immigrant Policy Center California Labor Federation, AFL-CIO California Nurses Association California School Employees Association California State Association of Electrical Workers California State Pipe Trades Council California Teamsters Public Affairs Council Communication Workers of America, District 9 Engineers & Scientists of California Professional & Technical Engineers UNITE HERE, AFL-CIO International Longshore & Warehouse Union United Farm Workers Utility Workers Union of America Western States Council of Sheet Metal Workers AB 67 (Gonzalez) Page 9 of ? OPPOSITION Agricultural Council of California Air Conditioning Trade Association Alhambra Chamber of Commerce American Petroleum and Convenience Store Association Brea Chamber of Commerce California Association of Bed and Breakfast Inns California Chamber of Commerce California Employment Law Council California Farm Bureau Association California Grocers Association California Hotel & Lodging Association California League of Food Processors California Pool & Spa Association California Restaurants Association California Retailers Association California Travel Association Camarillo Chamber of Commerce CAWA - Representing the Automotive Parts Industry Cerritos Regional Chamber of Commerce Chambers of Commerce Alliance of Ventura and Santa Barbara Counties Computing Technology Industry Association - CompTIA Culver City Chamber of Commerce Desert Hot Springs Chamber of Commerce and Visitors Center East Valley Legislative Advocacy Council El Dorado County Chamber of Commerce El Dorado Hills Chamber of Commerce & California Welcome Center Gateway Chambers Alliance Goleta Valley Chamber of Commerce Greater Conejo Valley Chamber of Commerce Greater Riverside Chambers of Commerce Greater San Fernando Valley Chamber of Commerce Lake Tahoe South Shore Chamber of Commerce Long Beach Area Chamber of Commerce Maxim Healthcare Services North Lake Tahoe Chamber of Commerce North Orange County Chamber Orange County Business Council Oxnard Chamber of Commerce Plumbing-Heating-Cooling Contractors Association of California Rancho Cordova Chamber of Commerce AB 67 (Gonzalez) Page 10 of ? Redondo Beach Chamber of Commerce & Visitors Bureau San Diego Regional Chamber of Commerce San Jose Silicon Valley Chamber of Commerce Santa Clara Chamber of Commerce & Convention-Visitors Bureau Santa Maria Valley Chamber of Commerce Visitor & Convention Bureau Simi Valley Chamber of Commerce Southwest California Legislative Council Torrance Chamber of Commerce Valley Industry and Commerce Association Western Electrical Contractors Association -- END --