BILL ANALYSIS Ó AB 357 Page A Date of Hearing: April 22, 2015 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair AB 357 Chiu - As Amended April 16, 2015 SUBJECT: Employment: work hours: Fair Scheduling Act of 2015 SUMMARY: Enacts the Fair Scheduling Act of 2015 to provide predictable work schedules to covered employees, as specified, in addition to other requirements. Specifically, this bill: 1)Requires a "food and general retail establishment" to provide its employees with at least two weeks' notice of their work schedules. 2)Defines a "food and general retail establishment" to mean a retail sales establishment that has a physical location with in-person sales, including, but not limited to, a food retail store, a grocery store, a general merchandise store, a department store, and a health and personal care store, meets all of the following: a) Has 500 or more employees in this state. b) Has 10 or more other such retail sales establishments located in the United States. AB 357 Page B c) Maintains two or more of the following: i) A standardized array of merchandise. ii) A standardized facade. iii) A standardized decor and color scheme. iv) Uniform apparel. v) Standardized signage. vi) A trademark or a service mark. 3)Excludes from the definition of "food and general retail establishment" an online retailer that does not have a physical location with in-person sales in this state, or a franchise that does not meet the aforementioned criteria. 4)Provides that this requirement does not apply to specified employees who are exempt from the payment of overtime under existing law. 5)Provides that a food and general retail establishment shall provide an employee with the following compensation, per shift, for each previously scheduled shift that the food and general retail establishment moves to another date or time or cancels, and each previously unscheduled shift that the food AB 357 Page C and general retail establishment requires an employee to work: a) One hour of pay at the employee's regular hourly rate if less than seven days' notice but at least 24 hours' notice is given to the employee. b) Two hours of pay at the employee's regular hourly rate for each shift of four hours or less if less than 24 hours' notice is given to the employee. c) Four hours of pay at the employee's regular hourly rate for each shift of more than four hours if less than 24 hours' notice is given to the employee. 6)Provides that the aforementioned compensation requirement shall not apply for shifts for which the employee is compensated with reporting time pay as required by any wage order of the Industrial Welfare Commission. 7)Provides that the aforementioned compensation requirement shall not apply to changes in the scheduling of rest periods, recovery periods, or meal periods. 8)Requires a food and general retail establishment to provide an employee with the following compensation for each on-call shift for which the employee is required to be available but is not called in to work: a) Two hours of pay at the employee's regular hourly rate for each on-call shift of four hours or less. AB 357 Page D b) Four hours of pay at the employee's regular hourly rate for each on-call shift of more than four hours. 9)Provides that the aforementioned compensation requirement related to on-call time shall not apply to on-call time that is required to be compensated as hours worked for which the employee is in fact compensated under existing law. 10)Establishes exceptions to these compensation requirements under any of the following circumstances: a) Operations cannot begin or continue due to threats to employees or property, or when civil authorities recommend that work not begin or continue. b) Operations cannot begin or continue because public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities or sewer system. c) Operations cannot begin or continue due to an act of God or other cause not within the food and general retail establishment's control, including, but not limited to, an earthquake or a state of emergency declared by a local government or the Governor. d) Another employee previously scheduled to work that shift is unable to work due to illness, vacation, or employer-provided paid or unpaid time off required by existing law when the food and general retail establishment did not receive at least seven days' notice of the other employee's absence. AB 357 Page E e) Another employee previously scheduled to work that shift has not reported to work on time, is fired, sent home, or told to stay at home as a disciplinary action. f) The food and general retail establishment requires the employee to work overtime, such as mandatory overtime. g) The employee trades shifts with another employee or requests from the food and general retail establishment a change in his or her shift, hours, or work schedule. 11)Requires the Labor Commissioner shall promulgate all regulations and rules of practice and procedures necessary to carry out the provisions of this bill. 12)Specifies that this bill shall not be construed to prohibit a food and general retail establishment from providing greater advance notice of an employee's work schedule or changes in an employee's work schedule than what is required by this bill. 13)Prohibits a food and general retail establishment from discharging or discriminating against an employee because he or she is any of the following: a) A person who receives CalWORKs cash aid. b) A parent, guardian, or grandparent who has custody of one or more children who receive CalWORKs cash aid. c) A person who receives CalFresh food assistance. AB 357 Page F 14)Requires a food and general retail establishment to allow an employee be absent from work without pay for up to eight hours twice a year, upon request, to attend any required appointments at the county human services agency. 15)Provides that as a condition of taking such time off, the employee shall give the employer reasonable advance notice of the employee's intention to take time off, unless the advance notice is not feasible. 16)Prohibits an employer from taking any action against an employee when an unscheduled absence occurs due to a required appointment at the county human services agency if that employee, within a reasonable time, provides documentation to the employer documenting the required appointment. 17)Prohibits sanctions from being applied upon a recipient of CalWORKs for failure or refusal to comply with CalWORKs program requirements if the employment or offer of employment fails to comply with these provisions. 18)Makes other related and conforming changes. 19)Contains legislative findings and declarations. FISCAL EFFECT: Unknown COMMENTS: According to the author, unpredictable scheduling practices and last-minute work schedule changes cause workers who are already struggling with low wages to live in a constant state of insecurity about when they will work or how much they AB 357 Page G will be paid on any given day. Therefore, this bill will provide food and retail workers in California with the right to schedule predictability and protect workers in a number of important ways. This bill would enact the Fair Scheduling Act of 2015, and is based on an ordinance recently enacted in San Francisco. As an initial matter, the bill makes the following legislative finding and declarations: More than one-half of food and general retail store employees nationally receive their work schedules one week or less in advance. According to a recent survey of employees at chain stores and large stores, only 40 percent of those surveyed have consistent minimum hours per week and the vast majority of employees find out from a supervisor if they are needed for the on-call shift a mere two hours before the shift starts. Retail industry research in New York City found that more than one-half of family caregivers in the retail industry are required to be available for on-call shifts, forcing them to arrange for child or elder care at the last minute. Women are also more likely than men to work part time and experience unpredictability in their work schedules; one study found that women were 64 percent of the frontline part-time workforce among retail workers. Unpredictable scheduling practices and last-minute work schedule changes cause workers who are already struggling with low wages to live in a constant state of insecurity about when they will work or how much they will earn on any AB 357 Page H given day. These practices also make it hard for employees to plan their finances and to plan for and obtain child care. These practices also prevent part-time employees from pursuing educational opportunities or holding a second or third job that those workers may need to make ends meet. According to census data, since 2006, the number of "involuntary part time employees" in California nearly tripled to 1,100,000 employees. According to the federal Bureau of Labor Statistics, less than one-half of the retail workforce nationwide works full time, and the number of those working fewer than 20 hours per week has grown by 14 percent in the past decade. According to a survey conducted in 2014 of workers who sell food in California, the largest producer of food in the United States, they are twice as likely as the general populace to be unable to afford sufficient quantities of the food they sell or the healthy kinds of food their families need, despite the financial health of the food retail industry. According to this same survey, workers who were Black or Latino were far more likely to be sent home early with no pay, to have a shift canceled on the same day it is scheduled, to not be offered a lunch break, or not be paid for all hours worked. For these reasons, to ensure family and financial stability for a vast segment of California's workforce, those employed by food and general retail establishments should be afforded some predictability and dignity in how they are scheduled to work. AB 357 Page I Brief Background on "Unstable and Unpredictable" Work Schedules A recent report<1> by the Center for Law and Social Policy and others states that unpredictable and unstable work scheduled leave many low-wage workers in a constant state of economic instability and personal turmoil. Unfortunately, for a growing number of employers, these scheduling practices are becoming business as usual. The report describes the extent and scope of the problem as follows: "With the rise of what is sometimes called "just-in-time scheduling," managers are expected to carefully control the relationship between consumer demand and expenditures on wages. If customer traffic or sales seem to be lagging on a given day, the expectation is that immediate changes to workers' hours should ensue. Just-in-time scheduling practices are part of larger trends in business practices - trends that -------------------------- <1> "Tackling Unstable and Unpredictable Work Schedules," Center for Law and Social Policy, Retail Action Project, and Women Employed (2014). AB 357 Page J are increasingly accepted as the norm in hourly-wage, service sector industries. These practices disproportionately affect low-income workers, who are already vulnerable financially. Just-in-time scheduling contributes to workers' income instability, making it difficult to make ends meet; it may threaten their eligibility for government income supports; and because workers may not always be scheduled for enough hours to qualify, it may limit their eligibility to claim firm-provided benefits like health insurance and sick days. In their rush to cut costs, many corporations are adopting business practices that seriously compromise workers' well-being. While workers feel pressure on their pocketbooks and strain on their home lives, front-line managers are being pressured too. In the retail industry, managers are often evaluated on whether they meet targets for payroll as a percentage of sales. With minimal control over sales, managers move quickly to decrease staffing levels when sales go down. In a study of low-level, non-production jobs at major US corporations in the retail, transportation, hospitality, and financial services industries, researchers found that managers at all firms experienced pressure and responded by "scheduling to demand." Across industries, employers have adopted labor strategies that "shift risk from the corporation onto workers, bringing with it instability in hours and income." For example, one study found that restaurant workers could be scheduled with a start time but no end time. Workers were instead scheduled as "12 BD." This means that a worker would arrive at work at noon and then leave when "business declined" or BD. That could be anytime and at the discretion of the management. Employers now also have technological tools to help manipulate workers' schedules in response to changes in demand. Recent news reports indicate an increasingly widespread use of software created by such companies as Kronos Inc. and Dayforce to "optimize schedules" by breaking them down into small AB 357 Page K increments of time and by tracking factors such as sales and (as in the case of Jamba Juice) weather patterns. In other words, the software creates schedules that cut costs, but are highly unpredictable for workers." The same report describes the impact of scheduling changes on workers as follows: "While paying bills and taking care of family members are high on the list of challenges that workers in lower-wage jobs experience when they are subject to erratic scheduling practices, the harm they face does not stop there. Workers experience adverse health effects, have difficulty finding and keeping childcare arrangements, face transportation obstacles, have trouble going back to school to advance their education, and experience considerable overall stress and strain on family life. Since their schedules fluctuate so much, they can't predict the size of their paychecks. Communities suffer, too, when workers can't afford to buy groceries or other goods from neighborhood businesses. Even the employers that adopt volatile scheduling practices that contribute to these problems may face negative repercussions, as they cope with the significant expenses associated with high rates of turnover and low morale. Moreover, consumers are increasingly wary of spending their money at businesses that treat their workers poorly. The ripple effects of unstable and unpredictable scheduling are felt in the lives of individuals, in communities, and throughout the economy? ?Such scheduling practices are more than simply inconveniences AB 357 Page L for workers. They have serious effects on individuals and families, are linked to adverse business consequences, and result in broad economic costs. Unpredictable and unstable work schedules may contribute to work-family challenges and employee stress, as well as marital strife and poor school performance among these workers' children. Workers with little control over their schedules and hours struggle to arrange childcare and transportation and may have difficulty scheduling doctor's appointments for themselves and their families, contributing to weaker health outcomes. Because they are unable to count on a set number of hours per week, many workers simply cannot make ends meet. For these workers, despite having jobs that should ostensibly enable them to pay the bills, public assistance often becomes necessary." ARGUMENTS IN SUPPORT This bill is co-sponsored by the United Food and Commercial Workers Western States Council and the Western Center on Law and Poverty. They make the following arguments, among others, in support of this bill: "Status Quo Scheduling Allows Employers to Exploit Worker's Unpaid Time - More than half of food and general retail store employees nationally receive their work schedules one week or less in advance. According to a recent survey of employees at large retail and grocery stores, only 40% of those surveyed have consistent minimum hours per week and the vast majority of employees find out from a supervisor if they are needed for the on-call shift a mere two hours before the shift starts. Spending unpaid time in limbo, pending a call from her employer, low-wage workers are less able to spend their unpaid AB 357 Page M time freely and undermined if they wish to use the time at a second or third job or advancing their future job opportunities through vocational training or post-secondary education. Fair Scheduling Helps Parents be Accountable to Children and Family Obligations Unpredictable scheduling practices and last-minute work schedule changes cause workers who are already struggling with low wages to live in a constant state of insecurity about when they will work or how much they will be paid on any given day. The instability of day-by-day scheduling not only makes it difficult for employees to plan their finances, it also makes it difficult to secure and maintain child care and contributes to parental stress, family instability, and has been documented as resulting in poor school performance among these workers' children? Fair Scheduling Helps Workers Keep Child Care Placements & Their Children Get AheadAccording to a report by Child Care Aware America, the average cost of full-time childcare ranges from $4,000 to $1600 annually per child. The National Women's Law Center (NWLC) says that there is only one child care slot for every child who needs on. If an hourly wage earner is fortunate enough to secure a placement at a child care provider, last minute changes in work schedules can put that placement at risk? Fair Scheduling Supports Work and Earnings - During recent legislative debates, opponents to legislation that would raise the wage claimed that increasing the wage by a dollar increment would not change the life conditions of workers who lived below the poverty line and that the debate over the wage increase was misplaced. Instead, they argued, that we should focus on how to help workers advance to better jobs. Without fair scheduling, low-income workers are stuck with their current job and wage. They are less able to pursue vocational AB 357 Page N or post-secondary education or to pursue opportunities to earn more money through self-employment or a second job. Instead, erratic and unpredictable schedules contribute to wage instability, which leads workers While some in the business community may argue that this policy change is an overreach, researchers have documented the business case for schedule fairness policies. In fact, several large retail and food employers have voluntarily begun moving to a 2-week fair scheduling policy. However, employees should not have to depend on the voluntary decisions of their employer(s) in order to be afforded the very necessary right of having advance notification of their schedule and compensation for last minute changes. If this policy change is possible, and recent announcements prove that it is, then it should be required so that workers can depend on a job-market that empowers them to manage their family and community obligations and to pay their bills. Fair Scheduling Protects Women and Minorities from Disparate Treatment - Women and workers of color are more likely to be low-wage hourly workers and they are more likely to be impacted by scheduling abuses. Research shows that Black and Latino workers work more shift-work and also experience more cancelled and shortened shifts than their white counterparts. These policies contribute to the fact that black men with full time jobs are paid just 76.3 cents for every dollar their white counterparts receive; for black women, the figure is 84.6 cents for every dollar a white woman is paid. Lack of ability to plan ahead also prevents full time work, contributing to the doubling of women workers who are employed part-time though desiring full-time work since the recession." With respect to the portion of the bill dealing with public assistance, the Western Center on Law and Poverty argues that fair scheduling can protect workers when they are forced to AB 357 Page O apply for public assistance. When workers income falls short, or when they fall out of the job market due to inability to find childcare or transportation to comply with on-call work demands, they are often forced to seek food or basic needs assistance through California's safety-net programs. In fact, according to the Center on Budget and Policy Priorities, 40 percent of California's food stamp recipients live in working families. Ironically, these workers face additional barriers of finding time to apply and certify their eligibility for the federal food benefits they are entitled to as low-income Americans because of their inability to schedule unpaid time off to attend to the paperwork and requisite interviews. In fact, California, with more poor workers eligible for food stamps than any other state, also ranks the lowest in the percent of eligible poor workers receiving these federally funded benefits. ARGUMENTS IN OPPOSITION A coalition of employers, including the California Chamber of Commerce and the California Retailers Association, opposes this measure and argues that it represents a one-size fits all mandate on only California retailers, will significantly increase such employers cost of doing business, and will limit their opportunity to provide flexibility to employees as well as offer additional hours of work, as doing so will expose the employer to litigation and statutory penalties. Opponents argue that this bill creates significant layering of penalties against employers for schedule changes. They state that although the bill provides limited exceptions to the application of these penalties for schedule changes, such as when operations cannot begin due to an Act of God or utilities are not working, the scope of when the penalties will apply is significant. They contend that employers are already faced with significant penalties, mandated additional compensation, and higher minimum wage rates. This bill would layer more penalties AB 357 Page P on an employer who is already compensating the employee for schedule changes, as well as hours worked. Financially punishing an employer for responding to last minute business demands or, worse, for offering an employee more hours of work is unfair and penalizes the employer just as much as employees. Opponents also argue that this bill creates ambiguity regarding "required" versus "voluntary" employee schedule changes. As they state: "[This bill] states that an employer shall pay an employee penalties for unscheduled changes the employer "requires" an employee to work. The term "requires" is ambiguous as to whether it includes only those schedule changes that (1) the employer actually mandates the employee to work or suffer adverse employment action; or (2) a schedule change that the employer offers the employee, and the employee individually feels pressured or compelled to work and therefore consents. For example, if an employer suggests it really needs additional help to cover a shift at a restaurant as a large of customers has just arrived and is the employee available to come in, is that enough to satisfy the "required" element of [this bill]? Ambiguity regarding similar terminology such as "provides" has created more than a decade of significant litigation for California only employers regarding the triggering of additional compensation for employees with regard to meal periods and is therefore an important distinction. See Brinker Restaurant Corporation v. Superior Court, 53 Cal.4th 1004 1039 (2012) (defining "provide" to mean a reasonable opportunity for an employee to take a 30-minute uninterrupted meal period that is not discouraged or impeded by the employer)." AB 357 Page Q On a related point, they argue that this bill discourages employers from offering additional work to part-time employees: "Under [this bill], if additional hours of work become available after an employer has issued the schedule, and the employer offers that additional work to a part-time employee, [this bill] penalizes the employer. Specifically, if the employee feels "required" to work the previously "unscheduled" offer of work, the employer would be forced to pay the employee not only compensation for hours worked, but also an additional four hours of compensation at the employee's "regular hourly rate." Such a penalty discourages employers from offering additional hours of work to part-time employees, thereby ultimately harming employees who are working part-time." Opponents also object to provisions of the bill that they contend creates a new, protected classification of employees. Under this bill, an employer would be prohibited from discriminating against or discharging any employee who falls within one of three protected categories. Combined with the new, unlimited leave referenced above, this precludes an employer from taking any conservative action against an employee who regularly misses work on a daily, weekly or monthly basis to attend an appointment, for threat of discrimination or retaliation litigation. In addition, they argue that there is no evidence of systematic employment discrimination against employees on this basis that would justify a new, protected classification in California law. As such, this protected classification will simply lead to an increase in litigation as it provides a new basis upon which to sue an employer who takes AB 357 Page R an adverse employment action for a legitimate reason against an employee who falls within one of these protected categories. They also argue that this bill subjects employers to multiple threats of extensive litigation: "In addition to litigation under PAGA, Labor Code Section 2699, an employee could also threaten an unfair competition claim under Business and Professions Code Section 17200, as well as a common law wrongful termination claim. Increasing the cost of doing business on all employers who engage in retail activity with the "additional pay" mandate, as well as subjecting them to multiple threats of litigation, is detrimental to the economy and the ability for businesses to thrive in this state. Notably, [this bill] references the various levels of penalties for schedule changes as "compensation," even though it is not compensating an employee for actual hours worked. This choice of term is not inconsequential, as it potentially triggers a three year statute of limitation to bring a civil action as opposed to a one-year statute of limitation for the penalty imposed. See Murphy v. Kenneth Cole Productions, Inc., 40 Cal.4th 1094 (2007) (holding premium pay for missed meal period is subject to three year statute of limitations versus one-year statute of limitations for penalties)." Finally, opponents argue that the San Francisco ordinance has not even gone into effect yet to determine the consequences of this policy. They state that in December 2014, the San Francisco Board of Supervisors passed the "Retail Workers Bill of Rights" that included a "fair scheduling" mandate, similar to that proposed in this bill. Mayor Ed Lee did not sign this ordinance, which will not go into effect until July 3, 2015. They state that San Francisco has yet to see the consequences AB 357 Page S either intended or unintended from the impact of its local ordinance mandating penalties for schedule changes. Given this, they argue that it is premature to impose this broad and punitive measure on all "food and general retail establishments" in California, especially those areas with high unemployment rates. COMMITTEE STAFF COMMENT In addition to the arguments mentioned above, opponents contend that, despite the exceptions contained in the bill, employers will still be subject to liability under the Labor Code Private Attorney General Act (PAGA) for any change in employee schedules. They argue that this bill states that an employer "shall" provide no less than two weeks' notice of an employee's schedule. Failure to provide two weeks' notice, no matter the reason, will independently create a PAGA violation and subject the employer to a representative action. Specifically, even though this bill would not assess penalties for an employer who has to cover a shift at the last minute because another employee calls in sick or works overtime, it is still a change in an employee's schedule with less than two weeks' notice and therefore a Labor Code violation subject to PAGA penalties. The threat of PAGA litigation will eliminate an employer's ability to provide any flexibility to their employees and will subject the employer to penalties for accommodating requested time off, sick leave, vacation, trading of employee shifts, etc. In response to this concern, the author has agreed to amend proposed Labor Code Section 518(h) to read as follows: (h) The requirements in subdivision (c) and (f) shall not apply, and an employer shall not be deemed to have violated subdivision (b), under any of the following circumstances: AB 357 Page T REGISTERED SUPPORT / OPPOSITION: Support 9to5 National Association of Working Women, CA American Association of University Women American Federation of State, County and Municipal Employees Better Opportunity Bill California Alliance for Retired Americans California Black Health Network California Employment Lawyers Association California Labor Federation, AFL-CIO California Nurses Association California Partnership AB 357 Page U California Professional Firefighters California School Employees Association California Teachers Association Center for Law and Social Policy Child Care Law Center Coalition of California Welfare Rights Organizations Community Food and Justice Coalition Consumer Attorneys of California Courage Campaign Equal Rights Advocates Hunger Action Los Angeles National Association of Social Workers, CA Chapter National Council of Jewish Women AB 357 Page V Office & Professional Employees International Union, Loca 29 Professional Association for Childhood Education River City Food Bank Sacramento Hunger Coalition San Francisco Living Wage Coalition SEIU California St. Anthony's Foundation Supervisor John Leopold, County of Santa Cruz UFCW Western States Council (sponsor) Western Center on Law and Poverty (sponsor) Western Regional Advocacy Project Opposition Agricultural Council of California AB 357 Page W Alhambra Chamber of Commerce AutoNation Brawley Chamber of Commerce Building Owners and Managers Association California California Association of Bed and Breakfast Inns California Association of Nurseries & Garden Centers California Attractions and Parks Association California Bankers Association California Business Properties Association California Chamber of Commerce California Employment Law Council California Grocers Association California Hotel and Lodging Association AB 357 Page X California League of Food Processors California Manufacturers and Technology Association California Mortgage Bankers Association California New Car Dealers Association California Restaurant Association California Retailers Association California Travel Association Camarillo Chamber of Commerce Cerritos Regional Chamber of Commerce Civil Justice Association of California El Centro Chamber of Commerce and Visitors Bureau Fairfield-Suisun City Chamber of Commerce Fullerton Chamber of Commerce AB 357 Page Y Gateway Chambers Alliance Goleta Valley Chamber of Commerce Greater Fresno Area Chamber of Commerce International Council of Shopping Centers International Franchise Association Irvine Chamber of Commerce Lodi Chamber of Commerce Monterey Peninsula Chamber of Commerce NAIOP - Commercial Real Estate Development Association National Association of Theatre Owners of California/Nevada National Federation of Independent Business North Lake Tahoe Chamber of Commerce Orange County Business Council AB 357 Page Z Oxnard Chamber of Commerce Palm Desert Area Chamber of Commerce Rancho Cordova Chamber of Commerce Redondo Beach Chamber of Commerce and Visitors Bureau Retail Industry Leaders Association Ripon Chamber of Commerce San Francisco Chamber of Commerce San Gabriel Valley Legislative Coalition of Chambers Santa Clara Chamber of Commerce & Convention-Visitors Bureau Santa Maria Valley Chamber of Commerce Visitor and Convention Bureau Simi Valley Chamber of Commerce South Bay Association of Chamber of Commerce AB 357 Page A Southwest California Legislative Council Southwest California Legislative Council TechAmerica The Chamber of the Santa Barbara Region Torrance Area Chamber of Commerce Wine Institute Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091