Lawmakers in the Golden State are considering a bill that would require businesses with more than 500 employees to shift to a 32-hour workweek and pay overtime premiums for excess hours—but does the bill have a chance of becoming law?
"You never know for sure, but this bill seems unlikely to become law, even in California," said Anthony DeCristoforo, an attorney with Ogletree Deakins in Sacramento, Calif.
Anet Drapalski, an attorney with Fisher Phillips in Los Angeles, said it's too early to tell if the bill will be signed into law. She noted, however, that the bill is getting some traction.
"Given the fact that California is often first when it comes to legislation—and then other states follow—we predict there is a 50/50 chance this bill gets signed into law," she said.
The Society for Human Resource Management (SHRM) opposes the bill. "SHRM believes in workplace flexibility that works for both employees and employers," said Emily M. Dickens, SHRM's chief of staff, head of government affairs and corporate secretary.
"We oppose this legislation because of its one-size-fits-all approach, which requires large organizations to pay overtime for any work in excess of 32 hours without reducing an employee's regular rate of pay," Dickens said.
Here's what employers need to know about the measure.
Regular Rate and Overtime Premiums
Currently, California employers must pay nonexempt workers time-and-a-half for hours worked beyond eight in a day or 40 in a week. Double time must be paid for hours in excess of 12 in a day, and additional rules apply to work performed on the seventh day in a workweek.
AB 2932 would require businesses with more than 500 employees to pay time-and-a-half when employees work beyond eight hours in a day or 32 hours in a workweek.
The bill contains additional language prohibiting employers from reducing an employee's regular rate of pay as a result of the reduced hourly workweek requirement.
"Regular rate of pay" is not the same as an employee's hourly rate of pay, DeCristoforo noted. It includes other forms of compensation, such as commissions and nondiscretionary bonuses, in addition to hourly pay.
"Covered employers will have to assess their workforce, as the bill would mean an increase in labor costs for employers," Drapalski said.
Under the bill, nonexempt employees would need to be paid the same amount for 32 hours as they were being paid for 40. "This means approximately a 20 percent increase in wages, not accounting for the additional overtimewages employers will have to pay if they need their employees to work 40 hours in a workweek," Drapalski explained.
"Employers will also have to do an audit of their employment policies, including sick-leave accrual policies, to ensure they are compliant with the law," she said.
Difficult Choices for Employers
Supporters of AB 2932 say it will increase productivity and improve the quality of life for workers.
"We've had a five-day workweek since the Industrial Revolution, but we've had a lot of progress in society, and we've had a lot of advancements," said the bill's co-author, Assembly Member Cristina Garcia, D-Bell Gardens, to the Los Angeles Times. "I think the pandemic right now allows us the opportunity to rethink things, to reimagine things."
Employers, however, say the cost of compliance will be too high. "U.S. companies, especially in the technology industry, have had a swift and worker-friendly response to challenges around labor market tightening," noted Joe Du Bey, co-founder and CEO of Eden Workplace, an office-management software company based in San Francisco.
He thinks any government legislation would be duplicative and costly and likely cause more harm than benefit.
DeCristoforo said the bill would have a devastating impact on businesses in California. If AB 2932 became law, covered employers with a standard 40-hour workweek would be confronted with some difficult choices, he noted.
An employer could continue to follow a 40-hour workweek and pay each employee eight hours of overtime aweek, which would raise labor costs. Alternatively, the employer could hire additional workers and split a 40-hour job between two employees. "This could result in the unintended consequence of employees getting fewer hours each week than they might want, as a job that was staffed by one person at 40 hours might now be covered by two employees at 20 hours each," DeCristoforo said.
"Of course, at a time when it's harder than ever for companies to find workers, filling a job with two employees instead of one may be easier said than done," he added. So, some businesses may feel forced to reduce operations to accommodate a 32-hour workweek.
"But even adding workers or restructuring operations to avoid overtime after 32 hours would not keep the employer's labor costs steady," DeCristoforo said, noting that the bill appears to require 40 hours of pay for 32 hours of work, which would "result in an immediate raise for every employee."
Dickens said the bill would create a significant logistical burden for human resource professionals, especially at companies with operations in multiple states. "And it would undoubtedly be bad for business in California, exacerbating staffing shortages, raising labor costs and making life more difficult for scores of businesses struggling to recover from the worst days of the pandemic."
She added, "On behalf of the 25,000 SHRM members from California, we look forward to working with lawmakers in Sacramento to advance policies that safeguard the lives and livelihoods of workers and make it easier to create meaningful, good-paying jobs."
