Mercury in retrograde or a sign of the end times? In a rare win for employers, the California legislature this past week failed to advance Assembly Bill 2932—mandating a 4-day workweek for large employers in the state—after the California State Assembly's Labor and Employment Committee declined to set it for a policy hearing. Sponsor and assembly member Evan Low (D-Campbell) stated AB 2932 was shelved because there was too little time to fully study its implications before taking the next legislative step—an acknowledgment of the wide-ranging effects of and the significant opposition to a law that would be the first of its kind in the United States (and many developed countries).
Currently, California employers must pay non-exempt employees time and a half for hours worked beyond 8 in a day or 40 in a workweek. Double time must be paid for hours in excess of 12 in a day. California is one of only a few states with that 8-hour daily overtime threshold, given the majority of states follow the federal Fair Labor Standards Act, which requires overtime only after 40 hours in a week.
AB 2932 would have amended Section 510 of the California Labor Code to require private-sector employers with more than 500 employees to pay hourly workers time and a half after recording more than 32 hours in a workweek. Notably, AB 2932 would have exempted businesses that are already unionized. The bill also contained language prohibiting employers from reducing an employee's regular rate of pay as a result of the change, effectively providing employees with a backdoor 20% minimum wage increase. One of the questions swirling around the bill was whether this provision would have prohibited employers covered by AB 2932 from reducing salaried non-exempt employees' salaries based on shorter workweeks, or whether employers would need to increase the hourly rate of pay for hourly-paid non-exempt employees so that they earn the same amount of pay for 32 hours as they did for 40.
Some corporations have already experimented with the 32-hour week as the COVID-19 pandemic has tightened a competitive labor market and increased demands for better work-life balance. For example, Kickstarter, the crowdfunding platform, kicked off its experiment with a 4-day, 32-hour workweek on March 28, 2022. But Kickstarter has approximately 100 employees and no central office, and has already aggressively promoted remote work since the pandemic started.
AB 2932's widespread change would have required large California employers to conduct a wholesale audit of their employment policies, including payroll, timekeeping, and PTO accrual. But there is some data suggesting change on this broad a scale can be successful. A sizable study in Iceland conducted from 2015 to 2019 wherein workers—about 1% of the total population—were paid the same amount for a four-day workweek found that productivity remained the same or improved in the majority of workplaces. That trial led unions to re-negotiate schedules and companies to take the initiative to change them themselves, and now 86% of Iceland's workforce have either moved to shorter hours for the same pay or will gain the right to.
Opponents of the bill, however, pointed to increased labor costs and logistical difficulties (particularly for employers with operations in multiple states). CalChamber included AB 2932 on its "Job-Killer" list, saying that it "significantly increases labor costs by imposing an overtime pay requirement after 32 hours and other requirements that are impossible to comply with, exposing employers to litigation under the Private Attorneys General Act (PAGA)." The Society for Human Resource Management also came out against AB 2932, warning that it would "create a significant logistical burden for human resource professionals" and would lead to "staffing shortages" and "raising labor costs[.]"
Such arguments will continue to remain theoretical, however—likely to the great relief of numerous employers in the Golden State. California will not become the first state to change the definition of the standard 40-hour workweek since Henry Ford instituted it in 1926. Employers may contact one of Venable's experienced California Labor and Employment attorneys with questions regarding potential resuscitation of AB 2932 in the next legislative session and issues to consider should a company consider moving from the traditional 5-day, 40-hour workweek.