California Legislature Considers New Law Mandating Reduced Workweek for Employees of Large Employers

On February 22, 2022, two members of the California Assembly introduced Assembly Bill 2932 (AB 2932) which, if passed, would require employers with 500 or more employees to reduce workweeks from 40 hours to 32 hours for nonexempt employees without reducing their pay. For employers with less than 500 employees, the definition of “workweek” would remain unchanged, requiring employers to pay nonexempt employees overtime only for hours in excess of 40 in a workweek or 8 in a workday.

The proposed legislation was prompted by the “Great Resignation,” calls from employees for a better work-life balance, and studies suggesting a reduced workweek leads to higher employee morale, a reduction of absences due to sick leave, and lower childcare costs.

If passed, AB 2932 would redefine “workweek” from 40 hours to 32 hours. However, the definition of “workday” would remain unchanged at 8 hours. Thus, a nonexempt employee who works more than 32 hours in a workweek or 8 hours in a workday would be entitled to overtime pay. The bill would also prohibit employers with more than 500 employees from reducing employees’ regular rate of pay to compensate for the reduced hours.

AB 2932 does not apply to employees who are classified as exempt from the overtime laws. Nor does it apply to employees who are unionized or have collective bargaining agreements with their employers.

Some companies such as Kickstarter and Panasonic have already experimented with the concept of a shortened workweek, as have the governments of other countries. For example, in Iceland, 86 percent of employees now work less than a 40-hour workweek after the country conducted trials that concluded shorter workweeks lead to more productivity and less burn-out in workers. Sweden, New Zealand, Japan, Scotland, and Spain have also tested shortened workweeks.

Opponents of AB 2932 argue that it will increase labor costs to employers by at least 10 percent. They also argue that it will limit employers’ ability to expand their workforces and create new jobs.

The California Labor and Employment Commission is currently reviewing the proposed bill. If it passes in the Committee, it will return to the California Assembly for debate and vote. If it passes the Assembly, it will move on to the California Senate, and if approved, will be sent to Governor Gavin Newsom for consideration. The deadline for the Legislature to pass the bill is August 31, 2022. Governor Newsom then has until September 30, 2022 to either sign or veto the bill.

We will continue to monitor AB 2932, as it could have significant implications for our clients. If you have any questions or want to learn more about the bill, please contact Jennifer Morin.