A new year often means new laws and changes to existing employment laws making it an important time for business owners and employers. 2020 brings many significant changes to the California Labor Code, most having gone into effect as of January 1, 2020.
Protect your business and ensure you remain in compliance with California State Law by reviewing the following Employment Law Update:
ABC TEST DETERMINING EMPLOYEE OR INDEPENDENT CONTRACTOR (AB 5)
AB 5 adopts and codifies the “ABC” test established in the California Supreme Court case Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal. 5th 903. The bill expands the reach of Dynamex by making the “ABC” test the default test for all Labor Code, Unemployment Insurance Code and Wage Order claims. As a result, the ABC test will apply to a host of additional causes of action to which it previously did not apply, such as, for instance, claims for failure to reimburse necessary business expenses and failure to provide accurate wage statements. Consequently, the bill impacts businesses in industries across the board. In addition to expanding the applicability of the ABC test, AB 5 also broadens the potential liability to businesses that are found to have misclassified independent contractors. The bill empowers the State Attorney General and certain city attorneys to pursue injunctions against businesses suspected of misclassifying independent contractors.
AB 5 also specifically exempts certain occupations, industries, and contractual relationships from the “ABC” test, and instead permits the use of the less-stringent, pre-Dynamex test established in G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, in certain specific circumstances.
Where a worker is not exempt, the “ABC” test applies. The “ABC” test presumes that all workers are employees, and places the burden on the hiring business to establish the following factors in order to classify a worker as an independent contractor: (A) the worker is free from the control and direction of the hirer in connection with the performance of the work; (B) the worker performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity. If the hiring business fails to establish any of these factors, the worker will be classified as an employee. The new statute does not permit an employer to reclassify an individual who was an employee on January 1, 2019, to an independent contractor due to the bill’s enactment.
AB 5 lists several specific occupations to which the older Borello test will continue to apply, including: insurance agents, surplus line brokers, analysts, physicians, surgeons, dentists, podiatrists, psychologists, veterinarians, lawyers, architects, engineers, private investigators, accountants, certain direct sales salespersons, securities broker-dealers, investment advisors, commercial fishermen, and certain newspaper carriers. AB 5 also provides that contracts for certain “professional services” are also exempt, under specific conditions. AB 5 defines “professional services” as the services provided by a human resources administrator, travel agent, graphic designer, grant writer, fine artist, payment processing agent, photographer, photojournalist, freelance writer, freelance editor, freelance newspaper cartoonist, esthetician, manicurist, barber, or cosmetologist. In addition to falling into one of these categories of “professional services,” hiring businesses must also establish that the worker meets additional, very precise requirements, in order for the exemption to apply. AB 5 also contains several other miscellaneous exemptions, including for real estate licensees, repossession agencies, the construction industry, and relationships between referral agencies and service providers.
Several employers not exempt under AB 5 have filed lawsuits seeking a preliminary injunction including: Uber, Lyft, Postmates, Doordash, freelance journalists, and several members of the trucking industry.
CREATING A RESPECTFUL AND OPEN WORKPLACE FOR NATURAL HAIR (SB 188)
California became one of the first states to ban race-based hair discrimination by enacting SB 188, also known as the Creating a Respectful and Open Workplace for Natural Hair (“CROWN”) Act. The CROWN Act expands the definition of “race” under the California Fair Employment and Housing Act (“FEHA”) to include traits historically associated with race, such as hair texture and protective hairstyles. “Protective hairstyles” include, but are not limited to, “braids, locks, and twists.”
The CROWN Act acknowledges the disparate impact workplace dress code and grooming policies potentially could have on black individuals. Policies that prohibit natural hair, including afros, braids, twists, and locks, are more likely to deter black applicants and burden or punish black employees than any other group. The stated purpose of the CROWN Act is thus to enforce the “constitutional values of fairness, equity, and opportunity for all.”
ADDITIONAL ACCOMMODATIONS FOR LACTATION EXPRESSION IN THE WORKPLACE (SB 142)
There are several laws already in practice regarding an employer’s obligation to provide accommodations to an employee for the purposes of expressing breast milk; SB 142 significantly changes that existing law. The existing law states:
- prohibits an employer, who is required by law to give an employee a rest period during a workday, from requiring the employee to work during the rest period;
- requires an employer to pay the employee one additional hour of pay, at the employee’s regular rate of compensation, for each rest period not provided;
- requires employers to provide a reasonable amount of break time to employees desiring to express milk for the employee’s infant child;
- requires an employer to make reasonable efforts to provide the employee with the use of a room, or other location, other than a bathroom, in close proximity to the employee’s work area, for the employee to express milk in private;
- exempts an employer from the break time requirement if the employer’s operations would be seriously disrupted by providing that time to employees desiring to express milk; and
- subjects employers who violate these provisions to a civil penalty of $100 per violation and authorizes the Labor Commissioner to issue citations for those violations.
SB 142 amends Labor Code section 1030 by requiring a “reasonable amount of break time” to express breast milk “each time the employee has a need to express milk.” The bill would also amend Labor Code section 1031 by adding additional requirements for a lactation room. As a result, a lactation room or location:
- must be private;
- may include the place where the employee normally works if that space otherwise meets the requirements of the Labor Code;
- shall not be a bathroom;
- shall be in close proximity to the employee’s work area;
- must be shielded from view and free from intrusion while the employee is expressing milk;
- must be safe, clean, and free of hazardous materials;
- must contain a surface area to place a breast pump and personal items;
- must have a place to sit; and
- must have access to electricity, extension cords, or charging stations necessary to operate an electric or battery-powered breast pump.
The new law also requires that the employer provide access to a sink with running water and a refrigerator for storing milk in close proximity to the employee’s workspace.
Finally, Labor Code section 1034 has been amended to require an employer to develop and implement a policy regarding lactation accommodation that includes the following:
- A statement about an employee’s right to request lactation accommodation;
- The process by which the employee makes the request;
- An employer’s obligation to respond to the request; and
- A statement about an employee’s right to file a complaint with the Labor Commissioner for any violation of a right under this chapter.
The employer shall include the policy in an employee handbook or set of policies that the employer makes available to employees. The employer shall distribute the policy to new employees upon hiring and when an employee makes an inquiry about or requests parental leave. If an employer cannot provide break time or a location that complies with the policy, the employer shall provide a written response to the employee.
The amendment thus provides employees with an undefined number of “additional breaks” for expressing milk. The expansion of these Labor Code sections creates significant potential liability for employers who fail to provide “reasonable breaks” “each time” the employee “has a need to express milk.”
PAID FAMILY LEAVE EXPANSION AND TASK FORCE (SB 83)
Effective July 1, 2020, California’s Paid Family Leave (PFL) wage replacement benefit will increase to eight weeks from six weeks within any twelve-month period. SB 83 allows state government employees that pay into the Nonindustrial Disability Insurance (NDI) program to receive six weeks of paid family leave. SB 83 also provides for the establishment of a task force for developing a proposal to increase paid family leave benefits to a full six months by 2021-22 for parents to care for and bond their newborn or newly adopted child. The proposal is expected to address job protections for employees, wage replacement rates up to 90 percent for low-wage workers, and provide a plan to implement and fund expanded paid family leave benefits.
ORGAN DONATION LEAVE OF ABSENCE (AB 1223)
AB 1223 requires employers to grant employees an unpaid leave of absence, not to exceed 30 days in one-year period, for the purpose of organ donation. This benefit is in addition to the existing 30 business days paid leave for an employee who is an organ donor. Public employees must first exhaust all available sick leave before taking that unpaid leave.
“NO RE-HIRE” PROVISIONS REMOVED FROM SETTLEMENT AGREEMENTS (AB 749)
Under the new law, which goes into effect on January 1, 2020, settlement agreements cannot contain any provision that prohibits, prevents, or otherwise restricts an employee from obtaining future employment with that employer or its parent companies, subsidiaries, divisions, affiliates, or contractors. Thus, California employers need to review their standard settlement agreements to remove any “no-rehire” provisions. Any such provisions found in settlement agreements entered into on or after January 1, 2020 are void as a matter of law and against California public policy.
The prohibition only applies to agreements with an “aggrieved person,” which is defined as a person who has “filed a claim against the person’s employer in court, before an administrative agency, in an alternative dispute resolution forum, or through the employer’s internal complaint process.” As a result, employers and employees remain free to enter into severance agreements with terminated employees that contain no-rehire provisions. However, any severance or agreement resolving an employment dispute would be implicated by AB 749. The new law also clarifies that it does not require employers to rehire employees where (1) the employer has made a “good faith determination” that the employee engaged in sexual harassment or sexual assault, or (2) the employer has a legitimate non-discriminatory or non-retaliatory reason for refusing to rehire the person. The new statute, however, does not define what constitutes a “good faith determination.”
UPDATE ON SEXUAL HARASSMENT TRAINING (SB 778)
Existing law that went into effect on January 1, 2019, expanded requirements for sexual harassment training such that it applies to employers with five or more employees (previously the sexual harassment training requirements applied to employers with 50 or more employees). The existing law includes requirements that employers provide:
- at least two hours of classroom or other effective training and education regarding sexual harassment prevention to supervisory employees every two years;
- at least one hour of sexual harassment prevention training and education to nonsupervisory employees every two years;
- new employees with sexual harassment training within six months of hire; and
- temporary or seasonal employees with sexual harassment prevention training within 30 calendar days after the hire date or within 100 hours worked, if the employee is expected to work for less than six months.
SB 778 extended the initial deadline for providing new training to those non-supervisory employees who were not previously covered under prior state law from January 1, 2020, to January 1, 2021. It also clarifies that employees who completed sexual harassment training in 2019 do not need to be retrained for another two years (i.e., until 2021), and then every two years thereafter (i.e., 2023, 2025).
SEXUAL HARASSMENT TRAINING: CONSTRUCTION AND TEMPORARY EMPLOYEES (SB 530)
SB 530 extends the date by when seasonal, temporary, and/or other employees hired to work less than six months to January 1, 2021. An employer that employs workers pursuant to a construction industry multiemployer collective bargaining agreement can satisfy the sexual harassment training requirement by demonstrating that an employee has received the training within the past two years.
DAMAGES AFFECTED BY GENDER, RACE, OR ETHNICITY (SB 41)
SB 41 applies to personal injury and wrongful death cases, and prohibits any reduction in damages resulting from an estimation, measure, or calculation of past, present, or future damages for lost or impaired earning capacity that is based on a person’s race, ethnicity, or gender.
STATUTE OF LIMITATIONS FOR FEHA CLAIMS EXTENDED TO THREE YEARS (AB 9)
Under existing law, the California Fair Employment and Housing Act (“FEHA”) requires that an employee alleging discrimination, harassment, or retaliation must first file a verified complaint with the Department of Fair Employment and Housing (“DFEH”) before he or she may file a civil action in court. Currently, an employee must file this DFEH complaint within one year from the date of when the wrong occurred. Once an employee receives a Right to Sue Notice from the DFEH, he or she has one year to file a lawsuit.
On October 10, 2019, California’s Governor, Gavin Newsom, approved AB 9, known as the Stop Harassment and Reporting Extension (“SHARE”) Act, which extends the deadline to file an allegation of unlawful workplace discrimination, harassment, or retaliation under the FEHA with the DFEH from one year to three years. Employers should note that AB 9 does not revive claims that have already lapsed under the current one-year statute of limitations rule.
LABOR COMMISSIONER AUTHORITY EXPANDED TO ORDER RESTITUTION OF AMOUNTS OWED (SB 688)
The Labor Commissioner can now order restitution if an employer is found to pay less than the contract wage (even if in excess of minimum wage). Previously, the Labor Commissioner could only seek wages for less than minimum wage violations and overtime.
EXCLUSION OF MANDATORY ARBITRATION AGREEMENTS (AB 51)
AB 51 prohibits employers from requiring employees to enter into arbitration agreements covering claims under the Fair Employment and Housing Act (“FEHA”) and the Labor Code as a condition of employment. The bill will be codified as a new section, Section 432.6, in the California Labor Code. The new law prohibits any person from requiring an applicant or employee to “waive any right, forum, or procedure” for a violation of the FEHA or the Labor Code, which includes the right to file a civil complaint in court or a complaint with a government agency. It makes a violation of Labor Code section 432.6 an “unlawful employment practice” under the FEHA. It also prohibits employers from retaliating against an applicant or employee who refuses to agree to an arbitration agreement. However, AB 51 does not apply to “post-dispute settlement agreements or negotiated severance agreements.” Further, it only applies to agreements “entered into, modified, or extended on or after January 1, 2020.”
Employer groups have already challenged AB 51 in federal court on the basis that it is preempted by the Federal Arbitration Act (FAA). The drafters of AB 51, anticipating a legal challenge, have attempted to address this by including subsection (f) which states, “nothing in this section is intended to invalidate a written arbitration agreement that is otherwise enforceable under the [FAA].” However, on December 30, 2019—just two days before the law was scheduled to go into effect—the District Court for the Eastern District of California issued a temporary restraining order (“TRO”) blocking AB 51’s enforcement. The court will hear the plaintiffs’ motion for a preliminary injunction on January 10, 2020. Given the court’s explanation for granting the TRO, it is extremely likely the court will turn the TRO into a preliminary injunction.
ARBITRATION FEES MUST BE PAID PROMPTLY BY DRAFTING PARTY (SB 707)
This new law mandates, in part, that either employment or consumer arbitrations that require the drafting party to pay certain fees and costs before the arbitration can proceed, that the drafting parties deem to be a material breach of the agreement is in default and thereby waives its rights to compel arbitration if the fees or costs to initiate an arbitration are not paid within 30 days after their due date. If the drafting party materially breaches the agreement and is in default then the consumer or the employee can either withdraw the claim from arbitration or they can proceed to civil court, or they can compel arbitration, in which case the drafting party must pay all the fees and costs. It also requires a court to impose a monetary sanction against a drafting party that materially breaches an arbitration agreement.
INCREASE IN MINIMUM WAGE (SB 3)
In 2015, the California Legislature enacted Senate Bill No. 3. SB 3 amended several sections of the Labor Code, including Section 1182.12 of the Labor Code which governs minimum wage. The bill mandates a gradual increase to the state minimum wage based on the size of the employer. In 2019, the minimum wage was $11.00 for employers with up to 25 employees (smaller employers) and $12.00 for employers with 26 or more employees (larger employers). In 2020, those numbers increased to $12.00 for smaller employers and $13.00 for larger employers. The annual increases will continue until 2023, when all employers must pay a minimum wage of $15.00.
From January 1, 2024, going forward, on or before August 1 of each year, the California Director of Finance will calculate an adjusted minimum wage. The calculation will increase the minimum wage by the lesser of 3.5 percent and the rate of the change in the averages of the most recent July 1 to June 30, inclusive, period over the preceding July 1 to June 30, inclusive, period for the United States Bureau of Labor Statistics non-seasonally adjusted Consumer Price Index for Urban Wage Earners and Clerical Workers (U.S. CPI-W). The result will be rounded to the nearest 10 cents ($0.10). Each adjusted minimum wage increase calculated under this subdivision shall take effect on the following January 1.
FAILURE TO PAY WAGES: PENALTIES (AB 673)
AB 673 creates a private right of action for employees to recover penalties for late payment of wages through the Private Attorneys General Act (PAGA). The employee will have the option to either pursue a private right of action under PAGA or recover statutory penalties for the same violation – but not both. AB 673 also removes the authority from the Labor Commissioner to recover penalties in an independent action.
OCCUPATIONAL SAFETY AND HEALTH TRAINING FOR VALLEY FEVER (AB 203)
Construction employers operating in counties where Valley Fever is “highly endemic” must provide annual training on the fungal disease to employees before employees begin work that is reasonably anticipated to cause substantial dust disturbance.
IMPLICIT BIAS TRAINING IN THE MEDICAL FIELD (AB 241)
By January 1, 2022, all continuing education courses for physicians and surgeons must include lessons on implicit bias in medical treatment. AB 241 requires the Board of Registered Nursing and Physician Assistant Board to adopt regulations requiring implicit bias training. Continuing education providers must comply with these regulations beginning January 1, 2023.
HEALTH FACILITIES NOTICE REQUIREMENT (AB 1695)
AB 1695 requires a licensee of a skilled nursing facility, at least 90 days prior to the finalization of
a sale, transfer of operation, or other change or transfer of ownership interests, to give written notice of proposed changes to residents. A licensee that fails to comply with the notification requirement is liable for a civil penalty of $100 per day for each day the notice is delayed. This is only applicable to license applications submitted after July 1, 2020.
AB 1695 also prohibits a prospective transferee, in the capacity of a prospective licensee, during a 60-day transition period, from discharging an employee without cause, other than the nursing home administrator and the director of nursing. In addition, during this 60-day transition period, employers are prohibited from reducing an employee’s wages, benefits, or other terms and conditions of employment as a result of the transfer or change of ownership. Applicable to license applications submitted after January 1, 2020.
AB 1695 does not apply to skilled nursing facilities that are operated as a distinct part of an acute care hospital.
REPORTING OCCUPATIONAL INJURIES AND ILLNESSES (AB 1804)
AB 1804 requires employers to report serious workplace injuries, illnesses, or death immediately by telephone or through an online platform that will be developed by the Division of Occupational Safety and Health. Until the online platform is developed, employers should make these reports by telephone and/or email, as an employer may be fined up to $5,000 for noncompliance.
WORKPLACE AND SCHOOL GUN VIOLENCE RESTRAINING ORDERS (AB 61)
Beginning September 1, 2020, AB 61 authorizes an employer, coworker who has substantial and regular interactions with the person and approval of their employer, or an employee or teacher of a secondary or postsecondary school, with the approval of the school administrator, to file a petition for an ex parte, one-year, or renewed gun violence restraining order. This gun violence restraining order will prohibit the subject of the petition from having in their custody or control, owning, purchasing, possessing, or receiving, or even attempting to purchase or receive, a firearm or ammunition when it is shown that there is a substantial likelihood that the subject of the petition poses a significant danger of self-harm or harm to another in the near future by having in their custody or control a firearm, and that the order is necessary to prevent personal injury to the subject of the petition or another.
THE CALIFORNIA CONSUMER PRIVACY ACT REQUIREMENTS FOR EMPLOYERS (AB 25)
In 2018, the California Legislature passed the California Consumer Privacy Act (“CCPA”), a law designed to provide consumers with more control over the personal data that businesses collect on those consumers and to have that data deleted. Under the prior iterations, the term “consumer” was broadly defined to include employees and job applicants. Because of this overbroad definition, the California Legislature enacted AB 25, which provides employers with a one-year exemption to come into compliance with the law.
Specifically, covered employers have until January 1, 2021, to meet all of the CCPA’s requirements except for two. First, by January 1, 2020, covered employers must ensure they have implemented reasonable security measures, both physical and electronic, to safeguard the personal information of employees and job applicants. In the event of a data breach resulting from failure to implement reasonable security measures, an affected employee can file an individual lawsuit or a class action and potentially recover between $100 and $750 per consumer per data breach incident or their actual damages, whichever is greater. Accordingly, any employer covered by the CCPA should review their electronic and physical security measures to ensure they are appropriately protecting their employees’ data.
Second, starting January 1, 2020, covered employers must disclose to employees and job applicants the categories of “personal information” collected about them and the purposes for which the information will be used. The disclosure must be made before or at the time the employer receives the personal information of any employee or job applicant. The disclosure does not need to list every piece of information collected about the employee, but rather only categories of information. Under the CCPA, covered employers will be prohibited from using any employee personal information that is not listed in the disclosure provided to employees. Therefore, the disclosure should be as comprehensive as possible in terms of identifying all business purposes for which the information is used. Examples of business purposes in the employment context include:
- to comply with state and federal law requiring employers to maintain certain records;
- to effectively process payroll;
- to administer and maintain group health insurance benefits, 401K and/or retirement plans; and
- to manage employee performance of their job duties.
For current employees, the disclosure can be made to them as a group in the employee handbook or through a memo to all employees. Since the CCPA requires the disclosure be made at or before the transaction in which the personal information is collected, the best approach is to include the disclosure with the job application for job applicants or future employees.
Employers should be cautious; the term “personal information” is defined so broadly by the CCPA that it potentially covers all information employers collect, maintain, or share about job applicants, employees, and their family members or dependents that could identify the individual or be used in conjunction with other information to identify the individual. Specifically, personal information includes “information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer.” The definition then identifies 11 categories and data elements, including “professional or employment-related information,” “education information,” and “characteristics of a protected category.”
It is important to note that the CCPA only applies to for-profit businesses that:
- do business in California,
- collect the personal information of consumers including employees, and
- satisfy any of the following criteria:
- Have annual gross revenues over $25 million;
- annually receive, sell, or share personal information about more than 50,000 or more California residents or households or 50,000 devices;
- derive 50% or more of their annual revenue from selling personal information of consumers.
It is important to note that every employment law situation is unique and this update is not a replacement for legal counsel. If you have further questions or would like additional information, contact Jerry Pearson at email@example.com.
To learn more about the employment law cases that impacted California businesses last year, read Part Two of our Employment Law Update here >>>