A new year, and a new Governor! And while California is used to changing employment-related legislation each year, 2020 will prove to see some unprecedented changes. New rules regarding Independent Contractors that even professionals find complex – Arbitration Agreements being deemed unlawful, increasingly detailed Lactation Accommodation requirements, new Hairstyle Discrimination protections, and amendments to Sexual Harassment Prevention Training requirements.
New California Employment Laws – The following is a description of most of the more impactful (but not all) new employment laws that unless otherwise stated, will go into effect on 1/1/20:
Independent Contractors
In 2018, the California Supreme Court’s decision in the Dynamex case created a strict 3-prong test for determining independent contractor vs. employee status under California’s wage and hour laws. A worker is legally presumed to be an employee unless A. the worker is free from the control and direction of the hiring company in connection with the performance of the work, both under the contract and in fact; AND 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. While prongs A and C were not new concepts to the analysis, prong B was a “bear” for many employers who questioned if this was now the death of the freelance industry in California.
This year, AB 5 was signed into law. While the original intent of the bill was to codify the Dynamex decision into the California Labor Code, after some very effective lobbying by special industry groups, AB 5 ended up creating a bit of a quagmire for employees. While the ABC test is now in fact incorporated in the labor code, the bill created a number of special exceptions. Notably, certain, specific occupations are now exempt from the ABC test as well as certain business relationships including certain Business to Business arrangements, certain Professional Services relationships, and certain subcontractors in the construction industry. To be eligible for these exemptions, each type of relationship is subject to specific definitions of the terms used in the bill as well as multi-prong tests of their own. And beware, being exempt from AB 5 does not ensure independent contractor status, it simply means that instead of using the “new” ABC test, the exempt relationships must go back to using a longer, more flexible test from a prior California case called the “Borello” test. And surprisingly, AB 5 says that if an employer converted an independent contractor into an employee after 1/1/19 based on the Dynamex case and he/she might now actually meet the definition given the new exemptions, that employer is prohibited from converting the person back into an independent contractor.
Now, more than ever, this is a complicated subject for employees who really need to seek qualified guidance as the risks and penalties can be quite costly and severe.
Arbitration Agreements
Many employers utilize mandatory agreements to arbitrate disputes with their employees. AB 51 will prohibit employers from requiring any applicant or employee from entering into new arbitration agreements or from having to sign a modified or extended agreement. It will further make actionable any threatened or actual retaliation against an individual who refuses to consent to the new prohibitions. A similar bill was vetoed last year by our prior Governor, based on its likely preemption by the Federal Arbitration Act and potential to be found unconstitutional. That being said, this bill becomes law in California on 1/1/20, and many expect years of legislation before the law’s legality is decided upon. Employers in California need to assess the risk of continuing to utilize such agreements going forward and should consult with experienced legal counsel if wanting to do so.
Arbitration Agreement Costs
SB 707 will require an employer to pay the costs and fees associated with an arbitration. Failure to do so will cause the agreement to be breached and allow the employee to withdraw the claim from arbitration and be entitled to attorney’s fees and costs.
Lactation Accommodation
Over the past several years, California has passed several laws expanding the requirements for employers to provide lactation accommodations to employees who need to express breastmilk during the workday. Last year, AB 1976 required employers to provide a location that is something other than a bathroom, should be close to the employee’s work area, and should generally be a permanent location only used for such purposes. It also spelled out the conditions under which a temporary location would be allowed.
This year, SB 142 takes the requirements even further. Patterned after a similar San Francisco bill (and a repeat from a bill last year that was vetoed by the Governor for presumably being too onerous), California employers must now ensure that in addition to the above, the location needs to be shielded from view; be free from intrusion while the employee is lactating; be safe, clean, and free from hazardous materials; contain a surface on which to place a breast pump and other items; contain a place to sit; have access to electricity or alternative devices needed to operate an electric or battery operated pump (such as extension cords, charging stations); and provide access to a sink with running water and a refrigerator for storing breastmilk. If a refrigerator cannot be provided, the employer may provide another cooling device such as a cooler. If a room used for other purposes will be utilized for lactation, the lactation activities need to take precedence. Employers in multitenant buildings or worksites are permitted to share a lactation space if unable to do so in their own workspace. Employers with fewer than 50 employees may be exempt from certain of these requirements if they can show undue hardship.
Further, the bill makes denying someone the necessary break time to lactate and/or an appropriate location for lactation a violation of California rest break laws and subjects the employer to a penalty of $100 per day of the violation.
Employers must also develop and disseminate a written lactation accommodation policy that contains specific language and must be included in the employee handbook, be provided to all new hires, and be given to any employee inquiring about parental leave.
Hairstyle Discrimination
Feeling that our business community has promulgated “Eurocentric” norms for professional grooming standards, the California legislature passed SB 188, referred to as the “Crown Act” (Creating a Respectful and Open Workplace for Natural Hair). The Fair Employment and Housing Act (FEHA) currently prohibits discrimination based on certain protected categories that include race. This bill expands the definition of race to include traits historically associated with race, including but not limited to, hair texture and protective hairstyles – listing specifically afros, braids, twists, and locks. Given this new legislation, employers should review company dress and grooming policies and practices to ensure compliance.
Sexual Harassment Prevention Training
Last year, SB 1343 expanded the requirements for mandated sexual harassment training for California employers. Prior law required employers with 50 or more employees (total headcount includes temporary and seasonal staff and all employees anywhere in the U.S.) to provide 2 hours of specified curriculum to their California supervisors and managers every 2 years. SB 1343 expanded the training requirements to employers with 5 or more employees who will now be required to train ALL California employees at least bi-annually. Originally, employers had until 1/1/20 to get these new training requirements met, but due to an outcry from the business community, the Governor signed SB 778 in August as an emergency piece of legislation, extending the training deadline to 1/1/21. The new law stipulates that an employer who already provided the training after 1/1/19 will not be required to provide it again until 2 years thereafter.
Supervisors and managers will still be required to attend 2 hours of training and non-supervisory staff 1 hour. All employees must receive their respective training within 6 months of assumption of a position. Seasonal, temporary, or any other worker hired to work for less than 6 months must be trained within 30 calendar days of beginning work or within 100 hours worked, whichever occurs first. While the required curriculum has not changed, SB 1300 from last year introduced the concept of “bystander intervention training” and encouraged employers to address the tendency for people to remain silent and refrain from providing assistance or coming forward when they witness harassment of others.
In-person training is not required, but post the #Me-Too movement, many employers are embracing these training requirements as an opportunity to encourage open and honest communication in the workplace about an uncomfortable topic – something that won’t happen if people are trained via webinar. Remember that these trainings have a specific, required curriculum and must be provided by trainers with knowledge and expertise in all of the covered topics.
Organ Donation Leave
Existing law requires employers with 15 or more employees to provide a PAID leave of absence of 30 days for employees who donate an organ and 5 days for those who donate bone marrow. AB 1223 will require employers, effective 1/1/20, to provide an additional 30 days of UNPAID leave for employees who donate an organ.
Paid Family Leave
Existing law provides for up to 6 weeks of wage replacement benefits for employees who need to take time off to care for an ill child, spouse, parent, grandparent, sibling, or domestic partner; or to bond with newborn babies or newly adopted children. Effective 7/1/20, SB 83, yet another new California law patterned after San Francisco’s unique employment laws, expands Paid Family Leave benefits to a maximum of 8 weeks and creates a task force to explore expanding the benefits up to potentially 6 months. Employers need to remember that while a form of wage replacement, Paid Family Leave does not provide any actual leave entitlement or job protection to employees which would instead be dictated either by company policy and/or state mandated leave laws such as California Family Rights Act (CFRA) or New Parent Leave Act (NPLA).
Reporting of Workplace Accidents/Injuries
Existing law requires employers to file reports of occupational injuries or illnesses that result in lost time beyond the date of the injury or illness and require more than first aid with the Department of Industrial Relations (DIR) via completion of a form. Serious injuries, illnesses, or deaths must be reported immediately by phone or email. SB 1804 will require employers to report serious injuries, illnesses, or deaths immediately either via phone or through an online platform that will be developed by the DIR. Failure to comply will result in a $5,000 penalty.
“No Rehire” Clauses in Settlement Agreement
It has been common practice for separation agreements to contain “no rehire” provisions by which a terminating employee and the employer agree that the employee will not be eligible to seek future employment with the employer. SB 749 will make such clauses illegal, except in situations where the employer has made a good faith determination that the employee has engaged in sexual assault or sexual harassment.
Civil Actions: Damages
Gender, Race, Ethnicity. Existing law allows a person who suffers a loss or harm from an unlawful act to recover damages from the person at fault. SB 41 would provide that such damages resulting from personal injury or wrongful death cases could not be reduced based on race, ethnicity, or gender.
DFEH Claims
Another repeat bill which was vetoed by the Governor last year, AB 9 extends the period of time within which an employee may file a complaint with the Department of Fair Employment and Housing (DFEH) from 1 year to 3 years.
Labor Commissioner Complaints
SB 229 expands the California Labor Commissioner’s mechanisms for enforcing anti-retaliation violations of the Labor Code and provides for procedures to be followed when adjudicating or contesting a citation. It further expands the Labor Commissioner’s authority to issue citations when employees are paid below an amount stipulated in a contract even if the contractual amount is above minimum wage.
Late Payment of Wages Penalties
Current law provides for civil penalties when an employee’s final wages are late, allowing the Labor Commissioner to recover the penalties as part of a hearing in an independent civil action. A percentage of the penalty recovered must be paid into the state. Under AB 673, individual employees will now be able to recover penalties for wages directly under the Private Attorney General Act (PAGA), removing the Labor Commissioner’s authority to recover civil penalties. Under the new law, employees will, however, have to choose between a private civil action, an administrative action with the Labor Commissioner, or a claim under PAGA.
Consumer Privacy Act
The Governor signed several amendments to the California Consumer Privacy Act (CCPA) which will have an impact on employers doing business in California. AB 25 postpones most of the requirements related to employee data until 1/1/21 with the exception of requiring employers to 1. provide reasonable security measures to safeguard employee data and 2. disclose the categories of personal information collected about employees and job applicants and the business reasons for which this data will be used. AB 1355 excludes from coverage under the CPA certain business to business communications or transactions. Note that the CCPA has a broad territorial reach and is not limited only to businesses in California. The topic, in general, is complex, and compliance with the vast changes will be challenging and require legal guidance. For more information, here is an informative article by our colleagues at Troutman Sanders: https://www.troutman.com/insights/california-governor-signs-ccpa-amendments-into-law.html
Workplace Violence Gun Restraining Orders
Existing law allows immediate family members and law enforcement personnel to petition courts for a gun violence restraining order to prohibit an individual from having access to firearms if there is a substantial likelihood of danger to oneself or others. AB 61 will allow employers, certain co-workers, and certain teachers to petition for a gun violence restraining order.
Domestic Partnerships
Existing law allows for 2 adults of the same sex or 2 adults of the opposite sex over the age of 62 to enter into a formal domestic partnership. SB 30 removes the age restriction, allowing any 2 adults over the age of 18 to become domestic partners.
Female Members of Boards of Directors
As a reminder, last year, SB 826 provided for the mandatory inclusion of women on corporate boards of directors. No later than the end of 2019, publicly held domestic or foreign corporations with principal corporate offices in California had to have a minimum of 1 female on its board of directors. By the end of 2021, the number of required females will increase to 2 if the corporation has a total of 5 directors, and 3 if the corporation has 6 or more directors. If you have not yet met this obligation, time is running out!
Minimum Wage and Exemptions
Although SB 3 passed in 2016, it provided for an annual increase in our minimum wage. Effective 1/1/20, for employers with 25 or fewer employees, the new minimum wage is $12.00 per hour. For employers with 26 or more employees, the new minimum wage is $13.00 per hour. As a reminder, in California, minimum wage has an impact on more than just the employees who earn at that level. In order to be exempt from overtime, an employee must have job responsibilities that meet certain legal requirements and must generally be paid a salary that is at least twice minimum wage for the equivalent of full-time work. This now means that the minimum salary requirement for exempt employees depends upon employer size and is either $49,920 or $54,080 per year.
Additionally, minimum wage has an impact on determining if insides sales employees are exempt and when certain trade employees can be required to provide their own hand tools. Also, keep in mind that close to 30 different cities and other municipalities in California have their own minimum wage ordinances.
For more information on exemptions, see Vantaggio’s Info Bulletins Exempt vs. Non-Exempt and Special Exemptions.
Other California Developments:
Call-In Pay for Phoning In
A California Court of Appeal, in Ward v. Tilly’s, Inc held that employees who were required to check into work via phone to see if they would be needed for a schedule shift but who are told not to report to work were due “reporting time pay.” Historically, if an employee showed up for work and was then sent home or only provide a partial day of work, he/she was entitled to pay for one half of the regularly scheduled hours that were expected to be worked – with a minimum due of 2 hours and a maximum due of 4 hours. In the case at hand, the court found that requiring the employees to remain available and to phone in to see if they were in fact needed amounted to the same thing as having the employee show up at work and declared that the employees were due reporting time pay on these occasions. Of note in this case, the employer required the employees to call 2 hours ahead of the anticipated shift start time. It remains to be seen if allowing the employee to call in further in advance would make a difference. Any employers with call-in practices should evaluate current policy and speak to experienced employment counsel.
Posters
In addition to new minimum wages, the DFEH is expected to make changes to their anti- discrimination poster based on the new Crown Act. If you need to order new 2020 combined federal and state poster sets, please contact us at or call 1-877-VHR-relx (1-877-847-7359).
And on the Federal Level:
Federal DOL Salary Level for Exempt Employees
If you remember, back in 2016, the Federal DOL had attempted to increase the salary threshold required for white-collar workers to be considered exempt from overtime rules from $455 per week ($23,660 per year) to $916 per week ($47,476 per year). The rule was ultimately blocked by a Federal judge in Texas before taking effect and then appealed, but the appeal was held in abeyance pending the DOL working on a revised plan. After much consideration and analysis, on 9/24/19, the DOL announced its new final rule that will go into effect on 1/1/20. The standard salary level required for “white collar” exemptions will be $684 per week ($35,568 per year) and the annual compensation required for “highly compensated employees” goes up from $100,000 per year to $107,432 per year. Nondiscretionary bonuses and incentive pay (including commissions) paid at least annually are allowed to satisfy up to 10% of the salary requirements.
NOTE: The current salary requirements for exempt status in California are in excess of the Federal levels. As such, for California employees, the minimum salary threshold of 2 x $12.00 or $13.00 per hour must be met. Also be aware that under California law, there is no “highly compensated” exemption.
What should employers do?
- Audit all of your current Independent Contractor relationships to ensure that they meet the new legal requirements. Reclassify anyone who doesn’t as an employee.
- Cease entering into mandatory Arbitration Agreements with employees after 1/1/20 and seek legal counsel on the subject. Be sure your current agreements contain the necessary language about payment responsibility and that you pay the associated cost and fees for arbitration in a timely manner.
- Ensure that you are able to provide a compliant Lactation Location for employees and that the appropriate lactation breaks are provided.
- Draft a compliant Lactation Accommodation policy and disseminate to new hires, publish in your handbook, and provide to all employees inquiring about parental leave.
- Update Employee Handbooks for: dress code policies, lactation accommodation, organ donation, paid family leave, other.
- Schedule all of your employees to attend Sexual Harassment Prevention Training prior to 1/1/20.
- Train those responsible for safety compliance about new Workplace Accident/Injury Reporting.
- Review Separation Agreements to remove No Rehire clauses.
- Be diligent about Recordkeeping given that employees now have 3 years to file complaints with the DFEH.
- Audit payroll practices to ensure Timely Payment of Wages due to the increased likelihood of penalties.
- Ensure all employees are being paid the correct Minimum Wage and that all exempt employees are paid the new minimum salary requirements. It would also be a good time to do an Exempt/Non-Exempt audit of your employees to ensure proper classification.
- Ensure your Boards of Directors have the required number of Female Board Members.
- Ensure your Call-In practices meet the new legal obligations and that employees are being paid the appropriate Reporting Time Pay.
- Obtain and post your new 2020 Employment Posters.
- Talk to your attorney to get guidance on compliance with the California Consumer Privacy Act.
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