Governor Newsom and the California Legislature Let Fly a Grand Slam of New Employment Laws for 2020
As the 2019 Legislative season ends, California employers will find it’s a whole new ballgame for 2020. New laws passed by the legislature, and signed into law by Governor Newsom, will make it harder to establish independent contractor status, ban mandatory arbitration agreements, ban no hire provisions in settlement agreements, and triple the time to file discrimination claims under the Fair Employment and Housing Act, among other things.
To help our clients and friends field the fair and foul balls, we summarize some of the key new California laws. Unless otherwise stated, all new laws become effective on January 1, 2020.
Dynamex ABC Test Codified (A.B. 5). This highly publicized new law will codify, clarify and expand the California Supreme Court decision issued last year in Dynamex Operations West, Inc. v. Superior Court, (2018) 4 Cal. 5th 903 (Dynamex). Workers who provide services for remuneration will be presumed to be employees, rather than independent contractors, for purposes of the Labor Code, the Wage Orders and the Unemployment Code, unless the 3 part ABC Test established in Dynamex is satisfied. For a discussion of the ABC test, see our article at https://srclaw.com/companies-with-contractors-have-you-learned-your-dynamex-a-b-cs/
The new law exempts several occupations from the application of Dynamex including licensed insurance agents, certain licensed health care professionals, registered securities broker-dealers or investment advisers, direct sales salespersons, real estate licensees, commercial fishermen, workers providing licensed barber or cosmetology services, and others performing work under a contract for professional services with another business entity, or pursuant to a subcontract in the construction industry. The law provides that if there is a legal exception, or a court rules that the 3-part test cannot be applied, then the determination of employee or independent contractor status shall be governed by the test adopted in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello).
Mandatory Arbitration Ban (A.B.51). Another high impact new law for employers is A.B. 51. This law prohibits employers from requiring an applicant or employee, as a condition of employment, continued employment or receipt of any employment benefit, to enter a mandatory arbitration agreement that “waive[s] any right, forum or procedure” for a violation of the Fair Employment and Housing Act (FEHA) or the California Labor Code. Under this law, employers may not require an individual “opt out” or take affirmative action to preserve such rights. Significantly, Governor Brown vetoed almost identical legislation last year (AB 3080) noting that it would be preempted by the Federal Arbitration Act (FAA) and plainly violate federal law. Further, a federal court in New York recently held that legislation passed in that state last year prohibiting mandatory arbitration of sexual-harassment claims was preempted by the FAA. It remains to be seen whether legal challenges may delay or impede the implementation of this law.
Arbitration Fees (S.B. 707). This law provides that if an employer or drafter of an arbitration agreement is required to pay costs and fees associated with the arbitration (either to initiate the arbitration or during the pendency of the arbitration), and fails to pay the fees within 30 days after such fees are due, the employer or drafting party will be in material breach of the arbitration agreement, will be in default and waives its right to compel arbitration. In that case, the employee may withdraw the claim from arbitration and proceed in court, or move to compel arbitration. If the employee decides proceed in a court action, the statute of limitations for all claims that relate back to the arbitration is tolled. Money sanctions will be imposed on the drafting party who breaches the arbitration agreement. When the employee compels arbitration, the employee will also be entitled to reasonable attorneys’ fees and costs related to the arbitration.
Statute of Limitations for FEHA Claims Expanded (A.B.9). Employees currently have one year to file an administrative claim for employment discrimination, including sexual harassment, with the Department of Fair Employment & Housing (“DFEH”) before they may file a civil lawsuit. This law extends that period to three years. The three-year statute of limitations will apply to all forms of employment and housing discrimination under the Fair Employment & Housing Act.
No Hire Provision Ban (A.B. 749). This law prohibits employers from including in settlement agreements provisions restricting an employee from working for the employer against whom the employee has filed a claim.
Sexual Harassment Prevention Training Clarified (S.B.778). This law, helpful to employers, amends the expanded training law passed last year (S.B. 1343) to clarify the timing of training requirements. S.B. 778 delays the training imposed by S.B. 1343 until January 1, 2021. This gives employers with 5 or more employees additional time to comply with the training requirements for both supervisory and nonsupervisory employees. In addition, S.B. 778 clarifies that employers are required to provide training to non-supervisory employees within six months of hire and to new supervisory employees within six months of assuming a supervisory position. Finally, the bill clarifies that those employers who provided training to an employee in 2019 will not need to provide the required refresher training for two years, rather than by the January 2021 deadline. The bill was signed by Governor Newsom on August 30, 2019 and went into effect immediately.
Sexual Harassment Training for Construction Workers and Employees Hired to Work Less Than Six Months (S.B. 530). This related law extends the compliance deadline for employers of seasonal, temporary or other employees that are hired to work for less than six months to provide mandatory sexual harassment training, from January 1, 2020 to January 1, 2021. Under the law passed last year, employers of these employees must provide the required training within 30 days of hire date or 100 hours worked, whichever occurs first. The new law also incorporates special training provisions for construction industry employers that employ workers pursuant to a multi-employer collective bargaining agreement.
Janitorial Workers Sexual Violence and Harassment Prevention Training (A.B. 547). The Janitor Survivor Empowerment Act requires the director of the Department of Industrial Relations to organize a training advisory committee that will generate a list of qualified organizations and trainers that janitorial employers would be required to use to provide biennial in-person sexual violence and harassment prevention training for janitorial workers. Employers subject to the training requirements will be required to use the training content created by the Labor Occupational Health Program. These statutory requirements are in addition to the Property Service Workers Protection Act that becomes effective on January 1, 2020.
Natural Hairstyle Non-Discrimination (S.B.188). We previously reported on the passage of “the Crown Act,” S.B. 188, which expanded the FEHA’s definition of “race” to include traits historically associated with race, such as hair texture and “protective hairstyles“ including as braids, locks and twists. For more information see: https://srclaw.com/californias-crowning-achievement-california-becomes-first-state-to-ban-natural-hairstyle-based-discrimination/ This new law will require employers to review and update workplace dress code and grooming policies and practices that prohibit natural hair styles.
Lactation Accommodation Expanded (S.B.142). This new law, based on the San Francisco lactation accommodation ordinance, imposes several additional requirements on California employers for breastfeeding mothers. In addition to providing a private lactation room, other than a bathroom, that is shielded from view and free from intrusion, the lactation room must: be in close proximity to the employee’s work area; be safe, clean and free of toxic or hazardous materials; contain a surface to place a breast pump and personal items; have a place to sit; and have access to electricity. In addition, there must be a sink with running water and a refrigerator suitable for storing milk (or employer-provided cooler) in close proximity to the employee’s workplace. Employers must now develop and implement a lactation accommodation policy with specific elements, which must be included in employee handbooks, and provide a copy of the policy to new employees at the time of hire, or when an employee makes an inquiry about or requests parental leave. Employers with fewer than 50 employees may seek an exemption if they can demonstrate undue hardship. Denial of reasonable break time or adequate space to express milk will be treated the same as a failure to provide a rest break.
Organ Donation Leave Expanded (A.B. 1223). Existing law requires private employers to provide up to 30 business days of paid leave in a one year period for the purpose of organ donation. Public employers must permit public employees similar paid leave if all available paid sick leave is exhausted. This new law requires public and private employers to grant an employee an additional 30 days of unpaid leave of absence for organ donation. Public, but not private, employees must first exhaust all available paid sick leave before taking unpaid leave.
Paid Family Leave Expanded (S.B. 83). Beginning July 1, 2020, the California Paid Family Leave benefit will be expanded to provide for eight weeks (instead of six weeks) of benefits. Approved by the Governor on June 27, 2019, this law became effective immediately.
California Family Rights Act Amendment (A.B. 1748). This bill amends the California Family Rights Act to conform flight deck and cabin crew member eligibility requirements to the Family and Medical Leave Act (FMLA) which has special hours of eligibility for airline flight attendants and other cabin crew members.
California Consumer Privacy Act Amendment (A.B. 25). The California Consumer Privacy Act (CCPA), enacted in 2018, provides sweeping privacy protections for California consumers, and becomes effective January 1, 2020. The potential scope of the CCPA is of great concern to employers as the term “consumer” may be construed broadly to include employees and to cover information employers collect on employees or applicants. This was not the intent of the CCPA. As a compromise measure, A.B. 25 was enacted to exempt employment information from the CCPA, at least for one year, unless extended, while the legislature works on finding an alternate solution to protect employees’ privacy. However, covered employers will still be required, no later than January 1, 2020, to disclose to employees and job applicants the categories of personal information collected and purposes for which the information will be used.
Gun Violence Restraining Order (A.B. 61). In an effort to avoid gun-related tragedies, beginning September 1, 2020, this law expands existing law to authorize certain additional persons who are in positions to notice warning signs to file a petition for an ex parte temporary gun violence restraining order (GVRO), a one year GVRO, or renewed GVRO. They include: (1) an employer; (2) a coworker who has had substantial and regular interactions with the person for at least one year and with the approval of their employer; or (3) an employee or teacher of secondary or postsecondary school that the subject person has attended in the past 6 months, with the approval of a school administrator or supervisor.
Late Payment of Wages (A.B. 673). This law provides that penalties for late payment of wages can be recovered by the Labor Commissioner, payable to the affected employee, as a civil penalty or by the employee as a statutory penalty in a hearing pursuant to the Labor Commissioner’s authority under the Labor Code. The affected employee may also pursue penalties for the late payment of wages through the Private Attorneys General Act (PAGA) but cannot also recover statutory penalties for the same violation.
Governor Newsom did veto a few bills that would have impacted California employers including the following. However, it is likely that some or all of these bills may reappear in the next legislative session so employers should keep these on their radar.
Immigration Documents Protection (A.B. 589). This law would have imposed a new workplace posting related to work authorization documents and a new “Worker’s Bill of Rights” notice to be provided to employees before verifying an employee’s employment authorization.
Call Centers (A.B. 1677). This law would have required any employer with a call center in the state who intends to relocate the call center to notify the Labor Commission at least 120 days before the relocation or face a civil penalty.
Discrimination Against Victim of Sexual Harassment Prohibited. (A.B.171) This bill would have expanded Labor Code 230(e)(1), which currently prohibits an employer from discharging or discriminating against an employee because of the employee’s status as a victim of domestic violence, sexual assault or stalking, to include victims of sexual harassment. It would have created a rebuttable presumption of unlawful retaliation based on the employee’s status as a victim of domestic violence, sexual assault, sexual harassment, or stalking if an employer took certain adverse actions against the employee (i.e. discharge, demotion, suspension, or any other adverse actions), within 90 days of the date the victim provided notice or when the employer had actual knowledge of the status.
Federal Law Update: FLSA Final Overtime Rule.
While this e-alert is intended to focus on California legislative developments, it is important to highlight, for our clients with employees outside of California, that on September 24, 2019, the U.S. Department of Labor issued its long awaited Final Rule on Overtime (Final Rule). Key features of the Final Rule include:
- Raises salary threshold necessary, along with satisfying the applicable duties tests, for the executive, administrative and professional exemptions from the Fair Labor Standards Act (FLSA) minimum wage and overtime pay requirements (also called “White Collar” exemptions) from $455 to $684 (or $35,568 per year) for a full time worker
- Raises the total compensation level to qualify for the “highly compensated employee” exemption from $100,000 to $107,432.
- Allows employers to count nondiscretionary bonuses and commissions that are paid at least annually to satisfy up to 10% of the white collar salary threshold for exempt status.
The Final Rule will become effective on January 1, 2020.
California employers know that when there is a federal and state law on the same subject, they must follow the law that is most favorable to the employee to ensure their compliance with both laws. With that in mind, employers with employees in California must ensure their compliance with the California minimum wage and corresponding salary requirement for exempt status under state law. Effective January 1, 2020, the California minimum wage will increase to $12 per hour for employers with 25 or fewer employees, and to $13 per hour for employers with 26 or more employees. This means the salary threshold for California white collar employees will increase to $49,920 or $54,080 per year, respectively (or twice the minimum wage based on a 40 hour week). Local ordinances in certain cities may impose even higher minimum wage requirements.
For more information about the Final Rule, see: https://www.dol.gov/whd/overtime2019/.
Employer Action Items for 2020:
To ensure your compliance with the new California employment laws, employers with California employees are encouraged to do the following:
- Review your independent contractor relationships to ensure you can satisfy the ABC test.
- Reassess whether arbitration agreements should be used.
- Note the new compliance deadlines for training, and make sure sex harassment training materials are updated.
- Review and update the policies in your employee handbook to reflect the changes imposed by these new laws, including:
- Dress and grooming policies
- Lactation accommodation
- Organ donation leave
- Review your pay practices and policies to ensure nonexempt employees are paid at least the applicable minimum wage, and that the salaries of white collar exempt employees’ satisfy the increased salary thresholds.
- Provide training to managers on the new legal requirements, and refresher training on other topics to minimize potential liability.
For further information, please contact one of our employment attorneys.