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New Laws for California Employers in 2020

December 23, 2019 Articles

The California Legislature and Governor Newsom have passed a sizable list of new laws governing the workplace in 2020. Employers are, once again, advised to evaluate their workplace rules and practices to insure they keep pace with these changes.

Employees and Independent Contractors (Effective January 1, 2020)

Assembly Bill 5 codifies the so-called “ABC test” for distinguishing employees from independent contractors that was adopted by the California Supreme Court in its April 2018 Dynamex decision. The ABC test establishes a presumption that workers are employees unless the hiring entity demonstrates that the worker (a) is free from the control and direction of the hiring entity in connection with the performance of the work, (b) performs work that is outside the usual course of the hiring entity’s business, and (c) is customarily engaged in an independently established trade, occupation, or business. Dynamex had only expressly applied to claims arising under the state Wage Orders, leaving debate over its application to other types of claims. AB5 expands the ABC test to provisions of the Labor Code and Unemployment Insurance Code.

AB5 exempts various specified occupations, industries, and business relationships from the Dynamex test, though it does not automatically deem those exempted workers independent contractors – rather, their status will be assessed under the more flexible multifactor Borello test. The exemptions include the following:

  • Certain professional occupations, including licensed insurance agents, physicians, doctors, lawyers, architects, engineers, private investigators, and accountants; registered securities broker-dealers or investment advisers; direct sales salespersons; and commercial fishermen.
  • Workers operating under certain types of professional services contracts that meet additional sub-criteria, including human resources administrators, marketing professionals, travel agents, graphic designers, fine artists, photographers, writers/journalists, and licensed barbers and cosmetologists.
  • Construction subcontractors, motor clubs, and real estate and repossession agency licensees that satisfy certain criteria.
  • “Bona fide business-to-business contracting relationships” where a “business service provider” contracts to provide services to another “contracting business,” if the contracting business demonstrates that 12 criteria are all satisfied. The criteria include that the business service provider is free from the control and direction of the contracting business, is customarily engaged in an independently established business of the same nature as that involved in the work performed, provides services directly to the contracting business rather than to the contracting business’s customers, maintains a business location separate from the contracting business, actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the contracting business, provides its own tools, vehicles, and equipment to perform the services, and can negotiate its own rates.
  • Certain “referral agencies” – businesses that connect clients with service providers in specified industries of dog walking, dog grooming, home cleaning, minor home repair, moving, errands, furniture assembly, animal services, web design, picture hanging, pool cleaning, yard cleanup, graphic design, photography, tutoring, and event planning – can have Borello apply instead of Dynamex if they can establish all of 10 requirements, which are similar to the above-mentioned business-to-business-contractor factors.

AB5 declares that it does not constitute a change in, but rather is declaratory of, existing law with regard to violations of the Labor Code relating to Wage Orders (such as meal and rest breaks, overtime, and minimum wage), thus giving retroactive effect to those types of claims – which effectively have a 4-year statute of limitations under California’s Unfair Competition Law.

AB5 also empowers city attorneys in large cities such as San Francisco, San Jose, and Los Angeles to enforce AB5’s new worker-classification standards by bringing an action for injunctive relief to prevent the continued misclassification of employees.

Employment Discrimination: Mandatory Arbitration (Effective January 1, 2020)

AB 51 will ban employers from requiring any applicants or existing employees to agree to arbitration “as a condition of employment, continued employment, or the receipt of any employment-related benefit.” In other words, employers will no longer be permitted to mandate arbitration with their employees.

Importantly, the law does not restrict employers from offering arbitration procedures to their employees as an option. If employees voluntarily agree to accept arbitration, they presumably will still be restricted from pursuing class or individual civil actions for their employment-related disputes. Thus, one option for employers is to revise their current arbitration procedures and forms to remove the mandatory component, making clear that the agreement is entirely optional. Of course, employers must exercise caution when doing so, carefully evaluating the risks and benefits for each specific workforce or individual employee.

AB 51 is silent as to any mandatory arbitration agreements entered into prior to January 1, 2020. Thus, the arbitration protocol employers already have in place now seems protected.

This law directly impacts all employment contracts or agreements that mention arbitration. Employers should promptly evaluate their current standard forms, and plan to update any mandatory arbitration procedures by the New Year.

Arbitration Agreements: Enforcement (Effective January 1, 2020)

SB 707 provides that if an employer fails to pay required arbitration fees (either associated with initiation of the arbitration or during the pendency of the arbitration) within 30 days of the due date, the employer is in material breach of the arbitration agreement, and the employee may either proceed with a claim in court or obtain an order requiring the employer to pay the arbitration fees and proceed in arbitration, along with an order imposing various forms of sanctions. SB 707 also requires private arbitration companies to collect and report demographic data in the aggregate relative to ethnicity, race, disability, veteran status, gender, gender identity, and sexual orientation of all arbitrators as self-reported by the arbitrators.

Employment Discrimination: Limitation of Actions (Effective January 1, 2020)

Assembly Bill 9 extends from one year to three years the statute of limitations period for filing complaints alleging employment discrimination and harassment with the Department of Fair Employment and Housing. This further signifies the importance of documenting responses to complaints of discrimination and harassment, and retaining those records

Employees’ Personal Information Excluded From California Consumer Privacy Act Until January 1, 2021

For covered employers, AB 25 delays most of the obligation to comply with the California Consumer Privacy Act (CCPA) with respect to employees’ information until January 1, 2021. Although the CCPA is expressly directed at consumer privacy, it also has implications for employment-related data. Because the CCPA defines “personal information” broadly, courts may interpret that term to cover many categories of data collected from employees, applicants, directors, contractors, or other personnel.

For covered employers, two provisions have not been delayed by AB 25 and will take effect on January 1, 2020: (1) “at or before the point of collection,” covered employers must notify applicants, employees, directors, contractors, and other personnel of “the categories of personal information to be collected and the purposes for which the categories of personal information shall be used,” and (2) covered employers will be liable for certain security breaches concerning the personal information of employees, applicants, contractors, or other personnel.

For more information about the CCPA’s application to employers, including an explanation of which employers are covered and more details about the two provisions taking effect on January 1, 2020, visit Farella’s client alert regarding the CCPA here.

Employees Authorized to Recover Statutory Penalties for Late Payment of Wages (Effective January 1, 2020)

AB 673 allows employees to recover statutory penalties for an employer’s failure to timely pay wages. Prior law authorized the Labor Commissioner to pursue civil penalties against employers for these late payments. Employers were subject to penalties of $100 for the initial violation and $200 plus 25% of the amount unlawfully withheld for each additional violation. AB 673 instead authorizes employees - as opposed to the Labor Commissioner - to bring these claims for statutory penalties. The employee is entitled to recover the statutory penalty provided for in the statute, or civil penalties under PAGA, but not both.

Settlement Agreements: Restraints on Future Employment (Effective January 1, 2020)

AB 749 voids settlement agreement terms entered on or after January 1, 2020 that preclude the employee from obtaining future employment with the employer. AB 749’s prohibition is triggered if the employee has filed a claim against the employer in court, administrative agency, or through the employer’s internal complaint process. The prohibition is limited to agreements “to settle an employee dispute,” though AB 749 does not expressly provide that the dispute need be the same as the initial “claim.” Thus, the settlement agreement need not expressly be to resolve whatever claim the employee may have filed through the employer’s internal complaint process in order to fall within AB 749’s gambit.

AB 749 contains two narrow exceptions. The first, most explicit and reflective of the #MeToo movement, is that the contractual prohibition does not apply to persons who the employer determines in good faith have engaged in sexual harassment (as defined by the FEHA) or sexual assault (as defined in the Cal. Penal Code). Of course, expressly acknowledging such a finding in any settlement agreement or other documentation will involve both negotiation and legal complications.

The second exclusion is more ambiguous. Rather than allow contractual provisions, it seems intended to clarify that employers may internally designate a former employee as ineligible for rehire if “there is a legitimate non-discriminatory or non-retaliatory reason for . . . refusing to rehire the person.” This language suggests that employers may not decline to rehire persons simply because they have raised claims. Moreover, the language does not appear to authorize an agreement by such persons not to reapply. Rather, the language appears to simply allow employers to decline to rehire persons because they performed inadequately or otherwise engaged in disqualifying behavior during their prior employment experience.

In terms of remedies, the statute will void offending agreement provisions. Though the statute does not recite a financial penalty, and is not part of the California Labor Code, a pattern of offending severance agreements could support a PAGA claim pursuant to Cal. Labor Code §432.5, which prohibits employers from requiring an employee to agree to a term the employer knows to be illegal.

Living Organ Donation (Effective January 1, 2020)

AB 1223 requires private employers with 15 or more employees to provide an additional 30 days of unpaid leave per year for the purpose of organ donation. This expands the existing requirement for employers to provide employees with up to 30 days of paid leave per year for the purpose of organ donation. The one-year period, consisting of twelve (12) consecutive months, begins on the date the employee’s leave begins.

AB 1223 also prohibits a life, long-term care, or disability insurance policy other than health insurance, issued, amended, renewed, or delivered on or after January 1, 2020 from refusing, limiting, or otherwise discriminating in the offering, issuance, cancellation, or any other condition of the insurance policy for an individual based solely on the person’s status as a living organ donor.

Further Expansion of Lactation Accommodations

Effective 2019, California law required employers to provide a room “other than a bathroom” to accommodate employees expressing breastmilk. Effective January 1, 2020, employers are not only required to provide a safe and clean private room (other than a bathroom), in close proximity to the employee’s workstation, but the room must also contain a surface for a breast pump, a place to sit, and access to electricity. Employers must also provide a sink with running water and a refrigerator (or other cooling device) in close proximity to the employee’s workstation.

SB 142 equates a failure to provide a reasonable lactation break or space with a failure to provide a rest break and also subjects the employer to a $100 civil penalty per violation. Employers with 50 or fewer employees may be exempted from certain of these requirements if they can demonstrate an undue hardship. Special requirements are provided for agricultural workers or employers in a multitenant building or multiemployer worksite.

Employers should review the accommodation policy in their employee handbook as the new law requires formulaic language about lactation accommodation, including the employee’s rights to file a complaint with the Labor Commissioner.

Discrimination: Hairstyles (Effective January 1, 2020)

SB 188, or the “Crown Act,” bans discrimination based on an employee’s hairstyle. The bill expands the definition of “race” under the FEHA to include traits historically associated with race, including but not limited to hair texture and hairstyles such as afros, braids, locks, and twists.

The Crown Act adds to a growing body of laws, regulations, and administrative guidance pertaining to employers’ dress codes and grooming standards. When developing dress and grooming policies, employers must be careful to balance a desire to create an organization’s “image” or “brand” with the many legal protections afforded to employees. For more information about the Crown Act and other legal authority related to dress and grooming codes, see Farella’s client alert here.

Labor Commissioner to Pursue Additional Wage Claims (Effective January 1, 2020)

Prior law authorized the Labor Commissioner to issue citations for wages paid below the minimum wage. SB 688 expands the Labor Commissioner’s authority to issue citations. Effective January 1, 2020, the Labor Commissioner will also have authority to issue citations if the wages paid are less than the wages the employer and employee agreed to, even if the paid wages exceed the minimum wage.

Discrimination: Complaints: Administrative Review (Effective January 1, 2020)

SB 229 expands the enforcement mechanisms available under Labor Code § 98.74 when the Labor Commissioner cites an employer for violating the Labor Code’s anti-discrimination and retaliation provisions. Under Labor Code § 98.74, once the Labor Commissioner issues a citation against an employer, the employer has 30 days after service of the citation to request an informal hearing to challenge the citation. If no request is made, the citation becomes final. SB 229 provides that, within 10 days of the citation becoming final, the Labor Commissioner shall file the citation with the superior court and the court must immediately enter judgment and allow the Labor Commissioner to file a petition to show cause why injunctive or nonmonetary relief should not be ordered. The bill also requires employers challenging the Labor Commissioner’s citation to post a bond equal to the total amount of penalties and other monetary relief.

Sexual Harassment Training: Requirements (Effective August 30, 2019)

SB 778 requires California employers with five or more employees to provide sexual harassment training to all employees by January 1, 2021. This deadline was extended one year from the previous deadline of January 1, 2020 under SB 1343. Nonsupervisory employees must receive one hour of training and supervisors must receive two hours of training every two years. Those trained in 2019 are not due for another training until 2021.

Under SB 530, the deadline for seasonal and temporary worker sexual harassment training was also extended to January 1, 2021.

The Department of Fair Employment and Housing (DFEH) anticipates providing online training courses, required by SB 1343, by early 2020.

Although the DFEH indicates that employees who have received training in the past two years from a current, prior, or a joint employer do not have to retake the training, the current employer is responsible for ensuring the employee’s compliance with the training requirement which may involve verifying compliance with a prior, alternative, or joint employer. The current employer is also required to provide such employees with a copy of the employer’s anti-harassment policy and have them acknowledge it.

For more information about the new California sexual harassment training requirements, see Farella’s prior client alert here, subject to the updates noted above.

Employers: Dependent Care Assistance Program: Notice to Employees (Effective January 1, 2020)

AB 1554 adds Section 2810.7 to the Labor Code, which requires employers to notify employees who participate in flexible spending accounts (FSAs)—including, but not limited to, dependent care, health, or adoption assistance FSAs—of any deadline to withdraw funds before the end of the plan year. Section 2810.7 provides a non-exhaustive list of how notice may be given, which includes by e-mail, phone, text message, postal mail, or in person. Although the law does not indicate when notice must be given, it does mandate that the notice be provided in two separate forms, one of which may be electronic.

It is likely that ERISA will preempt the law’s application to health FSAs. Additionally, given that most FSAs permit participants to submit claims after the end of the plan year via a run-out period, the notice is likely only to be required in situations where the status quo changes mid-year, such as with an employee’s termination.

Paid Family Leave (Effective July 1, 2020)

The Paid Family Leave (PFL) benefits program provides wage replacement to workers who take time off from work for an ill child, spouse, parent, grandparent, sibling, or domestic partner, or to bond with a child within one year of birth or adoption. The PFL program does not provide job protection, but other state and federal laws such as the federal Family and Medical Leave Act and the California Family Rights Act do provide such protection. Currently, the maximum duration of PFL benefits employees may receive from California’s State Disability Insurance program is six weeks. SB 83 extends this duration so that, as of July 1, 2020, eligible employees may claim up to eight weeks of PFL pay benefits within a 12-month period. 

San Francisco employers have additional obligations to employees who receive PFL benefits for child bonding purposes. The San Francisco Paid Parental Leave Ordinance (PPLO) requires San Francisco employers with 20 or more employees worldwide to supplement eligible employees’ PFL benefits, such that the employee receives 100% of the employee’s gross weekly wage, subject to a cap. On July 1, 2020, when the PFL period increases from six to eight weeks, covered employers will be required to provide eligible employees with eight weeks of supplemental compensation under the PPLO.

Prior to July 1, 2020, employers may consider reviewing leave policies, procedures and practices, and their parental or other paid leave benefits.

Occupational Injuries and Illnesses: Reporting (Effective January 1, 2020)

AB 1804 requires employers to immediately report any “serious occupational injury, illness or death to the Division of Occupational Safety and Health by telephone or email” or risk being subject to a $5,000 civil penalty. This requirement is in addition to the existing requirement that employers report every occupational injury or illness of employees that results in lost time beyond the date of the injury or illness, or that requires medical treatment beyond first aid. 

AB 1805 redefines and broadens the scope of what employers must regard as a “serious injury or illness.” Under existing law, a “serious injury or illness” requiring reporting is one that results in inpatient hospitalization for more than 24 hours. In contrast, the new definition encompasses any inpatient hospitalization, without a minimum time requirement, and specifically includes any employee who suffers from amputation or the loss of an eye.

AB 1805 also revises the definition of “serious exposure” to include any exposure to a hazardous substance in an amount “sufficient to create a realistic possibility that death or serious physical harm in the future” could result from such exposure.

Lastly, this bill also revises the definition of “serious violation.” Now, any violation that creates a “realistic possibility” of death or serious injury will be regarded as a “serious violation.” Overall, this bill broadens the scope of serious injuries or illness, and employers can expect to report a higher number of qualifying incidents.

Janitorial Workers: Sexual Violence and Harassment Prevention Training

AB 547 expands upon the Property Service Workers Protection Act (Act), signed into law in 2016, which required janitorial employers to register with state and the Division of Labor Standards Enforcement (DLSE) to establish biennial sexual violence and harassment prevention training requirements for all employees by January 1, 2020. To date, the DLSE has not yet finalized such training requirements, advising that employers may for time being provide employees with the Department of Fair Employment and Housing Sexual Harassment pamphlet (English version here and Spanish version here).

Notably, the Act established that the requisite training would need to be conducted in-person. This suggests that purely video, online, or e-learning training will not suffice, unlike the general anti-harassment training requirement for employers under Government Code Section 12950.1. The Act also required new and renewal registrations with the state to demonstrate compliance with the sexual violence and harassment prevention training requirements starting January 1, 2020.

AB 547 clarifies that the sexual violence and harassment prevention training content and trainer qualifications for supervisors must meet the standards set forth under Government Code Section 12950.1.

While the training content for nonsupervisory training must also meet Government Code Section 12950.1’s requirements, AB 547 establishes distinct requirements for nonsupervisory trainings, including certain trainer qualifications. AB 547 requires the Director of Industrial Relations to organize a training advisory committee to compile a list of qualified organizations that in turn must provide to employers certain qualified peer trainers eligible to provide nonsupervisory training. Qualified organizations must be a nonprofit corporation under 26 U.S.C. Section 501(c) and meet other statutory requirements such as having at least 30 qualified peer trainers available and access to local sexual violence-related trauma services, including other education and experience requirements. Peer trainers are required to have two years of nonsupervisory work experience in the janitorial or property service industry, be fluent in the language(s) of the workers to be trained, and meet other requirements. The Department of Industrial Relations must post its compilation of qualified organizations online by January 1, 2021.

Employers are required to pay $65 per participant for nonsupervisory training by a qualified peer trainer referred by a qualified organization, subject to an alternative collective bargaining agreement. Upon training completion, employers must certify that it has complied with nonsupervisory training and payment of same to the DLSE. Employers are required to utilize sign-in sheets for participants’ printed writing and signatures.

If the online list of qualified organizations indicate that there is no qualified peer trainer available to train nonsupervisory workers in a particular county, or if the trainers are not available to meet an employer’s needs, the employer may utilize a trainer prescribed by the Department of Fair Employment and Housing with respect to sexual harassment training to provide the requisite training in that county.

Civil penalties may be issued for janitorial employers that fail to register with the state ($100 per day up to a $10,000 maximum) or make a material misrepresentation on their registration application ($10,000 per violation), or any person or entity that contracts with a janitorial employer lacking proper registration (minimum of $2,000 not to exceed $10,000 for a first violation, minimum of $10,000 not to exceed $25,000 for a second violation).

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