California Governor Inks Numerous Expansive Employment Laws for 2020

10.17.2019

On Sunday October 13, 2019, California concluded another legislative session with new Governor Gavin Newsom signing significant employment-related legislation.  The following summarizes the bills that will affect employers going in to 2020.  New laws are generally effective January 1, 2020 unless otherwise indicated. 

AB 5 and AB 170

AB 5 codifies the California Supreme Court’s controversial Dynamex decision (Dynamex Operations West v. Superior Court (2018) 4 Cal.5th 903) and “ABC” test to determine whether an individual is properly classified as an independent contractor. To pass the ABC test, employers must prove the following three elements:

• The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
• The person performs work that is outside the usual course of the hiring entity’s business; and
• The person is customarily engaged in an independently established trade, occupation, or business of the same nature as   that involved in the work performed.

AB 5 clarifies that the ABC test applies to California’s IWC Wage Orders, Labor Code, and Unemployment Insurance Code.

AB 5 exempts certain classifications of workers from the ABC test and instead submit such workers to the traditional multi-factor Borello test for purposes of the Labor Code and Wage Orders.  Those workers include, insurance brokers; physicians, surgeons, dentists, podiatrists, psychologists, or veterinarians; lawyers, architects, engineers, private investigators, and accountants; registered securities broker-dealers, investment advisers, their agents, and representatives; direct sales salespersons; commercial fishermen working on American vessels; marketing, human resources administration, travel agents, graphic designers, grant writers, and artists; photographers, photojournalists, freelance writers, editors, and newspaper cartoonists; licensed estheticians, electrologists, manicurists, barbers, or cosmetologists; real estate agents; licensed repossession agencies; bona fide business-to-business contracting relationships; construction subcontractors; construction trucking services; certain referral agencies, and motor club services.  AB 170 exempts newspaper carriers in the same manner. 

The exemptions apply retroactively to existing claims and actions to the maximum extent permitted by law.  The exemptions do not appear in the section of AB 5 amending the Unemployment Insurance Code and it is unclear whether the exemptions extend to such claims.  However, legislative history to AB 170 suggests the intent of the Legislature was to apply the exemptions to both unemployment insurance and wage and hour claims.   

What this means for employers: Businesses should review their independent contractor agreements and relationships in light of AB 5. Special attention must be paid to the various exemptions created by AB 5 for particular occupations and industries.   

AB 9

AB 9 extends the statute of limitations for employees to file a complaint with the Department of Fair Employment and Housing (“DFEH”) from one year to three years for complaints of discrimination, harassment, and retaliation.

What this means for employers:  Employers must be more diligent about documenting complaints from employees and the response to the complaints.  Document retention policies will need to be adjusted accordingly to ensure that the employer’s documentation of complaints, investigations and resolution of complaints are not prematurely discarded.  Proper documentation of performance issues and documentation of the reasons for disciplinary action and termination decisions will become even more important given the lapse in time it will take to prosecute claims with the extended statute of limitations because supervisors’ memories will fade in such time.

AB 51

AB 51 prohibits employers from requiring applicants or employees to agree, as a condition of employment, to mandatory arbitration, class action or jury waivers relating to the Labor Code and the Fair Employment and Housing Act (“FEHA”).  Under AB 51, an agreement that requires an employee to opt out of a waiver or take any affirmative action in order to preserve their rights is deemed a condition of employment. Arbitration agreements subject to the Federal Arbitration Act (“FAA”) are excluded from this bill. AB 51 does not apply to post-dispute settlement agreements or negotiated severance agreements. 

What this means for employers:  Prior bills that attempted similar restrictions on arbitration agreements were vetoed by Governor Jerry Brown based on federal pre-emption.  The reach of this bill is uncertain due to the FAA carve out and potential legal challenges.  The law only applies to agreements entered unto after January 1, 2020. Current arbitration agreements remain enforceable. Employers should contact their employment counsel to determine if their arbitration agreement is affected by this bill.   

AB 673

AB 673 provides that penalties for late payment of scheduled wages (weekly, biweekly, or semimonthly) shall 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 before the Labor Commissioner. The affected employee may also enforce civil penalties for late payment of wages through the Private Attorneys General Act (“PAGA”) actions but cannot also recover statutory penalties for the same violation.

What this means for employers: The penalties for late payment of scheduled wages (as opposed to final wages) were uncertain prior to the passage of this bill.  Employers will have to be especially careful about meeting scheduled paydays as missed payroll now carries significant penalties that may attract litigation. 

AB 749

AB 749 prohibits settlement agreements from containing a provision that prohibits an employee from working for the employer or any parent company, subsidiary, division, affiliate, or contractor of the employer.  AB 749 states that the restriction on no-rehire provisions will not apply if the employer makes a good faith determination that the person engaged in sexual harassment or sexual assault.  Under AB 749, an employer is not required to continue to employ or rehire a person if there is a legitimate nondiscriminatory or non-retaliatory reason for terminating or refusing to hire an individual.

What this means for employers:  This is another bill in the wave of #Metoo legislation.  Employers will need to review severance and settlement agreements and consult with counsel to determine whether the no-rehire provision is appropriate in each individual case. 

AB 1223

AB 1223 requires employers to grant an employee an additional unpaid leave of absence, not exceeding 30 business days in a one-year period, for the purpose of organ donation.    

What this means for employers:  Employers must amend their Employee Handbook policies concerning this additional time off.  The organ and marrow donation leave law requires employers maintain health insurance for the duration of the leave. 

AB 1554

AB 1554 requires an employer to notify an employee who participates in a flexible spending account of any deadline to withdraw funds before the end of the plan year, excluding plans governed by ERISA.  Employers must provide notice electronically and in one other manner.

What this means for employers:  Employers must determine if non-ERISA FSAs (such as for dependent care) impose a deadline for withdrawal of funds prior to the end of the plan year, particularly for employees who terminate employment or lose eligibility mid-year. 

SB 83

SB 83, which was signed earlier this summer will extend the maximum duration of paid family leave (PFL) benefits from six to eight weeks beginning on July 1, 2020.

What this means for employers:  Employers should update policies including any discussion of PFL benefits in employee handbooks accordingly.

SB 142

SB 142 requires an employer to provide a lactation room, which meets the following requirements:

(A)      The lactation room shall not be a bathroom and shall be in close proximity to the employee’s work area, shielded from view, and free from intrusion while the employee is expressing milk;

(B)      The lactation room shall be safe, clean, and free of hazardous materials;

(C)      The lactation room shall contain a surface to place a breast pump and personal items;

(D)      The lactation room shall contain a place to sit; and

(E)      The lactation room shall have access to electricity or alternative devices, including, but not limited to, extension cords or charging stations, needed to operate an electronic or battery-powered breast pump.

SB 142 further requires an employer to provide access to a sink with running water and a refrigerator suitable for storing milk in close proximity to the employee’s work space.  If a refrigerator cannot be provided, an employer may provide another cooling device suitable for storing milk, such as an employer-provided cooler.

SB 142 deems the denial of a reasonable break time or adequate space to express milk a failure to provide a rest period in accordance with state law.  This bill also prohibits an employer from discharging, or in any manner discriminating or retaliating against, an employee for exercising or attempting to exercise rights under this statute.  

What this means for employers:  This bill expands on existing requirements under federal and California law to provide accommodations and time off for employees desiring to express milk for their infants.  This bill also requires employers to update their employee handbooks with a policy regarding lactation accommodation. 

SB 188

SB 188 amends the definition of race under the California Fair Employment and Housing Act (“FEHA”) to include traits historically associated with race, including, but not limited to, hair texture and protective hairstyles.  “Protective hairstyles” include, but are not limited to, such hairstyles as braids, locks, and twists.

What this means for employers:  Employers should review their dress code policies and practices to ensure compliance with the expansion of law.

SB 707

SB 707 penalizes an employer for failing to timely pay arbitration fees and costs.  Specifically, SB 707 provides that in an employment arbitration that requires the drafting party (usually the employer), to pay certain fees and costs before the arbitration can proceed, if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date, the employer is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel arbitration.  If this occurs, the employee may withdraw the claim for arbitration and proceed in court, and the statute of limitations shall be tolled as of the date of the first filing of a claim in any court, arbitration forum, or other dispute resolution forum.  SB 707 also requires courts to impose mandatory sanctions against the employer for the reasonable expenses, including attorneys’ fees and costs, incurred by the employee as a result of the material breach. 

What this means for employers: Employers seeking to compel arbitration must be mindful to deposit the necessary fees on a timely basis or endanger losing arbitration as a forum to resolve their dispute with the employee. This law likely will be challenged on the basis that it is preempted by the FAA, so stay tuned for further developments.   

SB 778 and SB 530

Last year, Senate Bill 1343 amended Government Code section 12950.1 to require employers with five or more employees to provide two hours of sexual harassment prevention training to all supervisory employees and one hour of sexual harassment prevention training to all nonsupervisory employees by January 1, 2020.

SB 778 extends the deadline to provide the above sexual harassment prevention training to January 1, 2021. 

SB 530 extends to January 1, 2021, the date on which employers of seasonal, temporary, or other employees hired to work for less than six months must begin to provide harassment training to such employees.  The law requires such employees to receive training within 30 days after the hire date or within 100 hours, whichever occurs first. 

SB 530 also allows construction firms signatory to multiemployer collective bargaining agreements to satisfy harassment training obligations by demonstrating that employees received training in one of specified circumstances, such as receiving training from another signatory employer or an apprenticeship program.     

What this means for employers:  Did you think this was going to be all “doom and gloom?”  Employers can breathe a sigh of relief regarding their obligations to provide harassment training has been extended with this bill. Employers who provided the training in 2018 are not required to provide refresher training until 2020, and employers who provided training in 2019 are not required to provide refresher training until 2021.  Thereafter, employers shall provide sexual harassment prevention training to each employee once every two years.

Vetoes

Governor Newsom vetoed the following bills:

• AB 171 would have expanded Labor Code Section 230 to prohibit discrimination or retaliation based on an employee’s status as a victim of sexual harassment, domestic violence, sexual assault, or stalking.
• AB 403 would have extended the statute of limitations to file a retaliation complaint with the Labor Commissioner from six months to two years, and would have authorized a court to award reasonable attorneys’ fees to a prevailing plaintiff. The bill would also have amended Labor Code Section 1102.5, California’s general whistleblower statute, to authorize a court to award attorneys’ fees in such actions. 
• AB 589 would have made it an unlawful employment practice for an employer to confiscate an employee’s passport or other immigration document in the course of committing, or with the intent to commit, trafficking, slavery, involuntary servitude, or a coercive labor practice.
• AB 1478 would have authorized an aggrieved employee to file a civil action against an employer for discriminating against or discharging the employee because the employee: (1) takes time off for jury duty, (2) is a victim of a crime or takes time off to appear in court to comply with a subpoena or other court order as a witness in any judicial proceeding, or (3) is a victim of domestic violence, sexual assault, or stalking or takes time of work to obtain judicial relief.  

Employers with questions regarding the legislation may contact the authors or their usual employment law counsel at Atkinson, Andelson, Loya, Ruud & Romo.

This AALRR alert is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR presentation/publication does not create an attorney-client relationship. The firm is not responsible for inadvertent errors that may occur in the publishing process. 

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