Legislative Update: New Employment Laws for California

10.17.2023

The 2023 legislative session saw many amendments to existing law and numerous vetoes from the Governor leading up to the October 14 deadline to approve proposed bills. Below we summarize the new California employment laws, which (unless otherwise noted) will go into effect on January 1, 2024.

AB 594 (Labor Code Enforcement)

AB 594 will authorize a public prosecutor to prosecute a civil or criminal action for a violation of specified provisions of the Labor Code or to enforce those provisions independently, until January 1, 2029. This bill provides that, in any action initiated by a public prosecutor or the Labor Commissioner to enforce the Labor Code, any individual agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration shall have no effect on the authority of the public prosecutor or the Labor Commissioner to enforce the Labor Code.

AB 647 (Grocery Employee Protections Upon Change In Control)

Existing law, upon a change in control of a grocery establishment, requires an incumbent grocery employer, within 15 days after the execution of the transfer document, to provide to the successor grocery employer with a list of eligible grocery workers, and requires the successor grocery employer to maintain a preferential hiring list of eligible grocery workers, to hire from that list for 90 days after the grocery establishment is fully operational and open to the public under the successor grocery employer, and to retain each eligible grocery worker hired for at least 90 days after their commencement date, except as specified. Existing law defines “grocery establishment” for purposes of these provisions as a retail store that is over 15,000 square feet that meets specified requirements, and excludes from the definition a retail store that has ceased operations for 6 months or more.

Effective January 1, 2024, AB 647 will exclude from the above requirements a retail store that has ceased operations for 12 months or more, and would include distribution centers that meet specified requirements within the definition of “grocery establishment,” regardless of square footage. The bill requires an incumbent grocery employer to also provide the list of eligible grocery workers to any collective bargaining representatives, and revises the employee information an incumbent grocery employer is required to provide to the successor grocery employer.

The law specifies that parties may, by collective bargaining agreement, provide that the agreement supersedes the provisions described above providing for employment protections for grocery workers.

AB 1076 and SB 699 (Non-Compete Agreements)

AB 1076 codifies Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937 by specifying that California’s statutory provision voiding noncompete contracts is to be broadly construed to void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored, that does not satisfy specified exceptions. California’s Unfair Competition Law (UCL) makes various practices unlawful and makes a person who engages in unfair competition liable for a civil penalty. The bill states that these provisions are applicable to contracts where the person being restrained is not a party to the contract.

AB 1076 also makes it unlawful to include a noncompete clause in an employment contract, or to require an employee to enter a noncompete agreement, that does not satisfy specified exceptions. AB 1076 requires employers to notify current and former employees in writing by February 14, 2024, that the noncompete clause or agreement is void. This bill would make a violation of these provisions an act of unfair competition pursuant to the UCL.

On a related note, SB 699 establishes that any contract that is void under California’s non-compete prohibition is unenforceable regardless of where and when the contract was signed. The bill prohibits an employer or former employer from attempting to enforce a contract that is void regardless of whether the contract was signed, and the employment was maintained, outside of California.

AB 1228 (Fast Food Minimum Wage)

AB 1228 will result in fast food employee minimum wages rising to $20 per hour on April 1, 2024 at national fast-food chains operating in California.

A similar piece of legislation, the Fast Food Accountability and Standards Recovery Act, AB 257, was adopted last year. However, fast food companies forestalled implementation of the legislation by amassing enough signatures to put the issue on a statewide ballot referendum in November 2024. This new legislation, AB 1228, is a negotiated compromise between the fast food businesses and labor unions to avoid a costly statewide ballot fight. The businesses agreed to withdraw the ballot measure earlier this Fall as part of this compromise.

For employees, AB 1228 results in the following benefits:

The definition of a “national fast-food chain” is now based on 60 limited-service restaurants as opposed to 100 establishments under the previous law;
The possibility of annual wage increases beginning January 1, 2025, of either 3.5% or an amount based on average changes to the consumer price index for urban wage earners and clerical workers each year, whichever is lower; and
A Fast Food Council that can recommend minimum standard for hours and other working conditions.

For employers, AB 1228 does the following:

Unions agreed to pause efforts to pass a law to make fast-food franchisers legally liable for labor violations committed by franchisees, which is a potential saving on legal costs;
Local governments will not be able to force fast-food companies to increase wages regionally for workers beyond increases approved by the State;
Lawmakers agreed to defund the Industrial Welfare Commission, which unions were going to use as an insurance policy if AB 257 was not implemented; and
Fast-food companies saved millions of dollars by calling off the referendum battle over AB 257.

AB 365 (Arbitration Agreement Enforcement)

This bill provides that trial court proceedings will not be automatically stayed during the pendency of an appeal of an order dismissing or denying a petition to compel arbitration.

SB 525 (Health Care Industry Minimum Wage)

This bill establishes five separate minimum wage schedules for covered health care employees, depending on the nature of the employer.

Under SB 525, any “covered health care facility” (as defined within the law) with 10,000 or more full-time equivalent employees (“FTEE”); any covered health care facility employer that is a part of an integrated health care delivery system or a health care system with 10,000 or more FTEEs; a covered health care facility employer that is a dialysis clinic or is a person that owns, controls, or operates a dialysis clinic; or a covered health facility owned, affiliated, or operated by a county with a population of more than 5,000,000 as of January 1, 2023, shall pay a minimum wage to covered health care employees of $23 per hour from June 1, 2024, to May 31, 2025, inclusive; $24 per hour from June 1, 2025, to May 31, 2026, inclusive; and $25 per hour from June 1, 2026, and until as adjusted.

This new law also requires, for any hospital that is a hospital with a high governmental payor mix, an independent hospital with an elevated governmental payor mix, a rural independent covered health care facility, or a covered health care facility that is owned, affiliated, or operated by a county with a population of less than 250,000 as of January 1, 2023, the minimum wage for covered health care employees to be $18 per hour from June 1, 2024, to May 31, 2033, inclusive, and $25 per hour from June 1, 2033, and until as adjusted.

This bill requires, for specified clinics that meet certain requirements, the minimum wage for covered health care employees to be $21 per hour from June 1, 2024, to May 31, 2026, inclusive; $22 per hour from June 1, 2026, to May 31, 2027, inclusive; and $25 from June 1, 2027, and until as adjusted.

SB 525 requires, for all other covered health care facility employers, the minimum wage for covered health care employees to be $21 per hour from June 1, 2024, to May 31, 2026, inclusive; $23 per hour from June 1, 2026, to May 31, 2028, inclusive; and $25 per hour from June 1, 2028, and until as adjusted.

This bill provides that a covered health care facility that is county owned, affiliated, or operated must implement the appropriate minimum wage schedule described above, beginning January 1, 2025.

SB 525 also separately requires, for a licensed skilled nursing facility, the minimum wage for certain other covered health care employees, to be $21 per hour from June 1, 2024, to May 31, 2026, inclusive; $23 per hour from June 1, 2026, to May 31, 2028, inclusive; and $25 per hour from June 1, 2028, and until as adjusted. The bill makes this minimum wage requirement effective only when a patient care minimum spending requirement applicable to skilled nursing facilities is in effect.

This bill also requires, for covered health care employment where the employee is paid on a salary basis, that the employee earn a monthly salary equivalent to no less than 150% of the health care worker minimum wage or 200% of the applicable minimum wage, whichever is greater, for full-time employment in order to qualify as exempt from the payment of minimum wage and overtime.

This bill, by March 1, 2024, requires the Department of Industrial Relations, in collaboration with the State Department of Health Care Services and the Department of Health Care Access and Information, to develop a waiver program that allows a covered health care facility to apply for and receive a temporary pause or alternative phase in schedule of the minimum wage requirements described above.

This bill prohibits any ordinance, regulations, or administrative action that is applicable to a covered health care facility and that establishes, requires, imposes, limits, or otherwise relates to wages or compensation for covered health care facility employees from being enacted or enforced in or by any city, county, or city and county, except as provided.

SB 553 (Workplace Violence Prevention Plans)

SB 553 requires all employers, with few exceptions, to design, implement, and maintain workplace violence prevention plans (“WVPP”) by July 1, 2024. WVPPs will be structured similar to IIPPs and will require an employer to designate the person responsible for implementing the program, identify and correct hazards through periodic inspections, train employees on hazards, and maintain records of incidents. However, unlike an IIPP, the law requires employers “to obtain the active involvement of employees” and any unions “in developing and implementing the plan, [and], in designing and implementing training.”

Additionally, the law requires employers to train employees on numerous topics, including the law’s definitions and requirements, the WVPP itself, the documentation required under the plan, how to report incidents and concerns, and ways employees can participate in the WVPP’s development and implementation.

The law also requires employers to maintain various records, including a separate violent incident log, records of the employees’ training, and records of workplace violence investigations. Under the new law, employee concerns of workplace violence must be investigated as part of the employer’s responsibility to identify and correct workplace hazards, and then the results of the investigation must be communicated to the employee. Employers also have a duty to conduct an investigation after incidents of workplace violence.

SB 616 (Paid Sick Leave)

SB 616 expands paid sick leave entitlements for California employees to 40 hours or five days (whichever is greater) per year effective January 1, 2024 by amending California Labor Code sections 245.5, 246, and 246.5.

Employers will generally have the following three options to choose from for paid sick leave compliance purposes:

As before, the employee can accrue one hour of sick leave for every 30 hours worked; or
The employee can receive an upfront grant of 40 hours or five days of paid sick leave (whichever is greater) at the beginning of employment and each 12 month period thereafter (“front-loading”) (no carryover or accrual of sick leave is required); or
As before, the employee can accrue sick leave at a rate other than one hour of sick leave for every 30 hours worked, provided the accrual is regular and results in the accrual of no less than 24 hours or 3 days of sick leave by the 120th day of employment and no less than 40 hours or 5 days of sick leave by the 200th day of employment.

When sick leave is accrued (i.e., it is not being frontloaded), SB 616 allows employers to impose a maximum accrual cap of 80 hours or 10 days and a use limit of 40 hours or five days per 12-month period. Under existing law, the allowable maximum accrual cap is 48 hours or six days and the allowable use limit is 24 hours or three days per 12 month period.

SB 616 also changes the sick leave requirement for providers of in-home supportive services and individual providers of waiver personal care services effective January 1, 2024, to permit an upfront grant of 40 hours or five days of sick leave, with no accrual or carryover, at the beginning of employment and each 12-month period thereafter.

SB 700 (Cannabis Use)

Effective January 1, 2024, AB 2188 (passed last year) makes it unlawful for an employer to discriminate against a person in hiring, termination, or any term or condition of employment, or to otherwise penalize a person, for either: (1) the person’s off-duty cannabis use away from the workplace; or (2) the results of an employer-required drug screening test that has found the person to have non-psychoactive cannabis metabolites in their hair, blood, urine, or other bodily fluids.

AB 2188 does not permit employees to possess or use marijuana on the job or otherwise interfere with the rights of an employer to maintain a drug-free and alcohol-free workplace. An employer can still refuse to hire an applicant based on a scientifically valid pre-employment drug screening conducted through methods that do not screen for non-psychoactive cannabis metabolites, including via impairment tests and tests that identify the presence of tetrahydrocannabinol (THC) in an individual’s bodily fluids.

AB 2188 contains exceptions, including employees in the building and construction trades, and does not apply to applicants or employees hired for positions that require a federal background investigation or security clearance. The law also does not preempt state or federal laws that require applicants or employees to be tested for controlled substances as a condition of employment, to receive federal funding or federal licensing-related benefits, or to enter into a federal contract.

On a related note, SB 700 makes it unlawful for an employer to request information from an applicant for employment relating to the applicant’s prior use of cannabis. Further, under SB 700, information about a person’s prior cannabis use obtained from the person’s criminal history could not be considered for employment purposes if related to prior cannabis use off the job and away from the workplace or based upon the results of a prior employer-required drug test that found nonpsychoactive cannabis metabolites in their system, unless the employer is permitted to consider or inquire about that information under a specified provision of the California Fair Employment and Housing Act or other state or federal law.

SB 723 (Rehire / Retention of Displaced Employees in Hospitality and Service Industries)

This bill amends SB 93, signed by the Governor in 2021 and which required certain employers in hospitality and service industries to rehire employees laid off due to the COVID-19 pandemic. Current law requires a covered employer to offer its laid-off employees specified information about job positions that become available for which the laid-off employees are qualified, and to offer positions to those laid-off employees based on a preference system, in accordance with specified timelines and procedures until December 31, 2024. The law also prohibits a covered employer from refusing to employ, terminating, reducing compensation, or taking other adverse action against a laid-off employee for seeking to enforce their rights under these provisions.

Existing law defines the term “laid-off employee” to mean any employee who was employed by the employer for six months or more in the 12 months preceding January 1, 2020, and whose most recent separation from active service was due to a reason related to the COVID-19 pandemic, including a public health directive, government shutdown order, lack of business, a reduction in force, or other economic, nondisciplinary reason related to the COVID-19 pandemic.

This bill redefines “laid-off employee” to mean any employee who was employed by the employer for six months or more and whose most recent separation from active employment by the employer occurred on or after March 4, 2020, and was due to a reason related to the COVID-19 pandemic, including a public health directive, government shutdown order, lack of business, reduction in force, or other economic nondisciplinary reason due to the COVID-19 pandemic. The bill creates a presumption that a separation due to a lack of business, reduction in force, or other economic, nondisciplinary reason is due to a reason related to the COVID-19 pandemic, unless the employer establishes otherwise by a preponderance of the evidence.

These requirements will expire December 31, 2025.

SB 848 (Reproductive Loss Leave)

SB 848 makes it an unlawful employment practice for an employer to refuse to grant a request by an eligible employee to take up to five days of reproductive loss leave following a reproductive loss event. A “reproductive loss event” means the day or, for a multiple-day event, the final day of a failed adoption, failed surrogacy, miscarriage, stillbirth, or an unsuccessful assisted reproduction.

The bill would require that leave be taken within three months of the event, with exceptions, and pursuant to any existing leave policy of the employer. The bill would provide that if an employee experiences more than one reproductive loss event within a 12-month period, the employer is not obligated to grant a total amount of reproductive loss leave time in excess of 20 days within a 12-month period. Under the bill, in the absence of an existing policy, the reproductive loss leave may be unpaid. However, the bill authorizes an employee to use accrued and available paid sick leave for purposes of this law.

Vetoed Bills

AB 524 (Family Caregiver Status Protection)

This bill would have added family caregiver status as a protected category under the Fair Employment and Housing Act, defined as “a person who provides direct care to a spouse, child, parent, sibling, grandparent, grandchild, domestic partner, or, with respect to an existing employee, any individual previously identified by the employee as a ‘designated person’ under” the California Family Rights Act.

AB 1356 (Cal/WARN Revisions)

This bill would have modified Cal/WARN to provide enhanced employee protections and place the law further out-of-alignment with the federal WARN Act.

SB 403 (Caste Status Protection)

This bill would have added caste status as a protected category under the Fair Employment and Housing Act.

SB 627 (Displaced Workers Opportunity to Transfer)

This bill would have subjected chain employers to rehiring and transfer requirements for employees due to facility closures.

SB 731 (Return to Office Notice)

This bill would have made it an unlawful employment practice for an employer to fail to provide to an employee who was working from home at least 30 calendar days’ advance notice before requiring the employee to return to work in person.

SB 799 (Unemployment Insurance for Striking Employees)

This bill would have restored eligibility for unemployment insurance after the first two weeks for an employee who left work because of a trade dispute.

Conclusion

Please join our complimentary Workplace Wednesday webinar on November 8th for further guidance and employment law updates regarding the 2023 California Legislative Season and our December Breakfast Briefing Tips & Trends for 2024 series which will focus on these new legal requirements and a look into 2024. Employers with questions about or in need of compliance assistance in connection with any of the above laws may also contact the authors or their usual AALRR employment and/or labor law counsel.