By Bicvan T. Brown
There have been many important employment law changes in California since the beginning of 2020. Tressler's attorneys are dedicated to helping California businesses succeed, and we have put together the following list along with tips for best practices. Here's what we think you should know:
- IT WILL BE MORE DIFFICULT TO CLASSIFY A WORKER AS AN INDEPENDENT CONTRACTOR. (AB 5)
AB 5 cements and expands a California Supreme Court decision, Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (April 30, 2018) to create a stricter standard for business owners to classify workers as independent contractors as opposed to employees. This law presumes all hired workers are employees unless the hiring entity can prove that the worker: A.) is free from the control or discretion of the hiring entity in connection with 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 of the same nature as the work performed for the hiring entity. All three prongs of the “ABC” test must be satisfied to establish the worker is an independent contractor.
AB 5 expands Dynamex’ “ABC” test to non-wage order claims, including Labor Code and Unemployment Insurance Code claims, while carving out exemptions for certain industries and positions. The exempted industries and positions are subject to a less onerous multi-factor test established in 1989 by S.G. Borello & Sons, Inc. v. Dep’t of Industrial Relations, 48 Cal.3d 341 (1989).
Several industries have challenged AB 5. The trucking industry’s challenge resulted in a Judge in the Southern District of California temporarily enjoining prong “B” of the ABC test on December 31, 2019. This means AB 5 currently does not apply to the trucking industry, because it is preempted by federal law. Uber, Lyft, and other gig-economy companies sued the State of California and are pushing a state ballot initiative to block AB 5. Freelance writers alleged AB 5 violates the First Amendment, as they are denied work by virtue of AB 5’s imposition of limits on the number of stories they can write before they are considered an employee. In response to the challenges, on January 10, 2020, Governor Gavin Newsom announced that his proposed 2020 California budget will include roughly $20 million for AB 5 enforcement.
Best Practices Tip: Work with knowledgeable counsel to determine the proper classification of all current independent contractor relationships. With experienced counsel, explore the variety of outside-the-box options for continuing independent contractor relationships.
- DENIAL OF LACTATION BREAK TIME & SPACE CAN INCUR REST BREAK PENALTIES (SB 142)
Denial of a reasonable break time or adequate space for lactation shall be deemed a violation of Labor Code 226.7 and allow an additional hour of pay at the employee’s regular rate of pay for each workday that the lactation break time or space is not provided. Further, SB 142 requires that a lactation policy be in an employee handbook or that these policies are made available and distributed to employees upon hire and upon inquiry about/request parental leave. If the employer cannot comply with time/space rules, the employer must provide a written response to the employee.
The lactation break time rules are:
- Every employer SHALL provide a reasonable amount of break time to accommodate an employee desiring to express breast milk for the employee’s infant child each time the employee needs to express milk.
- The break time shall, if possible, run concurrently with any break time already provided to the employee.
- Break time that does not run concurrently with the authorized rest time under the Industrial Welfare Commission shall be unpaid.
The lactation space rules are:
- Not a bathroom;
- In close proximity to the employee’s work area;
- Shielded from view;
- Free from intrusion while employee is expressing milk;
- Safe, clean, and free of hazardous materials;
- Contain a surface to place a breast pump and personal items;
- Contain a place to sit;
- Have access to electricity or alternative devices, including but not limited to extension cords or charging stations to operate electric or battery-powered breast pump;
- Employer shall provide access to a sink with running water and a refrigerator/cooler for storing milk in close proximity to employee’s workplace.
- Where a multipurpose room is used for lactation, the lactation shall take precedence over other uses, but only for the time it is being used for lactation purposes.
Different analyses are in place for employers with less than 50 employees, multitenant or multiemployer worksites, subcontractors, and sites with operational, financial, or space limitations.
Best Practices Tip: Work with knowledgeable counsel to develop and distribute a lactation accommodation policy. Consult with counsel on exceptions and hardship exceptions to determine if your business complies.
- CALIFORNIA EMPLOYEES WHO MAKE LESS THAN $54,080 ANNUALLY ARE POTENTIALLY NONEXEMPT AND ELIGIBLE FOR OVERTIME.
California’s State minimum wage increased to $13 per hour (26 or more employees) and $12 per hour (25 or less employees). Exempt executive, administrative, and professional employees must earn a salary of no less than two times the state minimum wage for full-time employment. Effective January 1, 2020, the minimum salary threshold for these exemptions is as follows:
- $54,080 per year (or $1,040 per week) for employers of 26 or more employees
- $49,920 per year (or $960 per week) for employers of 25 or fewer employees
California’s increased minimum wage will also impact commissioned inside salespeople. Under California law, commissioned inside salespeople are exempted from the state’s overtime laws if the employee earns more than 1.5 times the state minimum wage and more than half of the employee’s compensation represents commission earnings. In order to maintain their exempt status, commissioned inside salespeople will need to earn more than $19.50 per hour (26 or more employees) or $18.00 per hour (1-25 employees), whichever rate is applicable.
Best Practices Tip: Use experienced counsel to audit salaries, proper classification of exemption/non-exemption statuses, and ensure compliance with annual minimum wage increases.
- EMPLOYEES HAVE ADDITIONAL TIME TO FILE FEHA CLAIMS. (AB 9)
Previously, the statute of limitations for filing employment discrimination claims was one year. AB 9 extends the time period to file complaints to three years. Filing a complaint simply means filing an intake form with the Department of Fair Employment and Housing.
Best Practices Tip: Retain employee personnel files at least three years after separation from employment. Attend seminars conducted by knowledgeable, experienced trial counsel on how to keep the perfect employee file.
- ANTI-HARASSMENT TRAINING DEADLINE IS EXTENDED FROM JANUARY 1, 2020 TO JANUARY 1, 2021. (SB 778)
If a California employer has five employees, one hour of anti-harassment training must be given to nonsupervisory employees and two hours of training to supervisory employees by January 1, 2021. This must be completed every two years.
Best Practices Tip: Quickly retain qualified, experienced counsel to conduct engaging in-person anti-harassment training as well as anti-bias and anti-bullying training in the primary language of the employees. Schedule follow-up training sessions more frequently than the minimum once-every-two-year requirement. Create a reminder system to ensure all employees receive training at least every two years.
- AB 51 PROHIBITS EMPLOYERS FROM REQUIRING EMPLOYEES TO ARBITRATE FEHA OR LABOR CODE CLAIMS AS A CONDITION OF EMPLOYMENT.
This new law bans mandatory arbitration agreements as a condition of employment, continued employment, or receipt of employment-related benefits. This applies only to FEHA or Labor Code claims and exempts agreements enforceable under the Federal Arbitration Act. Voluntary arbitration agreements are lawful, and this law only affects employment contracts entered into on or after January 1, 2020.
This law is currently being challenged. On December 30, 2019, a federal Judge in the Eastern District of California issued a Temporary Restraining Order (TRO) against the State of California temporarily enjoining the State from enforcing this law. This TRO will remain in place until January 31, 2020, while modified to clarify that defendants are temporarily enjoined from enforcing AB 51 to the extent it applies to arbitration agreements covered by the Federal Arbitration Act.
Best Practices Tip: Work with knowledgeable counsel to review and/or update arbitration agreements, to help understand the pros and cons of arbitration, to provide updates on challenges on the validity of AB 51, and to determine if your business meets exceptions such as those under the FAA.
- NO-REHIRE PROVISIONS PROHIBITED IN SETTLEMENT AGREEMENTS IN EMPLOYMENT DISCRIMINATION RETALIATION AND HARASSMENT CLAIMS. (AB 749)
This new law prohibits employment settlement agreements from containing a “no-rehire” provision. Exceptions exist if there was a good faith determination that the employee engaged in sexual harassment or sexual assault or if there is a legitimate nondiscriminatory or nonretaliatory reason for terminating/refusing to rehire the particular employee.
Best Practices Tip: When settling employment actions, work with an attorney who will review settlement agreements for compliance with new laws and who will include severance language to save entire settlement agreements from being voided due to inclusion of prohibited provisions.
- EMPLOYER MUST TIMELY PAY REQUIRED FEES AND COSTS FOR ARBITRATION OR RISK MATERIAL BREACH OF THE ARBITRATION AGREEMENT, IS IN DEFAULT OF THE ARBITRATION, AND WAIVES THE RIGHT TO COMPEL ARBITRATION. (SB 707)
This law requires that the fees or costs to initiate an arbitration be paid within 30 days after the due date. If not, the employer will be considered in material breach of the arbitration agreement, be defaulted, and waives the right to compel arbitration. The employee or consumer can withdraw the claim from arbitration and proceed to trial. The statute of limitations will relate back and is tolled, and the Court can impose a monetary sanction.
Best Practices Tip: Work with attorneys who stay current on employment laws and who will create ticklers and reminders for arbitration fee and cost payments.
- THE OMNIBUS SEXUAL HARASSMENT BILL (SB 1300)
This omnibus bill, among its many provisions, allows a single incident of harassing conduct to defeat summary judgment. This now means a single incident of any harassing conduct under FEHA will create a triable issue of fact to support a hostile work environment claim. It adds all forms of third-party harassment on all FEHA protected categories, not just sexual harassment. It also prohibits the requirement of non-disparagement agreements and confidentiality agreements in sexual harassment settlement agreements.
Best Practices Tip: When settling sexual harassment actions, work with an attorney who will review settlement agreements for compliance with new laws and who will include severance language to save entire settlement agreements from being voided due to inclusion of prohibited provisions.
PENALTIES FOR UNPAID WAGES AND EQUAL PAY VIOLATIONS (SB 673)
This new law allows employees a private right of action to recover a civil penalty of $100 for the first violation and $200 for subsequent violations for each failure to timely pay wages, and 25 percent of the amount unlawfully withheld. It also allows employees to recover penalties for equal pay violations under Labor Code section 1197.5.
Best Practices Tip: Work with competent counsel to audit and to ensure employees are timely and equally paid.