The California legislature has been busy. There are numerous new and significant employment laws effective January 1, 2020. Employers should take note of the following key developments and should review their policies and practices—preferably with counsel—to ensure they are in compliance so as to limit any potential exposure.
Minimum Wage and Minimum Salary Basis Increase
(Labor Code § 1182.12)
California’s minimum wage increased on January 1, 2020, to $12.00 per hour for employers with 25 or fewer employees, and to $13.00 per hour for employers with 26 or more employees. As a result of this increase, the minimum salary an employee must earn to qualify for exempt status under California law will increase to $49,920 per year ($960 per week) for employers with 25 or fewer employees, and to $54,080 per year ($1,040 per week) for employers with 26 or more employees. These rates are set to increase again on January 1, 2021.
Employers should also be aware that many local municipalities and counties require a higher minimum wage than state law. Complying with the applicable minimum wage ordinance is important as these violations come at a steep price.
ABC Test to Determine Employment Status
(Labor Code §§ 2750.3, 606.5, 621)
In one of the most widely publicized bills of the year, AB 5 codified and expanded the “ABC” test used to determine whether a worker is properly classified as an independent contractor according to the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles.
The “ABC” test presumptively considers all workers to be employees and only permits workers to be classified as independent contractors if the hiring business demonstrates that the worker in question satisfies each of three conditions:
(A) That the worker is free from the control and direction of the hirer in
connection with performance of the work, both under the contract
for the performance of the work and in fact; and
(B) That the worker performs work that is outside the usual course of
the hiring entity’s business; and
(C) That the worker is customarily engaged in an independently
established trade, occupation, or business of the same nature as
that involved in the work performed.
The “ABC” test applies to the Wage Orders and to the Labor Code and Unemployment Insurance Code when a definition of employee is not otherwise provided. The statute also exempts certain occupations from the application of the “ABC” test and instead applies the definition of an employee as set forth in the multi-factor “Borello test” which focuses on the hiring entity’s control over the worker.
It is also important to note that Labor Code § 2753 provides for joint and several liability for any person, who, for money or other valuable consideration, knowingly advises an employer to treat an individual as an independent contractor to avoid employee status, if the individual is found not to be an independent contractor. The only exception to this potential liability is for attorneys.
Ban on Forced Arbitration
(Labor Code §§ 432.6, 433)
Beginning January 1, 2020, employers may not require any applicant or employees, as a condition of employment, continued employment, or the receipt of any employment related benefits, to “waive any right, forum, or procedure” for a violation of the Fair Employment and Housing Act or the Labor Code. An employer is also prohibited from threatening, retaliating, or discriminating against, or terminating any applicant or employee for refusing to consent to arbitration.
A violation of this new section of 432.6 to the Labor Code will be a misdemeanor under Labor Code section 433.
Last year, Governor Brown vetoed a virtually identical bill because he believed it violated federal law. The U.S. and California Chambers of Commerce, along with several trade organizations have filed a complaint in federal court to challenge the enforceability of these sections of the Labor Code. A preliminary injunction hearing is currently set for January 10, 2020.
Strategic Non-Payment of Arbitration Fees
(Code of Civil Procedure §§ 1281.97, 1281.98, 1281.99)
SB 707 provides remedies to employees subject to arbitration provisions where the employer fails to pay arbitration fees within 30 days of their due date. The statute allows arbitrators and courts to impose sanctions on a defaulting party, up to and including terminating sanctions.
Prohibition of No-Rehire Provisions
(Code of Civil Procedure § 1002.5)
A new law was passed prohibiting a term in a settlement agreement that restricts the former employee from working for the employer in the future. Essentially, a settlement agreement between an employer and employee can no longer contain “no rehire” clauses which have been a longstanding standard term in settlement agreements. However, when the employer has made a good faith determination that the employee has engaged in sexual assault or harassment, this does not apply.
Statute of Limitations to File a Claim for Violations of the
Fair Employment and Housing Act
(Government Code §§ 12960, 12965)
Under current law, before an employee can file a lawsuit alleging violations of the Fair Employment and Housing Act, he or she must first file a charge with the Department of Fair Employment and Housing. The employee has one year from the end of the alleged discriminatory conduct to file the charge. After receiving a right-to-sue letter from the Department of Fair Employment and Housing, the employee has one more year to file a lawsuit.
With the passage of AB 9, employees will now have three years to file their charge with the Department of Fair Employment and Housing and one year after the issuance of the right-to-sue letter to file a lawsuit. Effectively, this doubles the amount of time an employee has to bring a lawsuit from two years to four years.
Discrimination Based Upon Natural Hairstyles
(Government Code § 12926, Education Code 212.1)
SB 188 expanded the definition of “race” under the Fair Employment and Housing Act and the California Education Code to include “traits historically associated with race, including, but not limited to, hair texture and protective hairstyles,” such as “braids, locks, and twists.”
New Harassment Training Requirements
(Government Code § 12950.1)
Under the training requirements passed in 2018, the deadline for employers to provide new harassment training to employees was January 1, 2020. With the recent passage of SB 778, this deadline was pushed back one year. Now, employers with five or more employees must provide one hour of sexual harassment prevention training to non-supervisory employees and two hours of such training to supervisors by January 1, 2021.
Consistent with the previously enacted training requirements, employers who provided training to employees in 2019 are not required to provide it again until two years from the time the employee was trained.
Employers who provided training in 2018 must provide training in 2020 to maintain the two-year cycle and comply with the new deadline. Employers who trained in 2017 under the prior training law should have provided training in 2019 to maintain the two-cycle.
(Labor Code §§ 1030, 1031, 1033, 1034)
To expand on the 2018 bill requiring employers to provide lactation accommodations, SB 142 now requires employers to create and implement a lactation accommodation policy, including publishing the policy in the employee handbook and providing the policy when an employee asks about or requests parental leave.
Recovery of Penalties for Late Payment of Wages Due While Employed
(Labor Code § 210)
While employees could recover penalties for the failure to timely pay wages upon termination, the Labor Code had previously only permitted the Labor Commissioner to recover penalties for the failure to timely pay wages due while employed. Now, AB 673 provides a private right of action for employees to either recover the statutory penalties against the employer provided for in Labor Code § 210 in a hearing before the Labor Commission, or seek to enforce civil penalties under the Private Attorney General Act. However, the employee may not do both.
This update is intended to provide an overview of the most significant new developments impacting the California workplace. For more information about these new laws and regulations, please contact the employment law experts at RPNA to ensure your policies and practices are in compliance and up to date.