This year, the California legislature enacted numerous employment laws, from independent contractor status to hairstyle discrimination. Many of these newly enacted California employment laws dominated headlines; however, many important laws flew under the radar. Below is a brief summary of new employment laws that may affect you or your business. Where applicable, employers must comply with the following laws on or before January 1, 2020:

Employees vs. Independent Contractors (AB 5)

If you follow the news, you have probably already heard about AB 5. Also known as the “Gig Worker Bill” or “Gig Law”, AB 5 changes how independent contractors are classified in California.

Historically, California courts used the multi-factor Borello test to determine whether a worker qualified as an employee. In 2018, the California Supreme Court created a new three-factor test (the ABC test) in the Dynamex case, which was expanded and adopted into law this year with AB5.

This law presumes that all workers are employees and places the burden of proving the worker qualifies as an independent contractor on the employer. In order to qualify as an independent contractor, the employer must be able to prove the worker meets each factor of the ABC test:

A. The worker is free from the control and direction of the employer, both in the independent contractor agreement and in fact;
B. The worker is performing work outside the usual course of the employer’s business; and
C. The worker has its own business or enterprise of the same nature as the work performed.

AB 5 extended the application of the ABC test beyond wage and hour claims to all claims based on the California Labor Code and Unemployment Insurance Code. The ABC test does not apply to claims under the Fair Employment and Housing Act and other similar laws.

Certain professions are exempt from the ABC test, including but not limited to physicians, dentists, architects, insurance agents, engineers, accountants, real estate agents, attorneys, and direct sales salespersons. Exempted workers are not automatically classified as independent contractors, but instead are held to the less strict Borello test.

Improper classification of workers can result in the payment of back payroll taxes owed and significant fines. This new law makes it very difficult to classify workers as independent contractors. If you currently retain independent contractors, or intend to bring on independent contractors in the near future, give us a call to discuss proper classification in order to comply with the law.

Minimum Wage

In 2016, the California legislature enacted a bill designed to increase the minimum wage over a six-year period. On January 1, 2020, California employers with 26 or more employees must pay a minimum wage of $13.00 per hour. California employers with 25 or fewer employees must pay a minimum wage of $12.00 per hour. [1]

Employment Discrimination – Complaint Deadline (AB 9)

This law extends the time an employee can file a complaint with the Department of Fair Employment and Housing for employment discrimination under the California Fair Employment and Housing Act (FEHA) from one (1) year to three (3) years.

Arbitration Agreements (AB 51 and SB 707)

Historically, some California employers would require employees to sign an agreement to arbitrate any claims (as opposed to pursuing those claims in court). A new law prohibits employers from requiring any applicant for employment or current employee to agree to (a) mandatory arbitration or (b) waive any right, forum, or procedure for a violation of its employee rights. Employers cannot threaten, retaliate, or discriminate against any employee for his or her refusal to consent to mandatory arbitration or the waiver of any right or forum.

Additionally, employers (and drafters of arbitration agreements in consumer contracts) that are required to pay the costs of arbitration, must do so within thirty (30) days of the due date. An employer or drafting party that fails to pay arbitration costs within thirty (30) days is in breach of the agreement to arbitrate, waives its right to compel arbitration, and will be subject to monetary sanctions if the employee or consumer files an action in court.

If you have employees sign employment agreements, or if you require consumers to agree to arbitrate[2] , give us a call to make sure those agreements comply with the new laws.

Failure to Pay Wages (AB 673)

Currently, employers who fail to pay wages are liable to the Labor Commissioner for civil penalties, but not necessarily to the employee who is the subject of the wage claim. A new law allows employees to recover civil penalties from the employer in the amount of $100.00 for each initial violation and $200.00 for subsequent violations, in addition to other applicable penalties.

No-Hire Clauses (AB 749)

Employee settlement agreements often contain a “no-hire” clause, preventing the employee from ever again working for, or applying to work for, the employer. A new law prohibits the use of “no-hire” clauses in settlement agreements that address employment disputes, except in the event of an employee that has engaged in sexual harassment or assault.

Organ Donation (AB 1223)

Under existing law, private employers with fifteen (15) or more employees must permit an employee to take a paid leave of absence, up to thirty (30) days, for organ donation. This new law requires those employers to also provide an additional unpaid leave, up to thirty (30) additional days, for organ donation.

Flexible Spending Accounts (AB 1554)

Employers must provide notice of any deadline to withdraw funds prior to the end of the plan year to employees that participate in a flexible spending account. Notice may be provided by email, phone, text message, mail, or in person.

Lactation Accommodation (SB 142)

A law implemented in 2019 required employers to reasonably attempt to provide a private location for lactation that was in close proximity to the employee’s usual work area and was not a bathroom. The new law expands an employer’s obligations by requiring the employer to provide a private space for lactation purposes that:

  • Is not a bathroom;
  • Is in close proximity to the employee’s work area;
  • Is shielded from view;
  • Is free from intrusion while the employee is expressing milk;
  • Is safe, clean, and free of hazardous materials;
  • Contains a surface on which the employee can place the breast pump and other personal items;
  • Contains a place for the employee to sit; and
  • Has access to electricity or alternative devices needed to operate a breast pump.

The employee must be provided a reasonable amount of break time, which can run concurrently with the employee’s regularly scheduled break, to express breast milk each time the employee has a need to express milk. The employer must also provide access to a sink and refrigerator in close proximity to the employee’s work area. Employers with fewer than fifty (50) employees may be exempt if they meet certain requirements.

Hairstyle Discrimination (SB 188)

Current law prohibits employers from engaging in discriminatory employment practices, including hiring, promotion, and termination based on race and other protected characteristics. Recent high-profile events have revealed that racial discrimination is sometimes disguised as a refusal to allow certain hairstyles and other physical characteristics typically associated with a particular race.

Effective January 1, 2020, the definition of race in California’s employment discrimination law is expanded to include hair texture and hairstyles, including but not limited to afros, braids, twists, cornrows, and dreadlocks. Thus, employers can no longer prohibit employees from having a particular hairstyle or other trait historically associated with race.
Review your dress codes, handbooks, and policies for any restrictions

Failure to Pay Minimum Wage (SB 688)

Employers pay an employee less than the wage provided in the employee’s contract will be subject to citation.

Anti-harassment Training (SB 778)

A bill signed into law last year requires businesses with five (5) or more employees to provide supervisory employees with two (2) hours of anti-harassment training and non-supervisory employees with one (1) hour of training every two (2) years by January 1, 2020. This new law extends the deadline to January 1, 2021.

California Consumer Privacy Act (CCPA)

Although it was adopted last year, the CCPA becomes effective on January 1, 2020. The CCPA creates new privacy rights related to the collection, deletion, and sharing of personal information of California residents. It is important to note that the focus of the CCPA is California consumers, not necessarily California businesses. Businesses or service providers located outside of California may still be subject to the CCPA if they collect, store, and/or share personal information of California consumers.

The CCPA applies to businesses or service providers that collect California consumers’ personal information and meet one of the following:

  • Earns annual gross revenues in excess of $25,000,000;
  • Buys, receives for commercial purposes, sells, or shares for commercial purposes, the personal information of 50,000 or more consumers, households, or devices per year; or
  • Derives fifty percent (50%) or more of its annual revenues from selling consumers’ personal information.

The CCPA requires qualifying businesses to inform California consumers of the categories of personal information being collected and grants those consumers the right to request that the business:

  • Disclose the personal information that is collected, sold, or shared for business purposes;
  • Delete personal information that the business has collected about the consumer; and
  • Provide the option to opt-out of the sale of the consumer’s personal information.

Recent amendments to the CCPA delayed the application of the law to employee and business-to-business personal information. However, by January 1, 2021, personal information obtained from employees and business-to-business communications will be subject to the CCPA. Failure to comply with the provisions of the CCPA after notice of violation can result in a fine of $2,500.00 per incident for unintentional violations, and $7,500.00 per incident for intentional violations.

The CCPA is a complex law with many requirements, which will require an in-depth review of your website privacy policy and internal data collection and retention practices. If you think the CCPA may apply to your business, act now to meet the January 1, 2020 deadline and avoid noncompliance.

Parental Leave Posting Requirements

California’s New Parent Leave Act (NLPA), which requires employers with 20-49 employees to provide twelve (12) weeks of unpaid protected leave to bond with a child after birth, adoption, or foster care placement, became effective in January 2018. On April 1, 2019, a new law requiring employers to post information about the NLPA took effect.

Employers must post information about the NLPA in a prominent place easily visible by employees and job applicants. The posters should be in English, and if at least ten percent (10%) of the employer’s workforce speak another language, the employer should also display posters in that language.

If you have at least twenty (20) employees, make sure you have posted information about the NLPA and updated your employee handbook.

Compliance

As you can see, California enacted numerous laws this year that affect employers. Failure to comply can result in significant penalties or subject you to liability. Now is the time to review your independent contractor and employment contracts, employee handbook, privacy policy, and other internal policies for compliance.