October 24, 2019

Summary of Key New California Laws for 2020 (and Beyond): What Employers Should Know

By Pascal Benyamini

In his first year in office, California Governor Gavin Newsom signed several laws impacting California employers. A summary of some of the key new laws follows. The effective date of the particular new law is indicated in the heading of the Assembly Bill (AB) or Senate Bill (SB).1 The list below is in numerical order by AB or SB.

AB 5 – Worker Status: Employees and Independent Contractors (Effective January 1, 2020)

Of all the bills that Governor Newsom signed in 2019, AB 5 was by far the most widely reported and will have the most wide-ranging repercussions for companies that rely on independent contractors in California.

By way of background, the factors articulated by the California Supreme Court in 1989 in Borello & Sons, Inc. v. Department of Industrial Relations, were the standard Courts and various state agencies applied with various combinations to determine whether a worker is an employee or an independent contractor. The primary focus of the Borello factors is the degree of control exercised by the hiring entity over the manner and means of the workers’ performance. Secondary factors include whether workers purchase their own equipment, set their own hours, contract for discrete units of work rather than an indefinite time, hire their own helpers/ employees, perform services for companies other than the hiring entity, and assume risk for profit and loss.

Fast forward to 2018 when the California Supreme Court issued its decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles. In Dynamex, the Court introduced a new standard, commonly referred to as the “ABC test,” to determine whether a worker is an employee or an independent contractor. In summary, Dynamex’s ABC test is limited to claims under the Industrial Welfare Commission Wage Orders (Wage Orders). Further, the ABC test presumptively considers all workers to be employees and forces a hiring business to bear the burden of proving each of the following three conditions for the worker to be properly classified as an independent contractor:

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

AB 5 effectively codifies the Dynamex decision, requires companies in various industries to reclassify independent contractors as employees, and expands the ABC test’s application beyond claims rooted in the Wage Orders to all provisions and claims based upon the California Labor Code and Unemployment Insurance Code. By July 1, 2020, the ABC test will also apply to the Workers Compensation Code.2

AB 5 establishes some exemptions in seven groupings, covering about 50 industry-specific professions, trades and relationships, for which the ABC test does not apply, such as insurance agents, physicians, dentists, doctors, architects, securities broker-dealers and others.3 Instead, such industries/ professions will continue to be subject to the Borello factors and other contractor classification criteria in the statute. Many of these exemptions are very specific with multipart criteria and definitions, which are beyond the scope of this summary. One sector that did not receive an exemption is the gig- sector. There are various challenges that various non-exempted industries are considering to this new law, including a ballot measure putting the matter before the voters in California.

This bill amends section 3351 of the Labor Code, adds section 2750.3 to the Labor Code, and amends sections 606.5 and 621 of the Unemployment Insurance Code.

AB 9 – Employment Discrimination: Limitation of Actions (Effective January 1, 2020)

AB 9 is another bill that changes the employment landscape in California. Under existing law, an employee who claims to be aggrieved by an alleged unlawful practice has to file a verified complaint with the Department of Fair Employment and Housing within one year from the date upon which the unlawful practice occurred.

AB 9 extends the one-year period to three years for complaints alleging employment discrimination and harassment prohibited by the California Fair Employment and Housing Act (FEHA). Claims that have lapsed are not revived by this bill.

This bill amends sections 12960 and 12965 of the Government Code.

AB 51 – Employment Discrimination: Enforcement (Effective January 1, 2020)

AB 51 is another bill signed by Governor Newsom that will have wide-ranging repercussions for employers that rely on arbitration agreements in California. By way of background, under existing laws, an employer can generally require an employee to enter into an arbitration agreement, including as a condition of employment.

AB 51 essentially bans mandatory arbitration agreements and prohibits employers from requiring any applicant for employment or any employee to waive any right, forum, or procedure for a violation of any provision of the FEHA or other specific statutes governing employment (such the Labor Code) as a condition of employment, continued employment, or the receipt of any employment- related benefit. This means that, except in certain limited circumstances, AB 51 essentially bans arbitration agreements in California. In addition, AB 51 provides that even an opt-out of a waiver provision or requiring employees to take any affirmative action in order to preserve their rights are deemed a condition of employment and prohibited.

AB 51 also prohibits employers from threatening, retaliating or discriminating against, or terminating any applicant for employment or any employee because of the refusal to consent to the waiver of any right, forum, or procedure for a violation of specific statutes governing employment.

In an attempt to address federal preemption issues, AB 51 provides that nothing in the bill is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act (9 U.S.C. § 1 et seq.). Also, AB 51 should not impact arbitration agreements entered into prior to January 1, 2020, and does not apply to post-dispute settlement agreements or negotiated severance agreements. Given the potential clash with the Federal Arbitration Act, it is expected that AB 51 will be challenged on preemption grounds.

This bill adds section 12953 to the Government Code and section 432.6 to the Labor Code.

AB 203 – Occupational Safety and Health: Valley Fever (Effective January 1, 2020)

AB 203 requires certain construction employers with employees in counties where Valley Fever is highly endemic to provide effective awareness training on Valley Fever to all employees annually and before an employee begins work that is reasonably anticipated to cause substantial soil disturbance where work activities disturb the soil, including, but not limited to, digging, grading, or other earth-moving operations, or vehicle operation on dirt roads, or high winds. “Highly endemic” means that the annual incidence rate of Valley Fever is greater than 20 cases per 100,000 persons per year. The counties in question called out in this bill include Counties of Fresno, Kern, Kings, Madera, Merced, Monterey, San Joaquin, San Luis Obispo, Santa Barbara, Tulare, and Ventura.

AB 203 requires the training to cover specific topics that can be included in the employer’s injury and illness prevention program training or presented as a standalone training program. That said, employers do not need to provide the training during the first year that the county is listed as highly endemic, but are required to provide the training in subsequent years.

This bill adds section 6709 to the Labor Code.

AB 673 – Failure to Pay Wages: Penalties (Effective January 1, 2020)

In addition to existing penalties that an employee may recover for an employer’s failure to timely pay an employee’s wages, AB 673 authorizes the affected employee to bring an action to recover statutory penalties against the employer to recover unpaid wages. This bill provides that for any initial violation, the employer is subject to $100 for each failure to pay each employee. For each subsequent violation, or any willful or intentional violation, the employer is subject to $200 for each failure to pay each employee, plus 25 percent of the amount unlawfully withheld.

The bill authorizes an employee to either recover statutory penalties under these provisions or to enforce civil penalties under Labor Code section 2699(a) (i.e., the Private Attorneys General Act of 2004), but not both, for the same violation.

This bill amends section 210 of the Labor Code.

AB 749 – Settlement Agreements: Restraints in Trade (Effective January 1, 2020)

AB 749 prohibits “no-rehire” clauses in dispute- related settlement agreements and specifically “prohibits an agreement to settle an employment dispute from containing a provision that prohibits, prevents, or otherwise restricts a settling party that is an aggrieved person, as defined, from working for the employer against which the aggrieved person has filed a claim or any parent company, subsidiary, division, affiliate, or contractor of the employer.” This bill defines aggrieved person as someone “who has filed a claim against the person’s employer in court, before an administrative agency, in an alternative dispute resolution forum, or through the employer’s internal complaint process.”

Under AB 749, an employer may include a no- hire clause in a settlement agreement with an employee that has engaged in sexual harassment or sexual assault, or in severance or separation agreements unrelated to employment disputes. AB 749 also does not require an employer to rehire a former employee if the employer had a legitimate nondiscriminatory or non-retaliatory reason for terminating the employee’s employment.

This bill adds Chapter 3.6 (commencing with section 1002.5) to Title 14 of Part 2 of the Code of Civil Procedure.

AB 1223 – Living Organ Donation (Effective January 1, 2020)

Under existing law, private employers with 15 or more employees must permit an employee to take a leave of absence with pay, not exceeding 30 business days in a one-year period, for the purpose of organ donation.

AB 1223 requires such 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.4 The one-year period is measured from the date the employee’s leave begins and shall consist of 12 consecutive months.

This bill amends sections 89519.5 and 92611.5 of the Education Code, section 19991.11 of the Government Code, and section 1510 of the Labor Code, and adds sections 10110.8 and 10233.8 to the Insurance Code.

AB 1554 – Employers: Dependent Care Assistance Program: Notice to Employees (Effective January 1, 2020)

This bill 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. The notice may include, but is not limited to, the following: electronic mail, telephone, text message, mail, or in person.

This bill adds section 2810.7 to the Labor Code.

AB 1768 – Prevailing Wage: Public Works (Effective January 1, 2020)

AB 1768 expands the definition of public works to include work conducted during site assessment or feasibility studies. This bill also specifies that preconstruction work, including design, site assessment, feasibility studies, and land surveying, is deemed to be part of a public work, regardless of whether any further construction work is conducted.

This bill amends section 1720 of the Labor Code.

AB 1804 – Occupational Injuries and Illnesses: Reporting (Effective January 1, 2020)

AB 1804 requires the report of serious occupational injury, illness, or death to the Division of Occupational Safety and Health (Division) to be made immediately by telephone or through an online mechanism established by the Division. This bill provides that until the Division has made the online mechanism available, the employer is permitted to make the report by telephone or email.

This bill amends section 6409.1 of the Labor Code.

AB 1805 – Occupational Safety and Health (Effective January 1, 2020)

Under existing law, “serious injury or illness” is defined as requiring inpatient hospitalization for a period in excess of 24 hours for purposes of reporting serious occupational injury or illness to the Division. AB 1805 removes the 24-hour minimum time requirement, excludes those for medical observation or diagnostic testing, and explicitly includes the loss of an eye as a qualifying injury. This bill deletes, among other things, loss of a body member from the definition of serious injury and, instead, includes amputation.

In addition, this bill redefines “serious exposure” to include exposure of an employee to a hazardous substance in a degree or amount sufficient to create a realistic possibility that death or serious physical harm in the future could result from the actual hazard created by the exposure.

This bill also establishes that a serious violation exists when the Division determines that there is a realistic possibility that death or serious injury could result from the actual hazard created by the condition alleged in the complaint.

This bill amends sections 6302 and 6309 of the Labor Code.

SB 83 – Paid Family Leave (Effective July 1, 2020)

Under SB 83, wage replacement benefits under the California Paid Family Leave (PFL) increases from 6 weeks to 8 weeks beginning July 1, 2020.

This bill amends, repeals, or adds multiple sections of the Government Code, Labor Code, and Unemployment Insurance Code.

SB 142 – Lactation Accommodation (Effective January 1, 2020)

Under current California law, employers are required to make reasonable efforts to provide an employee who wishes to express breast milk with the use of a room or other location, other than a bathroom, in close proximity to the employee’s work area for the employee to express milk in private for the employee’s child. Employers are also required to provide such employees a reasonable amount of break time. The break time shall, if possible, run concurrently with any break time already provided to the employee. Break time for an employee that does not run concurrently with paid rest breaks need not be paid.

SB 142 requires that employers 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 has need to express milk. As with the existing provisions, under SB 142, the break time shall run concurrently with any break time already provided to the employee and break time to express milk in addition to other break times provided to the employee can be unpaid.

In addition, SB 142 requires that employers provide a lactation room or location for the employee to express milk in private. In addition to existing requirements, under this bill, the lactation room or location shall comply with all of the following requirements:

  • Be safe, clean, and free of hazardous materials, as defined.
  • 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, needed to operate an electric or battery-powered breast pump.

Further, an employer must provide, among other things, access to a sink with running water and a refrigerator suitable for storing milk in close proximity to the employee’s workspace. If a refrigerator cannot be provided, an employer may provide another cooling device suitable for storing milk, such as an employer-provided cooler.

Employers may comply with the new law by designating a lactation location that is temporary, due to operational, financial, or space limitations. But these temporary spaces shall not be a bathroom and shall be in close proximity to the employee’s work area, shielded from view, free from intrusion while the employee is expressing milk, and otherwise compliant with this section.

SB 142 does provide for some exemptions or exceptions. For example, employers with fewer than 50 employees may seek an exemption under SB 142 by demonstrating an undue hardship. But even if an employer obtains an exemption, SB 142 requires an employer to make a reasonable effort to provide a place for an employee to express milk in private. Another exception provided for in SB 142 is for an employer in a multitenant building or multiemployer worksite who may comply with this new law by providing a space shared among multiple employers within the building or worksite if such employers cannot provide a lactation location within the employer’s own workspace.

Finally, SB 142 requires an employer to develop and implement a policy regarding lactation accommodation and make it available to employees.

This bill amends sections 1030, 1031, and 1033 of the Labor Code, and adds section 1034 to the Labor Code.

SB 188 – Discrimination: Hairstyles (Effective January 1, 2020)

The FEHA protects against discriminatory employment practices, including hiring, promotion, and termination of employment based on certain protected characteristics, including race, unless based on a bona fide occupational qualification or applicable security regulations. Under SB 188, a.k.a. the “CROWN Act”, the definition of “race” includes traits historically associated with race, including, but not limited to, hair texture and protective hairstyles, which in turn include, but are not limited to, such hairstyles as braids, locks, and twists.

This bill amends section 212.1 of the Education Code and section 12926 of the Government Code.

SB 229 – Discrimination: Complaints: Administrative Review (Effective January 1, 2020)

SB 229 expands the appeal and enforcement powers of the California Labor Commissioner when the Labor Commissioner issues a citation to an employer for having violated anti-retaliation provisions. This bill also sets forth, among other things, the procedures for contesting the decision and order of the Labor Commissioner, including requiring a bond.

This bill amends section 98.74 of the Labor Code.

SB 671 – Payment of Wages: Print Shoot Employees (Effective September 5, 2019)

Under existing law, an employer who discharges an employee must pay the employee’s final pay at the time of termination. An employer may be subject to a waiting time penalty for failing to do so. Currently, an exception exists for employees engaged in the production or broadcasting of motion pictures such that an employer can pay without penalty the employee’s final pay by the next regular payday.

SB 671 – passed as an emergency measure – establishes a similar provision for print shoot employees.

This bill amends sections 203, 203.1, and 220 of the Labor Code, and adds section 201.6 to the Labor Code.

SB 688 – Failure to Pay Wages: Penalties (Effective January 1, 2020)

Under SB 688, the Labor Commissioner can cite an employer for failing to pay wages less than the wage set by contract in excess of minimum wage. This bill also provides procedures for an employer to contest such a citation, including posting a bond, and if the employer ultimately does not prevail, this bill provides that the bond will be forfeited to the Labor Commissioner for appropriate distribution.

This bill amends section 1197.1 of the Labor Code.

SB 707 – Arbitration Agreements: Enforcement (Effective January 1, 2020)

Under SB 707, the employer in an arbitration agreement (or drafter of the arbitration agreement in a consumer arbitration) is required to pay certain fees and costs before the arbitration can proceed, and if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration and waives its right to compel arbitration. Under such circumstances, the bill, among other things, authorizes the employee to withdraw the claim from arbitration and proceed with an action in court. And if the employee proceeds with an action in a court SB 707 provides that the statute of limitations with regard to all claims brought or that relate back to any claim brought in arbitration are tolled. This bill also requires the court to impose a monetary sanction on the employer who materially breaches an arbitration agreement, and would authorize the court to impose other sanctions.

This bill also requires a private arbitration company to collect and report demographic data in the aggregate relative to ethnicity, race, disability, veteran status, gender, gender identity, and sexual orientation of all arbitrators.

This bill amends sections 1280 and 1281.96 of the Code of Civil Procedure and adds sections 1281.97, 1281.98, and 1281.99 to the Code of Civil Procedure.

SB 778 – Sexual Harassment Training: Requirements (Effective August 30, 2019)

As a result of legislation passed in 2018 (SB 1343), employers who employ five (5) or more employees, including temporary or seasonal employees, were required to provide two (2) hours of sexual harassment training to all supervisors and managers, and at least one (1) hour of sexual harassment training to all non-supervisory employees, by January 1, 2020, and once every two (2) years thereafter.

SB 778 – signed as an emergency measure on August 30, 2019 – modifies and extends the compliance deadline to January 1, 2021. This bill also requires that new nonsupervisory employees be provided the training within six months of hire and new supervisory employees be provided the training within six months of the assumption of a supervisory position.

Finally, this bill provides much needed clarification that an employer who provided this training and education in 2019 is not required to provide it again until two years thereafter. This bill amends sections 12950.1 of the Government Code.5

1 As a reminder, the minimum wage in California is increasing to $13.00 per hour on January 1, 2020, for employers with 26 or more employees based on previous legislation signed by Governor Brown in 2015. The minimum wage for employers with 25 or fewer employees will increase to $12.00 per hour on January 1, 2020. Also, various cities and local governments in California have enacted minimum wage ordinances that exceed the state minimum wage.
AB 5 does not apply to other claims, such as those under the Fair Employment and Housing Act that reside in the Government Code.
After AB 5 was signed, Governor Newsom signed AB 170, which provides an exemption from AB 5 until January 1, 2021, to a newspaper distributor working under contract with a newspaper publisher and a newspaper carrier working under contract with either a newspaper publisher or a newspaper distributor. AB 170 amends section 2750.3 of the Labor Code, which was added by AB 5.
Similar provisions apply to employees of public employers who have to first exhaust all available sick leave before taking the unpaid leave. This bill also imposes restrictions on insurance companies.
See also SB 530, which among other things, modifies and extends the compliance deadline to January 1, 2021, for seasonal, temporary, or other employees that are hired to work for less than six months.

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