2020 California Employment Law Changes

New Year! New You!

As we write every year, California has new rules, regulations and court rulings that have changed the employment law landscape.  Here is a summary of the key new laws for 2020 (meaning, not every law is covered here. And no case law is discussed.  Think: Summary!)

Hiring

Arbitration Agreements. California now prohibits employers from requiring employees and applicants to arbitrate claims under the Fair Employment and Housing Act (FEHA) and the Labor Code. These laws cover discrimination, harassment, retaliation and wage and hour. The new law also prohibits class action waivers and arbitration programs requiring employees to “opt out” if they do not want to be part of an arbitration program. There are exceptions to the new bar, including for settlement agreements and negotiated severance agreements.

This change takes effect January 1, 2020 and arbitration agreements signed before that will be subject to the prohibition.

Compensation

Minimum Wage. Effective January 1, 2020, California employers with at least 26 employees must pay minimum wage at the rate of $13.00 per hour. For employers with 25 or fewer employees, minimum wage will increase to $12.00 per hour.

Employers are generally subject to federal, state and local minimum wage laws and must follow the stricter standard; that is, the one that is the most beneficial to the employee.

Exempt employees. The minimum salary that must be paid to exempt employees in California corresponds to the state minimum wage. Exempt employees must earn at least twice the state’s minimum wage for full-time employment, e.g. $54,080 annually for employers with 26+ employees. For employers with 25 or fewer employees, the amount is $49,920. This minimum salary increases as minimum wage increases. As always, the “duties” tests must be satisfied for any employee classified as exempt. 

Overtime for the Computer Software Professional Exemption. As of January 1, 2020, the computer software employees’ minimum hourly rate of pay exemption increases to $46.55 per hour.  (The minimum monthly is $8080.71; annual is $96,968.33). The applicability of this exemption requires careful analysis to see if the worker is performing the necessary duties. And note that this exemption is only from overtime. Exempt Computer Software Professionals must still be afforded the opportunity to take meal and rest breaks.  

Independent Contractors. California’s AB 5 is getting a lot of news coverage – and rightfully so. If you have anyone performing services for you that isn’t paid as a W2 employee, careful review of that relationship is a must. Companies must confirm that an independent contractor is really an independent contractor, or suffer the consequences.

In many important ways, AB 5 is “just” a codification of the California Supreme Court’s 2018 Dynamex “A-B-C test.” Under the test, a worker is an employee unless:

  • she is free from the control and direction of the hirer in performance of the work; and
  • she performs work that is outside the usual course of the hiring entity’s business; and
  • she is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

One big expansion under AB 5 is that Dynamex applied to the Wage Orders of the California Industrial Welfare Commission, while AB 5 applies more broadly to the California Labor Code and Unemployment Insurance Code definitions of an “employee.” As before, we do not recommend trying to parse this too liberally when reviewing your work relationships. We strongly recommend that you analyze all persons who perform work for your business to see where they fit under the laws.

In the event the “ABC” test cannot be applied to a particular work relationship, AB 5 clarifies that the determination of independent contractor status is governed by an evaluation set forth in a case called S.G. Borello & Sons, Inc. v. Department of Industrial Relations. Many employers are familiar with this review with the most significant factor being the control of the business over the worker.

The law also specifies certain jobs as exempt from the “ABC” test – but the Borello test must still be met!  These include licensed insurance agents, certain licensed health care professionals, certain practicing licensed professions (attorneys, architects, engineers, private investigators and accountants), registered securities broker-dealers or investment advisors, direct salespersons and construction subcontractors.  Other “professional services” may fit in an exemption if they have a business license and negotiate their own rates of pay, including travel agents, graphic designers, certain human resources and marketing professionals, certain photographers, freelance writers, licensed barbers and cosmetologists. Real estate licensees are subject to provisions of the Business & Professions Code instead of the “ABC” test. And there are new rules for business-to-business situations and “referral agencies” that connect clients with service providers who provide graphic design, photography, event planning, minor home repairs, moving, home cleaning, errands, and dog walking, among others.

Of note, employers may not reclassify an individual who was an employee on January 1, 2019 to an independent contractor because of these exemptions! But, the bill’s exemptions do apply retroactively if a worker fits under one.

Fair Employment

Hairstyle Discrimination Prohibited. California’s Fair Employment and Housing Act is expanded with regard to race. The definition of “race” now includes “traits historically associated with race, including, but not limited to hair texture and protective hairstyles,” including “braids, locks, and twists.” During the legislative process, lawmakers pointed to the fact that workplace dress code and grooming policies that prohibit natural hair, including afros, braids, twists and locks, have a disparate impact on Black individuals. Hair has historically been a determining factor of a person’s race, thus targeting certain hairstyles constitutes racial discrimination.

Revised Lactation Accommodation Requirements. Employers must provide employees the use of a room or other location that is in close proximity to the employee’s work area. The space has to be free from intrusion and it cannot be a bathroom. It has to be safe, clean, and free of hazardous materials. The employer must provide a place to sit, a surface to set the breast pump on (along with other personal items) and access to electricity. A sink and refrigerator must also be available.

The lactation space does not need to be used solely for lactation, but when a lactating employee needs to use it, they get priority.

Employers with less than 50 employees may be exempt from the specific requirements if they can demonstrate undue hardship (meaning compliance would create significant difficulty or expense in light of the employer’s size and financial resources). We suggest assuming that this is a very difficult standard to meet and you should talk with counsel before trying to rely upon hardship.

Employers must provide a reasonable break time for lactation. The new law provides that a failure to provide this break time or a location as described above, is a failure to provide a rest break. And when you fail to provide a rest break, there is a penalty of one additional hour’s pay per violation (limited to one per day).

Employers must implement a written policy describing the process for requesting lactation accommodation and informing employees of their right file a complaint with the Labor Commissioner. This policy should be in your handbook, in a separate document given to new hires, and to employees who ask about or ask for parental leave.

Expanded Time to File Claims of Harassment, Discrimination and Retaliation.  Under current law, a victim had one year from the last act to file a claim of harassment, discrimination or retaliation.  This time is now extended to three years.

“No-Rehire” Provisions Barred from Settlement Agreements. Often, when employers and employees enter into settlement agreements about employment law claims, the employee agrees never to seek employment from the employer (and any related companies).  Starting January 1, 2020, these provisions are not permitted. This rule covers matters resolved internally and those that have progressed to litigation.

The parties to the agreement may agree to end an employment relationship or prevent the employee from working for the employer again, if the employer made a good faith determination that the employee engaged in sexual harassment or sexual assault.  The employer is not required to keep that employee on or rehire them.

Training Requirements. Last year, harassment prevention training requirements were expanded to include small employers (employers with five or more employees) and for all employees to receive some training. Over the summer, the deadline for such training was extended to allow companies to comply.

By January 1, 2021, employers with five or more employees must provide two hours of training to supervisory employees and one hour to all non-supervisory employees in California.  The training must be repeated every two years. New hires must receive the training within six months of hire or promotion to a supervisory position.

Seasonal, temporary, and employees hired to work for less than six months must be trained within 30 calendar days after their hire date, or within 100 hours worked, whichever occurs first.  If the employee is employed by a temporary services employer, that company is to provide the training, not the end-client.

Time off

Organ Donation Time Off Expanded. Current law provides that employers with 15 or more employees must provide a paid leave of absence to an employee for the purpose of being an organ donor. The time off was for 30 days in a one-year period. The new law (AB 1223) gives the organ donor another 30 days of unpaid time off.  As before, any time off under this law may run concurrently with time off under the FMLA and CFRA.

Paid Family Leave.  Later this year (July 2020), California’s Paid Family Leave wage replacement benefits will increase from six to eight weeks of benefits.  These benefits are for employees who are on protected (or granted) time off to care for another – an ill family member or for new child bonding.  As before, this is not the right to take time off, but access to wage replacement while on leave. In San Francisco, the San Francisco Paid Parental Leave Ordinance will extend to eight weeks as well.

Questions? Please do not hesitate to contact me!

www.mstpartners.com •  408.293.1900 jdebacker@mstpartners.com

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