10 new California laws your business must understand for 2020

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The 2019 California Legislative year has officially come to a close. Not surprisingly, there are dozens of new employment laws hitting the books on January 1, 2020. Below we highlight 10 new laws, and provide key takeaways for covered employers as we inch closer to the new year.

Summary of new laws

  • Ban on arbitration (AB 51). This bill will preclude employers from requiring job applicants, current employees or independent contractors from agreeing to waive any right, forum, or procedure under the Fair Employment and Housing Act (FEHA) and the Labor Code as a condition of employment, continued employment, or the receipt of any employment-related benefit. The law will apply to any contracts entered into, modified, or extended on or after January 1, 2020, and does not apply to post-dispute settlement agreements or negotiated severance agreements. Violations carry the risk of injunctive relief and attorneys’ fees. While challenges to AB 51 based on federal law are anticipated, the law is nonetheless now on the books.
  • Extending FEHA statute of limitations (AB 9). Current law requires employees to file an administrative charge with the Department of Fair Employment and Housing within one year from the date an unlawful employment practice under FEHA occurs. AB 9 extends this deadline from one to three years, but retains the one year statute of limitations for Unruh Act-related claims.
  • Protecting hairstyles (SB 188). SB 188 amends the definition of “race” under FEHA to include “traits historically associated with race, including, but not limited to, hair texture and protective hairstyles.” Protective hairstyles is defined as including “such hairstyles as braids, locks, and twists.” New York recently adopted a similar protection.
  • Delay / Clarification for sex harassment training (SB 778). In 2018, SB 1343 extended sexual harassment training to employers with fewer than 50 employees, and required employers to train both supervisors and non-supervisory employees on or before January 1, 2020. SB 778 extends the deadline to January 1, 2021, and provides clarification as to non-supervisor training.
  • No rehire provision (AB 749). AB 749 prohibits any settlement agreement related to an employment dispute from preventing or restricting employee from obtaining future employment with the employer against whom the claim was filed. This applies to any agreement entered into or after January 1, 2020.
  • ABC test (AB 5). AB 5 codifies the California Supreme Court’s 2018 decision in Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018) and applies the so-called “ABC” test to many types of independent contractor tests under California law. AB 5 applies the ABC test to claims made under the Labor Code, Unemployment Insurance Code, and IWC Wage Orders, subject to certain exceptions. The law applies retroactively to claims made under IWC Wage Orders and Labor Code claims to enforce the IWC Wage Orders (consistent with Dynamex), and prospectively January 1, 2020 and later to other claims under the Labor Code and Unemployment Insurance Code.
  • Penalties for breach of arbitration agreement (SB 707). SB 707 implements new penalties if an employer fails to pay arbitration-related fees.
  • Minimum wage increase (SB 3). On January 1, 2020, the minimum wage for employers with 26 or more employees will increase to $13.00 per hour, meaning the salary threshold for exemption will be $54,080 annually. The minimum wage for employers with 25 or fewer employees will increase to $12.00 per hour, with the salary for exemption being $49,920 annually. In addition, many cities will increase their minimum wage beyond the state-minimum in 2020.
  • Lactation accommodation (SB 142). Among other things, SB 142 requires employers to provide a reasonable amount of break time each time the employee needs to express milk, and requires the employer to provide a location (not just make reasonable efforts) and enumerates many physical requirements for the location.
  • Data privacy (AB 25). The California Consumer Privacy Act of 2018 (CCPA) takes effect on January 1, 2020. AB 25 largely excludes from coverage the “personal information” of job applicants, employees, and independent contractors. It requires, however, that those individuals receive notice “at or before the point of collection” of the categories of personal information collected about them, and the purposes for its use. They are also entitled to data security standards relating to their data, and will have standing to bring a private right of action under the law.

Key takeaways for employers

Takeaway #1 - Audit your independent contractor relationships now

AB 5 applies retroactively to certain claims. It’s critical for employers to audit existing independent contractor arrangements to determine whether any exception may also be applied retroactively. Misclassification carries significant penalties and consequences.

Takeaway #2 - Prepare job applicant / employee / independent contractor notices

If covered under the CCPA, employers will need to ensure they have adequate notices provided to job applicants, employees, and independent contractors. This may include notices on job posting websites (e.g., LinkedIn, Indeed), within employee databases (e.g., Dayforce) or within independent contractor agreements.

Takeaway #3 - Audit severance / employment agreements

Employers should ensure their standard severance agreements do not include a “no rehire” provision, and should ensure employment agreements do not include a FEHA / Labor Code arbitration provision.

Takeaway #4 - Audit harassment training

Employers should ensure they are providing the legally mandated anti-harassment / discrimination training by the new deadline. Employers should also ensure their training is expanded to include the new hairstyle protections and lactation accommodations.

Takeaway #5 - Audit pay practices

With the minimum wage increasing, and AB 5 making many former independent contractors employees, now is a good time to audit pay practices to ensure classifications are up-to-date, meal and rest periods are being paid properly, wage statements are accurate and include all requirement substantive elements, and that exempt employees will be paid the salary minimum in the applicable jurisdiction effective 2020.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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