New year marks a significant expansion of employee rights, from noncompetes to sick leave to cannabis to wage increases for healthcare and fast food industries

Governor Newsom signed into law a plethora of bills that significantly expand the rights of employees in California, although notably vetoing a bill that would have prohibited caste discrimination. Most of the new laws take effect on January 1, 2024, while others take effect later. Savvy employers will take note of these new laws now, and get ahead of the game by reviewing their employee handbooks, personnel policies, and employment contracts before year end.

Effective January 1, 2024

SB 848: Reproductive Loss Leave

Employers with five or more employees must provide up to five days of protected time off to a California employee who has been employed for at least 30 days and suffers a "reproductive loss event," defined as a failed adoption, failed surrogacy, miscarriage, stillbirth, or unsuccessful assisted reproduction. The leave does not need to be taken in consecutive days but generally must be completed within three months of the event. If an employer does not have an existing leave policy that covers the event, the leave may be unpaid. However, while on leave, an employee is entitled to use other leave balances, including PTO, sick leave, and vacation. If an employee experiences more than one reproductive loss within a 12-month period, the employer is obligated to provide up to a maximum of 20 days' leave. Employers must maintain the confidentiality of an employee requesting leave, as well as assure that there is no discrimination or retaliation.

AB 1076 and SB 699: Noncompete Agreements

While noncompete agreements are common elsewhere in the country, California has long provided that, with limited exceptions, any agreement that restrains any person "from engaging in a lawful profession, trade, or business of any kind," including a competitive business, is void. Nonetheless, many companies have required California employees to enter into noncompete agreements either because they didn't appreciate the reach of the law or for the deterrent effect. The legislature took notice, observing that the existence of an invalid noncompete agreement, even if it isn't enforced, "has a chilling effect on employee mobility." Hence, the legislation.

AB 1076 does two things. First, it amends the existing law, Business & Professions Code section 16600, to make clear that the prohibition on noncompete agreements is to be read broadly and that the prohibition is not limited to contracts where the person being restrained is a party to the contract. Second, it adds Business & Professions Code section 16600.1, which "makes it unlawful to include a noncompete clause in an employment contract or to require an employee to enter [into] a noncompete agreement" unless one of the narrow exceptions applies. In addition, any employer that required a current or former employee who was employed in California after January 1, 2022, to sign a contract that included a noncompete clause must notify the employee that the clause is void. This notice must be in an individualized writing that is delivered by email and by delivery to the employee's or former employee's home address. Failure to deliver the notice is deemed an act of unfair competition.

SB 699 adds section 16600.5 to the Business & Professions Code. This new section clarifies that a noncompete agreement that violates California law is unenforceable in California regardless of where and when the agreement was signed. It further provides that an employer that enters into an agreement with an employee or prospective employee that includes an invalid noncompete clause, or that attempts to enforce an invalid noncompete clause, commits a civil violation. Suit can be brought by an employee, former employee, or prospective employee. Actual damages and injunctive relief can be sought, and attorney's fees and costs can be awarded.

SB 497: Presumption of Retaliation

This law will create an automatic presumption of retaliation if an employee is disciplined or discharged within 90 days of a complaint involving certain Labor Code provisions or unequal pay. The presumption is rebuttable, but it gives employees a substantial leg up. The law also adds a civil penalty of up to $10,000 per employee for each violation.

SB 616: Paid Sick Leave Increase

As previously reported by DWT here, SB 616 increases the amount of paid sick leave ("PSL") employers must provide to California employees from three days (24 hours) to five days (40 hours). Employers who have opted for the accrual method must also increase the annual cap to at least 80 hours or 10 days (whichever is greater). As with current law, employers must pay PSL to nonexempt employees at their regular rate of pay, not their base rate. It remains the case that many California cities require more PSL than is provided by state law, so, especially in the remote and hybrid working environment, employers must be careful to comply not only with state law, but also with ordinances applicable to the locations where their employees work.

AB 594: Public Prosecutor Enforcement of the Labor Code

In addition to allowing private lawsuits, existing law allows the California Labor Commissioner to sue to enforce most aspects of California's wage-and-hour laws. This new law authorizes "public prosecutors," meaning the Attorney General, a district attorney, a city attorney, a county counsel, or any other city or county prosecutor, to prosecute a civil or criminal action for such violations. The new law further provides that any individual agreement between a worker and employer that purports to limit representative actions or to require private arbitration will have no effect on the authority of the Labor Commissioner or the public prosecutor to bring suit.

SB 700: Cannabis Use

California's Fair Employment and Housing Act (FEHA) was amended in 2022 to prohibit employers from discriminating against applicants and employees based on off-duty cannabis use effective January 1, 2024. Now, on the eve of its effective date, the law has been expanded to prohibit employers from requesting information regarding an applicant's prior cannabis use, and from using any criminal history information about an applicant's or employee's prior cannabis use, unless the employer is permitted to do so under a specified provision of FEHA or other state or federal law.

SB 723: Rehire/Retention of Displaced Employees

Since 2021, California law has required certain employers in the hospitality and service industries to rehire employees who were laid off due to the COVID-19 pandemic. This bill extends the expiration of that law from December 31, 2024, to December 31, 2025. It also redefines the term "laid off employee" to include an employee who was (1) employed for at least six months and (2) separated on or after March 4, 2020, due to a public health directive, government shutdown order, lack of business, a reduction in force, or other non-disciplinary reasons. Additionally, the amended law adds a presumption that, through 2025, a separation due to a lack of business, reduction in force, or other economic, non-disciplinary reason is related to the COVID-19 pandemic unless the employer can prove otherwise.

SB 476: Payment of Costs Associated with Food Handler Card

Until now, California retail food facility employees required to obtain a food handler card were responsible for covering the costs of the required training and testing. As a result of SB 476, employers will have to pay their employees for all costs associated with obtaining their cards, including the time required to complete the training, the cost of testing, and any other costs associated with the certification program. Employers will also have to relieve employees of all work duties while the employees take the training course and examination, and they cannot condition employment on an applicant or employee having an existing card.

The new law also requires the California Department of Public Health to prepare a list of accredited food handler training programs by January 1, 2025. Local public health departments must post a link to the list on their websites.

SB 365: Stay of Litigation Pending Arbitration Appeal

Previously, when an employer appealed a trial court's denial of the employer's motion to compel a lawsuit to arbitration pursuant to an arbitration agreement, the lawsuit was automatically stayed until the appellate court ruled. Under the new law, trial courts will have discretion as to whether to stay the court proceeding or to require that the lawsuit go forward regardless of the appeal. This change is anticipated to be burdensome and costly for employers who potentially must litigate a lawsuit in court only to have to relitigate it in arbitration if the appeal is successful.

Effective Later in 2024 or in 2025

AB 1228: Minimum Wage Increase for Fast Food Workers

Effective April 1, 2024, the minimum wage for employees of fast food chain restaurants with more than 60 locations nationwide will increase to $20 per hour. This is $4 more than the standard $16 minimum wage that must be paid to most other hourly employees in California.

The law also establishes the Fast Food Council within the Department of Industrial Relations to oversee future wage increases and recommend other workplace standards to state agencies.

SB 525: Minimum Wage Increase for Healthcare Workers

Effective June 1, 2024, the minimum wage for the majority of California's healthcare employees will be established by five separate minimum wage schedules, depending on the nature of the employer. The law creates minimum standards for both hourly and salaried employees and provides employees with a right to sue to enforce these standards. Employers can apply for a one-year extension or an alternative phase-in schedule pursuant to a waiver program that is to be developed by the Department of Industrial Relations by March 1, 2024. Additional information, including a list of healthcare facilities and hospitals to which the law applies, is expected to be available by January 1, 2024, on the Department of Health Care Access and Information's website.

SB 553 and SB 428: Workplace Violence Prevention

As previously reported by DWT here, SB 553 is a first-of-its-kind workplace violence prevention law that applies across all industries and to nearly every employer with operations in California. The law sets forth multiple new requirements, including that, by July 1, 2024, employers must implement written plans and training aimed at combatting workplace violence. Cal/OSHA will enforce these obligations through inspections, penalties, and abatement requirements. Effective January 1, 2025, the law will also permit collective bargaining representatives to seek temporary restraining orders (TROs) on behalf of employees subjected to workplace violence or threats of violence.

SB 428 provides that, as of January 1, 2025, an employer whose employee has suffered harassment may seek a TRO and an injunction on behalf of the employee. The TRO, however, must not prohibit speech or activities otherwise protected by law.

SB 54: Diversity Disclosure for Venture Capital Companies

Unless extended by the Governor, starting on March 1, 2025, venture capital companies (VCCs) with connections to California (e.g., headquartered in California, significant presence or operational office in California, venture capital investments in California businesses, or investments from a person who is a California resident) will be required to report to the California Civil Rights Department (CRD) on the diversity of the founding members of companies in which they invest. VCCs are to collect this data by means of a standardized survey to be created by the CRD.

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All employers with employees in California are encouraged to review their employee handbooks and personnel policies now, to bring them into compliance with these new laws as well as other recent developments such as those we reported here.