Summer Roundup: New California Employment Laws

by Mitchell Silberberg & Knupp LLP
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September 30, 2018, was the cut-off for Governor Brown to sign or veto bills passed by the California legislature this year.  So it’s not surprising that that the summer months saw a flurry of employment legislation across Governor Brown’s desk.

Most significantly, the Governor vetoed AB 3080, which, as we alerted you last month, would have effectively banned non-disclosure agreements and arbitration agreements with respect to certain harassment and discrimination claims. 

Nevertheless, the Governor signed into law this summer a record number of bills, many of which further regulate the workplace.  Rounded up below are the most notable new employment bills signed into law, which will take effect on January 1, 2019, unless otherwise specified below:

California Legislature Amends FEHA and Expressly Affirms and Rejects Harassment Case Law

SB 1300, signed into law September 30, 2018, amends the California Fair Employment and Housing Act (“FEHA”) to:

  • Expand employer liability for acts of unlawful harassment by nonemployees (not just “sexual” harassment);
  • Prohibit employers, in exchange for a raise or bonus or as a condition of employment or continued employment, from requiring: (1) a release of FEHA claims or rights; (2) execution of a non-disparagement agreement or other document that prohibits disclosure of unlawful workplace conduct. Any such agreement or document will be considered void and unenforceable. This provision does not apply to negotiated settlements of claims filed in court, before an administrative agency or alternative dispute resolution forum, or submitted through an employer’s internal complaint process.
  • Prohibit a prevailing defendant from being awarded fees and costs unless the court finds the action was frivolous when brought or that the plaintiff continued to litigate after it clearly became so.

The bill also adds a new section to the Government Code (Section 12923) that declares that the purpose of FEHA is “to provide all Californians with equal opportunity to succeed in the workplace and should be applied accordingly by the courts.” In adopting this new section, the legislature expressly affirmed:

  • The standard set forth in Justice Ruth Bader Ginsburg’s concurrence in Harris v. Forklift Systems, 510 U.S. 17 (1993) (in a workplace harassment suit “the plaintiff need not prove that his or her tangible productivity has declined as a result of the harassment. It suffices to prove that a reasonable person subjected to the discriminatory conduct would find, as the plaintiff did, that the harassment so altered working conditions as to make it more difficult to do the job.”).
  • The rejection in Reid v. Google, Inc., 50 Cal.4th 512 (2010), of the “stray remarks doctrine.” The legislature reasoned that “the existence of a hostile work environment depends upon the totality of the circumstances and a discriminatory remark, even if not made directly in the context of an employment decision or uttered by a nondecisionmaker, may be relevant, circumstantial evidence of discrimination.”
  • The observation in Nazir v. United Airlines, Inc., 178 Cal.App.4th 243 (2009), that hostile working environment cases involve issues “not determinable on paper.”

Further, the legislature explicitly rejected:

  • The Ninth Circuit’s opinion in Brooks v. City of San Mateo, 229 F.3d 917 (2000), which may no longer be used in determining whether conduct is sufficiently severe or pervasive to constitute unlawful harassment, because “[a] single incident of harassing conduct is sufficient to create a triable issue regarding the existence of a hostile work environment if the harassing conduct has unreasonably interfered with the plaintiff’s work performance or created an intimidating, hostile, or offensive working environment.”
  • Reliance on Kelley v. Conco Companies, 196 Cal.App.4th 191 (2011), to support different standards for hostile work environment harassment depending on the type of workplace. The legislature reasoned “[i]t is irrelevant that a particular occupation may have been characterized by a greater frequency of sexually related commentary or conduct in the past. In determining whether or not a hostile environment existed, courts should only consider the nature of the workplace when engaging in or witnessing prurient conduct and commentary is integral to the performance of the job duties.”

California Limits Sex Harassment Settlement Agreement Confidentiality Provisions.

SB 820, also signed into law on the last day of Governor Brown’s bill-signing period, will prohibit and render void provisions in settlement agreements entered into on or after January 1, 2019, that prevent disclosure of factual information related to civil or administrative complaints of sexual assault, sexual harassment, and workplace harassment or discrimination based on sex. The law does not apply to provisions that: (1) protect the claimant’s identity at the claimant’s request, provided the defendant is not a government agency or public official; or (2) prohibit disclosure of settlement payment amounts.

California Will Require Women on Corporate Boards of Directors

Under SB 826, also signed into law on September 30, 2018, a publicly held corporation with principal executive offices in California must have a representative number of women on its board of directors. Specifically, by the end of 2019, covered corporations must have at least one women on their boards. By the close of 2021, the law will require at least two women on boards with five directors and at least three women on boards with at six or more directors. Companies that don’t comply face a $100,000 fine for the first violation. In signing the bill, Governor Brown reasoned that “recent events in Washington, D.C. — and beyond — make it crystal clear that many are not getting the message. … Given all the special privileges that corporations have enjoyed for so long, it’s high time corporate boards include the people who constitute more than half of all ‘persons’ in America.” The bill is the first of its kind.

California Expands the 1-Hour Digital Exhibition Exemption from Regulations Governing Minors In Entertainment

AB-2388, signed into law on September 5, 2018, expands the exemption from California’s Labor Code provisions governing employment of minors in the entertainment industry for certain limited performances to include “digital exhibitions.” Specifically, Labor Code Section 1310(c) now exempts from that chapter and Chapter 3 radio or television broadcasting or digital exhibitions where:

  • The minor does not receive compensation (directly or indirectly);
  • The engagement is limited to a single appearance lasting not more than one hour; and
  • No admission is not charged.

According to the bill’s author, examples of exempt performances under this section might include minors performing the national anthem at a ball game, singing in a church choir performance, or appearing in a local theater production, where such performances are broadcast.

Just as interesting is what did not make it into the law. As originally introduced, this bill would have required companies to obtain a Permit to Employ Minors in order to employ minors in “social media advertising.” As amended in May, the bill would have expanded the permit requirement and the Coogan Law to include contracts for “social media advertising” services (and not just employment). However, these provisions were cut from the bill in June, leaving only the expanded exemption for certain limited performances. For now, whether and under what circumstances California’s child labor and Coogan laws apply to the engagement of minor social media influencers remains uncharted waters.

California Clarifies Equal Pay Laws

Earlier this summer, the Governor signed AB 2282, the Fair Pay Act Bill, into law to clarify Labor Code sections 432.3 and 1197.5, which dictate how employers can use salary history information of employees and job applicants.  Section 432.3 prohibits all California employers (including public employers) from relying on the salary history information of an applicant as a factor in determining whether to offer the applicant employment or what salary to offer the applicant.  It also requires an employer, upon reasonable request, to provide the pay scale for a position to an applicant applying for employment.  Section 1197.5 (also known as the Equal Pay Act) prohibits employers from paying employees of one sex less than the other for substantially similar work and prohibits prior salary, by itself, from justifying any pay disparity.

The new law, AB 2282, clarifies these two laws.  First, it defines the previously undefined terms, “applicant,” “pay scale,” and “reasonable request,” in Labor Code section 432.3. “Applicant” is an individual who seeks employment with the employer, not a current employee.  “Pay scale” means the salary or hourly wage range.  “Reasonable request” means a request made after the applicant has completed the initial interview.  Second, AB 2282 clarifies that while employers may not ask for an applicant’s salary history information, they may ask for an applicant’s salary expectations.  Third, it amends Section 1197.5 to authorize an employer to make a compensation decision based on an employee’s current salary as long as any wage differential resulting from that compensation decision is justified by one or more specified factors, including a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or a bona fide factor other than race or ethnicity, such as education, training, or experience.

New Protections Against Defamation Lawsuits By Alleged Harassers

Governor Brown also signed into law AB 2770, which protects sexual harassment victims and their employers against lawsuits for defamation by (1) ensuring victims of sexual harassment and employers are not sued for defamation by the alleged harasser when a complaint of sexual harassment is made and the employer conducts its internal investigation, and (2) allowing an employer to state on a reference check that the alleged harasser is not eligible for rehire based upon the “employer’s determination that the former employee engaged in sexual harassment.”  The new law amends Section 47 of the California Civil Code, which relates to privileged communications, to make the conduct described above “privileged,” and therefore protected from defamation claims.

The referenced portion of this new law creates a potential minefield for employers.  First, the law does not set forth any minimum due process or investigation standards for employers to determine that an alleged harasser has engaged in sexual harassment.  As a result, even if employers are safe from defamation claims, their telling potential employers about a sexual harassment determination may give rise to other potential claims by alleged harassers.  Second, if a potential employer is informed of a potential employee’s alleged harassment and hires him/her anyway, this decision may give rise to future claims for negligent hiring.

California Eliminates the 7-Day Waiting Period For Paid Family Leave Benefits

AB 2587 amends Section 3303.1 of the California Unemployment Insurance Code, which pertains to Paid Family Leave (“PFL”).  PFL is a wage replacement program for California workers who take time off to care for a seriously ill family member or to bond with a minor child within one year of birth, adoption or foster care placement.  Prior to January 1, 2018, individuals were required to go through an unpaid seven-day waiting period before they could start receiving PFL benefits. This seven-day waiting period will be removed starting January 1, 2018.  The new law also deletes the requirement that, if an employer requires its employees to take up to two weeks of earned but unused vacation before and, as a condition of, the employee’s receipt of PFL, the employee must apply one week of that vacation to the unpaid seven-day waiting period.  Because the waiting period is no longer required, this vacation provision is no longer relevant.

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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