United States: 2021 Employment Law Spotlight: California

In 2020, California enacted several new laws affecting employers and their employment policies and procedures. While some of these laws are already in effect, others go into effect over the course of the next few months and years.

Laws That Took Effect in 2020

Workers' Compensation COVID-19 Liability

By signing SB 1159 into law on September 17, 2020, California Governor Newsom codified his earlier issued executive order, which states that under certain circumstances, when an employee tests positive for COVID-19, there is a rebuttable presumption that the employee contracted the virus while at work and, therefore, said illness is covered by the employers' workers' compensation insurance coverage.

Additional Exemptions from the ABC Test

At the beginning of 2020, AB 5 took effect, codifying the Dynamex  "ABC test" to determine whether a worker is properly classified as an employee or independent contractor. In September 2020, the Governor signed into law AB 2257, which expanded the list of occupations exempt from the test, revised the referral agency exemption, and expanded the business-to-business exemption to include relationships between two or more sole proprietors.

Some of the occupations added as exemptions include insurance underwriters, those providing professional consultant services, and musicians involved in a single-engagement live performance relationship.

It is important for employers to note that just because workers may be exempt from the ABC test, they do not automatically classify as employees, but instead their classification must be determined by the Borello multifactor test. Under  Borello, the primary test of an employment relationship, known as the "right to control" test, is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.

Laws Effective January 1, 2021

COVID-19 Infection Reporting Requirements

Effective January 1, 2021, employers are required to provide written notice to all employees assigned to a worksite and employers of subcontracted employees who were on the premises of any potential COVID-19 exposure within one business day of receiving "a notice of potential exposure." Employers must also notify local public health agencies within 48 hours of all workplace outbreaks, defined as three or more laboratory-confirmed COVID-19 cases within a two-week period. Any employer in violation risks the shutdown of the entire worksite.

Expansion of Medical Leave Under the CFRA

Senate Bill 1383 significantly expands family and medical leave under the California Family Rights Act ("CFRA"). The CFRA will now apply to all entities with at least five employees, including public agencies. It requires employers to provide up to twelve weeks of unpaid leave for an employee's serious medical condition or that of a qualifying family member. Additionally, SB 1383 also expands the list of qualifying members to include siblings, grandparents, and grandchildren. Employers should also be aware that in certain circumstances, CFRA leave will not run concurrently with leave under the Family Medical Leave Act ("FMLA") including leave for care of an adult child capable of self-care, a grandparent, grandchild, or sibling. Employers should reevaluate how they track FMLA and CFRA leave in circumstances where such leave runs separately.

You can find additional information on this expansion here.

Leave Expanded for Victims of Crime and Abuse

Under Labor Code section 230.1, employers with 25 or more employees were previously prohibited from terminating a victim of domestic abuse, sexual assault, and/or stalking to take time off to seek medical attention. AB 2992 expands these protections to a victim of any crime causing physical or mental injury or a threat of physical injury. It also requires employers to allow victims to take time off not only to seek medical attention, but also to obtain services from specified entities related to an experience of crime or abuse, including psychological counseling or mental health services, or to participate in safety planning and take other actions to increase safety from future crime or abuse.

Employees Permitted Additional Six Months to file DLSE Complaints

Previously, employees had only six months from the occurrence of a violation to file a complaint against an employer with the California Division of Labor Standards Enforcement (DLSE). However, AB 1947 extends that time an additional six months, leaving employers potentially on the hook for a full year after the complained-of conduct.

In addition, employers can also be subject to an award of reasonable attorneys' fees to an employee who prevails on a "whistleblower" claim.

Minimum Wage Increase

Effective January 1, 2021, minimum wage in the State of California increased to $13 per hour for employers with 25 or fewer employees and $14 per hour for employers with 26 or more employees. This increase in state minimum wage requires employers to reevaluate the salary of exempt employees, as they are entitled to a "monthly salary equivalent to no less than two times the state minimum wage for full-time employment" in order to maintain the employees' exempt status. Additionally, many cities and counties throughout California have enacted their own minimum wage laws that exceed the state's minimum wage requirements, including, but not limited to, the cities of Los Angeles and San Francisco. California employers must comply with both state and local minimum wage laws.

Mandated Report of Abuse

The California Child Abuse and Neglect Reporting Law requires "mandated reporters" to formally report any suspected child abuse to law enforcement. AB 1963 expands the list of "mandated reporters" to include: (i) human resources employees working for a business with at least five employees that also employs minors; and (ii) front-line supervisors of businesses with at least five employees whose duties require direct contact with, and supervision of, minors in the performance of the minors' duties in the workplace. Employers should ensure that any newly designated "mandated reporters" receive training in the identification and reporting of child abuse and neglect.

Limited No-Rehire Provisions in Settlement Agreements

Since January 1, 2020, "no-hire" provisions, which restrict an employee who has filed a claim against an employer from working for the employer, its parent, subsidiary or other affiliates, have been prohibited from use in employment settlement agreements, subject to limited exceptions. AB 2143 loosened the restrictions by allowing the "no-hire" provision when either (i) the employee failed to file the claim in good faith; or (ii) the employer has made and documented a good faith determination that the employee engaged in sexual assault, sexual harassment, or criminal conduct prior to the employee bringing the claim.

Laws To Take Effect In Coming Months/Years

New Requirements in Reporting Pay Data

Beginning on March 31, 2021, certain California employers will be required to report to the Department of Fair Employment and Housing information regarding employee pay data on an annual basis. The new law applies to employers that employ at least 100 employees and are required to file an annual Employer Information Report (EEO-1) under federal law.

Each applicable employer will be required to report the number of employees by gender, race, and ethnicity in their respective job categories used to report demographic information on the EEO-1 form, such as executive or senior-level officials, first or mid-level officials, laborers, technicians or service workers. Such employers are also required to establish and implement effective written procedures for determining the quantity and types of equipment used.

For a more detailed breakdown of this new requirement, please refer to our October post.

Hospital Employers Required to Maintain PPE Stockpiles

Beginning April 1, 2021, employers of workers in California general acute care hospitals are required to maintain a three-month supply of personal protective equipment (PPE), including surgical masks, eye protection, and specified respirators. Employers must also establish and implement effective written procedures for determining the type and quantity of each type of PPE used in its normal consumption.

Diversity Requirements For Corporate Boards

On September 30, 2020, AB 979 was signed into law, and requires a publicly held domestic or foreign corporation with its principal executive office located in California to meet certain diversity requirements as it pertains to its board of directors. These companies must have at least one director from an underrepresented community on its board by the end of 2021. In addition, by the end of 2022, a corporation with 5 to 8 directors must have a minimum of 2 directors from underrepresented communities, and a corporation with 9 or more directors to have a minimum of 3 directors from underrepresented communities. A director from an underrepresented community refers to a director who self-identifies as Black/African American, Hispanic/Latinx, Asian, Pacific Islander, Native American/Native Hawaiian/Alaska Native, or Gay/Lesbian/Bisexual/Transgender.

Liability Extends to Successor Employers

Effective January 1, 2022, AB 3075 expands the potential liability of any employer regarding wages, damages, and penalties owed to employees to its successor entity. This expansion applies to any entity that has acquired a business through a merger or consolidation, and either: (i) uses substantially the same workforce or services to offer substantially the same services as the original business; (ii) has substantially the same owners or managers that control the labor relations as the original business; (iii) employs any person who controlled the wages, hours or working conditions of the original workforce as a managing agent; or (iv) is an immediate family member of any owner, partner, officer or director of the original business.

In addition, a company is also required to include in its filed statement of information whether any officer or director has an outstanding final judgment issued by the Division of Labor Standards Enforcement or a court of law for a violation of any wage order or Labor Code violation.