The California legislative session ended on October 14th, and as always, it was a busy year for employment and labor laws. Here is a summary of some of the most consequential laws from this year’s session. Please note, all rules go into effect on 01.01.2020 unless otherwise noted.
Classification of Independent Contractors (AB 5)
- AB 5 changes which workers or businesses can be classified as independent contractors under the Labor Code and Wage Orders. The new law is largely a codification and expansion of the California Supreme Court's June 2018 decision in Dynamex Operations West, Inc. v. Superior Court. In Dynamex, the Court adopted the so-called “ABC Test” to determine whether a person providing labor is an employee or an independent contractor under California’s Wage Orders. To establish independent contractor status under the ABC test, employers must satisfy all three of the following: (A) the company does not control or direct what the worker does (i.e. right of control test); (B) the worker performs tasks outside of the hiring entity’s usual course of business; and (C) the worker must be engaged in an independently established trade, occupation or business. AB 5 codifies the ABC test and extends the test to both the Labor Code and Wage Orders. Additionally, AB 5 has several exemptions from the ABC test for various professions and business relationships, including professional services and the construction industries. Please note, exempt professions must still qualify as independent contractors under the prior legal standard, also known as the Borello test. Lastly, AB 5 provides that it is “declaratory of existing law” as to the Wage Orders, meaning it is the legislators’ intent that it be applied retroactively. There is still a lot of uncertainty with AB 5 and it will likely take a few years for employers to receive more guidance. Specifically, there has been little guidance to employers about what satisfies prong B of the ABC test.
Specified Lactation Accommodations (SB 142)
- SB 142 clarifies that lactation accommodations must not be a bathroom and must contain the following: (i) a surface for breast pump and personal items, (ii) a place to sit, (iii) electricity, extension and charging cords. Additionally, the employee must have access to a refrigerator (or cooler) and running water.
Additional Paid Family Leave (SB 83)
- SB 83 increases the maximum Paid Family Leave (PFL) benefits from six (6) weeks to eight (8) weeks as of July 1st, 2020. PFL covers certain workers who take time off work to care for a seriously ill family member or to bond with a minor child within one year of birth or placement, as specified. Please note, while EDD’s PFL plan is currently well funded, it may become burdened as the state continues to expand other benefits. As such, the current payroll tax rate of 1.0 percent (of an employee’s first $118,371 in wages earned in a calendar year) is expected to rise to 1.1 percent in 2020, and additional increases could come in future years.
Prohibition of “No Rehire” Provisions (SB 749)
- AB 749 prohibits employers from entering into agreements with employees to restrict the employee’s ability to work, including for the same employer in the future. This, in effect, prohibits so-called “no rehire” provisions customarily found in settlement and release agreements. There are a few exceptions to this rule, including when the employer has made a good faith determination that the employee engaged in sexual harassment or assault, or other documented misconduct.
Prohibition of Mandatory Arbitration Agreements (AB 51)
- AB 51 prohibits employers from requiring arbitration agreements as a condition of employment and retaliating against an employee who refuses to sign an arbitration agreement. Please note, this rule will likely be challenged in court on the basis that it is preempted by the Federal Arbitration Act (FAA). Gov. Jerry Brown vetoed two similar bills prohibiting mandatory arbitration agreements on the premise that states must follow the FAA and Supreme Court precedent.
Extension of Statute of Limitations for CA Discrimination + Harassment Claims (AB 9)
- AB 9 extends the Statute of Limitation from one (1) year to three (3) years for any complaint under the California Fair Employment and Housing Act (“FEHA”). This includes claims of discrimination and harassment.
California Consumer Privacy Act Changes (AB 25)
- AB 25 extends the time for employers to comply with much of the Consumer Privacy Act (CCPA) until January 1, 2021. Employers would have otherwise had to comply with CCPA when collecting personal data of employees, emergency contacts, and applicants. Please note, this temporary reprieve from much of the CCPA has been reviewed by analysis as giving the legislature time to consider what parts, if any, of the CCPA should apply to employers.
Please note, the information in this article is not intended to constitute legal advice and should not be relied upon in lieu of consultation with appropriate legal advisors in your own jurisdiction.