Legislative Update: Here Are the New California Employment Laws for 2020

Yesterday was the last day for Governor Newsom to sign or veto bills this legislative session.  Governor Newsom signed almost every employment bill presented to him by the legislature, including some that had been vetoed in prior sessions by Governor Brown.  Here’s the list of notable new laws, which take effect January 1, 2020 (unless otherwise noted):

AB 5 (Independent Contractors v. Employees):  This new law is the legislature’s codification of the California Supreme Court’s 2018 ruling in Dynamex v. Superior Court, as the test (with only a handful of enumerated exceptions) for determining whether a worker is an employee or an independent contractor in California.  As has been widely reported, the Dynamex ruling greatly narrowed the classes of workers who will qualify for independent contractor status, causing significant outcry from both the business community and freelance workers.  Despite this, the democrat-controlled legislature won’t overturn the Dynamex ruling and instead has codified it.  However, industries that can afford lobbyists and whose workers aren’t the target of unions (and their influence on the legislature) managed to negotiate some exemptions from Dynamex.  AB 5 exempts the following types of workers from the Dynamex test:  certain insurance agents/brokers; physicians, surgeons, dentists, podiatrists, psychologists, or veterinarians; lawyers, architects, engineers, private investigators, or accountants; securities brokers and investment advisors; direct salespersons as described in Section 650 of the Unemployment Insurance Code; commercial fishermen; certain real estate licensees; repossession agents; certain construction industry contract work, including trucking services; motor club services; referral agency work; and certain professional services contracts, including marketing, human resources, travel agent services, graphic design services, grant writing, fine artist work, work of certain agents who practice before the IRS, payment processing services with independent sales organizations,  services provided by certain still photographers or photojournalists, services provided by certain freelance writers, editors, and newspaper cartoonists, and services provided by certain estheticians, electrologists, barbers, manicurists, and cosmetologists.  The bill also exempts business-to-business contracting relationships from the Dynamex test if specified conditions are met.  For workers not covered by the Dynamex test, the prior Borello multi-factor test will apply to determine whether the worker qualifies as an independent contractor.  To the extent the bill provides exemptions from the Dynamex test, the bill expressly states that the exemptions are intended to apply retroactively to relieve employers of liability.  For workers who are not exempt from Dynamex, the bill clarifies that the Dynamex test will apply to claims brought under the Labor Code, the Wage Orders, and/or the Unemployment Code.  This is a highly detailed bill, with carefully crafted exemptions for only certain industries.  Employers with potentially covered workers and contracting relationships should review the bill closely for possible coverage.

AB 170 (Independent Contractors v. Employees): This bill, which was a last minute “gut and amend” of an entirely different bill, is similar to AB 5, but adds newspaper distributors and carriers to the list of negotiated exemptions from the Dynamex test.  These workers will be covered by the more traditional “Borello” test for independent contractor status.

AB 51 (Employment Arbitration Agreements):  This bill makes it unlawful for an employer to require employees to agree to arbitrate most employment disputes (those alleging violations of the Fair Employment and Housing Act and/or the Labor Code).  This bill includes within its prohibition agreements that allow employees an opportunity to opt-out of an arbitration agreement.  The bill is very similar to last year’s AB 3080, which the legislature passed but then Governor Brown vetoed.  However, this year’s bill includes a provision stating that the law is not “intended to invalidate a written agreement that is otherwise enforceable under the Federal Arbitration Act.”  This addition is intended to avoid the problem of FAA preemption, which made last year’s bill invalid on its face.  Given the way the bill is written, there is a chance that it will be enforceable as to agreements that are not covered by the FAA, but will not be a bar to agreements that are covered by the FAA.  An employer’s arbitration agreement generally should expressly state that it is governed by the FAA, but not all agreements actually are governed by the FAA.  An employer must be involved in interstate commerce in order to invoke the FAA.  This term is very broadly defined, but I expect plaintiffs’ attorneys to challenge the applicability of the FAA much more often in California courts.  Of note, the FAA also does not apply to many trucking employees.  If an employer does not know whether it can successfully argue FAA coverage, and the employer has a mandatory arbitration agreement, the employer is at risk for a finding that its arbitration agreement violates California law.  Any challenge to the agreement would be amenable to being brought on a class/representative basis with a threat of PAGA penalties.  The new law applies to “contracts entered into, modified, or extended on or after January 1, 2020.”  Thus, arbitration agreements entered into prior to January 1, 2020 appear to be safe, but not if they are modified or contractually “extended” after the effective date.  One final note – the bill does not apply to negotiated severance agreements or post-dispute settlement agreements.

AB 749 (No-rehire Provisions in Settlement Agreements):  This bill prohibits a settlement agreement entered into on or after January 1, 2020 from containing a provision whereby the settling employee agrees that he/she may not seek re-employment with the employer and is not eligible for rehire.  However, a no-rehire provision is allowed if the employer found, in good faith, that the settling employee committed sexual harassment or sexual assault.

AB 9 (Extended Statute of Limitations for FEHA Claims):  This bill greatly expands the statute of limitations to file a claim for employment discrimination, harassment, and/or retaliation under the Fair Employment and Housing Act (FEHA).  As most employers know, under current and long-standing law, an employee who wants to sue for employment discrimination is required to first file an administrative complaint with the Department of Fair Employment and Housing (DFEH).  The administrative complaint must be filed within one year after the alleged discriminatory act, and then the employee has one year from the date of the DFEH’s issuance of a right to sue notice to file a lawsuit.  This bill extends the employee’s time to file the administrative complaint from one year to three years.  The effect of this bill will be to allow employees to wait to file a lawsuit against an employer for four years after the alleged unlawful employment practice.  This new law invites stale discrimination claims that will be hard to defend based on fading memories and inability to locate relevant evidence.  Indeed, the extended statute of limitations is longer than employers are even required to keep personnel records (which would have information relevant to a claim of discrimination).  This is a poorly thought bill that will have bad consequences.

SB 142 (Lactation Accommodation):  This bill, which is modeled after a local San Francisco lactation accommodation ordinance, specifies lactation accommodation requirements for employers (even though California employers are already required by law to accommodate the lactation needs of new mothers).  An employer must provide an affected employee with a private space (other than the bathroom) that can be used for lactation. The space must have electricity, a table or other surface to hold equipment, and a place to sit.  The employer must also provide a sink and refrigerator or other cooling device (for storing milk) in close proximity to the employee’s workspace.  An employee’s normal workspace may be used if it otherwise complies.  There are additional provisions for multi-tenant buildings and agricultural employers.  Employers with less than 50 employees may seek an exemption from these specific requirements if compliance would pose an undue hardship, in which case the employer still has to accommodation lactation needs but may provide a bathroom (or other space) for this purpose.  The bill also requires employers to adopt a written lactation accommodation policy (which may be freestanding or included in an employee handbook) and to distribute that policy upon hire and at the time of any relevant inquiry by an employee.  The bill makes a failure to comply with these provisions a failure to provide a rest break under the Labor Code.

AB 25 (CCPA Amendment):  This bill amends the California Consumer Privacy Act (CCPA), which was enacted last year.  The CCPA grants consumers various rights with regard to their personal information held by businesses, including the right to request a business to disclose specific pieces of personal information it has collected and to have information held by that business deleted, as specified. The act requires a business to disclose and deliver the required information to a consumer free of charge within 45 days of receiving a verifiable consumer request from the consumer.  The CCPA really is a business/consumer law, not an employment law, but the wording of the CCPA was unclear as to whether “businesses” that collect personal information of applicants/employees are required to comply with the Act insofar as their use of personnel data is concerned.  AB 25 provides some clarification in this regard, specifying that information collected in the course of a person applying for a job or working for an employer (or as an owner, officer, director, or contractor of an employer) is exempt from most provisions of the Act until January 1, 2021.  In other words, for now, this just means that full coverage of the act is delayed until 2021 for employers (rather than the Act being permanently inapplicable).  Additionally, and importantly, there is one provision of the CCPA that will still apply to employers in the meantime.  This is the requirement that businesses disclose to “consumers” (i.e. applicants/employees), at or before the time of collection, the types of personal information that will be collected and the purposes for which it will be used.  “Personal information” is defined in Civil Code 1798.140.

AB 673 (Expanded Labor Code Penalties):  This new law amends Labor Code section 210 to allow an employee (and not just the Labor Commissioner) to bring an action to recover statutory penalties for late payment of wages.

SB 688 (Wage Claims): This new law expands the authority of the Labor Commissioner to adjudicate claims alleging that an employee was not paid all wages promised by contract/agreement. Previously, the Labor Commissioner only had authority to adjudicate claims that an employee was not paid at least the minimum wages required by law.

AB 1223 (Additional Organ Donation Leave):  California employers already have a legal obligation to provide an employee with up to 30 days of paid leave per year for purposes of organ donation.  This new law expands this obligation by requiring employers to provide an additional 30 days of unpaid leave if needed for purposes of organ donation.

SB 707 (Arbitration Agreements/Failure to Pay Fees):  This new law provides another new avenue for attack on employment arbitration agreements by providing that if an employer fails to pay required arbitration fees (either associated with initiation of the arbitration or during the pendency of the arbitration) within 30 days of the due date, the employer is in material breach of the arbitration agreement and the employee may either proceed with a claim in court or obtain an order requiring the employer to pay the arbitration fees and proceed in arbitration, along with an order imposing various forms of sanctions (monetary, issue, evidentiary, terminating).

SB 778 (Harassment Training):  This bill cleans up some confusion that resulted from a new law enacted last year expanding sexual harassment training requirements.  This bill clarifies that employers with 5 or more employees have until January 1, 2021 to provide two hours of training to supervisors and one hour of training to non-supervisory employees.  If an employer provides the training in 2019, it is not required to provide it again until two years later.

SB 188 (Racial Hairstyles):  This bill expands/clarifies race discrimination under California law to include discrimination against a person because of historical traits associated with race, including hair texture and protective hairstyles, such as locks, braids, and twists.

Governor Newsom vetoed the following bills:

AB 171 (Rebuttable Presumption of Retaliation):  This bill would have established a “rebuttable presumption” of unlawful retaliation for any adverse action taken by an employer against an employee within 90 days of the employee informing the employer that she is the victim of sexual harassment, domestic violence, sexual assault, or stalking.

SB 218 (Mini-DFEHs):  This bill would have allowed cities within the County of Los Angeles to adopt their own anti-discrimination ordinances (mini-FEHAs) and to create their own agencies (mini-DFEHs) for processing and remedying complaints of discrimination.

We will be hosting a webinar on November 21, 2019 at 10:00 a.m. to review these new laws and other employment law developments for 2020.  Registration information will be provided shortly.  In the meantime, employers wishing to review the text of these bills may do so here.

This legislative update first appeared on the California Labor & Employment Law Blog, and was written by Robin E. Largent.