The new year will bring significant changes for California employers, which could have substantial ramifications for businesses in the state. Employers should consider these key statutory developments and adjust their policies and practices.


Expanding Independent Contractor ABC Test (AB 5)

AB 5 codifies the "ABC" test adopted by the California Supreme Court in April 2018, in Dynamex Operations West, Inc. v. Superior Court of Los Angeles for classification of workers as employees or independent contractors under the California Wage Orders. Under the ABC test, a worker may only be classified as an independent contractor if the hiring entity can show that the worker meets all of the following criteria:

  • A. The worker is free from the control and direction of the hiring entity, both under the contract for the performance of work and in fact;
  • B. The worker performs work that is outside of the usual course of the hiring entity’s business, and
  • C. The worker is engaged in independently established trade, occupation, or business that is of the same nature as the work performed for the hiring entity.

Effective on January 1, 2020, under AB 5, the ABC test will also apply to the requirements of the California Labor Code, the California Unemployment Insurance Code, and, effective on July 1, 2020, the California Workers Compensation Code.

AB 5 also sets forth seven broad categories of exceptions – occupations and industries for which the ABC test is not applied. However, for those exceptions, the existing Borello test will continue to apply going forward.

See our previous detailed analysis of AB 5 here.

  • Practice Pointer: Employers should consult with legal counsel and review independent contractor classifications in light of the new law. 

Permitting Employees to Recover Civil Penalties for Unpaid Wages (AB 673)

Effective on January 1, 2020, the new law will permit employees to recover civil penalties for unpaid wages, which were previously available only through an action by the Labor Commissioner. Employees are entitled to recover $100 for each initial violation for failure to pay each employee, and each subsequent violation, and any willful or intentional violation, $200 for each failure to pay each employee, plus 25 percent of the unpaid wages.

AB 673 limits employee recovery to either statutory penalties or civil penalties under the Private Attorney’s General Act (PAGA), but not both, for the same violation.

  • Practice Pointer: Employers should make sure that their pay practices reflect on-time payment of wages to all employees. 

Expanding Labor Commissioner’s Authority to Pursue Wage Claims (SB 688)

Effective on January 1, 2020, the law expands the enforcement abilities of the Labor Commissioner. Previously, the Labor Commissioner could only issue citations for violations alleging unpaid minimum wages. The new law provides the Labor Commissioner with authority to issue citations for violations of unpaid wages that were less than the wage set by contract in excess of minimum wage.

Increasing Minimum Wage and Minimum Salary

On January 1, 2020, under existing laws, the California state minimum wage will increase to $12 per hour for employers of 25 or fewer employees and to $13 per hour for employers of 26 or more employees.

With the increased California state minimum wage, the minimum salary permitted in California will automatically increase to $49,920 annually for employers of 25 or fewer employees and $54,080 annually for employers of 26 or more employees. (The calculation of the California state minimum salary is the minimum wage times two times 2,080 hours.)

Many local ordinances also have minimum wage increases effective on January 1, 2020, which may be higher than the state minimum wage. These local ordinance increases do not affect the state minimum salary requirement.

  • Practice Pointer: Employers should review and increase as necessary any minimum wages paid to employees under local and state minimum wage laws, and ensure that any employees classified as salaried exempt employees are paid at least the applicable minimum salary required under state law. 

Harassment, Discrimination, and #MeToo

Extending Statute of Limitations for FEHA Claims (AB 9)

Effective on January 1, 2020, under AB 9, the deadline for a person alleging unlawful discrimination, harassment, or retaliation in violation of the California Fair Employment and Housing Act (FEHA) to file a verified complaint with the California Department of Fair Employment and Housing (DFEH) will be extended from one year to three years from the date of the occurrence.

The change will not revive claims that have already expired under the current statute.

Extending the Deadline to Complete Sexual Harassment Prevention Training (SB 778)

SB 778 extends the deadline for employers with five or more employees to provide two hours of sexual harassment prevention training to supervisors and one hour of sexual harassment prevention training to employees from January 1, 2020, to January 1, 2021. Additionally, AB 241 and AB 242 provide that physicians, nurses, surgeons, lawyers, and court staff must undergo implicit bias training as a component of continuing education.

Current law already requires employers of 50 or more employees to provide two hours of training to supervisors. That requirement is not extended and remains unchanged under the new law.

Medical staff training requirements would not take effect until 2023; the training requirement for legal workers becomes effective in 2022.

See our previous detailed analysis on sexual harassment prevention training here.

  • Practice Pointer: Employers should ensure that all employees are trained by the applicable deadlines. Employers should consult with legal counsel to ensure that existing and planned training includes all of the required elements. 

Prohibiting Discrimination Based on Protected Hairstyles (SB 188)

Effective on January 1, 2020, SB 188 will expand the definition of race under the FEHA to prohibit racial discrimination and harassment based upon a person’s natural hairstyle. The legislature found that workplace dress codes and grooming policies that prohibit natural hair, including afros, braids, twists, and locks, have a disparate impact on Black individuals, as such policies are more likely to deter Black applicants and burden or punish Black employees than any other group. All such policies will be unlawful. 

  • Practice Pointer: Employers should review and revise dress and grooming standards to ensure that none of the protected hairstyles are prohibited or discouraged. 

Arbitration Agreements and Separation/Settlement Agreements

Banning Mandatory Arbitration Agreements (AB 51)

For contracts for employment entered into, modified, or extended on or after January 1, 2020, AB 51 will prohibit California employers from requiring employees and applicants to sign arbitration agreements as a condition of employment, continued employment, or the receipt of any employment-related benefit.

The new law also provides that employers may not retaliate against an employee or applicant who refuses to sign an arbitration agreement. Severance agreements and post dispute settlement agreements are specifically excluded from the coverage of the law.

AB 51 is widely expected to be challenged in court on the grounds that the law is preempted by the Federal Arbitration Act (FAA).

Note that even if AB 51 will preempted by the FAA, the FAA does not cover all arbitration agreements, including agreements with "any class of workers engaged in foreign or interstate commerce," such as transportation workers.

  • Practice Pointer: Employers should consult with legal counsel to review existing arbitration agreements and revise them prior to January 1, 2020. Such agreements should include explicit language stating that enforceability is governed under the FAA. Employers considering rolling out arbitration agreements (and class action waivers tied to them) should do so prior to January 1, 2020. 

Establishing Penalties for Failing to Timely Pay Arbitration Costs (SB 707)

Effective on January 1, 2020, an employer who fails to pay within 30 days after the due date the costs and fees necessary for arbitration to begin or continue will be in material breach and default of the arbitration agreement and will waive its right to compel arbitration. In the event of such breach or default, the employee will be permitted to withdraw the claim from arbitration and proceed in court or commence action in court.

The employer may be required to pay to the employee the reasonable attorney’s fees and costs related to the arbitration. If the employee or consumer then proceeds with an action in court, the statute of limitations will be tolled back to the date the arbitration was filed.

The bill will also require the court to impose a monetary sanction on the drafting party who materially breaches an arbitration agreement and authorizes other sanctions, including evidentiary sanctions.

  • Practice Pointer: Employers should ensure that after an arbitration is commenced by an employee or employer that all fees are timely paid. 

Ending "No Rehire" Provisions in Employee Settlements (AB 749)

Effective on January 1, 2020, employers and employees may not enter into "no rehire" provisions in employment settlement agreements, except where the employer has made a good-faith determination that the employee engaged in sexual harassment or assault. Under AB 749, a settlement agreement may not prohibit or restrict a settling party from obtaining employment with the employer or its parents, subsidiaries, affiliates, divisions, and contractors.

Any such provisions will be void as a matter of law and a violation public policy. The prohibition applies to all "aggrieved persons," who are employees who have filed a claim in court, before an administrative agency, in an alternative dispute resolution forum, or through the employer’s internal complaint process.  "No re-hire" provisions may still be included in severance or settlement agreements that are entered into in response to demand letters or unfiled claims.

The new law prohibits only the agreement with the employee. It does not prohibit employers from determining, based on the conduct of a particular employee, that it will not rehire the employee at any time in the future. 

  • Practice Pointer: Employers should review settlement and separation agreements to ensure that any no-rehire provisions are only present where permitted under the new law. 

Leave, Accommodation, and Workplace Safety

Expanding Lactation Accommodation Requirements (SB 142)

Effective on January 1, 2020, employers will be required to provide more lactation accommodations than previously required in California. Specifically, a lactation room or location must:

  • Be close to the employee’s work area;
  • Be shielded from view and free from intrusion; and
  • Have certain features, including electricity and resources necessary to operate a breast pump.

The employer also must provide access to a sink with running water and a refrigerator nearby. As before, the room may not be a bathroom.

Employers must create and implement a lactation accommodation policy and make it available to employees. The policy must include the following:

  • A statement about an employee’s right to request lactation accommodation;
  • The process by which the employee makes the request;
  • The employer’s obligation to respond to the request; and
  • A statement about an employee’s right to file a complaint with the Labor Commissioner for any violation. 

Employers must include the policy in the employee handbook or other policies that the employer makes available to employees, and they must distribute the policy to new employees upon hiring and whenever an employee makes an inquiry about or requests parental leave. If an employer cannot provide break time or a location that complies with the new law, the employer must provide a written response to the employee.

Failure to provide an adequate room or location and/or failure to provide reasonable time for lactation will be deemed a violation of California’s rest period laws, requiring the employer to pay a premium of one hour of pay per day for each day on which a violation occurs.

Small employers of less than 50 employees may request an exemption if they can demonstrate that certain requirements of the new law would impose an undue hardship by causing "significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer’s business." If an exemption is granted, the employee will still be required to make reasonable efforts to provide the employee with use of a room or other location, other than a toilet stall, in close proximity to the employee’s work area, for the employee to express milk in private.

  • Practice Pointer: Employers should review their existing lactation accommodation policy and lactation area and update both in accordance with the new law. Employers who do not currently have a lactation policy must implement one. Employers who need to seek an exemption should consult with legal counsel and apply for one. 

Expanding Paid Family Leave (SB 83)

Effective on July 1, 2020, the maximum duration of Paid Family Leave (PFL) benefits an individual can receive from California’s State Disability Insurance program will be increased from six to eight weeks. There is no change in the law with regard to the amount of time that an individual may take for Family and Medical Leave Act leave, California Family Rights Act leave, or California Pregnancy Disability Leave.

The new law affects only the number of weeks for which the state will pay family leave benefits to the employee.

Providing Additional Days for Organ Donation Related Leave (AB 1223)

Under existing law, private employers with 15 or more employees must permit an employee to take a leave of absence with pay, not exceeding 30 business days in a one-year period, for the purpose of organ donation. Effective on January 1, 2020, employers will also be required to grant up to 30 business days of unpaid leave for the same purpose. The one-year period is measured from the date the employee’s leave begins and consists of 12 consecutive months.

  • Practice Pointer: Employers should update their leave policies to reflect that the additional unpaid leave is also available. 

Reporting Occupational Injuries and Illnesses (AB 1804)

Effective on January 1, 2020, AB 1804 will require employers to report serious workplace injuries, illnesses, or death immediately by telephone or through an online platform to be developed by the California Division of Occupational Safety and Health. Until the online platform is available, employers are permitted to make these reports by telephone or email. Noncompliance carries a $5,000 civil penalty.

  • Practice Pointer: Employers should review injury-reporting practices to ensure that they are promptly reporting serious injuries as required. 

Industry-Specific Legislation

Expanding Requirements for Labor Peace Agreements (AB 1291)

Effective on January 1, 2020, under AB 1291, any company with 20 or more employees applying for a license from California’s Bureau of Cannabis Control must "provide a notarized statement that [it] will enter into, or demonstrate that it has already entered into, and will abide by the terms of a labor peace agreement." Employers with fewer than 20 employees must agree to enter into the agreement within 60 days of hiring its 20th employee.

A "labor peace agreement" is a contract between an employer and an organized labor union in which the employer agrees to help the union organize the employer’s workforce and not to disrupt union organizing efforts, in return for the union’s agreement not to strike or cause other disruptions at the employer’s workplace during a union-organizing campaign. The law is silent as to what union should be chosen or how to go about choosing.

Supervisors do not count toward the 20-employee threshold. Failure to comply with AB 1291 will result in revocation or suspension of a cannabis company's license.

  • Practice Pointer: Cannabis employers should consult with legal counsel to plan for and obtain advice concerning entering into a labor peace agreement, as such an agreement may lead to union organizing efforts. 

Expanding CFRA Rights to Flight Crew Members (AB 1748)

Effective on January 1, 2020, AB 1748 amends the California Family Rights Act (CFRA) to conform flight deck and cabin crewmember eligibility requirements with the federal Family and Medical Leave Act (FMLA), which has special hours of eligibility for airline flight attendants and other cabin crew.

Flight attendants are eligible for FMLA leave if, during the previous 12 months, they have worked at least 504 hours and have been paid at least 60 percent of the monthly guarantee, which means that they worked 60 percent of the minimum number of hours that the employer scheduled the employee for in any given month. Flight attendants still must meet the requirement of being employed for one year in order to be eligible for FMLA or CFRA leave.

  • Practice Pointer: Airline employers should modify policies to conform their California Rights Act leave policy to the FMLA, to the extent that this change will not violate existing obligations under collective bargaining agreements. Such employers should consult with legal counsel prior to making policy changes where employees are covered by collective bargaining agreements. 

Sexual Violation and Harassment Prevention Training in the Janitorial Industry (AB 547)

This law requires the director of the Department of Industrial Relations to convene an advisory committee to identify qualified organizations that janitorial employers must use for in-person training on sexual violence and harassment prevention for janitorial employees.

Harassment and Discrimination Prevention Training: Construction and Temp Employees (SB 530)

SB 530 extends the deadline for mandatory sexual harassment training to January 1, 2021, for employers of seasonal, temporary, or other employees "hired to work for less than 6 months." The law also incorporates special provisions for construction industry employers who employ workers pursuant to multiemployer collective bargaining agreements.