California Small Business Employers Must Avoid Sticking Their Heads in the Sand
The governor approves new laws for California Employers every October. Year after Year. A common complaint we hear from our small business employers is: “How is a small business owner ever supposed to keep up with these new employment laws every year?”
Larger employers, staffed with in-house HR experts and attorneys, understand the significant consequences of non-compliance.
Unfortunately, many rural small business employers fail to include employment law compliance as a cost of doing business. Instead, they stick their heads in the sand and tell themselves that their happy employees would never sue them. Big mistake.
California employment laws are created to educate both employers and employees on the rules of the game. And, California is a difficult playing field compared to other less employee-friendly states. It simply makes good business sense to play by the rules, whether one agrees with them or not.
Unfortunately, ignorance can lead to lawsuits. And, defending any lawsuit is disruptive, costly, morale busting and unpleasant. For everyone! This includes employees and their families, staff and their families, co-workers and small business owners.
So, Let’s Get Educated
The Frog Knows, Do You?
Most bills go into effect on January 1, 2020, unless specifically stated otherwise in the bill, and/or as noted below. California employers still have time to prepare.
Easy Clickable Links to Text and Analysis of 2020 California Employment Laws
Access each bill mentioned below by clicking on the specific bill number. Your clicking this link will take you to the California Legislative website for that bill. Here you will find the full text, bill analysis, code sections added or changed and history of new California employment laws for 2020.
2020 California Employment Laws Approved by Governor Newsom
You will find listed below some of the most significant 2020 California employment laws passed. These apply to all California employers, both public and private, unless specifically noted otherwise below. However, keep in mind that the focus of this blog is on non-unionized, small business employers.
Wage and Hour Laws
AB 5: Worker Status: employees and independent contractors.
This bill codifies the decision of the California Supreme Court in 2018 Dynamex Operations West, Inc. vs. Superior Court of Los Angeles that presumes a worker is an employee unless a hiring entity satisfies a three-factor test (known as the “ABC test”). The burden of proof rests on the hiring entity and not the independent contractor. This bill also expands the applicability of “ABC test” for all Labor Code, Unemployment Insurance Code and Wage Order claims.
Independent Contractors Must Meet All of the Conditions Below (A + B+ C)
A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under contract for the performance of the work and in fact.
B) The person performs work that is outside the usual course of the hiring entity’s business.
C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
The B and C conditions make it significantly more difficult to classify workers as independent contractors. Independent contractors who fail to pass all three factors of the ABC test will now be subject to the Borello case ( S.G. Borello & Sons, Inc. v. Dept of Indus. Relations (Borello), 48 Cal. 3d 341, which has been in effect since 1989.
The primary test of an employment relationship in the Borello case , 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. Although the right to control is the primary factor, the courts also consider numerous secondary factors on a case-by-case basis:
- If the person performing services is engaged in an occupation or business distinct from that of the principal;
- If the work is a part of the regular business of the principal or alleged employer;
- Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
- The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
- If the service rendered requires a special skill;
- The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
- The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
- The length of time for which the services are to be performed;
- The degree of permanence of the working relationship;
- The method of payment, whether by time or by the job; and
- Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.
Exemptions from AB 5
Certain industries were rewarded with an exemption from the ABC test because they were fortunate enough to afford lobbyists to represent their interests. Lucky them.
Nevertheless, it’s important to note that even if the worker meets one of the exemptions, it must still demonstrate independent contractor status under Borello and/or the statutory provisions included in this bill.
The exemptions apply to these 7 categories:
- Specific occupations. Physicians, surgeons, dentists, podiatrists, veterinarians, lawyers, architects, engineers, private investigators, accountants, securities broker-dealers, investment advisers, direct sales salespersons and commercial fishermen.
- Professional Service Contracts. Contractual services for marketing, human resources, travel agents, graphic designers, grant writers, fine artists, agents practicing before IRS, payment processing agents, still photographers, photojournalists, freelance writers, editors, newspaper cartoonists, estheticians, electrologists, manicurists, barbers and cosmetologists- if certain criteria are met.
- Real estate licensees and repossession agencies. Certain real estate licensees and repossession agencies licensed pursuant to the California Business and Professions Code, as specified.
- Bona fide business-to-business contracting relationships. If a business service provider contracts to provide services to another business, the exemption will apply if the contracting business demonstrates that all 12 conditions mentioned in bill are satisfied.
- Certain relationships between contractors and individuals working under a subcontract in the construction industry. All 7 conditions mentioned in the bill must be satisfied.
- Certain relationships between referral agencies and service providers. The exemption applies if the contractor demonstrates that all of the 10 conditions mentioned in the bill are satisfied.
- Certain relationships related to motor club services. The exemption applies to a relationship between motor clubs and individuals performing services under a contract between the motor club and a third party to provider motor club services using the employees and vehicles of the third party. However, this is true only if the motor club demonstrates that the third party is a separate and independent business from the motor club.
Others were not as lucky. Thus, many were very frustrated to learn that they received no exemption from with the ABC test. These include: gig economy workers (Uber, Lyft, Doordash, etc.), home health aides, truckers, commercial janitors, nail salon workers, physical therapists, and all those not on the exemption list.
Employers can expect more legislation for exemptions in the coming year, as well as a referendum filed by the Gig Companies to exempt Ride-Hailing Companies from AB 5.
Action Suggested for AB 5
Learn more about this bill and the exempted professions by clicking on the link above. Make a list of your independent contractors. Do they meet all three components of the ABC test? Can you prove it? Does your business meet one of the exception?
We courage small business owners to seek help from an employment lawyer if it contracts with independent contractors. Misclassifications can be very, very expensive.
AB 170: Worker Status: Employee and Independent Contractors.
This bill temporarily exempts newspaper distributors and carriers working under contract either from a newspaper publisher or newspaper distributor from the “ABC test” until 2021.
AB 673: Failure to Pay Timely Wages: Penalties
Formerly, the state received civil penalties for unpaid wages under Labor Code Section 98.3. This bill now allows the worker the option to collect a statutory penalty pursuant to LC Section 98.3. Most distressing is that employers may also receive penalties for violations of California’s Equal Pay Act (Labor Code Section 1197.5)
The affected employee may also enforce civil penalties for late payment through the Private Attorneys General Act (PAGA) but cannot also recover statutory penalties for the same violation.
Why Does This Matter?
Because penalties add up fast. Failure to pay timely wages and equal pay subjects employers to penalties as follows:
1) For any initial violation, or any willful or intentional violation, one hundred dollars ($100) for each failure to pay each employee.
2) For each subsequent violation, or any willful or intentional violation, two hundred dollars ($200) for each failure to pay each employee, plus 25 percent of the amount unlawfully withheld.
Action Suggested for AB 673
Employees may now be more motivated to make equal pay claims. If a quick internal audit reveals a pay gap between genders or race you might want to consider retaining an attorney for legal advice on how to fix any pay gaps as you protect this information under attorney-client privilege.
SB 688: Failure to Pay Wages: Penalties
This bill expands the Labor Commissioner’s citation authority to recover restitution of the amounts owed to include an employer’s failure to pay contract wages. “Contract wages” means wages based upon an agreement for regular non-overtime hours.
The Math On This Speaks for Itself.
Employers simply must pay attention to: employee classifications, regular pay days, final pay, and overtime. It is also important for employers to maintain accurate records of wages, wage rates and job classifications that will legally justify differences in rates paid to employees of the opposite sex, race or ethnicity for substantially similar work.
Employment Discrimination, Harassment & Fair Employment Laws
AB 9: Employment Discrimination Claims: Extension of Statute
of Limitations (SOL)
This bill extends the SOL for filing a verified complaint with the Department of Fair Employment and Housing (DFEH) from one year from the date upon which the unlawful employment practices occurred to three years. It prohibits the revival of lapsed claims.
Action Suggested for AB 9
It’s more important than ever that small business employers train their supervisors and managers on harassment, discrimination and retaliation prevention best practices.
SB 142: Lactation Accommodation
This bill expands lactation accommodations to ensure access to adequate lactation space. All employers must provide a private, safe lactation room this in in close proximity to employee’s work area, free from hazardous materials, contains a surface to place a breast pump and personal items and a place to sit, and has access to electricity or alternative devices to operate a breast pump.
Employers with less than 50 employees must demonstrate that providing these requirements would create an undue hardship, and also provide the employee with the 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.
All employers must also develop and distribute a written lactation accommodation policy that includes statements required in Section 1034(a) the of the Labor Code (click on bill to view).
Action Suggested for SB 142
Make sure you have a written lactation accommodation policy that complies with this updated law. As a small business employer, you may be able to claim an undue hardship for the new requirements. However, you must make sure you are able to demonstrate why it causes and undue hardship and that you comply with the lesser requirements which state:
“If that employer can demonstrate that the requirement to provide an employee with the use of a room or other location, other than a bathroom, would impose such undue hardship, the employer shall make reasonable efforts to provide the employee with the 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.”
SB 188: Racial Discrimination: Hairstyles
This bill specifies that, under both FEHA and the anti-discrimination provisions of the Education Code, racial discrimination includes discrimination based on traits historically associated with race, including, but not limited to, hair texture and protective hairstyles, such as braids, locks, and twists. This bill amends Section 12926 of the California Government Code.
Action Suggested for SB 188
Advise your supervisors, managers and hiring professionals of this new law. Update your employee handbook to prohibit discrimination based on natural hairstyles.
SB 229: Discrimination: Labor Commissioner Judgments
Existing law prohibits an employer from retaliating against an employee for exercising their workplace rights and establishes administrative procedures under which workers are able to seek remedies.
This bill also expands on the appeal and enforcement mechanisms currently available when the Labor Commissioner issues a citation to an employer for violations of the Labor Code’s anti-retaliation provisions. Finally, this bill creates a process for judicial enforcement of citations issued by the Labor Commissioner in administrative determination of workplace retaliation laws.
Action Suggested for SB 229
Now is a good time to train your supervisors and managers on workplace rights and actions that might be considered retaliation. This new law allows injunctive relief and a faster pace for citations.
SB 778: Employers: Sexual Harassment Training: Requirements.
Extends, from January 1, 2020, to January 1, 2021, the deadline for covered employers (5 or more employees) to provide interactive sexual harassment prevention training and education to supervisory (two hours) and non-supervisory employees (one hour), and thereafter requires these employers to provide training to each employee every two years thereafter.
Employee headcount is determined by including part-time and temporary employees, those who are hired through temporary staffing agencies, and independent contractors. The law does not require employers to train independent contractors, although they are included in the headcount for purposes of determining coverage.
Employers who provided harassment prevention training to employees in 2019 are not required to provide refresher training again until two years from the 2019 training.
Employers with 50 or more employees that were subject to supervisory training requirements should continue the two year training cycle and train new supervisors within six months of hire date.
Under this bill, covered employers with fewer than 50 employees will be required to train new non-supervisory and supervisory employees within six months of hire after January 1, 2021.
Beginning January 1, 2020, seasonal, temporary and other employees that are hired to work for less than six months, must receive training within 30 calendar days after the hire date or within 100 hours worked, whichever occurs first.
Please refer too the Department of Fair Employment and Housing’s FAQs for more details and up-to-date employer information. This law amends Section 12950.1 of the Government Code. This bill includes required training, tracking and qualified trainers.
Action Suggested for SB 778
Carefully consider how best to implement this new law in your work environment. Plenty of on-line training options are available, including one created by the Labor Commissioner. However, the EEOC’s “Study of Harassment in the Workforce” compiled by a select task force in 2016, determined that online trainings that focus on compliance simply haven’t prevented harassment.
Employers might be better served by hiring an expert (by law this has to be an employment attorney or HR professional with expertise in this area) to do live interactive training at its worksite. This makes it possible to focus on creating a culture of mutual respect and providing tools for employees and supervisors to assist in building a culture free of harassment, discrimination and retaliation (such as active bystander training, implicit bias) as well as cover specific topics required by the law.
Laws re Arbitration and Settlement Agreements
AB 51: Waiver as a Condition of Employment
Bottom Line: Essentially this bill bans mandatory employment arbitration agreements or any agreements which restrict an applicants or employees right to refuse to consent to waive their rights with respect to claims under the Labor Code and the Fair Employment and Housing Act. Stay tuned.
This bill prohibits requiring applicants for employment or employees to waive their right to any right, forum, or procedure for a violation of any provision of the California Fair Employment and Housing Act (FEHA) or other specific statutes governing employment as a condition of employment or continued employment, or the receipt of any employer-related benefit. This bill only applies to contracts for employment enter into, modified or extended on or after January 1, 2020.
AB 51 also prohibits employers from retaliating, threatening or discriminating against applicants or employees for refusing to consent to waive their rights and the procedures under FEHA and the Labor Code, as well as to ensure that any contract relating to those rights and procedures be executed as a matter of voluntary consent.
AB 51 also states that it does not invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act (FAA).
Additionally, this bill does not apply to post dispute settlement, or negotiated severance agreements.
Action Suggested for AB 51
If you currently have a Mandatory Arbitration Agreement in place, talk to an employment lawyer.
AB 749: Settlement Agreements: Restraints on Trade
Prohibits settlement agreements that contain a provision that restricts a settling party who is an aggrieved person from working for the employer against which the aggrieved person has filed a claim. These provisions have been standard in Separation Agreements, as the employers typically don’t want an employee they separated from to reapply for the position.
However, employers may restrict an aggrieved person from future employment if the employer has made a good faith determination that the person engaged in sexual harassment or sexual assault, or if there is a legitimate non-discriminatory or non-retaliatory reason for termination or refusing to rehire the person.
Action Suggested for SB 749
Note to File: You will want to make sure any future Separation or Settlement Agreements are reviewed by employment law counsel.
SB 707: Enforcement of Arbitration Agreements
This bill provides that if an employment arbitration agreement requires the drafting party to pay certain fees and costs before the arbitration can proceed, and that if these fees and costs are not paid withing 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration and waives its right to compel arbitration.
SB 707 also requires a private arbitration company to collect and report demographic data in the aggregate relative to ethnicity, race, disability, veteran status, gender, gender identity and sexual orientation of all arbitrators.
Action Suggested SB 707
Another note to file: If you decide to implement Mutual Mediation and Arbitration Agreements, make sure to make note of these time deadlines.
Safety and Workers Compensation Laws
AB 1804: Occupational Injuries and Illnesses: Reporting
Requires all employers to report serious injury, illness or death immediately through an online mechanism established by DOSH or to report by telephone.
Action Suggested for AB 1804
Make sure the person in charge of your Injury and Illness Prevention Program (IIPP) is aware of this requirement. You might also desire to add to your written IIPP.
AB 1805: Occupational Injuries and Illnesses: Expanded
AB 1805 now re-defines “serious injury or illness” and “serious exposure” as follows:
a) “Serious injury or illness” means any injury or illness occurring in a place of employment or in connection with any employment that requires inpatient hospitalization, for other than medical observation or diagnostic testing, or in which an employee suffers an amputation, the loss of an eye, or any serious degree of permanent disfigurement, but does not include any injury or illness or death caused by an accident on a public street or highway, unless the accident occurred in a construction zone.
b) “Serious exposure” means any exposure of an employee to a hazardous substance when the exposure occurs as a result of an incident, accident, emergency, or exposure over time and is in a degree or amount sufficient to create a realistic possibility that death or serious physical harm in the future could result from the actual hazard created by the exposure.
Action Suggested for AB 1804 and AB 1805
Educate your IIPP Program Administrator of these new definitions. Update your IIPP.
CAL-OSHA Regulations: Wildfire Smoke Protections.
New emergency regulations are effective 7/29/19 through January 28, 2020, with two possible 90-day extensions. Cal-OSHA is expected to pass a permanent rule in 2020. This bill requires employers to take steps to protect workers who could be exposed to wildfire smoke. These include: 1) checking the Air Quality Index for PM2.5 and providing respirators when needed. Also includes training employees on hazards of wildfire smoke, the right to seek medical treatment and how to use and maintain respirators.
Action Suggested for General Industry Safety Order 5141.1
Employers who have employees who work outside or do not have adequate ventilation inside the employer facility, will want to comply with these emergency regulations.
In addition, power outages can also present electrical and other hazards for workers. Proper installation and use of generators can prevent electrocution hazards. Employers must make workers aware of the potential for electrocution or being injured by moving parts of machinery and other equipment when power is restored. Workers can also face health hazards from working without electricity in unventilated areas because ventilation systems are not working. Employers must train employees on these hazards.
AB 25: California Consumer Privacy Act (CCPA) of 2018: Exemption for Employment-Related Information
The California Consumer Privacy Act, beginning January 1, 2020, grants consumers various rights with regard to their personal information held by businesses. This includes 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.
This bill exempts from coverage of the CCPA certain personal information businesses gather from employees or job applicants. This exemption is scheduled to expire on January 1, 2021.
AB 1223: Living Organ Donation
Existing law, the Michelle Maykin Memorial Donation Protection Act, requires a private employer with 15 or more employees to 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 (Labor Codes 508-1513).
This bill requires a covered employer to grant an additional unpaid leave of absence, not exceeding 30 business days in a one-year period, to an employee who is an organ donor, for the purpose of donating the employee’s organ to another person.
Action Suggested for AB 1223
Employers with 15 or more employees should update their written leave of absence policy to include these additional requirements, particularly if they require employees to use up their accrued and unused sick leave, vacation or paid time off.
AB 1291: Adult-use Cannabis and Medicinal Cannabis: License application: Labor Peace Agreements
Withing 60 days of employing its 20th employee, Cannabis-license applicants are required to provide a notarized statement that the applicant will enter into, and abide by, the terms of a labor peace agreement.
AB 1554: Flexible Spending Accounts Notice
Employers are required to notify an employee who participates in a flexible spending account (FSA), including, but not limited to, a dependent care flexible spending account, a health flexible spending account, or adoption assistance flexible spending account, of any deadline to withdraw funds before the end of the plan year.
Action Suggested for AB 1554
Employers who offer Flexible Spending Accounts must make sure they are providing the required notice to covered employees.
SB 83: Paid Family Leave Expansion and Task Force
Extends the duration of Paid Family Leave benefits from six weeks to eight weeks beginning July 1, 2020.
Action Suggested for SB 83
Employers should mark their calendars to update their written Paid Family Leave policy and distribute DE-2511 Paid Family Leave form which should be available by July 1, 2020.
Need More Help?
Feel free to contact the authors if you have any further questions about these new 2020 Employment Laws, including applicability to your industry and how to implement them.
The Frog Knows, aka attorney Chuck Farrar, and Janice Knight, Senior HR Consultant
Contact Chuck with questions.
Feel free to call (530) 273-0800 with questions about this blog or to schedule an appointment for assistance with compliance and prevention strategies.
This Blog/Web Site is made available by the Law Office of Chuck Farrar for educational purposes only as well as to give you general information and a general understanding of the law in California, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and the The Law Office of Chuck Farrar. The Blog/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.