If you are an employee, California can be a great state in which to work. The wages are higher than most states and California has some of the most employee-friendly HR laws and regulations. Employer’s though often have a different opinion. California’s myriad employment-related requirements can be complex and burdensome for employers to implement. That’s why when one of C2’s government contracting clients recently won a contract in California, they called us wanting to discuss recent HR changes there. Never one to disappoint, California rang in the New Year with changes that bring further complexity to the state’s HR landscape. Let’s check out the most notable changes for 2020.
A. Restrictions on Arbitration Agreements
New California Labor Code § 432.6 prohibits employers from requiring an applicant or employee to sign an arbitration agreement as a condition of employment. The new law also prohibits retaliation against applicants or employees who refuse to sign arbitration agreements. Business groups have challenged the new law in court on the grounds that it is preempted by the Federal Arbitration Act. And recently, a federal judge enjoined the law from taking effect until the litigation is resolved. So, for now, California employers can continue to use arbitration agreements, but they need to continue to monitor this case closely.
B. Longer Statute of Limitations for Discrimination Claims
Employees will now have three years, as opposed to one year, to file claims for discrimination, harassment or retaliation with the Department of Fair Employment and Housing.
The one-year statute of limitations for filing a civil action after the employee files a Fair Employment and Housing Act (“FEHA”) complaint remains the same. This law only applies to California state discrimination claims; the statute of limitations and filing deadlines under federal anti-discrimination laws (e.g., Title VII of the Civil Rights Act) remain unchanged.
C. Prohibition on “No Rehire” Clauses
California has long opposed agreements and contracts that restrict employees’ ability to work or change employers. Now, settlement agreements between an employee and employer that resolve employment-based claims may no longer include a “No Rehire” provision, unless the employer has determined in good faith that the employee engaged in sexual harassment or assault. As a practical matter, this means that an employer could settle a claim with a former employee, but could not prevent the employee from later applying or even being rehired by the company, unless sexual harassment or assault was part of the basis for the employment separation.
D. The “ABC” Independent Contractor Test Gets Codified
On September 11, 2019, the California legislature approved a new law (Labor Code § 2750.3) adopting the “ABC” test set forth in the California Superior Court’s 2018 decision in Dynamex v. Superior Court for determining whether a worker is an “employee” or “independent contractor” under California state law.
Under the “ABC” test, any person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the company hiring the worker demonstrates all of the following:
(A) the person is free from the control and direction of the company in connection with the performance of the work, both under the contract for the performance of work and in fact;
(B) the person performs work that is outside the usual course of the company’s business; and
(C) the person is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work that is to be performed.
Notably, the Dynamex court’s original decision was limited to IWC Wage Order violations. However, the new codified version expands the reach of the “ABC” test to violations of the Labor Code generally, and also for purposes of unemployment insurance and workers’ compensation.
One positive for employers, there are several categories of workers who are exempt from the new law. Those categories include, in part: (1) certain professionals (e.g., doctors, lawyers, accountants, HR managers, etc.), (2) “arts” industry workers such as writers, actors, directors, graphic designers, and photographers, (3) real estate industry professionals, (4) some construction industry workers, and (5) business-to-business contracting relationships. This new law is expected to be challenged by business groups, since hundreds of thousands of workers across the state may have to be reclassified as employees and not independent contractors. But until a court weighs in on the new law, some businesses will need to radically restructure their operations or transform these workers into employees in order to comply with the new law.
E. More Lactation Accommodation Requirements
Since 2002, California law has required employers to provide reasonable break times and locations, other than a bathroom, for employees to express breast milk in private. New for 2020, California has expanded that law to impose additional lactation accommodation requirements. This new law requires the lactation “room” to have certain mandatory features, requires employers to have a lactation accommodation policy, changes the ability to claim an exemption, and expands the available penalties for non-compliance with the law. Notably now, lactation rooms must not be a bathroom and must have electricity, a sink with running water, a refrigerator, a place to sit, be in close proximity to the employee’s normal work station, and contain a surface for a breast pump and other personal items.
F. Hairstyle Discrimination Prohibited
On July 3, 2019, Governor Newsome signed into law Senate Bill No. 188, the Create a Respectful and Open Workplace for Natural Hair Act (“CROWN” Act). The law became effective January 1, 2020, and amended provisions of the FEHA and the California Education Code that prohibits discrimination based on race. The new law expands the definition of “race or ethnicity” to include hair texture and protected hairstyles, including “braid, locks and twists.” The legislature explained that the new law was needed because “workplace dress code and grooming policies that prohibit natural hair, including afros, braids, twists, and locks, have a disparate impact on black individuals as these policies are more likely to deter black applicants and burden or punish black employees than any other group.” (Incidentally, the state of New York now also has a similar law that bans employment discrimination based on hair type or style.)
G. Minimum Wage Increase
Effective January 1, 2020, the California state minimum wage increased to $13.00/hour for employers with twenty-six (26) or more employees and $12.00/hour for employers with fewer than twenty (20) employees.
Note that certain California cities have higher minimum wage rates including, for example:
- Los Angeles – $14.25/hour for employers with twenty-six (26) or more employees; $13.25/hour for smaller employers
- San Francisco – $15.59/hour;
- San Jose – $15.25/hour;
- Malibu, Santa Monica & Pasadena – $15/hour for employers with twenty-six (26) or more employees; and $14.25/hour for smaller employers; and
When it comes to employment law and HR compliance, California seems to be ever changing, and it can be challenging for even experienced employers to correctly navigate California’s complex requirements. Regardless, that complexity is here to stay for California employers. So, if your company conducts (or is planning to conduct) business in California, set aside enough time and resources to make sure that your HR policies and practices meet all of California’s mostly employee-friendly requirements.
C2 provides strategic HR outsourcing to clients who want to develop optimal workforce strategies and solutions to allow them to be more competitive and profitable. C2 blog posts are intended for educational and informational purposes only.