New Employment Laws Affecting California Employers Effective January 1, 2020

There are seventeen (17) significant developments in California employment law which require your attention:

Employee Misclassification, Wage & Hour

1 – New Rules Concerning the Misclassification of Workers – “ABC Test” Replaces Multi-Facts Tests (AB-5). In April 2018, the California Supreme Court made it significantly more challenging for California employers to hire individuals as independent contractors. Dynamex Operations West, Inc. v. Superior Court introduced the “ABC” Test.

The “ABC” Test starts with a rebuttable presumption, that all workers are employees unless each of the “ABC” elements are satisfied. The “ABC” elements are:

“A. Is the worker free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact?

1. Does the worker perform work that is outside the usual course of the hiring entity’s business?
2. Is the worker customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity?”

Effective January 1, 2020, the California state legislature codified the “ABC” Test, applied it retroactively, shifted the burden of proof to the alleged employer to demonstrate that the worker has not been misclassified, and added exemptions where the old multi-facts test is applied to determine if a worker has been misclassified.

Exceptions to the “ABC” Test include: Accountants; Architects; Attorneys; Cartoonists (who make 35 or less submissions); Commercial Fishermen; Dentists; Direct salespeople (paid by commission or sale and have written independent contract agreements); Editors (who make 35 or less submissions); Engineers; Hairstylists (who schedule own appointments and process own payments, among other things; Human Resources Administrators (of non-standard outputs/results); Insurance Brokers and Agents; Investment Advisors; Newspaper Distributors & Carriers (until 1/1/2021); Payment Processing Agents (through independent sales orgs.); Photographers (who make 35 or less submissions); Physicians & Surgeons; Podiatrists; Private Investigators; Psychologists; Registered securities broker-dealers and investment advisors; Securities Broker-Dealer; Travel Agents; and Veterinarians,

Industries exempted from the “ABC” Test must still satisfy the old Multi-Facts Test created by the California Supreme Court in S.G. Borello & Sons v. Department of Industrial Relations (1989) 48 Cal.3d 341. The Borello Court identified the following factors as useful in determining whether a worker is an employee: the right to control the manner and means of accomplishing the result desired [most important]; the right to discharge at will, without cause; whether the one performing services is engaged in a distinct occupation or business; 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 skill required in the particular occupation; whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; the length of time for which the services are to be performed; the method of payment, whether by the time or by the job; whether or not the work is a part of the regular business of the principal; whether or not the parties believe they are creating the relationship of employer-employee; the alleged employee’s opportunity for profit or loss depending on his managerial skill; the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; whether the service rendered requires a special skill; the degree of permanence of the working relationship, and  whether the service rendered is an integral part of the alleged employer’s business. These factors cannot be applied mechanically as separate tests; they are intertwined, and their weight depends often on particular combinations.

The penalties for misclassification of an employee as an independent contractor are severe and subject the employer to both government and private rights of action for failure to (a) pay minimum wage, penalties for meal and rest breaks, reimbursement for business expenses, wage statement / pay stubs, waiting time penalties, damages for unfair business practices, and possible class action and/or private attorneys general claims for willful misclassification. Damages may also include (a) having to pay all unpaid withholdings for each worker, plus late penalties; (b) a fine of $5,00-$25,000 penalty for each misclassified employee, and (b) possible exemplary damages.

In December 2019, the Employment Development Department (“EDD”) sent each California business a letter advising employers that “[a]fter January 1, 2020 workers will be considered employees unless proven otherwise.” Click to view the EDD’s information page concerning AB-5.

Immediate Action Required: Consult with an employment attorney, if your business utilizes independent contractors.

2 – Minimum Wage & Minimum Salary Threshold Increased. In 2016, California enacted a new law which will gradually increase the minimum pay received by nonunion employees. The hourly minimum wage will gradually increase based upon the size of the employer until 2022 (or 2023) until it is $15 per hour. The 2016 law also created a “Minimum Salary Threshold” establishing the minimum compensation a salaried employee can be paid to be exempt from California’s overtime laws. After 2023, the Minimum Salary Threshold and state minimum hourly wages will be linked to the Consumer Price Index.

Effective January 1, 2020, California’s state minimum wage will increase from $11 to $12 per hour for employers with twenty-five (25) or fewer employees, and from $12 to $13 per hour for employers with twenty-six (26) or more employees. In 2020, the Minimum Salary Threshold will increase from $45,760 to $49,920 per year ($24 per hour based on a 40-hour workweek and 2,080 hours worked per year) for employers with twenty-five (25) or fewer employees, and from $49,920 to $54,080 per year ($26 per hour) for employers with twenty-six (26) or more employees.

Both the state minimum wage and Minimum Salary Threshold will continue to increase annually until 2023:

Starting in January 2024, further increases will be made using a formula linked to the US Bureau of Labor Statistics non-seasonally adjusted Consumer Price Index.

Note: Any scheduled annual increase can be rejected by the California state legislature.

Local Minimum Wages Increased: Some California cities and counties have enacted local city or county wide minimum wages which are higher than California’s Minimum Wage. Employers must pay qualifying employees either the California Minimum Wage or the Local Minimum Wage, whichever is greater.

A few of the major population centers law are listed, below. Please be certain to check local laws to determine wage rates.

Alameda: As from July 1, 2020, the local minimum wage for all nonunion employees regardless of their employer’s size will increase from $13.50 to $15.00 per hour.

Belmont: As from January 1, 2020, the local minimum wage for all nonunion employees regardless of their employer’s size will increase from $13.50 to $15.00 per hour.

Berkeley: On July 1, 2019, the local minimum wage for all nonunion employees regardless of their employer’s size increased from $15.00 per hour to $15.59 per hour. The local minimum wage will increase based on the local Consumer Price Index every July 1.

Cupertino: As from January 1, 2020, the local minimum wage for all nonunion employees regardless of their employer’s size will increase from $15.00 to $13.75 per hour.

El Cerrito: As from January 1, 2020, the local minimum wage for all nonunion employees regardless of their employer’s size will increase from $15.00 to $15.37 per hour.

Emeryville: On July 1, 2019, the local minimum wage for all nonunion employees regardless of their employer’s size increased to $16.42 per hour. The local minimum wage will increase based on the local Consumer Price Index every July 1.

Freemont: The local minimum wage is determined by the employer’s size. As from July 1, 2020, for employers of 25 or fewer employees, the minimum wage will increase from the California minimum wage of $12 per hour to a local minimum wage of $13.50. For employers with 26 or more employees, the local minimum wage will increase from $13.50 to $15 per hour.

Long Beach: The local minimum wage is determined by the employer’s size (with an exception for Hotel & Concessionaire Workers – discussed below). As from January 1, 2020, for employers of twenty-five (25) or fewer non-union employees, the minimum wage will be $12 per hour. For employers with twenty-six (26) or more employees, the local minimum wage will be $13.00 per hour. The City has planned increases of $1.00 per hour until the local minimum wage, regardless of size will be $15.00 per hour, adjusted annually based on the local Consumer Price Index.

As from July 1, 2019, the local minimum wage for Hotel Workers is $14.97 per hour, and the local minimum wage for Concessionaire Workers is $14.72 per hour.

Los Altos: As from January 1, 2020, the local minimum wage for all nonunion employees regardless of their employer’s size is $15.40 per hour.

Los Angeles’ (city and county): The local minimum wage for nonunion employees is determined by employer size, with a special rate for Hotel Workers. As from July 1, 2019 the local minimum wage for employers with twenty-five (25) or fewer nonunion employees is $13.35 per hour. For employers with twenty-six (26) or more nonunion employees, the local minimum wage is $14.25 per hour. The City has planned increases of $1.00 per hour until the local minimum wage, regardless of size will be $15.00 per hour, adjusted annually based on the local Consumer Price Index.

Los Angeles International Airport employees have a special local minimum wage and mandatory health benefit.

Malibu: The local minimum wage is determined by employer size. As from July 1, 2019, the local minimum wage for employers with twenty-five (25) or fewer employees is $13.24. The local minimum wage for employers with twenty-six (26) or more employees is $14.25 per hour. As from July 1, 2020, the local minimum wage for employers with twenty-five (25) or fewer employees will be $14.25. The local minimum wage for employers with twenty-six (26) or more employees will be $15.00 per hour

Menlo Park: As from January 1, 2020, the local minimum wage for all nonunion employee regardless of their employer’s size is $15.00.

Milpitas: The local minimum wage for all nonunion employees regardless of their employer’s size is $15.00 per hour and is indexed to inflation, with scheduled changes on July 1, 2020.

Mountain View: As from January 1, 2020, the local minimum wage for all nonunion employees regardless of their employer’s size is $16.05 per hour and indexed to inflation,  with scheduled changes on January 1, 2021.

Oakland: As from January 1, 2020, the local minimum wage for all nonunion employees, regardless of size, will increase from $13.80 to $14.14 per hour. As from January 1, 2019, the local minimum wage for Hotel Workers with benefits is $15.00 per hour. The local minimum wage for hotel workers without benefits is $20.00 per hour. The local Hotel Workers minimum wage is linked to Consumer Price Index.

Palo Alto: As from January 1, 2020, the local minimum wage for all nonunion employees regardless of their employer’s size is $15.40 per hour.

Pasadena: As from July 1, 2020, the local minimum wage for employers with twenty-five (25) or fewer employees will be $14.25 per hour. The local minimum wage for employers with twenty-six (26) or more employees is $15.00 per hour.

Petaluma: As from January 1, 2020, the local minimum wage for employers with twenty-five (25) or fewer employees will be $14.00 per hour. The local minimum wage for employers with twenty-six (26) or more employees is $15.00 per hour.

Redwood City: As from January 1, 2020, the local minimum wage for all nonunion employees regardless of their employer’s size is $15.38 per hour.

Richmond: As from January 1, 2020 the local minimum wage will be $15.00 per hour.

Sacramento: As from July 1, 2019 the local minimum wage increased to $11.75 per hour. On July 1, 2020, the local minimum wages will increase to $12.40 per hour. Thereafter, the Sacramento local minimum wage will be linked to increases in the local Consumer Price Index.

San Diego: As from January 1, 2020 the local minimum wage will be $13.00 per hour, with future increases linked to the local Consumer Price Index.

San Francisco: As from July 1, 2019, the local minimum wage increased from $15.00 to $15.59 per hour. Future increases are linked to the Consumer Price Index.

San Jose: As from January 1, 2020 the local minimum wage will be $15.25 per hour. Future increases are linked to the local Consumer Price Index.

San Leandro: As from July 1, 2019, the local minimum wage for all nonunion employees regardless of their employer’s size is $14.00 per hour. On July 1, 202,0 the local minimum wage will increase to $15.00 per hour.

San Mateo: As of January 1, 2020, the local minimum wage for all nonunion employees regardless employer size will increase to $15.38 per hour.

Santa Clara: As from January 1, 2020, the local minimum wage for all nonunion employees regardless of their employer’s size will increase to $15.40 per hour.

Santa Monica: As from July 1, 2019, the local minimum wage for employers with twenty-five (25) or fewer employees is $13.25. The local minimum wage for employers with twenty-six (26) or more employees is $14.25 per hour. As from July 1, 2020 the local minimum wage for all employers will increase to $15.00 per hour.

Santa Rosa: As from July 1, 2020, the local minimum wage for employers with twenty-five (25) or fewer employees will increase to $14.00 per hour. For employers with twenty-six (26) or more employees the local minimum wage will increase to $15.00 per hour.

Sonoma: As from January 1, 2020, the local minimum wage for employers with twenty-five (25) or fewer employees will increase to $12.50 per hour. For employers with twenty-six (26)k or more employees the local minimum wage will increase to $13.50 per hour.

South San Francisco: As from January 1, 2020, the local minimum wage for all nonunion employee regardless of their employer’s size is $15.00 per hour.

Sunnyvale: As from January 1, 2020, the local minimum wage for all nonunion employees regardless of their employer’s size will increase to $16.05 per hour.

Immediate Action Required: Review your job descriptions, employee locations, and payroll to ensure compliance with local and state wage laws.

3 – New Employee Right To Recover Civil Penalties for Unpaid Wages. Since 2009, the California Labor Commissioner has imposed civil penalties against employers for failing to pay their employee wages. Penalties start at $100 for each failure to pay an employee and increase to $200 plus an additional twenty-five percent (25%) of the amount unlawfully withheld for subsequent violations, or if the failure is found to be willful, or intentional.

Effective January 1, 2020, employees may recover these civil penalties either as statutory penalties or civil penalties under the Private Attorneys General Act (“PAGA”).

Recommended Action: Review your payroll records for the past three (3-years) to ensure timely compliance with all payrolls. Should concerns of past compliance arise, consult with an employment attorney.

4 – Labor Commissioner’s Citation Authority Expanded. Since 2017, the Labor Commissioner has had the authority to issue citations to employers for failing to pay an employee at least the minimum wage. Effective January 1, 2020, the Labor Commissioner will also have the power to issue citations to employers who pay wages less than what was set by contract even when the wages paid exceeds the minimum wage.

Recommended Action: Review your payroll records for the past three (3-years) to ensure timely compliance with all payrolls. Should concerns of past compliance arise, consult with an employment attorney.

5 –New Federal Employee’s Withholding Certificate Form (Form W-4). The IRS has issued a new W-4 form. The new form (a) simplifies the form for employees taking standard deductions; (b) eliminates the number of withholding allowances; (c) adds a “head of household” checkbox option; (d) adds new options for multiple jobs in a household; and (d) lets employees directly enter the expected full-year tax credit for children and dependents.

Immediate Action Required: As from January 1, 2020, all new hires must use the new form. Existing employees need not complete the new form. However, all existing employees changing their withholdings must do so using the new form. Click to download a copy.

Everything Else

6 – Mandatory Sexual Harassment Training Deadline Extended. Since 2005, employers with fifty (50) or more employees have been required to provide supervisors with two hours of Sexual Harassment and Discrimination training within six (6) months of hire and every other year thereafter. Since 2015, abusive conduct prevention training has also been required. Since 2018, prevention of sexual harassment of gender identity, gender expression, and sexual orientation has been required.

As from January 1, 2021, and once every two (2) years thereafter all California employers with five (5) or more employees are required to (a) provide the two (2) hour supervisor training, and (b) all non-supervisory employees must receive one (1) hour of training.

The Department of Fair Employment and Housing is required to develop and post-training materials for employers to use for these purposes. As of this writing, the DFEH provides paid supervisor training, but not employee training.

Action Required. Consult with an HR consultant trainer or employment attorney to provide or review the training provided and ensure proper documentation and compliance with the applicable California law.

7 – Definition of Unlawful Discrimination Expanded To Include Hairstyles. Effective January 1, 2020, the Create a Respectful and Open Workplace for Natural Hair or “CROWN” Act modified the definition of race found in the Fair Employment and Housing Act (“FEHA”) to include “traits historically associated with race”, such as “hair texture” and “protective hairstyles” The definition of  “protective hairstyles” includes “braids, locks, and twists” and prohibits workplace dress codes and grooming policies which prohibit natural hair such as afros, braids, twists and locks.

Action Required. Review all dress codes and grooming policies to ensure compliance with the Crown Act. Provide employee and supervisor training. Consult with an employment attorney, as required.

8 – Paid Family Leave Benefits Expanded. Enacted in 2002 (and effective as of 2004), California’s Paid Family Leave (“PFL”) aka Family Temporary Disability Insurance (“FTDI”) provides wage replacement benefits to workers who take time off to care for a seriously ill child, spouse, parent, grandparent, grandchild, sibling, or domestic partner, or to bond with a minor child within one year of the birth or placement of the child in connection with foster care or adoption. As of January 1, 2021, PFL will be expanded to include active duty or call to active duty of the individual’s spouse, domestic partner, child, or parent in the Armed Forces of the United States.

Effective July 1, 2020, the maximum Paid Family Leave (PFL) benefits paid by California’s State Disability Insurance will be increase from six (6) to eight (8) weeks.

Required Action. Provide training to Human Resources professionals and employees as required.

9 – Organ Donation Related Leave Expanded. Effective January 1, 2011, California employers with fifteen (15) or more employees have had to provide leaves of absence (subject to state disability benefits) to employees who donate an organ or bone marrow not to exceed thirty (30) business days in a one-year period calculated from the date the employee’s leave begins and consists of twelve (12) consecutive months. The law also prohibits employers from interfering with or retaliating against any employee who takes a leave of absence for either purpose.

Effective January 1, 2020, employers will have to give an additional thirty (30) days of unpaid leave for the same purpose.

Required Action. All California employers should update their Leave of Absence policies to reflect this change and expanded benefit.

10 – Lactation Accommodation Requirements Revised, New Penalties. Since 2002, employers have had to make reasonable efforts to provide lactating employees with a location, other than a toilet stall, to express milk in private close to the employee’s work area.

Since 2013, an appropriate private location must have an electrical outlet and comfortable seating to facilitate lactation, and access must be provided to a refrigerator where breast milk can be temporarily stored.

Since 2019, the legislature has clarified what is considered adequate temporary accommodation for lactating employees. Under the old law, a temporary lactation location is considered to be acceptable provided: (1) the employer is unable to provide a permanent lactation location because of operational, financial, or space limitations; (2) the temporary location is private and free from intrusion while an employee expresses milk; (3) the temporary location is used only for lactation while an employee expresses milk; and (4) the temporary location meets all other requirement provided for by state law about lactation accommodation. Under the old law, agricultural employers may provide a private shaded space to express milk, which may include an air-conditioned cab of a truck or tractor.

Effective January 1, 2020, the legislature further expanded employer’s obligations to provide lactation accommodation. Employers must provide a lactation room or location (not a bathroom) that:

• Is in close proximity to the employee’s work area;
• Shielded from view;
• Free from intrusion while the employee is expressing milk;
• Safe, clean and free of hazardous materials;
• Contains a surface to place a breast pump and personal items;
• Contains a place to sit;
• Has access to electricity; and,
• The employer must provide access to a sink with running water and a refrigerator for storing milk in close proximity to the employee’s working space.

Employers must also implement a written lactation policy which affirms the employee’s (a) right to request lactation accommodation, and (b) to file a complaint with the California Labor Commissioner should accommodation not be provided. Civil penalties for failing to provide a lactation break or fail to provide an appropriate space for lactation of one hundred dollars ($100) for each day that an employee is denied reasonable break time or adequate space to express milk may be accessed by the Labor Commission.

Small employers (defined as employers with fifty (50) or fewer employees) may be exempt from the restrictions if they can demonstrate that compliance would impose an undue hardship (i.e. if they can demonstrate that compliance would be to difficult or expensive).

Recommended Action: Review and revise all lactation accommodation policies and practices. Have your HR Manager and supervisors meet with employees who are anticipated to need lactation accommodation to review your policies, practices, and the proposed location. Advise affected co-workers and supervisors as to the employer accommodations before the employers return from leave. Consult with an employment attorney, as required.

11 – The Stop Harassment and Reporting Extension Act (“SHARE” Act). Effective January 1, 2020, the Stop Harassment and Reporting Extension Act or “SHARE” Act will extend the statute of limitations for bringing claim under the Fair Employment and Housing Act (“FEHA”) including claims for sexual harassment, discrimination from one to three years.

To bring a claim under the FEHA, employees must first file a complaint with the Department of Fair Employment and Housing (“DFEH”) or with the Equal Employment Opportunity Commissions (“EEOC”) and the DEFH. The employee can either (a) request a right to sue letter from the DFEH, or (b) ask the DFEH to investigate. DFEH investigations can take a year or more to complete. Upon completion, the DEFH may also issue a right to sue letter. The employee will then have up to three (3) years to file a lawsuit. The SHARE Act, therefore, could extend the statute of limitations to file a FEHA lawsuit to four (4) years.

Recommended Action: Revise your business’ document retention policies to ensure that documents needed to defend against possible FEHA claims are not destroyed. Provide training to you Human Resources employees and supervisors, as required.

12 – “No Rehire” Terms in Settlement Agreements Likely Void. Effective January 1, 2020, settlement agreements entered into between employers and employees cannot bar employees from seeking re-employment if that employee filed a claim against the employer (a) in court, (b) before an administrative agency, (c) in an alternate dispute resolution forum, or (d) using the employer’s internal complaint process. “No rehire” terms in settlements entered into after January 1, 2020 will be held void as a matter of law and may also invalidate the entire settlement agreement. However, if the employer has made a good faith determination that the employee sexually harassed or otherwise assaulted a co-worker, the employer may restrict that employee from obtaining future employment.

Recommended Required. Review Consult with an employment attorney before entering into any separation, severance or similar agreement which uses “no rehire” terms.

13 – Employment Agreements Requiring Arbitration Are Now Prohibited. Effective January 1, 2020, California employers will be prohibited from entering into, modifying, or extending contracts for employment which require employees or applicants to sign arbitration agreements as a condition of employment, their continued employment, or to receive any employment-related benefit. Employers are further prohibited from retaliating against any employee or applicant for refusing to sign an arbitration agreement. However, mandatory arbitration provisions may be including in separation and post-dispute settlement agreements.

Recommended Action: Even though this new law is being challenged in Court, if your business relies upon employment arbitration agreements, it is strongly recommended that you consult with an employment attorney.

14 – New Penalties for Failing to Timely Pay Arbitration Fees and Costs. Effective January 1, 2020, if an employer fails to pay the costs and fees associated with employment arbitration within thirty (30) days of the due date, that employer will be found in breach of the arbitration agreement and to have waived the right to compel arbitration. In the event of such a breach, the employee may withdraw their claim from arbitration, and proceed in court or commence an action in court with the statute of limitation being tolled from the date arbitration was filed. Further, the trial court must impose monetary sanctions on the drafting party who materially breaches the arbitration agreement to compensate. The trial court may also impose sanctions to compensate the employee for their reasonable attorney’s fees and costs related with the failed arbitration. The new law also authorizes other sanctions, including evidentiary sanctions.

Recommended Action: Review all existing arbitration requirements and consult with an employment attorney.

15 – Methods for Reporting Serious Occupational Injuries and Illnesses To Be Expanded. Since 2015, California employers have had to report serious workplace injuries, illnesses, and/or death by telephone or email or face a $5,000 civil penalty for failing to comply. As of January 1, 2020, the state legislature authorized the expansion of the method of reporting such injuries and illnesses to include a new online platform to be developed California Division of Occupational Safety and Health. Once the online platform is available, employers will have to use it instead of email and/or the telephone.

Required Action. Provide training to all supervisor and designated Health and Safety employees.

16 – New Restrictions for Food Service Workers. Effective January 1, 2020, and to decrease the number of allergic reactions to latex, food service workers must wear gloves made of materials other than latex rubber when preparing and/or handling food.

Required Action. Provide training to all food service supervisors, employees, and designated Health and Safety employees.

17 – Anti-Bias Measure Enacted for Personal Injury & Wrong Death Damages. It has long been the practice in tort action to use race, ethnicity, and gender to calculate damage awards. Such awards provide restitution to victims. Nearly all such awards consider gender when projecting earning potential. Effective January 1, 2020, estimations, measures, or calculation of past, present, or future damages for lost earnings or impaired earning capacity resulting from personal injury or wrongful death may no longer be reduced based on race, ethnicity, or gender.

Recommended Action. No action is required.

Written updates of these and other new laws will be part of my firm’s next employee handbook and employment forms update. Should you have questions about these or any other workplace law, please contact me at doug@dmwadelaw.com.

The materials contained herein are for informational purposes only and not for the purpose of providing

legal advice. For advice about a particular problem or situation, please contact an attorney.