Key Takeaways For 2020’s New Employment Laws (Updated)

2020 brings a slew of new employment laws, some of which make significant changes to existing law, and others which make minor updates but which nonetheless require employers’ attention. Below is a roundup of the main legal changes and key takeaways. (This post has been updated to include recent developments regarding court action over AB 51.)

The ABC Test for Independent Contractors Expanded

AB 5 codifies and expands the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 4 Cal.5th 903 (2018), which adopted the “ABC test” in holding that a company classifying an individual as an independent contractor bears the burden of justifying that individual’s independent contractor classification.

Under the ABC test a person is considered an independent contractor only if the hiring entity can prove all three of the following:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the 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 Dynamex decision was limited to determining the proper employment classification under California’s Wage Orders, which governs things like overtime pay, and meal and rest breaks. AB 5 significantly expands on this, making the ABC test determinative when assessing any provisions of California’s Labor Code and Unemployment Insurance Code, as well as California’s Wage Orders.

Key Takeaways:

• The ABC test, particularly prong B, will make it much more difficult for employers to establish that a worker is properly classified as an independent contractor instead of as an employee.
• The new law exempts various professions from the ABC test, including physicians, lawyers, graphic designers and HR professionals among others. Classification of workers engaged in those professions will be governed by factors established in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989), which is a less rigorous test than the ABC test.
• Use caution when classifying workers as independent contractors in 2020. Misclassification can lead to significant monetary awards and penalties against employers.

Mandatory Employee Arbitration Agreements Banned (Temporarily BLOCKED By A Federal Court on December 30, 2019)

AB 51 essentially bans mandatory arbitration agreements entered between employers and employees. (Arbitration agreements are key to keeping employee lawsuits out of court where runaway juries can impose significant liability against employers.)

The bill adds a new Section 432.6 to the Labor Code prohibiting employers from requiring an applicant or employee (as a condition of employment, continued employment, or the receipt of any employment-related benefit) to “waive any right, forum, or procedure” for alleged violations of the entire Fair Employment and Housing Act (FEHA) and the entire Labor Code. AB 51 essentially prohibits mandatory arbitration agreements for any discrimination claims covered under FEHA (not just sexual harassment) and for any claims under the Labor Code (including wage and hour and other protections).

AB 51 applies to contracts entered into, modified, or extended on or after January 1, 2020. Agreements entered prior to that date are enforceable.

The law was always of questionable legality. In 2018, Governor Brown vetoed a virtually identical bill stating that it “plainly violates federal law,” referring to the Federal Arbitration Act, under which the U.S. Supreme Court has repeatedly struck down state laws that unduly restrict arbitration.

On December 6, 2019, a consortium of employer groups filed suit in federal court to block the new law from taking effect. On December 30, 2019, the judge in that case granted a temporary restraining order requested by the employer groups, temporarily blocking the new law from taking effect.  

Key Takeaways:

• Prior to AB 51, California law permitted employers to refuse to hire, or to terminate, an employee who refused to sign a valid arbitration agreement. AB 51 essentially ends this practice, creating a cause of action against employers who retaliate against or terminate an employee who refuses to sign an agreement requiring arbitration of FEHA and Labor Code claims.
• The federal court’s granting of the temporary restraining order means that for now, California employers may continue requiring employees to sign mandatory arbitration agreements as a condition of employment, and may refuse to hire, or terminate, an employee who refuses to sign one.
• Employers should follow this case closely, and pay attention to upcoming developments to ensure they are in compliance with the current state of employment arbitration agreement law.
• Even if AB 51 is ultimately upheld (which is questionable), employers will still be able to provide these agreements to employees with some modifications. You should soon have a conversation with competent employment counsel to discuss the best way to move forward.

“No Rehire” Clauses in Settlement Agreements and Certain Severance Agreements Invalid

AB 749 provides that employers, as part of a settlement agreement, cannot prohibit or restrict an “aggrieved person” from working for the employer. In other words, settlement agreements between employers and employees can no longer contain “no rehire” clauses, which up until now have been pretty standard. Under the new law, an “aggrieved person” means a person who has filed a claim against the person’s employer in court, before an administrative agency, in an alternative dispute resolution forum, or through the employer’s internal complaint process. However, if the employer has made a good faith determination that the employee has engaged in sexual assault or sexual harassment, this does not apply.

Key Takeaways:

• A standard severance agreement offered to an employee upon his or her termination can still contain a no rehire provision as long as the severance is not offered as settlement of an employment dispute.
• However, if an employee has raised a workplace complaint to HR or management, and you and the employee agree that the employee will resign in exchange for severance pay, the severance agreement cannot contain a no rehire clause.

Statute of Limitations Increased for Harassment and Discrimination Claims

Prior to passage of AB 9, employees had one year to file a complaint with the Department of Fair Employment and Housing (DFEH) when alleging workplace discrimination, harassment and retaliation, and the failure to do so within one year meant the employee could not file suit in court.  AB 9 extends this one-year filing period to three years.

Key Takeaways:

• Given this statute of limitations extension, it will become especially important for employers to keep detailed and accurate documentation on matters such as employee discipline, reasonable accommodation of disabilities, leaves of absence (FMLA/CFRA, Pregnancy Disability Leave, New Parent Leave, and disability leaves under the ADA and FEHA), employee complaints, and terminations.
• If you get hit with a harassment/discrimination lawsuit several years after the underlying events have occurred, you do not want to rely on memory alone, and key decision makers may no longer be employed by that time, so detailed documentation will be key.

Harassment Prevention Training Deadline Extended

SB 778 pushes the harassment training deadline back by one year for employers with five or more employees who must provide one hour of sexual harassment prevention training to nonsupervisory employees and two hours of such training to supervisors. The new deadline to provide such training is now January 1, 2021. SB 530 likewise pushes the training requirement out by one year for seasonal and temporary workers beginning January 1, 2021.

Key Takeaways:

• Employers who provided training to employees in 2019 aren’t required to provide it again until two years from the time the employee was trained.
• Employers who provided training in 2018 must provide training in 2020 to maintain the two-year cycle and comply with the new deadline.

Lactation Accommodation

SB 142 creates expanded requirements for employers to accommodate employees who are nursing mothers. A lactation room must be close to the employee’s work area, shielded from view and free from intrusion. The room must:

• Be safe, clean and free of toxic or hazardous materials;
• Contain a surface to place a breast pump and other personal items;
• Contain seating; and
• Have access to electricity.

Employers must also provide access to a sink with running water and a refrigerator suitable for storing breast milk close to the employee’s workspace.

Key Takeaways:  

• The law requires employers to create and implement a written lactation accommodation policy, and publish the policy in its employee handbook. Employers must also provide the policy when an employee asks about or requests parental leave. The written policy must adhere to the specific requirements of SB 142, which sets forth how employees may request accommodation, the employer’s duty to respond, and informs employees they can file a complaint with the California Labor Commissioner.
• The law contains an undue hardship exemption for employers with fewer than 50 employees.

Definition of Race Expanded to Include Hairstyles

SB 188 prohibits discrimination against employees based on natural hairstyles, amending the definition of “race” under the FEHA to include “traits historically associated with race, including, but not limited to, hair texture and protective hairstyles,” such as “braids, locks, and twists.”

Key Takeaway: Employers should update their dress code and appearance policies in their employee handbook to make clear they do not discriminate on the basis of race which includes natural hairstyles as defined in SB 188.

Expanded Leave Protection for Employees Who Donate an Organ

Until passage of AB 1223, employers were required to permit an employee donating an organ to take up to 30 days of paid leave within a one-year period. AB 1223 now requires employers to provide an additional unpaid leave of absence, up to 30 days per year, to an employee donating an organ.

Key Takeaway:  Employers with 15 or more employees should update their organ donor leave policy in their employee handbook to comply with the new law, permitting employees to take up to 30 days of paid leave, and 30 days of unpaid leave, to donate an organ.

OSHA’s “Injury” Definition Expanded, Increasing Employer Reporting Obligations for Workplace Injuries

AB 1805 changes the definitions of “serious injury or illness” and “serious exposure” to align with the federal Occupational Safety and Health Administration (OSHA) standards. Under passage of AB 1805, employers were required to report to the California Division of Occupational Safety and Health (known as Cal/OSHA) any “serious injury or illness,” which had been defined as requiring inpatient hospitalization for more than 24 hours for reasons other than medical observation or tests. AB 1805 removes the 24-hour minimum hospitalization requirement. This means employers will have to report all inpatient hospitalizations, regardless of the length of stay. The bill also updates the definition of “serious exposure” to mean exposure to a hazardous substance that has a “realistic possibility” of death or serious physical harm (versus current law requiring “substantial probability” of death/serious harm).

Key Takeaway:  Employers must report serious workplace injury, illness or death to Cal/OSHA based on the updated definitions.

Paid Family Leave Benefits Increased

Beginning July 1, 2020, the maximum duration of Paid Family Leave (PFL) benefits that individuals may receive from California’s State Disability Insurance (SDI) program will be extended from six to eight weeks, pursuant to SB 83.  The PFL program provides partial wage replacement benefits to employees who are absent from work to care for a serious ill family member or to bond with a minor child within one year of birth or placement of the child via foster care or adoption.

Key Takeaway:  Employers should update their Paid Family Leave policies in their employee handbook to note that the number of weeks of wage replacement will increase to eight starting in July.

Contact Rivera Employment Law with any questions about how these laws affect your organization.