By Clarice C. Liu, Esq., Published on January 18, 2022

Employment law in California continues to evolve and expand in the new year, ranging from fast-paced responses to COVID-19 safety, to heightened restrictions in nondisclosure agreements, to the increased scope for a leave of absence.  A host of new bills were enacted in the 2021 legislative sessions and signed into law effective this year.  An overview of the key changes is discussed in this article to help companies and individuals to ensure compliance and to stay current with the swiftly changing legal landscapes.

Independent Contractor Classification (AB 1506, AB 1561).

The California law governing the independent contractors status has continued to develop this year.  Previously, AB 5 codified the California Supreme Court’s new tests for independent contractors as set forth in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2008) 4 Cal.5th 903, which became effective on January 1, 2020.  AB 5 added section 2750.3 to the Labor Code, which expressly adopted the commonly known “ABC” test under Dynamex for purposes of the Labor Code, Unemployment Insurance Code, and California Wage Orders.

Certain professions and business relationships are, however, exempted from the ABC test.  In those cases, the characterization of the relationship would be determined by the multi-factor test established by the California Supreme Court in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello) 

With the newly enacted AB 1561, certain changes to the law were made, including the extension of the ABC exemption until January 1, 2025 for construction trucking industry and licensed manicurists. The law also revises the exemption to apply to relationships between a data aggregator and a research subject.  In addition, AB 1561 clarifies the insurance industry exemption for claims administration and third-party administrator work, and the exemption for manufactured home salespersons.

As a separate bill, AB 1506 further extends the AB 5 exemption allowing the Borello test to apply to newspaper carriers until January 1, 2025, and requires newspaper distributors to provide various data and information to the Labor and Workforce Development Agency.

Minimum Wage & Overtime Exemption.

Effective January 1, 2022, the California minimum wage will increase to $15 an hour for employers with 26 or more employees and $14 an hour for employers with 25 or fewer employees.  Local minimum wage laws may require a minimum wage that is higher than the state mandate. Minimum salaries also increase for the California administrative, executive and most professional overtime exemptions.  Starting on January 1, 2022, the minimum salary threshold is $58,240 per year for employers with fewer than 26 employees, and $62,400 per year for employers with 26 or more employees.  As for the California computer software overtime exemption, the minimum hourly rate of pay to qualify for this exemption is increasing to $50, the minimum monthly salary will increase to $8,679.16, and the minimum annual salary will be $104,149.81 in 2022.

Settlement And Non-disparagement Agreements (SB 331).

The California Stand Together Against Non-Disclosures Act (the “STAND” Act) is an existing law that prohibits settlement agreements from using nondisclosure agreement to conceal factual information regarding certain civil or administrative action claims of sexual assault, sexual harassment or sex discrimination.  The newly enacted SB 331 expands the STAND Act to also prohibit nondisclosure provisions from suppressing facts relating to other forms of harassment or discrimination under the Fair Employment and Housing Act. This bill applies to settlement agreements that are entered into on or after January 1, 2022 involving civil or administrative actions.

The bill similarly prohibits a non-disparagement agreement from silencing information for all protected categories under the Fair Employment and Housing Act, and not just for sexual harassment.  SB 331 also requires that non-disparagement clauses include the following language: “Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.” 

In addition, SB 331 requires settlement agreements to notify the employee that (1) they may consult an attorney, and (2) they have at least five business days to do so. However, an employee may execute a separation agreement before the end of the five business-day period if the execution is knowing and voluntary, and is not induced by the employer through fraud, misrepresentation, or a threat to withdraw or alter the offer before the end of the five business-day period. 

Arbitration Fee Payment (SB 762).

Under the Federal Arbitration Act and the California Arbitration Act, existing law permits businesses and employers to include clauses in consumer arbitration and requires the party which drafted the arbitration agreement to pay fees and costs before arbitration can proceed or during the pendency of an arbitration. The drafting party is in breach of the agreement, in default of arbitration, and waives its right to compel arbitration if it does not pay the fees within 30 days after the date they are due.

SB 762 further explains the timing of the fee and cost payments.  This bill requires the arbitration provider to issue invoices for the fees and costs to all parties to the arbitration immediately. The bill also requires those invoices to be issued as due upon receipt unless the arbitration agreement expressly provides a different time for payment. For fees and costs due during the pendency of the arbitration, SB 762 requires any extension of time for the due date to be agreed upon by all parties. 

COVID-19 Laws & Regulations.

On January 13, 2022, the U.S. Supreme Court granted emergency relief to stay implementation of the Emergency Temporary Standard (ETS) by the Occupational Health and Safety Administration (OSHA) regarding COVID-19.  Under the ETS, employers with 100 or more employees were required to create COVID-19 policies for their workplace; provide paid time off to employees for vaccination and/or recovering from side effects; and collect information on their employees’ vaccination status and maintain a vaccine roster.  The ETS further required covered employees to either provide proof of vaccination for COVID-19, or provide weekly negative COVID-19 test results.  However, the recent Supreme Court decision put on hold the implementation and enforcement of the ETS.  Enforcement of the ETS is now stayed pending that review by the U.S. Court of Appeal for the Sixth Circuit, and may reach the Supreme Court again for a final review.

In the meantime, the California Occupational Safety and Health Administration (Cal/OSHA) has continued to provide guidance in addressing workplace safety issues relating to COVID-19. The standards set forth by Cal/OSHA must provide at least the minimum standards promulgated by federal regulations.  The Cal/OSHA COVID-19 Prevention Emergency Temporary Standards is available at https://www.dir.ca.gov/dosh/dosh_publications/COVIDOnePageFS-12-16-2021.pdf

The key requirements regarding safety implementations include the following:

• No- Cost Testing:  Employers must make no-cost COVID-19 testing available on paid time to all employees who are exposed to COVID-19 at work including asymptomatic fully vaccinated employees.

• Mask Exemption:  Employees exempted from face covering requirements due to medical or mental health conditions or disabilities and who cannot wear a non-restrictive alternative must physically distance from other employees (six feet) and be tested at least twice weekly at no cost and during paid time.  

• Duty to Notify Employees: Employers are required to provide notice to all employees who were at the same workplace as a COVID-19 positive employee that they may have been exposed to COVID-19.  AB 654 clarifies that employers are required to provide notice to any employees who had “close contact” with a “qualified individual.”  A “qualified individual” is one who has tested positive for COVID-19, been diagnosed with or died from COVID-19 or is subject to a public health isolation order.  “Close contact” refers to being within six feet of a COVID-19 case for a cumulative total of 15 minutes or greater in any 24-hour period within or overlapping with the high-risk exposure period.

• Close Contact/Vaccinated Employees:  Employees who have close contact with a qualified individual and are not excluded from work because they are asymptomatic and either fully vaccinated or recently recovered from COVID-19 will have to both wear a face covering and physically distance at the workplace for 14 days following the last close contact.  

• Close Contact/Unvaccinated Employees:  Employees who are excluded from work after a close contact, never develop symptoms, and test negative with a specimen taken at least five days after the last known close contact may return to work after seven days, provided they wear a face covering and physically distance for 14 days following the last close contact.

• Exclusion:  The time frames relating to the exclusion or return to work of COVID-19 exposures will automatically adjust to be consistent with California Department of Public Health (CDPH) guidelines. 

• Duty to Notify Public Health Agency:  If an employer has an outbreak (meaning three or more COVID-19 cases) in its workforce within 48 hours or one business day, the employer must notify the local public health agency of the workplace of the names, number, occupation and workplace of those individuals.

• Duty to Provide Information: AB 654 requires employers to provide notice of potential exposure, benefits and disinfection and cleaning plans to employees who were “on the premises at the same worksite as the qualifying individual within the infectious period.”  That includes the employer’s sick leave policies, workers compensation benefits, and options for COVID-19 exposed employees.  Employers must also notify employees of cleaning and disinfection plan for employees who were on the premises at the same worksite as the qualifying individual within the infectious period.

• Rehiring:  SB 93 requires hotels, private clubs, event centers, airport hospitality operations, airport service providers, janitorial and building maintenance providers and security service providers to offer to rehire certain employees who were laid off due to COVID-19 reasons when job positions become available for which they are qualified. The job offer must be made in writing within five business days of the position becoming available.  Laid off employees covered by this law must have worked at least six months during the 2019 calendar year.  This rehiring requirement will be in effect until December 31, 2024.

Importantly, compliance of the Cal/OSHA requirements is enforced by two new mechanisms under the newly enacted SB 606. Penalties are available under the categories of “enterprise-wide” violations and “egregious” violations. A rebuttable presumption of an “enterprise-wide” violation arises where an employer has multiple worksites and either (1) has a written policy or procedure that violates safety rules (not including emergency regulations adopted within the last 30 days) or (2) Cal/OSHA has evidence of a pattern or practice of the same violations at more than one worksite. Unless the employer rebuts the presumption, Cal/OSHA can issue an enterprise-wide citation requiring abatement, including at locations where no violations were found.

An “egregious” violation” may occur where the employer intentionally makes no reasonable effort to eliminate a known violation, has an extensive history of prior violations, intentionally disregarded health and safety responsibilities, or engages in conduct amounting to clear bad faith; where violations result in worker fatalities, inpatient hospitalization of three or more employees, a large number of injuries or illnesses or persistently high rates of illness or injury; or where a large number of violations significantly undermine the effectiveness of the health and safety program.  Cal/OSHA is required to issue a citation for an “egregious” violation. Penalties for an “egregious” violation are assessed on a per employee basis.

Workplace Postings (SB 657).

Existing laws require employers to post certain information at the workplace.  To enable employers to continue to provide such communications with remote employees, SB 657 allows employers to distribute required workplace postings by email.  However, employers must still continue to physically display at the workplace the required postings. 

Criminal Penalties for Wage Theft (AB 1003).

Under existing law, an individual commits grand theft when they take the money, labor, or real or personal property of another in excess of $950. Grand theft is generally punishable either as a misdemeanor or as a felony. AB 1003 makes the intentional theft of wages, including gratuities, in an amount greater than $950 from any one employee, or $2,350 in the aggregate from two or more employees, by an employer in any consecutive 12-month period punishable as grand theft, subjecting employers to potential criminal charges. Significantly, independent contractors are included within the meaning of employee.

Expansion of California Family Rights Act (AB 1033).

Since 2021, the California Family Rights Act (CFRA) has been expanded to cover employers with five or more employees. With the newly enacted SB 1033, the scope of CFRA is further  expanded to add a “parent-in-law” to the list of family members, the care of whom would render an employee eligible for a CFRA leave. 

Personnel Record Retention & DFEH Enforcement (SB 807).

Under SB 807,  employers must preserve personnel records for a minimum of four years pursuant to the Fair Employment and Housing Act, starting January 1, 2022.  The four-year retention period may be extended to a longer period if a complaint has been filed with the Department of Fair Employment and Housing (“DFEH”). Employers are required to preserve employees’ and applicants’ personnel records for four years from the date they were created, after an employee is terminated, or when an applicant is not hired by a company. Upon receiving notice that a verified complaint has been filed, an employer must also preserve all relevant records until after the resolution of the complaint or the expiration of the statute of limitations for the claims, whichever is later.

In addition, SB 807 makes procedural modifications to the DFEH’s enforcement rights, including tolling the deadlines for the DEFH to file a civil action while the DFEH is conducting investigation or in a mandatory or voluntary dispute resolution, and extending the DFEH’s deadline to complete its investigation and issues a right-to-sue notice for a group or class complaint to two years. The time in which an individual can file a civil action for statutory violations is extended, as a corollary, by tolling that period during the pendency of the DFEH investigation.    

Practical Considerations.

To address these new changes in the law, companies should review their current personnel practices and to develop policies and best practices, including the following: 

• Review and analyze the company’s classification of independent contractors.  Work with legal counsel and tax/accounting professionals to ensure correct application of the standards and exemptions.

• Review current employee handbook and policies to update CFRA and other related leave of absence provisions.

• Ensure up-to-date compliance with all COVID-19 safety procedures.  Develop written guidelines and policies regarding vaccination, testing, time-off, notice, and reporting.  

• Review and revise settlement agreement templates to modify confidentiality and non-disparagement provisions consistent with the new law.

• Analyze employees’ salaries to ensure compliance with updated minimum wage requirements.  Review employees’ exemption status based on their duties and the new salary thresholds as of January 1, 2022.

• Update the company’s record retention policy to comply with the new requirements related to the Department of Fair Employment and Housing policies.

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The information provided in this article is intended for a general discussion of the subject matter and should not be construed as legal advice. For your specific circumstance, or inquiry about the issues addressed in this article or other employment law matters, please contact attorney Clarice Liu at (415) 288-8622 or [email protected].