Top 7 Compliance Changes Facing California Employers in 2020

Besides a plethora of college football bowl games and celebrations, New Year’s Day also always rings in a host of new employment laws taking effect at the state and local levels. And, as is often the case, California is leading the way.

The list of developments affecting employers in the Golden State is long. But some in particular especially stand out, including:

 

  • Prohibiting mandatory arbitration agreements;
  • Expanding privacy protections (including how personal information is defined);
  • Banning hairstyle discrimination;
  • Ending no-rehire provisions in settlement agreements; and
  • Extending the time for filing discrimination complaints.

Publicly-held corporations with headquarters in California also needed to comply by the end of 2019 with a new directive to have at least woman on their board of directors. This first-of-its-kind statewide law includes steep penalty provisions for companies that fail to comply.

So while you might feel as if you need a scorecard to keep abreast of this rapidly changing California legal landscape, which Littler employment attorney Bruce Sarchet has referred to as “shock and awe,” XpertHR is here to help with a look at the top 7 laws HR needs to know about:

  1. Are Independent Contractors Going the Way of the Edsel?

In 2018, the California Supreme Court’s Dynamex ruling established the especially employee-friendly “ABC test” under which a worker will be considered an employee under the state’s age and hour orders unless the hiring entity can show that the worker:

A. Is free from control and direction of the work, both under the contract and in fact;

B. Performs work that is outside the usual course of its business; and

C. Is 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, AB 5 codifies the Dynamex ruling and extends it further in a development that Bruce Sarchet calls, “staggering,” noting that he has received 75 calls about the new law in the past three months from employers across the US that do business in California.

“The idea is to really reclassify about 2 million workers in California from independent contractors to employees,” said Sarchet. “Businesses should take out their 1099s and audit them, see who we are actually engaging as independent contractors, and do we maybe need to look at changing the way we do that.”

The law touches virtually every business arrangement in the Golden State, according to Sarchet. And on a new XpertHR podcast, he said employers must reexamine those arrangements to ensure they are not “tripping up on an AB 5 landmine.”

  1. Banning Mandatory Arbitration Agreements

The US Supreme Court has consistently upheld the use of mandatory arbitration agreements by employers in a series of 5-4 decisions. But in response to the #MeToo movement, a few states have prohibited employers from using such agreements to block sexual harassment claims.

A new California law, AB 51 goes further to make it illegal for employers to use mandatory arbitration as a condition of employment. While the mandatory arbitration ban will not apply to post-dispute settlement agreements or negotiated severance agreements, it is nonetheless rather broad and not limited to sexual harassment cases.

But whether it will withstand a legal challenge by the California Chamber of Commerce and other trade groups remains to be seen. Sarchet noted that many lawyers believe the Federal Arbitration Act preempts the California ban, and he is representing a group challenging the new prohibition.

In June, a federal judge rejected a New York state ban on mandatory arbitration and Proskauer employment attorney Anthony Oncidi, who co-chairs the labor and employment practice at his firm’s Los Angeles office, said he has “every expectation that the same fate awaits AB 51.”

In the meantime, Oncidi said, “I’m advising employers not to abandon their arbitration programs because it won’t be long before AB 51 has been consigned to the ash heap of history.”

But as of January 1, this ban is California law until a court says otherwise. And that leads Sarchet to note that employers who keep their arbitration programs must tread cautiously because it could be a criminal misdemeanor to force arbitration on an employee.

  1. No Mas for No Rehire Agreements

Also effective January 1, is a #MeToo-inspired law that bans the use of no-rehire provisions as part of an employment law settlement or severance agreement. The legislature thought it was unfair that employers could ban whistleblowers from future employment while bad actors could remain on the job.

However, AB 749 does not prevent an employer and an aggrieved employee from agreeing to end an employment relationship. In addition, it does not require an employer to rehire an individual if it had a legitimate nondiscriminatory or non-retaliatory reason for terminating the employee.

  1. Hairstyle Discrimination Banned

California became the first state in the nation to pass a law banning discrimination based on natural hair or hairstyles. The law expands the definition of “race” under state anti-discrimination law to include hairstyles, such as:

  • Braids;
  • Dreadlocks; and
  • Twists.

As a result, workplace grooming policies and dress codes that prohibit natural hair, including Afros and the above hairstyles, now have a disparate impact on black applicants and employees because such policies are more likely to punish them than any other group.

Unlike some of the other new laws, Sarchet called this hairstyle discrimination ban one that should be “easily adapted” by California businesses.

  1. California Consumer Privacy Act (CCPA)

The California Consumer Privacy Act (CCPA) gives consumers control over the personal information companies can collect, store and share with others. Notably, the CCPA covers employers that conduct business in California, including out-of-state companies if they sell products to California residents.

“If you’re headquartered in another state, or even another country, but you have some sort of contact with California then there is going to be a chance that the California laws apply to you,” said Sarchet.

In addition, the definition of “consumer” is very broad under the law and may extend to job applicants and employees. But it excludes three categories of employment-related information from the definition of personal information, including:

  • Human Resources data, such as job applications;
  • Emergency contact information; and
  • Third-party beneficiary information (such as spouses on health insurance plans).

But this exclusion, AB 25, has a one-year sunset provision. So, what happens after January 1, 2021 is very much up in the air. “This is a not just evolving but exploding area of the law,” said Sarchet, citing the Illinois biometric privacy law as another example.

  1. Lactation Accommodations Expand

Also effective January 1, 2020, California has expanded accommodations for lactating mothers. The law, SB 142, requires employers to notify employees of their right to pump breast milk at work (including the space provided for it), and provides a way to communicate violations directly to the California Labor Commissioner’s Office.

It also requires employers to provide mothers with a secure and private space close to their workstation to hold their pumping equipment. Running water and a refrigerator or cooler for the milk they pump must be located close to their workstations as well.

The new law exempts employers with fewer than 50 employees if they can show that accommodating lactating mothers would be an undue hardship.

  1. Statute of Limitations Extended

The statute of limitations for an aggrieved California job applicant or employee to file a claim has been one year since the outset of the state’s Fair Employment and Housing Act. But starting in 2020, it will extend to three years.

“It’s a wakeup call for good personnel practices,” said Sarchet. “You’ve got to make sure that you’re documenting employee complaints carefully and you know the manager’s side of the story. Good recordkeeping while an event is taking place is going to become even more critical.”

A new XpertHR podcast takes an in-depth look at these developments and what they mean for employers, with more insights from Bruce Sarchet.

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