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California Legislative Update: Employment Bills That Passed the Legislature and Await Governor Approval
Sep 16, 2019

California Legislative Update: Employment Bills That Passed the Legislature and Await Governor Approval

Topics: New Laws & Legislation

Friday was the last day for California’s legislature to pass bills and present them to the Governor for signature or veto.  The legislature passed a number of employment-related bills this session. A couple of these bills have already been signed into law, but most await approval or veto by Governor Newsom, which will occur between now and October 13, 2019.  Here’s the list of noteworthy, and largely unfavorable, bills that were passed:

AB 5 (Independent contractors v. employees):  This bill is the legislature’s effort to codify the California Supreme Court’s 2018 ruling in Dynamex v. Superior Court, as the test (with only a handful of enumerated exceptions) for determining whether a worker is an employee or an independent contractor in California.  As has been widely reported, the Dynamex ruling greatly narrowed the classes of workers who will qualify for independent contractor status, causing significant outcry from both the business community and freelance workers.  Despite this, the democrat-controlled legislature won’t overturn the Dynamex ruling and instead has passed a bill codifying it.  However, industries that can afford lobbyists and whose workers aren’t the target of unions (and their influence on the legislature) managed to negotiate some exemptions from Dynamex.  AB 5 exempts the following types of workers from the Dynamex test: certain insurance agents/brokers; physicians, surgeons, dentists, podiatrists, psychologists, and veterinarians; lawyers, architects, engineers, private investigators, and accountants; securities brokers and investment advisors; direct salespersons as described in Section 650 of the Unemployment Insurance Code; commercial fishermen; certain real estate licensees; repossession agents; certain construction industry contract work, including trucking services; motor club services; referral agency work; and certain professional services contracts, including marketing, human resources, travel agent services, graphic design services, grant writing, fine artist work, work of certain agents who practice before the IRS, payment processing services with independent sales organizations, services provided by certain still photographers or photojournalists, services provided by certain freelance writers, editors, and newspaper cartoonists, and services provided by certain estheticians, electrologists, barbers, manicurists, and cosmetologists.  The bill also exempts business-to-business contracting relationships from the Dynamex test if specified conditions are met.  For workers not covered by the Dynamex test, the prior Borello multi-factor test will apply to determine whether the worker qualifies as an independent contractor (i.e. their independent contractor status may be still be challenged but a different test will apply).  To the extent the bill provides exemptions from the Dynamex test, the bill expressly states that the exemptions are intended to apply retroactively to relieve employers of liability.  For workers who are not exempt from Dynamex, the bill clarifies that the Dynamex test will apply to claims brought under the Labor Code, the Wage Orders, and/or the Unemployment Code.  This is a highly detailed bill, with carefully crafted exemptions for only certain industries.  Employers with potentially covered workers and contracting relationships should review the bill closely for possible coverage.  Because this bill appears to be the product of a significant amount of backroom dealing, it is expected to be signed into law. 

AB 170 (independent contractors v. employees): This bill, which was a last minute “gut and amend” of an entirely different bill, is similar to AB 5, but adds newspaper distributors and carriers to the list of negotiated exemptions from the Dynamex test.  These workers would be covered by the more traditional “Borello” test for independent contractor status.

AB 51 (employment arbitration agreements):  This bill would make it unlawful for an employer to require employees to agree to arbitrate most employment disputes (those alleging violations of the Fair Employment and Housing Act and/or the Labor Code).  This bill would include within its prohibition agreements that allow employees an opportunity to opt-out of an arbitration agreement.  The bill is very similar to last year’s AB 3080, which the legislature passed but the Governor vetoed.  However, this year’s bill includes a provision stating that the law is not “intended to invalidate a written agreement that is otherwise enforceable under the Federal Arbitration Act.”  This addition is intended to avoid the problem of FAA preemption, which made last year’s bill invalid on its face.  Given the way the bill is written, there is a chance that it will be enforceable as to agreements that are not covered by the FAA, but will not be a bar to agreements that are covered by the FAA.  An employer’s arbitration agreement generally should expressly state that it is governed by the FAA, but not all agreements actually are governed by the FAA.  An employer must be involved in interstate commerce in order to invoke the FAA.  This term is very broadly defined, but I expect plaintiffs’ attorneys to challenge the applicability of the FAA much more often in California courts.  Of note, the FAA also does not apply to many trucking employees.  If an employer does not know whether it can successfully argue FAA coverage, and the employer has a mandatory arbitration agreement, the employer is at risk for a finding that its arbitration agreement violates California law.  Any challenge to the agreement would be amenable to being brought on a class/representative basis with a threat of PAGA penalties.  The bill, which most believe Governor Newsom will sign, will apply to “contracts entered into, modified, or extended on or after January 1, 2020.”  Thus, arbitration agreements entered into prior to January 1, 2020 appear to be safe, but not if they are modified or contractually “extended” after the effective date.  One final note – the bill does not apply to negotiated severance agreements or post-dispute settlement agreements.     

AB 749 (no-rehire provisions in settlement agreements):  This bill would prohibit a settlement agreement entered into on or after January 1, 2020 from containing a provision whereby the settling employee agrees that he/she may not seek re-employment with the employer and is not eligible for rehire.  However, a no-rehire provision is allowed if the employer found, in good faith, that the settling employee committed sexual harassment or sexual assault.  [Yes, there are plenty of other wrongs that employees commit, but for some reason (#metoo still alive and well), this was the only wrong the legislature deemed worthy of making an employee categorically barred from rehire.]

AB 9 (extended statute of limitations for FEHA claims):  This bill would greatly expand the statute of limitations to file a claim for employment discrimination, harassment, and/or retaliation under the Fair Employment and Housing Act (FEHA).  As most employers know, under current and long-standing law, an employee who wants to sue for employment discrimination is required to first file an administrative complaint with the Department of Fair Employment and Housing (DFEH).  The administrative complaint must be filed within one year after the alleged discriminatory act, and then the employee has one year from the date of the DFEH’s issuance of a right to sue notice to file a lawsuit.  This bill extends the employee’s time to file the administrative complaint from one year to three years.  The effect of this bill would be to allow employees to wait to file a lawsuit against an employer until four years after the alleged unlawful employment practice.  This is a horrible bill that all employers should oppose.  It will invite stale discrimination claims that are hard to defend based on fading memories and inability to locate relevant evidence.  Indeed, the proposed extended statute of limitations is longer than employers are even required to keep personnel records (which would have information relevant to a claim of discrimination).  This is a poorly thought bill that will have bad consequences.  The current statute of limitations is plenty long (and much longer than the federal counterpart).

AB 171 (rebuttable presumption of retaliation):  This bill would establish, effective July 1, 2020, a “rebuttable presumption” of unlawful retaliation for any adverse action taken by an employer against an employee within 90 days of the employee informing the employer that she is the victim of sexual harassment, domestic violence, sexual assault, or stalking.  The employer can rebut the presumption based on evidence of a legitimate, non-retaliatory reason for the action.  This is a totally unnecessary bill that should be opposed.  There is already a burden-shifting framework for these claims that requires the employer to demonstrate the legitimate reasons for its actions.  Adding a “rebuttable presumption” against the employer to that framework serves no valid purpose and unfairly increases the risk to employers.   

SB 218 (mini-DFEHs):  This bill would allow cities within the County of Los Angeles to adopt their own anti-discrimination ordinances (mini-FEHAs) and to create their own agencies (mini-DFEHs) for processing and remedying complaints of discrimination.  This too is an unnecessary bill that will only serve to complicate things for employers who already have enough to deal with in trying to navigate California employment laws, particularly in areas where there are state statues and local ordinances with conflicting requirements.

SB 142 (lactation accommodation):  This bill, which is modeled after a local San Francisco lactation accommodation ordinance, would codify specific lactation accommodation requirements for employers (even though California employers are already required by law to accommodate the lactation needs of new mothers).  Under the bill, an employer must provide an affected employee with a private space (other than the bathroom) that can be used for lactation. The space must have electricity, a table or other surface to hold equipment, and a place to sit.  The employer must also provide a sink and refrigerator or other cooling device (for storing milk) in close proximity to the employee’s workspace.  An employee’s normal workspace may be used if it otherwise complies.  There are additional provisions for multi-tenant buildings and agricultural employers.  Employers with less than 50 employees may seek an exemption from these specific requirements if compliance would pose an undue hardship, in which case the employer still has to accommodation lactation needs but may provide a bathroom (or other space) for this purpose.  The bill also requires employers to adopt a written lactation accommodation policy (which may be freestanding or included in an employee handbook) and to distribute that policy upon hire and at the time of any relevant inquiry by an employee.  The bill would make a failure to comply with these provisions a failure to provide a rest break under the Labor Code.

AB 25 (CCPA amendment):  This bill amends the California Consumer Privacy Act (CCPA), which was enacted last year.  The CCPA grants consumers various rights with regard to their personal information held by businesses, including the right to request a business to disclose specific pieces of personal information it has collected and to have information held by that business deleted, as specified. The act requires a business to disclose and deliver the required information to a consumer free of charge within 45 days of receiving a verifiable consumer request from the consumer.  The CCPA really is a business/consumer law, not an employment law, but the wording of the CCPA was unclear as to whether the Act applied to personal information collected by employers (“businesses”) as part of the employment process.  AB 25 provides some clarification in this regard, specifying that information collected in the course of a person applying for a job or working for an employer (or as an owner, officer, director, employee, or contractor of an employer) is exempt from most provisions of the Act until January 1, 2021.  In other words, for now, this just means that full coverage of the act is delayed until 2021 for employers (rather than the Act being permanently inapplicable).  Additionally, and importantly, there is one provision of the CCPA that will still apply to employers in the meantime.  This is the requirement that businesses disclose to “consumers” (i.e. applicants/employees), at or before the time of collection, the types of personal information that will be collected and the purposes for which it will be used.  “Personal information” is defined in Civil Code 1798.140.  We will post a separate blog on compliance, assuming this bill is signed into law. 

SB 778 (harassment training):  This bill, which was already signed into law, cleans up some confusion that resulted from a new law enacted last year expanding sexual harassment training requirements.  This bill clarifies that employers with 5 or more employees have until January 1, 2021 to provide two hours of training to supervisors and one hour of training to non-supervisory employees.  If an employer provides the training in 2019, it is not required to provide it again until two years later.  Here's the text of this new law

SB 188 (racial hairstyles):  This bill, which was already signed into law, expands/clarifies race discrimination under California law to include discrimination against a person because of historical traits associated with race, including hair texture and protective hairstyles, such as locks, braids, and twists.  Here's the text of this new law.  We previously reported on this new law here.

And, now, here’s the list of favorable bills that were passed to help California employers and curb some of the litigation abuse happening in the state:

Bahahahahahaha. Not in California, folks.

Stay tuned for the final results on which bills are signed into law and which bills are vetoed, between now and October 13. To review the text of the bills discussed in this post and/or for more information on any of these bills, please see the legislative website here.

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