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California Employment Law Update for 2020

December 19, 2019 Michael Warren, Hilary Weddell

The California Legislature enacted a number of new laws for 2020 that will affect California businesses.  Below we discuss a few of the most notable employment laws that go into effect in the New Year.  Companies with a workforce in California should be sure to review and update their policies and procedures to ensure they comply with the new legal requirements.

Worker Classification (AB 5):

One of the biggest changes for employers next year is AB 5, nicknamed the “gig worker bill.”  The bill, however, applies to more than just the gig economy as it targets the misclassification of workers as independent contractors by codifying and expanding the California Supreme Court’s landmark 2018 Dynamex decision and its 3-part “ABC” test.  The ABC test— which already applied to numerous minimum labor standard requirements due to the Dynamex decision— states that a worker providing services in California is properly classified as an independent contractor only if the hiring entity can demonstrate that all of the following conditions are satisfied:

A.  The worker “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 worker “performs work that is outside the usual course of the hiring entity’s business;” and

C.  The worker “is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”

AB 5 will have a significant impact on California businesses that rely on contract, freelance, and contingent workers since a large portion of these individuals may need to be reclassified as employees.  As such, they would be entitled to labor protections such as a minimum wage, workers’ compensation benefits, unemployment insurance, and paid sick and family leave.

The bill specifically exempts workers in a number of industries, including doctors, dentists, accountants, real estate agents, hairdressers, lawyers, engineers, and architects.  But individuals in these professions are not necessarily considered independent contractors under the new law.  The determination whether an individual in one of these occupations is an employee or independent contractor will be governed by the less strict Borello test, which was the test in effect before AB 5 was enacted. 

Extension of Statute of Limitations to File FEHA Complaint (AB 9):

AB 9, which takes effect January 1, 2020, will extend an employee’s deadline to file a charge of discrimination with the California Department of Fair Employment and Housing (“DFEH”) from one year to three years.  AB 9 specifically states that it does not revive claims that had otherwise already lapsed under the current one-year rule.  The new state deadline is now six times longer than its federal counterpart, which requires employees file a charge of discrimination with the U.S. Equal Employment Opportunity Commission (“EEOC”) within 180 days (six months).   

Ban on No-Rehire Provisions in Settlement Agreements (AB 749):

AB 749 prohibits “no-rehire” clauses in settlement agreements entered into between an employer and employee.  Any such clause in any settlement agreement for an employment dispute entered into on or after January 1, 2020, will be void.  AB 749 exempts instances where the employer has made a good faith determination that the employee engaged in sexual harassment or assault.  The law does not require an employer to rehire an individual if it had a legitimate non-discriminatory or non-retaliatory reason for terminating the employee.

Increase of Paid Family Leave Benefits (SB 83):

Under existing law, Paid Family Leave (“PFL”) provides partial pay to employees who need to take time off from work to care for a seriously ill family member or bond with a new child.  Currently, workers paying into the State Disability Insurance program can claim up to six weeks of PFL benefits within any 12-month period.  Effective July 1, 2020, SB 83 will increase the benefit period from six weeks to eight weeks.  SB 83 also requires the Governor convene a task force to propose expanded benefits, including an increase in the PFL benefit duration to a full six months by 2021-2022.

Employer’s Payment of Arbitration Agreements Fees and Costs (SB 707):

SB 707 provides if an employer fails to pay fees associated with an arbitration proceeding within 30 days of the due date, it will be considered a breach of the arbitration agreement and waive the employer’s right to compel arbitration.  Consequently, upon the employer’s failure to pay, the employee may withdraw the claim from arbitration and prosecute it in court, or seek to compel arbitration.  If the employee proceeds in court, the bill imposes mandatory monetary sanctions on the employer for its breach.

If you have questions about any of these new laws or how they will affect your business, you should consult your attorney.