New Employment Laws for 2020 and Their Impact on California Employers

The beginning of a calendar year typically brings a host of new laws for California employers to incorporate into their policies and practices. 2020 is no exception. Discussed below are the new laws that are generally applicable to Goodwin clients and other companies with California employees. Unless otherwise indicated, all of these new laws took effect on January 1, 2020.

Bar on Mandatory Arbitration (AB 51)

The New Law: New Labor Code § 432.6 prohibits employers from requiring employees, as a condition of employment or continued employment, to waive their right to bring claims arising under the Fair Employment and Housing Act (FEHA) or the California Labor Code in court or before a state agency. An employer that imposes such a mandatory dispute resolution provision is guilty of a misdemeanor and is liable for a FEHA violation. Although the law does not refer to mandatory arbitration agreements specifically, its effect is to criminalize mandatory arbitration in the employment context. The law only applies to agreements entered into, modified, or extended after January 1, 2020, but does not apply to any agreements that are not a condition of employment or continued employment. The law makes no exception for arbitration agreements that include “opt-out” provisions or that otherwise enable employees to take affirmative steps to preserve their rights to have claims heard in court. A mutual agreement to arbitrate that is truly voluntary and not a condition of employment would not violate the statute.

Impact on Employers: Employers that violate the statute are subject to criminal penalties as well as sanctions under FEHA and the Labor Code, including penalties under the Private Attorneys General Act (PAGA). Business groups have challenged the new law in court as being preempted by the Federal Arbitration Act (FAA) and, in late January 2020, a federal judge issued an indefinite injunction blocking enforcement of the law while the issue is decided. Arbitration provisions with class action waivers offer important protection to employers, and modifications to arbitration programs should be undertaken only after consultation with employment counsel. Given uncertainty whether the law will survive judicial scrutiny, employers may wish to take a “wait and see” approach before making changes to existing forms of agreements with employees.

Expanded Lactation Accommodations (SB 142)

The New Law: SB 142 builds upon lactation accommodations required by a law that went into effect in 2018. Modeled after San Francisco’s existing lactation accommodation ordinance, SB 142 requires employers to provide working mothers with break time to express milk and lays out the physical requirements of a lactation room or location. The law prohibits discrimination or retaliation against employees for exercising rights under the law and subjects employers to rest break penalties if they deny working mothers with break time or adequate space to express milk. The law also requires employers to implement a formal lactation accommodation policy.

Impact on Employers: Creation of a compliant lactation location and review and modification of employee handbooks and policies may be warranted. For further information, read Goodwin’s summary of obligations for employers with new parents in the workforce.

Extended Limitations Period for FEHA Claims (AB 9)

The New Law: Historically, California employees wishing to bring claims for discrimination, harassment and retaliation under the state’s anti-discrimination law have had one year from the date of an alleged unlawful practice to file an administrative charge with the Department of Fair Employment and Housing. AB 9 extends the deadline to file a charge to three years after the unlawful employment practice occurs.

Impact on Employers: Employees now have three years to raise a claim of discrimination, harassment or retaliation. The tripling of the statute of limitations period disadvantages employers because evidence is lost and witness memories fade over time. Employers should work with their employment counsel to preserve evidence and memorialize critical facts where a particular termination or personnel action appears to create a litigation risk.

Codification of the “ABC Test” for Independent Contractors (AB 5)

The New Law: In 2018, the California Supreme Court issued a decision articulating a new legal test (the “ABC test”) for determining whether a worker is an independent contractor or employee. The decision was limited to claims arising under California’s Wage Orders and could have been limited or rolled back by courts in future cases. AB 5 now codifies the ABC test into law as new California Labor Code § 2750.3. From January 1, 2020 forward, for purposes of the California Wage Orders, the Labor Code and the Unemployment Insurance Code, the ABC test will generally be the test used to determine whether a worker providing services in California is an employee.

Impact on Employers: Although press coverage of AB 5 has focused on its impact on “gig” economy businesses, AB 5 has wide-reaching impact on all California employers. Companies making use of independent contractors in California should consult with counsel to re-evaluate existing independent contractor relationships and, if necessary, adjust practices to comply with AB 5. Lobbying efforts resulted a “swiss-cheese” law, with multiple complex exceptions being granted to various industries and occupations. For further information, read Goodwin’s in-depth discussion of AB 5.

Increased Paid Family Leave (SB 83)

The New Law: Existing law provides eligible California employees with up to six weeks of paid family leave benefits that are funded through mandatory employee contributions similar to the state’s short-term disability program. The new law will expand that entitlement to eight weeks of paid family leave beginning on July 1, 2020 for the purposes of caring for a seriously ill family member or bonding with a new child. The law also states that it is the Legislature’s intention to expand this law to six months for paid leave for baby bonding by 2022.

Impact on Employers: For most employers, this new law will have no fiscal impact. Many employers are already required to provide eligible employees with unpaid protected leave to bond with a new child or to care for a seriously ill family member, and this law will merely provide the employee with an expanded period of wage replacement during such a leave with no cost to the employer. For employers of San Francisco employees, however, the new law does create additional costs, as discussed . For further information, read Goodwin’s summary of obligations for employers with new parents in the workforce.

Banning Of “No Rehire” Provisions in Separation Agreements (AB 749)

The New Law: Separation agreements frequently state that departing employees will not reapply for employment or have a right to re-employment. The new law applies to settlement agreements where the departing employee has filed a lawsuit, administrative charge, or complaint through the company’s internal processes. In such circumstances, a “no rehire” provision will be deemed void and in violation of public policy. An exception is provided where an employer has a good-faith belief that the individual engaged in sexual harassment or assault.

Impact on Employers: With the prohibition of “no rehire” clauses, a former employee and employer could resolve a dispute, only to have the employee reapply and be turned down for employment, thereby creating standing for another lawsuit based on retaliation and failure to hire. A review of template separation agreements is warranted to remove any “no rehire” provision (or ensure that the provision is included only in permissible circumstances).

Penalties for Delaying Arbitration Proceedings (SB 707)

The New Law: Arbitration remains an employer-favorable forum, particularly because of the impact of class action waivers. This law strips employers of their right to compel or proceed in arbitration if they fail to pay the arbitration fees within 30 days of their due date. If an employer is late in remitting arbitration fees, the employee has the option of proceeding with his or her claims in court.

Impact on Employers: Because submission of claims to arbitration permits employers to avoid class actions, it is critical for employers to ensure that invoices from the arbitration forum are paid on time.

Employer Notices for Flex-Spending Accounts (AB 1554)

The New Law: Addressing concerns that employees forfeit funds not spent by year end, this law requires employers to notify employees participating in a flexible spending account of any deadlines to utilize funds by year end. Employers must provide this notice by electronic means and in one other form.

Impact on Employers: In Q4 of the plan year, employers should remember to provide the required notices reminding employees of the need to use available funds or risk forfeiting them.

Increased Leave Rights for Organ Donation (AB 1223)

The New Law: Since 2010, Labor Code § 1510 has required employers to allow employees to take a paid leave of absence of up to 30 business days within a one-year period for organ donations and up to five days for bone marrow donations. AB 1223 grants employees an additional unpaid leave of up to 30 business in a one-year period for organ donations.

Impact on Employers: Employee handbook and leave policies may need to be revised to accommodate this new right to additional unpaid leave. HR professionals should also be aware of this change in the law when addressing leave requests.

If you have any questions about implementing these new laws, including how existing employment policies and practices need to be modified, please contact a member of Goodwin’s California Employment team.