New Year, New Laws: Changes to California Employment Law in Effect Starting January 1, 2021

By Patty Chen, Esq.

With the new year, new California laws went into effect. These new laws generally continue and expand upon California’s more generous views towards employees. 

The California legislature has modified or extended exemptions and exceptions to existing law. It clarified the requirements that employers must meet to satisfy the exception for prohibiting “no-rehire” provisions in employment settlement agreements. The existing exemptions to the “ABC” test also have been modified and fine-tuned. The California’s Family Rights Act was amended to greatly expand the definition of applicable employers and family members, change requirements for parents who work for the same employer, eliminate the “key employee” provision, and create a pilot mediation program for small businesses. Additionally, the exemptions for providing notice requirement of personal information pursuant to the California Consumer Privacy Act was extended until January 1, 2022.  

The California Legislature also created new requirements. Private employers with 100 or more employees now must file an annual Employer Information Report (EEO-1) and submit a pay data report to the California Department of Fair Employment and Housing. Additionally, any publicly held domestic or foreign corporation whose principal executive office is located in California must have at least one director from an underrepresented community by 2022. 

The California Legislature has greatly expanded protections for employees who were victims of crime or abuse, provided for reasonable attorneys’ fees for employees who prevail on “whisteblower” claims, and extended the time an employee can file a claim with the California Division of Labor Standards Enforcement.

Amendments to Prohibition of No-Rehire Provisions in Employment Settlement Agreements

Under existing California law, a settlement agreement for an employment law case may not contain a provision prohibiting or restricting the employee from obtaining future employment with their employer. 

Existing law creates an exception from the prohibition if the employer has made a good faith determination that the employee engaged in sexual harassment or sexual assault. Effective January 1, 2021, AB 2143 expanded this exception to include good-faith determinations that the employee engaged in any criminal conduct. The bill amended the statute to make clear that an employee must have filed their claim against the employer in good faith in order to be entitled to the restriction against the no-rehire provision. In addition, AB 2143 requires the sexual assault or sexual harassment to be documented by the employer before the employee filed the claim.

Revisions to AB 5

AB 2257 does not change the underlying framework of AB 5, which codified the “ABC” test for determining when a worker is an independent contractor, but it does revise and add to some of the existing exceptions under the law. For more details on AB 5 and the “ABC” test, please see our prior client alert HERE.

For example, AB 2257 revises provisions related to exempt bona fide business-to-business (B2B) contracting relationships from the law’s application, such as for individual businesspersons who contract with one another “for purposes of providing services at the location of a single-engagement event,” provided certain criteria are met (including a lack of control over the work, a written contract specifying payment amounts, and each individual’s maintenance of his or her own business location).

AB 2257 also does the following:

  • Expands contracting business to include services provided to a public agency or quasi-public corporation;
  • Clarifies that the criteria of providing services directly to the contracting business rather than to customers of the contracting business does not apply if the entity service provider’s employees are solely performing the services under the contract under the name of the entity service provider and the entity service provider regularly contracts with other businesses;
  • Specifies that the written contract for services must state the payment amount, including any applicable rate of pay, for services to be performed, as well as the due date of payment for such services;
  • Provides that the entity service provider’s business location may include the entity service provider’s residence; and
  • Makes clear that the entity service provider can potentially contract (as opposed to the prior requirement of “actual contracts”) with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.

AB 2257 also expands the professional services exemption to include content contributors, advisors, producers, narrators or cartographers for certain publications, and more. It also exempts recording artists, songwriters, lyricists, composers, musical engineers and mixers, as well as musicians and musical groups engaged for a single-engagement live performance event, among other exemptions.

Minimum Wage

Starting January 1, 2021, employers must pay a minimum wage of $14 per hour, a $1 increase from last year’s hourly minimum. Businesses with fewer than 26 workers must increase their hourly wage to at least $13. 

Expansion of California’s Family Rights Act 

The previous version of California’s Family Rights Act (CFRA) tracked the requirements of the federal Family Medical Leave Act (FMLA). This year, the following changes were made to the CFRA:

  • Employer Eligibility: The previous CFRA only applied to companies with 50 or more employees within a 75-mile radius. Now, employers with 5 or more employees must provide eligible employees with up to 12 workweeks of unpaid protected leave during a 12-month period
  • Expanded Definition of “Family Members”: The CFRA allows employees to take unpaid protected leave to care for a “family member” with a serious health condition. The FMLA and the previous version of the CFRA define “family member” as the employee’s parent, child, spouse or domestic partner. Now, “family member” includes siblings, grandparents and grandchildren. In addition, “child” now covers all adult children (regardless of whether they are dependent) and children of a domestic partner. Potentially, this expansion appears to allow an employee to take a combined total of 24 weeks of unpaid leave under the CFRA and the FMLA due to the differing definitions of “family member.” For example, an employee who takes 12 weeks under the CFRA to care for a grandparent with a serious health condition may also be eligible under the FMLA to take another 12 weeks of leave to care for a spouse with a serious health condition. This issue may need to be resolved by the courts or later amendment.
  • Eliminated Provision for Parents Who Work for the Same Employer: The CFRA previously provided that when parents work for the same employer, their employer is not required to give more than 12 weeks to both parents combined to bond with their child. This provision has now been removed, and applicable employers now must provide 12 weeks to both employees.
  • Eliminated the “Key Employee” Exception: Under the previous CFRA, “key employees” who are among the highest 10% paid employees in the company could be refused reinstatement when necessary due to financial harm to the company. The new law eliminates this exception, so all employees have a right to reinstatement to the same or comparable job position (to the extent that the employee would have remained in that position if they had been continuously employed during the CFRA leave).
  • Created “Small Employer Family Leave Mediation Program”: This pilot program is applicable to companies with 5 to 19 employees. It was specifically created to address concerns that small employers would face increased litigation due to non-compliance with the new provisions of the CFRA. This mediation program will be in effect until January 1, 2024, unless extended. If an employer receives a Right-To-Sue letter from the California Department of Fair Employment and Housing (DFEH) regarding a claim under the new provisions of the CFRA, then the employer may request mandatory mediation through the DFEH, and the employee cannot pursue a claim in civil court until the mediation is completed. While there is no requirement that the parties resolve a claim at the mediation, the goal is to help resolve disputes before costly litigation is initiated.

Pay Data Reporting to the DFEH

A private employer with 100 or more employees must file an annual Employer Information Report (EEO-1) and to submit a pay data report to the DFEH on or before  March 31, 2021, and each year thereafter. The report must contain information about employees’ race, ethnicity and gender in the following categories: all levels of officials and managers, professionals, technicians, sales workers, administrative support workers, craft workers, operatives, laborers and helpers, and service workers. 

The DFEH must make the reports available to the California Division of Labor Standards Enforcement (DLSE) upon request and maintain the pay data reports for at least 10 years. The DFEH may seek an order requiring non-reporting employers to comply.

Directors from Underrepresented Communities on Corporate Boards

Any publicly held domestic or foreign corporation whose principal executive office is located in California must have a minimum of one director from an underrepresented community by no later than December 31, 2021. It also requires that by December 31, 2022, any California-based publicly held corporation with 5 to 8 directors to have a minimum of 2 directors from underrepresented communities, and a corporation with 9 or more directors to have a minimum of 3 directors from underrepresented communities.

Under the new law, a “director from an underrepresented community” means an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who self-identifies as gay, lesbian, bisexual or transgender.

Extended Exemptions from the California Consumer Privacy Act

Employers still must comply with the California Consumer Privacy Act (CCPA) requirement to provide notice before, or at the time of, collecting the personal information from an applicant or employee and must describe every category of information that will be collected and the purposes for which it will be used. The exemptions for personal information collected in the employment context and certain information collected in the course of a business-to-business (B2B) transaction or about B2B-related personnel for employers from the CCPA have been extended until January 1, 2022.

Expanded Protection for Employees Who Are Victims of Crime or Abuse

Previously, employers could not discharge, discriminate or retaliate against an employee who is a victim of crime or abuse for taking time off from work to obtain or attempt to obtain relief. 

Now, the law has been expanded to include protected leave for employees who are victims of domestic violence, sexual assault or stalking, to include leave for victims of other crimes or offenses that caused physical injury or that caused mental injury and a threat of physical injury. It also provides protected leave for an employee whose immediate family member is deceased as a direct result of a crime and expands the types of documentation for leave eligibility that an employee may provide to verify that a crime or abuse occurred.

The categories of time off work now also include taking time off work (1) to seek medical attention for injuries caused by crime or abuse, (2) to obtain services from prescribed entities as a result of crime or abuse, (3) to obtain psychological counseling or mental health services related to an experience of crime or abuse, or (4) to participate in safety planning and take other actions to increase safety from future crimes or abuse.

Extension of Time to File DLSE Complaints

Employees now have up to one year (from six months) to file a complaint with the California Division of Labor Standards Enforcement (DLSE) from the date on which they are “discharged or otherwise discriminated against in violation of any law under the jurisdiction of the Labor Commissioner.”

Attorney’s Fees for “Whistleblower” Claims

The courts now may award reasonable attorneys’ fees to a worker who prevails on a “whistleblower” claim under the Labor Code.

To discuss the above topic, please contact Patty Chen at patty@encorelaw.com or any other Encore Law attorney.

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