California Employers - Prepare for New (Non-COVID-19) 2021 Laws

By any measure, 2020 presented novel, life-changing experiences for all of us. The resilience and focus required to endure the seemingly relentless wave of changes have helped to hone the skills of most workplaces and allowed them to pivot and survive.

In line with our hope that 2021 will afford a bit more stability and considerable success, here are some of the significant, non-COVID-19-related legal changes applicable to California employers that human resource professionals should be preparing to manage.

Annual Pay Data Reporting to DFEH (SB 973-Effective January 1, 2121, and Compliance Completion by March 31, 2021)

On or before March 31, 2021, private employers with 100 or more employees nationwide, with at least one employee performing work in California, must submit an annual pay data report to the Department of Fair Employment and Housing (DFEH). The report is similar to reports employers of the same size must file with the federal Equal Employment Opportunity Commission (EEOC) or Office of Federal Contract Compliance Programs (OFCCP), but it must include a wage audit.

Employers with fewer than 100 employees during their chosen snapshot audit period may still be required to file a report if they "regularly employed 100 or more employees during the Reporting Year." Employers must include in the report employees assigned to California establishments and/or working within California, but may include other employees as well. Employees who telework from a residence outside of California but are assigned to an establishment in California should be included in the report.

The DFEH has issued helpful FAQs explaining the new obligation.

Diversity Requirement on Corporate Boards of Directors (AB 979-Effective January 1, 2021)

In 2018, the California legislature passed a law requiring publicly held corporations headquartered in California to include women on their boards by December 31, 2021 (SB 826).

Effective January 1, 2021, the law now also applies to foreign and domestic publicly held corporations with principal executive offices in California, and requires the inclusion of individuals from "underrepresented communities," which is defined as ethnic minorities and those who self-identify as gay, lesbian, bisexual, or transgender (AB 979). The number of such directors is proportionate to the total number of directors (AB 979).

ABC Test for Independent Contractors Expanded and Contracted (AB 2257 and Prop 22)

Coming to grips with the backlash resulting from the 2018 California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court and the subsequent enactment of AB 5, which narrowed the definition of "independent contractor," the California legislature enacted AB 2257. This emergency legislation amended the application of the ABC test to a variety of specific work arrangements, providing that the less stringent Borello test would apply to numerous specified occupations. We summarized those amendments here.

Following the enactment of AB 2257, on November 3, 2020, California voters passed Proposition 22 (Prop 22), which excludes from the ABC test certain gig-economy workers who are engaged as drivers for app-based, platform companies (such as Lyft and DoorDash). Prop 22 permits app-based companies to classify drivers as independent contractors only if the companies meet a number of conditions and provide certain benefits and protections to the drivers. For example, these companies may not unilaterally prescribe specific dates, times of day, or a minimum number of hours during which the drivers must be logged into the app or platform. Additionally, drivers cannot be required to accept any specific rideshare or delivery service requests as a condition of maintaining access to the app or platform.

These companies also must provide drivers who work at least 15 hours a week a healthcare subsidy consistent with the average contributions required under the Affordable Care Act, an earnings guarantee tied to 120 percent of minimum wage, compensation for vehicle expenses, and other protections.

We recommend closely tracking our future blogs regarding this dynamic area of the law.

Employee Designation of Kin Care/Sick Leave (AB 2017-Effective January 1, 2021)

It has been over 20 years since the passage of California's "Kin-Care" statute (Labor Code Section 233). As originally drafted, the Kin-Care law required employers to permit employees who accrued paid time off for their own illness or medical condition to use 50 percent of their annual accrual to attend to the illness of certain family members such as spouses and children.

In 2016, the Kin-Care law was expanded in coverage so as to render it in alignment with the broader protected uses set forth in the California Paid Sick leave statute (PSL) (known as the "Healthy Workplaces Healthy Families Act of 2014). Because of the alignment, the expanded and so-called Kin-Care law subsequently covered absences for the employee's own medical condition. Consequently, many are confused as to why Labor Code 233 is still referred to as the Kin-Care statute, as it covers an employee's own medical condition.

Many employers provide to their employees more generous paid time off accruals than the California state-mandated PSL. This is typically in the form of additional paid sick leave accrual, or a PTO accrual benefit (used for all absences). Since one-half of the annual accrual of these benefits can be used for any Kin-Care protected reason (including the employee's own illness), some employers unilaterally designated an employee's absence as covered by Kin-Care, regardless of whether the employee sought to use protected Kin-Care for the absence or not.

In response, AB 2017 amended the Kin-Care law, and effective January 1, 2021, the Kin-Care law requires the employer to ask the employee how the absence should be designated.

Expansion of the California Family Rights Act (SB 1383-Effective January 1, 2021)

The expansion of the California Family Rights Act (CFRA) becomes effective on January 1, 2021. The new law now covers employers with as few as five employees without regard to how many employees are at a nearby work location. Additionally, CFRA will now allow time off to care for a significantly expanded list of family members (SB 1383). Of significance here is that, because certain family members covered under CFRA (e.g., grandparents, grandchildren, siblings) are not covered by FMLA, leave taken to care for one of these members will not run concurrent under FMLA.

The CFRA now also applies when employees request time off due to a qualifying exigency related to covered active duty or calls to active duty of an employee's spouse, domestic partner, child, or parent in the Armed Forces of the United States. The leave entitlement remains limited to 12 weeks within the 12-month period used by the employer (e.g., fixed, rolling, etc.).

Our previous advisory about the expansion of CFRA can be found here.

2021 State Minimum Wage and Local Ordinances (Effective January 1, 2021)

On January 1, 2021, California's statewide minimum wage will increase to $14 per hour for employers with 26 or more employees and $13 per hour for employers with 25 or fewer employees. This increases the minimum salary threshold for exempt employees to $58,240 per year (or $1,120 per week) for employers of 26 or more employees and $54,080 per year (or $1,040 per week) for employers of 25 or fewer employees.

Many cities and counties have higher minimum wage requirements, but those minimums do not impact the exempt salary requirement. Our advisory on this development and all the local ordinance minimum wages is here.

Expanded Labor Code Retaliation Protections (AB 1947-Effective January 1, 2021)

Labor Code Section 98.7 enables workers to file retaliation claims with the Labor Commissioner when they believe they have been discharged or otherwise discriminated against in violation of laws enforced by the Labor Commissioner. Previously, these claims had to be filed within a six-month limitation period.

Beginning January 1, 2021, the time limit is extended to one year. In addition, AB 1947 now provides a remedy for attorneys' fees for a claim of retaliation under Labor Code Section 1102.5, protects employees who, in good faith, have disclosed or threatened to disclose, or are believed to have disclosed, violations of law or regulations at the workplace to law enforcement, a government agency, a supervisor, or any person at the employer with authority to investigate such a violation.

Prior to January 1, 2020, employees prevailing on a claim for violation of section 1102.5 could obtain damages, but not an award of attorneys' fees. AB 1947 authorizes a court to award reasonable attorneys' fees to a worker who succeeds on a retaliation claim under section 1102.5.

Expansion of Exceptions to No-Rehire Clauses in Settlement Agreements (AB 2143-Effective January 1, 2021)

Previous law provided that "no-rehire" clauses were prohibited in settlement agreements resolving employment disputes if an employee had filed a complaint in court or with a government agency against their employer, except where the employer made a good-faith determination that the former employee-complainant engaged in sexual harassment or assault.

With the enactment of AB 2143, settlement agreements entered into after January 1, 2021, are subject to a second exception to the no-rehire provision, namely, a good-faith determination that the former employee engaged in criminal conduct, e.g., embezzlement. The new law also provides that, to be eligible for the prohibition against a no-rehire clause, the former employee's complaint must be made in "good faith," and to qualify for the exception to the general prohibition against no-rehire clauses, the employer must make and document the good-faith determination before the complaint by the former employee is filed.

Anti–Harassment Training for Minors in the Entertainment Industry (AB 3175-Effective Sept. 25, 2020)

Since 2018, California employers in the entertainment industry were required to provide sexual harassment prevention training to "age-eligible minors" (minor actors between the ages of 14 and 17). These age-eligible minors and their parents or legal guardians have been required to attend or otherwise participate in training before they can obtain a work permit for the minors working in the entertainment industry.

AB 3175 clarifies that the minor must be accompanied by a parent or legal guardian during the training and that the parent or legal guardian must certify to the Labor Commissioner—under penalty of perjury—that the training has been completed. AB 3175 also modifies the foreign language translation requirement from providing the training in a language understood by the age-eligible minor and their parent or legal guardian to making a translation available "whenever reasonably possible."

Mandated Child Abuse Reporting and Training (AB 1963-Effective January 1, 2021)

In 1980, California enacted the Child Abuse and Neglect Reporting Law. The law requires that "mandated reporters" make formal reports of suspected child abuse to law enforcement. Under the law, the term "child abuse" includes acts and omissions constituting physical abuse, sexual abuse (including both sexual assault and sexual exploitation), willful cruelty or unjustified punishment, unlawful corporal punishment or injury, and neglect.

Effective January 1, 2021, AB 1963 adds the following "mandated reporters": (1) a human resources employee of a business with five or more employees that employs minors, and (2) for the purposes of reporting sexual abuse, an adult whose duties require direct contact with and supervision of minors in the performance of the minors' duties in the workplace of a business with five or more. (Note that supervisors are not mandated reporters of all types of child abuse, as defined, but only of sexual abuse.)

Covered employers are required to provide training to employees who have reporting duties under the law. The training must include training in both the identification and reporting of child abuse and neglect. The training requirement may be met by completing the general online training for mandated reporters offered by the Office of Child Abuse Prevention in the State Department of Social Services.

Partial Exemption on Timing of Rest Breaks for Unionized Security Officers (AB 1512-Effective January 1, 2021)

Under California law, nonexempt employees must be authorized and permitted to take a 10-minute rest period for every four hours worked or major portion thereof (Labor Code 226.7). An employer has an obligation to relieve its employees of all work duties during their rest periods.

AB 1512 amended Labor Code 226.7, and now provides partial relief to companies employing certain security personnel. Specifically, employees are covered if they are: (1) registered as security officers pursuant to the Private Security Services Act; (2) employed by a private patrol operator registered pursuant to the Private Security Services Act; and (3) covered by a collective bargaining agreement.

The collective bargaining agreement must contain certain terms, or the exception does not apply. The terms must address and include: (a) wages, hours of work, and working conditions of employees; (b) rest periods; (c) final and binding arbitration of disputes concerning application of the rest period provisions; (d) premium wage rates for all overtime hours worked; and (e) a regular hourly rate of pay of not less than one dollar more than the state minimum.

AB 1512 does not provide a defense to rest period violation cases filed before January 1, 2021. The law remains in effect until January 1, 2027.

Disclosure of Wage Judgments (AB 2075-Effective January 1, 2021)

Effective January 1, 2021, an amendment to the California Corporations Code will require entities doing business in California, including LLCs, LLPs, partnerships, and corporations, to disclose to the California Secretary of State whether certain key owners or managers have wage judgments against them.

The disclosure must be included in the statement of information that must be filed upon formation and every one or two years thereafter (AB 2075). The purpose of the requirement is to prevent business owners who violate the Labor Code from escaping liability by discarding one business entity only to form a new one.