2020 Legislative and Case Law Update - Presented to: PayChex - Fisher Phillips
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2020
Legislative and
Case Law Update
Presented to:
PayChex
Presented by:
Jason A. Geller
fisherphillips.com
jgeller@fisherphillips.com
415.490.2090
2019 Legislative Year in Review
• Three main takeaways from this year’s legislative session:
• Governor Newsom signed multiple pieces of legislation that were
previously vetoed by Governor Brown;
• The California Legislature focused its legislative efforts more on terms
and conditions of employment (e.g. arbitration and no re-hire
provisions in severance agreements) than on wage and hour matters;
and
• The California Legislature used California appellate court decisions as
the framework for multiple pieces of legislation (e.g. independent
contractor test).
2
2019 Legislative Year in Review
• 2,576 bills were introduced in
2019.
• 1,042 bills made it to the
Governor’s desk:
• Signed 870 (83.5%)
• Vetoed 172 (16.5%)
3AB 5 and Dynamex
4AB 5 and Dynamex
• By far, the biggest employment issue facing the Legislature in 2019.
• Labor’s attempt to codify and expand the Dynamex “ABC test.”
• Business community’s attempt to seek exemptions to Dynamex.
• Significant amounts of lobbying and attempts to get exemptions
under the proposed legislation.
5The Dynamex “ABC Test” - Classifying
Independent Contractors
• Under the new “ABC test,” a worker is considered an employee
under the Wage Orders unless the hiring entity establishes all
three of these prongs:
6The Dynamex “ABC Test”
A. The worker is free from the control and direction of the hirer in
connection with the performance of the work, both under the contract
for the performance of such work; AND
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 the work
performed for the hiring entity.
7What Does AB 5 Do?
• Codifies the “ABC test” for purposes of the Labor Code, the IWC Wage
Orders, and the Unemployment Insurance Code.
• Applies the “ABC test” for workers’ compensation purposes effective July
1, 2020.
Therefore, AB 5 not only codifies Dynamex (which was limited to
IWC Wage Order claims) but it also extends it to
other areas of the law.
• AB 5 also creates a number of exemptions to Dynamex for certain
industries.
8AB 5 Exemptions
(Generally revert back to the Borello test)
• Licensed insurance agents.
• Physicians, dentists, podiatrists, psychologists, veterinarians.
• Lawyers, architects, engineers, private investigators, accountants.
• Securities brokers and investment advisors.
• Direct sales salespersons.
• Commercial fishermen.
• Newspaper delivery (one-year exemption).
9AB 5 Exemptions
(Generally revert back to the Borello test)
• “Professional services” – marketing, human resources, travel agents,
graphic design, grant writers, fine artists, enrolled agents, payment
processing agents, photographers, freelance writers (all of whom must
meet specified criteria).
• Licensed estheticians, electrologists, barbers, cosmetologists, and
manicurists (all of whom must meet specified criteria).
• Real estate agents.
• Repossessors.
• General contractors and subcontractors in construction.
10AB 5 Exemptions
(Generally revert back to the Borello test)
• Limited exemption for subcontractors providing construction trucking services
(that meet specified criteria).
• The relationship between a motor club (AAA) and an individual providing
motor club services through a third party.
• The relationship between a “referral agency” and a “service provider.” (Graphic
design, photography, tutoring, event planning, minor home repair, moving,
home cleaning, errands, furniture assembly, animal services, dog walking, dog
grooming, web design, picture hanging, pool cleaning, or yard cleanup).
Exemptions contained in AB 5 are generally retroactive.
11AB 5 – The “Business-To-Business” Exemption
• “ABC test” does not apply to a bona fide business-to-business
contracting relationship between a business and a service provider
where:
• Service provider is free from direction and control.
• Service provider provides services directly to the business rather than to
customers of the business.
• Contract is in writing.
• Service provider has a business license or business tax registration where
required.
• Service provider has a separate business location.
• Service provider customarily engaged in an independent business.
12AB 5 – The “Business-To-Business” Exemption
• Service provider actually contracts with other businesses to provide same
services.
• Service provider advertises and holds itself out to the public to provide the
same services.
• Service provider provides its own tools, vehicles, and equipment.
• Service provider can negotiate own rates.
• Consistent with the nature of the work, the service provider can set its own
hours and location of work.
• Service provider not performing work for which a CSLB license is required.
Business community not very happy with this exemption –
some of these factors will be difficult to satisfy.
13AB 5 – Where is the Risk?
• 1099’s to individuals or sole proprietorship businesses.
• Persons or entities doing work only for your company.
• “Subcontractors” that are doing the same work as your
employees are doing.
• Concept of joint employment liability if independent
contractor test is satisfied.
14AB 5 – New Enforcement Mechanism
• In addition to private lawsuits
and PAGA, recent amendments
provide for injunctive relief
claims by AG, DAs, or city
attorneys.
• Similar to injunctive relief
language in UCL claims under
Section 17204 of the Business
and Professions Code.
• Likely to see high-profile,
politicized enforcement actions.
15AB 51
Ban on Mandatory Arbitration
16AB 51 – Ban on Mandatory Arbitration
• Touted as a bill that addressed sexual
harassment issues, but actually much
broader.
• Prohibits mandatory arbitration for any
violation of FEHA (employment
discrimination) or the Labor Code.
• Prohibits an employer from requiring a job
applicant or employee to sign an arbitration
agreement as a condition of employment,
continued employment, or the receipt of
any employment-related benefit.
17AB 51 – Ban on Mandatory Arbitration
• Applies to contracts entered into, modified, or extended on or after
January 1, 2020.
• No retaliation for failure to sign such an agreement.
• Does not prohibit truly “voluntary” arbitration agreements.
• But plaintiffs’ attorneys likely to argue any such agreement was under duress and
not truly voluntary.
• Agreement cannot require employees to “opt out or take any affirmative action”
to preserve their rights.
18AB 51 – Preempted by Federal Law?
• Similar to AB 3080 from 2018,
which was vetoed by Governor
Brown on the grounds that it was
likely preempted by the Federal
Arbitration Act.
• Likely will lead to years of litigation
over whether preempted by
federal law.
• Some employer groups likely to
immediately sue for injunctive
relief.
19AB 51 – Ban on Mandatory Arbitration
• Options for Employers
• Abandon arbitration altogether
• Continue requiring arbitration agreements and if challenged,
argue that AB 51 is pre-empted by the FAA
• Present arbitration as a voluntary option for employees,
highlighting the benefits of arbitration on cover page of the
arbitration agreement
20SB 707
Arbitration Agreements – Enforcement
21SB 707 – Pay Your Arbitration Fees on Time
• Provides that a drafting party that fails to pay the fees necessary to
commence or continue arbitration within 30 days after such fees are
due is held to have materially breached the agreement.
• In California, employers pay the costs of arbitration, so these costs can
be significant.
22SB 707 – Pay Your Arbitration Fees on Time
Possible Consequences of Not Paying Fees Timely:
• Not being able to compel arbitration and being forced back to court.
• Employee can move the matter to court, seek a court order compelling
the payment of the fees, continue the arbitration and permit the
arbitrator to seek collection of the arbitrator’s fees, or pay the costs and
fees and seek them from the drafting party at the conclusion of the
arbitration regardless of the ultimate outcome.
23SB 707 – Pay Your Arbitration Fees on Time
Possible Consequences of Not Paying Fees Timely:
• Mandatory monetary sanctions.
• Additional evidentiary, terminating, or contempt sanctions:
• Prohibit the drafting party from conducting discovery.
• Strike out pleadings by the drafting party.
• Issue a default judgment against the drafting party.
Listen to counsel when they tell you pay your arbitration fees! The stakes
are too high!
24AB 9
Statute of Limitations for FEHA Claims
25AB 9 – Statute of Limitations for FEHA Claims
• Extends the statute of limitations for filing claims
with DFEH (for all claims, not just sexual
harassment) from one year to three years.
• Creates significant issues associated with
memory, documentation preservation and the
ability to defend litigation with witnesses no
longer employed by Company.
• Similar legislation (AB 1870) was vetoed by
Governor Brown last year.
26AB 749
“No Rehire” Agreements
27AB 749 – “No Rehire” Agreements
• Another target of the #MeToo movement.
• Proponents argued that no-rehire provisions
in settlement agreements can punish victims
of harassment or discrimination and
dissuade people from reporting issues in the
workplace.
28AB 749 – “No Rehire” Agreements
• Forbids settlement agreements that prohibit a person from obtaining
future employment with the employer (including a parent, subsidiary,
affiliate, or contractor of the employer).
• Applies only to “aggrieved persons”
• Defined as someone who has actually filed a claim against the employer in court,
before an administrative agency, in an alternative dispute resolution forum, or
through the employer’s internal complaint process.
• Leaves open the possibility of including such clauses in severance agreements,
where no claim has been filed and not offered as settlement of an employment
dispute.
29AB 749 – “No Rehire” Agreements
• Does not apply where the employer has made a good-faith
determination that the employee engaged in sexual harassment or
sexual assault.
• Does not require an employer to continue to employ or rehire a person if
there is a “legitimate non-discriminatory or non-retaliatory reason.”
30AB 673
Penalties for “Late” Payment of Wages
31AB 673 – Penalties for “Late” Payment of Wages
• Existing Labor Code section 210 allows the Labor
Commissioner to recover a civil penalty for
failure to timely pay wages ($100 per employee,
$200 + 25% of late wages) for subsequent
violations). Penalty currently goes to the state.
• AB 673 changes this civil penalty to a statutory
penalty and allows the employee to recover it by
filing a claim before the Labor Commissioner.
• AB 673 clarifies an employee may recover this
penalty or a PAGA civil penalty, but not both, for
the same violation.
32SB 778
Sexual Harassment Prevention Training
33SB 778 – Sexual Harassment Prevention Training
SB 1343 from last year expanded required
sexual harassment prevention training to
smaller employers and requires training
for all employees (not just supervisors).
34SB 1343 – Sexual Harassment Prevention
Training
Smaller Employers Now Covered:
• Training now required for employers with five or more employees.
Training Required for All Employees:
• By January 1, 2021, an employer with five or more employees must provide at
least two hours of training to all supervisory employees in California within six
months of their assumption of a position.
• By January 1, 2021, an employer with five or more employees must provide at
least one hour of training to all non-supervisory employees in California within
six months of their assumption of a position.
• Thereafter, once every two years.
35SB 778 Makes Important Changes
and Clarifications
Delayed Implementation:
• Delays implementation of SB 1343 from January 1, 2020 to
January 1, 2021.
Clarifications:
• New non-supervisory employees must be trained within six months
of hire.
• New supervisory employees must be trained within six months of the
assumption of a supervisory position.
• Specifies an employer who has provided training in 2019 is not required to
provide refresher training until two years thereafter.
36SB 142
Lactation Accommodation
37SB 142 – Lactation Accommodation
• Based on local ordinance adopted in
San Francisco.
• Existing law requires employers to:
• (1) provide a reasonable amount of break time
to express milk, and
• (2) make reasonable efforts to provide an
employee with a lactation room, other than a
bathroom.
38SB 142 – Lactation Accommodation
Break Time “Each Time” Needed
• Specifies that break time shall be provided “each time such employee has
need to express breast milk.”
Raises the Stakes for Non-Compliance
• Denial of lactation breaks is now subject to Labor Code section 226.7 (meal
and rest period) penalty.
• No private right of action, but all of this is part of the Labor Code so subject to
PAGA.
• Need a more comprehensive lactation accommodation policy and procedure
in handbooks and manuals.
39SB 142 – Lactation Accommodation
Significant Expansion of Lactation Room
Requirements
• Must be shielded from view and free from
intrusion.
• Must be safe, clean, and free of hazardous
materials.
• Must contain a surface to place a breast pump and
personal items.
• Must contain a place to sit.
• Must have access to electricity or alternative
devices such as extension cords or charging
stations.
• Employer must provide access to a sink with
running water and refrigerator in close proximity to
the employee’s workplace.
40SB 142 – Lactation Accommodation
Exceptions and Accommodations:
• Employer in a multi-tenant building or multi-employer worksite can
share lactation space with multiple employers.
• Employer may designate a lactation room that is temporary due to
operational, financial, or space limitations.
• Employer with fewer than 50 employees may establish an exemption if it
can show undue hardship when considered in relation to the size,
financial resources, nature, or structure of the employer’s business.
41SB 142 – Lactation Accommodation
Employers Must Develop Lactation Accommodation Policy
• Must include:
• (1) a statement about an employee’s right to request lactation accommodation,
• (2) the process by which employees make requests,
• (3) the employer’s obligation to respond to requests, and
• (4) a statement about an employee’s right to file complaints with the Labor
Commissioner.
• Must include in employee handbook or policies and distribute to new
employees and employees inquiring about or requesting parental leave.
• If employer cannot provide break time or lactation room, must provide a
written response to the employee.
42SB 188
Race Discrimination Based on Hairstyles
43SB 188 – Race Discrimination
Based on Hairstyles
• Amends FEHA to define “race” to
include “traits historically associated
with race, such as hair texture and
protective hair styles.”
• Includes braids, locks, and twists.
• Similar legislation enacted in New York.
Photo by Suad Kamardeen on Unsplash
44California Consumer Privacy Act
45California Consumer Privacy Act
• Far-reaching measure enacted to stave off an
even worse ballot measure.
• Goes into effect in 2020.
• Applies to businesses that:
• Have annual gross revenue over $25 million; OR
• Annually buy or share personal information of
50,000 or more consumers; OR
• Derive 50% or more of annual revenue from
selling consumers’ personal information.
46California Consumer Privacy Act
Main Provisions:
• Disclosure – Up to twice a year, consumers may request disclosure of any
personal information collected by a business.
• Updated Privacy Policy.
• Implement two methods for receiving consumer/employee requests.
• Respond to requests within 45 days with a copy of all personal
information the business maintains.
• Train staff how to handle requests.
47California Consumer Privacy Act
Additional Provisions:
• Right to Delete Information.
• Right to “Opt Out” of Sale of Personal Information.
• No Discrimination Provisions.
• Private Right of Action for Enforcement.
• For data breaches.
48California Consumer Privacy Act
Does the CCPA apply to employees and employment data?
• This was one of the main issues the business community sought to clarify
this year.
• Employment data was not the intended target of the CCPA, but broad
and vague terms left the issue in doubt.
49The Compromise – AB 25
• CCPA does not apply to personal information collected about a person
acting as a job applicant or employee (for now).
• But this carve-out lasts for only one year – will have to negotiate an
extension next year with labor (who wants legislation around “workplace
privacy”).
• The carve-out for employment data does not apply to the data breach
provisions of the CCPA.
• IMPORTANT! Employers will still have to notify applicants and
employees about the categories of personal information they collect,
and the purposes for which they do so…by January 1, 2020.
50AB 61
Gun Violence Restraining Orders
51AB 61 – Gun Violence Restraining Orders
• “Red flag laws” allow individuals to pursue
restraining orders to prohibit possession of
firearms.
• These differ from workplace violence restraining
orders which are generally used in the domestic
violence or stalking contexts.
• AB 61 allows employers and co-workers to
pursue such restraining orders.
52Close But No Cigar: Vetoed Bills
• AB 171 (Gonzalez) – Would have created a rebuttable presumption of retaliation based on an
employee’s status as a victim of sexual harassment.
• AB 403 (Kalra) – Would have extended the statute of limitations for Labor Code retaliation
claims to two years and provided attorneys’ fees.
• AB 589 (Gonzalez) – Would have required all employers to provide a notice to employees
about human trafficking and “document servitude.”
• AB 1478 (Carillo) – Would have created a new private right of action for violations of Labor
Code sections 230 and 230.1.
• AB 1677 (Weber) – Would have established notice and penalty requirements for call centers
that relocate to other countries.
• SB 218 (Bradford) – Would have allowed local jurisdictions within LA County to adopt their
own employment discrimination laws and enforce FEHA claims.
53Reminder – State Minimum Wage
Increase
54Reminder – State Minimum Wage Increase
Effective Date Minimum Wage for Employers with 25 or Minimum Wage for Employers With 26 or
Fewer Employees More Employees
January 1, 2019 $11.00/hour $12.00/hour
January 1, 2020 $12.00/hour $13.00/hour
January 1, 2021 $13.00/hour $14.00/hour
January 1, 2022 $14.00/hour $15.00/hour
January 1, 2023 $15.00/hour $15.00/hour
55Reminder – State Minimum Wage Increase
• The increased minimum wage impacts various other
wage-hour laws.
• White collar exemptions now require a salary of
$1,040 per week or $54,080
• Inside sales exemption is $19.51 per hour.
• Tool rate for technicians is $26.00 per hour.
• Rest period premium pay for commissioned-only
employee increases.
56Case Law
Update
fisherphillips.comO’Grady v. Merchant Exchange
Produtions, Inc.
58O’Grady v. Merchant Exchange Productions, Inc.
• Banquet facility added 21% “service charge” to banquet contracts
but did not give any of the money to the banquet service
employees.
• Banquet server sued, claiming “service charge” should be treated as
a gratuity under Labor Code section 351.
• The court rejected statements in prior cases that service charges are
not gratuities; service charges may constitute gratuities.
• Appellate court sent case back to trial court for further development
of the facts.
59O’Grady v. Merchant Exchange Productions, Inc.
Takeaways:
• Hospitality employers must use care in charging “service
charges” where money does not go to service employees.
• Call money that goes to employees a gratuity.
• Call surcharges that go only to employer a “management fee,”
“setup fee” or “administration charge.”
6061
Resources
Fisher Phillips “California Employers Blog”
• https://www.fisherphillips.com/california-employers-blog
California Legislative Information (bill language, bill status, committee
analyses, etc.):
• http://leginfo.legislature.ca.gov/
• Remember to view “Today’s Law As Amended”
62Thank You
Presented by:
Jason A. Geller
jgeller@fisherphillips.com
415.490.2090
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