Every New Year seems to bring with it many new legal obligations for California employers, and this year is no exception. It is accordingly time for California employers to review their policies and practices to ensure compliance with the new laws that, unless otherwise specified, go into effect January 1, 2024.
Below is a summary of some of the most notable of these new laws.
SB 699 and AB 1076: Noncompete and Non-Solicitation Agreements
SB 699 and AB 1076 impact both noncompete and non-solicitation agreements, further limiting an employer’s ability to require post-employment restrictive covenants. Presently, the California Business and Professions Code Section 16600 renders void a majority of noncompete agreements, only offering narrow exceptions in the sale or dissolution of corporations, partnerships, and limited liability corporations.
SB 699 adds Section 16600.5 to the Business and Professions Code, which prohibits employers from entering into or attempting to enforce any contractual provision that restrains a person from engaging in a lawful profession, trade, or business of any kind, excluding the aforementioned narrow exceptions. This is prohibited regardless of where and when the contract was signed, and regardless of whether the employment was maintained outside of California. SB 699 establishes that an employer who violates its provisions commits a civil violation. The bill further authorizes an employee, former employee, or prospective employee to bring an action for injunctive relief or the recovery of actual damages, or both, and allows a prevailing plaintiff to recover reasonable attorney’s fees and costs.
AB 1076 expressly codifies existing case law established in the case Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937 that renders void any noncompete/nonsolicitation agreement in the employment context, no matter how narrowly tailored, unless an exception applies. AB 1076 specifies that the provision voiding noncompete agreements is to be broadly construed and makes its provisions applicable to contracts where the person being restrained is not a party to the contract. Notably, the law, once enacted on January 1, 2024, will have a retroactive effect, meaning existing restrictive covenants will need revision or likely revocation.
Notice Requirement: AB 1076 creates a new notice requirement that requires employers, no later than February 14, 2024, to give written notice to both current employees and former employees who were employed after January 1, 2022 that any prior noncompete agreement they entered into is void. Noncompliance with this notice requirement carries civil penalties.
Employers should review past and active agreements for noncompete language, including provisions relating to non-solicitation of customers or employees, correct any non-compliant agreements with its current employees, and prepare written notices to all current and former employees employed after January 1, 2022 stating that any such provisions are void. Employers should also remove all noncompete provisions from handbooks, including non-solicitation of customer or employees provisions.
SB 616: Expansion of Paid Sick Leave
SB 616 expands existing paid sick leave laws under the Healthy Workplaces, Healthy Families Act of 2014. Starting on January 1, 2024, whether utilizing an accrual method or a lump sum method, employers must increase paid sick leave from three days or 24 hours to five days or 40 hours, whichever is greater, within a 12-month period.
Employers may provide paid sick leave either through an accrual method or lump sum method. Employers who utilize an accrual method other than providing one hour per every 30 hours worked must provide no less than three days or 24 hours of accrued sick leave by the 120th calendar day of employment or each calendar year, or in each 12-month period, and no less than five days or 40 hours of accrued sick leave by the 200th calendar day of employment or each calendar year, or in each 12-month period. Employers may cap the accrual of paid sick leave to 10 days or 80 hours. Similarly, employers can place a cap of 10 days or 80 hours on the amount of paid sick leave an employee can carryover from year to year. Conversely, employers who utilize a lump sum method by providing five days or 40 hours at the beginning of each year do not need to provide any accrual or allow carryover.
Paid sick leave policies should be updated to reflect this major expansion of California’s paid sick leave law. Employers should also be mindful of the fact that California’s expansion of its paid sick leave law may provide more generous benefits than local paid sick leave ordinances and that Employers should follow the more generous law.
Employers should also make certain that their Labor Code Section 2810.5 Notice to Employee, which employers must provide to all employees, reflects the new amount of paid sick leave.
SB 848: Reproductive Loss Leave
SB 848 expands California’s Fair Employment and Housing Act to provide eligible employees with protective leave following a reproductive loss and makes it an “unlawful employment practice for an employer to refuse to grant a request by any employee to take up to five days of reproductive loss leave following a reproductive loss event.” A “reproductive loss event” is broadly defined to mean “a failed adoption, failed surrogacy, miscarriage, stillbirth, or an unsuccessful assisted reproduction.”
Reproductive loss leave must be taken within three months of the event, although the days do not need to be consecutive. An employee may take more than one reproductive loss leave each year, and up to 20 days within a 12-month period.
Reproductive loss leave may be unpaid (unless the employer has an existing policy stating otherwise). However, employees may use any accrued paid time off available to them, such as vacation, personal leave, accrued and available sick leave, or other compensatory time off to substitute for any unpaid reproductive loss leave.
Employers are required to maintain employee confidentiality relating to requests for reproductive loss leave.
The law applies to employers with five or more employees.
Employers should review and update their leave of absence policies to account for reproductive loss.
SB 553: Workplace Violence Prevention Plans [Effective July 1, 2024]
SB 553 requires employers to establish, implement, and maintain a workplace violence prevention plan by July 1, 2024. Employees and, if applicable, authorized employee representatives must be actively involved in developing and implementing the plan, including through identifying workplace violence hazards, designing training, and reporting and investigating workplace violence incidents. The workplace violence prevention plan must include, among other criteria, effective procedures for the employer to accept and respond to reports of workplace violence, prohibit retaliation against an employee who makes a report, ensure employee compliance with the plan, respond to workplace violence emergencies, review the effectiveness of the plan, and more. This bill also requires employers to maintain various records such as violent incident logs, incident investigations, and training records.
Although Cal/OSHA has yet to publish a model Workplace Violence Prevention Plan, we anticipate that they will.
Employers should prepare to establish a compliant workplace violence prevention plan well before July 1, 2024 to ensure compliance with this new law.
AB 2188 and SB 700: Off Premises/Off-Duty Cannabis Use
AB 2188 amends the California Fair Employment and Housing Act to make it unlawful for an employer to discriminate against an employee or job applicant based on (1) the person’s use of cannabis off the job and away from the workplace, or (2) an employer-required drug screening test that has found the person to have nonpsychoactive cannabis metabolites in their hair, blood, urine, or other bodily fluids. Employers may still conduct preemployment drug testing and may still refuse to hire someone based on a valid preemployment drug screening that does not screen for nonpsychoactive cannabis metabolites.
Nothing in AB 2188 permits an employee to possess, be impaired by or use cannabis on the job, and the law does not affect an employer’s rights and obligations in keeping a drug and alcohol-free workplace. Presumably, this means that if an employee smokes or consumes cannabis out of work, and arrives to work impaired, that conduct would not be protected by AB 2188.
SB 700 amends the California Fair Employment and Housing Act to protect employees and applicants for employment from discrimination based on the person’s use of cannabis while off the job and away from the workplace, specifically prohibiting employers from requesting information from job applicants about their prior use of cannabis.
These new laws do not apply to employees in the building or construction trades, or to applicants or employees hired for positions that require a federal background investigation or security clearance. The laws also do not preempt state or federal laws requiring applicants or employees to be tested for controlled substances as a condition of employment, receiving federal funding or federal licensing-related benefits, or entering into a federal contract.
Employers should review and revise their antidiscrimination and substance use policies and procedures to comply with these new prohibitions. For example, employment policies should distinguish between an employee’s use of cannabis outside of work versus an employee’s possession of, impairment by or use of cannabis on the job. Employers should also make certain that that the testing procedures they use comply with this new law.
SB 497: Equal Pay and Anti-Retaliation Protection Act
SB 497, the Equal Pay and Anti-Retaliation Protection Act, amends Labor Code Sections 98.6, 2201.5, and 1197.5, making it easier for employees to establish claims under the California Labor Code, including retaliation claims for complaining about or opposing an employer’s illegal conduct, including unequal pay practices. The law specifically creates a rebuttable presumption of retaliation if an employer engages in any action prohibited by SB 497 within 90 days of an employee’s protected activity. As such, the bill shifts the burden to the employer to rebut the presumption in favor of the employee’s claim with sufficient evidence.
Employers should be particularly mindful of its disciplinary practices considering the rebuttable presumption created by SB 497.
SB 525: Increase of Minimum Wage for Health Care Workers [Effective June 2024]
SB 525 raises the minimum wage for most health care workers depending on how a facility is classified, which is based on the facility’s size, type, location, and governmental payor mix percentage. SB 525 defines “covered health facility” to apply to nearly every type of health care facility except those owned, controlled, or operated by the California Department of State Hospitals, tribal clinics exempt from licensure, and outpatient settings operated by federally recognized Indian tribes.
The law’s coverage applies to “covered health care employees” and encompasses a broad array of positions, from patient care roles like nurses and physicians to support positions such as janitors and clerical workers. The law’s coverage extends to contracted or subcontracted employees when the healthcare facility has control over their wages, hours, or working conditions. Not included are outside salespersons, public sector employees not primarily involved in healthcare, and delivery or waste collection workers not directly employed by the healthcare facility.
SB 525 establishes separate minimum wage schedules based on the nature of the employer, as follows:
- Large Employers and Integrated Health Systems
a. Applies to:
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- Any covered health care facility employer with 10,000 or more full-time equivalent employees (FTEE)
- Any covered health care facility employer that is a part of an integrated health care delivery system or a health care system with 10,000 or more FTEEs
- A covered health care facility employer that is a dialysis clinic or is a person that owns, controls, or operates a dialysis clinic
- A covered health facility owned, affiliated, or operated by a county with a population of more than 5,000,000 as of January 1, 2023
*On or before January 31, 2024, the Department of Health Care Access and Information shall publish a list of all covered health care facility employers with 10,000 or more full-time equivalent employees, or covered health care facility employers that are a part of an integrated delivery system or health care system with 10,000 or more full-time equivalent employee.
b. Minimum wage schedule:
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- $23 per hour from June 1, 2024, to May 31, 2025, inclusive
- $24 per hour from June 1, 2025, to May 31, 2026, inclusive
- $25 per hour from June 1, 2026, until adjusted as specified
- Hospitals with High Government Payor Mix, Rural Independent Facilities, or County Run Facilities in Low Population Counties
a. Applies to:
-
- Any hospital with a high governmental payor mix
- An independent hospital with an elevated governmental payor mix
- A rural independent covered health care facility
- A covered health care facility that is owned, affiliated, or operated by a county with a population of less than 250,000 as of January 1, 2023
*On or before January 31, 2024, the Department of Health Care Access and Information shall publish a list of all hospitals that qualify as a hospital with a high governmental payor mix, independent hospital with an elevated governmental payor mix, or a rural independent covered health care facility.
b. Minimum wage schedule:
-
- $18 per hour from June 1, 2024, to May 31, 2033, inclusive, with 3.5 percent increases annually
- $25 per hour from June 1, 2033, until adjusted as specified
3. Primary Care, Free, Community, and Rural Clinics
a. Applies to:
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- An intermittent clinic that is not operated by or affiliated with a government clinic
- A community primary care or specialty clinic, including free clinics, and any associated intermittent clinic exempt from licensure
- A rural health clinic that is not license-exempt
- An urgent care clinic that is owned by or affiliated with a facility defined in clause (ii) or (iii)
b. Minimum wage schedule:
-
- $21 per hour from June 1, 2024, to May 31, 2026, inclusive
- $22 per hour from June 1, 2026, to May 31, 2027, inclusive
- $25 per hour from June 1, 2027, until adjusted as specified
- For all other Covered Health Care Facility Employers
a. Applies to:
-
- All other covered health care facility employers that don’t fall into the above three categories, including:
- hospitals
- skilled nursing facilities as specified
- integrated delivery systems
- ambulatory surgical centers
- urgent care clinics
- medical groups
- medical foundations
- county mental health facilities (starting January 1, 2025)
- county correctional health facilities (starting January 1, 2025)
- All other covered health care facility employers that don’t fall into the above three categories, including:
b. Minimum wage schedule:
-
-
- $21 per hour from June 1, 2024, to May 31, 2026, inclusive
- $23 per hour from June 1, 2026, to May 31, 2028, inclusive
- $25 per hour from June 1, 2028, until adjusted as specified
-
- Covered Employees Compensated on a Salary Basis
- The employee shall earn a monthly salary equivalent to no less than 150 percent of the health care worker minimum wage or 200 percent of the minimum wage, whichever is greater, for full-time employment in order to qualify as exempt from the payment of minimum wage and overtime.
Additionally, by March 1, 2024, the Department of Industrial Relations, in collaboration with the State Department of Health Care Services and the Department of Health Care Access and Information, must develop a waiver program that allows a covered health care facility to apply for and receive a temporary pause or alternative phase in schedule of the minimum wage requirements.
Employers should consult with legal counsel regarding the applicability of these new minimum wage laws to its operations and, if applicable, revise its policies to make certain that they are in compliance with the law’s new minimum wage requirements.
AB 1228: Increase of Minimum Wage for Fast Food Workers [Effective April 1, 2024]
AB 1228 raises the minimum wage for those employed by fast food restaurants. The bill defines “fast food restaurant” as a limited-service restaurant in California that is part of a national fast-food chain. A “national fast food chain” means a set of limited-service restaurants consisting of more than 60 establishments nationally that share a common brand, or that are characterized by standardized option for décor, marketing, packaging, products, and services, and which are primarily engaged in providing food and beverages for immediate consumption on or off premise where patrons generally order or select items and pay before consuming, with limited or no table service. Effective April 1, 2024, the minimum wage for fast food restaurant employees will be $20 per hour.
SB 476: Food Handler Cards
SB 476 shifts the burden of costs associated with obtaining a food handler card from the employee to the employer. This bill requires employers to pay the employee for any costs and fees related to the certification program and examination, as well as for the time required for the employee to complete the training and examination (which would be considered “hours worked”). The bill requires the employer to relieve an employee of all other work duties while the employee is taking the training course and examination. The bill also prohibits an employer from conditioning employment on the applicant or employee having an existing food handler card.
AB 636: Disclosure and Notice Requirements
Labor Code Section 2810.5 requires employers to provide a written wage and employment notice to new hires containing specified information, such as basic wage and hour information, sick leave, and how to file a complaint to remedy a violation of rights. AB 636 amends this existing law and requires an employer to include in the written notice information regarding the existence of a federal or state disaster declaration applicable to the county or counties in which the employee will be employed.
Additionally, beginning on March 15, 2024, employers will be required to give H-2A employees additional information in Spanish and, if requested by the employee, in English, describing an agricultural employee’s additional rights and protections under California law.
The California Labor Commissioner will create and make available a template for the notice, which can be found on the Labor Commissioner website starting on March 1, 2024. Employers should work with legal counsel to make certain they use complaint notices as of the first of the year, otherwise they risk legal penalties for not doing so.
AB 594: Labor Code Enforcement
AB 594 will authorize a public prosecutor to prosecute either a civil or criminal action for a violation of specified provisions of the Labor Code or to enforce those provisions independently until January 1, 2029. Notably, any individual agreement between an employee and employer to limit representative actions or to mandate private arbitration will have no effect on the public prosecutor or the Labor Commissioner’s ability to enforce this code.
SB 365: Arbitration Agreement Enforcement
SB 365 authorizes a party to appeal an order dismissing or denying a petition to compel arbitration, among other orders and judgments. Effective January 1, 2024, trial court proceedings will no longer be automatically stayed during the pendency of an appeal of an order dismissing or denying a petition to compel arbitration.
COVID-19 Legal Updates
Two notable laws regarding COVID-19 are set to expire at the end of 2023. Labor Code Section 6409.6 required employers to promptly provide notice of a confirmed case of COVID-19, as well as additional information such as the dates and locations where the infected individual worked. Although the requirements contained in this Section will automatically be repealed, employers are still required to notify individuals who had close contact with a confirmed COVID-19 case as soon as possible.
Labor Code Sections 3212.86, 3212.87, and 3212.88 created a rebuttable presumption of an industrial injury or illness for first responders, health care personnel, and employees whose employers have five or more employees and who test positive for COVID-19 during an outbreak at their workplace. Despite the expiration of this presumption, an employee may still be eligible to receive workers’ compensation benefits if the employee contracted COVID-19 at work and meets certain threshold requirements, including proving that the injury or illness arose out of the employee’s employment.
Minimum Wage Increase
Effective January 1, 2024, the California state minimum wage will increase to $16.00 per hour for all employers, regardless of the number of employees employed by the employer.
Note: Certain California cities have enacted minimum wage ordinances that exceed the state minimum wage. For example, in the City of Los Angeles, the minimum wage is $16.78 per hour.
Because of the state’s minimum wage increase, there is also a corresponding increase in the minimum salary that must be paid to an employee exempt under the administrative, executive, and professional overtime exemptions. In California, exempt employees must receive a salary of at least twice the state minimum wage for a 40-hour workweek. Accordingly, starting January 1, 2024, exempt employees must receive a minimum annual salary of $66,560 or $1,280 weekly.
We work tirelessly with our clients to proactively determine, before an issue arises, where they are vulnerable. Please contact us if you have any questions regarding your company’s readiness for the new year.
