With each passing year the legislature changes the rules by which businesses must operate in California. 2020 has been no different. Where our previous posts have discussed changes brought on by COVID-19, this post covers other recent law changes affecting how business operators conduct themselves. Business owners across the State of California should start contemplating their approach to dealing with and complying with these significant new requirements.

New Laws for Employers

1. SB 1383 – California Family Leave Rights Act (CFRA) Expansion

This legislation expands the California Family Rights Act, affecting both small and large California employers. The CFRA is best known as the law requiring covered employers to provide up to 12 weeks of unpaid leave during each 12-month period for family and medical leave. Previously this applied only to employers with 50 or more employees, but new law drops the requirement to just five or more employees.

With these changes, CFRA will apply to much smaller employers which have never needed to comply with a family and medical leave laws in the past. The law goes into effect on January 1, 2021, providing a short time to implement compliance plans.

Other provisions create significant legal questions for employers of all sizes in California.

The bill expands defines “family members” for whom employees can take leave to include broader categories like siblings, grandparents, grandchildren, and domestic partners. Second, “child” is expanded to include all adult children (regardless of whether they are dependent) and children of a domestic partner.

SB 1383 also eliminates the requirement that employees work within 75 miles of the worksite. And changes the situation where both parents work for the same employer. Under the current statute, employers are not required to provide over 12 weeks for leave for the birth, adoption, or foster care placement of a child. With the new law in place, it now requires employers to provide 12 weeks to both parents.

2. AB 1947 – Employment Violation Complaints

Current law already prohibits discrimination or retaliation against employees who complain about labor code violations or other legal violations. However, this bill increased the time for employees to file certain discrimination claims from six months to one year. The bill also allows an employee to recover his attorney’s fees if he prevails on a retaliation claim against his employer.  The law does not include a provision for a prevailing employer to recover its attorney fees, however.

3. SB 973 – Employers Annual Report Pay Data

SB 973 requires private employers with 100 or more employees to submit an annual pay data report to the California Department of Fair Employment and Housing (“DFEH”). Required information in the report includes the number of employees by race, ethnicity, and sex in each of the following job categories: executive or senior-level officials and managers, first or mid-level officials and managers, professionals, technicians, sales workers, administrative support workers, craft workers, operatives, laborers and helpers, and service workers.

Employers must also document the number of employees by race, ethnicity, and sex whose annual earnings fall within each of the pay bands used by the United States Bureau of Labor Statistics in the Occupational Employment Statistics survey. Employers must report the total number of hours worked by each employee in each pay band. This creates an important issue, as exempt employees rarely track hours worked.

It requires employers with multiple establishments in California to file a report for each establishment, and a merged report. The law goes into effect on January 1, 2020, with the first annual report by March 31, 2021, leaving employers with a brief window to compile the information needed.

4. AB 2257 (Independent Contractors)

Last year, California implemented AB 5 into law, amidst much consternation. This law adopted the so-called “ABC test” for determining who can be classified as an independent contractor. With this new test in place, many more worker previously considered independent contractors would now be classified as employees. However within AB 5 were specified carve outs for certain categories of workers which would still fall under the less stringent “Borello test” for determining who is an employee.

AB 2257 modifies aspects of AB5 to create more carve outs. These include changes to the “business-to-business” exception to the ABC test, including the terms required in a contract. AB 2257 also specifies that a business service provider’s residence is a permissible place of business, and limits the work materials the business service provider must provide.

AB 2257 expands the qualifying services for the exemption to include graphic design, web design, tutoring, consulting, youth sports coaching, caddying, wedding planning, wedding and event vending, yard cleanup, captioning, and interpreting and translating services.

Under AB 5, freelance writers, photographers, photojournalists, editors, and newspaper cartoonists become employees of a publisher if they contract for over 35 submissions in a single year. AB 2257 eliminates the automatic employee provision based on the number of submissions, and provides that these positions (and additional, similar positions) are covered by the Borello test.

AB 5 has faced much chagrin from California employers, and changes should be expected in each of the coming years. One of the most publicized potential changes to AB 5, Proposition 22, was passed by voters in the November 2020 election. This ballot initiative exempts app-based ride share and delivery drivers from AB 5, and subject to certain conditions, deem them to be independent contractors.

5. AB 2017 (Kin Care Leave)

Existing law, Labor Code 233, provides that employees must be permitted to use at least half of their annual accrual of employer-provided sick leave for “kin care” (family) reasons.  Current law allows the employer to determine how to apply sick leave to an employee’s absences for the diagnosis, care, or treatment of an existing health condition of, or preventive care for, an employee or an employee’s family member, or for time off related to domestic violence, sexual assault, or stalking. AB 2017 gives employees the “sole discretion” to designate the reason for which they use their available sick leave.