More Bad News For California Employers as Governor Signs Bills Into Law

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Written by Jeremy Mittman

Recently, we informed our readers about a new law making it more difficult to classify independent contractors as such.  Unfortunately, that was just the tip of the iceberg.  A number of additional new employment-related bills recently signed into law by Governor Gavin Newsom will have a negative impact on California employers. Unless specifically noted, these laws go into effect on January 1, 2020.  MSK recommends that any employer with California employees should consult with their employment counsel to address questions regarding changes to current policies/procedures in light of these new laws. 

AB 51Prohibits Mandatory Arbitration Agreements.  AB 51 bans the use of mandatory arbitration agreements and makes it a criminal misdemeanor for businesses to make workers or job applicants waive their right to sue for violations of the FEHA or the California Labor Code as a condition of employment.  Employers are also prohibited from threatening or retaliating against employees that refuse to agree to arbitration.  In addition to outlawing mandatory arbitration agreements, AB 51 also prohibits arbitration agreements that require employees to opt out of a waiver “or take any affirmative action in order to preserve their rights,” which means that “voluntary” arbitration agreements, requiring that employees opt out (or are otherwise bound by the arbitration agreement) are prohibited as well.  The express language of AB 51 provides that the law “is not intended to invalidate any agreement governed by the Federal Arbitration Act” (“FAA”).  It also specifically does not apply to post-dispute settlement agreements or negotiated severance agreements.

AB 51 only impacts arbitration agreements entered into on or after January 1, 2020, meaning mandatory arbitration agreements signed by employees prior to that date will remain in effect.  Despite AB 51’s express statement that it does not apply to arbitration agreements governed by the FAA, employers will likely challenge the law’s legality, as the FAA expressly preempts state laws that attempt to invalidate arbitration agreements that fall within the broad sweep of the FAA.  While the outcome of any challenge remains to be seen, we recommend that all California employers with mandatory employment agreements or “voluntary” arbitration agreements that require an opt-out review those agreements with employment counsel.  Those employers should certainly ensure that their arbitration agreements are expressly governed by the FAA (rather than California law) and should discuss the merits of using purely voluntary arbitration agreements starting January 1.  It is unclear whether employers can incentivize employees or candidates to sign such purely voluntary agreements with monetary (or other) incentives.

AB 9 – Extends Statute of Limitations for Filing DFEH Charges.  Also known as the Stop Harassment and Reporting Extension (SHARE) Act, AB 9 extends the deadline to file an allegation of unlawful workplace harassment, discrimination, or retaliation under the Fair Employment and Housing Act (“FEHA”) from one year to three years.  According to the State’s own press release, “AB 9 will impose a statute of limitations period that is six-times the length of the federal standard and three-times the length of the current state standard.” AB 9 does not revive lapsed claims.  As a result of this extension of the statute of limitations, employers will likely face an increase in charges filed with the Department of Fair Employment and Housing (“DFEH”) and lawsuits for harassment, discrimination, and retaliation based on protected characteristics such as sex and gender, sexual orientation, gender identity, race, age, religion, and disability. Additionally, it will be significantly harder for employers to argue that employees’ claims are time-barred for failing to timely exhaust their administrative remedies.

AB 749Invalidates “Don’t Darken My Door” Provisions in Settlement Agreements.  AB 749 voids “no rehire” provisions in settlement agreements entered into on or after January 1, 2020.  The law does include several notable exceptions, including where the employer has made a good faith determination that the individual engaged in sexual harassment or assault. In addition, it does not require an employer to rehire an individual “if there is a legitimate non-discriminatory or non-retaliatory reason for terminating the employment relationship or refusing to rehire the person;” however, it is unclear exactly what constitutes such a “legitimate” reason (e.g., is an employee’s filing of a frivolous claim or lawsuit a legitimate reason for an employer’s refusal to rehire?).  Prior to January 1, employers should have employment counsel review any standard settlement agreements that contain no re-hire provisions.

AB 1554 – Notifies Employees of Deadlines to Withdraw Funds from Flexible Spending Accounts.  AB 1554 requires employers to notify an employee (in at least two different prescribed manners, e.g., email, telephone, text message, post mail, in-person) who participates in a flexible spending account of any deadline to withdraw funds before the end of the plan year.

SB 142 – Expands Lactation Accommodation Requirements.  SB 142, in part, expands California’s lactation accommodation requirements.  The new requirements include that the employer-provided lactation room or location be “safe, clean, and free of hazardous materials” and that it contain a surface to place a breast pump and personal items and a place to sit.  Employers must provide access to electricity or alternative devices, including, but not limited to, extension cords or charging stations, needed to operate an electric or battery-powered breast pump.  Employers must also provide access to a sink with running water and a refrigerator (or cooling device or cooler) in close proximity to the employee’s workspace.  SB 142 provides that employers with fewer than 50 employees may be exempt from these requirements if they can demonstrate undue hardship, in which case such employers must make reasonable efforts to provide the employee with the use of a room or other location, other than a toilet stall, in close proximity to the employee’s work area, for the employee to express milk in private.  The new law also requires employers to implement written policies (e.g. in an employee handbook) related to lactation accommodations (clients of the firm may contact MSK for a sample policy).

SB 707Requires Employers to Pay Arbitration Initiation Fees Within 30 Days of Due Date.  SB 707 requires an employer to pay arbitration initiation fees within 30 days after the due date.  If the employer does not, it is in material breach of the arbitration agreement, in default of the arbitration, and waives its right to arbitration.  If the employer breaches, the employee can then proceed in a court of appropriate jurisdiction.  The stated purpose of this bill is to prevent employers who draft arbitration agreements from delaying arbitration by refusing to pay the required fees to initiate the process.

AB 267 – Expands Certification Requirements for Infants Working in the Entertainment Industry.  AB 267 expands certification requirements for infants working in the entertainment industry to cover any type of employment in the entertainment industry, rather than being limited to infants working “on any motion picture set or location.”

SB 271 – Specifies “Employment” for Motion Picture Production Workers for Unemployment Insurance Purposes.  AB 271 regulates what qualifies as “employment” for motion picture production workers in regard to where the services are performed for purposes of unemployment compensation.  If the service is localized in California (or some of the services are performed in California and the worker’s residence is in California), the worker’s entire service qualifies as “employment,” for purposes of determining eligibility for unemployment compensation benefits.

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