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Legal Updates

Employers Should Take Note Of New California Employment Laws

Over the past several months, a flurry of new employment laws have been enacted in California. While these new laws most directly affect entities that employ individuals in the Golden State, employers in other states should also pay attention to these developments, as employment-law trends in California are often harbingers of similar changes elsewhere.

Notification Of COVID-19 Workplace Exposure

As the COVID-19 pandemic has continued, a greater number of employers have been forced to grapple with how to notify employees of a potential workplace exposure. On September 17, 2020, California passed a law specifying when and how California employers must notify employees, their union representatives, and (in some instances) public health officials of a potential on-the-job exposure to the virus.

Notice To Certain Employees, Their Unions, And Employers Of Subcontracted Employees

Effective January 1, 2021, California employers who become aware of potential COVID-19 exposure in the workplace must take the following steps within one business day:

  • Provide notice to all employees (and their union, if any) who were on the premises at the same worksite as a “qualifying individual;” 
  • Provide the same notice to the employers of any subcontracted employees who were on the premises at the same worksite as a “qualifying individual;” 
  • Provide all potentially exposed employees and their union (if any) with information regarding COVID-19-related benefits (including under any federal, state, or local leave laws, as well as employer-provided benefits); and 
  • Notify all employees, their union (if any), and the employer of any subcontracted employees of the disinfection and safety plan that the employer plans to implement or complete.

A “qualifying individual” means a person who (i) has a laboratory-confirmed case of COVID-19, (ii), has received a positive COVID-19 diagnosis from a licensed health care provider, (iii) is under a COVID-19-related isolation order issued by a public health official, or (iv) has died from COVID-19.

The specific information that must be provided to each of the above categories of employees is spelled out in the statute. For example, notifications must contain anti-retaliation language, but must not name the “qualifying individual.”

Employers should notify the relevant individuals via the same method(s) they normally use in communicating employment-related information. This might include personal service, email, or even text-messaging, as long as the employer can reasonably anticipate that the employee will receive the notification within one business day.

Notice To Public Health Officials

This new California law also provides that employers must notify local public health officials upon the occurrence of a COVID-19 “outbreak,” — defined as “three or more laboratory-confirmed cases of COVID-19 among employees who live in different households within a two-week period.” In the case of such an outbreak, the employer must notify the local public health agency in its jurisdiction of the number of employees affected and of the name, occupation, and worksite of each employee with COVID-19.

Expansion Of Family Rights Act

Beginning January 1, 2021, all but the smallest California employers must provide unpaid leave benefits to employees. The expansion of the California Family Rights Act (“CFRA”), signed into law on September 19, 2020, has three major components.

First, whereas the CFRA previously applied only to employers with 50 or more employees (or 20 in the case of leave taken for purposes of bonding with a newborn), the revised law expands coverage to employers with as few as five employees. This means that even very small employers must now provide qualifying employees (i.e., employees who have been employed with the employer for a year or longer and who have worked 1,250 hours or more during the past 12 months) with up to 12 weeks of job-protected unpaid leave:

  • To care for their own serious health condition; 
  • To care for a family member with a serious health condition; 
  • To bond with a child (whether born, adopted, or placed in the employee’s foster care); or 
  • Caused by an exigency related to the deployment or military activities of the employee’s spouse, domestic partner, child, or parent who is a member of the military.

Second, the amended law eliminates the requirement that a certain number of employees work within a 75-mile radius for the employer to be covered by the CFRA. For example, under the prior version of the CFRA, an employer with 30 employees in Orange County and 30 employees in Silicon Valley would not have been covered by the CFRA because the employer would not have had 50 employees within a 75-mile radius. With the expansion of the CFRA to smaller employers and the elimination of the 75-mile standard, an employer with three employees in Orange County and three employees in Silicon Valley would now be covered.

Finally, the revisions to CFRA expand employee entitlements by:

  • Eliminating an exemption under which the most highly paid ten percent of an entity’s employees were not eligible for CFRA leave; 
  • Expanding the definition of “family member” to include children of any age, parents (broadly defined), grandparents, grandchildren, siblings (broadly defined), spouses, and domestic partners; 
  • For parents employed by the same employer, making both parents eligible to take CFRA leave to bond with a child (previously, only one parent was eligible for bonding leave); and 
  • Adding military exigency leave as a category of job-protected leave.

For larger employers covered by both the federal Family and Medical Leave Act (“FMLA”) and the CFRA, many of these revisions to the CFRA will not expand leave entitlements for employees. For the most part, employers can require employees to take FMLA and CFRA leave concurrently.

However, as the CFRA’s definition of “family member” is now more expansive than the FMLA’s definition, it is now possible – for example – that an employer subject to both laws would be required to provide up to 12 weeks of CFRA leave for an employee to care for his or her grandchild and, in the same year, provide up to an additional 12 weeks of FMLA leave for the same employee’s own serious health condition.

Because of these rather significant changes to the CFRA, California employers should revisit their CFRA and (if applicable) FMLA policies to make sure that they adequately describe employee leave entitlements, including the interaction between different policies.

New Pay Data Reporting Requirements For Larger Employers

Beginning in 2021, California employers who have over 100 employees and who are required to file an annual EEO-1 report under federal law will be required to submit an annual report containing certain demographic and pay data to the California Department of Fair Employment and Housing (the “DFEH”). The first report, covering the year 2020, is due on March 31, 2021.

According to the California legislature, these reporting requirements are intended to reduce pay gaps related to gender and race and to “allow for targeted enforcement of equal pay or discrimination laws.”

Covered employers must submit reports to the DFEH that include:

  • The number of employees by race, ethnicity, and sex in each of ten broad job categories; 
  • The number of employees by race, ethnicity, and sex in each of the pay bands established by the U.S. Bureau of Labor Statistics in the Occupational Employment Statistics survey; and 
  • The total hours worked by each employee within a given pay band.

The March 31, 2021 report must include information for all individuals who were on the employer’s payroll in any single pay period of the employer’s choice between October 1 and December 31, 2020. The law requires employers to submit the data in a format that allows for easy searching and sorting. The employer may voluntarily include “clarifying remarks” about information submitted in the report.

Amendment To Worker Classification Statute

Finally, the California legislature recently amended the state law defining which workers may be treated as independent contractors rather than employees.

In September 2019, California enacted the statute commonly known as AB 5. The law, which went into effect on January 1, 2020, was aimed in large part at what was seen as the inappropriate classification of “gig economy” workers as independent contractors.

However, businesses of all types and sizes have felt the impact of the statute. Under AB 5, for purposes of California Wage Orders, the California Labor Code, and the California Unemployment Insurance Code, employers in most industries are subject to the “ABC” test, meaning that in order to be properly classified as an independent contractor, a worker must meet all of the following (3) three criteria:

  • Part A: Is the worker free from the control and direction of the hiring entity in the performance of the work, both under the contract for the work and in fact? 
  • Part B: Are the services performed by the worker outside the usual course of the hiring entity’s business? 
  • Part C: Is the worker customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity?

AB 5 specifically exempts workers across a number of industries, including, for example, accountants, doctors, lawyers, and licensed barbers and cosmetologists. For workers in such exempted industries, the determination of whether they can properly be classified as independent contractors is governed by a more flexible, nine-factor common-law test, which focuses chiefly on the hiring entity’s right to control the manner and means by which the worker performs his or her work.

The recent amendment, known as AB 2257 and signed by Governor Gavin Newsome on September 4, 2020, modifies AB 5 by providing exemptions for additional categories of workers. These include, for instance, music industry professionals, home inspectors, most freelance writers and photographers, and individuals who provide risk-management or loss-control work for the insurance and financial services industries. Workers in these categories are now subject to the more generous nine-factor common-law test.

Adding more complexity to these issues, California voters recently approved a statewide ballot measure affecting the status of app-based transportation and delivery drivers working for companies such as Uber, Lyft, DoorDash, and Instacart. Under the new measure, these companies will be allowed to treat such drivers as independent contractors (rather than as employees, as AB 5 otherwise would require), so long as they provide drivers with certain benefits and allow them control over their schedules. At the same time, app-based drivers will enjoy some workplace protections typically reserved for employees, such as protections against sexual harassment and other types of discrimination.

Independent-contractor classification is frequently misunderstood and can be an area of uncertainty for employers in all states. The potential consequences of misclassification can be severe, wide-ranging, and costly and may include enforcement actions by a variety of state and federal agencies as well as lawsuits by individual workers. Businesses that classify California workers as independent contractors should carefully analyze each such relationship, in consultation with experienced legal counsel, to ensure compliance.

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By now, California employers are likely accustomed to adjusting to an ever-changing array of employee-friendly laws. However, depending on an employer’s size and workforce composition, this most recent flurry of laws may entail significant new responsibilities. Employers that have questions about how any of these laws may apply to their organization, or that need guidance regarding their current or impending compliance obligations, are encouraged to contact experienced employment counsel.