By: Ashleigh Kasper & Alison Korgan

Contributing Attorneys: David Nusz & Erica Rocush

The California legislature and judiciary had a busy 2023, developing and passing significant employment regulations and releasing opinions that will affect many aspects of employment litigation as we move into 2024. This update provides summaries of the most impactful employment-related laws and caselaw updates for which employers should account as they move into this new year.

Legislative Updates

Expansion of Paid Sick Pay

As of January 1, 2024, California employers are required to provide employees one hour of paid sick leave for every 30 hours worked, or, if calculated differently, at least 24 hours of paid leave within 120 days of employment and at least 40 hours within 200 days. Employers should be sure to update employee handbooks and sick pay policies to reflect these changes and ensure that the employer’s payroll and recordkeeping systems are accurately tracking and documenting accrued sick leave. Employers should also send out the new Labor Code section 2810.5 Notice to Employee and post the new Paid Sick Leave Notice poster, both of which are available through the DIR’s website.

Minimum Wage Increases

Starting January 1, 2024, California’s minimum wage will increase for most employers to $16.00 per hour. Fast food employees will receive a minimum wage increase to $20.00 per hour starting April 1, 2024. Employers of healthcare employees should be on the lookout for potential minimum wage increases between $18.00 and $23.00 per hour starting later this year*. While Governor Newsom originally pushed for these increases to be implemented June 1, 2024, he is now seeking to delay those increases as they relate to healthcare employees.

To potentially qualify for an exemption to the minimum wage law, an employee must earn a salary equal to at least two times the California minimum wage, which is $66,560.00 starting January 1, 2024. Employers should also check whether the municipalities in which they operate does not have a higher minimum wage.

New Protocols for Criminal Background Checks

Effective October 1, 2023, prior to extending a conditional job offer and unless required by law to conduct criminal background checks, employers cannot inquire about an applicant’s criminal history through job applications, background checks, or internet searches, or include statements in job postings that individuals with criminal history will not be considered for hire. Once a conditional job offer is extended, the employer may conduct a criminal background check if the employer in good faith believes a criminal background investigation is appropriate. If the employer intends to withdraw the conditional offer of employment due to the results of the criminal background investigation, the employer must conduct an individualized assessment into whether the applicant’s conviction history has a direct and adverse relationship with the specific duties of the job to justify denial of employment. The employer must then advise the applicant in writing what conviction information is being used as the basis for withdrawal of the offer and provide the applicant with the ability and time to respond with relevant information and documents to establish the results of the employer’s investigation are inaccurate or to provide other potentially relevant information.

New Standards for Whistleblower Claims – Rebuttable Presumption Under Labor Code 1102.5

On October 8, 2023, Governor Gavin Newsom signed into law Senate Bill 497 (SB 497), amending California Labor Code sections 98.6, 1102.5, and 1197.5. As it stands, California law prohibits employers from discharging or otherwise taking adverse employment action against an employee for engaging in protected conduct. Beginning January 1, 2024, SB 497 amends existing law to create a rebuttable presumption in favor of the employee’s claim of wrongful discharge or adverse employment action if that adverse action is taken within ninety (90) days of the employee engaging in protected conduct. The revised California law also provides for an expanded civil penalty up to $10,000 per employee per established violation of Labor Code section 1102.5 (the previous version of the law implemented a maximum penalty of $10,000 per violation). SB 497 amends section 1102.5 to require the Labor Commissioner to consider the nature and seriousness of the violation, including the type of violation, the economic and mental harm suffered, and the potential chilling effect on the exercise of employment rights in the workplace when assessing the penalty. The effect of SB497 is to make it easier for employees to meet their burden on 1102.5 claims and to increase the potential penalties recoverable under those claims.

Reproductive Loss Leave

Effective January 1, 2024, SB 848 requires employers to provide five days of unpaid but job protected leave for each reproductive loss event, up to 20 days in a year. A reproductive loss event includes miscarriage, unsuccessful assisted reproduction like IVF or IUI, failed surrogacy, or failed adoption. The employee’s loss leave must be taken within three months of the event. Unlike other bereavement leave options in California, employers are not allowed to ask for documentation providing support for the reproductive loss event.

Expansion of Rehiring Rights for Hospitality Employees Laid Off Due to Covid

California’s current COVID-19 rehiring and retention law, Labor Code section 2810.8, has been amended to remove the December 31, 2024 expiration and require employers to comply with section 2810.8 through December 31, 2025. Employers must continue to offer recall rights to covered individuals who were laid off due to the COVID-19 pandemic.

Pregnant Worker Fairness Act

This new Federal law, effective June 27, 2023, applies to employers in the private and public sector with at least 15 employees (“covered employers”). Its purpose is to protect employees and applicants of covered employers who have known limitations related to pregnancy, childbirth, or other related medical conditions. It requires that covered employers provide “reasonable accommodations” to a worker’s known limitations related to pregnancy, childbirth, or another related medical condition. The exception to this is when the accommodation would cause the employer an “undue hardship.” The law further forbids employers from requiring employees to take paid or unpaid leave if another reasonable accommodation can be provided.

PUMP Act

The Federal PUMP for Nursing Mothers Act requires employers to provide reasonable places—other than bathrooms and shielded from intrusion—and reasonable break time for an employee to express breast milk for their nursing child. This accommodation begins at childbirth and extends for one year. Furthermore, it must be available each time an employee requires such an accommodation.

Mandatory Workplace Violence Prevention Plans

Beginning July 1, 2024, SB 553 will require covered employers to adopt a comprehensive workplace violence prevention plan. The plan must identify individuals responsible for implementing and maintaining the plan, develop procedures to implement and review the plan, maintain a detailed log of workplace violence incidents, post-incident responses, and workplace violation injury investigations, provide training on the plan, and develop adequate recordkeeping. This law is very technical, and employers should contact an attorney for assistance in creating or revising these plans.

New Laws Regarding Employee’s Off Duty Use of Marijuana

SB 2188 adds to the California Fair Employment and Housing Act (“FEHA”) and makes it illegal for employers to discriminate against employees for the use of cannabis when not working and away from the worksite. Employers will still be able to test employees and potential employees for THC, but employers cannot discriminate if employees test positive for non-psychoactive cannabis metabolites. Employers may still prohibit possession, impairment, or use of marijuana on the job. Exceptions to AB2188 apply to the building and construction trades, but there is no exception for general safety-sensitive positions such as drivers or warehouse workers.

Questioning Regarding Prior Marijuana Prohibited

Employers will also be prohibited from requesting any information from employees or applicants about prior marijuana use. Employers also may not use an employee or applicant’s criminal conviction history for marijuana as a basis for an adverse employment action.

Express Prohibition on Noncompete Agreements

Beginning January 1, 2024, California expressly prohibits employers from entering into or attempting to enforce noncompete agreements, which are void under state law. The new law also mandates that any contract with a noncompete clause is now void, regardless of where and when the contract was signed, and whether employment was outside California. The law allows a current, former, or prospective employee to bring a private right of action to enforce the law and will allow the prevailing plaintiff to recover injunctive relief or actual damages or both, as well as attorney’s fees and costs. Employers who previously used non-compete language in contracts should evaluate whether to revise or amend those contracts in light of this new law.

New Procedure When Moving to Compel Arbitration

SB 365 amends existing law to state that, when a party appeals a denial of a petition to compel arbitration, the appeal “shall not automatically stay any proceedings in the trial court during the pendency of the appeal.” This is a departure from prior law, which provided an automatic stay of litigation pending such appeals. Employers will now need to take the additional step of petitioning the court to stay the matter in trial court while any appeal of a denial of motion to compel arbitration proceeds.

Caselaw Updates

PAGA Standing – Adolph v. Uber Tech (2023) 14 Cal.5th 1104

The Private Attorneys General Act (“PAGA”) permits aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code violations. On July 17, 2023, the Supreme Court of California concluded that a plaintiff in a PAGA claim maintains his or her standing to represent other aggrieved employees, even if the plaintiff’s individual PAGA claim is compelled to arbitration. Adolph ensures that a PAGA plaintiff maintains his or her standing to represent other aggrieved employees even if he or she has signed an arbitration agreement.

Expense Reimbursements – Thai v. IBM (2023) 93 Cal.App.5th 364

On July 11, 2023, the Court in Thai v. IBM held that employers are required to reimburse employees for expenses incurred working from home if those expenses are a direct consequence of fulfilling their job duties, including internet access, telephone service, and a telephone headset. The Court held that the employer was obligated to reimburse the employee even though the employer did not require the employee to incur the expenses, because the expenses were incurred as a direct consequence of the employee performing his job duties. Employers should evaluate their existing reimbursements and consider whether further reimbursements may be warranted to remote and/or hybrid employees in light of this ruling. This is particularly applicable to employers whose workforces began working from home as a result of the COVID-19 pandemic, or who continue to permit employees to work from home today. This ruling may extend to reimbursements for internet, computer hardware, telecom headsets, etc.

When Is It a Termination? – Young v. RemX Specialty Staffing (2023) 91 Cal.App.5th 427

Staffing agencies often face the issue in litigation of whether the end of a temporary work assignment constitutes a “discharge” of the employee’s employment with the staffing agency. Young held that an employee is not discharged when his or her temporary assignment ends if they are still employed by the staffing agency. In the case of Young, employee Young was not deemed to have been discharged when her temporary assignment ended because she was still employed by the staffing agency. As a result, the staffing agency was entitled to summary judgment because Labor Code § 201.3 requires a “discharge” of duties in order to trigger an employer’s responsibility to pay final wages, and Young was not considered discharged. While this holding is likely only applicable to cases involving Labor Code § 201.3, it may open the door for staffing agencies to argue that the end of a temporary work assignment is not considered a “discharge” in other contexts, including claims under the FEHA.

Direct Liability for Business-Entity Agents – Raines v. US Healthworks (2023) 15 Cal.5th 268

Raines was a job applicant who received an employment offer conditioned upon her passing a medical screening conducted by US Healthworks, a third-party occupational health services provider and an agent for the prospective employer. Raines sued US Healthworks, alleging that the questions were intrusive and in violation of the FEHA. The California Supreme Court held that a business entity acting as an agent of an employer may be held directly liable as an “employer” for alleged violations of the FEHA. This means businesses with at least five employees that carry out FEHA-regulated activities as an agent of an employer may be held directly liable for employment discrimination under FEHA.

Whistleblower Disclosures – People ex rel. Garcia-Brower v. Kolla’s (2023) 14 Cal.5th 719

The unanimous ruling by the California Supreme Court in Garcia-Brower broadened the interpretation of the word “disclose” under California Labor Code § 1102.5, which protects employees from retaliation by their employers when an employee discloses information the employee has reasonable cause to believe is a violation of a state or federal statute. The Court held that whistleblower protection extends to employees who make such disclosures even when the employer is already aware of the alleged violation disclosed, or when the employer themselves is the perpetrator of the alleged violation.

Meal and Rest Period Penalties – Naranjo v. Spectrum Security Services (2023) 88 Cal.App.5th 937

The Court in Naranjo held that an employer’s “good faith dispute” can prevent an aggrieved employee from collecting penalties and attorneys’ fees for “willful” or “knowing and intentional” violations under Labor Code §§ 203 and 226. In other words, if an employer has a “good faith belief” that it complied with the law at the time final wages were due, then the employer’s violation is not considered “willful” and can bar an employee from collecting penalties.

Religious Accommodations – Groff v. DeJoy (2023) 143 S.Ct. 646

In Groff v. DeJoy, the Supreme Court of the United States clarified the applicable standard for employers to use when analyzing requests for religious accommodations. Instead of the prior “de minimis burden” analysis, employers must show that the burden of accommodation “is substantial in the overall context of an employer’s business,” if the employer denies the accommodation. This decision strengthens protections for religious employees under Title VII.

Arbitration Agreements – Duran v. EmployBridge Holding, Co. (2023) 92 Cal.App.5th 59

The outcome of the Duran appeal demonstrates the importance of the language in an arbitration agreement with respect to enforcing the arbitration agreement to the fullest extent permitted by law. Here, EmployBridge’s arbitration agreement contained a carve-out provision stating that “claims under PAGA…are not arbitrable under this agreement.” Even though “individual” PAGA claims may be compelled to arbitration per Viking River Cruises, Inc. v. Moriana, the unambiguous language of EmployBridge’s arbitration agreement excluded all PAGA claims from arbitration. Accordingly, the Court of Appeal held that Plaintiff’s individual PAGA claim could not be compelled to arbitration. Employers who have not recently updated their arbitration agreements should have a lawyer review to ensure they have appropriate language to receive the maximum protection from the Agreement.

Arbitration Agreements – Westmoreland v. Kindercare Educ. LLC (2023) 90 Cal.App.5th 967

In Westmoreland, employer Kindercare Education used a severability clause in their arbitration agreement that stated that if the class and representative action waiver was found to be unenforceable, then the agreement was invalid and the class, collective, or representative action would need to be filed in court. The Court of Appeal found Kindercare’s PAGA waiver to be unenforceable, thereby invalidating the arbitration agreement in its entirety. Kindercare’s error was in the language of the severability clause, which required that the agreement be found invalid where there was an unenforceable PAGA action waiver. Like Duran, this case emphasizes the importance of language in ensuring the enforceability of arbitration agreements.

Arbitration Agreements – Alberto v. Cambrian Homecare (2023) 91 Cal.App.5th 482

Alberto cautions employers to verify that their employee onboarding documents do not have conflicting or incompatible language. As part of Cambrian Homecare’s onboarding process, employees were asked to sign a standalone arbitration agreement and separate confidentiality agreement. Because the arbitration agreement and confidentiality agreement were both presented to the employee at the time of hire and were both related to the employee’s employment, the Court determined that both agreements must be read together. The Court analyzed the confidentiality agreement and determined that it contained unconscionable terms. Because the Court considered both the confidentiality agreement and the arbitration agreement together, the Court determined that the unconscionable terms in the confidentiality agreement rendered the arbitration agreement unenforceable. Employers should therefore ensure that their various onboarding documents, when read together, do not invalidate each other based on unconscionable language or incompatible terms.

Recommended next steps for employers:

Work with your lawyers to:

1. Amend employee handbook/policies to:
   • Add a compliant reproductive loss leave policy;
   • Accommodate nursing employees with reasonable places and rest periods to express breast milk;
   • Change paid sick leave policy use and accrual limits;
2. Prepare a compliant workplace violence prevention plan before July 2024;
3. Update drug testing protocols to be compliant with the new rules relating to positive testing for nonpsychoactive cannabis metabolites;
4. Revise hiring protocols to ensure that inquiries into criminal backgrounds are not being improperly sought;
5. Ensure that payroll is changed to adapt to the new paid sick leave use and accrual limits, and provide separate notice to employees of the changes;
6. Update minimum wage and salary thresholds as applicable to ensure continued compliance; and
7. Review and update arbitration agreements to ensure they are enforceable under the recent legislative and caselaw updates.

For more information on these developments or assistance in ensuring your employment policies and practices are up to date and compliant with California law, contact your California employment attorneys at O’Hagan Meyer.

*This increase will not apply to employees who are employed as outside salespeople, employees who work in the public sector and where their primary duties performed are not health care services, delivery or waste collection work on the premises of a covered health care facility, provided that worker is not an employee of any owner of a covered health care facility, and medical transportation services in and out of covered healthcare facilities, provided that the worker is not an employee of the owner of the covered health care facility.