powerpoint presentation · 2020 legislative and case law update fisherphillips.com presented by:...

2020Legislative and Case Law Update

fisherphillips.com

Presented by:Jason A. [email protected]

Presented to:PayChex

2019 Legislative Year in Review

• Three main takeaways from this year’s legislative session:• Governor Newsom signed multiple pieces of legislation that were

previously vetoed by Governor Brown;• The California Legislature focused its legislative efforts more on terms

and conditions of employment (e.g. arbitration and no re-hire provisions in severance agreements) than on wage and hour matters; and

• The California Legislature used California appellate court decisions as the framework for multiple pieces of legislation (e.g. independent contractor test).

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2019 Legislative Year in Review

• 2,576 bills were introduced in 2019.

• 1,042 bills made it to the Governor’s desk:

• Signed 870 (83.5%)• Vetoed 172 (16.5%)

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AB 5 and Dynamex

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AB 5 and Dynamex

• By far, the biggest employment issue facing the Legislature in 2019.• Labor’s attempt to codify and expand the Dynamex “ABC test.”• Business community’s attempt to seek exemptions to Dynamex.• Significant amounts of lobbying and attempts to get exemptions

under the proposed legislation.

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The Dynamex “ABC Test” - Classifying Independent Contractors

• Under the new “ABC test,” a worker is considered an employee under the Wage Orders unless the hiring entity establishes all three of these prongs:

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The Dynamex “ABC Test”

A. The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work; AND

B. The worker performs work that is outside the usual course of the hiring entity’s business; AND

C. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

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What Does AB 5 Do?

• Codifies the “ABC test” for purposes of the Labor Code, the IWC Wage Orders, and the Unemployment Insurance Code.

• Applies the “ABC test” for workers’ compensation purposes effective July 1, 2020.

• AB 5 also creates a number of exemptions to Dynamex for certain industries.

Therefore, AB 5 not only codifies Dynamex (which was limited to IWC Wage Order claims) but it also extends it to

other areas of the law.

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AB 5 Exemptions(Generally revert back to the Borello test)

• Licensed insurance agents.• Physicians, dentists, podiatrists, psychologists, veterinarians.• Lawyers, architects, engineers, private investigators, accountants.• Securities brokers and investment advisors.• Direct sales salespersons.• Commercial fishermen.• Newspaper delivery (one-year exemption).

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• “Professional services” – marketing, human resources, travel agents, graphic design, grant writers, fine artists, enrolled agents, payment processing agents, photographers, freelance writers (all of whom must meet specified criteria).

• Licensed estheticians, electrologists, barbers, cosmetologists, and manicurists (all of whom must meet specified criteria).

• Real estate agents.• Repossessors.• General contractors and subcontractors in construction.

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• Limited exemption for subcontractors providing construction trucking services (that meet specified criteria).

• The relationship between a motor club (AAA) and an individual providing motor club services through a third party.

• The relationship between a “referral agency” and a “service provider.” (Graphic design, photography, tutoring, event planning, minor home repair, moving, home cleaning, errands, furniture assembly, animal services, dog walking, dog grooming, web design, picture hanging, pool cleaning, or yard cleanup).

Exemptions contained in AB 5 are generally retroactive.

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AB 5 – The “Business-To-Business” Exemption

• “ABC test” does not apply to a bona fide business-to-business contracting relationship between a business and a service provider where:

• Service provider is free from direction and control.• Service provider provides services directly to the business rather than to

customers of the business.• Contract is in writing.• Service provider has a business license or business tax registration where

required.• Service provider has a separate business location.• Service provider customarily engaged in an independent business.

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AB 5 – The “Business-To-Business” Exemption

• Service provider actually contracts with other businesses to provide same services.

• Service provider advertises and holds itself out to the public to provide the same services.

• Service provider provides its own tools, vehicles, and equipment.• Service provider can negotiate own rates.• Consistent with the nature of the work, the service provider can set its own

hours and location of work.• Service provider not performing work for which a CSLB license is required.

Business community not very happy with this exemption –some of these factors will be difficult to satisfy.

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AB 5 – Where is the Risk?

• 1099’s to individuals or sole proprietorship businesses.• Persons or entities doing work only for your company.• “Subcontractors” that are doing the same work as your

employees are doing.• Concept of joint employment liability if independent

contractor test is satisfied.

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AB 5 – New Enforcement Mechanism

• In addition to private lawsuits and PAGA, recent amendments provide for injunctive reliefclaims by AG, DAs, or city attorneys.

• Similar to injunctive relief language in UCL claims under Section 17204 of the Business and Professions Code.

• Likely to see high-profile, politicized enforcement actions.

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AB 51Ban on Mandatory Arbitration

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AB 51 – Ban on Mandatory Arbitration

• Touted as a bill that addressed sexual harassment issues, but actually much broader.

• Prohibits mandatory arbitration for any violation of FEHA (employment discrimination) or the Labor Code.

• Prohibits an employer from requiring a job applicant or employee to sign an arbitration agreement as a condition of employment, continued employment, or the receipt of any employment-related benefit.

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• Applies to contracts entered into, modified, or extended on or after January 1, 2020.

• No retaliation for failure to sign such an agreement.• Does not prohibit truly “voluntary” arbitration agreements.

• But plaintiffs’ attorneys likely to argue any such agreement was under duress and not truly voluntary.

• Agreement cannot require employees to “opt out or take any affirmative action” to preserve their rights.

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AB 51 – Preempted by Federal Law?• Similar to AB 3080 from 2018,

which was vetoed by Governor Brown on the grounds that it was likely preempted by the Federal Arbitration Act.

• Likely will lead to years of litigation over whether preempted by federal law.

• Some employer groups likely to immediately sue for injunctive relief.

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• Options for Employers• Abandon arbitration altogether• Continue requiring arbitration agreements and if challenged,

argue that AB 51 is pre-empted by the FAA• Present arbitration as a voluntary option for employees,

highlighting the benefits of arbitration on cover page of the arbitration agreement

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SB 707Arbitration Agreements – Enforcement

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SB 707 – Pay Your Arbitration Fees on Time

• Provides that a drafting party that fails to pay the fees necessary to commence or continue arbitration within 30 days after such fees are due is held to have materially breached the agreement.

• In California, employers pay the costs of arbitration, so these costs can be significant.

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Possible Consequences of Not Paying Fees Timely:• Not being able to compel arbitration and being forced back to court.• Employee can move the matter to court, seek a court order compelling

the payment of the fees, continue the arbitration and permit the arbitrator to seek collection of the arbitrator’s fees, or pay the costs and fees and seek them from the drafting party at the conclusion of the arbitration regardless of the ultimate outcome.

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Possible Consequences of Not Paying Fees Timely:• Mandatory monetary sanctions.• Additional evidentiary, terminating, or contempt sanctions:

• Prohibit the drafting party from conducting discovery.• Strike out pleadings by the drafting party.• Issue a default judgment against the drafting party.

Listen to counsel when they tell you pay your arbitration fees! The stakes are too high!

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AB 9Statute of Limitations for FEHA Claims

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AB 9 – Statute of Limitations for FEHA Claims• Extends the statute of limitations for filing claims

with DFEH (for all claims, not just sexual harassment) from one year to three years.

• Creates significant issues associated with memory, documentation preservation and the ability to defend litigation with witnesses no longer employed by Company.

• Similar legislation (AB 1870) was vetoed by Governor Brown last year.

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AB 749“No Rehire” Agreements

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AB 749 – “No Rehire” Agreements

• Another target of the #MeToo movement.• Proponents argued that no-rehire provisions

in settlement agreements can punish victims of harassment or discrimination and dissuade people from reporting issues in the workplace.

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• Forbids settlement agreements that prohibit a person from obtaining future employment with the employer (including a parent, subsidiary, affiliate, or contractor of the employer).

• Applies only to “aggrieved persons”• Defined as someone who has actually filed a claim against the employer in court,

before an administrative agency, in an alternative dispute resolution forum, or through the employer’s internal complaint process.

• Leaves open the possibility of including such clauses in severance agreements, where no claim has been filed and not offered as settlement of an employment dispute.

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• Does not apply where the employer has made a good-faith determination that the employee engaged in sexual harassment or sexual assault.

• Does not require an employer to continue to employ or rehire a person if there is a “legitimate non-discriminatory or non-retaliatory reason.”

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AB 673Penalties for “Late” Payment of Wages

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AB 673 – Penalties for “Late” Payment of Wages

• Existing Labor Code section 210 allows the Labor Commissioner to recover a civil penalty for failure to timely pay wages ($100 per employee, $200 + 25% of late wages) for subsequent violations). Penalty currently goes to the state.

• AB 673 changes this civil penalty to a statutory penalty and allows the employee to recover it by filing a claim before the Labor Commissioner.

• AB 673 clarifies an employee may recover this penalty or a PAGA civil penalty, but not both, for the same violation.

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SB 778Sexual Harassment Prevention Training

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SB 778 – Sexual Harassment Prevention Training

SB 1343 from last year expanded required sexual harassment prevention training to smaller employers and requires training for all employees (not just supervisors).

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SB 1343 – Sexual Harassment Prevention Training

Smaller Employers Now Covered:• Training now required for employers with five or more employees.

Training Required for All Employees:• By January 1, 2021, an employer with five or more employees must provide at

least two hours of training to all supervisory employees in California within six months of their assumption of a position.

• By January 1, 2021, an employer with five or more employees must provide at least one hour of training to all non-supervisory employees in California within six months of their assumption of a position.

• Thereafter, once every two years.

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SB 778 Makes Important Changes and Clarifications

Delayed Implementation:• Delays implementation of SB 1343 from January 1, 2020 to

January 1, 2021.

Clarifications:• New non-supervisory employees must be trained within six months

of hire.• New supervisory employees must be trained within six months of the

assumption of a supervisory position.• Specifies an employer who has provided training in 2019 is not required to

provide refresher training until two years thereafter.

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SB 142Lactation Accommodation

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SB 142 – Lactation Accommodation

• Based on local ordinance adopted in San Francisco.

• Existing law requires employers to:• (1) provide a reasonable amount of break time

to express milk, and • (2) make reasonable efforts to provide an

employee with a lactation room, other than a bathroom.

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Break Time “Each Time” Needed• Specifies that break time shall be provided “each time such employee has

need to express breast milk.”

Raises the Stakes for Non-Compliance• Denial of lactation breaks is now subject to Labor Code section 226.7 (meal

and rest period) penalty.• No private right of action, but all of this is part of the Labor Code so subject to

PAGA.• Need a more comprehensive lactation accommodation policy and procedure

in handbooks and manuals.

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Significant Expansion of Lactation Room Requirements

• Must be shielded from view and free from intrusion.

• Must be safe, clean, and free of hazardous materials.

• Must contain a surface to place a breast pump and personal items.

• Must contain a place to sit.• Must have access to electricity or alternative

devices such as extension cords or charging stations.

• Employer must provide access to a sink with running water and refrigerator in close proximity to the employee’s workplace.

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Exceptions and Accommodations:• Employer in a multi-tenant building or multi-employer worksite can

share lactation space with multiple employers.• Employer may designate a lactation room that is temporary due to

operational, financial, or space limitations.• Employer with fewer than 50 employees may establish an exemption if it

can show undue hardship when considered in relation to the size, financial resources, nature, or structure of the employer’s business.

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Employers Must Develop Lactation Accommodation Policy• Must include:

• (1) a statement about an employee’s right to request lactation accommodation, • (2) the process by which employees make requests, • (3) the employer’s obligation to respond to requests, and • (4) a statement about an employee’s right to file complaints with the Labor

Commissioner.• Must include in employee handbook or policies and distribute to new

employees and employees inquiring about or requesting parental leave.• If employer cannot provide break time or lactation room, must provide a

written response to the employee.

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SB 188 Race Discrimination Based on Hairstyles

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SB 188 – Race Discrimination Based on Hairstyles

• Amends FEHA to define “race” to include “traits historically associated with race, such as hair texture and protective hair styles.”

• Includes braids, locks, and twists.• Similar legislation enacted in New York.

Photo by Suad Kamardeen on Unsplash

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California Consumer Privacy Act

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• Far-reaching measure enacted to stave off an even worse ballot measure.

• Goes into effect in 2020.• Applies to businesses that:

• Have annual gross revenue over $25 million; OR• Annually buy or share personal information of

50,000 or more consumers; OR• Derive 50% or more of annual revenue from

selling consumers’ personal information.

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Main Provisions:• Disclosure – Up to twice a year, consumers may request disclosure of any

personal information collected by a business.• Updated Privacy Policy.• Implement two methods for receiving consumer/employee requests.• Respond to requests within 45 days with a copy of all personal

information the business maintains.• Train staff how to handle requests.

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Additional Provisions:• Right to Delete Information.• Right to “Opt Out” of Sale of Personal Information.• No Discrimination Provisions.• Private Right of Action for Enforcement.

• For data breaches.

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Does the CCPA apply to employees and employment data?

• This was one of the main issues the business community sought to clarify this year.

• Employment data was not the intended target of the CCPA, but broad and vague terms left the issue in doubt.

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The Compromise – AB 25

• CCPA does not apply to personal information collected about a person acting as a job applicant or employee (for now).

• But this carve-out lasts for only one year – will have to negotiate an extension next year with labor (who wants legislation around “workplace privacy”).

• The carve-out for employment data does not apply to the data breach provisions of the CCPA.

• IMPORTANT! Employers will still have to notify applicants and employees about the categories of personal information they collect, and the purposes for which they do so…by January 1, 2020.

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AB 61Gun Violence Restraining Orders

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AB 61 – Gun Violence Restraining Orders

• “Red flag laws” allow individuals to pursue restraining orders to prohibit possession of firearms.

• These differ from workplace violence restraining orders which are generally used in the domestic violence or stalking contexts.

• AB 61 allows employers and co-workers to pursue such restraining orders.

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Close But No Cigar: Vetoed Bills

• AB 171 (Gonzalez) – Would have created a rebuttable presumption of retaliation based on an employee’s status as a victim of sexual harassment.

• AB 403 (Kalra) – Would have extended the statute of limitations for Labor Code retaliation claims to two years and provided attorneys’ fees.

• AB 589 (Gonzalez) – Would have required all employers to provide a notice to employees about human trafficking and “document servitude.”

• AB 1478 (Carillo) – Would have created a new private right of action for violations of Labor Code sections 230 and 230.1.

• AB 1677 (Weber) – Would have established notice and penalty requirements for call centers that relocate to other countries.

• SB 218 (Bradford) – Would have allowed local jurisdictions within LA County to adopt their own employment discrimination laws and enforce FEHA claims.

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Reminder – State Minimum Wage Increase

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Reminder – State Minimum Wage IncreaseEffective Date Minimum Wage for Employers with 25 or

Fewer EmployeesMinimum Wage for Employers With 26 or

More Employees

January 1, 2019 $11.00/hour $12.00/hour





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Reminder – State Minimum Wage Increase

• The increased minimum wage impacts various other wage-hour laws.• White collar exemptions now require a salary of

$1,040 per week or $54,080• Inside sales exemption is $19.51 per hour.• Tool rate for technicians is $26.00 per hour.• Rest period premium pay for commissioned-only

employee increases.56

fisherphillips.com

Case Law Update

O’Grady v. Merchant Exchange Produtions, Inc.

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O’Grady v. Merchant Exchange Productions, Inc.

• Banquet facility added 21% “service charge” to banquet contracts but did not give any of the money to the banquet service employees.

• Banquet server sued, claiming “service charge” should be treated as a gratuity under Labor Code section 351.

• The court rejected statements in prior cases that service charges are not gratuities; service charges may constitute gratuities.

• Appellate court sent case back to trial court for further development of the facts.

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O’Grady v. Merchant Exchange Productions, Inc.

Takeaways:• Hospitality employers must use care in charging “service

charges” where money does not go to service employees.• Call money that goes to employees a gratuity.• Call surcharges that go only to employer a “management fee,”

“setup fee” or “administration charge.”

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Resources

Fisher Phillips “California Employers Blog”• https://www.fisherphillips.com/california-employers-blog

California Legislative Information (bill language, bill status, committee analyses, etc.):

• http://leginfo.legislature.ca.gov/• Remember to view “Today’s Law As Amended”

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https://www.fisherphillips.com/california-employers-bloghttp://leginfo.legislature.ca.gov/

fisherphillips.com

Thank You

Presented by:Jason A. [email protected]

Slide Number 12019 Legislative Year in Review2019 Legislative Year in ReviewAB 5 and DynamexAB 5 and DynamexThe Dynamex “ABC Test” - Classifying �Independent ContractorsThe Dynamex “ABC Test”What Does AB 5 Do?AB 5 Exemptions�(Generally revert back to the Borello test)AB 5 Exemptions�(Generally revert back to the Borello test)AB 5 Exemptions�(Generally revert back to the Borello test)AB 5 – The “Business-To-Business” ExemptionAB 5 – The “Business-To-Business” ExemptionAB 5 – Where is the Risk?AB 5 – New Enforcement MechanismAB 51AB 51 – Ban on Mandatory ArbitrationAB 51 – Ban on Mandatory ArbitrationAB 51 – Preempted by Federal Law?AB 51 – Ban on Mandatory ArbitrationSB 707SB 707 – Pay Your Arbitration Fees on TimeSB 707 – Pay Your Arbitration Fees on TimeSB 707 – Pay Your Arbitration Fees on TimeAB 9AB 9 – Statute of Limitations for FEHA ClaimsAB 749AB 749 – “No Rehire” Agreements�AB 749 – “No Rehire” Agreements�AB 749 – “No Rehire” Agreements�AB 673AB 673 – Penalties for “Late” Payment of Wages�SB 778SB 778 – Sexual Harassment Prevention TrainingSB 1343 – Sexual Harassment Prevention TrainingSB 778 Makes Important Changes �and ClarificationsSB 142SB 142 – Lactation Accommodation�SB 142 – Lactation Accommodation�SB 142 – Lactation Accommodation�SB 142 – Lactation Accommodation�SB 142 – Lactation Accommodation� SB 188 SB 188 – Race Discrimination �Based on HairstylesCalifornia Consumer Privacy ActCalifornia Consumer Privacy ActCalifornia Consumer Privacy ActCalifornia Consumer Privacy ActCalifornia Consumer Privacy ActThe Compromise – AB 25AB 61AB 61 – Gun Violence Restraining OrdersClose But No Cigar: Vetoed Bills Reminder – State Minimum Wage IncreaseReminder – State Minimum Wage IncreaseReminder – State Minimum Wage IncreaseSlide Number 57O’Grady v. Merchant Exchange Produtions, Inc.O’Grady v. Merchant Exchange Productions, Inc.O’Grady v. Merchant Exchange Productions, Inc.Slide Number 61ResourcesSlide Number 63

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