COVID-19 has permanently changed the workplace we once knew. Employers needed to adapt to new legislation meant to deal with the unprecedented impact of the pandemic. Expansion of the California Family Rights Act, mandatory paid sick leave for COVID-related illness, extended workplace safety protections, and workers’ compensation coverage for employees based on the rebuttable presumption they contracted COVID-19 at the workplace were just some of the laws enacted to expand and enhance employee benefits in response to the pandemic.
In 2021, California lawmakers continued to focus their efforts on resolving the negative effects of COVID-19, placing even greater responsibility on employers. Mandatory paid sick leave was extended through September 30, 2021. Job protection has also been enhanced to the point of shielding employees from termination due to poor performance. Various state agencies have been given additional authority to enforce the new laws and impose stiffer penalties for non-compliance. Although it is not yet illegal to be an employer in California, it is becoming increasingly more difficult to comply with the myriad of evolving regulations and also stay in business.
The following are summaries of the new laws most impacting California employers, with recommendations on what employers should do to avoid potential liability.
Unless otherwise stated, the new laws take effect on January 1, 2022.
More COVID-19-Related Laws
The Legislature responded to the COVID-19 pandemic with several new laws that impact employers in the context of workers’ compensation, paid sick leave, workplace safety, and employee wage theft.
SB 95 COVID-19 Supplemental Paid Sick Leave Extension
The FFCRA mandated COVID-19 emergency paid sick and paid family leave expired on December 31, 2020, and was not extended by Congress. California’s SB 95 was a budget trailer bill. It was signed April 16, 2021, effective immediately, retroactive to January 1, 2021 (thereby requiring back payments). It expanded the scope of covered employers, as well as the covered reasons for taking the leave. Although it expired on September 30, 2021, this California bill extended COVID-19 mandatory supplemental paid sick leave (SPSL) of up to an additional 80 hours for employers with more than 25 employers and included persons who teleworked and extended SPSL entitlements for reasons related to vaccinations and family care. It placed a significant burden on a much broader range of employers than did the FFCRA emergency paid sick leave law. Please visit our prior blog post for more detailed information regarding SB 95.
SB 95 Proactive Actions An Employer May Take to Protect Itself
Even though the California Supplemental Paid Sick Leave extension expired on September 30, 2021, if an employer provides an employee with sick pay for qualified leave taken by the employee beginning on April 1, 2021, through September 30, 2021, the employer may obtain IRS tax credit for the payment.
SB 606 Expansion of Cal/OSHA Citation Authority
In 2020, AB 685 established stringent COVID-19 recording and reporting requirements when employers received “notice of a potential exposure to COVID-19” at the workplace. SB 606 expands the enforcement authority of the California Division of Occupational Safety and Health (Cal/OSHA) and considerably increases Cal/OSHA’s enforcement power by establishing two additional categories of violations for which Cal/OSHA can issue citations: “enterprise-wide” violations and “egregious” violations:
- “Enterprise-wide Violations”This bill creates a rebuttable presumption that a violation committed by an employer with multiple worksites is “Enterprise-Wide” if the employer has a written policy or procedure that violates certain safety rules or Cal/OSHA has evidence of a pattern or practice. Cal/OSHA may issue an Enterprise-Wide citation requiring abatement if an employer fails to rebut the presumption. Penalties can range up to $134,334 per violation.
- “Egregious Violations”Cal/OSHA also must issue a citation for an “egregious violation” if the division believes that an employer has willfully and egregiously violated an occupational safety or health standard, order, special order, or regulation based on several factors listed in the statute. The bill requires each instance of an employee exposed to that violation to be considered a separate violation for the issuance of fines and penalties.
SB 606 Proactive Actions An Employer May Take to Protect Itself
While a business may never be able to anticipate every possible safety violation that might arise, there is no excuse for written policies and procedures that violate or do not conform with safety rules. A California employer must be extra vigilant in this area and be ready to devote adequate resources to preparing policies that conform with new regulations, along with providing sufficient workplace training and developing accident prevention strategies. The right priorities will make all the difference.
AB 1003 Wage Theft as Grand Theft
AB 1003 adds Section 487m to the Penal Code, making it the crime of grand theft to engage in intentional theft of wages, including gratuities. Prior law defined the crime of grand theft as theft committed when the money, labor, or real or personal property taken was of a value exceeding $950. AB 1003 goes further and makes the intentional theft of wages, including gratuities, in an amount greater than $950 from any one employee, or $2,350 in the aggregate from two or more employees, in any consecutive 12-month period, punishable as grand theft. The bill specifically authorizes wages, gratuities, benefits, or other compensation that are the subject of a prosecution under these provisions to be recovered as restitution in accordance with existing provisions of law. For the purposes of these provisions, (and only these provisions) independent contractors are included within the meaning of “employee” and hiring entities of independent contractors are also included within the meaning of “employer”.
AB 1003 Proactive Actions An Employer May Take to Protect Itself
Although COVID-19 and the pandemic are not mentioned in this legislation, its impact on workers precipitated the enactment of wage theft rising to the level of criminal grand theft. The goal is to protect workers who have already been severely impacted by the pandemic. An employer’s best protection is to keep careful records and to have in place a system of scrupulous supervision of managers who have access to or control over the disbursement of company funds or property.
More Restrictions on Settlement and Severance Agreements
SB 331 Nondisclosure Agreements
SB 331 significantly expands on controversial laws regulating settlement agreements passed in the last couple of years, particularly SB 820. Passed in 2018, this bill barred confidentiality provisions in settlements of lawsuits or administrative complaints that prohibited employees from disclosing their claims of sexual harassment, sexual assault, or discrimination based on sex.
Known as the “Silenced No More Act,” SB 331 significantly limits the types of information that can be restricted from disclosure in settlement agreements. Employers will not be able to prohibit disclosure of claims based on any characteristic protected under the California Fair Employment and Housing Act (FEHA). This means any provision that seeks to prevent or restrict an employee from disclosing factual information as to claims of harassment, discrimination, or retaliation based on protected characteristics under the FEHA will not be allowed. Prohibitions on disclosures in settlement agreements of claims based on race, color, religion, sex (pregnancy or gender), sexual orientation, marital status, national origin, ancestry, mental and physical disability (including HIV/AIDS), medical condition, etc. will be unenforceable. In effect, the law extends the prohibition on confidentiality provisions in settlement agreements to all forms of workplace discrimination—not just discrimination based on sex.
Restrictions in Employment and Separation Agreements
SB 331 also restricts non-disparagement provisions in employment and separation agreements that restrict an employee’s ability to discuss conduct the employee has reason to believe is unlawful.
A provision that limits an employee’s ability to disclose information related to conditions in the workplace must also state: “Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.” Provisions in the agreement that are in violation are deemed contrary to public policy and unenforceable.
SB 331 will apply to agreements entered on or after January 1, 2022.
Proactive Action An Employer May Take to Protect Itself
Whereas California will now prevent restrictions on the disclosure of certain information regarding the settlement of a lawsuit or administrative action, keep in mind what SB 331 does not do:
- Employers can still use clauses that prevent the disclosure of the amount paid to settle the claim.
- SB 331 does not prohibit inclusion of a legally-valid general release or waiver of all claims in a separation agreement.
- The bill does not prohibit provisions protecting an employer’s trade secrets, proprietary information, or confidential information that are not related to unlawful acts in the workplace.
- The prohibitions on non-disclosure provisions do not apply to general settlement agreements with employees that are not settlements of lawsuits or administrative complaints. Settling cases involving an allegation of discrimination outside of litigation can have significant advantages for an employer in terms of confidentiality and flexibility when negotiating a settlement.
- Nothing in this law prohibits an employer from denying allegations made by an employee, suing an employee for breach of a valid settlement agreement, or truthfully discussing conduct engaged in by the employee.
SB 93 Hospitality Preferential Hiring for Pandemic Layoffs
SB 93 requires certain hospitality employers, including hotels, private clubs, event centers, and airport hospitality servicers and their successor employers, to offer preferential hiring to employees laid off because of the pandemic. The bill carried an urgency clause, making it effective the same date the Governor signed it, April 16, 2021.
Although the employee eligibility requirements sound complicated a close look evidences just about anyone in the industry can qualify if:
- The employee was employed by the employer for six months or more in 2019, working at least two hours a week during that time, or
- The employee’s most recent separation from active service was due to a reason related to the COVID-19 pandemic, including a public health directive, Government shutdown order; lack of business; reduction in force; or other economic, non-disciplinary reason due to the COVID-19 pandemic.
Concerned that several laid-off qualified employees would be competing for one position, lawmakers went to great lengths to provide for enforcement, including imposing onerous record-keeping requirements and strict penalties on employers who do not give laid-off applicants preference over other applicants (civil penalties of $100 plus liquidated damages of $500 per employee per day). This turned out not to be a problem as there have not been nearly enough applicants of any kind to fill open positions once restaurants reopened.
Nevertheless, this state law does not restrict localities from implementing their own “right of recall” ordinances. Several have, particularly in the Los Angeles area.
SB 93 Proactive Actions An Employer May Take to Protect Itself
Complying with this law is not the problem. Currently, there are few available applicants, qualified or not, to fill these open positions. Employers in the hospitality industry need to protect their businesses by finding a way to fill their essential entry-level positions. Employers should also try convincing lawmakers that this type of legislation is misdirected. Finally, because foreign workers are essential to the hospitality industry, changes in immigration laws are needed.
Warehouse Distribution Centers
AB 701 Warehouse Distribution Centers Employee Quotas
AB 701 applies to larger employers (100 or more employees at a single distribution center or 1,000 or more employees at one or more distribution centers) who fall under the industry definitions for general warehousing and storage, merchant wholesalers or electronic shopping and mail-order houses. Nonexempt employees working at these Distribution centers must be provided with a written description of each quota to which they are subject, including tasks to be performed, materials produced or handled, time periods, and any potential adverse employment actions that may result from failure to meet quotas. Employees may not be required to meet a quota that would prevent compliance with break periods, the use of bathroom facilities, or occupational health and safety laws. If employees suspect that quotas are interfering with these things, they can request a copy of applicable quotas and their work speed performance records, which the employer must produce within 21 calendar days. The law also creates a rebuttable presumption of retaliation if the employer takes adverse action against an employee within 90 days of an employee’s request for the quota and personal performance data.
Employers should beware of the enforcement provisions of AB 701: The California labor commissioner, the state attorney general, a district attorney, or a city attorney all may enforce the provisions of AB 701. AB 701 permits current and former employees to seek injunctive relief to obtain compliance and to recover costs and reasonable attorney’s fees upon prevailing in that action. An employee may also bring a claim for civil penalties under the California Labor Code Private Attorneys General Act (PAGA).
It has been pointed out by commentators that employees may use AB 701 as a preemptive strike to avoid termination or discipline. AB 701 presumes that any adverse action against an employee is retaliatory if it is taken within 90 days of an employee complaint. An employee who is underperforming or who engages in misconduct can potentially misuse AB 701 to place an employer in the unenviable position of either disciplining the employee and facing an uphill battle on a retaliation claim or leaving the employee’s misconduct or performance issues unaddressed.
AB 701 Proactive Action An Employer May Take to Protect Itself
Regardless of how diligent employers are about meal and rest breaks and safety compliance, due to this law, employers are going to be facing unique scrutiny and they need to be prepared.
- Employers must act proactively to draft clear and compliant production quotas.
- The quotas must be prepared and in place before the law comes into effect.
- Implement or review and revise the current reporting process to ensure management can respond to employees’ requests for written quotas or work speed data (must be provided within 21 calendar days of receipt).
- Train managers as to the provisions of AB 701 and their compliance responsibilities.
- Review and revise record retention policies and practices so they can defend against quota-based employment actions, as well any other allegations of discrimination or wage and hour violations. Implementing at least a four-year period is recommended.
Also, quotas themselves are not always the answer. There are other ways to incentivize more productive workers. Whatever happened to paying workers higher hourly wages when they are more productive or do better work? That’s still legal in California. Discretionary bonuses have not yet been prohibited. Just keep in mind, if a non-discretionary bonus program is set up for non-exempt employees, an employer will need to average the bonuses into the employee’s overtime rate so best to keep bonuses discretionary.
Manufacturers and Retailers
AB 1084 Gender Neutral Retail Departments
AB 1084 will require a retail department store that is physically located in California that has a total of 500 or more employees across all California retail department store locations (that sells childcare items or toys) to maintain a gender-neutral section or area. “A reasonable selection of the items and toys for children that it sells shall be displayed, regardless of whether they have been traditionally marketed for either girls or for boys” in the gender-neutral section or area. These requirements will be enforced by the state attorney general, a district attorney, or city attorney. Beginning on January 1, 2024, failure to comply with the measure’s requirements will yield a civil penalty not to exceed $250 for a first violation, and $500 for a subsequent violation.
AB 1084 Proactive Action a Business May Take to Protect Itself
Businesses have been given more than two years to figure this one out (January 1, 2024). There is no specific requirement as to the size of the display section or area.
A best practice to comply with this law is simply to keep toys or many other childcare items in a gender-neutral section. Ultimately, the kids or their parents will decide which toys they prefer for boys or girls. As many items as possible should be included in a gender-neutral section or area.
SB 62 Garment Manufacturer Brand Guarantor Wage/Hour Liability
A few years ago, garment manufacturers and contractors were made jointly liable for the full amount of damages and penalties for any wage and hour violation, pursuant to the original law, AB633.
Senate Bill 62 goes way beyond that. It provides that a garment manufacturer, contractor, or brand guarantor who contracts with another entity or person for the purpose of garment manufacturing operations will be jointly and severally liable with any other manufacturer or contractor in the supply chain for an employee’s full amount of unpaid wages and any other compensation. Liability will also include interest, attorney’s fees, and civil penalties.
Just so there is no misunderstanding, SB 62 expands the definition of “brand guarantor” to include any entity that, before selling a garment, contracts for its assembly, “including sewing, cutting, making, processing, repairing, finishing, assembling, dyeing, altering a garment’s design, causing another person to alter a garment’s design, affixing a label on a garment, or otherwise preparing any garment or any article of wearing apparel or accessories designed or intended to be worn by any individual.”
Here is How SB 62 Will Work:
A retailer contracts with Manufacturer A to purchase a line of dresses. Manufacturer A subcontracts the cutting to Company B, the dyeing to Company C, and sewing to Company D. If Company D fails to pay its employees in compliance with the wage and hours law all companies in the chain may have joint liability to cover the unpaid or underpaid wages of Company D’s employees. This means that the retailer who sells the final garment could be found liable for wage violations of a subcontractor even where the ultimate vendor did not even know that subcontractor (Company D) was part of the supply chain. While any entity in the “chain” has a right to seek indemnity from those found jointly liable, litigation can be expensive and quite likely fruitless if companies in the chain cannot pay.
According to the California Chamber of Commerce “[n]othing in SB 62 will address the problem of underground bad actors in the garment industry evading the law”; SB 62 simply “allows those bad actors to continue operating as usual while passing the cost and liability to companies that have no control over the workers.”
SB 62 seeks to hold each person or entity contracting to have garments made in the supply chain liable for unpaid wages, damages, penalties, and other compensation owed to the workers who manufacture those garments, regardless of how many layers of contracting are used. The bill would make both brands and holding companies jointly liable as wage guarantors alongside garment manufacturer contractors for all civil legal responsibility for any workers retained by the contractor. The goal is to prevent the retail industry from end-running AB 633 and avoiding liability by subcontracting layer upon layer to produce garments.
A retailer who contracts with another person or entity to perform garment manufacturing operations will be jointly and severally liable with any entity that performs those operations, no matter how far down the manufacturing chain that entity may be. This means that the retailer who sells the final garment could be found liable for wage violations of a subcontractor where the ultimate vendor did not even know that subcontractor was part of the supply chain.
SB 62 expands the definition of “brand guarantor” any entity that, before selling a garment, contracts for its assembly, including sewing, cutting, processing, repairing, finishing, dyeing, altering a garment’s design, affixing a label on a garment, or otherwise preparing any garment.
Filing Claims for Unpaid Wages—No Private Right of Action
The bill does not create a private right of action. Employees can enforce their rights, solely by filing a claim with the Labor Commissioner against the contractor, the manufacturer, and the brand guarantor.
SB 62 Proactive Action a Business May Take to Protect Itself
SB 62 will take effect on January 1, 2022. Companies should start preparing now. Employers should do the following:
- When selecting contractors, companies should carefully select and audit vendors to ensure they comply with all California wage and hour laws, regulations, and wage orders—now more than ever and vendors should only deal directly with other vendors who themselves employ the same type of due diligence process with those whom they choose to deal with). Every link in the chain must meet minimum standards.
- Conduct an assessment by a knowledgeable independent person or certification by a qualified third party should take place and include a review of the following:
- Actual time records
- Tax returns/quarterlies
- Only W2s; there should be no 1099 IC’s working directly in the garment industry per AB5
- California Wage Theft Prevention Act Notice per Labor Code Section 2810.5
- The Meal and Rest Break Policies—and waivers. If there is no written policy, require one at every facility.
- Check records of prior violations and records of complaints filed with the DOL, DFEH, or the EEOC.
- Communications with the EDD
- If I-9s exist. If so, are they properly completed?
- Documentation of exempt vs. non-exempt employees. If classified as exempt, define the criteria.
- Review compensation and overtime rates
- Requirements for recording time must be in writing and signed by employees, along with meal and rest period requirements (in employee’s language).
- Paystub/Earning Statement examples with:
- Gross wages earned;
- Total hours worked;
- All deductions (including contributions and payments);
- Net wages earned;
- The inclusive dates of the period for which the employee is paid;
- The name of the employee and last four digits of Social Security number (or employee identification number);
- The name and address of the legal entity that is the employer;
- All applicable pay rates in effect during the pay period; and
- The amount of paid sick leave available, or paid time off leave an employer provides in lieu of sick leave.
- Employment Posters required by California law along, with applicable translations.
- Update any Employee Handbook or employment policies—or if none—at least define employee policies and minimum leave requirements and include the following:
- Leave under the new California Family Rights Act applies to all companies with five or more employees;
- Leave under the California paid sick leave law applies to all companies with one or more employees;
- Leave under the pregnancy disability law applies to all companies with five or more employees;
- Policy against discrimination, harassment, bullying, and retaliation is required under California law;
- Policy regarding lactation accommodation; and
- Any COVID-19 protocols; e.g. masks must be worn at all times when indoors along with social distancing.
*All of the above policies and any important employee notices should be in English and the primary languages spoken by the employees.
SB 62 Also Eliminates Piece Rate Compensation
This new law also prohibits garment manufacturers from choosing to pay their workers a set rate per piece or article of clothing produced. The Division of Labor Standards Enforcement Manual defines piece rate as, “[w]ork paid for according to the number of units turned out… [that] must be based upon an ascertainable figure paid for completing a particular task or making a particular piece of goods.”
The bill imposes a $200 fine per employee against a garment manufacturer or contractor, payable to the employee, for each pay period where the employee is paid by the piece rate.
Beware: legislation to prohibit piece-rate compensation in other industries is likely to be next on the lawmakers’ agenda—stay tuned.
SB 62 Proactive Action a Business May Take to Protect Itself
This may be old-fashioned, but there are other ways to incentivize more productive workers. Whatever happened to paying workers higher hourly wages when they are more productive or do better work? That’s still legal in California. Discretionary bonuses have not yet been prohibited. (If the bonuses are non-discretionary the employer will need to average the bonuses into the OT rate—so stay away from those if dealing with non-exempt employees.)