California Employment Law Update

Ah, It’s Bill Passing Season in California – and No Employer is Safe!

It’s springtime in California!  Even as the swallows return to San Juan Capistrano, the California legislature is busy, busy, busy passing 100s of new laws because, after all, you can never get too much of a good thing!

Yes, it’s Bill Passing Season in Sacramento again, and the California legislature seems as determined as ever to defend the state’s vaunted position as “#1 Judicial Hellhole” in the Nation!

Here’s the state of play so far – the State Assembly passed six new bills that would further add to a California employer’s to-do list:

  • AB-51 (Gonzalez, D-San Diego) is the legislature’s perennial attempt to outlaw arbitration in employment contracts, as we have reported before. Just like its predecessors, this bill is likely preempted by federal law (the Federal Arbitration Act) despite its declared intent not to invalidate agreements that are otherwise enforceable under the FAA.  Former Gov. Jerry Brown repeatedly refused to sign similar bills.  (We predict that Gov. Newsom may not be quite as punctilious.)
  • AB-171 (Gonzalez, D-San Diego) provides a “rebuttable presumption” of unlawful retaliation if within 90 days of notice to the employer of sexual harassment, domestic violence, stalking, or sexual assault, the employee suffers an adverse action (e.g., discharge, demotion, suspension, etc.) by the employer.
  • AB-196 (Gonzalez, D-San Diego) guarantees 100 percent wage replacement (up to the maximum weekly amount available for workers’ compensation temporary disability benefits) when workers access California’s Paid Family Leave.
  • AB-500 (Gonzalez, D-San Diego) provides paid leave of six weeks for employees of school districts, charter schools, and community colleges who suffer pregnancy-related disabilities (pregnancy, miscarriage, childbirth, recovery).
  • AB-1066 (Gonzalez, D-San Diego) makes striking employees eligible to receive unemployment benefits after the first four weeks of a trade dispute – currently, only employees who leave work due to a lockout are eligible for benefits.
  • AB-5 (Gonzalez, D-San Diego) codifies the Dynamex decision, making it nearly impossible for most employers to classify a worker as an independent contractor. Adopting this new standard could cost California businesses as much as $6.5 billion in additional payroll expenses.

Meanwhile, the State Senate passed some new bills of its own affecting employers:

  • SB-142 (Wiener, D-San Francisco) expands upon the existing requirement to provide nursing mothers a private space to express milk. The requirement for lactation accommodation, which was updated in the last legislative session, is further fine-tuned under SB-142, with the requirement that a lactation space contain a surface to place a breast pump and personal items, a place to sit, and access to electricity.  An employer also would be required to provide access to a sink with running water and a refrigerator or other cooling device in close proximity to the employee’s workspace.
  • SB-171 (Jackson, D-Santa Barbara) requires employers with 100 or more employees (which are already required to submit EEO-1 reports to the EEOC) to submit annual pay data reports to the state Department of Fair Employment and Housing, showing employee compensation and hours worked by gender, race, ethnicity and job category.
  • And finally, SB-37 (Skinner, D-Berkeley) would raise the corporate tax rate for businesses in California from 8.84% to a new rate ranging between 10.84% and 14.84% (i.e., an increase of between 23% and 68%).  If this latest tax increase passes, California will have achieved the Tax Trifecta:  The highest personal income tax rate (13.3%), state sales tax rate (7.25%) and corporate tax rate in the nation.  This latest increase in taxes comes amidst a record $21.5 billion budget surplus in Sacramento.

These bills now go to the other house of the legislature for review. The full legislature will or won’t pass them by September 13 after which time the lucky winners will head to Gov. Gavin Newsom for approval.

May 2019 California Employment Law Notes

We invite you to review our newly-posted May 2019 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

View PDF

California Bill Aims to Prohibit Employers from Discriminating on Basis of Hairstyle

A new California bill aims to make it illegal for employers to discriminate against employees based upon their hairstyles. SB 188, also known as the “CROWN Act” (Create a Respectful and Open Workplace for Natural hair), proposes amending the Education Code and Government Code to define “race or ethnicity” as “inclusive of traits historically associated with race, including, but not limited to, hair texture and protective hairstyles.” The bill expressly defines “protective hairstyles” as including but not limited to “braids, locks, and twists.”

The preamble to SB 188 notes that “workplace dress code and grooming policies that prohibit natural hair, including afros, braids, twists, and locks, have a disparate impact on Black individuals as these policies are more likely to deter Black applicants and burden or punish Black employees than any other group…. [H]air today remains a proxy for race.”  The bill, which was introduced by Sen. Holly Mitchell (D-Los Angeles), further states that “hair discrimination targeting hairstyles associated with race is racial discrimination.”

The CROWN Act passed 37-0 in the Senate and has been referred to the Committee on Judiciary.

9th Circuit Applies Strict Independent Contractor Test, Dynamex, Retroactively

Last year, we questioned whether California’s new restrictions on independent contractors would apply retroactively. Yesterday, the Ninth Circuit decided in Vazquez v. Jan-Pro Franchising Int’l, 2019 WL 1945001 (9th Cir. 2019), that the landmark ruling in Dynamex Operations West, Inc. v. Superior Court should be applied retroactively.

The new test established in Dynamex upended the Borello test, a multi-factor test that had been in use since 1989. The “ABC test” established in Dynamex makes it much harder for a hirer to classify a worker as an independent contractor, requiring the hirer to prove that the worker is: a) free from the control and direction of the hirer; b) the worker performs work outside of the usual course of the hirer’s business; and c) the worker is customarily engaged in an independently established trade of the same nature as the work performed. With the Ninth Circuit holding that Dynamex should be applied retroactively, an employer must now face the possibility that its once valid and correct classification of a worker is now improper.

Generally, judicial decisions are given retroactive effect. It has been an open question as to whether the Supreme Court’s Dynamex test would apply retroactively after the Supreme Court denied a petition for rehearing to consider that very issue. Considering the magnitude of this decision, employers should not only make sure that new workers are classified correctly according to Dynamex, but should revisit existing independent contractor agreements to verify they conform to the standards established by Dynamex.

Read the full decision here.

California Jury Awards $11 Million In Latest Blockbuster Sexual Harassment Verdict

For the second time this calendar year, a Los Angeles jury ordered an employer to pay $11 million to an employee who claimed to have been sexually harassed. And, once again, the amount of punitive damages ($8 million) dwarfed the amount of compensatory damages ($3.1 million) by a margin of more than two-to-one.

On Friday, the jury ruled against Alki David, a hologram producer who creates holograms of celebrities, and sided with one of his former employees, Chastity Jones. Jones alleged that David touched her inappropriately, brought a stripper into the workplace, and showed her pornographic videos. She testified that she was fired for refusing to have sex with David.

The trial was exceptionally intense, with David being escorted out of the courtroom by a deputy sheriff due to his outbursts, at one point calling plaintiff’s attorney Lisa Bloom (who happens to be the daughter of attorney Gloria Allred) “an abhorrent woman.” He continued, “Do something with your life, woman,” and “you have no morals.”

The jury awarded Jones $11 million – in response to which David exclaimed, “Ridiculous…I’m not paying it.”

Another former employee, Elizabeth Taylor, has made similar allegations of sexual harassment against David in a case that is set for trial in July…

Join Us for a Webinar on Sexual Harassment Claims and Mandatory Arbitration Agreements

I’m delighted to be presenting a webinar on “Sexual Harassment Claims and Mandatory Arbitration Agreements” for the California Lawyers Association from 12:00 to 1:00 pm PDT on Wednesday, April 24. In the wake of the #MeToo Movement, the use of pre-dispute arbitration agreements in the context of sexual harassment claims has come under fierce attack with some companies abandoning them altogether. We will discuss this alarming trend along with the pros and cons of arbitration and related topics such as the CEO diversity pledge. Learn more and register here.

Harassment Claims: Best Practices for Employers in the #MeToo Era

Tony Oncidi: On the issue of #MeToo and the current and best way for an employer to respond to those issues, I think there are certain things that are essentially table stakes that all employers need to do before they start considering other options. Number one, they have to make sure that they have all the appropriate policies in place, all of the reporting opportunities that an employee who may be a victim of harassment, or who may have witnessed harassment, can access. Those need to be updated; they need to be state of the art. The best practice when it comes to dealing with allegations of harassment or discrimination, whether it be a #MeToo kind of a claim or otherwise, is to properly, appropriately, and timely investigate the claim. A third thing that many employers are doing now is they’re beginning to consider whether to step away from arbitration.

The reasons that an employer should not step back from an arbitration agreement that’s already in place and that’s already been executed by somebody who is claiming to have been sexually harassed for example, is number one, it’s a risky form of unilateral disarmament. You’re essentially telling that employee that he or she is free to go to a jury. Number two, you are differentiating between sexual harassment claims, and for example, racial harassment claims, or religious discrimination or sexual orientation or disability. All of these are illegal under both state and federal law. And thirdly, it buys into the argument that there’s something inferior about arbitration. And I think that once the employer goes down that route, whether it’s with respect to a sexual harassment claim or any other kind of claim, it’s going to be very difficult to resurrect the position that arbitration is appropriate for any kind of claim.