This year, Governor Gavin Newsom signed into law a number of bills affecting California employers. Major changes in the coming year include:

• extending the limitation on confidentiality provisions in settlement agreements to all forms of workplace harassment and discrimination;

• limiting employers’ ability to require that employees sign non-disparagement agreements;

• expanding job-protected family leave for employees who need to care for the serious health condition of a parent-in-law;

• increasing the California Division of Occupational Safety and Health’s (Cal/OSHA’s) enforcement powers, including adding the ability to issue “enterprise-wide” and “egregious” violations; and

• criminalizing wage-theft and increasing the California Labor Commissioner’s power to recover amounts due to the Labor Commissioner under a final judgment.

Unless otherwise stated, all the new laws discussed below will take effect on January 1, 2022.

Hiring & Workforce Management

Settlement, Separation, and Non-disparagement Agreements

SB 331 limits restrictions on the disclosure of factual information in a settlement agreement for a claim filed in a civil action or a complaint filed in an administrative action regarding workplace harassment or discrimination (previously only applicable to acts of sexual harassment, assault, or discrimination). The bill also makes it an unlawful employment practice to require an employee to sign an agreement waiving their right to disclose information about unlawful acts in the workplace in exchange for a raise or bonus, as a condition of employment or continued employment, or in connection with a separation from employment. However, to the extent such an agreement includes a confidentiality or non-disparagement clause, employers may comply by including a specific carve-out for this disclosure right. Further, all agreements related to separation of employment must notify employees of their right to consult with an attorney and provide no less than five business days to do so.

Electronic Delivery of Workplace Notices

SB 657 permits employers to distribute information that they are required to physically post in the workplace to employees by email. The statute does not relieve employers of the obligation to post physical copies of required notices in the workplace, however.

Retention of Personnel Records / Tolling of Statutes of Limitations

SB 807 increases the time that employers are required to retain personnel records for applicants and employees from two years to four years from when the records were created or an employment action was taken. Additionally, if a claim is filed with the Department of Fair Employment and Housing (DFEH), an employer must retain personnel records the later of the expiration of the statute of limitations to file a civil action or when the complaint has been fully and finally disposed of and all administrative proceedings, civil actions, appeals, or related proceedings have terminated.

The law also tolls the deadline for the DFEH to file a civil action pursuant to the Fair Employment and Housing Act while a mandatory or voluntary dispute resolution is pending. The law gives the DFEH up to two years to complete its investigation and issue a right-to-sue notice for class or group, or employment discrimination complaints. The bill also extends the period in which an individual can file a civil action for violations of certain statutes, by tolling that period while the DFEH investigates and/or takes action on a complaint.

Rebuttable Presumption of “Enterprise-Wide” Cal/OSHA Violations

SB-606 expands Cal/OSHA’s enforcement abilities by, among other things, creating a rebuttable presumption that an employer with multiple worksites has committed an “enterprise-wide” violation if (1) the employer has a non-compliant written policy or procedure or (2) Cal/OSHA has evidence of a pattern or practice of the same violation(s) involving more than one of the employer’s worksites. An “enterprise-wide” citation would require “enterprise-wide” abatement.

The bill also authorizes Cal/OSHA to issue a subpoena during inspection if the employer fails to provide requested information promptly.

CFRA Expansion

AB 1033 adds “parent-in-law” to the definition of “parent” under the California Family Rights Act (CFRA). AB 1033 also makes changes to the small employer family leave mediation pilot program for employers between five and 19 employees.

Wage & Hour

Minimum Wages for Persons with Disabilities

SB 639 phases out existing law that allows employers to pay employees with mental or physical disabilities less than minimum wage under certain circumstances. SB 639 prevents the issuance of new licenses permitting the payment of subminimum wage after January 1, 2022, and will phase out the special licenses. Existing licenses can only be renewed for license holders who meet certain benchmarks.

Wage Theft as Grand Theft

AB 1003 makes the intentional theft of wages and other compensation of greater than $950 for a single employee, and $2,350 for two or more employees, within a 12-month period, punishable as “grand theft.” The law defines “employee” to include an independent contractor and “employer” to include the hiring entity of an independent contractor. Grand theft may be punishable either as a misdemeanor by imprisonment for up to one year or as a felony by imprisonment for 16 months or two to three years.

Dynamex Exemption for Newspaper Distributors and Carriers

AB 1506 extends the expiration of the exemption from the Dynamex test for newspaper distributors and carriers from January 1, 2022, to January 1, 2025. The bill excludes app-based carriers and expands the definition of “newspaper” to include certain digitally published periodicals.

Labor Commissioner’s Use of Lien on Real Property

SB 572 allows the Labor Commissioner to create a lien on real property, as an alternative to a judgment lien, to secure the amounts due to the Labor Commissioner under any final judgments.

PAGA Exception for Janitorial Employees

SB 646 creates a limited exception from the Private Attorneys General Act (PAGA) for specific janitorial employees who (1) are employed by a janitorial contractor that registered with the Labor Commissioner as a property service employer in calendar year 2020; (2) are represented by a labor organization that has represented janitors before January 1, 2021; and (3) perform work under a collective bargaining agreement (CBA) in effect before July 1, 2028. The bill’s provisions do not apply to existing cases filed before January 1, 2022, and do not prevent a janitorial employee from filing certain civil actions. The janitorial employee exception will be in effect the earlier of the expiration of the applicable CBA or on July 1, 2028.

Expanded Direct Contractor Liability for Unpaid Wages

SB 727 expands existing direct contractor liability to include penalties and liquidated damages owed by the subcontractor for contracts entered into on or after January 1, 2022. The bill allows the Labor Commissioner to enforce liability against a direct contractor.

COVID-19

COVID-19 Exposure Reporting

AB-654, which went into effect on October 5, 2021, updated the COVID-19 notice requirements that went into effect on January 1, 2021. Existing law required employers to report to employees within one business day of a potential COVID-19 exposure. Existing law also required employers to report COVID-19 outbreaks to the local health department within 48 hours. AB 654 updated the health department reporting deadline to be the later of one business day or 48 hours. The law also clarified that the individuals who must receive notice are those who were at the same workplace as a COVID-19 case during the infectious period. The law also extended the employer exemption from the COVID-19 outbreak reporting requirement to certain licensed entities, including community clinics, adult day health centers, community care facilities, and child daycare facilities. The law will be repealed on January 1, 2023.

COVID-19 as a Covered Disability for Public Employees

AB 845 expands the California Public Employees’ Pension Reform Act of 2013 to include COVID-19 as a covered disability for public employees who retire due to disability. Those who are eligible include active firefighting members, peace officers, fire and rescue service coordinators, employees providing direct patient care in health facilities, custodial employees in contact with COVID-19 patients, and providers of in-home support services (as defined by Labor Code § 3212.87). For a member who retires for disability in whole or in part because of COVID-19, the bill creates a rebuttable presumption that the disability arose out of the course of their employment. The law is set to expire on January 1, 2023.

Arbitration

Arbitration Fees

SB 762 requires an arbitration provider in an employment case to provide invoices for fees and costs, in their entirety, to all parties to the arbitration on the same day and by the same means. The bill requires that the invoices be due upon receipt, unless the arbitration agreement expressly provides a different time for payment. The bill also requires that all parties to the arbitration agree on any extension of time to pay fees and costs due during the pendency of the arbitration.

Industry-Specific and Other Bills

Ban on Piece Rate Pay for Garment Workers

SB 62 bans piece rate pay for garment workers, instead requiring that they be paid at least the minimum hourly wage.

The law also expands liability for unpaid wages to fashion brands, among others, by making garment manufacturers, contractors, and “brand guarantors” joint and severally liable for the full amount of unpaid wages and any other compensation, penalties, and attorney’s fees due to a garment manufacturing employee. The law also imposes a $200 fine, payable to the employee, for each pay period where the employee is paid by piece rate in violation of the law.

Warehouse Worker Quotas

AB 701 requires warehouse distribution centers with 100 or more employees at a single warehouse distribution center or 1,000 or more employees at one or more warehouse distribution centers in the state to provide employees with a written description of each quota that the employee is subject to, including the number of tasks to be performed, or materials to be produced or handled, and any potential adverse employment action that could result from failure to meet the quota.

Under the law, employers cannot require a quota that prevents an employee from taking timely meal breaks or rest periods, using bathroom facilities, or complying with certain occupational health and safety laws. Nor can employers take any adverse action against employees for failing to meet such a quota.

The law also provides current and former employees the right to request a written description of each applicable quota and a copy of the employee’s own personal work speed data from the most recent 90 days. In addition, AB 701 creates a presumption of retaliation in favor of a worker who is disciplined within 90 days of requesting this data or complaining to their employer or a state agency about an unsafe quota.

Gender-Neutral Retail Departments

AB 1084 requires that retail department stores that are physically located in California with 500 or more employees and that sell childcare items or toys to maintain a gender-neutral section, displaying a “reasonable selection” of items, regardless of whether they have been traditionally marketed to girls or boys. Beginning January 1, 2024, the bill imposes civil penalties for violation of the law ($250 for a first violation and $500 for subsequent violations).

What California Employers Should Do Now

California’s new laws affect a wide range of policies and procedures throughout the employment relationship. Accordingly, employers with a California workforce should do the following:

• Review and revise employee handbooks to ensure that they are up to date.

• Review and revise settlement, separation, and severance agreements to include the statutory notices and language.

• Update their record retention policies to ensure that personnel records are retained for at least four years, or longer depending on the circumstances.

Finally, employers should ensure they comply with minimum wage laws. On January 1, 2022, the state minimum wage goes up to $15 an hour for employers with 26 or more employees ($14 an hour for employers with fewer than 26 employees). Local minimum wages may be higher. Employers should also note that this increase affects minimum salary requirements for exempt employees.