As the California legislative season concludes, significant new laws are set to take effect in 2024. These laws bring forth various compliance obligations for employers, creating an ever-evolving landscape for businesses, human resource departments, and other stakeholders. In this article, we will discuss each of these laws from a legal perspective, examining their implications and providing practice pointers for navigating these changes effectively.
Challenging Non-Compete Agreements Under SB 699
Governor Newsom signed a bill into law that prohibits employers from entering into noncompete agreements with California employees which are void under state law. Additionally, employers cannot enforce such non-competes, regardless of where the agreement was executed. The bill does contain limited exceptions for sale of a business, dissolution of a partnership, or dissolution of, or termination of interest in a limited liability company. The Legislature had remote workers in mind when crafting this legislation and noted that out-of-state employers have often tried to prevent their former employees from taking in jobs in California under their out-of-state, non-compete agreements.
Violators will be met with a potential civil violation and be slapped with a damages award, or attorney fees and costs. It is unclear if this law will be constitutionally challenged by claims of burdening interstate commerce or impairing contracts. It is certain, however that the courts will be asked to determine how this law stands up in its practical application,. Employers should be well-informed about this law to avoid legal complications and potential liabilities. Effective 1/1/24
- Prohibits the enforcement of non-compete agreements regardless of where the contract was formed, even if it was signed in another state.
- It is a civil violation for an employer to enter into or enforce a noncompete agreement.
- Former and prospective employees may bring a private cause of action against an employer and may also seek injunctive relief as well as damages and costs.
Non-compete Notice Requirements for Employers under AB 1076
Another non-compete law, AB 1076, imposes new notice requirements on employers. Employers must notify current and former employees about unlawful non-compete covenants in their employment agreements. The notice must be given in writing, by 2/14/24, and delivered to the last known address and email address of the employee. If a business fails to provide notice by the deadline, they commit a violation of California’s Unfair Competition Law, which can result in civil penalties. This new law amends Business and Professions Code section 16600 and specifies that the ban on non-compete agreements should be interpreted with a broad stroke. It also provides that the provision applies to persons who are not necessarily a party to the contract, but are nevertheless restricted by its content.
- Employers must provide notice to current and former employees by 2/14/24 if there were any unlawful noncompete agreements contained in their employment contracts.
- Failure to give notice could result in civil penalties.
Minimum Wage Increases
The statewide minimum wage will increase by 50 cents to $16/ hour on January 1, 2024. In addition, the minimum exempt salary for all California employees will increase from $64,480 to $66,560.
- Please note: Many cities in California have their minimum wage set at a higher rate than state law so is important to double check the local requirements.
Raising Minimum Wage for Health Care Workers Under SB 525
A new law will raise the minimum wage for almost all health care employees, both hourly and salaried. The wage will be determined by set minimum wage schedules. The schedules will contain thresholds for both salaried and hourly employees. The applicable schedule (from $18 per hour to $23 per hour) will depend on the type of healthcare facility as well as the nature and size of the business. It also implements staggered raises in some categories. Businesses with 10,000 or more full-time employees must pay a minimum wage of $23/ hour effective June 1, 2024, $24/hour effective June 1, 2025 and $25/hour effective June 1, 2026. Smaller facilities and those in rural or areas with a large amount of Medicare and Medi-Cal patients will be required to pay $18/hour starting June 1, 2024. In addition, salaried employees must earn a salary equaling at least 150% of the healthcare worker minimum wage, or 200% of the applicable state minimum wage, whichever is greater. It also grants employees a private right of action to enforce these requirements. Business owners and human resources departments in the health care industry must be aware of this law to ensure compliance. This law becomes effective on 6/1/2024.
- Minimum wage for healthcare workers (including those not working directly with patients) will be $18-23/hour depending upon the type of healthcare facility and the nature and size of the business.
- Employees will have a private cause of action to enforce the new requirements.
- Healthcare facilities may request reclassification of their facility on the minimum wage scheduled and/or request a temporary pause or alternative phase-in schedule for the new requirements.
Setting a $20 Fast Food Minimum Wage under AB 1228
AB 1228 establishes a $20 minimum wage for fast food restaurants. This legislation affects limited-service restaurants that are part of a national fast-food chain. A national fast-food chain is defined as, “a set of limited-service restaurants consisting of more than 60 establishments nationally that share a common brand… and are primarily engaged in providing food and beverages for immediate consumption on or off premises where patrons generally order… and pay before consuming, with limited or no table service.”
- Minimum wage for fast food workers must be increased to $20/hour starting on April 1, 2024.
Litigation During Appeal to Compel Arbitration
SB 365 eliminates the automatic stay of litigation during the appeal of an order to compel arbitration. Courts will now have discretion to decide whether a case can proceed while an appeal is heard. Opponents predict that this law could have a negative impact on employers as it will force them to defend against a claim in court and potentially have to relitigate it in arbitration should the appeal succeed. Employers should familiarize themselves with this significant change and its impact on ongoing court proceedings. Effective on 1/1/24.
- Allows litigation to continue during an appeal of a denial of a petition to compel arbitration.
Expanded Rights for Workers
Expanding Paid Sick Leave under SB 616
Governor Newsom signed SB 616 into law, expanding California's existing paid sick leave law. The modifications encompass nearly all employees who work in California for 30 days or more in a year. The law increases the number of paid sick leave days that the employer must provide to five days or forty hours, up from three days or twenty-four hours. Employers who use the accrual method must increase the annual cap to at least eighty hours or ten days. Employers should take action now in preparing for this law. This law becomes effective 1/1/24.
- Increase in required sick leave for workers to 5 days or 40 hours.
Leave for Reproductive Loss under SB 848
SB 848 expands unpaid leave by allowing employees to take protected time off due to reproductive loss such as failed adoption, failed surrogacy, miscarriage, still birth, or unsuccessful assisted reproduction. Employers with five or more employees must allow for up to five days off for this purpose. If more than one reproductive loss happens with a twelve month period, the employer is only required to provide a maximum of ten days off in total. The law does not require that leave be taken consecutively, but the employer may require that it is taken within three months of the incident.
For employers without leave currently in place to cover this type of situation, the days off may be unpaid for the employee, or the employer must allow them to use other paid time off that the employee still has available for the calendar year. Employers are required to keep these events confidential and adjust their policies and procedures to ensure that no discrimination or retaliation occurs in relation to this new type of leave. This law becomes effective 1/1/2024.
- Employers must allow time off for reproductive losses of employees.
- Law guarantees up to 5 days off per loss, with a max of 10 days per year if multiple losses occur within a 12 month period.
SB 497: Presumption of Retaliation
Creates an automatic presumption of retaliation if an employee is disciplined or discharged within 90 days of a complaint based on certain Labor Code provisions or unequal pay. Employers may bring evidence to rebut the presumption, but if they do not succeed civil penalties may add up quickly at $100 per employee for each violation.
- This law makes it easier for an employee to establish their prima facie case for retaliation against the employer.
SB 700: Cannabis Use
This bill expands California’s Fair Employment and Housing Act (FEHA) in an effort to protect employees from discrimination by prohibiting employers from asking applicants and employees about off-duty cannabis use. It also prohibits employers from using information obtained from a criminal history report in its hiring or either employment-related decisions. The only exception is if the employer is otherwise permitted to make this inquiry pursuant to federal or state law. This law becomes effective 1/1/24.
- Employer cannot consider prior off-site cannabis use in its hiring or other employment-related decisions, unless otherwise provided for by state or federal law.
SB 476: Payment of Costs Associated With Food Handler Cards
This legislation requires employers to pay employees for all costs incurred in obtaining a food handler card, including the time required to obtain training, cost of testing and any other expense associated with the certification program. Employer must also excuse employee from work while they complete the training course and examination, and employment may not be conditioned on a potential employee already possessing a food handler card.
- Employer must now pay for all costs associated with employees obtaining a food handler card.
SB 723: Rehire/Retention of Displaced Employees
Since 2021, California law has required certain employers in the hospitality and service industries to rehire employees who were laid off due to the COVID-19 pandemic. This bill extends the expiration of that law from 12/31/2024 to 12/31 2025. It defines employees as 1) employed for at least 6 months; 2)separated on or after 3/4/20 due to a public health directive, government shutdown order, lack of business, or reduction in force, or other non-disciplinary reasons. The law presumes that a separation due to non-discipline is related to the COVID-19 pandemic unless the employer can prove otherwise.
- Employers may be required to rehire employees laid off during the COVID-19 pandemic through the end of 2025.
Workplace Violence Prevention Plan
Under SB 553 employers must develop a workplace violence prevention program by July 1, 2024. The plan must be readily accessible to all employees and requires businesses to log every workplace violence incident. Employers will now be required to provide training to employees on the workplace violence prevention plan as well as including it as a part of their injury prevention program.
The workplace violence prevention plan must include:
- The name and/or job title of the person responsible for implementing the program.
- Procedures for employers to receive and respond to reports of workplace violence, and to prohibit retaliation against an employee who makes a report.
- Information about how an employee can report a violent incident.
- Methods to alert employees of the presence, location and nature of workplace violence emergencies.
- Evacuation or sheltering plans.
- Information about how employee concerns will be investigated and how employees will be informed about the results of the investigation.
- Procedures to obtain the active involvement of employees in developing and implementing the violence prevention plan.
- Procedures to review the effectiveness of the violence prevention plan and revise as needed.
Cal OSHA is tasked with enforcing the new provisions and will conduct inspections, impose penalties and implement abatement requirements in accordance with the law. This law is effective: 1/1/2025
- Employers have a year to complete this new requirement, but should start implementing procedures and policies as soon as possible to ensure compliance with the deadline.
According to SB 362, the Delete Act amends California’s Data Broker Registration law, making it easier for consumers to request deletion of their data from registered data brokers. The law also requires that the California Privacy Protection Agency (CPPA) set-up an accessible way for consumers to request deletion of their information through the CPPA that all data brokers must honor. This task must be completed by 1/1/26. Employers will then have to check the CPPA monthly to see what requests have been made and complete the data deletions accordingly. Businesses engaged in data collection should began preparations now for this upcoming change in the law.
- Starting 2026 employers will have a new obligation to make consumer requested data deletions completed through the CPPA website monthly.
Public Prosecutor Enforcement of Labor Code
AB 594 “Authorizes public prosecutors meaning the Attorney General, district attorney, city attorney, county counsel, or any other city or county prosecutor to prosecute a civil or criminal action for such violations.” Any individual agreement between worker and employer that purports to limit representative actions or required private arbitration will have no effect on the authority of the Labor Commissioner or the public prosecutor to bring suit.
- Authorizes public prosecutors to prosecute a civil or criminal case for certain violations of the Labor Code.
Climate Change Initiatives
California is officially the first state in the country to mandate certain climate-impacting disclosures by businesses. AB 1305, called The Voluntary Carbon Market Disclosures Act, “will require companies who make climate-related claims or goals to provide certain annual disclosures on their website.” This bill along with SB 253 the Climate Corporate Data Accountability Act and SB 261 the Climate-Related Financial Risk Act, which are known together as the California Climate Accountability Package, require new climate risk disclosures for public and private companies doing business in California above certain revenue thresholds. SB 253, which is applicable to companies with revenues greater than $1 billion, requires disclosure of greenhouse gas emissions beginning in 2026. Companies are also required to obtain third party assurance of their reports. SB 261 requires large corporations with revenues exceeding $500 million to annually disclose climate-related financial risks, with an initial climate-related financial risk report due on or before January 1, 2026.
- New climate risk disclosures and reporting rolling out over the next two year that high revenue businesses will need to comply with.
California's new employment laws for 2024 present challenges and opportunities for businesses, HR departments, and employers statewide. Understanding the implications of each law and implementing appropriate compliance measures is crucial. Through awareness and preparation, businesses can navigate these changes successfully and ensure compliance with the evolving legal landscape.