This article is part of our 2024 Labor & Employment Roundup. To read the other articles, click below:
Employers should make sure they’re familiar with the wide range of California employment laws that go into effect next year. Workplace issues including non-compete agreements, marijuana use, paid sick leave, industry-specific minimum wages, and retaliation will all be impacted by recent and upcoming legislation; read on to see which ones may change your policies and procedures in 2024.
What this means for employers: It’s time to review employment agreements, sick leave and cannabis guidelines, health care plans, disciplinary procedures, employee pay rates, notice practices, and a host of other critical workplace policies to ensure compliance with new laws. Identify which human resources and other staff may need to be retrained to correctly and fairly enforce new rules. Consult employment counsel to be sure you’re addressing all new laws that apply to your business.
SB 699 and AB 1076: California Expands Its Ban on Non-Compete Agreements
Governor Gavin Newsom has signed two new bills strengthening California’s ban on non-compete agreements, creating increased burden and legal risk for employers. Both bills go into effect on January 1, 2024.
California has a long-standing public policy prohibiting non-compete agreements, codified in the Business and Professions Code. Specifically, it provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” Provisions in employment contracts and other agreements that prohibit an employee from working for a competitor, engaging in competitive business after completion of his/her employment, or imposing a penalty for doing so are invalidated, with limited exceptions.
Exceptions include restrictive covenants in the sale or dissolution of corporations, partnerships, and limited liability corporations. Such exceptions, however, generally do not apply to most agreements entered into by employees with their employers.
The first new law to expand on California’s non-compete ban is SB 699, which establishes that non-complete clauses are unenforceable regardless of where and when the contract was signed. Employers (or former employers) cannot enforce a contract that is void even if the contract was signed and the employment took place outside of California.
In addition, SB 699 prohibits an employer from signing a contract with an employee (or prospective employee) that includes a provision that is void under the law; violation can be costly for employers, as it creates a path for current, former or prospective employees to seek injunctive relief and/or damages, including attorneys’ fees and costs.
The second new law, AB 1076, codifies existing case law (Edwards v. Arthur Andersen LLP (2008)), by specifying that California’s non-compete law should be broadly construed to void any non-compete agreement, no matter how narrowly tailored, that does not fall under the legal exceptions.
AB 1076 applies these provisions to contracts even where non-compete clauses restrain a third party, and makes it unlawful to include a noncompete clause in an employment contract or to require an employee to enter a noncompete agreement that is not within the legal exceptions.
Notably for employers, AB 1076 also requires that individual written noticed be provided by February 1, 2024 to all current and former employees who were employed after January 1, 2022, informing them that any non-compete agreement they signed with the employer is void. Violation of these provisions could subject an employer to civil penalties under laws governing unfair competition.
The notification requirement under AB 1076 is likely to be quite burdensome to employers. In addition, both laws significantly increase the risk that employers, including out-of-state employers, will be subject to litigation over non-compete agreements. There is also likely to be increased risk to employers that use non-solicitation agreements, as both California state and federal courts have consistently found them unenforceable in recent years.
Employers should immediately review all employment agreements, confidentiality agreements and any other agreements they have or had with current and former employees to determine whether they contain non-compete or non-solicitation clauses requiring written notice.
SB 497: California Creates a Rebuttable Presumption of Retaliation
The Equal Pay and Anti-Retaliation Protection Act (SB 497) goes into effect on January 1, 2024. It amends the California Labor Code in multiple ways, providing additional protections to employees.
- SB 497 creates a rebuttable presumption of retaliation in favor of an employee, if the employer disciplines or discharges an employee within 90 days of certain protected activity, as set forth in California’s Equal Pay Act.
- It also increases the number of penalties that an employer may be subject to for violations of California’s whistleblower protection laws.
Currently, if an employee files a lawsuit alleging retaliation based on protected activity, courts review the allegation using a three-step process. First, the employee must establish a case with sufficient evidence that retaliation occurred. If the employee succeeds, the employer must identify a legitimate, non-retaliatory reason for the discipline or discharge. If the employer succeeds, the employee must prove that the reason given by the employer is false.
SB 497 impacts the first part of the three-step process. By creating a rebuttable presumption in favor of employees against employers, the Equal Pay and Anti-Retaliation Protection Act makes it easier for employees to establish a sufficient case of retaliation.
Going forward, employers should re-evaluate how they can avoid claims of retaliation, and how they can strengthen their arguments with respect to the second step of the process – identifying a legitimate, non-retaliatory reason for the discipline or discharge. This involves ensuring that employee performance issues are well documented and that supervisors, managers and directors are trained regarding the policy of documenting performance issues. It also involves ensuring that company policies are in place, and certain personnel (i.e. Human Resources) are adequately trained and available to enforce company policies evenly.
SB 616: California’s Paid Sick Leave Laws are Changing Again
California has amended its paid sick leave law, The Healthy Workplaces, Healthy Families Act of 2014, to increase the amount of sick leave employers are required to provide employees, and to expand certain nonretaliation provisions to employees covered by a collective bargaining agreement.
- The amendment, SB 616, increases the amount of paid sick leave that employers must provide employees to five days or 40 hours, from three days or 24 hours.
- It also extends the cap on an employee’s use of paid sick leave in any given year to 40 hours from 24 hours, as well as the cap on an employee’s maximum accrued paid sick leave, to 80 hours from 48 hours. The current accrual rate of one hour of paid sick leave for every thirty hours worked remains, and continues to permit employers to frontload the entire paid sick leave amount. If employers elect a different accrual method, the method must permit employees to accrue 40 hours by their 200th day of employment, in addition to accruing 24 hours by their 120th day of employment.
- SB 616 continues to exempt employees governed by a collective bargaining agreement from the accrual requirement in the California’s paid sick leave law. However, it amends California’s paid sick leave law to include non-construction industry employees covered by a collective bargaining agreement in the definition of “employee.”
Employers must now ensure that any employees covered by collective bargaining agreements are permitted to take paid sick leave for all of the reasons outlined in the paid sick leave law, in addition to reasons listed in the collective bargaining agreement. Employers also cannot require an employee covered by a collective bargaining agreement to find a replacement worker for days the employee takes paid sick leave, and are now subject to the anti-retaliation provision in California’s paid sick leave law.
Employers must revisit their paid sick time policies to ensure they are in compliance with California’s new thresholds. Even employers located in counties or cities that had previously imposed heightened paid sick leave requirements than the State must ensure that their policies are in compliance with the State’s amended requirements.
Employers with employees covered by a collective bargaining agreement must re-evaluate the permitted reasons employees can take paid sick leave, and must retrain management, supervisors and Human Resources regarding the updated paid sick leave requirements for employees covered by a collective bargaining agreement.
AB 2188 and SB 700: Protections for Off-Site, Off-Duty Marijuana Use and Prohibition on Inquiries about Prior Cannabis Use
AB 2188, effective January 1, 2024, amends the Fair Employment and Housing Act by adding protection for an employee’s off-site, off-duty marijuana use. The bill prohibits employers from discriminating against applicants or employees because they have used cannabis off the job and away from the workplace, or tested positive for non-psychoactive cannabis metabolites during a drug screening test.
However, employers may still use scientifically valid drug tests to screen for current impairment, as AB 2188 does not permit employees to possess, be impaired by, or use cannabis on the job, even for medicinal purposes. It also does not eliminate an employer’s right to maintain a drug- and alcohol-free workplace under current health and safety laws.
With AB 2188 as a springboard, SB 700 further amends the Labor Code, preventing employers from requesting information from an applicant relating to his or her prior use of cannabis. The bill would not, however, prohibit employers from inquiring about an applicant’s criminal history if otherwise permitted by law. SB 700 is effective January 1, 2024.
SB 523: Contraceptive Equity Act of 2022
SB 523 expands coverage of contraceptives by a health insurance policy issued, changed, renewed, or delivered on or after January 1, 2024, including requiring a health care insurer to provide point-of-sale coverage for over-the-counter, FDA-approved contraceptive drugs, devices, and products at in-network pharmacies – without cost-sharing or medical management restrictions.
Included in the law are requirements for coverage of vasectomies and related services; a health plan issues, amended, renewed or delivered on or after the beginning of January 2024 (except a grandfathered health plan or other qualifying plan for a health savings account) cannot require a deductible, coinsurance, copayment, or any other cost-sharing requirement on vasectomy services and procedures. For a qualifying health plan for a health savings account, the carrier must establish the plan’s cost sharing for vasectomy services at the minimum level necessary to allow the enrollee to claim tax-exempt contributions and withdrawals from their health savings account under IRS laws. Cost sharing cannot be imposed on a Medi-Cal beneficiary.
SB 848: Mandated Five Days Of Leave For Reproductive Loss
Effective January 1, 2024, employers with five or more employees would be required by SB 848 to allow an employee who has been employed for 30 or more days to take up to five days of unpaid leave following a “reproductive loss event.” Reproductive loss event is defined as “the day or, for a multiple-day event, the final day of a failed adoption, failed surrogacy, miscarriage, stillbirth, or an unsuccessful assisted reproduction.”
SB 951: Increased Disability Insurance and Paid Family Leave Rates
Effective January 1, 2025, SB 951 will increase the State Disability Insurance (SDI) and Paid Family Leave (PFL) wage replacement rates from 60-70 percent of an employee’s wages to 70-90 percent. To help fund this increase in wage benefits, the existing taxable wage ceiling for employee SDI/PFL wage deductions will be eliminated effective January 1, 2024.
AB 1288: Minimum Wage For Employees of National Fast Food Restaurants
AB 1288 comes on the heels of passing, and then repealing, the FAST Food Accountability and Standards Recovery Act. Effective April 1, 2024, the new law will apply to fast food restaurants that are part of an eligible “national fast food chain,” and sets minimum wages specifically for those employees. It repeals the FAST Recovery Act and is a compromise between the legislature and fast food industry.
Under the new law, fast food employees will be subject to a minimum wage of $20/hour, which may be increased on an annual basis by the appointed Fast Food Council, to a rate tied to the Consumer Price Index.
SB 525: Minimum Wage for Health Care Workers
Beginning June 1, 2024 and extending to June 1, 2025, SB 525 requires a health care worker minimum wage of $21 per hour, for hours worked in covered health care employment. Beginning in June 2025, that minimum wage goes up to $25 per hour for hours worked in covered health care employment.
This law also requires that salaried employees working in covered health care employment earn a monthly salary equivalent to no less than 150 percent of the health care worker minimum wage for full-time employment to qualify as exempt from the payment of minimum wage and overtime.
SB 723: Rehiring of Displaced Workers
In April 2021, California enacted SB 93, which created rehire rights for employees in the hospitality and business services industries who were laid off for reasons related to the COVID-19 pandemic. This new bill, SB 723, would remove the original bill’s expiration date and the requirement that covered employees must have been laid off due to COVID-19.
Covered employees will have a permanent right of recall for any layoff or reduction in force. The law applies to: hotels, private clubs, event centers, airport hospitality operations, airport service providers, and building services. It changes the definition of “laid-off employee” to mean any employee who was employed by an employer for 6 months or more, and whose most recent separation from active employment occurred on or after March 4, 2020 and was a result of a public health directive, government shutdown order, lack of business, reduction in force, or other economic, non-disciplinary reason.
Because of the new definition, this bill requires employers to offer rehire to any employee laid off after March 4, 2020, regardless of the date a new position becomes available, and extends the current repeal date of December 31, 2024 to December 31, 2025.
SB 723 will not change the substantive requirements of the original law with respect to laid-off employees: offering re-hire opportunities to laid-off employees pursuant to a specified procedure and giving laid-off employees five business days to accept or decline the offer; written notice to laid-off employees if the employer declines to recall the laid-off employee on grounds of lack of qualifications; retaining records; non-retaliation.
AB 2463: Volunteers Working on Public Works
AB 2463 extends the current Labor Code section governing pay rates of public works contracts and volunteer exemptions until January 1, 2031. Under current law, all workers employed on public works projects are required to be paid at least the general prevailing rate of per diem wages for work. Existing law exempts, until January 1, 2024, work performed by a volunteer, a volunteer coordinator, a member of the California Conservation Corps or a community conservation corps from these requirements. For the purposes of regulating public works contracts, existing law defines “public works,” as, among other things, construction, alteration, demolition, installation, or repair work performed under contract and paid for in whole or in part out of public funds.
SB 365: Change in Court Rules regarding Arbitration
Effective January 1, 2024, SB 365 provides that an appeal of an order dismissing or denying a petition to compel arbitration does not automatically stay the trial court proceedings, giving the superior court the discretion to decide whether to stay the trial court proceedings pending appeal.
AB 1355: Employer Electronic Notification Requirements of Employee Benefits
AB 1355 allows California employers the option to provide certain required documents to employees via email, but only if the recipient has opted into receipt of electronic statements. Effective January 1, 2024, the law allows electronic distribution of required notifications regarding the federal and California earned income tax credit, and information about unemployment benefits claims – but only if the employee or unemployed individual affirmatively, and in writing or by electronic acknowledgement, opts in to receipt of electronic statements or materials. The law also prohibits an employer from discriminating or retaliating against an employee who does not opt into receipt of electronic statements or materials.
SB 461: Religious and Cultural Observances for State Employees
Effective October 7, 2023, SB 461 allows an employee to elect to receive eight hours of holiday credit for religious or cultural observance in lieu of personal holiday credit.
AB 636: Changes to Wage Theft Prevention Act Notices
The Wage Theft Prevention Act requires employers to provide written notice of certain information to employees at the time of hiring. Effective March 15, 2024, AB 636 requires employers to include information about federal or state emergency or disaster declarations that may impact their health or safety on the job, issued within 30 days of an employee’s first day of employment. In addition, the law requires that any notice given to employees admitted under the federal H-2A agricultural visa program must include more detailed information, including information about pay rates, frequency of pay, rest periods, meal breaks, compensation for travel time, and more.
SB 227: Vendors of the California University System
SB 227 makes it unlawful for any vendor of the California University System to accept payment for services if the vendor’s employees are paid less than the higher of either the total compensation rate specified in the vendor’s contract with the university, or as required by the University policy.
Effective October 8, 2023, the bill requires notification to employees of their compensation, notification to employees of all basic payroll information on request, and additional reporting measures. The bill also authorizes an aggrieved employee to bring a civil action against the vendor if the employee first provides written notice of an alleged violation of these provisions and provides the vendor with the opportunity to correct it.
SB 553: Workplace Violence Restraining Orders and Prevention Plans
SB 553 amends the Workplace Violence Safety Act to allow a collective bargaining representative to seek a restraining order or injunction, including on behalf of employees who are not represented by the collective bargaining representative, if the person serves as a collective bargaining representative for at least one person working for the employer.
Effective January 1, 2025, the law specifies that before seeking such an order, the employer or collective bargaining representative will need to provide the employee who has suffered unlawful violence or a credible threat of violence an opportunity to decline to be named in the temporary restraining order. If the employee declines to be named, the employer can still seek a temporary restraining order on behalf of other employees at the workplace and, if appropriate, other employees at other workplaces of the employer.
About JMBM’s Labor & Employment Practice
JMBM’s Labor and Employment attorneys counsel businesses and management on workplace issues, helping to establish policies that address problems and reduce job-related lawsuits. We act quickly to resolve claims and aggressively defend our clients in all federal and state courts, before the Department of Labor, the NLRB, and other federal, state and local agencies, as well as in private arbitration forums. We represent employers in collective bargaining negotiations and arbitration.
This update is provided to our clients, business associates and friends for informational purposes only. Legal advice should be based on your specific situation and provided by a qualified attorney.