California: New Year, New Laws: Time for a New Handbook

By Swerdlow Florence Sanchez Swerdlow & Wimmer

October 30, 2023

As usual, the close of the 2023 legislative session brings an abundance of new laws impacting California employers.  We will cover these changes in more detail at our November 3rd seminar, but, as a preview, here are the most important state-law changes impacting California employers.

State Minimum Wage Increase

While several cities, like Los Angeles, already have a minimum wage above the current state minimum of $15.50, California’s minimum wage will increase to $16/hour effective January 1, 2024.  Consequently, to meet the salary basis test for overtime exemption purposes, employees who perform exempt duties must now make at least $66,560/year in salary.  Computer-software field employees will have an even higher minimum annual salary for exemption purposes:$115,763.35, effective January 1, 2024.

Takeaway: Employers must ensure that they are paying at least the applicable minimum wage to all non-exempt employees and the applicable minimum annual salary to all exempt employees.

Paid Sick Leave Increase

SB 616 expands California’s paid sick-leave requirements, increasing the minimum amount of sick leave provided to employees from 3 days (or 24 hours) to 5 days (or 40 hours).  Beginning January 1, 2024, employers must provide employees with 3 days/24 hours of paid sick leave by the employee’s 120th calendar day of employment and no less than 5 days/40 hours of paid sick leave by the employee’s 200th calendar day of employment.  Alternatively, an employer can provide employees with the lump sum of 5 days/40 hours at the start of each 12-month period (e.g., the calendar year).  If an employer chooses the accrual system of 1 hour earned for every 30 hours worked (as opposed to a lump-sum earning), the employer may cap total sick-pay accrual at 10 days/80 hours.  In addition, employers may cap the annual use limit at 5 days/40 hours.

Takeaway:  Employers should revise their California sick leave policies by January 1, 2024.

Reproductive Loss Leave

SB 848 expands the scope of State-required Bereavement Leave to now include certain types of reproductive losses.  Employers with 5 or more employees must provide employees who have worked for the employer for at least 30 days with up to 5 days of unpaid, reproductive-loss leave following any reproductive loss event(s), which are defined as any failed adoption, failed surrogacy, miscarriage, stillbirth, or unsuccessful assisted reproduction, experienced by the employee, the employee’s current spouse or domestic partner, or by another individual if the employee would have been a parent had the child been born.  Employers may limit this leave to a maximum of 20 days within a 12-month period.  Employers cannot retaliate against an employee for taking such leave, and the employer must maintain the confidentiality of the employee requesting the leave.

Takeaway: Covered employers should revise their bereavement-leave policies to cover reproductive loss.

Noncompete Clauses and Required Notice

SB 699 and AB 1076 strengthen California’s ban on noncompete agreements.  SB 699 makes it unlawful for employers to enter into or enforce noncompete agreements, and AB 1076 makes it unlawful for employers to include post-employment, noncompete clauses in employment contracts or require employees to enter post-employment, noncompete agreements.  There remain three narrow exceptions where noncompete agreements are enforceable: the sale of a business, the dissolution of a partnership, or upon the dissolution or termination of interests in a limited liability company.

Notably, by February 14, 2024, employers must provide individualized, written notice that any noncompete clause is void to all current and former employees who were employed at any time after January 1, 2022, who have signed agreements containing such noncompete clauses.  Employers must send this notice to each employee’s last known address and email address.  Failing to give proper notice exposes the employer to suits for unfair competition under the California Business and Profession Code.

Takeaway: Employers should update their employment and separation agreements to ensure they do not contain unlawful noncompete provisions.  In addition, employers should audit all agreements with employees who have been employed at any time since January 1, 2022, to determine if they contain unlawful noncompete clauses and, if they do, provide the required notice by February 14, 2024.

Workplace Violence Protection Plans

As of July 1, 2024, California will become the first state to require all employers to have a Workplace Violence Prevention Plan (“WVPP”).  The WVPP must include procedures to respond to employees’ reports of workplace violence, provide training on workplace violence prevention, and implement the use of violence-incident logs.  The WVPP can be included as a stand-alone section within an existing Illness and Injury Prevention Plan (“IIPP”), or it can be a separate document.

SB 553 also requires the California Division of Occupational Health and Safety to start enforcing new workplace violence requirements, and the Cal/OSHA Standards Board is required to adopt workplace violence standards no later than December 31, 2026.  However, even without regulations, Cal/OSHA is directed to start enforcing the WVPP requirement starting on July 1, 2024.

Takeaway: Employers should update their IIPPs to create and implement a WVPP by July 1, 2024.

Retaliation

SB 497 a.k.a. the “Equal Pay and Anti-Retaliation Protection Act” creates a rebuttable presumption of retaliation if an employee is disciplined or discharged within 90 days of engaging in certain protected activity, including making complaints about unpaid wages or other rights protected under California Labor Code, filing a PAGA letter with the California Labor and Workforce Development Agency, or engaging in activity protected under the Equal Pay Act.  To rebut this presumption, an employer must show that it acted based on a legitimate, nonretaliatory reason.

Takeaway: Employers should be mindful of this presumption and, when disciplining employees, should ensure they are doing so in a legitimate, nonretaliatory way, one supported with strong business rationale and good documentation.

Misclassification Penalties

The California Labor Code already allows the Labor Commissioner or a misclassified employee to recover penalties from an employer for misclassifying the employee as an independent contractor.  AB 594 adds Labor Code Section 226.9, which makes it easier for an employee to sue on his or her own behalf.  One important limitation included in this bill is that an employee cannot double dip to recover both the statutory penalty and the civil penalties assessed and collected by the California Labor and Workforce Development Agency under Labor Code Section 2699(a).

Takeaway:  Employers must ensure they are properly classifying their employees or risk significant exposure for this misclassification.

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