Sep 21, 2020

California Law Updates

There has been some recent activity with regard to a variety of important California laws impacting employers.  As outlined below, the areas affected are:  a slight loosening of recent laws concerning independent contractors; expansion of family leave obligations; expansion of workers’ compensation coverage for COVID-19 illness, and expansion from 1 to 3 years of the time for submitting discrimination and related claims.

Revisions to California’s Law on Independent Contractors

California’s Assembly Bill 5, that became law on January 1, 2020, principally as California Labor Code § 2750.3, significantly narrowed the range of working relationships that could be treated as independent contractor – as opposed to employment – relationships.  The statute provided that a true independent contractor relationship had to satisfy all three of the following: (A) the worker must operate free of control by the hiring entity; (B) the work being performed must be outside the course of the hiring entity’s business; and (C) the worker must be engaged in performing the type of hired work for other customers (the “ABC test).  Historically, the independent contractor test involved nine different elements (the “Borello test”), not one of which was considered controlling, and not all of which necessarily had to be present.  In application, the Borello test is far more flexible than the ABC test.  Under Labor Code § 2750.3, more than 50 categories of workers were exempted from the more stringent ABC test, and instead remained covered by the Borello test.

On September 4, 2020, Labor Code § 2750.3 was repealed and replaced by a new statutory scheme – Article 1.5, Chap. 2 of Division 3 of the Labor Code, beginning with new Labor Code § 2775 – that, possibly most notably, increases the number of exempt categories to 109, which are to be analyzed under the less-stringent Borello test.  The revised statute also revises and expands exemptions for certain professional services, freelance writers, photojournalists, music industry workers, and business-to-business relationships.  The addition of available exemptions is helpful, but given relationships still must be analyzed on a case-by-case basis to ensure compliance with the new statute.

Although the new law does not remedy all of the issues arising from the changes in California law concerning independent contractor relationships, it is an improvement on AB 5.

The new law does not address the ride share and food delivery sectors, which are the subjects of a November ballot measure (Proposition 22), that would permit drivers for certain ride share and delivery companies to be treated as independent contractors.

Expansion of Family Leave

California Governor Gavin Newsom has signed Senate Bill 1383, that expands family leave rights under the California Family Rights Act (“CFRA”).  Under the current version of the CFRA, employers with 50 or more employees are required to provide 12 weeks of unpaid but job-protected leave to deal with the employee’s own serious health condition, to care for a qualifying family member (parent, child, spouse, or domestic partner) with a serious health condition, or to bond with a new child.  Under the new law, which takes effect January 1, 2021, the employee threshold will drop from 50 to 5.  In addition, the statute expands the range of qualifying family members to include grandparents, grandchildren, parents-in-law, and siblings.  In circumstances where the employer employs both parents of a child, current law limits the available bonding time to 12 weeks for the parents as a unit.  The new law will eliminate this restriction, making the full 12 weeks available to each parent, separately.  Current law also permits an employer to decline to protect the positions of “key employees” who take CFRA leave.  The new law will eliminate this exception.

Along with expanding leave, the Governor also signed Assembly Bill 1867, that calls for the establishment of a small employer family leave mediation program for employers with between 5 and 19 employees.  An eligible employer who receives a right-to-sue letter (or the employee making the claim) may request mediation with the Department of Fair Employment and Housing, in which case the employee may not file a lawsuit until the mediation is completed.

Expanded COVID-19 Relief for Workers

Governor Newsom also signed two pieces of legislation expanding the COVID-19 relief available to workers.  The first of these, Senate Bill 1159 enacts into law the impact of the Governor’s earlier executive order providing that employees who return to the workplace and thereafter contract COVID-19 are presumed to have contracted the virus at work, and so are eligible for workers’ compensation benefits.  The presumption is rebuttable through evidence presented by the employer.  This presumption will remain in effect until January 1, 2023.  SB 1159 is considered emergency legislation, and so became effective immediately upon being signed by Governor on September 17, 2020.  The legislation is retroactive to July 5, 2020, which is when the Governor’s original executive order expired.

The second piece of COVID-related legislation is Assembly Bill 685, that makes various changes to the California Occupational Safety and Health Act of 1973.  One of these changes requires that within one business day of notice of potential exposure to COVID-19, the employer must notify all employees on premises at the time of the potential exposure.  Similarly, within one business day of receiving notice of exposure, the employer also is required to notify all employees of available COVID-related benefits, and also of the disinfection and safety plan that will be implemented.  Employers also must notify local public health officials within 48 hours if the number of identified COVID-19 cases rises to the applicable public health authority’s definition of an outbreak.

The legislation also specifically empowers the Division of Occupational Safety and Health to prohibit a process, operation or access to place of employment, if it determines that the process, operation or place of employment presents a risk of exposure to the novel coronavirus such as to constitute an imminent hazard to employees.  This coronavirus-specific provision remains in effect until January 1, 2023.

AB 685 was not treated as emergency legislation, and so will not become effective until January 1, 2021.

Extended Statute of Limitations for Statutory Discrimination Claims

As of January 1, 2020, the time for filing discrimination and other claims under California’s Fair Employment and Housing Act (“FEHA”) increased from 1 year to 3 years.  This relates only to filing of the required administrative claim.  The time for filing a lawsuit once the administrative process is completed (typically by the claimant requesting and receiving a right-to-sue letter) still is one year.

This change in the law places an increased premium on the importance of documenting the progress of the employment relationship.  Memories will fade, and witnesses may become unavailable, leaving the personnel file as the best record of what happened.  And, of course, files will have to be retained for an appropriate period of time, with 5 years post-termination being a reasonable minimum.

If you have any questions regarding the issues raised in this client alert, please contact your Labor and Employment counsel at Smith, Gambrell & Russell, LLP.


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