California Enacts New Employment Laws for 2022

December 17, 2021

As usual, the new year will bring a slew of new California employment laws. Following is a summary of many of the more significant new and widely applicable employment laws that will take effect in California on Jan. 1, 2022, unless otherwise stated.

Minimum Wage Increases

Effective Jan. 1, 2022, the California state minimum wage will increase to $15 per hour for employers with 26 or more employees, and it will increase to $14 per hour for employers with 25 or fewer employees. Some local cities and counties will have higher minimum wage requirements or will have minimum wage requirements that do not distinguish based on employer size.

At present, California has more than 35 cities and counties with their own minimum wage requirements including, but not limited to, Los Angeles, Menlo Park, Oakland, San Francisco and South San Francisco, San Jose, San Diego and Santa Clara. In light of the significant number of varying city and county requirements, employers should reevaluate any potentially applicable minimum wage requirements in the cities and counties where they have employees to ensure they do not run afoul of any minimum wage requirements slated to take effect in the new year.

AB 1561—Expanded and Revised ABC/Dynamex Independent Contractor Exemptions

AB 1561 addresses certain independent contractor exemptions originally enacted as part of AB 5, which adopted the ABC/Dynamex test as the standard for determining whether an individual was an employee or independent contractor. Under both the former and as-amended exemptions, the employee/independent contractor status of exempted individuals shall instead be determined under the multifactor test previously articulated in S. G. Borello & Sons, Inc. v. Department of Industrial Relations.

Importantly, AB 1561 amends Labor Code Sections 2778 and 2781 so the Jan. 1, 2022, expiration date for the statutory exemptions from the ABC/Dynamex test granted to licensed manicurists and construction trucking subcontractors is extended to Jan. 1, 2025.

AB 1561 also amends Labor Code Section 2782 to clarify that the statutory ABC/Dynamex test shall not apply to the relationship between a data aggregator and a research subject, and the Borello test will instead apply if certain statutory conditions are met.

AB 1561 amends Labor Code Section 2783 with respect to several different job classifications. First, it expands the exemptions from the ABC/Dynamex test to expressly include individuals providing claims adjusting, or third-party administration for, the insurance and financial services industries. Second, it amends the manufactured housing salespersons exemption to provide that duties statutorily imposed under the Health and Safety Code are not to be considered under the Borello test for determining independent contractor status.

Finally, by virtue of AB 1561 and in combination with AB 1506, Labor Code Section 2783 is amended to extend the exemption for newspaper publishers and distributors for three more years, until Jan. 1, 2025. As part of this amendment, the statute imposes annual reporting requirements starting on March 1, 2022 (and each March 1 thereafter while the exemption is in effect), mandating that publishers and distributors report certain workforce-specific wage, payroll and wage claim data to the California Labor and Workforce Development Agency.

AB 701—Warehouse Distribution Centers Must Disclose Quotas to Nonexempt Employees

AB 701 enacts Labor Code Sections 2100-2112, which regulate and set parameters around the use of production quotas at warehouse distribution centers in California. AB 701 expressly prohibits any quota that prevents an employee from (1) meal or rest break compliance, (2) use of bathroom facilities or travel to and from the bathroom, or (3) compliance with California “occupational health and safety laws” as set forth in the Labor Code.

AB 701 also requires covered employers to provide detailed written documentation of any applicable quota to each employee either upon hire or within 30 days of the effective date of the new law, and prohibits a covered employer from taking adverse employment action against an employee for failure to meet any quota that was not properly disclosed to the employee or which otherwise fails to meet its new provisions.

More detailed information on the requirements of AB 701 can be found in our prior article on this new law.

SB 331—Further Limits to Nondisclosure Agreements and Settlement Agreements

In 2019, California enacted Code of Civil Procedure Section 1001 to prohibit any settlement agreements from preventing the disclosure of factual information related to a claim in a civil or administrative action involving an act of sexual assault, sexual or other sex-based workplace harassment or discrimination, or retaliation for reporting the same. SB 331 expands Section 1001 to now prohibit settlement agreement provisions that restrict or prevent the disclosure of factual information related to a civil or administrative claim involving all forms of workplace harassment, discrimination and retaliation based on any protected class, not just those that are sex-based.

SB 331 also amends Government Code Section 12964.5 to require that an employment non-disparagement provision in any type of employment agreement that purports to restrict an employee’s ability to disclose information regarding workplace conditions include the following verbiage or something substantially similar: “Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have any reason to believe is unlawful.”

Section 12964.5 is also amended to require an employer who is offering an employee a separation agreement to notify the employee that he or she has a right to consult an attorney regarding the agreement, and to provide the employee with a “reasonable time period” to consider the agreement of not less than five business days, although an employee may voluntarily sign the agreement earlier.

Section 12964.5, as amended, exempts from its provisions “negotiated” settlement agreements to resolve an underlying claim brought by an employee in court, before an administrative agency, in an alternative dispute resolution forum or through an employer’s internal complaint process.

Importantly, the changes enacted under SB 331 are not retroactive, but will apply to agreements entered into on or after Jan. 1, 2022. Employers should consult with counsel and review and revise their current California release agreements prior to the new year.

SB 762—Arbitration Invoicing Requirements

Civil Code Sections 1281.97 and 1281.98, enacted on Jan. 1, 2020, impose stiff penalties and sanctions on employers for failing to timely pay arbitration fees. SB 762 amends those two Civil Code sections to require arbitration providers to provide an invoice for all arbitration fees and costs required before an arbitration can proceed to all parties, on the same day and by the same means.

The amended Civil Code sections also provide that, absent an express provision in the arbitration agreement stating the number of days in which the parties to the arbitration must pay any required fees or costs, the arbitration provider shall issue all invoices to the parties as “due upon receipt.” Notably, the statutes do not define the term “due upon receipt” and do not otherwise articulate a reasonable time frame for payment of any “due upon receipt” invoice from an arbitration provider. Thus, it remains unclear precisely when a “due upon receipt” invoice will be considered untimely under these two arbitration payment statutes. The amendments also require that any extension of a payment due date must be agreed upon by all parties to the arbitration.

Importantly, these statutes provide that a failure to timely pay arbitration fees can result in a waiver of the right to compel arbitration, withdrawal from the arbitration by the employee and/or an award of attorneys’ fees and costs to the employee and possible sanctions related to any successful motion compelling the arbitration or for fees and costs associated with any abandoned arbitration proceedings. Thus, it remains critical for employers to ensure that they timely pay arbitration invoices, and employers should consider building clauses into their arbitration agreements addressing the time limitations for payment of fees.

SB 646—PAGA Exemption for Certain Unionized Janitorial Employees

SB 646 enacts Labor Code Section 2699.8, which exempts and otherwise precludes certain janitorial employees covered by a collective bargaining agreement (CBA) that meets specific criteria, from filing a lawsuit under the Labor Code Private Attorneys General Act (PAGA).

The new statute provides that union-represented janitorial employees may not bring a PAGA action if they are covered by a CBA that “provides for the wages, hours of work, and working conditions of employees, provides premium wage rates for all overtime hours worked” and meets other specific conditions.

Those conditions require the CBA to: (1) provide total hourly compensation, inclusive of wages, health insurance and other benefits, of not less than 30 percent more than the state minimum wage; (2) prohibit all Labor Code violations otherwise actionable under PAGA and provide a grievance and binding arbitration procedure to redress such violations, and which allows the labor organization to pursue a grievance on behalf of all affected employees (i.e., a collective grievance); (3) expressly waive the requirements of PAGA in “clear and unambiguous terms”; and (4) permit the arbitrator to award any and all remedies available under the Labor Code, other than an award of penalties under PAGA that would be payable to the California Labor and Workforce Development Agency (LWDA).

If a CBA meets these criteria, the janitorial contractor or employer must provide the LWDA with its name, the name of the labor organization, and the duration of the agreement and number of covered employees, within 60 days of entering into the CBA, or 60 days after the enactment of the statute.

For purposes of this PAGA exception, a “janitorial employee” means an employee whose primary duties are “to clean and keep in an orderly condition commercial working areas and washrooms, or the premises of an office, multiunit residential facility, industrial facility, health care facility, amusement park, convention center, stadium, racetrack, arena, or retail establishment,” and who is (a) represented by a union that represented janitors before Jan. 1, 2021, and (b) employed by a janitorial contractor who registered as a property service employer pursuant to Labor Code Section 1423 in calendar year 2020.

Importantly, the statute expressly excludes the following from the definition of “janitorial employee”: window washers; housekeeping staff who make beds and change linens as their primary responsibility; workers at airport facilities or in cabin cleaning; workers at hotels, card clubs, restaurants or other food service operations; and grocery and drug store employees.

This janitorial PAGA exception does not preclude a janitorial employee from filing any other civil action against an employer other than a PAGA action, and thus employees are free to pursue direct statutory claims under the Labor Code and FEHA, as well as other claims pursuant to statute and/or common law.

Finally, the new janitorial PAGA exception does not apply to cases filed before Jan. 1, 2022, and it expires with the expiration of any qualifying CBA or on July 1, 2028, whichever is earlier.

SB 807—Personnel Records Retention and Procedural Changes to DFEH Enforcement

SB 807 extends the two-year personnel record retention requirement in Government Code Section 12946 to four years from the date the records were created, or the date the employment action was taken. If an employer is notified that a complaint was filed with the Department of Fair Employment and Housing (DFEH), then related personnel records must be retained until the employer is notified that the action has been fully resolved, or the first date after the period for filing a civil action has expired.

SB 807 also makes a number of procedural changes to the DFEH enforcement of the Fair Employment Housing Act (FEHA). The changes include authorizing electronic service of DFEH complaints, extending to two years the time for DFEH to complete its investigation and issue a right-to-sue notice for class or group employment discrimination complaints, and providing that suit on a class or group allegation may be brought in any county in the state.

The changes also include the tolling of certain filing deadlines. Importantly, SB 807 tolls the statute of limitations for individuals to file their own FEHA action while their complaint is pending before or being investigated by the DFEH, as well as the deadline for the DFEH to file a civil action pursuant to FEHA while a mandatory or voluntary dispute resolution is pending. Specifically, it states that the statute of limitations will be tolled until either (1) the DFEH files a civil action; or (2) one year after the DFEH notifies the complainant it is closing its investigation. The statute provides that this tolling provision will apply retroactively but does not revive already-lapsed claims.

AB 1033—Expanded Definition of Family Member Under CFRA and Small Business Mediation Provisions

AB 1033 adds “parents-in-law” to the list of included family members for whom an eligible employee can take protected leave under the California Family Rights Act (CFRA). AB 1033 also modifies the procedures surrounding requirements for employees of small businesses (i.e., those with five to 19 employees) to mediate family leave disputes prior to filing suit.

SB 657—Emailing of Required Notices and Workplace Postings

SB 657 enacts Section 1207 of the Labor Code and provides that, where employers are obligated to physically post and/or display mandatory postings in the workplace, the employers may also convey that information to employees by email with the document(s) attached. The email distribution, however, does not alter an employer’s obligation to physically comply with posting requirements.

AB 1003—Intentional Wage Theft Will Be Criminally Punishable

AB 1003 adds Section 487m of the California Penal Code to provide that the intentional theft of wages and/or gratuities in excess of $950 for one employee or $2,350 for two or more employees in a 12-month period is now punishable as grand theft, which can result in either misdemeanor or felony charges. This bill also defines employees to include independent contractors and provides for the recovery of wages and/or gratuities as restitution under its provisions.

AB 654—Clarification of Employers’ COVID-19 Workplace Exposure Notification Requirements

Effective Oct. 6, 2021, AB 654 amended COVID-19 employee and public-health notification obligations enacted by the California State Legislature in 2020 by clarifying several notice requirement provisions and expanding the categories of employers who are exempt from COVID-19 outbreak reporting requirements. These changes remain effective until Jan. 1, 2023.

First, AB 654 revises the time frame in which an employer must give notice to the local public health agency of a COVID-19 outbreak. Previously, employers had only 48 hours to notify local public health agencies. Now, employers have 48 hours or one business day, whichever is later. The practical effect of this rule is to exempt some employers from having to report outbreaks on weekends and holidays.

Second, AB 654 expands the list of employers who are exempt from reporting outbreaks to local public health agencies to now include, among others, adult day health centers, community clinics and care facilities, certain residential care facilities and child day care facilities.

Third, AB 654 clarifies the universe of employees who must be provided notice of COVID-19-related benefits after an outbreak. Employers are now required to provide notice of COVID-19-related benefits to all employees who were on the premises at the same worksite as the “qualifying individual” (i.e., the person who may have COVID-19) within the infection period. Before this amendment, employers had to provide notice of these benefits to all employees who may have been exposed to the qualifying individual, which is arguably a broader universe of employees. Similarly, AB 654 now requires employers to provide notice of cleaning and disinfection plans only to employees (and the employers of subcontracted employees), who were on the premises at the same worksite as the qualifying individual within the infectious period. Previously, employers had to notify all of their employees and subcontractors of these plans, irrespective of whether these individuals were actually at the worksite during the qualifying individual’s infectious period.

Finally, AB 654 adds the “delivery of renewable natural gas” to the list of critical governmental functions that may not be materially interrupted by COVID-19-related Cal/OSHA rules.

SB 606—Expansion of Cal/OSHA’s Enforcement Authority

Effective Jan. 1, 2022, SB 606 creates two new categories of California Division of Occupational Safety and Health (Cal/OSHA) violations: “willful and egregious” and “enterprise-wide,” which will almost certainly lead to much higher fines for California employers.

As for willful and egregious violations, Cal/OSHA can issue a citation if it finds at least one of the following factors to be true:

  • The employer intentionally — through conscious, voluntary action or inaction — made no reasonable effort to eliminate the known violation.
  • The violations resulted in worker fatalities, a worksite catastrophe (defined as the inpatient hospitalization, regardless of duration, of three or more employees resulting from an injury, illness or exposure caused by a workplace hazard or condition), or a large number of injuries or illnesses.
  • The violations resulted in persistently high rates of worker injuries or illnesses.
  • The employer has an extensive history of prior violations of this section.
  • The employer has intentionally disregarded its health and safety responsibilities.
  • The employer’s conduct, taken as a whole, amounts to clear bad faith in the performance of its duties under this section.
  • The employer has committed a large number of violations so as to significantly undermine the effectiveness of any safety and health program that may be in place.

Significantly, each employee exposed to an egregious violation will be considered a separate “violation” for purposes of the issuance of fines and penalties. Given that the maximum penalty for a violation is in the low six figures, California employers could easily face multimillion-dollar fines under this provision.

SB 606 also creates a rebuttable presumption that an employer with multiple worksites has committed an “enterprise-wide violation” if Cal/OSHA determines that either: (1) the employer’s written policy or procedure violates Cal/OSHA regulations; or (2) there is evidence of a pattern or practice of the same violation or violations committed by the employer at one or more of its worksites.

If an employer fails to rebut the presumption, Cal/OSHA is authorized to issue an enterprise-wide citation requiring enterprise-wide abatement. Complying with an order requiring abatement at multiple sites simultaneously could be onerous, particularly if the order demands a significant change in the employer’s operations. An enterprise-wide violation can also result in a six-figure civil penalty for even a single violation.

For more information about these new laws, or other California employment law questions, please contact the authors of this article or your McGuireWoods contact.