California Employers: New Employment Laws for 2023

This year has yet again been busy for the California Legislature and Governor Gavin Newsom, as they enacted several significant changes to hiring and workforce management, wage and hour, COVID-19, and other employment laws.

Employers with California workforces should take steps now to understand these major changes and ensure they are ready to comply with the new laws in the coming year.

Unless otherwise noted, all new laws discussed below will take effect on January 1, 2023.

Hiring & Workforce Management

Discrimination Protections for “Reproductive Health Decisionmaking” and Off-Duty Cannabis Use

SB 523 amends California’s Fair Employment and Housing Act (FEHA) to include “reproductive health decisionmaking” as a new protected category. The law defines “reproductive health decisionmaking” as “a decision to use or access a particular drug, device, product, or medical service for reproductive health.” SB 523 makes clear that discrimination on the basis of “sex” may also include reproductive health decisionmaking. FEHA’s anti-discrimination provisions apply to employers with five or more employees. The law also makes it unlawful to require employees or applicants to disclose information regarding reproductive health decisionmaking, and amends certain Health & Safety Code sections related to the provision of contraceptive drugs, devices, products, and medical procedures pursuant to a group health care service plan contract.

In addition, new protections for the off-duty use of cannabis go into effect on January 1, 2024. Unless specifically exempted thereunder, AB 2188 amends FEHA to prohibit discrimination on the basis of off-duty, off-site use of cannabis, as well as on the basis of testing positive for the presence of non-psychoactive cannabis metabolites in an employee’s or applicant’s hair, blood, or bodily fluids. This means that employers may still prohibit on-the-job use and impairment as well as screen for and take employment action based on the presence of cannabis metabolites that cause impairment or have psychoactive effects on an employee or applicant. Included among the employees exempt from AB 2188’s protections are those in the building and construction trades, as well as those who are legally required to be tested for controlled substances.

Employees’ reasonable accommodation requests related to the use of medical marijuana should be viewed in light of this new law. The California Supreme Court held in Ross v. Ragingwire Telecommunications, Inc., 174 P.3d 200 (Cal. 2008), that employers need not reasonably accommodate an employee’s use of medical marijuana since the drug remains illegal under federal law. However, once AB 2188 goes into effect, employers need to consider whether an employee’s reasonable accommodation request may now fall within the law’s parameters.

In addition, as of July 1, 2022, the California Department of Fair Employment and Housing, the agency charged with enforcing FEHA and California’s other civil rights laws, was renamed the California Civil Rights Department (CRD). The agency’s website address has similarly changed.

Paid Sick Time and Family Medical Leave to Care for a Designated Person

AB 1041 amends both the California Family Rights Act (CFRA) and the Healthy Workplaces, Health Family Act of 2014 (the “Paid Sick Leave Law”) to permit eligible employees to take leave to care for a “designated person.” Importantly, the definition of “designated person” varies slightly under the two laws, as well as from the similar San Francisco provision.

CFRA, which applies to employers with five or more employees, provides eligible employees with up to 12 weeks of leave per year to use for their own serious health condition or to care for a family member with a serious health condition, or to bond with a new child. AB 1041 expands the definition of “family member” to include an employee’s “designated person,” which is defined to include any individual related by blood or whose association with the employee is the equivalent of a family relationship. Under this law, employees may identify their designated person at the time the employee requests leave, but employers may limit an employee to one designated person per 12-month period. AB 1041 does not increase the total amount of time that an employee may take under CFRA.

Although CFRA leave often runs concurrently with leave under the federal Family and Medical Leave Act (FMLA), employers should remember that there are important distinctions between the two laws and, thus, circumstances when the leaves will not run concurrently:

In addition to this new “designated person” provision, CFRA already covers more family members than the FMLA, including registered domestic partners, grandparents, grandchildren, siblings, parents-in-law, and adult non-dependent children, as we wrote about previously.
Unlike the FMLA, CFRA does not cover disability due to pregnancy. Instead, leave taken in connection with pregnancy, childbirth, and related medical conditions is covered by the California Pregnancy Disability Leave law (PDL).
Leave taken for baby bonding time is covered by CFRA. Accordingly, in connection with a pregnancy, an eligible employee could be entitled to up to four months of leave for pregnancy disability under PDL, plus an additional 12 weeks for baby bonding under CFRA. FMLA, if applicable, could run concurrently with either or both leaves, depending on the timing.

California’s Paid Sick Leave Law provides paid sick leave to employees who work in California for at least 30 days within a year. Such leave may be used for the diagnosis, care, or treatment of an existing health condition, or preventative care for the employee or a covered family member. AB 1041 expands the definition of “family member” under this law to include a “designated person,” which is broadly defined to mean any person the employee identifies at the time the employee seeks paid sick leave. There is no requirement that the individual be a blood relative or akin to a family member as there is under CFRA. As with CFRA, employers may limit an employee to one designated person under California’s Paid Sick Leave Law per 12-month period.

Pay Transparency—Pay Scale Disclosures and Pay Data Reports

Perhaps highest on employers’ radars going into 2023, SB 1162 creates several new obligations to disclose pay scales to applicants and employees.

Employers already had an obligation to provide pay scales to job applicants upon request. California employers will now also need to provide such information to any current employee who requests it for the position in which the employee is currently employed. “Pay scale” is defined as “the salary or hourly wage range that the employer reasonably expects to pay for the position.”

Additionally, employers with 15 or more employees will also have to include pay scales on all job postings. And if such employers engage a third party to announce, post, or otherwise publish their job postings, then the employer will also need to provide pay scales to the third party for inclusion in their job postings.

In addition to making the appropriate pay scale disclosures, covered employers will also have new recordkeeping requirements such that they must maintain job title and wage rate history information for each employee for the duration of the employee’s employment, plus three years thereafter.

Employers that fail to comply with SB 1162’s new pay disclosure requirements may be subject to administrative or civil action, with damages, injunctive relief, and penalties available for violations.

SB 1162 also expands California employers’ pay data reporting obligations. Since 2021, California law has required private employers who have 100 or more employees and who must file a federal EEO-1 to file an annual pay data report with the CRD on or before March 31 of each year, as we have previously discussed. SB 1162 broadens these obligations in several significant ways.

First, the bill expands who must file a pay data report so that:

all private employers with 100 or more employees will be required to file a pay data report regardless of whether they also must file a federal EEO-1, and
private employers with 100 or more employees hired through labor contractors will be required to submit a separate pay data report regarding these contracted workers.

Second, in addition to demographic and pay band information, employers’ pay data reports will also need to identify, within each job category, the median and mean pay rate for each combination of race, ethnicity, and sex. While SB 1162 eliminates employers’ ability to submit a copy of their federal EEO-1 in lieu of the California pay data report, it does provide multi-establishment employers with a small reprieve by eliminating the requirement that such employers include a consolidated report in their annual filings.

Third, SB 1162 includes several administrative changes to the current law, including:

delaying the deadline to file pay data reports from March 31 to the second Wednesday of May each year, beginning in 2023, and
implementing a penalty scheme under which a court may impose a fine of up to $100 per employee for an employer’s initial failure to file the required pay data reports and a fine of up to $200 per employee for each subsequent failure.

Bereavement Leave

AB 1949 amends CFRA to require employers with five or more employees to provide employees who have worked for the employer for at least 30 days with up to five days of bereavement leave in connection with the death of a spouse, child, parent, sibling, grandparent, grandchild, domestic partner, or parent-in-law. Such leave must be taken within three months of the death, but need not be taken on consecutive days. In addition, AB 1949 prohibits employers from discriminating, retaliating, or interfering with an employee’s use of bereavement leave. This time is in addition to the 12 weeks employees may take under CFRA for other covered purposes.

Except to the extent that an employer’s existing policy provides paid benefits, bereavement leave will be unpaid. However, employees are permitted to use other available paid leave, including vacation, paid time off, or paid sick leave for bereavement purposes.

Retaliation Protections for Certain Workplace Emergency Conditions

Although much legislative attention has been given to the COVID-19 emergency over the last two and a half years, SB 1044 outlines new anti-retaliation protections for employees with a reasonable belief that they face non-COVID-19-related emergency conditions in the workplace. The law defines “emergency conditions” to include:

conditions of disaster or extreme peril to the safety of persons or property at the workplace or worksite caused by natural forces or a criminal act, and
an order to evacuate a workplace, a worksite, a worker’s home, or the school of a worker’s child due to a natural disaster or a criminal act.

SB 1044 generally prohibits employers from taking or threatening to take adverse action against an employee because the employee refuses to report to the worksite or refuses to leave the worksite based on the employee’s reasonable belief that the worksite is unsafe during such emergency conditions. In these situations, employers will also be prohibited from preventing employees from accessing their mobile devices.

Exceptions to this law include jobs where the nature of the work involves facing risk, such as first responders and employees working at health care or nursing facilities, military bases, or nuclear facilities. Depository institutions (such as banks) are also excepted.

Consumer Privacy

Employers should be aware that current provisions of the California Consumer Privacy Act, as amended by the California Privacy Rights Act (CCPA), that exempt personal information collected in the employment context from most of the statute’s privacy requirements will expire on January 1, 2023. After this time, covered employers will need to be sure that any personal information they collect from California residents (either as employees or applicants) complies with the CCPA’s rigorous standards. This includes updating privacy notices and policies to notify applicants, employees, and contractors of the categories of personal information and sensitive personal information collected, the purposes for the collection, to whom the information is disclosed and for what purposes, and how long the employer keeps the information, among other requirements.

Perplexingly for employers, the CCPA also appears to give employees the right to correct their personal information and request that it be deleted. It is not clear how the tension between these rights and employers’ obligations to create and maintain accurate employment records will be reconciled.

Importantly, employers must provide training on this new law to any individuals who are responsible for handling consumer inquiries (including from employees and applicants) about the business's privacy practices or the business's compliance with the CCPA.

Employers covered under the CCPA generally include those that do business in California and meet one of the following requirements:

have annual gross revenues in excess of $25,000,000;
annually buy, receive, sell, or share the personal information of 50,000 or more consumers, households, or devices; or
derive 50 percent or more of their annual revenues from selling consumers’ personal information.

Wage & Hour

State Minimum Wage

Under a 2016 amendment, California implemented a multiphase process to increase the state’s minimum wage to $15 per hour. Employers with 26 or more employees have been subject to the $15 minimum wage since January 1, 2022, and smaller employers were scheduled to see the same increase on January 1, 2023. However, the law also allows for a cost-of-living increase once the minimum wage reaches $15. Thus—as a result of inflation—the state’s Director of Finance announced earlier this year that, beginning on January 1, 2023, the minimum wage for all employers in the state will increase to $15.50 per hour. As a result of this increase, the minimum salary threshold for certain exempt classifications under state wage and hour laws will also increase for all employers to $64,480 per year ($5,373.33 per month). As always, employers should be mindful that local minimum wage requirements may be higher.

Wage Garnishment Threshold Formula

SB 1477 repeals the current formula for calculating the maximum amount that a judgment debtor’s wages may be garnished and replaces it with a new formula, effective as of September 1, 2023. Under the new formula, wage garnishments will not be able to exceed the lesser of 20 percent of the individual’s disposable earnings for that week or 40 percent of the amount by which the individual’s disposable earnings for that week exceed 48 times the state’s minimum wage.

COVID-19

COVID-19 Supplemental Paid Sick Leave

Earlier this year, California enacted a new COVID-19 Supplemental Paid Sick Leave (SPSL) program, under which employers with 26 or more employees were required to provide eligible employees with up to 80 hours (two weeks) of SPSL until September 30, 2022. AB 152 extends this deadline to December 31, 2022, but does not provide employees with any additional hours of SPSL.

AB 152 also makes two other significant changes to employers’ SPSL obligations:

It specifies that employers have no obligation to provide some SPSL (the potential leave is divided into two banks) if an employee refuses to provide documentation regarding the results of their COVID-19 diagnostic test or submit to an employer-required confirmatory COVID-19 diagnostic test within 24 hours. However, employers remain responsible for covering the cost of these diagnostic tests.
It establishes the California Small Business and Nonprofit COVID-19 Relief Grant Program to assist qualified small businesses or nonprofits that are incurring costs for COVID-19 SPSL until January 1, 2024.

AB 152 went into effect immediately upon Governor Newsom’s signature on September 29, 2022.

COVID-19 Workers’ Compensation Presumption

As we previously reported, California revised Section 3212.86 of its Labor Code last year, temporarily establishing a rebuttable presumption that, under certain circumstances, any COVID-19-related illness of an employee arises out of, and in the course of, employment for purposes of awarding workers’ compensation benefits. The presumption was supposed to expire on January 1, 2023, but AB 1751 extends this presumption until January 1, 2024.

COVID-19 Notifications

In late 2020, California adopted broad emergency regulations regarding COVID-19 in the workplace, including various workplace notice requirements for employers. Here are a few examples:

If the California Division of Occupational Safety and Health (Cal/OSHA) prohibits operations/processes at, or entry to, a worksite because there is an imminent risk to employees of contracting COVID-19, employers are required to post a notice regarding the same (a “Prohibition Notice”).
If an employer receives a notice of a potential COVID-19 exposure at the worksite, within one business day of receiving such notice, the employer is required to, among other things, provide specific written notice to all employees on the premises at the same worksite that they may have been exposed to COVID-19 (an “Exposure Notice”).
If the workplace has a COVID-19 “outbreak” (as that term is defined under the law), the employer generally is required to notify the local public health agency of the outbreak within 48 hours (a “Public Health Authority Notice”).

AB 2693 makes several important changes to these notice requirements.

First, AB 2693 provides employers with an alternative means to satisfy their Exposure Notice requirements. The law will now permit employers to post and prominently display a notice for 15 days that identifies, among other things, the relevant dates on which an employee with a confirmed case of COVID-19 was at the worksite and the location of the exposure. Employers will need to post the notice in a place where notices to employees concerning workplace rules or regulations are customarily posted and keep a log of the dates during which it was posted. AB 2693 does, however, still require employers to provide written notice to those employees (and their representatives, if applicable) who were in “close contact” (now defined to change as Cal/OSHA may update its definition) with a confirmed case of COVID-19 at the worksite.

Second, AB 2693 extends employers’ Prohibition Notice and Exposure Notice requirements by a year, delaying the law’s sunset until January 1, 2024.

Finally, AB 2693 eliminates the Public Health Authority Notice obligations from the statutory notice requirements.

While AB 2693 modifies COVID-19 notice requirements, California employers should remember that they currently remain subject to the Cal/OSHA COVID-19 Prevention Emergency Temporary Standard through December 31, 2022. Thereafter, employers will likely be subject to a non-emergency standard, which, if adopted later this month, would remain in effect through December 31, 2024. Additional information regarding the proposed non-emergency standard is available here.

Industry-Specific and Other Bills

Fast-Food Industry Council

AB 257 revolutionizes the fast-food industry by creating a “Fast Food Council,” which will be responsible for establishing and implementing minimum standards for wages, hours, training, and working conditions. Importantly, the law will apply to fast-food establishments with 100 or more locations nationally that:

share a common brand or that are characterized by standardized options for décor, marketing, packaging, products, and services, and
provide food or beverage for immediate consumption on or off premises to customers who order and pay for food before eating, with items prepared in advance or with items prepared or heated quickly, and with limited or no table service.

As we previously outlined, the requirements and impact of AB 257 are extensive. Given this impact, businesses and restaurant trade groups have been working since the fall to initiate a voter referendum that, if successful, would repeal AB 257. Whether a ballot measure will ultimately be put forward to voters remains unknown, but the referendum process is well underway, with a collation of opponents to AB 257 announcing on December 5, 2022, that they had submitted over one million voter signatures in support of the referendum.

Meal and Rest Breaks for Certain Public Hospital Employees

California has long required most employers to provide employees with certain meal and rest breaks, including private-sector hospital employees. SB 1334 expands these meal and rest break requirements to apply to hospital employees in the public sector as well. Specifically, public-sector employees who provide direct patient care or support direct patient care in a general acute care hospital, clinic, or public health setting will be entitled to:

one unpaid 30-minute meal period on shifts over five hours and a second unpaid 30-minute meal period on shifts over 10 hours, and
a rest period calculated based on 10 minutes net rest time for every four hours or major fraction thereof worked.

Under certain circumstances, SB 1334 allows covered public-sector hospital employees to waive their meal breaks and/or receive on-duty meals. If an employer violates these meal and rest break requirements, the employee will be entitled to one additional hour of pay at the employee’s regular rate of pay for each workday that the meal or rest period is not provided.

Importantly, SB 1334 exempts public-sector hospital employees who are covered by a valid collective bargaining agreement that provides for meal and rest periods and a monetary penalty equal to that available under SB 1334.

Call Center Relocations

AB 1601 amends the California Worker Adjustment and Retraining Act (Cal/WARN) to provide additional notice requirements for employers that operate “call centers,” which the bill defines as “a facility or other operation where employees, as their primary function, receive telephone calls or other electronic communication for the purpose of providing customer service or other related functions.” Under the new law, covered employers will be required to provide employees with statutory notice if they intend to:

move a call center to a foreign country, or
move a unit within a call center that comprises at least 30 percent of the call center’s total calls from the last 12 months to a foreign country.

What California Employers Should Do Now

These new laws will impact a variety of policies and practices for California employers. To ensure that they are ready to comply with the new legal landscape that awaits them in 2023 (or sooner), employers with a California workforce should do the following:

Consider updating COVID-19-related notice policies, and confirm that SPSL remains available to employees through the end of the year.
Update equal employment opportunity policies and corresponding trainings to identify “reproductive health decisionmaking” as a protected class.
Review and revise upcoming job postings (including promotions and transfer opportunities) to include the applicable pay scale. In addition, consider working with legal counsel to determine whether to conduct a pay equity audit.
Prepare to receive and handle requests from current employees for the pay scale related to their existing positions.
Review and revise paid sick leave and leave of absence policies to permit employees to take time off for a “designated person,” and adopt bereavement leave policies or update them with any missing rights. These policies should clearly identify when bereavement leave is available, by when it must be taken, and what an employee must do to identify their designated person.
Determine if you are covered by the CCPA and, if so, review your notices and policies regarding the collection, use, and disclosure of the personal information of employees, applicants, and contractors, and work with legal counsel to develop and implement a robust CCPA-compliant process for the same, including training of designated personnel.
Develop policies regarding employee attendance during emergency working conditions and train human resources personnel and managers on them.
Review pay practices and ensure that employee compensation complies with the updated minimum wage requirement and, for exempt employees, the updated salary threshold requirement.
Review drug screening policies and practices to ensure that, beginning in 2024, you do not screen for non-psychoactive cannabis metabolites except as explicitly permitted under AB 2188.
If you are an employer in the fast-food, health care, or call center sector, review your policies and practices to ensure that they comply with the new industry-specific laws.

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For more information about this Insight, please contact:

Jennifer L. Nutter
Los Angeles
310-557-9518
jnutter@ebglaw.com