California reaffirms its reputation as the most employee-friendly state and raises potential liability for employers. On May 23, 2022, the California Supreme Court issued the long-awaited decision in Naranjo v. Spectrum Security Services, Inc., finding that meal and rest period premiums are “wages” under California law and thus employers could be liable for failure to properly report and timely pay those premiums. California law requires employers to pay non-exempt employees a premium of one hour of pay for non-compliant meal or rest periods – such as when an employee is unable to take their break or does not receive a full, uninterrupted break. California state and federal courts have reached conflicting interpretations as to whether premium pay is considered “wages” for purposes of California waiting time penalties (Cal. Lab. Code § 203) and wage statement requirements (Cal. Lab. Code § 226). The Naranjo case involves a class of security guards who alleged that Spectrum Security Services had violated California labor law by failing to report the premium pay for missed meal breaks on employees’ wage statements and failing to timely pay the premium for missed breaks upon an employee’s separation from employment. A California appellate court found that the premium payments did not constitute “wages” and thus employers could not be penalized for failing to timely pay or report such wages. The California Supreme Court reversed that decision and held that premium payments for missed meal or rest breaks are wages and thus can result in wage statement and waiting time penalties. In a unanimous decision, the California Supreme Court specifically held that “[a]lthough the extra pay is designed to compensate for the unlawful deprivation of a guaranteed break, it also compensates for the work the employee performed during the break period.” What Employers Should Know The decision reaffirms the importance of strict compliance with California’s labor laws and the harsh implications and penalties that can stem from meal and rest break violations. As Naranjo now makes clear, meal and rest period violations can subject employers to waiting time and wage statement penalties if the premium payments are not properly reported and timely paid. To limit liability and exposure, California employers must be cognizant of recent developments and vigilant in updating and enforcing meal and rest period policies and payment procedures to ensure prompt reporting and payment of wages.

Among the 2020 ballot initiatives, California voters had the opportunity to weigh in on a 24-year ban on affirmative action in California.   In 1996, California voters approved the California Civil Rights Initiative (Proposition 209) which amended the California Constitution to prohibit the consideration of race, sex, color, ethnicity or national origin in public education, employment and contracting.  California became the first state to enact such a measure.   Proposition 16, which appeared on the 2020 ballot, would have repealed Proposition 209, meaning that public institutions could have considered race, gender or ethnicity as a positive element in admission, hiring, and contract decisions.   Californians voted against this measure, maintaining the current ban on affirmative action in the state. While Proposition 16 failed, California employers should bear in mind that the ballot measure applied to public employers and concerned the ability to use race, sex, color, ethnicity, or national origin as a positive factor.  The measure, whether or not it passed, did not alter the numerous safeguards in place, at both the state and federal level that protect against discrimination.  At the federal level, Title VII of the Civil Rights Act of 1964 specifically prohibits employers from discriminating on the basis of race, color, religion, sex, and national origin.  California has adopted even broader protections for employees, earning its title as the most employee-friendly state in the nation.  The California Constitution and state statutes offer a broad range of protections against arbitrary discrimination based on protected characteristics.  Arguably the strongest protection against employment discrimination comes from the California Fair Employment and Housing Act (“FEHA”), which applies to both private and public employers.  The FEHA prohibits employers from discriminating against job applicants and employees because of a protected category, or retaliating against them because they have asserted their rights under the law.  Additionally, for larger employers (50 or more employees) with qualifying federal contracts or subcontracts, there are additional affirmative action requirements under the Rehabilitation Act of 1973, Executive Order 11246, and the Vietnam Era Veterans’ Readjustment Assistant Act (“VEVRA”). Despite the defeat of Proposition 16, California remains an employee-friendly state with a host of broad protections and nuances that employers must carefully consider in making business decisions.

In the last two weeks, the California Legislature has enacted numerous bills relating to employer obligations in light of COVID-19.  Five of these bills have already been signed into law by Governor Newsom.  The remainder may still be signed by Governor Newsom on or before September 30, 2020, which will trigger either an immediate or a January 1st effective date.  Below is a summary of the legislation signed into law by Governor Newsom. AB 2257 - AB 2257 modifies the statutory scheme of AB5. AB5 was itself enacted in 2019 and codified the strict “ABC Test” for classifying workers as independent contractors. AB 2257 adds over fifty categories of workers that are exempt from the “ABC Test” and instead are subject to the more moderate “Borello multi-factor test,” for purpose of determining independent contractor status.  For a detailed discussion regarding AB 2257, please click here. AB 1867 - AB 1867 touches on three areas of employment.  First, the bill provides 80 hours of paid supplemental sick leave for California employees of employers with 500 or more employees nationwide and for health care providers or emergency responders that have been exempted from paid sick leave under the federal Family First Coronavirus Response Act.  Second, the bill provides for hand-washing requirements and further leave entitlements for food sector employees. Third, the bill requires employers to update their wage statements or other written notice regarding the amount of supplemental paid sick leave.  For a detailed discussion regarding AB 1867, please click here. SB 1159 - Creates a disputable presumption, under specific circumstances, for an employee who suffers illness or death resulting from COVID-19 on or after July 6, 2020 through January 1, 2023, that the employee contracted COVID-19 in the course and scope of employment.  The disputable presumption is raised under the following circumstances: (1) the employee tests positive for COVID-19 within 14 days after a day that the employee performed labor or services at the employee’s place of employment; (2) the day on which the employee performed labor or services at the employee’s place of employment at the employer’s direction was on or after July 6, 2020; and (3) the employee’s positive test occurred during a period of an outbreak at the employee’s specific place of employment. A more detailed discussion regarding SB 1159 is forthcoming on Polsinelli at Work. AB 685 – Requires employers to report an outbreak of COVID-19 to local public health officials. The new law also requires employers to report known cases to employees who may have been exposed to COVID-19 within one business day. Further, the new law expands Cal/OSHA’s authority to issue stop work orders for workplaces that pose a risk of an “imminent hazard” relating to COVID-19, i.e., hazards threatening immediate and serious physical harm. A more detailed discussion regarding AB 685 is forthcoming on Polsinelli at Work. SB 1383 - Expands the obligation to provide up to 12 workweeks of unpaid job-protected leave during any 12-month period for certain covered reasons to small employees (with as little as 5 employees) not covered before. Further, previously, leave for purposes of caring for a family member was available only if the family member was the employee’s child, a parent, spouse, or domestic partner.  SB 1383 permits eligible employees to care for grandparents, grandchildren, and siblings, unlike under the prior CFRA statute.  However, employees still need to meet eligibility requirements, predominantly - 12 months of service and 1,250 hours worked in the previous 12-month period, to qualify for family and medical leave.  A more detailed discussion regarding SB 1383 is forthcoming on Polsinelli at Work. These recent changes in California law overlay with the U.S. Department of Labor’s recently published regulatory guidance on September 14, 2020, relating to paid leave entitlements under the federal Family First Coronavirus Response Act (FFCRA), which, among other things, significantly narrows the definition of who is a “health care provider” that may be excluded from the FFCRA’s paid leave entitlement.  For a detailed discussion regarding the DOL’s new guidance, please click here.

As the nation battles the COVID-19 pandemic, California has been simultaneously grappling with one of the hottest employment law issue: the classification of workers as employees or independent contractors.  On September 4, 2020, California Governor Newsom signed into law AB 2257, a bill designed to clarify issues that arose from AB 5, which became effective January 1, 2020.  In light of the changes outlined below, companies should review their policies and agreements with independent contractors to ensure proper classification. AB 5 codified the California Supreme Court holding in Dynamex Operations West, Inc. v. Superior Court and adopted the “ABC” test to determine whether independent contractors should be treated as employees with various exceptions.  Under the “ABC” test, workers are presumed to be employees unless they satisfy three conditions: The worker is free from the employer’s control and direction in connection with the work performed, both under the contract and in fact; The work performed is outside the usual course of the employer’s business; and The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. AB 5 included an extensive list of exemptions for specific occupations and business relationships, resulting in confusion for many employers.  While AB 5 initially seemed to target the gig economy, its broad language has affected industries statewide.  In the nine months since AB 5 became effective, the bill has generated significant controversy as California businesses were forced to quickly develop strategies whilst combatting the litany of misclassification civil actions that emerged from AB 5.  Simultaneously, the Legislature immediately introduced dozens of stand-alone bills to amend the new law.  AB 2257 is the first of these post-AB 5 bills to become effective. AB 2257: The Latest Changes Occupation Exemptions: Under AB 5, certain occupations were excluded from the ABC test, including doctors, lawyers, dentists, licensed insurance agents, accountants, architects and engineers, private investigators, real estate agents, and hairstylists.  AB 2257 expands this list to include translators, appraisers, home inspectors and registered foresters.  AB 2257 also strikes the 35-assignments per year cap from AB 5, allowing freelance writers, translators, photographers, videographers and illustrators to work as independent contractors without regard to the number of assignments taken from one client. Entertainment Industry: AB 2257 also creates additional exemptions for the entertainment industry, with a particular focus on musicians and performers.  Recording artists, songwriters, lyricists, composers, proofers, managers of recording artists, record producers and directors, musical engineers, musicians, vocalists, music album photographers, independent radio promoters, and certain publicists are included in the exemptions.  Musicians who engage in a single-engagement live performance event are also exempt from the ABC test.  However, musicians who perform as a symphony orchestra, in a musical theater production, or at a theme or amusement park are not exempt from the ABC test.  Musicians who headline at a venue with more than 1,500 attendees or those who perform at a festival that sells more than 18,000 tickets per day are also not exempt from the ABC test.  For comedians, improvisers, magicians, and storytellers, AB 2257 does provide an exemption, but imposes the following conditions: (i) the individual performer performs original work they created and retains the intellectual property rights for such work; (ii) he or she is free from the hirer’s control; and (iii) the individual performer sets their own terms of work and negotiates rates. Referral Agencies: AB 2257 also makes significant expansions to the types of services that can qualify for the referral agency exemption.  AB 2257 adds to the list: consulting, youth sports coaching, caddying, wedding and event planning, and interpreting services.  AB 2257 clarifies that this exemption is not limited to those identified, leaving room for additional types of services to be added to this already expansive list.  AB 2257 does, however, make certain that the following services are not included: high-hazard industry services, janitorial, delivery, courier, transportation, trucking, agricultural labor, retail, logging, in-home care, or construction services other than minor home repair.  As a result, ride-share services, such as Uber or Lyft continue to be expressly excluded from the laundry list of exemptions. Business-to-Business Contracting Relationships: Importantly, AB 2257 expands the “business-to-business exemption” to apply to sole proprietors.  Previously, under AB 5, this exemption was only applicable to business entities that were incorporated.  AB 2257 provides a further exemption for sole proprietors under the “single-engagement exemption,” which provides the ABC Test will not apply for a single-engagement event, provided certain conditions are met.  AB 2257 also broadens the business-to-business exemption to include situations where a public agency or quasi-public corporation retains a contractor.  Another important amendment in AB 2257 is it no longer requires that a business service provider “actually contracts” with other businesses “without restriction form the hiring entity.”  Instead, AB 2257 merely requires that the business service provider can contract with other entities and maintain a clientele.  This amendment allows greater flexibility for entities which, for example, not have actually contracted with other businesses, so long as they have the opportunity to do so.  On that same front, AB 2257 also relaxes restrictions to allow business service providers to provide services directly to the customers of a contracting business. AB 2257 contains several additional significant amendments and nuances that California employers must carefully examine when navigating the ever-changing landscape of independent contractor law.  While further legislation and additional litigation is on the horizon, AB 2257 was made effective when signed and remains the current law in California.  Polsinelli attorneys are closely examining recent developments and remain prepared to assist you in developing business policies to comply with these measures.

On September 9, 2020, California Governor Newsom signed AB 1867. The new law provides for “gap” paid sick leave coverage for California employees who are otherwise exempt from emergency paid sick leave coverage provided under the federal Families First Coronavirus Response Act (“FFCRA”). In addition to providing paid leave, the law requires employers to comply with urgent-notice and posting requirements. General Requirement The new law is intended to act as “gap” paid leave for California employees who are employed by employers that are exempt under the federal Family First Response Care Act. The new California law applies to (1) employers with 500 or more employees; or (2) health care providers or emergency responders (working for a public or private entity of any size). The law provides for up to 80 hours of COVID-19 Supplemental Paid Sick Leave (“CSPSL”) for covered workers. Covered Employers The Act applies to private employers with 500 or more employees in the United States. For purposes of calculating the number of employees, “employees” includes: (i) all employees currently working, (ii) employees on leaves of any kind, (iii) employees of temporary placement agencies who are jointly employed under the Fair Labor Standards Act, and (iv) day laborers. Alternatively, the obligation to provide CSPSL applies to public and private entities of any size with respect to any health care providers or emergency responders which the entity employs, which have been excluded from sick leave under the FFCRA. Qualifying Reasons for Paid Sick Time A covered employer must provide an employee supplemental paid sick leave under the Act for any of the following reasons: The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19; The employee is advised by a healthcare provider to self-quarantine or self-isolate due to concerns related to COVID-19; or The employee is prohibited from working by the employer due to health concerns related to the potential transmission of COVID-19. Note that unlike the federal leave requirement, this new law does not provide for paid leave for reasons related to school closures. Additionally, the law does not expressly provide for paid leave to take care of a family member who may have contacted Covid-19. However, the law obligates an employer to provide CSPSL if an employer has a policy or practice of requiring that an employee self-isolate from the employer’s physical workspace due to risk of potential transmission after close contact with an individual diagnosed with Covid-19. The law is silent with respect to employees who are required to self-isolate but are capable of telecommuting. This analysis will have to be undertaken on a case-by-case basis. Covered Full-Time Employees An employee qualifies for the full 80 hours of CSPSL if the employee satisfies either of the following criteria: The employer considers the employee to work “full time”; or The employee worked or was scheduled to work, on average, at least 40 hours per week for the employer in the two weeks preceding the date the employee took CSPSL. Covered Part-Time Employees For part-time employees the minimum amount of CSPSL is calculated as follows: If the employee has a normal weekly schedule, the total number of hours the employee is usually scheduled to work for the employer over two weeks; If the employee works a variable number of hours, 14 times the average number of hours the employee worked each day in the six months prior to taking COVID-19 supplemental paid sick leave or, if the employee has been employed for less than six months, over the entire period the employee has worked for the employer; or If the employee works a variable number of hours and has worked for the employer over a period of 14 days or fewer, the total number of hours the employee has worked. Supplemental to Regular Paid Sick Leave Already Provided/ Retroactive Designation CSPSL must be provided in addition to any paid sick leave the employer already provides to employees. An employer may not require an employee to first use other paid leave provided by the employer. However, if an employer previously provided employees with leave for CSPSL reasons described above (separate or in addition to regular paid-sick leave), and which compensated the employee at an amount equal to or greater than what CSPSL requires, the employer may count the hours of the other paid benefit or leave towards the total number of hours CSPSL. If an employer provided non-compensated COVID-19 related leave separate or in addition to regular paid-sick leave), the employer will have the option of retroactively compensating the covered worker to satisfy the Act’s compensation requirements. Upon compensation, an employer will be able to credit these hours towards CSPSL requirements. Compensation for Paid Sick Time Employees using COVID-19 supplemental paid sick leave must be compensated at their regular rate of pay for their last pay period. Notice Requirements The Labor Commissioner has posted the following model notices that an employer must display that explains the nature of CSPSL. Food Sector Workers - https://www.dir.ca.gov/dlse/COVID-19-Food-Sector-Workers-poster.pdf Non-Food Sector Workers - https://www.dir.ca.gov/dlse/COVID-19-Non-Food-Sector-Employees-poster.pdf The Bill requires that the notice must be posted at workplaces before September 19, 2020.  Therefore, applicable companies that have not done so yet must do so as soon as practicable. Alternatively, the bill provides that if an employer’s employees do not frequent the workplace, then it may disseminate the notice through electronic means, such as by email. Employers must also provide notice in a wage statement (or a separate writing provided on pay day) of an employee’s available CSPSL each pay period. That requirement takes effect in the first pay period following the date of enactment. Expiration of the Law The requirement to provide COVID-19 supplemental paid sick leave expires on December 31, 2020, or upon the expiration of any federal extension of the Emergency Paid Sick Leave Act (whichever is later). Food-Sector Employers In April of 2020, Governor Newsom signed Executive Order (EO) N-51-20, which provided CSPSL for food sector workers. In large part, AB 1867 codifies the executive order’s language. However, AB 1867 differentiates from the prior Executive Order in a couple of ways. First, AB 1867 provides the aforementioned expiration period whereas the executive order was to be applicable only during the pendency of the statewide stay-at-home order. Additionally, AB 1867 clarified that that “food facilities” are defined as all entities codified under California Health and Safety Code section 113789. Additionally, AB 1867 codifies food-sector employer’s obligation to permit employees to wash their hands every 30 minutes. Polsinelli attorneys are closely examining recent developments and remain prepared to assist you in developing business policies to comply with these measures.