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Review of California’s 2023 Legislative Session and New Employment Laws for 2024

on Wednesday, 24 January 2024 in Labor & Employment Law Update: Sarah M. Huyck, Editor

California’s 2023 legislative session concluded at the end of September, and Governor Newsom approved a number of employment-related bills, many of which impose new obligations on California employers starting on January 1, 2024. California employers, including out-of-state companies with California employees, should take steps to become familiar with the new requirements and to make any necessary changes to ensure compliance. Outlined below is a non-exhaustive overview of several of those new laws:

Off-duty cannabis use (AB 2188 / SB 700)

Beginning on January 1, 2024, California statute prohibits employers from discriminating against employees and job applicants because of their use of cannabis off-the-job and away from the workplace. AB 2188 (which passed in 2022) will also make it unlawful for an employer—with some exceptions—to discriminate based upon the results of a required drug screening test that detects “nonpsychoactive cannabis metabolites in their hair, blood, urine, or other bodily fluids.” However, nothing in AB 2188 prohibits employers from maintaining a drug and alcohol-free workplace, and the legislation does not affect an employer’s rights or obligations under federal law or regulation.

In addition, SB 700 makes it unlawful (with limited exceptions) for employers to inquire about a job applicant’s past use of cannabis. Moreover, any information about prior cannabis use obtained from an applicant’s criminal history cannot be considered for purposes of employment if that prior use was off-the-job and away from the workplace.

Prohibition against noncompete/nonsolicitation agreements (SB 699/AB 1076)

For years, and subject to few specific exceptions, California’s Business & Professions Code Section 16600 has curtailed the use of restrictive covenants in employment agreements, providing that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void. Although Section 16600 and California courts’ interpretations of the statute have consistently nullified post-employment noncompete and noncompetition provisions in California employment contracts, SB 699 and AB 1076 provide additional protections against the inclusion and attempted enforcement of such restrictive covenants.

Per SB 699, any contract that is void under Section 16600 is unenforceable, regardless of where and when the agreement was signed. Thus, employers are prohibited from attempting to enforce a noncompete or nonsolicitation agreement, notwithstanding that the contract may have been executed and/or the former employee may have worked outside California.

AB 1076 codifies California case law (Edwards v. Arthur Anderson LLP (2008) 44 C.4th 937), confirming that the prohibition against restrictive covenants will be broadly construed and strictly enforced. This new law also makes it unlawful for an employer to include noncompete or nonsolicition provisions in their employment contracts, even if the employer does not intend to attempt to enforce those provisions. Furthermore, by February 14, 2024, employers must provide written notice to all current and former employees, who were employed after January 1, 2022, that any post-employment restrictive covenant with that employer is void and unenforceable.

In light of SB 699 and AB 1076, employers should review their employment contracts for compliance with these new statutory prohibitions. Employers should likewise identify all current and former employees with restrictive covenant provisions in their employment agreements, including those contracts that were signed by employees living outside of California. Once identified, and before February 14, 2024, employers should prepare and provide individual written notices to those current and former employees.

Workplace Violence Prevention Plans (SB 553)

By July 1, 2024, California employers (other than a few, specific exceptions) must develop, implement, and have procedures in place for maintaining Workplace Violence Prevention Plans (WVPPs). SB 553 requires employers to designate the individual responsible for implementing the WVPP, to identify and address hazards, to train employees, and to maintain appropriate records of incidents. Employers must establish effective procedures for accepting and responding to employee reports of workplace violence, and the results of such investigations are to be communicated to the reporting employee.

To ensure timely compliance with SB 553’s July 1, 2024 deadline, employers should (a) identify the individual to be responsible for implementing the WVPP; (b) consider potential workplace violence hazards; (c) develop and draft the WVPP, including the procedures for responding to reports of violence; and (d) prepare training for both employees and supervisors.

No automatic stays and arbitration (SB 365)

Pursuant to SB 365, litigation at the trial court level will no longer be automatically stayed while a party appeals the denial of a motion to compel the matter to arbitration.

Rebuttable presumption of retaliation (SB 497)

As of January 1, 2024, California law now recognizes a rebuttable presumption of retaliation if an employee faces an adverse employment action within 90 days of engaging in specific protected activity (e.g., claims for unpaid wages, equal pay complaints, claims filed with the Labor Commissioner). A violation of SB 497 may now subject the employer to a civil penalty of up to $10,000, payable to the employee. An employer, however, may rebut the legal presumption created by SB 497 by presenting evidence that the action in question was legitimate and not retaliatory.  

Reproductive loss leave (SB 848)

Starting January 1, 2024, employers must now provide an eligible employee with up to five days of unpaid reproductive loss leave, upon a reproductive loss event. In turn a “reproductive loss event” is defined as “the day, or for a multiple-day event, the final day of a failed adoption, failed surrogacy, miscarriage, stillbirth or an unsuccessful assisted reproduction. Similar to bereavement leave, reproductive loss leave must generally be taken within three months of the event. In addition, SB 848 entitles an eligible employee who experiences multiple reproductive loss events, to take up to 20 days of reproductive loss leave within a 12-month period.

Paid sick leave (SB 616)

In 2023, the California legislature amended the Healthy Workplaces, Healthy Families Act, and beginning on January 1, 2024, employers are subjected to different paid sick leave (“PSL”) requirements. For employers that front-load PSL, the annual minimum requirement will increase from three days (or twenty-four hours) to five days (or forty hours). If employers do not fully front-load PSL, then employees will be permitted to accrue and carry over unused paid sick leave, up to an increased cap of ten days or 80 hours.

Changes to paid family leave formula (SB 951)

On January 1, 2025, the formulas for calculating paid family leave and state disability insurance benefits will change, increasing the wage-replacement rate for lower income workers. These benefits are paid by the state, and workers earning less than the state’s average wage will be eligible to receive up to 90% of their regular wages while on leave.

California’s employment law landscape is always changing, and 2024 will be no different. Employers should review their policies and procedures to ensure compliance with these new laws.

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