California’s legislature covered a wide array of labor and employment law topics this legislative session. The laws discussed below were signed into law by Governor Newsom and will become effective on January 1, 2024 unless otherwise noted.  This Insight includes highlights of new laws affecting employers and is not intended to cover every new state and local law that was enacted this session.

Employers should begin reviewing these requirements to help ensure compliance with these new laws. Time to update those Employee Handbooks and train the management team!

New Employment Laws Generally Applicable to All California Employers

Non-Competes and Non-Solicitation Agreements: A Sea Change  

Arguably some of the most impactful legislation this session are the two bills pertaining to California’s non-compete law.  Two new bills expanded the scope and consequences of the state’s policies against restrictive covenants.  Governor Newsom signed Senate Bill 699 into law on September 1, 2023, and Assembly Bill 1076 into law on October 13, 2023.  Both are designed to strengthen the protections in California Business and Professions Code Section 16600, which provides 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.” SB 699 creates Business and Professions Code Section 16600.5, which provides that any contract that is void under Section 16600 is unenforceable “regardless of where and when the contract was signed.” Section 16600.5 further provides that employers may not enter into a contract with an employee or prospective employee that includes a provision that is void under Section 16600, and further provides that any company that enters into or attempts to enforce such a contract “commits a civil violation.” The new statute also creates a private right of action for employees whose agreements include restrictive covenants and provides for an award of attorney’s fees for any current, former, or even prospective employee who successfully brings suit over an employer’s use of those restrictive covenants.  

AB 1076 both amends Business and Professions Code Section 16600 and creates another new statute, Section 16600.1.  The amended Section 16600 confirms California precedent that any noncompete clauses, no matter how narrowly tailored, are void unless they satisfy a statutory exception.  It also provides that the application of Section 16600 “shall not be limited to contracts where the person being restrained from engaging in a lawful profession, trade, or business is a party to the contract.” Finally, the new Section 16600.1 declares it unlawful to include a noncompete clause in an employment contract and requires that any companies whose contracts included a noncompete clause issue a notice to all current employees and former employees who were employed after January 1, 2022, that the noncompete clauses in their contracts are void.  The deadline for this notice is February 14, 2024.

Workplace Violence: Policies and Procedures Now Required

On September 30, 2023, California enacted the first general industry workplace violence prevention safety requirements in the United States that will be applicable to nearly all California employers, with very few exceptions. Covered employers must develop and implement a workplace violence prevention plan (as part of their Injury and Illness Prevention Plans) that meets the requirements of the new Labor Code Section 6401.9 by the law’s July 1, 2024 effective date. Covered employers must establish, implement, and maintain an effective workplace violence prevention plan.  Requirements for such a plan include:

• Designating persons responsible for the plan.
• Effective procedures to obtain the active involvement of employees and authorized employee representatives in developing and implementing the plan.
• Methods the employer will use to coordinate the plan with employers, when applicable.
• Effective procedures for the employer to accept and respond to reports of workplace violence, and to prohibit retaliation against an employee who makes such a report.
• Effective procedures to communicate with employees regarding workplace violence, including how to report a violent incident, threat or other workplace violence concern; effective means to alert employees to the presence of a workplace violence emergency; and how to obtain help from staff assigned to respond and/or law enforcement.
• Procedures to identify and evaluate workplace violence hazards, including scheduled periodic inspections, and to correct any identified hazards.
• Procedures for post-incident response and investigation.
• Procedures to review and revise the plan as needed, including with the active involvement of employees and authorized employee representatives.
• Initial training about the plan when first established and annual training.

Employers must also keep various records specified in the new law, including:

• Records of workplace violence hazard identification, evaluation and correction.
• Training records.
• A violent incident log for every workplace violence incident.
• Records of workplace violence incident investigation.

These records must be maintained for at least five years and produced to Cal/OSHA upon request.

Workplace Violence Restraining Orders: Harassment

Currently, an employer is authorized to seek a restraining order to protect an employee only if the employee has suffered a “credible threat of violence.”  As of January 1, 2025, the law will be expanded to permit a restraining order to be sought if an employee has suffered harassment, which in the past was only something the “harassed” individual could pursue on their own.  “Harassment” for this purpose means “a knowing and willful course of conduct directed at a specific person that seriously alarms, annoys, or harasses the person, and that serves no legitimate purpose.”  The course of conduct must also “be that which would cause a reasonable person to suffer substantial emotional distress and must actually cause substantial emotional distress.” 

An additional change is that while currently only an employer is authorized to seek a restraining order on behalf of its employees (which include volunteers and independent contractors performing services at the employer’s worksite).  As of January 1, 2025, the law will be expanded to allow a collective bargaining representative to petition for a restraining order.  To be eligible to petition for a restraining order, the collective bargaining representative must be the collective bargaining representative “in employment or labor matters at the employee’s workplace” for the employee for whom the restraining order is being sought. 

The third restraining order change the new law makes is that it refers to two specific laws that a court may take into account in determining if the restraining order would prohibit speech or other activities that are constitutionally or are otherwise legally protected.  These protections will now include speech or conduct protected under the National Labor Relations Act and Government Code section 3555 through 3559 (which generally provide certain rights to unions to communicate with employees they represent and other protected activities including employees being able to seek union leave, etc.).

The final change the new law brings is that anyone seeking a restraining order must first provide the employee for whom the restraining order is sought the ability to not be named.  If an employee declines to be named, the law expressly provides that an employer or collective bargaining representative may still seek a restraining order on behalf of other employees. 

More Paid Sick Leave – And It’s Complicated

Significant changes have been made to California’s statewide paid sick and safe leave law since the Healthy Workplaces, Healthy Families Act (HWHFA) was first enacted in 2014.

Effective January 1, 2024, the amendment increases the number of job-protected paid leave hours employees can take each year under state law. When an employer implements an accrual and carryover policy, this change also increases how much paid leave employees can accrue and carry over from year to year. When an employer uses a frontload policy, the amendment increases the amount of paid leave employers must annually frontload.

Currently, an employee’s banked, accrued paid sick and safe leave may be capped at 48 hours or 6 days – whichever is greater. Due to SB 616’s amendments, the amount will increase to the greater of 80 hours or 10 days. California’s accrual limitation is unique in that it is not an annual or overall cap, but rather a temporary one, i.e., once an employee accumulates an amount of leave that equals the “cap” amount, they stop accruing but can immediately restart accruing leave when they use leave and their banked amount falls below the cap. The temporary accrual cap also practically functions as a cap on the amount of unused leave employees can carry over from one year to the next. This is because under the HWHFA “[a]ccrued paid sick days shall carry over to the following year of employment.”

Second, when frontloading is used to comply with paid sick and safe time obligations, many paid sick and safe time laws require the frontload distribution to occur when employment begins, i.e., on day 1. California’s existing state law, however, allows employers to provide no less than 24 hours or 3 days of paid leave for the employee to use by the time they complete their 120^th day of employment. Essentially, this option allows employers to impose a lengthier waiting period for new hires when frontloading is used than what the HWHFA otherwise allows (an 89-day waiting period, per the state labor department) when accrual is used. As a result of SB 616, in addition to providing the frontloaded 24 hours/3 days of paid leave by the 120-day mark, employers must also ensure that the employee has no less than a total of 40 hours or 5 days of paid leave (between the initial 120 day frontloading and the subsequent 200 day frontloading) for the employee to use by the time they complete their 200^th day of employment. Currently, the HWHFA allows employers to limit employees’ paid leave use per year to 24 hours or 3 days, whichever is greater. SB 616 increases the permitted annual use cap to the greater of 40 hours or 5 days.

Currently, the HWHFA does not apply to employees covered by a valid collective bargaining agreement (CBA) if the CBA expressly provides for employees’ wages, hours of work, and working conditions; provides paid sick days, paid leave or paid time off; requires final and binding arbitration of disputes concerning paid leave; provides premium wage rates for all overtime hours worked; and establishes a regular hourly rate of pay of not less than 30 percent more than the state minimum wage rate. SB 616’s amendments, however, extend some of the HWHFA’s protections to these particular employees, e.g., covered uses, replacement worker prohibition, and anti-retaliation protections.

Off-Duty Marijuana Use: Don’t Even Ask About It!

Recall that in 2022, the governor signed Assembly Bill 2188, which prohibits adverse action based on an employee’s use of cannabis off the job and away from the workplace or if a pre-employment drug test finds non-psychoactive cannabis metabolites in the applicant’s hair, blood, urine, or other bodily fluids. There was a year lag time before the law came into effect.  A year has passed, and this new prohibition now takes effect in just a few short months, on January 1, 2024.  Meanwhile, the governor signed Senate Bill 700, which amends AB 2188, to close an arguable loophole. As a result of this new law, it will now be unlawful for an employer to request information from a job applicant relating to the applicant’s prior use of cannabis, including in the applicant’s criminal history. These prohibitions are incorporated into the California Fair Employment and Housing Act (FEHA) and come with all usual remedies, including attorney’s fees.  The legislative intent behind this bill is that it is already illegal in California for employers to discriminate against job applicants for prior use of alcohol and other legal drugs. Therefore, SB 700 extends this to cannabis.

A Continued Expansion of Leave Rights: Reproductive Loss Leave

Senate Bill 848 makes it an unlawful employment practice for an employer to refuse to grant an eligible employee’s request to take up to five days of leave following a reproductive loss event. SB 848 acts as a subset of California’s Bereavement Leave law and increases an employee’s leave entitlements for a “reproductive loss event,” which 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.” Covered employers will be required to provide up to five days of leave for reproductive loss events. 

The law limits the amount of reproductive loss leave to a maximum of 20 days within a 12-month period.  Thus, although an employee may be subject to multiple reproductive loss events in a 12-month period, an employer is not required to provide more than 20 days of reproductive loss leave. California employers with five or more employees are covered under the law. 

Similarly, only those employees who have worked for the employer for at least 30 days are eligible for reproductive loss leave. Eligible employees must take the leave within three months of the event triggering the leave (i.e., reproductive loss events), but need not be taken on consecutive days. Leave under the statute is unpaid, unless the employer has an existing policy requiring paid leave. Eligible employees may choose to use any accrued and available sick leave, or other paid time off, for reproductive loss leave.

Like many other California leave laws, SB 848 prohibits employers from retaliating against any employee for requesting or taking leave for a reproductive loss.

Retaliation Claims Now Presumed Unless Rebutted

Senate Bill 497 provides for a rebuttable presumption of retaliation if adverse action is taken against an employee within 90 days of filing or participating in a Labor Commissioner claim, filing or participating in a Fair Pay Act claim, engaging in lawful, off duty conduct, or other actions protected by the Labor Code.

Notably, the employee has no burden of proof at the outset, they only need show protected activity, and a subsequent adverse action. The employer then has the burden of rebutting the presumption.

The District Attorney’s Office is Doing What? Local Enforcement of the Labor Code

Assembly Bill 594 authorizes local prosecutors to bring actions to enforce the labor code.  Under this new law, recovered lost wages go to employees, and recovered penalties to the general fund of the state. Attorneys’ fees may be awarded, as well. Arbitration agreements (other than collective bargaining agreements) shall have no effect on enforcement actions at the local level under this new law.  In the Budget Bill, passed in June 2023, $18 million was allocated to local agencies to enforce the California labor code.

Arbitration: No Automatic Stay, Despite Federal Policy and Supreme Count Precedent

Senate Bill 365 eliminates the automatic stay of trial court proceedings when the grant or denial of a petition to compel arbitration is appealed. SB 365 allows trial court proceedings to continue even as an appeal regarding the question of arbitration is under review, which increases court costs and resources spent on cases that ultimately are sent to arbitration. The United States Supreme Court has consistently declared a national policy favoring arbitration of claims. Most recently, the United States Supreme Court ruled on June 23 in Coinbase, Inc. v. Bielski that a district court must stay its pre-trial and trial proceedings while an appeal is pending. We are sure to see more legal challenges and developments in 2024 on this new law.

Industry-Specific Laws

Fast Food Industry: A $20 Minimum Wage and a Fast Food Council

The Past

The history of this bill is complicated. Last year, Assembly Bill 257, also known as the FAST Act, was signed into law.  This bill created a “Fast Food Council” with binding authority to establish wages and working conditions in the industry, including a new minimum wage applicable only to the fast food sector. In response, industry groups qualified a referendum for the November 2024 ballot seeking to overturn the FAST Act. This move suspended the formation of the Council, and AB 257 was put on pause. In response to that development, Assembly Bill 1228 was introduced earlier this year to impose joint liability of franchisors for labor and employment law violations of franchisees. The Budget Bill also included $3 million to re-fund the Industrial Welfare Commission (which has been de-funded for 19 years).  The IWC would have had authority to amend the Wage Orders in California, including those applicable to the fast food sector.  What followed was a series of negotiations that led to amendments of AB 1228 .  

Minimum Wages

Assembly Bill 1228 implements a new minimum wage rate of $20 per hour for employees at a “National Fast Food Chain,” (as defined ) effective April 1, 2024.  Thereafter, the new Fast Food Council can increase, on an annual basis, the minimum wage for fast food restaurant employees.  Beginning on January 1, 2025, the hourly minimum wage can increase on an annual basis by no more than the lesser of (rounded to the nearest ten cents) either 3.5 percent or the federal Consumer Price Index for Urban Workers.  In establishing minimum wage increases, the Council could take into account regional differences, or it could set a statewide increase.

Covered Establishments

AB 1228 applies to a “National Fast Food Chain”—a set of limited-service restaurants consisting of more than 60 establishments nationally.  To be covered, the restaurants must share a common brand, or be characterized by standardized options for decor, marketing, packaging, products, and services, and must be primarily engaged in providing food and beverages for immediate consumption on or off premises. Patrons also must generally order or select items and pay before consuming, with limited or no table service. (Covered establishments include, but are not limited to, those coded under NAICS Code 722513.)  Pre-existing bakeries are exempt, as are restaurants located in a grocery store.

The Rules

The new Fast Food Council will make recommendations for new standards specific to the fast food industry – establishing fast food restaurant minimum standards on wages and developing fast food restaurant minimum standards for working hours and working conditions adequate to “ensure and maintain the health, safety, and welfare of, and to supply the necessary cost of proper living to fast food restaurant workers.” “Working conditions” include, but are not limited to, wages, conditions affecting fast food restaurant employees’ health and safety, security in the workplace, the right to take time off work for protected purposes, and the right to be free from discrimination and harassment in the workplace.  

The Details

A collective bargaining agreement may supersede the statute if the agreement expressly provides for the wages, hours of work, and working conditions of the employees, and a regular hourly rate of pay not less than 30 percent more than the “state minimum wage” ($20 for fast food workers as of April 1, 2024) for those employees, and if the agreement provided equivalent or greater protection than the standards established by the Council.

The Labor Commissioner will enforce the new law, through the already-existing enforcement procedures set forth in the Labor Code, or by a covered worker through a civil action.  In any successful civil action to enforce this law by the Labor Commissioner or an employee, the court could grant injunctive relief and would award costs and reasonable attorney’s fees. Lastly, the bill includes a retaliation clause. A fast food restaurant operator could not discharge, discriminate, or retaliate against any employee due to the employee’s participation in a proceeding with the Council.

Hospitality Industry:  Recall and Retention Rights Are Expanded

Recall that in 2021, California passed SB 93, which required laid-off employees in the hospitality industry to be recalled in order of seniority, if they were laid off due to Covid-19. The law applies to hotels, private clubs, event centers, airport hospitality operations, and airport service providers, as well as janitorial, building maintenance, and security services provided to office, retail and other commercial buildings. Senate Bill 723 now extends these protections until December 31, 2025, and provides amendments that expand recall rights to include anyone who was employed by an employer for at least six months and whose most recent separation of employment by the employer occurred on or after March 4, 2020. The new law also creates a rebuttable presumption that anyone separated by a covered employer due to lack of business, reduction in force, or other economic reason was separated because of the COVID-19 pandemic.

Health Care Industry:  Minimum Wages

California has enacted new minimum wage requirements for employees in the healthcare industry. Depending on the size and type of health care operation or facility, minimum wages will vary. Covered employees under this new minimum wage include virtually anyone who works for a health care employer: nurse, physician, caregiver, medical resident, intern or fellow, patient care technician, janitor, housekeeping staff person, groundskeeper, guard, clerical worker, nonmanagerial administrative worker, food service worker, gift shop worker, technical and ancillary services worker, medical coding and medical billing personnel, scheduler, call center and warehouse worker, and laundry worker, regardless of formal job title.

The new wage ranges will be implemented on the following schedules:

• Health care employer with > 10,000 employees:
  • $23/hr., June 1, 2024
  • $24/hr., June 1, 2025
  • $25/hr., June 1, 2026
• Health care employer with < 10,000 employees:
  • $21/hr., June 1, 2024
  • $23/hr., June 1, 2026
  • $25/hr., June 1, 2028

Keep in mind that the salary test for overtime exemption is 1.5 x health care worker minimum wage, or 2x state minimum wage, whichever is greater.  And, future wage increases will be either 3.5% or CPI-U.

Food Handler Card

SB 476 requires employers to pay for costs associated with obtaining a food handler card. Previously, the state’s health and safety code required most restaurant workers to obtain a food handler card within 30 days of their hire date, with renewal every three years. The time needed for employees to obtain the card, or renewal, must be counted as hours worked, and employers must relieve their employees from all other work duties while they are in the process of completing their training. Lastly, employers are prevented from conditioning employment on applicants having an existing food handler card.

Grocery Store Workers

Assembly Bill 647 significantly expands the recall rights for grocery workers when there is a change of control in a grocery establishment. This law expands the categories of workers covered under California’s existing recall law. The definition of “grocery establishment” includes a “distribution center owned and operated by a grocery establishment and used primarily to distribute goods to and from its owned stores,” regardless of its square footage. It also excludes from the definition a retail store that ceased operations for 12 months or more. (Existing law establishes grocery worker retention provisions requiring the buyer of an existing grocery store to retain employees for a 90-day transition period during which an employee may only be discharged for cause, as specified, and considered for continued employment at the end of the transition period.)

The new law also adds an enforcement mechanism for violations of the law by adding a new private right of action to include reinstatement, front pay, back pay, value of benefits, and attorney’s fees. This was labeled a “Job Killer” by the CalChamber because of this significant new private right of action.

Assembly Bill 853 states that grocery or drug store companies must notify the state attorney general 180 days before finalizing a proposed merger or acquisition.

Conclusion

The pace of new employment laws coming out of the legislature did not slow down in 2023, nor do we expect it to slow down after the new year.  As those in the Human Resources and In-House employment law communities face these new compliance obligations, remember to update those handbooks, train your management team, and reach out to your employment counsel as needed.