Regulatory Onslaught Hits California Soon

by David James and Joseph Schmitt

California employers are accustomed to a fast-changing regulatory landscape, but even by California standards, the 2020 regulatory onslaught has been fierce. Association members should be careful to stay abreast of these new legal obligations. Among the most important:

COVID-19 Requirements

California adopted a new COVID-19 statute, effective immediately, which requires larger employers (generally those with more than 500) to provide additional paid sick leave. In addition, effective Jan. 1, all California employers will be required to post a notice in their workplace within one business day if they have information that there has been a potential exposure to COVID-19.

The employer notice must provide details regarding the exposure, information about benefits available to the employees, and data regarding the employer’s remediation plan. The statute also requires employers to notify the local public health agency of the potential exposure within 48 hours. Finally, the statute prohibits employers from requiring employees to disclose medical information, prohibits retaliation against employees for disclosing a positive test result, and allows employees to file retaliation complaints.

Worker’s Compensation

California enacted a statute, effective immediately, that creates a presumption that any essential employee who tests positive for COVID-19 is entitled to worker’s compensation coverage. The employer may rebut this presumption by showing that the employee contracted COVID-19 outside of the workplace, but absent evidence of such exposure, the employee will receive worker’s compensation benefits, and those costs will be attributed to the employer.

Kin Care

Effective Jan. 1, California employers must allow employees to determine whether they wish to use sick leave. Thus employers may no longer designate time off taken by employees as sick leave; only the employee may make that decision. As a practical matter, this means that employees may take time off, classify that time as something other than sick leave, and save the sick leave. Notably, the federal Department of Labor has taken the opposite position regarding federal FMLA leave, leaving employers to navigate this conflict.

Independent Contractors

California moved in two directions on the independent contractor front. The legislature adopted a new statute, known as AB5, that significantly restricts the circumstances under which a business may classify a worker as an independent contractor. The legislature essentially adopted the so-called Dynamex test, which, among other things, precludes a business from classifying a worker as an independent contractor if that worker is providing services integral to the employer’s business.

Meanwhile, the public voted for an industry-sponsored bill limiting the application of the Dynamex test and allowing businesses in certain industries (notably, ride-sharing and delivery) to treat workers as independent contractors. Unfortunately, those exceptions are unlikely to apply to Association members. We recommend against classifying workers in California as independent contractors unless you have consulted with an attorney.

Pay Data

Effective Jan. 1, California employers with more than 100 employees will be required to provide pay data to the state government.

Board of Directors Representation

Effective Dec. 31, 2021, all publicly held corporations with their principal executive offices in California must have a member of an underrepresented community on their board of directors.

Amazingly, these are only the highlights of the new statutes and regulations in California. Association members with California employees are well-advised to carefully monitor new legislative and regulatory activity.

David James and Joe Schmitt are shareholders in the labor and employment group at Nilan Johnson Lewis. Member companies are entitled to 60-minute, no-cost consultations with the attorneys. Call the firm at (612) 305-7500.