March 2022 Update
Practitioners are strongly advised to check the latest federal rules and regulations for updates, as new developments are continually emerging under the Biden Administration.
Chapter 1: Hiring Guidelines and Pitfalls
Senate Bill 93, effective April 21, 2021, and codified at Lab C §2810.8, mandates that employers offer new positions to qualified employees in certain industries who were laid off due to the COVID-19 pandemic. See §1.6B.
Labor Code §432.7 has been amended to permit criminal justice agencies to ask certain employees about arrests and detentions relating to violent or serious felonies as well as crimes involving dishonesty or obstruction of legal processes. See §1.29.
Chapter 3: Independent Contractors, Leased Workers, and Outsourcing
In Sandoval v Qualcomm Inc. (2021) 12 C5th 256, the California Supreme Court bolstered the strong presumption under California law that companies hiring independent contractors are not liable for injuries to the contractors’ workers. See §§3.4, 3.12.
At the same time, the discussion on employer liability (§3.4) has been updated to note that California law does extend protection to independent contractors against harassment based on listed protected categories. Govt C §12940(j)(1).
In Vazquez v Jan-Pro Franchising Int’l (2021) 10 C5th 944, the California Supreme Court decided that Dynamex applies retroactively, stating that “the well-established general principle affirming the retroactive application of judicial decisions interpreting legislative measures supports the retroactive application of Dynamex.” See §§3.9A–3.9B.
However, in the context of unemployment insurance taxation, the ABC test articulated in Dynamex applies prospectively after January 1, 2020, and the Borello test applies to unemployment insurance tax before January 2020. See Vendor Surveillance Corp. v Henning (2021) 62 CA5th 59, 74–75. See §§3.9A–3.11.
The term “alien” is replaced with “persons who are not citizens or nationals of the United States.” See AB 1096 (Stats 2021, ch 296). See §3.13.
With respect to joint employer status, in Medina v Equilon Enters. (2021) 68 CA5th 868, 881, the court found that Shell (gas station owner) and a MSO (multi-site operated) operator were indeed joint employers, “given Shell’s near-complete control over the MSO operators’ finances, day-to-day operations, facilities, and practices.” See §§3.40, 5.4A.
Effective September 28, 2021, the DOL rescinded the final rule, “Joint Employer Status Under the Fair Labor Standards Act,” which had taken effect on March 16, 2020. The DOL removed and reserved 29 CFR pt 791 in its entirety. The DOL will continue to consider legal and policy issues relating to FLSA joint employment before determining whether alternative regulatory or subregulatory guidance is appropriate. 86 Fed Reg 40939 (July 30, 2021). See §§3.42, 5.4A.
Required employee contributions and penalties for misclassifying employees as independent contractors have been updated for the current tax year. See §§3.49–3.50.
While penalties for late payment of final wages may be available under Lab C §203, a late payment of wages to a terminated employee does not give rise to a Lab C §1197.1 minimum wage citation if the employee is paid by the employer’s next regular payday. Jaime Zepeda Labor Contracting, Inc. v Department of Indus. Relations (2021) 67 CA5th 891. See §§3.56, 5.16.
Under SB 572, the Labor Commissioner now has the right to create a lien on real property to secure an amount due under any citation, finding, or decision that has become final and may be entered as a judgment, including those that have become final under Lab C §§1197.1, 226.5, 1023, and 1289. See Lab C §90.8. See §§3.56, 5.90A.
The chart summarizing the Employment Development Department’s (EDD’s) “Information Sheets” on employee-independent contractor distinctions in various industries has been updated. See §3.65.
Chapter 4: Immigration Law Requirements for Employers
With respect to Employment Authorization Documents (EADs) and renewal, eligibility categories A12 and C19 refer to Temporary Protected Status (TPS) applicants under 8 CFR §§244.12 and 244.5, respectively. The Department of Homeland Security (DHS) may extend the expiration date of a TPS beneficiary’s EAD by Federal Register notice. The Federal Register notice will provide instructions for completing or updating Form I-9. See §4.9.
In guidance announced on July 7, 2021, U.S. Citizenship and Immigration Services (USCIS) clarified its policy that, if an employee presents a receipt for a lost, stolen, or damaged document to complete Form I-9 verification, the employee must return in 90 days to present either the replacement document for which the receipt was issued, or another acceptable document or documents, to complete Section 2 of the Form I-9. See §4.9.
In 2020, USCIS introduced a revised version of Form I-9, marked “Rev. 10/21/2019 N.” Effective April 30, 2020, employers must use only that version of the form. (This continued to be true as of November 8, 2021.) The minor changes to the form and its instructions are summarized in §4.12.
A proposed regulation by DHS would have terminated the employment authorization program for certain H-4 spouses. The proposed regulation was withdrawn by the Biden Administration on January 25, 2021. However, the employment authorization program for certain H-4 spouses is still subject to ongoing litigation in the U.S. District Court for the District of Columbia. See §4.16.
Civil penalty and fine amounts have been updated. See §§4.24, 4.27, 4.30.
On October 8, 2020, Department of Homeland Security (DHS) issued an Interim Final Rule aimed at introducing stricter eligibility criteria for the H-1B specialty occupation classification, placing new restrictions on the placement of H-B workers at third party worksites, and reinstating strict evidentiary policies that had been rescinded earlier in 2020. The rule, which was to take effect on December 7, 2020, was challenged in court under procedural grounds for violating the rulemaking process under the APA. On December 1, 2020, a federal district court, ruling on summary judgment, set aside the DHS regulation, finding that the agency did not have good cause to bypass notice and comment rulemaking procedures. For discussion of the rulings in Chamber of Commerce v U.S. Dep’t of Homeland Sec. (ND Cal, Dec. 1, 2020, No. 20-cv-07331-JSW) 2020 US Dist Lexis 224974 and Chamber of Commerce v U.S. Dep’t of Homeland Sec. (ND Cal, Sept. 15, 2021, No. 20-cv-07331-JSW) 2021 US Dist Lexis 175696, see §4.38.
In response to the COVID-19 pandemic, the Trump Administration enacted numerous travel restrictions. Effective November 8, 2021, the regional COVID-19 travel bans were rescinded and replaced by COVID-19 vaccination requirements for nonimmigrants traveling by air from any country to the United States. These are summarized in §4.63.
The chapter also notes additional rules rescinded by the Biden Administration. See, e.g., §4.85.
Chapter 5: Wage and Hour Laws
New sections have been added to address the new COVID-19 temporary recall rights for certain hospitality and building services employees (see Lab C §2810.8; see §5.55A); warehouse employee quotas (see Lab C §§2101–2102; see §5.89I); chain community pharmacy quota prohibitions (see Bus & P C §4113.7; see §5.89J); and exceptions for janitorial employees under the Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab C §§2698–2699.8) (see §5.100B).
With the increase in the state minimum wage on January 1, 2022, the equivalent of two times the minimum wage of $14 per hour for small employers (25 employees or less) equals $58,240 per year ($1,120 per week), and two times the minimum of $15 per hour for large employers (26 employees or more) equals $62,400 per year ($1,200 per week) to qualify for the white collar exemptions. It is important to note that the salary basis test is set according to the California state minimum wage, not the applicable minimum wage that may apply in the various local cities and counties in California. Discussions and examples have been updated accordingly. See §§5.15A, 5.17, 5.56.
The federal minimum wage is $7.25 per hour. 29 USC §206(a)(1). As of January 1, 2022, the minimum wage for employees of federal contractors and subcontractors is $11.25 per hour, which will be adjusted for inflation on each subsequent January 1. 29 CFR §10.5. However, for work performed on federal contracts entered into on or after January 30, 2022, or that are renewed or extended (pursuant to an option or otherwise) on or after January 30, 2022, the minimum wage is $15.00 per hour, which will be adjusted for inflation on each subsequent January 1. 29 CFR §§10.5(c), 23.50. See §5.17.
Tipped employees may be paid a cash wage of $7.90 per hour as of January 1, 2022, which will be increased each January 1 thereafter so that it continues to equal 70 percent of the nontipped wage, rounded to the nearest $0.05. 29 CFR §10.28(a). For further discussion of tipped employees, see §§5.17, 5.19.
Also relevant to tipping in California, an online food delivery platform, as defined, is now prohibited from retaining any portion of amounts designated as a tip or gratuity; such amounts must be paid to the person delivering the food or beverage. Bus & P C §22599.1(a)(2). See §5.44.
In Association for Los Angeles Deputy Sheriffs v County of Los Angeles (2021) 60 CA5th 327, the court continued to hold that charter counties, such as the County of Los Angeles, have exclusive authority over the compensation of their employees and they are not bound by applicable provisions of Wage Orders or the Labor Code. See §§5.3, 5.89B, 5.89E.
Effective September 28, 2021, the DOL rescinded the final rule, “Joint Employer Status Under the Fair Labor Standards Act,” which had taken effect on March 16, 2020. The DOL removed and reserved 29 CFR pt 791 in its entirety. The DOL will continue to consider legal and policy issues relating to FLSA joint employment before determining whether alternative regulatory or subregulatory guidance is appropriate. 86 Fed Reg 40939 (July 30, 2021). See §5.4A; see also §3.42.
In Chamber of Commerce v Bonta (9th Cir 2021) 13 F4th 766, the court held that the Federal Arbitration Act (FAA) (9 USC §§1–16) did not preempt the regulation of prearbitration agreement behavior because Lab C §432.6 did not conflict with the FAA or create a contract defense by which arbitration agreements might be invalidated or not enforced, nor did it stand as an obstacle to the purposes and objectives of the FAA. However, the court held that the civil and criminal sanctions attached to a violation of Lab C §432.6 are preempted by the FAA because they stood as an obstacle to the liberal federal policy favoring arbitration agreements. See §§5.13C, 15.157, 20.26; see also §§11.42E, 17.119.
As of January 1, 2022, employees engaged in the performance of garment manufacturing may not be paid by piece rate, subject to certain exceptions. Such employees must be paid an hourly rate of not less than the minimum wage, but may also receive incentive-based bonuses. Lab C §2673.2(a)–(b). See also Lab C §2670. See §5.32.
In Ferra v Loews Hollywood Hotel, LLC (2021) 11 C5th 858, the California Supreme Court held that the term “regular rate of compensation” in Lab C §226.7 has the same meaning as the term “regular rate of pay” under Lab C §510(a). See §5.48.
With respect to meal period rounding, in Donohue v AMN Servs., LLC (2021) 11 C5th 58, 68, the California Supreme Court held that meal period entries could not be rounded because each meal period must be a minimum of 30 minutes. The court also held that if time records show noncompliant meal periods, “a rebuttable presumption of liability arises.” See §§5.48, 5.54C.
In Gomez v Regents of Univ. of Cal. (2021) 63 CA5th 386, the court rejected the rounding claims of a former employee of the Regents of the University of California because such timekeeping procedures were internal affairs, and the Regents were immune under Cal Const art IX, §9. See §§5.54C, 5.97.
Minimum salary requirements for professional exemption and specific professions have also been updated, see §§5.59–5.60, as well as for salary requirements relating to tools and equipment, see §5.89A.
The new prohibition on chain community pharmacies (as defined in Bus & P C §4001(c)) establishing quotas related to the required duties of a licensed pharmacist or pharmacy technician is summarized in Bus & P C §4113.7. See §5.89J.
With respect to complaints of discrimination or retaliation, in Lawson v PPG Architectural Finishes, Inc. (9th Cir 2020) 982 F3d 752, the Ninth Circuit certified the following question to the California Supreme Court: Does the evidentiary standard set forth in Lab C §1102.6 replace the rest of the test of McDonnell Douglas Corp. v Green (1973) 411 US 792, 93 S Ct 1817, as the relevant evidentiary standard for retaliation claims brought pursuant to Lab C §1102.5? The supreme court granted the request. Lawson v PPG Architectural Finishes, Inc. (review granted Feb. 10, 2021, S266001) 2021 Cal Lexis 932 (question of state law certified to the California Supreme Court by the U.S. Court of Appeals for the Ninth Circuit under Cal Rules of Ct 8.548). See §5.90B.
Labor Code §218.8 governs contracts entered into on or after January 1, 2022. See §5.94.
Per AB 1003, an employer’s intentional theft of wages in an amount greater than $950 from any one employee, or $2,350 in the aggregate from two or more employees, in any consecutive 12-month period may be punished as grand theft. Pen C §487m(a). See §5.95.
In Herrera v Doctors Med. Ctr. of Modesto, Inc. (2021) 67 CA5th 538, the court held that PAGA claims are not subject to arbitration under a predispute arbitration agreement because the LWDA, as the owner of the claims, did not consent to arbitration. Additionally, after the employees became representatives of the state, the employees did not agree to arbitrate the PAGA claims. See §5.93A. Similarly, in Winns v Postmates Inc. (2021) 66 CA5th 803, the court held it was immaterial that employees could opt out of an arbitration agreement with a PAGA waiver. The waiver improperly circumvented the legislative intent to empower employees to act as government agency representatives and harmed state enforcement interests. See §5.97.
In General Atomics v Superior Court (2021) 64 CA5th 987, the court rejected a PAGA claim when wage statements showed applicable hourly rates and total number of hours worked at each rate, despite listing overtime rate at 0.5 times the employee’s regular rate of pay, because employees could readily determine whether wages were correctly calculated. See §5.97.
The new exception for janitorial employees under the Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab C §§2698–2699.8) is discussed in §5.100B.
Chapter 6: Vacations, Family and Medical Leave, and Other Time Off
Senate Bill 95, which became effective March 29, 2021, requires employers to provide supplemental paid sick leave to employees who are unable to work for reasons related to COVID-19. See Lab C §§248.2–248.3. Senate Bill 95 expanded the protections of a prior COVID-19 sick leave entitlement (AB 1867) that expired December 31, 2020. The leave provided by SB 95 is in addition to any paid sick leave available under the Healthy Workplaces, Healthy Families Act of 2014. Lab C §248.2(b)(2)(D). Although SB 95 expired on September 30, 2021, if an employee was on leave on that date, the employer must allow that employee to take the full amount of leave to which they would otherwise have been entitled. Lab C §248.2(f). See §6.11.
Juneteenth National Independence Day (June 19) is now a federal holiday. See §6.16.
Assembly Bill 1033 amended Govt C §12945.21, the small employer family leave mediation pilot program that was created last year to permit an employer or employee to request mediation of a dispute before a civil action is filed. The amendments furnish additional details about the procedures for initiating and conducting the mediation, deadlines, and tolling the statute of limitations on the employee’s claims. Assembly Bill 1033 did not alter the program’s repeal date of January 1, 2024. See §6.30C.
The California Family Rights Act’s coverage has been expanded to permit an employee to take leave to care for a seriously ill parent-in-law. See §6.42.
Chapter 7: Tax Compliance
The Consolidated Appropriations Act, 2021 (Pub L 116–260, 134 Stat 1182) extends provisions of the Protecting Americans From Tax Hikes Act of 2015 (Pub L 114–113, 129 Stat 2242) through taxable years beginning on or before December 31, 2025. See §7.22B.
Withholding amounts and tax rates relating to disability insurance tax (SDI) have been updated. See §7.70.
Every limited liability company doing business in this state as described in Rev & T C §17941(a) that organizes or registers with the Secretary of the State under Rev & T C §17941(b) on or after January 1, 2021, and before January 1, 2024, shall not be subject to the tax imposed under this section for its first taxable year. See Rev & T C §17941(g)(1); Stats 2020, ch 8 (AB 85). This shall become operative only for a taxable year in which any budget measure appropriates one dollar ($1) or more to the Franchise Tax Board for the costs associated with administration of this subdivision. Rev & T C §17941(g)(2). This language was included in California’s fiscal year budget for 2021–2022. See SB 129, the Budget Act of 2021, §242. See §7.85.
Chapter 8: Unemployment Compensation and State Disability Insurance
Assembly Bill 1096 promotes the intent of the legislature to remove any references to the dehumanizing term “alien” from all California code sections, including Un Ins C §1264. Accordingly, all references to “alien” in the chapter have been replaced with “noncitizen” or “non-U.S. national.” See §8.90.
Chapter 9: Notice-Posting, Training, and Recordkeeping Requirements
Assembly Bill 654, enacted on October 6, 2021, amends Lab C §6409.6 by requiring an employer, if the employer or representative of the employer is notified of the number of cases that meet the definition of a COVID-19 outbreak, within 48 hours, or 1 business day, whichever is later, to report prescribed information to the local public health agency in the jurisdiction of the worksite. The bill further expands the list of employers exempt from the COVID-19 outbreak reporting requirement to various licensed entities, including, but not limited to, community and community care clinics, adult day health centers, hospices, and child day care facilities. See AB 654; see also Lab C §6409.6(h). See also §§9.18, 9.24, 12.1A.
Under the Fair Employment and Housing Act (FEHA), the requirement that certain employers, labor organizations, and employment agencies retain specified employment-related records and files has increased from 2 years to 4 years. Govt C §12946. See §§9.89, 9.94.
Chapter 10: Employee Handbooks
Despite certain allowances under California law, employers should give attention to how a company would prove that employees received notice of updates to policies posted online or on an intranet. See §§10.3, 10.6.
Terminology has been updated to account for “lactation breaks” (see §§10.11, 10.26A) and “religious creed” (see §10.13).
Before including any arbitration provisions in the employee handbook, or otherwise drafting an arbitration agreement, counsel should be familiar with the current requirements and constantly changing nature of these requirements for an employee’s knowing waiver of litigation rights. Labor Code §432.6 prohibits employers from mandating arbitration agreements as a condition of employment; however, voluntary arbitration agreements remain enforceable if compliant with all other requirements. See §10.21. This section also expands the discussion on the effect of failure to attach or provide copies of arbitration rules.
The discussion on reimbursement for use of personal cell phones has been expanded to include additional case law. See §10.26.
Chapter 11: Trade Secrets Protection and Unfair Competition
With respect to defining “trade secret misappropriation,” InteliClear, LLC v ETC Global Holdings, Inc. (9th Cir 2020) 978 F3d 653, 657, also supports the proposition that the DTSA uses the same statutory definition, and applies the same analysis, as the existing California version of the UTSA. See 18 USC §1839(3), (5). Further, “[t]he statute provides the following three definitions of ‘misappropriation’: (1) the ‘acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means;’ (2) the disclosure of a trade secret without the owner’s consent; and (3) the use of a trade secret without the owner’s consent.” Attia v Google LLC (9th Cir 2020) 983 F3d 420, 424, citing §1839(5)(A), (5)(B). See §§11.1A, 11.3, 11.10.
Motions to dismiss. Some federal courts have granted motions to dismiss trade secret claims at the pleading stage (usually with leave to amend) when there has been a lack of specificity in the facts pleaded to establish the elements of the cause of action. See Spice Jazz LLC v Youngevity Int’l, Inc. (SD Cal, Nov. 4, 2020, No. 19-cv-583-BAS-DEB) 2020 US Dist Lexis 206327, *13 (conclusory allegations raised on “information and belief” are insufficient). See §§11.1A, 11.3, 11.10.
Remedies: Damages, injunctive relief, fee shifting. With the exception of some additional provisional remedies (e.g., ex parte seizure orders), the DTSA provisions contain similar remedies for misappropriation as the UTSA: compensatory damages, restitution, a reasonable royalty, injunctive relief, treble exemplary damages and attorney fees. See, e.g., 18 USC §1836(b)(3)(A)(i), (b)(3)(D); Cleanfish, LLC v Sims (ND Cal, Dec. 15, 2020, No. 19-cv-03663-HSG) 2020 US Dist Lexis 235838 (both CUTSA and DTSA allow shifting of attorney fees on showing of “bad faith”); DiscoverOrg Data, LLC v Bitnine Global, Inc. (ND Cal, Nov. 11, 2020, No. 19-CV-08098-LHK) 2020 US Dist Lexis 210494, *23–29. See §11.1A.
Other developments. In Bambu Franchising, LLC v Nguyen (ND Cal, May 7, 2021, No. 5:21-cv-00512-EJD) 2021 US Dist Lexis 88030, *10–19, and Bakemark, LLC v Navarro (CD Cal, Apr. 4, 2021, No. LACV 21–02499 JAK (AGPx)) 2021 US Dist Lexis 119405, *21, recipes were found to be trade secrets. See §11.3.
Employee productivity data may qualify as a trade secret. In addition, the more complex and larger the business, the more courts may require the former employee to make “reasonable efforts.” Coast Hematology-Oncology Assocs. Med. Group v Long Beach Mem. Med. Ctr. (2020) 58 CA5th 748, 757–758, 762–765 (court described need for disclosure requirement in trade secret litigation, as opposed to other areas of intellectual property, and holding that hospital’s internal physician staff productivity data may qualify as trade secret; in addition, employer required its staff to sign nondisclosure agreements, protected its computer files with passwords, limited access to sensitive materials to need-to-know basis, locked office doors and file cabinets; and its employee handbook outlined confidentiality duties, and employees had to acknowledge this material in writing). See §§11.3, 11.6, 11.43.
New case law has been added to demonstrate that whether certain customer information is accorded trade secret status is usually a fact-intensive inquiry that largely depends on the specific business or industry, and that case law goes both ways. See, e.g., Glam & Glits Nail Design, Inc. v #notpolish, Inc. (SD Cal, June 7, 2021, No. 21-cv-0052-GPC-DEB) 2021 US Dist Lexis 106445, *13–15 (customer list with personal cell phone numbers of owners and operators of employer’s clients and distributors who prefer conducting business in Vietnamese, customers’ and distributors’ purchasing histories, corresponding pricing tiers, and their product and billing preferences could constitute trade secret); Navigation Holdings, LLC v Molavi (ND Cal 2020) 445 F Supp 3d 69, 77 (allegations of customer information included not only list of potential clients, but compilation of price information about proven clients that often included each client’s name, address, telephone number, contact person, and private email address; plaintiffs’ database contained client information that plaintiffs gathered over the entire history of their operations, which spanned not only many years but hundreds of thousands of hours of research, including prior order/pricing information); Bakemark, LLC v Navarro, 2021 US Dist Lexis 119405 at *21–28 (likelihood of success shown that customer list information was a protectable trade secret); Cherokee Chem. Co. v Frazier (CD Cal, Dec. 14, 2020, No. CV 20–1757-MWF(ASx)) 2020 US Dist Lexis 249624, *11–12 (complaint listed specific, nonpublic information unique to employer’s business, including contact information for its customers, past pricing information for at least one of its customers, unique requirements and chemical formulas of its customers, and prices it negotiated with vendors). See §11.5.
In Arthur J. Gallagher & Co. v Tarantino (ND Cal 2020) 498 F Supp 3d 1155, 1172, the court found “strategies regarding client policy structuring” and “client retention and renewal strategies” to be trade secrets within the insurance industry and that these were sufficiently pleaded. See §11.5.
A trade secret is “used” when it is exploited for an advantage, such as when a company takes written computer code of a competitor and incorporates it in its own program or product. MicroVention, Inc. v Balt USA, LLC (CD Cal, Sept. 9, 2021, No. 8:20-cv-JLS-KES) 2021 US Dist Lexis 198527, *7–12. See §11.7A.
To determine the amount of a reasonable royalty, courts will often calculate what the parties would have agreed to as a fair licensing price at the time the misappropriation occurred. DiscoverOrg Data, LLC v Bitnine Global, Inc. (ND Cal, Nov. 11, 2020, No. 19-CV-08098-LHK) 2020 US Dist Lexis 210494, *23–29. See §11.42.
Evidence presented that an employee emailed or downloaded confidential information to personal devices, email or cloud-based accounts, or kept a company-issued laptop on departure (and later returned it wiped of its data) will often suffice to establish “likelihood of success” on the merits of the trade secret claim. See discussion and cases cited in §11.42B.
In Cisco Sys., Inc. v Chung (ND Cal, Dec. 21, 2020, No. 19-cv-07562-PJH) 2020 US Dist Lexis 240028, *32–33, the court applied the “compelling reasons” standard in determining whether to seal portions of briefs filed in connection with motion to strike. See §11.44A.
New case law has been added discussing discovery and spoliation of electronically stored information (ESI). See cases cited in §11.46A, including, e.g., Gamino v KPC Healthcare Holdings, Inc. (CD Cal, Apr. 14, 2021, No. 5:20-cv-01126-SB-SHKx) 2021 US Dist Lexis 85706, *8 (“Because discovery must be both relevant and proportional, the right to discovery, even plainly relevant discovery, is not limitless”); Handloser v HCL Am., Inc. (ND Cal, Dec. 17, 2020, No. 19-cv-01242-LHK (VKD) 2020 US Dist Lexis 238847 (court denied plaintiff’s request for additional ESI discovery in files of five more custodians beyond 16 custodians whose files had already been searched); Karma Automotive LLC v Lordstown Motors Corp. (CD Cal, Sept. 16, 2021, No. 8:20-cv-02104-JVS-DFMx) 2021 US Dist Lexis 176837 (spoliation jury instruction imposed).
New case law continues to hold that attempts by the employer to contractually require an employee to assign ideas or inventions developed after termination of employment will be struck down as a form of noncompete agreement in violation of Bus & P C §16600 unless based on the employer’s trade secrets or patented ideas. See Whitewater W. Indus., Ltd. v Alleshouse (9th Cir 2020) 981 F3d 1045, 1052–59; Applied Materials, Inc. v Demaray, LLC (ND Cal, Sept. 16, 2021, No. 5:20-cv-09341-EJD) 2021 US Dist Lexis 176701. See §11.49.
In light of Ixchel Pharma, LLC v Biogen, Inc. (2020) 9 C5th 1130, covenants not to compete must be evaluated under the “rule of reason,” which involves a heavily factual analysis. In a typical case, this might even require expert testimony on the definition of the relevant market and the extent of the defendant’s market power. See Sandler Partners, LLC v Masergy Communications, Inc. (9th Cir 2021) 848 Fed Appx 798, 799. See §11.52.
A recent California decision has indicated that a former employee potentially could bring a representative action for violation of Lab C §432.5 on behalf of himself and other former or current aggrieved employees, seeking civil penalties under the Labor Code Private Attorneys General Act (PAGA) (Lab C §§2698–2699.8) because the employer made its employees sign unenforceable customer nonsolicitation agreements. See Johnson v Maxim Healthcare Servs., Inc. (2021) 66 CA5th 924. An earlier federal decision, however, rejected such a legal theory. See §11.52.
General corporate mismanagement or negligence usually will not support a breach of fiduciary duty claim. Haliburton Int’l Foods, Inc. v Marasco (CD Cal, Nov. 4, 2020, No. EDCV 20–1069 JGB (SHKx)) 2020 US Dist Lexis 246537, *15. See §11.68.
The U.S. Supreme Court case Van Buren v U.S. (2021) ___ US ___, 141 S Ct 1648, is discussed with respect to violations of the Computer Fraud and Abuse Act (CFAA). See §11.74.
Chapter 12: Workplace Safety
The Occupational Safety and Health Appeals Board has proposed amendment to 8 Cal Code Regs §376 to make video hearings, implemented during the COVID-19 pandemic, a permanent part of the appeal process. Practitioners should become familiar with this proposal, and possible amendment, for evaluation of the video hearing and prehearing processes as well as procedures for objection to the hearing time, location, or format. See §§12.1A, 12.67.
New legislation. Assembly Bill 685 requires a public or private employer that receives a notice of potential exposure to COVID-19 to provide specified notifications to its employees within 1 business day of the notice of potential exposure. The bill requires an employer, if the employer or representative of the employer is notified of the number of cases that meet the definition of a COVID-19 outbreak, within 48 hours, to report prescribed information to the local public health agency in the jurisdiction of the worksite. The bill also requires an employer that has an outbreak to continue to give notice to the local health department of any subsequent laboratory-confirmed cases of COVID-19 at the worksite. The bill exempts a health facility, as defined, from this reporting requirement. See AB 685 (effective Jan. 1, 2021); see also Lab C §6409.6. See discussion in §12.1A.
Assembly Bill 654 was approved by the Governor on October 5, 2021. This bill also addresses employers’ obligations to give notice of a COVID-19 outbreak to local public health agencies via amendment of Lab C §6409.6 and amends Lab C §6325 to address COVID-19 in the context of the Division of Occupational Safety and Health’s power to issue an Order Prohibiting Use. See AB 654; Lab C §§6325, 6409.6. See §§9.18, 9.24, 12.1A.
Senate Bill 606, approved by the Governor on September 27, 2021, will go into effect and be subject to enforcement by Cal/OSHA on January 1, 2022. The bill, among other actions, amends Lab C §6317 to include a rebuttable presumption that a violation committed by an employer with multiple worksites is enterprise-wide if the employer has a written policy or procedure that violates an enforceable regulation or standard (except emergency regulations adopted within the previous 30 days) or the Division of Occupational Safety and Health has evidence of a pattern or practice of the same violation involving more than one worksite. The bill also adds Lab C §6317.8, creating an “egregious violation.” Each instance of an employee exposed to the violation shall be considered a separate violation for purposes of issuance of fines and penalties. See SB 606; Lab C §§6317, 6317.8. See discussion in §§12.1A, 12.30, 12.36.
Senate Bill 321, approved by the Governor on September 27, 2021, directs the Division to convene an advisory committee for creation of voluntary industry-specific occupational health and safety guidance for the education of household domestic service and employees and employers. See §12.1A.
Executive Orders. Governor Gavin Newsom has issued various executive orders that may impact enforcement of Cal/OSHA regulations. Practitioners are advised to continuously review active executive orders for those relevant to the enforcement of Cal/OSHA regulations and other employment issues, including but not limited to COVID-19 vaccination mandates in healthcare. See §12.1A.
Emergency regulations. On November 19, 2020, the Occupational Safety & Health Standards Board (Standards Board) approved emergency regulations to address COVID-19 prevention. The Emergency Temporary Standards (ETS), including 8 Cal Code Regs §§3205, 3205.1, 3205.2, 3205.3 and 3205.4, were approved by the Office of Administrative Law and became effective November 30, 2020. The ETS were re-adopted, with amendment, on June 17, 2021. An early draft of text proposed for readoption on December 16, 2021, and additional information regarding the status of the ETS are available at https://www.dir.ca.gov/OSHSB/COVID-19-Prevention-Emergency.html. See §12.1A.
Cal/OSHA guidance. Cal/OSHA has published various guidance documents on requirements to protect workplaces from COVID-19. These are not regulations but may be seen as a map toward compliance with existing regulations and the ETS. The Cal/OSHA website notes that the guidance documents are updated as new information is received and the situation evolves. See https://www.dir.ca.gov/dosh/coronavirus/Guidance-by-Industry.html. See §12.1A.
Proposed permanent regulation. The Division has convened an advisory committee to provide input on a proposed permanent regulation addressing COVID-19. A discussion draft of the language of the proposed regulation, to be addressed in 2022, is available at https://www.dir.ca.gov/dosh/DoshReg/covid-19-emergency-standards/COVID-19_Prevention-Regulatory-Language-Discussion-DRAFT-AF.pdf. See §12.1A.
Mandatory COVID-19 vaccinations for certain employers. OSHA’s COVID-19 Vaccination and Testing ETS became effective November 5, 2021. The federal ETS mandates that employers with at last 100 employees develop and implement a COVID-19 vaccine policy. See 86 Fed Reg 61402 (Nov. 5, 2021). However, on January 13, 2022, the U.S. Supreme Court stayed the OSHA ETS pending further review before the U.S. Court of Appeals for the Sixth Circuit, meaning that at least for now, employers are not required to comply with the ETS. See §12.1A.
Penalties for violations have been updated in §§12.53, 12.56.
Chapter 13: Workplace Privacy
A new “Testing for COVID-19” section has been added to address developments in guidance from the federal Equal Employment Opportunity Commission (EEOC), the California Department of Fair Employment and Housing (DFEH), the Centers for Disease Control and Prevention (CDC), the California Department of Public Health, and others to assist employers’ efforts to reduce the risk of COVID-19 in the workplace. See §13.46A.
Discussion regarding employer requirements under the California Privacy Rights Act (CPRA) and the California Consumer Privacy Act of 2018 (CCPA) (CC §§1798.100–1798.199.100), including notice requirements, has been updated. See §13.3A.
As of January 1, 2023, in determining whether to require an HIV test of an applicant for life or disability insurance, a life or disability income insurer may not consider the applicant’s marital status, actual or perceived sexual orientation, gender, gender identity, gender expression, race, color, religion, national origin, ancestry, living arrangements, occupation, beneficiary designation, or ZIP codes or other territorial classification in the state, or any combination thereof. Ins C §799.05. See §13.48.
Chapter 15: Discrimination and Harassment
While the Dynamex ABC test controls for determining whether a worker is “an employee for purposes of the Labor Code, the Unemployment Insurance Code, and all wage orders,” some professions, such as that of newspaper carriers, are expressly excepted, and Borello remains the operative test. See Becerra v McClatchy Co. (2021) 69 CA5th 913, 935. See §§3.9A–3.9B, 15.3D.
On October 7, 2021, SB 331 was signed into law, expanding the prohibition under CCP §1001 on nondisclosure agreements pertaining to sexual assault, discrimination, and harassment to include any harassment or discrimination. The new legislation also amends Govt C §12964.5 to require employers to include language within any nondisparagement agreement, or other agreement restricting an employee’s ability to disclose information, that nothing in said agreement serves to restrict the employee’s right to disclose information about unlawful acts in the workplace. See §§15.40C, 15.107A, 16.A, 17.109A.
On September 30, 2021, SB 2, also known as the Kenneth Ross Jr. Police Decertification Act of 2021, was signed into law, eliminating certain immunity provisions for peace officers and custodial officers, or public entities employing peace officers or custodial officers sued under the Tom Bane Civil Rights Act. Stats 2021, ch 409. See §15.49.
In Shirvanyan v Los Angeles Community College Dist. (2020) 59 CA5th 82, the court held that the employee failed to demonstrate reassignment as a viable accommodation, when the employee did not provide evidence of any vacant position, the essential functions of which she could perform. The court also held that, while a finite leave of absence may be a reasonable accommodation, the employee failed to demonstrate that it would be viable in this instance, as she relied on a letter from a physician who was unaware of the extent of the injury. See §15.150.
The court in Chamber of Commerce v Bonta (9th Cir 2021) 13 F4th 766 recently held that, while the civil and criminal penalties associated with AB 51 were preempted, the bill itself is not generally preempted by the Federal Arbitration Act (FAA). See §§5.13C, 15.157, 20.26; see also §17.119.
In Caballero v Premier Care Simi Valley LLC (2021) 69 CA5th 512, the trial court determined that an arbitration agreement was unenforceable, as the agreement was in English, while the signing party only understood Spanish. The appellate court, however, reversed, holding that the party’s outward manifestations—including his failure to seek assistance in understanding the agreement’s terms—demonstrated mutual assent and intent to enter into the agreement, thus rendering it enforceable. See §15.157.
Tolling for claims for violations of CC §§51, 51.7, and 54 may apply retroactively, but this does not revive any claim that has otherwise lapsed. Govt C §12960(f)(2), (f)(3). See §15.159.
Chapter 16: Whistleblower Issues and Chapter 17: Discipline and Termination
A new section has been added, §17.109A, addressing nondisparagement. Specifically, in the wake of the #MeToo movement, California enacted SB 820, creating CCP §1001 to prohibit settlement agreements following a civil action or administrative complaints from preventing the disclosure of factual information regarding sexual assault, sexual harassment, or sex discrimination. These restrictions were expanded with the enactment of SB 331, effective January 1, 2022, which amended CCP §1001 and Govt C §12964.5.
As of January 1, 2022, an employer or former employer may not include in any agreement related to an employee’s separation from employment any provision that prohibits the disclosure of information about unlawful acts in the workplace. If there is a contractual provision that restricts an employee’s ability to disclose information related to conditions in the workplace, it must include, in substantial form, the following language: “Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.” Govt C §12964.5(b). If this type of nondisparagement language is in an agreement related to the employee’s separation from employment, the employer must notify the employee that the employee has a right to consult an attorney regarding the agreement and must provide a reasonable time period of not less than 5 business days in which to do so. Govt C §12964.5(b)(4). See §§16.1A, 17.109A.
As of January 1, 2022, if an agreement is made after a claim is filed in civil litigation or administrative action, the settlement agreement may not prevent or restrict disclosure of factual information regarding sexual assault, sexual harassment, workplace harassment or discrimination, failure to prevent workplace harassment or discrimination, or an act of retaliation for supporting or opposing harassment or discrimination. CCP §1001. See §§16.1A, 17.109A; see also §15.40C.
California’s Labor Code now protects employees from discipline or discharge for seeking to enforce the right to recall or alleging noncompliance with law requiring employers in certain enterprises, including hotels, airport hospitality, and building service providers, to rehire certain employees laid off due to COVID-19. This provision is repealed as of December 31, 2024. Lab C §2810.8. Employers should also note that certain cities, such as Los Angeles and Long Beach, have enacted similar ordinances. See §§16.1A, 17.6.
The California Labor Code expressly prohibits employers from retaliating against employees for refusing to participate in activities “that would result in a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation” under Lab C §1102.5(c). The court is authorized to award reasonable attorney fees to a plaintiff who brings a successful action for a violation of these provisions. Lab C §1102.5(j). See Stats 2020, ch 344 (AB 1947). See also §§16.13, 17.12.
Employers should take note that Lab C §432.6, also known as AB 51, was intended to prohibit mandatory arbitration agreements as of January 1, 2020. The statute is subject to ongoing litigation and has been enjoined for some purposes. See §17.12.
If an employee asserts a claim for failure to promote under the harassment provision of FEHA, the statute of limitations begins to run when the employee knows or reasonably should know of the employer’s unlawful refusal to promote the employee. See Pollack v Tri-Modal Distrib. Servs., Inc. (2021) 11 C5th 918, 941. See §17.63.
Additional recommendations have been included in the steps involved in conducting a termination meeting. See §17.96.
Assembly Bill 749 prohibited and invalidated any provisions in settlement agreements entered into on or after January 1, 2020, that prevent workers from obtaining future employment with the settling employer or its affiliated companies under certain circumstances. Assembly Bill 2143, passed in 2020, provided an exception to this ban, if the employer documented in good faith, prior to a claim, that a person engaged in sexual harassment, sexual assault, or criminal conduct. See Stats 2020, ch 73 (AB 2143). See §17.111.
Accordingly, settlement agreements entered into on or after January 1, 2020, may not prevent or restrict the “aggrieved person,” as defined, from obtaining future employment with the employer against whom the claim was filed, or any parent company, subsidiary, division, affiliate, or contractor of the employer. However, the law does not preclude the employer and aggrieved person from making an agreement to end a current employment relationship. It also does not preclude provisions restricting the aggrieved person from future employment with the settling employer if the employer has made a good faith determination that the person engaged in sexual harassment or sexual assault. The inability to contractually preclude an employee from being rehired also does not require the employer to employ or rehire a person if there is a legitimate nondiscriminatory or nonretaliatory reason for terminating the relationship or refusing to rehire the person. See CCP §1002.5. See §§16.1A, 17.111.
Additions to the chart summarizing California statutes limiting termination and discipline include Lab C §§230(b), 230(e), 230.2(f), 230.4, 230.5(a), 232.5, 246.5, 432.6, 432.8, 1024.6, 1033, 1171, 1197.5(k), 1512, 2810.8, 2930, 6310–6312, 6399.7, 6403.5, 6409.6; Health & S C §§1596.881, 1596.882; Un Ins C §1237; and IWC Wage Orders 1–13, §3(C), Wage Order 17, §5(H). See §17.119.
Chapter 16A: Workplace Investigations
Senate Bill 16 amends Evid C §1045 and Pen C §§832.5, 832.7, and 832.12 and adds Pen C §832.13. Among other changes, it expands on the admissibility and accessibility of peace officer records and increases the required record retention period in certain instances. The bill also requires law enforcement agencies to release records pursuant to a California Public Records Act request within the specified time frame and makes it mandatory for a law enforcement agency to request and review any record of investigation from a previous employing agency involving the lateral officer prior to employing that officer. See §16A.16A.
Senate Bill 206 adds Govt C §3254.6, which, among other changes, includes in the definition of “firefighter” certain temporary, seasonal firefighters employed by the Department of Forestry and Fire Protection, and requires that a temporary appointment firefighter shall not be terminated for cause without a right to appeal the termination to the State Personnel Board. See §16A.16A.
Chapter 18: Reductions in Force and Plant Closings
A new section, §18.1A, has been added to summarize employer requirements under SB 93, effective April 21, 2021, and codified at Lab C §2810.8, which mandates that employers offer new positions to qualified employees in certain industries who were laid off due to the COVID-19 pandemic. See also §§1.6B, 5.55A, 17.6.
Chapter 19: Insurance Coverage for Employment Claims
With respect to an “occurrence” in the area of sexual harassment, in Guillon v AMCO Ins. Co. (ND Cal, Jan. 26, 2021, No. 20-cv-07926-CRB) 2021 US Dist Lexis 14625, *12, the insured failed to show that the claims in the underlying action, “including the battery claim, could have resulted from ‘occurrences’ because the alleged conduct was intentional.” The court also found that these claims constituted “employment practices involving ‘coercion, demotion … harassment, [and] humiliation … ’ under the Employment Related Practices Exclusion” (2021 US Dist Lexis at *9), and rejected the argument that certain of the alleged conduct happened outside the workplace, finding that the nexus between the defendants’ alleged conduct and the plaintiffs’ employment was “straightforward” and thus within the exclusion. 2021 US Dist Lexis 14625 at *10–11. See §§19.4–19.5, 19.7A.
With respect to coverage under workers’ compensation policies, the court in Beazley Ins. Co. v National Cas. Co. (CD Cal July 19, 2019, No. CV 19–2175 PSG (JPRx) 2019 US Dist Lexis 130905, *19, observed: “As a gap-filler, the EL Policy covers a rare category of claims where the employee is suing the employer in a capacity other than as an employer.” See §19.9.
Chapter 20: Mediation and Arbitration of Employment Disputes
In Chamber of Commerce v Bonta (9th Cir 2021) 13 F4th 766, the court held that the Federal Arbitration Act (FAA) (9 USC §§1–16) did not preempt the regulation of prearbitration agreement behavior because Lab C §432.6 did not conflict with the FAA or create a contract defense by which arbitration agreements might be invalidated or not enforced, nor did it stand as an obstacle to the purposes and objectives of the FAA. However, the court held that the civil and criminal sanctions attached to a violation of Lab C §432.6 are preempted by the FAA because they stood as an obstacle to the liberal federal policy favoring arbitration agreements. See §§5.13C, 20.26; see also §17.119.
In Lim v TForce Logistics, LLC (2021) 8 F4th 992, the court found procedural and substantive unconscionability for an adhesion contract provided to an employee containing a delegation clause as well as cost-splitting, fee-shifting, and out-of-state venue provisions. See §20.31.
In Winns v Postmates, Inc. (2021) 66 CA5th 803, the court held that a PAGA waiver containing opt-out provision was invalid under Iskanian. See §§2.6, 2.85, 20.31A.
In order to clarify the timing of fee payments, SB 762 (effective Nov. 18, 2021) amends CCP §§1281.97–1281.98 to require arbitration providers to issue an invoice for the entirety of any fees and costs and payment due dates required for the arbitration proceeding to continue. See §20.41A.
Under JAMS rules, the arbitrator is authorized to determine whether the hearing, or any portion of it, shall be conducted in person, virtually, or in hybrid form, and may schedule the proceedings as deemed necessary or advisable under the circumstances. JAMS Rule 22(g). The parties also may agree to waive the hearing and submit the dispute on written submissions and evidence. JAMS Rule 23. See §20.47.
Chapter 21: Public Employment Issues
Senate Bill 270, effective September 27, 2021, amends Govt C §3558 by adding Govt C §3558(b)–(e), which allows the exclusive representative of a union to file a charge of an unfair labor practice when a public employer fails to provide to unions the work and personal contact information of new employees within 30 days of hire and of all the employees in the bargaining unit at least every 120 days. See §21.12.
Assembly Bill 237, effective January 1, 2022, enacted the Public Employee Health Protection Act, making it an unfair practice for a covered employer, as defined, to fail or refuse to maintain or pay for continued health care or other medical coverage for an enrolled employee or their enrolled dependents, for the duration of the enrolled employee’s participation in an authorized strike, at the level and under the conditions that coverage would have been provided if the employee had continued to work in their position for the duration of the strike. The Act would also make it an unfair practice for a covered employer to fail to collect and remit the employee’s contributions, if any, to this coverage, or to maintain any policy purporting to authorize an action prohibited by this provision or otherwise threaten an employee or their dependents’ continued access to health or medical care during or as a result of the employee’s participation in a strike. Govt C §§3140–3142. See §§21.30, 21.35.