As a business owner and operator, it is crucial to keep up with employment updates in your state to ensure you are in compliance with the law. California is known for its complex laws and compliance regulations, and 2020 is no different. Below, we’ve provided an overview of the important 2020 legal and compliance updates for employers in the state of California.
California 2020 Updates to Wage & Hour Laws
- State Minimum Wage Increase:
Minimum wage increases are taking place nationwide. In California, effective January 1st, 2020, the minimum wage has increased to $12/hour for employers with 25 or fewer employees, and $13/per hour for employers with 26 or more employees. Annual wage adjustments will be based on the Consumer Price Index each year moving forward. To ensure your compliance, provide pay increases to minimum wage workers, reclassify salaried employees earning less than twice the state minimum wage, check the minimum wage for your local area, and update minimum wage notice posters.
- Summary of California Minimum Wage Changes:
- $12/hr for employers with 25 or fewer employees
- $13/hr for employers with 26 or more employees
- FLSA Salary Test Update – Exempt Employees:
On January 22nd, the US Department of Labor revised the salary threshold requirement for exemptions, for the first time since the 1990s. Effective January 1st, 2020, all employers in the nation wishing to exempt employees from overtime wages must meet the new salary threshold of $684 per week, or $35,568 annually (increased from $455 per week or $23,660 annually). Meanwhile, the salary threshold for highly compensated exempt employees is now $107,432 annually, increased from $100,000 annually. To ensure compliance, audit all employee’s, including your out of state exempt employees to determine if they meet the salary test and reclassify those employees or provide increases as needed.
- Summary of Federal Salary Exemption Changes:
- 2020 Exempt employee minimum salary: $35,568/year.
- 2020 Highly compensated salary: $107,432/year.
California 2020 Updates to Employee Benefits Laws
- FSA Contribution Cap Increase (And New Notice):
Effective January 1st, 2020, employees can now contribute $2,750 toward their Health Care Flexible Spending accounts, increasing the annual cap by $50 from the previous limit of $2,700. Additionally, effective 2020, AB1554 requires that employers provide employees with notices of any deadlines that apply to the use of FSA funds. While this may have come too late for 2020 Open Enrollment season, be sure to update your open enrollment materials and notify employees of this change. Additionally, new employee packets should be updated to ensure future employees receive accurate information regarding FSA contribution limits.
- Summary of FSA Contribution Cap Increase:
- In 2020, employees can contribute up to $2,750 toward their FSA accounts.
- 401(k) Contribution Cap Increase:
Effective January 1st, 2020, the IRS announced that employees who participate in 401(k) plans will be allowed to contribute up to $19,500 annually (an increase of $500 from 2019). The limit on catch-up contributions (for employees aged over 50) also increased to $6,500 annually, while the contribution limit on Simple retirement accounts also increased to $13,500 annually. The limit on annual IRA contributions remains unchanged, at $6,000. To ensure your compliance, update your enrollment and new hire materials, and notify all employees of this change.
- Summary of 401(k) Contribution Cap Increase:
- 401(k) annual contribution limit: $19,500.
- Catch-up contribution annual limit: $6,500.
- Simple retirement annual contribution limit: $13,500.
- IRA annual contribution limit: $6,000 (unchanged from 2019).
- Paid Family Leave Expansion (SB83):
Beginning July 1, 2020, California will extend the maximum duration of Paid Family Leave (PFL) benefits from six weeks to eight weeks. This expansion builds upon the existing regulations regarding family leave in California, as detailed by the California Family Rights Act (CFRA). To ensure compliance, notify employees who are taking a PFL-qualifying leave and update any necessary forms or notices.
- Summary of Paid Family Leave Expansion:
- PFL maximum benefit length: 8 weeks, beginning 7/1/2020.
- Lactation Accommodation (SB142):
Effective January 1st, 2020, SB142 amends existing lactation accommodation laws in California to establish that employers are required to provide adequate space for lactation (that is not a bathroom). Under this regulation, California requires employers to provide a space for employees who are breastfeeding that, in addition to being a non-bathroom space, must be private, safe, and provide certain amenities, such as electricity, a place to sit, and a place to set a pump and other personal items. Noncompliance can result in fees of up to $100 per day, employees who are not provided reasonable space and time for pumping file formal complaints with the state. If you are an employer with less than 50 employees, you can request an exemption if you demonstrate that the accommodation would place undue financial hardship on your business. To ensure compliance, update handbook policies and ensure you have designated an adequate lactation space that meets all the outlined criteria.
- Summary of Lactation Accommodation:
- To accommodate employees who are breastfeeding, employers must provide employees with a safe, private room with electricity and space for a pump and personal items. The space must not be a bathroom.
- Living Organ Donation (AB1223):
Effective January 1st, 2020, all California employers with 15 or more employees are required to provide 30 days of unpaid leave, in addition to the previously required 30 days of paid leave, for purposes of organ donation. This regulation extends the available length of organ donation leave in California, noting that employers may require that employees exhaust all sick leave prior to receiving additional unpaid leave days for organ donation. Employees are still required to provide their employer with written verification of the need for medical organ donation. To ensure compliance, update your business’s existing organ donation policies and notify managers of this change.
- Summary of Living Organ Donation Accommodations:
- Employers with 15+ employees must provide, for employees with medical documentation for their participation in organ donation:
- 30 days of paid leave
- 30 days of unpaid leave
- Note: Employees may be required to exhaust all banked sick days prior to taking any unpaid leave.
California 2020 Updates to Workplace Harassment & Discrimination Laws
- Harassment Training Extension (SB778):
SB778 provides an extension to California employers covered under SB1343. SB1343 requires all employers in California with five or more employees to provide all employees with one hour of harassment training within six months of hire, and then an additional hour of training every two years (or two hours of training for managers). SB778 extends the deadline for completing this training from January 1st, 2020, to January 1st, 2021. To ensure compliance, train all existing employees by December 31st, 2020, and develop a schedule to establish regular harassment training for new employees and retraining for multiyear employees.
- Summary of Harassment Training Extension:
- Deadline for implementing the harassment training schedule extended to Jan 1, 2021.
- Training requires:
- 1 hour within the first 6 months of hire(or two years for managers)
- 1 additional hour of training for every 2 years worked (or 2 years for managers)
- Janitorial Harassment Training (AB547):
- Effective January 1st, 2020, California janitorial employers with five or more employees are required to provide two hours of harassment training to all employees, every two years. These trainings must be conducted by peer trainers who have forty hours of certified sexual assault prevention training, and at least two years of janitorial work experience. It is important that peer trainers are culturally competent and fluent in the primary language of workers. Trainings cannot be conducted by HR representatives or lawyers unless they meet the peer trainer requirements listed above. A list of acceptable peer trainers will be provided by the DLSE by April 2020. To ensure compliance, schedule time with a peer trainer to train all existing janitorial employees by December 31st, 2020, and develop a schedule to establish regular harassment training for new employees and retraining for multiyear employees.
- Summary of Janitorial Harassment Training:
- Janitorial employers with 5+ employees must provide 2 hours of sexual harassment training every 2 years, conducted by a peer trainer who has been certified in sexual harassment training and has janitorial work experience.
- CROWN Act (SB188):
effective January 1st, 2020, the CROWN Act (Creating Respectful and Open Workplaces for Natural Hair) applies to all employers in California covered under FEHA (employers with a minimum of five employees). According to this bill, professionalism was and still is closely linked to European features and mannerisms; further, workplace dress codes and grooming policies that prohibit natural hair, including afros, braids, twists, and locks, have a disparate impact on African Americans and are likely to deter black applicants. The CROWN Act seeks to protect employees from discrimination based on race-specific hairstyles that are intended to maintain or beautify natural hair. To ensure compliance, assess and update your grooming and dress code policies, and notify hiring managers of this change.
- Summary of CROWN Act (SB188):
- Employers are prohibited from discriminating against African-American natural hairstyles through workplace dress codes and grooming policies.
- FEHA Claim Statute of Limitations (AB9):
Effective January 1st, 2020, applicable to all California employers covered under FEHA (employers with five or more employees), AB9 allows employees and prior employees to file charges with the Department of Fair Employment & Housing up to three years after an incident of discrimination, harassment, or retaliation. For incidents in which the limitation has already lapsed, this will not revive old claims; however, if the limitation has not lapsed, this will extend the limitation. According to AB9, claimants are no longer required to exhaust administrative remedies. To ensure compliance, improve your company’s harassment investigation and documentation processes, update document retention policies, and ensure appropriate training is conducted for those investigating internal claims of harassment, discrimination, or retaliation.
California 2020 Updates to Workplace Safety Laws
- Valley Fever Training (AB205):
Effective May 1st, 2020, AB203 requires employees working on-site in counties where Valley Fever is an epidemic to complete annual Valley Fever awareness training. This applies, primarily, to California construction workers. An ‘epidemic’ is categorized as an infectious disease that affects more than 20 cases per 100,000 people annually. To date, Valley Fever is considered an epidemic in the following counties: Fresno, Kern, Kings, Madera, Merced, Monterey, San Joaquin, San Luis Obispo, Santa Barbara, Tulare, and Ventura. To ensure compliance, train all construction employees who may be working within these counties and develop a training strategy as part of onboarding new employees as well as a re-training schedule for multiyear employees.
- OSHA Reporting (AB1805):
Effective January 1st, 2020, there are new OSHA Reporting regulations for all California employers. California employers now must immediately report all serious injuries or illnesses to OSHA via telephone or an online portal. The online portal is not yet complete, so employers may continue to use email until such time as the portal is ready for use. AB1805 also expands the OSHA definition of ‘serious injury or illness’ to read, “Any injury or illness that requires inpatient hospitalization, for other than medical observation or diagnostic testing, or in which an employee suffers an amputation, the loss of an eye, or any serious disfigurement, but does not include any injury or illness or death caused by an accident on a public street or highway unless the accident occurred in a construction zone.” To ensure compliance, visit the CalOSHA website, watch for the availability of the online portal, and update your workers’ compensation trainings.
California 2020 Updates to Arbitration Laws
- Forced Arbitration Ban (AB51):
Effective January 1st, 2020, California employers are no longer allowed to require employees to sign arbitration agreements as a condition of employment or continued employment. Under AB51, employers cannot force employees to forego filing a civil action or complaint with any court. Employees may still enter into arbitration agreements voluntarily, but they cannot be subject to opt-out clauses, and signing the agreement may not be a condition of employment or continued employment. This bill is not retroactive and only applies to contracts entered on or after January 1st of 2020.
- Note: While the law states, ‘nothing in this section is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act,’ there is a strong case to suggest that it is in direct opposition with the FAA. As such, a temporary injunction has been placed on AB51 until a federal court can review the bill. Until that time, employers may continue to require employees to sign arbitration agreements as a condition of employment. To ensure compliance, seek guidance from your attorney on whether to continue using arbitration agreements (depending on your risk tolerance) and/or alter your agreement language to ensure that the voluntary nature of the agreement is very clear.
- Arbitration Fees (SB707):
Effective January 1st, 2020, California employees are allowed to withdraw from arbitration and file in court when an employer does not pay arbitration fees in a timely fashion. If a California employer fails to pay arbitration fees within thirty days, this places the employer in breach of SB707, and the employee has the option to withdraw the claim from arbitration and to process the claim in court, or to compel arbitration. To ensure you retain your right to arbitration, pay all arbitration fees immediately upon receipt and seek legal counsel upon entering arbitration.
California 2020 Updates to Classification Laws
- ABC Contractor Classification (AB5):
Effective January 1st, 2020, AB5 codified into law the ABC test adopted during the Dynamex case, with some exceptions. Under this bill, many more workers will be classified as employees, rather than independent contractors. The penalties for misclassifying a worker can be enormous, including back wages, penalties and interest on those wages, the plaintiff’s attorney fees, your own attorney fees, an arbitrator’s fees, and more. To ensure compliance, audit your contractors, update your contracts, evaluate your practices with contractors, and find out if your contractors are working for other vendors. Additionally, never provide handbooks or I-9s to contractors, and ensure your contractors do not appear in organization charts.
- Note: A number of significant exceptions to AB5 exist, allowing businesses to classify certain types of workers as contractors under the old Borello test. To determine how a worker should be classified under Borello, speak to a qualified Human Resources professional or employment attorney.
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