2023 New Laws

Here is a Great Summary of some of 2023’s Employment Law Updates from one of our HR resources to share with clients and colleagues.

In California, there’s no “slow season” when it comes to employment laws and human resources. Why is that? Because even when the statutory changes slow down after the first of the year, regulations, local ordinances, and court cases keep practitioners occupied.

So far, this year has been busy — we’ve seen several local ordinance updates, federal and state court decisions, regulatory developments from both the California Division of Occupational Safety and Health (Cal/OSHA) and the California Civil Rights Department (CRD), and important decisions from the National Labor Relations Board (NLRB). Even the United States Congress got some things done!

Read on for a snapshot of employment law developments that have occurred thus far in 2023.

Local Ordinance Updates in 2023

Local ordinances have experienced a lot of developments in 2023 so far, including minimum wage increases, and new minimum wage and fair work week ordinances.

Minimum Wage Rate Increases

While many California cities and counties increase their local minimum wage rates at the start of each year, several localities implement their local minimum wage rate increases midyear. Effective July 1, 2023, these localities will increase their minimum wage to:

• Alameda: $16.52/hour;
• Berkeley: $18.07/hour;
• Emeryville: $18.67/hour;
• Fremont: $16.80/hour;
• Los Angeles City: $16.78/hour;
• Los Angeles County (unincorporated areas): $16.90/hour;
• Malibu: $16.90/hour;
• Milpitas: $17.20/hour;
• Pasadena: $16.93/hour;
• San Francisco: $18.07/hour;
• Santa Monica: $16.90/hour; and
• West Hollywood: $19.08/hour — the same rate for all businesses, regardless of employer size — which is now the highest minimum wage rate in both California and the nation.

California employers with employees working in these jurisdictions should be prepared to implement these new local minimum wage rates. In fact, employers should always confirm where their remote employees are working, as they may be subject to different local minimum wage rates and ordinances than if they were reporting to the worksite. Review your employees’ hourly wage rates and make any necessary adjustments by July 1 to comply.

Also keep in mind that many of these local ordinances contain notice requirements, so employers should check to see if their city or county has any required posters or required updates for July 1.

New to the local ordinance fray this year is San Mateo County’s minimum wage ordinance effective April 1, 2023, which raised the minimum wage in the county to $16.50 per hour. This new ordinance only applies to businesses geographically located in the unincorporated areas of the county — it doesn’t apply in the city of San Mateo, which has its own minimum wage. San Mateo County's MWO comes with poster and recordkeeping requirements and includes protections for employees from retaliation.

Fair Work Week Ordinances

Effective April 1, 2023, retail businesses with at least 300 employees globally and any doing work in the city of Los Angeles took on new responsibilities under Los Angeles’ Fair Work Week Ordinance (FWWO), and Berkeley adopted a FWWO of its own that will go into effect in January 2024. Berkeley and Los Angeles’ ordinances are similar, but do have some differences.

Military Leave Pay

San Francisco’s new Military Leave Pay Protection Act became effective on February 13, 2023, and applies to private employers with 100 or more employees worldwide. It requires covered employers to provide supplemental pay benefits to San Francisco-based employees who are military reservists called on for military duty.

Local COVID-19 Supplemental Paid Sick Leave

On February 28, 2023, California ended its COVID-19 declaration of emergency; most local jurisdictions followed suit by ending their own local states emergency and, with them, their local COVID-19 supplemental paid sick leave ordinances. Oakland is the only locality to still have a local Covid-19 Supplemental Paid Sick Leave ordinance in effect. It will remain in effect until Oakland ends its local COVID-19 declaration of emergency.

Regulatory Updates

Cal/OSHA is keeping busy this year. At the beginning of 2023, a new nonemergency COVID-19 standard took effect, replacing the COVID-19 Emergency Temporary Standards (ETS) that were in place since late 2020. The nonemergency standard continues to require employers to address COVID-19 in the workplace, though it’s not quite as stringent as the ETS. The regulation remains in effect until 2025.

Shortly after adopting the new COVID-19 standard, Cal/OSHA turned its attention to the indoor heat illness standard. For several years now, California has had outdoor heat illness regulations on the books that require employers to have a plan to deal with heat illness and create obligations for high-heat scenarios in certain industries.

Per a statutory mandate, Cal/OSHA a few years ago began working on draft regulations for an indoor heat illness standard, the current draft of which contains some rules similar to the outdoor regulations. Cal/OSHA finished its 45-day comment period in May, and is now reviewing comments and will determine whether changes are necessary; if so, Cal/OSHA will make those changes before putting the standard before the Cal/OSHA board for a vote.

The California Civil Rights Department (CRD) also has been busy working on regulations. Most recently, the CRD adopted revised regulations relating to the use of criminal history, which are currently pending approval with the Office of Administrative Law (OAL).

The revised regulations generally seek to clarify employers’ obligations regarding the use of criminal history by adding more context and examples to the existing rules. For example, regarding the “individualized assessment” employers must perform when they consider revoking a conditional job offer based on criminal history, the revised regulations supplement the assessment’s level of detail by including a lengthy, non-exhaustive list of factors for consideration.

The revised regulations also add more examples of the types of evidence of rehabilitation or mitigating circumstances that applicants may submit during the process, as well as provide employers with additional factors to consider after receiving information submitted by the applicant and before making a final decision. 

We can provide a more detailed description of the revised regulations once they are approved by OAL.

Cannabis Law and Testing Considerations

Though not taking effect until January 1, 2024, employers should be aware of and prepare for some changes with respect to cannabis law and drug screening compliance. Employers will be prohibited from discriminating against an employee or job applicant based on the person’s use of cannabis off the job and away from the workplace.

Employers may still conduct preemployment drug testing, and an employer can still refuse to hire someone based on a positive test — but only if it’s a valid preemployment drug screening that doesn’t screen for non-psychoactive cannabis metabolites. This means employers that screen for marijuana/cannabis can only use tests that screen for psychoactive compounds, which may require the use of different tests than they’ve used in the past. Employers that conduct drug screening should review their testing procedures to ensure compliance with the law.

2023 Court Cases (So Far)

Over the last couple of years, we haven’t seen as many published employment law decisions, largely due to the COVID-19 pandemic slowing down the courts (and the rest of the world) — but so far, 2023 has been a bounce-back year with multiple labor and employment decisions coming out just in the first six months, with more to come.

The cases touch on areas of arbitration, wage and hour law, harassment and discrimination, whistleblower retaliation and more.

Arbitration

Arbitration law is constantly changing in California, often through court cases in both federal and state courts.

On February 15, 2023, the Ninth Circuit Court of Appeals issued a decision that invalidates California’s AB 51 — the latest in the long-running litigation over whether California may prevent employers from requiring arbitration agreements as a condition of employment (Chamber of Commerce of the United States of America, et al. v. Bonta, et al., No. 20-15291, 9th Cir. (February 15, 2023).

The Ninth Circuit found that the Federal Arbitration Act (FAA) preempts AB 51 because AB 51 criminalizes the formation of mandatory arbitration agreements and, thus, violates the FAA’s purpose of encouraging arbitration. With AB 51 currently unenforceable, California employers may continue to use mandatory arbitration agreements for the time being. AB 51’s future, however, is uncertain — litigation could go to the U.S. Supreme Court.

In addition to the legal developments surrounding AB 51 are numerous developments regarding arbitration and the Private Attorneys General Act (PAGA), and whether employees’ PAGA claims can be subject to arbitration when there’s a valid agreement.

Last year, the U.S. Supreme Court ruled that individual claims under the PAGA can be compelled to arbitration if the employee signed an arbitration agreement to that effect (Viking River Cruises v. Moriana, 142 S.Ct. 1906 (2022)). The court also concluded that when an employee’s individual claim is compelled to arbitration, it’s separated from the representative PAGA action, and the employee no longer has standing to bring the representative claim in court.

Shortly after this employer win, however, several California Courts of Appeal rejected the Supreme Court’s representative-standing conclusion. To settle this issue, the California Supreme Court granted review in Adolph v. Uber Technologies, Inc., which is expected to be decided this summer. Employers that use arbitration agreements, or are considering their use, should consult with their legal counsel and continue to monitor pending litigation.

Wage and Hour

As for wage and hour laws, courts issued decisions about California’s outside salesperson exception outside salesperson exemption and the federal Fair Labor Standards Act (FLSA) executive exemption.

First, a California Court of Appeal limited the types of locations that qualify as “outside” for purposes of the outside sales exemption (Espinoza v. Warehouse Demo Servs., Inc. 86 Cal. App. 5th 1184 (2022)). “Outside salespersons” in California are exempt from some wage and hour laws, including overtime, reporting time pay, and meal and rest breaks. To qualify for the exemption, an employee must work more than half the time away from their employer’s place of business.

In this case, the court found that employees who demonstrated the employer’s products in another store, Costco, were not outside salespersons for purposes of the exemption. The court found that the level of control the employer exerted over its demonstrators’ working conditions effectively made Costco warehouses its “places of business.” For example, all of the employer’s demonstrators, supervisors and event managers worked at Costco locations, used offices within Costco to clock in and out, check assignments, handle paperwork, and store and clean equipment.

The case illustrates that it’s employee control, not worksite ownership, that is key to the outside salesperson exemption.

Next up is the U.S. Supreme Court’s Opinion analyzing an employee’s pay under the FLSA to determine if the employee fell under the FLSA’s executive exemption (Helix Energy Solutions Group, Inc. et al. v. Hewitt, 143 S. Ct. 677 (2023)). In this case, the employee earned more than $200,000 annually, well above the FLSA’s “highly compensated employee” threshold of $107,432. However, the employee was paid based on a daily rate, which varied during his employment. The U.S. Supreme Court held that an employee paid on a daily rate was not paid on a salary basis and was therefore entitled to overtime pay — even though he met the other requirements of the executive exemption under the FLSA.

The case is a good reminder that an employee’s amount of compensation alone isn’t enough to justify an exemption, and employers should review their exempt employee compensation practices to ensure they’re in compliance. While California employers are typically subject to California’s more stringent laws, multi-state employers should review their compensation practices to ensure compliance with the FLSA where applicable.

Harassment

Many harassment and discrimination claims against employers arise from a supervisor’s conduct toward an employee. This is due to the heightened scrutiny the Fair Employment and Housing Act (FEHA) places on supervisor conduct by generally making employers strictly liable for their supervisors’ conduct.

According to a recent case, however, that liability is not unlimited: The Court of Appeal ruled that a supervisor’s conduct unrelated to work will not trigger strict liability for the employer (Atalla v. Rite Aid, 89 Cal.App.5th 294 (2023)).

In this case, a supervisor sent an employee lewd texts after hours. The court ultimately concluded that the supervisor was not acting in his supervisory capacity when he sent those lewd texts because the evidence showed that the two had cultivated a close ongoing friendship unrelated to work. As such, the case against Rite Aid was dismissed.

Discrimination

A California Court of Appeal ruled in favor of an employee in a pregnancy discrimination case, concluding that allowing a postpartum employee to leave work to avoid stress was not a reasonable accommodation (Lopez v. La Casa de Las Madres, 89 Cal.App.5th 365 (2023)).

In this case, after the employee’s pregnancy disability leave ended, she submitted documentation stating she had a “moderate-severe” disability but didn’t indicate it was pregnancy related. The employer determined it couldn't provide the employee’s requested accommodations for flexible/shortened days when things were stressful and couldn’t ensure that the job be performed without facing stressful situations at unpredictable times because those were inherent parts of the position.

The court ultimately concluded that the employee failed to show that after her pregnancy disability leave ended, she had a condition relating to pregnancy; she also failed to prove “that she could perform the essential functions of her job and that she was denied a reasonable accommodation.”

Whistleblower Retaliation

Labor Code section 1102.5 protects employees from retaliation when they “disclose” a legal violation made by their employer to a person with authority over the employee or to a government agency. In this case, an employee complained to her employer about unpaid wages, and the employer responded by threatening to call immigration authorities and terminating her employment. The Court of Appeal concluded the employee’s report was not a “disclosure” or protected whistleblowing activity because the employer already knew about the wrongdoing.

The California Supreme Court took up the case and, not surprisingly, reversed it, concluding that an employee is, indeed, protected under California’s whistleblower law even when the employee reports information already known by the employer or a government agency (People ex rel. Garcia-Brower v. Kolla's, Inc., 529 P.3d 49 (Cal. 2023)). The court’s holding is in line with other recent whistleblower retaliation cases decided in employees’ favor.   

Labor Relations

On June 1, 2023, the U.S. Supreme Court issued an opinion holding that an employer can sue a union under state law for intentionally damaging the employer’s property during a strike (Glacier Northwest, Inc. v. Teamsters, US 21-1449 (June 1, 2023)).

In this case, the employer filed suit in state court claiming the union intentionally damaged its property during a labor dispute. The Washington Supreme Court held that the National Labor Relations Act (NLRA) preempted the state law claims, but the U.S. Supreme Court ruled in a near unanimous opinion (8-1) that the NLRA doesn’t preempt an employer’s state law claim that a union intentionally destroyed the employer’s property during a strike. This is a win for employers who may now have some recourse to protect and recover the value of property destroyed during labor disputes.

NLRB Decisions

Though the NLRA is a federal law generally associated with unionized workforces, the law actually applies to most private businesses, even if not unionized. As such, NLRB decisions are important and often impact employer policies and practices.

Back in February, the Board ruled in McLaren Macomb that inclusion of overly broad confidentiality and non-disparagement provisions in employment severance agreements is unlawful under the NLRA, and even the mere offer of a severance agreement with these provisions violates the NLRA, regardless of whether the employee entered into the agreement. California also restricts the use of confidentiality, non-disparagement and non-disclosure provisions, so employers should consult with legal counsel about using any of these provisions in their agreements.  

On May 1, 2023, the Board issued a decision   Lion Elastomers LLC II, that could make it more difficult to discipline employees for profane outbursts and misconduct in certain circumstances without running afoul of the NLRA.

Employees can’t be discouraged from or disciplined for engaging in activities protected by the NLRA, such as talking about terms and conditions of employment. Things get complicated, however, if discussions get heated and an employee uses offensive language. In some cases, protected activity turns into abusive conduct and even unlawful harassment.

Prior to this decision, the Board said that absent evidence of discrimination, employers may discipline employees for profane outbursts and offensive statements in the workplace, including those of a racial or sexual nature, even when they are made in connection with some other concerted activity.

This decision overruled that test and returned to a series of setting specific tests adopted in prior Board decisions, including tests for statements made to management, statements made on social media or to other employees, and picket line conduct.

The practical takeaway is that certain disciplinary actions may come under more scrutiny or potentially violate the NLRA if the offensive or abusive conduct arguably occurs in the context of engaging in protected activity under the NLRA. When considering discipline for employee outbursts, employers should look carefully at the context and content to determine if the employee was engaged in protected activity.

Don't Forget About Congress

At the end of 2022, the federal government passed the Federal Pregnant Worker Fairness Act (PWFA) and the Providing Urgent Maternal Protections for Nursing Mothers Act (PUMP for Nursing Mothers Act), both of which expand federal protections for pregnant and nursing workers. 

The PUMP for Nursing Mothers Act took effect at the very end of last year, but the federal government didn’t begin enforcement until April 28, 2023. The law expands federal lactation requirements to cover both hourly/nonexempt and exempt employees, whereas only nonexempt employees were previously covered.

The PWFA takes effect June 27, 2023, and requires covered employers to make reasonable accommodations for limitations related to pregnancy, childbirth or related medical conditions — unless doing so would impose an undue hardship (similar to the federal Americans with Disabilities Act (ADA)).

One distinction, however, is that while the ADA requires an employee to be able to perform the “essential functions” of their position, with or without accommodation, the PWFA includes a provision allowing for the temporary inability of an employee to perform an essential function.

The new federal laws don’t change much for California employers, as California already has more stringent laws on the books under the FEHA. Multi-state employers, however, should review their policies and practices to account for the new federal requirements and any other state requirements in their locations outside of California.

Looking Ahead

The California Legislature is busy this year crafting new labor and employment legislation. After passing one of the key legislative deadlines in early June, several significant employment bills are moving forward, including bills related to paid sick leave, expansion of the FEHA, arbitration, employer speech, return to work laws, workplace violence and others. Employers should expect more frequent updates on pending legislation as it works its way through the legislative process this summer.  There’s still a lot of pending employment law litigation at the state and federal level. We will continue to monitor these cases and will provide updates as those decisions are released.

As a reminder, we are here to help organizations and it’s Leaders navigate through the complexities of compliance.