The California Legislature and Governor Brown had a busy year enacting and vetoing laws that will affect SCCA members and all employers throughout the state. In recent decades, California has gained a reputation for being “business/employer unfriendly” and the Democratic majority in Sacramento did very little to assuage that branding in 2018.
The Good
First, some good news. Despite a myriad of new laws metastasizing from the #MeToo Movement, which create liability, reporting requirements and record retention obligations, there were a few bright spots for those who sign payroll checks.
With help from SCCA, AB 1654 (PAGA Relief for Unionized Construction Employers) was passed and signed by the Governor: This new law says unionized workers in the construction industry are not covered by PAGA. In California, PAGA stands for Private Attorney General Act and it authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for an employer’s Labor Code violations. The aggrieved employees generally retain 25 percent of any civil penalty recovered and the remaining 75 percent goes to the California Labor and Workforce Development Agency.
AB 1654 exempts union contractors from these lawsuits provided the union contractors’ Collective Bargaining Agreement (CBA) (1) is entered into prior to January 1, 2025, (2) provides for the wages, hours of work, and working conditions of employees, premium wage rates for all overtime hours worked, and for the employee to receive a regular hourly pay rate of not less than 30 percent more than the state minimum wage rate, (3) prohibits all of the violations of the Labor Code that normally would be redressable under PAGA, (4) provides for a grievance and binding arbitration procedure to redress those violations and authorizes the arbitrator to award any and all remedies otherwise available under the Labor Code (except PAGA remedies), and (5) expressly waives PAGA rights.
Consequently, if SCCA’s CBAs comply with the above, those members that are signatories to the CBAs that comply are exempt from a PAGA lawsuit. At this time, however, no court has ruled whether the current CBAs are sufficient to exempt SCCA union contractors from PAGA actions and take advantage of AB 1654.
On another positive note Governor Brown used his veto pen on several bills that would have really hurt employers. The bills passed both the Assembly and the Senate; however, fortunately for employers, they were vetoed. Although the following bills are not law, watch these issues and prepare for implementation after the next legislative session and a new governor.
AB 3080 (Arbitration Agreements)
This bill would have made it unlawful for an employer to require employees to agree to arbitrate claims arising under the Labor Code (claims for unpaid wages, missed meal and rest breaks, etc.) or FEHA (claims for discrimination/harassment, etc.). Governor Brown cited Federal preemption as the basis for the veto, which is odd because California has been challenging Federal preemption in several other areas. Many legal practitioners think it’s wise to have arbitration agreements with employees. For now, those agreements are still valid; however, expect another attempt to get the arbitration ban into law.
AB 3081 (Joint Liability for Harassment)
This bill would have made a client “employer” jointly liable for harassment of an employee provided by a labor contractor. It also would have amended Labor Code 230 to provide for protected time off for victims of sexual harassment. It would have created a rebuttable presumption of retaliation for any adverse action taken against an employee within 30 days of being notified that the employee was the victim of harassment.
The Bad and the #Me Too Laws
Despite some welcome vetoes from Governor Brown, the Legislature did pass, and the Governor did sign, several bills that will have a negative impact on SCCA members and many employers throughout the state. Unless noted otherwise, these will be law effective January 1, 2019.
SB 1252 (Copy of Payroll Records)
Existing law already requires that employees have a right to inspect or copy their payroll records and that they must be allowed to do so within 21 days of such a request. This new law clarifies that if an employee requests a copy of the records, the employer must provide the copies (as opposed to requiring employees to copy the records themselves).
AB 1565 (Contractor Liability)
This new law took effect immediately as urgency legislation. It clarifies a new law enacted last year making certain direct contractors performing work in the state liable for unpaid wages by subcontractors. The amendments to the law provide requirements that must be met in order for a direct contractor to withhold payments to a subcontractor for “disputed sums.”
To withhold payment, the contractor must specify in its contract with a subcontractor all items of information that will be requested of the subcontractor, such as payroll records and other information related to hours worked. Make sure you immediately review and/or amend your contracts to be in compliance with the requirements of AB 1565; otherwise, without compliance, you may be unable to withhold payments if you don’t receive the necessary documentation from your subcontractors and vendors.
With the conviction of comedian Bill Cosby for sexual assault and allegations against Harvey Weinstein and others with their names on the Hollywood Walk of Fame, Sacramento and the Governor signed a number of bills regarding sexual harassment. While the Legislature’s intent was to correct past injustices, the unfortunate fallout is that California employers will bear the burden of added liability, the cost of training, record retention, and eventual litigation costs over the new requirements. Here is a quick summary of the new laws.
AB 3109 (Disclosure of Sexual Harassment)
AB 3109 makes void and unenforceable any provision in a contract or settlement agreement that prevents a party to the contract from testifying about criminal conduct or sexual harassment in an administrative, legislative, or judicial proceeding. With the passing of this law, it’s critical to review the “boilerplate” contained in many old settlement agreements. Old agreements that contain any language similar to this may void confidentiality and other provisions.
SB 224 (Sexual Harassment)
This bill amends section 51.9 of the Civil Code to expand the types of relationships that can be subject to a claim for sexual harassment to include lobbyists, elected officials, directors, producers, and investors. This statute generally applies to work relationships in which one person holds himself out as being able to help someone establish a business or professional relationship directly or with a third party.
With the vague language of SB 224, employers must be extremely cautious about employee relationships with not only other employees, but with investors, vendors, subcontractors, inspectors, and virtually anyone encountered in business. The pool of potential “sexual harassment plaintiffs” has just grown exponentially.
SB 820 (Settlement of Sexual Harassment Claims)
This new law prohibits provisions in settlement agreements entered into after January 1, 2019, that prevent disclosure of information pertaining to claims of sexual assault, sexual harassment, gender discrimination or related retaliation that have been filed in court or before an administrative agency. The new law does not prohibit a provision that prevents the parties to the agreement from disclosing the amount of the settlement. Also, at claimant’s request, the settlement agreement can include a provision that limits the disclosure of the claimant’s identity or of facts that would lead to the discovery of the claimant’s identity.
SB 1300 (FEHA Amendments)
This bill amends FEHA (Fair Employment Housing Act) in a number of ways, including making it unlawful for an employer to require an employee to release an FEHA claim in exchange for a bonus, raise, or continued employment, making employers liable for any kind of unlawful harassment by non-employees (not just for sexual harassment, as under existing law) where the employer knew or should have known of the harassment and failed to take appropriate remedial action, and adding certain statements of legislative intent to make it harder for employers to prevail on harassment claims. For example, there is a legislative declaration that harassment cases are rarely appropriate for resolution on summary judgment and a declaration that a single act of harassment may suffice to support a finding of a hostile work environment.
Simply put, this bill will increase the costs for litigating and settling any FEHA claim for California employers. Based on the “legislative intent,” virtually every harassment claim will have to be evaluated as if it’s going all the way to trial . . . no matter how weak.
With all these new requirements, obligations and potential liability, the Legislature now requires additional training to deal with these issues. SB 1343 (Sexual Harassment Training) was expanded to include small companies. Existing law required employers with 50 or more employees to provide supervisors with sexual harassment training.
The new law expands the training requirement to employers with five or more employees and requires that employers provide at least two hours of training to supervisory employees and at least one hour of training to non-supervisory employees by January 1, 2020, and once every two years thereafter.
AB 1619 (Sexual Assault; Statute of Limitations)
This new law increases the statute of limitations for filing a civil action for damages for sexual assault to 10 years after the alleged assault or three years after the plaintiff discovered or reasonably discovered injury because of the assault, whichever is later. To the extent there is employer civil liability under the doctrine of “respondent superior” (the employer responsible for the acts of the employee) for sexual harassment, the statute of limitations has been greatly expanded.
Can you imagine trying to investigate and respond to a complaint against your company for the acts of one of your employees 10 years ago?
SB 826 (Gender Composition of Boards of Directors)
This new law provides for mandatory inclusion of women on corporate boards of directors. Specifically, by the end of 2019, publicly held domestic or foreign corporations with principal executive offices in California must have a minimum of one female director on their boards. By the end of 2021, these corporations must comply with the following: (1) if the number of directors is six or more, the corporation must have a minimum of three female directors; (2) if the number of directors is five, the corporation must have a minimum of two female directors; (3) if the number of directors is four or fewer, the corporation must have a minimum of one female director. The new law also requires the Secretary of State to publish related statistics on its website.
While this only currently applies to publicly held/traded companies, it wouldn’t be surprising if the legislature expanded this to private companies.
SB 1976 (Lactation Accommodation)
SB 1976 makes changes to the existing lactation accommodation law. The existing law requires employers to make reasonable efforts to provide a location other than a toilet stall to be used for lactation.
The new law specifies that the location should be something other than a bathroom and further specifies that it generally should be a permanent location but that it can be a temporary location if (1) the employer is unable to provide a permanent location due to operational, financial, or space limitations, (2) the temporary location is private and free from intrusion while being used for lactation purposes, and (3) the temporary location is not used for other purposes while being used for lactation.
If an employer can prove it’s an undue hardship to comply, the employer may be able to provide a location (including a bathroom) other than a toilet stall. SB 1976 does not reference construction job trailers or construction sites or how contractors might comply with this law.
While the economy is currently moving along at a brisk pace, it’s critical for all SCCA member employers to be mindful of these changes in the law. Update your contracts and sub-contracts, employment agreements, settlement agreements, policies and procedures, and training to comply with the “legal minefield” that Sacramento expects California employers to navigate.
Patrick M. Hartnett can be reached at (714) 738-1156 ext. 210 or phartnett@hartnettlawgroup.com.
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