Among the slew of new laws in California, many give companies more responsibilities around preventing workplace bias, such as measures expanding pay transparency and prohibiting discrimination over off-the-clock cannabis use.
The Golden State has continued in 2022 to be a front-runner in promoting progressive employment proposals that are often models for other state legislatures across the country.
Though attorneys who work in the state say this past legislative session in California may have been roughly average in the number of labor and employment laws passed and signed by Gov. Gavin Newsom (D), they said the content of these particular measures means outsized new compliance expectations for employers.
“They’re scary signposts for what’s in California’s future,” said Adam Abrahms, a Los Angeles-based attorney with Epstein Becker Green PC. “Most employers are usually sitting around every September wondering if this is the year they need to call a bankruptcy lawyer or business relocator.”
The new laws drew praise from worker advocates for their role in promoting pay equity, combating wage theft, and advancing the concept of sectoral bargaining. But business and industry groups say California employers can’t bear more legal uncertainty while they’re still recovering from the fallout of Covid-19.
Small businesses in particular “are attempting a slow crawl out of the Covid hole that they have been in for the last two years,” said John Kabateck, California state director for the National Federation of Independent Business, which represents small employers. “Uncertainty continues to rule the day on main street.”
Pay Data Reporting
Newsom’s flurry of bill signings before a Sept. 30 deadline included leave benefit expansions, a ban on retaliation against those who exit unsafe work sites, and a law that would allow non-citizens to hold law enforcement jobs.
But one of the new employment laws drawing the most attention from companies is SB 1162. The pay transparency measure will likely have the broadest impact on California employers, according to Cepideh Roufougar, an employment lawyer with Jackson Lewis PC in San Francisco.
The law will require nearly 200,000 California companies with 15 or more employees to disclose salary ranges in their job postings starting next year. Previously, employers only had to do so upon reasonable request.
California joins Colorado, New York City, and Washington state in adopting a salary-posting requirement, though only Colorado’s law is currently in effect.
Failure to comply with the posting provision may result in a civil penalty of $100 to $10,000 per violation.
The new law could also reveal pay discrepancies at companies that may be fodder for bias suits. The bill was supportedby the California Employment Lawyers Association, a group of plaintiff-side attorneys.
“Compliance with the bill involves public-facing documents—job postings,” Roufougar said. “I expect there are attorneys out there watching for employers who do not comply.”
Broader pay gaps by gender and race are already well-documented in the state. For instance, California women working full-time earned about 13% less than men in 2020, according to the U.S. Bureau of Labor Statistics.
The bill would also open another avenue for bias litigation by giving current employees the right to request pay scales for their positions, and expanding existing pay data reporting requirements for companies with over 100 employees.
Employers will have to share pay data for contractors like staffing agencies and disclose the hourly wages for workers broken down by job category, race, and gender.
The first reporting deadline under the new law is May 2023. Anne Dana, an employment attorney with King & Spalding LLP, said companies should be preparing now.
“This isn’t information you can collect can assess at the eleventh hour,” she said. “I do think it’s going to significantly affect how employers are looking at pay.”
Employers in California will also no longer be allowed to discriminate against workers or candidates for use of cannabis off the clock after Newsom signed AB 2188. The law, which goes into effect in January 2024, contains exceptions for federal contractors and construction companies.
The bill does allow employers to take action if an employee is high at work, though there currently is no easy way to test for cannabis impairment. Widely available tests for active THC may emerge by the time the law goes into effect, but employers may have to rely on more ambiguous indicators to determine impairment, like physical signs or possession of drug paraphernalia.
The exceptions may be too narrow, according to Scott Witlin, an attorney with Barnes & Thornburg LLP in Los Angeles. The law doesn’t account for non-construction employees who also handle heavy equipment such as forklifts.
“The employers are going to face potential legal peril if one of their employees is high and is going to injure somebody and they don’t really have an effective mechanism to police that,” Witlin said.
Another question some employers have is whether the law exempts all employees of construction companies—including those in administrative roles—or only manual laborers. Employers may have more guidance on this by the time the law is in effect.
Recreational cannabis use has been legal in California since 2016. Over a dozen other states have also passed legislation legalizing recreational cannabis use with various provisions, some of which already included nondiscrimination statutes for off-hours use.
“I think this is a response of the California legislature and the governor to concerns from the cannabis industry as well as members of the public that if use of the substance is legal under state law, employees should have the right to use it on off-shift hours as long as they’re not impaired at work,” said Christopher Olmsted, a San Diego-based partner at Ogletree, Deakins, Nash, Smoak & Stewart PC.
The National Federation of Independent Business and other business groups opposed the measure, objecting to adding cannabis user protections to the state’s civil rights statute, the Fair Employment and Housing Act.
“Cannabis use is not the same as protecting workers against discrimination based on race or national origin. It shouldn’t be this protected class in FEHA,” Kabateck said.
Fast Food Sector Council
Claims of discrimination could become easier for workers to bring against California’s fast food operators because of AB 257, a first-in-the-nation law that applies to all chains with 100 or more US locations.
This law would create a 10-member appointed body, the Fast Food Sector Council, that would have the authority to establish industry-wide standards on working conditions like wages and hours. The council would consist of industry, worker, and government representatives who send proposals to the legislature for approval.
The law also gives fast food employees a path to sue for discrimination or retaliation if they believe they were mistreated after complaining about their employer failing to meet the industry-wide standards. The law establishes a rebuttable presumption of discrimination or retaliation if the worker is fired or disciplined within 90 days of the employer learning of the employee’s protected activity.
The initial proposal was narrowed in employers’ favor, with the current iteration not requiring franchise companies to share responsibility when quick-service restaurants break labor laws. The National Restaurant Association and International Franchise Association have kicked off an effort to circulate a statewide petition to invalidate the law through a referendum.
Abrahms said the law would “create a European-style sectoral bargaining situation” in which employers should expect more regulation, more litigation and “higher costs of operating your business.”
“While this law only directly impacts the fast food sector, it could probably be viewed as what organized labor and the California legislature would like to see happen in many industries,” he said.