Settlement and Severance Agreement Restrictions Headline Final 2021 Legislative Approvals

Seyfarth Synopsis:  On Saturday, October 9, 2021, Governor Newsom signed the last of 2021’s pending employment-related bills, including a bill imposing even more restrictions on settlement agreements.  The new laws will become effective on January 1, 2022. This post summarizes the new approvals as well as other new key employment laws with which California employers will need to comply.

On October 9, 2021, a day before his official deadline, Governor Newsom finished review of the 836 bills passed to him by the Legislature, signing 770. This 7.9% veto rate is higher than the lowest veto rates tallied by Jerry Brown in the late ‘70s/early ‘80s; but far lower than Arnold Schwarzenegger, who had the highest veto rates.

The most notable bill approved on October 9 was the “Silenced No More Act,” SB 331, which will, for settlement agreements entered into on or after January 1, 2022, expand the prohibition on confidentiality provisions to all forms of workplace discrimination.

Large retailers and wholesalers were hit especially hard this legislative season, with bills such as AB 1084, which will require large retail department stores to display a “reasonable selection” of gender-neutral items for children; SB 62, which imposes joint and several liability for brand guarantors and garment manufacturers; and AB 701, which will impose notice and other requirements on warehouse distribution centers that use quotas. 

Also notable are AB 1003, making wage theft grand theft, and AB 1033, which expands CFRA leave to parents-in-law.  Conspicuously absent from the final new law count is any legislation extending COVID-19 Supplemental Paid Sick Leave, which expired September 30, 2021.

Read on for summaries of recently-approved employment laws as well as other major employment bills that the Governor approved or vetoed.

Approvals

More Restrictions on Settlement and Severance Agreements:  For settlement agreements entered into on and after January 1, 2022, SB 331, the “Silenced No More Act” amends Section 1001 of the Code of Civil Procedure (enacted by SB 820 of 2018).  The law extends the prohibition on confidentiality provisions in settlement agreements to all forms of workplace discrimination—not just discrimination based on sex.

SB 331 also amends Section 12964.5 of the Government Code (enacted by SB 1300 of 2018) so that employers implementing non-disparagement agreements as a condition of employment (or in a separation agreement) will need to carve out an employee’s ability to discuss conduct the employee has reason to believe is unlawful. Specifically, it requires provisions restricting employees’ ability to disclose information related to conditions in the workplace to state: “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.” The bill also adds a provision specifically stating that any agreement or document violating the above provisions is contrary to public policy and unenforceable. These provisions do not prohibit inclusion of a legally-valid general release or waiver of all claims in a separation agreement, and requires employers offering agreements related to separation to notify the employee that he/she has a right to consult with an attorney, and provide at least five days within which to do so. Like its predecessors, the bill authorizes provisions prohibiting disclosure of the amount paid in a severance or settlement agreement, as well as an employer protecting its trade secrets, proprietary information or confidential information that are not related to unlawful acts in the workplace.

Gender Neutral Retail Departments: AB 1084 will require a retail department store with 500 or more employees that sells childcare items to maintain a gender-neutral section, displaying a “reasonable selection” of items for children, regardless of whether they have been traditionally marketed for either girls or for boys. These requirements will be enforced by the State of California through the Attorney General, a district attorney, or city attorney, and provides for recovery of attorney’s fees. Failure to comply with the measure’s requirements will yield a civil penalty not to exceed $250 for a first violation, and $500 for a subsequent violation.

Large Group Health Insurance: SB 255 will authorize an association of employers to offer a large group health care service plan contract or large group health insurance policy consistent with ERISA if certain requirements are met, including: (1) that the association is headquartered in California; (2) has continuously been a Multi-Employer Welfare Arrangement under ERISA (MEWA) since before March 23, 2010; (3) and that the large group health care service plan contract or large group health insurance policy have provided a specified level of coverage since January 1, 2019.

Warehouse Distribution Center Employee Quotas AB 701, among other things, adds several Labor Code sections that will require employers with over 100 California employees at a single warehouse distribution center—or with 1,000 or more California employees at multiple warehouse distribution centers—to give each nonexempt employee (including employees of third-party employers, temporary services, or staffing agencies) a written description of any quota that applies. This notice is to include (1) the number of tasks to perform or materials to produce or handle, (2) the relevant time period, and (3) any potential adverse employment action that could result from a failure to meet the quota. This written description must be provided upon hire, or within days of the January 1, 2022, effective date.

CFRA Leave for Parents-in-Law AB 1033, co-sponsored by the California Chamber of Commerce, will add parents-in-law to the list of family members for which an employee can take leave under the California Family Rights Act (CFRA). This addition builds upon last year’s SB 1383, which expanded CFRA to require businesses with as few as five employees to provide 12 weeks of mandatory family leave per year. SB 1383 also expanded the categories of persons for whom an employee can take CFRA leave to care to include grandparents and domestic partners. According to the Chamber of  Commerce, the inclusion of “parents-in-law” was inadvertently omitted from 1383, and its inclusion here, in AB 1033, is to fix this oversight.

AB 1033 will also require the Department of Fair Employment and Housing (DFEH) to notify an employee in writing of the requirement for mediation under the DFEH’s small employer mediation program prior to filing a civil action, and would require an employee to contact the DFEH’s dispute resolution division to indicate whether they are requesting mediation, and make other related changes.

Garment Manufacturer Brand Guarantor Wage/Hour Liability SB 62 will subject those sitting at the top of the supply chain—what the bill calls “Brand Guarantors”—to liability for the wage violations committed by their garment manufacturing vendors, even where the ultimate seller of the garment was completely unaware of the violation. In other words the bill will make clothing “brands” and holding companies—and even retailers—jointly liable with the contractors from whom they purchase t-shirts, hats, or even belts to sell for the contractor’s wage/hour violations, and perhaps even for violations by the contractor’s subcontractor.

According to the Governor’s signing announcement, SB 62 aims to “protect marginalized low-wage workers, many of whom are women of color and immigrants, ensuring they are paid what they are due and improving workplace conditions.” The California Chamber of Commerce disagrees, noting that “[n]othing in SB 62 will address the problem of underground bad actors in the garment industry evading the law”; SB 62 simply “allows those bad actors to continue operating as usual while passing the cost and liability to companies that have no control over the workers.” Time will tell if this measure will accomplish its intended goal. Regardless, employers should begin auditing their garment manufacturing vendors as soon as possible.

Emailing Required Postings to Employees SB 657 adds Section 1207 to the Labor Code to authorize employers to additionally distribute information that they are required to physically post to employees by email with the document or documents attached.

AB 5 Exemptions: Newspaper Distributors and Carriers and Manicurists AB 1506 and AB 1561, among other things, extend the exemption from the application of the ABC test for independent contractor status for newspaper distributors working under contract with a newspaper publisher and newspaper carriers, and for licensed manicurists, to January 1, 2025.

Wage Theft as Grand Theft AB 1003 adds Section 487m to the Penal Code, making it the crime of grand theft to engage in intentional theft of wages, including gratuities, “in an amount greater than nine hundred fifty dollars ($950) from any one employee, or two thousand three hundred fifty dollars ($2,350) in the aggregate.” Grand theft is generally punishable either as a misdemeanor by imprisonment in a county jail for up to one year or as a felony by imprisonment in county jail for sixteen months or two or three years.

Removing IWC Licenses to Pay Less to Individuals with Disabilities Starting January 1, 2022, SB 639 will prohibit the Industrial Welfare Commission from issuing special licenses that authorize the employment of a person with a disability for less than the minimum wage.

PAGA Janitorial CBA Exception SB 646: Creates a limited exception from PAGA for specific janitorial employees performing work under a collective bargaining agreement.

Expansion of OSHA Citation Authority SB 606 will radically increase Cal/OSHA’s enforcement power by establishing two additional categories of violations for which Cal/OSHA can issue citations: (1) “Enterprise-wide Violations” and (2) “Egregious Violations.” The California Chamber of Commerce initially designated SB 606 a job killer, but removed the bill from the list after amendments removed a provision that would have created a rebuttable presumption of retaliation if an employer were to take adverse action against an employee within 90 days of the employee taking any of a number of actions, such as disclosing a positive COVID-19 test or diagnosis of a communicable disease or reporting a possible violation of an OSHA standard.

Cal/OSHA agricultural workers wildfire smoke protections AB 73 imposes wildfire smoke protections for agricultural workers.

COVID-19 Workplace Notices AB 654, effective immediately upon its October 6, 2021, approval, clarifies AB 685 of 2020, which requires notice of COVID-19 cases in the workplace by eliminating duplicative obligations for businesses in certain industries, matching terms to corresponding federal guidelines, among other changes.

Hospitality Preferential Hiring for Pandemic Layoffs SB 93 requires certain hospitality employers—hotels, private clubs, event centers, and airport hospitality services—and successor employers, to offer preferential hiring to employees laid off because of the pandemic. The bill carried an urgency clause, making it effective the same date the Governor signed it, April 16, 2021.

COVID SPSL (Now-Expired) Extension SB 95 was a budget trailer bill that—effective immediately upon its April 16, 2021, signing, and retroactive to January 1, 2021—extended COVID-19 supplemental paid sick leave (SPSL) to September 30, 2021, for employers with over twenty-five employees. The law provided an annual allotment of up to eighty hours of available SPSL, covered persons who telework, and extended SPSL entitlements to reasons related to vaccinations and family care.

Vetos 

AB 616 would have created a process for agricultural employees to elect a labor representative through a ballot card election. In his veto message, the Governor cited inconsistencies and procedural issues related to the collection and review of ballot cards and directed the Labor and Workforce Development Agency to work with the Agricultural Labor Relations Board to go back to the drawing board and develop new policy proposals for legislative consideration.

AB 123 would have revised the formula for calculating certain leave benefits by requiring the weekly benefit amount be increased to equal to sixty-five or seventy-five percent of the highest wages paid to an individual. In his veto message, the Governor expressed his support for a robust paid leave program, but noted that his administration has already enacted a number of measures—SB 83 (increased duration of paid family leave), SB 1383 (CFRA expansion), AB 138 (increasing wage replacement)—aimed at increasing paid leave, making this legislation an unnecessary new expense. According to the bill’s author, however, the current formula for determining wage replacement is woefully deficient for low-income workers.

AB 1074 would have renamed the “Displaced Janitor Opportunity Act” the “Displaced Janitor And Hotel Worker Opportunity Act,” extending the right to recall provisions of the Act to hotel workers. In his veto message, the Governor explained that he enacted SB 93 in the beginning of 2021, which provided robust recall rights for hotel workers displaced by the pandemic.

Workplace Solutions

Employers will need a few months to prepare before the new laws become effective on January 1, 2022. Should you have a specific question about proactive measures to ensure compliance with any of the above new requirements, please feel free to reach out to your Seyfarth counsel.