Recent California Supreme Court Decisions Support Pay Protections for Employees Required to Remain on Work Premises and Expansive Standing for Plaintiffs Bringing Representative PAGA Claims


I.   Introduction – The Two Recent Supreme Court Cases, an Aligned Ninth Circuit Decision, and Suggestions for Employers

In two cases in February and March 2020, the California Supreme Court continued its expansive approach to employment claims.  In Frlekin v. Apple, Inc. (Feb. 13, 2020) 8 Cal.5th 1038, the Court held that the time spent by an employee on the employer’s premises waiting for and undergoing a search of packages, bags and personal technology devices brought to work constitutes “hours worked” for which the employer must compensate the employee.  In Kim v. Reins International California, Inc. (Mar. 12, 2020) __ Cal.5th __, 2020 WL 1174294, the Court held that an employee’s settlement of individual claims under the California Labor Code does not strip the employee of standing to bring representative claims under California’s Labor Code Private Attorneys General Act (PAGA; Lab. Code § 2698 et seq.).  And in an even more recent decision, Herrera v. Zumiez, Inc., (Mar. 19, 2020), __ F.3d __, 2020 WL 1301057, the U.S. Court of Appeals for the Ninth Circuit, following California appellate precedent, held that an employer must pay its employees for “reporting to work” where the employer requires them to call their manager within an hour before a scheduled shift to determine whether they are needed for the shift.

     Suggested Employer Response 

  1. In light of the decision in Frlekin, employers should consider adapting their policies either (a) to pay employees for time that the employer requires the employees to remain on the premises for searches of bags, packages or personal devices, before the employee commences or after the employee finishes performing work, or (b) to eliminate requirements, like wearing branded apparel, for which employees can reasonably be expected to bring a bag or parcel to work.
  2. Similarly, to address the holding in Herrera and the California case on which it relies, employers need to adapt their policies with better analytics on their anticipated staffing needs for various shifts. This may entail keeping better track of past staffing during similar shifts and also expanding employee responsibilities so that, for example, if an employee who is assigned to a shift is not needed for sales, he or she can be assigned to stocking inventory or other tasks.  Employers will need to determine whether the costs and benefits of requiring employees to call in shortly before a shift for which they must keep themselves available if needed outweigh the costs and benefits of definite advance scheduling.
  3. Based upon the holding in Kim, employer defendants in cases that include claims for Labor Code violations as well as PAGA representative claims should either make sure that a settlement resolves the PAGA claims, which will require court review, or be prepared to resolve those claims separately.

II.  Cases Imposing Compensation Obligations on Employers that Require Employees to Devote Their Time to Employer Needs

     A.  Frlekin v. Apple, Inc.: Where an employer’s policies compel its employees to bring bags to work, the employer must compensate them for the time to await and undergo searches of the bags before exiting the premises. 

Frlekin involved Apple’s policy of subjecting its retail store employees to “personal package and bag searches,” and requiring personal Apple technology to be “verified against [their] Personal Technology Card” during such searches.  The searches were required any time an employee exited the store “for any reason (break, lunch, end of shift).”  Employees had to clock out before awaiting and undergoing the searches.  As the Court pointed out, Apple retail store employees did not bring a bag to work solely for personal convenience; many carried in their bag their “Apple-provided apparel,” which they were required to wear at work and prohibited from wearing or displaying while outside the store.

The case focused on the proper interpretation of “hours worked,” a term in Wage Order 7 issued by California’s Industrial Welfare Commission, which “requires employers to pay their employees for all ‘hours worked’.” The Wage Order defined “hours worked” as “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so . . . .”  In reaching its conclusion that Apple was obligated to pay its employees for the time waiting for and undergoing the bag/package searches, the Court focused on the part of the definition that related to employer control of the employee.

The Court based its analysis on the judicially applied rule of interpretation of wage orders (and wage and hour laws) – that they are liberally construed to serve their remedial purpose, which is to protect and benefit employees.  Citing Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 587, the Court explained:

“. . . that ‘[t]he level of the employer’s control over its employees, rather than the mere fact that the employer requires the employees’ activity, is determinative’ concerning whether an activity is compensable under the ‘hours worked’ control clause. [Citation omitted.]  We also emphasize that whether an activity is required remains probative in determining whether an employee is subject to the employer’s control. But, at least with regard to cases involving onsite employer-controlled activities, the mandatory nature of an activity is not the only factor to consider. We conclude that courts may and should consider additional relevant factors — including, but not limited to, the location of the activity, the degree of the employer’s control, whether the activity primarily benefits the employee or employer, and whether the activity is enforced through disciplinary measures — when evaluating such employer-controlled conduct.”

Applying those factors, the Court easily found Apple obligated to compensate its retail store employees for the time spent awaiting and undergoing searches before Apple’s premises, because employees were subject to Apple’s control in connection with the searches:  Apple required compliance with the bag-search policy “under threat of discipline,” including termination; it confined employees to the premises until the search was performed; and it compelled employees to perform certain supervised tasks before and during the search, including locating a manager or guard, waiting for that employee’s availability, and opening packages and removing personal Apple technology devices for inspection.

The Court rejected Apple’s asserted interpretation of the Wage Order that “an employee’s activity must be ‘required’ and ‘unavoidable’ in order to be compensable.”  Those words were not in the text of the Wage Order, and Apple’s interpretation was inconsistent with the history of the definition of “hours worked” in the Wage Order.

The Court disagreed with Apple’s contention that the searches are akin to commute time for which an employer need not compensate an employee.  In contrast to commuting, in which an employer’s interest was limited to the employee arriving on time, Apple’s own interest in the search policy – to deter theft – was paramount.  Moreover, Apple’s policy controlled its employee in the workplace, not (as in commuting) while they were off premises coming to or leaving work.

The Court found galling Apple’s argument that its search policy was in part for the benefit of its employees, because, Apple maintained, it could have banned employees from bringing packages and personal technology devices to work.  In light of Apple’s directive that employees wear Apple-branded apparel in the store but not outside, “it is reasonable to assume that some employees will carry their work uniform or a change of clothes in a bag in order to comply with Apple’s compulsory dress code policy.”  The Court commented: “Apple’s personal convenience argument rings especially hollow with regard to personal Apple technology devices, such as an iPhone.”  The Court quoted the U.S. Supreme Court: “modern cell phones . . . are now such a pervasive and insistent part of daily life that the proverbial visitor from Mars might conclude they were an important feature of human anatomy.”  (Carpenter v. United States (2018) 585 U.S. __, 138 S.Ct. 2206, 2218.)  It quoted an even higher authority, Apple itself, which stated in an amicus brief filed in the Carpenter case that cell phones are “practical necessities of modern life,” “fundamental tools for participating in many forms of modern-day activity,” and “not just another technological convenience.”  And it quoted the highest authority, Apple CEO Tim Cook, who said in an online CNBC interview that the iPhone had “become so integrated and integral to our lives you wouldn’t think about leaving home without it.”

     B.  Herrera v. Zumiez, Inc.: An employer that requires its employees to call their manager 30 minutes to an hour before a scheduled shift commences must pay compensation to those employees for “reporting to work.” 

Like Frlekin, Herrera addressed Wage Hour 7, but rather than just the issue of how to interpret the term “hours worked,” the Herrera Court also focused on the term “report to work.”  Relying on and following a California Court of Appeal decision in Ward v. Tilly’s, Inc. (2019) 31 Cal.App.5th 1167, which it found no “persuasive data that the [California Supreme Court] would decide otherwise,” the federal appellate court found that requirement that employees call in at a specified short time before the beginning of a shift to find out if the employer would need them for the shift imposed “tremendous costs on employees” because “they cannot commit to other jobs or schedule classes during those shifts,” and had to “make contingent childcare or elder care arrangements, for which they might have to pay even if they” found that the employer did not need them for the shift.

As the employer controlled how its employees had to present themselves for work, the Court concluded that calling in constituted reporting for work, for which the employer had to compensate the employees.  “‘Report for work,’ in other words . . . is defined by the party who directs the manner in which the employee is to present himself or herself for work – that is, by the employer.”  (Quoting Ward, at 475.)

Because calling in constituted reporting for work, the employer was obligated to pay the employee “reporting time pay.”  Under section (5) of Wage Order 7, reporting time pay is compensation for at least “‘half the usual or scheduled day’s work’ in an amount no less than two hours’ wages and no more than four hours’ wages” even if the employer does not have sufficient work for the employee for those minimum time periods on the day the employee reported to work.

The Court also held that, under section 4(B) of Wage Order 7, which requires employers to pay employees at least the minimum wage for “all hours worked,” the plaintiff had stated a claim, subject to proof, for compensation for the time spent calling in 30 minutes to an hour before the commencement of a shift.  The determination of “hours worked” depends in part on whether the employee is under the control of the employer.  The plaintiff had alleged that the employer exerted control over the calls, “as well as the timing, frequency, and duration of the calls.”  The employee was entitled to present proof of that control at trial.

III.  Kim v. Reins International: Because a plaintiff need not show injury to himself to bring a representative PAGA claim, he may pursue representative PAGA claims after settlement and dismissal of his individual Labor Code claims.

In Kim, the plaintiff, whom Reins had employed as a “training manager,” which it had classified as an exempt position, asserted class claims against Reins for misclassification.  His complaint included claims for Labor Code violations, a claim under California’s Unfair Competition law, and representative PAGA claims.  Upon motion by Reins, the trial court compelled arbitration of Kim’s individual Labor Code and UCL claims (except for the UCL claim for injunctive relief), dismissed class claims, and stayed the PAGA claims.  Reins later served a statutory offer to compromise with regard to Kim’s individual claims, Kim accepted the offer, and those claims were dismissed.  Reins then filed a motion for summary judgment on Kim’s representative PAGA claims, which the trial court granted, finding that Kim lost standing upon settlement and dismissal of his individual claims, because he was no longer an “aggrieved employee”.

The California Supreme Court reversed, holding that standing for PAGA representative claims does not require the plaintiff to allege or show he suffered injury as a result of the employer’s Labor Code violations.  “The plain language of section 2699(c) [of the Labor Code] has only two requirements for PAGA standing.  The plaintiff must be an aggrieved employee, that is someone ‘who was employed by the alleged violator’ and ‘against whom one or more of the alleged violations was committed.’”  Reins’ argument that standing was “premised on a plaintiff’s injury,” and that the resolution of Kim’s individual claims via compensation for his injury removed the basis of his standing, “is at odds with the language of the statute, the statutory purpose supporting PAGA claims, and the overall statutory scheme.”

Because the “Legislature defined PAGA standing in terms of violations, not injury,” Kim achieved standing as an aggrieved employee when Reins committed one or more Labor Code violations against him, and “[s]ettlement did not nullify those violations.”

The Court found its interpretation aligned with PAGA’s statutory purpose, noting that the “sole purpose in enacting PAGA” was to expand the “limited enforcement capability” of the state agency that had been tasked with enforcing the Labor Code.   The PAGA plaintiff acts on behalf of the state government in bringing the PAGA claims; he is not seeking to redress employees’ injuries in such claims, but to “remediate present violations and deter future ones.”  (Citing Williams v. Superior Court (2017) 3 Cal.5th 531, 546.)

The Court held:  “The state can deputize anyone it likes to pursue its claim, including a plaintiff who has suffered no actual injury.”

This holding, that there are no restraints on who the state can deputize to pursue statutory claims on the state’s behalf, could result in expanded representative PAGA claims.  In a different legal context six years ago, the proliferation of lawsuits asserting representative claims under California’s Unfair Competition Law (“UCL”) by plaintiffs who did not suffer an injury themselves led to Proposition 64, an initiative on the November 2004 ballot. California voters passed Prop. 64 by a 60 to 40 margin.  The initiative amended, among other provisions, section 17204 of the Business and Professions Code to impose a standing requirement for plaintiffs – other than state or local law enforcement authorities – who wished to bring a representative UCL claim.  Since adoption of Prop. 64, a private plaintiff has been required to allege and show that he “suffered injury in fact and has lost money or property as a result of the unfair competition.”  (Bus. & Prof. Code § 17204; see id. § 17203 (incorporating standing requirement in section 17204 into provision for representative actions).)

With the significant impact of the COVID-19 pandemic on employers and employees alike, it is difficult to predict whether a proliferation of PAGA claims against employers by employees who have not suffered injury as a result of technical Labor Code violations will lead to an initiative like Prop. 64, particularly if such claims hit smaller employers who are more highly impacted by the current crisis and who lack the sophistication and human resources personnel to assure complete compliance with California’s complex Labor Code provisions.


Government to the Rescue: A Selective Compendium of Assistance for Businesses, Employers, Landlords and Tenants


With all of the laws, orders and regulations being passed, adopted or issued to address the crisis occasioned by the COVID-19 pandemic, I thought it might be helpful to provide a summary of many recent local (Los Angeles), California and federal passed, issued or proposed government actions granting relief and stimulus to businesses, employers and property owners.

I.     Los Angeles City Orders

  1. On March 23, 2020, the Mayor of the City of Los Angeles issued an order expanding the protection against evictions for residential tenants who are able to show an inability to pay rent due to circumstances related to the COVID-19 pandemic. (
  2. On March 17, 2020, the Mayor had issued an order protecting those commercial tenants from eviction who are “able to show an inability to pay rent due to circumstances related to the COVID-19 pandemic. These circumstances include loss of business income due to a COVID-19 related workplace closure, child care expenditures due to school closures, health care expenses related to being ill with COVID-19 or caring for a member of the tenant’s household who is ill with COVID-19, or reasonable expenditures that stem from government-ordered emergency measures.” (

II.     Relief for Borrowers   

Federal and state banking regulators have encouraged financial institutions to work with borrowers to address loan modifications that may be necessitated by the COVID-19 pandemic.  On March 22, 2020, the federal regulatory agencies and state banking regulators issued an Interagency Statement encouraging and effectively making it easier for banks to reach short term modifications with borrowers who were current on their loans before the COVID-19 crisis began.  (

III.     California Order

CA Executive Order N-31-20 ( temporarily suspends the 60-day notice requirement under the California WARN Act (Lab. Code § 1400, et seq.) for employers that give written notice to employees and meet other conditions.  The Executive Order gives relief to California employers who had (or have) to take action to lay off employees or suspend operations because of the impact of the COVID-19 crisis, but would not have been able to do so under the California WARN Act, which does not contain the exception for “unforeseen business circumstances” included in the federal WARN Act.  The California Department of Industrial Relations, Division of Labor Standards Enforcement and the Employment Development Department (EDD) issued guidance about this change, which explains the conditions an employer must meet to qualify for the temporary suspension, the manner in which notice must be sent, and applicability of the California WARN Act in general.  (

IV.     Federal Legislation

     A.     The Coronavirus Aid Relief, and Economic Security Act

On March 25, 2020, the U.S. Senate unanimously passed and sent to the House of Representatives H.R. 748, the “Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act,” to provide massive financial relief and stimulus to stem the financial crisis caused by the COVID-19 crisis.  The House is expected to pass the bill in short order, and the President has pledged to sign it.  Included in the Senate bill, in addition to direct payments to income-qualified individuals, are the following provisions:

  1. Expanded Unemployment Benefits. The legislation provides for a $600 per week increase in unemployment compensation insurance benefits (funded by the federal government), which currently average $300 per week.  The increased benefit lasts for up to four months.  It also expands unemployment benefits to people whose employment may not have been terminated but who cannot work as a result of coronavirus, either because they are sick, quarantined or need to take care of a child forced to stay home from school, and to people who are self-employed or are independent contractors working in the gig economy.
  2. Grants, loans and loan guarantees for businesses. The CARES Act authorizes grants, loans and loan guarantees for large businesses in “severely distressed industries,” including $25 billion in grants and $25 billion in loans to the passenger airlines, $17 billion to companies deemed critical to national security (read Boeing), and $425 billion for other businesses, cities and states, allocated through a funding mechanism established by the Federal Reserve.  Grants or loans from the $425 billion fund come with restrictions:  They may not be used for salary increases for executives of firms receiving the funds or for stock buybacks that primarily benefit company shareholders.  The legislation includes oversight measures for the fund, including a congressional oversight panel and a new inspector general to examine decisions made by the Treasury Department.  And allocations from the fund may not be used to benefit the President, Vice President, Cabinet members, Members of Congress, or their family members.  Allocations to “mid-sized businesses” with 500 to 10,000 employees are conditioned upon a pledge of neutrality in any union organizing efforts during the life of the loan.  Zero-interest loans of up to $10 million per business for businesses with fewer than 500 employees will be available through lenders (banks and credit unions) certified by the Small Business Administration.  Such loans will be convertible to grants if used for employee salaries, rent, paid leave, utility payments, health insurance premiums or other business necessities or worker protections.
  3. Other breaks for businesses. Under the legislation, businesses will be able to delay payment of the 6.2 percent payroll tax on wages over the following two years, with the first half due at the end of 2021, and the second half due at the end of 2022.  Other business tax breaks include an increase from 30 percent to 50 percent of the amount firms may deduct off their interest, delays in corporate and business taxes, and a change in the tax law to permit the hospitality industry to expense immediately the costs of building improvements.

     B.    The Family First Coronavirus Response Act

HR6201, the Family First Coronavirus Response Act, which was adopted on March 18, 2020, applies to employers of fewer than 500 employees and covers employees who have worked for their current employer for at least 30 days.   The Department of Labor is tasked with issuing regulations to grant relief to employers of 50 or fewer employees if compliance with the Act would jeopardize the viability of the business.  The FFCRA includes the following provisions:

  1. The Act has many sections but the provisions relevant to most employers are found in an amendment to the Family Medical Leave Act, which will be in effect through December 31, 2020, and by a new “Emergency Paid Sick Leave Act”.  These two provision fit together as pieces of a whole, which allows up to 12 weeks of paid leave (subject to modest dollar and other limits) for affected employees.
  2. Payroll Tax Credits for Employers.  Employers that are required to pay benefits to covered employees, as explained below, are allowed reimbursement of the amounts paid, up to the dollar limits for such benefits as set by the Act, by means of a refundable tax credit against payroll taxes as claimed on the employer’s quarterly tax return.  Employers may obtain help with cash flow by accessing employment taxes that have been withheld as set aside for deposit with the IRS.
  3. FMLA Amendments.  The FMLA amendments pertain only to employees who are caring for a son or daughter if the school or place of care for the child has been closed, or the child care provider of the child is unavailable, due to COVID-19 precautions.  These circumstances are added to all other occasions for leave under the FMLA, while the Act is in effect. The first 10 days of such leave may be unpaid, though any eligible employee may use other available paid leave during this initial 10 days.  The balance of the 12 weeks family leave may be paid at the rate of up to two-thirds of the employee’s regular pay for the number of hours per week the employee usually works, subject to a cap of $200 per day and $10,000 in total.
  4. Emergency Paid Sick Leave.  This “first two weeks of compensation” is broader in coverage than the FMLA provision.  It provides for pay at the employee’s regular rate, subject to $511/day (and $5,110 in the aggregate) cap, if the employee:(a) is subject to a quarantine or isolation order; (b) has been advised to self-quarantine; or (c) is experiencing symptoms; or for pay at two-thirds of the employee’s regular rate, subject to a $200/day (and $2,000 in the aggregate) cap, if the employee (d) is on leave to care for an individual who is subject to an isolation order or is a quarantined employee; or (e) is on leave to care for a son or daughter if the school or place of care for the child has been closed or the child care provider of the child is unavailable, due to COVID-19 precautions.

U.S. District Court Prohibits Enforcement of AB 51, the New CA Law that Would Ban Arbitration Agreements as a Condition of Employment


In my post on November 12, 2019, I described new California laws impacting employers as of January 1, 2020.  See  One of those laws, AB 51, prohibits employers from requiring new and current employees to enter into arbitration agreements as a condition of employment.

On December 6, 2019, the U.S. and California Chambers of Commerce, along with other business associations, filed a lawsuit in the U.S. District Court in Sacramento, asking the Court to declare AB51 is preempted by the FAA and therefore unenforceable as applied to arbitration agreements governed by the FAA and to enjoin California governmental from enforcing AB51 as applied to such agreements.

The plaintiffs filed a motion for temporary restraining order (TRO), which was heard on December 23, 2019.  On December 30, 2019, the Court granted the motion and issued a TRO prohibiting enforcement of AB51, because of the serious concerns raised about whether the statute is preempted by the FAA.  The Court also set a hearing for January 10, 2020 on a preliminary injunction.

In light of the Court’s ruling, AB51 cannot be enforced against employers that require current or new employees to sign an arbitration agreement as a condition of employment.  Employers should stay informed about the status of this case, and in particular the outcome of the January 10, 2020 hearing.



I.  Introduction

New laws that take effect at the turn of the year increase the risk of liability to those employers that do not plan for compliance.  Some steps that employers should consider include:

  1. Taking a close look at how they classify workers, either as independent contractors or as employees, and determining whether, under the ABC test (see part II, below), if applicable to the employer’s industry, previously classified contractors need to be reclassified as employees.
  2. Assessing, on one hand, the risk of continuing to include arbitration agreements in employment arrangements against, on the other hand, the value of such agreements and the possibility that the law prohibiting such agreements will ultimately be struck down as preempted by the Federal Arbitration Act.
  3. Improving documentation of grounds for termination, changes in terms or conditions of employment or decisions not to hire an applicant, in light of the tripling of the length of the statute of limitation to bring a claim for discrimination, harassment or retaliation under the Fair Employment and Housing Act.
  4. Modifying settlement agreements to eliminate “no rehire” clauses, and improving documentation of determinations not to rehire former employees who have brought claims against the employer.
  5. Implementing measures to comply with those provisions of the California Consumer Privacy Act for which the effective date was not extended to January 1, 2021, including notice of personal information an employer is gathering from employees and applicants resident in California and bolstering security measures for such data, to avoid the private right of action for unauthorized access caused by a security breach. 

II.  AB5 – The Enshrinement of the Dynamex Decision in the Labor Code—with Exceptions

Building on the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (see, the California legislature passed AB 5, enshrining the ABC test for independent contractor/employee classification in the California statutes.

AB5 makes clear that the ABC test for worker classification applies to the California Labor Code, the California Unemployment Insurance Code, and California Wage Orders.  Under the ABC test, a worker is “considered an employee rather than an independent contractor” unless the hiring entity sustains its burden to show all of the following factors are met:

A. The worker “is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.”

B.  The worker “performs work that is outside the usual course of the hiring entity’s business.”

C.  The worker “is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”

AB5 contains a host of exceptions – specified industries in which the ABC test does not apply to classification of workers.  Most of those industries had heavily lobbied the Legislature for an exception.  In many instances, where the statute states that the ABC test does not apply, it states that the long-time multifactor test for classifying a worker as a contractor or an employee, as stated in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, will apply.

Under Borello, the main factor in the classification determination is whether the person to whom the worker renders services has control or the right to control the worker with regard to the work done and the manner and means in which it is performed.  Other factors considered include: whether the person performing services is engaged in an occupation or business distinct from that of the person for whom the work is performed; whether the work is a part of the regular business of the latter person; which party supplies the instrumentalities, tools, and the place for the person doing the work; the level of skill required for the services rendered; whether in the locality, the work done by the worker is usually done under the direction of the person for whom the work is performed or by a specialist without supervision; the worker’s opportunity for profit or loss depending on the work performed; the length of the work relationship; and whether the work is paid by time or by the job.

One or more ride-share companies are organizing to place an initiative on the California ballot to make AB5 and the ABC test inapplicable to their drivers.  And some industries that the Legislature did not except from AB5 are contemplating constitutional challenges to the statute.  For now, on or before January 1, 2020, companies treating workers as independent contractors will need to consider seriously whether to change their classification to employees.

III.  AB51 – No Forced Arbitration Clauses with Employees

AB51, effective January 1, 2020, adds section 432.6 to the Labor Code to prohibit employers “as a condition of employment, continued employment, or the receipt of any employment-related benefit” from “requir[ing] any applicant for employment or any employee to waive any right, forum, or procedure for a violation of” the California Fair Employment and Housing Act (“FEHA”) or the Labor Code.  The statute’s nonexhaustive list of rights, forums or procedures that an employer is prohibited from requiring an employee or applicant to waive includes “the right to file and pursue a civil action or a complaint with, or otherwise notify, any state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity of any violation.”  The prohibition extends to any agreement that would require an employee “to opt out of a waiver”.  The legislation also adds section 12953 to the California Government Code (where the FEHA is located), to make it “an unlawful employment practice for an employer to violate section 432.6 of the Labor Code.”

The legislation contains a savings clause, stating that it is not “intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act. . . .”  And it excepts from the prohibition “postdispute settlement agreements or negotiated severance agreements.”

While the U.S. Supreme Court has ruled heavily in favor or enforcement under the Federal Arbitration Act of arbitration agreements between employers and employees, as well as class action waivers, it has based such ruling in large part on upholding the intention of the parties as disclosed in the arbitration agreements.  It has not ruled on state laws that prohibit compelled arbitration agreements.  How the Court views this new law may depend upon (1) whether it accepts the premise that, under the FAA, one condition of employment, that is, an arbitration agreement, can be singled out for prohibition, and (2) whether it sees the law as having a “disproportionate impact” on arbitration, which could make it subject to preemption by the FAA.

Pending a ruling on the statute’s enforceability, an employer runs the risk of liability under the FEHA for including as a condition of employment, the employee’s acceptance of an arbitration agreement.

IV.  AB9 – Lengthened Statute of Limitations for Discrimination and Harassment Claims under the Fair Employment and Housing Act

AB9, effective January 1, 2020, amends the FEHA, in particular section 12960 of the Government Code, increasing from one year to three years the statute of limitations for filing with the Department of Fair Employment and Housing (“DFEH”) a complaint alleging discrimination, harassment or retaliation in violation of the FEHA.  Filing a complaint with the DFEH and obtaining notice from that department that it will not pursue a civil action with regard to the complaint is a necessary prerequisite to a plaintiff filing a civil action in court for FEHA violations.

AB9 does not revive claims that have lapsed under the current statute of limitations, and it does not change the one-year limitations period for a plaintiff to file a civil action for FEHA violations, which starts to run from the date of the DFEH’s notice that it will not pursue a civil action.

Because a complaint for FEHA violations may now be filed up to four years after an alleged violation of that statute, employers should take greater care to document all decisions and actions taken with regard to hiring, discipline, promotions, demotions, termination and other terms and conditions of employment.  Statutes of limitation are adopted to provide sufficient time for an injured party to bring a lawsuit to seek redress and at the same time place an outer limit on such claims, to avoid the fading of memories, loss of records and other impacts on evidence that parties may need to offer to pursue or defend against a claim.  AB9 resets the balance in favor of allowing later claims over the risk that evidence will be lost by the passage of time.

V.  AB749 – Prohibition on “No Rehire” Provisions in Settlement Agreements

AB749 adds section 1002.5 to the California Code of Civil Procedure effective January 1, 2020, to ban inclusion in an agreement settling an employment dispute of any provision that “prohibit[s], prevent[s], or otherwise restrict[s] a settling party that is an aggrieved person from obtaining future employment with the employer against which the aggrieved person has filed a claim, or any parent company, subsidiary, division, affiliate, or contractor of the employer.”  Any provision that violates this provision is void.

The new law will not prohibit an agreement between an employer and aggrieved employee to end an employment relationship or a provision to prohibit the aggrieved employee from further employment, where “the employer has made a good faith determination that the person engaged in sexual harassment or sexual assault.”  In addition, the new law will not require an employer “to continue to employ or rehire a person if there is a legitimate non-discriminatory or non-retaliatory reason for terminating the employment relationship or refusing to rehire the person.”

In light of this law, where an employer is considering terminating employment of an employee who has filed a claim against the employer in court, before an administrative agency, in an alternative dispute resolution forum, or through the employer’s internal complaint process, the employer should be even more careful to assure that it has documented defensible reasons to terminate the employee.  Likewise, if a former employee who has filed such a claim applies for re-employment, the employer should have documented defensible reasons not to employ him or her.

VI.  SB688 – Expansion of Labor Commissioner Authority to Issue Citations for Failure to Pay Wages

SB688 amends section 1197.1 of the Labor Code to expand the Labor Commissioner’s Authority to issue a citation for underpaid wages.  In addition to the Labor Commissioner’s authority to issue a citation to an employer for having paid less than the minimum wage to its employees, the Commissioner is empowered, effective January 1, 2020, to issue a citation to an employer that has “paid a wage less than the wage set by contract in excess of the applicable minimum wage” in order to obtain restitution of the amounts underpaid.  This amendment provides an additional means for employees to recover wages they allege an employer failed to pay in accordance with a contract.

The law requires an employer that challenges a Labor Commissioner finding of unpaid wages in court to post a bond for the amount of found by the Commissioner to be due and owing.  The bond is forfeited to the Labor Commissioner if the court affirms or modifies the Commissioner’s finding and the employer fails to pay that amount within 10 days of the court’s ruling.

VII.  SB778 – Extension of Deadline to Provide Harassment and Abusive Conduct Training

This legislation extends the time from January 1, 2020 to January 1, 2021 for employers with five or more employees to provide at least two hours of classroom or other effective interactive training and education regarding sexual harassment to all supervisory employees and at least one hour of classroom or other effective interactive training and education regarding sexual harassment to all nonsupervisory employees in California.

VIII.  AB25 – Partial Reprieve on Applicability of the California Consumer Privacy Act (“CCPA”) to Employers

AB25 gives employers with employees who reside in California limited breathing room to prepare for the full application of the new law to data they gather from such employees.  For an employer to which the CCPA applies – that is, a for-profit entity that either (1) has annual gross revenues over $25 million; or (2) alone or in combination, annually buys, receives for its commercial purposes, sells, or shares for commercial purposes, alone or in combination, the personal information of 50,000 or more consumers, households, or devices; or (3) derives 50 percent or more of its annual revenues from selling consumers’ personal information – the application to employees’ personal information is delayed until January 1, 2021, but only to the extent that such information is used for purposes of the employment relationship.

Employers to which the CCPA is applicable must still be prepared for the law as of January 1, 2020, because of the following provisions:

  1. Absent adoption of a further delay in the CCPA’s applicability to employers, as of January 1, 2021, businesses will be required to disclose data collected during the prior 12 months upon a request. Tracking of such data should start on January 1, 2020.
  2. AB25 does not delay the January 1, 2020 implementation date for the requirement that a company notify its employees resident in California of the categories of personal information to be collected and the purposes for which that personal information will be used. Likewise, without further notice to employees of additional data to be collected or other uses to which the information collected will be used, the company will be limited to collecting the data and using it as described in the notice.
  3. AB25 does not delay the January 1, 2020 implementation date for the requirement that employers comply with the other CCPA requirements if they use employee data for non-employment purposes, for example, to market goods or services to employees; those requirements include disclosure and right to opt out of sales of personal information.
  4. AB25 does not delay the January 1, 2020 date authorizing an employee to bring a private right of action for data breaches impacting his or her data.