Major Changes to California Employment Law: What Employers Need to Know for 2025

Employers in California, and others with California employees and worksites, should take note of new laws set to take effect on January 1, 2025, as well as laws that have recently gone into effect that may impact their operations. Understanding the changes is essential for compliance, and Dinsmore's labor and employment attorneys are available to assist with navigating these regulatory changes to ensure your organization remains compliant.

Landmark Reforms to PAGA Statute Through Assembly Bill 2288 and Senate Bill 92

Over the last 20 years, many California employers have faced representative actions under California's Private Attorney General Act (PAGA). PAGA allows employees to sue their employers for California Labor Code violations on behalf of the Labor and Workforce Development Agency (LWDA), themselves and other employees. The defense of PAGA actions has proven to be expensive and time-consuming for California employers due to the large PAGA civil penalty awards ("PAGA penalties") and plaintiffs' attorneys' fees. On July 1, 2024, Governor Gavin Newsom signed into law two landmark reforms to PAGA: Assembly Bill 2288 and Senate Bill 92. Both pieces of legislation were effective immediately, and only apply to civil actions where the required PAGA notice was filed on or after June 19, 2024. The statute of limitation for PAGA penalties remains one year.

Key Takeaways of AB 2288 and SB 92

• PAGA plaintiffs may seek recovery on a representative basis for alleged Labor Code violations, only if the alleged violation was committed against a named plaintiff. Previously, PAGA plaintiffs could seek PAGA penalties for any alleged violation of the Labor Code covered by PAGA, even if the plaintiff was not subject to the alleged violation.
• Trial courts have discretion to manage PAGA actions and can limit the evidence presented at trial or otherwise limit the scope of the claim.
• Employers are now incentivized to act quickly to cure any violations. An employer who takes "all reasonable steps" to comply with the Labor Code before a plaintiff brings their PAGA claim may reduce PAGA penalties by 85%. An employer who takes "all reasonable steps" to cure any alleged violation within 60 days after receipt of the PAGA notice, may reduce PAGA penalties by 70%. "[A]ll reasonable steps" includes: conducting periodic payroll audits and curing any violations found in the results of the audit; maintaining and enforcing lawful written policies; training supervisors to be compliant with the Labor Codes and Wage Orders; and taking appropriate corrective actions with regard to supervisors.
• Additional penalties can be awarded for repeat offenders or if the court finds an employer's conduct was "malicious, fraudulent, or oppressive." In such a case, employees will be entitled to $200 per employee per pay period (increased from $100 per employee per pay period).
• Previously, the Labor and Workforce Development Agency (LWDA) received 75% of the PAGA penalties recovered and the employees recovered 25%. Now, employees are entitled to 35% of all PAGA penalties recovered.
• Employers with fewer than 100 total employees during the PAGA period can provide the LWDA with a confidential proposal to cure the alleged violations asserted in the PAGA notice within 33 days of receiving the notice.
• Employers with at least 100 total employees during the PAGA period can request an early evaluation conference and request for a stay of court proceedings. During the stay, a neutral evaluator will work with the parties to determine: (a) whether any of the alleged violations occurred and have been cured; (b) the strengths and weaknesses of plaintiff's claims and the employer's defenses; (c) whether plaintiff's claims, including any claim for penalties or injunctive relief, can be settled; and (d) whether the parties should share information that could facilitate early evaluation and resolution.

These landmark reforms provide California employers significant financial incentives to actively review their wage and hour practices and policies to heighten compliance with the California Labor Code. Employers should immediately consult with their counsel following receipt of a PAGA notice and implement policies and practices to regularly audit payroll.

Assembly Bill 1034

Assembly Bill 1034 extends the exemption from the PAGA for certain employees in the construction industry until January 1, 2038. The extension applies only to employees covered by a collective bargaining agreement which must meet specific conditions for this extension to apply including: (1) the employee receives a regular hourly pay rate at least 30% more than the state minimum wage; (2) premium wage rates for all overtime hours worked; and (3) it must contain express terms for the wages, hours of work and working conditions of employees.

Senate Bill 1100

Beginning January 1, 2025, Senate Bill 1100 amends the Fair Employment Housing Act (FEHA) to add that requiring a driver's license in a job advertisement, posting, application or other material is an unlawful employment practice unless two conditions are satisfied. The first is that the employer reasonably expects driving to be one of the job functions for the position. Second, the employer reasonably believes that satisfying the job function using an alternative form of transportation would not be comparable in travel time or cost to the employer. The act defines "alternative form of transportation" to include ride hailing services, taxis, carpooling, bicycling or walking.

To prepare, employers should:

1. Review any current job advertisements, postings or applications to ensure they do not include a driver's license requirement unless the above two conditions are met.
2. While the law does not currently define "other materials," employers should review any job descriptions, policies or handbook provisions that may also reference a driver's license requirement.
3. Ensure that all employees involved with hiring are trained on the new law.

Senate Bill 399

Senate Bill 399 created the California Worker Freedom from Employer Intimidation Act. The Act, which will go into effect on January 1, 2025, creates protections for employees who decline to attend or participate in employer-sponsored religious or political meetings and communications. Under the Act, employers may not discharge, discriminate, retaliate or take action against employees who decline to participate. Employers must also pay workers who opt to work, instead of attending meetings held to communicate the employer's opinion on religious or political matters. Notably, political matters include those relating to legislation, regulation and union activity, in addition to elections and political parties.

SB 399 authorizes the Labor Commissioner to enforce its provisions and creates a private right of action for employees to bring civil suits. It imposes a civil penalty of $500 per employee for each violation on employers that violate the Act and allows for injunctive relief and punitive damages.

The Act does not prohibit employers from communicating information necessary for employees to perform their job duties, including public entity employers that communicate regarding policies, law or regulations which the public entity administers. Nor does it prohibit higher education institutes from communications that are part of coursework or academic programming. It likewise does not apply to regular coursework required by educational institutions, employer-required civil rights and occupational safety trainings and public employer orientations.

The Act exempts certain religious entities, political organizations and nonprofits where the meetings or communications relate to their purpose or mission.

It remains to be seen whether, and to what extent, the National Labor Relations Act of 1935 preempts the California Worker Freedom from Employer Intimidation Act; however, challenges are expected.

Assembly Bill 2499

Governor Newsom also expanded the reach of California's anti-retaliation laws regarding employees who need to time off for jury duty, court appearances or who are victims of crime or abuse.

Assembly Bill 2499 further broadened the definition of a victim of a "qualifying act of violence," which means any of the following:

• sexual assault;
• domestic violence;
• stalking; or
• an act, conduct, or pattern of conduct, that includes an individual causing bodily injury or death, brandishing or exhibiting firearms or an individual who uses or makes reasonably perceived an actual threat of use of force against another to cause physical injury or death.

Employees may use vacation time, paid time off or paid sick leave, if available, concurrently with their time off due to a qualifying reason. However, employers are allowed to limit the amount of leave depending on the circumstances. An employer may also require that this leave run concurrently with the Family and Medical Leave Act/California Family Rights Act leave if the employee would have been eligible for that type of leave.

Importantly, employers will be required to give written notice of their rights under the bill to new hires, to existing employees annually, when requested by an employee and when an employee informs the employer that they or a family member is a victim.

Assembly Bill 2123

The California Paid Family Leave Program (PFL) provides wage replacement benefits for employees who take time off to care for certain seriously ill family members, to bond with a child within one year of birth or placement or to participate in a qualifying exigency related to active duty or call to covered active duty of certain family members. Prior to the enactment of Assembly Bill 2123, employers could require employees take up to two weeks of accrued vacation leave prior to accessing PFL benefits. Effective January 1, 2025, an employer can no longer require its employees to use up to two weeks of accrued vacation prior to receiving PFL benefits, making the benefits immediately available.

Assembly Bill 2319

Assembly Bill 2319 expands provisions of the California Dignity in Pregnancy and Childbirth Act. Hospitals are required to provide implicit bias training to employees who interact with perinatal patients. This includes, but is not limited to, physician assistants, medical assistants, licensed vocational nurses, doctors or those who facilitate, control or coordinate access to timely and appropriate medical treatment, as well as any others who provide medical and ancillary treatment. Initial basic training must be completed by June 1, 2025 and must be provided to new employees within six months. Employees are required to complete a refresher course every two years.

Hospitals are required to annually submit proof of compliance to the attorney general. If a hospital's proof of compliance shows that not enough employees have completed the training, a facility is liable for a fine of $5,000 for the first violation and $15,000 for each subsequent violation. A hospital will be found to be non-compliant based on the lesser of the following: 10% or more of employees failed to complete the training, or 25 employees failed to complete the training.

Senate Bill 988

Senate Bill 988 establishes the Freelance Worker Protection Act. Effective January 1, 2025, it imposes minimum requirements relating to contracts between a hiring party and a freelance worker. Under the new law, a "freelance worker" is defined as an individual or single-person organization, whether incorporated or using a trade name, hired as a genuine independent contractor to provide professional services for $250 or more. The bill requires a hiring party to pay a freelance worker the compensation specified by a contract for professional services on or before the date specified by the contract or, if the contract does not specify a date, no later than 30 days after completion of the freelance worker's services. Further, it requires a contract between a hiring party and a freelance worker to be in writing, and mandates a hiring party retain the contract for no less than four years.

Assembly Bill - 3234

This law does not impose any new, affirmative requirements on employers. However, should an employer choose to conduct a "social compliance audit," it will need to follow specific guidelines beginning January 1, 2025. A "social compliance audit" is defined as a voluntary, nongovernmental assessment of an employer's operations or practices to evaluate whether the operations or practices are in compliance with labor laws, including, but not limited to, wage and hour and health and safety regulations, including those regarding child labor. Whether the audit is performed "in part, or in whole, to determine if child labor is involved in the employer's operations or practices," the employer shall post a clear and conspicuous link on its website to a report detailing the findings of the employer's compliance with child labor laws. The report must contain the following:

1. The year, month, day and time the audit was conducted, and whether the audit was conducted during a day shift or night shift.
2. Whether the employer did or did not engage in, or support the use of, child labor.
3. A copy of the employer's current and past written policies and procedures related to child employees.
4. Whether the employer exposed children to any workplace situations that were hazardous or unsafe to their physical and mental health and development.
5. Whether children worked within or outside regular school hours, or during night hours, for the employer.
6. A statement that the auditing company is not a government agency and is not authorized to verify compliance with state and federal labor laws or other health and safety regulations.

Assembly Bill 1815

Assembly Bill 1815 modernizes the definition of "race" under California law, removing the term "historically" from the definitions of race. It also clarifies that traits associated with race include, but are not limited to, hair texture and protective hairstyles. AB 1815 is declaratory of existing law, meaning it applies retroactively and prospectively.

Senate Bill 1137 - This bill clarifies that the Fair Employment and Housing Act (FEHA), the Unruh Civil Rights Act and the Education Code prohibit "intersectional discrimination" - meaning the combination of two or more protected traits.

Senate Bill 828

Senate Bill 828 initially delayed the implementation of minimum wage adjustments for certain healthcare workers by one month. However, the day before the new adjustments were to take effect, the governor signed SB 159, causing a further delay. The adjustments ultimately took effect on October 16, 2024.

Senate Bill 1340

Starting January 1, 2025 Senate Bill 1340 provides that any political subdivision of the state may enact and enforce anti-discrimination laws that are at least as protective as state law. Specifically, SB 1340 mandates the Civil Rights Department (CRD) under the Unruh Civil Rights Act to work with local agencies to prohibit discrimination in employment against classes of persons covered by the act if certain requirements are met. This means we may see local agencies investigating and enforcing anti-discrimination laws, potentially increasing the burden on businesses to respond to administrative actions.

Assembly Bill 2011

Assembly Bill 2011 expands the Civil Rights Department's (CRD) Small Employer Family Leave Mediation Program. This program provides mediation through the CRD for alleged violations of certain provisions on family care and medical and bereavement leave. The Mediation Program will now be expanded to alleged violations of prescribed provisions on reproductive loss leave.

If you have questions about any of the upcoming changes, or need assistance with compliance, please reach out to a Dinsmore labor and employment attorney.

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