New 2023 Employment Laws & How Businesses Can Protect Themselves

The COVID-19 pandemic changed the workplace as we once knew it. Extensive legislation was enacted placing greater responsibility on employers to deal with the impact of spreading illness in the workplace. Even with the pandemic receding, laws continued to be enacted or extended focused on employee leave and health and safety in the workplace in 2022.

Expansion of the California Family Rights Act, mandatory Paid Sick Leave for COVID-related illness, extended workplace safety protections, and Workers’ Compensation coverage for employees based on the rebuttable presumption they contracted COVID-19 in the workplace were just some of the laws enacted to expand and enhance employee benefits. These laws are set to take effect in the coming year.

Also front and center are bills that will expand pay data reporting and pay scale disclosure. Important court decisions also have been issued that are already having a significant impact on employee arbitration and meal and rest periods.

This article is not an exhaustive list of all the new laws and regulations to take effect in 2023, but it does summarize key new laws. Please reach out to any of Dykema’s Labor and Employment attorneys to discuss the impact of the new laws on your business and to assess the best approach for complying with these new developments.

Minimum Wage Increase

On January 1, 2023, the minimum wage in California will increase to $15.50 per hour for all employers, regardless of the number of workers employed. Many cities and local governments have also enacted minimum wage ordinances exceeding the state minimum wage.

The salary to qualify for the administrative, executive, and professional exemptions from California’s overtime laws will increase to $64,480 on January 1, 2023, for all-sized employers. Local minimum wage requirements do not affect this salary threshold.

The salary to qualify for the computer professional exemption will increase to $112,065.20 annually and $53.80 per hour.

For licensed physicians and surgeons, including dentists, the statutorily specified rate to be deemed exempt from overtime regulations effective January 1, 2023, will be $97.99 per hour. The current hourly rate is $91.07.

Take Away: Every employer’s minimum wage rate for non-exempt employees and annual salaries for exempt employees need to be verified periodically to ensure compliance with current federal, state, and local laws. An employer’s failure to comply with either minimum wage requirements or salary floors can result in significant liability for back pay as well as statutory penalties to the improperly paid employees. A review of current compensation levels accompanied by targeted increases as necessary is important to avoid that liability.

The Importance of Meal and Rest Break Compliance Continues

This California Supreme Court clarified that meal and rest period premiums must be reported on the employee’s wage statement and paid within the statutory deadline for all wages due upon separation of employment in Naranjo v. Spectrum Security Services, Inc. (2022) 13 Cal.5th 93. This case increases exposure for meal period and rest break violations, as the derivative penalties can result in penalties significantly higher than the violations particularly in currently pending and future class actions and PAGA claims.

Take Away: Employers must be even more vigilant about compliance with California’s meal period and rest break requirements, as well as ensure accurate wage statements include any meal period and rest break penalty information. Failure to pay employees properly during their employment necessarily results in inaccurate wage statements and a failure to pay all wages when due. Simple, accurate bookkeeping allows employers to avoid these potentially significant statutory penalties.

Mandatory Bereavement Leave Policies

AB 1949, effective January 1, 2023, for the first time requires employers to provide time off of work to eligible employees after the death of a qualifying family member (this includes a spouse or domestic partner, child, parent, sibling, grandparent, grandchild, and parent-in-law).

• Employees are eligible for bereavement leave once they have been employed for at least 30 days prior to the commencement of leave.
• The five days of bereavement leave do not need to be taken consecutively and can be taken intermittently.
• The employee, however, must complete the bereavement leave within three months of the family member’s death.
• An employer may require that the employee provide documentation of the death of the family member including a death certificate, published obituary, or written verification of death, burial, or memorial services.

All employers must provide employees with five days of unpaid bereavement leave. Employees also must be allowed to use any paid vacation, personal leave, accrued and available sick leave, or compensatory time off that is otherwise available to them to be compensated during this leave.

Take Away: This is a new law that can be easily overlooked. Employers should ensure their bereavement leave policies are updated to reflect this change in the law, and that their supervisors and managers receive training in the new law’s requirements.

Leave of Absence: Expansion of “Family Member” Definition

AB 1041, effective January 1, 2023, expands the definition of “family member” and whom an employee can take leave to care for to include a “designated person”. The law is applicable to the California Family Rights Act (CFRA) and California paid sick leave law, the Healthy Workplaces and Healthy Families Act (HWHFA), “Designated Person” is defined differently under each law.

The California Family Rights Act (CFRA)

The CFRA allows eligible employees to take up to 12 weeks of paid or unpaid job-protected leave during a 12-month period for specified reasons. One reason is to care for a family member who has a serious health condition. Currently, the CFRA defines family members as a child, parent (including parent-in-law), spouse, registered domestic partner, grandchild, grandparent, and sibling. Under AB 1041 “designated person” will include “any individual related by blood or whose association with the employee is the equivalent of a family relationship.”

California Paid Sick Leave Law. The Healthy Workplaces and Healthy Families Act

Under California’s paid sick leave law, employees can use paid sick leave for the diagnosis, care, or treatment of an existing health condition of, or preventive care for, a family member. The Act previously defined a family member only as a child, grandchild, grandparent, parent, registered domestic partner, sibling, or spouse. AB 1041 adds a “designated person,” defined as “a person identified by the employee at the time the employee requests paid sick days.”

Take Away: While the expansion of the definition of a family member does not allow an employee to take additional leave beyond what is provided in the CFRA or the sick leave law, it does accommodate the needs of an employee who has a close relationship with someone who is not a traditional family member.

Keeping up with the California Equal Pay Act and the 2023 New Pay Transparency Law

The California Equal Pay Act

The California Equal Pay Act (EPA) was originally enacted in 1949 and prohibited an employer from paying its employees less than employees of the opposite sex for equal work. Since then, the Act has kept up with the times. Key amendments strengthened the EPA in a number of ways reflecting California’s commitment to achieving real gender pay equity beginning with the following amendments, effective January 1, 2016:

• Elimination of the requirement that the employees being compared work at the “same establishment.”
• Requiring equal pay for employees who perform “substantially similar work,” when viewed as a composite of skill, effort, and responsibility.
• Limiting the so-called “bona fide factor other than sex” defense.
• Prohibiting retaliation against employees who seek to enforce the law.
• Making it illegal for employers to prohibit employees from discussing or inquiring about their co-workers’ wages.

In 2017, a bill added race and ethnicity as protected categories. Consequently, employers are prohibited from paying employees less than employees of the opposite sex, of another race, or of another ethnicity, for substantially similar work. In addition, employers are prohibited from using prior salary to justify any sex-, race-, or ethnicity-based pay difference.

Labor Code section 432.3 was added in 2018 and generally prohibits employers from seeking applicants’ salary history information. It also requires employers to supply pay scales upon the request of an applicant.

As amended, the Equal Pay Act prohibits an employer from paying any of its employees wage rates that are less than those paid to employees of the opposite sex, of another race, or of another ethnicity for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.

The 2023 New Pay Transparency Law

AB 1162 imposes new pay data disclosure obligations on California employers. Compliance will require significant preparation.

The law requires that an employer with 15 or more employees include the pay scale for a position in any job posting, whether the posting is internal or external. If such an employer engages a third party to announce, post, publish, or otherwise make known a job posting, the employer must provide the pay scale to the third party, and the third party must include the pay scale in the job posting. “Pay scale” has been previously defined in California Labor Code section 432.3 to mean a salary or hourly wage range, and does not include bonuses, equity, or other types of compensation.

The law also includes additional requirements:

• An employer, upon request, must provide an employee the pay scale for the position in which the employee is currently employed.
• Private employers with 100 or more employees (with at least one in California) must submit an annual pay data report, including median and mean hourly rates for race, ethnicity, and sex within each job category, to the California Civil Rights Department, (the CRD; formerly known as the Department of Fair Employment and Housing, the DFEH). The reports will be publicly accessible.
• Employers must pay civil penalties for violating the new law. For each employee not included in the report, the employer would be fined $100 for the first omission and $200 for repeat omissions.

Private employers with more than 100 employees will be required to file an annual pay data report with the California Civil Rights Department by the second Wednesday in May. The first report will be due on May 23, 2023, for the 2022 year.

The new pay disclosure requirements go into effect on January 1, 2023.

Take Away: Depending on the size of the employer compliance with the New Pay Transparency Law can be daunting. The greater number of positions and the variance in pay depending on the location of the job can make compliance extremely difficult, at least with the first attempt to comply. Employers should start preparing ahead of time and be sure that sufficient resources are assigned to compliance. Once a system is established, updating should become far less time intensive. 

Getting High Off-the-Job: Cannabis Use Protection

As of January 1, 2024, AB 2188 will prohibit employers from discriminating against a worker based upon their off-the-job use of cannabis. Under the new law, employers can only take action against a worker for failing a valid pre-employment drug test if it, “does not screen for nonpsychoactive cannabis metabolites.” Importantly, the new law allows an employer to administer performance-based impairment testing, and to terminate the employment of an employee who is determined to be impaired by cannabis on the property or premises of the place of employment. The new law does not preempt state or federal laws requiring employees to be tested for controlled substances. Also, employees in building or construction trades are excepted from the prohibition on cannabis testing.

Employee Arbitration Agreement Developments

In a landmark victory for employers, the United States Supreme Court held in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, that employers can compel arbitration of an employee’s individual claims brought under the California Private Attorneys General Act (also known as PAGA). Before this decision, California courts precluded the arbitration of individual Labor Code claims brought under PAGA. That meant that even if the parties signed an agreement to arbitrate all claims, the PAGA was required to be litigated separately in court while the other alleged Labor Code violations could be arbitrated. Employers could not compel PAGA claims into arbitration.

Under the Supreme Court’s ruling, a plaintiff asserting a PAGA claim who is subject to an arbitration agreement requiring them to arbitrate claims individually may be compelled to arbitrate an individual PAGA claim for California Labor Code violations. The Court held that PAGA actions are severable into individual and non-individual claims and that individual PAGA claims can be compelled to arbitration if the agreement so provides. If that happens, then the individual loses standing to pursue non-individual PAGA claims in court, providing a basis for dismissal of those claims by the employer.

Take Away: Based on the Supreme Court’s Viking River Cruise decision, employers who do not have Mutual Arbitration and Class Action Waiver Agreements would do well to implement them. Employers who already have employee arbitration agreements should review them to be sure they comply with all requirements of California’s strict limits on arbitration along with a provision mandating the employee’s arbitration of individual PAGA claims and a strong severability clause.

Payment of Arbitration Fees

Recent developments highlight the requirement to pay arbitration fees timely. SB 762 became law in 2022 and required payment of arbitration fees “upon receipt”, with failure to pay resulting in a waiver of the right to compel arbitration.

Stand-alone Arbitration Agreements

Another important decision, Mendoza v. Trans Valley Transport (2022) 75 Cal. App.5th 748, underscored the importance of having a standalone arbitration agreement signed by both the employer and employee. In Mendoza, the court refused to find an enforceable agreement to arbitrate where the agreement merely appeared in a handbook, even though the employee had signed a handbook acknowledgment.

Extension of COVID-19 Notice Requirements and Cal/OSHA Authority

AB 2693 extends the statutory COVID-19 notice requirements until January 1, 2024. Previously, these notice requirements generally required employers to provide individual written notice to employees and others who may have been exposed to COVID-19 in the workplace. The good news is AB 2693 will require employers (in lieu of individual notice) to prominently display a notice of exposure in all places where notices to employees concerning workplace rules or regulations are customarily posted for 15 days when there has been a COVID-19 exposure. In the alternative, an employer can provide individual notices in the same general manner as previously required under the law.

The California Privacy Rights and Enforcement Act (“CPRA”) and Expanded Employee Provisions

The California Privacy Rights and Enforcement Act (“CPRA”) of 2020 requires covered businesses to provide legitimate and accessible means to allow consumers to obtain their personal information, delete it, correct it, or opt out of its sale. There was a partial exception for data collected for employment purposes which expires on January 1, 2023.

Covered employers under the CPRA

The CPRA is applicable to any company that collects the personal information of any California consumers and that in the past 12 months:

• Had at least $25 million of annual gross revenue,
• Bought sold, shared, or received personal data or the personal information of 100,000 or more California residents, and
• Received over half of its revenue from the sale of the personal data of California residents.

Under the law, covered Employers must provide notice of employees’ rights under the CPRA and provide employees, a way to tell the employer about their exercise of these rights. Employees may request that the company disclose the personal information collected about them and request that this information be deleted or corrected.

Employees also may direct the company not to sell or share their personal information, and each employee has the right to limit the use of sensitive personal information. Employees have the right to access personal information and to know what personal information is sold or shared and to whom.

Covered employers need to respond to data subject requests from employees, including the right to access or correct personal information. Employers need to prepare by doing the following:

• Identifying the personal information the company collects about its employees,
• Developing an employee and job applicant privacy notice,
• Reviewing contracts with service providers that receive and/or process employee personal information, and
• Establishing internal procedures to receive, analyze, and honor employee data requests.

Take Away: The expansion of the CPRA to provide the same privacy protections to employees as already exist for consumers should not be as difficult as it sounds. Employee privacy rights are guaranteed to employees under the California Constitution so employers already should have a system in place under which personal information is protected and never sold or shared without the employee’s consent. The only thing new for covered employers is the need to establish the procedures and provide the same notices to employees as should already be in place for consumers.

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For more information about these new laws and regulations, please contact Laura P. Worsinger (213-457-1744 or lworsinger@dykema.com), Charlotte Carne (734-214-7641) or ccarne@dykema.com), or Jasmina E. Aragon (213-457-1830 or jaragon@dykema.com).