New 2024 California Employment Laws & How Businesses Can Protect Themselves

In recent years, the California legislature focused on employment regulations dealing with the pandemic and the impact of illness in the workplace. For 2024, the emphasis shifted to strengthening existing laws in order to expand workers’ rights. This included across-the-board wage increases impacting non-exempt as well as exempt employees, particularly healthcare workers. Stricter laws were passed prohibiting retaliation against whistle blowers and barring employers from taking adverse action against employees for reporting or threatening to report various workplace violations.

The state law mandating paid sick leave days was expanded. In addition to the mandatory Bereavement Leave law enacted last year, a new Reproductive Loss law was enacted that will allow employees grieving due to miscarriage, failed adoption, etc., to take additional leave.

Although California restrictions on employee non-competes are the toughest in the country, the legislature has gone even further. New 2024 laws provide that such restrictive covenants are unenforceable regardless of when and where the contract was signed. The state will also impose notice requirements and compliance deadlines starting in 2024.

This article summarizes the key laws and regulations to take effect in 2024 and beyond that affect our clients—but it does not cover everything. 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.

Wage Increases

On January 1, 2024, the minimum wage in California will increase from $15.50 per hour to $16.00 for all non-exempt employees. Even with this increase many cities and local governments around the state such as San Francisco, Pasadena, San Jose, West Hollywood, and San Diego have enacted their own minimum wage ordinances that exceed the state minimum wage requirements.

Federal contractors: Beginning on January 1, 2024, per Executive Order 14026, the minimum wage rate that generally must be paid to workers performing work on or in connection with covered Federal contracts will increase to $17.20 per hour. In California, these employees must also be paid overtime if they work more than eight hours in a day or 40 in a week.

Exempt Employees: Due to the increase in the state minimum wage, the salary to qualify for the administrative, executive, and professional exemptions from California’s overtime laws will increase from $64,480 in 2023 to a salary of at least $66,560/yr,($1,280/wk) on January 1, 2024. Local minimum wage requirements do not affect this salary threshold for exempt employees. As always, in order to be classified as exempt, employees must also satisfy the duties tests.

Keep in mind:

• If an employee qualifies as exempt due to the duties he or she performs but works on a part-time basis and does not earn at least $66,560/yr in 2024, he or she cannot be classified as exempt and must be paid as an hourly employee.
• Regardless of whether an employee earns a salary of at least $66,560/yr, if the employee does not perform exempt duties (supervisors, managers, professionals) more than 50% of the time, the employee cannot be classified as exempt.

Computer Professionals: The salary to qualify for the computer professional exemption will increase from $112,065.20 annually and $53.80 per hour to $115,763.35 annually and $55.58 per hour effective January 1, 2024.

Licensed physicians and surgeons, including dentists: the statutorily specified rate to be deemed exempt from overtime regulations effective January 1, 2024, will increase from $97.99 to $101.22 per hour.

Take Away: Every minimum wage rate for non-exempt employees and annual salaries for exempt employees needs to be verified periodically to ensure compliance with current federal, state, and local laws.

Employers should review their wage-and-hour practices and be prepared to revise applicable policies to ensure compliance with the increased minimum wage requirements. When minimum wages are increased, the amount of meal and rest period premiums, reporting time pay, split-shift premiums, and waiting time penalties will also increase at the comparable rates.

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.

Minimum Wage Increase in the Healthcare Industry (SB 525)

California’s new healthcare law SB 525, will become effective on June 1, 2024. Coverage under this law is expansive. It will raise the minimum wage for nearly all healthcare employees and contractors, both hourly and salaried, working at facilities that provide patient care, healthcare services, or other services supporting the provision of healthcare. That means not only caregivers but also housekeepers, guards, clerical, administrative, food service, laundry workers, etc.

The minimum wage for employees will increase annually, commencing June 1, 2024, according to various schedules, depending on the applicable thresholds for the respective covered healthcare facility. The minimum wage will range from $18 to $25 per hour and will reach $25 per hour by June 1, 2028 at  all healthcare facilities.

Due to the financial impact of this bill, the state’s Department of Industrial Relations (DIR) is required to develop a waiver program that will allow employers to apply for a one-year temporary pause or alternative phase-in schedule of the minimum wage requirements. The waiver program must be developed no later than March 1, 2024. Also, on or before January 31, 2024, the state’s Department of Health Care Access will be required to publish more detailed information on its website disclosing classifications of the covered healthcare facility employers.

Take Away: SB 525 will go into effect in June 2024, so healthcare employers should consult with employment counsel to determine if and when the minimum wage requirements apply to their business and, depending on the applicable schedules in the statute, which workers are covered under the bill, and whether their business qualifies for a waiver.

Because SB 525 also extends to independent contractors, employers should review their service contracts to ensure these contractors are paid in accordance with the increased minimum wage.

Minimum Wage Increase in the Fast Food Industry (AB 1228)

Pursuant to AB 1228, as of April 1, 2024, California fast food workers at national fast food chains must receive at least $20 per hour in minimum wage. “National fast food chains” are defined generally as, “restaurants consisting of more than 60 (locations) nationally… engaged in providing food and beverages… with limited or no table service.”

The law also provides for the establishment of the “Fast Food Council” under the Department of Industrial Relations that will be responsible for establishing minimum standards for wages, hours, and other working conditions for fast-food workers. Beginning in 2025, the Council will have the authority to increase minimum wages for fast-food workers on an annual basis through 2029.

Expanded Employee Leave Laws

Expanded Sick Leave (SB 616)

This new law, SB 616 effective January 1, 2024, expands paid sick leave requirements for employers. The amendments increase the annual amount of California paid sick leave from three days or 24 hours to five days or 40 hours for eligible employees in each year of employment.

Employers who already offer a paid leave or paid time off policy will now need to ensure that under the policy:

• Employees are eligible to earn at least five days, or 40 hours, of sick leave or paid time off within six months of employment;
• The limitation on the amount of leave that can be carried over to a new year is increased to 40 hours, or five days, in each year of employment or 12-month period;
• Annual thresholds are increased to 80 hours, or 10 days, of accrued leave;
• As before, no accrual or carryover is required if the employee receives the full amount of leave at the beginning of each calendar year or year of employment (front-loaded). The full amount of leave given to employees now means at least 40 hours or five days.
• If an accrual method is used, a cap on carryover of accrued but unused sick hours of no less than 80 hours or 10 days is permitted.

Take Away: It is not enough that employees accrue the increased amount of days required by this new law (at least five days, or 40 hours, of sick leave or paid time off within six months of employment). As with minimum wage laws, employers need to be sure that local laws that require more accrued days than state law and different carry over thresholds are complied with.

Leave for Reproductive Loss (SB 848)

This new leave law, SB 848 goes into effect on January 1, 2024, and provides eligible employees with five unpaid leave days following a “reproductive loss event,” defined as a “failed adoption, failed surrogacy, miscarriage, stillbirth, or an unsuccessful assisted reproduction.” Gov’t. Code §12945.6(a)(7).

Employers can require employees to take the leave within three months of the reproductive loss event triggering the leave, but it need not be taken on consecutive days. Should an employee suffer more than one reproductive loss event, under the law the employer can limit the employee to no more than 20 days of reproductive leave in a 12-month period.

The right to this leave applies to persons who would have been a parent of the child had the event not occurred. Gov’t. Code §12945.6(a)(4), (a)(5), and (a)(6). Eligible employees are those employees who have worked for the employer for at least 30 days.

Although leave under the statute is unpaid, employees are eligible to use vacation, personal leave, accrued and available sick leave, or time off that is otherwise available.

The new law does not require an employee to provide any documentation supporting the request for reproductive loss leave. Further, the employer is responsible for ensuring that any information provided by the employee concerning this act remains confidential and is only shared with internal personnel or counsel as needed.

Take Away: Employers should update their handbook policies to ensure that staff understand their rights under this law and the compliance requirements. This is a complicated law and employment counsel can assist.

Protection from Violence, Harassment, and Retaliation in the Workplace

Workplace Violence Prevention Plans (SB 553)

SB 553, effective July 1, 2024, requires that covered employers develop and implement a comprehensive workplace violence prevention plan. This new law applies to most California employers with limited exceptions. The law will expand three areas for employers: (1) recordkeeping, (2) injury and illness prevention programs, and (3) employee training.

California Labor Code §6401.9(a)(6)(B)), defines “workplace violence” as any act of violence or threat of violence that occurs in a place of employment. It includes, but is not limited to:

• The threat or use of physical force against an employee that results in, or has a high likelihood of resulting in, injury, psychological trauma, or stress, regardless of whether the employee sustains an injury.
• An incident involving a threat or use of a firearm or other dangerous weapon, including the use of common objects as weapons, regardless of whether the employee sustains an injury.

          Written Workplace Violence Prevention Plan

In addition to the current Incident and Injury Prevention Program (IIPP), employers are required to create workplace violence prevention plans. These plans must be in writing and easily accessible to employees. Among other things, the Plans must include the following:

1. Identification (names or job titles) of the person or persons responsible for implementing the program.
2. Effective procedures for the employer to accept and respond to reports of workplace violence, and to prohibit retaliation against an employee who makes such a report.
3. Effective procedures to communicate with employees regarding workplace violence matters.
4. Effective procedures to respond to actual or potential workplace violence emergencies.
5. The employer’s system for ensuring that employees comply with safe and healthy work practices, which may include disciplinary action.

          Training

The law requires employers to provide workplace violence training to their employees. Training should occur when the plan is first established and annually thereafter. Employers should train their employees, supervisors, and upper management concerning their company’s procedure for handling workplace violence, including, how they can access the written workplace violence prevention plan and report workplace violence incidents or concerns. (Cal. Lab. Code §6401.9(e)).

          Recordkeeping

Employers must also retain various records for five years. These records include:

1. Records of workplace violence hazard identification, evaluation, and correction.
2. Training records.
3. A violent incident log for every workplace violence incident.
4. Records of workplace violence incident investigation.

Take Away: There is a lot of preparation and planning to do to meet the July 1, 2024 deadline. Employers should not delay in developing workplace violence prevention plans and developing a training plan for their employees on how to follow them.

Workplace Violence Restraining Orders: Harassment

SB 428 effective January 1, 2025, amends and expands the Workplace Violence Restraining Order statute. California law currently allows an employer to seek a temporary restraining order to protect employees from a person who has engaged in violence or has made a credible threat of violence.

California law will also allow employers to seek a temporary restraining order and/or injunction to prevent further harassment against an individual who has harassed their employees.

“Harassment” is a knowing and willful course of conduct directed at a specific person that seriously alarms, annoys, or harasses the person, and that serves no legitimate purpose. The course of conduct must be that which would cause a reasonable person to suffer substantial emotional distress and must actually cause substantial emotional distress. (Code of Civ. Pro. §527.8(a)(4)).

This law however prohibits a court from issuing an order that would prohibit speech or activities protected by the National Labor and Relations Act.

The Equal Pay and Anti-Retaliation Protection Act – Retaliation Rebuttable Presumption (SB 497)

This law, SB 497 which goes into effect January 1, 2024, makes it easier for employees to establish retaliation claims against employers.

To establish a prima facie case of retaliation, the employee must show that (1) the employee engaged in a protected activity; (2) the employer engaged in an adverse action against the employee (such as a termination, demotion, threat of termination or demotion, suspension, pay cut, or reduced hours); and (3) a causal nexus between the protected activity and adverse action. The burden then shifts to the employer to identify a legitimate, non-retaliatory reason for the action. Thereafter, the burden shifts back to the employee to show that the employer’s non-retaliatory reason was merely a pretext for retaliation.

This new law creates a rebuttable presumption in favor of the employee’s claim. The presumption applies if an employer takes adverse action against an employee within 90 days of the employee’s invoking or assisting in the enforcement of specified Labor Code provisions and the Equal Pay Act. The trier of fact is required to assume an employer retaliated against the employee if the employer disciplined the employee within 90 days of exercising his or her rights. For example, if an employee complains to Human Resources regarding his or her supervisor, and within 90 days of making that complaint, the employee is terminated, the employee will likely satisfy his or her initial burden of establishing a prima facie case of retaliation.

This law also expands the penalties for whistleblowers from a $10,000 penalty per violation to a $10,000 penalty per employee.

Take Away: Employers should assess and readjust how employees are disciplined and how discipline is documented. A comprehensive paper trail is essential. Witnesses should be questioned, and follow-up provided. Document retention both written and electronic is also crucial.

Employee concerns must be taken seriously and never ignored. At the same time, the “other side of the story” should also be fully investigated. Aim for “fair and balanced inquiries”.

California’s Continuing Battle Against Employee Restrictive Covenants 

Unlawful Post-Employment Noncompete Agreements Codified (AB 1076)

Although existing case law (the California Supreme Court decision in Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937), already prohibits post-employment noncompete agreements, this bill AB 1076, codifies that ruling by making it unlawful for employers to include noncompete clauses in employment contracts or require employees to enter post-employment noncompete agreements. This new law which takes effect on January 1, 2024, also voids such clauses in the employment context when they do not meet specific statutory exemptions (such as a non-compete as part of a sale of a business as set forth under California Business and Professions Code).

The law further requires that by February 14, 2024, employers must notify current employees and former employees (employed after January 1, 2022), that any noncompete agreement or noncompete clause contained within an agreement that the current or former employee signed is void (unless the agreement falls within a statutory exception as referred to above). Failure to provide notice is deemed an act of unfair competition, which may subject the employer to civil penalties of up to $2,500 per violation.

Expansion of Prohibitions on Non-Competes (SB 699)

Existing California law prohibits post-employment non-compete agreements with few exceptions (i.e., restrictive covenants in the sale or dissolution of corporations, partnerships, and limited liability corporations) are void and unenforceable. See Business and Professions Code section 16600 et. al. This bill restates California’s public policy that every contract that restrains anyone from engaging in a lawful profession, trade, or business of any kind is prohibited. The bill further provides that any contract that is void and unenforceable under section 16600, regardless of where and when the contract was signed. This restriction applies even if the contract was signed outside of California, and the employment was maintained outside of California.

Because SB 699 restricts California-based employers from enforcing non-competes against employees working in other states it is unclear how a court in another state will handle challenges to noncompete agreements alleged to violate these California laws when the employee works in a state other than California.

By creating a private right of action for violations SB 699 adds explicit enforcement rights for employees regarding restrictive contracts. Employers that violate SB 699 could be liable for civil violations. It goes into effect January 1, 2024.

Take Away: These two bills primarily reiterate what is already the law in California. Except in the context of the sale of a business, California already strictly prohibits post-employment non-compete agreements. These laws will however add enforcement rights that incentivize individuals to challenge a non-compete beyond just declaratory relief.

Notwithstanding California’s current prohibition on restrictive covenants, employers frequently include non-competes in employee agreements believing such clauses serve as a deterrent to competition and chill employee mobility. With these laws, employees will now be on notice that such restrictions are illegal, and employers will have liability if they try to enforce them. Also, under Labor Code §432.5 it is a misdemeanor to require an applicant or employee to agree in writing to an illegal term or condition of employment. Not to mention the Private Attorneys General Act (PAGA) which imposes substantial penalties for the violation of the Labor Code (e.g., $100 per employee per pay period for the first violation, $250 for the 2nd, and $4,000 thereafter).

Employers beware: SB 699 goes into effect on January 1, 2024. In order to avoid civil violations and significant penalties, employers should immediately review and revise standard employment agreements and related documentation for compliance with these laws. Non-competes and other restrictive covenants should no longer be entered into, nor should employers seek to enforce restrictive covenants unless they come within legal exemptions. Alternative ways of protecting against unfair competition might be considered, as discussed below.

Protecting Against Unfair Competition: A Road Less Traveled that Might Take Employers Where They Need to Go

Notwithstanding these laws strengthening prohibitions on employee non-competes and restrictive covenants, company trade secrets that consist of information or things that have economic value because they are not generally known or readily ascertainable by others still can be legally protected. 

Trade secrets can include, for example, confidential customer lists and marketing plans, contractual terms, financial records, formulas, practices, processes, and designs. They also can consist of pricing information, employee performance and salary records, and related data that the company takes reasonable measures to keep secret.

Both the federal Defend Trade Secrets Act (DTSA) and state trade secret statutes, specifically CUSTA, the California Uniform Trade Secret Act, provide civil causes of action and injunctive relief for the theft or misappropriation of trade secrets.

Bottom line: Under both state and federal law individuals are prohibited from disclosing trade secrets or using an employer’s or former employer’s trade secrets directly or indirectly to compete with the employer or to solicit the employer’s customers, clients, or vendors. Companies can proactively take steps to identify, mark, and catalog information that constitutes their trade secrets. Trade secrets need to be specifically defined in Employment Contracts and/or Employee Confidentiality Agreements and provisions included prohibiting the employees from using trade secrets to compete with the company during their employment and after their employment ends. Employment counsel with expertise in this area can be of assistance in preparing enforceable documentation.

Public Enforcement of the Labor Code (AB 594)

AB 594 authorizes a public prosecutor, including the AG, District and City Attorneys, County Counsel, or any other city or county prosecutors to prosecute a civil or criminal action for a violation of specified provisions of the Labor Code or to enforce those provisions independently (primarily wage theft and misclassification laws), until January 1, 2029.

The bill provides that in any action initiated by a public prosecutor or the Labor Commissioner to enforce the Labor Code, any individual agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration, “shall have no effect on the authority of the public prosecutor or the Labor Commissioner to enforce the Labor Code.” Therefore, if a private agreement requires arbitration of a dispute or limits representative actions  that will not affect the prosecutor’s ability to file a civil action

Electronic Notices For Employee Required Information (AB 1355)

AB 1355 authorizes employers to provide specified documents related to benefit claims, such as unemployment insurance, and California earned income tax credits, by email, if the employee opts into receipt of electronic notification.

An employer can provide notifications via email instead, only if the employee opts in, via electronic or written acknowledgment, to receive such electronic communications. Employers are prohibited from retaliating against an employee who refuses to opt in.

AB 1355 becomes effective on January 1, 2024, and automatically terminates on January 1, 2029.

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), Jasmina E. Aragon (213-457-1830 or jaragon@dykema.com), or your Dykema relationship attorney.