New 2025 California Employment Laws and Judicial Decisions and How Businesses Can Protect Themselves

Last year, the California legislature focused on strengthening existing laws in order to expand workers’ rights. Across-the-board wage increases impacted non-exempt as well as exempt employees, particularly healthcare workers. Stricter laws were passed prohibiting retaliation against whistleblowers, paid sick leave days, and bereavement leave, along with the unenforceability of restrictive covenants.

While this year, the statutes enacted by the legislature are less numerous than in prior years, California employers need to be aware that starting in January, the laws enacted will result in important changes. The workplace may also be affected by certain court opinions issued in the past year.

This article summarizes the key employment laws to take effect in 2025 and beyond along with the court decisions that will have significant impact—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 assess the best approach for complying with these new developments.

Employment Laws

Wage Increases

If it were not narrowly rejected by the voters, Proposition 32 would have increased the state minimum wage to $18 an hour for large and medium-sized employers and $17 an hour for employers with 25 or fewer employees.

Nevertheless, effective January 2025, the minimum wage will still increase based on the consumer price index (CPI). The new California state minimum wage will increase to $16.50 an hour (up from $16 an hour). This means the minimum salary test to qualify for the primary exemptions (administrative, executive, professional) will increase from $66,560 per year ($1,280 per week) in 2024 to a salary of at least $68,640 annually or $5,720 monthly in order to qualify as exempt starting on January 1, 2025.

• In addition, many cities and local governments around the state such as San Francisco (San Francisco: $17.70 per hour in 2025), Pasadena, San Jose, West Hollywood ($19.65 per hour in 2025), Los Angeles ($17.27 in 2024 ) and San Diego ($17.25 per hour in 2025) have enacted their own minimum wage ordinances that exceed the state minimum wage requirements.
• Local minimum wage requirements, however, 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.
• Certain fast-food workers must be paid $20 per hour based on the state law that took effect last year. The California Fast Food Council has the authority to raise the fast-food minimum wage effective January 1, 2025, and can do so at any time.
• In October 2024, state law kicked in requiring certain healthcare industry employees to be paid a minimum of $23 an hour through June 30, 2025, which will then increase to $24 an hour. The healthcare minimum wage is set to increase another dollar per hour to $25 on July 1, 2026, depending on the type of healthcare worker involved.
  • Computer Professionals: The salary to qualify for the computer professional exemption will increase from $115,763.35 annually and $55.58 per hour in 2024 to $118,657.43 annually and $56.97 per hour, with a minimum monthly salary of $9,888.13, effective January 1, 2025.
  • Licensed physicians and surgeons, including dentists: the statutorily specified rate to be deemed exempt from overtime regulations effective January 1, 2025, will increase from $101.22 per hour to $103.75 per hour.

Takeaway: 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. Beware of the California Multiplier Effect, in which a violation of a single regulation could lead to violations of several more.

• 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 comparable rates. Wage-and-hour practices and applicable handbook policies should be reviewed periodically to ensure compliance with the increased minimum wage requirements.
• Payroll should be audited for compliance with all the new local and statewide minimum wage requirements for applicable industries and locations. It is essential that exempt employees continue to qualify as exempt under the new salary basis minimum.
• A review of current compensation levels accompanied by targeted increases as necessary is important to avoid that liability.

Paid Family Leave

AB 2123, effective January 1, 2025, eliminates the ability of California employers to require their employees to use up to two weeks of accrued vacation time before they start receiving Paid Family Leave benefits under the EDD’s paid family leave program.

Takeaway: In the long run, this is probably a simpler system to comply with on an administrative basis.

Sick Leave Expansion

AB 2123, effective January 1, 2025, extends the use of sick days to assist any family member who is a victim of certain types of violent incidents or threats of violence. California employers should provide notice of this change to employees and alter their sick leave policies and practices. Employers should also consider training management so that they are aware that leave is no longer limited to victims of domestic violence, sexual assault, and stalking.

Takeaway: There are so many permissible justifications for an employee to use sick leave and reasons for keeping the causes for using sick leave private it might be best to implement a don’t ask-don’t tell policy.

Captive Audience Meetings

Under AB 399, effective January 1, 2025, California, as with a number of other states, will institute a ban on mandatory captive audience meetings. Pursuant to the “California Worker Freedom from Employer Intimidation Act,” California employers will be prohibited from discharging, discriminating, or retaliating against employees who refuse to attend any employer-sponsored meeting related to religious, political, or matters related to the decision to support or not support labor unions.

Takeaway: Employers must refrain from using the workforce to support or oppose political or religious causes. Best to concentrate on work. Another circumstance when a “don’t ask-don’t tell” policy makes sense.

Restrictions on Requiring Drivers’ Licenses for Job Openings

SB 1100, Effective January 1, 2025, prohibits California employers from including statements in job advertisements, job applications, or other employment staffing materials requiring applicants to possess valid driver’s license unless the employer can demonstrate that it: (1) reasonably suspects driving to be one of the job functions of the position and (2) reasonably believes that using an alternative form of transportation (such as biking, public transportation, etc.) that does not require a driver’s license would not be comparable in travel time or cost to the employer.

Takeaway: Employers often automatically or inadvertently request applicants to possess driver's licenses. Best to review ads and applications and make sure these statements are included only when applicable.

Wage and Hour (PAGA) Reform

Employers have been waiting for the enactment of a law like this for a long time. Previously, the Private Attorneys General Act (“PAGA”) allowed potential plaintiffs, aka “Bounty Hunters,” to pursue Labor Code claims against employers even if the claimants did not personally suffer Labor Code violations. Pursuant to the new law, as of July 1, 2024, employees only bring claims for alleged Labor Code violations that they actually experienced. Also, there is a one-year statute of limitations.

Penalties for numerous minor or isolated violations have been reduced or eliminated. Caps have been placed on penalties when employers have taken “all reasonable steps” to comply with certain provisions identified.

As to many more Labor Code sections, the new legislation allows employers an opportunity to cure, including violations relating to:

• meal or rest breaks
• overtime
• minimum wage
• expense reimbursement
• wage statements (pay stubs)

Employers will not have to pay a penalty for a cured wage statement violation. For all other cured claims, the penalty per employee per pay period is capped at a minimal amount. In imposing penalties, the employer’s size and resources, the nature, severity, and duration of the alleged violations, along with efforts to take appropriate corrective action, are required to be taken into consideration by the courts. The trial court may award a lesser or greater amount of penalties if an award is “unjust, arbitrary and oppressive, or confiscatory.”

Takeaway: While this new legislation provides employers with ways to reduce and potentially eliminate penalties related to PAGA actions, the danger of PAGA actions, class actions in general, and even individual wage and hour lawsuits has not gone away. Nor have the army of Bounty Hunters who lie in wait. Employers must remain vigilant. Wage and hour laws are constantly evolving, and the penalties for non-compliance remain challenging. Employers have a significant financial incentive to proactively ensure that their wage and hour practices are compliant with California law.

Crime Victims Leave Expansion

AB 2499, effective January 1, 2025, expands the list of reasons for which employees are permitted to take protected leave, including assisting family members who are victims of specified crimes.

This law also allows the use of state paid sick leave for these purposes. Employees will also be permitted to use vacation, personal leave, paid sick leave, or compensatory time off if that is available.

Of note, the definition of “victims” has been expanded to include a victim of a “qualifying act of violence,” regardless of whether anyone is arrested for, prosecuted for, or convicted of committing any crime, including domestic violence, sexual assault, or stalking involving bodily injury or death, use of a weapon, or use or threat of deadly force.

Employer obligations: The bill requires employers to provide written notice to (1) new hires, (2) all employees annually, (3) at any time upon request, and (4) any time the employer becomes newly aware that an employee or an employee’s family member is a victim.

Takeway: This bill requires continual notifications to employees. Be prepared. Have notices ready to distribute as part of onboarding and HR materials.

Pregnant Workers Fairness Act Regulations and California Law

The Equal Employment Opportunity Commission’s (EEOC’s) final rule implementing the federal Pregnant Workers Fairness Act (PWFA) became effective in June 2024. It is applicable to employers with at least 15 employees.

Although the requirements of the PWFA are similar to California’s pregnancy disability leave law (PDL), which requires covered employers to provide reasonable accommodations to employees “affected by pregnancy,” several PWFA provisions contain notable differences that must be implemented by California employers, including the following:

1. California law does not require employers to excuse an employee from performing their job’s essential functions. Under the PWFA, employers may be required to accommodate an employee by suspending essential job functions unless doing so would impose an undue hardship on the business. PWFA regulations provide that employers may be required to suspend essential functions up to 40 weeks in certain circumstances.
2. Under the PWFA, an employer may require documentation supporting an accommodation request only under specific circumstances. California law is similar in that it allows employers to require a medical certification supporting the accommodation request.
3. Unlike California, the EEOC’s rule provides several instances in which requiring documentation is not reasonable and cannot be required by the employer. These include:
   • When the known limitation and need for reasonable accommodation are obvious.
   • When the employee has already provided sufficient information, such as prior medical certification.
   • When the employee is pregnant, and the requested accommodation is one of four “predictable assessments” described in the regulation, which are accommodations the EEOC asserts are reasonable in virtually all cases, including:
     • Carrying water and drinking as needed during the workday;
     • Taking additional restroom breaks;
     • Sitting when their work requires standing and standing when their work requires sitting; and
     • Taking breaks as needed to eat and drink.

Takeaway: Like California, the EEOC, through the PWFA, has prioritized expanded rights and protections for employees affected by pregnancy, childbirth, and related conditions. They likely will continue to do so. Knowledgeable employers will consider updating a policy in their 2025 employee handbook that explicitly addresses pregnancy accommodations. Also, engaging in and documenting the interactive process with covered employees and applicants who require accommodation is crucial to support legal compliance.

Freelance Worker Protection Act

SB 988, effective January 1, 2025, expands protections for freelance workers and requires hiring organizations to provide a written contract containing, at minimum, the name and address of the hiring organization and freelance worker, an itemized list of all services that will be provided, the date of pay, and the date by which the freelance worker will provide a list of services rendered under the contract.

Takeaway: California is prioritizing expanding rights for freelance workers by requiring written contracts and enforcing timely payment for services rendered by workers by providing a mechanism for increased damages for violations.

Social Compliance Audits

Beginning January 1, 2025, businesses that choose to conduct voluntary, non-governmental social compliance audits will be required to post the audit results on their website. Such audits include but are not limited to, those that evaluate whether the organization is in compliance with wage and hour laws and health and safety regulations.

Takeaway: Although the new law does not require your business to conduct a social compliance audit, it does require transparency when such audits are voluntarily conducted.

Professional Services Agreements

AB2602, effective January 1, 2025, makes any provision in a personal or professional services agreement unenforceable if the provision (1) allows for the use of a digital replica of an individual’s voice or likeness, (2) does not clearly define the detail of all of the proposed uses, and (3) is not negotiated with legal representation or by a labor union.

Takeaway: This new California law embraces artificial intelligence technology and aims to protect performers against unfair contract terms and unauthorized use of AI-generated digital replicas.

Judicial Decisions

Loper Bright Enterprises v. Raimondo, 603 U.S. (2024)

In this landmark decision, Loper Bright Enterprises v. Raimondo, the U.S. Supreme Court overturned the case of Chevron USA v. National Resources Defense Council, a 40-year-old Supreme Court decision that established what is known as the “Chevron Deference,” meaning the federal court’s practice of deferring to the expertise of agencies specializing in specific regulated industries. Under the Chevron Deference, if a statute was ambiguous, courts were required to defer to any reasonable interpretation by the enforcing agency.

The demise of Chevron provides new opportunities for companies in regulated industries to challenge the agencies that regulate them.

By eliminating this doctrine after 40 years, experts advise that the Loper decision gives the trial courts much more freedom to interpret federal statutes independently. Without giving much deference to regulations or other interpretations by the administrative agencies, the power of federal administrative agencies will decrease considerably.

Muldrow v. City of St. Louis, 601 U.S. (2024)

In this case, the U.S. Supreme Court held that an employee alleging a discriminatory job transfer must show that the transfer inflicted “some harm with respect to an identifiable term or condition of employment.” The harm, however, “need not be significant” to violate Title VII of the Civil Rights Act of 1964 (“Title VII”).

The plaintiff was a female police sergeant. She claimed that she was forced to transfer jobs because her employer wanted to replace her with a male police officer who was thought to be a “better fit” for the “very dangerous” role she wanted and was denied. After the transfer plaintiff’s duties, schedule, position, and perks (unspecified) changed, and her schedule became less regular, and she also lost access to an unmarked take-home vehicle, among other consequences. While her prestige, caliber, and responsibilities decreased, her rank and pay remained the same.

Title VII makes it unlawful for an employer to “discriminate against any individual with respect to… terms [and] conditions… of employment, because of such individual’s race, color, religion, sex, or national origin.” In ruling for the plaintiff in this case, the Court rejected the lower court’s previous holding that in order to prove a job transfer was disadvantageous, plaintiffs were required prove that the job transfer caused a “materially significant disadvantage.”

The Supreme Court ruled that while a transfer must be “disadvantageous,” plaintiffs do not need to demonstrate that such harm was “materially significant.” As the Court clarified, Plaintiffs need only show “some injury” and do not need to meet any form of heightened standard such as “economic or tangible” changes in the terms or conditions of the plaintiff’s employment to prove that a job transfer was disadvantageous.

Naranjo v. Spectrum Security (May 2024)

This is an important California Supreme decision for employers. Wage Statements are highly regulated in California (see Labor Code section 226). Until this decision, any minor or inadvertent deviation from a long list of requirements that must be included on an employee’s pay statement could result in substantial penalties plus an award of significant attorney fees unrelated to any damage incurred by the plaintiff. The Naranjo Court held that “an employer’s objectively reasonable, good faith belief that it had provided employees with adequate wage statements precludes an award of penalties under statute.” This decision could significantly reduce potential liability arising from minor technical violations for employers who made reasonable and good faith efforts to comply with the Labor Code and establish a “good faith” defense against claims for statutory penalties.

This decision is a victory for California employers. Going forward, employers will not be subject to harsh derivative penalties under Labor Code section 226(e) in instances where a violation of Labor Code section 226(a) was the result of a reasonable and good-faith belief that the employer’s wage statements were compliant. But employers need to keep in mind that a good faith defense is unlikely to be successful if one of the specific categories of information required, such as the name and address of the employer, is omitted

Employers must ensure that wage statements are compliant and contain all required categories of information, as the potential penalties for violations remain harsh, especially in representative and class action matters.

Plaintiff v. Employer Electrical (March 2024)

In this decision, the California Supreme Court answered three questions that had been certified to it by the Ninth Circuit Court of Appeal regarding the meaning of “hours worked.” This decision explains what constitutes employer control sufficient to render particular activities compensable under Industrial Welfare Commission Wage Order No. 16.

Question 1:
Is time spent on employer premises waiting in a personal vehicle to scan an identification badge and have a security guard peer into a personal vehicle compensable as “hours worked?”

Answer:
Yes. Plaintiff was subject to employer control while waiting in line to exit through the security gate (even while in his personal vehicle because the search was for the Employer’s benefit (i.e., preventing theft of tools and endangered species on the site).

Question 2:
Is time spent on employer’s premises in a personal vehicle, driving from the employee parking lot to the security gate—subject to certain employer rules—compensable as “hours worked” or “employer-mandated travel?”

Answer:
Possibly.

The time spent traveling to the security gate at the end of the workday could possibly be compensable as “employer-mandated travel” but not “hours worked.” The mere fact that the employee is required to follow employer-mandated rules relating to safe travel does not render the employee subject to employer control (i.e., not hours worked). Travel time is compensable when an employee travels between two locations and the employee’s presence at the first location serves some employment-related purpose. Time spent traveling between a security gate and a parking lot is not compensable hours worked just because an employer imposes “ordinary workplace rules” during the drive to the worksite.

Question 3:
Is time spent on employer premises, where workers are prohibited from leaving but not required to engage in employer-mandated activities, compensable as “hours worked” when that time is designated as an unpaid meal period under a collective bargaining agreement?

Answer:
Yes. Even if a qualifying collective bargaining agreement exempts employers from the requirements of Wage Order No. 16, an employee must be paid a minimum wage for meal periods when an employer prohibits employees from leaving the premises, and this prevents employees from engaging in personal activities they could otherwise engage in if permitted to leave.

This article summarizes the key laws and regulations to take effect in 2025 and beyond—but it does not cover everything. Please contact any of Dykema’s Labor and Employment attorneys to discuss the impact of the new laws on your business and assess the best approach for complying with these new developments, including preparing or updating California Employee Handbooks.

For more information about these new laws and regulations, please contact Laura P. Worsinger (213-457-1744 or lworsinger@dykema.com), Christine A. Mardikian (213-457-1724) CMardikian@dykema.com, or your Dykema relationship attorney.