In a previous article that we published in October 2023, we detailed California’s forthcoming amendment to its noncompete law. That law, which is codified in voids any contract “by which a person is restrained from engaging in a lawful profession, trade, or business of any kind.� In our prior article, we highlighted some of the practical implications of the amendment upon its scheduled effective date of January 1, 2024. Now, almost a year later, courts are grappling with applying the amended law and defining its bounds in lawsuits filed in California and elsewhere.

In a recent decision issued by the United States District Court for the Central District of California, a federal court in California was tasked with determining whether dismissal of a cause of action for tortious interference with contract at the outset of a case is appropriate where the underlying contract arguably contained restrictive covenants in violation of California Business & Professions Code section 16600.

Specifically, in the case NFP Prop. & Cas. Servs. v. Alliant Ins. Servs.[1], plaintiff NFP, a middle market insurance broker, filed a complaint asserting various claims — including a claim for tortious interference with contract — against Alliant (an alleged competitor). The complaint claimed that, among other things, Alliant intentionally induced breaches of employment agreements by encouraging NFP’s employees to resign without notice, violating their contracts’ 60-day notice requirement, and to misuse NFP’s confidential information to solicit NFP’s clients and employees for Alliant.

At the outset of the case, Alliant asserted its own counterclaims against NFP and also moved to dismiss the tortious interference claim, arguing that the restrictive covenants in NFP’s employment agreements are unenforceable under California’s Business and Professions Code section 16600. Alliant argued that NFP’s definition of “Confidential Information� in its contracts was overly broad and effectively transformed NFP’s post-employment restrictive covenants concerning customer and employee solicitation into illegal noncompetes under California law. Alliant identified specific provisions in NFP’s contracts that it argued were unenforceable, including clauses about non-disclosure, client and employee solicitation post-employment, and a 60-day notice requirement prior to resignation.

The court refused to find the specific provisions at issue illegal on their face and determined that evaluating whether these clauses unlawfully restrain trade requires detailed factual analysis and is better suited for summary judgment rather than dismissal at the pleading stage. Accordingly, the court denied Alliant’s motion to dismiss, thereby allowing NFP’s claim for tortious interference to proceed. Relying on an earlier federal decision, the court reasoned, “parties that have successfully challenged a contractual provision under § 16600 ordinarily have done so only after having submitted evidence clearly demonstrating enforcement of such provision would result in a prohibited restraint.”[2]

This court ruling demonstrates that determining whether an employment agreement is illegal and void under California’s noncompete law can be a fact-intensive inquiry that may require discovery — an oftentimes onerous and expensive phase of litigation that litigants loathe. Because California’s noncompete law provides that a prevailing employee, former employee, or prospective employee is entitled to recover reasonable attorney’s fees and costs if a lawsuit to void an illegal noncompete agreement is successful, former employees are naturally incentivized to file suit to void contract provisions that arguably restrain their right to engage in a lawful profession.

Given this new reality, employers looking to enforce confidentiality provisions post-employment and avoid expensive, drawn-out litigation with former employees should work with experienced counsel to thoroughly review and, if necessary, revise their employment agreements to ensure that the definition of “Confidential Information� is appropriately tailored to the employer’s business interests and also that any post-employment restrictions are not de facto noncompetes or nonsolicitation provisions in violation of California law.

If you are concerned about your legal rights in California with respect to former employees suspected of misappropriating confidential information to compete with your company, the authors of this article previously authored Protecting Trade Secrets In States That Disfavor Noncompetes, which covers best practices to protect against unfair competition by former employees, given California’s ever-changing legal landscape.

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[1] 2024 U.S. Dist. LEXIS 192955, at *11-18 (C.D. Cal. Oct. 23, 2024)

[2] citing Proofpoint, Inc. v. Vade Secure, Inc., 2021 U.S. Dist. LEXIS 106709, 2021 WL 2308277, at *3 (N.D. Cal. June 4, 2021).

The Los Angeles County Fair Chance Ordinance for Employers (FCOE), which took effect on September 3, 2024, imposes several new compliance requirements regarding the consideration of criminal history in employment decisions. While some of its requirements mirror those under California State law, many of the FCOE’s requirements take things a step further.

Los Angeles County Has “Entered the Chat�

In 2016, Los Angeles enacted the Los Angeles Fair Chance Initiative for Hiring Ordinance (FCIHO) to regulate the use of criminal background checks in employment for work performed within the city. Soon after, California enacted the Fair Chance Act (FCA) in 2018, imposing similarly comprehensive regulations on employers with five or more employees doing business in the Golden State. 

Not to be outdone by the city and state, the Los Angeles County Board of Supervisors passed the FCOE earlier this year, which took effect on September 3, 2024. The FCOE goes beyond the state law by imposing stricter rules on the use of criminal background information in hiring decisions in unincorporated Los Angeles County, which is comprised of over 100 different communities peppered throughout 2,653.5 square miles (or 65%) of the County’s total territory.  In light of this geographic reality, many employers in and around the Southern California region will likely fall subject to the FCOE’s onerous requirements.

Coverage

The FCOE applies to any employer that: 1) is located or doing business in the unincorporated areas of Los Angeles County, and 2) employs five or more employees anywhere, regardless of location. Notably, owners, managers, and supervisors must be included for purposes of determining whether this five-person threshold is met. Furthermore, employers are broadly defined to include job placement or temporary agencies, nonprofit organizations, and entities which evaluate an applicant’s criminal history on behalf of other companies. 

The ordinance defines employees as individuals who perform (or in the case of applicants, are intended to perform) at least two hours of work on average each week within the unincorporated areas of the county. Moreover, the FCOE expansively defines “employmentâ€� to include full-time workers, part-time workers, contract workers, temporary or seasonal workers, and contingent/temporary workers.    

The physical location of the work must be within the unincorporated areas of Los Angeles County, and the ordinance defines this to include remote work from any location within the unincorporated areas of the county. Thus, the potential impact of this law on out-of-state employers with remote workers in unincorporated Los Angeles County should not be overlooked.

Los Angeles County provides a for determining whether a facility or remote worker’s address falls within unincorporated Los Angeles County.

Notable Provisions

The FCOE expands on current state law requirements and introduces entirely new obligations for employers with employees performing work in unincorporated areas of Los Angeles County.  Some, but not all, of the ordinance’s provisions are summarized below.

Prohibited Inquiries

Similar to state law, the FCOE prohibits employers from inquiring about an applicant’s criminal history before a conditional offer is made (even if the applicant prematurely volunteers such information during the initial hiring process). The FCOE imposes additional restrictions by prohibiting employers from discussing an applicant’s criminal history before the criminal background check is completed, and a copy of it is provided to the applicant for their review.

Look-Back Periods

The FCOE limits the consideration of criminal history to a look-back period of no more than seven years. In contrast, state law generally does not impose a temporal limitation on criminal history, save for a few limited exceptions (e.g., juvenile criminal history, arrests not resulting in convictions, etc.).

Job Advertisements and Notice Requirements

Both the FCOE and state law prohibit statements in job advertisements, solicitations, bulletins, postings, and internal company announcements that discourage individuals with criminal histories from seeking employment (e.g., “we do not hire felonsâ€�). However, the FCOE requires that employers also provide a written notice of intent to perform a criminal history review in conjunction with the job advertisement. The notice must include a list of all “material job dutiesâ€� of the job position which may reasonably have a direct, adverse, and negative relationship with criminal history and could potentially result in the withdrawal of a conditional job offer. If an employer is legally required to deny applicants with specific criminal records, it must also specify the relevant legal provisions imposing that restriction in the job advertisement.  

Conditional Offers

Unlike California’s FCA, which does not impose specific requirements pertaining to the language used in conditional offer letters, the FCOE requires conditional job offers to include the following:

• A written statement that the offer is contingent upon a review of the applicant’s criminal history;
• A written “good causeâ€� statement justifying why the criminal background review is necessary for the position (a generic statement only citing “safety concernsâ€� will not suffice); and
• The written disclosure of any other background checks or screening requirements that will be conducted by the employer, such as drug testing, social media history, or education verification.

Written Assessments

Both the FCOE and state law require employers to conduct an individualized assessment of the applicant’s criminal history before withdrawing a conditional job offer. However, unlike the FCA, the FCOE requires the individualized assessment to be documented in writing and provided to the applicant in conjunction with the mandatory preliminary and final adverse action notices before a conditional job offer is rescinded.

Harsh Penalties

Unlike state law — which provides maximum fines of $500 for violations — the FCOE imposes far greater penalties, including fines of up to $20,000 per violation and further sanctions by the Los Angeles County Department of Consumer and Business Affairs, which could impact an employer’s business licenses.    

Given the FCOE’s onerous requirements as well as the breadth of its potential application to numerous employers doing business in and around Los Angeles County, employers are strongly encouraged to conduct a review of their background screening practices with the assistance of legal counsel to determine coverage issues and ensure full compliance with the law.

On July 25, 2024, the California Supreme Court issued an opinion upholding the statewide ballot measure that classifies app-based drivers as independent contractors. Voters passed the law (also known as Proposition 22) in November 2020, funded in large part by app-based rise services. The law exempts app-based drivers from the otherwise-required “ABC� test to determine if a worker is an independent contractor or an employee.

What is the law that was challenged?

In November 2020, California voters passed Proposition 22 (California Business & Professions Code § 7448 et seq.), which made app-based drivers independent contractors — rather than employees — if:

1. The network company does not unilaterally prescribe specific dates, times of day, or a minimum number of hours during which the app-based driver must be logged into the network company’s online-enabled application or platform.
2. The network company does not require the app-based driver to accept any specific rideshare service or delivery service request as a condition of maintaining access to the network company’s online-enabled application or platform.
3. The network company does not restrict the app-based driver from performing rideshare services or delivery services through other network companies, except during engaged time.
4. The network company does not restrict the app-based driver from working in any other lawful occupation or business.

Under Proposition 22, the app-based drivers and the company (the “network company�) must also have a written contract, provide the drivers a guaranteed minimum level of compensation, provide a quarterly health care subsidy to qualifying drivers, and maintain occupational accident insurance that covers medical expenses and lost income for injuries suffered while the driver is online for the company.

Proposition 22 sets a particular procedure for amending the law, requiring the legislature pass amendments with seven-eighths of the membership, and limits amendments to those that are consistent with and further the purpose of the law.

What was challenged, and what did the court do?

Drivers challenged Proposition 22 as unconstitutional under the California constitution, arguing that it limited the legislature’s unlimited plenary power with respect to requiring workers’ compensation insurance.

In its recent opinion, the California Supreme Court upheld the constitutionality of the law. The Court noted that the initiative process was establish “not as a right granted the people, but as a power reserved by them.� Accordingly, the power reserved for the legislature regarding workers’ compensation is not exclusive such that it would preclude the electorate from undoing legislative action. Moreover, the Court noted that the language of Proposition 22 does not limit the legislature’s power to enact workers’ compensation laws (and does not itself say anything about workers’ compensation).

Further, the Court noted that the policy language of the California Constitution does not have a requirement that the workers’ compensation system cover any particular group of workers.

The Court did not make any ruling about whether any action by the legislature providing workers’ compensation to app-based drivers would run afoul of the provisions of Proposition 22.

What does this mean going forward?

This decision does not change any law (it just upholds a law already in place), and California app-based drivers may (subject to the above-described requirements) continue to be classified as independent contractors. However, the opinion sets the stage for potential future litigation regarding workers’ compensation requirements for app-based drivers in California.

In 2004, California enacted the Private Attorneys’ General Act (PAGA), a first-in-the-nation mechanism to expand the enforcement of the state’s robust Labor Code protections for employees. Proponents of PAGA celebrated its objective to allow California employees to seek significant penalties against employers by “stepping into the shoes� of the state. Over the last two decades, employers in California have endured an onslaught of lawsuits bringing PAGA claims, seeking penalties with little to no due process guardrails. Defending PAGA claims significantly impacted the “cost of doing business� in California, and, as a result, reform efforts emerged, led by a handful of businesses, non-profits, social justice advocates, and family-run farms comprising the “Fix PAGA Coalition.� After successfully gaining sufficient signatures to place a PAGA reform measure on the ballot, the coalition engaged in direct negotiations to reform PAGA with the California legislature and Governor Gavin Newsom, culminating in the enactment of amendments to PAGA signed into law on July 1, 2024, and taking effect as of June 19, 2024.

In consideration of the key policy interests at issue — eliminating PAGA abuse, protecting businesses that do the right thing, and allocating a greater share of penalties to employees — PAGA reforms include penalty caps, increased due process safeguards for employers, and incentives for taking all “reasonable stepsâ€� to comply with the California Labor Code. The “reasonable stepsâ€� measures allowed by the reform can result in up to an 85% total reduction in penalties. Accordingly, it is crucial for employers to become familiar with these measures.   

Employers Should Take All Reasonable Steps Nowto Ensure Compliance and Limit Exposure

Perhaps the single greatest success for advocates of PAGA reform is creation of clear incentives for employers to take proactive steps towards compliance immediately. Employers can reduce potential exposure upwards of 70-85% by instituting clear and objective measures to comply with the California Labor Code, including (1) conducting payroll audits; (2) maintaining compliant-written policies; (3) conducting training on applicable Labor Code and wage order compliance; (4) taking corrective action against supervisors; and (5) documenting any efforts pertaining to compliance. PAGA reform rewards proactive compliance taken prior toreceipt of a PAGA notice/lawsuit by reducing potential penalties by 85%. Employers who take such “reasonable steps� within 60 days after receiving a PAGA notice are entitled to a 70% reduction.

You’ve Received a PAGA Notice. Now What?

While we have always counseled employers to immediately evaluate potential exposure and take steps to ensure compliance upon receipt of a PAGA notice, the reforms create clear and specific timeframes within which certain actions must be taken to take advantage of penalty reductions. The following chart is intended to provide a roadmap to successfully navigate PAGA litigation within the new framework from the date a PAGA notice is postmarked:

DEADLINE	ACTION	BENEFIT
Before receipt	Take all “reasonable steps� to prospectively comply with the California Labor Code and applicable Wage Orders.	Eliminate 85% of potential penalties.
Within 33 days of postmark of PAGA notice	All employers are eligible to “cure� the most commonly alleged Labor Code violations. For larger businesses (i.e., 100 or more employees), the cure must be completed within 33 days of receiving PAGA notice. If the company employed fewer than 100 employees in total during the period covered by the PAGA notice (i.e., the preceding 12 months), the employer may submit a confidential proposal to the LWDA to cure one or more of the alleged violations.	Eliminate all civil penalties for violations that have been cured.
Within 60 days of postmark of PAGA notice	Take all “reasonable steps� to prospectively comply with the California Labor Code and applicable Wage Orders.	Eliminate 70% of potential penalties.
Upon Filing of PAGA Action in Court (i.e., at least 60 days after notice)	Employers with 100 or more employees may file a request for an “early evaluation conference� and request a stay of court proceedings. This is effectively like a settlement conference and provides an additional path for employers to leverage efforts to cure to reduce or eliminate potential penalties. Note: this process does not go into effect until October 1, 2024.	Allows employers to engage in a mediation-like process to receive a neutral evaluation of claims and a supervised process of curing that can lead to significant penalty reduction.

Hold the Line: Strategies to Defend PAGA Litigation

In addition to rewarding proactive measures to prevent or cure labor violations, the PAGA reforms create additional procedural safeguards that employers can leverage to advance a strong defense in litigation. Of particular interest are two reforms: (1) increased standing requirements; and (2) empowering the courts to manage PAGA claims. Prior to the reforms, employees were required only to demonstrate that they experienced one violationat any time before they could proceed to pursue penalties on behalf of others under the PAGA. To make matters worse, trial courts were powerless to effectively manage such unconstrained litigation. Now, employers are finally able to go on the offensive by challenging an employee’s standing from the outset. Through effective use of early discovery, employers can seek to limit an employee’s ability to pursue claims they have not personally experienced. Moreover, trial courts are now empowered to “limit the evidence to be presented at trial or otherwise limit the scope of any claimâ€� to ensure it can be “effectively tried.â€� While the contours of these increased safeguards remain to be developed, employers who are confident in their compliance efforts have more tools than ever to effectively fight back against PAGA litigation. 

On January 18, 2024, the California Supreme Court issued a highly anticipated decision in , determining whether trial courts can dismiss Private Attorneys General Act (PAGA) claims as unmanageable. The Court ultimately concluded that dismissing PAGA claims solely on manageability grounds — even if those claims are complex or time-intensive — is not among the tools that trial courts possess but left various other means for limiting or dismissing PAGA claims undisturbed.   

PAGA Claims – A Reminder

As many California employers are aware, PAGA allows employees to bring claims on behalf of the state to recover civil penalties for violations of the California Labor Code. In a successful PAGA action, the California Labor and Workforce Development Agency is entitled to 75% of the recovered penalties, and the remaining 25% goes to the “aggrieved employees.�

The Split in the California Courts of Appeal

The California Supreme Court’s decision resolved a split between the Courts of Appeal in the Second District and the Fourth District over the question of whether courts have the inherent authority to dismiss PAGA claims with prejudice on manageability grounds.[1] 

Procedural History of Estrada

Royal Carpet Mills, a California carpet manufacturer, employed Jorge Luis Estrada at one of its two Orange County facilities. Estrada initially filed a complaint against Royalty alleging various class action claims based on alleged violations of the California Labor Code, as well as a PAGA representative claim seeking penalties for various alleged Labor Code violations. Subsequently, twelve additional employees joined Estrada as named plaintiffs.

The trial court certified a subclass of employees to determine the meal period claims, and a bench trial was held where the plaintiffs presented live testimony from twelve of the thirteen named Plaintiffs, deposition testimony from Royalty’s managers, officers, and human resources employees, and testimony from an expert witness. At trial, Royalty presented testimony from two former employees and an expert witness. 

Following the bench trial, the trial court decertified the meal period subclass, reasoning there were “too many individualized issues to support class treatment.â€� Relatedly, the trial court dismissed the PAGA claim for meal period violations with prejudice, stating it was “unmanageableâ€� for similar reasons. 

The plaintiffs appealed the decision to the Fourth Appellate District, which reversed the trial court and held that manageability is not a valid basis for dismissing PAGA claims, despite the Second District’s 2021 decision in Wesson v. Staples the Office Superstore, LLC, which held that PAGA claims are subject to manageability requirements and could be dismissed on that basis.

The California Supreme Court Ruling

The California Supreme Court affirmed the Fourth District Court of Appeal decision in Estrada, holding that “trial courts lack inherent authority to strike PAGA claims on manageability grounds.â€� The Court highlighted the various differences between class action claims and representative PAGA claims and rejected the trial court’s reasoning that a lack of “predominanceâ€� for class claims meant that PAGA claims were unmanageable for the same reasons and should be dismissed.       

The Limited Impact of Estrada

While the Supreme Court’s decision in Estrada dealt yet another blow to California employers, it did not necessarily amount to the sweeping destruction of PAGA defenses that many among the plaintiff’s bar had hoped or predicted. Indeed, the Court “le[ft] undisturbed various case management toolsâ€� short of dismissing claims outright, such as narrowing the scope of PAGA claims and limiting evidence presented at trial. Moreover, the Court reiterated the use of “[r]epresentative testimony, surveys, and statistical analysis, along with other types of evidenceâ€� to ensure that “PAGA claims are effectively tried.â€�       The Court also left the door open for lower courts to dismiss PAGA claims on due process grounds, though it stopped short of elaborating on the nature of circumstances where such dismissals could be proper. Additionally, the Court emphasized that its decision does not impact various other existing means to dismiss PAGA claims, such as showing the individual employee is not aggrieved, an argument that can be asserted at the summary judgement stage to obtain a dismissal of PAGA claims.

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[1] Compare Wesson v. Staples the Office Superstore, LLC (2021) 68 Cal. App. 5th 746 [concluding that trial courts possess inherent authority to dismiss PAGA claims on manageability grounds] with Estrada v. Royalty Carpet Mills, Inc. (2022) 76 Cal. App. 5th 685 [concluding that trail courts lack such inherent authority].)

As we’ve previously written, California already takes a strong position against employee noncompete agreements. State law bans such agreements (with extremely limited exception) and imposes significant penalties on employers who nonetheless require workers to execute such provisions.

Recently, the Golden State took steps to expand its restriction on noncompetes even further to enable California courts to use California law to invalidate restrictive covenants that might otherwise be enforced in the states in which they were signed, where the employee is located, and/or where the employee resided at the time of the signing. Specifically, on September 1, 2023, Governor Gavin Newsom signed , which prohibits employers from entering into a contract with an employee or prospective employee that includes a provision “by which a person is restrained from engaging in a lawful profession, trade, or business of any kind, except as otherwise provided.â€� The new measure, which takes effect on January 1, 2024, adds Section 16600.5 to the California Business and Professions Code and has some support in existing California case law.¹ The very limited exceptions provided by the statute concern restrictive covenants in the sale or dissolution of corporations, partnerships, and limited liability corporations, so those exceptions likely would not apply to the majority of existing noncompetes between employers and non-shareholder employees.

The bill establishes that an employer who violates that law commits a civil violation and authorizes an employee, former employee, or prospective employee to bring an action to enforce that law for injunctive relief or the recovery of actual damages, or both, and provides that a prevailing employee, former employee, or prospective employee is entitled to recover reasonable attorney’s fees and costs if the lawsuit is successful.

Importantly for employers everywhere, Section 16600.5 renders noncompete provisions and agreements void — including any agreement or provision that is arguably akin to a noncompete provision, such as a non-solicitation or no-poach agreement — regardless of where they were initiated or signed. In effect, Senate Bill 699 makes California a safe haven for employees seeking relief from a noncompete that would otherwise be enforceable in a different state. In other words, if a non-California based employer hired an employee living and working in another state and asked him or her to sign a noncompete agreement, and that employee later moves to California, the noncompete agreement will no longer be enforceable against the individual. The reach of this new law doesn’t end there — it also applies to agreements between a California-based employer and employees residing outside of California in states where noncompete agreements have traditionally been enforced.

In addition to Section 16600.5, all signs point to Governor Newsom signing into law , which was passed unanimously by the California State Assembly in May 2023. A.B.1076 essentially clarifies that Section 16600 of California’s Business and Professions Code should be interpreted broadly to ensure that, with very limited exception, “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.â€�

In addition, the law will require employers to notify current and former employees in writing by February 14, 2024, of any noncompete agreements they signed which are now void. Noncompliance with this requirement carries civil penalties.

If Governor Newsom signs A.B. 1076 into law as expected, the implications for companies and employees are significant and include the following key considerations:

• Scope of Covered Agreements: The broad language of the law implies that not only noncompete and non-solicitation agreements but also other agreements, such as no-recruit and extensive nondisclosure agreements, may be affected. This potentially includes joint venture agreements and confidentiality agreements related to mergers or acquisitions that prohibit hiring each other’s employees.
• Retroactivity: The law, when enacted on January 1, 2024, will have a retroactive effect. Existing restrictive covenants will need prompt attention and likely revision or revocation. Companies will also need to assess logistics for efficiently and effectively providing formal notice to current and former employees regarding any noncompete agreements that they entered into with the company which will be void moving forward.
• California-Based Companies: Companies incorporated or with their principal place of business in California may find themselves unable to use various restrictive covenants, not just within the state, but anywhere. They will need to act swiftly to revoke existing agreements and inform affected parties. A key consideration for California companies without operations or employees in the State will be whether to relocate their principal place of business elsewhere.
• Companies Outside California with Employees in California: Companies incorporated or with their principal place of business outside California with employees based in California will need to develop compliance plans. Decisions will have to be made regarding which employees will receive notifications and how to handle no-recruit and confidentiality agreements.
• Companies Outside California with Employees Outside California: It seems as though this new bill is designed to attempt to interfere with employment agreements in which none of the parties, at the time of signing, are in California. There is risk that a company outside of California could be deemed to be subject to the notice requirements by an employee’s move to California subsequent to signing an agreement, which notice would have needed to be provided long before the company had any idea of the facts requiring the provision of that notice.

While the ultimate impact of this legislation remains uncertain, it is likely that legal challenges will arise in response to its implementation. The future landscape of employment agreements in California and the potential ripple effects on non-California-based companies are poised for significant change.

If you are an employer that may be affected by California’s latest legislation concerning noncompetes, you should consult with experienced employment counsel to ensure that your company is in compliance when the new laws take effect next year. If you are concerned about your legal rights in California with respect to former employees suspected of misappropriating confidential information to compete with your company, the authors of this article previously authored Protecting Trade Secrets In States That Disfavor Noncompetes, which covers best practices to protect against unfair competition by former employees, given California’s ever-changing legal landscape.

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¹ See Top of Form

Brown v. TGS Mgmt. Co., LLC, 57 Cal. App. 5th 303, 320 (2020) (finding overly broad confidentiality provision violated section 16600).

Bottom of Form

The 2023 California Legislative session, which ended on September 14, 2023, saw a flurry of activity on labor and employment-related laws. Governor Newsom has until October 14, 2023, to sign, veto, or pocket veto (i.e., take no action) on the bills sent for his signature. The following are bills to particularly keep an eye on — they all were passed in the final weeks of the session and are awaiting gubernatorial consideration. While Governor Newsom has until October 14, 2023, to sign, veto, or pocket the bills sent for his signature, we expect that most — if not all — of these measures will be signed into law.

Current state law sets the minimum number of paid sick days a full-time employee may accrue at three days/24 hours (absent separate local ordinances). This bill would increase the minimum number of annual sick days to five days/40 hours for full-time employees. This bill would also increase the accrual cap from six days/48 hours to 10 days/80 hours. The reasons an employee may use sick leave will not change.

This bill mandates a presumption of illegal retaliation if an employer takes particular disciplinary actions against an employee who has made a wage claim or complaint within the prior 90 days. Employers may rebut this presumption by showing a legitimate, nonretaliatory reason for the disciplinary action. This bill also would set a penalty not exceeding $10,000 per employee for each violation of the retaliation law, in addition to other remedies available.

After extensive negotiations between labor and the health care industry, this bill will gradually raise the minimum wage for workers in health care facilities to $25 per hour over the next several years. The rate of the raise varies based on the size of facility, ranging from large health facilities and clinics moving to $23 per hour in 2024 ($25 per hour in 2026) to other health facilities moving to $21 per hour in 2024 ($25 per hour in 2027 for community clinics and in 2028 for other facilities). Facilities with a large percentage of Medicare and Medicaid patients, rural independent hospitals, and small county facilities will start the increase in minimum wage at $18 per hour in 2024, and increase 3.5% annually through 2033. 

The definition of health care employee in this bill is broad, and does not only include direct patient care roles like “nurse, physician, caregiver, medical resident, intern or fellow, and patient care technician,� but also includes positions such as “janitor, housekeeping staff person, groundskeeper, guard, clerical worker, nonmanagerial administrative worker, food service worker, gift shop worker, technical and ancillary services worker, medical coding and medical billing personnel, scheduler, call center and warehouse worker, and laundry worker, regardless of formal job title.�

The Department of Health Care Access and Information will publish health care facility classification.  Notably, this bill will preempt city or county (including charter cities and counties) ordinances enacted or taking effect after September 6, 2023, until January 1, 2024, that specifically apply to health care workers (but does not apply to nonindustry-specific minimum wage ordinances).

Also revised as a result of extensive negotiations, this bill will raise the hourly minimum wage for fast food restaurant employees who work at chains with at least 60 locations nationwide to $20 per hour as of April 1, 2024. From 2025 to 2029, a Fast Food Council has the authority to annually the minimum wage at either 3.5% of the annual change in the Consumer Price Index (CPI), whichever is lower. The Fast Food Council will be made up of members of the fast food industry, fast food workers, and a neutral chair.  Importantly, this bill will bar cities and counties (including charter cities and counties) from setting a separate minimum wage for the fast food industry (but does not preempt ordinances that are generally applicable to all industries).

This bill would expand the number of days’ notice an employer must give to prior to a mass layoff, relocation, or termination at a covered establishment from 60 days to 75 days. Under California law, a mass layoff includes the layoff of 50 or more employees at a single location within a 30-day period.

FEHA Discrimination Bills

Finally, several bills awaiting Governor Newsom’s signature would expand the state’s Fair Employment and Housing Act (FEHA) discrimination prohibitions.

• : This bill would add a section to the FEHA, mandating that an employer provide at least 30 calendar days’ advanced notice before requiring an employee who works from home to return to work in person. The notice must include specific text that provides information related to reasonable accommodation in the form of remote work for employees with disabilities.
• : This bill would prohibit an employer from refusing to grant bereavement leave to an employee for reproductive loss.
• : This bill would prohibit employment discrimination on account of family caregiver status. Family caregiver status is defined as a person “who provides direct care to a spouse, child, parent, sibling, grandparent, grandchild, domestic partner, or, with respect to an existing employee, any individual previously identified by the employee as a ‘designated person.’â€�
• : This bill would prohibit employment discrimination for an employee’s or applicant’s use of cannabis off the job and away from the workplace. The employer would only be able to consider or inquire about cannabis use if permitted under other state or federal law.
• : This bill would prohibit discrimination based on ancestry, which is defined to include, among other things, caste.