United States: A Review Of 2023 Labor & Employment Legislation In California

The 2023 California legislative session saw the passage of a number of new and important labor and employment laws.

As in prior years, the California Legislature continued to expand employee leave rights this session. They increased the amount of paid sick leave employers are required to provide under California's existing paid sick leave law and established a new reproductive loss leave for employees.

Noncompete agreements also remained at the forefront of California law. The Legislature has declared that noncompetes, which have long been unenforceable in California, are now also unlawful. In addition, the new law indicates an employer will commit a civil violation any time it enters into a noncompete agreement even if the employer doesn't seek to enforce the agreement. Further, California employers are required to notify certain current and former employees that a previously signed unlawful noncompete is void by February 14, 2024. Another key area for the Legislature is cannabis laws. Based on a law that passed in 2022, and beginning on January 1, 2024, employers may not take any adverse employment action against employees for off-duty marijuana use. This year, the California Legislature expanded the law to protect applicants from discrimination based on prior cannabis use.

In response to higher rates of workplace violence, the Legislature also established the country's first set of general industry workplace violence safety standards. Beginning in 2024, employers will have new obligations, including developing and implementing a workplace violence prevention plan, training employees, and maintaining records regarding workplace violence.

Other new and amended statutes will require employers to revisit company policies and litigation strategies. For example, the Legislature eliminated automatic stays of trial court proceedings when appealing a denial of a motion to compel arbitration—meaning employers could be forced to continue litigating in court while challenging on appeal a denial of the right to arbitrate. The Legislature also established a rebuttable presumption of retaliation if an employee or applicant engages in protected activity related to wages and equal pay, making it more important than ever to accurately document performance issues and discipline employees in a timely manner.

The following are summaries of the most important new enactments. Employers should consult with knowledgeable employment counsel about these new statutes.

NONCOMPETES

SB 699—Restrictions on Out-of-State Noncompetes, Civil Violations, and Private Enforcement

SB 699 amends the California Business and Profession Code, beginning on January 1, 2024, to state that noncompete agreements and noncompete clauses in employment contracts are "unenforceable regardless of where and when the contract was signed." The law also prohibits employers and former employers from seeking to enforce noncompete agreements that are void under California law "regardless of whether the contract was signed and the employment was maintained outside of California." Thus, by way of SB 699, the California Legislature is attempting to extend California's protections to employees who did not live or work in California at the time they signed a noncompete agreement. Notably, under California law, noncompete agreements include clauses that prohibit solicitation of customers post-employment.

Additionally, starting on January 1, 2024, an employer will commit a civil violation any time it enters into or seeks to enforce a noncompete agreement that is void under California law. Moreover, the statute now provides for a private right of action for actual damages and for injunctive relief, if the law is violated. A prevailing employee is also entitled to attorneys' fees and costs.

Recommendation for Employers: Employers should review California employment contracts to ensure they do not contain unlawful noncompete language. Employers should also be wary of the reach of SB 699 to cover employees who did not live or work in California at the time they signed a noncompete agreement and should engage competent counsel when trying to navigate potential risks from the new law.

AB 1076—Restrictions on Noncompetes and Notice Requirement

AB 1076, which also amends the California Business and Professions Code, effective on January 1, 2024, explicitly states that it is "unlawful" to include a noncompete provision in an employment agreement. Additionally, AB 1076 creates a notice requirement for employers. By February 14, 2024, California employers and non-California employers with California employees must provide "written individualized communication" to current employees and former employees who were employed after January 1, 2022, and who previously signed noncompete provisions that their noncompete clause or agreement is "void." The notice must be delivered to the employee's last known address and email address.

AB 1076 also provides that it is an act of unfair competition to require an employee to sign a noncompete clause or agreement, or to fail to provide the required notice.

Recommendation for Employees: Employers should identify any noncompliant agreements with current and former employees who are residents of California and were employed after January 1, 2022. After identifying such employees, employers must comply with the written notice requirement by February 14, 2024.

LEAVE

SB 616—Paid Sick Leave Expansion

Effective January 1, 2024, SB 616 increases the number of job-protected paid leave hours employees can take each year from three days or 24 hours to five days or 40 hours. If employers wish to cap their employees' use of paid sick leave in each year of employment, SB 616 similarly increases the cap from three days or 24 hours to five days or 40 hours in each year of employment. SB 616 further modifies certain requirements depending on whether an employer provides sick leave to employees on an accrual/carryover basis or on an upfront/lump-sum basis.

Accrual Method. Employers may still provide sick leave on an accrual basis at an accrual rate of one hour for every 30 hours worked. An employer also may satisfy accrual requirements with a different accrual method, as long as the accrual is on a regular basis, and the employee has accrued at least three days of paid sick leave by their 120th calendar day of employment and at least five days of paid sick leave by their 200th calendar day of employment.

Additionally, for employers using an accrual method, California employers may still cap an employee's accrual of paid sick leave that they can carry over to the following year. SB 616, however, raises that cap from 48 hours to 80 hours.

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