ATTENTION CALIFORNIA EMPLOYERS: 2023 IS HERE. . . ARE YOU READY TO KICK OFF THE NEW YEAR?

By Stacy L. Fode, Esq. and Rachel H. Khedouri, Esq

California legislators were busy again throughout 2022 implementing protections for employees and obligations for employers. As we reported HERE, the California legislature enacted a number of new or expanded employee entitlements that went into effect this week, including bereavement leave, leave under the Healthy Workplaces, Healthy Families Act to care for certain “designated persons”, security against discrimination for reproductive health decision-making, and protection against retaliation relating to certain emergency conditions. To help California employers hit the ground running in 2023, we have compiled the following nine important employment-related steps companies should take to kick off the new year:   

1. Review employment contracts, arbitration agreements, and other employment-related agreements to ensure that they do not act to silence victims of workplace sexual assault and harassment. 

In 2022, the federal legislature zeroed in on sexual assault and sexual harassment in the workplace and enacted two significant laws aimed at empowering victims to report and publicly disclose illegal conduct. First, in March 2022, President Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 which prohibits employers from compelling arbitration or avoiding class actions of certain such claims. (Click HERE for our FAQs on this new law.) Note that the California statute (Labor Code 432.6) prohibiting mandatory arbitration agreements as a condition of employment of these as well as other workplace claims currently is stayed and under judicial review while the Ninth Circuit Court of Appeals reconsiders its opinion that would have upheld the ban. The appellate court withdrew its opinion in August following the U.S. Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana, in which the Court ruled an employer could require enforcement of an arbitration agreement waiving an employee’s right to bring individual claims under the California Private Attorneys General Act (“PAGA”), resulting also in the employee’s loss of standing to bring representative PAGA claims in court or arbitration. However, the Supreme Court left open the possibility that California could adjust PAGA to permit representative claims to survive and be filed in court. In other words, this decision is not a complete shield to representative PAGA claims.    

In early December, the President signed the “Speak Out” Act which prohibits courts from enforcing predispute nondisclosure and nondisparagement clauses regarding sexual harassment and sexual assault claims. The new law is vague in some of its terms but appears to apply to a wide variety of contracts or agreements that could act as a “gag order” on these types of claims for current, former, and prospective employees, as well as independent contractors. Notably, the Speak Out Act does not prevent employers from entering into separation or settlement agreements imposing confidentiality restrictions on claimants after they have raised sexual harassment or assault allegations. The Act also does not restrict employers from pursuing legitimate interests to protect trade secrets and proprietary information.

Employers should work with counsel to review their template employment agreements, predispute arbitration agreements, confidentiality agreements, independent contractor agreements and other workplace arrangements to ensure that they are in compliance with the new federal legislation, as well as any state or local law. In light of the Viking River Cruises ruling, California employers with arbitration agreements should update those agreements to include individual PAGA claims. And, stay tuned as the Biden Administration has clearly indicated that it intends to pursue broader legislation along these lines, including expanding the federal arbitration and nondisclosure bans to a wide range of employment claims such as discrimination on the basis of race, wage theft and unfair labor practices.

2. Consider how your company will comply with evolving pay transparency and other laws impacting recruiting across the country.

Those employers who are looking to hire in 2023 should be mindful of the national trend emerging over the past several years of requiring so-called “pay transparency” in job postings. As we have previously reported, a growing number of states and localities across the country have enacted legislation requiring employers to publicly disclose salary information when hiring. California’s new pay transparency and pay data reporting requirements, discussed in more detail HERE, went into effect on New Year’s Day, and employers of at least 100 employees will be required to report the number of and median and mean hourly rate for their employees by race, ethnicity, and sex annually starting on May 10, 2023.

Employers should have a plan in place for complying with the varying requirements of pay transparency laws across the country, including making sure existing job descriptions are up to date and job postings, including those for remote workers, are compliant. In particular, California employers with more than 15 employees should ensure job postings for California positions include a pay scale and all California employers should be prepared to provide this information upon request. We expect that the State shortly will issue FAQs or guidelines to assist employers in complying with these new pay transparency obligations.

3. Evaluate drug testing policies and procedures, particularly in connection with off-duty cannabis use.

Another national trend employers should keep in mind is the legalization of recreational cannabis usage and the corresponding impact on the workplace. Although California employers generally are permitted to maintain drug-free workplaces, they should consider whether any changes are required to their drug-related policies for 2023 and beyond. New legislation enacted in 2022 amends the California Fair Employment and Housing Act to make it unlawful to take adverse action against an employee based on (1) cannabis usage off-duty and off-premises or (2) a drug test finding of nonpsychoactive cannabis metabolites in their hair, blood, urine, or other bodily fluids. Although the new law does not go into effect until January 1, 2024, California employers should begin now to evaluate whether and how to continue testing applicants and employees for cannabis, as well as consider implementing an internal procedure to document the basis for drug testing employees who may be impaired on the job and support any adverse employment action taken against those employees.

4. Ensure wages are meeting new thresholds.

Both large and small California employers must meet new minimum wage levels for 2023. Effective January 1, 2023, the minimum wage increased to $15.50 per hour for all employers, from $14 per hour in 2022 for employers with 25 or fewer employees and $15 per hour for employers with more than 25 employees. The minimum wage set by certain cities and counties also rose this year. Click HERE for a list of local California minimum wages maintained by the UC Berkeley Center for Labor Research and Education. Employers should also confirm whether they are subject to other minimum wage rates set forth in Industrial Welfare Commission (IWC) wage orders.

The salary threshold for classifying workers as exempt under the California “white collar” exemptions (i.e., administrative, executive, and professional) increased to $64,480 per year for 2023. Employers should consider whether they now need to increase annual salaries for any employees classified as exempt from meeting the new threshold or, alternatively, to reclassify certain exempt employees who no longer meet the threshold to non-exempt.

5. Make sure employee handbooks and other policies are up to date with new laws.

Ringing in the New Year is always a good time to check in on employee handbooks and other employment policies in light of recent legislative changes. The current best practices on policies for electronic communications systems, social media, anti-discrimination and harassment, and wage and hour are always evolving and employers should make sure these provisions remain current. As noted above, California employers also may need to update their policies to add bereavement leave, change definitions of family leave eligibility to provide for leave to care for “designated persons”, and add reproductive health decision-making to any anti-discrimination policy list of covered categories. In addition, employers should consider whether they are subject to other new laws based on their specific industry or type of employee. For those employers covered by the 2022 COVID-19 Supplemental Paid Sick Leave law, the requirement to provide additional leave for certain COVID-19-related reasons ended on December 31, 2022. Note that employees who claimed covered leave on or before December 31 are entitled to continue until they exhaust their leave entitlement (up to 80 hours depending on the reason for leave).

On the federal front, President Biden signed the Respect for Marriage Act on December 13, 2022, which establishes legislative recognition for same-sex and interracial marriages. The Act provides that federal and state governments must fully recognize any marriage between two (and only two) individuals that are legally performed in any state. Although this Act effectively only confirms the current law of the land as set forth in Supreme Court rulings and does not create new rights for employees, its enactment serves as a reminder to employers to confirm that policies and benefit offerings based on marital status comply with the Act and all other policies are up to date under federal, state and local laws.

Feel free to reach out to NFC if you would like to update your handbook or other policies in 2023.

6. Confirm physical and electronic postings are up to date and any required notices were sent.

As we reported in October (HERE), the U.S. Equal Employment Opportunity Commission issued a new poster to be displayed in the workplace by all employers with 15 or more employees. Employers should confirm that they have the “Know Your Rights: Workplace Discrimination is Illegal” poster available physically in a conspicuous location in the workplace as well as electronically. Employers also should check that they have the most current state or local postings available and are providing such postings in all required manners. For California employers that are subject to citation or special orders issued by the Division of Occupational Safety and Health, new legislation requires that mandatory workplace notices be provided in any language spoken by at least five percent of the workers at the place of employment, including temporary workers placed in the workplace by a temporary employment or staffing agency.

As of January 1, California employers also are required under the California Privacy Rights Act to distribute a “notice at collection” to employees identifying the categories of personal information collected by the company – including “sensitive personal information” such as Social Security numbers, driver’s licenses, race, religious belief, union membership, and other commonly collected information —  and the purported use for that information. Employers should consider consulting with counsel to ensure this notice is properly drafted and distributed at or before the point of collection of personal information.

7. Check on “independent contractor” engagements.

In 2022, state agencies once again cracked down on the misclassification of employees as independent contractors. In California, as in several other states, the test for determining whether a worker is an independent contractor is narrowly interpreted to err on the side of employment. The cost of being found to have misclassified workers is steep and employers are encouraged to review “contractor” engagements to ensure that this designation is justified. 

8. Review severance policies and be mindful of obligations if large layoffs are planned.

It is always good practice for all employers to review severance policies and notice obligations in advance of a planned layoff. All employers contemplating a reduction in force, plant shutdown, merger or sale, or other significant shift in the business in 2023 should seek legal counsel in advance for guidance anticipating and navigating the legal obligations and employee relations issues that may accompany such changes.

9. And, last but certainly not least, don’t forget to schedule training!

No employment-related checklist would be complete without a reminder to schedule training for supervisors and managers on any updated company policies. Employers also should consider whether they are subject to any mandatory anti-discrimination and harassment training – for example, California employers with five or more employees must provide sexual harassment training to all supervisory and nonsupervisory employees every two years (and within six months of starting a supervisory or nonsupervisory position) – and make sure those timelines are met. Moreover, even where training is not required, it still is good practice to train managers to address and avoid any type of discrimination and harassment both to avoid such claims and to provide a defense to any claims raised. NFC has a wide offering of available training that we would love to bring to your organization.

Happy New Year and all the best in 2023 from your NFC West Team!


If you have any questions relating to this eAlert or need help implementing any of the new workplace policy requirements for 2023, please reach out to the NFC Attorney with whom you typically work or call us at 619.292.0515.

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