Bills signed by Gov. Brown Sept. 30, 2018

to take effect January 1, 2019 or 2020

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As is tradition in California, the end of September brings a flurry of activity as the Governor evaluates which of the Legislature’s bills to sign into law and which to veto. In the last year of his fourth and final term, but the first full year after the rocketing of the #MeToo movement into the public consciousness, Governor Edmund G. (“Jerry”) Brown, Jr. reviewed legislation addressing sexual harassment from myriad directions. His choices to enact many of the bills, seven of which are featured below, will have both immediate and lasting impact on California employers.

In 2019, employers must refrain from including confidentiality provisions in certain settlement agreements except upon employee request, and must refrain from certain other restrictions in settlement agreements. They must review an expanded set of business relationships whence harassment liability can spring, must make gender-conscious Board of Director decisions, must extend lactation accommodation, and must provide greater protection to employees from third parties. Additionally, almost all employers now will be required to provide anti-harassment training, and to all employees, not just supervisors.

Are you ready? Take a look at seven of the new laws that will have the greatest impact on employers in 2019 and beyond, and bear in mind that it could have been even worse, as the Governor vetoed bills that would have banned predispute arbitration agreements, extended the statute of limitation from one year to three for sexual harassment complaints, required preservation of records of complaints for up to five years after complainants or accused harassers left employment, and expanded liability between staffing agencies and employers who use them.

SB 820 — Non-disclosure agreements (NDAs) prohibited in sexual harassment, discrimination or assault cases

(Adds Code of Civil Procedure Section 1001)

What the law currently requires

Provisions in settlement agreements (entered into on or after 1/1/17) that prevent the disclosure of factual information related to a civil action for certain sexual offenses - including felony sex offenses, childhood sex abuse, sexual exploitation of a minor, or sexual assault of an elder or dependent adult - are void, and courts are prohibited from entering an order in any of those types of civil actions that restrict disclosure of such information.

How this bill changes the law

The new law expands the existing scope of claims that are subject to the NDA prohibition. For settlement agreements entered into on or after 1/1/19, SB 820 prohibits parties (including all public and private employers) from including a nondisclosure provision in settlement agreements in civil or administrative complaints for sexual assault, sexual harassment, and workplace harassment or discrimination based on sex. SB 820 expressly authorizes provisions that (i) preclude the disclosure of the amount paid in settlement and (ii) protect the claimant’s identity and any fact that could reveal the identity, so long as the claimant has requested anonymity and the opposing party is not a government agency or public official.

What you need to do in the next 90 days to adjust to the new law

If you have pending civil or administrative claims against you for sexual assault, sexual harassment, and workplace harassment or discrimination based on sex, you may want to resolve those claims and have the settlement agreement executed prior to 1/1/19, when the expanded prohibition on confidentiality goes into effect.

This new development ties into Section 13307 of the Tax Cuts and Jobs Act which amended the Internal Revenue Code to provide that no individual may deduct a “settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement.” It also prohibits the deduction of attorney’s fees related to any such payment. This section was most likely designed to deter defendants from seeking nondisclosure agreements in connection with sexual assault and sexual harassment settlements, which now under SB 820 are prohibited in California.

SB 1343 — Anti-harassment training for employees

What the law currently requires

Employers with 50 or more employers must provide anti-harassment training (and anti-“abusive conduct” training) to all supervisory employees at least once every two years. New supervisors must be trained within six months of hire or promotion.

How this bill changes the law

Starting January 1, 2020, all employers with five or more employees will have to provide training to all employees within six months of hire, and again every two years. If a seasonal or temporary employee will not be employed for six months, the training must be provided within 30 calendar days of hire or within the first 100 hours worked, whichever comes first.

What you need to do in the next 90 days to adjust to the new law

If you have not trained supervisory employees because you had fewer than 50 employees, or if you have not training non-supervisory employees because it was not required, and you have five or more employees, you must develop a plan to train all of them. You also should establish a protocol to track training of employees.

AB 3109 — Settlement Provisions Waiving Right to Testify About Harassment

(Adds Civil Code Section 1670.11)

What the law currently requires

Existing law provides that people should be free to seek redress of their grievances with the government, and to exercise free speech rights. Contract law also provides that a contract is illegal if it violates a law or is contrary to public policy.

How this bill changes the law

This bill makes contract provisions (entered into on or after January 1, 2019) that waive a party’s right to testify in an administrative, legislative, or judicial proceeding about alleged criminal conduct or sexual harassment void and unenforceable, when the party has been required or requested to attend the proceeding pursuant to a court order, subpoena, or written request from an administrative agency or the legislature. This law is particularly relevant to settlement agreements relating to an alleged sexual harassment claim, and its requirements are related to the new CCP Section 1001 created by SB 820, above.

What you need to do in the next 90 days to adjust to the new law

Previously entered into provisions appear to be exempted from this law. Nevertheless, you should discuss with competent counsel how to word confidentiality provisions in future sexual harassment settlements so as not to potentially run afoul of this law, for example by permitting disclosure if required or requested pursuant to a court order, subpoena, or written request from an administrative agency or the legislature.

SB 224 — Expansion of business/service/professional relationships subject to sexual harassment liability and easing of showing plaintiffs must make

(Amends Civil Code § 51.9 and Gov. Code §§ 12930 and 12948)

What the law currently requires

Under existing law, a plaintiff establishes liability for sexual harassment by proving specified elements, including, among other things, that there is a business, service, or professional relationship between the plaintiff and defendant and that the plaintiff is unable to easily terminate that relationship. Existing law provides that a relationship may exist between a plaintiff and certain persons, including an attorney, holder of a master’s degree in social work, real estate agent, and real estate appraiser.

How this bill changes the law

This bill expands the scope of the types of business/service/professional relationships subject to potential sexual harassment claims to include any relationship where the plaintiff proves, among other things, that the defendant holds himself or herself out as being able to help the plaintiff establish a business, service, or professional relationship with the defendant or a 3rd party. Additionally, the new law specifically adds investors, elected officials, lobbyists, directors, and producers to the list of persons/professionals who may be liable to a plaintiff for sexual harassment. Further, and perhaps most significantly, the bill eliminates the requirement that a plaintiff prove his/her inability easily to terminate the relationship with the defendant. It’s not hard to imagine even an auto consumer alleging harassment by a salesman or F&I associate, via leveraging the perceived discretion to grant or deny auto financing.

What you need to do in the next 90 days to adjust to the new law

Depending upon the nature of your business and the services you offer to your customers, SB 224 may broaden your risk of exposure to sexual harassment claims initiated by those customers. As a precaution, ensuring that all customer-facing employees have received sexual harassment training, both as to their fellow employees and as to the customers they service, is highly advisable and may mitigate the occurrence of incidents that could later lead to claims under this new legislation

SB 1300 — Unlawful employment practices: discrimination and harassment by nonemployees and non-disparagement agreements

(Amends Government Code Sections 12940 and 12965 and adds Sections 12923, 12950.2, and 12964.5)

What the law currently requires

Prior to the amendments, an employer could be held responsible for the acts of nonemployees with respect to sexual harassment of employees, applicants, unpaid interns, volunteers, or persons providing services under a contract in the workplace, provided the employer knew or should have known of the conduct and failed to take immediate and appropriate corrective action. Employers with 50 or more employees are required to provide sexual harassment training to supervisors.

How the bill changes the law

An employer can now be held responsible for the acts of non employees with respect to any type of harassment prohibited under FEHA (for example, harassment based on age, religion, national origin, etc.) of employees, applicants, unpaid interns, volunteers, or persons providing services under a contract in the workplace. The bill also clarifies the “severe or pervasive” standard employed in sexual harassment cases and expressly states that a single incident of harassing conduct is sufficient to create a triable issue regarding the existence of a hostile work environment. Employers are authorized to provide “bystander training” to their employees. Employers are now prohibited from requiring employees, as a condition of employment, to release any FEHA claims or to sign a non-disparagement agreement that prevents an employee from disclosing information about unlawful acts in the workplace.

What you need to do in the next 90 days to adjust to the new law

Employers should review and, if necessary, revise any release or non-disparagement agreements that they use with their current employees. Though employers are not required to provide training to non-supervisory employees, employers may want to develop a training curriculum that would teach all employees how to recognize “problematic behaviors” and how to report them.

AB 1976 — Lactation Accommodation in Employment

(Amends Labor Code Section 1031)

What the law currently requires

Existing law requires every employer to (1) provide a reasonable amount of break time to allow an employee to express breast milk for their own infant child and (2) make reasonable efforts to provide the employee with the use of a room or other location, other than a toilet stall, in close proximity to the employee’s work area for the employee to express milk in private. There is a limited exception to the break time requirement if offering a break would seriously disrupt the operations of the employer. The break time must, if possible, run concurrently with any break time already provided to the employee (i.e., a rest break). Break time that does not run concurrently with, or extends past the rest time authorized by the applicable wage order need not be paid. Existing law makes a violation of these provisions subject to a civil penalty and makes the Labor Commissioner responsible for enforcement.

How this bill changes the law

This bill expands the limitation on the lactation area. The employer must make reasonable efforts to ensure the lactation room/area is not a bathroom (not just the stall). Additionally, employers who provide a temporary area will be in compliance if four (4) conditions are met: (1) it cannot provide a permanent lactation location because of operational, financial, or space limitations; and the temporary lactation location is (2) private and free from intrusion while an employee expresses milk; (3) used only for lactation purposes while an employee expresses milk; and (4) otherwise meets the requirements of state law concerning lactation accommodation. If an employer can show that providing a location other than a bathroom would be an undue hardship, the employer must make reasonable efforts to comply with the law as it was before the bill (private location other than a toilet stall close to the work area).

What you need to do in the next 90 days to adjust to the new law

Evaluate whether you can provide a private lactation area other than a bathroom, and evaluate appropriate temporary lactation areas if a permanent location is not feasible due tooperational, financial, or space limitations. These location options should be reassessed for each individual employee due to the proximity and privacy requirements.

SB 826 — Women on Boards of Directors

(Adds Corporations Code Section 301.3 and 2115.5)

What the law currently requires

No existing board of directors composition mandate. SB 826 makes California the first state in the country to require that women to be included on companies’ board of directors.

How this bill changes the law

SB 826 requires a publicly held corporation based in California (i.e., a publicly held domestic or foreign corporation who principal executive offices, according to the corporation’s SEC 10-K form, are located in CA) to have a minimum number of females (defined as individuals who self-identify as women, regardless of their designated sex at birth) on its board of directors. SB 826 requires each such corporation, by December 31, 2019, to have at least one female director on its board and, if no board seats open up before this date on an all-male board, the corporation would need to increase its authorized number of directors and fill a new seat with a woman. Moreover, SB 826 imposes the minimum seats that must be filled by women, by December 31, 2021 as follows:

  • 6 or more directors = 3 female directors required
  • 5 directors = 2 female directors required
  • 4 or less directors = 1 female director required

The bill requires the Secretary of State to publish a report on its Web site by July 1, 2019 of the number of corporations headquartered in California that have at least one female director, and a report by March 1, 2020, and annually thereafter, regarding the following: (1) the number of corporations that complied with requirements in 2019; (2) the number of corporations that moved their headquarters in or out of California during 2019; and (3) the number of publicly held corporations subject to SB 826 during 2019, but no longer publicly traded.

What you need to do in the next year to adjust to the new law

Qualifying corporations failing to comply with the minimum quota by the deadlines face penalties. For each director’s seat not held by a female during at least a portion of a calendar year, the corporation would be subject to a $100,000 fine for the first violation and a $300,000 fine for further violations. Corporations that fail to timely file board member information with the Secretary of State are also subject to a $100,000 fine.

In a signing statement, Gov. Brown acknowledged that “serious legal objections have been raised” about the bill. “I don’t minimize the potential flaw that indeed may prove fatal to its ultimate implementation.”

If you are a publicly held corporation based in California, SB 826 regulates your board composition and imposes additional reporting requirements. Given the initial requirement deadline is December 31, 2019, and ramps up in 2021, such corporations will want to begin their vetting process for female board members at the earliest unless planning to move out of California or to go private before then.