New California Employment Laws for 2021

As we approach the end of this cataclysmic year, we can be thankful for something that never changes — more employment law issues to address.  The following describes the most significant California employment laws going into effect in 2021, along with an HR Compliance Checklist to help you plan ahead.

Expansion of the California Family Rights Act (SB 1383)

For many years, the California Family Rights Act (CFRA) mirrored the federal Family and Medical Leave Act (FMLA) and required that employers with 50 or more employees provide job-protected unpaid leave for the serious health condition of eligible employees and their family members as well as for new child bonding time. In the early years of the Iraq war, two military provisions were added to the FMLA, but not to CFRA.  In 2018, California enacted the New Parent Leave Act, which extended new child bonding time under CFRA to employees working for employers with 20 or more employees.

Effective January 1, 2021, SB 1383 expands CFRA to employers with 5 or more employees.  To be eligible, employees must be employed for 12 months and work 1,250 hours.  However, there is no longer a requirement that employees need to work at an office location with any particular number of employees. The prior law required that employees worked within 75 miles of 50 employees (or 20 employees for new child bonding time).

Other changes include that up to 12 weeks can be taken to care for a family member, which has been expanded to include grandparents, grandchildren, and siblings.  The new law also provides up to 12 weeks of time off due to a military-related “qualifying exigency,” which has been covered by the FMLA.

Independent Contractor Clarifications for Certain Businesses (AB 2257) and Proposition 22

Following significant lobbying efforts from various industry groups impacted by the enactment of AB 5 last year regarding independent contractors, AB 2257 provides certain clarifications which went into effect on September 4, 2020 as emergency legislation.  I wrote about AB 5 here.

AB 5 provided that a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity can prove that the following conditions are satisfied:

(A) the person is free from the control and direction of the hiring entity regarding how the work is performed;
(B) the person performs work that is outside the normal course of the hiring entity’s business; and
(C) the person is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

AB 5 identified various occupations, as well as business-to-business relationships and referral agencies, which would be exempt from the “ABC” test and instead the independent contractor determination would be determined by applying the California Supreme Court’s decision in S.G. Borello & Sons, Inc v. Dept. of Industrial Relations (1989). Borello applies a flexible 10-factor test, which is typically referred to as the “economic realities” test, with the most significant factor being whether the person to whom service is rendered has control or the right to control the worker both as to the work done and the manner and means in which it is performed.

AB 2257 increases and clarifies various occupations in which the Borello test will apply instead of the “ABC” test.  With respect to bona fide business-to-business contracting relationships, the new law clarifies that an individual acting as a sole proprietor may qualify as an independent contractor if all of the stated conditions are met.  When two bona fide businesses contract with each other under this exemption, the determination of whether an individual working for a business service provider is governed by the “ABC” test.

The new law further provides that the Borello test applies to the relationship between a referral agency and a service provider.  The definition of a “referral agency” is more expansive under the new law, which includes some additional occupations, such as wedding or event planning and interpreting services, as well as a definition for “consulting” services. A “client” is a person who uses a referral agency for services that are otherwise not provided on a regular basis by employees at the client’s business location or that are outside of the client’s usual course of business.  A “service provider” is an individual acting as a sole proprietor or business entity that agrees to the referral agency’s contract and uses the referral agency to connect with clients. The new law provides that the service provider must set their own hours and negotiate their hours and rates of pay directly with the client.  Referral agencies may charge a fee to the client but the fee may not be deducted from the service provider’s total compensation.

The new law expands the definition of “professional services” (for which the Borello standard applies if the requisite conditions are met) to include fine artists, specialized performers, and content contributors.  All of the following factors must be satisfied:  the individual maintains a business location separate from the hiring entity; has a business license if required; negotiates their own rates; sets their own hours aside from project completion dates; engages in other similar work; and regularly exercises discretion and independent judgment when performing services.

The new law also provides that the Borello test applies to various creative arts professions, including recording artists, songwriters, and the like, and to single-engagement live performance events, subject to exceptions for collective bargaining agreements.  Data aggregators are also covered by the new law.

Turning to Proposition 22, it was approved by voters after an extensive media blitz by its main sponsors (Uber, Lyft and DoorDash). It will create a statute that individuals who are drivers and delivery people for “delivery network companies” and “transportation network companies” are independent contractors. There remains uncertainty for these types of businesses due to a court decision prior to the election that found that these workers are employees.  The Ninth Circuit Court of Appeal will be ruling on this at some point.

Pay Data Reporting Requirements (SB 973)

The California legislature has continued to focus on employer compliance with the Equal Pay Act by requiring pay data reporting. SB 973 applies to private sector employers with 100 or more employees that are required to file the federal EEO-1 report in which employees are reported by gender, race, and ethnicity according to occupational category.  Beginning March 31, 2021, and annually thereafter, these employers must submit a pay data report to the California Department of Fair Employment and Housing (DFEH). The report must include the race, ethnicity and gender of employees by job category within pay bands used by the United States Bureau of Labor Statistics in the Occupational Employment Statistics survey.  The data will be provided according to a single pay period of the employer’s choice between October 1 and December 31 of the reporting year.

The DFEH will make these reports available to the Labor Commissioner upon request, although both agencies are required to keep the data confidential, except to carry out administrative enforcement or to respond to discovery in litigation.  The reports will not be subject to the California Public Records Act.

Harassment Prevention Training Required by January 1, 2021

SB 778, which went into effect on August 30, 2019, extended the deadline for employers to provide harassment prevention training. The new deadline is January 1, 2021 for employers with five or more employees to provide two hours of harassment prevention training to supervisors and one hour of training for all nonsupervisory employees in California. Thereafter, this training must be provided every two years. New hires must receive this training within six months of hire or promotion to a supervisory position. Current law contains various requirements regarding the content of the training.

Last year, SB 530, extended the timeline for employers to provide harassment prevention training for seasonal, temporary, or other employees that are hired to work for less than six months. The deadline is January 1, 2021 for employers with five or more employees to provide this training to these types of employees within 30 calendar days after their hire date or within 100 hours worked, whichever occurs first.

COVID-19 Employer Reporting Requirements and Enforcement by Cal-OSHA (AB 685)

Under existing law, employers are required to file reports of certain occupational injuries or illnesses to the Division of Occupational Safety and Health (referred to as Cal-OSHA).  AB 685 requires employers to notify specified employees of their potential exposure to COVID-19 within one business day from the employer’s notice that an employee tested positive or was diagnosed with COVID-19,  became subject to a COVID-19 isolation order or died due to COVID-19.  This notification must be provided to employees who were working at the same work site as the employee with COVID-19 during the infectious period which is defined as the 48-hour period before symptoms began.  The notice must be in writing, which includes via email or text, and it must include information regarding workers’ compensation insurance, COVID-19-related paid time off, and state-mandated leave time.  All employees and employees of subcontractors must be notified of the disinfection and safety plan that the employer has or will implement, consistent with CDC guidelines.  Employers must not identify the employee with COVID-19 by name in order to protect their privacy.

Employers must also notify the applicable local public health agency within 48 hours if the number of COVID-19 cases meets the definition of a COVID-19 outbreak as defined by the State Department of Public Health.

AB 685 further provides enhanced enforcement authority to Cal-OSHA by allowing the agency to issue orders to shut down an entire worksite that exposes employees to an imminent hazard related to COVID-19. It may also issue citations for serious violations.

Application of Workers’ Compensation Insurance to COVID-19 (SB 1159)

In May 2020, Governor Newsom issued an Executive Order which created a rebuttable presumption that employees’ illnesses relating to COVID-19 were occupational injuries eligible for workers’ compensation insurance benefits if certain criteria were met.  SB 1159 codifies this Executive Order by creating a rebuttable presumption for first responders and health care workers and for employees who test positive for COVID-19 during an outbreak, as defined, at their specific worksite.  To rebut the presumption that the employee’s COVID-19 illness is work-related, employers may present evidence demonstrating that the illness was not contracted at work as well as safety measures they have taken.  According to the Department of Industrial Relations, this bill limits the risk of employers being liable for claims where the infection did not occur at work by tailoring the presumptions to those first responders and frontline health care workers whose work puts them at the greatest risk of exposure and other employees where there is a demonstrated and verifiable COVID-19 outbreak at their worksite.

Employees are required to exhaust their paid sick leave prior to being eligible for workers’ compensation temporary disability benefits.  This law went into effect September 17, 2020.

Clarification of Crime Victim Time Off (AB 2992) and Designation of Paid Sick Leave (AB 2017)

California Labor Code Section 230 authorizes victims of domestic violence, sexual assault or stalking to take time off to obtain a temporary restraining order or other relief to ensure the health, safety or welfare of the victim or the victim’s child, as well as time off to seek medical attention, to obtain services, to obtain psychological counseling or participate in safety planning. AB 2992 expands this protection to include victims of a misdemeanor or felony crime that caused or threatened to cause physical or mental injury.  It further clarifies that a victim would include a family member that died as a result of the crime.

AB 2017 clarifies employees’ designation of paid sick leave when it is used for the reasons specified in Labor Code Section 230 or to care for ill family members.  Some employers have required employees to use paid sick leave under these circumstances.  The new law specifies that it is at the employee’s discretion whether to designate their use of paid sick leave for these purposes.

COVID-19 Supplemental Paid Sick Leave and Food Sector Requirements (AB 1867)

AB 1867, which went into effect on September 9, 2020, requires employers with more than 500 employees to provide up to 80 hours of paid sick leave due to COVID-19 specified reasons. This law closed the gap created by the federal Families First Coronavirus Relief Act which exempts employers with more than 500 employees.  AB 1867 provides that health care providers and emergency responders who have been excluded from coverage at the option of their employers pursuant to the FFCRA are covered by this new California law.

This new law further provides that COVID-19 supplemental paid sick leave must be provided by the food sector industry, and it authorizes workers in any food facility to be allowed to wash their hands at least every 30 minutes.

As with the FFCRA, these California requirements expire December 31, 2020 unless the FFCRA is extended.

Settlement Agreement Restrictions on No-Rehire Provisions (AB 2143)

Last year, California law prohibited “no-rehire” provisions in settlement agreements which would otherwise prevent the aggrieved employee from applying for employment or working for the settling employer, except when the employer had made a good faith determination that the employee had engaged in sexual harassment or sexual assault.  AB 2143 adds further restrictions on the “no-rehire” exception.  It provides that the aggrieved employee must have filed a claim (which includes an internal complaint) in good faith and the employer must have documented its determination that the employee engaged in sexual harassment, assault or criminal conduct prior to the employee’s claim.

Composition of Boards of Directors for Publicly Held Corporations (AB 979)

In 2018, the California legislature enacted a law requiring publicly held corporations with executive offices in California to have a certain number of women on their boards of directors.  AB 979 extends this requirement to include directors from underrepresented communities. The law phases in its requirements over 2021 and 2022. The 2018 law has been the subject of lawsuit challenges; the same is expected for AB 979.

Extension of Statute of Limitations for Retaliation Claims Filed with the Labor Commissioner (AB 1947)

Employers are prohibited from terminating or punishing an employee for having complained that their employer violated Labor Code provisions under the jurisdiction of the California Labor Commissioner, which include minimum wage, meal/rest break, and overtime violations.  The statute of limitations for bringing such a claim under Labor Code Section 98.7 had been six months from the adverse action. AB 1947 extends the limitations period to one year.   This bill also adds an attorneys’ fee provision to the potential remedies for a prevailing party in whistleblower claims brought under Labor Code Section 1102.5.

New California Minimum Wage and Salary Requirements for Overtime Exemptions

On Jan. 1, 2021, the California minimum wage will increase to $13 an hour for employers with less than 26 employees, and $14 an hour for employers with 26 or more employees.

In California, the Administrative, Executive and most Professional overtime exemptions require the payment of a monthly salary at the minimum rate of two times the California minimum wage times 2,080 hours. This means that beginning January 1, 2021, the minimum salary threshold is $54,080 per year for employers with less than 26 employees and $58,240 per year for employers with 26 or more employees.

The California computer software overtime exemption’s minimum thresholds are tied to the Consumer Price Index and adjust each year. For 2021, the minimum hourly rate of pay to qualify for this exemption is increasing to $47.48, the minimum monthly salary will increase to $8,242.32, and the minimum annual salary will be $98,907.70.

Your 2021 HR Compliance Checklist

  1. Conduct harassment prevention training for all non-supervisory staff by the end of 2020. For employers with less than 50 employees, be sure to conduct harassment prevention training for all supervisors by the end of this year.
  2. For employers with less than 50 employees, update your Leave of Absence policy to include CFRA-covered time off for employees’ and their family members’ serious health condition and for new child bonding. For employers already covered by CFRA, update your Leave of Absence policy to include the expanded CFRA provisions. Leave of Absence approval forms and other employee communications will likely require updates.  Consider conducting a training session for HR on the new provisions.
  3. By March 31, 2021, submit your pay data report to the DFEH (if you have 100 employees).
  4. Be vigilant and ensure compliance with all COVID-19 safety, notification and reporting requirements.Local public health orders and Executive Orders from the Governor should be regularly reviewed given the ever-changing COVID-19 landscape.
  5. Determine which standards apply to independent contractors and have your legal counsel analyze whether they meet the applicable test. If contractors need to be reclassified as employees, explore the implications such as payroll taxes and overtime which may be owed.
  6. Update your Employee Handbook (or other personnel manual) to reflect all required paid sick leave and crime victim time off provisions.
  7. Review settlement and severance agreement templates and ensure that “no-hire” provisions are inserted only when permissible.
  8. Review the salaries of all overtime exempt employees and ensure that the new minimum salary thresholds are met to maintain the exemption classifications.

For more information or assistance with employment law compliance matters, please contact Ms. Topliff at


Mary L. Topliff, Esq.

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