California Employers: Be Ready for 2023’s New Laws and Requirements

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Most of the new state employment laws enacted this year take effect on January 1, 2023. A couple of others, as noted below, take effect later, but employers should begin preparing to comply with them now. Here are summaries of new laws and developments for 2023:

• Higher State Minimum Wage: Senate Bill 3, effective in 2017, phased in annual increases in the state minimum wage until the rate reached $15 an hour for all employers in 2023. This year, the law’s automatic annual increase applies for the first time. It raises the minimum wage each January 1 to take account of the national inflation rate, up to 3.5 percent, and rounded to the nearest dime. As a result, on January 1, 2023, California’s state minimum wage for all employers (regardless of size) increases to $15.50 an hour – the maximum 3.5 percent allowed. During the measurement period, however, the national Consumer Price Index increased 7.9 percent. Employers also must pay attention to local minimum wage ordinances, which can require a higher minimum wage – and also may have annual increases.
• Higher Minimum Pay for Exempt Employees: A hike in the state’s minimum wage automatically brings an increase in the minimum salary for certain overtime exempt employees. Employers now must watch for this change every year. Under the administrative, executive, and professional exemptions, California employers must pay employees a monthly salary of at least twice the state’s minimum wage. With the new minimum wage increase, the minimum salary will be $5,373.33 per month, or $64,480 a year. Under the commission pay exemption, employees must earn at least one and a half times the state minimum wage for all hours worked, with at least half of their compensation from commissions. These employees will have to earn at least $23.25 an hour in 2023. Separately, the minimum pay for employees under the computer software professional exemption increases to $53.80 per hour, or $112,065.20 per year – a 7.6 percent increase, based on the California Consumer Price Index.
• Employee Sick Leave and Family and Medical Leave to Care for a “Designated Person”: Beginning January 1, 2023, employees will be able to use their California paid sick leave to care for a “designated person.” Employers with five or more employees also will have to allow employees to take state family and medical leave (under the California Family Rights Act, or CFRA) to care for a “designated person.” With both leaves, the person designated does not need to have a blood or family relationship with the employee, although it should be “the equivalent of a family relationship” for CFRA leave. Please see our alert on Assembly Bill 1041 for details.
• Bereavement Leave: After vetoes of several past efforts, most employers in California will have to provide bereavement leave starting on January 1, 2023. Assembly Bill 1949 will require employers with five or more employees to provide up to five days of bereavement leave for the death of certain family members. Please see our alert on this new law.
• COVID-19 State Supplemental Sick Leave Expires: California’s supplemental COVID-19 paid sick leave, as extended by Assembly Bill 152, expires on December 31, 2022. An employee using available supplemental paid sick leave on that date will be allowed to complete that absence and use available leave into the first days of 2023. Our alert on the law is available here. With COVID-19 rates spiking, employers should watch to see whether the Legislature and Governor enact a new mandate in 2023. Employers also should take note that local supplemental paid sick leave ordinances may still apply, such as in Oakland, Los Angeles, and Long Beach.
• Other COVID-19 Laws Extended: Two bills extended and modified some COVID-19 provisions that were set to expire, with the requirements now to remain until January 1, 2024. Assembly Bill 2693 extended California’s employee exposure notice requirements. However, employers will now be able to post a notice for 15 days, instead of providing individual notices. They also no longer will need to notify their local health agency. For worker’s compensation claims, Assembly Bill 1751 extends, until January 1, 2024, the rebuttable presumptions that an employee’s COVID-19 infection arose from employment. Typically, an employee has the burden of proof on a worker’s compensation claim. Even with this rebuttable presumption in place by law since 2020, California’s Commission on Health and Safety and Worker’s Compensation still found the denial of 34 percent of COVID-19-related claims during the period studied – compared to 10 percent of worker’s compensation claims generally.
• New Pay Transparency Law: Senate Bill 1162 imposes several new wage transparency reporting requirements on California employers, effective on January 1, 2023. All employers in California will have to (1) provide, upon request, the pay scale for the position in which a current employee is employed; and (2) maintain documentation of an employee’s job title and wage history for each employee for the duration of the employee’s employment and for three years afterward. Employers with 15 or more employees will have to include the “salary or hourly wage that the employer reasonably expects to pay for the position” in any job posting, including postings made on their behalf by third-party companies. The new law expands reporting requirements for employers with 100 or more employees, who now will have to file with the state an annual report showing employees’ median and mean hourly pay rates “[w]ithin each job category, for each combination of race, ethnicity, and sex.” These reports are due the second week of May each year. For 2023, the deadline is May 10. Please see our alert on these new requirements here.
• California Privacy Rights Act Takes Effect: The California Privacy Rights and Enforcement Act (CPRA), amending the California Consumer Privacy Act (CCPA), takes effect on January 1, 2023. The CPRA eliminates employer exemptions in the CCPA for employee/applicant data and expands several areas of the CCPA. It creates several privacy-related obligations for employers, including, but not limited to, the need to notify applicants, employees, and contractors about personal information that an employer may collect. The CPRA also increases employees’ rights to access, or restrict the use or disclosure of, certain categories of personal information.
• Digital License Plate Restrictions: Starting January 1, 2023, Assembly Bill 984 restricts the use of digital license plates, which have built-in GPS functionality, to track vehicle fleets. If employers use these plates to track employees, the tracking must be “strictly necessary” to employees’ duties and only done during work hours. An employer must provide a detailed notice regarding any tracking of employees, including a description of the specific activities that will be monitored, how the data will be used, whether the data gathered will be used to make any employment-related decision, vendors or other third parties to which information collected through monitoring will be disclosed or transferred, organizational positions authorized to access the data gathered, the dates, times and frequency that the monitoring will occur, and where the data will be stored and for how long.
• Employee Contraceptive and “Reproductive Health Decisionmaking” Protections: Senate Bill 523, the Contraceptive Equity Act of 2022, is a comprehensive law dealing mainly with coverage of contraception and related procedures. It has a couple of new employment protections, though. Starting January 1, 2023, the Fair Employment and Housing Act will prohibit discrimination based on “reproductive health decisionmaking,” which includes any “decision to use or access a particular drug, device, product, or medical service for reproductive health.” Employers cannot require disclosure of such information and must keep any such information confidential. The new law applies to employers with five or more employees.
• “Emergency Conditions” Protections: Senate Bill 1044 prohibits employers from taking or threatening to take an adverse action against employees who, in the event of an “emergency condition,” refuse to come to work or leave work based on a reasonable belief that the worksite is unsafe. “Emergency condition” means a disaster or extreme peril to the safety of a person or property at the workplace caused by natural forces or a crime, as well as an evacuation order concerning a natural disaster or crime at the workplace, an employee’s home, or an employee’s child’s school. It specifically excludes health pandemics. “Reasonable belief” means if a reasonable person would conclude there is real danger of death of serious injury if that person enters or remains on the premises. Employees also must be allowed to use mobile devices or other communication devices to seek emergency assistance, assess the safety of the situation, or communicate with a person to verify their safety during an “emergency condition.” The new law takes effect on January 1, 2023.
• Employee Garnishments: Senate Bill 1477 reduces the portion of an employee’s wages subject to garnishment to pay a judgment. The new limit will be the lesser of: (1) 20 percent of an employee’s disposable earnings (instead of 25 percent), or (2) 40 percent (rather than 50 percent) of the amount by which disposable earnings exceed 48 times the current state minimum wage or higher local minimum wage. This change is effective on September 1, 2023.
• Employee Off-Duty Marijuana Use and Drug Testing Changes: Last, but not least, Assembly Bill 1288 will prohibit employment discrimination for off-the-job marijuana use away from the workplace. Employers will not be able to use drug testing for “nonpsychoactive cannabis metabolites.” The new law applies to employees with five or more employees, with some limited exceptions. It is not effective until January 1, 2024, giving employers more time to sort out how to comply. For more details, please see our alert.

These new laws and developments pose new challenges for California employers. While some changes may be (or seem) straightforward, others raise significant issues and uncertainty. Employers should consult with employment counsel to ensure compliance. Happy 2023!