5 New California Laws That Change How Business Does Business

The 770 new California laws signed by Gov. Gavin Newsom, which took effect on New Year’s Day 2022, arrived in the wake of turbulence from a global pandemic. Employers and workers alike continued their struggles to recover from the economic downturn and upheaval caused by COVID-19—which had infected nearly 7.5 million people in California alone, killing almost 80,000. As a result, several of the bills that became law on Jan. 1 will have an outsized impact on how businesses in California operate, from small businesses with fewer than 26 employees, to giant Amazon warehouses, to gig-economy food-delivery apps. All employers will be affected by California’s new laws, as will the workers on whose labor businesses rely for survival.

Several new laws give workers important on-the-job protections, particularly against businesses who cut corners on COVID-19 health measures. On the other hand, legislators in 2021 were sensitive to complaints of COVID-impacted businesses about new laws and regulations. The state legislature considered 25 bills that were singled out as “job killers” by the California Chamber of Commerce. Only two passed. Of that pair, Newsom signed one and vetoed the other.

The bill nixed by Newsom would have allowed California farmworkers to use a special ballot card, available at local Agricultural Labor Relations Board offices, to vote by mail in union elections. Newsom said the law had “inconsistencies and procedural issues,” while the Chamber derided it as “forced unionization,” saying the law would also restrict employers’ ability to challenge union ballots and to decertify unions.

A Better Deal for Garment Workers

Newsom signed SB 62, a new law which establishes new protections for workers in the California garment industry. The state has the country’s highest concentration of garment workers, and since Jan. 1, employers in that industry must pay those workers an hourly wage not less than the state’s minimum wage, and must stop paying on a “piece-rate” basis. That is, paying a fixed sum for each piece of work completed. 

The new law also changes how workers pursue claims of “wage theft,” when their employers fail to pay minimum wage, or in some cases don’t pay at all. Previously, it was the worker’s responsibility in wage-theft claims to prove that the allegations had merit. The new law allows the state to place that burden on garment manufacturing firms and their contractors. The Chamber put the bill on its job-killer list, claiming that it would lead to garment-makers moving theor business to other states.

Taking Aim at Amazon

While too many businesses suffered during the pandemic, the online retail giant Amazon thrived, with profits skyrocketing as much as 220 percent in the first quarter of 2021. The second-largest online store, Walmart (a distant second with 6.6 percent of the online retail market compared to Amazon’s 41 percent), also saw sales and profits surge. For Amazon, as well as Walmart, online success is built on a business model of ruthless efficiency, with products shipped quickly and cheaply from massive warehouses by employees who often say they are dangerously overworked.

Assembly Bill 701, a new 2022 law passed by the California legislature and signed by Newsom, aims directly at Amazon’s culture of pervasive electronic surveillance driven by algorithms that measure worker productivity. When the new law took effect, California became the first state, and only one so far, to impose regulations on warehouse quota systems.

Amazon’s computers measure “Time Off Task,” meaning any time spent doing anything besides scanning barcodes or other assigned, repetitive tasks. Too much Time Off Task, or TOT, and a worker can be reprimanded or even fired. The algorithm counted any time not working as TOT. That includes trips to the bathroom which sometimes necessitate a 10-15 minute round trip in Amazon’s vast warehouse facilities—and any TOT period longer than five minutes can trigger the algorithm.

Previous to AB 701 taking effect, the algorithm’s standards were a mystery to to the online giant's 153,000 California employees. Under the new law, warehouse employers must reveal work-rate quotas to workers as soon as they’re hired, spelling out exactly how many times they are expected to perform specific tasks, and how much time they have to get them done. The businesses must also specify what the penalty will be for failing to meet the specified quota. Bathroom breaks and other required rest periods would no longer count against “Time Off Task” measurements.

The bill does not apply only to Amazon, Walmart and other large online retailers, of course. Any business with at least 1,000 warehouse employees in California, or 100 at any single facility, is subject to the new regulations.

The California Chamber of Commerce labeled the bill a job killer because it “threatens warehouse employers with duplicative costly litigation” and creates a new standard for determining what counts as retaliation against workers who complain about the quotas. 

After a series of amendments were added to AB 701, the Chamber dropped the “job killer” label from the bill.

COVID Crackdown on Safety Violators

The COVID-19 pandemic led to a new law, Senate Bill 606, that makes it easier for the state to slam California businesses with costly fines for workplace safety breakdowns. Workplace outbreaks in grocery stores, meat packing plants, warehouses, and restaurants—among other facilities where workers are grouped closely together—revealed the inadequacies of the California Division of Occupational Safety and Health (Cal/OSHA) when it comes to keeping tabs on businesses with multiple violations.

Before SB 606 took effect, Cal/OSHA needed to inspect every facility where a health or safety violation may have occurred, which was not feasible given that the agency has only one inspector for every 103,000 workers in the state. As a result, businesses with multiple violations were usually cited for only one, and then Cal/OSHA would negotiate a settlement—often for a sum deemed too weak to deter employers who didn’t want to be bothered with cumbersome social distancing, masking, and other COVID-prevention measures.

Now, California businesses cited for one violation will be forced to prove that they do not have multiple violations even if Cal/OSHA finds only one—as long as there is some sort of evidence of a pattern of violations across more than one worksite. If the business fails to rebut the allegation of multiple violations, it can be cited for an enterprise-wide violation, a new category created by SB 606.

The new law also creates the even more severe category of “egregious” violations, which can occur when there is a worker fatality—such as a worker catching and dying of COVID—or a large number of worker illnesses or injuries. A history of violations, or an intent to violate safety regulations, as well as several other conditions, can result in a citation for an “egregious” violation which like enterprise-wide violations carry fines up to $134,334.

But the catch under the new law is that the fine applies not just once, but for every worker affected by the violation. So if Cal/OSHA determines that 100 workers were potentially affected by a violation, a business would face a potential fine of more than $13 million.

Minimum Wage Hits $15 Per Hour

One of the most significant new laws affecting California businesses and workers is not new at all, but actually took effect in 2017. That’s when Senate Bill 3 first increased the state’s minimum wage to $10.50 per hour for businesses with at least 26 employees. The law, however, required new increases each Jan. 1 for the subsequent six years. That means, at the start of 2022, California’s minimum wage rose to $15 per hour in businesses with 26 or more employees. 

For those with 25 employees or fewer, the new minimum wage is raised to $14 per hour—but under SB 3 all California workers will be eligible for the $15 minimum wage starting on Jan. 1, 2023.

Silencing Workers is Now Canceled

For years, bosses who engaged in horrendous acts toward their employees—for example, film producer Harvey Weinstein, whose multiple cases of sexual assault ignited the #MeToo movement—silenced their victims with legal contracts called confidentiality or “non-disclosure” agreements. Known as NDAs, these settlements involved paying victims a severance package or other type of financial settlement in exchange for a legal requirement never to discuss the crimes or transgressions committed by their employers.  

NDAs have other, legitimate purposes, such as protecting valuable trade secrets and ideas for new products. They also frequently include “non-disparagement” clauses which prevent an employee or former employee from damaging an employer’s reputation by making negative comments.

Violating an NDA could carry significant penalties. That’s why, in 2018, California banned NDAs that prevented sexual misconduct victims from speaking out about the abuse and harassment they’ve endured at an employer’s hands. But that law, the STAND (Stand Together Against Non-Disclosure) Act, applied only to cases of sexual abuse. 

A new law taking effect in 2022, Senate Bill 331, widens the ban against NDAs designed to cover up employee abuse of workers. Under the new law, NDAs may no longer prohibit an employee from speaking publicly about any type of harassment or discrimination, including violations based on race, religion, gender, disability or any other “protected” characteristic. 

SB 331 also bans non-disparagement clauses from NDAs that employees must sign in order to gain employment or remain employed, or to obtain severance pay when they are laid off. Employers, however, can get around that ban at least in part by including non-disparagement clauses that specifically allow employees to discuss workplace activity they “believe to be unlawful.”

Even under the new law, California businesses may use NDAs to bar employees from discussing the monetary amount of any settlement or severance payment.