Episode 232 - Employment-Related Legislation Headed to the Governor

Welcome to the Workplace, a podcast by Cal Chamber. I'm Matthew Roberts, associate General Counsel with the California Chamber of Commerce. Hello listeners. The book has closed on the regular 2025 California legislative year. As usual, thousands of bills were introduced, including dozens that would impact employers. The California Chamber of Commerce took a new approach this year, highlighting cost of living concerns that have taken center stage for California's businesses and residents, known as the affordability agenda. Cal Chamber designated bills as either cost drivers that can have a negative impact on affordability or cost cutters that of course have a positive impact on affordability. Several employment law bills received the cost driver designation throughout the year. And to discuss how Cal Chambers affordability agenda framed the legislative session and which bills made it through to the governor's desk for potential signature, we welcome back Ashley Hoffman, Cal Chambers senior policy advocate for labor and employment. Thank you for being here, Ashley.

Thank you as always for having me.

All right, Ashley, so if you don't mind, I had just mentioned this loosely what the affordability agenda was, but if you'd like to take an opportunity to kind of recap how that agenda impacted an employment bills introduced, the session and the results of where we are, at least to this point, I think we'd all really appreciate kind of where we are.

So as a chamber, we are very proud to say that 28 out of the 29 cost drivers across all the issues issue areas were either stopped or amended. So there is only one on the governor's desk. I think for me, especially in the labor and employment space, but then also just keeping an eye on the other spaces. You know, this theme of affordability really coming off of the last election was big. Not only something that we focused on for purposes of what our members are interested in, but then also, you know, you saw a lot of similar terminology being used by the legislators themselves. So I think this really was a year where just given not only with private businesses are going, going through, but then also the state budget, there was a lot of focus on potential costs and affordability issues.

And I think that's an incredibly well done job on behalf of the business community and really just the state of California as a whole, because this was a major issue in the last election, is trying to help keep costs stable at this time. And oftentimes we can see employment legislation that will have a negative impact on that depending on the nature of the bill. So with that, let's get into the bills. And of course you said 28 out of 29 were stopped. That means there is one still outstanding. So we will start with the only cost driver that went to the governor's desk, SB7. Now, I know we've discussed this bill in particular a few times this year on the show and it also underwent late amendments here just before the legislative deadline. So Ashley, what's the current proposal in this bill? Where is it at and why is it still the last one getting a cost driver designation?

Yeah, so SB7, you know, it did undergo some amendments, but still is from our perspective, corporate, quite overly broad. So this bill is regulating the use of automated decision systems specific to the workplace. Really one of our biggest concerns with it is it treats employees and independent contractors exactly the same. So every obligation that would apply for an employee also would apply for a contractor. So for example, you know, there are quite broad definitions of ADS as well as employment related decision that dictate when a company or state government or local government would have to give notices. And basically that notice requirement gets triggered even if ADS is present at all and has any role, no matter how minimal, in anything related to employment, anything as simple as scheduling or where you get assigned or what have you, that triggers a notice requirement where you'd have to disclose quite a bit about the tool itself and how it's used. I know there's some concerns about what those disclosures would include. And if you think about manufacturer, a healthcare setting, the amount of notices that they would maybe be required to issue would be quite voluminous. There's also restrictions, you know, on use of ads. Right. The ability, how much you can rely on it and what that means if there's any reliance on it for purposes of discipline or termination. Right. Certain instances will trigger an obligation to first do an investigation. Again, that does apply also to contractors. So that opens up a lot of questions of if I'm a small business and ADS flags that a contractor I've hired to do some IT or software work for me is doing something inappropriate with my data or my accounts. I now have to basically treat them as an employee and go through a whole HR investigation before I could terminate that contract. There's a couple of other provisions. There's a right to access that's quite broad as well. Even though that did undergo some amendments, I know some folks still have some concerns about turning over some data. So, you know, I think for us there's a lot of, I'd say maybe hidden costs in that bill that are maybe not as obvious until you really start digging in just on how broad it is and all the obligations that it could lead to. You know, the time and then also really deterring, especially those smaller businesses who do rely sometimes on contracting because it's more affordable for them. This can make that less affordable.

All right. Well, we'll keep our eye on that one and see what happens with that last cost driver. All right, Ashley, let's move on to some other bills that don't have the cost driver tag, of course, but they are ones that will impact employers should Governor Newsom choose to sign them. As we have also discussed on the show this year, of course, immigration related issues for employers have been a hot topic really all year. The legislature did touch on this a little bit with a bill, AB 1136, in creating some new immigration related protections. So what does AB 1136 look like, Ashley?

So AB 1136 has undergone also some recent amendments. So it has two main pieces. The first is there is a new five day leave. It is five unpaid days for attending some type of meeting or proceeding related to immigration. We were able to get an amendment that says that the employer could allow a worker to use other forms of leave before they could use this slave. The next has to do with rehire. And if you're in the hospitality industry, this may look a little bit familiar to you. So if someone is terminated due to lack of work authorization or due to some sort of detention or incarceration due to immigration or deportation proceedings, the employer would then be required to rehire them either into the same position or another position that becomes available for between 12 to 24 months, depending. There's a little bit of an unclear provision in there saying that the employee can ask for more time. And the way I read that is it could be up to two years. Thankfully, we were also able to get a sunset. So it does sunset in July of 2029. There is also a small business exemption for those with fewer than 26 employees. So, you know, we were able to get some amendments. I think the one that we were really hoping for was to shorten that rehire period. Unfortunately, we're not, you know, able to get agreement on that. But, you know, this will be an interesting one to watch. Obviously a very important topic. You know, it does raise some concerns. We flagged. We just want to make sure that employers aren't put in a position where if an employee comes to them because one of these situations applies, does that trigger constructive knowledge under federal law? Right. And how are you making sure you're complying with this but also with your duties under federal law? So I think if this one passes, this is definitely one to watch. And really pay attention to as far as how it's being implemented.

All right. And one more bill that at least in small part touches on immigration related issues is SB294. And of course it goes without saying that California has quite a bit of notice requirements. I know SB7, if signed, would create all sorts of ones involving automated decision systems. But SB 294 is a little more of a traditional notice requirement. What's in this one?

Yeah, so this one started off quite broad, was another notice requirement. I think through a lot of our discussions, you're really pointing out the fact that a lot of the notices it was requiring were duplicative. It was pared back pretty significantly. So the notices that would be required. Right. Would be related to rights for immigration, were lights related to workers compensation and then some other rights. For example, I believe the right to organize is included in there. I think just given what we're seeing right now regarding immigration enforcement, that's, you know, and the fact that right now employers are not required right to give notice. Kind of like the know your rights pamphlets or things you might see that some employers are voluntarily handing out. This was meant to be, I think like a little kind of like a small like notice or pamphlet or something that an employee could have on hand if they are in an industry that may be subject to some, you know, inspection to raids. So it's really where the impetus for this one came from. The labor commissioner will be required to create a template for this notice. However, employers will not be required to use that template. It's really meant more to serve as a guide or, you know, can be used as a notice if an employer so chooses.

All right, well, moving on. Of course we're going to reintroduce the word Covid that I know we're all super happy to hear about. But one bill that made it to the governor's desk is a reprise of an old Covid era rehire law that was passed some years ago. Now in this bill, AB 858, we touch on this rehire provision again. So Ashley, can you kind of remind us what the rehire rights existed from the COVID era and what does AB858 do with them now going forward if it's signed?

So effective in 2021, certain rehire recall rights were instated primarily in the hospitality industry, building services, hotel and events. And those entities were required to rehire employees that were laid off due to economic issues related to Covid. And there is a rebuttable presumption that the layoff was related to Covid, that the employer would have to rebut. That bill was extended once before and is coming up due to expire. ABA 5, 8 had started as not only an extension of that, but also an expansion to all states of emergency, which was actually, you know, recycling some language from a bill in 2020 that was vetoed. It was trimmed down considerably. Now, you know, it simply just extends that sunset to January 1, 2027. And so that's about it. You know, just really one more. Two. Two more years. I can't do math right now.

It looks like one more full year.

Yeah, one more full year. And so thankfully, it was pared back pretty significantly from how it was introduced.

Yeah. And I think, you know, something I noted with that is as we've gotten farther and farther away from the COVID 19 pandemic, it's becoming harder and harder to prove that any kind of layoffs are related to economic conditions that are derived out of that. So obviously, a little bit of a limited impact, but one you still need to be aware of and to rebut if necessary. Now, another bill that focuses on employment contracts because on occasion the legislature likes to focus on things that may restrain trade, as they like to call it. We have a bill this year in that area, AB692. Now, a long time common practice, of course, has been for employers who want to can fund an employee's additional education or career growth credentialing in exchange for a promise that the employee will remain with the employer for a set period of time. That is, if I'm going to pay for your education or your credentialing, then I should at least be able to get some benefit out of that. Right. So how does AB692 kind of affect that scenario?

Yeah, so this is an interesting one in that to your point, there's a lot of programs, you know, hiring bonuses. Maybe it's loan forgiveness, maybe it's helping with the down payment. It's sending you to a leadership training. Right. Where employers offer that. But of course, you know, you're not going to want to pay someone a $10,000 signing bonus and have them quit two weeks later. And so this bill has also undergone a lot of amendments. I think we still have just a big concern that it could actually backfire, to be honest, and deter, you know, employers from offering some of these benefits. But we're able to get some exemptions in there. You know, for example, there is an exemption if you are offering some benefits related to helping people get housing, as some employers will do, especially if they're maybe in an expensive area or if they're in a very rural area where housing can be more limited. There are some conditions in which, you know, like a signing bonus is allowed as long as it's discretionary and unearned and asset of employment not tied to job performance. It would also need to be prorated. So if you mandate, you know, that someone stayed for a year and they stay six months. Right. You couldn't require them to owe you more than 50% of the amount back. I believe there's also a two year limitation on that as far as how long you can require them to remain. And then also there are some allowances for purposes of remade payment for tuition of a degree. Again, while I think, you know, for some employers these exceptions will be sufficient, there's definitely other circumstances where it would not be so, especially if you're talking about maybe more professional employees who are going to have attorneys. Right. That are going to be negotiating a whole host of terms. Things like this, you know, just might not really make sense. And so it'll be very interesting to see what happens with this one.

All right. And Ashley, let's finish up with one last bill, which is SB642. That would actually answer a big question that I've been trying to answer for a couple years now about pay scale compliance. So in that area, what does SB642 look to amend?

Yes. So this bill really started out as dealing with the job postings and the pay scale and also the Equal Pay Act. And in response to our request, we are happy to say the author was amenable to adding in a clarification to say that the pay scale that must be posted on the job posting is the amount that the employer would expect to pay upon hire. And I know that is a big question you guys get even to this day. So very happy to see that language again. It also does impact the Equal Pay Act. It does more align the statute of limitations to three years, which is more similar to, you know, Fair Employment Housing act claims. It does also, though, allow for recovery to date back up to six years, which is longer than the statute of limitations is a little bit unusual. There is, I believe, a law in New Jersey that is similar. I think the thinking here is that Equal Pay act claims are unique in that you don't always know what your coworkers are making. And so if you have been paid less than someone for five years, let's say you may not know that for a very long time because we don't all tend to walk around necessarily saying what our salaries are to one another. And so, of course, we don't love the precedent of that. We are opposed to it. But, you know, there is some recognition, I think, that the Equal Pay act is a little bit unique in that sense.

Okay, Ashley. Well, there's a lot out there on the table, so thank you for taking the time to update us on where the legislative session ended with the employment bills. We do look forward to updates in the future, as the governor has until the middle of October to act on these bills. So, Ashley, again, thank you for your time.

Thank you.

And thank you, listeners, for joining this discussion on the workplace. Please share and subscribe to Cal Chambers podcast by visiting calchamber.com.