With 2024 now upon us, so is a slew of new laws and regulations that will affect California businesses.
Every year, laws passed by the state Legislature and signed into law by the governor take effect, and 2023 was a busy legislative session in Sacramento. The end result is another round of new legislation that California employers need to stay on top of.
This article highlights the top 10 laws and regulations affecting businesses in 2024.
- Sick leave law expanded
A new law that took effect Jan. 1 increases the amount of paid sick leave days California workers are eligible for to five days (40 hours), up from the previous three, or 24 hours.
The new legislation applies to virtually all employees in the state. Under the law, employers have two options for providing sick leave:
Up front: Employers can provide all five paid sick days up front for the year, and these days can be used immediately.
Accrual: Under the new law, if an employer chooses the accrual method, it has two choices to build up paid sick leave:
- Accruing one hour of paid sick leave for every 30 hours worked, or
- Providing 40 hours of paid sick leave by the 200th day of the year (up from the previous 24 hours by the 120th day of the year).
Businesses must allow employees to use their available sick balance beginning 90 days after the start of employment.
- Pre-employment cannabis screening
Employers in California are now no longer allowed to ask a job applicant about past cannabis use.
The legislation, SB 700, bars employers from conducting pre-employment drug screenings for cannabis. In addition, the new law, which took effect Jan. 1, prohibits companies from penalizing workers for their off-the-clock cannabis use.
The new law took effect at the same time as another measure, AB 2188, which was passed by the legislature in 2022. That law makes it unlawful for employers to “discriminate” against a person in hiring, termination or any term or condition of employment based upon:
- Their use of cannabis off the job and away from the workplace.
- Failing a workplace drug test that only detects inactive cannabis compounds called metabolites. These non-psychoactive compounds do not indicate impairment, only that an individual has consumed cannabis in the last few weeks.
The law does not allow workers to use cannabis while on the job.
- FAIR Plan increases its limits
With more and more California businesses being forced to go to the California FAIR Plan for their insurance coverage, the market of last resort has moved to increase its commercial property coverage limits significantly as the old limits were not sufficient for many commercial buildings.
This should bring a semblance of relief to companies located in wildfire-prone areas, who have seen their commercial property insurance non-renewed and who have been unable to find replacement coverage.
The decision comes as commercial property rates continue rising due to inflationary pressures, but in particular for companies located in areas that are considered urban-wildland interfaces.
The FAIR Plan has increased its coverage limits per location for businesses as follows:
Division I commercial property program — The limit has increased to $20 million per location, from the previous $8.4 million.
Division II commercial property program — The limit has increased to $20 million per location, from the previous $7.2 million.
- Workplace violence law
A new law, which takes effect July 1, 2024, will require any California employer with at least one worker to “establish, implement and maintain” a workplace violence prevention plan, as well as require employers to conduct annual workplace violence prevention training and to keep an incident log of violent incidents in the workplace.
The prevention plan must include the following:
- Procedures for the employer to accept and respond to reports of workplace violence, and to prohibit retaliation against an employee who makes such a report.
- Procedures to communicate with employees regarding workplace violence, including:
- How to report a violent incident, threat or other workplace violence concern;
- Effective means to alert employees to the presence of a workplace violence emergency; and
- How to obtain help from staff assigned to respond and/or law enforcement.
- Procedures for responding to actual and potential workplace violence emergencies.
- Procedures to identify and evaluate workplace violence hazards.
- Employers are also required to train their workers on the plan and on how to respond to violent incidents or threats of violence.
Cal/OSHA will typically create model programs or plans for employers to follow. It has not yet stated it will do so, but it likely will as it has in the past when requiring implementation of specific prevention plans.
- Treasury reporting rule
A new Treasury Department rule requires businesses with fewer than 20 employees and less than $5 million in revenue to report ownership and control information to the Financial Crimes Enforcement Network (FinCEN) as part of an effort to cut down on fraud, money laundering and the funding of terrorism that could run through anonymous business entities.
The new rule was prompted by the passage of the Corporate Transparency Act (CTA) enacted in 2021, but which took effect Jan. 1, 2024.
Companies formed after Jan. 1 will have 30 days to file that information with FinCEN. Existing companies will have to start filing that information starting Jan. 1, 2025.
While the rule exempts many firms from reporting obligations, FinCEN estimates that it will affect more than 32 million organizations nationwide, imposing a new compliance burden for businesses throughout the country.
Failure to comply with the CTA’s reporting requirements can lead to civil and criminal penalties, including a maximum civil penalty of $500 per day (up to $10,000) and imprisonment for up to two years.
- No more non-competes
Under two new laws, non-compete agreements with employees are expressly illegal starting in 2024 and if an employer requires one be signed, it could provide grounds for a lawsuit by the worker.
Here’s a rundown of the two laws:
AB 1076 — AB 1076 adds new requirements and penalties to existing cases that make it illegal for employers to include non-compete clauses in employment contracts or require an employee to sign a non-compete agreement that doesn’t meet exceptions under the law.
The law also requires employers to notify current employees who signed non-compete agreements that they are now void under California law by Feb. 14, 2024. This also applies to former employees who were hired after Dec. 31, 2021.
SB 699 — This legislation bars employers from enforcing a non-compete agreement that is void under California law. Most notably it would make void an agreement signed by an employee out of state who later relocates to California.
It also provides employees and job applicants a private right of action, including awards for injunctive relief, actual damages and attorney’s fees, and costs if an employer requires them to sign a non-compete. Additionally, it makes a violation of the statute an act of unfair competition — another possible legal risk.
- New joint-employer rule
The National Labor Relations Board has issued a final rule that expands the definition of what’s considered a joint-employer relationship and increases employers’ potential liability.
Under the rule, two or more entities may be considered joint employers if they share one or more employees and they both can determine the workers’ essential terms and conditions of employment. If a company is deemed a joint employer with another entity, each can be held liable for labor law violations that the other commits.
The new NLRB rule applies to almost all industries, but will have the most effect on companies that use staffing or temp agencies, firms that are third party employers, and franchisors.
The rule took effect Dec. 26, 2023 on a prospective basis, meaning it applies to any cases filed on or after that date.
- Reproductive-loss leave law
Starting Jan. 1, 2024, workers in the Golden State can take up to five days off for a “reproductive loss,” defined as a miscarriage, stillbirth, failed adoption or failed surrogacy experienced by an employee, their spouse or partner.
Under the new law, SB 848, workers are not required to take all five days consecutively, but they must use them all within three months of the event. If an employee experiences two reproductive losses in a year, they will be eligible for 20 days off.
- New telecommuter class code
If you have staff who work remotely, you’ll want to know that there is a new California workers’ compensation class code that is lower than what was previously being charged.
After many people starting working remotely when the COVID-19 pandemic began in 2020, the Workers’ Compensation Insurance Rating Bureau created a new telecommuter class code (8871) and tethered its pure premium advisory rate to the 8810 clerical classification for easier administration.
Under Rating Bureau rules, code 8871 now receives its own rate that is 25% lower than the clerical rate. If you have remote workers, you’ll want to ensure they are in the telecommuter class code to enjoy the lower premium.
- Wage changes
The state minimum wage increased on Jan. 1 to $16, from $15.50 in 2023.
While that wage is for the state, a number of cities and municipalities have minimum wage rates that are higher.
Additionally, a new law, AB 1228, raises the minimum wage for fast food restaurant workers in the state to $20 an hour, starting April 1, 2024. This rate will increase annually through 2029 based on inflation.