2025 is set to be a major year in the Labor and Employment field. Coming on the heels of another busy year for state and federal legislatures and courts alike, this year promises to have much in store for changing—and further complicating—a complex field of law for companies to navigate. As a result, we have compiled a selection of the most pressing updates for companies to know about in the new year, as well as some important tips on how to stay up to date with new laws and legal standards.
AB 2288 and SB 92 Make Major Reforms to PAGA
On July 1, 2024, Governor Gavin Newsom signed into law new reforms to California’s Private Attorneys General Act, which authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of the State of California for Labor Code violations. These new changes apply only to civil actions brought on or after June 19, 2024.
The two reform bills, AB 2288 and SB 92, make some major changes to ease some of the burden on the law on employers. For employers with less than 100 employees during the prior year, the reforms allow for these companies to cure alleged Labor Code violations before a PAGA lawsuit may be filed. It is noteworthy that such an opportunity is granted to any size of employer when the alleged violations are wage statement violations. For employers with at least 100 employees during the prior year, these companies can file a request for a conference with the LWDA to review proposed cure plans, which would stay court proceedings pending their completion, after a PAGA lawsuit has been filed. Even still, successful completion of the conference could lead to a settlement which would preclude time in court entirely and save participating employers from costly court litigation.
PAGA penalties have also been revised with the new reforms. Employers who pay wages on a weekly basis will now face a 50% reduction in per-pay-period violations, eliminating what was formerly an arbitrary and unfair penalty scheme from the earlier version of PAGA. Additionally, no more penalties shall be imposed for “derivative: violations caused by the same underlying conduct. The PAGA default civil penalties have also been revamped, creating a variety of exceptions which allow for the default penalty to go as low as $25 per employee, per pay period, provided the alleged violation(s) resulted from an isolated, non-recurring event that did not extend past the lesser of 30 consecutive days or four consecutive pay periods. Lastly, PAGA civil penalties will be reduced to 15% of the maximum statutory amounts if an employer takes all reasonable steps towards statutory compliance before receiving a violation notice or a request for records. The penalty will only be reduced to 30% of the maximum statutory penalty if these steps taken towards compliance are taken within 60 days after receiving such a notice.
California Supreme Court Gives Employers Who Make Wage Statement Mistakes a Break
Although there were a variety of important wage and hour cases in California this past year, an important update came in the Supreme Court’s holding in Naranjo v. Spectrum Security Services, Inc., 15 Cal.5th 1056. Here, the Supreme Court held that a former employer’s objectively reasonable and good faith, albeit mistaken, belief that it provided employees with adequate wage statements precluded the award of civil penalties for a knowing an intentional failure to report the same unpaid wages, or any other required information, on a wage statement. This is extremely important for employers since it is very easy to run afoul of California’s very strict wage and hour laws, and wage statement violations are generally a very easy claim for plaintiffs in Labor Code violations cases to prevail on. This holding from the Supreme Court will help employers to avoid costly litigation resulting from honest mistakes.
SB 988 and New Protections for Freelance Workers
California’s SB 988 will now impose minimum requirements for contracts made between freelance workers and hiring parties if the amount of the services or work contracted for exceeds $250. The Freelance Worker Protect Act now requires the hiring party to pay the freelance worker as specified in the contract by the date specified in the contract, or, if no date is included within the contract, no later than 30 days after completion of the work. If the services exceed $250, the parties must make a written contract, and the hiring party must retain the contract for no less than four years. Further, the hiring party is prohibited from discriminating or taking any adverse action against the freelance worker for enforcing or seeking redress under the provisions of the Act.
Federal Arbitration Court Cases Update
The Ninth Circuit and U.S. Supreme Court have been extremely busy this year with important labor and employment cases. With regard to the Federal Arbitration Act (“FAA”), they have been especially engaged with better defining which types of workers are exempted from the FAA under the so-called “transportation clause.” This clause exempts the employment agreements of workers engaged in the transportation of goods in interstate commerce from the mandates of the Act. In Bissonnette v. LePage Bakeries Part St., LLC, 601 U.S. 246, for example, the Supreme Court broadened the reach of the exemption by stating that the role of the works, rather than the industry the worker is engaged in, is what determines their status with regard to the Act. Other cases, such as Lopez v. Aircraft Service International, Inc., 107 F.4th 1096, have broadened this category by stating that ancillary workers to the actual transportation of goods in interstate commerce (e.g. fuel technicians for airplanes) are still vital to the transport of those goods and so fall within the exemption. These rulings will have the effect of undermining the enforceability of arbitration agreements for those classes of workers that are deemed to be involved in the transport of goods in interstate commerce, making employers more vulnerable to litigation arising from workers in transportation-adjacent roles.
California Cracks Down on New Types of Discrimination
California passed a slew of bills in 2024 designed to eliminate certain types of discrimination towards both current and prospective employees. The first of these is AB 2499, which prohibits employers with 25 or more employees from taking any sort of adverse employment action against an employee who is a victim of a “qualifying act of violence,” or if a family member was recently a victim of such an act of violence, for taking time off work. “Qualifying act[s]” include any sort of conduct that includes either bodily injury, death, threat of force, or a dangerous weapon. Employees are allowed to take this leave concurrently with California Family Rights Act or Family Medical Leave Act leave and may also use paid sick days for this type of leave.
California also passed SB 1100, which amends the California Fair Housing and Employment Act (FEHA) to make it unlawful to reference a requirement of a driver’s license in job postings or applications, or require an applicant to have one, unless the employer reasonably expects the duties of the position to require driving. The employer must also reasonably believe that to satisfy the duties of the position, an alternative form of transportation would not be comparable in travel time or cost to the employer.
AB 1815 and SB 1137, also both passed in 2024, amend the Unruh Civil Rights Act and FEHA to prohibit employers from discriminating against hairstyles associated with a race and/or culture, and from discrimination based on the combination, or the intersectionality of, protected characteristics like race, gender, or sexual orientation, respectively. These amendments serve to explicitly encompass more forms of impermissible discrimination in the workplace and in the hiring process. Employers should be wary of these subtle changes to FEHA and the Unruh Act to avoid any civil rights violations claims being brought against them.
SB 399 and Captive Audience Meetings
Also taking effect in 2025, SB 399, or the California Worker Freedom from Employer Intimidation Act, is a prohibition against so-called “captive audience meetings.” The bill prohibits employers from taking any sort of adverse employment action against employees who decline to attend or participate in an employer-sponsored meeting, the purpose of which is to directly or indirectly communicate the employer’s opinion about religious or political matters. Notably, union organizing-adjacent topics are considered “political matters.” The bill will impose a $500 civil penalty per employee for each violation. Therefore, because employee terminations, transfers, and other adverse employment actions are unfortunately a necessary function of every company, it is wise to avoid holding any employer-sponsored meetings where religious or political matters are discussed in order to avoid the appearance of a retaliatory adverse employment action thereafter.
The Impact of Loper Bright on Labor and Employment Issues
The landmark Supreme Court case Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024) is set to have major implications in a variety of fields. This decision overturned the longstanding Chevron doctrine, which mandated that federal courts give substantial deference to federal agencies’ interpretations of the statutes that those agencies enforce. In the Labor and Employment area, the recently-extremely-active National Labor Relations Board (“NLRB”) and the decisions it renders are now capable of review by the courts and subject to being overturned. Similarly, the rulemaking power of the Department of Labor is also threatened by the Loper Bright decision. For example, the Department of Labor’s recent release of “80/20 Tip Rule,” disallowing employers from paying tipped employees who spend more than 20% of their work hours performing untipped activities from paying those employees below the federal minimum wage, has already come under attack by the Fifth Circuit. Likewise, even independent commissions like the FTC have come under fire by federal courts as well. The FTC’s final rule banning most non-competition agreements under Section 5 of the FTC Act was enjoined nationally in August 2024 by a federal district court in Texas. However, it is worthy to note that individual state laws still control whether non-compete agreements are allowed in their respective states.
Conclusion
The tumultuous 2024 legislative and court terms, both on the federal and state side, had introduced much uncertainty for companies entering the new year with how to handle a slew of rapidly appearing—and disappearing—laws, regulations, and other legal standards in Labor and Employment law. 2025 promises to be another hectic year in Labor and Employment law, and it can become increasingly difficult for employers to keep up with the latest trends. Luckily, the competent and experienced attorneys at Palmer Kazanjian Wohl Hodson are ready and willing to help guide your company into the new year by providing you with best-in-industry counsel for all your legal needs.