2018 Employment Law Update for Startups and Small Businesses

At the end of April 2018, the California Supreme Court issued an important decision affecting classification of workers in Dynamex Operations West, Inc. v. Superior Court.  This decision impacts California startups and small businesses in so far as many hires may be improperly classified as independent contractors under the new standard.  

Under Dynamex, there is a presumption that all workers are employees instead of contractors.  Businesses carry the burden of establishing that such classification. Finally, the Supreme Court adopted a new “ABC test,” and held that employers may classify a hire as an independent contractor only if the employer can demonstrate that the worker in question satisfies each of three conditions:

(a) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

(b) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(c) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

This decision not only expands the definition of “employee,” but also makes it even harder for California startups and small businesses to classify their hires as “independent contractors.”  As a result, all California businesses with “independent contractors” on payroll should conduct a thorough evaluation of such workers to determine whether they are properly classified.

In addition to the new pronouncement from the California Supreme Court, startups and small businesses should heed the existing regulations in effect in 2018 when hiring, interacting with, and managing their workers:

1. Salary History Ban: Employers seeking to hire must comply with California Labor Code Section 432.3, which prohibits employers from asking job applicants about their salary histories.  Employers should revise the “Salary History” box or section from job applications.
2. Ban the Box: Employers must delay background checks and inquiries about job applicants’ conviction records until they have made a conditional job offer to the applicant, pursuant to AB 1008, the California Fair Chance Act.
3. Paid Sick Leave: For businesses local to San Francisco, the San Francisco Paid Sick Leave Ordinance (PSLO) requires employers to provide paid sick leave to all employees (including temporary and part-time employees) who perform work in San Francisco.  The Rules take effect on June 7, 2018. Employers with 10 or more employees must allow employees to accrue at least up to 72 hours. Employers with less than 10 employees may: (1) Allow employees to accrue up to at least 48 hours; or (2) Provide an “advance” of 24 hours or 3 days of paid sick leave to comply with the State law “up-front option,” and later allow employees to accrue up to 40 hours to comply with SF law.
4. Bathrooms: Effective as of effective July 1, 2017, employers must allow employees to use the restroom, locker room, dressing room, or dormitory (referred to collectively as “facilities”) that corresponds to the employee’s gender identity or gender expression, regardless of the employee's sex assigned at birth. The main point of the regulations is that an employer must abide by how the employee identifies.  Bathrooms should be gender neutral in California.
5. Legalization of Marijuana in California: With the legalization of marijuana in California, many California startups and small businesses are unsure how to implement policies regarding marijuana in the workplace.  For the most part, employers may treat marijuana use similar to alcohol use in the workplace. Workers are supposed to show up for work fit for duty and not impaired. Businesses’ drug and alcohol policy should be updated to address marijuana specifically.  Businesses can exclude marijuana from any drug screening tests now that marijuana is legal.
6. Benefits v. Opt-Out: Startups and small businesses with less than 50 employees may compensation in lieu of group health plan coverage (oftentimes referred to as an “opt out payment” or a “waiver payment”).  
7. Sexual Harassment: As of January 1, 2018, SB 396 requires California employers with 50 or more employees to include additional components to the training already mandated for supervisors. SB 396 also requires California employers to post a poster about transgender rights in a prominent and accessible location in the workplace. The DFEH published this new poster on Transgender Rights For California Workplaces on November 16, 2017.

The foregoing list is not exhaustive or comprehensive. Smith Shapourian Mignano PC is available to answer any questions or concerns you may have regarding your workers.

This blog does not constitute solicitation or provision of legal advice, and does not establish an attorney-client relationship. This blog should not be used as a substitute for obtaining legal advice from an attorney licensed or authorized to practice in your jurisdiction. You should always consult a suitably qualified attorney regarding any specific legal problem or matter in a timely manner, as statutes of limitations may bar your claim.