As we conduct our regular policy audits for our clients, we have noticed that many of you have not been updating employee handbooks and policies with respect to arbitration agreements, non-compete, and non-solicitation agreements, as well as the California Family Rights Act. Here’s a condensed overview of the changes and what to consider when updating your employee handbooks and policies.
Arbitration Agreements. We continue to see many employers requiring mandatory arbitration agreements as a condition of employment, whether by handbook policy or contract. Arbitration agreements typically have been used by employers in an effort to avoid the class and collective actions that have long plagued employers. By disallowing the employee bound by the agreement from raising the dispute in a California court, the employee would raise the dispute in front of a private arbitrator during an arbitration proceeding. However, AB 51 was signed into law by Governor Newson in 2019, effectively prohibiting mandatory arbitration agreements as a condition of employment. While this law has faced and continues to face numerous challenges in court and will likely end up before the Supreme Court before the issue is settled, AB 51 currently prohibits mandatory arbitration agreements for any claims arising under the California Fair Employment and Housing Act (FEHA) or the California Labor Code as a condition of employment or receipt of any employment-related benefit.
What does this mean? Employers should be wary of utilizing mandatory arbitration agreements as a condition of employment while this case is still before the court for a final decision. Instead, employers can utilize voluntary arbitration agreements which are not mandatory as a condition of employment. Employers should review their employee handbooks and policies to ensure they are compliant, and their onboarding documents do not make arbitration agreements mandatory as a condition of employment.
Non-compete and Non-solicitation Agreements. Our firm often reviews California employment contracts, offer letters, and other agreements which include non-compete or non-solicitation language. Employers should be aware that while these agreements may be valid and enforceable in other states, non-compete agreements and non-solicitation agreements have long been disliked by California courts and are banned in California between employers and employees. There is a limited exception that allows narrowly drafted non-compete agreements between former business partners, against former members of a Limited Liability Company, or for parties engaged in the sale of a business. Absent those extremely limited exceptions, employers should make sure to review all employee handbooks, offer letters, and agreements to ensure there is no language that could be construed as a non-compete or non-solicitation clause.
California Family Rights Act Expansion. While most California employers are aware of the recent expansion of the California Family Rights Act (CFRA), we’ve seen several handbooks and policy documents that continue to limit CFRA’s application to the previous version of the law. As a reminder, CFRA now applies to employers with 5 or more employees, updated from the previous 50 or more employee requirement. The definition of covered family members under CFRA has also been expanded to include siblings, grandparents, grandchildren, and parents-in-law. It’s important to note that this definition is much more expansive than the federal Family Medical Leave Act, which may apply concurrently to employers with 50 or more employees. Finally, CFRA now allows 12 weeks of unpaid leave for each new parent who works for the company, rather than the total 12 weeks of unpaid leave between both parents who work at the same company previously mandated by law.
With the everchanging employment law landscape of California, Employers should review all handbooks, and policy documents annually to ensure their practice abides by changes in California law. If you have any questions as to whether your handbook and policies are compliant, please reach out to your Mitzel Group contacts for assistance. We are always available to provide you with an audit of your employment policies and practices and provide a liability analysis under applicable law.