On October 8, 2023, Governor Gavin Newsom signed into law Senate Bill 497, amending Labor Code Sections 98.6, 1102.5, and 1197.5. This law, effective January 1, 2024, establishes a rebuttable presumption of retaliation if an employer takes adverse employment action within 90 days of an employee’s protected activity. The aim is to simplify the process for employees to prove a prima facie case of retaliation and make it more challenging for employers to dismiss such claims early in litigation. Here’s a detailed look at SB 497 and its implications.
Key Features of SB 497
1. Rebuttable Presumption of Retaliation
If an employer takes disciplinary action within 90 days of an employee engaging in protected activity, it is presumed to be retaliatory. This shifts the burden of proof to the employer, who must demonstrate a legitimate, non-retaliatory reason for the action.
2. Coverage of Equal Pay Act Claims
The presumption also applies if an employee is disciplined within 90 days of enforcing their rights under the Equal Pay Act of 2017. This includes reporting wage discrimination based on sex, race, or ethnicity.
3. Attorney Fees for Prevailing Employees
Amended Labor Code Section 1102.5 allows prevailing employees (but not employers) to recover attorney fees. This increases the financial risk for employers facing retaliation claims.
4. Civil Penalties
Employers found to have retaliated against employees may face a civil penalty of $10,000 per violation. Penalties are assessed individually for each employee retaliated against, emphasizing the need for employers to meticulously avoid retaliatory actions.
Easier Path to Establish Retaliation
Traditionally, to establish a retaliation claim, employees had to satisfy the three-part burden-shifting test from McDonnell Douglas Corp. v. Green:
Engagement in Protected Activity: The employee must show they engaged in a protected activity, such as reporting a violation of law or participating in an investigation.
Adverse Employment Action: The employee must demonstrate they suffered an adverse employment action, such as termination, demotion, or reduced hours.
Causal Connection: There must be a causal link between the protected activity and the adverse employment action.
Under SB 497, an employee needs only to show that the adverse action occurred within 90 days of their protected activity. This significantly lowers the burden for employees to prove a prima facie case of retaliation.
Legal Context and Support
The California Supreme Court’s decision in Lawson v. PPG Architectural Finishes, Inc. (2022) supports the changes brought by SB 497. The Lawson case established that employees only need to show that their protected activity was a contributing factor to an adverse employment action. The burden then shifts to employers to provide clear and convincing evidence of a legitimate, non-retaliatory reason for the action. SB 497 builds on this precedent, making it even easier for employees to bring retaliation claims.
Employer Obligations Under Amended Labor Code Sections
Section 1102.5: Whistleblower Protection
Protected Activity: Disclosing information to a government or law enforcement agency about violations of law or refusing to participate in illegal activities.
Adverse Action: Any retaliatory action within 90 days of the disclosure or refusal is presumed retaliatory.
Section 1197.5: Equal Pay Act
Protected Activity: Reporting wage discrimination based on sex, race, or ethnicity.
Adverse Action: Any disciplinary action within 90 days of such a report is presumed retaliatory.
Section 98.6: Wage and Hour Violations
Protected Activity: Reporting violations related to wages, hours, and working conditions.
Adverse Action: Any disciplinary action within 90 days of such a report is presumed retaliatory.
Mitigating the Presumption
While the presumption of retaliation under SB 497 is strong, it is rebuttable. Employers can counter the presumption by presenting evidence of legitimate, non-retaliatory reasons for their actions. This involves a careful documentation process to support the rationale behind disciplinary measures.
Strategic Timing
Employers might delay adverse employment actions beyond the 90-day threshold to avoid the presumption of retaliation. However, this approach requires meticulous documentation and justification to ensure the delay is not perceived as manipulative.
Evidence of Legitimate Business Reasons
Employers should consistently document performance issues, misconduct, or other legitimate reasons for disciplinary actions. This documentation will be crucial in rebutting the presumption of retaliation by providing clear and convincing evidence of non-retaliatory motives.
Practical Steps for Employers
1. Documentation
Maintain detailed records of all employee complaints and the subsequent actions taken. Documentation should be thorough and contemporaneous to support the legitimacy of any disciplinary actions.
2. Training
Ensure that all supervisors and HR personnel are well-trained on recognizing and handling protected activities and understanding the implications of SB 497. Regular training can help prevent inadvertent retaliatory actions.
3. Policy Review
Review and update workplace policies to ensure they comply with the amended labor codes. Policies should clearly outline the procedures for handling complaints and the protections against retaliation.
Conclusion
SB 497 represents a significant shift in California’s labor law landscape, making it easier for employees to pursue retaliation claims and increasing the burden on employers to justify their actions. Employers must be vigilant in documenting legitimate reasons for disciplinary actions and ensuring compliance with the amended labor codes to avoid substantial penalties and legal costs.
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