California laws taking effect in 2022 impact creative business owners of all sizes. Below, we talk about the significant law changes impacting the types of businesses we serve.
New laws taking effect in 2022 changed the game for many creative business owners.
On September 9, 1850, the United States promised greatness when California joined the Union as the 31st state. Since 1850, the Golden State has risen to the forefront of US society in its own right. California is the most populous state in the United States and is home to the fifth-largest economy globally. California’s preeminent position in American life is also evident in the industries it houses: Hollywood, the most prolific film industry in the world, and Silicon Valley, the global tech hub.
Given the size of the economy and the interest at stake, California’s legal code is extensive. Combine this with Californians’ frequent use of ballot initiatives to amend the state constitution; keeping up may be difficult.
To help our readers stay up-to-date, we have compiled a summary of the California laws taking effect in 2022. While this is not a comprehensive list, we believe our readers should understand these changes as they proceed through the new year.
California Minimum Wage
In 2016, the California State Legislature passed Senate Bill 3 (“SB3”), and then-governor Jerry Brown signed it into law. The goal of SB3 was to increase the minimum wage until it reached $15.00 incrementally. Since 2016, the minimum wage has inched closer to the bill’s purpose. As an employer, this is a California law taking effect in 2022 of which to be aware.
SB3 divides employers into two groups based on the number of employees:
1) employers with 26 or more employees; and
2) employers with 25 or fewer. For those with 26 or more employees, the minimum wage reached its $15.00 goal earlier this year.
Effective January 1, 2022, it is illegal for employers with 26 or more employees to pay them less than $15.00. For employers with 25 or fewer employees, SB3 increased the minimum wage slowly. For these employers, the minimum wage is currently $14.00. It is still an increase from last year’s minimum of $13.00. However, it has not reached the $15.00 minimum set by SB3. This minimum will be met on January 1, 2023. From then on, the State of California will require all employers to comply with SB3’s $15.00 minimum wage requirement.
SB3 Exemptions
There are some exemptions to SB3, but a significant group that is not exempt from SB3 is tipped employees. Unlike federal law, which exempts tipped employees, SB3 does not. Further, California law has declared that gratuities are the employee’s sole property. This means that employers cannot reduce an employee’s wages by the value of the tips they earn. Among those exempt from SB3 are student employees, outside salespeople, and participants in national service programs like AmeriCorps.
It is also important to note that while SB3 is a state law, it sets a floor, not a ceiling. This means that local governments in California are free to place a higher minimum wage as they see fit. So, employers should ensure they comply with both SB3 and local laws establishing a minimum wage. For example, in San Mateo County, the minimum wage increased to $16.20 on January 1, 2022. This is for all employers regardless of the number of employees they have. In Novato, local laws create a third category for employers: more than a hundred employees. A local ordinance that went into effect on January 1, 2022, subjected each type to a different minimum wage:
- Employers with less than 26 people are subject to the state minimum wage of $15.00.
- Companies employing between 26 and 99 people cannot pay less than $15.53.
- Those employing more than 100 people cannot pay less than $15.77.
What is the California $18 Minimum Wage Initiative?
Employers should also be aware of the California $18 Minimum Wage Initiative. This may appear on the ballot on November 8, 2022. The ballot initiative must collect the required number of valid signatures and complete the verification process. If California voters approve this initiative, the California minimum wage will increase to $18.00. This increase would take effect in annual incremental increases from 2023 to 2026. Upon reaching $18.00 in 2026, the minimum wage would increase in future years. Yet, the growth will be based on the US Consumer Price Index changes.
NDA Laws
Governor Gavin Newsom signed Senate Bill 331 on October 10, 2021. This took effect on January 1, 2022. The bill relates explicitly to non-disclosure agreements (NDAs) and non-disparagement provisions in settlement agreements. This California law taking effect in 2022 is crucial to know if you employ individuals.
California law already prohibits non-disclosure and non-disparagement provisions in settlement agreements relating to sex claims. The new law expands the scope of the requirement. Now, these provisions are banned from any settlement or separation agreement for any protected category under section 12940 of the Government Code. This section includes disability, religion, race, and national origin.
Additional Language Requirement
Further, the new bill requires that there is additional explicit language that attorneys must include in separation or settlement agreements, which is:
“Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.”
General releases in these agreements must now also include a statement that “the employee has a right to consult an attorney regarding the agreement.”
However, this language does not apply to negotiated settlement agreements, which must be deliberate and voluntary.
California employers should always review their settlement and separation agreements to comply with these significant changes.
Women on Boards
In 2018, California passed Senate Bill 826 to place more women on corporate boards. The bill stated that each publicly held company with executive headquarters in California must have at least one woman on its board of directors by the end of 2019. By December 31, 2021, all five-member boards must have at least two women. Companies with six or more directors needed to have three women.
If a company does not meet this standard, it will face “hundreds of thousands of dollars in fines.” In addition, the California Partners Project states that “there are still 418 California companies that need to fill 563 board seats with women.”
Gender-Neutral Store Displays
Governor Newsom signed a new law on October 9, 2021, which states that large retailers in California must include gender-neutral displays for products for children (i.e., toys and toothbrushes) by January 1, 2024. The goal is to eliminate the pink and traditional blue hues that pressure children to conform to stereotypes.
However, it is crucial to note that this new law does not outlaw the traditional sections and colors. Instead, it states that these large retailers and department stores must have gender-neutral areas in addition to the traditional sections.
This law does not include clothes in the language of the text and only applies to “childcare items” and toys, which include teething and hygiene products. Further, it only applies to stores with a minimum of 500 employees. This means that small businesses are exempt from this California law taking effect in 2022.
Barbering and Cosmetology Licenses
On September 2, 2021, Senate Bill 803 (“SB-803”) completed its journey through the California State Assembly. This bill attracted a considerable amount of controversy leading up to its passage. The controversy stemmed mainly because of its changes to California’s beauty industry. Despite this, Governor Gavin Newsom signed SB-803 into law on October 7, 2021. SB-803’s changes took effect on January 1, 2022. Some argue that SB-803 made obtaining barbery and cosmetology licenses more accessible. However, others say that the bill undermined the field’s professional standards. Some of the less controversial changes SB-803 made to barbery and cosmetology include:
- Creating a new non-chemical hairstylist license; and
- Allowing estheticians to perform lash and brow tinting and perming.
Some of the more controversial changes of the bill made were:
- Removing the practical examination;
- Reducing the number of hours needed to complete barbery and cosmetology programs from 1,500 and 1,600 respectively to 1,000; and
- The streamlining of the endorsement process to accept out-of-state licenses in California.
What Critics Are Saying
Critics of SB-803 argue that reducing the hours’ requirement and eliminating the practical exam will result in a flooded market in underprepared graduates. Successful completion of the practical exam serves as an external measure of proficiency in the art of barbering. Further, 600 hours is about three months of training. This time is essential to develop the knowledge and skills required to be an effective barber or cosmetologist.
From now on, business owners should be aware that new employees likely are less prepared going forward. In addition, for the 36% of the cosmetology industry self-employed or with fewer resources than large franchises, be mindful that new hires may require more significant investments. Finally, it is more important than ever for those seeking to enter the profession to choose a program that will provide training and preparation. This is necessary to stand out in a career that will likely come flooded with underprepared talent.
Takeout Alcoholic Drinks
Governor Gavin Newsom signed Senate Bill 389 (“SB-389”) into law on October 8, 2021. SB-389 went into effect on January 1, 2022. This bill allows certain restaurants and alcohol manufacturers to sell mixed drinks, wine, and distilled spirits for off-premises consumption.
Restaurants had previously been granted similar privileges since March 2020 under Covid-19 relief regulations. However, those privileges expired at the end of 2021. SB-389 guarantees that takeout alcoholic drinks will remain legal until December 31, 2026.
While SB-389 does preserve the “cocktails-to-go” practice that started during the pandemic, it does make some notable changes. For example, covid-19 relief regulations permitted restaurants to deliver spirits, mixed drinks, and single servings of wine, in addition to selling them for takeout. Nonetheless, SB-389 did not include an extension for the delivery of alcoholic beverages.
Takeout Drink Requirements
To order an alcoholic beverage under SB-389, specific requirements must be met:
- 1) One must order the drinks with a “bona fide meal.” The California Department of Alcoholic Beverage Control (the “ABC”) has clarified that means an entrée; appetizers, side dishes, and desserts do not qualify.
- 2) There can be no more than two drinks per order.
- 3) The ordering customer must present a valid ID.
To sell a takeout drink, a restaurant must:
- Notify the ABC of their intent to sell drinks that they package; and
- Package the glasses in a container that clearly and conspicuously identifies them as an alcoholic beverage.
- The glass must have a secure lid designed to prevent consumption without removing the top.
- Ensure that mixed takeout drinks do not contain more than 4.5 ounces of distilled spirit per drink.
- Establishments must sell wine in single-serve containers unless in a manufacturer-sealed container.
- Place a warning that ensures customers know that the restaurants’ drinks are considered open containers. In addition, this warning should note that motorists should not transport it in the passenger compartment of a vehicle.
Always follow these guidelines to comply with this California law taking effect in 2022.
The Importance of Takeout Drinks
State Senator Bill Dodd, the author of SB-398, told Bay City News that, for many restaurants selling carry-out cocktails, “…has been critical to ensuring they can survive” and that “[m]aking [takeout drinks] permanent will assist their recovery, protecting jobs and our economy.”
And his constituents appear to agree. SB-389 has been well-received by the restaurant industry, especially in the wake of Omicron. Many in the industry have echoed Dodd’s sentiment that takeout drinks have been essential to staying afloat during the pandemic. A National Restaurant Association survey found that 78% of restaurants that sold takeout drinks could re-hire laid-off employees. This number is significantly higher than the 62% of restaurants that could do the same without offering drinks.
As you read over these laws, remember: you are not alone. Resources exist to help businesses like yours.
And if you need help of any kind, please schedule a call with us. Even if it’s not legal, we’re here to lend you a helping hand should you want it.
