Changes to California’s Compensation Law Will Lighten the Burden on Employees

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Changes to California's Compensation Law Will Lighten the Burden on Employees

On October 8, 2023, Governor Gavin Newsom signed Senate Bill (SB) No. 497 to become law. SB No. 497, also known as the Equal Pay and Anti-Retaliation Protection Act, amended California Labor Code Sections 98.6, 1102.5, and 1197.5 to reduce the burden on employees attempting to establish a prima facie case of retaliation. This new law, effective January 1, 2024, also includes civil penalties for each violation.

Existing Law

California retaliation claims follow a three-step burden-shifting analysis:

      1. First, the plaintiff bears the burden of establishing a prima facie case of retaliation;
      2. Second, if the plaintiff establishes a prima facie case, the employer can rebut that presumption by showing a legitimate, non-retaliatory reason for the alleged adverse employment action, thereby shifting the burden. of proof back to the plaintiff; and
      3. Third, if the employer establishes a legitimate, non-retaliatory motive, then the employee must prove that the employer’s reason for not retaliating is an excuse for the unlawful retaliation.
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Under current law, an employee may establish a prima facie case of retaliation by showing that (1) the employee engaged in protected activity; (2) the employer takes an adverse action against the employee; and (3) a causal connection exists between the protected activity and the alleged adverse action.

Changes

SB No. 497 allows a plaintiff to establish a rebuttable presumption that an employer retaliated against an employee if the employer engages in an adverse employment action within 90 days of the employee engaging in activity protected under any provisions of the Labor Code.

Introducing the rebuttable presumption of retaliation would make it easier for employees to establish a prima facie claim of retaliation, thereby shifting the burden to the employer to prove the existence of a legitimate, non-retaliatory reason for of alleged adverse employment action. In practice, some courts have found that the time of an alleged adverse employment action after the employee’s engagement in protected activity is sufficient to establish a prima facie case, so SB No. time that the adverse employment action must be in the said protected activity for a prima facie case to be automatically established.

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SB 497 further provides that, among other remedies, an employer is liable for a civil penalty not to exceed $10,000 per employee for each violation. Civil penalties will be imposed on the employee or employees who suffer the violation.

Employer Acquisition

Employers should review, and if necessary, improve, their policies regarding retaliation and the use of employee complaints, to ensure that the risk of retaliation is minimized in accordance with SB No. 497. The law comes into force on January 1, 2024.