New California Law Makes Proving Labor Code Retaliation Claims Easier for Employees

Under SB 497, a “rebuttable presumption of retaliation” is established in favor of the employee if an employer takes “adverse employment action” against an employee within 90 days of the employee engaging in protected activity covered by sections 98.6, 1102.5, and 1197.5 of the Labor Code. The law becomes effective on January 1, 2024, and sets forth a significant shift in California’s employment landscape.

The Current Scope of California’s Anti-Retaliation Provisions

Generally speaking, section 98.6 prohibits retaliation against employees who file wage claims with the Labor Commissioner or under the Private Attorneys General Act (PAGA), section 1102.5 prohibits retaliation against employees who report violations of the law, and section 1197.5 prohibits retaliation against employees who raise concerns under the California Equal Pay Act.

Currently, when a retaliation claim is brought under the above Labor Code provisions, courts apply a three-step “burden-shifting” analysis. First, the employee must show: (1) they engaged in protected activity; (2) they experienced an adverse employment action (e.g., demotion, suspension, termination, etc.); and (3) the protected activity and adverse action are connected. Second, once the employee has established these elements, the employer must identify a legitimate, non-retaliatory reason for the adverse employment action. Third, the employee must then prove that the employer’s non-retaliatory reason was false.

Changes to the Retaliation Landscape

SB 497 introduces a crucial change by creating a rebuttable presumption that an employer has retaliated against an employee if an employer takes an adverse action against an employee within 90 days of the employee engaging in protected activity (e.g., filing a claim, complaining to Human Resources, testifying on behalf of another employee, etc.). In effect, the law eliminates the first step of the burden-shifting analysis noted above whenever the employee can show that an adverse employment action occurred within 90 days of protected activity. If the employee can make this minimal showing, the employer must then provide a reason for why the adverse action was not retaliatory and, as the final step, the employee must still show that those reasons were false.

The new law also increases penalties for employers who are found to have retaliated against an employee for activity protected under Labor Code section 1102.5, making the employer liable for a civil penalty of up to $10,000 per employee for each violation. This penalty is in addition to any other remedies already available to the employee. Furthermore, SB 497 makes clear that employees cannot be retaliated against for disclosing their wages to colleagues or inquiring about another employee’s wages.

Recommendations to Employers

In light of SB 497, employers may need to reevaluate their approach to disciplining employees and documenting employee complaints regarding alleged Labor Code violations. Employers should ensure that supervisors understand the importance of being proactive in maintaining well-documented disciplinary actions and carefully noting any complaints. Providing training to Human Resource departments may also be critical in ensuring they understand the importance of comprehensive documentation and non-retaliation principles. Ultimately, adapting to this new law will be essential for California employers to maintain legally compliant workplaces.