Retaliation Claims Just Got Scarier

Halloween season is a good time for spooky stories, so let’s talk about a subject that strikes fear in the hearts of employers everywhere: retaliation claims.

Employers currently cannot retaliate against employees who exercise their rights under three California Labor Code provisions: Section 98.6 (engaging in lawful but potentially controversial conduct outside of work, making a claim to the Labor Commissioner, participating in a PAGA claim, and otherwise complaining about wages), Section 1102.5 (engaging in whistleblower activity), and Section 1197.5 (enforcing the Equal Pay Act). 

Senate Bill 497 ups the ante for employers who discriminate or take other adverse action against an employee based on the above activities. Effective January 1, 2024, employers will be presumed to have engaged in unlawful retaliation if they take such action within 90 days of the protected activity. The employer may rebut the presumption only by proving the legitimate, non-retaliatory reason for the negative action.

Failure to do so will result in a maximum penalty of $10,000. In determining the actual penalty, SB 497 requires the Labor Commissioner to consider the nature and seriousness of the violation, including the type of violation, the economic or mental harm suffered, and the chilling effect on the exercise of employment rights in the workplace.

Under current law, there are three stages to proving a retaliation claim: (1) the employee must establish a causal connection between their protected activity and the employer’s adverse action; (2) the employer must then identify a legitimate, non-retaliatory reason for the actions; and (3) the employee must prove that the employer’s proffered non-retaliatory reason actually was a pretext for retaliation.

SB 497 makes it easier for an employee to meet the first requirement above by creating a rebuttable presumption in favor of the employee’s claim. The presumption applies if an employer takes adverse action against an employee within 90 days of the employee’s invoking or assisting in the enforcement of certain California Labor Code provisions, including the Equal Pay Act. 

Employers with valid reasons for making a performance decision, for example, should not be deterred by SB 497. However, they must be able to prove the legitimate basis for their decisions.  And the penalty for dropping the ball is steep. 

SB 497 is just one of many new bills from the 2023 legislative session that will make it harder for California employers to do business.  We’re here to help – join us for our annual California Employee Handbook Update webinar and one of our Annual Employment Law Update sessions!  Click the links for details.

Read SB 497 here.