Employers’ Dilemma: Comply Now with New Employment Laws or Wait Out Court Challenges?
California employers enter 2020 facing many new and changed laws after an exceptionally active legislative session in 2019. However, the most difficult decision that many employers will face is whether to take action to immediately comply with some new requirements or wait until recent legal challenges to a few new laws wind their way through the court system and perhaps lead to subsequent legislative redrafting. For example, as noted below, the January 1, 2020 implementation of AB 51 has been stayed by a December 30, 2019 court ruling and the January 1, 2020 implementation of AB 5 is in question due to a December 30, 2019 complaint that alleges the law is unconstitutional and requests a preliminary injunction against AB 5.
This Client Alert outlines five of the most important new laws and new compliance requirements for employers. Employers should consult with legal counsel to assess the potential application of these new legal developments to each employer’s unique circumstances. Meyers Nave offers advice, counsel, training and HR program development and implementation to help clients understand and comply with all new California labor and employment laws.
- AB 5 – Codifies “ABC” Test for Classifying Independent Contractors
- AB 51 – Limits Mandatory Arbitration Agreements
- AB 9 – Extends Timeframe for Filing DFEH Complaints
- AB 749 – Prohibits No-Rehire Provisions in Settlement Agreements
- AB 241, AB 242 – Requires CME and MCLE Implicit Bias Training
AB 5 – Codifies “ABC” Test for Classifying Independent Contractors
AB 5 is landmark legislation aimed at reducing worker misclassification by codifying the California Supreme Court’s 2018 decision in Dynamex Operations West v. Superior Court (4 Cal.5th 903), which adopted the three-factor “ABC” test to classify workers as employees or independent contractors. The ABC test also creates a rebuttable presumption that a worker is considered an employee, thus imposing the burden to prove otherwise on the employer. AB 5 exempts specified occupations from the purview of the “ABC” test. Please click here for a detailed explanation of the “ABC” test and how employers can overcome the presumption of employee status. The implementation of AB 5 is uncertain because Uber and Postmates filed a complaint on December 30, 2019 in California federal district court alleging that AB 5 is unconstitutional. The complaint asks for a preliminary injunction while the lawsuit is under consideration. Also in December 2019, several organizations representing freelance writers filed a lawsuit in federal court in Los Angeles alleging AB 5 places unconstitutional restrictions on free speech.
While much discussion relates to AB 5’s impact on gig economy companies, the new requirements could also apply to public agencies at least with respect to provisions of the Labor Code, Unemployment Insurance Code, and Industrial Welfare Commission wage orders that are applicable to public employers. AB 5 expands the applicability of the ABC test across most, but not all, of the Labor Code and Unemployment Code. There are exceptions, and generally if an exception applies the prior test under S.G. Borello and Sons, Inc. v. Department of Industrial Relations 48 Cal.3d 341 (1989) applies. Meyers Nave has performed an extensive analysis of AB 5, addressing Frequently Asked Questions including: (1) whether contract employers that provide services to public agencies (versus individually contracted workers) are excluded from AB 5’s purview, (2) how AB 5 impacts CalPERS and (3) which provisions of Assembly Bill 5 apply retroactively.
AB 51 – Limits Mandatory Arbitration Agreements
AB 51 prohibits an employer from requiring an employee to sign an arbitration agreement as a condition of obtaining or retaining employment, or any term or condition of employment. AB 51 does not void any existing mandatory arbitration agreement. Retaliation is prohibited, and the traditional approach of including an opt-out clause is ineffective in establishing consent. AB 51’s implementation on January 1, 2020 is up in the air. On December 6, 2019, the U.S. Chamber of Commerce and several organizations filed suit against the State of California to have AB 51 declared preempted by the Federal Arbitration Act. The lawsuit seeks both a preliminary and permanent injunction. On December 30, a court granted a temporary restraining order and a motion for preliminary injunction is set for hearing on January 10, 2020. If the court grants the motion then the new law will be prevented from going into effect until the case can be decided on the merits. The case is filed in the Eastern District of California as Chamber of Commerce of the United States v. Becerra, Case No. 2:19-cv-2456 KJM DB.
AB 9 – Extends Timeframe for Filing DFEH Complaints
AB 9 significantly extends the statute of limitations for an employee to file a complaint with the Department of Fair Employment and Housing (DFEH) from one year to three years. An employee asserting claims under the Fair Employment and Housing Act (FEHA) must first file a complaint with DFEH, the state agency charged with enforcing California’s civil rights laws. Before the passage of AB 9, the complaint with the DFEH had to be filed within one year of the alleged unlawful practice. (Government Code § 12960(d)).
AB 9 specifies that it “shall not be interpreted to revive lapsed claims.” This indicates that the new law will not apply retroactively to claims that arose prior to the effective date of the bill, but for which the prior one-year statute of limitations had already passed by December 31, 2019. However, AB 9 does not specify what happens to existing claims for which the prior administrative filing deadline has not lapsed by December 31, 2019. A review of the Senate Judiciary Committee analysis indicates legislative intent to extend the limitations period to any existing claims for which the prior one-year statute of limitations did not lapse by December 31, 2019; however, the retroactive impact of AB 9 is still unsettled.
AB 749 – Prohibits No-Rehire Provisions in Settlement Agreements
Under AB 749, settlement agreements between an “aggrieved person” (as defined under the bill) and their employer may no longer contain no-rehire provisions, or any term that would otherwise restrict the employee’s ability to obtain future employment with the employer or related parent companies, subsidiaries, divisions, affiliates, or contractors. Employers and employees may still enter into agreements to terminate the employment relationship; a severance agreement offered to an employee may contain a no-rehire provision if the severance is not offered as settlement of an employment dispute and the employee has not filed a claim against the employer. Moreover, employers are still permitted to end the employment relationship, or refuse to rehire the person, if there is a “legitimate non-discriminatory or non-retaliatory reason” for doing so. AB 749 applies to all agreements entered into on or after January 1, 2020.
AB 241, AB 242 – Requires CME and MCLE Implicit Bias Training
AB 241 requires continued medical education (CME) curriculum in implicit bias under the Medical Board, Physician Assistant Board and Board of Registered Nursing. AB 242 requires all court staff who interact with the public to complete two hours of training developed by the Judicial Council. It also requires attorneys to complete mandatory continuing legal education (MCLE) that includes training on implicit bias and the promotion of bias reducing strategies. Employers that employ the aforementioned professions should ensure that their employees receive the implicit bias training by the specified deadlines. Meyers Nave bias prevention training which meets all MCLE requirements.