As we discussed in our annual update back in December, employers continue to see extensive developments on the labor and employment front as they progress through 2023. Aside from the minimum wage increases, pay equity/transparency, cannabis, and other updates which you can read about in our previous DE Insight, there are several new developments that materialized during the first quarter of 2023 that you should be aware of.
Pregnant Workers Fairness Act
While not new legislation, the Pregnant Workers Fairness Act (“PWFA”) is set to take effect on June 27, 2023, with the Equal Employment Opportunity Commission (“EEOC”) stating that it will start accepting charges under the PWFA for acts occurring on the same date moving forward. So, what do you need to know now?
The PWFA is a federal law that protects covered employees who have known limitations due to pregnancy, childbirth, or related medical conditions by requiring employers to provide reasonable accommodations, unless the accommodation will cause the employer an undue hardship. The most important takeaways from the PWFA — and areas where it expands upon existing law — are that: (1) an employee’s pregnancy-related medical restriction no longer has to rise to the level of a disability in order to be eligible for a reasonable accommodation nor must those accommodations be based upon whether the employer accommodates other employees who are similar in their inability to work; (2) employers may only require an employee to take leave as a last resort; and (3) employers must accommodate pregnant employees even if they cannot perform the essential functions of their jobs as long as the inability to do so is temporary and the essential function can be performed in the near future. As always, state laws which provide protections beyond those provided by the PWFA continue to have the same force and effect.
National Labor Relations Board Comes After Severance Agreements
Continuing on its trend favoring the limitation of employer rights, the National Labor Relations Board (“NLRB”) in McLaren Macomb[1] determined that several standard severance terms were no longer in line with the National Labor Relations Act (“NLRA”). While the administrative law judge who initially heard the matter found that the terms were lawful, upon review the NLRB reversed the decision, and in doing so overruled its own precedent. The Board found that even offering a severance agreement with what the Board deemed to be overly restrictive terms would be, in and of itself, an unfair labor practice. As with most Board precedent, the decision has left many questions of its enforcement unanswered.
On March 22, 2023, NLRB General Counsel Jennifer A. Abruzzo (the “GC”), released a memorandum[2] outlining her interpretation of the decision as to the agency’s enforcement priorities moving forward. The memorandum reinforced the concept that a current or former employee does not have to sign an unlawful agreement, but merely be offered one to bring an unfair labor practice complaint against an employer.
While opposing confidentiality and non-disparagement provisions generally, the decision and GC memorandum indicate that those which are narrowly tailored may still be permissible. As to confidentiality provisions specifically, they must be “narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications . . . .”[3] As to non-disparagement provisions, they must be limited to “employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity.”[4] Additionally, while the NLRA does not extend protections to supervisors, the GC takes the stance that the McLaren decision could provide protections to supervisors if they too are offered overly broad severance agreements, such as those preventing them from participating in a NLRB proceeding.
As always, the GC used the memorandum to foreshadow yet another area that the agency plans to target. In its last substantive paragraph, the memorandum states that other provisions may soon come under fire — including non-compete, non-solicitation, and no poaching clauses — as well as broad liability releases, covenants not to sue, and cooperation clauses.
California Flips Again — Twice
As one of the country’s most regulated states in the field of employment law, California frequently serves as a litmus test for new sector and trial phase regulation. Two of these “first of their kind” statutes have been at the forefront of public attention over the last few months, California Assembly Bills (“AB”) 5 and 51.
For some background, AB 5 (as later revised by AB 2257) expanded upon a previous decision from the California Supreme Court and codified the ABC independent contractor test in California.[5] For every individual that an employer wishes to hire as an independent contractor, AB 5 required employers to demonstrate that the person: (A) was free from the control and direction of the hiring entity in connection with the performance of the work; (B) performed work that was outside the usual course of the hiring entity’s business; and (C) was customarily engaged in an independently established trade, occupation, or business.[6] While the law did delineate a list of exempt professions[7], it understandably stood to cause some major issues for the state’s gig-economy based businesses, primarily Uber and Lyft. However, shortly after the passage of AB 5, California voters approved a ballot initiative exempting app-based transportation and delivery companies from AB 5. Despite the approval of a majority of California voters (approximately 59%), Proposition 22 was predictably challenged in the courts by unions who stood to gain financially by attaining access to wide swaths of potential new employees under AB 5. While initially successful in challenging the law at the superior court level, a three-judge panel of the California Court of Appeals reversed that decision on March 13, 2023. As it currently stands, app-based delivery and transportation drivers may continue to be classified as independent contractors within the bounds of the law’s requirements. However, this case is one to keep an eye on as it will most certainly find its way to the California Supreme Court.[8]
Similar to the original intentions of AB 5, California legislators sought to shift the balance of power away from employers with their enactment of AB 51. Initially, AB 51 had prohibited employers from requiring that employees enter into arbitration agreements as a prerequisite to hiring, continued employment, or access to benefits. As many could predict, the law was immediately challenged and remained in limbo for many years, causing many employers to err on the side of caution and avoid mandatory arbitration clauses (or arbitration clauses that could be construed as mandatory) altogether. The legality of AB 51 was addressed by a panel of the Ninth Circuit Court of Appeals in its February 15, 2023, decision which held that AB 51 was preempted by the Federal Arbitration Act as it burdens the formation of arbitration agreements.[9]
State Level Leave Laws
Several new leave laws take effect this year in one fashion or another, such as in Maryland and Oregon, which both passed their own state versions of paid family and medical leave. While qualified employers in Oregon have already been required to withhold employer contributions, they should begin preparing for employee leave benefits to kick in on September 9, 2023. For those covered under the new law, employees will be entitled to a maximum of 12 weeks of family leave within a 12-month period, for purposes including: (1) the birth or adoption of a child; (2) managing a serious health condition for the employee or a family member; (3) pregnancy or sick child leave; (4) the closure of a school or child care provider because of a public health emergency; (5) bereavement; or (6) military family leave. Employers in Maryland have a little more breathing room as only withholdings and contributions go into effect this year on October 1, 2023, with benefits commencing in 2025.
While not as expansive in scope, the Illinois One Day Rest in Seven Act as been amended to include an additional requirement that employees be provided an additional 20-minute meal break if working a 12-hour shift or longer and revised the day of rest requirement to 24 consecutive hours of rest in every consecutive seven-day period. The prior penalty under the act was increased from $25 to $100 per offense to a new maximum of $1,000 per offense per worker, with $500 going directly to the affected worker.
Pay Transparency
On March 3, 2023, New York State amended its pay transparency law to clarify its requirements, including that it: (1) applies to all private employers with at least four employees; (2) applies to remote workers if they report to a supervisor or work location in New York; (3) covers internal and external job postings; and (4) imposes a record keeping requirement demonstrating the employer’s compliance with the law. As a reminder, those employers in California, Rhode Island, and Washington should already be compliant with their respective state pay transparency laws which took effect on January 1 of this year.
A New Protected Class in Somerville, Mass.
Keeping with our trend of including a more unusual law or niche topic in our labor and employment law updates, this quarter’s update comes from the author’s own home state. On March 23, 2023, Somerville, Massachusetts, revised a local ordinance to provide anti-discrimination protections to individuals in multi-partner relationships. While Somerville had previously included polyamorous relationships in its definition of domestic partnerships, this was the first time any municipality or state had passed employment discrimination protections protecting polyamorous relationships. The ordinance is simple in nature and prohibits employment discrimination against those in relationships of two or more people.
As always, employers should be mindful of new and amended laws, even down to the municipal level, and court and administrative agency decisions which may have a direct impact on their business. If any of these events seem new to you, it may be time to take a look at your form documents and policies and bring them into compliance with relevant laws.
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[1] 372 NLRB No. 58 (2023).
[2] GC-23-05.
[3] Memorandum GC 23-05.
[4] Id.
[5] Dynamex Operations W. v. Superior Court and Charles Lee, Real Party in Interest, 4 Cal.5th 903 (Cal. 2018).
[6] See Labor Code § 2750.3.
[7] Exemptions under the original law include lawyers, doctors, securities broker-dealers, and qualifying commercial fishermen. AB 2257 added exemptions for new sectors as well including, but not limited to the entertainment and music industry.
[8] The original case is Castellanos v. State, No. RG21088725, (Cal.Super. Aug. 20, 2021).
[9] Chamber of Com. of the United States of Am. v. Bonta, 62 F.4th 473 (9th Cir. 2023).
