Caroline Powell Donelan and Natalie Alameddine
The hopes of California gig economy companies to retain the flexibility to classify workers as independent contractors were dashed this week when a federal district court judge refused to enjoin Assembly Bill 5 (“AB5”), which codifies the “ABC” test for most independent contractor classifications.
Governor Gavin Newsom signed AB5 into law last fall, effecting a seismic change on California’s legal landscape. Effective January 1, 2020, the law makes it nearly impossible for companies to lawfully classify most workers as independent contractors (rather than employees). The bill expands on California Supreme Court’s three-prong “ABC” test from its 2018 Dynamex decision for determining how workers can be classified, which you can read about here. With certain limited statutory exceptions, AB5 provides that, to properly classify a worker as an independent contractor in California, an employer must demonstrate that the worker: (A) is free from the company’s control and direction; (B) performs work outside of the company’s usual course of business; and (C) is customarily engaged in independent work of the same nature as the work performed. There is no balancing, as all three factors must be met. Continue reading “California Corner: The Employee v. Contractor Saga Continues as Uber and Postmates Face First Defeat in Attempt to Enjoin AB5”
Caroline Powell Donelan
UPDATE: Today, a federal court preliminarily enjoined the enforcement of AB-51 (California’s anti-arbitration law discussed here, here, and here) as it relates to arbitration agreements governed by the Federal Arbitration Association (“FAA”). We will get a detailed order from the court soon, but the minute order issued today is below. A great reminder to employers who wish to implement arbitration that the agreement should always expressly state it is governed by the FAA. Continue reading “Breaking: California Grants Preliminarily Injunction of AB-51”
Caroline Powell Donelan
UPDATE: On December 29, 2019, the U.S. District Court for the Eastern District of California issued an order temporarily enjoining the enforcement of AB 51 (California’s anti-arbitration law discussed here and here) pending resolution of plaintiffs’ motion for a preliminary injunction, highlighting the “likelihood of irreparable injury” to California employers, and noting plaintiffs had “raised serious questions regarding whether the challenged statute is preempted by the Federal Arbitration Act as construed by the United States Supreme Court.”
The court will hear plaintiffs’ motion for a preliminary injunction on January 10, 2020.
As the new year approaches, California employer associations have taken action to prevent Assembly Bill (“AB”) 51 from taking effect. As referenced in this BR Workplace Post, AB 51, signed by Governor Gavin Newsom on October 10, 2019, prohibits mandatory arbitration in cases under the Fair Employment and Housing Act (“FEHA”) and California Labor Code, and also prohibits employers from retaliating against individuals who do not consent to arbitration agreements. AB 51 is in part motivated by the #MeToo movement, and part reflective of California’s ongoing battle against the U.S. Supreme Court’s unwavering support of arbitration. It is designed to ensure employees maintain the right to bring FEHA and wage-and-hour actions in court, rather than forced arbitration as a condition of employment.
As employers across the state stare down the barrel of AB 51, the California Chamber of Commerce filed a Complaint for Declaratory and Injunctive Relief in federal court in California last week seeking to prevent AB 51 from going into effect on the grounds that it is invalid and preempted by the Federal Arbitration Act (“FAA”). The FAA has a long-established policy favoring arbitration as a means for efficient and individualized alternative dispute resolution. The U.S. Supreme Court has also steadfastly refused to allow employees to circumvent the FAA and file actions in court.
The hearing on the motion for preliminary injunction is set for January 10, 2020, nine days after AB 51’s effective date. Only time will tell how the court will rule. In the meantime, employers should contact legal counsel to determine the best, tailored course of action given their specific operations, workforce, and overall risk tolerance.
Caroline Powell Donelan and Taylor C. Morosco
California Governor Gavin Newsom went on a bill-signing frenzy earlier this month, enacting 17 new bills into law. Below, we highlight the “Big Five” which will have a certain and critical impact on any business with workers in the Golden State.
AB 51 – Prohibiting Mandatory Arbitration. California’s battle against arbitration wages on! For agreements “entered into, modified, or extended” on or after January 1, 2020, AB 51 prohibits employers from requiring current employees or applicants to “waive any right, forum, or procedure for a violation” of the Fair Employment and Housing Act or the California Labor Code. This necessarily means that an employer will not be permitted to require applicants or employees to consent to mandatory arbitration as a condition of employment. Notably, employees may still voluntarily consent to arbitration, and AB 51 does not apply to “postdispute” settlement agreements or “negotiated” severance agreements, terms that beg for clarification. AB 51 prohibits retaliation against individuals who refuse to consent to such agreements and even authorizes injunctive relief and attorneys’ fees to any plaintiff who proves a violation. There is no doubt that this bill will be challenged under the Federal Arbitration Act (“FAA”), which preempts any state law that “stands as an obstacle” to enforcing arbitration agreements. While the bill contemplates and tries to avoid preemption by expressly stating it is not “intended to invalidate a written arbitration agreement that is otherwise enforceable under the [FAA],” similar attempts by the state have been rejected. Continue reading “Shocker!? Scary New California Employment Laws – Coming to You January 1!”
Caroline Powell Donelan and Taylor C. Morosco
On April 24, 2019, the U.S. Supreme Court issued its 5–4 opinion in Lamps Plus, Inc., et al. v. Varela holding that class arbitration is only allowed when the parties’ agreement explicitly allows for it. In other words, when an arbitration agreement is silent or even ambiguous as to whether class-wide proceedings are allowed, claims must be arbitrated on an individual basis.
Lamps Plus is the latest decision from our highest court bolstering the enforceability of individual arbitration in the workplace.
In this post, we’ll take a semi-deep dive into Lamps Plus and evaluate potential implications for your workplace as well as for future litigation strategies. Continue reading “Have Employers Taken Home the Iron Throne with Lamps Plus?”
Emery Gullickson Richards
The U.S. Supreme Court’s decision in Epic Systems Corp. v. Lewis has significant ramifications for the scope of class action waivers in employee arbitration agreements. In each of the three consolidated cases that the Court’s opinion addressed, the plaintiffs were pursuing class/collective actions with Fair Labor Standards Act (“FLSA”) claims for unpaid overtime. Plaintiff Sheila Hobson’s FLSA claim in the Murphy Oil case had been dismissed by the trial court as a result of the arbitration provision in the employment agreement she signed when she started work at a gas station in Alabama. By contrast, plaintiff Jacob Lewis, a technical communications employee, had overcome a motion to dismiss his FLSA overtime class action in the Epic Systems case by arguing that a class action waiver in an arbitration agreement that had been emailed to him by his employer was unenforceable. In the Ernst & Young case, plaintiff Stephen Morris sought unpaid overtime under the FLSA and the California Labor Code for working long hours during audit season. As a result of the Supreme Court’s ruling, after remand, all of these claims now appear destined for arbitration unless they are resolved. The Epic Systems decision represents a broader affirmation, however, that arbitration agreements are enforceable regardless of the nature of an employee’s claim, even if the claims are brought pursuant to employment statutes that explicitly provide for class or collective actions. Continue reading “The Epic Systems Decision: Where Do Employers Go from Here?”