California 2020 Vision: HR Will See a Year of Litigation, Legislation and More

By June Bell January 10, 2020
California 2020 Vision: HR Will See a Year of Litigation, Legislation and More

A new year doesn't necessarily mean a clean slate. Even before it took effect Jan. 1, AB 5, the far-reaching California law that spells out whether workers should be classified as employees or independent contractors, was mired in litigation and confusion. Amendments, clarifications and lawsuits to sort it out will likely continue for years.

"The No. 1 issue for employers [in California in 2020] is the changing definition of who is an employee and, on the other side of that coin, who is an employer," said Jeff Tanenbaum, an attorney with Nixon Peabody in San Francisco.

Tanenbaum has been fielding many calls from clients, which include tech, health care and professional-services companies, asking if they qualify for one of the law's many exemptions. "Some are clearly in the crosshairs of AB 5," he said, and they must determine if reclassifying their independent contractors as employees is "feasible and prudent." Several are considering filing suit or joining pending litigation.

California's independent truck drivers got a break on New Year's Eve when a federal judge temporarily prevented the state from applying the law to them, and a preliminary injunction hearing is scheduled for Jan. 13. The California Trucking Association claimed that AB 5 was pre-empted by a federal statute. Additionally, a California state court ruled Jan. 8 that AB 5 doesn't apply to truck drivers.

A coalition of freelance journalists, editors and photographers didn't fare as well. Their request for a temporary restraining order was denied Jan. 3 by a federal judge, who set a hearing for March. Ride-hailing service Uber and meal-delivery service Postmates have filed their own suit to halt AB 5's enforcement.

Tanenbaum said he expected to see AB 5 tangled in litigation and tweaked with amendments to clarify ambiguous language. He was correct: The law's sponsor, Assemblywoman Lorena Gonzalez, D-San Diego, introduced a bill Jan. 6, saying that clarifications are coming. Tanenbaum noted, "It's rare for [legislation] to be right the first time, and this is a long way from right."

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The new law has so many exemptions and details that the state's Labor and Workforce Development Agency has created an "employment status" portal to answer frequently asked questions, and to guide workers and employers trying to apply the three-prong "ABC test" to determine whether an independent contractor should be classified as an employee.

Jessica Pfisterer, director of people for San Francisco-based health savings account provider Lively, conducted an audit of the company's independent contractors to ensure that the company would be compliant with AB 5. The 65-employee business uses a handful of independent contractors for specialized marketing work. Pfisterer, who became Lively's first HR manager when she was hired last fall, said the company determined that it did not need to hire those workers; "marketer" is one of the professions that received an exemption.

Hiring in a Tight Labor Market

California's historically low unemployment rate has given choosy job-hunters more options and left employers scrambling to fill vacancies. Amir Durrani, SHRM-CP, vice president of HR for Norms Restaurants in Southern California, keenly feels that pinch. Norms has about 1,800 employees, most of whom work at its 19 restaurants, which are open 24 hours a day. "We have that challenge of staffing every shift, every day," he said.

Nonetheless, Norms has relatively low turnover, due in part to effective recruiting—employees have been "the best recruiting managers we have," Durrani said—and a company culture that emphasizes respect and appreciation.

"People do not leave jobs for the money," he said. Rather, they move on because they don't feel valued and aren't learning. Because Norms plans to add as many as 11 restaurants in the coming year, growing its labor pool will be even more important over the next 12 months.

Keeping Employees on Their Best Behavior

High demand for workers and California's high cost of living have made the workforce multigenerational, said Sejal Thakkar, a trainer and chief civility officer for Train Xtra in south San Francisco. An increasing number of workers ages 65 and older are staying on the job while younger generations transition into new roles or enter the job market for the first time. Employers can help deter potential culture clashes and conflicts by ensuring that their workplace training is geared to their workforce's varied demographics.

Last fall, Gov. Gavin Newsom gave employers more time to provide sexual-harassment-prevention training. Businesses with at least five employees have until Jan. 1, 2021, to provide supervisors with two hours of sexual-harassment-prevention training and nonsupervisory workers with one hour of training. SB 778 requires that nonsupervisory workers complete their hourlong training within six months of their hire date. All employees must receive sexual-harassment-prevention training at least once every two years.

Thakkar urges employers to provide robust education on gender identity and expression, a mandatory topic that she knows makes some managers and workers anxious. "When we have discussions on which pronouns to use, you can see the level of discomfort," she said. "You can see half the room wiggling." That unease indicates that businesses need to make sure that their workplaces promote tolerance and respect, she said.

Another Legal Challenge

As many legal experts predicted, a California law that would have prevented employers from requiring employees to sign mandatory arbitration agreements was frozen in its tracks before it could take effect Jan. 1.

Opponents of AB 51 allege that the Federal Arbitration Act pre-empts state laws restricting arbitration agreements, the reason former Gov. Jerry Brown cited for his 2018 veto of similar legislation. But his successor, Newsom, signed AB 51 into law last fall. Supporters have hailed the legislation as a powerful tool for workers, who would have the right to sue their employers and take them to trial instead of having to resolve their complaints solely through arbitration.

A federal judge issued a temporary restraining order against the new law on Dec. 30 and will ultimately decide whether a permanent injunction is warranted.



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