California is known for new employment laws that then trickle out to the east coast, the northwest, and eventually nationwide. Think back to the mandate for sexual harassment prevention training and the roll-out of paid family leave in 2004, and the state-wide statutory sick leave mandate in 2015.
Yet, with new laws also come new court challenges, and several trend-setting California laws are totally or partially on hold pending further court proceedings. Here are some notable examples:
Prohibition on Mandatory Arbitration (AB51)
As reported here, enforcement of AB51 has been blocked by a Temporary Restraining Order (now extended), with another hearing set for January 31st. Employers hiring before month-end must decide whether to modify current arbitration agreements to make them voluntary, or to wait and see what happens on the 31st and thereafter (and risk that current arbitration agreements that include opt-out provisions or are mandatory do not meet AB51’s standard if upheld).
Assault on Independent Contractor Agreements (AB5)
As reported here, there are at least three current challenges to AB5 by specific industries. First, independent owner operators won in a state case which held that AB5 should not render them employees, given federal laws governing interstate commerce; that ruling will be appealed. And other truck drivers are fighting for a Temporary Restraining Order in federal court. Second, freelance writers, editors, still photographers, and visual journalists filed a lawsuit to address the limited scope exemption in AB5 (35 submissions per client per year) arguing it is arbitrary and unconstitutional (the TRO in that case was denied, and the hearing on the injunction is set for March). And third, on-demand companies have also filed a lawsuit arguing that the law is poorly drafted, has too many exemptions, and does not accomplish the intended goal of protecting workers (including the two individual named plaintiffs that chose to work as independent service providers and don’t want to be employees).
Challenge to Law Mandating Women on California Boards of Directors (SB 826)
In September 2018, the California Legislature passed SB 826 which set forth requirements for California based public companies to have a least one female director on their Board by the end of 2019 or face a fine of $100,000. Requirements increase by the end of 2021 based on Board size. A male shareholder of a Delaware corporation headquartered in California with an all-male Board filed a lawsuit challenging the “quota law” as unconstitutional.
Bold laws invite court challenges, and time will tell how it all shakes out once the lawsuits work their way through the system. In the meantime, employers must balance the risks of non-compliance with the possible rewards of litigation victories invalidating all or parts of these laws. Stay tuned to our fabulous blog to find out what happens next.