California Governor Gavin Newsom recently signed into law 15 bills designed to provide greater employee protections in California.  Among those bills were Assembly Bill 9 (“AB 9”) and Assembly Bill 51 (“AB 51”), both of which are aimed at protecting employees’ rights to litigate harassment, discrimination, and retaliation claims.

As we previously blogged about here, AB 9 increases the time limit for individuals to file a discrimination, harassment, or retaliation claim with the California Department of Fair Employment and Housing, effectively extending the practical statute of limitations for filing a lawsuit under FEHA to four years.

AB 51 may have even more significant ramifications.  AB 51 prohibits employers from requiring employees or potential employees to enter into arbitration agreements as a condition of employment.  More specifically, AB 51 provides that employees and applicants cannot be required to waive a right, forum, or procedure for a FEHA or Labor Code violation in exchange for employment or an employment-related benefit.  Additionally, employers may not threaten, retaliate, discriminate against, or terminate an applicant or an employee for refusal to consent to such waiver.

In 2018, Governor Jerry Brown previously vetoed a similar bill, Assembly Bill 3080 (“AB 3080”), stating that the bill “plainly violates federal law.”  While proponents of both AB 51 and AB 3080 promote the initiatives as bills consistent with and necessary in light of the #MeToo movement, opponents argue that the bills are preempted by the Federal Arbitration Act (“FAA”).  Specifically, several courts, including the United States Supreme Court, have confirmed on numerous occasions that the FAA preempts state laws when such laws contravene the FAA’s presumption in favor of enforcing arbitration agreements.

The authors of AB 51 likely anticipated this preemption argument by inserting a “savings clause”:  “Nothing in [AB 51] is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act.”  Based on a plain reading, AB 51 would therefore not apply to any arbitration agreement enforceable and governed under the FAA, including arbitration agreements with class action waivers.  However, until AB 51 is challenged, there will exist some uncertainty as to how courts will interpret this provision.  As a result, employers should anticipate challenges to AB 51 almost immediately.

Irrespective of whether AB 51 is challenged and whether such challenges are successful, AB 51 will not invalidate existing arbitration agreements and will apply only to agreements entered into, modified, or extended as of January 1, 2020.  Employees who prevail under AB 51 may be awarded injunctive relief and, notably, attorneys’ fees, among other available remedies.

Employers should evaluate their arbitration agreements and internal policies in advance of January 1st, and continue to monitor developments in California’s most recent attempt to establish its own standards wholly different and apart from the rest of the United States.  The employment lawyers at Hogan Lovells are available to help navigate this change and others as the legal landscape continues to evolve.

The legal community paid close attention to the California Supreme Court’s 2018 Dynamex decision which adopted a strict test to curtail misclassification of workers as independent contractors. Now that the California legislature has codified and signed the Dynamex decision into law as Assembly Bill 5 (“AB 5”), both the national and legal press have sounded alarm bells about the law’s impact on the gig economy and its reliance on independent contractors.

Companies that conduct business in Massachusetts have long been familiar with the new California standard. Back in 2004, the Commonwealth amended the Massachusetts Independent Contractor Law (the “MICL”) to establish a presumption that workers are employees unless an employer demonstrates independent contractor status by satisfying each element of the following three-part ABC test:

  1. the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and
  2. the service is performed outside the usual course of the business of the employer; and,
  3. the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed. M.G.L. c. 149 §148A.

Failure by an employer to prove any one of these three prongs is enough to establish that a worker is an employee. For employers, meeting the second condition is the most difficult hurdle to climb to show that their workers should be classified as independent contractors.

Massachusetts maintains a less-strict version of the ABC test for unemployment insurance benefits. In this context, a broader second prong standard — “work performed outside the usual course of business of the employer” or work performed “outside of all of the places of businessapplies.

The stakes are high for businesses on the wrong end of misclassification litigation under Massachusetts’ wage and hour laws and the MICL. Penalties include lost wages and benefits that individuals should have received if a court determines they were improperly classified as independent contractors. Businesses in violation of Massachusetts’ wage and hour laws may be liable for treble damages for “any” lost wages and other benefits, attorneys’ fees, and other significant fines. Tax penalties can also quickly mount.

Just last year, Massachusetts’ Supreme Judicial Court Chief Justice called worker misclassification a “serious problem both in our Commonwealth and across the nation” and urged the Massachusetts legislature to adopt a uniform scheme for the classification of workers. Ives Camargo’s Case, 479 Mass. 492, 502 (2018). The Hogan Lovells employment team will continue to update employers as jurisdictions across the United States consider the applicable standards for classifying individuals as employees or independent contractors.

Paid sick leave, additional family and medical leave, disability and parental leave – the number of leave entitlements at the state and local level keep proliferating. Compliance with this new legal landscape is tricky, and particularly so for employers with multi-jurisdictional workforces. The Hogan Lovells Employment team is here to help. On November 7 at 1 p.m. Eastern, we are hosting a one-hour live webinar to discuss the new laws and how employers can ensure compliance.

Our webinar – geared to in-house counsel and human resources staff but open to anyone – will unpack the common features of the new laws and highlight key differences across jurisdictions. We will provide tips for compliance with the patchwork of laws already on the books or pending, including the interplay of state paid leave benefits with employers’ own benefits plans and established unpaid leave rights under the Family and Medical Leave Act (FMLA) and Americans with Disabilities Act (ADA), and how to update policies and handbooks. Our panel of employment lawyers in California, New York, Massachusetts, and the D.C. region will prepare employers to avoid running afoul of this “new normal” and to correctly guide employees who approach their manager or Human Resources with the following scenarios:

  • I need a few days off because I am ill or injured.
  • I need time off to care for a family member in a medical crisis.
  • I need time off to deal with my own medical crisis.
  • I’m having a baby, how much time can I take?
  • Can I get additional time off under the FMLA or ADA?

We hope you will join us.


Later this week, on October 11, 2019, several important changes are coming to the New York Human Rights Law (“NYHRL”).

As you may recall, last year the New York legislature enacted legislation prohibiting employers from requiring nondisclosure sexual harassment claims in Nondisclosure Agreements (“NDA”) unless the employee requests confidentiality.  As of next week, that prohibition is strengthened to include all claims of discrimination, harassment and/or retaliation in “any settlement, agreement or other resolution of any claim, the factual foundation for which involves discrimination … that would prevent the disclosure of the underlying facts and circumstances … unless the condition of confidentiality is the complainant’s preference.”  If the employee requests confidentiality, then the Agreement may contain this provision.

Notably, the law does not prohibit the confidentiality of the settlement amount or of the NDA itself.

NDAs now must also be written in plain English and in the primary language of the employee.  In addition, they must give the employee at least 21 days to consider the NDA and contain a 7 day revocation period if the employee wishes to revoke their consent.

Additionally, as of January 1, 2020, NDAs must include that employees are not prohibited from “speaking with law enforcement, the Equal Employment Opportunity Commission, the state Division of Human Rights, a local commission on human rights, or an attorney retained by the employee or potential employee.”

As New York State and New York City have strengthened their stances on sexual harassment and discrimination, New York employers must remain vigilant and stay abreast of all of the changes in the law and adapt accordingly.  If NDAs do not abide by the above requirements, they will not be enforceable.

Hogan Lovells’ Employment team is experienced, well versed, and apt to advise on any issue of New York employment law, especially those regarding discrimination and harassment.

Following in the wake of the #MeToo movement, two new bills adopted by the California Legislature will expand the temporal scope of state-law harassment, discrimination, retaliation, and sexual assault claims. The first of these two, Assembly Bill 9 (“AB 9”), increases the time limit for individuals to file a discrimination, harassment, or retaliation claim with the California Department of Fair Employment and Housing. Filing such a claim is an administrative prerequisite to suing under California’s Fair Employment and Housing Act. AB 9 will raise the current one-year time limit on filing this administrative claim to three-years, extending the practical statute of limitations for filing a lawsuit under FEHA to four years (e.g. three years to file the administrative claim, and then one year thereafter to file a civil lawsuit).

The second bill, AB 1510, amends last year’s Assembly Bill 1619 (“AB 1619”). AB 1619 expanded the statute of limitations for adult victims of sexual assault to the greater of ten years after the last incident of assault or three years after discovery of the assault. However, AB 1619 only acted prospectively, applying only to claims brought on or after January 1, 2019. Assembly Bill 1510 (“AB 1510”) amends the scope of AB 1619 so that it revives certain, otherwise time-barred civil claims where those claims:

  • (1) Arise out of sexual assault or other inappropriate conduct by a physician at a student health center from Jan. 1, 1988 to Jan. 1, 2017;
  • (2) Seek damages of greater than $250,000; and
  • (3) Would otherwise have been time barred prior to Jan. 1, 2020.

Taken together, these two bills have been framed as part of California’s continued response to the #MeToo movement. However, as Hogan Lovells attorney Tao Leung writes in a recent article, the true impact of these bills, if signed by Gov. Newsom, may be much greater than advertised. The employment lawyers at Hogan Lovells are experienced in helping employers navigate the changing landscape of labor and employment law. Anyone with questions is encouraged to reach out to the authors of this article, or the attorney with whom they normally work at Hogan Lovells.

On September 20, 2019 the National Labor Relations Board (“NLRB” or “Board”) proposed a rule which, if approved, would exclude graduate and undergraduate student workers, who perform services in connection with their studies, from the definition of “employee” under the National Labor Relations Act (“NLRA”), thus precluding them from forming unions or engaging in collective bargaining activities at private colleges and universities.

The proposed Board rule comes amid a seesaw of NLRB decisions on the issue of student workers. In a 2016 Board decision addressing whether student assistants at Columbia University are employees, the Board held that such student workers were employees with collective bargaining rights under the NLRA. Applying the common-law agency doctrine, the Board explained that because the student assistants “perform work, at the direction of the university, for which they are compensated,” they are “employees” under Section 2(3) of the NLRA, notwithstanding their additional educational relationship with Columbia University. In response, graduate students at other institutions, such as New York University, American University, and Brandeis University, organized and negotiated collective bargaining agreements with their universities. The 2016 Columbia University decision reversed a 2004 Brown University decision, whereby the Board held that graduate assistants have a primarily academic, not economic, relationship with their school, and therefore they should not qualify as statutory employees.

The recently proposed Board rule has taken a similar approach to the Brown University decision, thereby holding students who perform services at a private college or university related to their studies to be primarily students with a primarily educational relationship with their university, and therefore not statutory employees. The Board has explained that its proposed standard is more consistent with the purposes and policies of the NLRA, which governs economic relationships, as opposed to those “primarily educational in nature.”

Public comments are invited on all aspects of the proposed rule and should be submitted by November 22, 2019. The NLRB has also solicited public comments on whether students who work at a private college or university in a capacity unrelated to their studies qualify as an “employee” under the NLRA. If adopted in its proposed form, the rule would undercut a growing number of student unionization efforts. Though it would not impact existing contracts between student worker unions and universities, it would nevertheless give private institutions a clear basis to refuse to recognize student unions.

For more information on the proposed rule or developments at the National Labor Relations Board, please contact an author of this blog post or the Hogan Lovells lawyer with whom you work.

Employers with employees—and, in some cases, 1099-MISC contractors —in Massachusetts have obligations starting next week under Massachusetts’ new Paid Family and Medical Leave Law (“MPFML”), which will entitle most Massachusetts workers to paid family and medical leave. Although benefits will not be available until 2021, employers must do two things now: provide notice to workers of their rights and obligations under MPFML by September 30, 2019, and implement required payroll deductions starting October 1, 2019.

A newly created state agency, the Department of Family and Medical Leave (the “Department”), will administer the paid leave program. The new law also creates the Family and Employment Security Trust Fund (the “Trust Fund”), from which paid leave benefits will be paid to eligible individuals who apply for them. The Trust Fund will be funded by employer and employee tax contributions. Below is a quick recap of the law’s key provisions and important upcoming deadlines.

Covered Employers: The law applies to virtually all private Massachusetts employers, regardless of their size or number of employees. Out-of-state employers with even one Massachusetts worker are generally covered.

Covered Workers: All W-2 employees (full-time, part-time and seasonal workers) who meet the financial eligibility requirements for unemployment benefits under Massachusetts law are covered by MPFML and must be counted for purposes of tax contributions. In other words, if you are required to report the employee’s wages to the Massachusetts Department of Unemployment Assistance (“DUA”), the employee is covered.

In addition, 1099-MISC contractors are covered if they constitute more than 50% of the employer’s total workforce and they:

  1. perform services as an individual entity;
  2. live in Massachusetts;
  3. perform the services in Massachusetts; and,
  4. do NOT qualify as an independent contractor under Massachusetts’ unemployment statute, M.G.L. c. 151A—meaning that the individual must perform services within the usual course of the employer’s business.


Qualifying Uses and Maximum Benefits per Benefit Year

Benefits will be available to eligible individuals for the following purposes:

  • to bond with a child within the first 12 months of the child’s birth or placement through adoption or foster care—12 weeks paid leave, which may be taken intermittently or on a reduced schedule upon mutual agreement of the employer and covered individual;
  • because of a qualifying exigency arising out of the fact that a family member is on or has been called to active duty in the Armed Forces—12 weeks, which may be taken intermittently or on a reduced schedule;
  • to care for a family member who is a covered service member (as defined by the law) with a serious health condition—26 weeks, which may be taken intermittently or on reduced schedule if medically necessary;
  • medical leave for an employee’s own serious health condition—20 weeks, which may be taken intermittently or on a reduced schedule if medically necessary; and
  • to care for a family member (as defined by the law) with a serious health condition—12 weeks, which may be taken intermittently or on a reduced schedule if medically necessary.

Benefits will be available beginning January 1, 2021, except that benefits to care for a family member with a serious health condition become available July 1, 2021. Eligible individuals may take up to 26 total weeks of combined paid family and medical leave per benefit year.  Employees (but not contractors) who take paid family or medical leave are generally entitled to reinstatement to the same or an equivalent position upon their return from leave. Benefits will be based on the worker’s average weekly earnings, subject to a maximum weekly benefit amount of $850 per week for 2021 (this amount will be adjusted annually based on the state average weekly wage).

Tax Contributions: Paid leave will be funded by a .75% payroll tax contribution (to be adjusted annually), which will be paid into the Trust Fund. Employers with 25 or more employees in Massachusetts will be required to pay the full contribution but may deduct from employees’ wages up to 100% of the contribution for family leave and up to 40% of the contribution for medical leave. Employers with fewer than 25 employees in Massachusetts will not be required to pay the employer portion of the contribution but will still need to deduct the employee portion from employees’ wages and remit it to the Trust Fund.

Withholding is required beginning October 1, 2019. More information about calculating the required contribution is available on the Department’s website at Employers must remit contributions quarterly through the Massachusetts Department of Revenue’s MassTaxConnect system. Contributions for the October-December 2019 quarter are due January 31, 2020.

Required Notice to Workers: Employers are required to display a workplace poster about MPFML, which is available here. Additionally, on or before September 30, 2019, employers must provide written notice to their Massachusetts workforce about certain aspects of MPFML, together with an opportunity to acknowledge or decline to acknowledge receipt. Sample notices are available from the Department here. Note that there are separate notices for W-2 employees and 1099-MISC contractors, as well as for employers with 25 or more covered individuals and those with fewer than 25 covered individuals.

Exemptions: Employers with private paid benefits plans may apply for an exemption from MPFML if their plans provide benefits and protections equal to or greater than those provided under the statute. Private plan exemptions for the first quarter of contributions are due December 20, 2019. See the Department’s website for additional details.

On September 24, 2019, the U.S. Department of Labor (DOL) announced a final rule that, effective January 1, 2020, will increase the salary threshold, by approximately 50%, that so-called “white collar” employees must be paid in order to be classified as “exempt” under the Fair Labor Standards Act (FLSA). Employees who do not meet the new heightened salary threshold of $684 per week (which equates to $35,568 per year) will be considered non-exempt and thus eligible for overtime pay. The DOL estimates that this change will impact approximately 1.3 million workers. Employers should act now to ensure that they will be in compliance with the new rule by January 1, 2020.

To be classified as an exempt employee (and thus not eligible for overtime) under the FLSA’s “white collar” executive, administrative, or professional exemptions, an employee must meet three requirements: (1) satisfy a “duties test” (i.e., have and perform specific white collar job duties); (2) be paid on a salary or fee basis (as opposed to an hourly basis); and (3) be paid at least $455 per week, which equates to $23,660 per year. If an employee is “highly compensated,” meaning that he or she earns at least $100,000 in total annual compensation, the employee may also be considered exempt under a relaxed version of the duties test. A highly controversial 2016 Obama-era rule attempted to double the existing salary threshold for white-collar workers (to $913 per week) and would have increased the annual compensation threshold to $134,004 for highly compensated individuals. That rule was enjoined by a Texas federal court, leaving 2004 thresholds in place. In the meantime, the DOL undertook to issue an overtime rule that would increase the salary threshold requirement, but not as high as under the 2016 rule. The final rule, announced September 24, 2019, is the result of that process and formally rescinds the enjoined 2016 rule.

The DOL’s new rule will implement several significant changes to current FLSA overtime requirements, including the following:

  1. White Collar Salary Threshold: The salary threshold required to meet the white collar exemption will increase from its current level of $455 per week (which equates to $23,660 per year) to $684 per week (which equates to $35,568 per year). As a result, employees who were previously exempt but earn less than $684 per week will now be eligible for overtime pay, unless their employers take action to increase their pay above the $684 per week threshold.
  2. Highly Compensated Employees: Highly compensated employees will be required to earn a total annual compensation of at least $107,432 per year ($684 of which must be paid weekly on a salary or fee basis) to qualify for exemptions. An employee who earns less than such amount will not be able to take advantage of the relaxed duties test for highly compensated employees.
  3. Bonuses and Commissions: Employers will be allowed to count non-discretionary bonuses, incentives, and commissions as up to 10% of the salary threshold of $684 per week, so long as such bonuses are paid at least annually.

The DOL intends to propose updates to these salary thresholds every four years. In contrast to the 2016 rule, the updates will not be automatic and will require notice and public comment periods. Further, the new rule makes no changes to the duties test for executive, administrative, and professional employees. Finally, the rule sets lower salary thresholds for employees in U.S. territories and the motion picture producing industry.

The rule will take effect on January 1, 2020. This leaves only a few months for employers to achieve compliance with the rule, by either treating employees who earn less than the salary threshold as non-exempt (and thus overtime eligible), or by boosting such employees’ pay to maintain their exempt status. Employers should consider taking the following steps:

  • Identify all employees impacted by the rule (i.e., employees currently classified as exempt under a white collar exemption who earn between $455 per week (or $23,660 per year) and $684 per week (or $35,568 per year)).
  • Determine the proper business actions to take with respect to each affected employee, such as whether to reclassify the employee as non-exempt, raise the employee’s salary to maintain exempt status, consider another FLSA exemption that does not require the employee to meet the new salary thresholds (such as the hourly computer professional exemption), or conduct a restructuring or a reassignment of work.
  • Ensure timekeeping and payroll systems are updated to reflect new employee classifications.
  • Consider whether to allow or adjust flexible or remote work schedules for exempt employees who become non-exempt, including whether to allow such employees to maintain use of a company cell phone or remote e-mail/network access.
  • Consider whether to adjust fringe benefits to take into account increased payroll costs the new rule will potentially incur.
  • If adjusting salaries or benefits, conducting layoffs, or taking related action as a result of the rule, ensure that all actions are nondiscriminatory and otherwise comply with applicable legal requirements, including providing WARN Act notices and complying with the release requirements under the Age Discrimination in Employment Act.
  • Consider conducting a comprehensive wage and hour audit to correct any current FLSA misclassification issues, including those not related to the FLSA salary thresholds. As noted above, the salary threshold is only one of multiple requirements needed for an employee to qualify as exempt under a white collar exemption. If an employer has potential wage and hour vulnerabilities—such as employees who may not satisfy the duties test—now may be a good time to conduct an audit and consider whether to make reclassifications of those employees as well.
  • Train newly non-exempt employees on timekeeping processes and their obligation to track their hours worked.

Employers should also be aware that their obligations under state wage and hour laws may differ from the FLSA, and should therefore ensure that their payroll policies and practices are compliant with state laws as well. For more information about the new rule, its expected impacts, or any other legal issues in the workplace, contact the authors of this article or the Hogan Lovells lawyer with whom you work.

On September 18, 2019, California Governor Gavin Newsom signed into law a bill that attempts to settle some of the ambiguity that remained surrounding the California Supreme Court’s decision in Dynamex and its “ABC Test.” While the new bill may have resolved some outstanding questions, the uncertainty is far from over.

As we previously covered, the California Supreme Court’s Dynamex decision in April 2018 largely displaced the Borello test with its lengthy list of factors, and instead decided that workers are presumed to be employees rather than independent contractors unless they can show: (A) the worker is free from control of the hiring entity (in contract and fact); (B) the worker is performing work outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an established trade.

The employee presumption, coupled with the difficult-to-pass test, has largely been viewed as a threat to the

so-called “gig” economy, and the new law, passed as AB 5 and codified as Labor Code Section 2750.3, does not resolve that uncertainty. Instead, it codifies the ABC Test for most workers, while at the same time creating numerous exceptions.

What We Do Know

To be sure, the new law does provide some clarity as to the scope of the ABC Test.

First, it syncs up the definitions under the Labor Code, wage orders, and unemployment insurance code – ending the debate as to whether courts would have needed to apply different tests for determining whether the same individual would be considered an employee – the ABC Test for claims under the wage orders (which set things like minimum wages and overtime) and claims under the Labor Code (which, for example, requires reimbursement of business expenses).

Second, it creates some exemptions from the ABC Test that allows some occupations to continue to be governed by the multi-factor Borello test, but these exemptions are narrow/industry-specific, and may require the hiring entity to satisfy separate multi-factor tests just to qualify for the exemption (see examples below). If an exemption is applicable, such exemptions apply retroactively to existing claims.

Unfortunately for some employers though, the Legislature resolved another ambiguity (previously covered here) when it declared with the passing of AB 5 that the ABC Test applies retroactively to those who don’t qualify for exemptions.

What Still Remains to Be Seen

Despite the additional clarity that the Legislature provided on some issues, significant ambiguity remains. The gig-economy companies have reportedly made plans – and contributed significant amounts of money – to back a ballot initiative that would provide a way to keep app-based drivers as independent contractors.

And even if voters do not change the law, the new Section 2750.3 will require companies to make fact-intensive inquiries to determine which test or exemption applies. By way of example, the classification of certain licensed occupations, such as physicians, lawyers, dentists, licensed engineers, and others will still be governed by the Borello test. Individuals that perform services via a contract for “professional services,” such as marketing professionals, HR administrators, photojournalists, etc. will be subject to the Borello test only if the hiring entity is able to demonstrate six separate factors regarding the contractor’s independence (i.e. maintains a business location separate from hiring entity, ability to set or negotiate their own rates, etc.) And in the case of a business-to-business contracting relationship, the use of the Borello test is proper if the contracting entity demonstrates that twelve different criteria are met (i.e. the contract is in writing, the business service provider provides its own equipment, the business service provider is free from the control and direction of the contracting business, etc.)

In short, while AB 5 was presumably intended to clarify the scope and applicability of the Dynamex holding by whittling down the number of separate tests used to evaluate the proper classification of contractors, it is clear that AB 5 has actually resulted in creating even more tests just to determine whether the ABC test or the Borello standard should apply. And irrespective of the complexity of the new law, it is indisputable that the law is a significant blow to any company that utilizes independent contractors in California.

The new law can be found here.

For more information about the classification of independent contractors, or any other legal issues in the workplace, contact the authors of this article or the Hogan Lovells lawyer with whom you work.

Every employer in New York State should keep an eye on the October 9th, 2019 deadline for employers to adopt and provide mandatory anti-harassment training for New York employees. This training is required for any employee who works even a portion of their time in New York State, including those based in a state other than New York. Moreover, the training is required for all employees, including exempt, non-exempt, part-time, and temporary employees.

In order to comply with the State’s training requirements, employers must either:

Employers in New York City should also keep in mind the additional training required for the City’s Stop Sexual Harassment in NYC Act which is to be completed by December 31, 2019. The requirements under the City law are similar to State law. However, the laws are not totally coextensive and employers should ensure that they comply with both. Therefore, employers may want to consider hosting a training which satisfies both laws.

The experienced employment lawyers at Hogan Lovells provide anti-harassment training which complies with both State and City law. For any questions, or to schedule a training, please contact the authors of this article or the lawyer with whom you normally work at Hogan Lovells.