As 2019 winds down, employers should keep an eye on the five biggest employment law trends for 2020.
- Sexual orientation discrimination: legal or not? At the top of the list, employers should be ready for the forthcoming decision from the U.S. Supreme Court on whether Title VII’s ban on sex-based discrimination prohibits discrimination based on sexual orientation and whether the statute prohibits discrimination against transgender employees based on their status as transgender or based on sex stereotyping. The justices heard oral argument in a trio of cases in October, reviewing opinions from the U.S. Court of Appeals for the Second Circuit, which ruled that sexual orientation discrimination does fall under the umbrella of Title VII in a case involving a New York skydiver who revealed his sexual orientation to a customer, and the Eleventh Circuit, which reached the opposite conclusion when considering the claims of a Georgia hospital security officer who claimed she was constructively discharged because she did not conduct herself in a traditional female manner and consistent with gender stereotypes. As for the question of protection for transgender employees, the Court considered a case brought by the Equal Employment Opportunity Commission (EEOC) against a funeral home company in Michigan that terminated an employee after she announced her plans to transition from male to female. There, the Sixth Circuit rejected the employer’s argument that the Religious Freedom Restoration Act shielded it from liability. The justices appeared divided at oral argument, making predictions about the outcome difficult. Whatever the Court decides, the opinion will have a significant impact on employers.
- California’s new law kicks in. Employers should also brace themselves for new legislation set to take effect in the Golden State. Assembly Bill 51 outlaws the use of mandatory arbitration agreements in employment claims related to the Fair Employment and Housing Act (FEHA) or violations of the state’s Labor Code. The new law also invalidates all agreements requiring the waiver of any right to forum or procedure if entered into as a condition of employment, continued employment or the receipt of any employment-related benefit. AB 51 does provide some delineated exemptions, such as those for Financial Industry Regulatory Authority-registered brokers or others required to be registered with a self-regulatory organization under the Securities Exchange Act. While employers certainly need to have the law’s requirements on their radar, AB 51 will likely face legal challenges and could be preempted based on Supreme Court precedent that states that the Federal Arbitration Act preempts state laws that prohibit arbitration of particular types of claims. Since the new law specifically bans arbitration of employment discrimination and labor code claims, it faces an unlikely future.
- Gig economy uncertainty. Developments in the gig economy will make headlines in the coming year as employers continue to struggle with the classification of workers as employees or independent contractors. In California, the issue will be front and center based on a combination of case law and legislation that established a presumption that workers are employees, and not independent contractors. To classify a worker as an independent contractor, employers must now satisfy all three prongs of the ABC test: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.
- Keeping things competitive. Cases challenging the legality of noncompete agreements continue to fill the courts, particularly as a favorite claim of state attorneys general. Groups of AGs have sent multiple letters asking the Federal Trade Commission (FTC) to limit the use of noncompete clauses in employment contracts, especially for low-income workers. Apparently, the agency was listening. The FTC recently announced a public workshop to examine “whether there is a sufficient legal basis and empirical economic support to promulgate a Commission Rule that would restrict the use of noncompete clauses in employer-employee employment contracts.” Employers are encouraged to attend the workshop and/or file a comment with the agency, which could result in an FTC rulemaking—and limitations on employers.
Joint effort on joint employers. Employers also need to watch for changes to the joint employer standard, as three federal agencies decided to weigh in on the issue in 2020. The National Labor Relations Board (NLRB) has been working on its review of the standard for more than a year, considering the almost 29,000 comments received in response to its Notice of Proposed Rulemaking (NPRM). Pursuant to the board’s NPRM, joint employer liability would be limited only to situations where the employer possesses—and actually exercises—“substantial direct and immediate control” over the employees’ essential terms and conditions of employment in a manner that is not “limited and routine.” Not to be outdone, the EEOC signaled plans to clarify its interpretation of when an entity is a covered joint employer under the federal equal employment opportunity laws. The agency aims to issue an NPRM—characterizing its rule as a “proposed amendment” to laws such as Title VII, the Americans with Disabilities Act and the Age Discrimination in Employment Act—before the end of 2019, with a comment period lasting until February 2020. As for the Department of Labor (DOL), the agency has also been working on its rules, which involve a four-part balancing test to determine whether multiple companies are joint employers, evaluating whether the potential joint employer hires or fires the employee, supervises and controls the employee’s work schedule or conditions of employment, determines the employee’s rate and method of payment, and maintains the employee’s employment records.
The DOL’s comment period on its proposal closed in June 2019, but the agency has not released a final draft of its standard for the Office of Management and Budget to review, pushing delivery of the final rule into 2020.
Why it matters: Before the ball has dropped on 2019, employers should be on the lookout for major employment issues in 2020, from a decision on whether legal protection exists for sexual orientation discrimination to the possibility of three new—and different—standards on joint employer liability.