Although most state legislatures have adjourned for 2019 or are in recess, those still in active session finalized several new employment laws in July. California advanced a bill that would codify a judicially established test for classifying workers as independent contractors, several states restricted the use of noncompete agreements, and bills to promote pay equity continued to appeal to state and local lawmakers. This month’s State of the States discusses these and other trending legislative topics.

Paid Leave

The Pennsylvania Supreme Court upheld Pittsburgh’s authority to enact a paid sick leave ordinance, finding the City of Pittsburgh's Paid Sick Days Act (PSDA) was a valid exercise of the City's "express statutory authority to legislate in furtherance of disease control and prevention.”1 The PSDA was enacted on August 3, 2015, but legal challenges postponed its effective date. Now that the PSDA has been found legal under the state constitution, employees will become eligible to accrue one hour of paid sick time for every 35 hours worked (including overtime hours) in Pittsburgh.2

In other local paid sick leave news, the San Antonio, Texas City Council has delayed enforcement of its paid sick leave ordinance until December 1 while courts decide the mandate’s legality.3 San Antonio was one of three cities in Texas to pass a paid sick leave ordinance, along with Austin and Dallas. The San Antonio ordinance had been scheduled to go into effect on August 1 for employers with six or more employees but is currently embroiled in litigation. The San Antonio law requires employers to allow employees to accrue one hour of paid sick time for every 30 hours they work, up to the accrual cap.4 The substantially similar Dallas ordinance5 took effect on August 1, 2019, although a newly filed lawsuit is challenging its legality under the state constitution. Meanwhile, due to ongoing litigation, Austin’s ordinance remains enjoined from taking effect.

At the state level, California has increased from six to eight weeks the amount of paid family leave benefits employees can receive from the California State Disability Insurance (SDI) program. Covered employees can take family leave time to care for seriously ill family members or after the birth or adoption of a child.6 The law not only provides the additional two weeks of benefits, but also addresses job protections for employees who take leave, and raises wage replacement rates for low-income workers.

Independent Contractors & Worker Classification

California has advanced AB 5, the legislative response to the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court.7 In Dynamex, the court imposed the so-called “ABC test” for determining whether workers are independent contractors or employees.8 The ABC test presumes a worker is an employee unless the hiring entity can show the worker is: (1) free from the control and direction of the hiring entity; (2) performing services outside the usual scope of the hiring entity; and (3) providing similar services as a trade or business outside the relationship with the hiring entity.9 AB 5 would expressly adopt the ABC test, with certain exceptions. The state senate is set to consider AB 5 in mid-August when the legislature reconvenes.

Meanwhile, on July 22, the Ninth Circuit withdrew its May 2 ruling in Vazquez v. Jan-Pro Franchising, International, Inc.10 that the ABC test Dynamex endorsed should apply retroactively. Instead, the Ninth Circuit determined the California Supreme Court should decide the matter.

On the other side of the country, on July 9, New Jersey Governor Murphy released a report on employee misclassification, stating his intent to sign legislation to limit misclassification. The report gave the results of the governor’s employee misclassification task force, which found that the practice had limited employment taxes paid to the state and perhaps had led to underpaid workers. The report recommends education and outreach activities, strengthened state contracting, coordination and data-sharing between agencies, legislation setting higher fines and penalties, and cooperation with neighboring states.

The same day, neighboring states Pennsylvania and Delaware signed a reciprocal agreement with New Jersey to work together to prevent worker misclassification across the states.11 Each state agreed to designate a point person as a liaison for the partnership to share data and to coordinate on investigations to the extent possible under the law. The agreement also provides that states refer any suspected criminal activity to the Office of the Attorney General and that they cooperate on criminal investigations between the state attorneys general where feasible.

Noncompetes

Another trend that developed during this year’s legislative session is tightened restrictions on noncompete agreements. In July, Maine, New Hampshire, and Rhode Island enacted laws banning noncompete agreements for certain employees.12 In Maine, employers will be prohibited from entering into or renewing noncompete agreements with employees earning wages at or below 400% of the federal poverty level.13 The Act to Promote Keeping Workers in Maine, effective September 18, 2019, further provides that employers must give notice of a noncompete requirement and the agreement cannot take effect until either six months has passed or the employee has completed a year of work.

New Hampshire amended its Noncompete Agreement Statute to nullify any noncompete agreement with a low-wage employee, which it defines as a worker earning equal or less than 200% of the federal minimum wage (equaling $14.50 or less per hour).14 This amended law will go into effect on September 8, 2019.

The Rhode Island measure includes a broader definition of low-wage earner, including undergraduate or graduate students, workers age 18 or younger, and employees exempt under federal law—in addition to those earning less than 250% of the federal poverty level.15 This law will take effect on January 15, 2020.

Discrimination & Harassment

Several jurisdictions enacted or advanced laws in July to prohibit employment discrimination based on a variety of factors.

California made history by becoming the first state to include hairstyle as a racially associated trait with the enactment of the CROWN Act on July 3, 2019. Hairstyles become part of the class of protected racial characteristics in the Golden State beginning on January 1, 2020.16

New York quickly took California’s lead, enacting S 6209 on July 12, 2019, to incorporate “traits historically associated with race” into the criteria of prohibited racial discrimination. The New York measure states that hair texture and “protective hairstyles”—like braids, locs, and twists—are traits associated with race. A similar law took effect earlier this year for employers in New York City.

Medical marijuana users gained some protection in New Jersey when the state enacted a law (AB 20) on July 2, 2019 that prohibits discrimination against an employee or applicant on the basis of a positive drug test for medical cannabis.17 The measure amended the state medical marijuana law by, among other things, directing employers on how to handle an employee’s positive result for cannabis. If an employee tests positive, the employer must allow the person to present a legitimate medical explanation for the positive result, and employers must also provide written notice of the right to explain the test.

On July 27, New York Governor Andrew Cuomo signed SB 5791 into law, which protects employees from discrimination and retaliation on the basis of immigration status.18 SB 5791 expands the definition of retaliation to include contacting or threatening to contact, as well as reporting or threatening to report, an employee’s suspected citizenship or immigration status to immigration authorities. This revision makes it unlawful for a New York employer to threaten, penalize, or in any manner discriminate or retaliate against employees because of their suspected or actual citizenship or immigration status.

At the local level, Pittsburgh enacted an ordinance, effective July 11, 2019, to amend the city’s discrimination protections to include gender identity and expression. Any employer with five or more employees must not discriminate against applicants or employees due to their sex, gender expression or identity, or sexual orientation. The ordinance also bans restricting recruiting efforts or limiting employment opportunities due to an individual’s gender identity, or retaliating against any individual because of a complaint or cooperation with an investigation into such discrimination.

A new New York City ordinance prohibits retaliation against individuals who make a request for a reasonable accommodation under any applicable provision of the New York City Human Rights Law.

Pay Equity

Another continuing employment law trend is restricting employers from making salary history inquiries during the hiring process. In July, New York enacted two laws to expand its equal pay protections.19 The governor signed SB 6549 into law on July 10, 2019, which bans employer inquiries into salary history or past wages. If an employee provides past salary information voluntarily upon receiving an offer, the employer is allowed to verify the information. This measure will become effective on January 6, 2020. The second law, SB 5248, updates the New York equal pay law to mandate equal pay for women and men performing “substantially similar” work. Previously, the wording of the law called for employers to provide equal pay for “equal work.” The equal pay amendments will take effect on October 8, 2019.

Not long after, on July 25, New Jersey enacted its own salary history ban, Bill A1094.20 Like similar pay history inquiry laws, New Jersey’s statute prohibits employers from screening job applicants based on the applicant’s prior salary history, which includes prior wages, salary or benefits. In addition, employers may not require that an applicant’s salary history satisfy any minimum or maximum threshold to be considered for a job. This new law will take effect on January 1, 2020.

On July 31, Illinois Governor J.B. Pritzker signed House Bill 834 into law, strengthening and amending the Illinois Equal Pay Act of 2003.21 Among other changes, HB 834 provides that employers must compensate employees equally, without regard to sex or race, where they perform “substantially similar work” the performance of which requires “substantially equal” skill, effort and responsibility. The measure also includes a salary history ban, preventing employers from screening job applicants based on their salary history, or from requesting or requiring salary history as a condition of being interviewed or considered for employment.

At the local level, Toledo, Ohio also enacted a salary history ordinance to prohibit past compensation inquiries and the use of salary history to determine wages or pay during hiring. The measure will become effective on July 4, 2020, and bans employers from asking about salary history, screening applicants based on prior wages, relying on previous compensation to determine an offer, or refusing to hire applicants because they will not disclose their salary history.

On the flip side, New Hampshire’s governor vetoed a salary history bill (HB 211) on July 10, 2019. The state legislature had passed the measure to ban employers from requiring an applicant to disclose previous compensation rates and from using salary history as a defense against allegations of salary discrimination.

Health and Safety

A new emergency regulation in California tasks employers with outdoor workers to check the Air Quality Index (AQI) forecasts and current AQI levels whenever they expect that workers might be exposed to poor air quality. The emergency regulation was adopted July 18, 2019 to combat the negative health effects of outdoor workers being exposed to wildfire smoke.22 It will be in effect for one year while the California Division of Occupational Safety and Health seeks an effective way to permanently regulate the risks surrounding wildfires and poor air quality. If the level of airborne particulate matter exceeds a certain threshold, the employer must notify employees of the harmful effects of wildfire smoke exposure “in a form readily understandable” by the employees likely to be affected. The regulations also stipulate that employers train workers regarding the health dangers of wildfire smoke, their rights to seek medical treatment, how they can check the air quality, and what communications to look for from employers. Employers are further required to provide respirators if workers are likely to experience harmful air quality.

At the local level, the Seattle City Council is considering a suite of four bills related to the safety and health of hotel workers. The impetus for these bills was a previously approved November 2016 ballot initiative that included various worker safety provisions, but faced numerous legal challenges, one of which was successful. In December 2018, the Washington Court of Appeals held that the initiative violated the single-subject rule.23

After Washington passed two statewide measures covering similar issues for workers in the hospitality and adult entertainment industries,24 Seattle took up several remaining concerns in separate, single-subject bills. The four measures cover workload for hotel room cleaning workers (CB 119554), require certain healthcare expenditures on behalf of covered hotel employees (CB 119555), aim to reduce instability for hotel workers in hotel chains during changes in ownership (CB 119556), and revise the panic-button requirements for hospitality workers (CB 119557).

Scheduling

Chicago, Illinois became the latest jurisdiction to enact a predictive scheduling law. Under the “Chicago Fair Workweek Ordinance,” starting July 1, 2020, covered employers must provide advance notice of work schedules to their employees, and pay additional wages if posted schedules are changed within a certain time period.25 The ordinance also requires employers to offer additional hours to existing employees before hiring new employees. The ordinance will apply to entities that employ at least 100 or more employees (or 250 or more employees working for a non-profit corporation), 50 of whom are primarily engaged in a covered industry. Such industries include building services, healthcare, hotels, manufacturing, restaurants, retail, and warehouse services.

Privacy

New York amended its data breach notification statute to, among other things, expand the definition of “personal information” covered under the law to include account numbers, biometric information, health information, and online account information. The Stop Hacks and Improve Electronic Data Security Act, or SHIELD Act, also imposes on companies new breach notification requirements, and mandates they take certain steps to safeguard protected information.

What's Next?

Although the summer is typically a slow legislative period, some states—notably California—will remain active through September. We will continue to monitor legislative and regulatory movements at the state and local levels, and report on any significant developments. For an update on notable wage and hour-related news, see the WPI's July edition of Wage Watch.26