Temporary Relief in California: Updates to New Arbitration Law and Independent Contractor Law

Last year California Governor Gavin Newsom signed two bills into law, amongst many others, affecting California employers. The first, Assembly Bill (AB) 51, prohibits employers from requiring applicants and employees, as a condition of employment, to waive their rights under the California Fair Employment and Housing Act and other specific laws governing employment. Such waivers generally appear in arbitration agreements. The second, AB 5, codifies the “ABC Test” decided in a 2018 case: Dynamex v. Superior Court (Cal., 2018), which set out the factors used to determine whether a worker is considered an independent contractor.

On December 30, 2019, a U.S. District Court judge granted a temporary restraining order (“TRO”) blocking AB 51’s effective date of January 1, 2020. The lawsuit was initially filed by the U.S. Chamber of Commerce, the California Chamber of Commerce, and various business groups in an effort to block AB 51 as the Federal Arbitration Act preempts it. The judge will hear the business groups` motion for a preliminary injunction on January 10th. This TRO effectively prohibits California state agencies from enforcing AB 51.

On December 31, 2019, another U.S. District Court judge granted a TRO blocking the enforcement of AB 5 to the motor carrier industry. The California Trucking Association filed suit after AB 5 was passed, arguing that the “ABC Test” should not apply to the motor carrier industry because AB 5 is preempted by federal law, the Federal Aviation Administration Authorization Act of 1994, which governs drivers who engage in interstate commerce. A hearing is set for January 13th to determine if a preliminary injunction is proper.

As a result of these decisions, please contact an Employers Council attorney if you have any questions about the implications of using an arbitration agreement as a condition of employment in California or using independent contractors in California’s motor carrier industry.