Nisha Verma

California continues to solidify its role as a national leader in regulating “AI” in the employment context. On June 25, 2026, Governor Gavin Newsom announced the launch of the “California AI-Unemployment Tracker,” a first-of-its-kind tool designed to monitor, track, and anticipate AI-related job loss trends in California. A publicly available dashboard developed in partnership between the California Policy Lab and the California Employment Development Department (EDD), the AI Unemployment Tracker seeks to gather evidence to determine how the adoption of generative AI affected workers and the labor market statewide since late 2022. The announcement of the AI-Unemployment Tracker follows two recent actions taken in California to address AI in the employment context. First, Governor Newsom issued a May 2026 executive order directing state agencies, labor experts, economists, universities, and industry leaders to assess AI’s labor market impacts and develop policy responses for affected workers. Second, as we previously discussed, California's Civil Rights Council finalized regulations in June 2025, effective October 1, 2025, that clarified that employers may be liable under the existing Fair Employment and Housing Act (FEHA) framework. Employers using AI-driven hiring, promotion, productivity, or discipline tools are now expected to evaluate those systems for disparate impact, maintain relevant records, and make sure algorithmic outputs do not unlawfully influence employment decisions. The AI-Unemployment Tracker is a further signal that California continues to lead the way in exploring AI in the employment context. Rather than focusing only on discrimination risks, the state seems increasingly concerned with broader labor market disruption, including displacement, retraining needs, and workforce transition planning. Employers should expect continued scrutiny over how AI affects employment decisions and the workforce structure itself. However, scrutiny does not automatically translate to liability under FEHA’s anti-discrimination framework. It is too early to predict if data from the AI-Unemployment Tracker will support a claim under FEHA or similar statutes.  Data-wise, the California Policy Lab and EDD’s initial data shows no evidence of rising statewide unemployment claims in AI-exposed occupations, and the data did not show large disproportionate increases by race, ethnicity, gender, or age in the number of high AI-exposure unemployment insurance claimants. Procedurally, California’s Unemployment Insurance Code bars litigants from using unemployment insurance hearing findings as evidence in separate or later actions. For now, these developments reflect California’s evolving regulatory strategy: not only addressing how AI impacts workers when used to make employment decisions, but now also tracking how AI impacts workers’ employment status when used to replace workers’ job functions. As California continues building this regulatory infrastructure, employers should continue building processes and designating personnel to perform impact assessments, perform bias audits, and report any adverse findings from the assessments and audits to relevant internal stakeholders. Dorsey continues to monitor new developments in the AI employment and workplace privacy space. Contact Melonie Jordan or your preferred Dorsey attorney for guidance in this fast-evolving area.

Dorsey Partner Nisha Verma offered perspective on the legal and reputational fallout surrounding the Blake Lively and Justin Baldoni dispute. Drawing on her experience in workplace investigations and employment disputes, Nisha addressed both the legal significance of the settlement and the reputational consequences of handling workplace-related disputes in the public eye. Nisha was quoted in a USA Today article, noting that “they both have a right to claim victory,” adding that each party prevailed on “significant and novel issues within their respective cases.” She also discussed the lasting reputational impact public litigation can have on individuals and organizations alike. Find the full article: Nisha Verma Offers Insight on Lively/Baldoni Settlement and Reputational Impact | News & Resources | Dorsey

https://dorsey.gjassets.com/content/uploads/2026/05/Robinow-WARN-Act-1.mp4 Whether and when to notify employees about a hotel sale is often overlooked during hotel acquisitions and is often viewed as solely an HR matter.  In practice, however, compliance with mandatory employee notification requirements can significantly impact transaction timing, operational continuity, and post-closing liability allocation between a hotel buyer and seller. The WARN Act requires employers to provide at least 60 days’ advance notice to employees, union representatives, and certain government entities in the event of certain plant closings or mass layoffs. The statute is designed to give employees time to prepare for job loss, seek alternative employment, or pursue retraining. Owners and operators, however, often believe that providing advance notice of an impending hotel sale to employees may undermine the continuity in staffing and management needed to transition the hotel through closing.  Front-line employees and department heads are critical to maintaining guest experience during a transition.  Providing advance notice of potential layoffs may lead employees to seek other opportunities, undermining stability during the transition period. Not every hotel falls within the WARN Act’s scope.  The statute generally applies to employers with at least 100 full-time employees, or 100 or more employees (including part-time workers) who collectively work at least 4,000 hours per week, excluding overtime.  In the hospitality sector, roughly 10% of U.S. hotels fall within its scope.  If you are buying or selling a hotel that may meet these thresholds, you should engage experienced hospitality-focused counsel with labor and employment specialists to advise on WARN Act exposure and strategy. The employer’s obligation to provide notice is triggered by: a plant closing affecting 50 or more full-time employees; or a mass layoff affecting at least 50 full-time employees where they represent at least 33% of the workforce at a single site, or 500 or more full-time employees regardless of percentage. Keep in mind, employment losses occurring within a 90-day period may be aggregated to meet these thresholds, preventing employers from structuring staggered terminations to avoid compliance. Allocating Liability in a Hotel Purchase and Sale Transaction When a hotel is sold, WARN Act liability does not disappear but generally shifts to the buyer as of the closing date of the transaction. That timing distinction is critical when planning workforce changes shortly after the closing. The transfer of employment from seller to buyer is not considered an employment loss under the WARN Act as long as those employees (or a sufficient amount) are rehired by the buyer under certain circumstances, after the transaction closes.  Buyers can avoid WARN Act liability by rehiring, or causing a new hotel management company to rehire, a sufficient amount of employees under these rules.  Note, however, that if these employees are offered re-employment with significant changes to their wages, benefits, job duties, or working conditions it may constitute “constructive discharge”. If notification is required, the seller will want to defer any termination of employees until after the transaction closes in order to reduce or eliminate the seller’s exposure under the WARN Act and shift the notification burden to the buyer.  This approach also helps preserve operational continuity and reduces the risk of employee attrition if the transaction does not close. Buyers must consider any anticipated workforce reductions shortly after closing and plan accordingly.  If a buyer plans a qualifying layoff at or within 60 days after closing, it will need to coordinate with the seller to fulfill its pre-closing notice obligations.  Purchase and sale agreements for hotels often restrict a buyer’s ability to communicate with employees and any notification of employees prior to closing should come from the seller.  Both sellers and buyers can avoid the associated risks of pre-closing notification by delaying any qualifying employee layoffs or closures until 60 days or later after the sale is completed. Temporary Layoffs Branded hotels are often required by the franchisor to complete significant renovations as directed under a property improvement plan (PIP) in connection with the hotel transfer and execution of a new hotel franchise agreement.  Any resulting full or partial hotel closure may require the owner or manager to temporarily lay off employees while the renovations are underway.  Under the WARN Act, temporary layoffs expected to exceed six months are treated the same as permanent layoffs and trigger notice requirements. Third-Party Management Often hotels are operated by third-party managers who serve as the employer in lieu of the hotel owner.  As a result, hotel managers often seek contractual protection against owner-driven decisions, such as a sale or closure that could trigger WARN Act obligations. If a hotel is subject to a hotel management agreement, upon the sale, the agreement can either be assigned to the buyer or terminated. If the hotel management agreement is terminated, the buyer may decide to transition the hotel to self-management or enter into a new hotel management agreement with the existing manager or a new third-party manager.  In any case, the buyer may desire to retain selected employees for operational continuity.  Note that if a third-party manager is employed, it will typically have operational control to decide most personnel decisions and in most cases an owner’s input is limited to the hotel’s general manager and some key personnel. State-Specific Requirements In addition to federal requirements, approximately 20 states—including California, New York, and New Jersey—have their own “mini-WARN” statutes, some of which impose stricter thresholds or longer notice periods.  For example, in California, the layoff of 50 employees will trigger the statute, even if 33% of the workforce is not affected.  These laws may apply independently of the federal statute and should be analyzed on a jurisdiction-by-jurisdiction basis. Bottom Line If you’re buying or selling a hotel with 100 employees and plan to either close the location (including sometimes temporarily) or terminate the employees or offer employment under materially different terms, you may be subject to the WARN Act which requires 60 days’ prior notice to employees, throwing a massive wrench in your plans to maintain operational continuity through the closing of the sale.  Buyers and sellers who address these issues early are better positioned to avoid disruption and liability.  Hotel investors should engage legal advisors experienced in the hospitality industry and labor and employment issues to guide them through the transaction process and advise on strategies to mitigate WARN Act exposure while managing operational continuity.

https://dorsey.gjassets.com/content/uploads/2026/04/WorkWatch-Nisha-5.mp4 Following his inauguration in January 2025, President Trump signed a flurry of executive orders affecting diversity, equity, and inclusion (“DEI”) policies across the public and private sector. Particularly concerning for private employers who are federal contractors, Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” addresses “illegal” private DEI and diversity, equity, inclusion, and accessibility (“DEIA”) policies by directing agencies, such as the Equal Employment Opportunity Commission (“EEOC”), to “combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.” Additional information about the EEOC and its guidance is available here and here. Private employers have also been taking note and updating their policies. However, the EEOC’s ability to enact this directive was hindered until it gained a quorum in October 2025. Now that it is operating at full capacity, emplhoyers have some visibility into the agency’s priorities. After a slow start, the EEOC initiated litigation against an employer for sponsoring a female-only networking event. The EEOC filed suit on February 17, 2026, against Coca-Cola Beverages Northeast, Inc., over its DEI initiatives, alleging that by sponsoring a two-day networking event at a casino for only female employees, Coca-Cola had discriminated against male employees on the basis of their sex. Female attendees were excused from their work duties, received their regular pay, and reimbursement for food and lodging expenses. The EEOC claims that the exclusion of male employees from attending the event was a denial of equal compensation, terms, conditions, or privileges of employment on the basis of sex. The EEOC’s subpoena and enforcement authority has become a preferred investigative and enforcement tool in reviewing private employers. Although the EEOC has always had broad authority to subpoena private employer records while an investigation is pending, the agency has demonstrably increased its use of this authority. Just a month after obtaining a quorum, the EEOC sought an enforcement action against Northwestern Mutual Life Insurance Co. in Wisconsin. While investigating a claim that an employee had been discriminated against based on his sex (male), race (white), and national origin (American-Irish) in violation of Title VII, the agency sought extensive information pertaining to Northwestern’s training, development, and promotion policies and initiatives over a three-year period. When Northwestern objected, the EEOC brought the lawsuit to compel compliance. The EEOC specifically demanded the following information:• Employee records from 2022 to 2025 for any training where race, national origin, sex, or sexual orientation was a criterion considered for participation in any employer-sponsored advisor or mentorship program.• All reports or summary documents from 2022 to 2025 that consolidated information about diversity and inclusion at Northwestern.• Based on a racial-equity initiative published on the company’s website, documents reflecting the structure, function, budget, staffing, programs, and participation in that initiative. • A list of employee names and contact information for anyone who had either received a “Diversity & Inclusion Champion Award,” and each woman or person of color retained, promoted, or sponsored, for whom another manager received “credit” or “positive feedback.”• Documentation of Northwestern’s performance management metrics and systems, including any systems used to track DEI goals and progress. The Wisconsin court has not yet decided whether to limit the EEOC’s inquiries. Other courts have found that the EEOC has broad statutory authority to investigate and request any company information relevant to a charge, which could include company-wide data and policies. For instance, in December, a California court ordered a supermarket chain operated by Vallarta Food Enterprises, Inc., to comply with an EEOC subpoena. The agency, investigating whether the company had excluded non-Hispanic individuals from employment, requested: extensive applicant and employee data (including demographic and contact information); screening questions used during the hiring process; job descriptions; and information about other race and national origin complaints. External advocacy efforts may be contributing to EEOC-led investigations into employer DEI practices. Although EEOC investigations are typically triggered by an individual complaint filed by a current or former employee or applicant, the EEOC can initiate investigations based on other information as well. Recent filings in the EEOC’s enforcement action against Nike, Inc. reveal that the EEOC’s now-Chair Andrea R. Lucas issued a Commissioner Charge against Nike in 2024 following receipt of more than 30 letters by America First Legal (“AFL”) urging the agency to investigate major corporations’ DEI programs. AFL is a nonprofit organization that litigates social and corporate issues and prioritizes (among other things) “Dismantling Diversity, Equity, and Inclusion.” Nike’s campaigns and public documents commenting on social justice and inequity had previously drawn attention from policymakers. The EEOC issued wide-ranging requests for information, including:• Nike’s organizational structure• Programs used to increase racial and minority representation in its U.S. workforce• The effect of minority representation on executive compensation• Employee layoffs in 2024• Racial and ethnic minority employee data• Consideration, application, and selection materials and information for 16 employment-related programs The court has not yet decided whether Nike must comply with all of the EEOC’s requests. Employers continue to settle discrimination claims investigated by the EEOC. Over the past few months, the EEOC has announced several settlements with employers over discrimination claims. A few notable examples include:• A $1.4 million settlement with LeoPalace Resort in Guam over allegations that it treated Japanese employees more favorably than non-Japanese (including those of American national origin) employees.• A $1.1 million settlement with Battleground Restaurants Group, Inc., which owns and operates several Kickback Jack’s restaurants in North Carolina. The lawsuit alleged the restaurants violated Title VII by intentionally failing to hire male applicants for host, bartender, and server positions.• A $150,000 settlement with Seward & Son, a large farming operation in Missouri accused of discriminating against American (and primarily Black) farm workers by providing foreign workers with preferential job assignments and other fringe benefits. However, a recent decision in Missouri suggests employers may be able to limit certain legal challenges to DEI programs. The state of Missouri sued Starbucks last February for its hiring, mentorship, and promotion policies and programs, claiming that its initiatives placed non-white, non-male, and “other preferred minorities” in an unlawful position of advantage over others in the workforce, in violation of state and federal laws. The heart of the allegations rested on Starbucks’ mentorship and employee-led affinity groups, which for a time were limited to specific employee populations. However, on February 5, 2026, the lawsuit was dismissed because the state had failed to allege its own specific injury or that of any individual or group of employees. Other EEOC actions demonstrate continued investigations of traditional discrimination claims. Based on these recent developments, employers might assume that the EEOC’s priorities have shifted. However, the agency continues to pursue allegations of race, sex, disability, and pregnancy discrimination and retaliation. Recent lawsuits include a Tennessee employer accused of restricting Black employees from a breakroom reserved for white employees and firing a supervisor who “failed to restrain” one of his direct reports from making internal and external complaints of discrimination. Another involves a Michigan-based in-home health care provider who refused to assign home visits based on a nurse’s race because it believed that some residents would prefer to be cared for by a non-Black nurse. Recent settlements also involved:• $100,000 settlement of a former employee’s religious discrimination claim against the Young Men and Women’s Hebrew Association. The EEOC found that the employer failed to accommodate a Christian employee’s request to attend Sunday church services and retaliated against her, forcing her to resign.• $95,000 settlement with JACO Coach Company, LLC following an employee’s report of sexual harassment and unwanted touching by a male coworker.• $75,000 settlement of age discrimination and retaliation claims by workers in a long-term care facility who were mocked because of their age and treated less favorably than younger workers. The EEOC’s focus on DEI-related enforcement is likely to continue. Employers can expect that the EEOC’s pursuit of Title VII discrimination and retaliation claims will continue. On February 26, Chair Andrea Lucas issued a letter to 500 of the largest employers in the U.S., urging chief executive officers, general counsel, and board chairs to “reject identity politics” and hire and promote individuals based on merit rather than protected characteristics. The EEOC appears committed to this approach through education, compliance efforts, and enforcement actions. Employers facing discrimination charges or agency information requests should engage legal counsel early to evaluate and preserve potential defenses. Employers who value and promote diversity may also wish to review programs, policies, and public-facing information to assess potential risks while fostering an inclusive, respectful workplace. Dorsey’s labor and employment attorneys are well-prepared to provide guidance as employers navigate the evolving DEI landscape. [1] Ending Illegal Discrimination And Restoring Merit-Based Opportunity – The White House [2] https://aflegal.org/priorities/

Since its inception, California’s Private Attorneys General Act has provided the plaintiff’s bar with a uniquely powerful tool. By deputizing “aggrieved employees” to enforce California’s Labor Code on the state’s behalf, PAGA has enabled private counsel to pursue civil action even when the individual employee’s harm may be minimal or even nonexistent. This framework has facilitated the rise of “headless” claims: representative actions where the named plaintiff dismisses their individual PAGA claim – often because the Federal Arbitration Act (FAA) mandates enforcement of an arbitration agreement – and exists as a procedural hook to assert representative PAGA claims on behalf of others. This risk-free practice, which often leverages boilerplate allegations to force extensive discovery or settlements, has largely benefited plaintiff’s counsel, while providing minimal recovery to the named plaintiff. Indeed, in reality, most of the money from a PAGA settlement doesn’t reach the employees: roughly a third goes to plaintiff’s counsel in attorneys’ fees, 65% of any PAGA penalties are paid to the state, and only 35% of any PAGA penalties goes towards the employees, which is then divided among all those covered by the claim – leaving each individual with a fraction of the total. PAGA litigation therefore often benefits lawyers and the state far more than the workers that the statute was designed to protect. Current legislative and administrative reforms sought to curb aggressive litigation tactics by refining penalty structures and dramatically expanding an employer’s right to “cure” identified violations. New administrative regulations aim to standardize filings and limit abusive practices while implementing procedural mechanisms, such as early judicial evaluation, that allow the courts to narrow the scope of the cases from the outset. Concurrently, case law continues to evolve regarding the enforceability of provisions in arbitration agreements that require adjudication of an individual employee’s PAGA claim in arbitration first, before the representative claims on behalf of other allegedly aggrieved employees can proceed in court (commonly called “headless” claims) – a question that has courts divided and is pending Supreme Court review[1] in a decision that could effectively end these “headless” PAGA claims. Yet, despite these reforms, one central reality persists: PAGA continues to exert significant pressure on employers. Filings remain robust, settlement incentives remain high, and trials are exceedingly rare. Compliance audits, cure efforts, and procedural refinements matter – but they do not eliminate the leverage embedded in representative claims or repeated filings. PAGA has been shaped, structured, and regulated – but it has not been diminished. The current landscape reflects a complex interplay of reform, litigation strategy, and enforcement dynamics, where standing, repeated filings, and settlement pressures continue to define employer exposure. Legislative Reform and Cure: Structure Without Contraction The July 2024 legislative amendments championed by Governor Gavin Newsom demonstrated a profound and meaningful effort to rein in abusive bounty-hunter litigation towards a system that incentivizes employer transparency. By implementing strict standing requirements and robust “cure” provisions, the amendments have sought to reduce the prevalence of opportunistic filings, on one hand, while simultaneously affording a larger share of recovered penalties delivered directly to the impacted work force, on the other. First, the 2024 reform tightened standing by requiring that a PAGA plaintiff personally suffer each specific alleged violation within the one‑year statute of limitations. This replaces the previous, highly permissive standard that allowed an employee to act as a proxy for the entire workforce and pursue penalties for a wide array of Labor Code violations they never actually experienced, so long as they suffered at least one unrelated violation, even if the underlying labor code violation was outside the statute of limitations. Put simply, this change requires PAGA plaintiffs to have more “skin in the game” for all the violations alleged, thus narrowing what claims an employee may pursue on behalf of others. In theory, the reforms created a procedural threshold that should filter out claims that exist primarily as leverage for settlements rather than vindicate actual employee harm. The 2024 reform has had particularly pronounced effects in headless PAGA cases – where the named plaintiff’s individual PAGA claim has been dismissed – raising the question as to whether that plaintiff retains standing to pursue the representative PAGA claims on behalf of others. This question, which has the courts divided, is now situated for Supreme Court review, and the answer is not purely academic; rather, this determination will inevitably influence settlement strategy, affect the effectiveness of arbitration, and shape how repeated filings are leveraged. In other words, if an employee’s individual PAGA claim is first compelled to arbitration, that employee must successfully arbitrate their claims in full before proceeding in court with respect to PAGA claims on behalf of others. In effect, counsel may have to actually litigate individual cases rather than simply leveraging settlements based on unverified representative claims. However, until resolved by the Supreme Court, representative claims can continue to generate significant pressure, independent of other procedural or statutory refinements, as counsel hems and haws about how the law will unfold until this decision has been rendered. Second, those reforms also refined how penalties are assessed and capped for common errors and expanded opportunities to cure violations by making aggrieved employees whole. On paper, through internal audits, employers can now identify and correct potential violations, implement compliance measures, and document “reasonable steps” that legally cap penalty exposure: 15% if completed before a PAGA demand or 30% if completed after notice of the PAGA action. As it stands, legislation is unclear as to how often these audits are to be performed, but an annual audit may ensure compliance well before any demand arises. Further, the 2024 amendments also offer an additional defense: once an employer has performed a qualifying audit and cured identified errors, they have a statutory right to “stay” subsequent litigation for early judicial evaluation through an early neutral evaluation (“ENE”). However, while the ENE promises to clarify disputed issues, evaluate proposed cures, and streamline resolution, the reality is that this forum is ripe with uncertainty and offers less flexibility than traditional mediation. Experienced neutrals and practitioners have raised concerns that this “newfangled” step may complicate rather than simplify resolution. Because the statute does not clearly map out what happens once an evaluation is initiated, parties may find themselves navigating a process that adds time and expense without necessarily making settlements easier or more likely than achieved by mediation with a mutually agreed-upon mediator who is trusted by both parties. Because very few PAGA actions ever go to trial, as most are resolved through negotiation or settlement long before formal adjudication, the true impact of these reforms is largely untested. Until these limitations are litigated, the practical effect of these reforms remains more theoretical in nature. Employers will likely cite to audits and cure efforts while plaintiff’s lawyers continue to cast aside their impact on settlement strategy. Further Legislative Reforms Attempt to Curtail the Reach of PAGA The ongoing tension between expanding enforcement and controlling abuse remains ever present in the legislative reforms and administrative developments. On February 2, 2026, the Legislature rejected Senate Bill 310 (“SB 310”), which sought to push back on the July 2024 reforms and create a standalone private right of action for untimely wage payments, which would increase PAGA penalties. Days later, on February 6, 2026, the LWDA Notice of Proposed Rulemaking demonstrated yet another meaningful effort to rein in PAGA. If adopted, these regulations would: Standardize administrative notice requirements and require detailed factual and evidentiary certification; Impose additional certification for high-frequency filers (200+ notices annually) with increased scrutiny for noncompliance; Clarify the cure process and how employers can document remediation; and Enhance oversight of settlements, including opportunities for affected employees to comment. However, these mechanisms do not materially change the economic incentive for plaintiffs to file broad, representative claims. The proposed rules may refine the process and filings, but repetitive, lightly modified claims will persist absent litigation as to the full impact and extent of these changes. The State of Play for PAGA and the Path Forward The recent PAGA reforms aim to narrow the statute’s reach, but their ultimate effect depends on how case law continues to solidify in 2026. Compliance programs, audits, and well-designed policies remain as critical as ever, and their importance will only grow if courts begin to give real weight to these defenses, providing meaningful tools to cap PAGA penalties. Historically, because most PAGA cases never reach a verdict, these actions have been driven by settlement pressure rather than adjudication. Yet, this evolution of PAGA presents opportunities for courts to impose meaningful caps on penalties for employers who conduct audits, cure and require individualized litigation before representative claims can proceed. This shift restores the significance of the individual employment relationship – historically sidelined in a lawyer-driven process – by requiring plaintiffs to personally suffer every alleged violation to maintain standing. Thus, by focusing on strong employee relationships and proving compliance, employers effectively neutralize the settlement-driven momentum that has largely driven PAGA litigation. [1] The California Supreme Court is expected to release its decision in Leeper v. Shipt, Inc. in early 2026, having granted review in April 2025, with a briefing schedule that concluded in December 2025.

Dorsey Partner Nisha Verma offered perspective on the Department of Labor’s (DOL) planned recission of the previous administration’s 2024 independent contractor rule. The DOL intends to reestablish the “economic reality test” under the Fair Labor Standards Act, which evaluates independent contractor status by examining the individual’s control over their work and their opportunity for profit or loss based on initiative or investment. Nisha contributed to an HR Dive article saying, “commentators like to call the newer rule ‘employer-friendly’ and the prior 2024 rule ‘employee-friendly,’ but in my experience, that is reductive and ignores the nuance these situations present.” She added, “I would like to see worker choice play more of a role in the analysis going forward, particularly since workers are more aware of their own tax circumstances, ability to earn other income, and need for flexibility than the business.” Read the full article in HR Dive

California’s employment law landscape is changing fast — and this time, it’s simply not a minor revision to the Private Attorneys General Act of 2004 (PAGA). The 2024 legislative reforms and the growing split among appellate courts over so-called “headless” PAGA claims reveal a widening gap between statutory reform and judicial practice. First, “headless claims” arise when an employee dismisses their individual PAGA claim—often because the Federal Arbitration Act (FAA) mandates enforcement of an arbitration agreement—but seeks to continue only the representative claims on behalf of other allegedly aggrieved employees. This strategy, increasingly used by plaintiffs’ counsel to bypass arbitration, has divided California’s appellate courts on a critical question: does a plaintiff retain standing to pursue representative PAGA claims once their individual claims are dismissed? Second, the 2024 amendments to PAGA – effective June 19, 2024 – create tools for employers to defend against PAGA actions.  The reforms redefine who qualifies as an “aggrieved employee,” expand employers’ opportunities to cure alleged violations, and reduce penalties where reasonable compliance efforts are shown. Most notably, the reforms impose a personal standing requirement: employees may only pursue penalties for Labor Code violations they personally experienced. This change curtails the “kitchen-sink” approach to PAGA pleadings and limits who may serve as a proxy for the state under the Labor and Workforce Development Agency (LWDA). Together, these developments mark a pivotal moment for one of California’s most powerful wage-and-hour enforcement tools. At the center lies a collision between California’s public enforcement model under the LWDA and the FAA’s mandate to enforce arbitration agreements – a collision that could fundamentally reshape how, and by whom, California labor laws are enforced. I. The LWDA’s Role — and Its Limits, Particularly with the Result on Headless Claims The LWDA’s position as the “real party in interest” in every PAGA case defines what these actions are, and what they are not. PAGA suits are not private disputes between an employer and an employee; they are enforcement actions brought on behalf of the state. In Rose v. Hobby Lobby Stores, Inc., the First District reaffirmed that while the LWDA owns the substantive rights being enforced, it is not financially responsible for litigation costs when it does not intervene. The LWDA holds the substantive right being enforced, but delegates its prosecution, permitting private plaintiffs act as its proxies.  That balance worked under the former PAGA structure, but the LWDA’s ability to act through private enforcement may be curtailed in practice, should “headless” claims be disavowed.  In effect, the state will still own the claims, but those claims will live or die based on the private employee’s arbitration. II. The "Headless Claims" Conundrum: A Circuit Split in Action If the California Supreme Court sides with the Second District and rejects headless claims, plaintiffs will be required to arbitrate their entire individual case before representing anyone else. On paper, that’s a win for employers — reinforcing arbitration programs and narrowing sprawling PAGA exposure. But beneath that surface lies a fundamental limitation on the LWDA’s ability to act through private plaintiffs. Here’s how the appellate landscape currently breaks down:   Appellate District  Position  Key Case(s)  Reasoning Second Appellate District Rejected headless claims entirely Leeper v. Shipt, Inc. (Dec. 2024) (pending review) Williams v. Alacrity Solutions Group, LLC (April 2025) PAGA includes individual and non-individual claims, regardless of how the complaint is framed, so purely headless claims cannot avoid arbitration. Fourth Appellate District Permitted headless claims on purely procedural grounds Rodriguez v. Packers Sanitation Services LTD., LLC (Feb. 2025) (pending review) There is no individual PAGA claim to compel to arbitration in a purely headless claim, but this leaves open the potential for other pleading challenges, such as demurrer or motion to strike. Fifth Appellate District Permitted headless claims pre-2024 bill reforms CRST Expedited, Inc. v. Superior Court (July 2025) Galarsa v. Dolgen California, LLC (Oct. 2025) PAGA’s representative structure provides three choices: (1) to pursue only their individual violations; (2) to pursue only non-individual violations; or (3) to pursue both.   Although the outcome of these cases will impact litigation strategy, all involve pre-reform PAGA claims, and have yet to address the implications of the post-2024 statutory standing requirement, which adds yet another layer of complexity moving forward. III. The Federal Constraints to PAGA – And What Remains Constant Despite the uncertainty surrounding headless claims, two federal pillars remain constant: the FAA and the Labor Management Relations Act (LMRA). Both impose preemption doctrines that define where federal law overrides state law — but they do so in very different ways. The FAA governs arbitration agreements, ensuring valid agreements are enforced unless a specific exemption applies.  For example, in Villalobos v. Maersk, Inc. (October 2025), there was no individual claim subject to arbitration because the plaintiff was a transportation worker exempt from the FAA. Simply, as made clear by the court in Villalobos, case authority related to headless claims cannot be used to bootstrap FAA coverage where none exists. Meanwhile, under the LMRA, preemption arises only when resolution of a PAGA claim requires interpretation of a collective bargaining agreement (CBA). In Renteria-Hinojosa v. Sunsweet Growers, Inc. (9th Cir. Aug. 2025), the court held that PAGA claims are not preempted if they merely reference, rather than interpret, a CBA. However, when an employee’s claim depends on exhausting a CBA’s grievance process, LMRA preemption applies. These federal anchors – FAA enforceability and LMRA preemption – remain stable amid California’s shifting state-law terrain and thus serve as guideposts in assessing arbitration risk and preemption defenses. IV. A New PAGA for a New Era With the California Supreme Court poised to decide Leeper and Rodriguez, and the 2024 reforms already in effect, PAGA is entering a defining chapter. The unanswered question is whether the LWDA can still meaningfully enforce labor laws through deputized private plaintiffs if every case must begin (and possibly end) in individual arbitration. For employers, that paradox is striking: a ruling requiring arbitration of individual claims first in all instances could mark the quiet sunset of PAGA’s broadest enforcement powers. Either way, the coming year will reshape the balance between state enforcement and federal arbitration mandates — and that balance will define the next decade of California wage-and-hour litigation.

Nisha Verma, a partner in Dorsey ’s labor and employment practice, was interviewed about the implications of the recently passed federal tax and spending law, often called the “megabill.” Nisha explained, “This will change the lives of Americans, but exactly how still has to be examined,” noting the law’s rapid passage “happened overnight and on a holiday weekend.” She highlighted potential impacts on workers, especially regarding the tax treatment of tips and overtime pay. Nisha shared, “Now that tips are more valuable, does that mean that rules like tip pooling … are going to be more scrutinized?” These changes could disincentivize wage increases and complicate workplace dynamics. Nisha’s insights shed light on the complexities and uncertainties businesses and employees may face as the law takes effect. Read the full article on CNN.

Following a landmark NLRB ruling last year, the answer is yes. For the last several decades, the process for union recognition of an employer’s workforce was largely unchanged. In 1974, the United States Supreme Court decided Linden Lumber Div., Summer & Co. v. NLRB, which provided the conditions under which employer had to recognize a union. Under the Court’s decision in Linden Lumber, a majority of employees had to elect a union through an election, win which the employer could campaign, before the employer had to recognize and bargain with the union. Since it is an unlawful employment practice for an employer to refuse to bargain with a legitimate union representative, the Court’s decision in Linden Lumber gave employers an important bright line for when their statutory obligation to recognize, and bargain with, a union kicked in. However, in Cemex Construction Materials Pacific, the Board reversed course, and held that there are circumstances where an employer might be required to recognize a union, regardless of whether the Board has conducted a formal election of the union.  Under Cemex, when an employer is presented with a demand for union recognition that the union claims is supported by a majority, the employer must do one of the following: (1) immediately recognize the designated union representative, or (2) file a petition to test the union’s majority status, or the legitimacy of the unit used to measure the majority status. If an employer opts for the latter option, the employer can file a petition that states the grounds for their good-faith belief that the claimed union does not have majority support. After receiving an employer’s petition, the Board will investigate the employer’s claims and may require a Board election if it finds a genuine question of representation. In Cemex, the Board noted that this is a reversal of the typical process, which usually requires unions to petition the Board for certification of a union, not the other way around. Employers that choose to file a petition with the Board should be aware that the Board’s decision provides harsh punishments for employers that are charged with unlawful employment practices (“ULPs”) in the run-up to an election. Historically, if a union purported to receive majority support, and a ULP charge is substantiated before the Board election, the remedy imposed by the Board was either a cease-and-desist order to stop the unlawful misconduct, or an order to re-run the election. As an extreme measure, the Board could issue a remedial bargaining order to force the employer to recognize the union, but only if it was proven that the employer’s action likely precluded a future election from being fair. In practice, this was a heavy burden to satisfy, and the Board rarely issued remedial bargaining orders. In Cemex, the Board overturned this standard, and held that an employer will be subject to a remedial bargaining order if the employer is found to have committed any ULP in the lead up to an election, so long as the violation would warrant the election being put aside. The Board reasoned that a delay in representation amounts to a lack of representation, and that the harsh new standard would better deter employers from committing unlawful employment practices that might prejudice an election. This standard is a pivotal departure from the Board’s past decisions. As Board Member Kaplan noted in his dissent, if a ULP charge is ultimately substantiated after the filing of a petition, “the petition will be dismissed, employees will lose the right to vote in a secret-ballot election, and the employer will be found to have violated [federal law] and ordered to recognize and bargain with the union.” Accordingly, employers that decide to test a union’s majority by filing a petition should act quickly to review their policies and procedures, and train supervisory employees to ensure that no inadvertent practice occurs that could lead to a ULP in the run-up to an election.  As practitioners in this area can confirm, during elections some unions intentionally file speculative ULPs as insurance in the event the union loses the election, so any conduct that could even potentially trigger a ULP should be discussed in-depth with counsel. The Board’s recent decision will certainly add to the pressure employers feel in trying to comply with federal labor laws, especially given the current labor market. Despite that, having a plan for potential workforce unionization can help mitigate the associated risks.

It is common knowledge that employers have a vested interest in the confidentiality and discretion of their employees, especially in emerging or sensitive industries. Employers invest time and money into training employees on proprietary systems, expose employees to valuable trade secrets, and make employees privy to internal disputes that could be damaging if made public. Accordingly, it is common practice for employers to require their employees sign confidentiality or nondisclosure provisions, often referred to as NDAs, in their employee or severance agreements as a condition for employment. Nondisclosure provisions in standard form employee or severance agreements offer employers a quick and easy way to safeguard potentially valuable or risky information without having to implement more costly measures. Even before the recent AI boom, competitive industries like technology and financial services relied so heavily on nondisclosure agreements that they became a ubiquitous part of the employment process.[1] However, employers should be aware that, in addition to the federal Speak Out Act (42 U.S.C. § 19403), state laws regarding the enforceability of confidentiality provisions in employee agreements vary and have undergone significant transformations in recent years. In 2017, the #MeToo movement arose in North America and Europe, a digital social movement regarding the pervasiveness of sexual misconduct, particularly in the workplace.[2] In the wake of the #MeToo movement, nearly twenty states and the federal legislature enacted laws limiting the use of confidentiality provisions that would prevent a victim or witness of sexual misconduct from disclosing their experience. The extent and application of state restrictions on nondisclosure agreements varies wildly: for example, some states like Louisiana provide merely that nondisclosure agreements that preemptively prevent an employee from disclosing future sexual misconduct are unenforceable.[3] By contrast, other states, like California, make it an unlawful employment practice, and creates significant employer liability, for any employer that requires any employee to sign a nondisclosure agreement that has the effect of preventing that employee from disclosing any unlawful acts.[4] Moreover, even states that have not adopted statutory limits on nondisclosure agreements have common law doctrines limiting the enforceability of nondisclosure agreements that are overly broad or restrictive. Specifically, 19 states have adopted restrictions on employer nondisclosure agreements. Seven of those states, Arizona, Hawaii, Maryland, Tennessee, Utah, and Virginia, restrict employers from enforcing nondisclosure agreements specifically related to sexual misconduct. While all seven states’ laws relate only to sexual misconduct, there are still notable differences in the degree of their restriction.  Before the federal Speak Out Act was passed, other states chose to adopt an even lower level of statutory restriction. For example, Arizona’s law only restricts the enforcement of nondisclosure agreements that prohibit a party to the agreement from making a statement in a criminal proceeding related to sexual assault and does not prohibit enforcement of an agreement that would prevent a party from making a public statement.[5] For these laws, compliance with the federal standard generally will mean compliance with the state law. By contrast, other states have restricted enforcement of all nondisclosure agreements related to sexual misconduct, regardless of whether they were agreed to before or after the incident occurred. For example, the laws of Hawaii, Tennessee, Virginia, and Utah all restrict the enforcement of nondisclosure agreements regarding sexual misconduct that are a condition of employment, even if the agreement was entered into after the workplace dispute occurred. Importantly, all these laws reference the enforcement of a nondisclosure agreement that is required by the employer as a condition for employment. Accordingly, most (but not all) of these states allow the inclusion of nondisclosure agreements in settlements, so long as they are independent of employment with distinct consideration. Indeed, Utah’s law specifically provides that their statute does not prohibit nondisclosure clauses that relate to the amount of a monetary settlement, or at the request of the employee.[6] Other states have gone further and have restricted the enforcement of employer nondisclosure agreements for a range of conduct beyond sexual misconduct. California, Colorado, Illinois, Maine, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington all restrict employer nondisclosure agreements that would prevent disclosure of certain types of unlawful conduct. For example, Colorado, Illinois, and Maine restrict the enforcement of nondisclosure agreements related to any unlawful employment practice, including and in addition to sexual assault. This is relevant because ‘unlawful employment practices’ include a range of conduct that might be difficult for an employer to predict. For example, Colorado’s law provides that it is an unlawful employment practice for an employer to “cause to be printed” an advertisement for prospective employment that indirectly discriminates on the basis of a protected class.[7] Intuitively, it may seem like common sense to draft a nondisclosure agreement that does not potentially restrict an employee’s disclosure of unlawful employment practices. However, when dealing with dense anti-discrimination statutes that don’t provide clear thresholds for liability, an overly broad nondisclosure agreement can easily restrict disclosure of an unlawful employment action, despite the employer’s best intentions. Furthermore, some states go even further and create liability for employers that require their employees to enter into statutorily prohibited nondisclosure agreements. California, Oregon, and Rhode Island all make it an unlawful employment practice for an employer to require their employees to sign a nondisclosure or nondisparagement agreement regarding certain unlawful acts. For example, California makes it an unlawful employment practice for an employer to require an employee to sign any “document to the extent it has the purpose or effect of denying the employee the right to disclose information about unlawful acts in the workplace.”[8] Furthermore, the California statute requires that all nondisclosure agreements contain language clarifying that nothing prevents the employee from disclosing conduct that they have reason to believe is unlawful.[9] An employer’s unlawful employment action under California’s statute exposes them to a civil cause of action and accompanying costs and damages.[10] When drafting nondisclosure agreements in states like California, employers should strive to carefully comply with the statutory restrictions to avoid significant liability. While the laws governing employers use of nondisclosure agreements have become increasingly complicated in recent years, there are a few longstanding principles that employers should keep in mind. Most importantly, no state restricts an employer from entering into a nondisclosure agreement for the purpose of protecting trade secrets and other proprietary information. Even California, which adopted extremely restrictive laws governing nondisclosure agreements, provides that their statute “does not prohibit an employer from protecting the employer’s trade secret proprietary information, or confidential information,” so long as the restrictions do not pertain to unlawful acts in the workplace.[11] In light of the recent changes to federal and state laws regarding the enforceability of employer nondisclosure agreements, employers should consider the following: Employers should avoid using the same standard form nondisclosure agreement for employees employed in different states. Employers should avoid drafting nondisclosure agreements that are overly broad and prohibit disclosure of information beyond what the employer intends to protect. For applicable states, employers should ensure that their nondisclosure agreements contain statutorily required disclosures that nothing prevent an employee from discussing instances of sexual misconduct, or other unlawful employment practices. [1] Shira Ovide, An Obsession With Secrets, The New York Times, July 27, 2021, https://www.nytimes.com/2021/07/27/technology/nondisclosure-agreements-tech-companies.html. [2] Amy Brittain, Me Too movement, Encyclopedia Britannica, Last Updated July 22, 2024, https://www.britannica.com/topic/Me-Too-movement. [3] LA HB161, 2024 Regular Session, Bill Text (2024), https://legiscan.com/LA/text/HB161/id/3011873. [4] Cal. Gov. Code § 12964.5(a)(1)(B). [5] Ariz. Rev. Stat. § 12-720. [6] Utah Code Ann. § 34A-5-114. [7] Colo. Rev. Stat. § 24-34-402. [8] Id. Cal. Gov. Code § 12964.5(a)(1)(B). [9] Id. [10] Id. § 12965(a). [11] Id. § 12964.5(f).

Although employers are welcome to support their employees’ ability to meet with their union representatives, they are not required to grant nonemployee union representatives access to their property to do so. In NLRB v. Babcock & Wilcox Co., the Supreme Court held that while employers may not restrict the right of employees to discuss self-organization amongst themselves, no such obligation is owed to nonemployee organizers. The Court found no issue with an employer's posting on his property against nonemployee distribution of union literature, subject to narrow exceptions concerning inaccessibility and discrimination. For decades, however, employers have been subject to a "public space" exception. Board decisions had consistently held that nonemployee union representatives were permitted to enter and solicit union support and activities within private property, so long as the space in which they did so was one the public was invited to enter and they were not disruptive. This is no longer the case following the NLRB's 2019 decision in UPMC Presbyterian Hospital. One such space that had been subject to the “public space exception” was hospital cafeterias. Therefore, this issue arose when two nonemployee union representatives were escorted out of a University of Pittsburg affiliated hospital after meeting with a group of employees to discuss union and organization-related matters in the facility's cafeteria, which is open to the public. The hospital had consistently, up to that point and afterward, implemented a practice of removing nonemployees engaging in any form of solicitation or promotional activity. The NLRB, when confronting this case, set forth a new standard that dispelled any confusion on whether a “public space” exception grants nonemployee union representatives unfettered access to such places on an employer's premises. It stated that the National Labor Relations Act “does not require employers to permit the use of its facility for organizational activities when other means are readily available.”  The fact that a space, such as a cafeteria, on an employer’s private property was open to the public does not mean a nonemployee must be allowed access for any purpose. To the extent that any previous Board law had created an exception, in addition to those created by the Court in Babcock that “requires employers to permit nonemployees to engage in promotional or organizational activities in public cafeterias or restaurants,” that decision was overruled. The Board, however, did make a note of the exceptions provided by the Supreme Court's decision in Babcock & Wilcox Co. There, the Court provided two very limited exceptions for when an employer may not restrict a nonemployee union representative from accessing their property: inaccessibility and discrimination. The first exception arises when a union representative cannot access employees through any other reasonable means. Thus, when there is no other avenue through which a nonemployee representative may communicate its message with employees, an employer's property right must give way. The second exception arises when an employer exercises his property rights in a discriminatory way. An employer may not restrict property access to a particular nonemployee union representative(s) when it does so for other nonemployee union representatives or permits similar conduct by others in similar relevant circumstances. For example, an employer may not grant access to other types of solicitations that are “similar in nature” while simultaneously denying access to nonemployee organizers.  Note that another 2019 Board decision held that granting access to charitable or civic associations (i.e., Girl Scout cookie sales) would not open the door to allowing non-employee union representatives on the property. Notably, the Board has since clarified that its decision in UPMC Presbyterian Hospital does not allow employers to restrict the access of nonemployee union representatives if the union representatives have “a contractual right to access the employer’s property.” Hilton Anchorage, 2020 NLRB LEXIS 99, 117 (N.L.R.B. March 4, 2020).

On September 18, 2019, Governor Gavin Newsom signed into law Assembly Bill 5, which clarifies when workers should be considered “employees” under the California Labor Code and the California Unemployment Insurance Code, thereby entitling them to the protections afforded by those laws. The bill codifies the standard set out in last year’s California Supreme Court decision, Dynamex Operations West, Inc. v. Superior Court of Los Angeles, which narrowed the circumstances under which a worker can properly be classified as an independent contractor. Specifically, under the new law, in order for a worker to properly be classified an independent contractor, the employer has the burden of establishing the following three elements (commonly referred to as the “ABC” test): (A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; (B) The person performs work that is outside the usual course of the hiring entity’s business; (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed. Most of the provisions of AB 5 become effective on January 1, 2020. Below are some answers to frequently asked questions to help employers navigate this significant development. Is the law under AB 5 any different than the Dynamex ruling? Under Dynamex, the “ABC” test was limited to the resolution of the employee or independent contractor question in claims arising under California’s Wage Orders—for example, claims for failure to pay minimum wage, overtime, or failure to provide adequate meal and rest periods. AB 5 codifies the decision in the Dynamex case and expands the application of the “ABC” test not only for purposes of the Wage Orders, but also the Labor Code and Unemployment Insurance Code as well.  This means that the “ABC” test will apply to more claims, including failure to reimburse necessary business expenses, failure to provide accurate and complete wage statements, claims for waiting time penalties under Labor Code section 203, potential recovery of Private Attorney General Act (PAGA) penalties, and failure to provide workers’ compensation insurance.AB 5 also empowers the California Attorney General and specified local prosecuting agencies to pursue injunctions against putative employers suspected of misclassifying their workers. Are there any exceptions to the application of the new standard in AB 5? AB 5 provides an exemption for a number of industries and occupations, subject to licensing and other requirements, including: Insurance brokers Physicians, surgeons, dentists, podiatrists, psychologists or veterinarians Lawyers, architects, engineers, private investigators and accountants Registered securities broker-dealer or investment adviser and their agents and representatives Direct sales salespersons (if they meet certain factors) Commercial fishermen working on an American vessel (until January 1, 2023) Contracts for “professional services” such as marketing, human resources administration, travel agents, graphic designers, grant writers, fine artists (if they meet certain factors) Photographers, photojournalists, freelance writers, editors, or newspaper cartoonists (if they meet certain factors) Licensed estheticians, electrologists, manicurists (until January 1, 2022), barbers, or cosmetologists (if they meet certain factors) Real estate agents Licensed repossession agencies Bona fide business-to-business contracting relationships (under certain conditions) Construction subcontractors (for work performed after January 1, 2020, under certain conditions) Construction trucking services (until January 1, 2022) Tutors (if they meet certain factors) Motor club services For these occupations, the determination of employee or independent contractor status will be governed by the more flexible, multi-factor test outlined in the California Supreme Court’s decision in S. G. Borello & Sons, Inc. v. Department of Industrial Relations. What effect does AB 5 have on an employer’s obligation to provide workers’ compensation insurance? The California Labor Code, at sections 3200 et. seq., requires employers to have workers’ compensation insurance covering their employees. AB 5 amends section 3351 of the Labor Code so that, for the purposes of determining the obligation to provide workers’ compensation coverage, the “ABC” test governs. Accordingly, workers who fall within the “ABC” test (and are not covered by an exception), should be covered by workers’ compensation insurance. Note that the narrowed definition of employee does not become effective until July 1, 2020 (with respect to the workers’ compensation provisions specifically). Will AB 5 affect an employer’s obligation to pay payroll taxes? The Unemployment Insurance Code imposes obligations on employers to pay certain amounts of Unemployment Insurance Tax and Employment Training Tax for its employees. Because AB 5 changes the definition of “employee” in the Unemployment Insurance Code, employers will have to pay these payroll taxes for workers who meet the definition of “employee” under the new test. Does AB 5 affect how much employers will have to withhold from employee’s paychecks? The Unemployment Insurance Code also imposes obligations on employers to withhold a portion of employees’ wages for State Disability Insurance and for California personal income tax. Accordingly, employers will have to make these withholdings for workers who meet the definition of “employee” under the new test. Does AB 5 affect an employer’s obligation to provide health insurance? Prior to AB 5, neither the California Labor Code nor the Unemployment Insurance Code imposed an obligation to provide health insurance to employees.  The amendments to these statutes pursuant to AB 5 do not add a requirement to provide health insurance to employees.  The federal Affordable Care Act sets up a scheme whereby “large” employers must either provide health insurance to a certain percentage of their employees, or pay specified penalties.  We have not yet seen any developments indicating whether the change in the definition of “employee” under California law will affect the determination of whether a worker is considered an “employee” under the federal ACA.  However, we are monitoring this issue closely.Note, however, that some jurisdictions in California, such as San Francisco, require certain employers to satisfy health care spending requirements for employees. The amount of required spending is based on the number of the employer’s employees, with small employers potentially exempt from the requirement. AB 5 could have an impact on how these requirements apply to employers. Can employers continue to pay workers who were formerly classified as independent contractors on a piece rate or project basis? AB 5 does not impact an employer’s ability to pay workers on a piece rate basis.   In order to properly do so, however, the employer must satisfy all requirements for paying employees by the piece or unit produced.   Namely, among other things, the employer must pay the employee not less than the applicable minimum wage for all hours worked in the payroll period, compensate employees for rest and recovery periods and for other nonproductive time separate from any piece-rate compensation, and ensure that piece-rate workers are paid overtime for hours worked in excess of eight in a day or forty in a week. What effect does AB 5 have on employers who hire temporary workers through a staffing agency? AB 5 does not have a direct effect on employers who hire temporary workers through a staffing agency, assuming the staffing agency categorizes those workers as employees of the staffing agency, and not independent contractors. If the staffing agency categorized those workers as independent contractors, and placed the workers at the contracting company’s site, arguably working subject to the control of the contracting company, there is a risk that the workers could make a claim of misclassification based on the “ABC” test against both the staffing agency and the contracting company. We recommend companies retaining temporary workers through a staffing agency confirm that the staffing agency classifies the workers placed as employees, unless they clearly meet the definition of an independent contractor. The decision as to whether to reclassify workers, and the changes to payroll and other benefits that may come along with it, continues to be nuanced. If you have independent contractors within your workforce, contact your Dorsey employment attorney for guidance.

While portions of California’s Immigrant Worker Protection Act have been enjoined, employers remain subject to notice obligations. California passed a statute limiting the extent to which employers could cooperate with federal immigration officials. Litigation quickly ensued, and a recent decision enjoined enforcement of part of the law, while leaving other provisions unaffected. With the speed of the news cycle, employers may understandably require clarification as to which immigration policies are actually in effect. What portions of the sanctuary state law were enjoined, and what parts remain effective? The Immigration Worker Protection Act (AB 450), which went into effect in January 2018, imposed three primary obligations on employers: A prohibition against allowing or consenting to a federal immigration enforcement agent’s request to enter nonpublic areas in the workplace, or to access employee records, without a judicial warrant; A prohibition against re-verifying the employment eligibility of a current employee outside the time and manner required by federal law; and A requirement to provide notice to employees upon receipt of a Notice of Inspection of Form I-9, and after the inspection, provide notice regarding the results of the inspection. Almost immediately, the law was challenged in court, in a case called United States v. California. On July 5, 2018, John A. Mendez of the United States District Court for the Eastern District of California issued a preliminary injunction blocking the enforcement of the first two of the above obligations, but not the third obligation concerning notice. The court reasoned that the first prohibition on cooperation with federal immigration officials likely “impermissibly discriminates against those who choose to deal with the Federal Government,” and therefore violates the intergovernmental immunity doctrine. The court also found that the second prohibition on early re-verifications likely violates the Supremacy Clause. The notice obligation, on the other hand, regulates the employer’s “failure to communicate with its employees,” and is therefore likely a permissible exercise of state power. Accordingly, as it currently stands, the notice provisions are in effect. Under the statute, employers must notify employees and labor union representatives within 72 hours of receiving a Notice of Inspection of Form I-9. Employers must include the name of the federal agency conducting the inspection, the nature of the inspection, the date the employer received the inspection notice, and a copy of the inspection notice. Additionally, within 72 hours after the inspection takes place, employers must also provide affected employees and their labor union representatives with the results of the inspection, a timeframe for correcting any deficiencies found, the date and time of any meetings with the employer to correct any deficiencies found, and a notice to the employees about their rights to representation during any meeting with the employer. It is important to note that at this point the court entered a preliminary injunction; the ultimate enforcement of the statute may change when the case reaches completion, and even then, an appeal to the Ninth Circuit (and perhaps ultimately to the Supreme Court) is likely.