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Courts Block State Laws Aimed at Protecting Workers, For Now

Jan. 2, 2020, 9:24 PM

Some groundbreaking state laws aimed at improving worker conditions have been blocked by courts, just as they were set to take effect early this year, a sign that industry groups will continue to fight measures that they say could upend business models and upset the status quo.

A judge temporarily blocked parts of a law that provides new protections for agricultural workers in New York; the trucking industry in California successfully fended off enforcement of a new test for determining when a worker is a contractor; and a separate California law that would limit mandatory arbitration agreements was similarly halted. The measures were set to take effect at the beginning of January.

The laws had the potential to disrupt industries, business groups argued in lawsuits filed in recent weeks. The opponents are poised to argue in upcoming hearings that the laws should remain on hold while courts consider challenges targeting whether they are constitutional or preempted by federal laws.

In the labor and employment realm, state and local laws have been passed at a rapid clip, particularly in progressive states like New York, California, and Massachusetts, to supplement long-dormant federal laws that govern the workplace. A slew of new measures are set to take effect this year, including laws to reclassify thousands of gig workers as employees, raise minimum wages in half the states, and increase salary thresholds for white-collar overtime pay exemptions.

Major industry groups have filed lawsuits to limit enforcement of some of these statutes, argue they are preempted by federal law, or try to carve out certain industries from compliance mandates. Business lobbyists unsuccessfully attacked the three laws recently held up in the courts throughout the respective legislative processes. They want the laws gutted, and fear that any enforcement while lawsuits are pending would be detrimental to business.

“These are the type of laws that industry groups will always fight,” said Stacey Leyton, attorney with Altshuler Berzon. The firm represents the International Brotherhood of Teamsters, which intervened to protect California’s new worker classification law. “You are seeing government officials increasingly concerned about economic inequity and disparity, and state legislatures are trying to do something about it, and it’s not surprising industry groups intervened to stop them from taking effect.”

California Laws Blocked

In California, the trucking industry fought to be exempted from the so-called “ABC” test, which sets a higher bar for employers who seek to label their workers as contractors. The California Trucking Association says that federal laws that govern interstate commerce should exempt truck drivers from the state’s classification law.

As that lawsuit moves forward, the groups say forcing the industry to make their workers employees before the case is decided would cause major damage. Freelance writers and gig economy companies Uber Technologies and Postmates Inc. also filed lawsuits challenging the law.

The Teamsters union and the state say truckers already were subject to the test following the 2018 California Supreme Court ruling in Dynamex Operations West v. Superior Court that created the new rigid standard. The California Trucking Association refiled its claim once Assembly Bill 5, which codified and expanded the decision, was passed in fall 2019.

Another California law faced similar pushback from industry. Assembly Bill 51 is a novel law that would limit use of workplace arbitration agreements. It was set to go into effect in January, but the U.S. Chamber of Commerce and other business groups raised questions about whether the Federal Arbitration Act preempts the state’s effort to curb mandatory arbitration. A judge granted the temporary restraining order the business groups requested. The hearing for preliminary injunction is set for Jan. 13.

Advocates for workers see mandatory arbitration as a way to silence workers’ claims against their employers because claims are kept out of a public court setting. Several states in the aftermath of the #MeToo movement passed legislation that would limit arbitration.

The FAA, which was signed into law in 1925 and is often touted as a means to help unclog courts and efficiently resolve disputes, presents a roadblock. A federal court in New York has already struck down a state law limiting arbitration agreements, a ruling that’s being appealed to the full U.S. Court of Appeals for the Second Circuit.

California’s law would restrict employers from requiring job applicants from signing the agreements as a condition of employment. That’s a departure from other tactics that declare certain claims, such as sexual harassment or discrimination, are invalid. The ruling only imposed a temporary restraining order, but it dealt a blow to a state statute on arbitration that was designed to pass legal muster where others failed. The business groups’ motion for a preliminary injunction will be heard Jan. 10.

Some Farm Worker Protections Halted

In New York, a federal judge answered farmers’ pleas to put the brakes on enforcement of at least some parts of a new state law that provided new protections for farm workers. Industry groups disputed the definition of a farm laborer under the law, among other facets. The judge allowed a temporary block on some parts of the law.

The law created the right for farm workers to organize, a day of rest, and overtime pay, among other protections. It was supposed to take effect Jan. 1, but was challenged by the New York State Vegetable Growers Association, Inc. and the Northeast Dairy Products Association, Inc. The industry groups argue the law could potentially ruin the state’s agriculture industry and may end up hurting farm workers more than it helps them.

The compromise measure, fiercely opposed by the farm lobby, is the result of a two-decade-long battle to give workers rights and basic protections. The U.S. District Court for the Western District of New York allowed a temporary delay in enforcement while it considers the groups’ claims. The judge said the broad definition of farm laborer in the law and other provisions could lead to irreparable harm for the industry. Another hearing will be held before the court on or before Jan. 24.

“There are different factual and legal issues in these cases, but they have some common threads,” said Terri Gerstein, director of the State and Local Enforcement Project at Harvard University’s Labor and Worklife Program. “Business and industry groups have lost in the political realm, so now they’re trying the courts. But in the end, there’s an urgent need for change right now. Economic inequality has gotten so extreme, and working conditions have become so degraded for many people, that there’s clear will among policymakers and the public to do something.”

Gerstein said the industry should instead focus on complying with the new laws.

Even when employers welcome a court blocking onerous new workplace requirements, they also can face complications in deciding what to do next. Many employers make changes to their human resources operations to comply with new laws ahead of time, said Jenn Betts, a labor and employment lawyer in the Pittsburgh office of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

“Are they going to go ahead and make the changes even though they aren’t legally required? Or are they going to put the genie back in the bottle?” Betts said.

—With assistance from Chris Marr.

To contact the reporter on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; John Lauinger at jlauinger@bloomberglaw.com

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