State Laws to Take On Gig Workers, Wages, Overtime in 2020

Jan. 2, 2020, 11:15 AM

The new year will bring no shortage of state employment law changes with California reclassifying thousands of gig workers as employees, minimum wages rising in half the states, and salary thresholds climbing for white-collar overtime pay exemptions.

The new decade begins with much of California’s worker classification law A.B. 5 having taken effect on Jan. 1, codifying a three-factor test that makes it harder for employers to count workers as independent contractors. The new law is causing employer angst over how to comply and over potential costs for ride-hailing providers such as Uber Technologies Inc. and Lyft Inc., trucking companies, and others. Employers in New Jersey and New York could come to share that angst as their state lawmakers and governors consider similar measures.

States and cities also could explore creating portable benefits funds so workers with multiple employers have access to retirement, paid time off, and other benefits.

Beyond worker classification and related gig economy issues, the year ahead also is likely to bring state law changes affecting noncompetition clauses, workplace discrimination, minimum wage, and overtime.

“For about the last 10 years, the states are really where all the action is” for labor and employment law, said Ben Ebbink, a labor and employment attorney with Fisher Phillips in Sacramento, Calif. “We expect that will continue.”

Minimum Wage

The year ahead will bring scheduled increases in minimum wages for 24 states, plus the District of Columbia. Notably, D.C. and seven states—California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, and New York—continue to phase in $15 hourly wage requirements, several of them enacted within the last year.

A couple of states are candidates to adopt phased-in $15 minimum wages in 2020. In Virginia, a new Democratic-majority legislature has a minimum wage increase on its agenda, and in Florida a citizen-led ballot measure will go before voters next November.

State lawmakers in Hawaii also could revisit minimum wage legislation, after trying but failing to agree on specifics of a 2019 proposal to phase in a $15 hourly wage by 2023.

Apart from the $15 proposals, Colorado’s labor department has proposed to broaden the categories of workers and industries covered by the state’s minimum wage, which rose to $12 hourly for nontipped employees on Jan. 1.

In Pennsylvania, a plan to phase in a $9.50 minimum wage by January 2022 has passed the Senate and awaits House action. It’s part of a bargain struck between Senate GOP leadership and Democratic Gov. Tom Wolf—in which Wolf will drop his proposal to expand overtime pay requirements in exchange for the minimum wage increase.

Overtime Expansion

A number of states with Democratic governors—including Colorado, Michigan, Washington state, and even possibly Pennsylvania—are pursuing increases to salary thresholds for exempting white-collar and supervisory workers from overtime pay requirements.

The moves come “as a response to the Trump administration,” Ebbink said, since worker advocates thought the new overtime salary threshold released by President Donald Trump’s Labor Department in 2019 wasn’t high enough.

Washington state finalized a rule to gradually raise its threshold starting July 1 until it reaches $1,603 weekly or $83,356 annually in 2028. The federal threshold, by comparison, will be $684 per week or $35,568 annually starting Jan. 1.

Colorado is proposing to raise its overtime exemption threshold to $42,500 starting July 1, with gradual increases to $57,500 in 2026.

Michigan Gov. Gretchen Whitmer (D) has called for agency rulemaking to take place in 2020 that will increase the salary threshold. Worker rights advocates are pushing for New Jersey to do the same. Some states, including California and New York, already have thresholds higher than the federal by pegging them to state minimum wage.

Gig Workers and Classification

The big news on worker classification has been California’s A.B. 5, but Ebbink said employers shouldn’t expect gig economy changes to stop there.

New Jersey and New York are expected to take similar steps toward classifying more workers as employees rather than independent contractors—entitling them to legal benefits such as minimum wage, business expenses, and overtime pay.

A related wave could begin in 2020, as well. Ebbink predicted California will consider legislation to grant gig workers some version of collective bargaining rights, and other states could follow.

California employers have made clear they plan to push back on the classification issue.

The California Trucking Association has sued to challenge A.B. 5 as unconstitutional. Meanwhile, ride-share and delivery driver networks are co-sponsoring a proposed ballot question asking voters to restore flexibility on classifying gig workers.

Attorney David Baffa said he hopes states will “get creative” about updating wage-and-hour and employee benefits laws to accommodate gig workers without killing off industries that rely on them.

“There is some creativity out there—not much—and I think you’ll see it come to a head with this A.B. 5 battle,” said Baffa, a labor and employment attorney with Seyfarth Shaw in Chicago.

He mentioned portable benefits funds as one example, such as the Black Car Fund that New York City operates for drivers working for black-car services as well as Lyft and Uber.

The state House in Washington has a worker-protection bill up for consideration in 2020 that would create portable benefits for gig workers.

The idea drew attention in November when Philadelphia passed a “bill of rights” covering 16,000 domestic workers that required employers to pay into a portable benefits fund providing paid time off.

Limits on Noncompete Contracts

Laws aimed at protecting workers from unfair noncompetition agreements imposed by employers advanced in a handful of states this year and could portend more state activity ahead, in addition to proposals for federal legislation or regulatory action.

“There’s a lot of concern about the limitations on an employee’s ability to move,” said Rick Grimaldi, a labor and employment attorney at Fisher & Phillips in Philadelphia.

New restrictions took effect Jan. 1 in Rhode Island and Washington state, similar to 2019 laws in Maine, Maryland, and New Hampshire. The laws generally block employers from imposing noncompete clauses as a condition of employment on low- or middle-income workers.

The income threshold for protection varies. For example, Maryland banned noncompetes for workers earning less than $15 hourly or $31,200 annually. Washington state, on the other hand, set a threshold of $100,000.

The District of Columbia is considering a similar move, with a pending council measure that would ban noncompetes for workers making less than three times the minimum wage. D.C.’s wage floor rises to $15 on July 1, 2020, meaning the noncompete ban threshold would be $45 hourly, or the equivalent of $93,600 annually for a full-time worker.

Illinois is looking at a similar law, and Pennsylvania also has considered the proposal, said Grimaldi.

LGBT, Hairstyle Discrimination

The most substantial action on workplace discrimination for 2020 is expected from the U.S. Supreme Court, where a trio of cases could bring a decision on whether the federal ban on “sex” bias already covers sexual orientation and gender identity.

Nevertheless, advocates continue pushing and watching for states and municipalities to enact or strengthen anti-discrimination laws covering LGBT workers.

Top of the list for 2020 will be Virginia, where the Democratic majority in the General Assembly is expected to consider expanding the state’s anti-bias law to cover sexual orientation and gender identity.

Similar proposals have shown signs of growing bipartisan support in states without Democratic majorities, including in Florida where the state’s GOP party chairman, Sen. Joe Gruters, sponsored an anti-bias bill in 2019 but failed to get it to a Senate floor vote. Florida proposals for the 2020 legislature have bipartisan sponsorship.

Compromise proposals that pair LGBT protections with religious exemptions could be revived as well, including in Georgia and Pennsylvania.

If the Supreme Court rules against LGBT protections at the federal level, it could inspire advocates to push harder for more action among states and municipalities, Ebbink said.

A new category of bias protection—for hairstyles and textures associated with race—could spread further in 2020, as the idea gains traction among advocates and faces little or no opposition from employers, he added. California, New York, and New Jersey in 2019 became the first states to enact laws specifically banning discrimination on the basis of hairstyle.

To contact the reporter on this story: Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editors responsible for this story: Karl Hardy at khardy@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com

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