It is essential for both employers and employees to stay up to date with new labor laws and regulations to ensure compliance and avoid potential legal issues. Changes in labor laws can impact an organization's policies, practices, and employee relations. Being aware of new laws can also help companies stay competitive by adopting innovative practices that attract and retain talent while complying with legal requirements. Failing to pay attention to new labor laws can lead to negative consequences such as fines, lawsuits, and damage to an organization's reputation.
In today’s article, I share insights from four lawyers who practice at Epstein Becker Green (EBG) and have expertise on some of the most relevant and important U.S. labor laws for 2023. These lawyers include:
- Nancy Gunzenhauser Popper, a member in the Employment, Labor, and Workforce Management Practice, who discusses U.S. pay transparency laws.
- Erik Weibust, a member of the Trade Secret and Mobility Practice, and Carter DeLorme, a member in the Employment, Labor, and Workforce Management Practice who both discuss non-competes with a focus on the healthcare industry.
- Kevin Sullivan, a member in the Employment, Labor & Workforce Management practice, who discusses California employment laws with a focus on wage and hour.
Pay transparency laws
Inc. named 2022 the Year of Pay Transparency. How has pay transparency laws evolved since last year and what should we expect for 2023?
Nancy Gunzenhauser Popper: 2022 was the year that we saw more and more jurisdictions start to undertake pay transparency laws, and in particular, pay transparency laws that require employers to disclose salary ranges on job postings. There's been federal laws and state laws over the past several years that have promoted equal pay in the workplace, and they've achieved that through a variety of different ways, either by enhancing equal pay protections or by changing the standards they must meet. Some have done so by saying that you can't pay people differently based on other protected categories, not just based on sex or gender.
And we've seen it transition over the years. A couple of years ago, the big trend was salary history laws. Employers couldn't ask employees, "What do you make at your current job?", because that was a common practice.
2022 saw a lot of legislation being proposed. It passed in some of these big jurisdictions, but there's more and more being proposed, and even in states that we don't typically think about as being the most progressive states to pass employment laws. I think in 2023, we're going to see more and more jurisdictions go in that same direction.
How do managers and employers handle employees who confront them when discovering their pay is far below the advertised one?
Nancy Gunzenhauser Popper: We do hope that that is never the situation because companies really shouldn't be posting for roles with a stated range when they know people are well below that range or well above that range, because then it's not really an accurate representation of the range associated with the role. But managers and employers should be prepared for this if they operate in a jurisdiction that requires these pay transparency rules, and should be thinking about how they want to address it, whether they're reevaluating those ranges or undertaking a pay equity analysis and maybe they just haven't gotten caught up to updating the salary ranges and associated pay for current employees. But they should take it seriously because these are real claims that employees are bringing forward and employers should be prepared with how to answer it. They should also have a point person designated internally who will be able to investigate the concerns, whether that's on the human resources or people side, or whether that's someone on the legal side.
Can employees hold employers accountable for any pay discrepancies?
Nancy Gunzenhauser Popper: Yes. As we've seen, some of these newer laws are particular to what needs to go on a job posting, but most states have equal pay laws on the books, and these laws say that employers cannot pay people differently on the basis of certain protected categories. Most of them it's you can't pay women less than men or you can't pay men less than women, if that's the case, because it's based on sex or gender.
A couple of more states have enhanced this to any protected category. If an employee believes that they're not being paid fairly and it's based on one of these protected characteristics, they're able to raise concerns and bring a claim under these equal pay laws, and that's one way that employees could hold their employers accountable. There's also the opportunity to raise concerns with the EEOC, with state agencies, city agencies, that govern employment laws and unfair treatment.
Watch the full video interview on YouTube.
Non-Compete laws in the healthcare industry
How did the COVID 19 pandemic bring healthcare specific non-compete laws to the forefront?
Erik Weibust: I don't know that the pandemic brought this area of law to the forefront as much as it brought to the forefront this industry, in particular, frontline healthcare workers. The states, as Carter mentioned, had already been legislating around non-competes for about a decade. And they'd been on the forefront of the news because of cases like the Jimmy John's case and other outlier cases of low wage workers being subject to non-competes. But what it did bring to the forefront was the importance of these frontline healthcare workers. And everyone, I'd say rightfully so, wanted to help them in any way possible. One way to do that was for legislators in particular, to focus on non-competes. There was also a pinch on workers because of the COVID 19 pandemic. And so employers were starting to lose frontline healthcare workers and were also thinking about ways to protect their workforce and their trade secrets and their patient relationships.
And they started looking more at non-competes. In 2022, there were about 98 bills proposed in 29 states, 30 of those bills involved the healthcare industry. And this year we've already seen at least 73 bills introduced in 27 states, and 27 of those are related to the healthcare industry. I do think that the COVID 19 pandemic brought focus to that industry, but the issue of non-competes has been the focus of legislatures generally for at least the last decade.
In what ways could non-compete laws impact healthcare different than other industries?
Carter DeLorme: Well, like I said with the last question, states are really focused on making sure that their citizens can get healthcare from the providers they want. And creating these non-compete laws that are targeted not just to doctors, not just to nurses, but down the line. In many states, we have nurse practitioners, we have LPNs, we have multiple people in the healthcare structure being freed from the concept of a non-compete so that you, Dan, decide this is the person I want to see.
If they go from hospital A to hospital B, you want to be able to still see that same person for a physical therapy issue or any other kind of continuing treatment. And that's going to be very different than other industries which may come behind it. But I think the strategy for states is to say, let's take a public interest that we know we can garner support around, which is choosing the healthcare provider of your choice, and make sure that if that person wants to, for whatever reason, transition to a different environment, they can still be able to provide care to the people they've provided care to before.
How do non-compete laws impact the doctor-patient relationship, and should consumers be concerned?
Erik Weibust: As I previously said, the doctor-patient relationship is considered sacrosanct. That's why a lot of states are moving towards restricting or limiting non-compete agreements for practitioners in particular. But not all states are doing that. Even in the states that don't do it, one of the elements you must establish typically to enforce a non-compete, at least at the injunction stage, is that it doesn't violate public policy, that there's no issues with public policy. And in geographies where there's limited either in a specialty or just limited healthcare options overall, courts are far less likely to enforce a non-compete, at least as broadly as they're typically written. They'll either narrow it or say, I'm not going to enforce it at the injunction stage, meaning I'm not going to tell the physician or the nurse that they can't go to this new employer, but you might be able to potentially get damages if they do so.
That's even in states where non-competes are allowed, both because in particular because of that physician-patient relationship or nurse-patient relationship. And again, even in those states where they are allowed, leaving aside what the court's going to do, you typically see in this context that the agreements are drafted far more narrowly. Rather than a nationwide non-compete agreement, which you might have with a senior executive at a biotech or a pharma company for instance, you'll have a 25-mile restriction or a 10-mile restriction. How does that affect consumers? Well, consumers will either have to travel further if they want to stay with their physician, or they'll have to go and find a new physician at their practice of choice. It could have those effects. But again, the courts take that into account just because it's written down that the physician has to move 50 miles away, doesn't mean that the court's actually going to enforce that. But there certainly could be effects on patients and consumers.
What do most workers in the healthcare profession get wrong or aren't aware of when it comes to this law?
Carter DeLorme: I think that's over, but previously it was just a lack of awareness. We can have a restrictive covenant, just like any other profession can have a restrictive covenant. But now we're seeing that states are saying, no, we're going to get into that space and take away that ability. The best example would be acquisition of physician practice groups.
So you pick X, Y, Z hospital, they want a neurology practice. They go out and negotiate with a neurology practice that was otherwise unaffiliated with the hospital. They come into the hospital, okay, we're going to pay you X, Y, and Z. We're going to give you this office space. We're going to funnel referrals to you to grow your practice in exchange for that, you're not going to compete against us for X period of time in X period of space. Whether those things will now be enforceable is subject to question. There's the FTC rule, but there's also many, many states that are saying, nope, we're not going to let that happen. Whether it's on an individual doctor basis or a whole practice basis.
Watch the full video interview on YouTube.
California employment laws with a focus on wage and hour
Can you explain what AB5 is and how it's being factored into the Olson v. California decision on independent contractor misclassification?
Kevin Sullivan: AB5 was enacted in response to the California Supreme Court's decision in Dynamex in 2018, which adopted for nearly every claim here under the California Labor Code, a three-factor test, what we know as the ABC test. Specifically, a hiring entity must meet each factor in order to show that a worker is properly classified as an independent contractor rather than an employee. The A factor, that the worker 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. And the B factor, that the worker performs work that is outside the usual course of the hiring entity's business; And the C factor, that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. Now, why AB5 is important, it went into effect in January, 2020, and thus AB5 – and that ABC test, that hiring entities must show in order to establish an independent contractor relationship rather than employee – applies to claims arising on or after January 1st, 2020, unless there's an exemption from AB5, and that's where we have Olson.
And so the plaintiffs in Olson alleged that they were not treated equally, or they and similarly situated workers in companies, were not treated equally by the legislature, such that there was an equal protection violation, because, as the Olson plaintiffs allege, there were all these exemptions and very unique exemptions and very many exemptions that were carved out from AB5, and thus that ABC test, that carved out these types of workers or those companies from having to meet that test. Again, the plaintiffs alleged that these sorts of exemptions were sort of lobbied for and reached through backdoor dealings, and that those exemptions really don’t make sense or there’s no legitimate or rational basis for those exemptions. The best example that they highlighted, considering the app-based type gigs, is that there was an exemption for app-based gig companies that provide errand-type services rather than an exemption for app-based companies that provide delivery or driving services. The Ninth Circuit appeared to get it right, but that doesn't mean that they agreed that the case has merit or that the legislature was wrong. The Ninth Circuit really just said that, yeah – what the plaintiffs are alleging, if it's true, that there were those sorts of backdoor dealings, or that these types of companies over here are being improperly treated, or that there's not equal protection for those companies, that there's no legitimate, rational basis for treating them differently than for other types of workers and companies, then they can state a claim. And so now, the case has gone back to the district court level – the trial court level – where the plaintiffs will continue to litigate that, and we'll see what happens.
What are the potential outcomes for California-based companies that hire gig and hourly workers?
Kevin Sullivan: It depends on the type of gig. So let's say for app-based companies that offer workers performing errand-type services, they're already exempted from AB5, and so they're exempt from that strict sort of ABC, test where a common law test for independent contractor relationship would apply instead, and it's much easier for hiring entities to meet that common law test. But for companies who don't have those exemptions, the app-based ride-hailing and delivery services companies, they're left fighting the fight on multiple levels. One, they're continuing to litigate in the Olson case that AB5 violates equal protection because those companies didn't get those same exemptions. Separately, those companies have been successful in compelling a lot of the plaintiffs in existing litigation to arbitrate their individual claims, presumably with the hope that if the companies prevail in those individual arbitrations, that the companies would then be able to show that those plaintiffs did not suffer any California Labor Code violations.
Why that's significant is because the plaintiffs in these types of cases, they don't bring their claims on behalf of only themselves. They always try to seek to bring their claims on behalf of all other workers on a class basis or a representative basis here under the California Private Attorneys General Act. And so when a company's able to show that that plaintiff did not suffer any Labor Code violation, or was not misclassified as an independent contractor, then that plaintiff would not be able to go and seek to represent other workers.
Can you compare the differences between how classifying gig workers is being handled differently in other states compared to California?
Kevin Sullivan: Companies in other states have it a lot easier in general. In California, with AB5 adopting that ABC test, which is pretty strict and had only been adopted by a few other states. And so, for the vast majority of states where there's no ABC test, then companies have a much easier road, let's say, in establishing than an independent contractor relationship, or should I say that a gig type working relationship is more properly classified as an independent contractor relationship rather than an employment relationship.
Watch the full video interview on YouTube.
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