Year in Review: Top 5 Employment Law Developments of 2021

Employment Law

Employers faced another challenging year in 2021, attempting to keep up with constantly changing regulations and laws addressing the continuing COVID-19 pandemic, while still facing traditional legal issues such as discrimination and worker classification. Below is a review of five of the biggest developments in employment law over the past year.

  • Political landscape changes. The introduction of a new administration in Washington, D.C., brought about a major shift in policy on employment-related issues this year. On his first day in office, President Joseph Biden signed an executive order reinforcing that Title VII protects against discrimination on the basis of sexual orientation or gender identity, and instructed federal agency heads to review existing orders, regulations, guidance documents, policies, programs or other agency actions to ensure conformity with this position. He later revoked his predecessor’s prohibitions on diversity training and pushed for increased competition, including a crackdown on noncompetes.

    The new direction was already seen in the efforts of various federal agencies as well. In September, the National Labor Relations Board sent a strong message of enforcement and the potential consequences for violations, issuing a pair of memos to its Regions encouraging the use of “every possible tool” in seeking remedies. The Department of Labor rescinded several rule changes made by the previous administration, including more employer-friendly versions of its independent contractor and joint employer rules, signaling the possibility of increased enforcement under the Fair Labor Standards Act. Not to be outdone, the Securities and Exchange Commission’s (SEC) whistleblower program reached new heights in 2021, topping $1 billion in awards since its inception in 2012. Of the total, more than $500 million was paid out in fiscal year 2021 alone, including the largest whistleblower award on record: $114 million to an individual (consisting of $52 million from the SEC and another $62 million based on related actions by another agency). The eyebrow-raising numbers demonstrated the SEC’s current efforts to encourage whistleblower and whistleblowing activity.
  • Pandemic rules and regulations. As the pandemic continues into the second year, state and federal laws and guidance on COVID-19 require around-the-clock employer vigilance. 2021 began with hope for a return to normal as employers began considering a return to the office. Declining numbers of hospitalizations and deaths—along with the availability of vaccines—triggered the relaxing of certain COVID-19-related requirements, such as the lifting of limits on capacity and the elimination of mask mandates. However, as the year went on, the spike in cases and the spread of the Delta variant caused many jurisdictions and agencies to consider vaccine requirements and reinstate mask mandates at both the state and federal levels. Agencies attempted to help employers with guidance, like the Equal Employment Opportunity Commission’s Q-and-A about the application of the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act when an employer offers incentives for workers to get a COVID-19 vaccine. As the year came to a close, employers faced a worrying winter season with a new variant, the Omicron strain, spreading in the United States. 
  • COVID-19 hits courtrooms. As the pandemic continued throughout 2021, courts across the country started to weigh in on various COVID-19-related disputes involving employers. In California, a federal court agreed with an employer that it did not have a duty to protect an employee’s spouse from becoming infected with COVID-19. The positive ruling for employers declined to extend an employer’s duty to provide a safe workplace to nonemployees who contract a viral infection off-premises. A Texas federal court considered an employee’s claim under the Emergency Paid Sick Leave Act (EPSLA), permitting the plaintiff to move forward on his wrongful termination claim that he was fired after a positive COVID-19 test. The order provided some insight into a court’s consideration of claims under the year-old EPSLA. An employee was also allowed to continue with his claim under state law in New York, after alleging that he was terminated for taking several days of medical leave for a respiratory illness that could have been COVID-19. 

    Litigation challenging vaccine mandates has also kept the courts busy. In what is believed to be the first court to consider the issue, a federal court in Texas dismissed a lawsuit brought by hospital employees who argued that their employer’s requirement to receive the COVID-19 vaccine or be terminated set them up for wrongful discharge. The court sent a clear message that employers are well within their rights to establish a policy mandating that employees receive the vaccine. More recently, the First Circuit affirmed the denial of a preliminary injunction to prevent the enforcement of a Maine regulation requiring all workers in licensed health care facilities to be vaccinated against COVID-19, while the Supreme Court declined to hear two requests to block New York’s vaccine mandate for health care workers.

    In a highly unusual move, on December 22, 2021, the U.S. Supreme Court announced that it will hear oral argument on January 7, 2022 on an application for an emergency stay related to the OSHA employer vaccine mandate and the CMS healthcare-facility vaccine mandate. The Supreme Court may or may not issue a temporary stay of the mandates, but at minimum the oral argument hearing will provide valuable insights into the Court’s view of the mandates.
  • Employee or independent contractor? California’s “employee or independent contractor” battles raged on in 2021. In January, the state’s highest court ruled that the game-changing Dynamex decision—where the court adopted a new standard that made it more difficult for businesses to classify their workers as independent contractors—applies retroactively. The unanimous decision breathed new life into cases pending at the time Dynamex became final in 2018, including a Private Attorneys General Act (PAGA) suit filed by a Grubhub driver, which the U.S. Court of Appeals for the Ninth Circuit moved forward in October. The federal appellate panel’s decision reaffirmed that Dynamex’s ABC test, which presumptively considers all workers to be employees and only allows classification as an independent contractor if the hiring entity demonstrates the worker can satisfy three conditions, may apply to historical Labor Code claims.

    Challenges to state laws on worker classification also found their way into the courtroom, with the Ninth Circuit recently upholding Assembly Bill 5, the law codifying the ABC test found in Dynamex in a case brought by freelance writers and photographers. The 2019 law regulates economic activity, not speech, the court said, and the occupational classifications—which allowed for limited exemptions—permissibly subjected workers in different fields to different rules. That decision followed an April opinion holding that federal law doesn’t preempt AB 5 as well as a state court ruling tossing Proposition 22, a measure that exempted ride-sharing companies from AB 5.
  • To arbitrate or not to arbitrate. In a major turn of events for California employers, on December 15, 2021, the Supreme Court granted certiorari in a case that challenges California’s ban on arbitration agreements that limit employees’ right to sue their employers in court on a representative basis under PAGA. Arbitration was also top of mind in the Ninth Circuit this year, with one panel establishing a standard for when an employee has waived her rights to judicial remedies. While not all statutory employment claims may be appropriate for arbitration, if a party agreed to arbitrate, she will be held to that agreement unless she can prove a congressional intent to preclude a waiver of judicial remedies for the statutory rights at issue, the court said. As the plaintiff failed to carry her burden, the panel shipped the dispute to arbitration. The Ninth Circuit also issued a split decision on Assembly Bill 51, a 2019 law that established various requirements for employers with regard to arbitration. The divided panel agreed with a district court’s decision to enjoin the implementation of civil or criminal penalties against employers for violations of the law, but found that certain portions of AB 51 were not preempted by the Federal Arbitration Act, upholding a provision that prohibits employers from requiring that employees execute an arbitration agreement as a condition of employment. 

Why it matters: 2021 was a complicated year for employers, and 2022 looks to present similar challenges, as the COVID-19 pandemic continues into another year—in addition to all the usual legal issues.

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