2023 was a seismic year for the employment landscape, with changes to state and federal laws that touch on hiring, firing, and just about everything in between. Members of Fenwick’s employment group recently walked through the year’s biggest changes, highlighting trends and providing practical guidance on how to navigate these changes. 

Here are some of the key action items:

1. Check your California leave policies. California employers should review and update policies and employee handbooks to reflect expanded employee leave opportunities. The state has increased the accrual rate of paid sick leave and now allows more hours to roll over from year to year. The state also created a new type of unpaid leave for individuals experiencing reproductive loss.

1. Mind the independent contractor and joint-employer shakeups. Review your independent contractor arrangements and designations. The U.S. Department of Labor has finalized a new rule that will make it more difficult to classify service providers as independent contractors under federal law. In addition, the U.S. National Labor Relations Board has broadened the definition of a joint employer, which could potentially result in liability for unfair labor practices by a co-employer—even if it is a temp or staffing agency.

1. Refine arbitration agreements. California employers should review and refine arbitration agreements based on developments brewing for the past few years, including on the heels of a state supreme court decision that held employees can arbitrate individual claims under the state’s Private Attorneys General Act (PAGA) without losing standing to act as the lead plaintiff in a pending state court PAGA action.

1. Revisit noncompete clauses. Many states are taking aim at noncompete clauses, and while a bid to outlaw them in New York recently hit a dead end on the governor’s desk, it’s likely to be tweaked and revived. Closely monitor state law developments regarding noncompete clauses in jurisdictions where your employees are located. Consider eliminating such clauses from your employment agreements and instead replacing them with restrictive covenants that focus on protecting confidential info, trade secrets, and customer relationships. In any event, a potential nationwide ban on noncompete clauses is still brewing at the Federal Trade Commission.

1. Be smart about AI. Artificial intelligence can be a powerful tool, but it can also create risks when it comes to hiring, promotion, and compensation. Ensure tools used to screen job applicants are not screening out members of protected classes and are compliant with applicable state laws. For example, tools that screen out applicants with employment gaps could inadvertently discriminate against people who were unable to work due to a disability. Separately, AI tools can expose your confidential information or trade secrets. If your employees use generative AI tools, ensure that their inputs do not include confidential information that could land in a third party’s lap. Or, to the extent possible, negotiate service agreements with AI tool providers in such a way to ensure your information is protected and that you have recourse if there is a breach.