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Under the Meyers‑Milias‑Brown Act (MMBA), a California public agency’s decision to contract out bargaining unit work is usually within scope of representation. PERB has found a majority of such decisions negotiable – especially where the outsourcing is driven by labor-cost or staffing considerations and does not change the agency’s core mission or services. If outsourcing reflects a fundamental policy or mission change that isn’t amenable to bargaining, the decision may be non-negotiable, but the impacts and effects still are.

An agency is required to provide a labor organization with the opportunity to meet and confer before contracting out bargaining unit work. However, it is not uncommon for public agencies to provide union notice after the agency issues a Request For Proposals (RFP), evaluates responsive proposals, and selects a contractor to provide the services at issue. Unions regularly complain that, at that stage, it is too late for the agency to meaningfully engage in bargaining with the union about the underlying decision to contract for the services.

This framework is about to change. Effective January 1, 2026, Assembly Bill 339 (AB 339) adds Section 3504.1 to the Government Code, and requires local public agencies in California to provide 45 days’ notice to labor organizations representing public employees about contracts for services that are the same as or similar to work performed by employees the labor organization represents — before a local public agency issues:

  • An RFP
  • A Request for Quotes (RFQ), or
  • A renewal of or extension to a contract that covers services within the scope of job classifications represented by a labor organization.

The bill is intended to increase transparency related to the contracting of public services and adds an extra procedural step for public agencies to discharge prior to making a contracting decision.

Some contracts are exempt from this new notice requirement, including (1) public works contracts for construction, alteration, demolition, installation, repair, or maintenance as defined by Labor Code section 1720, and (2) contracts for services that are related to the planning, design, administration, oversight, review, or delivery of public works, residential, commercial, or industrial buildings, or other infrastructure projects, as defined by Government Code Sections 4525 and 4529.10. Such contracts are for specialized services provided by architects, engineers, land surveyors, construction project management firms, and other professionals, and typically cover individual construction or repair projects as opposed to ongoing work.

For all other RFPs, RFQs and contract renewals and extensions that implicate bargaining unit work, the notice to the affected union must include the following information:

  • The anticipated duration of the contract,
  • The scope of work under the contract,
  • The anticipated cost of the contract,
  • The draft solicitation (or, if not yet drafted, the information that would normally go into one), and
  • The reason the agency believes the contract is necessary.

If an emergency or other exigent circumstance prevents the full notice period, the public agency contracting for such work is required to provide as much advance notice as is practicable under the circumstances.

Agencies are not required to provide the opportunity to meet and confer over the actual issuance of the RFP, RFQ or contract renewal/extension. Rather, the new law only requires that the agency provide notice to an affected union. However, the new notice requirement enhances the ability of labor unions to provide early input regarding decisions that may affect the employees that they represent.

Agencies should expect to receive an influx of information requests from the affected unions once the agency provides the requisite notice, as well as demands to bargain the underlying contracting decisions. Further, unions may reach out to the governing body upon receiving the contracting notice to request that the agency continue to use employees to provide such services, or that the agency in-source work presently performed by third party contractors.

Agencies should consider whether early discussions with a labor union may help avoid potential disputes about contracting decisions or whether consolidated notices involving multiple contracts may be advantageous. The parties may also mutually agree to discuss issues driving the RFP, RFQ or the decision to extend or amend an existing contract in advance of the agency’s decision on such contracts.

The new law states that it does not diminish any rights of employees or recognized employee organizations provided by law or by a memorandum of understanding (MOU). Therefore, if an MOU provides for a more generous notice period, a public agency should follow the MOU provision.

Importantly, the meet and confer obligations under the MMBA are not affected by the new law and all agencies should be prepared to engage in a good faith meet and confer on a negotiable contracting decision or the effects/impacts of a non-negotiable contracting decision, in addition to discharging the new notice obligations.

The Public Employment Relations Board (PERB)’s remedies for failure to meet and confer over contracting out decisions typically include reinstatement of the status quo, steps to make affected employees whole, and a mandate for future bargaining. Remedies may include cease and desist orders, orders to rescind the contract and return work to bargaining unit employees, and other make-whole relief for affected workers. It remains to be seen if PERB will apply similar remedies for failure to comply with AB 339 notice requirements, if the agency discharges the otherwise applicable meet and confer required by the contracting decision.

Agencies are advised to review services being contracted, renewed or extended to assess whether the work arguably falls within the scope of duties of a job classification represented by a recognized employee organization. Further, agencies should consider broadly applying notice beyond contracting decisions that affect bargaining unit work, as this can potentially mitigate against future disputes concerning the application of the notice requirements.

Agencies should incorporate the 45-day notice requirement to procurement procedures and timelines, except where expressly exempted by statute, to ensure compliance with the law.

Separate and apart from meet and confer obligations, general law cities are subject to statutory limits on outsourcing non-special services, and the bill does not change these restrictions.

Public agencies can best manage their risk by giving timely 45-day notice where required, collaborating with unions early in the process, maintaining clear documentation, and making contracting decisions that reflect transparency and good-faith compliance with state law.

For more information about AB 339, please attend our Labor Relations Legislative Update presented by Alex Volberding on December 11, 2025 at 10 am. More information is available at this link.

Please reach out to your trusted legal advisors with any questions.

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The Pregnant Workers Fairness Act (“PWFA”) is a federal law that went into effect on June 27, 2023.  The final regulations issued by the Equal Employment Opportunity Commission (EEOC) to carry out the law went into effect on June 18, 2024. PWFA requires public sector and private employers that have 15 or more employees to provide “reasonable accommodations to the known limitations related to the pregnancy, childbirth, or related medical conditions of a qualified employee, unless such covered entity can demonstrate that the accommodation would impose an undue hardship on the operation of the business of such covered entity.”  (42 U.S.C. § 2000gg-1(a).) While this may sound familiar, PWFA adds obligations to California public agencies to accommodate pregnant employees that can go beyond those already imposed by existing laws.

PWFA applies broadly to pregnancy, childbirth, and related medical conditions

Generally, pregnancy itself is not “disability” under the federal Americans with Disabilities Act (ADA), but pregnancy-related impairments or complications can be if they substantially limit a major life activity.  In passing PWFA, Congress recognized courts have found “that even severe complications related to pregnancy do not constitute disabilities triggering [ADA] protection” because they did not substantially limit a major life activity, often because of their short duration.  If such pregnancy-related medical conditions did not trigger ADA protection, there was no obligation to accommodate pregnant employees. This left pregnant workers “forced to choose between their financial security and a healthy pregnancy.”

PWFA fills this gap by requiring employers to provide reasonable accommodations to an employee who has limitations in the workplace because of pregnancy, childbirth, or related medical conditions, unless it would be an undue hardship (42 U.S.C. § 2000gg-1(a).)  Pregnancy includes current and past pregnancy, and potential pregnancy including abortion, stillbirth, and miscarriage, and infertility and fertility treatment.  The regulations provide a detailed list of related medical conditions, which includes miscarriage, gestational diabetes, preeclampsia, high blood pressure, anxiety, depression, hemorrhoids, frequent urination, and lactation issues. They also include conditions that may not always be associated with pregnancy, such as carpal tunnel syndrome, chronic migraines, dehydration, and infections. Limitations can be minor or episodic, such as morning sickness or cramping, and may not always meet the definition of a disability under the ADA.  Thus, employers may need to accommodate pregnancy-related medical conditions that would not qualify as “disabilities” under other laws. 

PWFA encompasses a broad range of accommodations – little things can make a big difference

The goal of PWFA is to allow employees to safely maintain their pregnancies in the workplace and recognizes an employer’s obligation to provide reasonable accommodations.  Pregnancy-related medical conditions may require an employee to take actions to protect their pregnancy, such as avoiding lifting, chemicals, or heat, or attending health care appointments.  Reasonable accommodations include:

  • Time off for health care appointments, treatment, or recovery
  • Schedule changes or a reduced schedule
  • Additional restroom breaks
  • Breaks for eating and drinking
  • Telework
  • The ability to sit or stand as needed
  • Light duty or help with lifting or other manual labor
  • Reserved parking spaces
  • Uniform changes
  • Temporary change or modification of job duties
  • Leave to recover from childbirth or other medical conditions

What is a reasonable accommodation is evaluated based on the facts and circumstances.  An employee may also need different accommodations at various times throughout pregnancy or after childbirth.

While under the ADA, an employee is not considered a “qualified employee” if they cannot perform the job duties with or without reasonable accommodations, under PWFA, an employee’s temporary inability to perform essential functions is not disqualifying.  Rather, PWFA makes clear an employee is still “qualified” and eligible for accommodations if the “inability to perform” is “temporary” and “can be reasonably accommodated,” and the employee could perform the function “in the near future.”  (42 U.S.C. § 2000gg(6)(A), (B).)  Thus, temporary reassignment or modification or suspension of one or more job functions is a reasonable accommodation.

Leave is a reasonable accommodation, but cannot be required if other accommodations are available

While leave can be a reasonable accommodation, PWFA prohibits requiring an employee to take leave if another reasonable accommodation is available. Thus, employers are obligated to consider if other accommodations can allow the employee to perform their job, including temporary reassignment, before implementing leave.

If leave is the only accommodation available, PWFA does not prescribe a specific maximum or minimum amount of time that an employee might be entitled to leave.  Leave is unpaid, but an employee may choose to use accrued paid leaves available to them.

No magic words are needed to request accommodations under PWFA

An employee may simply request accommodations because of their pregnancy or childbirth, but the EEOC’s regulations make clear the communication does not need to reference any specific medical condition or terminology.   EEOC guidance provides the following examples of requests that are sufficient to trigger PWFA:

  • “I’m having trouble getting to work at my scheduled starting time because of morning sickness.”
  • “I need more bathroom breaks because of my pregnancy.”
  • “I need time off from work to attend a medical appointment because of my pregnancy.”

While some requests may be straightforward and easy to implement, others may require the employer to engage in an interactive process to evaluate if reasonable accommodations are available to allow the employee to work.  The interactive process means an open dialogue, in good faith, to discuss proposed accommodations.  PWFA specifically prohibits requiring an employee to accept an accommodation other than one arrived at through the interactive process.  (42 U.S.C. § 2000gg-1(2).)

Documentation from a health care provider generally not needed

Unlike the ADA interactive process which often begins with a note from a health care provider, employers may only request documentation from a health care provider when it is reasonable and essential to evaluate the accommodation.  It is not reasonable when the need is obvious and the employee provides “self-confirmation” that the need for the accommodation is because of pregnancy, childbirth, or a related medical condition.  The goal of PWFA is to accommodate workers with pregnancy-related limitations – not to put hurdles up.  Often it is difficult for pregnant workers to get written medical notes.  Examples of situations where it would not be reasonable to request a medical note are:

  • A pregnant worker asking for a larger uniform;
  • A pregnant or lactating employee to ask for a modification of food/drink policies or bathroom breaks to allow for more frequent eating, drinking, bathroom breaks.

If a note from a health care provider is reasonable under the circumstances, it should only confirm the employee has a limitation related to pregnancy, childbirth, or a related medical condition (no specific diagnoses or private health information) and explain the modification that is needed.  The note may also come from “doctors, midwives, nurses, nurse practitioners, physical therapists, lactation consultants, doulas, occupational therapists, vocational rehabilitation specialists, therapists, industrial hygienists, licensed mental health professionals, psychologists, or psychiatrists,” and may be from a telehealth provider.  (29 C.F.R. § 1636.3(l)(3).)

PWFA interaction with other leave and accommodations laws

PWFA does not limit other state or federal laws that may provide protection to employees limited by pregnancy, childbirth or related medical conditions.  When evaluating requests for accommodations under PWFA, California public agencies should also consider the applicability of:

  • Leave for a serious health condition under the Family Medical Leave Act (FMLA) (up to 12 weeks);
  • Baby bonding leave under FMLA and the California Family Rights Act (CFRA) (up to 12 weeks);
  • Pregnancy Disability Leave under the Fair Employment and Housing Act (“FEHA”), California Government Code § 12945 (up to 17 1/3 weeks leave for being disabled by pregnancy, childbirth, or related medical conditions);
  • Providing reasonable accommodations and engaging in the interactive process for disabilities under the FEHA and ADA;
  • Reproductive Loss Leave under California Government Code Section 12945.6;
  • Nondiscrimination against employees based on pregnancy, childbirth, or related medical conditions under FEHA or Title VII of the 1964 Civil Rights Act; and
  • Providing support under the Urgent Maternal Protections for Nursing Mothers Act (PUMP Act), a federal law providing protections for employees to express breast milk at work.

Guidelines for complying with PWFA

The goal of PWFA is to make the workplace more welcoming and compassionate for pregnant workers.  Often little things – such as being able to sit more or have more frequent bathroom breaks – can make a big difference.  Public agencies should train supervisors to be mindful of when an employee might need an accommodation under PWFA.  Remember, employees do not need to use any specific words to request accommodations under PWFA, and many employees still feel hesitant to share their pregnancy in the workplace.

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With the enactment of SB 1137, California has explicitly recognized “intersectionality” under the Fair Employment and Housing Act (FEHA) and related statutes: or the idea that in certain instances, discrimination is not based solely on one trait, but rather based on the combination of two or more protected characteristics. Intersectionality is an analytical framework for understanding how different forms of inequality operate together, exacerbate each other, and can result in amplified forms of prejudice and harm. For example, under the intersectionality framework, an employee might claim discrimination on the basis of the intersection of gender, national origin, and disability status, rather than any one trait alone.

Traditionally, discrimination claims are framed around one trait at a time: sex discrimination, race discrimination, age discrimination, and so forth. Intersectional claims, however, recognize that discrimination often arises because of overlapping traits. Courts have acknowledged this reality, holding that bias can target the unique intersection of identities—as in Lam v. University of Hawai‘i, 40 F.3d 1551, 1561-62 (9th Cir. 1994), where the court recognized that discrimination against an Asian woman could not be understood merely as discrimination based on sex or race alone.

For example, an employee might allege that she was passed over for promotion not simply because she is a woman (sex discrimination) or because she is Black (race discrimination), but because of the intersection of those two characteristics—the unique stereotypes or assumptions attached to her identity as a Black woman.

Practical Take-Aways for Public Agencies

Employees may now frame claims that reflect the unique ways bias operates at the crossroads of identity categories—such as being both a woman and a person of color, or an older and disabled employee. For employers, including public agencies, this means reviewing policies, training, and documentation practices through a more nuanced lens. Public employers should anticipate that intersectional logic could extend to harassment, retaliation, and failure-to-accommodate claims, especially when multiple protected characteristics interact.

To that end, public agency employers should:

  • Update policies and procedures: Ensure that nondiscrimination policies expressly acknowledge that discrimination can occur based on a combination of traits. This clarification reflects the intent of SB 1137 and may strengthen an agency’s compliance posture.
  • Train supervisors and Human Resources: Supervisory and HR staff should understand that when employee experiences involve overlapping protected traits, disciplinary or evaluative decisions may carry heightened risk of being perceived as discriminatory or retaliatory. Training should emphasize careful documentation and consultation before acting.
  • Review complaint-handling protocols: Investigators should be aware of the possibility for potential patterns of bias that stem from the intersection of traits, for example, analyzing whether older women or employees of a particular race and gender combination are affected differently.
  • Reevaluate equity and inclusion programs: Consider how existing DEI or equal-employment initiatives address intersectional concerns. Programs that focus on one trait at a time may need to broaden their lens to reflect the realities SB 1137 codifies.
  • Document consistently: When taking adverse action, ensure that the reasons are legitimate, nondiscriminatory, and supported by contemporaneous evidence.
  • Consult counsel early: Intersectional claims often involve subtle factual and perception-based issues. Early involvement of legal counsel can help agencies assess risk, navigate investigations, and craft appropriate responses.

In conclusion, under recent California legal updates, for public agencies such as cities, counties, schools, and special districts, SB 1137 signals an important evolution in workplace equity obligations. Public agencies must be prepared for employees to assert claims that involve complex combinations of characteristics, and for investigators, arbitrators, and courts to analyze those claims more holistically.

Agencies should recognize that bias or adverse treatment may not always be evident when traits are considered separately—but may emerge when viewed together. Supervisors, HR professionals, and counsel should be trained to identify, document, and address these patterns early.

Trusted legal counsel can help public agencies stay compliant, proactive, and protective of employee rights by providing expert guidance on responding to intersectional discrimination claims.

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Senate Bill 627, also known as the No Secret Police Act (“Act”) was signed by Governor Newsom on September 20, 2025. The Act takes effect on January 1, 2026; an urgency clause in a prior version of the legislation that would have made it effective immediately was not included in the final version.

Penal Code Section 185.5 – Prohibition on Facial Coverings

Newly enacted Penal Code Section 185.5 prohibits peace officers employed by a city, county, or other local agency, federal law enforcement officers, and law enforcement officers of another state, from wearing a facial covering that conceals or obscures their facial identity while performing their duties in California. The Act excludes SWAT team duty, authorized undercover operations, tactical operations where protective gear is required for physical safety, and where applicable occupational health and safety regulations require.

The definition of facial covering does not include the following:

  • Translucent or clear masks
  • Motorcycle helmets
  • Eyewear to protect against retinal weapons
  • N95 medical or surgical masks
  • Breathing apparatuses necessary to protect against toxins, gas, and smoke
  • Masks to protect against inclement weather, or
  • Masks for underwater operations.

Penal Code section 185.5 makes it a misdemeanor to knowingly and willfully violate this prohibition.  Further, any officer found to have committed certain enumerated torts while wearing a facial covering in knowing and willful violation of the statute is not entitled to assert any privilege or immunity in a civil action, and is liable for the greater of actual damages or statutory damages of no less than $10,000.

Government Code Section 7289 – Mandatory Agency Policy

The Act also creates Government Code section 7289, which requires any law enforcement agency operating in California to maintain and publicly post a written policy limiting the use of facial coverings by July 1, 2026.

The policy must contain a requirement that all sworn personnel not use a facial covering when performing their duties, with narrowly tailored exemptions for:

  • Active undercover operations or assignment authorized by supervising personnel or court order
  • Tactical operations where protective gear is required for physical safety
  • Applicable law governing occupational health and safety
  • Protection of identity during prosecution, and
  • Applicable law requiring legal accommodations.

Agency policies must also include a “purpose statement” affirming the agency’s commitment to all of the following:

  • Transparency, accountability, and public trust,
  • Restricting the use of facial covering to specific, clearly defined and limited circumstances, and
  • The principle that generalized and undifferentiated fear and apprehension about officer safety shall not be sufficient to justify the use of facial coverings.

Even where an exemption applies, the policy must require that opaque facial coverings shall only be used when no other reasonable alternative exists, and the necessity is documented.

Agency policies must also prohibit a supervisor from knowingly allowing a peace officer under their supervision to violate state law or agency policy regarding face coverings.

A written policy that meets these minimum requirements shall be deemed consistent with the Penal Code section 185.5, unless a verified written challenge to its legality is submitted by a member of the public.  Upon receipt of the verified written challenge, the agency shall be afforded 90 days to correct any deficiencies, and if it fails to do so, the complaining party may challenge the written policy in court.

The criminal penalties in Penal Code section 185.5 will not apply to any law enforcement officer if they act in their capacity as an employee of the agency and the agency maintains and publicly posts a written policy no later than July 1, 2026.

Agencies are encouraged to get an early start on drafting their policies. The requisite agency policies will likely be subject to impacts meet and confer requirements with labor groups representing sworn employees, specifically in relation to workplace safety as well as other impacted terms and conditions of employment. Agencies should plan ahead to ensure that the impacts meet and confer process is completed before July 1, 2026. If an agency fails to have a compliant policy by that date, then a member of the public or an oversight body or governing authority can challenge that deficiency. Further, timely adoption of a policy can protect an agency’s officers from the criminal provisions of Penal Code section 185.5.

Further Legislation and Court Challenges Expected

In his signing message, Governor Newsom requested that the Legislature adopt follow-up legislation when it returns in January to ensure that law enforcement operations are not compromised. The Governor specifically stated that he reads the statute to permit the use of motorcycle or other safety helmets, sunglasses, or “other standard law enforcement gear not designed or used for the purpose of hiding anyone’s identity,” but requested that the Legislature provide additional exemptions for legitimate law enforcement activities and remove unnecessary liability for officers who carry out their duties in good faith. He further stated that follow-up legislation should remove any uncertainty or ambiguities around its scope.

The federal government is expected to challenge the statute’s applicability to federal officers, specifically whether the state has the constitutional authority to impose restrictions on federal law enforcement. Shortly after the bill was signed into law, officials with the Department of Homeland Security and Department of Justice indicated their agencies will not comply with the mask ban, calling it unconstitutional under the Supremacy Clause of the United States (U.S.) Constitution and stating that the United States Congress must take formal action to subject federal agents to the no-masking provision of SB 627.

This brings to the forefront the question of the legal ability of local peace officers to enforce the new law against federal law enforcement officers. Legal experts are divided on the constitutionality of the law’s restrictions on federal agents, and this issue will play out in the courts. Some legal scholars assert that state and local authorities have no power to arrest federal officers for official actions. This assertion is based on the seminal U.S. Supreme Court case In re Neagle, which involved a Deputy U.S. Marshal fatally shooting a former California Supreme Court justice who was physically attacking a sitting United States Supreme Court Justice. The Court ruled that the Supremacy Clause grants federal officers immunity from state prosecution when acting in their official capacity under a law of the United States. A likely effect of the Supremacy Clause is that a uniform regulation enacted by a State cannot bind federal agents. (In re Neagle (1890) 135 U.S. 1 at 75).

The statutory text states that the provisions of the Act are severable, so that if any provision, such as applicability to federal officers, is held invalid, the rest of the provisions will remain in effect. LCW will provide an update if any court decision impacts the applicability of these laws to local agencies.

Please reach out to your trusted legal advisors with any questions and for more guidance on SB 627.

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Money Knack, Unsplash

Can a public agency deduct an overpayment directly from an employee’s paycheck without running afoul of the Labor Code?  Two recent cases shed new light on this long-debated issue.  In Stone v. Alameda Health Sys., (2024) 16 Cal. 5th 1040, and Bath v. State of California (2024) 105 Cal.App.5th 1184, California courts confirmed that the Labor Code does not apply to public employers unless the statute clearly says so.  This reasoning casts doubt on whether Labor Code section 221, which prohibits employers from collecting or receiving any portion of wages already paid to an employee and section 224, which permits an employer to withhold or divert any portion of an employee’s wages when required by law, expressly authorized in writing by the employee, or authorized by a collective bargaining agreement, apply to public agencies at all.  For HR professionals and payroll administrators, these rulings create both opportunities and risks that demand attention.

In Stone, the California Supreme Court held that Labor Code provisions apply only to private employers unless the statute expressly provides otherwise.  Looking at the plain language of Labor Code sections 221 and 224, which address overpayments, these statutes do not expressly provide that they apply to public employers.

Shortly after Stone was decided, the Court of Appeal applied the same reasoning in Bath.  There, the court held that Labor Code section 222, which is located in the same chapter as sections 221 and 224, does not apply to public employers because the statute contains no express reference to them.  Section 222 makes it unlawful for an employer to withhold any portion of wages that have been agreed upon in a collective bargaining agreement.  By extending the reasoning in Stone, the Bath decision strongly suggests that other wage payment provisions within the same chapter, including sections 221 and 224, may also be inapplicable to public agencies.

What this means for overpayments and recoupments

In light of Stone and Bath, there is a strong argument that Sections 221 and 224 of the Labor Code do not apply to public employers. If so, public agencies may have greater flexibility to address overpayments.

However, the issue is far from settled. No appellate court has directly addressed whether sections 221 and 224 are inapplicable to public agencies. Until such a decision arrives, or the Legislature clarifies the issue, uncertainty remains.  Even if the statutes are not technically binding, there is a strong public policy in California disfavoring “self-help” actions by employers, such as unilaterally deducting wages without employee authorization. Ignoring this risk can invite litigation on public policy or other grounds, despite the favorable direction of the law.

Practical Guidance for Public Agencies

Even with favorable court rulings, public agencies should proceed cautiously. The safest approach is to notify the employee of any overpayment and seek a written repayment agreement. If the employee refuses to repay or breaches the agreement, the agency should consider pursuing recovery through the courts, rather than deducting directly from wages. This approach minimizes exposure to legal claims and reinforces commitment to lawful, respectful employment practices.

Conclusion: Proceed with Caution, Not Assumption

Public agencies should take this moment to review their wage deduction policies, train staff on best practices, and consult with trusted legal counsel to ensure their approach aligns with both the latest case law and sound employment practices.  Proactive steps now can help your agency avoid costly disputes later.

The legal standard may be evolving, but prudence and transparent communication remain the best foundation for public agency employment practices.

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Artificial intelligence (AI) and other automated decision systems (ADS) are becoming more common in public sector hiring. Resume screeners, video interview platforms, and other algorithmic tools promise efficiency—but they also bring legal risk.

Starting October 1, 2025, new regulations under the Fair Employment and Housing Act (FEHA) will go into effect. These rules clarify how FEHA applies to AI and ADS in employment decisions, with the goal of preventing discrimination.

The Legal Framework: FEHA and Automated Decision Systems

FEHA prohibits employment discrimination on the basis of protected characteristics such as race, gender, age, disability, religion, and more. The new regulations make clear that this prohibition extends to AI and ADS tools used in hiring, promotion, and other employment decisions.

Key points include:

  • Disparate impact counts: Even if bias is unintentional, employers can be liable if an ADS disproportionately excludes a protected group.
  • Examples of risk: Tools that screen applicants by schedule availability, assess reaction times, or analyze speech or facial expressions in virtual interviews, may disadvantage individuals with disabilities, religious obligations, or language differences.
  • Pre-employment inquiries: Pre-employment inquiries limits under FEHA also apply to inquiries made through ADS.
  • Liability extends to agents: If an outside vendor or recruitment partner uses a discriminatory ADS on your behalf, your agency is still responsible under FEHA.
  • Recordkeeping required: Employers must retain records of ADS use—including data, selection criteria, and employment decisions—for at least four years.
  • Bias testing is encouraged: While not mandatory, anti-bias testing and proactive efforts, such as self-auditing, can support a defense if a claim arises. Recency, scope, and quality of such efforts will be considered.

You can view the full regulations through the California Civil Rights Council’s official announcement here.

Why This Matters for Public Agencies

Public agencies face unique scrutiny in hiring because of the expectation of fairness and transparency in government employment. These new rules emphasize that automated tools are subject to the same anti-discrimination standards as human decision-makers.

Agencies must balance the benefits of efficiency with the obligation to maintain equal opportunity. Failure to comply could result in litigation, reputational harm, and reduced public trust.

Practical Steps Toward Compliance

Agencies can continue to use AI and ADS technology in hiring, but steps should be taken to ensure compliance with FEHA.

1. Inventory and Assess AI Tools

  • List all automated tools used in recruitment, hiring, and decisions regarding pay, benefits, or leave.
  • Determine whether each tool directly or indirectly screens candidates.

2. Audit for Bias

  • Test for disparate impact on protected groups.
  • Request documentation from vendors showing validation studies and fairness testing.

3. Update Policies and Vendor Contracts

  • Require vendors to certify FEHA compliance.
  • Ensure contracts include shared responsibility for compliance.
  • Clarify that human review supplements automated results.

4. Strengthen Recordkeeping

  • Retain ADS-related records for at least four years, including data, selection criteria, and outcomes.
  • Document all compliance steps to establish a paper trail of diligence.

5. Train HR and Hiring Teams

  • Educate staff about the limitations and risks of AI hiring tools.
  • Provide guidance on recognizing and addressing potential bias.

6. Provide Transparency and Accessibility

  • Ensure accessible processes for individuals with disabilities.
  • Offer accommodations or alternative application methods when needed; this includes both disability-related and religious accommodations.

AI and automated decision systems will continue to shape the future of hiring, but compliance with FEHA remains essential. Please reach out to your trusted legal counsel if your agency needs assistance in navigating the new FEHA regulations.

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The One Big Beautiful Bill Act (“OBBBA”), approved by Congress and signed into law by President Trump on July 4, 2025, created a new, federal overtime tax deduction that employees can claim on their federal tax returns. The tax deduction applies retroactively to the beginning of 2025 and will terminate on December 31, 2028, unless extended. 

What is Federal Overtime?

The new tax deduction only applies to federally mandated overtime pay. Under the federal Fair Labor Standards Act (“FLSA”), non-exempt employees must be paid overtime pay at a rate of 1.5 times their “regular rate” of pay for all hours actually worked beyond a specified number within a designated work period, usually forty hours in a seven-day work period for non-safety employees.

The “regular rate” of pay required by the FLSA includes various items of compensation provided to an employee for services to the employer, beyond just the base rate of pay. Generally, unless an item of compensation is expressly excluded by statute, it must be included when calculating the overtime rate.  Examples of items that must be included are longevity pay, education pay, certificate pay, and standby pay.

Because “qualified overtime compensation” under the OBBBA is determined by the FLSA, any non-FLSA overtime would not qualify for the deduction. Non-FLSA overtime is overtime such as overtime required solely by the California Wage Orders or contractual overtime under collective bargaining agreements. For example, the FLSA does not require daily overtime, (overtime paid for hours worked over eight in a workday), minimum call back time, extra pay for time worked on holidays, or overtime compensation paid to employees who are exempt from the overtime requirements. These premiums are often provided by collective bargaining agreements or personnel policies. Similarly, although the FLSA only counts hours actually worked towards the overtime threshold, many employers more generously count accrued paid time off as hours worked when calculating the overtime threshold.

Since employees are paid based on the more generous overtime rules adopted by the employer, employers’ payroll systems typically do not differentiate between overtime mandated under the FLSA and the more generous overtime calculation provided under the employer’s policy or bargaining agreements. Many employers have not tracked overtime required under the FLSA separately from non-FLSA overtime.

Employers Must Now Track and Report Federal Overtime Separately.

Since the new tax deduction only applies to FLSA overtime, employers must now separately track overtime required under the FLSA from overtime paid under more generous rules, but not mandated under the FLSA. Payroll systems will be required to track two types of overtime, rather than lumping all types of overtime together.

Starting with tax year 2025 W-2 forms, employers must track and report federal qualified overtime compensation separately so that eligible, non-exempt employees can claim a deduction for federal income tax when filing their federal income tax return.

Only overtime compensation paid to an individual required under the FLSA that is in excess of the regular rate is factored into the deduction amount. The Internal Revenue Service (“IRS”) has interpreted this provision to mean that only the half-time premium portion of time-and-a-half compensation qualifies for the deduction amount. For example, if an employee earns a regular rate of $40 an hour, their FLSA overtime rate would be $60 an hour ($40 x 1.5). Assuming the employee actually, physically worked a total of 50 hours in a seven-day work period, ten hours would be overtime under the FLSA and the employer would owe the employee a total of $600 in overtime pay. However, only $200 (i.e., the half portion in time-and-a-half) qualifies for deduction reporting purposes.

The OBBBA allows an individual whose modified adjusted gross income does not exceed $150,000 to take a maximum overtime deduction of $12,500. If individuals file a joint return and their modified adjusted gross income is less than $300,000, then the maximum overtime deduction is $25,000. The deduction is subject to an income-based phase-out if income exceeds these amounts.

Employers Can Use a Reasonable Method to Approximate FLSA Overtime Up to This Point.

For the 2025 tax year, employers are permitted to approximate a separate accounting of amounts designated as qualified overtime compensation by any reasonable method specified by the Secretary of the Treasury. The separate accounting method used should be documented and retained in the event of a future IRS audit. 

Employers are required to report the total amount of qualified overtime compensation as a separate line item on a W-2 Form or any other specified statement furnished to the individual. Following the previous example, if an employee earns a total of $600 in overtime and only $200 qualifies for the deduction, then employers will need to implement a method that separately records only the overtime amount that qualifies (i.e., the $200).

The IRS has also stated that it will provide transition relief for employers. Because the Secretary of Treasury and the IRS have yet to provide official guidance, W-2 Forms and other payroll forms, and federal income tax withholding tables will remain unchanged for the 2025 tax year.

Employers can expect the IRS to provide withholding procedures for the taxable years following December 31, 2025. For the 2026 tax year, the IRS published a draft W-2 with instructions for employers to use the code “TT” in Box 12 to report qualified overtime compensation.  However, this draft W-2 is for next year and not for 2025 reporting. The IRS and the Treasury Department are expected to provide additional guidance for both reporting entities and individual taxpayers.

Employers May Decide to Negotiate Different Pay Rates for Non-FLSA Overtime.

Previously, different rates of pay for different types of overtime may not have been practical for payroll purposes. However, new federal overtime tracking requirements have changed the landscape in regard to different pay rates. While the FLSA mandates overtime pay at an employee’s regular rate of pay, if a public agency negotiates to pay contractual overtime above and beyond FLSA requirements, payment of the regular rate is not required for non-FLSA overtime. Public agencies looking to save money can consider adopting a straight time rate, 1.5 times base pay, or even 1.5 times minimum wage rather than using the higher regular rate to calculate non-FLSA overtime. Such changes would be subject to meet and confer requirements for represented employees.

Employers Should Review Their Overtime Practices.

Employers must review their practices and agreements related to the payment of overtime.  Employers must isolate and determine which overtime is required under the FLSA and which overtime is based on state, local, or contract provisions not mandated by the FLSA.  For example, overtime paid for working on holidays, overtime based on the inclusion of paid leaves, and minimum call back time at the overtime rate that does not qualify as overtime under the FLSA must be tracked separately from overtime required under the FLSA.

LCW recommends that agencies continue to follow guidance from the Secretary of Treasury and the IRS to navigate new reporting requirements for the current and future years. Agencies should begin taking steps to identify and isolate overtime required under the FLSA.

Trusted legal advisors can assist with questions about compliance with the new federal overtime deduction and identifying FLSA mandated overtime.

We are excited to continue our video series – Tips from the Table. In these videos, members of LCW’s Labor Relations and Collective Bargaining practice group will provide various tips that can be implemented at your bargaining tables. We hope that you will find these clips informative and helpful in your negotiations.

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This article was reviewed in September 2025 and is up-to-date.

Many times, parties to a lawsuit receive trial court rulings in the midst of the litigation that are unfavorable, oppressive, and seem to them to be demonstrably wrong.  The parties want to appeal immediately, but their counsel will say that cannot happen, citing the “Final Judgment Rule.”  The rule certainly sounds dark and fateful.  Perhaps courts intend it to be, because the rule serves to deter disgruntled litigants from appealing while the trial court case is ongoing, and typically requires those litigants to wait months, or even years, to appeal.  So what is this rule?  And perhaps more importantly, what are ways to gain access to an appellate court early without offending it?

The Final Judgment Rule (sometimes called the “One Final Judgment Rule”) is the legal principle that appellate courts will only hear appeals from the “final” judgment in a case.  A plaintiff or defendant cannot appeal rulings of the trial court while the case is still ongoing.  For example, a party that loses its motion to compel discovery, motion for summary judgment, or demurrer cannot appeal these decisions, at least not until a final judgment has been entered in the case, concluding the lawsuit in the trial court.  The Final Judgment Rule has existed for hundreds of years, and serves the purpose of promoting judicial efficiency – cases would practically never end if the party who lost a motion while the case was pending could appeal it, wait for a decision from the court of appeal, and then continue with the trial court case.

Moreover, the Final Judgment Rule greatly reduces appellate court workloads by tending to make it so that only very important issues are ultimately presented to those courts.  If a party loses a motion early in the trial court case, they may certainly feel wronged.  But in the weeks or months afterward, the case may settle, the issue may fade in importance, or the trial court might actually decide to change the ruling, making appellate review unnecessary.  Postponing review conserves appellate court resources, and those of the parties as well.  In addition, postponing appellate review allows the appellate court to rule on all the challenges to the trial court’s decisions at the same time, thereby further promoting efficiency.  The appellate court will not have to consider “piecemeal” appeals.

The Final Judgment Rule may make sound policy sense.  But it is not much comfort to a litigant who has lost an important motion in court many months before the actual trial will start and cannot immediately appeal the bad ruling.

There are, however, some ways around the Final Judgment Rule.  Here are examples of four significant ways, and the circumstance under which each is available.

  1. Petition for Writ of Mandamus:

This is the classic method for obtaining relief while a litigation matter is still ongoing.  This type of petition to an appellate court seeks a “writ of mandamus” (sometimes also called a “writ of mandate”), essentially an order from the appellate court to the trial court directing it the trial court to change its decision or take some other action.  This type of writ is available in both federal and state courts.

The advantage of a petition for writ of mandamus is that it is available to overturn essentially any ruling or order made by a trial court, even though the lawsuit is still ongoing.  The disadvantage of this type of petition, however, is that it is entirely discretionary in the court of appeal.  The court of appeal is free to turn down any writ petition, even one that clearly has merit, and the court of appeal denies the overwhelming majority of petitions for writ of mandamus seeking review of trial court orders.  The state court percentage of accepted petitions is low and the number is even lower in federal court.  The reason these writs are so often denied on this summary basis (i.e., without even considering whether they raise a valid legal point) is that courts of appeal rarely see any reason to depart from the underlying principles of the Final Judgment Rule.

There are particular types of scenarios in which appellate courts are more likely to decide a writ on the merits.  One is when issues of privilege or confidentiality are concerned.  For example, when a trial court orders a litigant to disclose sensitive personnel records of individuals or information in which the litigant claims attorney-client privilege, the need for appellate review is immediate.  If the litigant obeys the trial court’s order, then the disclosure will be made, and the alleged harm done, before any appellate court can determine whether the trial court’s ruling in fact was correct.  It is widely understood that in these scenarios, appellate courts will more likely choose to intervene in the midst of litigation.

Another example is when the issue raised by the writ petition is one of great public importance, and when the party who files the petition can persuade the court that the public would be well served by the appellate court immediately reviewing and providing guidance on that particular issue without waiting for the case to conclude.

  1. A Preliminary Injunction Ruling:

The parties can also immediately appeal a trial court’s ruling granting or denying injunctive relief.  Trial courts have the power to issue preliminary injunctions at the beginning of a case that can operate to preserve the status quo.  For example, a trial court can order that a public college must stop enforcing a rule that supposedly stifles student First Amendment free speech rights.  Trial courts can make these orders based on an initial showing by the plaintiff, at the beginning of the case, that they are likely to succeed on the merits of their claim, that they are likely to suffer irreparable harm if the preliminary injunction is not granted, and that general equities and the public interest support issuance of the injunction.

Not only are these types of orders for injunctive relief by trial courts (either granting or denying) immediately appealable, but in the federal appellate courts, appeals of injunctions are given priority over other types of cases.

  1. Rulings on Anti-SLAPP Motions:

An immediate appeal is also available from a state trial court’s ruling on what is known as an “anti-SLAPP motion.”  This type of motion can be used by a defendant, including a public entity, in response to a lawsuit that challenges conduct by the defendant in furtherance of the defendant’s right of petition or free speech as defined by the anti-SLAPP statute.  (SLAPP stands for “Strategic Lawsuit Against Public Participation,” and is meant to refer essentially to meritless lawsuits brought against persons or organizations to punish them for and/or deter them from speaking out on important issues or petitioning the government for redress.)  The statute defines protected activities very broadly.  Indeed, courts have interpreted the definition to include government statements in various types of proceedings, including internal investigations conducted by public entities as to their employees.  (Hansen v. California Dept. of Corrections and Rehabilitation.)

If the anti-SLAPP statute applies in a given context, then the defendant can make a motion at the outset of the case to have a trial court determine if there is any “probability” of success on the claim.  If the plaintiff cannot present evidence making this showing of a “probability,” then the trial court rules in favor of the defendant.  If the defendant wins the motion, the trial court will require the plaintiff to pay the defendant’s attorneys’ fees and costs.  Thus, another very important way to have an appeal heard early in state court is to bring an anti-SLAPP motion.

  1. Qualified Immunity Decisions:

Another judicial determination that is often immediately appealable, in the midst of litigation, is a federal trial court’s decision on the defense of qualified immunity.  This is a defense available to individuals who are officials or employees of government agencies and are named personally in federal civil rights lawsuits.  In general, the defense of qualified immunity applies when the individual defendant is challenged for actions he or she took relating to an area of law that is unclear or unsettled.  If it is sufficiently difficult for the individual to tell what is constitutionally prohibited in the situation in question, then this defense will apply.  Qualified immunity will not provide a defense to claims for declaratory or injunctive relief against the individual, but it will serve as a defense to a monetary damages claim.

If the trial court either grants or denies a motion based on qualified immunity in the middle of the case, then either side respectively can appeal the determination, if the appeal involves essentially legal questions such as whether the plaintiff’s alleged rights at issue were sufficiently unclear to merit applying the defense.  The defense applies in a wide variety of cases brought against government officials and employees.  Significantly, individual defendants can claim the qualified immunity defense in wrongful termination cases in which the former employee claims violation of his or her constitutional free speech or due process rights.

Each of these four ways to obtain appellate review on an interlocutory basis — i.e., in the middle of the case — are available to public entity defendants.  This gives public entities a unique ability in many cases to structure the defense to obtain immediate access to an appellate court, and thus have important matters resolved before the case concludes.