We are excited to introduce our video series – Wage & Hour Issues in the Workplace. In these videos, members of LCW’s Wage & Hour practice group will provide various tips that can be implemented in your workplace. We hope that you will find these clips informative and helpful!

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Overview

Assembly Bill 692, effective January 1, 2026, significantly changes how employers in California may use repayment or “stay-or-pay” clauses in employment-related agreements. As described in the last sections of this post, however, it is likely AB 692 does not apply to public employers given that the law does not state specifically that it does so. Nevertheless, public employers should be aware of the provisions of AB 692 so they can evaluate their “stay-or-pay” arrangements in the light of the possibility a court finds differently. As explained below, AB 692 broadly restricts contractual terms that require an employee to repay costs or fees when employment ends, unless the agreement fits within one of the statute’s limited exceptions.

What AB 692 Prohibits

AB 692 declares void and unenforceable any new contract provision that conditions repayment on an employee’s separation from employment. This includes terms requiring workers to:

  • Repay training, education, or certification expenses if they leave before a certain date.
  • Reimburse relocation expenses, visa or immigration-related fees, or other onboarding costs upon resignation or termination.
  • Return sign-on or retention bonuses through clawback provisions tied to duration of employment.
  • Pay penalties, fees, or “liquidated damages” for quitting.

The prohibition applies whether repayment would go to the employer directly, a training provider, or a third-party debt collector.

The law also creates a private right of action with statutory damages and attorney’s fees available to an employee.

What Remains Permitted

AB 692 provides narrow exceptions permitting certain repayment provisions when specific statutory conditions are met.

Tuition or Educational Assistance Agreements

These agreements may require prorated repayment but only if:

  • The agreement is offered separately from any employment contract.
  • The credential is transferable and not required for the employee’s current job.
  • Repayment is specified before the contract is agreed to and capped at actual costs.
  • Repayment is not triggered by termination except for misconduct.
  • A prorated repayment is provided for during any required employment period and does not require an accelerated payment schedule if the worker separates from the employment.

Sign-On or Retention Bonuses

Repayment provisions may be used if:

  • Contained in a separate agreement from the primary employment contract.
  • The employee receives at least five business days to review and consult counsel.
  • The employee is notified of the right to consult an attorney.
  • Repayment is interest-free and prorated over a retention period of no more than two years.
  • The employee may defer payment until completion of the retention period.
  • Repayment is triggered only by voluntary separation or misconduct.

Apprenticeship and Loan-Forgiveness Programs

State-approved apprenticeship agreements and government-administered loan repayment assistance or loan-forgiveness programs remain unaffected.

Agreements that do not meet these criteria will be unenforceable.

How Stone v. Alameda Health System Affects Interpretation and Application of AB 692

The California Supreme Court’s explanation of how to interpret employment statutes leads to the likely result that AB 692 does not apply to public sector employers.

In August 2024, the California Supreme Court issued its decision in Stone v. Alameda Health System. Although Stone did not address repayment agreements, clawback provisions, or “stay-or-pay” arrangements, it is relevant because it clarifies the extent to which statutory provisions apply to public entities.

In Stone, the Court held that the California Labor Code’s meal- and rest-break provisions did not apply to Alameda Health System, a public agency employer, because the text of the statutes did not expressly include public agencies, demonstrating a lack of legislative intent to include them. Moreover, the “persons” covered by the statutes at issue do not include public agencies. The Court further held that public entities are not subject to civil penalties under the Private Attorneys General Act (PAGA) because they are not “persons” within the meaning of that statute, and because PAGA penalties are punitive.

What Stone Means

Because Stone directs courts to closely examine statutory definitions and legislative intent before applying Labor Code provisions to public entities, litigants may look to Stone when assessing whether AB 692 reaches public-sector employers.

Stone does not create a blanket rule that all employment-related statutes are inapplicable to public employers; its analysis is tied to the specific statutory language before the Court. However, courts have applied Stone’s reasoning to other statutes that regulate government agencies.

Practical Implications

Because AB 692 is not one of the statutes examined in Stone, it is uncertain how courts will apply it in the public-sector context. Nevertheless, it is likely based on the principles described in Stone that the statute does not apply to public sector employers. There are two statutes in AB 692 – Business & Professions Code section 16608, and Labor Code section 926. Neither statute contains any reference to public entities or any indication that the statutes are intended to apply to public entities. Also, the definition of “employer” under Business and Profession Code section 16608(a)(4) does not list any type of government agencies. This all supports a lack of any legislative intent to apply AB 692 to them.

Special Considerations for Charter Cities and Counties

In addition, charter cities and counties may have separate arguments under “home rule” principles allowing them to set employee compensation. Those agencies can argue these principles mean AB 692 does not apply to them. (Curcini v. County of Alameda.)

Wage and Hour Issues

Finally, it deserves mention that whether or not AB 692 applies to public employers, those employers still need to be careful – under other laws – with regard to any agreement to recover wages previously paid to employees. For example, under the federal Fair Labor Standards Act (FLSA), requiring an employee to repay training costs when they terminate employment could make it so their final paycheck for the last period of work amounts to less than the federal minimum wage for each hour of work.  Such repayment agreements can thus lead to FLSA liability. This was the holding of the Court of Appeal in 2008 in City of Oakland v. Hassey.  Relatedly, a final paycheck amounting to less than the state minimum wage for each hour of work could lead to liability under California law.   

In evaluating your agency’s response to AB 692, it will be helpful to engage trusted legal counsel for assistance.

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Artificial intelligence (“AI”) tools are increasingly being marketed as a way to streamline workplace investigations: summarizing evidence, generating interview outlines, comparing witness statements, or even “detecting inconsistencies” in testimony. While these tools may appear to help investigators move faster, public employers should approach AI-assisted investigations with caution. California public agencies have unique obligations to ensure their investigations are thorough, impartial, accurate, and defensible under case law and statutory requirements.

AI tools can support certain administrative tasks, but improper reliance on them can jeopardize the validity of the investigation, expose the agency to claims of bias or inadequate fact-finding, and create potential Public Records Act and confidentiality concerns. This blog post outlines the emerging legal and practical risks, and provides guidance to help public employers evaluate whether, and how, AI should (or should not) be used.

AI in Workplace Investigations: What These Tools Claim to Do

AI tools can:

  • Summarize large volumes of documents
  • Generate interview questions based on allegations or policies
  • Analyze transcripts for “inconsistencies”
  • Suggest credibility assessments
  • Identify potential timelines or patterns in evidence

Although these tools may seem efficient, they introduce significant legal and practical risks, especially in the context of public sector investigations.

Risk 1: Hallucinations, Inaccuracies, and Missing Nuance

AI tools are known to produce “hallucinations,” which occur when the system generates statements that appear authoritative but are factually incorrect.

In an investigation, even a minor factual distortion can:

  • Undermine the credibility of the investigatory report
  • Lead to incorrect findings
  • Create inconsistencies that an attorney challenging the report may highlight
  • Damage trust between the employer and employees

AI also frequently misses context, tone, or nuance — all critical to credibility determinations. AI cannot evaluate demeanor, motive, or subtle shifts in a witness’s explanation. It may summarize statements in a way that oversimplifies or distorts them.

Risk 2: Embedded Bias in AI Outputs

AI tools reflect the datasets they are trained on. For public employers, subject to constitutional and statutory nondiscrimination obligations including Title VII (42 U.S.C. § 2000e), Fair Employment and Housing Act (FEHA) (Gov. Code §§ 12940 et seq.) and due process requirements, AI-generated conclusions may inadvertently introduce bias into:

  • Witness credibility assessments
  • Evaluations of employee conduct
  • Interpretation of language or cultural communication styles
  • Discipline recommendations

Because California public employers must demonstrate impartiality in investigations, any bias reflected in AI outputs can compromise the investigation and expose the agency to legal challenge.

Risk 3: Confidentiality, Data Storage, and Public Records Risks

Workplace investigations often involve:

  • Confidential personnel information
  • Medical data (subject to the Confidentiality of Medical Information Act (CMIA) and the Health Insurance Portability and Accountability Act (HIPAA)
  • Peace officer records (subject to Penal Code §832.7)
  • Student information (for education agencies, under the Family Educational Rights and Privacy Act (FERPA)


Uploading investigation-related information into a third-party AI platform may violate confidentiality obligations, compromise privileged communications, or even trigger unintended disclosure requirements. Many generative AI tools store prompts, inputs, and outputs on external servers, and some reserve the right to use uploaded data to train or improve their models. As a result, sensitive details shared with an AI system may be retained, accessed by the vendor, or reproduced in future outputs, exposing an employer to privacy violations, discovery risks, and potential claims.

Risk 4: Ethical Concerns for Workplace Investigators

Over-reliance on AI risks blurring the line between the investigator’s independent judgment and the machine-generated suggestion.

Additionally, investigators must ensure that all work product is their own, that sources are verifiable, and that findings are based on actual evidence—not AI extrapolation.  AI tools that fabricate facts or produce misleading summaries can put investigators at risk of failing these obligations if not carefully controlled and independently verified.

Key Takeaways for Public Employers

  • AI should never replace human judgment in workplace investigations.
  • Any AI-generated summary or analysis must be independently verified.
  • Investigators should avoid uploading confidential personnel data into AI platforms unless the agency has vetted the tool’s security, privacy, and data-use policies.
  • Because AI tools are not designed to evaluate human behavior or nuance, their conclusions about credibility should be viewed with caution especially when used for investigative decision-making. Agencies should develop internal policies on whether, and how, AI may be used in investigations.

Because AI tools are rapidly evolving while legal standards for investigations remain constant, public employers should:

  • Review or update their workplace investigation policies.
  • Evaluate whether AI use should be restricted or prohibited in investigative processes.
  • Provide training to HR teams and investigators on the risks and obligations.
  • Consult legal counsel before adopting or integrating AI tools into investigative workflows.

If your agency is considering the use of AI tools or needs guidance on investigation best practices please reach out to trusted legal counsel.

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The article was reviewed December 2025 and the information is up-to-date.

The holiday season is a festive time to be shared with family, friends, and even co-workers.  Many employers also join in the celebrations by allowing employees to put up decorations and exchange gifts. Employers also like to host holiday parties filled with food, music, and alcohol. Sometimes, however, these activities can create legal liability for employers, particularly public entities. We present here a few tips and reminders that can help employers avoid liability without spoiling their employees’ holiday fun.

Workplace and Workspace Decorations

As the Second Circuit Court of Appeals has aptly stated, “No holiday season is complete, at least for the courts, without one or more First Amendment challenges to public holiday displays.” (Skoros v. City of New York (2d Cir. 2006) 437 F.3d 1.) Before decking the halls, employers should consider the location of holiday decorations. Employers who plan to decorate common work areas should strive to avoid the appearance of endorsing one religion over another. For example, if a nativity scene is displayed in the reception area or lunchroom, the employer may be perceived as favoring the Christian religion. Some employees may find this offensive. Therefore, employers who wish to decorate the workplace should use non-religious, winter themed decorations such as snowflakes, snowmen, candy canes, wreaths, holly, non-flammable candles, and gingerbread houses.

Since non-religious decorations are permissible, there is always debate over whether a decorated tree is a religious symbol. While a decorated tree may have religious connotations for some people, the U.S. Supreme Court has determined that a decorated tree is generally a secular nonreligious symbol. This view was also adopted by the EEOC. Thus, employers may include decorated trees among their holiday displays even if an employee objects. Nevertheless, for purposes of promoting positive employee relations, employers should be sensitive to the diversity of their workplace. Thus, even if you have a tree, ornaments with religious connotations, such as crosses, angels, or nativity references should not be allowed.

Employees who wish to decorate their own personal workspaces with Christmas, Kwanzaa or Hanukah themed decorations present a more difficult question. Prohibiting employees from displaying religious holiday themed decorations in their own workspace may give rise to claims of violation of free speech and religious expression. Also, because the law requires employers to accommodate religious beliefs, employers should not try to suppress religious expression in an employee’s personal workspace unless it creates undue hardship on business operations, or if it is visible to the public in a way that implies the agency’s endorsement of religion. (Berry v. Dep’t of Soc. Servs. (9th Cir. 2006) 447 F.3d 642.)

Finally, mistletoe should never be allowed in any area of the workplace including individual workspaces because it could lead to sexual harassment or hostile work environment claims.

Religious Holiday Accommodations

For many, the holidays are a time for religious observance. For example, a Christian employee working the night shift may ask for the evening off to attend Christmas Eve mass, a Jewish employee may request time off to observe Hanukah, or a Muslim employee may ask to have a break scheduled after sunset when fasting ends during Ramadan. Both federal and state discrimination laws require employers reasonably to accommodate their employees’ sincerely held religious beliefs, practices, and observances. Thus, employers who are confronted with requests for time off should try to accommodate them unless doing so would impose undue hardship. Accommodating an employee may mean changing the employee’s schedule or allowing the employee to switch shifts with a co-worker.

Holiday Gift Exchanges

The traditional holiday gift exchange — where one “Secret Santa” employee gives a gift to a randomly assigned employee — has largely been replaced by the “white elephant” gift exchange. Employees favor this type of gift exchange because it is fun and the gifts up for grabs are often humorous. This game, however, can easily turn into blood sport as employees become competitive and even downright vicious towards each other in their quest for the best gift.

In order to ensure fun for all employees, the announcement of a gift exchange should include language reminding employees to select gifts appropriate for the workplace. For example, employees should be discouraged from buying items that contain profane, graphic, or sexual content. In addition, employees should be reminded that the gift exchange is a festive occasion where everyone should be treated respectfully. A very modest limit on the cost of such gifts should be established, such as $10 to $25.

Individual Holiday Gifts

Despite the popularity of gift exchanges, some employees may choose to give individual holiday gifts to coworkers. While this may bring joy and cheer to some, others may feel left out if they do not receive a gift. Some employees may see selective gift giving as signs of discrimination or retaliation. Aside from any sort of legal claims, selective gift giving may also create a tense workplace environment where employees’ feelings are hurt. While employers should not require employees to bring gifts for everyone, employers may still create other gift giving guidelines or restrictions. For example, employers can create and enforce policies that require employees to exchange gifts outside of the workplace during non-work hours.

Holiday Apparel and Accessories

In addition to holiday decorations in the workplace, some employees may feel extra festive and want to wear holiday apparel or accessories. Prohibiting employees from wearing holiday themed apparel may give rise to claims of violation of free speech and religious expression. Nevertheless, employers do have the right to make sure that any holiday apparel complies with internal dress code policies or standards of professionalism.

In one example of holiday apparel causing uproar, Emilia Sellick was an employee of the U.S. Department of Veterans Affairs. Every holiday season, she wore a “Christmas bell” at work and the bell would jingle every time she moved. One day, Emilia’s supervisor called her into his office and abruptly instructed her to take off the bell. When Emilia asked her supervisor why she should remove her bell, he responded, “[b]ecause it annoys me.” After Emilia was not hired for a higher level position, she sued the Department alleging religious discrimination, among many other claims. She claimed that the “Christmas bell” incident was suggestive of discrimination. In the end, the court found that the incident did not warrant a reasonable inference of religious discrimination.  (Sellick v. Agency-Castle Point (S.D.N.Y. July 16, 2010) 2010 U.S. Dist. LEXIS 71579.)

Holiday Parties

The two biggest concerns for employers about holiday parties are potential legal liability from sexual harassment and drinking and driving. Because employees typically “let their hair down” during these events, they may not conduct themselves the same way they do at work. Also, alcohol clouds judgment. A luncheon rather than an evening event is more prudent for all these reasons. If a festive evening is the preferred celebration, employers may want to consider taking the following preventative steps to reduce liability.

Employers should remind employees of the workplace’s discrimination, harassment, and alcohol and drug policies. In addition, employers should designate a supervisor or manager to provide discrete oversight of employees during the party. For example, if alcohol is served, employers should limit the amount consumed by either issuing drink tickets to employees or stopping the service of alcohol well before guests start leaving the party. If an employee appears to have had too much to drink, a supervisor or manager can intervene and make arrangements for the employee to get home safely. Employers should also ensure that no underage employees, student workers, or interns are served alcohol. 

Finally, inappropriate and unwelcome verbal, physical, or visual conduct at a holiday party may lead to claims of harassment based on protected classification. Supervisors who observe or become aware of an incident that could violate the agency’s harassment policy remain responsible for reporting such conduct. If a harassment complaint is made after the party, employers should make sure they promptly investigate it.

Happy Holidays!

All of us at Liebert Cassidy Whitmore would like to come together to say Thank You and wish you a wonderful holiday season and a Happy New Year!

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Since our original post detailing the tracking and reporting requirements imposed by the One Big Beautiful Bill Act (“OBBBA”) for federal tax deduction of qualified overtime compensation (i.e., Fair Labor Standards Act (FLSA) overtime), the IRS has announced significant guidance for 2025 reporting.

For Tax Year 2025, Employers Are Not Required to Separately Report Qualified Overtime Compensation Due to Penalty Relief from the IRS.

On November 5, 2025, the Department of the Treasury and the Internal Revenue Service (IRS) issued Notice 2025‑62 (see IR-2025-110) providing penalty relief for the 2025 tax year with respect to certain new information-reporting obligations under the OBBBA.

Employers will not face penalties under the Internal Revenue Code (IRC) section 6721 for failure to file correct information returns, or under IRC section 6722 for failure to furnish correct payee statements, if the employer does not separately report the total amount of qualified overtime compensation in tax year 2025. The relief is strictly limited to the 2025 tax year.

Greater Flexibility Applies for Employers Who Voluntarily Report in 2025.

Although not mandatory in 2025, the IRS encourages employers to provide the separate accounting of qualified overtime to employees this year.  However, employers who voluntarily provide the separate overtime accounting in 2025 have greater flexibility than they will in 2026 and will not face penalties for the method used to calculate qualified overtime compensation. Regardless, the method used should be reasonable and consistent and comply with general recordkeeping and accuracy principles. The delay in reporting requirements reflects the IRS’s acknowledgement that many employers do not yet have the systems or information necessary to comply with the new reporting rules for 2025, as well as the fact that the W-2 form for the 2025 tax year will not be updated to accommodate the OBBBA changes.

Absent Employer Reporting, Individual Employees Can Calculate and Claim a Deduction for Qualified Overtime Pay in 2025.

On November 21, 2025, the IRS issued Notice 2025-69, providing guidance to individual taxpayers on how to claim the new qualified overtime compensation deduction for tax year 2025.

Because employers are not required to report qualified overtime compensation on W-2’s in 2025, Notice 2025-69 provides guidance and examples for how individual taxpayers can report and substantiate overtime deductions in the absence of formal reporting from employers. Individuals who are not furnished a separate accounting of qualified overtime compensation in box 14 of Form W-2 (or on a separate statement) must make a reasonable effort to determine whether they are considered overtime-eligible under the FLSA, which may include asking their employers about their status.

Individuals may use any of the following reasonable methods for purposes of determining the amount of qualified overtime compensation under section 225(c) for tax year 2025:

  1. If the individual’s pay statement for 2025 shows the FLSA overtime premium separately, meaning it lists the extra “half-time” portion for working more than 40 hours in the seven-day work period (or other appropriate work period length and hours threshold), then the individual can report that amount as qualified overtime compensation.
  • If the individual’s pay statement does not show the FLSA overtime premium separately, but it does show a combined number for all FLSA overtime pay (regular wages for overtime hours + premium wages), then the individual may report one-third of that combined amount as qualified overtime compensation.

Notice 2025-69 allows use of a similar fractional method to determine the reportable amount if double time overtime applies for hours worked in excess of 40 hours in a workweek (or other appropriate work period length and hours threshold). It also allows the individual to adjust the calculation if the fractional method would undercount the true overtime premium (for example, because the individual’s base rate increased due to a nondiscretionary bonus).

  • If the individual does not receive any statement showing the overtime premium, the total overtime pay, or the total premium above regular pay, the individual can use any reasonable method to estimate the regular rate of pay, and the number of hours worked above 40 per week or above the hour’s threshold for the applicable work period. A reasonable method includes requesting information from the individual’s employer and using the information provided by the employer for purposes of calculating the deduction.
  • If an individual is covered by different overtime rules under the FLSA compared to most 40-hour employees (such as firefighters, police, certain hospital workers), the individual must calculate overtime based on those specific rules but may still use any reasonable method described in this notice.

FLSA Compensatory Time Off is Reportable as Qualified Overtime Pay.

Until now, it has been unclear whether FLSA overtime earned as compensatory time off is reportable as qualified overtime compensation under the OBBBA. Notice 2025-69 affirmatively states that an individual who works for a state or local government agency that gives compensatory time at a rate of one and one-half hours for each FLSA overtime hour worked may include one-third of those wages for purposes of determining qualified overtime compensation.

Individual employees receiving compensatory time off may take the overtime amount into account for reporting purposes only in the year the compensatory time is paid due to the employee cashing it out or using the paid time off.

Where FLSA and Non-FLSA Overtime Are Reported as a Combined Amount, Individuals Can Use Earning Statements to Approximate Reportable FLSA Overtime.

Where employers combine FLSA and non-FLSA overtime on earnings statements, Notice 2025-69 states that individuals can use the statements to approximate the amounts of FLSA overtime.

In all cases, individuals must maintain copies of any documents they rely on in accordance with IRS recordkeeping requirements and should also maintain records of the basis for any approximation.

The Deduction is Capped and Phases Out at a Modified AGI Over $150,000.

The deduction is capped at $12,500 per individual (or $25,000 for married joint filers). The deduction phases out at a Modified Adjusted Gross Income threshold over $150,000 (or $300,000 for joint filers).

Conclusion

While the importance of tracking and reporting qualified overtime compensation under the OBBBA will remain, the IRS’s Notice 2025-62 provides transitional relief for tax year 2025.

Employers should view this as an opportunity to prepare, refine systems and educate stakeholders — but not as a reason to defer the work entirely. Beginning early will smooth the transition into the full enforcement years. We recommend the following employer guidelines:

  1. Continue to plan for the separate tracking of qualified overtime compensation (i.e., the portion of FLSA-mandated overtime that is eligible under the OBBBA). As discussed in our original post, the OBBBA’s deduction for qualified overtime requires a separate accounting of overtime that is FLSA-mandated and the value of “half-time” premium.
  2. Use the 2025 year as a transition year. The IRS is giving employers breathing room regarding the new breakdown reporting in tax year 2025. Failure to accurately report will not trigger penalties, provided other reporting obligations are met.
  3. Keep documentation of the reasonable method used. Even though the IRS is not imposing penalties for failure to separately account in 2025, employers should still document the method used to approximate or identify qualified overtime compensation.
  4. Communicate to employees. For the 2025 tax year, employers are encouraged to provide separate statements for employees showing their separately reported qualified overtime compensation, so that the employee may easily claim the deductions when filing. Early communication may reduce confusion.
  5. Prepare for 2026 and onwards. The relief applies only for 2025. Employers should accelerate system updates ahead of the 2026 reporting year, when the IRS will enforce the breakdown of qualified overtime.[1]

Should you or your agency need assistance evaluating your payroll practices, updating tracking systems, or communicating to employees regarding the eligible overtime deduction and reporting obligations, please reach out to your trusted legal advisors.

[1] As of now, the overtime deduction established by the OBBBA is in effect for tax years 2025 through 2028.

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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.