Client Update
firm victories
LCW Partners Adrianna Guzman And Laura Kalty, And
Associate
Attorney Barbara Boktor, Win Early Dismissal Of PERB Unfair Practice Charge.
An employee filed an unfair charge against his cityemployer, claiming the city violated the Meyers-MiliasBrown Act (MMBA). The employee alleged harassment, being singled out, and possibly threatened by a supervisor. But the employee did not identify any facts that concerned any of the labor-relations matters under the jurisdiction of the Public Employment Relations Board (PERB).
PERB’s General Counsel noted that the charge contained time-barred allegations and did not include any of the elements necessary to state a case subject to PERB’s jurisdiction. The General Counsel issued the employee a warning letter that the charge would be dismissed if the employee did not include facts regarding MMBAprotected activities, such as discrimination because of labor activities, or interference with the employee’s labor activities. The employee amended the charge twice, but never alleged any MMBA-protected labor activities.
LCW attorneys highlighted both the untimeliness of the employee’s allegations and the employee’s failure to state a MMBA claim. PERB’s General Counsel ultimately dismissed the employee’s charges entirely on both grounds that LCW highlighted in the city’s position statement.
Partner Laura Kalty Convinces
PERB’s GC That Hard Bargaining Is Not Illegal Surface Bargaining.
A union filed an unfair practice charge alleging that a district violated the Meyers-Milias-Brown Act (MMBA) by surface bargaining. During reopener negotiations, the union proposed that the district increase its health insurance contribution by 31%. The parties met, and the district rejected the proposal without making a counteroffer. The district explained that it had increased
its health insurance contribution in the previous negotiations; the current contribution allowed most employees to receive significant cash back; comparisons to other units were not valid; and the health insurance premium had only increased by 3 percent.
The union offered a second proposal for a reduced health insurance contribution. The district told the union it would take the second proposal to the governing board and did so. The district then notified the union that the board had declined the union’s offer, and the district would not make any counteroffer. The union filed an unfair practice charge.
Laura argued on behalf of the district that the ultimate question in surface bargaining claims is whether a party’s conduct, when viewed in its totality, was sufficiently egregious to frustrate negotiations. To bargain in good faith, a party must be willing to exchange reasonable proposals and try to reconcile differences. Parties must explain the reasons for a particular bargaining position with sufficient detail to permit negotiations to proceed based on mutual understanding. But hard bargaining is allowed. A party’s refusal to move from its position, if supported by rational arguments, can constitute permissible hard bargaining rather than a refusal to bargain. Failing to make a counterproposal does not necessarily violate the duty to bargain. When a party has previously objected to proposals in a way that makes it clear that a later proposal would likely be unacceptable, a counterproposal that offers a different response is not required.
PERB’s General Counsel agreed with the district’s argument that the Union did not state a prima facie case for surface bargaining and dismissed the Union’s charge.
LCW Partner Melanie Chaney And Associate Attorneys Gabriella Kamran And Anni Safarloo
Convince PERB That Association Waived Bargaining.
Partner Melanie Chaney and Associate Attorneys Gabriella Kamran and Anni Safarloo brought these
consolidated Public Employment Relations Board (PERB) charges to a successful conclusion. These cases arose from two separate sets of negotiations between a city and its fire association: 1) a city-driven change in the firefighter job description; and 2) a successor MOA. Each negotiation had a separate bargaining team.
After the city declared impasse in the MOA negotiations, the association refused to continue bargaining over job specification changes, asserting that its duty to bargain was “dormant” because of the impasse in the MOA negotiations. The city responded by filing an unfair practice charge alleging that the association’s refusal to bargain violated the Meyers-Milias-Brown Act (MMBA).
Meanwhile, the parties reached a tentative agreement on a successor MOA, without further discussing the job description issue. The city then implemented the job specification changes consistent with the city’s proposal. The association filed its own unfair practice charge alleging that the city unlawfully changed the job description without exhausting its bargaining obligations.
An ALJ held a consolidated hearing and dismissed both charges. The ALJ found that the association had not violated the MMBA in refusing to bargain and further concluded that the association had waived its right to continue bargaining over job specification changes, which served as a complete defense to its charge against the city.
On review, PERB determined the ALJ had adequately addressed the issues raised and that no errors existed that would change the outcome. PERB affirmed the ALJ’s conclusions and dismissed both unfair practice charges.
DISCRIMINATION
Age Claim Was Viable Despite That The Employees Had Not Applied For The Promotion.
Three Dealer Business Managers (DBMs) were long-term employees at Circle K: Brian Caldrone (54), Joseph Celusta (56), and Kathleen Staats (57). Each had a history of strong performance evaluations, awards and wanted to advance to regional leadership roles.
In 2020, Circle K’s West Coast Regional Director position became vacant. In the past, Circle K had posted position openings internally or circulated announcements by email or intranet to encourage qualified employees to apply. This time, the company did not post or open the position for applications. Instead, Circle K’s senior management handpicked a younger employee, Miko Angeles, aged 45, to fill the position. Angeles had previously served as the Southeast Regional Director, though he had a mixed performance record in that role.
When the three DBMs learned of the promotion, they believed that the company had bypassed its normal process to promote a younger employee. They sued Circle K in California state court for age discrimination under
The district court granted summary judgment for Circle K, holding that the DBMs could not establish age discrimination because they had not applied for the position. The court also found that, even if they could establish age discrimination, Circle K had provided a legitimate, nondiscriminatory reason for its decision, and the DBMs had not shown that this reason was pretextual.
The U.S. Court of Appeals for the Ninth Circuit reversed. The Ninth Circuit held that, when an employer does not announce a vacancy or solicit applications, employees are not required to show that they applied for the position to establish age discrimination. The Court also clarified that, although a ten-year age difference is the usual threshold for a “substantial” age gap, the DBMs could overcome a smaller gap by providing evidence that age was a significant factor in the employer’s decision. The Court found that the DBMs had presented sufficient evidence to create a triable issue of pretext and remanded the case for further proceedings.
Caldrone, et al. v. Circle K Stores, 2025 U.S. App. LEXIS 25766 (9th Circuit 2025).
both the ADEA and FEHA. Circle K removed the case to the U.S. district court.
ARTIFICIAL INTELLIGENCE
California Civil Rights Department Publishes New Regulations To Prevent Discrimination From Use Of AI Tools.
Artificial intelligence (AI) and other automated decision systems (ADS) have a growing role in public sector hiring. Resume screeners, video interview platforms, and other algorithmic tools promise efficiency, but they also create legal exposure.
On October 1, 2025, California’s new Fair Employment and Housing Act (FEHA) regulations took effect. They include a new regulation that defines terms (2 Cal. Code Regs. section 11008.1) and revisions to several existing regulations. They clarify how FEHA applies to AI and ADS in employment decisions. And, they aim to prevent discrimination in hiring and promotion practices based on protected characteristics such as race, gender, age, disability, religion, and other categories. The new regulations apply this protection to any AI or ADS tool used in recruiting, testing, evaluating, or promoting employees. Employers must treat automated tools the same way they treat human decision-makers under the regulations.
Key Provisions:
• Disparate Impact Counts: Even when bias is unintentional, agencies can face liability if an automated system disproportionately excludes applicants from a protected group.
• Examples of Risk: Tools that rank candidates by schedule availability, measure reaction time, or evaluate facial expressions or speech patterns in video interviews may disadvantage applicants with disabilities, religious commitments, or language differences.
• Pre-employment Inquiries: FEHA limits what an employer can ask before hiring, and those limits apply equally to inquiries made by or through automated systems.
• Liability Extends to Agents: When a vendor or recruitment partner uses a discriminatory algorithm on an agency’s behalf, the agency remains responsible under FEHA.
• Recordkeeping Required: Agencies must retain records of ADS use for at least four years. This includes data inputs, selection criteria, and employment outcomes
• Bias Testing Encouraged: Although the regulations do not mandate bias testing, the Civil Rights Council encourages agencies to conduct self-audits and fairness evaluations. The timing, scope, and quality of these efforts can support a defense if a discrimination claim arises.
Steps Toward Compliance:
Public agencies can continue to use AI and automated tools under the new regulations, but they must manage those systems carefully to maintain FEHA compliance.
1. Inventory and Assess AI Tools: Identify every automated system involved in recruitment, hiring, promotions, and employment decisions. Determine whether each tool directly or indirectly screens or ranks applicants.
2. Audit for Bias: Test each system 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 compliance with FEHA. Include shared responsibility and indemnification clauses in contracts. Specify that human review will supplement any automated recommendations or scores.
4. Strengthen Recordkeeping: Maintain ADS-related data, selection criteria, and decision records for at least four years. Document all compliance activities to create a clear record of diligence.
5. Train HR and Hiring Staff: Educate staff about the capabilities and limitations of AI tools. Train them to identify potential bias and to exercise independent judgment when reviewing automated results.
6. Ensure Transparency and Accessibility: Provide accessible hiring processes for applicants with disabilities. Offer reasonable accommodations or alternative methods for completing applications or assessments when needed, including for religious observances.
WAGE & HOUR
Labor Code Section 512.1’s Meal And Rest Breaks Do Not Apply To Charter Cities.
In 2022, the California Legislature added Labor Code section 512.1 to extend the meal and rest break rights that private sector health care workers have to public sector health care employees who are directly employed by: the state, political subdivisions of the state, counties, municipalities, and the Regents of the University of California.
A group of nurses who worked for the City and County of San Francisco (City) sued on behalf of themselves and similarly situated City-employed nurses. The nurses alleged that the City has failed to comply with section 512.1 since it took effect. The City is a charter city.
The City demurred on two grounds. First, the City argued that section 512.1 did not apply to charter cities. Second, the City argued that even if the Legislature had meant to apply section 512.1 to charter cities, the law would violate the constitutional home rule doctrine because the law “does not pertain to a matter of statewide concern” and “is not narrowly tailored to its purported goals.” The trial court sustained the City’s demurrer without leave to amend. The court found no
clear indication that the Legislature intended section 512.1 to apply to charter cities. The nurses appealed.
The California Court of Appeals affirmed the sustaining of the City’s demurrer. The nurses argued that charter cities came within section 512.1’s broad definition of “employer.” The Court disagreed. The Court of Appeal found that none of the other aids to statutory interpretation supported the nurses’ argument. For example, the Court noted that in other statutes, the Legislature expressly stated both that a matter was of statewide concern and was not a “municipal affair” as that term is used in the “home rule” doctrine stated in Section 5 of Article XI of the California Constitution. The Court found that section 512.1 did not expressly apply this statute to charter cities.
The Court of Appeal concluded that the City’s home rule authority gave it sovereignty over its employees’ compensation. The Court declined to address constitutional home rule questions because the statutory grounds were available and dispositive. The Court declined to infer any legislative intent from section 512.1 to contravene the City’s constitutional home rule authority.
Levy v. City and County of San Francisco, 114 Cal.App.5th 997 (2025).
First Amendment
Advisory Warning Public Of Prosecution For False Statements
In Peace Officer Misconduct
Complaints Violates First Amendment.
California law requires law enforcement agencies to investigate misconduct complaints that the public makes against their peace officer employees. (Penal Code section 832.5.) Since 1995, Penal Code section 148.6(a): 1) makes it a crime to knowingly file a false allegation of misconduct against a peace officer; and 2) requires every person who files a complaint to sign an advisory that warns that submitting a false complaint may result in criminal prosecution. Section 148.6 advisory informs people they have a right to file a complaint, even if there is not enough evidence to warrant action on the complaint, but warns that it is against the law to make a complaint known to be false.
The City of Los Angeles did not require those who filed complaints against peace officers to sign the section 148.6 advisory. The Los Angeles Police Protective League (LAPPL) sued the City to compel it to require the advisory. The City relied on federal precedent for its arguments that the section 148.6 advisory violated the First Amendment protections for free speech.
The trial court ruled for LAPPL, relying on the California Supreme Court’s precedent. That precedent was at odds with the federal precedents the City cited, and had upheld the section 148.6 advisory. The Court of Appeal affirmed, holding that it was bound by California precedent even though several federal courts had since found the advisory unconstitutional. The City petitioned
for review and urged the California Supreme Court to reconsider its own precedent.
The California Supreme Court reversed and overruled its prior precedent, holding that the section 148.6(a) advisory violated the First Amendment. The Court decided that the advisory created a substantial risk of deterring truthful or well-intentioned complaints of peace officer misconduct.
Applying intermediate scrutiny, the Court recognized that the Legislature had a significant interest in preventing false accusations but held that section 148.6(a) was not narrowly tailored to that goal. The Legislature could have addressed false complaints through less restrictive means, such as adding a materiality or harm requirement, improving procedural safeguards for officers, or revising the advisory language. Instead, the statute imposed an uneven and speechdeterring burden on people while leaving other false statements unregulated. The Court concluded that the law’s structure and mandatory warning created an unconstitutional risk of suppressing speech critical of government officials.
As a result of this decision, law enforcement agencies may not use or enforce section 148.6’s advisory requirement on formal complaints of peace officer misconduct. Law enforcement agencies cannot seek criminal prosecution if they receive a complaint that may have been submitted with knowingly false allegations.
Los Angeles Police Protective League v. City of Los Angeles (Nov. 10, 2025, No. S275272) ___Cal. 5th___ [2025 Cal. LEXIS 7261].
COUNTY SHERIFFS
Sheriff Had No Authority To Retain Independent Counsel.
Former Los Angeles County Sheriff Alex Villanueva attempted to settle an employment litigation involving a deputy sheriff. He directed the reinstatement of the deputy with back pay and benefits. The County filed a writ petition challenging Villanueva’s settlement directive as void and illegal because it was not approved by the Board of Supervisors or County Counsel.
The County Counsel sent Villanueva a letter notifying him that the Board had agreed to offer him conflict counsel on the question of whether the Sheriff had authority under the Los Angeles County Charter to settle the deputy’s employment action without approvals from the County Counsel and the Board. The letter informed the Sheriff that pursuant to California Government Code section 31000.6(a), the Board would provide the Sheriff independent legal counsel for that sole issue. The letter noted that the Sheriff could select his own counsel, but the Board had the discretion to pay only the compensation the Board deemed just and proper.
Villanueva selected Quinn Emanuel (Quinn) as his independent legal counsel. Quinn then sent the Sheriff a retainer agreement that quoted billing rates ranging from $695 to $1,400 an hour and contained an arbitration clause. The following day, the County Counsel’s office emailed Quinn a letter regarding a “retainer agreement.” The letter stated: the Board would determine the appropriate hourly rate; the County would pay a blended rate for attorneys of $495 an hour; and other terms and conditions.
Villanueva chose to sign the Quinn engagement letter without obtaining approval from County Counsel. When Quinn did not sign the County’s retainer agreement, the County Counsel’s office sent repeated communications stating the need to sign the County’s retainer agreement for Quinn to be paid. Quinn rejected the County Counsel’s retainer agreement and stated the County Counsel was conflicted and should have no involvement.
The County filed an ex parte application, citing Government Code section 31000.6, that asked the court to remove Quinn as counsel of record. The judge denied the application, finding that the section provided no procedure for such relief. But, the judge also stated that there was no contract between the Board and Quinn, and Quinn could not be paid with County funds until a contract was made.
In January 2020, Quinn substituted out of the case. In February 2020, Quinn sent the Sheriff an invoice for services for $1,740,001.70. The County did not pay Quinn.
Next, Quinn served the County, the Sheriff, and the Sheriff’s Department with a demand for arbitration at JAMS, based on arbitration provisions in the engagement agreement that Villanueva signed. The County responded with a lawsuit for declaratory relief. The County plaintiffs (the County, the Sheriff’s Department, and Villanueva in his official capacity) sought a declaration that there was no valid agreement to arbitrate, nor a valid contract with any County plaintiff to represent the Sheriff. The County’s lawsuit also sought to enjoin the pending arbitration and to require Quinn to withdraw the arbitration demand.
The trial court granted the County’s motion for preliminary injunction. The County then filed a motion for summary judgment. The trial court granted the County’s motion, finding no triable issues of fact as to whether the County entered into a fee agreement with Quinn, and that the Sheriff lacked the authority to enter into the Quinn agreement.
After the summary judgment hearing, but before the judgment was entered, Quinn filed a motion for leave to file a cross-complaint for breach of contract and related claims, contending leave should be granted to avoid forfeiture of “compulsory cross-claims.”
The County opposed Quinn’s motion to file a crosscomplaint, and the court denied it. The court then entered judgment for the County plaintiffs and against Quinn as to all causes of action contained in the County’s complaint, permanently enjoining the arbitration and ordering Quinn to withdraw its demand.
Undeterred, Quinn filed a new lawsuit against the County, the Sheriff’s Department, and Villanueva in his official capacity. The complaint alleged the same causes of action as Quinn had alleged in the arbitration and in its proposed cross-complaint in the County’s declaratory relief action. The County demurred, contending each cause of action was barred by the Government Claims Act, forfeited under the “compulsory counterclaim” statute, and unsupported by sufficient facts to state a valid claim as a matter of law. The trial court sustained the County’s demurrer without leave to amend.
Quinn timely appealed both cases. The California Court of Appeal consolidated the appeals for oral argument and decision. The Court framed the cases as a dispute centered
around the distinction between the Sheriff’s authority to select independent counsel versus his authority to retain independent counsel. The Court of Appeal concluded that the Sheriff did not have the authority to retain Quinn. The Court found that: summary judgment for the County plaintiffs in their declaratory relief action was proper; there was no error in the court’s denial of Quinn’s belated motion for leave to file a cross-complaint in that action; and Quinn’s subsequent lawsuit against the County was properly dismissed on demurrer on either of two grounds: because it was a compulsory cross-complaint in the earlier declaratory relief action or because Quinn failed to allege compliance with the presentation requirements of the Government Claims Act. The Court affirmed both the judgment in the County’s action and the order of dismissal in Quinn’s action.
County of Los Angeles v. Quinn Emanuel, 115 Cal.App.5th 489 (2025).
OPEN MEETING LAW
Disruptive Attendees Did Not Justify The City Council’s Action To Reconvene In A Different Room.
People disrupted three meetings of the Berkeley City Council. The mayor determined that the disruptions made it impossible to continue business. The mayor stated that order could not be restored by removing the people because of the level of the disruption and the number of people involved. The mayor recessed the meetings and reconvened them in a smaller nearby room. Members of the press were allowed to attend in person, but the public could only observe by video. The City Council did not return to the original meeting room on these three occasions.
The Berkeley People’s Alliance (Alliance), a civic group, sued the City for violating the Brown Act’s open-meeting requirements. The Alliance argued that the City violated the Act by: 1) failing to attempt to remove those who were interrupting the meetings before determining that order could not be restored; and 2) recessing the meetings and moving to a different room rather than ordering the meeting room cleared and continuing in session in the original room pursuant to Government Code section 54957.9.
The City demurred, alleging that the Brown Act did not require those measures. The trial court sustained the City’s demurrer, finding that section 54957.9 did not require the City Council to first attempt to remove disruptive individuals before determining that order could not be restored. The court also concluded that the City Council complied with the statute by recessing and reconvening the meetings in a different room with the press present.
The Alliance appealed. Its primary argument on appeal was that the City Council violated section 54957.9 by recessing the meetings and reconvening them in a different room rather than ordering the original meeting room cleared.
The California Court of Appeal noted the Brown Act’s fundamental purpose is to ensure that the people’s business is conducted openly and that members of the public can directly observe and participate in local government decision-making. Exceptions allowing closed sessions or restricted access are to be construed narrowly.
Section 54957.9 provides one such limited exception to the open meeting requirement if a group willfully interrupts a meeting and the order “cannot be restored by the removal of individuals who are willfully interrupting the meeting.” In that case, “the legislative body …may order the meeting room cleared and continue in session.”
The Court of Appeal found that the phrase “order the meeting room cleared” meant that the City Council could empty the same room of its occupants, but not move the meeting elsewhere. The Court reasoned that the Legislature could have authorized relocation if it intended to, but it had not.
The Court emphasized that other sections of the Brown Act, such as section 54954, allow relocation if it is unsafe to meet in the designated location because of fire, flood, or other emergencies. Section 54957.9 contains no similar authorization to relocate.
The Court also rejected the City’s argument that its approach promoted safety and efficiency. The justices noted that the Brown Act’s primary goal is transparency, and public agencies may not prioritize convenience or control over public access unless explicitly permitted by statute.
The Court of Appeal reversed the trial court’s dismissal, ruling that the Alliance adequately stated a claim for violation of the Brown Act.
Berkeley People’s Alliance v. City of Berkeley, 114 Cal. App. 5th 984 (2025).
Consortium Call Of The Month
Members of Liebert Cassidy Whitmore’s employment relations consortiums may speak directly to an LCW attorney free of charge regarding questions that are not related to ongoing legal matters that LCW is handling for the agency, or that do not require in-depth research, document review, or written opinions. Consortium call questions run the gamut of topics, from leaves of absence to employment applications, disciplinary concerns and more. This feature describes an interesting consortium call and how the question was answered. We will protect the confidentiality of client communications with LCW attorneys by changing or omitting details.
Answer:
Question:
Does our agency have to accept an employee’s doctor’s certification that the employee has a serious health condition and needs family leave?
Under the California Family Rights Act (CFRA), if the employer has a good faith reason to doubt the validity of the leave certification for an employee’s serious health condition, the employer may require, at its own expense, that the eligible employee obtain the opinion of a second health care provider designated or approved by the employer.
If the second opinion differs from the first, the employer may also require, at its own expense, that the employee obtain the opinion of a third health care provider designated or approved jointly by the employer and employee. The employer and the employee must each act in good faith in an attempt to reach an agreement as to the third provider. The opinion of the third health care provider is final and binding. (Gov. Code section 12945.2(j)(3).)
Did You Know?
Whether you are looking to impress your colleagues or just want to learn more about the law, LCW has your back! Use and share these fun legal facts about various topics in labor and employment law.
• Members of the public at an open and public meeting held under the Brown Act have the right to record the meeting with an audio or videotape recorder or a still or motion picture camera unless the legislative body reasonably finds that such recording results in noise, illumination, or obstruction of the view that persistently disrupts the proceedings.
• Starting January 1, 2026, AB 339 requires public agencies to give a recognized employee organization at least 45 days’ written notice before issuing a request for proposal, a request for quotes, or renewing or extending an existing contract to perform services that fall within the scope of work of job classifications represented by that organization. (Gov. Code section 3504.1.)
• Effective January 1, 2026, SB 827 expands the requirements that local public agency officials attend a two-hour ethics training every two years to include department heads or similar administrative officers of local agencies. Also effective January 1, 2026, covered officials must complete an initial ethics training within six months of the official commencing their service.
new to the Firm!
Talin Derohanessian's broad experience across legal operations positions her to play a meaningful role at LCW as she joins the firm’s management team as the Executive Operations manger.
Riley Jacobs is an Associate in the San Diego office of Liebert Cassidy Whitmore, where she advises clients on a variety of labor and employment and educational matters.
Meg Berkowitz joins our Los Angeles office, bringing extensive experience in complex litigation and regulatory matters. She has successfully led pre-suit investigations, negotiated settlements, and managed litigation.
LCW In The News
To view this article and the most recent LCW attorney-authored articles, please visit: www.lcwlegal.com/news
• LCW Partner Lisa S. Charbonneau and Associate Jordan Carman authored an article in Bloomberg Law discussing the recent Stone v. Alameda Health System decision. They explain how the ruling reshapes wage and hour coverage for California public agencies and what it means for employers navigating these obligations.
View the full article here: https://www.lcwlegal.com/news/california-public-agencies-have-morewage-law-clarity-post-stone/
• Senior Counsel Leighton Davis Henderson shared her insights with HR Dive on how artificial intelligence can support but not replace human judgment in workplace investigations. The article also highlights privacy risks and the importance of enterprise licenses.
Read the full piece here: https://www.lcwlegal.com/news/ai-can-help-workplace-investigations-butneeds-human-oversight-attorney-says/
Perks
benefits corner
Is Your Agency Ready For ACA Reporting In 2026?
The IRS has released the final Affordable Care Act (ACA) reporting forms (Forms 1094-C and 1095-C) for filing next year to cover tax year 2025. Applicable Large Employers, as defined by the Affordable Care Act, are required to file Forms 1094-C and 1095-C to provide the IRS with information about health care offered to employees and furnish a copy of Form 1095-C to each employee to whom it pertains. Employers who fail to furnish statements or file the completed forms by the deadlines may be subject to penalties, which is why preparation is key.
The Deadline to Furnish Form 1095-C to Employees is March 2, 2026.
Employers must provide or “furnish” full-time employees and employees enrolled in an employer-sponsored self-insured plan their Form 1095-C by the deadline on Monday, March 2, 2026
Applicable large employers (ALEs) have a new option to skip furnishing Form 1095-C if the employer provides a clear, conspicuous, and accessible notice that meets the following requirements. The notice is:
1. Posted in a location on the ALE’s website that is reasonably accessible to full-time employees;
2. States that employees may receive a copy of their statement upon request;
3. Explains how employees may request a copy of their Form 1095-C;
4. Includes an email address and a physical address where employees can make a request for their Form 1095-C;
5. Includes a telephone number that employees may use to contact the ALE with questions; and
6. Is written in plain, non-technical terms and with letters of a font size large enough to call a viewer’s attention that the information pertains to tax statements reporting health coverage. For example, a website that includes words on the main page reading “Tax Information” and a secondary page that includes the statement “IMPORTANT HEALTH COVERAGE TAX DOCUMENTS” in capital letters.
For this purpose, the Form 1095-C is timely furnished if provided to the requesting employee no later than the later of January 31, 2026, or 30 days after the date of their request.
The notice must be posted on the ALE’s website by March 2, 2026. The notice must remain on the ALE’s website through October 15, 2026.
The Deadline to E-File ACA Returns is March 31, 2026.
All public agencies are required to file Forms 1094-C and 1095-C electronically when filing ten (10) or more returns. The deadline to e-file Forms 1094-C and 1095-C is Tuesday, March 31, 2026.
Employers that would like an automatic 30-day extension to file Forms 1094-C and 1095-C must submit Form 8809 on or before the due date of the returns. The IRS has increased the penalty for failing to file a correct return to $340 per return (up from $330).
New Flexible Spending Account
Contribution Limits for 2026.
The employee salary reduction contribution limit for health flexible spending accounts (health FSAs) will increase to $3,400 for 2026 (up from $3,300 in 2025). Health FSA funds are tax-free dollars that may be used to pay eligible medical expenses not covered by other health plans. While $3,400 is the new limit set by the IRS, employers should also review the limits set by their own Section 125 cafeteria plan documents. Some cafeteria plan documents may set a lower limit, or may need to be revised if an employer would like to allow employees to make salary reduction contributions up to the IRS limit as it adjusts on an annual basis.
The increase to the 2026 health FSA contribution limit also means the IRS will permit employees to carry over up to $680 of unused health FSA funds at the end of a 2026 plan year to the following 2027 plan year. Employers should verify whether they have adopted a carryover option for their health FSA under their Section 125 cafeteria plan, and if so, should check the maximum amount that may be carried over per the terms of their cafeteria plan document.
The maximum amount of dependent care flexible spending accounts (also known as dependent care assistance plans or “DCAPs”) benefits will increase to $7,500 (and $3,750 for taxpayers who are married filing separately) in 2026. This up from $5,000 ($2,500 for married filing separately) in prior years. This change was made by the One Big Beautiful Bill Act earlier this year. Employers should review the limits set by their own Section 125 cafeteria plan documents, which may need to be revised if the employer wants to allow the new, higher DCAP contribution.
Rev. Proc. 2025-32 (Oct. 22, 2024); IRS News Release IR-2025103 (Oct. 9, 2024)
Benefits Compliance Question.
Question: What can an agency do with all of the experience gains it has accumulated over the years from employee’s health flexible spending accounts (health FSAs)?
Answer: “Experience gains” are the difference between annual forfeitures and the health FSA’s losses from overspent accounts. The Proposed Treasury Regulations that govern flexible spending accounts sets the guidelines on what an employer can do with the unspent money.
Pursuant to Proposed Treasury Regulation section 1.1255(o)(1), experience gains or forfeitures, may be:
• Retained by the employer maintaining the cafeteria plan; or
• If not retained by the employer, may be used only in one or more of the following ways:
• To reduce required salary reduction amounts for the immediately following plan year, on a reasonable and uniform basis (Note: This option requires the forfeitures to be used the “following plan year” and not later plan years);
• Returned to the employees on a reasonable and uniform basis (Note: The amount cannot be returned to employees based on their forfeiture amounts); or
• To defray expenses to administer the cafeteria plan.
• An employer would need to cross-check the reasons it can use the health FSA experience gains with its Section 125 cafeteria plan document. Depending on its terms, the plan document may allow all of the options stated above from Section 1.125-5(o), or it’s possible that a cafeteria plan document could limit the options.
LCW BENEFITS BEST PRACTICES TIMELINE
Each month, LCW presents a monthly benefits timeline of best practices.
December
For agencies that have benefit plan years that begin January 1, ensure any changes to a Section 125 cafeteria plan document are adopted by the agency’s governing body by December 31 to be effective by the start of the new plan year.
Ensure employees submit their salary reduction agreements for flexible spending account amounts for 2026.
Notify employees who participate in a flexible spending account (health FSA, DCAP, or adoption assistance) of any deadline to withdraw funds before the end of the plan year. Notice shall be by two different forms, one of which may be electronic. (Lab. Code, section 2810.7.)
For agencies with cash-out election procedures for leave that avoid the constructive receipt doctrine, ensure employees make irrevocable elections before December 31, 2025, to cash out vacation and sick leave that will be earned in 2026.
VIRTUAL CLASSES
All seven workshops include both traditional training and interactive simulations to develop skills helpful to labor relations professionals. Interested? Start Earning Your Certificate at: https://cvent.me/qWm1W9
2025 Schedule
*In-Person event: San Francisco
*Each class consists of two dates/parts. Participation in both dates/parts is required for certification.
*Participants in the LRCP program have a three-year timeframe to complete all seven classes.
Liebert Cassidy Whitmore