AB51, California’s Law Against Mandatory Employee Arbitration Agreements, is Invalidated

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AB51, California’s Law Against Mandatory Employee Arbitration Agreements, is Invalidated
California employers – especially those that required employees to sign arbitration agreements – have reason to celebrate. On February 15, 2023, the United States Ninth Circuit Court of Appeals in Chamber of Commerce v. Bonta, (Case No. 20-15291) 2023 WL 2013326 (9th Cir. Feb. 15, 2023), ruled that AB 51, a California law effectively prohibiting and criminalizing mandatory arbitration provisions in employment agreements, is invalid because it is preempted by the Federal Arbitration Act (FAA).

This development was not unexpected, as the U.S. Supreme Court has rendered a series of decisions supporting arbitration and striking down state laws prohibiting arbitration clauses in employment contracts as violations of the FAA. Yet despite this precedent, the California legislature has tried time and time again to enact anti-arbitration laws that creatively seek to avoid FAA preemption. AB 51 was the most recent attempt to circumvent the FAA.

AB 51 added California Labor Code Section 432.6, which prohibited employers from: (1) requiring employees to waive, as a condition of employment, the right to litigate certain claims in court; and (2) retaliating against applicants for employment or employees based on their refusal to waive such rights. Id. at (a) & (b). These two prohibitions by themselves would almost surely be preempted by the FAA but the California legislature sought to avoid that result by adding § 432.6(f), providing that nothing “in this section is intended to invalidate a written arbitration agreement that is otherwise enforceable under the [FAA].” To give the statute teeth, AB 51 also amended other codes to impose civil and criminal liability on an employer who violates Labor Code Section 432.6. Together, these provisions had the strange effect of imposing criminal and civil liability on employers who enter into arbitration agreements that are valid and enforceable.

The Chamber of Commerce of the United States filed a lawsuit seeking to declare that AB 51 was preempted by the FAA. In 2020, the trial court granted temporary injunctions against enforcement of AB51, because the court found that the Chamber of Commerce was likely to succeed in establishing that AB51 is preempted by the FAA. For that reason, employers did not feel the brunt of AB51 while the challenge made its way through appellate court.

The Ninth Circuit Court of Appeals (after some unusual twists, including a published decision that was later withdrawn by the Court) ultimately agreed with the trial court. The Ninth Circuit held that although AB 51 does not expressly prevent the formation of employment contracts containing an arbitration provision, it clearly disfavors the formation of arbitration agreements by placing civil and criminal liability on employers who require employees to sign arbitration agreements. That kind of penalty is an exception to generally applicable law that allows employers to require agreements, such as confidentiality agreements, as a condition of employment. The Ninth Circuit noted that the Supreme Court has held that “state rules that burden the formation of arbitration agreements stand as an obstacle to the FAA.” Kindred Nursing Centers Ltd. Partnership v. Clark, 137 S.Ct. 1421, 1423 (2017). In addressing AB 51’s strange mechanism of imposing liability for the formation of valid contracts, the Court held that that “[a] state rule interferes with arbitration if it discriminates against arbitration on its face or if it covertly accomplishes the same objective by disfavoring contracts that have the defining features of arbitration agreements.” Id. The Court held that “[b]ecause the FAA’s purpose is to further Congress’s policy of encouraging arbitration, and AB 51 stands as an obstacle to that purpose, AB 51 is preempted.” Id., at *10.

California employers should welcome this decision. The decision clarifies that businesses have broader freedom to contract as they see fit, and that it is permissible, even in California, to require employees to sign mandatory arbitration provisions as a condition of employment. The overall perception is that arbitration results in faster, less expensive resolution of employee-employer disputes, and keeps employment disputes out of California courts. Still, there are other schools of thought that believe that employment arbitrations can be more expensive for employers than the courts because private arbitrators often charge high hourly rates, the fees and costs of the arbitration must be advanced by employers, and dispositive motion victories (for example, a successful motion to dismiss a frivolous claim) are less common in arbitration. As well, even if arbitration is enforceable some employees may file their claims in court in the hope that the employer fails to take action to enforce arbitration.

Moreover, there are important limitations on employment arbitration agreements in California. In Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (2000), the California Supreme Court held that employer-employee arbitration agreements may be “unconscionable” and unenforceable if they do not include provisions for: (1) a neutral arbitrator; (2) all remedies allowed under statutes; (3) adequate discovery procedures; (4) a written and well-reasoned arbitration decision; and (5) the employer’s payment of all costs unique to the arbitration process itself.

It is predictable that the same labor groups that supported AB 51 will continue to try to develop alternative measures to restrict employment arbitration agreements. Employers are well-advised to consult with well-qualified employment attorneys to stay on the right side of the rapidly changing laws. The attorneys at the Conkle firm stay abreast of developments and are well equipped to help your business navigate all aspects of wage & hour, discrimination, class actions, Private Attorney General (PAGA) claims and employment law, including the intersection of employment arbitration and litigation. Conkle, Kremer & Engel attorneys have many years of experience drafting arbitration provisions in conformance with California law and handling employment disputes—whether in arbitration or litigation.

Amanda Washton and Alec Pressly

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Class Actions, Contracts, Contracts, Business and Finance, Discrimination, Employment Law, Litigation, Arbitration and Mediation

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Changing Messages from Courts on AB 51: Now Employers Cannot Require Arbitration Agreements

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Changing Messages from Courts on AB 51: Now Employers Cannot Require Arbitration Agreements
Note:  For updated developments on the long-running saga of AB 51, see our February 2023 blog post: “AB51, California’s Law Against Mandatory Employee Arbitration Agreements, is Invalidated”

For those employers who have been following the evolving history of Assembly Bill 51 (“AB 51”), which regulates California employers’ ability to have agreements to arbitrate any disputes with their prospective or hired employees, there is a new twist:  In a September 15, 2021 decision, Chamber of Commerce of the U.S., et al. v. Bonta, et al., Case No. 20-15291, the Ninth Circuit Court of Appeal reversed a District Court decision to conclude that the Federal Arbitration Act (“FAA”) did not preempt California AB 51’s ban on employment conditioned upon mandatory arbitration agreements. As explained below, this Ninth Circuit ruling may soon have a substantial impact on employers’ arbitration policies going forward.

In 2019, California passed AB 51, which added section 432.6 to the California Labor Code and section 12953 to the California Government Code to generally prohibit employers from requiring applicants or employees to agree to arbitrate as a condition of employment. AB 51 made it illegal for an employer to require applicants or employees, as a condition of employment, continued employment, or the receipt of any employment-related benefit, to waive any rights, forum, or procedure established by the California Fair Employment and Housing Act (“FEHA”) and the California Labor Code. The Conkle firm has written previously about the potential effects of AB 51.

AB 51 had been set to take effect on January 1, 2020, but on December 30, 2019, U.S. District Court Judge Kimberly Mueller issued a preliminary injunction, preventing AB51 from taking effect. Judge Mueller concluded that “AB 51 placed agreements to arbitrate on unequal footing with other contracts and also that it stood as an obstacle to the purposes and objectives of the FAA.” Bonta, No. 20-15291 at 12. In other words, Judge Mueller decided that AB 51 discriminated against arbitration agreements in a manner that is prohibited by the superseding federal law of arbitrations, the FAA.

California appealed Judge Mueller’s ruling.  On September 15, 2021, the U.S. Court of Appeals for the Ninth Circuit issued a split (2-1) decision partially reversing the District Court’s order. The Ninth Circuit held that the FAA did not preempt AB 51 with respect to its prevention of conditioning employment on the signing of an arbitration agreement. On this basis, the Ninth Circuit vacated the preliminary injunction that had stopped AB 51’s enforcement, so at present there is nothing stopping AB 51 from taking effect very soon.

For employers, this means that, unless there are further decisions by the Ninth Circuit or the United States Supreme Court, AB 51’s mandate that employers cannot condition employment or continued employment on the signing of an arbitration agreement will shortly go into effect. However, employers should be aware that AB 51 does not apply retroactively, which means that arbitration agreements previously signed by employers before AB 51 can still be enforced.  ([Proposed] Labor Code §432(f).)

A common question Conkle, Kremer & Engel attorneys are receiving is whether, even under AB 51, an employer is allowed to request that employees or prospective employees sign an arbitration agreement. The answer is yes. However, because the Ninth Circuit’s decision is somewhat muddled on this point, there is no clear answer to the natural follow up question, “What can I do if the employee refuses?”

The Ninth Circuit reasoned that the enforcement provisions of AB 51 are preempted “to the extent that they apply to executed arbitration agreements covered by the FAA.” Bonta, No. 20-15291 at 29. The dissent in Bonta attacks the majority’s reasoning as illogical:

In case the effect of this novel holding is not clear, it means that if the employer offers an arbitration agreement to the prospective employee as a condition of employment, and the prospective employee executes the agreement, the employer may not be held civilly or criminally liable. But if the prospective employee refuses to sign, then the FAA does not preempt civil and criminal liability for the employer under AB 51’s provisions.

Bonta, No. 20-15291 at 47. As the dissent argues, the majority’s reasoning could result in liability to the employer where the employer fails while attempting to engage in the prohibited conduct of forcing an employee or prospective employee to sign an arbitration agreement, but the employer would not have liability when the employer succeeds in engaging in that same prohibited conduct.

What does this ultimately mean for employers? We expect the Ninth Circuit’s ruling to be challenged by a request for an en banc review by a larger panel of the Ninth Circuit’s justices, or by a writ to the U.S. Supreme Court (which has recently been quite hostile to Ninth Circuit rulings that it has chosen to review).  Such a challenge could result in yet another “stay” that would effectively restore the injunction issued by Judge Mueller and preclude AB 51 from taking effect. However, unless a stay is issued, AB 51 is set to go into effect in the near future.

While much uncertainty remains as a result of the Ninth Circuit’s ruling, AB 51 will increase potential liability for employers that condition employment on arbitration agreements, as well as provide more power to employees who do not wish to arbitrate. Employers that currently have policies conditioning employment or continued employment on the signing of an arbitration agreement should continue to monitor the status of AB 51, should prepare for the possibility that it will not be able to require arbitration agreements going forward and should reevaluate the benefits and risks related to conditioning employment on the signing of an arbitration agreement.

CK&E attorneys keep updated on developments in the law that affect employers in California, including their rights to arbitrate disputes with applicants and employees.  Stay tuned for additional developments in this saga of AB 51.

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Banking and Finance, Beauty Industry, Class Actions, Contracts, Business and Finance, Employment Law, Fashion, Food, Craft Beer and Nutrition, Industries Represented, Litigation, Arbitration and Mediation, Manufacturing, Real Estate & Construction, Sales, Technology

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Can Employers Require Employees to be Vaccinated Against COVID-19?

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Can Employers Require Employees to be Vaccinated Against COVID-19?

As we have discussed in previous Coronavirus-related blog posts, employers have a general duty to provide a safe and healthy workplace that is free from serious recognized hazards where possible (meaning that such hazards are either nonexistent, eliminated, or reduced to a safe or acceptable level).  While most regions have tiered or priority programs in which newly-released COVID-19 vaccines will only be made available to certain age groups or industry sectors after higher-risk individuals are vaccinated, as the vaccines are made more widely available, “essential” employers and employers who may be planning to resume or increase the scope of their on-premises operations may see vaccination as an important tool to ensure the maximum level of safety within their workplaces.

These employers likely have many questions about COVID-19 vaccines, such as whether they may be able to require employees to be vaccinated against COVID-19 as a condition to being permitted at the workplace, how a vaccination program implicates disability and other related privacy issues and laws, and whether not requiring such vaccinations (or leaving it up to employees) could open them up to potential liability.

Addressing some of these concerns, the federal Equal Employment Opportunity Commission (EEOC) recently released guidance for employers regarding workplace vaccine mandates (see Section K). While the EEOC guidance does not make any blanket rule regarding the permissibility of mandatory vaccinations, it does give recommendations on how an employer should navigate the various concerns that arise in administering a vaccination program.  (But be aware that state health departments may release guidance or rules different from the EEOC and that union workers in particular may have collective bargaining agreements containing particular rules that must be taken into account.)

Vaccines are not Medical Examinations Under the ADA, but Employers Should be Careful with Inquiries Surrounding a Vaccine

The EEOC guidance initially provides that the administration of Coronavirus vaccines is not considered a “medical examination” under the Americans with Disabilities Act (ADA), but that employers should be careful when posing any pre-screening vaccination questions to their employees that might implicate the ADA’s rules regarding inquiries which are likely to elicit information about an employee disability.  Any pre-screening questions (i.e. to determine whether there is a medical reason that would prevent the employee from receiving the vaccine) must be job-related and consistent with business necessity – an employer must have a reasonable belief, based on objective evidence, that an employee that does not answer pre-screening questions and does not receive the vaccine will pose a direct threat to the health or safety of herself or others.  Though the EEOC has previously stated that “based on the guidance of the CDC and public health authorities […] the COVID-19 pandemic meets the direct threat standard,” this assessment may change moving forward, and an employer’s response to the “direct threat” concern will likely differ depending on industry and other workplace contexts.  In workplaces with significant worker density or customer contact, the threat is generally considered greater than in workplaces with limited interpersonal contact or the ability to work from home.  Under the guidance, these concerns apply equally to requests for an employee to show proof of a COVID-19 vaccine – the request by itself is not a disability-related inquiry, but any questions asking for reasons for not obtaining a vaccine may be.

The guidance identifies two circumstances in which disability-related screening questions can be asked of employees without needing to satisfy the “job-related and consistent with business necessity” requirement.  First, if the vaccination program is voluntary rather than mandatory, an employee’s decision to answer screening questions is also voluntary.  In such case, if an employee declines to answer screening questions an employer can decline to administer the vaccine, but the employer cannot retaliate against that employee in any manner for her decision.  The second circumstance is when employees receive an employer-required vaccination from a third party not under contract with the employer, such as a pharmacy.  However, the guidance cautions that any employee medical information obtained in the course of a vaccination program must be kept confidential by the employer, and that employers should advise employees not to provide medical information to the employer when providing proof of vaccination.

If an Employee Cannot Receive the Vaccine due to Disability or Religious Belief, Employers Must Try to Make Accomodations Where Feasible

Per the guidance, if an employee indicates that she is unable to receive a COVID-19 vaccination because of a disability, employers must conduct an individualized assessment of four factors in determining whether there is a direct threat to the health or safety of others in the workplace – the duration of the risk, the nature and severity of the potential harm, the likelihood that the potential harm will occur, and the imminence of the potential harm.  An employer cannot exclude an unvaccinated employee from the workplace unless there is no way to provide a reasonable accommodation to that employee that will eliminate or satisfactorily reduce the threat without undue hardship to the employer.  If such a threat cannot be reduced to an acceptable level, the employer can forbid the employee’s physical presence at the workplace.  However, this does not mean the employer may automatically terminate the employee – in some cases, the employee may be able to work remotely or may be eligible to take leave under various Coronavirus-related legislation, state law, or the employer’s own policies.  Employers should be sensitive to accommodation requests by employees and should engage in an interactive process that takes into account the nature of the industry, the employee’s role, CDC or other health official guidance regarding the current prevalence and severity of Coronavirus outbreaks, and whether an accommodation poses significant expense or difficulty to the employer.

The same standards and practices apply if an employee’s sincerely held religious belief prevents the employee from receiving the vaccine – while an employer should assume that a professed belief is sincerely held, if there is an objective basis for questioning the claimed belief, the employer may be justified in requesting additional information.

Further, the guidance refers to FDA literature providing that particularly because the COVID-19 vaccine is available under an Emergency Use Authorization (EUA) instead of traditional FDA approval, any person may opt out of receiving the vaccine.  As such, even if it is unclear whether disability or religious concerns motivate an employee’s decision to decline a vaccine, an employer should still likely make whatever reasonable accommodations are possible based on individualized assessments of the four factors described above.

The Genetic Information Nondiscrimination Act (GINA) is not Implicated by Employer Administration of a Coronavirus Vaccine

The guidance provides that because the COVID-19 vaccines, even though they use mRNA technology, do not involve the use of genetic information to make employment decisions or require the employer’s acquisition or the employee’s disclosure of employees’ genetic information.  However, as with disability concerns, employers should be careful to avoid pre-screening questions that specifically seek to obtain “genetic information” about their employees, which can include information about family medical history.

Practical Impacts for Employers Based on the Guidance

Based on the foregoing, employers, depending on the industry and the threat that unvaccinated workers may pose in a particular workplace, may find it easier to encourage but not necessarily require Coronavirus vaccinations, and, if vaccinations are required, employers may find it easier to have employees obtain the vaccines from third parties rather than the employer administering the vaccines.  Employers who do decide to create a vaccination program should create a thoughtful, formal process that both demonstrates reasonable efforts to maintain a workplace free of “direct threats” given the context of the business and takes the various health and privacy-related laws into account.  Protocols should be well-documented, including pre-screening questions and opt-out situations but, again, documentation must be held confidentially and employee inquiries should be narrow.  In some industries (for example, the California health care industry), employers are required to offer certain vaccines to their employees free of charge (and to provide technical information to employees regarding the vaccine itself), though it is unclear whether that requirement would be expanded to all California employers with respect to the COVID-19 vaccine.

An employer with employees who decline to take the vaccine may wish to have those employees sign a statement acknowledging the risks to that employee in making that decision, similar to the declination statement required in health care workplaces in California, and/or a liability waiver.  The employer may also want to post prominent signage or bulletins in its workplace regarding its Coronavirus protocols (which is already required in many instances) that includes some manner of information about the business’ vaccination policy in order to allow customers and others who enter the premises to be informed.  While such documentation may not eliminate liability, it may help to reduce it.

As always, the law surrounding Coronavirus issues in the workplace is constantly evolving.  The foregoing is not intended to be an exhaustive representation of federal, state, and local laws and directives regarding COVID-19, but is rather general information about some of the EEOC’s latest positions and how employers might be able to utilize those positions in the context of the particulars of their own workplaces.  Employers should always consult with the experienced attorneys before taking steps to implement a vaccination policy.  Conkle, Kremer & Engel attorneys stay up to date and are ready to help employers understand and implement practices regarding the Coronavirus vaccine in their  particular workplace circumstances.

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JAN
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ADA - Americans with Disabilities Act, Banking and Finance, Beauty Industry, Discrimination, Employment Law, Fashion, Food, Craft Beer and Nutrition, Industries Represented, Manufacturing, Real Estate & Construction, Regulatory Compliance, Sales, Technology

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Conkle Firm Q&A About Coronavirus Effects in Beauty Industry Report

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Conkle Firm Q&A About Coronavirus Effects in Beauty Industry Report

Conkle, Kremer & Engel attorney Eric Engel appeared in a recent Q&A concerning COVID-19’s effects and predictions for the personal care products business in Beauty Industry Report COVID-19 Special Report. Readers were reminded that, as they adapt and plan, they must remember and respect the classic issues such as correct labor and employment practices that are not changed by the crisis. If anything, the contract and labor disruptions of the emergency conditions will exaggerate those issues if they are forgotten in the rush to adapt and reopen business.

CK&E attorneys stay current on developments in the coronavirus pandemic, while being watchful for the kinds of issues that can undermine clients, to help clients adapt and thrive in challenging business environments.

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JUN
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Beauty Industry, Coronavirus and COVID-19 Regulations, Employment Law, Personal Care Products, Uncategorized

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LGBTQ Discrimination is Now Prohibited Nationally, but California was Ahead of the Trend

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LGBTQ Discrimination is Now Prohibited Nationally, but California was Ahead of the Trend

As headlines across the country have blared, on June 15, 2020 in Bostock v. Clayton County, Georgia the U.S. Supreme Court ruled that firing an individual for being homosexual or transgender is unlawful employment discrimination on the basis of sex under Title VII of the U.S. Civil Rights Act of 1964. But this rule is nothing new in California, which has long prohibited employment and housing discrimination on the basis of an individual’s LGBTQ characteristics.

Title VII’s message is “simple but momentous”: An individual employee’s sex is “not relevant to the selection, evaluation, or compensation of employees.” The statute’s message for our cases is equally simple and momentous: An individual’s homosexuality or transgender status is not relevant to employment decisions.

Bostock v. Clayton County, Georgia, U.S. Supreme Court

In bold and straightforward language the U.S. Supreme Court’s Bostock decision affirmed that any consideration of sex, homosexuality or transgender status in the course of adverse employment decisions is a violation of Title VII, even if there were other factors in the decision:

An employer violates Title VII when it intentionally fires an individual employee based in part on sex. It doesn’t matter if other factors besides the plaintiff ’s sex contributed to the decision. And it doesn’t matter if the employer treated women as a group the same when compared to men as a group. If the employer intentionally relies in part on an individual employee’s sex when deciding to discharge the employee—put differently, if changing the employee’s sex would have yielded a different choice by the employer—a statutory violation has occurred.

California’s equivalent rule is based on its Fair Employment and Housing Act (FEHA), which prevents employers from in any manner “discriminating” against persons based on their sex, gender, gender identity, gender expression or sexual orientation (among many other protected classes). While news stories about the Bostock decision emphasized hiring and firing decisions, “discrimination” can involve much broader employment concerns that involve consideration of prohibited classifications, such as:

  • – Transferring, demoting or taking other “adverse employment actions” with respect to an employee
  • – Paying an employee less than similarly situated employees
  • – Providing fewer or worse benefits to an employee than similarly situated employees
  • – Requiring additional conditions of employment for one employee compared to similarly situated employees

The U.S. Supreme Court’s decision did not weaken California’s existing protections for gay and transgender individuals, but provides an additional source of protection for them. California employers should continue to actively prohibit and take all reasonable steps to prevent discrimination in the workplace, and keep in mind that unlawful “discrimination” can encompass many types of adverse employment actions beyond hiring and firing decisions.

To guide our business clients, Conkle, Kremer & Engel attorneys stay updated on the latest developments in employment law, including anti-discrimination and wage & hour concerns.

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U.S. Dept. of Labor Publishes FAQ Guidelines for FFCRA

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U.S. Dept. of Labor Publishes FAQ Guidelines for FFCRA

We recently posted about the U.S. Families First Coronavirus Response Act (FFCRA), including its most important components, the Emergency Paid Sick Leave Act and the Emergency Medical Leave Expansion Act. As with most of the major new enactments intended to address COVID-19 issues, there was so little lead time that widespread confusion followed. The U.S. government has provided updates and guidelines to try to clarify the application of the FFCRA.

Most recently, the Department of Labor (DOL) has provided a “FAQ” response with more specific guidance to employers about how to comply with the FFCRA. These are some of the most important takeaways for employers:

  1. The DOL cleared up ambiguity surrounding whether state and local “stay at home” orders are considered a “quarantine or isolation order” for purposes of qualifying for EPSL under the FFCRA. The DOL guidance provides that a quarantine or isolation order includes a broad range of governmental orders including orders that “advise some or all citizens to shelter in place, stay at home, quarantine, or otherwise restrict their own mobility.” However, the government order must be the “but for” cause of the inability to work. An employee subject to one of these orders may not take paid sick leave where the employer does not have work for the employee, such as due to a downturn in business related to COVID-19, because the employee would be unable to work even if he or she were not required to comply with the quarantine or isolation order.
  2. Employees are not entitled to take EPSL or Emergency Family and Medical Leave (EFML) if their employer’s business has been forced to shut down in response to a federal, state or local government directive.
  3. If an employee takes EFML, an employer may require that the employee concurrently use any leave offered under the employer’s policies that would be available for the employee to take to care for his or her child, such as vacation, personal leave, or paid time off. No such provision exists with respect to EPSL.
  4. The DOL also provided additional guidance on the specific factors a small employer, with fewer than 50 employees, must show to receive an exemption from the requirement to provide leave under the FFCRA, when doing so would “jeopardize the viability of the business as a going concern.”
  5. Employers whose employees are teleworking should bear in mind that they are still required to comply with labor laws. Employees who are teleworking for COVID-19 related reasons must always record, and be compensated for, all hours worked, including overtime.
  6. An employee’s “regular rate of pay” as that phrase is defined under the Fair Labor Standards Act is used to determine the amount an employer must pay an eligible employee who takes EPSL or EFML (after the initial two-week unpaid period). Employers need to ensure they are accurately calculating employees’ regular rate of pay when compensating employees for paid leave.

The DOL’s FAQs, available here, provide needed guidance to help employers interpret and comply with the FFCRA. Conkle, Kremer & Engel attorneys continue to monitor and advise clients about the legal events affecting businesses trying to manage the impact of the COVID-19 pandemic.

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Banking and Finance, Beauty Industry, Coronavirus and COVID-19 Regulations, Employment Law, Fashion, Food, Craft Beer and Nutrition, Industries Represented, Manufacturing, Real Estate & Construction, Regulatory Compliance, Sales, Technology

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Ready or Not, FFCRA is Here

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Ready or Not, FFCRA is Here

The new Families First Coronavirus Response Act (FFCRA) became effective April 1, 2020, as the first substantial U.S. labor law response to the extensive disruption of employment resulting from COVID-19. Employers with fewer than 500 employees are affected, and need to understand its implications to be able to respond legally and appropriately. The most important parts of FFCRA are divided into three sections:

  • Emergency Paid Sick Leave Act (EPSLA)
  • Emergency Family and Medical Leave Expansion Act (EFMLA)
  • Tax Credits for Paid Sick and Paid Family and Medical Leave.

Be sure to read to the end – the Tax Credits are how employers get repaid the benefits that FFCRA requires them to pay employees.

Employers’ Notice Posting Requirements Under the FFCRA

As an initial note, the Department of Labor (DOL) has issued guidance on the FFCRA providing that employers with fewer than 500 employees are required to post a Notice of employees’ paid leave rights under the FFCRA conspicuously in their workplace. If some or all of an employer’s workers are working remotely, this notice requirement can be satisfied via email, regular mail, or a posting to the employer’s internal or external website. Employees who were recently laid off need not be provided with the Notice. The DOL guidelines will be the subject of another blog post in the near future.

The Emergency Paid Sick Leave Act (EPSLA)

The EPSLA requires employers with fewer than 500 employees to provide employees with Emergency Paid Sick Leave (EPSL), in addition to any leave accrued pursuant to the employer’s existing paid sick leave policy. An employee is entitled to use EPSL if the employee is unable to work or telework because they are:

  1. Subject to a federal, state or local quarantine or isolation order
  2. Advised by a health care provider to self-quarantine
  3. Experiencing COVID-19 symptoms and seeking medical diagnosis
  4. Caring for an individual subject to a federal, state or local quarantine or isolation order or advised by a health care provider to self-quarantine due to COVID-19 concerns
  5. Caring for the employee’s child if the child’s school or place of care is closed or the child’s care provider is unavailable due to public health emergency
  6. Experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor

Employees qualify for emergency paid sick leave regardless of the duration of their employment prior to the leave, and cannot be forced to exhaust other forms of accrued leave prior to using the new emergency paid sick leave. Employers must pay eligible employees for EPSL, but the FFCRA places caps on the amount:

• Full-time employees are to be paid for 80 hours at their “regular rate of pay” (as defined in the Fair Labor Standard Act) when the emergency paid sick leave taken for reasons 1 though 3 (limited to $511/day or $5,110 total per employee); and two-thirds of the employee’s regular rate of pay when leave is taken for reasons 4 through 6 (limited to $200/day, or $2,000 total per employee).
• Part-time employees are to be paid in the same manner, except the number of hours is based on the average number of hours worked over a two-week period.

The Emergency Family and Medical Leave Expansion Act (EFMLEA)

EFMLEA requires affected employers to allow eligible employees to take up to 12 weeks of paid leave if they are unable to work or telework due to the need to care for their minor child because the child’s school or childcare is unavailable due to Coronavirus-related reasons. The first 14 days (2 weeks) of the leave is unpaid, but the remaining 10 weeks must be paid at two-thirds of the employee’s regular rate of pay (limited to $200/day and $10,000 in the aggregate per employee). Note that an employee may elect to use ordinary accrued paid sick, vacation and/or PTO leave to cover the initial 10-day unpaid time period, and may also qualify for EPSLA.

Employers with 25 or more employees are required to return any employee who takes EFMLEA leave under this section to the same or an equivalent position upon the employee’s return to work. Employers with fewer than 25 employees are exempted from this requirement if they can show that, despite good faith efforts to restore the employee’s position, due to economic hardship no such position exists following the leave.

The DOL has advised that employers with fewer than 50 employees qualify for exemption from providing EFMLEA leave if it would “jeopardize the viability of the business as a going concern.” Employers seeking this exemption should document why their business meets this criteria.

Employer Tax Credits For Paid Leave under FFCRA

FFCRA includes crucial tax credit provisions intended to reimburse employers for mandatory employees’ paid leave benefits under the FFCRA. 100 percent of qualified (i.e. subject to the limits discussed above) sick and family leave payments made each quarter, through December 31, 2020, are exempt from the employer’s portion of payroll taxes. The credit is an offset to any payroll tax liability the employer has in the calendar quarter. Any excess amounts of paid leave above the employer-portion of the payroll taxes and deposit will be refunded to the employer. Employers should consult a tax professional regarding the full scope and limitations of these tax credits as they apply to their businesses.

Employers Who Shut Down Operations or “Furlough” Employees Need Not Provide FFCRA Leave

The DOL’s guidance provides that employees are not entitled to take paid sick leave or family and medical leave if their employer closes their worksite before, on or after April 1, 2020 (or if the business stays open on or after April 1, 2020, and employees are furloughed) if the business has been forced to shut down in response to a federal, state or local government directive.

Attorneys at Conkle, Kremer & Engel are monitoring the many legal implications of employers’ responses to COVID-19. CK&E is available to help businesses navigate compliance with the FFCRA, and other federal, state and local regulations intended to address the Coronavirus pandemic.

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Banking and Finance, Beauty Industry, Coronavirus and COVID-19 Regulations, Employment Law, Fashion, Food, Craft Beer and Nutrition, Industries Represented, Manufacturing, Real Estate & Construction, Sales, Technology

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Employers’ Duties to Maintain Employee Privacy in a COVID-19 Pandemic

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Employers’ Duties to Maintain Employee Privacy in a COVID-19 Pandemic

Dealing with illness in the workplace can be challenging under normal circumstances, but it is much more so in the midst of the Coronavirus pandemic. Many questions remain unanswered regarding the precise application of federal, state and local orders and their relationship with employee benefits. As COVID-19 becomes an increasing presence in California workplaces, and employers are forced to comply with government directives, it is just as important as ever for employers to take steps to maintain compliance with employee privacy regulations. Workers who suffer adverse employment decisions, such as pay reductions, furloughs and layoffs, may be particularly attuned to whether all their rights were respected in the process.

How much information may an employer request from an employee who calls in sick, in order to protect the rest of its workforce during the COVID-19 pandemic?

According to Guidance provided by the Equal Employment Opportunity Commission (EEOC) addressing the COVID-19 pandemic, employers covered by the Americans with Disabilities Act (ADA) may ask employees if they are experiencing COVID-19 symptoms such as fever, chills, cough, shortness of breath, or sore throat, but employers must maintain all information about employee illness as a confidential medical record in compliance with the ADA.

Does an employer have a duty to inform employees that one of their colleagues has tested positive for COVID-19?

Employers may be uncertain about whether to tell employees that there has been a reported case of COVID-19 in the workplace. Depending on the particular facts involved, information regarding illness of an employee or family member may be protected under the Health Insurance Portability and Accountability Act (HIPAA), the ADA or both.

A pandemic, on the other hand, likely alters those practices. In light of the rapid spread of COVID-19, employers should promptly inform workers if one of their colleagues tests positive for the virus. However, employers typically need not divulge the identity of an employee or employee’s family member to achieve the objective of maintaining a healthy workplace.

Employers may also choose to notify employees and other relevant parties that contagious illnesses may be present in any workplace and list precautionary steps suggested by medical professionals, such as the CDC. Even when not specifically required by law, it is important for business effectiveness to maintain the privacy of individual employees. These matters are best handled carefully to prevent unnecessary disruption in the workplace.

How should the employer communicate to employees that one of their colleagues has a suspected or confirmed case of COVID-19?

Clear, effective employer communications are critical to providing employees with relevant information, maintain order in the workplace, and reduce employees’ concerns. Employers should keep the following in mind when developing employee communications:

• Inform employees that the company will take any reasonable and necessary steps to ensure a safe and healthy work environment.
• Identify typical symptoms employees should watch out for.
• Include information on how to protect against getting the illness.
• Advise employees of any changes to policies.
• Notify employees of any discontinued travel.
• Ensure HR is available and prepared to address employees’ questions

What Are Employers’ Obligations to Prevent Harassment of Those Suspected of Being Infected?

Employers must take steps to prevent discrimination and harassment against individuals who have a potential claim that they are disabled due to a COVID-19 related reason. Employers should consider reminding employees of anti-harassment and discrimination company policies. Employers must be vigilant about promptly responding to and investigating any complaints of harassment or bullying in the workplace, and be conscious to limit the spread of rumors and speculation amongst the workforce.

Under the ADA, may an employer to require employees to provide a doctors’ notes certifying their fitness for duty when they return to work?

The EEOC says yes. The ADA permits such inquiries either because they would not be disability-related or, are justified under the ADA standards for disability-related inquiries of employees given the COVID-19 outbreak. However, doctors and other health care professionals may be too busy during and immediately after a pandemic outbreak to provide fitness-for-duty documentation. Therefore, new approaches may be necessary, such as reliance on local clinics to provide a form, a stamp, or an e-mail to certify that an individual does not have the pandemic virus.

Conkle, Kremer and Engel’s attorneys follow the legal developments concerning Coronavirus issues at the federal, state and local level. We are available to assist employers navigate their rights and obligations in these difficult times.

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U.S. CARES Act: PPP Loans Provide Gifts for Careful Employers

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U.S. CARES Act: PPP Loans Provide Gifts for Careful Employers

The U.S. Coronavirus Aid, Relief, and Economic Security (“CARES”) Act passed on March 27, 2020, and signed into law by President Trump on March 28, 2020, aims to address some of the economic impact of the COVID-19 crisis. The entire act is a $2 Trillion economic stimulus package – the largest ever. Aside from the well-publicized $1,200 per person payments, the CARES Act provides hundreds of billions of dollars for large and small businesses, state and local governments and public health.

Rather than try to summarize the entire CARES Act, we’d like to focus on what many of our clients should pay attention to first: The $349 billion loan fund for small businesses called the “Paycheck Protection Program” (“PPP”) administered by the Small Business Administration. The PPP is designed to be a huge tax-free gift to employers, provided that the employers are careful about how they use it.

The basic points for PPP loans under the CARES Act are:

  1. PPP loans are available to businesses with fewer than 500 employees, as well as 501(c)(3) non-profits, sole-proprietors, independent contractors and other self-employed individuals, so long as the business was operational and had paid employees on February 15, 2020. Some businesses with multiple locations, each having less than 500 employees, may also qualify (but generally, this is limited to hospitality businesses with a primary NAICS code starting with “72” – Accommodation and Food Service).
  2. Borrowers must make a good faith certification that the PPP loan is necessary due to the uncertainty of the current economic conditions caused by COVID-19.
  3. PPP loans will be issued through regular lenders who already handle SBA loans, in addition to new lenders electing to provide PPP loans. Your regular bank is likely to offer PPP loans.
  4. The amount of the PPP loan is at the borrower’s choice, but the maximum amount of a PPP loan is 2.5 times the business’ average monthly payroll expenses for the past year, up to $10 million.
  5. Most of the usual “red tape” for SBA loans has been waived, including determinations of borrower eligibility and creditworthiness. PPP loans are non-recourse, and require no personal guarantees. There are no fees, a maximum interest rate of 4%, and all payments are deferred for 6-12 months.
  6. PPP loans can be used for:
    a. “Payroll Costs” including salaries, vacation and sick leave, health insurance, retirement benefits, and state and local payroll taxes. But “Payroll Costs” does not include compensation for an employee’s annual salary in excess of $100,000. There is some uncertainty about this limitation, but indications are that for highly compensated individuals the first $100,000 in salary can be paid with PPP loan funds.
    b. Rent.
    c. Utilities.
    d. Interest on any debt obligations incurred before February 15, 2020.
  7. The total amount of the PPP loan funds that are used for these approved categories within the eight-week period following loan origination would be forgiven, and the forgiven amount is not taxable. In effect, the PPP loan turns into a tax free grant to the extent that it was used for the approved purposes.
  8. Businesses may elect to use PPP loan funds for other purposes not within the approved categories, but funds spent for “non-approved” uses will not be forgiven and the loan must be repaid with interest.
  9. There is an additional important condition that the PPP borrower must maintain the same number of full time employees, and cannot reduce salaries more than 25%, through June 2020. Otherwise portions of the PPP loan may not be forgiven. If the borrower terminated employees or made salary reductions greater than 25% between February 15, 2020 and April 26, 2020, as long as the employer hires back the same number of employees and restores salaries to sufficient levels by June 30, 2020, the PPP loan funds used for approved purposes will still be forgiven.
  10. One further cautionary note is that borrowers receiving a PPP loan are not be eligible for several of the other tax credits, refunds or deferrals available under the CARES Act, so consulting a tax professional about the value of those benefits to particular businesses would be advisable.

The PPP loan portion of the CARES Act is plainly designed to stem the layoffs and furloughs that have been rampant in the wake of the economic seizure that has been imposed by federal, state and local governments’ “stay at home” guidelines and orders intended to stem the COVID-19 outbreak. This can benefit both employees and employers who need to adapt their businesses to the unsettled conditions in which we find ourselves.

Business owners – from sole proprietors to employers of 499 employees (and some with more) should explore very seriously, very quickly, the virtual giveaway that the PPP loan program represents. If taken, PPP loans demand some care in documenting use of funds to assure compliance with the terms required to be granted forgiveness of the loan and receive the tax-free gift from the U.S. government.

Conkle, Kremer & Engel attorneys stay attuned to legal developments and the opportunities they create for our business clients. The CARES Act is a big opportunity that should be carefully considered and acted upon promptly.

June 18, 2020 Update: PPP funds remain undistributed, and PPP Loan Applications are currently due by June 30, 2020. See our updated blog posts concerning further developments in the PPP program:

CARES Act Update: Application for Paycheck Protection Program Loans And Guidelines Available Here

PPP Flexibility Act’s Changed Timing and Terms of Loan Forgiveness

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What California Employers Must Know About Coronavirus and COVID-19

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What California Employers Must Know About Coronavirus and COVID-19

Federal, California and other state and local governments continue to grapple with responding to and reducing the spread of Coronavirus (severe acute respiratory syndrome coronavirus 2 
(SARS-CoV-2)) and the disease caused by it, COVID-19. In addition to grappling with the personal and family effects, employers must ensure that they have a response plan in place to address Coronavirus’ impact on their business. In doing so, employers must be conscious of responding appropriately in light of the legal and business implications. In some ways, employers are in uncharted territory, but there are guideposts in existing laws and regulations. Here are some of the important considerations for employers to keep in mind in responding to Coronavirus:

Stay Up to Date on Government Guidance

In order to make an educated decision regarding what course of action will best protect employee safety, employers need to stay informed about the latest developments regarding the spread of the virus and adhere to government guidance for responding to the virus.

The Center for Disease Control (“CDC”) has provided Interim Guidance for Business and Employers  meant to help prevent workplace exposures based on the information currently known about the virus. Given the rapidly evolving nature of this situation, employers should check the CDC’s website frequently for updates.

Employee Education to Prevent the Spread of COVID-19 in the Workplace

Some basic steps employers should take to help prevent the spread of Coronavirus and protect workers’ health and safety include:

  • > Educate employees on Coronavirus signs and symptoms and precautions to take to minimize the risk of contracting the virus
  • > Encourage employees to wash hands frequently with soap and water for at least 20 seconds, and avoid touching their mouth, nose, and eyes with unwashed hands
  • > Practice social distancing, including minimizing non-essential travel, meetings and visitors
  • > Provide employees who continue to work in the office with hand sanitizer, flu masks, disinfecting wipes and paper towels, instruct them on proper use, and direct them to diligently clean frequently touched surfaces and objects (such as doorknobs, telephones, keyboards and mice)
  • > Actively encourage employees who show any symptoms of the disease caused by Coronavirus (COVID-19) or are close to others who have, to stay home and not come to work

Formulate a Response Plan

Employers should move quickly to implement workplace policies to prevent the spread of the virus and protect employees. Some examples of potential elements of an employer’s response plan may include:

  • > Establish processes to communicate information to employees and business partners on your infectious disease outbreak response plan
  • > Review human resources policies to make sure that policies and practices are consistent with public health recommendations and existing state and federal workplace laws
  • > Increase the frequency and thoroughness of worksite cleaning efforts, particularly in common areas such as bathrooms, break rooms and kitchens
  • > Seriously consider new policies and practices to reduce congregations and increase the physical distance between employees, customers, vendors and others, to reduce the chances for exposure – for example, staggered break times, phone or video conferences instead of meetings
  • > To the extent feasible, ensure that employees have the requisite computer, phone and other technological capabilities to perform their work from home
  • > Formulate plans for suppliers and workers whose jobs cannot be performed remotely, such as staggered schedules and breaks, off-hours deliveries, or having some tasks performed by outside contractors
  • > Encourage employees who are feeling sick to stay home or work remotely, even if they are not showing Coronavirus symptoms
  • > Prepare to respond to employees who may be nervous or concerned about contracting COVID-19. Employers should be understanding of  employees’ concerns and evaluate each request or issue based on the individual employee’s specific circumstances.

Legal Implications of Workplace Strategy

Although there is currently no California law or regulations addressing an employer’s legal obligations relating specifically to Coronavirus, workplace safety and health regulations in California require employers to protect workers exposed to airborne infectious diseases. Therefore, it is important for employers to understand the legal issues implicated by Coronavirus and the guiding legal principles which will inform the employer’s response to the virus.

OSHA Standards for Maintaining a Safe Workplace

Employers have a legal obligation to provide a safe workplace for employees, and the best way to prevent infection is to avoid exposure. The General Duty Clause, Section 5(a)(1) of the OSH Act of 1970, 29 U.S.C. 654(a)(1) requires employers to provide workers with working conditions free from recognized hazards that are causing or are likely to cause death or serious physical harm, to receive information and training about workplace hazards; and to exercise their rights without retaliation, among others.

Cal/OSHA Requirements

The Aerosol Transmissible Diseases (ATD) standard (California Code of Regulations, title 8, section 5199) requires employers to take certain actions to protect employees from airborne diseases and pathogens such as Coronavirus. The regulations apply only to specific industries, such as health care facilities, law enforcement services and public health services, in which employees are reasonably expected to be exposed to suspected or confirmed cases of aerosol transmissible diseases.

The ATD requires such employers to protect employees through a written ATD exposure control plan and procedure, training, and personal protective equipment, among other things. However, the requirements are less stringent in situations where the likelihood of exposure to airborne infectious diseases is reduced. For more information, Cal/OSHA has posted guidance to help employers comply with these safety requirements and to provide workers information on how to protect themselves.

Medical Leave, Paid Sick Leave Issues and Disability Discrimination

If an employee is forced to miss work due to the need to be quarantined or the need to care for a family member for similar reasons, employers must determine whether the Family and Medical Leave Act (FMLA) or other leave laws apply to an employee’s absence. If the employee has exhibited symptoms and is required to be away from work per the advice of a healthcare provider or is needed to care for a family member, leave laws may apply to the absence.

The FMLA regulations state that the flu ordinarily does not meet the Act’s definition of a “serious health condition,” it may qualify if it requires inpatient care or continuing treatment by a health care provider. In addition, eligible employees might be entitled to FMLA leave when taking time off for examinations to determine if a serious health condition exists, and evaluations of the condition, under the FMLA definition of “treatment.”

In contrast, if the employer itself implements health and safety precautions that require the employee to be away from work, an employer should proceed with caution before designating any time away from work as leave under a specific law. Doing so may require that the employee provide such leave when it otherwise would not be required to do so.

Review your sick leave, PTO (paid time off), or vacation policies. Consider reminding workers that the use of paid sick leave (PSL) is available to help workers who are sick to stay home. However, the employer cannot require that the worker use PSL – that is the employee’s choice. Employers may require employees use their vacation or PTO benefits before they are allowed to take unpaid leave, but cannot mandate that employees use PSL.

Employees in California at worksites with 25 or more employees may also be provided up to 40 hours of leave per year for specific school-related emergencies, such as the closure of a child’s school or day care by civil authorities (Labor Code section 230.8). Whether that leave is paid or unpaid depends on the employer’s paid leave, vacation or other PTO policies.

Paying Workers During a Pandemic

Depending on your organization’s business, some employees may be directed to work from home, temporarily furloughed, or work a reduced schedule.

Furloughs and Layoffs

Short-term layoffs or furloughs are generally permitted as long as the criteria for selection are not protected classes such as race, national origin, gender, etc. Exempt employees generally should continue to receive their full salary for each workweek in which they perform work. In contrast, hourly workers need not be paid for time not worked. A short-term layoff or furlough of less than six months should not implicate notice obligations under the Federal Worker Adjustment and Retraining Notification (“WARN”) Act, but may require advance notice under the California WARN Act, which was recently interpreted as having been triggered by certain short-term furloughs.

If non-exempt employees’ work schedules are reduced due to a temporary closure, they need not be paid according to their regular schedule under the Fair Labor Standards Act (FLSA). However, they may be eligible for state Disability Insurance (“DI”), and Paid Family Leave (“PFL”) benefits for caring for themselves or their family members. Employees receiving reduced hours because of the effects of COVID-19 may be eligible for unemployment insurance (“UI”). In California, the Governor’s Executive Order waives the one-week unpaid waiting period for DI and UI, so workers can collect those benefits for the first week out of work.

Resources for Additional Information about Coronavirus from the CDC

For more information about the Coronavirus and how businesses and individuals should best respond, refer to the below resources provided by the CDC and California’s Employment Development Department:

CDC: About Coronavirus and COVID-19

CDC: What You Need to Know About Coronavirus

CDC: Interim Guidance for Businesses and Employers

CDC: Frequently Asked Questions and Answers

EDD: Coronavirus 2019 and COVID-19

CK&E Can Help

During these uncertain and rapidly changing developments, employers need to be proactive and careful as to the steps they take to protect their businesses, employees, customers and vendors. Lawyers at Conkle, Kremer & Engel have decades of experience advising California employers and companies doing business in California about labor, regulatory, consumer and contract concerns. We remain available and ready to help our clients navigate these difficult times. Please contact John Conkle, Amanda Washton or any of our attorneys to discuss your concerns.

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