On March 18, 2020, Congress passed the Families First Coronavirus Response Act (“FFCRA”). The President quickly signed it into law on the same day. The Act provides paid sick time and expands the Family and Medical Leave Act to provide an extended period of unpaid or partially paid leave for qualifying reasons related to the coronavirus [COVID-19] public health emergency. Below is a summary of the portions of the new law relating to employee benefits and employer obligations. Continue Reading
Yesterday, San Francisco Mayor London N. Breed announced a “Workers and Families First Program” to offer additional paid sick leave benefits to employees who have been impacted by the COVID-19 pandemic. It will apply to San Francisco private sector workers, and if fully utilized, it could provide coverage for up to 25,000 San Francisco workers. Fortunately for already-struggling businesses, the Program is not compulsory. In addition, the Program will set aside $10 million in public funding to help offset the burden on who have to provide an additional five days of sick leave pay to workers, beyond their existing policies under SFPLO and state law.
According to the Mayor’s press release, “The Workers and Families First Program will provide City financial assistance to businesses and nonprofits to provide additional paid sick leave time to employees, over and above their existing policies. All San Francisco businesses will be eligible, with up to 20% of funds reserved for small businesses with 50 or fewer employees. The City will contribute up to one week (40 hours) at $15.59 per hour (minimum wage) per employee, or $623 per employee. The employer will pay the difference between the minimum wage and an employee’s full hourly wage.” Continue Reading
On March 12, 2020, in the case Kim v. Reins International California, Inc., the California Supreme Court addressed the issue: “Do employees lose standing to pursue a claim under the Labor Code Private Attorneys General Act (“PAGA”) … if they settle and dismiss their individual claims for Labor Code violations?” Unfortunately, for employers in California, the California Supreme Court held that an employee could continue to pursue PAGA claims against their employers, even if they have settled and dismissed their individual claims, for Labor Code violations against that employer.
Reins operates a number of restaurants in California, and employed the plaintiff, Justin Kim, as a “training manager.” Reins had classified its training managers as an exempt position. Kim sued Reins in a putative class action claiming that he and other training managers had been misclassified. His complaint brought individual claims, class action claims, and also sought civil remedies under PAGA as a result of the alleged misclassification.
Reins moved to enforce an arbitration agreement it had with Kim, dismiss the class action claims and stay the PAGA claim until the arbitration was complete (Reins acknowledged that it could not force arbitration of the PAGA claim). The Court granted Reins’ motion. It dismissed the class action claims and ordered arbitration of the individual claims while staying the PAGA claim pending the outcome of the arbitration. During the arbitration, Kim accepted a settlement offer from Reins and dismissed his individual claims as a result. This resulted in the stay of the PAGA claim being lifted. Reins moved for summary adjudication on the ground that Kim no longer had standing to pursue a PAGA claim given that he had settled and dismissed his individual claims. The trial court agreed with Reins and granted its motion, finding that Kim, by settling his individual claims, was no longer an “aggrieved employee” under PAGA.
The issue of standing acts as kind of a “gate keeper” to the court system, ensuring that courts are only deciding actual controversies between the parties. In order to determine whether Kim had standing to pursue the PAGA claim despite his dismissal of his individual claims, the California Supreme Court looked to the language of the PAGA statute, noting that its job was “to ascertain the intent of the legislature so as to effectuate the purpose of the [PAGA statute].” In looking at the plain language of PAGA as it relates to standing, a plaintiff has to establish two requirements: (1) he or she is someone “who was employed by the alleged violator;” and (2) he or she is someone “against whom one or more of the alleged violations [of the Labor Code] was committed.” The California Supreme Court held that in applying this plain language, both requirements could be readily ascertained. Kim was both employed by Reins and that he had alleged “that he personally suffered at least one Labor Code violation on which the PAGA claim was based.”
Reins argued that although this may have meant that Kim had standing under PAGA at the time he brought his claim, he “lost” standing when he settled and dismissed his individual claim. In particular, Reins argued that once Kim’s “injury” had been settled and thereby “redressed,” it was no longer a “continuing injury” that needed to be addressed under PAGA. The California Supreme Court rejected this argument.
First, the California Supreme Court held that the language of standing under PAGA focuses on the alleged violations, not the alleged injury. In essence, to adopt Reins’ argument, the California Supreme Court felt that it would be inserting “expiration” language into the statute, which it did not feel that it could do under the separation of powers theory. It concluded that the Legislature could have included such language when it enacted PAGA but apparently decided not to. Thus, in interpreting the PAGA standing requirement, the California Supreme Court held, “employees who were subjected to at least one unlawful practice have standing to serve as PAGA representatives, even if they did not personally experience each and every violation.”
Furthermore, under PAGA, a prospective plaintiff must first notify his or her employer and the Labor and Workforce Development Agency of the alleged violations and supporting facts and theories. The LWDA then has 65 days in which to investigate, issue a citation, or otherwise respond to the employee’s notice. If the LWDA fails to do one of these things within that time period, the employee may then bring a PAGA claim. The California Supreme Court concluded that the statutory purpose of PAGA was to allow private individuals, such as Kim, to seek to enforce PAGA as a means of augmenting “the limited enforcement capability of the [LWDA].” Thus, the Court noted that focusing on the PAGA plaintiff individual’s claims shifts focus from the proper role of the plaintiff who is instead “acting on behalf of the government.”
Likewise, although a representative of a class action can lose his or her ability to represent the class if he or she settles and dismisses her individual claims, the Court concluded that PAGA is not analogous to a class action. Rather, the California Supreme Court concluded, “Every PAGA action … is a representative action on behalf of the State” and not on a particular class.
The California Supreme Court also reasoned that allowing an employer to avoid PAGA penalties by settling a representative’s individual claims would frustrate the State’s ability to collect and distribute civil penalties that are supposed to be collected in connection with PAGA claims. The California Supreme Court was concerned that the State’s ability to recover future PAGA monies “would be diminished” and that “employers could potentially avoid paying any penalties to the state simply by settling with the individual employees.”
California employers need to be aware of the significance of the California Supreme Court’s Kim decision, especially in strategizing how to address alleged Labor Code violations brought by a single employee. Employers may now be forced to focus more on litigating the PAGA claims rather than trying to avoid those claims by seeking to settle and/or dismiss a representative employee’s individual claims.
The State of California filed an appeal last week to challenge a federal court’s order barring California from enforcing a new state law that would curtail workplace arbitration agreements. Unless the State takes some additional action, the lower court’s ban on enforcement of the new law, AB 51, will remain in effect during the appeal.
The new law would prohibit employers from requiring employees to agree to arbitrate claims alleging violations of the California’s Fair Employment and Housing Act and Labor Code. Many employers are especially concerned that AB 51 could impose imprisonment and fines on those who try to condition employment on workers signing arbitration agreements. However, proponents of the new law contend that it is needed to prevent employers from depriving mistreated workers of having their day in court (or in administrative agencies created to remedy workplace violations).
In rulings on January 31 and February 7, 2020, U.S. District Judge Kimberly Mueller (of the Eastern District of California, in Sacramento) issued a preliminary injunction barring the State from enforcing AB 51. That preliminary injunction is not permanent, but would remain in place until the district court decides whether to issue a permanent injunction. On February 19, 2020, the State filed its notice asking the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) to reverse the preliminary injunction.
Now that its appeal is on file, the State may ask either Judge Mueller or the Ninth Circuit to suspend enforcement of the preliminary injunction until the outcome of the appeal. If the State were to proffer such a request, and if the courts were to grant it, such a ruling would allow the State to enforce the ban on arbitration agreements while the appeal is pending.
Regardless of whether the State seeks or obtains such a stay, employers who wish to secure arbitration agreements from employees should consult with competent legal counsel. The district court case is Chamber of Commerce of the USA et al. v. Becerra et al., U.S. Dist. Ct. E.D. Cal. Case No. 2:19-cv-02456-KJM-DB. The Ninth Circuit case is Chamber of Commerce of the USA et al. v. Becerra et al., Case No. 20-15291.
A federal court in Sacramento explained last week its rationale for temporarily barring the State of California from enforcing a new law, AB 51, that would curtail employment arbitration agreements. The rationale set forth in that written order of February 7, 2020, strongly suggests (but does not guarantee) that the court is inclined to permanently enjoin the State from enforcing that new law.
By adding section 432.6 to the California Labor Code, AB 51 would have banned employers from requiring employees to agree to arbitrate claims alleging violations of the California’s Fair Employment and Housing Act and Labor Code. On December 30, 2019, U.S. District Judge Kimberly Mueller granted a temporary restraining order barring the State from enforcing that new law until a hearing could be held in early January 2020.
Then, in a ruling on January 31, 2020, the court converted its temporary restraining order into a preliminary injunction. The preliminary injunction enjoins the State from enforcing AB 51 as it relates to arbitration agreements that are governed by the Federal Arbitration Act (“FAA”). That preliminary injunction is not permanent, but will remain in place until the court decides whether to issue a permanent injunction.
Judge Mueller’s ruling last month did not “explain the reasoning” for issuing the preliminary injunction; however, she promised to do so “in a detailed, written order” that would be dispatched shortly thereafter. On February 7, 2020, Judge Mueller issued that detailed written order in Chamber of Commerce of the United States, et al. v. Becerra, et al., U.S. Dist. Ct. E.D. Cal. Case No. 2:19-cv-2456.
The State had challenged the legality of issuing such an injunction, arguing that the plaintiffs did not have legal standing to bring the action and that the federal court lacked jurisdiction to hear the case. Judge Mueller’s detailed written order rejects those arguments.
That detailed order also sets forth the court’s analysis on the following four factors: (1) the likelihood of the plaintiffs succeeding on the merits of their claim that AB 51 runs afoul of the FAA, (2) the probability that plaintiffs would suffer irreparable harm absent a preliminary injunction, (3) the balance of the equities, and (4) whether ordering such an injunction is in the public interest.
The court was persuaded that the plaintiffs were likely to succeed on the merits for a number of reasons. First, Judge Mueller agreed that AB 51 violates the FAA by treating arbitration agreements differently than other contracts. Second, the court found that, by imposing penalties against employers who require their employees to enter arbitration agreements, AB 51 interferes with the FAA’s goal of promoting arbitration.
Given such circumstances, Judge Mueller was convinced that employers would be harmed if she declined to issue a preliminary injunction. In that vein, she explained that employers who comply with AB 51 would sacrifice their federal right to require arbitration agreements under the FAA; meanwhile, employers who fail to comply with AB 51 may be subject to civil and criminal penalties.
The court ultimately concluded that the balance of the equities and the public interest supported issuing a preliminary injunction. Judge Mueller elaborated that ensuring the supremacy of federal laws is of “paramount” importance.
While the court’s ruling is a good sign that it will at some point permanently bar the State from enforcing AB 51, it remains to be seen if the State can avoid that outcome. And while this preliminary injunction is likely appealable, there is no indication yet as to whether the State will pursue such an appeal or merely continuing litigating in the trial court against the imposition of a permanent injunction. As these developments unfold, employers who wish to secure arbitration agreements from employees should consult with competent legal counsel.
A federal judge in Sacramento has continued an order that temporarily bars the State of California from enforcing a new state law that would curtail employment arbitration agreements. The new law, AB 51, which added section 432.6 to the California Labor Code, would have banned employers from requiring employees to agree to arbitrate claims alleging violations of certain state workplace laws; specifically, the Fair Employment and Housing Act and the Labor Code.
At a hearing on January 31, 2020, U.S. District Judge Kimberly Mueller converted her prior temporary restraining order into a preliminary injunction barring the state from enforcing the new law. In the minute order memorializing that ruling, Judge Mueller stated that she would “explain [her] reasoning in a detailed, written order” that will be dispatched “[i]n the coming days.” The case is Chamber of Commerce of the USA et al. v. Becerra et al., U.S. Dist. Ct. E.D. Cal. Case No. 2:19-cv-02456-KJM-DB.
In federal court, there are basically three types of injunctions that compel parties to do or stop doing a particular act; namely, 1) temporary restraining orders, 2) preliminary injunctions, and 3) permanent injunctions. Courts generally issue temporary restraining orders and preliminary injunctions to preserve the status quo while deciding whether to issue a permanent injunction. A court can issue a temporary restraining order without notice to the other party, while a preliminary injunction requires both notice to the other party and usually a hearing where each side presents their arguments.
Although not a guarantee that a permanent injunction will ensue, the issuance of a preliminary injunction is frequently a good sign that the court is strongly leaning in that direction. Indeed, to obtain a preliminary injunction, the party asking for it must persuade the court that there is a likelihood of ultimately prevailing on the merits.
One aspect of the new law that has employers especially concerned is that it could impose imprisonment and fines on employers who try to condition employment on workers signing arbitration agreements. According to employers, resolving workplace disputes through arbitration is better for everyone concerned because it is faster and more economical than litigating in court or in an administrative agency. Employers say it is wrong to impose criminal penalties on them for trying to bolster such common-sense procedures, and that doing so runs afoul of the Federal Arbitration Act.
On the other hand, proponents of the new law contend that it is needed to prevent employers from depriving mistreated workers of having their day in court (or in administrative agencies created to remedy workplace violations). They insist that, without the new law, employers can continue to coerce workers to sign away their legal rights, and that employees who sign away such rights are then “trapped in the employer’s handpicked arbitration system.”
Judge Mueller’s preliminary injunction is likely appealable, but there is no indication yet as to whether the State of California will pursue such an appeal or wait until the conclusion of the litigation.
Summary of Program
The risks involved in misclassifying a worker as an independent contractor rather than an employee have always been serious. A number of federal and state agencies regulate the proper classification of workers and have the authority to impose significant monetary and non-monetary sanctions against employers who get the classification wrong. AB 5 has changed the landscape yet again, and employers are now faced with converting contractors to employees unless they fit within one of the exemptions written into the new law.
- The Impact of the California Supreme Court case Dynamex Operations West, Inc. v. Sup. Ct.;
- AB 5 and its exemptions;
- A summary of the various tests applied by federal and state agencies to determine independent contractor status;
- A summary of the enforcement authority of various federal and state agencies and the sanctions they may impose;
- The due diligence employers must engage in before classifying a worker as an independent contractor; and
- California’s law imposing monetary and non-monetary sanctions against employers (and other individuals) who willfully misclassify workers as independent contractors.
If you or your company is currently using independent contractors, this is a seminar you should not miss.
Date: Thursday, February 13, 2020
Time: 9:00 a.m. – 9:30 a.m. – Registration & Breakfast / 9:30 a.m. – 11:30 a.m. – Seminar
Location: Weintraub Tobin, 400 Capitol Mall, 11th Floor, Sacramento, CA
Webinar: This seminar is also available via webinar. Please indicate in your RSVP if you will be attending via webinar.
Parking Validation provided. Please park in the Wells Fargo parking garage, entrances on 4th and 5th Street. Please bring your ticket with you to the 11th floor for validation.
There is no charge for this seminar.
Approved for two (2) hours MCLE. This program will be submitted to the HR Certification Institute for review. Certificates will be provided upon verification of attendance for the entirety of the webcast.
To register for this seminar, please RSVP to Ramona Carrillo by Friday, February 7, 2020.
Effective January 1, 2020, California’s minimum wage rate increased to $13.00 per hour (from $12.00) for employers with 26 or more employees and $12.00 per hour (from $11.00) for employers with 25 or fewer employees. The minimum wage will continue to increase yearly until it reaches $15.00 per hour on January 1, 2022 for employers with 26 or more employees and January 1, 2023 for employers with 25 or fewer employees.
In California, many cities and counties are increasing their minimum wages faster than the state. Click here for a chart of increases set to take place in 2020.
Mandatory arbitration agreements in California employment have been granted a stay of execution. For now. Earlier today, a federal judge in California issued a temporary restraining order enjoining enforcement of AB 51, the new California law that would have banned employers in the state from requiring employees to sign mandatory arbitration agreements as a condition of employment. AB 51 was set to take effect on January 1, 2020.
Earlier this month, a group of pro-commerce organizations and trade associations, including the United States Chamber of Commerce and the California Retailers Association, jointly filed a lawsuit seeking to block AB 51 from taking effect. The organizations argued that AB 51 was preempted by federal law that precludes states from limiting or interfering with the use of arbitration agreements to resolve disputes.
Judge Kimberly Mueller of the Eastern District of California accepted that argument, at least for now. The temporary restraining order prevents enforcement of AB 51 until at least January 10, 2020. The Court has set a hearing that day to decide whether to grant a preliminary injunction that would block enforcement of AB 51 until the lawsuit is resolved.
So what does this ruling mean for California employers? For now, not much other than hope. AB 51 will still take effect on January 10 unless Judge Mueller grants the longer injunction. Granting the temporary restraining order, however, does suggest that she believes the preemption argument may have merit. That said, employers would be best suited taking a wait-and-see approach between now and the next ruling from the court. In the meantime, employers may consider permissive, rather than mandatory, arbitration agreements that make clear entering into it is not a condition of employment. Also, because AB 51 does not apply retroactively, employers will still be able to enforce mandatory arbitration agreements that were entered into before January 1, 2020.
In 2018, this author blogged about how religious entities can navigate the potential traps when they seek to comply with the federal laws against anti-harassment, discrimination and retaliation laws by adopting handbook policies and training their employees, while protecting their status as exempt from the California analog to Title VII, the Fair Employment and Housing Act (FEHA). While that case was up on appeal, the parties settled, leaving the state of the law unsettled.
Happily for religious entities, the Court of Appeal for the Sixth Appellate District of California, has paved a clearer path forward for religious employers in another case pending at the same time.
To read the full article, please click here.