California Employment Law Update

Los Angeles Issues Two New Public Orders On COVID-19

On Tuesday, Los Angeles Mayor Eric Garcetti issued two new public orders in response to COVID-19’s continued growth and effect on essential businesses. Both of these public orders go into effect on Friday, April 10.

The first order contains provisions relating to grocery retail store, drug retail store, and food delivery employees. It mandates:

  • Grocery retail store and drug retail store employers to permit employees to change their schedules if the change is: (1) to provide daycare for the employee’s child; (2) to care for a sick member of the employee’s immediate family or member of its household; or (3) because the employee feels ill, suspects having been exposed to COVID-19, or exhibits a symptom of COVID-19. Food delivery platform businesses must permit an employee to decline an order for the same reasons.
  • Grocery retail store and drug retail store employers to first offer available work to qualified employees if the employee will not incur overtime before hiring a new employee or using a contractor, temporary employee, or staffing agency.

The second order pertains to all employers who are exempt from the Safer At Home Order (e.g., hardware stores, plumbers, laundromats, hotels). It requires:

  • Employees to wear face coverings (furnished at the expense of the employer) while performing their work;
  • Employers to permit employees to wash their hands at least every thirty minutes, and ensure their employees have access to clean bathroom stocked with all necessary cleaning and sanitizing products;
  • Employers to implement social distancing measures; and
  • Customers and visitors of the businesses and organizations to wear face coverings and employers may refuse to service any individual who does not.

These new obligations for Los Angeles employers are some of the strictest in the country. They last until the end of the local emergency and may be extended in the future.

Los Angeles Issues New Sick Leave Rules

On March 27, 2020, the Los Angeles City Council approved a new ordinance that would have required Los Angeles employers to provide up to 80 hours of supplemental sick leave relating to COVID-19.  The broadly-worded ordinance provoked opposition from some in the business community. 

Last night, LA Mayor Eric Garcetti signed a Public Order Under City of Los Angeles Emergency Authority (“Emergency Order”) that suspends the City Council’s ordinance and created a modified form of supplemental paid sick leave applicable to employers with 500 or more employees in the City of Los Angeles or 2,000 or more in the United States. Mayor Garcetti stressed the need to “anticipate that workers could suffer through layoffs if … [the City] imposes excessive burdens and costs upon businesses – many of which have ceased operations, lost customers, and sustained catastrophic losses due to this pandemic.”

Under the Emergency Order, eligible employees who work at least 40 hours per week or are classified as full-time will receive 80 hours of supplemental paid sick leave, based on their average biweekly pay between February 3 and March 4, 2020.  Eligible part-time employees will receive supplemental sick leave no greater than their average biweekly pay over the same period.  Supplemental sick leave is capped at $511 per day and/or $5,110 in the aggregate per employee.

Employees may use supplemental sick leave for the following purposes:

  • Due to their own COVID-19 infection or because a public health official or healthcare provider recommends they isolate or quarantine themselves;
  • Because the employee is at least 65 years old or has certain health conditions that make them more susceptible to COVID-19 (e.g., heart disease, weakened immune system, etc.);
  • To care for a family member who is not sick but is being quarantined or self-isolating; or
  • To provide care for a family member whose senior care provider or whose school or childcare provider temporarily ceases operations, if the employee is unable to secure a reasonable alternative caregiver.

Like the City Council ordinance, the Mayor’s Emergency Order exempts emergency and health services personnel.  However, the Emergency Order also exempts the following:

  • Critical parcel delivery employees;
  • Employees whose employer has a paid leave or paid time off policy that provides a minimum of 160 hours of paid leave annually;
  • Certain new businesses, except for specified construction and film production businesses;
  • Employers who were closed or not operating for a period of 14 or more days due to an emergency order related to the COVID-19 pandemic or who provided employees with at least 14 days of leave;
  • Government agencies; and
  • Certain employees covered by collective bargaining agreements.

California Ruling Guides Employers On Unlimited Vacation Policies

Tony Oncidi and Cole Lewis analyze the enforceability of an “unlimited” vacation or PTO policy in California in the wake of a new court case (McPherson v. EF Intercultural Foundation) for publication in Law360.

In a groundbreaking decision in McPherson v. EF Intercultural Foundation Inc., addressing the growing trend of providing unlimited paid time off (but no accrued monetary benefits) to certain exempt employees, the California Court of Appeal’s Second Appellate District has weighed in with some important new restrictions, which could have significant implications once COVID-19 recedes and everyone heads back to work.

In the modern employment setting, many salaried employees who are exempt from overtime (i.e., certain executives, professionals and managers) can and often do work remotely regardless of the location or time of day. With the advent of laptops, smart phones, email, text and internet access, very few of these employees ever have an undisturbed day off.

Few employers expect their exempt employees to refrain from checking email, voicemail and texts (even while they’re on vacation); and most employees enjoy the relative freedom associated with working remotely while still being connected (lightly tethered?) to the office — whether they’re in Maui or Manhattan.

In states like California, vacation benefits accrue and vest as the labor is rendered, and any accrued but unused paid time off/vacation must be cashed out and paid to the employee in the form of wages upon termination or resignation from employment.

So, how does an employer that must keep track of and pay an employee upon separation for all accrued but unused PTO determine how many hours an employee has withdrawn from his or her bank of accrued PTO benefits?

In an effort to enhance employee flexibility while avoiding the administrative headache of determining exactly how many hours were vacation and how many hours were worked remotely, many employers have shifted to so-called unlimited vacation policies for their exempt employees: Simply put, these employees may take as much or as little vacation as they wish, and vacation hours neither accrue nor are they cashed out upon separation from employment.

In McPherson, a case of first impression, the California Court of Appeal affirmed the trial court’s judgment (except for the amount of damages and attorney fees awarded) and held that the unlimited vacation policy at issue in this case was not as described and that the employer (EF Intercultural Foundation) owed the plaintiffs for certain accrued but unpaid vacation benefits.

Importantly, however, the court did not determine that an unlimited vacation policy (if correctly applied) would necessarily violate California law: “We by no means hold that all unlimited paid time off policies give rise to an obligation to pay ‘unused’ vacation when an employee leaves.”

In fact, the court noted, “We appreciate the benefit and understand the appeal the unlimited time off policies … may have to some employees.” One hypothetical employee (a surfer-skier) may prefer to work more than 50 hours per week for part of the year and take two or three months of PTO, while another employee (a parent) may prefer to work fewer hours throughout the year in order to free up evenings and weekends.

The defendant, EF Intercultural Foundation, is a nonprofit that runs organizational and cultural exchange programs between the U.S. and other countries. Three former employees — area managers who ran seasonal homestay programs for international students and who worked from home and in the field — brought an action against EF Intercultural, claiming that they were entitled to accrued vacation pay upon separation under EF Intercultural’s ostensibly unlimited vacation policy.

While EF Intercultural included a vacation policy in its handbook, which provided a specified number of vacation days for certain salaried positions, the vacation policy that applied to these particular plaintiffs was untracked and unwritten. The employees did not accrue vacation days and were only required to notify a supervisor before taking time off. EF Intercultural argued that this was an unlimited vacation policy that did not result in any accrual of benefits or require any payment upon termination.

The evidence presented during the bifurcated bench trial indicated that plaintiffs were informed about the unlimited vacation policy by a supervisor who had a “quite informal … side conversation” with them about the policy. The employees were informed they could take time off outside of the busy season (April through August) but that no vacation accrued. They were not expressly told that they could take as much vacation or PTO as they wanted.

The trial court determined that EF Intercultural’s vacation policy was not unlimited but that it was instead undefined. The lower court framed the lack of specificity as to the amount of vacation benefits as simply a problem of proof as to what EF Intercultural’s policy actually was and held that the plaintiffs were entitled to wages for accrued but unused vacation.

In this appeal, the court distinguished EF Intercultural’s policy from a truly unlimited vacation policy and essentially sidestepped the question of whether a properly administered unlimited vacation policy would require payout of anything upon termination: “We need not decide whether vacation wages are earned under an unlimited policy — whether ‘uncapped time off’ equate[s] to ‘vested vacation’ — as that is not the policy here.”

The appellate court held that although EF Intercultural characterized its policy as unlimited, its actual practice was to give plaintiffs a fixed amount of vacation time with an implied limit of two to four weeks, which was really no different from the amount of PTO provided to other corporate employees under the policy set forth in the handbook.

The court also noted that the plaintiffs’ schedules precluded them from taking advantage of a purported unlimited time off policy, citing a Division of Labor Standards Enforcement letter that stated that an employee must be given a fair opportunity to take vacation.

Furthermore, there was no evidence that EF Intercultural would have approved a substantial amount of vacation had it been requested. Therefore, the appellate court affirmed the lower court’s finding that EF Intercultural’s vacation policy had an “implied ‘cap’ and was by no means ‘unlimited'” and thus, the plaintiffs were owed vacation pay upon separation.

Even though the court limited its holding to EF Intercultural’s specific vacation policy and practice, noting the “particular, unusual facts of this case,” it provided helpful guidance for employers that already have implemented or are considering adopting an unlimited vacation policy.

The court determined that such a policy may relieve an employer from having to pay out any accrued vacation benefits upon separation if, in writing, it:

  1. clearly provides that employees’ ability to take paid time off is not a form of additional wages for services performed, but perhaps part of the employer’s promise to provide a flexible work schedule — including employees’ ability to decide when and how much time to take off;
  2. spells out the rights and obligations of both employee and employer and the consequences of failing to schedule time off;
  3. in practice allows sufficient opportunity for employees to take time off, or work fewer hours in lieu of taking time off; and
  4. is administered fairly so that it neither becomes a de facto ‘use it or lose it policy’ nor results in inequities, such as where one employee works many hours, taking minimal time off, and another works fewer hours and takes more time off.

The practical effect of the court’s ruling is to call into question the viability of unlimited vacation policies — especially if they are unwritten or informal. In view of McPherson, employers that have or are considering adopting such policies need to pressure test them and make sure they cannot be characterized as a subterfuge for depriving employees of PTO benefits. For example, the court concluded that plaintiffs in this case “appear to have received fewer benefits under the ‘unlimited’ time off policy than if the handbook’s accrual-based vacation policy had applied to them.”

Another problem with EF Intercultural’s policy was its informal nature — it was not described in writing and was instead communicated informally by way of side conversations between employees and their supervisors. If an employer is going to maintain an enforceable unlimited vacation policy, it must be memorialized in writing and should fully describe the benefits to the affected employees as well as the potential that they will leave money on the table by working more hours for the same pay than those who scheduled more PTO.

Drafting an enforceable unlimited PTO policy in the wake of McPherson is certainly possible, but it requires careful analysis of the affected employees, their particular schedules and the productivity and scheduling demands of the job. The policy must be fully transparent and clearly written so as to navigate around the shoals and pitfalls identified by the court in this instructive new opinion.

Reproduced with permission. Originally published April 3, 2020, Law360.

Lockdown Bay Area: Northern California Jurisdictions Extend and Expand Shelter-In-Place Orders

As we previously reported, six Bay Area counties and the City of Berkeley previously issued expansive shelter-in-place orders requiring all but “Essential Businesses” to cease operations.  Yesterday, all seven jurisdictions (Alameda, Contra Costa, Marin, San Francisco, San Mateo, and Santa Clara Counties and the City of Berkeley) issued orders extending their shelter-in-place requirements through May 3, 2020.

In addition, the new orders added further limitations on activities that can continue during this period.  Among other things, the new orders:

  • Clarify that, although Essential Businesses are encouraged to remain open, their employees should work remotely to the maximum extent possible;
  • Provide that Essential Businesses may only assign those employees who cannot perform their job duties from home to work outside the home;
  • Mandate that all Essential Businesses prepare, post, distribute to employees, and implement a Social Distancing Protocol at each of their facilities at which they are maintaining operations by no later than April 3, 2020; and
  • Require businesses that include an Essential Business component at their facilities alongside non-Essential components to scale down their operations to the Essential Business component only, to the extent feasible, while permitting mixed retail businesses that are otherwise allowed to operate to stock and sell non-Essential products.

A template Social Distancing Protocol is attached to each of the above-referenced orders as Appendix A.

An Employer Response Plan for COVID-19

From various employment law implications to managing employees working remotely, employers are faced with unprecedented challenges amid the COVID-19 crisis. As Proskauer’s Coronavirus Resource Center continues to supply advisable tips for clients worldwide, Anthony Oncidi, Cole Lewis and Nayirie Mehdikhani step in with advice for California-based employers as they devise their contingency plans.

Read their advice in the Daily Journal now.

Coronavirus & the Workplace: Answering Your Questions Webinar

Coronovirus

On Wednesday, March 25, please join us for a virtual Q&A session as we respond to your questions about the unique and complex workplace challenges presented by Coronavirus (COVID-19). In order to answer as many questions as we can in our one hour session, please submit your questions in advance to CoronavirusResponseTeam@proskauer.com by 5:00 p.m. on Tuesday, March 24.

Register for the webinar here.

California Orders Residents (All 40 Million!) To Shelter In Place

Today, March 19, 2020, Gov. Gavin Newsom issued Executive Order N-33-20 requiring all individuals living in California to “stay home or at their place of residence except as necessary to maintain continuity of operations of the federal critical infrastructure sectors.”  Individuals are permitted to leave their homes for necessities such as obtaining food, prescriptions and health care, but are required to practice social distancing during any such excursions.  Essential services will remain open, including, but not limited to:  gas stations, pharmacies, grocery stores, food banks, convenience stores, take-out and delivery restaurants, banks, hospitals, and laundromats.  California’s order will remain in effect until further notice.

Around the same time as Gov. Newsom’s Order, Los Angeles Mayor Eric Garcetti issued a “Safer at Home” emergency order requiring all residents of the City of Los Angeles to stay inside their residences and immediately limit all movement outside of their homes beyond what is absolutely necessary to take care of essential needs.  Of particular importance to employers, the new order prohibits individuals from going to their workplace unless they provide certain essential services.  Los Angeles’ Safer at Home order goes into effect immediately after midnight tonight (March 19, 2020) and will remain in effect until March 31, 2020, unless it is extended.

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