California Employment Law Update

California Court Confirms Kevin Spacey Must Pay $31 Million to House of Cards Producers

The Los Angeles County Superior Court has confirmed an arbitrator’s October 2021 award of $31 million to be paid by actor Kevin Spacey to producers of the Netflix show House of Cards for Spacey’s alleged breach of contract.  As we previously reported, the producers alleged that Spacey was responsible for millions of dollars in costs and lost revenue the show incurred when allegations of Spacey’s sexual harassment and sexual assault against House of Cards crew members surfaced in 2017, leading the producers to halt production and eventually rewrite the show to remove Spacey, who starred in the first five seasons.

In confirming the arbitration award, the court rejected Spacey’s argument that the arbitrator exceeded his authority by considering evidence “extrinsic” to Spacey’s alleged breach of contract.  The court interpreted this to mean “circumstantial” evidence and noted that there is no reason an arbitrator cannot consider circumstantial evidence when determining an award.

The court also noted that vacating an arbitration award is a high bar even in close cases and that Spacey “fail[ed] to demonstrate that this is even a close case.”  The arbitration award was within the arbitrator’s authority because it bore a rational relationship to the breach of contract, i.e., it was aimed at compensating the show’s producers for the effects of the breach, namely the costs and lost revenue, which are “fairly typical compensatory damages” in breach of contract cases.

This is a cautionary tale for those in positions of power who might be charged with illegally harassing their co-workers:  The employer may not only fire such individuals, it also may seek affirmative relief against them in the form of monetary damages incurred by the employer as a result of their untoward actions.

California Voters to Decide Future of PAGA in November 2024

The California Secretary of State announced on July 22, 2022 that a measure to replace the California Labor Code Private Attorneys General Act of 2004 (“PAGA”) qualified as an eligible statewide ballot measure for the November 2024 General Election ballot.  PAGA allows “aggrieved” employees to file a representative action on behalf of themselves and other “aggrieved” employees and the state of California for certain alleged California Labor Code violations.  As previously covered here, here, here, and here, PAGA has benefited attorneys, not workers.

The California Fair Pay and Employer Accountability Act (“FPEAA”), if passed by the voters, will put workers’ labor claims back in the hands of the independent regulator by empowering the Labor Commissioner to enforce labor laws and impose penalties.  Workers under this system would be able to get their claims handled without having to hire a private attorney to engage in a lengthy and costly lawsuit.  The proposed law would eliminate the Labor Commissioner’s authority to contract with private organizations or attorneys to assist with enforcement, require the Legislature to provide funding for Labor Commissioner enforcement, require the Labor Commissioner to provide pre-enforcement advice, allow employers to correct identified labor-law violations without penalties, award all penalties to the “aggrieved” employee, and authorize increased penalties for willful violations.  Proponents of the FPEAA claim this Act that eliminates employees’ ability to file lawsuits for monetary penalties for state labor-law violations will both protect businesses from shakedown lawsuits that line the pockets of plaintiffs’ lawyers and protect workers’ rights.

This latest initiative to repeal and reform PAGA follows the United States Supreme Court’s recent holding that PAGA representative action waivers in arbitration agreements are enforceable.  We will continue to monitor developments on the fate of PAGA.

Hollywood Updates Its COVID-19 Protocols As Los Angeles Covid Rates Surge

Amid a recent surge in COVID-19 cases and hospitalization rates in Los Angeles, the Alliance of Motion Picture and Television Producers (“AMPTP”) announced an extension of and modifications to the existing Return-to-Work Agreement between the Directors Guild of America, the AMPTP, IATSE, SAG-AFTRA, and other industry stakeholders.  The prior iteration of the Agreement had been set to expire on July 15, 2022.

Initially implemented in September 2020, the Agreement sets forth the rules regarding COVID-19 safety on guild productions.  It has undergone several extensions and modifications over the last two years, including in July 2021, February 2022, and May 2022.  The September 2020 Agreement was, in large part, an outgrowth of the initial Industry-Wide Labor-Management Safety Committee Task Force’s White Paper, about which we previously reported here.

The latest Agreement keeps in place the COVID-19 hospitalization rates’ driven trigger for the more stringent protocol that was set forth in the May 2022 version of the Agreement.  Specifically, the more rigorous safety measures are triggered for productions in metropolitan areas, counties, or provinces in the U.S. or Canada where 8 or more new weekly COVID hospitalization admissions are reported per 100,000 people over a 7-day period on covidactnow.org.

The website is maintained by Act Now, a data assessment non-profit organization.  According to the website, Los Angeles County has a hospital admissions rate of 11 per 100,000 as of July 20, meeting the trigger threshold.

The most recent iteration of the Agreement, which went into effect on July 16, 2022, modifies the more stringent COVID-19 protocol, such that (1) self-serve food service that requires employees to share utensils is limited to fully vaccinated workers; and (2) while Producer-provided transportation may operate at full capacity, all cast and crew must wear face masks. Limited exceptions apply, e.g. where a cast member is in make-up, at which time passengers are required to observe physical distancing.

Other preexisting protocols, such as those pertaining to mandatory health screenings and periodic testing requirements set forth in the earlier versions of the Agreement remain in effect.

When hospitalization rates fall below the threshold, productions may adhere to the less stringent protocol enumerated in the Agreement.  When that will be the case for Los Angeles County remains to be seen, but this version of the Agreement is set to expire on September 30, 2022.  We will continue to monitor the Agreement and provide updates as they occur.

Mayor Garcetti Signs “Healthcare Workers Minimum Wage Ordinance” Increasing Minimum Wage to $25

On July 7, 2022, Mayor Eric Garcetti signed the “Healthcare Workers Minimum Wage Ordinance” (“Ordinance”) which, effective August 13, 2022, increases the minimum wage to $25 per hour for healthcare workers employed at privately-owned healthcare facilities within the City of Los Angeles.  Beginning January 1, 2024, the minimum wage will increase annually based on the cost of living.

The purpose of the bill was in part to “fairly compensate[] [healthcare workers] for keeping us safe [during the COVID-19 pandemic] while facing risks to themselves and their families” and to address “hospitals…facing staffing shortages that could jeopardize the availability of care in Los Angeles…” Other reasons in support of this bill included the increased cost of living on Los Angeles and increased profits in the healthcare industry.

Despite the seemingly good intentions of the Ordinance, it only applies to privately owned facilities within the boundaries of the City of Los Angeles including:

  1. A licensed general acute care hospital as defined in Section 1250(a) of the California Health and Safety Code.
  2. A clinic, as defined in Section 1206(d) of the California Health and Safety Code, that is conducted, operated, or maintained as an outpatient department of a general acute care hospital or acute psychiatric hospital.
  3. A licensed acute psychiatric hospital as defined in Section 1250(b) of the California Health and Safety Code, including an acute psychiatric hospital that is a distinct part of another health facility.
  4. A licensed skilled nursing facility, as defined in Section 1250(c) of the California Health and Safety Code, that is a distinct part of a general acute care hospital or acute psychiatric hospital.
  5. A licensed residential care facility for the elderly, as defined in Section 1569.2 of the California Health and Safety Code, that is located or licensed at the same address as an acute psychiatric hospital or is located on the same campus or parcel of real property as an acute psychiatric hospital.
  6. A licensed chronic dialysis clinic as described in Section 1204(b)(2) of the California Health and Safety Code.
  7. All facilities that are part of an Integrated Healthcare Delivery System.

Opponents of the Ordinance have formed a group called “No on the Los Angeles Unequal Pay Measure” and argue that it is an “inequitable ordinance that would set a new arbitrary pay requirement for some healthcare workers in some healthcare facilities in the city, while excluding thousands of health care workers doing the same jobs.”

Applicable private healthcare employers should immediately review their pay practices in anticipation of the effective date of the Ordinance (August 13, 2022).  However, the Ordinance does include a limited waiver, stating: “… a court may grant a one-year waiver from the Minimum Wage requirements of this article if an Employer can demonstrate by substantial evidence that compliance with this article would raise substantial doubt about the Employer’s ability to continue as a going concern under generally accepted accounting standards.”

For help navigating this Ordinance and any applicable waivers please reach out to us or any of our employment attorneys.  We will continue to monitor the Ordinance for any updates.

 

July 2022 California Employment Law Notes

We invite you to review our newly-posted July 2022 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

View PDF

West Hollywood Employers Now Must Provide 96 Hours of Paid Time Off for Full-Time Employees

As of Friday, July 1, non-hotel employers with full-time employees in West Hollywood must provide up to 96 hours of compensated time off (“CTO”) each year.  (Part-time West Hollywood employees must receive a prorated number of CTO hours based on their hours worked.)  These requirements already went into effect for hotel employers on January 1, 2022.

The CTO may be used for vacation, sick leave, and/or “personal necessity” (which is not defined).  At least 50 percent of the hours must be for vacation or personal necessity leave.

Employers have some flexibility in how to implement this new policy.  The 96 hours can be provided to employees as a lump sum up-front each year, or employees may accrue them throughout the year.  If employers opt for the accrual model, employees will begin to accrue the CTO starting their first day of employment, but employers may limit employees from using the CTO to up to their sixth month of employment (except for using the CTO for sick leave, which must become available to employees no later than their 90th day of employment).

Employers may choose to “cap” employees’ accrued but unused CTO at 192 hours or more.  Once an employee reaches this cap, they will stop accruing additional CTO until they use some of their accrued CTO.

In line with existing California law on paid time off, vacation and personal necessity CTO under this ordinance is considered wages, and an employee’s unused accrued vacation and/or personal necessity CTO, if any, must be paid out to the employee upon separation.

A new Uncompensated Leave policy also took effect in West Hollywood on July 1, 2022.  Employers now must provide at least 80 hours of Uncompensated Leave to full-time employees (and a prorated number of hours to part-time employees) that can be used for the employee’s own sick leave or to care for a sick immediate family member when that employee has exhausted their available CTO.  Like CTO, an employer may front-load Uncompensated Leave or have employees accrue it, so long as employees may use this leave no later than their sixth month of employment.  Employers may “cap” Uncompensated Leave at 80 hours each year.

Employers who can show that these new leave policies would cause hardship may apply for a waiver of up to one year, depending on the level of hardship caused.

California Supreme Court to Determine Scope of Employer Liability for At-Home Spread of COVID-19

Last week, the California Supreme Court agreed to decide two unique questions with far-reaching implications for employer liability: (1) may an employer be held liable to an employee’s spouse when an employee contracts COVID-19 in the workplace and then infects their spouse at home, and (2) does an employer have a duty of care to its employees’ households to prevent the spread of COVID-19?

The Ninth Circuit certified these questions to the California Supreme Court in Kuciemba v. Victory Woodworks, No. 21-15963 (9th Cir. 2022), after an appeal of a Northern District of California judge’s dismissal of a suit brought by a Victory Woodworks employee and his spouse. The Ninth Circuit heard oral arguments in March 2022.

In the underlying action, the employee and his spouse alleged the company’s negligence and lack of safety precautions in the face of the COVID-19 pandemic caused the employee to contract COVID-19 in the workplace, which he then unknowingly brought home and transmitted to his wife, causing her to become severely ill. The district court dismissed the case, finding not only that California workers’ compensation law’s exclusive remedy provision barred the suit because the spouse’s injury was “derivative” to the employee’s, but also that the employer did not owe a duty of care to the employee’s spouse.

The Ninth Circuit asked the California Supreme Court to decide these novel issues of law because of the lack of precedent in California and the California public policy implications if employers may be held liable for the spread of COVID-19 to employees’ households.

The Court’s answers to these questions could have a tremendous impact on employers since, although COVID-19 infection rates may rise and fall, the virus has shown no signs of disappearing. We will continue to monitor this case as it develops and will provide an update on the California Supreme Court’s decision.

The U.S. Supreme Court Says PAGA Representative Action Waivers Are Enforceable After All

On June 15, 2022, in Viking River Cruises, Inc. v. Moriana, Case No. 20-1573,_ U.S. _ (2022), by an 8-1 majority, the U.S. States Supreme Court held that the Federal Arbitration Act (“FAA”) preempts the California Supreme Court’s central holding in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014), that actions brought under the California Labor Code Private Attorneys General Act of 2004 (“PAGA”) could not be divided into individual and representative claims through an agreement to arbitrate.  This landmark opinion means that, at least for now, arbitration agreements with waivers of the right to bring representative PAGA claims for violations suffered by other alleged “aggrieved employees” will be enforced—just like class action waivers.

As discussed here, in Iskanian, the California Supreme Court held that an arbitration agreement could not waive an employee’s right to bring a “representative” action under PAGA asserting claims based on violations of the Labor Code suffered by other employees because these actions are brought in the State’s shoes as a sort of qui tam action.  Employers repeatedly had attempted to obtain U.S. Supreme Court review of Iskanian, but the Court rejected multiple cert petitions until this term.

Justice Alito’s majority opinion echoed the familiar view that “[t]he FAA was enacted in response to judicial hostility to arbitration.”  The majority rejected plaintiff Angie Moriana’s argument that PAGA provides a substantive right to pursue representative PAGA actions to recover penalties for Labor Code violations suffered by the named plaintiff and other “aggrieved employees.”  However, the majority likewise rejected Viking River’s argument that the FAA and arbitration, in general, require totally bilateral proceedings between only one employee and the employer.  Instead, the Court took the view that arbitration is compatible with a form of “representative” proceeding in which one employee pursues PAGA claims in the shoes of the State (i.e., as its representative) for violations of the Labor Code suffered by that one employee plaintiff.

Significantly, the majority ultimately struck down Iskanian’s arbitration carve-out for PAGA claims by taking issue with what it described as PAGA’s “built-in mechanism of claim joinder,” by which named plaintiffs “use the Labor Code violations they personally suffered as the basis to join to the action any claims that could have been raised by the State in an enforcement proceeding.”  The majority held that this portion of Iskanian “unduly circumscribe[d] the freedom of parties to ‘determine the issues subject to arbitration’ and ‘the rules by which they will arbitrate[]’ … in a way that violates the fundamental principle that ‘arbitration is a matter of consent.’”

The majority held that PAGA provides “no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding” – i.e., arbitration.  Therefore, once an employee’s claim has been compelled to arbitration on an individual basis, any claims asserting violations of the Labor Code suffered by other employees can be dismissed.

Though employers have good reason to rejoice in this outcome, critics of the decision have already noted that Justice Sotomayor’s concurrence casts doubt on Viking River’s long-term impact.  Although she voted with the majority, her concurrence provided what ultimately amounts to a “How-To” guide for plaintiffs’ attorneys and lawmakers to circumvent the Court’s decision.  For example—although such a modification would turn the common conception of standing on its head—Justice Sotomayor suggested that California courts could interpret California law or, alternately, the Legislature could amend PAGA, to permit an employee to litigate representative PAGA claims on behalf of other employees, even after the employee lost individual standing once the employee plaintiff’s claims were compelled to arbitration.

Therefore, at least for now, California employers can rest easier knowing PAGA claims are no longer immune to arbitration and waiver agreements.  Moreover, employers should reexamine their arbitration agreements to ensure that the language is sufficiently broad to maximize on this development.

Employer Need Not Reimburse Travel Expenses for Drug Test

A federal appeals court recently affirmed a summary judgment entered in favor of WinCo Foods in a class action alleging that WinCo should have reimbursed successful job applicants for the time and travel expenses they incurred in obtaining a drug test as a pre-condition of employment.  In Johnson v. WinCo Foods, LLC, the court agreed with a lower court that WinCo was not obligated to reimburse those costs because plaintiffs were not employees of WinCo at the time that they took the drug tests.

The plaintiffs had advanced two arguments that they actually were WinCo employees at the time of the drug test.  First, the plaintiffs argued that they were WinCo’s employees because WinCo “controlled” the administering of the drug test.  Under California law, a court may use the “control test”—examining how much control the alleged employer exercises over the alleged employee’s “wages, hours, or working conditions”—to determine whether an employer-employee relationship exists.

However, the Ninth Circuit declined to apply the control test here because the plaintiffs were not working for WinCo when they took the drug test.  Rather, the drug test was “part of the job application process” as opposed to “performance of the job.”

In the alternative, the plaintiffs argued that under California contract law, an employment contract with WinCo had been formed prior to the drug test, at the time that WinCo notified the plaintiffs of the need to take a drug test to secure their “contingent job offer.”  The plaintiffs argued that a successful drug test was a “condition subsequent” to that existing employment contract, allowing WinCo to terminate the contract if the drug test was unsuccessful, but merely confirming the plaintiffs’ existing employment status if they passed the drug test.

The Ninth Circuit disagreed, finding that a successful drug test was instead a condition precedent to an employment contract with WinCo.  In its communications with the plaintiffs, WinCo was very clear that the plaintiffs’ hiring would not occur until after a successful drug test by, for example, calling the job offer “contingent” and informing the plaintiffs that a successful drug test was a condition of that contingent job offer.

Given what the Ninth Circuit characterized as “the ubiquity of preemployment drug tests” and other job application requirements, this decision should be a welcome one for California employers.  We will continue to monitor this case for any updates.

Despite Employee-Friendly Test, California Court of Appeal Finds in Favor of Employer in Whistleblower Retaliation Claim

As we reported here, earlier this year, the California Supreme Court confirmed a relaxed standard by which employees can prove whistleblower retaliation under Labor Code section 1102.5 in Lawson v. PPG Architectural Finishes, Inc., 12 Cal. 5th 703 (2022).  Despite the newly affirmed and extremely high burden for employers to prevail against Section 1102.5 claims on summary judgment, the Third District Court of Appeal recently ruled in favor of the County of Sacramento in a lawsuit brought by the County’s former employee, Cynthia Vatalaro in Vatalaro v. County of Sacramento, No. C090896, 2022 WL 1775708 (Cal. Ct. App. May 5, 2022).

Vatalaro was an administrative analyst for Sacramento County.  She received a job description listing the expected job duties for her promotion to an administrative services officer position from her would-be supervisor, Mindy Yamasaki.  Vatalaro contacted a human resources analyst expressing concerns about the anticipated reporting structure, her assigned job duties differing from the duties she had developed with her former supervisor, and that the assigned duties seem “inappropriate” for her position.  Shortly thereafter, Vatalaro started her new position, which was probationary for a six-month period under the County’s civil service rules.  Ultimately, the County determined Vatalaro did not succeed during the probationary period, terminated Vatalaro from the promoted position, and returned her to her previous job classification.

Vatalaro sued Sacramento County for unlawful retaliation under Labor Code section 1102.5[1], claiming Yamasaki mistreated her on several occasions as follows:

  • Assigning Vatalaro work “too lowly” for her position;
  • Excluding her from a staff appreciation meeting with “treats” by holding it on a day Vatalaro had taken off;
  • Giving Vatalaro certain assignments as “punishment” for complaining to Vatalaro’s former supervisor about Yamasaki’s conduct;
  • Teaming up with a co-worker to “harass” Vatalaro on several occasions after further complaints about her assignments.

Vatalaro attributed Yamasaki’s purported mistreatment to Vatalaro’s complaints about her assigned job duties.  Vatalaro also claimed she was released from probation in retaliation for her complaints.  Yamasaki submitted a memorandum supporting the release on the grounds that Vatalaro had been subordinate, disrespectful, and dishonest in her actions, pointing to several instances that she believed Vatalaro exhibited those qualities, such as Vatalaro repeatedly calling several meetings and assignments “a waste of her time,” and being dishonest about why she was unable to complete an assignment.

The county filed a motion for summary judgment.  The parties and the trial court framed their respective positions and ruling around the McDonnell Douglas burden-shifting test, and the trial court granted the motion in favor of the County.  The trial court held that the County had met its burden to show that Vatalaro could not allege a prima facie case of retaliation because she had not alleged or presented evidence of protected conduct.  The court reasoned that Vatalaro had neither “alleged that she had a reasonable belief that a specific federal, state, or local law or regulation was violated,” nor “presented evidence that she engaged in protected conduct,” but instead had only shown that she complained about “internal personnel matters.”  The trial court added that the County presented evidence that it had a legitimate business reason for releasing her from probation and Vatalaro fail to establish pretext.  Vatalaro appealed.

The Third District Court of Appeal affirmed the trial court’s ultimate ruling, but in light of Lawson, did so pursuant to the evidentiary standard of Section 1102.6, rather than the McDonnell Douglas test.  Section 1102.6 states:

[O]nce it has been demonstrated by a preponderance of the evidence that an activity proscribed by Section 1102.5 was a contributing factor in the alleged prohibited action against the employee, the employer shall have the burden of proof to demonstrate by clear and convincing evidence that the alleged action would have occurred for legitimate, independent reasons even if the employee had not engaged in activities protected by Section 1102.5

Cal. Lab. Code § 1102.6 (emphasis added).  The Court of Appeal reasoned that the County had met its burden and that Plaintiff needn’t show pretext.  The appellate court also questioned whether the test for a prima facie case for retaliation requires a plaintiff to actually hold a reasonable belief as distinct from the plain language of Section 1102.5, which states the employee must “have reasonable cause to believe” there was a violation of law.  Ultimately, the appellate court did not resolve the issue, stating that the County’s independent reasons for termination were sufficient to satisfy their burden on summary judgment.

[1] Vatalaro also asserted a cause of action for constructive discharge in violation of public policy.  The cause of action was dismissed on summary judgment because, among other things, a public employee is barred from asserting such a claim against a public entity employer.  The trial court’s ruling on this cause of action as not analyzed in the Court of Appeal decision.

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