California Employment Law Update

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 120th day (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.  However, for employees who have reached this cap, the employer must provide a cash payment once every 30 days for that employee’s accrued CTO over the cap.  Employees may also choose to “cash out” their accrued CTO instead of using it to take time off.

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 120th day (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.

L.A. Jury Delivers Mother of All Verdicts – $464 Million to Two Employees!

As we have previously reported, jury verdicts in employment cases have continued to skyrocket in recent months, and there is no sign they are leveling off. Late last week, a Los Angeles Superior Court jury awarded a total of over $464 million ($440 million of which was in punitive damages) in a two-plaintiff retaliation case. This verdict is more than double any previous amount ever awarded and clearly qualifies as the largest verdict of its kind since the Fall of the Roman Empire.

The plaintiffs alleged they were retaliated against for making complaints about sexual and racial harassment in the workplace, directed at them and other coworkers, leading to their being pushed out of the company.

One plaintiff brought complaints to management about the alleged sexual harassment of two female employees, and claimed he was constructively discharged after being subjected to retaliatory complaints and investigations from other supervisors.  The other plaintiff made anonymous complaints to the internal ethics hotline about the racial and sexual harassment of both himself and other coworkers.

After a two-month trial, the jury awarded one plaintiff $22.4 million in compensatory damages and $400 million in punitive damages and awarded the other plaintiff $2 million in compensatory damages and $40 million in punitive damages.

This latest verdict comes on the heels of a judge reducing another huge December 2021 verdict from a Los Angeles Superior Court jury (which we wrote about here) that awarded $5.4 million in compensatory damages and $150 million in punitive damages to a fired insurance company executive who alleged discrimination and retaliation. The judge ordered a reduction in the verdict to $18.95 million in punitive damages (or, in the alternative, a new damages trial) on the grounds that the prior verdict involved an impermissible double recovery ($75 million each from two Farmers Insurance entities) and a presumably unconstitutional ratio of punitive damages to compensatory damages (a ratio exceeding 9 or 10-to-1 is presumed to be excessive and unconstitutional, and the ratio in that case was 28-to-1).

Only time will tell if this $464 million verdict stands, but we will continue to monitor the case and provide updates as developments occur. In the meantime, our advice to employers worried about these gargantuan verdicts remains the same: ARBITRATE!

Several State “Job Killer” Bills Move One Step Closer to Passage

As covered previously here, the California Chamber of Commerce (“Chamber”) once again has identified a handful of “job killer” bills making their way through the legislative process.  This year’s crop of proposed legislation would, among other things, inflate employer data reporting requirements and further expand the scope of the Fair Employment and Housing Act (“FEHA”).  Several of these recently introduced bills already have passed one of the two houses of California’s legislature and, now, move on to a vote in the second house.  These bills include:

Data Reporting and Publication

  • SB 1162 (Limón; D-Goleta) Publication of Pay Data – requires that private employers with 100 or more employees submit a pay data report to the Department of Fair Employment and Housing (“DFEH”) and imposes civil penalties against employers who fail to do so.  SB 1162 also requires that the DFEH publish the pay data report on a public website.  In addition, SB 1162 requires that employers with 15 or more employees include the pay scale for each position in any job postings.

Expansion of the FEHA

  • AB 2188 (Quirk; D-Hayward) Cannabis Use & Employment Discrimination – makes it unlawful for an employer to discriminate against a person in hiring, termination, or any term or condition of employment, or otherwise penalize a person, based on use of cannabis off the job and away from the workplace.  AB 2188 includes a narrow carve-out for workers in the building and construction trades, and makes clear that it does not preempt state or federal laws requiring employees to be tested for controlled substances.  In addition, AB 2188 prohibits the use of traditional (accurate) marijuana tests, such as urine and hair testing.

Labor Relations

  • AB 2183 (Stone; D-Scotts Valley) Agricultural Labor Relations – changes union election procedures for agricultural employees by essentially eliminating a secret ballot election and replacing it with the submission of representation cards signed by over 50% of the employees.  AB 2183 also limits employers’ ability to challenge the submitted ballot cards, forcing employers to post a bond, and includes a presumption of retaliation if an employer disciplines, suspends, demotes, lays off, terminates, or otherwise takes adverse action against a worker during a labor organization’s representation ballot card campaign.

States of Emergency

  • SB 1044 (Durazo; D-Los Angeles) State of Emergency – prohibits employers from taking or threatening adverse action against any employee for refusing to report to or leaving work “because the employee feels unsafe.”  This bill does not apply to a narrow set of employees, including first responders and others called upon to aid in emergency response.  SB 1044 also prohibits employers from limiting employees’ use of mobile phones or other communication devices in such an event, if the employee wishes to communicate about their safety, seek emergency assistance, or assess the situation.

Workers’ Compensation

  • SB 213 (Cortese; D-San Jose) Workers’ Compensation Expansion of Presumption of Injury – creates a rebuttable presumption that infectious diseases (including COVID-19), cancer, musculoskeletal injuries, post-traumatic stress disorder, and respiratory diseases arose out of work for any hospital employee who provides direct patient care, increasing workers’ compensation costs for public and private hospitals.  In addition, the bill extends these presumptions for specified periods after an employee’s employment ends.

We will continue tracking the progress of these bills as they move through the Legislature and/or are signed by the Governor.

May 2022 California Employment Law Notes

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

View PDF

Employee with Mild Symptoms of COVID-19 Was Not “Disabled” Under California Law

In Michelle Roman v. Hertz Local Edition Corp., a United States District Court Judge for the Southern District of California granted summary judgment in favor of Hertz, and against former employee Michelle Roman, whose employment was terminated after she contracted COVID.  Roman claimed that her job should have been protected by the California Fair Employment and Housing Act (FEHA) while she suffered from mild symptoms of COVID.  Hertz terminated Roman’s employment after she came to work sick, which violated company policy.  The Court held that because Roman’s COVID symptoms were mild and temporary, they did not qualify as a “disability” under FEHA.  Therefore, FEHA did not protect Roman’s job from termination.

Roman worked as a manager for Hertz in National City, California.  During 2020, Roman received training from the company about COVID protocols, including that employees showing signs of COVID should not be admitted into the workplace.  Despite this training, Roman showed up at work for two days while experiencing mild symptoms of COVID, such as “super mild body aches,” fatigue, and pain in her hips and back that was “killing her.”  Roman did not believe that her symptoms were sufficiently severe to be caused by COVID.  Nevertheless, she took a COVID test to be sure.

The next day while at work, Roman learned that she had tested positive for COVID.  She informed her manager of the news and was immediately sent home.  After quarantining for two weeks, and receiving a negative COVID test, Roman tried to return to work, but instead was fired by Hertz for previously coming to work with symptoms of COVID, which violated company policy.

The basis for Roman’s lawsuit against Hertz was that because she became infected with COVID, she suffered from a disability.  Employees with a disability are entitled to protection against discriminatory and adverse actions under FEHA, as well as a reasonable accommodation.  To determine the definition of “disability,” the Court reviewed Cal. Code Regs. Tit. 2, §11065(d)(9)(B), which provides that a disability does not include conditions that are mild, do not limit a major life activity, and have little to no residual effects.  The regulation further provides that the common cold, seasonal or common influenza, muscle aches, soreness, and non-migraine headaches do not qualify as a disability.  Because Roman’s COVID symptoms were mild and did not linger, the Court found that she did not have a disability under FEHA and, therefore, she was not protected from termination.

In an important caveat, the Court noted that although many cases of COVID most resemble cold like symptoms, some cases are much more severe, with long duration, which “would easily qualify as a FEHA disability.”  Similarly, the California Department of Fair Employment and Housing guidelines provide “whether illness related to COVID rises to the level of a disability (as opposed to a typical seasonal illness such as the flu) is a fact based determination.”  The Court further noted that “long COVID” “may well fall within FEHA’s definition of disability.”

If an employee contracts COVID, and experiences severe and/or long-lasting symptoms, the employee may have a “disability” as that term is defined by applicable law.  As with any other disability, the employer would then have an obligation to engage in the interactive process, provide the employee with a reasonable accommodation, as necessary, and ensure that the employee is not discriminated or retaliated against because of his or her disability.  However, if the employee’s COVID symptoms are mild and of short duration, the employer has no obligation to engage in any of these activities, and the employee’s job may not be protected.

Netflix “Sees What’s Next” with New Policy Addressing Employee Activism

In a significant change of course among major employers, Netflix recently made several modifications to its employee culture memo, which is now called “Netflix Culture – Seeking Excellence.”

Among other things, Netflix inserted a section on “Artistic Expression.”  In it, the company acknowledges that “[e]ntertaining the world is an amazing opportunity and also a challenge because viewers have very different tastes and points of view. So we offer a wide variety of TV shows and movies, some of which can be provocative.”  The memo goes on, “[d]epending on your role, you may need to work on titles you perceive to be harmful.  If you’d find it hard to support our content breadth, Netflix may not be the best place for you.”

This change stands in stark contrast to the position of many other employers which, in the recent past, have been relatively deferential to employees’ opinions regarding corporate decisions and actions vis-à-vis controversial social and political issues.

Some news outlets have suggested this policy change may be in response to the backlash Netflix received from some of its employees after the release of the recent Dave Chappelle comedy special “The Closer.”

Notably, Netflix also added sections regarding employees treating all information as confidential, its commitment to philanthropy (by doubling donations to charity), and its representation-focused drive to see “a variety of stories and people on screen.”

Finally, Netflix changed the name of the “Real Values” section to instead be called “Valued Behaviors.”  Now, this section lists the following as “valued behaviors”: judgment; selflessness; courage; communication; inclusion; integrity; passion; innovation; and curiosity.  The characteristics underlying these categories include things like spending Netflix members’ money wisely, seeking to “understand members’ changing tastes and desires,” and recognizing “we all have biases” while working to counteract them.

This memo was released shortly before it was reported Netflix notified approximately 150 full-time employees—roughly 2% of its US workforce—and 70 part-time employees of their pending termination.  Most of the terminated employees are based in the United States.  Certain news outlets have noted that these terminations and culture changes coincide with Netflix’s cancelling production for several youth-focused “woke” programs, including Wings of Fire, Antiracist Baby, Stamped: Racism, Antiracism and You, and With Kind Regards from Kindergarten.  Netflix stated these lay-offs are due to “slowing revenue growth” and “business needs” rather than individual performance.

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