California Employment Law Update

California Cities and Counties Advise (or Order) Businesses to Close Up Shop

In the last few days, California’s most populous cities and counties have issued broad-sweeping guidelines to businesses to curb the spread of COVID-19 through enhanced social distancing measures.  These orders, most of which last through the end of March or early April, vary significantly in scope and severity.

On March 15, 2020, the City of Los Angeles issued an order requiring the following businesses to cease normal operations, beginning on March 16th, subject to very narrow exceptions:

  • All bars and nightclubs that do not serve food;
  • All movie theaters, live performance venues, bowling alleys, and arcades;
  • All gyms and fitness centers; and
  • All private social clubs.

Los Angeles’ order, which runs through March 31st, also prohibits all restaurants and retail food facilities from serving food to dine-in customers.

On March 16, 2020, San Diego County issued an amended order, that takes effect today (March 17th) and runs through the end of the month.  Most relevant to employers, it:

  • Prohibits all public gatherings;
  • Orders all bars, adult entertainment establishments and other business that serve alcohol but not food to close;
  • Prohibits restaurants and other business that sell food from operating any on-site dining and requires all food to be served by delivery, pick-up or drive-through options; and
  • Requires all businesses to enact social distancing, increased sanitation standards and “make every effort to use telecommuting” for their workforces; business must suspend any policy or procedure requiring employees to furnish documentation from healthcare providers for sick or other leave approval.

San Francisco and surrounding areas, arguably hit the hardest by COVID-19, have taken the most extreme measures.  On March 16, 2020, the Public health officers of Alameda, Contra Costa, Marin, San Francisco, San Mateo, and Santa Clara counties announced, along with the City of Berkeley, a legal order directing their respective residents to shelter at home for three weeks, beginning March 17.  Among other restrictions, these jurisdictions’ orders:

  • Require that all businesses, except “Essential Businesses,” cease all operations at their facilities, except for “Minimum Basic Operations;” employees may work from their residences;
  • Prohibit all public and private gatherings of any number of people occurring outside a household or living unit, subject to very narrow exceptions; and
  • Require that individuals maintain a minimum of six feet between each other when interacting outside of their residences.

To date, Fresno and Sacramento Counties have not issued similarly broad-sweeping orders, though they may do so in the coming days.  We will keep readers updated.

March 2020 California Employment Law Notes

We invite you to review our newly-posted March 2020 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

View PDF

Agreement To Divide $4.3 Million in Attorneys’ Fees Was Unenforceable Absent Disclosure About Insurance

Hance v. Super Store Indus., 44 Cal. App. 5th 676 (2020)

The attorneys who represented the employees in a class action filed a motion with the trial court for approval of a settlement of the action and also for an award of attorneys’ fees and a division of those fees among the lawyers in accordance with a fee division agreement that had been worked out among the lawyers. One of the lawyers challenged the fee division agreement on multiple grounds, including that one of the lawyers who was seeking enforcement of the agreement had failed to advise the clients that he lacked professional liability insurance as he was required to do by the California Rules of Professional Conduct. The trial court enforced the agreement, but the Court of Appeal reversed, holding that “[t]o allow [the attorney] to recover his agreed upon percentage of the attorney fee award, despite noncompliance with the requirements of the [insurance disclosure] rule, would effectively condone that violation, contrary to the purpose behind the rules.” The Court remanded the case to the trial court to determine what amount of fees the attorney should recover on a quantum meruit (i.e., equitable value) basis.

Employee Can Sue Employer That Was Not Released In Prior Class Action

Grande v. Eisenhower Med. Ctr., 44 Cal. App. 5th 1147 (2020)

Lynn Grande was assigned through a temporary staffing agency (FlexCare) to work as a nurse at Eisenhower Medical Center. Grande was a named plaintiff in a class action prosecuted against FlexCare in which she alleged she had not received her required meal and rest breaks, wages for certain periods she had worked and overtime wages. A year after FlexCare settled with the class (including Grande), Grande brought a second class action alleging the same violations against Eisenhower, which was not a party to the original class action. The trial court held a trial limited to the questions of whether Eisenhower was a released party as a result of the settlement agreement and/or whether Eisenhower and FlexCare were in privity such that Grande’s claims against Eisenhower were barred by the prior action against FlexCare. The trial court ruled in Grande’s favor, and the Court of Appeal affirmed, holding that because the release did not include words such as “clients, joint employers, joint obligors” of FlexCare or reference to “any client of FlexCare as to whom any class member may have provided services through FlexCare,” Eisenhower was not among the “Released Parties.” The Court further held that FlexCare and Eisenhower were not in privity with one another because joint employers are generally not liable for each other’s Labor Code violations (following Serrano v. Aerotek, Inc., 21 Cal. App. 5th 773 (2018) from the Fourth Appellate District and refusing to follow Castillo v. Glenair, Inc., 23 Cal. App. 5th 262 (2018) from the Second Appellate District). (Note that the second holding drew a dissent from Presiding Justice Ramirez.)

Summary Judgment Properly Entered In Favor of DOL in FLSA Case

Scalia v. Employer Solutions Staffing Group, 2020 WL 992564 (9th Cir. 2020)

Employer Solutions Staffing Group (“ESSG”) contracts with other companies to recruit employees and place them at jobsites for which ESSG provides administrative tasks such as payroll processing. ESSG conceded that it qualifies as an “employer” of the recruited employees under the Fair Labor Standards Act (“FLSA”). One of ESSG’s employees (Michaela Haluptzok) was responsible for processing payroll for a company whose employee called Haluptzok and told her without explaining why to pay all overtime hours as “regular hours.” Haluptzok complied even though in order to follow the employee’s instructions, Haluptzok had to ignore numerous error messages in ESSG’s software concerning the applicability of overtime payments. By the time ESSG’s relationship ended with the employer in question, more than 1,000 violations had occurred in which employees did not receive their earned overtime pay.

The Secretary of Labor sued ESSG and others over the FLSA violations, and the district court granted the Secretary’s motion for summary judgment, holding that ESSG had willfully violated the FLSA and awarded the Secretary $78,500 in unpaid overtime plus an equal amount in liquidated damages for the willful violation. The Ninth Circuit affirmed the judgment, holding that an employer may be liable even for the actions of a low-level employee such as Haluptzok. The Court also held that the violation was willful and, therefore, a three-year statute of limitations applied – as did an award of liquidated damages. Finally, the Court found there to be no right to indemnification or contribution from the other employers involved in the case.

Louisiana Wage Law Applies To Non-California Residents Working On Vessel Off The Coast Of California

Gulf Offshore Logistics, LLC v. Superior Court, 2020 WL 772610 (Cal. Ct. App. 2020)

Non-California resident crew members of the “Adele Elise” (a vessel that provides services to oil platforms located off the coast of California) filed this putative class action alleging multiple violations of California wage and hour law. The owner/operators of the vessel (all of whom are based in Louisiana) petitioned the Court of Appeal to issue a writ of mandate directing the superior court to vacate its order denying their motion for summary judgment. The owner/operators contended that Louisiana law applied to the claims, while the crew members claimed California law governed. The Court of Appeal agreed with the owner/operators and held that Louisiana law applies because the crew members are not residents of California and they perform work both within and outside the boundaries of California on a “boat at sea”: “The employment relationships here were formed in Louisiana, between Louisiana-based employers and non-resident employees who traveled to that state to apply for, and accept employment.”

Agreement Not To Compete With Employer While Still Employed Is Enforceable

Techno Lite, Inc. v. Emcod, LLC, 44 Cal. App. 5th 462 (2020)

Techno Lite employees Scott Drucker and Arik Nirenberg entered into an agreement with Techno Lite not to compete with Techno Lite while they were still employed with that company. Later, Techno Lite sued Drucker and Nirenberg for “siphoning off accounts of Techno Lite’s and diverting the business of [Techno Lite] to their own company, Emcod” and alleged causes of action against the employees for breach of fiduciary duty, interference with contractual relationships, intentional and negligent interference with economic advantage, conversion, fraud and unfair competition. The trial court found in favor of Techno Lite on the interference, fraud and unfair competition claims. The Court of Appeal affirmed, holding that a promise not to compete with an employer while employed is not void under Cal. Bus. & Prof. Code § 16600 (California’s anti-noncompete statute) and, therefore, the employees were properly found liable for fraud based upon a false promise.

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