Author Archives: Julia Aranda

California Supreme Court Makes Defense of PAGA Claims More Difficult For Employers

Last week, the California Supreme Court issued a highly anticipated decision in Estrada v. Royalty Carpet Mills, Inc., finding that trial courts cannot strike claims under the Private Attorneys General Act of 2004 (PAGA) due to concerns about their “manageability.” Since PAGA was enacted twenty years ago, there has been a massive surge in lawsuits and an infinitely growing threat of significant penalties and attorneys’ fees. While employers were hoping that this decision would give them a tool to curtail PAGA’s harm, unfortunately, it was yet another blow for employers.

Procedural History
The Estrada case involved the issue of “manageability” of a PAGA claim. Unlike a class action, which requires a judge to certify that all class members have “commonality” in their claims, PAGA does not require such a certification. Still, some courts found that where there was a disparity in the types of claims that members of a PAGA class had experienced, a judge could strike the claim for being “unmanageable,” similar to a finding of a lack of commonality in a class action. That was precisely the holding by the Court of Appeal in Wesson v. Staples the Office Superstore, LLC, 68 Cal.App.5th 746 (2021), a 2021 decision, which found that striking a claim for lack of manageability was an inherent power held by judges in PAGA claims. A few months after the Wesson decision, the Court of Appeal in Estrada disagreed, holding that courts have no inherent authority to strike or limit PAGA claims before trial. Estrada v. Royalty Carpet Mills, Inc., 76 Cal.App.5th 685 (2022).

Last week, the California Supreme Court resolved this difference, finding that trial courts lack inherent authority to strike PAGA claims on manageability grounds. It also recognized, however, that employers have a due process right to present affirmative defenses and introduce evidence to challenge the plaintiff’s evidence and reduce damages and that there are valid concerns with manageability in complex PAGA cases, especially those involving highly individualized inquiries into the experiences of hundreds or thousands of alleged aggrieved employees.

The issue resolved by the Estrada decision is really one of timing: striking a claim because it was unmanageable would have given employers a tool to eliminate PAGA claims at the outset of the case before heavy litigation ensued. Without that tool, employers will have to rely on other procedures to limit PAGA liability, such as motions for protective orders into expensive discovery or motions for summary adjudication to limit the scope of the PAGA claim. Unfortunately, those procedural vehicles are likely to be costly and will require employers to defend themselves actively.

What Estrada Means for Employers
This holding is certainly disappointing for employers, given the time and expense of the tools available to them to curb the abuse of PAGA. While employers may no longer have a viable argument to strike a PAGA claim at the outset of a case based on manageability grounds, they should focus on using the various case management tools referenced by the Supreme Court to work their way through PAGA cases. Employers should be ready to attack PAGA complaints at the pleading stage through demurrers or motions to strike, limit the scope of discovery through phased discovery and motions to postpone discovery of contact information, and to demand an early trial management plan. Once discovery is complete, employers should consider viability of attacking the claim through a summary judgment motion.

PAGA’s Fate on the Ballot
Employers are not the only critics of PAGA claims. If a PAGA claim is settled, 75% of any penalties go to the Labor Workforce Development Agency, with the remaining 25% split between employees and their lawyers, leading employee advocates to believe that PAGA primarily benefits the plaintiff’s bar and the State, as opposed to compensating the “aggrieved employees.” In response, Californians will be voting on the California Fair Pay and Employer Accountability Act this November, which could potentially replace PAGA by providing the entire award of penalties to employees, not the State. More importantly, the Act will eliminate attorney’s fees entirely, propose an award of double penalties for employers who knowingly violate the law, and establish a Consultation and Publication Unit for employer guidance. This ballot measure will allow employees to pursue claims faster without having lawyers take large chunks of their settlements, while employers will have a defense against shakedown lawsuits. Employers, employees, and plaintiffs’ attorneys will be watching this ballot measure closely over the next year.

For more information, contact Alia Chaib or Dan Handman in the Los Angeles office of Hirschfeld Kraemer LLP. Alia can be reached at 310-255-1835 or AChaib@hkemploymentlaw.com. Dan can be reached at 310-255-1820 or DHandman@hkemploymentlaw.com.

U.S. Department of Labor Issues Its “Final Rule” Regarding the Classification of Independent Contractors versus Employees

On January 9, 2024, the U.S. Department of Labor issued its final rule regarding the classification of independent contractors versus employees, which becomes effective March 11, 2024. Although California employers are bound to the more restrictive “ABC Test” (that generally leads to findings that most workers are employees and not independent contractors), employers that are bound by the federal Fair Labor Standards Act, whether by virtue of conducting business in a state that follows the FLSA or some other reason (e.g., federal contractors), should take note of the new federal rule, which departs from the more employer-friendly rule issued under the Trump Administration and returns to a test that more closely aligns with the multi-factor “economic realities” test that prevailed prior to the 2021 rule change.

Background
During the Trump Administration, the Department of Labor revamped its independent contractor test. Although that test, like the one before it and the most recent revision, both apply an “economic realities” test (with that term dating back to U.S. Supreme Court decisions from the 1940s), the Trump-era test focused upon two “core” factors: the level of control exercised over key aspects of the work by the putative employer and the worker’s opportunity for profit or loss. The net effect of the Trump era test was to provide more flexibility and make it easier to classify workers as independent contractors.
Under the Biden Administration, the Department of Labor quickly staked out a new position by attempting to rescind the Trump era rule (which was never implemented) and institute its own rule on the basis that, as a matter of public policy, workers who are (mis)classified as independent contractors are denied important legal protections and benefits. The DOL’s initial attempts to rescind the Trump era rule resulted in protracted litigation, which seemingly persuaded it to roll out a more comprehensive and deliberate rule change that would have a better chance of withstanding future legal challenges.

The New Six Factor “Economic Realities” Test—No Single Factor is “Core” or Determinative
In some ways, everything old is new again: the new iteration of the “economic realities” test hinges upon whether, as a matter of economic reality, the worker is economically dependent upon the hiring entity for work. If (s)he is, then the appropriate classification is that of employee and not independent contractor. The factors of this test are: (1) the worker’s opportunity for profit or loss depending on managerial skill; (2) investments by the worker and the potential employer; (3) the degree of permanence of the work relationship; (4) the nature and degree of control exercised by the potential employer; (5) the extent to which the work performed is an integral part of the potential employer’s business; and (6) the skill and initiative involved in the work. Importantly, unlike the Trump era test, there are no “core” factors that are more important than others, and no single factor is determinative.

The New Test Is Not an “ABC Test”
In a nod to California-centric concerns and those of other states that apply similar independent contractor tests, the DOL, in its press release announcing the final rule, explicitly stated that the final rule does not adopt an “ABC Test.” As California businesses know, under this test, a potential employer must satisfy all three of the following to classify a worker as an independent contractor: one, the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both as a matter of contract and as a practical reality; two, the worker performs work that is outside the usual course of the hiring entity’s business; and three, the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed (for example, a carpenter who frames a house for one hiring entity routinely engages in framing for others as well).

Takeaways
As a threshold issue, if you are a California employer, unless subject to a statutory exemption, you are (or should be) applying the aforementioned “ABC Test.” If you are doing so, then the odds are that a determination of employee versus independent contractor under the ABC Test is going to be consistent with the federal “economic realities” test. In other words, if you are subject to California law regarding worker classification, the DOL’s new rule is not going to make a big impact.

On the flip side, however, although the new federal rule is closer to the California standard than the Trump era federal rule, employers who adhere to the federal economic realities test should not assume that their classification conclusions will pass muster under California law: the federal test is still more employer-friendly than the ABC test, and an “independent contractor” under the federal test may be an employee under California’s ABC test. It is accordingly critical that employers undertake classification audits under the guidance of experienced employment counsel, mindful of which standards, federal or state, should apply.

Should you have any questions regarding the foregoing, please contact Monte Grix in the Los Angeles office of Hirschfeld Kraemer LLP. He can be reached at 310-255-1827 or MGrix@hkemploymentlaw.com

Important Handbook and Policy Changes for 2024 and Beyond

As California employers rightfully reflect on their accomplishments from 2023, it is time to look ahead to 2024 and make sure your company’s New Year’s Resolutions include the following:

Employee Handbook/Policy Changes 2024
- Paid Sick Leave Changes: As of January 1, 2024, most employers are required to provide 5 days/40 hours of paid sick leave under California law, but this amount, and rollover accruals from year to year, can be even greater if your company is subject to a local sick leave ordinance. See our blog post here.
- Reproductive Loss Leave: Employers are now required to provide unpaid leave, intermittent or continuous, of up to five (5) days of leave following a “reproductive loss event,” which is defined as a day or, for a multiple-day event, the final day of a failed adoption, failed surrogacy, miscarriage, stillbirth, or an unsuccessful assisted reproduction. The leave can be up to 20 days for employees who suffer multiple loss events.
- Prohibition Against Discrimination for Cannabis Use/Drug Testing: Employers cannot discriminate against employees for their use of cannabis off the job and away from the worksite; for a required drug screening test that finds an employee to have non-psychoactive cannabis metabolites in their system; or for an employee’s prior cannabis use obtained from their criminal history unless the Company is permitted to consider or inquire about such information by state or federal law.
Workplace Violence Prevention Plans Required for Most California Employers. Effective July 1, 2024, California law requires most California employers to create a written workplace violence prevention plan, a workplace violence incident log (consistent with OSHA standards), a workplace violence prevention curriculum specific to the employer, and annual training for all employees concerning identification and internal reporting of workplace violence concerns. The employee training and the written plan are required to be customized to the particular risk factors associated with each employer. (All of this is in addition to employers’ existing obligation under Section 527.8 of the Code of Civil Procedure to seek a temporary restraining order and permanent injunction where an employee has suffered unlawful violence or a credible threat of violence from any individual that can reasonably be construed to be carried out or to have been carried out at the workplace.)
Compliance with California Consumer Privacy Act (“CCPA”), as amended by California Privacy Rights Act (“CPRA”): If a California employer/business engages in the selling or sharing of consumers’ (including employees, applicants and independent contractors) personal information OR had gross revenues in 2023 in excess of $25 million, it is subject to the CCPA. The CCPA creates a complex and comprehensive set of consumer rights and lays out steps, including a web-platformed privacy policy, a notice at collection, a procedure to respond to consumer requests to exercise such rights, and an obligation to eliminate and/or limit the use of consumers’ personal information as much as possible. Failure to comply can subject businesses to costly civil penalties and/or suits for damages by the State of California and consumers, individually or on a classwide basis. See our blog post here.
Non-Competition/Non Solicitation Agreements. Noncompetition agreements/clauses have long been unenforceable in California, as developed through a long line of decisional (case) law. Now the California Legislature has expressly made the decisional law part of California statutory law. In addition, for the first time, a California employer who attempts to enforce an invalid non-compete – even one that was signed outside of California and is otherwise governed by and fully enforceable under the laws of another state – will be at risk of being sued under a new legal claim–a private cause of action permitting a former or existing employee to be awarded damages, injunctive relief and attorney’s fees and costs when challenging an invalid non-compete agreement/clause. Additionally, no later than February 14, 2024, employers must send individual notices to all current and former employees (if they were employed after January 1, 2022) informing them that their non-competes are void under California law. See our blog post here.

The policies and procedures described above are comprehensive and complex and should not be undertaken without the advice of legal counsel. We at Hirschfeld Kraemer stand ready to strategize and assist your company with all aspects of compliance and implementation.

For more information, contact Monte Grix or your Hirschfeld Kraemer legal counsel with any questions. Monte can be reached at (310) 255-1827 or mgrix@hkemploymentlaw.com.

Think The New Consumer and Employee Privacy Laws Don’t Reach Your Business? Think Again.

Background for Employers
In 2018, the California Legislature enacted the California Consumer Privacy Act (“CCPA,” Civil Code section 1798.100, et seq.) As originally enacted, the CCPA created privacy rights for “consumers” – specifically regarding the personal information that businesses collect about them. Notably, “consumers” is broadly defined under the CCPA as a natural person who resides in California, but California employers were largely spared from obligations under the original incarnation of the CCPA, other than providing notice of rights under statute.

In 2020, by voter initiative, the CCPA was modified and expanded by the California Privacy Rights Act (“CPRA”). Among other changes, employees, job applicants, and independent contractors are now considered “consumers.” Thus, if a business is “covered,” it must comply with the CCPA not only as to its customers and potential customers but as to its employees, job applicants, and independent contractors.

(The CCPA and CPRA are together referred to as the “CCPA” throughout this post.)

What Businesses/Employers Are Covered Under the CCPA?
Generally, for-profit entities doing business in California that collect consumers’ personal information, whether directly or through a third party, who meet any one of the following:

Buy, sell, or share the personal information of 100,000 or more California residents or households;
Derive 50% or more of their annual revenue from selling or sharing California residents’ personal information; or
Have gross annual revenue of over $25 million for the prior calendar year.

“Selling” and “sharing” also have specific definitions under the CCPA. “Selling” is straightforward: it means providing a consumer’s personal information to others for monetary or other consideration. “Sharing” is different, but still has a profit motive: it essentially means providing a consumer’s personal information to others for cross-context behavioral advertising, (i.e., targeted advertising), regardless of whether there is a monetary payment/other consideration.

Importantly, even if an employer’s business model has nothing to do with selling or sharing of consumer’s personal information, the fact that employees, applicants and independent contractors are “consumers” means that an employer is “covered” if it meets the $25 million gross revenue threshold.

When Do Businesses/Employers Have To Comply?
Covered businesses/employers were required to comply with the CCPA as of January 1, 2023, and final regulations were issued on March 29, 2023. However, the California Chamber of Commerce obtained an injunction, delaying enforcement of the new regulations for one year from the date the regulations were issued, or until March 29, 2024.

What Rights Do Consumers (Including Employees, Applicants and Independent Contractors) Have Under the CCPA?
The California Privacy Protection Agency (CPPA), the new agency created to enforce CCPA rights, aptly used the acronym “LOCKED” (Limit, Opt-Out, Correct, Know, Equal, and Delete). Consumers have the right to:
L –LIMIT the use and disclosure of sensitive personal information collected about them. (“Sensitive Personal Information” is a subset of “Personal Information”: think Social Security numbers; Driver’s License numbers; financial account access information; precise geolocation information; contents of mail, email, and text messages; genetic data; biometric information; and/or information about a consumer/employee’s health, sex life, sexual orientation, racial or ethnic origin, citizenship or immigration status, religious or philosophical beliefs, or union membership.)
O –OPT-OUT of the selling or sharing (as defined above) of their personal information.
C –CORRECT inaccurate personal information collected about them.
K –KNOW what personal information is being collected about them, including the categories of personal information collected, the categories of sources from which the personal information is collected, the business or commercial purpose for collecting, selling, or sharing personal information, the categories of third parties to whom personal information is disclosed, and the specific pieces of personal information collected.
E –EQUAL treatment. Businesses cannot discriminate against consumers for exercising their CCPA rights.
D –DELETE personal information collected from them (subject to some exceptions).

What Steps Do Employers/Businesses Have to Do to Comply with the Revised CCPA:

Step 1: Inventory Personal Information Collected
Covered businesses/employers first need to map what personal information of their consumers (including employees, applicants and independent contractors) they collect, what it is used for, and how long it is retained.
Step 2: Create and Distribute a Privacy Policy and “Notice at Collection” for Consumers
Once the foregoing mapping is complete, covered businesses/employers must provide notice of consumers’ rights and also provide methods by which consumers can exercise these rights. The CCPA requires that covered businesses/employers post an online privacy policy on their website that provides a comprehensive description of the business’s information practices, informs consumers about their rights under the CCPA and provides information necessary to exercise those rights. Similarly, covered businesses/employers need to provide a “Notice at Collection” to consumers – before any personal information is collected about them – that spells out what personal information is collected, for what purpose, for how long it is retained, and that provides notice of the aforementioned rights.
Step 3: Reasonably Limit the Collection, Use and Retention of Consumer’s Personal Information
Additionally, covered businesses/employers must limit the collection, use, and retention of consumers’ personal information to only those purposes that: (1) a consumer would reasonably expect, (2) are compatible with the consumer’s expectations and disclosed to the consumer, or (3) purposes that the consumer legitimately agreed to. Bottom line: the collection, use, and retention of consumer information must be reasonably necessary and proportionate to the above purposes.
Step 4: Timely Acknowledge and Respond to Consumer Requests to Exercise CCPA Rights
Covered businesses/employers also need to set up a procedure to receive and timely respond to consumer requests to exercise their rights under the CCPA (as noted above). Generally, for requests to delete, correct, or know, covered businesses/employers must confirm receipt of the request and provide information about how it will process the request no later than 10 business days after receiving the request. The business /employer must respond to the request no later than 45 calendar days after receipt. A covered business/employer must comply with a request to opt-out or limit no later than 15 business days after receiving the request.

What If My Company Does Not Comply?
A consumer whose personal information is subject to unauthorized access and disclosure as a result of a business’s violation of the duty to implement and maintain reasonable security procedures and practices may bring a civil action for statutory damages on an individual or class-wide basis (after a 30-day cure period) to recover damages between $100 to $750 per consumer per incident, or for actual damages, whichever is greater.
Additionally, the State of California (through the California Attorney General) can bring a civil action against a business for violation of the CCPA to recover civil penalties of $2,500 to $7,500 per violation. As with class actions, these relatively small amounts can add up quickly and lead to multimillion dollar liabilities. The CPPA may also bring an administrative enforcement action to recover such penalties.

How Do I Get My Business Compliant?
Each step of this process is complex and time intensive. It should only be undertaken with counsel. Hirschfeld Kraemer’s employment lawyers are available to guide you through this process and make sure you will become compliant with the CCPA as quickly and efficiently as possible.

For more information, contact Monte Grix in the Los Angeles, or Jenna Rogenski in the San Francisco office of Hirschfeld Kraemer LLP. Monte can be reached at 310-255-1827 or mgrix@hkemploymentlaw.com. Jenna can be reached at 415-835-9009 or jrogenski@hkemploymentlaw.com.

Non-Competes Continue to Get “No Love” in California

No later than Valentine’s Day 2024, California employers will be required to send “candy grams” to former and existing employees with unenforceable non-competes informing them that those provisions are void. Complicating this new legal requirement is an expanded definition of what constitutes an unenforceable non-compete and the creation of a new legal claim that can be brought against an employer who pursues enforcement of an invalid non-compete.

California has long prohibited most non-compete agreements. Since 1941, California law has rendered them invalid except under very limited circumstances (mostly involving the sale of a business). California courts have issued a long series of rulings clarifying what constitutes an unenforceable non-compete and what limited exceptions to this prohibition entail.

Effective January 1, 2024, a new law, AB 1076, forbids California employers from entering into non-competes with any of their employees unless they expressly fall into one of the narrow exceptions allowed by California law.

Equally important, a California employer who attempts to enforce an invalid non-compete – even one that was signed outside of California and is otherwise governed by and fully enforceable under the laws of another state – will be at risk of being sued under a new legal claim. SB 699 creates for the first time a private cause of action permitting a former or existing employee to be awarded damages, injunctive relief and attorney’s fees and costs when challenging an invalid non-compete and exposes that same employer to liability based upon an unfair competition claim.

Finally, no later than February 14, 2024, employers must send individual notices to all current and former employees (if they were employed after January 1, 2022) informing them that their non-competes are void under California law.

In light of these new developments, the following open questions remain unanswered:

Will a non-California employee who is subject to a valid non-compete be able to escape from that prohibition by moving to California?
Are California employers actually prohibited from requiring their non-California employees from entering into non-competes that are otherwise fully enforceable in states where those employees live and work?
Does this new law also prohibit agreements forbidding non-solicitation of customers and employees? As of now, consistent with prior court decisions, it certainly seems that customer non-solicits are prohibited as well.
Can a California employer still try to rely upon Labor Code section 925 by entering into an employment agreement containing a non-compete with another state’s choice of law provision when that employee is separately represented by their own legal counsel?

What steps must employers take right now in order to comply with these new laws?

Make sure your legal counsel reviews all existing non-competes to determine if they must be revised.
Prepare a list of individuals who must be contacted by February 14th to inform them that their non-competes are void along with a letter meeting this notice requirement.
Don’t automatically assume that every applicant with a non-compete will be prohibited from working for your company. Consult your lawyer to do an individual assessment as the need arises.
Finally, given the open questions listed above, we strongly recommend that you consult with legal counsel to determine what, if any, circumstances going forward will your company have the legal right to require new employees to sign a non-compete particularly those employees working remotely outside of California.

For more information, contact Steve Hirschfeld or Greg Glazer. Steve can be reached at 415-835-9011 or sh@hkemploymentlaw.com, and Greg can be reached at 310-255-1830 or gglazer@hkemploymentlaw.com

NLRB Issues New Joint Employer Rule

On October 26, 2023, the National Labor Relations Board (NLRB or the Board) issued a new rule addressing how the Board will assess joint employer status under the National Labor Relations Act. In short, the new rule lowers the bar significantly for finding two entities to be joint employers and raises heightened concerns about the careful use of contractors and potentially franchisor-franchisee relationships. Here are some key takeaways:

The prior rule focused on whether a putative joint employer’s control over employment matters is direct and immediate. However, the new rule focuses on whether the putative joint employer indirectly affects employees’ terms and conditions of employment or has reserved the right to control, even if it does not actually exercise this right. In other words, if an employer can indirectly control or influence another employer’s employees’ terms and conditions of employment, or it has somehow reserved its authority to do so (e.g., via a contract or potentially certain Brand standards), it is at risk of being found a joint employer.
Under the new rule, the relevant terms and conditions of employment are defined by the following broad, exhaustive list: 1) wages, benefits, and other compensation; 2) hours of work and scheduling; 3) the assignment of duties to be performed; 4) the supervision of the performance of duties; 5) work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline; 6) the tenure of employment, including hiring and discharge; and 7) working conditions related to the safety and health of employees.
Based upon what we have seen from the Biden Board, we expect the new rule will be interpreted very broadly and will expand the universe of joint employers. As a result, we expect more joint employer relationships to be found in entity-contractor and entity-subcontractor situations. Concerningly, as expressly indicated in the new rule, the Board is likely to give increased scrutiny of relationships between a franchisor and the employees of a franchisee.
The new rule makes clear that the putative joint employer must bargain with the relevant Union as to the terms and conditions over which it exercises control (directly or indirectly), and over which it has retained authority. This is in addition to the historic rule that a putative joint employer would be jointly and severally liable for the primary employer’s unfair labor practices.
The new rule will be applied retroactively to all pending election cases.

The key change under the new rule is that the alleged joint employer no longer must exercise power over the primary employer’s employees’ essential terms and conditions of employment. Instead, a putative joint employer, either by itself or through an intermediary (e.g., another entity or agent), need only have the authority or potential to impact terms and conditions to be considered a joint employer.

As a result of the new rule, it will become easier for employees of franchisees and staffing agencies to show that the franchisor or contracting entity is their joint employer. In other words, a franchisor or user firm may be required to negotiate with the unionized workers of the franchisee or contractor if it directly or indirectly controls their job terms and conditions or retains the right to do so, even if those rights have never been exercised. In addition, the joint employer will be jointly liable for all unfair labor practices committed by its contractor or franchisee. Although the new rule establishes a purportedly uniform joint-employer standard, the NLRB will still conduct a “fact-specific analysis on a case-by-case basis to determine whether two or more employers meet the standard.” This will create uncertainty for employers until Board cases are issued or there is a change in the political makeup of the Board following an election. It is important to contact legal counsel to understand and discuss the implications of the new rule, especially in the context of franchisor-franchisee relationships.

The NLRB’s new rule will take effect 60 days after publication, on December 26, 2023. We expect there will be challenges brought as to the new standards and we will provide updates as they become available. Nonetheless, this is a good time not only to review your staffing and other contracts and relationships, but also to assess risk tolerance as you review your franchise agreements and related Brand standards.

For more information, contact Keith Grossman, Monte Grix, or Aram Karagueuzian in the Los Angeles office of Hirschfeld Kraemer LLP. Keith can be reached at 310 255 1821 or kgrossman@HKemploymentlaw.com. Monte can be reached at 415 835 9016 or mgrix@HKemploymentlaw.com. Aram can be reached at 310 255 1836 or akaragueuzian@hkemploymentlaw.com.

California Expands Paid Sick Leave Law Effective January 1, 2024

On October 4, 2023, Governor Gavin Newsom signed Senate Bill 616 and expanded California’s sick leave law, the Healthy Workplaces, Healthy Families Act of 2014. As a result, California employers must be prepared to comply by January 1, 2024, notably by increasing the amount of paid sick leave provided to employees.

Paid Sick Leave Under Current Law
All California employers, regardless of size, are required to provide employees with 24 hours or three days of paid sick leave per year. The law applies to employees that have worked in California for 30 or more days in a year and have completed 90 days of employment with the same employer.

Employers may provide paid sick leave to employees through either the frontload or accrual methods:

Under the frontload method, employers must provide the full amount of paid sick leave (24 hours or three days) to employees at the beginning of the calendar year. Under this method, employers do not have to allow employees to carry over unused paid sick leave to the following year.
Under the accrual method, employees accrue paid sick leave at a rate of one hour for every 30 hours worked. Alternatively, employers may use a different accrual method so long as the employee has no less than 24 hours of accrued sick leave by the 120th calendar day of employment of each calendar year. Employers must allow employees to carry over unused paid sick leave to the following year but may limit employees’ use of accrued paid sick leave to 24 hours or three days in each year. Employers may cap employees’ total accrual of paid sick leave to 48 hours or six days.

Paid Sick Leave Under Amended Law: Increase from 24 to 40 Hours
On January 1, 2024, California’s paid sick leave law will expand and require California employers to provide employees with 40 hours or five days of paid sick leave per year, i.e., 16 more hours or two more days than previously required.

Employers may continue to provide paid sick leave through either the frontload or accrual methods as described above. Under the frontload method, employers are simply required to increase the sick leave provided at the beginning of the calendar year from 24 hours (three days) to 40 hours (5 days). As before, when using the frontload method, there will be no carryover required from year to year.

Under the accrual method, employers may continue to use the default accrual method of one hour for every 30 hours worked. Alternative accrual methods can be used; however, employers must also ensure that an employee has no less than 40 hours of accrued sick leave by their 200th calendar day of employment of each calendar year (and also still meet the benchmark of 24 hours by the 120th calendar day of employment). As with the current law, carryover of sick leave at 2 times the annual accrual is required when using this method, but now that figure amounts to a total carryover of 80 hours (10 days).

Additional Revisions to Amended Law
Paid Sick Leave and Collective Bargaining Agreements
Currently, the paid sick leave law does not apply to employees covered by a valid, collective bargaining agreement (“CBA”) that includes certain provisions. However, under the amended law, an employee working under a CBA (with the notable carveout of the construction industry) must be permitted to use paid sick leave for the following purposes:

Diagnosis, care, or treatment of an existing health condition of, or preventative care for, an employee or employee’s family member or
Time off for an employee who is a victim of domestic violence, sexual assault, or stalking.

(Note that non-union employees may use their sick leave for these same reasons.) An employer may not require that an employee working under a CBA search for or find a replacement to cover the days in which the employee uses paid sick days for such purposes.

Further, as with non-union employees, an employer may not discharge, threaten to discharge, demote, suspend, or discriminate against an employee working under a CBA for attempting to use or using paid sick leave. Such actions by an employer create a rebuttable presumption of unlawful retaliation.

Effect on Local Sick Leave Ordinances
Presently, eight California cities have their own paid sick leave laws (Oakland, San Francisco, Berkeley, Santa Monica, Emeryville, Los Angeles, Long Beach, and San Diego) with sick time benefits that meet or exceed those under California law. Thankfully, as of January 1, 2024, although such cities are free to continue to provide a greater amount of sick leave than under state law, the amended California paid sick leave law will bring some level of uniformity and preempt local ordinances in the following respects (note that all of these carry over from the existing California sick leave law—the difference is that these rules now apply to such local sick leave ordinances):

Employers are not required to provide compensation to an employee for accrued, unused sick leave upon termination, resignation, retirement, or separation from employment. However, if an employee separates and is rehired by the employer within one year from the date of separation, previously accrued and unused paid sick days must be reinstated.
An employer may advance paid sick leave to an employee at the employer’s discretion and with proper documentation.
An employer must provide an employee with written notice that sets forth the amount of paid sick leave available for use on either the employee’s itemized wage statement or in a separate writing provided on the designated pay date.
An employer must calculate paid sick leave for nonexempt/hourly employees using either of the following methods:
- Paid sick leave shall be calculated in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time; or
- Paid sick leave shall be calculated by dividing an employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.

(For exempt employees, paid sick leave is calculated in the same manner an employer calculates wages for other forms of paid leave time.)

If the need for paid sick leave is foreseeable, an employee must provide reasonable advance notice. If the need for paid sick leave is not foreseeable, an employee must provide notice for the leave as soon as practicable.
An employer must provide payment for sick leave taken by an employee no later than the payday for the next regular payroll period after the sick leave was taken.

Next Steps for Compliance
To comply with the amended paid sick leave law, California employers should take the following steps by January 1, 2024:

Review and Update Current Paid Sick Leave Polices. Employers should review their current paid sick leave or paid time off policies with counsel to ensure compliance with the provisions of the amended law.
Inform Employees of Any Policy Changes. Employers should notify employees, with sufficient lead time, of the revised paid sick leave policies.
Coordinate Changes with Payroll. If providing a greater paid sick leave allotment to employees than previously provided, employers should coordinate with payroll to ensure that the updated allotment is correctly noted on employees’ itemized wage statements.
Train Relevant Staff. Employers should ensure that human resources and payroll employees are aware of any paid sick leave policy changes and train them on how to administer such policies and to answer employee questions regarding same.

For more information, contact Monte Grix or Jenna Rogenski. Monte can be reached at 415 835 9016 or mgrix@hkemploymentlaw.com. Jenna can be reached at 415 835 9009 or jrogenski@hkemploymentlaw.com

Employee Arbitration Agreements and PAGA Claims: Yes We Can (With Qualifiers)

Last week, the California Supreme Court issued its long-awaited decision in Adolph v. Uber Technologies, Inc. to determine the effect of arbitration agreements on claims for penalties brought by employees under the Private Attorneys General Act of 2004 (PAGA). Unfortunately, this ruling does not offer employers one clear-cut way to deal with these disputes.

For many years in California, employers have understood that, although employees can waive their right to bring class actions via an arbitration agreement, they could not waive their right to bring a PAGA action, and, as a result, PAGA claims simply were not arbitrable. In a welcome development for employers, in 2022, in Viking River Cruises, Inc. v. Moriana, the United States Supreme Court held that this total prohibition on arbitrating PAGA claims violated the Federal Arbitration Act (“FAA”) and thus “individual” PAGA claims could be compelled to arbitration.

The open question after the Viking River Cruises decision was what became of the representative, “non-individual” PAGA claims that such an employee was attempting to bring on behalf of a group of “allegedly aggrieved” employees. The U.S. Supreme Court opined that a person compelled to arbitrate individual claims would have no “standing,” or legal right, to separately pursue such non-individual claims. But, Justice Sonia Sotomayor noted in a separate opinion that “standing,” at least with regard to claims brought under California law, is exclusively a matter of state law, and California would have the “last word” of how this played out.

It has now played out. In sum, a PAGA claim can now be simultaneously litigated on two tracks: an arbitration of “individual” PAGA claims, coupled with a lawsuit for “non-individual” claims. A plaintiff does not lose standing simply by having his non-individual claims compelled to arbitration.

But there is a very important caveat here: a trial court has the discretion, but not the obligation, to stay a “representative” PAGA claim while the individual PAGA claims are arbitrated. If the arbitrator concludes that the plaintiff-employee is not “aggrieved,” meaning they have not suffered any of the alleged Labor Code violations alleged, then that person does lose standing, and cannot pursue the non-individual, representative claims in court (and presumably that case would be dismissed). But if the plaintiff-employee obtains a decision from the arbitrator that they are an aggrieved employee, then that person retains standing to pursue the non-individual claims in court.

This presents employers with, possibly, a high-stakes game of chicken: if an employer believes that it has a good chance to prevail in arbitration on the employee’s individual claims, then it may want to pursue arbitration through a final decision. However, if the employer loses, then it is in the position of having to pay any assessed penalties, the arbitrator’s fees, and the attorneys’ fees and costs (upon request and award) of the plaintiff-employee. And on top of that, the employer now has to defend against a PAGA claim in a civil lawsuit.

Such a decision may or may not make sense—the risks and the rewards are high. Of course, if there is evidence that the employee is aggrieved and that some of Labor Code claims undergirding the PAGA claim have merit, an employer would be well advised to consider resolving such a case at an early stage through negotiation and mediation. Otherwise, the adage of “throwing good money after bad” comes into play.

Decisions about whether to utilize employment arbitration agreements and the enforcement of such agreements are complex, and should be considered thoughtfully with legal counsel. Please do not hesitate to reach out to us at Hirschfeld Kraemer with any questions and concerns your company may have.

For more information, contact Dan Handman or Monte Grix. Dan can be reached at 310-255-1820 or dhandman@hkemploymentlaw.com, and Monte can be reached at 415-835-9016 or mgrix@hkemploymentlaw.com

U.S. Department of Homeland Security Announces New Process to Protect Undocumented Whistleblowers

On January 13, 2023, U.S. Department of Homeland Security (DHS) announced an initiative to extend more protection against deportation for undocumented immigrants who report labor rights violations by employers. These protections are meant to allow undocumented workers to speak out about labor violations without fear of retribution. With this enhanced initiative, DHS provides an improved legal process for whistleblowing undocumented immigrants to defer removal (deportation) from the United States for two years and obtain a temporary work permit. Although DHS has explained that this policy is to protect workers from “unscrupulous employers”, any employer could potentially find themselves in a situation in which this issue arises and will need to understand the new policy.

—–

Q. What do employers need to know?

A. Employers should continue to comply with all applicable federal, state, and local labor laws. Labor laws are not impacted by this update. Rather, the DHS is streamlining certain protections to undocumented whistleblowers who cooperate with investigators.

Q. What government agencies are/could be involved?

A. Any labor and employment agencies – at the local, state, Federal level – can seek DHS support in an ongoing investigation or enforcement action related to a potential labor and/or employment law violation.

Q. What workers may benefit from this policy?

A. This policy only benefits undocumented workers that fall within the scope of a labor or employment agency investigation. The request for protection via deferred action must be initiated by the labor or employment agency.

Q. What benefits does this new policy provide?

A. This initiative provides protections from deportation (or removal) through deferred action and, if the undocumented worker can demonstrate “an economic necessity for employment”, they may receive temporary work authorization.

Q. What is deferred action?

A. Deferred action is the determination to defer removal (or deportation) as an act of prosecutorial discretion. Deferred action recipients do not obtain lawful immigration status but do benefit from being considered lawfully present while in a period of deferred action. However, their prior period(s) of unlawful presence are not excused. In other words, deferred inspection is not a permanent solution, but a temporary benefit that will allow individuals to obtain certain benefits such as work authorization and a social security number.

Q. This initiative appears to only apply to undocumented workers, how will Employers be impacted?

A. Undocumented workers have always been able to make claims against their employers for labor law violations. This initiative is best understood as a tool for labor and enforcement agencies to support undocumented worker victims or witnesses. Individuals who may have been scared to come forward before, may do so if they believe that they may be eligible for certain benefits and protections.

Q. What are the most common claims?

A. Employees who blow the whistle can allege any number of claims, including but not limited to failure to pay wages pursuant to state/federal law, unsafe working conditions, missed meal period and/or rest breaks, wrongful termination, and discrimination.

Q. What can employers expect?

A. The new policy may create an incentive for undocumented workers to bring claims against employers that have little or no merit. This may result in undocumented workers pursuing labor and employment claims against their employers, including wage and hour and EEO claims.

Q. How can employers best prepare in light of this announcement?

A. Many employers hire individuals who are not authorized to work in the U.S. for a variety of reasons. For example, an employer may have difficulty finding qualified employees, have a desire to pay less than what is required by law, or the lack of documented status may even be unknown to an employer. However, employers should take immediate action to ensure that they are complying and that they are hiring individuals who are authorized to work in the U.S. Employers should conduct internal audits, including wage and hour and Form I-9 audits, with the assistance of legal counsel to ensure compliance. Lastly, employers should work with legal counsel to ensure that they have appropriate policies and practices related preventing and investigating harassment and discrimination.

—–

Although this initiative is meant as a tool to help enforce current employment and labor laws, it may bring increased baseless complaints with an added level of complexity – how do you negotiate with an employee seeking a benefit that requires a favorable finding by a labor enforcement agency? The best way to protect an entity and employees is to ensure compliance. Accordingly, there is no time like the present to review current policies and verify compliance.

For an in-depth look at the U.S Department of Homeland Security’s announcement, check out WR Immigration’s upcoming webinar with Hieu Williams on May 11, 2023 at 11 AM PST.

For more information, contact Hieu T. Williams in the San Francisco office of Hirschfeld Kraemer LLP. She can be reached at 415-835-9020 or hwilliams@hkemploymentlaw.com

Additional contributions from:
Kimberley Best Robidoux, Partner, WR Immigration
Josune Aguirre Gamez, Senior Associate, WR Immigration
Laura Bloniarz, Senior Associate, WR Immigration

Key HR Legal Issues Impacting Non-Profit Organizations (webinar – April 12, 2023)

Non-profits face unique HR legal challenges. While counter-intuitive, these businesses are often more vulnerable to legal disputes than for-profit companies. This session will focus exclusively on what these agencies must do to ensure legal compliance and minimize costly litigation:

Why unions are focusing so much attention on non-profits and what you can do right now to avoid becoming a target
Special federal and state wage-hour issues
Unique issues that arise when negotiating CEO employment and compensation agreements
Managing a remote workforce to ensure legal compliance
How to effectively incorporate DEI initiatives
Establishing proper roles/responsibilities between your Board and executive team
Challenges when implementing reductions in force/layoffs

Hirschfeld Kraemer partner Steve Hirschfeld will moderate a discussion with Shawe Rosenthal LLP partner Fiona W. Ong and featured speakers Natalie Margolis, Chief Operating Officer of Catalight Foundation, Chris Bedford, Executive Director of the San Francisco Museum of Modern Art, and Neil Duke, Labor & Employment Practice Group Leader of Johns Hopkins Health System Corporation.

Click here to register to watch this webinar live on April 12, 2023
9:00am – 10:30am (Pacific)
12:00pm – 1:30pm (Eastern)