NLRB Rules Non-Disparagement Provisions Are Unlawful in Severance Agreements

In recent years, the California Legislature has limited the use of non-disparagement and confidentiality provisions in severance agreements. For example, non-disparagement provisions in California must now include a disclaimer clarifying that employees are still permitted to discuss allegedly unlawful conduct they experienced in the workplace and confidentiality provisions are prohibited in cases where an employee alleges discrimination or harassment based on sex.

While the California legislature has stopped short of declaring an all-out ban of non-disparagement and confidentiality provisions, the National Labor Relations Board’s (NLRB) recent decision in McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023), erects yet another barrier to employer’s use of non-disparagement and confidentiality provisions. In McLaren, the Board held that employers violate the National Labor Relations Act (the “Act”) when they include provisions within a severance agreement that (1) prevent employees from making statements that could disparage the employer, and (2) disclose the terms of the agreement. This decision is subject to appeal, so the NLRB’s decision is likely not the last word on this issue.

The NLRB’s Decision

In McLaren, a hospital employer laid off a number of employees for COVID-related reasons. The severance agreements the hospital presented to the laid off employees prohibited them from disparaging the hospital and discussing the terms of the agreement. One laid off employee challenged the enforceability of those provisions before the NLRB.

The NLRB found that the non-disparagement and confidentiality provisions violated Section 7 of the Act and were not enforceable. In addition, it held that the mere “proffer of a severance agreement” containing such provisions – regardless of whether the employee accepts the agreement – is an independent unfair labor practice in violation of Section 7 of the Act. Accordingly, an employee could file a unfair labor practices charge against an employer if the employer simply offered a severance agreement to an employee that contained a non-disparagement or confidentiality provision.

The remedy for this violation is that the unlawful provisions would not be enforced. Notably, the decision would apply to severance agreements offered to most private sector employees regardless of whether they work in a unionized workforce, although it would have no effect on managers, most supervisors, and some agricultural workers.

What Employers Should Do Next

The Board’s decision in McLaren is not all bad news. Much of the Board’s concern with the non-disparagement and confidentiality provisions at issue in McLaren focused on their breadth, with the Board concluding that the provisions placed too broad of a restriction on protected conduct under the Act. This leaves room for careful and creative drafting of provisions that are sensitive to the Board’s concerns. For example, with respect to the non-disparagement provision, the Board took issue with the scope, the lack of any temporal component, and the failure to define “disparagement.” As such, a non-disparagement term could be drafted in a manner that addresses these concerns. It is possible, for example, that the NLRB would reach a different result if “disparagement” was defined as defamatory, slanderous, or otherwise unlawful statements.

Also, it bears noting that this decision is subject to review by a federal Court of Appeals and potentially the U.S. Supreme Court. It would not be at all surprising if this decision was reversed at some stage of the appellate process.

Ultimately, how an employer decides to proceed following McLaren will require an assessment of a number of factors, including the employer’s goals, the facts surrounding the employer’s offer of the severance agreement, and an employer’s risk tolerance. Although somewhat extreme, an employer could opt to remove non-disparagement and confidentiality provisions in their agreements altogether in light of the California’s Legislature’s and the NLRB’s gutting of their relevant strength.

What is clear is that there are no “cookie cutter” answers to how employers should proceed in the wake of McLaren. If you’re considering offering a severance agreement with non-disparagement and confidentiality provisions, we strongly recommend that you carefully consider the reasons why you want them and determine the most optimal way to do so given the legal uncertainty that this decision presents.

For more information, contact Michelle Freeman, mfreeman@hkemploymentlaw.com, (415)-835-9003 or Dan Handman, dhandman@hkemploymentlaw.com, (310)-255-0705.

Mandatory Employment Arbitration Agreements Are Legal in California: Ninth Circuit Affirms That California Assembly Bill 51 Is Unenforceable

In some rare and welcome news for California employers, on February 15, 2023, the Ninth Circuit Court of Appeals, after first withdrawing its 2021 opinion in Chamber of Commerce of the United States of America v. Bonta that primarily upheld portions of California Assembly Bill 51, published a new 2 to 1 decision that affirmed the District Court’s preliminary injunction of this law. Under section 422 of the California Labor Code, AB 51 purported to criminalize and prohibit the formation of “involuntary” employment arbitration agreements, which the court reasoned was inconsistent with the Federal Arbitration Act (FAA): “Because the FAA’s purpose is to further Congress’s policy of encouraging arbitration, and AB 51 stands as an obstacle to that purpose, AB 51 is therefore preempted.”

Background

As we previously wrote, on October 10, 2019, Governor Newsom signed into law AB 51, prohibiting California employers from requiring, as a condition of employment, continued employment, or the receipt of any employment-related benefit, that any applicant for employment or employee waive “any right, forum, or procedure” for a violation of California’s Fair Employment and Housing Act or the Labor Code. Civil sanctions and criminal penalties could be imposed for violations of the law, including as a misdemeanor punishable by imprisonment and/or a fine. In effect, the new law was designed to prevent employers from requiring employees to arbitrate most employment-related claims instead of being able to bring such claims in court.

The U.S. Chamber of Commerce and other groups soon thereafter sought and obtained an injunction of the new law in the United States District Court, with U.S. District Judge Kimberly Mueller agreeing that “serious questions” had been raised about AB 51, on the grounds that it was likely preempted by the FAA.

On September 15, 2021, a divided three-judge panel of the Ninth Circuit Court of Appeals largely lifted the injunction, finding that most provisions of the California law were not preempted by the FAA or inconsistent with U.S. Supreme Court precedent. Notably, Judge Sandra Ikuta, in dissent, flatly disagreed and asserted that AB 51 was indeed contrary to the FAA and blasted what she saw as the illogic of making the formation of “involuntary” arbitration agreements unlawful, but also condoning enforcement of such agreements once executed.

In the aftermath of the United States Supreme Court’s decision in Viking River Cruises v. Moriana in 2022, which affirmed that individual PAGA claims were arbitrable, on August 22, 2022, the same three-judge Ninth Circuit panel withdrew its 2021 opinion and reconsidered the matter.

The Decision

This new decision, with Judge Ikuta in the majority, reasoned, based upon U.S. Supreme Court precedent, that “state rules that burden the formation of arbitration agreements stand as an obstacle to the FAA.” Based thereon, the Court held that AB 51 posed an unlawful barrier to arbitration agreements, was contrary to the FAA, and was unenforceable.

It is also worth noting that the Ninth Circuit tackled the issue of whether mandatory arbitration agreements were “voluntary” if they were required as a condition of new or continued employment. The majority reasoned that some level of unfavorable terms in an arbitration agreement did not alone mean the agreement was involuntary:“[c]ontrary to the arguments made by California and the dissent, a contract may be ‘consensual,’ as that term is used in contract law, even if one party accepts unfavorable terms due to some degree of unequal bargaining power.” Indeed, inequality in bargaining power, and agreeing to terms that one or more contracting parties does not like is par for the course across a wide range of contracts. But the majority concluded that the test of whether an arbitration agreement is “unconscionable” and therefore unenforceable is the same as for any other type of contract, noting that “AB 51 does nothing to change these basic principles,” implicitly recognizing that California law is quite settled on that point.

Takeaways

The future of mandatory employment arbitration provisions in California is not necessarily settled. The California Attorney General’s Office could ask the Ninth Circuit for an en banc review of the case by a larger panel of judges, or could appeal the decision to the U.S. Supreme Court. However, as we previously wrote on February 14, 2022, regardless of what the state of California does in this case, mandatory arbitration of sexual assault and sexual harassment claims will remain prohibited nationwide, as the U.S. Congress already amended the FAA to, among other things, invalidates employment pre-dispute agreements and class action waivers that require claims related to sexual assault or sexual harassment to be arbitrated on an individual basis

California’s Legislature and its courts, as a whole, will remain hostile to mandatory employment arbitration agreements. But as the federal courts have repeatedly decided, such agreements are enforceable in light of the FAA, and California cannot single such agreements out for treatment different from any other legal contract. Further challenges loom, including whether PAGA claims will remain arbitrable, and how (the California Supreme Court’s pending decision in Adolph v. Uber Technologies, Inc. should clarify this latter issue sometime in 2023), but for now, employers can and should consider requiring mandatory arbitration agreements as a term and condition of new and continued employment.

If you have any questions or concerns about how this new development may affect your business, please reach out to Monte Grix, mgrix@hkemploymentlaw.com, (415) 835-9016, or Derek Ishikawa, dishikawa@hkemploymentlaw.com or (310) 255-1803

Federal Trade Commission Proposes to Abolish Non-Compete Agreements

On January 5, 2023, the Federal Trade Commission proposed a new rule that would prohibit employers from imposing non-compete agreements on their employees and independent contractors. A non-compete clause contractually prevents a worker from competing against an employer, usually within a specified geographic area and period of time after the work relationship with the employer has ended. California already prohibits the use of non-compete agreements in most circumstances, so if the proposed rule is adopted it will have little effect in this state.

The proposed rule is based on the FTC’s preliminary finding that non-competes constitute an unfair method of competition, thereby violating Section 5 of the Federal Trade Commission Act. In a press release announcing the proposed rule, FTC Chair Lina M. Khan said: “The freedom to change jobs is core to economic liberty and to a competitive, thriving economy. Non-competes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand. By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition.”

The FTC’s proposed rule would bar employers from: entering into non-compete agreements with workers; keeping existing non-compete agreements with workers; or advising workers under most circumstances that they are subject to non-compete provisions.

Employers would also be required to rescind existing non-competes and inform workers of such rescission.

Certain other employment restrictions, like non-disclosure agreements, would not be barred by the proposed rule, unless so broad in scope that they in effect function as non-competes.

The public will have the opportunity to comment on the proposed rule for 60 days after the Federal Register publishes it. The FTC may then make changes in a final rule. The FTC specifically seeks comment on whether franchisees and senior executives should be covered by the rule, and whether low-and high-wage workers should be treated differently.

For more information, please reach out to William Ross in the Los Angeles office of Hirschfeld Kraemer LLP, wross@hkemploymentlaw.com, or (310) 255-1828.

California Family Rights Act (“CFRA”) Expanded to Include Leave to Care for Nonrelatives

On September 29, 2022, Gov. Gavin Newson expanded the California Family Rights Act (CFRA) by signing Assembly Bill 1041 into law, providing California employees the right to take leave to care for nonrelatives, (described as an employee’s “chosen family” or “extended relatives”).

Background:
Under the CFRA, employees of employers with 5 or more employees are entitled to take family and medical leave for up to 12 weeks in a 12-month period to care for themselves or a relative as defined by statute. That list of “relatives” previously meant child, parent, parent-in-law, grandparent, grandchild, sibling, spouse, or registered domestic partner.

New Expansion of CFRA:
AB 1041 expands the list of individuals for which an employee can take leave under the CFRA and the Healthy Workplaces, Healthy Families Act of 2014 to include a “designated person” identified by the employee; that is, “any individual related by blood or whose association with the employee is the equivalent of a family relationship.” The new law also expands the use of paid sick days under the California Sick Leave Law for a “designated person.” While there are currently no specific criteria for naming a “designated person” (who does not need to be designated until taking the leave), employers may limit the employee to one designated person per 12-month period.

Takeaways:
The new law takes effect January 1, 2023. For now, there is little guidance, other than the language of the bill itself, regarding the boundaries of who may be a “designated person.” Until further notice, employers should err on the side of caution and apply these new provisions of the CFRA liberally. Further, this new law, along with others that have been implemented over the past year, makes it critical that employers have their employee handbooks and policies reviewed by legal counsel prior to being implemented effective January 1, 2023.

Please reach out with any questions you may have regarding this important development to Monte Grix, mgrix@hkemploymentlaw.com, (415) 835-9016, or Laraya Parnell, lparnell@hkemploymentlaw.com, (310) 255-1829.

Ketanji Brown Jackson Makes History

Justice Ketanji Brown Jackson made history on September 28th, 2022, at the opening conference for the start of the U.S. Supreme Court’s October Term. She is the first Black woman to be named to the U.S. Supreme Court. Her confirmation adds to the liberal wing of the court, which is dominated 6-3 by conservatives.

The Senate voted 53-to-47 to confirm Judge Jackson, with three Republicans joining 48 Democrats and two independents in the historic vote. The Senate vote was a procedural step taken after the 22-member Senate Judiciary Committee deadlocked 11-11 along party lines as to whether to advance her nomination. Prior to the confirmation hearings, support for Jackson had seemed strongly bipartisan, and she had drawn praise from both sides of the aisle for being extremely well qualified.

Jackson, 51, is one of the two youngest members of the Supreme Court, along with Amy Coney Barrett. Jackson served eight years as a federal trial court judge and in 2021 was confirmed for a seat on the U.S. Court of Appeals for the District of Columbia. Before that, she served as a public defender. Following her 1996 graduation from Harvard Law School, she clerked for Justice Breyer, whom she replaced after his recent retirement.

For more information, contact Kirstin Muller in the Los Angeles office of Hirschfeld Kraemer LLP. She can be reached at 310-255-0705 or kmuller@hkemploymentlaw.com

Local 11 “Strikes” Again: Los Angeles City Council Bypasses Ballot Initiative & Passes Union’s Hotel Workers Protection Ordinance

The Hotel Worker Protection Ordinance, proposed by UNITE HERE Local 11 to require, among other things, daily room cleaning, panic buttons, limitations on overtime and housekeepers’ workloads, and increased wages, was passed by the Los Angeles City Council on June 28, 2022, rather than allowing the issue to be decided via a Ballot Initiative by City voters in November. The law will take effect 30 days after Mayor Eric Garcetti’s anticipated approval of the Ordinance.

The Ordinance is similar to ordinances passed by the Cities of West Hollywood, Santa Monica, Long Beach, and Oakland.

Key portions of the Ordinance for hotel employers located in the City of Los Angeles include:

Personal Security Devices
Hotels must provide a personal electronic security device, commonly referred to as a “panic button,” to each hotel worker assigned to a guest room or restroom facility where other hotel workers are not assigned to be present. Hotels with 60 or more guest rooms must have a designated and assigned security guard to receive panic button alerts and provide immediate assistance in the event of an alert. Hotels with less than 60 rooms may use a hotel manager or supervisor to fulfill this requirement, but must provide specific training to the assigned manager or supervisor.

The Ordinance provides rights to hotel workers who report violent or threatening conduct, including paid time off to report such conduct to law enforcement, and sets a strict retaliation prohibition against any hotel worker who activates a personal security device and leaves the work area due to a perceived threat or emergency.

A notice must be placed on the back of each guest room door and restroom regarding the personal security device requirements.

On an annual basis, hotels are required to provide training regarding the Ordinance’s personal security device requirements.

Daily Room Cleaning
The Ordinance effectively guts popular hotel so called “green” environmental programs and financial incentives for hotel guests to forego daily room cleaning, essentially mandating daily room cleaning absent a guest’s opt-out of such service, which opt out must be “without solicitation by the hotel.”

Workload Limitations and Compensation
The Ordinance limits the number of square feet room attendants may clean in an 8-hour workday, depending upon the number of guest rooms in the hotel, the type of rooms the room attendant cleans, and the number of buildings in which the room attendant cleans. In general, hotels with 45-59 guest rooms cannot require room attendants to clean more than 4,000 square feet of floor space in an 8-hour workday, and hotels with 60 or more guest rooms cannot require room attendants to clean more than 3,500 square feet of floor space in any 8-hour workday. If the limitation is exceeded, the room attendant must be paid double time for all hours worked during the workday, which requirement does not exist in any other circumstance found in California’s Labor Code.

Voluntary Overtime
Hotels cannot require a hotel worker to work more than 10 hours in a workday unless the hotel worker provides written consent and is advised of their rights in advance.

Recordkeeping
Hotels must maintain records with detailed information relating to compliance with the workload limitations, overtime hours worked, written overtime consents, and training, among other things.

Enforcement
The City or any aggrieved person may enforce the Ordinance by a civil action and recover attorneys’ fees and costs for doing so. Substantial penalties, similar to those available under the Private Attorney General’s Act (“PAGA”), apply for violations of aggrieved person’s rights and failure to maintain records, as well as treble damages for willful violations.

Collective Bargaining Agreement Waiver
The Ordinance states hotels may obtain a waiver of certain of the Ordinance’s requirements through a collective bargaining agreement if the waiver is expressed in clear and unambiguous terms. Even though the Ordinance (and comments by Local 11) create the impression that such waiver is pro forma, in practice in other cities with similar ordinances, that has not been the case. Hotel employers should count on the reality that the Los Angeles City Council, through the Ordinance and its express waiver requirement, has provided Local 11 with a powerful new cudgel to wield against unionized employers who seek a waiver of the Ordinance’s provisions through bargaining. Additionally, despite bargaining rules under the National Labor Relations Act, which should allow hotels to bargain to lawful impasse over such waivers and effectively implement them, the Ordinance prohibits this and bars unilateral implementation even after bargaining to impasse.

For more information, reach out to Alison Hamer, ahamer@hkemploymentlaw.com, (310) 255-1813, or Keith Grossman, kgrossman@hkemploymentlaw.com, (310) 255-1821.

California Supreme Court Issues Important Decision For Employers That Use Staffing Agencies

If you use a staffing agency for your workforce, the California Supreme Court just issued an important decision that may affect your rights.

In Grande v. Eisenhower Medical Center, the California Supreme Court held that a wage-hour class action settlement for $750,000 between an employee and the staffing company did not preclude the employee from suing the employer for whom she worked. The California Supreme Court rejected the argument that the employer was an “agent” of the staffing company and that all claims had therefore been released. This decision allows employees a potential double recovery, but there are easy fixes that come with smart lawyering when a case against either party settles.

Background

In 2012, Lynn Grande worked for about a week as a nurse at Eisenhower Medical Center in Rancho Mirage, California. She was placed there by her staffing agency-employer, FlexCare, LLC. Grande thereafter sued FlexCare in a class action for alleged Labor Code violations. The parties resolved their dispute through a court-approved settlement agreement. The settlement agreement released FlexCare’s “agents” without specifying who such agents were.

Less than a year later, Grande sued Eisenhower based on the same alleged Labor Code violations. FlexCare intervened in the second lawsuit, arguing that Grande had resolved and released such claims through her prior lawsuit against FlexCare. The trial court disagreed, and the parties appealed. The Court of Appeal also sided with Grande, reasoning that she could pursue her lawsuit against Eisenhower because one, Eisenhower was not in “privity” with FlexCare (a requirement for claim preclusion); and two, Eisenhower was not a releasee under the prior settlement agreement.

The California Supreme Court agreed with the Court of Appeal for basically the same reasons. As to the release of “agents” in FlexCare’s prior settlement agreement, the Supreme Court held that this was not enough, and it was not clear that, by virtue of their contractual relationship alone, that Eisenhower was an “agent” of FlexCare.

As for “privity,” although this can be a complex and esoteric legal issue, as the Supreme Court explained, it comes down to whether a defendant to a lawsuit can claim that the plaintiff suing it is barred from doing so by an earlier judgment where the same plaintiff was a party. In order to do this (to apply the doctrine of “claim preclusion”), the claim or claims need to be the same, and the parties to the earlier action either need to be the same, or, at least, the party asserting claim preclusion must be able to prove that the defendant in the earlier action was its “virtual representative” in the lawsuit.

Put another way, if the parties are not the same, there must be essentially no difference between the interests and posture of the “virtual representative” in the earlier lawsuit and the defendant that later asserts claim preclusion.

Here, the Court found that there was no “mutuality”: Eisenhower was trying to take the benefit of the earlier settlement, but there was no two-way street; that is, there was seemingly no basis to bind Eisenhower to the earlier judgment—either by requiring Eisenhower to pay part of the judgment against FlexCare, or if, say, it had been deemed unfavorable to FlexCare (and by extension, Eisenhower).

The defendants also argued that the hospital was contractually indemnified by FlexCare, but this did not move the Court: although there could be exceptions, a contractual obligation to indemnify doesn’t mean that the contracting parties are necessarily in “privity.” Ultimately, the Supreme Court held that Grande could make the same claims against Eisenhower as it had earlier made against FlexCare.

Takeaways

There are two critical points to be learned from this decision:

First, if the intent of a class settlement agreement between a staffing agency and a representative plaintiff is to also release the staffing agency’s clients (or vice versa), the agreement should state that clearly; do not rely on ambiguous terms, like “agent” and hope that saves the day.
Second, any time a staffing agency is involved, there is the potential for the agency and the end user to be liable as “joint employers” and both parties should be actively involved in resolving or litigating. Otherwise, paying twice is a real possibility.

Monte Grix is a partner in the San Francisco office of Hirschfeld Kraemer LLP. He can be reached at (415) 835-9016 or mgrix@hkemploymentlaw.com.

Million-Dollar PAGA Cases Can Be Avoided Under U.S. Supreme Court’s Viking River Decision

On June 15, 2022, the U.S. Supreme Court issued a bellwether decision that has the potential to dramatically decrease employers’ exposure under California’s Private Attorneys General Act of 2004 (PAGA).

PAGA has bedeviled California employers for nearly two decades now, leaving employers responsible for billions of dollars in Labor Code penalties and attorney’s fees. The U.S. Supreme Court may have finally put an end to that.

What Is PAGA?

PAGA is similar, but not identical to a class action for Labor Code (wage and hour) violations. It is similar because it allows an “aggrieved employee” to bring claims for penalties for himself and for other “aggrieved employees” that the State could have assessed against an employer for Labor Code violations. It is different because the claims are for penalties, not damages, and as a result any PAGA claim is brought by an “aggrieved employee” on behalf of other “aggrieved employees” for penalties that the State could impose. Because PAGA allows employees to seek penalties on behalf of all “aggrieved employees,” the damages can be astronomical.

That is where things get tricky. The U.S. Supreme Court has previously found that an employer can enforce an arbitration agreement with an employee that contains a class action waiver, since large class actions are incompatible with arbitration, supposedly a quicker and more informal process. In 2014, however, the California Supreme Court found that the differences between PAGA claims and class actions were significant enough that waivers of “non-individual” PAGA claims in arbitration agreements could not be imposed on employees. This past year, the U.S. Supreme Court was asked to reconsider that decision in Viking River Cruises, Inc. v. Moriana.

Supreme Court Allows Arbitration Agreements That Waive “Non-Individual” PAGA Claims

Under the U.S. Supreme Court’s decision in Viking River, employers can now enforce arbitration agreements that contain a waiver of non-individual or representative PAGA claims. However, the Court’s reasoning differs from its view of class action waivers. The Court explained that PAGA comprises individual and non-individual claims. In other words, a plaintiff, like Moriana, can seek a claim for PAGA penalties individually on behalf of herself, and on a non-individual basis, as a representative of other alleged aggrieved employees.

Moriana entered into a bilateral arbitration agreement that contained a waiver of representative action PAGA claims. The Court found that Moriana was bound by her agreement to arbitrate her individual PAGA claims. But it left open the question of what happens to the non-individual claims on behalf of the other non-party, aggrieved, employees. Because PAGA provides a plaintiff standing to maintain non-individual or representative claims only if they also maintain individual claims in that action, the Court reasoned that Moriana lacked standing to pursue her non-individual claims in state court. Thus, the Court directed the lower court to dismiss Moriana’s representative action and compel her individual PAGA claims to arbitration.

Justice Sonia Sotomayor’s concurring opinion suggests that the Court left an “out” for the California legislature to modify the scope of PAGA’s standing requirement as a workaround to this issue. Nonetheless, at the end of the day, Viking River holds that arbitration agreements requiring only individual PAGA claims to be litigated in arbitration are enforceable.

Key Takeaways

This is a major win for California employers, who have paid billions of dollars to resolve PAGA claims since the statute was enacted. With a well-crafted arbitration agreement, employers should now be able to escape these high-value cases and force employees to litigate them individually, not as a group.

Many California employers, however, do not have waivers of “non-individual” PAGA claims in their arbitration agreements since the 2014 decision of the California Supreme Court shut the door to them and will now want to add them. Other employers do have PAGA waivers, but frequently those waivers use language that the U.S. Supreme Court found to be imprecise.

Either way, a well-crafted PAGA waiver may be the key to avoiding millions of dollars in potential PAGA liability, a very powerful tool. California courts, in the past, have bent over backwards to limit arbitration, so it is in employers’ interest to have an airtight agreement with a well-drafted PAGA waiver in it. We encourage all employers to contact counsel right away so they can take advantage of this ruling.

For more information, reach out to Dan Handman, dhandman@hkemploymentlaw.com, (310) 255-1820 or Ferry Lopez, flopez@hkemploymentlaw.com, (310) 255-1826. Both are in the Los Angeles office of Hirschfeld Kraemer LLP.

Juneteenth as a Holiday: What Employers Need To Know

This coming Monday, June 20, 2022, will be the second Juneteenth officially recognized as a federal holiday in the U.S. All federal government offices, federal courts, banks, post offices, schools, and the U.S. financial markets will be closed. Many private employers are following suit, although they are not legally required to give employees time off. Also, although Juneteenth is not yet an official state holiday in California, employers should treat Juneteenth in the same manner as all other federal holidays.

Background

Last year, in the midst of the Black Lives Matter movement, President Biden signed the Juneteenth National Independence Day Act, recognizing June 19th as a federal public holiday.

Although President Abraham Lincoln’s January 1863 Emancipation Proclamation officially abolished slavery, it would be over two years before the Civil War ended in April 1865, and even longer before the news spread to all parts of the U.S. Juneteenth marks June 19, 1865, the day that U.S. Brigadier General Gordon Granger and his troops landed at Galveston, Texas, bringing the news that the Civil War had ended and that enslaved African Americans were now free.

Juneteenth is the first new federal holiday approved since Martin Luther King Jr. Day in 1983.

This year, the Juneteenth federal holiday will be observed in the U.S. on Monday, June 20, 2022.

California State Holiday?

While California has not yet designated Juneteenth as a state holiday, a proposal to make Juneteenth a paid holiday for California state employees recently passed unanimously in the Assembly and moved to the Senate. When introduced in May 2022, Assembly Bill 1655, sponsored by Assemblyman Reggie Jones-Sawyer, D-Los Angeles, would have made June 19 a paid holiday for civil service employees along with those who work for California State University and California Community Colleges. Currently, state employees may use their one annual “personal holiday” to take the day off on June 19th; state employees receive one personal holiday per year in addition to 11 paid holidays.

Next Steps

Employers are taking notice and using the new federal holiday as a way to advance their diversity, equity, and inclusion goals and commitments by closing or operating with skeleton crews on June 19th or 20th. For those employers unable to shut down their operations, they can consider holiday pay premiums for working employees or letting employees use PTO or floating holidays on or around Juneteenth.

Employers should also update their employee handbooks if they are observing Juneteenth as a holiday, paid or otherwise.

For more information, contact Kirstin Muller, a partner in the Los Angeles office of Hirschfeld Kraemer LLP. She can be reached at kmuller@hkemploymentlaw.com or (310) 255-0705.

California Courts Strike Down Corporate Board Diversity Requirements

In two recent cases, judges have struck down recently enacted California statutes requiring diversity for underrepresented communities and for women on the boards of directors of publicly held corporations based in California. Those statutes require that publicly held corporations with principal executive offices in California have a specified number of such directors—depending on the size of their board—by certain specified dates.

Both lawsuits were brought on behalf of California taxpayers by Judicial Watch, Inc., which describes itself as a conservative, non-partisan educational foundation. To date, the California Secretary of State has announced that she will appeal the decision regarding women on the board of directors, but has not announced whether she will appeal the other decision.

On April 1, 2022, Los Angeles Superior Court Judge Terry Green granted plaintiffs’ motion for summary judgment in Crest et al. v. Padilla (Crest II), C.A. No. 20STCV37513 Cal. Super. Ct., which challenged California’s board diversity statute for underrepresented communities, defined as a director who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or as gay, lesbian, bisexual, or transgender.

Judge Green found that the plaintiffs had standing as taxpayers, and that the statute violates the equal protection clause of the California Constitution because it “treats similarly situated individuals differently based on race, sexual orientation, and gender identity, because that use of suspect categories is not justified by any compelling interest, and because the statute is not narrowly tailored to serve the interests offered…” Judge Green concluded that no race-neutral alternatives had been considered by the Legislature. He enjoined the use of taxpayer funds to implement the statute.

On May 13, 2022, Los Angeles Superior Court Judge Maureen Duffy-Lewis issued a decision in Crest et al. v. Padilla, C.A. No. 19STCV27561 Cal. Super. Ct. (Crest I), which challenged California’s board diversity statute for women.

Similar to Judge Green’s decision, Judge Duffy-Lewis found that the plaintiffs had standing as taxpayers, and that the statute violates the equal protection clause of the California Constitution because it treats “similarly situated groups” in an unequal manner, does not serve a compelling state interest, and is not narrowly tailored, concluding that the Legislature did not consider gender-neutral alternatives. She enjoined enforcement of the statute.

For more information, please reach out to William Ross in the Los Angeles office of Hirschfeld Kraemer LLP, wross@hkemploymentlaw.com, or (310) 255-1828.