On May 9, 2023, the California Supreme Court heard oral arguments in Adolph v. Uber to decide “[w]hether an aggrieved employee who has been compelled to arbitrate [their individual] claims under the [California Labor Code] Private Attorneys General Act (PAGA) . . . maintains statutory standing to pursue PAGA claims arising out of events involving other employees . . . in court or in any other forum the parties agree is suitable.” 

The Court’s answer to the question is of critical importance to employers who utilize (or are considering utilizing) arbitration agreements.  Last year, the U.S. Supreme Court held in Viking River Cruises v. Moriana that an employee who has been compelled to arbitrate their individual PAGA claim(s) lacks standing to pursue PAGA claims involving other employees in court.  The decision made employment arbitration agreements increasingly attractive to employers because it potentially allowed arbitration agreements to dispose of most, if not all, of a PAGA action.  But the U.S. Supreme Court’s decision also left open the possibility that the California Supreme Court might disagree with its conclusion and, because the issue is a matter of pure state law, the California Supreme Court’s decision would control at the end of the day.

The Oral Arguments

Unsurprisingly, the parties spent time during oral arguments discussing the import of a prior California Supreme Court decision, Kim v. Reins International California, Inc. In Kim, the California Supreme Court held that an employee who settles their individual (non-PAGA) Labor Code claims still maintains standing to pursue a PAGA action in court. In reaching its conclusion, the Court explained that “[a] PAGA claim is legally and conceptually different from an employee’s own suit for damages and statutory penalties [because] [a]n employee suing under PAGA does so as the proxy or agent of the state’s labor law enforcement agencies and may recover civil penalties that are distinct from the relief available to employees suing for their own individual Labor Code violations. The Court also explained that to have standing under PAGA an individual must be an “aggrieved employee” – defined by PAGA as “any person who was employed by the alleged [Labor Code] violator and against whom one or more of the alleged violations was committed,” and an individual does not necessarily lose status as an “aggrieved employee” by virtue of settling their individual (non-PAGA) Labor Code claims.

Both parties argued Kim supported their respective positions. For his part, Adolph argued that Kim supports his bid for standing despite his individual PAGA claims being compelled to arbitration because, in his view, unless and until there is an adjudication of his status as an “aggrieved employee,” nothing under PAGA precludes his pursuing PAGA penalties for other employees in a separate court action. Meanwhile, Uber argued that Kim supports its argument that Adolph lacks standing to pursue PAGA claims on behalf of other employees in court while he is arbitrating his individual PAGA claims. Uber argued that, unlike the employee in Kim, Adolph has no “skin in the game” when it comes to the separate court action for PAGA penalties for other employees and therefore lacks standing to prosecute that case. Although there was disagreement on the application of Kim (among other things), both sides did appear to agree that if the California Supreme Court concluded that an employee compelled to individual arbitration maintains standing to pursue PAGA claims involving other employees in court, it would still be appropriate to require trial courts to stay the action pending completion of the individual arbitration.

What’s Next

The California Supreme Court files its written opinions within 90 days of oral arguments and the decision becomes final 30 days after filing. As such, the resolution of the questions posed in Adolph should be out by August 7, 2023.

Jackson Lewis will continue to monitor this case.  If you have questions about PAGA claims, arbitration, or related issues, please contact a Jackson Lewis attorney.  

Governor Newsom signed Assembly Bill (AB) 113 which enacts changes to the collective bargaining process for agricultural workers.

In September 2022 Newsom signed Assembly Bill (AB) 2183  which established new ways for farmworkers to vote in a union election under the Agricultural Labor Relations Act (ALRA), including options for mail-in ballots, and authorization cards submitted to the California Agricultural Labor Relations Board (the Board), in addition to the existing in-person voting process.

AB 2183 also imposes civil penalties on agricultural employers that are found to have committed unfair labor practices of up to $10,000 for each violation and up to $25,000 for cases where the employee suffers “serious economic harm.” Significantly, the legislation allows the Board to impose personal liability on directors and officers of the employer.  In addition, AB 2183 requires employers to post an appeal bond in cases where an employer seeks to appeal an order of the Board involving monetary awards or economic benefits to employees or unions.

At the time of signing AB 2183 Newsom, the United Farm Workers, and the California Labor Federation agreed on clarifying language to be made to the enacted law. AB 113 implements the provisions of that agreement.  

AB 113 makes the following changes to the collective bargaining process:

  • Eliminates the option to conduct union elections using mail-in ballots.
  • Retains the option to conduct union elections via “card-check” system, also referred to as the “the Majority Support Petition.”
  • Limits the number of card-check elections that result in the certification of labor organizations to 75 certifications.

Under the bill, these changes would sunset on January 1, 2028, and at that time the card-check elections will no longer be an available option for union elections.

AB 113 takes effect immediately as a Budget Bill.

Jackson Lewis will continue to track legislation in California relevant to employers. If you have questions about the application of AB 2183/ AB113 or related labor issues, contact a Jackson Lewis attorney to discuss.

In November 2022, the City of Irvine was the first city in Orange County to pass a Hotel Worker Protection Ordinance. The ordinance generally took effect on December 22, 2022. However, the fair compensation for workload section of the ordinance takes effect on May 21, 2023.

Under that section of the ordinance, hotel employers are required to limit workloads for room attendants based on square footage. The ordinance also imposes a maximum room cleaning quota, dependent on the size of the hotel. Moreover, there are limits on the number of hours employees can work without written consent from the employee.  

There is now an initiative for a similar ordinance in the city of Anaheim. The organization pushing for the ordinance has collected sufficient signatures to require the city council to either adopt the ordinance, ask for a fiscal report, or send it to the city voters for consideration in 2024. Like the Irvine ordinance, the proposed Anaheim ordinance would require hotels and event centers to:

  • Provide panic buttons with a security guard on call for employees.
  • Place certain limitations on workload and hours for employees.
  • Set a $25.00 minimum wage for hotel housekeepers and other hotel workers with an annual increase.
  • Provide protections ensuring workers are retained when new owners or operators take over a business.

The Anaheim City Council is scheduled to consider the ordinance on May 16, 2023, though the agenda for that meeting has not yet been released.

If you have questions about the proposed Anaheim ordinance or related issues pertaining to hotel worker protection ordinances, contact a Jackson Lewis attorney to discuss.

In a pair of cases decided by the Second Appellate District of the California Court of Appeal, the Court reiterated the difference between procedural and substantive unconscionability when it comes to invalidating arbitration agreements based on unconscionability: procedural unconscionability focuses on the fairness of the process leading to the formation of the agreement, whereas substantive unconscionability focuses on whether the terms of the agreement are so one-sided that it unfairly benefits one of the parties to the agreement. The Court repeated the well-established rule in California that both procedural and substantive unconscionability must be present to invalidate an arbitration agreement and cautioned that a court must not “double count” procedural unconscionability or otherwise “water down” substantive unconscionability in its analysis.

The Two Cases

The facts of the two cases were similar. In Basith v. Lithia Motors, Inc. and Fuentes v. Empire Nissan, Inc., the Court of Appeal reviewed similar arbitration agreements in two otherwise unrelated cases. Both cases involved employees who signed arbitration agreements before starting work at car dealerships. In Basith, the plaintiff signed an online arbitration agreement, which he had to sign if he wanted the job (i.e. it was presented as take-it-or-leave-it.) In Fuentes, the plaintiff signed a single one-page form that had tiny and seemingly blurred print that rendered it largely unreadable.

Both agreements were deemed to have procedural unconscionability because they were presented to the employees on a take-it-or-leave-it basis in connection with their employment. The key question, then, was whether any substantive unconscionability existed in addition to procedural unconscionability. While substantive and procedural unconscionability do not need to be present to the same degree because the two are evaluated on a sliding scale where the greater presence of one can compensate for a lesser showing of the other, both substantive and procedural unconscionability must be present to invalidate the arbitration agreement. 

The Court held that despite a number of arguments raised by the employees, the substance of the arbitration agreements was fair, and therefore no substantive unconscionability existed to invalidate the agreements:

  • Font Size and Readability – In Fuentes, the Court rejected the employee’s argument that the tiny font size and unreadability of the agreement made it difficult to understand and thus substantively unconscionable.  The Court explained that “font size and readability go to the “process of contract formation” and therefore are “logically pertinent to procedural unconscionability and not substantive unconscionability.
  • Mutuality and Multiple Documents – In Fuentes, the Court rejected the employee’s argument that the agreement did not apply fully to the employer and the agreement was confusing to a layperson because of the presence of multiple contracts. The Court explained that the arbitration agreement controlled over any other document and the agreement applied to the employer.
  • Instructions on How to Initiate Arbitration – In Fuentes, the Court rejected the employee’s argument that the agreement’s lack of instructions on how to initiate arbitration gave rise to substantive unconscionability. The Court explained that the agreement stated that the procedures for arbitration would be governed by California’s Arbitration Act, which is not unconscionable.
  • Employer’s Signature – In Fuentes, the Court rejected the employee’s argument that the agreement’s lack of the employer’s signature amounted to substantive unconscionability. The Court explained that this might create an issue of whether a contract exists at all – an issue that the employee did not raise, but it does not concern how fair the agreement was and thus does not concern substantive unconscionability.
  • Legalese – In Basith, the Court rejected the employee’s argument that a layperson would have been led to believe that they had waived the ability to file a complaint with the Equal Employment Opportunity Commission or California Department of Fair Employment and Housing (“DFEH”) (the DFEH is now known as the California Department of Civil Rights). The Court explained that prolix legalese may result in procedural unconscionability since it goes to the form of the arbitration agreement, but it does not concern substantive unconscionability since the agreement did not actually waive such rights.

 The Takeaway

Unconscionability is one of the few contractual defenses that may be used to invalidate an arbitration agreement. Basith and Fuentes are therefore important cases because they confirm the dividing line between procedural and substantive unconscionability and ensure that a party or court does not “double count” procedural unconscionability or otherwise “water down” substantive unconscionability in a misguided rush to invalidate an arbitration agreement.   

If you have questions about employment arbitration agreements in California or related issues, contact a Jackson Lewis attorney to discuss.

As the temperatures rise, many employers, including those in the retail industry, may be fielding applications from minors looking for summer work.  Before hiring applicants under the age of 18, it’s important to understand the requirements that apply to that segment of the workforce. 

Minimum Age to Work

For most employers, a minor must be at least 14 years of age to work.

Work Permits

In California, most minors under the age of 18 must have a permit to work. After an employer agrees to hire a minor – and before the minor may begin working – the minor must obtain a Statement of Intent to Employ Minor and Request for Work from their school.  The minor and the employer complete the form, and the form must be signed by the minor’s guardian and the employer.  After the minor returns the form to the school, school officials may issue the Permit to Employ and Work. The permit will state the maximum number of hours the minor may work per day and week, the range of hours during the day that the minor may work, any limitations, and any additional restrictions imposed at the school’s discretion.

A permit that is issued during the school year will expire five days after the start of the next school year. During the summer, minors may obtain work permits from the superintendent of the school district where the minor lives.  Permits are required even when school is not in session; i.e. during summer break.

High school graduates and minors who have received a certificate of proficiency are exempt from permit requirements.

Hours of Work

California law places limits on the number of hours per day and week that a minor may work.  The limitations vary depending on the age of the minor and whether school is in session. 

The following is a general summary of some of the key limitations:

 16 & 17-Year-Olds14 and 15-Year-Olds
When school is in session4 hours per day on a school day 8 hours on a non-school day Limited to 48 hours per week3 hours per school day outside of school hours8 hours on a non-school dayLimited to 18 hours per week
When school is not in session8 hours per dayLimited to 48 hours per week8 hours per day Limited to 40 hours per week

There are also limitations on the time of day that a minor may work based on their age and whether school is in session.

Type of Work to be Performed

Employers should be aware that California and federal law dictate the type of work that minors may perform.  For example, 14- and 15-year-old employees may perform the following types of work in the retail and food service industries:

  • Office and clerical work
  • Cashiering, selling, modeling, art work, work in advertising departments, window trimming, and comparative shopping
  • Price marking and tagging by hand or by machine, assembling orders, packing and shelving
  • Bagging and carrying out customers’ orders
  • Errand and delivery work by foot, bicycle, or public transportation
  • Certain types of clean-up work and kitchen work

Employers should ensure that they are not assigning work to minor employees that run afoul of any state or federal restrictions.

Recordkeeping

Employers must have a valid work permit on file for all minors and make the permits available for inspection by the school and officers of the Division of Labor Standards Enforcement at all times.  Employers must also keep a record, for three years, of minor employees’ names, dates of birth, and addresses, and maintain for minor employees the same payroll and timekeeping records required for all employees.

Mandated Reporter

In 2020, California passed a bill that expanded the definition of a mandated reporter. Under the law, a California employer with five or more employees that employ minors must provide training on identification and reporting of child abuse and neglect to the following two classes of mandated reporters: (1) all human resources employees; and (2) all adults whose duties require direct contact with and supervision of minors in the performance of the minors’ duties in the workplace.

If you have questions about the employment of minors or related issues, contact a Jackson Lewis attorney to discuss.

The “cannabis industry” in California is not monolithic but is actually composed of employers in various industries. Agricultural employers cultivate cannabis, manufacturing employers process cannabis and package it, and retail employers sell the cannabis. For all these employers, Cal/OSHA imposes several workplace safety requirements that can pose compliance challenges.

Currently, Cal/OSHA does not have a specific regulation for employers involved in the cannabis industry. In 2018, Cal/OSHA issued advisory findings and recommendations on the industry-specific regulations for cannabis establishments. The findings concluded that there was a need for industry-specific regulations, particularly as it applies to employee exposure to secondhand smoke from on-site consumption of marijuana. To date, however, no such regulation has been proposed.

Despite the lack of industry-specific regulation, cannabis industry employers should be aware of many general requirements under Cal/OSHA which are detailed on a Cal/OSHA industry page.

Injury and Illness Prevention Program (IIPP)

All California employers are obligated to have an effective written IIPP, which should include procedures to identify and correct health and safety hazards and detailed training plans for employees among other components.

 Cal/OSHA also suggests that cannabis industry employers review the Injury and Illness Prevention Model Program for Workplace Security due to the nature of the industry. The model program walks through communication with employers, hazard assessment for workplace security issues, and related issues.

Relevant Health and Safety Regulations

Cal/OSHA has identified other general industry standards as having potential application to cannabis industry employers, including the following:

If you are a cannabis industry employer and have questions about workplace safety compliance in California, please reach out to the authors, the Jackson Lewis attorney with whom you often work, or any member of our Workplace Safety and Health Team.

In 2022, the California legislature passed Senate Bill (SB) 1162, which expanded the state’s existing pay data reporting requirements for “payroll employees” to include a new pay data report for employers with 100 or more “labor contractor employees.”  Under SB 1162, the pay data reporting deadline was moved to May. This year these reports are due May 10th.

But—according to a new FAQ from the California Civil Rights Department—beginning April 18, employers may seek “enforcement deferral” on their “labor contractor employee reports.”  This delayed enforcement may come as a pleasant surprise to employers still grappling with the expanded scope of the labor contractor reporting

The key takeaways from the April 14th FAQ Update include:

  • The CRD will only accept requests for enforcement deferral through its pay data reporting portal. As such, employers interested in taking advantage of this reprieve must first register for the portal.
  • Request for enforcement deferral must be made by May 10, 2023.
  • The enforcement deferral will be through July 10, 2023.
  • The CRD will not consider requests made by a third party on behalf of an employer, such as a Professional Employer Organization (PEO).
  • The enforcement deferral request will only apply to “labor contractor employees” reports. Reports covering “payroll employees” will still be due on May 10th.

Under applicable pay data reporting requirements, the CRD may seek a court order requiring the employer to comply with reporting requirements if they do not submit timely, as well as civil penalties of up to $100 per employee for initial violations. Employers with concerns over the May 10th “labor contractor employee” reporting deadline may benefit from seeking taking advantage of this procedure to seek enforcement deferral.

If you have questions about obtaining an enforcement deferral or related issues pertaining to California pay data reporting, contact a Jackson Lewis attorney to discuss.

On April 1, 2023, the City of Los Angeles’ Retail Fair Workweek Ordinance took effect, but the City had only issued a Frequently Asked Questions page as guidance. More recently, the City published rules and regulations as required in the ordinance.

The Rules and Regulations cover the following topics:

  • Determining who is a covered employee
  • Determining who is a covered employer
  • Good faith estimates
  • Advance notice of work schedules and changes to work schedules
  • Predictability pay and exemptions to predictability pay
  • Rest between shifts requirement
  • Offering additional work hours to employees
  • Notice and posting requirements
  • Record retention requirements
  • Notices to cure
  • Enforcement

Most of the rules and regulations restate what is in the ordinance but also include illustrative examples for determining if an employer is a retail business and calculating the total number of employees globally for purposes of coverage under the ordinance.

Two items of note in the regulations are the definition of when a schedule has substantially deviated from the good faith estimate of hours and how offers of additional hours should be provided.

When Estimated Hours Substantially Deviate

The regulations set forth when a good faith estimate of hours is deemed to “substantially deviate” for the purposes of the statute. Under the regulations a good faith estimate substantially deviates when any of the following occurs:

  • Six work weeks out of twelve consecutive work weeks in which the number of actual hours worked differs by 20% or more from the expected hours in the Good Faith Estimate, and the differences are not due to documented employee-initiated or employee-approved changes
  • Six work weeks out of twelve consecutive work weeks in which the actual days of work differ from what was indicated in the Good Faith Estimate at least once per week, and the differences are not due to documented employee-initiated or employee-approved changes
  • Six work weeks out of twelve consecutive work weeks in which the actual location of the Shift differs from what was indicated in the Good Faith Estimate at least once per week, and the differences are not due to documented employee-initiated changes or employee-approved changes; or
  • Six work weeks out of twelve consecutive work weeks in which at least one actual Shift per week is outside of the potential Shifts indicated in the Good Faith Estimate; and the differences are not due to documented employee-initiated or employee-approved changes.

If actual work hours substantially deviate from the hours’ estimate, employers must have a legitimate, documented business reason that was unknown at the time of the estimate to substantiate the deviation. If the employee requests a revised good faith estimate, the employer must provide a current estimate within ten calendar days of the employee’s request.

Offer of Additional Hours

The regulations also set forth a process for offering additional hours to employees in lieu of hiring additional employees. The regulations state that the notice communicating the offer should contain the following:

  1. Shifts or days and times the employee must be available to work;
  2. Length of time the employer anticipates requiring coverage of the additional hours;
  3. Description of the position;
  4. Required qualifications for the position and that training, if any, will be provided;
  5. The process by which the employee may accept the hours; and
  6. Date and time by which the employee must accept or decline the offer

Posting

All employers covered by the ordinance are required to post a notice of the ordinance. The City has published the notice on its website for employers in several languages. Covered employers are also required to provide this notice to all new employees at the time of hiring.

If you have questions about the Los Angeles Retail Fair Workweek Ordinance or related issues, contact a Jackson Lewis attorney to discuss.

California has had a handful of bills in recent years that discuss the process for hiring employees when there is a change in ownership or control.  There is another bill pending pertaining specifically to grocery stores that experience a change in control. Assembly Bill (AB) 647 would amend certain requirements upon a change in control of a grocery establishment.

The California Chamber of Commerce, the California Grocers Association, and the California Retailers Association have submitted opposition to the bill, stating, “In 2015, AB 359 was signed into law, which added protections for grocery workers from being laid off for 90 days after a store changes ownership through consolidation, merger, or reorganization. AB 647 seeks to extend the timelines in AB 359 by 40 days and include distribution centers, with no supporting data to show this change is needed for the transfer of information or the protection of employees. The most recent amendments to AB 647 create a rebuttable presumption in favor of an employee, sets arbitrary standards for the reinstatement of employees, and create significant litigation risks for the grocery industry, including the addition of punitive damages.”

Under the current law, upon change of control of a grocery store, the incumbent employer has 15 days after the execution of the agreement affecting the change in control to provide the successor employer with a list of eligible grocery workers.  The successor employer is required to maintain a preferential hiring list of eligible workers and to hire from that list for 90 days after the grocery store is fully operational and open to the public. The successor grocery employer must retain each eligible worker for at least 90 days after the commencement date.  

To be an eligible worker, the worker must have been primarily employed by the incumbent employer for at least 6 months prior to execution of the agreement affecting the change in control unless the worker is a “separated employee.”  Separated employees must have been separated from employment for certain non-disciplinary reasons prior to the change in control and satisfy other requirements.  Eligible workers do not include managerial, supervisory, or confidential employees.

AB 647 would extend the timeline for hiring from the list of eligible workers to 120 days after the grocery store is fully operational and require the successor employer to retain each eligible worker it hires for at least 120 days after each worker’s commencement date unless the successor employer determines during the 120-day period that it requires fewer eligible grocery workers.

The bill also would require an incumbent grocery employer to provide the list of eligible grocery workers to any collective bargaining representatives and would require the incumbent grocery employer to add the eligible workers’ cellular telephone numbers and email addresses, if known, to the list of information already required to be provided to the successor grocery employer.

The bill would authorize a successor grocery store employer to obtain the list of eligible grocery workers from a collective bargaining representative if the incumbent grocery employer does not provide the information within 15 days.

The bill would grant a worker who is offered a position that is more than 15 miles from their place of residence the right to refuse an offer without a loss of seniority and would grant a separated employee a right to recall based on seniority before hiring any new employees for one year.

This bill is still in the early stages and it is likely it will not be  know until the end of the legislative session in September whether it will be sent to the Governor for consideration.

Jackson Lewis will continue to track legislation that impacts California employers. If you have a question about this bill or related issues, please contact a Jackson Lewis attorney with whom you regularly work.  

Since the passage of California Assembly Bill (AB) 5 in 2019, there have been subsequent legal challenges and revised legislation that continues to shape the status of independent contractors and related employment law issues in California.  Keeping track of all the cases and exemptions related to AB 5 is almost as difficult as determining who can be an independent contractor.

AB 5, which became effective in January 2020, codified and broadened the California Supreme Court 2018 decision Dynamex Operations West, Inc v. Superior Court, in which it set forth the “ABC” test for determining whether a worker should be classified as an independent contractor. Under the test a worker may be classified as an independent contractor if the employer can satisfy the following criteria:

  •  (a) the worker is free from control and direction in the performance of services; and
  • (b) the worker is performing work outside the usual course of the business of the hiring company; and
  • (c) the worker is customarily engaged in an independently established trade, occupation, or business.

The following are some of the recent developments relating to AB 5 and independent contractors in the Golden State.

AB 5 and Its Retroactive Application

In January 2021, the California Supreme Court held in Vazquez v. Jan-Pro Franchising International, that its Dynamex decision applies retroactively to independent contractor classification claims and decisions/conduct pre-dating Dynamex.

AB 5 and Federal Preemption

Soon after the passage of AB 5, motor carriers challenged its application to their work. Initially, a preliminary injunction preventing AB 5’s application to motor carriers was granted by the federal district court.  That decision was short-lived, however, when in April 2021, the 9th Circuit panel held that the application of California Assembly Bill 5 (AB 5) to motor carriers is not preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA).

That 9th Circuit Court decision became final when in 2022 the U.S. Supreme Court declined to review that decision. At this juncture, AB 5 requirements apply to motor carriers in the state.

AB 5 and First Amendment

In 2022, the U.S. Court of Appeals for the 9th Circuit held that AB 5’s requirements pertaining to independent contractors did not violate the First Amendment. A company that handled signature collection for political issues, argued that applying AB 5 to individuals knocking on doors and gathering signatures discriminated against them based on their free speech rights. The 9th Circuit disagreed and upheld a denial of a preliminary injunction against the enforcement of AB 5.

AB 5 and Proposition 22

In 2020, California voters approved Proposition 22, also known as the “Protect- App-Based Drivers and Services Act,” which allows app-based ride-share and delivery driver companies to hire drivers as independent contractors if certain conditions were met. 

This year, the California Court of Appeal upheld Proposition 22, despite challenges.

AB 5 and Exemption Legislation

And since the passage of AB 5, several legislative bills have passed, that exempt certain professions from the “ABC” test, including newspaper distributors, manicurists, and construction trucking subcontractors.

Recent legislative and judicial history both demonstrate that the employment issues arising from AB 5 and its application in the workplace remain challenging and ever-changing.

If you have questions about AB 5 or independent contractor classification, contact a Jackson Lewis attorney to discuss.