In Vazquez v. Jan-Pro Franchising International (Vazquez), the California Supreme Court answered “Yes” to the Ninth Circuit’s question, “Does your independent contractor ABC test in Dynamex Operations West, Inc. v. Superior Court (Dynamex) apply retroactively?”

In 2018, the Dynamex Court concluded that under California wage orders, anyone who performs work for a business is presumed to be an employee entitled to the protections afforded by the wage orders.

The Dynamex Court also held that a hiring entity can avoid that presumption of employment and wage order application when it comes to independent contractors, but only if the hiring entity establishes:

(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

This infamous “ABC Test” was codified into California statutory law by Assembly Bill 5 (AB 5).

Before the ABC Test, California courts and California hiring entities used a multifactor test outlined in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, commonly known as the “Borello Test.” The Borello Test focused on the amount of control a business exercised over a worker by looking at numerous factors. The more control a business exercised over a worker (e.g. set hours, location of where work was to be performed), the less likely that the worker could be properly classified as an independent contractor.

Since the ABC Test is more stringent than the Borello Test, employers and industry groups argued they should not be held accountable under the ABC Test in misclassification lawsuits that predated the Dynamex opinion.

The Vazquez Court disagreed, holding that it “did not change a settled rule on which the parties below had relied” and that Dynamex addressed an issue of first impression. The Vazquez Court simply concluded that there was no reason to depart from the general rule that judicial decisions are given retroactive effect.

What does this mean for California employers? Any employers defending against independent contractor misclassification cases that predate the 2018 Dynamex decision should reevaluate those issues under the more demanding ABC Test rather than rely on the more favorable, but outdated Borello Test.  And for those lucky employers not facing misclassification litigation at the moment, the Vazquez decision justifies company worker classification audits looking back beyond 2018.

Jackson Lewis tracks California case law relevant to employers. If you have questions about this case or related issues with worker classification contact a Jackson Lewis attorney to discuss.

California’s Department of Fair Employment and Housing (DFEH) continues to advance toward the March 31, 2021 pay data collection deadline.  When SB 973 was passed in September, DFEH had six months to develop and implement a data collection system that could accomplish the task.  It is delivering.  DFEH issued its first guidance on November 2 and released more FAQs on November 23.  And now, DFEH has again released new FAQs and updated its pay data reporting website.

Please find the rest of this article on our Pay Equity Advisor blog.

At the end of 2020, California approved the Division of Occupational Safety & Health’s (“Cal OSHA”) COVID-19 Emergency Temporary Standard (“ETS”).

Among the many requirements in the new ETS, Cal OSHA imposed a performance-based obligation on employers to establish and implement an effective COVID-19 Prevention Program, COVID-19 preventive measures (e.g., social distancing and mandatory use of face coverings), and COVID-19 case management (e.g., investigation, recording, and reporting). In establishing these requirements, the ETS also published prescriptive written COVID-19 Prevention Program components and procedures for handling COVID-19 cases, as well as steps to regulate multiple infections and presumed outbreaks at the workplace that are already subject to substantial state and local health department requirements. Moreover, the ETS substantially departs from other health and safety regulations by compelling worker exclusion following a potential workplace exposure to COVID-19, mandating exclusion pay in limited circumstances,  and that employees be provided COVID-19 testing. The ETS further imposes potential liability on employers if they fail to comply with the various requirements.

The ETS has created confusion and frustration among California employers already facing a multitude of federal, state, and local COVID-19 requirements, which are in a constant state of flux. The ETS also attempts to impose requirements that are administered by other responsible agencies and authorities, making employers’ obligations unclear and duplicative. For example, the ETS imposes an obligation on employers to notify state and local health departments of multiple COVID-19 cases despite this obligation already being imposed on employers under AB 685, guidance from the state health department, and standing health department orders.

Cal OSHA’s ETS also uses inconsistent language to discuss requirements (e.g., “offer” vs. “provide” in the context of required testing), imprecise language, and imposes obligations that do not make sense from either a technical or feasibility standpoint. For instance, the ETS defines a “COVID-19 test” as one that is (i) approved by the United States Food and Drug Administration (“FDA”) or has an Emergency Use Authorization from the FDA, and (ii) is administered in accordance with the FDA approval or Emergency Use Authorization. In doing so, Cal OSHA fails to take into account that COVID-19 tests can be approved for use under other regulatory pathways and that many COVID-19 tests on the market are not approved by FDA or under an Emergency Use Authorization. Restricting testing in this way also unnecessarily complicates an already complicated requirement and makes compliance more difficult, costly, and time-intensive.

Despite numerous concerns raised in public meetings and written responses to the ETS, Cal OSHA also has not provided sufficient guidance on how to comply with the ETS, leaving many obligations on testing, worker exclusion, and COVID-19 case management unclear. Cal OSHA only just recently provided the public updated FAQs but still left numerous questions and ambiguities.

In response to the ETS’ ambiguities and overwhelming compliance burden, the Western Growers Association, the California Business Roundtable, the California Association of Winegrape Growers, the California Farm Bureau Federation, Ventura County Agricultural Association, and the Grower-Shipper Association of Central California joined together to file a lawsuit against Cal OSHA and related entities and individuals over the ETS before the Los Angeles Superior Court. The lawsuit contends that the Board violated employers’ due process rights and the state’s administrative procedure laws by failing to provide clear and adequate notice of the link between the ETS and the emergency situation necessitating the new rules. The lawsuit also claims that the ETS improperly imposes “unprecedented financial and operational costs on employers” in the state and without evidence that the new requirements will significantly or even materially improve workplace health and safety as it pertains to COVID-19. The required measures further lack clarity, such that employers are not understanding what is required of them, and do not take into account resources, feasibility, or costs. Further, the action alleges that many of the requirements in the ETS have little to no connection to workplace health and safety and instead deputize employers to monitor non-work-related COVID-19 exposure risks. The suit filed by the agricultural associations follows a lawsuit filed in San Francisco Superior Court by retail industry groups seeking declaratory and injunctive relief from the ETS.

To date, Cal OSHA and the other entities named in the suits have not publicly responded or acknowledged either complaint.

Jackson Lewis will continue to monitor issues pertaining to COVID-19 and the workplace in California. If you have questions about the ETS or related workplace safety issues, contact a Jackson Lewis attorney to discuss.

The City of San Jose recently passed an ordinance extending its supplemental paid sick leave ordinance until June 30, 2021 and expanding it to apply to all employers with employees working in San Jose.

Extension

When it was first passed, San Jose’s supplemental paid sick leave ordinance was set to expire on December 31, 2020. In late 2020, the City committed to extending the ordinance into 2021 but waited to see if the Emergency Paid Sick Leave (EPSL) provided under the Families First Coronavirus Response Act (FFCRA) would be extended before taking action. When the federal government did not extend the FFCRA, the City of San Jose passed a revised ordinance that extends the City’s supplemental sick leave until June 30, 2021. The ordinance is retroactive to January 1, 2021.

Expansion

San Jose’s original ordinance was designed to provide sick leave to employees who did not receive EPSL under the FFCRA; thus it only applied to employers with 500 or more employees. Because the FFRCA was not extended into 2021, the City of San Jose decided to expand its ordinance to apply to all employers with employees in the City of San Jose, regardless of the size of the employer. That means that San Jose’s supplemental paid sick leave is now available to all employees working in the city.

Reasons for Leave

The revised ordinance does not change the reasons for which sick leave may be taken. An employee may take leave when unable to work because the employee:

  • Is subject to a federal, state, or local quarantine or isolation order related to COVID-19 or is caring for someone who is;
  • Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19 or is caring for someone who is;
  • Is experiencing symptoms of COVID-19 and seeking a medical diagnosis; or
  • Is caring for their child if the child’s school or place of care is closed or unavailable due to COVID-19 precautions.

No Additional Time

Like the original ordinance, the revised ordinance provides full-time employees with 80 hours of paid sick leave (part-time employees receive a pro-rata amount). However, the ordinance states that 80 hours is the total amount available to employees for the period of April 2, 2020, to June 30, 2021.

Other local ordinances such as the City and County of Sacramento have also been extended. But like the federal government, the state of California has thus far not extended statewide supplemental paid sick leave.

Jackson Lewis continues to monitor local, state, and federal legislation pertaining to COVID-19. If you have questions about supplemental paid sick leave or other employment concerns related to COVID-19, contact a Jackson Lewis attorney to discuss.

The Department of Fair Employment and Housing (DFEH), the administrative agency charged with enforcing the California Family Rights Act (CFRA), has released new documentation for Family and Medical Leave that reflects the expansion of CFRA which went into effect on January 1, 2021.

These new documents include the required poster for employers for both Family and Medical Leave as well as for Pregnancy Disability Leave.

Employers should be sure to update their posters and new hire and leave packets to include the revised information, in addition to relevant company policies and procedures pertaining to leave.

If employers need additional guidance regarding compliance with California leave laws, they can contact a Jackson Lewis attorney to discuss.

2020 presented a myriad of challenges for California employers, including the constant march of California court opinions regarding the Private Attorneys General Act (PAGA) claims.

The California courts focused on two issues involving PAGA this year:

  • Can a Plaintiff proceed with their PAGA claim (standing)?
  • Can a Defendant compel arbitration when there is a PAGA claim?

Standing Cases

The biggest PAGA standing decision in 2020 was from the California Supreme Court in Kim v. Reins International California, Inc. The issue before the court was, does an employee bringing an action under PAGA lose standing to pursue representative claims as an “aggrieved employee” by settling and dismissing his or her individual claims against the employer? The Court concluded that no, settlement of individual claims does not strip an aggrieved employee of standing, as the state’s authorized representative, to pursue PAGA remedies.

The California Court of Appeal had several decisions pertaining to PAGA standing. In Starks v. Vortex Industries, Inc. Plaintiff Starks filed notice with the Labor & Workforce Development Agency (LWDA) alleging various Labor Code violations and eventually filed a Complaint alleging a PAGA cause of action against Vortex. Over a year later, Plaintiff Herrera filed a substantially identical PAGA action against Vortex.

Plaintiff Starks settled with Vortex and Plaintiff Herrera moved to intervene and set aside the judgment. The Court of Appeal agreed with the trial court that Plaintiff Herrera’s motion was untimely and as an agent of the LWDA could not attack the judgment.

In Robinson v. Southern Counties Oil Company, the Court of Appeal agreed with the trial court holding. The trial court had previously sustained without leave to amend a demurrer to Plaintiff’s amended complaint holding that Plaintiff was barred from bringing a PAGA action asserting the same claims that were settled in a prior class action/PAGA case that he opted out of. Moreover, the trial court held he lacked standing to bring a representative action on behalf of employees employed during the period when he was no longer employed by Southern Counties.

Arbitration and PAGA

Provost v. YourMechanic, Inc., is a decision that straddles the line between standing and arbitration. YourMechanic sought to compel the plaintiff to arbitrate whether he was an “aggrieved employee” within the meaning of the Labor Code before he could proceed with his single-count representative action under PAGA that alleged various Labor Code violations against the company. The Court of Appeal concluded that a PAGA-only representative action is not an individual action at all, but instead is one that is indivisible and belongs solely to the State of California. Therefore, YourMechanic could not require the plaintiff to submit by contract any part of his representative PAGA action to arbitration.

In Olabi v. Neutron Holdings, Inc., the plaintiff sued Neutron Holdings (dba Lime) for Labor Code violations under the PAGA and unfair competition regulations. The plaintiff claimed Lime intentionally misclassified him and other independent contractors resulting in violations of the Labor Code. Lime filed a petition to compel arbitration. Before the hearing on the motion to compel arbitration, the plaintiff dismissed his unfair competition claim with prejudice and disavowed any victim-specific relief. The trial court denied the petition to compel arbitration. Because the language of the arbitration agreement broadly excluded PAGA actions and the PAGA claim was the only claim remaining in the action, the Court of Appeal concluded that the trial court did not err in denying the petition to compel arbitration.

In Brooks v. Amerihome Mortgage Company, LLC, the plaintiff filed a PAGA notice with the Labor Workforce Development Agency, asserting wage violations under the Labor Code. In response, AmeriHome filed a demand to arbitrate the plaintiff’s claims on an individual basis. Following the expiration of the required PAGA notice period, the plaintiff filed a first amended complaint on behalf of himself and other alleged aggrieved employees of AmeriHome asserting a single cause of action under PAGA and moved for a preliminary injunction enjoining the arbitration. The trial court granted the preliminary injunction, reasoning that allowing the arbitration to proceed would impermissibly split a single, pure PAGA claim into an arbitrable individual claim and a non-arbitrable representative claim. The Court of Appeal agreed and affirmed the trial court’s decision.

In Jarboe v. Hanlees Auto Group, the Court of Appeal held that one of the defendants could compel arbitration with respect to the plaintiff’s individual Labor Code claims. However, the Court of Appeal also held that the arbitration agreement could not be enforced for the plaintiff’s PAGA claim because the PAGA claim belongs to the State of California and cannot be the subject of the parties’ private arbitration agreement. In addition, the Court of Appeal held that the arbitration agreement did not cover the other 15 defendants in the action based on either the third-party beneficiary doctrine or equitable estoppel. Finally, the Court of Appeal held that the trial court did not abuse its discretion in refusing to stay the PAGA action pending the resolution of the arbitration between the plaintiff and the one defendant.

Jackson Lewis will continue to track developments related to the Private Attorneys General Act and other litigation developments. If you have questions about PAGA or related issues, contact a Jackson Lewis attorney to discuss.

The California Employment Development Department (EDD) has released the Voluntary Plan Employee Contribution and Benefit Rates for 2021.

Employers are required to withhold and send state disability contributions to the EDD. The 2021 rates are as follows:

Employee Contribution Rate 1.2%
Taxable Wage Ceiling (per employee per year) $128,298.00
Maximum Contribution (per employee per year) $1,539.58
Maximum Weekly Benefit Amount (WBA) $1,357.00
Maximum Benefit Amount (WBA X 52 weeks) $70,564.00
Assessment Rate 0.14%

The employee contribution rate is the percentage withheld from the wages of employees who are covered by Disability Insurance (DI) and Paid Family Leave (PFL). The taxable wage ceiling is the maximum yearly wage that is subject to DI and PFL withholding. The maximum contribution is the maximum amount withheld from the yearly wages of an employee who is covered by state disability and who annually earns an amount equal to or exceeding the taxable wage ceiling.

The change in contribution rates and the maximum weekly benefit amount is relevant to employers who must comply with San Francisco’s Paid Parental Leave Ordinance (PPLO).  The city of San Francisco requires most employers with 20 or more employees worldwide to supplement PFL benefits received by employees to bond with a new child.  During the PFL leave period, the PPLO supplemental compensation provided by an employer, added to the PFL wage replacement benefit received from the EDD, must equal 100% of the employee’s gross weekly wage, subject to a cap.  For 2021, the PPLO cap will be $2,262 per week.  So, if an employee receives the PFL maximum weekly benefit amount of $1,357, the employer’s PPLO supplemental compensation obligation will be $905 a week.

The EDD also released an updated Overview of California’s Paid Family Leave Program and the required Disability Insurance Provisions brochure based on legislative changes that went into effect on January 1, 2021.

Jackson Lewis continually monitors governmental changes affecting California employers. If you have questions regarding Paid Family Leave, the Paid Parental Leave Ordinance or other wage replacement requirements contact a Jackson Lewis attorney to discuss.

In mid-November, as cases continued to rise, the California Department of Public Health issued a “travel advisory” which recommended quarantining for those who returned to the state from other states or countries. The advisory distinguished between “non-essential travel” such as tourism and “essential travel” such as for work, study, economic services, immediate medical care, or health and safety.

Before the state advisory, the County of Santa Clara issued an order which required all person traveling into Santa Clara County from a point of origin 150 miles from the County border to quarantine for 10 days after arrival. The County had exemptions from the quarantine requirements for licensed healthcare professionals, persons traveling to perform essential governmental functions, or those working for essential critical infrastructure work.

San Francisco also issued a travel quarantine order, which requires anyone who in the 10 days before arriving in San Francisco spent any time outside of the 10 Bay Area counties (San Francisco, San Mateo, Santa Clara, Alameda, Contra Costa, Solano, Sonoma, Napa, Marin, and Santa Cruz) to quarantine for 10 days, including residents. Similar to Santa Clara, San Francisco exempts healthcare professionals, employees of essential infrastructure who are traveling for work, or employees of an essential business who must return to work due to a lack of staffing.

Most recently, the County of Los Angeles issued a travel quarantine order, which requires that those traveling outside the Southern California Region (Imperial, Inyo, Los Angeles, Mono, Orange, Riverside, San Bernardino, San Diego, San Luis Obispo, Santa Barbara, and Ventura) quarantine for 10 days after arrival. Like San Francisco and Santa Clara, certain types of employees such as licensed healthcare professionals and those commuting for work for essential infrastructure may be exempt from the order. Also exempted from the Los Angeles County order are professional or collegiate sports teams and team staff; personnel of a film or media production traveling for work.

Employers should be aware of the quarantine and travel quarantine orders applicable to their employees and consider whether there is a supplemental paid sick leave requirement for an employee who needs to quarantine.

Jackson Lewis will continue to monitor state and local orders pertaining to COVID-19. If you have questions about these or other health orders, contact a Jackson Lewis attorney to discuss.

2020 has been a year of constant changes for California employers. Here are some big developments that employers cannot afford to miss in 2021.

Expansion of the California Family Rights Act

One of the biggest legislative changes facing California employers in 2021 will be the expansion of the California Family Rights Act (CFRA). Currently, employers with 50 or more employees are subject to CFRA and its federal equivalent, Family Medical Leave Act (FMLA). Both provide employees with up to 12 weeks of unpaid leave.  When Senate Bill 1383, goes into effect on January 1, 2021, CFRA will be expanded to cover all employers with 5 or more employees.

In addition, Senate Bill 1383 expands the scope of family members for whom the employee can take leave.  CFRA currently allows employees to take unpaid leave for a number of purposes, including to care for a “family member” with a serious health condition. CFRA currently defines “family member” to include a minor child (unless the child is dependent), a spouse, or a parent.  In 2021, the list of family members will be expanded to include grandparents, grandchildren, or siblings. In addition, the definition of a child will be expanded to cover all adult children, regardless of whether they are dependent.  Senate Bill 1383 also provides leave due to a qualifying exigency related to active duty or call to active duty of an employee’s spouse, registered domestic partner, child, or parent.

To complement this expansion of the CFRA, the California legislature added qualifying exigency leave as a reason for receiving wage replacement benefits from the California Paid Family Leave Program.

Independent Contractors

The California legislature passed two bills this year that amend Assembly Bill 5 which set forth the requirements for classifying a worker as an independent contractor. Assembly Bill 2257 recasts, clarifies, and expands exemptions under Assembly Bill 5, including adding exemptions for referral agencies and professional services, such as photographers. Assembly Bill 323 similarly sets forth exemptions for newspaper carriers from Assembly Bill 5 requirements.

California voters also voted in favor of Proposition 22 which allows for the classification of individuals engaged in app-based transportation services, such as rideshare and delivery drivers, as independent contractors.  Proposition 22 provides workers with minimum compensation levels, health insurance subsidies to qualifying drivers, medical costs for on-the-job injuries, and prohibits drivers from working more than 12 hours in a 24-hour period for a single company. It requires companies to develop sexual harassment policies, conduct criminal background checks, and require safety training for drivers.

Workplace Equality and Diversity

California passed two new laws intended to promote equality and diversity in the workplace. Assembly Bill 979 requires that by December 21, 2021, publicly held corporations headquartered in California must diversify their boards of directors with directors from “underrepresented communities.” The new law defines a director from an underrepresented community as “an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Island, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender.”

Assembly Bill 973 creates pay reporting requirements for employers to encourage and ensure wage parity for women and minorities. The law requires employers who meet certain employee thresholds and must file an annual Employer Information Report (EEO-1) under federal law, to submit an annual report to the California Department of Fair Employment and Housing (DFEH). The annual report to the DFEH will include the number of employees (and hours they worked): (1) by race, ethnicity, and sex; (2) in each of the job categories in the federal EEO-1 Report; (3) whose annual earnings fall within each of the pay bands used by the U.S. Bureau of Labor Statistics in the Occupational Employment Statistics survey.

Jackson Lewis tracks legislative and case developments pertaining to employers in California. If you have questions about these developments or other concerns about preparing to face the challenges of 2021, contact a Jackson Lewis attorney to discuss.

Most of California is currently subject to the state’s Regional Stay at Home Order and  COVID-19 cases surging around the state. Meanwhile, federal and state supplemental paid sick leave benefits available to employees in California will soon expire.

The Families First Coronavirus Response Act (“FFCRA”), which includes paid sick leave obligations for employers with less than 500 employees, is set to expire on December 31, 2020. California’s recently enacted statewide supplemental paid sick leave law will also expire on  December 31. As of now, neither has been extended beyond the current expiration date.

Some local governments, however, have taken steps to continue their local supplemental sick leave ordinances into the coming year:

Other localities, such as the City of Los Angeles and the City of Long Beach, have ordinances that already continue into 2021.

Jackson Lewis continues to monitor local, state, and federal legislation pertaining to COVID-19. If you have questions about supplemental paid sick leave or other employment concerns related to COVID-19, contact a Jackson Lewis attorney to discuss.