With an alarming number of American workers lacking adequate retirement savings, California and a handful of other states began implementing state-sponsored retirement savings programs.  The CalSavers Retirement Savings Program (CalSavers) was first launched as a pilot program in 2018 and then expanded to all eligible employers in the state in July 2019 in order to provide employees access to a retirement savings program without the administrative complexity for employers. CalSavers requires employers who do not offer employer-sponsored retirement plans to its employees, such as a 401(k) plan, to automatically enroll their employees into the CalSavers plan and to remit payroll deductions to the CalSavers trust for each employee who does not affirmatively opt out of participation in the plan.

In 2018, Howard Jarvis Taxpayers Association (HJTA), a non-profit lobbying and policy group, challenged the legality of CalSavers and claimed that the program was expressly preempted by the Employee Retirement Income Security Act of 1974 (ERISA). HJTA argued that, without preemption, such state-run employee funds will have none of the protections of ERISA.

On March 10, 2020, a federal judge ruled that CalSavers does not create an “employee benefit plan” under Section 3(3) of ERISA and is, therefore, not preempted. The reasoning behind this determination was that CalSavers is not established or maintained by an “employer” and does not “relate to” any ERISA plan.

“Actual employers have no discretion in the administration of CalSavers and do not make any promises to employees; employers simply remit payroll deducted payments to the Program and otherwise have no discretion regarding the funds,” Judge Morrison C. England stated.  Furthermore, the court refused to find that the California Secure Choice Retirement Savings Investment Board, the state agency board that administers CalSavers, and the California Secure Choice Retirement Savings Trust, the trust that held the contributions, are “employers” because neither the Board nor the Trust acts directly or indirectly in the interest of an employer.

Lastly, the federal district court held that CalSavers does not “relate to” an ERISA plan because it does not interfere with nor apply additional requirements on any employer-sponsored or ERISA plans.  It also does not mandate that an employer establish an employee benefit plan. Rather, CalSavers applies only when an employer does not sponsor its own retirement plan.

Judge Morrison previously dismissed the lawsuit in 2019 without prejudice, which allowed HJTA to refile. Last fall, the federal Department of Justice filed a “Statement of Interest” that supported HJTA’s stance that CalSavers was preempted by ERISA. Despite this support from the Department of Justice, the federal court disagreed.

It is not clear at this time if HJTA will appeal this decision.

Jackson Lewis will continue to monitor this matter. If you have questions about CalSavers or other ERISA issues, contact a Jackson Lewis attorney to discuss.

As many counties in California issue executive orders and proclamations to either close certain businesses or shelter-in-place, California employers are faced with the difficult decision whether to lay off employees while they are closed. In the event of an immediate business closure, California employers were concerned with how to comply with the notice requirements for the California Worker Adjustment and Retraining Notification Act (Cal/WARN).

Under Cal/WARN a covered establishment is defined as an industrial or commercial facility that employs 75 or more employees (including part-time employees) during the preceding 12 months before the mass layoff. The Cal/WARN defines a mass layoff as one where 50 or more employees are laid off at a covered establishment, during any 30-day period. Typically, a mass layoff would require the covered employer to provide 60 days’ notice to employees and certain administrative entities.

On March 17, California’s governor provided guidance and issued an executive order clarifying how mass layoffs due to COVID-19 orders may be handled. While Cal/WARN still applies, the notice requirement is relaxed to be given “as soon as practicable.” The notices must include a basis for reducing the notification period, including reference to being due to “business circumstances that were not reasonably foreseeable as of the time of the notice would have been required.” The notices must also direct employees that they may be eligible for unemployment insurance and provide a link to http://www.labor.ca.gov/coronavirus2019

The governor’s order also charges the Labor Workforce Development Agency to issue further guidance regarding Cal/WARN by March 23rd.

If you need assistance with handling a mass layoff or have questions about the applicability of Cal/WARN to our business, contact a Jackson Lewis attorney to discuss.

On March 16, 2019, six Bay Area counties issued Shelter-in-Place Orders (“the Orders”) limiting the operation and activities of residents and businesses in Alameda, Contra Costa, Marin, San Francisco, Santa Clara, and San Mateo Counties.  The purpose of the Orders is to slow the spread of COVID-19.

When Do the Orders Take Effect?

The Orders take effect at 12:01 am on March 17, 2020, and end at 11:59 pm on April 7, 2020, or until extended, rescinded, amended or superseded.

What do the Orders Require?

  • All individuals living in the six counties are to shelter at their place of residence.
  • All businesses with a facility in any of the six counties, except “Essential Businesses” and those considered “Essential Infrastructure,” are required to cease all operations at their facilities. Non-Essential Businesses may continue operations only using employees or contractors who work remotely. On-site employees at Non-Essential Businesses may only perform “Minimum Basic Operations” tasks.
  • Generally, residents may only leave their homes to engage in specified health and safety activities, to work for or obtain services at a healthcare operation, to operate an Essential Business or essential governmental function, to provide Minimum Basic Operations services, to travel to or from educational institutions to receive materials for distance learning, or to receive meals or any other related services. The Orders preclude most other travel including travel on foot, bicycle, scooter, motorcycle, automobile or public transit.
  • The Orders preclude all public and private gatherings occurring outside a household or living unit.
  • Individuals are required to practice social distancing whenever outside of their residence.

What Businesses are Essential Businesses?

The Orders provide exemptions for a myriad of employers operating “Essential Businesses.”  Essential businesses include: healthcare operations and businesses that provide essential infrastructure; stores that sell groceries and products necessary to maintain the safety, sanitation, and essential operation of residences; businesses that cultivate food, including farming, livestock and fishing; businesses that provide food, shelter, and social services; newspapers, television, radio, and other media services; gas stations, auto-supply, auto-repair, and related facilities; banks and related financial institutions; service providers who provide services necessary for maintaining the safety, sanitation, and essential operation of residences, such as plumbers, electricians and exterminators; businesses providing mailing and shipping services, including post office boxes; educational institutions; hardware stores; laundromats, drycleaners, and laundry service providers; restaurants and other facilities that prepare and serve food; businesses that supply products needed for people to work from home; businesses that supply other essential businesses with the support or supplies necessary to operate; businesses that ship or deliver groceries, food, goods or services directly to residences; airlines, taxis, and other private transportation providers providing transportation services necessary for Essential Activities; businesses that provide home-based or residential care for seniors, adults, or children; businesses that provide professional services, such as legal or accounting services, when necessary to assist in compliance with legally mandated activities; and childcare facilities providing services that enable employees exempted from the Orders to work as permitted.

For purposes of the Orders fitness and exercise gyms are not healthcare operations and will be required to close. And while restaurants may remain open, they are required to limit service to delivery or carryout only.

What are “Minimum Basic Operations”?

Non-Essential Businesses may only continue “Minimum Basic Operations” at their facilities.  Minimum Basic Operations are necessary activities related to security, maintaining the value of inventory, processing payroll and benefits, and ensuring that employees may work remotely.   Any employees on-site for Minimum Basic Operations activities must comply with Social Distancing requirements such as maintaining at least six-foot distance between other individuals.

What is Essential Infrastructure?

Essential infrastructure includes public works construction, construction of housing, airport operations, water, sewer, gas, electrical, oil refining, roads and highways, public transportation, solid waste collection and removal, internet, and telecommunications systems (including the provision of essential global, national, and local infrastructure for computing services, business infrastructure, communications, and web-based services).

Jackson Lewis has a dedicated team tracking and responding to the developing issues facing employers in this difficult time. If you need guidance in handling the complicated issues pertaining to COVID-19, contact a Jackson Lewis attorney to discuss.

The California Supreme Court has weighed in on who is an aggrieved employee under the Private Attorneys General Act (PAGA) 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?

Under the PAGA, an “aggrieved employee” may bring a representative action on behalf of him or herself and other “aggrieved employees” for any violation of the California Labor Code. Cal. Labor Code §§ 2698, et seq.  Since the law was first enacted in 2004, many California employers have been hit with PAGA actions, in which employees can seek substantial civil penalties previously only recoverable by the State of California. PAGA cases have become increasingly favored by plaintiffs’ attorneys for several reasons, including the fact that PAGA-claims cannot be compelled into arbitration.

In oral arguments in January, counsel for the employee argued that the appellate ruling caused the plaintiff-employee and the State of California (which deputized him to prosecute PAGA claims) to be in conflict. He argued a plaintiff-employee could potentially face choosing between his own settlement or proceeding with protecting the representative action. In the underlying case, Plaintiff Kim was served with an offer to compromise to resolve his individual claims under Code of Civil Procedure section 998. If Kim had not accepted the offer to compromise and failed to obtain a larger judgment on his individual claims under Section 998, Kim may not have had a right to recover court costs as the prevailing party and may have had to pay Reins International’s costs.

The Court agreed with Kim. The Court stated, “[a] PAGA claim is legally and conceptually different from an employee’s own suit for damages and statutory penalties. An employee suing under PAGA “does so as the proxy or agent of the state’s labor law enforcement agencies. … Moreover, the civil penalties a PAGA plaintiff may recover on the state’s behalf are distinct from the statutory damages or penalties that may be available to employees suing for individual violations.”

The Court clarified that not every private citizen can serve as the state’s representative under PAGA, only an aggrieved employee has PAGA standing. The opinion points back to the PAGA definition of aggrieved employee as “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.” Though as seen in Kim, even an employee who has settled their claims with their employer, can still serve as an aggrieved employee.  As the Court explained, “Employees who were subjected to at least one unlawful practice have standing to serve as PAGA representatives even if they did not personally experience each and every alleged violation.”

Jackson Lewis assists employers with litigation pertaining to Private Attorney General Claims and related matters. If you would have a PAGA claim or have questions about PAGA, contact a Jackson Lewis attorney to discuss.

Confirmed Coronavirus (COVID-19) cases have risen swiftly in California and in response, administrative agencies have released guidance to employers regarding wage and hour issues and paid sick leave.

Late last, week, the Labor Commissioner’s office provided input on administering paid sick leave in light of coronavirus. The Labor Commissioner indicated that preventative care under paid sick leave would include self-quarantine as a result of potential exposure to COVID-19 if recommended by civil authorities or if the employee has traveled to a high-risk area. However, employers cannot require employees to use paid sick leave for quarantine purposes. The Labor Commissioner’s guidance can be found here.

At the same time, California’s Employee Development Department (EDD) announced support services to employers and employees affected by COVID-19. Employees who are sick or quarantined due to the virus may file for disability benefits. Employees who cannot work because they are caring for a family member who is sick or quarantined can seek paid family leave benefits. Moreover, employees can claim unemployment insurance benefits due to reduced hours or operations shut down related to the virus concerns.

Employers experiencing a slowdown in their businesses or services as a result of the coronavirus impact on the economy may apply for the UI Work Sharing Program as an alternative to layoffs. Employers experiencing a COVID-19-related hardship may request a 60-day extension from the EDD for filing state payroll reports and depositing state payroll taxes (without penalty or interest penalties).

If employers have questions regarding paid sick leave or other issues related to COVID-19, they should contact a Jackson Lewis attorney to discuss. To better support clients as they respond to this challenging public health issue, Jackson Lewis has established a dedicated “Coronavirus” team that is continually assessing risks, preparing employee communications, and providing practical advice on the workplace compliance issues flowing from coronavirus workplace concerns.

As the confirmed cases of Coronavirus (COVID-19) rises in the U.S., more states are issuing directives regarding employee cost-sharing for screening and testing for the virus. Testing for COVID-19 is free if performed by the Centers for Disease Control and Prevention, however, the testing is expected to be offered more broadly by commercial labs.

On March 5, Governor Newsom, of California, joined several other states, including New York, Maryland, and Washington in mandating that insured health plans regulated by the Department of Managed Health Care immediately reduce cost-sharing to zero for all medically necessary screening and testing for COVID-19.  Therefore, if a medical professional determines that such screening or testing is advisable, insured medical benefit plans subject to California law may not charge a co-pay or deductible services related with COVID-19, including testing, screening, emergency room visits, and doctor’s visits. Insurers also must ensure that the plan’s advice line/customer service representatives are adequately informed that the plan is waiving cost-sharing as described above and clearly communicate this to participants who contact the plan seeking medically necessary screening and testing for COVID-19. Governor Newsom said, “Californians shouldn’t have to fear a big medical bill just because they took a test for COVID-19.”

The state’s mandate for waiving cost-sharing has limits; the Governor’s order does not cover the treatment of COVID-19, such as hospital stays for more severe cases. This is because the requirements focus on diagnosis, not treatment of COVID-19.

The Governor’s order applies to insured benefits only and does not apply to self-insured plans. ERISA preempts the application of state law to self-funded plans. Cost-sharing requirements for self-funded plans may be banned by the federal government.  However, in the meantime, employers with self-funded plans may opt to mirror state law requirements by eliminating cost-sharing for COVID-19 testing, and many insurers are opting to voluntarily eliminate cost-sharing for COVID-19 testing nationwide.

If Human Resources or benefits stakeholders have questions on benefits, ERISA compliance or other issues related to COVID-19, they should contact a Jackson Lewis attorney to discuss. Jackson Lewis is continuing to monitor the situation to assist employers in handling this complicated situation.

Employers all over the State of California have been waiting earnestly for over two years for the California Supreme Court to issue its opinion in Kim v. Reins International California. A ruling that will decide whether a settling employee remains an aggrieved employee for purposes of the Private Attorneys General Act (PAGA). The wait is not over. In the meantime, the California legislature is considering whether to ease some of the burdens of PAGA for employers.

PAGA provides that, as an alternative to civil penalties being assessed and collected by the Labor and Workforce Development Agency (LWDA), civil penalties may be recovered through a civil action brought by an aggrieved employee on his or her behalf and on behalf of other aggrieved employees. (Labor Code section 2698, et seq.)

Among other Labor Code violations, PAGA authorizes an employer to “cure” specified violations of itemized wage statement requirements, within 33 days of the date of the notice from the aggrieved employee. (Labor Code sections 2699.3(c)(2)(A) and 2699.5.) A “cure,” in this context, signifies making the aggrieved employee whole and providing itemized wage statements for each pay period for the last three years.

However, Senate Bill 1129, seeks to expand the types of itemized wage statement violations that an employer could cure and would allow the employer 65 calendar days of the postmark date of the notice to cure the violation.

The current 33-day period to cure period is only permitted for two types of wage statement violations:

  1. failure to include either the start and end date of the pay period pursuant, and
  2. failure to provide the name and address of the legal employing entity.

The current cure period of 33 days hardly allows enough time for most employers to actually cure even these two violations. A corrected and “fully compliant” wage statement must be provided to every employee for every pay period going back three years from the date the PAGA notice was filed with the LWDA. For larger employers, curing such wage statement deficiencies could take months for a single year, much less, 33 days for a three-year time frame. Moreover, the requirement for “fully compliant” corrected wage statements is typically interpreted to mean wage statements that comply with all nine requirements set forth in the Labor Code section.

The bill also seeks to reduce, from three years to one year, the itemized wage statements that the employer would be required to provide in order to cure a violation and expand the types of itemized wage statement violations that can be cured.

These changes would allow more employers to take advantage of the cure period and remedy issues before a complaint is filed.

While employers wait on the California legislature and Supreme Court to provide more clarity on PAGA, employers should contact a Jackson Lewis attorney immediately upon receiving a PAGA notice. Time is of the essence when a PAGA notice is received, and remedying the curable violations could save employers hundreds, thousands, even millions of dollars in civil penalties.

While litigation over the controversial Assembly Bill 5 (AB 5) continues throughout the state, a San Diego Superior Court judge recently issued a preliminary injunction enjoining and restraining a company from failing “to comply with California employment law” regarding a category of individuals within the City of San Diego while the litigation is pending. This decision is noteworthy because it appears to require the company to immediately reclassify its independent contractors as employees, despite the fact the Court has not yet ruled on the merits of the City’s claim.

The case was brought by the City Attorney of San Diego against Maplebear, Inc. doing business as InstaCart, a same-day grocery delivery company. The lawsuit asserts a cause of action for Unfair Competition under California’s Business and Professions Code in which the City claims that Instacart “maintains an unfair competitive advantage by misclassifying workers” who provide shopping services as independent contractors instead of employees.

In the Order issued by the Honorable Timothy Taylor, he notes that the probability of one side prevailing is “not free from doubt.” On the other hand, he writes that the City will “more likely than not” be able to establish that Instacart Shoppers “perform a core function” of the business; are not free of control, and are not engaged in an independently established trade, occupation, or business. The Court also points out that while the City has the burden going forward with evidence, Instacart has the burden of establishing proper classification.

Judge Taylor’s Order goes on to note, “[t]he policy of California is unapologetically pro-employee (in the several senses of that word). Dynamex [the case that spawned AB 5] is explicitly in line with that policy. While there is room for debate on the wisdom of this policy, and while other states have chosen another course, it is noteworthy that all three branches of California have now spoken on this issue.” An attitude that is likely to be reiterated again and again as businesses grapple with the fallout from Dynamex and AB 5.

After issuance of Judge Taylor’s Order granting the City’s request for a preliminary injunction, Instacart moved on an ex parte basis to confirm that the preliminary injunction is subject to an automatic stay pending appeal, to stay enforcement of the preliminary injunction pending appeal or, in the alternative, to dissolve the preliminary injunction altogether. Judge Taylor denied Instacart’s ex parte application and the Company has since filed an appeal.

Jackson Lewis will continue to monitor developments in this case and others involving the application of AB 5 in the gig economy. Contact a Jackson Lewis attorney if you have questions about AB 5 or the classification of individuals as employees or independent contractors.

Prior pay, alone or in combination with other factors, is not a job-related “factor other than sex” that can be used to justify a difference in pay under the Equal Pay Act (EPA), a majority of judges on the U.S. Court of Appeals for the Ninth Circuit has held again. Rizo v. Yovino, No. 16-15372 (Feb. 27, 2020).

The Court previously reached this conclusion in 2018. On appeal to the U.S. Supreme Court, the Supreme Court remanded the case because the authoring judge (Judge Stephen Reinhardt) passed away before publication of the opinion.

The new majority decision, authored by Judge Morgan Christen, reiterates, “Allowing employers to escape liability by relying on employees’ prior pay would defeat the purpose of the Act and perpetuate the very discrimination the EPA aims to eliminate.” Accordingly, the Court held, “[A]n employee’s prior pay cannot serve as an affirmative defense to a prima facie showing of an EPA violation.”

The Ninth Circuit has jurisdiction over Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.

Please find the full article on the Jackson Lewis Publications page here.

The much anticipated California Consumer Privacy Act (“CCPA”) is now in effect (as of January 1, 2020), and as we’ve recently reported, class action litigation under the CCPA has already begun.  Organizations should have already assessed whether their business is subject to the new law and if so, taken steps to ensure compliance.  Likely, one of the most difficult compliance areas of the CCPA is responding to consumer requests to know the personal information a business collects about them.  Under the CCPA consumers have the right to know what personal information a business is collecting about them.  The information must be made available, free of charge, within 45 days, although extensions are available in limited circumstances. The business’s response to a request to know must be in a “readily useable format that allows the consumer to transmit this information to another entity without hindrance.” In addition, in October of 2019, as required by the CCPA, Attorney General Xavier Becerra announced Proposed Regulations that operationalize the new law and provide clarity and specificity to assist in implementation of the CCPA. The Proposed Regulations, which were recently updated, have yet to be finalized, but as is, have a technical and substantive impact on the consumer request to know process.

Please find the full article on the Jackson Lewis Workplace Privacy, Data Management & Security Report.