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Employers are facing increasingly difficult business decisions as a result of COVID-19 and, in developing a plan of action, must take care to avoid the many risks for wage and hour litigation that may be asserted in the wake of those decisions, especially as they relate to the execution of temporary layoffs or furloughs. On March 17, 2020, Governor Newsom issued an unprecedented executive order significantly changing notice requirements for employers contemplating layoffs in California. This blog addresses two of the hidden risks that are potentially triggered at the outset of a furlough: (1) WARN notices under both Executive Order N-31-20 and federal WARN, and (2) the payment of wages, including accrued unused vacation or paid time off. Whether employers call it a furlough, a temporary layoff, or a shutdown, the legal analysis is largely the same.

Notification periods under WARN complicate furloughs, even with California’s executive order

In a mass layoff or plant closure situation, employers may be required to provide notice under the federal Worker Adjustment and Retraining Notification (WARN) Act and equivalent California WARN Act (collectively, the Acts). COVID-19 creates WARN compliance challenges for many employers. This is particularly true for employers who are required to quickly shut down operations by state or local mandate, such as bars and gyms in many California cities. These unique circumstances may create a tension with WARN obligations.

Both the federal WARN and California WARN require employers at a covered establishment to provide 60 days’ notice to covered employees prior to a closing or mass layoff, as defined in the Acts. The California WARN, modeled after the federal WARN, applies to a wider range of employees. There are a number of parameters, exceptions, and industry-specific guidelines under both the federal and California WARN. Of utmost importance here, however, is the fact that the California Court of Appeals has held in The International Brotherhood of Boilermakers v. NASSCO Holdings Inc. that California WARN applies to temporarily furloughed employees who have been furloughed for less than six months, even though the same furlough would not have triggered notice obligations under federal WARN which only applies to furloughs in excess of six months.

Continue Reading California executive order suspends and modifies California WARN requirements due to COVID-19 but employers contemplating furloughs are not yet in the clear

On July 3, California became the first state to pass legislation that bans discrimination based on natural hairstyles. Governor Gavin Newsom signed into law the CROWN Act (Create a Respectful and Open Workplace for Natural Hair). The CROWN Act amends the state’s Government Code and Education Code to define “race or ethnicity” as “inclusive of traits historically associated with race, including, but not limited to, hair texture and protective hairstyles.” The new law expressly protects hairstyles including, but not limited to, “braids, locks, and twists.” Governor Newsom called the law “long overdue.” The bill passed unanimously in the senate and the assembly, and takes effect on January 1, 2020.

Continue Reading New York and California ban discrimination against natural hair

Companies in the transportation industry with operations in California have some positive news to celebrate. On May 3, 2019, in Anthony Ayala v. U.S. Xpress Enterprises, Inc., et al., the Central District of California granted partial summary judgment and dismissed a truck driver’s meal and rest period claims, finding that they were preempted by the December 2018 ruling of the Federal Motor Carrier Safety Administration (FMCSA).

In its December ruling, the FMCSA stated that California cannot enforce its meal and rest period laws with regard to interstate motor carriers because those laws do not provide any additional safety benefits above those already provided by the meal period rules contained in the federal hours of service rules. It also found that the California meal and rest period rules unduly burden interstate commerce.
Continue Reading Promising news for companies in the transportation industry

In April 2018, the California Supreme Court turned worker classification on its head when it decided Dynamex Operations West Inc v. Superior Court (Dynamex). In Dynamex, the court adopted a three-factor “ABC” test for analyzing misclassification claims under the California Wage Orders. Under the ABC test, for an employer to show that workers were properly classified as independent contractors, they must demonstrate that: the worker (A) was not under the company’s direct control and direction; (B) performed work that was outside the usual course of the hiring entity’s business; and (C) was customarily engaged in an independent business. Because of, in particular, the second element of the test, this standard makes it very difficult for businesses to prove that workers are independent contractors.

Since last year’s ruling in Dymanex, there has been much speculation about the application of the decision, specifically whether it applies retroactively and the scope of any application of the “ABC” test.

To the shock of employers, on May 2, 2019, a unanimous three-judge panel of the Ninth Circuit of the United States Court of Appeals (the Panel), in Vasquez v. Jan-Pro Franchising International, Inc. (Jan-Pro), held that the Dynamex rule should be applied retroactively.

Continue Reading Dynamex in retrograde – misclassification test and its retroactive reach may open the flood gates for misclassification cases in California

California companies have been required to reconsider their use of independent contractors since the state’s Supreme Court outlined the new ABC test in Dynamex Operations West, Inc. v. Superior Court. Unlike the prior Borello test, which involved the balancing of numerous factors, the ABC test requires that a company establish all of the following: (A) the worker is free from the control and direction of the company; (B) the work is outside the company’s usual course of business; and (C) the worker is customarily engaged in an independent established business in the same line of work.

In the transportation industry, however, the ABC test may be preempted by the Federal Aviation Administration Authorization Act (the FAAAA). The FAAAA preempts all state laws that “relate[] to a price, route, or service of any motor carrier . . . with respect to the transportation of property.” The United States Supreme Court has held that preemption may occur “even if a state law’s effect on rates, routes, or services is only indirect” and applies “at least where state laws have a significant impact related to Congress’ deregulatory and pre-emption-related objectives.”

Because the ABC test is new, there is no binding authority in California on the question of whether it is preempted by the FAAAA. Given this fact, Western States Trucking Association filed a lawsuit against the Acting Director of the California Department of Industrial Relations (Andre Schoorl) and the California Attorney General (Xavier Becerra) seeking a finding that the FAAAA preempts the ABC test.

Continue Reading 9th Circuit to consider whether the FAAAA preempts California’s ABC test for independent contractor truck drivers

On Tuesday, January 15, 2019, the U.S. Supreme Court found that truck drivers classified as independent contractors cannot be compelled to arbitrate their claims under the Federal Arbitration Act (FAA). See New Prime, Inc. v. Oliveira, No. 17-340, 2019 WL 189342 (U.S. Jan. 15, 2019).

This decision has significant ramifications for transportation industry companies that previously utilized arbitration agreements with their independent contractor drivers. Given the court’s ruling, those independent contractor drivers can no longer be compelled to arbitrate their claims under the FAA.

The plaintiff, Dominic Oliveira, worked as an independent contractor driver for a trucking company, New Prime Inc. As part of his contract with New Prime, Olivera agreed to arbitrate all disputes. In contradiction to this agreement, Oliveira brought a claim in court against New Prime on behalf of himself and thousands of other independent contractor drivers. Oliveira alleged that he and the other drivers were misclassified as independent contractors, and that they were actually employees of the company.

Continue Reading High court finds independent contractor truck drivers excluded from FAA

California law requires that employers authorize and permit their employees to take rest periods based on the total hours worked in a day. Employers must authorize and permit 10 minutes net rest time for every four hours worked or major fractions of an hour. If the workday is less than three and one-half hours, then no rest period is required. Even though no work is performed, employers must consider rest periods as compensable time worked.

New Rest Period Requirements For Piece-Rate Workers 

Recently, the legislature placed substantial new requirements on employers with employees who are compensated on a piece-rate basis for any work within a pay period.
Continue Reading California’s New Rest Period Requirements for Piece-Rate Workers

Q:        What is easiest way to get rid of a wage and hour class action?  

A:        Making an offer of judgment to moot the named plaintiff’s claim by proposing to pay him or her an amount that will fully satisfy his or her entire individual claim.

This is exactly the strategy that the employer utilized and which, at first blush, the U.S. Supreme Court approved in Genesis Healthcare Corp v. Symczyk. But don’t get too excited, a quick review of Genesis establishes that its utility will likely be limited. 

Continue Reading U.S. Supreme Court Limits Use of Offers of Judgment to Avoid Class Actions