(Current as of July 10, 2020)
Most small businesses in California have taken a big hit during these trying times. Unfortunately, for some it was a fatal blow. For those left standing and trying to thoughtfully plan for re-opening, the myriad government rules, regulations, orders, and recommendations seem like a moving target that changes by the week. To add to the confusion, there is no single source to gather all relevant information regarding the federal, state, and local requirements applicable to any given situation.
Nonetheless, there is one common denominator: the employees. Employees are a primary catalyst for success or failure of the business, and right now many of them are at home wondering when they will go back to work and what their new working environment will entail. Below are some of the most significant employment law considerations that California businesss owners should be mindful of during California’s re-opening of businesses.
Getting the Employees to Come Back
As a preliminary matter, it is important to keep in mind that many California employees are currently making around $1,000 per week through California unemployment benefits and other government resources (including emergency federal legislation). Seeing as how that amount is higher than what many of them would be making at work (especially if they come back to work in a reduced role and/or with reduced hours), business owners are rightfully concerned about enticing former employees to leave the safety of their homes to potentially receive less money.
However, the Federal Pandemic Unemployment Compensation program (part of the $2 trillion CARES Act passed by Congress in March), which is currently providing an additional $600 per week to individuals who are collecting state unemployment compensation, expires on July 31, 2020. This could be reason enough for workers to become incentivized to return, as they would see their weekly government payments drop by $600 per week.
Some members of Congress are trying to extend these federal unemployment benefits. For instance, the Health and Economic Recovery Omnibus Emergency Solutions Act (the “HEROES Act”) proposed by Congresswoman Nita Lowey would extend the Federal Pandemic Unemployment Compensation payments through January 31, 2021. The Worker Relief and Security Act, proposed by Senators Michael Bennet and Jack Reed, would extend the benefits until the government declares the state of emergency for COVID-19 is over (at which point the benefits would continue for 30 additional days). Workers still eligible for unemployment would continue to receive weekly funds from their state, but the amount would be gradually reduced over 3 months. No such legislation has been made law as of yet, and the House and the Senate are currently on a two-week recess, scheduled to return the week of July 20th.
Additionally, the California Employment Development Department requires those seeking unemployment benefits to meet the following three eligibility criteria to qualify for, and continue to collect, the payments: (1) your past earnings must meet a certain minimum threshold; (2) you must be unemployed without fault of your own; and (3) you must be able to work, available for work, and actively seeking work (and provide periodic certifications stating as such). The third requirement will undoubtedly become impossible for many currently unemployed workers to satisfy with regard to the various counties and cities in California that permit business operations. Business owners can simply notify their past employees that the business has re-opened (or will soon be re-opening) and that their re-employment is desired (albeit likely on different terms). At that point, those prior employees cannot lawfully continue to collect unemployment payouts because they would have a job offer in hand. Business owners should review their hiring practices to ensure compliance with applicable laws and protect their businesses from poorly worded offer letters, employment contracts, and out-of-date policy manuals.
Paid Leave; Federal, State, and Local Laws Apply
The federal Families First Coronavirus Relief Act (FFCRA) requires certain employers (including restaurants) with fewer than 500 employees to provide their workers with paid sick leave and expanded family and medical leave related to COVID-19, and the FFCRA’s provisions will remain in place through December 31, 2020 unless otherwise modified. The DOL has issued a notice that all covered employers are required to post in a conspicuous place where employees or applicants may view it. The notice can also be distributed to employees by e-mail or through regular mail.
The FFCRA establishes two types of leave to assist workers who are negatively impacted by COVID-19. The first is the “Emergency Paid Sick Leave Act” which provides eligible employees up to 2 weeks of paid sick leave. The second is the “Emergency Family and Medical Leave Expansion Act” which amends the Family and Medical Leave Act to provide eligible employees up to 12 weeks of family and medical leave, the latter 10 weeks of which are paid (as it is designed to interplay with the first 2 weeks of leave being paid through sick leave such that the entire 12 weeks is paid). Note that employees who take leave under either of these acts are entitled to continue their health insurance coverage under the employer’s group health plan (assuming that is the situation) on the same terms and conditions as if they had not taken such leave, and the employees remain responsible for paying their usual portion of plan premiums.
Exemptions:
The Secretary of Labor has the authority to exempt employers with fewer than 50 employees from having to provide paid sick leave or expanded family/medical leave to employees to care for children whose school or childcare facility is closed, if doing so would jeopardize the viability of the business as a going concern. This exemption would apply if any of the three following conditions exist:
1. such leave would cause the employer’s expenses and financial obligations to exceed available business revenue and cause the employer to cease operating at a minimal capacity; or
2. the absence of the employee or employees requesting such leave would pose a substantial risk to the financial health or operational capacity of the employer because of their specialized skills, knowledge of the business, or responsibilities; or
3. the employer cannot find enough other workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services the employee or employees requesting leave provide, and the labor or services are needed for the employer to operate at a minimal capacity.
Businesses relying on this exemption should not send any supporting materials or documentation to the Department of Labor; rather, they should retain such records for their own files in the event a dispute arises in the future about the circumstances and rationale for the business relying on such an exemption. As always, documentation matters to a significant degree to reduce liability exposure, and records should be kept for a minimum of four years.
Inapplicability of Exemptions; Tax Credits:
For businesses unable to rely on any of the above exemptions, the business can be reimbursed (through tax credits) for amounts paid to its employees for sick leave wages and qualifying family/medical leave wages, as well as for the allocable costs to maintain health care coverage for such employees taking this special COVID-19 leave. Also, if none of the above exemptions apply to a particular business, then the rules set forth below govern the situation.
Reasons for Sick Leave under the Emergency Paid Sick Leave Act; Calculating Leave Time:
For businesses unable to rely on any of the above exemptions, an employee is eligible to take paid sick leave under 6 delineated situations, as follows:
Situation #1. The employee is unable to work because the employee is subject to a federal, state, or local COVID-19 quarantine or isolation order, which applies to employees who cannot work or “telework” due to shelter-in-place orders. Note that leave is only available in this circumstance if the employer actually has any work for the employee to do. As such, business closures due to the economic downturn resulting from the COVID-19 pandemic would not trigger employee eligibility under this first situation because the employee’s lack of work would be due to the business closure, not the employee’s inability to leave home. Employees subject to shelter-in-place orders may not take paid sick leave under this first situation if they are able to “telework,” provided that there is work for the employee to do, the employer allows the employee to telework, and there are no extenuating circumstances that prevent the employee from performing that work (such as a COVID-19 related power outage).
The law defines “telework” broadly to mean any function or task the employer allows the employee to accomplish at home or at a location other than the employee’s regular workplace. The typical presumption that employees are working continuously throughout the workday does not apply to telework for COVID-19 related reasons. As such, employers are not required to pay employees for unreported hours while teleworking, unless the employer knew (or should have known) that the employee was working.
Situation #2. The employee is unable to work because the employee has been advised by his/her health care provider to self-quarantine for a reason related to COVID-19. Such advice must be based on the health care provider’s belief that the employee has COVID-19, could have COVID-19, or is particularly vulnerable to contracting COVID-19. Also, the self-quarantining must prevent the employee from working, even remotely.
Situation #3. The employee is unable to work because the employee is experiencing symptoms of COVID-19 (as identified by the U.S. Centers for Disease Control and Prevention) and is seeking a medical diagnosis. Leave taken for this reason is limited to the time employees are unable to work because they are taking affirmative steps to obtain such medical diagnosis, including time spent making, waiting for, or attending an appointment for a COVID-19 test. It also includes employees who seek a test, are told that they do not meet the criteria for testing, but are nonetheless advised to self-quarantine, but only if that prevents the employee from working or teleworking (and work would otherwise be available). Note that this third situation does not cover (i) employees who are self-quarantining without actively seeking a medical diagnosis or (ii) employees who are waiting for test results, but are able to, and allowed to, telework (unless the COVID-19 symptoms prevent them from accomplishing their work activities).
Situation #4. The employee is unable to work because the employee needs to care for someone who (i) is subject to a federal, state, or local quarantine or isolation order or (ii) has been advised by a health care provider to self-quarantine due to concerns related to COVID-19. This fourth situation only applies if the employee would otherwise be able to work (and there is work available from the employer), and he/she is only unable to do so because of the need to care for such third-party. The need to care for such third-party must be genuine, and the individual to be cared for must be an immediate family member, roommate, or someone with whom the employee has a close relationship that creates an expectation that the employee would provide them with care.
Situation #5. The employee is unable to work because the employee needs to care for their child because (i) the child’s school or place of care has closed or (ii) the childcare provider is unavailable due to COVID-19 related reasons. Just as with the fourth situation above, this fifth situation only applies if the employee would otherwise be able to work (and there is work available from the employer), but he/she is only unable to do so because of the need to take the time and energy to provide care for the employee’s child. Also, paid sick leave is only available under this fifth situation if the employee legitimately needs to care for, and is actually caring for, the employee’s child; it is not available if someone else, such as a co-parent or guardian, is available to provide the care.
Situation #6. The employee is unable to work because the employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor. To date, no such conditions have been specified by such governmental bodies.
If any one or more of the above six situations apply to an employee, then a determination must be made regarding the total dollar amount of sick pay owed to the eligible employee. Each full-time employee is entitled to 80 hours of paid sick leave, and a part-time employee is entitled to the “number of hours that such employee works, on average, over a 2-week period.” If the part-time employee’s schedule varies from week to week, employers must first calculate the average number of hours the employee was scheduled per day over the six months immediately prior to the date the employee began taking paid sick leave. Once the employer calculates the daily average (based on calendar days, not just actual workdays, especially if the employee does not work every day of the week), such number should be multiplied by 14 to obtain the two-week average. Note that full-time employees are defined as those who are normally scheduled to work at least 40 hours per workweek, and those employees who work fewer than 40 hours per workweek are considered part-time employees. Also note that employees are eligible for this type of paid leave immediately upon being hired, without any minimum number of employment days or hours being required.
The amount of paid sick leave an employer is required to pay is capped at $511 per day ($5,110 in total) if the employee is taking the leave for himself/herself (i.e., Situations 1, 2, or 3 above). If the employee is taking leave to care for someone else (i.e., Situations 4 or 5 above), then the employee would be entitled to receive two-thirds pay, subject to a cap of $200 per day of leave (and $2,000 in total).
Child Care; Extended Leave:
The Emergency Family and Medical Leave Expansion Act amends existing law to provide eligible employees up to 12 workweeks of expanded family/medical leave, which is available for employees who need the time off to care for a child whose school or place of care is closed, or whose childcare provider is unavailable, for a COVID-19 related reason. This type of leave is unpaid for the first two weeks, though the paid sick leave discussed above is available for that timeframe and the two types of leave are designed to work together so that eligible employees have a continuous stream of income for up to 12 weeks while caring for their children whose school or childcare is not available.
For each day of extended leave after the first two weeks, the employer must pay the employee two-thirds of their regular rate times the number of hours the employee would normally be scheduled to work that day, up to a maximum of $200 per day ($10,000 in total) for the additional 10 weeks. For employees with varying schedules who have worked fewer than six months, the law requires that the amount paid is based on the reasonable expectation of the employee at the time of hiring. This is yet another reason to review all hiring policies, procedures, and agreements. Note that accrued PTO (paid time off) for vacations or other reasons cannot be used by the employee to supplement his/her earnings (to help make up for the missing one-third of pay) unless the employer and employee agree. Generally, the right to be eligible for this type of leave requires that the employee be employed for at least 30 days.
Employee’s Notice Requirements:
If an employee is seeking paid sick leave or expanded family leave to care for their child whose school is closed or whose childcare facility is unavailable to provide care due to COVID-19, an employer may require the employee to provide reasonable notice of the need for leave as soon as practicable after the first workday is missed, with such notice including the employee’s name, the dates for which leave is requested, the child’s name, the name of the school or childcare provider that is unavailable, a representation that no one else is available to care for the child, and a statement that the employee is unable to work (or telework) because of such COVID-19 related reason. An employee seeking paid sick leave due to quarantine or an applicable isolation order must provide the name of the government entity that issued the order. Furthermore, any employee seeking paid sick leave because a health care provider has advised him/her or her to self-quarantine must provide the name of their physician.
Employees Returning from Leave; Restoration of Job:
In general, an employee returning to work after taking any of the types of leave discussed above is entitled to the same (or substantially equivalent) position that he/she had prior to taking such leave. Of course, an employee who would have been laid off for reasons entirely unrelated to their taking leave are not protected, but the business would bear the burden of showing why that is the case (which can be an uphill battle without sufficient documentation). Also, the duty of job restoration does not apply to employers with fewer than 25 employees, but only if the employer can show that (i) the employee took leave to care for his/her child whose school or childcare facility was closed or unavailable, (ii) the employee’s position no longer exists due to economic or operating conditions caused by COVID-19 during the employee’s leave, (iii) the employer made reasonable efforts to restore the employee to the same (or substantially equivalent) position, and (iv) if such reasonable efforts of restoration were not possible or otherwise failed, the employer made reasonable efforts for a period of 1 year to contact the employee if/when an equivalent position becomes available (with such 1 year period beginning on either the date the leave concludes or the date that is 12 weeks after such leave began, whichever is earlier).
Interplay with Other Types of Leave; Local Laws:
The paid sick leave and expanded family leave rights described above are in addition to all other rights to which an employee is entitled, and an employer may not deny an employee paid sick leave or expanded family leave because the employee has already taken another type of leave or otherwise require an employee to use another source of paid leave before taking expanded family leave. For instance, with respect to California law (specifically Los Angeles local ordinances with provide employees with certain additional rights), all non-exempt W-2 employees (part-time or full-time) who have been working for a business for at least 90 days are entitled to 1 hour of paid sick leave (at their regular rate of pay) for every 30 hours they have worked (if the business has implemented the accrual method) or 48 hours provided up front (if the business has implemented the front-loading method). Such paid sick leave begins upon the oral or written request of the employee, and the business can limit the total paid sick leave to 48 hours per 12-month cycle. As such, it is possible that 12 weeks of paid leave could be required to be provided first as described above (assuming it is a childcare scenario), followed by 48 hours of paid sick leave per local laws.
Safety Measures and Training, Particularly For the Food and Beverage Industry
The COVID-19 Industry Guidance for Dine-In Restaurants established by the California Department of Public Health includes disinfecting protocols, social distancing requirements, and other operational recommendations. In Los Angeles, the County Department of Public Health continues to release its listing of restaurants and certain other workplaces associated with cases of COVID-19, officially termed “non-residential congregate settings.” Businesses which appear on the list are those linked to “a cluster of respiratory illness” cases in workers and others associated with the location, plus at least one positive COVID-19 diagnosis. Although appearing on the list does not suggest neglect or wrongdoing on the part of the business, it likely does not instill public confidence either. As the list potentially keeps growing (especially as business re-openings continue to occur), customer confidence could further decrease in those establishments and the industry as a whole. Ultimately, businesses will be responsible for following local, state, and federal regulations and the general public (as well as the media) will be paying attention to which businesses are implementing the appropriate safety measures.
In addition, on July 1, 2020, California Governor Gavin Newsom ordered the immediate shut-down of all indoor dining activities for at least three weeks in the following 19 counties (representing about 70 percent of California’s total population) that have experienced the highest rates of new COVID-19 infections: Los Angeles, Santa Barbara, Orange, Riverside, Sacramento, San Bernardino, Contra Costa, Santa Clara, Fresno, Glenn, Imperial, Kern, Kings, Merced, San Joaquin, Solano, Stanislaus, Tulare, and Ventura. Enforcement teams (including agencies such as the California Department of Alcoholic Beverage Control and the Department of Business Oversight) will be randomly spot-checking businesses to ensure compliance, with violators facing citations, fines, and loss of licenses.
With the stakes so high, robust training sessions should be held by each business to fully educate workers on the latest rules, regulations, best practices, and preferred methods to socially distance, sanitize surfaces, prepare food, operate at reduced capacity (and outdoors, with potential weather issues), and deal with disgruntled (and potentially recalcitrant) customers. Providing training manuals and other written documentation to all employees is also advisable, as it memorializes what they have been told during training sessions and would likely help protect the business from liability if it is ever alleged that the staff was not properly trained on how to follow applicable rules, regulations, and guidelines. Healthy levels of caution, discretion, optimism, and discipline will carry us all forward toward the shared goals of good health, great food, and a resurging economy.
