Last week, the United States Supreme Court issued its long-awaited decision in Viking River Cruises, Inc. v. Moriana (US 20–1573 6/15/22) (“Moriana”). The singular question presented to the Court was whether the Federal Arbitration Act (“FAA”) requires enforcement of arbitration agreements waiving an employee’s right to assert “representative” claims under California’s Private Attorneys General Act (“PAGA”). In response, the Court provided two answers: (1) wholesale waivers of an employee’s right to bring any PAGA claims in any forum will not be enforced; yet (2) arbitration agreements can require an employee to arbitrate their own individual PAGA claims, leaving the absent employees’ claims subject to dismissal.
For context, PAGA is a decades-old law that allows private citizens to step into the shoes of the Labor Commissioner, essentially turning “aggrieved” employees into bounty-hunters for the State’s Labor and Workforce Development Agency (“LWDA”). Specifically, PAGA litigants are authorized to recover civil penalties on behalf of the State for certain Labor Code violations, which would otherwise be recoverable only by the Labor Commissioner. If successful, employees receive a 25 percent share of civil penalties recovered, with the remaining 75 percent going to the LWDA. And another thing, PAGA allows for the recovery of attorneys’ fees and costs, which are often exponentially larger than the underlying civil penalties and statutory damages recovered—leaving no surprise as to why PAGA has become such a popular vehicle for plaintiffs’ attorneys.
California is infamous for its hostility towards employers. On May 23, the California Supreme Court continued on its unwavering mission to solidify that well-earned reputation by issuing a 45-page decision in Naranjo et al. v. Spectrum Security Services, Inc., a case we have been closely monitoring at Blank Rome.
For context, the failure to pay wages in California triggers not only an award of those unpaid wages, but potentially steep and costly statutory and civil penalties as well, including so-called: (1) “waiting time penalties”—up to 30 days’ wages for former employees; and (2) “wage statement penalties” when the unpaid wages render the employee’s pay stub inaccurate. Wage statement penalties start at $50 for the first violation and rise to $100 for subsequent violations. When claims are brought on a classwide basis, these penalties can become astronomical, as they are all assessed on a per-employee, per-pay-period basis.
On February 9, 2022, California Governor Newsom signed into law Senate Bill (“SB”) 114.
The law reinstates the COVID-19 supplemental paid sick leave (“CSPSL”) requirement for companies with more than 26 employees. Like California’s prior CSPSL iteration, which expired on September 30, 2021, the new law provides up to 80 hours of CSPSL for full-time employees for certain COVID-19-related reasons. The law takes effect immediately, but the obligation to provide CSPSL does not begin until February 19, 2022. The law is currently set to remain in effect through September 30, 2022.
Here are the pertinent details that employers need to know:
Covered Employers: SB 114 covers all employers in California with more than 25 employees. Employers with 25 or fewer employees are not covered.
Covered Employees: SB 114 covers employees who are unable to work or telework due to any of the reasons that qualify for CSPSL (detailed below).
Amount of Leave: Full-time employees are entitled to up to 80 hours of CSPSL for qualifying reasons. Part-time employees are provided a prorated amount of this benefit. This leave is in addition to regular paid sick leave already required under California law.
On December 15, the U.S. Supreme Court changed course and announced that it would decide whether representative claims brought under California’s Private Attorneys General Act (known as “PAGA”) can be waived by an otherwise enforceable arbitration pact—taking on a years-long conflict between the California Supreme Court’s 2014 Iskanian v. CLS Transportation Los Angeles, LLC decision (holding that arbitration agreements cannot bar PAGA claims) and the U.S. Supreme Court’s own 2018 Epic Systems Corp. v. Lewis decision (holding that courts must enforce arbitration agreements under the Federal Arbitration Act (“FAA”), including those containing class/collective action waivers). You can read more about the Epic Systems holding in Epic Shift: Supreme Court Enforces Class Action Waivers in Arbitration Agreements and The Epic Systems Decision: Where Do Employers Go from Here?
Critics of Iskanian and its progeny essentially argued to the U.S. Supreme Court that it allowed an end run around the FAA, which preempts any state law that restricts the enforceability of arbitration agreements.
The petition was filed on behalf of Viking River Cruises, one of many filed by employers across the Golden State this year, each asking the U.S. Supreme Court to weigh in on the Iskanian versus Epic Systems PAGA conflict.
The Blank Rome team will be watching this one closely and with bated breath, as the Supreme Court’s ruling will impact thousands of businesses and have fundamental and profound effects on representative litigation both in California and across the United States.
On October 7, 2021, California Governor Newsom signed SB-331, also known as the “Silenced No More Act.” The Act substantially restricts the right of employers to include confidentiality provisions in separation agreements under existing California law beyond its #MeToo origins. Beginning on January 1, 2022, the new law will prohibit confidentiality provisions in separation agreements involving workplace harassment or discrimination on any protected basis, not just on sex. Any provision in violation of this prohibition will be against public policy and unenforceable.
Expanding #MeToo Protections
In 2018, California passed SB-820, or the STAND (Stand Together Against Non-Disclosure) Act, in response to the #MeToo movement. The law, now California Code of Civil Procedure section 1001, prohibits confidentiality provisions in separation agreements that prevent the disclosure of factual information regarding sexual assault, sexual harassment, workplace harassment, or discrimination based on sex.
If an employer does not provide an employee with a compliant meal or rest period, Labor Code section 226.7(c) requires the employer to “pay the employee one additional hour of pay at the employee’s regular rate of compensation.” In Ferra v. Loews Hollywood Hotel, LLC, the California Supreme Court held that the “additional hour of pay” for meal or rest period violations must encompass all non-discretionary payments, as well as hourly wages. Thus, if an employer pays an employee non-discretionary incentive pay or bonuses, or commissions, those amounts must be included in determining the “hour of pay” the employer owes to the employee for a meal or rest period violation. (Note: The same rule applies to a “recovery” period, which is less common and refers to a cooldown period afforded an employee to prevent heat illness.)
Many employers have initiated practices of monitoring time records for apparent meal period violations and automatically paying an hour of pay accordingly. If the hour of pay was paid at an employee’s base hourly rate that did not include non-discretionary payments, then additional amounts may now be owed to the employee. Also, given the increased cost to an employer of a meal period premium, employers who provide employees flexibility regarding the scheduling of their meal periods may want to reconsider that flexibility and instead insist on strict meal period scheduling and reporting to avoid potential exposure.
On March 19, 2020, Governor Newsom gave another shot in the arm to California’s COVID-19 supplemental paid sick leave law, which (as amended) goes into effect today, March 29, 2021. The new statute, California Labor Code section 248.2, replaces and expands the state’s supplemental sick leave law that expired at the end of last year.
This new law covers all California employers with more than 25 employees, provides more paid sick leave, adds more qualifying reasons for leave, and entitles some employees to retroactive payment.
It is anticipated that all adults in California will be eligible to receive the COVID-19 vaccine by mid-April, shortly after the new leave law takes effect. Employers should therefore anticipate and prepare for a new a flood of leave requests as employees snag available appointments.
A New Dose of Supplemental Paid Sick Leave
Perhaps the most important update is that the new law provides more supplemental paid sick leave, which must be made available for immediate use upon the employee’s oral or written request.
Under the new law, full-time employees are entitled to 80 hours of supplemental paid sick leave.
As we previously reported, on April 7, 2020, Los Angeles City Mayor Garcetti issued an emergency order calling for supplemental paid sick leave for City employees who are not covered by the federal Families First Coronavirus Response Act and who must miss work for reasons related to COVID-19. On April 11, 2020, the Los Angeles Office of Wage Standards (“OWS”) issued rules and regulations clarifying Mayor Garcetti’s supplemental paid sick leave order. The rules and regulations can be found on the OWS website here.
The OWS anticipates updating these rules and regulations, and we will continue to monitor the OWS for the latest guidance.
On April 7, 2020, Los Angeles City Mayor Eric Garcetti issued an Emergency Order requiring certain employers to provide up to 80 hours of supplemental paid sick leave to employees who are not covered by the federal Families First Coronavirus Response Act for reasons related to COVID-19. The Emergency Order can be found on Mayor Garcetti’s website here.
Here are the basic provisions of Mayor Garcetti’s COVID-19 Supplemental Paid Leave Order (“Order”):
Who Is Covered by the Supplemental Paid Sick Leave Order?
Employers with 500 or more employees within the City of Los Angeles or 2,000 or more employees nationally may be required to provide supplemental paid sick leave to employees who are unable to work or telework if they meet the following criteria: (i) they have worked for the same employer from February 3, 2020, through March 4, 2020, and (ii) they perform work in the City of Los Angeles.
Citing the need to prevent or mitigate the spread of COVID-19, California Governor Newsom acknowledged that California employers have had to close rapidly without providing their employees the advance notice required under California law. Generally, the California WARN Act requires employers to give a 60-day notice to affected employees and both state and local representatives prior to a plant closing or mass layoff.