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What California Employers Need to Know in the Wake of the Coronavirus

By March 24, 2020 No Comments
What California Employers Need to Know in the Wake of the Coronavirus - lisa sherman law firm - california

The Coronavirus has not just upended our personal and professional lives in an instant, but companies nationwide are grappling for guidance.  Given the frantic changes that federal and state legislatures are racing to implement, we will constantly update our blog with the latest information.  

California’s Initial Executive Order Issued March 12, 2020

Governor Gavin Newson issued an Executive Order on March 12, 2020 enhancing State and Local Government’s Ability to Respond to the Covid-19 Pandemic. 

This Order: 

  • Directed Californians to follow public health directives including canceling large gatherings more than 250 people; 
  • Removed waiting period for unemployment and disability insurance for Californians who lose work as a result of the COVID-19 outbreak; 
  • Readied the state to commandeer hotels & medical facilities to isolate & treat COVID-19 patients 
  • Allowed local and state legislative bodies to hold meetings via conference calls while still meeting state transparency requirements.

California’s Statewide Stay at Home Order

On Thursday, March 19, 2020, California Governor Gavin Newsom issued a mandatory “Stay-at-Home” order, directing all California residents to stay home or at their place of residence. This Order went into effect on Monday, March 23, 2020 and will stay in place until further notice.

Violation of the order is a misdemeanor, punishable by a fine not to exceed $1,000 and up to six months imprisonment.  The exception to the stay at home order is to permit Californians working in 16 federally designated “critical infrastructure” sectors to continue their work.  Those critical infrastructure sectors are detailed by the federal Cybersecurity and Infrastructure Security Agency’s (CISA) publication, Identifying Critical Infrastructure During Covid-19.  https://www.cisa.gov/identifying-critical-infrastructure-during-covid-19.

The 16 sectors are: 

  • Chemical Sector
  • Commercial Facilities Sector
  • Communications Sector
  • Critical Manufacturing Sector
  • Dams Sector
  • Defense Industrial Base Sector
  • Energy Sector
  • Financial Services Sector
  • Food and Agriculture Sector
  • Government Facilities Sector
  • Healthcare and Public Health Sector
  • Information Technology Sector
  • Nuclear Reactors, Material and Waste Sector
  • Transportation Systems Sector
  • Water and Wastewater Systems Sector

The Order also stated that the supply chain must continue, and that Californians still needed access to necessities such as food, prescriptions, and health care.  Nevertheless, anytime people need to leave their homes or places of residence, whether to obtain necessities or work in critical infrastructure sectors, they must practice social distancing.

While Governor Newsom’s order provides no further guidance to employers, however, the Cyber Infrastructure Security Agency (“CISA”) from the Department of Homeland Security issued a memo on the same day, March 19, 2020, identifying an initial list of “Essential Critical Infrastructure Workers” in each infrastructure sector.  https://www.cisa.gov/publication/guidance-essential-critical-infrastructure-workforce  The CISA cautioned that the list was advisory in nature and not a federal directive or standard in and of itself, deferring to state and local governments, but should be useful guidance until the State of California issues any further clarifications.

Executive Order N-31-20 Temporarily Suspends 60 Day Notice Requirements and Liabilities under California Worker Adjustment and Retraining Notification Act (“Cal-WARN”)

On March 17, 2020, Governor Newsom issued Executive Order N-31-20 temporarily suspending the 60 day notice requirements and liabilities under the California Worker Adjustment and Retraining Notification Act (“Cal-WARN”). https://www.gov.ca.gov/wp-content/uploads/2020/03/3.17.20-EO-motor.pdf

Cal-WARN applies when an employer has a mass layoff, termination, or relocation at a “covered establishment” in California with 75 or more employees.

  • A “mass layoff” occurs when an employer terminates at least 50 employees at the covered establishment within a 30-day period due to lack of funds or work.
  • A “termination” occurs when there is a “cessation or substantial cessation of industrial or commercial operations in a covered establishment.”
  • A “relocation” occurs when an employer moves all or substantially all of its operations at a covered establishment to a different location 100 miles or more away.

When Cal-WARN is triggered, employers must provide at least 60-days’ advance notice to affected employees and certain state and local officials before conducting the mass layoff, termination, or relocation. Failure to provide the mandated notice exposes employers to liability for back pay (up to 60 days), the value of benefits for affected workers, civil penalties of up to $500 per day (which can be recovered under PAGA), and attorney fees.

Under Cal-WARN (unlike the federal WARN Act) there is no minimum period for the layoff. Courts have found that even a “brief” layoff is sufficient to trigger the notice obligations under Cal-WARN. In other words, if an employer furloughs 50 employees or more at a “covered establishment” even for a few days or weeks, the 60-day notice obligation would be triggered unless one of the limited exceptions to Cal-WARN applies.

Because there is no temporary grace period under Cal-WARN, employers have been scrambling to figure out whether they need to provide Cal-WARN notices in light of the increasing number of businesses being forced to temporarily close their doors or furlough employees. The only possible exception under Cal-WARN that could apply to the closures caused by the coronavirus is the exception for layoffs “necessitated by a physical calamity.” However, it is far from clear whether the current COVID-19 emergency would qualify as a “physical calamity.”

The Executive Order temporarily suspends the Cal-WARN obligation to provide 60-day prior notice of a mass layoff, relocation, or termination “caused by COVID-19-related ‘business circumstances’” and relieves employers of the Cal-WARN liabilities for damages and civil penalties. Although employers covered by the Executive Order need not provide 60-days’ advance notice, they must still:

  • Provide “as much notice as is practicable,” including a brief statement of the basis for reducing the notification period; and
  • Ensure their written notices contain the following statement: “If you have lost your job or been laid off temporarily, you may be eligible for Unemployment Insurance (UI). More information on UI and other resources available for workers is available at labor.ca.gov/coronavirus2019.”

The Executive Order applies retroactively to March 4, 2020, and extends through the end of the current COVID-19 emergency, which remains undetermined. The Executive Order also requires the California Labor and Workforce Development Agency to provide additional guidance on the order by March 23, 2020, which was issued promptly.

The Guidance on Conditional Suspension of California Warn Act Notice Requirements under Executive Order N-31-20, https://www.dir.ca.gov/dlse/WARN-FAQs.html, indicates that the Executive Order does not suspend the Cal-WARN Act in its entirety, nor does it suspend the law for all covered employers; it only suspends the 60 day notice requirement and details the conditions that must be met to rely on the Executive Order.

Los Angeles County Issues Safer at Home Order for Control of Covid-19

On March 19, 2020, Mayor Eric Garcetti issued the “Safer at Home Order for Control of Covid-19” which became effective at 11:59 p.m. that night and continuing through April 19, 2020.  https://www.gov.ca.gov/wp-content/uploads/2020/03/3.19.20-attested-EO-N-33-20-COVID-19-HEALTH-ORDER.pdf  

The Order exempted for a 24 hour period following the effective date to allow employees and business owners to access their workplaces to gather belongings so long as social distancing requirements are followed. This Order applies to all cities in Los Angeles County, except the cities of Pasadena and Long Beach. 

The Order requires all residents of the City of Los Angeles to stay inside their residences and immediately limit all movement outside of the home beyond what is absolutely necessary to take care of essential needs. 

All gatherings are defined of 10 or more people are prohibited anywhere within Los Angeles County. For all gatherings that are not prohibited (between 2-9 persons) and for all “Essential Businesses”, the Health Officer orders the following infection control precautions: 

  1. Practice social distancing within the confined space by requiring attendees to be separated by six feet, to the extent feasible; 
  2. Provide access to hand washing facilities with soap and water or hand sanitizer that contains at least 60% alcohol; 
  3. Post a sign in a conspicuous place at the public entry to the venue instructing members of the public to not attend if they are experiencing symptoms of respiratory illness, including, fever or cough; and 
  4. Adhere to communicable disease control recommendations provided by the Los Angeles County Department of Public Health. 

The Order does not prohibit any individual or family from outdoor activities such as hiking, walking, shopping at Essential Businesses, including, grocery stores and restaurants offering delivery, drive-thru or carry out service, so long as all persons practice social distancing to the extent practicable. 

The Order requires all indoor malls, shopping centers, playgrounds and non-essential businesses to close. “Essential Businesses” are defined to include 22 categories detailed in the order at paragraph 13 (a)-(v).

The following Essential Businesses will remain open:

  • City/County government services:
  • Police stations
  • Fire stations
  • Jails
  • Courts
  • Garbage/sanitation
  • Public Transportation
  • Water, power, and gas utilities
  • Public works construction, including construction of housing
  • Airport and Port operations
  • Gas service stations, auto supply, auto repair, bicycle repair shops and related facilities.
  • Health care operations, including:
  • Hospitals
  • Clinics
  • Dentists
  • Pharmacies
  • Pharmaceutical and biotechnology companies
  • Medical and scientific research
  • Laboratories
  • Healthcare suppliers
  • Home healthcare services providers
  • Veterinary care providers
  • Mental health providers
  • Physical therapists and chiropractors
  • Cannabis dispensaries, or any related and/or ancillary healthcare services
  • Manufacturers and suppliers
  • Healthcare operations does not include fitness and exercise gyms and similar facilities
  • Food providers, including:
  • Restaurants offering take-out, delivery or drive-thru. No dine-in service.
  • Grocery stores
  • Water retailers
  • Certified farmers’ markets
  • Farm and produce stands
  • Supermarkets
  • Convenience stores
  • Warehouse stores
  • Food banks
  • Convenience stores
  • Pet supply
  • Take-out from restaurants, drive-thru restaurants, and delivery from restaurants
  • Food cultivation, including farming, livestock, and fishing
  • Organizations and businesses that provide food, shelter, and social services (including gang prevention and intervention, domestic violence and homeless services agencies)
  • Gas service stations, auto supply, mobile auto repair operations, auto repair shops, bicycle repair shops and related facilities.
  • Hardware and building supply stores and nurseries.
  • Plumbers, electricians, exterminators, custodial/janitorial workers, handyman services, funeral home workers and morticians, moving services, HVAC installers, carpenters, landscapers, gardeners, property managers, private security personnel and other service providers who provide services to maintain the safety, sanitation, and essential operation to properties and other essential activities.
  • Banks, credit unions, financial institutions and insurance companies.
  • Businesses providing mailing and shipping services, including post office boxes.
  • Laundromats/laundry service
  • Newspapers, magazines, television, radio, podcasts and other media services
  • Educational institutions, including public and private K-12 schools, colleges, and universities — for purposes of facilitating distance learning or performing essential functions provided that social distancing of six-feet per person is maintained to the greatest extent possible.
  • Businesses that supply products needed for people to work from home.
  • Utility companies and other businesses that supply other essential businesses with the support, services, or supplies necessary to operate, provided that strict social distancing is maintained.
  • Individuals or businesses that ship or deliver groceries, food, beverages or goods directly to residences or businesses, including rail and trucking.
  • Airlines, taxis, ride sharing services, and other private transportation services providing transportation services necessary for essential activities and other purposes expressly authorized in this Order.
  • Home-based care for disabled persons, seniors, adults, or children.
  • Residential facilities and shelters for disabled persons, seniors, adults, and children.
  • Professional services, such as legal, payroll or accounting services, when necessary to assist in compliance with legally mandated activities.
  • Hotels, motels, shared rental units and similar facilities.
  • Military/Defense Contractors/FFRDC (Federally Funded Research and Development Centers)
  • Childcare facilities providing services that enable employees exempted in this Order to work as permitted, under restrictions contained in the Order.

Many businesses have contacted us who are manufacturers of consumer products seeking advice on whether they can be deemed an Essential Business under subsections (a) as household consumer products, (n) businesses that supply other Essential Businesses with the support and supplies they need to operate, and/or (o) Business that ship, truck… directly to residences, Essential Businesses, which must be carefully analyzed to determine if they qualify. 

Proposed Legislation by Los Angeles City Council

The City of Los Angeles is considering two emergency measures, 72J and 73KK that will restrict businesses’ ability to operate even further.

Motion 72J provides for the following:

“Cities like Philadelphia have also adopted the policy of just cause for laying off workers, in which employers must show a bona fide reason to terminate employees. Los Angeles should pursue a similar policy.

In addition, the City should require employers to provide worker recall rights, in which laid-off workers have right of first refusal to return to jobs once businesses reopen.

Lastly, the City should pursue a worker retention policy in the case of bankruptcy or transfer of ownership. As some businesses declare bankruptcy and transition to alternate owners, the new owners should be required to retain the same employees. This is particularly of concern in the hospitality and tourism industries.

The motion asked the City Attorney to draft an emergency ordinance that would apply retro-actively to March 1, 2020 that would only permit employers to terminate an employee for “just cause.”  Employers could only terminate employees in order of seniority. In addition, if a company takes over ownership of a prior company, the new company would be required to give preference to the employees previously employed at the same worksite in order of seniority. 

Finally, the motion would require employers to permit employees to take a total of 15 one-minute breaks every 4 hours to wash their hands.”

Motion 72KK seeks to have the City to establish regulatory guidelines for hospitality workers requiring:

  • Any layoffs could only be done by seniority;
  • Re-hiring employees could only be by seniority;
  • Require “just cause” terminations; and
  • “worker retention”

We are not exactly clear what the “worker retention” prevision envisions, but we can expect that it would prohibit employers from terminating employees and forcing them to keep employees on the payroll even if the Company cannot afford to do so.

To the extent any businesses in Los Angeles survive the coronavirus shutdown, if any of these measures pass, it will have the effect of eliminating these businesses. 

Businesses affected by these measures, should they pass, should contact LA City Council members to express their concerns:

Families First Coronavirus Response Act (“FFCRA”)

https://www.congress.gov/bill/116th-congress/house-bill/6201/text

The Families First Coronavirus Response Act was passed by the Senate and signed by President Trump on March 19, 2020.  The Act provides for two paid leaves that employers across the United States must provide to employees in response to the coronavirus epidemic.  

The Act is effective no later than 15 days after enactment (by April 2, 2020) and expires on December 31, 2020.  The Act provides for two sources of paid leave: Emergency Paid Sick Leave Act (“EPSLA”) and the Emergency Family and Medical Leave Expansion Act (“EFMLA”

Emergency Paid Sick Leave Act (EPSLA)

Covered Employees: All employees.

Covered Employers: Employers with fewer than 500 employees.

Amount of Leave:

  • Full time employees: 80 hours of paid leave
  • Calculated at their regular rate of pay (as calculated by the FLSA) or the minimum wage, whichever is greater.
  • Part-time employees: Average number of hours worked over a two-week period.
  • If an employee works a variable schedule, it is the average number of hours they worked per day over the previous six months. If the employee has not worked this long, it is the reasonable expectation of the employee at the time of hire of the average number of hours per day the employee would normally be scheduled.

The Emergency Paid Sick Leave Act sets forth six covered reasons qualifying for paid sick leave, and a corresponding rates of pay for the employee and a cap on payments to the employees depending on the reason for leave:

Covered Reason For LeaveRate of PayCap on Payments
(1) The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19The employee’s regular rate of pay (as determined under section 7(e) of the Fair Labor Standards Act of 1938 (29 U.S.C. 207(e)).$511 per day and $5,110 in the aggregate
(2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19The employee’s regular rate of pay (as determined under section 7(e) of the Fair Labor Standards Act of 1938 (29 U.S.C. 207(e)).$511 per day and $5,110 in the aggregate
(3) The employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis.The employee’s regular rate of pay (as determined under section 7(e) of the Fair Labor Standards Act of 1938 (29 U.S.C. 207(e)).$511 per day and $5,110 in the aggregate
(4) The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).Two-thirds of the employee’s regular rate of pay.$200 per day and $2,000 in the aggregate
(5) The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID–19 precautions.Two-thirds of the employee’s regular rate of pay.$200 per day and $2,000 in the aggregate
(6) 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.Two-thirds of the employee’s regular rate of pay.$200 per day and $2,000 in the aggregate

Employers cannot require employees to use any other leave prior to using the Emergency Paid Sick Leave.

Notice requirements: Employers must post a notice in conspicuous places on the premises of a notice to be prepared by the Secretary of Labor.  The Secretary of Labor has 7 days after the enactment of the Act to make the notice publicly available.

The Act cannot not diminish the rights or benefits of employees provided under any other Federal, State, or local law, collective bargaining agreement, or existing employer policy.

Employers are not required to pay out any unused Emergency Paid Sick Leave at the end of employment.

Emergency Family and Medical Leave Expansion Act (“EFMLA”)

Eligible employees: An employee who has been employed for at least 30 calendar days.

Covered employers: An employer with fewer than 500 employees.

Qualified reasons for paid FMLA leave: When the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency (with respect to a COVID-19 declared by a Federal, State, or local authority), the employee may take up to 12 weeks of leave.

Amount of paid leave:

  • First 10 days may be unpaid (but employee may use other paid leaves during this time)
  • Paid at no less than two-thirds of the employee’s regular rate of pay (as determined by the FLSA) and the number of hours the employee would normally be scheduled to work for up to 12 weeks.
  • Paid leave shall not exceed $200 per day and $10,000 in the aggregate.

Reinstatement rights:  Employees are entitled to reinstatement to the same position or an equivalent position, unless the employer employs fewer than 25 employees.  In that case, the employer must make reasonable efforts to provide the employee with a position or an equivalent position for 1 year after the “public health emergency concludes” or 12 weeks after commencement of the leave, whichever is earlier.

Exclusions: The Secretary of Labor has authority to issue regulations for good cause to exclude certain health care providers and emergency responders, and to exempt small businesses with few than 50 employees if requirements would “jeopardize the viability of the business as a going concern.”  This will likely be triggered by most small businesses who simply cannot afford to comply with these new laws. 

The Act provides payroll tax credits granted to employers to offset the costs associated with these employer-provided mandates.  This is a concern for many business owners, especially restaurant owners, who have been forced to close or substantially reduce their operations to take-out only, and now must find extra money for these payments and wait for a tax credit.

DOL Guidance Issued on March 20, 2020

On March 20, 2020, the Department of Labor added two new resources: (1) Families First Coronavirus Response Act: Employee Expanded Family and Medical Leave Rights https://www.dol.gov/agencies/whd/pandemic/ffcra-employee-paid-leave

and (2) Families First Coronavirus Response Act: Employer Expanded Family and Medical Leave Requirements https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave

We noticed a few items in the guidance that didn’t quite track the FFCRA. For example, the DOL states that an employee qualifies for paid sick time if the employee is unable to work (or unable to telework) due to a need for leave because “the employee is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19.” (emphasis added). Note that the statute specifically refers to a son or daughter, not just any child. 

The DOL guidance confirms that, when paid sick leave and emergency FMLA overlap as in the childcare situation, they run concurrently (not consecutively):

“All employees of covered employers are eligible for two weeks of paid sick time for specified reasons related to COVID-19. Employees employed for at least 30 days are eligible for up to an additional 10 weeks of paid family leave to care for a child under certain circumstances related to COVID-19”

“A full-time employee is eligible for up to 12 weeks of leave (two weeks of paid sick leave followed by up to 10 weeks of paid expanded family & medical leave) at 40 hours a week, and a part-time employee is eligible for leave for the number of hours that the employee is normally scheduled to work over that period.”

Also, the DOL revealed some new information about how it will enforce the law. The first 30 days will be a trial period for employers, as long as they have good intentions to comply with the law:

“The Department will observe a temporary period of non-enforcement for the first 30 days after the Act takes effect, so long as the employer has acted reasonably and in good faith to comply with the Act.  For purposes of this non-enforcement position, “good faith” exists when violations are remedied and the employee is made whole as soon as practicable by the employer, the violations were not willful, and the Department receives a written commitment from the employer to comply with the Act in the future.”

The DOL indicated in a footnote in the employee guidance that it expects to issue FFCRA regulations in April 2020 so we will need to await further clarification on this new law. 

IRS Guidance Issued on March 20, 2020

The Internal Revenue Service offered a preview into the tax credit plan for coronavirus-related paid leave for workers and tax credits for small and midsize businesses. https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus

Here is what we know at this point: 

  • Complete Coverage-Employers receive 100% reimbursement for paid leave pursuant to the Act.
    • Health insurance costs are also included in the credit
    • Employers face no payroll tax liability.
    • Self-employed individuals receive an equivalent credit.
  • Fast Funds-Reimbursement will be quick and easy to obtain.
    • An immediate dollar-for-dollar tax offset against payroll taxes will be provided
    • Where a refund is owed, the IRS will send the refund as quickly as possible.
  • Small Business Protection-Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or child care is unavailable in cases where the viability of the business is threatened.
  • Easing Compliance-Requirements subject to 30-day non-enforcement period for good faith compliance efforts.

The IRS is also supporting businesses with liquidity issues. That is, companies can take immediate advantage of paid leave credits by retaining and accessing funds that they would otherwise pay to the IRS in payroll taxes. Employers can even get an advance from the IRS if those amounts are not sufficient to cover the cost of paid leave by seeking an expedited advance from the IRS by submitting a streamlined claim form. The IRS expects to release that form this week. 

For more information on Coronavirus Tax Relief by IRS, please visit this link. https://www.irs.gov/coronavirus

Additional Useful Links

Unemployment Insurance: edd.ca.gov/unemployment

EDD on Coronavirus: https://www.edd.ca.gov/about_edd/coronavirus-2019.htm

Employers experiencing a hardship as a result of COVID-19 may request up to a 60-day extension of time from the EDD to file their state payroll reports and/or deposit state payroll taxes without penalty or interest. A written request for extension must be received within 60 days from the original delinquent date of the payment or return.

For questions, employers may call the EDD Taxpayer Assistance Center.

Toll-free from the U.S. or Canada: 1-888-745-3886

Hearing impaired (TTY): 1-800-547-9565

Outside the U.S. or Canada: 1-916-464-3502

Rapid Response Team: Employers planning a closure or major layoffs as a result of the coronavirus can get help through the Rapid Response program. Rapid Response teams will meet with you to discuss your needs, help avert potential layoffs, and provide immediate on-site services to assist workers facing job losses. For more information, refer to the https://www.edd.ca.gov/pdf_pub_ctr/de8714rrb.pdf or contact your local America’s Job Center of California https://www.edd.ca.gov/Office_Locator/default.htm

California Department of Public Health – COVID-19 Daily Updates

https://www.cdph.ca.gov/Programs/CID/DCDC/Pages/Immunization/ncov2019.aspx

U.S. Department of Labor – OSHA – COVID-19

https://www.osha.gov/SLTC/covid-19/standards.html

California Labor Commissioner FAQs – COVID-19

https://www.dir.ca.gov/dlse/2019-Novel-Coronavirus.htm

California Labor & Workplace Development Agency – COVID-19 Resources for Employers and Workers

https://www.labor.ca.gov/coronavirus2019/

Centers for Disease Control and Prevention – COVID-19

 https://www.cdc.gov/niosh/emres/2019_ncov.html

EEOC – What You Should Know About the ADA, the Rehabilitation Act, and COVID-19

 https://www.eeoc.gov/eeoc/newsroom/wysk/wysk_ada_rehabilitaion_act_coronavirus.cfm

California State Franchise Board – tax relief available to California taxpayers affected by COVID-19

https://www.ftb.ca.gov/

U.S. Small Business Administration –  COVID-19: Disaster Assistance and SBA Loan Information

https://www.sba.gov/funding-programs/disaster-assistance

California State Treasurer’s Office – California Capital Access Program for Small Business (CalCAP SB or Program)

https://www.treasurer.ca.gov/cpcfa/calcap/sb/index.asp