On the heels of Donohue v. AMN Services, LLC recognizing a rebuttal presumption of meal period violations based on the employer’s time records alone – as discussed in our prior blog post – the California Supreme Court has, in another blow to employers, ruled that the premium pay required where the employer does not provide meal, rest or recovery periods is not based on the hourly rate of pay (as had previously been understood). In essence, the California Supreme Court has found that the “rate of compensation” for the purpose of determining the additional hour of pay due to employees who are not provided meal, rest or recovery periods is synonymous with the overtime rate of pay and must include all nondiscretionary payments, not just hourly rates.Continue reading
California has just reinstated the COVID-19 specific paid sick leave law that expired at the end of 2020 but this time with a twist. As we discussed in a blog post last year, California enacted the 2020 COVID-19 Supplemental Paid Sick Leave law to extend benefits to employees not covered by the paid benefits provision of the Families First Coronavirus Response Act (FFCRA). While the FFCRA’s paid sick leave provision lapsed on December 31, 2020 along with California’s 2020 COVID-19 Supplemental Paid Sick Leave law, California has just passed, effective March 29, 2021, the 2021 COVID-19 Supplemental Paid Sick Leave law extending benefits again with significantly expanded eligibility.
The 2021 COVID-19 Supplemental Paid Sick Leave law requires all California employers with more than 25 employees to provide COVID-19 related paid sick leave (up to 80 hours) to employees who cannot work or telework due to the reasons discussed below. This paid leave is in addition to any payment that was provided under the previous COVID-19 Supplemental Paid Sick Leave law expiring on December 31, 2020. The 2021 COVID-19 Supplemental Paid Sick Leave law does not apply to independent contractors, unlike the previous law, and expands upon the eligibility criteria. The California Department of Industrial Relations (DIR) has issued 2021 COVID-19 Supplemental Paid Sick Leave FAQs offering detailed guidance on this new law.
Covered employees are now eligible under the 2021 COVID-19 Supplemental Paid Sick Leave law if they are unable to work or telework due to any of the following reasons:
- The covered employee is subject to a quarantine or isolation period related to COVID-19, as defined by an order or guidelines of the State Department of Public Health, the federal Centers for Disease Control and Prevention, or a local health officer who has jurisdiction over the workplace
- The covered employee has been advised by a healthcare provider to quarantine due to COVID-19, or is experiencing symptoms of COVID-19 and is seeking a medical diagnosis
- The covered employee is caring for a family member (as defined) who is either subject to a quarantine or isolation period or has been advised by a healthcare provider to quarantine due to COVID-19
- The covered employee is caring for a child whose school or place of care is closed or unavailable due to COVID-19 on the premises
- The covered employee is attending a vaccine appointment or cannot work or telework due to vaccine-related symptoms
The California Supreme Court has largely been silent on meal period questions since its seminal decision in Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004 (Brinker), clarifying that an employer satisfies its obligation to provide meal periods where it “relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage employees from doing so….” Brinker made clear that an employer is not obligated to police meal breaks and ensure no work is performed during these breaks. Despite this silver lining for employers, litigation has proliferated post Brinker in the form of class actions seeking premium pay – one hour’s pay at the employee’s regular rate of compensation for each workday a meal period is not provided – as well as collective actions under the Private Attorneys Generals Act (PAGA) pursuing penalties for alleged meal period violations.
While the Brinker decision can be parsed to support an employer’s or employee’s legal position, the Supreme Court has just issued a notable class action decision in Donohue v. AMN Services, LLC (Donohue) dealing a resounding blow to employers by, for the first time, prohibiting rounding of time punches for meal periods and creating a presumption of a meal period violation based on the employer’s time records.
In that case, the employer, AMN Services, maintained policies and procedures for Continue reading
2020 has been another banner year for California employment laws, with legislation and Cal/OSHA rulemaking associated with COVID-19 prevention and reporting taking center stage. In our annual update of new employment laws impacting California private sector employers, we lead off with California’s COVID-19 related laws, given their far-reaching impact on the state’s workforce during the pandemic as employers continue to implement measures to prevent the spread of COVID-19 in the workplace. We have also addressed other substantive legislative developments, particularly in the areas of wage and hour law and reporting of employee pay data. Unless otherwise indicated, these new laws will take effect on January 1, 2021.
COVID-19 Related Rulemaking and Legislation
Temporary Emergency COVID-19 Prevention Rule Not to be outdone by Virginia OSHA, Oregon OSHA or Michigan OSHA, Cal/OSHA adopted an onerous COVID-19 specific temporary emergency regulation effective November 30, 2020. Below is a detailed summary of how we got here, as well as an outline of what the rule requires.
On November 19, 2020, the California’s Occupational Safety and Health Standards Board (Standards Board) voted unanimously to adopt an Emergency COVID-19 Prevention Rule following a contentious public hearing with over 500 participants in attendance (albeit virtually). The Emergency Rule was then presented to California’s Office of Administrative Law for approval and publication. The Rule brings with it a combination of requirements overlapping with and duplicative of already-existing state and county requirements applicable to employers, as well as a number of new and, in some cases, very burdensome compliance obligations.
The Standards Board’s emergency rulemaking was triggered last May with the submission of a Petition for an emergency rulemaking filed by worker advocacy group WorkSafe and National Lawyers’ Guild, Labor & Employment Committee. The Petition requested the Board amend Title 8 standards to create two new regulations Continue reading
The U.S. Equal Employment Opportunity Commission (EEOC) has published guidance for employers on disability-related concerns in light of COVID-19. The EEOC enforces workplace anti-discrimination laws including the requirements for reasonable accommodations and rules about medical examinations and inquiries under the Americans with Disabilities Act (ADA). In a post What You Should Know About the ADA, the Rehabilitation Act and the Coronavirus, the EEOC has made clear that while the ADA rules continue to apply, they “do not interfere with or prevent employers from following the guidelines and suggestions made by the [Centers for Disease Control and Prevention (CDC)] about steps employers should take regarding the Coronavirus.”
Specifically, the CDC has issued Interim Guidance for Businesses and Employers, which provides various recommendations including that employers “actively encourage” sick employees to stay home, perform routine environmental cleaning, emphasize that employees use respiratory etiquette and hand hygiene, and advise employees before traveling to take certain steps.
Notably, the Interim Guidance provides the following recommendations, which Continue reading
California has just passed Assembly Bill (AB) 749 resolving an ambiguity under current case law by generally prohibiting an employer from requiring, in settling an employment dispute, that a current or former employee agree not to obtain future employment with that employer.
A similar issue arose last year in Golden v. Cal. Emergency Physicians Med. Grp., in which the Ninth Circuit Court of Appeals ruled that the no hire provision contained in a settlement agreement between a physician and his former employer, a physician medical group, constituted a “restraint of a substantial character” on the physician’s medical practice and therefore violated California’s non-compete law, Business and Professions Code section 16600. Specifically, the Ninth Circuit found that the agreement’s preclusion of the physician from working at “any facility owned or managed by” the employer was lawful but that it violated Section 16600 to the extent that it permitted the employer to terminate the physician from employment with any medical facility where the employer contracts or may later contract for services.
AB 749 expands on this Ninth Circuit ruling by barring any agreement to settle an employment dispute from containing a provision “prohibiting, preventing or otherwise restricting” the employee from obtaining employment with the employer or “any parent company, subsidiary, division, affiliate or contractor of the employer.” Significantly, the law only applies in circumstances where Continue reading
The California legislature is considering a bill that would codify in the Labor Code and Unemployment Insurance Code the California Supreme Court’s decision in Dynamex – which adopted a standard that made it significantly more difficult for employers to classify workers as independent contractors, ignoring the realities of the modern workplace and gig economy. Assembly Bill 5 was introduced back in December 2018, and has passed the Assembly and is making its way through the Senate.
As this blog previously noted, last year the Supreme Court in Dynamex interpreted the definition of “employee” under the California Wage Orders as placing the burden on the hiring entity seeking to characterize a worker as an independent contractor to establish each of these three factors: (A) that the worker is free from the control and direction of the hiring entity in performing the work; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed. This is known as the “ABC test.”
For years prior to the Dynamex decision, the California courts Continue reading
By: Megan S. Shaked
In California, generally an employer may not employ a non-exempt employee for a work period of more than five hours per day without providing the employee with a meal period that may be taken off the premises. Yet, in the restaurant industry employers often provide employees free or discounted meals to be eaten on the premises. Such perks are provided for countless reasons, including to allow employees to enjoy the dishes being offered to customers, to build morale and productivity, and to discourage theft.
In Rodriguez v. Taco Bell Corp., the United States Court of Appeals for the Ninth Circuit considered whether a restaurant violated California law by requiring employees purchasing meals from the restaurant at a discount to eat their meals on the premises.
In Rodriguez, a restaurant employee filed a class action lawsuit against Taco Bell claiming she was entitled to be paid a premium rate for the time she spent on the employer’s premises eating the discounted meal during her meal breaks. She argued that because the employer required the discounted meal to be eaten in the restaurant, that the employee was under sufficient employer control to render the time compensable.
At the time, the restaurant offered thirty-minute meal breaks that were fully compliant with California requirements, but with an offer that employees could purchase a meal from the restaurant at a discount. The catch? Employees were not required to purchase the discounted meal, but if they chose to they could only get the discount if they ate the meal in the restaurant. The policy was intended to prevent theft.
The court, applying the meal period standard set out by the California Supreme Court in Brinker Restaurant Corp. v. Superior Court, reasoned there was no violation of California law because the employer relieved employees of all duties during meal breaks and exercised no control over their activities. Employees were free to use the thirty minutes as they wanted, and the employer did not interfere with the employees’ use of the break time. Employees were not required to purchase any restaurant products.
The court in Rodriguez distinguished cases where employers exercised control over employees even though they were not performing work by, for example, requiring employees travel to work on employer provided transportation. Where employees were compelled to participate, compensation was required. On the other hand, where employers offered a benefit or service that employees could choose, compensation was not required. The court further distinguished cases where employers exercised control over employees during their breaks by, for example, subjecting them to “on-call” restrictions. In such cases employees were subject to performing duties for their employer during breaks and thus entitled to compensation for such time.
The court also rejected an additional claim by plaintiff that the discounted value of the meal should be added to her regular rate of pay for overtime purposes. Since the court held plaintiff was not entitled to be paid for her time eating the discounted meals, it likewise held she was not entitled to overtime pay for it either.
Background on Meal Periods
In general, non-exempt employees who work more than five hours in a day are entitled to an unpaid meal period of not less than 30 minutes. The meal period must begin no later than the fifth hour of work. Yet, if the total work period per day of the employee is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee.
A second meal period of not less than 30 minutes is required if non-exempt employees work more than ten hours in a day. The meal period must begin no later than the end of the tenth hour of work. If the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of the employer and employee only if the first meal period was not waived.
Wage Order 5, which governs meal periods, rest periods and overtime in the restaurant industry, requires employees be relieved of “all duty” during the meal period. The failure to provide a required meal period can be a costly mistake for employers. Employees are entitled to premium wages of one additional hour of pay at the employee’s regular rate of pay for each workday that the meal period is not provided.
Prior to the decision in Brinker, there was uncertainty over what it meant for an employer to provide a meal period. Brinker clarified that an employer is obligated to relieve the employee of all duty for the designated period. Although employers are not required to police employees to ensure no work is performed, employers must relinquish control over employee’s activities, must permit them a reasonable opportunity to take an uninterrupted 30-minute break, and must not impede or discourage them from doing so. In discussing the history of meal periods, the Brinker Court agreed with the Division of Labor Standards Enforcement’s historic interpretation of the wage order that generally employees must be free to leave the premises during their meal period.
Takeaways for Businesses
Rodriguez sanctions a common practice in the restaurant and food service industries to offer employees free or discounted meals eaten on the premises. It remains true that employees not falling within this exception must be permitted to leave the work place for a proper off-duty meal period. The key will be, as it was in Rodriguez, that the employee voluntarily chooses to purchase a discounted meal and the employer does not interfere with the employee’s activities while on break.
This case is a good reminder for businesses to ensure their meal period policy is up to date and that managers are adequately trained to ensure compliance. Care should be taken so that employees are not discouraged from taking their uninterrupted, duty-free meal periods.
Conn Maciel Carey is pleased to announce that Megan Stevens Shaked has joined the firm as a senior associate in its San Francisco, CA office. Ms. Shaked, an experienced employment litigator, will represent clients in a wide range of employment-related litigation, and counsel clients on a myriad of legal issues that California employers face in the workplace.
“Megan brings a depth of experience with employment litigation, counseling and training that will enhance the employment law services we provide to employers across all industries,” said Andrew J. Sommer, head of the firm’s California practice.
“Megan is a great fit for the continued growth of our California practice,” said Kara M. Maciel,” a co-founder of the firm and Chair of the firm’s national labor and employment practice. “California is a prominent base for our firm’s work, and Megan brings deep experience with the full range of employment issues that California employers face”
Ms. Shaked has successful trial experience, and brings a creative approach to resolving tricky client issues. Those qualities fit perfectly with the Conn Maciel Carey model. Ms. Shaked added that:
“I was drawn to Conn Maciel Carey by its highly-respected nationwide practice and broad-based experience in employment litigation, counseling and workplace safety. Leveraging my litigation experience, I am looking forward to working with its attorneys to provide quality legal service to the firm’s clients. I am excited to join such a successful, dynamic group of attorneys.”
Historically, California has applied a multi-factor test for evaluating whether a worker is an employee or independent contractor. These factors – all of which must be considered with no single controlling factor – were developed almost 30 years ago by the California Supreme Court in S.G. Borello & Sons v. Department of Indus. Relations (Borello). Under this test, consideration was given to the business’ right of control over the manner and means of completing the work, the method of payment, duration of the relationship, and the kind of work being performed, among other factors. Although Borello examined these factors in the context of workers’ compensation laws, its multi-factor test has been applied to other types of legal claims.
In the new economy, businesses have considered arrangements outside of an employment relationship such as hiring freelancers or contract workers. Based on an individualized analysis with no bright line rule, Borello’s multi-factor test has afforded businesses flexibility in structuring positions to support an independent contractor relationship. Yet, the consequences of misclassification are severe, exposing businesses to liability for minimum and overtime wages, denied rest and meal breaks, unreimbursed work-related expenses and tax liability. While Uber and other gig economy companies have become embroiled in high-profile litigation over independent contractor issues, businesses across the spectrum are affected as well.
Dynamex Imposes Inflexible Standard
In Dynamex Operations West, Inc. v. Superior Court (Dynamex), the California Supreme Court has just upended Borello, by recognizing a different standard for determining whether workers should be classified as employees or independent contractor for purposes of California’s wage orders. These wage orders impose obligations relating to minimum and overtime wages, reporting time pay, uniforms and meal and rest periods.
In Dynamex, delivery drivers filed a class action against defendant claiming that Dynamex had misclassified its delivery drivers as independent contractors, rather than employees, in violation of the applicable wage order. Based on the definition of “employ” contained in the wage orders, the Court recognized that a worker is considered an employee of an entity that has “suffered or permitted” the worker to work in its business. The suffer or permit to work definition is broader and more inclusive than the traditional test adopted by Borello.
The Supreme Court interpreted the suffer and permit to work standard as placing the burden on the hiring entity to establish that the worker is an independent contractor who was not intended to be covered by the wage order. The Court concluded that, in order to meet this burden, the hiring entity must establish each of these three factors:
(1) that the worker is free from the control and direction of the hiring entity in performing the work;
(2) that the worker performs work that is outside the usual course of the hiring entity’s business; and
(3) that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.
The first factor is similar to the control factor recognized as a primary consideration under Borello’s common law test. While businesses may structure the work arrangement in a manner to demonstrate an absence of control, the same is the not true under the second factor. Even if the worker has a specialized skill, works from home and does not perform work under the direction or control of the hiring entity (factors considered under Borello), the mere fact that the worker’s services are part of the entity’s usual course of business defeats independent contractor status. The Court cited as an example a bakery that hires cake decorators to work on a regular basis on its custom-designed cakes, which it found to be part of the hiring entity’s usual business operation. On the other extreme, the Court found that a plumber hired by a retail store to repair a bathroom leak would not be considered to perform services that are part of the store’s usual course of business. There are numerous consulting arrangements that are now vulnerable under this factor.
Similarly, the third factor places another significant hurdle to establishing independent contractor status because it requires the worker to independently decide to engage in this business relationship, as opposed to being designated as an independent contractor by the hiring entity. The Court found that an individual meeting this requirement “generally takes the usual steps to establish and promote his or her independent business – for example, through incorporation, licensure, advertisements, routine offerings to provide the services of the independent business to the public or to a number of potential business, and the like.” Accordingly, this factor suggests that the worker would need to establish some sort of independent business entity or identity.
The Supreme Court has recognized that its ruling marks a major departure from past cases and defies guidance by the California Labor Commissioner following the Borello multi-factor test. In adopting this broad standard for the employment relationship, the Court considered the economic consequences of classifying workers as independent contractors, with businesses avoiding payroll taxes and workers’ compensation obligations, and workers assuming financial burdens.
Takeaways for Business Owners
While this newly recognized standard provides greater clarity than the Borello multi-factor balancing test, it imposes a very high burden for employers seeking to classify workers as independent contractors. It should be noted that the Borello test for now will continue to apply in contexts outside of California’s wage orders and should be evaluated as well. Yet, Dynamex may effectively end up being the benchmark because it imposes a higher, more rigid standard applying to wage and hour violations that typically are the greatest source of exposure for businesses misclassifying workers as independent contractors.
Business owners and management should immediately, through the advice of employment counsel, review all current independent contractor arrangements to ensure proper classification under this new standard. Before classifying a worker as a “consultant,” i.e., independent contractor, businesses will need to consider primarily whether the worker has an independent business and whether the nature of worker’s services is similar to the business’. Decisions to treat a worker as a consultant motivated by financial reasons alone or because the individual works from home will now be suspect. Under appropriate circumstances, however, the California courts will likely continue to recognize independent contractor status for traditionally recognized independent contractors such as attorneys, accountants and construction trades who perform services independent of the hiring entity’s business.