Seyfarth Synopsis: In the popular PBS show Downton Abbey, a large staff attends to the every domestic need of the British Earl and his family. Those of us somewhat less fortunate have likely felt the additional household burdens associated with the SIP orders. And as California businesses re-open, companies and workers have yet another chore to attend: cleaning uniforms more often. We have tailored this post to examine some implications for employers.

Etiquette From A Bygone Era

Although we previously blogged on employer reimbursements for uniforms, tools, and equipment, the new realities of operating a business amidst heightened sanitation requirements make it time to suit up for a reexamination of the issues.

In general, the underlying rules regarding employer reimbursements for uniforms, tools, and equipment have not changed. Under California law, employers still must pay for or reimburse a non-exempt employee for all costs associated with uniforms, regardless of how much the employee earns. This law differs from federal law, which generally allows employers to pass those expenses off to employees so long as their pay does not drop below the minimum wage. Even in California, though, employers typically need not reimburse employees for time spent personally cleaning clothing if the cleaning requires minimal time or care and can fit within the employee’s typical laundry schedule.

The Nature Of Life Is Not Permanence, But Flux

COVID has brought a dramatic shift to our work hours and environments. Once upon a time, people shared clothing items—like aprons (or waistcoats!)—with the colleagues working before and after them. But person-to-person transmission of COVID has brought some sharing practices into question. Similarly, uniform clothing items such as vests or ties once were cleaned infrequently and yet now may require aggressive, regular cleaning to guard against COVID transmission.

For employees whose uniforms need special cleaning, California employers must provide and maintain the uniform without cost to the employee. Likewise, any uniforms that require ironing, dry cleaning, special laundering, or sewing and repairs because of the nature of employment must be maintained by the employer or covered by a uniform maintenance credit that pays for the time and costs incurred in maintaining it.

The World Is A Different Place From The Way It Was—Uniforms in the Time of COVID

Bringing this back to the present, what about uniform or work clothing items that, pre-COVID, would have required little to no maintenance or cleaning? If items like vests and aprons must now be cleaned after every shift—in excess of employees’ normal laundry habits—the new cleaning regimen may lead to claims that the employee should be reimbursed for the extra time or expenses involved.

But employers are not without options! One potential solution is to provide employees with multiples of required clothing items. Even if an employee must wear and clean a vest every day, having several on hand to rotate through family laundry cycles would reduce the burden of keeping them clean and sanitary. Another possible solution is for the employer itself to take responsibility for cleaning work garments, such as by enlisting a qualified laundering service.

Employers could also have employees wash uniform items at the worksite. But care must be taken with respect to washing soiled garments. For example, the CDC cautions against handling laundry from people who are infected, recommends wearing gloves, and warns that shaking laundry can release virus fomites into the air. Our Workplace Safety team is well-versed on the CDC’s guidance on ways to minimize the risk of virus transmission when handling clothing and other frequently handled workplace items.

It’s Not A Masquerade—What About Masks?

Currently, the CDC and others are advising employees to wear masks when performing work that puts them in contact with others. Indeed, some jurisdictions, such as Los Angeles, have required individuals to wear face masks at certain public places.

Assuming that the face masks worn by employees are generic—i.e., no company branding, logos, or special color—they likely are not a “uniform” under California law. Employers thus should not need to reimburse employees for time spent washing masks, especially if the amount of time spent cleaning masks does not significantly add to the employee’s laundry burden.

But this is California, so take care to minimize the time employees may feel required to devote to cleaning their masks. Again, providing multiple masks for employees to rotate through the workweek may help obviate any potential issue of required special cleaning.

Workplace Solutions

In our current new reality, frequent washing of often-used garments like vests and aprons may be advisable. But employees who lack a large staff of butlers, valets, and maids may feel additional burdens associated with this new requirement. Here, as with everything we do in the COVID-infused employment workplace, we must take care when implementing policies and procedures that keep both employees and the public safe while also complying with California’s often peculiar employment laws. As always, please reach out to Seyfarth with questions.

Edited by Coby Turner

We are pleased to announce the release of the 2020 edition of our in-demand book, Cal-Peculiarities: How California Employment Law is Different. The book is available in a convenient, searchable eBook format. Click HERE to order your copy to be delivered via e-mail today!

We also invite you to join us for a free webinar going over some of the biggest changes in the last year! The webinar will be on Thursday, May 28, 2020 with Seyfarth attorneys Chantelle Egan, Coby Turner, and Ann Marie Zaletel. They will discuss the latest legal developments of interest to executives, managers, in-house counsel, and human resources professionals with employees or workers in California, including:

  • New! Overview of COVID-19 provisions in the state of California
  • New! Expansion of ABC test for independent contracting
  • New! Ban on no-rehire provisions in settlement agreements
  • New! Ban on mandatory arbitration agreements
  • New! Expanded lactation accommodation: impacts on return to work
  • New! Expansion of Paid Family Leave benefits
  • New! Ban on hairstyle discrimination (the CROWN Act)
  • New! Organ donation leave entitlement
  • New! Minimum wages and salary thresholds for exempt status
  • New! Sexual harassment training requirements
  • New! Extension of filing deadlines for discrimination suits
  • “Regular rate” issues for meal premium pay and sick pay
  • “Unlimited vacation” plans under new scrutiny
  • Emerging issues in the life of COVID-19

While there is no cost to attend this program, registration is required. Please click HERE to register! The webinar will be offered at the following times:

1:00 p.m. to 2:30 p.m. Pacific

4:00 p.m. to 5:30 p.m. Eastern

3:00 p.m. to 4:30 p.m. Central

2:00 p.m. to 3:30 p.m. Mountain

On behalf of your Cal-Pecs team, thank you for your continued interest in the blog.

 

Seyfarth Synopsis: “Per diem” (or per day) employment may seem like a simple way to maintain a flexible workforce enabling employers to respond to last-minute changes in staffing needs. But certain legal and practical issues can hamper this flexibility. Here we briefly overview per diem employment, and describe some best practices to avoid common mishaps.

What is Per Diem Employment?

Employers sometimes refer to employees who work variable and irregular hours as “per diem” employees. Some employees prefer this status, as it provides them with flexibility and the opportunity to pick up work (often at higher rates of pay), without committing to a regular schedule. This arrangement can benefit employers as well, as it enables them to utilize a pool of employees to supplement regular staffing when the workload increases or during staff shortages. While per diem employment is common in the health care, education, and construction industries, and in connection with seasonal retail and agricultural work, the flexible nature of per diem status has also led employers in various other industries to consider this work status alternative.

While per diem employment typically is part-time, it differs from most part-time arrangements. Part-time employees work a shorter schedule than their full-time colleagues, while per diem employees often work full shifts.

While part-time employees might earn benefits (typically at a reduced rate), per diem employees generally do not. But per diem employees typically earn a higher hourly rate, reflecting their ability to fill shifts on short notice.

Benefits of Per Diem Employment

Flexibility. Per diem staffing provides employers with flexibility. Employers that can draw on a pool of vetted, trained per diem workers don’t have to scramble to meet unexpected staffing needs. Hospitals thus often use per diem health care workers during flu seasons, when they experience a surge in patients. Employees enjoy a corresponding flexibility. Many individuals with competing family or employment responsibilities enjoy the chance to earn extra money without committing to a regular schedule for a particular employer. These employees can keep up their skills (particularly in clinical or technical professions like healthcare) without committing to regular employment.

Control of Labor Costs. Per diem staffing can also be cost effective. Employers generally need not worry about having to pay for employees who are not currently needed or about having to continue contributions to benefit plans when the work is not there.

Employer Best Practices

Notwithstanding its clear advantages, per diem employment raises special challenges that employers should keep in mind:

Clear Employee Understanding. Make sure the employee understands the employment relationship. To ensure that the nature of the employment relationship is clear, employers should maintain written policies or agreements outlining the characteristics of the relationship (for example, the limited hours, the absence of any guarantee of hours, the limitations on benefits, and the expected availability).

The ACA. Beware of full-time equivalency. Under the Employer Shared Responsibility provisions of the Affordable Care Act, if an employer with more than 50 full-time (or full-time equivalent) employees hires an employee who averages over 30 hours per week—or 130 hours a month for the initial measuring period used by the employer (could be 6 or 12 months)—then the employee could be considered a full-time equivalent employee who must be offered at least one health plan option that provides minimum value and is affordable. Employers, to avoid an unexpected triggering of healthcare eligibility, should track how many shifts per diem employees are selecting.

Personnel Records and Actions. Employers should maintain documentation for per diem employees to the same extent as full-time or part-time employees. Employers should follow the same disciplinary and corrective action processes for per diem employees that they follow for other employees, and see that per diem employees receive regular feedback about their performance.

Scheduling Ordinances. Some jurisdictions have predictive scheduling laws that may affect the ability to offer per diem employment. Be sure to check local ordinances!

Unemployment. In California, per diem employees can file unemployment claims. This is yet another reason why it is critical to record whether per diem employees are refusing work or restricting their availability. It is particularly important for employers to have a clear policy regarding any availability expectations for per diem employees. This practice will allow employees to understand the scope of the commitment that they make as a per diem employee and any limitations on their ability to decline shifts.

Processes. Employment laws apply! Employers should be mindful that employment laws—and often the employer’s own policies—extend to per diem employees as well as regular full-time and part-time employees. Employers must ensure that per diem employees understand their policies, including timekeeping and meal- and rest-period requirements. Employees who work infrequently, or for multiple employers, may need reminders of these policies. Managers also need to understand that EEO policies, including the duty to reasonably accommodate employees with disabilities, apply equally to per diem employees.

Paid Sick Leave and Protected Absences. Even though they may not work many hours, per diem employees are entitled to paid sick leave under California law and many local laws. As per diem employees often are not eligible to accrue PTO, employers that rely on PTO plans to meet paid sick leave requirements should ensure that per diem employees (and other excluded employees) are covered by a separate policy that provides the required accrual and use of sick leave. Although per diem employees are not steady employees and thus may not have enough hours to qualify for FMLA/CFRA leave, note that employees who have 12 months of service and who have worked 1,250 hours in the preceding 12 months are entitled to FMLA/CFRA leave. Employers should track hours worked to stay in compliance with FMLA.

Meeting Short-Term Needs. Consider using temporary workers in some instances instead of per diem employees. Employers might have short-term projects that arise, and need employees with a specialized skill set for a short time frame. Such projects might be better staffed by temporary workers than per diem workers. This approach will help employers avoid tricky issues that might arise when the short-term need ends, such as whether the conclusion of employment could be treated as a termination (triggering final pay obligations for the employer).

Final Pay. Be mindful of final pay issues. Final pay in California is due on the final day of employment (or within 72 hours, if the employee resigns without notice). The final-pay requirements apply to all employees, including per diem employees. Employers should communicate regularly with their per diem employees to ensure that the term of their employment is clear. Final pay may be due immediately upon the end of an assignment, so it is important to define clearly when an assignment ends.

Workplace Solutions

Per diem employment can be a flexible way for employers to address unforeseen staffing shortages or fluctuations in work. Nonetheless, employers should be mindful that they still have important obligations to per diem employees. Employers should make sure they are following all best practices to ensure compliance with California and federal employment laws for all employees, even those who work sporadically.

If you would like to learn more about using per diem employees in your workforce, please contact a Seyfarth Shaw attorney for assistance.

Edited by Elizabeth MacGregor

Seyfarth Synopsis:  On April 29, 2020, Alameda, Contra Costa, Marin, San Francisco, San Mateo, and Santa Clara Counties, as well as the City of Berkeley, issued updated shelter-in-place orders. These orders take effect May 4 and run through May 31, 2020. They nominally adjust the restrictions that have been in effect since March 17, mostly by allowing some additional outdoor businesses and outdoor activities to open. Sacramento County also issued an amended order, which will be in effect from May 1 through May 22, 2020. Like the Bay Area orders, it makes only nominal changes to which businesses may operate in Sacramento County.

Bay Area Counties

Since March 17, six San Francisco Bay Area counties have largely coordinated their efforts to combat the coronavirus, and ordered all but essential businesses closed. After renewed orders were set to expire on May 3, some businesses hoped that the force would be with them, and May the 4th would mark more than just Star Wars Day. Alas, this “new hope” has not manifested into reality.

On April 29, the Bay Area counties and City of Berkeley issued amended shelter-in-place orders that largely maintain the status quo. Non-essential businesses must remain closed, and the orders do little to broaden the definition of what is “essential.” Aside from Essential Businesses and Minimum Basic Operations, the orders allow the following to resume so long as physical distancing and industry-specific requirements are followed:

  • All construction projects that follow the Construction Project Safety Protocols appended to the orders;
  • All real estate transactions, with restrictions on open houses and limited tours;
  • Childcare, camps, and educational/recreational programs that provide care for small, unchanging groups of children, whose guardians are permitted to work under the orders;
  • Use of certain shared outdoor recreational facilities (these differ slightly across jurisdictions, but include facilities such as golf courses and athletic fields); and
  • “Outdoor Businesses” such as nurseries, landscaping, and agriculture that normally operated outdoors prior to the shelter-in-place orders.

The orders continue to require businesses to prepare, post, and distribute social distancing protocols. Appendix A to the new orders is a (very slightly) revised version of the template protocol attached to the prior orders. The most significant change is incorporating the mandate from prior health orders that employees and customers must wear face coverings. Per the orders, businesses must update their protocols to reflect this change.

The orders have different social distancing protocols for construction businesses. These businesses must instead comply with the appended Construction Project Safety Protocols.

Sacramento County

Sacramento’s new order is similar, but not identical to the Bay Area orders. It continues to require individuals to stay home except to perform Essential Activities, and all but Essential Businesses must continue to cease physical operations, aside from Minimum Basic Operations. The order, does, however make some different changes to what it deems “essential.” The key differences are:

  • Health care facilities can reschedule appointments for care that was considered non-urgent and canceled when the stay-at-home order was first issued;
  • Non-contact recreational facilities that involve shared equipment may open provided social distancing is followed and shared items are disinfected. These facilities include golf courses, shooting and archery ranges, and tennis courts;
  • Food trucks are now included as Essential Businesses; and
  • Residential real estate brokers can conduct in-person showings, provided they are limited to no more than two visitors, in addition to the realtor.

Unlike the Bay Area counties, Sacramento does not have a face covering mandate. The County still requires, however, that businesses continue to prepare, post, and distribute a social distancing protocol in a form substantially similar to the one attached to the order.

Workplace Solutions

It’s not too early to prepare for the future. Although the amended shelter-in-place orders do not lift most restrictions on businesses, companies should still start preparing to reopen. Each county indicated that it could revise the orders earlier if certain metrics were met. Seyfarth has developed a number of resources to help with post-pandemic renewal and recovery, and our deep bench of talent is always available to help plan for the day the Jedi return and sheltering-in-place is no more.

Seyfarth Synopsis: On April 28, 2020, Mayor London Breed announced a plan to allow employees working in San Francisco to use funds from the Healthcare Security Ordinance (“HCSO”) contributions to buy “necessary expenditures,” including food, rent, and utilities during the COVID-19 pandemic. Previously, use of these funds were limited to eligible health care expenses. Now, Mayor Breed’s announcement unlocks over $138 million for disbursement to employees who may now use the funds to meet their essential needs.

San Francisco’s Healthcare Security Ordinance

Employers with employees working in San Francisco likely are already aware of San Francisco’s many peculiarities, including the HCSO, which requires most employers to make healthcare expenditures on behalf of certain employees based on the number of hours the employee works in the City. As an alternative to contributing to health insurance coverage, employers may instead contribute healthcare expenditures to Medical Reimbursement Accounts (MRAs), through the SF City Option Program. Employees then can withdrawal funds from their MRA to cover medical expenses and other healthcare needs. According to the Mayor’s announcement, the MRAs currently have $138 million in available, unused funds that employers have contributed over the years.

Mayor Breed’s Plan To Expand Use Of MRA Funds To Pay For Basic Expenses

Citing the need to “protect public health” and “making sure people have enough to eat, have a roof over their head, and have the peace of mind that they’ll be able to pay their bills,” Mayor Breed’s declaration permits employees to withdraw funds deposited in their name to use for basic expenses, including food, rent and mortgage payments, and utilities during the COVID-19 pandemic.

Workplace Solutions

While the announcement says the SF City Option Program will contact eligible employees about how to withdraw funds, employers may also inform their employees that they may be eligible to request a disbursement of funds that were previously made in their name.  This can be done by providing a copy of the announcement, or pointing employees to the SF City Option’s website.

Regardless of how the expenditures may be used, the announcement nonetheless confirms the HCSO, along with every other San Francisco labor law, remains in effect during San Francisco’s shelter-in-place. Employers still must contribute the appropriate amount of healthcare expenditures on behalf of their covered employees. Likewise, employers are not likely to receive any leniency from the City in failing to make these expenditures during the emergency.

The HCSO is a particularly tricky ordinance to satisfy and there are a number of pitfalls that can trip up even the most diligent employer, leading to a costly audit and potential assessment of penalties from the Office of Labor Standards Enforcement. If you would like assistance with a review of your compliance with the HCSO or representation in audit proceedings, please feel free to contact one of Seyfarth’s attorneys.

Edited by Coby Turner

Seyfarth Synopsis: Last week, the San Francisco Board of Supervisors and the San Jose City Council enacted emergency ordinances to expand paid sick leave beyond that provided under the federal Families First Coronavirus Response Act. While San Francisco’s Public Health Emergency Leave ordinance awaits Mayor London Breed’s signature, Mayor Sam Liccardo has signed the San Jose COVID-19 Paid Sick Leave Ordinance, which became effective on April 7, 2020.

The Families First Coronavirus Response Act (FFCRA) Focuses on Smaller Employers

As we’ve noted (here, here, and here), the FFCRA requires employers with fewer than 500 employees to provide up to 80 hours of emergency paid sick leave to certain employees who are unable to work due to COVID-19 related reasons. As part of a growing trend, San Francisco and San Jose’s emergency ordinances attempt to close FFCRA coverage gaps by providing additional paid sick leave to employees not covered by the FFCRA.

The San Francisco and San Jose Ordinances Apply To Employers with 500 or More Employees And Permit Offsets

Covered Employers. The ordinances by the two Cities (the San Jose ordinance now effective and the San Francisco ordinance expected to be effective soon) require private employers with 500 or more employees to provide up to 80 hours of supplemental paid sick leave to employees who are unable to work as a result of the COVID-19 public health emergency. This supplemental leave will be available to eligible employees for immediate use. San Jose’s ordinance, however, deviates from San Francisco’s ordinance by also covering private employers with fewer than 50 employees.

What Can The Paid Sick Leave Be Used For. Generally, an eligible employee may use the supplemental leave granted by either ordinance if the employee cannot work because of one of these reasons:

  • The employee is experiencing symptoms of COVID-19 and seeking medical diagnosis.
  • The employee is subject to COVID-19 related quarantine or isolation by a government order, or is caring for someone subject to the same (including, in San Francisco, vulnerable populations who are recommended to self-isolate).
  • The employee has been advised by a health care provider to self-quarantine due to COVID-19, or is caring for someone subject to the same.
  • The employee is caring for a family member because school or day care is closed due to COVID-19.

Although both ordinances delineate similar situations for use of supplemental leave, San Francisco specifically limits an employee’s caring of other individuals to family members. However, San Francisco expands care to a family member (not necessarily a child) whose  caregiver becomes unavailable due to the public health emergency.

No Carryover. The ordinances disallow employees from carrying over any unused paid sick leave at the ordinances’ sunset dates, or from being paid for unused amounts of sick leave.

Offsets. Both ordinances allow offsets for paid time off that an employer already provided to its employees. Under the San Francisco ordinance, the amount of emergency paid sick leave an employer must pay will be reduced for every hour the employer allowed the employee to take paid leave or paid time off for COVID-19 related reasons, over and above the employee’s existing sick, vacation, and PTO banks, between February 25, 2020, and the ordinance’s enactment. Similarly, the San Jose ordinance provides an offset for some combination of paid personal leave available to employees as of the effective date of its ordinance on April 7, 2020.

The Cities Differ In Defining Eligible Employees, Calculating Payment, Setting Notice Requirements, and Providing Exemptions. 

Covered Employees. San Francisco construes “Employee” broadly as any employee—full-time, part-time, or temporary—who worked 56 or more hours in San Francisco, including telework, during the 365 days immediately preceding the effective date of the ordinance. On the other hand, San Jose broadly includes those who have worked at least two hours for their employers within the City.

San Jose Remote Workers Excluded. If employees can work from home, San Jose does not provide them these additional COVID sick leave benefits. San Jose further specifies that only employees who must leave their residences to perform Essential Work are covered.

Payment. San Francisco employers may calculate this additional COVID paid sick in the same manner they calculate sick time under the San Francisco paid sick leave laws. Meanwhile, San Jose models payment calculation after the FFCRA.

Notice Requirements. Employers doing business in San Francisco must closely observe the notice requirements set forth in the City’s ordinance. The San Francisco’s Office of Labor Standards Enforcement (“OLSE”) will post a notice on its website within seven days of the ordinance’s enactment. Thereafter, within three days, employers must provide the OLSE’s notice to its employees. To ensure the Notice can be reached by all employees, employers should

  • post the Notice in a conspicuous place at workplace, via electronic communications,
  • post the Notice on an employer’s web-based or app-based platform, and
  • provide the Notice in English, Spanish, Chinese, and any language spoken by at least 5% of the employees.

In addition, the Notice must include the amount of ordinance-provided paid sick leave that is available to the employee.

Meanwhile, San Jose, while not laying out specific notice requirements, asks employers to comply with any notice requirement established by the City’s Office of Equality Assurance.

Health Care and First Responder Exemptions. Under the San Francisco ordinance, employers of health care providers or emergency responders, as defined under the FFCRA, may elect to exclude eligible employees from receiving the ordinance-provided leave. Hospital employers may be exempted from the San Jose’s ordinance only if, between April 7, 2020 and April 21, 2020, the hospital operators provide their employees some form of paid personal leave at least equivalent to the paid sick time as required by the ordinance.

Other Considerations. Both Cities prohibit employers from conditioning leave upon employees finding replacement workers. San Francisco has a few more explicit limitations, including prohibiting employers from requiring employees to use other accrued time off before using the supplemental leave, and from asking employees for doctor’s notes or other documentation substantiating absences. San Francisco employers also cannot modify their PTO policies during the pendency of the emergency ordinance.

Sunset Dates. The San Francisco ordinance sunsets 61 days after enactment, unless the ordinance is extended. San Jose’s ordinance sunsets on December 31, 2020.

Penalties for Non-Compliance. The San Francisco ordinance specifically prohibits retaliation, discrimination, or any interference with the exercise of employees’ rights. A rebuttable presumption of retaliation arises if an employer takes an adverse action against an employee within 90 days of the employee engaging in a protected act or filing a complaint for violation of this ordinance. San Jose’s ordinance can be enforced in the same manner as its Minimum Wage Ordinance.

Seyfarth Synopsis: Employers offering bonuses to workers during the COVID-19 crisis must beware the famous saying that “wisdom comes to us when it can no longer do any good.” Some bonuses trigger special rules that employers must follow to avoid unexpected liabilities in the time of COVID.

Readers of this blog know that California creates peculiar challenges for companies that choose to provide their employees with certain benefits and incentives. A classic example is vacation pay. While employers need not provide paid vacations, employers that do so may face unexpected liability because of Cal-peculiar rules that treat unused vacation pay as a vested wage.

Like vacation pay, bonuses are optional, but quite common. Many employers find bonuses useful to motivate employees and reward special service. Bonuses may be particularly helpful in the time of COVID: essential businesses that remain open know that work can be especially stressful for employees.

Recognizing this reality, businesses may institute short-term bonuses for employees who answer the call of duty during these challenging times. A bonus might provide for an extra $X per week of service or an extra $Y per hour. These amounts are paid in lump sums at designated intervals. The employer thus does the right thing while the loyal employee is duly rewarded. What could possibly go wrong?

Enter here the labyrinth of California employment law. Well-meaning employers initiating bonus programs may face a triple whammy in the form of (1) wage-payment penalties, (2) overtime-pay liabilities, and (3) wage-statement liabilities. But don’t give up! Here are a few pitfalls endangering the well-intentioned California employer and some thoughts on how to avoid them.

Wage Payment Penalties. California employers that willfully fail to pay wages earned through the last day of employment owe penalties for every day that payment is delayed—up to 30 working days—measured by the amount of the daily wage. And other penalties apply to late payments of wages.

But what’s that got to do with bonuses? A bonus is a form of wage. A worker who leaves the company during a bonus program may claim entitlement to bonus money allegedly earned through the last day of employment, and argue that a pro rata bonus must be paid, along with all other wages, by the last day of employment. Employers who are not prepared to honor such a claim should have their bonus program specify that employees must remain employed on designated dates to be bonus-eligible. Employers thus have specified that the bonus is in part a reward for remaining employed through the pay date, or that the bonus is not calculable until a designated date, to preempt any mistaken notion that the bonus somehow was due earlier than when the employer is prepared to pay it. In the absence of an express eligibility requirement, California courts have held that employees who terminate employment may be entitled to a portion of a bonus. Even with such a requirement, courts might hold that an employee may be entitled to a pro rata portion of a bonus if the employee was fired without cause.

Retroactive Bonus Pay. As faithful readers know, both federal and California law require employers to include nondiscretionary bonuses in the “regular rate of pay” used to calculate overtime premium pay. Accordingly, the bonus paid to a nonexempt employee should include retroactive premium pay for overtime hours worked during the bonus period. Consider a biweekly bonus of $180 earned during a period in which the employee worked 80 regular hours and 10 overtime hours. Under the federal method—and also under the California method for “production” bonuses—the overtime formula would divide the $180 bonus by the 90 hours worked, yielding a regular bonus rate of $2. The employer must add $2/hour * 0.5 * 10 hours, or $10 in retroactive overtime pay, to augment the $180 base bonus.

Failure to pay these overtime wages can trigger penalties—both in the form of waiting-time penalties for employees who leave the company and for all employees in the form of penalties for the late payment of wages. What’s more, any bonus that California considers a “flat sum” bonus would require a special overtime formula. In our example, the $180 bonus would be divided by only the regular hours of 80, to yield a regular bonus rate of $2.25. That rate would then be multiplied by 1.5 (not 0.50) to yield retroactive overtime pay in the amount of $2.25/hour * 1.5 * 10 hours, or $33.75. Accordingly, California employers may seek to structure bonuses as production bonuses (e.g., $x per hour) as opposed to flat sum bonuses (e.g., $y per period).

But employers need not fall into an abyss of disenchantment and abandon such incentives or bonuses altogether. Wise employers can seek to navigate around overtime-pay issues by structuring bonuses in the form of a stated percentage of all earnings (including overtime earnings) that an employee achieves during the bonus measurement period.

Wage Statements. Under Labor Code section 226, employers must furnish itemized wage statements to record various items of information, including “all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.” Reporting bonus payments accurately can be a challenge. Employers reporting bonuses on the wage statement as simply a lump sum have incurred large wage-statement penalties, in the amount of statutory penalties of $50 per employee and civil penalties of $250 per employee. One California case held that a wage statement need not record hourly rates and hours worked for a bonus where the bonus hours were worked during a prior pay period, meaning that there were no “applicable hourly rates in effect during the pay period” covered by the wage statement. But that case is unpublished and not precedential. Absent more authoritative assurance, California employers are best advised to report, on the wage statement corresponding to the bonus payment, as much detail as is practicable with respect to calculation of the bonus.

Workplace Solutions. Employers that initiate bonus programs to meet the COVID moment have nothing but admirable intentions, and deserve commendation, not condemnation. But California employers who create bonuses create correlative obligations. In structuring a bonus program with those obligations in mind, and in ensuring that the obligations are met as they come due, please don’t hesitate to contact your favorite Seyfarth lawyer. And for any other COVID related questions or concerns, feel free to visit Seyfarth’s COVID-19 Resource Center.

By: Chantelle C. Egan, Jaclyn A. Gross, and Timothy M. Hoppe

Seyfarth Synopsis.  Eight California counties—San Francisco, Alameda, Contra Costa, San Mateo, Santa Clara, Marin, Sonoma, and Santa Cruz—along with the City of Berkeley, issued revised shelter-in-place orders on March 31st. The new orders add clarifying language around essential businesses and prohibited activities, as well as create a new affirmative obligation for employers to create and post a Social Distancing Protocol.

Revised County and City Orders.

Citing the success of local shelter-in-place orders in helping flatten the curve of COVID-19 cases, Bay Area officials in the Counties of San Francisco, Alameda, Contra Costa, San Mateo, Santa Clara, Marin, Sonoma, and Santa Cruz, along with the City of Berkeley (which has its own public health department), signed updated orders extending the shelter-in-place through at least May 3, 2020.

The orders, which went in effect at 11:59 p.m. yesterday, March 31, are all substantively the same. Like the previous orders, the revised orders require people to stay at home except for doing essential activities, such as grocery shopping, and non-essential businesses will remain closed. However, the updated orders also add clarifying language around essential businesses and prohibited activities as well as new obligations for employers.

Updates and New Obligations for Essential Businesses.

The updated orders expanded the list of essential businesses to include:

  • Service providers that enable residential transactions (notaries, title companies, realtors, etc.);
  • Funeral homes and cemeteries; and
  • Moving companies, rental car companies, and rideshare services that specifically enable essential activities.

That said, all essential businesses that continue to operate facilities must scale down operations to their essential components only.

Perhaps most important for employers operating essential businesses, however, is the requirement to develop, post, and distribute a “Social Distancing Protocol” no later than midnight this Thursday, April 2, 2020. The Protocol must be substantially the same as Appendix A attached to the orders, and must be posted in facilities frequented by employees or the public. It must be displayed at or near the entrance of the relevant facility and be easily viewable. A copy of the Protocol must also be provided to each employee performing work at the facility.  Santa Cruz County is the only order not officially requiring implementation of a Social Distancing Protocol, but essential businesses are still encouraged to do so.

Guidance Regarding Prohibited Activities.

The new order not only focuses on what the community must or can do, but also what is prohibited.

  • Most construction—residential and commercial—is prohibited. However, there are exceptions for projects to help keep people safe and housed, including:

–  Health care projects directly related to addressing the pandemic;

–  Projects immediately necessary to the maintenance, operation, or repair of Essential Infrastructure;

–  Construction of shelters and temporary housing (excluding hotels and motels);

–  Affordable housing and multi-unit or mixed-use developments containing at least 10% income-restricted units;

–  Public works projects designated as essential by the lead governmental agency;

–  Projects necessary to provide critical services to certain vulnerable individuals;

–  Construction necessary to ensure existing construction sites that must be shut down under the orders are left in a safe and secure manner, but only to the extent necessary to do so; and

–  Construction or repair necessary to ensure residences and buildings containing Essential Businesses are safe, sanitary, or habitable to the extent such construction or repair cannot reasonably be delayed.

  • Use of playgrounds, dog parks, public picnic areas, and similar recreational areas is prohibited. These areas must be closed to public use.
  • Use of shared public recreational facilities such as golf courses, tennis and basketball courts, pools, and rock walls is prohibited. These facilities must be closed for recreational use.
  • Sports requiring people to share a ball or other equipment must be limited to people in the same household.
  • Funerals limited to no more than 10 people attending.

We are following developments closely, so stay tuned for updates as they come.

Seyfarth Synopsis: California Governor Gavin Newsom issued an Executive Order suspending some Cal-WARN Act obligations, attempting to ease struggling employers’ obligations in the face of COVID-19; but note that employers must still comply with critical remaining obligations.

Executive Order N-31-20

Employers struggling with tough layoff decisions and confusing legal obligations might have breathed a small sigh of relief upon learning that Governor Newsom, on March 17, 2020, signed Executive Order N-31-20 suspending certain employer obligations under the California WARN Act. But the Order does not give California employers a free pass, so read the rest of this blog (and the Order) very carefully to see what Cal-WARN obligations remain in place.

Cal-WARN requires employers to provide 60 days’ notice to employees and other individuals before the employer causes a mass layoff, relocation, or termination. Acknowledging that COVID-19 has forced some employers to close rapidly without providing the required notice, the Order suspends notice provisions as of March 4, 2020 through the (as yet undetermined) end of the current emergency. The Order also suspends Cal-WARN’s noncompliance remedies of backpay, other damages, and civil penalties. Note that these suspensions apply only to employment actions that are caused by COVID-19-related “business circumstances that were not reasonably foreseeable as of the time that notice would have been required.”

The Order requires that employers still issue the required Cal-WARN notice, with as much advance notice “as is practicable” under the circumstances.

Employers must provide the notice to all of the following:
(1)        Affected employees
(2)        California Employment Development Department
(3)        Local workforce investment board
(4)       Chief elected official of each city and county government within which the termination, relocation or mass layoff occurs.

The notice must include:
(1)        All of the information required by the federal WARN Act
(2)        A brief statement of the basis for reducing the notification period
(3)        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 Order requires, by March 23, 2020, the California Labor and Workforce Development Agency to provide additional guidance regarding how Executive Order N-31-20 will be implemented.

As a result, employers may want to consider a brief garden leave to cover the time between notices and actual separations, if their financial resources so allow. And if the employer believes its actions may be covered by Cal-WARN, send out notices as soon as possible, invoking both the unforeseeable business circumstances application of the Order as well as the physical calamity exception of Cal-WARN, which may apply to the COVID-19 scenario.

If you’ve read this far and still are asking, “What is Cal-WARN again? And how does it differ from federal WARN?,” read on. If you already know the basics, and just need to be kept up to date on COVID-19 obligations, continue to visit this space and our resource page.

Cal-WARN Basics

California is peculiar in that the scope of its Cal-WARN exceeds the scope of federal WARN in two major respects: (1) Cal-WARN applies to companies that are too small to be covered by the federal WARN Act, and (2) Cal-WARN applies to business decisions affecting groups of employees that are too small to be covered by federal WARN.

Cal-WARN is triggered by

  • the layoff of at least 50 employees (who worked for at least 6 out of the 12 months prior to when a California WARN notice would be due) at a “covered establishment” over a rolling 30-day period due to “lack of funds or lack of work,”
  • a “termination,” defined as the “cessation or substantial cessation of industrial or commercial operations in a covered establishment,” or
  • a “relocation,” defined as the removal of all or substantially all of the operations at the facility to a different location 100 miles or more away.

A “covered establishment” is “any industrial or commercial facility or part thereof that employs, or has employed within the preceding 12 months, 75 or more persons.” There is no authority clarifying whether this definition of “covered establishment” refers to 75 persons at any single point in time over the 12 month period, or 75 separate persons over the course of the 12 months.

Unlike federal WARN and most other state mini-WARN laws, the California law contains no express minimum length of layoff that can trigger the notice obligations. At least one California court, in International Bd. of Boilermakers v. NASSCO Holdings Inc. 17 Cal. App. 5th 1105, 1122–25 (2017), has stated that it would not read the federal WARN’s six-month layoff standard into California WARN law, and, while not committing to any particular standard, indicated that even a “brief” layoff was sufficient. Thus, under Cal-WARN, a furlough of at least 50 employees at a “covered location” even of a short duration (e.g., 7-10 days) could trigger notice obligations.

If  the above did not sufficiently “WARN” you, you would not be alone. Compliance with federal and state WARN acts is complex to say the least. Where any doubts arise as to whether a state or federal WARN statute might be triggered by a potential furlough or any other employment action, employers are strongly advised to consult their favorite Seyfarth attorney.

By Emily Schroeder

Seyfarth Synopsis: With COVID 19 responses rapidly evolving, employers of all sizes—from major airlines to small restaurants—are experiencing dramatic declines in business, and a lack of work for employees. In this time of need the government is here to help. A word here on California Unemployment Insurance.

An employer facing business challenges that affect its workforce might consider California’s Employment Development Department Work Sharing Unemployment Insurance Program. The EDD describes this program as a “practical alternative to layoffs.” For example, instead of laying off 20% of a workforce, an employer could reduce payroll by 20% and Unemployment Insurance would pay part of the difference in wages to employees. This approach also could help employers by reducing the need to re-hire and re-train employees when business improves.

Employer Qualification Requirements

The employer must have experienced a reduction in production, services, or other conditions that cause it to seek an alternative to layoffs. As with any generous offer, certain terms and conditions apply:

  • A minimum of two employees, comprising at least 10% of the regular workforce or a unit of the workforce, must be affected by a reduction in wages and hours worked.
  • The reduction in weekly wages and hours worked must be at least 10%, not to exceed 60%.
  • The employer must maintain employee health and retirement benefits under the same terms and conditions as prior to the reduction in hours and wages or to the same extent as for employees not participating in the plan.
  • Corporate officers and major stock holders may not participate.

Other specifics appear at https://www.edd.ca.gov/unemployment/Work_Sharing_Program.htm

Employee Qualification Requirements

Participating employees must meet these requirements:

  • Be a part of the employer’s permanent regular workforce and not a leased, intermittent, temporary, or seasonal employee.
  • Have qualifying wages in the base quarters used to establish a regular California UI claim, calculated by one of two alternative methods: the Standard Base Period and the Alternative Base Period. The Standard Base Period is the first four of the last five calendar quarters prior to filing the claim. The Alternative Base Period is the most recently completed four calendar quarters prior to filing the claim. If the employee has earned at least $1,300 in one quarter of either type of Base Period, or $900 in one quarter of either type of Base Period and total base period earnings are 1.25 times the highest quarter’s earnings, then the employee would qualify. For more, see https://www.edd.ca.gov/pdf_pub_ctr/de8714ab.pdf
  • Have completed a normal work week (with no hour or wage reductions) before participating in Work Sharing.

How do I sign up, and what comes next?

Fill out the Work Sharing Plan Application, DE 8686, and submit to the EDD. These instructions and the Form can be found online here: https://www.edd.ca.gov/pdf_pub_ctr/de8686.pdf

The EDD Special Claims Office will send a letter of approval, one mail claim packet for each participating employee, and a ten-week supply of weekly certifications for each employee. You’ll need to issue these certifications to affected employees each week for the duration of the program. These forms must be mailed in weekly.

Benefits will also be paid weekly, proportionate to the percentage of reduction in hours and wages. This example from the EDD is instructive: An employee who normally works five days a week for $500 is reduced to four days a week for $400. The Work Sharing benefits for this employee would be 20% of the benefits the employee would receive if unemployed. If maximum UI benefits for this employee would be $300, the employee would qualify for $60 in Work Sharing Benefits, bringing their weekly pay to $460.

The employer will be charged for Work Sharing Unemployment Insurance in the same manner as for regular UI benefits.

Can exempt employees participate?

California’s Department of Labor Standard Enforcement in 2002 expressly opined that having exempt employees participate in the EDD Work Sharing Program destroyed pay on a “salary basis,” meaning, in the DLSE’s opinion, exempt employees could not participate. But that February 27, 2002 opinion letter was disapproved in 2009. The most current DLSE opinion letter appears to permit a bona fide reduction in both hours and salary for exempt employees (even if somewhat temporary, as long as it is not fluctuating), though it does not mention EDD Work Sharing. We do not know how courts would come down on this issue. It is possible that courts would consider exempt employees participating in Work Sharing to have been converted to non-exempt employees, subject to overtime and other non-exempt wage and hour requirements.

This sounds too good to be true, so what’s the downside?

This program can be administratively burdensome, because of the application and weekly certifications. And employers must periodically re-apply. There is also a potential increase in your unemployment insurance tax rate, but layoffs would have the same result if laid-off employees seek unemployment insurance.

If you have additional questions, contact your favorite Seyfarth attorney or Seyfarth’s COVID 19 Task Force or COVID 19 Resource Center.