In only two months, California employers have experienced an unprecedented disruption to business and the adoption and implementation of myriad new laws aimed at remedying the economic effects of COVID-19 and limiting its spread. But even now, as California lawmakers from the Governor to local mayors agree that it is time for California to get back to doing business, there is great uncertainty as to when and how this can safely occur. The process will obviously be gradual and subject to reversal at any time. Business operations will eventually return to full capacity, but the workplace will be different for months, if not years, to come as a result of new laws, and the nature of the pandemic crisis itself.
When it comes to employee matters, how can an employer best develop a plan to navigate the uncertainty of emergency orders restricting operations, new laws and regulations, and an entirely new business environment?
We suggest that employers work with their professionals to implement their own four phase plan: (1) determine when your business can lawfully reopen and to what extent; (2) assess how the timing of bringing employees back affects the risks and costs associated with reopening your business; (3) identify any limitations on your discretion to choose which employees to bring back and when; and (4) understand new workplace requirements and create systems to implement them.
1. Determine when your business can lawfully reopen and to what extent.
On March 19, 2020, Governor Newsom imposed an immediate shelter in place order that affected all California residents and businesses, with the exception of certain essential businesses. Governor Newsom has since announced a four stage plan to reopen the State’s economy, which he calls the “Pandemic Resilience Roadmap” to reopen California. Stage 1 focuses on safety and preparedness by building out testing, contact tracing, personal protective equipment (PPE), hospital surge capacity and making essential workplaces as safe as possible. Stage 2 allows for gradually opening some lower risk workplaces, schools, and childcare facilities, all with modifications. Stage 3 permits higher-risk workplaces to open with modifications, and finally, Stage 4 allows the highest risk workplaces to open. Just yesterday, the Governor announced that the guidelines to move to stage 2 for lower population counties have been relaxed.
Many businesses designated “non-essential” under the Governor’s March 19, 2020 Executive Order must remain closed as California moves into early Stage 2. And, the subset of businesses allowed to reopen will be subject to limitations and requirements as outlined in Section 4 below. For example, in early Stage 2, certain “lower-risk workplaces” including retail (curbside and delivery only), related logistics and manufacturing, office workplaces, limited personal services, outdoor museums, child care, and essential businesses can open. It is unclear when businesses designated in Stage 3 (so-called higher-risk workplaces including movie theaters, religious services, and gyms) and Stage 4 (highest risk workplaces like concert venues, convention centers, and live audience sports facilities) will be permitted to reopen.
The State’s Public Health Officer & Director announced that additional sectors, businesses, establishments, and activities will be progressively designated for reopening, subject to certain modifications. Some counties may be able to move more quickly through Stage 2 and reopen more businesses before a statewide order issues, if they can demonstrate that they meet the California Department of Public Health’s established readiness criteria. Other counties, however, may decide to reopen more slowly; for instance, the State recognized that local health jurisdictions have the authority to maintain more restrictive public health measures if the conditions within that jurisdiction warrant it.
This means that the timeline for reopening a particular business depends on what the local County and/or City’ directives, orders, and guidance allow. If a business is finally permitted to reopen, it will need to follow not only State-issued guidance and legal requirements, but also the applicable guidance and legal requirements from local public health authorities. For example, the County of Los Angeles Department of Public Health rolled out its own Roadmap to Recovery with a five-stage reopening process. Under that local roadmap, as of May 8, 2020, only select businesses can reopen for curbside pickup (bookstores, florists, clothing and shoe stores, sporting goods stores, toy stores, and music stores) and auto sales dealerships can reopen to the public. These businesses can only reopen in a limited capacity providing curbside pickup services if they comply with specific County-issued protocols to ensure physical distancing and manage infection control. In contrast, in San Francisco, businesses will reopen more slowly; an even smaller selection of retailers will be permitted to begin curbside pickup until May 18, 2020, at the earliest.
Although California (and possibly your local health department), has outlined a general roadmap to recovery, if you are not an essential business that has already been operating under the Safer at Home restrictions, or one of the designated businesses now allowed to open under your local health order(s), when and to what extent your workplace can reopen remain evolving questions. Businesses will need to monitor announcements from both state and local government officials as they authorize the reopening of additional businesses. Links to these resources can be found in Section 4 below for the State of California, the City and County of Los Angeles, City and County of San Francisco, and Orange County
2. Assess how the timing of bringing employees back affects the risks and costs of reopening your business.
Governmental authorization to begin workplace operations is just the beginning. Just because an employer can ramp up doesn’t mean it should, at least not right away. Employers will be well-served by a business-specific analysis of the new costs and risks created by the pandemic and by pandemic-related legislation and regulation. Broad plans that span industries and one-size-fits-all reopening protocols are of limited utility, at best, because employers are different and the laws arising out of the pandemic are in a constant state of change. However, it is universally clear that the new laws make the cost to employers of most employees higher than it was before the pandemic.
A. Paid Leaves of absence add cost.
Chief among the new costs to be considered are the paid leaves of absences mandated by the Families First Coronavirus Response Act (“FFCRA”). Prior to the FFCRA, employers generally and with few exceptions had the discretion to decide the circumstances under which they would pay for employee leaves of absence. In contrast, the FFCRA requires many employers to pay employees during COVID-19 related leaves of absence for as long as ten weeks. You can find our article on the details of the FFCRA here: https://articles.jmbm.com/2020/03/31/frequently-asked-questions-what-employers-need-to-know-about-the-ffcra/. While the cost to employers of FFCRA leaves is, at least to some extent, offset by a tax credit, there is certainly no risk of incurring the financial cost of FFCRA leaves for employees that have been laid off or are on furlough. Employer paid leave obligations under FFCRA expire on December 31, 2020.
B. Plan for decreased productivity.
Compliance with an array of new and ever changing workplace safety requirements, as well as the penalties for failure to satisfy them, should be top of mind for employers who intend to bring employees back into their workplaces during the pandemic. And the costs are not simply monetary. For example, employees who thrived in pre-pandemic open plan offices may find they are less motivated and efficient when isolated from their fellow workers in the workplace. The same is true for employees who work for employers and/or industries that have significant social interaction through in-person meetings, conventions, or conferences but now must interact, if at all, through videoconferencing tools. In short, employers should include in their workplace reopening analysis an anticipated decrease in employee productivity and morale and/or the cost of managing performances in a new and more isolated environment. We have highlighted some of the new workplace requirements in Section 4 below.
C. Workers’ Comp – probably not getting less expensive.
California employers should also anticipate that their workers compensation costs will increase due to recent changes to California’s workers’ compensation law. Typically, it is the employee’s burden to prove that they were injured on the job in order to obtain workers’ compensation benefits. However, on May 6, 2020, Governor Newsom signed an executive order that establishes a rebuttable presumption that any essential workers infected with COVID-19 contracted the virus from their place of employment if they get the illness within 14 days of having worked in the employer’s workplace. This order effectively shifts the burden of proof, now requiring employers to prove that the employee did not contract COVID-19 at the workplace. This is a virtually impossible burden given the contagiousness of COVID-19, at least based on current understanding. Injuries associated with COVID-19 will all essentially be workplace injuries compensable under the workers’ compensation system and this will certainly affect the cost of coverage. Employers will also be subject to liabilities that are not covered by workers compensation, in particular damages under California Labor Code Sections 132a (discrimination) and 4553 (serious and willful misconduct). Section 4553 claims, which multiply the underlying award in workers’ compensation by 50% at the employer’s expense, make compliance with new workplace safety regulations (discussed below) particularly important. Of course, employers that can or must delay reopening their workplaces until after the worst of the pandemic has passed will be less likely to have COVID-19 workers compensation claims.
D. Cost of labor may be higher.
Employers may find it necessary to offer at least short term increases to entice employees to return to workplace environments they perceive as risky. The federal government is currently subsidizing employees’ claims for unemployment insurance benefits by providing employees with an extra $600 weekly benefit – in addition to the amount the employee receives from California for unemployment benefits – pursuant to the Federal Pandemic Unemployment Compensation provision of the Coronavirus Aid, Relief, and Economic Security Act. This means that employees who make less than $54,000 annually may qualify for more pay per week through unemployment than if they work reduced hours, and may not want to return to work because they are making more money by not working. Declining an invitation to return would likely jeopardize the employee’s unemployment benefits so, if push comes to shove, most would be expected to return at their pre-pandemic rate but at a cost to employee morale. Those who do decline create the additional burden to the employer of trying to recruit, hire, train and deploy new personnel during the pandemic.
E. Balance the benefits of PPP loan proceeds against full cost of labor.
Employers should also consider the cost differential between the expected increase in their unemployment insurance rate due to layoffs and furloughs against the expense of bringing employees back to work with the proceeds of “Paycheck Protection Program” (“PPP”) loans. Even though these loans would only cover payroll costs accrued during the eight week period following the date they were awarded, keeping employees working in some capacity and off unemployment can only benefit the employers future contribution rate. Of course, the employer still must bear other costs and risks associated with employment, such as increased workers’ compensation costs, wage and hour and employment discrimination claims, as well as the cost of managing the employee complement. And, if the work is not there for the employees after the expiration of the forgiveness period for the proceeds of the PPP loan, the employer will find itself laying off or furloughing those employees again. You can find our articles on the PPP loan program here: https://www.jmbm.com/covid-19-resource-center.html.
3. Identify any limitations on your discretion to choose which employees to bring back and when.
Once any applicable stay-at-home orders have been lifted, employers will have varying degrees of discretion over which employees to recall to their workplaces and when. California employers who work free of union contracts typically are constrained in the recall decisions only by applicable state and federal discrimination and retaliation laws.
A. Discrimination laws apply, even during a pandemic.
These businesses should ensure that the selection process they use when determining which employees to bring back, and when, does not run afoul of anti-discrimination and anti-retaliation laws. But how? Here, history is an effective guide. A common theme in employment litigation is that the employer’s practices place too much discretion in the hands of management whose inherent bias is left unchecked. Employers least vulnerable to such a challenge are those with effective procedures in place to monitor and evaluate personnel decision-making, measure the career progression of all protected classes, ensure the equity of compensation decisions, and remind management of their equal employment opportunity obligations. Conversely, employers most at risk are those with casual or excessively subjective employment practices. Thus, employers with maximum discretion should employ the most objective criteria possible to rehiring decisions. This includes the rate of pay, work location, and timing of return.
B. Follow your CBA or make a better deal.
Employers who are parties to collective bargaining agreements (“CBA”) will be additionally restricted in their recall decisions by the terms of those agreements. Most CBAs contain provisions requiring that the employer bring employees back based on seniority or some other objective criteria. Courts have recognized that employer compliance with the terms of its CBA in hiring and recall decisions is a defense to discrimination claims. Given the significant disruption to business caused by the pandemic, many employers may find that the recall provisions in their CBAs are unworkable. To avoid employee grievances, employers that need to modify the recall system embodied in their CBAs should bargain with their unions for an appropriate side-letter in advance of implementing any new recall plan.
C. Local laws may limit your discretion to make recall decisions.
Beyond the limitations of existing law and CBAs, there may also be local orders that impose recall obligations on employers within particular industries. For example, the City of Los Angeles has enacted the Right of Recall Ordinance, requiring certain employers to rehire qualified workers who were laid off on or after March 4, 2020 for economic, non-disciplinary reasons before offering open positions to new employees.
Employers covered by the Right of Recall Ordinance include airport employers (the City of Los Angeles Department of Airports and each airport it operates), commercial property employers (owners, operators, or managers and lessees of nonresidential properties that employ at least 25 janitorial, maintenance or security service workers), event center employers (owners, operators, or managers of structures of more than 50,000 square feet or with a seating capacity of at least 1000 seats), and hotel employers (owners, operators or managers of hotels that contain at least 50 guestrooms or earned at least $5 million in gross receipts in 2019). Where more than one laid off worker is entitled to preference for an open position, the Ordinance dictates that the laid off worker with the greatest length of service is entitled to the recall. Los Angeles has also enacted the Worker Retention Ordinance, which applies to the same employers that are covered by the Right of Recall Ordinance. Where a change in ownership occurs between March 1, 2020 and March 4, 2022, covered employers are required to hire certain employees who were employed by the incumbent business before hiring new employees during the first 6 months following the change in ownership. These employees need to be retained for at least 90 days, after which, the employer must complete a written evaluation of each worker in consideration of a “permanent” position.
4. Understand new workplace requirements and develop systems to implement them.
The pandemic workplace is radically different from the pre-pandemic workplace. As businesses make plans to reopen and return their employees to work, employers should consider what preparations need to be made to ensure the health and safety of their employees in the workplace. The federal Occupational Safety and Health Act requires employers to provide a workplace that is free from recognized hazards and complies with occupational safety and health standards. Likewise, Cal/OSHA requires employers to provide a safe and healthful workplace for their employees. On top of this, there are a multiplicity of city and county regulations imposing additional and sometimes conflicting workplace safety obligations.
Employers who intend to reopen their workplaces should not rely upon secondary sources for information about workplace safety standards because the standards are frequently changing. Employers will be well-served by checking the governmental websites of relevant jurisdictions and conferring with their counsel as they develop their plans for employees to return to the workplace, as they implement those plans, and even after employees have returned to work.
Employers should consider the following steps:
- Evaluate and address potential workplace hazards. Some considerations include (but are certainly not limited to):
- Are workstations too close? Do barriers need to be installed? With more employees reentering the workplace, should/can schedules be staggered? Can the employee in a particular position continue teleworking?
- Will posting signs or markers be helpful to remind employees to practice social distancing?
- What kind of PPE is appropriate and/or required? Does the workplace have sufficient inventory of that PPE?
- Do employees have sufficient access to handwashing or sanitizing stations?
- Does the workplace have sufficient access to disinfecting cleaning supplies and a regular enhanced cleaning schedule, particularly for high-touch surfaces?
- Implement an infectious disease exposure control and response plan. In developing this plan, employers should incorporate the general and applicable industry-specific COVID-19 guidance issued by the State of California, CDC, OSHA, and Cal/OSHA for employers, as well as any guidance from local public health city and county officials. This will help demonstrate employers’ efforts to ensure their employees’ health and safety; guide employees to immediately report potential contact or exposure to designated personnel; and allow employers to respond effectively and promptly manage the risk of the spread of infection and keep businesses operating as smoothly as possible.
- Educate your workforce. Employers should review their injury and illness prevention program (IIPP) and update it as necessary. As employees are reintroduced into the workplace, employers should hold trainings pursuant to that IIPP in order to make sure employees understand the new social distancing, hygiene, cleaning, and other precautionary protocol they have implemented, and further to understand that following this protocol is critical to workplace health and safety.
- Safeguard employee data (including medical information). In addition to protecting the health and safety of employees, employers should ensure they are properly safeguarding personal employee data. Employers should review their data access, storage, and security procedures to manage the risk of data breaches, particularly in light of the emergency actions many employers had to take in transitioning their employees into teleworking arrangements at the onset of the pandemic.
Beyond these general steps, employers should monitor the more specific guidance issued by the city and county in which they operate – the proscriptions and requirements to which employers must adhere are constantly changing and advice that is relevant one day may become obsolete the next. To ensure that they are making operational decisions based on the most up to date information available, employers should consult the sources that are directly updated by the cities and counties where they are located. Employers should also continue to monitor guidance issued by the CDC, which will also inform employer decisions. Relatedly, to ensure that they are implementing the wisest operational decisions based on the available information and on existing law, employers should consult with counsel.
- For industry guidance for counties that have received state approval to move faster into stage two, visit: https://covid19.ca.gov/roadmap-counties/
- For guidance specific to Los Angeles City and Los Angeles County, including the most current Safer at Home Order, and protocols for businesses that are permitted to reopen under the Order, visit: http://publichealth.lacounty.gov/media/Coronavirus/ and https://www.lamayor.org/COVID19Orders
- For employer resources specific to San Francisco City and County, visit: https://sf.gov/topics/business-during-coronavirus-pandemic
- For employer resources specific to Orange County, visit: https://covid19info.ocgov.com/
Employers are faced with a number of difficult decisions in determining when and how to reopen their businesses in this challenging environment. In addition to complying with their existing legal obligations, employers need to consistently monitor the guidance issued by government agencies and health protection agencies. To this end, employers should continue to consult with counsel as they work towards satisfying their legal obligations while maintaining their operational needs.
Marta M. Fernandez
R. Scott Brink
Barbra A. Arnold
Taylor N. Burras
This update is provided to our clients, business associates and friends for informational purposes only. Legal advice should be based on your specific situation and provided by a qualified attorney.