COVID-19 in the Workplace for Small Employers

Our lives have all dramatically changed since March 11, 2020 when the World Health Organization declared that the spread of the novel coronavirus, which causes a condition called COVID-19 was a pandemic an instituted recommendation to stop the spread of the deadly disease. 

Since that time, schools have closed, workers have been laid off or put on leave, and businesses have suffered.  Big businesses can take the economic hit.  Small businesses are struggling.  Owners are fearful and worried that the business they sunk their blood, sweat, and tears into for years may go out of business before the pandemic even peaks. 

The answers are not easy, and the laws and orders change, sometimes hour by hour.  However, small employers and businesses are not without options to stay alive an thrive after the crisis is over. 

Here is some information that may be helpful as of this date, March 20, 2020:

#1 The Governor has issued a Stay-At-Home Order.  Do I have to Shut My Business Down?

Generally speaking, yes, unless the business falls within the exceptions provided by an U.S. Department of Homeland Security. These 16 infrastructure guidelines define what businesses are considered “essential” and are permitted to continue operating.  https://www.cisa.gov/sites/default/files/publications/CISA-Guidance-on-Essential-Critical-Infrastructure-Workers-1-20-508c.pdf

If your business does not fall into these categories, you are ordered to shut down until further notice.  Failure to do so is punishable by a $1,000 fine or imprisonment. 

#2 We’ve been shut down and I do not have remote work for my employees.  Can I lay them off?  Am I require to pay them if I put them on administrative leave?

Your business is still your own, so doing what is necessary is still your call.  However, whether you lay the workers off or you put them on leave, they will be entitled to some unemployment benefits if they qualify.  Please see the link to the California Labor & Workforce Agency for further information.  https://www.labor.ca.gov/coronavirus2019/.

# 3 I am not required to shut down, but I have employees who are scared to come to work.  Can I require them to be there?

It is risky to require an employee to be on the premises.  An employer can require an employee to come to work and discipline the employee for refusing to do so, provided that the refusal does not violate OSHA guidelines, the employee is not in imminent danger and is not sick, caring for a family member who is sick, adhering to a quarantine order, has a child whose school is closed and the worker cannot find child care, or absent some other legally protected reason, such as a medical condition protected by the California Fair Employment and Housing Act or The Americans with Disabilities Act.

Employees who have been ordered to self-quarantine are employees who are 65 and older and employees who have preexisting health conditions. If possible, assess the availability of telecommuting options for employees.

#4 Must I require an employee who lost access to childcare to attend work?

According to California law, employees who work at worksites with at least 25 employees are already entitled to take off up to 40 hours each year for specific school-related events, including school closures or the unexpected unavailability of the school or child care provider; employees may tap into this entitlement to work from home or to take time off on an unpaid basis.

In addition, the Family First Coronavirus Response Act requires employers with fewer than 500 employees to provide employees two weeks of paid sick leave at the employee’s regular rate of pay if the employee cannot come to work because their child’s school closed due to the Coronavirus.

Additionally, after the initial two weeks of sick pay, employers are required to provide up to 12 weeks of family medical leave for employees who have been employed for at least 30 days with up to 12 weeks of family and medical leave at a rate of no less than two-thirds of the employee’s regular rate of pay up to $510 per day, though the first 10 days of the leave can be unpaid if the child’s school continues to close. https://www.dol.gov/coronavirus.

#5 If my employee is sick, do I have to pay them for taking leave?

If a salaried employee performs any work during the workweek, the employee must be paid his/her full salary for the week, unless the employee is out of work for a full day due to personal reasons, vacation or illness and has no remaining vacation or sick time.

Even if the worker is an hourly worker, if an employee is sick or needs to care for a family member who is sick, you must provide paid sick leave pursuant California state law. Additionally, employees who cannot attend work because they have contracted, or been exposed to COVID-19 may consider applying for short term disability benefits.

The Family First Coronavirus Response Act would also require employers to provide 80 hours of paid sick leave to full-time employees, prorated for part-time employees, if the employee is unable to work.  Additionally, the employee will be entitled to the extensions provided in item number 4 above. 

Here are resources that you may find helpful for up to date new regarding the virus, as well as maintaining your business during the crisis:

California State Resources

Coronavirus 2019 (COVID-19) Resources for Employers and Workers

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

https://www.sba.gov/disaster-assistance/coronavirus-covid-19

Federal Resources

https://www.dol.gov/coronavirus

https://www.dol.gov/agencies/whd/pandemic

https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/businesses-employers.html

https://www.gov.ca.gov/wp-content/uploads/2020/03/3.19.20-attested-EO-N-33-20-COVID-19-HEALTH-ORDER.pdf

https://www.cisa.gov/coronavirus

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The Paycheck Fairness Act: What Does It Mean for California Employers and Employees

The headlines glared on March 27, 2019, as the House passed a long-awaited bill titled The Paycheck Fairness Act (“PFA”).  The bill was intended to strengthen protections against gender-based wage discrimination. However, there is no reason for companies to institute wide spread panic just yet.  The bill is awaiting a Senate vote, which is expected to be an uphill battle.  Even in the event this bill eventually becomes a law, the ramifications for California employers will be minimal.  California already has laws in place that are substantially similar to the PFA and business has not been shut down just yet.  However, the possibility for women in all states to earn a paycheck equal to her male colleagues is electrifying.

In order to understand the PFA, its important to look at a brief history of equal pay in federal law.

Equal Pay Act of 1963

The Equal Pay Act of 1963 (“EPA”) prohibits employers from paying men more than women, unless they can show the men earned their higher salary through their own merits or seniority. An employee may prove a violation of the Equal Pay Act by demonstrating: “(1) the employer pays different wages to employees of the opposite sex; (2) the employees perform equal work on jobs requiring equal skill, effort, and responsibility; and (3) the jobs are performed under similar working conditions.” 29 U.S.C. § 206(d)(1) (2006).

Deficiencies of the EPA

The EPA has failed to prevent gender-based wage discrimination in the following ways:

  1. The EPA allows for only the differential amount of compensation for 180 days, without any penalties unless an employee can prove the violation was willful. This allows for very little incentive for a low-income worker to enforce her rights under the law.
  2. The EPA’s class action provisions require employees to opt in to participate in a class action suit.
  3. The EPA does not prohibit retaliation for discussing and/or sharing salary information with co-workers.  This makes it difficult for employees to discover the discrepancy in pay.  Workers are losing their rights to equal pay simply because they have no means to discover the discrepancy.

The Lilly Ledbetter Fair Pay Act

Due to the deficiencies in the EPA over the years, women discovered that they were earning far less than their male colleagues with similar experiences and job titles.  For instance, Lilly Ledbetter, after discovering that male managers with less experience were earning more than she, sued her employer (Good Year Tire) under the Equal Pay Act.  However, even though she was able to establish that she was denied equal pay under the law for many years, she was denied more than a pittance because the statute of limitations under the law at the time ran from the date the employer initiated the illegal payment policy, not by each discriminatory paycheck.  Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007). This ruling rendered the Act impossible to enforce. 

As a result, The Lily Ledbetter Act of 2008 was signed into law. It amended The Civil Rights Act of 1964 by extending the 180-day statute of limitations for filing a lawsuit to each new discriminatory paycheck, rather than when the employer initiated the policy.

The Paycheck Fairness Act (S. 892 and H.R. 1619)

After Lily Ledbetter, various lawmakers have sought (rather unsuccessfully) to amend the Equal Pay Act to close the loopholes that are stopping women from pursuing their rights and getting compensated for their time and efforts equally with their male co-workers. 

Thus, the PFA was proposed in order to amend the EPA by establishing that wage comparisons may be made between employees who perform substantially equal jobs at any of the employer’s places of business that are located in the same county or political subdivision. Many businesses operate out of multiple offices. Employers should not get a pass by shuttling employees to different locations.

Additionally, the PFA provides that a “factor other than sex” defense must be based on a bona fide, job-related factor (i.e. education, training, or experience) that is of a business necessity. Furthermore, the bill specifies that an affirmative defense cannot be made if the employer fails to provide an alternative business practice that would serve the same business purpose without producing a pay differential.

The Paycheck Fairness Act will also allow employees to recover punitive and compensatory damages, such as out of pocket expenses and emotional distress, just like every other act of discrimination under Title VII of the Civil Rights Act.  The Paycheck Fairness Act will also allow class members to automatically opt into the class so that class members are fairly compensated for their missing pay. 

Finally, The Paycheck Fairness Act will prohibit employers from retaliating against workers for disclosing their salary information to others. This would thwart others like Lily Ledbetter from going for years without discovering they were paid less than their male colleagues.  Finally, the bill would require employers to share salary data with the Equal Employment Opportunity Commission (“EEOC”), so that the agency could enforce the laws protecting employees from discriminatory practices. “S. 2199 – Summary”. United States Congress. Retrieved 9 April 2014. The bill would also make employers who violate sex discrimination prohibitions liable in a civil action for either compensatory punitive damages. Id. 

Equal Pay in the State of California

            What are the potential ramifications to California workers and employers should this bill become law?  Hardly any. California already has one of the strongest laws in the nation guaranteeing equal pay for equal work.

Requesting Salary Information is Prohibited

In 2018, California amended Labor Code section 432.5 to prohibit employers from asking job applicants about their current or past salaries or benefits, seeking said information from other sources or through an agent, or relying on such information to make an offer of salary. There are two limited exceptions: 1) The law does not apply to salary history information that is disclosable under state or federal law (i.e.  the California Public Records Act or Freedom of Information Act) and 2) The law also does not prohibit an applicant from voluntarily offering salary information without prompting. There is nothing that prohibits an employer from asking applicants how much they are seeking in salary.

Retaliation for Disclosure of Salary History Illegal

Under California Labor Code section 232, employers are prohibited from retaliating against their employees for disclosing their salary information to others. California has already banned this type of activity so that employees are on notice of an inconsistencies in their pay with others.  Federal law will not have an impact on the vast majority of California employees.

Labor Code Section 1197.5 Requires Employers to Pay Employees Equally When They Perform Substantially Similar Work

Similar to the PFA, California Labor Code Section 1197.5 requires employers to pay its employees equally if they perform “substantially similar work.” According to the Department of Industrial Relations, “Substantially similar work refers to work that is “similar in skill, effort, responsibility, and performed under similar working conditions.” https://www.dir.ca.gov/dlse/California_Equal_Pay_Act.htm.

Likewise, “skill refers to the experience, ability, education, and training required to perform the job. Effort refers to the amount of physical or mental exertion needed to perform the job. Responsibility refers to the degree of accountability or duties required in performing the job. Working conditions has been interpreted to mean the physical surroundings (temperature, fumes, ventilation) and hazards.” Id.  

California requires employers to treat similarly skilled employees equally with their counterparts.      

Labor Code Section 1197.5 Requires Employers to Prove That the Wage Differential Was from a Bona Fide Factor That is Unrelated to the Sex, Race, or Ethnicity of the Worker

By the same token, “an employer may defeat an Equal Pay Act claim by proving that the wage differential is due to a bona fide factor other than sex, race, or ethnicity, but to succeed on this defense, the employer must also prove that the factor is: 1) not based on or derived from a sex-, race-, or ethnicity- based factor; 2) job related; and 3) consistent with a business necessity.” Id.

California employers already have the burden to establish an eventual affirmative defense that the reasons for any wage differentials stems from legitimate business necessity and not due to sex or race.

Emotional Distress and Punitive Damages are Available for Those Who Have Been Discriminated Against in Pay Due to Gender and Other Factors

California’s Fair Employment and Housing Act codified in the Government Code Section 12926 et. seq. provides that an employer cannot discriminate against an employee on the basis of sex or race.  

Pursuant to California Government Code Section 12940(a):

“It shall be an unlawful employment practice, unless based upon a bona fide occupational qualification, or, except where based upon applicable security regulations established by the United States or the State of California: (a) For an employer, because of the race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age, or sexual orientation of any person, to refuse to hire or employ the person or to refuse to select the person for a training program leading to employment, or to bar or to discharge the person from employment or from a training program leading to employment, or to discriminate against the person in compensation or in terms, conditions, or privileges of employment.” (emphasis added)

            Emotional distress, punitive damages, and attorneys’ fees are recoverable under FEHA.  Therefore, California law provides that an employee could seek and receive damages for an employer failing to pay them equally to their employer. 

Labor Code Section 1197.5 Allows Employees Two Years from the Discriminatory Paycheck (Three Years if Willful) to File a Claim

Under California’s Equal Pay Act, an employee must file a claim within two years from the date of the violation. If the violation is willful, then an employee has three years to file. Like the PFA, California already recognizes that each discriminatory paycheck that reflects unequal pay is considered a violation for the purpose of calculating the deadline for filing.

California Employers (Nor the Rest of the Nation) Should Panic Over the PFA

            As a lawyer who represents small businesses, as well as employees, in employment disputes, I see both sides struggle with compliance with the laws and enforcement of their rights.  No one wants to see a business go under due to increased regulation.

            However, the rest of the nation could learn from states like California.  Business is still growing.  Our equal pay laws have not devastated small businesses.  In fact, they encourage healthy competition and quality candidates.  Paying people equally is not only morally sound, but will only result in healthier, productive employees who will want your business to succeed.                 The PFA will not solve everything, but it is a right step in the direction of equali

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Navigating California Meal and Rest Beak Laws

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Dynamex Operations West, Inc. v. Superior Court of Los Angeles: Is it Really the Big Bad Boogeyman of Business in California?

 

Can you be an independent contractor today in California?  On April 30, 2019, the California Supreme Court issued a ruling in Dynamex Operations West, Inc. v. Superior Court of Los Angeles that changed the landscape for hiring consults in the state.  Hailed as a hero by labor groups, and a boogeyman to businesses and consultants alike, the case has been cheered, feared, and everything in between for almost one year now.  Both groups are correct in some ways and wrong in others. 

In its capacious, 82-page decision, the California Supreme Court rejected the previous test that the court used to determine whether a worker has been properly classified as an independent contractor for the purposes of the California’s Industrial Welfare Commission (“IWC”)’s wage orders in favor of a stricter standard used in states such as New Jersey and Massachusetts. Particularly, the Court embraced a standard presuming that all workers are employees instead of contractors and placed the burden on any entity classifying an individual as an independent contractor of establishing that such classification is proper under the newly adopted “ABC test.”

The ABC Test

Under the ABC test, a worker will be deemed an employee for wage order purposes unless the hiring entity proves:

  • (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • (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.

Most businesses have no problem meeting elements (A) and (C) as these elements have always been part of the analysis as to whether they can hire or be a consultant rather than an employee. It is element (B) that has caused wide spread panic.  Essentially, the Court is saying that if a worker performs duties that further the usual course of the hiring entity’s business, they can not work as consultants. 

For instance, a hairdresser in a hair salon will sometimes lease the space from the salon and the hairdresser sets their own schedule and markets for their own clients. This type of arrangement may be prohibited under these standards because the hairdresser performs work that is within the scope of the usual course of the hiring entity’s business, selling and performing hair dressing services. 

However, the same hair salon would still be free to employ a plumbing service to come and fix a plumbing issue in the salon. Fixing a broken pipe would not be something that would be expected in the usual course of business of the salon. 

If we explore the example even further, janitorial services should be concerned.  Many businesses outsource this need to a company who either employs its own staff or the company is just the janitor alone.  Is performing a necessary, regular service considered something that would be within the usual course of a hair salon’s business?  Who knows? On the one hand, the purpose of the salon is to provide hair dressing services, not janitorial.  However, janitorial services are necessary in order to keep the salon’s licensing and to keep the salon clean for customers.  Additionally, the services are performed regularly.  Thus, its possible that a business employing a single janitor, even one who markets themselves as an independent business and has multiple clients, might be considered an employee under these standards. 

Vulnerable Industries

  • Taxi Cab Companies: On October 22, 2018, a cab driver sued a cab company with whom he worked as an independent contractor with for misclassification of his position. The California Court of Appeal, in Garcia v. Border Transportation Group, ruled that the Dynamex test applied exclusively to claims that fell under the California Wage Order, while leaving other employment claims for evaluation under the Borello While relieving some categories of workers, this leaves a lot of employers and workers confused as to what rights each has available.  
  • Ride Sharing Apps: It has been widely speculated that the decision was meant to attack ride sharing apps that have independent drivers.  However, the analysis will as usual come down to whether the usual course of the business of these apps is to run the app or as a transportation company. 
  • Janitorial Services
  • Real Estate: Real estate agents may be vulnerable, although much of their work is likely exempt from the wage orders due to the sales exemption. 
  • Medical Groups and Hospitals: Doctors are often independent contractors.  However, like real estate agents, they are exempt from the wage orders.
  • Event services groups
  • Bookkeepers
  • HR Consulting Firms
  • Transportation Industries

What Happens if I Misclassify a Worker as an Independent Contractor?

If a Court should rule that a business misclassified a worker as a contractor, the employer could be liable for:

  • Wage Law Violations: Employers will be held liable for failure to wages, including criminal liability in some instances. Employers found in violation may incur massive penalties for unpaid overtime costs and attorney’s fees.
  • Tax Consequences: Penalties may be levied for failing to withhold state and federal payroll taxes, including failure to make matching social security and Medicare payments.
  • I-9 Violations: Employers who fail to properly complete I-9 verifications have been penalized by the DOL.
  • Unemployment Insurance and Worker’s Compensation Fund Penalties: Companies who fail to contribute to the state unemployment or worker’s compensation insurance pool, may be assessed penalties.
  • Employee Benefits: Misclassified independent contractors are entitled to coverage under the company’s employee benefit plans and reimbursement for expenses the worker incurred while they should have been classified as an employee.   

 

Recommended Practices

            So, where do we go from here.  There is good news for companies employing contractors and workers who desire an independent contractor relationship:

  • Analyze whether the worker is subject to the wage orders. Because the Dynamex test applies exclusively to the wage orders, workers who are exempt from overtime wages, minimum wages, reporting time pay, unpaid expenses, and meal and rest break protections are not covered under the Dynamex decision.
  • Transportation businesses may have a unique exemption under the FAAAA. Businesses engaged in the transportation industry may have a unique exemption under the Federal Aviation Administration Authorization Act of 1994 (FAAAA). The FAAA contains provisions that would conflict with prong “B” of the Dynamex In those instances, the federal law should outweigh state law. 
  • Ensure the business does not exercise control over the worker.
  • Review mission and purpose of the business. Companies should take care to define their business and how it relates (or better, does not relate) to the services being performed. Carefully review the kinds of public statements made in marketing material and websites that describe the business and refine them as appropriate.
  • Require Contractors to maintain their own business. Independent Contractor agreements should include the expectation that the Contractor is not required to be at the business on a set schedule and that they are free to work for others and to market to their own clients. Before working for an independent contractor, require documentation from the worker, such as a business license, business card, advertising, and/or references. A business should contract only with legal entities, if possible.
  • If a contractor would otherwise qualify under the Wage Orders, it is strongly recommended that you follow the most restrictive test for independent contractor status. Failure to do so could result in you fighting two lawsuits, not just one. One for wages and one for any other claims the individual maintains against the company. 

 

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