UPDATED: Bay Area Counties Prohibit Travel and Close Non-Essential Businesses

Note: This post has been updated (again) effective March 18, 2020. A hard copy of this discussion can be downloaded here.

Adoption of Local “Shelter in Place” Orders

Six Bay Area counties and one local city have adopted “Shelter in Place” orders effective March 17, 2020. These orders severely limit group activities and individual travel in and through each county. The effect on most businesses is even more severe: unless designated as “essential” (or supporting “essential” activities), all businesses in each county must basically close.

Sonoma County has also adopted a Shelter in Place order effective March 18, 2020. Its terms are also virtually identical to other Bay Area counties except for an expanded list of essential businesses including agriculture, dairy, and beverage production (including winery and brewery operations), as well as businesses necessary to supply “agriculture, food and beverage distribution.”

Napa County initially decided not to implement a Shelter in Place order but has since implemented an order, effective March 20, with its own list of essential businesses including any “form of cultivation of products for personal consumption or use,” activities or businesses “associated with planting, growing, harvesting, processing, cooling, storing, packaging, and transporting such products, or the wholesale or retail sale of such products.” instead adopting a revised emergency order effective March 18, 2020. This list appears to cover virtually all agricultural, wine, and beverage-related activities (including both wholesale and retail sale, potentially such as winery hospitality and tasting rooms). The remaining terms of the order are similar to other counties apart from specific coverage of activities related to medical devices and cemetery/funeral services.

The orders were authorized and are enforceable under the California Health and Safety Code; violation by individuals or businesses could result in substantial civil fines, penalties, and even potential criminal prosecution. The orders are expected to remain in place through at least April 7, 2020.

Terms of the Orders

The initial orders are virtually identical and are published on the relevant municipal website, which can be viewed via the following links: Alameda, Berkeley, Contra Costa, Marin, San Francisco, San Mateo, and Santa Clara. San Francisco also published a set of Frequently Asked Questions, a source for interpreting each local order, which can be viewed here.

Sonoma County’s order is also published online here, with Frequently Asked Questions addressed here. Napa County’s shelter-in-place order is published here (and its initial emergency order, effective until March 19, is here).

Effect on Non-Essential Travel and Businesses

First, the orders require all residents to “shelter at their place of residence” with limited exceptions for “essential” activities and some non-group outdoor activities. This means that individuals living in an affected county are not allowed to travel away from home for non-essential work, even if it is outside the county. While this requirement may not be rigidly enforced, it does have a few immediate consequences:

· Individuals who live in an affected county may be fined or prosecuted for traveling to a non-essential business or activity; and

· Individuals who refuse to leave home and report to work at a non-essential activity may insist that they need not do so because leaving home violates the law. Individuals disciplined for failure to report to work at a non-essential business might, for example, make retaliation claims under California Labor Code section 1102.5, which prohibits retaliation for refusing to violate the law, or under California public policy.

Second, of immediate interest to businesses, the orders require all non-essential businesses “to cease all activities at facilities located within” affected counties. This means that they must stop all onsite activity immediately except for “Minimum Basic Operations” limited to:

· The minimum necessary activities “to maintain the value of inventory, ensure security, process payroll and benefits, and related functions; and

· The minimum necessary activities to “facilitate” employees working remotely from their residences.

This is a dramatic limitation meant to effectively shut down all non-essential businesses apart from the bare minimum operations necessary to protect an establishment, process payroll and benefits, and maintain IT access for off-site workers.

Essential Business and Activity

A broad range of businesses have been deemed “essential.” These operations are allowed with “social distancing” limitations, including:

· Healthcare operations and essential infrastructure;

· Grocery operations including supermarkets, convenience stores, other retail grocery and food outlets (even including farmers markets), and pet supplies;

· Food cultivation such as farming and fishing;

· In Sonoma County Only: Agriculture; beverage cultivation, processing and distribution (presumably wineries, breweries and cider); dairies and creameries. These industries may remain open to “preserve inventory and production: but not for “retail business.”

· In Sonoma County Only: Businesses necessary to supply agriculture, food, and beverage cultivation, processing, and distribution;

· In Napa County Only: Any form of cultivation of products for personal consumption or use, activities or businesses “associated with planting, growing, harvesting, processing, cooling, storing, packaging, and transporting such products, or the wholesale or retail sale of such products;”

· In Napa County Only: Specific coverage of manufacturers, distributors, warehouse facilities, suppliers and servicers of medical devices, diagnostics, equipment and services, and activities required to maintain the supply chain;

· In Napa County Only: Specific coverage of cemetery and funeral service providers;

· Food and shelter services for disadvantaged individuals, and residential facilities and shelters for seniors, adults, and children;

· Food and shelter services for disadvantaged individuals, and residential facilities and shelters for seniors, adults, and children;

· Home-based care for seniors, adults, or children;

· Child-care facilities (but with dramatic limitations on the manner of care);

· Newspapers, television, radio, and other media services;

· Gas stations and auto-supply, auto-repair, and related facilities;

· Banks and related financial institutions;

· Hardware stores;

· Services necessary to safety, sanitation, and essential operation of residences and permitted businesses such as plumbers, electricians, exterminators, and other service providers;

· Mailing and shipping services, including post office boxes;

· Educational institutions;

· Laundromats, dry cleaners, and laundry service providers;

· Restaurants and other facilities that prepare and serve food but only for delivery or carry out;

· Businesses that supply products needed for people to work from home (this is undefined);

· Businesses that ship or deliver groceries, food, goods or services directly to residences;

· Airlines, taxis, and other private transportation providers providing transportation services necessary for essential and other authorized activities;

· Professional services, such as legal or accounting services, when necessary to assist in compliance with legally mandated activities; and

· Businesses that supply other essential businesses with the support or supplies necessary to operate.

This last category is the least well-defined, as it is not clear how much “support” or “supply” is enough to count as “essential.”

Maintaining operations in a non-authorized business could have serious civil and criminal consequences, including fines up to $1000 per day and even imprisonment. On the employment side, employees disciplined for failure to report to work at a non-authorized business could make the same types of whistleblower, retaliation, and public policy claims discussed above.

Other Consequences

The significance of employee layoffs due to ordered shutdowns is unclear. Employers will argue that employees have not been terminated or laid off, but authorities may argue that shutdowns longer than one pay period qualify as a “termination” requiring immediate payment of final pay and accrued vacation. It is far more likely that the federal government will adopt short-term paid leave requirements (pending in Congress this week) that clarifies employment status and provides tax credits for paid leave. Some of these dynamics are discussed in our recent blog post, which can be viewed here.

Even businesses deemed “essential” are likely to encounter workforce shortages due to employees’ family or childcare needs. Affected county schools are shut down, immediately creating childcare issue that working parents may not have anticipated. For employers with 25 or more employees, workers typically have a right to take up to forty hours per year off to attend to a “school emergency” (see Labor Code section 230.8), and workers at employers with twenty or more employees are likely to invoke either FMLA or state parental leave rights for child and family quarantines or illness.

Employers will also need to comply with benefit and coverage issues, from monitoring potential COBRA notices necessitated by loss of coverage during long-term closures to providing information on short-term unemployment benefits.

Conclusion

The effect of these orders is not yet fully understood and will develop over the coming days. If not followed, they may be replaced with even more dramatic limitations stopping almost all social activity.

Fortunately, both local and federal authorities seem poised to craft comprehensive relief programs designed to assist individuals – and hopefully businesses – affected by the pandemic event.

We will continue to monitor the situation and provide updates as events develop.

Current Issues Faced by Employers During Pandemic Conditions

Note: This topic will be updated regularly with new posts as the pandemic event continues. Issues such as local shelter-in-place and federal sick leave / paid leave developments will have a major impact on employers' options and obligations in the coming days.

A hard copy of this initial discussion can be downloaded here.

Introduction

Employers are faced with a sudden increase in operational and health-related issues as the COVID-19 pandemic takes hold in the United States. This includes a variety of public health appeals and standards, such as suggestions that certain employees should be segregated or businesses closed, without binding governmental authority or changes to the employment laws that apply to such situations.

Businesses throughout the state face substantial risk under anti-discrimination and disability accommodation laws, and wage-and-hour rules, that apply to the most well-intentioned actions.

We have assembled several issues facing employers this week, with links to governmental sites as appropriate. They will be updated as issues evolve.

Employee Illness and Exposure

Obviously Ill Employees:

There is no clear exception to state or federal disability accommodation laws allowing employers to send home all ill employees. While there is a “direct threat” exception under both the federal Americans with Disabilities Act and the state Fair Employment and Housing Act, the laws require an interactive process with employees before removing them from work and place the burden of proof on employers.

The federal Equal Opportunity Commission published guidance stating that, once a “pandemic” is declared by the Centers for Disease Control, employers “should rely on the latest CDC and state or public health assessment” to determine whether employees should be sent home. See https://www.eeoc.gov/facts/pandemic_flu.html. This current guidance does provide that “employees who appear to have acute respiratory illness symptoms (i.e. cough, shortness of breath) upon arrival to work or become sick during the day should be separated from other employees and be sent home immediately.” See https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html.

Employers will need to decide whether they are willing to risk claims under state and federal disability accommodation laws, and alleged discrimination based on “perceived” disability, when sending home obviously ill employees. It would be wise to maintain written documentation of an individual’s observed symptoms, and discussions with them, in a confidential medical file such as that used to maintain other protected health information.

Workplace Safety and OSHA Requirements:

There are few specific requirements applicable to non-healthcare-industry employers. The chief requirement even during a pandemic is the “general duty” to maintain a safe workplace.

It is likely that even this “general” duty requires employers to plan for known issues in the workplace: including, as of now, the risk of infection. Federal OSHA has prepared a set of guidelines, many of which are common sense, applicable to medium (with substantial public contact) and lower-risk (little public contact) workplaces.

See www.osha.gov/Publications/influenza_pandemic.html

Cal-OSHA has published similar guidelines: www.dir.ca.gov/dosh/coronavirus/General-Industry.html. For most employers, Cal-OSHA’s basic recommendations include steps such as actively encouraging sick employees to stay home; providing information and training to employees on issues such as cough and sneeze etiquette and hygiene; routine environmental cleaning of shared workplace equipment and furniture; allowing flexible worksite telecommuting and flexible work hours to increase physical distance among employees; other methods of minimizing exposure between employees and the public, and postponing large work-related events. Cal-OSHA also recommends “sending employees with acute respiratory illness symptoms home immediately” – something employers do not seem allowed to do automatically under state or federal disability accommodation laws.

EDD Benefit Materials:

All employees who are laid off, leave the workplace to self-quarantine, or miss work due to illness or to care for a family member must receive the Employment Development Department publication, DE-2320. See www.edd.ca.gov/pdf_pub_ctr/de2320.pdf.

Sick Leave and Vacation Use:

The language of California’s sick leave law does not appear to cover self-quarantine activity where illness or exposure has not been confirmed. Despite this, the Labor Commissioner has taken the position that individuals who self-quarantine are entitled to use sick pay benefits, and to be protected by sick pay laws, so long as the quarantine is “recommended by civil authorities.” See https://www.dir.ca.gov/dlse/2019-Novel-Coronavirus.htm. Given this, employers probably will need to allow employees to use paid sick leave benefits during such periods and, due to the law’s requirements, they may not request medical certification of the need for leave.

Care for an individual’s own COVID-19 illness, or a family member’s, certainly is covered by state sick leave rules. Moreover, it will also be covered by the state’s Kin-Care rules (Labor Code section 233), which allows use of up to one-half an employee’s annual PTO accrual for sick leave purposes as well. So an employee with three days of sick leave and four weeks of vacation each year may be entitled to thirteen days of sick leave under these laws – just about enough to cover a 14-day quarantine period.

Importantly, employers may not require employees to use sick leave during these absences. Failure to use sick leave could make the absence unexcused unless covered by another law (such as the Family medical Leave Act).

Finally, if employees take FMLA-covered leave, employers may allow but may not require the use of vacation or other paid leave to “coordinate” with state disability benefits. Employees on such leaves are covered by a federal regulation prohibiting mandatory use of paid time off during any “paid” part of the leave – including times when an employee is receiving state disability or even workers’ compensation benefits.

Layoffs and Shutdowns

This is an area where employers face huge potential risk. Pubs and wineries have been encouraged to shut down, for example, but the recommendation is neither binding nor protects employers from run-of-the mill laws the Labor Commissioner has promised to enforce. Businesses considering full or partial shutdowns, or even major reductions in hours, should consider the effect of these laws until authorities actually order businesses to stop operating.

Final Pay:

Labor Code section 201 requires immediate payment of all wages due, including accrued but unused vacation, at the time of discharge. This applies to most industries. The California Labor Commissioner has long taken the position that layoffs without a definite return date, or layoffs with a return date past the current pay period, are a “discharge” under Section 201.

Accordingly, if employees are laid off or taken off schedule without a definite return date, or with a date past the current pay period, it appears that employers must pay all accrued wages and vacation the same day. Failure to make the final payment on time results in a one-day wage penalty each day the pay is delayed, up to thirty times a worker’s average daily pay. There is no urgency exception to this requirement.

Reporting Time:

Most employees must receive “reporting time” pay when an individual reports to work but is sent home without working at least half the scheduled shift.

This would apply to an employer who shut down operations one morning, or to an employee who appears ill and is sent home by the employer (but not where an employee chooses to go home on their own). The amount dues is half the current day’s schedule, at least two and at most four hours, so an eight-hour employee sent home after one hour would be owed four hours total for the day.

The Labor Commissioner has made clear in the past few days that there is no urgency exception to this requirement unless local authorities prohibit operation of the business – even during the current crisis. See https://www.dir.ca.gov/dlse/2019-Novel-Coronavirus.htm.

Salaried Employees:

Salaried employees must be paid a full week’s salary if an employee performs any work during the workweek. So if an employer’s workweek starts at midnight on Sunday, and the employee reports to work on Monday morning, the employee must receive a full week’s salary even if the employer suspends operations for the rest of the week.

Even if a shutdown is required, salaried employees almost certainly must receive full pay for the week if they have works at all during the current workweek unless they are formally laid off. In such cases, the layoff probably would be considered a termination, requiring immediate final pay (including any unpaid vacation) as discussed above. Salaried employees would then be entitled only to partial-week pay through their last day of employment. See 29 C.F.R. § 541.602(b)(6).

It is possible that employers could also reduce exempt employees’ base salaries temporarily if requiring fewer workdays during the week due to a short-term economic slowdown; this has ben approved by some federal authorities and a 2009 Labor Commissioner opinion letter following the 2008 recession. See DLSE Opn. Ltr. 2009.08.19.

The Labor Commissioner has clarified that it will enforce this requirement during the current pandemic. See https://www.dir.ca.gov/dlse/2019-Novel-Coronavirus.htm. (Unlike employer-initiated shutdowns, this rule would not apply to an employee who misses work for a full day due to illness or disability, or other unpaid leave, so long as the employer has a sick leave or disability pay plan in place.)

WARN and Mini-WARN Acts:

State and federal laws require sixty days’ notice to workers, state authorities, and union representatives (if any) before a mass layoff, relocation, or termination of operations affecting any “covered establishment.” Covered establishments include any facility or part thereof that has employed 75 or more people in the prior 12 months, and mass “layoffs” includes those affecting 50 or more employees in any 30-day period.

The penalties for failure to provide advance notice include up to 60 days’ pay to every affected employees, the cost of lost benefits, and a per-day civil penalty of up to $30,000 total. An employer can lay off employees when “actively seeking capital or business,” which probably would not apply to pandemic-related shutdowns, and (again) there is no urgency exception to this statute.

While a shutdown by the government would excuse an employer, a voluntary shutdown on the advice of officials (such as Governor Newsom’s March 15 pronouncement) would not. Federal law contains a similar WARN requirement that also lacks any pandemic-related exceptions.

Conclusion

Employers are being encouraged to “do the right thing” both for their employees and the public. But because they are informal, these requests neither modify existing labor and employment laws nor provide any safe-harbor for businesses. Companies should carefully consider all applicable laws when regulating their employees or modifying their work schedules.

We will continue monitoring developments and update our materials as the pandemic event continues.

Federal Court Enters (Confusing) Injunction Against California's Arbitration Prohibition

A federal court in Sacramento has extended its injunction against California's A.B. 51, a new law prohibiting most mandatory employment arbitration agreements. This development follows our prior posts discussing A.B. 51 (here) and the court's initial temporary restraining order blocking its enforcement (here).

The full injunction has not been drafted yet and will be released in the coming days. For now, the draft injunction is a positive but confusing development.

On the one hand, the injunction does prohibit most enforcement of the new law. But on the other, it applies only to agreements "covered by the Federal Arbitration Act." This leaves some employers to determine whether any argument exists that their particular agreement is not covered by the FAA.

In practice this will not make much difference; most employment agreements are covered by the federal law. We now suggest, however, that arbitration agreements contain express language incorporating the FAA and - possibly - that language referring to state or "any other applicable law" be removed. As the plaintiffs in the case have argued, confusion caused by the law (and the court's injunction) remains dangerous due to its substantial civil and criminal penalties.