To close out 2020, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) recently issued two new opinion letters addressing overtime payments for caregivers and travel time for partial-day teleworkers under the Fair Labor Standards Act (“FLSA”).  We recommend a close review of these opinion letters as they offer a helpful overview of key FLSA principles and may provide answers to questions shared by numerous employers.

FLSA2020-19

In Opinion Letter FLSA2020-19, the WHD addressed whether an employee who voluntarily teleworks for part of the day and works at the office for the remainder, and performs certain personal tasks in between (but otherwise performs no work during the commute), must be compensated for travel time between her home and the office under several different scenarios (some where the employee’s work preceded the travel to personal appointments and ultimately the office, and others where the employee continued working after traveling back home from a personal appointment).

The following principles inform the compensability of travel time:

  1. An employee does not need to be paid for hours that they are off duty – i.e., when they are completely relieved from duties for a period of time long enough to use the time effectively for their own purpose. 29 C.F.R. § 785.16(a).
  2. Normal commuting or ordinary travel from home to work and vice versa is specifically excluded from compensable hours. 29 C.F.R. § 785.35.
  3. Travel that is part of an employee’s principal activity – e.g., travel between different worksites within the workday – is considered part of the day’s work. 29 C.F.R. § 785.38.
  4. The period between commencement and completion on the same workday of an employee’s principal activity or activities is compensable under the continuous workday doctrine. 29 C.F.R. § 790.6(b).

The WHD advised that none of the contemplated travel time was compensable because, in each scenario, the employee was either off duty or engaged in normal commuting, or the travel was clearly not worksite-to-worksite travel or otherwise compensable under the continuous workday doctrine.  Relevant to the off-duty inquiry, the WHD emphasized that she could use the time effectively and for her own purpose before returning to work at the hour of her choosing.  As to the applicability of the continuous workday doctrine, relying in part on Second and Ninth Circuit precedent, the WHD explained that the doctrine does not apply where the travel time is off-duty time and the employee is not required to perform his or her work at any particular time (i.e., immediately before or after commuting from a work site), even if the employee chooses to perform some work before traveling to the office.

 FLSA2020-20

As background, although many states have stricter requirements, the FLSA requires overtime pay at a minimum of one and one-half times a non-exempt employee’s regular rate of pay for all hours worked in excess of 40 hours in a workweek by that employee.  29 U.S.C. § 207(a).  The regular rate of pay must include “all remuneration for employment paid to, or on behalf of, the employee,” subject to certain exceptions, including extra compensation provided by a premium rate paid for certain hours worked in any day or workweek because such hours are in excess of 8 in a work day or 40 in a workweek.  29 U.S.C. § 207(e)(5).  Such extra compensation must be contingent upon working hours in excess of 40 in a workweek or 8 in a day and be made pursuant to some form of legitimate agreement or understanding (though not necessarily a written agreement).  An employer can credit any payments excludable from the regular rate under section 7(e)(5) towards overtime pay owed under the FLSA.  29 U.S.C. § 207(h)(2).

In Opinion Letter FLSA2020-20, the WHD addressed whether an employer can pay its caregivers an overtime premium equal to one and one-half times the hourly rate for hours over 8 in a day based on expected number of hours worked and provide supplemental pay at a rate of one and one-half times the hourly rate for unexpected additional hours (i.e., pre-calculate overtime payments).

The WHD confirmed that extra compensation for hours worked in excess of 40 in a workweek or in excess of 8 hours in a workday may be excluded from the regular rate as an overtime premium under section 7(e)(5) of the FLSA and credited towards an employer’s overtime pay obligations under Section 7(h) of the FLSA in any workweek in which overtime pay is owed.

While not relevant to the core inquiry, the WHD also restated its position on the excludability of sleep time from hours worked for live-in employees and those who work shifts of 24 hours or more: For live-in employees, sleep time can be excluded if there is a reasonable agreement to do so, the employee has private quarters in a homelike environment, and the employee is afforded reasonable periods of sleep totaling at least five hours.  For employees working shifts equal to or more than 24 hours, up to 8 hours of sleep time can be excluded provided the employee has adequate sleeping facilities, can usually enjoy an uninterrupted night’s sleep, and there is an express/implied agreement to exclude sleep time.

 

On January 6, 2021, the U.S. Department of Labor released its much-anticipated Final Rule addressing independent contractor status under the Fair Labor Standards Act.  The Department indicates that the rulemaking should appear in the Federal Register on January 7, 2021, with an effective date 60 days thereafter.

The Final Rule is, in substance, very similar to the Proposed Rule the Department issued in September 2020 (and discussed here).  Under the Final Rule, the key points are as follows:

  • The “ultimate inquiry” is whether an individual is “economically dependent” on another for work.
  • To evaluate economic dependence, one examines the “economic reality” of the situation.
  • Economic reality, in turn, depends on several factors. Two of those factors, deemed “core” factors, carry significantly weight in the analysis than the other factors.  Those two core factors are:
    • “The nature and degree of control over the work”; and
    • “The individual’s opportunity for profit or loss.”
  • In addition to these core factors, three additional factors also influence the economic reality analysis:
    • “The amount of skill required for the work”;
    • “The degree of permanence of the working relationship between the individual and the potential employer”; and
    • “Whether the work is part of an integrated unit of production.”
  • The list of economic reality factors is not exhaustive, and other considerations may be pertinent in any given case.
  • In evaluating these various factors, “the actual practice of the parties involved is more relevant than what may be contractually or theoretically possible.” For example, the potential to exercise control is less significant under the Final Rule than the actual exercise of control.
  • The Final Rule provides several examples illustrating how to apply these principles.

With the upcoming change of administration, the big question is what comes next.  There may be efforts after January 20 to push back the effective date of the Final Rule, as well as to invoke the Congressional Review Act to strike the regulation.  If Congress does not overturn the rulemaking, it seems likely that the validity of the new standard will end up in the courts.  If the courts uphold the Final Rule, then the Department has the option of proceeding with a new rulemaking to put in place a different standard.

Keep an eye out for further developments, particularly over the next month or two.

At the time we are posting this, we are just weeks away from the inauguration of President-Elect Joseph Biden. Although perhaps not at the very top of the list of questions about the forthcoming Biden administration, somewhere on the list has to be this question: “What changes will we see in wage-hour law?”

We don’t have the proverbial crystal ball, but there are a number of issues that the Biden administration may focus on at some point during the next four years, be it through legislation, new rules implemented by the Department of Labor (DOL) or even executive orders.  They may include the following:

1) An increase in the federal minimum wage

The last time the federal minimum wage was increased was more than 11 years ago – in July 2009 – when it was increased from $6.55 per hour to $7.25. This appears to be the longest Congress has ever gone without increasing the minimum wage. With more and more states and local governments increasing their minimum wages to $15.00 per hour or more, a push to increase the minimum wage seems likely from the new administration at some point in the next four years.

2) Adoption of a new  test for independent contractor status – perhaps one based on California’s controversial AB 5

In “The Biden Plan for Strengthening Worker Organizing, Collective Bargaining, and Unions,” President-Elect Biden pledged to “enact legislation that makes worker misclassification a substantive violation of law under all federal labor, employment, and tax laws with additional penalties beyond those imposed for other violations.” And he pledged to “fund a dramatic increase in the number of investigators in labor and employment enforcement agencies to facilitate a large anti-misclassification effort.”

What might President-Elect Biden have in mind?  And what might he be looking at as a model?

We have written here frequently about California’s controversial independent contractor statute known as AB 5, which established an onerous “ABC” test that must be satisfied for workers in most industries to be classified as independent contractors.

During his campaign, President-Elect Biden expressed his admiration for AB 5 and suggested that he would like to see it implemented nationwide.  It would not be surprising to see that desire resurface at some point during his presidency.

3) Raising the salary threshold for white collar exemptions            

Near the end of President Obama’s administration, the DOL issued a rule increasing the salary threshold for most white collar exemptions from $23,660 ($455 per week) to $47,476 ($913 per week).  Only an eleventh-hour injunction and new, post-election DOL leadership stopped that rule from being implemented. Instead, under the new DOL leadership, the salary threshold for most white collar exemptions was raised to $35,568.

Might the Biden administration look to push the salary threshold up to that same $47,476 figure that had come so close to being implemented – or something close to it?  Of course.

4) Not defending the DOL’s “joint employer” rule in court

 The standard for “joint employers” has been debated and redefined repeatedly over the years. During the current administration, the DOL issued a business-friendly rule defining the term. The validity of that rule is currently a matter of appeal before the Second Circuit Court of Appeal.  The Biden administration could effectively put an end to that rule by simply choosing not to defend it in court.

5) Amending federal laws to preclude class and collective action waivers

In Epic Systems Corp. v. Lewis, the United States Supreme Court confirmed that class and collective action waivers can be enforceable. It is no secret that, in response, many employers have implemented arbitration agreements that include class and collective action waivers as a means of avoiding the large wage-hour class and collective actions that have become so prevalent over the past two decades.

Is it possible that the Biden administration might push for legislation that would effectively put an end to such class and collective action waivers?  While there has not been much buzz about this issue, it certainly seems like it would be something the Biden administration might consider if it wanted to have a large impact on wage-hour law.  Of course, whether and how they could accomplish it is another matter entirely.

Rules relating to tip credit and pooling have resulted in a significant amount litigation in the hospitality industry, and, in many cases, substantial liability or settlements. Yesterday, the U.S. Department of Labor (“DOL”) announced its new final rule that revises current regulations pertaining to tipped employees. The final rule specifically addresses tipped occupations that qualify for application of a tip credit, as well as permissible and impermissible tip pooling practices.

Allowance of Tip Credit for Tasks Related to Tip-Producing Occupations

The final rule codifies the DOL’s previous guidance that employers may take a tip credit for any amount of time an employee in a tip-earning occupation performs related to non-tipped duties performed contemporaneous with, or within a reasonable time immediately before or after, the tipped duties. The final rule identifies certain front-of-the-house tasks, including cleaning and setting tables, making coffee, and occasionally washing dishes or glasses as related non-tipped duties that qualify as time for which a tip credit may be taken. In addition to these examples, the final rule provides that a non-tipped duty is related to a tip-related occupation if the duty is identified as a task of a tip-producing occupation in the Occupational Information Network (O*Net). This is distinguishable, however, from work unrelated to the tipped occupation, which would then be considered a “dual job” for which a tip credit could not be taken by an employer.

Rules Pertaining to Permissible and Impermissible Tip Pooling

The final rule reiterates the provision in the Consolidated Appropriations Act of 2018 that prohibits employers, managers, and supervisors from keeping any tips received by employees. In other words, the “house” may never retain tips, without exception.

In addition, the final rule amends its previous regulation to remove language that had imposed restrictions on an employer’s use of tips when the employer does not take a tip credit, meaning that back-of-the-house employees, such as cooks and dishwashers, can now participate in a tip pool. The final rule does not alter the DOL’s current regulation that provides that employers who take a tip credit against tipped employees’ wages may maintain a tip pool among only tipped employees, i.e. front-of-the-house workers, and not employees who do not customarily and regularly receive tips, i.e. back-of-the-house workers.

Effective Date of the Rule

The final rule will take effect 60 days after being published in the Federal Register. The final rule has already been submitted to the Office of the Federal Register for publication, which is currently pending.

Because of the apparently strategic timing of the announcement by the outgoing Trump Administration of the final rule, it is possible that the Biden administration will seek to curtail enforcement of the final rule, or, perhaps, even pursue new rulemaking to effectively reverse the final rule, or portions thereof.

***

We will be sure to keep you abreast of all new developments. In addition, because state laws regarding tip credit and tip pooling may differ substantially from federal standards, and compliance with federal law does not excuse satisfying state and local requirements, it remains important for businesses with tipped employees to ensure compliance with all applicable laws.

Many employers may be eager to put 2020 in the rearview mirror.  But before ringing in the New Year, employers should carefully evaluate whether they need to make any changes to their current practices to ensure that they remain in compliance with state and local laws, including those relating to minimum wage.

As reflected in the chart below, in 2021, minimum wage will increase in more than two dozen states, with most of the changes set to take effect on January 1.  Minimum wage will also increase at the local level in a number of counties and cities.  Accordingly, employers with minimum wage workers should consult with counsel to ensure that their compensation practices are compliant with the laws in all of the jurisdictions in which they operate.

 

Jurisdiction  2020 Minimum Wage  2021 Minimum Wage
Alaska $10.19 $10.34
Arizona $12.00 $12.15
Flagstaff, AZ $13.00 $15.00, or $2 above state minimum wage, whichever is greater
Arkansas $10.00  $11.00
California $12.00 – 25 or fewer employees

$13.00 – 26+ employees

$13 per hour for employers with 25 or fewer employees

$14 per hour for employers with 26 or more employees

Belmont, CA $15.00 $15.90
Berkeley, CA $16.07 No update provided yet, eff. 7/1/2021
Cupertino, CA $15.35 $15.65
Daly City, CA $13.75 $15.00
El Cerrito, CA $15.37 $15.61
Emeryville, CA $16.84 No update provided yet, eff. 7/1/2021
Los Altos, CA $15.40 $15.65
Los Angeles City, CA $15.00 (26+ employees)

$14.25 (25 or fewer)

$15.00 (26+ employees)

$15.00 (25 or fewer), eff. 7/1/2021

Los Angeles County, CA $15.00 (26+ employees)

$14.25 (25 or fewer)

$15.00 (26+ employees)

$15.00 (25 or fewer), eff. 7/1/2021

Malibu, CA $15.00 (26+ employees)

$14.25 (25 or fewer)

$15.00 for all employers, eff. 7/1/2021
Menlo Park, CA $15.00 $15.25
Milpitas, CA $15.40 No update provided yet, eff. 7/1/2021
Mountain View, CA $16.05 $16.30
Oakland, CA $14.14 $14.36
Palo Alto, CA $15.40 $15.65
Pasadena, CA $15.00 (26+ employees)

$14.25 (25 or fewer)

$15.00 (26+ employees)

$15.00 (25 or fewer), eff. 7/1/2021

Petaluma, CA $15.00 (26+ employees)

$14.00 (25 or fewer)

$15.20 for all employers, regardless of size
Redwood City, CA $15.38 $15.62
Richmond, CA $15.00 $15.21
San Diego, CA $13.00 $14.00
San Francisco, CA $16.07 No update provided yet, eff. 7/1/2021
San Jose, CA $15.25 $15.45
San Mateo, CA $15.38 $15.62
Santa Clara, CA $15.40 $15.65
Santa Monica, CA $15.00 (26+  employees)

$14.25(25 or fewer)

$15.00 (all employees), eff. 7/1/2021
Sonoma, CA $13.50 (26+ employees)

$12.50 (25 or fewer)

$15.00 (26+ employees)

$14.00 (25 or fewer)

Sunnyvale, CA $16.05 $16.30
Colorado $12.00 $12.32
Denver, CO $12.85 $14.77
Connecticut $12.00, eff. 9/1/2020 $13.00, eff. 8/1/2021
Florida $8.56 $8.65, eff. 1/1/2021

$10.00, eff. 9/30/2021

Illinois $10.00 $11.00
Chicago, IL $14.00 (for employers of 21+)

$13.50 (for employers 4 to 20)

$15.00 (for employers of 21+), eff. 7/1/2021

$14.00 (for employers 4 to 20 ), eff. 7/1/2021

Cook County, IL $13.00 $13.00 (no increase listed, several municipalities have opted out and are subject to IL minimum wage), eff. 7/1/2021
Maine $12.00 $12.15
Maryland $11.00 $11.75 (15+ employees)

$11.60 (14 or fewer)

Prince George County, MD $11.50 $11.50
Montgomery County, MA 14.00 (51+ employees)

$13.25 (11-50 employees)

$13.00 (10 or fewer)

$15.00 (51+ employees), eff. 7/1/2021

$14.00 (11-50 employees), eff. 7/1/2021

$13.50 (10 or fewer), eff. 7/1/2021

Massachusetts $12.75 $13.50
Michigan $9.65 $9.87
Minnesota $10.00 for large employers (annual gross sales of $500,000 or more)

$8.15 for small employers

$10.08 for large employers

 

$8.21 for small employers

Minneapolis, MN $13.25 (100+ employees)

$11.75 (fewer than 100)

$14.25 (100+ employees), eff. 7/1/2021

$12.50 (fewer than 100), eff. 7/1/2021

St. Paul, MN $12.50 for macro businesses (more than 10,000 employees)

$11.50 (101 to 10,000 employees)

$10.00 (6 to 100 employees)

$9.25 (5 or fewer)

$12.50 for macro businesses (more than 10,000 employees), eff. 7/1/2021

$12.50 (101 to 10,000 employees), eff. 7/1/2021

$11.00 (6 to 100 employees), eff. 7/1/2021

$10.00 (5 or fewer), eff. 7/1/2021

Missouri $9.45 $10.30
Montana $8.65 $8.75
Nevada $8.00 (for employers offering specified health benefits)

$9.00 (for all other employers)

$8.75 (for employers offering specified health benefits), eff. 7/1/2021

$9.75 (for all other employers), eff. 7/1/2021

New Jersey $11.00, for most employers

$10.30, small employers (fewer than 6 employees, seasonal employees)

$12.00, for most employers

$11.10, for small employers

 

New Mexico $9.00 $10.50
Santa Fe, NM $12.10 No update provided yet, eff.  3/1/2021
New York  $11.80 $12.50, eff. 12/31/2020
New York City, NY $15.00 $15.00
Nassau, Suffolk, Westchester, NY $13.00 (increasing to $14.00 on Dec. 31, 2020) $14.00 (increasing to$15.00 by Dec. 31, 2021)
Ohio $8.70 $8.80
Oregon $12.00 $12.75, eff. 7/1/2021
Portland, OR $13.25 $14.00, eff. 7/1/2021
Non-Urban Counties, OR $11.50 $12.00, eff. 7/1/2021
South Dakota $9.30 $9.45
Vermont $10.96 $11.75
Virginia $7.25 $9.50, eff. 5/1/2021
Washington $13.50 $13.69
Seattle, WA $15.75 (500 or fewer employees)

$13.50 (500 or fewer and money plus tips and benefits paid by employer)

$16.39 (more than 500 employees)

 

$16.69 (500 or fewer employees)

 

$15.00 (500 or fewer, plus tips and benefits paid by employer)

 

$16.69 (more than 500 employees

 

 

Which state’s wage and hour laws apply to Louisiana employers whose employees applied and interviewed for their jobs in Louisiana, acknowledged receipt of employment documents in Louisiana, and resided in Texas, Mississippi, and Ohio while they worked offshore?  The answer, according to the California Court of Appeals, is California if the employees are based in California.

In Gulf Offshore Logistics, LLC et al. v. Superior Court of Ventura County, employees worked on a vessel that provided maintenance services to offshore oil platforms located outside California’s boundaries. The vessel docked in a California port, and employees reached it by flying into and out of Los Angeles. The vessel sailed through the Santa Barbara channel (which is within California’s state law boundaries), but also sailed outside of California waters — including to the oil platforms where employees performed their work.

Three employees filed a proposed class action lawsuit, claiming their employers violated California law regarding minimum wage, overtime, meal and rest periods, maintaining accurate work records, and providing accurate wage statements. The employers moved for summary judgment, arguing that California law did not apply. The trial court denied that motion.

On a petition for writ of mandate, the Court of Appeals applied a conflicts of law analysis. It found the following facts particularly noteworthy. The employers were LLCs formed under Louisiana law, and their members were all Louisiana residents. The employees applied for and interviewed for their jobs in Louisiana, acknowledged receipt of employment documents in Louisiana, and did not reside in California. On these facts, the Court of Appeals concluded that Louisiana had more significant contacts with the parties and a greater interest in regulating the employment relationships than California. It therefore found that California law did not apply.

Thereafter, the California Supreme Court decided two cases concerning the application of California wage and hour laws to employees who performed work for their employers both in and out of California. In the first case, Ward v. United Airlines (2020) 9 Cal.5th 732, the Court addressed the application of the wage statement requirement in California Labor Code section 226(a). The Court held that “workers are covered [under section 226(a)] if they perform the majority of their work in California; but if they do not perform the majority of their work in any one state, they will be covered if they are based for work purposes in California.” Id. at 756. In the second case, Oman v. Delta Air Lines (2020) 9 Cal.5th 762, the California Supreme Court extended this holding to California Labor Code section 204, which governs the timing of wage payments. The Court considered that obligations to pay wages and provide wage statements occurred on at least a semi-monthly basis and that Sections 204 and 226 applied only during pay periods in which the employees were based in California or worked primarily in California.

In both Ward and Oman, the Supreme Court stated it would be inappropriate to adopt a single test for determining application of California wage and hour laws to multistate workers because application would vary on a statute-by-statute basis. (Oman at 772; Ward at 318-19 [citing Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191, 1201]).

In light of Ward and Oman, the Court of Appeals determined that it was “mistaken” to conclude in Gulf Offshore Logistics, LLC that Louisiana law should apply because it had a greater interest than California in regulating these employment relationships.  Instead, it found, the “relevant inquiry is the location in which the work is performed.”  The Court provided no further guidance or analysis regarding how this rule would apply to the Labor Code sections at issue in Gulf Offshore Logistics, LLC that were not addressed in Sullivan, Ward, or Oman, such as minimum wage, meal periods, rest periods, and recordkeeping.

Only time will tell whether the employers will seek review from the California Supreme Court and, if so, how that Court would rule.

In a continuing trend, employers are abandoning on-call scheduling as states and cities continue to pass predictive scheduling laws.

1. What is Predictive Scheduling?

Predictive scheduling laws require employers to give employees adequate notice of when they will work so that they can plan for and around their work shifts.  The idea is that, unlike on-call scheduling, predictable schedules make it easier for workers, especially part-time retail and restaurant workers, to meet their needs, such as working another job, attending school, or arranging childcare.  The laws generally require employers to provide a certain amount of notice of schedule and impose premiums for last-minute schedule changes.

2. Where are Employers Subject to Predictive Scheduling Laws?

Oregon is currently the only state with a predictive scheduling law, following the lead of several cities including Seattle, New York City, Philadelphia and Chicago.  San Francisco became the first U.S. city to require large chains to provide predictable schedules to their workers and janitorial and security services.

a. What Is Required?

San Francisco’s Formula Retail Employee Rights Ordinances (“FRERO”) and New York City’s Fair WorkWeek Law regulate hours, retention, scheduling and treatment of part-time employees at covered businesses.  The FRERO applies to formula retailers, or “chain stores,” with at least 40 stores worldwide and 20 or more employees in San Francisco, as well as their janitorial and security contractors.  New York City’s Fair Workweek Law applies to all chain fast food establishments and to retailers with at least 20 workers within the city.

Notice of Work Schedules

In both San Francisco and New York City, employers must provide workers with their schedules at least 14 days in advance.  For new employees, employers must provide a written estimate of their monthly schedule.  Additionally, New York City bans on-call scheduling of retail workers, requiring retail businesses to provide 72 hours’ advance notice of work schedules.

Hours

Employers in San Francisco and New York City must offer any extra work hours to current part-time employees before hiring new employees or contractors.  New York City also gives preference to existing workers at the location where shifts are available, followed by existing workers from other worksites before the employer can advertise new shifts or hire new employees.

Written Consent and Premiums for “Clopenings”

New York City requires an employer to obtain an employee’s written consent and to pay a $100 premium to an employee who works a “clopening” – two shifts over two calendar days with less than 11 hours between shifts, usually involved where the employee closes the business one day and opens it the next.  San Francisco does not have a similar requirement.

Retention

In San Francisco, if a covered retailer is sold, the new owner must retain for 90 days any employees who worked for the former employer for at least six months before the sale.  New York City does not have a similar requirement.

Notice of Rights

San Francisco requires employers to post a notice of “change in control” and provide employees a notice of their rights when the business is sold.  New York City requires employers to provide employees notice of their rights under the Fair Workweek Law.

Retaliation Prohibited

Both San Francisco and New York City prohibit employers from retaliating against employees who exercise their rights by, for example, requesting predictability pay or reporting employer non-compliance with the laws.

Equal Treatment

In San Francisco, employers must provide equal treatment to part-time employees, as compared to full-time employees at their same level, with respect to (1) starting hourly wage, (2) access to employer-provided paid time off and unpaid time off, and (3) eligibility for promotions.  Hourly wage differentials are permissible if they are based on reasons other than part-time status, such as seniority or merit systems.  New York City does not have a similar provision regarding the equal treatment of part-time workers.

a. What Are The Potential Damages?

Predictive scheduling laws require the payment of “predictability pay” for schedule changes and on-call shifts.  In San Francisco, if an employer changes an employee’s schedule less than 7 days before the shift, it must pay the employee a premium of 1 to 4 hours of pay at the employee’s regular hourly rate.  If an employee is required to be “on-call,” but is not called in to work, the employer must pay the employee a premium of 2 to 4 hours of pay at the employee’s regular hourly rate.  The amount of predictability pay depends on the amount of notice and the length of the shift.  There are exceptions where the schedule change is outside the employer’s control – e.g., failure of public utilities, an earthquake or other Act of God, or another employee not showing up to work.

In New York City, the premium is $200 for fast food employers and $300 for retailers for each failure to provide work schedules in compliance with the law.  New York also requires retail employers to pay $500 or damages (whichever is greater) for on-call shifts or shift changes with less than 72 hours’ notice.  Additionally, New York imposes fines to the City for violations leading to legal action and provides a private right of action to recover damages.

3. Is Los Angeles Next?

In October 2019, the Los Angeles City Council asked the Office of the Attorney General to draft a Fair Workweek Ordinance, with recommendations on how to implement a fair workweek law in Los Angeles.  The proposed law would apply to retail establishments with 300 or more employees globally, which fall within certain retail trade categories and who directly or indirectly exercise control over the wages, hours or working conditions of any employee.  The types of retail businesses would include fixed point-of-sale retail, big box retail, grocery stores, and internet and mail order retailers.

Covered employers would have to give employees notice of their schedules at least 14 days in advance.  Employers would have to pay premiums to employees for call-in shifts, shifts not scheduled at least 14 days in advance, shifts cancelled within 72 hours, and shifts for which they have to call in first to determine if they are needed.

4. What About California?

In January 2020, California Sen. Connie Leyva, a former labor leader, introduced SB 850, the Fair Scheduling Act of 2020.  The bill would require grocery stores, restaurants and retail stores to give workers 7 days’ notice of their schedules or pay them premiums for providing less notice or cancelling shifts.

The Labor Commissioner would be charged with enforcing the bill and would be authorized to impose fines for violations.  Further, the Labor Commissioner, the Attorney General, or any employee aggrieved by violations of the bill would be authorized to bring an action to recover civil penalties, as well as attorney’s fees, costs and interest.

COVID-19 shortened the legislative calendar and the Senate sent only 10 employment-related bills to the Assembly this year.  SB 850 was held in committee in July 2020.  But given the trend toward predictive scheduling in the state, it is likely that SB 850 or some amended version of it will be passed by the California legislature.

The legal landscape surrounding independent contractor relationships in California continues to evolve swiftly.

As we wrote here, in January 2020, state court Judge William Highberger issued a decision holding that the Federal Aviation Administration Authorization Act (“FAAAA”) preempts use of California’s version of the “ABC” test (as adopted by the California Supreme Court in Dynamex Operations West Inc. v. Superior Court, and subsequently codified in AB 5) to differentiate between independent contractors and employees in the trucking industry.  More specifically, Judge Highberger held that “b]ecause Prong B of the ABC Test … prohibits motor carriers from using independent contractors to provide transportation services, the ABC Test has an impermissible effect on motor carriers’ ‘price[s], route[s], [and] service[s]’ and is preempted by the FAAAA.”

Only weeks later, in a separate matter in federal court, U.S. District Court Judge Roger Benitez granted a preliminary injunction to prevent the State of California from enforcing AB 5 against the trucking industry, concluding that the plaintiffs in that case had met their burden to show a likelihood of succeeding on the merits with respect to their preemption claim.

The California Court of Appeal has now weighed in.  On November 19, 2020, the Court reversed Judge Highberger’s decision and held that the FAAAA does not preempt application of the “ABC” test in the trucking industry.  In reaching its conclusion, the Court reasoned that the “ABC test is a law of general application,” and it “does not mandate the use of employees for any business or hiring entity.”

The Court of Appeal likely will not have the last word on this issue.  At least some of the trucking businesses involved in the case reportedly plan to seek review from the California Supreme Court.

In addition, Judge Benitez’s preliminary injunction ruling is pending on appeal before the Ninth Circuit.  And even the Ninth Circuit’s anticipated decision may not finally resolve the matter, as the issue could ultimately reach the United States Supreme Court.

As featured in #WorkforceWednesday:  California voters passed Proposition 22, which will exempt app-based transportation and delivery network companies from the state’s AB5 worker classification law. Attorneys Amy Ramsey and Kevin Sullivan tell us what this means for CA employers and the gig economy more broadly. You can read more here.

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As we have written here before, ride share and food delivery companies doing business in California had a lot at stake in the November 3, 2020 election. In fact, it was possible that those businesses might even cease doing business in California depending on the outcome of the election – or dramatically change their business models in the state.

Specifically, on November 3, 2020, California voters were asked to decide the fate of Proposition 22, the ballot initiative that would remove those companies from the scope of AB 5 and allow drivers to be treated as independent contractors. (As we explained here, AB 5 codified and expanded the controversial “ABC” test adopted by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court for determining whether workers in California should be classified as employees or as independent contractors.)

Depending on sources, ride share and food delivery companies spent between $110 million and $200 million on the campaign to pass Proposition 22.

Their campaign seems to have paid off. While the votes are still being tallied at the time this post is being written, it appears that Proposition 22 has passed with approximately 58.4% of the votes.

There is more than a great deal of irony in the apparent passage of Proposition 22. It is no secret that AB 5 was aimed at forcing ride share and food delivery companies to treat drivers as employees. Now, the very industries at which the legislation was directed are excluded from it.

While app-based ride share and food delivery companies will be able to treat drivers as independent contractors going forward (with some wage and benefit concessions found in Proposition 22), there may be some uncertainty about whether or how the passage of Proposition 22 will impact pending litigation challenging the status of the drivers pre-Proposition 22. Unlike Proposition 11, the meal and rest period initiative in the emergency services industry that California voters passed in 2018 – and that expressly provided that it was clarifying existing law and would apply retroactively – Proposition 22 does not expressly include such provisions.

Once immediate consequence seems likely, however. As we previously wrote here, in August 2020 in an action filed by the State Attorney General, a California Superior Court judge issued a temporary restraining order requiring the ride share companies to treat their drivers as employees in compliance with AB 5. While that decision has been appealed, it seems likely that the temporary restraining order will be dissolved now that ride share companies in California are effectively excluded from AB 5.

And at least one of the ride share companies still faces a perhaps unexpected challenge— a class action complaint alleging that it was improperly forcing drivers to support Proposition 22.

Only time will tell whether other industries or businesses will choose to use the California ballot initiative process to seek to be excluded from AB 5 or from other California laws – or whether the passage of Proposition 22 will inspire the legislature to find a better way to deal with independent contractor issues than the hastily passed AB 5.