Los Angeles City Council Passes Ordinances Regarding Right to Recall and Worker Retention
On April 29, 2020, the Los Angeles City Council simultaneously passed two ordinances in response to COVID-19 that could potentially have long lasting and far reaching impacts on applicable businesses: the Right of Recall Ordinance and the Worker Retention Ordinance. The Mayor has until May 11, 2020, to act on both of the ordinances. These ordinances, pending approval of the Mayor, will be effective 31 days from their publication date.
Right to Recall Ordinance:
While the true impact of the ordinance remains to be seen, the City Council’s claimed purpose behind the Right of Recall Ordinance (“Recall Ordinance” was to enact, for employees of certain limited employers, “legal protections for workers laid off due to the pandemic.” Essentially, the Recall Ordinance requires the specified businesses to attempt to rehire laid off workers before offering open positions to new employees. However, while the Recall Ordinance was ostensibly passed as a measure against the impacts of COVID-19 and the various stay-at-home orders which shuttered these businesses, the Recall Ordinance does not have a sunset clause and will remain law until the City Council repeals it.
The Recall Ordinance applies to Airport Employers, Commercial Property Employers, Event Center Employers, and Hotel Employers. The Ordinance provides specific definitions for each type of employer:
Airport Employer: Any employer, regardless of size, that provides any service at the Airport or provides any service to any employer servicing the Airport, and is required to comply with the Los Angeles Living Wage ordinance, Los Angeles Administrative Code Section 1-.37 et seq. However, this does not include (1) an airline; or (2) an employer that is party to an agreement with the airport that contains a worker rehire requirement. The “Airport” is defined under the Recall Ordinance as the City of Los Angeles Department of Airports and each airport which it operates in the city.
Commercial Property Employer: An owner, operator, manager or lessee, including a contractor, subcontractor or sublessee, of a non-residential property in Los Angles that employs 25 or more janitorial, maintenance or security service workers. However, only the janitorial, maintenance, and security service workers who perform work for a Commercial Property Employer are covered by the Recall Ordinance.
Event Center Employers: An owner, operator, or manager of a publicly or privately owned structure in Los Angeles of more than 50,000 square feet or with a seating capacity of 1,000 seats or more that is used for public performances, sporting events, business meetings or other similar events.
Hotel Employer: An owner, operator or manager of a residential building in the City designated or used for public lodging or other related service for the public and either contains 50 or more guestrooms or has earned gross receipts in 2019 exceeding $5 million. A Hotel Employer includes the owner, operator, manager or lessee of any restaurant physically located on hotel premises.
Laid Off Worker Defined
The Recall Ordinance defines laid off worker as any person (1) who performs at least two hours of work, “in a particular week,” within the geographical boundaries of Los Angeles for an employer, (2) has a length of service with the employer of six months or more, and (3) whose most recent separation from active employment by the employer occurred on or after March 4, 2020, as a result of a lack of business, a reduction in work force or other economic, non-disciplinary reasons. Employees of an Event Center Employer who are in managerial, supervisory or confidential positions are excluded from coverage.
Rebuttable Presumption of Non-Disciplinary Termination
The most striking provision in the Recall Ordinance, outside the possibility of punitive damages, is that it creates a rebuttable presumption that any termination occurring on or after March 4, 2020, was for a non-disciplinary reason. This means that the burden rests on the employer, if challenged, to show that an employee was terminated for disciplinary reasons and does not have a right to recall. This is a significant modification of the at-will standard long codified under California Labor Code section 2922. The Recall Ordinance therefore essentially imposes on covered employers a just cause termination standard, long advocated by labor unions and plaintiffs’ lawyers.
Right of Recall
The Recall Ordinance establishes that there shall be a priority made for certain workers laid off during the COVID-19 pandemic. A laid off worker is qualified if that worker (1) held the same or similar position at the same site of employment at the time of the laid off worker’s most recent separation from active service with the employer; or (2) is or can be qualified for the position with the same training that would be provided to a new worker hired into that position.
If more than one laid off worker is entitled to preference for a position, the employer must offer the position to the laid off worker with greater seniority at the employment site.
The employer is required to make an offer of recall to a laid off worker for any position which is or becomes available after the effective date of the Recall Ordinance for which the laid off worker is qualified. The offer must be made in writing to the last known mailing address of the employee, by electronic mail, and by text message. A laid off worker who is offered a position pursuant to the Recall Ordinance must be given at least five (5) business days to respond to the offer. Unlike similar recall rights which may be contained in employer policies or collective bargaining agreements, the Recall Ordinance does not have a time limitation in which the laid off worker maintains these rights. Consequently, an employee laid off in March 2020 may need to be reoffered a similar position that becomes available years later.
Significant Legal Remedies
The Recall Ordinance provides significant legal remedies to laid off workers who believe that a former employer has violated it. A laid off worker may bring an action against an employer for violating the Recall Ordinance and may be entitled to: (1) hiring and reinstatement rights, (2) actual damages suffered by the laid off worker or statutory damages in the sum of $1,000, whichever is greater, (3) punitive damages, and (4) attorneys’ fees and costs. Any employer who has litigated any type of employment discharge case in Los Angeles is unfortunately aware that the plaintiff’s attorneys’ fees award is often in the high six figures and Los Angeles juries frequently hand out seven figure punitive damages awards. Conversely, however, the Recall Ordinance provides that a prevailing employer is only entitled to recover its attorney’s fees and costs if a court determines that the laid off worker’s lawsuit was frivolous.
The Recall Ordinance does, however, provide a limited safe-harbor provision and internal remedies exhaustion provision. Specifically, before filing a civil action a laid off worker must provide written notice to the employer of the provisions of the article alleged to have been violated and the facts supporting the alleged violation. The employer then has 15 days from receipt of the notice to cure any alleged violation.
Exemption for Collective Bargaining Agreements
If a collective bargain agreement (“CBA”) already contains a right of recall provision on the effective date of the Recall Ordinance, then the recall provision within the CBA shall supersede it. However, when the CBA expires or is open for renegotiation, the provisions of the Recall Ordinance may only be waived if a waiver is explicitly set forth in the CBA in clear and unambiguous terms.
If a CBA does not include a right of recall provision at the time the Recall Ordinance becomes effective, then it applies. Nonetheless, a CBA may be amended at any time to explicitly waive with clear and unambiguous terms the provisions of the Recall Ordinance.
No Waiver of Rights
Except for in a CBA provision as described above, any waiver by a worker of any or all of the provisions in the Recall Ordinance will be deemed void and unenforceable. This is significant as it essentially requires an employer to provide the recall rights to a terminated or laid off employee even if they provide them severance or otherwise reach an amicable resolution of the employee’s separation.
Rules and Regulations
While the final version of the Recall Ordinance may leave employers with ample questions, the Los Angeles Office of Wage Standards of the Bureau of Contract Administration will eventually promulgate Rules and Regulations, which will hopefully clear up any confusion with the Recall Ordinance or limit some of its impact.
Worker Retention Ordinance
The COVID-19 Worker Retention Ordinance “Retention Ordinance”) subjects certain businesses within Los Angeles to worker retention provisions when a change of ownership or control occurs within two years following the declaration of emergency resulting from the COVID-19 pandemic. While ostensibly tied to the impacts of the pandemic, labor unions have been pushing the City Council to provide these exact same restraints on the covered businesses for many years.
The Retention Ordinance applies to the same employers covered by the Recall Ordinance: Airport Businesses, Commercial Property Businesses, Event Center Businesses, and Hotel Businesses. These businesses are defined the same way they are defined in the Recall Ordinance other than the term “employer” is replaced by “business.”
Under the Retention Ordinance, a “worker” is defined as an individual who was employed by the incumbent business employer and:
who has a length of service with the incumbent business employer for six months or more;
whose primary place of employment is a business subject to a change in control,
who is employed or contracted to perform work functions directly by the incumbent business employer, or by a person who has contracted with the incumbent business employer to provide services at the business subject to the change in control; and
who worked for the incumbent business employer on or after March 4, 2020, and prior to the execution of the transfer document.
The Retention Ordinance excludes from coverage all managerial, supervisory, or confidential position employees of any covered employer (as opposed to just the Event Center Business exclusion in the Recall Ordinance).
Responsibilities of the Incumbent Business Employer
The incumbent business employer is required to provide to the successor business employer the name, address, date of hire, and occupation classification of each worker, within 15 days after the execution of a transfer document.
The incumbent business employer must post written notice of the change in control of the business at the location of the affected business within five business days following the execution of the transfer document. This notice must remain posted during any closure of the business and for six months after the business is open to the public under the successor business employer. The notice must contain, at a minimum, (1) the name of the incumbent business employer and its contact information, (2) the name of the successor business employer and its contact information, and (3) the effective date of the change in control. The notice must be posted in a conspicuous place at the business that is visible to all employees and applicants for employment.
Responsibilities of the Successor Business Employer
The successor business employer must maintain a preferential hiring list of workers and is required to hire from that list for a period beginning upon the execution of the transfer document and continuing for six months after the business is open to the public under the successor business employer.
If the successor business employer extends an offer of employment to a worker, the successor business employer must retain written verification of that offer for at least three years from the date of the offer. This verification must include the name, address, date of hire, and occupation classification of each worker.
90 Day Transition Period
A successor business employer is required to retain each worker hired pursuant to the Retention Ordinance for a minimum of 90 days, and a worker can only be discharged for cause during this 90 day period. The successor business is required to provide a worker with a written offer of employment for this transition period and the offer must remain open for at least 10 business days from the date of the offer. At the end of the 90 day period, the successor business employer must perform a written performance evaluation for each worker retained pursuant to the Retention Ordinance. A record of this written performance evaluation must be retained for a minimum of three years.
If the worker’s performance during the 90 day period is satisfactory, then the successor business must consider offering the worker continued employment. Notably, the Retention Ordinance only mandates that the business “consider” offering the worker, but does not state that it is required.
If during the six months that the successor business employer is required to maintain a list of workers identified by the incumbent business employer, the successor business employer determines that it requires fewer workers than the incumbent business employer did, then the successor business employer must offer the position to the worker in the same occupational classification with the greatest seniority with the incumbent business employer.
A worker who believes their rights pursuant to this Ordinance have been violated may bring an action against either the incumbent business employer or the successor business employer. The available remedies include (1) hiring and reinstatement rights, (2) front or back pay for each day of the violation, and (3) value of the benefits the worker would have received under the successor business employer’s benefits plan. Similar to the Recall Ordinance, a court may also award attorneys’ fees and costs to a worker who prevails, but only to a business if it obtains a court determination that the worker’s lawsuit was frivolous.
Also similar to the Recall Ordinance, the worker must take certain steps before filing an action: (1) the worker must provide written notice to the incumbent business employer and/or the successor business employer of any alleged violations, and (2) the business must be given 15 days from the receipt of the written notice to cure the alleged violations.
Exemption for Collective Bargaining Agreements and No Waiver of Rights
The same provisions in the Recall Ordinance regarding CBAs and No Waiver of Rights are found in the Retention Ordinance.
Rules and Regulations
As with the Recall Ordinance, the Los Angeles Office of Wage Standards of the Bureau of Contract Administration will eventually promulgate Rules and Regulations on the Retention Ordinance.