NLRB GC Memo Calls For Aggressive Retroactive Make-Whole Remedies Against Employers
By: NLRB GC Memo Calls For Aggressive Retroactive Make-Whole Remedies Against Employers
Last year, National Labor Relations Board (“NLRB” or “Board”) General Counsel, Jennifer Abruzzo, issued GC Memorandum 23-08 opining that, with some exceptions, the maintenance and enforcement of non-compete agreements violates the National Labor Relations Act (“NLRA” or “Act”). Then last week, she doubled down and issued a new memorandum, GC Memorandum 25-01, encouraging the Board to (i) impose wide-ranging make-whole remedies in the face of non-compete agreements that violate the NLRA, (ii) extend her non-compete rationale to recognize a rebuttable presumption of unlawfulness with respect to so-called “stay-or-pay” agreements (under which an employee agrees to disgorge/recover the cost of a benefit—like a training cost—if they separate from employment before an agreed upon date), and (iii) impose wide-ranging make-whole remedies in the face of stay-or-pay agreements that violate the Act.
Specifically, the General Counsel describes the harms that flow from non-competes as being uniquely “pernicious” and thus encourages the Board to broaden its remedial efforts and order employers to—
- compensate current employees for the difference in lost compensation where the employee can show they were deprived of a better job opportunity because of a non-compete (simply by showing a preferable vacancy, qualification, and that the non-compete acted as discouragement from applying);
- compensate former employees for periods of unemployment where the employee can show they were unemployed for longer than they otherwise would have been as a result of the non-compete;
- compensate former employees for the different experience in accepting a job of lesser compensation in compliance with the non-compete compared to a better-paying job they were dissuaded from taking due to the non-compete; and
- compensate former employees for moving-related and retraining-related expenses incurred obtaining employment consistent with the terms of a non-compete provision.
Scarier still, the memo suggests that “any uncertainty” as to the evidentiary sufficiency supporting a claim for the foregoing remedies should be “resolved in favor of the employee.”
Next, GC Memorandum 25-01 takes aims at stay-or-pay agreements that seek to recoup front-end expenses from early-departing employees, and ultimately describes them as “presumptively unlawful.” The memo advocates that employers may only be permitted to rebut the presumption of unlawfulness by proving both that the stay-or-play provision advances a legitimate business interest (e.g., to recover expenditures when the employee leaves before the employer can reap the anticipated benefit of the expenditure) and that the provision is “narrowly tailored,” which means (i) voluntarily entered into (i.e., optional) in exchange for a benefit, (ii) stating a reasonable and specific repayment amount, (iii) with a reasonable stay period, and (iv) a carve-out for no repayment in the event of involuntary termination.
As with non-competes, GC Memorandum 25-01 similarly advises that the “maintenance of non-voluntary stay-or-pay arrangements” violates the NLRA and “requires a more robust remedy….” For example, “when an employer attempts to collect the purported debt,” in addition to nullifying the debt, “the employer must compensate the employee for any legal fees or any other expenses associated with defending against the employer’s action.”
Further, just like with non-competes, where employees might miss out on more lucrative job prospects because of their existing agreements, “employees must have the opportunity to come forward and demonstrate that they were deprived of better employment opportunities” by their stay-or-pay agreements. Said differently, Abruzzo’s Memorandum encourages the Board to impose the same aggressive, wide-ranging make-whole remedies against employers with stay-or-pay agreements as with non-compete agreements.
While the Memorandum does suggest granting employers a sixty-day window to cure preexisting stay-or-pay provisions consistent with the parameters outlined in the document (i.e., until December 6, 2024), the office of the General Counsel concludes with an unambiguous warning to employers, “I intend to prosecute preexisting stay-or-pay arrangements that fail the test set forth herein and seek retroactive application, absent extenuating circumstances.”
Employers with non-compete or stay-or-pay agreements in circulation would thus be well-advised to have their labor counsel review such agreements with an eye toward last week’s memo without delay. The author of this article, John Giovannone, and other attorneys at CDF are well equipped to provide advice in this area.
San Diego’s New Fair Chance Ordinance
By: San Diego’s New Fair Chance Ordinance
In keeping with the recent proliferation of fair chance legislation at the state and local levels, effective October 10, 2024, businesses with five or more employees who carry out business in unincorporated areas of San Diego County are subject to San Diego County’s Fair Chance Ordinance (“SDFCO”). The SDFCO prohibits unlawful pre-job offer inquiries about arrest and conviction histories of job applicants. Administrative penalty enforcement for violations of the SDFCO commences July 1, 2025.
Employment applicants whose primary job location averages two or more hours of work each week within an unincorporated area, including remote work done from an unincorporated area, are protected by this ordinance.
The SDFCO piggybacks on California’s Fair Chance Act (“FCA”), which prohibits employers with five or more employees from asking a job candidate about conviction history before making a job offer. Specifically, the FCA forbids employers from:
- including on a job application any questions about conviction history before a conditional job offer has been made;
- asking about or considering an applicant’s criminal history before a conditional job offer has been made; and
- considering information about arrests not followed by conviction, participation in pretrial or post-trial diversion programs that have been completed and the underlying pending charges or conviction dismissed, sealed, or eradicated; or convictions that have been sealed, dismissed, expunged, or statutorily eradicated.
After offering a job, the FCA permits an employer to conduct a criminal history check, but the law requires employers to make an individualized assessment of the conviction history and its relevance to the job being sought, in addition to potential mitigating factors. The employer cannot revoke the employment offer without considering the nature and gravity of the criminal history, the time that has passed since the conviction, and the nature of the job to which the candidate applied. If the employer revokes the job offer based on an applicant’s criminal history, the employer must so notify the applicant in writing, including by stating the disqualifying conviction, provide the applicant with a copy of any conviction history report the employer relied upon, and give the applicant five business days to respond. The employer must consider any information provided in an applicant’s response and thereafter notify the applicant in writing of any final disqualification, and the applicant’s right to file a complaint with the Civil Rights Department.
The SDFCO appears to impose greater restrictions than the FCA on employers in unincorporated areas of San Diego in that employers must complete individualized assessments in writing and may not, absent exigent circumstances, fill an open position during the five business day response period following a job offer revocation. Also, the SDFCO does not contain an explicit carve-out for employers required by state or federal law to conduct background checks. The SDFCO imposes greater administrative penalties than the FCA, in amounts as high as $20,000 per violation for repeat violations. The SDFCO requires employers to retain all records and documents related to an applicant’s employment applications and the written assessment and reassessment performed for one year following receipt of the application.
The SDFCO tasks the San Diego County Office of Labor Standards and Enforcement with, among other things, receiving complaints regarding violations of the SDFCO, investigating and obtaining records regarding reported violations, enforcing the SDFCO, and issuing administrative penalties for violating the SDFCO.
In general, this is a good time for all employers to review and update their employment applicant screening processes under the recent statewide and local government fair chance legislation. According to County data, San Diego County’s unincorporated areas are spread over wide swathes of the County and host 14,400 businesses. Employers will be wise to check the subtle reaches of the County’s geography to understand whether and how they are uniquely affected by this new, stricter ordinance. If you have any questions about whether and how your business is affected, please contact this author or any of CDF’s lawyers.
Sexual Harassment Claims Covered Under the EFAA Exempt Entire Case from Arbitration
By: Sexual Harassment Claims Covered Under the EFAA Exempt Entire Case from Arbitration
Earlier this week, a California Court of Appeal affirmed the trial court’s decision in Liu v. Miniso Depot CA, Inc., et al., which held that the plain language of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“EFAA”) exempts a plaintiff’s entire case from arbitration where the plaintiff asserts at least one sexual harassment claim subject to the EFAA.
Plaintiff Yongtong Liu was hired in April 2021 by Defendant Miniso Depot as an hourly-paid human resources administrator. In January 2022, Liu was re-classified by the company as an exempt employee, though her job duties did not change. Throughout her employment, Liu, who identified as a lesbian and dressed in “unisex non-gender specific style,” alleged that she was subjected to unwelcome, severe and pervasive harassment and discrimination based on her sexual orientation and gender. Liu alleged that comments were made about her appearance, attractiveness, and body. She further alleged that derogatory comments were made about female and homosexual employees generally. Liu also alleged that she was asked to participate in hiring, pay, and immigration practices which she believed to be illegal, and when she refused to comply with those practices, the harassment and discrimination against her increased. As a result, Liu resigned in June 2023, and filed suit against Miniso in October 2023 for wage and hour violations as well as sexual and sexual orientation/gender identity harassment and discrimination under the Fair Employment and Housing Act (“FEHA”), retaliation, constructive termination, and intentional infliction of emotional distress.
Miniso filed a motion to compel arbitration of all of Liu’s claims under the Federal Arbitration Act (“FAA”) in reliance on the arbitration agreement that Liu had signed when she accepted Miniso’s job offer. Liu opposed Miniso’s motion to compel arbitration, arguing that her sexual harassment claim under FEHA exempted her entire action from arbitration under the EFAA. The trial court agreed with Liu and denied Miniso’s motion to compel arbitration, finding that when a complaint includes a claim for sexual harassment to which the EFAA applies – the arbitration agreement is unenforceable as to the plaintiff’s entire case.
Miniso appealed the trial court’s decision. While Miniso conceded that the EFAA applied to Liu’s claims for sexual harassment and sexual orientation/gender identity harassment, it contended that the trial court erred in its conclusion that the arbitration agreement was unenforceable as to all of Liu’s claims. Instead, Miniso argued that the trial court should have compelled Liu to arbitrate all of her claims, except the two sexual harassment claims.
The California Court of Appeal, Second Appellate District, disagreed with Miniso and affirmed the trial court’s decision. It held that under the EFAA, when a plaintiff’s lawsuit contains at least one claim that fits within the scope of the EFAA, the arbitration agreement is unenforceable as to all claims asserted in the lawsuit.
The Court of Appeal found that the statutory language of the EFAA was clear on its face, citing in relevant part, “at the election of the person alleging conduct constituting a sexual harassment dispute… no pre-dispute arbitration agreement… shall be valid or enforceable with respect to a case… which is filed under… [s]tate law and relates to… the sexual harassment dispute.” FAA, 9 U.S.C. Section 402(a). The Court concluded that, because Congress chose the term “case,” rather than “claim,” the plain language of the statute allowed Liu to be exempt from mandatory arbitration for all of the claims in her case so long as one of her claims was covered under the EFAA. The Court further noted that their ruling avoided the potential for inefficiency and related burden in having the parties litigate separate proceedings in court and an arbitration forum.
Other courts have recently reached a similar result. In Doe v. Second Street Corp., (Sept. 30, 2024, B330281) ___ Cal.App.5th ___ [2024 WL 4350420], the court found that the plain language of the EFAA applied to the entire case, not merely the sexual assault or sexual harassment claims alleged as a part of the case. Similarly, two federal district court opinions, Johnson v. Everyrealm, Inc., (S.D.N.Y. 2023) 657 F.Supp.3d 535, 561, and Turner v. Tesla, Inc. (N.D.Cal. 2023) 686 F.Supp.3d 917, 925, both held that when a complaint includes a claim for sexual harassment to which the EFAA applies. the arbitration agreement is unenforceable with respect to a plaintiff’s entire case. There has been one decision where the court ruled differently (Mera v. SA Hospitality Group, Inc. (S.D.N.Y. 2023) 675 F.Supp.3d 442), finding that the parties’ arbitration agreement was unenforceable with respect to the plaintiff’s hostile work environment claims, but was enforceable with respect to the plaintiff’s unrelated wage and hour claims that were pled on behalf of a class of individuals.
This decision highlights the potentially expansive reach of the EFAA. Please contact your favorite CDF attorney if you have any questions about this case.
How Employers Can Safeguard Trade Secrets In The Absence Of Non-Compete Agreements Oct 8, 2024: CDF Partners Dan M. Forman and Ashley A. Halberda recently authored the article “How Employers Can Safeguard Trade Secrets In The Absence Of Non-Compete Agreements”
How California Ruling Alters Worker Arbitration Agreement Enforcement Jul 26, 2024: CDF Partner Sander van der Heide authors the article “How California Ruling Alters Worker Arbitration Agreement Enforcement”
CDF Webinar: Just When You Thought It Was Safe to Go Back to the Office – The Top 10 Current Legal Headaches for California Employers in 2024
Complimentary Webinar – The Top 10 Current Legal Headaches for California Employers in 2024
New Minimum Wage for California Health Care Workers Takes Effect October 16, 2024
By: New Minimum Wage for California Health Care Workers Takes Effect October 16, 2024
A minimum wage increase for health care workers in California will kick in on October 16, 2024. The change was originally slated to take effect this past June, after California enacted Senate Bill (“SB”) 525 in the fall of 2023. Over the summer Senate Bill 159 delayed the implementation of the increase due to concerns over the impact on the California budget. Under SB 159 the implementation of the minimum wage increases was delayed until either (1) certain increases to state revenues took place; or (2) the California Department of Health Care Services (DHCS) notified the Legislature that it had initiated the data retrieval necessary to implement an increase to hospital quality assurance fee revenues.
The DHCS submitted that notice to the Legislature on October 1, 2024, thus triggering the health care minimum wage increases for 15 days later, on October 16, 2024.
The new minimum wage is required for those who (1) work for a covered “health care facility” and (2) provide health care services or support the provision of health care.
Covered health care facilities include:
- Facilities or other work sites that are part of an integrated health care delivery system;
- Licensed general acute care hospitals;
- Licensed acute psychiatric hospitals and psychiatric health facilities;
- Mental health rehabilitation centers;
- Licensed skilled nursing facilities, if owned, operated, or controlled by a hospital or integrated health care delivery system or health care system;
- Patients’ homes when health care services are delivered by an entity owned or operated by a general acute care hospital or acute psychiatric hospital;
- Licensed residential care facilities for the elderly, if affiliated with an acute care provider or owned, operated, or controlled by a general acute care hospital, acute psychiatric hospital, or the parent entity of a general acute care hospital or acute psychiatric hospital;
- Licensed home health agencies;
- Physicians groups;
- Most outpatient clinics;
- Community clinics, intermittent clinics, or certain publicly operated clinics (except as exempted);
- Rural health clinics;
- Urgent care clinics;
- Ambulatory surgical centers;
- County correctional facilities that provide health care services; and
- County mental health facilities.
Of note, the new minimum wage does not only impact healthcare workers, but also those employees working for a covered facility. This includes employees in the following occupations:
- nursing;
- caregiving;
- services provided by medical residents, interns, or fellows;
- services supporting patient care, including technical and ancillary services;
- janitorial work, housekeeping, laundry, food services, groundskeeping and guard duties;
- business office clerical work;
- scheduling, medical coding and billing;
- call center and warehouse work; and
- gift shop work
The amount of the minimum wage increase varies across different employers, and will increase in phases, with the first phase starting on October 16, 2024. The following chart outlines the applicable rates by employer type for each phase.
| Phase | Health care employer or integrated health system with 10,000+ FTE; Dialysis clinics | Safety Net Hospitals | Clinics | Others |
| 1 | $23.00 per hour from October 16, 2024 to June 30, 2025 | $18.00 per hour from October 16, 2024 to June 30, 2025 | $21.00 per hour from October 16, 2024 to June 30, 2026 | $21.00 per hour from October 16, 2024 to June 30, 2026 |
| 2 | $24.00 per hour from July 1, 2025 to June 30, 2026 | 3.5% annual wage increases from July 1, 2025 to June 30, 2033 | $22.00 per hour from July 1, 2026 to June 30, 2027 | $23.00 per hour from July 1, 2026 to June 30, 2028 |
| 3 | $25.00 per hour from July 1, 2026 to December 31, 2027 | $25.00 per hour from July 1, 2033 to December 31, 2034 | $25.00 from July 1, 2027 to December 31, 2028 | $25.00 per hour from July 1, 2028 to December 31, 2029 |
| 4 | Starting January 1, 2028, the minimum wage will be adjusted for inflation each year | Starting January 1, 2035, the minimum wage will be adjusted for inflation each year | Starting January 1, 2029, the minimum wage will be adjusted for inflation each year | Starting January 1, 2030, the minimum wage will be adjusted for inflation each year |
The minimum wage increase will also affect salaried workers, as covered employers must ensure that salaried employees earn a monthly salary equivalent to no less than 150% of the health care worker minimum wage or 200% of the otherwise applicable minimum wage, whichever is greater.
Covered employers may qualify for a waiver in the form of a one-year temporary pause or alternative phase in the schedule of the minimum wage requirements if they can demonstrate that compliance with the minimum wage requirements would detrimentally affect the operations of their business. To do so, they must submit an application with supporting documentation on the Department of Industrial Relations website.
Covered employers must also post a notice to employees of the change in the minimum wage (the Labor Commissioner’s Office notice is available here).
If you are a covered healthcare employer, you must act immediately to provide proper notice to covered employees, revise pertinent policies, and work with payroll providers to ensure compliance. SB 525 is a complex piece of legislation that has left many organizations wondering whether their employees are subject to the newly mandated minimum wage and, if so, which specific minimum wage applies to them. This is particularly challenging given the short turnaround time for compliance by October 16, 2024.
CDF’s health care industry employment defense practice is here to help through this process. Contact Candace DesBaillets, Dawn Irizarry, Carolina Schwalbach, or your favorite CDF attorney, if you have questions about the health care minimum wage increases or changes made by SB 525.
CDF Promotes Six Female Attorneys – Expands Leadership Feb 15, 2024: IRVINE, Calif. – Feb. 15, 2024 – CDF Labor Law LLP (CDF) is proud to announce the promotion of two attorneys to Partner and four to Senior Counsel, all of whom are talented women employment defense litigators. These… Read More
NLRB, DOJ, FTC and DOL Formalize the Exchange of Information to Help Scrutinize The Impact of Mergers on Workers
The MOU
On August 28, 2024, the National Labor Relations Board
Captive Audience Meetings Now Banned By State Law in California
By: Captive Audience Meetings Now Banned By State Law in California
Last Friday, Governor Newsom signed SB 399 – The California Worker Freedom from Employer Intimidation Act into law.
SB 399, which will take effect on January 1, 2025, prohibits private and public employers in California from subjecting, or threatening
Navigating Politics in the Workplace
By: Navigating Politics in the Workplace
In a state as diverse and politically active as California, employers are bound to encounter clashing political expressions among employees this election cycle. Navigating these challenges and enforcing policies affecting the expression of employees’ political beliefs in the workplace can be a daunting task.
California Court of Appeal Upholds Adverse Employment Action Where Employee Unable to Perform Essential Job Functions
This month, the California Court of Appeal affirmed the trial court’s grant of summary adjudication to the employer in a disability discrimination case alleging violations of the Fair Employment and Housing Act (FEHA). The opinion
2024 PAGA Reforms – Has the Landscape Changed?
By: 2024 PAGA Reforms – Has the Landscape Changed?
The Private Attorneys General Act (PAGA), enacted in 2004, upturned California’s employment law landscape. In theory, PAGA allowed employees to file lawsuits to recover civil penalties
CDF Webinar: Navigating the New PAGA – A Strategic Guide for Employers
Join us for a complimentary webinar during which CDF partners will discuss the new iteration of California’s Private Attorneys General Act (PAGA) and related legal developments while providing attendees with strategic guidance on leveraging these reforms to avoid and defend PAGA litigation.