Special thanks to Ma. Rosario Lombera, Manuel Antonio Calderón, Marco Rojas and Juan Valles.

In this Quick Chat video, our Labor & Employment and Tax lawyers discuss some of the most frequently asked questions regarding the Subcontracting Reform’s 2022 Inspection Program, through which authorities from the Ministries of Labor, Social Security and Tax plan to ensure that companies providing and contracting services comply with the regulations of the Subcontracting regime.

Click here to watch the video.

 

Special thanks to guest contributor, Melissa Allchin

COVID-19 has been a mainstay for over two years now. Notwithstanding the pandemic’s devastating impacts, employers (and employees) have tired of thinking about COVID-19, and are ready to allocate their energy and resources to other pressing matters, such as the economic crisis or transformative geopolitical events.

Though it is clear that the pandemic is not yet receding, it does seem that we could finally be reaching equilibrium in the form of a new normal, as the world has largely emerged from COVID-19 restrictions and gotten back to work with some semblance of normalcy. Where does this leave employers who want to continue to protect the health and safety of their workforces while also turning their attention to other issues? Below (and in our video chat COVID-19: It’s Not Over Until It’s Over, Employers), we discuss the COVID-19 trends we’re seeing now, as well as practical tips for employers as they continue to navigate pandemic issues in the workplace.

  1. Contact tracing–should employers still do it?

Employers are still seeing COVID-19 cases in the workplace, and if anything, cases have increased considerably in many locations. Many employers are asking whether they still need to contact trace or track COVID-19 cases in their workforce. While some employers have stopped contact tracing, there are important considerations to think through before employers decide to do so.

What’s required and what’s recommended?

Employers should look at what’s required and what’s recommended in jurisdictions where they have employees and, based on requirements and recommendations, devise a best practice for their workforce. Many jurisdictions have done away with contact tracing requirements for employers, but contact tracing is still recommended or encouraged in other jurisdictions–and it’s still required in some.

At the federal level, though the Occupational Safety and Health Administration (OSHA) does not specifically require employers to conduct contact tracing, OSHA’s General Duty clause (Section 5(a)(1)) still obligates employers to provide workers with a safe and healthful workplace, which in turn requires employers to comply with state, local and federal recommendations and laws regarding workplace safety. OSHA has advised that employers must take appropriate steps to protect workers from exposure to COVID-19 in the workplace. These steps might include notifying workers to monitor themselves for signs or symptoms of COVID-19 if they have been exposed–which, of course, is a form of contact tracing.

California is an example of a jurisdiction that still requires contact tracing. The Cal/OSHA Emergency Temporary Standard (ETS) requires employers, after learning of one positive COVID-19 case at the worksite, to

(i) determine the day and time the COVID-19 case was last present in the workplace and, if possible, the date of the positive COVID-19 test(s) and/or diagnosis, and the date the COVID-19 case first had COVID-19 symptoms;

(ii) determine who may have had a close contact with the positive case; and

(iii) within one business day, notify employees and independent contractors who were in the same “worksite” as the positive COVID-19 case of their potential exposure without disclosing the infected individual’s identity.

There are additional Cal/OSHA requirements when there is an “outbreak” of three or more positive cases in the workplace within a 14-day period, including excluding COVID-19 cases and employees who had close contact until they test negative or the return to work requirements for COVID-19 cases are met. Of course, determining which employees must be excluded under these rules requires contact tracing.

Other states, such as Illinois, encourage employers to notify fellow employees of an infected individual of their possible exposure to COVID-19 in the workplace, while maintaining confidentiality as required by the ADA. And Wisconsin urges employers to notify the local health department after learning that a worker has tested positive for COVID-19 so that the health department has the option to initiate contact tracing procedures.

Employers should keep monitoring, because changes are still being made

Employers should continue to keep an eye out for changes because some jurisdictions are continuing to modify recommendations and requirements as case numbers change or new subvariants become dominant. For instance, California recently made changes to its definition of “close contact.” California used to define “close contact” as what’s become a familiar standard–being within six feet of a positive case for a cumulative total of 15 minutes or more over a 24-hour period. Early this month, the California Department of Public Health (CDPH) changed that definition to focus on “shared indoor airspace.” Now, “close contact” in California means someone sharing the same indoor airspace (such as a home, clinic waiting room, airplane, etc.) for a cumulative total of 15 minutes or more over a 24-hour period (which could include, for example, three individual five-minute exposures for a total of 15 minutes) during an infected person’s (laboratory-confirmed or a clinical diagnosis) infectious period. Though there is not much guidance on how large a shared indoor airspace can be, a “home” is one of the examples provided by CDPH, as is “work colleagues within the same office space.” Following a rule of reason, if employees are in the same room for a cumulative 15 minutes over the course of 24-hour period, they’ll most likely be considered a “close contact” in California, which will require notice–and contact tracing.

What if employers decide not to contact trace? Are there risks?

Employers who decide not to contact trace face potential liability.

For one thing, employers in states with liability shield laws may lose the protection of those laws if their health and safety practices do not line up with current COVID-19 guidance and/or requirements, because some states have conditioned their liability shield law protections on employers following both recommended and required safety measures for COVID-19.

For another, employers increasingly being sued by third parties in so-called “take-home cases”–and we expect to see even more of these. In the typical take-home case, a third party plaintiff alleges that an employee who contracted COVID-19 at work brought the virus home to their spouse or another individual who suffers severe illness or death. The spouse or third-party then sues the employer for damages. While the fundamental question of whether an employer can be liable for a third party’s injuries is not yet fully resolved, courts are beginning to address the issue.  For example, the US Court of Appeals for the Ninth Circuit recently certified questions to the California Supreme Court, seeking guidance on whether there could be third party liability (under a negligence standard) for take-home COVID cases and whether the workers’ compensation regimes will preempt that liability. While we await the answer to these questions, employers should consider the increased risk of liability in these types of cases if they choose not to contact trace. And employers should note that even if the workers’ compensation “exclusive remedy” defense is found to apply to third party claims, plaintiffs may still argue that the defense is not available to the employer and should be set aside if an employer knows an employee has been exposed to a harmful agent, but fails to notify the employee.

Key takeaway: Employers should revisit their policies and procedures around contact tracing, and make sure they are up-to-speed on any requirements or recommendations in locations where they have employees before determining whether to relax their contact tracing policies–and keep in mind that an inappropriate relaxation in contract tracing could lead to liability.

  1. Mandatory vaccination policies–do employers still need them?

Earlier in the pandemic, many US employers adopted mandatory COVID-19 vaccination policies (in jurisdictions where they are not prohibited) as a way of keeping the workplace safe. But then the OSHA COVID-19 Vaccine and Testing Emergency Temporary Standard (OSHA ETS)–which caused some employers to put mandatory vaccination policies in place in anticipation of its implementation–was enjoined by the US Supreme Court on January 13, 2022 and was subsequently withdrawn by the Biden administration. At the same time, most state and local vaccination requirements have been rolled back. One exception: New York City still technically requires employees who work in the city limits to be fully vaccinated. The requirement continues to be extended by 5-day increments (with the last Executive Order extending the requirement issued on July 10), and so it remains in effect, notwithstanding public comments by the Mayor of NYC that his administration is not enforcing the mandate.

Employers who currently have mandatory vaccination policies in place should revisit them to determine whether they are still permissible under state and local law and whether they are still prudent for their workforces. Key considerations include:

  • Patchwork policies. Employers with employees in multiple states have had to implement patchwork policies for vaccinations, since some states’ laws prohibit employers from requiring vaccinations or discriminating based on vaccination status (although most don’t). Keeping track of the laws and pending legislation in several jurisdictions, and constantly modifying policies and procedures accordingly, can be difficult.
  • Who is “vaccinated”? While a fully vaccinated workforce is still the best way to ensure that the workforce is as protected as possible, as the time increases between employees’ final doses or booster shots, immunity may wane, and as of now, there’s not an easy metric for employers to use to determine just how protected workers are at any given time. Employers who continue to implement mandatory vaccination policies should determine how they will require employees to keep vaccinations up-to-date, and what steps to take if today’s vaccinated employees don’t have effective immunity levels to combat surges down the road. There is some guidance on this point. For instance, the San Francisco County Health Officer recently clarified that the City’s definition of “up-to-date on vaccination” does not include any boosters beyond the first booster shot, but also mentioned that “future conditions may require a change.”
  • Religious accommodations. Employers have seen their fair share of accommodation requests from employees asserting religious beliefs in order to obtain an exemption from vaccination requirements. Determining whether an employee is entitled to a religious-based accommodation can be tricky. The Equal Employment Opportunity Commission (EEOC) explains that employers should generally assume an employee’s request for a religious accommodation is based on sincerely-held beliefs–even if the religious belief is unfamiliar to the employer or a nontraditional religious belief. The test under Title VII’s definition of religion is whether the beliefs are, in the individual’s “own scheme of things, religious.” Employers can reject religious accommodations if they determine the employee’s objection is based on “social, political, or personal preferences, or nonreligious concerns about the possible effects of the vaccine.” This will almost always require employers to make a difficult call and face the risk of litigation by disgruntled employees if accommodations are denied.
  • Employee lawsuits. Employers should balance the benefits of a mandatory vaccination policy against the detriment of possible employee lawsuits from employees who don’t want to be vaccinated. Especially now–with no OSHA ETS to provide protection and the lifting of indoor mask mandates and vaccination mandates across the country and elsewhere–employers will have to determine whether maintaining a mandatory vaccination policy (as opposed to, for instance, a policy that allows employees to choose between vaccination or regular testing) is worth it.

Key takeaways: Employers should revisit mandatory testing or vaccination policies in those locations where they are still requiring them, and determine whether they should make changes based on the considerations outlined above and other factors such as current COVID-19 levels in the communities where they have employees.

  1. Accommodation requestswhat can employers expect?

Employers returning employees to the office should be prepared to handle not only requests for accommodation from vaccination requirements, but also for “long COVID”– a term used by the CDC to describe various post-COVID-19 conditions where individuals experience new, returning, or ongoing health problems four or more weeks after being infected with the virus.

According to the EEOC’s COVID-19 Q&A technical guidance, “long COVID” can be an actual disability if it substantially impairs a major life activity. The EEOC has provided examples of individuals who suffer from ongoing health problems and are “substantially limited in major life activities” weeks after they are infected with COVID-19, including:

  • An individual diagnosed with COVID-19 who experiences ongoing but intermittent multiple-day headaches, dizziness, brain fog, and difficulty remembering or concentrating which the employee’s doctor attributes to the virus
  • An individual diagnosed with COVID-19 who initially receives supplemental oxygen for breathing difficulties and has shortness of breath, associated fatigue, and other virus-related effects that last, or are expected to last, for several months
  • An individual who has been diagnosed with COVID-19 and experiences heart palpitations, chest pain, shortness of breath, and related effects due to the virus that last, or are expected to last, for several months
  • An individual diagnosed with “long COVID,” who experiences COVID-19-related intestinal pain, vomiting, and nausea that lingers for many months, even if intermittently

Key takeaways: Employers should prepare for long-COVID accommodation requests by reviewing the EEOC guidance and CDC guidance on long COVID, reviewing their reasonable accommodation policies and procedures, and ensuring that managers, supervisors and HR are trained on long COVID and consider it a disability when processing reasonable accommodation requests.

  1. Travelwhat’s required?

Finally, international travelers flying to the US are no longer required to present proof of a negative coronavirus test taken within a day of their departure flight to the US. Just after midnight on June 12, 2022, the Biden administration lifted its requirement that all travelers test negative for coronavirus before flying to the US. The change will be reassessed by Centers for Disease Control and Prevention (CDC) in 90 days, according to a senior administration official. The CDC may decide to reinstate the requirement if a new variant of the virus emerges that is of concern.

Testing prior to air travel is still recommended. Moreover, foreign nationals still are required to be fully vaccinated against coronavirus to enter the country (whether traveling by air or by land), with limited exceptions.

The CDC has kept and expanded its travel advice based on the community spread of COVID-19 in the US, with protective cautionary measures relative to the level of community spread. For individuals traveling to areas with a high level of community spread, the CDC recommends wearing a mask in indoor public places, that individuals who are not up to date with their COVID-19 vaccines avoid travel to high level areas, and that unvaccinated individuals quarantine for five days upon returning home and test three to five days after returning home.

The CDC also still recommends all travelers:

  • Ensure they are up-to-date with COVID-19 vaccines (including boosters) before any planned travel
  • Self-monitor for COVID-19 symptoms, and isolate and get tested if they develop symptoms
  • Consider packing at-home COVID tests in case they develop symptoms while traveling
  • Bring a mask, because they may be required by individual airports, airlines, public transit agencies, and some businesses

Travel requirements for jurisdictions outside of the US continue to vary greatly. The United Kingdom has completely lifted its vaccination requirements for travelers, and other countries in Europe have as well. Many countries have a stoplight system–signaling that you don’t have to be vaccinated if traveling from a “green” country, but that if you’re traveling from red list countries you may have to be vaccinated or meet additional requirements. And countries with limitations on travel may have exceptions. For instance, the Netherlands won’t allow travelers to stay in the Netherlands if they’re not vaccinated, but if they’re simply transiting through the Netherlands to another location, they may be able to wait in the airport for a bit before moving on.

Key takeaways:

Know before you go (and make sure employees know before they go), because requirements for travel vary by jurisdiction, but at the moment fully vaccinated international travelers are not required to provide a negative test before boarding a plane to travel to the US.

  1. Formswhat should employers keep?

We don’t know whether another variant or surge will come along requiring employers to once again reinstate COVID-19 policies and procedures they may have started putting to the side. Though we all hope to never need them again, employers should not toss out all of the systems they have implemented to deal with the pandemic just because of COVID-19 exhaustion.

We think employers should hold onto these types of forms:

  • Documents for reasonable accommodation requests under the ADA and Title VII (and analogous state / local law), for both COVID-19 related and non-COVID-19 related requests–including request forms, request determination notifications, a guide to assist managers, supervisors and HR through the interactive and determination process, and response letter templates (both for granting accommodations and denying them). As we said before, we expect to see requests for accommodation continue, and having these forms handy will be helpful, especially with the expected uptick in accommodation requests as employers return employees to the office.
  • A plan for reopening / reopening checklist. We’ve learned from experience that depending on community levels or outbreaks in the workplace, employers may need to close the office for a week or two and then quickly pivot and reopen. A plan to reopen and an easy-to-follow checklist will help employers remain agile should we see more waves or surges.
  • Employee and visitor symptom / health check self-certification forms, requiring respondents to self-certify a lack of COVID-19 symptoms, close contact or diagnosis. In the case of increased COVID-19 case levels, these may again come into play.
  • Protocol for when an employee or visitor tests positive for COVID-19. Especially if employers operate for a while without a positive case in the workplace, this is a great reference should one occur. Make sure to update this with applicable CDC, state and local requirements and guidance.

Key takeaway: Employers should review and update their COVID-19 forms, policies and procedures, taking stock of what they have–and what they may need–to be able to change course at a moment’s notice.

So, in summary, employers should think through: 

  • Contact tracing-employers should continue to trace in accordance with applicable requirements or guidance, and fully understand the risks if they don’t
  • Testing and vaccination policies-employers should revisit these and determine what works best now, while following state and local requirements
  • Accommodation requests-employers will continue to deal with these, so make sure managers, supervisors and HR are up-to-speed
  • Travel-know before you go, because travel rules still vary greatly by jurisdiction
  • Forms-keep the ones we’ve outlined for a quick pivot if necessary

For assistance with these items and all of your employment needs, contact your Baker McKenzie employment attorney.

Summer in Chicago always brings welcome change, but the end of the Illinois legislative session in the spring can mean a flurry of new obligations in the summer for Illinois employers. This year is no exception. We highlight five changes Illinois employers should be aware of as they prepare their workforce for this summer and beyond.

  1. The Illinois CROWN Act makes workplace hair discrimination illegal

On June 29, 2022, Governor Pritzker signed the Create a Respectful and Open Workplace for Natural Hair Act (“CROWN Act”) into law, banning race-based hair discrimination by employers in Illinois. Specifically, the CROWN Act, which is effective January 1, 2023, expands the definition of “race” under the Illinois Human Rights Act (IHRA) to include “traits associated with race, including, but not limited to, hair texture and protective hairstyles such as braids, locks, and twists.” Though a similar law, Illinois SB 817, was signed into law in August 2021, it only prohibited schools from issuing policies on hairstyles historically associated with race or ethnicity. The CROWN Act, expands the protection by prohibiting race-based hair discrimination in employment, housing, financial transactions and public accommodations.

Illinois and 16 other states (including California, Colorado, Connecticut, Delaware, Louisiana, Maine, Maryland, Nebraska, Nevada, New Mexico, New Jersey, New York, Oregon, Tennessee, Virginia, and Washington) and several municipalities have enacted similar CROWN laws. In addition, the US House of Representatives passed a federal CROWN Act in March of this year which would make hair discrimination illegal in all 50 states if passed, but the bill has not yet been approved by the Senate.

What should Illinois employers do now?

Illinois employers should:

  • Revise employee handbooks, with a particular focus on grooming policies, to ensure they emphasize compliance under the CROWN Act.
  • Train managers / supervisors, HR and employees on the CROWN Act to mitigate the possibility of race-based hair or trait discrimination under the CROWN Act and other applicable anti-discrimination laws.
  1. New sexual harassment prevention obligations for Chicago employers

On April 27, 2022, the Chicago City Council passed Substitute Ordinance 2022-665, amending the Chicago Human Rights Ordinance and creating new obligations for Chicago employers relating to sexual harassment prevention. The amendments became effective July 1, 2022.

Here are the key changes Chicago employers need to know:

New written policy requirements

Employers must have a written policy prohibiting sexual harassment as of July 1, 2022. The written policy must include:

  • The definition of sexual harassment in Section 6-10-020, which has been revised to specifically include sexual misconduct: “any (i) unwelcome sexual advances or unwelcome conduct of a sexual nature; or (ii) requests for sexual favors or conduct of a sexual nature when (1) submission to such conduct is made either explicitly or implicitly a term or condition of an individual’s employment, or (2) submission to or rejection of such conduct by an individual is used as the basis for any employment decision affecting the individual, or (3) such conduct has the purpose or effect of substantially interfering with an individual’s work performance or creating an intimidating, hostile or offensive working environment; or (iii) sexual misconduct, which means any behavior of a sexual nature which also involves coercion, abuse of authority, or misuse of an individual’s employment position.”
  • A statement that sexual harassment is illegal in Chicago, as well as a statement that retaliation for reporting sexual harassment is illegal in Chicago.
  • Examples of sexual harassment.
  • Details on how an employee can report an allegation of sexual harassment, including, as appropriate, instructions on how to make confidential reports (with an internal complaint form) to managers, corporate headquarters, human resources, or other internal reporting processes.
  • Information about legal services, including governmental agencies, available to employees who may be victims of sexual harassment.

The written policy must be made available to employees within their first calendar week of starting employment, in the employee’s primary language.

The Chicago Commission on Human Relations (the “Commission”) has provided model sexual harassment policies in several languages on its website.

New training requirements

The written policy also must include a requirement that all employees participate in annual sexual harassment prevention training–and employers are required to mandate their employees participate in the trainings beginning July 1, 2022, meaning that by June 30, 2023 all employees must receive their first round of required annual training. Specifically:

  • All employees must participate in a minimum of one hour of sexual harassment prevention training annually
  • Supervisors / managers must participate in a minimum of two hours of sexual harassment prevention training annually
  • All employees must also participate in a minimum of one hour of bystander training annually

The State of Illinois model sexual harassment prevention training program, which provides one hour of training, is sufficient for the sexual harassment prevention training for employees. In addition, training templates and materials for the additional hour of training (for supervisors / managers) and for the hour of bystander training have been made available to employers on the Commission’s website.

New notice requirements

Effective July 1, 2022, all employers are required to conspicuously display–in at least one location where employees commonly gather–posters, both in English and in Spanish, designed by the Commission about the prohibitions on sexual harassment. The posters are available for download on the Commission’s website.

Recordkeeping requirements

Employers must keep a record of the employer’s written policy prohibiting sexual harassment, trainings given to each employee, and records demonstrating compliance for at least five years–or for the duration of any claim, civil action, or pending investigation relating to the law, whichever is longer. If employers fail to maintain the records, a presumption is created that the employer is in violation of the law (rebuttable only by clear and convincing evidence).

Longer statute of limitations, longer notification period for the Commission, and penalties

Employees now have a 365 day statute of limitations (instead of 300 days) to report all forms of discrimination, including sexual harassment. In addition, after receiving a report of an alleged violation, the Commission has 30 days to notify a respondent (increased from 10 days)–which, according to outreach materials on the amendments, is intended to mitigate retaliation such as denial of a reasonable accommodation request.

Any employer who violates the written policy, training or notice requirements is subject to a fine of between $500-$1000 per day, per offense.

What should Chicago employers should do now?

  • Review sexual harassment prevention training programs for timing and content to ensure they comply with the new law.
  • Determine rollout procedures to ensure all employees receive training before June 30, 2023.
  • Train HR on the new amendments, including recordkeeping requirements.
  • Visit the Commission’s website for helpful model materials.

Continue Reading Illinois Employer Summer Checklist: 5 Recent Changes You Should Know

Special thanks to presenters Michael Michalandos (Sydney), Jonathan Isaacs (Hong Kong), Tomohisa Muranushi (Tokyo), Kenneth Chua (Manila) and Celeste Ang (Singapore)

Our four-part Navigating the World webinar series features US moderators welcoming Baker McKenzie colleagues from around the globe as they share the latest labor and employment law updates and trends. In this session, US-based multinational employers with business operations in the Asia Pacific region hear directly from Joseph Deng and local practitioners on the major developments they need to know, and come away with practical tips and takeaways to implement.

Please click here to view a recording of the webinar highlighting APAC.

Click here to view the program details and to watch recordings of any sessions you may have missed.

 

 

Special thanks to presenter Melissa Allchin.

 

The possibility of putting COVID-19 in our collective rearview mirrors grows every day. But before we declare the pandemic over, our Labor & Employment and Immigration lawyers discuss the key items employers should keep in mind as we head towards the pandemic’s exit, including:

  • contact tracing, exposure notification requirements and confidentiality concerns for the workplace
  • testing and vaccine mandates
  • religious, medical and disability accommodations
  • business travel and travel-related testing
  • form retention

Click here to watch the video.

Special thanks to presenters Johan Botes (Johannesburg), Elif Nur Cakir Vurgun (Istanbul), Joanna Matthews-Taylor (Dubai) and Christiana O’Connell-Schizas (Riyadh)

Our four-part Navigating the World webinar series features US moderators welcoming Baker McKenzie colleagues from around the globe as they share the latest labor and employment law updates and trends. In this session, US-based multinational employers with business operations in the Middle East and Africa hear directly from Elizabeth Ebersole and local practitioners on the major developments they need to know, and come away with practical tips and takeaways to implement.

Please click here to view a recording of the webinar highlighting MEA. 

We invite you to register to reserve your spot at our final session wrapping up this series:

ASIA PACIFIC: Wednesday, June 22 at 3 pm PT / 5 pm CT/ 6 pm ET

Click here to view the program details, to register and to watch recordings of any sessions you may have missed.

The U.S. Supreme Court just handed employers a huge win in the continuing war over California’s Private Attorneys General Act (PAGA), a bounty-hunter statute that deputizes employees to sue on behalf of the state. In yesterday’s Viking River Cruises, Inc. v. Moriana, decision, the Supreme Court held that employers may compel employees to arbitrate individual PAGA claims, and that non-individual (representative) PAGA claims should be severed and dismissed by courts. (See our previous discussions of the Viking River Cruises case here and here).

The Viking River Cruises decision provides employers with a necessary defense to the ever increasing flood of PAGA claims and litigation.  Employers who already use arbitration agreements should immediately revise their templates to account for the Court’s holding. And employers who do not have arbitration programs in place now have another, compelling reason to roll out arbitration agreements: protecting their businesses against the very real threat of outlandish PAGA penalties for even minor, hyper technical violations of the California Labor Code.

Below, we recap the PAGA statute, the Court’s decision, and what employers should do now.

First, a little about PAGA

PAGA, enacted in 2004, permits a single employee to stand in the shoes of California’s Attorney General and file suit on behalf of other “aggrieved” employees to recover civil penalties for California Labor Code violations. Under existing California precedent, the PAGA statute effectively works a rule of claim joinder, allowing a single party to unite multiple claims against an opposing party in a single action. The penalties recoverable in a PAGA action can be substantial, with default penalties calculated as $100 “for each aggrieved employee per pay period for the initial violation,” and $200 per aggrieved employer per pay period for “each subsequent violation.” As such, potential PAGA claims easily reach millions of dollars against small employers, and tens of millions against large employers. Worse, PAGA claims often are founded on technical violations of the Labor Code, such as simple administrative oversights, that result in no real harm to employees. Under PAGA, the state keeps 75% of any PAGA award, with the remaining 25% distributed among the employees affected by the violation at issue.

California court decisions have expanded PAGA’s reach over the years. In 2009, the California Supreme Court held that employees bringing actions under PAGA need not comply with the procedural rules applicable to class actions, such as the need to show common issues that are capable of resolution through common proof. See Arias v. Superior Court, 46 Cal. 4th 969 (2009). Then, in 2014, the California Supreme Court held that employees could not waive their right to bring PAGA claims in court through arbitration agreements, paving the way for a significant uptick in PAGA litigation. See Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014). The U.S. Supreme Court took issue with Iskanian in Viking River Cruises, and overruled the case in part.

What happened in Viking River Cruises

After quitting her job at Viking, Angie Moriana filed a PAGA action against Viking in California state court. Her complaint alleged that Viking had failed to provide her with her final wages within 72 hours, as required by Sections 201 and 202 of the California Labor Code. Moriana also asserted an array of other Labor Code violations allegedly suffered by other Viking employees-including violations of provisions concerning the minimum wage, overtime, meal periods, rest periods, timing of pay, and pay statements.

Moriana had entered into a mandatory arbitration agreement with Viking at the start of her employment, in which she agreed to arbitrate any dispute arising out of her employment. The arbitration agreement also contained a “Class Action Waiver”-providing that in any arbitral proceeding, the parties could not bring any dispute as a class, collective, or representative PAGA action-and a severability clause specifying that if the Class Action Waiver was found invalid, any class, collective, representative, or PAGA action would presumptively be litigated in court. However, under the severability clause, if any portion of the waiver remained valid, it would be enforced in arbitration.

Viking moved to compel arbitration of Moriana’s “individual” PAGA claim—her claim for damages arising from the alleged violation she personally suffered—and to dismiss the other PAGA claims that Moriana asserted on behalf of other employees as the deputized agent of the state. The trial court denied the motion, and the California Court of Appeal affirmed, holding that categorical waivers of PAGA standing are contrary to state policy and also that PAGA claims cannot be split into arbitrable individual claims and nonarbitrable “representative” claims (i.e., claims brought on behalf of other employees).

The California Court of Appeal’s ruling necessarily followed the holding of the California Supreme Court in Iskanian, which established two PAGA rules:

  • a principal prohibition that prevents parties from waiving representative standing (here, a “representative” as a proxy for the state) to bring PAGA claims in a judicial or arbitral forum, and
  • a secondary prohibition invalidating agreements to separately arbitrate or litigate “individual” PAGA claims for Labor Code violations that an employee suffered, on the theory that resolving victim-specific claims in separate arbitrations does not serve the deterrent purpose of PAGA.

Under Iskanian’s principal prohibition, the lower courts were required to treat the representative-action waiver in the agreement between Moriana and Viking as invalid to the extent it was construed as a wholesale waiver of PAGA standing. However, the agreement’s severability clause allowed enforcement of any “portion” of the waiver that remained valid, so the agreement still would have permitted arbitration of Moriana’s individual PAGA claim even if wholesale enforcement was impossible. But because California law prohibits division of a PAGA action into constituent claims, the state courts refused to compel arbitration of Moriana’s individual PAGA claim as well. The U.S. Supreme Court granted certiorari, and reversed.

What the U.S. Supreme Court said

The question before the U.S. Supreme Court was whether the Federal Arbitration Act (FAA) preempts the California rule invalidating the contractual waivers of the right to assert representative claims under PAGA.

The U.S. Supreme Court found that PAGA’s built-in mechanism of claim joinder is in conflict with the FAA. Iskanian’s prohibition on contractual division of PAGA actions into constituent claims circumscribes the parties’ freedom to determine by contract what issues are subject to arbitration and the rules by which they will arbitrate, violating the fundamental principle that arbitration is a matter of consent. The Court found a state rule imposing an expansive rule of joinder in the arbitral context would defeat the ability of parties to control which claims are subject to arbitration-and which ones are not-by permitting parties to “superadd” new claims to the proceeding, regardless of whether the agreement committed those claims to arbitration. When made compulsory by way of Iskanian, precisely as how PAGA’s joinder rule functions, the result is that the parties are effectively compelled to either go along with an arbitration in which the range of issues under consideration is determined by coercion rather than consent, or else forgo arbitration altogether. Either way, the Court said, the parties are coerced into giving up a right they enjoy under the FAA, and thus Iskanian’s rule is incompatible with the FAA.

Because Iskanian’s rule that PAGA actions cannot be divided into individual and non-individual claims is preempted, Viking was entitled to compel arbitration of Moriana’s individual PAGA claim. And because PAGA does not provide a mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding, the Supreme Court held that courts should dismiss non-individual, representative PAGA claims for lack of standing.

What employers should do now

The Viking decision is the light at the end of the tunnel California employers have been looking for since the Iskanian decision-and before. But employers should be diligent to ensure that their employment agreements and arbitration provisions will avail them of the benefit of this ruling. California employers should review form / template employment agreements with counsel for any necessary modifications, and work with counsel to make sure they are compliant with applicable pay, meal and rest break, and other requirements that are popular targets of PAGA claims. Contact your Baker McKenzie employment attorney for help understanding how the Viking decision impacts your workforce and for help with your employment needs.

We are pleased to share with you The Global Employer – Global Immigration & Mobility Quarterly Update, a collection of immigration and mobility alerts from around the world.

Please click here to view.

Special thanks to presenters Matias Herrero (Buenos Aires), Liliana Hernandez-Salgado (Mexico City), Maria Cecilia Reyes Jaimes (Bogota), Leticia Ribeiro (Trench Rossi Watanabe, Sao Paulo*) and Andrew Shaw (Toronto)

*Trench Rossi Watanabe and Baker McKenzie have executed a strategic cooperation agreement for consulting on foreign law

Our four-part Navigating the World webinar series features US moderators welcoming Baker McKenzie colleagues from around the globe as they share the latest labor and employment law updates and trends. In this session, US-based multinational employers with business operations in the Americas hear directly from Benjamin Ho and local practitioners on the major developments they need to know, and come away with practical tips and takeaways to implement.

Please click here to view a recording of the webinar highlighting the Americas. 

We invite you to register to reserve your spot at our upcoming sessions:

MIDDLE EAST AND AFRICA: Wednesday, June 15 at 9 am PT / 11 am CT/ 12 pm ET

ASIA PACIFIC: Wednesday, June 22 at 3 pm PT / 5 pm CT/ 6 pm ET

Click here to view the program details, to register and to watch recordings of any sessions you may have missed.

 

Special thanks to panelist Nicholas Murray, of Twilio.

 

 

Join us for our webinar, “Measure What You Treasure,co-hosted by the ACC Foundation.

The first step in any organization’s strategic approach to advancing inclusion, diversity and equity is ensuring that accurate data exists. But diversity data collection can be challenging.  During this session our expert panelists will address the importance of data in your I&D strategy, how to get hold of it, what to do with it when you have it, and the related employment and data privacy law implications and considerations.

Date: Tuesday, June 21, 2022

Time: 1:00 – 2:00 pm ET

Click here to register.