The City of Los Angeles Enacts Ordinances Requiring Certain Employers to Recall Laid Off Workers and Retain Workers Upon the Sale of the Business

The City of Los Angeles recently enacted two ordinances that provide unprecedented employment protections for workers and place heavy new burdens on employers in several industries hit most heavily by the COVID-19 pandemic: Hospitality, Commercial Property, and the Airport.

On May 3, 2020, Mayor Eric Garcetti signed the “COVID-19 Right of Recall Ordinance” and the “COVID-19 Worker Retention Ordinance,” which become effective on June 14, 2020. Both Ordinances include “COVID-19” in their title, and the stated purpose of both Ordinances is to ensure fair employment practices during the economic upheaval resulting from the COVID-19 pandemic. The Right of Recall Ordinance also specifically states it was enacted to provide “legal protections for workers laid off due to the pandemic,” but an examination of the operative language of the Ordinance makes clear that it provides new recall rights to employees even if their lay-off was not caused by COVID-19. Similarly, the Worker Retention Ordinance provides new retention rights in the event of the sale of a business, even if the sale is not prompted by COVID-19.

COVID-19 Right of Recall Ordinance[i]

The Right of Recall Ordinance requires Covered Employers to recall Qualified Laid Off Workers to any position that is or becomes available after June 14, 2020. The written offer of recall must give the worker no less than five (5) business days to accept or decline the position, and it must be sent via U.S. Mail to the worker’s last known mailing address, and via electronic mail and text message to worker’s the last known email address and cell phone number. 

A “Covered Employer” includes:

• Airport Employers – Any employer providing services at any airport operated by the City of Los Angeles Department of Airports within the City, or providing services to any employer servicing the Airport, but excluding airlines and employers whose contracts with the Airport already contain a worker rehire requirement.
• Commercial Property Employers – Owners, operators, managers, and lessees of non-residential property within the City that employ 25 or more janitorial, maintenance, or security service workers. (The Ordinance only applies to those employees of the business that perform janitorial, maintenance, and security services.)
• Event Center Employers – Owners, operators, and managers of any venue within the City that is used for public performances, sporting events, business meetings, or similar events, and which is more than 50,000 square feet or has a seating capacity of 1,000 or more. An Event Center includes, but is not limited to, concert halls, stadiums, sports arenas, racetracks, coliseums, and convention centers including concert halls, stadiums, sports arenas, and convention centers.
• Hotel Employers – Owners, operators, and managers of buildings within the City used for public lodging or other related public service, and which have 50 or more guestrooms or gross receipts in excess of $5 million in 2019. A Hotel Employer includes the owner, operator, manager, or lessee of any restaurant physically located on hotel premises.

A “Laid Off Worker” is any worker who:

• Performs at least two (2) hours of work in a particular week within the City of Los Angeles for a Covered Employer;
• Worked for the Covered Employer for six (6) months or more; and
• Was laid off due to lack of business, reduction in workforce, or other economic non-disciplinary reasons on or after March 4, 2020.[ii] The Ordinance creates a rebuttable presumption that any lay off occurring on or after March 4, 2020 was due to a “non-disciplinary reason.”[iii]

Managers, supervisors, confidential employees, and workers who “perform as their primary job responsibility sponsorship sales for an Event Center Employer” are excluded from coverage.

A Laid Off Worker is “Qualified” for an open position and must be recalled if the worker:

• Held the same or similar position at the same site of employment at the time of the worker’s most recent separation from active service with the employer; or
• Is or can be qualified for the position with the same training that would be provided to a new worker hired for that position.

If more there is more than one Qualified Laid Off Worker for any position, the employer shall first offer the position to the worker with the greatest length of service in the same or similar position and then to the worker who is or can be qualified for the position with training. When determining length of service, the employer must count all periods of time during which a worker has been in active service, including periods of time when the worker was on leave or vacation.

Worker Retention Ordinance[iv]

The Worker Retention Ordinance requires the retention of employees when a Covered Business changes ownership or control[v] and the new owner (Successor) continues to operate the same type of business as the former owner (Incumbent).

Specifically, the Incumbent is required to post, in a conspicuous place, a written notice advising workers of the change in control within five (5) business days following the execution of the purchase agreement (Transfer Document), and the notice must remain posted until six (6) months after the business is open to the public under the Successor.[vi] Within fifteen (15) days after execution of the Transfer Document, the Incumbent is also required to provide the Successor with a list of its workers, including, their name, address, date of hire, and occupation classification.

The Successor is required to maintain a preferential hiring list of the Incumbent’s Covered Workers, and hire from that list until six (6) months after the Successor opens its business to the public. The Successor must provide a written offer of employment to each worker hired from the list; the offer must remain open for at least ten (10) business days; and it must offer employment for at least a ninety (90) day transition period, during which the worker can only be terminated for “cause.”[vii] At the end of the ninety (90) days, the Successor must perform a written evaluation of each worker, and if satisfactory, consider offering the worker continued employment.[viii]

The “Covered Businesses” under the Worker Retention Ordinance are identical to the Covered Employers under the Right to Recall Ordinance: Airport Employers, Commercial Property, Event Center Employers, and Hotel Employers.

A “Covered Worker” is any worker who:

• Is primarily employed by an Incumbent business subject to a change in control;[ix]
• Is employed (or contracted to perform work) directly by the Incumbent, or by a person who contracted with the Incumbent, to provide services at the business subject to the change in control;
• Worked for the Incumbent for six (6) months or more; and
• Worked for the Incumbent on or after March 4, 2020 and before execution of the Transfer Document.[x]

Managers, supervisors, and confidential employees are excluded from coverage.

Provisions Common to Both Ordinances

A collective bargaining agreement in place as of on June 14, 2020 that contains a right of recall provision or a worker retention provision supersedes the Ordinances.

Both Ordinances prohibit retaliation against any Covered Worker for asserting rights under the Ordinance, and they create a private cause of action for violation of the Ordinance. However, as a prerequisite to filing a lawsuit, the Covered Worker must send written notice to the employer delineating the specific provisions of the Ordinance alleged to have been violated, and the facts supporting such allegations. The employer then has fifteen (15) days from receipt of the notice to cure the alleged violation(s).

If the Covered Worker prevails in a lawsuit alleging violation of the Right of Recall Ordinance, a court may award reinstatement to the position, the greater of $1,000 or the worker’s actual lost pay and benefits, punitive damages, and attorneys’ fees. If the Covered Worker prevails in a lawsuit alleging violation of the Worker Retention Ordinance, a court may award reinstatement to the position, lost wages and benefits,[xi] and attorneys’ fees. If the employer prevails under either Ordinance, the court may award reasonable attorneys’ fees and costs only if it determines the lawsuit was frivolous.

Neither Ordinance has an expiration date. Instead, both require the Chief Legislative Analyst to report to the City Council and Mayor before March 1, 2022 about the effectiveness of the Ordinances. Specifically, the report must address the effectiveness of the Ordinances in protecting workers’ stability of employment, make recommendations for additional protections that further the intent of the Ordinances, and indicate whether the provisions of the Ordinances are still necessary based on the City’s recovery from the impacts of the COVID-19 pandemic.

Although both Ordinances purport to address employment circumstances and the loss of employment caused by COVID-19, neither actually require an employee’s lay off or the sale of a business to have been caused by COVID-19. In addition, the Ordinances apply to lay-offs occurring any time from March 4, 2020 through the effective date of the Ordinances, which could be March 1, 2022 (nearly two years after the City declared a local public health emergency related to COVID-19) or later if extended, regardless of how long the pandemic lasts, and irrespective of the period of time during which a business experiences negative effects from the pandemic.

For more information on employers’ obligations to employees during the COVID-19 pandemic, suggested policies, or other employment issues, please contact your Lagasse Branch Bell + Kinkead attorney or any member of our COVID-19 taskforce: Jennifer Branch (jbranch@albblaw.com), Kelly Folger (kfolger@albblaw.com), Melissa A. Lewis (mlewis@albblaw.com), Lara P. Besser (lbesser@albblaw.com) and Jessica Yang (jyang@albblaw.com). 

END NOTES:

[i] See Los Angeles City No. Ordinance 186602, Article 4-72J-A to Chapter XX of the Los Angeles Municipal Code, available at: http://clkrep.lacity.org/onlinedocs/2020/20-0147-S15_ORD_186602_06-14-2020.pdf.

[ii] The Ordinance does not require the lay-off to have been caused by COVID-19.

[iii] The Ordinance is retroactive in that it requires recall of workers laid off on or after March 4, 2020, and creates a rebuttable presumption about the reason for lay off, even though the Ordinance does not become effective until June 14, 2020.

[iv] See Los Angeles City Ordinance No. 186603, Article 4-72J-B to Chapter XX of the Los Angeles Municipal Code, available at: http://clkrep.lacity.org/onlinedocs/2020/20-0147-S15_ORD_186603_06-14-2020.pdf.

[v] A change in control means any sale, assignment, transfer, contribution, or other disposition of all or substantially all of the assets used in the operation of the business, or a discrete portion of the business.

[vi] The notice must include the name and contact information of the Incumbent and Successor businesses, and the effective date of the change in control. It must be posted in a conspicuous place at the business, where it is visible to Covered Workers, other employees, and applicants for employment.

[vii] The Successor must retain written verification of all offers for at least three (3) years, including the name, address, date of hire, and occupation classification of each worker.

[viii] There is no “requirement” that an employer actually hire a satisfactorily performing worker, but we recommend employers have documented legitimate business reasons for any decision not to hire, in order to defend against potential discrimination and retaliation claims.

[ix] The Ordinance does not require the change in control to have been caused by COVID-19.

[x] The Ordinance is retroactive in that it requires retention of workers terminated because of a change in control on or after March 4, 2020, even though the Ordinance does not become effective until June 14, 2020.

[xi] Lost wages shall be calculated at a rate of compensation not less than the higher of the average regular rate of pay received by the worker during the last three (3) years of their employment in the same occupation classification, or the most recent regular rate received by the worker while employed by either the Incumbent or Successor business. Lost benefits shall be based on the value of the benefits the worker would have received under the Successor’s standard benefit plans.