Two new City of Los Angeles ordinances that the mayor signed into law on May 4, 2020 will force employers in certain industries to rehire laid off or furloughed employees in a specified manner, rather than at the employer’s discretion. The Right of Recall Ordinance (“Recall Ordinance”) and Worker Retention Ordinance (“Retention Ordinance”) require return-to-work preferences to certain employees in the hard-hit travel, entertainment, tourism, and hospitality sectors, who have been furloughed or laid off due to the COVID-19 shelter-at-home orders issued by Governor Gavin Newsom and Mayor Garcetti. 

The Recall Ordinance mandates that certain employees laid off from work on or after March 4, 2020 must be rehired pursuant to a recall procedure that is reminiscent of unionized workforces governed by collective bargaining agreements. Those affected include (a) certain employees who work for an “Airport Employer”; (b) janitorial, maintenance or security services personnel working for a “Commercial Property Employer”; (c) personnel working for an “Event Center Employer” or (d) personnel working for a “Hotel Employer.” The Recall Ordinance does not include a sunset provision.¹

The accompanying Retention Ordinance governs the same industries as the Recall Ordinance and mandates that in the event of a change in control or change in ownership of an Airport Business,² Commercial Property Business, Event Center Business, or Hotel Business, for two years following the declaration of the COVID-19 emergency,³ those employed on or after March 4, 2020 by the incumbent business, must be placed on a “preferential hiring list.” The new entity must hire personnel from this list for at least six months, must retain these personnel for no less than 90 days, and must also conduct performance evaluations to assess ongoing employment.

Both ordinances will become effective on June 14, 2020 and significantly limit the applicability of at-will employment⁴ for employees in these industries.

Is My Business Impacted?

The two companion ordinances apply to the following industries only:

• Airport Employers and Airport Businesses: include any employers that provide service at Los Angeles Airports or provide service to employers servicing Los Angeles Airports except airlines and business that have contracted with the airport whose contracts already include worker rehire procedures.
• Commercial Property Employers and Commercial Property Businesses: include non-residential properties located in Los Angeles that employ 25 or more janitorial, maintenance or security service workers. Covered employers include the owner, operator, manager, lessee, contractor, subcontractor or sublessee. These ordinances only apply to janitorial, maintenance, and security service workers who perform work for a Commercial Property Business.
• Event Center Employers and Event Center Businesses: include publicly or privately owned structures in the City with more than 50,000 square feet or with a seating capacity of 1,000 seats or more, that are used for public performances, sporting events, business meetings or similar events. Covered employers include the owner, operator, or manager of an Event Center.  Examples of an “Event Center” include concert halls, stadiums, sports arenas, racetracks, coliseums, and convention centers.
• Hotel Employers or Hotel Businesses: include residential buildings in the City designated or used for public lodging or other related service for the public and either contain 50 or more guestrooms or have earned gross receipts in 2019 exceeding $5 million. Covered employers include the owner, operator or manager of the hotel, or the owner, operator, manager or lessee of any restaurant physically located on the hotel premises.

Notably, non-profit institutions of higher learning that operate medical centers in the City of Los Angeles are exempted from these ordinances.

What Does the Recall Ordinance Require My Business to Do?

The Recall Ordinance requires that employers in the identified industries make a written offer (by mail, email and text message) of recall back to work to a “Laid Off Worker” for any position that is or becomes available for which the individual can work. To be qualified for recall, the worker must have either:

1. Held the same or similar position at the same site of employment at the time of the most recent separation; or
2. Is or can be qualified for the position by receiving the same training that a brand new hire would receive for the position.

Don’t Forget Seniority!

If more than one worker is entitled to a preference to be recalled, the employer must give priority to the worker with the greatest length of active service for the employer based on that employee’s having held the same or similar position at the same worksite. Thereafter, the employer can take into account whether the employee subject to recall is or can be qualified for the position by providing the same training as it would provide to a new hire.

Employees subject to recall must be given at least five days to accept or reject the offer of recall.

Does My Business Have to do this for All its Employees?

No. The two ordinances only apply to active employees of the identified business (including time when the employee was on leave or vacation) and meet all of the following criteria:

1. Employees who, in a particular week, perform at least two hours of work within the geographical boundaries of the City for the employer, and
2. Have been employed with the employer for at least 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 reason.

Managers, supervisors, confidential employees or persons who perform, as their primary job responsibility, sponsorship sales for an Event Center Business are not covered.

Can My Business Still Fire Employees for Any Lawful Reason?

The ordinances create a rebuttable presumption that any termination of employment occurring on or after March 4, 2020, was due to a non-disciplinary reason—i.e., due to COVID-19-related operational limitations or closures.  However, if the employee was having performance or work conduct issues, or was otherwise being disciplined for lawful reasons, it is imperative to maintain documentation of such measures in order to definitively rebut the ordinance’s presumption that the employee was fired for non-disciplinary reasons that might entitle them to automatic right of recall.

Clear and unequivocal documentation of performance concerns is crucial because both ordinances expressly provide for a private right of action enabling employees to sue in California state court.

What are the Risks for Non-Compliance?

Failure to comply with the Recall Ordinance allows eligible employees to sue in California Superior Court to obtain:

• Hiring and reinstatement rights;
• Actual damages for lost pay and benefits, and statutory damages of $1,000, whichever is greater;
• Punitive damages; and
• Reasonable attorney’s fees and costs.

Before suing under the Recall Ordinance, however, the employee must give written notice to the employer of the legal violations and facts, and the employer is allowed 15 days from receipt of the notice to cure the violations.

Similarly, failure to comply with the Retention Ordinance allows eligible employees to sue the previous owner or the successor business to obtain:

• Hiring and reinstatement rights;
• Front or back pay for each day the violation continues, which will 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 years of their employment in the same occupation classification; or
  • The most recent regular rate received by the worker while employed by either the business, the previous owner, or the successor business;
• The value of the benefits the worker would have received under the successor business’ benefits plan; and
• Reasonable attorneys’ fees and costs.

Similarly, before suing under the Retention Ordinance, the worker must give written notice to the previous owner and/or successor business of the legal violations and facts, and the previous owner and/or successor business has 15 days from receipt of the written notice to cure the violations.

We are About to Buy One of These Distressed Businesses. How do These Ordinances Impact Change in Personnel?

Businesses seeking to acquire or are acquiring other businesses in the above categories must also comply with these ordinances as successor employers—regardless of whether it is an asset or stock purchase.  These entities must retain workers if a change in ownership or control occurs within two years from the date of the COVID-19 emergency declaration.

The previous owner is required within 15 days after execution of a document of transfer/sale, to provide to the successor business the names, addresses, dates of hire, and occupation classifications of each worker.  For purposes of this section, the eligible workers of the previous owner include the following:

1. An employee who has been actively employed with the previous owner for six months or more;
2. Whose primary place of employment is a business subject to the sale, transfer, acquisition or other change of control;
3. Who is employed or contracted to perform work functions directly by the previous owner, or by a person who has contracted with the previous owner to provide services at the business subject to the change in control; and
4. Who worked for the previous employer on or after March 4, 2020, and prior to the execution of the documents transferring control/ownership.

Consistent with the above, the eligible employees do not include managerial, supervisory, or confidential employees.

From the list provided by the previous owner, the “successor business” must hire from a preferential list provided by the previous owner for at least six months after the successor business opens its operation to the public.  If the successor business extends an offer of employment to a worker, the successor business must keep written verification of that offer for no fewer than three years from the date the offer was made, and the verification must include the name, address, date of hire, and occupation classification of each worker.

The successor business must then retain such workers for a period of at least 90 days, and conduct performance evaluations after the 90-day period. An employer can only fire an employee during this time if there is “cause” for the termination.  If the worker’s performance during the 90-day transition employment period is satisfactory, the successor business must consider offering continued employment, and retain a record of the written performance evaluation period for no fewer than three years.

What if the Employees of Our Company are Already Covered by a Collective Bargaining Agreement?

The ordinances expressly stated that a collective bargaining agreement containing a right of recall clause supersedes these ordinances.  If the collective bargaining agreement expires or is subject to renewal, a waiver of the ordinance must be in clear and unambiguous terms in the collective bargaining agreement itself.  Any other alleged waiver of the ordinance will be deemed void.

Can Los Angeles Really do This?

The Retention Ordinance is modeled after the Los Angeles Grocery Worker Retention Ordinance, which was enacted in 2005 with broad support from local employee unions and heavily litigated. In 2011, the California Supreme Court concluded that the Grocery Worker Retention Ordinance was not preempted by the National Labor Relations Act and did not violate equal protection.⁵ We are informed that local employee unions are advocating that other municipalities in Los Angeles County consider similar measures. 

Affected employers should take precaution to ensure that their already complicated return to work business plans comply with these ordinances because the penalties for non-compliance can be steep.