All California Attorneys Should Review The State Bar’s Ethical Opinion Providing Guidance On Third-Party Litigation Funding Before Considering Litigation Funding
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The California State Bar’s Standing Committee on Professional Responsibility has issued Formal Opinion No. 2020-204 setting out the ethical considerations and disclosure requirements for attorneys whose clients are considering or utilizing third-party litigation funding. With litigation funders becoming more numerous and more creative in the funding structures offered, the committee’s opinion comes at an excellent time. Within the opinion, the committee points out the following issues and disclosures that attorneys must consider or make before utilizing third-party litigation funding:
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Duties of Competence and Communication: Pursuant to a lawyers’ duties of competence (Rule of Professional Conduct (“CRPC”) Rule 1.1(b)) and communication (CRPC 1.4(a)), an attorney must discuss whether third-party “litigation funding would assist in accomplishing the client’s goals. Such advice would likely need to include a discussion of the pros and cons of obtaining litigation funding and alternatives, if any.” To that end, in order to advise on a litigation funding contract, “the lawyer must understand how the terms of the funding agreement impact decisions in the litigation.”
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Duties of Independent Judgment and Loyalty: CRPC 2.1’s duty to provide “independent professional judgment” and the general duty of loyalty imposed on attorneys interplays with CRPC 1.7’s proscription on an attorney accepting representation “if there is a significant risk that the representation will be materially limited by the lawyer’s relationship with a third person” to limit some possible litigation funding arrangements. Furthermore, CRPC 1.8.6 requires specific disclosures and waivers before a lawyer can accept payment from a third person for the representation of a client. In combination, all of these rules require an attorney to take care when considering third-party litigation funding that requires any of the following: (1) payments made directly to law firms rather than to the clients; (2) rights of review or information sharing requirements with litigation funders; and (3) control over any aspect of the litigation by a third-party funder. While the committee did “not reach a general conclusion that any particular degree of control is per se unethical,” the opinion serves as a warning that such a possibility exists, and warnings and waivers as to the above are a minimum requirement for attorneys considering such an arrangement.
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Protecting Confidential Information: Importantly, attorneys must also consider CRPC 1.6, which bars an attorney from sharing confidential information without a client’s consent. To that end, it is paramount that attorneys seek and obtain a non-disclosure and confidentiality agreement with any third-party litigation funder before communicating any confidential information. Further, such an agreement may aid in protecting communications and work product from being discoverable. The committee cites Laguna Beach County Water Dist. v. Superior Court (2004) 124 Cal.App.4th 1453, 1459 for the proposition that such an agreement may shield work product shared with a litigation funder from discovery. However, as caselaw on these issues has not been developed to a point where a clear answer is known, an attorney must obtain informed consent from a client that such a waiver could occur before undertaking any sort of confidential communication with a third-party litigation funder or entering a litigation funding agreement.
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Although attorneys are often justified in asking exactly what, if any, value they receive in exchange for their bar dues, in this instance, Formal Opinion No. 2020-204 gives California lawyers something useful. By following the guidance therein, attorneys should be able to more effectively craft the appropriate disclosures and conflict waivers for their clients that wish to utilize third-party litigation funding, allowing the attorneys to avoid the headaches and expense of malpractice and breach of fiduciary duty claims.
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About the Author:
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Carl Mueller is a business litigation attorney that represents clients in all phases of civil litigation. Mr. Mueller’s practice has a focus on attorney-client disputes of all kinds. If you have questions regarding this article contact Carl Mueller at cmueller@maloneyfirm.com.
By Carl I. S. Mueller, Esq., The Maloney Firm, APC
Over the last several weeks, the “Center for Disability Access,” a division of the well-known San Diego based law firm Potter Handy, has filed several law suits in the Los Angeles Superior Court and Federal District Courts on behalf of an individual named Chris Langer. Common to each lawsuit are the following facts: (1) Mr. Langer is allegedly suffering from Delayed Endolymphatic Hydrops, which causes permanent partial hearing loss; (2) Mr. Langer attempted to watch videos on the websites of the various defendants, all consumer-facing businesses with brick-and-mortar locations; and (3) the lack of subtitles or closed captioning for the videos on the websites utilized by Mr. Langer created a barrier to Mr. Langer’s use of the website.
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Each of the lawsuits assert the following causes of action:
(1) violations of the Americans with Disabilities Act, specifically 42 USC § 12181 (the “ADA”), and
(2) violations of California’s Unruh Civil Rights Act, specifically Cal. Civil Code § 51-53 (the “Unruh Act”).
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These lawsuits represent several noteworthy developments in the world of ADA litigation. First, while ADA website liability cases are generally increasing, filing cases against consumer-facing companies for failing to place subtitles or closed captioning on internet videos remains uncommon.
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Second, Potter Handy and the Center for Disability Access had previously been focusing almost exclusively on ADA and Unruh Act violations relating to physical and architectural barriers to use. Indeed, Mr. Langer himself was and is a plaintiff in dozens of lawsuits filed by Potter Handy and the Center for Disability Access relating to his use of a wheel chair. As a result of Potter Handy and the Center for Disability Access beginning to file website accessibility cases, and as a testament to the volumes of cases Potter Handy is capable of filing, it is likely that ADA and Unruh Act website violation case filings will begin to increase substantially.
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Third, Mr. Langer has filed these cases in both Federal and State courts at a time when the Los Angeles Superior Court is experiencing significant slowdowns as a result of the COVID-19 pandemic. After filing most of their previous ADA cases in Federal Court, this strategic shift by Potter Handy presents new challenges to defendants who wish to resolve these cases quickly. Right now, jury trial dates in civil cases—and the related discovery cutoffs—are a desert mirage, and there is no clear prognosis for when those trials will resume in the Los Angeles Superior Courts. As such, the attorneys’ fees provision in the Unruh Act can create a perverse incentive for plaintiffs to drive litigation and related fees beyond what is normally expected.
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What does this mean for business owners in California? With Potter Handy beginning to file ADA website accessibility cases, the volume of websites that will be scrutinized for potential lawsuits is sure to drastically increase. As such, it is more important than ever for business owners to review their websites to ensure compliance with the latest Web Content Accessibility Guidelines (“WCAG”), as previously discussed here. Additionally, if a business owner receives a demand letter, settling early and avoiding litigation entirely is the best way to limit costs, as litigation in the Los Angeles Superior Court may become more expensive and drawn out than cases in the Federal District Court. As always, an ounce of prevention is worth a pound of cure, and may just increase your website’s audience as well!
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About the Author:
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Carl Mueller is a business litigation attorney that represents clients in all phases of civil litigation. Mr. Mueller’s practice has a focus on attorney-client disputes of all kinds. If you have questions regarding this article contact Carl Mueller at cmueller@maloneyfirm.com.
On September 30, Governor Newsom signed AB 1947, which extends the statute of limitations for DLSE complaints and authorizes courts to award reasonable attorney’s fees to a plaintiff who brings a successful action for a violation of Section 1102.5 of the Labor Code. The bill’s provisions take effect January 1, 2021. Learn more about how AB 1947 affects California businesses and workers below.
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Extended Statute of Limitations
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California Labor Code Section 98.7 currently allows individuals who believe that they have been discharged or otherwise discriminated against in violation of any law under the Labor Commissioner’s jurisdiction to file a complaint with the California Division of Labor Standards Enforcement (DLSE) within six months after the violation occurred. Assembly Bill (AB) 1947 extends this deadline to one year after the occurrence of the violation.
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Changes to Labor Code Section 1102.5
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Labor Code Section 1102.5 prohibits employers from retaliating against employees for reporting employer violations or noncompliance with local, state, or federal statutes and regulations. Under this section, employees must only have “reasonable cause to believe” their employer violated the aforementioned laws to file a complaint.
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AB 1947 amends Section 1102.5 to authorize courts to award plaintiffs with reasonable attorney’s fees if they are successful in retaliating against violations of Section 1102.5 in court. Therefore, employers may be liable to pay employees’ attorney fees when they face suits arising from Section 1102.5 violations.
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Implications for California Employers
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Critics of AB 1947 suggest that the new bill adds financial incentivizes for employees to litigate Section 1102.5 claims instead of utilizing the DLSE’s more efficient investigation procedures. The bill will likely also heighten the DLSE’s enforcement activities by doubling the statute of limitations for such claims.
On September 30, Governor Newsom signed AB 3075, which imposes liability on successor employers for unpaid wages, specifies criteria to establish successorship, and adds information that employers must include in statements of information filed with the California Secretary of State. The bill also gives local jurisdictions the authorization to enforce state labor standards requirements with respect to imposing minimum penalties for noncompliance with wage-related statutes and regulations. Learn more about how AB 3075 affects California businesses and workers below.
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Brief Background of AB 3075
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According to the Economic Policy Institute, California workers lose almost $2 billion per year as a result of employers’ wage theft violations.[1] Assembly Bill (AB) 3075 was created to provide workers with an avenue to recover lost wages from their employer’s successor. Under the new bill, when an employer is obligated by a judgement in court to pay wages, damages, and/or penalties to their workforce and these debts are left unpaid, the successor employer is liable to pay those debts. These provisions take effect January 1, 2021.
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What is a Successor Employer?
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Broadly, a successor employer is a business that acquires (through merger, reorganization, consolidation, transfer of stock or assets, or otherwise) all or substantially all of another business or its assets. Under AB 3075, successorship is established if a business meets any of the following criteria:
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1. Uses substantially the same facilities or substantially the same workforce to offer substantially the same services as the judgment debtor. This factor does not apply to employers who maintain the same workforce pursuant to Chapter 4.5 (commencing with Section 1060) of Part 3 of the California Labor Code.
2. Has substantially the same owners or managers that control the labor relations as the judgment debtor.
3. Employs as a managing agent any person who directly controlled the wages, hours, or working conditions of the affected workforce of the judgment debtor. The term managing agent has the same meaning as in subdivision (b) of Section 3294 of the Civil Code.
4. Operates a business in the same industry and the business has an owner, partner, officer, or director who is an immediate family member of any owner, partner, officer, or director of the judgment debtor.
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New Requirements for Successor Employers
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Significantly, AB 3075 stipulates that, pursuant to a final judgement, a successor to any judgement debtor is liable for any unpaid wages, damages, and penalties owed to the judgement debtor’s former workforce.
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The bill also requires corporations to document whether any officer, director, or in the case of a limited liability company, a member or manager, has an outstanding final judgment issued by the DLSE or a court of law for a violation of any wage order or provision of the Labor Code. This information should be included within corporations’ statements of information filed with the Secretary of State starting on the earlier of either the date of certification by the Secretary of State that California Business Connect is implemented or January 1, 2022.
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The bill also amends Section 1205 of the Labor Code to authorize local jurisdictions to enforce state labor standards requirements with respect to imposing minimum penalties for noncompliance with wage-related statutes.
On September 30, Governor Newsom signed Assembly Bill (AB) 979, which establishes groundbreaking diversity quotas for the corporate boards of publicly traded companies headquartered in California. Find out more about how AB 979 affects California businesses below.
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Brief History of AB 979
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In spite of widespread corporate interest in promoting diversity and inclusion in the workplace, the boards of most Fortune 500 companies remain unrepresentative of the diversity of the California workforce. A recent study conducted by Forbes and Ropes & Gray found that out of 5,670 board positions in Fortune 500 companies, only 24 are occupied by individuals who openly identify as LGBTQ+.[1] Deloitte’s 2018 “Missing Pieces Report” found that just 16% of Fortune 500 board members are people of color.[2]
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In 2018, California lawmakers created a quota for female board members by passing Senate Bill (SB) 826. This bill is credited with accelerating the inclusion of women in white collar industries, as well as setting a far-reaching example for responsible business practices. It is also heavily criticized as potentially unconstitutional, and, along with AB 979, faces opposition in court.
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Citing concerns about “racial injustice and inequity in our society,” Assemblyman Chris Holden (D-Pasadena) modeled AB 979’s requirements after SB 826 in order to expedite the diversification of California’s white collar workforce. “While some corporations were already leading the way to combat implicit bias, now, all of California’s corporate boards will better reflect the diversity of our state. This is a win-win as ethnically diverse boards have shown to outperform those that lack diversity.”
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Employer Requirements under AB 979
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AB 979 requires any publicly held foreign or domestic corporation whose principle executive office is headquartered in California to comply with the following requirements:
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1. No later than the close of the 2021 calendar year, the corporation must have a minimum of one director from an underrepresented community; and
2. No later than the close of the 2022 calendar year, corporations with nine or more directors must have a minimum of three directors from underrepresented communities, corporations with more than four but fewer than nine directors must have a minimum of two directors from underrepresented communities, and corporations with four or fewer directors must have a minimum of one director from an underrepresented community.
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In the context of AB 979, a director from an “underrepresented community” refers to individuals who self-identify as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or as gay, lesbian, bisexual, or transgender.
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No later than March 1, 2022, California’s Secretary of State will begin to publish annual reports documenting compliance with the bill’s diversification requirements. Under AB 979, the Secretary of State is authorized to fine corporations between $100,000 and $300,000 for failing to comply with the bill’s requirements or for failing to file board member information in a timely manner.
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Resources for California Employers
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Find the full text of Assembly Bill (AB) 979 here.
Employers weighing their dispute resolution options are often enticed by the ability to delegate as much power as possible to an arbitrator. Arbitrators are typically given the authority to allow as much discovery as needed and to limit the types of motions that may be brought. Additionally, arbitrators can be granted the authority to determine which claims must be arbitrated. For example, if a dispute arises between an employee and employer, the arbitrator will determine if the dispute must be arbitrated or may be pursued in court. While this appears to be a straightforward procedure, a recent California appellate court decision demonstrates that it is not always clear who decides the subject of arbitrability. In Neal Mortiz v. Universal City Studios, et al., Appellate No. B299083 (September 2, 2020), the appellate court denied Universal’s attempt to force a dispute with producer Neal Moritz over the 2019 film Fast & Furious Presents: Hobbs & Shaw (“Hobbs & Shaw”) into arbitration. The ruling speaks to two key issues within the arbitration process: one, does the court or the arbitrator decide whether the dispute is required to be arbitrated, and two, can an agreement to arbitrate cover any disputes between the parties?
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The Contracts Provided that the Parties Agreed to Arbitrate Disputes
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Producer Neal Moritz spent 16 years producing Fast and Furious films for Universal City Studios LLC. Moritz and Universal entered into separate contracts for six of the first seven movies in the franchise (contracts FF1-FF4, FF6, FF7), and entered into a seventh contract that covered the eighth, ninth, and tenth movies (contract FF8-10). The terms of the FF7 contract, which required arbitration to resolve any future disputes, were incorporated into the FF8-10 contract and applied to any “sequels” or “remakes” in the Fast and Furious franchise.
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The Dispute Over Hobbs & Shaw
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Moritz claims to have worked on Hobbs & Shaw, which was released in 2019 and was referred to by both Moritz and Universal as a “spin-off.” While both parties agree that they exchanged written drafts of another producer contract for Hobbs & Shaw with Universal, the contract was never finalized or signed. Shortly before filming on Hobbs & Shaw began, Universal notified Moritz that since there was no agreement, Universal was under no obligation to compensate him. Moreover, Universal directed Moritz not to work on the film unless an agreement was reached. Subsequently, Moritz filed a lawsuit in the Los Angeles Superior Court claiming that he and Universal had an oral contract that Universal breached, and that he is owed compensation for his work on Hobbs & Shaw.
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Universal Moved to Compel Arbitration
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Universal sought to compel arbitration based on Moritz’s producer contracts for FF6 and FF7, which stated that the parties were required to arbitrate any “controversy, claim, or dispute.” Even though Hobbs & Shaw was considered a “spin-off,” Universal took the position that an arbitrator should determine the threshold question of whether the dispute over Hobbs & Shaw was arbitrable under any of the agreements.
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The question of whether a particular dispute is to be arbitrated is usually a matter for the court, unless the parties “clearly and unmistakably provide otherwise.” Henry Schein, Inc. v. Archer & White Sales, Inc. (2019) ___U.S.___ [139 S.Ct. 524, 530, 202 L.Ed.2d 480, 487]. In the FF1-4 contracts, the question of arbitrability was delegated to the arbitrator, but such language was not in the FF6 and FF7 contracts. Nonetheless, Universal argued that since all disputes with Moritz were to be arbitrated, this meant an arbitrator should decide if the Hobbs & Shaw dispute should be heard in arbitration.
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The trial court found that the FF6 and FF7 contracts did not demonstrate the parties’ “clear and unmistakable” intent to arbitrate and therefore did not allow an arbitrator to decide if the Hobbs & Shaw dispute should be arbitrated. Moving to the next phase of the inquiry, the trial court found that since the parties considered Fast & Furious Presents: Hobbs & Shaw a “spin-off,” and not a “sequel,” or a “remake,” the dispute should be decided in court.
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The Arbitration Provisions Do Not Require This Dispute to be Arbitrated
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Universal appealed, claiming that since the arbitration provisions in the FF6 and FF7 agreements required arbitration of any dispute, any question of whether the claim has to be arbitrated must be decided by an arbitrator. The appellate court disagreed. First, the court determined it was not clear that the parties agreed to delegate arbitrability questions concerning a dispute over Hobbs & Shaw to an arbitrator. Second, Universal’s interpretation would mean that any dispute would have to first go to an arbitrator no matter how unrelated the dispute was to the underlying contractual relationship. It noted that there must be “some minimal connection between the contract and the dispute.” Otherwise, the contract would create absurd results. As an example, if an employee at Universal assaulted Moritz, it would not stand to reason that Moritz would be compelled to arbitrate that dispute. For these reasons, the appellate court affirmed the decision to deny the motion to compel arbitration.
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What are the Key Takeaways?
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1. Make sure the contract is clear. The trial court observed that the FF8-10 contract was “hardly a model of clarity.” Having a contract with clear language on arbitration increases the chances that it will be enforced as intended.
2. Determine if an arbitrator or the court should decide whether a particular dispute must be arbitrated. Consult with legal counsel to determine which is more advantageous. While the FF1-4 contracts all expressly delegated questions of arbitrability to an arbitrator, Universal removed this term from the FF6-7 contracts. Had this term been in the contract, it would have provided Universal with a better argument that an arbitrator needed to decide if the dispute over Hobbs & Shaw should be arbitrated.
3. Never cut corners, even when the parties have a good relationship. The Fast & Furious franchise is one of the most successful movie franchises in the world. Moritz is undoubtedly a part of that success, but neither Moritz nor Universal likely anticipated what would happen if their relationship broke down. Certainly, the FF8-10 contract could have referred to any film in the series rather than only sequels or remakes. Universal could have taken steps when the idea for the Hobbs & Shaw film was conceived to make sure Moritz did no work until there was a written contract.
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About the Author:
Nicholas Grether is an employment attorney in the Employment Law Department at The Maloney Firm, APC. If you have questions regarding this article, contact Nicholas Grether at ngrether@maloneyfirm.com.
On September 17, Governor Newsom signed SB 1159 and AB 685 as part of his COVID-19 related worker protection package. SB 1159 creates a statutory rebuttable presumption that certain employees who test positive for COVID-19 contracted the virus at work. AB 685 strengthens Cal/OSHA’s COVID-19-related enforcement abilities and creates new notice and reporting requirements for employers in the case of COVID-19 exposure in the workplace. Find out more about how SB 1159 and AB 685 affect California businesses and workers below.
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Senate Bill (SB) 1159 extends the rebuttable presumption created by Executive Order (EO) N-62-20 that employees who test positive for or are diagnosed with COVID-19 were exposed to the virus at the workplace. This presumption makes employees that are “injured” as a result of COVID-19 exposure in the workplace eligible for workplace compensation benefits. As an emergency bill, its provisions take effect immediately as of September 17, 2020.
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Which Employees Qualify?
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In order for most employees to qualify for SB 1159’s COVID-19-related presumption, they must test positive during an outbreak at the employee’s “specific place of employment” and be employed by a business with five or more employees. The presumption only applies if all of the following conditions are met:
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1. The employee has tested positive for COVID-19 within 14 days after a day that the employee performed labor or services at the employee’s place of employment at the employer’s direction.
2. The day on which the employee performed labor or services at the employee’s place of employment at the employer’s direction was on or after July 6, 2020. This must be the last date the employee performed labor or services at the employee’s place of employment at the employer’s direction prior to the positive test.
3. The employee’s positive test occurred during a period of an outbreak at the employee’s specific place of employment.
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Under SB 1159, a “specific place of employment” may include a “building, store, facility, or agricultural field where an employee performs work at the employer’s direction.” It does not include an employee’s home or residence, unless the employee provides home health care services within a home or residence.
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For employees working in the healthcare and public safety sectors to qualify for the presumption, the condition that there must be an “outbreak” at the workplace does not apply; they must only test positive for COVID-19 within 14 days of performing services at their place of employment on or after July 6, 2020.
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What Is An Outbreak?
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Within the context of SB 1159, a qualifying “outbreak” exists if one of the following occurs at a specific place of employment within 14 calendar days:
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1. If the employer has 100 employees or fewer at a specific place of employment, 4 employees test positive for COVID-19.
2. If the employer has more than 100 employees at a specific place of employment, 4 percent of the number of employees who reported to the specific place of employment test positive for COVID-19.
3. A specific place of employment is ordered to close by a local public health department, the State Department of Public Health, the Division of Occupational Safety and Health, or a school superintendent due to a risk of infection with COVID-19.
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Employer Reporting and Worker’s Compensation Requirements
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Qualifying employees who are protected under the presumption are entitled to “full hospital, surgical, medical treatment, disability indemnity, and death benefits.” However, if a deceased employee has no dependents, their entitlements to any death benefits are waived. Employees must also use and exhaust all COVID-19-related paid sick leave benefits available to them before using other temporary disability benefits.
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Employers are required to report the following information in writing to their claims administrator within three business days when the employer knows or reasonably should know that an employee has tested positive for COVID-19:
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1. An employee has tested positive. For the purposes of this report, the employer shall not provide any personally identifiable information regarding the employee who tested positive for COVID-19 unless the employee asserts the infection is work related or has filed a claim form pursuant to Section 5401.
2. The date that the employee tests positive, which is the date the specimen was collected for testing.
3. The specific address or addresses of the employee’s specific place of employment during the 14-day period preceding the date of the employee’s positive test.
4. The highest number of employees who reported to work at the employee’s specific place of employment in the 45-day period preceding the last day the employee worked at each specific place of employment.
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Employers are also required to retroactively report any employees who tested positive on or after July 6, 2020, and prior to September 17, 2020. If an employer is aware that an employee tested positive during that period, the employer must report the information specified above to its claims administrator within 30 business days of September 17, 2020. However, for reports of cases between July 6, 2020 and September 17, 2020, the data specified in the fourth paragraph above is changed to “the highest number of employees who reported to work at each of the employee’s specific places of employment on any given work day between July 6, 2020, and the effective date of this section.”
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Non-compliance with SB 1159’s reporting requirements may lead to a civil penalty of up to $10,000, as determined by the Labor Commissioner.
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Assembly Bill (AB) 685 creates stricter reporting obligations for California employers in the event of COVID-19 exposure in the workplace and strengthens Cal/OSHA’s ability to issue Orders Prohibiting Use (OPU), also known as Stop Work Orders, to workplaces that pose a risk of a COVID-19-related “imminent hazard.” AB 685 will be in effect from January 1, 2021 until January 1, 2023.
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What Are Employers’ Notification Requirements?
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AB 865 requires employers to take all of the following actions within one business day if the employer or representative of the employer receives a notice of potential exposure to COVID-19:
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1. Provide a written notice to all employees, and the employers of subcontracted employees, who were on the premises at the same worksite as the qualifying individual within the infectious period that they may have been exposed to COVID-19 in a manner the employer normally uses to communicate employment-related information. Written notice may include, but is not limited to, personal service, email, or text message if it can reasonably be anticipated to be received by the employee within one business day of sending and shall be in both English and the language understood by the majority of the employees.
2. Provide a written notice to the exclusive representative, if any, of employees under paragraph (1).
3. Provide all employees who may have been exposed and the exclusive representative, if any, with information regarding COVID-19-related benefits to which the employee may be entitled under applicable federal, state, or local laws, including, but not limited to, workers’ compensation, and options for exposed employees, including COVID-19-related leave, company sick leave, state-mandated leave, supplemental sick leave, or negotiated leave provisions, as well as antiretaliation and antidiscrimination protections of the employee.
4. Notify all employees, and the employers of subcontracted employees and the exclusive representative, if any, on the disinfection and safety plan that the employer plans to implement and complete per the guidelines of the federal Centers for Disease Control.
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Employers are also required to report information regarding a COVID-19 outbreak, as defined by the State Department of Public Health, to the local public health department within 48 hours of learning of the outbreak. This definition of a COVID-19 outbreak differs from the definition under the aforementioned workers’ compensation rule, and will be largely defined by the applicable local health department.
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In the case of COVID-19-related deaths, employers must notify the local public health agency in the jurisdiction of the worksite of the names, numbers, occupations, and worksite(s) of the employees who died as a result of COVID-19 exposure. Employers are also required to report the business address and NAICS code of the worksite(s) where the employees worked. An employer that has an outbreak as defined within this section is required to continue to give notice to the local health department of any subsequent laboratory-confirmed cases of COVID-19 at the worksite.
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New Cal/OSHA Process
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Under normal circumstances, employers are given 15 days to respond to a notice that the Division of Occupational Safety and Health (Cal/OSHA) intends on issuing a “serious” citation and, effectively, provide evidence that could prevent them from being issued a citation. AB 865 exempts Cal/OSHA from sending these notices of intent before issuing serious citations.
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AB 685 also reiterates that Cal/OSHA may shut down a business that presents an “imminent hazard” related to the potential transmission COVID-19.
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Cal/OSHA has long had the authority to shut down a worksite if it determines the worksite presents an “imminent hazard.” However, AB 685 adds Section 6325(b) to the Labor Code, which reiterates that the Division of Occupational Safety and Health can close down a business if it deems there is an “imminent hazard” related to potential COVID-19 transmission.
Find the full text of Executive Order (EO) N-62-20 here.
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Find the California Department of Public Health’s definition of a COVID-19 Outbreak here.
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If you have questions regarding the application of SB 1159 and AB 685 to your business, please contact one of the following attorneys in The Maloney Firm’s Employment Law Department: Patrick Maloney, Lisa Von Eschen, Samantha Botros, or Nicholas Grether.
On Thursday, September 17, Governor Gavin Newsom signed Senate Bill 1383 (SB 1383), which extends job-protected family leave protections to millions of California small business workers. The bill requires businesses with 5 or more employees to offer 12 weeks of job-protected unpaid family leave by January 1, 2021. Find out more about how SB 1383 affects California businesses and workers below.
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Brief History of SB 1383
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Currently, businesses with 20 or more employees are required to provide job-protected 12-week parental leave, and larger businesses with 50 or more employees are required to provide job-protected leave to care for an ill family member. Access to job-protected leave is crucial for workers who seek to take advantage of California’s Paid Family Leave program and return to their jobs after taking time off. According to the Office of Governor Newsom, “since California’s Paid Family Leave Program was enacted more than 15 years ago, lack of job protection under the California Family Rights Act (CFRA) has prevented millions of workers from accessing their Paid Family Leave Program benefits due to the size of their employer.”
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While all California workers pay into the state’s family leave program automatically, millions of employees have not taken advantage of the program’s benefits because of the lack of job-protection provisions for small business workers. SB 1383 expands state-mandated job-protected leave provisions to include employees of small businesses.
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Employer Requirements under SB 1383
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Starting in January, businesses with 5 or more employees will be required to grant requests by employees to take up to 12 weeks of unpaid protected leave during any 12-month period for any of the following reasons:
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1. to bond with a new child of the employee
2. to care for themselves or a child, parent, grandparent, grandchild, sibling, spouse, or domestic partner, as specified
3. due to a qualifying exigency related to the covered active duty or call to covered active duty of an employee’s spouse, domestic partner, child, or parent in the Armed Forces of the United States.
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Although the bill does not require employers to offer paid leave, it requires that employers hold employees’ jobs until they return to work and maintain the employee’s employer-paid health benefits. The bill also requires small businesses to grant spouses who work for the same employer 12 weeks of family leave each. As the leave does not constitute a break in service, employers are required to maintain employees’ seniority status when they return to work for purposes of layoffs, promotions, and other seniority-related benefits.
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Workers who qualify for job-protected unpaid leave may apply for California’s Paid Family Leave Program, which provides employees with eight weeks of partial pay that amounts to between 60-70% of their weekly salary.
On September 9, 2020, Governor Gavin Newsom signed Assembly Bill 1867 (AB 1867) to expand COVID-19-related paid sick leave provisions. According to Governor Newsom’s office, the new law “eliminates coverage gaps to ensure every employee has access to paid sick days if they are exposed or test positive to COVID-19 for 2020.” Find out more about how AB 1867 affects California businesses and workers below.
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What is AB 1867?
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In order to close the coverage gaps left by Executive Order (“EO”) N-51-20 and the Families First Coronavirus Response Act (“FFCRA”), which provides COVID-19-related supplemental paid sick leave to food sector workers and employees of businesses with 500 or fewer workers, Governor Newsom signed AB 1867 into law. Most significantly, the bill codifies existing COVID-19-related supplemental paid sick leave requirements for food sector workers (Labor Code 248) established in EO N-51-20 and extends these mandatory sick leave protections to private employers with over 500 employees nationwide as well as public and private employers of first responders and health care employees who opted not to provide paid sick leave under the federal FFCRA (Labor Code § 248.1).
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In addition, AB 1867 strengthens the enforcement provisions in California’s preexisting paid sick leave law, codifies existing COVID-19-related hand washing standards, and requires the Department of Fair Employment and Housing (DFEH) to create a small employer family leave mediation pilot program.
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What are the newly required supplemental paid sick leave provisions?
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Under AB 1867, private businesses with 500 or more employees, in addition to some employers of emergency responders and health care providers, are now required to provide their California-based employees with COVID-19-related supplemental paid sick leave no later than September 19, 2020, if employees are unable to work when they are:
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1. subject to a federal, state, or local quarantine or isolation order related to COVID-19;
2. advised by a health care provider to self-quarantine or self-isolate due to concerns related to COVID-19; and/or
3. prohibited from working by the hiring entity due to health concerns related to the potential transmission of COVID-19.
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The amount of COVID-19 supplemental paid sick leave that an employee is entitled to is based upon his/her normal schedule, as follows:
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1. “Full time” employees who worked or were scheduled to work, on average, at least 40 hours per week during the two weeks preceding the date of taking sick leave are entitled to 80 hours of supplemental paid sick leave.
2. Covered workers with a “normal weekly schedule” are entitled to the total number of hours the covered worker is normally scheduled to work over two weeks.
3. Covered workers who work a “variable number of hours” per week are entitled to 14 times the average number of hours the employee worked each day in the six months preceding the date the employee took COVID-19 supplemental paid sick leave (or, if the employee has worked less than six months but more than 14 days, the average hours worked over the entire employment period).
4. Covered workers who work a “variable number of hours” and have worked for a period of 14 or fewer days are entitled to the total number of hours the employee has worked for that employer.
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Under AB 1867, workers are entitled to COVID-19 supplemental sick pay at an hourly rate equal to the highest of:
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1. the covered worker’s regular rate of pay for their last pay period (including amounts subject to any applicable collective bargaining agreement);
2. state minimum wage; or
3. local minimum wage.
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However, employers are not required to pay more than $511 per day and $5,110 in total for COVID-19 supplemental paid sick leave taken by each covered worker. Covered workers can determine how much of the maximum COVID-19 supplemental paid sick leave they use, which is available immediately upon their oral or written request.
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This supplemental paid sick leave mandate will expire on the later of either “December 31, 2020, or upon the expiration of any federal extension of the Emergency Paid Sick Leave Act established by the federal Families First Coronavirus Response Act.” Supplemental paid leave already provided in accordance with EO N-51-20 or federal or local law for the same reasons can count toward the total number of hours of AB 1867’s requirement to provide supplemental paid sick leave.
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Non-food sector employers must provide their employees with notice of the amount of supplemental paid sick leave available to them each pay period under AB 1867. Non-compliance with AB 1867’s COVID-19 supplemental paid sick leave mandate may result in a citation from the California Labor Commission.
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Other Important Provisions
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For employees in the food sector, AB 1867:
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1. Requires that employers permit employees working in food facilities to wash their hands every 30 minutes, and as needed.
2. Codifies EO N-51-20 mandating COVID-19-related supplemental paid sick leave for food sector workers.
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AB 1867 also requires the Department of Fair Employment and Housing (DFEH) to create a family leave mediation pilot program for employers with between 5 and 19 employees. The pilot program would allow an employer or an employee, within 30 days of procuring a right-to-sue notice alleging a violation of Section 12945.2, to request that all parties participate in mediation through the DFEH’s dispute resolution division. If either the employee or the employer requests mediation, the employee would be prohibited from pursuing any civil action until the mediation is complete. The bill would also toll the employee’s statute of limitations, including for additional related claims, upon receipt of the request by an employer or the employee to participate in the mediation program. These provisions are repealed on January 1, 2024.
By Patrick M. Maloney, Esq., The Maloney Firm, APC
On September 15, 2020, the Court of Appeal published the decision in Aerotek, Inc. v. Johnson Group Staffing Company, Inc., which held that attorneys’ fees awarded under the California Uniform Trade Secrets Act belong to the lawyer, not the client. The dispute on appeal in Aerotek was whether the law firm had waived its right to any fee award via pro bono language in its fee agreement and whether a fee award under the California Uniform Trade Secrets Act belonged to the lawyer or to the client. After Porter Scott, P.C. represented the Johnson Group through two jury trials and in the appellate court on a modified pro bono basis, the Johnson Group claimed it should receive the entirety of an award of attorneys’ fees in the amount of $735,781.27, notwithstanding that it had not paid the lawyers for the bulk of their services. Ultimately, the Court of Appeal held that, unless the parties had a different agreement, the lawyers should receive the award of statutory attorneys’ fees to the extent those fees exceeded amounts already paid to them.
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Aerotek presented a unique set of circumstances. The client, Johnson Group, had fallen behind in paying fees. The law firm, Porter Scott, sought, and was granted leave, to withdraw due to nonpayment. After the Court granted the withdrawal motion, Porter Scott agreed to represent Johnson Group on a modified pro bono basis. Porter Scott agreed to waive the past due legal fees of approximately $92,000, in exchange for a one-time payment of $25,000, and agreed that Johnson Group would not be required to pay any further legal fees. A footnote in the new fee agreement stated that Porter Scott’s waiver of the past due fees would not apply in the event of a fee award. Additionally, Johnson Group would be required to pay costs going forward. Johnson Group claimed the footnote concerning the waiver should be interpreted to mean the lawyers had waived their right to any fee award in excess of the past due amount they had written off. Likely incensed by the client’s attempt to deprive their former counsel of compensation for its tremendous and successful efforts over an extended period of time, the Court of Appeal soundly rejected each of Johnson Group’s arguments.
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The lesson in Aerotek goes beyond its express holding that legal fees awarded in trade secret cases belong to the attorney. Beneath the surface, Aerotek teaches that poorly drafted legal fee agreements can pose significant problems for lawyers. Simply put, had the lawyers in Aerotek prepared a fee agreement that clearly and unambiguously stated that the entirety of any fee award would belong to the law firm, they would have avoided substantial litigation and delay. To put this into perspective, the underlying suit was filed in 2007, the new fee agreement executed in 2009, judgment was entered in 2014, and the appeal on the fee entitlement issue spanned from 2015 to 2020. Further, the fee dispute resulted in multiple depositions and other litigation activities for which the lawyers were not compensated.
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When representing clients in matters where there is even a remote possibility of a prevailing party fee award, counsel should be careful to articulate in the fee agreement whether the client or the lawyers will be entitled to receive the fee award. This is true even if the lawyer intends to follow the holding of Aerotek, namely, that the fee award will belong to the lawyers to the extent the award exceeds the amounts that the client already paid to the lawyers. This, alone, will go a long way to avoid disputes by creating clear expectations about how the fee award will be treated, since most clients are unlikely to have read the Aerotek decision.
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Also worthy of consideration is the treatment of legal fee awards in contingent fee matters. Some considerations include:
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1) Whether the lawyer is entitled to both the contingent fee and the fee award;
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2) Whether the lawyer should receive the greater of the contingent fee or the statutory fee award; and
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3) Whether the fee award should be included in the total recovery when calculating a contingent fee award.
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Where there is a lack of clarity in the fee agreement, clients often feel their lawyer has taken advantage of them. When counsel proposes to receive both a contingent fee and the fees awarded to the prevailing party, the lawyer should also assess whether the proposed fee may be deemed unconscionable.
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Another issue to address includes what will happen if the Court does not award the full amount claimed by counsel as prevailing parties’ fees. This may occur because the Court determines that the fees charged were excessive or otherwise improper. Or, more benignly, because a portion of the fees claimed are outside the scope of the statute authorizing the prevailing party to recover fees. In the first example, the client may have a legitimate dispute with the attorney for overcharging. In the latter example, the client may make an unwarranted claim it is not required to pay the full amount of fees.
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The fee agreement should also cover the handling of sanction awards. In contingent fee matters, the awarded sanctions likely should be paid and belong to the attorney. In hourly matters, the client likely should receive a credit against the outstanding balance or, in some instances, a refund.
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About the Author:
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Patrick Maloney is the founder of The Maloney Firm, APC, a boutique law firm that represents clients in business litigation and related matters. Mr. Maloney has represented both lawyers and clients in a number of legal fee disputes and legal malpractice matters. Mr. Maloney may be reached at pmaloney@maloneyfirm.com or 310-540-1505.
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