The law’s broad reach includes successor companies to affected employers following change of control, form or ownership, transfer of assets or relocation of operations.

In what may be a first in California, the state Legislature recently passed a law that creates unionlike recall rights for employees who work for private sector businesses in certain industries. As COVID-19 infection rates decrease, vaccination rates rise and businesses continue to reopen and rehire, the state of California has imposed new rehire obligations on all employers regardless of size involved in certain businesses. SB 93, recently signed into law by Governor Gavin Newsom, requires employers that own or operate an “enterprise” in one of six particular areas to first offer newly opened positions to laid-off employees. That obligation extends until the end of 2024. The law also requires those employers to keep extensive records of job openings and attempts to recall for three years. The new law, a narrower version of a bill that Governor Newsom vetoed in fall 2020 that would have applied to a much broader scope of employers, is considered emergency legislation and took effect April 16, 2021.

Impacted Businesses

The law applies to the following “enterprises,” most of which are related to travel, tourism and large events, and all of which were disproportionately disrupted by the pandemic:

• Hotels with more than 50 rooms;
• Private clubs with at least 50 guest rooms;
• Event centers, i.e., publicly or privately owned structures of more than 50,000 square feet or 1,000 seats used for public performances, sporting events, business meetings or similar events, including concert halls, stadiums, sports arenas, racetracks, coliseums and convention centers, and including premises that are leased, sublet or contracted in conjunction with the event center;
• Airport hospitality operations, including businesses that provide services in connection with the preparation of food or beverages to airlines or airport passengers or those that provide retail or consumer goods or services to the public at the airport;
• Airport service providers, including businesses that contract with airlines and airports, operate on airport property and those that load and unload property and passengers from aircraft, assist passengers or provide security, airport ticketing and check-in functions, ground-handling of aircraft, aircraft cleaning, sanitation or waste removal; and
• Providers of building services (janitorial, building maintenance or security services) to office, retail or other commercial buildings.

The law’s broad reach includes successor companies to affected employers following change of control, form or ownership, transfer of assets or relocation of operations.

Recalling Employees

SB 93 provides eligible employees who were laid off for reasons related to the COVID-19 pandemic―including public health directives, government shutdown orders, loss of business, reductions in force or any other economic reason related to the pandemic―with significant protections and reinstatement rights. To be eligible, employees must have worked for the qualified employer for at least six months between January 1, 2019, and January 1, 2020. The new law does not apply to employees who lost their jobs for reasons unrelated to the pandemic or for disciplinary reasons.

Employers of affected businesses are required, within five business days of establishing a position, to offer in writing to those eligible former employees who were laid off for reasons related to the pandemic all job positions that become available after April 16, 2021, for which the laid-off employees are “qualified.” Recall rights begin with seniority based on the original hire date with the enterprise. To “qualify” for a new position, the laid-off employee must have held the same or similar position at the time of layoff as the one being offered. Eligible laid-off employees who are offered a position have five business days to accept or decline the offer. The new law permits making simultaneous conditional offers as long as those with the most seniority are given priority for hiring.

If an employer declines to recall a laid-off employee on the grounds of lack of qualifications and instead hires someone else, it must provide the laid-off employee with written notice within 30 days, providing the reasons for the decision and including the selected employee’s length of service with the employer of those hired in lieu of that recall.

The law prohibits retaliation against laid-off employees for seeking to enforce their rights, participating in proceedings related to the law, opposing any practices proscribed by the law or asserting their rights under the law. 

Recordkeeping Obligation

The new law requires employers to keep extensive records related to each laid-off employee for at least three years, including layoff notices, contact information that would make it easier to locate them upon departure and subsequent offers of employment.

Collective Bargaining Agreements

The requirements of SB 93 may be waived in a valid collective bargaining agreement, but only if the waiver is clear, unambiguous and specific to SB 93. This means that, in a departure from other laws, the new law does not grandfather in collective bargaining agreements with existing recall provisions.

Right to File Administrative Claims, Enforcement and Penalties for Noncompliance

Laid-off employees may file complaints with the Division of Labor Standards Enforcement (DLSE) for violations under the law and may be awarded front or back pay, the value of benefits the employee would have received under the employer’s benefit plan, or be hired or reinstated. The DLSE is empowered to award civil penalties of $100 per employee, along with $500 as liquidated damages payable to the employee, for each day an employee’s rights under the law are violated, until the violation is cured.

The law does not provide for a private right of action and does not provide for criminal penalties.

What This Means for Employers

While many collective bargaining agreements routinely provide laid-off employees with recall rights, SB 93 is striking in that it imposes unionlike requirements on private employers. Impacted businesses should think before hiring over the next few years and take immediate steps now to comply with the law to avoid the prospect of significant penalties for noncompliance. Employers obligated to comply should consider putting procedures in place to determine when those laid off should be offered a job before others. Document the positions held, reasons for lay off, contact information for departing employees, open positions and job offers made. Be sure to document compliance. As following these steps may prove to be complicated, consider seeking counsel to ensure compliance with this new law.

Beginning of a Trend

The new law in California may be the beginning of a trend. New York City is considering a similar bill, Int. No. 2241, that would require that employees laid off as a result of the COVID-19 pandemic be offered the same or similar position first, once the position from which they were terminated or another similar position becomes available, with some exceptions. The New York law, if passed in its current form, authorizes a private right of action and enforcement by the Commissioner of Consumer and Worker Protection and the Corporation Counsel. The bill would further require that any successor business retain the rehiring requirements of the prior business.

About Duane Morris

Duane Morris has created a COVID-19 Strategy Team to help employers plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.

For More Information

If you have any questions about this Alert, please contact Lori Ocheltree, Brooke B. Tabshouri, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group, any member of the COVID-19 Strategy Team or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.