On April 29, 2020, the City of Los Angeles passed the COVID-19 Worker Retention Ordinance to protect workers amid the economic fallout of the COVID-19 pandemic by requiring certain businesses within the City to adhere to worker retention provisions whenever a change in control occurs within two years following the declaration of emergency due to COVID-19. The ordinance takes effect on June 14, 2020.
The ordinance defines a “change in control” as any sale, assignment, transfer, contribution, or other disposition of all or substantially all of the assets used in the operation of a business, or a discrete portion of a business that continues to operate as the same type of business of the incumbent business employer.
The ordinance applies to the following four types of businesses: Airport Business, Commercial Property Business, Event Center Business, and Hotel Business. The ordinance defines these businesses as follows:
- Airport Business: A business providing any service at or to the City of Los Angeles Department of Airports and each airport which it operates in the City that is required to comply with the Los Angeles Living Wage Ordinance. Airline companies and businesses that have agreements with the City of Los Angeles Department of Airports or its airports that already contain worker retention requirements are specifically excluded from the ordinance.
- Commercial Property Business: An owner, operator, manager or lessee, including a contractor, subcontractor or sublessee, of a non-residential property in the City that employs 25 or more janitorial, maintenance or security service workers. The ordinance only applies to the janitorial, maintenance and security service workers who perform work for the Commercial Property Business.
- Event Center Business: An owner, operator, or manager of a publicly or privately owned structure in the City of more than 50,000 square feet or with a seating capacity of 1,000 seats or more that is used for public performances, sporting events, business meetings, or similar events. Examples include concert halls, stadiums, sports arenas, racetracks, coliseums, and convention centers.
- Hotel Business: An owner, operator or manager of a residential building in the city designated or used for public lodging or other related services for the public and either contains 50 or more guestrooms or has earned gross receipts in 2019 of over $5 million. The term also includes the owner, operator, manager, or lessee of any restaurant physically located on hotel premises.
The ordinance applies to workers:
- Who performed work for the incumbent business employer for at least six months, including periods of vacation or leave;
- Whose “primary place of employment” is a covered business subject to a change in control;
- Who is employed or contracted to perform work for the incumbent business employer either directly or by a third-party; and
- Who worked for the incumbent business employer on or after March 4, 2020, and prior to the execution of the transfer document effecting the change in control.
Importantly, the ordinance does not apply to “managerial, supervisory, or confidential” employees, although these are not defined terms under the ordinance.
Incumbent Business Employer Responsibilities
In the event of a change in control of a Covered Business, the ordinance requires the incumbent business employer to do the following:
- Within five (5) business days after the transfer document is signed, post written notice of the change in control in a conspicuous place at the location of the affected business. The notice must stay up during any business closure and for six (6) months after the business is open to the public under the successor business employer. The notice must contain the name and contact information for the incumbent and successor business employers and the effective date of the change in control.
- Within fifteen (15) calendar days after the execution of the transfer document, provide to the successor business employer the name, address, date of hire, and occupation classification for each covered worker.
Successor Business Employer Responsibilities
The ordinance requires the successor business employer to do all of the following:
- Maintain a preferential hiring list using the workers identified by the incumbent business employer and hire workers from the list for a period beginning when the transfer document is executed until six (6) months after the business is open to the public under the successor business employer.
- Provide a written offer of employment to covered workers hired pursuant to the ordinance and keep written verification of the offer for at least three (3) years. The verification must include the name, address, date of hire, and occupation classification of each covered worker.
Moreover, during a 90-day transition period after the worker is hired, the successor business employer is required to:
- Retain workers hired pursuant to the ordinance for at least ninety (90) days at reasonable terms and conditions, as required by law. Importantly, during the 90-day transition period, the successor business employer cannot terminate workers without cause.
- Provide workers with a written offer of employment for the 90-day transition period. The offer must remain open for at least ten (10) business days from the date of the offer.
- Perform a written performance evaluation at the end of the 90-day transition period. The successor employer must keep a copy of the evaluation for at least three (3) years.
- If the worker’s performance is satisfactory, the successor employer must “consider” offering the worker continued employment.
If the successor business employer realizes during the six month period that it is required to maintain a list of workers identified by the incumbent business employer that it requires fewer workers than did the incumbent business employer, the successor business employer must offer the position to the worker in the same occupational classification with the most seniority with the incumbent business employer.
The ordinance prohibits both the incumbent and successor employer from retaliating (i.e., discharging, reducing pay or otherwise discriminating) against any worker for opposing any practice proscribed by the ordinance, participating in proceedings related to the ordinance, or asserting or seeking to exercise rights under the ordinance.
The ordinance provides a private right of action and civil remedies to employees for violations, including hiring and job reinstatement rights, front and back pay, the value of the benefits the worker would have received under the successor employer’s benefits plan, and reasonable attorneys’ fees and costs.
The ordinance provides employers an opportunity to cure alleged violations. Before workers can bring a civil action, they are required to provide written notice to the incumbent and/or successor business employer of the provisions alleged to have been violated and the facts supporting the alleged violation. The incumbent and/or successor business employer then has 15 days from receipt of the written notice to cure the alleged violation.
As you are aware, things are changing quickly and there is no clear-cut authority or bright line rules. This is not an unequivocal statement of the law, but instead represents our best interpretation of where things currently stand. This article does not address the potential impacts of the numerous other local, state and federal orders that have been issued in response to the COVID-19 pandemic, including, without limitation, potential liability should an employee become ill, requirements regarding family leave, sick pay and other issues.
Sheppard Mullin is committed to providing employers with updated information regarding COVID-19 and its impact on the workplace. Stay informed on legal implications with Sheppard Mullin’s Coronavirus Insights Portal which now aggregates the firm’s various COVID-19 blog posts on a broad range of topics.