Month: July 2021
CA’s Mandate Ends
In mid-May 2021, California Governor Gavin Newsom announced that the state’s COVID-19 safety mandates would be extended until June 15. But now, businesses are free to open without capacity restrictions or physical distancing limitations and fully-vaccinated persons are no longer required to wear masks in buildings. Rumors persisted that the state would keep the mask mandate in place even after reopening but this announcement brings the state into alignment with the newest Center for Disease Control guidance. This is welcome news to California franchises, which have faced numerous challenges just keeping the lights on in the wake of the pandemic and subsequent year-long lockdown. Without capacity restrictions and physical distancing requirements, franchises can finally open up and go back to making money once again. California has also brought its statewide travel guidelines into compliance with current CDC guidance, opening up even more avenues for business.
Rebuilding after a Lost Year
After more than a year of forced closures, limited capacity reopenings, and minimal foot traffic, California franchises can start to see a light at the end of the tunnel. It goes without saying that the global and local economies suffered greatly during the pandemic and, sadly, the lack of a steady stream of business caused many longtime franchises to permanently close. However, franchisors of all types can now begin rebuilding with California fully reopening for business. Allowing a return to full capacity means that restaurants finally have their full complement of tables and do not have to worry about vaccinated patrons being turned off by having to wear masks while dining. Storefronts and boutique shops are seeing an increase in foot traffic as the state reopens and people feel safe to venture out of their homes and start spending money again. Car supply and auto parts businesses look forward to increased revenues as more people return to working in offices and thus need to maintain their vehicles for the commutes. Even movie theaters look set to make a comeback with people also ready to pick up old leisure activities after the isolating shutdown. As you can see, the move to full capacity will have a positive effect on franchises of all types and franchisors must be ready.
Ready For Business
With California’s reopening, franchisors have begun to prepare for the huge increase in business. They should ensure that their franchise is fully staffed at this point to handle the uptick and that all workers understand what the changing guidelines mean for customers. Franchisors should also expect changes from customers as some guests may continue to wear masks indoors as a precaution, even though it is no longer mandated by the state. Finally, franchise owners should begin planning for a brighter future.
Filed Under: Franchise & Distribution
San Diego and SDG&E Reach Agreement
On May 25, 2021, the San Diego City Council voted 6-3 to approve a franchise agreement between the city and San Diego Gas & Electric. SDG&E, an energy utility that provides gas and electric services, is a subsidiary of Sempra Energy, which is likewise based in San Diego. The agreement means that SDG&E will continue to provide energy services to San Diego residents for the next 10 years and includes an option to extend the agreement an additional 10 years. The franchise agreement was approved after a lengthy debate and public comment by 120 citizens. In exchange for providing energy, SDG&E will be paid $80 million to cover the franchise agreements while an additional $30 million will be allocated to help meet the City’s climate-related goals. In the end, the City Council and SDG&E determined that the deal, which was negotiated by Mayor Todd Gloria, was too good to pass up. The agreement has several out clauses and also allows for the city to purchase SDG&E from Sempra at the going rate and municipalize the utility under public oversight. Though the agreement is new, SDG&E has held exclusive franchise agreements to provide energy services with San Diego for over 100 years.
In Spite of Agreement, Questions Remain
Although the City and SDG&E agreed on an $80 million franchise fee for providing energy services, they are still at odds over other issues and outstanding franchise agreements. In January 2020, the City of San Diego sued SDG&E for more than $35 million after the City had to pay to move the utility company’s equipment during the Pure Water project. Then, after the previous energy services franchise agreement expired in January 2021, the two sides began bickering over SDG&E’s progress in burying power lines across the city. San Diego’s city attorney’s office has claimed that SDG&E was both overcharging for its services in burying the power lines and had engaged in a purposeful slowdown on the project while waiting for the new franchise agreements to be signed. SDG&E, however, claimed that they were not authorized to work on burying the lines after the prior franchise agreement expired, but some in the City saw that as little more than an excuse. Indeed, some members of the City Council expressed concerns that San Diego was agreeing to a massive, new franchise fee with SDG&E while the two parties are engaged in litigation over Pure Water and a contentious standoff over burying the power lines.
In spite of these outstanding issues, the City voted in favor of the new $80 million franchise agreement after it received support from a broad cross-section of individuals and groups, including San Diego residents, politicians, union members, and local business interests. A massive deal of this kind can only mean good things for other businesses and entities looking to sign franchise agreements in the State of California in the future.
Filed Under: Franchise & Distribution
Two Flexible Work Schedule Bills
With America reopening in the wake of the covid-19 pandemic, employees are returning to the office after working remotely for more than a year, but some may not be able to come back for various reasons. In order to ease the transition for all parties involved, two bills were recently introduced before the California legislature that would give employers and employees the power to agree to mutually-beneficial flexible work schedules. The two pieces of legislation, Assembly Bill 230 and Assembly Bill 1028, introduced in January and February 2021, respectively, would create a narrow new exception to the existing 8-hour overtime rule by giving employees the right to request a remote, flexible work schedule of up to four 10-hour days per week. However, under this new arrangement, the employer would not be required to pay increased overtime wages for the 9th and 10th hours of each workday as is normally required by state law. AB1028 would also allow employees working these flexible schedules more leeway when planning their meal and rest breaks throughout the workday. With the introduction of these bills, it seems clear that California is prepared to give both employers and employees additional benefits to make flexible work schedules easier to create and maintain.
Give and Take
While AB230 and AB1028 would put more power into the hands of employees by giving them the ability to request remote, flexible schedules, it should be noted that employers are not required to approve the request and that nothing introduced in either AB230 or AB1028 is mandatory. Additionally, the flexible work schedule may be discontinued at any time by either the employer or employee giving notice to the other party, so it’s not a permanent imposition. Further, employers who agree to a flexible work schedule are no longer required to pay the overtime rate unless the employee works more than 10 hours in a day or 40 hours in a week, which provides some economic relief and incentive. So these bills would not be all bad for employers as they provide some impressive carrots for employers who have the capacity to allow their employees the opportunity to work remotely.
Though employers may be skeptical of such changes and allowing more employees to work remotely, it must be noted that AB230 and AB1028 are both still pending in the California Legislature. Both bills have been referred to the Committee on Labor and Employment where they will be subject to further debate and scrutiny by committee members before an eventual vote is taken and AB 1028 has also been referred to the Committee on Judiciary. All of this means that the bills face some hurdles and could be changed or outright rejected before the full legislature ever gets a chance to vote on them. In the meantime, employers should consider the possible impact of this legislation when making plans for how and when they will let employees who can’t return to the office work remotely.
Filed Under: Labor & Employment
Gig Companies Take Another Blow in the Courtroom
Earlier this year, gig economy companies operating in California lost another lawsuit seeking to allow them to determine questions of gig worker classification via private arbitration instead of using the courts. On April 22, the Second Appellate District of the Court of Appeals of the State of California invalidated an arbitration provision in Uber’s contracts that would have waived the right for workers to file a suit against the company under California’s Private Attorney General Act. Uber argued that this contractual provision meant that issues such as gig worker misclassification and labor law violations must first be decided in arbitration before the worker could sue under PAGA, but the courts once again declined to adopt this position. With this loss, Uber joins other gig companies like Zum Services and Skip Transport, both of which have previously failed to halt PAGA lawsuits on the basis of contractual arbitration waivers. With this series of courtroom setbacks, it appears that gig companies operating in California will be faced with the possibility of incurring significant liability if workers take them to court under PAGA.
What is The Private Attorney General Act?
Codified in 2004, California’s PAGA is an expansive law that allows “aggrieved employees” to file lawsuits on behalf of themselves, other employees, and the State itself for violations of California’s labor laws. Despite the fact that private individuals bring the claim themselves, California courts have routinely held that a PAGA lawsuit is not “an individual action at all, but instead is one that is indivisible and belongs solely to the state.” Indivisibility is key because gig companies have repeatedly argued that worker classification questions are “threshold issues” that must be settled first to determine whether the worker is indeed an aggrieved employee or simply an independent contractor. Further, gig companies argue that any such threshold issues should be decided in private arbitration according to contractual provisions because independent contractors have no standing to sue under PAGA in the first place. However, California courts have rejected this argument outright, finding that there are no divisible threshold issues in PAGA cases and that courts, not private arbitration, should determine whether the aggrieved employee was actually aggrieved and actually an employee. Likewise, courts have found that a worker’s right to file a PAGA lawsuit cannot be waived and that any arbitration provision that seeks to do so is unenforceable and invalid.
What Does it Mean for Companies?
Uber’s loss in the courtroom appears to be even more evidence that California courts will protect a worker’s right to sue under PAGA, regardless of any possible threshold issues. Gig companies operating in California should be aware of the increased risk and potential liabilities they face from PAGA lawsuits and that contractual waivers appear to be unenforceable in the state. However, it is unknown how Proposition 22, the voter-approved ballot initiative that exempts most gig workers from the state’s worker status laws, will affect existing and future PAGA lawsuits going forward.
Filed Under: Labor & Employment
In late April, the Ninth Circuit Court of Appeals handed down a ruling that could have massive implications for lab
or law in California, especially for the trucking industry. In a major ruling, the Ninth Circuit reversed the district court’s preliminary injunction against California’s Assembly Bill 5, finding that the law is not preempted by the Federal Aviation Administration Authorization Act. The FAAAA preempts any state law that is “related to a price, route, or service of any motor carrier… with respect to the transportation of property.” However, the Ninth Circuit found that AB5 is a labor law of general applicability that “does not bind, compel, or otherwise freeze in
to place the prices, routes, or services of motor carriers” and is therefore not preempted by federal law.
Passed in 2019, AB5 codified and expanded the California Supreme Court’s three-pronged ABC test used to determine whether a worker is classified as an employee or an independent contractor. Following this, the California Trucking Association amended an existing complaint in federal district court to file suit to halt implementation of AB5 in the state. The CTA, which represents independent trucking companies, aka motor carriers, and 70,000 drivers who operate as independent contractors, claimed that AB5 was preempted by federal law because it would force members to be reclassified as employees after they voluntarily opted to classify as independent contractors. The district court, agreeing that the CTA was likely to succeed on the merits of its claims and that enforcement of AB5 was likely to have an effect on prices, routes, and services, granted an injunction against the implementation of AB5. The State of California then appealed the case to the Ninth Circuit.
The Ninth Circuit’s Ruling
The 2-1 ruling, authored by Circuit Judge Sandra S. Ikuta, a George W. Bush appointee, the Ninth Circuit reversed the lower court’s injunction. Although AB5 would raise costs for trucking companies by forcing them to hire more employees to remain compliant, the court held that this is not enough to cause federal preemption. Instead, the majority relied on Ninth Circuit precedent to find that the effect of AB5 would not interfere to the point where “it compels a result at the level of the motor carrier’s relationship with its customers or consumers.” The court further rejected the CTA’s claims that AB5 must be preempted because implementation would cause some small trucking companies to shutter and force others to leave the state, leaving the remaining companies providing “diminished services.” The majority stated that Ninth Circuit precedent isclear and that it has consistently rejected arguments that state law must be preempted by federal law on the basis of these kinds of “indirect effects” on the trucking industry. Circuit Judge Mark J. Bennett, a Donald Trump appointee, provided the lone dissent, stating that AB5 “significantly impacts the services motor carriers provide to their customers” and should thus be preempted. The ruling in California Trucking Association v. Bonta now paves the way for implementation of AB5 in California.
Source: CA Trucking Assoc. V. Bonta, https://cdn.ca9.uscourts.gov/datastore/opinions/2021/04/28/20-55106.pdf
Filed Under: Labor & Employment