What California Businesses Need to Know About the New Price Transparency Law Going Into Effect July 1st

Beginning July 1, 2024, SB 478 will go into effect, which means businesses will no longer be allowed to add a service fee, or any other hidden fees, to a customer’s bill, except for government taxes and fees and reasonable shipping costs.  The “Honest Pricing Law” or “Hidden Fees Statute” is intended to allow the customer to see the true price of an item or service they are purchasing and aims to prevent “drip pricing,” which is when businesses advertise a lower price than what customers actually pay.

The Attorney General (“AG”) issued a FAQ statement clarifying many of the issues facing businesses attempting to comply with the new Honest Pricing Law. Below are the key items from the FAQ that businesses may find helpful. The full FAQ can be found here.

  1. The law will apply to all businesses selling or advertising to a consumer, not just online ticket sellers, including restaurants, tasting rooms, event centers and hotels.
  2. All mandatory and automatic fees, including service charges, fees for employee healthcare, or any other such add on fee must be included in the advertised or stated price to the customer.
    – Businesses can explain that extra fees are included, and they can specify what they represent, but this should be listed under the total price or as an aside explaining the total price.
    – The fees cannot be stated separate from the price on a receipt or at the bottom of a menu, for example, as usually handled currently.
  3. Sales taxes and government fees, as well as reasonable shipping costs, do not need to be displayed in the total price and can still be listed separately on a receipt or invoice.
  4. Fees for optional services or things contingent on an event, like a cancellation fee, do not need to be included (only mandatory, automatic fees must be included in the price).
  5. Fees for delivery of food directly from a restaurant do not need to be included in advertised or stated price for the food because the delivery fee is for the delivery service and not for the food.

Initially, automatic gratuities (like 18% for parties of 6 or more) added to a restaurant bill are allowed if all the automatic gratuity goes to the employees. The AG does not initially expect to enforce SB 478 as to an automatic gratuity as long as all money goes to employees, however, the guidance is not clear whether this will remain the case or whether the business would be safe from prosecution in a private action for such charges. Mandatory gratuities have been treated as service fees for wage and hour purposes, so this may raise unintended consequences, which you should be discussed with counsel.

What does this mean for California businesses?  Businesses can no longer charge a service fee, or any other mandatory, automatic fee, unless that fee is included in the advertised or stated price to the customer.

For more information reach out to the DP&F Employment Law partners Jennifer E. Douglas, Marissa E. Buck and HR Consultant, Kristina Kiessig.

DP&F Employment Law Group Presents: HR Workshops this April

Join us this spring for HR Workshops designed to help business owners and HR professionals navigate some of the most difficult situations faced by California employers today.

We will be holding two identical HR Workshops – one in Santa Rosa and one in Napa – each with a morning and afternoon session covering different topics in California employment law.

During the morning sessions, we will cover Wage and Hour topics including the importance of accurate timekeeping, tips for complying with meal and rest break requirements, and other risk management topics.

For the afternoon sessions, we will cover how to effectively provide and manage Reasonable Accommodations and Leaves of Absence.

During both sessions attendees will have the opportunity to work together to analyze hypotheticals and discuss strategies with the group. This is a great opportunity to practice your skills and expand your knowledge!


Santa Rosa – Tuesday, April 16, 8:30 AM – 4:00 PM

Flamingo Resort & Spa, Santa Rosa

Full Day | Includes Lunch – $699
Half Day | AM or PM – $369

Morning Session: Wage & Hour
8:30 AM – 11:30 AM

Afternoon Session: Reasonable Accommodation & Leaves of Absence
1:00 PM – 4:00 PM

Napa – Thursday, April 18, 8:30 AM – 4:00 PM
Napa Valley Marriott, Napa

Full Day | Includes Lunch – $699
Half Day | AM or PM – $369

Morning Session: Wage & Hour
8:30 AM – 11:30 AM

Afternoon Session: Reasonable Accommodation & Leaves of Absence
1:00 PM – 4:00 PM

Attendees can choose to attend either the morning or afternoon session of either workshop, or attend the full day. All full-day attendees will also receive lunch included with the price of registration.

SHRM, HRCI & MCLE Credit Pending

Click to RegisterQuestions? Reach out to [email protected].

Key Legal Updates All California Employers Should Know for 2024

Employment laws in California are always changing, and it is important for employers in California to keep up with these changes to ensure their policies and practices are compliant. This blog post provides key updates to the California employment laws that all employers should know for this year.

Minimum Wage Increase

Beginning January 1, 2024, the state minimum wage for all employers has been increased to $16.00 per hour. This rate reflects a 3.5% increase from this year’s minimum wage based on the law’s provision that allows this increase if the national Consumer Price Index (“CPI”) is over 7%. All employers must post the current minimum wage rate in a common area where employees can easily view it.

With this new rate of $16.00/hour, the minimum salary for exempt employees in 2024 has also increased to $66,560.00/year. Note that the minimum salary is tied to the state minimum wage rate, not individual municipalities.

Employers should also check if there is a higher minimum wage in any city or municipality where they have employees working (typically 2 hours/week is the minimum). For example, the minimum wage in Santa Rosa has increased to $17.45/hour.

Increase in Paid Sick Leave Amount to 5 Days

As of January 1, 2024, the amount of paid sick leave that must be provided to employees under the Healthy Workplaces, Healthy Families Act increased to five (5) days, or 40 hours, per year. Employers can still choose to either provide paid sick leave in a lump sum each year or allow employees to accrue paid sick leave based on hours worked.

The minimum accrual rate is still one (1) hour for every 30 hours worked. If paid sick leave is accrued, employees must now be allowed to accrue up to a cap of at least ten (10) days, or 80 hours. However, employers can limit employees’ actual use of accrued sick leave to five (5) days, or 40 hours per year.

Reproductive Loss Leave Required for All Employers with 5 or More Employees

Beginning January 1, 2024, private employers with five (5) or more employees are required to provide all employees who have worked for the employer for at least 30 days with five (5) days of unpaid, protected leave following a reproductive loss event, which includes a failed adoption, failed surrogacy, miscarriage, stillbirth or an unsuccessful assisted reproduction.

The five days of leave do not have to be taken consecutively but must be completed within three months of the reproductive loss event. This new leave is available for each qualifying reproductive loss event; however, employers have the right to limit the maximum amount of leave under the policy to no more than 20 days in a 12-month period.

Off-Duty Cannabis Use Added as a Protected Class Under FEHA

Starting January 1, 2024, off-duty cannabis use was added as a protected class under the state’s Fair Employment and Housing Act law (“FEHA”). The law specifically prohibits any adverse employment actions taken against an employee for off-duty cannabis use and prohibits an employer from drug screening for cannabis. Employers may still prohibit on-duty possession, impairment, or use. Additionally, the law does not apply to employees in the building or construction trades, or employees that work in positions that require federal background investigations or security clearance under federal law.

Non-Compete Agreements With Employees Still Prohibited in California

Under existing law in California, non-compete agreements with employees are and have been void and unenforceable. Nonetheless, the state has passed two new laws regarding post-employment non-compete agreements that both went into effect on January 1, 2024.

The first law confirms existing case law and voids all unlawful noncompete agreements contained in employment contracts. Under this law, employers are required to individually notify all current employees, and former employees who were hired after January 1, 2022, whose employment contracts include a noncompete clause or who were required to sign a noncompete agreement that such clauses or agreements are void. The notice must be given in writing by no later than February 14, 2024. The notice can be by email, but it must be an individualized communication to each employee or former employee.

The second law confirms that all noncompete agreements are void and unenforceable regardless of where and when the contract was signed. Even if the contract was signed in another state with an employee who was working outside of California, it cannot be enforced in California. The law also makes it a civil violation for employers to enter into or try to enforce unlawful noncompete agreements. Further, the law gives employees the right to bring a civil action against an employer that attempts to enforce an unlawful noncompete agreement, which allows the employee to seek damages and attorneys’ fees and costs in addition to injunctive relief.

New Presumption of Retaliation for Adverse Actions Taken Within 90 Days of Protected Activity

Starting January 1, 2024, if an employer takes any adverse action against an employee within 90 days of the employee engaging in so called “protected activity,” it will create a rebuttable presumption of retaliation under the law. An employer who violates this provision will be liable for a civil penalty of up to $10,000 per employee to be awarded to the employee(s) that was retaliated against. “Protected activity” is defined broadly and includes, among other things, employees who make an internal complaint about working conditions, wages, harassment, etc., an employee who files a suit or complaint with an agency against the company and an employee who testifies in a proceeding against the employer.

NLRB Decision in Stericyle Requires Employers to Review Their Handbook Policies

In 2023, the National Labor Relations Board (“NLRB”) issued a decision in Stericycle, Inc. and Teamsters Local 628 regarding workplace policies and the effect they have on employee rights under the National Labor Relations Act (the “NLRA”). The decision states that workplace policies cannot infringe on employees’ rights under the NLRA, either directly or indirectly. This includes policies that could discourage employees from engaging in protected activities under the NLRA. Employees’ rights under the NLRA, which are protected, include: the right to form or join unions, the right to engage in protected, concerted activities to address or improve working conditions and the right to refrain from engaging in these activities.

Employers should review their handbook policies and make sure they are drafted so that their policies do not “chill” employees’ exercise of their rights under the NLRA.

Additional Updates and Reminders

Updated Wage Theft Notice (Required for all Non-Exempt Employees Upon Hire)

The Notice to Employee required under Labor Code Section 2810.5 – also referred to as a “Wage Theft Notice” – has been updated for 2024.  All employers are required to use the new form. You can access the revised Wage Theft Notice here.

Updated Harassment Poster

The California Civil Rights Department (CRD) has updated their “California Law Prohibits Workplace Discrimination and Harassment” poster. Employers are required to display this poster in a common area where employees can easily view it. You can access the new updated poster here.

IRS Mileage Reimbursement Rate Increase

Starting January 1, 2024, the Internal Revenue Service (IRS) has increased the standard mileage rate by 1.5 cents per mile for 2024 to 67 cents per mile.

Overtime Change for Small Agricultural Employers

For employers with 25 or fewer employees, the phase in for overtime rules for agricultural workers continues in 2024 with daily overtime for any hours worked in excess of 8.5 hours in a day and 45 hours in a week.

Workplace Violence Prevention Plan Required by July 1, 2024

Starting July 1, 2024, all employers are required to establish and maintain a workplace violence prevention plan as part of their Illness Injury Prevention Plan (“IIPP”), which will include maintaining a violence incident log and providing effective training on the workplace violence prevention plan. We will be doing a more detailed blog post on the requirements for the new plan in the Spring.

Employers should reach out to their workers’ compensation carrier for assistance with updating their IIPP accordingly.

For more information reach out to the DP&F Employment Law partners Jennifer E. Douglas and Marissa E. Buck.

COVID-19 Updates for California Employers

On January 9, 2024, the California Department of Health (CDPH) issued an order changing COVID-19 related definitions. These revisions apply to the Cal/OSHA Non-Emergency Regulations, which are still in place until February 3, 2025 and must be followed by all employers in California.

The questions and answers below reflect the updated rules and definitions that currently apply in the workplace. You can read more about the changes on Cal/OSHA’s FAQ page here, which is updated regularly.

COVID-19 Updates for California Employers as of January 2024

What is the current definition of the “infectious period” for employees who test positive for COVID-19?

For COVID-19 cases with symptoms, the “infectious period” is a minimum of 24 hours from the day of symptom onset. Under the current regulations, there is no infectious period for COVID-19 cases with no symptoms.

If an employee tests positive, are they required to be excluded from the workplace?  

If an employee tests positive for COVID-19 and has symptoms, they must be excluded from the workplace for a minimum of 24 hours from the day of symptom onset.

Symptomatic COVID-19 cases may return to work after 24 hours if:

  • 24 hours have passed with no fever, without the use of fever-reducing medications and;
  • Symptoms are mild and improving.

If an employee tests positive for COVID-19 and is asymptomatic, there is no infectious period for the purpose of isolation or exclusion, which means they are not required to be excluded from the workplace. If symptoms develop, the above criteria will apply.

All employees who test positive for COVID-19 must wear a mask around others for 10 days from the date of the positive test or symptom onset.

Are employees allowed to come to the workplace if they had a “close contact” with someone with COVID-19?

Yes – employees do not have to be excluded from the workplace unless they test positive.

If employees have had a “close contact,” they are no longer required to test; however, the CDPH still recommends testing for:

  • All people with new COVID-19 symptoms; and
  • Close contacts who are at higher risk of severe disease or who have contact with people who are at higher risk of severe disease.

Are masks still required in the workplace?

Masks are only required in the workplace in the following situations:

  • Employees who test positive for COVID-19 must wear a mask while around others for 10 days from the positive test or symptom onset;
  • In an outbreak or major outbreak all employees in the exposed group must wear a mask; and
  • If a local ordinance requires it, such as places like healthcare facilities and skilled nursing facilities.

Close contacts are no longer required to wear masks; however, it is still recommended that close contacts wear masks around others for 10 days following the last contact.

What is a “close contact”?

The regulation defines a “close contact” as sharing the same indoor airspace as a COVID-19 case for a cumulative total of 15 minutes or more over a 24-hour period during a COVID-19 case’s infectious period.  Spaces that are separated by floor-to-ceiling walls (e.g., offices, suites, rooms, waiting areas, bathrooms, or break or eating areas that are separated by floor-to-ceiling walls) are considered distinct indoor airspaces.

What is the current definition of an “outbreak”? 

The new outbreak definition requires at least three COVID-19 cases within an exposed group during a 7-day period (previously it was a 14-day period).

Is an employee paid if they test positive and are unable to work?

Possibly. The COVID supplemental paid sick leave program has expired. However, an employee may be eligible for compensation if they have accrued sick time and/or vacation time, or through disability insurance.

Note that the Workers’ Compensation Presumption expired on January 1, 2024, which means the presumption that an employee’s work-related COVID-19 illness is an occupational injury and eligible for workers’ compensation is no longer available.

Does an employer still need to send a notification to employees when there is a workplace exposure?

If an employer becomes aware of a potential COVID-19 exposure in the workplace, they are still obligated to notify all employees who may have had close contact with a COVID-19 case in the workplace. The notice must be in writing and must be provided within one business day of discovering the potential exposure.

Is an Employer still required to maintain a COVID Prevention Plan (CPP)?

Yes. To comply with the Non-Emergency Regulations, an employer must either develop a written COVID-19 Prevention Program or ensure its elements are included in an existing Injury and Illness Prevention Program (IIPP).

Does an employer still need to provide COVID-19 testing to employees?

Regardless of CDPH recommendations, employers must continue to make COVID-19 testing available at no cost and during paid time to all employees who had a close contact at work with a person with COVID-19 during their infectious period, except for asymptomatic employees who recently recovered from COVID-19.

In workplace outbreaks or major outbreaks, the COVID-19 regulations still require testing of all close contacts in outbreaks, and everyone in the exposed group in major outbreaks. Employees who refuse to test and have symptoms must be excluded for at least 24 hours from symptom onset and can return to work only when they have been fever-free for at least 24 hours without the use of fever-reducing medications, and symptoms are mild and improving.

For more information reach out to the DP&F Employment Law partners Jennifer E. Douglas and Marissa E. Buck.

FTC Issues Proposed Non-Compete Ban To Spur Employee Mobility, Aligning with Existing California Law

Thursday, January 5, 2023, the FTC issued its proposal to prohibit non-compete clauses in employment agreements in an effort to boost wages and competition, citing worker mobility as essential to a thriving U.S. economy. California has long prohibited such clauses pursuant to Business and Professions Code Section 16600. The FTC’s proposed rule is shining a light on the issue, which makes it a good opportunity to focus California and non-California employers’ attention on what can be done to protect their businesses from unlawful competition.

The rule flows from President Biden’s 2021 Executive Order Promoting Competition, which directed the FTC to address unfair use of non-compete and similar agreements to stifle employee mobility and depress wages. Like California’s law, the proposed rule would invalidate existing non-compete agreements in place and would provide exception for the sale of certain types of businesses. If promulgated, the new FTC rule would supersede and preempt inconsistent state laws, and employers will be required to issue notice to employees, rescinding existing employment agreements to remove objectionable non-competition clauses.

Similar to California, under the proposed FTC rule, nondisclosure and non-solicitation agreements would also be scrutinized, e.g., as to whether such agreements are invalid in that they so broad as to effectively function as noncompete agreements.

The rule is currently open for public comment until March 6, 2023, and employers will be subject to enforcement 180 days after final publication.

For workers, the rule provides more flexibility to pursue future employment in a worker’s area of expertise, to market one’s talents and seek increased compensation. For employers, this rule is another wake-up call for the need to safeguard and secure trade secret assets of the business to which an individual has access.

Given the reality of increased mobility, employers should be ensuring that:

  1. Employees with access to sensitive information are covered by up-to-date confidentiality and lawful non-solicitation obligations; and
  2. Employers must redouble efforts to keep organized, diligent records of the existence, inventory and location of any employer assets or property, including devices and customer lists, so as to expediently secure such assets should an employee or contractor depart on short notice.

We continue to monitor developments and will make ourselves available to concerned clients to discuss what can be done to favorably address business impacts and requirements flowing from the new FTC rule and California’s existing non-compete prohibitions. For more information as to how this will impact IP rights, contact Chris Passarelli. For more information about how this will impact your employment agreements, contact Jennifer Douglas.

Ninth Circuit Rules Time Booting Up Computer Before Clocking In Is Compensable

The Ninth Circuit Court of Appeals issued a decision earlier this week holding that employees who worked at a call center were entitled to compensation for the time spent booting up their computers at the start of the work day prior to clocking in. The call center employees conducted the majority of their jobs using their computers, thus the Court determined that turning on and booting up the computers was “integral and indispensable” to the workers’ duties. Under the FLSA, duties that are “integral and indispensable” are considered principal activities and must be compensated.

For employers in California, this is another sign that both state and federal courts are moving towards requiring employers to compensate employees for time spent prior to clocking in where employees are completing tasks that are required by the employer or indispensable for their jobs. Some examples include: booting up computers, cleaning and preparing tools, and putting on a uniform or safety equipment.

Employers should review the tasks that non-exempt employees undertake prior to clocking in each day to determine if those duties are related to their jobs and should be compensated. If employees are completing tasks that are “integral and indispensable” to their jobs prior to clocking in, employers should determine the average amount of time the tasks take to complete each day and add that amount to employees’ paychecks.

For those who are interested in reading the full decision, the case is Cariene Cadena and Andrew Gonzales v. Customer Connexx, LLC and Janone, Inc., case number 21-16522.

If you have any questions about this or any other employment related matters, please contact Marissa Buck, Jennifer Douglas or any member of DP&F’s Employment Law team.

Flexible Workplace Options for Employers

As more employees return to the workplace, employers are searching for ways to retain existing employees and attract new talent in a changing landscape where remote work and shorter workweeks are becoming more common. This article looks at two options for employers who are seeking to give employees greater flexibility in their schedules and how to remain compliant with California labor laws in the process.

Alternative Workweek Schedule

One option for employers is to implement an alternative workweek schedule (“AWS”), which provides greater flexibility by allowing employees to work longer shifts on less workdays. The AWS also permits non-exempt employees to work more than 8 hours in a day without incurring daily overtime. The most common AWS is the 4/10, where employees work 4 days a week for 10 hours each day.

Under an AWS, no overtime is required for a regular schedule of not more than 10 hours per workday within a 40-hour workweek. If employees work longer than 10 hours a day on an AWS, they are entitled to overtime pay at one-and-one-half times their regular rate of pay for all time worked between 10 and 12 hours, and double their regular rate of pay for any hours worked over 12 hours. Additionally, employees are entitled to overtime for all hours worked on any day that is not included in the AWS at one-and-one-half times their regular rate for the first 8 hours and double their regular rate of pay for any hours worked over 8 hours.

An AWS can be used for an entire company, or any identifiable “work unit” including a department, a shift, or a particular location. The AWS must be approved by a secret ballot election of at least two-thirds of the affected employees in the work unit. Employers can propose one schedule for all employees in the work unit or provide a menu of schedule options that each employee can choose from.

Once the work unit and AWS is determined, employers should follow the steps below to implement the AWS.

  1. Notice. Send a notice to all employees in the work unit regarding the proposed schedule change and describe how the change will affect their hours, wages, and benefits.
  2. Pre-Election Meeting and Disclosure. Employers are required to hold a pre-election meeting at least 14 days before the secret ballot election to discuss the proposed alternative workweek schedule. Employers must also provide all employees with a written disclosure that includes the information discussed at the meeting. If at least 5% of the employees in the work unit speak a language other than English, employers must provide the disclosure in that language as well.
  3. Secret Ballot Election. Hold the election at the worksite during regular work hours. If some employees in the work unit are not present for the election, they can provide an absentee ballot upon their return.
  4. Notify DLSE. If the AWS is approved by the employees in the work unit, the election results must be mailed to the Department of Industrial Relations. Employers should follow the instructions on the DLSE website regarding where to send the notice and what information to include: https://www.dir.ca.gov/databases/oprl/dlsr-awe.html.
  5. Implement Schedule: Employers may not require employees to work the new AWS for at least 30 days after the final results of the election.

Employers must also make reasonable efforts to accommodate a schedule with 8-hour work days for employees who voted in the election but are unable to work the AWS, employees who have a religious belief or observance that conflict with the AWS, and employees who are hired after the date of the election and are unable to work the AWS.

Hybrid Work Schedule

While remote work has gained popularity amongst employees and employers, for many companies it is necessary to have employees physically present in the workplace. One option for employers is to create a hybrid remote work schedule that allows employees to work remotely part of the time. Employers can require a certain number of days at the workplace each week, or create set schedules designating the specific days of the week on which employees will work remotely.

Employers should have a written policy in place that describes which employees or groups of employees are eligible for remote work, how to request a remote work schedule and who needs to approve it, and the expectations for employees when working remotely.

If remote work is provided as a purely voluntary option for the benefit of the employee, and it is not a requirement of their job, employers are not obligated to reimburse employees for expenses incurred in working remotely.

We recommend working with counsel to implement either an AWS or a remote work policy to ensure compliance with all California labor laws.

If you have any questions about this or any other employment related matters, please contact Marissa Buck or any member of DP&F’s Employment Law team.

COVID-19 Supplemental Paid Sick Leave: New California State COVID Leave Law Applies to all California Employers with 26 or More Employees

On February 9, 2022, Governor Newsom signed the new COVID-19 Supplemental Paid Sick Leave law (SB-114), which is retroactive to January 1, 2022 and extends through September 30, 2022.

Similar to the previous law that provided COVID-19 supplemental paid sick leave and expired last year, the new COVID-19 Supplemental Paid Sick Leave law requires employers in California with 26 or more employees to provide up to a total of 80 hours of paid sick leave to employees for certain COVID-19 related reasons. While we expect updated FAQs on the new law from the DIR soon, the key details from the statute are included below.

  • 26+ Employees: The law requires employers with 26 or more employees to provide supplemental paid sick leave for certain COVID-19 related reasons.
  • Retroactive to January 1 and through September 30: The requirement to provide the paid sick leave will take effect on February 19 (10 days after the law was signed by the Governor), at which point it will be retroactive to January 1 and extend until September 30, 2022. Employers are required to provide retroactive payments to any employees who were provided with an unpaid leave for qualifying reasons since January 1 at the request of the employee (either orally or in writing). The retroactive payment must be paid on or before the payday for the next full pay period after it is requested by the employee.
  • Two Categories of Paid Leave (up to 40 hours each): The new supplemental paid sick leave is split into two categories – the first allows employees to take up to 40 hours of leave for COVID related reasons similar to the prior law, and the second allows employees to take an additional 40 hours of leave if they or their family member test positive for COVID-19.
  • First Category: Employers must provide up to 40 hours of supplemental paid sick leave for employees that are unable to work or telework due to any of the following reasons:
    • Employee is subject to quarantine or isolation order or guidelines due to COVID-19;
    • Employee is advised to quarantine or isolate by heath care provider;
    • Employee is attending an appointment for themselves or a family member to get a vaccine or booster and/or experiencing symptoms from a vaccine or booster or caring for a family member who is experiencing symptoms from a vaccine or booster (limit of 24 hours per vaccination/booster – see below);
    • Employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
    • Employee is caring for a family member who is subject to quarantine, or has been advised to isolate;
    • Employee is caring for a child whose school or child care is closed or unavailable due to COVID-19.
  • Second Category: Employees who test positive for COVID-19, or have to care for a family member who tests positive, are entitled to an additional 40 hours of supplemental paid sick leave. Employers can request proof of a positive test for the employee or family member prior to providing the supplemental paid sick leave. If an employee refuses to get tested or provide test results to the employer, employers are not obligated to provide the additional 40 hours of supplemental paid sick leave. Employers can require documentation of a positive COVID test for retroactive payments requested by the employee as well. Employers are required to pay for the test for employees, but it is unclear if employers will also be required to pay for tests for family members of employees.
  • Amount of Leave: Full-time employees that work at least 40 hours per week on average are entitled to 40 hours of supplemental paid sick leave under each category, for a total of 80 hours of supplemental paid sick leave. Other non-full-time employees are entitled to the average amount of hours they normally work over a 14-day period.
  • 24-hour Limit for COVID Vaccine/Booster: Employers can limit the supplemental paid sick leave an employee can use for each vaccine or booster and any related side effects, for themselves of a family member, to three days (24 hours), unless the employee provides verification from a healthcare provider that the symptoms are continuing after three days.
  • Amount of Pay: Supplemental paid sick leave should be paid at the employee’s regular rate of pay, up to a maximum of $511 per day and no more than $5,110 total per employee. An employee’s regular rate includes any commissions or non-discretionary bonuses.
  • Must List Amount Used on Wage Statements: The COVID-19 Supplemental Paid Sick Leave is a separate entitlement from other paid sick leave provided by the employer and must be listed separately on the written notice or wage statement provided to employees each pay period. However, instead of listing the available balance of supplemental paid sick leave, employers are only required to list the amount of leave that has been used to date. If an employee has not yet used any leave, their statement should list “zero.”
  • Cannot Require Substitution of Other Leaves: The supplemental paid sick leave is in addition to other paid leave. Thus, employers cannot require employees to substitute their vacation, PTO, or other paid sick leave when using supplemental paid sick leave.
  • Distinct from Cal/OSHA ETS Exclusion Pay: Employers cannot require employees to first exhaust their supplemental paid sick leave when exclusion pay is required to be paid under the Cal/OSHA ETS. Based on this, it appears employers cannot apply these hours toward the exclusion pay obligation when employees are required to be excluded from the workplace due to a workplace exposure to COVID-19 but we expect clarification on this requirement in the forthcoming FAQs.
  • Notice Requirement: The Labor Commissioner is required to make a model notice available for employers to send to employees, which should be available shortly. The notice should be posted in the workplace and must be emailed to employees who do not frequent a workplace.

If you have any questions about this or any other employment related matters, please contact Marissa Buck or any member of DP&F’s Employment Law team.

COVID-19 Leave: Employer Obligations After September 30

State and Federal COVID-19 Leave Laws Are Set to Expire on September 30, 2021

As of the date of this article, both the federal and the California COVID-19 leave laws are set to expire on September 30, 2021 and it does not appear that either the State or Federal legislatures will be extending these provisions. The California law, SB-95, requires employers with 26 or more employees to provide up to 80 hours of supplemental paid sick leave for COVID-19 reasons from January 1 to September 30, 2021. The American Rescue Plan Act, which was passed by Congress earlier this year, extended the ability of employers to take a tax credit against their payroll taxes for offering leave to employees for COVID-19 reasons through September 30, 2021. Additionally, the optional COVID-19 related leaves under the federal law, Emergency Paid Sick Leave and Emergency FMLA, both expire on September 30.

After September 30, 2021, employers with 26 or more employees will no longer be required to provide the COVID-19 supplemental paid sick leave under California law. Employers of any size may still choose to put their own COVID-19 policies in place that provide pay for employees who miss work for COVID related reasons, however, employers will no longer receive a tax credit for those payments.

California’s law required employers to initially give notice to employees regarding the availability of the COVID-19 supplemental paid sick leave and the time period of the leave. However, employers may want to remind employees that the leave is expiring on September 30. Note that if an employee is already taking COVID-19 supplemental paid sick leave at the time the leave expires on September 30, they are permitted to take the full amount of leave that they are entitled to even if it extends past September 30.

Employer Pay Obligations After September 30

Although employers will no longer be required to provide separate supplemental paid sick leave for COVID-19 purposes after September 30, under the Cal/OSHA Emergency Temporary Standards (“ETS”) employers must maintain all pay and benefits for employees who are required to be excluded from the workplace due to COVID-19 and otherwise able to work. Employees may choose to use their regular paid sick leave during the exclusion period; however, employers cannot require employees to use their regular paid sick leave.

The exclusion pay is only required for cases of workplace exposure to COVID-19, therefore, if employers are able to show that an employee’s exposure to COVID was outside the workplace no exclusion pay is required in that case. Employers also do not have to pay an employee that receives disability payments or worker’s compensation during the exclusion period. For more information on the Cal/OSHA ETS exclusion pay you can access the DIR’s FAQ page here.

Additionally, many employers are now requiring vaccinations and/or regular COVID-19 testing as a condition of employment. If employees are required to receive the vaccine as part of their job, employers must pay for the cost of the vaccine, if any, and the time it takes the employee to get vaccinated. Further, the DIR issued an FAQ on COVID-19 testing that states that employers must pay for the cost of COVID-19 testing if it is a requirement of the job. This includes paying for the test itself, the time it takes the employee to get tested (including any travel time), and reimbursing employees for travel expenses if the testing location is not at their regular workplace. You can read the DIR’s full FAQ on COVID-19 testing here.

Employee Leave Options After September 30

Even though the State and federal COVID-19 leaves are expiring on September 30, many employees will still need to take time off from work for COVID-19 related reasons. Unless their employers have their own COVID-19 policies in place, much of this time off work may be unpaid.

If an employee is sick with COVID-19 symptoms or is caring for a family member who has COVID-19 symptoms, they can use their regular California paid sick leave if they have accrued time available. Employees can also take family and medical leave under CFRA to care for themselves or their family members if their symptoms rise to the level of a serious health condition. Leave under CFRA is unpaid but employees may qualify for disability insurance from the state.

If you have any questions about this or any other employment related matters, please contact Marissa Buck or anyone on the DP&F Employment Team.

Regular Rate Blues: California Supreme Court’s Decision on Premium Payments and Other Pay Practice Reminders

On July 15, 2021, the California Supreme Court decided in Ferra v. Loews Hollywood Hotel, LLC that employers must pay premium payments to employees for missed meal, rest, and recovery breaks at the employee’s “regular rate of pay” instead of the employee’s base hourly rate, as many employers were doing. The ruling is retroactive, and employers should audit their practices to determine if a true-up payment is necessary.

Under California wage and hour laws, an employer must provide and permit nonexempt employees who work more than five hours in a day an unpaid duty-free meal period of at least 30 minutes in length starting no later than the end of the fifth hour of work. Employees who work no more than six hours in a day may waive the meal period upon written agreement between the company and the employee. In addition, nonexempt employees who work at least three and one-half hours in a day must be provided and permitted a paid 10-minute duty-free rest period for every four hours of work or major fraction thereof, and a second rest period if working up to six hours a day. Employees who work outdoors are entitled to cool-down recovery periods in fixed, shaded areas whenever needed to prevent heat illness.

If an employer doesn’t provide compliant meal, rest, or recovery periods, the employer must pay the employee one additional hour of pay as a “premium” for each workday that the meal, rest or recovery period was not provided. (Labor Code § 226.7.) Before the recent ruling, it was unclear whether this premium should be paid at the employee’s base hourly rate or their “regular rate of pay” which includes all nondiscretionary incentive payments such as bonuses and commissions. The Court settled this issue: the premium must be paid at the regular rate of pay, not the base rate. This is bad news for employers that acted in good faith by paying premium pay at the base hourly rate.

How To Calculate “Regular Rate of Pay”

Regular rate calculation requires employers to include all compensation for hours worked and divide that number by the total hours worked. “All compensation” includes hourly wages, nondiscretionary bonuses, shift differentials, on-call pay, and commissions. In general, most bonuses are considered nondiscretionary and include any bonus that employees know about and expect such as: production bonuses, bonuses for quality of work, bonuses to induce employees to work more efficiently, attendance bonuses, and safety bonuses. Thus, if nonexempt employees are paid a commission, non-discretionary bonus, or other incentive payment, such payment must be factored into the employees’ regular rate in order to compute any applicable overtime or break premium compensation.

Different Rule for Flat Sum Bonus: Note that California law requires the use of a different rule for calculating “regular rate of pay” when employees earn a non-discretionary, flat sum bonus. A flat sum bonus is typically a bonus paid for working a shift that is not tied to any measure of production or efficiency, for example a flat sum bonus for working on a weekend. When calculating the regular rate of pay from a flat sum bonus, the bonus is divided by only the regular, non-overtime hours worked in the workweek instead of all hours.

For examples showing regular rate calculations you can review the Labor Commissioner’s website here.

When To Use Regular Rate

The regular rate of pay is used when calculating overtime, California paid sick leave (see sick leave section below) and now meal and rest pay premiums.

Overtime “True Up” Calculations

If the employees’ bonus or commission is paid out on a weekly basis, the calculation is simple and the additional pay is added to all other wages earned in the workweek and then divided by the total hours worked in that workweek to come up with the regular rate. However, the majority of bonuses and commissions are not paid on a weekly basis and are more often earned and calculated on a monthly or quarterly basis.

If employees earn nondiscretionary bonuses or commissions on a monthly, quarterly, or other non-weekly basis, the amount of the bonus or commission earned must be spread out over the period it was earned by the employee for purposes of the overtime calculation. Employers must apportion the bonus or commission payments to each workweek during the period the amount was earned on a pro rata basis. Once that is done, employers must then recalculate any additional overtime amounts that may be owed over the period the bonus or commissions was earned, and “true up” the amount by paying the employee the difference.

The true up process for overtime or premium payments should be done whenever the bonus or commission payments are made to employees. Any additional overtime or premium amount owed to employees should be paid at the same time as the bonus or commission or in the following pay period. If you have questions regarding the method of calculating the regular rate or “truing up” payments, you should work with legal counsel to ensure employees are being compensated appropriately.

Paid Sick Leave Pay for Hourly Employees Is Also Regular Rate

An often-overlooked provision of California’s paid sick leave law is that the rate of pay for paid sick leave for hourly (non-exempt) employees is also the regular rate, not the straight hourly rate of employees. This is different than how an employer usually pays vacation or PTO time, so it can often slip by even the most seasoned of HR professionals and payroll personnel.

Nonexempt employees must be paid their regular non-overtime hourly rate for the amount of time taken as paid sick leave. To determine the rate of pay for nonexempt employees taking sick leave, the employer may either:

  • Calculate the regular rate of pay for the workweek in which the employee used paid sick leave, whether or not they actually worked overtime in that workweek (see above; this is calculated like the “flat sum” bonus), or
  • Divide your total compensation for the previous 90 days (excluding overtime premium pay) by the total number of non-overtime hours worked in the full pay periods of the prior 90 days of employment

For exempt employees, paid sick leave is calculated in the same manner the employer calculates wages for other forms of paid leave time (for example, vacation pay or PTO).

Take Away

This is a good time for employers to review their pay practices and contact their legal counsel to determine what, if any, corrections should be made. Because the ruling is retroactive, there may be an increase in litigation surrounding meal and rest breaks. It is important to be proactive in evaluating risk.

If you have any questions about this or any other employment related matters contact Sarah Hirschfeld-Sussman or anyone on the DP&F Employment Team.

Top Three Tips for Employers in Implementing Remote Work Policies

The COVID-19 pandemic has created many challenges and changes in the workplace, with one of the biggest changes being the increase in remote work for employees. As the economy reopens this year, employers are now able to bring employees safely back to the workplace. However, many employers are also exploring flexible work arrangements that allow their employees to continue to work remotely.

Implementing a remote work policy can be a benefit to employers in retaining employees by allowing flexibility in their schedules and may also help attract new employees that would not otherwise live close enough to the employer’s workplace. Here are three tips employers should follow when implementing a remote work policy for their workplace.

1) Create a written policy for remote work. Having all or part of your workforce working remotely presents new challenges for both employers and employees, thus it is important to lay out the policy clearly in writing. A remote work policy should clearly state which employees are eligible for remote work (and any employees that are not eligible) and the requirements for working remotely, including the ability to still meet the essential functions of the position. Employers can implement a general work from home policy that allows employees to voluntarily work from home when it is necessary for the employee’s convenience. Alternatively, employers can approve remote work arrangements with employees on an individual basis that allow employees to work remotely either full or part time, in which case the employer should enter into a separate remote work agreement with each employee. Either way, the policies should be signed by employees to acknowledge receipt and should include a statement that the employer has the right to revoke the remote work option at any time.

2) Comply with all labor laws for non-exempt employees working remotely. Remote work for non-exempt employees can pose challenges for employers in ensuring that hours worked are tracked properly, all overtime is paid, and adequate meal and rest breaks are provided. Employees must track their time, including meal and rest breaks, as accurately as possible when working remotely just as they would in the workplace. Employers should be clear about the working hours for non-exempt employees to ensure they are not working off the clock. Policies requiring pre-approval for overtime should also be reiterated in the remote work policy. Working hours and breaks can be difficult to track when employees are not present at the worksite, thus it is important to layout the requirements in writing and set up a system of communication with your remote employees.

3) Reimburse employees business expenses where required. Under California law, employers must reasonably reimburse workers for all “necessary” business expenses incurred by the employee in carrying out their job duties. If the remote work policy is voluntary and employees have a designated office at the workplace that they can use anytime, their expenses for remote work will likely not need to be reimbursed since the remote work is voluntary and not “necessary.” However, during the pandemic most employees were required to work remotely and it became necessary for their job. If employees are still required to work remotely under an employer’s policy, employers must reimburse employees for expenses incurred in working remotely including paying all or part of their cell phone and internet bills, providing or paying for office supplies, and even paying for necessary office furniture.

Employers should work with legal counsel to ensure their remote work policies are compliant.

For questions about this or any other employment law matters, contact Marissa Buck or anyone on the DPF Employment Law team.

U.S. Supreme Court Rules Against Union Access to Agricultural Employer’s Land

On June 23, the U.S. Supreme Court held that a California regulation allowing union organizers to enter an agricultural employer’s property is unconstitutional. The regulation, on the books since the mid-1970s, requires farms to permit unions to speak with and recruit farmworkers in the hour before and after work and an hour during lunchtime for up to 120 days each year. (Cedar Point Nursery v. Hassid (U.S., June 23, 2021, No. 20-107) 2021 WL 2557070.)

In the case, a strawberry plant nursery and a fruit shipment company sued the California Agricultural Labor Relations Board arguing that the regulation gave farmworker unions an easement to enter and conduct business on their land without authorization or compensation. The Court agreed, holding that the regulation took away the agricultural employer’s right to exclude trespassers from its private property, amounting to a “taking” of company property without “just compensation” in violation of the Fifth Amendment.

With the regulation essentially gone (barring the unlikely scenario that the government or the unions decide to pay farms for access to their workers), labor unions will have to find alternative means to communicate with and recruit agricultural union members. This ruling is hailed as a resounding victory for agricultural employers. For more information about this contact Sarah Hirschfeld-Sussman or anyone on DP&F’s employment team.

Regulating Social Media in the Workplace

The proliferation of social media creates new and difficult situations for employers. Many employers wonder to what extent they can regulate their employee’s social media activities or legally take an employment action based on an employee’s off-duty conduct.

For better or worse, most of us carry smart phones with the capacity to text, email, comment, and upload photos and videos instantaneously. Platforms like Facebook, Twitter, Instagram and YouTube allow us to easily share our personal, and potentially controversial, opinions publicly. In addition, our viewpoints or activities can easily be disseminated by others. Take, for example, an employee is recorded saying something offensive outside of work and the video is published on someone else’s social media account.

Navigating these situations is not simple. While the First Amendment’s right to free speech generally does not apply to actions taken by private employers, there are other privacy laws in California that do. For example, the California Constitution, at Article I, Section 1, gives every citizen a right to privacy, and California Labor Code Section 980 prohibits employers from asking employees for their social media log-ins and passwords or asking them to access their social media accounts on demand. However, depending on the circumstances, once an employee publishes on social media, the right to privacy may be considered waived.

California law, found at Labor Code Section 96(k), protects employees’ rights to engage in lawful off-duty conduct, and provides remedies when employment is adversely affected in violation of these laws. However, off-duty conduct that harms or potentially harms the employer’s business interests or involves a crime may be a valid basis for an employment decision. Since these are tricky situations, the individual facts must be considered and an employer may want to consult with legal counsel before taking action.

We recommend employers adopt a standard policy to handle these situations. Below are some guidelines to keep in mind when adopting a social media policy.

What Employers Can Regulate
Employers can restrict an employee’s social media behavior in the following ways:

  • Use of personal social media during work time or on the employer’s equipment (company computers, phones)
  • Use of the employer’s name, logos, brand names, slogans or trademarks and appearing to speak on behalf of the employer
  • Communications about confidential or proprietary employer information including non-public information that may be valuable to competitors, such as client lists, product information, and pricing
  • Posts about co-workers, supervisors, or the employer, competitors or suppliers that are vulgar, obscene, threatening, harassing, libelous, or discriminatory based on a protected class (but be careful about regulating negative posts made in the context of discussing terms and conditions of employment protected by the National Labor Relations Act, discussed below)
  • If the employee chooses to identify themselves as an employee of the employer on any social media network, you can require them to state in clear terms that the views expressed on the social media network are theirs alone and that they do not necessarily reflect the views of the company
  • Unlawful conduct, even when it occurs off-duty

What Employers Can’t Regulate
Employers should not prohibit or restrict the following:

  • An employee’s communications about wages, hours, or other terms and conditions of their employment as these may be protected under the National Labor Relations Act
  • Disclosure of facts related to sexual harassment in the workplace, as these may be protected depending on the circumstances
  • An employee’s communications about their political beliefs, political associations or affiliations, engaging or participating in politics, and/or becoming candidates for public office

Before taking any adverse action against an employee based on a social media post or other off-duty conduct, employers should consider the following:

  • Does the activity negatively affect the employer’s business? How?
  • Does the activity violate the employer’s social media policy?
  • Is the employer enforcing the policy uniformly? For example, have other employees posted similar content or about similar topics without being disciplined?
  • Can the employer legally take action, or is the activity in question protected under the law? Consult legal counsel if you have any doubts.
  • How did the employer learn of the posting or conduct? Did they learn in a way that could be considered an invasion of privacy?
  • How will taking action affect employee morale?
  • How will the action be perceived by the employer’s customers, community and the public if it is publicized?

Taking action based on an employee’s off-duty conduct or social media activity can be challenging for employers, and there are many factors to consider. Employers should think about the legal risks involved and adopt a legally compliant policy. As always, we recommend employers work with legal counsel when handling these sensitive issues.

For questions about this or other employment matters contact DP&F’s Employment Team, Jennifer Douglas, Marissa Buck or Sarah Hirschfeld-Sussman.


Governor Newsom Signs New Employee Recall Law (SB-93) – Effective Immediately

SB-93 was signed by Governor Newsom on April 16, 2021 and is effective immediately. The new law requires certain employers to recall eligible workers who were laid-off for reasons related to COVID-19 if their prior positions become available. Here are the key parts of the law employers need to know:

  • Covered Employers: SB-93 only applies to employers who operate an “enterprise,” which is defined as a “hotel, private club, event center, airport hospitality operation, airport service provider, or the provision of building service to office, retail, or other commercial buildings” regardless of the number of employees.
    • Hotel means a building offering overnight lodging to the public with 50 or more guest rooms, or suites of rooms.
    • Private club means a membership-based business that operates a building with 50 or more guest rooms, or suites of rooms, for overnight lodging for members.
    • Building service means janitorial, building maintenance, or security services for office, retail, or other commercial buildings.
  • Laid-Off Employees: Laid-off employees are eligible to be offered employment if they were: (1) employed for six months or more from January 1, 2019 to January 1, 2020, full-time or part-time; and (2) most recently separated from active service due to a “reason related to the COVID-19 pandemic.” Reasons related to COVID-19 include: a public health directive, government shutdown order, lack of business, a reduction in force, or other economic, non-disciplinary reason due to the COVID-19 pandemic.
  • Requirements: Covered employers must offer laid-off employees open positions that (1) become available after April 16, 2021, and (2) are the same or similar to the laid-off employee’s position at the time of the employee’s most recent layoff. Employers must make an offer within five business days of establishing the position, and give the employee five business days to accept or decline the offer.
    • The offer must be made in writing and delivered in person or by mail to the employee’s last known address, and by email and text message if the employer has that contact information.
    • If more than one laid-off employee qualifies for a position, the employer must offer the position to the employee with the longest length of service, which is the total of all periods the employee worked for employer since their hire date including time when they were on leave or vacation.
    • If the laid-off employee is not qualified for the open position, the employer must provide written notice within 30 days stating the length of service of the individual who was hired and the reasons for the employer’s decision not to hire the laid-off employee.
  • Record Retention: For each laid-off employee, employers must maintain the following records for three years from the date of the written notice of layoff:
    • The employee’s full legal name
    • The employee’s job classification at the time of separation from employment
    • The employee’s date of hire
    • The employee’s last known residential address
    • The employee’s last known email address
    • The employee’s last known telephone number
    • A copy of written layoff notices provided to the employee, and
    • All records of communications between the employer and the laid-off employee concerning offers of employment made pursuant to SB-93

The law allows laid off employees to file a complaint with the Division of Labor Standards Enforcement (“DLSE”) for violations of SB-93, and employers who violate the provisions of the law may be subject to penalties. The full text of the law can be found here.

If you have any questions about this or any other employment related matters, please contact DP&F’s employment team, Jennifer Douglas, Marissa Buck or Sarah Hirschfeld-Sussman.

Spring Employment Law Update

Join firm co-managing partner, Jennifer Douglas, along with Marissa Buck and Sarah Hirschfeld-Sussman, on Wednesday, April 7th, 10:00 AM – 12:00 PM for a complimentary webinar on current employment law issues.

In particular, the webinar will address recent changes to employment laws affecting California employers, and COVID-19 issues including vaccination. This webinar is open to all clients.

DP&F’s Employment Law practice advises firm clients in all manner of employment issues including wage and hour, discrimination, reasonable accommodation, leaves of absence, and implementing state and federal regulations.

The team often analyzes legal risks associated with hiring, disciplining and firing in order to counsel clients with these employment decisions. Although counseling is the key to DP&F’s employment practice, the team includes trained and experienced litigators who protect firm clients’ interests when litigation becomes necessary.

The employment law team recognizes the importance human resources plays in every business and an in-depth understanding of human resources enhances the team’s ability to counsel their clients in all areas of employment law.

Click Here to Register

Employer Focused Summary of American Rescue Plan Act and California COVID-19 Supplemental Paid Sick Leave Act

The American Rescue Plan passed and signed into law by President Biden on March 11, 2021 extends and resets the FFCRA after its expiration on March 31. The extension and reset goes into effect on April 1 through September 30, 2021.

In addition, Governor Newsom signed a new COVID-19 Supplemental Paid Sick Leave Act (SB-95) into law this past Friday, March 19 which is retroactive to January 1, 2021 and extends through September 30, 2021.

The relevant portions of the two laws are summarized below.

Federal: American Rescue Plan Act (“ARPA”)

  • <500 Employees: The provisions of the ARPA only apply to employers with less than 500 employees.
  • Additional Leave as of April 1: Amount of FFCRA leave available is reset to up to 80 hours (10 days) of emergency paid sick leave (“EPSL”) and up to 12 weeks of emergency FMLA leave (“EFMLA”).
    • Leave taken prior to April 1 will not count toward the reset cap
  • Providing Leave Not Required: Employers are not required to provide paid leave, but if they choose to they will receive payroll tax credits for doing so until September 30, 2021.
  • New Qualifying Reasons for Leave: ARPA expands the qualifying reasons for taking leave under both the EPSL and EFMLA to include:
    • Seeking or awaiting results of COVID-19 test after an exposure or at an employer’s request;
    • Vaccination appointments;
    • Conditions or complications related to receiving the COVID-19 vaccine.
  • Changes to Paid Leave for EFMLA: ARPA expands the amount of paid leave available under the EFMLA as follows:
    • Eliminates the requirement that the first 10 days of EFMLA is unpaid;
    • Increases the total tax credit cap for EFMLA from $10,000 to $12,000 per employee.
  • Additional Qualifying Reasons and Pay for both EPSL and EFMLA: Under the ARPA, both EPSL and EFMLA can be taken for the following qualifying reasons (in addition to the new reasons listed above). Note that this is an expansion of the EFMLA leave, which was previously only allowed for childcare purposes.
  • Additional Qualifying Reasons and Pay for both EPSL and EFMLA: Under the ARPA, both EPSL and EFMLA can be taken for the following qualifying reasons (in addition to the new reasons listed above). Note that this is an expansion of the EFMLA leave, which was previously only allowed for childcare purposes.
    • Qualifying Reasons Related to the Employee’s Own Health:
      • Subject to quarantine or isolation order due to COVID-19;
      • Advised to self-quarantine by heath care provider due to COVID-19;
      • Experiencing symptoms of COVID-19 and seeking medical diagnosis.
      • Under the EPSL this is paid at the employee’s regular rate of pay, up to $511/day (capped at $5,110) total; under the EFMLA it is limited to 2/3 of the employee’s regular rate of pay, up to $200/day (capped at $12,000 total)
    • Qualifying Reasons Related to Employee’s Need to Care for others:
      • Caring for a family member who is subject to quarantine, or has been advised to self-quarantine;
      • Caring for a child whose school or child care is closed due to COVID-19.
      • Under both EPSL and EFMLA this is paid at 2/3 employee’s regular rate of pay, up to $200 per day.
  • New Non-Discrimination Rule: The new law prohibits the tax credit for employers that discriminate in giving FFCRA paid leave by favoring highly compensated employees, full-time employees, or employees on the basis of tenure with the employer. If employers do not make FFCRA paid leave available to all employees without respect to their compensation level, job category or seniority, they could be denied the tax credit.

California: SB-95 – COVID-19 Supplemental Sick Leave

  • 26+ Employees: The law requires employers with 26 or more employees to provide supplemental paid sick leave for COVID-19 reasons. The law does not apply to employers with 25 or fewer employees, however these employers are covered under the federal ARPA discussed above. Employers with 500+ employees will be covered by SB-95 and not by the federal ARPA.
  • Retroactive to January 1 and through September 30: The requirement to provide the paid sick leave will take effect on March 29 (10 days after law enacted), at which point it will be retroactive to January 1, and extend until September 30, 2021. This means that if you did not provide paid sick leave for qualifying reasons as of January 1, but instead provided unpaid leave, you will need to provide pay for that leave retroactively by the next full pay period to comply with this law (note that you may qualify for FFCRA tax credits for doing so).
  • Reasons for Leave: Employers must provide supplemental paid sick leave for employees that are unable to work or telework due to any of the following reasons:
    • Subject to quarantine or isolation order or guidelines due to COVID-19;
    • Advised to self-quarantine by heath care provider;
    • Attending vaccine appointment;
    • Experiencing symptoms of COVID-19 and seeking medical diagnosis;
    • Caring for a family member who is subject to quarantine, or has been advised to self-quarantine;
    • Caring for a child whose school or child care is closed or unavailable due to COVID-19.
  • Amount of Leave: Full-time employees (work at least 40 hours per week on average) are entitled to 80 hours of supplemental paid sick leave. Other employees are entitled to the average amount of hours they normally work over a 14-day period.
  • Amount of Pay: Employees get their regular pay during leave, up to a maximum of $511 per day, and $5,110 total.
  • Separate from Sick Leave on Wage Statement: The COVID-19 Supplemental Paid Sick Leave is a separate entitlement from other paid sick leave provided by the employer, and must be listed separately on the written notice or wage statement provided to employees.
  • Model Notice Forthcoming: The Labor Commissioner shall make a model notice available by the end of this week that employers can send to employees.

If you have questions or need further information please feel free to reach out to DP&F’s Employment Team, Jennifer Douglas, Marissa Buck and Sarah Hirschfeld-Sussman. This post is provided for general informational purposes only and should not be construed as legal advice. The various governmental agencies tasked with enforcing these laws will likely publish FAQs addressing some of the uncertainties that may develop as to how these laws will work in practice. We encourage you to check with those agencies frequently for regulatory guidance.

NEW Cal/OSHA Emergency Standards for COVID-19 Prevention

On November 30, the Office of Administrative Law reviewed and approved the Emergency Standards for COVID-19 Prevention proposed by the California Occupational Safety and Health Standards Board (Cal/OSHA). The new rule goes beyond Cal/OSHA’s guidance issued to date, and employers must comply immediately.

Cal/OSHA has indicated it plans to take enforcement action based on the new standards. As a result, employers need to critically review any existing COVID-19 policies and procedures and bring them in line with these new regulations.

Which employers must comply?

The emergency rule applies to all California employers and employees except:

  • workplaces with one employee who does not have contact with others;
  • employees that are working from home; and
  • employees subject to Cal/OSHA’s Aerosol Transmissible Diseases standard (such as healthcare facilities, nursing homes, paramedics and emergency responders).

Written COVID-19 Prevention Program

Covered employers must maintain a written COVID-19 Prevention Program, which can be integrated into the employer’s IIPP or maintained in a separate document. The requirements of a written COVID-19 Prevention Program are extensive and will need to be tailored to each employer’s circumstances.

An employer’s COVID-19 Prevention Program must include the following categories of information summarized below. Employers should review the regulations for more details and reach out to legal counsel with any individual concerns.

1. System for Communicating

OSHA requires employers to communicate with employees about certain topics, including asking employees to report any symptoms, exposures or hazards in the workplace, providing information about access to testing and COVID-19 hazards, policies and procedures.

2. Identification of COVID-19 Hazards

Employers have an obligation to identify, evaluate and respond to hazards. The Prevention Program must include:

  • A process for screening employees for COVID-19 symptoms (which can include self‑screening at home prior to reporting to work)
  • Policies and procedures to respond to COVID-19 cases, taking into account a workplace-specific evaluation of potential COVID-19 hazards
  • Strategy for maximizing quantity of outdoor air when possible and increasing filtration efficiency

3. Investigating and Responding to COVID-19 Cases

Employers must have an effective procedure to investigate COVID-19 cases in the workplace, including a procedure for verifying cases, collecting information and contact tracing to determine potential exposure to others.

An employer must give notice of potential COVID-19 exposure within one business day to any employees, contractors or other employers who may have been exposed without revealing personal identifying information. (This is the same requirement as AB-685.)

Cal/OSHA requires that employers offer COVID-19 testing, at no cost to employees during their working hours, if they have had a potential exposure in the workplace, and inform them of any benefits they may be entitled to (such as workers’ compensation and protected leave laws).

4. Correction of Hazards

Employers must implement effective policies and/or procedures for correcting unsafe or unhealthy conditions, work practices, policies and procedures in a timely manner based on the severity of the hazard.

5. Training

Employers must provide training and instruction on the employer’s policies and procedures, how COVID spreads and how to minimize the spread using various methods.

6. Physical Distancing

The standard requires that employees must be separated by at least six feet, unless the employer can demonstrate that such separation is not possible, in which case employees should be as far apart as possible.

7. Face Coverings

Employers must provide face coverings and ensure they are properly worn by employees (over the nose and mouth when indoors, or outdoors and less than six feet away) with limited exceptions.

8. Other Controls and PPE

Based on the employer’s workplace environment, the employer must put controls and procedures in place to minimize transmission, such as disinfection and cleaning protocols, handwashing stations, erection of barriers and usage of PPE.

9. Reporting and recordkeeping

Employers must follow certain recordkeeping and reporting requirements, including reporting any COVID-19 case that results in the hospitalization or death of any employee to Cal/OSHA, and documenting steps taken to implement the COVID-19 Prevention Program and comply with Cal/OSHA regulations.

Employers must record and track all COVID-19 cases with the employee’s name, contact information, occupation, location where the employee worked, the date of the last day at the workplace and the date of a positive COVID-19 test, and this information shall be made available to employees with personal identifying information removed.

10. Exclusion of Cases

Employers must take steps to ensure COVID-19 cases are excluded from the workplace until return to work criteria is met.

Importantly, the regulation specifies that excluded employees must continue to receive earnings, seniority and other rights and benefits of employment as if they had not been removed from their job, with some exceptions.

11. Return to Work criteria

Generally, employees with symptoms cannot return to work until:

  • At least 24 hours have passed since a fever of 100.4 or higher has resolved without the use of fever-reducing medications;
  • COVID-19 symptoms have improved; and
  • At least 10 days have passed since COVID-19 symptoms first appeared.

Employees without symptoms who test positive cannot return to work until a minimum of 10 days have passed since the date of specimen collection of their first positive COVID-19 test.

A negative COVID-19 test shall not be required for an employee to return to work.  This has been interpreted by most in the community to mean that employers cannot require a negative test in order to return to work.

There is different return to work criteria when an employee is subject to an isolation or quarantine order, or when an employee’s removal would create an undue risk to community health or safety.

Response to Multiple Infections & Outbreaks

The Cal/OSHA regulations provide requirements in the event a workplace suffers from multiple COVID-19 infections or an “outbreak.”

An “outbreak” occurs (under the Cal/OSHA regulations and according to the California Department of Public Health) if there are three or more COVID‑19 cases within a 14-day period, or if a local health department identifies a workplace as an outbreak location. In the event of an “outbreak,” the employer must:

  • Provide immediate no-cost testing to all employees at the exposed workplace who were present during the period of outbreak, and then another test one week later. Then, employers must provide continuous testing of employees who remain at the workplace at least once per week, until no new COVID cases are detected in the workplace for a 14-day period;
  • Exclude any cases and exposed employees from the workplace;
  • Investigate and determine possible workplace factors, implement any changes necessary, and document any steps taken;
  • Notify the local health department within 48 hours after the employer discovers an outbreak . (This is the same timeframe as required by AB-685. Note that AB-685, and the regulation described above also requires employers notify any employees within one business day that they may have been exposed if they were on the worksite during the infectious period.)

Response to Major Outbreaks

The Cal/OSHA regulations provide requirements in the event a workplace suffers from a “major outbreak” which occurs when there are 20 or more COVID-19 cases in a 30-day period. In such instances, employers must provide testing at least twice weekly until there are no new cases detected in a 14-day period. In the event of a major outbreak, in addition to taking all the same steps for an “outbreak,” an employer must conduct a thorough investigation and take preventative steps such as installing high efficiency air filters and evaluating whether to halt some or all operations temporarily.

Requirements for Employer-Provided Housing & Transportation

The new Cal/OSHA regulations provide specific requirements for employers that have employer-provided housing and transportation, including prioritizing assignment of housing and transportation, cleaning and disinfection protocols, hand hygiene, physical distancing and the use of face coverings.

For more details, a full copy of the approved Cal/OSHA regulations can be found here.

This update is provided for informational purposes only. If you need specific legal guidance, please contact Jennifer Douglas, Marissa Buck or Sarah Hirschfeld-Sussman to discuss.

Highlights of Napa County’s Updated Shelter in Place Order Including Cloth Face Covering Requirement

On May 7, 2020, Napa County issued an Order modifying the prior Shelter in Place Order that was issued on April 22, 2020. The full text of the Order can be found here, and the updated FAQs are here.

Here are the key changes in the new Order:

  • The Order requires wearing cloth face coverings when inside places of business and in workplaces when interacting with any person where six feet of physical distancing cannot be maintained.
    • A Face Covering is Not Required When: at home; in your car alone or solely with members of your household; exercising outdoors provided you are staying at least six feet apart from anyone who is not a member of your household (but it is recommended that you have a face covering with you and readily accessible); when eating or drinking.
    • Who Should Not Wear a Face Covering: Children 6 years old or younger may not need a face covering and children under 2 should not wear one;  anyone who has trouble breathing or is unable to easily remove a face covering without assistance; anyone who has been advised by a medical professional not to wear a face covering.
    • Essential businesses must require their employees wear a face covering in any area where others may be present, even if there are no customers or members of the public present at the time. Essential businesses should inform customers about the requirement of wearing a face covering, including posting signs at the entrance to the store or facility.
    • All workers operating public transportation, or operating other types of shared transportation are required to wear a face covering when at work in most settings.
    • Workers doing minimum basic operations, like security or payroll, essential infrastructure work, or government functions should wear a face covering when six feet of physical distance cannot be maintained.
    • For more information on cloth face coverings, including links to guidance on how to make your own mask, see the Napa County requirement here.
  • The Order states that businesses will be permitted to reopen within the State of California’s framework that identifies four-stages to reopening.
    • Non-essential businesses will be permitted to reopen according to the State’s four-stage framework. It is anticipated that Early Stage 2 non-essential businesses may be able to open as early as Friday, May 8, 2020. The list of those businesses, and how they will be allowed to operate, will be provided by the State.
    • Counties may be able to move into Deep Stage 2, but only after the State Public Health Officer provides criteria and procedures for doing so, as well as the template for submitting a “readiness plan” that requires self-certification by the Public Health Officer and approval by the Board of Supervisors.
    • Stage 3 non-essential businesses will not be able to reopen until the Governor determines, on a statewide basis, that counties can move into Stage 3. The Governor has also said this stage is months away.
  • The Order allows drive-in activities that can comply with physical distancing requirements.
  • All construction is now allowed but it must comply with Construction Site Requirements to maintain social distancing and sanitation (see Appendix B to the Order).
  • The Order allows outdoor recreation sports that can comply with physical distancing requirements; however, person-to-person contact sports are still prohibited.
    • The list of approved outdoor recreation activities can be found here.
    • Golfing, use of tennis courts, and use of swimming pools (public and semi-private) are permitted as long as they are used in compliance with social distancing protocols. (The specific, detailed requirements for golf courses remain the same – see Appendix C of the Order).
    • You can exercise outdoors if you will not be in close contact with other people or using equipment that other people outside your household have touched. Fitness centers, gyms, recreational centers, fitness equipment at parks, climbing walls, basketball courts, and other shared sports facilities remain closed.
  • Comment on the Short-Term Lodging Industry
    • The Napa County Public Health Officer has advised the lodging industry that reservations beginning on and after June 1, 2020 may be accepted. However, this is not a guarantee that the reservations can be honored, and short-term lodging businesses should inform customers that their reservations will be cancelled if the local and/or state Shelter-At-Home orders continue to prohibit short-term lodging at that time. Further, lodging businesses should consider how they will provide appropriate sanitation and enforce physical distancing protocols when they are allowed to reopen.
    • The Compliance Task Force will not engage in enforcement activities for lodging businesses that are currently accepting reservations for dates beginning June 1, 2020 and beyond, but making new reservations for dates in May is still prohibited and subject to enforcement.

For more information please contact Marissa Buck.

Managing Onsite Employees During COVID

Many of you have continued to have employees work at your facility and others are preparing to re-open and/or have employees return to the workplace.  There are many key issues to consider in having onsite employees and we have attempted to address the majority of them below. Note that the specific requirements will vary depending on your work environment (i.e. an office setting versus a warehouse or production facility) and if you have specific questions you should contact us directly to discuss.

  • Essential Workers Only
    • You should continue to limit employees in the workplace to those who are essential to the onsite business needs. If you have employees returning to the workplace, make sure you know who is returning and when – if you have too many employees coming back on the same day it could be unsafe. It may be helpful to stagger shifts so you have less employees coming and going at the same time.
    • If possible, you can phase in the return of employees but make sure to use non-discriminatory factors in determining who comes back when, such as seniority.
    • To the extent you are able to keep all or part of your workforce remote you should continue to allow employees to work remotely. It is also possible to alternate work from home weeks or days so that you have less employees at the workplace at one time.
    • Continue to stress to employees that they should not come to work if they are sick and to notify the appropriate person if they have been exposed to someone with COVID-19.
  • Refusal or Inability to Return to Work
    • Determine how to handle employees who are either unable or unwilling to return to work, whether it is because of fear, health concerns, family obligations, or employees that remain quarantined due to COVID-19 exposure.
    • These will need to be handled on a case-by-case basis. It may be helpful to create a company policy beforehand on how to handle employees who are not in a protected category, but only if you are able to consistently follow that policy.  At the very least designate one person to address these concerns so that consistency is more likely to be obtained.
    • For employees in high risk groups, consider allowing them to stay remote or on leave and if they are able to return to work consider if additional PPE or other protections are available (i.e. a separate workstation away from other employees, fewer days in the workplace, etc.). 
  • Workplace Safety
    • Social Distancing Protocol: As we provided in an earlier update, all of the Bay Area counties have issued required Social Distancing Protocols that need to be posted at the worksite. A copy of the sample protocol is attached to all relevant County Shelter in Place Orders and they are available in Spanish.  If you don’t already have one, you need to create a protocol and post it where employees can see it when they return to the workplace. It is also helpful to circulate the protocol and any other updated safety policies and procedures to employees before the return to the workplace so employees know what to expect. (If you need us to resend the April 1 email let us know).
    • PPE: Depending on the work environment and the Shelter in Place Order for your County, you may need to provide PPE for your employees, such as gloves, masks, face shields, or goggles. Employers are required by OSHA to provide and pay for PPE. Increasing the availability of hand sanitizer throughout the workplace and sinks with soap is also helpful.
    • Additional Resources: CDC guidance on cleaning and disinfecting facilities can be found here: https://www.cdc.gov/coronavirus/2019-ncov/community/disinfecting-building-facility.html, as well as additional guidance from OSHA on protecting workers during a pandemic: https://www.osha.gov/Publications/OSHAFS-3747.pdf.
  • Symptom Checks Including Temperature Readings
    • The EEOC has stated that doing employee symptom checks, including taking employee temperatures, before they enter the workplace is allowable under the ADA because COVID-19 presents a direct threat to other employees, customers, and the general public. Employers can also ask employees if they have COVID-19 related symptoms. The CDC recently updated the list of COVID-19 symptoms, stating that people with the following symptoms may have COVID-19:
      • cough
      • shortness of breath, or difficulty breathing; OR
      • at least two of the following symptoms: fever, headache, chills, sore throat, repeated shaking with chills, new loss of taste or smell, and muscle pain.
    • All information collected about employee illness is considered confidential medical information and must be treated as such by the employer.
    • Particular Issues Regarding Temperature Checks:
      • While temperature checks are permitted, the EEOC notes in their guidance that employers should be aware that some people with COVID-19 do not have a fever. Temperature checks should be done in conjunction with other symptom checks and/or questions related to high-risk factors such as being in close quarters with a person who has COVID-19 or traveling to a high risk area in the last 14 days.
      • If you send an employee home because they have a temperature they should be paid for reporting to work that day to limit potential liability. Additionally, you should have a policy for what to do if an employee refuses to have their temperature taken.
      • It is not required that you have a medical professional take temperatures, however, the person doing it should be trained, have proper PPE (mask, gloves, face shield or goggles, and a gown), use a no-touch thermometer (and know how to use it), and understand the confidentiality considerations.
      • An employee’s temperature is confidential medical information, thus the temperature check needs to be done as privately as possible to keep the information confidential. Employees should not line up and wait to have their temperature taken, both for privacy reasons and for social distancing purposes.
    • Although you are allowed to take temperatures, you should consider this step carefully to determine if you want to start this process.  For now, you are not required to take temperatures and unless or until it is required, you may want to hold off given the logistical issues and the confidentiality concerns.
    • For more information on symptom checks and other issues regarding return to work procedures, the EEOC’s Question and Answer page can be found here: https://www.eeoc.gov/eeoc/newsroom/wysk/wysk_ada_rehabilitaion_act_coronavirus.cfm.
  • Potential or Actual COVID-19 Exposure in the Workplace
    • Create a plan for how to respond if an employee becomes sick at work including sending the employee home, cleaning and disinfecting the workplace, and identifying all employees who had contact with the sick employee starting 2 days before the employee showed symptoms.
    • The CDC provided guidelines for permitting essential employees to continue working following potential exposure to COVID-19 if they remain asymptomatic and additional precautions are implemented (see below). Potential exposure means living with or having close contact (w/in 6 ft.) of an individual with confirmed or suspected COVID-19 beginning 48 hours before the individual showed symptoms.
      • Pre-screen the employee before they enter the workplace by taking their temperature and assessing symptoms
      • As long as no temperature or symptoms, the employee should self-monitor under the supervision of the employer’s occupational health program
      • The employee should wear a face mask at all times in the workplace for 14 days after the last exposure (face mask provided by employer)
      • The employee should maintain 6 ft. and practice social distancing whenever possible in the workplace
      • Clean and disinfect all areas such as offices, bathrooms, common areas, shared electronic equipment routinely
      • If the employee becomes sick during the day they should be sent home immediately and their workplace should be cleaned and disinfected
      • Compile information on all persons who had contact with the ill employee during the time the employee had symptoms and 2 days prior, including anyone who was w/in 6 ft. of the employee during this time period
    • Determining when an employee can return to the workplace after having COVID-19 should be an interactive process between the employer and the employee and their healthcare provider. For more information on when an individual with COVID-19 can discontinue home isolation see the CDC’s guidance here: https://www.cdc.gov/coronavirus/2019-ncov/hcp/disposition-in-home-patients.html.
    • Additional resources for employers in planning and responding to COVID-19 can be found here: https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html.

Governmental guidance on this crisis evolves constantly.  We will continue to do our best in keeping you informed.  For specific questions please reach out to Jennifer Douglas or Marissa Buck.

Additional Information on Paycheck Protection Program and SBA Disaster Loan Programs

The U.S. Department of the Treasury announced today, March 31, that the SBA and the Treasury expect the CARES Act programs to be up and running by this Friday, April 3, 2020. You can find resources related to the CARES Act programs on Treasury’s website here, which is updated often and currently includes an application for borrowers for the Paycheck Protection Program (PPP). Additionally, the SBA has a resource page for small business that can be accessed here.

Significantly, the SBA is now indicating that 75% of PPP loan amounts will need to be spent on payroll as opposed to other allowed uses in order to qualify for loan forgiveness.  It has also provided details on the loans, which will have relatively short, two year terms for the balance that is not forgiven, but with very low interest rates of 1%.

The Treasury and the IRS also have posted resources regarding the Employee Retention Tax Credit.  But note that you cannot receive the payroll tax credit if you receive a PPP loan.  Additional information on the tax credit is now on Treasury’s Frequently Asked Questions page here, and on the IRS FAQ page here. The IRS has created a new tax form for advance credits and is currently in the process of finalizing the instructions for the form.

Here are some additional details on the available loan programs:

The Paycheck Protection Program (PPP) in the CARES Act will be administered under the U.S. Small Business Administration’s loan provisions.  The SBA and Treasury Department will be releasing additional regulations and guidance to lenders on the program.  The loans will be obtained directly from banks, so you should contact your bank to learn if and how it plans to participate in the program.

Eligible employers can borrow 2.5 times their monthly payroll costs  and other specific costs as described below.  Loan amounts can be up to $10 million.  An employer must either already meet the list of eligibility by number of employees maintained by the SBA, or have up to 500 employees, whichever is greater.  Wineries can have up to 1,000 employees; other employers can check their industry size limit at https://www.sba.gov/size-standards/.

The PPP loans have significant benefits, most notably that 8 weeks of payroll costs and other specific expenses will be forgiven as long as the employer maintains its prior headcount, with some ability to reduce salary levels (discussed below).  Employers that have already reduced headcount can rehire employees and still obtain the full forgiveness amount.  The loans are capped at 4% interest, and have deferred payments for at least six months, and up to one year.  The interest on the loans will not be forgiven, so some payments on the loans need to be made.  The loans can have up to 10 year terms; have no recourse to a businesses’ shareholders, partners or members; and require no collateral or personal guarantee.

The PPP is a separate program from the SBA’s existing Economic Injury Disaster Loan (EIDL) program.  Businesses apply directly to the SBA for these loans, at https://covid19relief.sba.gov.  The EIDL program provides loans of up to $2 million to cover economic injuries incurred in a disaster.  The CARES Act has broadened the eligibility for those loans as well, similar to the Paycheck Protection Program.  For now, a borrower can apply for an EIDL loan and also be eligible for a Paycheck Protection Loan, and can refinance the EIDL loan into a future paycheck protection loan.  However, the EIDL loan is still a loan, and needs to be paid back.  It will not be forgiven, and the proceeds of an EIDL cannot go to cover payroll or other costs that a business would seek to borrow and have forgiven under the PPP.  Note that once the PPP loans become available, business will no longer be eligible for both programs, and there is thus a narrow window to obtain an EIDL and still participate in the PPP.  Also, participants in the PPP loan forgiveness will not be able to use the employment tax credit or payroll tax deferrals in section 2301 and 2302 of the CARES Act.

As for the PPP loans, the loan amount can include 2.5 times the prior year’s average total monthly payroll costs (modified for seasonal employers or new businesses), subject to important limits below.  Payroll costs include:

(aa) the sum of payments of any compensation with respect to employees that is a—

(AA) salary, wage, commission, or similar compensation;

(BB) payment of cash tip or equivalent;

(CC) payment for vacation, parental, family, medical, or sick leave;

(DD) allowance for dismissal or separation;

(EE) payment required for the provisions of group health care benefits, including insurance premiums;

(FF) payment of any retirement benefit; or

(GG) payment of State or local tax assessed on the compensation of employees; and

(bb) the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period…

Importantly, in calculating the payroll costs, the total does not include:

(aa) the compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period;

(bb) taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period;

(cc) any compensation of an employee whose principal place of residence is outside of the United States;

(dd) qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116–127); or

(ee) qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act (Public Law 116–127)….

Thus, in determining eligible loan amounts, the pro rata monthly portion of salary for an employee earning over $100,000 per year is not included (but the amount under $100K annualized is included.)

The loan proceeds can be spent on a variety of business costs and expenses set out in the SBA Act; however only a narrow category of costs can be forgiven under the CARES Act.  These are the amounts incurred and payments made over the 8 weeks after the loan is obtained (not to exceed the principal amount of the loan) for:

(1) Payroll costs.

(2) Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation).

(3) Any payment on any covered rent obligation.

(4) Any covered utility payment.

PPP loan proceeds used for any other purpose will not be forgiven.  The lender will require documentation to prove that the funds to be forgiven were spent on allowed items.  The Treasury Department will be providing regulations as to how the loan forgiveness program is to be implemented.

The amount of forgiveness will be reduced if the business reduces its employee headcount below its previous average full-time employee level, based on the average number of full-time equivalent employees for each pay period within a month, either during the period from February 15, 2019 to June 30, 2019; or from January 1, 2020 to February 29, 2020, at the business’s election.  Seasonal employers are required to use the February to June period.  Employers have the opportunity to re-hire employees that have been released as a result of the current crisis and still take advantage of the full loan forgiveness amount, as long as employee full-time equivalent returns to their prior levels by June 30, 2020.

There is more flexibility as regards to salary reductions without losing the full forgiveness amount.  The amount of forgiveness will be reduced by the amount of any reduction in salary that exceeds 25%, but only for each employee that did not make more than $100,000 on an annualized basis during any single pay period in 2019.  In other words, salaries for those making less than $100,000 per year can be reduced by up to 25% without impacting the loan forgiveness amount.  This also means employees who earned more than $100,000 on an annualized basis in any pay period in 2019 (even those that received a raise to $100,000 annualized only in the last pay period of 2019) could have their salaries reduced by more than 25% without decreasing the available loan forgiveness.  Employers also have the opportunity to remedy any reductions in salary by June 30, 2020 as well.

For a list of Coronavirus related resources, please see our Resources Page.