California Establishes Immediate Right of Recall for COVID-Related Layoffs

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Highlights

  • California Gov. Gavin Newsom has signed Senate Bill (SB) 93, legislation establishing a statewide right of recall for employees laid off due to reasons related to the COVID-19 pandemic.
  • The law impacts a significant number of California employers, including those employers utilizing temporary service or staffing agencies to fill positions, and has notable implications for private equity and other ownership groups who acquire operations in California.
  • The new law is effective immediately and remains in place through Dec. 31, 2024.

California employers must comply with yet another California-specific law designed to address the economic impacts connected to COVID-19 pandemic closures. On April 16, 2021, California Gov. Gavin Newsom signed Senate Bill (SB) 93 requiring California employers to offer to rehire employees who were laid off due to a reason related to the COVID-19 pandemic, including separations caused by public health directive, government shutdown order, lack of business, reduction in force or other economic reason due to the pandemic. The law is effective immediately.

Covered Employers

All employers that own or operate a hotel, private club, event center, airport hospitality operation, airport service provider, or provide building services to office, retail or other commercial buildings are covered under SB 93. The statute specifically includes entities that utilize a temporary service or staffing agency to provide employees.

The law notably imposes obligations on private equity and other ownership groups, as SB 93 specifically includes recall obligations for entities that have changed ownership or structure. In that regard, employers must offer to recall employees if the ownership of the employer changed after the layoff but the operation is the same or similar as before pandemic-related closures, if the form of the employer changed after the pandemic (e.g., corporation to limited liability company), or if substantially all of the assets of the employer were acquired by another entity that conducts the same or similar operations using substantially the same assets. Employers who relocate operations where a laid-off employee was employed prior to the pandemic are also covered under the law.

Covered Employees

Only employees who were employed by the employer for six months or more in the 12 months preceding Jan. 1, 2020, are eligible. Further, to be eligible for protection under the statute, the employee's most recent separation from active service must be due to a reason related to the COVID-19 pandemic. This includes employees who were laid off because of a business closure/slowdown as a result of a public health directive, government shutdown order, lack of business, reduction in force or other economic, non-disciplinary, pandemic-related reasons.

When Must Employees Be Offered Recall?

The right of recall is triggered when a covered employer establishes a job position. The statute lacks specificity concerning whether the recall must be offered only when a new position is created or also when existing positions become available.

Within five business days of establishing a position, the employer must offer eligible employee(s) "all job positions" that are available for which the laid-off employee(s) are qualified. The statute specifies that a laid-off employee is qualified for a position if the employee held the same or similar position at the time of the employee's most recent layoff. In the event that multiple employees are eligible for recall to a single position, the employer must offer the position to the laid-off employee with the greatest length of service based purely on time in service.

Employees must be notified of the available positions in writing by hand or mail, and by email and text message to the extent that the contact information is in the employer's possession. The employee shall have at least five business days from the date of receipt to accept or decline the offer. Employers may make simultaneous conditional offers of employment, with final offer conditioned on the application of the identified preference system.

Employers may decline to recall laid-off employees on grounds of lack of qualifications. If the employer hires someone other than a laid-off employee for the position, the employer must provide the laid-off employee who was not recalled a written notice detailing the length of service of the "replacement" employee, along with all reasons for the decision not to recall. This notice must be provided within 30 days of the employer's decision not to recall the employee.

Recordkeeping

The employer must retain certain records for three years after the date of the written notice of layoff to employees. These records include standard information such as employees' names, addresses and contact information, as well as employees' classification at the time of separation, written notices regarding layoffs provided to employees, and all communications between the employer and employees regarding offers of employment under the right of recall.

Enforcement

SB 93 is unique among many California employment statutes in that it explicitly lacks a private right of action outside of the Division of Labor Standards Enforcement (DLSE). Laid-off employees may file a complaint for violation of the law with the DLSE, and the DLSE may bring a civil action, but employees may not directly file suit in court for violation of the right of recall law.

Conclusion and Considerations

SB 93 presents potential issues for compliance well into 2024, particularly as the California Labor Commissioner's Office continues its high rate of enforcement actions related to COVID-19 worker protections. Employers should ensure proper recordkeeping of layoffs and terminations conducted, and carefully track when new positions are created and filled by employees working in California. If so, recall might need to be offered to one or more employees depending on the circumstances.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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