Recall Rights and Retention Obligations: How Local Ordinances are Changing Workplace Regulation in the COVID-19 Era

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We all remember the shelter-in-place orders of 2020, and the resulting drop in customers for many businesses as the pandemic took its toll throughout the year.  Perhaps we should not have been surprised when the pandemic continued and the resulting rounds of employee furloughs turned into rounds of employee layoffs.  This was especially true in the hospitality sector, which suffered a 41% decrease in jobs between May 2020 and June 2020.1  But now this sector is slowly but surely starting to bounce back, with over 300,000 jobs added in September 2020.2  This growth, albeit slow to start, has also triggered some municipalities to mandate the re-hire of previously terminated employees, a protection usually afforded only to unionized workers.

Traditionally, employers largely have autonomy over rehire decisions; they can choose whom to recall and the order in which employees are recalled, and can decide not to recall certain employees based on legitimate business reasons.  But a new spate of “right of recall” laws aims to change that paradigm, putting in place mandates requiring certain employers to rehire laid-off workers when their businesses resume or reopen and dictating the criteria used to recall those workers.

Flurry of Local California Laws

It is not surprising that this trend started in the Golden State.  Several California municipalities have instituted ordinances that provide a laid-off employee a right to be recalled to work in order of seniority.  In May 2020, Los Angeles passed the Right of Recall Ordinance and Worker Retention Ordinance, which mandate return-to-work preferences to certain employees in the travel, entertainment, tourism and hospitality sectors.  The Los Angeles Recall Ordinance states that certain employees laid off on or after March 4, 2020 must be rehired “pursuant to a recall procedure that is reminiscent of unionized workforces.”  The parallel Los Angeles Retention Ordinance governs the same industries and mandates that “in the event of a change in ownership of a covered business, employees of the previous business must be placed on a preferential hiring list.”

The Long Beach Recall Ordinance, which took effect on June 22, 2020, governs a more limited set of industries, focusing on commercial property employers that provide janitorial services and employ 25 or more employees, and hotel employers that employ 25 or more employees. The rights under this ordinance apply to those furloughed on or after March 4, 2020. The Long Beach Recall Ordinance requires these businesses to rehire workers who have been furloughed or laid off due to “a lack of business, a reduction in work force, bankruptcy, or other economic, non-disciplinary reason” in a specified manner, rather than at the employer’s discretion.3  The accompanying Retention Ordinance governs the same industries and requires, in the event of change in control or ownership, that the successor employers place the predecessor’s employees on a preferential hiring list.4  The successor entity must hire personnel from this list, and for at least six months, must retain these personnel for no less than 90 days, absent just cause to terminate.

In San Francisco, Mayor London Breed instituted Emergency Ordinance 104-20, which became effective June 23, 2020 and applies to a wider breadth of businesses, including for-profit employers that, on or after February 25, 2020, employed 100 or more employees. The Ordinance similarly requires that laid-off employees be recalled in order of seniority.  Specifically, an employer that initiated a layoff at the beginning of the COVID-19 pandemic and subsequently seeks to hire an employee, must follow these steps:

  • If filling the eligible worker's former position, the employer must first offer the eligible worker an opportunity for reemployment before offering it to another person.
  • If filling any position substantially similar to the eligible worker's former position that is also located in San Francisco, the employer must first offer the eligible worker an opportunity for reemployment to this position before offering it to another person.

San Francisco’s Ordinance provides two additional obligations: it includes a notice of layoff provision, similar to the federal and state WARN laws, and it requires employers to provide reasonable accommodations to employees who are unable to work due to the need to provide childcare to children whose school has been closed due the pandemic.

Oakland’s Hospitality Worker Right to Recall Ordinance, which took effect on July 23, 2020, is limited to the following hospitality industries:

  • Airport hospitality providers (businesses that provide food, beverage, retail, or other consumer goods or services to the public at Oakland International Airport);
  • Event centers that are more than 50,000 square feet or have 5,000 or more seats;
  • Hotels; and
  • Restaurants with more than 500 employees, regardless of where the employees are employed, or is a franchisee associated with a franchisor or a network of franchises that employ more than 500 employees in the aggregate.

Under the Oakland Ordinance, a covered employer must extend a written offer to eligible laid-off employees (those laid off after January 31, 2020) of any job positions with the employer for which the employee is qualified that become available after the effective date of the Ordinance. Employers must also provide written notice to laid-off employees who are not called back due to lack of qualifications if a person is hired other than a laid-off employee.

Not to be left out, on September 8, 2020, the City of San Diego enacted two emergency ordinances: The City of San Diego COVID-19 Building Service and Hotel Worker Recall Ordinance and the City of San Diego COVID-19 Worker Retention Ordinance. Both Ordinances apply to three categories of employers: commercial property employers, event center employers, and hotel employers. The Recall Ordinance requires a covered employer to offer positions that become available on or after September 8, 2020, to qualified employees who were laid off on or after March 4, 2020. Under the Retention Ordinance, when a covered business experiences a change in control (a sale or assignment, among other definitions as provided in the Ordinance), covered employees are given preference in hiring for a period of six months and once hired, the employee must be retained for no fewer than 90 days unless there is cause for termination, provided the successor employer continues operating for 90 days. Once the 90 days have elapsed, the successor employer must perform a written performance evaluation for each eligible employee retained pursuant to the Retention Ordinance. San Diego’s Ordinances are set to remain in effect until March 8, 2021 (six months from the effective date) unless extended on or before that time.

After this flurry of local activity, there was a glimmer of hope that California would enact state-wide legislation restricting local action on this topic.  But the governor dashed those hopes on September 30, 2020, when he vetoed a California statewide right to recall bill, expressing concerns about creating a “patchwork of requirements in different counties” and “sharing too much personal information of hired employees.”  As a result, the existing right to recall laws in the Golden State continue to be enforceable and other local governments have continued the trend.

On November 10, 2020, for example, the Santa Clara City Council approved the COVID-19 Worker Recall Protections Ordinance, which covers employees in building, food and hotel service who work at a location within the city limits of Santa Clara for six months or more.  The Ordinance covers both full- and part-time employees, but does not apply to managerial, supervisory or confidential positions.  The Ordinance requires priority for re-hire of laid-off workers, and requires that a laid-off worker be given no less than five business days to either accept or decline an offer of re-employment.  The City of Santa Clara also recently proposed a revision of its existing Worker Retention Ordinance, which has been in effect since May 4, 2017, to include hotel workers under these protections.  The City further proposes that the Worker Retention Ordinance would apply to hotels with 50 or more guestrooms, and to both full- and part-time employees.

East Coast Legislation

Not to be outdone, a number of cities and localities on the East Coast have contemplated similar recall and retention issues in light of the pandemic.  On October 5, 2020, Baltimore’s City Council passed two ordinances, the first requiring certain employers to recall certain employees who have been laid off after the imposition of the COVID-19 state of emergency, and the second requiring certain successor business employers to retain certain employees.  The mayor initially vetoed both of these bills, not only over concerns of federal law preemption and potential violation of the Contracts Clause of the United States Constitution, but also out of concern the Retention Bill would have put additional undue burdens on hotel employers and failed to provide clarity over the obligations that would be placed on hotel employers.

Ultimately, the Baltimore City Council overrode the mayor’s veto, enacting both bills.  Much like the California Ordinances, the Baltimore Laid-Off Employees Right of Recall Ordinance applies to commercial properties, event center and certain hotel employers, with a focus on recall rights provided to covered employees laid off on or after March 5, 2020.  The Right of Recall Ordinance requires that employers in the subject industries offer workers a position in order of seniority by length of service. The COVID-19 Employee Retention Ordinance requires that a hotel employer must retain the hotel staff if the ownership of the business changes hands.

In New York City, Mayor de Blasio signed Local Law 99 of 2020 into law on September 28, 2020. The law requires successor hotel owners to provide employment and maintain wages for a period of 90 days. After the 90-day period, the new employer must perform a written evaluation of each employee, and if the employee’s performance is deemed to be satisfactory (this term is undefined), then the successor hotel must offer the employee continued employment.  Should the successor hotel need to reduce its staff, the successor hotel must retain employees by seniority and experience within each job classification.  The bill provides further protections, including remedies such as back pay and liquidated damages to hotel workers.

Lastly, but likely not the last, on January 7, 2021, Philadelphia’s mayor signed two bills entitled “Travel and Hospitality Worker Recall and Retention” and “Retention of Hotel Workers.” The former ordinance requires employers in certain hospitality and travel-related industries offer job positions to laid-off employees as they become available, and the latter ordinance requires that hotel employees receive notice of changes in hotel ownership.  Further, the Retention of Hotel Workers Ordinance requires that the successor hotel employer maintain a preferential hiring list of certain current and previously laid-off employees to whom the employer must extend employment offers for up to six months once the successor hotel is in operation. Both of these bills have an expiration date of December 31, 2025.

Opposition Remains

Significantly, this onslaught of new bills has not been without resistance.  For example, the Greater Philadelphia Hotel Association argued, to no avail, that the 10-day window for employees to respond to a recall is burdensome, and could hurt business.5 The Maryland Hotel Lodging Association pushed back on Baltimore’s legislation, claiming “the bills would strip its members of flexibility needed to recover from the economic crisis, as it would require them to hire employees back based on seniority,” which may not align with their immediate needs.6  Taking it a step further, San Diego hoteliers have sued their city, alleging that the Ordinances “violate the state and federal constitution” and represent an “illegitimate attempt pushed by special interests to readjust rights and obligations” under already existing employment contracts.7

Regardless of such opposition, it appears municipalities, especially in the wake of the COVID-19 pandemic, are becoming increasingly focused on protecting workers and showing no hesitation in their willingness to dive directly into workplace regulation.

 

Footnotes

2 U.S. Bureau of Labor Statistics, Current Employment Statistics Highlights (Sept. 2020).

3 Long Beach, CA Ordinance No. 20-0015.

4 Long Beach, CA Ordinance No. 20-0016.

7 See Lori Weisberg, San Diego hotels sue city over rehiring ordinance they claim is unconstitutional, The San Diego Union-Tribune (Nov. 6, 2020).

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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