The last few weeks have seen a flurry of COVID-19-related employment developments across the country and, in particular, California. The state has moved into Stage 2 of its four-stage framework for reopening, which ushered in an easing of restrictions for lower-risk workplaces such as retail stores. Traditional office buildings have been deemed higher risk and significant restrictions remain in place. Several San Francisco Bay Area counties have, in turn, extended their shelter-in-place orders through May 31, 2020, and Los Angeles County extended its order indefinitely, stating that “restrictions will be gradually relaxed” on an unspecified timeline. In this alert, we address several important updates that employers, particularly those with a California presence, need to know as they continue to navigate the pandemic.

Governor Newsom’s Executive Order Creates Workers’ Compensation Presumption for Employees Who Contract COVID-19

This month, Gov. Gavin Newsom issued an executive order that is likely to dramatically expand the number of employees who can receive COVID-19-related workers’ compensation benefits. Under the order, an employee who performs work at the employer’s workplace on or after March 19, 2020, then tests positive for, or is diagnosed with, COVID-19 within 14 days of working in the workplace, will benefit from a presumption that the employee contracted COVID-19 in the workplace and is therefore eligible for workers’ compensation benefits.

The employer can rebut this presumption and avoid coverage if it establishes that the employee contracted COVID-19 outside the workplace—a very difficult burden for employers to meet. In rebutting the presumption, employers should proceed with caution and not pry too deeply into an employee’s personal circumstances, lest they run afoul of employee privacy protections and disability discrimination laws such as the Americans with Disabilities Act and California’s Fair Employment and Housing Act. Further, employers should be aware of the increased likelihood of employees filing workers’ compensation retaliation claims if they are terminated (or experience any other adverse employment action) after becoming eligible for workers’ compensation benefits.

The governor’s executive order will likely result in significant increases in costs to California workers’ compensation coverage providers, which, in turn, will mean increased premiums for California employers. In addition, the order may face legal challenges. A similar Illinois rule was recently withdrawn after several employer coalitions challenged it. Notwithstanding potential legal challenges, absent an extension, the California rebuttable presumption will apply to COVID-19-related injuries suffered on or before July 5, 2020.

California Employees May Be Entitled to Vacation Pay at Termination Under ‘Unlimited’ Vacation Policies

California employers (especially startups and tech companies) have been increasingly adopting unlimited or discretionary time off policies, which permit employees to take time off at their discretion, subject to certain limitations. Employers (particularly those considering or engaging in layoffs or terminations as a result of COVID-19) should be careful to maintain clear, written unlimited time off policies—and consistently administer and communicate the parameters of such policies to employees—in light of a recent ruling by a California appeals court.

In McPherson v. EF Intercultural Foundation, Inc., the court held that a certain set of managerial employees were owed vacation wages at termination because, despite having a practice of not tracking the employees’ actual vacation time, the employer’s vacation policy was neither unlimited in practice nor conveyed to the employees in writing. The employer never expressly told the employees it had an unlimited vacation policy (the policy was communicated by supervisors informally upon hire and sometimes via email) and, in practice, the employer expected employees to only take two to six weeks of vacation, not an unlimited amount.

The court was careful to note that it was not ruling that all unlimited vacation policies give rise to an obligation to pay vacation wages at termination. However, it provided that a truly unlimited vacation policy may not trigger such liability where the policy, among other things, (1) spells out the rights and obligations of the employee and employer and the consequences of failing to schedule time off; and (2) in practice allows sufficient opportunity to take time off. Employers should revisit their unlimited vacation or time off policies and practices given this decision.

EEOC Reissues Guidance Regarding Accommodation of High-Risk Employees During the Pandemic

Last week, the Equal Employment Opportunity Commission (EEOC) reposted FAQs regarding accommodating employees who are at a “higher risk for severe illness” if they contract COVID-19. If an employer is concerned about an employee’s health, the EEOC instructs employers to conduct a “direct threat analysis” to determine whether an employee’s health is placed at risk by returning to the workplace. Such an analysis requires an employer to make an “individualized assessment” considering a number of factors, including the duration of the risk and the nature and severity of the potential harm. As part of the assessment, the employer should determine whether a reasonable accommodation is available that can reduce the risk to the employee. This approach is consistent with general EEOC guidance instructing employers to focus on individualized solutions, rather than one-size-fits-all approaches, to workplace accommodations.

Under the EEOC’s guidance, employers should not bar employees from the office solely because they are in a COVID-19 high-risk category (e.g., over the age of 65 or have medical conditions such as diabetes or asthma). Instead, if an employer has determined that an employee’s medical condition poses a direct threat to him or her, it must not exclude the employee from work (or require telework) unless the employer cannot provide any other reasonable accommodation without undue hardship.
The EEOC also stated that, under certain circumstances, an accommodation that would not have posed an undue hardship before COVID-19 may pose an undue hardship today. For example, the EEOC explains that COVID-19 may make it more difficult to acquire certain items needed for a reasonable accommodation or to provide employees with temporary reassignments as an accommodation. Further, the EEOC notes that an employer’s sudden loss of its income stream due to the pandemic can affect whether a proposed accommodation presents a “significant expense” that makes it unreasonable. However, even given the EEOC’s updated guidance, employers should exercise extreme caution before denying a potential accommodation based on the belief that it presents an undue hardship.

The EEOC’s guidance, including an FAQ on this topic, is available here.

EEOC Delays Employee Demographic Reporting Deadline Due to COVID-19

The EEOC has announced that it will delay the deadline for its annual collection of employee demographic survey data from covered employers until 2021 due to the impact caused by the pandemic. This provides some temporary relief to employers that are required to submit such data.

Companies with 100 or more employees and certain federal contractors are normally required to submit the survey, also known as the EEO-1 report, by May 31 of each year. The survey requires company employment data to be categorized by race/ethnicity, gender and job category. The agency has announced that it expects to start collecting such data in March 2021, and will later announce due dates for report submission.

San Francisco Mayor Announces Plan Allowing Employees to Use Healthcare Funds for Non-Healthcare Expenditures in Response to COVID-19

San Francisco’s Mayor has recently announced a plan to allow employees in San Francisco to use employer-contributed funds under the city’s Health Care Security Ordinance (HCSO)—a law requiring covered San Francisco employers to make healthcare expenditures on behalf of their workers—for necessary expenses such as food, rent and utilities, in addition to eligible healthcare expenses, during the pandemic. Employers would not be required to make additional contributions under this plan and they are not excused from their existing HCSO obligations.

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