COVID-19 Traps for Unwary Employers: Have You Taken Prophylactic Measures to Mitigate Liability for Employment-Related Claims?
By Tiffany Carrari
August 26, 2020
It’s no secret that the public health crisis created by COVID-19 has devastated California businesses. Many have faced forced closures or been otherwise disadvantaged by federal, state and local mandates, legislation, and stay-at-home orders. And while cannabis industry businesses are deemed “essential,” continued operations of those businesses during the COVID-19 pandemic trigger a host of employment issues.
In the context of COVID-19’s effect on employment, the resultant legal landscape is ever-shifting, unprecedented and tricky to grasp. California employment laws are already complex and difficult to navigate, even for the most astute. Keeping an employment attorney on retainer is cost prohibitive for most businesses and it is all too easy for employers to run afoul of the law. Now, governmental efforts to grapple with the fallout of COVID-19 has prompted new legislation that remains untested in courts and may expose employers to additional liability.
Types of Potential COVID-Related Workplace Claims
California employers will undoubtedly face employment litigation arising from employee claims related to COVID-19 exposure in the workplace. Such claims are likely to focus on allegations of negligence and wrongdoing by employers who fail to take necessary precautions or violate government mandates involving personal protective equipment (PPE) protocols and social distancing requirements. Concerns related to the potential for employer liability in such cases are exacerbated by the fact that development and direction of COVID-19 case law remains uncertain.
One thing we do know is that Governor Newsom’s May 6th order related to workers’ compensation claims mandates that any positive case of COVID-19 reported by someone within 14 days of leaving their house for work is “presumed” to be work-related (shifting the burden of disproving that presumption to employers). The May 6th order relates to workers’ comp claims filed from March 19th through July 5th, and whether that presumption is extended beyond the July 5th expiration remains to be seen. However, any employee who contracts COVID-19 can file a workers’ compensation claim, even without the benefit of a presumption. With regard to outcomes, a recent survey conducted by trial consulting firm Dispute Dynamics found that juries may be likely to hold employers responsible for workplace contractions of COVID 19: DDI-Coronavirus-Article-June-2020.
COVID-19 employment litigation could also arise in the context of misclassification of employees as independent contractors where such misclassification leads to the denial of California Disability Insurance Benefits for otherwise eligible workers who have a full or partial loss of wages due to a non-work illness.
Additional triggers for employment litigation might arise where covered employers are alleged to have violated federal and state laws such as the Family Medical Leave Act and California Family Rights Act that provide job protection for employees who take time off work to take care of a family member with COVID-19.
Employers could also be found to have violated the California Fair Employment and Housing Act if they fail to provide reasonable accommodations such as telecommuting for immunocompromised employees, for unauthorized disclosures of an employee’s confidential medical information (including a COVID-19 diagnosis), or for wrongful termination of an employee that fails to report to work in compliance with a stay-at-home order.
Employers might also struggle with California and federal paid sick leave requirements under the Healthy Workplaces, Healthy Families Act of 2014 and the Families First Coronavirus Response Act, as well as employee rights related to school and daycare closures. (As noted in our previous blog post, the FFCRA requires that employers post a notice about the FFCRA’s employee leave laws conspicuously in the workplace.)
It is also possible that some employers could face denial of claims by liability insurers who glom onto “illegal” acts exclusions. An “illegal” act is one that is against the law; and whether an executive order mandating or disallowing certain business operations is equivalent to or given the effect of a law is (again) a question for the courts.
If you are an employer then you should know that the above-discussed “traps for the unwary” comprise only a sampling and cursory discussion of possible sources of COVID-19 related employment litigation. You should also know that your particular business or situation may be exempt from some of the requirements discussed herein or subject to additional requirements undiscussed. We strongly caution against trying to make employment law related applicability determinations without the advice of experienced legal counsel.
We acknowledge the convoluted nature of CA employment law and that the saddling effect of additional COVID-19 related legislation can be overwhelming. That’s why we’re here to offer potential solutions.
Contractual Methods to Minimize Liability
Our first recommendation to employers is to read our previous blog post about Preventing and Managing Coronavirus Outbreaks in the Workplace, which was drafted to give employers some guidance with regard to ensuring workplace safety and compliance during COVID-19. The primary means of reducing risk in the workplace should be implementing appropriate health and safety practices and properly training employees about the new system. (In other words, the easiest way to avoid liability is to ensure that proper procedures are in place to begin with so that workers have no claims to bring.)
A prudent employer might also consider engaging legal counsel to draft an employee acknowledgement of the company’s COVID-specific policies and practices that explicitly states or implicitly demonstrates that an employer is not negligent in their response to the pandemic, and perhaps even a stand-alone arbitration agreement for use as a prophylactic measure to (hopefully) ward off prospective litigation by mandating arbitration to settle disputes. Note that if you already have a waiver, acknowledgment or arbitration agreement in place, we recommend having it reviewed and updated (if necessary) to reflect any recent changes in the law.
In addition, employers should update their Employee Handbooks to include an Addendum that addresses policies that may be impacted by COVID-19, such as pandemic operating protocols, protocols for employee training and returning to work, sick leave policies, vacation and travel policies, furloughs and temporary layoffs, remote work and/or teleworking policies, disaster preparedness and contingency plans, and office logistics. The COVID Addendum should address the specific measures that have been put in place to comply with relevant requirements and guidance, and to protect workers and the public. The Addendum will be business-specific, and should be signed by all employees before returning to work. Employees should attest in writing to having received and read the updated Employee Handbook including the COVID Addendum and acknowledge that their employer has implemented the required and recommended workplace safety measures. This will help avoid a later claim that the employee was uninformed about changes to the company’s operating policies or that proper procedures were not in place.
A popular request from our clients in recent months has been to draft a liability waiver for execution by their employees. The hope of course being that an employee signing such waiver would waive a release potential claims arising from exposure to and contraction of COVID-19 at work. Because such waivers are likely to be disfavored and unenforceable if challenged in court, we typically suggest that in lieu of, or in addition to, a liability waiver, employers have workers sign an acknowledgement form stating that the employer has implemented appropriate measures to maintain safety in the workplace and has informed employees of any COVID-specific modifications to company procedures. Such an acknowledgement could contain statements by the employee that their employer is not being negligent and is taking the necessary precautions to prevent exposure to and spread of the virus at work. As mentioned above, such an acknowledgement could be included in a COVID Addendum to a company’s Employee Handbook. If a liability waiver is used, it is important to note that one cannot waive liability for intentional, reckless, or grossly negligent conduct. Liability waivers must be clear and must not violate public policy in order to be enforceable.
Another option is to have employees sign an arbitration agreement. When disputes are arbitrated, the parties avoid full-blown litigation by presenting their respective cases, through a less formal process, to an arbitrator (generally a retired judge) who renders a binding decision on the parties. There are many benefits to arbitration including: avoiding massive jury awards, privacy and confidentiality, substantial cost and time savings, limited rights to appeal (increased certainty), more flexibility, less formality and more.
Drafting an enforceable employment-related arbitration agreement in California requires specific legal knowledge and due diligence because the law in this area is subject to recurrent tweaking and interplay with the Federal Arbitration Act (FAA). Most notably, California’s AB-51 which became effective on January 1, 2020 prohibits employers from entering into “mandatory” arbitration agreements for most types of employment claims. However, AB-51 is on ice after the U.S. District Court for the Eastern District of California issued a temporary restraining order enjoining the state from enforcing AB-51 pending the outcome of litigation seeking to strike it down on preemption grounds (the FAA favors arbitration agreements).
A business should consider the potential cost savings associated with having employees agree to arbitrate (to the extent allowable) rather than litigate disputes related to COVID-19, and weigh this against any potential chilling effect that requiring employees to sign such a waiver might have. Many businesses find that it is worth the time and investment, especially in light of the current landscape. Wishing you could compel arbitration when you’re stuck in litigation is not an ideal place to be, so don’t go there!
Finally, it is important to note that neither liability waivers nor “no negligence” acknowledgements will protect employers against an employee filing a workplace injury claim with Cal/OSHA. There are other types of claims that cannot be waived either under California law. Employers should seek the advice of counsel when preparing any COVID-related employment documents, as well as before terminating or taking adverse action against an employee, including the denial of any COVID-19 related request.
This information is provided as a public educational service and is not intended as legal advice. For specific questions regarding how employers can prevent and manage coronavirus outbreaks in the workplace while minimizing liability, or regarding other topics related to cannabis or hemp, please contact the Law Offices of Omar Figueroa at info@omarfigueroa.com or 707-829-0215 to schedule a confidential legal consultation.