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New Employment-Related Laws In California

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With the new year have come a slew of new laws impacting employers throughout California. Here’s an overview: 

MINIMUM WAGE 

Minimum wage continues to increase in California. 

Beginning on January 1, all employees in the Golden State are required to be paid at least $15.50/hour. As of the summer of 2022, the minimum wage is even higher in certain cities, as follows:

  • Los Angeles County: $15.96/hour 
  • City of Los Angeles: $16.04/hour and $18.86/hour for hotel employees working in properties with 60 or more rooms
  • Malibu: $15.96/hour  
  • Pasadena: $16.11/hour  
  • Santa Monica: $16.96/hour and $18.17 for hotel employees  
  • West Hollywood: $17.50/hour (businesses with 50 or more employees), $17.00/hour (businesses with fewer than 50 employees) and $18.35/hour for hotel employees (starting July 2023, employees in all three categories must be paid at least $18.86)

Note that employers should remain alert for further updates as many city minimum wage increases occur mid-year. Also, other cities and industries, not referenced above, may also have their own minimum wages. 

LEAVE LAWS 

The scope of bereavement leave rights has been expanded. 

Bereavement is now a protected leave category in California. Employees are permitted to take up to five days of bereavement leave for the death of a family member. This leave may be unpaid, but employees can avail themselves to available vacation, personal leave, accrued sick leave, or compensatory time off. 

Employees may take leave to care for a “designated person.” 

Additionally, leave has been expanded so that an employee can care for “designated persons” (defined as any individual related by blood or whose association with the employee is the equivalent of a family relationship)—this under the California Family Rights Act. Employees may identify one “designated person” every 12 months.  

NON-DISCRIMINATION LAWS 

California identifies a new protection for reproductive health decision-making. 

Under the California Fair Employment and Housing Act, it is now unlawful to discriminate against an individual in hiring or employment decisions based on “reproductive health decision-making,” which includes use of a particular drug or medical service. 

PAY TRANSPARENCY  

Employers will face heightened pay transparency requirements. 

As of January 1, employers are required to make additional disclosures on pay data reports and provide pay ranges on job postings. This new mandate impacts almost all employers and there will be large civil penalties for non-compliance, up to $10,000 per violation. 

Pay scale disclosure requirements mean employers must (1) include the applicable pay scale on all job postings; (2) not use salary history as a factor in employment decisions; and (3) maintain records of job title and wage rate information for the duration of an employee's employment, plus an additional three years.  

For employers with 100 or more employees, annual pay data reports must be submitted (this year by May 10) to the California Civil Rights Department setting forth the number of employees by race, ethnicity and sex, along with information on these employees’ earnings, pay rate and hours worked. 

EMPLOYEE PRIVACY  

Employee information is placed under heightened protection. 

Under the California Privacy Rights Act, certain employers now have increased obligations to ensure protection of employees’ information in the same way they have been expected to protect consumer data. The CPRA applies to employers that either (1) had annual gross revenues in excess of $25 million (as of January 1 of the calendar year); (2) annually buy, sell or share the personal information of 100,000 or more consumers or households; or (3) derive 50 percent or more of its annual revenues from selling or sharing consumers’ personal information. 

Under the CPRA, “personal information” is “information that identifies, relates to, describes, is reasonably capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household,” including professional or employment-related information. 

Key employee rights under the CPRA include (1) notice of collection of personal information; (2) the right to delete and correct personal information; (3) the right to know what information is sold and shared; (4) the right to opt out of the sale of personal information; and (5) the right to restrict uses of personal information.  

WORKPLACE SAFETY  

Prohibition of retaliation for failure to work during an emergency condition. 

As of January 1, employers cannot retaliate against employees who refuse to report for work or leave work during an “emergency condition” (which includes conditions created by natural forces or a criminal act, but not a health pandemic) if there is a reasonable belief that the workplace is unsafe. Likewise, employers are now prohibited from stopping employees from accessing their mobile devices to seek emergency services, assess safety concerns or communicate others to confirm their safety.  

NOTICE REQUIREMENTS 

Cal-WARN notice requirements expand to call centers. 

Existing notice requirements under Cal-WARN have been expanded to call center employers that intend to relocate their call center(s) or one or more operating units. The Labor Commission is authorized to enforce this law.  

COVID-19 UPDATES 

Notice requirements for outbreaks are now more limited. 

Employers are no longer required to notify a local public health agency in the event of a COVID-19 outbreak. However, employers must continue to notify employees of potential exposure. Previously, employers had to provide written notice to all employees the day of exposure. Now, employers must simply display a notice in a prominent place for 15 days.  

Supplemental paid sick leave expires.  

Employer requirements to provide COVID-19 Supplemental Paid Sick Leave expired on December 31, 2022. Employees on leave at the time of expiration may finish taking the amount of leave then available. Having said that, certain cities and counties have their own SPSL policies that may still be in effect.  

COVID-19 remains an “injury” for purposes of workers’ compensation.  

Under existing law that was set to expire in January 2023, illness or death from COVID-19 is an “injury” for purposes of workers’ compensation and there is a rebuttable presumption that such an injury has arisen in the course of employment, making it compensable. Under AB 1751, this law has been extended through January 2024.  

POTENTIAL ARBITRATION UPDATES 

California Supreme Court may walk back requirement to arbitrate representative actions. 

Since the U.S. Supreme Court’s decision in Viking River Cruises v. Moriana, representative actions brought pursuant to the California Private Attorneys General Act (PAGA) are now subject to individual arbitration. Nevertheless, in June 2022, the California Supreme Court granted review in Adolph v. Uber Technologies, which review will likely examine whether an employer may compel the arbitration of PAGA claims under California law. We will continue to monitor the Adolph case and report back when a decision has been issued.  

FAIR WORK WEEK  

Some employers may be faced with even more burdens around employee scheduling and pay. 

We await Mayor Karen Bass’s signature enacting the Fair Work Week Ordinance. If it becomes law as expected, retail businesses in Los Angeles or establishments employing 300 or more employees worldwide will face increased obligations around employee scheduling and pay. 

Pursuant to the law if enacted, (1) employers will have to provide a good faith estimate of their would-be employees’ work schedules before hiring; (2) employees can request preference for work hours and location; (3) employers must furnish written notice of an employee’s schedule at least 14 days in advance; (4) deviations from the provided schedule could result in overtime, or even double time pay; (5) employers will need to offer existing work to current employees before hiring additional workers; (6) employees cannot be required to find coverage for their shifts; (7) employees cannot be required to work two shifts with less than 10 hours between them; and (8) employers must retain records for at least three years, including work schedules, copies of written offers to employees for additional work, and other correspondence with employees regarding scheduling 

If approved, the Ordinance is to take effect in April 2023, it will not be subject to waiver, and violations will result in civil penalties up to $500 per infraction. Not only that, employees will also have a private right of action in the event of an alleged infraction. 

WEHO PAID TIME OFF 

Sick leave for West Hollywood employees. 

As has been the case since July 2022, employers in West Hollywood are required to provide full-time employees with at least 96 paid hours each year for sick leave, vacation or personal necessity, plus a minimum of 80 hours of unpaid sick time. Part-time employees must accrue paid time off in proportional increments, and once accrued, their paid time off must carry over, though it can be capped at 192 hours. Unused accrued unpaid time off must carry over as well but can be capped at 80 hours. 

HOTEL INDUSTRY SPECIFIC LAWS 

Increased requirements on hotels to prevent human trafficking. 

Hotel employers continue to be required to provide staff with at least 20 minutes of training on how to recognize human trafficking. On top of this, hotel operators are now subject to civil penalties if a supervisory employee “knew of or acted with reckless disregard of the activity constituting sex trafficking” within the hotel and failed to inform a proper authority (e.g., law enforcement or the National Human Trafficking Hotline). 

Increased protection for hotel workers in the City of Los Angeles. 

In Los Angeles, the Hotel Worker Protection Ordinance became effective last August. The law is meant to ensure hotel workers are equipped with personal security devices and supported in their ability to report criminal and threatening behavior. It also contains provisions to ensure fair compensation and deter overly burdensome work. And while the application of certain provisions is dependent upon the size of a given hotel, the Ordinance creates at least some new requirements for all hotels in Los Angeles.  

Key provisions of the law include (1) providing certain workers with a personal security device; (2) staffing a position to respond to distress calls; (3) conducting trainings around security measures; (4) providing notice to staff and guests of these safety policies; (5) limiting mandatory overtime; (6) record retention; (6) limiting the ability to implement programs not to clean or sanitize rooms daily; and (7) limiting workload for room attendants.  

West Hollywood enacted a similar law—the Hotel Worker Protection Ordinance—that also became effective in 2022. As such, hotels in that city should continue to ensure compliance with the Ordinance by (1) protecting hotel workers from violent or threatening conduct; (2) providing fair compensation depending upon workload; (3) ensuring the right of hotel worker recall and retention; and (4) providing public housing training. 

EMPLOYER ACTION ITEMS 

In light of all of the new laws referenced above, employers would be wise to do all of the following right away: 

  1. Review base salaries for all exempt employees to ensure they meet the applicable salary requirements and confirm that non-exempt employees are being paid at least the applicable minimum wage.  
  2. Update employee handbooks to reflect changes in the law.
  3. Create pay scales for all employee positions to be used in job posting or upon request by an employee.  
  4. Review city- and industry-specific laws to ensure compliance.  
  5. Work with those responsible for payroll and legal counsel to meet the May 10 deadline for California’s pay data reporting requirement, including aggregating pay data by position and protected characteristic. 

Of course, the employment team at Michelman & Robinson, LLP is always available to answer your employment-related questions.  

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations. 

Determining Ownership of Pore Space Based on the Nature of Underground Caverns

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Andrew W. Bell


With our collective consciousness focused on a greener and cleaner environment, companies within the energy space are working to reduce their carbon footprints. One solution toward that end is Carbon Capture Utilization and Sequestration (CCUS), an innovative technology implemented to minimize man-made greenhouse gases.

The promise of CCUS as a tool to slow down global warming by recycling carbon dioxide (CO2) emissions is undeniable, but with it comes certain unintended concerns for players in the energy industry. One of these has to do with ownership of the subsurface pore space in which CO2 is injected and stored.

This issue continues to be debated in Texas and, most recently, an appellate court determined that pore space ownership belongs to the holder of the surface estate rights. Yet this may not be the final word on the topic. A request is currently pending before the Texas Supreme Court to review the recent appellate court decision captioned Myers-Woodward, LLC v. Underground Services Markham, LLC.

At the heart of Myers-Woodward is the novel question of whether pore space ownership should be determined based on the nature of the underground cavern at issue—a naturally occurring cavern formed out of dirt and rock versus an artificially created cavern formed out of solid minerals. This article takes a deep dive into that query pending the Texas Supreme Court’s decision to hear the case.

The Meyers-Woodward Decision

Myers-Woodward involves a dispute between Myers-Woodward, LLC, a surface estate owner, and two other companies, the mineral interest owners, regarding cavern space resulting from brine mining operations. The mineral interest owners sought a declaration from the trial court that they had the right to store oil, gas, and other gases or liquids in the cavern space created when they extracted salt from the subsurface. Myers-Woodward contended that it owned the subject tract in its entirety, including all geological structures in the subsurface, and that the mineral interest owners did not have the right to use the cavern for storage of hydrocarbons or other products or substances.

The trial court agreed with the mineral owners, ruling they were the owners of the subsurface caverns created by virtue of their salt mining activities. Myers-Woodward appealed, arguing that it owned all the physical land—all meaning the surface, subsurface, the matrix underlying the earth, and the reservoir storage space beneath the surface. In response, the mineral owners argued on appeal that (1) naturally occurring caverns should be distinguished from ones artificially created and (2) because the cavern at issue was a byproduct of their salt mining operations that required their maintenance to be utilized for storage operations, they should be entitled to subsurface ownership rights.

In support of their position, the mineral owners relied on Texas case law precedent; namely, Mapco, Inc. v. Carter, in which it was determined that the holders of the mineral estate owned all rights to pore space where the cavern was formed out of the underground mineral salt being mined. However, despite the precedent established in Mapco, the appellate court ruled in favor of Myers-Woodward because of “well-recognized, decisional law” in Texas holding that “the mineral interest owner owns the minerals but not the subsurface.”

Of note, the appellate court did not delve into a discussion regarding the distinction between naturally occurring and artificially created caverns. Instead, it explained that a mineral owner is merely entitled to a fair chance to recover and extract subsurface minerals, not to subsequently use the subsurface for its monetary gain after those minerals are extracted.

Request for Review from the Texas Supreme Court

On August 1, 2022, the mineral interest owners requested that the appellate court reconsider its decision. In their briefing, the companies argued they possess an unrestricted mineral estate in all minerals, including the salt, in, on, or under Myers-Woodward’s property, and the salt caverns created from mining operations. The companies again distinguished between naturally occurring caverns, which they alleged belonged to the surface owner, and artificially created caverns, which the companies alleged belong to the mineral owner.

More particularly, the companies explained that caverns created by the mining of solid minerals (i.e., salt) are composed of the actual minerals themselves, whereas caverns created by the mining of non-solid minerals (i.e., liquid oil or natural gas) are pre-existing and composed of non-mineral earth, like dirt or rock. With that by way of background, they reasoned that mineral owners should own the artificially created caverns made up of minerals, while surface owners should have ownership of naturally occurring caverns composed of dirt and rock.

It is for this reason, according to the companies, that the appellate court should have followed Mapco, which specifically involved salt mining operations, rather than the “well-recognized decisional law” involving liquid oil and gas operations.

Notwithstanding these arguments, the appellate court denied the request to reconsider its opinion in Myers-Woodward. That denial led to a petition for review with the Supreme Court of Texas, which is calendared to be filed on January 20, 2023.

It is suspected that the companies will make the same argument for pore space ownership to the Texas Supreme Court that was made to the appellate court. If the Texas Supreme Court grants the petition for review, a ruling overturning the Myers-Woodward decision could pave the way to changing the law regarding pore space ownership not only in Texas, but potentially across the country.

An Interim Solution to the Pore Space Ownership Debate

As we await the Texas Supreme Court’s pronouncement on the ownership of subsurface pore space, steps can be taken by parties seeking to engage in underground storage after existing wells or mines have been depleted. First among them, the negotiation of provisions in mineral leases addressing these rights.

One of the main arguments advanced by the surface owner in Myers-Woodward was that the mineral lease executed in that case only granted to the lessee the right to mine, drill, and operate for minerals and maintain facilities necessary for producing, treating, and transporting them. Arguably then, at least as far as the surface owner was concerned, nothing in the leases could have been interpreted to grant the lessees the right to use the subsurface structures for storage.

Hence, a seemingly clear interim takeaway from Myers-Woodward: negotiating the right to engage in subsurface storage  when the mineral lease is executed could prevent these disputes altogether.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

Tax Increases on High-Value Real Estate Deals in L.A. Are on the Horizon

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Mehdi Sinaki


Effective April 1, 2023, the City of Los Angeles will impose a so-called “Mansion Tax” upon commercial and residential property sales exceeding $5 million (certain housing, non-profit, and public entities will be exempt).

The new tax rate of 4% will apply to qualifying properties sold for more than $5 million but less than $10 million. Commercial and residential real estate traded for $10 million or more will be subject to a 5.5% tax rate. The Mansion Tax will not replace or modify existing documentary transfer taxes in L.A. Instead, it is to be an additional documentary transfer tax calculated based on the gross sale amount of property—existing debt will not reduce the tax basis.

By way of example, after April 1, the seller of a $10 million multi-family property in L.A. will be hit with a Mansion Tax bill of $550,000 (5.5% of the sale price)—this in addition to ordinary city and county transfer taxes that can total ~$56,000. Proceeds generated by the Mansion Tax—estimated to be between approximately $600 million and $1.1 billion annually—are intended to address the city’s homeless problem by funding affordable housing and tenant assistance programs.

As the April 1 effective date fast approaches, those thinking about selling real property in L.A. may want to act now to avoid the imposition of the Mansion Tax. That being said, the real estate professionals at Michelman & Robinson, LLP stand ready to provide any counsel you may need.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

City of LA Passes Fair Work Ordinance

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Lara A. H. Shortz


It looks as though retail businesses employing 300 or more workers globally will soon be subject to a new set of requirements related to their employees within the City of Los Angeles.

Last week (on November 29), the L.A. City Council passed the Fair Work Week Ordinance, intended to “promote the health, safety, and welfare of retail workers in the City by providing them with a more predictable work schedule that ensures stability for themselves and their families and the opportunity to work more hours.” The Ordinance now goes to Mayor Eric Garcetti for his signature and if signed into law, as expected, qualifying retailers in L.A. will be faced with even more burdens around employee scheduling and pay. In anticipation of this apparent inevitability, Michelman & Robinson, LLP provides this overview of the new law.

Affected Employers

As referenced, the Ordinance applies to retail businesses or establishments that employ 300 or more employees worldwide. This includes, but is not limited to, motor vehicle and parts dealers, building material and garden equipment dealers, food and beverage retailers, grocery retailers, and electronics and appliance retailers. For purposes of this alert, all references to employer(s) are intended to be limited to qualifying dealers and retailers.

Affected Employees

The Ordinance applies to any individual employed by an employer. To the extent an employer contends that the Ordinance does not apply in any given circumstance, it has the burden of showing that a worker is not an employee under the law.

Requirements Under the Ordinance

Good Faith Estimate: Before hiring, employers must provide a good faith estimate of their would-be employees’ work schedules. Employers that deviate too far from this estimate in actual scheduling will need to provide a legitimate business reason to explain the deviation.

Right to Request Change: Employees have the right to request preferences for work hours and location. Employers may accept or deny these requests but must provide a reason for any denials in writing.

Work Schedule: Employers must provide employees with written notice of their work schedules at least 14 days in advance. Further, employers must provide written notice of any change that occurs after the two-week notice requirement. Employees have the right to decline any schedule changes. If an employee accepts a proposed change, the acceptance must be in writing.

Predictable Pay: If an employee agrees to a schedule change that does not result in loss of time or results in 15 or more minutes of additional work, the employer shall give an extra hour of pay at the employee’s regular rate. For example, if an employee is scheduled to work four hours on a Monday and agrees instead to work four hours on the following Tuesday, the employee will be eligible to be paid for an extra hour. Further, if the employee’s hours are reduced 15 or more minutes from what was indicated on a schedule, the employee shall receive half time for any time not worked. These pay requirements will not apply in certain circumstances including, but not limited to, (1) where an employee requests a change or (2) extra hours require overtime pay.

Additional Work Offerings: Before hiring new employees or using outside workers, employers must first offer existing work to current employees if one or more is qualified to do the job and the additional work would not result in overtime pay. Employers must make this offer of employment 72 hours before hiring someone new and must give current employees at least 48 hours to accept in writing.

Coverage: Employers cannot require employees to find coverage if they miss a shift for a reason covered by law.

Rest Between Shifts: Employers cannot schedule any employee for two consecutive shifts with less than 10 hours of rest in between them without written consent of the employee. If the employee does consent, he/she/they will be paid time and a half for the second shift.

Retention of Records: Employers must retain records for at least three years demonstrating compliance with the Ordinance as it pertains to current and past employees. Upon request, the Designated Administrative Agency (DAA)— in this case, the Office of Wage Standards (OWS) of the Bureau of Contract Administration—must be given access to these records, which include work schedules, copies of written offers to employees for additional work, and other correspondence with employees regarding scheduling.

Posting Notice: Employers must post notices about the Ordinance to be provided by the DAA in English, Spanish, Chinese (Cantonese and Mandarin), Hindi, Vietnamese, Tagalog, Korean, Japanese, Thai, Armenian, Russian and Farsi, and any other language spoken by at least five percent of employees at any given workplace.

Retaliation Prohibited: Employers may not retaliate against employees for exercising their rights under the Ordinance.

If approved, the Ordinance will take effect in April 2023. Assuming it becomes law, the Ordinance will not be subject to waiver and violations will result in civil penalties up to $500 per infraction. Not only that, employees will also have a private right of action in the event of an alleged infraction. Of course, we will continue to monitor the progression of the Ordinance and report back if and when the Mayor signs it into law. In the meantime (and given the potential for legal exposure), it is essential that employers prepare for the enactment of the Ordinance as soon as is practicable.

An Uber to Prison: Lessons Learned from a Convicted CSO

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Matthew Yarbrough


The fate of a former member of Uber’ C-suite should serve as a wake-up call for company stakeholders across industries. 

Earlier this month, Uber’s ex-chief security officer, Joseph Sullivan, was found guilty of obstruction of justice and concealment of a felony, and he is now staring down the barrel of a prison sentence that will likely range from 24 to 57 months. Sullivan’s troubles stem from his response to a data breach that Uber fell victim to back in November 2016, which placed at risk the personal information of nearly 60 million Uber individuals—drivers and customers alike. 

A Tale of Two Breaches 

Hackers penetrated Uber’s AWS S3 bucket in 2016 and then demanded a six-figure ransom to prevent the release of the stolen data online and ensuing publicity that the company suffered a massive data breach. 

As it turns out, when this demand was made, Uber was being investigated by the Federal Trade Commission in connection with another data breach that was discovered by Uber two years prior, in September 2014. That incident was reported to the FTC in February 2015 and Sullivan was an integral part of Uber’s subsequent response to and settlement negotiations in connection with the FTC’s related investigation. Of note, the FTC’s inquiry into the data breach of 2014 was ongoing at the time of the 2016 infiltration. In fact, just days before he learned about that second data breach, Sullivan provided testimony under oath to the FTC about the 2014 episode. 

More particularly, Sullivan had outlined to the FTC the steps Uber had taken to fix and improve the company’s security program in the wake of the 2014 incident, going so far as to claim that measures were put in place to prevent any additional breaches that targeted the same vulnerabilities. The 2016 breach proved this to be untrue, which is why Sullivan sought to hide the event from the FTC by paying the 2016 attackers $100,000 in bitcoins not only to prevent the release of the stolen data, but also to buy their silence while Uber was under the FTC’s microscope. 

 That payment was made through Uber’s bug bounty program as pretext for their ability to assert that a reportable data breach never occurred in 2016. In order to ensure their cooperation, the hackers were required to sign a nondisclosure agreement drafted by Sullivan and Uber’s in-house lawyer that included a false “promise” and statement that the hackers “did not take or store any data during or through [their] research.”  

Ultimately, In November 2017, new management within Uber ’s executive team divulged the 2016 data breach to the FTC, leading to Sullivan’s arrest by the FBI and ultimate prosecution and conviction. 

Lessons Learned 

There is much for company stakeholders and data security professionals to learn from Sullivan’s legal woes. But first, and important preface: merely failing to disclose a data breach is not, by itself, a crime. What Sullivan did to invite trouble was overtly obstructing a regulatory investigation into a cyber incident and actively concealing it from regulators. Which leads to lesson number one—data breaches and ransom payments should never be kept from governmental agencies or internal and external stakeholders. Instead, companies falling victim to cybercrime should immediately consult with outside counsel who can make the legal call to contact and notify law enforcement. 

Sullivan also ran afoul of the law by misusing Uber’s bug bounty program to cover up a data breach and a subsequent ransom payment. Without question, bug bounties are a critical tool to discover security and network vulnerabilities, but they must be used in adherence with specific policies that identify permissible activities and payment parameters. Thus, lesson number two— bug bounty programs should be leveraged in furtherance of legitimate security research and never to conceal evidence of a crime or a cybersecurity breach. 

Finally, the case against Sullivan demonstrates the clear emphasis law enforcement agencies and regulators are placing on (1) company disclosure obligations in the aftermath of cybercrimes, and (2) individual accountability of in-house counsel and IT for corporate misconduct. Stakeholders should understand that prosecution decisions as they pertain to a given organization are influenced by that entity’s history of compliance, its current compliance programming, the company’s proactive Incident Response Plan, and whether the organization has furnished prompt and complete disclosure of misconduct by individuals associated with its compliance program. Those in C-suites and on boards would be wise to seek outside counsel and act accordingly. 

Of course, should you have any questions, concerns or needs in terms of data security and incident response, the cyber pros at Michelman & Robinson are here to help. 

Supplemental Paid Sick Leave in California Extended to December 31

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Derrick Fong-Stempel


The employment team at Michelman & Robinson, LLP has some important news for California employees: Governor Gavin Newsom signed Assembly Bill 152 into law last week, which, effective immediately, serves to extend Supplemental Paid Sick Leave (SPSL) for covered employees—those unable to work because of certain COVID-19 reasons—to December 31, 2022. Prior to the swipe of Governor Newsom’s pen, SPSL in California was due to expire on September 30. 

No New Responsibilities for Employers  

AB 152 does not impose any additional or new leave bank for employees or create further obligations or restrictions upon employers as compared to its previous incarnation. Accordingly, employees that have used all their available SPSL hours before October 1 and experience other qualifying absences between now and year-end will need to use different pay or wage replacement benefits (e.g., non-COVID paid sick leave, vacation time or California Disability Insurance) to receive payment. However, employees who still have SPSL remaining will have access to this benefit for the remainder of 2022, assuming they experience a qualifying absence.  

Right to Request Follow-Up Testing Revamped 

Of note, an employer’s SPSL obligations are not without condition. Previously—under California’s 2022 COVID-19 SPSL law in place prior to AB 152—when an employee requested SPSL after an initial positive test, employers were only authorized to require another test five days later. The rub was that employees could remain on SPSL for several days thereafter so long as they tested positive, and employers were left with no form of recourse. This is no longer the case, which is a positive for management. Do not hesitate to contact Lara Shortz or Derrick Fong-Stempel for details on this development. 

Relief Program for Small Businesses 

Beyond all of the above, AB 152 includes the California Small Business and Nonprofit COVID-19 Supplemental Paid Sick Leave Relief Grant Program, established to give up to $50,000 to qualifying small businesses and nonprofits to pay for SPSL. This portion of the law—set to be repealed on January 1, 2024—includes several exemptions that exclude certain entities from eligibility. If interested in learning more, please reach out to Lara or Derrick.

AB 152: the Takeaway for Employers 

Now that AB 152 is on the books, employers should be prepared to do all of the following: 

  • Pay SPSL to eligible employees; 
  • Continue to report SPSL payments on wage statements;  
  • Consider amending existing COVID paid leave policies and procedures; and 
  • Pay for all COVID-19 testing and compensate non-exempt employees for related time. 

Of course, the employment lawyers at M&R are here to answer any COVID-19-related questions you may have.  

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

When it Comes to Fast-Food, There’s a New Sherriff in Town

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Amanda K. Monroe


There is groundbreaking news to report in the fast-food industry, at least in California. This month, Governor Gavin Newsom signed into law a bill (AB 257, the Fast-Food Accountability and Standards (FAST) Recovery Act) that puts the power to set minimum wages and working conditions for fast-food workers into the hands of a new council of employees, employers and union activists.

Formerly the domain of state and federal lawmakers, governance of the fast-food employment landscape will now be tasked to a 10-member government-appointed council that will operate within the California Department of Industrial Relations. This group will set minimum standards on wages, maximum allowable hours of work, working conditions, and training for fast-food restaurant employees.

The new law is a big win for unions. Pursuant to the terms of the bill, the council can authorize an increase of the minimum wage earned by fast-food employees up to $22 an hour in 2023. For 2024, the council can raise the hourly minimum wage by another 3.5% or a figure pegged to the U.S. consumer price index. In addition, the law now provides employees with another direct pathway to sue employers. Specifically, it authorizes fast-food restaurant workers to bring causes of action for discharge, discrimination, or retaliation for exercising rights under the FAST Recovery Act.

While a boon for more than 550,000 fast-food workers operating in approximately 30,000 locations throughout the Golden State, franchise owners may be hit hard by the law giving workers a seat at the table in terms of compensation and workplace health and safety. Importantly, the bill's requirements only apply to fast-food establishments consisting of 100 or more locations nationally—those that (1) share a common brand or are characterized by standardized options for decor, marketing, packaging, products, and services; and (2) provide food or beverage for immediate consumption on or off premises to customers who order and pay for food before eating, with items prepared in advance or with items prepared or heated quickly, and with limited or no table service.

Going forward, fast-food operators outside California may want to pay close attention to this development, as the law may well serve as a model in other jurisdictions throughout the country. Of course, if you have any questions about AB 257 or any other employment-related inquiries, the employment specialists at Michelman & Robinson, LLP are here with answers.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

Worlds Collide: NIL Rights and NFTs Raise Important Legal Considerations

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Tim Gorry


Scan the headlines on any given day and you’re likely to come across stories about NIL rights and NFTs, both oftentimes selling for jaw-dropping amounts of money (at least before the cratering cryptocurrency market took a bite out of NFT valuations). Until recently, however, these two acronyms—which’ve become part of our daily vernacular—have rarely been uttered in the same breath. That’s no longer the case.

New laws creating previously unheard-of opportunities for student-athletes to sell the rights to their names, images and likenesses rights and cash in on their notoriety have proliferated in lockstep with companies looking to leverage non-fungible tokens as a marketing tool. The result: a slew of NFT deals between brands—which still see NFTs as promising for customer engagement despite the crypto downturn—and collegiate (and even high school) stars flexing their NIL muscles.

The University of Iowa’s Luka Garza and Gonzaga’s Jalen Suggs were pioneers when they minted NFTs just after finishing their final seasons in the NCAA back in March 2021. Since then, many student-athletes have taken their lead, including Ga’Quincy “Kool-Aid” McKinstry of the University of Alabama, who just about a year ago came to terms on a signing day NFT with Kraft Foods, Inc., makers of the Kool-Aid drink.

By some accounts, corporations have earmarked more cash toward NFTs than any other segment of the NIL market. But given the tenuous crypto landscape and relative nascency of NFT-based NIL deals, the burning question is whether brands will stay the course. All indications suggest the answer to be yes, in which case there are a variety of legal considerations for these companies to take into account.

The same is true for athletes and athletic departments given that NFTs are also a vehicle by which students can monetize their personal brands—even, in some cases, without the need for negotiating sponsorship deals. Toward that end, several major basketball programs—the University of Kansas and University of Kentucky, among them—have announced NFT deals; dozens of top collegians have signed with The Player’s Lounge, an NFT-backed community for college fans; and former NFL star Tim Tebow launched a company focused on creating NFTs through a partnership with the INFLCR+ Local Exchange.

Consequently, all participants in the NIL/NFT game would be wise to keep all of the following top of mind.

SEC Also Stands for Security and Exchange Commission

For many, NFTs are speculative assets, purchased as investments assuming their values will increase over time, in which case they can be sold at a profit. As such, despite their digital

characteristics, NFTs run the risk of being considered “securities” for purposes of their treatment under the law. Enter the SEC—no, not the Southeastern Conference.

Under the Securities Act of 1933, a security is essentially any type of negotiable instrument that represents some type of financial value. Some that immediately come to mind include fungible investments like stocks and bonds. But the definition of securities as set forth by the U.S. Supreme Court also includes “investment contracts,” meaning an "investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others." This so-called Howey Test means that release of an NFT could implicate federal securities law.

For instance, should an NFT be purchased with the intent of licensing the underlying asset, or reselling copies for profit, then securities laws could potentially come into play. And if characterized as a security after satisfying the Howey analysis, any given NIL-related NFT would be subject to heavy duty scrutiny and regulation by the SEC, particularly when it comes time to sell the token. In that instance, the sale would require registration with the SEC, unless an exemption under federal securities law applied, and the NFT would fall under state “blue sky” laws. There is more. Platforms facilitating any NFT transaction—including the likes of the aforementioned universities and Player’s Lounge—might have to register as a securities exchange, alternative trading system, and/or as a broker-dealer.

Copyrights Matter

Intellectual property interests, namely copyrights, should always be a topic flashing brightly on the radar screens of anyone dabbling in the NFT marketplace. Indeed, parties to an NFT transaction must understand the importance of obtaining appropriate IP rights prior to consummating an exchange.

To be clear, NFT creators have to tread lightly when leveraging the work of others. More specifically, permission must be obtained from the owner of a copyright before a third-party creation is incorporated into an NFT, especially one positioned for sale. The failure to do so could subject the originator of an NFT—be it a brand, university or student-athlete—to legal action and financial exposure in the form of copyright infringement litigation. By way of example, this could happen where an NFT incorporates the logo or other IP of a school or athletic conference.

The IRS

Student-athletes and their advisors must remember that tax implications follow most every transaction, and that includes the exchange of NFTs. When selling these digital tokens, tax laws apply and need to be followed to avoid any discrepancies with the IRS.

NFT deals are typically considered to be barter transactions for tax purposes, as tokens are generally characterized as property, as opposed to currency, by the Internal Revenue Service.

This means that the fair market value of these assets must be reported on tax returns as income, and sales are to be set forth as capital gains.

For creators, tax repercussions may be ongoing. Another extraordinary aspect of NFTs is a feature that allows digital artists and other originators to be paid a percentage whenever the tokens they created are resold. Thus, NFTs can function as an annuity for their creators, who may participate in financial gains over time, thus triggering the potential of future taxation.

NIL Compliance +

With the advent of NIL laws have come compliance obligations and other miscellaneous concerns to be contemplated by those ready to ink an NFT deal.

Agreements between NFT creators, student-athletes, brands and/or exchanges must comply with all applicable state laws, not to mention SEC regulations and Federal Trade Commission (FTC) rules governing the advertising of products and services. Likewise, NFT transactions should not conflict with university contracts, policies or procedures, including any restrictions related to the use of a school’s IP.

Given the growing popularity, intricacies and nuances of NFTs, university compliance departments would be wise to train their employees on the ins and outs of these digital assets, the federal and state laws that apply to them, athletic conference rules and regulations, and the value and place of NFTs within a student-athlete’s portfolio of NIL activity.

To be sure, the market for NIL rights and NFTs is still in its infancy and it remains to be seen the extent to which the two together will be leveraged by brands, athletes, colleges and universities and related NFT platforms. That being said, no matter how these relatively new marketing vehicles continue to evolve, the legal obligations they trigger should never be ignored.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

The Metaverse Is Shining a Virtual Light on Data Privacy and Ownership

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Jason Blackstone


The metaverse is quickly growing from a technical idea shrouded in mystery and misunderstanding to an emerging tool for businesses and brands across industries. So much so that Deloitte recently launched a Metaverse Services Division, aimed at providing education around transformative Web3 tools in its own custom virtual environment, while at the creative festival, Cannes Lions, Meta debuted a virtual metaverse marketing showcase enabling avatars to explore and enjoy the Côte d'Azur. Last year in support of the Special Olympics, Coca-Cola launched its inaugural NFT campaign, providing NFT holders with a virtual good bag of digital assets, and connected to its annual billionaire list, Forbes recently launched Virtual NFT Billionaires.  

The energy for and adoption of the metaverse—and the NFTs populating the space—by so many companies begs the question, who owns this content? And perhaps even more importantly, who owns the personal data connected to the metaverse and NFT experiences?  

From Web2 to Web3  

The metaverse is more than just virtual spaces and avatars, it signals a paradigm shift in the way brands and customers interact and information is shared. The metaverse is built on the idea of Web3, a new iteration of the internet that prioritizes decentralization and individual ownership over the authority of third-party intermediaries.  

 In our current version of the internet, referred to as Web2, tech and social media platforms gather and monetize consumer data in exchange for providing consumers with access to their communities and services. With Web2, there are clear rules and regulations around data protection and privacy that third-party platforms and businesses must adhere to. In the Web3 future, however, consumers, not platforms or intermediaries, will have greater control over their data, and thus, their digital identity, creating new challenges and opportunities related to asset ownership and data privacy.  

Personal Data Shift 

The idea of identity ownership is foundational to Web3 and the metaverse. Right now, digital wallets are commonly used to store cryptocurrencies and NFTs. However, these wallets are more than a storehouse, they also serve as a form of a digital ID card, in which data about an individual’s activities and preferences can be stored. Essentially, as the Web3 and the metaverse mature, the reins controlling how personal data is used and shared will transfer from tech platforms to consumers.   

In this scenario, companies will be incentivized to build direct relationship with consumers versus taking a mass marketing approach. For example, instead of Facebook ads, a coffee shop could provide customers with NFTs that offer coupons on drinks or updates on weekly specials. In exchange for the value provided by the NFTs, the consumers allow the coffee company access to their data. This one-to-one relationship brings privacy to the forefront. As consumers are empowered to determine how, when, and where their data is shared, companies will need to take greater precautions around data security, especially as individuals will be more identifiable by their data.  

Digital Asset Ownership  

As indicated, one of the most recognizable features of the metaverse are NFTs, also known as non-fungible tokens. Of note, the NFTs populating the metaverse go well beyond the headline-grabbing static pieces of art and music that have sold for millions in months past. When used effectively, so-called Smart NFTs are practical and impactful tools for confirming authenticity, connecting NFT ownership to a community or company, and offering ongoing rewards, access, and content to their owners.     

No matter the subject matter, digital ownership is core to the use of NFTs. That being said, one of the big sources of uncertainty in this nascent virtual landscape is exactly what NFT holders own.  

In the physical world, a person purchasing a poster can choose to hang it, enhance it, or even destroy it. NFTs, on the other hand, include attached conditions that control what rights holders actually have with respect to the digital assets they acquire. When boiled down, most NFTs are merely a ledger entry that contains a reference to the content that is purchased; they do not contain the actual content. Oftentimes, the actual content is hosted on a web server separate from the blockchain that contains the NFT entries.  

In most cases, NFT holders have no rights to a token’s underlying creative content. For instance, someone buying an NFT of a media clip (say, an NBA top shot) does not acquire any ownership of the media it contains—what is purchased is solely the exact expression of the clip. Further muddying the ownership waters is the fact that NFTs can be programmed in ways that limit how the purchased content can be shared or edited. Likewise, royalties can be programmed into NFTs, providing monetary benefit to the creator each time it is transferred. While potentially lucrative, this unique feature highlights additional nuances and risks around data privacy and digital ownership.  

Considerations Going Forward  

With more and more companies and businesses leaning into the metaverse and NFTs as tools for customer engagement, much thought and rigor must be given to rights and usage issues. An emerging concern for those issuing NFTs is whether holders will use these digital assets in a manner that may violate the wishes of their creators. As the metaverse and, by extension, NFTs become more commonplace in everything from marketing to entertainment, regulations will need to evolve that prioritize data privacy and protection.   

As the full impact of the metaverse and Web3 on business and society continues to come into focus, there is no question that this new iteration of the internet is poised to shift the way we think about identity, ownership, and community in a digital space. To be sure, companies and brands plotting their Web3 strategy must keep data privacy and ownership top-of-mind if they are to mitigate risk and preserve valuable customer relationships. 

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

The U.S. Supreme Court Hands Down a Very Employer-Friendly Arbitration Ruling

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BY: LARA A. H. SHORTZ, NEIL EDDINGTON


On June 15, the U.S. Supreme Court issued its much-anticipated decision in Viking River Cruises Inc. v. Moriana. The high court ruled that representative actions brought pursuant to the California Private Attorneys General Act (PAGA) may be compelled to individual arbitration—a break from the position previously taken by the California Supreme Court in Iskanian v. CLS Transp. Los Angeles LLC that PAGA representative claims are not subject to arbitration agreements.

The ruling in Viking is a major development that impacts every California employer. Indeed, in the wake of the decision, employers in the Golden State may need to revise their employee arbitration provisions.

PAGA Claims

PAGA allows employees to file actions and pursue civil penalties on behalf of the state for violations of California’s Labor Code. California views PAGA as an important mechanism to ensure that labor laws are being followed and that employees are adequately protected.

For years and pursuant to Iskanian, an employee initiating a representative PAGA claim was permitted to seek redress in court, even in the event an arbitration agreement was signed. It was the finding of the California Supreme Court that a contract that waived an employee’s right to bring a PAGA action in court was invalid as a matter of public policy. As otherwise stated, the enforcement of wage-and-hour laws on behalf of the state by way of a PAGA action was not preempted by the Federal Arbitration Act (FAA)—this because such a case was not between two contracting private parties, but between the state and an employer. The bombshell opinion in Viking changes all that.

The Viking Decision

In Viking, a former sales representative named Angie Moriana initiated a PAGA action alleging wage-and-hour law violations against the river cruise company. Of note, Moriana’s employment contract with Viking contained a mandatory arbitration agreement.

In an 8-1 ruling, the U.S. Supreme Court decided that the FAA—which instructs courts to enforce arbitration agreements and preempts state rules that undermine them—serves to block the Iskanian rule, at least partially. The vast majority of justices found that Viking could push Moriana's individual claims into arbitration pursuant to the FAA. And because of that, it was determined that California law would not permit her to continue in court with her "non-individual" claims (those brought on behalf of other workers).

According to Justice Samuel Alito, "PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding." He went on to state, "Moriana lacks statutory standing to continue to maintain her non-individual claims in court, and the correct course is to dismiss her remaining claims.

Justice Sonia Sotomayor concurred, reasoning that PAGA does not permit a plaintiff to proceed in court with non-individual claims if her individual claims are sent to arbitration, though she opined that California's courts and legislature are the best authorities to address questions that may arise about a PAGA plaintiff's standing to litigate "non-individual" claims. Nonetheless, and at least for the time being, the high court’s opinion is one worthy of celebration by California businesses.

The Takeaway for California Employers

The Viking opinion provides some long-awaited relief for California employers whose employees have executed arbitration agreements that waive the right to bring a representative PAGA action. These employers should now take the opportunity to confer with counsel and review their arbitration provisions to determine whether any revisions are necessary to ensure they receive the protections afforded by Viking. Toward that end, the employment attorneys at Michelman & Robinson, LLP stand ready to assist.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.