News Type: Blogs

This is an update to Michelman & Robinson’s previous report about California Insurance Commissioner Ricardo Lara’s bulletin (Bulletin 2020-3) to insurance companies requiring the return of premiums to businesses and consumers in an effort to provide financial relief during the coronavirus crisis. By way of a new bulletin (Bulletin 2020-4) issued today (May 15, 2020), Commissioner Lara has extended his prior mandate directed at all admitted and non-admitted property and casualty and workers’ compensation carriers doing business in California. M&R explains the scope of Commissioner Lara’s updated directive here.

Q. What is the purpose of the commissioner’s latest bulletin (Bulletin 2020-4)?

A. Today’s bulletin (1) clarifies what is required of insurance carriers under Bulletin 2020-3, issued April 13, 2020, and (2) extends the relevant time period for that previous bulletin.

Q. What did the prior premium-related bulletin (Bulletin 2020-3) call for?

A. By virtue of local and statewide stay-at-home orders that have curtailed policyholders’ personal and commercial activities, the projected risk and loss exposure across a variety of insurance lines have become overstated or misclassified. In response, Commissioner Lara in Bulletin 2020-3 ordered all insurers doing business in California to make an initial partial premium refund for the months of March and April as quickly as possible (but in no event later than August 11, 2020) to certain California policyholders.

Q. What exactly does Commissioner Lara’s new bulletin (Bulletin 2020-4) clarify?

A. Bulletin 2020-4 clarifies that prior Bulletin 2020-3 does not require full, 100% refunds of premiums for the months of March and April. It does, however, compel insurers to provide partial refunds, taking into account only the portions of premiums for the months of March and April where projected loss exposures of certain policies have become misclassified or overstated. Further, Bulletin 2020-3 provided that if the COVID-19 pandemic continued into and beyond May, a subsequent bulletin would be issued to insurers. Commissioner Lara has done just that with Bulletin 2020-4.

Q. What does Bulletin 2020-4 say about extending the time for premium reductions?

A. Consistent with California Governor Gavin Newsom’s May 7 order transitioning California into Stage 2 of the so-called Pandemic Resilience Roadmap-all the while keeping the state’s stay-at-home order in effect-Commissioner Lara’s latest bulletin extends the directive in Bulletin 2020-3, requiring carriers to reduce premium in the affected lines of insurance through May 31, 2020. Remember, Bulletin 2020-3 only contemplated the months of March and April.

Of note, if the stay-at-home order in California continues into June and beyond, the commissioner will issue additional directives to ensure premiums continue to accurately affect policyholders’ exposure to loss.

Q. To put Bulletin 2020-4 in proper context, what were the directives in Bulletin 2020-3?

A. The prior bulletin requires insurers issuing policies in the following lines of insurance to provide affected California policyholders with a notification of the amount of their partial refunds, a check, premium credit, reduction, return of premium, or other appropriate premium adjustment, no later than August 11, 2020:

  • Workers’ compensation
  • Commercial multi-peril
  • Commercial liability
  • Medical malpractice
  • Commercial automobile
  • Private passenger automobile
  • Any other insurance line where the risk of loss has fallen substantially as a result of the COVID-19 pandemic.

In addition, carriers must provide explanations of the basis for the adjustments, including any changes to the classification or exposure basis of affected policyholders.

Q. Do the premium-related bulletins require insurers to report anything to the California Department of Insurance?

A. Yes, affected insurers must report to the CDI no later than June 12, 2020 all actions taken and contemplated future actions to refund partial premium in response to or consistent with the bulletins. The required reporting must now also include information with respect to any premium adjustments for May 2020, in addition to March and April.

The CDI provided a Microsoft Excel workbook, which can be found here, for insurers to use for their reports, which are to be submitted to the Rate Specialist Bureau at [email protected].

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.

This week, the U.S. Supreme Court agreed to hear a case of great consequence when it comes to judicial review of IRS guidance that arguably concerns tax collection or assessment. At issue in CIC Services LLC v. Internal Revenue Service is the scope of the Anti-Injunction Act and, more specifically, what constitutes the collection or assessment of taxes for purposes of the statute.

CIC Services LLC is a risk management consulting firm and material advisor to captive insurance companies. Its lawsuit relates to Notice 2016-16 issued by the Treasury Department and IRS, by which the federal government:

  • Identified certain transactions entered into between taxpayers and related captive insurance companies as having the potential for tax avoidance or evasion (micro-captive transactions);
  • Labeled micro-captive transactions as “transactions of interest;” and
  • Subjected micro-transactions to reporting requirements and potential penalties associated with “reportable transactions.”

In a nutshell, Notice 2016-16 served to label micro-captive transactions as potentially abusive tax shelters, much to the chagrin of CIC Services. In response, the company filed its complaint against the IRS in the United States District Court for the Eastern District of Tennessee, seeking to render Notice 2016-16 and its mandates invalid. CIC Services alleged that in issuing the notice, the IRS failed to follow the requisite notice-and-comment rulemaking and congressional review procedure for legislative rules as set forth in the Administrative Procedure Act.

The trial court dismissed CIC Services’ complaint for lack of subject matter jurisdiction, holding that the Anti-Injunction Act divested it of jurisdiction because the lawsuit was “for the purpose of restraining the assessment or collection of any tax.” CIC Services appealed this ruling to the Sixth Circuit, arguing that the Anti-Injunction Act did not prohibit pre-enforcement review of Notice 2016-16 because it is not geared toward tax collection or assessment; rather, the Administrative Procedure Act compels such a review.

For its part, the IRS contended that compelling taxpayers to report on the use of potentially questionable tax shelters (read: micro-captive transactions) is (and was) related to tax collection and therefore protected by the Anti-Injunction Act. The Sixth Circuit agreed, finding that the Anti-Injunction Act barred CIC Services’ litigation.

By way of certiorari, the U.S. Supreme Court has stepped in and is set to hear CIC Services LLC v. Internal Revenue Service during its October 2020 term. Michelman & Robinson will be sure to follow this interesting case and convey the High Court’s decision.

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.

You may be hearing the phrase “force majeure” being thrown around quite a bit in response to the upheaval caused by the coronavirus. But what does this archaic phrase mean for you and your real estate contracts? In short, a force majeure clause operates to excuse performance obligations in an agreement or to extend time of performance when an unforeseeable event, or one that is “beyond the contractor’s control,” causes one or more parties to be unable to meet their contractual obligations. Given that the coronavirus may well qualify as a triggering event for purposes of a force majeure clause in one of your contracts, we offer the following information, which is geared toward commercial real estate.

Q. Do force majeure clauses impact commercial real estate contracts?

A. Yes. Nearly all commercial contracts, including most commercial leases, contain some form of force majeure clause. Examples of a force majeure include prevention, delays or stoppages due to strikes, lockouts, labor disputes, terrorist acts, acts of God, governmental actions, inactions or delays, civil commotion, extreme weather, fire or other casualty, and/or other causes beyond the reasonable control of the party obligated to perform.

That being said, even in the event of a force majeure, commercial tenants are typically still on the hook to pay rent to their landlords. Many commercial leases include language stating that force majeure may not be raised as a defense for a tenant’s non-performance of any obligations with regard to the payment of rent. Such carve-outs are extremely advantageous for landlords and-absent other possible defenses (see below)-effectively mean tenants will not be able to circumvent rent altogether-or pay lesser amounts-if something out of their control occurs that results in their landlords being unable to perform their duties under any given commercial lease. Of note, the carve-outs also act to insulate landlords from tenants that refuse to pay rent because of a force majeure that prohibits those tenants from entering or continuing their business operations on leased premises.

Rent aside, force majeure usually excuses landlords and tenants from other performance under their commercial leases, but only for a period equal to the prevention, delay, stoppage or inability to perform. And of course, if a commercial lease does not include the carve-out language referenced above, even a tenant’s rent may be subject to a force majeure clause.

Q. Are force majeure clauses enforceable?

A. Yes, but the analysis is fact-intensive and should be considered on a case-by-case basis. Especially important is the precise language of the force majeure clause at issue. As with all contractual disputes, the terms of the agreement (for our purposes here, a commercial lease) and the intent of the parties control a court’s analysis. Force majeure clauses will only limit damages where circumstances beyond the parties’ control have frustrated their reasonable expectations.

Q. Does the coronavirus pandemic trigger the force majeure clause in your contract?

A. Possibly. Again, the inquiry will turn on the specific language in the force majeure clause at issue coupled (potentially) with the governmental orders in place in the jurisdiction where the contract is to be performed.

Most courts read force majeure clauses narrowly, especially those that use unspecific terminology, catch-all phrasing, or the term “act of God.” In fact, the applicable test does not limit triggering factors to “acts of God,” but focuses on the unforeseen nature of the force majeure event and the ability of parties to a contract to have prevented the circumstance if they acted diligently.

However, some force majeure clauses expressly identify “illness,” “disease,” “epidemic,” “pandemic,” or similar terms in the list of triggering acts. In those instances, it is fairly clear that the coronavirus outbreak would activate the force majeure clause and excuse contract performance.

If your force majeure clause does not contain these illness-related terms, it still may be in play. For example, many force majeure clauses are triggered where governmental decrees, laws, or ordinances render performance untenable. Given the influx of coronavirus-related governmental orders prohibiting gatherings of people-such as the San Francisco Bay Area’s shelter in place order-parties to a contract could reasonably lean on their force majeure provision in these instances. Further to that point, parties in California may even argue that the state government has already declared a force majeure event resulting from the pandemic. On March 12, Governor Gavin Newsom issued Executive Order N-25-20, providing, in part, that “state and local public health officials may, as they deem necessary in the interest of public health, issue guidance limiting or recommending limitations upon attendance at public assemblies, conferences, or other mass events, which could cause the cancellation of such gatherings through no fault or responsibility of the parties involved, thereby constituting a force majeure.”

Big picture: while a force majeure provision may be narrowly construed and, under the laws of some states, such as New York and Texas, only triggered where the clause clearly and expressly includes the contingent event, commercial landlords and tenants should understand that even catch-all language making reference to “calamities” or “causes beyond a party’s reasonable control” may be leveraged to their advantage depending upon the circumstances.

Q. Are there other related contract doctrines available as a result of the coronavirus pandemic?

A. Yes, parties to an agreement might be able to assert the defense of “frustration of purpose” and essentially argue that the stated purpose of the contract is frustrated by a governmental prohibition in response to the virus. The case law, at least in some jurisdictions, includes solid precedent as it concerns frustration of purpose based on a government order.

Impossibility of performance is another potential defense to contract enforcement, though not a terribly effective one. This doctrine is construed quite narrowly and usually applied only where performance is objectively impossible, such as where a “thing” necessary for performance has been destroyed. In theory, a party to a commercial lease could argue that it was prevented from performing due to a shelter in place, quarantine, or an isolation ordinance decreed by executive order, but to the extent commercial buildings remain open to provide minimum basic operations and essential business, it is not likely “impossible” for a tenant or a landlord to perform under their commercial lease. This is especially true as it relates to the payment of rent.

It is important to note that in certain contracts, falsely invoking the defense of force majeure or one of the alternative defenses just listed-whether or not in good faith-can alone constitute a breach of contract leading to more potential problems.

Q. Are there any additional concerns and strategies I should keep in mind?

A. In the commercial real estate context, be proactive with your landlord, tenant, or lender. We all are operating in the same uncertain times and landscape, and virtually every business owner understands the economic hardships we all face-your, landlord, tenant or lender included. For instance, rather than waiting until after a payment is late or missed, proactively reach out to those with whom you do business and discuss the circumstances and your options. To that end, consider negotiating modifications and forbearance agreements, which set forth in writing in advance how the parties intend to deal with the pandemic’s impact on their business relationship.

Businesses should also take a close look at tax and cash flow relief programs available to them from the federal and state governments and their respective agencies. For example, the federal government recently announced that it would give taxpayers a 90-day extension to pay 2019 income taxes due on up to $1M in tax owed, which is meant to cover pass-through entities and many small businesses. Commercial landlords and tenants should research sources of financial and tax relief, and discuss the same with their trusted attorneys, accountants, brokers, and advisers.

Please know that we are here to help you in any way we can. That includes coordination with your insurance and real estate brokers, both of whom should be familiar with existing market conditions.

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.

In a dramatic departure from the rather flexible standard for joint employer liability embraced under the Obama administration, the Department of Labor has announced a final rule regarding joint employer status under the Fair Labor Standards Act (FLSA) that will surely please employers. It becomes effective in mid-March. The new rule is, in part, a response to the business community’s outcry against prior decisions finding franchisors to be joint employers of their franchisees’ employees, even when those franchisors lacked control over the terms and conditions of workers’ employment.

Four-Factor Balancing Test

In a nutshell, the DOL has adopted a four-factor balancing test to establish whether two or more affiliated businesses jointly employ workers that perform tasks for one company while simultaneously benefiting the other. As finalized, this test weighs whether a potential joint employer:

  1. Hires or fires an aggrieved employee;
  2. Supervises and controls the employee’s work schedules or conditions of employment to a substantial degree;
  3. Determines the employee’s rate and method of payment; and
  4. Maintains the workers’ employment records.

Of note, not every one of these factors must be satisfied for a business to be considered a joint employer.

Clearly, the DOL’s new rule is a far cry from the Obama standard, which made it easier for workers to sue their employees by considering a business to be a joint employer not only if it exercised direct control of an employee’s activities, but also if it had “indirect” or even “potential” control. The net effect of the rule as reworked will be to reduce joint employer liability, which is good news for businesses.

The Takeaway

All companies, including yours, should be mindful of joint employer liability because when two businesses are deemed joint employers under the FLSA, they share responsibility for their employees’ wages and can both be deemed legally liable for wage violations. That being said, the DOL’s final rule gives employers more leeway than previous incarnations, is limited to the FLSA, and has no effect on the issue of joint employer liability as it relates to other federal or state employment statutes.

Of course, the labor and employment attorneys at Michelman & Robinson, LLP are here to answer any questions you may have about joint employer liability or, for that matter, any other employment-related issue.

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.

Cannabis is on fire. And as more and more jurisdictions move to legalize marijuana for medical and/or recreational use, would-be players in the cannabis space are lining up to sign leases on commercial property from which they hope to operate. Which begs the question: do these cannabis-related leases require any unique terms given the nature of the business? The answer is a definitive yes.

A critical concern for any storefront retailer, including those operating a cannabis business, is the lease agreement. To be sure, given the unique circumstances presented in the pot biz-namely, the interplay of federal and state laws, banking and insurance industry aversion, and the relative unknowns presented by a new and burgeoning industry-leases for dispensaries and associated retail operations require special considerations. Here’s an overview.

Compliance with Law

Most commercial leases require tenants to comply with all federal, state and local laws. That’s a problem for players in the marijuana industry because the use, sale and possession of most cannabis products are illegal under federal law. That being said, real property leases entered into by cannabis businesses should specifically exclude the requirement that the tenant abide by all federal laws, including the Controlled Substances Act(21 U.S.C. § 811), which renders the medical and recreational use of cannabis illegal on the federal level.

Landlord Acknowledgement

By way of a use provision ordinarily present in a commercial lease, the tenant typically ensures that the landlord permits the intended use of the premises. In the case of a marijuana dispensary or similar enterprise, tenants would be wise to demand a lease provision stating that the landlord expressly acknowledges and authorizes the tenant’s cannabis-related use of the subject property.

Landlord Cooperation

A standard commercial lease often contains a cooperation clause that requires the landlord to cooperate with the tenant in furtherance of the tenant’s business. For instance, a tenant might need its landlord’s cooperation when performing construction work or obtaining licenses and permits. With that in mind, all tenants in the cannabis business should demand robust landlord cooperation provisions in their leases obligating the landlords to sign any documents and make necessary acknowledgments in furtherance of the tenants’ core operations. In fact, the cooperation clause should mandate that the landlord use diligent efforts and take cooperative action as soon as practicable upon a tenant’s request.

Lease Termination

Because the state of the law as it pertains to marijuana is ever-evolving, the termination provision in any cannabis-centric commercial lease should allow for the right of the tenant to terminate early in the event of a change in the law or enforcement patterns, nuisance claims, or other occurrences that serve to disrupt or hinder the purpose of the lease. Bottom line: if a tenant is no longer allowed to operate in the cannabis business, it must have a means of relief from future payment obligations.

Contingency Provision

In some instances, a cannabis business is required to present an executed lease in order to qualify for a license to operate or obtain necessary financing. In such a circumstance, where the lease is signed as a pre-condition, the tenant should negotiate for a contingency provision allowing for early termination in the event it fails to obtain the license or financing contemplated when the lease was executed.

Insurance Requirements

Commercial leases routinely contain provisions that require tenants to provide proof of specified types and levels of insurance. But there’s more. Those insurance requirements usually include thresholds regarding the perceived market quality of the insurer (for example, an “A-rated” insurer). Nevertheless, not all insurance companies issue policies to cannabis businesses. Consequently, such tenants should ensure that their lease agreements allow them to obtain coverage from any insurer willing and able to write the risk, regardless of rating.

What About the Landlord’s Perspective?

It’s no surprise that landlords will have their own set of priorities when negotiating key provisions in cannabis-related leases. First and foremost, tenants shouldn’t be surprised when they’re asked to pay a premium to lease commercial real estate. Many landlords still have reservations about the legal marijuana industry, and they may insist upon a greater income stream in exchange for any increased risk undertaken, perceived or otherwise. Also, it’s not unusual for a landlord to require an indemnification provision that is much stronger than is the norm in order to protect against such perceived risks or, alternatively, to require additional insurance coverage limits.

The Takeaway

If you’re a prospective in the cannabis sector, no need to fear. Simply recognize the forgoing issues-understanding that this list of provisions above isn’t exhaustive-and approach commercial lease negotiations diligently. Of course, as with any legal transaction, it’s recommended that you first consult with experienced legal counsel.

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.

If you’re in management, there’s some good news to report out of the National Labor Relations Board-at least theoretically.

The NLRB has just ruled that it’s not a violation of federal law-namely, the National Labor Relations Act-when employers misclassify their workers as independent contractors, as opposed to employees.

Classification issues have made headlines of late, especially in the wake of the California Supreme Court’s decision in Dynamex Operations West Inc. v. Superior Court, which significantly relaxed the standard applied in California to determine whether any given individual may be acting as an employee or independent contractor. But let’s put a pin in that for just a moment.

In the matter before the NLRB, Velox Express (a medical logistics company) was found to have misclassified certain workers as independent contractors. Despite this conclusion, the Board held that the misclassification didn’t violate the NLRA, which makes it illegal for employers to punish workers for forming unions or otherwise engaging in “concerted activities.” The NLRB determined that misclassification on the part of Velox didn’t serve to suppress workers’ organizing rights-this because the workers in question weren’t “inherently threatened” with firing or other discipline for acting together (and misclassification, by itself, wasn’t tantamount to such a threat).

The takeaway from the case is straightforward-employers that misclassify workers aren’t subject to NLRB litigation in the absence of some other labor law violation-though perhaps it’s something of a non-issue given the impact of certain state laws.

In California, for example, misclassification violates state law and related claims can still be brought by aggrieved workers (either individually or in a representative capacity) and the Division of Labor Standards Enforcement – the administrative agency charged with enforcement of the Labor Code. That being said, and given the ruling in Dynamex-by which an individual may be denied the status of employee only if the worker is the type of traditional independent contractor (such as an independent plumber or electrician) who would not reasonably have been viewed as working in the hiring business-there may well be an uptick rather than downturn of misclassification cases notwithstanding the NLRB’s take on the topic.

Long story short: (1) misclassification should remain front and center on company radar screens, and (2) the upside of the NLRB’s Velox Express ruling is likely reserved for entities with locations in states that largely track federal law.

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

It’s a given that employers are prohibited from discriminating against employees on the basis of sex, race, color, national origin and religion – this according to Title VII of the Civil Rights Act of 1964, which generally applies to employers with 15 or more employees, including federal, state and local governments. It’s also been a given that a court lacked jurisdiction over a court action for discrimination under Title VII until and unless an employee first filed a charge of discrimination on the underlying claim with the U.S. Equal Employment Opportunity Commission (EEOC). Not anymore. By way of its recent ruling in Fort Bend County v. Davis, the U.S. Supreme Court has determined that this now-familiar administrative filing precondition is a “procedural obligation” and not a jurisdictional prerequisite to a lawsuit.

The “jurisdictional” vs. “procedural” distinction is important because if the failure to satisfy the charge-filing requirement itself does not divest a federal court of its jurisdiction over a Title VII lawsuit, an employer-defendant to a lawsuit must now affirmatively raise the plaintiff-employee’s failure to file a charge before a court is required to enforce the requirement. And critically, although the Court noted the plaintiff-employee’s charge-filing requirement is mandatory if properly raised, the defendant-employer may forfeit such requirement it “waits too long to raise the point.”

Translation: federal courts do not lack jurisdiction over discrimination claims simply because plaintiffs bypass the EEOC. Therefore, employers and their counsel must carefully review Title VII lawsuits to ensure they do not contain allegations and claims not previously specifically identified in an EEOC charge. Failure to timely object (e.g., in a responsive pleading) to such allegations and claims not raised to the EEOC may result in a waiver of the defense that a plaintiff has failed to exhaust administrative filing requirements.

Have questions about the EEOC, Title VII or anything in between? The labor and employment attorneys 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 guidance in specific situations.

Brokers and agents take note – an appellate court in California handed down a decision earlier this month that strikes at the legality of “broker fees” charged by agents.

In Mercury Insurance Co. v. Jones, the 4th District Court of Appeals reversed a trial court decision and gave the thumbs up to a fine in excess of $27M that the California Department of Insurance had levied against the insurer back in January 2015 (the largest fine against a property and casualty company in the CDI’s history). The Department did so pursuant to an administrative action it initiated after determining that Auto Insurance Specialists (AIS) and other Mercury “brokers” – which charged consumers between $50 and $150 in fees in addition to premiums on Mercury auto policies – were actually acting as de facto agents, rendering the fees illegal and subject to prior approval by the CDI.

An administrative law judge, who arrived at the amount by multiplying nearly 184,000 unlawful transactions by $150, initially recommended the penalty. A trial court later overturned it, but the three-justice appellate panel in Jones concluded that doing so was in error and contrary to the intent of Proposition 103, which requires carriers to obtain prior regulatory approval for insurance rates.

It has long been a policy of the Department that fees improperly charged by agents are to be treated as premium subject to a prior approval rate filing. The court in Jones gave its stamp of approval to this policy as well as the CDI’s Bulletin 80-6 (and subsequent clarification), stating that while brokers are free to charge fees to insureds, agents can do so only if they provide services to consumers that are apart from and outside the scope of their agency relationships with carriers.

Insurance Commissioner Ricardo Lara reacted to the appellate court ruling by saying, “[the] decision is unequivocal: insurers cannot avoid the Department’s scrutiny by charging ‘fees’ on top of the rates already approved by the Commissioner. Our efforts to maintain fair rates depend on insurers playing fair by disclosing the full cost of their insurance, which Mercury did not do.”

The takeaway for producers acting as agents: now more than ever, fees charged over and above premiums will be under the microscope.

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

Nearly a year after its decision in Epic Systems Corp. v. Lewis, finding that class and collective action waivers contained in employer arbitration agreements are lawful and enforceable under the Federal Arbitration Act, the U.S. Supreme Court has spoken once more on the topic. This week, in Lamps Plus Inc. v. Varela, the high court ruled that arbitration agreements must specifically contemplate class arbitration for that process to be invoked.

The upshot is that an employer with a valid arbitration agreement not containing an explicit class action waiver can compel alleged class action claims to individual arbitration (assuming, of course, that the given contract does not specifically provide for class arbitration). In making its determination, the Court clarified that ambiguity in an arbitration agreement is not enough to evidence consent to class arbitration. No doubt, the justices’ 5-4 vote represents yet another employer-friendly decision.

Notwithstanding the foregoing, and as we previously pointed out after the Epic Systems ruling was published, employers should proceed with caution despite the good news in Lamps Plus. Remember, a variety of grounds can exist to render an arbitration agreement unenforceable – whether or not it contains a class or collective action component. And despite the Court’s determination in Lamps Plus requiring no ambiguity in a contract regarding a party’s capacity to pursue class arbitration, state and local law may specifically permit alternate ways to facilitate collective or enforcement actions (such as California’s Private Attorneys General Act).

As a practical matter, employers in the wake of Lamps Plus (and Epic Systems) should be certain that arbitration provisions are drafted in compliance with current law. That being said, assuming your company does not want to permit class-wide arbitration, DO NOT include language in your agreements that references class claims (other than a class action waiver).

If interested in a deeper dive on arbitration agreements and class or collective actions, the labor and employment lawyers at Michelman & Robinson, LLP are just a phone call or email away. In the meantime, we are here to help craft effective and enforceable arbitration agreements that will stand up to the scrutiny anticipated in the aftermath of Lamps Plus and Epic Systems.

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

The Family Medical Leave Act (FMLA) is admittedly complex. Still, covered employers are required to strictly comply with its terms. To assist employers as they navigate the intricacies of the FMLA, the U.S. Department of Labor (the “DOL”) recently issued several opinions concerning some difficult and unresolved issues.

FMLA Benefits to Be Tapped First

According to the DOL, once an eligible employee learns that his or her absence from work falls under the umbrella of FMLA protection, the 12-week leave benefit is triggered. In such cases, covered employers are advised not to permit workers to take paid sick time that may be available to them before first using their FMLA leave. As otherwise stated, employers must start the clock running on workers’ 12 weeks of FMLA time as soon as a worker’s absence is determined to qualify for leave under the federal statute. In its opinion letter, the DOL also noted, however, that “nothing in FMLA supersedes any provision of state or local law that provides greater family or medical leave rights than those provided by FMLA.” To that end, an employer may provide additional leave when FMLA leave is exhausted (but such additional time cannot be designated as FMLA leave.)

Of note, the DOL’s opinion directly contradicts a Ninth Circuit ruling that specifically allows workers to defer FMLA leave and take paid time off instead. In Escriba v. Foster Poultry Farms (decided back in 2014), the court held that employees could decline to use FMLA leave. Given this decision, employers in the Golden State (which is decidedly employee-friendly) shouldn’t be too quick to change their current policies as they pertain to family or medical leave. Rather, the DOL’s opinion, which is not binding, simply suggests that employers may prevent employees from extending their FMLA leaves by using paid time off first.

Organ Donors Covered Under the FMLA

Another question often raised is whether a voluntary organ donation falls within the scope of the FMLA. As otherwise stated, are these procedures an impairment or physical condition that qualifies as a serious health condition under federal law? In a separate opinion letter, the DOL has decided that they are. According to the DOL, organ donations surely trigger employers’ FMLA leave obligations.

Incremental Leave

The FMLA allows workers to take leave in periodic (read: noncontinuous) increments. But what about that employee who elects to be out of the office – say – every Friday? Is there anything an employer can (or should) do about that? The answer is tread lightly.

While such a pattern of absence from the workplace may be difficult for an employer (both in terms of inconvenience and tracking the time away), it’s absolutely within a worker’s rights to take necessary time off pursuant to the FMLA to attend to personal or familial care. Still, an employer can request documentation that confirms that an employee must be out on Fridays (or whatever the relevant day or days may be), and workers must do their best to schedule leave so that interference with company operations are kept at a minimum. But all things being equal, if an employee’s reason for being absent from work on “Fridays” is legitimate, he or she can take leave on those days under the FMLA.

The Bottom Line

No doubt, the intricacies of the FMLA can be a bit tricky. To reduce your company’s administrative burden and exposure under the law, ensure complete and consistent documentation of all requests and accurate tracking of FMLA leave time. And, in the event you have questions about your obligations under the FMLA, the California Family Rights Act (CFRA) or any other employment-related issues you may be facing, feel free to contact Lara Shortz at (310) 229-5500 or [email protected] Kathryn Lundy (212) 730-7700 or [email protected].

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