Author: Stephanie Hill

Mandatory Arbitration is Alive and Well

A big win for California employers was announced February 15, 2023, when the Ninth Circuit Court of Appeals in Chamber of Commerce of the United States of America v. Bonta found that the Federal Arbitration Act (FAA) preempts California legislature’s attempt to prohibit employers from requiring employees to arbitrate employment disputes by enacting AB 51.

This is important because arbitration agreements can facilitate the prompt resolution of employment-related disputes, and they provide an effective alternative to the lengthy and costly (for both employers and employees) process of litigation. The February 15, 2023 Bonta decision means that California employers can continue to implement arbitration agreements as a condition of employment.

How Did We Get Here?

It’s been a long and winding road.

In 2019, Governor Newsom signed AB 51 into law, and it was set to go into effect January 1, 2020. Among other things, AB 51 purported to ban employers from requiring applicants and employees as a condition of employment to sign arbitration agreements waiving their right to pursue Labor Code or California Fair Employment and Housing Act (FEHA) claims in court.

The U.S. Chamber of Commerce and several other business groups filed suit for a preliminary injunction in federal district court, arguing the FAA preempted AB 51 and requested a temporary restraining order to halt enforcement while litigation was ongoing. Two days before AB 51 was set to go into effect, the temporary restraining order was granted. On January 31, 2020, the district court granted the preliminary injunction finding that AB 51 violated the FAA as it imposed a higher consent requirement and interfered with the FAA’s goal of promoting arbitration by threatening civil and criminal penalties against employers.

California appealed the district court’s decision to the Ninth Circuit. In a ruling in September 2021, a three-judge panel of the Ninth Circuit reversed the district court’s decision in part, holding that the FAA did not preempt AB 51 to the extent it sought to regulate an employer’s conduct prior to executing an arbitration agreement.

The Chamber of Commerce then requested that the Ninth Circuit reconsider its September 2021 decision. Following a closely watched decision in Viking River Cruises v. Moriana, the Ninth Circuit withdrew its original decision in favor of a rehearing.

The Result

The Ninth Circuit’s February 15, 2023 decision in Bonta affirmed the district court’s grant of a preliminary injunction and held the FAA preempted AB 51 because it “stands as an obstacle to [further Congress’s policy of encouraging arbitration].”

What’s Next?

This may not be the last word, but for now, the latest Ninth Circuit decision in Bonta adds leverage to the position that employers can insist on mandatory arbitration agreements to resolve most employment-related disputes. We will keep you posted.

As always, employers should consult with legal counsel to discuss further.

As we have seen in just the past few weeks of the new year, laws are rapidly changing for employers. Following our Employment Law Update webinars provided to Private Sector and Non-Profit Employers, and Public Entity Employers, our Labor & Employment Team has provided an extensive 2023 Employment Law Update detailing new and evolving laws for all types of employers.

The 2023 Employment Law Update covers:

• New pay transparency law
• New rights to unpaid leave to care for a “designated person”
• New law regarding marijuana use off-the-job
• COVID-19 updates
• Expanded requirements for private employers under the California Consumer Privacy Act

If you have any questions, please contact our attorneys.

Click here to download the 2023 Employment Law Update.

California’s Density Bonus Law provides housing developers with tools to encourage the development of much needed affordable and senior housing. The California Legislature has continued to refine the Density Bonus Law over the past year, with new legislation taking effect on January 1 of this year that provides additional flexibility to developers in meeting the requirements for a density bonus. In addition, a 2022 appellate court ruling upheld the right of density bonus developers to obtain waivers and modifications of local development standards, even when the project could be redesigned to comply with those standards.

These changes are outlined below and incorporated into the 2023 update of our Guide to the California Density Bonus Law. Please click here to download the 2023 Guide. If you have questions about the Density Bonus Law or information in the Guide, please contact the author of the Guide, Meyers Nave attorney Jon Goetz, at jgoetz@meyersnave.com.

2023 Changes

Shared Housing Projects. AB 682 establishes “shared housing” as a new category of housing eligible for a density bonus and the other benefits of the Density Bonus Law. “Shared housing” is defined in the legislation as a residential or mixed use structure containing five or more private units which share common areas such as a kitchen or dining area. The separate units within the shared housing development are treated the same as traditional self-contained housing units for purposes of the density bonus law. The new legislation opens up the density bonus law to support a wider range of housing options such as group homes.

Base Density Calculation. Under the Density Bonus Law, the density bonus amount is calculated on a “base density” of the number of units that would be permitted to be constructed under generally applicable local requirements. Most cities and counties have adopted standards for the maximum number of units per acre, which can be used to calculate the base density. But for those communities that do not have such standards, it can be very difficult to determine the base density. AB 682 establishes a method for determining the base density in those communities, which is to be estimated by analyzing objective standards for such factors as allowable floor area ratios, setback requirements, open space and parking requirements. The developer may submit a base density study to the community, which must accept it if it has included all applicable objective development standards.

Very Low Vehicle Travel Areas. AB 2334 provides that 100% affordable housing projects in “very low vehicle travel areas” in specified urban counties are entitled to unlimited density and height limit increases of up to 33 feet. A “very low vehicle travel area” is defined as an “urbanized area” located within one of the designated counties with per capita vehicle miles travelled per capita at 85% or less of the per capita vehicle miles travelled per capita for the region or city as a whole. These benefits are available in ten Northern California counties (Alameda, Contra Costa, Marin, Napa, Sacramento, San Francisco, San Mateo, Santa Clara, Solano and Sonoma), and seven Southern California counties (Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara and Ventura). This is the first time the density bonus law has provided special benefits to housing developments on the basis of vehicle miles travelled.

Development Bonuses for Commercial Projects. AB 1551 readopts legislation that sunsetted at the end of 2021 requiring that cities and counties provide a “development bonus” to commercial developers who partner with affordable housing developers for the construction of affordable housing on the commercial project site, or offsite within the jurisdiction located near schools, employment and a major transit stop. The commercial developer may participate through the donation of land or funds for the affordable housing, or direct construction of the housing units. To be eligible for the development bonus, at least 30% of the housing units must be restricted to lower income residents or 15% of the housing units must be restricted to very low income residents. Unlike the primary Density Bonus Law, there is no fixed amount of increased density awarded to the developer. Instead, the development bonus can be any mutually agreeable incentive, including up to a 20% increase in development intensity, floor area ratio, or height limits, up to a 20% reduction in parking requirements, use of a limited use elevator, or an exception to a zoning ordinance or land use requirement.

Elimination of Project Amenities to Comply with Development Standards.
An appellate court ruled in 2022 that a developer who seeks to waive or reduce development standards under the Density Bonus Law cannot be required to strip the project of amenities or redesign the project in order to meet local development standards. In that case, Banker’s Hill 150 v. City of San Diego, 74 Cal. App. 5th 755 (2022), a developer of a 204 unit residential project required a waiver or modification of the city’s height limit in order to accommodate all of the units it was entitled to build under the density bonus law. Project opponents argued that the city’s height limit did not need to be waived because the project could be redesigned to meet the height limit by eliminating an interior courtyard. The court ruled that the city had properly waived the height limit, as the city could not demand that the developer remove the courtyard in order to satisfy existing development standards. The court remarked that the density bonus law “provides a developer with broad discretion to design projects with additional amenities even if doing so would conflict with local development standards.”

As we previously reported, California employers have new wage transparency requirements that began January 1, 2023. The signing of SB 1162 into law left many employers looking for additional guidance. Late last month, the California Labor Commissioner issued some guidance on the law through a series of FAQs.

The Labor Commissioner provided guidance on the these previously unanswered questions:

1. Must the pay scale include bonuses, tips, or other benefits?

No. “Pay scale” means the salary or hourly wage range the employer reasonably expects to pay for a position. The Labor Commissioner’s position is that any compensation or tangible benefits provided in addition to a salary or hourly wage are not required to be posted. The employer may include this information to make its recruitment efforts more competitive and employers are cautioned other forms of compensation may be considered for equal pay purposes.

2. Must the pay scale include expected commissions?

Yes. If the hourly or salary wage is based on commissions or piece rate, the commission range or piece rate range must be included in the job posting.

3. Does the job posting requirement apply to companies that have less than 15 employees in California, but 15 or more nationwide?

Yes. The Labor Commissioner interprets the statute to apply to any employer with at least 15 employees, one of whom is in California. In addition, any individual performing any kind of compensable work for the employer who is not a bona fide independent contractor would be considered and counted as an employee, including salaried executives, part-time workers, minors, and new hires.

4. Do job postings have to include the pay scale for remote jobs that could be performed outside of California?

Yes. The Labor Commissioner interprets the statute to mean that the pay scale must be included within the job posting if the position may ever be filled in California, either in-person or remotely.

5. Can employers link to the salary range in an electronic posting or include a QR code in a paper posting that will take an applicant to the salary information?

No. The Labor Commissioner’s position is that employers must include the pay scale within the posting.

One outstanding issue:  The new guidance does not clarify whether the pay scale requirements only apply to postings made on or after January 1, 2023, or if it will apply to all postings that remain active as of January 1, 2023. To be safe, we recommend ensuring all active job postings satisfy the new pay scale requirements.

The new pay transparency law and other employment laws that employers need to know will be discussed on January 11 and January 12, 2023 at Meyers Nave’s annual California Employment Law Update.

Please reach out to the authors to see what we can do to help you finalize any pay scale requirements or provide additional guidance related to pay transparency in the new year.

 

With 2023 just around the corner, here are the top 3 things employers need to do to get ready for 2023:

1. Update your employee handbook. Let us help you to tune-up your employee handbook for 2023.

Having an up-to-date handbook will ensure that your organization’s managers will be able to comply with California’s ever changing employment laws.

New changes for 2023 include:

• New requirements for unpaid bereavement leave;
• Expansion of the California Family Rights Act; and
• Arbitration agreement updates.

If it has been several years since you’ve updated your handbook, then your handbook may be out of date regarding earlier changes related to:

• Paid Sick Leave;
• Paid Family Leave;
• Organ and Bone Marrow Donation Leave;
• Lactation Accommodations; and more.

Also we recommend checking that your handbook is up-to-date on California’s rules regarding meal periods, rest breaks, and overtime. We see an increasing number of wage and hour class action and Private Attorneys General Act claims. When employers’ wage and hour policies are non-compliant or not followed, they face greater risks.

2. Get ready for new pay transparency requirements.

Employers need to get ready now to comply with SB 1162. Key requirements begin January 1, 2023.

Job postings must include the pay scale (Employers of 15 or employees)

All job postings via direct or third parties, must include a pay scale. The “pay scale” should identify the salary or hourly range that the employer reasonably expects to pay for the position.

Pay scale must be provided to applicants and employees upon request (All employers)

Pay scales must be provided to applicants or employees upon request.

Recordkeeping: Employers must maintain records of job titles and wage history for each employee (All employers)

Employers must include employee job title and wage rate history in their employee records for the duration of employment plus three years after employment ends. This information must be recorded and accessible for review.

Annual pay data report (Private employers with 100 or more employees)

By May 10, 2023, these large private employers must submit an annual pay data report with new information on median and mean hourly rates by race, ethnicity, and sex within each job category. Similar reporting is required of private employers with 100 or more employees hired through labor contractors.

3. Employers Must Comply with Additional Requirements of the California Consumer Privacy Act of 2018 (“CCPA”) (as amended by the California Privacy Rights Act of 2020 (“CPRA”).

In January 2023, certain private business employers in California will have expanded privacy and information security obligations. The time is now to plan for significant changes to existing policies and practices for handling certain information.

Which Businesses Must Comply with the CCPA?

The CCPA applies to most companies that do business in California and:

• Have an annual gross revenue in excess of $25 million dollars in the preceding calendar year;
• Alone or in combination, annually buy, sell, or share the personal information of 100,000 or more consumers or households; or
• Derive 50 percent or more of their annual revenues from selling or sharing consumers personal information.

The CCPA does not apply to nonprofit organizations or government agencies.

What is required?

Beginning January 1, 2023, employers will be required to:

• Provide an expanded notice to California-based applicants and employees at the time of collection of information concerning information such as the categories of personal information and sensitive personal information collected, the purposes that they will be used, how long the information will be retained, and whether the information is sold or shared.
• Provide new privacy disclosures about employees’ CCPA rights and how to exercise these privacy rights. The employers privacy policy must be updated every 12 months.
• Develop procedures to comply with requests for information, deletion, and correction.
• Enter into data processing agreements with any third parties or services providers, such as including vendors, with whom the employer shares personal information.
• Provide training to ensure proper responses to CCPA requests.

Businesses who fail to comply with the CCPA by January 1, 2023 will be subject to an injunction and per violation penalties of $2,500 and up to $7,500 for each intentional violation and each violation  involving personal information of minors. At present, enforcement is  through a new California Privacy Protection Agency, and not individual consumers/employees. Employees/consumers do have a private right of action for negligent data breaches.

To prepare for these new data privacy rules, employers are recommended to:

• Determine what type of employee and applicant personal information the company is collecting, where it is stored, and how it disclosed or shared with vendors or others.
• Prepare written policies and procedures to ensure disclosure at the time of collection of information, yearly privacy disclosures, a process to make requests, and timelines and responsibilities for complying with requests.
• Prepare written disclosures and data processing agreements.
• Ensure reasonable security procedures and practices for personal information.
• Provide training to staff who will be responsible for ensuring responses to CCPA requests.

As always, please reach out to your employment counsel at Meyers Nave if you have any questions, concerns, needs for clarification or if you would like further assistance.

Overview

Earlier this year, Governor Newsom signed Assembly Bill (AB) 2011 (Wicks) and Senate Bill (SB) 6 (Caballero) into law to increase housing production in the state by allowing residential construction on commercially-zoned property. The two bills balance the State’s interest in new housing with local control and provide for increased wages, benefits and standards for construction workers on the projects. The bills take effect on July 1, 2023.

Basics of AB 2011

AB 2011, the Affordable Housing and High Road Jobs Act of 2022, provides for streamlined ministerial approval for certain multifamily housing development projects in commercial zones. This statute creates two processes for streamlined, ministerial review of housing projects on commercially zoned property. Under the first process, 100% of the proposed units within the housing development project must be dedicated to lower income households at an affordable cost or at an affordable rent set in an amount consistent with the rent limits established by the California Tax Credit Allocation Committee. The second process in AB 2011 provides for certain ministerial approvals where a development abuts a commercial corridor (defined as a public street, other than a freeway, that has a right-of-way of at least 70 feet and not greater than 150 feet) and has a frontage along the commercial corridor of a minimum of 50 feet. To qualify for ministerial approval under the Commercial Corridor option, these developments must:

• if the development will be owner-occupied, have at least 30% of the units offered at an affordable housing cost to moderate income households or 15% of the units offered at an affordable housing cost to lower income households; or
• if rental units, meet the higher of (a) the minimum inclusionary housing requirement of the city or county in which the property is located or (b) either i) 15% of the units reserved for lower income households or ii) 8% of units reserved for very low income households and 5% of units for extremely low income households.

In addition, AB 2011 projects must also meet a number of threshold site-specific and project-specific criteria, as defined in the statute. This additional qualifying criteria, include, among other things, that the property is located within a zone where office, retail, or parking are principally permitted use; the property is in an urbanized area; and the property is located no closer than 500 feet from a freeway. The law establishes the minimum and maximum densities, height limits, and setback requirements for such projects, which differ depending on the size of the project site, the amount of commercial corridor frontage, and whether the site is within ½ mile of a “major transit stop.” Projects in commercial corridors are also subject to the applicable objective standards for the “closest zone” in the jurisdiction that allows multifamily residential use at the residential density permitted by AB 2011. 100% affordable projects are only subject to the applicable objective standards for the “closest parcel” meeting that density requirement.

Under AB 2011, a ministerial application for qualifying projects is exempt from the California Environmental Quality Act (CEQA), and a decision on the project must be made within 90 days for projects with less than 150 homes or within 180 days for projects with more than 150 homes. Any design review must occur in this limited timeframe and be based solely on objective standards. If a local government determines that a project does not comply with objective planning standards, it must provide a written explanation to the proponent within a 60-90 day period from filing of the application, depending on the number of the units in the project. Projects using the streamlined approval process would also be eligible for density bonuses, incentives and concessions, waivers and reductions in development standards, and potentially reduced parking ratios under California’s Density Bonus Law (Gov. Code § 65915.).

Finally, in terms of workforce requirements, AB 2011 mandates payment of prevailing wages to all construction workers on an eligible project. Developers building 50 or more units of housing must also submit monthly compliance reports to the local government and make family healthcare benefit contributions for projects with qualified construction craft workers on projects with more than 50 units. These expenditures may be credited toward compliance with the prevailing wage requirements.

Basics of SB 6

SB 6, the Middle Class Housing Act of 2022, allows for residential development on property zoned for retail, parking and office space without the requirement for a rezoning of the property. In comparison to AB 2011, SB 6 does not offer a ministerial approval pathway unless the project otherwise qualifies under SB 35. However, SB 6 projects offer lower minimum density requirements and no affordability requirement, except that the project must satisfy any applicable inclusionary housing requirement of the city or county in which the property is located. Nonetheless, SB 6 projects must be housing development projects that are either entirely for residential units or mixed use projects with at least 50% of the square footage dedicated to residential use. These projects should be located on sites 20 acres or less in an urban area and should not be adjoined to any site where more than a third of the square footage is dedicated to industrial use. SB 6 projects must satisfy the height, setback, parking requirements of the jurisdiction’s closest parcel that allows the authorized density.

Prevailing wages for labor are required under SB 6. Unlike AB 2011, labor organizations must be notified in advance to work towards an agreement for a skilled and trained workforce. If two skilled and trained bids are not received, however, a developer can rebid without the requirement. This process would ensure union labor for SB 6 projects if two qualified bids are received from contractors.

Implementation of New Laws

Despite its many pre-approval conditions for compliance, developers may prefer AB 2011 due to its ministerial project approval in a streamlined, CEQA-exempt process, which significantly shortens the time for project approval. Moreover, AB 2011 lacks strict skilled and trained workforce requirements which may enable more flexibility for workforce selection. Although prevailing wages are required, the additional cost of requiring prevailing wages may be off-set by the time and dollar savings provided by the streamlined approval. However, because non-100% affordable housing AB 2011 projects must be located on sites in a qualifying commercial corridor, developers with projects on commercial sites located outside of a qualifying commercial corridor will need to rely on SB 6. SB 6 lacks the approval streamlining and CEQA-exemption of AB 2011 and requires both prevailing wages and a skilled and trained workforce. However, the allowed density for SB 6 projects could be at least 30 dwelling units per acre (if the project is located in a metropolitan jurisdiction), not including any potential density bonus, and SB 6 projects may qualify as development projects under the Housing Accountability Act, which significantly limits the discretion of the local agency to deny compliant projects.

Cities and counties should review their current zoning and development regulations to determine what standards would apply for projects in the jurisdiction’s major commercial areas based on the “closest zone” or “closest site”, as appropriate. Cities and counties may wish to modify objective standards in anticipation of projects utilizing SB 6 and AB 2011 to ensure that the standards in the “closest zones” are appropriate.

Conclusion

Whether looking at these housing laws from a local agency or a private development perspective, the real-world implementation of AB 2011 and SB 6 to proposed development sites and development projects is quite complicated and site-specific. To determine whether your property or project qualifies, you can use Meyers Nave’s AB 2011/SB 6 matrix, linked here, or contact the authors listed above for a more in-depth analysis.