California lawmakers may soon approve a union-backed bill that would extend indefinitely a Covid-era measure that subjects the hospitality industry to hefty fines and litigation if they don’t offer laid-off workers their jobs back in order of seniority, even if the business is under new ownership.
Senate Bill 723 passed the California Senate in May and will be taken up by the state Assembly in September. The proposed law is one of several employer groups and the California Chamber of Commerce describe as “job killers,” because they expose companies to millions of dollars in liability under conditions they describe as vague and difficult to predict.
The bill has the strong support of unions including Local 11 of UNITE-HERE, which organized a hotel worker strike in Los Angeles and is frequently in conflict with non-union hotels and resorts.
California State Sen. Maria Elena Durazo (D-Los Angeles)
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SB 723’s sponsor is Sen. Maria Elena Durazo, who spent much of her career as an organizer and union official at Local 11 and the AFL-CIO before running for office in 2017. She has taken in more than $500,000 in union campaign contributions since then, according to California campaign records, including nearly $40,000 from her old union.
Employers complain the existing law, which is scheduled to sunset at the end of next year, has vague definitions – workers must be offered the “same or similar” position to the one they held before the layoff, for example -- that can lead to statutory violations that rapidly pile up fines. Employers are required to offer jobs to any worker who previously worked for the company or a predecessor at the same location for at least six months and give them five days to accept or reject the offer.
In the highest-profile enforcement action so far, the California Department of Industrial Relations announced $3.3 million in fines against the posh Terranea Resort in Rancho Palos Verdes for failing to offer 53 laid-off employees their jobs back in 2021.
Local 11, locked in a long-term struggle with Terranea over organizing the resort, filed the complaint that led the state to investigate. The Los Angeles Times later reported that a total of five employees weren’t offered their old jobs back and Terranea settled for $1.5 million in July. The state awarded 53 workers an average of $26,500 each and the resort paid a $5,300 civil penalty.
Anthony Caso, a constitutional law attorney and senior legal fellow for the Claremont Institution, described the Terranea citation as “Trial by Press Release,” in an editorial last year. The Labor Commissioner announced the $3.3 million fine before any hearings and without a detailed explanation of how the resort had violated the law.
“What they do is they will issue a fine before any hearing,” Caso said in a telephone interview. “You can contest the citation -- that’s when you get the hearing. But in the meantime the news goes out that a citation has been issued and your business takes a hit to its reputation.”
Even if the Assembly passes the companion to SB 723 it isn’t certain Gov. Gavin Newsom will sign it into law. Newsom vetoed a similar bill in 2020, citing the impact on employers, although he later signed a narrower SB93 that is the right-to-recall law now in effect.
SB723 would delete all references to Covid-19, broadening the law to require employers to offer workers their jobs back after any layoffs for any “public health directive, government shutdown order, lack of business, a reduction in force, or other economic, nondisciplinary reasons.” The law would require employers to maintain records listing the name, job classification, date of hire, address and all communications with laid-off workers for at least three years. Penalties include reinstatement rights, back pay at the average rate from the previous three years before being laid off, and the value of benefits.
The law would apply whether a company changed ownership or moved to a different location, as long as “the enterprise is conducting the same or similar operations.”
The bill is among several “job killers” the Cal Chamber is tracking, including AB524, which would allow employees to sue companies if they are disciplined for missing work due to “caregiver status,” regardless of who they are providing care to.
Another "job killer" bill, SB525, would increase the minimum wage for all workers in the healthcare industry to $25 an hour.