A federation of hotel and motel owners and operators challenged a San Diego ordinance that requires certain building service and hospitality employers to recall workers laid off due to the pandemic before hiring new employees. In San Diego County Lodging Association v. City of San Diego, No. 20-cv-2151 (September 16, 2021), the U.S. District Court for the Southern District of California upheld the ordinance, which as a result remains effective and binding until it sunsets on March 8, 2022.

The Recall Ordinance

In response to the COVID-19 pandemic, on September 8, 2020, the City Council of San Diego adopted an ordinance to assist local service and hospitality employees who were particularly affected by layoffs due to the drastic reduction in travel during the pandemic. The “City of San Diego COVID-19 Building Service and Hotel Worker Recall Ordinance” requires larger commercial property, hotel, and event center employers to offer employees who have been laid off due to the pandemic, or seasonal employees not scheduled for work due to the pandemic, all available job positions for which they are qualified before employing new workers. A laid-off employee is “qualified” for a position if the employee previously “held the same or similar position” or “is or can be qualified for the position with the same training that would be provided to a new employee hired into that position.”

The Challenge to the Ordinance

Two months after the city adopted the ordinance, the San Diego County Lodging Association (SDCLA) challenged its legality in a lawsuit against the City of San Diego. The SDCLA filed an early motion for summary judgment to bring the issues straight to a head. It advanced two legal theories: (1) “the Ordinance violates the Contracts Clauses of the United States Constitution and California Constitution” because it “replac[es] the right of hotel owners to terminate an employee ‘at will’ with ‘the option of suspending an employment contract’” and (2) “the Ordinance is preempted by section 2922 of the California Labor Code, which codifies at-will employment,” because the ordinance subjects employers to liability despite acting in accordance with that code section.

The court did not find either argument persuasive. Judge William Q. Hayes ruled that the ordinance was not unconstitutional because it was enacted for and appropriately addressed a public purpose: to ensure impacted employees “enjoy a right to return to their previous jobs when business activity resumes in order to aid economic recovery.” Judge Hayes further found that the California Labor Code did not preempt the ordinance because the ordinance is not at odds with section 2292 and “the state legislature has expressly stated its intent not to preempt local recall measures like the Ordinance.”

Key Takeaways

The court denied the SDCLA’s motion for summary judgment in full, meaning that commercial property, hotel, and event center employers remain subject to the recall requirements of the ordinance. Although the SDCLA’s lawsuit objecting to the ordinance can continue in court, the summary judgment ruling casts doubt that the SDCLA will ultimately prevail. Absent a successful legal challenge, the ordinance will remain effective at least until it sunsets on March 8, 2022.

Ogletree Deakins will continue to monitor and report on developments with respect to the COVID-19 pandemic and will post updates in the firm’s Coronavirus (COVID-19) Resource Center as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.