Federal

Paycheck Fairness Act Fails Key Vote (S. 3772)

During the recent post-election "lame duck" session, the Senate reconsidered the Paycheck Fairness Act (S. 3772) but was unable to obtain the 60 votes necessary to invoke cloture and vote on the bill. This bill would have amended the Equal Pay Act (EPA) and the Fair Labor Standards Act (FLSA) to provide further tools regarding gender-based wage discrimination. For instance, it would have eliminated the current "any factor other than sex" defense to explain wage differentials, and instead required employers to affirmatively demonstrate any differential resulted from a bona fide factor other than sex, and that the bona fide factor was a business necessity. It would also have removed the caps on compensatory and punitive damages for EPA violations, and made it easier for plaintiffs to maintain class action suits. In light of the recent election results, it appears this bill is stalled and will not be enacted this year or in 2011.

AGENCY

Federal

EEOC Issues Final Rule Concerning Title II of GINA

Generally speaking, Title II of the Genetic Information Nondiscrimination Act (GINA) prohibits employers from discriminating based on genetic information, restricts employer acquisition of genetic information, and limits the disclosure of genetic information. Although Title II took effect in November 2009, the Equal Employment Opportunity Commission has just recently issued its much anticipated Final Rule implementing Title II. This Final Rule and accompanying regulations officially take effect on January 11, 2011 and, amongst other things, provides considerable clarification of GINA's definitions (e.g., "genetic test," "employee") and the circumstances under which employers may lawfully acquire "genetic information."

As mentioned, under Title II "covered entities" (including employers) may not "request, require or purchase" genetic information of an individual or family member except in very narrow statutorily-enumerated circumstances. Notably, the Final Rule deleted the requirement that employers "deliberately" obtain genetic information for a violation to occur; rather, the Final Rule specifies that "request" includes "conducting an Internet search on an individual in a way that is likely to result in a covered entity obtaining genetic information; actively listening to third-party conversations or searching an individual's personal effects for the purpose of obtaining genetic information; and making requests for information about an individual's current health status in a way that is likely to result in a covered entity obtaining genetic information."

The Final Rule also contains considerable discussion about several exceptions to the general prohibition on an employer's acquisition of genetic information, including: (1) "inadvertently acquired" information; (2) information obtained through commercially and publicly available sources; (3) information obtained pursuant to a leave request; (4) voluntary wellness program-related disclosures; and (5) information obtained through workplace monitoring of toxic substance exposure.

For instance, Title II's general prohibition on acquiring genetic information does not apply where a covered entity "inadvertently" acquires this information (e.g., someone accidentally sends to the employer or the employer unintentionally uncovers this information.) The Final Rule provides considerable guidance on how this narrow exception applies in the medical examination context, and essentially creates a duty on employers to ensure there is no inadvertent disclosure during such examinations, but also provided a specific "safe harbor" disclaimer for employers to use in such situations.

Specifically, the Final Rule states an employer who acquires genetic information in response to a lawful request for medical information cannot claim inadvertence unless the covered entity specifically directs the individual or medical provider (in writing or verbally) not to provide genetic information. In this regard, an employer who receives genetic information despite the verbal or written warning may invoke the inadvertent disclosure exception but an employer who fails to provide this instruction cannot invoke this exception even if the disclosure to the employer was inadvertent unless the employer can demonstrate its initial request was not likely to result in the employer obtaining genetic information.

The Final Rule also sets forth (in section 1635.8(b)(1)(i)(b)) a specific "safe harbor" provision that covered entities may include in their medical information request that will ensure any subsequent disclosure of genetic information despite this provision will be "deemed inadvertent." The EEOC-provided sample "safe harbor" provision is as follows:

The Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits employers and other entities covered by GINA Title II from requesting or requiring genetic information of an individual or family member of the individual, except as specifically provided by the law. To comply with this law, we are asking that you not provide any genetic information when responding to this request for medical information. "Genetic information" as defined by GINA, includes an individual's family medical history, the results of an individual's or family member's genetic tests, the fact that an individual or an individual's family members sought or received genetic services, and genetic information of a fetus carried by an individual or an individual's family member or an embryo lawfully held by an individual or family member receiving assistive reproductive services.

The Final Rule also provides clarification, and numerous examples, about another form of "inadvertent disclosure" — the so-called "water cooler problem" — in which a manager accidentally elicits or overhears disclosures about "genetic information" of an employee or family member. These examples specify that obtaining "genetic information" in response to questions such as "How are you?" or "How is your son feeling today?" will not violate Title II's prohibition on acquiring genetic information. However, this variant on the "inadvertent" acquisition exception will not apply if the employer "follows up a question concerning a family member's general health with questions that are probing in nature" such as whether other family members have the condition or if the individual has been tested for the condition.

The Final Rule also clarified the so-called "commercially and publicly available information" exception to the prohibition on acquiring genetic information. The Rule notes that the prohibition on acquisition does not apply to information publicly available on the internet, including through social networking sites (e.g., Facebook, MySpace, etc.) unless the media source requires permission to access and this permission has not voluntarily been provided. In other words, an employer cannot surreptitiously access an employee's password-protected Facebook profile and then invoke the "publicly available" exception. Similarly, since the "publicly available" exception is another variant of the "inadvertent" acquisition exception, employers cannot rely on it if they accessed internet sites specifically looking for genetic information about an individual.

The Final Rule also sets forth circumstances under which genetic information may be obtained as part of a "voluntary wellness program," including as part of a "health risk assessment." Amongst other things, the Rule sheds light on what is required to ensure the disclosure is actually "voluntary." For instance, the Rule notes that a covered entity may offer an inducement for completing a health risk assessment that includes questions about family medical history or other genetic information provided the covered entity specifically identifies these questions and makes clear that the individual need not answer these particular questions to receive the inducement. In effect, the Rule approves the use of a so-called "bifurcated" health risk assessment.

The Final Rule also provides some guidelines concerning an employer's confidentiality obligations concerning the storing of genetic information. The Rule notes that, as under the ADA, employers must keep records reflecting genetic information in separate files and treat them confidentially. However, while employers must maintain confidentiality of any such information regardless of when obtained, it need not physically remove such genetic information from a pre-existing file obtained before November 2009 (Title II's effective date).

These are just some of the numerous items discussed in the Final Rule and employers should consider reviewing the entire Final Rule for additional questions regarding these and other items. The complete text of the Final Rule is available at www.federalregister.gov/articles/2010/11/09/2010-28011/regulatoins-under-the-genetic-information-nondiscrimination-act-of-2008. The EEOC has also posted a document entitled "Questions and Answers for Small Businesses: EEOC Final Rule on Title II of the Genetic Information Nondiscrimination Act of 2008" at www.eeoc.gov/laws/regulations/gina_qanda_smallbus.cfm.

Other practical steps employers should consider moving forward include (1) reviewing and revising their policies (especially EEO policies) to ensure genetic harassment and discrimination are prohibited; (2) obtaining and posting the new EEOC-provided poster discussing GINA and its protections; (3) reviewing file storage and document retention policies and procedures to ensure genetic information is not obtained unless authorized, that it is properly stored to maintain confidentiality, and to ensure it is not improperly disclosed (including during potential subsequent litigation); (4) updating forms to avoid improperly requesting genetic information and to include the 'safe harbor' provision for medical-related examinations; and (5) training supervisors and human resources employees about GINA-related compliance.

JUDICIAL

California

California Supreme Court Clarifies Three-Year Statute of Limitations Applies for All "Waiting Time" Penalty Claims

Labor Code sections 201 and 202 provide that when an employee is terminated or resigns his or her final wages are generally due and immediately payable. Labor Code section 203 provides that if an employer willfully fails to timely pay final wages, "the wages of the employee shall continue as a penalty from the due date" up to a maximum of 30 days. While it appeared clear the three-year statute of limitations to pursue wage-related claims applied to actions seeking both "final wages" and these so-called "waiting time" penalties, an open question remained regarding the statute of limitations when employees sought only to recover the "waiting time" penalty portion (i.e., in instances where the final wages had been paid, even belatedly). Specifically, it was unclear whether "waiting time" penalty-only cases would be governed by the three-year statute for wage claims generally, or the one-year period in Code of Civil Procedure section 340 for penalty provisions.

In a unanimous decision, the California Supreme Court held that the three-year limitations period for wage-related claims applied to all waiting time penalty claims, regardless of whether the employee was also seeking unpaid final wages. The Court relied heavily upon the statutory language in section 203(b) which provides "[s]uit may be filed for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise." The Court concluded this language reflected a legislative intent for only a single limitations period to apply for suits for unpaid wages and penalties. The Court also reasoned that a contrary result would create confusion with multiple different limitations periods, and potentially permit employers to "game the system" and control what limitations period governs their employees' section 203 claims.

However, the Court also held that section 203 "waiting time" penalties are not available as "restitution" under Business and Professions Code section 17200 (Unfair Competition law). The Court reasoned that these "waiting time" penalties are not intended to compensate employees for work performed, but are a penalty intended to encourage employers to pay final wages on time and punish those who do not. Accordingly, the Court held that while unpaid overtime wages are potentially recoverable under the Unfair Competition law because they represent the employee's property (i.e., wages they have earned), waiting time penalties are not recoverable under the Unfair Competition Law because the employees have no ownership interest in these penalties.

In effect, the Court held a three-year limitations period applied in all actions seeking to recover waiting time penalties, but it declined to apply the four-year statute of limitations that would have applied if the employee could also seek recovery under the Unfair Competition Law. (Pineda v. Bank of America N.A.(S170758 Nov. 18, 2010) ___ Cal.4th ___, 2010 Cal.LEXIS 11678.)

Cashiers Permitted to Sue under PAGA for Retailer's Failure to Provide "Suitable Seating"

Section 14 in several of California's Industrial Wage Orders provides that "all working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats." In this case, a retail cashier sued under California's Private Attorneys General Act (PAGA), Labor Code Section 2699(f), which permits private plaintiffs to sue for violations of certain listed statutes. Among those statutes is Labor Code Section 1198, which provides, in part that "[t]he employment of any employee…under conditions of labor prohibited by the order is unlawful." In effect, the cashier argued a violation of the Wage Order's "suitable seating" requirement violated Labor Code section 1198 entitling the employee to sue under PAGA to recover the statutorily-enumerated penalties (up to $200 per employee per pay period for each violation).

The employer argued a violation of this Wage Order section would not violate Labor Code Section 1198 because the seat requirement was not a condition of labor "prohibited" by the Wage Order. The employer also argued PAGA's penalties were not available because the Wage Order had its own internal penalty provision, applying only to employees who were "underpaid," which this employee was not. The trial court dismissed the cashier's complaint, but the court of appeals reversed, holding that Labor Code Section 1198 applies to any violation by an employer of the "standard conditions of labor" enumerated in the Wage Orders (in this case, the affirmative duty to provide "suitable seats.") The appellate court also held the Wage Order's penalty provision for "underpaid" employees did not preclude an employee from pursuing PAGA's statutory penalties for other violations of the Wage Order, including the failure to provide suitable seats.

In short, the court concluded the employees could proceed with their claim that a Wage Order violation violated Labor Code section 1198, thus entitling them to PAGA's penalty provisions. (Bright v. 99 Cent Only Stores (2010) ___ Cal.App.4th ___, 2010 Cal.App.LEXIS 1935.)

(NOTE: A different division of the same appellate district is scheduled to hear oral argument on the same issue in a different matter in early December and other courts are also considering this issue. Accordingly, it is foreseeable that these courts will issue conflicting results and that the California Supreme Court may eventually weigh in on this issue.)

Plaintiff's Attorney Not Permitted to Attend Mental Examination

California's Discovery Act permits a mental examination of a plaintiff in employment cases where the plaintiff alleges severe or ongoing emotional distress as a result of the employer's conduct. In this FEHA sexual harassment case, the court ordered that the plaintiff's attorney would not be permitted to attend the psychiatric examination of his client. The court noted that while California law permits the audio taping of this examination, the attorney's presence would potentially unduly interfere with the examination and there was no evidence the psychiatrist would act inappropriately. (Toyota Motor Sales v. Sup. Ct. (ex rel Braun) ___ Cal.App.4th___, 2010 Cal.App.LEXIS 1926.)

Federal

Employee Who Failed to Follow Re-Hire Procedures Outlined in CBA Precluded from Suing Employer for Not Re-Hiring Him

An employee sued under the Americans with Disabilities Act (ADA) alleging his employer failed to accommodate his disability, laid him off because of his disability, and refused to rehire him because of his disability. The federal district court dismissed the accommodation and termination claims on the grounds the employee had failed to file a charge with the Equal Employment Opportunity Commission (EEOC) within 30 days after receiving a right-to-sue letter from the California Department of Fair Employment and Housing (DFEH). The Ninth Circuit Court of Appeals reversed, holding that once an employee has received a DFEH right-to-sue letter that would entitle him to an EEOC right-to-sue notice, the employee is not required to also file a claim with the EEOC to pursue his ADA claims. The court concluded the "work share" agreement between the two agencies makes it unnecessary to file a claim with both agencies.

However, the court concluded the employee could not maintain his "failure to re-hire" claim because he failed to comply with the collective bargaining agreement's (CBA) procedures for re-hire. In this case, the CBA specified that employees must regularly attend "roll call" meetings to move to the top of the union's out-of-work list, but Plaintiff admitted he had not attended due primarily to logistical issues. The court reaffirmed that the employer did not have an affirmative obligation to seek plaintiff out for rehire, and could hold him to the same requirements as other employees seeking re-hire. (Stiefel v. Bechtel Corp.(9^th Cir. 2010) ___ F.3d ___, 2010 U.S.App.LEXIS 22670.)

Employer Did Not Violate FLSA in Seeking Repayment of Training Costs Following Employee's Early Separation

An employee who resigned her employment after only two years challenged the employer's policy of requiring employees who departed before five years of employment to repay a pro rata share of previously-provided training costs. In this case, the employer immediately provided the employee her total final paycheck (approximately $2,400 representing 60 hours work), but withheld the employee's accrued unused vacation and compensatory time off and also sent a demand for the remaining pro-rata portion of the previously-provided training expenses. The federal court rejected the employee's claim the employer violated the Fair Labor Standards Act (FLSA) by deducting the vacation and compensatory time-off and in insisting on repayment of the other training expenses.

The federal court concluded the employer had not violated the FLSA's requirement that employees receive the federal minimum wage each workweek because the employer had provided the employee with a final paycheck in an amount exceeding the federal minimum wage for each hour worked. In this regard, the court noted the employer would have violated the FLSA had the employer withheld the entire final paycheck in satisfaction of a debt, but this employer had still paid the employee approximately $40 per hour in the final paycheck totaling approximately $2,400 for 60 hours worked. The court also rejected the employee's contention the repayment provision constituted an impermissible "kickback," reasoning the repayment agreement was akin to an employer-provided loan the employee agreed to repay. The court concluded that so long as the employer paid the employee at least the statutory minimum wage, it could collect the remaining training costs just like any other creditor. (Gordon v. City of Oakland (9^th Cir. 2010) ___ F.3d __, 2010 U.S.App.LEXIS 23803.)