California

The 2013 legislative session is increasingly coming into focus now that the deadline for new bills to be introduced has expired.   The next significant deadline will be the May 31st deadline for bills to clear the legislative chamber in which they were originally introduced.  For now, we are continuing to monitor the following employment-related bills:

Annual Minimum Wage Adjustments Proposed (AB 10)

This bill would increase California’s minimum wage by specified amounts for three consecutive years beginning in 2014, with annual adjustments tied to inflation thereafter.  Specifically, this bill would increase California’s minimum wage to $8.25 beginning on January 1, 2014, to at least $8.75 in 2015, and to at least $9.25 in 2016.  This bill would also provide for annual adjustments beginning in 2017 to maintain employee purchasing power, calculated by using the California Consumer Price Index.  The bill would also specifically prohibit the Industrial Welfare Commission from adjusting the minimum wage downward in years with negative inflation levels.

Similar versions of this bill are introduced annually and have repeatedly stalled in recent years (ex. AB 196 [2012]), but the very early introduction of this bill suggests it may be a legislative priority.  This fact, coupled with minimum wage increases in several California municipalities and in numerous states and the President’s call for the national minimum wage to increase to $9.00, suggests a minimum wage increase is likely in 2013.

Status: This bill has passed the Labor and Employment Committee. 

Labor Protections Proposed for Domestic Workers (AB 241)

Titled the Domestic Worker Bill of Rights, this bill would specially regulate the wages, hours and working conditions of “domestic work employees.”  Domestic work employees would be defined as individuals providing services related to the care of persons in private households or maintenance of private households or their premises, and would include childcare providers, caregivers, housekeepers, housecleaners and other household occupations (but does not include family members of “domestic work employers” or babysitters under the age of 18 or babysitters over 18 providing “irregular and intermittent” service [i.e., less than six hours a week].)  The bill also specifies that domestic work employees would be entitled to overtime under Labor Code section 510, with certain exceptions, and establishes new meal requirements for domestic work employees working more than five hours in a day (including the ability to prepare and eat their own meals without charge/deduction using the employer’s kitchen).  The bill would also establish new “paid days of rest” requirements for domestic work employees after one year of service with the same employer.

For live-in employees, the bill also enumerates new regulations concerning sleep periods, and sets minimum standards for these employees’ on-site lodging.  For personal attendants accompanying disabled individuals, it further defines “compensable hours worked.”  

The bill would also expressly apply Industrial Welfare Commission Wage Order No. 15-2001 to domestic work employees, except where this new bill provides more specific protections, in which case it would govern.  The bill would also require the Division of Labor Standards Enforcement to enforce these provisions, and provide domestic work employees a private right of action to enforce these provisions.

This bill would also remove the household domestic services exception from Workers Compensation, and require all domestic work employers (as defined) to obtain Workers’ Compensation insurance for their domestic services employees.

Last year, the Legislature passed but the Governor vetoed AB 889 which would have required the Department of Industrial Relations to adopt by January 2014 regulations concerning the working conditions of “domestic work employees.”  The Governor’s veto message cited a concern about adopting extensive new regulations concurrently with the DIR’s plan to conduct studies regarding the regulations impact, and he cited a preference for the studies to be conducted first. 

Status: This bill is pending in the Labor and Employment Committee.

Bill to Clarify that Employees, Not Employers, Get to Decide Whether the Employee Will Obtain a Copy or Inspect Payroll Records (AB 155)

Labor Code section 226 requires employers to provide itemized wage statements containing specific statutorily-enumerated items, to maintain copies of these statements for three years at specific locations, and to permit current or former employees to inspect or obtain a copy of these payroll records. This bill would slightly amend Labor Code section 226 to specify that the employee, and not the employer, makes the election whether they will inspect or copy, or receive a copy of, or any combination thereof, regarding his or her employment records.  This bill is intended to legislatively overrule an unpublished decision that suggested an employer could, upon receiving an inspection or copying request, decide which of the two mechanisms it wanted to allow.  This bill would make clear that only the employee can make this election, in effect meaning an employer could not refuse to provide copies simply because it decides to allow inspection instead.

This bill appears likely to pass and to be signed into law, although it seems unlikely to impact many employers, most of whom probably understood they could be compelled to provide copies of these records through a request under section 226.

Status: This bill overwhelmingly passed the Labor and Employment Committee but recently was placed on inactive status.

Incentive for Early Resolution of DLSE Claims Proposed (AB 228)

Presently, California’s Labor Commissioner and the Director of the Department of Industrial Relations are authorized to take assignments of certain claims for enforcement, including claims for lost wages and occupational safety violations.  This bill would add Labor Code sections 62.1 and 96.1 to specify that the DIR Director and the Labor Commissioner, or their deputies, may waive any penalties against an employer for a qualified claim if this claim is the first of its type against the employer, and the claim is resolved within 30 days of the Commissioner’s or DIR Director’s issuance to the employer of notice of the claim and the potential waiver of penalties if resolved within 30 days.

On April 15, 2013, this bill was amended to specify that these new Labor Code sections would not apply to violations of minimum wage requirements.

Status: This bill is pending in the Labor and Employment Committee.  A hearing on the bill was recently cancelled.

“Familial Status” Protection again Proposed for FEHA (SB 404)

This bill would include “familial status” to the list of protected categories under FEHA for which the right to seek, obtain, and hold employment cannot be denied.  If enacted, “familial status” would be defined as “an individual who provides medical or supervisory care to a family member.”  “Family member” would also be broadly defined to include a child, parent, spouse, domestic partner, parent-in-law, sibling, grandparent or grandchild, as defined in specified statutes.  The bill’s author states this bill is intended to correct a discrepancy since the FEHA presently prohibits “familial status” discrimination in housing, but not employment, and to prevent discrimination against employees for family caregiving responsibilities unrelated to work. 

This bill is similar to several prior versions that either failed passage (AB 1001 [in 2009] and AB 1999 [in 2012) or that passed but were vetoed (AB 836 [vetoed by then-Governor Schwarzenegger]).

Status: This bill was recently put in the appropriations committee’s “suspense file” indicating the bill may not advance further this legislative session. 

FEHA Sexual Harassment need not be Motivated by Sexual Desire (SB 292)

California’s Fair Employment and Housing Act presently precludes harassment based on certain statutorily-enumerated bases, including “sex.”  Government Code section 12940(J)(4)(C) presently defines “harassment because of sex” to include “sexual harassment, gender harassment, and harassment based on pregnancy, childbirth or related medical conditions.”  Following a recent proposed amendment, this bill would modify this definition to also specify that “sexually harassing conduct need not be motivated by sexual desire.” (When originally introduced, this bill proposed to expand this definition to include threats of sexual violence and to specify that an act is sexual harassment regardless of the sexual orientation, sexual desire or intent of the harasser.  The originally-proposed expanding language has been omitted but it is not yet clear why).

Status: This bill passed the senate unanimously and is currently before the assembly for consideration.

Additional Remedies Proposed for Employees after Employer Prevails on Mixed Motive Affirmative Defense (SB 655)

In February 2013, the California Supreme Court generally upheld an employer’s ability to assert the so-called “mixed motive” affirmative defense, whereby the employer argues that even if an employee’s protected classification partially motivated the challenged decision, the employer would have made the same decision for legitimate, non-discriminatory reasons.  (Harris v. City of Santa Monica (2013) 56 Cal.4th  203.)  The Court held this would not provide a complete defense against liability under FEHA, but would preclude certain types of remedies including economic (e.g., lost wages) and non-economic damages (e.g. emotional distress). 

This bill responds to Harris and would amend FEHA to increase the remedies available to an employee despite the employer’s successful assertion of the “mixed motive” defense.  Specifically, this bill would include a new provision (Government Code section 12940(a)(6), stating that even if an employer proves the mixed motive defense, the employee may still prevail on their unlawful practice claim by demonstrating the protected characteristic was a “substantial factor” in the challenged decision.  The bill defines substantial factor as “a reasonable person would conclude the factor contributed to the harm” but must be “more than a remote or trivial factor.” 

If the employee meets this standard, they would be entitled to the remedies contained in newly proposed section 12965(b)(2), including a statutory penalty of $25,000, to be awarded directly to the employee.  However, the employee would not be entitled to back pay or reinstatement. This new remedies provision would also authorize the court to order declaratory or injunctive relief that would “effectuate the purpose of this part.”  An earlier version specified this could include requiring the employer conduct FEHA-related training for all employees, supervisors and management, but that specific requirement was omitted in a recent amendment.  This new subsection also retains the previously applicable ability of the court to award a prevailing party reasonable attorney’s fees and costs, including expert witness fees.

Status: As originally introduced, this bill applied solely to medical fraud, but was very-recently substantially amended (essentially completely gutted) to respond to Harris.  It is currently pending in the Judiciary Committee.

AGENCY

USCIS Introduces New I-9 Form

In March 2013 the U.S. Citizenship and Immigration Services published a revised Employment Eligibility Verification Form I-9.  All employers are required to complete a Form I-9 for each employee hired in the United States. Improvements to Form I-9 include new fields, reformatting to reduce errors, and clearer instructions to both employees and employers.

The new form may be accessed here: http://www.uscis.gov/files/form/i-9.pdf.

As of May 7, 2013, all employers should be using the new I-9 form.

JUDICIAL

FEDERAL

Employee’s Collective Action Under FLSA Dismissed After Ignoring 
Rule 68 Offer That Satisfied Her Claim

In a 5-4 decision, the United States Supreme Court ruled that a collective action for unpaid wages brought under the Fair Labor Standards Act (FLSA) was properly dismissed when the individual plaintiff’s claim became moot after the employer had offered to make her whole.
The employer had a practice of automatically deducting 30 minutes of time per shift for meal breaks for certain employees, regardless of whether the affected employees performed compensable duties during that time.  Plaintiff, a nurse for Genesis, sued claiming this practice violated the FLSA.  Plaintiff brought this case on her behalf and, as allowed under the FLSA, on behalf of all “other employees similarly situated.”  This type of action is known as a “collective action.”

When the employer answered the complaint, it simultaneously served on plaintiff an offer of judgment pursuant to Federal Rule of Civil Procedure 68, which included $7,500 for the alleged unpaid wages and any such reasonable attorneys’ fees and costs “as the Court may determine.”  The Rule 68 offer stipulated that it would be deemed withdrawn if the plaintiff did not accept it within 10 days.  The plaintiff did not accept the offer.  The hospital moved for dismissal on the grounds of lack of subject matter jurisdiction since the plaintiff no longer had a personal stake in the outcome of the case as she was offered complete relief of her claims.  The district court granted the motion to dismiss finding that the Rule 68 offer of judgment mooted the plaintiff’s claim.

The court of appeals reversed, finding that the employer’s strategic offer of judgment to “pick off” the named plaintiff should not short circuit the processing of a collective action, and that the case should be remanded to allow the plaintiff to seek “conditional certification” of those similarly harmed by the employer.

The Supreme Court disagreed with the court of appeals’ ruling and found that the district court properly dismissed the entire collective action when the only named plaintiff no longer had a stake in the action.   In reaching this ruling, the Supreme Court expressly noted that it was not resolving the split in the circuits regarding whether an unaccepted Rule 68 offer moots an FLSA collective action claim.   The parties agreed in the case before the Court that the Rule 68 offer made in this case mooted plaintiff’s FSLA claim.  In reaching its decision that the lack of a claim by plaintiff, rendered the collective action moot, the Court distinguished the cases involving class certification and Rule 68 offers, noting that Rule 23 class actions are “fundamentally different from collective actions under the FLSA.”  As the Court noted, a claim for unpaid wages “remains live” until it is settled, judicially resolved, or barred by a statute of limitations.  The lack of a named plaintiff does not prevent those who were in the collective action from bringing their own suit. 

The strongly worded dissent warns those who might rejoice in the ruling of the majority and think that they have found a mighty sword to defeat collective actions to keep in mind, “[t]he situation [the decision] addresses should never rise again.”  The dissent focuses on the underlying premise of this decision that an unaccepted Rule 68 offer renders a plaintiff’s claim moot.  “As every first-year law student learns, the recipient’s rejection of an offer ‘leaves the matter as if no offer had ever been made.’”  Thus, the plaintiff had the same interest in the outcome of a case when she filed it that she did when she did not accept the Rule 68 offer.  The dissent finds the lower court erred when it mooted plaintiff’s claim upon her rejection of the Rule 68 offer and sent her home “empty-handed.” 

Genesis Healthcare Corporation, et al. v. Symczyk (2013) __U.S.__, 133 S.Ct. 1523.

Inappropriate Remarks by Supervisor Insufficient to Sustain Harassment Cause of Action but Retaliation Claim Could Proceed

A five-month employee pursued claims for sexual harassment and retaliation based on inappropriate remarks by a co-worker, with whom she worked once a week for about three months, inappropriate comments by a supervisor on four occasions (including a comment regarding plaintiff’s breast size), and regular comments by her supervisor during her last couple months of employment that she should work wearing a French maid’s costume, or similar remarks.  The plaintiff regularly complained to her manager about the remarks.  The supervisor also used curse words while reprimanding her. 

Plaintiff went to her manager that day to complain of this interaction with the supervisor.  The manager said that he “was tired of listening to all this and that obviously [she] had a problem getting along with [her supervisor] and that it would be best if [she] got [her] personal items and left.”  Plaintiff then left the workplace.  Plaintiff maintained she was fired and the company maintained she resigned.

The lower court granted the employer summary judgment on plaintiff’s claims of sexual harassment and retaliation.  It found that plaintiff’s allegations of “harassment” were not sufficiently severe or pervasive to alter the conditions of her employment.   With respect to the retaliation claim, the lower court read plaintiff’s deposition testimony as admitting that she was fired only in retaliation for her complaints on the last day of her employment.  The lower court found these complaints, relating to a subcontractor’s social event, did not violate Title VII and, therefore, could not support a claim of retaliation.

The Court of Appeals for the Ninth Circuit agreed with the lower court regarding the claim of harassment, but disagreed on the retaliation claim.  With respect to the harassment claim, the court of appeals noted that the actions complained of were not severe and the harassment was not of a physical nature and plaintiff did not claim that her work suffered because of it.  The appellate court overturned the dismissal of the retaliation claim, finding plaintiff’s affirmation in her deposition that she was terminated for her complaints on July 29 was general and ambiguous and did not “compel a conclusion” that she was solely fired for her July 29 complaints.  The court also overruled the lower court on its alternative ruling that there was no evidence that the employer’s legitimate reason for terminating her was pretextual.   The court of appeal found that the employer did not offer any reason for the termination and, in fact, maintained that she quit.  Moreover, even if a legitimate reason was raised for her dismissal, there were inferences which could support a finding of pretext as the plaintiff did not have any record of insubordination until she complained of sexual harassment.

This case provides employers with a couple of good reminders.  First, beware the retaliation claim.  Employers may have good processes in place to address complaints of harassment in the work place, but that good work will lose its value if supervisors make rash decisions in response to employee complaints.  Second, employers cannot speak out of both sides of their mouths.  Either an employee is discharged for a specific, articulable reason or an employee quits despite attempts by the employer to properly address his or her complaints.

Westendorf v. West Coast Contractors of Nevada, Inc. (9th Cir. 2013) 712 F.3d 417.

Court of Appeals Strikes Down NLRB Poster

Last year the National Labor Relations Board (NLRB) promulgated a rule that would require most private sector employers to display an 11 x 17” poster notifying employees of their rights under the National Labor Relations Act, including their right to form or join a union.  A district court enjoined the rule in April 2012 pending the outcome of litigation challenging the rule.

On May 7, 2013 the U.S. Court of Appeals for the D.C. Circuit struck down the rule requiring display of the poster.  The court held the rule would violate employers’ right not to speak because the failure to post a notice constituted an unfair labor practice.

National Association of Manufacturers, et. al. v. NLRB, 2013 U.S. App. Lexis 9231.

Note: The U.S. District Court for the District of South Carolina also found that the NLRB lacked authority to promulgate the rule in Chamber of Commerce of the U.S. v. NLRB (D.S.C. 2012) 856 F.Supp.2d 778.

Two Courts Deny Class Certification Following Dukes and Brinker

Both the Ninth Circuit Court of Appeals and the California court of appeal denied class certification in separate wage and hour class actions, further exemplifying the recent difficulties in obtaining class certification followingWal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011) and Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1021.

On remand from the United States Supreme Court, the Ninth Circuit Court of Appeals overturned its earlier decision affirming class certification on a putative class of non-exempt employees at a newspaper facility for unpaid overtime and meal and rest break violations. 

The ninth circuit reversed and remanded the district court’s certification of plaintiff’s Labor Code violations to reconsider the issue of commonality under Federal Rule 23(a)(2) and whether class certification for monetary damages was appropriate under Federal Rule 23(b)(3).  The court determined that simply because an employer applies its internal exemption policies uniformly, common questions do not necessarily predominate over individual issues.  The court remanded the case back to the district court to consider the other factors relevant to whether common questions predominate. 

The ninth circuit also reversed its earlier decision affirming class certification of monetary claims under Rule 23(b)(2).  Based on the reasoning of Dukes, the court held that class certification for monetary claims were not cognizable under Rule 23(b)(2), and since no named plaintiffs were current employees, Plaintiffs did not have standing to seek injunctive relief on behalf of the class. 

Wang v. Chinese Daily News, Inc. (9th Cir. 2013) ___F.2d___.  The state appellate court denied class certification in Dailey v. Sears, discussed below.

CALIFORNIA

The California court of appeal denied certification in a wage and hour case where plaintiffs sought to certify a proposed class of Managers and Assistant Store Managers of a tire and automotive repair center.  Plaintiffs claimed the employer misclassified these managers as non-exempt employees.  Plaintiffs claimed the employer implemented uniform policies and practices that had the effect of requiring the proposed class members to work at least 50 hours per week and spend the majority of their time performing non-exempt work. 

The trial court denied class certification, finding that evaluation of how class members actually spent their time requires individualized evidence and cannot be determined on a classwide basis.  The court of appeals affirmed, holding that individual issues over how class members actually spent their time predominated over common issues.  The employer successfully showed that each store staffed and directed work to its managers and assistant store managers differently, and whether these employees had to spend more than 50 percent of their time doing non-exempt work depended on the day, week, and store.  The court noted that day-to-day tasks of managers depended greatly on a number of factors, ranging from store location to particular management styles and preferences.  The court also rejected plaintiff’s efforts to suggest they could prove liability through the use of statistical sampling, as the court held this was not a substitute for proving commonality at the class certification stage. 

Dailey v. Sears (2013) 214 Cal.4th 974.

Employee’s Right to Privacy May be Violated by Word-of-Mouth, Not Just Written Disclosure

The California court of appeal held that the common law right to privacy may be violated by word-of-mouth, not just written disclosure. 

In this case, plaintiff suffered from bipolar disorder, which required her to take a leave of absence.  Plaintiff alleged that during her leave of absence, management orally informed her co-workers of her bipolar disorder.  As a result, coworkers avoided her and shunned her.  Plaintiff filed suit, including a claim for invasion of privacy.  The trial court granted summary judgment to the employer, holding that the right to privacy can only be violated by written, not oral communication.  The appellate court reversed, holding that a common law invasion of privacy claim may exist where the employer publicly discloses private facts, even where the disclosure is by word of mouth. 

The court also held that a claim for invasion of California’s constitutional right to privacy is different than a common law claim for invasion of privacy.  The constitutional right to privacy focuses on institutional record-keeping, and may be violated where a private record that was supposed to be kept confidential is disclosed.  The common law right to privacy, on the other hand, is violated by a public disclosure of private facts, where such disclosure is offensive or objectionable to a reasonable person.  

Ignat v. Yum! Brands, Inc. (2013) 214 Cal.App.4th 808.

“Me-Too” Evidence Limited to Similarly Situated Individuals

California courts have previously permitted employees to present evidence of discrimination and harassment experienced by other employees in the same protected category.  This evidence, commonly referred to as “me-too” evidence, is used to suggest a discriminatory animus on the part of the employer. 

Plaintiff, who was of Asian descent, alleged discrimination on the basis of his race/national origin.  Plaintiff sought to introduce evidence at trial that his employer favored employees of Arab descent.  The trial court excluded such evidence as irrelevant and unduly prejudicial.  The appellate court affirmed, holding that plaintiff was not entitled to present evidence of discrimination against employees outside of his protected class to show discrimination or harassment against him.   The court recognized the limits of “me-too” evidence, and limited the admissibility of such evidence to similarly situated individuals. 

The court also held that if an employer is the prevailing party, the employer is entitled to ordinary litigation costs, regardless of whether the lawsuit was frivolous, groundless, or unreasonable.  The court held that costs are mandatory, while attorneys’ fees are within the court’s discretion.  
Hatai v. Department of Transportation (2013) 214 Cal.App.4th 1287.

Statutory Scheme Makes County and Public Authority Joint Employer of In Home Services Support Worker

Guerrero v. Sonoma County Superior Court is a unique and highly specific “joint employer” case revolving around the government funded payment of the wages of an in-home care provider.  Central to the case is a complicated and comprehensive scheme of federal and California statutes, which were implemented in Sonoma County through enactment of local ordinances.  The statutes establish responsibilities of both Sonoma County and the Sonoma County In-Home Support Services Public Authority (Public Authority) to provide and pay for in-home care of qualified disabled recipients.

Under this rubric, Sonoma County and the Public Authority authorized an individual, Allejandra Buenrostro to receive in-home support services paid for by the state.  Buenrostro retained Plaintiff Guerrero to provide those in-home services, but Plaintiff was not paid for her three months of service.  Plaintiff sued Buenrostro, Sonoma County and the Public Authority, under the FLSA and California Labor Code.

At the trial court, Sonoma County and the Public Authority won a demurrer on the grounds they were not Geurrero’s employers.

Applying Bonnette v. California Health and Welfare Agency (9th Cir. 1983) 704 F.2d 1465, and Martinez v. Combs, 49 Cal.4th 35 (2010), and based on the statutory and local ordinance implementation scheme, the court of appeal reversed, determining that the trial court erred in holding that the County and Public Authority were not joint employers for purposes of federal and state law.

Several facts contributed to the decision.  By statute and ordinance the County and the Public Authority had determined Buenrostro’s eligibility and need for services under the program, authorized Buenrostro to hire a household worker, determined the tasks for which the Public Authority would pay, determined the level and quality of services, determined how Plaintiff would be paid (in this case through Buenrostro), that the County was responsible for documenting the hours worked, including entering the provider’s timesheet into a statewide database, and assure correct payment to the individual.  The County also had to authorize the disbursement of all funds to be paid, review timesheets, review and correct timesheet discrepancies, and resolve payment inquiries.  The Public Authority had the right to collectively bargain, and negotiate increases in wages.  Sonoma County and the Public Authority each maintained employment records on both providers and recipients.  Sonoma County was also responsible for authorizing recipients of services (in this case Buenrostro) – and could terminate Buenrostro’s rights to the services.

This is a unique and highly specific situation where the out