California
The deadline for the California legislature to pass any bills has expired, and a number of employment-related bills (discussed below) have been forwarded to the Governor for veto or signature by September 30th. In the interim, the following two employment-related bills have already been signed into law:
Governor Signs Bill Permitting Adjustments to Retiree Health Benefits (AB 1814)
California’s Fair Employment and Housing Act (FEHA) generally prohibits discrimination based on age in the terms, conditions or privileges of employment. This new law creates a narrow exception, codified in Government Code section 12940(a)(5)(B), specifying that FEHA does not prohibit employers from providing health benefits or health care reimbursement plans to retired persons that are altered, reduced or eliminated when the retiree becomes eligible for Medicare benefits. This new law applies only to health benefits offered to “retired persons,” and essentially adopts an exception to the federal Age Discrimination in Employment Act permitting employers to offer health benefits to retired participants that are adjusted when the participant becomes Medicare eligible. This exception is intended to encourage employers to continue offering modest retiree health benefits to participants who retire before becoming Medicare eligible as a “bridge” until they become Medicare eligible.
This law applies to all retiree health benefit plans and contractual provisions or practices concerning retiree health benefits and health care reimbursement plans in effect on or after January 1, 2011.
Governor Signs Bill Expanding California Whistleblower Protection Act to Employees of the Judicial Branch (AB 1749)
Under existing law, California’s Whistleblower Protection Act (CWPA) (Gov. Code § 8547 et seq.) protects state employees from retaliation by their employer for reporting fraud, waste, abuse of authority, violations of law, or activities that create a threat to public health. The CWPA currently enumerates internal procedures for state employees to file a written complaint, including with the State Personnel Board for investigation, and provides that any person who intentionally engages in retaliation against a state employee or applicant for making a protected disclosure is subject to a misdemeanor and may be held individually liable for civil damages.
This new law flows from California’s ongoing budget crisis and is intended to ensure transparency in the judicial branch’s use of state-provided funds. Accordingly, this bill generally extends the CWPA’s provisions to the judicial branch, and specifies that a person employed by the Supreme Court, a court of appeal, a superior court, or the Administrative Office of the Courts qualifies as an “employee” under the CWPA, except as specified in the bill. Thus, this new law allows judicial employees or applicants to file written complaints concerning retaliation with specified agencies, including with the State Personnel Board. It also codifies that, except where judicial immunity otherwise applies, judicial branch employees who retaliate against an employee or applicant for a protected disclosure is subject to a $10,000 fine and imprisonment up to a year. This new law takes effect January 1, 2011.
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In addition to these two new laws, the following bills have passed the Legislature and are awaiting signature or veto by the Governor:
Legislature Again Passes Bill Limiting Credit Reports in Employment Decisions (AB 482)
The federal Fair Credit Reporting Act and the California Consumer Credit Reporting Agencies Act regulate and specify the procedures employers must follow to obtain and use credit reports in employment decisions. Currently, employers may request and consider an applicant or employee’s credit report in employment decisions provided the employer follow certain statutorily-enumerated procedures, including those requiring notice to the employee/applicant.
This bill would prohibit employers, other than certain financial institutions, from obtaining consumer credit reports for employment purposes unless (1) the information is substantially job-related, meaning that the person for whom the report is sought has access to money, other assets, or trade secrets or other confidential information, or (2) the position at issue is in the state Department of Justice, a managerial position, that of a sworn police officer or other law enforcement position or a position for which the law requires the employer to obtain this type of information. This bill would not apply to financial institutions subject to the federal Gramm-Leach-Bliley Act (governing financial institutions) and implementing regulations, if the person or business is subject to compliance oversight by a state or federal regulatory agency with respect to these laws.
The Governor vetoed similar versions of this bill in 2008 and 2009. However, the United States Congress is currently considering similar bills, so this bill might be enacted first at the federal level. Sseveral other states have already-enacted similar credit check limits suggesting pressure is building for these prohibitions.
Bill Limiting Arbitration of Hate Crime Civil Claims Passes Assembly (AB 1680)
Known as the Hate Crimes Protections Act, this bill would prohibit any person/entity from requiring another person to waive any legal right, penalty, remedy, forum or procedure for violations of the Ralph Civil Rights Act or the Bane Civil Rights Act (Cal. Civ. Code § 51.7 et seq.) as a condition of entering into a contract for the provision of goods or services. Specifically, this bill would prohibit anyone from requiring, as a condition of entering into a contract, a waiver of another person’s ability to file and pursue a civil action or complaint with the Attorney General, the Department of Fair Employment and Housing, or any court or governmental entity. This bill, which would apply to contracts entered into after January 1, 2011, would not prohibit knowing and voluntary waivers of these rights, but would impose the burden of demonstrating the waiver was voluntary and knowing upon the person seeking the waiver. Opponents argue this bill is intended to eliminate pre-dispute arbitration agreements.
Legislature Passes Bill Increasing Penalties for Failure to Pay Minimum Wage (AB 1881)
Labor Code section 1194.2 presently provides that in a court action to recover unpaid wages in violation of the minimum wage laws, the court may award liquidated damages equal to the amount of wages unlawfully unpaid, plus interest. This bill would increase the amount of liquidated damages that may be awarded to an employee to twice the amount of the wages unlawfully unpaid, plus interest. In other words, the employee would be entitled to recover the amount of unpaid wages, plus a penalty equal to up to twice the amount of unpaid wages.
Legislature Passes Bereavement Leave Bill (AB 2340)
Currently, California’s Labor Code permits employees to take time off without threat of retaliation for a number of reasons. This bill would create a new leave right, to be codified at Labor Code section 230.5, entitling eligible employees (those working more than 60 days prior to a leave) to take up to three days bereavement leave in the thirteen-month period following the death of a spouse, child, parent, sibling, grandparent, grandchild or domestic partner. It would also prohibit employers from discharging, disciplining or discriminating against an employee for inquiring about, requesting or taking bereavement leave, and it would provide civil penalties and permit lawsuits against employers who violate its provisions.
This bereavement leave need not be taken in consecutive days, and the employer would be entitled to request documentation of the death within 30 days of the leave taken. This bereavement leave is unpaid, but an employee may use vacation, personal leave or compensatory time off that is otherwise available to the employee. This new leave would not apply to employees covered by a valid collective bargaining agreement that provides for bereavement leave and other specified working conditions.
Legislature Passes Bill Creating Pilot Program to Monitor Swimming Pool and Spa Construction Industries (AB 2770)
To uncover abuses in the “underground economy,” this bill would establish a pilot program to investigate employment and payment practices within the swimming pool and spa construction industry. This bill would require the Employment Development Department (EDD), in consultation with other agencies, to develop and implement a set of criteria that, if met by an employer, would trigger a recommendation for an audit or investigation by appropriate state tax authorities to determine if the employer is in violation of statutes relating to employee wages, hours and working conditions. After July 1, 2011, the EDD would be required to take specified actions (including notifying appropriate state tax authorities) with respect to an employer when application of the set of criteria indicate a violation of these employment laws have occurred.
This pilot program would be codified at new Labor Code section 559 and would be effective from January 1, 2011 until January 1, 2017, unless shorted or extended.
Legislature Passes Bill to Revise Attorney’s Fees Awards in Small Employment Cases (AB 2773)
California’s Fair Employment and Housing Act (FEHA) grants trial courts discretion to award reasonable attorney’s fees to a prevailing party, but Code of Civil Procedure section 1033 also provides the court discretion to limit fees when the prevailing party receives a judgment less than what could have been awarded in a limited civil case ($25,000). Earlier this year, the California Supreme Court held in Chavez v. City of Los Angeles (2010) 47 Cal.4th 970 that a trial court has discretion in a FEHA case to deny a successful plaintiff attorney’s fees if the plaintiff proceeds in unlimited civil court but recovers less than the $25,000 jurisdictional minimum. (In Chavez, the court denied a nearly $900,000 attorney’s fees request in a FEHA discrimination case in part because the plaintiff only recovered $10,000 in damages.)
This bill would nullify Chavez and provide that Code of Civil Procedure section 1033.5 shall not apply to FEHA actions, meaning FEHA plaintiffs recovering small monetary awards might still recover attorneys’ fees awards that dwarf the amount recovered by plaintiff.
Legislature Passes Bill Limiting Consideration of Protected Characteristics in Assessing Workers Compensation Coverage or Apportionment (SB 145)
This bill would limit the consideration of an employee’s protected characteristics (e.g., race, religious creed, national origin) in workers’ compensation proceedings in two respects. First, it would provide that no workers’ compensation claim shall be denied because the employee’s injury was related to the employee’s race, religious creed, color, national origin, age, marital status, sex, sexual orientation, or genetic characteristics. This provision is intended to prevent coverage from being denied because an employee was assaulted or injured by another party because of the employees’ protected characteristics (e.g., a racially motivated assault on an employee performing his or her duties).
The second provision would preclude the use of certain “risk factors” based on protected classifications when apportioning liability and causation for permanent disability purposes. Thus, physicians would not be permitted to consider race, national origin, gender, sex, genetic characteristics, and certain other factors when assessing apportionment of the causes of an industrial disability. The Governor vetoed a bill containing this second limitation in 2008.
Legislature Passes Bill Providing Paid Time Off for Organ and Bone Marrow Donations (SB 1304)
Under current law, state employees who have exhausted available sick leave are permitted to take up to 30 days paid leave for the purpose of organ donation, and up to 5 days paid leave for bone marrow donations. Known as the Michelle Maykin Memorial Donation Protection Act, this bill would add a new Labor Code provision (section 1508 et seq.) and extend this public employee benefit to private employees.
If enacted, private employers with 15 or more employees would be required to provide up to 30 days of paid leave per year for an organ donation in any one year period, and up to 5 days of paid leave per year for a bone marrow donation in any one year period. Employers would be permitted to require written verification of these donations, and could require employees to take up to five days of accrued sick or vacation leave for bone marrow donations and up to two weeks of earned and unused sick or vacation leave for organ donations, unless prohibited by a collective bargaining agreement provision. This leave would not be considered a break in continuous service for benefit/seniority purposes, and shall not be taken concurrently with FMLA or CFRA-related leaves. It would also prohibit employers from interfering with employees taking such leaves and prohibit retaliation against employees from taking such leaves. It would also authorize employees to file civil actions to enforce violations of these leave rights.
Legislature Passes “Card Check” Bill for Agricultural Employees (SB 1474)
California law presently provides for secret ballot elections for employees in agricultural bargaining units to select labor organizations to represent them for collective bargaining purposes. This bill would create an alternative majority signup election procedure whereby agricultural employees would select their labor representatives by submitting a petition to the board accompanied by representation cards signed by a majority of the bargaining unit members. The Governor has previously vetoed several earlier versions of this bill, and another veto is expected.
JUDICIAL
California
California Supreme Court Limits Application of the “Stray Remarks” Doctrine in FEHA Discrimination Cases
In this FEHA age discrimination case, the discharged plaintiff attempted to introduce evidence that his supervisors had referred to his ideas as “obsolete” or “old” and that his co-workers called him an “old fuddy duddy” or “old man.” The employer argued California courts should adopt the federal "stray remarks" doctrine and consider age-related comments by a co-worker, or even by a supervisor outside of the termination context, irrelevant and insufficient to defeat summary judgment.
The California Supreme Court declined to adopt the federal “stray remarks” doctrine because it is unnecessary and its categorical exclusion of evidence might lead to unfair results. The Court first expressed concerns that a categorical rule always excluding all so-called “stray remarks” might result in the exclusion of potentially relevant evidence. The Court also expressed concerns that a trial court would improperly “weigh” the evidence, which it is not supposed to on summary judgment motions, if it applied this doctrine and focused exclusively upon these comments in isolation. Finally, the Court noted the federal courts had adopted widely divergent approaches and definitions in trying to apply this doctrine.
Accordingly, the Court declined to adopt the federal “stray remarks” doctrine and held instead that a trial court must make its summary judgment determination based on “the totality of the evidence in the record, including any relevant discriminatory remarks.” In other words, employers will generally not be able to have the trial court simply ignore arguably discriminatory comments by co-workers or by supervisors that are unrelated to the challenged employment decision. Rather, the comments must be considered along with all other evidence in assessing the employer’s motivations. However, the Court observed that trial courts may still grant summary judgment if after considering the “totality of the evidence” (including the comments that might otherwise be excluded if the “stray remarks” doctrine had been adopted), the employee’s evidence fails to sufficiently rebut the employer’s explanations.
In summary, the Court refused to adopt a bright-line rule that would have excluded these so-called “stray comments” as irrelevant in FEHA discrimination cases. Rather, these comments must be considered as part of the “totality of the evidence” for summary judgment purposes. As a practical matter, this ruling underscores the importance of training employees to avoid making discriminatory comments because as is the case after a Miranda warning is issued, anything employees say likely can and will be used against them and their employer in future litigation. This ruling creates another split between Caifornia and federal law and potentially may make it more difficult to obtain summary judgment in employment cases in state court. (Reid v. Google, Inc.(2010) 50 Cal.4th 512.)
California Supreme Court Holds Labor Code Section 351 Does Not Create a Private Right of Action
A card dealer filed a class action against his casino employer alleging its mandatory tip policy (requiring dealers to contribute 15 to 20% of their tips to a tip pool) violated Labor Code section 351, which prohibits employers and their agents from collecting part or all of any gratuity left for an employee by a patron. The court of appeal and the Supreme Court rejected the employees’ claims and instead found that section 351, as currently written, does not provide a private right of action. Section 351 only authorizes the Department of Industrial Relations to sue directly under Labor Code section 351. However, the Court noted the employees are not completely without a remedy as they may sue for common law conversion, and it effectively invited the California legislature to create additional civil or administrative remedies, including potentially a private right of action under Labor Code section 351.
Perhaps as interesting as the Court’s narrow holding is what the Court did not address. For instance, the Court did not reexamine the permissibility of tip pools generally. This suggests that a tip pools’ legality must be considered under prior cases permitting such pools (provided certain criteria are met), including the seminal case of Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062, 1067.) The Court also did not address whether a section 351 violation could support an unlawful competition claim under Business and Professions Code section 17200 et seq. Finally, although the Court granted review in this particular case, it declined review in other 2009 cases addressing who can participate in these pools and in what circumstances, suggesting open questions remain. (Lu v. Hawaiian Gardens Casino, Inc. (2010) ___ Cal.4th ____, 2010 Cal.LEXIS 8093.)
California Supreme Court Grants Issue Preclusive Effect to Federal Agency’s Investigative Findings to Defeat Wrongful Termination Claim
A discharged quality assurance auditor initially filed an administrative complaint with the United States Secretary of Labor under the whisteblower protection provisions of the Aviation Investment and Reform Act. However, after receiving the Secretary’s investigative findings concluding the airline employer had not violated federal law and dismissing his administrative complaint, the employee elected against further pursuing administrative appeal options but instead filed a wrongful termination civil action. The employer argued the Secretary’s investigative findings it had not retaliated against the employee should be given issue preclusive effect, thus defeating the employee’s civil wrongful termination claims.
In a 4-3 decision, the California Supreme Court agreed, highlighting the particular factual and procedural circumstances of this case, and the particular provisions of this particular federal law and its administrative remedy procedures. The court noted the important public policy of not allowing the re-litigation of matters or issues previously decided in judicial or administrative proceedings provided certain criteria are met, including that the issue was actually litigated or the parties had the opportunity to fully litigate. In this case, this federal laws administrative procedures provided the employee ample opportunity to fully present his claims in an adversarial setting and provided direct access to federal appellate courts for judicial review. On these facts, the court concluded the employee had already had sufficient opportunity to litigate the issue of causation (i.e., what motivated his employer’s termination decision), thus precluding him from re-litigating this same issue in state court. (Murray v. Alaska Airlines, Inc. (2010) ___ Cal.4th ___, 2010 Cal.LEXIS 8293.)
Wage and Hour Class Actions Generally Not to be Dismissed at Pleading Stage
Several employees filed a wage and hour class action alleging their employer maintained a policy and practice of denying meal and rest breaks to hourly, non-union employees. The trial court granted the employer’s demurrer (the state court equivalent of a motion to dismiss at the pleading stage) without leave to amend on the grounds the plaintiffs had not alleged facts sufficient to establish a class. The court of appeals reversed, holding that in wage and hour class actions issues concerning class suitability generally should not be resolved at the pleading stage. While not conclusively prohibiting dismissal of wage and hour class actions at the pleading stage, the court reiterated the preferred approach is to defer decisions concerning the propriety of the class action until the class certification motion. (Gutierrez v. California Commerce Club, Inc.(2010) ___ Cal.App.4th ___, 2010 Cal.App.LEXIS 1464.)
Federal
Ineffective Modifications are Not Reasonable Accommodations under ADA
The Equal Employment Opportunity Commission sued an employer under the Americans with Disabilities Act alleging it had failed to accommodate a deaf employee because it had not provided a sign language interpreter for certain staff meetings, disciplinary sessions, and training. The federal district court granted the employer’s summary judgment motion finding the employer had engaged in the interactive process and provided a variety of accommodations (e.g., an interpreter for some meetings, a co-worker taking contemporaneous notes for others) that enabled the employee to perform the essential job functions. The Ninth Circuit Court of Appeals reversed finding triable issues of fact existed concerning the employer’s accommodation and interactive process efforts, including whether the employer should have realized its prior accommodation efforts were ineffective.
The court first reiterated the general rules requiring employers to engage in the interactive process after an employee requests an accommodation, that the employer need only provide a reasonable accommodation, not the accommodation the employee prefers, and that the employer retains the ultimate discretion to choose between effective accommodations. However, the court also observed that an ineffective modification or adjustment is not a reasonable accommodation, and that the accommodation effort is ongoing and not exhausted by a single effort. Specifically, the employer’s interactive process obligation continues if the employee requests a different accommodation or the employer becomes aware the initial accommodation is failing and further accommodation is needed.
In this case, the court concluded that being able to understand and participate in mandatory department meetings is a benefit and privilege of employment even though not directly bearing on an employee’s performance of essential job functions. The court noted questions remained concerning whether the employer’s accommodations (e.g., an interpreter for some but not all meetings and contemporaneous written notes for others) enabled the employee to attend and participate as equally as non-deaf employees. The court also concluded questions remained about whether the employer was aware or should have been aware that its modifications were ineffective for this employee. The court reiterated that an employer need not be clairvoyant, but this employee had specifically mentioned these accommodations were not working, and that he could not understand some key policies (under which he had been disciplined) without an interpreter’s assistance. (EEOC v. UPS Supply Chain Solutions (9thCir. 2010) ___ F.3d. ___, 2010 U.S.App.LEXIS 17918.)
Ninth Circuit Rejects Terminated Employees’ Claim Employer Required to Discharge All Employees Engaging in Sexual Conduct
Several male employees who were terminated following an internal investigation that corroborated their sexually inappropriate behavior filed a Title VII gender discrimination claim based on the employer’s decision not to discharge female employees who engaged in sexual discussions at work. The federal district court granted the employer’s summary judgment motion finding the terminated male employees were not similarly situated to the non-terminated female employees, and the Ninth Circuit court of appeals affirmed.
The appellate court held that although the non-terminated female employees had engaged in some sexual related banter or participated in some of the complained-of-conduct, they were not similarly situated in several crucial respects. First, the terminated employees was qualitatively and quantitatively different because even if the female employees had engaged in some banter, there were at least several instances of unwelcome harassing behavior by the male employees (e.g., pinching a female employee’s buttocks, calling another a “fat cow,” etc.). Secondly, the male employees’ conduct had resulted in an internal harassment complaint whereas the male employees never complained about the female employees’ conduct, including after the investigation began, but cited this conduct only as a defense for their own conduct. The court observed that an employer that implements a sexual harassment policy may reasonably distinguish between violative conduct that elicits a complaint from comparable conduct that is tolerated by co-workers without a complaint. (Hawn v. Executive Jet Mgmt, Inc. (9th Cir. 2010) ___ F.3d ___, 2010 U.S.App.LEXIS 17083.)
Ninth Circuit Concludes Faith-Based Humanitarian Organization Exempt from Title VII’s Prohibition against Religious Discrimination
A faith-based humanitarian organization terminated two long-term employees after discovering they held religious views incompatible with the organization’s doctrinal belief (i.e., they denied the deity of Jesus Christ and disavowed the doctrine of the Trinity). In a lengthy 2-1 decision, the ninth circuit rejected the employees’ Title VII religious discrimination claims, holding that the humanitarian organization qualified for Title VII’s religious exemption even though not a church or affiliated with any church.
The circuit court reiterated that Title VII generally prohibits religious discrimination, but an employer is exempt if it is a “religious corporation, association, educational institution, or society with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such entity of its activities.” The majority opinion noted that while this exemption generally is applied to churches and entities similar to churches, the exemption is not limited to churches and also applies to some religious corporations, associations and societies that are not churches. In determining whether a particular entity qualifies for this narrow exemption, the court must consider all relevant religious and secular characteristics to determine whether the employer is primarily religious or secular in nature.
Interestingly, the two justices in the majority then appeared to adopt different tests for purposes of this exemption. For instance, one justice held that the test for a nonprofit entity is whether the organization “1) is organized for a self-identified religious purpose… 2) is engaged in activity consistent with, and in furtherance of, those religious purposes, and 3) holds itself out to the public as religious.” The other justice, however, defined the inquiry as whether an organization “is organized for a religious purpose, is engaged primarily in carrying out that religious purpose, holds itself out to the public as an entity for carrying out that religious purpose, and does not engage primarily or substantially in the exchange of goods or services for money beyond nominal amounts.” (Spencer v. World Vision, Inc. (9th Cir. 2010) ___ F.3d ___, 2010 U.S.App.LEXIS 17602.)