California
Cal-COBRA Premium Assistance Bill Signed into Law and Immediately Effective (SB 838)
On June 3, 2010, Governor Schwarzenegger signed into law SB 838 which is designed to conform California’s Cal-COBRA provisions with the federal COBRA provisions regulating the COBRA premium subsidy. In February 2009, the federal American Reinvestment and Recovery Act (ARRA) created a 65% COBRA premium subsidy for up to 9 months (later extended to 15 months) for “assistance eligible individuals,” as defined. In response, the California legislature in 2009 passed AB 23 which established specific notice requirements and enrollment opportunities for Cal-COBRA eligible employees (those working for employers with 2 to 19 employees) to obtain premium subsidy assistance under ARRA. The federal premium subsidy eligibility period has subsequently been extended multiple times, including beyond the December 31, 2009 deadline identified in AB 23.
This just-enacted and immediately effective bill is essentially intended to extend AB 23 beyond the December 31, 2009 deadline and maintain conformity between Cal-COBRA and federal COBRA. Specifically, this bill requires Cal-COBRA-related plans and insurers to provide notice of the federal premium subsidy to beneficiaries experiencing a qualifying event between January 1, 2010 (the day after AB 23 expired) and the expiration of the federal premium subsidy eligibility period (which currently lapsed as of May 31, 2010). It also requires plans and insurers to give certain qualified beneficiaries whose employment is terminated on or after March 1, 2010 written notice regarding the availability of premium assistance and the special election opportunity provided under ARRA. It also requires plans and insurers to maintain premium assistance information on their websites, applies certain notice requirements to employers of employees terminated after March 2, 2010, and directs the Department of Managed Health Care to designate model notices consistent with these changes.
In summary, this bill does not create new employer obligations per se, but primarily clarifies Cal-COBRA notification requirements regarding the federal ARRA subsidy for employers, health plans and health insurers. Since it is tied to the currently-expired federal COBRA premium subsidy, Cal-COBRA employers and insurers foreseeably need to provide the notices required under SB 838 to eligible individuals (as defined) who experienced “qualifying events” before the May 31, 2010 eligibility expiration deadline.
As of press time, the federal COBRA premium subsidy remains expired as of May 31, 2010, and it is unclear whether it will be extended. If extended, it likely will be made retroactive to the May 31st expiration date.
Bill Limiting Credit Reports in Employment Decisions Passes Assembly (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. 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 financial or confidential information, or (2) the position at issue is in the state Department of Justice, a managerial position, that of a sworn police officer of other law enforcement position or a position for which the law requires the employer to obtain this type of information.
Similar versions of this bill have passed the Legislature in 2008 and 2009 but were vetoed by the Governor. The United States Congress is currently considering similar bills, so this bill might be enacted first at the federal level.
Bereavement Leave Bill Passes Assembly (AB 2340)
This bill would entitle eligible employees (those working more than 60 days prior to a leave) to take up to three days unpaid 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 new leave would not apply to employees covered by a valid collective bargaining agreement that provides for bereavement leave and other specified working conditions. This bill is now pending in the Senate.
Assembly 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 requires 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 their attorney’s fees if they proceed in unlimited civil court but recover 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.
Senate Passes Bill to Remove Agricultural Employees’ Exempt Status (SB 1121)
California law presently exempts agricultural employees from the general Labor Code requirements regarding overtime and meal periods. This bill would remove this exemption for agricultural employees and entitle them to the more general overtime requirements (e.g., after 8 hours in single work day) and to meal periods. This bill has passed the Senate and is now pending in the Assembly.
Senate Passes Bill Providing Paid Time Off for Organ and Bone Marrow Donations (SB 1304)
This bill would require employers with 15 or more employee to provide up to 30 days of paid leave per year for an organ donation and up to 5 days of paid leave per year for a bone marrow donation. This bill would essentially extend a paid leave right for state employees to private employees. 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.
Senate 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. This bill is now pending in the Assembly, where similar bills have passed on multiple occasions before being vetoed by the Governor.
Federal
Bill Encouraging Work-Life Balancing Policies Fails to Pass the House of Representatives (H.R. 4855)
The House of Representatives voted against passing the Work-Life Balance Award Act, a bill intended to encourage employers to develop and implement work-life balance policies. Under this bill, the Department of Labor (DOL) would have awarded an annual “Work-Life Balance Award” to employers that had developed and implemented work-life balance policies, defined as workplace practices “designed to enable employees to achieve a satisfactory work-life balance.” The National Society for Human Resources Manager was a strong advocate for this bill.
AGENCY
Federal
DOL Changes its Mind about Compensability of “Changing Clothes” Under the FLSA
The Department of Labor (DOL) has issued an Administrator’s Interpretation (No. 2010-2) that reverses prior Opinion Letters concerning the compensability of changing certain clothing items in several respects, and which may have significant ramifications for employers.
Section 3(o) of the Fair Labor Standards Act (FLSA) provides that time spent “changing clothes or washing at the beginning or end of each workday” is excluded from compensable time under the FLSA if the time is excluded from compensable time pursuant to “the express terms or by custom or practice” under a collective bargaining agreement. (29 U.S.C. § 203(o).) The DOL’s just-issued Administrative Interpretation concludes this exclusion from compensable time “does not extend to protective equipment worn by employees that is required by law, by the employer, or due to the nature of the job.” In other words, the DOL’s position is that unionized employers need not compensate employees for changing into certain “clothes,” but must compensate employees for time spent “donning and doffing” protective gear (e.g., protective equipment worn by meat packing employees, etc.) that the employee must wear because required by law, the employer, or the nature of the job. In reaching this conclusion, the DOL effectively disavowed its 2002 and 2007 opinion letters which had drawn a different conclusion.
The DOL also concluded that changing clothes, even if not compensable, can constitute the first “principal activity” under the Portal to Portal Act (29 U.S.C. § 254), thus entitling the employee to compensation for all subsequent activities, “including walking and waiting,” during the then-commenced continuous workday. In other words, even if the employer need not pay the employee for “changing clothes,” the clothes changing may trigger the continuous workday entitling the employee to compensation for all subsequent activities. This Administrative Interpretation is available at www.dol.gov/whd/opinion/adminintrprtn/FLSA/2010/FLSAAI2010_2.htm
DOL Expands FMLA Protections to Non-Nuclear Families
The DOL has also issued an Administrator’s Interpretation clarifying the definition of “son and daughter” under the Family and Medical Leave Act (FMLA), and expanding the definition of “in loco parentis” to any individuals who assume the role of caring for a child regardless of their legal or biological relationship to the child. As this Interpretation and the accompany press release make clear, it is intended to extend the FMLA’s protections to non-traditional families, including same sex parents and unmarried partners.
The FMLA entitles eligible employees to take up to 12 workweeks of job-protected leave for statutorily-enumerated reasons, including the birth/adoption/foster care placement of a “son or daughter,” or to care for a “son or daughter” with a serious health condition. The FMLA regulations define a “son or daughter” as a “biological, adopted or foster child, a stepchild, a legal ward or a child of a person standing in loco parentis.
This particular Administrative Interpretation focused on the definition of in loco parentis, and specifically whether it applied to employees lacking a biological or legal relationship with a child. The DOL concluded, consistent with the language of 29 CFR § 825.122(c)(3), that a biological or legal relationship is not necessary for in loco parentis status for FMLA leave purposes. Rather, the key issue is the employee’s intent to assume such in loco parentis status, and the DOL noted in loco parentis status can be established by either day-to-day care or financial responsibility for the child. In this regard, the DOL concluded either factor would suffice, whereas the statutory language of section 825.122(c)(3) and court decisions arguably suggest both needed to be present.
The DOL also observed that neither the FMLA nor its regulations “restrict the number of parents a child may have under the FMLA” and it provided a specific example of a child having four parents for FMLA leave entitlement purposes. The DOL reiterated, however, that whether an employee stands in loco parentisdepends on the particular facts in each relationship, and reaffirmed an employer’s ability to request documentation to determine the employee’s relationship to the child for FMLA purposes. This Administrative Interpretation is available at www.dol.gov/whd/opinion/adminIntrprtnFMLA.htm.
NLRB Issues Guidance Concerning Class Action Waivers in Mandatory Arbitration Agreements
The National Labor Relations Board (NLRB) has issued a Guideline Memorandum (GC 10-06) to provide a legal framework for its regional offices to use when assessing the legality of class action waivers in mandatory employment arbitration agreements. Although not determinative, this Guidance Memorandum should provide insights into how the NLRB will handle challenges to class action waivers in arbitration agreements.
The Guidance Memorandum declined to issue bright-line rulings validating or invalidating arbitration agreement class action waivers, but noted all agreements should be carefully scrutinized subject to a set of principles contained in the memorandum. For instance, the NLRB observed that mandatory arbitration agreements preventing, or that could reasonably be read as preventing, employees from joining together to enforce rights under Section 7 of the NLRA would be unlawful. On the other hand, employers may condition employment on employees agreeing to arbitrate on an individual basis non-NLRA statutory employment claims provided otherwise enforceable under the Federal Arbitration Act or the applicable employment statute. In such instances, however, the agreement must make clear employees will not be disciplined for collectively pursuing NLRA section 7 claims. Moreover, the NLRB observed that employers may not discipline employees who attempt to file class actions for non-NLRA-related claims despite an enforceable class action waiver in the arbitration agreement; rather, the employer’s remedy is to seek dismissal of the class action complaint and to compel individual arbitration. Guidance Memo GC-06 is available on the NLRB website www.nlrb.gov under “General Counsel Memos.”
Federal Agencies Issues Guidance Concerning “Grandfathered Plans” under the Health Care Reform Act
The Internal Revenue Service and the Departments of Labor and Health and Human Services have recently published interim regulations providing guidance on the exemption from certain portions of the Health Care Reform Act for group health plans in existence prior to March 23, 2010 (so-called “grandfathered plans”). Amongst other things, this Guidance addresses the changes to a group health plan will affect the plans “grandfathered” status, thus making it subject to the Health Care Reform Act, as well as what steps plans must take to maintain their “grandfathered” status. The full text of this guidance is available at 75 Fed. Reg. 34538 or at www.edocket.access.gpo.gov/2010/pdf/2010-14488.pdf.
USCIS Launches Redesigned E-Verify Employer Web Interface
The United States Citizenship and Immigration Services (USCIS) has unveiled a redesigned web interface for employers using the agency’s E-Verify Program to determine employee eligibility to work. This new web interface is intended to enhance ease –of-use, minimize errors, support compliance with terms of use, and enable real-time validation of employers enrolling in E-Verify against commercial data. It also contains enhanced security features (i.e., masking Social Security numbers) to protect privacy and to ensure only valid companies enroll in E-Verify. Additional information about the new interface can be found on the E-Verify Redesign section of the E-Verify web page at www.dhs.gov/E-Verify.
JUDICIAL
California
Appellate Court Affirms Denial of Class Action for Meal and Rest Period Claims, But Allows Class Claim on Calculation of Overtime Rate of Pay
Approximately 4000 security guards filed a wage and hour class action alleging the employer failed to provide off duty meal breaks, off duty rest breaks, and failed to include certain reimbursements and an annual bonus payment in calculating the employees’ hourly rate of overtime pay. Plaintiffs claimed they never received off-duty rest or meal periods and that the nature of their job duties did not qualify for an on-duty meal period. The overtime claim was based on the employer’s failure to include (1) an allowance for the cost of cleaning uniforms and the cost of gasoline, and (2) bonus payments when calculating the overtime rate of pay.
The Fourth District Court of Appeal affirmed the denial of class certification on the meal and rest period claims due to lack of commonality. Although the employer required all employees to sign on-duty meal period agreements, it did not uniformly require on-duty meal periods, and multiple individual factors determined which employees could and were relieved of duties to take meal periods. Similarly, the employer had no formal policy denying off-duty rest breaks, meaning whether an employee received an off-duty rest break depended on a variety of individual circumstances. However, class certification was appropriate for the overtime calculation claim since it hinged on common legal principles, including which reimbursements and bonuses needed to be considered for overtime rate of pay calculations. (Faulkinbury v. Boyd & Associates, Inc. (2010) ___ Cal.App.4th ___, 2010 Cal.App.LEXIS 964.)
Prevailing Employer Entitled to Recover Expert Witness Fees against Plaintiff Who Rejected a Statutory Offer to Compromise
A former employee challenged the trial court’s award of $128,000 in expert witness fees to the employer who prevailed on her FEHA age and sex discrimination claims. The California court of appeals agreed with the plaintiff that the same standard applicable to attorneys’ fees awards to prevailing defendants should also apply to expert witness fee awards under Government Code section 12965. Applying this standard, the prevailing employer could not recover its expert witness fees under FEHA’s provisions because it could not demonstrate Plaintiff’s claims were frivolous or groundless, or that she unreasonably continued to litigate her claims. However, the employer was entitled to recover at least some of its expert witness fees under Code of Civil Procedure section 998 because the plaintiff failed to accept the employer’s statutory offer to compromise for $20,001. (Holman v. Altana Pharma US, Inc.(2010) ___ Cal.App.4th ___, 2010 Cal.App.LEXIS 1022.)
Federal
U.S. Supreme Court Public Employer Search of Text Messages Did Not Violate Employee's Privacy Rights
In a long-awaited decision, the United States Supreme Court unanimously held a public employer did not violate an employee’s Fourth Amendment expectations of privacy when it reviewed text messages sent and received on an employer-issued pager. Although the Court declined to delineate under what circumstances employees, public and private, maintain privacy expectations in the workplace, this ruling may provide some guidance for future cases.
In this case, the public employer (the City of Ontario, California) issued two-way pagers to employees with a limited allotment of text characters each month, and it published its policy stating employees had no expectation of privacy or confidentiality when using these pagers and preserving the employer’s ability to monitor usage without notice. As part of a subsequent investigation to determine whether the text allotment was too low, the employer obtained a transcript of the plaintiff’s texts from its outside provider which revealed many of the plaintiff’s texts were not work-related and sexually explicit. The employee challenged his subsequent termination claiming the public employer’s search violated his Fourth Amendment rights against unreasonable searches and seizures.
The Court concluded the public employer’s text message review did not violate the employee’s Fourth Amendment rights. Notably, citing a practical concern about not issuing too broad a ruling while technology changes so quickly, the Court simply assumed the employee had a reasonable expectation of privacy in his text messages and that the employer’s audit constituted a Fourth Amendment search. Instead, the Court focused on whether the search was “unreasonable,” and concluded it was not because it was motivated by a legitimate work related purpose (to determine if the existing text limit was too low) and was not excessively intrusive in scope. The Court suggested a similarly properly motivated and non-excessively intrusive search would also be permissible in the private employer context.
The Court’s observation that “operational realities” may affect an employee’s privacy expectations is a good reminder for employers to develop and enforce clear written policies stating employees maintain no privacy rights in employer provided devices, and preserving the employer’s ability to monitor without notice. Employers must also ensure these policies are uniformly applied and not undercut by “informal” practices such as ignoring violations or suggesting the employer will not monitor. (City of Ontario, et al. v. Quon (2010) 560 U. S. __, 2010 U.S.LEXIS __.)
United States Supreme Court Invalidates Decisions by Two-Member NLRB Board
In a 5-4 decision, the United States Supreme Court held the five-member National Labor Relations Board (NLRB) lacked authority to issue nearly 600 decisions after its board membership dropped to only two members. Anticipating upcoming vacancies and a likely tumultuous confirmation process for new members, in 2007 the NLRB board had delegated decision-making authority to a three-member group, which became a two-member group after the third member left, but continued to issue rulings under the National Labor Relations Act (NLRA).
However, the Court held that Section 3(b) of the NLRA requires a delegee group maintain a membership of three in order to exercise the delegated authority of the Board. The Court observed that the NLRB’s general quorum requirement is three members, and that although the board may delegate authority to three-member groups, which can proceed on a two-member quorum basis, the delegee group loses its authority once its membership falls below three members. The Court noted that allowing the delegee group to proceed with only two active members would effectively make two members a quorum for the entire board, thus invalidating 1947 amendments which had specifically increased the requisite quorum size from two members to three members. (New Process Steel, L.P. v. National Labor Relations Bd. (2010) ___ S.Ct. ___, 2010 U.S.LEXIS 4973.)
Supreme Court Upholds Arbitrator’s Ability to Determine Enforceability of Arbitration Agreement
In an employment discrimination lawsuit, the plaintiff/employee opposed the employer’s motion to compel arbitration arguing the entire arbitration agreement was unconscionable and therefore unenforceable. The employer argued the arbitrator, and not the court, must decide the enforceability of the arbitration agreement since the agreement contained a so-called “delegation clause” authorizing the arbitrator to resolve issues concerning the interpretation, applicability or enforceability of the arbitration agreement. The United States Supreme agreed and held that under the Federal Arbitration Act, if an arbitration agreement specifies the arbitrator will determine the enforceability of the agreement, then under general contract rules the arbitrator will resolve any challenges to the agreement as a whole (i.e., that the entire agreement is unconscionable as asserted in that case). On the other hand, if the employee challenges only the enforceability of the delegation provision, then the court will consider the challenge. (Rent-A-Center West, Inc. v. Jackson (2010) ___ U.S. ___, 2010 U.S.LEXIS ___.)
United States Supreme Court Decides Not to Review San Francisco Healthcare Law
The United States Supreme Court has decided not to review whether the federal Employee Retirement Income Security Act of 1974 (ERISA) preempts the San Francisco ordinance requiring employers to spend certain amounts on health care insurance for employees. Specifically, the Court declined to review a Ninth Circuit decision, Golden Gate Restaurant Ass’n (9th Cir. 2008) ___ F.3d ___, which had held that ERISA does not preempt San Francisco’s health care ordinance. As a result, the Ninth Circuit decision remains good law, and it appears San Francisco employers will be required to adhere to the healthcare ordinance essentially mandating employers pay a certain amount in health care coverage for employees or contribute certain specified amounts directly to the City of San Francisco.
Federal Court Compels Arbitration of FEHA Race Discrimination Lawsuit
A federal district court in California enforced an arbitration agreement for FEHA race discrimination claims, thus confirming courts will enforce properly-crafted arbitration agreements notwithstanding the ninth circuit’s seeming hostility to such agreements. The court reiterated that arbitration agreements are generally enforceable contracts unless they are both procedurally and substantively unconscionable. The court noted this agreement had some aspects of procedural unconscionability since the employee had no choice but to sign it to be employed, but also noted it was not completely procedurally unconscionable since the arbitration agreement was a stand-alone clearly labeled document that the employee had to review and sign. In other words, the employee knew what he was signing.
The court also held that this agreement was not substantively unconscionable since it contained all of the so-called “minimum requirements” for requiring arbitration of statutory employment claims: (1) it did not limit any available remedies; (2) it allowed for sufficient discovery; (3) it allowed for a written arbitration award with sufficient judicial review; (4) it did not impose unreasonable costs or arbitration fees on the employee; and (5) it required a neutral arbitrator. In this case, although the arbitration agreement precluded judicial review of the arbitrator’s substantive rulings, it did not preclude the narrow judicial review authorized under Civil Code section 1286.2. Lastly, the agreement possessed the requisite “modicum of bilaterality” since it required both employer and employee to arbitrate all potential disputes between them. (Cornejo v. Spenger’s Fresh Fish Grotto (N.D.Cal. 2010) 2010 U.S.Dist.LEXIS 48354.)