California
The initial deadline for new legislation to be introduced has expired, and as expected with a new administration, a number of employment-related bills are now pending either in the California Assembly or Senate. Page constraints preclude covering every employment-related bill, but some of the more significant bills progressing in the Legislature include the following:
Minimum Wage Increase Proposed (AB 10)
This bill would increase California's minimum wage from $ 8.00 to at least $8.50 effective January 1, 2012, and provide for automatic annual increases beginning in 2013 based upon the California Consumer Price index.
Bill Limiting Credit Checks in Employment Decisions Re-introduced (AB 22)
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 passed the California Legislature in 2008, 2009 and 2010 but were vetoed by the then-Governor Schwarzenegger. This history suggests this bill will again pass the Legislature and advance to Governor Brown's office for signature or veto.
CFRA Expansion Proposed (AB 59)
This bill would increase the circumstances upon which employees would be entitled to protected leave under California's Family Rights Act (CFRA). Specifically, this bill would (1) eliminate the age and dependency elements from the definition of "child," thus permitting employees to take protected leave to care for independent adult children suffering from a serious health condition; (2) expand the definition of "parent" to include an employee's parent-in-law; and (3) permit an employee to take leave to care for a seriously ill grandparent, sibling, grandchild, or domestic partner, as defined.
Assembly Considering Bill Authorizing Debit Cards for Paycheck Purposes and Electronic Wage Statements (AB 196)
Labor Code section 213 presently authorizes an employer to deposit an employee's wages in a "bank, savings and loan association or credit union" of the employee's choice. This bill would also authorize an employer to deposit an employee's wages in "an industrial bank or trust company." This bill would also permit an employer to transfer an employee's wages or advance on wages to a card issued by a specified financial institution (e.g., a "payroll card" or "debit card"), provided the employee voluntarily authorizes the transfer and the card can be used to access funds at an automated teller machine in California, and the employee is entitled to at least one pay card transaction without charge per pay period.
This bill would also amend Labor Code section 226 to specify employers may provide "electronic" itemized wage statements, provided the electronic statement contains all required information and the employer provides the employee with electronic access in a confidential setting during normal business hours to print the statement. This bill would essentially codify two prior DLSE opinion letters authorizing "pay cards" for payroll purposes and "electronic" wage statements under certain instances.
Increased Penalty for Minimum Wage Violations (AB 196)
Labor Code section 1194.2 presently authorizes an employee to recover liquidated damages equal to the amount of wages unlawfully unpaid in minimum wage violations. This bill would increase the amount of liquidated damages that may be awarded to twice the amount of wages unlawfully unpaid, plus interest. A similar version (AB 1881) was vetoed in 2010.
Bill Targets Non-California Choice of Law and Forum Provisions (AB 267)
This bill would prohibit employment contract provisions (including in applications or handbooks) requiring an employee, as a condition of obtaining or continuing employment, to use a forum other than California or to agree to a choice of law other than California law, to resolve any employment-related issues that arise in California.
Increased Time for Employers to Respond to EDD Notices? (AB 274)
This bill would provide employers 30 days, rather than the current 10 days, to submit information to the Employment Development Department concerning an employee's request for unemployment insurance benefits.
DLSE to Offer Consultation Services and an Opportunity to Cure? (AB 311)
This bill would establish in the DLSE a "Labor Standards Consultation Unit" to provide consulting services to an employer or employee regarding compliance with labor standards, at a fee not to exceed the actual cost to the unit. This bill would also prohibit the DLSE from citing an employer for labor standard violations discovered as a result of the employer requesting or accepting such consulting services provided the employer remedies the violation within 30 days.
Bereavement Leave Bill Re-Introduced (AB 325)
This bill would allow employees to take up to four days of unpaid bereavement leave within a thirteen month period following the death of a spouse, child, parent, sibling, grandparent, grandchild or domestic partner, and authorize civil actions for violations of this new leave right. In 2010, Governor Schwarzenegger vetoed a prior version of this bill proposing three days of unpaid bereavement leave.
"Card Check" to Replace Secret Ballot Elections for Agricultural Employees? (SB 104)
California law currently requires secret ballot elections for employees in agricultural bargaining units to select labor organizations to represent them for collective bargaining purposes. This bill would permit agricultural employees, as an alternative procedure, to select their labor representatives by submitting a petition to the Agricultural Labor Relations Board signed by a majority of the bargaining unit. A similar bill (SB 1474) was vetoed in 2010.
Employment Protections for Medical Marijuana Users (SB 129)
This bill would make it unlawful for employers to discriminate against or penalize an applicant or employee because that person is a "qualified patient" under California's Compassionate Use Act of 1996, or because the person tested positive for marijuana, unless the employer demonstrates the employee is impaired while at work. This bill is intended to legislatively overrule the California Supreme Court's decision in Ross v. Ragingwire Telecommunications, Inc. (2008) 42 Cal.4th 920, which held employers need not accommodate employee medical marijuana usage. Similar versions of this bill have previously passed the Legislature but were vetoed by the former Governor.
Bill Would Require Employers to Maintain Insurance Coverage during Pregnancy-Related Leaves (SB 299)
Government Code section 12945 currently prohibits employers from refusing female employees disabled by pregnancy, childbirth or a related medical condition to take up to 4 months leave from work. This bill would prohibit employers from refusing to maintain and pay for coverage under a group health plan for an employee who takes such qualifying leaves. However, the employer would potentially be entitled to recover from the employee the premiums paid if the employee failed to return to work after the leave expires unless the employee qualified for one of the bill's identified statutory exceptions.
Meal Period Exemption Proposed for Transportation Industry Employees (SB 316)
In 2010, then-Governor Schwarzenegger approved a bill (AB 569) exempting from the Labor Code's meal period provisions employees in particular industries (e.g., construction, commercial drivers, etc.) if covered by a collective bargaining agreement containing specified items, including meal period provisions. This bill would add employees in the transportation industry, as defined in IWC Wage Order Number 9, to the list of employees exempt from California's meal period requirements. A fairly similar bill (SB 319) would exempt transportation industry employees whose work places them in an armored car in shifts during a workday.
Several Bills Propose Amendments to California's Alternative Workweek Schedule Requirements (SB 367 and SB 378)
Labor Code section 511 authorizes employers to utilize so-called "alternative workweek schedules" to avoid paying daily overtime in certain situations, but the fairly rigorous requirements for enacting such schedules limits their usage. The first bill, known as the Small Business Workplace Flexibility Act of 2011 (SB 367), would permit individual employees at small employers (less than 25 employees) to request a flexible workweek schedule, thus bypassing the "work unit" approval process. A second bill (SB 378) would permit employers to offer "regularly scheduled alternative workweek" schedules authorizing more than 10 hours a day provided the employer pays overtime as set forth in Labor Code section 511(b).
Increased Workplace Smoking Prohibitions Proposed (SB 575)
Labor Code section 6405.5 currently prohibits smoking of tobacco product inside an "enclosed space" (as defined) at a place of employment, and authorizes civil fines for violations. This bill would expand the prohibitions on workplace smoking to include "owner-operated businesses" (except where the owner-operator is the only employee) and eliminate most of the currently specified exceptions that permit smoking in certain work environments (e.g., hotel lobbies, bars and taverns, tobacco shops, banquet rooms, warehouse facilities and employee break rooms).
FEHA and Unruh Act to Prevent Genetic Information Discrimination? (SB 559)
This bill would amend the Unruh Civil Rights Act (Civil Code § 51 et seq.) and FEHA, as well as other statutory anti-discrimination provisions (e.g., contained in the Education Code, etc.), to prohibit discrimination on the basis of "genetic information" as defined in the bill.
Employer Good Faith Defense Proposed (SB 883)
This bill would preclude employers from being liable for Labor Code or Wage Order violations if the employer establishes that at the time of the alleged violation, it was acting in good faith and in compliance with or reliance upon an applicable employment statute or regulation (e.g., a Labor Commissioner or Department of Labor opinion, etc.)
AGENCY
Federal
DHS' E-Verify Self-Check Program Takes Effect March 18, 2011
The Department of Homeland Security (DHS) has recently announced that its new E-Verify Self-Check program will be effective March 18, 2011. Under this voluntary program, an individual may check his or her work authorization status through E-Verify prior to employment, and prior to an employer conducting a similar E-Verify inquiry regarding this individual. Previously, only employers had access to the E-Verify database. The DHS states this program is intended to allow individuals to identify and correct potential errors prior to the individual's application for employment. The DHS' proposed rule is available athttp://edocket.access.gpo.gov/2011/2011-3490.htm.
JUDICIAL
California
California Supreme Court Holds Arbitration Agreements May Not Require Employees to Waive Labor Commissioner Hearing Regarding Wage Disputes
An employee seeking to recover unpaid wages may either pursue judicial relief by filing a civil action or pursue administrative relief by filing a claim with the Labor Commissioner pursuant to a special statutory scheme codified in Labor Code sections 98 through 98.8 (a so-called Berman hearing). In this case, after an employee initiated Berman proceedings with the DLSE to recover vacation pay, the employer moved to compel arbitration pursuant to the parties' agreement requiring arbitration for all employment-related disputes (except for several narrow inapplicable exceptions). The trial court refused to compel arbitration finding it premature until after the Berman hearing, but the appellate court reversed and ordered arbitration. In a 4-3 decision, the California Supreme Court held that an employer-imposed arbitration agreement cannot require an employee to waive his or her entitlement to a Berman hearing for wage disputes, although the employer can require arbitration for a post-Bermanhearing appeal.
The Court concluded that an employee's entitlement to recover wages is an unwaiveable statutory right, and that a Berman hearing provides a number of legislatively-enumerated procedural and substantive advantages that would be jeopardized if an employee must immediately proceed to formal arbitration. Amongst these, the Court noted Berman hearings are relatively informal (i.e., an employee need not retain counsel) and can be resolved on an expedited basis with limited discovery and pleadings. Moreover, an employee who prevails at aBerman hearing can rely on the Labor Commissioner to enforce an award and potentially represent the employee, while an employer challenging the award through appeal must post an undertaking equal to the award and has almost no chance of recovering its attorneys' fees. Thus, the Court concluded an employer cannot require as a condition of employment that an employee waive his or her entitlement to a Berman hearing if the employee elects an administrative rather than a judicial remedy for a wage dispute.
However, the Court also held that an arbitration agreement may be enforced either if an employee initially elects civil litigation rather than an administrative remedy, or if either party attempts to appeal the Labor Commissioner's determination; in those instances, the parties' dispute or the post-Bermanappeal would proceed before an arbitrator rather than in civil court. Significantly, the Court also noted that not only would the statutory protections afforded an employee after a successful Berman hearing (i.e., employer must post undertaking, potential Labor Commissioner representation of employee, etc.) still apply in the arbitration proceeding, but also that the arbitration agreement must also satisfy the heightened requirements for other non-waiveable statutory claims (e.g., FEHA, etc.). In other words, and for example, the employee would not bear any unique arbitration-related costs (e.g., arbitrator fees, etc.) and would be entitled to recover all remedies otherwise available. (Sonic-Calabasas A, Inc. v. Moreno (2011) ___ Cal.4th ___, 2011 Cal. LEXIS 1831.)
(NOTE: the Court did not say employers could not enforce arbitration agreements for wage disputes, but held only that these arbitration provisions did not apply until after the administrative Berman hearing if the employee so elected. As a practical matter, however, the Court inclusion of the Bermanhearing protections along with the other employee-protections in arbitrations (e.g., employer pays all arbitrator fees) makes it unlikely employers will attempt to enforce arbitration provision after a Berman hearing).
Employees May Recover up to Two Premium Wage Payments per Day for Missed Meal and Rest Periods
Labor Code section 226.7 requires an employer who fails to provide an employee with a meal or rest period to pay that employee one additional hour of pay (a so-called "premium payment") for each day that the meal or rest period is not provided. An undecided issue has been the number of premium payments an employee may receive each day, with employees arguing they may receive up to two payments if both a meal and rest period is missed, and employers arguing employees may recover only a single premium payment per "work day." In 2009, a federal district court in California held the Industrial Wage Orders treat these as separate violations and, thus, employees may recover up to two premium payments in a single day if both a meal and rest period is missed. (See Marlo v. UPS (C.D. Cal. 2009) 2009 U.S.Dist.Lexis 41948.) However, since lower federal district court decisions are not binding in California, it remained to be seen whether California state courts would adopt a similar rule.
A California court of appeal has recently followed Marlo and held that employees may recover up to two additional hours of pay on a single work day for meal and rest period violations if both a meal and rest period is missed. The California appellate court first concluded that the legislative history to section 226.7 supported this interpretation, noting it was enacted concurrently with the Industrial Wage Orders which are structured such that meal and rest period violations are treated as separate violations. The court also concluded allowing up to two premium payments would further public policy by dissuading employers who had already failed to provide a rest period (and already owed an hour premium pay) from also not providing a meal period. (United Parcel Service, Inc. v. Superior Court (ex rel Allen) (2011) ___ Cal.App.4th ___, 2011 Cal.App.LEXIS 181.)
Appellate Court Applies Armendariz' Factors to Independent Contractors and Invalidates Arbitration Agreement
In Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th83, the California Supreme Court identified certain "minimum requirements" for arbitration agreements involving non-waiveable statutory claims, including under FEHA (e.g., neutral arbitrator, written arbitration decision, reasonable discovery, no limitation on remedies, employer bears arbitrators fees, etc.). In this FEHA sex harassment suit filed by several independent contractors, a California appellate court held these factors also apply to independent contractor claims under FEHA, and concluded this agreement was unenforceable because it was procedurally and substantively unconscionable.
The court found procedural unconscionability from the fact the agency presented this agreement on a "take it or leave it" basis with only several minutes to review and did not provide a copy of the agreement to the contractors. The court also noted the agreement improperly shortened the limitations period for filing claims (from one year to 180 days) and authorized the arbitrator to automatically award arbitration fees to the employer if it prevailed. The court also declined to sever these multiple, offending provisions which made the agreement "rife with unconscionability," and instead invalidated the entire arbitration agreement. (Wherry v. Award, Inc. (2011) ___ Cal.App.4th ___, 2011 Cal.App.LEXIS 199.)
Employee Who Shows up to Work Simply to be Notified of Termination Decision Entitled to Only Two Hours Reporting Time Pay, and must Demonstrate Actual Injury to Recover for Wage Statement Violations
A discharged employee filed a class action alleging the employer failed to provide the proper amount of "reporting time" pay when he went to the employer to learn of his termination. Although the employee had not been scheduled to work that day and had been paid 2 hours reporting time pay to attend a brief-termination meeting, he claimed he was entitled to reporting time pay equal to half of his normal work schedule (i.e., 4 hours pay). The California appellate court concluded the employer properly paid the two hours owed under Wage Order 5-2001, and also rejected the employee's wage statement claim, noting the employee could not demonstrate an actual injury.
The court noted that Section 5(A) of Wage Order Number 5-2001 requires employers to pay their employees no less than 2 hours and no more than 4 hours at the employee's regular rate of pay for each workday the employee is required to report to work and does report, but is not put to work for less than half of the employee's regularly scheduled workday. The court noted this provision provides two alternative reporting time mechanisms: if the employee is required to work that day the employee is entitled to a half-shift reporting wage not to exceed 4 hours, but if the employee is not scheduled to work and only reports for a meeting, the employee is entitled to the minimum payment of 2 hours. In this case, the employer paid the employee the requisite two-hour reporting time payment which adequately compensated him for a termination meeting lasting less than a minute.
The court also rejected the employee's wage statement claim under Labor Code section 226 noting an employee must suffer actual injury as a result of a knowing and intentional failure by an employer to comply with the statute. The court held an employee cannot simply claim one of the nine itemized requirements is missing from a wage statement, but instead must demonstrate how that allegedly missing information actually caused injury. (Price v. Starbucks (2011) ___ Cal.App.4th ___, 2011 Cal.App.LEXIS 186.)
Another California Appellate Court Concludes Employers Need Only "Provide" Employees with Opportunity to Take a Meal Period
Employees and employers continue to await the California Supreme Court's long-awaited decision in Brinker concerning an employer's meal period obligations, and specifically whether an employer need only "provide" an opportunity to take a meal period, or must "ensure" the meal period is actually taken. Unfortunately, although Brinker appears fully briefed, no oral argument has been set and a final decision is not expected until at least mid-2011.
In the interim, another California court of appeal has defeated a class certification request in a wage and hour class action on the grounds the Labor Code only requires employers to make meal periods available, but need not compel or ensure the employee actually takes the meal period. The appellate court also precluded class certification on the employees' rest period claims on the grounds the employer demonstrated it maintained policies authorizing paid rest periods, and since employees can decide not to take such rest periods, individualized questions would predominate regarding any employee's reason for not taking an authorized rest period. The court also denied class certification on the employees' wage statement claim under Labor Code section 226 on the grounds the employees must demonstrate actual injury to recover the identified statutory penalties.
(Tien v. Tenent Healthcare Corp. (2011) ___ Cal.App.4th ___, 2011 Cal.App.LEXIS 182.)
(NOTE: the California Supreme Court will likely soon grant review in Tien, thus rendering it unciteable pending a final decision in Brinker.)
California Court Upholds "Explicit Mutual Wage Agreement" that Pre-determines Overtime Compensation
An employee sought substantial amounts of overtime claiming the parties' written agreement to pay him $880 per week did not include the approximate 26 hours of overtime, thus entitling him to 26 hours per week of overtime at a rate of $33 (1 ½ times the $22 hourly rate resulting from dividing $880 by 40). The employer countered that the parties' written agreement constituted an "explicit mutual wage agreement" which lawfully compensated him both for his regular rate at $11.14 and provided an hourly overtime wage of $16.71. Both the trial court and the California court of appeal ruled in the employer's favor concluding the parties' agreement constituted an enforceable explicit mutual wage agreement that remains valid under California law notwithstanding the DLSE's contrary conclusion.
The court first concluded that Labor Code section 515 does not invalidate explicit mutual wage agreements despite subsection (d)'s language that "[f]or purposes of computing the overtime rate of compensation required to be paid to a nonexempt full-time salaried employee, the employee's regular hourly rate shall be 1/40th of the employee's weekly salary." The court also declined to follow the DLSE Enforcement Manual's interpretation that such agreements are no longer permissible following the enactment of Labor Code §515 in 2000.
Instead, the court concluded an employer and employee may lawfully agree before the employee starts work to pay the employee a guaranteed salary so long as the employee receives at least one and a half times the employee's basic rate for any hours worked beyond the statutorily defined workday of eight hours. The court noted this agreement must specify: (1) the days the employee will work each workweek; (2) the number of hours the employee will work each workday; (3) the specific amount of the salary the employee is guaranteed to be paid; (4) the employee is informed and agrees to the basic hourly rate of pay upon which the salary will be based; (5) the employee is informed and agreed the agreed-upon salary covers the employees straight-time hours and overtime hours; and (6) the agreement is reached before the work is performed. (Arechiga v. Delores Press, Inc. (2011) 192 Cal.App.4th 567.)
(NOTE: although a favorable result for this employer, employers should be careful relying upon such agreements at least until the review period has expired, given the potentially very-high cost of making a mistake; a contrary result in this case would have entitled the employee to 3 years worth of overtime (26 hours per week at a rate of $33) plus attorneys' fees).
Appellate Court Concludes Independent Contractor Issue Requires Trial
Teamster union member drivers who owned their own trucks filed a wage and hour class action against a "common carrier" transportation business alleging they were misclassified as independent contractors. The trial court granted summary judgment for the transportation company concluding the drivers were properly classified as independent contractors, but the California court of appeal reversed holding whether the drivers were employees or independent contractors presented a question of fact. The appellate court first noted that summary judgment would be appropriate only if the independent contractor issue involved no disputed inferences or evidence, and it reiterated that the parties' label for their relationship is not dispositive (here, the parties' agreement stated the drivers were independent contractors).
The court also reiterated that the "right to control work" remains the most significant consideration, but it must also consider other secondary factors, including the right to discharge at will, and the nature of the business and services, including whether the one performing services is engaged in a distinct occupation or business. The court noted the fact the defendant/carrier did not control the "manner and means" of the services (i.e., which routes the drivers took to haul loads, etc.) was a factor suggesting independent contractor status, but was not enough to establish this status as a matter of law. The court also noted numerous factors suggestive of an employee relationship including that the collective bargaining agreement described the drivers as employees, that the carrier issued W-2 forms to the plaintiffs and withheld taxes, and offered and paid for health benefits for the drivers who were paid hourly and could be summarily dismissed. (Arzate v. Bridge Terminal Transport, Inc. (2011) 192 Cal.App.4th 419.)
Non-Union Members Entitled to Notice and Opportunity to Object Before Private Information Provided to Union
During collective bargaining, the union sought disclosure of personal information (e.g., name, address, phone number) for all non-union county employees. The California court of appeal concluded disclosure was required, but also concluded that the non-union members had a reasonable expectation of privacy in this information provided to their employer. As such, they were first entitled to notice and an opportunity to opt-out of the disclosure even if the union otherwise had a legal entitlement to this information. (LA County Employee Relations Commission v. Service Employees International Union (2011) ___ Cal.App.4th ___, 2011 Cal.App.LEXIS 209.)
Appellate Court Concludes Prevailing Employer Not Entitled To Recover Attorneys' Fees on Meal and Rest Period Claims
An employer that successfully defended various wage-related claims, including for missed meal and rest periods, sought to recover its attorneys' fees under Labor Code section 218.5 which authorizes a "prevailing party" to recover fees and costs in actions for "nonpayment of wages, fringe benefits or health and welfare or pension fund contributions." (The employer did not seek attorneys' fees for successfully defending the overtime claims since Labor Code section 1194 authorizes only employees to recover fees for overtime disputes). In a somewhat interesting ruling, a California appellate court concluded the employer could not recover its fees because the "wages" owed for meal and rest period violations under Labor Code section 226.7 are somehow different than the "wages" contemplated under Labor Code section 218.5. However, the employer was entitled to recover its statutory costs (approximately $20,000) in defending against the employee's wage and hour claims. (McGann v. United Parcel Service, Inc. (2011) ___ Cal.App.4th ___, 2011 Cal.App.LEXIS 211.)
Claims Adjusters for Third Party Administrator Properly Classified as Exempt
Claims adjusters employed by a third party administrator (TPA) filed a wage and hour class action seeking unpaid overtime contending they were misclassified as administratively exempt. A California appellate court affirmed summary judgment in the TPA's favor finding the claims adjusters were exempt administrative employees under Wage Order No. 4 applicable to professional technical, clerical, mechanical and similar occupations.
The appellate court noted the administrative exemption from overtime under Wage Order 4 applied to persons whose duties and responsibilities involve the performance of office or non-manual work directly related to general business operations of either his or her employer, or his or her employer's customers. The court first declined to apply the so–called "administrative/production" dichotomy noting it is simply one possible analytical tool and only to be applied in appropriate circumstances not present in t