San Francisco Minimum Wage Increases to $12.25 Effective May 1, 2015

The hourly minimum wage rate in San Francisco increases to $12.25, effective May 1, 2015.  Proposition J, which San Francisco voters passed on November 4, 2014, will raise the hourly minimum wage to $15.00 by 2018.  The Minimum Wage Ordinance requires employers to post updated posters or notices informing employees of their rights.

An updated version of the “Official Notice” for the 2015 minimum wage increase is available here: http://sfgsa.org/Modules/ShowDocument.aspx?documentID=12780.

EEOC Issues Proposed Rule Which Would Amend ADA Regulations as They Relate to Employer Wellness Programs

On April 20, 2015, the Equal Employment Opportunity Commission (EEOC) issued a proposed rule which will provide guidance on how to structure an employer wellness program without violating federal anti-discrimination laws, including the Americans with Disabilities Act (ADA).

Many employers that provide health coverage also provide wellness programs to improve the health of their employees and reduce health care costs.  Some wellness programs ask employees to engage in healthier behavior, while other programs use a health risk assessment or biometric screening to determine an employee’s health risk factors, such as body weight and high blood pressure or cholesterol. 

Although Title I of the ADA limits the circumstances in which employers may inquire about employees’ health or require that they undergo medical examinations, it allows such inquiries and examinations if they are voluntary and part of a wellness program.  Similarly, the Health Insurance Portability and Protection Act (HIPAA), as amended by the Patient Protection and Affordable Care Act (ACA), allows wellness programs to offer incentives so long as the program meets certain criteria. 

The EEOC’s proposed rule seeks to clarify what does and does not constitute a permissible wellness program in light of the ADA’s protections.  Specifically, the proposal makes a number of changes to the ADA regulations, including the following:

1.Wellness programs must be reasonably designed to promote health or prevent disease.

To meet this standard, the wellness program must have “a reasonable chance of improving the health of, or preventing disease in, participating employees,” and must not be overly burdensome, a subterfuge for violating the ADA or other laws prohibiting discrimination, or highly suspect in the method chosen to promote health or prevent disease.

2.Wellness programs must be voluntary.

An employer cannot require employees to participate in a wellness program and may not deny health insurance coverage under any of its group health plans or particular benefit packages with a group health plan, or generally limit the extent of such coverage, for non-participation.  An employer may not take any other adverse action against employees who refuse to participate in the wellness program or who fail to achieve certain health outcomes.

Additionally, if the wellness program is part of a group health plan, the employer must provide employees with a notice that clearly explains what medical information will be obtained, how the information will be used, who will receive the information, the restrictions on its disclosure, and the methods the covered entity uses to prevent improper disclosure.

3.Employers may offer limited incentives for employees to participate in wellness programs or to achieve certain health outcomes.

The maximum allowable incentive an employer may offer employees for participation in a wellness program that is part of a group health plan and includes disability-related questions or examinations, or for achieving certain health outcomes, may not exceed 30 percent of the total cost of employee-only coverage.  The total cost of coverage is the amount the employer and employee pay, not just the employee’s share of the cost.

4.Employers must maintain medical information in a confidential manner.

Employers may only receive medical information in aggregate form that does not disclose, and is not reasonably likely to disclose, the identity of specific employees, except as is necessary to administer the plan and for other limited purposes described in the regulations. 

5.Employers must provide reasonable accommodations that enable employees with disabilities to participate in the wellness program and to earn incentives offered by the employer.

Interested members of the public are invited to provide input on this proposal for 60 days from the date of publication, or until June 19, 2015.  The EEOC has identified specific issues of particular interest to aid in the development of a final rule, such as whether any additional safeguards are necessary to ensure that employees' participation in wellness programs is voluntary.

The full text of the proposed rule can be found at: https://www.federalregister.gov/articles/2015/04/20/2015-08827/amendments-to-regulations-under-the-americans-with-disabilities-act.

JUDICIAL DEVELOPMENTS

Supreme Court Decides that Courts have the Power to Review EEOC Conciliation Efforts under Title VII

In this case, a female applicant applied for a coal miner job with a mining company and was not hired.  She filed a charge with the EEOC alleging sex discrimination.  The EEOC investigated and found reasonable cause to believe that the applicant as well as other female applicants were denied a mining job based on their sex. 

Before filing suit, the EEOC sent a letter to the mining company advising that a representative would be contacting them to begin the conciliation process, and a year later sent a letter that the conciliation process was unsuccessful.  It then filed its lawsuit to which the mining company asserted as a defense that the EEOC had not attempted to conciliate in good faith.  The EEOC replied that its efforts were not subject to judicial review.  Appeals followed a trial court decision in favor of the employer, and a subsequent reversal by the appellate court which agreed with the EEOC.

The United States Supreme Court disagreed with the EEOC and appellate court, stating, “Congress rarely intends to prevent courts from enforcing its directives to federal agencies” unless the statute in question provides otherwise.  The Court found that nothing in Title VII prevented judicial review, and held that a court may narrowly review whether the EEOC tried to engage the employer in a discussion in order to give the employer a chance to remedy the alleged discriminatory practice.  The Court ruled that a sworn affidavit by the EEOC would suffice to meet this requirement, but if the employer submitted evidence to the contrary, then a court could determine whether the conciliation obligations were met.  If not met, the remedy would be to order the EEOC to undertake the required conciliation efforts.

Mach Mining, LLC v. EEOC (2015) — U.S. —

Class Action Fairness Act (CAFA) Removal Granted After Class Certification Expands Class Size And Amount In Controversy 

In this case, an employer initially removed a rest break class action to district court under the CAFA based on class allegations contained in the employees’ amended complaint (CAFA grants jurisdiction to federal courts in civil actions where the amount in controversy exceeds $5 million.)  The employer submitted evidence that there was $5.5 million dollars in controversy, based on estimates taken from the employees’ amended complaint regarding the alleged number of missed rest breaks.  The district court remanded the case to state court based, in part, on the employees’ assertion that the amount in controversy was fewer than CAFA’s required $5 million. 

The case progressed in state court, and the state court tentatively certified a class of all assistant managers who did not receive breaks.  This class certification expanded the number of employees in the class – the amended complaint had purported to certify only a class of assistant managers who “worked alone.”  Due to the increase in class size the amount in controversy expanded over $5 million.  The employer removed again, arguing the amount in controversy was now satisfied.  The district court remanded because the removal was untimely as it was based on the same class definition as the first removal, and the employer appealed. 

The court of appeals determined that the order of class certification was tantamount to an amended pleading, altering the class definition.  The class certification was therefore the first time a pleading established that the amount in controversy satisfied CAFA jurisdiction.  The employer’s second removal was therefore timely, and satisfied CAFA’s amount in controversy requirement.  The case was remanded to district court for further proceedings.

Reyes v. Dollar Tree Stores, Inc. (9th Cir. April 1, 2015) 781 F.3d 1185

Court of Appeals Decision Questions the Enforceability of Bans on Re-employment in Settlement Agreements

In this case, an emergency-room doctor formerly affiliated with the California Emergency Physicians Medical Group (CEP) sued the group after losing his staff membership at one of its facilities.  His suit alleged various state and federal causes of action including racial discrimination.  CEP removed the case to federal court.

Prior to the scheduled trial date, the parties orally agreed in open court to settle the matter.  In return for a substantial monetary amount, the doctor consented to relinquish his current suit, to forego all other possible claims against CEP, and to waive any and all rights of employment with CEP, or at any facility that CEP may own or with which it may contract in the future (the "no-employment provision").  The presiding magistrate judge asked the doctor to confirm that he was willing to bind himself in this manner.  The doctor confirmed his willingness to be bound by the agreement, but "extremely reluctantly.”  After terms of this agreement were reduced to writing, the doctor refused to sign the formal agreement.  The doctor also moved the district court to set it aside, arguing that the no-employment provision violated California Bus. & Prof. Code §16600, which provides that a contract is void if it restrains anyone from engaging in a lawful profession, because it restrained him from the lawful practice of his profession.

The district court denied the doctor’s motion based solely on its finding that §16600 did not apply because the no-employment provision was not a covenant not to compete.  The district court then dismissed the action and the doctor appealed. 

The court of appeals held that the district court abused its discretion in holding that Cal. Bus. & Prof. Code § 16600 did not apply solely because the no-employment provision in the settlement agreement did not constitute a covenant not to compete.  Although the appellate court conceded California courts have not yet settled whether a contract can impermissibly restrain professional practice under §16600, the panel remanded the case to the district court for further proceedings to determine whether the no-employment provision constitutes a “substantial restraint” on the doctor’s medical practice in violation of §16600. 

Golden v. Cal. Emergency Physicians Med. Group (2015) 2015 U.S. App. LEXIS 5642 

California Court of Appeal Grants Defendant Attorneys’ Fees for Trade Secret Claim Brought in Bad Faith

The case concerned allegations that a third-party recruiter, hired by Defendant Company, contacted at least nine Plaintiff Company employees (among candidates from other companies) with touchscreen experience about open positions at Defendant Company.  Plaintiff Company subsequently filed suit, maintaining that Defendant Company had "illegally" targeted Plaintiff Company employees to obtain Plaintiff Company’s touchscreen technology trade secrets.  Plaintiff Company also contended that a listing of its employees with touchscreen experience was itself a trade secret, despite a showing that the information was publicly available on LinkedIn and at the U.S. Patent and Trademark Office (USPTO).  After bringing unsuccessful motions for a restraining order and to seal documents, and facing a demurrer to its amended complaint, Plaintiff Company dismissed its suit without prejudice.  A motion for fees followed, which the trial court granted. 

The court of appeal affirmed the trial court's finding that Plaintiff Company brought its trade secret claim against Defendant Company in bad faith and awarded Defendant Company $180,000 in attorneys' fees.  First, the appellate court affirmed that Defendant Company was the prevailing party, finding that Plaintiff Company had dismissed its case to avoid an adverse determination on the merits of its claims.

Second, applying the judicial test for bad faith (which requires a showing of both objective and subjective bad faith in bringing an action), the court determined Plaintiff Company brought its claim in bad faith.  In doing so, the court looked at, among other things, what evidence Plaintiff Company had prior to filing suit.  Specifically, the appellate court noted that Plaintiff Company did nothing more than accuse Defendant Company of attempting to recruit its employees, which Defendant Company was entitled to do under state law.  The court also found that Plaintiff Company’s claims were grounded in the generic concern that Plaintiff Company employees, if hired by Defendant Company, would disclose Plaintiff Company’s trade secrets.  These claims, however, do not support a claim for actual or threatened trade secret misappropriation.  The appellate court also considered Plaintiff Company’s "evasive" and "equivocal" pleadings and its litigation misconduct that included objections to providing evidence to support its claims and its belated trade secret disclosure.  Ultimately, the appellate court admonished Plaintiff Company for bringing "incoherent," "nonsensical" claims that were asserted for an improper purpose.

Cypress Semiconductor Corporation v. Maxim Integrated Products, Inc., et al. (2015) ____ Cal.App.4th ___.