California
At the close of this year’s legislative session, Governor Jerry Brown has signed into law a handful of employment-related bills, and vetoed several others. The following employment bills have been signed into law and take effect January 1, 2013, unless otherwise indicated:
Presumed Damages for Wage Statement Violations (SB 1255)
Labor Code section 226 requires employers to provide itemized wage statements containing statutorily-enumerated categories of information, and provides that an employee suffering injury as a result of a knowing and intentional failure by the employer to provide this information is entitled to the greater of all actual damages or a specified statutory damages (e.g., $50 for initial violation and $100 for per employee for each subsequent violation) not to exceed $4,000. This bill responds to several conflicting court opinions on the definition of injury, and provides a statutory definition of what constitutes “suffering injury” for purposes of recovering damages for wage statement violations.
For instance, these amendments specify that an employee will be deemed to “suffer injury” if the employer fails to provide a wage statement. An employee will also be deemed to suffer injury if the employer fails to provide accurate or complete information regarding the other specified items on the itemized wage statement and the employee cannot “promptly and easily” determine from the wage statement one or more of the following: (a) the amount of gross wages or net wages paid to the employee during the pay period or any of the other information required to be provided on the itemized wage statement; (b) which deductions the employer made from gross wages to determine the net wages paid to the employee during the pay period (although the employer would still be able to aggregate deductions where permitted); (c) the name and address of the employer and, if a farm labor contractor, the name and address of the legal entity that secured the services of the employer during the pay period; or (d) the name of the employee and only the last four digits of his or her social security number or an employee identification number.
The bill defines “promptly and easily” as meaning a “reasonable person would be able to ascertain the information without reference to other documents or information.” The amendments clarify that a “knowing and intentional failure” does not include an isolated and unintentional payroll error due to a clerical or inadvertent mistake. This bill also provides that the reviewing hearing officer or fact finder may consider as a relevant factor whether the employer, prior to the alleged violation, has adopted and is in compliance with a set of policies, procedures and practices which fully comply with Labor Code section 226.
The final version of the bill also includes language incorporating the amendments to Labor Code section 226 as a result of two other bills, AB 1744 [wage statement requirements for temporary service providers] and AB 2674 [employee inspection rights], discussed below.
New Wage Statement Requirement for Temporary Services Employers (AB 1744)
This bill also amends Labor Code section 226 and requires, on or after July 1, 2013, that if the employer is a “temporary services employer” (as defined in Labor Code section 201.3(a)(1)), the required itemized wage statement must also contain the rate of pay and total hours worked for each temporary services assignment.
This bill also slightly amends the Wage Theft Prevention Act (AB 469) enacted in 2011, which required employers to provide to non-exempt employees at the time of hire a written notice containing specifically-enumerated information (e.g., rate of pay, etc.). This bill requires that temporary services employers ensure this notice include the name, the physical address of the main office, the mailing office if different from the physical address of the main office and the telephone number of the legal entity for whom the employee will perform work, and any other information the Labor Commissioner deems material and necessary. According to the author, this notice requirement was included already under existing law but had not been explicitly included in new Labor Code section 2810.5 (added as part of the Wage Theft Prevention Act), thus creating some confusion. This amendment clarifies the notice requirement as it relates to providing basic information to employees of temporary services employers.
Explicit Mutual Wage Agreements that Predetermine Overtime Compensation Prohibited (AB 2103)
Labor Code section 510 establishes an 8-hour workday and a 40-hour workweek and requires payment of overtime (as specified) for non-exempt employees who work beyond these timeframes. In Arechiga v Delores Press, Inc. (2011) 192 Cal.App.4th 567, a California court of appeal upheld an explicit written mutual wage agreement that pre-determined a non-exempt employee’s overtime compensation and included it as part of the employee’s salary. The Arechiga court concluded Labor Code section 515 did not specifically invalidate such agreements and declined to enforce the DLSE’s Enforcement Manual that held such agreements were impermissible following the enactment of Labor Code section 515 in 2000.
As expected, the Legislature overwhelmingly passed and Governor Brown signed a bill nullifying Arechiga. This bill amends Labor Code section 515 by adding new subsection (d)(2) to provide that “payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee’s regular, non-overtime hours, notwithstanding any private agreement to the contrary.”
New Wage Garnishment Floor Enacted (AB 1775)
This bill makes several changes to the Wage Garnishment Law in order to essentially raise the so-called “garnishment floor” to increase the minimum amount of an employee’s (a.k.a. “judgment debtor’s”) weekly earnings that are exempt from wage garnishment. Previously, federal law limited the amount of an employee’s earnings subject to such withholding orders. This bill amends California’s Code of Civil Procedure sections 706.011 and 706.050 to increase the amount of a judgment debtor’s weekly earnings that are exempt from levy under an earnings withholding order from 30-times the federal minimum wage to 40-times the California minimum wage.
Specifically, this bill provides that the maximum amount of disposable earnings of a judgment debtor for any workweek that is subject to levy under an earning withholdings order shall not exceed the lesser of the following amounts: (a) twenty-five percent of the individual’s “disposable earnings” for that week; or (b) the amount by which the individual’s “disposable earnings” for that week exceeds 40-times the state’s minimum hourly wage in effect at the time the earnings are payable. The bill also enumerates the various multipliers to be used to determine the maximum amounts of disposable earnings subject to garments that are proportionately equivalent for pay periods of different intervals. This bill also defines “disposable earnings” as the portion of an individual’s earnings that remain after deducting all amounts required to be withheld by law.
Social Media Privacy Law Enacted for Employees (AB 1844)
As expected, California has followed the legislative trend at both the federal and state level by enacting a bill limiting an employer’s access to an employee’s or applicant’s personal social media. Specifically, under new Labor Code section 980, an employer will be prohibited from requiring or requesting an employee or applicant from doing any of the following: (a) disclose a username or password for the purpose of accessing personal social media; (b) access personal social media in the presence of the employer; or (c) divulge any personal media, except as part of employer investigation (discussed below). For purposes of this bill “social media” means an electronic service or account, or electronic content, including, but not limited to, videos, still photographs, blogs, video blogs, podcasts, instant and text messages, e-mail, online services or accounts, or Internet Web site profiles or locations.
This bill also prohibits an employer from discharging, disciplining, threatening to discharge or discipline, or otherwise retaliating against an employee or applicant for not complying with a request or demand by the employer that violates these provisions. However, while California law generally authorizes the Labor Commissioner to investigate Labor Code violations, a recent Senate amendment specifies that the Labor Commissioner would not be required to investigate or determine any violation of this new law.
When initially introduced, some employers complained these prohibitions were too broad and may preclude employers from properly investigating allegations of employee misconduct. As amended, this bill specifies these prohibitions do not affect an employer’s existing rights and obligations to request an employee to divulge personal social media reasonably believed to be relevant to an investigation of allegations of employee misconduct or employee violation of applicable laws and regulations, provided that the social media is used solely for purposes of that investigation or a related proceeding. This new law also does not prohibit an employer from requiring or requesting an employee to disclose a username, password, or other method for the purpose of accessing an employer-issued electronic device. Similarly, while an employer cannot retaliate against an employee for not complying with an employer request that violates this new law, the bill also specifies that employers are not prohibited from terminating or otherwise taking an adverse action against an employee or applicant if otherwise permitted by law.
Lastly, while the bill clearly prohibits employers from requiring employees to divulge passwords, etc. it does not contain any specific provisions precluding employers from accessing publicly-available social media (although employers should still consider other generally-applicable considerations in that context).
California has now joined Maryland as states prohibiting employers from requiring employees divulge such social media access information [Maryland’s version (S.B. 433) takes effect October 1, 2012]. Other states are expected to similarly pass such bills shortly, and the Social Networking Online Protection Act (SNOPA) is pending at the federal level.
Expanded Religious Accommodation Duties under the FEHA (AB 1964)
California’s Fair Employment and Housing Act (FEHA) precludes discrimination based on religion, and absent an undue hardship, requires employers to reasonably accommodate “religious beliefs or observances,” which is presently defined to include observance of the Sabbath or holy days and reasonable travel time prior to and subsequent to a religious observance. Governor Brown has signed this bill amending the FEHA’s religious accommodation provisions to include “religious dress and grooming practices” (as defined) as a belief or observance requiring potential accommodation.
The bill specifies that “religious dress practice” shall be construed broadly to include the wearing or carrying of religious clothing, head or face coverings, jewelry, artifacts, and any other item that is part of the observance by an individual of his or her religious creed. “Religious grooming practice” shall also be construed broadly to include all forms of head, facial, and body hair that are part of the observance by an individual of his or her religious creed.
This bill specifies that an accommodation is not reasonable if the accommodation requires segregation of an employee from customers or the general public. However, the bill also states that an accommodation is not required if it would result in a violation of FEHA or any other law prohibiting discrimination or protected civil rights. Lastly, the bill clarifies that the same criteria for assessing “undue hardship” in the disability accommodation context apply in the religious accommodation context.
DIR to Publicly List All Prevailing Wage Laws (SB 1370)
California law requires that workers employed on a public work, as defined, be paid not less than the general “prevailing rate” of per diem wages, as specified. Governor Brown has also signed this bill which responds to criticisms that there is no single location where employers can identify all projects subject to state mandated prevailing wage requirements. Accordingly, this bill requires the Director of Industrial Relations (DIR) to post on its website a list of every California code section and the language of those sections that relate to the prevailing wage rate requirements for workers employed on a public work projects. The DIR would be required to post this information on its website on or before June 1, 2013, and to update that list each February 1st thereafter.
Exemption from Written Commission Requirements for Certain Temporary Variable Incentive Payments (AB 2675)
As a reminder, last year California enacted AB 1396 which amended Labor Code sections 2751 and 2752 and required that all employers by January 1, 2013, provide a written contract containing specified information to employees who are paid commissions. As enacted, AB 1396 excludes from this writing requirement specified short-term productivity bonuses or bonus and profit sharing plans.
This new bill responds to employer criticisms that these written contractual requirements are unduly burdensome in the temporary incentive context (e.g., car salesman) where employers might briefly provide increased commission levels to increase productivity during a specific period. Accordingly, this bill amends Labor Code section 2751 and specifies that “commission” for purposes of the written contractual requirement does not apply to “temporary, variable incentive payments that increase, but do not decrease, payment under the written contract.”
“Breastfeeding” Added to the FEHA’s Protections Against Sex Discrimination (AB 2386)
The FEHA precludes discrimination based on sex, which is presently defined to include gender, pregnancy, childbirth and medical conditions related to pregnancy or childbirth. This bill adds “breastfeeding and related medical conditions” to the FEHA’s definition of “sex” as protected categories for unlawful employment discrimination under state law. In effect, this bill supplements the lactation accommodation requirements contained in Labor Code sections 1030 through 1033, by prohibiting employers from discriminating or retaliating against female employees who express milk at work after they return from pregnancy disability or CFRA baby-bonding leave.
This bill is intended to address several recent federal court decisions suggesting that discrimination for breastfeeding at work does not constitute sex or gender discrimination.
Employee Personnel File Inspection Rights Amended (AB 2674)
As many employers know there were a number of practical questions had previously arisen relating to employees’ ability to inspect their personnel files under Labor Code section 1198.5. Governor Brown has signed this law which is intended to address some of these questions by establishing “minimum standards” for the inspection and receipt of a copy of personnel records.
For instance, current section 1198.5 requires the employer to permit inspection at “reasonable intervals” but it did not previously specify whether former employees have inspection rights, and did not identify a particular time limit to comply or enumerate a specific penalty for non-compliance. This bill makes clear both current and former employees have inspection rights, as do their representatives, and requires an employer to permit inspection no later than 30 days after receiving a written request (unless mutually extended to 35 days from the original request).
This bill also requires employers, upon an employee’s request, to provide copies of these records at a charge not to exceed the actual cost of reproduction within these same time frames. For former employees, the employer may mail a copy of the records if the employee reimburses the employer for actual postal expenses.
This bill also outlines the procedures for inspecting or copying personnel files, and requires employers to develop a form that shall be made available upon verbal request to the employee’s supervisor or employer’s representative. This bill also specifies that current employees will generally be permitted to inspect records where the employee works, whereas former employees may inspect at the location where the records are stored. This bill also specifies that employers will be required to maintain personnel records for a period of not less than three years after termination of employment.
This bill specifies that these inspection rights would cease during the pendency of any litigation by a current or former employee relating to a personnel matter. It also provides alternative inspection/copying mechanisms involving former employees terminated for violations of law, or an employment-related policy involving harassment or workplace violence.
As to former employees, an employer is only required to comply with one request per year to inspect or copy their personnel records. Employers will also not be required to comply with more than 50 requests in one calendar month for inspection or copying made by a representative or representative of employees. The bill clarifies that section 1198.5 does not apply to employees covered by a collective bargaining agreement if the agreement expressly provides for all of the following: (a) the wages, hours of work and working conditions of employees; (b) a procedure for the inspection and copying of personnel records; (c) premium wage rates for all overtime hours worked; and (d) a regular rate of pay of not less than 30 percent more than the state minimum wage rate.
While section 1198.5 previously had no specifically-enumerated penalty, current or former employee or the Labor Commissioner may recover a penalty of $750 and attorneys’ fees, as well as injunctive relief.
Lastly, this bill amends Labor Code section 226(a), which requires employers to maintain a “copy” of wage statements, to clarify that “copy” includes computer-generated statements.
EDD Able to Share New Hire Information With Joint Enforcement Strike Force (AB 1794)
California law requires employers to file with the Employment Development Department (EDD) specified information on new employees, and authorizes the use of that information for specified purposes, including the administration of the law regarding unemployment insurance benefits. This new law amends Unemployment Insurance Code section 1088.5 and until January 1, 2019, authorizes the EDD to provide the specified new employee information to the Joint Enforcement Strike Force on the Underground Economy, the Contractors’ State License Board, and the State Compensation Insurance Fund. The bills’ proponents state this information sharing is intended to target employers and contractors who fail to properly pay employees or fail to obtain the legally-required workers’ compensation insurance.
New Law Targets ADA Access Abuses (SB 1186)
Although well-intentioned, the California and federal laws ensuring individuals with disabilities equal access to public facilities have resulted in claims of litigation abuse. This new law is intended to curb some of these abuses by reducing statutory damages and providing statutory protections for defendants who timely correct construction-related accessibility violations of the Unruh Civil Rights Act. For example, this bill caps statutory damages at $1,000 rather than $4,000 for any defendant who corrected all violations in the claim within 60 days of being served with the complaint provided the defendant satisfied several other conditions. Similarly, small business defendants (as defined) are entitled to have statutory damages reduced to $2,000 when that defendant corrects the violation with 30 days of being served with the complaint. The bill also allows defendants to seek a stay of proceedings pending an early evaluation conference, and allow the court, when assessing an attorneys’ fees award, to consider the reasonableness of plaintiff’s conduct in light of their obligation to mitigate damages.
Vetoed Bills
As always, there were also a number of significant employment-related bills that did not pass this year, but may resurface in the future, including bills proposing to:
- Prohibit employers from advertising for job openings in a manner suggesting unemployed applicants need not apply (AB 1450);
- Requiring the DIR to adopt regulations governing the working conditions of domestic work employees (AB 889); and
- Enact new Heat Illness Prevention regulations for agricultural employers (AB 2346).
JUDICIAL
California
Another Post-Brinker Decision Upholding Denial of Class Certification Because Individual Issues Predominate
Previously in this case, prior to the present decision, the court of appeal published an opinion concluding that employers must provide employees with breaks, but need not ensure employees take breaks, that individual disputes dominated all of plaintiffs' claims, and that the class representatives were inadequate. After the California Supreme Court’s decision in Brinker Restaurant Corp. v. Superior Court the case was remanded with directions to vacate the decision and reconsider in light of Brinker. The court found its decision was consistent with Brinker, and affirmed the trial court's order denying class certification for a second time.
With respect to meal breaks, the court held an employer satisfies its obligation to provide a meal break if it relieves its employees of all duty, relinquishes control over their activities, permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so. On the other hand, the employer is not obligated to police meal breaks and ensure no work is performed. The court held that requiring enforcement of meal breaks would place an undue burden on employers, particularly those employers whose employees are numerous or who do not appear to remain in contact with the employer during the day. Bona fide relief from duty and the relinquishing of control satisfies the employer's obligations, and work by a relieved employee during a meal break does not thereby place the employer in violation of its obligations and create liability for premium pay.
In this case, the court found overwhelming evidence that Lamps Plus' policies allowed and encouraged meal periods. Namely, all nonexempt employees were required to sign a form stating they acknowledge the company upholds the rest and meal break laws, they will comply with the policy, and they will report any missed breaks to human resources. Further, Lamps Plus made clear its commitment to follow the law by authorizing supervisors and managers to take disciplinary action to enforce the policy, up to the point of suspending employees who did not take their scheduled breaks. Also, the evidence showed that Lamps Plus did not have a universal practice of denying employees their breaks.
As to its review of the trial court’s decision denying class certification, the court of appeal reviewed the evidence and agreed that individual issues predominated. Whereas some employees declared they often missed meal and rest breaks, others declared they always received meal and rest breaks. Further, some employees declared their meals breaks were uninterrupted, and others claimed interruptions of varying degrees. The court emphasized that even the named plaintiffs had divergent experiences, despite all having worked at the same store and having reported to the same store manager. Given these variances, plaintiffs failed to demonstrate a common practice or policy. Similarly, class members’ testimony and declarations varied widely on the off-the-clock and waiting time claims, undermining any inference of a companywide policy requiring off-the-clock-work or failing to pay wages.
Note to Employers: The weight afforded by this appellate court to Lamps Plus’ written policy regarding meal and rest breaks in concluding that the company’s policies allowed and encouraged breaks emphasizes the importance of promulgating and enforcing a comprehensive meal and rest break policy.
(Flores et al. v. Lamps Plus, Inc., et al. (2012) 209 Cal.App.4th 35)
Nature of Interstate Activity Determines Applicability of Motor Carrier Exemption and Source of Employer's Vacation Benefits Determines Applicability of ERISA preemption
Plaintiff and other truck drivers filed a class action against their employer alleging wage and hour violations, including claims for failure to pay overtime compensation, failure to pay promised vacation benefits in full, and failure to pay vacation benefits due upon termination of employment pursuant to Labor Code § 227.3. The trial court summarily adjudicated these three counts in favor of the employer, holding plaintiffs were exempt from federal overtime compensation and the other two counts were preempted by ERISA. The court of appeal held summary adjudication was proper as to plaintiffs’ overtime claim and the count for failure to pay promised vacation benefits to current employees, but improper as to the count of failure to pay vacation benefits due upon termination of employment.
The FLSA requires employers to pay employees covered by the Act one and one-half times their normal hourly wage for each hour worked in excess of forty hours per week. The motor carrier overtime exemption applies to individual employees if (1) the employer is a carrier subject to the jurisdiction of the Secretary of Transportation, and (2) the individual employees are engaged in activities directly affecting the safety of operation of motor vehicles in interstate or foreign commerce. Here, the court found plaintiffs were exempt from the FLSA's overtime compensation requirements pursuant to the motor carrier exemption because plaintiffs reasonably could be expected to be assigned to interstate routes.
In deciding the vacation benefits claims, the court looked to Massachusetts v. Morash (1989) 490. U.S. 107, which held that a policy of maintaining a separate fund to pay employees vacation benefits constitutes an employee benefit plan governed by ERISA, but a policy of paying vacation benefits from an employer's general assets does not constitute an employee benefit plan governed by ERISA. Accordingly, ERISA preempts an action under state law for failure to pay vacation benefits only if the employer maintains a separate account for payment of vacation benefits and does not pay its employees vacation benefits from its general assets.
Here, the employer's filings with the IRS stated that its vacation benefits plan was funded from general assets of the employer. However, in support of its motion for summary adjudication, the employer's president filed a declaration stating that the employer had contributed to the vacation benefits and that the IRS forms were incorrect. The court held these competing filings created a triable issue of fact precluding summary adjudication of both the vacation benefits claims.
Nevertheless, the court found the employer's vacation benefits policy was legal with respect to current employees. Although the trial court erred in basing summary judgment of the vacation benefits for current employees on ERISA preemption, its ruling based on the legality of the employer's policy was proper. The employees argued that the employer's policy of paying its drivers $500 (and later $650) per week of unused vacation time violated Labor Code § 227.3, which states that upon termination of employment, an employee's unused, vested vacation time "shall be paid to him as wages at his final rate in accordance with such contract of employment or employer policy respecting eligibility or time served." The court held Labor Code § 227.3, by its express terms, applies only to the situation where an employee is terminated without having taken off his or her vested vacation time. Neither Labor Code 227.3 nor any other authority supports the proposition that, apart from the situation where an employee is terminated with unused vacation time, a vacation benefits policy must provide for payment of vacation time at an employee's regular rate of pay.
(Bell v. H.F. Cox, Inc., (2012) 209 Cal.App.4th 62)
Court Finds Employees Not Entitled to Reporting Time Pay or Additional Compensation for Working Split-Shifts for Attending Mandatory Store Meetings
In this case brought by former retails sales and customer service representatives of AirTouch, plaintiffs alleged AirTouch improperly failed to pay "reporting time pay" for days when employees were required to report to work just to attend work-related meetings and contend they were owed "split-shift" compensation for days on which they attended a meeting in the morning and worked a regular shift later the same day.
Reporting time pay is required where an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee's usual or scheduled day's work. In this circumstance the employee must be paid for half the “usual or scheduled days’ work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee's regular rate of pay. (Cal. Code Regs., tit. 8, section 11040, subs. 5(A).) When an employee is scheduled to work, the minimum two hour pay requirement applies only if the employer furnishes work for less than half the scheduled time. As such, the court found the former employee was not entitled to receive "reporting time pay" for attending meetings at work, because all the meetings were scheduled in advance and appellant worked at least half the scheduled time.
A split-shift is "a work schedule, which is interrupted by non-paid non-wo