California Still Revising Harassment Training Regulations

The California Fair Employment and Housing Commission met on August 29 and revised the sexual harassment training regulations further. My previous post summarizing the regs is here. If you would like a redline copy of the current revision, please email Jennifer or me.

The most significant modification is that employers may elect to use a "training year" for all supervisors, such that each supervisor is trained once at some point in every other calendar year. For example, the employer could pick 2007 as a training year for all supervisors, thereby requiring all supervisors to be trained again by the end of 2009. (New supervisors and new hires still would have receive initial training within six months of hire or promotion). The regs' other alternative is to track each supervisor's training individually, ensuring that supervisor is trained on a bi-annual schedule. This change should help employers who would not be able to keep up with each supervisor's "anniversary" date for training purposes.

The final regulations should be out by the end of this year.

DGV

Bad ADEA Release Held Invalid

I previously have posted on well-intentioned releases gone wrong. Here's another installment.

Separation agreements and releases of claims under the Age Discrimination in Employment Act are not valid unless they comply with the technical requirements of the Older Workers' Benefits Protection Act of 1989. These agreements must, among other things, be written in clear language, advise the employee to seek an attorney, provide up to 21 days (45 in case of a layoff of two or more employees) for the employee to consider the release, and a 7-day revocation period. When a release does not follow the OWBPA requirements, the employee may keep the severance and sue under the ADEA.

In Syverson v. IBM Corp., the Ninth Circuit held IBM's release was insufficiently clear, thereby invalidating the age discrimination release and allowing a class of laid-off employees to sue for age discrimination. Unfortunately for IBM, the Eighth Circuit already held that the release was invalid. The Ninth Circuit, however, performed its own analysis, and reached a similar conclusion.

The main problem with this release was that it contained a release of all claims (including ADEA claims), but also contained a "covenant not to sue," exempting ADEA claims. A release extinguishes a claim; a covenant not to sue is a promise not to assert a right in court.

The employees argued the release was unclear because it left the reader with the impression that he/she could bring a lawsuit under ADEA even after signing the release. IBM argued (reasonably) that the covenant not to sue was significant because it provided IBM protection from employees who released claims but then filed lawsuits anyway. IBM explained the release invalidated the claim, but the covenant not to sue would permit IBM to recover its defense costs. Why carve out the ADEA claim from the covenant not to sue? IBM said it intended to comply with the EEOC rule that a covenant not to sue cannot be used to preclude employees from challenging the validity of the ADEA release in court.

The Ninth Circuit said that the IBM covenant not to sue was ambiguous and hard to understand. The tension between the covenant and release was sufficient to invalidate the ADEA release.

So, if you use a "standard" release for employees 40 and over, you may wish to obtain a tune-up in light of this decision. Additionally, federal courts have been scrutinizing the validity of "birthday lists" required for effective ADEA releases in the context of layoffs. So, be careful out there!

DGV

California Appeals Court Interprets Bounty Hunter Amendments

The Private Attorneys General Act of 2004 is more commonly known as the "Bounty Hunter law" or "PAGA" - depending on whom you ask. This is the law that authorized employees to sue in court for "civil penalties," previously recoverable only by the state Labor Commissioner. PAGA also includes a "catch all" penalty to make sure most every provision of the Labor Code is associated with a penalty for non-compliance. One important catch is that employees suing under PAGA must share penalties recovered with the state.

Shortly after its passage, employees and their lawyers brought countless class actions for every conceivable violation of the Labor Code. In one of the more frequently cited examples, an employee sought tens of millions in penalties under PAGA because a poster was printed in the wrong font size.

The abuse of this law was so rampant, the Legislature amended the law just a few months after it became effective. The amendments were passed as "urgency" legislation that took effect immediately upon its passage. The amendments created a "safe harbor," requiring employees to notify the Division of Labor Standards Enforcement and the employer of perceived violations, so they might be corrected before a lawsuit was filed.

So much for the safe harbor. In Dunlap v. Superior Court (Bank of Am.), the Court of Appeal decided that a plaintiff may seek "statutory penalties" that were available under the Labor Code pre-PAGA, without complying with PAGA's notice requirement. Dunlap brought a class action for a pu-pu platter of Labor Code violations, including failure to pay overtime, failure to keep payroll records, meal and break violations, and failure to pay wages timely. Bank of America moved to strike, alleging Dunlap did not follow PAGA's notification prerequisites. Dunlap argued that he was suing for "statutory penalties," authorized by Lab. Code section 218, which existed long before the passage of PAGA.

The Court of Appeal decided Dunlap was correct. Even though PAGA specifically requires employees to follow its notice requirements for violations of the substantive laws Dunlap included in his Complaint, the Court of Appeal decided Lab. Code section 218 permitted a separate civil action without following PAGA. The Court distinguished between "statutory penalties" available to employees before PAGA and "civil penalties" recoverable only after meeting PAGA's exhaustion requirements.

This case cuts a huge loophole into PAGA. Why would an employee take the time to follow PAGA's exhaustion requirements and then divvy penalties with the state when the employee can bring his or her own action under section 218? (Yes, Virginia, that's a rhetorical question). PAGA will be used only for the obscure violations subject to penalties that previously could be recovered only by the Labor Commissioner, or the new catch-all penalty.

The Court of Appeal invited the Legislature to clarify PAGA again if its interpretation was incorrect. The PAGA"s notice provisions give employers a chance to comply with the many Labor Code mandates before facing huge liabilities for penalties. If the Labor Code is meant to protect employees, rather than create hundreds of opportunities for "gotcha" lawsuits, the Legislature should make whatever clarification is necessary to overturn Dunlap.

DGV

Employers Who Hire Illegals Sued by Other Employers

California employers may wish to review their I-9 compliance policies and procedures. According to this article, an employment agency has accused a grower in California of hiring illegal aliens as an "unfair business practice." According to the article, the lawsuit was brought under Californians broad unfair competition law, Bus. and Prof. Code section 17200. The theory is that hiring illegal aliens is an unlawful business practice under the UCL, because the lower wages unlawful workers will accept results in an unfair competitive advantage for the employers who hire them.

Under Prop. 64, which narrowed the UCL's applicability, the plaintiff will have to establish "standing," or actual injury in fact in order to maintain the lawsuit. For example, an employer would have to establish that it lost business to a competitor that hires illegal aliens and could set prices lower as a result.

"Illegalemployers.org" a group that seems to have been formed specifically to target employers that hire undocumented workers, is referenced in the article.

It seems that the marketplace is going to implement its own immigration reform since the government's efforts to enact immigration reform legislation stalled back in April.

DGV

California Minimum Wage Update

The L.A. Times reports Governor Arnold Schwarzenegger and the legislature compromised on a minimum wage increase from $6.75 to $8.00. Under the current version of the bill, the increase will be phased in over two years. The first increase, which will take effect on 1/1/07, will be $0.75 (to $7.50 / hour). The second increase, from $7.50 to $8.00, will take effect on 1/1/08.
Under the compromise, the minimum wage will not be indexed to inflation.

If passed, the minimum wage increase will affect California's executive, administrative, and professional exemptions from overtime, which require a minimum salary of twice the minimum wage. So, the new minimum salary requirements will be $31,200.00 on 1/1/2007 and $33,280 on 1/1/2008.

The bill has not yet been signed, so it is possible additional changes will be made. We will keep you posted.

DGV

"Pretext" standard concisely explained

Jottings by an Employer's Lawyer reports on the Seventh Circuit's recent articulation of what constitutes "pretext" in discrimination cases. Judge Frank Easterbrook, writing for a panel in Yindee v. CCH, Inc.:

once a non-retaliatory explanation has been articulated, [*7] the plaintiff must show that this explanation is a pretext for discrimination. To do this the employee must establish that the explanation is a lie, which permits a jury to infer that the tale has been concocted to conceal an unlawful truth. See St. Mary's Honor Center v. Hicks, 509 U.S. 502, 113 S. Ct. 2742, 125 L. Ed. 2d 407 (1993).It is not enough to demonstrate that the employer was mistaken, inconsiderate, short-fused, or otherwise benighted; none of those possibilities violates federal law. See Forrester v. Rauland-Borg Corp., No. 05-4650 (7th Cir. June 29, 2006) (collecting authority); Pollard v. Rea Magnet Wire Corp., 824 F.2d 557 (7th Cir. 1987). Poor personnel management receives its comeuppance in the market rather than the courts.

Gee, I wish I had written that.

Closer to home, the California Supreme Court has articulated a similar standard:

On the other hand, if nondiscriminatory, Bechtel's true reasons need not necessarily have been wise or correct. While the objective soundness of an employer's proffered reasons supports their credibility . . . the ultimate issue is simply whether the employer acted with a motive to discriminate illegally. Thus, "legitimate" reasons . . . in this context are reasons that are facially unrelated to prohibited bias, and which, if true, would thus preclude a finding of discrimination. . . . "

Guz v. Bechtel Nat., Inc., 24 Cal. 4th 317, 358 (Cal. 2000).

DGV

Yes, you have no class action

After the California Supreme Court's decision in Sav-On Drug Stores, Inc. v. Superior Court (Rocher), some optimistic plaintiffs' lawyers opined virtually all overtime class actions (those where the plaintiff challenged companies' classification of managers as "exempt" from overtime) automatically would be certified.

Au contraire. In this post-Sav-on decision, Dunbar v. Albertson's, the First District Court of Appeal held the trial court was within its discretion to deny class certification in an overtime case.

DGV

Employer's Policy Defeats Employee's Claim Computer Was Private

The 9th Circuit U.S. Court of Appeals rejected an employee's argument that a search of his work computer violated the 4th Amendment. In U.S. v. Ziegler, an employee of a private corporation was caught downloading child pornography. The FBI investigated, arrested him and he was prosecuted. He challenged the search of his computer under the 4th Amendment of the U.S. Constitution, which guarantees protection from warrantless intrusions by the government.

The 9th Circuit held the search did not violate the 4th Amendment because the employee had no reasonable expectation of privacy in his work computer. The most significant fact in the Court's view was that the employer had a policy permitting random monitoring and searching of the computer.

The Court of Appeals in part relied on a California court's decision, TBG Ins. Services Corp. v. Superior Court (Zieminski) (2002) 96 Cal.App.4th 443 , 117 Cal.Rptr.2d 155. In that case, the California Court of Appeal held that an employee had no expectation of privacy in a company-owned computer that the employee used at his home for work and personal mixed use:

As can be seen, Zieminski knew that TBG would monitor the files and messages stored on the computers he used at the office and at home. He had the opportunity to consent to TBG's policy or not, and had the opportunity to limit his use of his home computer to purely business matters. To state the obvious, no one compelled Zieminski or his wife or children to use the home computer for personal matters, and no one prevented him from purchasing his own computer for his personal use. With all the information he needed to make an intelligent decision, Zieminski agreed to the Company's policy and chose to use his computer for personal matters. By any reasonable standard, Zieminski fully and voluntarily relinquished his privacy rights in the information he stored on his home computer, and he will not now be heard to say that he nevertheless had a reasonable expectation of privacy.

The 4th Amendment applies only to the government. But California's constitutional right to privacy can be asserted against private employers. Therefore, employers that do not have electronic monitoring policies risk claims that email / internet monitoring is an invasion of California workers' privacy. It seems to me that a company employing California workers would be vulnerable to such a claim even if the corporation is located out of state.

DGV

San Francisco Employers - Wallet alert

The SF Chronicle reports San Francisco Mayor Gavin Newsom just signed a new law guaranteeing health insurance for San Francisco residents. The SF Health Access Program or SF HAP appears to have been developed by the "Universal Healthcare Council," a group comprised of business and labor leaders in and out of healthcare. Here is a whitepaper on their recommendations.

The cost is estimated at $200 million (about $2400 per uninsured resident), which means it will be much higher. The white paper says the program will be financed by a "combination of sources, including tax dollars, local business contributions and individual premiums," according to the report.

According to FAQ's developed by SF's health care agency, non-profits with under 50 workers and small employers with under 20 workers will be exempt initially. Employers with less than 100 employees will have to contribute up to $1.06 per employee hour on some form of health insurance, reimbursement of medical costs, or contribution to the new "SF HAP." That number increases to $1.60 per hour for employers of over 100 workers.

DGV

California minimum wage update

The Sacramento Bee reported on 8/5/06 that the California Industrial Welfare Commission deadlocked on a proposal to raise the California minimum wage - to $9.78(!). There are a number of proposed bills to raise the minimum wage, as this 8/4 Sacramento Bee article reports. I would think there will be some kind of minimum wage increase. The last one was in 2002.

DGV

California Supreme Court Says: "At Will" Means "At Will"

Sometimes a cigar is only a cigar. But an offer letter that says "your employment may be terminated 'at-will'" always is an unambiguous statement that employment is "at will." The California Supreme Court unambiguously so held in Dore v. Arnold Worldwide, Inc.

Here's the offer letter:

Brook, please know that as with all of our company employees, your employment with Arnold Communications, Inc. is at will. This simply means that Arnold Communications has the right to terminate your employment at any time just as you have the right to terminate your employment with Arnold Communications, Inc. at any time.

The lower court apparently decided that because the offer explained "at will" meant that employment could be terminated "at any time," it left open the possibility that the grounds for termination somehow were other than "at will."

In a refreshingly brief opinion based on logic and common sense, the Supremes unanimously decided that the agreement contained no ambiguity whatsoever:

The language of the parties' written agreement is unambiguous. AWI's letter plainly states that Dore's employment with AWI was at will. Indeed, as the trial court observed, Dore admitted as much and further admitted that he "read, signed, understood and did not disagree with the terms of the letter." Even the Court of Appeal acknowledged that the term "at will" when used in an employment contract normally conveys an intent employment may be ended by either party "at any time without cause." Although AWI's letter also states that AWI would provide Dore a "90 day assessment" and "annual review," these provisions, in describing AWI's employee evaluation schedule, neither expressly nor impliedly conferred on Dore the right to be terminated only for cause.

The Supreme Court also held that the 90-day probationary period and the promise of an annual review did not create any expectation of continued employment contrary to employment at will:

Although AWI's letter also states that AWI would provide Dore a "90 day assessment" and "annual review," these provisions, in describing AWI's employee evaluation schedule, neither expressly nor impliedly conferred on Dore the right to be terminated only for cause.

Right. Introductory periods are not inconsistent with at-will employment, contrary to what some have said. Of course, where employment is "at will" an introductory period is not legally required. But they do serve a purpose, in that they manage employees' expectations and provide management with a safe harbor for making an initial assessment regarding whether a hire is going to work out.

****Shameless self-promotion follows********

When you read the opinion, don't stop before you get to the page listing the attorneys! That's right, your humble correspondent helped write an amicus brief supporting the employer (surprise). Would it have been nice if the opinion had included a cite to our brief? Natch.

DGV