San Francisco Minimum Wage Going UP

1/1/09 - the SF Minimum Wage increases to $9.79. And let's not forget that poster! Here's a free one. The $9.79 minimum applies to all private sector employers. But city government contractors have a higher minimum wage $11.54. And here is your poster, government contractor! Happy new year anyway.

Court of Appeal: Employer Must Disclose Classmember Info Even Over Their Objection?

The general trend has been that the courts do not mind -- at all -- if employees' names and addresses are disclosed to plaintiffs' attorneys in class action cases. The most an employer can hope for is the right to send out an "opt out" form before disclosure, where employees must affirmatively deny their consent to release the information.

Well Crab Addison (operator of Joe's Crab Shack) decided to go one better: send out the "opt-out" form to all employees before it was required to disclose the information in discovery, but without specifically discussing the lawsuit at issue. Here's the form:

RELEASE OF CONTACT INFORMATION
From time to time, Joe’s Crab Shack (the “Company”) may be asked to provide your contact information, including your home address and telephone number, to third parties. The Company may be asked to provide such information in the context of legal proceedings, including class action lawsuits.

We understand that many employees may consider this information to be private and may not want it released. Accordingly, please indicate whether you consent to the disclosure of your contact information by marking the appropriate box.
__ No, I do not consent to the Company’s disclosure of my contact information to third parties.
__ Yes, I consent to the Company’s disclosure of my contact information to third parties.
__ I would like to be asked on a case-by-case basis whether I consent to the disclosure of my contact information to a particular third party, and my contact information should only be provided if I affirmatively consent in writing.

No sale, said the Court of Appeal, affirming the trial court:

to the extent the right to privacy is based on the release forms, there are strong reasons for not giving effect to those forms. Employees indicating that they did not want their contact information disclosed, or wanted disclosure on a case-by-case basis, were unaware at the time they signed the forms of the pending litigation to enforce their statutory wage and overtime rights through a class action lawsuit. We may presume that, had they known about the litigation, their response on the form would have been different. Additionally, the forms apprised them that their contact information could be disclosed if required by law, so they were aware of the limitation on privacy offered by the forms.

So, nice try. With a proper disclosure about any existing litigation, it's possible such a form could be given more deference by a court. But the courts seem unreceptive to efforts to preclude plaintiffs from contacting employees.

The case is Crab Addison, Inc. v. Superior Court and the opinion is here.

Court of Appeal: How to Calculate Overtime on a Bonus

The First District Court of Appeal held that Costco properly calculated overtime on a production bonus in Marin v. Costco, opinion here.

I am frequently asked how bonuses and commissions affect overtime calculations. Basically, the "half time" (or whole-time in the case of double-time overtime) is due on the bonus, once the bonus is allocated to the hours that were necessary to generate it. You worked 1000 total hours including 20 overtime hours during a bonus period. The bonus is $2000. The incremental hourly rate is $2000/1000 hours = $2.00 per hour. That is the amount of wages on which no overtime previously was paid. So, you owe: 1/2 * $2.00 per hour * 20 overtime hours worked = $20.00.

Get it? The court of appeal did. That's the federal formula, and the formula the DLSE endorses. The court did not mention that California law endorses the use of federal overtime calculation rules. But it does. The plaintiffs wanted the overtime to be calculated by dividing the bonus over the straight time hours and then paying time and one-half on that figure. That would have resulted in double counting. In addition, it would have ignored the simple fact that the employee had to work all hours to earn the bonus - straight plus overtime.

So, if your eyes are crossed, welcome to wage and hour law. The opinion is linked above. It's got a detailed explanation of the rule and the arguments in favor and against.

Enjoy your holiday!

Greg

New FMLA poster

Merry Christmas from the US DOL. Here's your new FMLA poster, necessary for complying
with the new regulations when they become effective next month.

Merry Christmas / Happy Chanukah / Happy Kwanzaa! Happy New Year, too.

Greg

Court of Appeal: No Defense Attorneys' Fees for Frivolous Claims?

The Court of Appeal agreed with the district court that Laura Young's FEHA claim for harassment against her former supervisor was frivolous, vexatious, etc. The trial court, however, awarded only one dollar in attorneys' fees against Young. The court's rationale was that since employer Exxon was going to pay the supervisor's fees, and since Exxon did not complain that the action against Exxon itself was frivolous, the court should not award fees that Exxon would ultimately recover.

Does that make a lot of sense? Yes, but only if you're gutting the attorneys' fees statute. Employers are responsible to pay for employees' defense costs under Labor Code section 2802, unless the employee is found to have engaged in actual unlawful harassment. So, a frivolous claim against an employee by implication is part of the claim against the employer, no? And given most claims against individual managers are barred as a matter of law, and given awards of attorneys' fees are as rare as hen's teeth anyway, one would think that a court would want to give effect to the Legislature's decision to permit an award of attorneys' fees when claims are frivolous. Right?

No. The court of appeal agreed with the trial court and held that where, as in this case, the employer is paying an individual employee's defense costs, the trial court need not award attorneys' fees if the claim against the employer is not frivolous. You don't believe me? Here's the quote:

In short, despite its finding that Young’s case against Lopez was frivolous and vexatious, the trial court had the discretion to deny attorney fees to Lopez. Because the award would benefit only Exxon, a defendant which was not otherwise entitled to an award and which did not show it incurred any significant fees on Lopez’s behalf that it would not have incurred in any event, we see no abuse of discretion in the trial court’s decision.

By the way, the attorneys' fees statute, Government Code section 12965(b) is very simple and says nothing about differing standards for employers and employees.

In actions brought under this section,the court, in its discretion, may award to the prevailing party reasonable attorney's fees and costs, including expert witness fees, except where the action is filed by a public agency or a public official, acting in an official capacity.

The statute says nothing about basing awards on who pays the fees. I know it says "discretion," but the courts have held that prevailing plaintiffs are generally entitled to fees as a matter of right, while prevailing defendants have a heavy burden to establish the claims were "frivolous, unreasonable, or without foundation." I think the courts may have lost sight of the plain language of the statute over the years.

While I'm complaining, the Court of Appeal also decided not to publish its analysis of Young's claims on the merits. That means the bar will not benefit from the court's detailed analysis of Young's claims for discrimination, harassment, retaliation, etc. The decision should be published if only because Young claimed a mental disability and that her outbursts and conduct in violation of policy were attributable to the disability. The Court distinguished Gambini v. Total Renal Care, discussed here, and held that Young's disability did not exempt her from termination for her misconduct.

Anyway, I'm sure Exxon is happy to have won the case. But there was a dark lining in a silver cloud that may affect employment litigation for the rest of us. The opinion in Young v. Exxon is here.

Court of Appeal: Summary Judgment Against Plaintiffs Challenging Starbucks' Application

California employers cannot ask applicants to disclose certain convictions for marijuana-related misdemeanors that are more than two years old. Starbucks knew that, and included a disclaimer on the back of its application, viz:

CALIFORNIA APPLICANTS ONLY: Applicant may omit any convictions for the possession of marijuana (except for convictions for the possessions of marijuana on school grounds or possession of concentrated cannabis) that are more than two (2) years old, and any information concerning a referral to, and participation in, any pretrial or post trial diversion program.”

Although that may read like a proper disclaimer, it was included in a larger paragraph of disclaimers located away from the general convictions question, which did not exclude such marijuana convictions. So, the California disclaimer did nothing to stop Erik Lords and his band of merry putative classmembers from filing suit, claiming the application form was defective. Erik and co. wanted about $26 million in penalties. Aggrieved applicants get a penalty of $200 or actual damages for faulty applications.

The court of appeal agreed with the trial court and the plaintiffs that the general disclaimer was improperly placed away from the general convictions question. Had the properly worded disclaimer been placed next to the conviction question, it would have been legally correct, the court said.

But the court of appeal detected a couple of problems with Lords' prayer. [I kill me]. First of all, none of the named plaintiffs had a marijuana conviction. Second, all had read the allegedly hidden language. Third, none was denied employment because of a wrongfully disclosed conviction.

So, the court said:

We see nothing in the statute to support plaintiffs’ claim that the Legislature ntended to protect the privacy interests of job applicants who had no marijuana convictions in their background. As we explain below, we decline to adopt an interpretation that would turn the statute into a veritable financial bonanza for litigants like plaintiffs who had no fear of stigmatizing marijuana convictions.

The case is Lords v. Starbucks and the opinion is here.

No Punitive Damages for Meal and Rest Period Violations

While the wage and hour world waits for the Walmart decision, in which the court awarded roughly $170 million in meal period premiums, penalties and punitive damages. the other courts are working away.

Wait no longer. Ms. Brewer is a waitress at Cottonwood golf resort's restaurant. She sued for meal and break violations among a smorgasbord of other employment claims. She lost on her age discrimination claims. But she won on some Labor Code violations. The jury also awarded her punitive damages, over and above the meal and break premiums, penalties for improper wage statements, etc. (I bet you thought I was going to make food puns throughout this post, didn't you?)

The court of appeal reversed on punitive damages. The court decided that the Labor Code creates new rights not available at common law. Therefore, their remedies are exclusive. The court also held that a claim for unpaid meal periods and other Labor Code violations "arise" out of contract - the employment relationship. As such, punitive damages are not available as a matter of law.

Here's a long quote from the opinion to prove I read it, or at least that I know how to cut and paste:

We agree with Cottonwood’s contention, which Brewer does not dispute on appeal, that the Labor Code statutes regulating pay stubs (§ 226) and minimum wages (§ 1197.1) create new rights and obligations not previously existing in the common law. Moreover, those same statutes provide express statutory remedies, including penalties for the violation of those statutes that are punitive in nature, that are available when an employer has violated those provisions. Section 226, subdivision (e), provides that any employee “suffering injury as a result of a knowing and intentional failure by an employer to comply with [the pay stub requirements] is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not exceeding an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney’s fees.” Similarly, section 1197.1, subdivision (a) provides that any employer who pays or causes to be paid to any employee a wage less than the minimum wage “shall be subject to a civil penalty as follows: [¶] (1) For any initial
violation that is intentionally committed, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee is underpaid[;]
[¶] (2) For each subsequent violation for the same specific offense, two hundred fifty dollars ($250) for each underpaid employee for each pay period for which the employee is underpaid regardless of whether the initial violation is intentionally committed.” Here, Brewer sought and recovered the maximum $4,000 penalty available for Cottonwood’s pay stub violations, and the judgment contained an additional penalty of $15,300 pursuant to section 1197.1 for the overtime violations. We are not persuaded by Brewer’s argument that the remedies set forth in the statutory scheme were not intended to be the exclusive remedy available for statutory violations, and Brewer does not articulate any basis for concluding those penalties are so inadequate that other remedies should be permitted. Similarly, the
regulations requiring employers to provide meal breaks (§ 512) and rest breaks
(Cal. Code Regs., tit. 8, § 11090, subd. 12(A)), and providing numerous forms of
remedies for their violation, also appear to have created new rights and obligations not previously existing in the common law, and the statutory scheme provides “a comprehensive and detailed remedial scheme for its enforcement.” (Rojo v. Kliger, supra, 52 Cal.3d at p. 79.) Those remedies include an award in the nature of liquidated damages under section 226.7 (cf. Murphy v. Kenneth Cole
Productions, Inc. (2007) 40 Cal.4th 1094, 1112 [because “damages [from missed
meal and rest breaks] are obscure and difficult to prove, the Legislature may
select an amount of compensation [for the violation] without converting that
remedy into a penalty” for statute of limitations purposes]), injunctive relief
(see generally § 1194.5), and potential statutory penalties (see § 558). We are convinced that, because the meal and rest break provisions of the Labor Code “established a new and comprehensive set of rights and remedies for [employees]… [and] [n]o such specialized rights and remedies existed at common law… the remedy provided in the statute ‘is exclusive of all others unless the statutory remedy is inadequate.’ [Quoting Turnbull, supra, 219 Cal.App.3d at p. 827.]” (De Anza Santa Cruz Mobile Estates Homeowners Assn. v. De Anza Santa Cruz Mobile Estates, supra, 94 Cal.App.4th at p. 916.)

* * *
We are also convinced that, even were the remedies provided by the statutory scheme not the exclusive remedies for the new rights, punitive damages would nevertheless be unavailable because punitive damages are ordinarily limited to actions “for the breach of an obligation not arising from contract” (Civ. Code, § 3294), and Brewer’s claims for unpaid wages and unprovided meal/rest breaks arise from rights based on her employment contract. Brewer argues, without citation to relevant authority, that Cottonwood’s breach of its statutory obligations under the Labor Code is a “breach of an obligation not arising from contract,” thereby supporting the award of punitive damages.

However, in analogous situations, the courts have recognized that, when a statute imposes additional obligations on an underlying contractual relationship, a breach of the statutory obligation is a breach of contract that will not support tort damages beyond those contained in the statute.(See, e.g., Kwan v. Mercedes-Benz of North America, Inc. (1994) 23 Cal.App.4th 174, 187–192 [breach of Consumer Warranty law obligations is breach of contract and does not support tort damages for emotional distress].) We apprehend the Labor Code provisions governing meal and rest breaks, minimum wages, and accurate pay stubs constitute statutory obligations imposed only when the parties have entered into an employment contract and are obligations arising from the employment contract. The breach of an obligation arising out of an
employment contract, even when the obligation is implied in law, permits contractual damages but does not support tort recoveries. (Cf. Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 700.) Although Brewer relies on language from Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal.App.4th 1137, 1147 to assert prompt payment of wages involves sufficiently fundamental public polices that the willful failure to make such payments will support punitive damages, the court in Gould expressly recognized that, although a claim for wrongful discharge in violation of public policy would state a tort claim, a claim seeking tort recoveries based on the allegation the employer otherwise breached the employment contract agreement was barred by Foley. (Gould, at p. 1155.)

The case is Brewer v. Premier Golf Properties and the opinion is here.

IRS Standard Mileage Rate for 2009: $0.55 Per Mile

The IRS announced the standard mileage rates for 2009. Effective January 1, 2009, the reimbursement rate will be $0.55 for business use of a vehicle, $0.24 for moving and medical expenses, and $0.14 for service to charitable organizations. For the second half of 2008, the reimbursement rate actually was higher, at $0.585.

The IRS's announcement is here.

DGV

Definitely summary judgment. Definitely.

FEHA does not protect against bad managers, only decisions and actions with a discriminatory basis. “[I]f nondiscriminatory, [the employer’s] true reasons need not necessarily have been wise or correct. [Citation.] 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.” (Guz, supra, 24 Cal.4th at p. 358; see also Hersant, supra, 57 Cal.App.4th at p. 1005 [“‘The [employee] cannot simply show that the employer’s decision was wrong or mistaken, since the factual dispute at issue is whether discriminatory animus motivated the employer, not whether the employer is wise, shrewd, prudent, or competent.’”].)

So said the court of appeal in Mangano v. Verity, Inc. The opinion is here.

Basically, Mangano was a long term employee at Verity. Springsteel, the CFO, was his boss. Springsteel gave Mangano the nickname "rainman" because he had an uncanny memory, and he was a bit quirky. He also called him Tommy, instead of Tom. ::::Wow, that's why they passed anti-discrimination laws. -Ed. :::: Mangano was turned down for a promotion that was given to a clearly qualified outside candidate. When he applied, he complained about the nicknames, and Springsteel never used them again.

Little did Springsteel (or anyone else) know that Mangano later would be diagnosed with Asperger's syndrome, a form of autism. So, he sued for disability discrimination and harassment. The court of appeal upheld summary judgment. I only blogged about the case because of the point made in the quoted language above.

New FMLA Regulations Are Here

The federal DOL finalized its FMLA regulation revisions. We analyzed earlier drafts here and here. We'll publish a full analysis of the final regulations soon.

To find the new regulations, page down to p. 141 of the PDF, here. The first 140 pages are analysis and commentary. No one can read all that and stay awake. You'll put your eye out. Of course, that could earn you up to 12 weeks of leave....

Greg

H/T Ross Runkel

California's Wage Laws Reach Outside State's Borders

Multi-state employers - take note. In today's mobile world, employees travel from place to place, performing duties as the job requires. When an employee lives in Arizona and works all over the place, including California, must the employee be paid under California law?

Well, yes, at least for the work performed in California, according to the Ninth Circuit Court of Appeals. In what appears to be a straightforward application of "choice of law" principles, the court has probably wreaked havoc on payroll systems, human resources departments, and risk managers all over America. So, Oracle employed instructors who taught other companies' employees how to use Oracle software. Some of the employees lived in Arizona or Colorado, but performed some of the work (sometimes in partial weeks), in California.

The Court of Appeals said that when the non-resident employees work in California, California wage and hour law applies. The court did not say when this rule kicks in - what if an employee flies over California, just passes through, visits California for a one-day business trip, etc.? The question mark means: I dunno. But I know what my next article is going to be about.

The case is Sullivan v. Oracle Corp. Here is the opinion.

Greg

Area Blogger Reads Our Blog!

We have confirmation from teh InTeRw3bs that at least one person has read this page. Thanks to The UCL Practitioner for mentioning us in her Blawg Review # 183. And btw, the UCL Practitioner is always worth a read too if you pay any attention to California's Unfair Competition Law.

DGV

Election Day is a Vote on the Employee Free Choice Act

This is not a "partisan" blog. We don't care for whom you vote. We represent employers/ management, though. So, we tend to discuss legal developments through a prism of how they affect the employer. And that's. O.K.

I bring up the election because, let's face it, all blogs are about the election. Why should ours be any different? Oh, and it's pretty much a given that the fate of the so-called "Employee Free Choice Act" will turn on which candidate is elected President next Tuesday. It pays to know what the law is, what it will bring to your business, and whether you can live with it. We can certainly live with it here at SV (once we hire enough lawyers to handle all of the work that this law is going to generate for us.) Hint hint.

Essentially, the law (if passed) will make it possible for unions to organize workers without a secret ballot election, merely by signing up a "majority" of the workers in an appropriate bargaining unit. Once the union demonstrates its status as representative, contract negotiations must start within 10 days of the union's request. The parties must negotiate a first contract in 90 days. If the parties fail, then there's mediation. If you're ok with all this so far, then here's the part that might concern you if you are a business owner or manager (and maybe if you're a union member too): if mediation fails, a government appointed arbitrator will decide on a first contract for you. ("Hello, I'm the government arbitrator. I'm here to help. So, I'll be deciding the employees' wages, and what the terms of your contract will be, too!") If you don't believe, me, the link to the proposed law is here.

The private sector workforce is about 7% unionized now. When employers are able to explain to employees what unionization will bring, employers win the election about 50% of the time. But when employers are silent, unions win a vast majority of the time - possibly 80% of the time? If there is no secret ballot, no campaign and a union's representation will be based only on whether union organizers can convince employees to sign an authorization card at a pizza and beer fest down at the local union hall? Well, you do the math.

So, here's a selection of law firm articles on the EFCA. If you seek balance, try Yoga. Or you can Google the AFL-CIO's or union advocates' explanation of the law, too. Again, the text of the current version of the bill, HR 800, is here. There, now you can vote.

DGV

Son of Brinker?

Brinker's gone. But Brinkley's here! At least for now. In Brinkley v. Public Storage, Inc., the court of appeal issued a published opinion, in which it held that meal and rest periods merely must be provided, not forced. This holding tracks Brinker v. Superior Court (now on review).
The court in Brinkley relied on federal case law, the same cases on which the court of appeal in Brinker relied.

Given the similarity to Brinker, the Supreme Court may accept review of Brinkley under a "Grant and Hold" order. So, don't rely on Brinkley unless review is denied. We won't learn its fate for a couple of months.

The second key issue in Brinkley is the court's holding that the wage statement statute, Lab. Code section 226 requires proof of injury and some intent on behalf of the employer. That statute provides penalties of up to $4000 per employee for non-compliant wage statements....

Be careful out there!

DGV

DLSE: Brinker is Dead. Long Live Brinker!

Earlier this year, the California Division of Labor Standards Enforcement adopted the meal period standards that the Court of Appeal announced in the famous Brinker decision. We covered that DLSE memo here.

So now that the California Supreme Court decided to review the Brinker case, what will the DLSE do?

Well DLSE just issued a NEW memo in which it rescinds its Brinker memorandum, here. In its new "rescission" memo, the DLSE strongly suggests it will continue to enforce meal period laws such that an employer need not force employees to take meal periods; it simply must offer them. (So, to DLSE, Brinker is gone, but not forgotten).

Good news for employers facing DLSE claims. But in court, this area of the law remains pretty muddy.

Hat tip to Storm and Wage Law.

California Supreme Court Expands "Equitable Tolling" of Limitations Period

When an employee pursues internal remedies rather than filing a charge or lawsuit, the statute of limitations is tolled, the California Supreme Court said today. (That means the statute does not count the time during which the internal remedy is pursued, expanding the limitations period accordingly).

The Antelope Valley school district had a detailed internal procedure for investigating discrimination / harassment complaints. Plaintiff McDonald and others pursued the internal remedies. By the time they filed a discrimination charge with the Department of Fair Employment and Housing, more than a year had passed since the last discriminatory act.

The limitations period is tolled for "continuing violations," for pursuing mandatory administrative agency remedies, and for other reasons. But the Court expanded that legal doctrine to the employer's internal processes. So, if you have an investigation procedure, grievance steps, internal peer review, or other informal, voluntary alternative dispute resolution procedure, the statute of limitations may be "tolled" while those proceedings continue. It will be important to send a letter telling employees when the internal remedies are no longer in effect to trigger the statute. It will also be important to secure witness information, documents, and the like, given that the employer may face litigation over stale issues down the road.

The opinion is McDonald v. Antelope Valley Community College District and the opinion is here.

California Supremes Accept Review in Brinker

In a not-very-surprising development, the California Supreme Court accepted review of the Brinker v. Superior Court decision, discussed here and here. And here.

When the California Supreme Court accepts review, the opinion cannot be cited. So, the law now reverts to the pre-Brinker days. Which means you should read my old article, here.

However, there is one wrinkle that remains to be ironed out. The DLSE, our labor standards agency, has adopted the Brinker opinion as its enforcement position. Will the DLSE leave its interpretation in effect while the high court considers the case? We shall see. The discussion of the DLSE memorandum regarding Brinker is here.

DGV

Reminder to Post Voting Time Notice

So, I hear there's an election soon. There's a rumor it's November 4.

At least 10 days before the election, employers in California must post this notice. Employers also must give employees up to two hours off to vote if they are unable to vote outside of work hours. Here is information from the California Secretary of State about the law.

Ninth Circuit Upholds San Francisco's Health Care Ordinance

A panel of the Ninth Circuit upheld San Francisco's Healthcare Security Ordinance. The ordinance requires employers either to maintain a certain expenditure on health care for its employees or contribute the minimum to the city. The city operates a healthcare access plan, called Healthy San Francisco, funded by these taxes - er - contributions by the employers.

The Golden Gate Restaurant Association challenged SF's plan as preempted by ERISA.
Late in 2007, the district court held ERISA indeed preempted the ordinance. We posted on that here.

The district court's opinion lasted about a week. The Ninth Circuit stayed the district court's decision, foreshadowing its view that ERISA does not preempt the law. The Ninth Circuit panel decided the ordinance neither creates and ERISA plan nor "relates" to a plan. In its long opinion, the court rejected a series of arguments advanced by the Golden Gate Restaurant Association and a number of amici curiae, including the U.S. Department of Labor.
Unless or until the Supreme Court overrules this case, it will probably result in more local ordinances establishing mandatory health care systems. Employers will have to have different benefits coverage in different jurisdictions, pay the higher taxes, or increase coverage to the highest common denominator....

The case is Golden Gate Restaurant Association v. San Francisco, and the opinion is here.

Governor Vetoes AB 437, AB 2279, AB 2918, AB 3062, AB 3063

Governor Schwarzenegger vetoed several employment law bills:

AB 437 - would have stated the Legislature's intent to reject the U.S. Supreme Court's decision in Ledbetter v. Goodyear, regarding the statute of limitations in discrimination cases.

AB 2279 - would have required employers to accommodate the use of medical marijuana.

AB 2918 - would have outlawed most credit checks except in narrow and specified circumstances.

AB 3062 - would have expanded the Labor Code's protection of employees whose wages are garnished.

AB 3063 - would have codified more limits on pre-employment inquiries regarding criminal convictions.

California's Computer Professional Exemption Tweaked

California computer professionals enjoy a special exemption from overtime that has a duties component and a minimum pay component. Last year the Legislature rolled back the minimum pay requirement from $49 / hour down to $36 / hour. Governor Schwarzenegger just signed AB 10, which provides that an employee may be eligible for the special computer exemption if s/he earns a salary of over $75,000 per year. The salary and hourly rate are adjusted each year. AB 10 is here. This is an "urgency" statute, which means it takes effect immediately.

Governor Vetoes AB 2874 and SB 1583

AB 2874 (here)would have lifted the $150,000 cap on damages available in administrative hearings at the Fair Employment Housing Commission;

SB 1583 (here) would have imposed penalties on non-lawyer consultants who gave erroneous advice on classifying employees as independent contractors.

Terminated.

Greg

President Signs ADA Amendments Act

President Bush signed a bill significantly reforming the Americans With Disabilities Act. The new law, which takes effect on January 1, 2009, primarily overturns 9 years of case law interpreting the definition of "disability" under the ADA. Our article on the new law is here. The text of the law is here. Acronym lovers will likely be disappointed by "ADAAA."

DGV

Court of Appeal Upholds Independent Contractor Status

The Court of Appeal rejected a plaintiff's claim that he was an employee rather than an independent contractor. The plaintiff alleged that the independent contractor agreement's "at will" clause established employee status. The court of appeal disagreed, holding that the other indicia of contractor status were so strong that they overcame the at-will employment clause. The court found persuasive that the company did not control the worker, an inspector, at the job site, that he provided his own tools and equipment, that he performed skilled work, and the parties' agreement contemplated the independent contractor relationship.

The case is Varisco v. Gateway Science and Eng'g and the opinion is here.

Avoiding Wage and Hour Liability?

The best way to avoid violating California's wage and hour laws is to become a charter county! OK, you might need an amendment to the constitution, but it may be worth it. In Dimon v. County of L.A. (here), the plaintiffs brought a meal and rest period class action on behalf of deputy probation officers. The trial court dismissed the case on the ground that California statutes governing meal and rest periods were inapplicable to Los Angeles County, because it is a charter county. The court of appeal agreed. This case is similar to Curcini v. Alameda County, which we discussed here.

DGV

Court of Appeal Vacates Denial of Class Certification

A delivery company's drivers brought a putative class action, claiming they were misclassified as independent contractors. The trial court denied class certification. The court also refused to allow pre-certification discovery of the putative class members, relying on case law that has since been overruled. Division 7 of the Second District Court of Appeal vacated the order denying certification, in great part because the trial court denied the plaintiff's motion to compel the identities of class members.

The case is Lee v. Dynamex, Inc. and the opinion is here.

DGV

San Francisco Employers - Mandatory Transportation Benefit Coming

The San Francisco Supervisors passed a new ordinance requiring certain employers to provide certain commuter benefits. The ordinance is here. Here are the highlights:

Covered employers: employ 20 employees or more (anywhere, not just in SF).

Eligible employees: non-exempt employees who perform 10 or more hours of work in SF per week.

Benefit: The employer can either (1) enroll in a "commuter check" program where pre-tax funds are taken out of employees' paychecks so they can purchase transportation with pre-tax dollars or (2) buy employees transit passes worth up to $45.00 per month or (3) operate a "van pool" to take employees to and from work.

Effective Date: On about December 8, 2008.

"Never mind."

The California Supreme Court dismissed review of Harvey v. Sybase, discussed here.

Brinker - Petition for Review filed

The plaintiffs in Brinker v. Superior Court (discussed here) filed their Petition for Review in the California Supreme Court. Docket is here.

New EEOC Guidance on ADA and Performance Standards

The EEOC issued an FAQ-style document explaining employers' obligations under the ADA with respect to enforcing performance standards. This is a helpful document that should clear up some confusion regarding whether and when a disability requires employers to ignore performance and conduct standards applicable to all employees generally. Here is the EEOC's publication.

Can't Currently Count on Kin Care Case

How's that for alliteration? OK, it's Friday. So sue me. Maybe I can represent me. Anyway, the Supreme Court took up McCarther v. Pacific Telesis Group here. The issues on review:

Petition for review after the Court of Appeal reversed the judgment in a civil action. This case presents the following issues: (1) Does Labor Code section 233, which mandates that employees be allowed to use a portion of "accrued and available sick leave" to care for sick family members, apply to employer plans in which employees do not periodically accrue a certain number of paid sick days but are paid for qualifying absences due to illness? (2) Does Labor Code section 234, which prohibits employers from disciplining employees for using sick leave to care for sick family members, prohibit an employer from disciplining an employee who takes such "kin care" leave if the employer would have the right to discipline the employee for taking time off for the employee's own illness or injury?

We posted on this opinion here. We wrote an article here. Much toner and pixels spilled for naught. Now we must wait for the Supreme Court to decide this important wage and hour / leave issue here. If you want us to do an amicus brief while we're waiting, email me.

Court of Appeal: Inadequate Notice of Disability But Sufficient Notice for CFRA Leave

The Court of Appeal decided that Continental Airlines management had insufficient notice that its employee, Henry Avila, had a covered "disability" under the Fair Employment and Housing Act. The employer knew the employee had missed work because he was "sick," was hospitalized for three days, and that he presented a couple of slips from Kaiser putting him off work for short durations. The court, though, found it was undisputed that the employer did not know that the reasons for the absences amounted to a "disability" under FEHA. The plaintiff's failure to accommodate claim failed for the same reason.

However, the court held that Continental was on sufficient notice that the employee needed CFRA leave. Avila's merely calling in sick was not sufficient notice:

That plaintiff called in sick was, by itself, insufficient to put Continental on notice that he needed CFRA leave for a serious health condition. (See Gibbs v. American Airlines, Inc. (1999) 74 Cal.App.4th 1, 9 [“an employee who calls in sick to work for several days while taking antibiotics for an apparent flu has not provided her employer with ‘notice sufficient to make the employer aware that the employee needs CFRA qualifying leave’”]; see also Stevens v. Department of Corrections (2003) 107 Cal.App.4th 285, 292 [“in the context of leave for an employee’s own serious health condition, the mere notice that an employee seeks to use sick time is insufficient to place the employer on notice that the employee seeks CFRA-qualifying leave”] [dictum].)

Yet, the court held (2-1) that the employee's claim that he gave the Kaiser doctor's notes to an unidentified manager was sufficient to create a triable issue of fact that he sufficiently requested a CFRA leave. The employee's testimony was sufficient to require a trial as to whether the company had adequate notice that the employee was hospitalized for 3 days, sufficient to
constitute a "serious health condition" requiring leave. The dissenting justice believe that the employee did not make a sufficient request for leave.

The opinion in Avila v. Continental Airlines is here.

California Paid Sick Leave Bill - Status

AB 2716 is the California bill that would mandate paid sick leave for ALL employers (even small ones), albeit with a few exceptions stated in the bill. The bill is modeled after San Francisco's paid sick leave ordinance, here. This is the probably the bill that would have the most impact on employers if it is passed and signed.
But, according to the Legislature's website, the bill has been placed in the Senate Appropriations Committee's "suspense" file (here). So, this bill may be dead, at least for this session.

DGV

California Supreme Court Says "no" to "Limited" Non-Compete Agreements, but "yes" to Broad Releases

The California Supreme Court issued its opinion in Edwards v. Arthur Andersen - read here -

The Court flatly rejected the "limited" or "narrow" non-competition agreement as unlawful under Bus. and Prof. Code section 16600. The court said that California's unfair competition law bans all non-compete agreements, even when they only restrict the employee's right to work for a limited number of employers. So, bid a sad goodbye to Ninth Circuit cases recognizing the "limited" non-compete such as International Business Machines Corp. v. Bajorek (9th Cir. 1999) 191 F.3d 1033 and General Commercial Packaging v. TPS Package (9th Cir. 1997) 126 F.3d 1131.

Below the fold, but perhaps more importantly, the court upheld a release that covered "any and all" claims. The lower court held that the release was invalid because it included unwaivable claims such as for reimbursement of expenses under Lab. Code section 2802. The court said that general release language such as at issue in Edwards impliedly did not include the release of claims that are not capable of being released:

We apply this rule in holding that a contract provision releasing “any and all” claims, such as that used in the TONC in the present case, does not encompass nonwaivable statutory protections, such as the employee indemnity protection of section Labor Code 2802. In so holding, we interpret the TONC such that it does not violate Labor Code section 2804. As a consequence, the TONC is neither unlawful nor null and void.

So, that's really good news for those of us employment lawyers who don't carve out all unwaivable claims from our releases.

DGV

California Supreme Court Takes Up Harvey v. Sybase

I posted here about Harvey v. Sybase. The California Supreme Court granted review here. The issues are whether the "same actor inference" (against discrimination) applies at trial and heightens the plaintiff's burden, and whether a court of appeal reviews a punitive damages award under the "clear and convincing" evidence standard.

Stay tuned.

Narrowcast Supreme Court Opinion Contains Hidden Gems

So, I actually did not read Miklosy v. Regents on the day it was issued. The headline holding is that the state's Whistleblower Protection Act, Gov't Code section 8547 et seq., does not apply to the University of California, unless the University fails to address an internal complaint. Of course, this case is important to the University, its lawyers, its employees, and people who sue the University. But I'm none of those.

Yet, at the end of the opinion, the Court made some key rulings that affect all of us California employment lawyers:
- the court endorsed the long line of court of appeal decisions holding that individuals may not be held liable for wrongful termination in violation of public policy;
- the court held that claims for intentional infliction of emotional distress are preempted by the Workers' Compensation Act even when the conduct alleged violates public policy. The claim for wrongful termination is not preempted, but the common law IIED claim is.
- public entities may not be sued for wrongful termination in violation of public policy.

DGV

New California Law: Limit on Wage and Hour Releases

The Governator signed another employment law. This one's called AB 2075, which modifies Labor Code section 206.5. already prohibits releases of any claim for wages unless payment has been made. The new subsection (b) will define "release" to include

requiring an employee, as a condition of being paid, to execute a statement of the hours he or she worked during a pay period which the employer knows to be false.

If your organization requires employees to certify their hours before you pay them to avoid later wage claims, you may wish to take a look at your practices. This law will take effect 1/1/09.

DGV

DLSE Memorandum to Staff: Follow Brinker

The California Division of Labor Standards Enforcement has issued a memorandum to its deputy labor commissioners instructing them to follow the court of appeal's decision in Brinker v. Superior Court (Hohnbaum). (If you don't know what Brinker is, see here).

It is unclear whether DLSE will follow this enforcement policy if the Supreme Court accepts review. Also, there is some indication the legislature could address meal periods as part of the state budget negotiations. Finally, if an employee files in court, the DLSE memo will not have much force. So, be cautious before changing your policies until this all shakes out. For now, though, the DLSE is following Brinker. Here is the text of the memo (footnotes omitted):


State of California
DIVISION OF LABOR STANDARDS ENFORCEMENT - HQ
MEMORANDUM
TO: DLSE Staff
FROM: Angela Bradstreet, Labor Commissioner
Denise Padres, Deputy Chief
Robert Roginson, Chief Counsel
DATE: July 25, 2008
SUBJECT: Binding Court Ruling on Meal and Rest Period Requirements

On July 22, 2008, the California Court of Appeal issued its decision in Brinker Restaurant Corp. v. Superior Court of San Diego County (Hohnbaum), (2008) ___ Cal.App.4th ___ , 2008 WL 2806613. The court in Brinker decided several significant issues regarding the interpretation of California’s meal and rest period requirements. The decision is a published decision, and its rulings are therefore binding upon the Division of Labor Standards Enforcement (DLSE).

The decision in Brinker included the following rulings regarding the interpretation of California’s meal and rest period requirements:

Meal Periods

• The court held that Labor Code § 512 and the meal period requirements set forth in the applicable wage order mean that employers must provide meal periods by making them available, but need not ensure that they are taken. Employers, however, cannot impede, discourage or dissuade employees from taking meal periods.1

• The court rejected the so-called “rolling five-hour” requirement as being inconsistent with the plain meaning of Labor Code § 512 and the applicable wage order.2 An employer must make a first 30-minute meal period available to an hourly employee who is permitted to work more than five hours per day, unless (1) the employee is permitted to work a “total work period per day” that is six hours or less, and (2) both the employee and the employer agree by “mutual
consent” to waive the meal period.3 The court also found section 512 to plainly provide that an employer must make a second 30-minute meal period available to an hourly employee who has a “work period of more than 10 hours per day” unless (1) the “total hours” the employee is permitted to work per day is 12 hours or less, (2) both the employee and the employer agree by “mutual consent” to waive the second meal period, and (3) the first meal period “was not waived.”4 Employers are not required to provide a meal period for every five consecutive
hours worked.5 The court held that the employer’s practice of providing employees with an “early lunch” within the first few hours of an employee’s arrival at work did not violate California law, even though that would mean that the employee might then work in excess of five hours without an additional meal period.6

Rest Periods

• The court held that the rest period requirements set forth in the applicable wage order mean that employers must provide rest periods, but need not ensure that they are taken. Employers, however, cannot impede, discourage or dissuade employees from taking rest periods.7

• The court held that employers need only authorize and permit rest periods every four hours or major fraction thereof and they need not, where impracticable, be in the middle of each work period.8 The court interpreted the phrase “major fraction thereof” to mean the time period between three and one-half hours and four hours and not to mean that a rest period must be given every three and one-half hours.9 In so doing, the court rejected as incorrect a 1999 interpretation by the Labor Commissioner that the term “major fraction thereof” means an employer must provide its employees with a 10-minute rest period when the employees work any time over the midpoint of each four hour block of time.10 The court ruled that the rest periods must be given if an employee works between three and one-half hour and four hours, but if four or more hours are worked, it need be given only every four hours, not every three and one-half hours.11

The court also ruled that the applicable wage order rest period provisions do not require employers to authorize and permit a first rest period before the first scheduled meal period. Rather, the applicable language of the wage order states only that rest periods “insofar as practicable shall be in the middle of each work period.” Accordingly, the court concluded, as long as employers make rest periods available to employees, and strive, where practicable, to schedule them in the middle of the first four-hour work period, employers are in compliance with that portion of the applicable wage order.12

The court relied upon the plain meaning of the Labor Code and applicable wage order provisions in making its determinations. The court found persuasive the reasoning in the federal district court decisions in White v. Starbucks (ND Cal. July 2, 2007) 497 F.Supp.2d 1080 and Brown v. Federal Express Corp. (CD Cal. Feb. 26, 2008) 2008 WL 906517, and concluded that employers need not ensure meal periods are actually taken, but need only make them available.13 The court distinguished the decision in Cicairos v. Summit Logistics, Inc. (2006) 133 Cal.App.4th 949, concluding that the facts in Cicairos established that the employer failed to make meal periods available to employees and that the court there only decided meal periods must be provided, not ensured.14 All staff must follow the rulings in the Brinker decision effective immediately and the decision shall be applied to pending matters. Please ensure that any wage claim filed with DLSE that has a meal or rest period issue is reviewed by your Senior Deputy prior to making any final determination on its merits.

New California Statute: SB 940 - Temporary Services Employees

Contrary to what you may think, not all California employment laws are passed on the final day of the legislative session. The legislature not only passed SB 940 in July, but also the Governor signed it. The text of the new law is here.

This new law will change payroll practices applicable to "temporary service" workers as defined in the statute. New Labor Code section 201.3 defines "Temporary services employer" as follows:

an employing unit that contracts with clients or customers to supply workers to perform services for the clients or customers and that performs all of the following functions:
(A) Negotiates with clients and customers for matters such as the time and place where the services are to be provided, the type of work, the working conditions, and the quality and price of the services.
(B) Determines assignments or reassignments of workers, even if workers retain the right to refuse specific assignments.
(C) Retains the authority to assign or reassign a worker to another client or customer when the worker is determined unacceptable by a specific client or customer.
(D) Assigns or reassigns workers to perform services for clients or customers.
(E) Sets the rate of pay of workers, whether or not through negotiation.
(F) Pays workers from its own account or accounts. [and]
(G) Retains the right to hire and terminate workers.

However, "Temporary services employer" does not include any of the following: (A) A bona fide nonprofit organization that provides temporary service employees to clients. (B) A farm labor contractor, as defined in subdivision (b) of Section 1682. (C) A garment manufacturing employer, which, for purposes of this section, has the same meaning as "contractor," as defined in subdivision (d) of Section 2671.

So, if you're a "temporary services employer," or if you use one, read on:

- Unless an exception applies below, covered temporary workers must be paid weekly. Wages for the current week's work are due on the pay day of the following calendar week.

- When an assignment is completed, the final wages for the assignment may be paid on the regular pay day in the week following the completion of the assignment (not the final day).

- If a temp is assigned to work "day to day," from a centralized pool, employees' wages are due AT THE END OF EACH DAY, but only if (A) The employee reports to or assembles at the office of the temporary services employer or other location. (B) The employee is dispatched to a client's worksite each day and returns to or reports to the office of the temporary services employer or other location upon completion of the assignment. (C) The employee's work is not executive, administrative, or professional, as defined in the wage orders of the Industrial Welfare Commission, and is not clerical.

- Striker replacements - Temporary services employees used for strike replacements must be paid AT THE END OF EACH DAY.

- Except as stated above, temporary services employees who are fired by the agency or who quit are paid final pay in the regular way (Lab. Code sections 201, 202).

- None of these rules apply if the employee is assigned to a client for more than 90 days, unless the agency pays weekly in accordance with this new provision.

Employers who use temporary agencies should ensure their vendors comply with these sections, as employees have been known to assert "joint employer" wage claims against the client and the agency.

Those of you who hire striker replacements from temporary agencies should ensure that the agency is capable of paying employees daily.

DGV

EEOC Issues New Guidance on Discrimination Based on Religion

The Equal Employment Opportunity Commission updated its Compliance Manual's section on discrimination based on religion. View it here. This chapter covers the following, according to the EEOC:

I - Coverage issues, including the definition of “religion” and “sincerely held,” the religious organization exception, and the ministerial exception.
II - Disparate treatment analysis of employment decisions based on religion, including recruitment, hiring, promotion, discipline, and compensation, as well as differential treatment with respect to religious expression; customer preference; security requirements; and bona fide occupational qualifications.
III - Harassment analysis, including religious belief or practice as a condition of employment or advancement, hostile work environment, and employer liability issues.
IV - Reasonable accommodation analysis, including notice of the conflict between religion and work, scope of the accommodation requirement and undue hardship defense, and common methods of accommodation.
V - Related forms of discrimination, including discrimination based on national origin, race, or color, as well as retaliation.

This revision gives employers and their lawyers a good opportunity to refresh their understanding of what "religion" means under Title VII and employers' obligations not only to "reasonably accommodate" religious practices, but also to refrain from discrimination, harassment and retaliation based on religion.

DGV

Brinker Article

We published an article on Brinker in the San Francisco Daily Journal today (July 25). The article is here.

DGV

Our U.S. and California Supreme Court Roundup Articles

Here are our articles summarizing the past term's significant employment law decisions from the California and U.S. Supreme Courts. We do this every year no matter how many times you tell us not to. After all, we can't just abandon those firms who glom onto our work product without attribution. Click here:

California Supreme Court roundup.

U.S. Supreme Court roundup.

Brinker: The Watershed Meal Period Decision Comes Down

We will write more later. But let us be one of the first to welcome the Court of Appeal's decision in Brinker v. Superior Court (Hohnbaum) (opinion here). Here is the court's holding.

we conclude the class certification order is erroneous and must be vacated because the court failed to properly consider the elements of plaintiffs' claims in determining if they were susceptible to class treatment.Specifically, we conclude that (1) while employers cannot impede, discourage or dissuade employees from taking rest periods, they need only provide, not ensure, rest periods are taken; (2) employers need only authorize and permit rest periods every four hours or major fraction thereof and they need not, where impracticable, be in the middle of each work period; (3) employers are not required to provide a meal period for every five consecutive hours worked; (4) while employers cannot impede, discourage or dissuade employees from taking meal periods, they need only provide them and not ensure they are taken; and (5) while employers cannot coerce, require or compel employees to work off the clock, they can only be held liable for employees working off the clock if they knew or should have known they were doing so. We further conclude that because the rest and meal breaks need only be "made available" and not "ensured,"individual issues predominate and, based upon the evidence presented to the trial court,they are not amenable to class treatment. Finally, we conclude the off-the-clock claims are also not amenable to class treatment as individual issues predominate on the issue of whether Brinker forced employees to work off the clock, whether Brinker changed time records, and whether Brinker knew or should have known employees were working off the clock.

Wow. So, this is a major decision that could bring meal and break period class actions to a screeching halt, even though the Legislature does not seem inclined to do so. The only thing is, if the Supreme Court grants review, the decision could disappear for as much as a couple of years and could get reversed by the High Court.

So, champagne breaks in the HR department need not be provided or offered - yet.

DGV

Federal Minimum Wage Going Up to $6.55 per hour 7/24/08

Most of us who practice or work in California don't think much about the federal minimum wage. That's because California's minimum wage is far higher than the federal standard. Those of you not subject to California's $8.00 minimum may be interested in the upcoming increase to the federal minimum. The FLSA minimum wage will rise $5.85 to $6.55 per hour on July 24, 2008. It will increase again to $7.25 on 7/24/09, too. Here's a U.S. DOL fact sheet on the federal minimum wage.

DGV

Ninth Circuit on Damages Available under FMLA

Farrell worked for Tri-County Metropolitan Transportation District of Oregon. The district denied some FMLA requests that Farrell made because of his own conditions. A jury awarded him $1,110 in lost wages for the work time Farrell lost because of the emotional distress he suffered when the district denied his FMLA claim. Although emotional distress damages are not available under the FMLA, lost work time is. So, the Ninth Circuit decided, a jury was entitled to award Farrell lost wages due to emotional distress.

The case is Farrell v. Tri-County Metropolitan Transportation District of Oregon and the opinion is here.

Pre-Certification Motion to Strike Class Action Upheld

You can call it the anti-certification motion, the motion to de-certify, or a motion to strike class allegations. Some employers bring preemptive motions to head off plaintiffs' motions for class certification. That's a bold move that could stop a class action in its tracks. Or it could result in a denial that portends rough going when the plaintiff ultimately seeks certification.
BCBG is a retailer who was party to a wage and hour class action (exemptions) that lasted some three years before the company decided to bring matters to a head. The plaintiffs argued that there was no such thing as a motion to strike class allegations. But the court of appeal upheld the procedure here. The case is In re BCBG Overtime Cases.

Charter Counties Not Covered by Labor Code Overtime and Meal/Rest Period Provisions

Chaplains at the (Alameda County) Santa Rita jail brought suit for unpaid overtime and meal / rest periods under the Labor Code. The Court of Appeal affirmed the County's demurrer to the complaint. The court recognized that Alameda County is a "charter" county with the constitutional power to control employees' "compensation." Since overtime and meal/rest period payments are part of "compensation," the applicable provisions in the Labor Code did not apply. (The county has its own provisions regarding such compensation.)

The case is Curcini v. County of Alameda and the opinion is here.

DGV

Offers of Compromise

An offer of compromise under section 998 of the Code of Civil Procedure is a powerful tool to end litigation. If the other side does not accept the offer, it may result in financial penalties unless the other side's recovery is more than the section 998 offer. So, if you offer $10,000 under section 998 to settle a case, for example, the plaintiff has to do better than $10,000 at trial or the post-offer costs must be paid to the defendant.
But section 998 offers are tricky. The Court of Appeal recently held that a section 998 offer may not condition settlement on a "general release" of "all claims" (claims over and above what is included in the lawsuit that is the subject of the section 998 offer). The case is Chen v. Interinsurance Exchange and the opinion is here.

DGV

Court of Appeal: Deduction of Training Costs from Final Pay Illegal

To encourage police officers to stay with the Oakland Police Department longer, Oakland required those who went through training at its police academy to reimburse the city for training costs if the person left the police department before completing five years of service. Oakland's agreement with the police union provided that departing officers would owe the money at the time of separation and that the city could "deduct any amounts owed under this provision from the employee’s final paycheck." The remainder would be due as a debt.

Kenny Hassey was a new police officer. He signed an agreement permitting the city to charge back training costs if he left within five years. The training costs began at $8,000 and decreased over time. After several months, Hassey was told he was not performing to standards and should resign. He did, and therefore owed the repayment of training costs. Oakland deducted part of the money from his final pay, leaving about $6,000. Oakland sued Hassey for the rest. Hassey cross-complained that the repayment agreement was illegal.

The Court of Appeal first upheld Oakland's motion for summary judgment on its claim for the training costs. The court rejected arguments that it is illegal to ask employees to reimburse training costs, both under the federal Fair Labor Standards Act and under the Labor Code. The court upheld the breach of contract claim, in that Hassey had agreed to repay the money. Significantly, the court also rejected Hassey's argument that asking him to repay training costs was a de facto unlawful covenant not to compete.

The court then, not really surprisingly, held that Oakland illegally withheld Hassey's entire final paycheck as partial payment of the training costs. First, the court held, under the FLSA and state law, Hassey was not paid minimum wage for his final pay period because of the deduction. Second, the court held that Oakland was not allowed to "set-off" the reimbursement of training costs against wages. This conclusion is consistent with a lot of case law.

The opinion is City of Oakland v. Hassey and the opinion is here.

New I-9 Form

The USCIS has issued a new Form I-9 for employers to verify employment eligibility. The new form is here. It is substantively unchanged from the prior version, but has a new expiration date (6/30/09). Employers must use the new form as of 7/1/08.

DGV

IRS Standard Mileage Rate GOING UP

Effective July 1, the IRS mileage reimbursement rate will increase to $0.585 per mile. That's an $0.08 increase. This rate will remain in effect for the remainder of 2008.

The reimbursement rate for reimbursement of mileage for medical issues and moving also goes up $0.08 to $0.27, up from $0.19.

The IRS's announcement is here.

U.S. Supreme Court Holds Plan Administrator Had Conflict of Interest

Under ERISA, employees have the right to challenge decisions under a covered plan in federal court. The court will review the plan administrator's decision under different standards, depending on the circumstances. In certain cases, the court defers to the administrator's decision unless the administrator "abused its discretion." In other situations, the court applies "de novo" review and does not defer to the plan administrator at all. To determine what standard of review to apply, the trial court considers a number of circumstances, one of which is whether the plan administrator had a "conflict of interest."

The Supreme Court considered whether a plan administrator has a conflict when it is responsible for deciding to approve claims AND is the entity responsible for funding benefits. In a 5-4 decision, the Court said that such plan administrators do have a conflict. Therefore, the district court must consider this situation as "a factor" in deciding the deference to give the administrator's decision.

The case is Metropolitan Life Ins. Co. v. Glenn and the opinion is here.

U.S. Supreme Court Decides State Pension Formula Does Not Violate ADEA

Kentucky's pension system provides retirement benefits for employees who reach a certain age. It also provides benefits for certain employees who become disabled in the line of duty, or after a certain amount of service. The formula for retirement benefits adds "imputed" years of service to those employees who become disabled before retirement. The EEOC challenged the formula claiming that the pension provided lower "imputed" years for disabled employees who had longer service and, therefore, was a proxy for age discrimination.

Confusing, right? Well, the Supreme Court held the pension formula did not violate the Age Discrimination in Employment Act. And the decision was 5-4, with Justices Scalia, Kennedy, Ginsburg, and Alito dissenting.

The case is Kentucky Retirement System v. EEOC and the opinion is here.

Ninth Circuit: No-Match Letters Not Convincing Evidence of Immigration Status

The Ninth Circuit held that Aramark's policy of firing workers who did not cure "no-match" letters issued by the Social Security Administration was not compelled by law. Therefore, the court concluded, an arbitration award reinstating 33 workers who did not correct "no-match" deficiencies timely was not contrary to public policy.

In essence, Aramark received "no match" letters from the SSA for over 50 employees. The company issued a letter to the employees saying that if they did not correct the social security numbers within a certain period of time, they would be terminated. The employees' union grieved the termination. An arbitrator held the no-match letter did not establish the employees were ineligible to work and did not supply good cause for discharge under the union contract. Aramark attempted to challenge the award as contrary to public policy, namely IRCA.

The Court of Appeals upheld the arbitrator's award. The court noted that no-match letters did not prove illegal alien status and reviewed impressive statistics showing that many, many employees have mismatches because of factors other than immigrant status. So, the arbitrator's award did not violate public policy and was entitled to deference.

If no-match letters don't prove the employee is not entitled to work, and if the court is correct that there are few consequences that flow from the failure to correct them.... someone might argue: why issue them to the employer at all? Shouldn't it be up to the Social Security Administration and the employee to correct social security information to ensure that withholdings are properly credited? Why should the employer care if the employee is deprived of credit because of a mismatched number? If the employee won't correct it, the money can be used to pay other recipients.

The case is Aramark v. SEIU and the opinion is here.

Ninth Circuit: Employee's Burden to Show Disability Under ADA

Gribben worked for UPS. He claimed a heart condition was a "disability" because it "substantially limited" major life activities. Specifically, Gribben's physician felt that he could not perform a lot of physical activity when temperatures rose above 90 degrees. (The problem was that Gribben lived in Phoenix.)

The district court granted summary judgment against Gribben because he did not show that he had more trouble with physical activity in the hot Phoenix weather than a person without a disability. The Ninth Circuit reversed, holding Gribben's testimony about his own limitations was enough to raise a triable issue of fact.

Whether or not you have a heart condition, it becomes harder to physically exert oneself in hot summer sun. So, how can you tell if a condition is "substantially limiting" without some basis for comparison? I guess the court's point is that the comparison can be made by the fact finder rather than the trial court on summary judgment.

The case is Gribben v. UPS and the opinion is here.

Court of Appeal to Employers: No Coverage for You if Claims Reported Untimely

Westrec Marina Management had a "claims made" insurance policy with Arrowood Indemnity Co.. The policy covered claims reported during the policy period or within 30 days of policy expiration. After receiving a discrimination charge and a demand letter, the employer did not report it to the insurer timely. Arrowood, the insurer, denied the claim. The trial court found in favor of Arrowood and the court of appeal agreed. The court said that Westrec was on notice during the policy period that a "claim" was being made and that Westrec therefore failed to report the claim timely.

So, when you receive a charge, demand letter, etc. and you wish to have insurance coverage, it may be wise to tender to the insurer if there is any doubt about whether the information you have constitutes a "claim."

The case is Westrec Marina Management, Inc. v. Arrowood Indemnity Co., and the opinion is here.

Ninth Circuit Invalidates Certain Pre-Employment Inquiries

The Ninth Circuit has issued a few opinions lately in which the court has struck down pre-employment inquiries such as applicant drug testing, medical examinations, and the like. The court recently held that NASA's practice of investigating contractors' employees was too intrusive and, therefore, violated the employees' "information privacy" rights under the Constitution. The court, however, held that the questionnaires and background checks were not "searches" under the Fourth Amendment.

The persons at issue were employees of Caltech, working under a contract for NASA at a federal facility. Of note, these employees were not exposed to sensitive information and were considered "low risk" by NASA.

NASA has conducted the same federal background check since its inception for its own employees, and recently expanded the investigation to contractors. The federal investigation includes questionnaires sent to persons identified by the applicant, and asks for a broad and open-ended amount of information about the applicant's employment history, education, habits, behaviors, financial responsibility, etc.

The court found that parts of the questionnaire were too broad and, therefore, violated the applicants' rights to informational privacy because they were not sufficiently narrow to justify the intrusion.

Interestingly, the court held that questionnaires concerning past illegal drug use were NOT a violation, because they were narrowly tailored to meet the government's legitimate interest in a drug-free workplace. But, the questions asking about counseling for prior drug use were not narrowly tailored and, therefore, a violation of the applicants' privacy rights. Recall that in the recent case of Lanier v. City of Woodburn, the Ninth Circuit invalidated a county's applicant drug testing program.

This case is called Nelson v. NASA and the opinion is here.

U.S. Supreme Court on Employer's Burden of Proof in Age Discrimination Cases

The federal Age Discrimination in Employment Act is structured differently from Title VII. That is why case law interpreting Title VII is not always applicable in ADEA cases.

Like Title VII, ADEA authorizes "disparate impact" cases - where the plaintiff demonstrates a neutral employer practice that has a greater effect on members of a protected group than non-members. The statute provides that an employment practice is legal if based on "reasonable factors other than age." The question the Court addressed in Meacham v. Knolls Atomic Power Lab. is whether the "RFOA" provision is part of the plaintiff's burden of proof or an affirmative defense. Agreeing with the EEOC's long-held position, the Court held that employers have the burden of proving that a challenged practice, one that has a statistically significant impact on older workers, is based on "reasonable factors other than age."

Happy Second Anniversary to Us!

That's right. Our little Firm was born on 6/19/06. (Our little blog didn't come along until 6/30/06, so you can count on another "Look at Me" post on 6/30.)

Since our debut, we've grown to 7 lawyers in two Northern California offices. We've consumed about 250 lbs of coffee, 50 cases of copy paper, 11 computers, 2 projectors, countless boxes of pens, cases of stickies, and a lot of pizza, Chinese food, burritos, falafel, diet coke, a variety of nuts and lots and lots of mints. (tm)

Thanks for coming along with us. I hope we've added value, on and off the blog (notwithstanding this post).

Jennifer and Greg

Ninth Circuit: No Right to Search Text Messages Stored by Third Party

The headlines blared: "Employers can't look at your email or text messages." Unfortunately for you merchants of NSFW* content on employers' systems, not so fast. The case, Quon v. Arch Wireless, is not as broad as the papers suggest.

In Quon. the Ontario, CA sheriff noted excessive text message traffic over the department's system. Under the department's policy, an employee would get 25,000 characters as part of the plan and would have to pay for overage.

But the Sheriff wanted to see if the employees were using the system for non-work related matters. So, he contacted Arch Wireless, which provides the text message service and stores archived messages for the county. (That is, the county used Arch Wireless as its cell provider for text messages). Having received the owner's request, Arch turned over the text messages to the Sheriff.

The problem is that Arch was precluded from doing so by the Stored Communications Act. Arch, as an archiver of messages, could not turn over the messages without a court order or the consent of both parties to the communication.

The Sheriff also argued that its policy destroyed any expectation of privacy. But there was testimony from management that the announced policy was not to "audit" messages if the employee paid the overage. The promise not to inspect created an expectation of privacy.

Bottom line though - if the employer stores its own emails, this case does not apply. When this case does not apply, if you want to ensure you have access to employees' electronic communications, you need a tight policy that destroys any "reasonable expectation of privacy."

On the other hand, if a third party is the repository of your business' emails, texts, third party voice mails.... this case may be a shift in the law regarding when employers are permitted to see these communications. Therefore, employers may wish to consider bringing these IT functions "in house" or giving up the right to monitor such communications at will.

Read Quon v. Arch Wireless here.

DGV

* "Not safe for work." Yes, I am hip, kthanksbye..

Supreme Court Strikes Down California AB 1889 - Union "Neutrality"

Some years ago (2003 or so) I was lucky enough to be involved in a case where the court struck down California's AB 1889. That law requires employers receiving state funds not to use them to oppose (or support) union organizing. The California Chamber of Commerce and other groups challenged the law. The district court granted summary judgment in favor of the Chamber and held the law preempted.

On appeal, the Ninth Circuit initially upheld the district court's holding that federal law preempted AB 1889. But, the court then heard the case "en banc" and changed its mind, upholding the California law.

Then, my prior firm was replaced by Supreme Court experts who sought (and obtained!) certiorari review of the decision.

The Supreme Court decided today 7-2 that AB 1889 is preempted by the National Labor Relations Act. That is, California's law impermissibly regulated employers' conduct that is otherwise regulated by the National Labor Relations Act.

This is a very important case for nursing homes and other businesses that receive state funds. The case is Chamber of Commerce v. Brown and the opinion is here.

Court of Appeal Permits Claim of "Preemptive" Retaliation

Lisa Steele, a new employee of the California Youth Offender Parole Board, was a participant in a bikini contest (away from work). Her boss, Galindo, attended the contest. When they saw each other, Galindo kissed her on the cheek on a single occasion. No one was offended. Galindo otherwise treated Lisa professionally.

But another employee was in the process of complaining about Galindo's conduct at work. The powers than be apparently were worried that Steele would be a witness against Galindo, although she had not yet complained or participated in an investigation. So, according to the record, the higher-ups engaged in conduct forcing her to resign.

A jury found for Steele on a constructive discharge claim. But the YOPB appealed, arguing (among other things) that Steele had not engaged in protected activity, so she could not have suffered "retaliation."

The Court of Appeal, though, decided that Steele's status as a "potential" witness was enough to confer "protected activity" status. Steele's proof that the constructive discharge was related to management's fear that Steele would testify against Galindo was enough to prove Steele's retaliation claim. Preemptive retaliation for future possible protected activity ... Minority Report anyone?

So, what employee is not a "potential witness" in a workplace discrimination, harassment or retaliation claim? The lower courts will be left to sort that out, I guess. The opinion is Steele v. Youth Offender Probation Board and the opinion is here.

Court of Appeal Rules on Holiday Pay, Regular Rate, and Overtime

Sometimes employers pay workers "holiday premium" pay for working on a holiday. Under federal law, if the holiday premium is at least 1.5 times the normal rate, such premiums may be taken as a "credit" against overtime premiums due in the same workweek.

The Court of Appeal just decided that this federal regulation also applies in California. If you're not familiar with this rule, here's an example from the opinion of how it works:

During the week of September 4, 2006, Ms. Roman worked 12 hours on Monday, which was Labor Day, 12 hours on both Tuesday and Wednesday, and 8 hours each on Thursday, Friday, and Saturday for a total of 60 hours. Her paycheck reflected payment of one and one-half times her regular rate for the 4 hours of overtime she worked on both Tuesday and Wednesday of that week, as well as the premium rate of pay of one and one-half times for the 12 hours she worked on Labor Day. As such, Ms. Roman was paid for 40 hours at her regular rate of pay and 20 hours at a rate of time and one-half. Ms. Roman contends that the time and one-half she was paid for working on Labor Day was her regular rate of pay pursuant to the Employee’s Handbook, and she was entitled to be paid one and one-half times the premium rate for the hours she worked on Labor Day.

The plaintiff argued that she was entitled to time and one-half for the 20 hours of overtime she worked. The employer argued it paid her time and one-half for eight of those hours because of the holiday premium policy.

The Court of Appeal decided nothing in the California overtime law required the employer to pay more than the time and one-half for 20 hours of overtime work. However, the court expressly reserved judgment on whether the employee could bring a breach of contact claim for the holiday pay premium.

The case is Advanced Tech Security Services, Inc. v. Roman and the opinion is here.



Well, the court of appeal decided that

OSHA: Employers Must Pay for Most Personal Protective Equipment

Both federal and state OSHA impose rules requiring employees to wear "personal protective equipment" such as work boots, safety goggles, etc. Federal OSHA just issued a final regulation requiring employers to pay for such equipment in most circumstances. The obligation is limited to equipment required for compliance with OSHA standards.

According to OSHA's preface to the regulation:

The items excepted from payment by this rule are: Non-specialty safety-toe protective footwear (including steel-toe shoes or steel-toe boots) and non-specialty prescription safety eyewear, that is allowed by the employer to be worn off the job-site; Shoes or boots with built-in metatarsal protection that the employee has requested to use instead of the employer-provided detachable metatarsal guards; Logging boots required by 1910.266(d)(1)(v); Everyday work clothing; or ordinary clothing, skin creams, or other items used solely for protection from the weather.

For a long, detailed discussion and the regulation itself, please see here.

Local Living Wage Ordinance Not Local

Hayward, California has a "living wage" ordinance. This is a local law that requires employers to pay employees more than state or federal minimum wage. Such ordinances typically apply only to employers with city contracts, but San Francisco applies its local minimum wage ordinance to all employers.

Hayward's applies only to city contractors. Cintas had a contract with Hayward to handle laundry services. But many such services were performed outside of Hayward. Employees brought a class action against Cintas, claiming Cintas was violating the Living Wage Ordinance.

Agreeing with the trial court, the Court of Appeal held that Hayward could require city contractors to pay employees under the Living Wage Ordinance, even though the work was performed outside of Hayward. (The ordinance applied only to employees working on the contract, not to all Cintas employees worldwide).

The case is Amaral v. Cintas Corporation and the opinion is here.

DGV

Court of Appeal: No Disability and No Retaliation

In 2000, the California Legislature amended the Fair Employment and Housing Act to ensure the definition of "disability" is broader than the definition in the Americans With Disabilities Act. Way broader. For example, under state law, the employee's "mitigating measures" (such as glasses to help the sight impaired) are not taken into account when evaluating if a person has a disability. Another major difference is that an impairment need only make life activities "difficult" to be "limiting." Under federal law, the impairment must be "substantially" limiting, which is much tougher to prove.

I don't know of any published opinion holding that someone failed to demonstrate a "disability" under the new state law version of the definition. Until now.
Arteaga was part of a crew on a Brink's armored car. He picked up money from ATMs. Money was missing, repeatedly. Brink's investigated and let Arteaga know. An investigation into theft could create a certain numbness, as well as stress. Predictably, therefore, after the investigation commenced, Arteaga began complaining of pain and numbness in his arms, fingers, shoulders and feet, and that he was experiencing "stress." No one had noticed any issues with Arteaga's performance related to the numbness, nor had he complained about it before, although he said he had been experiencing it for a couple of years.

Holding Arteaga did not have a disability, the court noted that his alleged impairment did not "limit" his ability to work, either compared with his pre-disabled condition or with others who perform the work. The opinion is full of interesting observations about relevant considerations: Arteaga did not disclose any impairments on medical forms; the company took him to a doctor on two occasions who released him back to work immediately; he had not complained of any issues until he was under investigation; pain alone does not automatically constitute a disability; no duty to accommodate when employee did not disclose disability; and others.

Arteaga also claimed retaliation because he filed a workers' compensation claim. The court held that the timing was not enough to raise a triable issue of fact because the company had been investigating Arteaga's performance before he filed the workers' compensation claim and then simply followed through with the termination decision.

Where the employee relies solely on temporal proximity in response to the employer’s evidence of a nonretaliatory reason for termination, he or she does not create a triable issue as to pretext, and summary judgment for the
employer is proper.

The case is Arteaga v. Brink's Incorporated. The opinion is here.

DGV

GINA's Little Secret

We posted on the new GINA law here. Most of the law prohibits employment discrimination based on genetic characteristics and genetic testing except in specified circumstances. But wait, there's more! Jennifer pointed out to me that section 302 of GINA also increases federal penalties for child labor violations by 10%. The new provision modifes the Fair Labor Standards Act, section 216(e).

DGV

U.S. Supreme Court Issues Two Retaliation Decisions

The U.S. Supreme Court is wrapping up its Term. Yesterday, the Court issued two significant decisions regarding retaliation.

In CBOCS West, Inc. v. Humphries, the Court ruled 7-2, that employees may sue for retaliation under 42 U.S.C. section 1981. Section 1981 is a post-Civil War anti-race-discrimination statute that does not require employees to pursue administrative remedies through the Equal Employment Opportunity Commission. However, it substantially overlaps with Title VII of the Civil Rights Act. California employees have the Fair Employment and Housing Act. The main benefit of section 1981 is its longer statute of limitations and the lack of an exhaustion requirement. Justices Thomas and Scalia dissented, noting that section 1981 is an anti-discrimination statute that protects people from conduct based on "who they are" rather than "what they do" (engage in protected activity). The opinion is here.

In Gomez-Perez v. Potter, the court, this time 6-3, held that the section of the Age Discrimination in Employment Act's protecting federal government workers authorizes retaliation claims against the federal government. The opinion is here. Chief Justice Roberts and Justices Scalia and Thomas dissented.

Courts' First Kin Care Ruling

California law provides for "Kin Care," which essentially authorizes employees to use half of paid sick leave to care for covered family members' illnesses. Labor Code section 233, the statute that created Kin Care, prohibits employers from discharging, disciplining, or taking other action against employees for taking Kin Care. Section 234 invalidates absence control policies that count Kin Care against attendance. But Section 233 also says that employers can impose the same conditions on Kin Care that it applies to its sick leave policies applicable to employees' own illnesses.

The Court of Appeal decided in McCarther v. Pacific Telesis that employers may count Kin Care leave against attendance to the same extent as sick leave for an employee's own illness. The Court relied on the language in section 233 that permits employers to treat Kin Care the same as sick leave. The Court said that section 234 prohibits employers only from placing additional burdens on the use of Kin Care. This was a key ruling, since Pacific Telesis permits unlimited sick leave, but counts sick leave against employees' attendance. If section 234 prohibited the attendance policy, employees there essentially could take unlimited sick leave, call it Kin Care, and never come back to work.

Stay tuned for a full length article in the Daily Journal next week. In the meantime, here's the opinion.

DGV

Update - Cal. Supreme Court Review Granted

We posted on Schachter v. Citigroup here. The California Supreme Court has decided to review the decision, which upheld Citigroup's stock option plan's forfeiture provisions under California wage and hour law. The court of appeal also said that payment in stock options did not violate Labor Code section 212. Stay tuned for the Supreme Court's view, probably in 2009 or 2010.

Meet GINA

President Bush signed the "Genetic Information Nondiscrimination Act," or "GINA." Title I of the new law prohibits the use of genetic testing or genetic testing results to affect health insurance premiums. "Genetic testing" includes one's own test and the tests of family members.

Title II of the law addresses employment discrimination. Basically, the law follows Title VII of the Civil Rights Act of 1964, and bars employers' reliance on genetic information in making employment decisions. The law specifically says there are no disparate impact claims allowed, so intentional discrimination must be proved. It's also illegal to request genetic information, although there are exceptions for inadvertent requests (such as family history) and when information is disclosed as part of an FMLA procedure.

I'm not sure whether any employers were discriminating based on genetic information, or where they were getting it. Apparently, Congress saw a need to step in, though. So, you genetic testers and discriminators - knock it off. Actually, the law takes effect in 18 months. By that time, remember to update your handbooks, applications, training programs, and EEO statements. Also, I'm sure there will be a new poster(!)

Here's the text of the new law.

H/T to Ross Runkel for the link and for lots of other information.