Articles
2011 Berliner Cohen Employer Update
January 28, 2011
LEGISLATIVE DEVELOPMENTS
Paid Leave for Organ and Marrow Donations
SB 1304 adds a new provision to the California Labor Code, effective January 1, 2011, which extends to private employees a benefit formerly available only to public employees. Previously, state workers who had exhausted available sick leave were permitted to take up to 30 days of paid leave for donating organs to another person, and up to 5 days of paid leave for donating bone marrow. The Michelle Maykin Memorial Donation Protection Act expands this benefit, Now, private employers with 15 or more employees will be required to provide up to 30 days of paid leave per year for an organ donation in any one-year period, and up to 5 days of paid leave per year for a bone marrow donation. This leave may be taken in one or more than one period. An employee seeking the leave must provide written verification to the employer that he or she is an organ or bone marrow donor and that the donation is a medical necessity. The leave will not be considered a break in service for purposes of calculating the employee’s right to salary increases, sick leave, vacation, annual leave or seniority. This leave does not run concurrently with FMLA or CFRA. The employer may require that the employee first use up to 5 days of accrued sick or vacation leave for bone marrow donations and up to 2 weeks of earned and unused sick or vacation leave for organ donations. The employee must be restored to the same or equivalent position held when the leave began, and employers are prohibited from interfering with employees taking such leaves or retaliating against employees who take such leaves.
New Meal Period Exemptions
AB 569 amends California Labor Code section 512 to exempt the following categories of employees covered by a valid collective bargaining agreement from the meal period provisions otherwise applicable to non-exempt employees: construction occupation, commercial drivers, security officers, gas and electrical corporation employees, and employees of a publicly-owned local electric utility. The exemption applies only to such employees covered by a valid collective bargaining agreement that: (1) expressly provides for the wages, hours of work, and working conditions of employees; (2) expressly provides for meal periods for employees; (3) includes final and binding arbitration of disputes concerning application of meal period provisions; and (4) provides for premium wage rates for all overtime hours worked, and a regular rate of pay of not less than 30% more than the state minimum wage rate.
Bill Limiting Employer Use of Credit Reports Vetoed
AB 482, which was designed to prohibit virtually all employers from obtaining consumer credit reports as part of the employment process, was vetoed by Governor Arnold Schwarzenegger. This was the third time the Governor vetoed similar credit check prohibitions, on the basis that California’s employers have inherent needs to obtain information about applicants for employment, and existing law provides protections for employees from improper use of credit reports.
ADMINISTRATIVE DEVELOPMENTS
Expansion of Family Medical Leave Act (FMLA)
On June 22, 2010, The United States Department of Labor (DOL) issued an “administrator regulation which clarified the definition of “son or daughter” under the FMLA. This clarification ensures that an employee who assumes the role of caring for a child receives parental rights to family leave, regardless of the legal or biological relationship. The interpretation provides that “employees who have no biological or legal relationship with a child may nonetheless stand in loco parentis [“in the place of a parent”] to the child and be entitled to FMLA leave.” Even where a child has two biological or legal parents, there may still be a finding that a child is the “son or daughter” of an employee who lacks a biological or legal relationship with the child. For example, an uncle who is caring for his young niece and nephew when their single parent is called to active military duty may exercise the right to family leave. A grandmother who cares for a sick grandchild when her own child is unable to do so may seek FMLA leave. An employee who shares in the parenting of a child with his or her same-sex partner will be able to exercise the right to FMLA leave to care for or bond with that child. The employee need only provide a simple statement asserting that the requisite family relationship exists to stand in loco parentis for purposes of family and medical leave.
Final Regulations on GINA
The final regulations regarding the Genetic Information Nondiscrimination Act (GINA) took effect on January 10, 2011. This Act prohibits employers from discriminating against employees based upon genetic information, and forbids employers from collecting genetic information about their employees (although exceptions exist for inadvertent discovery of genetic information). The final regulations resolve questions which were left open by earlier versions of the regulations. For example, employers are expressly permitted to offer financial incentives to encourage employee participation in workplace wellness programs. Further, the Equal Employment Opportunity Commission (EEOC) suggests that to further protect the employer against the inadvertent collection of genetic information, employers should provide a disclosure about GINA when asking employees for information related to family medical leave or disability accommodations.
Proposed Rule on HIPAA
In July 2010, the Department of Health & Human Services issued proposed a new rule to strengthen and expand the Health Information Portability and Accountability Act of 1996 (HIPAA) and specifically its rules regarding privacy, security and enforcement.
The proposed rule would implement the Health Information Technology for Economic and Clinical Health Act (HITECH Act) and would require business associates of entities covered by HIPAA, such as third-party administrators and pharmacy managers for health plans, claims processing and billing companies, transcription companies, and persons who perform legal, actuarial, accounting, management or administrative services for covered entities and who require access to protected health information, to adhere to most of the same rules as the HIPAA-covered entities. This would apply to HR consultants as well. Liability for failure to comply with the HIPAA privacy and security rules would extend directly to business associates and business associate subcontractors even though HIPAA’s privacy rule does not directly apply to business associates.
The rule is designed to include expanded notices of privacy practices to individuals regarding their rights, to give individuals greater control over the disclosures of their personal health information through expanded requirements regarding authorization before a covered entity or business associate can disclose their protected health information. Individuals would also have easier access to their personal health information in an electronic format. Covered entities must protect the health information of decedents for only 50 years after death, as opposed to the current rule’s requirement that the information be protected in perpetuity. This is designed to grant family members, researchers and historians access to personal health information of persons who have been deceased for many years. Essentially, the proposed rule aims to afford an individual’s health information greater protection through the sharing of responsibility against impermissible disclosures of protected information by both HIPAA-covered entities and their business associates and subcontractors.
New Workers’ Compensation Regulations
October 8, 2010, the California medical provider network (MPN) and employee information regulations took effect. Employers should revise their employee notices and workers’ compensation posters to comply with the new regulations. Key changes include:
- The 30-day waiting period is eliminated for employers rolling out the MPN.
- When an employer changes MPNs, the 14-day notification period is eliminated.
- The change of MPN notice needs to be sent only to injured workers currently treating, not all employees.
- The employer’s initial MPN notification process at the time of hire can be streamlined into a brief overview of the MPN regulations. At the time of injury, however, full MPN notification must be provided.
- MPN notices are required in Spanish only where there are Spanish-speaking employees.
- Full MPN notification must be posted at all employer locations.
- Revised versions of the Workers’ Compensation Claim Form (DWC 1) and Notice of Potential Eligibility and The Employee Poster (Notice of Employees – Injuries Caused by Work) Form (DWC 7) must now be provided to employees
Revised forms can be found at www.dir.ca.gov.
Internships
In April 2010, The New York Times reported a Department of Labor (DOL) “crackdown” on the practice of for-profit employers using unpaid interns. The DOL highlighted that in order to be legally compliant, an internship should provide training similar to that provided in an academic or vocational institution, not displace regular paid workers, and should not provide the employer with any immediate advantage. The California Labor Commissioner has issued guidance on the subject as well, which also relies on the availability of academic credit and written documentation of the educational benefits derived by the intern.
2.6 New Cal-OSHA Heat Illness Regulations. Effective November 4, 2010, a new heat illness regulation was codified at California Code of Regulations §3395. The new regulation applies to all outdoor places of employment. Employers are required to have shade present when temperatures exceed 85 degrees and have shade available when the temperature does not exceed 85 degrees. It includes special high heat rules for workers in specific industries including agriculture, construction, landscaping, oil and gas, and the transportation of agricultural products, construction materials or other heavy items (including furniture, lumber, freight, cargo, cabinets, industrial or commercial materials) in non-air-conditioned vehicles.
The full regulation is available at http://www.dir.ca.gov/DOSH/HeatIllnessInfo.html.
DEVELOPMENTS IN CASE LAW
Wage and Hour Issues
Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723. A number of managers at several restaurants who were classified as exempt from overtime brought a class action lawsuit against their employer, claiming that they were actually non-exempt employees and thus entitled to overtime pay. The plaintiffs attempted to certify a class that consisted of three types of employees: (1) kitchen managers or chefs, (2) department managers or associate general managers, also called assistant managers, floor managers, restaurant managers or bar managers, and (3) general managers. The trial court denied certification because there was not common proof sufficient to allow a fact-finder to make a class-wide judgment as to the class members. The Court of Appeal affirmed the trial court’s finding that the action was not suitable for class treatment because common questions of law and fact did not predominate over individualized issues.
Dukes v.Wal-Mart Stores, Inc., certiorari granted December 6, 2010. The United States Supreme Court has agreed to hear a gender employment lawsuit against Wal-Mart in what has become the largest class-action lawsuit in U.S. history. The allegations are that Wal-Mart engaged in gender bias in pay and promotion of workers at its various stores throughout the country. The court will decide whether as many as 1.6 million current and former Wal-Mart employees can claim discrimination as a class. The outcome of the Wal-Mart case will have a tremendous impact on whether plaintiffs from various stores or locations may successfully bring class-action lawsuits against an employer.
Baker v. American Horticulture Supply (2010) 185 Cal.App.4th 1295. A sales representative sued a distributor for, among other things, violation of the Independent Wholesale Sales Representatives Contractual Relations Act (Civil Code §1738.10 et seq.). The issue of law was whether a sales representative who had suffered damages as a result of nonwillful violation of the Act could recover damages, or whether proof of “willfulness” was a prerequisite to prevailing under the statute. The Court of Appeals held that the Legislature’s intent was to permit a sales representative to recover damages for a violation of the Act even in the absence of willful conduct.
Bamonte v. City of Mesa (9th Cir. 2010) 598 F.3d 1217. Police officers for the City of Mesa sued, claiming they should have been paid for the time they spent donning and doffing gear such as uniforms, footwear, badge, belt, service weapon, holster, handcuffs, batons and portable radios. The Court of Appeals held that time spent engaged in donning and doffing was not compensable time under the federal Fair Labor Standards Act and the Portal-to-Portal Act because the officers had the option to don and doff their gear at home.
Gilb v. Chiang (2010) 186 Cal.App.4th 444. The Department of Personnel Administration for the State of California (DPA) and its director sought declaratory and other relief against the State Controller regarding the DPA’s authority to direct the Controller to defer paying State employees’ salaries when appropriations are unavailable due to the Legislature’s failure to enact a timely budget. The Court of Appeal held that the DPA was acting within its authority by issuing a pay letter which instructed the Controller to reduce the paychecks pending the adoption of a budget, and that the State was not required to pay its employees the State minimum wage (so long as at least the federal minimum wage was paid) during a budget impasse.
Lu v. Hawaiian Gardens Casino, Inc. (2010) 50 Cal.4th 592. A card dealer filed a class-action lawsuit against his employer, a casino, over the casino’s mandatory tip-pooling policy. He argued that the mandatory tip pooling violated California Labor Code section 351 which states that gratuities belong exclusively to the employee who earns them. Both the trial court and the court of appeals had previously concluded that Section 351 does not give an individual a private right of action to sue an employer to recover misappropriated tips. The California Supreme Court agreed, but also indicated that its holding does not prohibit employees from pursuing other legal remedies for misappropriated tips through non-statutory causes of action, including a common-law action for conversion, nor does it prevent the Legislature from creating additional remedies or even a private right to sue for violations of Labor Code section 351.
Cumbie v. Woody Woo, Inc. (9th Cir. 2010) 596 F.3d 577. Consistent with California law, the Ninth Circuit allowed mandatory tip-pooling under the Fair Labor Standards Act (FLSA) for restaurant employees. FLSA allows “tip credits” to be applied towards minimum wage. Here, the employee was paid above the federal minimum wage, there was no tip credit and there was an existing tip sharing agreement amongst the employees receiving a portion of the tips. The court addressed the employee’s ownership of the tips, and held that there was no violation of the minimum wage laws.
Martinez v. Combs (2010) 49 Cal.4th 35. The California Supreme Court affirmed a decision by the California Court of Appeal granting summary judgment to the employer and two produce merchants through whom the employer sold strawberries, whom the Plaintiff claimed were his joint employers. The owner of the direct employer, Isidro Munoz, Sr., was doing business as Munoz & Sons. Munoz hired seasonal agricultural workers to pick berries on four separate sites, and had one business that involved the harvesting of strawberries that would be sold fresh and one that involved strawberries that would be frozen. The Court stated that courts should consider the definition of “employer” which is included in the applicable IWC wage order: one who “exercises control over the wages, hours, or working conditions of any person.” However, neither of the produce merchants “suffered or permitted” plaintiff to work because neither had the power to prevent plaintiff from working. Only the direct employer had any control over whether workers were hired or fired, how and at what rate workers were paid wages, and where and when employees were to report to work. No evidence suggested that the direct employer’s employees viewed the produce merchants’ field representatives as their supervisors or believed they owed their obedience to anyone but the direct employer and his foremen. Therefore, only the direct employer could be liable for any wage violations. The Court also rejected the plaintiff’s argument that a joint employer relationship existed because the strawberry vendors indirectly benefited from their labor, by making money from the sale of the produce.
Pellegrino v. Robert Half International, Inc. (2010) 181 Cal.App.4th 713. Former employees sued the temporary staffing firm which previously employed them for violation of the Labor Code’s provisions regarding overtime compensation, meal and rest periods, and itemized wage statements. The employer raised the affirmative defense that the employment agreements signed by the employees required that any such claims had to be raised within a period of six months. The trial court found this attempt to shorten the statute of limitations unenforceable because California Labor Code section 219 precludes an employee from waiving overtime claims, meal and rest break claims, or other claims under the Labor Code.
Rutti v. Lojack (9th Cir. 2010) 596 F.3d 1046. 450 technicians who worked for Lojack installing and repairing vehicle recovery systems, brought a class action lawsuit under the Fair Labor Standards Act (FLSA) and California law. The technicians traveled to client locations in company vehicles. Lojack would pay the technicians from the start of work at each site until the job was complete, but would not compensate the technicians for the drive to and from the sites. The technicians also complained that they were required to perform duties before and after their commute including logging on to a handheld device to find out where their jobs were for the day, mapping out and prioritizing their routes, and at the end of the day, sending an electronic transmission to Lojack through a portable data terminal. In August 2009, the Ninth Circuit held that the employees’ pre-shift activities were not integral to the principal job activities and were de minimus, and thus did not have to be compensated. The court found a triable issue of fact as to whether the post-shift activities were integral to the principal job activities. The Ninth Circuit also held that the post-shift commute time and transmissions time were not compensable because they did not have to be sent immediately at the conclusion of the last job, but could be sent up to 12 hours after the employee’s shift ended. However, In March 2010, the Ninth Circuit withdrew its August 2009 opinion and issued another decision. In the March 2010 decision, the Court held that the commute time was not compensable under the federal law and Portal-to-Portal Act. The fact that employees drove company vehicles, and their use was restricted (the drivers could not have any passengers, could not use the vehicle for personal errands, had to drive directly from home to the job and back, and could not use mobile phones except to check in with the Lojack dispatcher), had no effect. The pre-shift activities of mapping and prioritizing routes were considered part of commuting, and not integral to the employee’s principal activities, and thus were not compensable. However, the transmission of data via the electronic device after the shift was, in this case, found to be integral to the employee’s principal duties and therefore was compensable time.
Solis v. Jasmine Hall Care Homes, Inc. (9th Cir. 2010) 610 F.3d 541. Care providers at residential care facilities for developmentally disabled adults in California were being assigned five 24-hour shifts per week, but were considered “on-duty” and were paid for only 8 hours per shift. During each shift, they remained on premises and were provided sleeping accommodations for the “off-duty” portions of their shifts. They were not permitted to leave the premises during a shift except for authorized company business. Investigation showed that even “off-duty” workers were required to help, were interrupted during personal time or sleep to attend to residents’ needs. The Department of Labor sued claiming various violations of the Fair Labor Standards Act. The trial court ruled in favor of the Department of Labor, but although there were still other issues pending before the trial court, Jasmine Hall Care Homes immediately appealed that ruling to the Ninth Circuit Court of Appeals. The Ninth Circuit denied the appeal because no final decision had been entered by the trial court prior to the filing of the appeal.
Solis v. So. Cal. Maid Service & Carpet Cleaning, Inc. (Unpublished) Case No. CV 06-3903 AG. The United States District Court for the Central District of California sided with the U.S. Department of Labor in finding that Southern California Maid Service had wrongly classified its home and carpet cleaners as independent contractors and failed to pay them the federally required minimum wage or overtime for hours worked over 40 per week. The court awarded back wages to the workers and ordered payment of more than $1 million in liquidated damages for violations of the federal Fair Labor Standards Act. In September 2008, the Labor Department filed for civil contempt charges for the employer’s continued failure to comply with the order. In April 2009, the court ordered daily fines against the company of $2,000, plus an additional $200 per day each from the individual owners. The individual owners were then taken into custody and jailed for four days. They were released after appearing before the judge, at a hearing where the couple promised to pay the balance of the $3.5 million within 2 weeks.
Discrimination
Chavez v. City of Los Angeles (2010) 47 Cal.4th 970. The California Fair Employment and Housing Act (FEHA) permits a prevailing plaintiff to recover his or her attorney’s fees. California Code of Civil Procedure California §86 provides that cases where recovery is less than $25,000 will be considered “limited jurisdiction” cases and that the scope of permissible discovery is greatly reduced. In this case, the Plaintiff recovered damages for his FEHA claim of $11,500 (less than half the $25,000 limit) and then sought an attorneys’ fees award for $870,935.50 based on 1,851 attorney hours. The California Supreme Court held that the trial court had the discretion to deny the attorneys’ fees award where the plaintiff prevailed “modestly” on the sole claim that an interdivision transfer order was temporarily rescinded in retaliation for Plaintiff’s assertion of other, ultimately unsuccessful claims of discrimination, and had found that the fees claimed were grossly inflated when considered in light of the single claim on which the plaintiff had prevailed, the amount awarded, and the amount of time an attorney might reasonable expect to spend in litigating that lone claim. The trial court could properly consider whether the plaintiff’s attorney should have realized that the claimed injury was so slight that it would not support a damages claim in excess of the $25,000 limit.
Lewis v. City of Chicago (2010) 130 S. Ct. 2191. In May 2010, the U.S. Supreme Court unanimously held that the 300-day limit for filing a disparate impact claim under Title VII does not start to run until a promotional test is used as the basis of a hiring or promotion decision. In this case, unsuccessful public employee applicants filed claims more than 300 days after the promotional test was scored or the test results were posted. The Court held that the discrimination does not occur until the test results are used to deny someone hiring or select another candidate for promotion. Thus a new statute of limitations starts to run every time the test results are used. This means that a single qualification test which is used to establish a pool of qualified applicants for hiring or promotion remains subject to a timely legal challenge so long as hiring and promotional decisions are made from that pool.
Murray v. Principal Financial Group (9th Cir. 2010) 613 F.3d 943. Murray was a “career agent” for Principal, whose duties were to sell a wide range of financial products and services, including annuities, disability income, 401(k) plans and insurance. Murray sued for sexual harassment under federal Title VII. Principal moved for summary judgment on the ground that Murray, as an independent contractor, is not entitled to the protections of Title VII. The Ninth Circuit upheld the trial court’s decision, reiterating that insurance agents are independent contractors and not employees for the purposes of various federal employment statutes, including the Employee Retirement Income Security Act (ERISA), the Age Discrimination in Employment Act (ADEA) and Title VII.
Brownfield v. City of Yakima (9th Cir. 2010) 612 F.3d 1140. The Americans with Disabilities Act (ADA) limits when an employer may require medical examination of current employees. The EEOC and courts have allowed such examinations where the employer has a reasonable belief, usually founded on a decline in the employee’s performance, that the employee’s ability to perform essential job functions is impaired by a medical condition or the employee poses a direct threat. In Brownfield, the Ninth Circuit held that the high standard of showing “business necessity” for a “prophylactic” fitness for duty examination, was met where a police officer had exhibited highly emotional responses, loss of temper and “volatile” reactions to minor events following an off-duty automobile accident. The employer need not wait for actual decline in job performance or harm to require the examination.
Reid v. Google, Inc. (2010) 50 Cal.4th 512. Reid was hired by Google at age 52 to be a director of operations and a director of engineering. Reid alleged that the vice-president of engineering operations and other employees made derogatory age-related remarks to Reid during his employment. He was told that his opinions were “obsolete,” “too old to matter,” that he was “slow,” “fuzzy,” “sluggish,” and “lethargic,” that he “did not display a sense of urgency” and “lacked energy.” Other co-workers called Reid an “old fuddy-duddy,” “old guy,” told him his knowledge was ancient, and told him his compact disc jewel case office placard should be an “LP” instead of a “CD.” A month before Reid was removed from the director of operations position, one of Google’s co-founders sent an e-mail saying “We should avoid the tendency towards bloat particularly with highly paid individuals.” When Reid was removed, two men took over his duties – one fifteen years and the other twenty years his junior. He was assigned the task of creating an in-house graduate degree program, but was not given a budget or staff to support it. He was encouraged to look for jobs in other departments but no one intended to hire him, and one department head commented that Reid was not a “cultural fit” at Google. When Google eliminated the in-house graduate degree program, Reid was terminated. He sued the company five months later, claiming age discrimination. Google filed a motion for summary judgment. The trial court found that Reid had failed to raise a triable issue of material fact as to whether Google’s reasons for terminating his employment were pretextual, and that his age discrimination claim should be dismissed. The Court of Appeal reversed the trial court’s granting of Google’s summary judgment motion, finding that, on the issue of whether the stated reason for termination was pretextual, the evidence Reid had presented raised a triable issue of material fact. Reid offered discriminatory comments that co-workers had made and evidence that Google had demoted him to a nonviable position before terminating him. Reid v. Google is a landmark case because previously, “stray remarks,” or comments made by a person who was not the decision-maker, outside the decision-making process, or which had no effect on the decision-making process, would not be considered as evidence in deciding a motion for summary judgment. Now, however, courts are free to consider this type of evidence, making the chances of an employer’s success on a motion for summary judgment less likely.
Reeves v. MV Transportation (2010) 186 Cal.App.4th 666. Reeves, a 55-year-old attorney, applied for a position as a staff attorney for MV Transportation, which ended up hiring a 40-year-old applicant who possessed what the company found to be superior qualifications. Reeves was not interviewed. Reeves sued claiming age discrimination. The employer could not locate the candidates’ employment applications, which Reeves argued created an issue of fact for a jury to decide regarding his rejection. The court found that MV had presented a legitimate business reason for rejecting Reeves (the other applicant was more qualified), so the burden shifted to Reeves to prove that the company’s reasons for hiring someone else were a mere pretext and the true motivation was age discrimination. Courts generally defer to the legitimate business decisions of employers in deciding which applicant is better qualified. The court concluded that Reeves could not establish that MV’s reasons were pretextual, and that the employer’s failure to produce the job applications alone was not a reason to deny dismissal of Reeves’ claim.
Harassment
Dep’t of Fair Employment & Housing v. Artifer USA, Inc. The Fair Employment and Housing Commission found the company and an individual supervisor liable for sexual harassment, sex discrimination, failure to take reasonable steps to prevent discrimination, and constructive discharge. The behavior in this case included sexual remarks by the supervisor to the plaintiff regarding a female sales person, including telling plaintiff the saleswoman had masturbated for him on the couch in his office, showed him the vibrator she kept in her purse, and had suggested that he, the salesperson and another acquaintance have a “threesome.” The supervisor also commented on Plaintiff’s appearance, frequently telling her how good she looked. When she started wearing hooded sweatshirts, ball caps and no makeup to try and deter his comments, the supervisor told her to “put on some make up and do something” to make herself look nicer. Plaintiff found a webcam installed to her office computer monitor which pointed directly at her chest, and although she would reposition it every day, the next morning it would be pointed at her chest again. The supervisor would show up at Plaintiff’s house unexpected and uninvited, and on one occasion pulled her into a hug so tight she could not move. Plaintiff was awarded the full amount of back pay, emotional distress damages, and an administrative fine. The defendants were ordered to cease and desist from harassment, circulate a sexual harassment prevention policy, provide training, and post all required DFEH posters. The individual supervisor was also required to undergo harassment prevention training.
Haberman v. Cengage Learning, Inc. (Dec. 2009) 180 Cal.App.4th 365. The employer’s motion for summary judgment on harassment claims filed by an employee who was fired for poor sales performance was granted because the alleged acts were not so severe or pervasive as to create a hostile work environment. The case involved 11 instances of conduct occurring over 3 years, including brief and isolated comments such as “How do you look so good so early in the morning?”, “next time I’ll go for a younger one because women in their 40s get sick,” that a school administrator was “pretty hot for an older woman,” taking a picture of the plaintiff smiling at a convention, telling the plaintiff a textbook author “had the hots for” her, asking the plaintiff how she knew whether someone was good in bed, asking if she had any friends who just wanted to have sex. The comments fell “far short of establishing a pattern of continuous, pervasive harassment necessary to show a hostile working environment under the Fair Employment and Housing Act [FEHA].”
Hawn v. Executive Jet Management, Inc. (9th Cir. 2010) 615 F.3d 1151. Plaintiffs in this case were male airline pilots who were terminated after a female flight attendant alleged that they sexually harassed her and created a hostile work environment through an array of conduct including sexualized banter, crude jokes, and the sharing of crude and/or pornographic e-mails and websites. Plaintiffs contended that the female flight attendant was a participant in, or initiator of, the conduct she complained about, and that their terminations were illegal because she and other female flight attendants engaged in similar conduct but were not terminated because they were females. The court concluded that there was a difference between the Plaintiff airline pilots and the female flight attendants in that the pilots’ actions toward the flight attendants had given rise to a complaint of sexual harassment, while the female flight attendants’ alleged comment had not. The other incidents, therefore, were not such parallels to her case as to give rise to a genuine issue of pretext.
EEOC v. Prospect Airport Services, Inc. (9th Cir. 2010) 621 F.3d 991. A male employee was protected from hostile environment sexual harassment by a female co-worker (sexually suggestive statements and gestures, unwelcome sexual advances) even though plaintiff admitted that “most men” would have “welcomed” the behavior and the employee made no written complaint. Sufficient evidence was presented by the EEOC to make a grant of the employer’s motion for summary judgment improper.
Retaliation
Hedgpath v. City of Anaheim (Unpublished) (March 23, 2010) Superior Court No. 06-CC-06369. Hedgpath sued the City of Anaheim and the chief of police for retaliation in violation of the Fair Employment and Housing Act (FEHA). The California Court of Appeal for the Fourth District affirmed the holding in Jones v. Lodge at Torrey Pines Partnership that nonemployer individuals are not personally liable for any role in retaliation, and held that the chief of police had no personal liability for retaliation under FEHA against Plaintiff. The court also found that a claim for retaliation under FEHA could be maintained by a former employee even if the alleged retaliatory conduct occurred after his resignation.
Holman v. Atlanta Pharma US, Inc. (2010) 186 Cal.App.4th 262. A female former employee sued her former employer under FEHA for wrongful suspension in violation of public policy, sex discrimination, and retaliation. At the close of evidence, the employer moved for nonsuit with respect to plaintiff’s retaliation claim, and the motion was granted. Because the employer had made an offer of judgment under Code of Civil Procedure section 998 which the plaintiff rejected, but the plaintiff did not recover at least as much as the employer offered in the 998 proposal, the employer was entitled to recover its post-offer costs, and the court permitted the employer to recover expert witness fees in addition to its attorneys’ fees.
Employee Privacy
City of Ontario v. Quon (2010) 130 S. Ct. 2366. A former police sergeant sued for violation of his privacy rights and violation of the federal Stored Communications Act (SCA). Concerned that officers were using their text pagers mostly for personal messages, the chief of police decided in 2002 to read some of them. During this process he learned that most of the messages sent by Sergeant Quon were personal, and some were sexually explicit. In August 2002, an audit found that Quon had sent or received 456 messages, but only 57 were work-related. In an earlier Ninth Circuit court decision, Quon v. Arch Wireless (9th Cir. 2008) 529 F.3d 892, the court held that the text-messaging service provider had violated the SCA by providing the content of the text messages to the employer, even though the employer owned and had paid for the paging device and messaging service. The Ninth Circuit Court relied on the lack of specific written consent to the disclosure. The United States Supreme Court was not asked to address this part of the Ninth Circuit Court decision. At issue before the Supreme Court was whether the Fourth Amendment’s ban on “unreasonable searches” puts any limitations on searches by public employers. The Court said those limits were minimal – permissible as long as the employer had a “work-related purpose” for inspecting an employee’s desk or reading messages sent by an employee on an agency-owned paging device. In this case, the United States Supreme Court upheld the lower court’s holding, finding that the police chief’s reading of the text messages constituted a search, but that it was reasonable.
Mendoza v. ADP Screening and Sel. Services, Inc. (2010) 182 Cal.App.4th 1644. Mendoza filed a complaint alleging that a prospective employer had denied him a job because the employer had received a pre-employment background check conducted by defendant that identified Mendoza as a registered sex offender on a Megan’s Law website. The Court of Appeal held that an employment screening business had a constitutional free speech right to republish information disclosed on the Megan’s Law website to its clients, not withstanding the statutory prohibitions on the use of such information. Mendoza’s claim also failed because registered sex offenders are not a protected class for purposes of federal or state equal employment opportunity laws. Significantly, however, the Court noted that Mendoza could potentially allege a violation of Penal Code section 209.46 (which prohibits the use of any information disclosed on the website for purposes of employment) against the prospective employer.
Non-Compete Agreements
Dowell v. Biosense Webster, Inc. (Oct. 2009) 179 Cal.App.4th 564. The Second District Court of Appeal affirmed the judgment of the trial court, holding that the non-competition and non-solicitation clauses were facially void. The Court, in dicta, questioned the continued viability of the common law trade secret exception to covenants not to compete. The Court found that even assuming such an exception exists, it was inapplicable, because the noncompete and nonsolicitation clauses in the agreements were not narrowly tailored or carefully limited to the protection of trade secrets, but rather were so broadly worded as to restrain competition.
Silguera v. Creteguard, Inc. (2010) 187 Cal.App.4th 60. The Second District Court of Appeal found that, where an employee was terminated based upon a non-compete signed with employee’s previous employer, the employee can sue for wrongful termination in violation of public policy. The facts revealed that Creteguard had an “understanding” with an industry competitor, that they would honor the competitor’s non-compete with its employees, even though Creteguard did not believe that such non-competes were legally enforceable in California. The Court found that such an “understanding” between the companies, was “tantamount to a no-hire agreement” and held that such agreement was void and unenforceable under Section 16600 because it unfairly limited employees’ mobility. The Court noted that the former employer “should not be allowed to accomplish by indirection that which it cannot accomplish directly.”
Leaves of Absence
McCarther v. Pacific Telesis Group (2010) 48 Cal.4th 104. The Supreme Court of California reversed the judgment of the court of appeal and held that Section 233 does not apply to uncapped compensated sick leave policies. Section 233, more commonly referred to as the “kin care statute” provides that, “[a]ny employer who provides sick leave for employees shall permit an employee to use in any calendar year the employee’s accrued and available sick leave entitlement, in an amount not less than the sick leave that would be accrued during six months of the employee’s then current rate of entitlement, to attend to an illness of a child, parent, spouse, or domestic partner of the employee.” The company’s sick leave policy, as stipulated by all parties, was such that “employees do not earn, vest or accrue any particular number of paid sick days in a year.” The Court found that it was impossible to determine the compensated sick time to which an employee would be entitled in any given six month period; therefore, it was, similarly, impossible to determine the amount of kin care to which an employee would be entitled under Section 233. It concluded that Section 233 does not apply to policies, like that of defendants, which provide uncapped compensated sick leave.
Sullivan v. Dollar Stores, Inc. (9th Cir. 2010) 623 F.3d 770. An employee who continued to be employed at the same retail store location did not meet the 12 months of employment requirement for Family Medical Leave Act (FMLA) eligibility following the bankruptcy of her former employer, a discount clothing retailer. Although the dollar store hired some of the former employer’s workers, the new business did not purchase any inventory from the former employer, Plaintiff was required to complete a job application, and the dollar store hired many employees from other stores or new hires. There was a break in Plaintiff’s employment of approximately one month, during which time the store was renovated. Finally, Plaintiff’s job title, duties, and supervisor were different from those she had at the former employer, and the dollar store had a different pricing structure.
Employer-Employee Arbitration
Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665. The California Supreme Court had previously held that binding arbitration decisions could be overturned only for a narrow set of circumstances permitted by statute (e.g., arbitrator misconduct). In Pearson, the Court created an exception from this standard for employment arbitration of discrimination cases. The Court held that “when, as here, an employee subject to a mandatory employment-arbitration agreement is unable to obtain a hearing on the merits of his FEHA claims, or claims based on other unwaivable statutory rights, because of an arbitration award based on legal error, the trial court does not err in vacating the award.” First, the Court found that the arbitrator misapplied the tolling provision of Section 1281.12 of the California Code of Civil Procedure and, therefore, erroneously granted summary judgment for defendant, precluding a hearing on the merits. The plaintiff also asserted that the arbitration agreement was unlawful because it sought to restrict plaintiff from seeking administrative remedies. The Court held that “inclusion of a provision limiting resort to an administrative forum does not render the arbitration agreement unconscionable or unenforceable;” however, it noted that unconscionability was not raised by plaintiff and was, consequently waived. This case is significant in that it calls into question the use of summary judgment in employment arbitration of discrimination or wage claims, as the resulting decision for the employer is now reviewable by a court.
Suh v. Superior Court (2010) 181 Cal.App.4th 1504. In this case, there were two separate contracts at issue. The 2008 Agreement, to which plaintiffs were not signatories, was found by the Court to be inapplicable to plaintiffs and provided no basis for compelling arbitration. While the Court acknowledged certain exceptions under which a nonsignatory may be bound by an arbitration clause, it did not find that these shareholders were so bound. The 2006 Agreement provided for arbitration in accordance with the American Health Lawyers Association rules. Plaintiffs asserted that the arbitration clause was procedurally and substantively unconscionable. The Court noted the prevailing view, “that both procedural and substantive unconscionability must be present before a court can refuse to enforce an arbitration provision based on unconscionability.” The Court found that the severe limitations on remedies under the AHLA rules to be substantively unconscionable. There was uncontested evidence that plaintiffs were required to sign, as a condition of employment, a “Waiver and Agreement” binding them to the 2006 Agreement without having seen the Agreement. The Court also noted that the arbitration clause was on page 13 of the agreement and was in the same font and size as the rest of the agreement. The Court concluded that the arbitration provision in the 2006 Agreement was therefore unconscionable.
Employee Discipline
Small v. Raley’s (Unpublished) 2009 WL 1639720. The Third District Court of Appeal affirmed the trial court’s entry of summary judgment in favor of Raley’s. Raley’s had a Non-Fraternizing Policy in its Employee Handbook, which detailed the sound policy and considerations for the policy (including business reasons and preventing sexual harassment lawsuits). The Court affirmed the deference given to the employer’s judgment of management employees, stating that “[a]n employee’s violation of the employer’s policies provides grounds for termination, and juries should not be allowed to decide the correctness of an employer’s business judgment in making termination decisions, particularly with respect to managerial employees (absent an unlawful basis such as illegal discrimination).” The employee admitted the misconduct but argued that there was an implied agreement to a published progressive discipline structure that should have been followed prior to termination. The Court pointed out that, even if such structure applied and no other employee had ever been fired for violation of the Non-Fraternizing Policy, he would still need to present evidence that Raley’s use of his violation of the policy was pretextual. No such evidence was presented and the Court concluded that the trial court properly granted summary judgment.
WHAT’S AHEAD FOR 2011 AND BEYOND
2011 is AB 1825 Compliance Year for Many Employers
As AB 1825, the bill requiring employers of 50 or more employees to conduct training on the identification and prevention of harassment in the workplace every 2 years was passed in 2007, the year 2011 will be a compliance year for most employers. Under the law, the training must be completed by December 31, 2011 regardless of the date training occurred in 2009. Employers should keep in mind that any person hired at or promoted to a managerial level must be trained within 6 months of his or her hire or promotion, whether or not the hire or promotion occurs within the employer’s regular compliance year.
Health Care Reform
Provisions Effective 2010
Small-Business Tax Credits. Beginning in 2010, small employers that contributed at least 50% of their employees’ health care premiums became eligible to receive tax credits. “Small employers” mean businesses with no more than 25 employees. The amount of the credit varies based on the number of employees and the average annual employee compensation, up to 35% of their premiums.
Early Retiree Reinsurance Program. This is a program which will provide $5 billion for employer health plans that offer coverage to early retirees ages 55-64. Reimbursement will be made to plans on behalf of early retirees and their spouses, surviving spouses, and dependents, up to 80% of certain claims between $15,000-$90,000. The program will end in 2014 or when the $5 billion allotment runs out, whichever comes first. Assistance is offered on a first-come, first-serve basis. The Department of Health & Human Services has already begun accepting applications for this program.
Tax Exclusion for Coverage of Adult Children. The new legislation extended the definition of “dependent” to include children who will not turn 27 at any time during the applicable tax year, which had the effect of expanding the income tax exclusion for employer-provided health coverage to include employees’ children under the age of 27.
Adoption Assistance. In 2010, the legislation also increased the adoption tax credit and the adoption assistance tax exclusion from $10,000 to $13,170.
Provisions Which Apply to All Plans
Elimination of Lifetime Limits. Plans are prohibited from imposing lifetime limits on “essential health benefits.”
Restriction of Annual Limits. Plans may place annual limits on “essential health benefits” only until January 1, 2014, when annual limits on such benefits are completely prohibited.
Prohibition on Rescissions. Plans may not rescind coverage in most circumstances. Rescission is only permissible in cases of fraud or intentional misrepresentation by the insured.
Coverage for Adult Dependent Children. Plans that cover dependent children must extend coverage to them until age 26. Grandfathered plans (group health plans in effect on March 23, 2010 which have not made any changes which would cause them to lose grandfathered status) do not have to extend such coverage to dependent children until January 1, 2014, unless those children are not eligible for other employer-sponsored coverage.
Elimination of Preexisting Condition Exclusions for Children. Plans may not refuse coverage because of a preexisting condition or limit health plan participation, to children under the age of 19.
Provisions Which Apply Only to New Plans
Preventive Care Coverage. New health plans must cover certain evidence-based preventive care without cost sharing. These plans cannot charge patients co-pays or deductibles for certain services if provided in-network.
Nondiscrimination Rules. The nondiscrimination rules for “highly compensated” employees that previously applied only to self-insured health plans will not apply to fully-insured group health plans.
Claims and Appeal Process. New plans are required to create a claims and appeals process by which individuals may appeal decisions about coverage made by their insurance companies or health plans.
Health Care Reform Provisions Effective 2011
Health Care Account Charges. In 2011, health savings accounts (HSAs), medical savings accounts (MSAs), and flexible spending accounts (FSAs) can no longer be used for over-the-counter medicines, only for prescription drugs and insulin. There will be an additional tax on distributions from these accounts which are not used for qualified medical expenses.
Cafeteria Plans for Small Businesses. The new legislation provides certain eligible small employers with a new safe harbor from the nondiscrimination rules for cafeteria plans.
W-2 Reporting. Beginning in the 2011 tax year, employers must report the value of employer-provided health benefits on their employees’ W-2 forms.
Long-Term Care. In January 2011, a voluntary insurance program will be established. Through this program, individuals may purchase long-term care insurance and make contributions to the program via payroll deductions.
Wage and Hour Law in California
Meal Periods and Rest Breaks. It was anticipated that the California Supreme Court would decide Brinker Restaurant Corporation v. Superior Court of San Diego (Hohnbaum) in 2010. The Supreme Court granted review on August 29, 2008. As of the date of publication, no decision has issued. Brinker will decide the issue of whether (1) employers are responsible for ensuring that non-exempt employees actually take their meal periods and rest breaks, or whether simply making those breaks available and relieving the employees of duties during those times is sufficient to comply with California law; and (2) whether it is acceptable to schedule meal and rest breaks earlier than the middle of a shift if the needs of the business demand it.
Classification as Exempt or Non-Exempt. On November 28, 2007, the California Supreme Court granted review of Harris v. Superior Court (2007) 154 Cal.App.4th 164. The issue in Harris is whether insurance claims adjusters were properly classified as exempt under the administrative exemption. Specifically, the Court will analyze whether the employees were engaged in work that was “directly related to management policies or general business operations,’ commonly referred to as the administrative/production dichotomy, and whether this analysis actually resolves the issue of whether an employee is properly classified under the administrative exemption.
Proposition 8 Appeal
In February 2004, the Office of the County Clerk in San Francisco, at the direction of then-mayor Gavin Newsome, began issuing marriage licenses to same-sex couples. Several lawsuits were filed to enjoin the City from issuing the licenses to same-sex couples. Those cases were eventually consolidated and in May 2008, the California Supreme Court decided the In Re Marriages case. The Supreme Court held that California statutes and legislation which banned same-sex marriages were subject to strict scrutiny because they treated a class of individuals (homosexuals) differently, violated the Constitutional rights of those individuals, and could not be used to preclude same-sex individuals from marrying. In response to this decision, during the November 2008 election California voters passed a ballot initiative referred to as Proposition 8, which amended the California Constitution to define marriage as only between a man and a woman. After the California Supreme Court upheld the voter initiative, a lawsuit was filed in federal court, called Perry v. Schwarzenegger. On August 4, 2010 Justice Vaughn Walker overturned Proposition 8, but his ruling has been stayed pending the appeal. The Ninth Circuit Court of Appeals began hearing oral argument on the appeal on December 6, 2010. The three-justice panel is expected to issue an opinion in 2011.
The outcome of this case potentially has an impact on several areas of employment law, including but not limited to the definition of “spouse” under federal family leave acts, employee benefits and ERISA, and personal income tax.
Legalization of Marijuana
Although the ballot initiative known as Proposition 19, which attempted to legalize marijuana under California law if not federal law, was defeated in the November 2010 election, advocates of the measure have indicated that another such initiative will appear on the ballot in 2012.
Vetoed Measures Which May be Revived
It is anticipated that with Jerry Brown’s election to Governor, several provisions that were vetoed by former Governor Schwarzenegger will be passed again by the Legislature, and likely signed by the new Governor:
- AB 1881: Increases the amount of liquidated damages employees could recover for minimum wage violations.
- AB 2187: Creates new criminal penalties for persons or employers who willfully fail to pay final wages upon termination.
- AB 2340: Entitles eligible employees to three days unpaid bereavement leave and permits employees to initiate civil actions against employers who violate these new rights.
- SB 1370: Requires all employment contracts for services rendered within California in which the method of payment involves commission to be in writing and to set forth the method by which the commissions are calculated and paid.
The materials provided here are selective, informational summaries only and do not cover all aspects of all legislation or cases that affect the employment relationship. They do not include all information necessary to evaluate any specific case. They are not intended as legal advice or as legal treatises and should not be relied on as such.