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, an