This legislative update was initially prepared by WPKT partner Michael S. Kalt for the Society for Human Resources Management, San Diego chapter, where he serves as the Vice President — Legislation.
DOL Issues Final FMLA Regulations
After two years work, the Department
of Labor (DOL) has issued the final Family Medical Leave Act (FMLA)
regulations to take effect on or about January 15, 2009. Due to
space constraints, this update cannot cover all the changes, but some
of the more noteworthy items include:
Military Leave Rights.
As expected, the new regulations incorporate and clarify the National
Defense Authorization Act of 2008 (NDAA) which had previously enacted
two new leave benefits: (1) for family members of seriously injured
service members (“military caregiver leave”), and (2) for National
Guard/reserve members called into service (so-called “qualifying exigency
leave”). For instance, the new regulations define “qualifying
exigencies” as (1) short-notice deployment; (2) military events and
related activities; (3) childcare and school activities; (4) financial
and legal arrangements; (5) counseling; (6) rest and recuperation; (7)
post-deployment activities; and (8) additional activities agreed to
by employer and employee.
The military caregiver benefit
allows family members to take up to 26 weeks of unpaid FMLA leave for
seriously injured or ill service members. The regulations confirm
this leave is not limited to spouses, parents and children (as with
most FMLA leaves) but can include grandparents, aunts, uncles, cousins
and relatives designated by the service member as “next of kin.”
The regulations confirm that the 26 weeks must be taken within a 12-month
period, and that the leave may be taken by each family member only once
per injury, but more than one family member may qualify for the leave.
The regulations retain the prohibition on employees waiving FMLA rights
prospectively, but confirm employees may voluntarily settle their FMLA
claims without court or DOL approval.
Prior FMLA regulations had been interpreted by some as permitting employees
to notify their employers of the need for FMLA leave up to two business
days after an absence from work. The new regulations generally
require the employee, absent unusual circumstances, to follow the employer’s
established call-in procedures to notify employers of an FMLA-related
Employers now have five business days, rather than the previous two
business days, to notify employees that a leave of absence is being
characterized as FMLA leave.
Fitness-for Duty Exams.
The new regulations permit employers to require employees returning
from leave to undergo fitness-for-duty tests if the job presents a significant
risk of harm to the employee or others.
To strengthen employee privacy rights, the new regulations limit who
may contact an employee’s health care provider, and expressly prohibit
the employee’s direct supervisor from doing so.
The new regulations permit employers to deny attendance-based awards
to employees who missed work due to FMLA leave provided the employer
treats non-FMLA leave in the same fashion.
courts had suggested “light duty” work counted against FMLA leave
time. The new regulations confirm that time spent performing light
duty does not count against FMLA leave entitlement.
Chronic Health Conditions.
A common employer complaint was how to define the “chronic conditions”
that constituted a “serious health condition” for FMLA purposes.
The new regulations specify that chronic conditions only qualify as
serious health conditions if they require periodic treatment from a
health care provider at least twice per year.
E-Verify Extended Until
President Bush has signed a
budget resolution bill (H.R. 2638) extending the federal government’s
e-verify program until March 2009. Originally set to expire in
November 2008, e-verify is the government’s web-based employment eligibility
verification program that employers may currently use on a voluntary
basis. Since a new administration will soon take office, and given
the number of currently-pending federal bills addressing employment
eligibility verification issues, it remains to be seen whether and in
what form e-verify will continue beyond the new March 2009 deadline.
Federal Contractors Required
to Use E-Verify
Beginning January 15, 2009,
certain federal contractors and subcontractors will be required to use
the federal E-Verify system to verify their employees’ employment
eligibility, according to a final rule issued on November 14, 2008 amending
the Federal Acquisition Regulation. This new rule requires federal
contractors to confirm the employment eligibility of all employees hired
during a contract term, and to verify the eligibility of all current
employees who are working on the federal contract (as defined in the
rule). These rules apply to all contracts valued at over $100,000
and lasting more than 120 days , and applies to subcontracts valued
at over $3,000. It also applies to existing indefinite delivery/indefinite
quantity contracts lasting beyond July 15, 2009. The rules do
not apply, however, to contracts lasting less than 120 days, or involving
commercially available off-the-shelf items, or to contracts involving
work only outside the United States. The rules require the subject
federal contractors to enroll in e-verify within thirty days of a contract
It is anticipated these regulations
will apply to nearly 200,000 federal contractors and potentially 4 million
employees, meaning there may be a considerable backlog in January 2009
when these regulations take effect. Since e-verify has only been
extended until March 2009 (see above) and since a new administration
will soon take office, the long-term impact and format of these new
rules remains to be seen.
DHS Issues Supplemental
“No Match” Rules
On October 23, 2008, the Department
of Homeland Security (DHS) issued its “supplemental final rule”
essentially republishing without substantive change the final “No
Match Rule” originally issued in August 2007. The initial version
of the final rule outlined an employer’s responsibilities to resolve
discrepancies in no-match letters received from the Social Security
Administration. In October 2007, a federal district court enjoined
the final rule from being implemented, which prompted the DHS to issue
in March 2008 its proposed supplemental final rule addressing the judge’s
Among other things, the supplemental
final rule clarifies that employers will not be deemed to have constructive
knowledge of an employee’s illegal resident status if it takes certain
statutorily enumerated steps with specifically enumerated time-frames
after receiving a no-match letter. The entire final rule can be
found online at www.dhs.gov/xlibrary/assets/ice_no_match_letter_finalrule.pdf.
The final rule will not be effective until included in the federal register
and it remains to be seen whether it will survive the almost certain
Rule 409A Compliance Deadline
Just a reminder, December 31,
2008 is the current deadline for certain “nonqualified deferred compensation
arrangements” to comply with Section 409A of the Internal Revenue
Code. Adopted in 2004, section 409A applies to certain deferred
compensation arrangements governing compensation paid in a later tax
year although the legally binding right arises in a prior tax year.
Such “deferred compensation arrangements” may include, but are not
limited to, severance agreements, stock options, change in control agreements,
and deferred compensation plans. Failure to comply with Section
409A may result in deferred compensation being deemed income earlier,
and may result in tax penalties.
California Supreme Court
to Review Meal and Rest Period Issues
As expected, the California
Supreme Court has decided to review Brinker Restaurant v. Superior
Court (ex rel Hohnbaum), Supreme Court Case No. S166350, an appellate
court decision which had provided some much needed clarity regarding
meal and rest period issues. Among other things, the California
court of appeal in Brinker held employers need only “provide”
but need not “ensure” meal and rest periods are taken, and it had
suggested class actions would rarely be appropriate given the individualized
The California Supreme Court
decision is not expected until late 2009 at the earliest, but it should
provide final guidance on numerous meal and rest period issues including:
(1) whether employers need only “provide” meal and rest periods
or must actually “ensure” they are taken; (2) whether employers
must provide meal periods for every five consecutive hours worked (the
so-called “rolling five” rule) or only a single meal period during
the first five hours; and (3) the amenability of these claims to class
action proceedings. In the interim, the appellate court decision
in Brinker is no longer citeable.
Interestingly, following the
California Supreme Court’s decision to review Brinker, the
Department of Labor Standards Enforcement (DLSE) issued an announcement
that it was rescinding its July 22, 2008 memorandum which had expressly
adopted the reasoning and standards enunciated in Brinker.
While announcing that the July 22d memorandum could no longer be relied
upon, the DLSE also announced that until the California Supreme Court
issues a final decision in Brinker, the DLSE would still interpret
California’s meal period laws as only requiring an employer “provide”
meal periods, but not “ensure” they are taken. In other words,
the DLSE seemed to say that it was no longer relying upon Brinker directly, but would continue to enforce the result in Brinker (the appellate court version) until the California Supreme Court issues
the final Brinker decision.
Pursuit of Internal Remedies Tolls FEHA Statute of Limitations
In a race discrimination/harassment
claim brought pursuant to California’s Fair Employment and Housing
Act (FEHA), the employer argued the civil suit was untimely because
the employees failed to file an administrative charge within the statutory
one-year period. The employees argued FEHA’s statute of limitations
should be equitably tolled (i.e., stayed) during the period they and
the employer investigated and attempted to resolve their internal complaint.
The trial court and the California court of appeal agreed with the employer,
but a unanimous California Supreme Court reversed finding that FEHA’s
statute of limitations was equitably tolled during the period the employees
voluntarily pursued internal administrative remedies.
California courts had previously
held that equitable tolling necessarily applied in situations where
employees were “required” to exhaust administrative remedies before
filing a complaint. In this case, the California Supreme Court
held tolling may also apply when employees voluntarily pursue internal
remedies before filing a formal complaint. Notably, the Court
did not say equitable tolling automatically applied for all voluntary
administrative remedies, but concluded it should in this instance where
the pursuit of administrative remedies furthered public policy goals
(i.e,. notice to the employer, possible informal resolution, etc.).
(McDonald v. Antelope Valley Community College Dist. (2008) 45
Denied Attorney’s Fees Despite Prior
Statutory Offer to Compromise
An employee sued alleging his
supervisor discriminated against and harassed him because of his mental
disability (Asperger’s Syndrome) by calling him “Rainman” on six
occasions. The California court of appeal affirmed summary judgment
in the employer’s favor concluding the supervisor was unaware of the
Asperger’s Syndrome at the time he made the comments, and that the
“sporadic use of ambiguous but potentially demeaning nicknames”
does not constitute a hostile work environment. The appellate
court also observed that an employer does not necessarily perceive an
employee as disabled simply because it perceives him as “quirky”
or “socially awkward.
After prevailing, the employer
sought to recover its expert fees and attorneys’ fees citing the employee’s
failure to accept its prior statutory offer to compromise (i.e, a CCP
998 offer). Notably, the appellate court awarded nearly $20,000
in expert fees finding that the employer’s prior $2,500 settlement
offer was reasonable under the circumstances. However, the appellate
court declined to award attorneys’ fees concluding that despite the
prior statutory settlement offer, the employer was still required to
demonstrate the employee’s claim was unreasonable or frivolous. (Mangano v. Verity, Inc. (2008) 167 Cal.App.4th 944)
Employer’s Failure to
Follow Contractual Procedures Leaves Door Open for Possible Implied
A former long-term employee
sued his employer alleging breach of an implied contract to terminate
him only for cause. The employer argued he was an at-will employee
citing the initial employment agreement containing an at-will provision
and its general handbook policies. The employee argued the employment
agreement did not foreclose a possible “for cause” implied contract
since the employer’s failure to obtain the signature of the officer
specifically identified in the agreement rendered it ineffective.
The California court of appeal
noted the employer had presented considerable evidence of an at-will
arrangement generally, but concluded the employer’s failure to follow
the procedure specifically identified in the agreement created questions
for the jury to decide at trial. The appellate court reaffirmed
that a properly executed at-will employment agreement will preclude
implied contracts for continued employment, but noted the employer’s
failure to follow the required procedures created a jury question.
The court also noted that in the absence of an executed contract, employee
handbooks and other documents containing at-will provisions remain important,
but do not necessarily “foreclose the possibility” of an implied
agreement to terminate only for cause. (Stillwell v. Salvation Army (2008) 167 Cal.App.4th 360).
Employers Not Liable for
Accidental Misstatements in Wage Statements
Current and former property
managers filed a class action alleging the employer failed to provide
meal and rest periods, and failed to provide accurate wage statements.
The employer acknowledged the wage statements contained the wrong mileage
reimbursement rate, but contended the error was inadvertent and had
been corrected, and had caused no injury to the employees since the
wage statements contained the correct amounts notwithstanding the improper
rate listed. The California court of appeals granted summary judgment
in the employer’s favor, finding that an employer cannot be liable
for wage misstatements under Labor Code section 226 unless it knowingly
and intentionally makes such misstatements and an employee suffers injury
as a result. In this case, the “technical” misstatement did
not result in the employees being underpaid or receiving insufficient
information to challenge the payments received.
Applying several recent federal
district court opinions, the appellate court also held that employers
need only provide meal and rest breaks to employees, but need not ensure
they are actually taken. The court also rejected the employee’s
arguments they were required to receive their meal periods within the
first five hours of their shift. Although the meal/rest period
rulings are favorable for employers, it is anticipated this aspect of
the ruling will be short-lived and that this case will soon be put on
hold pending the California Supreme Court’s anticipated ruling in Brinker. (Brinkley v. Public Storage, Inc. (2008) 67
California Labor Code Applies
to Work Performed by Non-Residents in California
Several Arizona and Colorado-based
employees of a California corporation sued under the California Labor
Code for overtime incurred during hours worked in California.
The employer argued the California Labor Code did not apply to non-residents
and the District Court for the Central District of California agreed.
The ninth circuit, however, reversed concluding the California Labor
Code applies to work performed in California by non-residents of California.
Applying traditional “choice of law” principles, the federal court
concluded California has a strong interest in applying its Labor Code
to work performed by non-residents while in California, and it rejected
the employer’s various due process arguments. The court, however,
also confirmed the Labor Code and California law did not apply to work
performed by non-residents outside of California. (Sullivan v. Oracle
Corp. (9th Cir. 2008) ___ F.3d ___, 2008 U.S.App.LEXIS
Governor Calls for Wage
and Hour Reforms to Bolster State’s Economy
6, 2008, Governor Arnold Schwartzenegger proposed changes to California’s
wage and hour laws designed to stimulate employment in the state and
preserve high paying jobs here. His proposals include:
- An effort to keep
high paying jobs in California by providing overtime exemptions for
all executive, sales, administrative and professional employees who
earn more than $100,000 a year.
- A move to make it
easier for employers to implement flexible work schedules. The
proposal would allow employees to work more flexible hours upon request,
such as four ten-hour workdays in a forty hour week, without being paid
- Clarification of
meal and rest period rules to save businesses the litigation costs associated
with defending meal and rest period class actions, and reduce confusion
in administration of meal break rules which should reduce employee terminations
due to meal break violations.
The Governor has called
for a special session of the Legislature to address these issues.
This Employment Law Alert is a publication of Wilson Petty Kosmo & Turner LLP and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only and you are urged to consult an attorney concerning your own situation and any specific legal questions you may have. Internal Revenue Service regulations require that certain types of written advice include a disclaimer. To the extent the preceding message contains advice relating to a tax issue, the advice is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer, for the purpose of avoiding Federal tax penalties. Copyright © 2008 WPKT LLP. All rights reserved.