LEGISLATIVE

California

New Alternative Work-Week Schedule Amendments Take Effect Soon (ABX2 5)

As reported in our February update, during the special session which adjourned on February 19, 2009, the California legislature passed a bill amending the Labor Code provisions concerning “alternative work-week” schedules. The enacted bill did not specify an effective date, but pursuant to California Constitution Article 4, Section 8(c)(1) and according to the Department of Industrial Relations website, these new amendments take effect May 21, 2009.

These amendments are intended to increase work schedule flexibility by making it easier for employers and employees to adopt “alternative work-week” schedules. For instance, Labor Code section 511 previously specified these alternative schedules could be adopted after a two-thirds vote of affected employees in a “work unit,” but it failed to define the term “work unit.” As amended, section 511 now specifies that a work unit includes “a division, a department, a job classification, a separate physical location or a recognizable subdivision,” and may also include an individual employee who otherwise satisfies the criteria of a “reasonably identifiable work unit.”

The amendment further specifies that employers may include on the menu of work schedule options a regular schedule of eight-hour days. This amendment is intended to make it easier for employees to vote for the full menu of potential work schedules, even if that particular employee desires to keep working a normal five day, eight hour a day schedule. These amendments further provide that employees who adopt a menu of schedule options may, with employer consent, move from one schedule option to another on a weekly basis.

As reported in the March update, a bill (AB 141) is presently pending in the California legislature which would allow individual non-exempt employees to request alternative workweek schedules, thus avoiding the need for a super-majority approval of employees in a “work unit.”

Federal

Since our last update, there have been additional employment-related bills introduced at the federal level, including the following:

New Employee Verification Act (H.R. 2028)

The just-introduced New Employee Verification Act (NEVA) is intended to replace the current mechanisms used to verify new employee work eligibility, thus not only ensuring a legal workforce but also preventing identify theft. This bill would develop a new paperless electronic employment eligibility system to replace the federal E-Verify electronic system and to eliminate the current I-9 Form. Employers would access this electronic system, called the Electronic Employment Verification System (EEVS) by the current state “new hire” reporting process currently used for child support enforcement. The bill would also create a voluntary biometrics option (e.g., a fingerprint) employers could use in the verification process, thus reducing identity theft. The bill would also preclude wages earned through future unauthorized work from being considered in determining Social Security Benefits.

A similar version of this bill was introduced in 2008 but stalled in the House. The just-introduced version has been referred to the Education and Labor Committees.

Patriot Employer Act Reintroduced (S. 829)

This reintroduced bill would provide “patriot” employers with a one-percent tax credit against their taxable income. The bill defines “patriot” employers as those who, amongst other enumerated requirements: (1) maintain their corporate headquarters in the United States; (2) pay at least 60 percent of their employee’s health care premiums; (3) maintain and follow a policy of neutrality in union organizing drives; and (4) for employers with more than 50 employees, maintain an equal number of full-time employees in the United States as overseas. The bill also specifies certain compensation and retirement benefits be paid to employees depending on an employer’s size.

This bill is presently pending before the Senate Finance Committee, and the House is currently considering a similar bill, the Eagle Employer’s Act (H.R. 989). Notably, then-Senator Obama co-sponsored the 2007 version of the Patriot Employer Act, which stalled in the Senate.

Protecting America’s Workers Act (H.R. 2067)

This bill would amend various provisions of the Occupational Safety and Health Act (OSHA). It would expand OSHA’s coverage to include state and local public employees and federal government workers, and expand the coverage and protections for other currently covered industries, such as railroad and airline employees. This bill would also codify whistleblower protections and increase health and safety fines, and provide additional rights to workers and their families, including the right to contest OSHA’s failure to issue citations and its proposed penalties. This bill is presently pending before the House Committee on Education and Labor.

401(k) Fair Disclosure for Retirement Security Act (H.R. 1984)

This bill would amend the Employee Retirement Income Security Act of 1974 (ERISA) to require additional reporting and disclosures for individual account plans, particularly regarding fees charged for each account. For instance, plan administrators for individual account plans would be precluded from entering into plan services contracts unless the plan administrator receives statements detailing the services to be provided, the annual charges for the plan, including component charges for administration and record-keeping, transaction-based charges, and investment management charges.

This bill is presently pending in the House, which passed a similar version last session. The Senate is presently considering a similar bill, the Defined Contribution Fee Disclosure Act of 2009 (S. 401).

AGENCY

California

DLSE Approves Alternative Work-Week Schedules for Summer Months

California’s Department of Labor Standards Enforcement (DLSE) recently posted an opinion letter (DLSE Opinion 2009.03.23) authorizing employers to adopt alternative workweek schedules for summer months, provided they comply with all regulations otherwise applicable to the adoption of such schedules (e.g., election procedures, notice requirements, etc.). In this particular instance, the DLSE allowed a manufacturer employer to adopt a summer schedule (June to September) of four 9-hour days and one 4-hour day, without incurring overtime for non-exempt employees working this schedule, and to maintain a normal schedule of five 8-hour days the rest of the year. This opinion letter provides some previously missing guidance on whether “alternative workweek schedules” during only a particular period satisfies the requirement work schedules be “regularly recurring.”

California’s Labor Code and its Industrial Wage Orders contain numerous provisions concerning workweek schedules, and the adoption of so-called alternative work-week schedules. Simply summarized, Labor Code section 511 permits employers to adopt “alternative workweek schedules,” thus allowing non-exempt employees to work up to ten hours per day without overtime on any given day, provided the employer satisfies fairly strict election procedures for adopting such schedules (e.g., secret ballot election approval by two-thirds vote of affected employees in a work unit). Labor Code section 500(b), however, defines “workweek” as any “fixed and regularly recurring period of 168 hours, seven consecutive 24-hour periods,” while Wage Order 1-2001 requires regularly scheduled alternative workweek in which the specific number of work days and work hours are “regularly recurring.”

Until this DLSE opinion, it was unclear whether alternative work week schedules during only a particular time of year would satisfy the requirement such schedules be “regularly recurring,” or whether employers would have to maintain such schedules for the entire year. In this opinion letter, the DLSE noted that the Labor Code and Wage Orders require only the schedule be “regularly recurring,” not that the alternative workweek schedule occur each workweek of the year. The DLSE noted this schedule involved a single, regular schedule occurring only during specified and temporary time periods thus allowing employees to determine their schedule in advance, and that all contemplated shifts exceeded four hours of work.

The DLSE also noted that to the extent the alternative workweek schedule remains the same each year, after it has been properly adopted by the employer under Labor Code section 511, the employer would not be required to conduct further elections each year.

The full text of this and other opinion letters may be found on the DLSE’s website:

www.dir.ca.gov/dlse/DLSE_OpinionLetters.htm.

Federal

Government Agencies Provide Guidance on Combating “Swine Flu”

In light of the Department of Health and Human Services’ (HHS) public health emergency announcement on April 26, 2009 concerning the H1N1 virus (also referred to as the “swine flu”), employees and employers undoubtedly have questions about the disease, and precautions they can adopt to prevent its spread in the workplace. A number of government agencies have recently posted informative materials about the disease and potential “best practices” to limit its spread. For instance, information concerning the disease and its transmission can be found on the HHS website, www.hhs.gov, and on the Center for Disease Control and Prevention’s website, www.cdc.gov/swineflu.

The Department of Labor (DOL) and OSHA have also published guidance materials concerning the disease and potential employer “best practices” to prevent workplace infections. For instance, OSHA has issued “Guidance on Preparing Workplaces for an Influenza Pandemic” (OSHA 3327-02N 2007), which is also available on its website: www.osha.gov/Publications/influenza_pandemic.html. The DOL website also offers a guidance document entitled “Pandemic Influenza Preparedness and Response Guidance of Healthcare Workers and Healthcare Employers” (OSHA 3328-05 2007) available at www.osha.gov/publications/3328-05-2007-English.html. Another informative government website is www.pandemicflu.gov which contains a number of “frequently asked questions” regarding pandemic flus, and their impact on the workplace and steps available to employers. These “frequently asked questions” can be accessed at www.pandemicflu.gov/faq/workplace_questions/human_resource_policies/index.html.

E-Verify Requirements for Federal Contractors Delayed Until June 30, 2009

The federal government has again agreed to delay, this time until June 30, 2009, a new rule requiring certain federal contractors and subcontractors to use the federal E-Verify electronic system to determine the work eligibility for employees. This new rule would be the first compelling certain employers to utilize the otherwise voluntary federal E-Verify system. Specifically, it would require covered federal contractors (as defined in the proposed final rule) to use E-Verify for all new employees hired during a federal contract’s term, and to verify current employees who would work on the federal contract. (The particular requirements for this new rule are detailed more fully in the December edition of the WPKT Employment Newsletter available at www.wpkt.com).

This rule was originally scheduled to take effect January 15, 2009, but has been delayed multiple times, most recently until the just-postponed effective date of May 21, 2009, due to various legal challenges.

EEOC Issues “Best Practices” Guidelines for Family Caregiver Policies

In 2007, the Equal Employment Opportunity Commission (EEOC) issued a guidance document entitled “Disparate Treatment of Workers with Caregiving Responsibilities,” to identify circumstances under which discrimination against workers with caregiving responsibilities might violate federal discrimination laws. Both at the time and since the 2007 Guidance was issued, the EEOC has clarified that caregivers are not a protected classification under federal discrimination statutes, but noted that discrimination against employees because of these caregiving responsibilities might violate other federal discrimination laws.

On April 22, 2009, the EEOC issued a guidance document entitled “Employer Best Practices for Workers with Caregiving Responsibilities.” This new guidance document is intended to supplement the 2007 guidance by identifying potential “best practices” employers may adopt to reduce the potential for equal employment opportunity violations against caregivers, and to remove barriers to equal employment opportunity. The guidance identifies many potential tools (e.g., training and policies) employers may consider to assist in the recruitment, hiring, promotion and retention of employees with caregiving responsibilities.

The full text of both this “Best Practices” guidance and the 2007 guidance on Caregiving Responsibilities may be found respectively on the EEOC website as follows: www.eeoc/policy/docs/caregiver-best-practices.html and www.eeoc.gov/policy/docs/caregiving.html.

JUDICIAL

California

California Supreme Court to Decide Whether California Labor Code Applies to Non-Residents While in California

As mentioned in a prior newsletter, the ninth circuit recently issued a fairly controversial opinion in which it concluded that California’s Labor Code provisions, including those regulating overtime, applied to non-residents who temporarily performed work in California. (See e.g., Sullivan v. Oracle, Inc. (9th Cir. 2008) 2009 U.S. App. LEXIS 2892.) In Sullivan, the ninth circuit concluded Colorado residents who worked several days in California were entitled to the California Labor Code’s protections for the time worked in California, even though they were Colorado residents who worked the overwhelming majority of their time in Colorado. This decision drew considerable protests from many groups, including California’s hospitality industry, who expressed concern this decision might dissuade employers from sending employees to California on business.

The ninth circuit recently ordered this opinion withdrawn, meaning it is no longer citable, and it certified the following questions to the California Supreme Court: (1) Does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week? (2) Does Business and Professions Code Section 17200 apply to the overtime work described in question one? (3) Does Section 17200 apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs if the employer failed to comply with the overtime provisions of the Fair Labor Standards Act?

As expected, the California Supreme Court recently accepted these certified questions, and briefing will begin shortly. However, a final decision on these issues is not expected until at least 2010. (Sullivan v. Oracle Corp., Cal. Supreme Court Case No. S170577).

Another Arbitration Class Action Waiver Deemed Unconscionable

In a class action lawsuit by restaurant managers seeking unpaid overtime, the restaurant employer attempted to compel arbitration under its agreement which also contained a class action waiver. Both the trial court and California court of appeal concluded the class action waiver was substantively unconscionable, and that the entire arbitration agreement was procedurally unconscionable.

The appellate court relied heavily upon the California Supreme Court’s decision in Gentry v. Superior Court (2007) 42 Cal.4th 443, 463, which held class action waivers in arbitration agreements may be unenforceable if the waiver impermissibly interferes with the employee’s ability to vindicate unwaivable statutory rights. Applying Gentry, the appellate court concluded overtime constituted an unwaivable statutory right, and concluded the class action waiver would impermissibly interfere with enforcement of these rights since the class members were low wage earners with limited English language skills. The court also concluded the agreement was procedurally unconscionable because of the power disparity between the employer and the employee, meaning the employee did not have real opportunity to reject the agreement, and because this employer’s accompanying materials regarding the agreement were misleading. (Olvera v. El Pollo Loco, Inc. (2009) ___ Cal.App.4^th ___, 2009 Cal.App.LEXIS 618).

(NOTE: last month’s newsletter discussed two other recently published appellate court decisions invalidating class action waivers in arbitration agreements. [See e.g., Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4^th 1277; Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4^th 154]. Since the California Supreme Court’s decision in Gentry, there have now been four published appellate court decisions invalidating the class action waivers in arbitration agreements, but none enforcing it in the wage and hour context. Since the final result in most of these decisions was to invalidate the entire arbitration agreement, thus allowing the lawsuit to proceed in state court on a class basis, employers may wish to carefully scrutinize their arbitration agreements to determine whether they still want to include class action waivers.)

Arbitration Agreement in Employment Application Upheld

In a seemingly rare victory for employers, a California court of appeal recently issued a published decision compelling arbitration and rejecting the employee’s myriad arguments against enforceability.

In this FEHA discrimination claim filed by a former employee, the employer sought to compel arbitration based upon an arbitration provision contained in the employee’s initial employment application. The employee/plaintiff opposed arbitration arguing the provision’s language stating “I agree . . . that all disputes that might arise out of my employment with the company” will be arbitrated, was unfairly one-sided. The trial court compelled arbitration and the California court of appeal affirmed.

The appellate court commenced its analysis by reaffirming that arbitration agreements must be both procedurally and substantively unconscionable, although not in equal degrees, before courts will invalidate employment arbitration agreements. The court agreed that this employment agreement was procedurally unconscionable, but that its overall procedural unfairness was limited, thus essentially increasing the level of substantive unconscionability required to be shown by the party opposing arbitration. The court noted this arbitration provision was set forth in a succinct easily understood paragraph contained in a relatively short four-page agreement, and the provision has been called to the applicant’s attention who was required to initial his acknowledgment of this provision.

The court also rejected the employee’s contention the arbitration provision was substantively unconscionable (i.e., unfairly one-sided) simply because it used the language “I agree.” The court observed the provision was broadly worded to include all employment-related disputes, and did not contain other language or provisions suggesting the employer retained the ability to pursue its potential claims in court (i.e., there were no provisions allowing the employer to seek injunctive relief in court, etc.). The court also rejected the employee’s contention the employer had waived its right to seek arbitration, noting the limited discovery conducted before seeking arbitration was entirely consistent with the discovery that would be generally permitted in the arbitration. (Roman v. Superior Court (ex rel Flo-Kem, Inc.) ___ Cal.App.4th ____, 2009 Cal.App.LEXIS 543).

Appellate Court Upholds Employee’s Release of Disputed Wage Claims, and Concludes Employee Who Settles Class Action Claim No Longer Has Standing to Represent the Class

Two employees filed a class action against their employer seeking unpaid overtime for themselves and a purported class of similarly situated employees. During the convoluted procedural history, the first employee settled her claims and executed a complete release in exchange for enhanced severance benefits. After class certification was denied, the second plaintiff settled her claims in exchange for a $51,000 payment, but attempted to retain the right to appeal the class certification denial in her representative capacity. The court of appeal concluded the first employee’s release was enforceable and barred her wage claims, and that the second employee’s settlement precluded her from participating as a class representative.

Regarding the first employee’s claims, the appellate court rejected the argument that the prior release was unenforceable under Labor Code section 206.5 which generally precludes employers from obtaining releases based upon wages already owed. Relying upon the statutory language in Labor Code sections 206 and 206.5, as well as the recent decision in Chindarah v. Pick Up Stix, Inc (2009) 171 Cal. App. 4th 796 (covered in last month’s newsletter), the court held that the employee and employer can release claims for wages owed where a bona fide dispute exists regarding the claim. In this case, the employer had already paid the employee all wages undisputedly owed, and the employee had released the disputed claims in exchanged for additional payments (“enhanced severance benefits”).

The appellate court concluded the second employee’s settlement precluded any further continued involvement as a class representative under California law, notwithstanding language in her release agreement reserving her ability to continue acting as a class representative. The court noted that an employee only has her individual claims, not her individual claims plus some additional class-related claims, and that class actions are simply a procedural mechanism to pursue the individual claim. Accordingly, a class representative’s voluntary settlement of her individual claim resolves her claim and moots her ability to proceed as class representative. Notably, however, the appellate court emphasized its ruling turned on the voluntary nature of the representative’s settlement, and noted that employers cannot “pick off” class representatives simply by making an unsolicited offer of the amounts claimed by the class representative. (Watkins v. Wachovia Corp. (April 16, 2009) _____ Cal. App. 4th ______, 2009 Cal. App. LEXIS 556).

Employer Not Liable for Torts Committed by Former Employee after Employment Ended

Plaintiff sued a plumbing company for negligent hiring and retention alleging the company’s hiring of a former felon enabled the felon to meet and date, and ultimately murder the plaintiff’s mother. The employer argued it could not be liable for the former employee’s misconduct because the murder occurred nearly two years after the employer terminated the employee. The trial court and appellate court ruled in the employer’s favor finding the employer does not owe a duty of care against harm inflicted by a former employee after the employment relationship ends. The appellate court stressed both the fact the employment relationship had already ended and the amount of time between the termination and the tortious conduct (two years) in concluding the employer owed no such duty. (Phillips v. TLC Plumbing, Inc., et al. (2009) 172 Cal.App.4th 1133.)

Motor Carrier Hazardous Material Transportation Exemption Limited to Days Drivers Actually Transport Hazardous Materials and Drivers Not Entitled to Be Paid For On-Call Time

Several service representatives sued their employer for unpaid overtime on days they worked more than eight hours transporting materials, and for unpaid compensation for hours spent “on call.” The employer argued the service representatives, whose duties frequently involved transporting hazardous materials, were covered by the motor carrier exemption in California’s Industrial Wage Orders and therefore exempt from California’s overtime law.

Relying heavily upon the 2002 Update of the DLSE Enforcement Manual, the court of appeal agreed the motor carrier exemption would exempt the drivers from generally applicable overtime laws, but only on the days the service representatives actually transported hazardous materials for at least part of the day. The appellate court noted that the drivers would be entitled to overtime incurred on any day during which the driver performed non-driving duties for the entire workday. Accordingly, the appellate court reversed the summary adjudication ruling in the employer’s favor because the employer had failed to present evidence the plaintiffs transported hazardous materials on each workday for which they claimed overtime.

The appellate court concluded, however, the plaintiffs were not entitled to compensation for the “on call” time spent being available to respond to customer inquiries. The court agreed “on call” time may be compensable if it is spent primarily for the employer’s benefit, which depends heavily upon the restrictions imposed by the employer upon the employee’s free time. However, the court concluded the on-call restrictions in this case (e.g., wearing a beeper, responding to telephone calls within 30 minutes, and two hours to respond to a patient’s home) were not unduly restrictive and, thus, were non-compensable. (Gomez v. Lincare, Inc. (April 29, 2009) ___ Cal.App.4th ___, 2009 Cal.App.LEXIS 2713.)

Federal

United States Supreme Court Upholds Collective Bargaining Agreement Provision Requiring Arbitration of Age Discrimination Claims

Several night watchmen, all of whom were union members, filed suit in federal district court against their employer under the Age Discrimination in Employment Act (ADEA). The employer attempted to compel arbitration pursuant to the collective bargaining agreement (CBA) provision requiring all employment discrimination claims be submitted to binding arbitration under the CBA’s grievance and dispute resolution procedures. Both the district and circuit courts denied arbitration holding collective bargaining agreements could not waive a covered employee’s right to a judicial forum for statutory discrimination claims.

In a 5-4 decision, the United States Supreme Court reversed, holding that CBA provisions that “clearly and unmistakably” require union members to arbitrate ADEA claims are enforceable. The Court noted that the ADEA does not currently prohibit arbitration of employee age discrimination claims. The Court also distinguished prior decisions in which it had declined to require arbitration of statutory discrimination claims on the grounds the CBA provisions at issue in those cases did not expressly cover both statutory discrimination and contractual claims. (14 Penn Plaza LLC v. Pyett (2009) ___ S.Ct. ___, 2009 U.S. LEXIS 2497.)

Notably, 14 Penn Plaza appears to apply only to those CBA provisions expressly requiring arbitration of statutory discrimination claims, and not to broadly worded CBA provisions not referencing such claims. Secondly, since this decision rests heavily upon the absence of any ADEA provision precluding CBA waivers for such claims, it is foreseeable Congress may soon attempt to amend the ADEA (and perhaps other federal civil rights statutes) to preclude such waivers.

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 © 2009 WPKT LLP. All rights reserved.