LEGISLATIVE

California

New Cal-COBRA Notice Requirements Enacted (AB 23)

On May 13, 2009, the Governor signed a bill intended to extend the federal COBRA premium subsidy to smaller employers covered by CAL-COBRA (i.e., employers with between two to nineteen employees). This bill was passed on an urgency and unanimous basis, and is immediately effective and imposes some additional notice requirements upon health care service plans, contract administrators, and insurers of small California employers.

As detailed in earlier newsletters, the American Recovery and Reinvestment Act of 2009 (ARRA) was enacted in February 2009, and created a short-term COBRA premium subsidy (65%) for “assistance eligible individuals” (i.e., employees involuntarily terminated between September 1, 2008 and October 31, 2009.) It also imposed new notice obligations on employers, including a requirement that employers notify eligible individuals of a special election opportunity for previously declined COBRA coverage. While the federal COBRA covers employers with more than twenty employees, this bill ensures employees for smaller California employers are notified of ARRA’s benefits, including the second-chance election period.

The California bill requires health care plans and insurers to notify “qualified beneficiaries” about the premium assistance available under ARRA to subsidize Cal-COBRA coverage. This bill requires this written notice to inform qualified beneficiaries that ARRA provides a new opportunity to elect Cal-COBRA continuation coverage with a 65% premium subsidy, along with other specified information. Similar to the federal bill, this bill also provides a second election opportunity for qualified employees (i.e., involuntarily terminated from September 1, 2008 through February 16, 2009 [ARRA’s enactment date]) who previously declined Cal-COBRA coverage to elect Cal-COBRA coverage now that assistance is available.

For qualifying events occurring between September 1, 2008 and the bill’s effective date (May 13, 2009), health plans or insurers are required to provide written notice within the later of 14 calendar days of the bill’s effective date or 7 business days after the insurer receives notice of the qualifying event. For qualifying events occurring between the bill’s effective date and December 31, 2009, health plans and insurers will be required to provide notice within 14 days of a qualifying event (the same period of time specified under current law). Qualified beneficiaries will have 60 days to elect continuation coverage after receiving notice.

Although health plans and insurers will be primarily responsible for providing these notices, smaller employers should anticipate they may receive inquiries directly from former employees, and may wish to coordinate with their health plans and insurers to confirm these notices have been sent.

Other Pending California Bills

Our last several newsletters have highlighted a number of employment-related bills introduced in either the California Assembly or Senate. Since last months’ newsletter, there have not been many significant developments, with most of these bills still pending in their respective originating chamber. Unfortunately, several bills that would have provided additional scheduling flexibility (AB 141 and SB 187) or much-need clarifications regarding meal and rest periods (SB 287 and SB 380) appear to have failed at the committee stage.

Since June 5^th is the current deadline for bills to be passed out of their original house of origin, we anticipate a number of key votes will soon occur and provide insights into which bills will ultimately reach the Governor’s desk. These developments will be discussed in the June Newsletter to be issued in several weeks. In the interim, below are several of the more noteworthy developments as well as some additional pending bills not previously highlighted:

Bill Prohibiting Non-California Forum Selection Clauses Passes Assembly (AB 335)

This bill would prohibit and preclude enforcement of employment contract provisions requiring California employees, as a condition of employment, to agree to apply non-California law to disputes, or to agree to resolve the disputes in forums outside of California. While this bill would prohibit such provisions from being imposed on employees as a condition of employment, it would not prohibit employees from voluntarily agreeing to these choice of law or forum selection provisions if supported by independent consideration. This bill has passed the Assembly and is now pending in the Senate. The Governor vetoed a similar bill (AB 1043) last year.

Lactation Accommodation Guidelines (AB 514)

Labor Code section 1030 currently requires employers to provide a “reasonable amount” of break time for employees to express milk for the employee’s infant child, and states this break time shall if possible run concurrently with break time already provided to the employee. This bill would require employers to provide a twenty-minute paid rest period for lactation purposes during each four-hour work period and that this lactation period would immediately proceed or follow the employee’s rest period. Compliance with this rule would not affect the employer’s obligations to provide meal and rest periods. This bill has passed a committee vote and is slated for a full floor vote shortly.

Payroll Record Bill Passes Assembly (AB 527)

California law authorizes the Labor Commissioner to investigate employee complaints regarding unpaid wages. This bill would provide that if the Labor Commission finds that any payroll records submitted for any pay period relating to the claim have been intentionally falsified, then all payroll records relating to that claim or complaint will be presumed false and disregarded. In effect, this bill would take an evidentiary presumption specific to the garment industry and make it applicable to all employers. This bill recently passed the Assembly and is currently pending before the Senate’s Labor and Industrial Relations committee.

California’s Version of Lilly Ledbetter Act Passes Assembly (AB 793)

In February 2009, President Obama signed the Lilly Ledbetter Fair Pay Act (Ledbetter Act), which essentially overruled the United States Supreme Court decision in Ledbetter v. Goodyear Tire & Rubber Co. (2007) 550 U.S. 618. The Ledbetter Act amended various federal civil rights statutes to clarify that the statute of limitations for discriminatory pay claims is triggered each time the employee receives a paycheck flowing from an original discriminatory decision.

This bill would similarly reject the Ledbetter decision and clarify that the statute of limitations in California for unlawful compensation practices accrues when any of the following occurs: (1) a compensation decision or other practice is adopted; (2) an individual becomes subject to a compensation decision or practice; or (3) an individual is affected by this decision or practice, including each time the employee is paid under that decision or practice. This bill recently passed the Assembly and now heads to the Senate.

Prohibition on Consumer Credit Reports Passes Assembly (AB 943)

The federal Fair Credit Reporting Act permits employers to obtain credit reports regarding an applicant or employee seeking promotion provided the employer provides notice that a report is needed and the person authorizes procurement of the credit report. This bill would amend California’s Fair Employment and Housing Act to prohibit employers, except where based upon a bona fide occupational qualification, from refusing to hire or disciplining persons who refuse to authorize employers to obtain a credit report regarding the person. This bill would also create a rebuttable presumption of an unlawful employment practice if an employer takes any such prohibited action within 60 days of the person denying authorization for the employer to obtain the credit report. This bill recently passed the Assembly and now heads to the Senate.

Limitations on E-Verify Passes Assembly (AB 1288)

The federal E-Verify program allows participating employers to electronically verify a worker’s employment eligibility by accessing information in databases maintained by the Social Security Administration and the United States Citizenship and Immigration Services. While E-Verify is a voluntary program, this bill attempts to address concerns some municipalities are mandating use of E-Verify. Accordingly, this bill would prohibit the state or a city, county, city and county, or special district, from requiring an employer (other than one of those government entities) to use E-Verify, except when required by federal law or as a condition of receiving federal funds. This bill recently passed the Assembly and heads to the Senate.

Transit Time from Remote Parking Locations Compensable? (AB 1421)

In 2002, the California Supreme Court held that time spent in transit upon employer-required transportation (e.g., shuttles) constituted compensable time (Morillion v. Royal Packing Co. (2002) 22 Cal.4th 575), while in 2006, a California appellate court held time spent voluntarily taking transportation provided, but not required, by the employer is non-compensable. (Overton v. Walt Disney Co. (2006) 136 Cal.App.4th 263). This bill would provide that time spent in transit on a facility-provided conveyance from a remote employee parking lot to and from the place of employment shall be considered compensable if the employee is employed at an airport, amusement park, sports venue or entertainment venue. This bill has passed committee and a floor vote is expected shortly.

Additional Protections for Wage-Garnished Employees Passes Assembly (AB 1562)

Labor Code section 2929 prohibits employers from discharging employees whose wages have been threatened with garnishment, or whose wages have been subjected to garnishment for the payment of “one judgment.” This bill would amend Labor Code section 2929 to provide that employees may not be discharged because their wages have been subjected to garnishment for “five or fewer judgments.” This bill is intended to address uncertainty as to whether Labor Code section 2929 currently allows discharge for more than one garnishment, and to provide greater protections during the current recession. This bill recently passed the Assembly and will now proceed to the Senate. Last year, the Governor vetoed a similar bill (AB 3062) which would have precluded discharge regardless of the number of times a worker’s wages were garnished.

Federal

These additional employment-related bills have been introduced at the federal level:

Fair Pay Act of 2009 (S. 904, H.R. 2151)

These identical bills would amend the Fair Labor Standards Act of 1938 (FLSA) to prohibit discrimination in the payment of wages on account of sex, race, national origin and for other purposes. These bills would not prohibit pay disparities based on seniority, merit systems, or systems measuring quantity or quality, but would prohibit employers from reducing other employees’ wages to achieve parity. These bills would also make it more difficult for employers to argue any wage differential resulted from bona fide factors other than sex, race or national origin. Similar bills were introduced last year, and were supported by then-Senator Obama, but stalled in Congress.

Healthy Families Act Reintroduced (H.R. 2460)

This bill would require employers with more than 15 employees to permit employees to accrue up to 56 hours of paid sick leave in a calendar year, to be used to care for the illness of the employee or statutorily enumerated family members, or for absences due to domestic violence, sexual assault or stalking. Employees would accrue one hour of paid sick time for every 30 hours worked, which they could use beginning on the 60^th calendar day of employment. This bill would prohibit employers from interfering with exercise of these rights, including counting paid sick time under a no-fault attendance policy, or from retaliating against employees who take paid sick leave.

This recently-introduced version attempts to address several of the problems which caused earlier versions to fail. For instance, it specifies that employers who already maintain a paid leave policy (e.g., paid sick leave, PTO banks, etc.) sufficient to meet the requirements of this bill would not be required to provide additional paid sick time. It also provides additional clarity and tightening regarding the individuals “related by blood or affinity” for whom paid sick leave could be used.

This bill has significant support (over 100 co-sponsors) and has been identified as a legislative priority.

Domestic Violence Leave Act (H.R. 2515)

This bill would amend the Family and Medical Leave Act (FMLA) to allow employees to take unpaid leave, including on intermittent basis, to address domestic violence, sexual assault or stalking. This bill would allow employees to take leave to care for themselves or a family member addressing domestic violence, sexual assault or stalking and their effects, which would include seeking medical attention or legal assistance, among other things, because of these actions. The leave would be unpaid but employees would be permitted to substitute accrued paid leave for leave taken for these purposes. Employers would be required to maintain strict confidentiality regarding evidence of domestic violence, including requests for leave.

This bill would also amend the FMLA to include domestic partners under the Act by including the term “domestic partner” (as defined in the bill) wherever the term “spouse” appears in the FMLA.

While this bill would create new leave rights under federal law, California law already provides time off for victims of domestic violence or sexual assault. (See Labor Code section 230 et seq.)

Paid Vacation Act of 2009 (H.R. 2564)

This just-introduced bill would amend the Fair Labor Standards Act to require employers with more than 100 employees to provide one week of paid vacation each year to “eligible” employees (i.e., employees who have been employed more than one year and worked at least 1,250 hours during the preceding 12-month period). After three years of enactment, this bill would require employers with more than 100 employees to provide two weeks paid vacation each year, and employers with more than 50 employees to provide one week paid vacation. Employees would be required to provide at least 30 days advance notice of their intent to take paid vacation.

WAGES Act Introduced (H.R. 2570)

Known as the Working for Adequate Gains for Employment in Services Act (WAGES Act), this bill would amend the Fair Labor Standards Act to establish a base minimum wage for tipped employees. This bill would require that within 90 days of its enactment, tipped employees would receive an hourly minimum wage of $3.75. This base minimum wage would increase to $5.00 beginning on July 1, 2011, and beginning on July 1, 2012 would increase to 70 percent of the federal minimum wage then in effect, but be at least $5.50 per hour.

Arbitration Fairness Act (S. 931/H.R. 1020)

These bills would prohibit and invalidate any pre-dispute arbitration agreements requiring arbitration of employment, consumer, franchise or civil rights disputes. The just-introduced Senate version (S. 931) also contains a provision specifying that collective bargaining agreement arbitration provisions shall not preclude employees from seeking judicial enforcement of civil rights. This provision appears to be in response to the United States Supreme Court decision in 14 Penn Plaza v. Pyett (discussed in April’s newsletter) which upheld CBA arbitration provisions for employee’s federal age-discrimination claims. Similar versions of these bills have previously stalled but support appears to be growing for this bill.

FMLA Inclusion Act (H.R. 2132)

The Family and Medical Leave Act of 1993 (FMLA) allows qualified employees to take up to twelve weeks of unpaid leave to care for newborns, the employee’s serious health condition or the serious health condition of a spouse, parent or minor child. This bill would amend the FMLA to permit leave to care for a same-sex spouse, domestic partner, parent-in-law, adult child, sibling or grandparent with a serious health condition. This bill is similar to previous versions that that have stalled in Congress.

Federal WARN Act Amendments (H.R. 2077)

Known as the “Alert Laid-Off Employees in Reasonable Time (ALERT)” Act, this bill would amend the federal Worker Adjustment and Retraining Notification (WARN) Act in several respects. First, it would amend the definition of “mass layoff” for advance notification purposes to include job losses occurring at more than one jobsite, whereas the current WARN Act focuses on a single job site. It would also increase the available civil penalties, permitting employees to receive double back pay, rather than the current back pay, for WARN Act violations.

AGENCY

California

Cal-OSHA Provides Guidance Regarding H1N1 Flu

As mentioned in the last newsletter, a number of federal agencies have posted information concerning the H1N1 virus, including how it is spread and potential employer “best practices” to prevent its spread. Cal-OSHA has similarly recently issued its “Guidance for Employers and Employees Regarding Recent Swine Flu Cases.” This document can be found on Cal-OSHA’s website: www.dir.ca.gov/dosh/swineful/Cal-oshaguidancesswineflu.pdf.

Federal

DOL Issues Opinion Letter Clarifying Enforceability of Employer Call-in Procedures for Unforeseen FMLA Leave

The Department of Labor (DOL) recently issued an opinion letter (FMLA2009-1-A) providing clarification regarding a frequently recurring issue: the amount of notice required for unforeseen FMLA leave and whether employers may enforce internal notification policies. This opinion letter clarifies that employees requiring unforeseen FMLA leave must generally comply with an employer’s call-in procedures for such leaves, where practicable, and it expressly rescinded a prior opinion letter (Opinion Letter FMLA 101) suggesting employees had two business days to provide such notice.

By way of background, the FMLA requires employees to provide 30 days notice for foreseeable FMLA leave, and where the need for leave is unforeseen, to provide notice “as soon as practicable.” The DOL’s 1995 regulations clarified “as soon as practicable” as generally meaning “within one to two business days” after the employee learned he or she needed such leave. The prior FMLA-related opinion letter issued in 1999 (Opinion Letter FMLA 101) concluded employers could not enforce internal notice policies more stringent than the FMLA, and many employers (and employees) interpreted this as creating essentially a two business day grace period for employees to provide notice.

The just-issued DOL opinion letter clarifies that there is no “two-day rule” for providing notice, and that instead, employers may generally require employees to follow the employer’s usual and customary notice and procedural requirements. The DOL noted that the recently published final FMLA regulations, which became effective in January 2009, specifically omitted any language codifying this “two-day rule.” The DOL noted that the employee must still provide notice “as soon as practicable” which generally should be “within the time prescribed by the employer’s usual and customary notice requirements applicable to such leave” absent usual circumstances. The DOL noted that in most instances, it should be practicable for the employee to provide notice either the same day or the next business day, but noted the employer ultimately must take into account the individual facts and circumstances.

Accordingly, the DOL reaffirmed the Final Rule’s finding that “where an employer’s usual and customary notice and procedural requirements for requesting leave are consistent with what is practicable given the particular circumstances of the employee’s need for leave, the employer’s notice requirements can be enforced.” The DOL also expressly rescinded the prior opinion letter which had been interpreted as creating the two-day-business-grace period. The entire text of the DOL’s opinion letter can be found at www.dol.gov/esa/whd/opinion/fmla.htm.

Government Agencies Provide Guidance on Combating “Swine Flu”

As mentioned in the last newsletter, a number of federal government agencies have recently posted informative materials about the H1N1 virus disease and potential “best practices” to limit its spread. Since then, additional government agencies have posted helpful guideline information. For instance, the Equal Employment Opportunity Commission has recently posted on its website (www.eeoc.gov) the following notices: “Employment Discrimination and the 2009 H1N1 Flu Virus” and “ADA-Compliant Employer Preparedness for the H1N1 Flu Virus.”

ICE Announces Increased Employer Enforcement

On April 30, 2009, U.S. Immigration and Customs Enforcement (ICE) issued a Fact Sheet outlining its worksite enforcement strategy. This Fact Sheet announces that effective immediately, “ICE will focus its resources in the worksite enforcement program on the criminal prosecution of employers who knowingly hire illegal workers in order to target the root cause of illegal immigration.” The entire ICE Fact Sheet can be found at www.ice.gov/pi/news/factsheets/worksite.htm.

Department Of Labor Confirms Stimulus Projects Subject To Prevailing Wage Requirements

In a memorandum issued to all contract agencies of the Federal Government, the Department of Labor confirmed that construction projects paid for with funds appropriated in the American Recovery and Reinvestment Act of 2009 (“ARRA”) are subject to the bid and prevailing wage requirements of the Davis-Bacon Act. Construction companies engaged in projects using ARRA funds are encouraged to refer to the DOL’s guidance regarding bidding and wages. The full text of this memorandum can be found at http://www.dol.gov/esa/whd/recovery/AAM207.pdf.

JUDICIAL

California

California Supreme Court Agrees to Hear Several Wage and Hour Cases

The California Supreme Court has granted review in Lu v. Hawaiian Gardens (S171442) to determine whether Labor Code section 351 permits a private right of action for employees to sue their employers directly for alleged tip-pooling violations. The Court has also accepted review in Sullivan v. Oracle, Inc. (S170577) to determine whether California’s Labor Code applies to overtime work performed in California for California-based employers by out-of-state employees. The Court also accepted review in Pineda v. Bank of America (S170758) to determine the statute of limitations for recovering waiting time penalties for unpaid wages.

The Court also granted review in Deleon v. Verizon Wireless (S170377) to address an employee’s ability to pursue certain types of claims under the Private Attorney General Act (PAGA). However, the Court also indicated it would defer briefing in Deleon pending a final ruling in the currently pending matter, Arias v. Superior Court (S155965), which also addresses PAGA issues.

Employee Must Demonstrate Reasonable Accommodation Possible to Prevail on Interactive Process Claim

A former teacher sued under FEHA alleging his employer discriminated on the basis of his disability (HIV-positive), and for not accommodating his disability and not engaging in the interactive process. The court of appeal affirmed summary judgment in the employer’s favor concluding the employee was not a qualified person under FEHA because he lacked necessary credentials for the position sought, and the employer’s lack of knowledge of his HIV status precluded any discriminatory decision making.

The appellate court also concluded the employer-proposed accommodation (allowing him to finish his degree program in three years rather than two) was reasonable because it addressed the limitations flowing from his disability. The court also noted the employee’s proposed accommodation (priority in assignment of lower division courses) was not reasonable because it did not involve modifications or adjustments to the workplace to enable him to perform the essential functions of his position. The court also observed the employer arguably should have convened an additional meeting as part of the interactive process, but that the employee still could not prevail on the interactive process claim unless he could identify a reasonable accommodation that would have been possible at the time the interactive process occurred. (Scotch v. The Art Institute of California-Orange County, Inc., (2009) 173 Cal.App.4th 986.)

“Me Too” Evidence Helps Defeat Summary Judgment Motion

A frequently recurring evidentiary issue in discrimination cases is the admissibility of testimony from other employees contending they were also discriminated against (so-called “me too” evidence). In Sprint/United Management Co. v. Mendelsohn (2008) 128 S.Ct. 1140, the United States Supreme Court declined to issue a bright-line ruling permitting or precluding such evidence, holding its admissibility turns on the particular facts presented in each case.

A California court of appeal has recently permitted such evidence to help defeat a summary judgment motion in a pregnancy discrimination case under FEHA. In that case, the plaintiff sought to bolster her pregnancy discrimination claims, and to rebut the employer’s proffered legitimate business reason for termination (time-card fraud), with declarations from other employees terminated shortly after they announced their pregnancy to the same supervisor. The appellate court concluded these declarations were relevant and not unduly prejudicial, and therefore admissible and sufficient to preclude summary judgment. (Johnson v. United Cerebral Palsy/Spastic Children’s Foundation (2009) 173 Cal.App.4th 740.)

Properly Worded Arbitration Agreement Precluded Labor Commissioner Claim for Vacation Pay

Under California law, an employee generally has two principal options to pursue claims for wages owed by contract or statute: a judicial action, or an administrative claim with the California Labor Commissioner (a so-called “Berman Hearing”). Labor Code section 229 also generally provides that private arbitration agreements will not preclude an employee from pursuing actions to recover unpaid wages claimed by the employee. In this case, however, the court of appeal ordered the Berman Hearing regarding unpaid vacation dismissed and compelled the parties to arbitrate their dispute.

The appellate court noted the Federal Arbitration Act (FAA) preempts Labor Code section 229 if the parties’ agreement is governed by the FAA, and this employment agreement specifically incorporated the FAA. This arbitration agreement also specifically stated it applied to any judicial “or other governmental dispute resolution forum” with certain specified exceptions, and these exceptions did not include Labor Commissioner claims. Lastly, the court concluded unpaid vacation constituted an unwaivable statutory right, thus requiring this arbitration agreement to contain various procedural and substantive safeguards, but held the waiver of a Berman Hearing would not pose a serious threat to an employee’s ability to recover unpaid vacation. (Sonic-Calabasas A, Inc. v. Moreno (May 29, 2009) ___ Cal.App.4th ___, 2009 Cal.App.LEXIS ___.)

Federal

Pregnancy Discrimination Act Does Not Apply Retroactively

In 1978, Congress amended Title VII with the Pregnancy Discrimination Act (PDA), to preclude employers from treating pregnancy-related leaves less favorably than other types of medical leaves. The PDA did not specify, however, that it applied retroactively to preclude employers from providing less service credit for pension calculation purposes for pregnancy-related leaves predating the PDA’s enactment.

In this case, several female employees who took pregnancy leaves prior to the PDA’s enactment sued arguing the employer violated the PDA by not retroactively providing them full service credits for pregnancy-related leaves prior to 1979, thus causing them to receive smaller pension benefits. The employees conceded the employer had changed its pension policy to provide equal credit for pregnancy leaves taken after the PDA’s enactment. Nonetheless, the employees argued the employer necessarily violated the PDA by paying pension benefits calculated in part under an accrual rule that gave less retirement credit for pregnancy leave pre-dating the PDA than for medical leaves generally.

The United States Supreme Court held that the PDA did not apply retroactively, and that applying a pre-PDA accrual rule to post-PDA pension benefits was lawful as part of a bona fide seniority system because the pre-PDA accrual rule did not constitute unlawful discrimination at the time it was applied. The Court essentially noted it was not unlawful to apply a seniority system based in part upon criteria that would not be lawful if currently enacted provided it did not apply these subsequently invalidated criteria for accrual purposes after the law changed. In other words, the employer did not act improperly in paying post-PDA pension benefits calculated in part under an accrual rule applied only pre-dating the PDA that gave less credit for pregnancy leaves than for other medical leaves.

The Court noted that seniority systems are generally afforded special treatment under Title VII, and that employers are not prohibited from applying different standards of compensation pursuant to a bona fide seniority system provided the differences are not the result of an intent to discriminate based on gender. The Court concluded the pre-PDA accrual criteria used by this employer did not reflect intent to improperly discriminate since before the PDA, Title VII did not prohibit employers from treating pregnancy leave differently than other leaves. The Court also refused to apply the PDA retroactively noting the general presumption against retroactivity and the absence of any legislative intent to apply the PDA retroactively. (AT&T Corp. v. Hulteen (2009) ___ U.S. ___, 2009 U.S. LEXIS 3470.)