LEGISLATIVE

California

Governor Vetoes Majority of Employment-related Bills

As mentioned in prior newsletters, most significant employment-related bills (e.g., paid sick leave, meal period reform, etc.) stalled in the Legislature ensuring they would not be enacted this year. The handful of employment bills that passed both legislative houses also faced an uncertain future as the Governor repeatedly threatened to veto all bills absent legislation addressing other priorities (e.g., prison staffing, water rights, etc.). Literally hours before the legislative deadline expired, the Governor withdrew his blanket veto threat to allow his office to review each bill on his desk. Although he withdrew his blanket veto threat, the Governor once again vetoed almost all employment bills that reached his office, meaning a new year will not bring substantial legislative changes for California employers.

Here is a summary of the bills signed or vetoed by the Governor, along with a reminder about a previously-enacted measure taking effect on November 1, 2009:

 

New Laws

Most of the new laws were extremely industry specific (ex. AB 236 concerning car washes and AB 485 creating leave rights for employers subject to the California Wing of the Civil Air Patrol) or were public sector bills generally concerning public sector benefits and will not be detailed at length in this newsletter. There were only minor bills potentially affecting private employers, as follows:

Medical Treatment Authorization (AB 361)

California’s workers’ compensation laws permit employers or insurers to establish a medical provider network for the provision of medical treatment of injured employees. This new law precludes employers, regardless of whether it has established a medical provider network or entered into contracts directly with medical providers, from refusing to pay for workers’ compensation medical treatment services if the employer approved those services before the treatment was provided. This law is intended to address some billing problems medical providers were experiencing after they provided medical treatment to injured employees. This bill takes effect January 1, 2010.

Workers’ Compensation Coverage for Third-Party Torts (AB 1093)

This new law is intended to clarify California’s workers’ compensation provisions by ensuring that injuries inflicted by third-parties at the worksite because of an employee’s protected criterion (ex. race, gender, etc.) are not automatically disqualified from coverage under the “personal relationship” or “personal motivation” exception. California’s workers’ compensation provisions generally require employers to provide workers’ compensation benefits or medical treatment for injuries incurred by employees arising out of and in the course of employment.

However, an exception for coverage has been recognized for injuries occurring in the workplace if the employee is killed or injured as a result of a personal motivation between a third-party aggressor and the employee victim (ex. domestic violence-type disputes extending into the workplace). This new law amends Labor Code section 3600 to provide that in determining whether workers’ compensation coverage applies when a third-party injures or kills an employee, no “personal relationship” or “personal connection” shall be deemed to exist between the employee and third-party based solely upon a determination that the third-party injured or killed the employee solely because of the third-party’s personal beliefs relating to his or her perception of the employee’s race, religious creed, color, national origin, age, gender, disability, sex or sexual orientation.

 

Vetoed Bills

As mentioned, the Governor once again vetoed most of the substantive employment-related bills including the following:

-- AB 335 which would have created a rebuttable presumption against enforcing employment contract provisions requiring disputes to be heard in non-California forums or to be subject to non-California law. The Governor had previously vetoed a similar version in 2008, and vetoed this version noting judges can determine whether to enforce non-California provisions.

-- AB 793 which would have created California’s version of the recently enacted federal Lilly Ledbetter Fair Pay Act regarding statute of limitations for compensation claims. The Governor vetoed this bill stating it is not necessary since the federal bill already overturns the United States Supreme Court decision in Ledbetter, and noting that this bill would be broader than the federal version.

-- AB 943 which would have limited employer usage of consumer credit reports for employment-related decisions. The Governor had previously voted a similar version in 2008, and vetoed this version noting employers have an “inherent need” to obtain relevant information about prospective employees.

-- AB 1288 which would have prohibited the state or municipalities from requiring employers to use the federal E-Verify system except when required by federal law. -- AB 527 which would have allowed the Labor Commissioner to presume relevant payroll records submitted by employer are false if it discovered a “pattern of intentional falsification” by the employer (e.g., two or more instances.)

-- AB 1562 which would have prohibited employers from terminating an employee because the employee’s wages had been threatened or the wages had been subjected to garnishment for the payment of five or fewer judgments at any one time.

-- SB 242 which would have amended the Unruh Civil Rights act to prevent business establishments from adopting or enforcing policies requiring, limiting or prohibiting the use of any particular language in the business establishment unless the policy was justified by a “business necessity,” as defined.

 

Reminder: New Payroll Tax Withholding Tables Take Effect on November 1, 2009 (Abx4 17)

As mentioned in the August newsletter, the Legislature has passed and the Governor has signed a new law requiring employers to use increased wage withholding tables and accelerating the rates for individuals and corporations to pay estimated income tax installments. This bill was enacted on an urgency basis to essentially accelerate tax collections, and the new withholding tables take effect November 1, 2009.

For background, existing law requires the Franchise Tax Board to prepare wage withholding tables for employers to use for withholding taxes on wages paid. Existing law further allowed, in lieu of the withholding tables, withholding at a rate of 6% for supplemental wages and a rate of 9.3% for stock options and bonus payments. Under this new law, for wages paid after November 1, 2009, the wage withholding tables must produce a sum equal to 10% more than the sum specified for purposes of the prior wage withholding tables (i.e., the law increases the applicable withholding rate on employee wages by 10%). This bill also increases the withholding rates to 6.6% for supplemental wages (up from 6%) and to 10.23% for stock options and bonus payments (up from 9.3%) for stock options and bonus payments paid on or after November 1, 2009.

Last year, California enacted a bill (SB 28X1) requiring individuals with non-wage income and corporations to accelerate their quarterly estimated tax payments, using a schedule of payments of 30%, 30%, 20% and 20% rather than four quarterly payments of 25%. This new bill further accelerates these estimated tax payments, with 30% due in April, 40% due in June, zero due in September and 30% in December. This new payment schedule begins for installments due in tax years beginning on or after January 1, 2010.

If employers have not already done so, they might consider notifying employees about these impending changes in anticipation of employee questions about why their take home pay appears different. Employers should also ensure any third-party payroll provider is using the updated tables effective November 1st, and potentially prepare for a wave of employees attempting to alter their state tax withholdings to counteract these new accelerated tax tables.

 

Reminder: Salary Basis Test for “Computer Professionals” May Change Before January 1, 2010

California Labor Code section 515.5 previously provided that computer professionals may be exempt from overtime requirements provided they satisfy certain specifically enumerated duties and receive an hourly rate of $36 on an annualized basis (down from $41 per hour in 2007.) In 2008, and in response to employer concerns about tracking hours for computer professionals, California enacted a bill (AB 10) providing an alternative salary basis test exempting computer professionals from overtime requirements if the computer professional satisfies the duties requirements and receives an a statutorily enumerated annual salary (initially $75,000) for full-time employment and is paid at least once a month and in a monthly amount of not less than one-twelfth the annual salary.

AB 10 also provided that the hourly and salary rate for the computer professional exemption are subject to change each October 1st by the Division of Labor and Statistics (DLS.) In November 2008, the DLS increased these rates (effective January 1, 2009) to an hourly rate of $37.94, an annual salary requirement of $79,050, and a monthly payment of $6,587.50. It presently remains to be seen whether the DLS will announce for 2010 new hourly, monthly and annual salary amounts needed to satisfy the salary basis prong of the “computer professional” exemption. If so, it is expected these new rates will take effect January 1, 2010.

As a further reminder, paying these rates will satisfy only the “salary basis” prong of the computer professional exemption, and employers must still demonstrate the employee satisfies the fairly stringent “duties” portion set forth in Labor Code section 515.5.

Federal

New FMLA Amendments Expand Military Family Leave (H.R. 2647)

On October 28, 2009, President Obama signed into law the National Defense Authorization Act of 2010, which contains several provisions amending the recent Family and Medical Leave Act amendments (FMLA) providing for military caregiver leave. These new amendments expand the eligibility for leave under the “qualifying exigency leave” and “caregiver leave” portions of the military leave rights under the FMLA. In effect, this defense authorization bill largely enacts the provisions of the Supporting Military Families Act of 2009 (H.R. 3403) originally introduced into the House of Representatives in June 2009.

As originally enacted in 2008, the FMLA authorized up to 12 weeks of job-protected leave in a 12-month period for an eligible employee (e.g., family member of a person on or about to be deployed for active duty) for any “qualifying exigency” (as defined.) As originally drafted, this so-called “qualifying exigency” leave applied only to family members of reserve and National Guard members, but not to members of the regular armed services. The just-enacted amendments permit families of active duty military members in the regular armed services to be eligible for “qualifying exigency” leave.

As originally enacted, the FMLA’s “caregiver leave” provisions permitted up to 26 weeks of unpaid leave for employees to care for a family member injured while serving on “active military duty.” The new amendments expand the “caregiver leave” rights to permit leave to care for veterans undergoing medical treatment, recuperation or therapy for serious injury or illness that occurred during the five years preceding the treatment date.

Protecting Older Workers against Discrimination Act Introduced (H.R. 3721)

This bill would amend the federal Age Discrimination in Employment Act (ADEA) to provide the same standards of proof for Title VII claimants, and effectively nullify the recent United States Supreme Court decision in Gross v. FBL Financial Services, Inc. (2009) 129 S.Ct. 2343. In Gross, the Court noted the statutory differences between the ADEA and Title VII, and concluded ADEA claimants must prove age was a “but for” cause of the challenged decision, while Title VII claimants need only prove a protected criterion was a “motivating factor” in the employment decision.

This bill would amend the ADEA by adopting the statutory language added to Title VII in 1991 concerning the standard of proof and the so-called “mixed motive” affirmative defense. Specifically, the amended ADEA would provide that a claimant establishes an unlawful employment practice if the claimant demonstrates age was a “motivating factor” in the challenged decision. As under Title VII, the employer could then avoid certain types of damages, but not liability completely, by proving it would have made the same decision in the absence of the impermissible motivating factor.

This just-introduced bill is currently pending in the House, and is expected to quickly pass and head to the Senate where it will also likely pass. It is anticipated President Obama will also sign this bill if it passes Congress.

Extended COBRA Continuation Protection Act of 2009 (H.R. 3930)

Not surprisingly, a bill has recently been introduced to extend the eligibility period and maximum assistance period for the COBRA premium assistance available under the American Reinvestment and Recovery Act of 2009 (ARRA). Quickly summarized, ARRA provided a 65% premium subsidy for COBRA coverage of up to 9 months for employees involuntarily terminated between September 2008 and December 31, 2009. This bill would extend ARRA’s premium subsidy in two respects: (1) it would expand the maximum period of COBRA premium assistance from 9 months to 15 months; and (2) it would extend the eligibility period from December 31, 2009 until June 30, 2010.

This bill would also extend the maximum period for traditional COBRA continuation coverage (i.e., non-ARRA subsidized) for eligible employees (i.e., involuntary terminations) from 18 months to 24 months.

This bill has been referred to the Committee on Education and Labor. Given the current economic situation and since this same Congress enacted ARRA earlier this year, it is anticipated some version of this bill will be enacted fairly quickly.

Hiring Heroes Tax Incentives Act of 2009 (H.R. 3620)

This bill would amend the Internal Revenue Code to allow employers a tax credit of up to 15% of the first $10,000 of wages paid to a “qualified employee.” Qualified employees would be employees who currently are members of the Ready Reserve or the National Guard, or “recently separated veterans” (i.e., former active duty members of the Armed Forces discharged within five years of their hire date.) This tax credit would expire on December 31, 2012. This bill has been referred to the House Committee on Ways and Means.

Anti-Arbitration Amendment for Federal Contractors Passes Senate (S.A. 2588)

The United States Senate has recently passed an amendment to a budget bill that would prohibit federal contractors from requiring employees to sign pre-dispute mandatory arbitration agreements as a condition of employment for certain types of employment disputes, including Title VII or sexual assault or harassment claims. It remains to be seen whether the House will join in this amendment to its previously passed appropriations bill. There are also several pending bills, including the Arbitration Fairness Act of 2009 (H.R. 1020/S. 931), that would prohibit any employers from requiring employees to agree to arbitration as a condition of employment.

Reminder: Title II of GINA Effective November 21, 2009

In May 2008, President Bush signed into law the Genetic Information Non-Discrimination Act of 2008 (GINA) protecting individuals from discrimination based upon genetic information for health coverage purposes (Title I) and in employment relationships (Title II). While GINA’s health coverage provisions (Title I) began taking effect in May 2009, its employment provisions (Title II) become effective on November 21, 2009.

Broadly summarized, Title II of GINA applies to employers with 15 or more employees and (1) prevents the use of “genetic information” (as defined) in employment decisions concerning employees or applicants, (2) prohibits the intentional acquisition of genetic information, and (3) imposes strict confidentiality requirements with respect to genetic information (i.e., employers must treat it in same manner as other medical information). GINA also authorizes the same remedies for violations of its Title II as are available under Title VII (e.g., reinstatement, back pay, injunctive relief, punitive damages and attorneys’ fees).

As mentioned elsewhere in this newsletter (see Federal Agency Developments), the EEOC is responsible for issuing final regulations implementing Title II, but it is not clear whether these will be issued before the November 21, 2009 effective date. In the interim, and as also discussed below, the EEOC has issued an updated EEO poster incorporating Title II’s prohibition against discrimination based on “genetic information.” The EEOC has also posted on its website an

overview of GINA and background information concerning its regulations implementing Title II. This “background information” can be obtained at www.eeoc.gov/policy/docs/qanda_geneticinfo.html.

Reminder: Mental Health Parity and Addiction Equity Act of 2008 Takes Effect on January 1, 2010

Originally signed into law in October 2008, the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) will finally take effect on January 1, 2010. Under this Act, group health plans for over 50 employees that provide coverage for both physical as well as mental health/substance abuse conditions cannot discriminate against mental health/substance abuse conditions in terms of the financial requirements or treatments limits. In other words, this Act ensures that financial requirements (e.g., deductibles, co-payments) and treatment limits (e.g., number of visits, etc.) applicable to mental health and substance abuse are no more restrictive than the requirements or limitations placed on other medical conditions.

This Act is intended to eliminate the prior practice of some health plans imposing higher patient cost sharing or more restrictive treatment limitations for mental health and substance abuse coverage. The MHPAEA is also broader than a prior version of this bill (the Mental Health Parity Act of 1996) which had prevented discrimination in some respects (ex. lifetime coverage limits) but had allowed different treatment in other respects (ex. number of annual visits, etc.)

The Department of Labor (DOL) is expected to issue new regulations concerning the MHPAEA but it remains to be seen whether these final regulations will be issued or take effect until after MHPAEA becomes effective in January 2010. In April 2009, the DOL published in the Federal Register a request for public comments on the MHPAEA, but the DOL and Department of Health Services appear to be still reviewing the numerous public comments received.

Federal Contractor Requirements for E-Verify Now in Effect

The Department of Homeland Security’s long-delayed rule requiring federal contractors to use the federal E-Verify system finally took effect September 8, 2009. As discussed in greater detail in earlier newsletters, this rule will require that most federal contracts awarded or solicitations issued after the effective date include clauses requiring the contractor (and in some instances, subcontractors) to use the federal E-Verify system for purposes of determining employee eligibility to work if the contract contains the Federal Acquisition Regulation E-Verify Clause. These requirements to use E-Verify will generally apply to any contractor employee hired during the contract’s term, or to any current contractor employee assigned to perform work on the federal contract. In other words, covered contractors will need to use E-Verify for all new hires, regardless of whether working on the federal contract, and to employees hired before the contract was awarded if they will work on the contract.

 

AGENCY

California

DFEH Institutes Case Grading System for Administrative Charges

The Department of Fair Employment and Housing (DFEH) has recently announced it has instituted an internal “case grading system” for purposes of investigating administrative charges filed. Modeled on a similar system used by the Equal Employment Opportunity Commission, this grading system will enable the DFEH to focus its investigative efforts on claims that appear to have merit, rather than simply investigating claims based on the order received.

Cal-OSHA Issues Interim Enforcement Policy Concerning H1N1 and Aerosol Transmissible Diseases

On August 5, 2009, Cal-OSHA’s new Aerosol Transmissible Disease (ATD) standard (Title 9 CCR section 5199) took effect. In September, CAL-OSHA issued an interim enforcement policy discussing section 5199’s applicability to H1N1, and the use of respirators and isolation of hospitalized individuals. This interim enforcement policy can be found at http://www.dir.ca.gov/dosh/SwineFlu/Interim_enforcement_H1N1.pdf.

Federal

EEOC Issues Updated Technical Assistance Manual Regarding Pandemics and ADA Compliance

Just in time for the flu season and on the heels of President Obama’s declaration of the H1N1 virus being a national emergency, the Equal Employment Opportunity Commission has issued an updated technical guidance manual entitled “Pandemic Preparedness in the Workplace and the Americans with Disabilities Act.” This guidance assists employers in preparing for potential flu outbreaks while complying with the Americans with Disabilities Act (ADA). Amongst other things, this document provides the EEOC’s guidance, through question-and-answer format, on management of the workforce before, during and after pandemic, and answers these (and other) questions:

• How much information may an employer request from an employee who calls in sick, in order to protect the rest of its workforce when an influenza pandemic appears imminent?
• When may an ADA-covered employer take the body temperature of employees during a pandemic?;
• Does the ADA allow employers to require employees to stay home if they have symptoms of the pandemic influenza virus? And
• When employees return to work, does the ADA allow employers to require doctors’ notes certifying their fitness for duty?

The full-text of this guidance document is available on the EEOC website: www.eeoc.gov/facts/pandemic_flu.html.

New EEOC “EEO is the Law” Poster Now Available

Federal law requires that employers post notices describing the federal laws prohibiting discrimination based on race, color, sex, national origin, religion, age, equal pay, disability and genetic information. The EEOC has recently announced that it has revised its “Equal Employment Opportunity is the Law” poster that many employers post to satisfy the federal posting requirements. This new version reflects current federal discrimination law (including the ADA Amendments Act of 2008) and has been revised to add information about the Genetic Non-Discrimination Act of 2008 (which takes effect November 21, 2009), and to include updates from the Department of Labor. Employers may order up to ten copies of the new “EEO is the Law” poster, or a poster supplement, through the following website: www.eeoc.gov/posterform.html.

DOL Issues Proposed Interim Final Rule Regarding Title I of GINA

The Department of Labor has recently issued a proposed interim final rule implementing Title I (the portion applicable to health care coverage) of the Genetic Information Non-Discrimination Act of 2008 (GINA). Amongst other things, this proposed rule defines a number of GINA’s terms, including “genetic information” by specifically enumerating what items are included in and excluded from this term. This interim final rule, which is available on the DOL website (www.dol.gov) takes effect on December 7, 2009, and public comments will be accepted until January 5, 2010.

As discussed previously, the EEOC is responsible for issuing proposed final regulations concerning Title II of GINA, which applies to employers by preventing discrimination and limiting employer access of “genetic information.” In March 2009, the EEOC issued proposed regulations and sought public comment, but the final regulations have not yet been issued, and it remains to be seen whether the final regulations will be issued before the November 21, 2009 effective date for Title II of GINA.

OSHA Announces Emphasis on Accurate Record Keeping by Employers

The United States Department of Labor’s Occupational Safety and Health Administration (OSHA) recently announced it is initiating a “national emphasis program” (NEP) on recordkeeping to assess the accuracy of injury and illness data recorded by employers. The recordkeeping NEP will focus on selected industries with high injury and illness rates, and will involve inspecting occupational injury and illness records prepared by businesses and appropriately enforcing regulatory requirements when employers are found to be under-recording injuries and illnesses. These NEP inspections will include a records review, employee interview and a limited safety and health inspection of the workplace.

DHS Officially Rescinds “No Match” Rule

As widely anticipated, the Department of Homeland Security (DHS) has officially published a final rule rescinding the proposed “no match” regulations originally issued in 2007, but which never took effect. The “no match” regulations outlined an employer’s legal obligations upon receiving notification from the Social Security Administration that an employee might not be authorized to work in the United States. These regulations were immediately enjoined by a federal court and in August 2009, the DHS announced a proposed rule rescinding these “no match” regulations in favor of the new administration’s focus on worksite enforcement.

JUDICIAL

California

Employer’s Failure to Provide Agreed-Upon Accommodation Just Once Proves Costly

A grocery employee sued her employer for failure to accommodate under the Fair Employment and Housing Act (FEHA) after she urinated on herself in the checkstand because her supervisor would not let her go to the bathroom. The employer knew this employee needed to constantly drink water and to frequently use the bathroom due to prior tonsil and larynx cancer, and it had accommodated the employee for over a year by allowing her keep water in her checkstand (despite its policy) and to use the bathroom frequently and whenever necessary. However, on one occasion, a night supervisor who was unaware of the employee’s disability had not been able to cover the register quickly enough, and the employee wet her pants while waiting for assistance. The jury ruled in the employer’s favor on the employee’s interactive process claim, but in the employee’s favor on the failure to accommodate claim, and awarded $200,000, including nearly $150,000 in emotional distress damages.

On appeal, the employer argued a single incident could not constitute a failure to accommodate, particularly since the employee had not informed this supervisor about why she needed to go so urgently, and given the employer’s overall accommodation efforts for this employee. The court of appeal rejected this argument and affirmed the jury verdict, noting that FEHA requires the employer to reasonably accommodate an employee by providing the agreed-upon accommodation, and not simply accommodating that employee most of the time. The appellate court essentially reaffirmed that while the employer need only provide reasonable accommodations under FEHA, once it agrees to do so it must consistently do so, noting that “a single failure to make reasonable accommodations can have tragic consequences for an employee who is not accommodated.” (A.M. v. Albertsons LLC (2009) ___ Cal.App.4th ___, 2009 Cal.App.LEXIS 1675.)

Employee Properly Exhausted Administrative Remedies for Harassment Claim

An employee sued his employer alleging he was harassed and discriminated against because of his race. The trial court granted the employer’s summary judgment motion finding, amongst other things, that the employee had failed to exhaust administrative remedies because his DFEH administrative complaint did not specifically mention “harassment.” The court of appeal reversed, reiterating that these charges are to be liberally construed since drafted by non-lawyers, and include not only the claims specifically mentioned but those likely to be uncovered by a reasonable investigation. The appellate court concluded the charge’s allegations, as well as other DFEH documents that used the term “harassment,” provided sufficient notice to the employer and likely would have resulted in “harassment” being discovered during an investigation.

The employer also argued that the so-called “same actor” inference precluded any possible discrimination claim since the same supervisor accused of discriminating had previously treated the employee favorably. The appellate court noted this inference only applies when the supervisor previously acts for genuine motives, and not simply because his supervisor ordered him to promote the plaintiff. The appellate court also held sufficient questions existed concerning the adequacy of the employer’s investigation to raise a triable issue of fact concerning the proffered legitimate business reasons. Finally, the appellate court spent considerable time discussing the pertinent summary judgment standards, and its harsh criticisms of the employer in that case may make summary judgment slightly more difficult for employers in other cases. (Nazir v. United Airlines, Inc. (2009) ___ Cal. App. 4th __, 2009 Cal. App. LEXIS 1659.)

“Reasonable Geographic Limitations” Define Employer Liability for Injuries Incurred While Traveling for Treatment for Existing Industrial Injuries

An employee undergoing medical treatment for a prior industrial injury sued her employer to recover for new injuries incurred in a motor vehicle accident after she ran a red light nearly 130 miles from her home and doctor’s office. The injured employee admitted she had been visiting her mother’s house two hours away, but contended the employer would still be liable for these new injuries because they incurred while traveling from her mother’s house to her worker’s compensation medical provider. The worker’s compensation judge found the employee’s motor vehicle accident injuries were a compensable consequence of her existing industrial injuries and awarded temporary disability indemnity and additional medical benefits.

The Worker’s Compensation Appeals Board and California court of appeal reversed, holding that the new injuries were not compensable because they clearly occurred outside the “reasonable geographic area” of her employer’s compensability risk. The appellate court reaffirmed that an employer may have to compensate for additional injuries received during travel to or from a medical appointment relating to an existing compensable injury while the employee is traveling a reasonable distance or within a reasonable geographic area. However, the court also held the employer would not be liable for additional injuries incurred when an employee chooses – for reasons unrelated to his or her need for medical treatment – to travel to a distant location beyond the reasonable geographic area even if the injury incurs while traveling to the appointment. The court declined to adopt a specific test for determining these reasonable geographic boundaries, stating such determinations must occur on a case-by-case basis considering all relevant circumstances. (Esquivel v. Workers’ Compensation Appeals Bd. (2009) ___ Cal.App.4th ___, 2009 Cal.App.LEXIS 1664.)