LEGISLATIVE

California

Just a reminder that the following bills (previously discussed in our October and November newsletters) take effect January 1, 2010, unless otherwise noted:

Limitations on Employer’s Ability to Rescind Medical Treatment Authorization (AB 361)

California’s workers’ compensation laws permit employers or insurers to establish a medical provider network to provide medical treatment to 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.

New Limitations on Display of Nooses in Workplace (AB 412)

California’s Hate Crimes Law prohibits the display of certain symbols (i.e., swastikas, burned crosses) with the intent to terrorize persons. This bill expands these protections and provides that anyone who hangs a noose, knowing it to be a symbol representing a threat to life, in certain statutorily-enumerated places including a "place of employment," for the purpose of terrorizing an occupant, shall be subject to imprisonment and civil fines up to $5,000 for the first offense. This bill is not targeted specifically at employers, but provides additional incentive for employers and employees to ensure nooses are not displayed in the workplace for purposes of harassing co-workers.

Civil Air Patrol Employment Protection Act (AB 485)

This bill requires employers with more than 15 employees to provide at least 10 days of leave per year for voluntary members of the California Wing of the Civil Air Patrol to respond to emergency operational missions. To be eligible for this leave, employees must have worked for their current employer for more than 90 days immediately preceding the commencement of the leave. Eligible employees are also required to provide as much advance notice of the leave as possible. This bill also requires employers to reinstate employees to their original position or a position with equivalent seniority and benefits, unless the employee is not restored due to conditions unrelated to the leave. This bill does not require employers to grant Civil Air Patrol leave to employees required to respond as first responders for a local, state or federal agency to the same or simultaneous emergency operational mission. This bill also authorizes employees to bring civil actions to enforce these Civil Air Patrol leave rights.

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, there is a coverage exception 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.

Injured Employee’s Right to Pre-Designate Treating Physician Extended (SB 186)

This bill removes the December 31, 2009 sunset date on an injured worker’s ability to pre-designate his or her treating physician as the treating physician in the event of a workplace injury. California’s Workers’ Compensation laws generally require employers to secure and pay for the medical treatment for a workplace injury, and allow employers to select the treating physician for the first thirty days after a workplace injury. Existing law also provided employees with the right to be treated by his or her own physician from the date of injury if specified requirements are met, including a requirement that the physician agree to be pre-designated. As originally enacted, the bill allowing an employee to pre-designate a personal physician was set to expire on December 31, 2009.

Increased Workers’ Compensation Penalties (SB 313)

California requires that every employer secure the payment of workers’ compensation for work-related injuries, and authorizes the Department of Industrial Relations to issue penalty assessment orders against employers who fail to comply. This bill increases the penalty assessment to $1,500 per employee (up from $1,000 per employee) employed during the time the employer was uninsured, and restructures the laws governing penalties for noncompliance.

Price Discounts for Unemployed Consumers not Discriminatory under the Unruh Act (SB 367)

The Unruh Civil Rights Act (Civil Code section 51 et seq.) prohibits business establishments from discriminating, including through price discounts, against customers because of specified reasons (e.g., sex, race, religion, etc.), and authorizes civil remedies for non-compliance. This bill clarifies that discounts or other benefits offered to or conferred on a consumer because the consumer has suffered the loss or reduction of employment would not be considered an arbitrary discrimination in violation of the Unruh Civil Rights Act. This bill was enacted on an urgency basis after the October 11^th legislative deadline, and took immediate effect on November 2, 2009.

Federal

COBRA Premium Subsidy Extended Through February 2010

On December 21, 2009, President Obama signed into law a bill (H.R. 3326) immediately extending the eligibility and duration period for the COBRA premium subsidy originally enacted in February 2009 under the American Recovery and Reinvestment Act (ARRA). Simply summarized, ARRA created a nine-month COBRA premium subsidy (65%) for "assistance eligible individuals" (defined as employees "involuntarily terminated" for other than misconduct between September 1, 2008 and December 31, 2009.) By its terms, ARRA’s initial eligibility period was set to expire on December 31, 2009, and many individuals had exhausted or would soon exhaust the full nine month subsidized premiums available under ARRA.

Contained within Section 1010 of a much larger Defense Appropriations bill, this immediately effective bill extends the "eligibility period" for subsidized premium assistance from December 31, 2009 until February 28, 2010. It also extends the maximum duration of premium assistance from nine months to fifteen months. It also allows assistance eligible employees whose premium subsidy had expired but had not paid the full unsubsidized COBRA premiums after the subsidy elapsed (defined as the "transition period" [e.g., in December 2009 after the nine months expired]) to receive retroactive coverage by paying the subsidized premium either within sixty days of this bill’s enactment or, if later, within thirty days of receiving notice of the ability to obtain retroactive coverage. Eligible individuals who "overpaid" by paying the full unsubsidized COBRA premium during this "transition" period will be entitled to reimbursement for this overpayment.

As under ARRA, this new bill imposes additional notice requirements upon employers and Plan Administrators. Specifically, by February 17, 2010, employers will be required to update their COBRA notices to reflect the extended eligibility and duration periods (until February 28, 2010 and for fifteen months respectively) and provide notice to the "assistance eligible individuals" who were previously notified about ARRA generally about the new premium subsidy extension For those employees who experience an employment termination on or after October 31, 2009, employers must provide this notice within the normal timeframes for providing continuation coverage notices. For those employees in a "transition period" (i.e., whose prior subsidy had lapsed and had not paid the full premium or had paid the full premium) employers must provide notice about these extension rights, including the ability to retroactively renew the subsidized coverage for the balance of the extended period, within 60 days of the first day of the transition period.

Fortunately, the Department of Labor (DOL), which had previously published sample COBRA premium subsidy notices, has already announced that it intends to soon publish updated notices reflecting these extended periods and additional information on its website: www.dol.gov/cobra. A helpful "Fact Sheet" outlining this new extension and employer notice requirements is also posted on the DOL’s website at www.dol.gov/ebsa/newsroom/fscobrapremiumreduction.html.

NOTE: another federal bill that recently passed the House (H.R. 2847) and proceeds to the Senate would extend the COBRA premium subsidy eligibility period through June 2010. It remains to be seen whether the California legislature will similarly extend last year’s bill (AB 23) essentially extending these federal COBRA obligations to smaller employers covered under Cal-COBRA.

New Restrictions on Federal Contractor Arbitration Agreements Enacted (H.R. 3326)

The 2010 Defense Appropriations Bill extending the COBRA Premium Subsidy (discussed above) also contains a provision (Section 8116) restricting federal contractors and subcontractors from using or requiring arbitration agreements for large contracts funded by this bill. Specifically, section 8116 prohibits any funds made available under this defense bill to be expended for any federal contract for more than one million dollars awarded more than sixty days after its effective date unless the federal contractor agrees not to require arbitration agreements or to enforce existing arbitration agreements with its employees for certain statutorily-enumerated claims. These claims for which arbitration agreements will be prohibited include claims under Title VII, torts relating to sexual assault or harassment (including assault and battery) intentional infliction of emotional distress and negligent hiring and supervision. This provision also requires that within 180 days of the bill’s enactment, federal contractors must certify that subcontractors working on these contracts have agreed to these restrictions for their employees.

This provision currently applies only to federal contractors working on large contracts under this particular defense bill and only to specific claims (e.g., Title VII and sexual assault related torts.) However, its passage may foretell efforts in 2010 to pass the Arbitration Fairness Act of 2009 (H.R. 1030, S. 931) which would amend the Federal Arbitration Act to prohibit pre-dispute arbitration agreements for private employers.

New FMLA Eligibility Requirements for Airline Flight Crews Signed into Law (S.1422)

Known as the Airline Flight Crew Technical Corrections Act, this recently-enacted and now effective bill amends the Family Medical Leave Act (FMLA) by adjusting the "hours-of-service" requirement for airline flight crews. This bill is intended to make it easier for flight crews to qualify for FMLA leave by specifying that airline flight crews’ "hours worked" would not be limited solely to hours spent actually "in flight," as such a narrow definition would effectively preclude most flight crews from meeting the FMLA’s eligibility requirements (i.e., 1250 hours worked during the preceding 12 months.)

Under these amendments, flight attendants or flight crewmembers will be considered to meet FMLA’s hours of service requirement if they have worked or been paid for: (1) at least 60% of the applicable total monthly guarantee, or the equivalent for the previous 12-month period for or by the employer with respect to who such leave is requested; and (2) a minimum of 504 hours (not counting personal commute, time spent on vacation, or medical or sick leave) during such period.

Open Access to Courts Act of 2009 Introduced (H.R. 4115)

Although it does not directly say so, this bill is intended to reverse two recent United States Supreme Court decisions (Ashcroft v. Iqbal (2009)129 S.Ct. 1937 and Bell Atlantic v. Twombley (2007) 127 S.Ct. 1955) which had made it easier for federal courts to dismiss at the pleading stage insufficiently pled complaints, including employment-related claims. This bill would prohibit federal courts from dismissing complaints at the pleading stage "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle the plaintiff to relief," and from dismissing complaints where the plaintiff’s claims, as plead, appear implausible or insufficient to sustain a reasonable inference in the plaintiff’s favor. A similar but slightly different bill, the Notice Pleading Restoration Act of 2009 (S. 1504) is currently pending in the Senate.

Bill to Increase Penalties for Independent Contractor Misclassification Introduced (S. 2882)

Known as the Taxpayer Responsibility, Accountability and Consistency Act of 2009, this bill would amend the Internal Revenue Code of 1986 to modify the rules relating to the treatment of individuals as independent contractors or employees. Amongst other things, this bill would make it harder for employers to qualify for the "safe harbor" exemption for misclassifying employees as independent contractors, and could substantially increase the penalties for misclassification (e.g. from the current range of $50 to $250,000 for larger employers to $250 to $3,000,000). A similar bill is pending in the House (H.R. 3408) and both bills are very similar to a prior version (H.R. 5804) which stalled in the 2008 Congressional session. It is unknown if President Obama would sign the current versions of these bills, although as Senator he did draft and/or sponsor several bills targeting employer misclassification of independent contractors. This particular Senate version has been referred to the Committee on Finance.

AGENCY

California

No Increase in Computer Professional Salary for Exemption Purposes

Just a reminder, the Division of Labor Statistics and Research has announced that the overtime exemption rate for computer professionals will remain unchanged from its current levels. Accordingly, for 2010, the minimum hourly rate for computer professionals will remain at $37.94, the monthly salary minimum will remain at $6,587.50 and the minimum annual salary requirement will remain at $79,050.00.

Federal

IRS Announces Slightly Reduced 2010 Mileage Reimbursement Rates

The Internal Revenue Service (IRS) has announced that effective January 1, 2010, the optional standard mileage reimbursement rates for automobiles will be fifty (.50) cents per business mile driven (down from .505 cents per mile in 2009). Additional information concerning the standard mileage rates (including for business, charitable organizations and medical/moving expenses) can be found in IRS Revenue Procedure 2009-54 available on the IRS’ website: www.irs.gov.

JUDICIAL

California

Public Policy Protects Employee Who Makes Good Faith, but Mistaken, Claim for Overtime Wages

An employee who believed he had not received two hours of owed overtime reported these concerns to his employer. The employer initially paid the additional requested overtime, but after further investigation, determined the employee had not been owed the additional overtime and terminated the employee for theft despite the employee’s claim of mistake and his offer to repay the monies. The discharged employee subsequently sued for wrongful termination in violation of public policy arguing California’s public policy protections for overtime extended to good faith but mistaken claims for overtime. The trial court concluded California’s public policy did not apply to mistaken beliefs and dismissed the claim.

The California court of appeals reversed, however, concluding that California’s fundamental public policies concerning overtime payments extended to good faith claims, even if ultimately factually mistaken. The appellate court noted California courts had repeatedly held in analogous whistle-blowing contexts that employees who make good faith but mistaken claims are protected from retaliation, and determined the same rule should apply to requests for unpaid overtime. (Barbosa v. IMPCO Technologies, Inc. (2009) 179 Cal.App.4th 1116.)

Sporadic Comments Spread Over Three Years Insufficiently Severe or Pervasive to Constitute Hostile Work Environment Sexual Harassment

A female employee terminated for not reaching her sales goals sued for FEHA sexual harassment and retaliation alleging the employer terminated her for internally raising concerns about sexual harassment. The employee’s sexual harassment claim alleged that her supervisors had made approximately eleven comments over a two to three year period, such as observing the employee "looked pretty" and that a customer had "the hots" for her, and inquiring whether she knew any women who "only wanted sex, not a relationship," and whether she was going to marry her boyfriend.

The California court of appeals affirmed summary judgment in the employer’s favor on the harassment claim, observing that while several of the comments were "too personal and inappropriate for the workplace," they were not sufficiently severe or pervasive to constitute actionable hostile work environment sexual harassment under the FEHA. The appellate court also found no causal connection existed between the employee’s alleged internal complaints and her being placed on a performance improvement plan since the employer’s concerns about her performance clearly pre-dated her alleged complaints and the decision makers were also unaware of any alleged complaints. (Haberman v. Cengage Learning, Inc. (2009) ___ Cal. App. 4th ____, 2009 Cal. App. LEXIS 2034.)

NOTE: this is the third recent California decision granting summary judgment on hostile work environment harassment claims, which may suggest California courts are more closely scrutinizing these claims. (See also Hughes v. Pair (2009) 46 Cal.4th 1035 [trustee’s several crude comments on two occasions not a hostile work environment for business establishment harassment claim under Civil Code § 51.9; Mokler v. County of Orange (2007) 157 Cal.App.4th 121 [co-worker’s improper comments on three occasions over five week period insufficient for FEHA hostile environment claim].) However, employers are encouraged to continue enforcing their anti-harassment policies.

Public Employee’s Prior Administrative Proceedings Not Complete Bar to Subsequent FEHA Retaliation Claim

A public employee sued for FEHA retaliation alleging her employer retaliated against her for filing a DFEH gender discrimination charge, and a jury awarded $100,000 in damages and nearly $400,000 in attorneys’ fees and costs. On appeal, the public employer argued the employee’s prior internal administrative challenges with the State Personnel Board regarding the particular employment decisions barred her FEHA retaliation claim even though the employee had not previously alleged they were retaliatory at the administrative stage. The appellate court rejected the employer’s argument the entire claim was barred, noting that the prior administrative proceedings and the FEHA involved different "primary rights," with the state civil service system protecting the right of continued employment and FEHA protecting the right to be free from invidious discrimination. As such, public employees are not generally required to raise FEHA issues during their administrative proceedings, and therefore, the doctrine of res judicata does not act as a complete bar to a subsequent FEHA action when an employee previously pursues an administrative challenge. However, the related, but narrower, doctrine of issue preclusion may preclude re-litigation of certain issues previously determined in the administrative proceeding.

The appellate court also rejected the employer’s argument the employee had to demonstrate the prior DFEH charge was well founded and filed in good faith. The court observed that the "good faith belief" standard articulated in Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028 applied to the FEHA retaliation provision’s "opposition" clause, but not to its "participation" clause which was satisfied by the mere filing of the DFEH charge. In any event, the court also noted sufficient evidence existed to conclude the employee in objectively reasonable good faith believed the DFEH charge was valid. Finally, the court concluded sufficient evidence existed to uphold the jury’s retaliation verdict, including a supervisor’s comments the employee "would be sorry" if she filed her DFEH charge and the contrast between the previously unblemished performance history before the complaint and the numerous suspensions following the complaint. (George v. California Unemployment Ins. Appeals Bd. (2009) ___ Cal.App.4th ___, 2009 Cal.App.LEXIS 1976.)

Trial Court Properly Decertified Class Action for Retail Manager’s Overtime Claims

Retail store managers filed a class action alleging their employer misclassified them as exempt and failed to pay overtime wages. After a somewhat convoluted procedural history, the trial court granted and the court of appeals affirmed the employer’s motion to decertify the class on the grounds that individual issues predominated over common issues, and a class action was therefore not the appropriate mechanism for employees to litigate their claims. In support of its motion, the employer had presented numerous declarations demonstrating the managers routinely exercised independent judgment, and that their daily duties varied widely depending upon the store’s location, size and configuration, and upon the manager’s duties and styles. (Keller v. Tuesday Morning, Inc. (2009) ____ Cal. App. 4th ____, 2009 Cal. App. LEXIS 1950.)

Federal

Compensatory and Punitive Damages Not Recoverable for ADA Retaliation Claim

An employee filed a retaliation claim pursuant to 42 U.S.C. §12203 of the Americans with Disabilities Act (ADA) alleging his employer improperly terminated him for complaining about disability discrimination. Facing an issue of first impression in this circuit, the Ninth Circuit Court of Appeals concluded that while the ADA’s discrimination provision authorized legal remedies including compensatory damages, the plain language of the ADA’s retaliation provision authorized only equitable remedies. Accordingly, the plaintiff could not recover compensatory or punitive damages on the ADA retaliation claim, and also was not entitled to a jury trial on that claim. (Alvarado v. Cajun Operating Co., (9th Cir. 2009) __ F.3d ___, 2009 U.S.App.LEXIS 26999.)

Ninth Circuit Affirms District Court Decision Authorizing Two On-Duty Meal Periods in the Same Day

In 2008, a California district court upheld an employee’s ability to take two on-duty meal periods in a ten-hour shift provided the statutory requirements for an on-duty meal period were met for both meal periods. (McFarland v. Guardsmark, LLC, 538 F.Supp.2d 1209 (N.D. Cal. 2008.) The ninth circuit recently affirmed, without major discussion, this employer-friendly decision. (McFarland v. Guardsmark, LLC, (9th Cir. 2009) __ F.3d ___, 2009 U.S.App.LEXIS 26796.) As discussed in prior newsletters, the DLSE also issued an Opinion Letter in 2009 (Opinion Letter 2009.06.09) upholding the result in McFarland and authorizing drivers to take two on-duty meal periods on the same day provided the statutory requirements were met for on-duty meal periods.