LEGISLATIVE

California

In advance of the June 4, 2010 deadline for bills to pass the first legislative chamber, the California legislature is currently considering a number of employment-related bills, including the following:

Bill Limiting Credit Reports in Employment Decisions Reintroduced (AB 482)

The federal Fair Credit Reporting Act and the California Consumer Credit Reporting Agencies Act regulate and specify the procedures employers must follow to obtain and use credit reports in employment decisions. This bill would prohibit employers, other than certain financial institutions, from obtaining consumer credit reports for employment purposes unless (1) the information is substantially job-related, meaning that the person for whom the report is sought has access to financial or confidential information, or (2) the position at issue is in the state Department of Justice, a managerial position, that of a sworn police officer of other law enforcement position or a position for which the law requires the employer to obtain this type of information.

Similar versions of this bill have passed the Legislature in 2008 and 2009 but were vetoed by the Governor. The United States Congress is currently considering similar bills, so this bill might be enacted first at the federal level.

Bill Limiting Arbitration of Hate Crime Civil Claims Passes Assembly (AB 1680)

Known as the Hate Crimes Protections Act, this bill would prohibit any person/entity from requiring another person to waive any legal right, penalty, remedy, forum or procedure for violations of the Ralph Civil Rights Act or the Bane Civil Rights Act (Cal. Civ. Code § 51.7 et seq.) as a condition of entering into a contract for the provision of goods or services. Specifically, this bill would prohibit anyone from requiring, as a condition of entering into a contract, a waiver of another person’s ability to file and pursue a civil action or complaint with the Attorney General, the Department of Fair Employment and Housing, or any court or governmental entity. This bill, which would apply to contracts entered into after January 1, 2011, would not prohibit knowing and voluntary waivers of these rights, but would impose the burden of demonstrating the waiver was voluntary and knowing upon the person seeking the waiver. Opponents argue this bill is intended to eliminate pre-dispute arbitration agreements.

This bill has recently passed the Assembly and is pending before the Senate Judiciary Committee.

Bill Increasing Criminal Failure for Willful Failure to Pay Wages Passes Assembly (AB 2187)

California law establishes misdemeanor criminal penalties for various violations of the Labor Code, including the willful failure to pay wages due. This bill increases these criminal penalties by establishing a misdemeanor and imposing a civil penalty (between $1,000 and $10,000) and potentially imprisonment up to six months upon an employer or person who willfully fails to pay all wages due to an employee who has been discharged or quits within 90 days of the date those wages became due. This bill would also require a person or employer who violates these provisions to pay restitution in an amount equal to the amount of unpaid wages to the aggrieved employee and pay prosecution costs upon the conviction becoming final.

This bill has recently passed the Assembly and is currently pending in the Senate Labor and Industrial Relations Committee.

Assembly Considering New Limitations on Employer Usage of Prior Convictions (AB 2727)

Labor Code section 432.7 presently prohibits employers from asking about or using in employment decisions information about arrests or detentions that did not result in a conviction. This bill would prohibit employers from denying an application for employment based on an individual’s prior conviction unless the employer determines there is a direct relationship between the criminal offense and the employment sought, or the granting of employment would involve an unreasonable risk to property or safety. The bill requires that in making this determination, employers must consider specifically-enumerated factors, including the specific duties of the employment sought, the time between the conviction and application, and the seriousness of the offense. This bill would also authorize civil actions to recover civil remedies, including statutory damages presently available for violations of Labor Code section 432.7.

This bill has recently passed the Assembly Labor and Employment Committee and is pending in the Appropriations Committee. Since the Governor has previously vetoed bills limiting employer consideration of credit history, it appears unlikely this bill will be signed into law.

Bereavement Leave Bill Passes Assembly Committee Vote (AB 2340)

This bill would entitle eligible employees (those working more than 60 days prior to a leave) to take up to three days unpaid bereavement leave in the thirteen-month period following the death of a spouse, child, parent, sibling, grandparent, grandchild or domestic partner. It would also prohibit employers from discharging, disciplining or discriminating against an employee for inquiring about, requesting or taking bereavement leave, and it would provide civil penalties and permit lawsuits against employers who violate its provisions. This new leave would not apply to employees covered by a valid collective bargaining agreement that provides for bereavement leave and other specified working conditions.

This bill has recently passed committee votes before the Committee on Labor and Employment and the Appropriations Committee.

Bill Clarifying Employer’s Bond Posting Obligation Passes Assembly (AB 2772)

This bill would amend Labor Code section 98.2 to make clear that an employer who wishes to appeal to superior court a Labor Commissioner’s determination must “first” post a bond in the amount of the judgment rendered in the administrative proceeding. In 2000, the California legislature amended Labor Code section 98.2 (AB 2509) to include language requiring employers to post bonds for superior court appeals, but a California appellate court held this duty was merely “directory” and not “mandatory and jurisdictional.” (Progressive Concrete Inc. v. Parker (2006) 136 Cal.App.4th 540, 548.) This bill would essentially nullify Progressive Concrete and clarify that employers seeking to appeal a Labor Commissioner ruling must first post a bond as a prerequisite to appealing.

This bill easily passed the Assembly and is pending in the Senate where passage also seems likely.

Bill to Revise Attorney’s Fees Awards in Small Employment Cases Passes Committee Vote (AB 2773)

California’s Fair Employment and Housing Act (FEHA) grants the trial court discretion to award reasonable attorney’s fees to a prevailing party, but Code of Civil Procedure section 1033 also provides the court discretion to limit fees when the prevailing party requires a judgment less than what could have been awarded in a limited civil case ($25,000). Earlier this year, the California Supreme Court held in Chavez v. City of Los Angeles (2010) 47 Cal.4th 970 that a trial court has discretion in a FEHA case to deny a successful plaintiff their attorney’s fees if they proceed in unlimited civil court but recover less than the $25,000 jurisdictional minimum. (In Chavez, the court denied a nearly $900,000 attorney’s fees request in a FEHA discrimination case in part because the plaintiff only recovered $10,000 in damages). This bill would nullify Chavez and provide that Code of Civil Procedure section 1033.5 shall not apply to FEHA actions.

This bill recently passed a committee vote in the Assembly and has been referred to the Assembly’s Appropriations Committee.

Bill to Remove Agricultural Employees’ Exempt Status Introduced (SB 1121)

California law presently exempts agricultural employees from the general Labor Code requirements regarding overtime and meal periods. This bill would remove this exemption for agricultural employees and entitle them to the more general overtime requirements (e.g., after 8 hours in single work day) and to meal periods. This bill has recently passed a vote with the Senate Labor and Industrial Relations Committee but remains pending in the Senate.

DFEH Proposes Amendments to its Housing Provisions (SB 1252)

The Department of Fair Employment and Housing has sponsored a bill to amend FEHA’s provisions to make several technical revisions concerning “housing” discrimination. Specifically, this bill would (1) amend FEHA’s civil penalty caps to conform with those imposed for violations of the federal Fair Housing Amendments Act; (2) make technical revisions to consistently include “source of income” as a characteristic protected from housing discrimination; and (3) clarify that admission preferences based on age imposed in connection with a federally-approved housing program do not constitute age discrimination in housing. This bill is presently pending in the Senate and is likely to pass, but likely will not have a major impact on employers since it focuses on FEHA’s “housing” provisions.

Paid Time Off for Organ and Bone Marrow Donations? (SB 1304)

This bill would require employers with 15 or more employee to provide up to 30 days of paid leave per year for an organ donation and up to 5 days of paid leave per year for a bone marrow donation. This bill would essentially extend a paid leave right for state employees to private employees. It would also prohibit employers from interfering with employees taking such leaves and prohibit retaliation against employees from taking such leaves. It would also authorize employees to file civil actions to enforce violations of these leave rights. This bill has recently passed several committee votes in the Senate and is presently pending before the Senate Appropriations Committee.

Senate Passes Bill Requiring Written Employment Contract for All Commissioned Employees in California (SB 1370)

Labor Code sections 2751 and 2752 currently require employers with no permanent and fixed place of business within California and who hire employees to be paid on commission to put these employment contracts in writing or face statutory treble damages. This bill would amend section 2751 to make its written contract requirement applicable to all employers entering into a contract of employment involving commissions as a method of payment to employees who render services in California. In other words, this bill would extend this written contract requirement from its current limited application to employers lacking a “permanent and fixed place of business in California” to apply to all employers using commissioned employees in the State of California. This bill has passed the Senate and is currently pending in the Assembly.

“Card Check” Bill for Agricultural Employees Reintroduced (SB 1474)

California law presently provides for secret ballot elections for employees in agricultural bargaining units to select labor organizations to represent them for collective bargaining purposes. This bill would create an alternative majority signup election procedure whereby agricultural employees would select their labor representatives by submitting a petition to the board accompanied by representation cards signed by a majority of the bargaining unit members. This bill has recently passed a vote in the Senate Labor and Industrial Relations Committee and is pending before the Appropriations Committee. Similar bills have been vetoed the last couple years suggesting passage and final enactment appear unlikely.

Federal

Another Extension of the COBRA Premium Subsidy and Unemployment Insurance Benefits Appears Likely, But Not Guaranteed (HR 4213)

As May 2010 drew to a close, Congress was negotiating amendments to a previously passed bill (HR 4213) that would have further extended emergency unemployment insurance benefits and the COBRA premium subsidy eligibility deadline from May 31, 2010 until December 31, 2010. It presently appears, however, that prior to going into a brief recess (until June 7, 2010), Congress only passed a portion of these amendments, including those extending unemployment insurance benefits (albeit until November 30, 2010, rather than December 31, 2010), but not the COBRA premium subsidy. Congress is expected to re-visit these other provisions, including the COBRA premium subsidy, after June 7^th and any further COBRA premium subsidy extension would almost certainly apply retroactively to the current May 31, 2010 expiration deadline. At this point, another COBRA premium subsidy extension appears likely shortly, but the final details of this extension will need to be resolved.

If the COBRA extension is enacted, employers and/or their group health plans will continue to be required to provide notice of the 65% premium subsidy to “assistance eligible individuals” involuntarily terminated for other than gross misconduct between May 31, 2010 (the current subsidy deadline) until the soon-to-be-determined new expiration deadline (currently proposed for December 31, 2010. The Department of Labor would likely soon issue updated model COBRA notices concerning any future extensions, and in the interim, the DOL has recently posted updated notices for employer usage reflecting the previous extension until May 31, 2010. These notices are available at www.dol.gov/ebsa/cobramodelnotice.html.

Please note, this contemplated extension would extend the eligibility period for discharged employees, but not extend the length of the coverage period (currently 15 months), including for employees who are nearing the end of their subsidized coverage.

AGENCY

Federal

DOL Publishes Final Rules Implementing Executive Order 13496 and Imposing New Posting Requirements on Federal Contractors

In January 2009, President Obama signed Executive Order 13496 requiring federal departments and agencies to include in their contracts provisions requiring contractors and subcontractors to post notices informing their employees of their rights to organize under federal labor laws. As required under this Executive Order, on May 20, 2010, the Department of Labor (DOL) issued a final rule requiring federal contractors and subcontractors to provide notice to their employees, and establishing the contents of the required notices. The final rule also implements other provisions of Executive Order 13496, including provisions requiring sanctions, penalties, and remedies that may be imposed if the contractor/subcontractor fails to comply with its obligations. This final rule is contained in 29 CFR 471 in 75 Fed.Reg. 28368, and is available online at edocket.access.gpo.gov/2010/pdf/2010-11639.pdf.

The now-published final rule includes detailed specifications about these posting requirements including the location and contents of these posters. For instance, it specifies employers must post these notices in “conspicuous places,” including where other employment-related posters are required, and it requires employers to post the notice electronically if it customarily does so for other notices, and specifies the contents of such electronic posting. Additional information, including a compliance fact sheet and the required poster, are available on the Office of Labor Management Standards at www.dol.gov/olms/.

Department of Defense Issues Interim Rule Restricting Mandatory Arbitration Agreements of Title VII/Sex-Based Claims in Federal Contracts

As discussed in the February 2010 newsletter, section 8116 of the Defense Appropriations Act for Fiscal Year 2010 restricted the use of mandatory arbitration agreements for certain claims in contracts involving federal funds. Specifically, section 8116 prohibits the use of funds appropriated by this defense bill in contracts involving more than $1 million if the contractor restricts its employees to arbitration for claims under Title VII or for torts related-to or arising out of sexual assault or harassment, including assault and battery and infliction of emotional distress.

This interim rule implements section 8116 and provides numerous examples to help contractors determine its applicability in federal contracts awarded in or after fiscal year 2010. This rule also clarifies that it does not apply to the acquisition of commercial items, including commercially available off-the-shelf items, and it allows the Secretary of Defense to waive its applicability to a particular contractor or subcontractor if necessary to avoid harm to national security. This rule also contains a clause (section 252.222-77006) specifying the language restricting the use of mandatory arbitration agreements to be included in solicitations and contracts valued in excess of $1 million in appropriated funds. This interim rule is immediately effective but the Secretary of Defense will accept written comments until July 19, 2010. This interim rule can be accessed at 75 Fed. Reg. 27946 or at fdsys.gpo.gov/fdsys/pkg/FR-2010-05-19/html-2010-11966.htm.

DOL Launches “We Can Help” Campaign to Educate and Assist Low-Wage Earners

The Department of Labor has officially launched its “We Can Help” nationwide campaign to educate “low-wage and vulnerable workers” about their rights and the DOL’s services. The DOL’s Wage and Hour Division is spearheading this campaign to educate workers about their wage and hour rights, including how to file complaints and the DOL’s investigatory powers. This campaign is national in scope, but will target particular industries such as construction, janitorial work, hotel/motel services, food services and home health care. The DOL is using bi-lingual public service announcements, a new toll-free hotline, and a newly unveiled website, www.dol.gov/wecanhelp/.

DOL Announces “Plan/Prevent/Protect” Program to Ensure Employer Compliance with Federal Labor Laws

The DOL has recently announced its intent to implement a “Plan/Prevent/Protect” program to change how it regulates employer compliance with various federal employment laws, including wage and hour, safety and discrimination laws. This program is intended to make employers more proactive by dissuading them from continuing a “catch me if you can” approach (i.e., waiting until a federal audit to comply) and instead require employers to affirmatively demonstrate compliance to their employees and the DOL. Amongst other things, it is expected employers will be required to develop “plans” to demonstrate compliance with applicable laws, to “prevent” violations by implementing and enforcing these plans, and to “protect” by educating employees about these plans and by designating individuals to monitor these plans.

The DOL is expected to further develop these requirements in the future, so stay tuned. Particular focus areas are expected to include requiring employers to develop injury and illness prevention programs for OSHA purposes, and for wage and hour purposes to require employers to explain to independent contractors why they are not classified as employees.

JUDICIAL

California

California Supreme Court Defines “Employer” for Wage and Hour Purposes

Agricultural workers sued their employer and several produce merchants (and a produce merchant supervisor) to recover unpaid wages after their employer went bankrupt. The trial court and appellate court concluded the produce merchants and supervisor were not “employers” for purposes of Labor Code section 1194, and therefore could not be held liable for wages still owed by the bankrupt employer. The California Supreme Court affirmed in a ruling that provided a much-needed definition of “employer” under Labor Code section 1194 and the applicable Industrial Wage Orders.

The Court commenced its analysis observing that Labor Code section 1194 provides employees a remedy to recover unpaid wages, but not a clearly defined target since it failed to define the “employer” who could be liable. In Reynolds v. Bement (2005) 36 Cal.4th 1075, the Court had held the common law definition of employer and employment relationship applies to unpaid wage claims under section 1194, and therefore corporate agents could not be held liable for unpaid wages.

Notably however, in this most recent case, the Court revised and expanded its analysis in Reynolds and its definition of employer, holding that courts should apply the Industrial Wage Commission’s (IWC) definition of “employer” and “employment,” not simply the common law definition. Under the IWC’s definition, an employer means anyone who (a) exercises control over the wages, hours or working conditions, or (b) who suffers or permits a worker to work, or (c) who engages a worker to work, thereby creating a common law relationship. In summary, this Court held the “common law” definition does not define employer for all purposes, but simply assists with one of the three alternatives for establishing an employment relationship under the applicable wage order and Labor Code section 1194. The Court did, however, reaffirm that the IWC’s definition of employer does not impose liability on individual corporate agents acting within the scope of their agency. The Court also held the IWC’s definition does not incorporate federal law, including the “economic realities” test under the Fair Labor Standards Act.

Applying the IWC’s definition, the Court concluded the employees could not sue the employer’s produce merchants, even though this effectively left these workers without a remedy since their employer was bankrupt. The Court noted that while the produce merchants benefited indirectly from their supplier’s employees, they did not “suffer or permit” the employees to work because they did not have the power to prevent the employees from working with their employer. The Court observed a business relationship alone does not transform a purchaser into the employer of the supplier’s workforce. The Court also held that while the produce merchants gave general instructions to the supplier employer about how to perform its contractual duties, they did not exercise sufficient control over the supplier employee’s wages, hours or working conditions to constitute an employer. (Martinez v. Combs (2010) ___ Cal.4th ___, 2010 Cal.LEXIS 4660.)

CSU Employees Need Not Seek Relief Through a Mandate Petition Before Pursuing a Civil Claim Under California's Whistleblower Protection Act

A former CSU employee who received an adverse internal decision on his whistle-blowing claims filed a civil complaint rather than challenge the internal decision through mandamus review. The trial and appellate court concluded the employee’s failure to challenge the internal decision through mandamus review barred the civil action for damages. The California Supreme Court reversed holding that the whistleblower statute (Gov. Code § 8547 et seq.) does not require a CSU employee to seek review of an internal decision on his whistleblower complaint via writ of mandate. Rather, once a CSU employee has complied with CSU's internal complaint procedures and received an adverse decision, the employee may bring a civil action for damages. (Runyon v. Board of Trustees of the California State University (2010) 48 Cal.4th 760.)

Federal

United States Supreme Court Recognizes Longer Statute of Limitations Period for Title VII Disparate Impact Claims

In a unanimous decision, the United States Supreme Court held claimants pursuing Title VII disparate impact claims may file an EEOC charge within the 300-day filing period each time the employer “uses” or “applies” the practice allegedly creating a disparate impact. In other words, and in contrast with Title VII disparate treatment claimants who must file a timely charge after a discriminatory practice is adopted, Title VII disparate impact claimants may file charges after the practice is adopted or after each time the practice is “used” by the employer.

In this case, Chicago firefighters filed EEOC charges in 1997 alleging the City of Chicago’s 1995 decision to hire only applicants who scored as “well qualified” during pre-hiring tests created a disparate impact on African-Americans in violation of Title VII. The City argued, and the Seventh Circuit Court of Appeals agreed, that the 1997 charges were untimely because although these claimants were not hired in 1997 based on the 1995 decision to use the scoring criteria, the claimants needed to file their charges within 300 days after the original scoring decision was made. The circuit court held that the later hiring decisions were not new discriminatory acts, but the automatic consequences of the test scores based on the earlier decision creating the disparate impact.

The United States Supreme Court disagreed, essentially holding that a new violation occurred each time the employer “made use of” the employment decision creating the disparate impact (in this case, applying its scoring criteria for hiring purposes several years after the original decision to rely on these criteria.). The Court noted that disparate impact claims do not require intentional discriminatory intent and, thus, applicants need not show the employer intended to discriminate based on race each time it applied or used the criteria – rather, the applicant need only demonstrate the employer applied the criteria giving rise to the adverse impact within the 300 day period before the EEOC charge was filed. The Court noted this ruling did not conflict with its prior decision in Ledbetter v. Goodyear Tire & Rubber Co. (2007) 550 U.S. 618 (since overruled) since Ledbetter involved disparate treatment claims requiring the employee to demonstrate deliberate intent within the limitations period; in those circumstances, the employee could not simply rely upon present effects of past discrimination. (Lewis v. City of Chicago (2010) ___ U.S. ___, 2010 U.S.LEXIS 4165.)

Supreme Court Holds ERISA Fee Claimants Need Only Achieve “Some Degree of Success on Merits” to Recover Attorney’s Fees

The Employee Retirement Income Security Act’s (ERISA) general attorney’s fees provision, 29 U.S.C. § 1132(g)(1), vests the trial court with discretion to award “reasonable attorney’s fees and costs . . . to either party.” The United States Supreme Court recently held an ERISA fee claimant need not be a “prevailing party” to be eligible for attorney’s fees under this provision, but need only achieve “some degree of success on the merits.” The Court noted section 1132(g)(1) does not statutorily limit fee awards to a “prevailing party,” in contrast with ERISA’s other fees provision, 29 USC 1132(g)(2), which applies in ERISA actions to recover delinquent employer contributions to multiemployer plans.

The Court concluded a fees claimant need only show “some degree of success on the merits,” but cautioned this requires more than “trivial success on the merits” or a “purely procedural victory.” The Court held this particular fees applicant was entitled to recover fees since although she did not receive a final judgment, the trial court’s determination that “compelling evidence” supported her disability claim which prompted the insurer to reverse its benefits decision represented more than a “purely procedural victory.” (Hardt v. Reliance Std. Life Ins. Co. (2010) ___ U.S.___, 2010 U.S.LEXIS 4164.)

Public Employee’s Complaints about Employer’s Failure to Comply with Legal Obligations Potentially Entitled to First Amendment Protection

In Garcetti v. Ceballos (2006) 547 U.S. 410, the United States Supreme Court held that public employees do not have First Amendment protections for statements made pursuant to their official duties. Applying Garcetti, the Ninth Circuit Court of Appeals held a low-level public employee might have First Amendment protections regarding his complaints to the public agency’s chairman that his supervisor was misrepresenting the agency’s compliance with legal obligations. The circuit court noted that complaints about a public agency’s failure to comply with legal obligations would involve a matter of public concern. It also concluded a triable issue of fact existed regarding whether this program analyst was acting as a concerned private citizen who might enjoy First Amendment protection, or simply a public employee fulfilling his official duties in making the report, in which case the First Amendment would not apply.

The court also noted that the proximity in time between the employee's report to the board and his poor performance evaluation a few days later, his discipline just over a month later, and ultimately his termination approximately four months later created a triable issue of fact regarding whether he was retaliated against based on his complaint. (Anthoine v. North Central Counties Consortium (9^th Cir. 2010) ___ F.3d ___, 2010 U.S. App.LEXIS 10477.)

Overbroad Medical Questions that are Irrelevant to Plaintiff's Present Ability to Perform His Job Held to Violate the Rehabilitation Act and the ADA

An FBI investigator terminated because he refused to respond to his employer’s questions in a medical questionnaire sued alleging the questions he refused to answer were impermissible disability-related inquiries under the Americans with Disabilities Act (ADA) and the Rehabilitation Act. The federal district court agreed with the plaintiff, and rejected the employer’s arguments the questions were justified by the business necessity of ensuring an armed police officer could perform his job properly and safely.

The court noted the ADA permits “fitness for duty” exams provided the medical inquiries are job-related and consistent with business necessity, but held these challenged questions were not a reasonably effective means of achieving Defendant's goal because they were not narrowly tailored to determining whether Plaintiff was currently able to perform the essential functions of his job. For example, one question asked if Plaintiff had ever been treated for a mental condition, which could include childhood phobias or a long-resolved eating disorder, while other questions were not limited to mental conditions and could require disclosure of any medical treatment, including for eczema or appendicitis. (Scott v. Napolitano (S.D. Cal. 2010) ___ F.Supp.2d ___, 2010 U.S. Dist. LEXIS 42882

This Employment Law Alert is a publication of Wilson Turner Kosmo 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 © 2010 Wilson Turner Kosmo LLP. All rights reserved.