California
Cal-COBRA Premium Assistance
Bill Signed into Law and Immediately Effective (SB 838)
On June 3, 2010, Governor Schwarzenegger
signed into law SB 838 which is designed to conform California’s Cal-COBRA
provisions with the federal COBRA provisions regulating the COBRA premium
subsidy. In February 2009, the federal American Reinvestment and
Recovery Act (ARRA) created a 65% COBRA premium subsidy for up to 9
months (later extended to 15 months) for “assistance eligible individuals,”
as defined. In response, the California legislature in 2009 passed
AB 23 which established specific notice requirements and enrollment
opportunities for Cal-COBRA eligible employees (those working for employers
with 2 to 19 employees) to obtain premium subsidy assistance under ARRA.
The federal premium subsidy eligibility period has subsequently been
extended multiple times, including beyond the December 31, 2009 deadline
identified in AB 23.
This just-enacted and immediately
effective bill is essentially intended to extend AB 23 beyond the December
31, 2009 deadline and maintain conformity between Cal-COBRA and federal
COBRA. Specifically, this bill requires Cal-COBRA-related
plans and insurers to provide notice of the federal premium subsidy
to beneficiaries experiencing a qualifying event between January 1,
2010 (the day after AB 23 expired) and the expiration of the federal
premium subsidy eligibility period (which currently lapsed as of May
31, 2010). It also requires plans and insurers to give certain
qualified beneficiaries whose employment is terminated on or after March
1, 2010 written notice regarding the availability of premium assistance
and the special election opportunity provided under ARRA. It also
requires plans and insurers to maintain premium assistance information
on their websites, applies certain notice requirements to employers
of employees terminated after March 2, 2010, and directs the Department
of Managed Health Care to designate model notices consistent with these
changes.
In summary, this bill does
not create new employer obligations per se, but primarily clarifies
Cal-COBRA notification requirements regarding the federal ARRA subsidy
for employers, health plans and health insurers. Since it
is tied to the currently-expired federal COBRA premium subsidy, Cal-COBRA
employers and insurers foreseeably need to provide the notices required
under SB 838 to eligible individuals (as defined) who experienced “qualifying
events” before the May 31, 2010 eligibility expiration deadline.
As of press time, the federal
COBRA premium subsidy remains expired as of May 31, 2010, and it is
unclear whether it will be extended. If extended, it likely will
be made retroactive to the May 31st expiration date.
Bill Limiting Credit Reports
in Employment Decisions Passes Assembly (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.
Bereavement Leave Bill Passes
Assembly (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 is now pending in the Senate.
Assembly Passes Bill to
Revise Attorney’s Fees Awards in Small Employment Cases (AB 2773)
California’s Fair Employment
and Housing Act (FEHA) grants trial courts 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, meaning FEHA plaintiffs recovering
small monetary awards might still recover attorneys’ fees awards that
dwarf the amount recovered by plaintiff.
Senate Passes Bill to Remove
Agricultural Employees’ Exempt Status (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 passed the Senate and is now pending in the Assembly.
Senate Passes Bill Providing
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.
Senate Passes
“Card Check” Bill for Agricultural Employees (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 is now pending in the Assembly, where similar
bills have passed on multiple occasions before being vetoed by the Governor.
Federal
Bill Encouraging Work-Life
Balancing Policies Fails to Pass the House of Representatives (H.R.
4855)
The House of Representatives
voted against passing the Work-Life Balance Award Act, a bill intended
to encourage employers to develop and implement work-life balance policies.
Under this bill, the Department of Labor (DOL) would have awarded an
annual “Work-Life Balance Award” to employers that had developed
and implemented work-life balance policies, defined as workplace practices
“designed to enable employees to achieve a satisfactory work-life
balance.” The National Society for Human Resources Manager was
a strong advocate for this bill.
AGENCY
Federal
DOL Changes its Mind about
Compensability of “Changing Clothes” Under the FLSA
The Department of Labor (DOL)
has issued an Administrator’s Interpretation (No. 2010-2) that reverses
prior Opinion Letters concerning the compensability of changing certain
clothing items in several respects, and which may have significant ramifications
for employers.
Section 3(o) of the Fair Labor
Standards Act (FLSA) provides that time spent “changing clothes or
washing at the beginning or end of each workday” is excluded from
compensable time under the FLSA if the time is excluded from compensable
time pursuant to “the express terms or by custom or practice” under
a collective bargaining agreement. (29 U.S.C. § 203(o).)
The DOL’s just-issued Administrative Interpretation concludes this
exclusion from compensable time “does not extend to protective equipment
worn by employees that is required by law, by the employer, or due to
the nature of the job.” In other words, the DOL’s position
is that unionized employers need not compensate employees for changing
into certain “clothes,” but must compensate employees for time spent
“donning and doffing” protective gear (e.g., protective equipment
worn by meat packing employees, etc.) that the employee must wear because
required by law, the employer, or the nature of the job. In reaching
this conclusion, the DOL effectively disavowed its 2002 and 2007 opinion
letters which had drawn a different conclusion.
The DOL also concluded that
changing clothes, even if not compensable, can constitute the first
“principal activity” under the Portal to Portal Act (29 U.S.C. §
254), thus entitling the employee to compensation for all subsequent
activities, “including walking and waiting,” during the then-commenced
continuous workday. In other words, even if the employer need
not pay the employee for “changing clothes,” the clothes changing
may trigger the continuous workday entitling the employee to compensation
for all subsequent activities. This Administrative Interpretation
is available at www.dol.gov/whd/opinion/adminintrprtn/FLSA/2010/FLSAAI2010_2.htm
DOL Expands FMLA Protections
to Non-Nuclear Families
The DOL has also issued an
Administrator’s Interpretation clarifying the definition of “son
and daughter” under the Family and Medical Leave Act (FMLA), and expanding
the definition of “in loco parentis”
to any individuals who assume the role of caring for a child regardless
of their legal or biological relationship to the child. As this
Interpretation and the accompany press release make clear, it is intended
to extend the FMLA’s protections to non-traditional families, including
same sex parents and unmarried partners.
The FMLA entitles eligible
employees to take up to 12 workweeks of job-protected leave for statutorily-enumerated
reasons, including the birth/adoption/foster care placement of a “son
or daughter,” or to care for a “son or daughter” with a serious
health condition. The FMLA regulations define a “son or daughter”
as a “biological, adopted or foster child, a stepchild, a legal ward
or a child of a person standing in loco parentis.
This particular Administrative
Interpretation focused on the definition of in loco parentis,
and specifically whether it applied to employees lacking a biological
or legal relationship with a child. The DOL concluded, consistent
with the language of 29 CFR § 825.122(c)(3), that a biological or legal
relationship is not necessary for in loco parentis status for
FMLA leave purposes. Rather, the key issue is the employee’s
intent to assume such in loco parentis status, and the DOL noted
in loco parentis status can be established by either day-to-day
care or financial responsibility for the child. In this regard,
the DOL concluded either factor would suffice, whereas the statutory
language of section 825.122(c)(3) and court decisions arguably suggest
both needed to be present.
The DOL also observed that
neither the FMLA nor its regulations “restrict the number of parents
a child may have under the FMLA” and it provided a specific example
of a child having four parents for FMLA leave entitlement purposes.
The DOL reiterated, however, that whether an employee stands in loco
parentis depends on the particular facts in each relationship, and
reaffirmed an employer’s ability to request documentation to determine
the employee’s relationship to the child for FMLA purposes.
This Administrative Interpretation is available at www.dol.gov/whd/opinion/adminIntrprtnFMLA.htm.
NLRB Issues Guidance Concerning
Class Action Waivers in Mandatory Arbitration Agreements
The National Labor Relations
Board (NLRB) has issued a Guideline Memorandum (GC 10-06) to provide
a legal framework for its regional offices to use when assessing the
legality of class action waivers in mandatory employment arbitration
agreements. Although not determinative, this Guidance Memorandum
should provide insights into how the NLRB will handle challenges to
class action waivers in arbitration agreements.
The Guidance Memorandum declined
to issue bright-line rulings validating or invalidating arbitration
agreement class action waivers, but noted all agreements should be carefully
scrutinized subject to a set of principles contained in the memorandum.
For instance, the NLRB observed that mandatory arbitration agreements
preventing, or that could reasonably be read as preventing, employees
from joining together to enforce rights under Section 7 of the NLRA
would be unlawful. On the other hand, employers may condition
employment on employees agreeing to arbitrate on an individual basis
non-NLRA statutory employment claims provided otherwise enforceable
under the Federal Arbitration Act or the applicable employment statute.
In such instances, however, the agreement must make clear employees
will not be disciplined for collectively pursuing NLRA section 7 claims.
Moreover, the NLRB observed that employers may not discipline employees
who attempt to file class actions for non-NLRA-related claims despite
an enforceable class action waiver in the arbitration agreement; rather,
the employer’s remedy is to seek dismissal of the class action complaint
and to compel individual arbitration. Guidance Memo GC-06 is available
on the NLRB website www.nlrb.gov under “General Counsel Memos.”
Federal Agencies Issues
Guidance Concerning “Grandfathered Plans” under the Health Care
Reform Act
The Internal Revenue Service
and the Departments of Labor and Health and Human Services have recently
published interim regulations providing guidance on the exemption from
certain portions of the Health Care Reform Act for group health plans
in existence prior to March 23, 2010 (so-called “grandfathered plans”).
Amongst other things, this Guidance addresses the changes to a group
health plan will affect the plans “grandfathered” status, thus making
it subject to the Health Care Reform Act, as well as what steps plans
must take to maintain their “grandfathered” status. The full
text of this guidance is available at 75 Fed. Reg. 34538 or at www.edocket.access.gpo.gov/2010/pdf/2010-14488.pdf.
USCIS Launches Redesigned
E-Verify Employer Web Interface
The United States Citizenship
and Immigration Services (USCIS) has unveiled a redesigned web interface
for employers using the agency’s E-Verify Program to determine employee
eligibility to work. This new web interface is intended to enhance
ease –of-use, minimize errors, support compliance with terms of use,
and enable real-time validation of employers enrolling in E-Verify against
commercial data. It also contains enhanced security features (i.e.,
masking Social Security numbers) to protect privacy and to ensure only
valid companies enroll in E-Verify. Additional information about
the new interface can be found on the E-Verify Redesign section of the
E-Verify web page at www.dhs.gov/E-Verify.
JUDICIAL
California
Appellate Court Affirms Denial of Class
Action for Meal and Rest Period Claims, But Allows Class Claim on Calculation
of Overtime Rate of Pay
Approximately 4000 security guards filed a wage and hour class action
alleging the employer failed to provide off duty meal breaks, off duty
rest breaks, and failed to include certain reimbursements and an annual
bonus payment in calculating the employees’ hourly rate of overtime
pay. Plaintiffs claimed they never received off-duty rest or meal
periods and that the nature of their job duties did not qualify for
an on-duty meal period. The overtime claim was based on the employer’s
failure to include (1) an allowance for the cost of cleaning uniforms
and the cost of gasoline, and (2) bonus payments when calculating the
overtime rate of pay.
The Fourth District Court of Appeal affirmed the denial of class certification
on the meal and rest period claims due to lack of commonality. Although
the employer required all employees to sign on-duty meal period agreements,
it did not uniformly require on-duty meal periods, and multiple individual
factors determined which employees could and were relieved of duties
to take meal periods. Similarly, the employer had no formal policy
denying off-duty rest breaks, meaning whether an employee received an
off-duty rest break depended on a variety of individual circumstances.
However, class certification was appropriate for the overtime calculation
claim since it hinged on common legal principles, including which reimbursements
and bonuses needed to be considered for overtime rate of pay calculations.
(Faulkinbury v. Boyd & Associates, Inc. (2010) ___ Cal.App.4th ___, 2010 Cal.App.LEXIS 964.)
Prevailing Employer Entitled to Recover
Expert Witness Fees against Plaintiff Who Rejected a Statutory Offer
to Compromise
A former employee challenged the trial court’s
award of $128,000 in expert witness fees to the employer who prevailed
on her FEHA age and sex discrimination claims. The California
court of appeals agreed with the plaintiff that the same standard applicable
to attorneys’ fees awards to prevailing defendants should also apply
to expert witness fee awards under Government Code section 12965.
Applying this standard, the prevailing employer could not recover its
expert witness fees under FEHA’s provisions because it could not demonstrate
Plaintiff’s claims were frivolous or groundless, or that she unreasonably
continued to litigate her claims. However, the employer
was entitled to recover at least some of its expert witness fees under
Code of Civil Procedure section 998 because the plaintiff failed to
accept the employer’s statutory offer to compromise for $20,001.
(Holman v. Altana Pharma US, Inc. (2010) ___ Cal.App.4th
___, 2010 Cal.App.LEXIS 1022.)
Federal
U.S. Supreme Court Public
Employer Search of Text Messages Did Not Violate Employee's Privacy
Rights
In a long-awaited decision,
the United States Supreme Court unanimously held a public employer did
not violate an employee’s Fourth Amendment expectations of privacy
when it reviewed text messages sent and received on an employer-issued
pager. Although the Court declined to delineate under what circumstances
employees, public and private, maintain privacy expectations in the
workplace, this ruling may provide some guidance for future cases.
In this case, the public employer
(the City of Ontario, California) issued two-way pagers to employees
with a limited allotment of text characters each month, and it published
its policy stating employees had no expectation of privacy or confidentiality
when using these pagers and preserving the employer’s ability to monitor
usage without notice. As part of a subsequent investigation to
determine whether the text allotment was too low, the employer obtained
a transcript of the plaintiff’s texts from its outside provider which
revealed many of the plaintiff’s texts were not work-related and sexually
explicit. The employee challenged his subsequent termination claiming
the public employer’s search violated his Fourth Amendment rights
against unreasonable searches and seizures.
The Court concluded the public
employer’s text message review did not violate the employee’s Fourth
Amendment rights. Notably, citing a practical concern about not
issuing too broad a ruling while technology changes so quickly, the
Court simply assumed the employee had a reasonable expectation of privacy
in his text messages and that the employer’s audit constituted a Fourth
Amendment search. Instead, the Court focused on whether the search
was “unreasonable,” and concluded it was not because it was motivated
by a legitimate work related purpose (to determine if the existing text limit
was too low) and was not excessively intrusive in scope. The Court
suggested a similarly properly motivated and non-excessively intrusive
search would also be permissible in the private employer context.
The Court’s observation that
“operational realities” may affect an employee’s privacy expectations
is a good reminder for employers to develop and enforce clear written
policies stating employees maintain no privacy rights in employer provided
devices, and preserving the employer’s ability to monitor without
notice. Employers must also ensure these policies are uniformly
applied and not undercut by “informal” practices such as ignoring
violations or suggesting the employer will not monitor. (City
of Ontario, et al. v. Quon (2010) 560 U. S. __, 2010 U.S.LEXIS __.)
United States Supreme Court
Invalidates Decisions by Two-Member NLRB Board
In a 5-4 decision, the United
States Supreme Court held the five-member National Labor Relations Board
(NLRB) lacked authority to issue nearly 600 decisions after its board
membership dropped to only two members. Anticipating upcoming
vacancies and a likely tumultuous confirmation process for new members,
in 2007 the NLRB board had delegated decision-making authority to a
three-member group, which became a two-member group after the third
member left, but continued to issue rulings under the National
Labor Relations Act (NLRA).
However, the Court held that
Section 3(b) of the NLRA requires a delegee group maintain a membership
of three in order to exercise the delegated authority of the Board.
The Court observed that the NLRB’s general quorum requirement is three
members, and that although the board may delegate authority to three-member
groups, which can proceed on a two-member quorum basis, the delegee
group loses its authority once its membership falls below three members.
The Court noted that allowing the delegee group to proceed with only
two active members would effectively make two members a quorum for the
entire board, thus invalidating 1947 amendments which had specifically
increased the requisite quorum size from two members to three members.
(New Process Steel, L.P. v. National Labor Relations Bd. (2010)
___ S.Ct. ___, 2010 U.S.LEXIS 4973.)
Supreme Court Upholds Arbitrator’s
Ability to Determine Enforceability of Arbitration Agreement
In an employment discrimination
lawsuit, the plaintiff/employee opposed the employer’s motion to compel
arbitration arguing the entire arbitration agreement was unconscionable
and therefore unenforceable. The employer argued the arbitrator,
and not the court, must decide the enforceability of the arbitration
agreement since the agreement contained a so-called “delegation clause”
authorizing the arbitrator to resolve issues concerning the interpretation,
applicability or enforceability of the arbitration agreement.
The United States Supreme agreed and held that under the Federal Arbitration
Act, if an arbitration agreement specifies the arbitrator will determine
the enforceability of the agreement, then under general contract rules
the arbitrator will resolve any challenges to the agreement as a whole
(i.e., that the entire agreement is unconscionable as asserted in that
case). On the other hand, if the employee challenges only the
enforceability of the delegation provision, then the court will consider
the challenge. (Rent-A-Center West, Inc. v. Jackson
(2010) ___ U.S. ___, 2010 U.S.LEXIS ___.)
United States Supreme Court
Decides Not to Review San Francisco Healthcare Law
The United States Supreme Court
has decided not to review whether the federal Employee Retirement Income
Security Act of 1974 (ERISA) preempts the San Francisco ordinance requiring
employers to spend certain amounts on health care insurance for employees.
Specifically, the Court declined to review a Ninth Circuit decision,
Golden Gate Restaurant Ass’n (9th Cir. 2008) ___ F.3d
___, which had held that ERISA does not preempt San Francisco’s health
care ordinance. As a result, the Ninth Circuit decision
remains good law, and it appears San Francisco employers will be required
to adhere to the healthcare ordinance essentially mandating employers
pay a certain amount in health care coverage for employees or contribute
certain specified amounts directly to the City of San Francisco.
Federal Court Compels Arbitration
of FEHA Race Discrimination Lawsuit
A federal district court in
California enforced an arbitration agreement for FEHA race discrimination
claims, thus confirming courts will enforce properly-crafted arbitration
agreements notwithstanding the ninth circuit’s seeming hostility to
such agreements. The court reiterated that arbitration agreements
are generally enforceable contracts unless they are both procedurally
and substantively unconscionable. The court noted this agreement
had some aspects of procedural unconscionability since the employee
had no choice but to sign it to be employed, but also noted it was not
completely procedurally unconscionable since the arbitration agreement
was a stand-alone clearly labeled document that the employee had to
review and sign. In other words, the employee knew what he was
signing.
The court also held that this
agreement was not substantively unconscionable since it contained all
of the so-called “minimum requirements” for requiring arbitration
of statutory employment claims: (1) it did not limit any available remedies;
(2) it allowed for sufficient discovery; (3) it allowed for a written
arbitration award with sufficient judicial review; (4) it did not impose
unreasonable costs or arbitration fees on the employee; and (5) it required
a neutral arbitrator. In this case, although the arbitration agreement
precluded judicial review of the arbitrator’s substantive rulings,
it did not preclude the narrow judicial review authorized under Civil
Code section 1286.2. Lastly, the agreement possessed the requisite
“modicum of bilaterality” since it required both employer and employee
to arbitrate all potential disputes between them. (Cornejo v. Spenger’s
Fresh Fish Grotto (N.D.Cal. 2010) 2010 U.S.Dist.LEXIS 48354.)
