LEGISLATIVE

California

Governor Signs Amendments to Bone Marrow/Organ Donation Leave Law (SB 272)

Last year, the Governor signed a bill into law Labor Code section 1510 which requires employers with more than fifteen employees to allow employees to take up to five days paid leave in a one-year period for bone marrow donations and up to thirty days paid leave in a one-year period for organ donations. On August 1, 2011, Governor Brown signed into law a bill which clarifies several provisions of this new leave law.

Specifically, this bill amends Labor Code section 1510 to clarify that the days of leave are "business" days rather than calendar days (e.g., five "business" days for bone marrow donations), and that the one-year period is measured from the date the employee's leave begins and consists of 12 consecutive months. This bill also specifies that such a leave does not constitute a break in the employee's continuous service for purpose of his or her right to "paid time off." In effect, this bill adds "paid time off" to the previously enumerated entitlements [sick leave, salary adjustments, vacation, seniority and annual leave] not affected by time-off under Labor Code section 1510. In a similar fashion, this bill clarifies that employers may condition the initial receipt of leave upon the employee's use of a specified number of earned but unused days for paid time off, just as with unused vacation or sick leave.

This bill passed with overwhelming bi-partisan support and as enacted, states that it is declaratory of existing law.

Governor Declines to Sign That Would Have Allowed Metropolitan Planning Organizations to Adopt Ordinances Requiring Employers to Provide Commuting Benefits (SB 582)

On August 1, 2011, Governor Brown declined to sign a bill passed by the Legislature that would have allowed certain state agencies to adopt ordinances requiring employers within their regional jurisdiction to offer particular commuting benefits to employees. Specifically, this bill would have authorized, until January 1, 2017, metropolitan planning organizations (MPO) and air districts to jointly adopt ordinances requiring certain employers located within their common area of jurisdiction to offer their employees specified commute benefits. To achieve its stated goal of reducing the number of single-occupant vehicle trips, this bill would have allowed an MPO and air district to require employers to offer one of three options to employees for commuting purposes: (1) a pre-tax option where employees could exclude from taxable wages commuting costs incurred for public transit; (2) the employer could provide a subsidy to offset the employee's public transit or vanpool costs; or (3) the employer could directly provide transportation (e.g., vanpool, bus, etc.) to the employee at no or low cost to the employee.

The Governor declined to sign this new bill noting some agencies already have this authority, and the potential economic impact on employers.

Federal

FMLA Amendment to Permit Bereavement Leave for Death of Child Proposed (S. 1358)

Known as the Parental Bereavement Act of 2011, this bill would amend the Family and Medical Leave Act (FMLA) to permit a parent to take up to twelve weeks of job-protected, unpaid leave following the death of a son or daughter. The bill's author states it is intended to prevent the anomalous result of a parent being permitted leave to care for a child's serious health condition, but not permitted leave to grieve a son or daughter's death. Like other FMLA provisions, it would only apply to employers with more than fifty employees. This recently-introduced bill has been referred to the Committee on Health, Education, Labor and Pensions.

(NOTE: the California Legislature is currently considering a bill (AB 325) that would allow employees to take up to three days unpaid leave following the death of certain statutorily-enumerated family members.)

Bill Proposes to Eliminate "Use it or Lose it" Provision for FSA Balances (S. 1404)

Currently, any leftover balance in an employee's Flexible Spending Account (FSA) at the end of a plan year is forfeited to the employer. Known as the Medical Flexible Spending Account Improvement Act of 2011, this bill would eliminate this forfeiture provision and allow employees to pay taxes on and withdraw any remaining funds in their employer-sponsored FSA. This bill has some initial bi-partisan support and is the Senate's equivalent of a currently pending House of Representatives version (H.R. 1004). This bill has been referred to the Committee on Finance.

House Considering Bill to Amend NLRB in Response to Boeing Complaint (H.R. 2587)

The National Labor Relations Board (NLRB) recently made headlines when it filed an unfair labor practice complaint against a unionized employer for proposing to build a new plant in a "right to work" state. This recently-introduced bill would amend the National Labor Relations Act to deny the NLRB any power to order an employer to restore any work in a particular state, or to prevent an employer from relocating to another location. This bill has almost no chance of being enacted this year, but it does suggest that labor issues will continue to dominate the headlines during the upcoming election year.

JUDICIAL

California

Arbitration Agreement Class Action Waiver Does Not Preclude Private Attorney General Act Claims

The enforceability of class action waivers in employment arbitration agreements continues to be on ongoing legal question. In 2007, the California Supreme Court strongly suggested such class action waivers may be unconscionable but directed that trial courts must evaluate such waivers against certain factors, including the modest size of the potential individual recovery, the potential for retaliation, and whether absent class members would otherwise know their legal rights. (Gentry v. Superior Court (2007) 42 Cal.4th 443.) The ongoing viability of Gentry was called into question by the United States Supreme Court's decision in AT&T Mobility LLC v. Concepcion et ex. (2011) 131 S.Ct. 1740, in which the Court held the Federal Arbitration Act (FAA) preempted a California rule precluding class action waivers in consumer arbitration agreements. Although AT&T involved a consumer agreement rather than an employment agreement, many thought the Court's reasoning would apply and negate Gentry.

Unfortunately, in the first published California appellate court decision examining the interplay between AT&T and Gentry, the court effectively side-stepped this issue holding it did not need to decide if the FAA preempted Gentry because the plaintiffs had failed to present sufficient evidence that the class action waiver would actually be unconscionable in this wage and hour class action. However, the appellate court also held that AT&T would not preclude employees from pursuing a representative action under California's Private Attorney General Act (PAGA), and that any arbitration agreement provision waiving the right to maintain a PAGA claim would be unenforceable. The court reasoned that unlike in the typical class action context seeking monetary relief for the class members, PAGA claims are essentially public enforcement actions of Labor Code provisions with 75 percent of any recovery flowing to the Labor and Workforce Development Agency. (Brown v. Ralphs Groc. Co. (2011) ___ Cal.App. ___, 2011 Cal.App.LEXIS 902.)

(NOTE: this opinion interjects more uncertainty regarding the enforceability of class action waivers in employment agreements, but it would not be surprising if the California Supreme Court soon decided to review its Gentry decision post-AT&T.)

Appellate Court Declines to Enforce One-Sided Arbitration Provision Contained in 58-Page Employee Handbook

California courts will enforce arbitration agreements imposed as a condition of future employment provided the agreement is not both unduly procedurally and substantively unconscionable. In this FEHA discrimination case, a California court of appeal refused to enforce the employer's arbitration agreement finding it both substantively and procedurally unconscionable and sufficiently tainted with unfairness that it could not simply sever the offending provisions and enforce the remaining provisions.

The court found the agreement procedurally unconscionable because it was imposed as a condition of employment without an opportunity to negotiate, it was buried on page 54 of a 58 page employee handbook, and it referenced the applicable AAA arbitration rules but failed to provide a copy of these rules. The court also found the agreement substantively unconscionable ("one-sided and harsh") because it only required the employee to arbitrate its potential claims, but not the employer, and it imposed a unilateral 10-day response deadline upon the employee or the employee's claims would be barred.

(Zullo v. Superior Court (ex rel Inland Valley Publishing Co.) (2011) ___ Cal.App.4th ___, 2011 Cal.App.LEXIS 902.)

Appellate Court Outlines Current and Former Employees' Privacy Considerations in Discovery

In a single plaintiff FEHA age discrimination and wrongful termination case, the plaintiff sought discovery relating to the employer's current and former employees. Among other things, the plaintiff sought a list of the names, addresses and phone numbers of all employees who worked for the employer during a two year time period, the reason for the termination, whether severance benefits were offered and if so, a description of the benefits. The trial court ordered the employer to produce this information but the court of appeal reversed and ordered the trial court to reconsider its ruling in light of the privacy considerations the appellate court enumerated.

The appellate court acknowledged the information sought may have some relevance to the plaintiff's disparate impact and disparate treatment discrimination claims, but also observed these confidential personnel records implicated the non-witness third parties' privacy rights. The court noted these employees' privacy rights weighed against disclosure unless the litigant can demonstrate a compelling need for the information and that the information could not be obtained through depositions or from non-confidential sources. The court also addressed the plaintiff's request for contact information for current and former employees. After noting that the action was not a class action and that these employees were identified as percipient witnesses, the court concluded that the right to privacy entitled current and former employees who are not parties to litigation to advance notice and an opportunity to object to the disclosure of their personal information. (Life Technologies Corp. v. Superior Court (ex rel Joyce) (2011) ___Cal.App.4th ___, 2011 Cal. App. LEXIS 916.)

Security Guards Working Consecutive Overnight Shifts Not Entitled To "Split Shift Premium Under Wage Order 4-2001

Wage Order 4-2001 discusses so-called "split shifts" and requires employers to pay an additional hour's pay at minimum wage if an employee's work schedule is interrupted by non-paid non-working periods established by the employer other than for bona fide rest or meal periods. An oft-cited example might involve restaurant employees who work 11:00 a.m. to 2:00 p.m. and then from 4:00 p.m. to 9:00 p.m., in which case they would be entitled to be paid for eight hours worked and an additional one-hour split shift payment (but no overtime since only actually working eight hours.)

In this case, current and former security guards who worked consecutive overnight shifts brought a wage and hour class action lawsuit alleging that their employer failed to pay them split shift premiums owed under Wage Order 4-2001. The employees argued that since their shifts began in one calendar day, but ended in the next calendar day, they were entitled to additional pay for working a split shift when they reported to work later that same night for their next shift. The published opinion does not discuss these employee's actual shifts, but for example purposes, assume these employees worked 8:00 p.m. to 4:00 a.m. one night and then returned to work at 8:00 p.m. that same night. The appellate court concluded these employees did not work a split shift (as defined) because their shift was not broken into two non-consecutive parts; rather, they worked a single uninterrupted overnight shift that happened to span two "workdays" as defined by the employer. The fact the employee later reported to work later that same workday to begin their next uninterrupted overnight shift did not mean they were entitled to a split shift payment based upon the conclusion of the prior shift earlier that day. (Securitas Security Services USA, Inc. v. Superior Court (ex rel Holland) (2011) 197 Cal.App.4th 115.)

Class Certification Denied in Administrative Exemption Dispute

In this class action suit by accountants claiming they were misclassified as exempt under the Administrative exemption, the Court of Appeal upheld the trial court's decision denying class certification finding that commons questions did not predominate. The employees claimed that they "did not have discretion to deviate from the plan without prior express approval" of their supervisor and that they "perform[ed] non-manual work directly related to management policies or general business operation," both necessary requirements to qualify for administrative exemption. However, the court of appeal reviewed the evidence submitted by the employer, including evidence that the level of supervision over the employees varied depending on the regional location of the office, the individuals involved and the type of engagement, and upheld the trial court's finding that a class action was not superior as it showed a need for individualized inquiries to resolve the conflicting evidence submitted by the parties. (Soderstedt v. CBIZ Southern California, LLC (2011) 197 Cal.App.4th 133.)

Contractors Are Liable for Subcontractor's Labor Code Violations Where The Contract Does Not Provide Sufficient Funds to Comply with Minimum Wage Obligations

This case addresses the proper standard for liability under a relatively new Labor Code provision, Labor Code section 2810 (adopted in 2003). Labor Code section 2810 prohibits a person or an entity from entering into a contract "for labor or services with a construction, farm labor, garment, janitorial, or security guard contractor, where the person or entity knows or should know that the contract or agreement does not include funds sufficient to allow the contractor to comply with all applicable local, state, and federal laws or regulations." It also allows "aggrieved" individuals to sue the contractor for any injury resulting from a violation. In this case, a home builder, was joined in two class actions brought by employees of its subcontractors alleging a variety of wage and hour violations including, among other claims, failure to pay overtime and failure to provide meal and rest periods.

On appeal, the home builder argued the minimum wage was the proper wage standard to be used in evaluating the sufficiency of a contract while the employees argued that the proper measure was the local average industry wage for the particular occupation. After analyzing the statutory construction and legislative intent behind the statute, the Court of Appeal agreed with the home builder that the minimum wage was the appropriate standard, noting this statute was intended to "eliminate contracts that are so inadequate that even the bare minimum labor law requirements cannot be met." (Castillo v. Toll Bros., Inc. ( 2011) ___Cal.App.4th ___, 2011 Cal. App. LEXIS 980.)