California
The October 9th deadline for
Governor Brown to sign or veto new bills has expired with the Governor
signing into law a number of employment-related bills, all of which
take effect on January 1, 2012, unless otherwise noted:
Governor Signs Bill Limiting
Credit Checks in Employment Decisions (AB 22)
Federal and California law,
through the Fair Credit Report Act and the state Consumer Credit Reporting
Agencies Act respectively, authorize employers to obtain and use consumer
credit reports for employment purposes provided certain statutory procedures
are followed. This new bill limits an employer's ability to
obtain such reports by prohibiting employers, other than certain financial
institutions, from obtaining consumer credit reports for employment
purposes unless the person for whom the report is sought works in a
statutorily-enumerated position.
Specifically, the person for
whom the report is sought must be: (1) a position in the state Department
of Justice; (2) a managerial position, as defined; (3) that of a sworn
peace officer or other law enforcement position; (4) a position for
which the information contained in the report is required by law to
be disclosed or obtained; (5) a position that involves regular access
to specified personal information for any purpose other than the routine
solicitation and processing of credit card applications in a retail
establishment; (6) a position in which the person is or would be a named
signatory on the employer's bank or credit card account, or authorized
to transfer money or enter into financial contracts on the employer's
behalf; (7) a position that involves access to confidential or proprietary
information (as specified); or (8) a position that involves regular
access to $10,000 or more of cash, as specified. This new law
defines "managerial position" as an employee covered by the executive
exemption set forth in Industrial Welfare Commission Wage Order 4, subparagraph
1 of paragraph A of Section 1.
This bill also requires that
the written notice informing the person for whom the report is sought
to also inform the person of the specific reason for obtaining the report
(i.e., which of the statutorily-enumerated positions the person falls
within that authorize obtaining such a report).
New Law Prohibits Mandatory
Use of E-Verify (AB 1236)
The federal E-Verify Program
presently enables participating employers to voluntarily use this program
to verify that hired employees are authorized to work in the United
States. Several states have emulated Arizona's law, which was
upheld in the United States Supreme Court decision in Chamber of
Commerce v. Whiting, requiring employers to use E-Verify.
In contrast, this new California law prohibits the sState of California,
or a city, county, city and county or other special district from requiring
an employer other than one of these government entities to use the federal
E-Verify system, except when required by federal law or as a condition
of receiving federal funds.
Governor Signs Wage Theft
Prevention Act of 2011 (AB 469)
Known as the Wage Theft Prevention
Act of 2011, this law amends a number of Labor Code provisions to impose
various new penalties for employer violations of wage laws, and creates
new notice and document retention requirements for employers.
For instance, it amends Labor Code section 1174 to increase from two
to three years the amount of time employers are required to maintain
payroll records. Newly amended section 1174 further specifies
that employers may not prohibit employees from maintaining a personal
record of their hours worked or piece-rate units earned.
It also requires employers
to provide written notice to employees upon hire of the employee's
wage rate, payday and name and address of the employer, and to provide
additional notice within seven days when the wage rate changes unless
reflected in the wage statements required under Labor Code section 226.
This provision does not apply to public sector employees exempt from
overtime, or to employees covered by collective bargaining agreements
containing certain information specified in the Labor Code.
This bill also contains several
increased penalty provisions designed to prevent perceived widespread
abuse by employers of wage and hour laws, or frivolous litigation tactics
designed to prevent enforcement of wage-related awards. For instance,
it specifies that employers who violate the minimum wage statutes may
be liable for restitution of wages to the employee, in addition to the
pre-existing criminal and civil penalties. It also makes it a
misdemeanor if an employer willfully violates specified wage statutes
or orders, or willfully fails to pay a final court judgment or final
order of the Labor Commission for wages due.
It also extends the period
from one year to three years for the DLSE to commence a collection action
of a statutory penalty or fee. It also increases the period from
six months to two years for a convicted employer to maintain a bond,
and requires the employer to immediately provide an accounting of assets
(for collection purposes) or face severe civil penalties. It would
authorize employees to recover attorney's fees and costs incurred
to enforce a cost judgment for unpaid wages.
New Law Targets Willful
Misclassification of Employees as Independent Contractors (SB 459)
This new law prohibits the
"willful misclassification" of an employee as an independent contractor.
It also prohibits employers from charging individuals who have been
willfully misclassified any fee or making any deductions from compensation
for any purpose, including for goods, materials or space rental, that
the employer could not have lawfully made if the individual had not
been misclassified (i.e., expenses employers could not charge to an
employee). This new law defines "willful misclassification"
as "avoiding employee status for an individual by voluntarily and
knowingly misclassifying that individual as an independent contractor."
This new law also authorizes
the Labor and Workforce Development Agency (LWDA) or a court to award
civil penalties ranging from $5,000 to $15,000 per violation, in addition
to any other legally-authorized penalties or fines. The LWDA or
court "shall" also order the employer to display prominently for
one year on its website or in an area generally accessible to all employees
or the public, a notice containing specifically-enumerated information
about the violation (e.g., that a violation has occurred, that the employer
has changed its business practice, how employees may contact the LWDA,
and that the notice is being posted pursuant to a state order).
It also authorizes the LWDA or a court to issue civil penalties ranging
from $10,000 to $25,000 per violation, in addition to other available
remedies, if they determine the person or employer has engaged or is
engaging in a "pattern and practice" of these violations.
In instances where the employer is a licensed contractor pursuant to
the Contractors' State License Law, the LWDA or court may transmit
a certified copy of its order to the Contractors' State License Board.
This bill also imposes joint
and several liabilities upon persons who knowingly advise an employer
to misclassify an employee as an employer if the worker is not found
to be an independent contractor. In an example perhaps of professional
courtesy, this individual liability does not extend to licensed attorneys
providing legal advice in the course of practicing law.
New Law Requires Farm Labor
Contractors to List Contracting Entity on Itemized Wage Statement (AB
243)
Labor Code section 226 requires
an employer to furnish each employee with an accurate itemized wage
statement showing statutorily-enumerated items, including the name and
address of the legal entity that is the employer. This new law
amends section 226 and requires an employer who is a farm labor contractor
(as defined) to disclose on the itemized statement the name and address
of the legal entity that secured the employer's service. This
bill provides that this listing would not create any legal liability
on the part of the listed legal entity.
Governor Signs Bill Authorizing
the Labor Commissioner to Award Liquidated Damages (AB 240)
California's Labor Code provides
two avenues for an employee to recover unpaid minimum wages: either
a civil complaint filed in court or an administrative complaint with
the Labor Commissioner. However, while an employee may presently
recover liquidated damages (amongst other remedies) in a civil action,
the Labor Code does not specifically authorize the Labor Commissioner
to award liquidated damages for unpaid minimum wages. This bill
eliminates this discrepancy by amending Labor Code section 98 to specifically
provide that in an administrative proceeding with the Labor Commissioner
to recover unpaid minimum wages, the Labor Commissioner may award liquidated
damages.
New Law Includes Gender
Identity and Expression Protections in the FEHA (AB 887)
Presently, various California
laws, including the FEHA, prohibit discrimination or harassment against
individuals because of "sex," which is defined to include gender,
and through their incorporation of Penal Code section 422.56, gender
identity and behavior. This new law makes technical changes to
these provisions, including the FEHA, to specifically identify "gender,
gender identify and gender expression" as characteristics protected
under the FEHA. In effect, these changes preclude the current
need to cross-reference various statutes to determine the meaning of
"gender" which is now included directly in the particular statute.
Under this new law, "gender expression" is defined as "a person's
gender-related appearance and behavior whether or not stereotypically
associated with the person's assigned sex at birth."
While California law presently
requires employers to allow an employee to appear or dress consistently
with the employee's gender identity, this new law also requires employers
to allow an employee to appear or dress consistently with the employee's
gender expression. Lastly, this law includes "gender," "gender
identity" and "gender expression" to the list of characteristics
that will not disqualify an employee under the personal relationship
or personal connection exception to Workers' Compensation coverage
if attacked by a third-party solely because of this characteristic.
Governor Signs Bill Prohibiting
Genetic Discrimination in Employment (SB 559)
The Governor has signed a new
law prohibiting discrimination based on "genetic information."
Effective January 1, 2012, this bill amends the Unruh Civil Rights Act
(Civil Code § 51 et seq.) and the FEHA, as well as other statutory
anti-discrimination provisions (e.g., contained in the Education Code,
etc.), to prohibit discrimination on the basis of "genetic information."
"Genetic information" is defined to mean "with respect to any
individual, information about any of the following: (a) the individual's
genetic tests; (b) the genetic tests of family members of the individual;
and (c) the manifestation of a disease or disorder in family members
of the individual." This bill overlaps considerably with the
federal Genetic Information Non-Discrimination Act of 2008 (GINA) but
it remains to be seen if it adopts all of its definitions or if some
differences emerge.
Governor Signs Bill Requiring
Employers to Maintain Insurance Coverage during Pregnancy-Related Leaves
(SB 299)
Government Code section 12945
currently prohibits employers from refusing employees disabled by pregnancy,
childbirth or a related medical condition from taking up to four months
of job-protected leave from work. This new law amends section
12945 and prohibits employers from refusing to maintain and pay for
coverage under a group health plan for an employee who takes such qualifying
leaves. Employers will be required to maintain coverage for the
duration of the leave, but not to exceed four months in a twelve-month
period, at the level and under the conditions that coverage would have
been provided if the employee had remained in continuous employment
for the duration of the leave. Employers will not be precluded
from maintaining and paying for coverage under a group health plan beyond
four months.
Employers may recover from
the employee the premiums paid during this period if the employee fails
to return to work after the leave expires and this failure is not because
the employee has taken a CFRA leave or because of the continuation or
onset of health condition that prompted the initial leave.
New Law Prohibits CFRA-Related
Interference (AB 592)
California's Family Rights
Act (CFRA) and Pregnancy Disability Leave (PDL) prohibit employers from
refusing to grant leave to an eligible employee for certain statutorily
enumerated reasons (e.g., to care for a family member with a serious
health condition under CFRA, to take leave on account of pregnancy under
PDL, etc.). This new law amends CFRA and the PDL to make
it an unlawful employment practice for an employer to interfere with,
or restrain the exercise or attempted exercise of any right provided
to an employee under these provisions.
This bill essentially codifies
in the CFRA and the PDL the Family Medical Leave Act's (FMLA) prohibition
on employer "interference" with FMLA leave rights. [See e.g.,
29 U.S.C. § 2615(a)(1) ("it is unlawful for any employer to interfere
with, restrain, or deny the exercise of or the attempt to exercise"
substantive rights guaranteed by the FMLA.)] Many had assumed
the CFRA and the PDL already incorporated these "interference" prohibitions
but an unpublished federal court decision had injected some uncertainty
on this issue.
New Law Prohibits Health
Insurance Coverage Discrimination Based on Types of Domestic Partnership
(SB 757)
California law presently requires
health care service plans and health insurance policies to provide group
coverage to the registered domestic partner of the employee or insured
equal to the coverage provided to the spouse of those persons.
This new law amends these provisions to specify that a plan or policy
may not discriminate in coverage between spouses or domestic partners
of a different sex and spouses or partners of the same sex.
Governor Signs Bill Requiring
All Employers Provide Written Commission Contracts, but Deleting Treble
Damages Provision (AB 1396)
Labor Code section 2751 previously
required that out-of-state employers with no permanent fixed place of
business in California who use commission contracts for paying employees
to put these contracts in writing. In turn, Labor Code section
2752 imposed treble damages upon out-of-state employers who violated
Labor Code section 2751.
This newly-enacted bill amends
Labor Code section 2751 and requires that by January 1, 2013, all employers
(not just those outside California) entering into employment contracts
for services to be performed in California and contemplating payment
in commissions to put the contract in writing and identify the method
by which commissions will be computed and paid. This amendment
is intended to address a judicial decision which had effectively invalidated
a prior version of Labor Code section 2751 because it imposed these
requirements only on out-of-state employers. This new bill, however,
also repeals Labor Code section 2752 and its treble damages provision.
As under the prior version
of Labor Code section 2751, employers are required to give a signed
copy of the contract to every employee who is a party to it, and to
obtain a signed receipt for the contract from each employee. As
amended, this provision also states that when the contract expires and
the parties continue to work under the expired contract's terms, the
contract terms are presumed to remain in full force and effect until
the contract is superseded or either party terminates the employment.
New Law Affects Certification
of Agricultural Labor Representatives Because of Employer Misconduct
(SB 126)
California law precludes employers
from engaging in unfair labor practices in the election of agricultural
employees of labor representatives, and authorizes the Agricultural
Labor Relations Board (ALRB) to refuse to certify an election if it
determines employer misconduct affected the election results.
This new law provides that if the ALRB refuses to certify an election
because of employer misconduct and concludes the employer's misconduct
likely precludes a fair and free new election, it may certify the labor
union as the agricultural employee's exclusive bargaining representative.
This new law also specifies that in such instances, the labor representatives
may file a declaration of failure to reach a collective bargaining agreement,
thus triggering mandatory mediation, within 60 days after the ALRB has
certified the labor organization because of employer misconduct precluding
a free and fair election.
New Law Regarding Apprentice
Programs (SB 56)
Presently, the Division of
Apprenticeship Standards within the Department of Industrial Relations
is required to randomly audit all apprenticeship programs during each
five-year period to ensure compliance with specified requirements, including
industry-specific training criteria. This new law eliminates the
requirement of random audits during five-year increments, and instead
directs the division to conduct audits of apprenticeship programs generally.
It also creates requirements for applications for building and construction
trades programs for approval of a new or expanded apprenticeship program.
Vetoed Bills
The Governor also vetoed a
number of employment-related bills, some of which had also been vetoed
by his predecessor, including the following:
- a bill that would
have entitled employees to three days unpaid bereavement leave following
the death of specifically-enumerated family members (AB 325);
- a bill that would
have invalidated employment contract provisions requiring any employment-related
disputes to be decided under non-California law or in a non-California
forum (AB 267);
- a bill that would
have restored a trial court judge's authority to award substantial
attorney's fees awards in FEHA cases when the prevailing employee
only recovered less than $25,000 (AB 559);
- a bill that would
have specifically authorized employers to utilize "payroll cards"
to pay wages subject to certain enumerated conditions (the Governor
opined the proposed restrictions were too harsh) (SB 931); and
- a bill that would
have precluded the consideration of particular characteristics or so-called
"risk factors" in apportioning Workers' Compensation liability
(the Governor noted the courts already preclude the consideration of
such factors) (AB 1155).
Federal
President Obama's Jobs
Plan Targets Unemployment Discrimination
Amongst the proposed tax credits
and unemployment benefits reform, President Obama's recently-proposed
"Jobs Bill" includes several employment-related provisions, including
one targeting so-called "unemployment discrimination." This
provision would make it unlawful for employers with more than 15 employees
to discriminate against job applicants based upon their current employment
status (i.e., the fact they are unemployed). Another currently
pending bill (H.R. 2501 [the Fair Employment Opportunity Act of 2011])
would similarly preclude employers from discriminating based on "unemployed"
status and preclude employers from publishing job advertisements suggesting
unemployment status may disqualify an applicant from further consideration.
AGENCY
State
DFEH's New Procedural
Rules Effective October 7, 2011
The Department of Fair Employment
and Housing (DFEH) is the state agency charged with enforcing California's
FEHA, including by filing, investigating and conciliating charges alleging
unlawful employment practices. Although the DFEH had previously
issued procedures of general application, it had not previously developed
express regulations. Beginning in 2010, the DFEH began developing
a set of procedural regulations to govern its practices and procedures
with respect to the filing, investigation and conciliation of unlawful
practice complaints. Amongst other things, these regulations explain
the intake and investigation process, the DFEH's new priority system
for handling charges, the "dual filing" system with the EEOC, and
the procedure for amending complaints. These regulations took
effect October 7, 2011, and are available at www.dfeh.ca.gov.
Federal
NLRB Issues New Union Rights
Poster, but Delays Posting Deadline
As discussed in the September
newsletter, the National Labor Relations Board has issued a Final Rule
requiring all employers subject to the National Labor Relations Act
(NLRA) to display a poster notifying employees of their rights under
the NLRA. A downloadable copy of this poster, which must be 11x17
inches, is available at www.nlrb.gov/poster. Employers with further
questions about the fairly-detailed posting and translation requirements
can also access www.nlrb.gov/faq/poster.
The NLRB had originally required
all subject employers to post this poster by November 14, 2011.
However, citing a desire to provide further education to covered employers
and employees, the NLRB has recently announced this deadline has been
extended until January 31, 2012.
IRS Issues Guidance on Tax
Treatment of Employer-Provided Cell Phones
The Internal Revenue Service
(IRS) has recently issued Notice 2011-72 to provide guidance concerning
the federal tax treatment of employer-provided cell-phones. (www.irs.gov/pub/irs-drop/n-11-72.pdf)
This notice relates to a provision in the Small Business Jobs Act of
2010, that had removed cell phones from the definition of listed property,
a category that normally requires additional recordkeeping by taxpayers.
The just-issued Notice states
that when an employer provides an employee with a cell phone primarily
for non-compensatory business reasons, both the business and personal
use of the cell phone is generally non-taxable to the employee.
The IRS will also not require recordkeeping of business use in order
to receive this tax-free treatment. An employer will be considered
to have provided an employee with a cell phone primarily for "non-compensatory
business purposes" if there are substantial reasons relating to the
employer's business (e.g., employer need to contact employee, employee
need to be in contact with clients outside of business hours, etc.),
other than providing compensation to the employee, for issuing the employee
a cell phone. Similarly, if the phone has been provided for such
non-compensatory business reasons, then the employee's personal use
of the cell phone will also be treated as a working condition fringe
benefit, the value of which is also excludable from the employee's
taxable income. However, a cell phone provided for non-compensatory
business reasons (e.g., promoting morale, recruiting an applicant, providing
additional compensation) will still be considered a taxable benefit.
The IRS has also issued a memorandum
to its Field Examination Operations directing them to utilize a similar
approach when assessing the fairly-common scenario where employers provide
cash allowances or reimbursements to employees for work-related use
of personally-owned cell phones. Under this approach, employers
that require employees, primarily for non-compensatory business reasons,
to use their personal cell phones for business purposes, may treat reimbursements
of the employees' expenses for reasonable cell-phone coverage as non-taxable.
As under the Notice, this non-taxability rule would not apply for reimbursements
of unusual expenses or coverage made as a substitute for a portion of
an employee's wages. The IRS' memorandum, which contains additional
examples, is available at www.irs.gov/pub/foia/ig/sbse/sbse-04-0911-083.pdf.
IRS Announces Voluntary
Worker Classification Settlement Program, and Partnership with DOL on
Misclassification Issues
The IRS has also launched a
new program to permit federal taxpayers (i.e., employers) to voluntarily
reclassify workers as employees for federal employment tax purposes,
thus enabling them to obtain relief similar to that available under
the current Classification Settlement Program (CSP). Very simply
summarized, under the new Voluntary Classification Settlement Program
(VCSP), employers with independent contractor classification problems
will be able to get into compliance by voluntarily reclassifying these
individuals as employees for future tax periods and by paying a portion
of the employment tax liability for the past non-employee treatment.
To be eligible, an employer
must (a) have consistently treated the workers in the past as nonemployees;
(b) have filed all required Forms 1099 for the workers for the past
three years; (c) not currently be under audit by the IRS; and (d) not
currently be under audit by the Department of Labor or a state agency
concerning the classification of these workers. Employers must
also apply for the program by filing a Form 8952, and enter into a closing
agreement with the IRS. Additional details about this program
are available in the IRS' announcement (www.irs.gov/newsroom/article/0,,id=246203,00.html)
or in the IRS' Announcement 2011-64 (www.irs.gov/pub/irs-drop/a-11-64.pdf)
The IRS has also announced
that it is partnering with the Department of Labor (DOL) to target the
misclassification of employees as independent contractors. This
partnership between federal agencies, and between these federal agencies
and a handful of states (which does not yet include California), is
intended to facilitate information sharing and law enforcement coordination.
The IRS/DOL press release is available at www.dol.gov/opa/media/press/whd/WHD20111373.htm.
This partnership and the new VCSP program likely signal a new federal
emphasis on classification issues.
JUDICIAL
California
California Supreme Court
Schedules Oral Argument in Brinker
After many delays, the California
Supreme Court has scheduled oral argument for November 8, 2011 at 9:00
a.m. in San Francisco in the Brinker
case. (Brinker Restaurant v. Superior Court (ex rel Hohnbaum),
S166350.) This case should provide much needed clarity on meal and rest
period issues including whether an employer must "provide" the opportunity
to take a meal period, or "ensure" the meal period is actually taken.
Employers can look for a major ruling in early 2012.
Federal
Company's Deviation from
Normal Disciplinary Procedures Sufficient Evidence of Pretext for Age
Discrimination Plaintiff to Survive Summary Judgment
A 59-year old former employee
sued for FEHA age discrimination, citing the fact her employer allegedly
treated younger similarly situated employees more favorably and that
the employer had deviated from its normal disciplinary policies before
terminating her. The district court granted summary judgment in
the employer's favor finding it had terminated plaintiff for multiple
policy violations, but the ninth circuit reversed citing, in part, the
various evidentiary burdens in an employee's favor at the summary
judgment stage.
The appellate court first observed
the plaintiff had presented substantial and specific of pretext by showing
her employer (1) treated younger, similarly situated employees more
favorably by issuing performance improvement plans (PIPs) prior to termination
and (2) had deviated from the company's normal disciplinary procedure
by terminating her without first issuing a PIP. The court rejected
the employer's argument that only employees reporting to the same
immediate supervisor and those committing the exact same policy violation
should qualify as similarly situated to the plaintiff. Instead,
the court determined that plaintiff had raised a factual question as
to whether other employees holding the same job as plaintiff were similarly
situated, because (1) company officials oversaw discipline on a national
level, (2) the other employees had violated similar company policies
and procedures that served the same purpose as those violated by plaintiff,
and (3) the policy violations at issue were of comparable seriousness.
The court also rejected the
employer's suggestion that there could be no inference of age discrimination
since two of the "comparators" were 42 and 40 years old and, thus,
also protected by the FEHA. The court noted the FEHA protects
against age discrimination, not simply discrimination against employees
because they are 40 or older, and, thus, the proper inquiry is whether
the plaintiff was treated less favorably than a "significantly younger"
similarly situated employee, regardless of whether that employee is
in the protected class. (Earl v. Nielsen Media Research,
Inc. (9th Cir. 2011) ___ F.3d ___, 2011 U.S. App. LEXIS
19616.)
Applying
Dukes, the Ninth Circuit Directs Lower Courts to Rigorously Examine
the Merits of Class-Wide Discrimination Claims at Class Certification
Stage
In its first employment class
action decision of the post-Dukes v. Walmart era, the ninth circuit
reviewed the standards for class certification in a gender discrimination
lawsuit. In this action, the district court certified a nationwide
class consisting of current and former female Costco employees who had
been denied promotion to general manager or assistant general manager
to seek injunctive relief, compensatory damages, and back pay in 2007.
The ninth circuit vacated the
class certification order with regard to the district court's findings
on commonality and typicality, and concluded the district court had
applied the incorrect standards. The court held the rigorous analysis
required by Dukes to determine commonality mandates that the
district court weigh the merits of the class-wide discrimination claims
to the extent that they overlap with class certification issues on remand.
The court opined that the plaintiff must show that there is "a common
question that will connect many individual promotional decisions to
their claim for class relief." The court must resolve any factual
disputes necessary to determine whether there was "a common pattern
and practice that could affect the class as a whole." With regard
to typicality, the court opined that a named plaintiff's claims are
not typical if the named plaintiff is subject to defenses which are
not typical of those that may be raised against other members of the
proposed class. (Ellis v. Costco
(9th Cir. 2011) ___ F.3d ___, 2011 U.S. App. LEXIS 19060.)
