California

DLSE Unveils Template for Employers to Use to Comply with "Wage Theft Prevention Act," and also Issues FAQs Outlining Employer Obligations

As discussed in prior newsletters, the Wage Theft Prevention Act of 2011 (AB 469) takes effect January 1, 2012, and imposes new notice requirements upon employers. Specifically, newly-added Labor Code section 2810.5 requires employers to provide written notice to employees (unless statutorily exempted) upon hire in the language the employer typically communicates such information of: (1) the employee's pay rate and basis for pay rate (e.g., salary, commission, hourly, etc.); (2) allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances; (3) the regular payday designated by the employer; (4) the name of the employer, including any "doing business as" names used by the employer; (5) the physical address of the employer's main office or principal place of business, and a mailing address, if different; (6) the employer's telephone number; (7) the name, address, and telephone number of the employer's workers' compensation insurance carrier; and (8) any other information the Labor Commissioner deems material and necessary.

Employers must also provide written notice of any change to these items within seven calendar days after the time of the changes, unless the changes are reflected in a timely wage statement furnished under Labor Code section 226, or notice of all changes is provided in another writing required by law, within seven days of the changes.

These notice requirements apply to all new hires after January 1, 2012, unless the employee: (1) is directly employed by the state or any political subdivision thereof; or (2) is exempt from the payment of overtime wages by statute or the IWC Wage Orders; or (3) is covered by a valid collective bargaining agreement that expressly provides for wages, hours of work, working conditions, premium wages for all overtime, and a regular rate of pay not less than thirty percent more than state minimum wage.

The new law tasked the Labor Commissioner with developing and making available a template for employers to use to comply with these requirements. The Labor Commissioner's exemplar is now available on the DLSE website at

http://www.dir.ca.gov/dlse/LC_2810.5_Notice.pdf.

The DLSE has also issued a set of "Frequently Asked Questions" concerning this new law and the DLSE-issued template. These FAQ's are available at

http://www.dir.ca.gov/dlse/FAQs-NoticeToEmployee.html. As discussed below, the DLSE FAQs contain several interesting insights, and raise several issues, including to whom the notices must be provided, that employers should evaluate more fully, including with their legal counsel.

For instance, the DLSE FAQs authorize employers to use the DLSE-issued template or to develop their own form provided it contains the statutorily-required information identified above, and "any other information the Labor Commissioner deems material and necessary." Notably, the DLSE-issued template requires employers to provide certain items beyond that specifically-required in the new law, including requiring the employer to identify the type of employment agreement (e.g., oral, written, etc.), to identify the employee's hire date, to identify the business entity of the employer (e.g., corporation, partnership, etc.) to provide information about third-party benefits or payroll administrators, and to identify the Workers' Compensation policy number. The DLSE's FAQ's, Question No. 6, authorizes employer to develop their own notices "so long as they contain all the information required by the law, including all the information requested on DLSE's template" which suggests the DLSE's position is these new items are items the DLSE "deems material and necessary."

Notably also, while newly-added Labor Code section 2810.5 only expressly requires employers to provide these notices to covered employees "at time of hire" or after any of these items change, DLSE's FAQs, Question 2, states "the notice should be given to all current employees and then to all new employees at the time of hire."

The FAQs further state that this notice may be presented along with other materials at time of hire but the notice required under Labor Code section 2810.5 must be on its own form. The FAQs authorize the form to be provided electronically provided the worker can acknowledge the receipt of the notice and print out a copy, and they recommend employers keep a record of notices provided to their employees.

The new law requires employers to provide these notices to employees in the language the employer normally uses to communicate employment-related information, and the DLSE FAQs indicate the DLSE will post non-English template versions as they are completed. It indicates the DLSE will provide Spanish, Chinese, Korean, Vietnamese and Tagalog versions, and potentially others.

San Francisco's Minimum Wage Increases to $10.24 on January 1, 2012

On January 1, 2012, the San Francisco minimum wage will increase from $9.92 per hour to $10.24 per hour for all employees (including temporary or part-time employees) who perform work in San Francisco. Pursuant to the San Francisco Minimum Wage Ordinance, Chapter 12R of the San Francisco Administrative Code, the City's minimum wage is adjusted annually based on increases in the regional consumer price index. All employers, regardless of where located, must pay this San Francisco-specific minimum wage to employees who work at least two hours of a particular week in the City's geographic boundaries. More information about this wage increase, including the new minimum wage poster and a set of Frequently Asked Questions regarding this minimum wage, is available on the City and County of San Francisco Labor Standards Enforcement website: www.sfgsa.org.

San Francisco Employers Required to Display New Poster in 2012 Regarding Health Care Security Ordinance

Effective January 1, 2012, businesses with more than twenty (20) employees (and non-profits with more than fifty (50) employees) must display a notice outlining the amounts employers must spend on health care benefits to comply with the San Francisco Health Care Security Ordinance (HCSO). Under the HCSO, businesses with twenty or more employees must spend a minimum amount on health care benefits for each of their "covered employees" — generally, those employees who work 8 or more hours per week in San Francisco and have been employed more than ninety (90) days. As outlined in the new Notice, employers with between 20-99 employees must spend at least $1.46 for each hour worked for each covered employee, while employers with 100+ employees must spend at least $2.20 for each hour worked by each covered employee. More information as well as a downloadable copy of this Notice is available at www.sfgov.org/olse/hcso.

Federal

Bill Authorizing Tax Credits for Hiring Veterans Takes Effect

Congress recently passed and President Obama signed into law a bill providing various tax credits to encourage employers to hire unemployed veterans. Under the Hire Heroes Tax Credit, employers would receive a $2,400 tax credit for hiring veterans who have been unemployed between four weeks and six months, and a tax credit of $5,600 for hiring veterans who have been unemployed for more than six months. Under the Wounded Warriors Tax Credit, employers would receive up to a $9,600 tax credit for hiring veterans with service-related disabilities who have been unemployed for more than six months.

AGENCY

Federal

NLRB Postpones (Again) Deadline for Employers to Display Union Rights Poster

The National Labor Relations Board (NLRB) has announced that it is postponing until April 30, 2012 (from January 31, 2012), the deadline for employers to display a poster advising employees of their rights under the National Labor Relations Act. The NLRB states this postponement flows from a request by the federal district count in Washington D.C. that is hearing legal challenges to this posting requirement.

As mentioned in prior newsletters, a downloadable copy of this poster, which must be 11×17 inches, is available for free download at www.nlrb.gov/poster, and employers can obtain more information about this poster and the fairly-detailed posting and translation requirements at www.nlrb.gov/faq/poster.

IRS Mileage Reimbursement Rate to Remain at $ .555 in 2012

The Internal Revenue Service (IRS) has announced that the 2012 optional standard mileage rate used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving expenses. Beginning January 1, 2012, the standard mileage rates for the use of a car will be: 55.5 cents per mile for business miles driven (unchanged since an increase announced in July 2011), 23 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations. The full-text of the IRS' announcement is available at www.irs.gov.

NTSB Proposes Complete Ban on Cell Phone Usage While Driving

Citing a desire to prevent distracted driving, the National Transportation Safety Board (NTSB) has recently called for a nationwide-ban on driver use of personal electronic devices (PEDs) while operating a motor vehicle. If enacted, this ban would appear to extend to even "hands free"-type PEDs, except those installed by the vehicle's manufacturer, and would prohibit drivers from using cell phones or texting while driving. The NTSB's rule would not preclude passengers from using such devices. (In July 2008, California implemented a ban on driver use on non-hands free cell phones, and in January 2009, prohibited texting while driving). The NTSB's proposed ban is not an employment rule per se or even targeted specifically at employers, but may have employment-related ramifications, particularly for those employers who have mobile employees. More information about the NTSB's proposal is available atwww.ntsb.gov/doclib/fact_sheets/PED_Ban_Fact_Sheet.pdf.

JUDICIAL

California

California Supreme Court Allows Supplemental Briefing in Brinker

Following the recent oral argument in Brinker, the California Supreme Court announced it will allow supplemental briefing on the issue of whether any ruling on the "rolling five" issue would apply prospectively only, or also apply retroactively. During oral argument on the main issue presented (whether employers must "provide" or "ensure" a meal period is taken), the justices inquired whether employers might be required to provide a meal period for every five hours worked (a "rolling five hour" obligation), including a second meal period during an eight hour shift where an early meal period is taken. The Court's Order specifies that each side will submit initial written briefs on this issue by January 3, 2012, and reply briefs by January 13, 2012, at which time the matter will be deemed re-submitted. This supplemental briefing suggests that a final ruling will not be issued until Spring 2012, and that the final ruling may involve a new interpretation of the "rolling five" issue, meaning Brinkermay create new issues while resolving others.

California Supreme Court Provides Guidance, but not Bright-Line Rules, on Administrative Exemption

Insurance claims adjusters filed four class action lawsuits against their insurance company employer alleging that they had been erroneously classified as exempt "administrative" employees and sought damages for unpaid overtime work. The California Supreme Court overturned the appellate court's holding that the claims adjusters were not exempt as a matter of law and explained that the lower court's analysis was flawed, as it had focused solely on determining whether the adjusters were administrative or production workers under the "administrative/production worker dichotomy." Using this dichotomy, the lower court evaluated the employee's duties as compared to the business of the employer to determine whether the employee primarily engaged in administering the affairs of the enterprise or primarily engaged in producing the commodities, whether goods or services, that the enterprise exists to produce and market. The lower court found that the claims adjusters were "production workers," and thus non-exempt, because their work was not carried on at the level of policy or general operations.

The Supreme Court rejected the lower court's strict application of the dichotomy and directed that the doctrine had effectively been superseded in this context by more specific and detailed statutory and regulatory enactments, including Wage Order 4-2001. While the Court declined to eliminate the dichotomy entirely, it held that its application was limited to circumstances where statutory and regulatory authorities failed to provide adequate guidance. Rather, here, the question of whether workers are "exempt" under the administrative exemption required consideration of the express language of IWC Wage Order 4-2001, the relevant federal statutes and regulations specifically cited in the order, and the relevant sections of the California Labor Code.

Pursuant to Labor Code section 515(a) and IWC Wage Order 4-2001, there is a four-part test to determine whether employees qualify under the administrative exemption: (1) workers must be paid no less than two times the state minimum wage for full-time employment; (2) their work must be "administrative"; (3) their primary duties must involve that administrative work; and (4) they must regularly exercise independent judgment and discretion. In addressing whether the work of claims adjusters is "administrative" in nature, the Supreme Court looked to the statutory and regulatory authorities cited in the Wage Order and explained that work qualifies as "administrative" when it is "directly related to management policies or general business operations." Work is "directly related" if it is qualitatively administrative and quantitatively of substantial importance to the management or operations of the business. This is a conjunctive test. The Court noted that with regard to the qualitative aspect of the test, administrative operations include work done by "white collar" employees engaged in servicing a business. Such servicing includes, as relevant in this case, advising management, planning, negotiating, and representing the company. The Court refused to opine on the quantitative aspect of the test.

The Court ultimately declined to decide whether claims adjusters actually qualified for the administrative exemption and ordered the trial court on remand to undertake a factually intensive inquiry of the claims adjusters' duties and evaluate whether they meet the test for exemption as articulated in the applicable statutes and wage orders.

(Harris v. Superior Court (ex rel Liberty Mutual Ins. Co.) (2011) ___ Cal.4th ___, 2011 Cal. LEXIS 13237.)

Appellate Court Provides Guidance on "Reporting Time Pay" and "Split Shift Premiums" for Employees who Attend Scheduled Meetings

Employees who attended scheduled monthly meetings, including on their days off, filed a class action seeking "reporting time pay" and "split shift premiums" under Wage Order 4. The employees argued that although they were paid for attending these scheduled meetings, which often lasted approximately an hour or ninety minutes (although scheduled for ninety minutes to two hours), they were entitled to statutorily-enumerated "reporting time pay" and additional split shift premium pay on those occasions where the employees worked their regular shift later on the same day. In a case of first impression, a California court of appeal rejected both arguments and held the employer was not required to pay additional compensation beyond that already paid either for attending the meetings, or for attending the meeting and later working a regularly-scheduled shift.

Subdivision 5(A) of Wage Order regulates "reporting time pay" and provides: "[e]ach workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee's usual or scheduled day's work, the employee shall be paid for half the usual or scheduled day's work, but in no event for less than two (2) hours nor more than four (4) hour, at the employee's regular rate of pay, which shall not be less than the minimum wage." The appellate court rejected the employees' argument this provision required they be paid no less than two hours wages regardless of whether the meeting was scheduled and if they worked at least half of the time allotted for the meeting. The court emphasized the statutory language conditioning reporting time pay based upon either the employee's "usual" or "scheduled" days work, and held that provided the meeting is sufficiently scheduled, thus providing adequate notice to the employee, reporting time pay is only required when the employee is paid less than the scheduled day's work. As applied in this case, the employees were not entitled to receive a minimum of two hours pay simply for attending a scheduled meeting, but were entitled to only the time spent in the meeting provided the meeting (i.e., the time worked) lasted at least half of the scheduled time.

In reaching this conclusion, the court distinguished the recent result in Price v. Starbucks, Inc. (2011) 192 Cal.App.4th 1136, 1146, in which the court upheld two hours of reporting time pay for an employee called into work simply to be terminated in a one-minute meeting. The court noted that the Price court had concluded two hours of reporting time pay was appropriate because he had been called in on an impromptu basis on his day off and therefore had not planned for the meeting and had no expectation how long it would last. In contrast, these employee meetings were scheduled with certain start times and expected agendas and durations, and all lasted at least half of the expected duration.

In another issue of first impression, the appellate court also rejected the employees' claim to "split shift premiums" on those occasions where they worked later on the same day as these meetings because these employees already earned more than the minimum wage required by Wage Order 4. Subdivision 4(C) of Wage Order 4 states that "[w]hen an employee works a split shift, one (1) hour's pay at the minimum wage shall be paid in addition to the minimum wage for that workday, except when the employee lives at the place of employment." Again focusing on the statutory language, and the fact subdivision 4(C) is located in the "minimum wage" section of Wage Order 4, the court concluded that the one-hour minimum wage penalty is paid in addition to the "minimum wage for that workday," not the regular wage for that workday.

Thus, an employee is only entitled to additional compensation representing the difference between what they actually earned and what they would have earned had they been paid the minimum wage for their entire shift plus an extra hour. The court used the following example based upon an eight-hour shift to explain this point: a minimum wage worker earning $8.00 an hour and working an eight-hour shift would be entitled to a ninth-hour of minimum wage ($72.00) where a split-shift premium applied. However, an employee making $12.00 per hour and working an eight-hour shift would not be entitled to any split-shift premium because he has already actually earned an amount ($96 [eight times an hour rate of $12]) exceeding the amount owed had he worked an entire shift at minimum wage plus an extra hour ($72 [eight hours of minimum wage plus one additional hour of minimum wage as a penalty).

The court also concluded one of the class representatives had already waived her claims for split-shift premiums or reporting time pay by executing a broadly-worded release and accepting a severance payment. The court rejected the employee's claim these items were undisputedly owed and thus incapable of being released pursuant to Labor Code section 206, because a good-faith dispute existed regarding the employee's entitlement to these items. However, the court also held these employees' claims for reporting time and split shift premiums were governed by Labor Code section 1194 and its unilateral attorney fee provision rather than Labor Code section 218.5 and its provision awarding attorneys' fees to the "prevailing party." Thus, these employees could not be held liable for the attorneys' fees incurred by the employer in successfully defending against these "reporting time" and "split shift" payment claims. (Aleman v. Airtouch Cellular (2011) ___ Cal.App.4th ___, 2011 Cal.App.LEXIS 1609.)

Employer May Provide Hearsay Evidence to Obtain Temporary Restraining Order to Prevent Workplace Violence

Code of Civil Procedure section 527.8 permits an employer to seek a temporary restraining order and an injunction on behalf of an employee who has suffered unlawful violence or a credible threat of violence carried out at the workplace. To obtain a temporary restraining order, the employer must provide an affidavit showing reasonable proof that an employee has suffered unlawful violence or a credible threat of violence by the defendant, and that great or irreparable harm would result to an employee. The court will conduct a hearing within 15 days of the petition's filing, and if the judge finds "clear and convincing" evidence of unlawful violence or a credible threat of violence, the judge may issue an injunction lasting up to three years.

In this case, the husband of a terminated employee alleged the trial court improperly issued a three-year injunction enjoining him from making further violent threats against two of her fellow co-workers. The husband argued the trial court should not have considered hearsay evidence recounting his statements that he was going to "put [the two co-workers] down" or that he was "going to flip his lid" and "do something he would regret." A California appellate court rejected this argument, noting section 527.8 authorizes the trial judge to consider "any testimony that is relevant" and does not specifically exclude hearsay. The appellate court also cited the unique expedited nature of these workplace violence injunctive hearings, and that a judge, rather than a jury, will weigh this evidence and decide whether the clear and convincing standard of proof is met in any case. (Kaiser Foundation Hosp. v. Wilson (2011) 201 Cal.App.4th 550.)

Employer Not Required to Indemnify Employee for Attorneys' Fees Incurred Defending Against Suit by the Employer

An employee who successfully defended a lawsuit brought by his employer alleging breach of contract and conversion requested indemnification under Labor Code section 2802 for the attorneys' fees he incurred. Labor Code section 2802 states "an employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of his or her duties." In a case of first impression, a California court of appeal concluded that while section 2802 would require indemnification of the employee for claims brought by a third-party, the common law definition of "indemnify" did not extend to "first party disputes" or "direct liability" between the employer and the employee. The appellate court also noted that while Government Code section 317 requires corporations to indemnify agents who successfully defend a corporation's claims, section 317 did not extend to limited liability corporations such as this employer. (Nicholas Laboratories LLC v. Chen (2011) 199 Cal.App.4th 1240.)

Company Contracting With Caltrans to Provide Tree Pruning and Removal Services Must Pay Its Employees the Prevailing Wage Rate

California's Prevailing Wage Law (Labor Code §§ 1720-1861) requires that, except in specified circumstances (e.g., public works contracts involving less than $1,000), workers employed on "public works" shall be paid at least the general prevailing rate of per diem wages for work of a similar character in the locality in which the public work is performed. In this case, a private company that contracted with CalTrans on a one-time basis for tree removal and pruning on the highways argued it was not performing "public work" or "maintenance" (as defined) and thus was not required to pay the prevailing wage to its employees.

The Department of Industrial Relations and a California court of appeal disagreed citing the parties' contractual terms, the expansive definition of "maintenance" (which extended to these tree trimming operations) and the broad interpretation generally afforded the Prevailing Wage Law and its regulations. The court observed such "maintenance" fell within the definition of "public works" and the Prevailing Wage Law applied to even a one-time contract since even though this work was not routine and recurring for this contractor, it was routine and recurring for CalTrans. (Reliable Tree Experts v. Baker (ex rel. Cal. Dept. of Trans.) (2011) 200 Cal.App.4th 785.)

Under After-Acquired Evidence Doctrine, Back Pay Award Stops Accruing at the Time Plaintiff Engaged in Misconduct that Would Have Resulted in Termination

Under the "after acquired evidence" doctrine, conduct discovered after termination that would have resulted in termination may potentially bar an employee from suing completely or cut off economic damages after the date of discovery. In this case, a California court of appeal held that a sheriff who had been improperly terminated could not recover economic damages after his post-termination felony convictions (three years after termination) since those felony convictions would have disqualified him from working as a law enforcement officer.

However, the appellate court declined to apply the "unclean hands" doctrine to preclude the sheriff from any recovery whatsoever. While the "unclean hands" doctrine potentially applies more broadly and may act as a complete defense to recovery, and the "after acquired evidence" doctrine generally limits further damages after the date of discovery, the complained-of misconduct generally must relate to the particular dispute between the parties in the litigation. Thus, the fact this sheriff had improperly once used a county helicopter or subsequently engaged in tax-fraud would not insulate the country from its improperly motivated termination since these events were not related.

The court also held the sheriff's complaints directly to the decisionmaker about the decisionmaker's unlawful activities constituted a legally-protected activity under California's whistle-blowing statute (Labor Code section 1102.5). Lastly, the court rejected the county's suggestion the sheriff had waived the protections of the Public Safety Officers Procedural Bill of Rights Act (POBRA) by signing a three-paragraph memorandum that did not mention POBRA and simply noted he would serve at the "pleasure" of the incoming sheriff. (Jaramillo v. County of Orange (2011) 200 Cal.App.4th 811.)

Court of Appeal Upholds Substantial Jury Verdict Award Based on Humiliating Sexual Conduct Directed at Female Employee

A California appellate court upheld an $860,000 jury verdict (of which $677,000 was attorneys' fees) in favor of a female employee who alleged her male supervisors had sexually harassed her. The court concluded that the alleged conduct (i.e., telling her to "show her butt to customers" to increase sales, spreading rumors she had herpes and was sleeping with co-workers, and inviting her to strip clubs and suggesting she pose in a bikini) was sufficient pervasive even though occurring only over a several week period. The court also concluded the conduct was sufficiently severe given the sexually-explicit and vulgar nature of the conduct, which included touching her on the arm and turning her around so customers could view her body, the "humiliating" impact upon this young female employee and the fact her supervisors were the harassers. The court also distinguished this case from several recent California cases which had declined to impose liability simply because of sexual discussions in the workplace, noting this conduct specifically involved and was targeted at the complaining female employee rather than simply discussing sex in general.

The court also rejected the employer's contentions the employee's allegations were "inherently improbable" given several inconsistencies in witness' recollection, noting it would not second-guess the juror's credibility determinations and it is not uncommon for witnesses to vary slightly in their recollection. (Fuentes v. Autozone, Inc. (2011) 200 Cal.App.4th 1221.)

Supervisors May Not be Individually Liable for Discrimination under California State Law Equivalent of USERRA

A serviceman denied reinstatement following his military deployment sued his employer and several supervisors under California's Military and Veterans Code section 394 which prohibits discrimination or retaliation against members of the armed forces. In a case of first impression in California, a California court of appeal concluded the supervisors could not be held individually liable notwithstanding section 394's prohibition against any "employer or person or agent" engaging in discriminatory or retaliatory actions.

Relying heavily upon several California Supreme Court decisions precluding individual liability under the Fair Employment and Housing Act for discrimination and retaliation, the appellate court concluded that similar s