California

With the expiration of the June 1st deadline for bills to clear the first legislative chamber, the legislative forecast has begun to take shape with a number of employment bills having either moved forward or stalled.  Some of the more significant employment-related bills to pass the Senate or the Assembly include:

Assembly Passes Bill Requiring New Wage Statement Requirement for Temporary Services Employers (AB 1744)

Labor Code section 226 requires employers to provide accurate itemized wage statements in writing containing specific statutorily-enumerated items.  This bill would amend section 226 and require that if the employer is a “temporary services employer,” the statement must also contain the name and address of the legal entities that secured the services of the employer and the total hours worked for each legal entity.  This new requirement would incorporate the definition of “temporary services employer” presently contained in Labor Code section 201.3(a)(1).

Status: This bill is now pending in the Senate.

Senate Passes Bill Establishing Presumed Damages for Wage Statement Violations (SB 1255)

Labor Code section 226 requires employers to provide itemized wage statements containing statutorily-enumerated categories of information, and provides that an employee suffering injury as a result of a knowing and intentional failure by the employer to provide this information is entitled to the greater of all actual damages or a specified sum not to exceed $4,000.  This bill would provide that an employee is deemed to suffer injury for purposes of this penalty if the employer fails to provide a wage statement or fails to provide a wage statement showing the name of the employee and the last four digits of the employee’s social security number or the employee identification number. 

An employee would also be deemed to have suffered injury if the employer fails to provide accurate and complete information, as specified, and the employee cannot “promptly and easily” determine from the wage statement alone the amount and manner in which the employer calculated the gross and net wages paid to the employee during the wage period, the deductions made to from the gross wages to determine net wages, and the name and address of the employer or legal entity that secured the employer’s services.   The bill defines “promptly and easily” as meaning a “reasonable person would be able to ascertain the information without reference to other documents or information.”

Recent amendments clarify that a “knowing and intentional failure” does not include an isolated and unintentional payroll error due to a clerical or inadvertent mistake.  This bill would also provide that the reviewing hearing officer or fact finder may consider as a relevant factor whether the employer, prior to the alleged violation, has adopted and is in compliance with a set of policies, procedures and practices which fully comply with Labor Code section 226. 

Status:  This bill is now pending in the Assembly.

Assembly Passes Bill Increasing Statutory Penalties for Wage and Hour Violations (AB 2099)

Currently, Labor Code section 1199 imposes a statutory fine of not less than $100 upon any employer or other person acting as an officer, agent or employee of an employer that does any of the following: (a) requires or causes any employee to work for longer hours than those fixed, or under conditions of labor prohibited by an order of the commission; (b) pays or causes to be paid to any employee a wage less than the minimum fixed by an order of the commission; or (c) violates or refuses or neglects to comply with any provision of this chapter or any order or ruling of the commission.  Citing the “inadequate” amount of this statutory penalty, this bill would increase the fine for a violation of this provision from at least $100 to not less than $250. 

Status: This bill is presently pending in the Senate.

Assembly Passes Bill Prohibiting Explicit Mutual Wage Agreements that Predetermine Overtime Compensation (AB 2103)

In Arechiga v Delores Press, Inc. (2011) 192 Cal.App.4th 567, a California court of appeal upheld an explicit written mutual wage agreement that pre-determined a non-exempt employee’s overtime compensation and included it as part of the employee’s salary.  The Arechiga court concluded Labor Code section 515 did not specifically invalidate such agreements and it declined to enforce the DLSE’s Enforcement Manual that held such agreements were impermissible following the enactment of Labor Code section 515 in 2000.  This bill would overturn Arechiga by amending Labor Code section 515 to provide that “payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee’s regular, non-overtime hours, notwithstanding any private agreement to the contrary.” 

Status: This bill recently passed the Assembly and now moves to the Senate where passage seems likely.

Assembly Passes Bill Altering Wage Garnishment Amounts (AB 1775)

Presently, a levy of execution upon the earnings of a judgment debtor is made by service of an earnings withholding order upon the debtor’s employer, with federal law limiting the amount of an employee’s earnings subject to such withholding orders.  This bill would amend these provisions to specifically enumerate in California’s Code of Civil Procedure the maximum amounts subject to such withholding orders, rather than requiring reference to federal law.  If enacted, the amount of an individual judgment debtor’s weekly disposable earnings subject to a garnishment shall not exceed 25% of the employee’s weekly disposable earnings or the amount by which the individual’s disposable earnings exceed 40 times the state minimum hourly wage in effect at the time the earnings are payable.

Status: This bill has passed the Assembly and is presently pending before the Senate Judiciary Committee.

Senate Unanimously Passes Bill Requiring DIR to Publicize Prevailing Wage Laws (SB 1370)

California law requires that workers employed on a public work, as defined, be paid not less than the general “prevailing rate” of per diem wages, as specified.  This bill would require the Director of Industrial Relations (DIR) to post a list of every California code section and the language of those sections that relate to the prevailing wage rate requirements for workers employed on a public work on the DIR’s website on or before June 1, 2013, and to update that list each February 1st thereafter.

Status:  This bill is now pending in the Assembly.

FEHA

Assembly Passes Bill Prohibiting Discrimination against Unemployed Applicants (AB 1450)

This bill would limit an employer’s ability to take employment actions relating to an individual’s “employment status,” defined as an individual’s “unemployment.”  Specifically, this bill would prohibit an employer, unless based upon a bona fide occupational qualification, from (a) refusing to consider an individual or offer employment because of the individual’s “employment status,” (b) publishing advertisements suggesting an individual’s current employment is a job requirement; or (c) directing an employment agency to take an individual’s employment status into account in screening or referring applicants for employment.  This bill would impose similar prohibitions on employment agencies.

The proposed bill would not prohibit employers or employment agencies from publishing job advertisements setting forth the lawful qualifications for the job, including but not limited to the holding of a current and valid professional or occupational license.  It would also not prohibit advertisements for job vacancies stating that only applicants who are currently employed by that employer will be considered (so-called “internal” hiring).  This bill would authorize civil penalties of $1,000 for the first violation, $5,000 for the second violation and $10,000 for each subsequent violation, enforceable by the Labor Commissioner.  Lastly, “state contracts” entered into after January 1, 2013, shall require compliance with these requirements, and failure to do so would be grounds for canceling, terminating, or suspending the contract and debarring the contractor from eligibility for future state contracts, as specified.

Recently adopted amendments clarify that employers would not be precluded from (a) obtaining information regarding an individual’s employment, the dates of employment, or the reasons for the separation from employment; (b) having knowledge of an employee’s employment status; (c) considering an employee’s employment history (as opposed to status) or the reasons underlying an employee’s employment status; (d) refusing to offer employment to a person because of the reasons underlying an individual’s employment status; or (e) otherwise making employment decisions pertaining to that individual.

Status: This amended bill passed the Assembly and is pending in the Senate.

Assembly Passes Bill Clarifying FEHA’s Religious Accommodation Requirements (AB 1964)

The FEHA precludes discrimination based on religion, and requires employers to reasonably accommodate “religious beliefs or observances,” which is presently defined to include observance of the Sabbath or holy days and reasonable travel time prior to and subsequent to a religious observance.  This bill would amend FEHA’s religious accommodation provisions to include the practice of wearing religious clothing or hairstyles (as defined) as a belief or observance.  “Wearing religious clothing or a religious hairstyle” would mean any of the following: (a) wearing religious apparel that is part of the observance of the religious faith practiced by that individual; (b) wearing jewelry or an ornament that is part of the observance of the religious faith practiced by that individual; (c) carrying an object that is part of the religious faith practiced by that individual; or (d) adopting the presence, absence or style or a person’s hair or beard that is part of the observance of the religious faith practiced by that individual.

This bill would specify that an accommodation is not reasonable if the accommodation requires segregation of an employee from customers or the general public.  As with disability accommodation, an employer does not have to adopt an accommodation posing an “undue hardship” and this bill would adopt for religious accommodation purposes the “undue hardship” factors used for disability accommodation analysis.  As recently amended, this bill specified that no accommodation is required if an accommodation would result in the violation of specified laws protecting civil rights.

Status:  This bill passed the Assembly and is pending in the Senate. 

Assembly Passes Bill Adding “Breastfeeding” to FEHA’s Protections (AB 2386)

The FEHA precludes discrimination based on sex, which is presently defined to include gender, pregnancy, childbirth and medical conditions related to pregnancy or childbirth.  This bill would add “breastfeeding and related medical conditions” to the FEHA’s definition of “sex” as protected categories for unlawful employment discrimination under state law.  In effect, this bill would supplement the lactation accommodation requirements contained in Labor Code sections 1030 through 1033, by prohibiting employers from discriminating or retaliating against female employees who express milk at work after they return from pregnancy disability or CFRA baby-bonding leave.  A recent amendment declares these changes would be declaratory of existing law, meaning they would apply retroactively.

Status: This bill passed the Assembly and is pending in the Senate.

Assembly Passes Bill Prohibiting “Family Caregiver Status” Discrimination (AB 1999)

As originally introduced, this bill would have amended FEHA to include “familial status” as an additional basis upon which the right to seek, obtain and hold employment cannot be denied.  “Familial status” would have been defined as an individual who is, who will be or who is perceived to be a family caregiver, with “family” meaning a child, a parent, a spouse, a domestic partner, a parent-in-law, a sibling, a grandparent or a grandchild. 

Responding to objections these definitions effectively covered every employee, this bill has been amended to prohibit discrimination against “family caregiver status” rather than “familial status.”  In turn, “family caregiver status” is defined as “an individual who provides medical or supervisory care to a family member.”

Status:  This bill has passed the Assembly and is pending in the Senate. 

Leaves of Absence

Assembly Passes Bill Expanding CFRA’s Leave Provisions (AB 2039)

California’s Family Rights Act (CFRA – Government Code section 12945 et seq.) generally authorizes eligible employees to take up to 12 weeks of job-protected leave in a year for (a) the birth or placement of a child; (b) to care for the employee’s parent, spouse, or child who has a serious health condition; or (c) to care for the employee’s serious health condition that prohibits them from performing the essential functions of their job.  This bill would expand these leave rights and, if enacted, create additional differences between CFRA and the federal Family Medical Leave Act (FMLA).

For instance, like the FMLA, CFRA presently defines “child” as an individual under the age of 18 or an adult dependent child.  This bill would eliminate the age and dependency status of a child, meaning employees would be eligible for CFRA leave to care for adult children.  This bill would also expand CFRA to allow employees to take leave to care for a sibling, grandparent, grandchild or parent-in-law with a serious health condition.  It would also specify that CFRA leave may be used to care for a “domestic partner” with a serious health condition, and adopt the Family Code’s definition of “domestic partnership” as “two adults who have chosen to share one another’s lives in an intimate and committed relationship of mutual caring.”  

Status: This bill has passed the Assembly and is pending in the Senate.

 Employee Relations/Privacy

Assembly Passes Amendments Regarding Employee Rights to Inspect Personnel Files (AB 2674)

Labor Code section 1198.5 presently provides that an employee has the right to inspect the personnel records the employer maintains relating to the employee’s performance or to any grievance concerning the employee.  This section presently requires the employer to permit inspection at “reasonable intervals” but does not specify whether former employees have inspection rights, and does not identify a particular time limit to comply or enumerate a specific penalty for non-compliance.  This bill would specify that both current and former employees have inspection rights, as do their representatives, and require an employer to permit inspection no later than 30 days after receiving a written request (unless mutually extended to 35 days from the original request).  This bill specifies that former employees would be entitled to one request per year to inspect or copy their records.

This bill would also require employers, upon an employee’s request, to provide copies of these records at a charge not to exceed the actual cost of reproduction within these same time frames.  For former employees, the employer may mail a copy of the records if the employee reimburses the employer for actual postal expenses.

This bill also outlines the procedures for inspecting or copying personnel files, and requires employers to develop a form that shall be made available upon verbal request to the employee’s supervisor or employer’s representative.  This bill also specifies that current employees will generally be permitted to inspect records where the employee works, whereas former employees may inspect at the location where the records are stored.  This bill also specifies that employers will be required to maintain personnel records for a period of not less than three years after termination of employment.

This bill specifies that these inspection rights would cease during the pendency of any litigation by a current or former employee relating to a personnel matter.  This bill would also provide alternative inspection/copying mechanisms involving former employees terminated for violations of law, or an employment-related policy involving harassment or workplace violence.

This bill would also permit a current or former employee or the Labor Commissioner to recover a penalty of $750 from the employer, and would further permit a current or former employee to obtain injunctive relief and attorneys’ fees.  

Status: This bill has passed the Assembly and is now headed to the Senate, and it does not appear to face much opposition.

Two Social Media Bills Move Forward (AB 1844 and SB 1349)

Consistent with the legislative trend at both the federal and state level, both these bills would prohibit employers from requiring applicants or employees to provide password or other information that would enable employers to access private social media maintained by the employee.  (SB 1349 would impose similar prohibitions on educational institutions regarding students and applicants).  Both bills respond to recent media reports that some schools and employers are requiring employees and/or students to divulge such information thus allowing the employer/educational institution access they could not otherwise obtain.  As presently drafted, these bills would not affect other screening devices (e.g., credit checks, etc.), nor preclude employers/educational institutions from accessing non-private social media.

Both bills appear to have fairly strong bi-partisan support and little opposition so passage of either or both seems likely, and both have recently been amended.  For instance, SB 1349 has been amended to clarify that employers/educational institutions would not be precluded from requesting (but not requiring) the employee/student to provide access to aid in a formal investigation regarding specific allegations of harassment, discrimination, intimidation or potential violence.  However, the employer/educational institution would not be permitted to discipline an employee/student who refused to disclose the requested information.  AB 1844 has been amended to delete the language that specified an employer has no legal duty to access social media as part of its background check regarding employees. 

(NOTE: Maryland has recently enacted the first bill prohibiting employers from requiring employees divulge such social media access information (S.B. 433, effective October 1, 2012) and other states are expected to similarly pass such bills shortly.  The Social Networking Online Protection Act (SNOPA) has also recently been introduced at the federal level.)

Status:  AB 1844 passed the Assembly unanimously on May 10, 2012, and now heads to the Senate.  SB 1349 has also overwhelming passed the Senate and is now pending in the Assembly.

Miscellaneous

Senate Passes Bill Invalidating Adhesion Contracts Precluding Consolidated or PAGA Actions (SB 491)

This recently-introduced and quickly-passed bill would provide that any term in a contract of adhesion purporting to waive the right to join or consolidate claims, or to bring a claim as a representative member of a class or in a private attorney general capacity shall be deemed to lack the necessary consent to waive that right and be void.  This bill would apply to such contractual provisions that are entered into on or after January 1, 2013.  Since this bill was amended and passed the same day, there is presently no published committee analysis, but this bill appears intended to sidestep recent judicial decisions upholding class action waivers in arbitration agreements.

Status: This bill passed the Senate and is now pending in the Assembly.

Senate Passes Bill Requiring Pension-Related Reporting for Retired Corporate Executive Officers (SB 1208)

Presently, domestic and publicly-traded corporations must annually file a report disclosing the compensation, as specified, of each board of director member and its five most highly compensated executive officers who are not members of the board, and its chief executive officer.   This bill would amend these requirements and instead require that a publicly traded corporation include in that report the “total compensation,” as defined, paid to each director, the principal executive officer, principal financial officer, and each of the three most highly compensated executive officers other than the principal executive officer or principal financial officer.  Publicly traded corporations would also be required to include the “total compensation” with respect to each of the corporation’s five most highly compensated retirees, and the names of those retirees.

Status: This bill passed the Senate and is now pending in the Assembly.

Assembly Passes Bill Imposing New Employer Requirements and Penalties to Combat Heat Illness in Agricultural Workers (AB 2346)

In 2005, California was the first state to adopt heat illness regulations and Cal-OSHA has subsequently worked with employers and employees on education and enforcement efforts.  Citing a concern that regulations by themselves are insufficient, this bill (known as the Farm Worker Safety Act) proposes a number of new rules and penalties related to heat illness and outdoor places of agricultural employment. 

Amongst other things, this bill would prescribe very specific duties on employers to reduce the risk of heat illness among agricultural employees, to be enforced by Cal-OSHA.  For instance, this bill enumerates very specific requirements concerning the amount of water and shade employers must provide (including the duty to provide and daily wash a canteen), as well as required breaks to drink water and take rest breaks in the shade.  This bill also would impose specified civil penalties (with amounts depending on the temperature and number of employees involved), and create a private right of action for violations.  This bill would also provide that directing an agricultural employee to work in violation of these provisions may constitute involuntary manslaughter requiring restitution up to $1,000,000 to the deceased worker’s family.

Status: This bill passed the Assembly and is now pending in the Senate.

JUDICIAL

California

Appellate Court Upholds Class Action Waiver in Arbitration Agreement, Suggesting the United States Supreme Court Decision in ConcepcionInvalidates the California Supreme Court’s Decision in Gentry

One of the more frequently litigated employment-related topics is the enforceability of mandatory arbitration provisions generally, and the enforceability of class-action waivers in such agreements specifically.  InGentry v. Superior Court (2007) 42 Cal.4th 443, the California Supreme Court held class action waivers would not be enforced against statutory employment claims if, based upon the various factors it enumerated, class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration.  While Gentry did not necessarily preclude class action waivers for FEHA and Labor Code claims, the appellate courts applying the Gentry standard have fairly uniformly invalidated the class action waivers, resulting in either class action arbitration proceedings, or class action state court proceedings.  (See e.g., Murphy v. Check ‘n Go of California, Inc.  (2007) 156 Cal.App.4th 138.)

However, in AT&T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740, the United States Supreme Court overruled another California Supreme Court case precluding class action waivers in the consumer context, and a debate ensued regarding Gentry’s continued viability post-Concepcion.  A recent decision by a California court of appeal held that Concepcion effectively overruled Gentry, providing some initial clarity on this subject, and likely increasing the prospect the California Supreme Court will reexamine Gentry, and potentially other arbitration-related issues, post-Concepcion.

In this wage and hour class action involving alleged overtime violations, the employer had attempted to enforce an arbitration agreement that contained an express class action waiver.  The California court of appeal concluded both the arbitration agreement and its class action waiver should be enforced on the grounds that Concepcion invalidated the Gentry test and that under the broad presumption of enforceability under the Federal Arbitration Act (FAA), the agreement should be enforced according to its terms.  The appellate court noted that the FAA preempts not only state laws that expressly prohibit arbitration of particular claims, but also invalidates state laws or decisions that appear to apply more broadly, but have the effect of disfavoring arbitration. 

Notably also, the appellate court next concluded that the National Labor Relations Board’s (NLRB’s) determination in D.R. Horton (2012) 357 NLRB No. 184 that such class action waivers violate the National Labor Relations Act (NLRA), did not affect the result in this case.  The court noted that the NLRB’s determination was not entitled to judicial deference since the NLRB was effectively interpreting the FAA, which was outside its jurisdiction and expertise, and the D.R. Horton decision was inconsistent with United States Supreme Court decisions interpreting the FAA.

Lastly, the appellate court held the class action waiver would also apply to representative actions under California’s Private Attorneys General Act (PAGA) for these Labor Code violations.  On this point, the court expressly disagreed with a contrary result by another California appellate court, which had held that Concepcion did not apply to “representative” actions (as opposed to class actions) and that a waiver of PAGA representative actions would be unenforceable under California law.  (See e.g. Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489).   While the California Supreme Court had not previously granted review in Brown, this split amongst the appellate court increases the likelihood of review being granted shortly.  (Iskanian v. CLS Transportation Los Angeles LLC (2012) ___ Cal.App.4th ___, 2012 Cal.App.LEXIS 650.)

(NOTE:  While this is a favorable result for employers who use arbitration agreements containing class action waivers, it seems likely the California Supreme Court will weigh in on this specific issue in the near term).

Another Arbitration Agreement Invalidated

As discussed in prior newsletters, California courts have held that employment agreements requiring arbitration of future disputes are potentially enforceable, but the practical reality is that employees almost always oppose enforcement and many courts have declined to enforce them.  In this case, a California appellate court declined to enforce the employer’s arbitration agreement, which had the practical effect of allowing these employees to proceed in court with their wage and hour class action.  Preliminarily, the court concluded the United States Supreme Court recent decision in AT&T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740 does not preempt California’s test for measuring unconscionability in employment arbitration agreements (first enunciated in Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83), and that this particular agreement was both procedurally and substantively unconscionable.

Applying Armendariz, the court found this arbitration agreement procedurally unconscionable because it was contained in paragraph 37 of a 38 paragraph agreement, the agreement was not translated even though the employer knew these Spanish speaking employees likely could not read the agreement, and the agreement referenced AAA’s rules for conducting future arbitrations but did not provide a copy of these rules.  In short, the court felt the employer had not done enough to ensure these employees understood the legal significance of this arbitration agreement.  The court also found the agreement substantive unconscionable because it materially limited the applicable statute of limitations (from three years to six months), it was not “mutual” in nature since the employer could still seek judicial relief for its claims, and it required the employees to reimburse a prevailing employer with its attorneys’ fees.  The court also declined to apply Illinois law given California’s interest in these types of claims, and it declined to sever these provisions on the grounds this agreement was “permeated” with unconscionability. (Samaniego v. Empire Today LLC (2012) 205 Cal.App.4th 650.)

“Partner” May Sue Partnership for FEHA Retaliation

A partner sued its general partnership for FEHA retaliation alleging she was removed from her position because she had reported that male employees were sexually harassing female employees.  The trial court dismissed her claim holding that her partnership status precluded her from maintaining a FEHA retaliation claim, but the California court of appeal reversed.   The appellate court noted that FEHA’s retaliation provision, section 12940 subsection (h), precludes retaliation “against any person” who opposes any unlawful discrimination or harassment, and that section 12925(d) defines “person” to include partnerships. 

The court also held that the California Supreme Court’s decision in Jones v.