California

The 2010 California legislative session saw fewer and less significant employment-related bills pass the Legislature and make it to the Governor.  And perhaps not unexpectedly in this election year, the Governor has again vetoed the vast majority of employment bills affecting private employers.  Indeed, most of the new laws enacted were very industry specific or were public sector bills generally concerning public sector benefits and will not be detailed at length in this newsletter.

However, some of the new bills potentially affecting private employers and taking effect January 1, 2011 include:

Additional Exemptions from Meal Period Requirements for Certain Unionized Industries (AB 569)

Labor Code section 512 enumerates California’s meal period requirements, generally requiring employers to provide thirty minute meal periods to employees working more than 5 and 10 hours unless waived by mutual consent.  This law amends section 512 and exempts from these meal period requirements employees (as defined in the statute) from construction occupations, commercial drivers, employees in the security services industry employed as security officers, and employees of electrical and gas corporations or local publicly owned electrical utilities. 

This exemption only applies under both of the following conditions: (1) the employee is covered by a valid collective bargaining agreement; and (2) the agreement expressly provides for the wages, hours of work, and working conditions of employees, and expressly provides for meal periods for these employees, final and binding arbitration  of disputes concerning meal period disputes, premium wage rates for all overtime hours worked, and a regular rate of pay not less than 30 percent more than the state minimum wage rate.  Newly added subsection (g) enumerates the definitions to determine whether employees in these particular industries qualify for this exemption.

Unemployment Insurance Eligibility for Domestic Violence Victims (AB 2364)

California law provides unemployment insurance benefits to eligible employees who are unemployed through no fault of their own.  Until this new law, these provisions contained a “good cause” exception allowing employees to retain their eligibility if they left employment to protect their “children” from domestic violence abuse.  This law amends this domestic violence “good cause” exception to specify that an employee retains their eligibility if they voluntarily left employment to protect their “family” (not simply “children” as under prior law) from domestic violence abuse.

Paid Leave Entitlement for Organ and Bone Marrow Donations (SB 1304)

California law had previously entitled state employees who had exhausted available sick leave to take up to 30 days paid leave for donating organs to another person, and up to 5 days paid leave for donating bone marrow to another person.  Known as the Michelle Maykin Memorial Donation Protection Act, this bill adds a new Labor Code provision (section 1508 et seq.) extending this public employee benefit to private employees. 

Private employers with 15 or more employees will be required to provide up to 30 days of paid leave per year for an organ donation to another person in any one year period, and up to 5 days of paid leave per year for a bone marrow donation to another person in any one year period.  Leaves taken under new Labor Code section 1508 may be taken in one or more periods.  Employees seeking such leaves must provide written verification to the employer that he or she is an organ or bone marrow donor and that there is a medical necessity for the organ or bone marrow donation.

This leave will not be considered a break in continuous service for purposes of the employee’s right to salary adjustments, sick leave, vacation annual leave or seniority.  Such leaves shall also not be taken concurrently with FMLA or CFRA-related leaves.  Employers may require as a condition of an employee’s initial receipt of such leaves that an employee take up to five days of accrued sick or vacation leave for bone marrow donations and up to two weeks of earned and unused sick or vacation leave for organ donations, unless prohibited by a collective bargaining agreement provision.

Employers must also restore an employee returning from such leaves to the same or equivalent position (i.e., similar seniority status, pay and benefits) held by the employee when leave commenced.  As with other leaves, employers need not reinstate employees because of conditions unrelated to the underlying leave. Employers are also prohibited from interfering with employees taking such leaves or retaliating against employees from taking such leaves.  Employees will be able to enforce violations of these leave rights through a private right of action.   

New Human Trafficking Disclosures for Large Retailers and Manufacturers Beginning in January 2012 (SB 657)

This law, known as the California Transparency in Supply Chains Act of 2010, will require large retail sellers and manufacturers (i.e., having annual worldwide gross receipts exceeding one hundred million dollars) doing business in California to publicly disclose their efforts to eradicate slavery and human trafficking from their supply chains.  Business subject to these disclosure requirements will be required to conspicuously post on their internet website their efforts to prevent trafficking, including the statutorily-enumerated minimum disclosures contained in new Civil Code section 1714.43, subsection (c).  Please note, that the new disclosure requirements begin January 1, 2012, not 2011.

Vetoed Employment-Related Bills

As mentioned, the Governor vetoed most employment-related bills affecting private employers, including:

AB 482 which would have limited employer usage of credit reports for employment-related decisions.  This is the third time the Governor has vetoed similar credit check prohibitions, but several other states have recently enacted such prohibitions and the federal Congress is considering a similar bill (H.R. 3149).  A similar bill will likely be re-introduced in California in 2011.

AB 1881 which would have increased the amount of liquidated damages employees may recover for minimum wage violations.

AB 2187 which would have created new criminal penalties for persons or employers who willfully fail to pay final wages upon termination.

AB 2340 which would have entitled eligible employees to three days unpaid bereavement leave, and permitted employees to initiate civil actions against employers who violated these new rights.  The Governor vetoed this “well intentioned” law, just as he had in 2009, citing a concern about creating new grounds for lawsuits.

AB 2468 which would have created a new designation (“Breast-Feeding Mother Friendly Worksite”) for employers to use in their promotional material upon certification by the Labor Commissioner.

AB 2773 which would have required an award of attorney’s fees in all FEHA cases, even when the plaintiff received only nominal damages not exceeding the jurisdictional limit for unlimited civil cases ($25,000).  This bill would essentially have abrogated the California Supreme Court decision in Chavez v. City of Los Angeles(2010) 47 Cal.4th 970 which held trial courts have the discretion to deny attorneys’ fees to  FEHA plaintiffs receiving a verdict less than $25,000.

SB 145 which would have prevented a workers’ compensation apportionment determination from considering an employee’s race, religious creed, color, national origin, age, gender, marital status, sex, or genetic characteristics.  The Governor vetoed this bill for the second year citing a concern it would undermine California’s workers’ compensation apportionment reforms of 2004.

SB 1474 which would have altered the procedure for union certification elections in the agricultural industry by allowing “card check” signatures rather than secret ballot elections.

Proposition 19 May Impact Employer’s Marijuana Policies

Known as the “Regulated, Control and Tax Cannabis Act of 2010,” Proposition 19 would permit individuals over 21 years of age to possess and consume (but not sell) up to one ounce of cannabis.  Although not specifically targeted at employers, this proposition could potentially affect employers.

In 2008, the California Supreme Court held in Ross v. Ragingwire Telecommunications, Inc. (2008) 42 Cal.4th 920, that Proposition 215, which had legalized medicinal marijuana, did not require employers to accommodate medical marijuana usage because Proposition 215 did not address employers, and because federal law prohibited medical marijuana.

Proposition 19 does not mention Ross, but it does include a provision specifically addressing employers.  If passed, it would add a new provision, Section 11304, to California’s Health and Safety Code prohibiting discrimination against any person lawfully engaging in any conduct permitted by this act (i.e., possessing or consuming up to one ounce of cannabis).  This new section, however, would not affect “the existing right of an employer to address consumption that actually impairs job performance by an employee.”  In other words, employers could not discriminate against (i.e., discipline) employees who possess or consume limited amounts of cannabis, including presumably shortly before or during work breaks, and likely cannot conduct “reasonable suspicion” based testing simply for consumption, but employers can discipline if the employee’s consumption “actually impairs” their performance.  Notably also, unlike Proposition 215 which legalized only medical marijuana, Proposition 19 appears to legalize marijuana for all purposes, not simply medicinal.

Federal

Congress Reintroduces Paycheck Fairness Act and Bill Targeting Independent Contractor Misclassifications 

Just before the Congress recessed before the upcoming midterm elections, it reintroduced two bills reflecting the administration’s priorities, and speculation arose these bills may see quick action after these elections. The first bill, known as the Fair Playing Field Act of 2010 (H.R. 6128/S.3786), seeks to prevent independent contractor misclassification through increased guidance provided by the federal government, and stepped-up tax penalties for employers who misclassify employees as independent contractors.  The White House has already signaled support for this bill, which is fairly similar to the Employee Misclassification Prevention Act (H.R. 5107/S.3254) presently stalled in Congress (and detailed in prior newsletters).

The second bill, the Paycheck Fairness Act (S.3772), would amend portions of the FLSA/Equal Pay Act, by increasing available remedies (i.e., punitive damages) and limiting employer defenses for pay differentials.  The White House has also signaled its support for this bill, which is fairly similar to the Paycheck Fairness Act of 2009 (H.R. 1338) that also is presently stalled in Congress. 

AGENCY

California

REMINDER: New Workers’ Compensation Posting Requirements Take Effect on October 8th, 2010

Pursuant to regulations adopted by the California Division of Workers’ Compensation (DWC) in June 2010, employers must post and begin using new workers’ compensation-related information by October 8, 2010 or face statutory fines and penalties.  Specifically, by October 8, 2010, employers must post the new “Notice to Employees – Injuries Caused by Work” (DWC 7 Form) poster.  This poster must be displayed in both English and Spanish and be posted in a conspicuous location frequented by employees.  A copy of this new poster is available at www.dir.ca.gov/dwc/forms/DWCForm7_2010.pdf. 

Beginning October 8, 2010, employers must also begin using the revised DWC Claim Form 1/Notice of Potential Eligibility reflecting these recently amended regulations.  A copy of this updated form is available atwww.dir.ca.gov/dwc/forms/claimform2010.pdf.  Beginning October 8, 2010, employers must also distribute a new “Your Rights to Workers’ Compensation Benefits” pamphlet to all new employees who start work on or after that date. 

These regulations also impose new requirements upon employers utilizing a Medical Provider Network (MPN).  For instance, employers must create an MPN Notice and post it next to the revised DWC 7 Form, and provide a copy of this updated MPN Notice to employees injured on or after October 8, 2010.  These regulations also outline new requirements, including notice requirements, for employers implementing, changing or terminating an MPN.  A copy of the new “Notice of MPN Plan Modification Form” is available atwww.dir.ca.gov/dwc/forms/MPN_materialmodification_Oct2010.pdf.  These regulations outline some changes concerning the content and distribution of MPN-related notices, including allowing MPN notices to be distributed electronically, requiring MPN contact e-mail address to be included in notices and eliminating the 14-day MPN implementation and change of MPN notice period.

The DWC has posted electronically “Answers to Frequently Asked Questions about Medical Provider Networks” atwww.dir.ca.gov/dwc/mpn/DWC_MPN_FAQ.html.  A complete set of the MPN regulations is also available at www.dir.ca.gov/dwc/dwcpropregs/MPNReg.htm.

FEHC Releases Proposed Modifications to Pregnancy-Related Regulations

The Fair Employment and Housing Commission (FEHC) has recently released its notice of proposed changes to regulations 7291.2-7291.17 concerning pregnancy, childbirth or related medical conditions.  As explained in greater detail in the FEHC’s Notice of Proposed Rulemaking dated April 16, 2010, these proposed amended regulations are intended to update the FEHC’s pregnancy regulations to conform to statutory changes to the FEHA.  These regulations are also intended to provide additional clarity and guidance to employees and employers on preventing pregnancy-related discrimination and identifying potential reasonable accommodations.

Consistent with this stated intent, the recently unveiled proposed regulations provide additional clarification concerning the pregnancy provisions definitions, including “disabled by pregnancy,” “intermittent leave,” “reasonable accommodation” and “related medical condition.” These proposed regulations would further clarify, in a new subsection, that pregnancy-related harassment is unlawful. 

The full-text of these recently unveiled proposed regulations are available in clean and red-lined format (highlighting the proposed changes) on the FEHC’s website at www.fehc.ca.gov/act/pregnancyregulations.asp.  The short written comment period concerning these proposed modifications has now expired, and a final proposed set of regulations is expected shortly.

Federal

New Drug Testing Custody and Control Forms for DOT-Regulated Employers Effective October 1, 2010

The Department of Health and Human Services (HHS) recently issued a new Federal Drug Testing Custody and Control Form (CCF) for use in both federal employee and Department of Transportation (DOT) drug testing programs.  Beginning October 1, 2010, DOT-regulated employers may begin using the new CCF form, a copy of which may be downloaded through the HHS’s website atwww.reginfo.gov.   Employers may continue using the prior CCF form until September 30, 2011, provided they make certain notations on the old form as described in the Interim Final Rule referenced below.

On September 27, 2010, the DOT published an Interim Final Rule providing instructions on how to complete the new CCF form (and the old form through September 2011), and making a technical amendment to laboratories concerning the mandatory reporting of confirmed positive drug/drug metabolite quantifications to Medical Review Officers.  This proposed Interim Final Rule is contained in the Federal Register at 49 CFR Part 40.  The DOT will accept comments concerning the Interim Final Rule until October 27, 2010, but since the new CCF Form is already in use, the DOT is requesting comments about the actual implementation of the new CCF rather than the form itself.  Written comments may be submitted through www.regulations.gov and following the online instructions.

NLRB Upholds Display of Stationary Banners Outside Secondary Employer’s Business

A business sued a union under the National Labor Relations Act (NLRA) after the union’s members displayed a large stationary banner announcing a “labor dispute” and seeking to elicit “shame on” the business or persuade customers not to patronize the business.  Significantly, the business was not in a “labor dispute” with this union, but rather it was a client of another business who was in a labor dispute with this union.  This so-called “secondary employer” sued under NLRA Section 8(b)(4)(ii)(b) which makes it an unlawful labor practice for unions to “threaten, coerce or restrain” secondary employers to dissuade them from doing business with the primary employer (i.e., the employer with whom the union has a dispute).

In a sharply-divided 3-2 decision, the National Labor Relations Board (NLRB) concluded the peaceful stationary display of a banner outside a secondary employer does not violate the NLRA’s prohibitions against “secondary boycotts.”  The NLRB majority concluded the NLRA does not preclude all forms of union protest activity directed at a secondary employer, but only prohibits conduct that “threatens, coerces or restrains” the secondary employer.  The majority observed that while ambulatory picketing (i.e. parading protest signs) might be unlawful as against a secondary employer, the stationary display of a large banner did not constitute picketing because it was generally non-confrontational.  The majority also suggested displaying a banner constitutes a form of speech (akin to hand billing) protected by the First Amendment, as opposed to ambulatory picketing which is a form of conduct potentially regulated by the NLRB.  The sharply-worded dissent stated bannering is an impermissible secondary boycott under the NLRA.  (United Brotherhood of Carpenters and Joiners of America, Local Union 1506 and Eliason & Knuth of Arizona, Inc. (2010) 355 NLRB 159.) 

JUDICIAL

California

California Supreme Court Grants Review Concerning Union Access to Private Property for Picketing Purposes

The California Supreme Court has granted review in Ralph’s Grocery Co. v. United Food and Commercial Workers Union Local 8 (discussed in July newsletter) in which an appellate court invalidated two California laws (the Moscone Act and Labor Code section 1138.1) restricting an employer’s ability to enjoin union protests on its property during a labor dispute.  The California Supreme Court has not yet published the exact issue to be determined, but presumably it will involve these particular provisions as well as potentially larger First Amendment issues concerning union speech on otherwise employer private property. 

Employee Requiring Cane to Walk Deemed Disabled Under the FEHA, and Employer’s Failure to Document Performance Issues Precludes Summary Judgment

A former employee filed age and disability discrimination claims under the Fair Employment and Housing Act (FEHA) citing, amongst other things, that he had been terminated days after his 60th birthday and his supervisor had made several negative comments about his use of a cane following a stroke.  The trial court granted summary judgment in the employer’s favor finding the employee was not disabled under FEHA and that the employer had articulated a legitimate business reason (e.g., performance issues) for his termination.  The California court of appeal reversed, noting the heavy summary judgment burden facing employers generally and the various factual issues presented by the evidence.

The appellate court first noted that walking is a major life activity and that under FEHA’s relaxed standard for disability purposes (“limits” a major activity versus “substantially limits” as under federal law), an individual requiring a cane to walk is physically disabled under California law.  The court also raised questions about the employer’s claim the employee had performance issues warranting termination, noting his performance evaluations had generally been favorable with no major criticisms, and various other cited-concerns were not mentioned to management prior to his termination.  The court also noted that a supervisor’s alleged inquiry about when the employee would “get rid of the cane” and a threat to terminate the employee if he “didn’t make a full recovery” might constitute direct evidence of discriminatory animus.  However, the court also stated that simply asking the employee how old he was and wishing him a “happy 60th birthday” did not constitute direct evidence of age-related bias.  Lastly, the court declined to apply the so-called “same actor” presumption against discrimination when the same individual is involved in favorable and unfavorable actions towards the plaintiff, noting in this case plaintiff had suffered a stroke during his employment.  (Sandell v. Taylor-Listug, Inc. (2010) 188 Cal.App.4th 297.)

Labor Code Does Not Preempt Municipal Ordinance Requiring Hotels to Pass Mandatory Service Charges to Employees. 

Service workers sued their hotel employers to enforce a Los Angeles ordinance requiring all non-unionized hotels surrounding Los Angeles Airport to pass along the hotels’ mandatory service charges to workers who render services for which the charges were collected.  Los Angeles had enacted this ordinance citing a concern service workers had seen their incomes decline because hotel customers assumed the hotels’ service charges were already being passed along to the service workers.  The California Court of Appeals rejected the hotel employer’s argument that Labor Code sections 350 through 356 (dealing with gratuities) preempted the ordinance.  The court noted the Ordinance governs service charges, not gratuities, and therefore did not conflict with the Labor Code.  The court also observed the Labor Code outlines the employees’ ownerships in gratuities, but does not address the employers’ entitlement to service charges, which were not gratuities.  The court also rejected the hotel employers’ various constitutional challenges to the ordinance.  (Garcia v. Four Points Sheraton LAX (2010) 188 Cal. App. 4th 364.)

Federal

Male Employees Not Required to Endure Female Co-Worker’s Sexual Harassment

A male employee sued for Title VII sexual harassment after his employer failed to respond to his multiple complaints about unwelcome sexual conduct by a female co-worker.  The employee had identified fairly serious and repeated sexual conduct by his female co-worker, but his managers had not responded suggesting he should be flattered by the attention and joked he should sing “I am too sexy for my shirt.”  The Ninth Circuit Court of Appeals  reversed summary judgment in the employer’s favor raising questions about the adequacy of the employer’s response.

The court reiterated that Title VII protects male employees from sexual abuse by female employees, and that employer’s cannot discount a male employee’s sexual harassment complaints simply because men generally or some male co-workers might be flattered by a female employee’s sexual interest.   The court also noted that Title VII is not a general civility code and, citing modern realities of office romances, observed employers are not necessarily liable simply because a co-worker asks another co-worker out.  However, this female co-worker’s overt sexual advances were sufficiently severe and pervasive that it potentially created a hostile work environment, and this male employee had repeatedly complained to the employer who had not properly responded, thus requiring a jury trial to resolve.  (EEOC v. Prospect Airport Services, Inc. (9th Cir. 2010) ___ F.3d ___, 2010 U.S.App.LEXIS 18447.)

Newspaper Reporters Do Not Qualify for “Creative Professional” Exemption, and Employer Failed to “Provide” Meal Periods

In this Fair Labor Standards Act (FLSA) class action, the Ninth Circuit Court of Appeals concluded that reporters at the Chinese Daily News, a Chinese-language newspaper, did not qualify for the “creative professional” exemption and were therefore improperly denied overtime by their newspaper employer.  The court noted that this exemption is generally narrowly construed and requires an employee’s primary duty to be the “performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical or physical work.”  The court also cited a Department of Labor regulation that most journalists will not qualify for this exemption which is reserved for journalists contributing a “unique or creative interpretation or analysis to a news product” as opposed to journalists who collect and organize information that is already public.  The court concluded these reporters for a fairly small newspaper primarily provided “standard recounts of public information” rather than engaging in “sophisticated analysis” or “investigative interviews.”

Regarding these employee’s meal period claims, the court concluded that regardless of how Brinker is ultimately decided, this employer had not “provided” the required meal periods.  The court noted these employees never were provided an opportunity to take sustained off duty meal periods even if they had wanted given their long and harried hours, their tight deadlines, and the fact they carried required pagers all the time.  In short, the employer had no evidence (time cards, etc.) suggesting these employees ever took meal periods, and the court concluded their job’s circumstances effectively precluded them from taking breaks.

The appellate court also concluded the district court acted properly in invalidating the “opt outs” from the class action on the grounds the employer’s coercive actions (e.g. terminating two class representatives, threatening others, and posting signs suggesting employees should opt out) probably explained the inordinately high 90% opt out rate from the class.  Lastly, the court concluded the FLSA does not preempt a section 17200 unfair competition claim.  (Wang v. Chinese Daily News (9th Cir. 2010) ___ F.3d ___, 2010 U.S.App.LEXIS 19929.)

Ninth Circuit Clarifies “Successor in Interest” for FMLA Eligibility Purposes

An employee sued under the Family Medical Leave Act (FMLA) against the employer who had hired her after purchasing her former bankrupt employer’s leasehold premises, claiming her new employer was her former employer’s “successor in interest” thus allowing her to combine her service periods with both employers to meet the FMLA’s 12-month eligibility requirement.    Generally, an employee is not eligible for the FMLA’s protections until he or she has worked for a particular “employer” for 12 months, but the term employer “includes . . . any successor in interest to an employer.”

While the FMLA does not define the term “successor in interest,” the Department of Labor (DOL) has issued a regulation enumerating the following factors to be considered in determining successor liability for the predecessor’s violations: (1) substantial continuity of the same business operations; (2) use of the same plant; (3) continuity of the work force, (4) similarity of jobs and working conditions; (5) similarity of supervisory personnel; (6) similarity in machinery, equipment and production methods; (7) similarity of products or services; and (8) the ability of the predecessor to provide relief.  No single factor is dispositive, and courts must examine the circumstances in their totality, and balance the policies underlying the FMLA and the affected parties’ interests.

Applying these factors, the Ninth Circuit Court of Appeals concluded the subsequent employer was not a “successor in interest” under the FMLA, meaning this employee had not worked the required 12 months to be eligible for leave from the subsequent employer.  Although the subsequent employer had purchased the prior employer’s lease and rehired several former employer employees, the other factors did not support successor in interest liability.  For instance, the subsequent employer had substantially reconfigured the leased premises prior to commencing its operations, its operations and product line were materially different than the prior employers, it brought in the majority of its own employees, and even the Plaintiff’s job title and duties were differ