| Legal Updates |
2012 California Employment Law Newsletter. Click on newsletter to read about significant changes in
employment laws for California employers.
Additional New Employment Laws for 2012
California employers must be prepared to comply with these and other bills that impact employment law. Most of the new laws signed
by Gov. Brown take effect January 1, 2012. This does not give employers much time to come into compliance. Contact us to find out
what procedures you need to implement and what policies you need to update before the start of the New Year.
WAGE THEFT PREVENTION ACT of 2011 – PAY RATE NOTICES REQUIRED
AB 469 amends and adds several sections to the California Labor Code. Significantly, employers should note the new Labor Code
section 2810.5 which requires an employer to provide each new nonexempt employee with a written notice at the time of hire
containing the following:
(1) pay rate, basis (whether hourly, salary, commission etc.) and overtime rate,
(2) if applicable, allowances claimed as part of the minimum wage, including meal or lodging
(3) regular paydays designated by employer
(4) name of the employer, including any DBAs used by employer
(5) the physical address and telephone number of employers main office or principal place of business, and a mailing address, if
different, and
(6) the name, address and telephone number of the employer’s workers’ compensation carrier.
Changes to any such information must be set forth in a written notice to employees within 7 days of the changes, unless the changes
are reflected on a wage statement or other writing required by law to be provided. The Labor Commissioner has been tasked with
creating a template for employers to use in compliance with the new notice requirements. Employers should take steps to promptly
implement the new notice requirements. These requirements do not apply for exempt employees, but if the employee is misclassified
as exempt than this adds yet another issue for employers that are found liable for misclassification. We can help you ensure your
employees are properly classified and can help you draft notices that comply with these new requirements for nonexempt employees.
Contact our office for assistance.
In addition, this bill contains several provisions which create new penalties or increase existing penalties for violations. For instance,
any employer who pays employees less than the minimum wage proscribed by the applicable California wage order is subject to
paying the employee restitution of wages. The law also increases the statute of limitations for the DLSE to collect penalties from 1 to
3 years.
GENDER IDENTITY AND EXPRESSION AS PROTECTED CLASSES
AB 887 updates the definition of gender to also mean a person’s gender identity and gender expression. Gender expression is
modified to mean a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s
assigned sex at birth. The new law amends the Fair Employment and Housing Act, the Unruh Civil Rights Act, and other
nondiscrimination laws to include gender identity and expression as distinct protected classes. The updates make it clear that
discrimination on the basis of gender identity and expression is prohibited. Employers must allow an employee to appear or dress in a
manner consistent with the employee’s gender expression. Employers should review and update any uniform, dress and appearance
policies.
NO DISCRIMINATION OF HEALTH PLAN COVERAGE
Current laws require health care service plans and health insurance policies to provide coverage to registered domestic partners of
employees and/or policyholders that are equal to the coverage provided to the spouse of those persons. This new law provides that
health plans may not discriminate between spouses or domestic partners of a different sex and spouses or domestic partners of the
same sex.
E-VERIFY NOT REQUIRED UNDER CALIFORNIA LAW
The E-Verify Program of the United States Department of Homeland Security enables employers to use the program, voluntarily, to
verify employees authorized to work in the U.S. AB 1236 prohibits the state (or city or county) from requiring employers to use an
electronic employment verification system, such as E-Verify, unless required by federal law or as a condition to receive federal funds.
The law bars making the use of E-Verify a condition of receiving a California government contract or a California business license.
However, federal legislation that conflicts with this bill is currently pending. If passed, the federal Legal Workforce Act could trump
California law on this issue and force employers nationwide to use a system like E-Verify. For the time being, California employers
have the right to choose, but be on the lookout for updates and changes in the future.
INTERFERENCE OR RESTRAINT OF EMPLOYEE LEAVE UNDER MOORE-BROWN-ROBERTI FAMILY RIGHTS ACT
The Moore-Brown-Roberti Family Rights Act makes it an unlawful employment practice for employers to deny a request by an eligible
employee to take up to 12 workweeks of unpaid protected leave during any 12-month period (1) to bond with a child who was born to,
adopted by, or placed for foster care with, the employee (2) to care for the employee’s parent, spouse, or child who has a serious
health condition, or (3) because the employee is suffering from a serious health condition rendering him or her unable to perform the
functions of the job. AB 592 will make it unlawful for an employer to interfere with, restrain, or deny the exercise of, or the attempt to
exercise, any protected rights under the Family Rights Act.
WAGE STATEMENTS FOR FARM LABOR CONTRACTORS
Employers are required to give employees itemized wage statements listing several required items. AB 243 expands the information
that must be included on itemized wage statements, but only for Farm Labor Contracts. The new law requires farm labor contractors
to disclose in the itemized statement the name and address of the legal entity that secured the employer’s services. Willful violation
of the bill’s provisions will be a crime. The bill amends Section 226 of the Labor Code.
New Requirements for Requesting Consumer Credit Reports. Click here for information on consumer credit reports.
Client Alert - Changes to SBA 504 Debt Refinance Program
We thought you might be interested to know that the SBA recently announced revisions to the 504 debt refinance
program. The revisions have been approved and published in the federal register, effective October 12, 2011. The
new rules finalize the interim rules that implemented the Small Business Jobs Act of 2010, which authorized
projects approved for financing under Title V of the Small Business Investment Act to include the refinancing of
qualified debt.
Major changes to the final rules include:
• Banks will no longer be required to loan 50% of appraised value
• Cash out will be allowed for eligible business expenses up to 90% of equity including the debt that is being
refinanced
• Loans that are in deferment and current will be eligible for refinance
If you are interested in learning more, the National Association of Development Companies recorded a webinar on
the Major Revisions to 504 Debt Refinance on October 17, 2011. It will be available to download at www.nadco.org
on November 1, 2011.
Also, here is a link to published rules: http://www.gpo.gov/fdsys/pkg/FR-2011-10-12/html/2011-26311.htm
Client Alert - Employers Must Now Provide Health Benefits for Pregnancy Disability
Existing law prohibits an employer, with five or more employees, from refusing to allow a female employee who is
disabled by pregnancy, childbirth, or a related medical condition to take a leave of absence from work for a
reasonable time of up to four months. Prior to SB 299, employees on pregnancy disability leave were entitled to the
same benefits provided to employees on other types of disability leave. SB 299 amends Section 12945 of the
Government Code and makes it an unlawful employment practice for employers to refuse to maintain and pay for
coverage under the employer’s group health plan for an employee who takes leave under this section. This bill
becomes effective January 1, 2012. Many employers limit the continuation of health coverage for employees on
leave. With this new law, California employers must extend the continuation period up to four months for pregnancy
disability leaves and provide the same group health benefits on the same terms as if the employee was reporting to
work. There are a few limited circumstances where the employer can recover the premium. Contact us to learn
more about how this law affects you.
Client Alert - Commission Agreements Must Be In Writing
Existing law required employers, who had no permanent or fixed place of business in California and who entered
into employment contracts involving commissions as a method of payment, to provide employees with written
commission agreements outlining how commissions are computed and paid. On October 7, 2011, Gov. Brown
signed AB 1396 which amends Labor Code Section 2751. Now the requirement for written commission
agreements is applicable to all employers doing business in California. This means that all California employers
who enter into a contract of employment involving commissions must set forth, in writing, the specific details
regarding the commission payment schedules and how commissions are calculated. Under this new law,
employers must also give a signed copy of the contract to the employee and obtain a signed receipt for the contract
from the employee. Commission agreements can be simple or complicated, but many employers fail to include
several key provisions and definitions that should be included. Failure to consider and include such key provisions
opens employers up to unnecessary risk of costly litigation. If you pay your employees a commission, you must
have a written commission agreement by January 1, 2013. Contact us for details on drafting clear and lawful
commission agreements to ensure compliance with these new requirements.
Client Alert - NLRB Postpones Effective Date for New Posting Requirement
The National Labor Relations Board (“NLRB”) has postponed the November 14, 2011 effective date of its new
posting rule that requires union and non-union employers to notify employees of their rights under the National
Labor Relations Act (“NLRA”). This notice requirement goes into effect January 31, 2012. In its October 5 news
release, the NLRB stated that the postponement was intended to allow for “enhanced education and outreach to
employers, particularly those who operate small and medium sized businesses.” Failure to post the notice after
January 31, 2012 is considered an unfair labor practice. You can obtain a copy of the notice from the NLRB’s
website at http://www.nlrb.gov/poster.
Client Alert: Bath & Body Works Pays Employee $70,000 to Settle Sexual Orientation Harassment Case
On August 3, 2011, the Department of Fair Employment and Housing (DFEH) announced the settlement of a
workplace sexual orientation harassment claim against Limited Brand Store Operations, Inc. and Bath & Body
Works, LLC for $70,000.
The male employee alleged that his female supervisor harassed him based on his sexual orientation. He
claimed that she “drew pictures of male genitals, which she hung in the store’s back room, told his co-workers
that he liked kissing boys, and falsely claimed that his attitude was affecting the work environment.” The DFEH
alleged that, although another store manager witnessed the harassment and the employee complained to the
district manager, Bath & Body Works failed to stop the harassment, ultimately forcing the employee to quit.
In addition to paying the settlement amount, Bath & Body works must provide training to its supervisors,
provide training to all new hires, display posters informing employees of their rights, and retain copies of all
harassment and discrimination complaints.
This case is a good reminder for smaller employers that even the big companies have improper practices and
that allegations of harassment must be investigated and resolved.
Client Alert: IRS Increases Mileage Rate to 55.5 Cents per Mile
The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final
six months of 2011. The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011,
through December 31, 2011. This is an increase of 4.5 cents from the 51 cent rate currently in effect.
It is not required that employers use the IRS rate, but it is recommended so that businesses don’t have to
calculate the actual expense. In California, employers have a duty to reimburse employees for business
expenses, which includes reimbursing employees who drive their own vehicles for business purposes.
Client Alert: Wal-Mart Class Action Certification Denied
In a win for employers, on June 20, 2011, the Supreme Court overturned a ruling from the Court of Appeal, and
found that class-action status was not appropriate for a sex-discrimination lawsuit.
In Wal-Mart, 3 current or former employees sued the retail giant, claiming that the company discriminated
against them on the basis of their sex by denying them equal pay or promotions in violation of Title VII of the
Civil Rights Act. The workers claim that the local managers’ discretion over pay and promotions is exercised in
favor of men and that Wal-Mart is aware of this effect and did not take any action. The workers also claim that
the discrimination is common to all Wal-Mart’s female employees.
In order to bring a class action, there must be a question of law or fact that is common to all class members
under Federal Rule of Civil Procedure 23. Wal-Mart has a non-discrimination policy and gave pay and promotion
authority to managers at the local store level. The court said that in a company of Wal-Mart’s size and
geographical scope, it is unlikely that all managers would exercise their discretion in a common way without
some common direction from Wal-Mart. The court stated that the employees didn’t show that Wal-Mart
directed managers to make discriminatory pay or promotion decisions in a common way. The employees
sought to sue about literally millions of employment decisions at once. The court held that the claim for
backpay was “individualized”. Wal-Mart is entitled to individualized determinations of each employee’s
eligibility for backpay.
Client Alert: Workplace Misconduct Caused by Mental Disability is Not Protected
On April 13, 2011, the California Court of Appeal found that terminating an employee based on workplace
misconduct that is related to a mental disability does not amount to discrimination in Wills v. Superior Court.
In Wills, a court clerk had bi-polar disorder. During a manic episode, the court clerk threatened police
department personnel with physical harm and sent threatening and inappropriate email messages to co-
workers at their work email addresses. The employee was terminated for the misconduct. She sued the
court, claiming that she was terminated for conduct related to her mental disability. The Fair Employment and
Housing Act (FEHA) protects employees from discrimination based on mental disability and bipolar disorder,
among other things. The court found that an employer may distinguish between disability-caused misconduct
and the disability itself in the narrow context of threats or violence against coworkers. The court stated that
employers must provide a safe working environment for its employees. This interpretation of FEHA allows
employers to provide the safe working environment while protecting employees with a disability. The court
noted that this is not a situation where in the misconduct impacts the employee’s job performance,
necessitating an accommodation.
Client Alert: Oral Workplace Complaints Are Protected Under Labor Law
On March 22, 2011, the US Supreme Court found that employees are protected from retaliation when they voice
complaints about workplace violations, even if the employee fails to provide a written complaint in Kasten v.
Saint-Gobain Performance Plastics Corp.
In Kasten, an employee orally complained about the location of time clocks, stating that the employee didn’t get
paid for dressing in required protective gear. The employee was later terminated for failing to record his time.
The employee sued, claiming that he was fired in retaliation for making a complaint about the time clocks. The
employer claimed that the anti- retaliation provisions of the Fair Labor Standards Act only covered written
complaints, not oral complaints. The statue says that an employee is protected if he has “filed any complaint.”
The court interpreted the word ‘filed’ broadly and found that an oral complaint is protected. The court stated
that a “narrow interpretation would undermine the Act's basic objective, which is to prohibit ‘labor conditions
detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general
well-being of workers’”.
Client Alert: Updates to Arbitration Provisions in an Employment Agreement
Over the last year, several cases have been reported where the courts have ruled significant changes are
required to arbitration language in employment agreements in order for the arbitration provision to be
enforceable. In addition, a new ruling in AT&T Mobility LLC v. Concepcion (2011 WL 1561956), permits the use of
class action waivers in employment agreements. If your employment agreements have not been revised in the
last year and you want to be able to enforce arbitration, please contact Jennifer McClain at Jennifer@mrjlaw.
net or any of our attorneys at (714) 972-2333, for a revision of your agreement.
Client Alert: Repeal of 1099 Reporting Provision
There is good news for business as a new reporting requirement that was enacted as part of the healthcare
reform has been repealed. On April 14, 2011, President Obama signed H.R. 4, to retroactively repeal the
expansion of 1099 information reporting requirements.
The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011
eliminates a provision of the Patient Protection and Affordable Care Act that requires businesses to file IRS
form 1099 for any payments totaling $600 or more in a year that are made to another business in exchange for
goods and services. This means that the 1099 rules revert to the same reporting rules that existed before the
healthcare reform legislation.
Client Alert: Penalties for Meal Periods and Rest Breaks
On February 16, 2011, the Court of Appeal found that an employer that fails to provide meal and rest periods
could be liable for 2 separate premium payments per day, one for meal periods and one for rest periods, rather
than 1 premium payment for failure to provide meal and rest periods in United Parcel Service v. Superior Court
(CA2/8 B227190).
CA Labor Code § 226.7 requires an employer who fails to provide an employee with a meal or rest period, to pay
that employee one additional hour of pay, which is called a premium payment, for each work day that the meal
or rest period is not provided.
In UPS, employees filed a suit against their employer, seeking compensation for missed meal and rest periods.
The court stated that the Industrial Wage Commission's wage orders treat meal periods and rest periods in
separate sections, each providing the additional hour of pay per work day for the designated type of violation.
Together, the sections provide, among other things, that employees are entitled to an unpaid 30-minute meal
period after working for five hours and a 10-minute rest period per four hours of work. The court stated that if
there was not an additional premium wage when the second type of violation occurs, it would encourage an
employer to require an employee who has missed a ten-minute rest break to also miss his or her lunch period.
The Court of Appeal held that the statute permitted up to two premium payments per workday, one for failure to
provide one or more meal periods, and another for failure to provide one or more rest periods.
Client Alert: FLSA/Outside Salesmen
On February 14, 2011, the United States Court of Appeals found that pharmaceutical sales representatives
were exempt from the Fair Labor Standards Act's (FLSA) overtime provisions in Christopher v. SmithKline
Beecham (9th Cir. 10-15257). In SmithKline, a sales representative’s job is to get a commitment from a doctor
that the doctor will prescribe the product to patients when it is appropriate. Tasks include visiting a doctor’s
office, building relationships with doctors, explaining the benefits of the product, and providing samples to the
doctors. Former sales representatives sued their employer for wage claims, including unpaid overtime. The
sales reps claimed that they were mere promoters of the product since they are legally prohibited from directly
selling the product; therefore, the employees were not exempt under the outside sales person exemption. The
pharmaceutical company urged the court to take a broad view of the term “sell”, in light of the restrictions on
direct sales in the pharmaceutical industry.
The court stated that the primary duty of a sales rep is not promoting the products in general or schooling
physicians in drug development; that these are but preliminary steps toward the end goal of causing a
particular doctor to commit to prescribing more of the particular drugs in the sales reps drug bag. The court
found that work performed incidental to and in conjunction with the employee's own outside sales or
solicitations shall be regarded as exempt outside sales work. The court held that the employee receive their
commissions in lieu of overtime and enjoy a largely autonomous work-life outside of an office. The
pharmaceutical industry's representatives share many more similarities than differences with their colleagues
in other sales fields, and held that they are exempt from the FLSA overtime-pay requirement
Client Alert: Independent Contractors vs Employees
On January 31, 2011, the Court of Appeal in Arzate v. Bridge Terminal Trans. (CA2/8 B219335) found that the
various factors that are used to determine whether a worker is an independent contractor or an employee
cannot be applied mechanically as separate tests, they are intertwined and their weight depends often on
particular combinations.
In Arzate, truck drivers that transported cargo between ports and the business’s customers alleged that they
were employees and brought wage claims against the business. The business claimed that the workers were
independent contractors. There were factors to support the claim that the workers were independent
contractors, such as the workers received a 1099 tax form for the payments on the lease of their trucks,
workers drove their own trucks and paid the related expenses, could have leased more than one truck to the
business and hired other drivers, could decline a dispatch, and decided when and where to take meal and rest
breaks. However, factors that indicated that the workers could have been an employee were that a written
agreement stated the workers were employees, the business issued W-2 forms to the workers for driving
each haul, the business withheld taxes from these payments, offered health plan benefits, and the workers
performed work that was part of the core business.
The court of appeal reversed the lower court decision to grant a summary judgment in favor of the business
and ordered the court to deny the motion. The court stated that considering the totality of the evidence, a court
might reasonably conclude that the workers were employees of the business.
2011 California Employment Law Newsletter: Click on the newsletter to read about important changes in
employment laws for California employers.
Client Alert: Repayment of Training Costs
On November 19, 2010, the Court of Appeal found that a city did not violate the minimum wage provisions of the
FLSA when it required a police officer to repay a portion of her training costs when she voluntarily left the city’s
employment before completing 5 years of service in Gordon v. City of Oakland (9th Cir. 09-16167).
Under the Fair Labor Standard Act (FLSA), employers must pay their employees at least the federal minimum
hourly wage every workweek. 29 U.S.C. § 206.
In Gordon, a city had a policy that as a condition of employment, a police officer would sign an agreement that if
the officer voluntarily quit before working for 5 years, the officer would repay a portion of the cost of the police
academy training. An officer quit after less than 2 years of service and was required to repay a portion of the
training. The officer alleges that the City violated the minimum wage provisions of the FLSA by requiring her to
reimburse it for part of her training costs. The officer did not allege that she was not paid minimum wage (as
the statute she is relying on provides), but instead she alleged that her payment to the City for a portion of her
training costs is an illegal “kick-back” payment. The law provides that wages cannot be considered to have
been paid by the employer unless they are paid finally and ‘free and clear,’ meaning that the employee does not
‘kick-back’ directly or indirectly to the employer part of the wage.
The district court dismissed Gordon’s complaint for failure to state a claim. The court of appeal concluded that
the training cost was a voluntary loan that the officer accepted and it was not a kick-back.
Client Alert: Failure to Prevent Harassment
On October 21, 2010, the Fair Employment and Housing Commission found an employer liable for failure to take
all reasonable steps to prevent discrimination in Dept. Fair Empl. & Hous. v. Lyddan Law Group (Williams) No. 10-
04-P, FEHC Precedential Decs. 2010. However, the commission stated that while the acts that were
complained about were inappropriate, they did not rise to the severe or pervasive standard for harassment and
also found that no retaliation had occurred.
In Lyddan, a paralegal was employed by an attorney for approximately 6 years, during which the attorney made
derogatory comments about people of various races and about women, and sent derogatory jokes and
comments via e-mail. The work relationship soured after an issue with an annual bonus and accusations by
the lawyer that the employee was gossiping. The employee resigned and filed a claim against the employer.
The employer did not have a written policy against harassment and did not have any training regarding
harassment or discrimination prevention. Under CA Government Code § 12940(k), an employer must take all
reasonable steps to prevent discrimination and harassment from occurring.
The Fair Employment and Housing Commission found that the email messages with jokes and comments, the
verbal comments, and the hand gestures were inappropriate but were legally insufficient to amount to the
requisite severity that would give rise to a hostile work environment. There was no support for the claim that
the employee’s work environment was hostile as a result of the inappropriate acts. The commission required
that the employer undergo training to prevent sexual harassment.
Client Alert: Family Medical Leave Act- Successor in Interest
The Court of Appeal recently addressed the issue of when a new employer is a “successor in interest” to a
former employee under the Family and Medical Leave Act (FMLA) in Sullivan v. Dollar Tree Stores (9th Cir. 08-
35413). Under the FMLA, an employee is not eligible for FMLA leave until he or she has worked for an employer
for at least 12 months, and the term “employer” includes any successor in interest of an employer.” 29 U.S.C. §
2611(4)(A)(ii).
In Dollar Tree, an employee requested leave to care for her mother. Some leave was granted, but not all of the
requested leave was granted. Shortly afterward, the employment was terminated. The employee claimed that
she was entitled to FMLA, and the employer said she had not worked the required length of time to be eligible
for FMLA. The employee argued that her employer, the Dollar Tree, was a successor in interest of her former
employer, Factory 2-U, and thus the employee was eligible for FMLA. Factory 2-U had sold the lease of the store
to Dollar Tree and closed down. The Dollar Tree did not buy any assets of Factory 2-U. Dollar Tree reconfigured
the store, stocked it with Dollar Tree merchandise, and hired all new workers (only 1 other Factory 2-U
employee went to work for Dollar Tree.)
The court stated that the employee is not entitled to FMLA benefits because her new employer, for whom she
worked for less than 12 months, is not a successor in interest of her former employer. The court applied the 8
factors established by the Department of Labor to determine whether a company is a successor-in-interest
and concluded that, while some factors slightly suggested successorship, on balance successorship had not
been established. Factors that the court noted were that when the Dollar Tree opened its store, it brought in its
own employees, trained employees in its own methods, changed the employee’s job title and responsibilities,
and brought in new stock and product. Employers should be aware of potential successor liabilities when
purchasing or merging with another entity.
Client Alert: Mental Disability and Accommodations
On October 19, 2010, the Fair Employment and Housing Commission found an employer liable for failure to
engage in the interactiive process with an employee who had a disability and ordered an award of $89,863.70
($14,863.70 in back pay and $50,000 in emotional distress damages for the employee; and $25,000 in
administrative fine to the General Fund), plus affirmative relief of postings and training for management
personnel regarding reasonable accommodation in Dept. Fair Empl. & Hous. v. Avis Budget Group (Reed) (Oct.
19, 2010) No. 10-05-P, FEHC Precedential Decs. 2010. Under CA Government Code § 12940(m), an employer
must make a reasonable accommodation for the known physical or mental disability of an employee. Under §
12940(n), an employer must engage in a timely, good faith, interactive process with an employee to determine
any effective reasonable accommodations.
In Avis, an employee had post traumatic stress disorder, which is a mental disability, and requested a reduced
shift of 6 hours as an accommodation. Avis placed the employee on unpaid leave and requested medical
documentation. She timely provided the documentation requested, including the diagnosis, the reasons for the
accommodation, and why it would allow her to perform the essential functions of the job. Avis was not satisfied
with the documentation and requested a blanket release of all of her medical records, including years of
psychiatric records that detailed sexual and other physical and mental abuse. The employee declined to
provide the release and Avis did not engage the employee by discussing the need for additional documentation,
the inadequacy of the information supplied, or give her an opportunity to provide more documentation.
Approximately 5 months after the employee was placed on unpaid leave, Avis obtained an independent medical
opinion consistent with the opinion of the employee’s doctor and granted the accommodation. However, she
had requested a 30 hour workweek and she was only given 16 hours a week, which was made her a part-time
employee. A month later, Avis laid off 4 employees due to site closings and a reduced seasonal need, and the
employee was one of the employees selected for the lay off.
The Fair Employment and Housing Commission stated that the reduced schedule is a form of accommodation
that the FEHA expressly provides may be a reasonable accommodation. It stated that placing the employee on
5 months of unpaid leave, then making a unilateral decision to return her to a 16-hour schedule which cut her
pay and exposed her to layoff while rejecting, without explanation, her doctor‘s reasonable accommodation
request, violated the employer‘s duty to reasonably accommodate the employee. The employer also failed to
engage in the interactive process to determine an appropriate accommodation.
Client Alert: Multimillion Dollar DFEH Settlement
On November 30, 2010, the Department of Fair Employment and Housing (DFEH) announced that it would settle a
class action lawsuit filed against Verizon for improper family medical leave practices. Verizon has agreed to
pay up to $6,011,190.00 to current and former California employees. The lawsuit alleged that Verizon denied or
failed to timely approve employees’ requests for leave for their own serious health condition, to care for a
family member with a serious health condition, or to bond with a new child under the California Family Rights
Act (CFRA). The DFEH also alleged that Verizon fired some employees for violating Verizon's attendance policy
when they missed work for a CFRA-qualifying reason. Verizon agreed to revise its policies, implement training
for managers and HR, and to submit regular updates to the DFEH regarding compliance. This settlement is the
largest settlement in the history of the DFEH, and is pending court approval.
This case is a good reminder for smaller employers, that even the big companies have improper practices.
Business should not just follow an ‘industry-wide standard practice’ that may not be correct.
Client Alert: DFEH Disability Settlement
On October 7, 2010, the Department of Fair Employment and Housing (DFEH) announced an out-of-court
settlement of a disability discrimination claim filed against The Permanente Medical Group (TPMG) for refusal to
accommodate and unlawful termination. In this claim, a nurse suffered a disability that was initially
accommodated. The employee had surgery, desired to return to work, and requested additional
accommodations, which were approved by her doctor. The employer refused to allow the employee to return
to work, but instead, placed her on a permanent leave of absence. The DFEH required the employer to reinstate
the employee, to pay her $210,000.00 for lost wages and emotional pain and suffering, and to provide training
for managers regarding disability discrimination prevention.
Client Alert: Waiting Time Penalties
On November 18, 2010, the California Supreme Court ruled that a 3-year statute of limitations applied for wage
penalties and held that certain penalties are not recoverable as restitution in Pineda v. Bank of America, N.A. (SC
S170758). Under CA Labor Code §§ 201, 202, when an employee is terminated, final wages are generally due
and payable immediately. Section 203 provides that if an employer willfully fails to pay the final wages, the
employer is subject to a penalty of one day of wages for each day late, up to 30 days. In Pineda, an employee was
paid 4 days after his termination, so he was paid late. The employee sued to receive pay for the penalty under §203
(but he did not sue to recover wages, as he was already paid). Under CCP § 340, a 1-year statute of limitations
applies to actions to recover penalties but CCP § 338 provides for a 3-year statute of limitations to recover wages.
The trial court incorrectly held that a 1-year statute of limitation applied under CCP §340 and that the employee sued
after the 1-year statute had expired. The Court of Appeal upheld the decision. The California Supreme Court
reversed the Court of Appeal and found that an action for a late payment penalty was subject to same statute of
limitations as final wage claim, which is 3 years. The court also stated that the waiting time penalty is not
recoverable as restitution under Unfair Competition Law (UCL).
Client Alert: FLSA and Accommodations
On November 18, 2010, the Court of Appeal found for the employer when it determined that reduced pay may be
appropriate when accommodating a schedule request in Parth v. Pomona Valley Hosp. Medical Center (9th Cir. 08-
55022). Under the Fair Labor Standard Act (FLSA), hospitals and certain other institutions must pay its employees
at one-and-one-half times the employees' regular rate for any employment in excess of 8 hours in any workday and
in excess of 80 hours in a 14-day period. 29 U.S.C. § 207(j). In Parth, a hospital scheduled its nurses to work an 8
hour shift. Many nurses requested a 12 hour shift so they could have more days off. In response, the hospital
offered an optional 12 hour shift schedule that paid a lower wage. The lower wage was intended to make up for the
cost of paying time and a half. The nurses would still make about the same amount of money regardless of which
shift they worked.
The nurse sued, alleging that the hospital violated the FLSA by creating a pay plan that paid nurses working 12-hour
shifts a lower base hourly rate than nurses working 8-hour shifts. The court found for the employer and stated that
when an employer changes its shift schedule to accommodate its employees’ scheduling desires, the employer
may reduce the employee pay rate to pay its employees the same wages they received under the former schedule,
so long as the rate reduction was not designed to circumvent the provisions (including overtime) of the FLSA. This
case will have a limited application so we advise that you consult counsel regarding pay changes for various shifts.
33.
Client Alert: Workers Comp Changes
Effective October 8, 2010, employers in California must comply with new workers’ compensation notice
requirements. The California’s Division of Workers' Compensation (DWC) regulations require all employers to
post a new notice titled, “Notice to Employees – Injuries Caused by Work” in a conspicuous location frequented by
employees. In addition, employers must distribute a new "Your Rights to Workers' Compensation Benefits"
pamphlet to all new employees who start work on or after October 8. Employers must also use the revised DWC-1
Claim Form/Notice of Potential Eligibility, when a potential workplace injury arises. Employers that use a medical
provider network (MPN) must create a MPN Notice to post and distribute to injured employees. Failure to comply by
the deadline can result in fines of up to $7,000 in civil penalties. The DWC-1 form here and additional information
here.
Proposition 19 - Legalizes Marijuana
Proposition 19 is a California ballot proposition which will be on the November 2, 2010 California statewide ballot.
It allows people that are 21 years old or older to possess, cultivate, or transport marijuana for personal use. State
and local governments could authorize, regulate, and tax commercial marijuana-related activities under certain
conditions. These activities would remain illegal under federal law.
Employers are concerned about passing Proposition 19 because it limits an employers’ ability to address
marijuana use to situations where job performance is actually impaired. Currently, employers may have a zero-
tolerance drug policy and employers may terminate an employee that is under the influence of marijuana at work.
Under Prop 19, an employer can’t take any action if an employee is under the influence at work unless it affects the
employee’s job performance.
Because the proposition is ambiguous in some aspects, if it passes, it is sure to create additional litigation in the
workplace
Employer Alert: Stray Remarks Doctrine
On August 5, 2010, the California Supreme Court favored employees and limited the use of the “stray remarks
doctrine” in discrimination cases in Reid v. Google, Inc. (SC S158965). Under this doctrine, a statement by a non-
decision-maker, such as a co-worker, or a statement that a decision maker makes outside of the decisional
process, is deemed “stray,” and is irrelevant and insufficient as evidence of discriminatory intent.
In Google, an employee was terminated and sued Google for age discrimination. The employee was hired when
he was 52 years old and fired when he was 54 years old. The employee’s claim was based in part on negative age-
related comments made by employees (other than his supervisor) in the workplace. The employee alleged that his
co-workers said he was ‘slow’, ‘fuzzy’, ‘sluggish’, ‘lethargic’, and called him ‘old guy’, ‘old fuddy-duddy’ and other
derogatory names.
The trial court dismissed the case on summary judgment, holding that the employee’s claim of “stray remarks” by
non-decision makers was not sufficient evidence of discrimination to merit a trial. The Court of Appeals reversed
the decision and held that the evidence of stray remarks was admissible. The California Supreme Court agreed
with the Court of Appeal and rejected strict application of the stray remarks doctrine. The court stated that stray
remarks may be considered, along with other evidence, in evaluating whether an employee has demonstrated that
discrimination was the reason for an adverse employment decision.
Employer Alert: Misclassification of Employees as Contractors
Are your workers properly classified? Under pressure from a slow economy, more companies are switching to
hiring independent contractors instead of employees, to eliminate pay for overtime, medical benefits, vacation, and
other benefits. In addition, independent contractors can be less expensive as they are not eligible for
unemployment benefits, workers compensation, and other regulations that protect employees. Beware that if
employees are misclassified, the short term savings will be outweighed by the cost in the long run.
Multiple government agencies are spending more resources to pursue employers that have misclassified workers
as independent contractors. President Obama’s federal budget for the 2011 fiscal year includes $25 million for the
Department of Labor for a Misclassification Initiative designed to target employer who misclassify workers. The
IRS began its National Employment Tax Research Project in February 2010, in which the IRS will audit 6,000
employers to examine employment information related to misclassification.
Employers should carefully review any contract worker relationship to determine whether the worker is properly
classified. There are a number of factors that are considered when determining classification, including whether
the employer exerts control over how the work is done, whether the worker has a license or certification for the work,
the amount of skill required for the work, the method of pay, whether the work performed is part of the regular
business, who provide the tools, and the degree of permanence of the relationship. If you have independent
contractors, it is important that you have a written contractor agreement with the worker to set forth the terms of hire.
Employer Alert: Non-Compete Agreements
On July 30, 2010, the California Court of Appeals upheld the strong policy against non-compete agreements in
Silguero v. Creteguard, Inc., Case No. B215179.
In Silguero, an employee signed a confidentiality agreement with her employer FST, which prohibited her from all
sales activity for 18 months after her termination. She was terminated a few months later and she subsequently
found a new job with a competitor, Creteguard. FST informed Creteguard of the confidentiality agreement and
asked Creteguard to honor the non-compete. Creteguard terminated the employee and stated in writing: “Although
we believe that non-compete clauses are not legally enforceable here in California, [Creteguard] would like to keep
the same respect and understanding with colleagues in the same industry.” The employee sued Creteguard for
wrongful termination in violation of California’s public policy against non-compete agreements.
The court found that an employer may be held liable for terminating an employee based on an unenforceable non-
compete agreement with a former employer. Even though the new employer was not a party to the non-compete
agreement and did not draft the agreement, the new employer was liable to the employee on a wrongful termination
claim because it honored the unenforceable agreement. The court stated that public policy provides for open
competition and employee mobility.
Employers should not use non-competition agreements and employers should use caution and seek counsel
when presented with a request from a former employer to restrict an employee’s work.
OSHA Heat Illness Requirements
As the weather heats up, it is important to review your heat illness prevention policies to make sure you are in
compliance with California Division of Occupational Safety and Health (Cal/OSHA) requirements.
The Heat Illness Prevention Standard is set forth in the California Code of Regulations § 3395, which requires all
employers to take 4 steps to prevent heat illness for workers who are outdoors:
1. Training. Provide heat illness prevention training to all employees, including supervisors.
2. Water. Provide enough fresh water so that each employee can drink at least 1 quart per hour and encourage
them to do so.
3. Shade. Provide access to shade for at least 5 minutes of rest when an employee believes he or she needs a
preventative recovery period. They should not wait until they feel sick to do so.
4. Written Procedure. Develop and implement written procedures for complying with the heat illness prevention
standard.
Client Alert: FMLA Expanded to Non-Traditional Families
On June 22, 2010, the Wage and Hour Division of the U.S. Department of Labor issued interpretation letter No.
2010-3, which expanded the definition of "son or daughter" under the Family and Medical Leave Act (FMLA) beyond
the traditional legal or biological parent-child relationships.
FMLA entitles an eligible employee to take up to 12 weeks of job-protected leave, in part, due to the birth of a son or
daughter of the employee and in order to care for such son or daughter, for the placement of a son or daughter for
adoption or foster care, and to care for a son or daughter with a serious health condition. 29 U.S.C. § 2612(a)(1)(A)
- (C); 29 C.F.R. § 825.200. The definition of "son or daughter" under FMLA includes not only a biological or adopted
child, but also a "foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis". 29 U.S.C. §
2611(12).
The Department concluded that the term “In Loco Parentis” can include an adult with no legal or biological
relationship to a child, when that adult provides day-to-day care, responsibilities, or financial support. The letter
specifically points to its application for unmarried partners, same-sex partners, or grandparents that are primary
caregivers.
An employer’s procedure to verify an employee’s relationship with a child after a request for FMLA leave does not
change. The employer should require the employee to provide “reasonable documentation” or a “statement of the
family relationship.” 29 C.F.R. § 825.122(j). A simple statement asserting that the requisite family relationship
exists is all that is needed where there is no legal or biological relationship.
Employment Alert: Privacy in Employee Communications
On June 17, 2010, in a narrow win for employers, the California Supreme Court ruled in Ontario v. Quon (US 08-
1332 6/17/10), that a city police department did not violate an officer's right to privacy by reviewing personal text
messages he sent on a city-owned pager.
In Quon, a police department issued pagers to employees. The department required employees to pay any
charges that were over the plan limit or overage charges. A supervisor told employees that the department would
not read the content of the text messages if the employees paid for the overage charge. The lower court found that
the supervisor gave employees a reasonable expectation of privacy in the messages by his statements. The
Supreme Court reversed, stating that "because the search was reasonable, [the city] did not violate [the employee's]
Fourth Amendment rights, and the court below erred by concluding otherwise." The court found that city reviewed
the text messages for the legitimate purpose of determining the efficacy of existing character limits so the search
was reasonable.
However, employers are cautioned that not all searches of employee communications are permitted. The court
states: "Prudence counsels caution before the facts in the instant case are used to establish far-reaching premises
that define the existence, and extent, of privacy expectations enjoyed by employees when using employer-provided
communication devices. Rapid changes in the dynamics of communication and information transmissions are
evident not just in the technology itself but in what society accepts as proper behavior. ...At present, it is uncertain
how workplace norms, and the law's treatment of them, will evolve." All employers should have a policy regarding
the use of company technology.
Client Alert: HIRE ACT
On March 18, 2010, the Hiring Incentives to Restore Employment (HIRE) Act was enacted to provide incentives for
employers to hire workers impacted by the economy. Employers who hire workers who were previously
unemployed or only working part time, between February 3, 2010 and January 1, 2011, may qualify for a payroll tax
incentive. Employers will be exempt from their share of Social Security taxes on wages paid to these workers after
March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits,
and employers would still need to withhold the employee’s share of Social Security taxes, as well as income taxes.
Additionally, employers may claim a general business tax credit, up to $1,000 per worker, for each worker retained
for at least a year, when they file their 2011 income tax returns.
Employer must get an affidavit from each eligible new hire certifying that he or she was unemployed during the 60
days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-
day period. Employers can use the Form W-11 to meet this requirement. Do not file this form with the IRS, just
retain it with your tax records.
Client Alert: COBRA Subsidy Extended Again
On April 15, 2010, President Obama signed the Continuing Extension Act of 2010 that continues the 65% COBRA
subsidy for 15 months for qualifying individuals who lost their jobs. The COBRA subsidy will now cover qualified
individuals who are involuntary terminated on or before May 31, 2010. Employers are required to notify former
employees and their dependents of the retroactive relief. Employers should work with their health plan
administrator to amend their current COBRA notice to include the subsidy information and notify the eligible
employees. Employers should also establish and implement administrative procedures to ensure compliance
with the new COBRA provisions.
Family Medical Leave Act -Covered Employers
Did you know that even if you don't have any employees eligible for FMLA, you could still be a covered employer, and
would be obligated to follow certain notice provision? Click here to read more regarding the requirements for a
covered employer.
DFEH Research
UCLA and Rand did a study regarding California employment discrimination law and its enforcement. A
discrimination lawsuit under the FEHA or Title VII cannot be filed until the plaintiff has filed a complaint with either
the DFEH or the EEOC and obtained from one of these agencies a “right to sue” letter. Thus, nearly all enforcement
of anti discrimination laws takes place through the processing of individual complaints. The following are statistics
regarding the claims filed and the outcomes of claims. For every 1 million employees in California, about 1,000
employment discrimination complaints are filed each year. Of these 1,000 complaints, approximately:
250 will be filed with the EEOC. Of these:
o 50 will result in a median settlement of $7,500. We did not examine other outcomes of EEOC charges.
750 will be filed with the DFEH, of which:
o 375 will be accompanied by a request for an immediate “right to sue” letter, in most cases on the advice
of lawyers, and not pursued further by DFEH.
▫ Of these, 165 will result in cases being filed in Superior Court, of which about 2 will reach a jury
verdict. Of these:
- 1 will be a verdict for the employer.
- 1 will be a verdict for the employee, in a median amount of $205,000.
▫ We have very limited information about those that are settled after issuance of a right to sue letter
but without reaching a jury trial.
o 375 will be processed administratively by the DFEH, of which:
▫ 73.5 will be rejected for investigation.
▫ 33 will be dismissed for reasons unrelated to case merits.
▫ 34 will end when the complainant requests a "right to sue letter" during the course of the
investigation.
▫ 20 will be dismissed after a preliminary investigation finds insufficient evidence.
▫ 165 will be dismissed because DFEH finds insufficient probable cause to believe that a violation
has occurred.
▫ 46 will be settled or resolved during the administrative process. Of these:
- 27 will receive a median benefit of $4,000.
- 3 will receive some other relief, most often the dissemination of information by the employer
or
the posting of a DFEH poster.
- 16 will produce benefits or other outcomes not recorded in the DFEH data.
▫ 3.5 will be sent to the DFEH Legal Division for possible issuance of an accusation before the Fair
Employment and Housing Commission (FEHC) or settlement.
▫ 2.6 will result in an accusation being filed with the FEHC
▫ 0.2 will result in a published decision by the FEHC.
The full study can be found here: California Employment Discrimination Law and Its Enforcement: The Fair
Employment and Housing Act at 50
Sick Leave Policies and Kin Care
In a recent case, McCarther v. Pacific Telesis Group, 48 Cal.4th 104, the Supreme Court of California held that the
'kin care' regulation does not apply to paid sick leave policies that provide for an uncapped number of paid days off.
Click here for more information.
Trade Secrets
In a recent case, Perlan Therapeutics v. Super. Ct. (Nexbio, Inc.) (CA4/3 G042205 11/5/09), the California Court of
Appeal ruled that a company attempting to protect their trade secrets did not properly identify the trade secrets at
issue.
In Perlan, a biotech company's founders left Perlan and formed a competitor, NexBio. Perlan brought an action
against the two former employees claiming the employees had misappropriated its trade secrets. California
discovery statutes require that a plaintiff bringing an action for misappropriation of trade secrets file a trade secret
statement before beginning discovery of the trade secrets. The statement must identify with "reasonable
particularity" the trade secrets that are alleged to have been misappropriated. The trial court found that Perlan's
statement lacked the necessary particularity, and granted the defendant employees an order that precluded
discovery until Perlan provided sufficient identification of its claimed trade secrets. The Court of Appeal affirmed. In
conclusion, employers should take steps to protect their trade secrets during litigation. Employers should also
identify their trade secrets and review their policies to keep the trade secrets confidential.
2010 California Employment Law Newsletter: Click on the Newsletter to read about important updates in
employment law for California employers.
2009 California Employment Law Newsletter: Click on the Newsletter to read about important updates in
employment law for California employers.
2008 California Employment Law Newsletter: Click on the Newsletter to read about important updates in
employment law for California employers.
Red Flag Rules
Red Flag requirements that implement the federal Fair and Accurate Credit Transactions Act, (“FACTA” or “FACT
Act”) are mandatory as of November 1, 2008. This act requires creditors to develop and implement a written Identity
Theft Prevention Program to detect, prevent, and mitigate identity theft in connection with the opening of certain
accounts or certain existing accounts and securely disposing of that information when it is no longer needed. Click
here to read more information and click here to see the FTC's 26 red flag guidelines.
Sexual Harassment Training Requirements
California law requires all supervisors to receive at least two hours of sexual harassment prevention training that
must include information regarding federal and state sexual harassment laws, harassment prevention and
correction, and remedies available to victims. The law applies to all organizations with 50 or more employees.
Sexual harassment prevention training is recommended for all businesses.
Click here to see the Final Proposed Sexual Harassment Training & Education Regulations
As Adopted by the Fair Employment and Housing Commission on November 14, 2006.
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