EMPLOYMENT AND LABOR LAW: LEGAL UPDATE FOR CALIFORNIA EMPLOYERS

December 08th, 2017/By Admin/In Blog, SBSBLOG, Uncategorized

Topics for this Month include:

– Reminders of laws that go into effect on January 1

– “Escalated” Compensation for Employees Returning from Military Leave

– Temporary Layoffs and California WARN Act

– Closely Held Corporation Owners Can be Liable as “Joint Employers”

– And more!

LEGISLATIVE/REGULATORY UPDATE

The new year is rapidly approaching.  Here are a few reminders of changes that go into effect on January 1, 2018:

  • Minimum wage in California increases to $10.50 per hour for employers with 25 or less employees and $11.00 per hour for employers with 26 or more employees.  (This also means the salary threshold for exempt employees will increase to $43,680 for small employers and $45,760 for larger employers.)
  • Employers will no longer be permitted to ask job applicants about their past salary history, and must provide applicants pay scale information upon request.
  • Employers with 5 or more employees will no longer be permitted to ask job applicants about past criminal convictions until after a conditional offer of employment.
  • Employers with 20-49 employees within a 75-mile radius in California will be required to provide employees who meet the CFRA requirements up to 12 weeks of unpaid parental leave within the first year of the birth, adoption or foster placement of a child.
  • New restrictions on immigration enforcement and notice and posting requirements go into effect.
  • Management harassment training will need to include information on gender identity, gender expression and sexual orientation.

Other things to look out for in 2018:

  • H.R.3441 (Save Local Business Act): The House of Representatives passed a bill to amend the FLSA and NLRA to narrowly define a “joint employer” as one who directly, actually, and immediately exercises significant control over the essential terms and conditions of employment. This bill is now pending in the Senate.
  • ICE announced plans to increase its workplace inspections by four or five-fold.  Make sure you have I-9s for all of your employees, and that you are using the most current version (revised July 17, 2017) when completing a new form.
  • OSHA pushed back the deadline to electronically file injury and illness reports (Injury Tracking Application) to December 15, 2017, but there is speculation that this deadline may be extended further.
  • The DOL has extended the transition period to implement the “fiduciary rule” for retirement account advisers to July 1, 2019.

SIGNIFICANT CASE LAW

Employee Returning from Military Leave is Entitled to “Escalated” Compensation

In Huhmann v. Federal Express Corp., the plaintiff was an airline pilot and a member of a collective bargaining unit.  Union members were promised bonuses in certain amounts based on their position if the next collective bargaining agreement was ratified. Before ratification, the plaintiff was called to active duty and deployed for over three years.  Upon his return, the plaintiff returned to his employment at FedEx, and received a bonus in the amount of $4,700.  The plaintiff sued under the Uniformed Services Employment and Reemployment Act (“USERRA”), contending that if he had not gone out on military leave, he would have received a larger bonus of $17,700 because he would have been in a different position at that time.

To determine whether an employer violated USERRA, a court applies the “escalator principle” and the “reasonable certainty test.”  The “escalator principle” provides that a service member should be returned to the position of employment in which the employee would have been employed if the employment had not been interrupted by the military service (i.e., the employee’s “escalator” career trajectory), including benefits.  The “reasonable certainty test” looks at the reasonably certainty of obtaining that level of employment absent the military service.  In this case, the district court found, and the Ninth Circuit agreed, it was reasonably certain that had the plaintiff not been on active duty, he would have been in the position that provided for the greater bonus and, therefore, was entitled to the higher amount.

Temporary Layoffs are Subject to California WARN Act

In The Int’l Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers v. NASSCO Holdings Inc., NASSCO temporarily reduced its labor workforce for about 30 days due to a lull in work.  About 90 employees were laid off without advanced notice.  The union sued for violation of the California Worker Adjustment and Retraining Notification (“WARN”) Act.  Under the federal WARN Act, layoffs are defined as being out of work for six months or longer.  However, in analyzing the language of the California WARN Act, the Fourth Appellate District found that a “layoff” is defined as a “separation from the position,” and not necessarily separation from the employment relationship itself, and there is no specified length of time that the separation must last.  Thus, even a temporary work stoppage can trigger California WARN Act notice requirements.

Sole Shareholders of Closely Held Corporations Can Be Held Liable for Wage Violations as a “Joint Employer”

“Closely held corporations” are owned by a single or limited number of shareholders.  These businesses receive the same “corporate veil” protections as larger corporations, to protect shareholders’ personal assets from liability stemming from a company’s acts.  That corporate veil can be “pierced” if, for example, the company is found to be a sham or an “alter ego” of the shareholders.  In 2016, Labor Code 558.1 was added to create individual liability for those who actually violate, or cause to be violated, minimum wage and hour laws.  However, an individual owner’s risk of personal liability for a company’s wage and hour violations has just been expanded.

In Turman v. Superior Court, the sole shareholder and director of a restaurant was sued in a wage and hour lawsuit.  The trial court concluded that the owner could not be held liable because, otherwise, every sole owner of a closely held corporation could be subject to personal liability simply by virtue of being the owner.  The Fourth Appellate District disagreed, finding that the lower court failed to properly apply the “joint employer” test articulated in the California Supreme Court case Martinez v. Combs, 49 Cal.4th 35 (2010), as well as other tests for joint employment under other laws.  The appellate court reasoned that while “silent” owners are not considered joint employers, under Martinez – which involved a wholly different business entity – if the owner is authorized to do any of the following, then the owner is considered an employer: (1) suffer or permit another to work; (2) control wages, hours and working conditions; or (3) engage employees.

While Labor Code Section 588.1 holds individuals liable who actually violate, or cause to be violated, minimum wage and hour laws, this ruling goes far beyond what the Legislature contemplated.  This ruling seems to eviscerate the corporate veil, holding owners liable even if they were not involved in the particular bad act.  However, other courts may ultimately disagree with this district.  Until then, closely held corporations should take heed and be aware that “non-silent” owners could be considered joint employers.

A “Post Dispute” Arbitration Agreement for PAGA Claims Means an Agreement Made After Exhausting Administrative Requirements

Several years ago, the California Supreme Court pronounced that representative claims under the Labor Code Private Attorneys General Act (“PAGA”) cannot be compelled to arbitration based on a “pre-dispute” arbitration agreement. Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014).  However, parties can agree to arbitrate a PAGA claim “post-dispute.”  The question since then has been what constitutes a “post-dispute” agreement?  In Julian v. Glenair, Inc., the Second Appellate District held that an agreement to arbitrate a PAGA claim only is valid if the agreement is made after the plaintiff has exhausted the administrative requirement to notify the Labor and Workforce Development Agency (“LWDA”) of the pending claim, and the time for the LWDA to decide whether to take the claim, has expired.  The court’s rationale was that, before this time, the State of California has not consented to arbitration.  Once the LWDA loses jurisdiction of the PAGA claim, then the individual plaintiff stands in the shoes of the State, and has the power to decide whether to arbitrate the claim.

Minimum Wage Compliance Under the FLSA Is Determined on a Weekly Basis

In Douglas v. Xerox Business Services, LLC, the Ninth Circuit joined several other circuits in concluding that when determining whether an employer has satisfied the minimum wage requirements under the FLSA, the workweek must be analyzed as whole, rather than hour by hour.  In other words, as long as the employee is paid an overall average of the minimum wage for each hour worked in a workweek, irrespective of whether the employee was underpaid one hour but overpaid another hour, then the employer has complied with the FLSA’s minimum wage requirements.  Employers should note that California does not follow this same analysis, and employers in this state should continue to ensure that employees are paid at least minimum wage for each hour worked.

 

[This article is for informational purposes only and does not constitute legal advice. Do not act or rely upon any of the resources and information contained herein without seeking appropriate professional assistance.]

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