EMPLOYMENT AND LABOR LAW: LEGAL UPDATE FOR CALIFORNIA EMPLOYERS

February 13th, 2020/By Admin/In Blog, SBSBLOG, Uncategorized

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Legislative/Regulatory Update

Preliminary Injunction Issued to Enjoin Enforcement of Assembly Bill 51

Assembly Bill No. 51 (“AB 51”) would make it unlawful for employers to require employees to sign arbitration agreements, as a condition of employment, that waive any right, forum, or procedure established by the FEHA or the Labor Code, even if employees are permitted to opt out of the agreement.  On January 31, 2020, the Eastern District of California issued a preliminary injunction to enjoin enforcement of AB 51 to the extent arbitration agreements are covered under the Federal Arbitration Act.

Courts Reject Enforcement of Assembly Bill 5 Against Interstate Truck Drivers

On January 16, 2020, the Southern District of California granted a preliminary injunction to prohibit enforcement of AB 5 against interstate motor carriers in a case filed by the California Trucking Association (“CTA”). The court determined the Federal Action Administration Authorization Act (“FAAAA”) preempts AB 5 because the “ABC test” effectively prohibits motor carriers from using independent contractors to provide transportation services, which has a significant and impermissible effect on motor carriers’ prices, routes, and services in contrast to Congress’ intent to deregulate interstate trucking. The Court determined the public interest supports preliminary injunctive relief because, with or without the “ABC test,” California still maintains numerous laws and regulations designed to protect workers classified as employees and to prevent misclassification, including the Borello test. Therefore, the State of California is now enjoined from enforcing AB 5 as to any motor carrier operating in California, pending the entry of final judgment.

A similar result was reached by the Los Angeles Superior Court in People v. Cal Cartage Transportation Express, LLC, which also found the FAAAA preempts the “ABC test.”

Updated I-9 Form Must be Used by May 1, 2020

The USCIS has announced that employers must begin using the October 21, 2019 version of the I-9 form by May 1, 2020. Until then, employers can use either the older version or the new version. The updated form can be found at: https://www.uscis.gov/i-9.

DOL Issues Final Rule to Clarify Regular Rate Requirements under the FLSA and Opines on Factoring in Nondiscretionary Bonuses

The U.S. Department of Labor’s (“DOL”) Wage and Hour Division (“WHD”) issued a final rule to update and clarify the calculation of the regular rate for overtime compensation under the Fair Labor Standards Act (“FLSA”). Employers may exclude the following perks and benefits when calculating an employee’s regular rate of pay:

  • costs of certain parking benefits, wellness programs, onsite specialist treatment, gym access and fitness classes, employee discounts, tuition benefits, and adoption assistance;
  • payments of unused sick leave or paid time off;
  • payments of certain penalties under state and local scheduling laws;
  • certain reimbursed expenses;
  • certain sign-on and longevity bonuses;
  • cost of office coffee and snacks;
  • discretionary bonuses; and
  • contributions to benefit plans for events that could cause future financial hardship or expense, such as accidents, unemployment, or legal services.

The WHD also clarified that a bonus’ label does not determine whether it is discretionary. The agency also eliminated the restriction that “call-back” and similar pay must be infrequent and sporadic to be excluded from employees’ regular rate, but such payments must not be prearranged. The WHD further updated its “basic rate” regulations, which is an alternative to the regular rate, by allowing employers using an authorized basic rate to exclude from overtime computation additional payments under specific circumstances. The final rule went into effect on January 15, 2020. A copy of the final rule can be found here: https://www.federalregister.gov/d/2019-26447.

Separately, the DOL issued an opinion letter stating that allocating bonuses equally to each week of the bonus period is the appropriate method for computing overtime pay on bonus earnings that cannot be identified with a particular workweek. If the bonus covers only one workweek, the bonus amount is added to the employee’s other earnings for that workweek and the total earnings are divided by the total hours worked. If the bonus covers a longer period and cannot be identified with a particular workweek, then the employer is to assume the employee earned an equal bonus per workweek of the period. The employer must then calculate the additional overtime pay owed in those workweeks that the employee worked more than 40 hours.

DOL Issues Final Rule on Joint Employer Status under the FLSA

On January 12, 2020, the DOL issued its final rule updating how to determine joint employer status under the FLSA. Per the FLSA, an employee may have, in addition to his or her employer, one or more joint employers, who are jointly and severally liable for paying minimum wage and overtime. An employee may have one or more joint employers when the employer suffers, permits, or otherwise employs the employee to work, but another individual or entity simultaneously benefits from that work. The DOL adopted a four-factor balancing test to determine whether the potential joint employer controls the employee. The balancing test examines whether the potential joint employer:

(a) hires or fires the employee;
(b) supervises or controls the employee’s work schedule or conditions of employment to a substantial degree;
(c) determines the employee’s rate and method of pay; and
(d) maintains the employee’s employment records.

Additional factors may be relevant if the initial factors indicate the potential joint employer exercises significant control over the terms and conditions of the employee’s work. Whether an individual or entity is a joint employer depends on all the facts in a particular case, and the appropriate weight given to each factor depends on the circumstances. The DOL emphasized a potential joint employer’s power, ability, or reserved contractual right to exercise control over one or more of the factors is relevant, but not in themselves sufficient to establish joint employer status unless there is actual exercise of control. Also, indirect control is not established just because a direct employer voluntarily decides to accommodate the potential joint employer’s request, recommendation, or suggestion. Nor does the potential joint employer’s maintenance of the employee’s employment records alone lead to a finding of joint employer status.

Furthermore, the DOL identified several factors not relevant in determining joint employer status, including:

(a)  an employee’s economic dependence on the potential joint employer;
(b)  factors traditionally used to determine whether a worker is an independent contractor or employee;
(c)  the potential joint employer operating as a franchisor or entering into a brand-and-supply agreement;
(d)  the potential joint employer’s contractual agreements with the employer requiring the employer to comply with legal obligations or to meet certain standards to protect the health or safety of its employees or the public;
(e)  the potential joint employer’s contractual agreements with the employer requiring quality control standards to ensure the consistent quality of the work product, brand, or business reputation; and
(f)  the potential joint employer’s practice of providing the employer with a sample employee handbook or other forms, allowing the employer to operate a business on its premises, offering an association health plan or retirement plan to the employer or participating in such a plan with the employer, or any other similar practices.

The DOL’s final rule takes effect on March 16, 2020.

DOL Opines on Per-Project Payments and the Salary Basis Test for Exempt Status

The DOL issued an opinion letter regarding how the salary basis test works when hiring an employee on a project basis. The employer hired an employee to provide services for an assigned project lasting one year and paid the employee a predetermined amount in biweekly installments.  This satisfies the salary basis test provided the amount exceed the minimum salary threshold and the payments do not vary from week to week or month to month based on the number of hours worked or quality of the work performed. If the same employee is assigned to a second project, while continuing to work on the initial project, and he or she receives, in addition to payments received for work on the first project, biweekly payments for completing the second project, then the employer’s payment for the second project qualifies as additional compensation. The additional compensation is paid for additional work beyond the scope of the first project and can be paid on any basis without changing the employee’s exempt status.

NLRB Permits Employers to Prohibit Use of Work Emails for Non-Work Purposes 

In a position reversal, the National Labor Relations Board (“NLRB”) recently held that an employer does not violate the National Labor Relations Act (“NLRA”) by restricting the nonbusiness use of its emails and other IT resources, unless there is proof of discrimination or an employer’s email system provides the only reasonable means for employees to communicate with each other. The NLRB stated that employers have a property right to control the use of their equipment, including IT resources, and employees have no right under the NLRA to use the employers’ IT resources, including work emails, to engage in activity protected by the NLRA, such as communications regarding wages, work hours, working conditions, and union activities. Employees can use other modern technology, such as smartphones and social media, to engage in such activity; thus, prohibiting the use of work. A copy of the NLRB’s decision can be found here: https://apps.nlrb.gov/link/document.aspx/09031d4582ec1a7e.

NLRB Permits Employers to Mandate Confidentiality During Workplace Investigations

In another position reversal, the NLRB has determined employers can require confidentiality during workplace investigations, but the continuation of confidentiality even after an investigation is over must be scrutinized on a case-by-case basis to determine whether employees’ protected Section 7 rights under the NLRA are outweighed by the employer’s legitimate business justifications. The NLRB reasoned that it is imperative to balance the employers’ and employees’ rights, consider the importance of confidentiality during an ongoing investigation, and parallel other federal agencies like the EEOC and OSHA who require confidentiality during investigations of alleged wrongdoing. Further, facially neutral confidentiality rules during open investigations, which protect employees from retaliation, maintain employee privacy, and ensure the integrity of an investigation, are beneficial to both employers and employees. These legitimate and substantial justifications outweigh the comparatively slight impact confidentiality would have on employees’ rights. Nevertheless, investigative confidentiality rules not limited to the duration of an open workplace investigation require individualized scrutiny to determine whether any post-investigation adverse impact on NLRA-protected conduct is outweighed by legitimate business justifications. A copy of the NLRB’s decision can be found here: https://apps.nlrb.gov/link/document.aspx/09031d4582ec1a7d.

Recent Case Law

FEHA Was Not Enacted to Make Workplaces More Collegial

In Doe v. Department of Corrections and Rehabilitation, a psychologist working for a state prison filed a lawsuit alleging disability discrimination, failure to engage in the interactive process, failure to provide reasonable accommodations, retaliation, and harassment in violation of the Fair Employment and Housing Act (“FEHA”). The employee claimed his supervisor criticized his work during a performance review, ordered a wellness check on him when he did not communicate he was out sick, suspected him of bringing a personal cellphone to work in violation of prison policy, assigned him additional work the same day he had a union meeting, and denied his request to leave work early for a doctor’s appointment.

The appellate court affirmed summary judgment for the employer, holding that while the supervisor’s actions may have upset or angered the employee, they did not amount to an “adverse employment action” because they did not threaten to materially affect the terms, conditions or privileges of his job. Similarly, the denial of an accommodation request does not qualify as an adverse employment action. The court noted that although workplaces can be stressful and the relationship between employee and supervisor can often be contentious, the FEHA does not guarantee employees a stress-free work environment.

Wage Statements with Abbreviated Fictitious Business Names Violate the Labor Code

California Labor Code section 226(a)(8) requires wage statements to list the name of the legal entity that is the employer. In Noori v. Countrywide Payroll & HR Solutions, Inc., an employer listed “CSSG” as its employer name, which was an unregistered acronym of the employer’s out-of-state fictious business name, “Countrywide Staffing Solutions Group.”  The plaintiff claimed he was unable to promptly and easily determine the name of the legal entity from the furnished wage statements. The trial court found the wage statements complied with California law, but the appellate court reversed. The appellate court held Labor Code section 226 requires neither the employer’s name registered with the California Secretary of State nor the employer’s complete name on wage statements. Minor truncations of an employer’s name comply with the statute, including out-of-state fictious business names. However, severe truncations or alterations of the employer’s name do not comply when it leads to confusion. In Noori, “CSSG” was not a registered name nor a minor truncation. The appellate court’s decision was not altered by the fact that the checks attached to the wage statements included the complete name of the employer because the paycheck is not part of the wage statement.

Job Tasks Can be Considered Exempt or Nonexempt Work, Depending on its Purpose

In the Safeway Wage and Hour Cases, a former supermarket store manager sought unpaid overtime wages, alleging he was misclassified as an exempt employee. The jury found the manager was exempt and not entitled to overtime, and the appellate court upheld the verdict. The appellate court elaborated on the categorization of a manager’s work as exempt or nonexempt. Each task performed by a manager must be classified as either exempt or nonexempt, and whenever there is concurrent performance of exempt and nonexempt work, the categorization of that time depends on the purpose of the activity. Work generally performed by a nonexempt employee is categorized as nonexempt, even if it is performed by a manager. If such nonexempt work takes up most of the manager’s time, the manger is likely a nonexempt employee. However, a task that is helpful in supervising employees is exempt, even if the identical task performed for a different, nonmanagerial reason would be nonexempt. Therefore, managers and their subordinates could engage in identical work, but the task may be categorized as exempt or nonexempt based on the purpose it serves. The consideration of a task’s purpose is intended to categorize work that is not inherently managerial but is directly and closely related to management and supervision of employees.

Court of Appeal Finds Company and its Subordinate Affiliate are a Single Employer

In Mathews v. Happy Valley Conference Center, Inc., the plaintiff worked at Happy Valley Conference Center, Inc. (“Happy Valley”), a subordinate affiliate of Community of Christ (“the Church”). The plaintiff sued both entities for retaliation in violation of Title VII.  One issue on appeal was whether the two entities were considered a single employer. The appellate court applied the integrated enterprise test and found substantial evidence in support of Happy Valley and the Church being a single employer. The integrated enterprise test looks at four factors: (1) interrelation of operations; (2) common management; (3) common ownership or financial control, which is never enough to establish single employer liability; and (4) centralized control of labor relations, which is deemed the most important factor. In this case, the Happy Valley board members were closely intertwined with the greater Church organization; Happy Valley’s financial statements were audited by the Church; Happy Valley’s bylaws described Happy Valley as an “integral subordinate unit and part of” the Church who is accountable to the Church’s leadership; and there was substantial evidence proving centralized control of labor, including that (1) sexual harassment complaints related to Happy Valley were to be reported to and handled by the Church, (2) the Church possessed the plaintiff’s personnel file for no apparent independent reason, and (3) the Church’s general counsel, a high ranking Church official, and the president of Happy Valley were extensively involved in discussions during the weeks leading up to the plaintiff’s termination. Therefore, there was a reasonable inference that the decision to terminate plaintiff’s employment was influenced or dictated by individuals acting on behalf of the Church. (The court also held there was no liability under FEHA because the defendants were exempt religious, non-profit corporations.)

Joint Employer Status Not Applicable to Company Providing Services to an Employer

In Myers v. Dignity Health, et al., a nurse practitioner who worked at a rural clinic owned and operated by Dignity Health sued Dignity Health and Optum360 Services, Inc. (“Optum360”) for unlawful discrimination, retaliation and constructive termination in violation of public policy.

Optum360 provided revenue cycle services to Dignity Health. Optum360 asserted it was not plaintiff’s employer.  Both the trial and appellate courts agreed. The test to determine joint employer status emphasizes the defendant’s right to control the means and manner of the workers’ performance and considers a number of factors.  Here, the court found Optum360 did not: (1) pay plaintiff’s salary, benefits or taxes, (2) own the equipment the plaintiff used to perform her work, (3) have the authority to hire, transfer, demote, discipline or discharge the plaintiff, set her schedule or determine her amount of pay, or (4) employ staff that provided medical care. Rather, Dignity Health and Optum360 had a business arrangement that separated the clerical and administrative staff from medical practitioners like the plaintiff. Based on the totality of the circumstances, all the factors pointed to Optum 360 not being a joint employer.

Employer Cannot Impose “Meaningful” Restrictions on Employees’ Layovers

California and federal law require certain truck drivers to take ten-hour uninterrupted off-duty layovers. Under California law, the time employees spend on layovers is compensable if the employer exercised control over the employees during that time. Even when employees are permitted to engage in personal activities, control may exist if the employer imposes meaningful restrictions on the employee. The key question is whether the employee may use the break or non-work time however he or she would like.

In Ridgeway v. Walmart, Walmart required its long-haul truck drivers to obtain preapproval before taking a layover at home. Although they were free to leave the truck and engage in personal activities during layovers, they could not freely go home when they are not working. Walmart’s policy restricted the drivers’ freedom of movement and prevented them from making a unilateral decision to spend layovers at home. The Ninth Circuit found this constituted an exercise of control over the drivers during layover periods. By requiring drivers to seek permission, rather than merely providing notification before taking a layover at home, Walmart exerted control over the drivers by reserving the right to decline their requests. Walmart’s policy dictated what the drivers could do on layovers and restricted employees from complete freedom of movement during their layovers. Therefore, Walmart was obligated to compensate the truckers at least minimum wage for their layover time, even if the drivers were not working during the layover.

Filing a Workers’ Compensation Claim Can Toll the Time to File a FEHA Claim

In Brome v. California Highway Patrol, an openly gay law enforcement officer claimed that over his 20-year career, other officers subjected him to derogatory and homophobic comments, singled him out for pranks, repeatedly defaced his mailbox, and refused to provide him with backup in the field. In January 2015, the officer filed a workers’ compensation claim and went out on medical leave. The workers’ compensation claim was resolved on October 27, 2015.  He took disability retirement in February 2016 and filed a DFEH charge on September 15, 2016.  The CHP contended the DFEH charge was untimely because it was not filed within one year of the alleged discrimination. The plaintiff claimed the time was equitably tolled. The First Appellate District held that because the workers’ compensation claim was based on the same allegations as the DFEH charge, a reasonable jury could find that the CHP was on notice that it faced a potential discrimination claim, and was not prejudiced by the fact the plaintiff waited more than a year to file his DFEH charge, and the plaintiff’s delay in filing the claim was justified.  Thus, the filing of the workers’ compensation claim could be found to have equitably tolled the one-year filing requirement.

For more information regarding these topics or the related practice area contact:

Sherry B. Shavit

[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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