EMPLOYMENT AND LABOR LAW: LEGAL UPDATE FOR CALIFORNIA EMPLOYERS

October 04th, 2019/By Admin/In Blog, SBSBLOG, Uncategorized

Topics for this Month include:

Enacted California Employment-Related Bills
DOL’s Final Regulations on New Salary Thresholds for Exemptions
Meal and Rest Break Questions Certified to CA Supreme Court
No Unpaid Wage Recovery in a Pure PAGA Action
Rulings on On-Duty Meal Periods
Franchisor Held Not Liable as Joint Employer
And more . . .

Legislative/Regulatory Update

We are in the home stretch! Governor Newsom has until October 13, 2019 to sign or veto bills passed by the Legislature which, unless otherwise specified, will go into effect on January 1, 2020. Here is where we are:

AB 5: Codifies the “ABC” test from Dynamex Operations West Inc. v. Superior Court and applies it to the Labor Code, IWC Wage Orders, Unemployment Insurance Code, and Business and Professions Code, with exceptions for licensed insurance agents, certain licensed health care professionals, registered securities broker-dealers or investment advisers, direct sales salespeople, real estate licensees and workers providing cosmetology, manicuring, hairstyling or barbering services, electrologists, estheticians, workers providing natural hair braiding, licensed repossession agencies, and those performing “work under a contract for professional services” with another business entity or pursuant to a subcontract in the construction industry. Enacted on September 18, 2019.
AB 9: Increases time to file complaint with DFEH from one year to three years. Sitting on Governor’s desk.
AB 51: Prohibits requiring arbitration agreements for FEHA and Labor Code claims as a condition of employment. Applies to agreements entered into, modified, or extended on or after January 1, 2020. Sitting on Governor’s desk.
AB 170: Exempts newspaper distributors and carriers from AB 5 until January 1, 2021. Enacted on October 2, 2019.
AB 171: Prohibits discrimination and retaliation against a victim of sexual harassment; rebuttable presumption of retaliation if adverse employment action occurs within 90 days of reporting (or employer knowing of) being a victim of domestic violence, sexual assault, sexual harassment or stalking. Amended to define “sexual harassment” the same as under FEHA and add employer may overcome presumption by showing a valid business reason for the adverse employment action. Rebuttable presumption effective July 1, 2020. “Employer knowledge” excludes people/entities authorized to receive confidential complaints from harassment victims. Sitting on Governor’s desk.
AB 241, 242 & 243: Address implicit bias in the healing arts profession, judicial branch and law enforcement. AB 241 & 242 enacted on October 2, 2019; AB 243 (law enforcement) held in abeyance.
AB 372: Establishes two-year “Infant at Work” pilot program for state agencies to allow new parents or caregivers to bring an infant up to 6 months in age into the workplace. Sitting on Governor’s desk.
AB 403: Increases time to file retaliation claim with DLSE from 6 months to two years and provide attorneys’ fees to plaintiffs who prevail on Labor Code 1102.5 claim. Sitting on Governor’s desk.
AB 418: Creates a privilege for communications between union agents and represented employees or represented former employees. Ordered to Senate’s inactive file.
AB 673: Permits employee to file lawsuit to recover statutory penalties or enforce civil penalties in the same amount recovered by the DLSE for failure to pay wages in violation of the Labor Code and limits employee to recover either statutory or civil penalties, not both. Fair Pay Act violations as one of the violations that trigger penalties for failure to pay wages under Labor Code Section 210. Sitting on Governor’s desk.
AB 749: Prohibits settlement agreements from containing no re-hire clauses. Employer not required to employ or re-hire anyone when there is a legitimate non-discriminatory or non-retaliatory reason to terminate the employment relationship or not re-hire the person. Can agree to end current employment relationship. Sitting on Governor’s desk.
AB 1223: Requires employers to grant an employee an unpaid leave of absence for the purpose of organ donation, in addition to the already existing 30-day paid leave in a one-year period. Sitting on Governor’s desk.
AB 1478: Allows employees to sue under PAGA for violations of Labor Code sections 230 (jury duty) and 230.1 (crime victims). Employees (1) bringing a PAGA action are not required to pursue any other remedy before bringing the action, (2) have one year from the time of the violation to file for relief with either the Labor Commissioner or the courts, and (3) may seek remedies through the Labor Commissioner or the courts, but not both. Sitting on Governor’s desk
AB 1554: Requires employers to notify employees participating in a flexible spending account of any deadline to withdraw funds by the end of the plan year. Enacted on August 30, 2019.
AB 1804: Requires employers to immediately report serious workplace injuries, illnesses, or death to the Division of Occupational Safety and Health by telephone or through an online platform developed by the division. Noncompliance carries a $5,000 penalty. Enacted on August 30, 2019.
SB 41: Prohibits reducing lost earnings or impaired earnings capacity damages resulting from personal injury or wrongful death based on or considering race, ethnicity, or gender. Enacted on July 30, 2019.
SB 83: Beginning July 1, 2020, California Paid Family Leave will increase from six to eight weeks for employees who take time off work to care for a seriously ill family member or bond with a child within one year of birth or placement. A task force will develop a proposal to extend PFL benefits to six months by 2021-2022. Enacted on June 27, 2019.
SB 142: Increases requirements for lactation rooms, including temporary or multipurpose rooms where lactation must take precedence over other uses. Lactation rooms must: (1) not be a bathroom; (2) be in close proximity to the employee’s work area; (3) be shielded from view; (4) be free from intrusion; (5) be safe, clean, and free from hazardous materials; (6) contain a surface to place personal items; (7) contain a place to sit; (8) contain access to electricity; and (9) contain access to a sink and refrigerator. Employers with less than 50 employees may be exempt from a requirement if it causes the employer undue hardship, significant expense, or difficulty in relation to the size, financial resources, nature, or structure of the employer’s business. Sitting on Governor’s desk.
SB 171: Require employers with 100+ employees to submit pay data to DFEH. Held in Assembly Appropriations Committee.
SB 188: Expands definition of race in FEHA and Education Code to include traits historically associated with race, including but not limited to hair texture and protective hairstyles (g., braids, locks and twists). Enacted on July 3, 2019.
SB 530: Extends the date to January 1, 2021 for employers with five or more employees to provide mandatory sexual harassment training to seasonal, temporary, or other employees hired to work for less than six months. Sitting on Governor’s desk.
SB 707: Requires employers to pay arbitration fees within 30 days or else waive arbitration. Sitting on Governor’s desk.
SB 778: Fix last year’s law on sex harassment training to state: (1) the deadline for employers to comply with the new sex harassment training requirements is extended from January 1, 2020 to January 1, 2021; (2) employers must provide sex harassment training to both supervisory and non-supervisory employees once every two years; (3) non-supervisory employees must be trained within six months of hire; (4) anyone trained on or after January 1, 2018 does not have to be trained again until two years thereafter. Includes urgency clause to take effect immediately. Enacted on August 30, 2019.

DOL Increases Salary and Compensation Levels for Exempt Employees

On September 24, 2019, the U.S. Department of Labor (“DOL”) (finally) announced its final rule to update and revise the Fair Labor Standards Act (“FLSA”) regarding the earnings requirements necessary to exempt executive, administrative, or professional employees from federal minimum wage and overtime pay. Effective January 1, 2020, the minimum salary threshold for a full-time, exempt employee will increase from $455 to $684 per week (or $35,568 per year). Employers are permitted to use nondiscretionary bonuses, incentives, and commissions, which are paid at least annually, to satisfy up to 10 percent of the minimum salary level for exempt status. If an employee does not earn enough nondiscretionary bonuses, incentives, or commissions in a 52-week period to maintain exempt status, the employer will have one pay period at the end of the 52-week period to make a “catch-up” payment. Furthermore, the total annual compensation level for highly compensated employees will increase from $100,000 to $107,432 per year. A copy of the DOL’s ruling can be found here: https://www.dol.gov/whd/overtime2019/overtime_FR.pdf. Note, however, California has higher salary requirements (generally twice the minimum wage), does not allow employers to include nondiscretionary bonuses, incentives, or commissions to meet the minimum salary threshold, and there is no highly compensated exemption.

NLRB Decides Mandatory Arbitration Case Following Supreme Court’s Epic Systems Corp.

In Epic Systems Corp. v. Lewis, the U.S. Supreme Court held that arbitration agreements with class and collective action waivers do not violate the National Labor Relations Act (“NLRA”) and are enforceable under the Federal Arbitration Act. In light of this, the National Labor Relations Board (“NLRB”) recently made several important determinations regarding mandatory arbitration agreements and the NLRA. First, Section 8(a)(1) does not prohibit employers from issuing arbitration agreements in response to employees engaging in Section 7 protected concerted activities, including filing a wage/hour lawsuit. Second, Section 8(a)(1) does not prohibit employers from threatening to discharge employees who fail or refuse to sign a mandatory arbitration agreement. Third, the NLRB reaffirmed its long-standing precedent that Section 8(a)(1) prohibits employers from disciplining or discharging employees who engage in Section 7 protected concerted legal activity, which includes discussing wages and other employment terms and conditions with coworkers or filing a class or collective action with fellow employees over wages, hours and/or other employment terms and conditions. A copy of the NLRB’s decision can be found here: http://apps.nlrb.gov/link/document.aspx/09031d45828cd9ce

Misclassification of Employees as Independent Contractors, Alone, Does Not Violate the NLRA

On August 29, 2019, the NLRB opined that an employer’s misclassification of its employees as independent contractors does not, standing alone, violate the National Labor Relations Act (“NLRA”). In this case, an employer unlawfully misclassified its drivers as independent contractors and terminated an employee after she raised a group complaint that the employer was classifying them as independent contractors but treating them like employees. The Board found the misclassified drivers were “employees” subject to the NLRA and the employee who raised the complaint was terminated in violation of Section 8(a)(1). However, an employer’s erroneous statement to workers that they are classified as independent contractors does not, in and of itself, prohibit them from engaging in activity protected under Section 7. Per Section 8(c), an employer’s communication of its legal opinion to its workers, without threat of reprisal, force, or promise of benefit, that they are independent contractors does not constitute an unfair labor practice. The NLRB also based its decision on several legal and policy concerns, such as preserving the creation of independent contractor positions and preventing the burden of proof in unfair labor practices from shifting to the employer. A copy of the NLRB’s decision can be found here: https://apps.nlrb.gov/link/document.aspx/09031d4582d411f0

Recent Case Law

Ninth Circuit Requests California Supreme Court to Resolve Meal and Rest Break Questions

In Cole v. CRST Van Expedited, Inc. fka CRST, Inc., a truck driver brought a class action lawsuit on behalf of all CRST Van Expedited, Inc. (“CRST”) drivers alleging they were neither provided requisite meal and rest breaks nor compensated premium wages for the missed breaks. The district court granted summary judgement in favor of CRST and granted CRST’s motion to decertify the meal and rest break classes because CRST provided a reasonable opportunity for its employees to take mandated meal and rest breaks. On appeal, plaintiff argued that CRST did not record drivers’ meal and rest breaks on its pay statements and did not have a written policy for meal and rest breaks, although it did post California’s meal and rest break policies on a bulletin board in a common area. The Ninth Circuit Court of Appeals found that no controlling California Supreme Court precedent directly governed these issues and certified two state law questions to the California Supreme Court: 1) “Does the absence of a formal policy regarding meal and rest breaks violate California law?” and 2) “Does an employer’s failure to keep records of meal and rest break taken by its employees create a rebuttable presumption that the meal and rest breaks were not provided?” The Ninth Circuit was persuaded that the California Supreme Court was best suited to answer these questions. A copy of the Ninth Circuit’s order can be found here: https://cdn.ca9.uscourts.gov/datastore/opinions/2019/08/01/17-55606.pdf

California Supreme Court Finds Arbitration Agreement Unenforceable

Oto, LLC v. Ken Kho is a cautionary reminder to employers that although Federal and California law favor arbitration agreements, they must still be procedurally and substantively conscionable, especially when it comes to wage disputes. In Oto, the employer’s arbitration agreement prohibited employees from having their wage claims heard by administrative agencies such as the DLSE (known as “Berman hearings”). Generally, employees do not have to pay anything or even have an attorney at a Berman hearing, and filing administrative claims is easy. In this case, the employee was handed the arbitration agreement while he was working and asked to sign it then and there. The agreement was in English and in very small font, but the employee’s first language is Chinese. He was not given a copy of the agreement. The agreement was silent as to who pays the costs of arbitration.

The California Supreme Court held the agreement was unenforceable because it was procedurally unconscionable and failed to provide an accessible and affordable forum in exchange for giving up the right to a Berman hearing. Employers may ensure an arbitration agreement is procedurally sound by: (1) providing the employee sufficient time to review, seek advice, and sign the agreement; (2) designating a knowledgeable individual who can explain the agreement’s contents and significance; (3) providing a copy of the agreement to the employee; (4) legibly drafting an agreement with large font, multiple paragraphs, short sentences, and simple words such that a layperson can easily understand; and 5) ensuring the agreement clearly states the employer is responsible for all arbitration costs. Substantively, the agreement should be drafted in away so that it clearly states the procedure to initiate arbitration and who pays for arbitration, and does not incorporate the costly, complex and time-consuming intricacies of civil litigation. Although this is not an exhaustive list, employers should be mindful to learn from the mistakes made in Oto when promulgating arbitration agreements.

Cal. Supreme Court Holds there is No PAGA Claim for Unpaid Wages under Labor Code § 558

In ZB, N.A. v. Superior Court, the California Supreme Court determined that employees cannot seek recovery of unpaid wages under Labor Code section 558 when suing solely under the Labor Code Private Attorneys’ General Act (“PAGA”). Labor Code section 558 states that employers who violate wage and hour laws under the Labor Code or Industrial Welfare Commission are subject to a civil penalty of $50 for the initial violation and $100 for every subsequent violation “for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages.” After confirming that there is no private right of action under Labor Code section 558, the Court found that the “in addition to” language differentiated the civil penalty from the recovery of unpaid wages, which it characterized as a victim-specific form of relief. Because the PAGA is not victim-specific, but rather deputizes an employee to recover civil penalties on behalf of the State of California, employees cannot recover unpaid wages through a Labor Code section 558 claim. Notably, the Court emphasized that its ruling does not impact the Labor Commissioner’s ability to bring an unpaid wage claim under Labor Code 558.

On-Duty Meal Periods: No Extra Premium But Must Still Have Downtime

The nature of certain industries or jobs prevents employees from being relieved from all duty for a 30-minute meal period. In such cases, the Wage Orders permit employers and employees to voluntarily agree to a paid, on-duty meal period. The question in Naranjo v. Spectrum Security Services, Inc. was whether employees must be paid the one-hour premium pay for not receiving an off-duty meal period. The Second Appellate District held that as long as the on-duty meal period agreement is lawful (i.e., the agreement is voluntary and the employee can revoke it at any time), then no additional pay is required, other than to pay for the work performed during the on-duty meal period. The appellate court also agreed with other courts that have ruled an employee cannot receive additional penalties under Labor Code §203 (waiting time) or Labor Coe §226 (wage statement) when an employee does not receive a meal or rest break and is not paid the one-hour premium pay.

In another on-duty meal period case, L’Chaim House v. DLSE, employees at residential care homes for seniors are provided on-duty meal periods. The question was whether the meal periods must be 30-minutes long. The First Appellate District held yes. Even though the employees had valid on-duty meal periods, the employees still had to be given 30 minutes of time to eat and have “lesser duties” during that 30-minute period.

Ninth Circuit Determines Franchisor Did Not Have Requisite Control to be a Joint Employer

In the wage/hour class action case Salazar v. McDonald’s Corp., the Ninth Circuit found no evidence that McDonald’s Corp. had the necessary level of control over the employees’ employment for a franchisee to make it a joint employer, even if it could have prevented some of the alleged wage and hour violations. There are three definitions that can establish an employment relationship: (1) to exercise control over wages, hours or working conditions, (2) to suffer or permit to work, or (3) to engage, thereby creating a common law relationship. The Ninth Circuit held that none of these definitions were satisfied: (1) McDonald’s did not retain a general right of control over the day-to-day aspects of work at the franchises and any direct control it did exert over the employees was to exercise quality control and maintain brand standards; (2) McDonald’s did not have the power to cause the employees to work or prevent them from working because it had no authority over hiring, direction, supervision, discipline, discharge or day-to-day activities; and (3) a franchise system alone does not constitute an employment relationship under California common law, which depends on a franchisor’s right to control the means and manner of work performed at the franchises.

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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