Mary Siceloff

On September 25, 2016, Governor Brown approved a very short but powerful piece of legislation for California employees who work for employers who are based outside of California and wish to have another state’s laws govern the employment relationship. Senate Bill 1241 adds Section 925 to the California Labor Code and states expressly that after January 1, 2017, an employer is limited in the use of forum selection and choice of law provisions in employment contracts with California employees.

Specifically, Section 925 states that:

“(a)        An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following:

                (1)          Require the employee to adjudicate outside of California a claim arising in California.

                (2)         Deprive the employee of the substantive protection of California law with respect to a controversy arising in California.

(b)          Any provision of a contract that violates subdivision (a) is voidable by the employee, and if a provision is rendered void at the request of the employee, the matter shall be adjudicated in California and California law shall govern the dispute.

(c)           In addition to injunctive relief and any other remedies available, a court may award an employee who is enforcing his or her rights under this section reasonable attorney’s fees.

(d)          For purposes of this section, adjudication includes litigation and arbitration.”

The one exception to the new rule is when an employee is represented by counsel when the employment contract is being negotiated.  Specifically, Section 925(e) states that:

“(e)        This section shall not apply to a contract with an employee who is in fact individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated or the choice of law to be applied.”

In addition to the statutory right an employee has to challenge any choice of law or forum selection clause that violates section 925, if an employee suffers some adverse action (e.g. failure to hire or termination) because of either: 1) his/her refusal to sign an employment agreement that he/she believes violates section 925; or 2) his/her legal action to challenge the employment agreement under section 925, it is likely that the employee will also be able to bring a common law claim for violation of public policy based on the public policy contained in section 925.

Take Away:  Employers should review and update the various forms of employment agreements they require their California employees to sign as a condition of employment (e.g. employment agreements, arbitration agreements, confidential & proprietary information agreements) to ensure they comply with the new law after January 1, 2017.

On October 11, 2016, the California Department of Industrial Relations (“Labor Commissioner”) issued an opinion letter clarifying the method of calculation for paid sick leave under Labor Code section 246 (the “Healthy Workplaces, Healthy Families Act of 2014”) for employees paid by commissions and for exempt employees who also receive an annual bonus.  Here is what the Labor Commissioner said:

1. Commissioned Employees.

The amount of paid sick leave (PSL) due to an employee who is paid almost entirely by commissions may be calculated using either method available under Labor Code section 246(k)(1) or (2), which read as follows:

“(1)      Paid sick time for nonexempt employees shall be calculated in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, whether or not the employee actually works overtime in that week.

(2)        Paid sick time for nonexempt employees shall be calculated by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.”

Thus, the Labor Commissioner has taken the position that for purposes of PSL under the statute, commissioned employees (either outside sales employees, or employees who meet the inside sales exception to overtime requirements) are not exempt and their PSL can be calculated like non-exempt employees under section 246(k)(1) or (2).  To support its position, the Labor Commissioner points to certain legislative history behind the statute that indicates that the language in Labor Code section 246(k)(3) (which governs the calculation of PSL for exempt employees), was meant to apply only to an employee who is exempt under the “administrative,” “executive,” or “professional” exemption.

2. Exempt Employees Who Receive a Non-Discretionary Bonus.

The Labor Commissioner said that normally an exempt employee would be entitled to continue to receive his or her full pay without deduction for a sick day of less than 8 hours, but the day or partial day of sick leave may be deducted from earned or fronted leave balances.   The non-discretionary bonus would not figure into the salary of an exempt employee (in this case, those administrative, executive or professional employees exempt under Labor Code section 515(a)) because such bonuses are only figured into the pay of a non-exempt employee in order to determine the regular rate of pay for overtime and to figure the PSL rate under Labor Code section 246(k)(1)-(2).

So, under Labor Code section 246(k)(3), the PSL for exempt employees is calculated in the same manner as the employer calculates wages for other forms of paid leave time.  For a full-time exempt employee, the annual salary would be divided by 52 weeks and then by 5 days to determine the daily wage that would have been paid for the sick day.

Take Away:  Employers must be sure that they are not only properly granting and tracking accrued sick leave under the Healthy Workplaces, Healthy Families Act, but that they are also properly calculating the compensation due employees when they take a paid sick leave day under the law.  The attorneys in Weintraub Tobin’s Employment Law Group assist employers in all areas of employment law compliance, including the new and frustrating world of mandatory sick leave.  Contact any one of us if we can be of assistance.

On October 5, 2016, the Eleventh Circuit held in Villarreal v. R.J. Reynolds Tobacco Co., that an unsuccessful job applicant cannot sue a prospective employer under the Age Discrimination in Employment Act (ADEA) for a disparate impact claim.  In so holding, the Eleventh Circuit reverses its November 30, 2015 decision holding the opposite.

The ADEA generally protects employees aged 40 and older from discrimination in employment on the basis of their age.  A job applicant who is denied employment because of a practice that is discriminatory on its face, can sue under the ADEA under a disparate treatment claim, by proving that the employer acted with the intent of discriminating against the job applicant.  However, Villarreal now forecloses the possibility that an applicant can state an ADEA claim against a practice that, while not discriminatory on its face, has the effect of disproportionately discriminating against persons aged 40 and older.

The 49-year-old plaintiff in Villarreal applied online with R.J. Reynolds for the position of a territory manager and was screened out by a recruiting contractor under R.J. Reynolds’ guidelines which provided that a “targeted candidate” was someone only “2-3 years out of college” and to “stay away from” an applicant who had been “in sales for 8-10 years.”  After receiving no response to his first application, the plaintiff applied five more times over the next two years and was rejected each time.  The plaintiff filed a collective action on behalf of all job applicants aged 40 and older who were rejected for the position of territory manager.  R.J. Reynolds moved to dismiss plaintiff’s disparate impact claim on the basis that it was not statutorily authorized under the ADEA.  The district court dismissed the claim, finding that the ADEA only authorized disparate impact claims by employees, not applicants.

Almost all employers are business people. They are used to credits and debits in handling and accounting for commercial accounts,  they are used to the application of credit in one transaction to make up for a shortfall in another.  A customer over pays for a delivery in March but under pays by the same amount for a delivery in April. Most businesses are satisfied to have the debit in one month offset the credit in another.  A recent Third Circuit Court of Appeals case reminds employers that payments to employees can only rarely be treated in the same way as commercial accounts.

In Smiley v. DuPont, plaintiffs in a class action unpaid wage lawsuit, claimed that they had not been paid wages and overtime for time spent “donning and doffing” equipment and apparel necessary to perform work. DuPont sought to offset this allegedly unpaid work time by pointing to the fact that DuPont voluntarily paid its workers for meal periods. That voluntary lunch payment is not required by law. Thus, DuPont argued that the voluntary meal period payment should offset any wages not paid for “donning and doffing” time.

Find out if the trial court agreed with DuPont’s analysis by visiting the HRUSA blog post at http://blog.hrusa.com/blog/unpaid-work-time-is-not-offset-by-voluntary-payment/.

Unless you have been living under a rock for the last few months, you are undoubtedly aware that December 1, 2016 marks the day that the U.S. Department of Labor’s (“DOL”) new overtime rules become effective. The new minimum salary level for the executive, administrative, and professional employee exemptions under the Fair Labor Standards Act (“FLSA”) will be $913 per week, or $47,476 per year, which more than doubles the current minimum salary levels. You will recall from our October 13, 2016 post that 21 states jointly filed a lawsuit in the Eastern District of Texas asking that the Court block the DOL from implementing the rules. Shortly after filing their Complaint, the states filed a Motion for Preliminary Injunction, asking the court to block enforcement of the new rule pending a final ruling. A hearing has been scheduled for November 16, 2016, just two weeks before the new rule is scheduled to take effect. Accordingly (and because the issuance of an injunction is a long-shot), employers must prepare for the new overtime rules to go into effect. One option employers are considering is the implementation of a fluctuating workweek to reduce the financial implications of the new overtime rules.

To read the rest of the article, visit the HRUSA blog at http://blog.hrusa.com/blog/new-dol-overtime-rules-and-the-fluctuating-workweek/

Since its 1994, decision in Troupe v. May Department Stores Co., 20 F.3d 734 (7^th Cir. 1994), the Seventh Circuit has instructed the district courts within its boundaries (including those in Illinois) to look for evidence that creates “a convincing mosaic of discrimination” in considering summary judgment motions in employment discrimination cases.  After more than a decade of inconsistencies and criticisms of this approach, the Seventh Circuit has now abandoned this approach with its decision in the case Ortiz v. Werner Enterprises, Inc., decided August 19, 2016.  The Seventh Circuit ruled that the sole test that should be applied in considering summary judgment motions in employment discrimination cases, “is simply whether the evidence would permit a reasonable fact finder to conclude that the Plaintiff’s race, ethnicity, sex, religion or other prescribed factor caused the discharge or other adverse employment action.”  The Seventh Circuit’s ruling appears to be an attempt to bring some certainty to the summary judgment process in employment discrimination claims by abandoning the vague and inconsistent “convincing mosaic” approach.

Werner Enterprises is a shipping company that provides freight brokerage services to its customers.  Brokers for Werner would be responsible for finding a carrier for any customer’s load and then putting that shipment into the proprietary system maintained by Werner.  Brokers were compensated through a base salary but would also earn a commission if they could generate a profit for Werner, i.e., locating carriers for the load who would charge less than Werner would charge the customer for moving the freight.

Read the rest of this article at the HRUSA blog here: