Blog: The Labor & Employment Law Blog

An employer’s ability to have disputes with employees resolved by arbitrators instead of courts had some ups and downs in recent days. One of those developments suggests that employers should review and perhaps revise their arbitration agreements to keep them enforceable in state court. The other development indicates that arbitration agreements will continue to be treated favorably by federal courts.

In particular, the California Court of Appeal published yet another opinion last week diminishing the ability of employers to enforce arbitration agreements with their employees. On the other hand, the U.S. Supreme Court this week decided yet another case striking down a state law that impairs enforcement of arbitration contracts.

It is widely believed that, all other things being equal, an arbitrator would be less likely than a court to conclude that an arbitration agreement is invalid. Accordingly, many employers prefer to have an arbitrator (instead of a court) decide whether such a contract is valid. However, California’s First Appellate District issued a decision on February 16, 2012, in a case called Ajamian v. CantorCO2e, L.P., indicating that such ambitions are not always easy for employers to obtain.

The appellate court noted that a broadly worded provision in an employer’s arbitration contracts gave “arbitrators the power to decide the validity of [those] arbitration agreements.” Nonetheless, the court said the provision “did not provide clear and unmistakable evidence that the parties intended to delegate authority to the arbitrator, rather than to the court.” As fate would have it, the court went on to find the agreement unenforceable and declined to order the employee to arbitrate the dispute.

A few days later, on February 21, 2012, the U.S. Supreme Court unanimously overturned a West Virginia law that rendered “unenforceable all predispute arbitration agreements that apply to claims alleging personal injury or wrongful death against nursing homes.” In a case called Marmet Health Care Center, Inc. v. Brown, the nation’s highest court reiterated that any state’s “categorical rule prohibiting arbitration of a particular type of claim” is invalid because it runs afoul of federal law.

This much remains certain: California may not adopt a law banning or specifically impairing the arbitration of employment disputes, but care must be taken to ensure that arbitrators can resolve disputes concerning the enforceability of an arbitration agreement. Thus, employers are well advised to confer with counsel to determine if an arbitration contract is desirable.

Where an employer determines that such an agreement is appropriate, legal counsel can provide guidance in terms of what provisions should be included to enhance the enforceability of such a contract. Legal counsel also can help to identify provisions in an employer’s existing arbitration agreements that should be discarded to achieve that goal.

In my November 4, 2011 post, I discussed a new California law (Labor Code § 226.8) that imposes serious monetary fines and other sanctions against those who willfully misclassify workers as “independent contractors” rather than “employees.” Those who violate the law can find themselves paying up to $15,000 per violation and up to $25,000 if there is a pattern and practice of misclassification. Also, if the violator is a licensed business, it runs the risk of having its license revoked. Finally, the law provides for publication of a notice to employees and the general public for a period of one year, stating that the violator committed a serious violation of the law.

California’s Secretary of Labor and Labor Commissioner have made it clear that California is serious about enforcing this new law and the state has teamed up with the Feds to help it do so. On February 9, 2012, the Deputy Administrator from the federal Department of Labor (DOL), Nancy J. Leppink, and California’s Labor Commissioner, Julie Su, held a press teleconference announcing that the DOL and California have signed a Memorandum of Understanding (MOU) that provides for the DOL and California to share information and resources as they embark on intensified enforcement efforts against those who misclassify workers as independent contractors. According to the DOL and the State, the purpose of increasing enforcement is to protect the rights of employees and level the playing field for responsible employers by reducing the practice conducted by some businesses of misclassifying employees. This federal/state partnership is the twelfth of its kind for the DOL.

Leppink stated at the press conference that “this memorandum of understanding helps us send a message: We are standing together with the State of California to end the practice of misclassifying employees. …This is an important step toward making sure that the American dream is still available for workers and responsible employers alike.”

Su said “California is proud to enter into this partnership with the U.S. Department of Labor to work together to attack the problems of the underground economy, … Gov. Brown just signed an important law that went into effect on Jan. 1, increasing penalties for willful misclassification. With the Labor Department, we are poised to use all the tools in our arsenal to lift the floor for hardworking employers and employees throughout the state.” The current term of the MOU is through December 21, 2014.

California businesses must be aware that any business model that attempt to change, obscure or eliminate the employment relationship are illegal if they are used to evade compliance with the law. The misclassification of employees as something else, such as independent contractors, presents a serious problem because these workers often are denied access to certain benefits and protections like family and medical leave, overtime compensation, minimum wage, and unemployment insurance benefits, to which they are entitled. Misclassification can create economic pressure for law-abiding business owners, who often struggle to compete with those who are skirting the law. Finally, and most important to both the federal and state government, employee misclassification generates substantial losses in federal and state tax revenues, unemployment insurance contributions, and workers’ compensation funds.

For questions regarding this new MOU or any of the federal or state laws related to the misclassification of independent contractors, or for legal assistance in evaluating your current classifications, feel free to contact Lizbeth West or one of the other employment lawyers in the Employment Group at Weintraub Genshlea Chediak Tobin & Tobin – the employment lawyers who support employers.

In October 2011, Governor Brown signed AB 469 – the “California Wage Theft Prevention Act of 2011” (the “Act”). The Act created Labor Code section 2810.5(a) which, as of January 1, 2012, requires employers to provide some new employees at the time of hire with a written notice that details their rate of pay, employer name and address, workers’ compensation carrier, and other information specified in the Act. The Act also instructed the DLSE to create a model notice that employers can use.

The DLSE issued its model notice in late December 2011 which can be obtained at: www.dir.ca.gov/dlse/LC_2810.5_Notice.pdf. Because AB 469 specifically provided that the DLSE could include additional information in the notice, the model notice calls for more information than that itemized in Labor Code section 2810.5(a). It is not mandatory that employers use the DLSE model form. However, if they prepare their own form, it must include all of the information contained in the model form.

This notice is not required if an employee is: (a) directly employed by the state or any political subdivision thereof; (b) is exempt from the payment of overtime wages by statute or wage order; or (c) covered by a collective bargaining agreement that expressly provides for wages, hours of work and working conditions, and provides for premium wage rates for all overtime worked.

One requirement contained in the DLSE’s model notice that is not itemized in the statute, is a requirement that the employer note whether employment is under an oral or written employment agreement. Most non-exempt at-will employees are not subject to a formal written employment agreement; instead they merely fill out an application and are offered – and accept – an oral offer of employment. However, if there is any writing (e.g. offer letter) that reflects the terms of employment, then the employer will need to reflect the existence of such writing on this notice.

Also, it appears that the DLSE is taking the position that in addition to new hires, employers must provide the notice to current employees. Also, as expressly provided in section 2810.5(b), if any of the information contained in the notice changes during employment, the employer is required to communicate that change to the employee within seven calendar days of such change.

Finally, while the statute does not specify what, if any, penalties can be imposed for failure to comply with the notice requirement, it is likely that the Private Attorney General Act (“PAGA”) penalties will be relied upon by employees and/or the DLSE when pursuing a non-compliance claim. Under certain circumstances, PAGA penalties can be imposed against an employer for failing to comply with various Labor Code sections. The amount of PAGA penalties can range anywhere from $100 per employee per pay period for the initial violation to $200 per pay period per employee for subsequent violations.

If you have questions about the new notice requirement, feel free to contact any of the employment lawyers at Weintraub Genshlea Chediak Tobin & Tobin Tobin & Tobin who are always available to answer questions and assist employers in all of their employment law needs. Happy New Year.

‘Twas the week before Christmas

And all through the land

Holiday parties served up claims

Fist over hand

The averments were stated

In legal pleadings with care

In hopes that generous jurors

Soon would be there

The lawyers were nestled

Smugly in stuffed chairs

With clients alleging

Unwelcomed gropes and stares

Okay, this blog update is not penned by Ebenezer Scrooge, nor is it meant to be construed as “The [F]right Before Christmas.” Nonetheless, it is common knowledge that workplace holiday parties often are adorned with things that, like reindeer pulling a sled, can haul employers before courts in the New Year.

Festive outfits, bouncy music, tasty treats, and flowing libations all packed into an informal and playfully decorated setting are aimed at promoting cheer and good will. But such circumstances also can lead to inhibition and generate well-meaning but potentially offensive comments (e.g., those concerning the physical appearances of attendees), along with misconstrued flirtations or invitations. Such parties also may stir the occasional unwanted touching of coworkers – especially those who say they were unaware that they were standing under the mistletoe.

Indeed, over just the past five years, at least ten California civil appeals have involved alleged misconduct at a holiday party that played a role in spurring the lawsuit. Allegations in those cases ranged from seemingly mild comments about a person’s perceived weight loss to more problematic recommendations that an employee wear tighter clothes. They also included holiday costumes depicting offensive words, holiday skits laced with racial stereotypes, holiday gift exchanges involving presents rife with sexual overtones, and provocative invitations or requests to sit on Santa’s lap, not to mention other suggestive innuendo. Oh, and then there’s the would-be Grinch who instructed a subordinate, allegedly on the basis of a protected characteristic, to answer company phones while the other employees frolicked and played in the Eskimo way.

So in this joyous season, we do not mean to haunt you with the ghosts of lawsuits past or present, nor do we aim to cleanse your workplace of future holiday parties or to replace laughter and good cheer with bah-humbug grumbles. We merely encourage employers to celebrate responsibly and to take reasonable steps to make such events enjoyable for everyone. At the same time, we wish all of our subscribers a wonderful holiday season and a happy and prosperous 2012!

On August 30, 2011, the National Labor Relations Board (“NLRB”) adopted a rule that would require certain employers, including non-union employers to post a notice to employees explaining their rights under the National Labor Relations Act (“NLRA”). The implementation date was originally set for November 14, 2011. However, due to a number of lawsuits challenging the rule, the implementation date was delayed and the NLRB announced that the rule would not go into effect until January 31, 2012.

While it is still an open question as to whether any of the pending legal challenges to the rule will block the NLRB from implementing the rule starting January 31, 2012, employers should be aware of what is required under the rule and whether they are obligated to comply.

What is Required to be Posted?

The NLRB has created an 11” x 17” notice that informs employees that the NLRA protects their right to organize a union; form, join, or assist a union; bargain collectively; discuss wages, benefits, and other conditions of employment; raise complaints; strike and picket; or choose not to do any of these activities. The notice also outlines certain conduct by employers and unions that is prohibited by the NLRA and informs employees what to do if they believe their rights have been violated under the NLRA (“Notice”).

Where Can Employers Obtain a Copy of the Notice?

The NLRB says that the easiest way to obtain the Notice is to download it from its website – www.nlrb.gov/poster and print it on a single 11-by-17 paper or two 8-by-11 papers taped together. Free copies of the Notice are also available upon request at any NLRB regional office. Employers who purchase commercially produced comprehensive employment law posters that contain various required notices, will just need to make sure that their new 2012 comprehensive poster includes the new NLRB Notice.

What Employers are Required to Post?

With some limited exceptions, most private sector employers (union and/or non-union) are likely required to post the new Notice, regardless of size or industry. For the most part the rule exempts just a few industries: agricultural, railroad, airlines, and very small employers that have just a slight effect on interstate commerce (e.g. non-retail employers with annual gross volume of less than $50,000, and retail employers with an annual gross volume of less than $500,000).

Where Should the Notice be Posted?

The Notice should be posted in a conspicuous place, where other workplace rights notices and company notices concerning personnel rules or policies are customarily posted. Reasonable steps should be taken to ensure the Notice is not altered, defaced, or covered by any other material, or otherwise rendered unreadable. Employers with remote worksites should post the Notice at those locations to ensure that all employees are notified of their rights. Employers with operations both within and outside the U.S. are required to post notices at workplaces in the U.S. and its territories, but not at any workplaces in foreign countries. Employers who typically post personnel rules and policies on an internet or intranet site should also post the Notice of NLRA rights there, in addition to a physical posting. Employers are not required to distribute the posting by email, Twitter or other electronic means.

Are there any Penalties for Non-Compliance?

The NLRB cannot penalize employers merely for failing to post the new Notice. However, whether the employer did or did not post the new Notice will likely be considered by the NLRB in any unfair labor practices case. Therefore, failure to post the Notice could have negative consequences for an employer who is otherwise trying to defend against allegations of violations of the NLRA. Moreover, if an employer does not post the Notice, the NLRB may also extend an employee’s six (6) month statute of limitations for filing an unfair labor practices claim against an employer.

Recommendations.

Unless and until either the courts or new legislation declares that the NLRB does not have the authority to require employers to post the new Notice, all employers subject to the NLRB’s jurisdiction are well advised to comply with the new rule and post the Notice by January 31, 2012 so as to avoid any potential exposure related to non-compliance.

Most employers are aware of the federal law known as the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”) which is designed to protect those who serve in the armed forces from discrimination and retaliation. However, many California employers are unaware that section 394 of the California Military and Veterans Code also prohibits employers from discriminating against members of the armed forces (“Section 394”). Therefore, an employee who believes he/she has been discriminated against based on his/her military status has the right to pursue a claim under one or both laws.

However, a recent case has declared that who the plaintiff-employee can sue is different under federal and state law. In Haligowski v. Superior Court (Mario Pantuso, real party in interest) (11/10/11), Plaintiff Mario Pantuso was called to active duty with the Navy while he was employed by Safway Services, LLC (“Safway”). When Pantuso returned from his six-month deployment in Iraq and asked for his job back, his immediate supervisor at Safway, Mike Haligowski, and the regional manager, Greg Chomenko, informed Pantuso that he was terminated from his employment with Safway. Pantuso sued Safway, Haligowski, and Chomenko for discrimination and retaliation in violation of Section 394, and Safway for wrongful termination in violation of public policy. He claimed that because of his membership in the Navy, the defendants discriminated against him by: 1) giving him negative performance evaluations after he informed his supervisors that he would be deployed; 2) terminating his employment; 3) refusing to re-employ him; and 4) failing to pay him an allegedly earned bonus.

The two individual defendants demurred to the complaint on the grounds that as supervisors, they cannot be held individually liable under Section 394 for employment-related decisions. The trial court overruled the demurrer based on the plain language of Section 394 and the individual defendants petitioned for a writ of mandate to the court of appeal. The court of appeal looked at the plain language of Section 394 to determine if it supported the trial court’s decision. The relevant parts of Section 394 read as follows:

Section 394(a): “No person shall discriminate against any officer, warrant officer, or enlisted member of the military or naval forces of the state or of the United States because of that membership.”

Section 394(d): “No employer or officer or agent of any corporation, company or firm, or other person, shall discharge any person from employment because of the performance of any ordered military duty or training or by reason of being an officer, warrant officer, or enlisted member of the military or naval forces of this state… .”

The appellate court said it could perceive two possible constructions of the use of the words “person” and “agent” in Section 394. First, as Pantuso argues and the trial court ruled, it could be determined that the Legislature intended to hold individual supervisors personally liable for discrimination under the statute. Second, and consistent with the California Supreme Court’s interpretation of other employment discrimination laws like California’s Fair Employment and Housing Act (“FEHA”), it could be determined that the use of the words “agent” and “other person” was “intended only to ensure that employers will be held liable if their supervisory employees take actions later found discriminatory, and that employers cannot avoid liability by arguing that a supervisor failed to follow instructions or deviated from the employer’s policy.” (Citing the California Supreme Court’s 1998 decision in Reno v. Baird, wherein the Court analyzed the words “any person” in the FEHA and concluded that individuals who do not themselves qualify as employers may not be sued under the FEHA for alleged discriminatory acts.)

The Haligowski court said that the language of Section 394 is parallel to that used in the FEHA and, given the similarity in the language of, and goals behind, these employment discrimination statutes, “…it would be illogical and incongruous to hold that the word “person” in Section 394 subjects supervisory employees to personal liability whenever they engage in a discriminatory act against a member of the military forces when they are not otherwise personally at risk for managerial acts that discriminate on the basis of race, gender, age, or disability.”

The court rejected Pantuso’s argument that the courts must import the USERRA definition of “employer” into Section 394. The court pointed out that USERRA was not analogous to Section 394, in that it’s definition of “employer” was much broader and clearly spelled out Congress’ intent to hold a supervisor personally liable. Therefore, the court ruled that there is no personal liability under Section 394.

Because employers and employees have the right to reach agreement as to the terms, conditions and nature of the work, many employers believe that anything they can get an employee to agree to is legal and permissible. This notion can lead an employer into a violation of law. Some obligations, however, such as the obligation to pay overtime to non-exempt workers, the provision of worker’s compensation, and the obligation to provide a safe work environment (to name just a few) cannot be bargained away. An employee’s agreement to surrender these statutory protections is void, and can also constitute a violation of criminal law.

An employee’s right to receive earned wages also belongs on this list. Once earned, wages are held in trust by the employer until paid to the employee. Employers may not treat an unpaid wage as their own property. They cannot require an employee to surrender his or her claim to it, nor can the employer (except in a few statutorily defined exceptions) deduct from it, attach it, or otherwise treat it as their own property. In general terms, all an employer can do with an unpaid wage is pay it. In fact, it is a crime for an employer to require an employee to execute a release of earned wages, and all such releases are invalid.

So, do you know what constitutes an impermissible release? Well, a document that says: “I release any and all claims to the wages I earned,” is pretty clearly prohibited, but what about a time record? In 2009, the statute prohibiting wage releases was amended so as to render void (and to make a misdemeanor) efforts by an employer to have an employee execute or ratify time records which the employer knows to be false. Employers in California should exercise real care to ensure that disputes over what time was worked (and consequently, what wages are due) are not resolved solely at the employer’s insistence. Wage disputes resolved in that way may set the employer up for a claim that it has violated the law.

As a practical matter, employees and employers compromise and resolve disputes over wages due all the time. These compromises and resolutions sometimes occur with the aid of the Labor Commissioner or the Courts but are often resolved outside of these administrative or legal proceedings. Bona fide disputes over wages due can be resolved by compromise, but it is important that documents reflecting that resolution demonstrate a lawful compromise and not an illegal release.

Labor Code section 206.5 states:

(a) An employer should not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. A release required or executed in violation of the provisions of this section shall be null and void is between the employer and the employee. Violation of this section by the employer is a misdemeanor.

(b) For purposes of this section, “execution of a release” includes requiring an employee, as a condition of being paid, to execute a statement of the hours he or she worked during a pay period which the employer knows to be false.

Lawyer Answer: It depends.

Here, that answer is not simply a dodge but is instead a reflection of what can be some complicated legal terrain. The question of advanced training costs arises in a number of situations: (1) where an employer advances costs for training to obtain a license or certification that is required by an ordinance or statute; (2) where such certification or licensure is not required by statute or ordinance but the employer requires it as a condition of employment; and (3) where the training is neither a requirement of statute, ordinance or by the employer, but reimbursement or supplement of such training costs or tuition is provided as a benefit.

The answer to the question involves a number of laws, including the provisions of the Fair Labor Standards Act and the California Labor Code. Depending on the nature of the reimbursement or repayment obligation, tax laws and wage deduction rules may also be involved. The short answer is that employers can sometimes permissibly seek reimbursement of advanced costs for licensure or certifications required by law, can generally not seek reimbursement for training that the employer imposes as a requirement of employment and may seek reimbursement of a tuition or training cost benefit on terms agreed to in advance. This is a fact specific inquiry and employers are well advised to talk to counsel about any reimbursement, loan forgiveness or deduction program for such advances and costs.

Many employers also complain that they invest in training of an employee only to lose that employee to a competitor once most of that training has been completed, but before the training employer has recovered the costs of the training. Employers often seek to restrict or limit an employee’s ability to seek employment elsewhere (for a period sufficient for the employer to reap the benefit of the training they provided) and/or to require an employee to reimburse the employer for the cost of training if they leave employment prior to the expiration of that period. Improperly drafted agreements of this kind can constitute contracts for a specified term (the polar opposite of at will employment) and may violate some Labor Code violations. Where repayment of such costs is permitted, the employer must also consider the tax effect of incremental loan or cost advance forgiveness. Tax advice should be sought in structuring such a program.

Finally, if early termination repayment is permitted, the employer must exercise care to ensure that any deduction of wages is permitted under California law.

Governor Brown signed a significant number of bills into law during the 2011/12 legislative term, many of which will have a direct impact on almost every California employer, regardless of size. Many laws impose new obligations on employers and prevent employers from engaging in what they may otherwise thought was previously permissible. Below is a summary of the employment-related legislation that goes into effect on January 1, 2012 (except where noted).

1. AB 22 – Consumer Credit Checks.

Adds Labor Code section 1024.5, which will prohibit an employer or prospective employer (with limited exceptions for financial institutions) from obtaining consumer credit reports unless the person for whom the report is sought has or will have a position in one of the following categories:

a. A managerial position;

b. A position with the state Department of Justice;

c. A sworn peace officer or other law enforcement position;

d. A position for which the information in a credit report is required to be disclosed or obtained by another law;

e. A position that involves regular access to someone’s bank or credit card accounting information, SS number, and date of birth (does not include routine solicitation and processing of credit card applications in a retail store);

f. A position where the person is, or would be, any of the following: i) a named signatory on the bank or credit card account of the employer; ii) authorized to transfer money on behalf of the employer; or iii) authorized to enter into financial contracts on behalf of the employer;

g. A position that involves access to certain confidential or proprietary information; or

h. A position that involves regular access to cash totaling $10,000 or more of the employer, or its customers or clients, during the workday.

It also amends Civil Code section 1785.20.5 to require that the written notice provided to prospective employees prior to requesting a credit report for employment purposes, to identify the specific basis (per Labor Code section 1024.5) for the use of such a report. All other notice and disclosure requirements currently in effect under the state Consumer Credit Reporting Agencies Act remain in place. Violation of the new law can result in lawsuits for damages, attorney’s fees and costs, as well as additional penalties of up to $5,000 for each violation.

2. Written Commission Agreements.

While the Labor Commissioner and certain courts have already held that an employer must have a written commission plan explaining the calculation of, and entitlement to, commissions, there was no state law that mandated such writing until now.

AB 1396 (not effective until January 1, 2013) will amend Labor Code section 2751 and require that all commission compensation arrangements “shall be in writing and shall set forth the method by which the commissions shall be computed and paid.” The new law defines “commissions” as “compensation paid to any person in connection with the sale of the employer’s property or services and based proportionately upon the amount or value thereof.” Commissions do not include short-term productivity bonuses or bonus and profit sharing plans, unless based on an employer’s promise to pay a fixed percentage of sales or profits as compensation. Failure to comply with the new law can expose the employer to an action for penalties of $100 per pay period per aggrieved employee under PAGA.

3. Wage Theft Prevent Act of 2011

AB 469 is effective January 1, 2012 and amends and adds a number of provisions to the California Labor Code. Below are a few of the provisions of the new law employers will want to know.

a. Amends Labor Code section 98 to permit the Labor Commissioner to award liquidated damages to an employee who succeeds in a claim for a violation of the minimum wage law. Previously only a court could award liquidated damages;

b. Amends Labor Code sections 240 and 243 to permit the Labor Commissioner to require an employer who is convicted of a wage violation or who fails to satisfy a judgment for unpaid wages to maintain a bond for up to two years and, if an employer fails to do so, impose penalties of up to $10,000;

c. Amends Labor Code section 1174 to increase the number of years an employer must keep employee identification and payroll records as required under that section from two years to three years. Also provides that an employer may not prohibit an employee from maintaining their own “personal” record of hours worked or piece rate units earned. (ASIDE: The DOL’s new app for IPhones will help employees do that);

d. Amends Labor Code section 1194.2 to increase the amount of liquidated damages a court can award to twice the amount of the unpaid wages plus interest in any action before the court under Labor Code sections 98, 1193.6 or 1194;

e. Provides that an employer who willfully fails to pay (and has the ability to pay) a final court judgment or final order issued by the Labor Commissioner for all wages due, is guilty of a misdemeanor and subject to fines between $1,000 to $20,000, and possible jail time;

f. Requires employers to provide each non-exempt employee at the time of hire with a notice that includes the following: i) the rate or rates of pay and basis thereof (e.g. hourly, shift, day, week, salary, piece, commission, etc., including overtime rates); ii) allowances, if any, claimed as part of the minimum wage (e.g. meal or lodging credits/allowances); iii) the dates of regular payday(s); iv) the name of the employer, including any dba’s; v) the physical address of employer’s main office or principal place of business, and a mailing address, if different; vi) the employer’s telephone number; vii) the name, address, and telephone number of the employer’s workers’ compensation insurance carrier; and viii) any other information the Labor Commissioner may deem necessary and material (which means employers will likely see further requirements from the Labor Commissioner before the effective date of the new law). Finally, if any of the information required to be in the notice changes, a new written notice of such change must be provided to each employee within 7 calendar days of the change unless the change is reflected on a timely wage statement.

4. Continuation of Health Coverage under the PDL.

Unlike under the FMLA and CFRA which require an employer to continue group health insurance benefits for an employee out on a family medical leave (up to a maximum of 12 weeks), there was no requirement to do so when an employee was out on pregnancy disability leave (PDL).

SB 299 will require employers to maintain and pay for coverage under a group health plan for an employee out on PDL. PDL provides for an employee to take up to a maximum of four months of leave for disabilities related to pregnancy, child birth, or a related medical condition. Therefore, the obligation to continue health insurance coverage could potentially be for up to a four month period.

5. Misclassification of Independent Contractors.

This is a very important new law and will only bolster the heightened scrutiny over the misclassification of workers by a number of state and federal agencies. In fact the federal DOL has entered into MOU’s with a number of states (California has not yet signed, but is expected to) which provide for collaboration between the DOL and states to audit and take enforcement action against companies that misclassify workers as individual contractors.

SB 459 adds section 226.8 to the Labor Code. The new law prohibits the willful misclassification of an employee as an independent contractor by a consultant or an employer, and prohibits charging misclassified individuals a fee, or taking a deduction from their compensation, if it would otherwise violate the law had the individual been classified as an employee. “Willful misclassification” means that an employer is trying to “avoid employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”

Violation of the new law can result in serious consequences, including: a) a court or the California Labor and Workforce Development Agency (LWDA) can impose civil penalties between $5,000 and $15,000 for each violation, or $10,000 to $25,000 for a pattern and practice of violations; b) the LWDA or court can contact the state’s Contractors License Board and require the Board initiate action; and c) the LWDA or court will require any person or employer who willfully misclassifies a worker to prominently displace a notice on its website, or if no website, in an area that is accessible to all employees and the general public, a notice stating: i) it has committed a serious violation of the law by willfully misclassifying employees as independent contractors; ii) it has changed its business practices to avoid further violations; iii) that any worker who believes he/she is being misclassified may contact the LWDA (contact information must be included); and iv) that the notice is being posted pursuant to a state order. The notice must be signed by an officer of the company and remain posted for one year.

The bill also adds section 2753 to the Labor Code. This new law provides that any person, who for money or other valuable consideration, knowingly advises an employer to treat a worker as an independent contractor to avoid employee status for that worker, shall be jointly and severally liable with the employer if the worker is found not to be an independent contractor. The new law does not apply to attorneys providing legal advice in the course of the practice of law or a person who provides advice to his or her employer.

6. Out of State Workers’ Compensation Coverage.

Previously, if a California employer had employees who performed work out of state from time to time, they had to obtain a separate workers’ comp policy to cover the employees under the laws where they worked.

AB 228 amends Insurance Code section 11780.5 to provide that the State Compensation Insurance Fund (SCIF) may also insure a California employer against his or her liability for workers’ compensation benefits, under the law of any other state, for California employees

temporarily working outside of California on a specific assignment if SCIF insures the employer’s other employees who work within California.

7. No Mandated E-Verify by Government Agencies.

E-Verify is a federal program administered by the U.S. Department of Homeland Security and the US Social Security Administration. Some federal laws require certain employers to utilize the program. Otherwise, other employers can voluntarily use the program to verify that the employees they are hiring are authorized to work in the U.S. (e.g. that the identification documents utilized to complete the federal I-9 Form are in fact legitimate).

AB 1236 (known as the “Employment Acceleration Act of 2011” adds Article 2.5 (section 2811, et. seq.) to the Labor Code. It provides that, except as required by federal law, or as a condition of receiving federal funds, neither the state nor a city, county, city and county, or special district shall require an employer to use an electronic employment verification system, including under the following circumstances: (a) as a condition of receiving a government contract; (b) as a condition of applying for or maintaining a business license; or (c) as a penalty for violating licensing or other similar laws.

8. Expanding the Definition of “Gender”.

AB 887 amends, among other statutes, the Fair Employment and Housing Act (FEHA) (Government Code §§12920, et. seq.) to include gender expression in the definition of “gender.” “Gender expression” is defined as “a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth. The new law makes it unlawful to discriminate on the basis of gender identity and gender expression and also requires employers to allow an employee to appear or dress in a manner consistent with the employee’s gender expression.

9. Protection of “Genetic Information.”

Consistent with the federal Genetic Information Nondiscrimination Act (GINA), SB 559 amends, among other statutes, the FEHA (Government Code §§12920, et. seq.) to include “genetic information” as protected from forming the basis for employment discrimination. “Genetic information” is a separate category from “genetic characteristics” which were already protected under FEHA. “Genetic information” includes any request for, or receipt of, genetic services, or participation in clinical research that includes genetic services, by an individual or any family member of the individual. It does not include information about the sex or age of any individual.

On the other hand, “genetic characteristics” means either of the following: (a) any scientifically or medically identifiable gene or chromosome, or combination or alteration thereof, that is known to be a cause of a disease or disorder in a person or his or her offspring, or that is determined to be associated with a statistically increased risk of development of a disease or disorder, and that is presently not associated with any symptoms of any disease or disorder; or (b) inherited characteristics that may derive from the individual or family member, that are known to be a cause of a disease or disorder in a person or his or her offspring, or that are determined to be associated with a statistically increased risk of development of a disease or disorder, and that are presently not associated with any symptoms of any disease or disorder.

CONCLUSION:

Wow…. that was a lot to digest wasn’t it. What should employers do now? Well, because of the immensity of the new laws, and the consequences for failing to comply with them, employers are advised to work with their employment counsel to ensure that their policies and procedures are updated appropriately, and that they take all steps necessary to train their supervisors and managers to comply with the new obligations. The employment lawyers at Weintraub Genshlea Chediak Tobin & Tobin are available to assist employers in their understanding of, and compliance with, these new laws. Please feel free to contact us.

Making California the seventh state in the country to enact such a law, Gov. Jerry Brown signed Assembly Bill 22 on October 9, 2011. As reported here in a post dated August 18, 2011, this law bars most employers (except certain financial institutions) from using pre-employment credit checks in the hiring process. It remains to be seen if Occupy Sacramento or Occupy Wall Street protesters will decry the exemption in this law as yet another example of government showing undue favoritism to the financial sector. Either way, prudent employers who wish to perform or commission credit checks of employees or job applicants should consult legal counsel so as to avoid costly lawsuits.