Labor and Employment

Almost every employer offers some form of vacation leave to its employees. Some employers, following the lead of academia, also offer long-term employees sabbatical leaves so that they can “recharge their batteries” and hopefully return to work more productive and creative.

Employers must ensure that they have proper policies in place in characterizing sabbatical leave to avoid it from being considered as vacation leave. The difference is important: Vacation leave that has been earned but not used must be paid out at the time the employee’s employment ends; whereas, sabbatical leave does not.

In Paton v. Advanced Micro Devices, Inc., the plaintiff sued his former employer claiming that the eight weeks of sabbatical leave that he had accrued was actually vacation time that needed to be paid out to him when his employment ended. Plaintiff argued that the sabbatical program was essentially extra vacation leave and that, under section 227.3 of the Labor Code, his employer could not require him to forfeit such pay.

Although the trial court granted the former employer’s motion for summary adjudication, the California Court of Appeals reversed and adopted a four-part test for determining whether leave should be considered sabbatical leave or vacation leave. The four factors adopted by the Court are:

(1) Whether the leave is granted infrequently. This tends to support the assertion that the leave is sabbatical in nature and intended to retain experienced employees who have devoted a significant period of service to the employer. The Court recognized that offering sabbatical leave every seven years would appear to be an appropriate starting point for assessing corporate sabbaticals;

(2) Whether the length of the leave is adequate to achieve the employer’s purpose, which typically requires that the length of leave be longer than that “normally” offered as vacation leave;

(3) Whether the sabbatical leave is offered in addition to regular vacation leave; and

(4) Whether a sabbatical program incorporates some feature demonstrating the employer’s intent that the employee is expected to return to work after the sabbatical is over.

The Court made clear that no single factor would be dispositive. Rather, the court emphasized that it was important to determine whether the sabbatical leave was intended as an incentive to induce experienced employees to continue working for defendant and increase the productivity or creativity upon their return to work as opposed to merely providing additional vacation for longer-term employees.

Employers who offer or intend to offer sabbatical leaves to their employees should review such plans with legal counsel to avoid incurring additional, unintended liabilities.

abor Code section 2810 was enacted by the California Legislature in 2004. The primary provision of section 2810 prohibits a party such as an employer from contracting for certain types of services, including construction services if that party knows or should know the contract “does not include funds sufficient to allow the contractor to comply with all applicable local, state and federal laws or regulations governing the labor or services to be provided.” It also provides a private cause of action in favor of employees “aggrieved” by any violations.

Section 2810 was enacted to address “wide spread subminimum wages and working conditions” that existed primarily in construction, janitorial, security and garment industries at the time. In Castillo v. Toll Bros., Inc. (decided July 28, 2011), a California appellate court addressed the provisions of section 2810 for apparently the first time. Toll Bros. was the general contractor on several construction projects and was later sued by employees of subcontractors alleging violations of wage and hour laws, including section 2810. The employees argued that Toll Bros., in bidding the projects, did not include sufficient funds to the subcontractors that resulted in the claimed wage and hour violations.

Toll Bros. moved for summary judgment in both class actions arguing that under section 2810, it only had to ensure that the employees of the subcontractors were being paid a minimum wage. The plaintiff employees on the other hand, argued that, because employees in construction services are typically paid at rates higher than minimum wage, the contracts entered into by Toll Bros. should have included funds sufficient to pay the local prevailing wages for this labor.

In affirming summary judgment in Toll Bros.’ favor on some of the claims, the California appellate court held that the clear language of section 2810 “unambiguously requires the sufficiency of a contract challenged under section 2810 to be measured by the minimum wage cost for the work anticipated.” The Court found it significant that there was “no general law requiring an employer to pay its workers the average local wage for a particular skill or trade if that average wage is higher than the legal minimum.” “Merely to pay less than the prevailing wage therefore violates no law” and could not form the basis for a section 2810 violation.

Thus, the Court held that a contract violates section 2810 only if the funds paid will not allow the subcontractor to comply with applicable laws or regulations in performing the contract, one of those applicable laws being the minimum wage law. The Court also rejected the plaintiffs’ argument that they should be treated differently given that the construction industry regularly pays higher wages than the legal minimum wage. The Court found that the California legislature did not express an intent to distinguish between the various industries in enacting section 2810.

Therefore, employers who are entering into contracts with subcontractors should analyze whether the contract for services allows the subcontractor to pay its employees at least minimum wages for the work anticipated to avoid a possible violation of section 2810.

Can an employee take FMLA leave for substance abuse?

The FMLA regulations clearly state that:

“FMLA leave may only be taken for treatment for substance abuse by a health care provider or by a provider of health care services on referral by a health care provider. On the other hand, absence because of the employee’s use of the substance, rather than for treatment, does not qualify for FMLA leave.”

(19 C.F.R. § 825.119(a) (emphasis added).)

So, according to the regulations, an employee is not qualified for FMLA leave if he/she is absent because of current substance abuse right? Not so fast.

In Picarazzi v. John Crane, Inc. (“J. Crane”), the employee, Picarazzi, had a history of alcohol abuse and started to have attendance problems in March 2008. In late March or early April, 2008, the employee informed J. Crane of his alcoholism and his need to get some help. He filled out leave of absence paperwork and went into rehab on April 2, 2008. He turned in a FMLA medical certification from his doctor that said he would be in rehab for approximately 30 days and the anticipated discharge date was May 2, 2008. The HR coordinator for the J. Crane approved the FMLA leave and provided the employee with an FMLA designation form stating that his “12 weeks of job protection expires on June 23, 2008.” The Company also asked that the employee check in every 30 days.

The employee was discharged from rehab on April 23rd with a return to work note from the rehab facility stating he could return to work the next day. However, his doctor issued a return to work note stating he could return to work on April 30th with no restrictions. The employee did not return to work at any time between April 24th and April 30th. Instead, he had relapsed and returned to rehab on April 30th. He was discharged from rehab on May 8th, and his doctor provided a return to work release saying he could return to work on May 13th. He didn’t return to work until May 14th, and then went out sick on May 15 & 16. He relapsed again on or around May 21st and eventually went back into rehab on June 9th and was released on June 15th. On many days in between and after his various rehab treatments, the employee was absent from work and apparently consuming alcohol (in fact he admitted in his deposition that he was drinking about a pint of vodka every day).

In applying its attendance “point” system, J. Crane considered the periods when the employee was in rehab (April 2 – April 23, April 30 – May 8, and June 9 – June 15) as FMLA leave and did not assess any points against him for those days. However, J. Crane did not consider the days when the employee was not in rehab and did not return to work, as protected leave and assessed absentee points against him. Pursuant to its policy, because the employee had a significant number of absentee points against him, J. Crane terminated the employee on June 26, 2008. He filed a lawsuit against J. Crane arguing that his termination was wrongful and violated his rights under the FMLA.[1]

In reliance on the strict language of the FMLA regulations, J. Crane filed a motion for summary judgment against the employee’s FMLA claim. The Company argued that it assessed absentee points against the employee only on those occasions when he was not enrolled in a rehab program or under his doctor’s care.

Despite the Language of the FMLA Regulations, the Court Denied the Motion for Summary Judgment. Why?

Among other reasons, the Court found that:

1. An employee need not be enrolled in a rehab facility every day that he is on leave in order to qualify for FMLA leave. Therefore, some days the employee was out of rehab could still qualify as FMLA protected and thus a triable issue of fact exists.

2. The employer made representations to the employee (contained in the FMLA designation form prepared by J. Crane’s HR coordinator) that he was on “job protected” FMLA leave until June 23, 2008.

Important Lessons for Employers.

• Accuracy of FMLA paperwork is essential. The Court focused on J. Crane’s FMLA designation form that stated that the employee’s “job protected” leave would expire on June 23, 2008. The medical certification from the employee’s doctor listed only 30 days for the anticipated duration of rehab. Therefore, that should have been the date the employee’s “job protected” FMLA leave should have expired absent a change in circumstances (and new medical certification) extending the FMLA leave. What the HR coordinator did with the FMLA designation form was confuse the employee’s total “entitlement” to 12 weeks leave in a 12 month period under the FMLA, with the “approved amount” of FMLA leave being granted based on the information provided by the health care provider. Therefore, according to the Court, while the FMLA regulations don’t protect the current use of alcohol, the employee here could reasonably rely on the representation in the FMLA designation form and believe he was on job protected leave until June 23, 2008.
• Employers should not complete generic FMLA paperwork and merely say “you get 12 weeks during 12 months and the leave expires on X.” Rather, employers should use the information they have from the employee and his/her health care provider to complete careful and accurate FMLA paperwork that reflects the realities of the given situation. If circumstances change and the employee says he/she needs further leave, the employer is entitled to seek additional medical certification to be fully informed of the employee’s current situation and the basis for any further FMLA leave.

[1] The employee also claimed that J. Crane didn’t follow its progressive discipline policy but that issue is not discussed in this case review.

On July 18, 2011, the California Supreme Court issued its opinion in the case California Grocers Association v. City of Los Angeles, in which it upheld the Grocery Worker Retention Ordinance enacted by Los Angeles in December 2005. That ordinance provides that when grocery stores of a specific size are acquired by a new owner, the current employees have certain rights during a 90-day transition period. These rights include: the seller must prepare a list of non-managerial employees with at least six months employment as of the date of transfer and the buyer of the store must hire from that list during the transition period. Furthermore, the hired employees may only be discharged for cause during the transition period and that, at the end of the transition period, the buyer must prepare a written evaluation of each employee’s performance and “consider” offering all “satisfactory” employees continued employment. There are similar ordinances that have been adopted by several other California municipalities, such as Berkeley (Marina Business Workers), Emeryville (Hotel Workers), and San Jose (Airport Business Workers).

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The California Supreme Court handed down a decision on June 30, 2011, which is viewed by many as hurting business travel to California. The Court, in Sullivan v. Oracle, unanimously decided that non-resident employees working in California are entitled to overtime payment pursuant to California law. The Court also gave out-of-state employees four years to sue their employer, holding that overtime work performed by out-of-state employees within California can serve as the basis for a claim under California’s unfair competition law (“UCL”). (Cal. Bus. & Prof. Code § 17200.)

This decision ended a long running dispute between Oracle Corporation, a large software company headquartered in California, and three of its former employees who trained Oracle’s customers in the use of the company’s products. While the plaintiffs mainly worked in their home states (Colorado and Arizona), they occasionally worked in California for business trips. The most these employees worked in California was 110 days per year; however, other years, they spent as little as 20 days in California. Oracle applied the wage-hour laws of the plaintiffs’ resident states to their employment. As a result, plaintiffs filed claims for overtime compensation under California law and restitution under the UCL.

On appeal, the Ninth Circuit Court of Appeals asked the California Supreme Court to decide the underlying questions of California law which would have a significant impact on the “large but undetermined number of California-based employers [who] employ out-of-state residents to perform work in California.”

The Court found that California’s overtime laws “apply by their terms to all employment in the state, without reference to the employee’s place of residence.” The Court reasoned that to not apply California’s overtime laws would “encourage employers to substitute lower paid temporary employees from other states for California employees, thus threatening California’s legitimate interest in expanding the job market.” However, this type of activist policy argument is not the place of the Court and fails to consider the ancillary jobs lost by the substantial decrease in business travel to California. Most disturbing, however, was the Court’s suggestion that the employee performing work may be entitled to apply either the resident state labor laws or California’s labor laws, whichever may be more beneficial for him or her.

Employers doing business in California are expected to see a flood of new wage and hour litigation as a result of this new ruling. Accordingly, California-based employers should review their payroll practices and develop policies and procedures to deal with overtime compensation of out-of-state employees traveling to work within California.

Employees in California generally are not eligible for state unemployment benefits if they quit their jobs voluntarily. However, if the employee resigns for reasons related to childcare, he or she may still qualify for such benefits under the EDD’s regulations. Childcare-related resignations often stem from changes in the employee’s domestic circumstances; for example, when the employee has separated or divorced from a spouse. Such resignations may also result from the employee’s daycare provider becoming unable to continue performing such services; for example, if a daycare center closes its doors or if a relative, neighbor, or friend of the employee who watched the child is no longer available to do so.

Under EDD regulations, good cause for quitting may be “based on domestic circumstances if the [employee]’s obligation is of a real, substantial, and compelling nature such as would cause a reasonable person genuinely desirous of retaining employment to take similar action.” (Cal. Code Regs., title 22, section 1256-9(b).) This exception may apply so long as the reason for quitting “is due to a legal or moral obligation.”

The EDD recognizes that providing or arranging for childcare is a parent’s legal or moral obligation. Thus, the employee’s eligibility for unemployment benefits usually will depend upon his or her childcare options. According to the EDD, “under normal circumstances, arranging care with neighbors, relatives, friends, a nursery school, or daycare service are considered practical alternatives to quitting [a job].” Moreover, EDD guidelines specify that an employee has good cause to quit only if he or she “has explored all childcare options and is left with no practical alternative to quitting.”

In that vein, the EDD may decline to find good cause if the employee’s childcare options are not unworkable but merely undesirable; for example, if the distance from home or work to an alternate childcare provider is somewhat greater but not excessively far. Similarly, an employee typically will not qualify for unemployment benefits if he or she quits simply because the cost of childcare is too high. Under the guidelines, the cost of childcare “is usually not a consideration in deciding if a claimant had good cause for quitting.” However, the EDD has signaled that “special circumstances may arise” if the cost of available childcare is “exceptional and unreasonable.”

To avoid resignations for childcare-related reasons, employers may consider various options; for example, modifying an employee’s shift, transferring the employee to another worksite, or utilizing a telecommuting arrangement. When an employee quits on account of childcare options without giving the employer an opportunity to contemplate such alternatives, or if the employer believes the employee has not explored or unreasonably rejected other childcare options, the employer may consider challenging the employee’s application for unemployment benefits.

Today, the United States Supreme Court ruled in favor of Wal-Mart in its monumental sex discrimination lawsuit brought on behalf of all female employees. The court ruled unanimously that the lawsuit against Wal-Mart Stores Inc. cannot proceed as a class action, reversing a decision by the 9th U.S. Circuit Court of Appeals in San Francisco. The lawsuit could have involved up to 1.6 million women, with Wal-Mart facing potentially billions of dollars in damages. The decision is a victory for many employers snared in the net of class action litigation by employees who are attempting to support their cases by flimsy evidence.

The Court unanimously ruled that the purported class of employees could not prove a “common question of law or fact.” The Court pointed out that “the crux of a Title VII inquiry is the reason for a particular employment decision, and respondents wish to sue for millions of employment decisions at once. Without some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members’ claims will produce a common answer to the crucial discrimination question.” The Court found the necessary “glue” to be completely absent from Plaintiffs’ case.

In making this finding the Court looked at the fact that Wal-Mart had a written policy prohibiting discrimination and penalties for those who violated it. The Court felt the Plaintiffs’ evidence from a sociologist, asserting that Wal-Mart’s corporate culture made it vulnerable to gender bias, completely inadequate. The Court’s decision also said that in this type of case there needs to be a common element tying together “literally millions of employment decisions at once.” The majority found the Plaintiffs’ statistical evidence and sociologist’s report amounted to nothing but thin air. Ultimately, commenting on the question of evidence of common elements, the Court found the evidence supporting Plaintiffs’ claims to be “entirely absent here.”

The Court did hold that a corporate policy, such as Wal-Mart’s, of giving local supervisors discretion over employment matters, could support a Title VII disparate-impact claim. However, the justices pointed out that the disparate-impact claim would be challenging a single employment decision by a single supervisor, and did not mean that “every employee in a company with that policy has a common claim.” The Court felt that “in a company of Wal-Mart’s size and geographical scope, it is unlikely that all managers would exercise their discretion in a common way without some common direction.”

This decision brings some much needed relief to employers faced with the ever growing trend of class-action discrimination lawsuits. In addition, the Court’s decision will potentially have a larger impact on Wage & Hour Class Actions, where the Justices have provided employers with a strong decision outlining the evidentiary burden employees have in certifying a matter as a class action.

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 If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact any members of the the  Labor and Employment Group. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.