California Supreme Court Makes It Easier For Workers in Misclassification Cases To Obtain Class Certification

Employment class action litigation is often won or lost with a class certification ruling.  If the employer is successful in opposing class certification, then these cases often go away with little or no fanfare and limited liability.  If, however, an employer is unsuccessful, it may be exposed to substantial liability.  After the California Supreme Court's ruling last month in Ayala v. Antelope Valley Newspapers, workers alleging employment misclassification claims will find it easier to obtain class certification thereby transforming their relatively small individual claims into potentially multi-million dollar class action disputes. 

The plaintiffs in Ayala were newspaper carriers employed by defendant newspaper publisher. In their action, the four plaintiffs claimed that defendant classified them as independent contractors when, in reality, they were employees entitled to various wage and hour protections.  They sought to certify a class consisting of other carriers employed by defendant. The trial court denied plaintiffs' motion for class certification, concluding that common issues did not predominate because determining the carriers' employee status would require a detailed review of how defendant controlled the work of each respective carrier.  Plaintiffs appealed the trial court's denial to the Court of Appeal which agreed with plaintiffs that the issue was a common one capable of answer on a class wide basis. The California Supreme Court granted review and affirmed the ruling by the Court of Appeal. 

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California Court of Appeal Affirms That It Pays To Be the Squeaky Wheel

In a time when California courts are busier than ever, the California Court of Appeal recently did double duty by issuing an opinion that both decided an issue of first impression in California and implicitly approved Senate Bill ("SB") 292, a relatively new law (and one that we blogged about last year) clarifying that sexual harassment under California’s Fair Employment and Housing Act (“FEHA”) does not require proof of sexual desire towards plaintiff.

The Court's opinion in Max Taylor v. Nabors Drilling USA, LP can be found here. (Warning: this one is not family friendly!)  The case involved an employee working as a “floorhand” on an oil rig. For anyone who has never worked on an oil rig before (myself included), a floorhand is usually the lowest member of a drilling crew and is given the dirtiest and most physically demanding jobs. During the course of plaintiff’s employment, his male supervisor subjected him to serious and extreme harassment. For example (and this is where it gets bad, although we're only giving you the PG version), his supervisors called him multiple derogatory terms for gay men, made several offensive comments when he had an infection on his face, posted his photograph in the restroom with offensive graphics, urinated on him, spanked him, and aroused themselves in his presence and then asked him to sit on his lap.

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A Not-So Happy New Year for California Employers: 2014 Legislative Update

It has become an annual New Year’s tradition in California -- employers getting up to speed on a host of new employment laws that will affect them in the coming year. The California Legislature was busy in 2013 imposing new burdens on employers for 2014 and beyond. We previously blogged about an increase in the state minimum wage and a statutory clarification of the definition of sexual harassment, but those new laws are only the tip of the iceberg. Here’s our annual summary of the most important new laws affecting California employers.

  • Expanded Whistleblower Protection (SB 496): California law already prohibits employers from retaliating against employees who report the employer’s violation of state or federal law to a government or law enforcement agency. SB 496 expands whistleblower protection in several ways. First, it prohibits retaliation against internal whistleblowers, so an employee who reports suspected violations within the company is entitled to whistleblower protection to the same extent as an employee who reports violations to a government agency or law enforcement. Second, SB 496 provides whistleblower protection for reports of violations of local ordinances and regulations, as well as state and federal statutes. Third, SB 496 provides whistleblower protection to employees whose duties include the disclosure of legal compliance issues, which overturns case law excluding such employees from whistleblower protection.
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Remember: New Increase to California Minimum Wage Affects Exempt Employees Too!

California Governor Jerry Brown recently signed into law an increase in the state’s minimum wage, from the current rate of $8.00 per hour up to $9.00 per hour beginning on July 1, 2014. The minimum wage will increase again to $10.00 per hour, effective January 1, 2016. 

In addition to ensuring that all non-exempt employees are paid the increased minimum wage, employers with operations in California should also evaluate how the increase to the minimum wage affects salaries of exempt employees. California law requires that exempt employees be paid a salary of at least twice the minimum wage for full time employment on a monthly basis.  Under the existing minimum wage of $8.00, exempt employees must be paid an annual salary of at least $33,280. With the increase to the minimum wage, the minimum salary for an exempt employee will increase to $37,440 per year by July 2014, and then to $41,600 by January 1, 2016. Employers who do not ensure that their exempt employees are receiving at least these amounts will be exposed to misclassification claims.

Companies with employees in California should review their compensation practices to ensure they are fully in compliance with applicable law before the increased minimum wage takes effect.

New California Law Provides that Sexual Desire Is Not a Required Element in a Sexual Harassment Lawsuit

In a same-sex sexual harassment case, does the plaintiff need to prove that the alleged harasser's conduct was motivated by sexual desire?  Under SB 292, a law signed by Governor Brown a few days ago, the answer in California is "no."   

A key question when dealing with a sexual harassment claim under California's Fair Employment and Housing Act ("FEHA") is whether the harassment was "because of sex."  Relying on the United States Supreme Court's ruling in Oncale v. Sundowner Offshore Services, Inc., a California appellate court held in Kelley v. The Conco Companies that proof of sexual desire was required in order to allege a same-sex sexual harassment claim.  In Kelley, the plaintiff, a male apprentice iron worker, suffered sexually-explicit and homophobic insults and threats from male coworkers.  The Kelley court found that the conduct, while abusive, was not "because of sex" under FEHA, because the coworkers were simply using sexually-explicit language but were otherwise not acting out of sexual attraction towards the plaintiff.  

Five years before Kelley, a different California appellate court in Singleton v. United States Gypsum Company had reached the opposite conclusion, holding that plaintiff only had to prove that he or she was treated differently because of gender and that proof of sexual motivation was unnecessary.  While the Court in Singleton also analyzed Oncale, it found that the case did not stand for the proposition that a plaintiff had to present proof that the harasser was motivated by sexual desire.

SB 292 resolves the split in the California appellate courts by explicitly overturning Kelley and clarifying that sexual harassment under FEHA does not require proof of sexual desire towards plaintiff. Employers with operations in California should take note, however, that while SB 292 is aimed at overturning the decision in Kelley, it goes beyond that decision as it encompasses all types of sexual harassment, same-sex as well as different-sex. This new law is a reminder that effective policies that comply with state and federal law, and training of supervisors as required by California law, is more important than ever.

New Pregnancy Disability Leave Regulations Take Effect in California

California law requires employers with five or more employees to provide pregnancy disability leave (PDL) to employees who are disabled by pregnancy, childbirth or related medical conditions. New revisions to the PDL regulations have taken effect and include some notable substantive changes, including the following:

  • Expansion of definition of “disabled by pregnancy.” The regulations now define the term “disabled by pregnancy” to include needing time off for prenatal or postnatal care, gestational diabetes, pregnancy-induced hypertension, preeclampsia, post-partum depression, and loss or end of pregnancy. The regulations indicate that the list of conditions is intended to be non-exclusive and illustrative only, so employers should take a broad view of the term “disabled by pregnancy.”
  • Prohibition of discrimination based on “perceived pregnancy.” It is now unlawful to discriminate or harass an employee based on “perceived pregnancy,” which the regulations define as being regarded or treated by an employer as being pregnant or having a related medical condition.
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Happy New Year: New Laws Affecting California Employers In 2013

The California Legislature was again busy in 2012 thinking of new ways to make it more difficult to do business in the Golden State. Here’s our annual overview of key changes to employment laws in California (see last year's summary here). Companies with operations in California should ring in the new year by ensuring their familiarity and compliance with these laws, which took effect on January 1, 2013.

  • Computing Regular Rate of Pay for Nonexempt Salaried Employees (AB 2103)AB 2103 amends the California Labor Code to provide that for the purpose of computing the overtime rate of compensation required to be paid to a salaried, nonexempt employee, the employee’s regular hourly rate shall be 1/40th of the employee’s weekly salary, regardless of any agreement between the employer and the employee to the contrary. The Legislature made clear in the bill that its intent is to overturn Arechiga v. Dolores Press (2011) 192 Cal.App.4th 567, in which a California Court of Appeal upheld a written wage agreement that predetermined a nonexempt employee’s overtime compensation and included it as part of the employee’s salary. AB 2103 means that the method of calculating overtime for salaried, nonexempt employees cannot be modified by any agreement between the employer and the employee.
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California Legislature Prohibits Requesting Employee Social Media Passwords

As we blogged about earlier this week, there have been a lot of recent cases before the National Labor Relations Board ("NLRB") testing the validity under federal labor laws of employer policies seeking to restrict employee use of social media.

The NLRB isn't the only place action is happening recently in this developing clash between employment law and social media.  Responding to an emerging controversy about whether employers can require disclosure of social media passwords during the hiring process, the California Legislature has passed Assembly Bill 1844, which Governor Jerry Brown signed in late September.  It takes effect on January 1, 2013.

This legislation prohibits an employer from requiring or requesting that an employee or job applicant disclose a user name or password for the purpose of accessing personal social media. AB 1844 also prohibits requiring or requesting that an employee or applicant access personal social media in the presence of the employer, or divulge any personal social media.  Finally, it also prohibits retaliation against an employee or applicant for not complying with an employer's request for such information.

The law does contain a few limited exceptions.  An employer may request that an employee divulge personal social media that the employer reasonably believes to be relevant to an investigation of allegations of employee misconduct or employee violation of law, provided that the social media is used solely for purposes of that investigation.  Additionally, the law does not preclude an employer from requiring or requesting that an employee disclose a user name, password or other method for the purpose of accessing an employer-issued electronic device.

With the passage of this law, California becomes the third state (along with Maryland and Illinois) to legislatively limit employer access to social media accounts. Companies with employees in California should assess their hiring and employment practices to make sure they are in compliance with these new restrictions.

California: New Requirements For Commission Agreements To Take Effect

Companies with employees in California who are paid on commission should be aware of a new law requiring commission agreements to be in writing.  As we've blogged about previously, California AB 1396 was enacted last year with a deferred effective date of January 1, 2013.  That deadline is now coming up quickly, and affected employers should therefore begin to prepare for compliance.

The new law requires all contracts for employment involving commissions as a method of payment to be in writing and to set forth a method by which the commissions are required to be computed and paid. The employee must be given a signed copy of the agreement, and the employer must obtain a signed receipt from the employee. If the contract expires and the parties continue to work under the terms of the expired contract, the contract terms are presumed to remain in full force and effect until the contract is superseded or employment is terminated by either party.

California law defines commission wages as compensation paid for services rendered in the sale of the employer's property or services and based proportionately on the price of the service or product sold. The definition of “commissions” does not include short-term productivity bonuses such as those paid to retail clerks, and it does not include bonus and profit-sharing plans unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.

With the January 1, 2013 effective date of AB 1396 fast approaching, now is the time to ensure that agreements and procedures that comply with the new requirements are in place with respect to each of your commissioned employees in California.

California Supreme Court Clarifies Meal and Rest Break Requirements Under State Law

In its long-anticipated decision in Brinker v. Superior Court, a unanimous California Supreme Court has clarified the scope of an employer’s obligation to provide meal and rest breaks to non-exempt employees in California.  The Court's full opinion is available here.

Meal Breaks

California law requires employers to provide employees with a meal period of not less than 30 minutes for workdays lasting more than five hours, and to provide two meal periods for workdays in excess of ten hours, subject to waiver in certain circumstances.  At issue in Brinker was whether an employer must ensure that an employee’s work stops for the required 30 minutes, or whether an employer is only obligated to make meal periods available, with no responsibility for whether they are taken.  The Court concluded that an employer’s obligation is to relieve its employee of all duty, with the employee thereafter at liberty to use the meal period for whatever purpose he or she desires.  The employer must relinquish control over its employee’s activities and give the employee a reasonable opportunity to take an uninterrupted 30 minute break, and the employer may not impede or discourage the employee from doing so.  However, the employer is not obligated to police meal breaks and ensure no work is performed. 

Timing of Meal Breaks

The Court held that an employer must provide a first meal period no later than the end of an employee’s fifth hour of work, and a second meal period no later than the end of an employee’s tenth hour of work.  The Court found that there are no additional timing requirements, such as rolling five hour meal periods. 

Rest Periods

Under California law, employers must authorize and permit employees to take rest periods based on the total hours worked daily, at the rate of ten minutes net rest time per four hours worked or major fraction thereof.  A rest period need not be authorized for employees whose total daily work time is less than three and one-half hours.  The Court summarized the rest period obligation as follows: employees are entitled to ten minutes’ rest for shifts from three and one-half hours to six hours in length, 20 minutes for shifts of more than six hours up to ten hours, 30 minutes for shifts of more than ten hours up to 14 hours, and so on.  The 10-minute breaks must fall within the middle of a four hour period of work, to the extent practicable.

Timing of Rest Periods

The Court held that employers do not have a duty to permit their employees a rest period before any meal period.

What Brinker Means For Employers

Brinker is generally regarded as a favorable ruling for employers, and the decision provides a roadmap for employers to reduce the risk of claims arising from alleged meal and rest period violations.  Post-Brinker, it is essential that California employers carefully review and, if necessary, revise policies to state that meal periods are duty-free, 30 minutes in length and are to be taken before the end of the fifth hour of work.  Rest period policies should now detail that rest periods are authorized and permitted in accordance with the specific standards set forth above.

Employers should continue to require employees to clock out and in for meal breaks, and to carefully monitor and manage whether employees are working through their meal periods.  Employers are liable for straight time or overtime pay if they know or should have known employees have worked through meal breaks. If an employee is not clocking out for meals, an employer would likely be found to be on notice that the employee continued to work and thus should be paid for that time.  Additionally, if there is a pattern of employees not taking meal periods, or taking meal periods of less than 30 minutes in length or after the end of the fifth hour of work, management should look into whether the employees are really being given the opportunity to take timely 30-minute off-duty meal periods.

Finally, supervisors and managers should be trained on the importance of allowing employees to take meal and rest periods as prescribed in Brinker.  While the outcome in Brinker is good news for employers, managers who discourage or prevent employees from taking meal or rest breaks will expose the company to substantial liability.

Seasons' Greetings From The California Legislature--New Laws That Apply To Employers In January 2012

The California legislature has done plenty this year to leave in employers' stockings for the holidays--new employment laws that will become effective January 1, 2012.  In addition to the new California Transparency in Supply Chains Act we blogged about earlier, after some eggnog and holiday cheer, employers will need to be aware of new legal obligations that will kick in as we kick off 2012.  Here are the highlights.

 “Anti-Wage Theft” Law (AB 469). The Wage Theft Prevention Act of 2011 requires employers to provide non-exempt employees, at the time of hiring, a notice specifying the employee’s rate or rates of pay and the basis on which the employee’s wages are to be calculated (such as hourly, daily, piece, salary, commission, etc.). The notice must also include applicable overtime rates, allowances (if any) claimed as part of the minimum wage, the employer’s designated regular payday, the name of the employer (including any “doing business as” names), the employer’s physical and mailing addresses, and contact information for the employer’s workers’ compensation carrier. The Act also requires the employer to notify employees in writing of any changes made to any of this information within seven days of the implementation of such changes, unless the changes are reflected on a timely wage statement or other writing required by law. The Act adds an element of criminal liability by providing that any employer who willfully fails to pay wage-related Labor Commissioner orders or court judgments is guilty of a misdemeanor. 

Independent Contractors (SB 459). This new law cracks down on employers who misclassify their employees as independent contractors by imposing a fine of between $5,000 and $25,000 for “willfully” misclassifying a worker as an independent contractor. “Willful misclassification” means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor. The law also imposes joint and several liability for a non-attorney consultant to advise an employer to willfully misclassify someone as an independent contractor.

Background Checks (AB 22). This law prohibits most employers from obtaining or relying on consumer credit reports regarding employees or job applicants, except in certain specified limited circumstances. The law does not apply to financial institutions or entities required by law to perform credit checks. Under the new law, employers may still obtain and rely upon credit reports for managerial employees covered by the executive exemption.

Pregnancy Disability Leave (AB 592 and SB 299). This law expressly prohibits “interference” with the exercise of any right provided under the California Family Rights Act, or due to disability by pregnancy, childbirth or related medical conditions. In a provision that may prove to be preempted by ERISA, the law also requires employers to maintain and pay for health coverage under a group health plan for any eligible female employee who takes up to four months of leave due to pregnancy, childbirth or a related medical condition in a twelve month period. 

Gender Identity and Expression (AB 887). Existing law prohibits discrimination and harassment based on gender. This law expands the definition of “gender” to include both gender identity (how the person sees him or herself) and gender expression (how other people view the person). Under the new law, an employee must be permitted to dress consistent with the employee’s gender identity and expression.

Genetic Information Discrimination (SB 559). Discrimination in hiring or employment based on genetic information is now unlawful under the Fair Employment and Housing Act. Genetic information is defined to include the individual employee’s genetic tests, the genetic tests of the employee’s family members, and the manifestation of a disease or disorder in the employee’s family members. 

Commission Agreements (AB 1396). This law requires all contracts for employment involving commissions as a method of payment to be in writing and to set forth a method by which the commissions are required to be computed and paid. The employee must be given a signed copy, and the employer must obtain a signed receipt from each employee. This law does not take effect until January 1, 2013, so employers have a year to prepare for compliance.

Agricultural Labor Relations (SB 126). This law authorizes the California Agricultural Labor Relations Board to certify union elections when employer misconduct affects the outcomes.

 Happy Holidays!

It's Time to Ensure Compliance with the California Transparency in Supply Chains Act

Under the California Transparency in Supply Chains Act, beginning January 1, 2012, large retailers and manufacturers that do business in California must disclose information on their websites about what they do to eradicate slavery and human trafficking from their supply chains. The new law applies to companies with worldwide gross receipts of over $100 million.

The law provides that if a covered company has a website, it must disclose certain information via a “conspicuous and easily understood link” on the homepage. The company must disclose to what extent, if any, it does each of the following:

  1. Engages in verification of product supply chains to evaluate and address risks of human trafficking and slavery, specifying if the verification was not conducted by a third party.
  2. Conducts audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains.
  3. Requires direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking.
  4. Maintains internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking.
  5. Provides company employees and management, who have direct responsibility for supply chain management, training on human trafficking and slavery, particularly with respect to mitigating risks within the supply chain of products.

Notably, the law does not require companies to do anything to combat slavery and human trafficking. The law simply requires disclosure of the above information.   

Although the law’s exclusive remedy for noncompliance is an action for injunctive relief brought by the Attorney General, the law does not limit remedies available for a violation of any other state or federal law. On an annual basis, the California Franchise Tax Board will submit to the Attorney General a list of companies required to make the disclosure.


California: "Suitable Seating" Class Actions on the Rise

California employers need to be mindful of a new kind of wage-hour class action – class claims arising from the “suitable seating” requirements of the California Industrial Welfare Commission’s wage orders. 

The wage orders set forth what employers must do with respect to employees’ wages, hours and working conditions. There are 17 wage orders, applying to every industry and occupation. Most of the wage orders provide that “all working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of such seats.” Unfortunately, the wage orders do not define “suitable seats” or “reasonably permits.”   

In Bright v. 99 Cents Only Stores, a cashier at a discount retail chain filed a class action against her employer alleging that the company did not provide cashiers with “suitable seating.” Unlike the typical wage-hour class action, this case does not involve a claim that employees were underpaid. Instead, the plaintiff seeks to use the alleged wage order violation to trigger the penalty provisions of the California Private Attorney General Act (PAGA), which amount to $100 for each aggrieved employee for the first violation and $200 per pay period for each aggrieved employee for subsequent violations. The Court of Appeal recently ruled that the plaintiff can proceed with her case and, if she proves the employer did not provide suitable seating, recover PAGA penalties.

The retail industry is the first industry in the cross-hairs of the plaintiffs’ bar for seating violation class actions, but employers in the hospitality and manufacturing industries should expect to be targeted soon. The decision of the Bright court permitting PAGA penalties for seating violations may lead to class actions for violations of other obscure provisions of the wage orders, such as requirements relating to changing rooms, resting facilities and workplace temperatures. California employers should take immediate measures to ensure they are in compliance with the seating requirements and other provisions of the California wage orders.


California Overtime Rules Apply To Work Performed In California By Out-Of-State Employees

The California Supreme Court has ruled that California’s daily overtime requirements apply to work performed in California by non-residents.  In Sullivan v. Oracle Corp., three employees of Oracle who were not residents of California worked as “instructors” and trained Oracle’s customers in the use of the company’s products.  Required by Oracle to travel, the plaintiffs worked primarily in their home states but also in California and several other states.  California is one of the few states that requires payment of daily overtime for hours worked in excess of eight in a day.  At issue in the case was whether these non-residents of California were entitled to daily overtime for days they worked in California.

In a unanimous decision, California Supreme Court held that the California Labor Code does apply to overtime work performed in California for a California-based employer by out-of-state employees, such that overtime pay is required for work in excess of eight hours in a day.  In reaching this conclusion, the Court noted California’s strong interest in applying its overtime law to all non-exempt workers, and all work performed, within the state’s borders.   The Court stated that to permit non-residents to work in California without the protection of the state’s overtime law would completely sacrifice, as to those employees, California’s important public policy goals of protecting health and safety and preventing the evils associated with overwork.  Additionally, not applying California law 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.

While not great news for employers, this decision provides guidance to multi-state employers about how to pay non-exempt employees who work occasionally in California.  However, the Court left some important questions unanswered.  First, the decision does not directly apply to employers that are based outside of California.  The Court specifically limited its holding to out-of-state employees working for California-based employers.  The question remains whether an employer based outside of California must comply with California’s overtime rules for those days its non-California employees work in California.  Even though the ruling does not specifically address this scenario, the reasoning the Court employed in reaching its decision leaves the door open for an argument that its holding applies to employers based outside of California.  Also, the Court was not asked to address, and did not address, whether other provisions of California’s wage law -- such as the contents of pay stubs, meal period requirements, the compensability of travel time, the accrual and forfeiture of vacation time, and the timing of payment to employees who quit or are discharged -- apply to work performed in California by non-resident employees.
California-based employers with non-exempt employees in other states who occasionally work in California should immediately confirm that all such employees are paid overtime in conformity with California law when working in California. 

Victory For Employers in Washington Medical Marijuana Case

In a victory for employers, the Washington Supreme Court has ruled that Washington’s Medical Use of Marijuana Act (“MUMA”) does not protect medical marijuana users from adverse hiring or disciplinary decisions based on an employer’s drug test policy. Click here to download a copy of the decision in Roe v. Teletech Customer Care Management. The lawsuit and all appeals were handled for the employer by Stoel Rives attorneys Jim Shore and Molly Daily.

Jane Roe (who did not use her real name because medical marijuana use is illegal under federal law) sued Teletech for terminating her employment after she failed a drug test required by Teletech’s substance abuse policy. She alleged that she had been wrongfully terminated in violation of public policy and MUMA since her marijuana use was “protected” by MUMA. The trial court granted summary judgment in favor of Teletech, and Roe appealed. As discussed in a previous blog, the Washington Court of Appeals, Division II affirmed the trial court’s dismissal of Roe’s case. Roe then appealed to the Washington Supreme Court.

The Supreme Court ruled 8-1 in favor of in Teletech, holding that MUMA provides an affirmative defense to state criminal prosecutions of qualified medical marijuana users, but “does not provide a private cause of action for discharge of an employee who uses medical marijuana, either expressly or impliedly, nor does MUMA create a clear public policy that would support a claim for wrongful discharge in violation of such a policy.” The Court’s holding applies regardless of whether the employee’s marijuana use was while working or while off-site during non-work time. Adding to a significant victory for employers, the Court’s decision extends to the current version of MUMA as amended by the Legislature in 2007, and not just the original version passed by the voters in 1998 in effect when the facts of the case arose.

The plaintiff in the Teletech case did not raise a disability discrimination or reasonable accommodation claim under Washington’s Law Against Discrimination, and the Supreme Court therefore did not expressly reach that particular issue. But the Court did point out that marijuana remains illegal under federal law regardless of what the State of Washington does, and that it would be incongruous “to allow an employee to engage in illegal activity” in the process of finding a public policy exception to the at-will-employment doctrine. Moreover, the Court noted that the Washington State Human Rights Commission itself acknowledges that “it would not be a reasonable accommodation of a disability for an employer to violate federal law, or allow an employee to violate federal law, by employing a person who uses medical marijuana.”

The workplace implications of medical marijuana continue to be a developing area in many states. California’s Supreme Court has ruled in a manner consistent with Washington. Also previously covered in World of Employment, in Emerald Steel Fabricators, Inc. v. Bureau of Labor & Industries, the Oregon Supreme Court ruled that because federal criminal law preempts Oregon’s medical marijuana law, employers in Oregon do not have to accommodate employees' use of medical marijuana. But some states are more protective of an employee’s medical marijuana use. Given the continued efforts by marijuana advocates and civil rights groups to “push the envelope” of medical marijuana laws into the workplace, it is important for employers to continue to closely monitor legislative and legal developments. A recent effort to include workplace protections for medical marijuana users via amendments to Washington’s medical marijuana laws was defeated, but we anticipate similar efforts may be made in other states in the coming years.

There are many sound reasons why employers have zero tolerance policies and engage in drug testing of applicants and/or employees, including customer requirements, government contracting requirements (e.g.,the federal Drug Free Workplace Act), federal or state laws (including DOT requirements for transportation workers), workplace safety, productivity, health and absenteeism, and liability. To best protect themselves, employers should review their policies to make sure that illegal drug use under both state and federal law is prohibited, and that their policies prohibit any detectable amount of illegal drugs as opposed to an “under the influence” standard. Employers should also ensure that all levels of their human resources personnel know how to handle medical marijuana issues as they arise.

California: Employee's E-Mails With Lawyer Are Not Privileged When Sent Via Company Computer

A clear and comprehensive computer policy is an essential component of any employee handbook. Last week, a California appellate court ruled that when such a policy is in place, an employee who uses the company computer to e-mail her attorney about perceived harassment and discrimination in the workplace waives the attorney-client privilege.

In Holmes v. Petrovich Development Company, the plaintiff alleged that she was the victim of sexual harassment and retaliation arising from her employer’s response to her pregnancy. Before quitting her job, the plaintiff used her work computer to send e-mails to her attorney regarding possible legal action. As might be expected, the employer subsequently located these e-mails on its computer system, and used the e-mails as part of its defense of the employee’s lawsuit.

Ordinarily, communications between a client and her attorney are confidential and privileged. In this case, however, the employer’s policies provided that: (1) company computers were to be used only for company business, (2) the company would monitor its computers for compliance with this policy and thus might “inspect all files and messages … at any time,” and (3) employees using company computers to create or maintain personal information or messages “have no right of privacy with respect to that information or message.”

The court ruled that when the plaintiff used a company computer to e-mail her attorney about an employment action against her boss, with knowledge of her employer’s computer monitoring policy, the employee knowingly disclosed the information to the company, and her communications with her attorney lost their privileged character. Summing it up neatly, the court said that sending the e-mails via company computer “was akin to consulting her lawyer in her employer’s conference room, in a loud voice, with the door open, so that any reasonable person would expect that their discussion of her complaints about her employer would be overheard by him.”  The defendants prevailed on all of plaintiff's claims.

This case reinforces that there are many benefits to an employer’s implementation of a well-written computer policy.

Ninth Circuit Issues Split Decisions on Compensation for Travel Time and "Off-the-Clock" Work


Employees who drive company vehicles between home and work will find little to cheer about in a recent Ninth Circuit decision . . . unless they live in California.  In Rutti v. Lojack Corporation, a three-judge panel refused to relax the rule that commuting time is non-compensable under the Fair Labor Standards Act (FLSA).  

The employee, who installed vehicle recovery systems, contended that his travel time between home and worksites was compensable under the FLSA and California law because his employer required him to drive company vehicles and significantly restricted his activities while doing so.  For example, the employer prohibited the employee from transporting passengers and engaging in personal pursuits, and required him to drive directly to and from the worksite with his cell phone turned on.  

All three judges rejected that argument under the FLSA, holding that use of an employer's vehicle to commute is non-compensable even if it is a condition of employment and that the restrictions placed on the employee's activities were incidental to his principal job activities.  The unanimous panel also rejected the employee's argument that his commuting time was compensable under the "continuous workday doctrine," under which an employee's workday generally lasts until he has completed all of his principal activities during the day. 

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9th Circuit: No Compensatory or Punitive Damages in ADA Retaliation Cases

The Ninth Circuit Court of Appeals recently limited the remedies available to employees who sue for retaliation under the Americans with Disabilities Act (ADA), ruling that the statute does not provide for punitive damages, compensatory damages or a jury trial in ADA retaliation cases.  Click here to read the decision in Alvarado v. Cajun Operating Co. 

Mr. Alvarado worked as a cook in defendant’s restaurant. He complained after his supervisor made allegedly discriminatory remarks related to his age and disability, and shortly afterward he received several disciplinary write-ups for poor performance.  After Mr. Alvarado was ultimately terminated, he sued his former employer for, among other things, retaliation under the ADA.  Prior to trial, the federal district court granted defendant’s motion in limine, barring plaintiff from seeking punitive and compensatory damages, and a jury trial, on his ADA retaliation claim on the grounds that the statute provided only equitable relief for such claims.

The Ninth Circuit affirmed the district court’s ruling by holding that the plain, unambiguous language of the ADA remedy provisions specifically enumerate only those sections of the act for which compensatory and punitive damages (and a jury trial) are available, and that the ADA anti-retaliation provision is not included in that list.  Somewhat surprisingly considering the laws at issue have been on the books since 1991, the Ninth Circuit appears to be only the third Circuit Court of Appeals to have been presented with the issue, after the Seventh and Fourth Circuits (which reached similar conclusions).  The court also noted that several district courts in other circuits had reached the opposite conclusion (perhaps most surprising of all), by ignoring the text of the remedy provision and instead emphasizing the overall structure of the ADA and the “expansive” intent of the 1991 amendments. 

For now, the law in the Ninth Circuit on this question is clear:  while still entitled to compensatory or punitive damages in disability discrimination or failure to accommodate claims under the ADA, employees may not receive those damages for ADA retaliation claims.

Continue Reading...

Supreme Court to Review Text Message Case; Primarily of Interest to Public Employers

Yesterday the United States Supreme Court agreed to consider whether a police officer has a reasonable expectation of privacy in text messages sent using his department-issued pager.  The Ninth Circuit Court of Appeals ruled earlier this year that the officer had such a privacy right.  Click here to read the opinion below in City of Ontario, California v. Quon

In Quon, the employer, the City of Ontario, distributed to its police officers pagers with texting capability.  The City then audited the use of text messages by the officers to determine whether overage charges may have been caused by personal use of the service.  During the audit, it discovered that Quon had sent several personal, sexually explicit text messages.  Quon sued the City, asserting violations of his right to privacy under the Fourth Amendment of the United States Constitution as well as under Article I, Section I of the California Constitution.  The District Court dismissed Quon's suit after a jury found that the City conducted the audit to investigate usage, not misconduct.  The Ninth Circuit reversed, holding that the City violated Quon's constitutional privacy rights by reading his private texts, and the City's articulated policies did not give Quon sufficient notice that his texts could by read by others to overcome his privacy rights. 

What does this mean for employers?  For most private employers, this case will have little or no impact.  Federal privacy rights, such as those that come from the Fourth Amendment, apply only to public employers and not to private ones.  Private California employers should watch out:  California courts have sometimes applied state constitutional rights to private employers, and could rule that their employees have privacy rights in work-provided email and text systems.  Still, it is a good practice for all employers, public and private and in all states, to adopt and distribute policies clearly stating that employees have no expectation of privacy in communications they make using employer-provided equipment and systems, such as email, text messages, cell phones, etc. 

California DLSE Reverses Itself Regarding Schedule and Salary Reductions for Exempt Employees

The California Department of Labor Standards Enforcement (DLSE) has issued an opinion letter in which it concludes that California law does not prohibit an employer from temporarily reducing the work schedule of an exempt employee from five days a week to four days a week, and correspondingly reducing the employee's salary by 20 percent.  The employer in question was experiencing significant economic difficulty and wanted to temporarily reduce the schedules and salaries of exempt employees to avoid or limit the need for layoffs.  The DLSE concluded that this practice does not violate the salary basis test and the affected employees would not lose their exempt status.

Although this conclusion is consistent with well-settled principles of federal law, it represents a reversal of the DLSE's opinion.  The DLSE reached the opposite conclusion -- that an employer cannot reduce the salary of an exempt employee during a period in which the company operates a shortened workweek due to economic conditions -- in a 2002 opinion letter.  The 2002 opinion letter relied on a federal court decision that the DLSE now characterizes as "not well-reasoned and misguided."

Although DLSE opinion letters are not binding authority, California courts usually give them a great deal of weight.  Additionally, DLSE opinion letters provide insight into how the DLSE will interpret the law in cases it pursues as California's wage and hour enforcement agency.

California Supreme Court: No Privacy Violation for Employer's Placement of Video Camera in Employees' Office

The California Supreme Court has issued its decision in Hernandez v. Hillsides, Inc., finding that an employer's placement of a hidden camera in an office used by two employees did not violate the employees' right to privacy.  This case has been closely watched (OK, pun intended) as it worked its way through the appellate courts.  Like all workplace privacy cases in California, the case is highly fact-specific and should not be interpreted as encouraging employers to conduct clandestine surveillance of employees.

Hillsides operated a residential facility for neglected and abused children.  Plaintiffs Hernandez and Lopez were employees of Hillsides who shared an enclosed office and performed clerical work during daytime business hours.  Hillsides learned that late at night, after the plaintiffs had left the premises, an unknown person repeatedly used a computer in the plaintiffs' office to access and view pornographic web sites.  Concerned that the culprit might be a staff member who worked with the children who resided there, Hillsides set up the hidden camera, which could be operated from a remote location at any time.  Neither of the plaintiffs was suspected of being the culprit, and the employer only activated the camera after hours when the plaintiffs were gone.  The plaintiffs' activities were never viewed or recorded by means of the surveillance system.

Continue Reading...

Use Workshare Program to Cut Costs and Keep Workers

Are you looking for ways to hang on to staff, yet reduce costs?  Those goals are not necessarily mutually exclusive if you choose to participate in your state's workshare program.  A workshare program allows your employees to collect some unemployment benefits but continue working part time.  Here's an article from the Center for Law and Social Policy that gives additional detail.

Seventeen states have such programs:  Arizona, Arkansas, California, Connecticut, Florida, Iowa, Kansas, Maryland, Massachusetts, Minnesota, Missouri, New York, Oregon, Rhode Island, Texas, Vermont and Washington.  For a sample of a workshare law, see Section 1279.5 of California's unemployment insurance code.

Each state’s program is a little different, but they have common attributes.  We’ll use Oregon’s program as an example. 

Continue Reading...

Oregon Legislature Bans Mandatory Meetings

A new Oregon bill will prohibit employers from requiring employees to attend mandatory or "captive audience" meetings on, among other topics, labor unions.  Governor Ted Kulongoski is expected to sign the bill, which would them become law effective January 1, 2010.  Click here to read SB 519

SB 519 prohibits an employer from taking action against an employee who refuses to participate in communications concerning the employer’s opinions on religious or political matters. Religious or political matters is defined broadly and includes communications to employees about unionization.  An employee who suffers economic loss (through termination or suspension) as a result of the bill can sue his or her employer and recover treble damages.  The bill also allows employees to obtain an injunction prohibiting additional "captive audience" meetings. 

This law might not be long-lived:  the U.S. Supreme Court found a similar California law to be preempted by federal labor law.  Click here to read that opinion in Chamber of Commerce v. Brown.  Even if a court finds Oregon's statute to be similarly preempted (and we believe a court will), the law could still apply to employers that are not covered by federal labor law - namely, Oregon public and agricultural employers.  Also, the word from Salem is that the legislature will still revise the law to provide additional protections for religious employers (such as churches and some hospitals) who hold religious meetings, so keep an eye out for those changes in the next week or so. 

Extension of Federal Benefits to Same-Sex Partners Falls Short of Goals

The memorandum issued by President Obama yesterday extends some benefits to the same-sex partners of federal employees, including access to a government insurance program that pays for long-term conditions such as Alzheimer's disease, and to sick leave to care for a sick same-sex partner or a non-biological child.  However, the extension did not provide eligibility for health care to same-sex partners, drawing protest from gay activists

Why did President Obama stop short?  The Defense of Marriage Act (DOMA), the 1996 federal law that, among other things, defines marriage as a legal union exclusively between one man and one woman.  According to President Obama's press statement, the White House determined that DOMA prevented an extension of all benefits to same-sex partners, including health care.  In the statement, President Obama called on Congress to repeal DOMA and signaled an intend to extend all benefits to same-sex partners if and when that happens. 

President Obama's actions will clearly impact Federal agencies and their employees, but what effect does it have on private employers?  For now, none  - the memorandum only applies to the federal government.  However, it does signal a growing trend in mandating the extension of employee benefits to same-sex partners. States that recognize same-sex marriage generally require private employers to extend benefits to same-sex spouses; other states that do not recognize same-sex marriages but do recognize same-sex partnerships (such as Oregon, Washington and California) may require private employers to extend benefits to same-sex partners under certain circumstances.  Private employers should consult legal counsel about their possible obligation to provide such benefits. 

Former Employee Wins $4.1 Billion, Dr. Evil Award

An arbitrator recently awarded $4.1 billion in favor of the former chief marketing officer of iFreedom  Communications Inc., finding that iFreedom breached his employment contract by firing him without cause.  You read that right:  $4.1 billion, with a "b."  U.S. Dollars, not Zimbabwean.  Don't believe us?  You can read the opinion yourself:  Chester v. iFreedom Communications Inc.

$4.1 billion dollars.  That's a ton of money.  Boatloads of money.  In fact, that's so much money, we are awarding Mr. Chester our First Annual Dr. Evil Award!  Congratulations!

So, how did Chester rack up $4.1 billion in damages?  The employment agreement guaranteed him a salary of $12,000 a month plus commissions of 5 percent of gross sales; if he was fired without cause, he would continue to receive commissions.  iFreedom also was supposed to provide Chester with 1.1 million shares of common stock upon hiring and another 600,000 shares if he met certain sales targets .  Apparently, iFreedom did really, really well.  Sales, stock and interest added up, and in a big way.

How can employers avoid owing an ex-employee billions?  First, be careful drafting employment agreements!  A carefully drafted agreement could have avoided this massive liability.  Second, if the agreement requires "cause" for termination, make sure such cause actually exists before pulling the trigger on someone.  Finally, if you get sued and the other side is seeking billions of dollars, hire a decent lawyer and don't try to represent yourself.  It turns out the founder of iFreedom (a non-lawyer) represented the company by himself.  Oops. 

Starbucks Obtains Reversal of $105 Million "Tip Sharing" Case

Just over a year ago, we reported about a $105 million California verdict in favor of Starbucks baristas who were required to pool their tips with supervisors.  As you might expect, Starbucks appealed that decision.  Yesterday, a California Court reversed the decision.  Click here to read the decision in Chau v. Starbucks.

The 4th District Court of Appeal in San Diego ruled Tuesday that supervisors "essentially perform the same job as baristas," so they should get their fair share of the collective tips.  (We wonder what that says about the supervisors' exempt status?)  Attorneys for the baristas have indicated they will appeal to the California Supreme Court, and the Stoel Rives World of Employment will be watching, its $3.50 latte in hand. 

Ninth Circuit Declines to Reconsider Ruling on SF Health Care Ordinance

Back in October 2008, the Ninth Circuit Court of Appeals upheld a San Francisco city ordinance that requires many employers to either contribute a specified amount toward their employees' health care costs on a regular basis or pay into a city health care fund for San Francisco residents.  Earlier this week, the Ninth Circuit denied a petition for rehearing en banc, meaning that the law will continue to be in effect--until or unless the Supreme Court decides to hear an appeal. 

The San Francisco Health Care Security Ordinance went into effect on January 9, 2008.  It is a "pay or play" health care plan, as it requires employers either to "pay" for health care or "play" by the rules of the city health care fund.  The ordinance applies to for-profit employers with at least 20 employees and non-profit employers with at least 50 employees.  For more information on the ordinance, including compliance information, click here

In the underlying lawsuit, Golden Gate Restaurant Association v. San Francisco, a group of employers brought a lawsuit seeking the federal court to declare that the San Francisco ordinance is preempted by the federal Employee Retirement Income Security Act of 1974 (ERISA).  The Ninth Circuit disagreed, and the ordinance will continue to be in effect.  This decision may pave the way for other state and local governments to pass similar "pay or play" health care laws, knowing that they will likely withstand a legal challenge. 

Starbucks Wins Round in Class Action over Applications' Marijuana Questions

Earlier this month, Starbucks scored an important procedural victory from the California Court of Appeals, which ruled that a class of employees lacked standing to sue over questions the coffee chain asked on its employment applications about prior marijuana convictions.  Click here to read the opinion in Starbucks v. Superior Court

Despite the apparent victory, this case teaches an important lesson for California employers:  make sure your employment applications do not inquire about minor marijuana possession convictions that are more than two years old.  Such questions violate California Labor Code Sections 432.7 and 432.8.  In the Starbucks case, even though the court held that the applications violated the statute, there was no evidence that any of the class members had been harmed; the outcome would have been different had the class consisted of employees who were denied employment based on their answers to the question, or employees who disclosed that information in response to the unlawful question. 

California Overtime Laws Cover Nonresidents Who Work in California

Do California wage and hour laws - including their daily and weekly overtime provisions - apply to non-residents who occasionally perform work in California?  Yes, according to a decision from the Ninth Circuit Court of Appeals earlier this month.  Click here to read the court's decision in Sullivan v. Oracle Corp.

In Sullivan, Oracle sent employees who regularly lived and worked in Arizona and Colorado to California on temporary assignments to train Oracle's customers on the use of its software products.  The plaintiffs sued under California law for daily and weekly overtime when they worked in California.  Oracle argued that Arizona and Colorado law should apply because the employees regularly work and live in those states.  (Of course, the plaintiffs would not have been entitled to any overtime pay under Arizona or Colorado law).  A district court sided with Oracle and granted its motion for summary judgment.  However, the Ninth Circuit overturned that decision and held that “California's employment laws govern all work performed in the state, regardless of the residence or domicile of the worker.”

What does this mean for employers?  If you have non-California employees working in California, even on temporary assignment, make sure that you comply with California's unique wage and hour and overtime laws.  For more information on California law, including its daily and weekly overtime provisions, check out this helpful FAQ from the California Labor Board

California Supreme Court to Review Rest and Meal Break Case

Back in August, we reported a California Court of Appeals decision that employers must provide rest and meal breaks, but are not required to control that the breaks were taken.  Last week, the California Supreme Court granted review of that case - it might uphold the decision, but it might also overturn it. 

The grant of review means the lower court case has no effect until the Supreme Court rules.  California employers should return to policing meal and rest breaks to make sure employees take them, at least until a new decision comes from the California Supreme Court, probably early next year.  Watch the Stoel Rives World of Employment for updates!

Fourteen Million Reasons Not to Misclassify Employees as Independent Contractors

A class of current and former FedEx Ground drivers misclassified as "independent contractors" will receive an additional $9 million in reimbursements for employment-related expenses, an appointed referee ruled October 20.  This award will be combined with a previous award of $5.3 million the drivers received in 2006.  The award will reimburse the drivers for such expenses as truck maintenance and registration, uniforms, fuel, and liability insurance.  For more information on the drivers' lawsuit, click here

As this case shows, employers run a substantial risk by misclassifying its employees as "independent contractors."  Not only can the misclassified employees bring lawsuits (for any number of reasons, such as unpaid overtime, minimum wage violations, family and medical leave issues, and more), but state and federal tax agencies can bring collection actions seeking unpaid payroll taxes, unemployment taxes and penalties.

Concerned that your independent contractor might be a misclassified employee?  The IRS has this handy information on how to determine whether the employee is correctly classified.  There is even an IRS form (Form SS-8) that you can file to seek the Service's help in determining if your employee is correctly classified.  Of course, if you believe that you have misclassified employees working as contractors, it might be a good time to contact your labor and employment attorney. 

Ninth Circuit Upholds San Francisco Health Care Ordinance

The Ninth Circuit Court of Appeals recently upheld a San Francisco city ordinance that requires many employers to either contribute a specified amount toward their employees' health care costs on a regular basis or pay into a city health care fund for San Francisco residents. 

The San Francisco Health Care Security Ordinance went into effect on January 9, 2008.  It is a "pay or play" health care plan, as it requires employers either to "pay" for health care or "play" by the rules of the city health care fund.  The ordinance applies to for-profit employers with at least 20 employees and non-profit employers with at least 50 employees.  For more information on the ordinance, including compliance information, click here

In Golden Gate Restaurant Association v. San Francisco, a group of employers brought a lawsuit seeking the federal court to declare that the San Francisco ordinance is preempted by the federal Employee Retirement Income Security Act of 1974 (ERISA).  The Ninth Circuit disagreed, and the ordinance will continue to be in effect.  This decision may pave the way for other state and local governments to pass similar "pay or play" health care laws, knowing that they will likely withstand a legal challenge. 

Free Lunch Seminar on California Law for Oregon Employers October 30

Do you have an office or a facility in California? Do you have any employees who work in California? If you've had to confront the challenges of complying with California's unique employment laws and regulations, you'll want to join us.

We will have a lively discussion led by Tony DeCristoforo, a labor and employment law specialist based in our Sacramento office, and Victor Kisch, a Portland based attorney who practiced in California for about a decade. They will summarize the important differences between Oregon and California employment laws.

  • Where?  Stoel Rives' Portland Office
  • When?  11:30 a.m., October 30, 2008
  • Cost?  Free!  As Tom Peterson would say, "Free is a very good price!"

For registration information, click here

Governor Schwarzenegger Signs Two New Employment Laws, Vetoes Many Others

California employers take note:  late last month, the Governator signed a few new employment laws, but vetoed many others. 

Two bills are now law in California:

  • A.B. 10, which immediately exempts from state hourly overtime pay requirements computer professionals earning more than $75,000 a year .
  • A.B. 2001, which gives local governments authority to establish whistleblower hotlines, and requires cities and counties to protect the confidentiality of whistleblowers.

The bills that Governor Schwarzenegger vetoed include:

  • A.B. 2279, which would have prohibited employers from discriminating in hiring, termination, or employment conditions based on the use of medical marijuana.
  • A.B. 437, which would have reversed (for state law purposes only) the "paycheck rule" on equal pay claims as set forth in the U.S. Supreme Court's 2007 decision in Ledbetter v. Goodyear Tire & Rubber Co.
  • A.B. 2386, which would have changed the rules for farmworkers' union elections, providing for either secret mail-in ballots or a traditional ballot box election.
  • A.B. 3063, which would have prohibited employers from asking job applicants about arrests or detentions that did not result in convictions, or about participation in pre-trial or post-trial diversion programs.
  • S.B. 1717, which would have doubled the amount of weeks a worker could receive disability pay.


Governor Schwarzenegger Vetoes SB 1583

As previously reported in the Stoel Rives World of Employment, the California Assembly passed Senate Bill 1583, which would have made paid consultants who advise employers to treat workers as independent contractors to avoid employee status jointly and severally liable with the employer if it is determined the workers are not independent contractors.  The Governator vetoed (terminated?) the bill on September 28.  It does not appear likely that there is enough support in the Assembly to override the veto. 

California Bans Texting While Driving

Add "texting" to the list of things you may not do in California while driving.  As previously reported in the Stoel Rives World of Employment, on July 1 this year, California banned talking on a cell phone while driving (although talking on a hands-free device is still okay).  However, the California legislature forgot to add texting to that ban. 

Senate Bill 28, signed by the Governator on September 24, 2008, fixed the loophole.  It reads: “A person shall not drive a motor vehicle while using an electronic wireless communications device to write, send, or read a text-based communication.”  The bill took effect immediately. 

Employers in all states should consider amending their employee handbooks to discourage texting, cell phone use, computer use, or other distracting habits while employees drive on company business.  In the event of an accident during work time, an employer risks significant liability if it is found the accident was caused by a distracted employee.  If you don't believe the Stoel Rives World of Employment, perhaps you will believe Katie Couric:

California Assembly Passes Four Employment-Related Laws

California employers take note:  The California State Assembly recently passed four significant employment-related bills that you should pay close attention to:

  • Medical MarijuanaA.B. 2279 would prohibit discrimination against an employee based on marijuana use, as long as the use was for medical reasons and did not occur at the workplace or during the hours of employment.
  • Equal PayA.B. 437 would reject the "paycheck rule" established in the U.S. Supreme Court's decision in Ledbetter v. Goodyear Tire & Rubber Co., 127 S. Ct. 2162 (2007).   Under the new bill, the statute of limitations for pay claims under the state Fair Employment and Housing Act would toll with each discriminatory paycheck an employee receives. 
  • Independent ContractorsS.B. 1583 would make paid consultants who advise employers to treat workers as independent contractors to avoid employee status jointly and severally liable with the employer if it is determined the workers are not independent contractors.
  • Arrest RecordsA.B. 3063 would prohibit employers from asking applicants about arrests  that did not result in convictions, or about participation in pre-trial or post-trial diversion programs.

Will the Governator sign the bills?  Right now, he and the state assembly are deadlocked over the state budget, and Schwarzenegger has said he will not sign any new bills unless and until a new budget is agreed on.  However, if he does not sign the bills within 30 days of their passage, they automatically become law.  Stay tuned to the Stoel Rives World of Employment for more updates!

California Drywall Contractor Settles Meal Break Case for $1.4 Million

California employers beware:  the state Attorney General is enforcing meal breaks and overtime laws.  This week, an Orange County drywall contractor agreed to pay $1.4 million in damages to employees who did not receive their legally required meal breaks or who did not recieve overtime.  To read the settlement in the case, California v. Interwall Dev. Sys. Inc., click here.  To read the Attorney General's press release, click here

The defendant also agreed to pay the state up to $131,000 in payroll taxes it should have paid if it had adequately compensated its employees, civil fines totaling $200,000, $70,000 in attorneys' fees and costs, and $26,000 to cover the cost of a "restitution administrator."  Ouch. 

So remember:  under California law, employees are entitled to a ten-minute break every four hours and to overtime pay for working more than eight hours per day or forty hours per week.   If you don't follow the law, you might get a visit from the Governator

California Court Upholds One Year Statute of Limitation to Arbitrate FEHA Claim

If you've followed the development of California law on the enforceability of arbitration agreements in the last few years, you know it's complex.  And last week, it just got a little more so, although in a way that might be good for employers.  In Pearson Dental v. Superior Court, the California Court of Appeal (Second District) enforced an arbitration agreement requiring the employee to bring any claims within one year, despite the "hybrid" two year statute of limitations in California's Fair Employment and Housing Act (FEHA).   

The employee sued the employer for violation of FEHA alleging age discrimination and other claims.  The employer successfully moved to compel arbitration, and the arbitrator granted the employer's motion for summary judgment on the grounds that arbitration was not requested within one year as required by the arbitration agreement. The trial court vacated the arbitration award, but the Court of Appeal reversed, holding that the one-year statute of limitations did not "unreasonably restrict plaintiff's ability to vindicate his rights under the FEHA."  The court noted that the FEHA does not have a "true" two-year statute of limitations, but rather a "hybrid" period, in which the employee must file an administrative complaint within the first year.  Thus, the arbitration agreement's one-year limitations period was comparable to the FEHA's one-year administrative complaint deadline. 

Does this mean that California courts will be more likely to enforce arbitration agreements?  Don't count on it.  The court did not spend significant time analyzing the agreement for evidence of either substantive and procedural unconscionability - which are the bases on which many California courts have invalidated arbitration agreements.  Nevertheless, the case does give employers some comfort in knowing that a shorter limitations period sometimes may be enforceable.  If you want to read up on the complex history of employment arbitration agreements in California, here's what the Attorney General has to say on the topic

California Employers Required To Offer, But Not Police, Meal and Rest Breaks

California employers scored a major victory regarding meal and rest periods as the result of a new California Court of Appeals decision, Brinker Restaurant Corp. v. Superior Court.  Under the ruling, employers must provide meal periods by making them available, but need not ensure that they are taken.  To read Stoel Rives' detailed synopsis of the case, click here

California Paid Sick Leave Bill Dies in Committee

A California bill to provide universal paid sick leave died in committee last week, following intensive lobbying efforts from small businesses and their lobbyists.  The bill would have granted employees of small companies in California up to five days of paid sick leave each year, while workers at larger companies could take up to nine days a year.  To read more, check out this article from the L.A. Times

The bill was scuttled primarily due to the cost of implementation and enforcement in a year in which the state faces a $15 billion deficit.  Even if it had passed, the bill faced a likely veto from Governor Arnold Schwarzenegger.  The bill's sponsor, Fiona Ma (D-San Francisco), vowed to reintroduce a similar measure next year. 

If passed, the law would have made California the first state to have a mandatory paid sick leave program.  However, the program is not entirely unprecedented:  employees is San Francisco already have a paid sick leave program.  Further, since January 1, 2004, California has offered wage replacement benefits for employees who take time off from their jobs in order to care for a family member or child with a serious health condition.  Want to learn more about the legislative process?  Watch this.

California Supreme Court Confirms Noncompetes Are Invalid

In a 7-0 decision yesterday, the California Supreme Court held that a noncompetition agreement signed by a former Arthur Andersen CPA was invalid under California law.   In Edwards v. Arthur Andersen LLP, the court reminded us that noncompetition agreements are invalid under California's Business and Professions Code section 16600, even if they are written narrowly enough not to deprive persons of their right to pursue their profession.  The court specifically rejected the "narrow restraint" exception to section 16600 that had previously been adopted by the Ninth Circuit, under which employers could enforce noncompetes that did not "entirely preclude" an employee from practicing his or her trade. 

Hang Up and Drive! Washington and California Ban Cell Phone Use While Driving

Last night I was riding home and was almost run off the street by a woman reading a novel while driving, when I remembered:  Effective July 1, 2008, new laws in California and Washington prohibit the use of hand-held cell phones while driving.  Drivers may, however, use a cell phone if the communication is made using hands-free device such as a bluetooth headset or wired headset.  Earlier this year, another Washington law went into effect banning text messaging while driving. 

In Washington, both the cell phone and the text messaging laws are "secondary enforcement " laws, meaning that offenders will only receive a ticket if pulled over for another traffic violation such as speeding or running a stop sign.  California law enforcement, however, is authorized to ticket drivers only for cell phone use.  As far as I know, Oregon does not yet prohibit reading while driving (but it should!)

Want more information?  The California DMV has a great Q&A site on its new law.  Don't live in Washington or California but want to know what the law is in your state?  Check out this handy chart of state cell phone laws from the Governor's Highway Safety Association. 

Employers should alert their employees who may drive in California or Washington as part of their job duties.  And employers in all states might consider implementing a cell phone policy that restricts the use of cell phones while driving.  Recent years have seen a large upswing in lawsuits against employers who supply their employees with cell phones, if the employee is then in an accident while using the phone. 

Big Day at the Supreme Court: Four New L&E Decisions

Today the U.S. Supreme Court issued four labor and employment-related decisions; none, however, were big surprises or substantial changes in the law.

 First, in Meacham v. Knolls Atomic Power Laboratory, the Court held 8-0 that an employer defending an Age Discrimination in Employment Act case bears the burden of proving a "reasonable factors other than age" or "RFOA" affirmative defense.  Truth be told, most defense lawyers have assumed that it was the employer's burden to prove the affirmative defense; this decision simply confirms that assumption.  Continue Reading...

Make Mine a "Venti": Starbucks Ordered to Pay Baristas $105 Million

A California Superior Court ordered Starbucks Corp. to pay $105 million in restitution to baristas who were required to pool their tips with supervisors. Chou v. Starbucks Corp., Cal. Super. Ct. No. GIC836925 (Mar. 19, 2008). The class action case was brought on behalf of all baristas who worked at any California Starbucks going back to October 8, 2000: an estimated 100,000 workers. That’s a little over $1,000 per barista—or approximately 420 tall lattes each.

No Individual Liability for Retaliation Under California FEHA

In a ruling that could simplify the defense of retaliation claims in California, the California Supreme Court recently held that there exists no individual liability for retaliation under California's Fair Employment and Housing Act (FEHA). Jones v. The Lodge at Torrey Pines P’ship, (Cal. Mar. 3, 2008). Although the FEHA prohibits discrimination by "an employer," in contrast, it prohibits retaliation by "any employer, labor organization, employment agency, or person." Based on the legislative history, the court determined that the legislature did not intend to provide for personal liability when it added the word "person."