Just when you think that California cannot get any more employer-unfriendly, the California Legislature reminds us that it actually can. The latest reminder is legislation that was recently introduced by Democratic Assemblyman Mark Stone (AB 2416) to allow employees to record liens against their employers’ property for alleged unpaid wages. That’s right—alleged. In order to record a lien, the employee does not need to have proven his entitlement to unpaid wages in a court action or Labor Commissioner proceeding or otherwise. It is only after the lien is recorded that the employee must prove up the lien by demonstrating that he is actually owed the unpaid wages. If the employee succeeds, he is also entitled to recover attorneys’ fees and costs. A lien can also be recorded and enforced by a group of employees or by a government agency (e.g. the DLSE). The only way the employer can avoid the lien is by obtaining a surety bond (similar to that required to stay a money judgment pending appeal), which is itself a costly procedure.
At least there’s some faint protective relief built in to the legislation for employers--well, sort of. If an employer defeats an action to enforce a lien, the employer can, in very limited circumstances, recover its attorneys’ fees and costs IF the employer can prove that the employee’s action was brought unreasonably and in bad faith. (Conversely, the employee of course automatically gets awarded his attorneys’ fees and costs if he proves entitlement to unpaid wages, regardless of whether the wage withholding was in good faith.)
The proposed legislation has exclusions for employees covered by collective bargaining agreements if certain specified conditions are met, and also excludes employees who are exempt administrative, professional or executive employees (of course, the employee can challenge his exempt status and thereby avoid this exclusion, and the legislation specifically states that it is the employer’s burden to prove, as an affirmative defense, that the employee meets the test for exemption).
Employers should voice their opposition to this unnecessary legislation, which has already passed one labor committee and, if enacted, will provide one more tool for the plaintiffs’ employment bar to use to pressure employers to settle wage and hour claims, particularly those brought on behalf of a class of employees. The text of the proposed legislation is available here.
April 17, 2014
Posted by Cal Labor Law in CDF News & Events
Our subscribers are reminded of our upcoming webinar on Tuesday, April 22, 2014 on the subject of criminal history inquiries during the hiring process (and for subsequent employment purposes). In this webinar, CDF Partner Mark Spring will discuss recent developments in the law in this area, including recent federal EEOC enforcement guidance and the increasing number of states and cities (most recently San Francisco) enacting "ban the box" laws that limit criminal history inquiries on employment applications and in the employment context more generally. He will also discuss additional restrictions on criminal history inquiries imposed by California law and offer practical guidance on best practices for California employers to follow in order to minimize risk in this area of increasing legislative focus and litigation. For more information on this complimentary 30-minute webinar and to register, click here.
San Francisco has joined several other cities in enacting “ban the box” legislation to restrict the ability of private employers to inquire about and consider criminal history information for employment purposes. San Francisco’s recently enacted Fair Chance Ordinance takes effect August 13, 2014. The Ordinance applies to private employers located or doing business in the City and County of San Francisco with 20 or more employees (including owners and regardless of where the employees work). The Ordinance’s protections apply to applicants or employees whose place of employment is entirely or substantially located in San Francisco.
The Ordinance prohibits covered employers from making any inquiry regarding criminal history until after an initial job interview. The Ordinance specifically prohibits “check the box” type questions regarding criminal history on employment applications. In addition to prohibiting direct inquiry of an applicant or employee, the Ordinance also specifies that employers may not indirectly inquire about criminal history through the use of a background check or other means until after an initial interview. Furthermore, prior to conducting any criminal history inquiry, the employer must provide the applicant or employee with a written notice of their rights under the Ordinance. This notice, along with a required workplace poster, will be prepared and published by San Francisco’s Office of Labor Standards Enforcement (OLSE).
In addition to restricting the timing of any criminal history inquiry, the Ordinance also restricts the scope of any such inquiry as well as an employer’s permissible response to learning that an applicant or employee indeed has a criminal background. The Ordinance completely prohibits employers from inquiring about or considering (1) arrests that did not result in a conviction (unless an investigation or charges are currently pending); (2) completion of a diversion program; (3) sealed or juvenile offenses; (4) offenses that are more than seven years old from the date of sentencing; and (5) offenses that are not felonies or misdemeanors (such as infractions). Even if an employer learns of criminal history information, the employer is limited in its ability to consider that information as a bar to employment. The Ordinance requires that the employer conduct an individualized assessment of the nature of the offense as it relates to the specific job position at issue. The offense may only be considered if it has a “direct and specific negative bearing on that person’s ability to perform the duties or responsibilities necessarily related to the employment position.” In this regard, the employer must consider whether the position “offers the opportunity for the same or a similar offense to occur” and whether “circumstances leading to the conduct for which the person was convicted . . . will recur.” The employer must also consider the amount of time that has elapsed since the conviction and consider any mitigating factors and rehabilitation efforts specific to the individual applicant or employee.
If an employer decides to take adverse action based on criminal history information (e.g. refusal to hire or promote), the employer must first notify the applicant or employee of the intended decision in writing (and provide a copy of the background check or criminal conviction report) and allow the applicant or employee seven days to respond with any evidence of inaccuracy in the information or to describe any mitigating factors or rehabilitation. After receiving such a response, the employer must wait a reasonable time to evaluate the information and reconsider the intended action before making a final decision. If the employer decides to proceed with the adverse action, it must notify the employee of that decision and that it was based on the criminal history information.
The Ordinance requires covered employers to retain records (including application forms and other related records) for three years. Covered employers are also affirmatively required to state on all job solicitations or advertisements that the employer will consider for employment qualified applicants with criminal histories in a manner consistent with the Ordinance.
The OLSE may investigate compliance and violations of the Ordinance and may award appropriate relief to an applicant or employee, as well as impose penalties against an employer. The OLSE may also file a civil action against an employer for a violation of the ordinance.
Employers are reminded that they have separate obligations to comply with the Fair Credit Reporting Act as well as California’s Investigative Consumer Reporting Agencies Act. Both of these acts regulate the process of conducting background checks for employment purposes and overlap in some ways with the requirements of the San Francisco Ordinance. Additionally, employers are reminded that the EEOC recently published its own guidance on the use of criminal background checks for employment purposes and has stepped up its enforcement efforts in this area. Employers are urged to review their criminal background check practices for compliance, and San Francisco employers must additionally ensure more specific compliance with the new San Francisco Ordinance. The text of the Ordinance is available here.
March 27, 2014
Posted by Cal Labor Law in Union-Management Relations
Yesterday, Region 13 of the National Labor Relations Board issued a groundbreaking decision in holding that scholarship football players at Northwestern University are “employees” under the National Labor Relations Act and can be represented by a union, the College Athletes Players Association (CAPA), if they vote to do so. The NLRB ordered an election to take place and ordered Northwestern to provide an Excelsior list of voters to the Board by April 2. In reaching this conclusion, after analyzing the testimony of players, coaches and others, the Board held:
- The scholarship football players are not primarily students.
- The athletic activities of the scholarship football players do not constitute a core element of their educational degree.
- The athletic activities of the scholarship football players are supervised by individuals who are not members of the academic faculty and this fact militates against a finding that these individuals are merely students.
Based on these and other sub-factors described in detail in the decision, the Board concluded that the walk-on players were not employees, but that the scholarship players were employees and could participate in a union election. This decision has the potential to cause major changes in the way college athletics are administered. It is being closely watched not only by labor and employment law experts, but by colleges, the NCAA, ESPN and all sports media, and anyone with any interest in college athletics and/or amateur athletics.
Northwestern has already announced that it will appeal this decision to the entire National Labor Relations Board. Under NLRB rules, this Board will only consider the appeal if Northwestern can establish one of the following conditions:
- That a substantial question of law or policy is raised because of (i) the absence of, or (ii) a departure from, officially reported Board precedent.
- That the Regional Director’s decision on a substantial factual issue is clearly erroneous on the record and such error prejudicially affects the rights of a party.
- That the conduct of the hearing or any ruling made in connection with the proceeding has resulted in prejudicial error.
- That there are compelling reasons for reconsideration of an important Board rule or policy.
This was a surprising ruling, as many experts expected that the CAPA was going to have a difficult time convincing the NLRB that the student-athletes were “employees” under the NLRA. However, there is a long way to go before this becomes a reality. Most expect vigorous appellate litigation by both sides, which will be well financed by interested parties. In addition, it is reasonably likely that Congress may intervene and act to amend the NLRA in some way to make it clear that student-athletes are not covered. Influential Republican Senator Lamar Alexander, who formerly was the President at University of Tennessee and served as the Secretary of Education under President George H.W. Bush has already weighed in on his outrage over the decision with a public statement: “Imagine a university’s basketball players striking before a Sweet Sixteen game demanding shorter practices, bigger dorm rooms, better food, and no classes before 11 a.m. This is an absurd decision that will destroy intercollegiate athletics as we know it.” We already know that President Obama is a big college basketball fan, so he may be more than willing to sign any bills to prevent college athletics from being turned on its head.
For a copy of this very interesting decision, please click here.
We will continue to keep you updated on this matter as it moves forward as there will certainly be more developments in the coming months.
News media are widely reporting that President Obama intends this week to direct the Department of Labor to materially revise the Fair Labor Standards Act (FLSA) regulations pertaining to overtime exemptions so that fewer employees will qualify for an exemption from overtime. Obama's move relies on his executive authority to revise the rules that carry out the FLSA. Obama is relying on this executive authority to carry out his pro-worker agenda, as a means of sidestepping the need to pass actual legislation that likely would be blocked by Republicans in Congress.
While the details of the intended revisions have not yet been announced, it is reported that Obama will be urging at least two significant changes: (1) an increase in the amount of minimum compensation that must be paid to an employee in order for the employee to qualify for exempt status (the minimum currently is $455 per week under the FLSA, and Obama is expected to direct that the minimum be substantially increased, with some urging that it be doubled); and (2) replacing the FLSA "primary duty" test with a more quantitative test that requires an employee to spend a certain percentage of his or her time (likely at least 50%) on exempt duties in order to qualify for exempt status. These changes would substantially decrease the number of employees who qualify for overtime exemption under the FLSA, and would also likely substantially increase the number of wage and hour lawsuits (already soaring) filed against employers to challenge exempt status and seek unpaid overtime compensation. Business groups are expected to vigorously oppose the intended overhaul of the regulations.
So what does this mean for California employers? Probably not much. California employers are already subject to more narrow overtime exemption laws under California law. To qualify for exemption in California, an employee (among other things) must be paid a guaranteed salary of at least $640 per week (rising to $800 per week in 2016) and must spend more than 50% of his or her weekly work time on exempt duties. Thus, the changes being contemplated by the White House are already in effect in California, and the Obama administration appears to be looking to California's laws as guidance in revising the FLSA's overtime exemptions. This is not good news for employers.
March 11, 2014
Posted by Cal Labor Law in Arbitration Agreements
The California Supreme Court has scheduled oral argument for April 3, 2014 in Iskanian v. CLS Transportation, a case involving the enforceability of class/representative action waivers in employment arbitration agreements under California law. The Iskanian court ruled that California's "Gentry" test for invalidating class action waivers was no longer good law in light of the United States Supreme Court's decision in AT&T Mobility v. Concepcion, and that employers may not be compelled to arbitrate on a class wide basis where they have not specifically agreed to do so. The Iskanian court also held that the contractual waiver of the right to pursue a PAGA representative action in arbitration was similarly enforceable. Finally, the Iskanian court rejected the NLRB's D.R. Horton decision invalidating class action waivers in arbitration agreements on the ground that such waivers violate the NLRA. Our prior posts on the Iskanian case are here. Following oral argument in April, a decision by the California Supreme Court should issue by early July. California employers that have, or are considering, employment arbitration agreements will want to stay tuned for this key decision.
March 10, 2014
Posted by Cal Labor Law in Immigration
Employers are faced with a plethora of employment and immigration cross over issues. Here’s a list of 7 important tips:
- Don’t include the I-9 with the job application. You can only request that the I-9 be filled out once the applicant has accepted a job offer.
- Make sure you have a completed I-9 on file for every employee at your company.
- Keep the I-9’s in binders rather than the employee’s HR file. Have one set of binders for active employees and one set for terms.
- Employers have begun to see more instances where an employee has recently legalized their status and presented a work permit and new social security number. When the employee was originally hired they presented what were presumed to be valid work authorization documents. Now the employee comes forward and says my real name is different, and here is my new SSN and work permit. In such a case, fill out a new I-9, attach a memo explaining the situation and a copy of the new work permit and social security card, and staple all of this to a copy of the old I-9. Usually, the employer must terminate the old name in their HR information system and process the new one as a new hire. In such a case, the original old I-9 can go into the term binder along with a copy of the memo as well.
- Anytime you are presented with a discrepancy in the employee’s SSN (i.e. a mis-match letter from any government agency), call the employee in to verify there isn’t a simple typographical error on the original hire paperwork. If not, send them to the Social Security Administration and ask them to bring back verification of their SSN. If no verification is forthcoming within 30 to 60 days, contact legal counsel re probable termination.
- If an undocumented employee files a labor/employment based claim with the employer, and the employer subsequently discovers that the employee is undocumented, the employee must be terminated since they are not work authorized. However, the employer will be liable for the employment claim that led to the discovery of the undocumented status.
- When making a job offer to an H-1B or similar non-immigrant visa holder, indicate on the job offer letter that the job is still terminable at will despite the fact that you are petitioning for them for x number of years on the visa petition. Also indicate that you are under no obligation to sponsor the employee for permanent residency, but even if you decide to do so in the future, it won’t alter the terminable at will relationship.
For more information, please contact Greg Berk, Chair of the CDF Immigration Practice Group.
On February 21, 2014, California's Department of Fair Employment and Housing Council (FEHC) published proposed amendments to the California Family Rights Act (CFRA) regulations. These regulations are intended to clarify some aspects of the existing regulations and also to adopt many of the recent amendments to the federal FMLA regulations to make the two acts more consistent. The proposed amended regulations touch on almost every aspect of the CFRA process, addressing, among other things, length of service/eligibility issues, the certification process and timeframes for responding to employee requests for CFRA leave, computation of amount of leave entitlements, key employee issues, clarification of reinstatement rights, maintenance of health and other benefits during leave, retroactive desingation of leave, and the interplay between CFRA leave and California pregnancy disability leave. The proposed regulations make clear that same-sex spouses are covered under CFRA and make clear that the FMLA regulations apply to CFRA leave "to the extent not inconsistent" with the CFRA regulations. Importantly, there remain some areas where CFRA administration will continue to differ from FMLA administration. Among other things, pregnancy disability is not covered under CFRA and, therefore, a California employee who is otherwise eligible for leave under CFRA/FMLA will be eligible for up to four months of leave for pregnancy disability AND up to twelve weeks of additional leave for baby-bonding under CFRA. The proposed regulations make clear that a California employer is required to maintain the employee's group health benefits for this whole time period (and not just up to 12 weeks). Some other notable differences between CFRA and FMLA are that the medical certification and scope of permissible medical inquiry are narrower under California law than under FMLA, and the circumstances under which an employer can seek re-certification are narrower under California law. The proposed regulations provide a sample medical certification that California employers can use. (In this author's opinion, the proposed certification is insufficient as it relates to intermittent leave needs).
Employers covered by CFRA should carefully review the proposed regulations and consider whether to submit comments and/or proposed revisions. The full text of the proposed amended regulations is available here. There is a public comment period through June 2, 2014. Comments can be submitted via email to FEHCouncil@dfeh.ca.gov. There will also be two public hearings on the proposed amended regulations: 10:00 a.m. on April 7, 2014 at UC Irvine School of Law, and 10:00 a.m. on June 2, 2014 at the California Public Utilities Commission Main Auditorium in San Francisco. For more information, see the DFEH website here.
Yesterday the Ninth Circuit issued its decision in Rea v. Michaels Stores, reversing a remand order and finding that the defendant employer’s removal of the case to federal court under the Class Action Fairness Act (CAFA) was proper. In line with its decision last year in Roth v. CHA Hollywood Medical Center, the Ninth Circuit reaffirmed that a defendant’s removal options are not limited to the two 30-day windows specified in the federal removal statute. As long as the defendant has not run afoul of either 30-day removal window (meaning that no pleading or other paper revealed on its face that the action was removable), the defendant may remove at any time based on its own information and investigation. The Ninth Circuit also reaffirmed its holding last year in Rodriguez v. AT&T Mobility Services, that the preponderance of evidence standard (and not the legal certainty standard) applies to CAFA removals and that allegations in a complaint purporting to limit the amount in controversy to under $5 million are not binding and do not prevent removal under CAFA.
Applying these principles to the Michaels Stores case, a wage and hour class action alleging misclassification of store managers, the Ninth Circuit held that the employer’s removal was timely, even though it was filed years into the litigation and not within 30 days of any initial or subsequent pleading. The court also held that Michaels had sufficiently demonstrated that the amount in controversy “could exceed $5 million” based on evidence that Michaels expected its managers to work 45 hours per week, along with deposition testimony of putative class members stating that they in fact regularly worked 45 or more hours per week. Extrapolating these overtime hours to the number of employees in the putative class resulted in alleged overtime damages exceeding $5 million. The court held that this evidence (particularly in the absence of any contrary evidence) was sufficient to meet the employer’s burden of proving by a preponderance of the evidence that the amount in controversy requirement was met. For these reasons, the Ninth Circuit held that the district court’s order remanding the case to state court was erroneous.
Notably, while the plaintiff’s petition for review of the remand order was pending before the Ninth Circuit, the litigation proceeded on remand in the state court, resulting in a class being certified. The plaintiff argued before the Ninth Circuit that this grant of class certification turned the Complaint’s non-binding allegation limiting recovery to under $5 million into a binding allegation, thereby precluding CAFA jurisdiction. The Ninth Circuit rejected this argument, reasoning that post-removal developments are not relevant to assessing whether removal was proper at the time the removal was filed and that such subsequent developments do not defeat an otherwise proper removal.
The Rea v. Michaels Stores decision is helpful for employers defending wage and hour class actions in California state courts but seeking to remove those actions to federal court. The full decision is available here.
February 18, 2014
Posted by Cal Labor Law in Immigration
The U.S. Department of Homeland Security will accept new H-1B visa filings on April 1 for a start date of Oct 1. H-1B work visas are for foreign national employees that are college degreed professionals such as software developers, engineers, chemists, scientists, financial analysts, etc. The annual quota of 85,000 visas applies to first time H-1B’s, not to extensions with the same company or transfers to other companies.
It is suggested that employers query their departments to see if they have a need for such a visa for either a possible new hire or to keep a valued current foreign national employee work authorized. This year's quota is expected to fill up relatively fast.
Many employers have valued foreign national employees working on a one-year work permit after college (known as Option Practical Training or OPT). Since the OPT will expire, it’s important that the H-1B visa be explored to allow them to remain work authorized. Some employees are eligible for a one-time extension of their OPT (based on their STEM education in science, technology, engineering, and math), but eventually will still need the H-1B visa.
For more information, please contact Greg Berk, Chair of the CDF Immigration Practice Group.