California’s Mandatory Sexual Harassment Training May Extend To Employers and Supervisors Beyond California’s Borders

The Fair Employment and Housing Commission recently released its proposed modifications to California Government Code section 12950.1 (AB 1825), which requires two hours of harassment training for supervisors of employers with 50 or more employees.

The proposed regulation clarifies two main issues that were unclear in AB 1825. First, the proposed regulations state that for the purposes of counting the 50 employees, employees both inside and outside California should be counted. Second, the proposed regulations require sexual harassment training for supervisors who are located outside of California, but supervise employees within California.

It is also important to note that the proposed regulation adds language that harassment training for an employee does not create an inference that that employee is a supervisor. The Commission stated that it "does not want to discourage employers from offering two hours of harassment training to a variety of non-supervisory employees for fear that these employees might be construed to be supervisors on the sole basis that they had received harassment training."

The Commission is seeking written comments on these modifications, which can be submitted until July 21, 2006. The next Commission meeting is set for August 29, 2006, in Riverside, California. At this meeting the Commission will decide whether to adopt these proposed regulations, modify the regulations, or make further changes. For more information regarding the proposed regulation, the California Fair Employment and Housing Commission's web site can be found here.

“Top Ten Items Out-Of-State Employers Need To Know” Posted on InhouseBlog

InhouseBlog, has published a guest article by Cal Labor Law's own Brian Van Vleck and Anthony Zaller entitled, "Top Ten Items Out-Of-State Employers Need To Know About California's Unique Labor Laws." Click here to read the article.

InhouseBlog is written by Geoffrey G. Gussis, Esq. who has been in-house counsel and is now back in private practice at Riker, Danzig, Scherer, Hyland & Perretti LLP. InhouseBlog is an excellent resource for in-house attorneys and provides information on a wide range of issues.

The U.S. Supreme Court Expands The Definition of Illegal “Retaliation” Under Title VII

The U.S. Supreme Court's June 22 decision in Burlington Northern & Santa Fe Railway Co. v. White has substantially expanded the scope of employer action that may be deemed illegal "retaliation" under Title VII. In particular, the Court held that (1) The threshold injury necessary to support a Title VII retaliation lawsuit is significantly lower than the injury necessary to support a discrimination lawsuit; and (2) An employer may be liable for retaliation causing harm to an employee that is not even "workplace-related or employment-related."

It is not immediately clear how much impact the decision may have on most California retaliation lawsuits, which are overwhelmingly filed in state court under state law. Nevertheless, California employers would be well advised to understand the important anti-retaliation issues raised in the Burlington.

What is An "Adverse Employment Action?"

Title VII prohibits "discrimination" based on race, gender, religion and other protected characteristics. In the archetypal discrimination case, a protected employee is terminated, demoted, or denied a salary increase. But should a protected employee also be allowed to literally "make a federal case" out of it whenever he believes he was unfairly denied a window office, was not invited to an important meeting, or was not given a "plum" work assignment?

Federal Courts have long struggled over the proper line between injuries that will support a federal discrimination lawsuit -- referred to as "adverse employment actions" -- and events that are simply too trivial to warrant Court intervention.

For example, in the 1994 case of Harlston v. McDonnel Douglas Corporation, 37 F.3D 379, 382 (8th Cir. 1994), the plaintiff, a secretary, claimed that she had been discriminatorily reassigned to a new position that "involved fewer secretarial duties and was more stressful in that she had to watch the door, listen for the fax, and be in charge of security for people coming in and out of the area." Noting that the plaintiff had "suffered no diminution in her title, salary, or benefits," the Eighth Circuit held that her reassignment was "insufficient to establish the adverse action required to make a prima facie case" of discrimination in violation of Title VII.

Other federal Circuits followed this method of analysis, focusing primarily on the loss of tangible monetary benefits. A significant minority of courts, however, advocated a more liberal definitions of the types of job changes that would be deemed sufficient to support a federal lawsuit. The U.S. Supreme Court granted certiorari in the Burlington case to resolve this split among the lower courts.

Why Is Retaliation Different?

One issue frequently debated by commentators and courts has been whether a more liberal definition of an "adverse employment action" should apply to allegations involving retaliation for opposing discrimination, as opposed to claims for discrimination itself. The Supreme Court squarely addressed this issue in Burlington, holding that Title VII does, indeed, provide extra protections to retaliation plaintiffs beyond the protections available to those who are merely alleging discrimination.

The particular facts in Burlington were that the plaintiff, Sheila White, was the only woman working at one of her employer's rail yard facilities. She was formally employed as a "track laborer," which could potentially include any number of duties around the yard. When the operative facts of the case occurred, however, White was primarily performing "forklift duty." But after she lodged an internal sexual harassment complaint against a supervisor, the Company reassigned the forklift duties to another employee. (In a separate incident, White was also temporarily suspended for insubordination and claimed that this action, too, was retaliatory).

White was never fired or demoted but she nevertheless filed a lawsuit alleging that her forklift duties were taken away as retaliation for complaining about her supervisor's sexual harassment. A jury entered a verdict in her favor, awarding her $43,500 in compensatory damages. But the employer appealed and a plurality of the full Sixth Circuit ultimately reversed the judgment on the grounds that White had not suffered an "adverse employment action."

The Supreme Court reversed the Sixth Circuit and sided with the employee. In doing so, it held unequivocally that Title VII imposes special protections against retaliation that do not apply to discrimination actions.

Title VII depends for its enforcement upon the cooperation of employees who are willing to file complaints and act as witnesses. Plainly, effective enforcement could thus only be expected if employees felt free to approach officials with their grievances. Interpreting the anti-retaliation provision to provide broad protection from retaliation helps assure the cooperation upon which accomplishment of the Act's primary objective depends. . . .We therefore reject the standards applied in the Courts of Appeals that have treated the anti-retaliation provision as forbidding the same conduct prohibited by the anti-discrimination provision . . .

(Burlington, supra (internal citations and punctuation omitted).)

Lowering The Bar For Retaliation Claims.

To further these anti-retaliation policies, the Supreme Court has lowered the bar for establishing an "adverse employment action" in a retaliation claim in two significant ways.

First, the Court held that "The scope of [Title VII's] anti-retaliation provision extends beyond workplace-related or employment-related retaliatory acts and harm." This holding was fairly gratuitous since White's lawsuit, by all appearances, only involved work-related injuries. Nevertheless, the new rule is clearly stated. Under this new rule employers might conceivably be liable under Title VII for non-work related injuries, such as defaming a former employee or interfering with his outside business interests.

Second, and more significant, an employer may now be liable in all jurisdictions under Title VII for any retaliatory conduct that would "dissuade a reasonable worker from making or supporting a charge of discrimination." The Court offered a few vague guidelines for applying this test -- noting, for example, that social "snubbing," "petty slights" and "minor annoyances" should not be actionable. The reality, of course, is that characterizing conduct as "petty" or "minor" is largely in the eye of the beholder. As a result, the one certainty is that courts and lawyers will be spending a great deal of resources in coming years litigating whether particular lateral transfers or reassignments would have "dissuaded a reasonable worker" from making a complaint.

What Should Employers Do?

Even before the Burlington ruling, employers would have been well-advised to promulgate and enforce written anti-retaliation policies. Once an arguably protected complaint has been lodged by an employee, the best practice is to advise the complainant that the Company does not tolerate retaliation and that any perceived retaliation should be reported immediately so that it may be investigated and, if necessary, remedied. The complainant's supervisors should also be advised of the Company's anti-retaliation policy. All of this advice applies with added force in the aftermath of Burlington.

Unfortunately for employers, however, it is not only legitimate "whistleblowers" who complain. Some employees are skilled at manipulating the complaint process for their own benefits. This typically occurs when an employee who is already "on thin ice" for performance or other work-related reasons, decides to lodge a complaint in the belief (often correct) that the fear of a lawsuit will deter the employer from taking any adverse actions against him.
There is simply no easy formula for balancing the employer's need to run its business against the possibility of a retaliation lawsuit. The best an employer can do is to be aware of all the ways that retaliation can occur, and take appropriate action in each case based on all of the facts.

Liability for Misclassifying Employees As Independent Contractors

Many California companies have recently been sued and had an assessment issued against them by the California Employment Development Department ("EDD") for unpaid payroll taxes because the company allegedly misclassified its California workers as independent contractors rather than employees.

If a company improperly classifies a worker as an independent contractor, it may face liability from an assessment from the EDD for unpaid unemployment insurance, disability insurance, and employment taxes. In addition to the EDD assessment, the misclassified workers could also allege that they are owed unpaid overtime going back four years in addition to seeking reimbursement and for businesses expenses and penalties in violation of Labor Code section 2802.

For guidance on whether employers have properly classified its workers as independent contractors, the California Division of Labor Standards Enforcement ("DLSE") provides an explanation of the "economic realities" test. The DLSE maintains that the most indicative fact determinative of whether a worker is an employee or an independent contractor depends on whether the person to whom service is rendered (the employer or principal) has control or the right to control the worker both as to the work done and the manner and means in which it is performed. The DLSE also sets forth the other factors that are considered when determining an employee's status:

1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal;
2. Whether or not the work is a part of the regular business of the principal or alleged employer;
3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
4. The alleged employee's investment in the equipment or materials required by his or her task or his or her employment of helpers;
5. Whether the service rendered requires a special skill;
6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
7. The alleged employee's opportunity for profit or loss depending on his or her managerial skill;
8. The length of time for which the services are to be performed;
9. The degree of permanence of the working relationship;
10. The method of payment, whether by time or by the job; and
11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.

The DLSE's full explanation of this topic can be found here. The DLSE's information provides a great starting point for employers to audit their classifications of employees, but each case may present different facts, and the economic realities test may change depending on the jurisdiction and whether state or federal law is at issue.

Department of Homeland Security Proposes Rule for Employee “No Match” Social Security and Immigration Status Letters

On June 9, 2006, the Department of Homeland Security (DHS) proposed two Federal regulations to help businesses comply with verifying employees' work eligibility. The first proposal would allow employers to digitize their employees' I-9 forms. The second proposal suggests guidelines that, if followed by the employer, would provide a safe harbor for employers when a discrepancy in the employee's Social Security number or immigration status are discovered.

No match letters are sent to employers typically when the employee's Social Security number does not match the worker's name on tax or employment eligibility documents, such as the I-9 form. The DHS or the Social Security Administration can send no match letters to employers. The DHS letter informs the employer that the immigration status or the employment authorization documentation presented by the employee is not consistent with its records. The Social Security Administration sends a letter informing the employer that the employee's Social Security number submitted for employment does not match the agency's records.

The DHS proposed regulations set forth a set a rules that if the employer follows in good faith, then the DHS would not find that employers violated any of their legal obligations.

The proposed regulations have a 60-day public comment period, but the I-9 regulation will become effective on an interim basis until it is published.

New Noteworthy Cases

Topic: First Amendment Protections for Government Employees. Plaintiff, a supervising deputy district attorney, advised his supervisors to dismiss a case based on misrepresentations in a police affidavit that was used to obtain a search warrant. At the hearing on a defense motion to challenge the warrant, Plaintiff recounted his review of the affidavit. He was later transferred to a new position and denied a promotion. Plaintiff claimed that these employment actions were in retaliation for exercising his First Amendment rights. The Supreme Court held that when public employees make statements pursuant to their official duties, they are not speaking as citizens for First Amendment purposes, and the constitution does not insulate their communications from employer discipline. Thus, had Ceballos leaked his information to the press, his speech would likely have been protected. However, because his "complaint" was contained in a work-related memorandum, his actions were not protected by the First Amendment.

Singh v. Superior Court (UHS of Delaware, Inc.), No. B187797 (2nd Dist. June 12, 2006). Topic: Payment of overtime for healthcare employees working alternative workweek schedules. Plaintiff Singh, a registered nurse, signed an agreement in accordance with an alternative workweek schedule that had previously been adopted by the hospital's employees. The agreement stated that he would be paid the regular rate of pay for work performed within the 3/12 schedule (three twelve-hour shifts per week), time-and-a-half pay for all work performed beyond forty hours in the workweek and double time pay for work in excess of twelve hours in a workday. Singh argued that under the Industrial Welfare Commission Wage Order No. 5 (Cal. Code Regs., tit. 8, § 1150, subd. 3(B)(1)), he was entitled to time-and-a-half pay for all hours worked beyond the regularly scheduled alternative workweek, including hours 37 to 40. The hospital argued that under section 3(B)(8), Singh was only entitled to overtime pay after 40 hours of work had been performed in a week. The Court found in favor of the hospital, holding that Wage Order No. 5 provides that health care employees working a 3/12 alternative workweek schedule are only entitled to overtime pay for work in excess of forty hours per week or twelve hours in a workday.

Carter v. California Dept. of Veterans Affairs, No. S12796 (June 8, 2006). Topic: retroactivity of FEHA amendments. Plaintiff, a nurse, brought suit alleging that she had been sexually harassed by a patient in 1996. The California Supreme Court found that the 2003 amendment to FEHA, which expressly imposed liability on employers for sexual harassment by non-employees, applies to claims preceding the amendment.

Williams v. Genentech, Inc., No. A110611 (1st Dist., May 9, 2006). Topic: Continuing Violation Doctrine; Duty to Accommodate. Plaintiff, a receptionist, went out on medical leave for work-related stress in October 2000. On January 31, 2001, after having received multiple requests for extension of Plaintiff's leave, Genentech filled Plaintiff's position. Genentech informed Plaintiff that when she was cleared to return to work, she would have sixty days to apply for a new position. On July 9, 2002, more than a year after she had been informed that her position had been filled, Plaintiff filed a DFEH charge in which she alleged race and disability discrimination. The Court held that there was a triable issue of fact as to whether or not the continuing violation doctrine applied to extend the statute of limitations where she was not actually terminated until July 16, 2001. Further, although Plaintiff did not include a "failure to accommodate" claim on her DFEH complaint, the Court held that the trial court erred in barring the cause of action under the exhaustion of administrative remedies doctrine where she had included "disability discrimination" in her original charge. However, because Plaintiff had presented a doctor's note stating that she was "totally incapacitated" and unable to work at the time Genentech filled her position, she failed to establish that she was a qualified individual with a disability. Further, the undisputed evidence established that Genentech did not did not fail to accommodate Plaintiff or to engage in the interactive process where there were no available jobs at the time Plaintiff was cleared to return to work.

Important Employment Cases Pending Review for June 2006

Green v. State
Whether California law requires an employee to prove he or she is qualified to perform the job in question as part of the employee's prima facie case.

Smith v. Superior Court of Los Angeles (L'Oreal USA, Inc)
Whether an employee who is hired for an agreed-upon period of time such as a one day project has been "discharged" within the meaning of Labor Code section 201 and is thus entitled to waiting time penalties.

Dore v. Arnold Worldwide, Inc.
Is extrinsic evidence as to the parties' interpretation of the contract admissible where an employment contract states "your employment with [the employer] is at will" and "this simply means that [the employer] has the right to terminate your employment at any time"? The 2nd District's found in favor of the plaintiff, finding it was reasonable for Plaintiff to assume that he could only be terminated for cause where the contractual language did not reference "cause" or contain an integration clause and he was placed on a 90-day probationary period, which he completed.

California Employers Must Investigate the “Objective Reasonableness” of Medical Opinions Before Refusing To Hire An Employee

Under state and federal law, employers have an affirmative duty to provide "reasonable accommodation" for "disabled" workers. This obligation includes a requirement to engage in a good faith "interactive process," in which the parties discuss the employee's limitations and explore possible accommodations.

The recent California appellate decision of Gelfo v. Lockheed Martin Corp., addressed a common dilemma for employers -- what to do when an employee claims he is "100% healthy" but the written medical restrictions contained in his file tell a different story.

In Gelfo, the plaintiff had suffered a back injury and obtained workers compensation benefits based on medical reports stating that he was "permanently disabled" and restricted from "prolonged sitting or standing." Within a month of settling his workers compensation claim for a lump sum cash payment, however, the employee requested rehire on the ground that he was now totally recovered.

Lockheed-Martin denied Gelfo's request for re-hire because, relying on the medical reports contained in his file, it believed he was unable to do the job. Gelfo then sued Lockheed for discrimination under the FEHA.

The appellate court first decided that, since Gelfo had admitted he could work without any restrictions, he was not "actually disabled." But the Court went on to hold that any applicant who is denied a job based on medical restriction contained in his file is, by definition, "regarded as" disabled -- and this is also a protected class of employees under the FEHA. Thus, even though Gelfo was ultimately found to have had no medical impairment whatsoever, Lockheed was still legally required to engage in an "interactive process" and to give him a "reasonable accommodation," if necessary.

Unfortunately for employers, at that point the Appellate Court simply remanded the matter to the trial court without providing any concrete guidance about what an employer should do when an employee's subjective statements contradict his own medical restrictions. For example, the Court did not say whether Gelfo's alleged failure to provide an updated medical release to Lockheed would, if proven, be fatal to his case on remand. The Court was also silent about whether Gelfo should be barred from asserting facts in the lawsuit that were directly contrary to the facts he asserted in support of his workers' compensation claim.

Nevertheless, the Gelfo case illustrates that California employers would be wise to observe the following "do's and don'ts" whenever an employee's perceptions of his own abilities are at odds with his pre-existing medical restrictions.

*Do: Engage in an interactive discussion with the employee about his own perception of his capabilities and whether any reasonable accommodations would allow him to perform the essential job duties.
*Do: Request, in writing, an updated medical release reflecting the employee's current medical condition and restrictions.
*Do Not: Make a decision based on prior medical opinions without giving the employee a chance to explain his condition and obtain, if necessary, an updated medical opinion. As the Gelfo Court put it, "an employer cannot slavishly defer to a physician's opinion without first pausing to assess the objective reasonableness of the physician's conclusions."
*Do Not: Require the employee to certify, as a condition of reinstatement, that he can return to work without any physical restrictions whatsoever. As the Gelfo Court explained, "A policy requiring an employee be '100 percent healed' before returning to work is a per se violation [of the FEHA and ADA], because it permits an employer to avoid the required individualized assessment of the employee's ability."

Immigration Reform: Advice For Businesses In Troubled Times

The immigration debate and our nation's struggle with our complex and difficult border enforcement and labor supply needs are gripping headlines with massive immigration reform bills in the House and the Senate, huge protest rallies by immigrant groups, and aggressive worksite raids by the Department of Homeland Security ("DHS"). Garnering much less attention, but maybe more far-reaching is the United States Supreme Court's forthcoming decision on whether to allow class action lawsuits under the RICO Act against businesses accused of hiring unauthorized immigrants. This article reviews the most important developments and recommends some cost-effective solutions.


1. The Senate Immigration Bill.

On Thursday, May 25, 2006, a tenuous bipartisan coalition in the United States Senate passed an immigration reform and security bill called CIRA, the Comprehensive Immigration Reform Act of 2006. The bill includes numerous border enforcement and immigrant legalization provisions, but most relevant to businesses are:

  • stricter I-9 document-review requirements;
  • required use of a tedious electronic system for verifying new hires' legal status;
  • a chief executive officer certification requirement;
  • and significant penalty increases.

a. Stricter document-review requirements.

Current law requires businesses to review eligibility documents to establish an individual's identity and eligibility to work in the United States and attest to the document review in the I-9 Form. The employer fulfills this legal duty so long as the documents reasonably appear to be genuine on their face. The Senate bill would require businesses to consider the "totality of the circumstances" in evaluating whether the documents examined are genuine and establish an individual's identity and eligibility for employment.

Current law, however, contains an antidiscrimination provision that prohibits employers from refusing to honor documents that on their face reasonably appear to be genuine. CIRA does not revise that provision, potentially creating a quandary for businesses: Do not engage in a full investigation and violate CIRA; investigate too thoroughly and possibly violate current antidiscrimination laws.

b. Electronic system for verifying new hires' legal status.

The proposed electronic system requires a business to submit an individual's name, birth date and social security number (or equivalent) to the DHS within 3 days of hire. The DHS is required to provide a "confirmation" or tentative "nonconfirmation" response within 3 days. The business must notify the individual if the DHS's response is a tentative nonconfirmation. The individual has 10 days to contest the tentative nonconfirmation. If the individual contests the nonconfirmation, the DHS has 10 days to issue a final confirmation or nonconfirmation notice.

If the DHS has systemic problems timely processing final notices, it automatically receives an extension of not less than 180 days. During that time period, a business cannot terminate an individual's employment for being tentatively nonconfirmed. The bill therefore could stick individuals into "nonconfirmation purgatory," creating an economic disincentive for a business to develop the employee and a disincentive for the employee to invest time and energy into the employer.

More disconcerting, the Senate bill provides a tentatively nonconfirmed employee an additional ground for suing his or her employer. Employees on tentative nonconfirmation status are protected from termination because of the nonconfirmation status, so terminating an individual because he or she is nonconfirmed will be considered unlawful discrimination. Additionally, businesses that do not invest the time or energy into nonconfirmed individuals may also be found to have engaged in unlawful discrimination.

c. Chief executive officer certification.

The Senate bill authorizes the DHS in certain circumstances to require a business to certify -- under penalty of perjury -- that it is either in compliance with the law's documentation and electronic-verification requirements or has implemented a compliance program. The business's chief executive officer or similar official must sign the certificate. Because the bill allows for criminal sanctions and imprisonment, the new law would expose a business's CEO, owner, or other executive to jail time. This exposure would exist even though that individual was not personally responsible for any CIRA violations.

d. Increases in the penalties.

The bill also significantly increases the civil penalties that businesses would face, including fines of $20,000 for hiring undocumented workers. Additionally, the bill increases fines up to $6,000 for a single recordkeeping or verification violation.

Businesses may think they can at least breathe a sigh of relief because the bill still has to go to the conference committee and be reconciled with the House of Representatives' immigration bill. We interviewed Congressman Dana Rohrabacher (R-CA), to gauge the political climate and the probability of CIRA, or something like it, becoming law. Congressman Rohrabacher said: "It will take a supreme effort by the conferees of the House of Representatives and the Senate to reach a compromise. The reason is that the two bills from them are not similar bills. They are opposed in purpose and dissimilar in structure."

In fact, the House bill, H.R. 4437, contains even more serious challenges to businesses. It contains no guest worker or legalization provisions, increases current fines to a maximum of $40,000, and requires verification of all employees, not just new hires. "Whatever bill comes out and is finally passed will have a major employer-sanction provision and an employer-verification system," Mr. Rohrabacher stated when asked to predict the type of provisions the final bill will contain. The good news for businesses is that Congress seems committed to provide employers with the tools to properly verify workers' status -- through a new electronic verification system with the DHS. Also, if employers followed the verification process, they would be immune from liability for terminating employees and from sanctions, even if the DHS verification ultimately was wrong.

2. Department of Homeland Security's Renewed Enforcement Policy.

On April 19, 2006, the DHS raided operations of IFCO Systems, a manufacturer of crates and pallets, in twenty-six states throughout the United States. U.S. Immigration and Customs Enforcement agents arrested thousands of undocumented employees, and arrested seven current and former executives on charges they conspired to transport, harbor, and encourage unauthorized workers to reside in the United States. Apparently, IFCO initially became the target of a government investigation because the Social Security Administration had written IFCO over 13 times regarding over a thousand employees who had faulty Social Security numbers. The day following the raids, DHS Secretary Michael Chernoff held a press conference to emphasize the DHS's renewed commitment to enforcing immigration laws and imposing criminal sanctions on individual managers.

3. United States Supreme Court Hears Oral Argument On Whether Businesses Can Be Subject To Class Action Lawsuits Under RICO.

Possibly a more important development is the United States Supreme Court's decision to hear Mohawk Industries, Inc. v. Williams. In Mohawk, current and former employees brought a class action against the company and its managers alleging that they employed unauthorized immigrants to drive down wage rates and workers' compensation premiums. The plaintiffs based their lawsuit on alleging that Mohawk and its recruiting agencies engaged in racketeering activity under the Racketeering Influenced and Corrupt Organizations Act ("RICO") through alleged violations of immigration laws. The Supreme Court heard oral argument on this case on April 26, 2006 and its decision is forthcoming. If the Supreme Court allows RICO claims based on alleged immigration violations, businesses could be exposed to multimillion dollar class action verdicts because of alleged immigration violations.


With the consequences of noncompliance becoming more catastrophic, businesses must implement a compliance program. Under current law, such a program can be established with relatively simple steps:

1) Develop a compliance statement and policy that sets forth:

  • the business's intent to hire only authorized workers;
  • procedures for hiring only authorized workers;
  • procedures for complying with recordkeeping requirements; and
  • procedures for responding to Social Security Administration inquires or other immigration-related inquiries;

2) Train and periodically retrain managers and supervisors regarding their obligations to comply with immigration laws and how to properly review authorization documents and complete the I-9 Forms;

3) Periodically audit the managers' and supervisors' hiring practices and the business's recordkeeping practices;

4) Discipline managers and supervisors who fail to comply with the business's compliance program; and

5) Periodically revisit and update the program for continued compliance.

If CIRA becomes law, employers can easily revise this compliance program to include new procedures that will be required. These would likely include: determining when the totality of the circumstances compels a more thorough review of an individual's eligibility documents, and training managers and supervisors how to handle "nonconfirmed" employees.

Ultimately, the existence of a strong immigration compliance program will protect your business from the potential risk of RICO based class action lawsuits, help you avoid the attention of U.S. Immigration and Customs Enforcement agents, and protect your executives from criminal prosecution. Also, if CIRA becomes law, it would specifically reduce the penalties imposed for immigration violations if a strong compliance program exists. Now, more than ever, businesses should focus upon creating a robust and effective immigration-compliance program, and stay attentive to developments out of Washington, D.C.

The attorneys at Carothers DiSante & Freudenberger LLP will be monitoring this legislation closely.

Wage and Hour Laws as Applied to Resident Managers

Like all California employers, the hotel industry is required to pay employees in accordance with both federal law, in the form of the Fair Labor Standards Act ("FLSA"), and state law, namely the California Labor Code and wage orders promulgated by the California Department of Industrial Relations ("DIR"), and enforced by the Department of Labor and Standards Enforcement ("DLSE"). Employees are generally presumed to be hourly employees, and therefore entitled to overtime and meal and rest breaks, unless one of a few narrow exemptions applies. This article provides some insight into determining whether or not a resident manager in the hospitality industry is exempt from the protections of California's wage and hour laws, and provides guidance on application of the lodging credit.(Note that neither federal nor state law provides a statutory definition of "resident manager." However, both use and inquiry to the DLSE provide the informal, and common sense, definition that a resident manager is an employee provided with full-time lodging at the hotel or apartment dwelling where he or she works.)

California assumes that all employees are protected by the state's wage and hour obligations to, among other things, keep records, pay overtime and minimum wage, and provide required rest and meal breaks. However, there are exemptions from these protections for "white collar" employees, i.e., those who are executive, administrative or professional employees. The state provides an exemption test, under which an employee will only be considered exempt under the executive or administrative categories if he or she (1) spends more than 50% of the work day (2) on tasks that are intellectual, managerial or creative, (3) which require the exercise of discretion and independent judgment and (4) for which the monthly pay is at least twice the minimum wage for one month of full time work. At the current minimum wage rate of $6.75/hour, the monthly salary requirement is $2,340, or $28,080/year. (The professional exemption applies to specific jobs, such as doctors, engineers or lawyers.)

The first question to ask is whether or not your resident manager is an exempt employee. The law takes the view that, unless an employer can show to the contrary, all employees are subject to the wage and hour law protections. Calling an employee a manager and paying a sufficiently high salary are not sufficient to find that an employee is exempt. Rather, the employee must spend more than 50% of his or her work time engaged exclusively in exempt duties to qualify for the exemption. "Exclusively" means that if the employee is performing a non-exempt task and an exempt task concurrently, that time counts as non-exempt time. Careful analysis of the duties performed by that employee is critical. For example, if the manager is giving directions to the hotel on the telephone while providing managerial oversight to other employees, this will be considered time spent on non-exempt work.

If the manager satisfies the requirements to be treated as an exempt employee, the employer receives no particular credit or benefit for providing free or discounted accommodations to the employee. However, if the manager does not satisfy the requirements to be treated as an exempt employee, a portion of the value of the accommodations can be credited against the employer's minimum wage obligations.

Specifically, federal regulations provide that an employer may credit the cost of lodging toward the minimum wage requirement if the lodging is furnished for the benefit of the employee, is accepted voluntarily and without coercion by the employee, and is customarily furnished by other employers in the same industry. California provides additional guidance to hotel employers providing lodging to an employee. First, the lodging provided must be actually received, must be part of the employee's compensation, and the employee must enter into a voluntary written agreement to credit the lodging toward the minimum wage requirement. Second, the lodging must be available to the employee for full-time occupancy, and it must be adequate, decent and sanitary according to the usual and customary standards of the industry. A good rule of thumb would be to provide your resident employee with the same caliber of lodging provided to your guests (although you cannot require employees to share a bed). Finally, the following rates are then creditable toward the employer's minimum wage obligation.

The following list provides the rate credited toward minimum wage based on the type of lodging:
Room Occupied Alone: $31.75/week; Room Shared: $26.20/week; Apartment: 2/3 of the ordinary rental value, up to $381.20/month; Where a couple is employed by an employer: 2/3 of the ordinary rental value, up to $563.90/month.

Determination of whether an employee qualifies as exempt is both critical and complex. Liability for mistakenly classifying a non-exempt employee as exempt can be significant. Employers who wish to treat their resident managers as exempt should consider seeking advice from their employment counsel regarding application of these laws in the hospitality industry.

Cal Labor Law

Robin E. Largent is a Partner in CDF’s Sacramento office and may be reached at 916.361.0991 or BIO »


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