California Labor & Employment Law Blog

By Mark S. Spring

For many of us in California, Tuesday is the first day back from a three day holiday weekend.  However, in Massachusetts, it is also an election day.   Massachusetts citizens today will choose a replacement for the late Senator Ted Kennedy.

Most people believe it is a very close race between Democrat Martha Coakley and Republican Scott Brown.  The result of this race is much bigger than Massachusetts politics.  If Brown wins, the Senate will then have 41 Republicans, enough to fillibuster any Democratic sponsored legislation, including the Employee Free Choice Act (EFCA).  In reality, the success of many of the pro-employee legislation now sitting in Congress (FMLA expansion, WARN Act expansion, mandatory sick leave, EFCA, Arbitration Fairness Act, and many other bills) may be riding on Martha Coakley's ability to keep both Massachusetts Senate seats with the Democrats.

It may not be an election day in California, but California employers should pay close attention to what is happening in Massachusetts Tuesday.

By Robin E. Weideman

California's Department of Labor Standards Enforcement issued a new opinion letter this week analyzing the requirements of the faltering business exception under the WARN Act.  As most employers know, in certain circumstances employers are required to give employees 60 days notice of a mass layoff or shutdown.  There is a notable exception to the 60-day notice requirement, known as the faltering company exception.  In California, the faltering company exception is codified at Labor Code section 1402.5.  Companies may apply to the DLSE for a determination that the company meets the faltering company exception and thereby are excused from the requirement of giving their employees 60 days advance notice of a layoff.  The DLSE's new opinion letter is fairly detailed and provides useful guidance on factors the DLSE will look at to determine whether the exception actually applies.  Employers who believe they may qualify should review the new opinion letter for guidance.  The letter (which concludes that the exception does not apply on the facts presented) is available here.  Interestingly, the DLSE has also re-posted an older opinion letter wherein the DLSE found the faltering business exception applicable.  That letter is available here.

By Robin E. Weideman

The Genetic Information Nondiscrimination Act of 2008 (GINA) takes effect November 21, 2009.  GINA, which applies to all entities covered by Title VII, prohibits discrimination in employment based on an employee's (or the employee's family members') genetic information.  The Act further prohibits employers, with few exceptions, from requesting or obtaining genetic information about an employee.  The EEOC has now issued a revised "EEO Is The Law" poster, incorporating the requirements of GINA.  Covered employers should download and post the new poster this November.  The new poster is available on the EEOC website and can be accessed here. 

By Greg Berk

A recent federal district court decision regarding the mandatory use of E-Verify for federal government contractors clears the way for the government to fully implement this requirement on Sept 8, 2009.  Chamber of Commerce v Napolitano, No AW-08-3444, U.S. Dist Ct., So. Dist. Maryland, 8/25/09

E-Verify is the internet-based I-9 employment verification system run by the Department of Homeland Security (DHS).  The Court held that being a federal government contractor is optional and therefore the issue of whether DHS can legally mandate use of E-Verify is moot.   

As a result, on September 8, 2009, all new contracts awarded by the federal government that exceed $100,000 will require that those contractors use E-Verify verification as part of the I-9 hiring process.  In addition, those contractors will be required to include mandatory E-Verify provisions in all sub-contracts exceeding $3,000.   

Federal contractors and subcontractors will be required to use E-Verify for new hires as well as for those existing employees that are working on a “covered” contract.

Contracts signed prior to September 8, 2009 will not be affected. This is a prospective requirement that will be triggered through the award of a new federal contract. 

By Mark S. Spring

In May, we blogged about the California Department of Industrial Relations Guidelines for Employers on the Swine Flu epidemic.  Click here for earlier blog. 

Since that time, the California DIR has updated their information.  The most updated information form the California DIR and Cal-OSHA is available here:

http://www.dir.ca.gov/dosh/SwineFlu/Cal-oshaguidanceswineflu.pdf

The California information is helpful, but for those that really need to study the option on what type of practices and policies to implement as the fall and winter flu season approaches, we recommend that you go to www.flu.gov.  The Federal Government and Center for Disease Control have put together this website to act as one-stop access to all U.S. Government H1N1, avian and pandemic flu information.  The information there is very extensive and includes information for employers, educational institutions and other organizations that will have issues related to the H1N1 flu and related illnesses.  This website will be updated regularly and we advise anyone with questions about this topic to review the information available on this website.

By Robin E. Weideman

Reversing one of its earlier opinion letters from 2002, California’s Department of Labor Standards Enforcement issued a new opinion letter on August 19 stating that employers may implement a pro-rata reduction of exempt employee salaries, in exchange for a shortened workweek. Specifically, the opinion letter addresses whether an employer may shorten the workweek from five days to four days and reduce salaries by a proportionate 20%.  The DLSE opined that an employer could properly do this, without violating the salary basis test and without jeopardizing the exempt status of its employees under federal or California law.  The DLSE relied on several federal Department of Labor opinion letters and related federal caselaw upholding the lawfulness of a pro rata salary reduction in circumstances where an employer shortens its employees’ workweek due to economic necessity.

As many California employers know, the DLSE’s new opinion letter flatly contradicts a prior opinion letter on the same subject, in which the DLSE concluded that employers could not reduce an exempt employee’s salary in exchange for a commensurate reduction in the hours of work, without violating the salary basis test and jeopardizing the employee’s exempt status.  In the DLSE’s prior opinion letter, the DLSE reasoned that tying an employee’s compensation to the amount of hours or days the employee works is inconsistent with the notion of being a salaried employee and, therefore, violates the salary basis test.

The DLSE’s new guidance on the subject is consistent with federal law and provides employers more flexibility in making necessary reductions in exempt salaries during tough economic times, by allowing employers to provide affected employees with a reduced workload in exchange for the salary reduction.  That being said, the DLSE’s shifting positions on the requirements of California’s wage and hour laws (shifts that are notable not only in this area, but also in many others, including the subject of meal period requirements) begs the question:  if the agency charged with the responsibility of interpreting California’s wage and hour laws cannot seem to decide what the laws require, how is it fair to hold California employers strictly responsible for understanding the specific requirements on threat of having to defend costly class action litigation and potentially pay a judgment for getting it wrong based on the interpretation of the day?
 

By Mark S. Spring

The Sacramento Business Journal reported that a CareerBuilder survey released this week found that almost half of the people laid off during the second quarter of this year already found new full-time jobs (48%) and another three percent found part time positions.  According to the Business Journal, this CareerBuilder survey also found that 56% of people laid off in the past year found full-time positions that paid more than the job that they were laid off from. 

The results of this survey could help support employers who have to argue against very aggressive claims for lost wages and benefits in employment litigation where the employee and his/her attorney claim that it is "impossible" to find a new or comparable job.  A complete copy of the Business Journal article can be found here.

By Mark S. Spring

If you have employees that work outside, then your business is covered by the California Heat Illness Prevention Regulations.  Outdoor work is broadly interpreted so don't assume that because your employees work in or near a building they are not covered.  For example, an employee who spends a significant amount of his day on a loading dock of a building is likely covered by the Heat Illness Prevention Regulations. 

The Heat Illness Prevention Regulations address such topics as shade requirements, drinking water requirements, heat illness training requirements and other related subtopics. 

We suggest that the appropriate human resources or safety manager of any business that has outdoor workers in California become familiar with these Regulations. 

More detailed information is easily available by clicking on any of the following links:

Heat Illness Prevention Q and A from Cal-OSHA - http://www.dir.ca.gov/dosh/heatIllnessQA.html

Cal-OSHA Heat Illness Prevention General Information and Links - http://www.dir.ca.gov/DOSH/HeatIllnessInfo.html

Video Information from Cal-Osha - http://gov.ca.gov/index.php?/videoblog/9624/

Pocket Pamphlet in English to Give to Outdoor Employees - http://www.dir.ca.gov/dosh/dosh_publications/HeatIllnessEmployeeEngSpan.pdf

Pocket Pamphlet in Spanish to Give to Outdoor Employees - http://www.dir.ca.gov/DOSH/dosh_publications/HeatIllnessEmployeeEngSpan.pdf#page=2

Employer Sample Heat Illness Prevention Policy Published by Cal-OSHA - http://www.dir.ca.gov/dosh/dosh_publications/ESPforHeatIP3-10-19-07.pdf

By Mark Spring

This week the California Judicial Council approved and announced that all California state courts will close the third Wednesday of each month to help offset California's budget crisis and avoid layoffs.  These closings will commence in September and are expected to last until at least June 2010.  These closings will certainly result in delays of proceedings and trials.  Each court will have discretion on how to handle these furloughs to suit local needs.  However, all closures will be treated as a court holiday giving litigants one extra day to meet deadlines.

By Cindy Caplan

The implementation of regulations requiring federal contractors and subcontractors to use E-Verify has been delayed again until September 8, 2009 so that the Obama administration can review the proposed rules.  E-Verify is a free, internet-based system that allows employers who are enrolled in the E-Verify program to confirm the legal status of new employees.  Although use of E-verify is currently voluntary, the proposed regulation will make its use mandatory for all federal contractors who are awarded a new contract after September 8, 2009 that includes the Federal Acquisition Regulation E-Verify clause.

Additional information on the proposed E-Verify regulations can be found here.

By Robin E. Weideman

California's Department of Labor Standards Enforcement has published a new manual governing wage and hour issues, including prevailing wage requirements, for employees on public works contracts.  California employers with such contracts may find this manual useful as a reference tool.  The manual is available here.

By Robin Weideman

Earlier this week, the EEOC issued technical guidelines for employers to assist them in complying with the Americans With Disabilities Act when implementing policies and procedures to deal with swine flu in the workplace.  The EEOC's guidance is here.  Employers adopting policies and procedures to specifically address swine flu are advised to review the EEOC's guidance.

By Mark S. Spring

Late last month, President Obama announced his intention to nominate Craig Becker and Mark Gaston Pearce to fill two of the three vacant positions on National Labor Relations Board.

Currently the NLRB only has two members Chairperson Wilma B. Liebman (Democrat) and Peter C. Schaumber (Republican).

Craig Becker (Democrat) is currently Associate General Counsel to the Service Employees International Union and the AFL-CIO.  He has also been a law professor teaching labor law at UCLA, Georgetown, and Univeristy of Chicago law schools.  Mark Gaston Pearce is a partner with Creighton, Pearce, Johnsen & Giroux, a Buffalo, New York firm that represents unions.  Pearce, an African-American, is active in diversity issues in the legal profession. He teaches labor relations at the Cornell University School of Industrial & Labor Relations. 

NLRB appointments must be approved by the Senate. 

By Mark S. Spring

The California Occupational Safety and Health Administration has published guidelines for employers and employees regarding the Swine Flu.  These guidelines are contained in a 3 page PDF handout that is available at:

http://www.dir.ca.gov/dosh/SwineFlu/Cal-oshaguidanceswineflu.pdf

We recommend that all California employers review these guidelines and the attachments contained in them.  In addition, if you learn that one of your California employees is or may be infected with the Swine Flu, we encourage you to contact Cal-OSHA consultation service for guidance at 1-800-963-8424 or infocons@dir.ca.gov.

By Mark S. Spring

Concerned about what to tell your employees regarding the potential Swine Flu pandemic?  The answers are not clear yet because the potency of the virus and the extent to which it may spread remain undetermined.  The Swine Flu may be no more problematic than the standard seasonal flu, or it may be a much bigger problem.  Opinions vary and most experts feel that more time must pass before clear answers emerge. 

For now, the Center for Disease Control and medical experts are generally recommending extra vigilance on standard hygiene and health practices such as washing hands, not touching your nose, mouth or eyes, getting plenty of sleep, eating healthy, and avoiding contact with sick individuals.  However, because the advice may change based on further findings and developments, the CDC is maintaining a very good webpage that provides update on the Swine Flu and what to do about it. 

As of today (May 3), we recommend that employers have their HR or Health/Safety folks get general information out concerning the Swine Flu and encourage sick employees to stay home.  We also recommend that HR and Health Safety managers monitor the CDC web page daily for updates and suggestions.  You can access the page by clicking here: http://www.cdc.gov/h1n1flu/ 

By Robin E. Weideman

On April 29, the California Senate Labor and Industrial Relations Committee rejected an employer-friendly bill (SB 187) aimed at making it easier for employers to lawfully allow employees to work an alternative workweek schedule.  If passed, the bill would have allowed individual employees to request a compressed four day per week work schedule (four ten hour days) and if the employer agreed, overtime compensation would not have to be paid for hours worked under the regular four day per week schedule.  The bill would have provided a workable alternative to the rigid election process employers must now use in order to adopt a valid alternative workweek schedule, and would have allowed individual employees greater flexibility in scheduling their workweeks.  Notwithstanding the benefits the bill would have provided both employers and employees, the Senate rejected the bill this week on party lines, with two Republican Senators voting in favor of the bill and four Democratic Senators voting against the bill.

By Robin E. Weideman

California’s Department of Labor Standards Enforcement recently issued an opinion letter ratifying an employer’s implementation of an alternative workweek schedule solely for summer months.  More specifically, the DLSE indicated that an employer could lawfully have employees work a regular 8 hour per day, 40 hour per week schedule from October through May, and an alternative “9/80” schedule from June through September.  The DLSE opined that even though the alternative schedule was limited to 4 months out of the year, it was a still a “regularly recurring” schedule within the meaning of California Labor Code section 511(a), which specifies the parameters and process for adoption of an alternative workweek schedule in California. 

Even though the DLSE approved the seasonal use of an alternative workweek schedule, it is important to note that employers wishing to implement any alternative workweek schedule must still go through the election process set forth in Labor Code section 511 and the Industrial Welfare Commission Wage Orders, and the specific alternative workweek schedule must also be in compliance with the hours limitations for alternative workweek schedules set forth in the governing statutes.

By Robin E. Weideman

Employers are reminded that beginning tomorrow, April 3, 2009, the new I-9 form (with a February 2, 2009 revision date) must be used for all new hires.  The new form is available here.  As previously posted, the most significant change from the old form to the new form is that expired documents may no longer be used to verify employment eligibility.  The new form expires June 30, 2009.

By Robin E. Weideman

Oral argument before the California Supreme Court is scheduled for April 8 in two cases involving a private sector employee's ability to pursue representative relief under California's Unfair Competition Law (UCL) and Private Attorney's General Act (PAGA).  The cases are Arias v. Superior Court and Amalgamated Transit Union v. Superior Court.  The issues before the Supreme Court are framed as follows:

Arias v. Superior Court of San Joaquin County (Angelo Dairy et al., Real Parties in Interest), S155965 #07-412 Arias v. Superior Court of San Joaquin County (Angelo Dairy et al., Real Parties in Interest), S155965. (C054185; 153 Cal.App.4th 777; Superior Court of San Joaquin County; CV028612.)  Petition for review after the Court of Appeal granted a petition for peremptory writ of mandate.  This case presents the following issues:  (1) Must an employee who is suing an employer for labor law violations on behalf of himself and others under the Unfair Competition Law (Bus. & Prof. Code, § 17203) bring his representative claims as a class action? (2) Must an employee who is pursuing such claims under the Private Attorneys General Act (Lab. Code, § 2699) bring them as a class action?

Amalgamated Transit Union v. Superior Court of Los Angeles County (First Transit, Inc., et al., Real Parties in Interest), S151615 #07-247 Amalgamated Transit Union v. Superior Court of Los Angeles County (First Transit, Inc., et al., Real Parties in Interest), S151615. (B191879; 148 Cal.App.4th 39; Superior Court of Los Angeles County; KC043962.)  Petition for review after the Court of Appeal denied a petition for peremptory writ of mandate.  This case presents the following issues:  (1) Does a worker’s assignment to the worker’s union of a cause of action for meal and rest period violations carry with it the worker’s right to sue in a representative capacity under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) or the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.)? (2) Does Business and Professions Code section 17203, as amended by Proposition 64, which provides that representative claims may be brought only if the injured claimant ―complies with Section 382 of the Code of Civil Procedure, require that private representative claims meet the procedural requirements applicable to class action lawsuits?

Our previous posts on these cases are here and here.  We will continue to post developments on these cases.

By Mark S. Spring

Earlier this week, arbitrator Steven Wolf found, in ruling on a grievance filed by the National Council of EEOC Locals - Local 216 against the EEOC, that the EEOC engaged in an improper practice of using compensatory time off (comp time) instead of properly paying overtime to certain investigators and mediators employed by the EEOC.  If you are interested in learning more about this decision, the Union's post arbitration brief is available by clicking here and the EEOC's post hearing brief is available by clicking here.

By Candice Boyd

On Friday, March 27, Gov. Arnold Schwarzenegger signed legislation extending unemployment insurance benefits for jobless Californians. The unemployment insurance bill provides an additional 20 weeks of unemployment insurance benefits to those who meet certain criteria including the exhaustion of the 59 weeks of federal/state benefits previously available – 26 weeks of state benefits plus federal extensions totaling 33 weeks. To be eligible for the extension, individuals are also required to look for work on a weekly basis. The additional unemployment insurance benefits will be funded by approximately $2.5 to $3 billion in federal stimulus funds.

For additional information about the new legislation, including eligibility requirements, please visit the California Employment Development Department website: http://www.edd.ca.gov/Unemployment/FederalState_Extended_Duration_Benefits.htm

Click the following link to view the new legislation: http://files.statesurge.com/file/925077

By Mark Spring

Last week, the American College of Trial Lawyers Task Force on Discovery and the Institute for the Advancement of the American Legal System issued its Final Report on civil litigation and discovery.  The report is one of the more in-depth studies on the problems with our current system for litigating civil disputes.  The Report makes some fairly aggressive recommendations, many of which are motivated by the increasing costs and burdens of civil discovery.  The Task Force and Institute clearly recognized that in many lawsuits it is the costs and burdens of discovery that drive the resolution.  The Report specifically noted that the civil litigation system itself and the associated discovery process is often used as a weapon to force settlement, instead of being a system that is affordable and efficient and used to uncover relevant evidence.

Much of the study focuses on the problems with civil discovery and the need to place reasonable limitations on the discovery process.  The study criticized the current "one size fits all" approach to civil discovery, stating that the discovery rules need to be modified to limit discovery and make it more proportional to each case being litigated.  The Report should be commended for challenging the current practice of broad open-ended discovery procedures that have been the hallmark of the civil justice system for most of the last seventy years.

Some of the specific recommendations of the Report include:

1.         Notice pleading should be replaced by fact based pleading so that the parties and court can better define the scope of discovery up front.

2.         The development of alternate procedures for resolution of some disputes where full discovery and a full trial are not required and matters can be resolved on the papers and affidavits.  The Task Force emphasized that contract interpretations and statutory remedies would be particularly amenable to such a procedure which is currently being used in Canada.

3.         The discovery rules need to be modified and the courts need to become more involved in the discovery process to make sure that the principle of proportionality is adhered to.

4.         Discovery in general and document discovery in particular should be more limited.

5.         Early disclosure of prospective trial witnesses should be required.

6.         Parties should not be expected to take every conceivable step to preserve all potentially relevant electronically stored information.

7.         Judges must learn more about electronic discovery and offer more guidance to litigants in this area.

8.         Contention interrogatories should either be allowed on a very limited basis or perhaps not at all.

9.         A single judge should be assigned to each civil case and should stay with the case through termination.

Change often comes very slow in the legal system, but this Final Report recommends some sweeping changes to civil discovery that this blogger believes should be seriously considered by those with the ability to implement such change.  For a complete copy of the report, click here.

By Marie DiSante

Employers are relying with increasing frequency on Employment Practices Liability Insurance to help protect against the cost of litigating employment disputes.  Those policies, however, often contain very strict provisions about providing notice to the insurer not only of actual claims made against the employer, but also of potential claims.  Employers need to be aware of these notice obligations in order to avoid losing the benefits of the policy they purchased.

Eric Little, a friend of our firm who specializes in representing insurance policyholders who have disputes with their insurers, gives the following guidance about providing notice under EPLI policies.

By Eric Little:

Employers rely on insurance to fund the defense of a wide variety of employment related litigation.  Especially in these uncertain economic times, most Employers no longer have the luxury of conducting business in California without Employment Practices Liability Insurance (EPLI) in addition to Commercial General Liability Insurance (CGL).

Since many Employers have previously had CGL claims—say, a customer “slip and fall” on company premises—but have not faced employment claims under their EPLI coverage, most Employers have not considered the significant differences between CGL policies and EPLI when providing notice of a claim.

Most CGL policies have an almost lazy approach when it comes to the Employer’s obligation to notify the insurer of a claim.  In California, the general rule is that the Employer is required to provide “immediate notice,” but the penalty for not doing so is minimal.  If the claim is in litigation, the Employer won’t recover litigation costs prior to the date that the notice is provided to the insurer.  The insurer can only refuse to provide policy benefits—typically, future litigation costs and settlement costs—if the insurer is “prejudiced” by the late notice.  It is nearly impossible for an insurer to establish that it has been prejudiced. 

But EPLI policies have totally different notice requirements.  They require immediate notice and that the notice be provided during the policy period in which the Employer first has knowledge of the claim or potential claim. 

And the “knowledge” issue can be tricky for Employers.  Who has knowledge is important.  Knowledge by someone in Human Resources is certainly enough, but often a low level supervisor’s knowledge is enough to obligate the Employer to provide notice to its EPLI carrier. 

What knowledge is also important.  An employee shouting “I’ll see you in court” after getting fired is certainly enough knowledge to require an Employer to provide notice to its EPLI carrier, but there are many, far more subtle situations which insurers argue require notice.  Areas often missed are knowledge acquired through workers compensation proceedings, DLSE proceedings, exit interviews of employees, and employee complaints.  Did the employee complain about: discrimination, retaliation, harassment, wrongful termination, employment related misrepresentation, defamation, libel, slander, invasion of privacy, failure to promote, wrongful discipline, denial of training, deprivation of career opportunity or seniority, negligent supervision of others, negligent training, or negligent retention?  These are but some of the “what” knowledge that triggers an Employer’s obligation to provide notice.  

When the employer has knowledge is critical.  The insurer will examine the insurance claim to determine when the Employer first had knowledge of the claim.  If the insurer discovers that the Employer had knowledge prior to the policy inception, the insurer likely will deny the claim. 

There are many considerations which go into providing notice.  Describing all of them is beyond the scope of this post.  But and increased awareness of the above pitfalls can protect Employers from the most common mistakes.  

Eric Little is Managing Partner of Little Reid & Karzai, LLP, a boutique law firm in Irvine, California specializing in representing insurance policyholders who have disputes with their insurers.  Mr. Little has more than 15 years experience in the field and is responsible for many appellate decisions vindicating insurance policyholders’ rights.  He practices throughout California.

By Sarah Drechsler

A recent MSNBC article reports that the number of employment discrimination claims filed with the Equal Employment Opportunity Commission jumped 15 percent in fiscal 2008, reaching the highest level since the agency opened in 1965.  The largest increases were in age discrimination claims and in retaliation claims.  The article discusses the relation between the record number of claims and the rising level of unemployment in the country, and warns that the number of claims may continue to rise in 2009.  Click here to read the article.
 

By Mark Spring

The California Fair Employment and Housing Commission (our San Diego Partner Dave Carothers is one of the Commissioners) recently announced that it will be amending the regulations interpreting/enforcing the California Family Rights Act to take into account the changes that result from the Department of Labor's recently modified federal regulations interpreting the federal Family Medical Leave Act.  Of course, we will continue to keep you updated on the progress of these regulations.  In the interim, the FEHC has published a very useful and detailed comparison between the California CFRA and the federal FMLA, which can be found here.  The FEHC has also published a comparison of  the meaning of the term "disability" under the ADA, the ADAAA, and the California Fair Employment and Housing Act.  That comparison table is here.

By Mark Spring

The stimulus bill that Obama will sign today (The American Recovery and Reinvestment Act of 2009) is not employment legislation, but it does have some important provisions related to COBRA.  The most important and talked about change to COBRA is the 65% subsidy the government is providing for certain eligible COBRA participants.  Under this provision there is a 65 percent subsidy, advanced by the employer or plan sponsor and then recouped via a credit against payroll tax submissions.  The subsidy is available to eligible individuals for up to nine months.  There is a lot more detail to the COBRA modifications than we can put in a single blog posting, but here are some of the basics:

ELIGIBILITY FOR COBRA SUBSIDY

To be eligible for a subsidy, all of the following must occur:

1) The employee must have been involuntarily terminated on or after September 1, 2008 and before January 1, 2010.

2) The employee must pay 35% of the COBRA premium.

3) The employee must have previously elected COBRA or elects COBRA coverage during the new special election period which runs from the time the Act is passed and ends sixty days after the plan administrator sends out the newly required notice of this new special election period.

4) The employee must have a qualifying income which means he or she must have annual taxable income of less than $125,000 for an individual or $250,000 for a couple in order to receive (and be allowed to keep) the full subsidy.  There is a gradual phaseout of the subsidy allowance for AGI between $125,000 and $145,000 for an individual, and between $250,000 and $290,000 for a couple.

OTHER IMPORTANT TERMS SURROUNDING COBRA SUBSIDY

APPLICATION - The COBRA subsidy applies to general health insurance plans.  It does not apply to dental or vision-only plans, counseling plans, health care flexible spending accounts or HRAs.

TIME - For group health plans that pay monthly premiums, the subsidy provisions become applicable March 1, 2009 (assuming Obama signs the Act this month as indicated).

NEW NOTICE REQUIREMENTS - All newly COBRA eligible participants who are involuntarily terminated between now and December 31, 2009 must be given a notice outlining the subsidy provisions.  In addition, a new notice must be sent out to any employee who was previously involuntarily terminated after September 1, 2008 re-offering a new COBRA election, along with notice of the subsidy provisions.  As indicated above, this second category of noticed employees will then have a new 60 day window in which to elect COBRA coverage back to the date of the involuntary termination, but the employee will only receive the subsidy prospectively.  The people who are likely to take advantage of this second retroactive "bite of the apple" are those that were involuntarily terminated and then suffered from a medical problem leading to substantial uninsured medical expenses that exceed the cost of COBRA.  The Act requires the Department of Labor to publish new notices for these purposes within 30 days of the Act's enactment.

EXPIRATION - The subsidiary expires after 9 months or when the employee becomes eligible for other group health insurance, whichever comes first.  The employee is required to notify the plan administrator if he or she does become eligible for other group health coverage and if he or she does not, certain penalties can be applied.

INVOLUNTARY TERMINATION - The act fails to define the term "involuntary termination."  Based on other statutes, this term is likely to include layoffs and any other termination that is not for misconduct or was not a voluntary quit.

THINGS TO DO

Probably the two most important things that employers and health plan administrators need to do are:

(a) determine who was previously involuntarily terminated after September 1, 2008 and thus who will be eligible for the new COBRA notice; and

(b) establish administrative procedures to ensure compliance with all of the new COBRA provisions of the Act and get them implemented.

By Robin E. Weideman

With the tough economic climate employers continue to face, we have received a number of inquiries regarding the circumstances under which an employer can reduce the salary of an exempt employee without destroying the employee’s exempt status under California law.  As a general rule, an employer may lawfully reduce an exempt employee’s salary, on a prospective basis, so long as the employee’s guaranteed salary does not drop below two times the California minimum wage (currently equating to a minimum salary of $33,280 annually).  Where the reduction becomes problematic is a situation where the reduction is tied to the employee’s hours/days of work and/or to some measure of production.  Many times this arises where the employer tries to give the employee something positive to “offset” the reduction in salary and negative morale that flows from the reduction.  For example, an employer might consider reducing exempt employees' salaries by 20% in exchange for giving the employees Fridays off.  California’s Department of Labor Standards Enforcement takes the position that this type of salary reduction violates the salary basis test and destroys exempt status (meaning that meal and rest breaks and daily/weekly overtime rules would apply to the affected employees).  The DLSE reasons that exempt employees are paid for the value of their work, not for the number of hours or days they work, and it is generally up to the exempt employee to determine the number of hours to work to accomplish his or her job duties.  Tying the amount of an employee’s compensation to the quantity of work the employee performs is at odds with the notion of being a salaried employee.  Any California employer considering salary reductions for exempt employees should review the following opinion letter issued by the DLSE on the subject: DLSE Opinion Letter.

The bottom line is that if you are considering salary reductions for exempt California employees, the reductions can be made, but the reduction should not be linked to any corresponding change in days or hours worked.  In addition, the employees’ salary must not fall below twice the minimum wage, and the employees’ job duties must still meet the test for exempt status.

On a final note, the foregoing applies to circumstances under which employers reduce salaries as a result of the operational requirements of the business.  Different rules apply where an exempt employee voluntarily seeks to work a reduced schedule for personal reasons.
 

By Cindy Caplan

On January 30, 2009, the U.S. Citizenship and Immigration Services (USCIS) announced that it will delay the the implementation of the new Form I-9 (Employment Eligibility Verification) to April 3, 2009.  The new Form I-9 was scheduled to go into effect today (February 2, 2009).  The delay will provide the USCIS the opportunity for further consideration of the rules and to reopen the public comment period for an additional thirty days, until March 4, 2009.  The USCIS press release can be found here.  The delay in implementation is the result of the Obama administration placing a freeze on new regulations enacted under the Bush administration.

Under the rules scheduled to go into effect on April 3, 2009, employers will no longer be able to accept expired documents to verify employment authorization on the Form I-9.  The new rules contain a number of technical changes, including the addition of foreign passports containing specially-marked machine-readable visas to List A of the Form I-9.  We will continue to monitor the status of the proposed regulations and will post any relevant developments.
 

By Mark S. Spring

All employers should be aware that starting in February, they must use the revised I-9 form for all new hires.  There is no need to get revised I-9 forms completed from existing employees.  However, for determining employment eligibility for employees hired after February 1, 2009, the revised form must be utilized.  The revised form makes a number of changes, the most significant being that expired documents may no longer be used to verify eligibility to work.  The new I-9 form is available here.
 

By Kent Sprinkle

Employers with any employees working in the city and county of San Francisco should be sure to confirm that they are in compliance with San Francisco's minimum wage, which was increased to $9.79 per hour, effective January 1, 2009.  For the time being, the California state minimum wage remains the same as it was in 2008 ($8.00 per hour) for employers in the rest of the state.  For any other questions concerning minimum wage or related issues, please feel free to contact us.  Happy New Year!
 

By Robin E. Weideman

California employers are reminded that they are required by California law to provide all employees with a notice of potential eligibility for the federal Earned Income Tax Credit. California Revenue and Taxation Code section 19853 requires that all employers provide this notice to all employees either at the same time as their annual wage summary (Form W-2), or within one week of providing the W-2. It is not sufficient to provide the notice on an employee bulletin board or through internal company mail. Instead, the notice must be hand-delivered to employees or mailed to the employees' last known home address on file with the company. The notice must generally provide instructions on how to obtain information and forms from the IRS regarding the Earned Income Tax Credit. The following sample language satisfies this requirement: 

"Based on your annual earnings, you may be eligible to receive the Earned Income Tax Credit from the federal government.  The Earned Income Tax Credit is a refundable federal income tax credit for low-income working individuals and families.  The Earned Income Tax Credit has no effect on certain welfare benefits.  In most cases, Earned Income Tax Credit payments will not be used to determine eligibility for Medicaid, supplemental security income, food stamps, low-income housing, or most temporary assistance for needy families payments.  Even if you do not owe federal taxes, you must file a tax return to receive the Earned Income Tax Credit.  Be sure to fill out the Earned Income Tax Credit form in the federal income tax return booklet.  For information regarding your eligibility to receive the Earned Income Tax Credit, including information on how to obtain the IRS Notice 797 or Form W-5, or any other necessary forms and instructions, contact the Internal Revenue Service by calling 1-800-829-3676 or through its website at www.IRS.gov."

By Marie D. DiSante

In response to the current crisis in our nation's financial markets, last week California Governor Arnold Schwarzenegger called for a special session of the Legislature to pass a plan to invigorate California's economy.  Governor Schwarzenegger has prescribed an action plan of targeted proposals that are designed to generate and retain jobs in California.  The workplace reforms designed to assist California employers consist of the following:

Overtime Exemptions: Governor Schwarzenegger is proposing to classify as exempt from overtime pay all executive, sales, administrative, and professional employees who earn over $100,000 annually.  Such legislation is long overdue. It would have the very significant effect of reducing the litigation costs associated with lawsuits alleging that employers failed to pay overtime compensation to highly paid employees.  Governor Schwarzenegger's offices estimates this will save California employers $90 million per year in employee classification costs (which includes the cost of paying overtime to highly compensated employees and the cost of misclassification lawsuits).

More Flexible Work Schedules: Governor Schwarzenegger is proposing to allow employees to work more flexible hours upon request, such four ten-hour work days in a 40-hour work week, without being paid overtime.  Such legislation would put California in line with nearly every other state in the nation.  Governor Schwarzenegger's office predicts that such legislation would reduce absenteeism, boost productivity, raise employee retention rates, and reduce claims on the Unemployment Insurance trust fund.  It also would provide employees with the flexibility they need to balance family needs with work obligations, and it would help employees significantly reduce the amount of time and money (not to mention fossil fuels) spent in traveling to work. Again, such legislation is long overdue.

Clarification to Meal and Rest Break Rules: Governor Schwarzenegger also is proposing that the Legislature clarify existing law regarding meal and rest periods to provide employers and employees with a clear understanding of the break rules and by offering flexibility to both businesses and workers.  Governor Schwarzenegger's office predicts this will save hundreds of millions of dollars in litigation costs, and it will lead to fewer employment terminations over meal break violations and a more welcoming work environment.  On behalf of all employers who have faced the overwhelming costs of meal and rest break litigation, and all employees who have genuinely desired to forego a meal break in lieu of going home 30-60 minutes earlier or earning more money from tips or commissions, I offer a resounding endorsement.

Governor Schwarzenegger's proposals are sound ways to advance the interests of both employers and employees alike. We only can hope the California Legislature sees it the same way.  I urge you to contact the legislators in the districts in which you do business to offer support for Governor Schwarzenegger's proposals.  It would go a long way toward putting California on a more level playing field with the rest of our great nation, and it would do so in a way that would benefit workers and employers alike.
 

By Robin E. Weideman

California employers are reminded that they are required to post a notice about employees’ right to take time off to vote in the upcoming election on November 4.  Employees are entitled to a maximum of two hours of paid time off to vote, if the employee does not have sufficient time outside of work to vote.  The employer may require that the time off be taken at the beginning or end of the employee’s shift.  The notice must be posted at least 10 days before the election.  To access the required notices from the Secretary of State’s office, click here.

By Marie D. DiSante

Immigration is one of the hottest topics in employment law these days, both legally and politically.  As a sign of the times, the Department of Labor has been taking a very aggressive enforcement position with respect to many employers, and even with respect to certain law firms who routinely assist their employer clients gain authorization to work in the United States through the PERM labor certification process, a process by which an employer obtains authorization to employ a foreign citizen on a permanent basis following a demonstrated inability to recruit U.S. citizens or others already authorized to work in the U.S. to the available position.  In one case, the DOL has gone so far as to demand the audit of every application submitted by a particular immigration law firm over the past several years.  Immigration expert Angelo Paparelli has written a series of articles on the DOL's aggressive enforcement efforts.  For those employers who employ workers through the PERM labor certification process, I commend Angelo's articles to you.  They are both enlightening and frightening.

By Vanessa W. Whang

Does your company have a formal policy governing internet access to social networking sites like FaceBook, My Space or Linked-In during work hours?  Social networking sites are relatively new in the employment arena and reaction is mixed.  Some employers feel websites like Linked-In can be a valuable marketing, networking and sales tool and encourage their employees to establish a strong presence on such websites.  Other employers believe websites like FaceBook or My Space cause a drain on productivity and create the opportunity of leaking confidential company information.  Your company's reaction to employee-use of social internet networking sites depends on a number of different things.  Considerations include whether there is a benefit (usually networking) that can be achieved by employee presence on such websites, the possibility for over-use of such sites, the loss of workplace productivity, the type of information disseminated on such websites, etc.  Each company must make an individualized determination as to whether social networking sites are beneficial to the company and what risks such websites pose before creating formalized policies concerning the use of social networking sites.  Regardless, in this new electronic age, each company should consider whether its policies are keeping up with electronic advances and whether social networking policies (or any other policies concerning new technologies--see our July 17 posting regarding text messaging policies) are warranted.

Posted by Shannon Going and Mark S. Spring

With the difficult economic climate of today’s markets cutting into profit margins across almost all sectors, employers may be considering layoffs as a way to minimize financial hardship.  California employers, however, should be aware that there is an alternative to layoffs through California’s Work Sharing, or “partial unemployment” Program.  The goal of the Work Sharing program is to ease the difficulties of a layoff situation for both the employer and the employee – while the employee avoids a period of total unemployment, the employer can avoid the costs of hiring and retraining new employees when business conditions improve.  The program gives the employer the option to, instead of discharging an employee, allow the employee to work a reduced schedule and collect the percentage of their weekly unemployment insurance benefit amount equal to the percentage reduction in wages for that week.   

To be eligible, the employer must show that a minimum of 10% of the regular permanent workforce requires a reduction in wages and hours worked, and that at least 2 employees, but not less than 10% of the regular permanent workforce, participate in the program.  Employers with employees subject to a collective bargaining agreement must also obtain the written approval of the bargaining agent.  To apply, employers must submit their plan for approval to the California Employment Development Department (“EDD”) using form DE 8686 (http://www.edd.ca.gov/pdf_pub_ctr/de8686.pdf).  Each Work Sharing Plan is effective for six months, but the employer may be approved for subsequent plans so long as it continues to meet the criteria for participation.

Eligible employees must (a) be regularly employed by the employer applying for the program, (b) show qualifying wages in base quarters used to establish regular California unemployment insurance claims, (c) show a reduction in hours and wages of at least ten percent, (d) have completed a normal work week (with no hour or wage reductions) prior to participating in the employer’s program, and (e) not be a leased or temporary employee. 

Believe it or not, the holiday season is upon us once again and many employers are planning their holiday parties.  These events can be a good opportunity for co-workers to interact on a more personal level, and are often perceived by employers as morale-boosters.  Unfortunately, some people also see these events as an opportunity to over-indulge in alcohol, opening the door to potential liability for the very employers who are hosting the parties.

Under California law, a "host" generally is not responsible for the injuries caused by a guest's consumption of alcohol.  Courts have recognized an exception to this rule, however, finding that employers may, in fact, be liable for injuries caused by employees who consume alcohol at company functions.  Third-parties injured by such employees have been allowed to sue companies where their employees' conduct was a "foreseeable risk" of their consumption of alcohol occurring after ordinary working hours, but still within the "scope of employment."  For purposes of their analyses, courts have found that a risk is "foreseeable" if an employee's conduct is not so unusual that it would be unfair to include the loss within the employer's cost of doing business.  Additionally, attending an employer-sponsored function and consuming alcoholic beverages is considered to be "within the scope of employment" if 1) the activity is endorsed by the express or implied permission of the employer and 2) there is some conceivable benefit to the employer or the activity is a customary aspect of the employment relationship.

Given the potential exposure to liability, employers should evaluate their policies regarding alcohol at company events.  Clearly, the most conservative approach is to simply prohibit the consumption of alcohol at these get-togethers.  This could be handled one of several ways, such as announcing to everyone that the typical bar will be replaced with seasonal non-alcoholic beverages (i.e., egg nog and hot cider), making the event more of a family affair and inviting employees' children, or simply letting employees know that no alcohol will be served.

However, many employers are reluctant to deprive their employees of this form of holiday cheer, in which case other alternatives should be considered to help reduce – albeit not eliminate entirely – potential legal exposure.  Such options might include making attendance voluntary and holding the event off the company's property, using a cash bar and instructing bartenders not to serve more than a specified number of drinks to any individual, or arranging for transportation home for all employees.  Finally, before any company-sponsored event, employers should remind their managers and supervisors that they serve as an example to other employees and therefore should not become intoxicated themselves.

Wishing you all a happy and safe holiday season.