As expected, yesterday Governor Brown signed the paid sick leave bill (AB 1522) into law, making California the second state to mandate that employers provide paid sick leave to their employees (Connecticut was the first). This means that starting in July 2015, California employers generally will have to provide their employees with at least 3 paid sick leave days per year. Our recent post on the bill is available here. California employers who already provide paid sick leave to their employees will want to review their policies against the requirements of the new law to ensure compliance. Employers who currently do not provide paid sick leave will want to review the new law and adopt a compliant sick leave policy.
September 8, 2014
Posted by Cal Labor Law in New Laws & Legislation
The California Legislature has passed the following notable labor and employment bills, which are now awaiting approval or veto by Governor Brown:
AB 1897 – This bill would expand liability for a contractor’s wage and hour violations to make the hirer of the contractor jointly liable for the contractor’s wage and hour violations. The bill applies to businesses that obtain workers from labor contractors but excludes businesses that have less than 25 workers (including those obtained from a labor contractor) as well as businesses that have less than 5 workers supplied by a labor contractor at any given time. The bill excludes certain employee leasing entities and also excludes workers who are exempt from overtime under California laws.
AB 1522 – This bill would mandate that private California employers provide paid sick leave for employees, beginning in July 2015. If the bill is signed into law, most employees will be entitled to one hour of paid sick leave for every 30 hours worked. Employees will be able to use sick leave for their own illness or for preventive care, to care for a sick family member, and/or to recover from certain crimes. Employers will be able to cap annual sick leave use at 3 days (24 hours) per year, however unused, accrued sick leave will roll over from year to year (this rollover can be capped at no less than 6 days (48 hours). Employers will be able to set a minimum increment for use of sick leave, but the minimum increment cannot be greater than 2 hours. Employees will not be entitled to pay for unused sick leave at the time of separation of employment. Employers will be required to provide notice to employees of their accrued sick leave on their itemized wage statements or on a separate document provided at the same time as wages. Employers will also be required to post a paid sick leave poster to be prepared by the Labor Commissioner’s office. The bill also prohibits retaliation against an employee for using sick leave and establishes a rebuttable presumption of such retaliation if adverse action is taken against an employee within 30 days after the employee’s use of sick leave. Employees covered by collective bargaining agreements with paid sick leave provisions and other enumerated criteria will be exempted from the new law. Employers that already have paid sick leave policies that comply with at least the minimum leave rights provided under the bill will not be required to provide additional leave.
In addition to the foregoing, Governor Brown already signed into law AB 2074, which increases employer liability in actions alleging the employer paid the employee less than the minimum wage. Under AB 2074, employees will now be able to recover liquidated damages for violations going back three years (4 years under the Unfair Competition Law).
If there is any positive news for California employers, it is that AB 2416 was not passed by the Legislature. AB 2416 would have provided a procedure for an employee with a wage claim against his or her employer to record a lien against the employer’s real and personal property in the state.
Governor Brown has until September 30 to sign or veto the bills pending before him. Employers who wish to voice opposition should direct comments to the Governor’s office.
Earlier this summer, the California Supreme Court ruled in Iskanian v. CLS that while class action waivers in employment arbitration agreements are enforceable, similar waivers of the right to bring a representative action under PAGA are not enforceable. The Court reasoned that preventing a representative action under PAGA is contrary to California public policy because it undermines the state’s interest in fully penalizing employers who violate labor laws. The Iskanian Court ruled that California’s public policy was not preempted by the Federal Arbitration Act (“FAA”) because the FAA only applies to arbitration of private disputes and a PAGA plaintiff represents the interests of the state, not himself, such that the claim isn’t really a private dispute between an employee and his employer but rather a dispute between the state of California and a private employer. The Court held that the FAA does not apply to disputes between a state agency and a private employer. This reasoning is a stretch in this author’s opinion. At least one (so far) federal district court in California apparently agrees, having chosen not to follow Iskanian. In Fardig v. Hobby Lobby, a wage and hour putative class action, a Central District judge granted the employer’s motion to compel arbitration, rejecting the plaintiffs’ argument that a PAGA representative action waiver in the arbitration agreement was unenforceable. The court held that FAA preemption is an issue of federal law and that federal courts are not bound by the California Supreme Court’s opinion that the FAA does not preempt California public policy with respect to PAGA representative action waivers. The court went on to hold that it disagreed with Iskanian and that a PAGA claim filed by an employee is a dispute between the employee and his employer, not between the state of California and the employer. As such, the district court held that the FAA applied and preempted any California public policy weighing against enforceability of a PAGA representative action waiver. This means that the individual plaintiffs will now have to litigate their individual wage claims in private arbitration and do not have the right to pursue any class or representative PAGA claims in any forum.
The Fardig v. Hobby Lobby decision (August 11, 2014, Central District Case No. SACV 14-00561 JVS) is a favorable development for California employers as it demonstrates that there is some continued viability of PAGA representative action waivers in employment arbitration agreements, notwithstanding Iskanian. Employers should also note that the parties is Iskanian have until late September to petition for review of the decision by the United States Supreme Court. If that happens, it is quite possible that the Supreme Court will reverse the PAGA portion of the Iskanian opinion. Even if review is not sought (or is sought but denied), employers facing the issue of enforceability of a PAGA representative action waiver should remove California state court cases to federal court wherever possible.
Last week a California Court of Appeal held that class certification was appropriate in a case alleging that the employer failed to reimburse employees for expenses associated with using their personal cell phones for work calls. At the trial court level, the employer successfully opposed class certification, arguing that liability could not be established on a class wide basis because it required individualized inquiry regarding whether an employee purchased a plan over and above what he normally would have had for purely personal use, and/or whether the employee incurred charges over and above his personal plan. The employer also argued that if someone other than the employee paid the employee’s cell phone bill, the employee would not have standing to pursue a claim for relief and this also created individualized issues. In addition to the individualized issues bearing on liability under Labor Code section 2802, the employer also successfully argued that damages would be highly individualized. The trial court denied class certification based on the predominance of individualized issues.
The Court of Appeal reversed, holding that the trial court abused its discretion in denying class certification. The Court of Appeal held that the trial court relied on the wrong standard for liability for a reimbursement claim under Labor Code section 2802. According to the Court of Appeal, all that is required to prove liability under Labor Code section 2802 is that the employee necessarily incurred expenses in the course of his job duties. The employee does not need to prove that he incurred expenses over and above what he would have incurred absent the job, nor does he have to prove that he actually paid his cell phone bill. The court held that if the rule were otherwise, the employer would receive a windfall by being able to pass on some of its operating expenses to employees. Thus, the court held that to be in compliance with Labor Code section 2802, “the employer must pay some reasonable percentage of the employee’s cell phone bill” if the employee uses a personal cell phone for work purposes. In other words, "reimbursement is always required." The court did not define what a “reasonable percentage” is, but instead held that “the calculation of reimbursement must be left to the parties and the court in each particular case.”
Based on its interpretation of the standard for liability under Labor Code section 2802, the Court of Appeal held that a class should have been certified because liability could be determined on a class wide basis and did not depend on adjudication of numerous individualized issues. The court acknowledged that damages issues were “more complicated” (i.e. individualized) but held that individualized damage issues do not defeat class certification and that the trial court could employ statistical sampling to calculate damages under the standards set forth by the California Supreme Court in Duran v. U.S. Bank.
The case is Cochran v. Schwan Home Service, Inc. and is available here. Employers that have employees using personal cell phones for business calls should review their expense reimbursement policies to ensure that these employees are reasonably compensated for the expense of making business calls on their personal devices.
August 4, 2014
Posted by Cal Labor Law in Union-Management Relations
Late last month, the NLRB in two separate steps, on July 18 and July 30, decided to ratify all administrative, personnel and procurement matters handled by the Board from January 4, through August 5, 2013 and all actions taken by the Regional Directors selected during this time period, including the Regional Director of Region 31 (Los Angeles). This is the period during which the United States Supreme Court held, in NLRB v. Noel Canning, that the NLRB did not have a proper quorum due to improper recess appointments. The NLRB believes that these acts of ratification eliminate any questions concerning the validity of actions undertaken during this period by the Board or by Region 31 (and the other regions where RDs were selected by a Board with less than a quorum). It remains to be seen whether anyone will attempt to challenge this ratification in the courts by arguing that any decisions made during the time period need to be given a de novo review and that ratification is simply not sufficient.
July 21, 2014
Posted by Cal Labor Law in CDF News & Events
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Last week the California Supreme Court continued its trend of issuing employee-friendly decisions, this time in a case involving the commissioned salesperson exemption. In Peabody v. Time Warner Cable, the plaintiff was a commissioned salesperson who sold advertising spots for Time Warner Cable. She was classified as exempt from overtime under California's commissioned salesperson exemption, which applies to a sales employee whose earnings exceed at least one and one-half times the minimum wage if more than half of those earnings represent commissions. Time Warner paid plaintiff her regular wages on a biweekly basis, but only paid her commission wages once per month. Thus, at least one paycheck per month was comprised only of base hourly pay and did not reflect earnings exceeding more than one and one-half times the minimum wage. However, the monthly commission check, which represented commissions earned for a monthly period (not just for a bi-weekly period), brought the employee's wages for the month to more than one and one-half times the minimum wage.
Plaintiff sued, arguing that she was not properly paid overtime wages for hours worked in excess of eight per day or forty per week. The trial court granted summary judgment for Time Warner, agreeing with Time Warner that it properly paid plaintiff under the commissioned salesperson exemption and that plaintiff was not entitled to additional overtime compensation. Plaintiff appealed to the Ninth Circuit, which certified a question to the California Supreme Court concerning whether an employer could properly allocate commission wages over the pay periods in which they were "earned," or whether the commission wages could only be attributed to the pay period in which they were actually paid. The California Supreme Court said the latter.
In so holding, the California Supreme Court reasoned that California overtime exemptions are narrowly construed and must be interpreted in favor of the employee and against the employer. The Court's holding certainly accomplishes that. The Court acknowledged that California law permits commission wages to be paid less frequently than regular wages and that monthly, or even less frequent, payment of commission wages is permissible (given that commission wages often are not "earned" until certain conditions are satisifed and are not calculable with the same frequency as the regular payroll schedule). However, the Court reasoned that just because California law allows less frequent payment of commission wages that aren't "earned" every pay period does not mean that an employer can use a monthly or less frequent schedule to pay commission wages that are earned. The Court reasoned that California law requires that all wages earned for work performed generally be paid no less frequently than twice per month. Time Warner was arguing that it could allocate commission wages to the pay periods in which they were "earned," but the Court said that permitting this would be tantamount to authorizing monthly pay periods for wages earned. Because monthly pay periods are not authorized by the California Labor Code, the Court held that Time Warner had not properly paid the plaintiff and she did not qualify for the commissioned salesperson exemption.
The Court acknowledged that Time Warner's pay system was proper under the federal commissioned salesperson exemption, but declined to find it proper under California law because California law, unlike federal law, requires at least semi-monthly pay periods.
The California Supreme Court's decision makes it much more difficult for employers to satisfy the commissioned salesperson exemption under California law. Employers that look back and allocate commission wages over the pay periods in which they were "earned" as a means of ensuring that the employee's pay is at least one and one-half times the minimum wage, should revise their practices in light of this decision.
Yesterday the California Supreme Court issued its decision in Ayala v. Antelope Valley Newspapers, holding that the trial court erred in denying class certification to a group of newspaper carriers who worked as independent contractors for Antelope Valley Newspapers and later sued the newspaper for wage and hour violations on the basis that they should have been classified as employees. The Court held that the trial court focused on the wrong legal criteria in denying class certification and that the matter had to be remanded for the trial court to re-assess class certification using proper criteria. In denying class certification, the trial court held that the issue of whether the carriers were employees or independent contractors could not be decided in one stroke as to the entire class because the evidence showed substantial variation in the degree of control the newspaper exercised over its carriers’ work, and the issue of degree of control is the primary factor in assessing whether a worker is an independent contractor or an employee.
The California Supreme Court held that the trial court erroneously focused on variation in the level of control actually exercised by the newspaper, rather than on whether the newspaper uniformly retained the right to control the carriers’ work. The Court emphasized that the key issue is whether the hirer has the right to control the work, not whether the hirer actually exercises that right. The Court explained that evidence of whether the hirer retains the right of control typically is found in the contract between the hirer and the worker. In this case, the newspaper used largely the same form independent contractor agreement for all of its carriers. The Court stated that the trial court “afforded only cursory attention” to the parties’ agreement, when it should have focused on the agreement as the starting point for its analysis. Rather than outright saying that if a hirer uniformly uses the same agreement for all of its workers, the issue of right to control can always be decided on a class wide basis, the Court reserved some room for trial courts to look to the parties’ “course of conduct” (and beyond just the agreement).
“While any written contract is a necessary starting point, [ ] the rights spelled out in a contract may not be conclusive if other evidence demonstrates a practical allocation of rights at odds with the written terms. In deciding whether claims that hinge on common law employee status are certifiable, then, a court appropriately may consider what control is ‘necessary’ given the nature of the work, whether evidence of the parties’ course of conduct will be required to evaluate whether such control was retained, and whether that course of conduct is susceptible to common proof – i.e. whether evidence of the parties’ conduct indicates similar retained rights vis-à-vis each hiree, or suggests variable rights, such that individual proof would need to be managed.”
The Court directed that on remand, the trial court would need to assess whether the newspaper, notwithstanding the form contract it entered with all carriers, actually had different rights with respect to each that would necessitate mini-trials. The Court briefly addressed the fact that the test for determining whether a worker is an independent contractor or an employee depends not only on the right of control, but also on numerous secondary factors (method of payment, who supplies the tools and equipment, place of work, etc.). The Court minimized the significance of the secondary factors and of evidence of individualized variation bearing on those factors, reasoning that variation in one or more secondary factors may not impact class certification if the factor is not a heavy one in the analysis compared to the other factors.
The Court’s decision and reasoning makes class certification more likely in independent contractor misclassification cases is likely to fuel more of this litigation. This is because many companies use form independent contractor agreements and these agreements often spell out the “right to control” retained by the company. The full decision is available here.
California employers must be aware that the state’s minimum wage increases to $9 per hour on Tuesday, July 1st. This is the first increase in the state minimum wage in six years, and represents a $1 per hour increase from the previous minimum wage of $8 per hour. This new minimum wage is only temporary, and will increase to $10 per hour on January 1, 2016.
Low-end, hourly employees are not the only employees who are affected by this increase, however. It is also important to remember that California law also requires salaried, exempt employees to earn a monthly salary equivalent of no less than two times the new state minimum wage for full-time employment. Consequently, even some exempt employees will see an increase in their salary as a result of the minimum wage increase. Effective July 1st, the new minimum monthly salary for exempt employees will be $3,120, or $37,440 per year.
It is also important to remember that effective January 1, 2014, the City and County of San Francisco increased its minimum wage for all employees working in San Francisco to $10.74 per hour. The notice that San Francisco requires its employers to post can be found and printed here.
Not to be outdone by the City of Seattle, San Francisco Mayor Ed Lee recently proposed a measure to increase San Francisco’s minimum wage to $15 per hour by July 2018. Voters will have the opportunity to weigh in on Mayor Lee’s proposal in the upcoming November ballot. Even if Mayor Lee’s proposal is voted down (which seems unlikely given the proposal’s support), San Francisco’s minimum wage is already set to increase to $11.03 on January 1, 2015.
The San Francisco Board of Supervisors also recently voted to increase employers’ expenditures under the Health Care Security Ordinance (“HCSO”). Under the HCSO, employers must satisfy the Employer Spending Requirement by calculating and making required health care expenditures on behalf of all covered employees. Effective January 1, 2015, these expenditures are set to increase, depending on the number of employees. The notice that San Francisco requires its employers to post regarding the HCSO can be found and printed here. For more information on the HSCO in general, please click here.
The HSCO and the proposed increase to its minimum wage rate are additional examples of employment-related ordinances unique to the City and County of San Francisco. Employers should recall San Francisco’s Commuter Benefits, Family Friendly Workplace, and Paid Sick Leave.
Any employers interested in discussing or implementing any of the above changes to California and San Francisco law or any other employment-related policy or practice (or even the recent woes of the San Francisco Giants) are encouraged to contact Ryan McCoy in CDF’s San Francisco office.
Today the United States Supreme Court issued its decision in NLRB v. Noel Canning, voiding President Obama’s 2012 recess appointments to the NLRB on the ground that the appointments exceeded the President’s constitutional authority. In so holding, the Court affirmed the D.C. Circuit Court of Appeal’s decision last year in the case. However, the Court did not agree with the D.C. Circuit Court’s reasoning. The D.C. Circuit Court had held that the recess appointments were invalid because the Senate was not actually in “recess” at the time and that the recess appointment power only applies to inter-session recesses, and then, only to vacancies that arise during such a recess (as opposed to vacancies existing at the time the recess commences). By contrast, the Supreme Court held that the recess appointment power applies both to inter-session and intra-session recesses and is not limited to vacancies that arise during a recess. However, the Court held that the recess must be of a sufficient length to trigger the recess appointment power. The Court held that the break in the legislative session must be at least 10 or more days in order for recess appointments to be authorized. In the case of the 2012 NLRB recess appointments, the appointments were made during a period when the Senate was convening every three days for pro forma sessions when no business was actually conducted. The Court held: “Three days is too short a time to bring a recess within the scope of the clause. Thus we conclude that the president lacked the power to make the recess appointments here at issue.”
The Court’s voiding of the NLRB appointments invalidates many NLRB decisions and actions in which the 2012 recess appointees participated. It is unclear how the NLRB with proceed as to the many affected matters. However, NLRB Chairman Mark Gaston Pearce issued the following statement today:
“The Supreme Court has today decided the Noel Canning case. We are analyzing the impact that the Court’s decision has on Board cases in which the January 2012 recess appointees participated. Today, the National Labor Relations Board has a full contingent of five Senate-confirmed members who are prepared to fulfill our responsibility to enforce the National Labor Relations Act. The Agency is committed to resolving any cases affected by today’s decision as expeditiously as possible.”
The Court’s full opinion in Noel Canning is available here.