October 12, 2011
Posted by Cal Labor Law in CDF News & Events
On Monday, October 17, CDF Partners Mark Spring and Greg Berk will be speaking at the California Restaurant Association's Education Seminar at the SMUD Headquarters Auditorium in Sacramento, California. Mark will be discussing important new legal and HR issues surrounding social media in the workplace. Greg will be speaking on immigration compliance issues. In addition, EPLI experts Ronald Guillen and Caroline Calnon will be presenting on employment practices liability insurance. We encourage those in the Sacramento area to attend this great program. The cost is $10 for CRA members and $25 for non-members. More information and a registration link are available here.
In pleasant news for California employers, Governor Brown vetoed several unappealing employment bills this past weekend. The bills he vetoed include (1) AB 267, which would have invalidated forum selection and choice of law provisions in employment contracts with California employees, (2) AB 325, which would have required California employers to provide bereavement leave, and (3) SB 931, which would have imposed new requirements for use of payroll cards. That is the good news.
The bad news is that Governor Brown signed into law AB 22, which limits California employers’ ability to use credit reports for employment purposes. Under the new law, employers (with the exception of certain financial institutions) are prohibited from obtaining or relying on credit reports for applicants and employees, unless the report is sought in relation to (1) a position in the California Department of Justice; (2) a managerial position (defined as a position that qualifies for the executive exemption from overtime); (3) a sworn peace officer or other law enforcement position; (4) a position for which credit information is required by law to be disclosed or obtained; (5) a position that involves regular access (other than in connection with routine solicitation of credit card applications in a retail establishment) to people’s bank or credit card account information, social security number, and date of birth; (6) a position in which the employee would be a named signatory on the employer’s bank or credit card account, authorized to transfer money on behalf of the employer, or authorized to enter into financial contracts on behalf of the employer; (7) a position that involves regular access to cash totaling $10,000 or more of the employer, a customer, or client during the workday; and (8) a position that involves access to confidential or proprietary information (defined as a legal “trade secret” under Civil Code 3426.1(d)).
Even if the employer is permitted to obtain a credit report under one of the exceptions outlined above, the employer must first provide written notice to the applicant or employee, specifying the permissible basis for requesting the report and providing a box for the employee/applicant to check off to request a copy of the report, which must be provided free of charge and at the same time the employer receives its copy of the report. If employment is denied based on information in a credit report, the employer must advise the applicant/employee and provide the name and address of the credit reporting agency that supplied the report.
Other labor and employment legislation signed into law by the Governor in the last few days includes the following:
SB 459 (Misclassification of Independent Contractors): This new law creates stiff penalties for willful misclassification of employees as independent contractors. The law defines “willful” as “voluntarily and knowingly misclassifying” an individual. The law also makes it unlawful for an employer to charge an individual who has been willfully misclassified any fees or other deductions from compensation if those fees and deductions (e.g. for licenses, space rental, equipment) would have been prohibited had the individual been properly classified as an employee. In the event of a finding of willful misclassification, penalties may be assessed in the range of $5,000 to $25,000 per violation. Additionally, an employer in violation may be ordered to display prominently on its Internet web site (or other area accessible to employees and the general public) a notice that explains the employer has been found guilty of committing a serious violation of the law by willfully misclassifying employees, along with other prescribed information. The new law also imposes joint and several liability on individuals who, for money or other valuable consideration, knowingly advise an employer to treat an individual as an independent contractor to avoid employee status. Excepted from liability are employees who provide advice to their employer, and licensed attorneys providing legal advice to the employer.
AB 469 (Notice of Pay Details): This new law requires employers to provide each employee, at the time of hire, with a notice that specifies (1) the pay rate and the basis, whether hourly, salary, commission or otherwise, as well as any overtime rate, (2) allowances, if any, claimed as part of the minimum wage, including meals or lodging, (3) the regular payday, (4) the name of the employer, including any “doing business as” names used by the employer; (5) the physical address and telephone number of the employer’s main office or principal place of business, and a mailing address if different, and (6) the name, address and telephone number of the employer’s workers’ compensation carrier. The employer must notify each employee in writing of any changes to the information set forth in the notice within 7 days of the changes, unless such changes are elsewhere reflected on a timely wage statement or other writing required by law to be provided.
AB 887 (Gender Identity and Expression): This new law amends the Fair Employment and Housing Act (as well as various other laws) to make clear that discrimination on the basis of gender identity and “gender expression” is prohibited. Gender expression refers to a person’s gender-related appearance and behavior, whether or not stereotypically associated with the person’s assigned sex at birth. The new law also requires employers to allow an employee to appear or dress consistently with the employee’s gender expression.
AB 1236 (E-Verify): This new law prohibits the state, or a city or county, from requiring employers to use E-Verify as a means of verifying employees they hire are authorized to work in the United States.
AB 243 (Farm Labor Contractors): This new law requires employers who are farm labor contractors to disclose to employees the name and address of the legal entity that secured the employer’s services. This information must be disclosed as part of the employees’ itemized wage statements required by Labor Code section 226.
SB 126 (Agricultural Labor Relations): This new law deals with petitions objecting to the conduct of an election before the Agricultural Labor Relations Board and specifies that where the ALRB refuses to certify an election because of employer misconduct that, in addition to affecting the results of the election, would render slight the chances of a new election reflecting the free choice of employees, the labor union shall be certified as the exclusive bargaining agent for the bargaining unit.
Unless otherwise specified most new laws take effect January 1, 2012. California employers will want to familiarize themselves with these new laws as applicable to their workforces and operations, and revise policies and procedures accordingly.
Late last week, Governor Brown signed into law AB 1396, which requires commission pay arrangements to be set forth in a written contract. All employers must comply by January 1, 2013. Under the new law, whenever an employer enters into a contract of employment with an employee for services to be performed in California and the employee’s compensation involves commissions, the contract must be in writing and set forth the method by which the commissions will be computed and paid. The employer must give a signed copy of the contract to the employee and must retain the employee’s signed receipt of the contract. In the event the contract by its terms expires but the parties nevertheless continue to work under the expired contract, its terms are presumed to remain in full force and effect until the contract is expressly superseded by a new contract or the employment relationship is terminated. For purposes of the new law, “commissions” are defined in accordance with Labor Code section 201.4 as compensation paid to any person in connection with the sale of the employer’s property or services and based proportionately upon the amount or value thereof. However, the new law specifies that “commissions” does not include short-term productivity bonuses nor bonus and profit-sharing plans, unless they are based on the employer’s promise to pay a fixed percentage of sales or profits as compensation for work.
There has been a fair amount of litigation in California over the meaning of “commissions” in cases dealing with the overtime exemption for certain commissioned salespersons. This new law may well invite more litigation concerning commission pay within the state. Employers who have employees performing work in California and who are even arguably paid in whole or in part with commissions should be provided a written contract (with an acknowledgement form for the employer to retain) setting forth the formula and timing for earning and payout of commissions. Failure to comply could subject an employer to an action for penalties of $100 per pay period per aggrieved employee under the Private Attorneys General Act.
This week, California Governor Jerry Brown signed into law SB 299, legislation requiring California employers to continue group health coverage to employees on pregnancy disability leave for up to four months. California employers with five or more employees have long been required to comply with California's law permitting employees disabled by pregnancy to take a leave of absence of up to four months for the disabling condition. This leave is in addition to traditional "maternity leave," which separately provides the employee up to 12 weeks of leave for baby bonding (if the employer has 50 or more employees and is covered under FMLA/CFRA). Prior to passage of SB 299, employees on pregnancy disability leave were entitled to the same benefits provided by an employer to employees on other types of disability leaves. With respect to continuation of group health benefits, many employers limit the continuation of such coverage to 12 weeks, as this is the required time period for continuation of coverage under the FMLA/CFRA for family and medical leaves of absence. With the passage of SB 299, effective January 1, 2012, California employers must extend the continuation period to four months for pregnancy disability leaves.
As specified in the legislation, group health benefits must be continued on the same terms and conditions as if the employee continued actively reporting to work. Therefore, if the employer pays the entire premium for employee coverage, it must continue to do so for up to four months of pregnancy disability leave. If the employee normally pays a portion of the premium, the employee may be required to continue making such contributions (either for self or for dependent coverage) during the leave. Additionally, if the employee fails to return from pregnancy disability leave, the employer may recoup from the employee the premiums the employer paid to continue the employee's coverage during the leave, unless the reason the employee did not return is because of a continuing disability or because the employee took a separate protected leave (e.g. maternity leave) under the FMLA/CFRA.
California employers should review their policies and procedures relating to pregnancy disability leaves to ensure compliance with this new law.
October 5, 2011
Posted by Cal Labor Law in Legal Information
The NLRB announced today that it is postponing the implementation date for its recently issued employee-rights notice. The new effective date is January 31, 2012. The NLRB's stated reason for the postponement is to "allow for further education and outreach" in light of "queries from businesses and trade organizations . . . about which businesses fall under the Board's jurisdiction." Coincidentally, however, the NLRB's newly required poster currently is under both legislative and legal attack. As reported in our prior post, legislation has been introduced to block implementation of the new poster, and lawsuits have been filed by various groups seeking to enjoin implementation. Stay tuned for further developments on this contested issue.
The California Supreme Court has finally scheduled oral argument in Brinker v. Hohnbaum for November 8, 2011. Employers can reasonably expect a decision in the case sometime between December 2011 and February 2012, as the Court generally has 90 days following oral argument to issue its decision. The long-awaited decision is expected to provide much needed clarity on an issue that has fueled countless lawsuits and caused operational headaches for employers as well as inconvenience for employees. Specifically, the Court will decide whether California meal period laws require employers to ensure that employees take at least a 30 minute, uninterrupted meal break at or before completing five hours of work, or whether employers are simply required to provide their employees the opportunity to take such a break, which the employee may voluntarily decide to skip with no adverse consequence to either the employer or the employee.
Most courts that have decided this issue have held that the law simply requires the employer to provide the opportunity for a meal break, but a few courts (along with the DLSE for a period of time) have held that employers must ensure such breaks are taken, regardless of whether an employee wants to take them. As a result, employers have had no clear direction on the proper interpretation of the law and most have taken the conservative approach and forced employees to take breaks, even disciplining them for failing to do so, much to the displeasure of many employees. Employer friendly groups have caused numerous bills to be introduced before the California legislature in the last two or three sessions to try to clarify this issue in a way that is operationally manageable and beneficial to employers and employees alike, but the legislature has refused to pass almost any bill that would provide the greatly needed relief--much to the appreciation of the California plaintiffs' bar which has profited wildly from the cottage industry of meal break litigation.
Stay tuned for further developments on this important case for California employers.
On September 21, 2011 the Internal Revenue Service introduced the Voluntary Worker Classification Settlement Program that offers employers the opportunity to gain certainty regarding potential past federal tax liability associated with misclassifying workers as independent contractors. The Program allows employers to voluntarily reclassify workers that were improperly classified as independent contractors into employees and pay a minimal payment (federal payroll taxes, interest and penalties) to cover past federal payroll tax obligations for the contractor-turned-employee. A link to the IRS announcement with more details about the Program is here.
To be eligible for the Program, an employer must:
(1) Consistently have treated the workers in the past as nonemployees,
(2) Have filed all required Forms 1099 for the workers for the previous three years, and
(3) Not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers.
With the federal and state authorities increasing their enforcement in this area, the primary benefit of this Program is that it allows employers that believe they may have missclassified workers as independent contractors to be assured, by paying the minimal amount to the IRS (10% of the back payroll taxes owed), that they will have not have any further past federal tax liability.
There are, however, significant risks with using this Program. This program is not a complete amnesty program. There are many areas where an employer can be liable when it misclassifies employees as independent contractors other than federal payroll taxes. This Program only provides relief for federal payroll taxes. Participation in this Program would still leave the employer with potential liability to state taxing agencies, the employer's workers' compensation carrier, and directly to the misclassified worker. In fact, using this Program and then reclassifying the workers as independent contractors may alert the state agencies to the possibility of liability for unpaid state payroll taxes and unemployment contributions. If your workers' compensation carrier becomes aware of the misclassification it can seek payment for past unpaid workers' compensation insurance premiums under the theory that the workers should have been on the payroll used to calculate the amount of the premiums. The reclassification of the workers may also alert them to potential recovery on a variety of issues, including but not limited to unpaid overtime, missed meal and rest breaks and unpaid employee benefits that they did not receive during the time period they were misclassified (such as retirement/pension benefits, stock options, health insurance, and vacation). Moreover, using this Program may be seen as an admission that, in fact, the workers were not independent contractors, thereby making it easier for the state agencies and individual employees to pursue these potential damages. Finally, the Program includes a provision whereby the employer is subject to future payroll tax audits from the IRS for a six year period as opposed to the normal three year statute of limitations.
Although the Voluntary Worker Classification Settlement Program offers certainty regarding past federal taxes, use of the Program could lead to other issues. We recommend that employers think carefully about the risks to their workforce before using this Program and consult with competent attorneys and/or tax advisors before doing so.
Almost four years ago, the California Supreme Court granted review of Harris v. Superior Court, 154 Cal.App.4th 164 (2007), an important case involving application of the administrative exemption under California law. The Court has finally scheduled oral argument on the case for October 3, 2011.
The issue under review in Harris is whether certain insurance claims adjusters were properly classified by their employer as exempt under the administrative exemption. Specifically, the Court will analyze whether the claims adjusters were engaged in work that was “directly related to management policies or general business operations,” commonly referred to as the administrative/production dichotomy, and whether this analysis is dispositive of the issue regarding whether an employee is properly classified under the administrative exemption.
This decision in this case is likely to offer some important guidelines in determining how to properly analyze whether employees qualify for the administrative exemption under California law. For a more detailed description of the Court of Appeal ruling and case background, click here. We expect a decision in December or January 2012.
September 14, 2011
Posted by Cal Labor Law in New Laws & Legislation
On August 28, we posted abouta new posting requirement established by NLRB regulation that requires private sector employers to post a detailed notice informing their employees about their rights to unionize. This requirement takes effect in November 2011.Our prior blog post is here.
Several developments have occurred in the last two weeks:
1. NLRB Poster is Now Available
Even though the requirement to post the notice about union rights is not effective until November, the NLRB has already prepared the poster and made it available on its website. The poster just became available in the last few days. Employers can review and/or download the poster here.
2. NAM Sues to Block Implementation
On Thursday September 8, the National Association of Manufacturers filed a lawsuit in Federal District Court in Washington DC, seeking an injunction to stop implementation of the NLRB's regulatory mandate. The lawsuit claims that the NLRB lacks the authority to mandate a posting requirment and that such a requirement can only come from Congress in the form of legislation.
3. House Legislation Introduced to Block Posting Requirement
Congressman Ben Quayle introduced HR 2833, The Employee Workplace Freedom Act, to block the implementation of the NLRB regulation requiring the new posting. The Employee Workplace Freedom Act seems to repeal the regulation and specifically provides that The National Labor Relations Board shall not enforce or promulgate any rule that requires employers to post notices relating to the National Labor Relations Act. A copy of the Act is available here.
We will continue to post developments on this subject as they arise.
In a Santa Clara County Superior Court Statement of Decision that employers can hope will be echoed by an appellate court, the Honorable James P. Kleinberg ruled following a bench trial that an employer complies with California's meal break requirement if it makes a 30-minute break "available" rather than "ensure" that the break is taken.
The case is Driscoll v. Graniterock. The Graniterock plaintiffs were concrete ready-mix drivers. The drivers do not have a regular schedule and until they arrive at work to get the concrete trucks, they do not know how long the day will last or whether they will have to work through lunch. The on-duty nature of the work is dictated by the physical properties of concrete, a perishable product that, once pouring has commenced, must be poured continuously until complete. Drivers could, however, tell the dispatcher that they wanted a meal break. Drivers were paid a premium for taking an on-duty meal break, and not surprisingly, expressed a strong preference for eating on the job, earning additional pay, and leaving early.
Graniterock drivers signed a revocable on-duty meal period agreement that included the caveat that the written revocation provide a one day advance notice of the decision to revoke. Judge Kleinberg rejected Plaintiffs' argument that the one day notice was facially invalid, finding it significant that the one day notice requirement did not deter a driver from revoking the agreement -- indeed three drivers did revoke. The more common scenario showed that dispatchers made every effort to accommodate a driver's desire for a break, even when the driver did not revoke the agreement but simply called to say he wanted lunch.
Most importantly, while noting that the issue of whether an employer must "ensure" or merely "make meal breaks available" remains to be decided by the California Supreme Court, the court sided with the majority of appellate cases currently pending resolution of Brinker, and concluded that the Wage Order's use of "provide" means "to make available." Graniterock argued, apparently quite persuasively that since its drivers knew that the meal break waivers were neither required nor irrevocable, and that they could simply request and receive a meal break, it was the drivers themselves who chose to waive their right to an off-duty meal break.
While employers can applaud the trial court's ruling, a note of caution sounds in the decision's procedural background: this bench trial was tried for more than two weeks and required 55 witnesses and 285 exhibits, an expensive undertaking for the company, albeit one with the comfort of an excellent outcome.