San Francisco’s Minimum Wage Goes Up In January 2012

San Francisco's minimum wage, which currently is $9.92 per hour, is increasing to $10.24 per hour effective January 1, 2012.  This makes San Francisco the first city in the country with a minimum wage in excess of $10 per hour.  The minimum wage increase is tied to a new law passed by San Francisco voters in 2004 which automatically increases the city's minimum wage in accordance with inflation.  Employers with employees who work more than two hours in a workweek inside San Francisco city limits should ensure their payroll practices are updated to reflect the new minimum wage.

Are You Ready for 2012?  Attend Our December 6 Webinar on the Latest CA Employment Law Developments

Brinker is not the only important court case with which California employers need to be concerned for 2012.

Besides Brinker, do you want to learn:

What other important cases have been decided and are pending?
What did the California legislature do in 2011 that will change the way employers do business in 2012?
How will the recent elections and NLRB actions change what is likely to occur in 2012?
Where will governmental agencies and plaintiffs' counsel be focusing their enforcement efforts in 2012?

Get the answers you need to these questions as well as information on these other hot topics:

New Restrictions on Obtaining Credit Reports
New Information that Must Be Provided to California Employees at Hiring
Developments Related to Mandatory Arbitration and Class Actions
New Anti-Discrimination Laws
New Protections for Pregnancy & Medical Leaves

With 2012 around the corner, CDF would like to ensure CA employers start off the New Year informed on what laws are changing and what legislation to watch.

This is one CDF webinar you won't want to miss!

REGISTRATION INFORMATION

Attendance is Complimentary
Sign Up Today!

December 6, 2011
9:00 a.m. - 10:15 a.m. (PST)

Registration:  Click HERE to register for this webinar.

Individual Supervisors Not Liable for Military Service Discrimination

On this Veteran's Day, employers are appropriately reminded that various laws prohibit discrimination against employees on account of military service.  One of these laws is California Military & Veterans Code Section 394.  This law prohibits employment discrimination against members of the armed forces because of their membership or service.  Yesterday, in a case of first impression, a California court addressed whether individual supervisors may be sued and held personally liable for discrimination under Section 394.  In Haligowski v. Superior Court (Pantuso), the plaintiff was a Lieutenant in the Navy and was called to active duty in Iraq during the course of his employment with defendants.  After returning from a 6 month tour of duty, plaintiff was informed his employment was terminated.  Unsurprisingly, plaintiff sued for discrimination.  He sued not only his employer, but also his immediate supervisors.  The individual supervisors asked the trial court to throw out the claims against them individually, but the trial court refused, holding that Section 394 allows for personal liability against individual supervisors.  The supervisors appealed.

On appeal, the California appellate court reversed, holding that Section 394 only allows for liability against an employer, not against individual supervisors.  The court reasoned that although Section 394 prohibits discrimination by any "person," that does not necessarily mean that liability may be imposed against any "person."  The court explained that California's primary law prohibiting employment discrimination, FEHA, similarly prohibits discrimination by any person, yet it is well-established that only employers (not individual supervisors) may be held liable for discrimination under FEHA.  The court held that there was no reason to treat employment discrimination under Section 394 any differently.

To be clear, the court in no way addressed the propriety of the employee's claims against the employer, much less held that the employer acted properly in terminating the employment relationship.  The court simply held that the employee would have to pursue his claims only against the employer and not against his individual supervisors. 

Update on This Morning’s Oral Argument in Brinker

Earlier today, I watched the Brinker v. Superior Court oral argument broadcast live from the California Supreme Court on television.  Unfortunately, I missed about 20% of the arguments because the TV station broadcasting the event, CalChannel, was having technical difficulties.  They have not determined what the technical difficulties were, but if I had to guess I would think that is very possible that a key employee on the broadcast team had his required meal period fall right in the middle of the broadcast and had to leave for 30 minutes.

I think it is a bit crazy to try to predict what the Supreme Court is going to do based on questions and statements made at oral argument.  My ability to predict such things is about as good as my ability to hit a free throw in a crowded gym with the game on the line.  If you have never seen me play basketball, that means somewhere around 55 to 60%.  Therefore, this blog entry will contain no predictions.  However, I can comment on some of the what I saw and the key points that were highlighted:

First, let me address what most believe to be the most important issues in the case:  What does "provide" mean?

A number of the Justices seemed very hostile to the appellant attorney's argument that "provide" means to ensure that meal breaks are taken.  Justices Kennard, Liu, Corrigan and Baxter all appeared perplexed at this argument and challenged the position of the appellant's attorney with aggressive questioning on the issue.  I thought Justice Liu made a very salient point when he quieried:  If the wage orders and statutes are supposed to be intepreted in the manner most favorable to the employee, wouldn't it make the most sense to say that the employee is released of all control during the meal period and the statute is best interpreted to allow the employee complete freedom to do whatever he or she wants to do, including working through his or her meal period if the employee desired?  At least two other Justices seemed to wonder the same thing as Justice Liu based on their follow up questions.  In fact, when the appellant's attorney argued that the employer could still discipline the employee who does not take a meal period after being ordered to do so, at least two of the Justices questioned how this was an interpretation that was favorable to the employee.  One of the Justices also commented that the Court of Appeal decision holding that provide simply means to make available is not in isolation and seemed well supported by at least 9 other federal district court cases.

The other key substantive issue before the Court is the timing requirement of meal breaks.  Is a meal break required for every 5 hour period of work on a rolling basis, or is an employee who works more than 5 hours simply entitled to take a meal break at any time during his or her shift?  On this issue, the Justices who were active with questions seemed most harsh to Brinker's position on timing.  Justice Liu spent a lot of time with Brinker's attorney on this issue.  He seemed particularly adamant that the language in the wage order means that an employee cannot work a five hour period without a meal period and seems to require a rolling 5 hour intepretation.  He offered the example of when an employee works a 9 hour work shift from 9am to 6pm and takes his first meal period at 12 noon for 30 minutes, until 12:30pm.  Liu seemed taken aback when Brinker's attorney argued that a second meal period would not be required in that scenario.  Liu kept harping on the fact that the law says "every 5 hours" and the time period from 12:30 to 6pm was 5 and a half hours.  A number of other Justices who weighed in on this issue, including Chief Justice Cantil-Sakauye, seemed to feel the same way as Justice Liu, although they did not express their feelings as strongly as Liu did.

The third issue that was discussed focused on the viability of class actions for meal and rest break violations.  Unfortunately it was during this portion of the appellant's argument that the audio went out and this issue was not addressed at length by Brinker's attorney.  Thus, there is little I can offer on this particular issue.

The final issue discussed was whether the California Supreme Court's decision would be prospective only or retroactive.  Personally, I cannot understand how the decision would only be prospective.  This decision involves an interpretation of statutory and regulatory language.  Thus, it appears to me that any decision of the California Supreme Court would have to be an interpretation of existing law, which therefore must have retroactive implications.  Brinker's attorney also seemed surprised that this topic was broached by the Justices.

Let me emphasize that it would be foolish for any employer (or employee) to attempt make policy or practice decisions based upon the oral argument or any person's report or views of it (including mine).  This is particularly true here.  The matter is now submitted, which means that the Court is generally required to issue a decision within ninety (90) days.  Have patience for no more than three more months and we will soon have some guidance.  When we do, you can bet that we will report on it right away.

Open Enrollment Approaching:  Should We Be Concerned About Health Reforms?

Many employers are about to embark on the annual open enrollment period where they modify their health benefits (or at least consider doing so) and undergo the process of enrolling employees for the 2012 calendar year.  Certain provisions of Obamacare (officially known as the Patient Protection and Affordable Care Act or "PPACA" for short), have already taken effect.  Others will come into play over the next 26 months.  This blog does not allow for a comprehensive review of the PPACA.  However, we wanted to provide  some resources that are accessible, without cost, to help guide our readers as they approach open enrollment and as we get closer to 2014 when all the Act's provisions are scheduled to be in place.

1. www.healthcare.ca.gov/priorities/healthbenefitexchange.aspx

The PPACA has provisions that allow states to set up exchanges to make it easier for individuals and small businesses to compare plans and buy health insurance on the private market.  California was one of the first states to begin working on this.  This website provides good information on the California Health Benefit Exchange.

2. www.healthcarelawsuits.org

There have been many challenges to the PPACA in the courts.  If these are successful, the PPACA may not move forward as intended.  Only time will tell whether these challenges will derail the PPACA completely, partially or not at all.  Six writs of certiorari are currently before the United States Supreme Court and the mandates of Obamacare are under attack based on constitutional grounds.  This website provides a good summary of the status of the various lawsuits challenging the PPACA.

3. www.kff.org/healthreform/8061.cfm

On this website, the Henry J. Kaiser Family Foundation provides a good summary of the key provisions of the PPACA and a helpful Implementation Timeline.

4. www.dol.gov/ebsa/healthreform/

This is the United States Department of Labor's website on the PPACA.  It contains comprehensive information on the Act, including but not limited to access to the proposed DOL regulations related to the Act.

5. http://www.healthcare.gov/law/resources/ca.html

This website provides information on implementation of the PPACA in California.

We hope this information is helpful to you.

Labor Commissioner to Issue Template for Compliance With New Wage Notification Requirement

We previously posted on California's passage of the Wage Theft Protection Act of 2011 (AB 469), which requires California employers to start providing written notice to new hires of wage payment information as well as various other categories of information.  Our prior post is here.  California's Labor Commissioner is required to prepare a template for employers to use for this purpose.  The Labor Commissioner has published on its website (here) that this template, along with guidance on compliance, will be available in mid-December.  We will post this information as soon as it becomes available.

A Little Harassment Does Not Equal a Hostile Work Environment

In an unusually helpful ruling in favor of a California employer, the Fourth District Court of Appeal upheld an Orange County trial court’s decision to throw out a jury verdict finding sexual harassment.

In Brennan v. Townsend & O'Leary, Plaintiff Stephanie Brennan started with advertising agency Townsend & O’Leary as an assistant media planner in 1991 and rose steadily in the agency until she became an advertising supervisor and vice-president in January 2005.  Brennan testified at trial that although she was close to agency owner Steve O’Leary – who was “like a second father” – and his wife, in 1999 the agency hired a senior vice president media director, and the corporate environment began to change.  Brennan told the jury that she regularly confided in O’Leary and he asked her about her personal and dating life.  She testified to a variety of sexually explicit conversations both with O’Leary and more generally at executive meetings during 2000 and 2001. She described a number of Christmas parties featuring off-color Santas in 2002 or 2003.  Finally, in August 2004, Brennan inadvertently obtained an email written by individual co-defendant Scott Montgomery referring to Brennan as “big-titted” and “mindless.”  Understandably, Brennan complained about the email, a complaint that resulted in a written reprimand and warning issued to Montgomery.  In addition, Brennan sought out and talked to current and former agency employees to find other examples of sexual harassment.  In the Fall of 2004, Brennan told O’Leary that other employees had harassment complaints, but that they would be unwilling to speak with him.  She threatened to leave the agency.  O’Leary repeatedly asked Plaintiff to stay with the agency, to cooperate in investigating sexual harassment with an outside investigator, and to “restore” the company environment.  Brennan responded that she wished to leave and that she expected a compensation package for her “constructive termination.”  When she did not get the expected package, Brennan told O’Leary that she was going to “move on” with her attorney and gave him a letter from her lawyer in October 2004.  In November, Brennan refused to cooperate with the outside investigator the agency hired to investigate sexual harassment and finally in January she submitted her written resignation.

The jury concluded that Brennan was the victim of sexual harassment and awarded $200,000 from the agency, and $50,000 from individual defendant Montgomery, author of the offensive email.  The trial judge threw out the verdict, holding that there was no substantial evidence to support a finding of hostile work environment harassment.  The Court of Appeal agreed, ruling that as a matter of law, O’Leary’s evidence was insufficient to meet the “severe or pervasive” standard necessary to support a finding of hostile work environment.  The court explained:  “There is no recovery for harassment that is “occasional, isolated, sporadic or trivial," and “an employee seeking to prove sexual harassment based on no more than a few isolated incidents of harassing conduct must show that the conduct was ‘severe in the extreme.’”

The Court quickly dismissed any suggestion that the behavior Brennan complained of was “severe” and focused instead on whether it was “pervasive.”  The Court went on to note that the only harassment directed at O’Leary personally was the single “rude, unprofessional” email referring to her as a “big-titted, mindless one.”  In addition, she witnessed three sexually offensive incidents over three years that were directed at others.  “Such evidence simply does not show a concerted pattern of harassment.”  The Court was equally unimpressed by evidence of Steve O’Leary’s personal conversations of Brennan’s personal life, many of which the plaintiff admitted were not unwelcome of offensive, and the third-party complaints of harassment Brennan uncovered in her personal investigation.  Simply put, the Court found that the evidence was “not enough” to support the verdict.

While the Brennan decision is a distinct “win” for employers and the defense bar, employers should remain wary:  the jury believed the plaintiff’s testimony and awarded $250,000 in damages to her.  What is more, one judge disagreed and wrote a dissenting decision.  The defendants eventually prevailed, but no doubt only after a costly and likely painful fight that could have been avoided had no inappropriate workplace conduct occurred.

Mark Spring and Greg Berk to Provide Educational Seminar in Sacramento on October 17

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.

California Governor Vetoes Several Bad Employment Bills, But Signs Law Limiting Use of Credit Reports and a Few Others

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.

New California Law Requires Written Contract for Commission Pay Arrangements

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.

Editor
Cal Labor Law

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

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