Obama to Seek to Narrow Federal Overtime Exemptions

News media are widely reporting that President Obama intends this week to direct the Department of Labor to materially revise the Fair Labor Standards Act (FLSA) regulations pertaining to overtime exemptions so that fewer employees will qualify for an exemption from overtime.  Obama's move relies on his executive authority to revise the rules that carry out the FLSA.  Obama is relying on this executive authority to carry out his pro-worker agenda, as a means of sidestepping the need to pass actual legislation that likely would be blocked by Republicans in Congress.

While the details of the intended revisions have not yet been announced, it is reported that Obama will be urging at least two significant changes:  (1) an increase in the amount of minimum compensation that must be paid to an employee in order for the employee to qualify for exempt status (the minimum currently is $455 per week under the FLSA, and Obama is expected to direct that the minimum be substantially increased, with some urging that it be doubled); and (2) replacing the FLSA "primary duty" test with a more quantitative test that requires an employee to spend a certain percentage of his or her time (likely at least 50%) on exempt duties in order to qualify for exempt status.  These changes would substantially decrease the number of employees who qualify for overtime exemption under the FLSA, and would also likely substantially increase the number of wage and hour lawsuits (already soaring) filed against employers to challenge exempt status and seek unpaid overtime compensation.  Business groups are expected to vigorously oppose the intended overhaul of the regulations.

So what does this mean for California employers?  Probably not much.  California employers are already subject to more narrow overtime exemption laws under California law.  To qualify for exemption in California, an employee (among other things) must be paid a guaranteed salary of at least $640 per week (rising to $800 per week in 2016) and must spend more than 50% of his or her weekly work time on exempt duties.  Thus, the changes being contemplated by the White House are already in effect in California, and the Obama administration appears to be looking to California's laws as guidance in revising the FLSA's overtime exemptions.  This is not good news for employers.

Proposed Amendments to CFRA Regulations Published

On February 21, 2014, California's Department of Fair Employment and Housing Council (FEHC) published proposed amendments to the California Family Rights Act (CFRA) regulations.  These regulations are intended to clarify some aspects of the existing regulations and also to adopt many of the recent amendments to the federal FMLA regulations to make the two acts more consistent.  The proposed amended regulations touch on almost every aspect of the CFRA process, addressing, among other things, length of service/eligibility issues, the certification process and timeframes for responding to employee requests for CFRA leave, computation of amount of leave entitlements, key employee issues, clarification of reinstatement rights, maintenance of health and other benefits during leave, retroactive desingation of leave, and the interplay between CFRA leave and California pregnancy disability leave. The proposed regulations make clear that same-sex spouses are covered under CFRA and make clear that the FMLA regulations apply to CFRA leave "to the extent not inconsistent" with the CFRA regulations.  Importantly, there remain some areas where CFRA administration will continue to differ from FMLA administration.  Among other things, pregnancy disability is not covered under CFRA and, therefore, a California employee who is otherwise eligible for leave under CFRA/FMLA will be eligible for up to four months of leave for pregnancy disability AND up to twelve weeks of additional leave for baby-bonding under CFRA.  The proposed regulations make clear that a California employer is required to maintain the employee's group health benefits for this whole time period (and not just up to 12 weeks).  Some other notable differences between CFRA and FMLA are that the medical certification and scope of permissible medical inquiry are narrower under California law than under FMLA, and the circumstances under which an employer can seek re-certification are narrower under California law.  The proposed regulations provide a sample medical certification that California employers can use.  (In this author's opinion, the proposed certification is insufficient as it relates to intermittent leave needs).

Employers covered by CFRA should carefully review the proposed regulations and consider whether to submit comments and/or proposed revisions.  The full text of the proposed amended regulations is available here.  There is a public comment period through June 2, 2014.  Comments can be submitted via email to FEHCouncil@dfeh.ca.gov.  There will also be two public hearings on the proposed amended regulations:  10:00 a.m. on April 7, 2014 at UC Irvine School of Law, and 10:00 a.m. on June 2, 2014 at the California Public Utilities Commission Main Auditorium in San Francisco.  For more information, see the DFEH website here.

IRS Announces New Mileage Reimbursement Rate

Yesterday the IRS announced the 2014 optional standard mileage reimbursement rates.  Beginning January 1, 2014, they decrease one-half cent from the current rates in effect, and are as follows:

  • 56 cents per mile for business miles driven;
  • 23.5 cents per mile driven for medical or moving purposes; and
  • 14 cents per mile driven in service of charitable organizations (same as current rate in effect).

Employers using the standard IRS rates for mileage reimbursement purposes should adjust their expense reimbursement policies accordingly.

SF Family Friendly Workplace Poster Available

San Francisco employers are reminded that the city's new Family Friendly Workplace Ordinance (FFWO) takes effect January 1, 2014 and requires employers to consider employee requests for flexible or predictable work arrangements to assist with caregiving responsibilities.  Our prior post on this new ordinance is here.  This new local ordinance requires San Francisco employers with twenty or more employees to post a poster setting forth the provisions of the ordinance.  That poster has just been made available.  Employers can access the poster here.  For more information on the FFWO, click here.

San Francisco Adopts Family Friendly Workplace Ordinance, Increasing Cost of Employing Workers in the City by the Bay

Last week, San Francisco’s Board of Supervisors unanimously adopted the Family Friendly Workplace Ordinance, giving employees the right to request flexible work schedules or other accommodations to help the employee with childcare obligations and other similar household obligations.  The ordinance of course provides legal remedies to an employee whose rights under the ordinance are violated.  San Francisco Mayor Ed Lee has stated that he will sign the ordinance into law, but has not yet done so.  If signed into law as expected, the ordinance will take effect January 1, 2014.  Thus, employers with employees in San Francisco should familiarize themselves with the newly passed ordinance.

The ordinance applies to employers who regularly employ 20 or more employees, including part-time employees, within the City of San Francisco.  The ordinance grants employees with 6 or more months of service and who work at least 8 hours per week the right to request a flexible work arrangement to accommodate the employee’s caregiving responsibilities for (1) a child; (2) a parent age 65 or older; or (3) a spouse, domestic partner, parent, child, sibling, grandparent or grandchild with a serious health condition.  An eligible employee may make up to two requests for accommodation per year, but may make additional requests following the birth or adoption of a child and/or an increase in the employee’s caregiving responsibilities for a family member with a serious health condition.  An employee may request accommodation in the form of an alternative work schedule, telecommuting, job sharing, part-time work, or any other type of flexible work arrangement.  An employee’s request must be made in writing, and must detail the accommodation requested and how that accommodation relates to the employee’s caregiving responsibilities.  The request must also state the proposed commencement and duration for the requested accommodation.

An employer who receives a written request must respond both verbally and in writing.  The employer must meet with the employee about the request within 21 days of receiving the request.  The employer thereafter must respond to the request in writing within 21 days, explaining whether the employer will grant or deny the request.  An employer who denies the request must explain, in writing, “bona fide business reasons” for the denial, such as identifiable cost of granting the request (lost productivity, rehiring or retraining costs), negative effect on ability to meet customer demands, inability to meet work demands or transfer work among employees, etc.

If an employee’s request is denied, the employee then has 30 days to seek reconsideration, which requires the employer to again meet with the employee within 21 days and respond in writing thereafter within 21 days.

The new ordinance states that it shall be unlawful for a San Francisco employer to interfere with, restrain, deny the exercise of any rights granted by the ordinance.  It also makes it unlawful to discharge, threaten to discharge, demote, or otherwise take adverse employment action against an employee for exercising rights under the ordinance.  The ordinance grants enforcement authority to San Francisco’s Office of Labor Standards Enforcement, which can investigate alleged violations and take administrative and legal action to enforce the ordinance and remedy certain violations.  The ordinance does not provide for a private right of action.

Employers will be required to post mandatory posters (not yet published) concerning the new ordinance and will also be required to maintain records of employee requests for 3 years.

The text of the ordinance is available here.

New California Law Expands Missed Meal and Rest Period Premium Pay to Missed “Recovery” Periods

Last week, California’s Governor signed into law SB 435, which provides for one hour of premium pay for missed “recovery periods.”  This new law amends Labor Code section 226.7, which California employers know as the law providing premium pay for missed meal and rest periods.  (Basically, it’s a penalty of one hour of pay for a missed break, but California courts call it a “wage” instead of a “penalty” so that the statute of limitations on the claim is three times as long).  The statute has led to myriad class action lawsuits in California alleging missed meal and rest breaks and seeking premium pay under section 226.7 on behalf of proposed classes of employees.  Well, with the new amendment to section 226.7, this will undoubtedly lead to a whole new category of class action lawsuits seeking premium pay—now for allegedly missed “recovery” periods.  So what is a “recovery period?”  A recovery period is a cool down period of at least 5 minutes on an “as needed” basis that must be afforded to employees who work outside.  Thus, this new law does not affect all California employers, but only those with outside employees, such as construction industry employers, agricultural employers, and the like.  Employers are encouraged to review Cal-OSHA/Department of Industrial Relations guidance on heat illness and injury prevention.  For some information in this area, click here and here.

The text of the new law is available here.

Impact on Employers of California’s New Law Authorizing Driver Privileges for Illegal Immigrants

Governor Jerry Brown signed AB 60 into law on October 3, 3013.  The law allows individuals without immigration status to obtain driver privileges (DP) and to obtain a DP identification from DMV.  The law goes into effect on January 1, 2015 in order to give DMV sufficient time to publish regulations and procedures and to staff up to meet the expected demand.

CDF reminds employers that the DP identification will not satisfy I-9 requirements.  While a state issued driver license is an acceptable List B document, a DP card will not be.  By definition, anybody who applies for the DP identification is most likely not work authorized.

It is the opinion of this author that Congress will eventually grant employment authorization documents (EAD’s) sometime during the next two years to this same population segment – however it remains to be seen when.  Until then, employers are reminded to remain vigilant regarding accepting proper I-9 documentation for new hires and reverifications.

For more information on the new DP, click here.

For information on other immigration matters, please contact Attorney Greg Berk, Chair of the CDF Immigration Practice Group.

California Governor Approves Minimum Wage Hike, Domestic Worker Bill of Rights, and Expansion of Paid Family Leave Benefits

This week, California's Governor signed into law legislation (1) increasing the state minimum wage, (2) providing overtime compensation for many household employees, and (3) expanding the scope of California's paid family leave insurance program.   With respect to minimum wage (which is currently $8/hour in California), AB 10 increases the minimum wage to $9/hour effective July 1, 2014, and further increases it to $10/hour effective January 1, 2016.  Currently, the only state with a higher minimum wage than California's upcoming $9/hour is Washington, where the minimum wage is $9.19/hour.

The Governor also signed into law AB 241, which adds section 1450 to the California Labor Code and is known as the Domestic Worker Bill of Rights.  Under this new law, individuals who work in many household occupations are now required to be paid overtime compensation at a rate of one and one-half times their regular rate for all hours worked in excess of 9 hours per day or 45 hours per week.  The law excludes "casual babysitters" whose work is intermittent or irregular as well as babysitters who are under age 18, and further excludes individuals who work in residential care facilities.  The law would apply to nannies, housekeepers, and individuals who provide care for the elderly and/or disabled within a private household.  This new law takes effect January 1, 2014.

Finally, the Governor signed into law SB 770, which expands the scope of California's family temporary disability insurance program.  Under the current program, employees who take time off to care for a seriously ill child, spouse, parent or domestic partner, or for baby bonding, are entitled to partial wage replacement benefits through this state insurance program administered by the EDD.  Under the new law, these benefits are expanded to also be provided to employees who take time off to care for a seriously ill grandparent, grandchild, sibling or parent-in-law.  This new law takes effect July 1, 2014.  To be clear, this new law is not a leave statute and does not require California employers to provide leaves of absence to employees for any of these circumstances, much less to provide employees pay for such leaves.  An employer's leave obligations are governed by the employer's policies and the employer's coverage under other applicable laws such as the FMLA and CFRA.

We will continue to keep you updated on any additional legislative developments.

Prevailing Employer In Wage Case Can Only Recover Attorneys’ Fees If Claim Was Brought In Bad Faith

Employers may recall recent publicity in California over the extent to which an employer may recover its attorneys’ fees after prevailing in a wage and hour action.  This is because Labor Code section 218.5 on its face provides that the prevailing party in any action brought for nonpayment of wages “shall be awarded” its reasonable costs and attorneys’ fees.  Thus, Labor Code section 218.5’s fee-shifting provision on its face applies equally to a prevailing employee and employer.  Based on this language, in Kirby v. Immoos, a trial court awarded attorneys’ fees to an employer who prevailed in a wage case alleging, among other things, meal and rest break violations.  A California court of appeal thereafter affirmed the employer’s fee award.  However, the California Supreme Court ultimately reversed this outcome and held that Labor Code section 218.5 does not apply to meal and rest break claims, reasoning that these claims are not claims alleging “non-payment of wages.”  The Court’s ruling left open the possibility that a prevailing employer could recover attorneys’ fees in certain other types of wage-related actions.

To avoid this result, the California Legislature introduced a bill, SB 462, to amend Labor Code section 218.5 to provide that a prevailing employer may only recover attorneys’ fees if a trial court finds that the employee brought the wage action in bad faith.  The legislature recently passed this bill and yesterday California’s Governor signed it into law.  With this amendment, it will be even more difficult and rare for a prevailing employer to recover attorneys’ fees in wage and hour actions in California.

California Legislative Watch:  Pending Labor and Employment Bills

There are a number of bills being considered by the California Legislature this session that are of interest to California employers.  With the Democratic supermajority in both legislative houses, as well as a Democratic Governor, it is quite likely that more employee-friendly bills will be passed and signed into law than in recent years.  The following are some of the notable pending bills:

SB 404 (FEHA/familial status):  This bill would expand the list of protected categories for employment discrimination purposes under FEHA, to include “familial status.”  “Familial status” is defined to include individuals who provide medical or supervisory care to a family member (child, parent, spouse, domestic partner, or parent-in-law).  If signed into law, this will expand the scope of lawsuits and potential liability against employers for alleged discrimination against applicants or employees based on their familial status.

AB 556 (FEHA/military and veteran status):  This bill would add “military and veteran status” to the list of protected categories for employment discrimination purposes under FEHA.

SB 400 (domestic violence/stalking):  This bill would expand employment protections provided to victims of domestic abuse (Labor Code section 230) by adding a provision that prohibits employers from discriminating against applicants or employees based on their known status as victims of domestic violence, sexual assault or stalking, and would also require employers to provide time off to employees who need to attend court proceedings dealing with stalking (the law already provides for time off for proceedings relating to domestic violence and assault).  Most notably, the law would require employers to provide “reasonable accommodation” to victims of domestic violence, sexual assault and/or stalking in the form of implementing safety measures for the employee while at work.

SB 655 (FEHA/mixed motive cases):  This bill is intended to codify the California Supreme Court’s recent decision in Harris v. Santa Monica, specifically to codify the burden-shifting framework and remedies available in cases where there are mixed motives for an adverse employment action in a FEHA discrimination case.  Under this bill, a plaintiff in a discrimination case will prevail if he/she proves that his/her protected status/activity was a “substantial motivating factor” for the employer’s decision to take adverse employment action against the plaintiff.  However, the employer can try to limit its liability by pleading and proving that it would have made the same adverse employment decision even without consideration of the protected characteristic/activity.  If the employer proves this, the employer will not be liable for economic damages (back pay/front pay).  However, the employer will still be liable for non-economic damages (emotional distress damages), attorneys’ fees, expert witness fees, a penalty of $15,000, and possibly injunctive relief. 

AB 263/SB 666 (wage complaints and immigration practices):  These bills would amend Labor Code 98.6 to make clear that written or oral complaints regarding wages the employee believes are owed him/her are protected activities for purposes of the prohibition on retaliation against an employee for engaging in protected conduct.  These bills would also make clear that an employee may, but is not required to, exhaust administrative remedies before filing a lawsuit.  These bills would also add sections 1019 et seq. to the Labor Code, delineating certain unfair and unlawful immigration-related practices.  “Unfair immigration practices” include requesting more or different documents of an applicant than are allowed under federal I-9 rules; refusing to honor documents that appear genuine on their face; using the federal E-verify program to check authorization status of a person at a time or in a manner not required or authorized under the program procedures; and threatening to file or filing a false police report.  The new law would also prohibit retaliation against applicants/employees who complain about the employer’s non-compliance with these provisions and/or inform others of their rights in this regard, or who even seek information from the employer about its compliance.  The new law would provide a rebuttable presumption that adverse action taken against an employee within 90 days of such protected activity is retaliatory.

AB 442 (liquidated damages for wage violations):  This bill would expand the remedies available to employees who file claims with the Labor Commissioner for payment of a wage lower than minimum wage.  The bill would permit the Labor Commissioner to award liquidated damages (employees can already recover liquidated damages in a civil lawsuit), in addition to unpaid wages, penalties, and interest.

AB 729 (privilege for communications with union agent):  This bill would create an evidentiary privilege (similar to the attorney-client privilege) to protect from disclosure confidential communications between a union agent and a represented employee or former employee.

AB 218 (limits state/local agency inquiries into applicant criminal history):  This bill would add section 432.9 to the Labor Code and would generally prevent state and local agency employers from asking applicants to disclose criminal history information, via application or otherwise, until after it is first determined that the applicant meets the minimum qualifications for the position.

AB 241 (domestic workers/wages):  This bill, which was introduced but unsuccessful last year, is back.  This bill would add certain wage protections for domestic workers, such as babysitters and house cleaners.  With certain exceptions, the bill would require payment of daily and weekly overtime and compliance with other wage order requirements, for most household workers.  With respect to babysitters, the law would exempt babysitters under age 18 and would also exempt "casual" babysitters who work no more than 6 hours per week in any given month (these employees are still entitled to minimum wage for all hours worked, however).  The law also sets forth specific requirements for live-in household employees.

AB 10 (minimum wage increases):  This bill provides for state minimum wage increases as follows:  $8.25/hour on January 1, 2014; $8.75/hour on January 1, 2015; $9.25/hour on January 1, 2016; $9.50/hour on January 1, 2017; and $10.00/hour on January 1, 2018.

AB 25 (social media/public employers):  Last year, a new law was passed prohibiting private employers from requiring applicants or employees to disclose usernames/passwords for social media and/or requiring employees to access or divulge social media.  This bill would extend these provisions to public employers.

SB 770 (paid family leave expansion):  This bill would expand California's paid family leave partial wage replacement program (administered through EDD) to provide wage replacement benefits to an employee who takes time off to care for a seriously ill grandparent, grandchild, sibling, or parent-in-law, effective July 1, 2014.  (Current law already provides such benefits to employees who take time off to care for a spouse, child, parent, or domestic partner.)

In addition to the foregoing bills being considered by the California Legislature, the Legislature already passed and the Governor already signed into law SB 292, which "clarifies" that a plaintiff claiming sexual harassment under FEHA need not prove that the harassment was motivated by sexual desire in order to prove "sexual" harassment.  This is not really a change in the law, but the bill was aimed at curtailing the effect of a recent California Court of Appeal decision, Kelley v. Conco, 196 Cal.App.4th 191 (2011), which had some language suggesting that in a same-sex harassment case, evidence that the alleged harasser was heterosexual and not motivated by sexual intent or desire could defeat a harassment claim.

The full text of each of these bills, along with information on the bills' sponsors, is available here.  Wondering why this list does not include all of the employer-friendly bills pending before the Legislature?  (Of course there aren't any--they were all defeated early on in the session.)

The California Legislature has until September 13 to pass bills this session, and the Governor thereafter has until October 13 to sign or veto such bills.