California Enacts New Laws Attacking Arbitration and Arbitration Agreements

On the last day to sign or veto bills this legislative session, California’s Governor signed into law two bills clearly aimed at attacking and limiting arbitration and arbitration agreements in California.  The first, AB 2617, prohibits mandatory, pre-dispute arbitration agreements in contracts for the provision of goods or services, to the extent an individual is required to waive the right to bring a civil action for violation of civil rights relating to hate crimes or political activity.  The statute does not expressly state that it applies to employment arbitration agreements and is instead specifically tied to the Ralph Civil Rights Act (Civil Code section 51.7), which prohibits violence or threat of violence against a person because of a person’s protected characteristics (e.g. political affiliation, sex, race, color, religion, marital status, etc.), and the Bane Civil Rights Act (Civil Code section 52.1), which prohibits interference by intimidation or coercion with a person’s constitutional or statutory rights.  The new law prohibits a person or business entity from requiring an individual to waive the rights provided by these statutes, including the right to pursue a civil action for a violation of these statutes.  The new law applies to contracts entered into, modified, renewed or extended on or after January 1, 2015.  Any person seeking to enforce an arbitration provision waiving the right to bring a civil action under these statutes will bear the burden of proving that the waiver was entered into knowingly and voluntarily and not as a condition of the contract or of providing or receiving the goods or services.

Although the new law is tied specifically to hate crime statutes, there is some potential for the law to impact arbitration agreements in the employment arena.  In some instances, courts have held that certain types of employment discrimination and harassment claims may also constitute hate crimes within the meaning of Civil Code sections 51.7 and 52.1.  These statutes are very broadly and poorly worded, leaving some room for differing interpretations by courts.  The new law may also be held to apply to arbitration provisions in independent contractor agreements.  

While the scope of the new law and its impact is far from clear, it does seem clear that the new law is contrary to the Federal Arbitration Act and would be deemed preempted as to agreements governed by the FAA.  There almost certainly will be many legal challenges to the legality of this new law.

Also in an effort to decrease the attractiveness of arbitration as a forum for dispute resolution, Governor Brown signed into law AB 802, which requires major arbitration providers such as JAMS and AAA to publish at least quarterly on their websites (beginning in January 2015) detailed information concerning arbitrations they have handled, including (1) the name of any non-consumer party involved in the arbitration (i.e. the name of the employer), (2) the nature of the dispute (e.g. employment), (3) where the non-consumer party is an employer, whether the employer was the initiating or responding party, (4) the annual wage (in a range) earned by the involved employee, (5) the amount of the claim, which party prevailed, and the amount of any award, including attorneys’ fees, (6) whether the employee was represented by an attorney and, if so, the name of the attorney and the law firm, (7) the name of the arbitrator and the amount of the arbitrator’s fees, and (8) the total number of times the employer previously has been a party in arbitration or mediation before the dispute resolution provider.  This new law has the obvious (and likely intended) effect of destroying the usual benefit of privacy that arbitration and mediation provide.

We will keep you posted as to further developments in this area. 

New California Law Makes Companies Liable for Wage Violations of Contractors

Yesterday, California’s Governor signed AB 1897 into law, notwithstanding tremendous opposition from business and trade groups.  Under AB 1897, which takes effect January 1, 2015, a client employer will share civil legal responsibility and civil liability for all workers supplied by a labor contractor for the payment of wages and the failure to obtain valid workers’ compensation coverage.  A “client employer” means a business entity that obtains or is provided workers to perform labor within its usual course of business from a labor contractor.  However, it does not include business entities with a workforce of less than 25 workers (including those hired directly by the client employer and those provided by a labor contractor) or businesses with five or fewer workers supplied by a labor contractor at any given time.

The new law makes the client employer jointly liable with the labor contractor for civil liability relating to the payment of wages and/or failure to provide workers’ compensation coverage.  However, the statute expressly permits client employers to include indemnification provisions in their service contracts and to enforce those provisions as a remedy against the labor contractor for liability created by acts of the labor contractor.  Labor contractors may also contractually agree to indemnity provisions in their favor for acts on the part of the client employer that lead to liability.  The statute sets forth one exception to the ability of the parties to shift liabilities by contract – a client employer may not shift to the labor contractor any legal duties or liabilities under Cal-OSHA.

Under the new law, a worker or his representative must notify the client employer of violations at least 30 days prior to filing a civil action against the client employer.  Of course, the new law also prohibits client employers or labor contractors from taking adverse action against a worker for providing notifications of violations or filing a claim or civil action.

Looks like Christmas came early for the plaintiffs' bar, which will now have more potential pockets to pick in wage and hour actions filed against California employers.

California Expands Mandated Sexual Harassment Training to Include Workplace Bullying

Since 2005, California has required employers with 50 or more employees to conduct sexual harassment training of supervisors within 6 months of assuming a supervisory position and biennially thereafter.  Last week, Governor Brown signed AB 2053 into law, expanding the mandated content of this training to include training on prevention of “abusive conduct.”  The statute defines "abusive conduct” as conduct of an employer or employee in the workplace, with malice, that a reasonable person would find hostile, offensive, and unrelated to an employer’s legitimate business interests.  The statute further provides that abusive conduct may include repeated infliction of verbal abuse, such as the use of derogatory remarks, insults, and epithets, verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating, or the gratuitous sabotage or undermining of a person’s work performance.  However, “a single act shall not constitute abusive conduct, unless especially severe and egregious.” 

The new law does not further specify the content of the training on prevention of abusive conduct, nor does it mandate that any specific amount of time be allotted to this topic within the 2-hour sexual harassment training.  The new law takes effect January 1, 2015.  Employers covered by California’s training requirement should review and revise their training materials to ensure that prevention of abusive conduct is covered. 

To be clear, this new training requirement does not create a private right of action by an employee against the employer to seek damages for workplace bullying.  It is a training requirement only.  That said, if an employee is “bullied” because of a characteristic protected under California’s Fair Employment and Housing Act (e.g. race, gender, religion, disability, age), the employee could bring a claim for harassment or discrimination under that law.  Additionally, even if bullying is not directed at an employee because of a protected characteristic, it is still possible for a bullied employee to pursue a claim for intentional infliction of emotional distress.  For these reasons, employers (regardless of whether they are covered by the new training requirement) may wish to include language in their employee handbooks making it a violation of company policy for employees to engage in workplace bullying/abusive conduct toward other employees.  Employers should also take workplace complaints of abusive conduct/bullying seriously by conducting prompt investigations and taking appropriate remedial action. 

California Employers Must Provide Paid Sick Leave Starting Next Year

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.      

Employment-Related Bills Pending Signature By California Governor

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.

California Set To Increase Minimum Wage On July 1st; San Francisco Increases Rates Under Health Care Security Ordinance Along With Higher Minimum Wage

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.

Administration of FMLA Leave for Same-Sex Spouses Gets Easier Under Proposed Rule

The Department of Labor (“DOL”) has announced a notice of proposed rulemaking to revise the definition of “spouse” under the FMLA to make it clear that the FMLA applies to legally married same-sex spouses, regardless of where they live.  Before last year, the FMLA applied only to opposite sex spouses.  Last year, the United States Supreme Court issued its decision in United States v. Windsor, holding that federal laws that discriminate against same-sex married couples are unconstitutional.  As a result of the Windsor decision, the FMLA’s provisions allowing family and medical leave to care for a “spouse” became applicable not only to opposite-sex spouses but also to same-sex spouses – so long as the employee requesting leave resides in a state that recognizes same-sex marriage.  This is because the FMLA currently defines “spouse” in a way that is tied to the law of the state where the employee resides.  The problem with the current spousal definition is that many states still do not recognize same-sex marriage, and even if an employee was married in a state that does recognize same-sex marriage, he or she technically is not eligible for FMLA leave (to care for a spouse) if currently living in a state that does not recognize same-sex marriage.  This has resulted in administration difficulties for employers, many of whom would prefer not to have to engage in an inquiry about whether the employee resides in a state that recognizes same-sex marriage in order to determine whether to allow the employee leave.  However, employers who have decided that they will provide the same leave benefits to same-sex spouses regardless of the state in which they reside, run the risk of deducting from an employee’s FMLA leave bank if the employee actually resides in a state that does not recognize same-sex marriage.  Because the FMLA technically does not apply to spousal leave for that employee, any leave allowed should not be deducted from the employee’s FMLA leave bank.  If the leave was deducted and the employee improperly was deemed to have exhausted all available leave only to later be denied leave that did fall under the FMLA, the employer could face liability for wrongful denial of FMLA leave.

The proposed amendment to the FMLA’s “spouse” definition eliminates this problem.  Under the proposed rule, “spouse” would be defined to include individuals legally married in any state (including common law marriage where recognized under the law of the state).  The definition would also extend to individuals validly married abroad if the individuals could have been legally married in any U.S. state.

The proposed rule has not yet been published in the Federal Register.  Once it is, it will be subject to a public comment period and approval process before it is actually approved and implemented.  We will keep you posted of developments in this regard.  Employers covered by the FMLA will want to follow these developments and, once the rule is finalized, revise their FMLA policies and practices to ensure that their FMLA administration practices are in compliance with the new rule.  The DOL’s notice of proposed rulemaking is available here.  Additional information, including answers to frequently asked questions, are available here and on the DOL’s website.

California Minimum Wage Bill and Mandatory Sick Leave Bill Moving Forward

Last week, SB 935 (Leno) passed through the California Senate.  SB 935 provides for additional increases in the California minimum wage.  Under the current language of the bill, if enacted, the California minimum wage would move to $11 an hour in January 2015, $12 an hour in January 2016, and $13 an hour in January 2017.  Increases in 2018 and thereafter would be based upon inflation.  The bill specifically provides that the California Industrial Welfare Commission would not have authority to lower the minimum wage during periods of negative inflation.  We expect SB 935 to pass the Assembly as well.  It is unclear if Governor Brown would sign it.

AB 1522 also passed its first legislative house last week.  AB 1522 (Gonzalez), also referred to as the Healthy Workplaces – Healthy Families Act of 2014,  provides that any employee who works in the State of California for more than 7 days in a calendar year shall accrue paid sick leave at the rate of one hour for every 30 hours worked and would be able to use sick time at a rate of 24 hours per year after 90 days of employment.   Under the terms of AB 1522, paid sick leave could be used for the employee’s illness or that of a family member as well as for any leave related to domestic violence, sexual assault or stalking.  AB 1522 provides for a collective bargaining exception, as long as the CBA provides for some sick days.  We expect AB 1522 to pass the Senate as well and anticipate that most of the important lobbying on this bill will occur at the Governor’s office.

S.F. Bay Area Employers Must Provide Commuter Benefits by September 30

The Bay Area Commuter Benefits Program, SB 1339, was enacted in 2012 to allow two local Bay Area agencies—the Metropolitan Transportation Commission and the Bay Area Air Quality Management District—to jointly adopt a commuter benefit ordinance requiring  employers to offer commuter benefits to covered employees.  These agencies have now adopted a Commuter Benefit rule requiring larger Bay Area employers to offer specified commuter benefits to covered employees by September 30, 2014 as a means of encouraging carpooling and use of public transporation.

Covered Employers

The new Rule applies to employers with an average of 50 or more full-time (30 hours of work per week) employees performing work within the following nine Bay Area counties:  Alameda, Contra Costa, San Mateo, Marin, Napa, San Francisco, Santa Clara, southern Sonoma County, and southwestern Solano County.  For purposes of determining whether an employer has an average of at least 50 employees, the look back period is the most recent three month period.

Covered Employees

The Rule requires covered employers to provide the commuter benefits described below to employees who perform an average of at least 20 hours of work per week (the average looks back to the previous calendar month) within the counties listed above, excluding a seasonal or temporary employee (an employee who works 120 days or less within the calendar year).

Required Commuter Benefits

By September 30, 2014, covered employers must offer at least one of the following commuter benefit options to covered employees:

  • Pre-tax option:  A program, consistent with section 132(f) of the Internal Revenue Code, allowing covered employees to elect to exclude from taxable wages costs incurred for transit (bus, rail or ferry) passes or vanpool (a vehicle with a carrying capacity of at least six adults, not including the driver) charges, up to $130 per month;
  • Employer-paid benefit:  A program whereby the employer pays employees a subsidy of up to $75 to cover the cost of commuting via transit or by vanpool; or
  • Employer-provided transit:  transportation provided by the employer to covered employees at no cost or low-cost via bus, shuttle, or vanpool.

In lieu of these options, an employer may offer an alternative benefit that provides at least the same reduction in single-occupancy vehicle trips as the three options identified above.  Any alternative benefit must be submitted to and approved, in writing, by the Bay Area Air Quality Management District.

Administrative Requirements

Covered employers are required to designate a Commuter Benefits Coordinator who is responsible for implementing the employer’s commuter benefit program and for complying with the Rule.  Covered employers must also register online with the Bay Area Air Quality Management District and provide specified information before September 30 and annually thereafter.  Covered employers must also provide notice of the Rule and the employer’s commuter benefits to covered employees.  Finally, the Rule imposes a recordkeeping requirement of 3 years for records establishing compliance with the Rule.

For more information and for registration obligation details, click here.

Employees to Be Allowed to Record Liens Against Employer Property for Alleged Unpaid Wages?  Whaaat?

Just when you think that California cannot get any more employer-unfriendly, the California Legislature reminds us that it actually can.  The latest reminder is legislation that was recently introduced by Democratic Assemblyman Mark Stone (AB 2416) to allow employees to record liens against their employers’ property for alleged unpaid wages.  That’s right—alleged.  In order to record a lien, the employee does not need to have proven his entitlement to unpaid wages in a court action or Labor Commissioner proceeding or otherwise.  It is only after the lien is recorded that the employee must prove up the lien by demonstrating that he is actually owed the unpaid wages.  If the employee succeeds, he is also entitled to recover attorneys’ fees and costs.  A lien can also be recorded and enforced by a group of employees or by a government agency (e.g. the DLSE).  The only way the employer can avoid the lien is by obtaining a surety bond (similar to that required to stay a money judgment pending appeal), which is itself a costly procedure.

At least there’s some faint protective relief built in to the legislation for employers--well, sort of.  If an employer defeats an action to enforce a lien, the employer can, in very limited circumstances, recover its attorneys’ fees and costs IF the employer can prove that the employee’s action was brought unreasonably and in bad faith.  (Conversely, the employee of course automatically gets awarded his attorneys’ fees and costs if he proves entitlement to unpaid wages, regardless of whether the wage withholding was in good faith.)

The proposed legislation has exclusions for employees covered by collective bargaining agreements if certain specified conditions are met, and also excludes employees who are exempt administrative, professional or executive employees (of course, the employee can challenge his exempt status and thereby avoid this exclusion, and the legislation specifically states that it is the employer’s burden to prove, as an affirmative defense, that the employee meets the test for exemption).

Employers should voice their opposition to this unnecessary legislation, which has already passed one labor committee and, if enacted, will provide one more tool for the plaintiffs’ employment bar to use to pressure employers to settle wage and hour claims, particularly those brought on behalf of a class of employees.  The text of the proposed legislation is available here.

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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