All posts by Karen Marshall

After a lengthy and intense arbitration, Judge William A. Bettinelli found in favor of our client, Thomas Enterprises, Inc. by awarding $52,350,000 as the fair market value of 32 acres of land surrounding the Sacramento Train Depot. Previously, Thomas Enterprises had agreed to sell the acreage to the City of Sacramento, but the parties could not agree on a purchase price. The City offered to purchase the property prior to arbitration for $8,200,000.

Thomas Enterprises had purchased the 237 acre Downtown Railyards site (owned for over a century by Southern Pacific Railroad) and sold the 32 acre parcel to the City for the development of a centralized intermodal site, to include all forms of transportation servicing downtown Sacramento and the surrounding area. Judge Bettinelli’s decision represents the final step in the sales process.

Wilke, Fleury attorneys Tom Redmon and Dan Baxter handled the matter on Thomas Enterprises’ behalf.

On Friday, October 22, a federal jury in Sacramento returned a punitive damages award of over $10,000,000 in a case brought by Wilke Fleury on behalf of plaintiffs Brian Dawe, Gary Harkins, and Flat Iron Mountain Associates. That award was in addition to the same jury’s October 18 award of $2.58 million in compensatory damages.

Represented by Wilke Fleury partner Dan Baxter, the plaintiffs sued the California Correctional Peace Officers’ Association, Corrections USA, and two individual defendants for breach of contract and defamation—among other claims—stemming from a campaign of misconduct perpetrated by the defendants in 2006 and 2007. After a three-month trial, the jury found in favor of Dawe, Harkins, and Flat Iron on their claims, as well as on an assortment of counterclaims made by Corrections USA. Of the total damages awarded to plaintiffs, over $12 million was against CCPOA, the largest correctional officers’ union in the country and a powerful force in California politics.

On December 31, 2010 the firm’s Mergers and Acquisitions group successfully closed the sale of our client’s high-tech manufacturing business to an equity capital fund for cash, debt, and equity consideration of approximately $60,000,000. Much of the management of the business has been retained, and Wilke Fleury continues to provide legal services to the client as general corporate counsel under the new ownership. As is typically the case with business mergers, negotiation and closure of the deal required legal counsel in many areas of business law including contract, employment, Uniform Commercial Code, entity formation, real estate, environmental, and other areas.

Robert F. Tyler of the firm’s litigation department recently prevailed in a major complex medical malpractice case brought against one of the firm’s longstanding clients. The case involved a 48 year old man who was brought into the client’s hospital with a severe brain bleed after falling as the result of an apparent loss of consciousness. Various tests done shortly after admission disclosed cardiac abnormalities, which were ultimately felt to have been caused by the injuries resulting from the fall, rather than being the cause of the loss of consciousness and fall itself. Twenty months later, the patient died in his sleep.

At the time of his death, the patient was 50 years old and earning between $150,000 and $350,000 per year. Both before and after his hospital stay, the patient never complained of any significant medical problems and never took any sick leave. On autopsy, it was found that he had suffered a major heart attack at some point in the past, and that all of his cardiac arteries were severely clogged, with the cause of death stated as untreated cardiac problems.

The wife and the two minor daughters of the patient brought a wrongful death claim, contending that the events leading up to the fall were caused by cardiac problems, which they claimed should have been found and worked up by the hospital. The plaintiffs contended that had that taken place, the patient’s severe underlying cardiac disease would have been demonstrated, and steps would have been taken to avert the patient’s untimely death.

The trial itself involved 32 witnesses, with strongly conflicting testimony from experts in cardiology, intensive care, neurology, clinical laboratory operations, and emergency room care. Plaintiffs postulated an earnings loss of $3.9 million, and ultimately requested a total award in excess of $11.7 million. After a six week trial, the jury returned a 9-3 verdict in favor of the defense, finding that the defendant hospital had correctly interpreted the abnormalities shown on the test in question as being due to the injury caused by the fall (rather than causing the fall), and that the hospital’s workup of the patient was correct and complete. While those conclusions were and are medically correct, they were complex and were very vigorously contested by well-credentialed experts on both sides. Therefore, the fact that the jury ultimately came to appreciate the defendant’s position despite their obvious sympathy for the plaintiffs, clearly constituted a very successful result for the client.

Employers often seek to reduce an employee’s damages in a wrongful termination case by the amount by which the employee mitigated, or could have mitigated, his or her damages. Before the employee’s earnings from the replacement job will be applied in mitigation, employers must be able to prove that the replacement job was comparable to the employee’s lost job. This means that wages from the replacement job will not be used to reduce the employee’s lost wages in a wrongful termination lawsuit when the employee’s new job is different or inferior.

In Villacorta v. Cemex Cement, Inc., 221 Cal.App.4th 1425, (2013), Cemex Cement, Inc. (“Cemex”) laid off Alfredo Villacorta (“Villacorta”) and hundreds of other employees. Villacorta sued Cemex for wrongful termination. Villacorta alleged he was terminated based on his race (Filipino). Villacorta found a new job eight months later. However, the job was not local. His commute to the new job was approximately four to six hours round-trip depending on traffic, so Villacorta rented a room closer to his new employment and only returned home to his family on the weekends. Villacorta prevailed in his wrongful termination lawsuit against Cemex approximately three years after his termination, and was awarded three years of salary (approximately $198,000) instead of eight months of salary (approximately $42,000) as damages. The Court of Appeal upheld the award because the replacement job was inferior in that Villacorta was not able to see his family during the workweek and had to pay for two residences – one for his family and one for himself – during the week.

In today’s tough economy and job market, layoffs, reductions in force, and terminations may be necessary and comparable replacement work might not be readily available to former employees. This case serves as a reminder to ensure that layoffs, reductions in force, and terminations are handled properly and are well documented. Employers should remember that they cannot rely on different or inferior re-employment to mitigate wrongful termination damages, and might consider offering severance packages for higher risk terminations.

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DID YOU KNOW…
Same sex heterosexual employees CAN sexually harass each other. Sexual motivation or interest is not a prerequisite to sexual harassment under the Fair Employment and Housing Act (FEHA). Heterosexual employees may be subjected to harassment because of sex if attacks on their heterosexual identity are used as a weapon of harassment at work. (e.g. harassing conduct insinuating straight employees are gay). Taylor v. Nabors Drilling USA, LP, 222 Cal.App.4th 1228 (2014).
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The State legislature was busy this past year, particularly in the area of employment law. Employers will want to be aware of the changes to make sure they do not have an un-happy year. Here is a synopsis of some of the notable changes:

EMPLOYEE WAGES

AB 10 – Minimum Wage Increase

Under existing law, the minimum wage for all industries is no less than $8.00 per hour.

AB 10 will increase the minimum wage to no less than $9.00 per hour on or after July 1, 2014. The minimum wage will increase again to no less than $10.00 per hour on or after January 1, 2016.

Employers should also reexamine the wages of their exempt employees in light of the minimum wage increase to ensure they still qualify for an exemption.

AB 442 – Minimum Wage Violations

Under existing law, employers who fail to pay the minimum wage to their employees face a citation by the Labor Commissioner consisting of a civil penalty and restitution.

AB 442 expands existing law to also subject the employer to a citation by the Labor Commissioner for liquidated damages, in addition to a civil penalty and restitution. Recovered wages and liquidated damages will be payable to the employee.

AB 390 -Withholding’s from Wages

Existing law criminalizes the failure to make agreed-upon payments to health and welfare funds, pension funds, or specified benefit plans.

AB 390 expands existing law to criminalize the failure to remit state, local or federal withholding’s from employee wages.

TIME OFF AND LEAVE

SB 770 – Paid Family Leave

Under existing law, paid family leave wage replacement benefits are available for employees who take leave to care for a seriously ill child, spouse, parent, or domestic partner.

SB 770 allows employees to receive paid family leave wage replacement benefits to care for a seriously ill grandparent, grandchild, sibling, or parent-in-law.

SB 400 – Stalking Victims

Existing law provides certain protections to employees who are victims of domestic violence or sexual assault, including prohibiting employers from taking adverse action against such victims who take time off from work related to the domestic violence or sexual assault as long as the employee complies with certain conditions.

SB 400 extends the protections in existing law to victims of stalking. It also prohibits employers who learn of an employee’s status as a victim of domestic violence, sexual assault, or stalking from discharging or retaliating against the employee because of their status as victim, and requires employers to provide reasonable accommodations to such employees (e.g., implement safety measures).

SB 288 – Victim’s Rights

Under existing law, employers are prohibited from discharging or discriminating against employees who take time off to serve on a jury, to appear as a witness if they are victims of crime, or to take time off to obtain relief if they are victims of domestic violence or sexual assault.

SB 288 extends the protections of existing law by prohibiting employers from discharging or discriminating against employees who are “victims,” as defined in the law, and take time off upon the victim’s request to appear in any proceeding affecting their rights as a victim.

DISCRIMINATION

AB 556 & 292 – FEHA

Under existing law, the Fair Employment and Housing Act (FEHA) prohibits discrimination and harassment in employment on the basis of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, or sexual orientation.

AB 556 expands the protected classes under FEHA to include military and veteran status. (Employers may inquire into military or veteran status in order to award a veteran’s preference under the law.)

SB 292 clarifies that sexual harassment does not have to be motivated by sexual desire.

SB 530 – Judicially Dismissed or Sealed Convictions

Under existing law, employers are generally prohibited from asking applicants or employees for information about an arrest or detention not resulting in a conviction, or from seeking information about a referral or participation in a pre- or post-trial diversion program.

SB 530 extends the protections to generally prohibit employers from asking applicants or employees for information about convictions that have been judicially dismissed or ordered sealed.

AB 263 -Employee Protected Conduct

Under existing law, employers are prohibited from firing or discriminating against an employee or applicant who has engaged in protected conduct.

AB 263 expands existing law to prohibit retaliation or adverse action against an employee or applicant who has engaged in protected conduct, and expands protected conduct to include a written or oral complaint that the employee was underpaid wages.

ENFORCEMENT OF VIOLATIONS

AB 1386 – Liens on Employer Property

Under existing law, the Labor Commissioner hears employee complaints in administrative proceedings that may result in final orders. Existing law then provides a process for turning final administrative orders into judgment liens with the same force and effect as civil court judgments.

AB 1386 provides an alternative procedure to judgment liens that allows the Labor Commissioner to turn final administrative orders into liens that may be recorded in any county where the employer has property, and remain in place for 10 years, unless sooner satisfied or released.

SB 462 – Attorney Fee’s and Costs

Under existing law, a court must award reasonable attorney’s fees and costs to the prevailing party in any action for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions if any party requests attorney’s fees and costs upon the initiation of the action.

SB 462 amends the law to only allow attorney’s fees and costs to a non-employee prevailing party (e.g., an employer) if the court finds the employee brought the action in bad faith.

As an attorney who practices primarily in the construction defect arena, I read Dr. Craner’s commentary¹ with particular interest. My practice includes both prosecution as well as defense of owners and developers in residential and commercial property cases, many of which have a “mold” component. Indeed, my deposition of Dr. Bruce Kelman in the Kerruish v. Kimball Hill Homes case is cited in Craner’s article.

In my many years of experience on both the plaintiff and defense sides of the “mold” debate, i.e., whether and to what extent indoor mold arising in water-damaged buildings is a valid, diagnosable, treatable, and preventable environmental health disorder, I have, since its publication, consistently observed defense experts relying upon the ACOEM’s statement on “Adverse Human Health Effects Associated with Molds in the Indoor Environment”² as the “final” scientific word on the issue. Plaintiff experts, on the other hand, are routinely challenged to defend and prove the scientific basis of their affirmative opinions as a rebuttal to the ACOEM Statement.

Those of us who practice in this area have long suspected that the heretofore concealed process by which the ACOEM Mold Statement was created was flawed and biased, not only in its content and balance as an “evidence-based” guideline, but especially in its tone, which blatantly comes across as a “defense argument” to any attorney willing to read it. How can any advocate come away with any other impression when the same experts who were profiting from defense medical/legal consultations and testifying in mold-related litigation were incredibly selected by ACOEM to be the primary authors of its organizational position statement on this subject?

Dr. Craner’s critique has finally brought some light and balance to the issue. Construction defects and resultant litigation related to indoor mold will go on, but I strongly suspect the ACOEM Mold Statement will no longer receive the same level of reliance or respect that it has been unduly given up to this point by attorneys and experts. ACOEM, as an organization, has major credibility problems as a result of this document and would do well to follow Dr. Craner’s recommendations to restore organizational integrity and respect.

References
1. Craner J. A critique of the ACOEM statement on mold: undisclosed conflicts of interest in the creation of an “evidence-based” statement. Int J Occup Environ Health. 2008 Oct-Dec;14(4): 283-98.
2. Adverse Human Health Effects Associated with Molds in the Indoor Environment. Journal of Occupational and Environmental Medicine:Volume 45(5): 470-478 (2003).

Striking a blow to developers and their insurance carriers, a state appellate court has ruled that California’s Right to Repair Act is not the exclusive remedy for homeowners for actual damages resulting from construction defects. Although the issues were raised in the context of a subrogation action in which an insurance carrier sought to recoup from a developer relocation expenses it paid a homeowner, the decision has wide-ranging implications.

In its ruling on August 28, 2013, the California Court of Appeal, Fourth Appellate District put to rest the construction industry’s claim that the Right to Repair Act (Civil Code section 895 et seq.) eliminated many common law-based construction defect theories favorable to homeowners, including strict liability, and that it substituted new and much shorter statutes of limitations. An increase in residential construction defect litigation is expected in response to the ruling.

Enacted in 2002, the Act, which is sometimes referred to as SB 800, only recently became the subject of appellate review, due in part to the fact that its application was limited to homes sold after January 1, 2003.

Viewed with relief by attorneys representing homeowners in construction defect actions, the court concluded that the Act was never intended to, and does not, establish exclusive remedies for claims for actual damages for construction defects. In effect, the court held that homeowners who suffer actual damages as a result of a construction defects have a choice of remedies. Further, the ruling makes clear that common law claims are still governed by the longer statutes of limitations, up to 10 years for latent construction defects.

The case is Liberty Mutual Insurance Company v. Brookfield Crystal Cove LLC, No. G046731, 2013 Cal. App. LEXIS 687.

If you have any questions about what to do in response to this decision in terms of policies and procedures, or due to a claim, contact David Frenznick.

California’s Fair Employment and Housing Act (“FEHA”) prohibits members of a partnership from sexually harassing and retaliating against its employees for reporting or opposing sexual harassment, but does not protect individual partners from sexual harassment. Partners are not protected because FEHA only prohibits employment discrimination, and partners are not in an employer-employee relationship with the partnership. However, an open question under FEHA was whether a partner could bring a retaliation claim against the partnership when the partner opposed the sexual harassment of the partnership’s employees.

A recent opinion of the Court of Appeals answers that question in the affirmative. In Fitzsimons v. California Emergency Physicians Medical Group, the Court ruled that partners have standing to sue their partnership for retaliation under FEHA where the partner is terminated for opposing the sexual harassment of employees.

Case Summary
Plaintiff Mary Fitzsimons was a partner with California Emergency Physicians Medical Group (“CEP”). Plaintiff was removed from her position as regional director and filed suit alleging that CEP removed her in retaliation for reports she made that officers and agents of CEP had sexually harassed female employees of CEP’s management and billing subsidiaries. The trial court entered judgment in favor of CEP, holding that FEHA does not apply to retaliation by a partnership against a partner because partners are not in an employer-employee relationship.

The Court of Appeal reversed. In doing so, the Court found that the plain language of FEHA bars partnerships from retaliating against any person, including a partner, who opposes or reports the sexual harassment of an employee. However, the Court made it clear that upholding plaintiff’s claim “does not imply that a partner would have standing to assert a valid claim for harassment or discrimination against himself or herself by the partnership.”

What This Means for Employers
California partnerships face liability for retaliating against a partner who reports or opposes the sexual harassment of a partnership employee. Accordingly, a partnership would be wise to review its current anti-retaliation policies, make any changes necessary to ensure that those policies are clear, and train all partners and managers regarding the coverage of those policies.

Many employers are struggling to understand some of the more technical aspects of the Affordable Care Act (“ACA”) and its effect on employer budgets. Specifically, employers are looking for guidance on the complicated issue of how to determine whether workers qualify as full-time employees (“FTEs”) for purposes of the ACA’s employer shared responsibility provision and how to comply with the limitation on waiting periods before insurance coverage begins. The IRS’s recently issued guidance sheds light on the application of the employer shared responsibility rules and the 90-day waiting period limitation.

The Basics of the Employer Shared Responsibility Provision

The ACA’s employer shared responsibility provision applies to employers with 50 or more FTEs (employees working 30 or more hours per week). It requires such employers to provide FTEs “minimum essential coverage” or pay a penalty based on the number of FTEs that are not offered coverage. “Minimum essential coverage” means group health coverage under an eligible employer-sponsored group health plan, defined as a plan offered to employees of an employer that is a governmental plan or a plan or coverage available in the individual or group market.

Beginning in 2014, each covered employer will be assessed a penalty if any FTE is certified as eligible to receive a premium tax credit when buying insurance in a state-based “health insurance exchange.” The annual penalty is $2,000 per FTE in excess of 30 workers.

New Safe Harbor Guidelines 

The IRS guidance addresses “safe harbor” methods that employers may use to determine which employees are treated as FTEs for purposes of the employer shared responsibility provision. For ongoing employees, employers are generally permitted to apply a “look back” method that uses “standard measurement periods” and the “stability periods” that follow them. The “standard measurement period” is the period of time an employer chooses to apply to determine whether ongoing employees are FTEs. An “ongoing employee” is one that has been employed for at least one standard measurement period. The period must be at least 3 but not more than 12 consecutive months. The “stability period,” the period for which the employee’s status as an FTE or non-FTE is locked in regardless of hours worked, ¬must run at least 6 calendar months and at least as long as the standard measurement period. An employee who does not average at least 30 hours per week during the standard measurement period can be treated as a non-FTE during the stability period that follows the standard measurement period.

Employers are also permitted to use an administrative period between the standard measurement period and the stability period to determine which ongoing employees are eligible for coverage and enroll these employees. This administrative period may last up to 90 days, but may neither increase nor decrease the measurement or stability period.

If a new employee is reasonably expected to work full time at the start date, no penalties will be assessed as long as the employer offers coverage to the employee before the end of the 90 day waiting period discussed below. There is also a special safe harbor for determining whether variable-hour and seasonal employees are FTEs. Employers can determine whether these workers are FTEs using an initial measurement period of 3 to 12 months. The employer measures the hours of service completed during that period to determine whether an employee completed an average of 30 hours of service per week.

The 90-Day Waiting Period Limitation

The ACA bars a group health plan from imposing a waiting period for enrollment in group health coverage of more than 90 days. “Waiting period” is defined as the period that must pass before coverage becomes effective for an employee or dependent who is otherwise eligible to enroll under a group health plan’s terms. The plan may impose other substantive eligibility conditions as long as the condition is not designed to avoid the 90-day waiting period limitation.

What This Means For You 

To prepare for the employer mandates and avoid costly penalties, employers should take a close look at the composition of their workforce to determine which employees qualify as FTEs. Further, employers that have not already done so should immediately evaluate their group health coverage options.

On Friday, February 1, the United States Court of Appeal for the Ninth Circuit upheld a $5,000,000 judgment in a 2010 case brought by Wilke Fleury on behalf of plaintiffs Brian Dawe, Gary Harkins, and Flat Iron Mountain Associates against the California Correctional Peace Officers’ Association, Corrections USA, and one individual defendant. That judgment, in turn, followed a three-month trial in which a federal jury found that the defendants defamed Messrs. Dawe and Harkins and perpetrated related acts that caused significant damages to Dawe, Harkins, and Flat Iron Mountain Associates.

On appeal, the defendants argued that the judgment against CCPOA et al. was too large, and also maintained that certain claims should have been denied altogether under California’s application of the “litigation privilege,” among other principles. The appellate panel uniformly and unanimously rejected each of the defendants’ arguments, and affirmed the district court judgment in full.

In both the jury trial and on appeal, Dawe, Harkins, and Flat Iron were represented by Wilke Fleury partner Dan Baxter. Dan and his clients not only achieved the victories mentioned above, but also prevailed on each of the counterclaims advanced by the defendants at the trial.

Wilke Fleury congratulates Dan and his clients for achieving a fair and just result.

The work of Wilke Fleury partner and lobbyist John Valencia was hailed by the American Society for Dermatologic Surgery in the September/October 2012 edition of Currents, the Society’s semimonthly magazine. In an article entitled “ASDSA Victory: California Patient Safety Bill Passes,” the Society detailed the passage of Assembly Bill 1548 (imposing stiffer penalties for violations of the ban on “rent-a-doc” business schemes that have become prevalent in the context of cosmetic medical procedures), and specifically highlighted the importance of Mr. Valencia’s work. Among the “lessons” noted by the Society in advocating for AB 1548’s passage was the following:

"Engage an excellent contract lobbyist:  John Valencia of Wilke Fleury acted as the contract lobbyist in California for every step of this effort.  He is passionate and knowledgeable about this issue and became a trusted resource within the state legislature, MBC, Governor’s Office and other venues.  His hard work and creativity was absolutely critical to this success."

Wilke Fleury is proud of Mr. Valencia’s diligent work, and values the trust and confidence the Society has placed in Mr. Valencia and the firm.

California Employment Law Developments

The following is a synopsis of notable changes in California employment laws that take effect on January 1, 2013, unless otherwise noted.

AB 1744 & SB 1255 – Employee Compensation: Itemized Statements.

Under existing law, employers must provide itemized wage statements to employees on a semi-monthly basis, or when employees are otherwise paid. Employees who are injured by a knowing and intentional failure to provide the requisite information on the itemized statements may recover damages no greater than a $4,000 penalty and costs and attorney fees.

AB 1744 requires that temporary services employers provide additional information on the itemized wage statement, including the rate of pay and total hours worked for each temporary services assignment, and additional information in the notice given to the employee at the time of hire.

SB 1255 provides that employees have suffered “injury” as a matter of law where employers fail to provide a wage statement. Furthermore, employees are deemed to have suffered “injury” where the information on the itemized statement is not accurate and complete, and employees cannot promptly and accurately determine specified information from the wage statement alone.

AB 1775 – Wage Garnishment: Exempt Earnings.

The California Wage Garnishment Law limits the amount of earnings that may be subject to withholding for employees who are judgment debtors. AB 1775 increases the amount of wages exempt from garnishment to the lesser of 25 percent of the individual’s weekly disposable earnings or the amount by which the individual’s disposable earnings for the week exceed 40 times the state minimum hourly wage (currently $8 per hour) in effect at the time the earnings are payable, unless an exception applies. Disposable earnings are defined as the portion of an individual’s earnings that remains after all amounts required to be withheld by law have been deducted. AB 1775 becomes effective July 1, 2013.

AB 1844 – Employer use of Social Media.

AB 1844 prohibits employers from either requiring or requesting social media usernames or passwords from employees and applicants if the purpose is to access personal social media, access personal social media in the employer’s presence, or to divulge personal social media. However, the law does not affect employers’ rights to request that employees divulge personal social media to investigate employee misconduct, or to access employer-issued electronic devices.

AB 1844 also prohibits retaliation, or threats of retaliation, against employees who refuse to comply with an illegal request or demand to divulge social media usernames or passwords.

AB 1964 – Discrimination in Employment: Reasonable Accommodations.

The California Fair Employment and Housing Act (FEHA) requires employers to make reasonable accommodations for religious beliefs or observances as long as such accommodations do not impose undue hardships on employers. AB 1964 adds religious dress and grooming practices as covered beliefs or observances under FEHA. It further provides that segregating the religious employee from the public or other employees on account of their religious dress or grooming practices is not a reasonable accommodation.

AB 2103 – Employment: Wages and Hours: Overtime.

Existing California law sets the full-time workday at eight hours and the full-time workweek at 40 hours for non-exempt employees. Overtime is required for hours worked by nonexempt employees in excess of the daily and hourly limits. AB 2103 provides that, notwithstanding any private agreement to the contrary, the payment of a fixed salary to a nonexempt employee is considered compensation only for the employee’s regular, non-overtime hours.

AB 2386 – Employment and Housing Discrimination: Sex: Breastfeeding.

FEHA prohibits employers from discriminating against employees on the basis of sex. AB 2386 defines “sex” to include breastfeeding and related medical conditions.

AB 2674 – Employment Records: Right to Inspect.

Under existing law, an employee has the right to inspect the employer’s personnel records pertaining to his/her performance or to any grievance regarding the employee. AB 2674 requires employers to maintain these personnel records for at least three years after the termination of the employee. Additionally, employers must, within 30 calendar days of receiving a request, provide both current and former employees, or their representatives, with the opportunity to inspect and receive a copy of their records, except while a lawsuit relating to a personnel matter is pending. However, these requirements do not apply to employees covered by a valid collective bargaining agreement that already provides an inspection and copy procedure for personnel records.

AB 2675 – Employment Contract Requirements.

Existing California law requires employers to enter into written employment contracts with employees who are compensated on a commission basis. The contracts must specify how the commissions will be calculated and paid to the employees. AB 2675 exempts certain types of commissioned employees from this requirement. Specifically, a separate written contract is not required for: 1) short term productivity bonuses; 2) temporary variable incentive payments that increase, but do not decrease, under a written contract; or 3) bonus and profit sharing plans when the employer has not offered to pay a fixed percentage of sales or profits as compensation for work to be performed.

SB 863 – Workers’ Compensation.

SB 863 increases permanent disability benefits for employees by 30 percent, phased in over a two year period. It adjusts the formula for calculating the benefits amount, thereby making compensation amounts more accurately reflect the loss of future earnings. When determining the extent of permanent disability, only the nature of the physical injury or disfigurement, the injured employee’s occupation, and his or her age when injured can be considered. SB 863 also prohibits, with some limitations, increases in permanent disability ratings for sleep dysfunction, sexual dysfunction, and psychiatric disorders. Additionally, it creates a mandatory Independent Medical Review Process for medical treatment disputes. Finally, SB 863 makes a number of changes affecting Medical Provider Networks including streamlining the approval process, limiting the grounds that employees can use to avoid obtaining treatment with a Medical Provider Network and eliminating a number of other requirements that applied to such networks.

Minimum Wage.

Certain computer software employees and licensed physicians and surgeons are exempt from overtime requirements if they receive certain minimum rates, which have now increased.

Computer professionals: Hourly rate increase from $38.89 to $39.90; monthly rate increase from $6,752.19 to $6,927.75; annual rate increase from $81,026.25 to $83,132.93.

Licensed Physicians or Surgeons: Hourly rate increase from $70.86 to $72.70 per hour.

Federal Employment Law Developments

There were no significant employment laws enacted by the U.S. Congress during 2012. However, there were a number of other federal developments that may affect some California employers.

DOL and California Join Forces to Target Employee Misclassification as Independent Contractors

The United States Department of Labor (DOL) and the California Secretary of Labor and Workforce Development announced that they have entered into a memorandum of understanding regarding the improper classification of employees as independent contractors. This memorandum is a part of the DOL’s Misclassification Initiative, which aims to prevent, detect and remedy employee misclassification as independent contractors. The memorandum states that the DOL and the California Labor and Workforce Development Agency will share information, coordinate enforcement efforts and develop a procedure for exchanging investigative leads, complaints and referrals of possible violations. The memorandum also states that the agencies can conduct joint investigations.

EEOC Provides Additional Guidance on Employers’ Use of Criminal Records

The EEOC updated its enforcement guidelines relating to the consideration of arrest and conviction records in employment decisions. The EEOC identified two scenarios in which it believes that employers can successfully claim that their criminal conduct screen is acceptable: 1) when the employer utilizes the EEOC’s Uniform Guidelines on Employee Selection Procedures to validate their criminal conduct screen for the position; and 2) when the employer utilizes a targeted screen which considers certain specified factors, and then provides an opportunity for an individualized assessment for people who are excluded by the screen to determine whether the policy, as applied to them, is job related and consistent with business necessity. The EEOC emphasized that employers can avoid liability for disparate impact discrimination by utilizing individualized assessments and considering more complete information on individual applicants or employees. In its guidance, the EEOC stressed that a screening policy that contains an automatic exclusion of all applicants with criminal conduct is flawed because it does not focus on the dangers of particular crimes and the risks in particular positions. The EEOC also stated that, unlike a conviction, a mere arrest does not establish criminal conduct. Therefore, an arrest alone cannot be used to deny an employment opportunity. However, an employer can make an employment decision based on the underlying conduct of the arrest.

NLRB Continues to Scrutinize Employer Social Media Policies

The National Labor Relations Board (NLRB) released a report focusing on employer use of social media policies. The report laid out the framework that the NLRB uses to determine if a work rule violates a workers’ rights under Section 7 of the National Labor Relations Act (NLRA). Section 7 states that “employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection….” Therefore, a work rule that bars any of the above activities is unlawful. Additionally, a work rule violates the NLRA if employees would reasonably interpret the rule as prohibiting protected activity, the rule was formulated in response to union activity or the rule has been applied to restrict the exercise of Section 7 rights. The report states that utilizing ambiguous social media rules which lack limiting language informing the employees that the rule does not restrict Section 7 right violates the NLRA. The NLRB stated that rules are less likely to be unlawful if they clarify and restrict their scope by including examples of unprotected conduct. Additionally, the NLRB stated that a “savings clause” stating that the social media policy will be in compliance with the NLRA does not save an otherwise unlawful work rule.

NLRB Issues Opinion Relating to Mandatory Arbitration Clauses

In D.R. Horton and Machael Cuda, the NLRB held that Section 7 activities include the pursuit of a workplace grievance either through litigation or arbitration. Therefore, an arbitration clause that requires employees to waive their right to pursue class litigation of claims in any forum violates Section 7. However, the NLRB held that a mandatory arbitration clause does not violate Section 7 if it requires arbitration of individual claims but allows employees to pursue class action claims through litigation. It is worth noting that since this opinion was issued the California Court of Appeals has declined on multiple occasions to apple this reasoning to cases.

Wilke Fleury Partner and Chief Lobbyist, John Valencia, will address The Federation of State Medical Boards (FSMB) on November 1st in New Orleans. Mr. Valencia has been invited to present on "The Use of MedSpas in California to Facilitate the Nonphysician Practice of Medicine." Mr. Valencia will chronicle the recent, successful enactment into law by California Governor Jerry Brown of Assembly Bill 1548 to counter these unlawful practices – a project of Wilke Fleury client, the American Society for Dermatologic Surgery (ASDS).

The measure was strongly supported by the Medical Board of California.

The Federation of State MedicalBoards is a national non-profit organization representing the 70 medical and osteopathic boards of the United States and its territories. The FSMB’s 2012 Board Attorneys Conference convenes over two days to address key, patient-protection issue developments in the states.

Recent Federal Court Decision Deems Obesity a Disability Under the ADA
Studies estimate the rate of obesity in this country to be at an all-time high – over one-third of adult Americans are now considered clinically obese. As this trend has risen over the years, many courts have grappled with the question of whether obesity may be considered a disability under the Americans with Disabilities Act (ADA) such that employers must offer accommodations to their employees whose obesity interferes with their job performance. A recent federal court decision out of Louisiana adopted the EEOC’s liberal view on this issue, holding that obesity on its own may be considered a disability under the ADA, even absent a showing of an underlying physiological disorder – something other courts have required in the past.

In EEOC v. Resources for Human Development, Inc. (827 F.Supp.2d 688 (E.D. La. 2011)), the employee at issue supervised the employer’s day care program and weighed over 500 pounds. Although she had received exemplary performance reviews, she was ultimately fired based on concerns over her “limited mobility” and difficulty performing CPR. The employee later died due to complications from her obesity, but the EEOC brought suit on her behalf, arguing that a person with “severe obesity” (which they defined as having body weight in excess of 100 percent above normal) is disabled under the ADA. The employer, on the other hand, argued that there must be a showing of underlying physiological disorder – such as a cardiovascular or respiratory problem – in order to bring the condition within the meaning of a “disability” under the ADA. The employer’s position was supported by holdings in several other federal court cases. The court, however, was not persuaded, and adopted the EEOC’s broader standard.

Although no court in California has similarly recognized obesity as a disability in and of itself under the ADA or FEHA, California employers should consider the Louisiana decision a harbinger of a more liberal approach to the issue. Employers who encounter obese employees seeking accommodations under the ADA should consider seeking legal advice before dismissing such requests outright.

Employee Wellness Programs Are Increasingly Popular, But Not Without Risk
In an effort to confront the problem of obesity in the workplace before it becomes an issue, many employers are implementing wellness programs. Wellness programs encompass a broad array of approaches to incentivizing healthier lifestyles and promoting health and wellness. Some offer rewards for adopting healthier habits such as losing weight or quitting smoking, and some simply encourage employees to have better nutrition or to be more active. The most typical arrangement rewards participants in the program with reduced health plan premium costs (which are usually automatically deducted from paychecks), but other common examples include gift cards or additional paid time off as incentives for participation or reaching certain specified goals. Studies show that up to 60% of employers now offer some type of wellness program to their employees.

Implementing these programs can appear to be a win-win for employers, as they may result in workers losing weight, becoming healthier, avoiding costly medical issues, and missing work less frequently. However, employers should be aware of certain pitfalls that may accompany workplace wellness programs. Employers should avoid implementing wellness programs that are too aggressive, such as requiring employees to undergo a health risk assessment. The ADA states that such assessments must be voluntary, so participation cannot be a standard for employment. In addition, the recently implemented Genetic Information Nondiscrimination Act (GINA) prohibits employers from asking about employees’ genetic information, so questions about family history may violate the law. Moreover, the Health Information Portability and Accountability Act (HIPAA) forbids employer medical plans from charging higher rates based on health status – so a health assessment or wellness program designed to ferret out smokers, for instance, may violate HIPAA. (There are exceptions to this provision for employer wellness programs that meet certain criteria, such as providing alternative rewards to employees who cannot or should not achieve a particular health goal.) Finally, employers should take care not to allow certain employee health information to fall into the hands of those making employment decisions. A terminated employee could easily allege that he was fired not based on his job performance, but rather because of a health condition that may be protected under the ADA.

The potential for liability should not dissuade employers from implementing wellness programs at all. Such programs have proven successful in improving employee health and morale and reducing health care costs. If in doubt about the legality of such programs (or certain provision in such programs), employers should seek legal advice.