Does an employee who retires quit?  California employers are required to promptly pay final wages to employees when they “quit.”  Specifically, Labor Code section 202 provides that employees without a contract for a definite period are entitled to prompt payment of wages either within 72 hours of quitting or immediately upon quitting if they provide at least 72 hours advance notice of their intention to quit.  Employers who fail to make prompt payment of wages are subject to waiting time penalties up to 30 days of wages.  (Lab. Code § 203.)

In McLean v. State, 228 Cal. App. 4th 1500, 176 Cal. Rptr. 3d 734 review granted and opinion superseded, 338 P.3d 304 (Cal. 2014), the court of appeal concluded that an employee who “quits” includes an employee who retires.  There, a state employee retired and separated from her employer on the same day that she retired.  She did not receive her final wages on her last day of employment, nor did she receive them within 72 hours of that date.  Her employer argued that Labor Code section 202 and 203 only applied to employees who “quit” as opposed to those who “retire,” and that the distinction between a “quit” and a “retirement” was well-established in the civil service. The court of appeals disagreed; concluding that “quit” as used in Labor Code section 202 and 203 has one meaning for private and public employers, and includes employees who quit to retire.

That court of appeal decision is now being reviewed by the California Supreme Court.  In the meanwhile, both private and public employers are still subject to Labor Code sections 202 and 203.  Employers should be aware of the prompt payment requirements when employees resign, and the potential applicability of these requirements to employees when they retire.  The decision will have a profound effect, particularly as employees of the baby-boomer generation begin to retire.  It could also subject employers to potential actions by employees who have already retired for waiting time penalties if they did not receive timely payment of their final wages when they retired.

DID YOU KNOW…

Workers on a prevailing wage project are entitled to no less than the prevailing wage (i.e., a basic hourly rate).  This requirement seeks to ensure that the winning bidder is not awarded the project by paying lower wages to workers than the other bidders.  A court of appeal recently recognized that the second-place bidder can sue the winning bidder if the winning bidder only obtained the lowest bidder status because it did not pay workers the prevailing wage.  See, Roy Allan Slurry Seal, Inc. v. Am. Asphalt S., Inc., No. B255558, 2015 WL 738675 (Cal. Ct. App. Feb. 20, 2015).

By:  Branden M. Clary
Wilke Fleury Labor & Employment News
March 2015

Harassment, discrimination and retaliation can be costly for employers, even when employees do not suffer substantial injuries as a consequence of the conduct.  Employees who sue their employers under Title VII for harassment, discrimination or retaliation are subject to its statutory caps on compensatory and punitive damages.  The caps are based on the size of the employer, from 15 employees to more than 500 employees.  When punitive damages are recoverable under state common-law claims, they must be proportional to the violation.  However, a recent decision determined that proportionality does not need to be assessed for the statutory punitive damages caps established under Title VII.

In Arizona v. ASARCO LLC, 773 F.3d 1050 (9th Cir. 2014),  a female employee filed federal claims against her former employer for sexual harassment under Title VII (federal law).  The employer was a large employer with more than 500 employees.  The employee prevailed on her sexual harassment claims.  She apparently did not suffer a substantial compensable injury, so the jury awarded her nominal damages of $1 to formally recognize that she had been harassed.  The jury also awarded her $868,750 in punitive damages, which the court reduced to $300,000 in accordance with the statutory cap under Title VII based on the size of the employer.  The employer challenged the constitutionality of the award in light of the disparity between the nominal and punitive damage awards.  The court of appeal upheld the award despite the disproportionality because it determined that Title VII sufficiently informs employers of the conduct that subjects them to punitive damages and the maximum amount of such damages – in this case, capped damages of $300,000 for an employer with more than 500 employees.

Employers should take all allegations of harassment, discrimination and retaliation seriously.  If they have not already, employers should adopt and implement anti-discrimination and harassment policies.  Employers also need to enforce their anti-discrimination and harassment policies, investigate complaints, and take prompt and effective remedial action when a violation occurs.  While caps exist for punitive damages under federal law, punitive damages are not capped under California Law, the Fair Employment and Housing Act (“FEHA”).  And whereas Title VII applies to employers with 15 employees, FEHA’s discrimination and retaliation provisions apply to employers with just 5 employees, and its harassment protections apply to all employers, regardless of size.

DID YOU KNOW…

The FEHA imposes a continuing obligation on employers to communicate with employees or applicants to determine effective reasonable accommodations in response to a request for a reasonable accommodation (i.e., the interactive process).  Employers may be liable if they are responsible for a breakdown in the interactive process.  See, Swanson v. Morongo Unified Sch. Dist., 232 Cal. App. 4th 954 (2014).

By:  Samson Elsbernd,
Wilke Fleury Labor & Employment News
February 2015

Does an employee who retires quit?  California employers are required to promptly pay final wages to employees when they “quit.”  Specifically, Labor Code section 202 provides that employees without a contract for a definite period are entitled to prompt payment of wages either within 72 hours of quitting or immediately upon quitting if they provide at least 72 hours advance notice of their intention to quit.  Employers who fail to make prompt payment of wages are subject to waiting time penalties up to 30 days of wages.  (Lab. Code § 203.)

In McLean v. State, 228 Cal. App. 4th 1500, 176 Cal. Rptr. 3d 734 review granted and opinion superseded, 338 P.3d 304 (Cal. 2014), the court of appeal concluded that an employee who “quits” includes an employee who retires.  There, a state employee retired and separated from her employer on the same day that she retired.  She did not receive her final wages on her last day of employment, nor did she receive them within 72 hours of that date.  Her employer argued that Labor Code section 202 and 203 only applied to employees who “quit” as opposed to those who “retire,” and that the distinction between a “quit” and a “retirement” was well-established in the civil service. The court of appeals disagreed; concluding that “quit” as used in Labor Code section 202 and 203 has one meaning for private and public employers, and includes employees who quit to retire.

That court of appeal decision is now being reviewed by the California Supreme Court.  In the meanwhile, both private and public employers are still subject to Labor Code sections 202 and 203.  Employers should be aware of the prompt payment requirements when employees resign, and the potential applicability of these requirements to employees when they retire.  The decision will have a profound effect, particularly as employees of the baby-boomer generation begin to retire.  It could also subject employers to potential actions by employees who have already retired for waiting time penalties if they did not receive timely payment of their final wages when they retired.

DID YOU KNOW…

Workers on a prevailing wage project are entitled to no less than the prevailing wage (i.e., a basic hourly rate).  This requirement seeks to ensure that the winning bidder is not awarded the project by paying lower wages to workers than the other bidders.  A court of appeal recently recognized that the second-place bidder can sue the winning bidder if the winning bidder only obtained the lowest bidder status because it did not pay workers the prevailing wage.  See, Roy Allan Slurry Seal, Inc. v. Am. Asphalt S., Inc., No. B255558, 2015 WL 738675 (Cal. Ct. App. Feb. 20, 2015).

Harassment, discrimination and retaliation can be costly for employers, even when employees do not suffer substantial injuries as a consequence of the conduct.  Employees who sue their employers under Title VII for harassment, discrimination or retaliation are subject to its statutory caps on compensatory and punitive damages.  The caps are based on the size of the employer, from 15 employees to more than 500 employees.  When punitive damages are recoverable under state common-law claims, they must be proportional to the violation.  However, a recent decision determined that proportionality does not need to be assessed for the statutory punitive damages caps established under Title VII.

In Arizona v. ASARCO LLC, 773 F.3d 1050 (9th Cir. 2014),  a female employee filed federal claims against her former employer for sexual harassment under Title VII (federal law).  The employer was a large employer with more than 500 employees.  The employee prevailed on her sexual harassment claims.  She apparently did not suffer a substantial compensable injury, so the jury awarded her nominal damages of $1 to formally recognize that she had been harassed.  The jury also awarded her $868,750 in punitive damages, which the court reduced to $300,000 in accordance with the statutory cap under Title VII based on the size of the employer.  The employer challenged the constitutionality of the award in light of the disparity between the nominal and punitive damage awards.  The court of appeal upheld the award despite the disproportionality because it determined that Title VII sufficiently informs employers of the conduct that subjects them to punitive damages and the maximum amount of such damages – in this case, capped damages of $300,000 for an employer with more than 500 employees.

Employers should take all allegations of harassment, discrimination and retaliation seriously.  If they have not already, employers should adopt and implement anti-discrimination and harassment policies.  Employers also need to enforce their anti-discrimination and harassment policies, investigate complaints, and take prompt and effective remedial action when a violation occurs.  While caps exist for punitive damages under federal law, punitive damages are not capped under California Law, the Fair Employment and Housing Act (“FEHA”).  And whereas Title VII applies to employers with 15 employees, FEHA’s discrimination and retaliation provisions apply to employers with just 5 employees, and its harassment protections apply to all employers, regardless of size.

DID YOU KNOW…

The FEHA imposes a continuing obligation on employers to communicate with employees or applicants to determine effective reasonable accommodations in response to a request for a reasonable accommodation (i.e., the interactive process).  Employers may be liable if they are responsible for a breakdown in the interactive process.  See, Swanson v. Morongo Unified Sch. Dist., 232 Cal. App. 4th 954 (2014).

In 2014, Governor Brown signed a variety of employment-related measures. These bills became law on January 1, 2015, unless otherwise specified. These new measures will affect the day-to-day business of employers in 2015. The highlights for these new employment-related measures follow:

California law provides various forms of leave (paid and unpaid) to employees. Prior to January 1, 2015, paid sick leave was not mandated. AB 1522 enacted the “Healthy Workplaces, Healthy Families Act of 2014,” which now mandates paid sick leave, and applies to most California employers. The new paid sick leave law covers exempt and non-exempt employees (including part-time, per diem, and temporary employees). Specifically, the new law:

• Mandates that employers provide at least 24 hours of paid sick leave per year. This benefit will apply to California employees who work 30 or more days within one year from the commencement of their employment.
• Requires that employees accrue no less than one hour of sick leave for every 30 hours worked beginning on July 1, 2015, which employees are entitled to use beginning on the 90th day of their employment.
• Authorizes employers to limit the amount of sick leave used to 24 hours or 3 days in each year of employment, though employees may accrue up to 48 hours or 6 days. Accrued paid sick days generally carry over to the following year.
• Prohibits employers from discriminating or retaliating against employees who utilize paid sick leave.

Long-standing California law strictly prohibits harassment and discrimination of employees, applicants, employment training applicants, and apprentices. These protections are applicable 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, sexual orientation, or military and veteran status.

These protections have been extended to include individuals participating in an unpaid internship, volunteer opportunity, or other program that provides unpaid experience in a workplace or industry.

AB 2053 (Gonzalez) – Employment Discrimination: Education and Training: Abusive Conduct

Current law requires employers with 50 or more employees to provide training and education regarding sexual harassment to all supervisory employees. This training is to be a minimum of two hours and must be conducted within the first 6 months of an employee assuming a supervisorial position, and thereafter every two years.

This new law adds training on the prevention of abusive conduct to existing sexual harassment training requirements for supervisory employees. Abusive conduct is defined as malicious conduct that would reasonably be considered hostile, offensive, and unrelated to an employer’s legitimate business interests.

AB 326 (Morrell) – Occupational Safety and Health: Reporting Requirements

Current law requires an employer to file a complete report of every occupational injury or illness of each employee to the Division of Occupational Safety and Health within the Department of Industrial Relations. Immediate reporting via telephone or telegraph is required for cases involving serious injury, illness or death of an employee.
Employers must now make immediate reports by telephone or email to the Division of Occupational Safety and Health for every case involving an employee’s serious injury or illness or death.
Contracting

AB 1897 (Hernandez) Labor Contracting: Client Liability

State law regulates the terms and conditions of employment and provides specific obligations for employers in California. Employers, for example, are prohibited from entering into a contract for labor or services if the employer knows or should know that there are insufficient funds available for the contractor to comply with existing labor and employment laws.

In a significant expansion of employer-based liabilities, employers who contract with labor contractors for employees will now share civil legal responsibility and liability for the payment of wages and the failure to obtain valid workers’ compensation coverage for all workers who are supplied under the contract. Client employers are also prohibited from shifting legal duties and liabilities for workplace safety to the labor contractor. Employers and contractors are required to provide enforcement agencies and departments, upon request, with information and documentation of compliance with these provisions. Exemptions include nonprofit, labor, and motion picture payroll service organizations, as well as third parties engaged in employee leasing arrangements.

AB 2365 (Pérez) – Unlawful Contracts

Non-disparagement clauses are used in contracts to prevent individuals from making statements or taking any other action that can have a negative impact on the other party.
Responding to recent media reports identifying companies that were using non-disparagement clauses to silence unhappy customers, state law now prohibits a consumer goods or service contract from waiving a consumer’s right to make any statement relating to their retail experience, and also prohibits a consumer from being penalized for making statements about their retail experience.

SB 1446 was an urgency statute that went into effect in July of 2014 when it was signed. It permits renewal of small employer (employers with fewer than 50 employees) health plans that fail to meet the requirements of the Affordable Care Act through the end of 2015 for group health insurance that was in effect on December 31, 2013, and was still in effect in July of 2014 when the law took effect.

SB 1034 (Monning) Health Care Coverage: Waiting Periods

Under federal law, group health plans and insurance issuers are prohibited from applying a waiting period that exceeds 90 days. Current law in California allows group health plans and policies to apply waiting periods up to 60 days as a condition of employment, provided that the condition is applicable to all eligible employees and dependents.
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Health plans and health insurance policies in the group market are now prohibited from imposing waiting or affiliation periods in addition to the waiting period imposed by an employer. Group health plans or insurers are still permitted to administer a waiting period imposed by a plan sponsor or employer, though.

Under state law, the state Employment Development Department (EDD) considers the facts submitted by an employer to determine a claimant’s eligibility for unemployment compensation benefits. An administrative law judge could reconsider an unemployment eligibility determination if an appeal is filed by either the claimant or the employer within 20 days after mailing the notice of a determination.

The deadline for filing an appeal has now been extended. Beginning on or after July 1, 2015, claimants and employers have 30 days to appeal an unemployment eligibility determination.

AB 1792 (Gomez) – Public Benefits: Reports on Employers

AB 1792, referred to by some as the public shaming law, requires the state Department of Finance to identify and compile an annual list of private employers with 100 or more employees who are enrolled in public assistance programs. The Department will send a list of the 500 employers in the State with the most employees who are enrolled in public assistance programs to the Legislature and will post the list (a “list of shame”) on its website beginning in January of 2016, and continuing until January 1, 2020.

Employers must reimburse employees for all necessary business expenditures or losses incurred in the course of their employment. This requirement applies to employee personal cell phone use when employees must use their personal cell phones for business purposes, even when employees have unlimited minutes and do not incur any extra charge by using their personal cell phones.

In Cochran v. Schwan’s Home Serv., Inc., 228 Cal. App. 4th 1137 (2014), a group of customer service managers brought a putative class action against their employer for failing to reimburse them for work-related use of personal cell phones. The trial court did not certify the class action; in part because it determined that too many questions existed concerning individual cell phone plans (unlimited or limited minutes) and payment of the cell phone bills (by the employee or by someone else). The court of appeal simplified the issue for the trial court by determining that employer-required use of personal cell phones is always required. It makes no difference whether employees incur an additional expense that they would not have incurred if they did not have to use their cell phones for work. Employers must still pay a reasonable percentage of their employees’ personal cell phone bills.

Nowadays, employers would be hard pressed to identify one employee who does not have a personal cell phone. As discussed in an earlier issue this year (Volume 17, Issue 4), employers may be liable for constructive discharge based on failing to reimburse employees for necessary work expenditures. Employers, therefore, should take their reimbursement obligation seriously and ensure that employees are not required, and are aware that they are not required, to use their personal cell phones for business purposes. Alternatively, where employees are required to use their personal cell phones for business purposes, employers should ensure that they receive reimbursement for the expense.

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DID YOU KNOW…

The United States Supreme Court recently determined that time spent by hourly warehouse employees waiting for and participating in antitheft security screenings before they could leave work each day was not compensable under the federal Fair Labor Standards Act. See, Integrity Staffing Solutions, Inc. v. Busk, No. 13-433, 2014 WL 6885951 (Dec. 9, 2014).
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In July of 2014, the U.S. Equal Employment Opportunity Commission (“EEOC”) issued its first comprehensive guidance on pregnancy discrimination and pregnancy-related disabilities since 1983 concerning the federal Pregnancy Discrimination Act (“PDA”). The PDA prohibits discrimination on the basis of past, current and intended pregnancy. With respect to intended or future pregnancy, employers may be liable for any adverse actions taken on the basis of (1) perceived or actual reproductive risks, (2) intention to become pregnant, (3) fertility treatments, and/or (4) the use of contraceptives. Additionally, the PDA prohibits discrimination against employees based on medical conditions related to pregnancy or childbirth, including lactation, breastfeeding and abortion. The EEOC’s guidance brings federal law more in line with California law.

One of the most discussed provisions in the EEOC guidance involves the EEOC’s position that employers must provide reasonable accommodations to pregnant employees or those with pregnancy-related conditions. While pregnancy does not automatically constitute a disability under the ADA, the guidance requires employers to treat pregnant employees who are temporarily unable to perform the functions of their job the same as it treats other employees with similar inabilities to perform their jobs, including those with disabilities. Thus, pregnant women with work restrictions must be offered light duty if the employer offers light duty, even if light duty is typically only offered to employees recovering from job-related injuries.

Another key highlight from the EEOC guidance concerns parental bonding leave. Parental bonding leave is generally offered so that new parents can bond with or care for a new child. The guidance requires that men and women must be offered bonding leave on equal terms. Thus, if female employees are offered five weeks of parental leave, male employees must also be offered five weeks of parental leave.

Employers should review their pregnancy, discrimination, leave and disability accommodation-related policies and practices to ensure compliance with the PDA and ADA’s requirements and EEOC guidance. Employers should also monitor their compensation practices and performance appraisal systems for patterns of potential discrimination based on pregnancy, childbirth or related medical condition.
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DID YOU KNOW…
As of January 1, 2015, California-mandated sexual harassment training must now include training and education on the prevention of bullying. (AB 2053) The training must be provided every two years for supervisory employees, or within six months of an employee assuming a supervisory position, for employers with 50 or more employees.
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 By Branden M. Clary

The California Supreme Court recently determined that employees who are not authorized to work in the United States may still bring claims against their former employers for violating the Fair Employment and Housing Act (“FEHA”), and may even recover damages (e.g., lost wages) against them.

In Salas v. Sierra Chemical Co., (2014) 59 Cal.4th 407 a former employee sued his employer under the FEHA for failure to provide reasonable accommodations for his physical disability, and for retaliation. During his employment, the employee suffered a couple of back injuries. The employee filed a workers’ compensation claim after one of the injuries. Shortly thereafter, the employer laid the employee off as a part of a seasonal reduction of workers, and the employee sued his employer. During the litigation, the employer discovered that the employee used false identification documents, without which, the employee would not have been eligible to work. The employer argued that this “after-acquired” evidence completely barred the employee’s claims. The California Supreme Court determined it did not. It concluded that FEHA’s antidiscrimination provisions apply to employees regardless of their immigration status, and therefore, the employee could continue with his suit against his former employer.

This case is important for employers who unknowingly hire undocumented workers. On the one hand, employers must comply with federal work eligibility requirements, including verification of identity and work eligibility of new employees. On the other hand, California employers may not discriminate against unauthorized employees who misrepresent their work status, even though the employees were never authorized to work for the employer in the first place. Those employees may still recover lost wages for the period before the employer learned the employee was not legally eligible to work, but not for the period after the employer learned of their unauthorized work status.

DID YOU KNOW…

Beginning July 1, 2015, California employers, subject to limited exceptions, are required to provide paid sick leave to exempt and non-exempt employees. Employers are not required to allow employees to accrue more than 6 work days of sick leave, and may limit an employee’s annual use of sick leave to 3 work days. Employers do not have to pay employees for accrued, unused sick leave upon separation from employment.

 By Samson R. Elsbernd

Public works projects are publicly financed construction projects done under contract. California law generally requires contractors and subcontractors who are working on public works projects to pay their employees the rates of wages (“prevailing wages”) set by the Director of the Department of Industrial Relations (“DIR”) in the location where the work will be performed. However, a recent court of appeal decision determined that employees of a subcontractor on a public works project who fabricated materials from a permanent, offsite facility were not entitled to prevailing wages.

In Sheet Metal Workers’ International Association, Local 104 v. Duncan (Cal. Ct. App., Aug. 27, 2014) 14 Cal. Daily Op. Serv. 10205, the employee of a subcontractor for a public works project filed a complaint with the DIR alleging non-payment of prevailing wages for materials he fabricated for a public works project. The employee fabricated custom sheet metal materials away from the project site. The Court of Appeal determined that the employee’s work was not work done in the execution of a public works contract. Neither the custom-nature of the materials nor the fact that the subcontractor did not sell fabricated materials to the general public were determinative. What was determinative was that the work was done at a permanent, offsite facility, and the location and existence of that facility was established independent of the public works project.

Previously, a materials supplier exemption for “on-hauling” materials onto public works sites was recognized for contractors who sold their supplies to the general public. This case now recognizes another exemption for contractors who do not sell their fabricated materials to the general public. Contractors and subcontractors should ensure they meet the exemption. In other words, verify that their facility is truly a permanent, offsite facility, as opposed to an off-site, temporary facility established specifically for the public works project. Subcontractors, in particular, will also want to review their contracts to ensure that the contracts do not obligate them to pay prevailing wages whether or not prevailing wage law applies.

DID YOU KNOW…

The Equal Employment Opportunity Commission (EEOC) recently released guidance concerning its enforcement of the Pregnancy Discrimination Act and the Americans with Disabilities Act. This is the first time in 23 years that the EEOC updated its guidance on these laws governing pregnant employees. The guidance may be accessed at: http://www.eeoc.gov/laws/guidance/pregnancy_guidance.cfm

 By Samson R. Elsbernd

Employers are generally required to pay nonexempt California employees overtime for any hours worked in excess of eight in one day or forty in one week, and for the first eight hours worked on the seventh consecutive day in a workweek. Employees are entitled to payment for overtime – even if not reported – when their employers have actual or constructive knowledge that they are working overtime. A recent court of appeal decision is instructive, and affirmed judgment for the employer because the employee could not prove his employer was aware of his off-the-clock hours.

In Jong v. Kaiser Foundation Health Plan, Inc., 226 Cal.App.4th 391, 399 (2014), Jong, and other non-exempt employees, brought a putative wage and hour class action against Kaiser for non-payment of overtime compensation. Jong argued that his job could not be completed unless he worked overtime, and that he was criticized for working overtime, which was why he worked overtime hours off-the-clock. But Jong was unable to demonstrate that Kaiser knew or should have known that he was working unreported overtime hours. He had no evidence that his supervisors told him he could or should work off the clock, or that he should not report his overtime. When Jong reported overtime work, he was paid for that time. Jong also signed an attestation acknowledging that off-the-clock work was a violation of Kaiser’s policies. Accordingly, Jong could not prove that Kaiser should have paid him for his unreported overtime hours because Kaiser was not aware of his unreported overtime.

Employers should be particularly sensitive to wage and hour claims, which are particularly ripe for class action lawsuits. Additionally, failing to compensate employees for overtime can subject employers to civil lawsuits to recover unpaid overtime, including interest, attorney fees, and costs of suit. Once employers become aware of unreported overtime, they should address it. They may require employees to sign attestations that failing to report all hours worked violates company policy, and to verify the hours worked on their timesheets. If they have policies prohibiting overtime work without prior approval, they may discipline employees for working unapproved overtime. However, employers should still compensate employees for all time worked of which they are aware.

DID YOU KNOW…

All employers, regardless of size, are subject to sexual harassment claims pursuant to California’s Fair Employment and Housing Act. Kim v. Konad USA Distribution, Inc., 226 Cal.App.4th 1336, 1350 (2014). Sexual harassment training may help prevent and assist in defending against sexual harassment claims, and is required every two years for supervisory employees, or within six months of an employee assuming a supervisory position, for employers with 50 or more employees.

The California Supreme Court recently issued a decision with widespread ramifications for employers. Previously, the Court determined that class action waivers in employment contracts may be enforceable as long as they were not unconscionable or violative of public policy. The California Supreme Court, following intervening U.S. Supreme Court precedent, determined that its prior decision was abrogated and reversed itself. Class action waivers in employment contracts are enforceable in California notwithstanding unconscionability or State public policy to the contrary.

In Iskanian v. CLS Transp. Los Angeles, LLC, 2014 WL 2808963 (June 23, 2014), an employee brought a wage and hour class action lawsuit. The employer sought to enforce an arbitration agreement whereby the employee had waived the right to proceed by class and representative proceedings. The lower courts ordered individual arbitration and dismissed the class claims with prejudice. Similarly, the California Supreme Court determined that the class action wavier was enforceable because the Federal Arbitration Act (“FAA”) does not permit States to refuse to enforce class action waivers on public policy or unconscionability grounds.

On the other hand, the California Supreme Court determined that representative actions under the Labor Code Private Attorneys General Act of 2004 (“PAGA”) cannot be waived. PAGA allows employees to bring claims on behalf of the State of California against their employers, and seek statutory penalties for violations of the California Labor Code, such as overtime and meal and rest period violations. The FAA did not require a contrary result because the FAA seeks to ensure a forum for resolution of private disputes (e.g., disputes between an employer and employee relating to their employment contract), but PAGA actions are not private disputes. PAGA disputes are disputes between the State and the employer concerning violations of the Labor Code.

Individual arbitration of employee claims can be advantageous for employers. For example, it can prevent employees from aggregating otherwise small dollar claims that may not otherwise be economically feasible for an employee to bring as an individual claim. Employers will want to make sure their arbitration agreements do not contain overbroad language that could invalidate otherwise enforceable class action waivers (e.g. waivers of representative actions). PAGA representative actions cannot be waived as a condition of employment in any forum, including arbitration and state and federal court.
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DID YOU KNOW…
The Equal Employment Opportunity Commission (“EEOC”) issued new guidance on the application of federal employment discrimination law under Title VII to religious dress and grooming practices, and what steps employers can take to meet their legal responsibilities in this area. The guidance can be viewed at:http://www.eeoc.gov/eeoc/publications/qa_religious_garb_grooming.cfm

 By Branden M. Clary 

The California Supreme Court recently issued a decision with widespread ramifications for employers. Previously, the Court determined that class action waivers in employment contracts may be enforceable as long as they were not unconscionable or violative of public policy. The California Supreme Court, following intervening U.S. Supreme Court precedent, determined that its prior decision was abrogated and reversed itself. Class action waivers in employment contracts are enforceable in California notwithstanding unconscionability or State public policy to the contrary.

In Iskanian v. CLS Transp. Los Angeles, LLC, 2014 WL 2808963 (June 23, 2014), an employee brought a wage and hour class action lawsuit. The employer sought to enforce an arbitration agreement whereby the employee had waived the right to proceed by class and representative proceedings. The lower courts ordered individual arbitration and dismissed the class claims with prejudice. Similarly, the California Supreme Court determined that the class action wavier was enforceable because the Federal Arbitration Act (“FAA”) does not permit States to refuse to enforce class action waivers on public policy or unconscionability grounds.

Individual arbitration of employee claims can be advantageous for employers. For example, it can prevent employees from aggregating otherwise small dollar claims that may not otherwise be economically feasible for an employee to bring as an individual claim. Employers will want to make sure their arbitration agreements do not contain overbroad language that could invalidate otherwise enforceable class action waivers (e.g. waivers of representative actions). PAGA representative actions cannot be waived as a condition of employment in any forum, including arbitration and state and federal court.

DID YOU KNOW…
The Equal Employment Opportunity Commission (“EEOC”) issued new guidance on the application of federal employment discrimination law under Title VII to religious dress and grooming practices, and what steps employers can take to meet their legal responsibilities in this area. The guidance can be viewed at: http://www.eeoc.gov/eeoc/publications/qa_religious_garb_grooming.cfm

By Samson R. Elsbernd

Arbitration agreements are commonplace in California employment relationships. As with employee handbooks, employers may attempt to reserve the right to modify their arbitration agreements with employees. The reservation of this right may be unilateral, meaning that the employer can modify or terminate the agreement but the employee cannot change his or her mind about the agreement. Such modification clauses are not illusory because the law implies a promise by the employer to exercise its right in good faith and pursuant to fair dealings, and hence, these modification clauses may be enforced.

In Casas v. Carmax Auto Superstores California, LLC, 224 Cal.App.4th 1233 (2014), an employee sued his employer and the employer moved to compel arbitration pursuant to an arbitration agreement. The trial court refused to enforce the arbitration agreement based on the employer’s unilateral modification clause. The court of appeal reversed. In upholding the employer’s modification clause, the court of appeal noted that the arbitration agreement was separate from (and not lost within) an employee handbook and required notice to the employees by a date certain each year of any modifications. However, the court of appeal would not enforce a provision of the arbitration agreement applying the agreement in effect at the time the employer received the claim. Instead, the arbitration agreement in effect at the time the claim arose applied, notwithstanding any subsequent modification to the arbitration agreement by the employer after the claim arose. Nevertheless, the employer’s arbitration agreement contained a savings clause to modify the provision to comply with the law, so the employer’s modification clause
could be enforced.

California employers have some authority now for unilaterally reserving the right to modify or terminate their arbitration agreements with employees. Employers should make sure their arbitration agreements are not lost within other employment documents, and should include a savings clause to modify any arbitration provisions that conflict with the law to conform to the law. Employers should also consider providing advance notice to employees, though the failure alone to provide advance notice will not make the agreement illusory since employers must exercise their right to modify in good faith and pursuant to fair dealings with employees.

DID YOU KNOW…

Employees who are terminated for failing to fulfill important functions of their position cannot demonstrate that their employer’s reasons were untrue or pretexutal based simply on after-acquired evidence years after the termination that the employer was not damaged by their failure to perform. Serri v. Santa Clara University, 14 Cal. Daily Op. Serv. 5922 (Cal. Ct. App., May 28, 2014) (discrimination claim on motion for summary judgment).

 By Samson R. Elsbernd

Employees who resign sometimes sue their employer for constructive discharge. An employee is constructively discharged under California law when the employer intentionally creates or knowingly permits working conditions that are so intolerable that a reasonable person in the employee’s position would have been forced to resign. The conditions must be so objectively bad that the employee’s only reasonable option is to resign or quit. This situation may arise when employers fail to reimburse non-exempt employees for necessary work expenditures.

In Vasquez v. Franklin Management Real Estate Fund, Inc., 222 Cal.App.4th 819 (2013), Vasquez drove his personal vehicle as part of his job and earned $10 per hour. Vasquez resigned after his employer failed to reimburse him for vehicle expenses (e.g., gasoline and maintenance), and sued his employer for constructive discharge. Vasquez alleged he was unable to meet basic living expenses and effectively earned less than the state minimum wage because he had to apply his wages towards his vehicle expenses. Vasquez also alleged that he repeatedly asked for reimbursement from his supervisors, and that his supervisors were aware of his financial situation. The court of appeal allowed Vasquez to proceed with his claim because a reasonable trier of fact could find that an employee had no option but to resign when an employer passes on its operating expenses to a low wage worker by failing to reimburse the employee for the expenses.

Employers should be mindful that they are statutorily obligated to reimburse employees for necessary work expenditures. Failing to reimburse employees for expenses the employer should have covered will not generally be sufficient to pursue a constructive discharge claim. However, it may when the employee’s hourly wage is close to the minimum wage. (The minimum wage will increase from $8.00 per hour to $9.00 per hour beginning July 1, 2014.) More commonly, employees will seek recovery of unreimbursed expenses by filing a claim with the Labor Commissioner. Awards for reimbursement carry 10% interest.

DID YOU KNOW…

When an employee takes leave under the Family and Medical Leave Act (FMLA), employers must return the employee to work after receiving a certification from the employee’s health care provider that the employee is able to work. But, employers may require a fitness for duty exam thereafter if they have reason to question the health care provider’s opinion. White v. County of Los Angeles (Cal. Ct. App., Apr 15, 2014) 22 Wage and Hour Cas.2d (BNA) 676.

The California Labor Code Private Attorneys General Act of 2004 (“PAGA”) does not provide a basis for employers to remove PAGA actions from state to federal court. PAGA allows employees to bring claims on behalf of the State of California against their employers. PAGA claims seek statutory penalties for violations of the California Labor Code, such as overtime and meal and rest period violations. Under PAGA, employees can bring the action on their own behalf and on behalf of other aggrieved employees and recover twenty-five percent of the statutory penalties, in addition to attorneys’ fees and costs. (The State retains seventy-five percent of the statutory penalties.)

In Baumann v. Chase Inv. Services Corp., 2014 WL 983587 (9th Cir., March 13, 2014, 12-55644), Baumann sued his employer in California state court under PAGA based on statutory violations for withheld overtime pay. Baumann did not assert any federal claims. However, Baumann’s employer removed the action to federal court based on the federal Class Action Fairness Act of 2005 (“CAFA”), which confers original jurisdiction in federal courts for certain class actions. Baumann’s employer argued that the PAGA claims were a class action under CAFA. The district court found removal to federal court was proper. The Ninth Circuit Court of Appeal reversed. The Court of Appeal held that the district court did not have original jurisdiction over Baumann’s removed PAGA suit under CAFA. The Court of Appeal determined that PAGA actions are not sufficiently similar to federal class actions because they are not claims for class relief. Rather, they are enforcement actions “filed on behalf of and for the benefit of the state.” Accordingly, CAFA did not provide a basis for federal jurisdiction of the PAGA lawsuit.

When employers are served with a lawsuit by their employees, one of the first considerations for defending that lawsuit will be deciding venue for the action in state or federal court. Employees generally file employment actions in State court. Employers oftentimes prefer to defend employment lawsuits in federal court. Federal courts have stricter pleading requirements, expedited discovery schedules, and may even be considered more employer friendly. Employers need to establish a grounds for federal jurisdiction in order to remove a state action to federal court. PAGA will not provide grounds for removing an action from state to federal court. But, a federal court may allow a PAGA action to proceed in federal court if the federal court has other grounds for establishing federal jurisdiction.

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DID YOU KNOW…
Employees have one year from the date of an allegedly wrongful act to file a complaint with the Department of Fair Employment and Housing under the Fair Employment and Housing Act (FEHA). Parties to a contract can agree to shorten statutes of limitation as long as the shortened period is reasonable, BUT employers probably cannot shorten the FEHA statute of limitations. Ellis v. U.S. Security Associates, 14 Cal. Daily Op. Serv. 3098 (Cal. Ct. App., Mar. 20, 2014) (six-month period not enforceable).
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