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.

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.

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.

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.

The California Supreme Court has further clarified the administrative exemption from overtime pay requirements. In Harris v. Superior Court, the Supreme Court found that the “administrative/ production worker” test is not a dispositive tool in determining whether an employee is exempt from overtime pay. Rather, courts must consider the particular facts and apply the language of the statutes and wage orders at issue. While the Court’s decision appears to provide more latitude for employers, the Court gives minimal guidance for determining what actually constitutes an administrative exemption.

California’s Mandatory Overtime Law and its Three Exemptions:
According to Section 510 of the California Labor Code, employers must pay overtime to any employee who works more than eight hours a day or forty hours a week. However, Wage Order No. 4-2001 establishes three exemptions to California’s mandatory overtime: The executive exemption, the administrative exemption and the professional exemption.

The administrative exemption covers employees who perform work directly related to management policies or general business operations of either the employer or the employer’s clients. Employees who fall under this exemption must customarily and regularly exercise discretion and independent judgment, and must work under only general supervision. Furthermore, they must either perform specialized or technical work requiring special training, experience or knowledge, or they must execute special assignments and tasks. There is also a minimum salary requirement of two times the State’s minimum wage for full-time employment.

Case Background:
Plaintiffs, who were claims adjustors, brought a class action lawsuit alleging that their employer erroneously classified them as administratively exempt from overtime pay. Plaintiffs moved for summary adjudication, arguing they were not exempt as a matter of law. The trial court granted Plaintiffs’ motion. The Court of Appeal affirmed the trial court’s decision by using the “administrative/production worker” dichotomy test.

The “administrative/production worker” dichotomy test distinguishes between “administrative employees,” who are primarily engaged in administering the business affairs of the enterprise, and “production-level employees,” whose primary duty is producing the commodity that the enterprise exists to produce and market. The former falls under the administrative exemption for overtime pay, while the latter does not.

Case Analysis:
The California Supreme Court’s decision focused on the scope of the administrative exemption for overtime pay under Wage Order 4-2001. The Court noted the “administrative/production worker” dichotomy test applied by the lower courts failed to utilize the actual language of Wage Order No. 4-2001 and other pertinent statutes and regulations. The Court further noted that the dichotomy may be impractical in the modern workplace: “Because the dichotomy suggests a distinction between the administration of a business on the one hand, and the production end on the other, courts often strain to fit the operations of modern-day post-industrial service-oriented businesses into the analytical framework formulated in the industrial climate of the late 1940s.”

Work qualifies as “administrative” when it is directly related to management policies or general business operations. The Court explained what work qualifies as directly related as follows: First, it must be qualitatively administrative in nature. Second, quantitatively, it must be of substantial importance to the management or operations of the business. To determine the qualitative component, the Court decided it needed to look to more specific statutes and regulations specifically listed within Wage Order No. 4-2001 to see what is actually administrative in nature. Former Regulation 541.205(b) (now (c)) provided that administrative operations include work done by white collar employees engaged in servicing a business. Such servicing may include advising management planning, negotiating, representing the company, purchasing, promoting sales, and business research and control. An employee performing such work is engaged in activities relating to the administrative operations of the business notwithstanding that he is employed as an administrative assistant to an executive in the production department of the business. These activities may be administrative in nature whether or not they are performed at the level of policy. (29 C.F.R. § 541.205(b)(c).) In this particular case, Plaintiffs attacked Defendants’ showing as to only the qualitative component. The Court thus expressed no opinion as to the quantitative component of the test.

The Supreme Court did not make a ruling on whether Plaintiffs were actually exempt, but instead sent the case back to the Court of Appeal to determine whether Plaintiffs’ duties were administrative in nature. The take-away point from this decision is that the “administrative/production worker” dichotomy is not dispositive on the issue of administrative exemption. Moreover, the Ninth Circuit has held that under more recent applicable federal regulations, claims adjusters are exempt from the Fair Labor Standards Act’s overtime requirements, “[i]f they perform activities such as interviewing witnesses, making recommendations regarding coverage and value of claims, determining fault and negotiating settlements.”

What This Means For You:
We now know that the “administrative/production work” dichotomy is no longer dispositive in determining exemption; work done by white collar employees engaged in servicing a business, including advising management, planning, negotiating, representing the company, purchasing, promoting sales, and business research and control may be deemed to satisfy the qualitative component. To satisfy the quantitative component of the same test, it must be of substantial importance to the management or operations of the business. Employers should consider these new guidelines in determining whether their employees properly qualify as administratively exempt. Each case must be determined on a fact-intensive basis; there are no bright line rules.

In light of the recent United States Supreme Court decision upholding the individual mandate as a key component of the Affordable Care Act (ACA), all provisions of the ACA will continue to be implemented, with some limits on Medicaid expansion. In an effort to expand health care coverage, employers will now have to offer affordable coverage to their employees beginning in 2014, or else pay a penalty.

Small Employer Exception:
The requirement to offer affordable coverage is based on how many full-time equivalent employees the employer has. If there are less than 50 full-time equivalent employees, then the penalties do not apply. However, if an employer with 25 or fewer employees and an average wage of less than $50,000 decides to offer health coverage, the employer may be eligible for a health insurance tax credit.

No Employer Coverage:
If the employer has at least 50 full-time equivalent employees and does not offer coverage, then there will be a penalty assessed if the employer has one or more employees who are receiving a premium tax credit or cost sharing subsidy in an Exchange. The penalty is $2,000 annually times the number of full-time employees minus 30. The penalty is increased each year by the growth in insurance premiums.

Unaffordable Employer Coverage:
Even if an employer who has at least 50 full-time employees does offer some form of coverage, it needs to be “affordable.” The employer-sponsored insurance must pay for at least 60% of covered health care expenses for a typical population, and no employee should have to pay more than 9.5% of family income for the employer’s coverage. If either of these requirements are not satisfied, the employee may choose to buy coverage in an Exchange and receive a premium tax credit. If the employee receives a tax credit in an Exchange, the employer must pay a penalty for every employee who chooses the tax credit option. The penalty is $3,000 annually for each full-time employee receiving a tax credit, up to a maximum of $2,000 times the number of full-time employees minus 30. The penalty is increased each year by the growth in insurance premiums.

What This Means For You:
The ACA will have a major impact on employers come 2014. It is imperative that employers properly determine whether they will be assessed penalties based on the number of employees they have. Employers should evaluate the type of insurance coverage offered to all employees, and make sure the cost of coverage meets the minimum requirements to be deemed affordable.

In a long-awaited ruling, the California Supreme Court has finally clarified the rules applicable to meal and rest periods for non-exempt employees. The Court concluded that employers are only required to provide meal and rest periods to employees, they are not, however, required to ensure that their employees actually take them. Here is a short synopsis of the Court’s conclusions.

Meal Periods Must be Provided Following Five Hours of Work
Employers are required to provide an “off-duty,” unpaid meal period to non-exempt employees following any shift in excess of five hours. An “off-duty” meal period means the employer relieves the employee of all duties during the meal period. Meal periods must last for at least 30-minutes.
Employers have flexibility concerning how the meal-period is scheduled, and do not have to provide the meal-period during the fifth hour of work. Instead, employers must simply provide their employees with a meal period no later than the end of the employee’s fifth hour of work. If the employee is working more than ten hours, then the employee is entitled to a second 30-minute meal period to be taken no later than the end of the employee’s tenth hour of work. The meal period may be scheduled any time within the employee’s shift so long as these time constraints are observed.
Even though employers are required to provide “off-duty” meal periods to their employees, they are not required to police their employees to ensure they do not work during the meal period or otherwise force their employees to take the meal period However, employers may not coerce or encourage employees to skip their meal period or take an “on-duty” meal period. If an employer does so, it is subject to a mandatory penalty equal to one additional hour of pay at the employee’s regular rate of pay.

In summary, employees can decide how to spend their meal period, but employers must allow them an uninterrupted, off-duty meal period of 30-minutes after any work period of more than five hours.

Rest Breaks Must be Provided During a Shift Longer Than 3.5 Hours.
Employers are also required to provide paid rest breaks to non-exempt employees who are scheduled to work more than 3.5 hours in a day. Employers must count rest periods as time worked, and must authorize and provide employees with a 10-minute rest in a 3.5 to 6 hour shift, 20 minutes rest in a shift longer than 6 hours but no more than 10 hours, and 30 minutes rest in a shift more than 10 hours but no more than 14 hours. Failing to account for the mandated rest periods in scheduling and assigning shifts may be considered a denial of the rest period, which could subject employers to a penalty (e.g., payment of one additional hour of pay at the employee’s regular rate of pay).

Employers must make a good faith effort to authorize and permit the 10-minute rest periods in the middle of each 4-hour period to the extent it is practical (e.g., at or near 2-hours into the shift). Within an eight-hour shift, one rest break should generally fall on either side of the meal period.

In summary, employers must authorize and provide rest periods to employees. As with meal periods, however, employers need not ensure that employees actually take the rest periods.

What This Means For You
All employers should have policies in place informing employees of their right to take mandated rest and meal periods and explaining that failure to do so can lead to discipline, up to and including termination of employment. However, with the Supreme Court’s new ruling, employers need not require employees to clock in and out for rest periods (although it is still a good idea to do so for meal periods, which are unpaid). Employers should see a decrease in the number of wage and hour class actions based on meal and rest break violations as a result of this ruling, as employees will now be required to prove that they were not allowed to take breaks, rather than simply that they worked through their breaks.

In Campbell v. PricewaterhouseCoopers, LLP, two thousand unlicensed junior accountants brought a wage and hour class action against their employer, PricewaterhouseCoopers, LLP, alleging that it had failed to pay them mandatory overtime. The Ninth Circuit Court of Appeals held that these unlicensed accountants were not categorically ineligible for the exemptions to mandatory overtime. As this case indicates, an employee’s licensure status is not determinative of the employee’s exemption status.

California’s Mandatory Overtime and its Three Exemptions
According to Section 510 of the California Labor Code, employers must pay overtime to any employee who works more than eight hours a day or forty hours a week. However, Wage Order No. 4–2001 establishes three exemptions to California’s mandatory overtime: the executive exemption, the administrative exemption and the professional exemption.
The executive exception covers employees whose primary duty is the management of the enterprise in which they are employed or a customarily recognized department of that enterprise. Employees who fall under this exemption must customarily and regularly direct the work of two or more employees. Furthermore, these employees must have the authority to hire or fire other employees or their recommendations as to hiring and firing must be given particular weight.
The administrative exemption covers employees who perform work directly related to management policies or general business operations of either the employer or the employer’s clients. Employees who fall under this exemption must customarily and regularly exercise discretion and independent judgment and must work under only general supervision. Furthermore, they must either perform specialized or technical work requiring special training, experience or knowledge, or they must execute special assignments and tasks. Finally, they must be primarily engaged in exempt work meeting the above requirements.
The professional exemption covers two types of employees: (1) those who are licensed or certified by the State of California and are primarily engaged in the practice of one of the following recognized professions: law, medicine, dentistry, optometry, architecture, engineering, teaching or accounting, and (2) those who are primarily engaged in an occupation commonly recognized as a learned or artistic profession. The latter category includes occupations requiring advanced knowledge in a field acquired through a course of study, work that is original and creative in a recognized field of art, and work which is predominantly intellectual and varied in character. Both categories of employees must customarily and regularly exercise discretion and independent judgment in the performance of their duties.
For each of the categories of exemptions, there is a minimum salary requirement of two times the State’s minimum wage for full-time employment.

The Ninth Circuit’s Analysis in Campbell v. PricewaterhouseCoopers, LLP
In Campbell, plaintiffs argued that they were categorically ineligible for the professional exemption because they were not licensed CPAs. The Ninth Circuit disagreed, holding that the tests listed in Wage Order 4-2001 are alternative, not exclusive, tests for qualifying under the professional exemption. Therefore, the fact that an employee lacks a CPA license does not categorically preclude that employee from qualifying for the professional exemption if that employee is engaged in work that requires advanced knowledge in a field acquired through a course of study, that is original and creative in a recognized field of art or, as in this case, that is predominantly intellectual and varied in character. The court further held that the plaintiffs could fall within the administrative exemption if their work was performed under only general supervision, they performed work directly related to management policies or general business operations and they were primarily engaged in exempt work.
Ultimately, the court held that plaintiffs were not automatically ineligible for the professional and administrative exemptions to mandatory overtime simply because they were unlicensed. Therefore, the court returned the case to the district court to determine whether, based on the facts presented, plaintiffs engaged in work that required advanced intellectual or artistic knowledge in a field acquired through a course of study, thereby falling under the professional exemption, or were engaged primarily in business operations or management while working under only general supervision, thereby qualifying for the administrative exemption.

What This Means For You
While this case specifically addressed the profession of accounting within the context of the professional and administrative exemptions, the Court’s holding has a much broader application. When analyzing whether an employee is exempt, the employee’s licensure status does not end the inquiry. For example, employees in the fields of law, medicine, dentistry, optometry, architecture, engineering and teaching can fall within the professional exemption prior to acquiring their state licenses or certifications if those employees engage in work that requires advanced intellectual or artistic knowledge in a field acquired through a course of study. Furthermore, unlicensed employees can qualify for the administrative exemption if they engage primarily in business operations or management while working under only general supervision. Finally, unlicensed employees can qualify for the executive exemption if their primary duty is management, they regularly direct the work of at least two employees, and they have the authority to hire, fire, or recommend the hiring or firing of other employees.

The following is a synopsis of notable changes in California and federal employment laws that take effect in 2012.

California Law
AB 469 – Wage Theft Prevention Act
At the time of hiring, every employer must provide each employee with a notice containing the rate and basis of the employee’s wages. Employers must also notify each employee in writing within seven calendar days of any changes to the information contained in the notice unless the changes are reflected in the employee’s next wage statement. The Division of Labor Standards Enforcement has promulgated a form to be used for this purpose, which can be downloaded from the DLSE’s website: www.dir.ca.gov/dlse/LC_2810.5_Notice.pdf.   All of the information contained within the form must be provided even if the form itself is not used.

In addition to paying civil penalties, employers who fail to pay employees the minimum wage will now be required to pay restitution to employees for unpaid minimum wages. Furthermore, employees may recover attorney’s fees and costs to enforce a judgment for unpaid wages. Employers who willfully fail to timely pay a judgment for wages will now be guilty of a misdemeanor and subject to fines, imprisonment or both for each offense.

This law also extends the time the Labor Commissioner has to commence action to collect a statutory penalty or fee from one year to three years.

SB 459 – Penalties for Willful Misclassification of Independent Contractors
Employers that willfully misclassify an employee as an independent contractor will be assessed a penalty of between $5,000 and $25,000 per violation. The law also prohibits employers who have willfully misclassified an employee as an independent contractor from charging the employee any fees or making any deductions from his compensation if such a fee or deduction would have been prohibited if the employee were not an independent contractor.

AB 22 – Use of Credit Report Information in Employment
This law prohibits employers, with the exception of certain financial institutions, from obtaining a credit report for employment purposes unless the applicant is seeking one of the following positions:
• positions in the state Department of Justice;
• managerial positions, as defined under the “executive” exemption to California overtime laws;
• peace officer or other law enforcement positions;
• positions for which the information contained in the report is required by law to be disclosed or obtained by the employer;
• positions involving regular access to specified personal information for any purpose other than routine solicitation and processing of credit card applications in a retail establishment;
• positions in which the person is or would be a named signatory on the employer’s bank or credit card account, or authorized to transfer money or enter into financial contracts on the employer’s behalf;
• positions involving access to confidential or proprietary information; or
• positions involving regular access to cash amounts of $10,000 or more.

If a credit report is obtained for one of these positions, the employer must provide written notice to the applicant or employee specifying the basis for requesting the report and providing the employee the opportunity to request a copy of the report.

AB 887 – Gender Non-Discrimination
Refines the definition of “gender” under the Fair Employment and Housing Act (“FEHA”) to include a person’s gender identity or gender expression. “Gender expression” is defined as “a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth.”

SB 299 – Extended Health Coverage During Pregnancy Leave
Employers must continue to maintain and pay for coverage under a group health insurance plan for employees on pregnancy disability leave for up to four months.

AB 592 – Pregnancy Leave/CFRA Leave
This law makes it an unlawful employment practice for employers to interfere with, restrain, or deny the exercise of, or the attempt to exercise, any right provided under the California Family Rights Act or the Pregnancy Disability Leave Law.

AB 1236 – Electronic Employment Verification
Prohibits the state, or a city, county, or special district, from requiring private employers to use an electronic employment verification system except when required by federal law or as a condition of receiving federal funds.

SB 559 – Discrimination: Genetic Information
This law expands FEHA to prohibit discrimination based on an applicant’s “genetic information.” Genetic information is defined as:
• an individual’s genetic tests;
• the genetic tests of the individual’s family members; or
• the manifestation of a disease or disorder in the individual’s family members.

SB 757 – Health Insurance Coverage for Domestic Partners
Existing law requires that domestic partners be provided with the same insurance coverage as spouses under all circumstances. However, policies issued outside the state of California to employers with a principal place of business and a majority of employees outside of California are exempt from this requirement. SB 757 eliminates that exemption by providing that no health insurance policy or certificate of health insurance marketed, issued or delivered to California residents may discriminate between spouses or domestic partners of the same sex and spouses or domestic partners of a different sex.

Increase in Minimum Salary Requirements for Exempt Computer Professionals and Physicians
California is raising the minimum salary required to qualify for the “computer professional” overtime exemption. Computer professionals must be paid a minimum of $38.89 per hour or $81,026.25 annually and not less than $6,752.19 per month. Similarly, the minimum rate for exempt physicians will increase to $70.86 per hour.

Federal Law

New Mandatory Federal Law Employment Poster
All employers subject to the National Labor Relations Act (NLRA) are required to post notices informing employees of their rights under the NLRA. The 11-by-17 inch notice will be provided at no charge by NLRB regional offices or may be downloaded from the NLRB website and printed either in color or in black and white. Employers must also post the notice on an internet site if personnel rules and policies are customarily posted there.

In investigations of alleged discrimination under California’s Fair Employment and Housing Act, workplace investigators frequently rely on standards enunciated by federal courts interpreting Title VII, as such standards often apply equally to cases brought under California’s Fair Employment and Housing Act. California courts have expressly recognized the overlap between the two statutory schemes and the appropriateness of relying on federal Title VII cases when considering FEHA claims. In some cases, however, California has considered and rejected the federal stray remarks doctrine. As a result, workplace investigators must be more wary of relying on federal authorities when determining whether discrimination has occurred.

The “Stray Remarks Doctrine”
The stray remarks doctrine was first coined by the U.S. Supreme Court in 1989 and has since been adopted and notably expanded by federal circuit courts. Under this doctrine, federal courts deem irrelevant any remarks made by non-decisionmaking coworkers and remarks made by decisionmaking supervisors outside of the decisional process of adverse employment decisions, and evidence of such stray remarks are insufficient to defeat summary judgment. Further, federal courts treat ambiguous comments as stray remarks because they do not sufficiently indicate discriminatory animus.

In Reid v. Google, the California Supreme Court rejected the “Stray Remarks Doctrine” and held that California courts must consider the totality of the evidence, including any relevant discriminatory remarks, in determining whether discrimination has occurred. This decision represents a significant divergence from the Federal Courts’ acceptance of the “Stray Remarks Doctrine” and creates impetus for California employers to make efforts to eliminate all inappropriate comments from the workplace.

Case Background
In 2002, Google hired Brian Reid, age 52, to be Google’s director of operations and director of engineering. Reid alleged that during his employment at Google, an executive to whom Reid occasionally reported, as well as other co-workers, made derogatory age-related remarks to him. According to Reid, the executive told him his opinions and ideas were “obsolete” and “too old to matter,” that he was “slow,” “fuzzy,” “sluggish,” and “lethargic,” and that he did not “display a sense of urgency” and “lack[ed] energy.” Other coworkers called Reid an “old man” and an “old fuddy-duddy,” and joked that Reid’s compact disc jewel case office placard should be an “LP” instead of a “CD.” Less than two years later, Google terminated Reid’s employment, stating that he was not a “cultural fit.” Reid then sued Google, alleging age discrimination and offering as evidence the comments that had been made to him. Google moved for summary judgment, arguing that the comments were stray remarks and thus insufficient to defeat the motion. The trial court granted Google’s motion, finding Plaintiff’s evidence insufficient to raise a triable issue. The Court of Appeal reversed, rejecting Google’s argument that the alleged ageist comments were stray remarks and finding them sufficient to create an inference of illegal discrimination.

The Supreme Court’s Decision
The California Supreme Court affirmed the decision of the Court of Appeal, holding that the comments made by Reid’s supervisors and coworkers should not be viewed in isolation as stray remarks, but instead should be considered with all the evidence in the record. The Court rejected the stray remarks doctrine for a number of reasons. First, the Court explained that strict application of the stray remarks doctrine would result in a court’s categorical exclusion of evidence even if the evidence was relevant. The Court noted that remarks not made directly in the context of an employment decision and remarks uttered by a non-decisionmaker may still be relevant circumstantial evidence of discrimination, particularly where a non-decisionmaker influences a decisionmaker. Second, strict application of the stray remarks doctrine would be contrary to the procedural rules codified by statute and adopted in California cases. Specifically, California law directs that at the summary judgment stage, courts “shall consider all of the evidence set forth in the papers and all inferences reasonably deducible from the evidence.” Third, while a stray remark alone may not create a triable issue of discrimination, when combined with other evidence of pretext, an otherwise stray remark may create evidence that is sufficient to defeat summary judgment. Fourth, because there is no precise definition of who is a decision maker or what constitutes a remark made “outside of the decisional process” in the employment context, federal courts have treated identical remarks inconsistently. Thus, the Court concluded, in a California employment discrimination case, the stray remarks doctrine is not to be applied and the court is to consider all alleged discriminatory comments.

What This Means for You
In California, even casual comments made by non-decisionmaking employees or ambiguous remarks made by decisionmakers outside of the decisionmaking process may be used as evidence of discrimination. Employers must take care to ensure that all employees are trained regarding proper conduct in the work place. This includes making sure that employees do not make improper and potentially discriminatory comments about another employee’s race, ethnicity, sex, gender, age, sexual orientation and the like. Even comments as seemingly innocuous as “lethargic” and “quick study” may be found to constitute evidence of age discrimination. Finally, you should ensure that all employment decisions are made based on objective qualifications that cannot be misinterpreted as potentially discriminatory.

FMLA Leave
The Family and Medical Leave Act (FMLA) is a federal law that has long provided for up to 12 weeks per year of protected family and medical leave from work for qualifying employees. Typically, employees take FMLA leave to receive medical treatment for the employee’s own illness or injury, or to care for an ailing spouse or family member.
Recently, in response to the country’s prolonged involvement in military operations in Iraq and Afghanistan, Congress created two new categories of FMLA leave: (1) military caregiver leave, and (2) military qualifying exigency leave. These new categories are in addition to the family and medical leave already provided for under the FMLA.

Military Caregiver Leave
Military Caregiver Leave provides up to 26 weeks of time off per year for an employee to care for a child, parent, spouse, or next of kin who is a “covered military member” – i.e., a current member of the Armed Forces (including the National Guard and Reserves), or a member of the Armed Forces, the National Guard, or Reserves on the temporary disability retired list – and who has a serious injury or illness sustained while in the line of duty. “Next of kin” is defined as anyone other than a child, parent, or spouse who is the nearest blood relative of the covered member. Typically, covered members designate their “next of kin” for military caregiver purposes, but if none is selected, the following level of priority applies: blood relatives granted legal custody of the servicemember; brothers and sisters; grandparents; aunts and uncles; and first cousins. Under military caregiver leave, “children” and “parents” include step-children and step-parents and foster or adopted children and parents.

Military Qualifying Exigency Leave
Military Qualifying Exigency (QE) Leave provides 12 weeks of leave per year for an employee whose child, parent, or spouse is a “covered military member” – meaning in this case that he or she is either a member of the reserve components (Army National Guard of the United States, Army Reserve, Navy Reserve, Marine Corps Reserve, Air National Guard of the United States, Air Force Reserve, and Coast Guard Reserve) or a retired member of the Regular Armed Forces or Reserve – that is on active duty or notified of impending active duty status in support of a “contingency operation.” “Contingency operations” are those that either (1) are designated by the Defense Secretary as one in which members of the armed forces are or may become involved in military actions, operations, or hostilities against an enemy of the United States or against an opposing military force, or (2) result in active duty of members of the uniformed services during a war or national emergency declared by the President or Congress. (The military member’s active duty orders should specify if the call is for a “contingency operation,” and employers may require that the employee certify the need for leave by providing either those orders or a signed statement from the employee describing the facts supporting the request for QE leave.) Note that QE leave does not apply to family members of the Regular Armed Forces or Reserve on active duty or call to active duty status – only reserves and retired members.

The Department of Labor has identified eight categories of QE leave – key to each of these is that the need for leave must arise out of the fact that the employee is a parent, child, or spouse of a covered military member:

1. Short-notice deployment. The eligible employee may take up to seven days of leave if his or her spouse, parent, or child is given seven days’ notice or less of deployment.
2. Military events and related activities. The eligible employee may take leave for any official, military-sponsored ceremony, program, or event related to the active duty or call to active duty status of a covered military member. Leave may also be taken to attend family support or assistance programs sponsored or supported by the military or the American Red Cross that relate to the active duty or call to active duty status of a covered military member.
3. Childcare and school activities. Eligible employees may take leave to make child care arrangements or to attend certain school functions for the child of a covered military member.
4. Financial and legal arrangements. Eligible employees may take leave to make or update financial and legal arrangements for when the covered military member is on active duty or call to active duty.
5. Counseling. Leave is available for the employee, the covered military member, or the covered military member’s child to attend counseling by a non-health care provider, as long as the counseling arises from active duty service or call to active duty.
6. Rest and recuperation. As much as five days of QE leave is available to an eligible employee to spend time with a covered military family member on rest and recuperation leave during his or her deployment.
7. Postdeployment activities. For 90 days following the termination of active duty status, eligible employees may take leave to attend ceremonies incident to the return of the covered military family member, such as ceremonies and reintegration briefings, or to address issues related to the death of a covered military family member, such as recovering the body and making funeral arrangements.
8. Other additional activities. The employer and employee may agree that other events arising out of a covered military member’s active duty or call to active duty status qualify as exigency. In such instances, the employer and employee must agree on the QE coverage, timing, and duration.

As with traditional FMLA leave, eligible employees may take leave under either the QE or military caregiver provisions on an intermittent or reduced schedule basis. Also as with traditional FMLA leave, employees must make a reasonable effort to schedule any leave for medical treatment so as to disrupt the employer’s operations as little as possible, and employees must give as much notice as practicable in advance of their leave.

The same approaches that employers have used in the past to manage their FMLA leave policies apply to these new categories, as well. For instance, employers would be wise to:

• Require written notice of leave in advance;
• Track all periods of leave, and keep all records regarding leave eligibility, determinations and notifications on file, ideally with one dedicated person;
• Avoid inflexible leave policies that will interfere with the obligation to make decisions on a case-by-case basis;
• Get specific information regarding the need for the leave up front to avoid later problems and miscommunication; and
• Provide notice to the employee that FMLA leave time is being counted, and notify the employee before his or her leave time is exhausted.

These common-sense precautions will minimize the problems with and abuse of FMLA leave that many employers confront.

In a unanimous decision, the United States Supreme Court recently held that an employee who has not engaged in protected activity may still have a valid cause of action for retaliation, if the employer took adverse action against the employee due to the employee’s connection to another employee who engaged in protected activity. This holding dramatically expands the scope of retaliation liability for employers under Title VII of the Federal Civil Rights Act of 1964.

Case Background
Mariam Regalado and her fiancé, Eric Thompson, were both employees of North American Stainless (NAS). In 2003, Ms. Regalado filed a sex discrimination charge against the company with the EEOC. The EEOC notified NAS that Ms. Regalado had filed the charge. Three weeks later, NAS terminated Thompson’s employment. Thompson then sued NAS, alleging his discharge was in retaliation for his fiancé’s EEOC charge. The trial court and the Court of Appeals dismissed the lawsuit, finding that Title VII’s protections did not apply to Thompson because he had not personally engaged in the protected activity. The United States Supreme Court disagreed.

Analysis
The Court looked at two issues: (1) whether Thompson’s firing constituted unlawful retaliation under Title VII, and (2) if it did, whether Title VII provided Thompson with a cause of action.

As to the first issue, the Court concluded that, assuming the facts alleged by Thompson were true, it was difficult not to conclude that NAS’s termination of Thompson had violated Title VII. In its analysis, the Court noted that Title VII’s anti-retaliation provisions must be construed to cover a broad range of employer conduct. Specifically, Title VII’s anti-retaliation provision prohibits any employer action that may dissuade a reasonable worker from making or supporting a charge of discrimination. The Court found that it was “obvious that a reasonable worker might be dissuaded form engaging in protected activity if she knew that her fiancé would be fired.”

As to the second question, the Court set forth the “zone of interest” test. The Court determined that a plaintiff could not sue unless he falls within the zone of interest sought to be protected by the statutory provision whose violation forms the legal basis of his complaints. In other words, as an employee of NAS, Title VII was intended to protect Thompson from the unlawful actions of his employer. The Court reasoned that, if the facts alleged by Thompson were true, then Thompson’s termination was the intended means of punishing Ms. Regaldo for filing a charge against her employer. Therefore, Thompson was a “person aggrieved with standing to sue under the statutory regime of Title VII.” Even though Thompson did not engage in any protected activity under Title VII, he was within the “zone of interest” sought to be protected by Title VII, which allows a person aggrieved by an alleged employment practice to bring a civil action.

What this Means for You
While the Court allowed an employee who had not engaged in protected activity to bring a claim, it declined to identify the specific types of relationships that would fall within Title VII’s protections. The Court noted that “firing a close family member will almost always meet the requisite standard, and inflicting a milder reprisal on a mere acquaintance will almost never do so.” Accordingly, it is important for employers to realize that Title VII protects more than just the employee who engages in the protected activity. Here are some things to keep in mind in light of Thompson:

• Promptly investigate employee complaints.
• Review all personnel decisions involving the complaining employee to ensure that your employment actions are free of any retaliatory motive.
• Ensure that all employment policies include anti-retaliation provisions.
• Train managers, supervisors, and human resource staff to refrain from and to identify potential instances of associational discrimination or retaliation.
• Following a complaint, remind supervisory employees that retaliation is prohibited and taking action of any sort, even against someone associated with an employee who has brought a complaint, may be unlawful.
• Document performance problems thoroughly and contemporaneously to support any adverse employment actions taken.
• Always make certain that adverse employment decisions are based on legitimate and non-discriminatory factors.

Because most cases in California are brought under FEHA, rather than Title VII, it is unclear how this holding will impact the majority of retaliation cases in California. However, given that California courts look to federal decisions for guidance and because California courts are usually more liberal than the federal courts, it would not be surprising to see California courts follow the reasoning of this decision.

The transition to or maintenance of a drug-free workplace raises concerns regarding employee privacy of which employers must be cognizant. An employer may choose to implement a workplace alcohol and drug policy for many reasons, including to provide a safe workplace for employees, to avoid adverse health effects on employees with concomitant costs to the employer, and to protect the company’s image. An employer may also choose to implement a workplace alcohol and drug policy in order to contract with the state or federal government, or to be eligible for federal and state aid.

Whatever the motivation for implementing an alcohol and drug policy, the policy should be a written document that addresses the use of, or being under the influence of, alcohol and drugs in the workplace. The policy should be clear and precise, and strictly followed at all times. The policy needs to be disseminated to employees and easily accessible to them (e.g., posted on a bulletin board, included within the employee handbook, additional copies available in the human resources department). The policy should address the reason for the policy, and cover such areas as (a) pre-employment screening, (b) use, sale, or possession of alcohol and drugs on company premises, (c) searches of employees and their personal property, (d) testing for alcohol and drugs, (e) disciplinary action, and (f) employee assistance programs.

One of the primary components of any alcohol and drug policy is testing for alcohol and drugs. There are generally three categories of testing: pre-employment testing, reasonable suspicion testing and random testing. Pre-employment testing is the least risky type of policy the employer can implement. Pre-employment testing refers to the employer testing applicants for employment for drug and alcohol use as part of the employer’s review of the applicant’s qualification for employment. Employers may implement alcohol and drug testing as part of a regular, pre-employment physical examination for all applicants.

On the other hand, an employer may not require alcohol and drug testing for all employees who are eligible for promotion. Instead, employers should only require employees who are eligible for promotion to submit to testing after the employer determines that there is a compelling business need to test the employee, based on the nature and qualifications of the new position for which the employee is being considered. If the employer does not have a compelling business need to test the employee, then the employer could be subject to substantial tort liability for invasion of the employee’s privacy rights.

Current employees who are not being considered for promotion should only be tested based on a reasonable suspicion of alcohol or drug use. Reasonable suspicion may be based on direct observation of drug use or possession, custody or control or the physical symptoms of being under the influence of a drug, a pattern of abnormal conduct, arrest or conviction for a drug related offense, information provided by a reliable source or evidence that the employee has tampered with a previous drug test. Although reasonable suspicion testing does not require certainty, mere “hunches” are not sufficient to warrant a test. A random alcohol and drug test is the most risky test the employer can administer. Random drug tests will generally only be allowed where the employer can demonstrate that the employer’s special interest and the public interest outweigh the employee’s reasonable expectation of privacy. Generally, the employer must show that the employee’s to be tested are in safety sensitive positions. Moreover, the employer must provide advance notice of the random testing program, minimize the degree of intrusion involved, and provide safeguards for protesting the confidentiality of the process. Finally, there should be little or no discretion as to who is chosen for testing. In other words, the testing should be truly random.

Claims that may be asserted by employees who have been tested under a policy found to be unlawful include invasion of privacy, intentional infliction of emotional distress, defamation, discrimination and wrongful termination if the employee is discharge as a result of the test.

Any testing that is performed should be conducted by an independent contractor. With experience conducting tests. This will provide additional protection to the employer against a lawsuit by an employee alleging flawed testing because the torts of an independent contractor are generally not be attributable to the employer. Furthermore, employers should only receive a simple pass or fail result, not a detailed reporting of the employee’s private test results.

After the results are received by the employer, the employer should ensure that access to the results is limited. For example, the employer should not store the results in the employee’s personnel file. Moreover, the consequences for an employee who receives adverse test results should be predetermined in the workplace alcohol and drug policy.

Finally, employers should be aware that they may be required to make reasonable accommodations for employees desiring to enter rehabilitation, whether this desire is motivated by an adverse test result or is made by the employee at the employee’s initiative. Apart from the workplace alcohol and drug policy, an employer with twenty-five or more employees must reasonably accommodate any employee wishing to voluntarily enter and participate in an alcohol or drug rehabilitation program as long as the accommodation does not pose an undue hardship on the employer. If the employee receiving an adverse test result is not terminated, the employer may need to make similar accommodations for that employee.

If you are considering implementing a workplace alcohol and drug policy, or are reviewing your current policy, Wilke Fleury can help ensure that it complies with state and federal law, and meets the stringent state and federal contracting and federal aid standards.