Employers take note! A Court held an employer’s ignorance of a higher minimum wage set by local ordinance can constitute a “willful failure to pay”, resulting in waiting time penalties. California courts are permitted to award an employee a waiting time penalty (of up to 30 days’ worth of the employee’s wages), if the employer “willfully fails to pay” the employee her full wages immediately (if discharged/terminated), or within 72 hours (if she quits)¹. A waiting time penalty can also be awarded when the employee’s final paycheck is for less than the proper wage (minimum wage, prevailing wage, or living wage).

In Diaz v Grill Concepts Services², the appellate court found that the restaurant’s failure to pay the required living wages to terminated employees amounted to a willful failure to pay, justifying waiting time penalties. The restaurant was located in a special zone by the airport that was subject to an ordinance requiring a living wage that was higher than California’s minimum wage. What constituted a living wage was determined by the ordinance and when the ordinance was amended, the required wage increased. The restaurant was sued by terminated employees who sought waiting time penalties.

A failure to pay is willful if the employer knows what it is doing and intends to do what it is doing³. The restaurant’s HR director suspected it might be underpaying its employees as she saw a newspaper article that referenced a higher wage. The restaurant made one inquiry to try to determine the requisite wage, but was told that an amendment to the ordinance was “in process.” The restaurant purportedly took no further action beyond periodically searching the internet to see if the ordinance had been amended. The Court found the employer’s ignorance coupled with a failure to determine the wage was a willful failure to pay, justifying waiting time penalties.

A link to UC Berkeley Labor Center’s Inventory of Minimum Wage Ordinances is here. According to the Berkeley Inventory, some municipalities with living wage ordinances include: Albany, Berkeley, Davis, Emeryville, Fairfax, Hayward Los Angeles, Los Angeles Airport Hospitality Enhancement Zone, Marin County, Oakland, Oxnard, Pasadena, Petaluma, Port Hueneme, Port of Los Angeles, Port of Oakland, Richmond, Sacramento, San Diego, San Francisco, San Jose, San Leandro, San Mateo County, Santa Barbara, Santa Clara County, Santa Cruz, Santa Cruz County, Santa Monica, Santa Monica Hotel Worker Living Wage, Sebastopol, Sonoma, Sonoma County, Ventura, Vernon, Watsonville and West Hollywood.

 


¹California Labor Code section 203.
²Diaz v Grill Concepts Services, Cal. Ct. App. 2nd District, 05/24/18 Case No. B280846.
³In re Trombley (1948) 31 Cal.2d 801, 807.

In Scott v. Gino Morena Enterprises, the Ninth Circuit clarifies that the statute of limitations period for filing a Title VII suit commences after the EEOC issues a right-to-sue notice.

Plaintiff Scott sued her employer in federal court, alleging sexual harassment and retaliation at a barbershop at Camp Pendleton where she worked. She brought suit under Title VII of the Civil Rights Act of 1964. Under Title VII, a plaintiff must exhaust her administrative remedies by filing a charge with the Equal Employment Opportunity Commission (the “EEOC”) or a qualifying state agency (such as DFEH) and receiving a right-to-sue notice. After exhausting administrative remedies, a plaintiff has 90 days to file a civil action.

Scott’s employer contended that she became eligible to receive a right-to-sue notice from the EEOC 180 days after the filed her charge, and that the 90 day clock started ticking 180 days after Scott filed a charge with the EEOC. Scott contended the 90 day clock didn’t start ticking until she actually received her right-to-sue notice. The court had granted summary judgment for Scott’s employer on the basis that her claims were time-barred as she had waited more than 90 days after she became eligible to receive a right-to-sue notice from the EEOC. Scott appealed the ruling, and the Ninth Circuit reversed (in part) the summary judgment ruling, holding that the 90 day clock doesn’t begin until the right-to-sue notice is received.

One concern about starting the clock upon receipt of the EEOC notice (as opposed to 180 days after filing the charge) is that the employer shouldn’t have to wait years to find out if litigation will begin. Evidence can be lost as witnesses’ memories may fade or they may move away. While an employee can rely on this decision in waiting to sue, she can’t wait forever. If appropriate, an employer can still assert arguments about unreasonable delay (doctrine of laches).

The California Supreme Court’s ruling this morning in Alvarado v. Dart Containers may have many employers scrambling to verify their overtime pay calculations. The Court rejected Dart’s complicated overtime calculations, which utilized a multiplier of 0.5 instead of 1.5, and which, in calculating the “regular rate” of pay to determine overtime pay, used a divisor of the total hours worked, including overtime. According to the Supreme Court, to account for overtime premium associated with a flat sum bonus, the correct calculation is the amount of the bonus divided by the regular hours worked by the employee, multiplied by 1.5.

Thus, to correctly calculate the total overtime compensation due to the employee, the calculation is as follows:

(overtime hours x regular rate x 1.5) + (bonus/regular hours worked x overtime hours worked x 1.5) = total overtime compensation

Importantly, this rule applies retroactively, exposing any company that incorrectly calculated overtime rates to statutory penalties, whether or not the mistake was made in good faith.

The health care industry has long allowed employees to voluntarily waive one of the 2 meal periods on shifts greater than 12 hours. Plaintiffs in Gerard v. Orange Coast Memorial Medical Center argue, however, that such a waiver violates Labor Code section 512, which does not allow waivers on shifts longer than 12 hours. Defendants argue that section 11 of Wage Orders 4 and 5 control their meal period obligations, notwithstanding section 512. (Section 11 applies to union employees, but not the state and its political subdivisions). This case has already been decided twice by the Court of Appeal, with the last decision finding the waivers valid. The Supreme Court granted review.

The case is fully briefed and awaiting oral arguments before the California Supreme Court, after which time an opinion is due within 90 days.

The NLRB flip-flops again. After less than 3 months, the test as to whether the 2 or more entities will be deemed joint employers is back to the 2015 standard announced in the Board’s Browning-Ferris decision. Just in December 2017, the Board overruled Browning-Ferris in a 3-2 decision, Hy-Brand, which requires a showing that the company alleged to be a joint employer actually exercised some “direct and immediate control” over the essential employment terms of another company’s employees.

On February 26, 2018 though, the Board voted to vacate its Hy-Brand decision after an ethics investigation determined that member William Emanuel should have been disqualified from participating in the decision (his former law firm represented one of the companies in Browning-Ferris). Member Emanuel was in the majority of the 3-2 Hy-Brand decision.

For now, the Browning-Ferris standard applies; within the collective bargaining arena, joint employment can be established by showing “reserved contractual control”, even if not exercised, or indirect control, or control that is “limited and routine.”

A second Court of Appeal has ruled that discrimination against a person’s sexual orientation is a civil rights violation, in an unusual case where two federal bodies, the EEOC and the Justice Department, took opposite sides. In Zarda v. Altitude Express, Inc. et al, the federal appeals court in New York agreed with the EEOC that bias against sexual orientation necessarily discriminates on the basis of sex. While the employer, Altitude Express, Inc. is uncertain whether it will appeal the decision, it appears likely that this issue will ultimately head to the Supreme Court, because a third appellate court has, based on 1979 precedent, ruled that sexual orientation discrimination is not included in the Title VII anti-discrimination ban.

While still new enough that most employers don’t yet know what a “PAGA” claim is, a claim under PAGA (the four letter acronym for Private Attorney General Act) can indeed be a curse to those employers unlucky enough to have made its acquaintance. You see, under the Labor Code PAGA, aggrieved employees are allowed to file suit on behalf of the State of California Labor and Workforce Development Agency, themselves, and other employees to collect penalties for any violation of the California Labor Code.

If the Labor Code already specifies a civil penalty for violation of a specific provision, then an employee may attempt to collect that penalty for themselves and on behalf of other aggrieved employees. If the underlying Labor Code section does not specify the civil penalty, the PAGA penalty is equal to $100 for each employee per pay period for the initial violation, and $200 for each employee per pay period for each subsequent violation. Cal. Lab. Code §2699(f)(2).  Thus, given the breadth of the California Labor Code and the numerous opportunities for unintentional violations, the potential penalties are staggering. Even more, a successful employee will be awarded their attorney fees and costs.

Not only is there monetary incentive to assert PAGA claims (75% of the monies go to the State, and 25% to the employees), but plaintiff’s attorneys will often assert a PAGA claim as a backup in a class action because unlike class actions, a PAGA class does not have to be certified.  Additionally, PAGA claims are not waivable, whereas rights to assert class action are. Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014).

In July 2017, the PAGA claim became even more powerful.   In Williams v. Superior Court, 3 Cal.5th 531 (2017) the Supreme Court of California unanimously reaffirmed the broad scope of discovery in civil litigation, and held that plaintiff was entitled the name and contact information of all of the employer’s 16,500 employees, not just those of the workers in plaintiff’s store. In doing so, the Supreme Court rejected the notion that plaintiff must first show good cause or some likelihood of success on the merits before receiving such information. It reversed the trial court’s order that plaintiff must first answer deposition questions to establish some merit to plaintiff’s action before seeking that discovery.

The upshot of Williams is that a single employee, even on a weak or frivolous case, can force an employer to engage in extensive and costly discovery, and can expand the potential liabilities to such an extent that most employers cannot bear the risk of not settling.

With respect to PAGA, the saying “the best defense is a good offense” couldn’t be more true. Some Labor Code violations are considered “not serious” and are subject to a 33 day cure period before the employee may sue. Employers should contact their counsel immediately to ensure that the violations are properly corrected within that period. But even before a suit is filed, employers can mitigate their exposure to a PAGA suit by carefully examining their policies, procedures, and practices to preemptively spot any potential Labor Code violation and take corrective action.

Whether you have been sued under PAGA, or are simply looking to avoid a PAGA suit, we can help you.

Employers, it’s time to pull out the drafting pen and make an important change to your job application forms. Almost all job applications ask for basic information, including the applicant’s education and job history.  Under job history, application forms usually seek the names of prior employers, positions held, dates of employment, and salary history. But starting January 1, 2018, it will be illegal in California to ask, directly or indirectly, for an applicant’s salary history. Care must be taken to remove the salary history information requests from the application- even if the applicant does not fill out the information, the employer has improperly required the prohibited information. Care must also be taken to warn hiring managers and other job interviewers to avoid inquiry on past salaries in efforts to determine a salary offer. Further, an employer, upon reasonable request, is required to provide an applicant with the pay scale for the position. California employers should be prepared.

Finally, while the drafting pen is out, employers should also remove any questions regarding criminal convictions on their job applications.  This, too, has been prohibited.

The purpose behind this new law is to expand the equal pay protections of California’s pay equality mandates, including Labor Code Section 1197.5. Under section 1197.5, pay equality, on the basis of sex, race and ethnicity, is required for “substantially similar work, when viewed as a composite of skill, effort, and responsibility.” Use of salary history to set an employee’s wages is believed to perpetuate the pay gaps experienced by women and minorities, and therefore, has been banned. Further, although an employer may legally consider prior salary information disclosed voluntarily, without prompting, by an applicant in setting the compensation for that applicant, salary history alone may not justify any disparity in compensation; an employer still runs a risk of creating disparate pay for substantially similar work, and therefore, must tread carefully.

California employment rules are complex. Contact us if you need guidance in creating an equitable hiring and offer process, setting flexible and fair pay scales, drafting job descriptions, and/or updating your employment handbook or policies.

Under the New Parent Leave Act, employees who work for a company with 20 or more employees within a 75-mile radius may take up to 12 weeks of job-protected leave to bond with a new child within one year of the child’s birth, adoption, or foster care placement.  To qualify for leave,  employees must have worked for the employer for more than 12 months and worked at least 1,250 hours during the previous 12 months.  An employer employing both parents who are both entitled to leave for the same child does not have to give more than 12 weeks of leave total to the employees.  The employer may grant simultaneous leave to these parents if the employer chooses.  The law becomes effective January 1, 2018.

Please contact us if you need help updating your employee handbooks, or for assistance with your employee’s leave requests, including requests by employees to take baby bonding leave.

California employers who share or interchange employees with another employer should know about the joint employer doctrine and its potential impact on an employer’s status as a “joint employer” for leave of absence purposes under the California Family Rights Act (CFRA) and federal Family and Medical Leave Act (FMLA).

A private employer is covered under FMLA and CFRA if it is engaged in any business or enterprise in California and directly employs 50 or more employees in any US state, the District of Columbia or any US territory or possession to perform services for a wage or salary. (Cal. Govt. Code § 12945.2(c)(2)(A);Title 2 of the California Code of Regulations, § 11087(d); 29 U.S.C. § 2611(4)(A)(i) and Title 29 of the Code of Federal Regulations, § 825.104.)

Where two or more businesses exercise some control over the work or working conditions of an employee, the businesses may be considered joint employers of the shared employee under FMLA and CFRA. Under the joint employer test, an employer that does not otherwise meet the 50-employee threshold may still have to provide FMLA/CFRA leave to its eligible employees if it “employs” enough jointly-employed employees to put them over the 50-employee threshold.

The FMLA regulations state:

(a) Where two or more businesses exercise some control over the work or working conditions of the employee, the businesses may be joint employers under FMLA. Joint employers may be separate and distinct entities with separate owners, managers, and facilities. Where the employee performs work which simultaneously benefits two or more employers, or works for two or more employers at different times during the workweek, a joint employment relationship generally will be considered to exist in situations such as:

  1. Where there is an arrangement between employers to share an employee’s services or to interchange employees;
  2. Where one employer acts directly or indirectly in the interest of the other employer in relation to the employee; or,
  3. Where the employers are not completely disassociated with respect to the employee’s employment and may be deemed to share control of the employee, directly or indirectly, because one employer controls, is controlled by, or is under common control with the other employer.

29 C.F.R. § 825.106(a).

The CFRA regulation is identical to the FMLA regulation, except the California regulation adds the following sentence:

A determination of whether or not a joint employment relationship exists is not determined by the application of any single criterion, but rather the entire relationship is to be viewed in its totality based on the economic realities of the situation.” (Title 2 of the California Code of Regulations, § 11087(d)(3).)

Where a joint employment relationship is found, the joint employee is counted by both employers, whether or not maintained on one of the employer’s payroll, in determining whether the 50-employee minimum is met. (Title 29 of the Code of Federal Regulations, § 825.106(d); Title 2 of the California Code of Regulations, § 11087(e)(4)(B).) The net effect of this is that a smaller employer (less than 50 employees) may be covered under FMLA/CFRA and therefore have to provide FMLA/CFRA leave to eligible employees even if it has less than 50 employees on its payroll.

If you have questions about whether a joint employment relationship exists, feel free to contact me at 925.930.6600 or dmarchiano@archernorris.com.