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Archive for the ‘Employment Law Blog – CA’ Category

The CCPA: Precursor To American GDPR Or Undue Burden On American Businesses

Posted on: July 30th, 2018

By: Jonathan Romvary

As we recently posted, California recently passed the landmark California Consumer Privacy Act of 2018 (“CCPA”) that goes into effect on January 1, 2020 and grants California residents new expansive privacy rights. Many observers are comparing its scope to that of the European Union’s General Data Protection Regulation (“GDPR”). However, as protective as the new statute may be for California residents, it represents a number of significant burdens and challenges for businesses throughout the country.

Unknown Final Requirements

Despite what appears to be a finalized bill, future amendments and clarifications to the CCPA are necessary and will likely significantly alter the current draft. The CCPA was enacted after a single week of legislative debate. The reasons for the quick turnaround can be debated but the current draft contains a number of errors that will need to be addressed before its effective date on January 1, 2020. The uncertainty surrounding the bill means that businesses attempting to be proactive in terms of compliance may be throwing darts in the dark.

Attorney General Regulations

Additionally, the bill instructs the California Attorney General to develop regulations ahead of the effective data in a number of areas to further the purposes of the CCPA. While its arguable whether this will provide greater protections to consumers, it will undoubtedly come at the burden of those businesses covered by the CCPA. At this time these specific AG regulations are unknown and with an upcoming election, there is no guarantee we will know what these regulations will be until late next year before implementation.

Compliance Burn Out

As we all know, the GDPR went into effect on May 25, 2018. Most companies have spent the last year conducting data flow analysis, mapping, and regulatory compliance in order to come into compliance prior to the effective date. According to an October 2017 survey by Paul Hastings LLP, the cost of GDPR compliance for Fortune 500 firms runs approximately $1 million just for the necessary technology that those companies need to comply.

Unfortunately for all of those companies that spent the last 12 to 18 months traversing GDPR compliance, you will not automatically be complying with the CCPA. The CCPA requirements, while similar, do not entirely overlap with the GDPR and, in many cases, the CCPA goes even further than the GDPR. All those companies will now need to engage in an additional 18 months of legal compliance reviews in anticipation of the January 1, 2020 implementation date.

The scope of the CCPA affects businesses across the country, not just those in California. The CCPA protections generally encompasses all retail and commercial activity that includes the collection of data relating to a resident of California which retained, sold or transferred by the business. While the CCPA contains numerous exemptions of data use and functionality these exceptions require close scrutiny and analysis by covered businesses. To discuss how the CCPA might affect your business and what you can do in anticipation of the numerous issues relating to the act, please contact Jonathan Romvary at [email protected].

On-Premises Rest Breaks: Should I Stay or Should I Go?

Posted on: July 18th, 2018

By: Allison Hyatt

Under California law, non-exempt employees are entitled to a 30-minute meal break if the employee works more than 5 hours in a workday, and a 10-minute break for every 4 hours worked (or “major fraction” thereof).  In the past, employers commonly required employees to remain on the premises during rest breaks.  However, with the California Supreme Court’s decision in Augustus v. ABM Services, Inc. (2016) 2 Cal. 5th 257, which emphasized the fact that employers must “relinquish any control over how employees spend their break time,” employers should discontinue any such policies still in practice.

Although the issue in Augustus was on-call rest periods and therefore the Court did not directly consider an on-premises rest break policy, the California Labor Commissioner’s office updated its fact sheet on rest breaks to specially address on-premises break policies in light of the Augustus opinion.  Quoting the Supreme Court’s opinion, the Labor Commissioner’s office explained that employers cannot impose such restraints, stating: “‘during rest periods employers must relieve employees of all duties and relinquish control over how employees spend their time.’  As a practical matter, however, if an employee is provided a ten minute rest period, the employee can only travel five minutes from a work post before heading back to return in time.”

Moving forward, it is unclear as to how courts will address pre-Augustus on-premises rest break policies believed to be legal at the time.  The Augustus Court did not clarify any limitations to what appears to be a sweeping ruling described by the Dissent in Augustus as a “marked departure from the approach we have taken in prior cases.”  2 Cal. 5th 257, 277.  In one post-Augustus case, Bell v. Home Depot U.S.A., Inc. 2017 U.S. Dist. LEXIS 55442 (E.D. Cal. April 11, 2017), the Eastern District of California declined to reconsider a summary judgment ruling in favor of Home Depot on the plaintiffs’ claims that Home Depot violated California law by requiring employees to remain on premises during rest breaks.  The Eastern District had ruled, prior to the decision in Augustus, that such a policy did not violate the applicable California wage order and statute.  In response to the plaintiffs’ motion for reconsideration, Home Depot argued that the Augustus decision implies that restricting employees to the premises, without additional duties or constraints, does not violate the rule.  The Eastern District declined to alter its ruling, noting:

“[t]he facts in Augustus and the present matter are distinct, as the present case does not concern ‘on-call’ rest periods. . . The Augustus court did not directly consider an on-premises rest break policy which does not require employees to remain on call such as the one at issue here.  While the Court finds Defendants’ reading of Augustus more persuasive and accurate than Plaintiffs, it does not specifically adopt Defendant’s interpretation that Augustus affirmatively condones on-premises rest breaks.  Rather, the Court finds that the holding in Augustus does not go as far as Plaintiffs contend.”  2017 U.S. LEXIS 55442 at *5.

It will be interesting to see how other courts interpret the implications of the Augustus opinion.  For now, employers are encouraged to follow the California Labor Commissioner’s advice and discontinue any practices that impose any restraints on how employees spend their break periods.  If you have any questions or would like more information, please contact Allison Hyatt at (916) 472-3302 or email at [email protected].

California Appellate Court Concludes That Employer Lawfully Rounded Employee Time Up and Down

Posted on: July 12th, 2018

By: Laura Flynn

The Second District of the California Court of Appeal has ruled that calculating payroll by automatically rounding workers’ hours either up or down to the nearest quarter-hour is legal as long as it does not result in workers being systematically underpaid over time. In a published opinion, the three-judge panel found the payroll system implemented by a Southern California hospital system was neutral both on its face and in the way it was applied.

Under the employer’s payroll system, an hourly worker who clocked in between 6:53 and 7:07, was paid as if they clocked in at 7:00.  Meal breaks that lasted between 23 and 37 minutes were rounded to 30 minutes.  The legality of the calculation method was challenged by two former employees who alleged they weren’t paid properly or given adequate meal breaks or rest periods.  The primary allegation was that the rounding system did not comply with the California Labor Code because it did not use employees’ exact clock-in and clock-out times.

A statistical expert analyzed the time records for all of the hospital employees over a four-year period.  Although some employees lost work time, the remainder either gained time or broke even. Overall, the calculation method resulted in the employer over compensating employees.  The Appellate Court held a rounding system is valid if it “average[s] out sufficiently,” rejecting claims that minor discrepancies in an individual employee’s wage calculations establish that the employee is entitled to assert a claim for underpayment.

The Court relied on Section 785.48 of title 29 of the Code of Federal Regulations which allows employers to round work time as long as it doesn’t result in workers being underpaid over statistically significant periods of time. California’s Division of Labor Standards Enforcement has adopted the federal regulation as part of its enforcement standards.  The Court’s opinion confirms Section 785.48 and the policies underlying it “apply equally to the employee-protective policies embodied in California labor law.”

AHMC Healthcare, Inc. v. Superior Court, filed 6/25/18, Los Angeles Superior Court Case No. B285655.

If you have any questions or would like more information, please contact Laura Flynn at [email protected].

California’s New Independent Contractor Test

Posted on: July 11th, 2018

By: Christine Lee

On April 30, 2018, the California Supreme Court issued a landmark decision in Dynamex Operations West, Inc. v. Superior Court, No. S222732, in which the Court adopted an extremely broad view of workers who will be deemed “employees” as opposed to “independent contractors” for purposes of claims alleging violations of California’s Wage Orders.  This decision will undoubtedly lead to increased litigation challenging classification of workers across the state as employers will now have a much higher burden to defeat such claims.

Under the new “ABC” test set forth in Dynamex, a worker will be presumed to be an employee unless the hiring entity proves all of the following:

(A) The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract and in fact; and

(B) The worker performs work that is outside the usual course of the hiring entity’s business; and

(C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work he or she performed for the principal.

An employer’s failure to establish any one of the three factors will result in a determination that the worker is an employee as a matter of law.  The Court’s ruling specifically applies to claims asserted under the IWC Wage Orders, which impose obligations related to minimum wages, overtime, and required meal and rest breaks. It is presently unclear how the case applies to claims arising under other statutes.

We encourage all companies doing business in California to immediately evaluate classification of outside contractors or vendors.  Under Dynamex, the vast majority of persons performing services for a company will be considered employees if they are performing work within the usual course of the company’s business, even if those individuals act autonomously and are free from control or direction of the hiring entity.

Therefore, we strongly encourage employers to consult with counsel to evaluate and consider reclassifying independent contractors or risk finding themselves on the losing end of an expensive and painful misclassification case.

If you have any questions or would like more information, please contact Christine Lee at [email protected].

Is An Employee’s Intentional Act An Employer’s “Accident”?

Posted on: July 10th, 2018

By: Rebecca Smith and Zach Moura

It may just be, according to the California Supreme Court’s recent decision in Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co., Inc. (June 4, 2018, No. S236765).  In Liberty v. Ledesma, the underlying lawsuit was brought by a minor who sought damages for molestation committed by an employee of a general contractor (“L&M”) while the employee was working on a long-term construction project at the minor’s school.  In response to this underlying suit and the tendering of the action by L&M to its carrier, Liberty Surplus Insurance Corporation and Liberty Insurance Underwriters (“Liberty”), Liberty filed a declaratory relief action seeking to adjudicate that they had no duty to provide coverage under a general liability policy.

The certified question presented to the Supreme Court by the 9th Circuit Court of Appeals was when a third party sues an employer for negligent hiring, retention and supervision of an employee who intentionally injured that third party, does the suit allege an “occurrence” under the employer’s general liability policy?  The Supreme Court responded that the answer turns on whether the injury can be considered “accidental” and concluded “it can.”

In reaching its decision, the Supreme Court acknowledged that the act of L&M in hiring the employee who later turned out to be the molester was intentional and that the employee’s molestation of the student was also intentional; however, held that because L&M did not “expect” its employee to molest a student, an accident transpired as required by the definition of “occurrence” in the Liberty policy.  The Court emphasized that the issue of whether an act constituted an accident for purpose of coverage MUST be viewed from the standpoint of the insured.  Explaining their decision, the Court stated that because the molester’s acts were unanticipated from L&M’s perspective, they were accidents in the context of providing insurance.  The allegedly negligent hiring, retention and supervision were independently tortious acts according to the Supreme Court, which form the basis of their claim against Liberty for defense and indemnification.  Further, the Court stated that the molester’s intentional conduct did not preclude potential coverage for L&M.

While the Supreme Court effectively wiped out a line of California Court of Appeal decisions which held that the unexpected consequences of an intentional act are not an accident, the Court pointed out that if the determination was justified in that if the insurer’s argument regarding the definition of occurrence and accident were accepted, it would leave employers without coverage for claims of negligent hiring, retention or supervision whenever the employee’s conduct is deliberate.  Such a result, the Court opined, would be inconsistent with California law, which recognizes the cause of action even when the employee acted intentionally.

It is expected that the opinion will lead to an increase in claims to insurers from employers facing negligent hiring claims.  It may also lead to an increase in litigation of coverage for liability claims based on intentional acts that result in allegedly unexpected injury, which would previously have been denied on the basis that the unexpected consequences of an intentional act are not an accident and therefore, not an occurrence under personal injury liability coverage.

If you have any questions or would like more information, please contact Rebecca Smith at [email protected] or Zach Moura at [email protected].