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Archive for the ‘Employment Law Blog – CA’ Category

To Bonus or Not to Bonus? Departing from the FLSA, the California Supreme Court Clarifies Calculation of Overtime Including Flat Sum Bonuses

Posted on: April 16th, 2018

By: Christine C. Lee

Calculating the correct overtime pay rate for non-exempt employees just got a little more complicated for California employers who elect to pay bonuses.  In the recent case of Alvarado v. Dart Container Corporation of California, plaintiff Hector Alvarado, a non-exempt warehouse worker, was paid a flat “attendance bonus” of $15 per day in addition to his hourly rate if he worked a full shift on a Saturday or Sunday.  Because there was no California statute, regulation or wage order directing how employers should calculate the rate of pay for overtime purposes when such non-discretionary flat sum bonuses are paid, the employer, Dart Container Corporation of California, followed the methodology set forth in the federal Fair Labor Standards Act (FLSA).

Dart calculated the overtime pay rate by taking Mr. Alvarado’s total earnings in the relevant pay period, which included the attendance bonuses, and dividing that figure by all hours worked in the pay period including overtime.  Using this figure, Dart paid Mr. Alvarado 1.5 times this rate for every overtime hour worked.

To thank his employer for the bonuses, Mr. Alvarado sued Dart in a wage and hour class action alleging Dart miscalculated the overtime rate of pay.  He argued Dart should have divided the period’s earnings and attendance bonuses only by the amount of non-overtime hours worked which would have resulted in a marginally higher overtime rate of pay.  In support of his position, Mr. Alvarado relied on the California Division of Labor Standards Enforcement’s (DLSE) Enforcement Policies and Interpretations Manual which states that when employees earn a flat sum bonus, their overtime rate is determined by dividing the regular and bonus earnings only by the regular non-overtime hours worked during the relevant pay period.  The case reached the California Supreme Court for guidance.

There, Dart argued because its formula complied with the federal FLSA when California law gave no guidance, its methodology was lawful.  Dart also argued the DLSE Manual was merely an underground regulation and interpretation of the law and therefore was not entitled to any special deference.  The Court agreed the DLSE manual was not entitled to special deference.  Nevertheless, the Court held “[W]e are obligated to prefer an interpretation that discourages employers from imposing overtime work and that favors the protection of the employee’s interests.”  The Court found Mr. Alvarado’s method was “marginally more favorable to employees” and should now be the law of California.  To add further ambiguity to its ruling, the Court cautioned this methodology only applied to non-production related flat sum bonuses and not necessarily to production-based bonuses such as piece rate or commission-based bonuses.

Dart requested only prospective application of the Court’s rulings since California law had been unclear up to that point.  The Court refused the request, leaving Dart on the hook for 4+ years’ worth of unpaid overtime, penalties for inaccurate wage statements, penalties under Labor Code §203 and California’s Private Attorney General Act, and attorney’s fees and costs.

The unfortunate result of this decision is that employers may stop bonusing non-exempt employees and/or flee California to avoid this kind of catastrophic litigation.

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

 

Salary History Cannot Be Used To Justify Wage Gap

Posted on: April 10th, 2018

By: Rebecca J. Smith

The U.S. Court of Appeals for the 9th Circuit, which heard the case of Rizo v. Fresno County Office of Education en banc last year, has changed the 9th Circuit’s position and found that an employee’s prior salary – either alone or in a combination of factors – cannot be used to justify paying women less than men in comparable jobs.

“The Equal Pay Act stands for a principle as simple as it is just:  men and women should receive equal pay for equal work regardless of sex” Judge Stephen Reinhardt wrote in the opinion.   The opinion clearly establishes that an employer cannot justify a wage differential between male and female employees by relying on prior salary.

In the ruling made on Monday, April 09, 2018, the en banc panel overturned the earlier panel’s decision looking at the history of the act and indicating that Congress simply could not have intended to allow employers to rely on past discriminatory wages to justify continuing wage differentials.  One of the biggest issues, going forward after this decision will be whether negotiated salaries are included within the equal pay statutes.  Judge M. Margaret McKeown indicated in her concurring opinion that she was concerned about chilling voluntary discussions between employees or potential employees and employers when an employee is attempting to use prior salaries as a bargaining chip.

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

Was That An Out-Of-Bounds Whistle?

Posted on: February 23rd, 2018

By: Samuel Y. Edgerton, III

On Wednesday, February 21, 2018 the U.S. Supreme Court settled a split of opinion between the Ninth and Fifth Circuit Court of Appeals. The issue before the high court concerned the definition of the term “whistleblower” under the Dodd-Frank Act.

In March 2017, the Ninth Circuit found that former Digital Realty executive Paul Somers was entitled to whistleblower protection under Dodd-Frank after being discharged because he complained to upper management that a senior vice president had eliminated some internal corporate controls. These eliminations allegedly constituted a violation of the Sarbanes-Oxley Act.  However, in 2013, a Fifth Circuit ruling in a similar case, Asadi v. G.E. Energy, found that to be eligible for protection under Dodd-Frank as a recognized “whistleblower,” the employee must show that they took their complaint to the SEC, per the specific wording of the statute.

Mr. Somers’s San Francisco based employer appealed the Ninth Circuit’s ruling to the high court, as it was undisputed that Mr. Somers had not reported to the SEC, but reported elsewhere.

In ruling for a definition of a whistleblower as those who report to the SEC, the Supreme Court excluded Dodd-Frank whistleblower protections to those only reporting at their place of work.

The high court ruling is instructive on two fronts: It means that whistleblower definitions in the enabling statute are to be strictly construed. The high court opinion also suggests quite strongly that lower courts and federal agencies cannot ignore unambiguous language in an enforcement statute and expand the definitional meaning on their own.

Score one for the strict constructionist! The Ninth Circuit was out of bounds.

As stated by Justice Kagan during oral argument last November, “you have this definitional provision, and it says what it says.”

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

Navigating New California Employment Laws

Posted on: February 1st, 2018

By: David Daniels

Are you and your clients doing business in California prepared for the new employment laws that take effect in 2018? If you represent employers in the state of California, these laws may very well affect the daily operations of their business. Unless specified, all new legislation outlined below went into effect on January 1, 2018.  As explained more fully below, I strongly encourage you to review your client’s employee handbooks and job applications to ensure compliance with the new 2018 employment statutes.

 

  • Stop asking about salary history –  AB 168 bars employers from asking job applicants about their previous salary. The legislation’s goal is to narrow the gender gap by preventing employers from basing offers on prior salary and thus, presumably, perpetuating historical discrimination. This will also remove the perceived gap in negotiating power between an employers and employees who must disclose their prior salary. Employers should ensure that their job applications don’t seek prohibited information and that those interviewing applicants know not to ask these questions.  I encourage all employers to review their written and/or on-line employment contracts to determine if the applicant is requested to state their salary history in the “Previous Experience” sections of the applications.  It is common practice to ask the applicant about their salary history in these sections of the application.  This practice must stop before January 1, 2018 in order to be compliant with California law.

 

  • More employers must offer parenting leave – SB 63, officially titled the Parental Leave Act, requires employers with between 20 and 49 employees to offer parenting leave that mirrors the Family Medical Leave Act. The new Act allows employees who work for a covered employer to take 12-weeks of unpaid, job-protected leave if they have worked a minimum of 1,250 hours in the 12-months prior to taking leave.  Employees can take leave only for the purpose of bonding with a newborn child, adopted child or foster child within a year of the birth or placement. Covered employers will also need to maintain health coverage under the same terms as an active employee. The Act also prohibits discrimination and retaliation against an employee for taking parental leave. The Parental Leave Act does not require employers to pay any portion of the leave but requires that employees be able to use accrued sick and vacation time. Employees can apply to have a portion of the parental leave paid for through the state’s Paid Family Leave program.  Please note that, San Francisco requires some employers to pay a remaining portion of parental leave.

 

  • Expanded harassment training – California requires at least biannual harassment training for supervisors in companies with 50 or more employees. Having given a dozen sessions of the  training in the last month, I can assure you that there’s no shortage of material to talk about. But as of January 1, 2018, SB 396 requires that the training include information on gender identity, gender expression, and sexual orientation. If your handbook doesn’t specifically prohibit discrimination and harassment on those bases, you’re overdue for a revision.

 

  • Ban the box – Following the leads of San Francisco and Los Angeles, AB 1008 prohibits employers with five or more employees from:
    • Asking on employment applications about criminal convictions;
    • Asking applicants about criminal convictions before making a conditional offer of employment;
    • When conducting background checks on applicants, considering, distributing, or disseminating information about prior arrests not leading to conviction, participation in diversion programs, or convictions that have been sealed, dismissed, expunged, or otherwise nullified.

 

Employers who wish to rely on criminal conviction information to withdraw a conditional job offer must notify the applicant of their preliminary decision, give them a copy of the report (if any), explain the applicants right to respond, give them at least five business days to do so, and then wait five more business days to decide when an applicant contests the decision. There are exceptions for employers who operate health facilities hiring employees who will have regular access to patients or drugs.

 

  • Minimum Wage Increases – On January 1, 2018, the California state minimum wage goes up to $11.00 per hour for businesses with 26 or more employees and $10.50 per hour for smaller companies.

 

  • Worksite Immigration Enforcement and Protections, AB 450 – The Immigrant Worker Protection Act shields workers from immigration enforcement while on the job. The legislation prohibits employers from providing federal immigration enforcement agents access to a business without a warrant and requires employers to notify employees of Form I-9 inspections performed by federal immigration enforcement officials.

 

  • Gender Identification: Female, Male or Nonbinary, SB 179 – This new law, which goes into effect on September 1, 2018, allows California residents to choose from three equally recognized gender options — female, male or nonbinary — on state-issued identification cards, birth certificates and driver’s licenses.

 

  • Employment Discrimination: Gender Neutral Language, AB 1556 – This law is a revision to California’s Fair Employment and Housing Act which deletes gender-specific personal pronouns in the state’s anti-discrimination, anti-harassment, pregnancy disability and family/ medical leave laws by changing “he” or “she,” for example, to “the person” or “the employee.”

 

  • LGBT Rights for Long-Term Care Facility Residents, SB 219 – Called the Lesbian, Gay, Bisexual, and Transgender (LGBT) Long-Term Care Facility Residents’ Bill of Rights. The new law will strengthen anti-discrimination protections for LGBT individuals living in long-term care facilities, making it unlawful to willfully and repeatedly fail to use a resident’s preferred name or pronoun or to deny admission to a long-term care facility because of gender identity or sexual orientation. You must post a notice about the protections and follow recordkeeping requirements.

 

  • Human Trafficking, AB 260 – This new law extends the list of businesses that must post human trafficking information notices to include hotels, motels and bed and breakfast inns. In addition, SB 225 requires the human trafficking notice include a new number for those who wish to send text messages. Businesses are not required to post the updated notice until on or after January 1, 2019.

 

  • Anti-Discrimination Protections for Veterans, AB 1710 – This law will expand the current protections for members of the armed services. AB 1710 prohibits discrimination in all “terms, conditions, or privileges” of employment.

 

  • Health Facilities: Whistleblower Protections, AB 1102 – increases the maximum fine for a violation of whistleblower protections in healthcare facilities from $20,000 to $75,000.

 

  • Harassment Prevention Training: Farm Labor Contractors, SB 295
    This bill requires sexual harassment prevention training for each agricultural employee provided in the language understood by that employee in order to apply for or renew a license. The bill also requires an employer provide to the commissioner the total number of agricultural employees trained in sexual harassment prevention in the calendar year prior to the month the renewal application is submitted.

 

  • Labor Law Enforcement, Retaliation, SB 306 – This allows the Labor Commissioner to investigate an employer with or without a complaint from an employee as long as the Labor Commissioner suspects retaliation or discrimination against a worker.

 

  • Increased Liability for Construction Contractors, AB 1701 – This law pertains to private construction contracts entered into after January 1, 2018. It imposes liability onto the general contractor for any unpaid wages, benefits or contributions that a subcontractor owes to a laborer who performed work under the contract.

 

Please feel free to contact me at [email protected] should you wish to further discuss any of these new laws and/or how to best change your policies and practices to ensure compliance with California law.

Employer Notification to Disseminate Updated Sexual Harassment Brochure or Poster to California Employees

Posted on: December 11th, 2017

By: Elizabeth G. Fellmeth

On April 1, 2016, stronger discrimination and harassment regulations under the Fair Employment and Housing Act (“FEHA”) took effect. In addition to distributing California’s Department of Fair Employment and Housing (“DFEH”) brochure on sexual harassment (DFEH-185), the new regulations require employers to prepare and disseminate their own harassment, discrimination, and retaliation prevention policy.  A summary of the new FEHA regulations can be found here.  The DFEH also issued a workplace harassment guide for employers found here, which provides recommendations for implementing an effective anti-harassment program.

While employers may have spent the last year implementing the new regulations, the DFEH recently issued an updated DFEH-185 brochure replacing the earlier version (found here in English and here in Spanish).  The new brochure is also available in a printable poster format (found here in English and here in Spanish).

State law requires employers to disseminate the new information to their employees.  Employers can fulfil their obligations by providing new hire and current employees with a hardcopy or email copy of the updated brochure or new poster.  To ensure receipt of the brochure or poster, employers should include an acknowledgment form for employees to sign and return.

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