Fenwick Employment Brief - Summer 2017 Update

by Fenwick & West LLP
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California Legislative and Agency Update

Read about the latest California cities to increase hourly minimum wages, newly expanded transgender protections, criminal background check limitations and other changes in California law.

New York Legislative Update

New York City wants to make sure freelance workers are paid on time and in full. Read more to learn what it means for independent contractors and companies that engage them.

Washington Legislative Update

Find out what Washington’s new paid family leave program aims to provide and how it will work.

DOL: Apparent Shift Toward More Employer Friendly Policy

Actions by the federal Department of Labor portend an apparent shift toward a more employer-friendly wage and hour policy.

Cases

California Supreme Court Opens Discovery for Plaintiffs in Labor Code PAGA Actions

California Supreme Court Clarifies Day-of-Rest Obligation for Non-Exempt Employees

Employees of Temporary Staffing Agencies May be Forced to Arbitrate Claims Against Agency Clients

No FEHA Violation for Refusing to Rescind Resignation of Disabled Employee

California Legislative and Agency Update

Local Minimum Wage Hikes

The below California cities increased their hourly minimum wage to the following rates (which exceed the state minimums) as of July 1, 2017:

  • Emeryville: $14.00 per hour for employers with 55 or fewer employees, $15.20 per hour for businesses with more employees.
  • Los Angeles (city and county): $10.50 per hour for employers with 25 or fewer employees, $12.00 per hour for businesses with more employees.
  • Milpitas: $11.00 per hour.
  • Sacramento: $10.50 per hour for employers with 100 or fewer employees (larger employees faced this rate hike in January).
  • San Francisco: $14.00 per hour.
  • San Jose: $12.00 per hour.
  • San Leandro: $12.00 per hour.

Transgender Protections of FEHA Expanded

Although transgender employees are already protected by the Fair Employment and Housing Act, new regulations effective July 1 clarify the scope of the protection, including working conditions and recording of employee gender and name. The regulations recognize protection for employees in the process of transitioning between genders and the need for “safe and adequate” locker rooms and dressing rooms (in addition to restrooms), and they require “gender neutral” signage on single-occupancy restrooms. Further, employers may be liable for violating FEHA if they fail to use an employee’s preferred gender, name and/or pronoun. Employers should ensure that managers and supervisors are aware of these requirements to avoid inadvertent violations.

New Prohibitions on Use of Criminal Background Information

Also as of July 1, new state regulations took effect that further limit how employers can consider criminal history when making employment decisions and imposing certain notice requirements related to such decisions. Notably, employers may no longer ask about any non-felony convictions for possession of marijuana that are more than two years old, representing an expansion upon prior limitations. The regulations also prohibit considering criminal history if it will result in an adverse impact on protected individuals; the individual will bear the burden of proving that the employer’s policy had an adverse impact, and an employer, as a defense, may show the practice is job-related and consistent with business necessity. When relying on criminal history information obtained by anyone other than the candidate or employee, employers taking adverse action must provide pre-action notice to the individual to allow the individual to show the information is inaccurate. As state and federal limitations on the use of criminal background information tighten, employers should re-visit their candidate vetting processes and determine how much criminal information they really need.

New Notice Requirement for Right to Domestic Violence Leave

As addressed in our Winter 2017 Update, effective July 1, Labor Code Section 230.1, which addresses time off for employees who are victims of domestic violence, sexual assault or stalking, now includes a requirement that employers inform employees of their rights under that law—upon hire and request. Employers who provide employee handbooks upon hire containing provisions about the right to take such time off are already complying with this new requirement. Employers who are not providing such written notification may use the California Division of Labor Standards Enforcement’s form or should add such a policy to their existing handbook or workplace postings as soon as possible.

DFEH Publishes “Workplace Harassment Guide for California Employers”

In May, the California Department of Fair Employment and Housing published a nine-page guide for employers to help clarify employer obligations around preventing and correcting wrongful behavior. The guide contains detailed advice on training, responding to employee reports and conducting investigations, among other helpful information. The DFEH also provided a new poster and employee brochure on sexual harassment, so employers should be sure to update these items if used as part of their workplace postings.

San Francisco Expands Protections for Nursing Mothers and Female Job Applicants

Last month, San Francisco Mayor Ed Lee signed into law the Lactation in the Workplace Ordinance, which will apply to all employees within the city of San Francisco as of January 1, 2018. The ordinance goes beyond the lactation accommodation requirements of existing federal and California law by defining more precisely what a lactation room must contain, mandating that employers have a written lactation accommodation policy and request process, and imposing new recordkeeping obligations.

On July 20, 2017, Mayor Lee also signed the Parity in Pay Ordinance, which will prohibit employers from considering or inquiring about the current or past salary of job applicants, beginning July 1, 2018. The ordinance aims to close the current pay gap between women and men. Applicants and employers will still be free to discuss salary expectations, and an applicant may voluntarily disclose a prior salary for negotiation purposes. Penalties for violating the ordinance will run from $100-$500 per person per violation.


New York Legislative Update

New York City Installs Protections for Freelance Workers

Effective May 15, 2017, New York City’s Freelance Isn’t Free Act aims to ensure that freelance workers in New York City are paid on time and in full. FIFA, which covers contracts and agreements made on or after May 15, 2017, does the following:

  • Requires a contract (or multiple contracts over a 180-day period) worth $800 or more between freelance workers and hiring parties to be in writing.
  • Prohibits hiring parties from paying freelance workers late or underpaying them.
  • Protects freelance workers against retaliation for asserting their rights under FIFA.

Freelance workers are individuals hired or retained as independent contractors to provide services for compensation, even if incorporated or using a trade name and without regard to their immigration status. Certain workers are excepted from coverage, including employees; individuals who agree to perform services for no pay; certain sales representatives and licensed attorneys and medical professionals; individuals hired or retained by any federal, state, local or foreign government; or businesses and other organizations that have more than one person.

The written contract must include the names and mailing addresses of the freelance worker and hiring party, an itemization of all services to be provided, the value of the services, the rate and method of compensation and the date of payment or the mechanism by which the payment date will be determined. If silent on the final point, payment is due no later than 30 days after the services under the contract are completed. Both the freelance worker and the hiring party must keep a copy of the contract.

FIFA may apply to work performed outside of New York City, depending on the circumstances, including where some of the work is performed in New York City or the hiring party has significant operations in New York City.

Freelance workers must file claims for failure to provide a written contract under FIFA within two years of the alleged violation; claims for nonpayment, underpayment or act of retaliation must be filed within six years of the alleged violation. Remedies may include damages equal to the value of the contract, a $250 fine, double damages for nonpayment or underpayment, injunctive relief, and attorneys’ fees and costs.


Washington Legislative Update

Washington State Enacts Generous Paid Family Leave Program

On July 5, 2017, Washington became the fifth state to guarantee paid family leave for employees when Governor Jay Inslee signed the program into law. Washington’s paid family leave program will provide 12 weeks of wage substitution, or 14 weeks for certain births, up to a benefit cap of $1,000 per week. Employees and employers alike will pay into the system funding the leave, although employers with 50 or fewer employees will not have to contribute. The law goes into effect in 2020, so further guidance will likely come before then.


DOL: Apparent Shift Toward More Employer Friendly Policy

Actions by the federal Department of Labor portend an apparent shift toward a more employer-friendly wage and hour policy.

In early June, the DOL withdrew Obama-era guidance that called for an expansive definition of joint employment relationships and stated that most workers were employees (and not independent contractors). Weeks later, the DOL announced that it would reinstate its historical practice of issuing opinion letters. Such letters are an official, written opinion by the DOL’s Wage and Hour Division about how a law applies to the specific situation described by a requesting employer, employee or other inquirer. From 2010 to 2016 under the Obama administration, the DOL had replaced that practice with use of more general interpretive guidance, publishing 11 interpretations during that period. U.S. Secretary of Labor Alexander Acosta explained that the opinion letters facilitate better understanding of the Fair Labor Standards Act and other statutes and expressed the DOL’s commitment “to helping employers and employees clearly understand their labor obligations so employers can concentrate on doing what they do best: growing their businesses and creating jobs.”

Additionally, the DOL has indicated that it intends to revisit the embattled salary threshold in its enjoined overtime rule. In a brief recently filed regarding the enjoined rule (previously reported in the Winter 2017 Update), the DOL asked the court to confirm its authority to set a salary minimum without addressing the validity of the specific salary threshold—$47,476 annually—set by the rule. The DOL opted not to advocate for the minimum, indicating instead that it “intends to undertake further rulemaking to determine what the salary level should be.” Indeed, on July 26, 2017, the DOL published a Request for Information (the mechanism for seeking public comment) on the overtime rule, specifically seeking feedback on the salary level test, methodology for calculating the salary threshold, automatic updating of the salary threshold, and the interplay of the salary level and duties tests. Public comments may be submitted on or before September 25, 2017. These actions are consistent with Secretary Acosta’s prior comments that the minimum salary for exempt employees must be updated to keep pace as “life gets a lot more expensive” but that the current threshold was excessive.


Cases

California Supreme Court Opens Discovery for Plaintiffs in Labor Code PAGA Actions

The California Supreme Court, in Williams v. Marshalls of California, expanded the scope of information plaintiffs can obtain from employers in Labor Code Private Attorneys General Act actions.

PAGA (California Labor Code § 2698 et. seq.) authorizes employees to file representative actions on behalf of themselves and other aggrieved employees for violations of certain Labor Code sections, including, for example, claims for unpaid wages, meal and break period violations, misclassification and retaliation. Williams, who was employed at a Costa Mesa, California, Marshalls store, filed a PAGA representative action against the company in 2013. Williams alleged that Marshalls undertook companywide unlawful practices, including requiring employees to work during meal periods without pay, erasing meal period violations from time records, making late payments and requiring employees to carry out company business without reimbursement.

During discovery, Williams sought the names and contact information for all non-exempt Marshalls employees in California for a two-year period. Marshalls refused to produce the information on three grounds—the request was overbroad, unduly burdensome and an invasion of privacy. The trial court ordered Marshalls to provide information for employees who worked in the same Costa Mesa store as Williams, but denied the request as to employees in the company’s other approximately 130 stores unless Williams could demonstrate some merit to his claims after submitting to “at least six productive hours of deposition.” The Court of Appeal denied Williams’ appeal, holding that he failed to “set forth specific facts showing good cause justifying the discovery sought” and show “a compelling need for discovery” that would justify compromising third party privacy interests. The supreme court granted review to “resolve issues of first impression concerning the appropriate scope of discovery in a PAGA action.”

Supreme Court’s Reasoning
The supreme court held that Williams was entitled to obtain the names and contact information of every nonexempt Marshalls employee in California for a two-year period and rejected each of Marshalls’ three bases for refusing to produce the information. As a general matter, the court emphasized that the right to discovery is broad and must be construed liberally in favor of disclosure unless the request is clearly improper and that under the Labor Code, the right to discovery includes the right to learn “the identity and location of persons having knowledge of any discoverable matter.” (Labor Code § 2017.010.)

More specifically, the court held that disclosure of information of others who may be aggrieved was “an essential first step to prosecution of any representative action.” Further the court stated that the Labor Code and Code of Civil Procedure do not require a party seeking discovery to establish good cause or prove the merits of the underlying claims before obtaining relevant discovery. Finally, the court concluded that the information sought by Williams was not so highly sensitive and private as to warrant protection. Any residual privacy concerns could be protected by issuing a notice to the employees as set forth in Belaire-West Landscape v. Superior Court, 149 Cal. App. 4th 554 (2007) (notices include assurances that the third parties are under no obligation to talk to plaintiffs’ counsel and provide an opportunity to opt out of disclosure).

California Supreme Court Clarifies Day-of-Rest Obligation for Non-Exempt Employees

In Mendoza v. Nordstrom, the California Supreme Court recently provided much needed guidance about a non-exempt employee’s entitlement to a day of rest in a workweek. California Labor Code Sections 551 and 552 provide that an employee has the right to receive one day of rest—and an employer shall not cause an employee to work more than six days—“in seven.” The court concluded that compliance is measured by the defined workweek, and not on a rolling basis. It further held that an “employer cannot affirmatively seek to motivate an employee’s forsaking rest, but neither need it act to prevent such forsaking.”

The court also evaluated Section 556, which creates one (of several) exceptions to the day of rest obligation. It provides that Sections 551 and 552 do not apply “when the total hours of employment do not exceed 30 hours in any week or six hours in any one day thereof.” The court concluded that the six hour cap applied to each and every day of the applicable workweek, such that the day-of-rest obligation would apply if the employee worked more than six hours at least one day in the applicable workweek. The court declined to opine on whether Section 556’s test was conjunctive (meaning both the weekly and daily conditions must be satisfied) or disjunctive (meaning only one condition must be satisfied), as resolution was not necessary for the matter.

This clarification provides employers with significant non-exempt employee populations an opportunity to review and ensure scheduling practices—formal and informal—comply with day-of-rest obligations.

Employees of Temporary Staffing Agencies May be Forced to Arbitrate Claims Against Agency Clients

A California appellate court ruled, in Garcia v. Pexco, that a temporary worker could be made to arbitrate his California Labor Code claims against both the staffing agency that employed him and the company for which he had served as a non-employee temp (Pexco). This was true even though the worker had signed an arbitration agreement only with the staffing agency. The court held that all of the workers’ claims, including those against Pexco, were “intimately founded in and intertwined with” his employment relationship with the staffing agency. That relationship was governed by the employment agreement compelling arbitration between him and the agency and explicitly covered statutory wage and hour claims. The court reasoned that since the employee alleged both Pexco and the agency were his joint employers and based his claims against both on the same set of facts, he could not attempt to link the two to hold them liable for alleged wage and hour claims, while at the same time arguing the arbitration provision only applied to the agency and not Pexco.

No FEHA Violation for Refusing to Rescind Resignation of Disabled Employee

In Featherstone v. Southern California Permanente Medical Group, a California appellate court dismissed claims by a disabled employee asserting wrongful termination and disability discrimination when her employer refused to rescind her resignation. The employee alleged that she had quit her job due to an altered mental state brought on by an adverse reaction to medication. In rejecting her claims, the court noted that “absent evidence of constructive discharge or contractual obligation, refusal to allow rescission is not an adverse employment action.” The ruling follows similar federal court decisions under the Americans with Disabilities Act, but is the first to directly address rescission of resignation under FEHA. Such rulings can be highly fact specific; employers who find themselves in a similar situation should check with counsel before taking action.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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