NEWSLETTER

California Governor Helps Employers By Vetoing Several Pending Bills 

California Governor Arnold Schwarzenegger had until midnight, October 14, 2007 to act upon all of the legislation that had been pending on his desk. That deadline has now passed, and Governor Schwarzenegger used this time, at least in part, to convey his support for employers within California.

While noting that “California has the strongest employment leave and workplace protection laws in the country,” Governor Schwarzenegger returned without signature three bills aimed at expanding employees’ rights to take time off. Assembly Bill 537 would have expanded the circumstances under which an employee is entitled to take leave under California’s Family and Medical Leave act to include: (1) time off to care for an ill child, regardless of the child’s age or dependency status; (2) an expanded definition of the term “parent” to include the employee’s parent-in-law; and (3) time off to care for an employee’s ill grandparent, sibling, grandchild or domestic partner. Similarly, Senate Bill 727 would have expanded the definitions of individuals who are eligible for temporary disability insurance benefits. Senate Bill 549, if passed, would have required all employers to provide eligible employees with up to four days bereavement leave.

Other laws that Governor Schwarzenegger vetoed include:

Senate Bill 836, which would have expanded workplace protections to include “familial status” as a basis upon which employers could not discriminate or retaliate against employees.

Assembly Bill 1707, which would have provided for a $750 penalty against all employers who do not meet certain delineated requirements regarding providing current and former employees the opportunity to inspect and make copies of their personnel files.

Senate Bill 622, which in Governor Schwarzenegger’s words would have created “new and redundant exposure to litigation [and] may cause businesses to avoid use of the independent contractor model even where it may be appropriately utilized.”

Assembly Bill 435, which would have allowed employees to recover liquidated damages in minimum wage complaints brought before the Labor Commissioner.

Assembly Bill 504, which would have required employers to pay restitution to striking employees under certain, newly-delineated circumstances.

Assembly Bill 8, which would have, among other things, imposed a tax on small employers who could not afford to provide health insurance coverage to employees in order to fund health care coverage for those who do not currently provide insurance benefits.

These are just a few of the 214 bills that Governor Schwarzenegger vetoed during 2007. During 2007, he also signed 750 bills into law. These are just some of the laws impacting employers that were acted upon.

California Adopts Military Spouse Leave Law

Effective immediately, California employers must, under certain circumstances, provide up to ten days of unpaid leave to employees who have spouses in the military.

On October 9, 2007, Governor Schwarzenegger signed into law Assembly Bill 392. AB 392 adds a section to the California Military and Veteran’s Code to permit the spouse of an individual in the military to take time off from work while the military spouse is on leave from deployment.

Who is affected?

The new law applies to all employers with 25 or more employees. To be eligible for the leave, the employee must work at least an average of 20 hours per week and have a spouse who is on active duty for any of the United States Armed Forces, National Guard or Army Reserves, in an area of military conflict.

What must an employee seeking this time off do?

To be entitled to the unpaid ten days off from work, the employee must provide notice to the employer, no later than two business days after receiving an “official notice” that the spouse will be on leave from deployment, that the employee intends to take time off from work during the leave from deployment. Further, the employee must provide “written documentation, certifying” that the spouse will be on leave from deployment.

While the statute presumes that the employee will “request” the time off, there are no circumstances specified under which the employer may deny the leave, or request that the leave be taken at some other time during the spouse’s period of deployment.

Employers’ Bottom Line:

There are uncertainties about this law. For example, as noted above, the law does not address whether an employer has flexibility to ask that the ten-day leave be scheduled in accordance with business operational needs. As a result, it is recommended that employers provide as much flexibility as possible when faced with requests for leave under this new law. The new law prohibits retaliation against an employee for asserting rights under this section.

California employers must provide a number of different types of leave to employees. Employers must not only provide leave for obvious reasons (such as due to disabilities, family leave, pregnancy leave, occupational leave), but also for less obvious reasons (such as substance abuse rehabilitation, attending school conferences, attending school activities, and attending adult literacy education). Failure to provide all of the necessary and legally permissible leaves can be quite costly for employers.

If you have any questions about this new law, any leaves of absence required under California law, or any other aspect of employment law, please contact the Ford & Harrison attorney with whom you usually work or the author of this article, Helene Wasserman, at hwasserman@fordharrison.com or 213-237-2403.

California Supreme Court Classifies Pay for Missed Meal/Rest Breaks as Wages

In the most eagerly anticipated California employment law ruling in years, the California Supreme Court has held that the “one hour of pay at the employee’s regular rate of compensation,” which employers must provide employees for each day they miss the statutorily mandated meal break is to be considered wages. As such, claims for failure to provide meal periods are subject to the three-year statute of limitations applicable to violations of California’s wage laws.

In Murphy v. Kenneth Cole, the California Supreme Court addressed the issue that has fast become one of the “hottest topics” in the area of California wage and hour law. Under California law, all employees must be afforded the opportunity to take a ten-minute paid rest break for every four hours the employee works. Additionally, all employees must take a thirty-minute, uninterrupted, unpaid meal break for every five hours of work. There are two exceptions to this requirement: one for employees who work fewer than six hours who voluntarily waive their meal period, and one for employees who work in positions where they cannot be relieved of all duty and who voluntarily execute written meal period waivers. If employees are not afforded the opportunity to take their rest breaks, and if they do not take their mandatory meal breaks, they are entitled to receive one hour of pay, at their regular rate of compensation, for every day on which they miss their rest and meal breaks.

At issue in Murphy was the characterization of that “one hour of pay” the employee is provided. While recognizing that a tangential effect of the requirement to provide the sum to the employee is to modify employer behavior, the Court held that the primary reason for the requirement is to compensate the employee for the fact that he or she was not provided the unpaid, uninterrupted thirty-minute meal break.

Employers’ Bottom Line:

This case establishes, yet again, the importance of making certain that employers comply with all wage and hour requirements. The financial ramifications for non-compliance can be astronomical. California wage and hour law is very different from the federal FLSA, so simply complying with the FLSA is not enough to protect employers from significant exposure in California. If in doubt, please have your wage and hour practices reviewed by experienced California employment counsel.

If you have any questions regarding this decision or California labor or employment-related issues, feel free to contact any attorney in Ford & Harrison’s Los Angeles office or the author of this article, Helene Wasserman, hwasserman@fordharrison.com, 213-237-2403.

Court Permits Employers to Satisfy Statutory Reimbursement Obligation By Paying Employees Enhanced Compensation

The California Supreme Court recently held that an employer can meet its obligations to indemnify its employees for expenses by paying employees an enhanced compensation that takes the expenses into account. See Gattuso v. Harte-Hanks Shoppers, Inc. (11/5/07).

In this case, the plaintiff, Gattuso, worked as an outside sales representative for Harte-Hanks and sued his employer on behalf of himself and others similarly situated, seeking indemnification under California Labor Code Section 2802 for expenses incurred in using his own automobile to perform employment duties. Under Section 2802, employers are required to indemnify employees for expenses necessarily incurred in the discharge of employment duties. Harte-Hanks argued that it satisfied its obligations under Section 2802 by paying the outside sales representatives higher base salaries and higher commissions than it pays to inside sales representatives. The higher salaries and commissions are intended to compensate for the automobile expenses.

The Court noted that there are three different ways in which employers can reimburse employees for automobile expenses: 1) the “actual expense method,” under which the employee submits detailed and accurate records regarding the various expenses that are to be reimbursed, including maintenance, repairs, insurance, fuel, and the like; 2) the “mileage reimbursement method,” under which the employee keeps track of all miles driven to perform job duties, and the employer and the employee determine the appropriate mileage reimbursement to encompass all of the automobile expenses; and 3) the “lump sum payment method,” which was the one at issue in this case.

Under the lump sum payment method, the employer pays a fixed amount for automobile expenses. It can be determined “per diem,” or it can be considered a car allowance or gas stipend. The amount is based upon a thorough understanding of what the employee does, where the employee drives, etc. The Court held that Labor Code Section 2802 permits an employer to use the lump sum method to reimburse employees for automobile expenses, provided the amount paid is sufficient to provide full reimbursement for actual expenses necessarily incurred. Additionally, the employee must be permitted to challenge the amount of the lump sum payment as being insufficient.

Further, the Court held that an employer using the lump sum method and increasing the employee’s base or commission compensation to account for reimbursement of automobile expenses must provide some method or formula to identify the amount of the combined employee compensation payment that is intended to provide expense reimbursement.

Employers’ Bottom Line:

This case provides yet another look at California wage and hour law. Whether it is reimbursing employees for automobile related expenses, or other regularly recurring expenses, employers must be aware of their legal obligations. If employers are not aware of what is required of them, the results can be disastrous.

Should you have any questions about this or any other issue related to employment law, please contact the author of this article, Helene Wasserman at hwasserman@fordharrison.com or 213-237-2403 or the Ford & Harrison attorney with whom you usually work.

California Court of Appeal Provides Some Hope to Employers Battling Meal and Rest Break Claims

In a well-drafted, yet currently unpublished decision, the California Court of Appeal for the Fourth Appellate District (San Diego County) issued an order that, if published or followed in published decisions, will ease the tremendous burden currently placed on California employers related to meal and rest break claims. In Brinker Restaurant Corporation v. Superior Court of San Diego County (October 12, 2007), the appellate court reversed the trial court’s order certifying a class action, based on the trial court’s erroneous interpretation of the law.

Brinker operates 137 restaurants within California. The purported class was made up of current and former hourly employees of Brinker’s restaurants. These employees asserted several claims, including claims for violation of California’s rest and meal break laws, as well as other wage and hour violations. Specifically, the employees claimed that Brinker violated California law by not specifically scheduling rest breaks in the middle of each work period. Further, the employees asserted that Brinker violated California’s meal period law by allowing “early lunches” and by not “ensuring” that employees take their meal break. Further, the employees claimed that they were forced to “work off the clock” and that Brinker engaged in a practice of “shaving time” from the payroll records to reflect less than a five-hour shift. The trial court ordered the classes certified.

Concluding that the trial court’s order was based upon erroneous assumptions, the Court of Appeal vacated the order certifying the class. The Court of Appeal held that without the trial court’s erroneous assumptions, many of the claims were not susceptible to class treatment because they were based on an individualized assessment of the facts.

In analyzing the rest period claim, the Court relied upon the language of the IWC Wage Order 5-2001 to conclude that “(1) employees need be afforded only one 10-minute rest break every four hours ‘or major fraction thereof’ . . .(2) rest breaks need be afforded in the middle of that four-hour period only when ‘practicable,’ and (3) employers are not required to ensure that employees take the rest breaks properly provided to them . . . .” The Court further explained that, had the trial court reached those conclusions, there would be a determination that only individualized claims exist and, thus, class certification would be improper.

In analyzing the meal period claim, the Court addressed two separate issues. One argument presented by the employees related to Brinker’s “early lunching” policy, under which Brinker allegedly required its hourly employees to take their meal periods within the first hour of their shift, and then the employees would be required to work in excess of five hours, potentially up to ten hours, without an additional meal period. The employees argued that this violated the labor code, which the employees interpreted as requiring an employer to provide a meal break for every five hours of work. Applying what it called “common sense,” the Court reasoned that an employer must provide a 30-minute meal break to employees who are permitted to work more than five hours per day, but need not provide a meal break for every five hours of work.

The second issue relating to meal periods addressed whether an employer is required to ensure that employees take their meal periods. The Court did not rule on this issue because the trial court had failed to decide it. However, the Court identified the issue and noted that under the language of Labor Code Section 512, the question is whether employers are required to ensure that employees take meal breaks, or, rather, whether employers must simply make the meal break available. In instructing the trial court regarding how it believed the trial court should address the issue on remand, the Court cited to the dictionary definition of the term “provide,” meaning, “to make available.”

Further, the Court cited to the recent federal court decision in White v. Starbucks, 497 F.Supp.2d 1080 (N.D. Cal. July 2, 2007), in which the court concluded that “the California Supreme Court . . .would require only that an employer offer meal breaks, without forcing employers actively to ensure that workers are taking these breaks,” and it stated that “the employee must show that he was forced to forego his meal breaks as opposed to merely showing that he did not take them regardless of the reason.”

With regard to the “off the clock” and “time shaving” issue, the Court simply noted that the trial court needed to conduct a more detailed inquiry as to whether the elements of those claims were met before determining that they were appropriate for class certification.

Employers’ Bottom Line:

Employers should remain cautious, but optimistic, in light of this ruling. It is not a published decision, so other courts are not required to rely upon it, nor can it even be cited to courts rendering decisions on these issues. However, efforts are being made to request publication of the decision. In any event, this decision is good news in that it may reflect how other courts, when faced with similar issues, would rule.

California wage and hour law is constantly changing and being reinterpreted. That is why it is vital that all employers with operations in California have their wage and hour policies and practices audited by California counsel experienced in the area of wage and hour law. Should you have any questions about this article or any other area of California employment law, please contact the author of this article, Helene Wasserman, at hwasserman@fordharrison.com or (213) 237-2403.

California Department of Fair Employment and Housing Approves Sexual Harassment Training Regulations

It took more than a year, but regulations have finally been approved to give employers guidance regarding their obligations to provide sexual harassment training pursuant to California Government Code Section 12950.1 (“AB 1825”).

As we previously reported in our November 2004 California Management Law Update, as of January 1, 2006, all employers with 50 or more employees are required to conduct mandatory sexual harassment training of all supervisors. The training must be at least two hours in length and must cover certain specific topics. Each supervisor must be trained at least every two years, and a newly hired or newly promoted supervisor must be trained within six months of assuming supervisory roles.

While the statute provided some information, there were substantial gaps in the legislation, which required significant interpretation and “tea leaf” reading until the regulations were finalized. Many of those questions have now been answered.

Who is a Covered Employer?

The regulations define covered employer as one having 50 or more employees. To determine whether an employer has 50 or more employees, you need to count all full-time and part-time employees, as well as contractors. Additionally, if an employer has had 50 or more employees in 20 or more consecutive weeks in the current or prior year, that employer is required to provide the training. Significantly, not all of the employees must be located in California. So, if an employer has 10 employees in California and 40 employees in other states, that employer must comply with the requirements of the statute and regulations.

Who is a Supervisor?

Another term that has now been defined is the term “supervisor.” A supervisor, for purposes of this statute, is anyone who has the ability to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward or discipline other employees, or direct them, or adjust grievances or effectively recommend that action. A “supervisor” is one who utilizes independent judgment. Significantly, employers are only required to train supervisors located in California. Although language was proposed that would have required training anyone who supervised employees in California, even if the supervisor was not located in California, that language was ultimately rejected.

What Types of Training are Permitted?

Much was discussed about what form the training must take and who is qualified to conduct the training. The regulations approve live training, e-training, and webinars/webcasts, but dictate certain requirements for each. All of the forms of training must include questions that assess learning, skill-building activities assessing understanding, and numerous hypothetical scenarios with questions.

Live Training: Of course live training, by a trainer as defined below, is always permitted, provided it meets the other requirements set forth.

E-Learning: The regulations expressly permit “e-learning.” If an employer elects to use an “e-learning” program, the program must be developed and approved by trainers and instructional designers. Additionally, there must be an opportunity for the supervisor to seek guidance and ask questions of a trainer, and employers must ensure that the trainer responds to the questions no more than two business days after the question is asked.

Webinars/Webcasts: Another approved method of training consists of webinars or webcasts. If an employer elects to use this type of training, it must ensure that the supervisor takes the entire program, and there must be documentation of active participation during the program, such as interactive content, questions, hypothetical scenarios, etc.

Other Programs: The regulations also provide for other “effective interactive training” programs.

Who May Conduct the Training?

To be qualified as a “trainer,” the individual must be either: (a) an attorney admitted to practice in any state for more than two years and whose practice includes employment law; or (b) a “human resources professional” or “harassment prevention consultant” with a minimum of two or more years of practical experience in areas related to sexual harassment, including training, responding to complaints, conducting investigations into sexual harassment complaints and/or advising employers or employees regarding discrimination/retaliation/harassment prevention; or (c) a professor or instructor in law school, college or university, who has a post-graduate degree or California teaching credentials and either twenty instruction hours or two or more years of experience teaching employment law. Individuals who do not meet these qualifications because of they lack the requisite years of experience may team teach with a trainer, provided the trainer supervises the individual and is available throughout the training to answer questions.

What Subjects Must the Training Cover?

The regulations specify certain subjects that must be covered in the training. Mandatory training subjects include: (a) the legal definition of sexual harassment; (b) statutory provisions; (c) types of conduct constituting harassment; (d) remedies available to harassment victims; (e) strategies to prevent harassment; (f) practical examples; (g) limited confidentiality of the complaint process; (h) resources available to victims of harassment; (i) employer’s obligation to conduct an effective investigation; (j) what to do if the supervisor is personally accused; (k) antiharassment policy elements; (l) how harassment complaints are filed; and (m) how to prevent harassment, discrimination, and retaliation. If an employer so chooses, it may address other forms of harassment as part of the training program.

What is Training Year Tracking?

Because all supervisors must be trained every two years, and within six months of being hired or promoted into a supervisory role, the regulations provide guidelines for how to track the training conducted. The regulations discuss “Training Year Tracking” or TYT. Using the TYT method of tracking, the training employer may designate the “training year” and retrain by the end of the next training year, two years later. Newly hired or promoted supervisors trained within six months of assuming supervisory duties may be included in next group training year, even if that is sooner than two years. Employers can shorten but not lengthen the training year.

It is the employer’s burden to establish and verify that all supervisors are appropriately trained in a timely manner. To verify the training, records must be maintained reflecting the name of supervisor being trained, the date on which the training occurred, the type of training, and the name of the trainer. Training records must be maintained for a minimum of two years.

Employers’ Bottom Line:

Sexual harassment training for supervisors is now the “law of the land” in California. If you have any questions regarding the new regulations or the law mandating sexual harassment training, please contact the Ford & Harrison attorney with whom you usually work or the author of this article, Helene Wasserman, hwasserman@fordharrison.com or 213-237-2403.

Construction Workers’ WARN Act Claims Denied: Site of Employment Was Actual Construction Site, not Corporate Headquarters

The Ninth Circuit recently affirmed the decision of a federal trial court denying former construction workers’ claims that their termination violated the Worker Adjustment and Retraining Notification (WARN) Act. The Court held that the workers were not covered by WARN because they did not demonstrate that 50 or more laid-off employees worked at a single site of employment. See Bader et al v. Northern Line Layers, Inc. (September 10, 2007).

Plaintiffs in this case were former employees of Northern Line Layers, Inc., (NLL) and worked at various construction sites across several states. While all administrative functions took place at NLL’s facility in Billings, Montana, the plaintiffs did not work in administrative roles. Instead, they were construction workers, assigned to construction sites at which NLL placed employees.

As part of a merger, more than 50 NLL employees were laid off. NLL did not provide formal WARN notice to either the affected NLL employees or to the Montana State Dislocated Worker Unit. Several employees brought suit, claiming that NLL’s conduct violated WARN. The trial court ruled in favor of NLL, finding that NLL’s Billings office was not a “single site of employment” for 50 or more laid-off employees, as required to trigger WARN.

The Ninth Circuit affirmed. In so holding, the Court evaluated the regulations promulgated by the Department of Labor for interpretation of WARN, and specifically the regulations related to the definition of “single site of employment.” In particular, given the significant number of affected employees who were construction workers working at sites remote from the Billings headquarters office, the Court evaluated the provision of the regulations related to employees who are “outstationed” or whose primary duties involve work outside of the employer’s regular employment sites.

The Ninth Circuit rejected the plaintiffs’ argument that all NLL employees who work outside of Billings are “outstationed,” that Billings is their “home base,” and that the Billings headquarters therefore is a “single site of employment for all NLL employees.” The Court explained that the term “outstationed” refers to a situation where employees live for a short period of time at a certain site, departing for home when the work is done. In this case, the remote construction workers were not residents of Montana and did not, therefore, consider Billings to be their home.

The DOL comments regarding the regulations note that this provision is intended to apply to “mobile workers” who do not report to a specific office. Here, the construction workers were stationed at specific construction sites. Billings was not the “home base” of NLL’s construction-site employees. The Court also determined that Billings was not the site from which these employees’ work was assigned. The work was assigned and overseen by on-site project managers.

Accordingly, the former employees failed to raise a genuine issue of material fact regarding whether 50 or more people were laid off at a “single site of employment” under the WARN Act and summary judgment in favor of the employer was appropriate.

Employers’ Bottom Line:

In addition to federal WARN requirements, as discussed in this case, many states, including California, have their own WARN requirements. It is essential that every employer who is contemplating a layoff or downsizing be aware of the state and federal notification requirements associated with downsizing. If you have any questions about the practical or legal implications of downsizing, or any employment law issue, please contact the author of this Alert, Helene Wasserman, at (213) 237-2403 or hwasserman@fordharrison.com.

Release Contained in Severance Agreement did not Bar USERRA Claims

The California Court of Appeal recently held that a release of rights in a severance agreement does not bar claims arising from the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). See Perez v. Uline, Inc. (12/6/07).

In this case, the plaintiff, Perez, was a Captain in the United States Marine Corps Reserves and was discharged the same day he returned to work from duty with the Reserves. The employer offered him a severance agreement, requesting that Perez execute a release in exchange for receipt of certain severance benefits. The release was sufficiently broad to encompass all potential claims brought by Perez. Perez contemplated seeking legal advice regarding the agreement, but ultimately executed the release without the benefit of legal counsel.

Subsequently, Perez sued Uline and three of its employees, asserting various claims, including claims for defamation, failure to pay overtime, wrongful termination and breach of contract. Perez’ wrongful termination and breach of contract claims were based on the theory that he was removed from his position solely because “he was apt to be called to active duty and was, in fact, absent for one week due to a military obligation.”

The trial held that the severance agreement validly released all of Perez’ claims. Perez appealed and the Court of Appeal affirmed the trial court with regard to Perez’ claims for defamation and labor code violations. However, the Court of Appeal reversed as to Perez’ USERRA claims.

Reading the language of USERRA literally, the court noted that “a contract may not limit the protections of USERRA, which prohibits termination of employment based on membership in the military or performance of military service.” Thus, the court concluded that the severance agreement was not a valid waiver of Perez’ rights under USERRA.

Employers’ Bottom Line:

Just as the California legislature recently enacted legislation protecting the spouses of members of the military who request time off when their spouses are home from deployment, this decision illustrates the extent of protection provided to members of the military under USERRA. It is important for employers to recognize that a separation agreement waiving claims relating to an individual’s employment or termination may not bar claims brought under USERRA.

If you have any questions regarding USERRA, separation and release agreements in general, or any other topic related to employment law, please contact the author of this article, Helene Wasserman, at hwasserman@fordharrison.com or 213-237-2403, or the Ford & Harrison attorney with whom you usually work.

Helene Wasserman, a partner in our Los Angeles office, authored of all of the articles in the December California Management Update and is also one of the editors of this newsletter. She frequently writes and lectures on a variety of employment related issues and often is quoted in publications discussing employment related topics. More information regarding Helene’s background and experience is available on our web site at http://www.fordharrison.com.

Helene is also the host of the Employer Helpcast, which is a “one stop website” for both “nuts and bolts” employment law advice and insight into new legal developments affecting employers.