Wage and Hour Compliance Under California's...

Presenting a live 90‐minute webinar with interactive Q&A

Wage and Hour Compliance Under California's Employee‐Friendly Framework and New LegislationNavigating Unique Overtime Pay, Increased Minimum Wage, Mandated Recovery Periods, and Expanded Employer Penalties

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

WEDNESDAY, JANUARY 22, 2014

Today’s faculty features:

Michael N. Westheimer, Shareholder, Buchalter Nemer, San Francisco

Teresa R. Tracy, Principal, Gladstone Michel Weisberg Willner & Sloane, Los Angeles

The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

WAGE AND HOUR COMPLIANCE UNDER

CALIFORNIA’S EMPLOYEE-FRIENDLY

FRAMEWORK AND NEW LEGISLATION

A Live CLE Webinar

January 22, 2014 10:00 am to 11:30 am PDT

1:00 pm to 2:30 pm EDT

Sponsored by Strafford Publications, Inc.

Teresa R. Tracy, Esq. Gladstone Michel Weisberg Willner & Sloane, ALC

4551 Glencoe Avenue, Ste. 300 Marina del Rey, CA 90292 Tel. (310) 821-9000, x723

[email protected]

______________________________________________________________________________________________________ © Gladstone Michel Weisberg Willner & Sloane, ALC

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NOTE: THESE MATERIALS ARE DESIGNED TO ASSIST IN ISSUE-SPOTTING AND TO HIGHLIGHT MAJOR DIFFERENCES BETWEEN FEDERAL AND CALIFORNIA LAW. IT DOES NOT IDENTIFY OR DISCUSS EVERY DIFFERENCE BETWEEN THESE LAWS. PLEASE CONSULT AN ATTORNEY IF YOU HAVE SPECIFIC ISSUES.

I. NEW LAWS

A. Generally Applicable

Increased Minimum Wage (Labor Code section 1182.12 / AB 10)

Existing state law requires payment of the minimum wage at the rate of $8.00 per hour for all time worked. This bill raises the minimum wage, effective July 1, 2014, to $9.00 per hour, and raises it again to $10.00 per hour effective January 1, 2016. (Note: San Francisco’s minimum wage increases to $10.74/hour and San Jose’s minimum wage increases to $10.15/hour, effective January 1, 2014.)

Exempt Salaries or Hourly Rates Increase An exempt employee must be paid a salary of no less than twice the minimum wage. Thus, because the minimum wage is going up, minimum salaries for exempt status also increase. Effective July 1, 2014, the minimum monthly salary for exempt positions will increase to $3,120.00. The compensation threshold for California’s computer software exemption, which is tied to the Consumer Price Index, is also increasing effective January 1, 2014. As of that date, the hourly minimum is $40.38, or $7,010.88/month, or $84,130.53/year.

Damages for Minimum Wage Violations Increased (Labor Code sections 1194.2 and 1197.1 / AB 442)

Existing law authorizes the Labor Commissioner to perform certain investigative and enforcement activities, including those related to the payment of wages. It also provides for certain criminal and civil penalties related to the payment of wages, and authorizes the Labor Commissioner to recover liquidated damages for an employee who brings a complaint alleging payment of less than the minimum wage, as well as a citation that includes a civil penalty.


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This new law expands the penalty and restitution provisions for a citation to also subject an employer to payment of liquidated damages to the employee in an amount equal to the wages unlawfully unpaid.

Meal and Rest Period Expanded to “Recovery” Periods and Penalties Expanded (Labor Code section 226.7 / SB 435)

Existing law prohibits an employer from requiring an employee to work during any meal or rest period mandated by an order of the Industrial Welfare Commission (IWC) and establishes penalties for an employer’s failure to provide a mandated meal or rest period. This law expands that prohibition to cover a recovery period mandated by applicable statute or applicable regulation, standard, or order of the IWC, the Occupational Safety and Health Standards Board, or the Division of Occupational Safety and Health, i.e., to a recovery period mandated under Cal/OSHA’s heat illness standard. Employers with outdoor places of employment are subject to Cal/OSHA’s heat illness standard, which allows for cool-down periods in the shade of no less than five minutes at a time on an “as needed” basis for employees to protect themselves from overheating. It exempts from its requirement any employee who is otherwise exempt from meal or rest or recovery period requirements pursuant to other state laws, including, but not limited to, a statute or regulation, standard, or order of the Industrial Welfare Commission. It also requires an employer to pay an employee, for any recovery period mandated by law, one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest or recovery period is not provided. The bill defines “recovery period” as a cool-down period afforded an employee to prevent heat illness.

New Penalties for Employer’s Failure to Make Payments to Benefit Funds (Labor Code section 227 / SB 390)

Existing law makes it a crime for an employer who has made withholdings from an employee’s wages to fail to make agreed-upon payments to health and welfare funds, pension funds, or various benefit plans. It also provides that the crime be punished as a felony or misdemeanor, as specified, based on the amount that was withheld from the employee’s wages but not paid to the plan. The law makes it a crime in the same way, for an employer to fail to remit withholdings from an employee’s wages that were made pursuant to state, local or federal law. It also specifies how


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recovered withholdings or court-imposed restitution, if any, from the criminal proceeding are to be forwarded or paid.

New Protections for Protected Wage Activities (Labor Code section 98.6 / AB 263)

Existing law prohibits an employer from discharging an employee or otherwise discriminating against an employee or applicant for employment on the basis of engaging in prescribed protected conduct relating to the enforcement of the employee’s or applicant’s rights. AB 263 adds protection against retaliation or any adverse action for any employee or applicant on the basis of engaging in protected conduct under the Labor Code, including a written or oral complaint by an employee that he/she is owed unpaid wages. Remedies for a violation can include reinstatement, lost wages, and a civil penalty of up to $10,000 per violation. It also provides that there is no need to exhaust administrative remedies prior to bringing a lawsuit for a violation of these provisions. Current law requires a court in any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, to award reasonable attorney’s fees and costs to the prevailing party if any party to the action requests them upon the initiation of the action. This law makes the award of attorney’s fees and costs in favor of an employer contingent on a finding by the court that the employee brought the court action in bad faith.

Employer Right to Attorney’s Fees Limited (Labor Code section 218.5 / SB 462)

Existing law allows for an award of attorneys’ fees to the prevailing party in an action brought for the nonpayment of wages. Under this new law, an employer who wins a wage claim lawsuit can only recover attorneys’ fees if the court finds that the employee filed the lawsuit in bad faith.

Labor Commissioner Award Results in Lien on Real Property (Labor Code section 98.2 / AB 1386)

Existing law provides for the procedures followed by the Labor Commissioner in hearing and deciding cases, and for the filing of a final order with the clerk of the superior court unless the parties reach a settlement approved by the Labor Commissioner. Under the existing procedures, the clerk of the superior court then enters judgment in conformity with the final order, which has the same force and effect as a judgment entered in a civil action.


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This new law contains a new procedure under which the Labor Commissioner may record a certificate of lien for final orders, which is applicable to the employer’s real property and is effective for 10 years or as otherwise specified.

Domestic Worker Bill of Rights (Labor Code section 1450, et seq. / AB 241)

Existing law regulates the wages, hours and other terms and conditions of work for household occupations. This bill establishes new requirements until January 1, 2017, regulating the hours of work for certain domestic work employees and providing for overtime at 1.5 times the employee’s regular rate for all hours worked over 9 hours in any workday and more than 45 hours in the workweek. Domestic work occupations now include childcare providers, caregivers of people with disabilities, sick, convalescing, or elderly persons, those who maintain private households or their premises, house cleaners, housekeepers, maids, and other occupations. It includes, as defined, domestic workers who are “personal attendants,” which means any person employed by a private householder or by any third party employer recognized in the health care industry to work in a private household, to supervise, feed, or dress a child, or a person who by reason of advanced age, physical disability, or mental deficiency needs supervision, and who spends at least 80% of working time in the household on such work. There are defined exclusions from the coverage of this law, including any person who is the parent, grandparent, spouse, sibling, child or legally adopted child of the domestic work employer; any person under 18 years of age who is employed as a babysitter for a minor child of the domestic work employer in the employer’s home; any person employed as a casual babysitter for a minor child in the domestic employer’s home unless the worker is over 18 years of age.

B. Prevailing Wage Laws

SB 776, amending section 1773.1 of the Labor Code (relating to prevailing wage rates and employer payment credits)

Under the existing prevailing wage law, certain employer payments (e.g., health and welfare, pension, vacation, travel, subsistence) are a credit against the obligation to pay the general prevailing wages, except credit is not granted for benefits required under state or federal law (e.g., workers’ compensation). Employer payments include the rate of contribution made by the employer to a trustee or 3rd party person pursuant to a plan, fund, or program, the rate of actual costs to the employer anticipated in providing benefits to workers pursuant to a specified enforceable commitment, and payments to the California Apprenticeship Council.


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This new law provides that an employer may take credit for those specified employer payments, even if those payments are not made during the same period for which credit is taken, if the employer regularly makes those payments on no less than a quarterly basis. Under the new law, credit cannot be granted for employer payments made to monitor and enforce laws related to public works if those payments are not required by a collective bargaining agreement. The DLSE Public Works Manual issued in May 2009 already stated that the credit for the allowable employer payments could be taken if the payments were made no less than quarterly. Therefore, it appears that although the law does not say it is conforming the language of the law to existing enforcement policies, that appears to be the case. Note: the new law does not allow credit to be taken for employer payments made to monitor and enforce laws related to public works if those payments are not required by a collective bargaining agreement.

SB 7, adding section 1782 to the Labor Code (relating to charter cities and construction projects)

This bill prohibits a charter city from receiving or using state funding of financial assistance for a construction project if the city has a charter provision or ordinance that authorizes a contractor to not comply with prevailing wage provisions on any public works contract. There are specified exceptions.

SB 54, adding section 25536.7 to the Health and Safety Code (relating to hazardous materials)

This law requires any owner or operator of a stationary source that is engaged in activities described in Code 324110 or 325110 of the North American Industry Classification System (NAICS), as that code read on January 1, 2014, and with one or more covered processes that is required to prepare and submit an RMP pursuant to state law, when contracting for the performance of construction, alteration, demolition, installation, repair or maintenance work of the stationary source, to require its contractors and any subcontractors to use a skilled and trained workforce to perform all onsite work within an apprenticeable occupation in the building and construction trades (with the exception of oil and gas extraction operations). As part of these requirements, there is a provision requiring the use of journeymen, and requires that they be paid the prevailing wage rate, except that it does not include shift differentials, travel and subsistence, or holiday pay. There is also a collective bargaining exemption.


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SB 377, amending section 1773.5 of, and adding section 1741 to the Labor Code (relating to procedures for determining whether a project is a public works project and addressing civil wage and penalty assessments)

This law requires that, when a request is made to the Director of Industrial Relations for a determination of whether a specific project or type of work is a “public work,” the director must make a determination within a specified period of time. It also has procedures for appeals. Under prior law, the Labor Commissioner had certain timelines within which to issue a civil wage and penalty assessment if there was a determination that there was a violation of the laws regulating public works, including the payment of prevailing wages. Under prior law, a joint labor-management committee established under a specified provision of federal law could bring an action against any employer who failed to pay prevailing wages as required by state law. In addition, each contractor and subcontractor was required to keep accurate payroll records, as specified, that were certified and available for inspection, as specified. The new law tolls the period for assessments and commencing an action brought by a joint labor-management committee for the amount of time described in the new law. The law requires the person filing the notice of completion to also provide notice to the Labor Commissioner, as described, and would require the awarding body/political subdivision that is accepting a public work to provide the Labor Commissioner notice of that acceptance as described. It also tolls the period for service of assessments and for commencing an action for the length of time notice is not provided to the Labor Commissioner.

AB 1336, amending sections 1741, 1771.2, and 1776 of the Labor Code (relating to prevailing wages and payroll records)

Like one portion of SB 377, one portion of this new law extends the deadline for service of an assessment for violation of public works laws, including prevailing wages. Existing law allows a joint labor-management committee, established pursuant to a specified provision of federal law, to bring an action against any employer that fails to pay prevailing wages as required by state law. The new law (a) extends the time for a joint labor-management committee to do so, and (b) provides that the court in an action on prevailing wages, must award restitution to an employee for unpaid wages, plus interest, from the date the wages became payable, and liquidated damages equal to the amount of unpaid wages owed, and authorizes the imposition of civil penalties only against an employer that failed to pay the prevailing wage to its employees, injunctive relief, or any other appropriate equitable relief.


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Under existing law, the contractor and subcontractor must keep accurate payroll records that show certain things, and any copy of records made available for inspection by, or furnished to, a joint labor-management committee must be marked or obliterated only to prevent disclosure of an individual’s name and social security number. Under the new law, the copy of records made available for inspection by, or furnished to, a joint labor-management committee can only be marked to obliterate the individual’s social security number, leaving the name visible. The law also requires that any copy of records made available for inspection by, or furnished to, a multiemployer Taft-Hartley trust fund that requests the records for the purposes of allocating contributions to be participants be marked or obliterated only to prevent disclosure of the individual’s full social security number, but provide the last 4 digits of the social security number.

AB 195, amending section 20133 of the Public Contract Code (relating to public contracts and making an appropriation therefore)

Under current law, some counties can use alternative procedures, known as design-build, for bidding on specified types of construction projects in the county in excess of $2.5 million. These procedures include a requirement that in some cases assesses a fee payable to the State Public Works Enforcement Fund, which funds are continuously appropriated for the Department of Industrial Relations’ prevailing wage enforcement activities. This new law extends these provisions until July 1, 2016.

AB 797, adding numerous sections to the Public Utilities Code (relating to Santa Clara County Valley Transportation Authority contracts)

This only applies to employers who have contracts or subcontracts with the Santa Clara County Valley Transportation Authority.

C. Additional New Laws Applicable to Schools

Criminal Background Checks for Private Schools (Education Code sections 44237 and 56366.1 / AB 389)

Existing law provides for certain investigations by the Superintendent of Public Instruction to conduct pre-certification reviews and investigations at any time without prior notice if there is substantial reason to believe that there is an immediate danger to the health, safety or welfare of a child. It also requires every private school on the elementary or high school level to require each applicant for employment in a position requiring contact with minor pupils, who does not possess a valid California state teaching credential, or is not currently licensed by another state agency


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that requires a criminal record summary, to submit two sets of fingerprints to the Department of Justice for the purpose of obtaining a criminal record summary. Existing law requires the recipient of the summary to not disclose its contents or provide copies of the information, and requires the information received to be destroyed upon hiring. This law authorizes the Superintendent, when conducting an onsite review or investigation, to verify that the nonpublic, nonsectarian school or agency has received a successful criminal background check clearance and has enrolled in subsequent arrest notice services, as specified, for each owner, operator and employee of the nonpublic, nonsectarian school or agency. Notwithstanding other restrictions on sharing and destroying criminal background check information, a nonpublic, nonsectarian school or agency, must (a) upon demand, make available to the Superintendent evidence of a successful criminal background check clearance and enrollment in subsequent arrest notice services, as provided, for each owner, operator, and employee of that school or agency; and (b) retain the evidence. It also deletes the exemption for applicants possessing a valid California state teaching credential or who are currently licensed by another state agency that requires a criminal record summary, from submitting two sets of fingerprints for the purpose of obtaining a criminal record summary.

Moorpark Unified School District and Four-Day School Week (Education Code sections 37710 and 37712 / SB 236)

Existing law authorizes certain school districts to operate one or more schools on a four-day school week if the school district complies with specified instructional time requirements and other requirements related to the four-day school week. Beginning the 2013-2014 fiscal year, this law authorizes the Moorpark Unified School District to operate one or more high schools offering a middle college program on a four-day school week conditioned on complied with specified requirements.

Teacher Authorization in Special Education (Education Code section 44265.2 / SB 368)

Existing law establishes the Commission on Teacher Credentialing and authorizes it to issue teaching and service credentials, including a special education credential. This law authorizes program sponsors, as defined, to offer comparability and equivalency (as those terms are defined) to a special education credential-holder seeking to add a special education authorization to his/her special education credential in accordance with specified guidelines and criteria.


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Professional Development for Classified School Employees (Education Code section 45390, et seq. / SB 590)

Existing law authorizes the governing board of any school district to grant any classified employee a leave of absence of up to one year, as provided, to study or retrain to meet changing conditions within the district, and to reimburse the costs (including tuition) to a permanent classified employee who satisfactorily completes approved training to improve his/her job knowledge, ability, or skill. This law requires a local educational agency, if it expends funds for professional development of any school site staff, to consider the needs of its classified school employees (as defined) to update their skills and to learn best practices in various optional areas, including pupil learning and achievement, pupil and campus safety, and special education.

California Bathroom Bill (Education Code section 221.5 / AB 1266)

This new law allows transgender students in public schools to choose which restrooms they use and whether they participate in boys or girls athletic teams and competitions. It requires all California public schools to permit biological boys in girls’ restrooms and showers, as well as permitting biological girls to use boys’ restrooms and showers. This is based on the student’s gender identity irrespective of the gender listed on the pupil’s records. II. JUDICIAL DEVELOPMENTS

A. The Gonzalez Decision: Alternative Compensation Systems at Risk

In Gonzalez v. Downtown LA Motors, 215 Cal.App.4th 36 (2013), a class of 108 automobile service technicians who worked for the defendant dealership was paid on a piece-rate system for servicing vehicles. They were paid an established rate for each “flag hour.”1 The technicians could and usually did earn more than minimum wage every week under this system. Therefore, they were not paid separately for any other non-repair tasks they performed, such as cleaning their work area while waiting for the next vehicle to service, or for any other non-repair time. They claimed that they were not allowed to leave even if there were no vehicles to repair.

1 A “flag hour” was time spent on actual vehicle repair, with each repair task assigned its own

number of flag hours. For employers who do not use a “flag” system, such as employees who work on a piece rate or other basis (e.g., housecleaners who are paid on a per-house basis with no payment for travel between houses), the discussion would be in terms of currently-paid and currently-unpaid time, with the currently paid time being treated, for the purpose of this discussion, as flag hours.


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Despite the fact that they were paid at least the minimum wage for all hours worked, the California appellate court held that the technicians were nevertheless required to be paid separately at least at the minimum wage rate for all time spent in non-repair work.

The court did not address rest breaks, although the defendant argued that the court’s decision would compel additional wages for each break (because rest breaks are paid, non-repair time).

The class of 108 employees was awarded $553,653 in uncompensated time, $1,555,078 in waiting time (including interest), and $237,840 for the failure to pay all compensation due at the time of termination.

The employer sought review by the California Supreme Court, but that Court declined to review it despite support for review filed by the California Chamber of Commerce.

While this case involved auto mechanics, the court’s holding applies to any employee who is paid on a system that does not specifically and separately pay for all “non-productive” time between active work duties, e.g., housekeepers who are paid based on the number of houses cleaned but who have to travel between houses.

1. Alternative Compensation System After Gonzalez

(a) Combination Flag Rate/Minimum Wage System

It is possible to have a combination flag rate/minimum wage system such as the Gonzalez court seemed to believe would be possible. Under this system, employees would continue to be paid a flag rate for all time actually spent working on a repair, provided that any time that the flag rate did not cover at least minimum wage would have to be paid at minimum wage. In addition, any non-repair time would be paid at the current minimum wage (this would include all rest breaks, down time, waiting time, clean-up time, etc.).

This would involve the implementation of a complicated timekeeping and payroll system, with at least the following:

(1) Employees would have to accurately log all of the time spent on various tasks. For example, if a service technician went on a rest break, he would have to note the start and stop time of the break. He would have to make similar notations of start/stop times for every segment of the workday during which he was not performing repairs.

It is foreseeable that employees would find such a system to be cumbersome and would not be diligent about doing this. This would then raise questions about the accuracy of the records. Keep in mind that it is the employer’s


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responsibility to maintain accurate time records, so in general any question about the accuracy is likely to be resolved in favor of the employee.

The employer’s payroll also needs to be modified:

(1) The payroll system would need to be modified to accommodate payment during non-overtime hours of differing numbers of hours payable at different rates.

(2) The payroll system would need to be modified to pay at least the minimum wage during time designated as having been spent doing repairs (presumably this would only incur for a slow, non-productive employee, or an employee who was assigned an unfamiliar or unduly time-consuming repair, particularly if the flag rate was not really designed to fully cover the repair).

(3) The payroll system would also need to be modified to recalculate the “regular rate” for workweek and pay overtime on the calculated “regular rate” for each workweek. The “regular rate” is the rate upon which overtime is based.

According to the DLSE Enforcement Manual (2002, as amended), either of the following two methods can be used to determine the regular rate for computing overtime where the employee is paid on a piece rate basis:

(1) Divide the total earnings for the week, including earnings during overtime hours, by the total hours worked during the week, including earnings during overtime hours, by the total hours worked during the week, including the overtime hours. For each overtime hour worked, the employee is entitled to an additional one-half the regular rate for hours requiring overtime payments at 1.5x the regular rate, and additional full rate for hours requiring overtime payments at 2x the regular rate.

(2) Use the piece rate as the regular rate and pay 1.5 times this rate (or 2x, as applicable) for production during overtime hours. This method is rarely used, and would be particularly problematic given the flag rate system that does not pay a standard flat rate per task but rather a rate that varies from repair to repair.

However, there is concern that this does not account for the two different rates that would be payable under the combination flag rate/minimum wage system that the Gonzalez court described. It is more likely that the weighted average method would apply. This method applies


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where two rates of pay are paid during a workweek (i.e., the flag rate during repair time, and the minimum wage during non-repair time). According to the DLSE Enforcement Policies and Interpretations Manual:

Where two rates of pay are paid during a workweek, the California method for determining the regular rate of pay for calculating overtime in the workweek mirrors the federal method, based upon the weighted average of all hourly rates paid. (See 29 CFR § 778.115) Initially, therefore, it must be predicated upon the finding that there are established hourly rates being paid. The rate will be established by adding all hours worked in the week and dividing that number into the total compensation for the week.

The problem with this approach is that the flag rate applicable to the different repair jobs might vary from job to job, depending upon how long the employee actually takes to perform that job. For example, a repair that has a standard rate of $200 for a job that is generally estimated to take 5 hours to complete would normally be thought of as paying $40/hour. However, if the employee only took 4 hours to complete the job, one could argue that the actual hourly rate for that individual employee for that given task was $50/hour. This would mean that the timekeeping and payroll system would quickly become very complicated, with employees having to record not only the flag rate for each repair but also the actual time spent on that repair, and with the compensation system needing to accommodate an endless variety of changing weighted averages.

It seems that the administration of this system would be unduly burdensome, lead to noncompliance or mistakes, and thus be more trouble than it would be worth.

In short, a combination flag rate/minimum wage plan should only be used by a very sophisticated employer that was determined to retain the flag rate system, and then only if that employer had a management and supervisory team carefully trained to constantly monitor the accuracy to the data being recorded by employees, and a sophisticated compensation program that could accommodate all of the numerous recalculations necessary.

(b) Hourly Rate Based on Average Compensation

The simplest alternative, from an administrative standpoint, although one that could be unpopular with employees, would be to simply convert to an hourly rate system. Under this system, an hourly rate would be established for every employee that was at least the applicable minimum wage. This hourly rate would be paid for all “work time,” regardless of the task being performed by the employee at the time (including time that the employee had no work to do but was required to stay on the premises). Overtime would be paid at the applicable hourly rate for that employee.


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To blunt the possible negative reaction of employees to such an approach, the hourly rate could be established to result in approximately what any given employee had earned over a specified period of time.

• For example, if an employee had earned $24,000 during the previous six months (assuming no significant overtime), the hourly rate for that employee could be set at $23.08 ($24,000x2 = $48,000/year; $48,000/52=$923.08/week; $923.08/40=$23.08/hour). Presumably over time this would result in the employee making the same as was made under the prior system.

• As another example, if an employee had only earned $16,000 during the previous six months (again, assuming no significant overtime), the hourly rate for that employee could be set at $15.38 ($16,000x2=$32,000/year; $32,000/52=$615.38/week; $615.38/40=$15.38/hour).

The effect could be further mitigated by relatively simple (compared with the onerous steps of the combination flag rate/minimum wage system) record designed to monitor the productivity of the employee. If productivity increased or declined, the hourly rate for that employee could be modified at specified times or as deemed appropriate by the employer.

(c) Hourly Rate with Bonus

Another system that would be more complicated than the hourly rate system described above is to combine an hourly rate with additional amounts for achieving stated production output goals (e.g., a weekly or monthly productivity or achievement bonus). This would regularly recognize and reward productive employees, and hopefully incentivize less-productive employees to increase productivity.

This would require the establishment of an hourly rate at no less than the applicable minimum wage (currently $8/hour) plus a comprehensively-written bonus plan. We recommend that such a plan be given to each affected employee and that a written acknowledgement of receipt be maintained in the employee’s personnel file.

There are a variety of ways that a bonus plan can be drafted, e.g., number of repairs done.

It should be kept in mind that payment of a bonus requires the regular rate (for overtime purposes) to be recalculated for the period of the time that the bonus is designed to cover (a weekly bonus would affect the base week’s regular rate, a monthly bonus would affect the base month’s regular rate, etc.). This can be an administrative burden, although we believe that an outsourced payroll provider probably already has programs that can rather easily accommodate the calculations.


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Again, according to the DLSE Enforcement Policies and Interpretations Manual, the procedure is as follows:

First, find the overtime on the regular hourly rate. Then, separately, compute overtime due on the bonus: find the regular bonus rate by dividing the bonus by the total hours worked throughout the period in which the bonus was earned. The employee will be entitled to an additional half of the regular bonus rate for each [hour worked at 1.5 overtime rate] and to an additional full amount of the bonus rate for each double time hour, if any.

Regular hourly rate of pay $10.00 Total hours worked in workweek = 52 Total overtime hours at time and one-half = 12 Overtime due on regular hourly rate = 12 x $15.00 $180.00 Bonus attributable to workweek $138.00 Regular bonus rate = $138.00 [bonus] / 52 [total hours worked] = $2.6538 / 2 [additional half for overtime hours at 1.5 overtime rate] = $1.33 x 12 overtime hours

$15.92

Total earnings for the workweek: Straight time: 40 hours @ $10.00 $400.00 Overtime: 12 hours at $15.00 $180.00 Bonus $138.00 Overtime on bonus $15.92 Total $733.92

(d) Back Liability

As in any wage and hour case, Gonzalez opened the door to significant back liability for up to four years preceding the filing of any lawsuit.

The most common way to try to avoid or at least minimize the likelihood of a class action and the onerous awards, fees, and penalties that can result, is to pro-actively try to resolve individual employee liability by reaching a good faith resolution for payment of compensation owed in exchange for a release of all claims. This approach can minimize the size of the potential class action and avoid, on an individual settling employee basis, the imposition of huge penalties and attorneys’ fees.

This approach, while not risk- or problem-free, may be particularly appropriate where records have not been kept of the different “kinds” of hours worked, i.e., repair time and non-repair time. A good faith estimate would be mutually agreed to and the necessary straight-time and overtime


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wages paid in exchange for a comprehensive release of all wage and hour claims, including any claim brought by another person.

It seems reasonable that a good faith agreement could be based on a comparison of the number of hours worked each workweek with the number of flag hours logged for that workweek, with minimum wage being paid for the difference. This would necessarily assume that each employee actually worked on each repair for the exact number of hours of the flag hours for that repair. We realize that this would not take into account employees who are very productive (do not take the repair’s flag hours to complete the repair) or those who are not as productive (take more than the repair’s flag hours to complete the repair) on any given repair. However, for the purpose of settlement, and in light of the fact that we are not aware of any tracking of the actual time each employee took on each repair, this seems to be a reasonable approach.

Due to the complications of approaching employees with such a proposal, counsel should be involved in designing the general approach and drafting the settlement and release document.

B. Auto-Deduction Timekeeping Systems Under Pressure

California has a specific statutory requirement that employers maintain accurate records regarding the starting and stopping time of each work period for each employee.

Under federal law, courts have regularly held that a policy which automatically deducts pay for meal periods is not, by itself, unlawful. White v. Baptist Mem’l Health Care Corp., No. 08-2478, 2011 U.S. Dist. LEXIS 52928, 2011 WL 1883959, at *8 (W.D. Tenn. May 17, 2011); Fengler v. Crouse Health Found., Inc., 595 F. Supp. 2d 189, 195 (N.D.N.Y. 2009).

Furthermore, under federal law, the federal courts have held that there is no duty to ensure that employees are not working through unpaid meal breaks, and employers utilizing an automatic meal deduction policy may legally shift the burden to their employees to cancel the automatic deduction if they work through an unpaid meal break. See Frye v. Baptist Mem’l Hosp., Inc., No. 07-CV-2708, 2010 U.S. Dist. LEXIS 101996, 2010 WL 3862591, at *7 (W.D. Tenn. Sept. 27, 2010) (describing the burden shifting as a “natural consequence of any employer’s adopting an automatic deduction policy”). In other words, an employer’s failure to “ensure” that its employees are not working during unpaid meal breaks does not make the use of an automatic meal deduction policy illegal. Rather, it is the failure to compensate an employee who worked with the employer’s knowledge through an unpaid meal break--whether the employee reported the additional time or not--that potentially violates the FLSA. See, e.g., Kuebel v. Black & Decker Inc., 643 F.3d 352, 363 (2d Cir. 2011) (“[O]nce an employer knows or has reason to know that an employee is working overtime, it cannot deny compensation simply because the employee failed to properly record or claim his overtime hours.”); Saleen v. Waste Mgmt., Inc., 649 F. Supp. 2d 937, 940 (D. Minn. 2009) (“Plaintiffs . . . agree that, as long as [the employer] reverses the half-hour deduction when it becomes aware that a worker has not taken a meal


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break, [the employer] does not act unlawfully.”). Therefore, an employer may prevail in a wage and hour claim based on federal law if the timekeeping system shifts the burden to its employees to cancel the automatic deduction if they work through an unpaid meal break.

Even under federal law, such a system can be tricky. For example, in Quickley v. University of Maryland Medical Systems Corp., (D.Md., September 14, 2012), the employer used an auto-deduct system that provided opt-out buttons for some types of time missed, but not for missed meal periods. On this basis, the court denied the employer’s motion to dismiss, allowing the case to go forward.

However, given the difference between California and federal timekeeping requirements, it is risky to use an auto-deduct timekeeping system in California. It is simply too easy for an employee to later claim that he/she did not actually get a meal break, that the meal break was short, or that the meal break was late, any of which could result in penalties and potentially unpaid wages and waiting penalties.

C. Preemption by Federal Law Available to Certain Transportation Employers The Airline Deregulation Act and/or the Federal Aviation Administration Authorization Act may provide a basis for certain employers engaged in transportation to argue that federal law (which does not require meal and rest breaks, impose penalties for missed breaks, does not have daily overtime requirements, and does not have waiting time penalties) preempts those state claims as well as state derivative claims such as unfair competition claims.

The First Circuit has held that a state law regulating wages, hours, and working conditions is preempted by the ADA. DeFiore v. American Airlines, 646 F.3d 81 (1st Cir. 2011) (state tip law preempted as it applied to skycaps).

Eight federal district courts in California have now specifically held that the ADA and the FAAAA preempt California’s meal and rest break requirements and related and derivative claims, three of which specifically involved air carriers:

• Angeles v. U.S. Airways, Inc. (employee claims for state meal and rest break violations, and derivative claims, were preempted by the ADA)

• Miller v. Southwest Airlines Co. (ADA preempted California’s meal and rest break requirements with respect to airline carrier operations agents who assisted with customer service and many aspects of ensuring flight timeliness and safety)

• Blackwell v. SkyWest Airlines, Inc. (ADA preempted the plaintiff’s claims for violation of California’s meal and rest break laws, and a derivative unfair competition claim, because they impacted the air carrier’s routes and prices)


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• Campbell v. Vitran Express, Inc., (FAAAA preempted meal and rest break claims of transportation employer which did truck deliveries)2

• Cole v. CRST, Inc. (FAAAA preempted California’s meal and rest break laws and ancillary state claims)

• Dilts v. Penske Logistics, 819 F. Supp. 2d 1109 (S.D. Cal. 2011)3(FAAAA preempted meal and rest break and related claims)

• Aguiar v. California Sierra Express (FAAAA preempted the plaintiff’s claims regarding meal and rest breaks as well as compensation and record-keeping relating to alleged unpaid wages for these breaks)

• Esquivel v. Vistar Corp. d/b/a Roma Food (FAAAA preempted the plaintiffs’ five claims based on California meal break requirements, i.e., the failure to provide off-duty meal breaks or pay the one-hour penalty for this failure, failure to provide accurate wage statements, failure to pay all compensation due upon termination, and a derivative unfair competition claim) ; although an appeal was filed to the Ninth Circuit, it was dismissed on March 29, 2012.

However, the California courts are not unanimous in reaching this conclusion. For example, in Mendez v. R&L Carriers, Inc., a federal district court in California held that the FAAAA did not apply to state meal and rest break claims as applied to truck drivers. Furthermore, an employer should be prepared to present evidence that the state requirements impact rates, services or routes. In Aguirre v. Genesis Logistics, et al., a district judge from the Central District of California found that FAAAA preemption applies to dismiss meal and rest break claims brought by truck drivers operating in California.

The failure to present such evidence could doom the argument. See, e.g., Gennell v. FedEx Ground Package System, Inc. (First Circuit’s September 2013 decision finding no preemption of New York law where no evidence of impact presented).

III. CURRENT CLASS AND REPRESENTATIVE ACTION ISSUES IN CALIFORNIA

A. Class Certification

2 An appeal to the Ninth Circuit was filed in this case and is currently pending. Oral argument is

scheduled for March 3, 2014.

3 On April 18, 2012, an appeal to the Ninth Circuit was filed in this case and is currently pending. Oral argument is scheduled for March 3, 2014.


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Employers hoped that the U.S. Supreme Court’s ruling in Duke’s, et al. v. Wal-Mart Stores, Inc., and its subsequent 2013 ruling in Comcast Corp. v. Behrend, would significantly slow the class certification wave since it established a higher level of scrutiny for class certification, at least in federal courts. It remains to be seen whether and to what extent this hope rings true. As seen below, California courts seem to be trending toward rejecting differences in damages among putative class members as a reason to deny class certification.

• Layva v. Medline Industries, Inc., __F.3d __ (9th Cir. May 28, 2013)

The proposed class consisted of warehouse workers who claimed that their time was rounded down, that non-discretionary bonuses were not included in their regular rate for purposes of overtime, and two derivative claims (waiting time penalties and inaccurate wage statement penalties). The district court denied class certification on the ground that each employee worked different hours and earned different bonuses during different weeks, requiring an individualized determination of damages. The Ninth Circuit disagreed, noting that damages determinations are individual in nearly all wage and hour class actions. It went on to distinguish Comcast, saying that the issue in Comcast was not mere individualized damages, but the fact that the theory of liability was based on one particular anticompetitive practice and the damages theory was based on an amalgam of four anticompetitive practices that plaintiff’s expert could not isolate from one another.

• Abdullah v. U.S. Security Assocs., Inc., 2013 WL 5383225 (9th Cir., Sept. 27, 2013)

Security guards claimed, among other things, the employer required them to work through their meal breaks. The district court certified the class, including a meal break subclass. The Ninth Circuit upheld the decision. The Ninth Circuit focused on commonality and predominance, rejecting the employer’s “nature of the work” exception because the employer argued that all of the putative class members qualified for this exception, not just some of them. The court felt that the correctness of this assertion could be decided on a classwide basis and therefore commonality was met. The court applied a similar approach to predominance and noted the employer’s practice of providing sign-in sheets to support its conclusion that the calculation of damages would not be overly burdensome. • Campbell v. Best Buy Stores, L.P., 2013 WL 5302217 (C.D. Cal. Sept. 20, 2013)

In-home appliance and electronics repair technicians alleged various state labor law violations, including working off the clock, failure to pay overtime, and meal and rest break violations. The court granted in part the motion for class certification. In doing so, the court focused mainly on commonality and predominance. The proposed subclasses of those who worked off the clock/overtime and were denied meal and rest breaks were


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found to be lacking in commonality. Plaintiffs failed to show that the employer had a policy or practice requiring the employees to forgo breaks or fail to report overtime. The court also found that there was no “unofficial” policy to violate the employer’s “official” policy. The court did find that common issues prevailed with respect to whether the employer had a policy of not paying the putative class members for drive time home, since the employer changed its policy in this regard midway through the proposed class period and so the court granted certification only with respect to this claim. • Jones v. Farmers Insurance Exchange, __ Cal.App.4th__ (Nov. 26, 2013)

Auto physical damages claims representatives sued for various wage and hour violations related to certain work described by the employer as “minimal” computer synch time that the employees did before or after work at their homes. The trial court denied class certification on the ground that common issues of fact or law did not predominate over individual issues, that class certification would not provide substantial benefits to litigants and the courts, and that the class representative could not adequately represent the class. It stated that the parties disputed what tasks were required to be performed before the beginning of the shift, that the evidence showed the employer did not always deny requests for overtime to complete some tasks, such that there was not sufficient demonstration of a classwide policy of refusing to pay overtime and was instead an individualized question. It went on to state that whether the putative class members had time to complete the required tasks before the first appointment of the day also involved individualized inquiries and numerous variables. The appellate court disagreed and reversed with instructions to allow an amended complaint with a suitable class representative and to then grant class certification.

• Martinez v. Joe’s Crab Shack Holdings, N.A., 2013 WL 5977417 (Cal. Ct. App.

Nov. 12, 2013)

Managerial employees alleged they were misclassified as exempt. The trial court denied class certification on the grounds that the employees failed to establish typicality, adequacy, commonality, and predominance of common facts/issues. The decision was large the result of what the court deemed to be an inadequate evidentiary record that failed to show how many hours an individual putative class member spent on exempt and non-exempt duties, and which also included plaintiffs’ admission that the amount of time at issue varied from day to day. On appeal the appellate court reversed. It found the proposed class representatives and their claims adequate and typical of the class they sought to represent. The court disregarded the fact that most of the general managers were opposed to the litigation; according to the court, higher-level managers did not have to perform as many non-exempt job duties. The court reasoned that on remand, the trial court could simply put general managers into a subclass or carve them out of the class


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entirely. The court also found that there was commonality and predominance despite the plaintiffs’ inability to state exactly how long any employee spent on a task. According to the court, all class members were covered by standard policies, routinely covered for non-exempt employees and did non-exempt work, and worked more than 40 hours per week without overtime pay. The court said that on remand, the trial court would have to reconsider whether class treatment is superior, further commenting that where a court focuses on an employer’s policies and practices, class treatment can be superior. • Benton v. Telecom Network Specialists, __Cal.App.4th__ (Oct. 16, 2013) Some of the technicians in the class were employed directly by TNS and some were employed by staffing agencies and assigned to TNS. They alleged that TNS was the employer of both groups and alleged, among other things, meal and rest break violations and failure to pay overtime. The trial court denied class certification, holding that TNS’s liability could not be established through common proof because (1) the employees worked under a diversity of workplace conditions that enabled some of them to take meal and rest breaks; and (2) the staffing companies had adopted different meal and rest break and overtime policies throughout the class period. The appellate court reversed and remanded. The opinion has an extensive discussion of the development of class certification standards as applied to wage and hour cases. According to the appellate court, the employer’s liability arises by adopting a uniform policy that violates the law. Whether or not the employee was able to take the required break goes to damages, and the fact that different employees might have different damages does not require denial of class certification. Thus, this decision should spur employers to make sure that they adopt and take the steps to enforce lawful policies. • Faulkinbury v. Boyd & Associates, Inc., 216 Cal.App.4th 220 (May 10, 2013) The court changed its position on class certification of claims for meal and rest period violations, and off-the-clock violations. According to the court, the claims were amenable to class treatment because the issue was whether the employer had uniform policies that were unlawful under California law. One of the issues in the case was the employer’s policy of requiring the employees to sign on-duty meal break agreements; the court said that the lawfulness of this policy could be determined on a class-wide basis. • Dailey v. Sears, Roebuck and Co., 214 CAL.APP.4TH 974 (2013) This case involved wage and hour claims by managers and assistant managers who


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claimed that as the result of being misclassified as exempt, the employer violated numerous wage and hour laws. The trial court denied class certification, concluding that the individual facts and issues unique to each member of the alleged class and requiring separate adjudication were more numerous and significant than the common issues, and that bringing all individual class members’ claims before the court in one action was “not impracticable.” The appellate court found no abuse of discretion and affirmed.

B. Rule 23 Class Actions and FLSA Collective Actions Can Be Combined

• Busk v. Integrity Staffing Solutions, Inc., (9th Cir. Apr. 12, 2013)

The Ninth Circuit has joined the Third and Seventh Circuits in holding that there is no theoretical reason why both class and collective actions cannot be combined in the same case. The employees alleged that they had to undergo security checks at the end of the day and upon leaving their work area for a meal break. They claimed they were not paid for this time, which could amount to 25 minutes. They sought a Rule 23 class action and a collective action under the FLSA. The district court dismissed the state claims as incompatible with a collective action under the FLSA and dismissed the remaining claims on the merits. The Ninth Circuit found that time waiting for security checks was at least arguably compensable since it was for the employer’s purpose. This distinguished the case from others in which security checks were not at the behest of the employer. E.g., Bonilla v. Baker Concrete Construction Co., 487 F.3d 1340 (11th Cir. 2007)(time spent in airport security not compensable). The court did find no claim for alleged disruptions in the meal break. It went on to find no inherent incompatibility between a Rule 23 state law class action and an FLSA collective action, and remanded the case.

C. IRS States Class Action Incentive Awards Taxable as Wages

On March 15, 2013, the IRS issued a private letter ruling responding to a request for a determination of whether incentive awards paid to class representatives under a settlement agreement in a class action that includes wage claims (the request specifically mentioned the FLSA) were wages for employment tax purposes. The IRS concluded that they were. If they are treated as wages for the purpose of federal income taxes, one can reasonably assume that California would take the same position if the question were posed. IV. BEST PRACTICES

A. Generally


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- Keep current on new developments and make sure that policies are regularly

updated to remain current

- Train both employees and supervisors/managers on company policies

- Enforce policies and conduct audits to further ensure compliance

- Consider adopting an arbitration agreement that will pass muster under California law. However, employers need to keep in mind that such agreements result in arbitration decisions with extremely limited grounds for review, and that the cost of funding or defending numerous arbitrations can get expensive very quickly.

B. For Overtime Issues

- Make sure that employees are properly classified as exempt and non-exempt

and that the job description supports the classification

- Include language that is clear about when the employee will be paid overtime, and that the policy is consistent with state law. Remember that while a policy may say that overtime needs prior approval, employees still need to be paid the overtime worked if the employer knew or should have known about the work; discipline is the appropriate action in such a case.

- Require employees to clock in and out at the beginning of each work period

(including meal breaks)

C. For Off-the-Clock Issues

- Include language in the employee handbook that not only prohibits this in clear and understandable terms. The policy should also state that an employee who works off-the-clock is subject to discipline up to and including termination, and that a supervisor or manager who knowingly allows an employee to work off-the-clock is also subject to discipline up to and including termination. The policy should also require employees to immediately report any violations to HR.

- Train non-exempt employees and their supervisors on the timekeeping

policy and keep a record of the training completion


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- Issue regular reminders to employees about the timekeeping policies and/or post a reminder in the break room or near the time clock

- Consider having managers or other appropriate personnel check with

employees to confirm they are not working off-the-clock

- Require employees to acknowledge that their time records are accurate, or if the records are not accurate, require them to immediately notify their manager or HR

- Thoroughly investigate any complaints, discipline violators, and pay for

reported off-the-clock work

- Don’t give non-exempt employees remote access to company systems or email; if this is not feasible, make it clear in the policy and through the above steps that they must record any such remote access time

- “Donning and doffing” issues are related to these claims. If employees have

to go through employer-sponsored security checks, wear uniforms or personal protective clothing, or other similar activities, review the policy to ensure that employees are properly compensated for these activities.

D. For Meal and Rest Breaks

- Review the policy and make sure it is clear, up-to-date, and provides for

disciplinary action against employees as well as supervisors/managers for violations

- Provide more than one way for employees who miss a meal or rest break to

easily report it

- Pay the penalty if a meal or rest break is missed

- Pay the penalty if a meal or rest break is shortened at the employer’s request or if a meal break is late

- Review any on-duty meal agreements to ensure that the underlying facts

support this exemption E. Deductions and Reimbursement

- Make sure that only allowable deductions are being made. Under state law,


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an employer is only allowed to use “self-help” under very narrow circumstances

- California requires employees to be reimbursed for expenses reasonably

incurred in connection with the job. This includes such things as travel expenses

F. Vacations

- State law does not allow a use-it-or-lose it policy. Ensure that company

policy is consistent with this. A company can institute a cap on accrual that is “reasonable”

- Require employees and/or supervisors/managers to track vacation used by each employee

G. Commissions

- State law now requires that commission agreements be in writing. The

agreement should be specific and easily understood and signed and dated by each affected employee

- State law requires that an employee be paid for all commissions that the

employee has earned – avoid “chargebacks”

H. Paperwork and Payroll

- State law requires new employees and, under certain circumstances, existing employees, to be provided with a written document identifying their employer and various wage information

- State law requires paystubs to contain certain information, including the

name and address of the employer, the rate of pay and hours worked at each rate of pay, the time period covered by the paycheck, and similar detailed information


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- State law requires that paychecks be able to be cashed within the state without delay or any fee or discount. As a practical matter, this usually means using a bank with locations in California

The information provided herein is published as a service to our clients and friends and is intended for general informational purposes only. It is not intended to constitute advertising, solicitation or legal advice, and does not create, and is not intended to create, an attorney-client relationship. ©2014 Gladstone Michel Weisberg Willner & Sloane, ALC. All Rights Reserved.


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Teresa R. Tracy is chair of Gladstone Michel Weisberg Willner & Sloane, ALC’s Labor & Employment Group. She has practiced exclusively in labor and employment law for 30 years and has extensive experience representing employers in wrongful termination, discrimination, harassment, wage and hour matters, class actions and traditional labor law. She also advises clients on compliance with the myriad of state and federal regulations governing employers. Ms. Tracy is the author of numerous articles and presentations on litigation avoidance, and has been selected nine times by her peers as a Southern California Super Lawyer in the area of Labor and Employment. She was also named one of the “Top 75 Women Litigators” by the Los Angeles/San Francisco Daily Journal.

J.D., Loyola University School of Law (310) 821-9000, x723 [email protected]

Client Alert

December 2013

This alert is published as a service to our clients and friends. The material contained here is provided for informational purposes only and is not intended to constitute advertising, solicitation

or legal advice. For more information, visit www.buchalter.com.

Ringing in the New Year: A Summary of New California Employment Laws for 2014 Michael N. Westheimer, Esq. and Cynthia Moir, Esq.

California’s 20122013 Legislative Session concluded with the

enactment of a variety of new laws that will affect California

employers. In light of these developments, summarized below,

California employers should review their employment policies

and practices to ensure compliance with new legal obligations.

The new laws generally take effect on January 1, 2014, unless

otherwise indicated.

Minimum Wage / Overtime California’s minimum wage will increase to $9.00 per hour

effective July 1, 2014, and further increase to $10.00 per hour

effective January 1, 2016. (AB 10.)

In addition to affecting hourly employees, these increases may

have an impact on employees who are “exempt” from overtime,

due to related increases in threshold compensation that must

be paid to qualify for various exemptions. For certain state law

executive, administrative and professional exemptions, the

employee must be paid a salary of at least twice the state

minimum wage for fulltime employment. In addition, for the

commissioned inside sales exemption, the employee’s earnings

must exceed 1½ times the state minimum wage.

Employers in the cities of San Francisco and San Jose should also

note that effective January 1, 2014, San Francisco’s minimum

wage will increase to $10.74 per hour and San Jose’s minimum

wage will increase to $10.15 per hour.

The compensation threshold for California’s computer software

employee exemption increases annually, as it is tied to the

Consumer Price Index. Effective January 1, 2014, the threshold

compensation component to qualify for this exemption

increases to $40.38 per hour, or $7,010.88 per month, or

$84,130.53 per year.

In addition, due to passage of the Domestic Worker Bill of Rights

Act (AB 241), domestic work employees who work as personal

attendants are now eligible for overtime. This generally

includes, with some exceptions, individuals who are employed

to work in a private household to supervise, feed or dress a child

or a person who needs supervision by reason of advanced age,

physical disability or mental deficiency. They are entitled to 1½

times their regular rate of pay for work in excess of nine hours in

a workday or 45 hours in a workweek.

Recovery Periods Under existing CalOSHA regulations, employees who work

outside in temperatures exceeding 85 degrees must be provided

with fiveminute cooldown periods (recovery periods) in a

shaded area on an asneeded basis to protect from overheating.

The Labor Code statute for meal and rest periods has been

amended to include recovery periods. (SB 435.) Employers are

prohibited from requiring employees to work during a recovery

period, and must pay them one additional hour of pay for each

workday a required recovery period is not provided.

Retaliation Based on Immigration Status/Exercising Labor Code Rights Companion bills (AB 263, SB 666) protect undocumented

workers from retaliation for pursuing employmentrelated

claims. Employers are prohibited from reporting or threatening

to report a current, former or prospective employee’s suspected

immigration status, or the suspected immigration status of his

or her family member, in retaliation for exercising a right related

to his or her employment. Violation may result in revocation of

the employer’s business license, civil penalties and/or criminal

penalties. In addition, an attorney who engages in such conduct

toward a witness or party to a civil or administrative action may

be subject to suspension, disbarment or other discipline.

These new laws further provide that an employer that retaliates

against an employee or applicant for exercising rights under the

Labor Code may be subject to a civil penalty of up to $10,000.

The new laws also clarify that an individual is not required to

exhaust administrative remedies or procedures prior to bringing

a civil action under the Labor Code, unless the specific Labor

Code statute under which the action is brought expressly

requires exhaustion of an administrative remedy.

Expanded Protection for Whistleblowers Existing law prohibits employers from retaliating against an

employee for disclosing information to a government or law

enforcement agency, if the employee has reasonable cause to

believe that the information discloses a violation of a state or

federal rule or regulation. This law has been expanded to also

prohibit retaliation against an employee who makes an internal

complaint to a supervisor or other employee with authority to

investigate, discover or correct the violation. (SB 496.) The law

also has been amended to cover disclosures pertaining to

perceived violations of local rules or regulations.

http://www.buchalter.com/bt/index.php?action=Show&AttyID=316&option=com_content&task=view&id=152&Itemid=134


Client Alert

December 2013

This alert is published as a service to our clients and friends. The material contained here is provided for informational purposes only and is not intended to constitute advertising, solicitation

or legal advice. For more information, visit www.buchalter.com.

Driving Privileges for Undocumented Workers A new law (AB 60) requires the Department of Motor Vehicles

to issue driver’s privileges to an individual who is unable to

submit satisfactory proof that the applicant’s presence in the

United States is authorized under federal law, if he or she meets

all other qualifications for licensure and provides satisfactory

proof of his or her identity and California residency. This law

further provides that it a violation to discriminate against an

individual because he or she holds or presents a license issued

under these provisions. This law will take effect when the

Director of the DMV issues a declaration of readiness to issue

the new licenses, or on January 1, 2015, whichever is earlier.

Employers should note that this special driver’s license does not

satisfy federal I9 requirements for verifying employment

eligibility of new hires. The special license will include a

recognizable feature, such as the letters “DP” instead of “DL,”

but will not have any other distinguishable features.

Anti-Discrimination / Anti-Harassment Laws The Fair Employment and Housing Act (“FEHA”) prohibits

employment discrimination and harassment based on a variety

of protected categories. FEHA has been amended (AB 556) to

add “military and veteran status” to the list of protected

categories. This is defined to include members or veterans of

the United States Armed Forces, the United States Armed

Forces Reserve, the United States National Guard, and the

California National Guard.

FEHA also has been amended (SB 292) to state expressly that

sexually harassing conduct need not be motivated by sexual

desire. The Legislature made this clarification in response to a

California appellate court opinion issued in 2011, Kelley v. The Conco Companies, 196 Cal.App.4th 191.

Dismissed or Sealed Convictions Current law restricts employers from considering certain

criminal records in making hiring or employment decisions. A

new law (SB 530) prohibits an employer from asking an

applicant to disclose, or from utilizing as a factor in determining

any condition of employment, information concerning a

conviction that has been judicially dismissed or ordered sealed,

unless certain limited exceptions apply.

Crime Victim Leaves of Absence / Accommodation / Anti-Retaliation Multiple new laws augment employment protections for crime

victims. Existing law prohibits an employer from taking adverse

employment action against an employee who is a victim of

domestic violence or sexual assault and needs to take time off

from work to seek relief. A new law (SB 400) extends these

protections to victims of stalking. This new law additionally

expands protections to prohibit retaliation because of the

employee’s status as a victim, and requires employers to

provide reasonable accommodation upon request for the

victim’s safety while at work.

Another new law (SB 288) prohibits employers from retaliating

against an employee who is a victim of a serious felony or other

specified crimes for taking time off from work, upon the victim’s

request, to appear in court to testify at related proceedings.

Leave for Reserve Peace Officers and Emergency Rescue Personnel Existing law requires companies with 50 or more employees to

permit temporary leaves of absence for volunteer firefighters.

This law has been expanded (AB 11) to also cover reserve peace

offices and emergency rescue personnel.

Family Care California’s Employment Development Department administers

a state disability insurance program that provides Paid Family

Leave (PFL) wage replacement benefits for employees who take

time off to care for a seriously ill child, spouse, parent, or

registered domestic partner, or to bond with a new child. This

law has been expanded (SB 770) to cover time off to care for a

seriously ill sibling, grandparent, grandchild or parentinlaw.

In addition, San Francisco has adopted the Family Friendly

Workplace Ordinance, which applies to employers with 20 or

more employees. This new ordinance allows eligible employees

working in San Francisco to request a flexible or predictable

working arrangement to assist with caregiving responsibilities

for children or family members, and requires the employer to

respond to the request.

Employer Recovery of Attorney’s Fees The Labor Code previously provided for an award of attorney’s

fees to the prevailing party in an action brought for the

nonpayment of wages. This law has been amended (SB 462) to

limit a prevailing employer’s recovery of attorney’s fees to

situations where the employer can show that the employee

brought the action in bad faith.

Client Alert

December 2013

This alert is published as a service to our clients and friends. The material contained here is provided for informational purposes only and is not intended to constitute advertising, solicitation or legal advice. For more information, visit www.buchalter.com.

These provisions augment California’s expansive repertoire of employee protections. California employers should consider auditing their current policies and practices accordingly, and make any necessary changes to ensure they are in full compliance with the new laws.

Michael Westheimer is a Shareholder in the Firm’s Labor & Employment Practice Group in the San Francisco office. He can be reached at 415.227.3530 or [email protected]

Cynthia Moir is an Associate in the Firm’s Labor & Employment Practice Group in the San Francisco office. She can be reached at 415.227.3507 or [email protected]



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