March 2017 Update
Chapter 1: Hiring Guidelines and Pitfalls
A new section has been added on the topic "Foreign Labor Contractors." See §1.6A.
Labor Code §432.7 has been amended to prohibit employers from requiring applicants to disclose, verbally or in writing, or from utilizing as a condition of employment, information concerning an arrest, detention, processing, diversion, supervision, adjudication or court disposition that occurred while the applicant was subject to the process and jurisdiction of juvenile court law. See §§1.29, 13.10.
Chapter 2: Employment Contracts and Executive Compensation
Advances of commissions do not constitute wages. The essence of an advance is that at the time of payment, the employer cannot determine whether the commission will eventually be earned, because a condition to the employee's right to the commission has yet to occur (or the condition's occurrence is not currently ascertainable). Therefore, an advance, by definition, is not a wage because all conditions for performance have not been satisfied. Lindell v Synthes U.S. (ED Cal 2016) 155 F Supp 3d 1068. See §2.42.
The National Labor Relations Board (NLRB) continues to take the position that arbitration agreements barring class actions violate §7 of the National Labor Relations Act (NLRA) (29 USC §§151–169). See Price-Simms, Inc. (2015) 363 NLRB No. 52. The Ninth and Seventh Circuits have recently adopted the NLRB's rationale and have concluded that arbitration agreements barring class or collective actions do indeed violate the NLRA—thereby creating a split with earlier circuits' decisions on this issue. See Morris v Ernst & Young, LLP (9th Cir 2016) 834 F3d 975; Lewis v Epic Sys. Corp. (7th Cir 2016) 823 F3d 1147, 1155; Murphy Oil USA, Inc. v NLRB (5th Cir 2015) 808 F3d 1013. On January 13, 2017, the U.S. Supreme Court elected to hear Morris, Lewis, and Murphy Oil together, to settle the issue. See §§2.85, 5.93A.
Effective January 1, 2017, Lab C §925 prohibits an employer from requiring an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would require the employee to adjudicate outside of California (in either litigation or arbitration) a claim arising in California, or deprive the employee of the substantive protection of California law with respect to a controversy arising in California. See §§2.93, 11.54A, 20.22.
Chapter 3: Independent Contractors, Leased Workers, and Outsourcing
In Administrator's Interpretation No. 2016–1, the U.S. Department of Labor clarified that the concept of joint employment under the Fair Labor Standards Act (FLSA) (29 USC §§201–219) is notably broader than under the common law, due to the FLSA's expansive definition of "employ." See §3.42.
Employer consent is not required for a collective bargaining unit combining the employees solely employed by the contracting company and the employees jointly employed by that same contracting company and a leasing agency. See Miller & Anderson, Inc. (2016) 2016 NLRB Lexis 498 (overruling Oakwood Care Ctr. (2004) 343 NLRB 659). The NLRB applies the "community of interest" test to decide whether such collective bargaining units are appropriate. See §3.44.
The NLRB takes the position that two or more entities are joint employers of a single workforce if they share or codetermine those matters governing the essential terms and conditions of employment. Browning-Ferris Indust. of Cal., Inc. (Aug. 27, 2015, No. 32-RC-109684) 2015 NLRB Lexis 672. See §3.44.
Chapter 4: Immigration Law Compliance for Employers
In November 2016, USCIS published a revised version of Form I-9, marked "11/14/2016 N." Starting January 22, 2017, employers must use only this new version of the form. The revised Form I-9 contains electronic enhancements, including hover-over instructions and drop-down lists from which List A, B, and C documents can be selected based on the employee's citizenship/immigration status. It is optimized for electronic completion. The form is available at http://www.uscis.gov/i-94. See §4.12.
Fines for immigration hiring violations have been increased. See §4.23.
So have the fines for paperwork violations. See §4.24.
The fine for violating Labor Condition Application (LCA) recordkeeping requirements has also increased. See §4.39.
Effective January 1, 2017, Lab C §1019.1 broadened the protections from "unfair immigration-related practices" beyond the retaliation context and extended them to any employee or applicant regardless of whether they have made a complaint. The statute states that it is unlawful for an employer, in the course of satisfying federal law requirements for eligibility determinations (8 USC §1324(b)) to: (1) request more or different documents than required under federal law to verify eligibility; (2) refuse to honor documents that on their face reasonably appear to be genuine; (3) refuse to honor documents or work authorization based on the specific status or term of status that accompanies the authorization to work; or (4) attempt to reinvestigate or re-verify an incumbent employee's authorization to work using an "unfair immigration practice" (defined in Lab C §1019). Labor Code §1091.1 also authorizes an employee or applicant (or their representative) to file a complaint with the Division of Labor Standards Enforcement, and authorizes the Labor Commissioner to award a penalty up to $10,000 and equitable relief. See new §4.30A.
Chapter 5: Wage and Hour Laws
Employees working on oil platforms in the Santa Barbara Channel, which are subject to the Outer Continental Shelf Lands Act (43 USC §§1331–1356b), are subject to the FLSA, but not to California's wage and hour laws. Williams v Brinderson Constructors, Inc. (CD Cal, Aug. 11, 2015, No. CV 15–2474-MWF (AGRx)) 2015 US Dist Lexis 105511. See §5.1.
As a result of the passage in 2016 of Proposition 64, the Control, Regulate and Tax Adult Use of Marijuana Act, employees engaged in the cultivation of marijuana are subject to Wage Order No. 4–2001. Bus & P C §26065; Bus & P C §19333. See §5.3.
Narrow distinctions may determine which Wage Order applies to a job or occupation. See Bains v Department of Indus. Relations (2016) 244 CA4th 1120 (employees harvesting prunes from trees, loading them in containers and/or vehicles, and transporting them to where they will be processed are covered by Wage Order No. 14–2001, while employees processing and packing prunes in fixed drying sheds located next to orchard are subject to Wage Order No. 13–2001). See §5.3.
In Administrator's Interpretation No. 2016–1, the Department of Labor (DOL) announced an expanded joint employer test that the agency now applies under the FLSA and the Migrant and Seasonal Agricultural Worker Protection Act (29 USC §§1801–1872). See §5.4A.
As of January 1, 2017, an employer may not require an employee who primarily resides and works in California to agree to either of the following conditions:
Require the employee to adjudicate outside of California a claim arising in California (Lab C §925(a)(1)); or
Deprive the employee of the substantive protection of California law with respect to a controversy arising in California (Lab C §925(a)(2)).
Any contract provision that has either condition is voidable by the employee, and an employee that is enforcing his or her rights is entitled to an award of attorney's fees, injunctive relief, and other remedies as a court or an arbitrator may order. Lab C §925(b)–(d). However, these restrictions on choice of law and choice of forum do not apply to a contract with an employee that is individually represented by legal counsel in negotiating its terms. Lab C §925(e). See §5.13B.
An employer that withholds wages in violation of Lab C §212 is subject to a civil penalty, for each failure to pay an employee, of $100 for any initial violation and $200 plus 25 percent of the amount withheld for each subsequent violation or any willful or intentional violation. Lab C §225.5. These civil penalties are limited to violations of Lab C §212 that result in the withholding of wages. For these purposes, a fee for cashing a check or a hold placed on a check can be considered the "withholding of wages." Solis v Regis Corp. (ND Cal 2007) 612 F Supp 2d 1085, 1088. See §5.14A.
Employers must furnish each employee at the time wages are paid with an itemized written statement, showing nine items of information (Lab C §226(a)(1)–(9)), including "gross wages earned." In Soto v Motel 6 Operating, L.P. (2016) 4 CA5th 385, the court held that "gross wages earned" does not include value of accrued but unpaid vacation time. See §5.14B.
The itemized wage statement also must also include the total hours worked by each employee, with some exceptions. Effective January 1, 2017, those exceptions (see Lab C §226(j)) were expanded to include employees who are paid solely on salary, salespersons paid on commission, high-ranking executives partially compensated with stock options, and others who are exempt from payment of the minimum wage or overtime. See §5.14B.
Employees who voluntarily quit employment generally must be paid on their last day of work; however, an employee who does not give prior notice must be paid within 72 hours after his or her last day of work. Lab C §202. In McLean v State of Cal. (2016) 1 C5th 615, the court held that Lab C §202 also applies to employees who retire, just as it does to those who voluntarily quit for other reasons. See §5.16.
The California minimum wage will increase from $10.00 per hour to $15.00 per hour between January 1, 2017 and January 1, 2023, depending on the size of the employer's workforce. See §5.17.
In American Hotel & Lodging Ass'n v City of Los Angeles (9th Cir 2016) 834 F3d 958, the Ninth Circuit held that the NLRA does not preempt a city's minimum wage ordinance, even though it includes a collective bargaining opt-out provision. See §5.17.
Employees that are paid solely by commission must be compensated separately for no less than the minimum wage when they are performing tasks unrelated to sales. Vaquero v Ashley Furniture Indus. (9th Cir 2016) 824 F3d 1150. See §5.17.
As of January 1, 2017, the minimum wage for employees of federal contractors and subcontractors is $10.20 per hour, which will be adjusted for inflation on each subsequent January 1. 29 CFR §10.5. See §5.19.
In Schaefer v Walker Bros. Enters., Inc. (7th Cir 2016) 829 F3d 551, the Seventh Circuit held that restaurant servers who spent 10 to 45 minutes daily performing tasks such as making coffee, washing and slicing fruit, filling ice buckets, restocking bread bins, replenishing supplies, and performing various cleaning tasks were not entitled to the full minimum wage for that time, because such duties were "related" to tipped work. See §5.19.
Mandatory service charges—for example, for banquet or room service meals—are not considered tips and may be credited against the employer's minimum wage obligations. The Fourth Circuit has held that an employer must satisfy at least two requirements to credit "service charges" toward the minimum-wage obligation: (1) the service charge "must have been included in the establishment's gross receipts," and (2) it must have been "distributed by the employer to its employees." McFeeley v Jackson Street Entertainment, LLC (4th Cir 2016) 825 F3d 235, 246. See §5.20.
Meal and lodging credits against the minimum wage have been updated. See §5.21.
Daily overtime is determined based on the number of hours worked by an employee in a workday, which may be different than the number of hours in an employee's shift that spans two workdays. See Henry v Home Depot U.SA., Inc. (ND Cal, Jan. 4, 2016, No. 14-cv-04858-JST) 2016 US Dist Lexis 792; §5.24.
The hourly rate of pay for an employee employed solely at a single hourly rate is the employee's "regular rate." In determining whether to include an amount in the calculation of the regular rate, courts look to "whether the payment at issue is generally understood as compensation to the employee, not whether the payment is tied to specific hours worked by the employee." Flores v City of San Gabriel (9th Cir 2016) 824 F3d 890, 899. In Flores, the Ninth Circuit found that the employer's payment of cash-in-lieu of benefits had to be included in the employee's regular rate, because it was similar to an attendance bonus. See §5.27.
Over the course of a 4-year period commencing January 1, 2019, agricultural employees will receive on a phased-in basis the same rights to daily and weekly overtime as most other California employees. See §5.42.
Following up on last year's amendments to California's Equal Pay Act (Lab C §1197.5) regarding gender-related wage differentials, the Wage Equality Act of 2016 (SB 1063) enacts nearly identical language to preclude wage differentials based on race or ethnicity. For these and other changes, see §5.42A.
In Oregon Restaurants & Lodging v Perez (2016) 816 F3d 1080, the court upheld the DOL's 2011 amendments to 29 CFR §§531.52, 531.54, 531.59, which prohibit employers, regardless of whether they take a tip credit, from requiring customarily tipped employees to participate in a tip pool that includes customarily nontipped employees. The court found that Cumbie v Woody Woo, Inc. (9th Cir 2010) 596 F3d 577 does not foreclose the DOL's ability to regulate tip pooling practices of employers who do not take a tip credit. See §5.44.
In Watterson v Garfield Beach CVS LLC (ND Cal 2015) 120 F Supp 3d 1003, the court held that an employee who voluntarily enrolled in her employer's health insurance plan was not entitled to compensation for time spent completing an annual health screening and online wellness review in order to avoid paying a $50 per month increase in her medical premium. The court found that the employee was not subject to the employer's control because she was not required to enroll in the plan. The court also rejected the employee's argument that the employer was the primary beneficiary of her participation in the annual screening and wellness review. See §5.45.
In Tyson Foods, Inc. v Bouaphakeo (2016) 577 US __, 136 S Ct 103, the Supreme Court held that liability and damages for uncompensated time spent donning and doffing required gear could be determined by statistical techniques when the employer failed to keep records of the time spent on those activities. The Court permitted evidence of an industrial relations expert's determination of the average time it took employees to don and doff the gear based on analysis of 744 videotaped observations of the employees' activities. See §5.47.
In Scott-George v PVH Corp. (ED Cal, Jul. 22, 2016, No. 2:13–cv–0441–TLN–AC) 2016 US Dist. Lexis 96208, the court dismissed a claim under California law brought by employees who alleged they were not compensated for the time during which they were subjected to a security inspection of their purses and bags. The court held the employees failed to show that the checks were a mandatory activity. They could choose not to bring a bag, purse, or the like to work. See §5.47.
In Rodriguez v E.M.E., Inc. (2016) 246 CA4th 1027, the court reversed summary adjudication in favor of an employer who had combined two 10-minute employee rest periods into one 20-minute rest period per 8-hour shift. The court held that a departure by an employer from "the preferred schedule" is permissible only when the departure (1) will not unduly affect employee welfare, and (2) is tailored to alleviate a material burden that would be imposed on the employer by implementing the preferred schedule. See §5.48.
In Driscoll v Graniterock Co. (2016) 6 CA5th 215, the employer was found to have complied with the obligation to provide its concrete mixer drivers an off-duty meal period each day by informing the drivers of their right to a meal period and making a meal period available to drivers who requested one. The employer provided employees with a legally compliant employee handbook that contained information about the availability and right to a 30-minute off-duty meal period, the drivers acknowledged they had reviewed the policy, and the employer posted the applicable wage order. There was no evidence that any driver was ever denied an off-duty meal period when he or she requested it. Although the nature of the concrete mixing and delivery industry precludes scheduling off-duty meal periods in advance—the timing of a meal period is dependent on the state of the concrete in the driver's truck and the requirements of a construction job to which he or she is attending—"an employer is not required to schedule meal periods." See §5.48.
In Corbin v Time Warner Entertainment-Advance/Newhouse Partnership (9th Cir 2016) 821 F3d 1069, 1075, the court of appeals upheld the employer's policy of rounding time to the nearest quarter hour, which the court found to be consistent with 29 CFR §785.48(b). See §5.54C.
Also in Corbin, the court of appeals rejected an employee's claim for 1 minute of off-the-clock work on a single occasion, given that it was de minimis. The employer had not pleaded de minimis as an affirmative defense, but the court held that an employer is not required to plead the doctrine as an affirmative defense. See §5.54D.
In Boyd v Bank of Am. Corp. (CD Cal 2015) 109 F Supp 3d 1273, 1286, the federal district court held that real estate appraisers were not administratively exempt because their work did not directly relate to management policies or general business operations. See §5.58. Nor did they meet the professional exemption, because their work did not fall into a field of science or learning requiring a specialized course of study. See §5.59.
Hourly and salary exemption amounts have been updated to reflect 2017 requirements. See §§5.59–5.60.
Private school teachers of students enrolled in kindergarten through grade 12 are exempt from overtime, provided that, as of July 1, 2017, the teacher must earn the greater of:
100 percent of the lowest salary offered by any school district to a credentialed teacher (and not someone employed in that position pursuant to an emergency permit, intern permit, or waiver); or
70 percent of the lowest schedule salary offered to a credentialed teacher (and not someone employed pursuant to an emergency permit, intern permit, or waiver) by the school district or county in which the private school is located.
On May 23, 2016, the DOL announced an increase in the minimum salary to $913 per week, or $47,476 per year, beginning December 1, 2016. The new minimum salary also included automatic updates beginning January 1, 2020 and every three years thereafter. However, on November 22, 2016, in Nevada v United States Dep't of Labor (ED Tex, Nov. 22, 2016, No. 4:16-CV-00731) 2016 US Dist Lexis 162048, the court enjoined implementation of this change. The court held that the DOL exceeded its delegated authority and that the increase was not based on a permissible construction of the applicable statute. The DOL has filed an appeal with the Fifth Circuit. See §5.62.
Police, fire fighters, and similar employees, regardless of rank or pay level, that primarily perform traditional first-responder duties will not qualify as exempt executive employees. 29 CFR §541.3(b). Morrison v County of Fairfax, Va. (4th Cir 2016) 826 F3d 758. See §§5.65, 5.70.
In Lutz v Huntington Nat'l Bank (6th Cir 2016) 815 F3d 988, the Sixth Circuit held that residential-loan underwriters are administratively exempt employees, because their job duties relate to the general business operations of the bank, and they exercise discretion and independent judgment when performing those duties. See §5.71.
In Encino Motorcars, LLC v Navarro (2016) 579 US ___, 136 S Ct 2117, the Supreme Court held that the DOL failed to provide a reasoned explanation for its 2011 change in position that service advisors, who evaluate car repair needs and solicit supplemental repair services, are not exempt from FLSA overtime requirements. See §5.80.
In Torres v Wells Fargo Bank, N.A. (CD Cal, Oct. 12, 2016, No. ED CV 15-2225 PSG (KKx)) 2016 US Dist Lexis 163159, the district court held that the employer lawfully included in its incentive compensation plan for home mortgage consultants a deduction for third-party fees, including credit report and appraisal fees, that the consultants failed to collect on loans that were not closed due to cancellation or denial. See §5.89C.
A new section has been added on the topic, "Employer-Provided Training Costs." See §5.89E.
In Kilby v CVS Pharmacy, Inc. (2016) 63 C4th 1, the California Supreme Court provided some long-awaited guidance on the "suitable seating" requirement. See §5.89G.
By January 1, 2019, the Division of Occupational Safety and Health is required to propose to the Occupational Safety and Health Standards Board, for the board's review and adoption, a standard that minimizes heat-related illness and injury among employees working in indoor places of employment. Lab C §6720 (amended). See §5.89H.
In Ramos v Garcia (2016) 248 CA4th 778, an employee-manager who was mistakenly named in a wage and hour action as a coemployer—when he was actually a coemployee—was not entitled to an award of attorney fees under Lab C §§218.5 or 1194(a), because he was not a prevailing employee-plaintiff (he was a defendant), and the lawsuit was not brought in bad faith. See §5.92.
When an arbitration agreement clearly and unmistakably delegates all authority to the arbitrator, a court may not decide whether the agreement is enforceable, except as to claims under the Private Attorneys General Act of 2004 (PAGA) (Lab C §§2698–2699.5). Mohamed v Uber Techs., Inc. (9th Cir 2016) 836 F3d 1102. See §5.93A.
When an agreement is ambiguous on the issue of whether class arbitration is available, the question must be determined by the arbitrator in the first instance. Nguyen v Applied Med. Resources Corp. (2016) 4 CA5th 232 (trial court should not have dismissed class claims, but should allow arbitrator to decide whether arbitration clause permits arbitration on class basis). See §5.93A.
Regarding legal fees for class counsel, the court may use a percentage method for its calculation of the fee award after careful consideration of information about contingency, novelty, and difficulty, together with an assessment of the skill of class counsel, number of hours worked, and the asserted hourly rates. It is within the trial court's discretion to determine whether to cross-check the reasonableness of the percentage fee through a lodestar calculation. Laffitte v Robert Half Int'l, Inc. (2016) 1 C5th 480 (approving fee award of one-third of $19 million class settlement over objection of one class member). See §5.93B.
Amendments to PAGA by SB 836 (Stats 2016, ch 31), effective June 27, 2016, modify some of its filing, processing, and settlement procedures. The following are some highlights of those amendments, which apply prospectively to all pending PAGA cases, as well as new filings:
All new PAGA claim notices must be filed online, with a copy sent by certified mail to the employer;
All employer cure notices or other responses to a PAGA claim must be filed online, with a copy sent by certified mail to the aggrieved employee or aggrieved employee's representative;
A filing fee of $75 is required for a new PAGA claim notice and any initial employer response (cure or other response) to a new PAGA claim notice;
The time for the Labor and Workforce Development Agency (LWDA) to review a notice under Lab C §2699.3(a) has been extended from 30 to 60 days;
When filing a new PAGA lawsuit in court, a filed-stamped copy of the complaint must be provided to the LWDA (applies only to cases in which the initial PAGA claim notice was filed on or after July 1, 2016);
Any settlement of a PAGA action must be approved by the court, whether or not the settlement includes an award of PAGA penalties. A copy of a proposed settlement must be provided to the LWDA at the same time that it is submitted to the court; and
A copy of the court's judgment and any other order that awards or denies PAGA penalties must be provided to the LWDA.
An employer may not require an employee to individually arbitrate whether he or she is an "aggrieved employee" within the meaning of PAGA, while preserving its right to a judicial forum for all other aspects of the claim. Perez v U-Haul Co. of Cal. (2016) 3 CA5th 408. See §5.97.
In Rosenfield v GlobalTranz Enters., Inc. (9th Cir 2015) 811 F3d 282, the court held that a complaining employee's position as a manager for the employer was an important part of the "context" that the fact-finder must consider when evaluating a retaliation claim. A reasonable employer would view many actions taken by a non-managerial employee differently than the same actions taken by a manager. See §5.103.
In Genesis Healthcare Corp. v Symczyk (2013) 569 US ___, 133 S Ct 1523, the Supreme Court held that an FLSA plaintiff that disregarded her employer's offer of judgment under Fed R Civ P 68, which she admitted mooted her individual claim, had no continuing interest in the case. Therefore, the employee's suit was appropriately dismissed for lack of subject-matter jurisdiction. However, the Court subsequently held that an unaccepted settlement offer, even an offer of judgment under Fed R Civ P 68, to satisfy the named plaintiff's individual claim does not render a case moot. Campbell-Ewald Co. v Gomez (2016) 577 US __, 136 S Ct 663. See §5.106A.
Chapter 6: Vacations, Family and Medical Leave, and Other Time Off
Several cities have adopted their own paid sick leave policies, which may in some instances provide greater benefits for employees than those available under the Healthy Workplaces, Healthy Families Act of 2014. Among those cities: Emeryville, Los Angeles, Oakland, San Diego, San Francisco, and Santa Monica. See §6.11.
Effective January 1, 2017, an employer having 25 or more employees must inform each new employee of his or her right to take protected time off because of domestic violence, sexual assault, or stalking. New employees must be informed of this right on hire, and current employees on request. The Labor Commissioner is tasked with developing a form for this purpose on or before July 1, 2017, and employers are not required to comply with this rule until the Labor Commissioner has posted the model form on the DLSE's website (http://www.dir.ca.gov/dlse/DLSE-Forms.htm). Lab C §230.1(h)(1)–(3). See §6.137.
Chapter 7: Tax Compliance
Assembly Bill 1775 changed the due date to file certain business entity tax returns to conform to the federal due dates. For taxable years beginning on or after January 1, 2016, California conforms to the due dates for foreign partnerships and limited liability companies (LLC) to file information returns to report nonwage withholding. Although the information return file date changed, the payment due date remains the same. See §7.88.
Chapter 8: Unemployment Compensation and State Disability Insurance
Effective January 1, 2017, an employer with ten or more employees must file required reports of contributions, quarterly returns, reports of wages paid, and annual reconciliation returns with the EDD electronically, and remit all contributions for unemployment insurance premiums by electronic funds transfer. Beginning January 1, 2018, these requirements will extend to all employers. See §8.33.
A new section has been added on the topic, "Attachment of Unemployment Benefits for Child Support." See §8.139A.
For periods of disability beginning on and after January 1, 2018, but before January 1, 2022, the formula for determining an employee's weekly benefit amount has been revised, providing a weekly benefit amount minimum of $50 and increasing the wage replacement rate in the statutory table. See §8.179.
California's disability insurance program includes a paid family leave benefit, under which employees are eligible for family temporary disability insurance for up to 6 weeks in order to care for a seriously ill family member, bond with a child within 1 year of the child's birth, or bond with a new foster or adopted child. An employee making a claim for family temporary disability insurance benefits must submit a medical certificate establishing eligibility. Currently, there is a 7-day waiting period before benefits are paid. Effective January 1, 2018, the 7-day waiting period requirement is eliminated. Un Ins C §3303(b). See §8.179.
Chapter 9: Notice-Posting, Training, and Recordkeeping Requirements
The Legislature has enacted AB 1978, the Property Service Workers Protection Act (Lab C §§1420–1434). This law contains numerous measures to protect janitorial industry employees from sexual assault. See §9.61A.
A new section covering the recordkeeping requirements of employers subject to the Property Service Workers Protection Act has been added. See §9.73B.
Although Lab C §226 requires employers to provide written wage statements containing specifically-enumerated information, including identifying the total hours worked, it contains an exception from reporting the total hours worked of employees who are paid solely on salary and are exempt from overtime. Effective January 1, 2017, Lab C §226(j) eliminates the need to show hours worked for employees exempt from minimum wage and overtime under several specified exemptions. See §9.70.
All employers are required to maintain, for 3 years, records of the wages and wage rates, job classifications, and other terms and conditions of employment for all employees. One purpose of this requirement is to help show that disparities in pay based on gender, race, or ethnicity do or do not exist in the employer's workplace. Lab C §1197.5(d). See §9.90.
Chapter 10: Employee Handbooks
The "Employee Handbook Receipt Acknowledgment" in §10.9 has been modified.
The "Introductory Period Policy" in §10.18 has been modified.
Amended FEHA regulations that took effect April 1, 2016 expressly require employers to adopt and disseminate a written discriminati, harassment, and retaliation prevention policy that, among other things: lists all protected categories; makes clear that the law prohibits coworkers, third parties, supervisors, and managers from engaging in discrimination, harassment, or retaliation; provides a complaint process and prohibits retaliation for making a complaint or participating in an investigation. 2 Cal Code Regs §11023. See §10.19.
Although courts have upheld arbitration provisions included in employee handbooks, others have rejected this approach. See Serpa v California Sur. Investigations, Inc. (2013) 215 CA4th 695 (upholding arbitration provision contained in employee handbook); compare Esparza v Sand & Sea, Inc. (2016) 2 CA5th 781 (arbitration provision in employee handbook not enforceable because (1) handbook stated it was not intended to establish an agreement; (2) policy acknowledgement signed by employee did not express agreement to the arbitration provision; and (3) acknowledgment stated that employee had not yet read handbook). See §10.21.
Federal labor law protects the rights of employees to discuss their wages, hours, and working conditions. See, e.g., Battle's Transp., Inc. (2015) 362 NLRB 17 (provision in employer's confidentiality agreement that barred employees from discussing "human resources related information" and "investigations by outside agencies" ordered rescinded, because it could reasonably be construed to restrict discussion regarding terms and conditions of employment). See §10.23.
The form "Performance Standards; Misconduct, Discipline, and Termination" in §10.39 has been modified.
Smoking has been illegal in enclosed workplaces in California since 1997, with a few minor exceptions. Effective June 9, 2016, most of those exceptions have been eliminated. The smoking ban now extends to owner-operated businesses, hotel lobbies, banquet rooms, warehouse facilities, and employee break rooms. See Lab C §6404.5(e); §§10.45, 12.115–12.117.
Chapter 11: Trade Secrets Protection and Unfair Competition
The existence of the Defend Trade Secrets Act (DTSA) (Pub L 114–153, 130 Stat 376) does not preempt or preclude a companion trade secret misappropriation claim under a state-law version of the Uniform Trade Secrets Act (UTSA). Allstate Ins. Co. v Rote (D Or, Aug. 7, 2016, No. 3:16-cv-01432-HZ) 2016 US Dist Lexis 2016 104374. See §11.1A for a summary of the DTSA's essential features.
Basically, the DTSA uses the same statutory definition of "trade secret misappropriation," and applies the same analysis, as under the existing California version of the UTSA. Henry Schein, Inc. v Cook (ND Cal, June 22, 2016, No. 16-cv-03166-JST) 2016 US Dist Lexis 81369. See §11.1A.
In Henry Schein, Inc. v Cook (ND Cal, June 22, 2016, No. 16-cv-03166-JST) 2016 US Dist Lexis 81369, the court held that certain customer information developed and maintained through a proprietary software program, which included buying patterns and marketing and pricing strategies, were protectable trade secrets under both the UTSA and DTSA. See §11.5.
California courts have refused to adopt the "inevitable disclosure" doctrine because the state has a strong public policy favoring mobility of its workforce and because it would conflict with the prohibition against covenants not to compete under Bus & P C §16600. See Cypress Semiconductor Corp. v Maxim Integrated Prods., Inc. (2015) 236 CA4th 243, 264. Additionally, under the newly enacted federal DTSA, the inevitable disclosure doctrine has been rejected. See 18 USC §1836(b)(3)(A)(i). See §11.10.
The form "Sample Offer or Hire Letter to New Employee" has been modified. See §11.21.
Employees can be careless when discussing their departure or competition plans, often communicating through their employer's e-mail system. This has been a fertile area for recovery of damaging evidence against former employees. Also, a waiver of attorney-client protections may occur if the employee communicates to his or her outside counsel through his former employer's e-mail or computer network. See Tatung Co. v Shu Tze Hsu (CD Cal, Feb. 19, 2016, No. SACV 13-1743-DOC (ANx)) 2016 US Dist Lexis 22012; §11.41C.
Recent cases in the criminal and 4th Amendment context have held that people do not have a reasonable expectation of privacy in public peer-to-peer digital file-sharing network records, cell-tower or site records, records showing "to/from" e-mail addresses, or records of the IP addresses of websites they have visited. See People v Evensen (2016) 4 CA5th 1020; U.S. v Forrester (9th Cir 2008) 512 F3d 500, 510; U.S. v Elima (CD Cal, June 22, 2016, No. SACR 16-00037-CJC) 2016 US Dist Lexis 87588. See §11.41C.
The recently enacted federal DTSA contains provisions similar to those in the UTSA regarding when attorney fees may be awarded to a successful plaintiff/employer (upon a showing for "willful" misappropriation), or to a defendant (when the evidence establishes the claim was brought or maintained by the plaintiff in "bad faith"). One distinction, however, is that a plaintiff may be immune from attorney fees under the DTSA unless the employer has given prior written notice to the employee of his or her right to disclose trade secrets of an employer to federal, state, or local government officials, or to an attorney, in connection with legitimate "whistleblowing" activities to report, or cause to be investigated, a suspected violation of law. See 18 USC §1833(b); §11.42A.
Currently, the law regarding enforceability of arbitration provisions in employment agreements is in a state of flux. A recent California Supreme Court decision rejected certain "unconscionability" challenges raised by employees to the enforceability of their employment arbitration contracts. See Baltazar v Forever 21, Inc. (2016) 62 C4th 1237. See also Nguyen v Applied Med. Resources Corp. (2016) 4 CA5th 232; Tompkins v 23andMe, Inc. (9th Cir 2016) 840 F3d 1016; Ali v J.P. Morgan Chase Bank, N.A. (9th Cir. 2016) 647 Fed Appx 783, 785. Prior to Baltazar, the trend had been to find them unenforceable on grounds of procedural or substantive unconscionability (or both). See §11.42E.
However, arbitration agreements that contain forum selection clauses requiring an individual party to arbitrate disputes in a foreign state or distant forum, allow one party to unilaterally select the arbitrator, limits remedies, or contain a shortened limitations period, have been found to be substantively unconscionable. Magno v College Network, Inc. (2016) 1 CA5th 277, 288; Penilla v Westmont Corp. (2016) 3 CA5th 205, 214; but see Britvan v Cantor Fitzgerald, L.P. (CD Cal, July 18, 2016, No. 2:16-cv-04075-ODW (JPRx)) 2016 US Dist Lexis 93184 (upholding validity of New York forum selection clause where at time employment arbitration agreement was signed, both parties were based in New York, and terms of employment were originally to be performed in New York). See §11.42E.
In Center for Auto Safety v Chrysler Group, LLC (9th Cir 2016) 809 F3d 1092, 1096, the Ninth Circuit adopted a rule about sealing procedures in certain trade secrets cases. See §11.44A.
Even an unintentional failure to conduct an adequate search for electronically stored digital information (ESI) in discovery can lead to significant sanctions. In Rodman v Safeway Inc. (ND Cal, Oct. 4, 2016, No. 11-cv-030030-JST) 2016 US Dist Lexis 137988, the plaintiff was awarded over $688,000 in discovery sanctions when Safeway's counsel did not meet its obligation to conduct, with the client's assistance, a reasonable search for relevant and responsive ESI that had been requested in discovery. Counsel negligently relied on the client's marketing director (not its IT people or a reputable outside forensic computer consultant) to do the initial ESI searches. See §11.46A.
Labor Code §2802 requires an employer "to indemnify an employee for all expenses and losses incurred in direct consequence of the discharge of his duties," but only those expenditures or losses an employee must "necessarily incur." USS-POSCO Indus. v Case (2016) 244 CA4th 197, 205. See §11.47A.
California courts expressly recognize the "preemptive" litigation strategy by former employees and their new employers in bringing claims for statutory unfair competition under Bus & P C §17200 or declaratory relief under CCP §1060 to challenge unenforceable noncompete clauses in their employment agreements. See, e.g., Robinson v U-Haul Co. of Cal. (2016) 4 CA5th 304 (court granted permanent injunction barring company's enforcement of covenant not to compete under UCL in independent dealer agreements). See generally §11.62.
In Couch v Morgan Stanley & Co. (CD Cal, Aug. 7, 2015, No. 1:14-cv-10-LJO-JLT) 2015 US Dist Lexis 104021, aff'd (9th Cir 2016) 656 Fed Appx 841, the court held that simply inserting an unenforceable noncompetition provision in an employment agreement (without even attempting to enforce it) could not only give rise to an unlawful competition claim under Bus & P C §17200, it might also support a tortious interference with prospective economic advantage claim by the employee. See §11.52.
In Gulaid v CH2M Hill, Inc. (ND Cal, March 10, 2016, No. 15-cv-04824-JST) 2016 US Lexis 31906, the court held that FEHA only applies to California-based conduct. See §11.52.
New sections on Choice of Law, Forum Selection, or Contractual Arbitration Clauses have been added to chap 11. See §§11.54A–11.55B.
In Pinela v Neiman Marcus Group, Inc. (2015) 238 CA4th 227, the court invalidated a Texas choice of law clause in an arbitration agreement when the plaintiff was a California-based employee suing his Texas-based employer for violation of California wage and hour laws. See §§11.55, 11.55B.
In Verdugo v Alliantgroup, L.P. (2015) 237 CA4th 141, the court invalidated on public policy grounds both the Texas forum selection and choice of law clauses inserted in an employment agreement by the employer to avoid California wage and hour laws; the employee was a California-based resident and worker. See §11.55.
Where a forum selection clause is found to be "permissive" rather than "mandatory," the majority of courts, after Atlantic Marine Const. Co. v U.S. District Court for W. Dist. of Texas (2013) 571 US ___, 134 S Ct 568, have applied the traditional forum non-conveniens test, which analyzes both private and public interest factors. See Carl's Jr. Restaurants LLC v 6Points Food Servs., Ltd. (CD Cal, July 7, 2016, No. CV 15-9827-GHL (ASx)) 2016 US Dist Lexis 88248; §11.55A.
In Robinson v U-Haul Co. of Cal. (2016) 4 CA5th 304, the court of appeal upheld the trial court's permanent injunction barring the company's enforcement of an unlawful covenant not to compete under the UCL, despite the company's position that it no longer intended to enforce the covenant in its independent dealer agreements. See §11.62.
A defendant who has an "economic interest" in a specific contract, but is not a party to that contract, still may be held liable for tortiously interfering with it. Popescu v Apple Inc. (2016) 1 CA5th 39; see §11.66.
The form "Short Agreement for Protection of Proprietary Information" in §11.76 has been modified.
The form "Definitions" in §11.78 has been modified.
The form "Duty of Trust and Confidentiality" in §11.79 has been modified.
The form "No Disclosure or Misappropriation of Proprietary Information" in §11.80 has been modified.
The form "Conflicting Employment or Business Opportunities" in §11.85 has been modified.
The form "Nonsolicitation of Employees" in §11.86 has been modified.
The form "Returning Company Documents and Other Tangible Items" in §11.89 has been modified.
Chapter 12: Workplace Safety
DOSH's list of high hazard industries for FY 2016–2017 shows an increase of over 100 percent. Although 12 industries were removed from the list, 35 were added. Employers in these industries, regardless of their own safety records, are subject to a heightened potential for inspection. See §12.1A.
In McCarthy Bldg. Cos., Inc. (Jan. 11, 2016) OSHAB 11-1706 and 2046 DAR, the Board upheld a due diligence defense where the controlling employer demonstrated that it had a full-time safety supervisor on the work site who spent 70 percent of his day walking the job. In addition, other supervisors on site were also responsible for watching their areas of responsibility for hazards; the controlling employer provided safety training to all employees on site and enforced a system of sanctions for violations of safety rules; and the violative condition was not readily visible to passers-by. See §12.37B.
Effective January 1, 2017, the criteria for citing OSHA violations as "repeat" will change dramatically. The "look back" period will increase from 3 years to 5, and the clock will begin running when the initial citation becomes final, not when the violation occurred. The geographic scope of the "look back" will also expand; rather than the current restriction of violations occurring in the same Cal/OSHA region, the "look back" will include the entire state. See §12:39.
The rules concerning the timing and calculation of abatement credits for citations classified as serious and serious (accident-related) changed dramatically with the amendment of Lab C §6320. This has caused a great deal of confusion. See §§12.55, 12.57.
The California Occupational Safety and Health Appeals Board (Board) has gone digital. The preferred method of filing an appeal is by filling out electronic forms at the Board's website. See https://caldir-production-portal.ecourt.com/public-portal/. Telephonic notice of an intent to appeal is still available and initial appeal papers can be filed by mail, but the Board will create an electronic file from the hard copy filings. Thereafter, all communications between the Board and the parties to an appeal will be by e-mail and the Internet. See §12.62.
A new section has been added discussing the expedited hearing process for certain OSHA violations. See §12.63A.
A new section has been added discussing the "logical time not yet reached" defense to an OSHA citation. See §12.75A.
A new section has been added discussing workplace violence prevention in healthcare. See §12.118A.
Chapter 16: Whistleblower Issues
In Rosenfield v Globaltranz Enters. (9th Cir 2015) 811 F3d 282, the court held that a reasonable jury could find the employee's advocacy reached the requisite degree of formality to constitute protected activity under 29 USC §215(a)(3) where the employee complained orally to management on at least eight occasions that the company was not in compliance with the FLSA. See §16.2.
The "opt-out" provision of the Energy Reorganization Act (42 USC §5851(b)(4)) empowers whistleblowing employees at nuclear energy sites to bring antiretaliation claims to federal court after 1 year of agency inaction. With regard to the issue of administrative exhaustion, before an employee may opt out of the agency process and bring a retaliation suit against a respondent in federal court, the respondent must have had notice of, and an opportunity to participate in, the agency action for 1 year. As a general rule, adding a new respondent to an administrative complaint restarts the 1-year exhaustion clock as to that person. See Tamosaitis v URS Inc. (9th Cir 2015) 781 F3d 468; §16.9A.
Chapter 16A: Workplace Investigations
In City of Petaluma v Superior Court (Waters) (2016) 248 CA4th 1023, the court held that an investigation report prepared by outside counsel need not contain legal advice to protect the report from having to be produced in litigation, as long as counsel provided "legal services … in anticipation of litigation." See §16A.5.
Chapter 17: Discipline and Termination
The United Supreme Court held in Green v Brennan (2016) ___ US ___, 136 S Ct 1769, 1776 that the running of the limitations period for a constructive discharge claim under Title VII begins on the date that the employee provides the employer with "definite notice of his intent to resign," rather than at the time of the employer's last discriminatory act giving rise to the resignation. See §17.33A.
In claims involving work-related injuries, California workers' compensation laws generally provide the exclusive remedy for an employee's claim for physical injuries, including emotional distress, arising from conduct within the normal scope of the employment relationship. However, employees with workers' compensation claims may sue for violations of the Americans with Disabilities Act, the California Fair Employment and Housing Act, and wrongful discharge in violation of public policy when they have been discriminated against on the basis of their injuries. Prue v Brady Co./San Diego, Inc. (2015) 242 CA4th 1367. See §17.58.
Chapter 19: Insurance Coverage for Employment Claims
Two recent federal court decisions have reached contrary conclusions about whether the claim that an employer's failure to reimburse business expense under Lab C §2802 is precluded by a policy exclusion for violations of any state law governing wage, hour and payroll policies and practices. Compare Admiral Ins. Co. v Kay Auto. Distribs., Inc. (CD Cal 2015) 82 F Supp 3d 1175 (holding that §2802 is a wage and hour law, and exclusion applies) with Hanover Ins. Co. v Poway Academy of Hair Design, Inc. (SD Cal, Nov 14, 2016, No. 15cv536 BTM DHB) 2016 US Dist Lexis 158041 (finding §2802 is not a wage and hour law, and thus not subject to wage and hour exclusion in policy). See §19.12.
Chapter 20: Mediation and Arbitration of Employment Disputes
A party to an arbitration has the right to have a certified shorthand reporter transcribe any deposition, proceeding, or hearing as the official record. The costs of using a reporter fall on the party requesting one. If for some reason the arbitrator refuses the request for a reporter, the requesting party can petition the court for an order compelling the arbitrator to grant the request. CCP §1282.5. See §20.45.
Chapter 21: Public Employment Issues
The right to union representation extends to nondisciplinary meetings with management that may have an impact on the employee's terms and conditions of employment, such as a meeting to discuss possible accommodations of the employee's disability. Sonoma County Superior Court (2015) PERB Dec. No. 2409C, 39 PERC 88. See §21.8.
When one organization wins recognition as the "exclusive representative" for a group of employees in a particular "bargaining unit," then only that organization may represent employees in that unit. Hartnell Community College Dist. (2015) PERB Dec. No. 2452E, 40 PERC 56. See §21.11.