March 2018 Update
On December 22, 2017, the Tax Cuts and Jobs Act (HR 1) (official title: An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018) was signed by the President and became law. See Pub L 115–97, 131 Stat 2054. This update was too far advanced in production to include an analysis of the Act’s impact on some sections of this book, particularly in chapter 2 (Employment Contracts and Executive Compensation) and chapter 7 (Tax Compliance). For an overview of selected provisions, see Marilyn Barrett, A Summary of HR 1 (aka the Tax Cuts and Jobs Act), 39 CEB Cal Bus L Rep 64 (Jan. 2018).
Chapter 1: Hiring Guidelines and Pitfalls
When and how employers may consider criminal convictions continues to be a hot topic, both nationally and in California. Against this backdrop, AB 1008 amended the Fair Employment and Housing Act (FEHA) to preclude most employers from inquiring about an applicant’s criminal record or conviction history until after a conditional employment offer is made, and imposed new notice and disclosure requirements if this information is sought. See §1.29.
AB 168 added Lab C §432.3, to preclude employers from relying on an applicant’s salary history as a factor in determining whether to offer employment to the applicant and, if so, the salary to offer the applicant. The bill also precludes employers from inquiring orally or in writing, personally or through an agent, about an applicant’s salary history, including about compensation and benefits. See new §1.30A.
Chapter 2: Employment Contracts and Executive Compensation
California courts permit claims for wrongful termination if the employer terminates the employee for a legally impermissible reason, such as if the termination violates a public policy. Shaw v Superior Court (2017) 2 C5th 983. See §2.2.
In Farrar v Direct Commerce, Inc. (2017) 9 CA5th 1257, the court held an arbitration agreement to be substantively unconscionable in one aspect because it was one-sided, given that it excluded any claims arising from a confidentiality agreement the employee had also signed. See §2.6.
Private parties cannot agree in a predispute arbitration agreement to arbitrate claims under the Private Attorneys General Act of 2004 (PAGA) (Lab C §§2698–2699.5), because the state is the real party in interest. Bentacourt v Prudential Overall Supply (2017) 9 CA5th 439. However, whether PAGA claims can ever be arbitrated remains unclear. See Borelli v Black Diamond Aggregates, Inc. (ED Cal, Mar. 21, 2017, No. 2:14-cv-02093-KJM-KJN) 2017 US Dist Lexis 40834 (citing Sakkab v Luxottica Retail N. Am., Inc. (9th Cir 2015) 803 F3d 425 and finding that California Supreme Court expresses no preference regarding whether individual PAGA claims are litigated or arbitrated). Compare Tanguilig v Bloomingdale’s, Inc. (2016) 5 CA5th 665 (finding that because PAGA plaintiff acts as proxy for the state, PAGA claim cannot be ordered to arbitration without state’s consent). See §§2.6, 2.85.
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. The circuit courts of appeals have split on this issue (most recently, see NLRB v Alternative Entertainment, Inc. (6th Cir 2017) 858 F3d 393 (agreeing with NLRB); Cellular Sales of Mo., LLC v NLRB (8th Cir 2016) 824 F3d 772 (disagreeing). The United States Supreme Court has agreed to consider this issue in its current term. See §2.85.
An arbitration agreement that waives the right to public injunctive relief is contrary to California policy and is therefore unenforceable under California law. McGill v Citibank, N.A. (2017) 2 C5th 945. See §2.85.
The availability of class arbitration is based on what the parties agreed to in their prearbitration agreement, which is subject to interpretation under state contract law. Sandquist v Lebo Auto., Inc. (2016) 1 C5th 233. See §2.85.
When a court in California must first determine what state law applies in a contractual choice-of-law provision, it will evaluate the choice-of-law question before determining unconscionability. Doe v George St. Photo & Video, LLC (ND Cal, Dec. 19, 2016, No. 16-cv-02698-MEJ) 2016 US Dist Lexis 175329. See §2.93.
Chapter 3: Independent Contractors, Leased Workers, and Outsourcing
Although most federal circuits follow a version of the “economic realities” test for determining joint employment under the FLSA, the Fourth Circuit has held it is the wrong test, because it focuses on the relationship between the employee and the putative employer, rather than on the relationship between the putative joint employers. Salinas v Commercial Interiors, Inc. (4th Cir 2017) 848 F3d 125, 137. See §3.42.
The NLRB takes the position that two or more entities are joint employers of a single workforce if they exercise direct and immediate control over the workforce. Hy-Brand Indus. Contractors, Ltd. (2017) 365 NLRB No. 156. In Hy-Brand, the NLRB overruled its prior decision in Browning-Ferris Indust. of Cal., Inc. (Aug. 27, 2015, No. 32-RC-109684) 2015 NLRB Lexis 672, and stated that the new standard “serves labor law and collective bargaining well,” and is a standard that is “understandable and rooted in the real world.” Direct and immediate control is a prerequisite to a finding of joint employer status. See §3.44.
In 2017, the U.S. Secretary of Labor withdrew the Department of Labor’s 2015 and 2016 informal guidance on independent contractors and joint employment. However, this withdrawal does not change any requirements for employers under federal or state law. It likely represents the Department of Labor’s acquiescence to state labor departments’ pursuits of misclassification claims, as many state labor departments work with the U.S. Department of Labor concerning employee misclassification issues. See §3.48.
Chapter 4: Immigration Law Requirements for Employers
Fines for violations have been updated. See §§4.23, 4.24, 4.27, 4.39.
In October 2017, Governor Brown signed AB 450 (Stats 2017, ch 492) into law. Designated the California Immigrant Worker Protection Act, it adds new Govt C §§7285.1, 7285.2, and 7285.3 and Lab C §§90.2 and 1019.2. The law became effective January 1, 2018, and imposes a number of requirements on employers vis-à-vis enforcement actions by federal immigration agents. The law contains four general provisions: worksite access, records access, notice, and reverification. See new §4.30B.
There is one important caveat when applying to change nonimmigrant status: If a petition is submitted within 90 days after admission in another nonimmigrant visa status, the change of status may be denied, because under a State Department rule there is a presumption of willful mispresentation of intent to engage in status-compliant activity only. This was previously a 60-day rule; the 90-day rule became effective September 1, 2017. See §4.44.
In late 2017, in a reversal of prior practice, USCIS began denying Form I-131 Advance Parole applications where the applicant departs the United States while the I-131 application is pending. See §4.85.
Chapter 5: Wage and Hour Laws
In Goonewardene v ADP, LLC (review granted Feb. 15, 2017, S238941; superseded opinion at 5 CA5th 154), the California Supreme Court will decide: Does the aggrieved employee in a lawsuit based on unpaid overtime have viable claims against the outside vendor that performed payroll services under a contract with the employer? See §5.13.
California wage and hour laws apply to nonresidents of California who perform any work in the state. Sullivan v Oracle Corp. (2011) 51 C4th 1191 (residents of other states who perform work in California for California-based employer may pursue claims for overtime compensation under California law). California law also applies to employees that are undocumented aliens or that lack proper work authorization. Kao v Joy Holiday (2017) 12 CA5th 947, 955. See §5.13.
As of January 1, 2018, employers are prohibited from using an applicant’s salary history as a factor in deciding whether to offer employment, or the salary to offer the applicant. Lab C §432.3(a). See new §5.13A.
As of January 1, 2018, for any employee who is licensed under the Barbering and Cosmetology Act (Bus & P C §§7301–7426.5), which generally includes barbers, cosmetologists, estheticians, manicurists, and electrologists, wages that are paid to that employee for providing services for which such a license is required, when paid as a percentage or a flat sum portion of the sums paid to the employer by the client, and for selling goods, shall constitute commissions, provided that the employee is paid a regular base hourly rate of at least two times the state minimum wage rate for all hours worked in addition to commissions paid. Lab C §204.11. See §§5.13C, 5.17.
A “knowing and intentional failure” does not include an isolated and unintentional payroll error due to a clerical or inadvertent mistake. In Kao v Joy Holiday (2017) 12 CA5th 947, 961, the court held that an employer that knew it initially provided no wage statements to an employee, and later provided statements that did not contain the hours worked and rate of pay, engaged in a knowing and intentional violation. See §5.14B.
No vacation pay is owed when the employer requires a waiting period before vacation pay begins to accrue. The court of appeal reaffirmed this rule in Minnick v Automotive Creations, Inc. (2017) 13 CA5th 1000 (upholding employer policy that employees earned 1week of vacation after completion of 1 year of service, but did not earn or accrue vacation during first year). See §5.16.
The California minimum wage will increase from $11.00 per hour to $15.00 per hour between January 1, 2018, and January 1, 2023, depending on the size of the employer’s workforce. See §5.17.
In Douglas v Xerox Bus. Servs., LLC (9th Cir 2017) 875 F3d 884, the Ninth Circuit concluded that although employees may have earned less than the minimum wage in some hours due to Xerox’s “mind-numbingly complex payment plan,” the employer actually did comply with the FLSA when the workweek as a whole was evaluated. See §5.17.
In Vaquero v Stoneledge Furniture, LLC (2017) 9 CA5th 98, the court held that sales employees who are paid on commission under Wage Order No. 7–2001 (8 Cal Code Regs §11070) are entitled to receive separate compensation for rest periods. See §5.17.
Meal and lodging credits against the minimum wage have been updated. See §5.21.
In Brunozzi v Cable Communications, Inc. (9th Cir 2017) 851 F3d 990, the Ninth Circuit held that an employer violated the FLSA by paying piece-rate employees a “bonus” that was reduced for each overtime hour worked. See §5.32.
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.
AB 46 amended Lab C §1197.5 in 2017 to clarify that the “employer” subject to the Equal Pay Act means both public and private employers, but public employers are exempt from the statutory and misdemeanor penalties identified in Lab C §1199. See §5.42A.
In Oregon Restaurants & Lodging v Perez (9th Cir 2016) 816 F3d 1080, the court upheld the Department of Labor’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. Compare the recent case of Marlow v New Food Guy, Inc. (10th Cir 2017) 861 F3d 1157, in which the 10th Circuit held that an employer that paid employees an hourly rate equal to or greater than minimum wage could retain their tips, and the DOL did not have authority to promulgate 29 CFR §531.52. On July 20, 2017, the DOL announced that it would no longer enforce the 2011 amendments and that it would be rescinding the amended regulations in the future. See §5.44.
In Frlekin v Apple, Inc. (9th Cir 2017) 870 F3d 867, 869, the Ninth Circuit certified the following question to the California Supreme Court: Is time spent on the employer’s premises waiting for, and undergoing, required exit searches of packages or bags voluntarily brought to work purely for personal convenience by employees compensable as “hours worked” within the meaning of Wage Order No. 7–2001 (8 Cal Code Regs §11070)? See §5.47.
No employer may require an employee to work during any rest period mandated by an applicable order of the Industrial Welfare Commission. Lab C §226.7(b). In Augustus v ABM Sec. Servs., Inc. (2016) 2 C5th 257, the California Supreme Court held that employees must be relieved of all duties during rest periods. Employers must relinquish any control over how employees spend their breaks. On-duty or on-call rest periods, such as those requiring employees to monitor pagers, radios, or phones, are not permitted. “A rest period, in short, must be a period of rest.” See §5.48.
In Vaquero v Stoneledge Furniture, LLC (2017) 9 CA5th 98, the court held that sales employees who are paid on commission under Wage Order No. 7–2001 (8 Cal Code Regs §11070) are entitled to receive separate compensation for rest periods. The employer had kept track of hours worked, including rest periods, and paid a guaranteed minimum hourly rate as an advance on commissions earned in later pay periods. However, that did not satisfy the employer’s obligation, because the formula for determining commissions did not include any component that directly compensated the employees for rest periods. Thus, employees incorrectly received the same amount of compensation regardless of whether they took rest periods. See §5.48.
In Gerard v Orange Coast Mem. Med. Ctr. (review granted July 12, 2017, S241655; superseded opinion at 9 CA5th 1204), the California Supreme Court will decide: (1) Did Senate Bill 327 (concerning health care employee meal period waivers) constitute a change in the law or a clarification in the law? (2) Is Wage Order No. 5–2001, §11(D) (8 Cal Code Regs §11050(11)(D)) partially invalid to the extent it authorizes health care workers to waive their second meal periods on shifts exceeding 12 hours? (3) To what extent, if any, does the language of Lab C §516 regarding the “health and welfare of those workers” affect the analysis? See §5.48.
In Silva v See’s Candy Shops, Inc. (2017) 7 CA5th 235, the court affirmed summary adjudication in favor of the employer on the plaintiff’s claims challenging the employer’s rounding and grace period policies. In addition to rounding timeclock entries up or down to the nearest six minutes (or 1/10th of an hour), the employer also allowed employees on a voluntary basis to punch in up to 10 minutes prior to their scheduled start time and punch out up to 10 minutes after their scheduled end time. Employees were paid based on their scheduled start and end times. The employer prohibited employees from working during the 10-minute grace periods. If, however, an employee was asked to perform work during a grace period, the manager would make a timekeeping adjustment to ensure the employee was properly paid. See §5.54C.
In Mendoza v Nordstrom, Inc. (2017) 2 C5th 1074, the California Supreme Court answered three certified questions from the Ninth Circuit as follows:
A day of rest as required by Lab C §§551 and 552 is guaranteed for each workweek. Periods of more than 6 consecutive days of work that stretch across more than 1 workweek are not prohibited, but Lab C §554(a) requires that over the course of every calendar month, an employee must receive “days of rest equivalent to” 1 day’s rest in 7.
The exemption in Lab C §556 for employees working shifts of 6 hours or less applies only to those who never exceed 6 hours of work on any day of the workweek. If on any 1 day an employee works more than 6 hours, a day of rest must be provided during that workweek, subject to other possible exceptions which may apply.
An employer causes an employee to go without a day of rest when the employer induces the employee to forgo rest to which he or she is entitled. An employer may permit or allow an employee, fully apprised of the entitlement to rest, independently to choose not to take a day of rest.
Following the California Supreme Court’s decision, the Ninth Circuit in Mendoza v Nordstrom, Inc. (9th Cir 2017) 865 F3d 1261, affirmed the district court’s dismissal of the claims because neither plaintiff worked more than 6 consecutive days in any 1 workweek. See §5.55.
Nonmonetary benefits may not be included in the determination of whether an employee is paid the minimum salary. Kao v Joy Holiday (2017) 12 CA5th 947. See §5.56.
The executive exemption applies to any employee who, among other requirements, is primarily engaged in duties that meet the test of the exemption. In Batze v Safeway, Inc. (2017) 10 CA5th 440, 478, the court held that an employer need not provide an accounting of a manager’s activities for every workweek; inferences may be drawn from activities in the surrounding weeks to show that the manager was primarily engaged in exempt tasks. See §5.57.
See the Note in §5.62 for the current status of the Department of Labor’s “Final Rule.”
Hourly and salary exemption amounts have been updated to reflect 2018 requirements. See §§5.59–5.60.
Agreeing with the Second Circuit, but disagreeing with the Sixth Circuit, in McKeen-Chaplin v Provident Sav. Bank (9th Cir 2017) 862 F3d 847, the Ninth Circuit held that mortgage underwriters did not meet the administrative exemption requirements, because their duties went to the heart of the bank’s marketplace offerings, not to the internal administration of the bank. See §5.71.
In Freixa v Prestige Cruise Servs. (11th Cir 2017) 853 F3d 1344, the court held that an employer may not allocate an employee’s commissions to hours worked outside the periods in which the commissions were earned. See new §5.77A about commissioned employees who are exempt from federal overtime.
On remand from the U.S. Supreme Court, the Ninth Circuit held in Navarro v Encino Motorcars, LLC (2017) 845 F3d 7925 that a car dealership’s service advisors were not exempt from overtime, because they did not sell cars, stock parts, or perform mechanical work on cars. However, on September 28, 2017, the U.S. Supreme Court granted certiorari in Encino Motorcars, LLC v Navarro (2017) 198 L Ed 2d 780, to decide whether service advisors are exempt from overtime under 29 USC §213(b)(10)(A). See §5.80.
When an employer reimburses employee business expenses by paying enhanced compensation in the form of increases in base pay or commission rates, the employer is required to “communicate to employees the method or means of identifying the portion of compensation that is intended to provide expense reimbursement at or near the time of compensation.” Espejo v The Copley Press, Inc. (2017) 13 CA5th 329, 363. See §5.89A.
Labor Code §98.7 authorizes the Labor Commissioner to investigate discrimination and retaliation claims and order certain relief after an investigation and determination. SB 306 expanded these powers effective January 1, 2018, by authorizing the Labor Commissioner to proceed without a complaint: (1) in instances where suspected retaliation has occurred during the course of adjudicating a wage claim under Lab C §98; (2) during a field inspection pursuant to Lab C §90.5; or (3) in instances of immigration-related threats in violation of Lab C §§244, 1019, or 1019.1. See §5.90.
In OTO, L.L.C. v Kho (review granted Nov. 29, 2017, S244630; superseded opinion at 14 CA5th 691), the California Supreme Court will decide the following issues: (1) Was the arbitration remedy at issue in this case sufficiently “affordable and accessible” within the meaning of Sonic-Calabasas A, Inc. v Moreno (2013) 57 C4th 1109 to require the company’s employees to forego the right to an administrative Berman hearing on wage claims? (2) Did the employer waive its right to bypass the Berman hearing by waiting until the morning of that hearing, serving a demand for arbitration, and refusing to participate in the hearing? See §5.90.
In Stratton v Beck (2017) 9 CA5th 483, the court of appeal affirmed the trial court’s award of $31,365 in attorney fees against an employer that unsuccessfully appealed the Labor Commissioner’s award of $304 in unpaid wages plus $5,757 in liquidated damages, interest, and penalties. See §5.90.
In Cortez v Doty Bros. Equip. Co. (2017) 15 CA5th 1, the court held that when a collective bargaining agreement unmistakably required arbitration of claims arising under a Wage Order, that necessarily included parallel Labor Code provisions to enforce that Wage Order, such as claims for overtime, meal and rest breaks, reporting, and recordkeeping. See §5.92.
However, a broadly drafted arbitration provision will not ordinarily require arbitration or preclude a lawsuit. See Vasserman v Henry Mayo Newhall Mem. Hosp. (2017) 8 CA5th 236, 247 (collective bargaining agreement did not include explicitly stated, clear, and unmistakable waiver of judicial forum for employees’ statutory claims); §5.92.
In Voris v Lampert (review granted July 12, 2017, S241812; superseded opinion at 2017 Cal. App. Unpub. Lexis 2163 (Mar. 28, 2017)), the California Supreme Court will decide: Is conversion of earned but unpaid wages a valid cause of action? See §5.92.
In Williams v Superior Court (2017) 3 C5th 531, the California Supreme Court held that a plaintiff in a representative statewide action under PAGA is entitled to discovery of the names and contact information of other “aggrieved employees” at the beginning of the proceeding, without any showing of good cause. The court rejected the argument that providing home contact information of other employees—which “is generally considered private”—compelled a prohibition or limitation on discovery, such as requiring other employees to opt in. Such a limitation “may significantly hamper the ability of aggrieved employees, deputized by the state, to assist in broad and effective enforcement of the labor laws.” 3 C5th at 555. Instead, the court endorsed issuance of Belaire-West opt-out notices to other employees. See §§5.93, 5.97.
An arbitration agreement that purports to waive the statutory right to seek injunctive relief in any forum, as permitted by various California statutes, is contrary to California public policy, not preempted by the FAA, and thus unenforceable. McGill v Citibank, N.A. (2017) 2 C5th 945. See §5.93A.
In Sandquist v Lebo Automotive, Inc. (2017) 1 C5th 233, the court held that an arbitration provision that did not specify whether the availability of class arbitration was to be resolved by a court or the arbitrator had to be interpreted against the employer as the drafter of the provision, pursuant to CC §1654, when the employee argued that the issue was for the arbitrator to decide. See §5.93A.
An employee may be required to arbitrate claims against a nonsignatory employer under the doctrine of equitable estoppel. In Garcia v Pexco (2017) 11 CA5th 782, the employee had entered into an arbitration agreement with his primary employer, a temporary staffing agency. He then sued both the agency and Pexco, a company to which the agency had assigned him. When Pexco moved to compel arbitration, the employee asserted that he was not bound to arbitrate the claims against Pexco because it was not a signatory to his agreement with the agency. Under the doctrine of equitable estoppel, a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate claims that are “intimately founded in and intertwined with his employment relationship” with the signatory defendant. 11 CA5th at 787. Additionally, given that the employee alleged that Pexco and the signatory defendant were agents of one another and every cause of action alleged identical claims against all defendants, the court held that the agency exception applied to bind the employee to arbitrate his claims against Pexco. See §5.93A.
In Julian v Glenair, Inc. (2017) 17 CA5th 853, the court held that an agreement to arbitrate a PAGA claim, entered into before an employee is statutorily authorized to bring such a claim on behalf of the state, is an unenforceable predispute waiver. An employee may not agree to arbitrate a PAGA claim until the Labor and Workforce Development Agency (LWDA) notifies the employer and the aggrieved employee that it does not intend to investigate the alleged violation or the agency’s time period to provide such notice has expired. See §5.97.
In Esparza v KS Indus., L.P. (2017) 13 CA5th 1228, the court concluded that for purposes of the Iskanian rule (Iskanian v CLS Transp. Los Angeles, LLC (2014) 59 C4th 348), PAGA representative claims for civil penalties are limited to those where a portion of the recovery is allocated to the LWDA, but claims for unpaid wages or other remedies that are not allocated in this manner are not exempted from arbitration under Iskanian. See §5.97.
In Hernandez v Ross Stores, Inc. (2017) 7 CA5th 171, the court held that an employer may not compel an employee to arbitrate individual aspects of a PAGA claim while maintaining a representative action in court. See also Betancourt v Prudential Overall Supply (2017) 9 CA5th 439; §5.97.
For contracts entered into on or after January 1, 2018, a direct contractor that erects, constructs, alters, or repairs a building, structure, or other private work is liable for any debt owed to a wage claimant (including unpaid wages, benefits, and interest, but not penalties or liquidated damages) for any labor of a subcontractor on the project. Lab C §218.7(a). The Labor Commissioner may bring a civil action to enforce that liability or use the procedures set forth in Lab C §98 or Lab C §1197.1. A third party owed fringe or other benefit payments on a wage claimant’s behalf may bring a civil action. Lab C §218.7(b). See new §5.100E.
In Arias v Raimondo (9th Cir 2017) 860 F3d 1185, the Ninth Circuit held that an undocumented alien could pursue an FLSA retaliation claim against his employer’s attorney, who sought to have the employee deported before the trial of the employee’s wage and hour claims. See §5.103.
Chapter 6: Vacations, Family and Medical Leave, and Other Time Off
An employer may adopt a policy that no vacation accrues during the first year of employment (or any other period), as long as the policy is not a pretense. Although vacation pay cannot be taken away once earned, an employer may control when the vacation benefit begins to accrue. Thus, if an employer’s policy is clearly stated, the employer may provide a waiting period before employees become eligible to earn vacation. Minnick v Automotive Creations, Inc. (2017) 13 CA5th 1000. See §6.2.
The New Parent Leave Act (Govt C §12945.6) became effective January 1, 2018. It require employers with 20 to 49 employees to provide up to 12 workweeks of job-protected leave for an employee to bond with a new child within 1 year of the child’s birth, adoption, or foster care placement. For discussion of the Act’s provisions, see new §§6.30A–6.30G.
A plaintiff can show “continuing treatment” under the Family and Medical Leave Act (FMLA) and California Family Rights Act (CFRA) in more than one way. See Soria v Univision Radio Los Angeles, Inc. (2016) 5 CA5th 570, 602. See §6.46.
Regardless of whether the employee’s need for leave is foreseeable or unforeseeable, the basic rule is that an employee’s notice must be sufficient to make the employer aware that the employee needs potentially FMLA- or CFRA-qualifying leave. See Bareno v San Diego Community College Dist. (2017) 7 CA5th 546, 566 (physician’s note placing employee “Off Work” and including onset date for condition and probable duration is sufficient notice under CFRA). See also Moore v Regents of Univ. of Cal. (2016) 248 CA4th 216, 249 (informing employer of need to take leave for surgery to implant device for heart condition was sufficient notice of need for CFRA-qualifying leave). See §6.65.
In Bareno v San Diego Community College Dist. (2017) 7 CA5th 546, the court of appeal concluded that it was error for the trial court to grant summary judgment to the college on an employee’s claim of retaliation under the CFRA. The court held that the question of whether notice is sufficient under the CFRA is a question of fact, and it found there were at least three disputed issues of material fact. See §6.66.
The penalty for a willful failure to post the FMLA notice has been increased from $110 to $166 for each separate violation. See §6.96.
AB 1710, enacted in 2017, amended Mil & V C §394 to include within its prohibitions discrimination in the terms, conditions, or privileges of employment. The amendment was intended to ensure that military service members are protected from a hostile work environment. See §6.126.
Members of the National Urban Search and Rescue Response System are considered part of the “uniformed services” for purposes of the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). See §6.127.
An employer may compel arbitration of a returning service member’s claims under USERRA. Ziober v BLB Resources, Inc. (9th Cir 2016) 839 F3d 814. See also Ziober v BLB Resources, Inc. (9th Cir 2016) 839 F3d 814, 817 (USERRA does not supersede arbitration clauses in employment agreements when those clauses do not reduce, limit, or eliminate rights under USERRA). See §6.134.
As reported in last year’s update, effective January 1, 2017, an employer having 25 or more employees must inform each new employee of his or her right under Lab C §§230(c), (e), and (f) and 230.1 to take protected time off because of domestic violence, sexual assault or stalking. New employees must be notified of this right on hire, and current employees on request. The Labor Commissioner has since developed a form for this purpose. See §6.137.
Chapter 9: Notice-Posting, Training, and Recordkeeping Requirements
The Department of Industrial Relations has issued a new minimum wage poster for workplaces (MW-2017). See §9.13.
Effective January 1, 2018, all employers are required to display a poster about the workplace rights of transgender individuals. The poster, DFEH– EO4P, is available at https://www.dfeh.ca.gov/wp-content/uploads/sites/32/2017/11/DFEH_E04P-ENG-2017Nov.pdf. See §9.35.
FEHA presently requires employers with 50 or more employees to provide at least two hours of sexual harassment prevention training and education regarding sexual harassment and abusive workplace conduct to all supervisory employees within six months of hire or promotion and once every two years. SB 396 amended Govt C §12950.1 to require this training to include the prevention of harassment based on gender identity, gender expression, and sexual orientation. See §9.61.
A new §9.61A has been added, describing sexual harassment prevention requirements that apply to farm labor contractors.
Chapter 11: Trade Secrets Protection and Unfair Competition
The Defend Trade Secrets Act (DTSA) may be asserted when the alleged trade secrets misappropriation occurs outside the state boundaries and California’s version of the Uniform Trade Secrets Act (UTSA) does not reach the unlawful conduct because the bar of the “extraterritorial” doctrine may apply. See Cave Consulting Group, Inc. v Truven Health Analytics Inc. (ND Cal, Apr. 24, 2017, No. 15-cv-02177-SI) 2017 US Dist Lexis 62821. See §11.1A.
The DTSA does not apply to acts of misappropriation (disclosure and use) that occurred before the enactment of the statute. Cave Consulting Group, Inc., supra; Avago Technols. United States Inc. v NanoPrecision Prods., Inc., (ND Cal, Jan. 31, 2017, No. 16-cv-03737-JCS) 2017 US Dist Lexis 13484. Some courts have held, however, that a DTSA claim can be asserted if the wrongful acquisition of the trade secret occurred before the statute was enacted, but the disclosure or use occurred after the DTSA became law. See Sleekez, LLC v Horton (D Mont, Apr. 21, 2017, CV 16-09-BLG-SPW-TJC) 2017 U.S. Dist. LEXIS 71410. See §11.1A.
The existence of the DTSA does not preempt or preclude a companion trade secret misappropriation claim under a state-law version of the UTSA. See VIA Technols., Inc. v ASUS Computer Int’l (ND Cal, Feb. 7, 2017, No. 14-cv-03586-BLF) 2017 US Dist Lexis 45998. See §11.1A.
Since the DTSA applies only to services or products used, or intended for use, in interstate or foreign commerce, a DTSA claim may be challenged at the summary judgment (but not the pleading stage), for lack of the court’s subject matter jurisdiction. See Garfield Beach CVS LLC v Mollison Pharmacy (SD Cal, Aug. 22, 2017, No. 17-cv-00879-AJB-MDD) 2017 US Dist Lexis 135322. See §11.1A.
The DTSA uses the same statutory definition of “trade secret misappropriation,” and applies the same analysis, as the existing California version of the UTSA. Waymo LLC v Uber Technols., Inc. (ND Cal, May 15, 2017, No. C 17-00939-WHA) 2017 US Dist Lexis 73843; Veronica Foods Co. v Ecklin, (ND Cal, June 29, 2017, No. 16-cv-07223-JCS, 2017 US Dist Lexis 101325. See §11.1A.
The DTSA rejects the “inevitable disclosure” doctrine, just like California law. See Waymo LLC v Uber Technols., Inc. (ND Cal, Nov. 2, 2017, No. C 17_00939 WHA) 2017 US Dist Lexis 183688; §11.1A.
An actual showing of irreparable harm is necessary to obtain injunctive relief under the DTSA. See First W. Capital Mgmt. Co. v Malamed (9th Cir 2017) 874 F3d 1136. See §11.1A.
One recent decision held that a private right of action for “conspiracy” in the theft of trade secrets cannot be asserted under the DTSA. See Steves and Sons, Inc. v Jeld-Wen, Inc. (ED Va, Sept. 13, 2017, No. 3:16cv545) 2017 US Dist Lexis 148461. See §11.1A.
In Kapu Gems v Diamond Imports, Inc. (ND Cal, Aug. 12, 2016, No. 15-cv-03531-MMC) 2016 US Dist Lexis 107091, the court held that a special pricing list for certain customers was a trade secret. See §11.3.
Competitors often already have the same or overlapping customers, or lists of prospective customers, and that fact will make it much more difficult to claim that customer information is a trade secret of one competitor over another. See Beaulieu Group, LLC v Bates(CD Cal, Oct. 18, 2016, No. EDVC 15-1090 JGB (KKx)) 2016 US Dist Lexis 187630; §11.5.
Aggrieved employers may seek provisional injunctive relief for trade secret misappropriation from the courts even if the arbitration process of the Financial Industry Regulatory Authority (FINRA) applies to adjudicate the underlying claims. See Fidelity Brokerage Servs, LLC v Rocine (ND Cal, Sept. 7, 2017, No. 17-cv-4993-PJH) 2017 US Dist Lexis 145193. See §11.5B.
Alleging the mere possession of trade secrets is not enough; the misappropriating party must actually use the trade secrets for a claim to arise. Beaulieu Group, LLC v Bates (CD Cal, Oct. 18, 2016, No. EDVC 15-1090 JGB (KKx)) 2016 US Dist Lexis 187630. See §11.7A.
The constitutional right to publish anonymously is an aspect of the freedom of speech protected by the First Amendment. Thus, a plaintiff seeking discovery of the anonymous person’s identity must first make a prima facie showing that the post or commentary is defamatory. Yelp v Superior Court (2017) 17 CA5th 1; ZL Technols., Inc. v Does 1-7 (2017) 13 CA5th 603, 612. See §11.41D.
Restraints on the ability to compete after an agreement terminates—even only for a limited geographical region—are void under Bus & P C §16600. Artec Group v Klimov (ND Cal, Dec. 22, 2016, No. 15–cv–03449–RMW) 2016 US Dist Lexis 170194. See §11.52.
In Synthes, Inc. v Knapp (ED Cal 2017) 250 F Supp 3d 644, the action was originally filed in Pennsylvania district court and transferred to California under 28 USC §1404. The California district court applied Pennsylvania law to decide the plaintiff’s breach of nondisclosure agreement, breach of noncompete agreement, and breach of fiduciary duty and trade secrets claims. See §11.55.
Recent decisions in many jurisdictions (including California) have found UTSA preemption even when trade secret misappropriation is not specifically alleged or asserted in the complaint. See Avago Technols. United States Inc. v NanoPrecision Prods., Inc., (ND Cal, Jan. 31, 2017, No. 16-cv-03737-JCS) 2017 US Dist Lexis 13484 (UTSA preemption extends to claims based on misappropriation of confidential and proprietary information, regardless of whether it qualifies as trade secret). See §11.61A.
In Ixchel Pharma, LLC v Biogen Inc. (ED Cal, Sept. 12, 2017, No. 2:17-00715 WBS EFB) 2017 US Dist Lexis 147742, the court concluded there was no viable UCL claim absent a showing of actual or threatened harm to competition. See §11.62.
An employer-employee relationship, without more, is not a fiduciary relationship. Nevertheless, an employee (even one in a lower-level position) has similar duties of loyalty to the employer under principles of agency law. E.D.C. Technols., Inc. v Seidel (ND Cal 2016) 216 F Supp 3d 1012. See §11.68.
The Computer Fraud and Abuse Act (CFAA) provides two ways of committing a statutory violation of improperly accessing a protected computer: (1) obtaining access without authorization, and (2) obtaining access with authorization and then using that access improperly. Musacchio v United States (2016) 577 US __, 136 S Ct 709; hiQ Labs, Inc. v LinkedIn Corp. (ND Cal, Aug. 14, 2017, No 17-cv-03301-EMC) 2017 US Dist Lexis 129088. See §11.74.
The CFAA does not give rise to liability when an employee is authorized to access information while employed and later misuses the information, because it governs unauthorized access rather than use. Physician’s Surrogacy, Inc. v German (SD Cal, Aug. 23, 2017, No. 17 CV 0718-MMA) 2017 US Dist Lexis 135325. See §11.74.
The CFAA is not to be used or construed as a trade secret “misappropriation” statute, although lawyers have attempted to treat it as one in order to get their cases into federal court. See Physician’s Surrogacy, Inc. v German, (SD Cal, Aug. 23, 2017, No. 17 CV 0718-MMA) 2017 US Dist Lexis 135325 (“The CFAA is not meant to serve as a supplement or replacement for misappropriation claims”); §11.74.
Chapter 12: Workplace Safety
The Occupational Safety and Health Standards Board has approved several new regulations of significance. These include those regarding Respiratory Crystalline Silica (8 Cal Code Regs §§1532.3, 5155, 5204); Exposure to Beryllium (8 Cal Code Regs §§1535.1, 5155, 5205, 8359.1); Workplace Violence Prevention in Healthcare (8 Cal Code Regs §3342); and Process Safety Management for Petroleum Refiners (8 Cal Code Regs §5189.1). See §12.1A.
Civil penalties associated with Cal/OSHA citations have increased in some cases, as outlined by Lab C §§6427–6430 and 8 Cal Code Regs §336. See §§12.53, 12.56.
Chapter 15: Discrimination and Harassment
Under the Tax Cuts and Jobs Act (Pub L 115–97, 131 Stat 2054), no deduction is allowed for any settlement, payout, or attorney fees related to sexual harassment or sexual abuse, if such payments are subject to a nondisclosure agreement. IRC §162(q). This provision is effective for amounts paid or incurred after the date of enactment (December 22, 2017). See §15.103.
Chapter 16: Whistleblower Issues
Health and Safety Code §1278.5 has been amended to provide expanded protections for doctors and other medical staff who report quality-of-care concerns at health care facilities. The statute also prohibits discrimination and retaliation against a patient, employee, member of the medical staff, or any other health care worker of a health facility because that person has presented a grievance, complaint, or report to the facility, or has initiated, participated, or cooperated in an investigation or administrative proceeding related to the quality of care, services, or conditions at the facility. The amendment also increases the maximum fine for a misdemeanor violation of §1278.5 from $25,000 to $75,000. See §§16.2, 16.12.
The Ninth Circuit issued an opinion setting forth the standards for pleading plausible claims under Fed R Civ P 12(b)(6) in whistleblower cases filed under the False Claims Act in United States ex rel Campie v Gilead Sciences (9th Cir 2017) 862 F3d 890. In Campie, former employees of defendant Gilead Sciences alleged that Gilead made false claims regarding its compliance with Food and Drug Administration regulations about certain HIV drugs. The Ninth Circuit identified three theories for pleading violations of the FCA: (1) factual falsity; (2) implied false certification; and (3) promissory fraud. See §16.3.
The Department of Veteran Affairs Accountability and Whistleblower Protection Act of 2017 (Pub L 115–41, 131 Stat 862) created an office to look into claims made by whistleblowers at the VA and to protect them from retaliation. This Act allows the VA to take back bonuses paid to employees found guilty of misconduct and prohibits employees who are appealing discipline from being placed on paid administrative leave. See §16.8.
In Williams v Superior Court (2017) 3 C5th 531, the California Supreme Court held that an employee bringing a PAGA claim was entitled to discovery of the identity of all other employees statewide. See §16.8.
Effective January 1, 2018, amendments to Lab C §98.7 empower employees in whistleblower cases to obtain injunctions under a relaxed standard, and put the burden on employers to vacate the Labor Commissioner’s findings. See also Lab C §§1106.61–1106.62. See §§16.8, 16.9A.
Chapter 17: Discipline and Termination
In a recent Ninth Circuit decision, the court affirmed the district court’s order denying the defendant’s motion to dismiss a whistleblower claim brought under the Dodd-Frank Act’s antiretaliation provision (15 USC §78u-6(h)(1)(A)(iii)), reasoning that in using the term “whistleblower,” Congress did not intend to limit protections to those who disclosed information to the Securities and Exchange Commission (SEC), but rather, the antiretaliation provision also protected those who were fired after making internal disclosures of alleged unlawful activity under the Sarbanes-Oxley Act and other laws, rules, and regulations. Somers v Digital Realty Trust, Inc. (9th Cir 2017) 850 F3d 1045. This puts the Ninth Circuit at odds with the Fifth Circuit. See Asadi v G.E. Energy (USA), L.L.C. (5th Cir 2013) 720 F3d 620 (only report to SEC qualifies as whistleblowing). The Supreme Court has since granted certiorari in Somers. See Digital Realty Trust, Inc. v Somers (June 26, 2017, No. 16-1276) 2017 US Lexis 4190. See §17.4.
Chapter 18: Reductions in Force and Plant Closings
The occurrence of a plant closing or mass layoff depends on an “employment loss” as that term is used in the federal Worker Adjustment and Retraining Notification Act (WARN) (29 USC §§2101–2109), which defines it as applicable only to (29 USC §2101(a)(6))
Any employment termination that is not a discharge for cause, voluntary departure, or retirement;
A layoff of more than 6 months; or
A reduction in individual employees’ work hours of more than 50 percent during each month of any 6-month period.
California WARN (Lab C §§1400–1408), our state’s counterpart to the federal act, is triggered by a “layoff,” which is defined as “a separation from a position for lack of funds or lack of work.” Lab C §1400(c). Unlike the federal WARN, California’s act does not include a time component. In International Bhd. of Boilermakers, etc. v NASSCO Holdings, Inc. (2017) 17 CA5th 1105, the employer laid off about 90 employees for a period of approximately 4–5 weeks. The employer did not provide notice of the layoff to its employees, and when the employees sued, the employer argued that California WARN did not apply because the layoff was temporary only. The court rejected that argument. Under California WARN, a “separation from a position” can be permanent or temporary. There is no reasonable basis to conclude that a 4–5 week layoff does not constitute a “separation from position,” but a 6–7 month layoff does. The legislative history and underlying public policy support the conclusion that an employer has the obligation to provide notice even if the intended layoff is temporary and short term. See §18.29.
Chapter 19: Insurance Coverage for Employment Claims
An order for payment of wages unlawfully withheld from an employee is a restitutionary remedy. Espejo v The Copley Press, Inc. (2017) 13 CA5th 329, 341 n.7. See §19.12.
Chapter 21: Public Employment Issues
Effective January 1, 2018, certain employees of the Judicial Council of California have collective bargaining rights under the Judicial Council Employer-Employee Relations Act (JCEERA) (Govt C §§3524.50–3524.81). See new §21.7A.
Jurisdiction of the Public Employment Relations Board (PERB) over local government agencies does not extend to the City of Los Angeles or County of Los Angeles, which have created local employment relations bodies with powers and procedures similar to PERB’s, including procedures for hearing “unfair practice” charges. Judicial review of a local board’s decision may be sought through a writ of mandamus under CCP §1094.5. City of Los Angeles v City of Los Angeles Employee Relations Bd. (2016) 7 CA5th 150. See §21.38.