Effective January 1, 2018 California employers can no longer ask an applicant for employment to disclose information about criminal convictions.  The new law (added as Section 12952 to the Government Code) applies to employers with 5 or more employees.  Once an offer of employment has been made, employers can conduct criminal history background checks, but only when the conviction history has a “direct and adverse relationship with the specific duties of the job,” and requires certain disclosures to the applicant if employment is denied based on the background check.  This Friday’s Five covers five areas of the new law that California employers should be aware of when hiring employees:

1. Employers may not include on any application for employment “any questions that seeks the disclosure of an applicant’s conviction history.”

2. Employers may not inquire into or consider this conviction history of the applicant, including any inquiry about conviction history on any employment application, until after the employer has made a conditional offer of employment to the applicant.

3. Employers can only research certain areas of an applicant’s background after a conditional offer has been made.

Employers may not “consider, distribute, or disseminate information” relating to any of the following areas when conducting a conviction history background check:

(A) Arrest not followed by conviction, except in some limited circumstances set forth in Labor Code section 432.7.

(B) Referral to or participation in a pretrial or posttrial diversion program.

(C) Convictions that have been sealed, dismissed, expunged, or statutorily eradicated pursuant to law.

4. If an employer intends to deny employment based on the applicant’s conviction history, it must make an “individualized assessment” if the conviction history “has a direct and adverse relationship with the specific duties of the job.

In making his determination, the employer shall consider all of the following:

(i) The nature and gravity of the offense or conduct.

(ii) The time that has passed since the offense or conduct and completion of the sentence.

(iii) The nature of the job held or sought.

The employer is not required to records these results of this individualized assessment in writing. However, employers that also must comply with local city and county background checks must be careful to follow those requirements as well.  For example, Los Angeles’ ordinance requires that employers provide this assessment in writing to applicants. 

5. If the employer preliminary disqualifies the applicant based on a conviction history, the employer is required to provide written notice to the applicant.

The notice must contain all of the following items:

(A) Notice of the disqualifying conviction or convictions that are the basis for the preliminary decision to rescind the offer.

(B) A copy of the conviction history report, if any.

(C) An explanation of the applicant’s right to respond to the notice of the employer’s preliminary decision before that decision becomes final and the deadline by which to respond. The explanation shall inform the applicant that the response may include submission of evidence challenging the accuracy of the conviction history report that is the basis for rescinding the offer, evidence of rehabilitation or mitigating circumstances, or both.

The applicant then has five business days to respond to the notice before the employer makes a final decision.  If the employee responds within this time limit, and states that they dispute the accuracy of the conviction history report and is in the process of obtaining evidence to support their position, the applicant will have an extra five business days to respond.  The employer must consider the information provided by the applicant before making a final decision.

If the employer makes a final decision denying the applicant employment solely or in part because of the applicant’s conviction history, the employer is required to provide a written notice to the applicant containing the following:

(A) The final denial or disqualification. The employer may, but is not required to, justify or explain the employer’s reasoning for making the final denial or disqualification.

(B) Any existing procedure the employer has for the applicant to challenge the decision or request reconsideration.

(C) The right to file a complaint with the Department of Fair Employment and Housing.

In addition to this new law, California employers need to be sure they are in compliance with the Federal Fair Credit Reporting Act (FCRA) and the California Investigative Consumer Reporting Agencies Act (ICRAA) when conducting any background checks.

California’s state minimum wage increased for California’s employers on January 1, 2018.  California’s minimum wage law provides for two different rates based on the size of the employer, and the minimum wage increases are reflected in this chart:

Date Minimum Wage for Employers with 25 Employees or Less Minimum Wage for Employers with 26 Employees or More
January 1, 2017 $10.00/hour $10.50/hour
January 1, 2018 $10.50/hour $11.00/hour
January 1, 2019 $11.00/hour $12.00/hour
January 1, 2020 $12.00/hour $13.00/hour
January 1, 2021 $13.00/hour $14.00/hour
January 1, 2022 $14.00/hour $15.00/hour
January 1, 2023 $15.00/hour

 

Once the rate reaches $15 per hour, it will be adjusted annually based on inflation.  Here are five potential pitfalls California employers need to be careful to avoid with the increase in the state minimum wage.

Pitfall #1: Who is considered an employee?

California’s Department of Industrial Relations website provides the following explanation:

Labor Code section 1182.12 defines “employer” as: “any person who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person [and] includes the state, political subdivisions of the state, and municipalities.”

Any individual performing any kind of compensable work for the employer who is not a bona fide independent contractor would be considered and counted as an employee, including salaried executives, part-time workers, minors, and new hires.

The DIR admits that California’s minimum wage statute does not specify how employers should count employees to determine if they have more or less than 26 employees.  For example, the law does not provide a time period that employers could use to calculate the average number of employees in determining whether or not they meet the 26 employee threshold.  Therefore, employers should be very conservative in making this calculations, and if there is any doubt or the calculation is close, employers should consider paying the higher minimum wage rate rather than risk an audit or costly lawsuit over the difference in rates.

Pitfall #2: The salary level to qualify as an exempt employee increases based on the state minimum wage.

Employers need to review the base salary for all exempt employees to ensure the employees meet the salary required to be exempt.  To be exempt from the requirement of having to pay overtime to the employee, the employee must perform specified duties in a particular manner and be paid “a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” (Lab. Code, § 515, subd. (a).)  For more information about the salary basis test for exempt employees, see my previous article here.

With the increase in the state minimum wage in 2018, the equivalent of two times the minimum wage of $10.50 per hour for small employers equals $43,680 per year, and two times the minimum of $11.00 per hour for large employers equals $45,760 per year to qualify for the white collar exemptions.

It is important to note that the salary basis test is set according to the California state minimum wage, not the applicable minimum wage that may apply in the various local city and counties in California.

Pitfall #3: Which minimum wage rate applies if the number of employees raises and falls below 26 employees throughout the year? 

The California Department of Industrial Relations provides that: “An employer with 26 or more employees at any time during a pay period should apply the large-employer minimum wage to all employees for that pay period.”  It is important to note that the DIR’s opinion is not binding on a court of law, but it can be instructive of the position the state would take in its own enforcement actions.

Changing the rate of pay for each pay period raises another pitfall about the notice employers are required to provide employees before changing their rate of pay (see pitfall #4 below).

Likewise, employers with exempt employees who are earning at or near the two times salary basis required to qualify as an exempt employee (see pitfall item #3 above), and whose number of employees may increase during the year to 26 or more employees, need to be careful about the salary amounts being paid to employees.  If there is a chance that the employer’s workforce could increase to 26 or more employees, the employer should take a conservative approach and pay the higher salary amounts required for employees to meet applicable exemptions.

Pitfall #4:  Employers are required to update the notice to employees setting forth the employee’s rate of pay. 

California employers are required to provide non-exempt employees with certain information upon hire as required by the Wage Theft Protection Act.  The law became effective in 2012 and is codified at Labor Code section 2810.5.  Many employers use the Labor Commissioner’s template to meet this notice requirement.

However, employers who pre-populate the form will need to revise the forms to ensure that the wage rates comply with the increased minim wage rate in 2018.  Likewise, it is a good practice to review the notices mid-way through the year to ensure compliance with  the various local cities and counties (such as Los Angeles and Santa Monica) that typically increase their minimum wage rates in July each year.

Employers are not required to re-issue the Notice to Employee to existing employees with updated wage information as long as new increased rate is show on the employee’s pay stub with the next payment of wages.  The DIR publishes a great FAQ on the law here that employers should review.

Pitfall #5: Employers still need to comply with local city or county minimum wage requirements if those laws provide a higher minimum wage rate. 

Employers need to review any applicable local city or county laws that may provide for a higher minimum wage than the state minimum wage requirement.  Employers must comply with the highest minimum wage rate applicable to their workforce.  It is also important to review the local minimum wage ordinances as many ordinances differ in how to determine if the employer is small or large, and usually contain their own notice requirements.  A list of the various local minimum wage ordinances across the United States is published by UC Berkley Labor Center.

Happy New Year.  I started the Friday’s Five articles in the summer of 2014, and the interest in the articles has been more than I expected.  I appreciate everyone who has read them and provided comments and feedback. If you have any topics you would like me to address, please let me know. With that said, here is a list of five resolutions for California employers in 2018:

1. Relax – Still need to make sure your employees are taking their meal and rest breaks.

2. Train – All supervisors must be trained to comply with California’s required sexual harassment prevention training for employers with 50 or more employees.

Since 2015 the training must discuss bullying in the workplace to be legally compliant, and as of January 1, 2018, the training also needs to cover harassment based on gender identity, gender expression, and sexual orientation.

3. Read – Update employment handbook policies on a yearly basis.

2018 has a few new laws that should be addressed the employee handbook and new hire packets.

4. Run – Sorry, no play on words with this one, you just need to get outside and run a bit.

5. Organize – and keep employment files, time records and wage information for at least the length of any applicable statute of limitations.

Employers should review their systems to ensure there is a process in place on how to organize and maintain employment information for the required time periods, it is required under the law and can help defend the company should litigation ensue.

A final more bonus resolution:
Learn – more by attending my webinars on California employment laws to stay up to date.

In the next month, I will be hosting a seminar on the new laws facing employers in 2018 and what steps should be taken to comply. The date is still to be determined, but drop me an email if you are interested and I make sure you are notified once we set the date and location.

Wishing you the best in 2018!

AB 168 was approved by Governor Brown on October 12, 2017 which prohibits employers from seeking or taking into consideration an applicant’s prior compensation and benefits when determining whether to hire the applicant, and in setting the applicant’s compensation and benefits.  The new law creates Labor Code section 432.3.  This Friday’s Five covers five issues of the new law that employers must understand:

1. The law applies to all employers, regardless of size, effective January 1, 2018.

2. Employers may not rely on salary history information of an applicant in determining whether to offer employment and in determining the about of compensation to offer.

3. Employers may not seek salary history information, which includes compensation and benefits, about the applicant.

4. Upon a reasonable request, an employer must provide the “pay scale” for the position to an applicant.

5. Nothing in the law prohibits employees from voluntarily disclosing salary history to a prospective employer.

The National Labor Relations Board issued a ruling this week that reverses the Board’s ruling issued under the Obama administration in regards to who can be held a “joint employer.”  The ruling is critical to businesses in the franchisee industry as well as businesses that use contract workers.  This Friday’s Five reviews five keys issues on the NLRB’s ruling in Hy-Brand Industrial Contractors and Brandt Construction Co. and the joint employer test for California employers:

1. The Hy-Brand decision overrules the NLRB’s prior holding in Browning-Ferris

In Browning-Ferris, the Board held that even when two entities have never exercised joint control over essential terms and conditions of employment, and even when any joint control is not “direct and immediate,” the two entities will still be joint employers based on: (1) the mere existence of “reserved” joint control, or (2) based on indirect control, or (3) control that is “limited and routine.”

The NLRB’s ruling in Hy-Brand stated, “We find the Browning-Ferris standard is a distortion of common law as interpreted by the Board and the courts, it is contrary to the Act, it is ill-advised as a matter of policy, and its application would prevent the Board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations.”

2. Joint-employer relationship can only be established by “direct and immediate” control

In reverting back to its pre-Browing-Ferris test, the NLRB restores the joint-employer test that it set forth in Airborne Express, 338 NLRB at 597 fn. 1.  In Airborne Express the Board explained that, “[t]he essential element in [the joint-employer] analysis is whether a putative joint employer’s control over employment matters is direct and immediate.” A company’s right to approve hires is not enough to establish a joint-employer relationship, but instead, “[i]n assessing whether a joint employer relationship exists, the Board does not rely merely on the existence of such contractual provisions, but rather looks to the actual practice of the parties.”

3. The NLRB’s holding makes it consistent with Federal and some state courts’ test for joint-employer

The NLRB’s decision stated that its reversal of the standard use in finding a joint-employer makes its standard more consistent with Federal and state law court rulings on the issues.  For example, the NLRB cited the following cases: Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 683 (9th Cir. 2009) holding that a “finding of the right to control employment requires . . . a comprehensive and immediate level of ‘day-to-day’ authority over employment decisions.”  Gulino v. N.Y. State Educ. Dep’t, 460 F.3d 361, 379 (2d Cir. 2006) (employment relationship must involve a “level of control that is direct, obvious and concrete, not merely indirect or abstract”); SEIU Local 32BJ v. NLRB, 647 F.3d 435, 442–443 (2d Cir. 2011) (“‘An essential element’ of any joint employer determination is ‘sufficient evidence of immediate control over the employees.’”)); Texas World Service Co. v. NLRB, 928 F.2d 1426, 1432 (5th Cir. 1991) (same); Pulitzer Publishing Co. v. NLRB, 618 F.2d 1275, 1280 (8th Cir. 1980) (holding that the Board erred in finding a joint-employer relationship, distinguishing cases “where the companies share direct supervision of the employees involved and control hiring, firing, and disciplining”); see also NLRB v. Denver Building & Construction Trades Council, 341 U.S. 675, 689–690 (1951) (holding that contractor’s supervision over subcontractor’s work “did not eliminate the status of each as an independent contractor or make the employees of one the employees of the other,” emphasizing that “[t]he business relationship between independent contractors is too well established in the law to be overridden without clear language doing so”).

4. California’s joint employer test

“[T]he basis of liability is the defendant’s knowledge of and failure to prevent the work from occurring.”  Martinez v. Combs, 49 Cal.App.4th 35, 70.  Therefore, to be an employer, the entity must have power to prevent the worker from performing work.  If there is no control to prevent the work, the entity cannot be held liable as a joint employer.

California’s Industrial Welfare Commission (IWC) also sets forth law regarding California’s wage and hour requirements.  The IWC definition also includes “any person … who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.”  The court in Martinez held that a joint employer relationship exists when one entity, which hires and pays workers, places the worker with another entity that supervises the work.  There are many factors that a court can look to in making this determination, and employers need to carefully analyze the facts particular to their situations.

5. Additional joint-employer liability for California employers under Labor Code section 2810.3

Effective January 1, 2015, Labor Code section 2810.3 expanded the liability of “client employers” that obtain workers through temporary agencies or other labor contractors.  The law requires that the client employer who obtains the workers through the agency must share in the liability for any wage and workers compensation issues.  The law also provides that a client employer cannot shift all of the liability for wage and workers’ compensation violations.  However, the law does provide that the client employer can seek indemnity from the labor contractor for violations.  Therefore, it is important for employers who are covered by Labor Code section 2810.3 and who are obtaining workers through a labor contractor to ensure the labor contractor is meeting all wage and workers compensation requirements, and negotiate an indemnity provision in the contact with the labor contractor should any liability arise.

With the fires effecting large portions of Southern California and Los Angeles this week, it is a good time to review some of the obligations employers have in regards to pay and leave issues during times of natural disasters.  The picture above is one I took showing the smoke covering the northern part of Los Angeles on a flight to Napa on Thursday night.  It was just a couple of months ago I wrote about this topic when Napa faced the same situation of wild fires in October.  So for regular readers of the blog, this article will be a refresher course, but I thought it would be important to cover this topic again in today’s Friday Five:

1. Reporting time pay obligations

California law requires an employer to pay “reporting time pay” under the applicable Wage Order.  This requires that when an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee’s regular rate of pay, which cannot not be less than the minimum wage.

In addition, if an employee is required to report to work a second time in any one workday and is furnished less than two hours of work on the second reporting, he or she must be paid for two hours at his or her regular rate of pay.

California’s Labor Commissioner provides the following example:

For example, if an employee is scheduled to report to work for an eight-hour shift and only works for one hour, the employer is nonetheless obligated to pay the employee four hours of pay at his or her regular rate of pay (one for the hour worked, and three as reporting time pay). Only the one-hour actually worked, however, counts as actual hours worked.

Employers must remember, when an employee is scheduled to work, the minimum two-hour pay requirement applies only if the employee is furnished work for less than half the scheduled time.

2. Time paid as reporting time pay does not trigger overtime pay

Reporting time pay for hours in excess of the actual hours worked is not counted as hours worked for purposes of determining overtime.

3. Reporting time pay and meetings

There has been significant litigation over reporting time pay that is owed when employees are called in for meetings.  If an employee is called in on a day in which he is not scheduled, the employee is entitled to at least two hours of pay, and potentially up to four hours if the employee normally works 8 hours or more per day. See Price v. Starbucks.

However, if the employer schedules the employee to come into work for two hours or less, and the employee works at least one half of the scheduled shift, the employer is only required to pay for the actual time worked and no reporting time is owed.  See my prior post on Aleman v. AirTouch for a detailed discussion.

4. Exceptions to the reporting time requirements – “Acts of God”

The Wage Orders provide that employers are not required to pay overtime pay during the following circumstances:

  1. When operations cannot begin or continue due to threats to employees or property, or when civil authorities recommend that work not begin or continue; or
  2. When public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities, or sewer system; or
  3. When the interruption of work is caused by an Act of God or other cause not within the employer’s control, for example, an earthquake.

5. What if the employee voluntarily leaves early?

Employers are not required to pay reporting time pay if the employee voluntarily leaves work early.  For example, if the employee becomes sick or must attend to personal issues outside of work and leaves early, then the employer is not obligated to pay reporting time pay (however, this may trigger paid sick leave or other legal obligations for the employer).

Matt Lauer’s abrupt departure from NBC illustrate important lessons employers should take away from this week’s events in how to investigate and respond to harassment claims.  It is important it note that NBC is not like most employers in that this one of the most newsworthy and public harassment allegation cases in the nation and it must manage public relations at the same time of mitigating its legal liability.  However, there are still lessons employers should pay attention to arising out of this case, leading to this Friday’s Five:

1. Be up-front and as accurate as possible in any initial reports or disclosures to the public

Employers need to be very careful in issuing any public statements about harassment allegations and investigations.  As set forth below, in addition to likely being evidence in litigation, it could create additional defamation liability for all of the parties involved.

If a company does issue a statement, it needs to be well vetted and with knowledge of all of the facts.  For example, NBC’s responses to the Lauer issues raised questions.  First NBC issued a statement from Chairman Andrew Lack read on the Today Show Wednesday morning stating that the woman’s complaint was “the first complaint about his behavior in the over twenty years he’s been at NBC News.”  Later in the same day, NBC released a second statement stating, “We can say unequivocally that, prior to Monday night, current NBC News management was never made aware of any complaints about Mat Lauer’s conduct.”  The fact that NBC issued a qualifying explanation that “current NBC News management” was never informed later in the day, when initially the company said that there was no complaint ever made about Lauer, had raised many questions: did former NBC News management know of complaints?  If so, what, if any, actions did the company take in response to those complaints?

2. Don’t rush to make any disclosures to the public

Even though the company’s intentions may be good in making disclosures as quickly as possible, it can create some issues, such as:

  • Making statements that may not be accurate because all of the facts have not been discovered and all of the witnesses have not been spoken to. Even though it may not be intended, providing changing facts makes it look that the company is attempting to cover up issues.
  • Creating additional legal liability: statements issued publicly will be evidence in any resulting litigation, and could be used against a party in the litigation.

As discussed below, given the liability that could be created, employers should think twice about issuing any statements to third-parties that do not have a need-to-know.

3. Be careful in discussing any aspect of the complaint and investigation to third-parties who do not have a need to know

Employers must also be careful about issuing any statements to other employees in the company or to the public that could result in a defamation charge by the alleged victim or the alleged harasser.  Employers can be liable for defamation for statements made about the employee’s termination, statements made during investigations, or statements about the employee after they left employment.  Generally, to prove defamation, a plaintiff needs to prove “(a) a publication that is (b) false, (c) defamatory, and (d) unprivileged, and that (e) has a natural tendency to injure or that causes special damage.”  Taus v. Loftus (2007).  A plaintiff must show that the statements caused damages such as damage to their reputation, that the statements made it harder to find another job, or emotional distress.  Again, it is critical that employers do not rush to make any statements before all of the facts are known.  A good rule of thumb is to only discuss the allegations, investigation, and ultimate findings about the investigations with the parties involved and individuals who have a need to know.

4. Must conduct “immediate and appropriate corrective action” in the workplace

Employer must act quickly in addressing the potential harassment in the workplace.  How soon the investigation must start depends on the circumstances.  In Van Zant v. KLM Royal Dutch Airlines, 80 F.3d 708, 715 (2d Cir. 1996) the employer’s response was held to be prompt where it began investigation on the day that complaint was made, conducted interviews within two days, and fired the harasser within ten days.  In Steiner v. Showboat Operating Co., 25 F.3d 1459, 1464 (9th Cir. 1994), the court held that an employer’s response to complaints were not immediate when it did not seriously investigate or reprimand the supervisor until after plaintiff filed charge with state FEP agency, even though the harasser was eventually discharged.  In Saxton v. AT&T, 10 F.3d 526, 535 (7th Cir 1993) the court found that the investigation was prompt when it started one day after complaint and a detailed report was completed two weeks later.  In Nash v. Electrospace Systems, Inc. 9 F.3d 401, 404 (5th Cir. 1993) the court held that the investigation was prompt when completed within one week.  The court in Juarez v. Ameritech Mobile Communications, Inc., 957 F.2d 317, 319 (7th Cir. 1992) found the investigation was adequate when completed in four days.

However, employers have no duty to report findings to the public or other third-parties that do not have an interest in the harassment allegations and the subsequent investigation.  High profile harassment claims do carry an additional public relations aspect that must be considered, but employers have not legal duty to report findings to the public.  In fact, doing so may create additional liability as discussed above.

5. Employers may have to take actions internally before conducting the investigation

Based on the allegations and the facts of the case, as a precautionary measure, the employer should analyze if any immediate steps needs to be taken.  The EEOC set forth examples of precautionary steps that may be necessary include: “scheduling changes so as to avoid contact between the parties; transferring the alleged harasser; or placing the alleged harasser on non-disciplinary leave with pay pending the conclusion of the investigation.”  However, the employer needs to ensure that the complainant “should not be involuntarily transferred or otherwise burdened, since such measures could constitute unlawful retaliation.”

The type of precautionary actions that the employer should take depends on the facts they are presented with, as each case will vary.

Happy Thanksgiving.  I hope everyone is getting some time to relax and enjoy some time with their families.  Entering the holiday season, it is a good time to review employer’s obligations to accommodate requests for time off for holidays and best pay practices during holiday leaves.  This Friday’s Five covers five reminders for employers about holiday leaves and pay:

1. California employers are not required to provide employees time off for holidays.

There is no requirement that California employers provide time off (except for religious accommodations – see below) for holidays. California’s DLSE’s website states the following:

Hours worked on holidays, Saturdays, and Sundays are treated like hours worked on any other day of the week. California law does not require that an employer provide its employees with paid holidays, that it close its business on any holiday, or that employees be given the day off for any particular holiday.

2. California employers are not required to pay for time off for holidays, nor are they required to pay additional wages if employees work on holidays.

Likewise, there is no requirement that employers pay employees extra pay or “holiday pay” for work performed on holidays. Employers can voluntarily agree to pay employees extra pay for work that is required during holidays, but these terms would be governed by policy set forth by the employer. Therefore, employers are urged to make sure their holiday pay policies are clearly set forth.

California’s legislature has proposed bills that would require certain employers to pay employees double time for work done on Thanksgiving, but none of these bills have become law.  For example, the “Double Pay on the Holiday Act of 2016” proposed to require an employer to pay at least 2 times the regular rate of pay to employees at retail and grocery store establishments on Thanksgiving. None of these attempts by the legislature have been successful yet in requiring California employers to pay any extra “holiday pay.”

3. Employers must provide reasonable accommodations for employees who cannot work on certain holidays due to religious observances.

Employers need to be aware of any religious observances of their employees since employers need to provide reasonable accommodations for employees due to religious reasons. The analysis of reasonable accommodation is required is a case by case analysis based on the company’s type of business and the accommodation requested by the employee. If the employer’s operations require employees to work during normally recognized holidays, such as a restaurant, then this should be communicated to employees in the handbook or other policies and set the expectation that an essential function of the job requires work during normal holidays.

4. If an employer does pay for time off during holidays, the employer does not have to allow employees to accrue holiday paid time off.

If an employee leaves employment before the holiday arrives, the employer is not required to pay the employee for the day off.  But the employer’s policy regarding holiday pay must be clearly set out and be clear that this type of benefit does not accrue to employees and that they must be employed during the specific holidays to receive the holiday pay.  Often the employer will also require that the employee works the days leading up to and following the holiday in order be eligible for the holiday pay.

5. If a pay day falls on certain holidays, and the employer is closed, the employer may process payroll on the next business day.

If an employer is closed on holidays listed in the California Government Code, then the employer may pay wages on the next business days.  The DLSE’s website explains this, and other considerations, for the timing requirements for payroll.  The holidays listed in the Government Code are as follows:

  • January 1 — New Year’s Day
  • Third Monday in January — Martin Luther King Jr. Day
  • February 12 — Lincoln’s Birthday
  • Third Monday in February — Washington’s Birthday
  • Last Monday in May — Memorial Day
  • July 4 — Independence Day
  • First Monday in September — Labor Day
  • Second Monday in October — Columbus Day
  • November 11 — Veterans Day
  • Fourth Thursday in November — Thanksgiving Day
  • Day after Thanksgiving
  • December 25 — Christmas
  • Other days appointed by the governor for a public fast, thanksgiving or holiday

The DLSE’s website provides the definition of “holiday” here.

The U.S. Supreme Court heard oral arguments on October 2, 2017 in Epic System Corp. v. Lewis.  And while the case may not make headline news, it has very important ramifications for employers across the country.  At issue is whether employers can legally compel employees to enter into arbitration agreements which contain class action waivers.  The decision is likely to be decided by the U.S. Supreme Court this December.  Below are five issues regarding the Supreme Court’s decision and the impact it may have on employer’s businesses going into 2018:

1. There is a split in Circuit Courts regarding if arbitration agreements with class action waivers are enforceable

Many courts have been upholding arbitration agreements that contain class action waivers, including the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC.  That case held that class action waivers are enforceable, following the standards set forth by the U.S. Supreme Court in AT&T Mobility v. Concepcion.

However, the Ninth Circuit’s ruling in Morris v. Ernst & Young holding that a class action waiver in an arbitration agreement is unenforceable because the class action waiver is contrary to the rights provided to employees under the National Labor Relations Act (“NLRA”).  The arbitration agreements in the Morris case were mandatory, and they contained a “concerted action waiver” clause preventing employees from bringing a class action.  Plaintiffs claimed that the “separate proceedings” clause contravenes the NLRA, 29 U.S.C. §§ 151 et. seq.  The Ninth Circuit held:

This case turns on a well-established principle: employees have the right to pursue work-related legal claims together. 29 U.S.C. § 157; Eastex, Inc. v. NLRB, 437 U.S. 556, 566 (1978). Concerted activity—the right of employees to act together—is the essential, substantive right established by the NLRA. 29 U.S.C. § 157. Ernst & Young interfered with that right by requiring its employees to resolve all of their legal claims in “separate proceedings.” Accordingly, the concerted action waiver violates the NLRA and cannot be enforced.

This holding is contrary to the holdings in the Second, Fifth, and Eight Circuits that have concluded that the NLRA does not invalidate collective action waivers in arbitration agreements.  This split in circuit courts will be resolved by the U.S. Supreme Court’s holding in Epic System Corp. v. Lewis.

2. U.S. Department of Justice changed its position to support class action waivers

Under the Obama Administration, the DOJ supported the position taken by the NLRB that class action waivers found in arbitration agreements violated Section 7 of the NLRA.  However, under the Trump Administration, the DOJ has changed its view and in the summer of 2017 filed an amicus brief explaining it now does not believe class action waivers violate the NLRA.  This further adds to the split in authority that will be resolved by the U.S. Supreme Court’s ruling in Epic System Corp. v. Lewis.

3. Potential benefits of arbitration agreements for California employers

There are a number of benefits for California employers to have arbitration agreements.  One major benefit is the class action waiver discussed above.  For large employers this can be an effective bar from employees bringing class actions.  However, in California, employees still have rights to pursue “representative actions” under the Private Attorneys General Act (PAGA) as discussed below.  Moreover, the arbitration process can proceed faster than civil litigation, saving a lot of time and attorney’s fees in the process.  For example, often the discovery process moves faster in arbitration, and if there are any disputes, the parties can raise them with the arbitrator telephonically, instead of the lengthy and formal motion process required to resolve disputes in civil court.

The arbitration process is also confidential, so if there are private issues that must be litigated, these issues are not filed in the public records of the courts. The parties also have a say in deciding which arbitrator to use in deciding the case, whereas in civil court the parties are simply assigned a judge without any input into the decision. This is very helpful in employment cases, which often involves more complex issues, and it is beneficial to the parties to select an arbitrator with experience in employment law.

4. Potential drawbacks of arbitration agreements in California

While there are many benefits of arbitration agreements, they do not come without a few drawbacks. The primary drawback is that in California, the employer must pay all of the arbitrator’s fees in employment cases. Arbitration fees can easily be tens of thousands of dollars – a cost that employers do not need to pay in civil cases. However, if the company values the confidentiality and speed of process provided in arbitration, and potentially limiting class action liability exposure, this extra cost may well be worth it.

In addition, even if the U.S. Supreme Court rules in favor of employers in Epic System Corp. and upholds the use of class action waivers, the California Supreme Court held that employees may still bring representative actions under the Private Attorneys General Act (PAGA). Even though PAGA claims are limited to specific penalties under the law, and have a much shorter one-year statute of limitations than compared to potentially a four-year statute of limitations for most class actions brought for unpaid wages under the Labor Code, the potential penalties under PAGA can still be substantial for employers.

5. Impact on employers

Employers who utilize arbitration agreements will need to monitor the Supreme Court’s decision in Epic System Corp.  If the Supreme Court rules that class action waivers violate Section 7 of the NLRA, employers will need to review and potentially modify any arbitration agreements with class action waivers.  Such a ruling could spur many more class actions.  With that said, employers should always be auditing their wage and hour policies and practices to ensure compliance with Federal and state laws.

If the Supreme Court holds that arbitration agreements with class action waivers do not violate Section 7 of the NLRA, it is likely that employers can continue to implement the agreements with employees.  However, as mentioned above, California employers still must remain vigilant about their wage and hour practices, as there is still substantial liability under representative actions under PAGA.

Another Friday – another Friday’s Five.  November 2017, a great time to have a refresher course on five obligations employers have under California law to prevent and correct any potential harassment and discrimination in the workplace:

1. Duty to prevent harassment

The Fair Employment and Housing Act (FEHA) requires employers to take “all reasonable steps necessary to prevent discrimination and harassment from occurring.”  Gov. Code section 12940(k).  As part of this requirement, employers should have policies setting out a definition of sexual harassment, who employees should complain to regarding harassment, explain the types of discipline that may be used in harassment cases, that the complaint will be kept confidential to the extent possible, prohibit retaliation from employees who complain, and be distributed to employees with receipt acknowledged by the employee.

2. Duty to distribute California’s harassment pamphlet

California employers should develop a new hire packet.  One required document in this new hire packet is the California Department of Fair Employment and Housing’s information sheet.  It is required to be provided to employees “in a manner that ensure distribution to each employee.”  This requirement applies to all California employers, regardless of their size.

The DFEH provides the pamphlet (DFEH-185) online for employers to download here.

3. Duty to have written an anti- harassment, discrimination, and retaliation policy

Regulations issued by California’s Fair Employment and Housing Council took effect on April 1, 2016 set forth a requirement that employers adopt a written discrimination, harassment, and retaliation prevention policy that meet certain conditions.

The regulations provide that employers “have an affirmative duty to create a workplace environment that is free from employment practices prohibited by the Act.”  The regulations set forth that in addition to providing employees the Department’s DFEH-185 brochure on sexual harassment, or an alternative writing that complies with Government Code section 12950, employers are required to develop a harassment, discrimination, and retaliation policy that meets certain requirements, including the employer’s complaint procedure, instruct supervisors to report any complaints, and confirm that the employer will conduct a fair and timely investigation, among other items.  Most notably, the new regulations require employers to obtain employees’ acknowledgment of receipt of the written policy.

4. Duty to train supervisors

California employers with 50 or more employees are required to provide at least two hours of classroom or other effective interactive training and education regarding sexual harassment to all supervisory employees who are employed as of July 1, 2005, and to all new supervisory employees within six months of assuming a supervisory position.  All covered employers must provide sexual harassment training and education to each supervisory employee once every two years.  In 2015, California requires that a portion of the training also address “abusive conduct.”  More information about what topics must be covered in the training, who qualifies to provide the training, as well as other requirements about the training can be found here.

5. Duty to investigate complaints

California Government Code section 12940(j) provides that it is “unlawful if the entity, or its agents or supervisors, knows or should have known of this conduct and fails to take immediate and appropriate corrective action.”  The law also provides that employers are liable if they “fail to take all reasonable steps necessary to prevent discrimination and harassment from occurring.”  Gov. Code section 12940(k).  If the employer fails to take the preventative measures, they can be held liable for the harassment between co-workers.  If the harassment occurs by a manager, the company is strictly liable for the harassment.  If the harassment occurred by a non-management employee, the employer is only liable if it does not take immediate and appropriate corrective action to stop the harassment once it learns about the harassment.  Investigations must follow certain parameters in order to be deemed adequate under the law.  Click here for more information about conducting adequate investigations.