California is the first state to propose restrictions on an employer’s ability to communicate with employees after work hours.  AB 2751, currently making its way through the California legislature, would give employees the “right to disconnect.”  While this right has been adopted in other countries, such as France, Spain, and Mexico, no state in the U.S. has a specific law addressing this issue.  As discussed below, the proposed law would dramatically change the dynamic on overtime work for both exempt and nonexempt employees in California.  Here are five key issues California employers need to know about the proposed bill:

1. The proposed bill: AB 2751.

AB 2751, if passed in its current form, would require employers to develop a policy that provides employees with the right to disconnect “from communications from the employer during nonworking hours.”  Nonworking hours would need to be established in writing between the employer and employee.  The employee could file a complaint for a pattern of violation, which is defined as three or more documented instances of being contacted outside of work hours.  Violations of the law would be a misdemeanor and of at least $100.  Unionized workers covered by a collective bargaining agreement are not provided protection under this law. 

2. Exceptions under the proposed law.

The proposed bill does permit employers to contact employees outside of working hours for emergencies or for scheduling purposes impacting changes within 24 hours.  “Emergency” is defined as situations that threaten an employee, customer, or the public, a situation that disrupts or shuts down operations, or causes physical or environmental damage. 

3. California state and local laws already protect workers.

California law already provides for numerous protections to employees who are required to work overtime.  Some examples are:

  • Overtime: California law requires employers to pay overtime.  As recognized by the California Supreme Court, this is an unwaivable right by employees.  Labor Code section 510 provides that nonexempt employees must be paid one and one-half their wages for hours worked in excess of eight per day and 40 per week and twice their wages for work in excess of 12 hours a day or eight hours on the seventh day of work.
  • On-call time: Under California law, an employee’s on-call or standby time may require compensation.

4. The proposed bill would apparently apply to exempt employees and does not account for different industries.

The proposed bill does not exclude exempt employees from the law.  Therefore, even exempt employees, such as doctors, lawyers, engineers, officers of a corporation, would all still be covered under the law. 

The proposed bill does not address industries that do not have fixed work hours.  One could only imagine the impact such a bill would have on the trucking industry, catering and event companies, and health care providers.  The bill is silent on industries that do not have established work hours because of the practical considerations for their workplaces and how the law would apply to these industries. 

5. Not only does the bill create a right to disconnect – it also creates a right to refuse to work overtime altogether.

In addition to providing employees the right to disconnect, the bill also apparently provides employees with a legal right to refuse to work overtime past their normal work schedule.  Currently under California law, employers may require employees to work overtime, as long as the employer complies with the overtime requirements and other wage and hour requirements (some mentioned above).  However, under the proposed law, it shifts the decision to the employee on whether they want to work overtime.  The employee would be permitted to leave work at the designated “nonworking hour” as agreed with the employer, and refuse to communicate with the employer at that point.  The bill would limit employers’ ability to have employees work overtime only in emergency situations, as defined by the law. 

Under California’s pay data reporting obligations, employers with 100 or more employees must prepare and file reports by May 8, 2024.  Employers are required to gather and report employee race and ethnicity data, among other items.  However, many employers do not have records detailing employee’s race and ethnicity, so how can this information be gathered?  California’s Civil Rights Department (CRD) explains in their FAQs, how employers may collect this information.

Understand the Reporting Categories

The initial step for employers is to understand the seven race/ethnicity categories that must be reported on. These categories are:

  1. Hispanic/Latino
  2. Non-Hispanic/Latino White
  3. Non-Hispanic/Latino Black or African American
  4. Non-Hispanic/Latino Native Hawaiian or Other Pacific Islander
  5. Non-Hispanic/Latino Asian
  6. Non-Hispanic/Latino American Indian or Alaskan Native
  7. Non-Hispanic/Latino Two or More Races

These classifications are adopted from the federal EEO-1 survey to maintain consistency with federal reporting and facilitate the process for employers.  In the past, employers could report “unknown,” but this is not an option for employers reporting in 2024. 

Employee Self-Identification

The CRD explains that the preferred method for collecting this data is employee self-identification. Employers should provide employees the option to voluntarily disclose their race or ethnicity. The CRD provides the following sample statement that employers can use when approaching employees:

“[Employer name] is subject to certain governmental recordkeeping and reporting requirements for the administration of civil rights laws and regulations. In order to comply with these laws, [employer name] invites employees to voluntarily self-identify their race or ethnicity. Submission of this information is voluntary and refusal to provide it will not subject you to any adverse treatment. The information obtained will be kept confidential and may only be used in accordance with the provisions of applicable laws, executive orders, and regulations, including those that require the information to be summarized and reported to the government for civil rights enforcement. When reported, data will not identify any specific individual.”

Address Non-Disclosure

If an employee chooses not to self-identify, employers must still classify the employee under one of the specified race/ethnicity categories. The CRD explains that employers should attempt to gather the employee’s race/ethnicity based on the following (in this order):

  • by using current employment records,
  • other reliable records or information, and
  • as a last resort, observer perception.

Use of Observer Perception

When observer perception is used, it is important to acknowledge the potential for inaccuracies. Employers are encouraged to document the use of observer perception in the clarifying remarks field of their reports. An example statement is: “The race/ethnicity of [number] employees in this employee grouping is being reported based on observer perception.”  However, employers are not required to provide this statement in the clarifying remarks. 

By following these guidelines, employers can effectively comply with reporting requirements while respecting their employees’ privacy and promoting an inclusive workplace culture. Remember, the ultimate goal of collecting this data is to foster an environment of fairness and equality in employment practices.

Employers of 100 or more employees to report to the California Civil Rights Department (“CRD”) pay and hours-worked data by establishment, pay band, job category, sex, race, and ethnicity.  The pay data reports are due by May 10, 2024.  This requirement applies to employers even if they are based outside of California, but have one employee (or even one employee hired through a labor contractor such as a staffing agency) working in California or assigned to an establishment in California.   

By requiring large employers to report pay data annually the Legislature sought to encourage these employers to self-assess pay disparities along gendered, racial, and ethnic lines in their workforce and to promote voluntary compliance with equal pay and anti-discrimination laws.

In addition, Senate Bill 973 authorized CRD to enforce the Equal Pay Act (Labor Code section 1197.5), which prohibits unjustified pay disparities. Moreover, the Fair Employment and Housing Act (Gov. Code § 12940 et seq.), already enforced by CRD, prohibits pay discrimination. The CRD states that the Employers’ pay data reports allow CRD to identify wage patterns and allow for effective enforcement of equal pay or anti-discrimination laws, when appropriate.

In 2022, the Legislature passed Senate Bill 1162 to enhance the California pay data reporting law in many aspects.  For example, private employers with 100 or more workers hired through labor contractors in the prior calendar year to report pay data for these workers and requiring more information about the employer’s workforce, such as median and mean wage information.  In addition, starting in the reports due on May 8, 2024, employers must also report whether employees worked remotely during the “Snapshot Period.” 

1. Pay data reports are due on May 8, 2024.

California requires employers to submit the pay data reports by the second Wednesday of May each year (which is May 8 in 2024).

The reports require employers to gather and report about median and mean hourly rate for each combination of establishment worked at, race, ethnicity, and sex within each job category, pay band, hours worked in 2023, as well as if the employee worked remotely.

Employers with 100 or more employees hired through contractors are required to submit a separate report for these employees.

2. Employers who must report.

Under Government Code section 12999(a)(1), a private employer that has 100 or more employees (anywhere as long as it has one employee in California) are required to submit a pay data report to the Civil Rights Division (CRD).  An employee is “an individual on an employer’s payroll, including a part-time individual, and for whom the employer is required to withhold federal social security taxes from that individual’s wages.” Gov. Code § 12999(k)(1).

3. Determining if an employer has 100 or more employees.

An employer has the requisite number of employees if the employer either employed 100 or more employees in the Snapshot Period or regularly employed 100 or more employees during the Reporting Year. “Regularly employed 100 or more employees during the Reporting Year” means employed 100 or more individuals on a regular basis during the Reporting Year. “Regular basis” refers to the nature of a business that is recurring, rather than constant. The CDR provides the following example: “In an industry that typically has a three-month season during a calendar year, an employer that employed 100 or more employees during that season regularly employed the requisite number of employees and would be required to file a pay data report with CRD.” 

The Snapshot Period is a single pay period between October 1 and December 31 of the Reporting Year.  For the reports due in 2024, the Reporting Year is 2023.  Employers may choose the single pay period between October 1 and December 31. The Snapshot period is used to identify the employees to be reported on in the pay data report. The employee does not have to be paid during the Snapshot period – it only matters whether the employee was employed during the Snapshot Period.

Employees located inside and outside of California are counted when determining whether an employer has 100 or more employees.

An employer with no employees in California during the Reporting Year is not required to file a pay data report.

Part-time employees, including those who work partial days and fewer than each day of the work week, are counted the same as full-time employees. 

Employees on paid for unpaid leave, including the California Family Rights Act (CFRA) leave, pregnancy leave, disciplinary suspension, or any other employer-approved leave of absence, must be counted.

Employers must include all employees assigned to California establishments and/or working within California.

4. Must include remote workers outside of California, but “assigned” to an establishment in California.

Starting for Reporting Year 2023, employers must report the number of employees in an employee group who worked remotely. The CDR explains, that a “remote worker refers to employees (payroll employees or labor contractor employees) who are entirely remote, teleworking, or home-based, and have no expectation to regularly report in person to a physical establishment to perform their work duties. Employees in hybrid roles or (partial) teleworking arrangements expected to regularly appear in person to perform work at a particular establishment for any portion of time during the Snapshot Period would not be considered remote workers for pay data reporting purposes.”

Remote workers outside of California “assigned” to an establishment in California must be included in the employee pay data report.  The CDR provides the following example: If an employer has a single establishment in Riverside, California with 500 employees working from that location, the employer would submit a report covering all 500 employees. If 25 of these employees were working remotely (in California or beyond), the employer’s report would still cover all 500 employees.

5. When a Labor Contractor Employee Report must be filed.

Companies are required to file a separate Labor Contractor Employee Report if it had 100 or more employees hired through labor contractors in the prior calendar year anywhere with at least one worker based in California. 

“Labor contractor” – is defined as “an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.”  The CDR explains that a client employer’s “usual course of business” means the regular and customary work of the client employer. “Regular and customary work” means work that is performed on a regular or routine basis that is either part of the client employer’s customary business or necessary for its preservation or maintenance. “Regular and customary work” does not include isolated or one-time tasks.  The CDR provides the following example: Catering staff contracted to serve food at a trucking company’s tenth anniversary party would not be performing work within the client employer’s usual course of business, assuming catering a party is an isolated occurrence for the company.

The CDR explains that the pay data report only applies to employees hired through labor contractors, not 1099 workers. 

The Civil Rights Department California Pay Data Reporting website is here.

The CRD’s FAQs about the Pay Data Report is here.

In Cornell v. Berkeley Tennis Club, Plaintiff Ketryn Cornell alleged that her obesity should qualify as a disability under California law. Ketryn Cornell began working part-time for the Berkeley Tennis Club as a lifeguard and pool manager in 1997, while attending college at UC Berkeley. She was employed as a night manager and continued to work at the Club after graduating from college in 2001.  In 2011, she took on additional duties and began working as a night manager, day manager, and tennis court washer. She received positive reviews, merit bonuses, and raises throughout this period.

The Club employed a new general manager in 2012.  The new manager implemented a uniform policy.  While mandating the staff to wear uniform shirts, the largest sized ordered by the club did not fit Cornell.  Cornell was obese, at five feet, five inches tall, she weighed over 350 pounds.  Cornell explained to the general manager that she needed a bigger size, and he reported that he would work on providing an appropriate uniform.  However, it is unclear if he attempted to find shirts Cornell could fit.  Taking upon herself, Cornell ordered shirts from a specialty shop at her own expense and had them embroidered with the Club logo.

Cornell filed a lawsuit in May 2014, asserting causes of action for various Labor Code violations and the eight causes of action that were at issue on the appeal, which included disability discrimination/failure to accommodate under the Fair Employment and Housing Act (FEHA), wrongful discharge in violation of public policy based on the disability discrimination, disability harassment under the FEHA, and retaliation under the FEHA.  Here are five takeaways for California employers arising from this disability discrimination decision:

1. Obesity can qualify as a physical disability under the Fair Employment and Housing Act.

Under FEHA, it is unlawful to discriminate against an employee on the basis of “physical disability.” (Gov. Code, § 12940, subd. (a).)  In addition to making it illegal to discriminate on the basis of disability, the FEHA makes it unlawful “to fail to make reasonable accommodation for the known physical . . . disability of an . . . employee.” (§ 12940, subd. (m)(1).)  Finally, the FEHA prohibits an employer from harassing an employee “because of . . . physical disability.” (§ 12940, subd. (j)(1).)

The Club moved for summary adjudication of the discrimination/failure to accommodate claim and the harassment claim on the basis that Cornell’s obesity is not a physical disability under FEHA. The Club also argued that even if Cornell has a condition protected by the FEHA, she did not require an accommodation and was not terminated for a discriminatory reason, and the Club’s actions were not severe or pervasive enough to constitute harassment.

Cornell argued that her obesity qualified as an actual physical disability because it is a “physiological disease, disorder, condition, cosmetic disfigurement, or anatomical loss that does both of the following: [¶] (A) Affects one or more of the following body systems: neurological, immunological, musculoskeletal, special sense organs, respiratory, including speech organs, cardiovascular, reproductive, digestive, genitourinary, hemic and lymphatic, skin, and endocrine. [¶] (B) Limits a major life activity.” (Government Code § 12926, subd. (m)(1).)

In Cassista v. Community Foods, Inc. (1993) 5 Cal.4th 1050 (Cassista), the California Supreme Court held “that weight may qualify as a protected `handicap’ or `disability’ within the meaning of the FEHA if medical evidence demonstrates that it results from a physiological condition affecting one or more of the basic bodily systems and limits a major life activity.” (Id. at p. 1052.) Interpreting the same statutory language as currently found in section 12926, subdivision (m)(1)(A), and relying on federal antidiscrimination law for guidance, the Court concluded that “an individual who asserts a violation of the FEHA on the basis of his or her weight must adduce evidence of a physiological, systemic basis for the condition.” (Cassista, at pp. 1063-1065.)

The court set forth the definition of “physiological”:

Rather, the pertinent question is whether a genetic cause qualifies as a “physiological cause.” “Physiological” means “relating to the functioning of living organisms.” (Oxford English Dict. Online (3d ed. Mar. 2006) [as of Dec. 21, 2017 [physiological].) This term encompasses genetics, and the Club does not argue otherwise. We therefore reject the implication that Cornell cannot establish her claim by proving that her obesity has a genetic cause.

The Court found that Cornell’s testimony that other doctors had determined her obesity was caused by genetics, and the fact that those doctors were not deposed, was enough evidence for Cornell to overcome the employer’s motion for summary judgment and proceed to trial on this claim.

2. Even if others were involved in decision to terminate, plaintiff can still maintain a discrimination cause of action if person alleged to have discriminated against plaintiff was involved in the termination decision.

The employer in this case argued that the general manager who was alleged to have discriminated against Cornell was not the only person involved in the decision to terminate her, but that other supervisors were involved, and therefore the decision could not have been discriminatory.  The court rejected this argument in holding:

“[S]howing that a significant participant in an employment decision exhibited discriminatory animus is enough to raise an inference that the employment decision itself was discriminatory, even absent evidence that others in the process harbored such animus.” (DeJung v. Superior Court (2008) 169 Cal.App.4th 533, 551.) There is evidence that [General Manager] Headley made several comments suggesting he held a discriminatory animus toward Cornell. Although the extent to which he participated with Gurganus and Miller in the decision to fire Cornell is unclear, there is plenty of evidence that he participated in some way….

3. While sporadic comments are not enough to create a hostile work environment, courts may look to the context of all of the actions taken against the employee in determining if a hostile work environment existed.

The Club argued that even if Cornell is otherwise entitled to protection under the FEHA, summary adjudication of her disability harassment claim was proper because she was not subject to sufficiently severe or pervasive harassment. The appellate court disagreed:

Here, Cornell was able to present enough evidence to at least continue to trial with her harassment cause of action because of the statements made by the General Manager in regards to obtaining a uniform shirt that fit Cornell, the General Manager’s comments about Cornell having weight-loss surgery, and his comments to kitchen staff not to give Cornell extra food because “she doesn’t need it.”  The Court recognized that these types of comments on four occasions do not create a hostile work environment, “Four comments over several months does not establish a pattern of routine harassment creating a hostile work environment, particularly given that the comments were not extreme.”  (“Actionable harassment consists of more than “annoying or `merely offensive’ comments in the workplace,” and it cannot be “occasional, isolated, sporadic, or trivial; rather, the employee must show a concerted pattern of harassment of a repeated, routine, or a generalized nature.” (Lyle v. Warner Brothers Television Productions (2006) 38 Cal.4th 264, 283.)”)

However, the Court found that the employer’s conduct must be viewed in context of the General Manager’s other actions, “including his ordering of shirts that were significantly too small for her and reporting to the Personnel Committee that she was resisting the uniform policy by not wearing appropriate shirts, as well paying her less than another employee and denying her extra hours and internal job openings.”  This evidence was enough to prevent the employer from dismissing Cornell’s harassment claims prior to trial.

4. Requests for reasonable accommodations are protected activities under the law.

In 2015 the Legislature amended section 12940 to add subdivision (m)(2), which made it unlawful for an employer to “retaliate or otherwise discriminate against a person for requesting accommodation under this subdivision, regardless of whether the request was granted.” (Stats. 2015, ch. 122, § 2.)

5. Primary takeaway for employers: treat all employees with respect.

While certain conduct that is rude, unfair, and unethical may not raise to the level of being unlawful discrimination, harassment, or retaliation under the law, this type of conduct will inevitably lead to higher litigation costs and employee turnover.  I’ve written about how most companies cannot afford to have managers like Steve Jobs, and this case is another example.  While the employer had arguments that the manager’s actions in this case were not illegal under the law, even if the employer prevails at trial in this case, the costs associated with the litigation are substantial.  Unprofessional comments by co-workers, managers and supervisors in the workplace should be stopped by employers, as they may not be illegal, it could create litigation from employees who felt that they were not treated fairly.

As reported previously on this blog, the minimum wage for California’s fast-food operators will increase to $20 per hour on April 1, 2024 under AB 1228.  The new law applies to national fast food chains, which are defined as “limited-service restaurants consisting of more than 60 establishments nationally that share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products, and services, and which are primarily engaged in providing food and beverages for immediate consumption on or off premises where patrons generally order or select items and pay before consuming, with limited or no table service. For purposes of the definitions in this part, “limited-service restaurant” includes, but is not limited to, an establishment with the North American Industry Classification System Code 722513. Bakeries and grocery stores are exempt from this definition and are not included as fast-food restaurants. 

Here are five essential steps fast-food operators who are covered under AB 1225 should review for this April 1 deadline:

1. Update wage rates with payroll company.

    Operators need to communicate with their payroll company to ensure that the $20 per hour minimum wage is updated and reflected on all employees’ pay stubs provided for pay periods after the April 1st deadline. 

    2. Ensure that all overtime rates are calculated at the new rate.

    Likewise, operators need to ensure that all applicable overtime rates are calculated properly for all overtime worked starting April 1. 

    3. Update pay stubs to reflect increased wages.

    All pay stubs issued for pay periods that include work done since April 1, 2024 must include the increased minimum wage rate.  Employers need to work closely with their payroll companies to ensure that work prior to the April 1 deadline, and work completed on and after April 1 are reported correctly on employees’ pay stubs. 

    4. Ensure new employee notices include the updated wage information.

    Covered businesses must also update the notices to employees required under Labor Code section 2810.5 are updated with the new minimum wage for any employees hired on April 1, 2024.

    5. Audit exempt employee classifications and ensure all exempt employees are paid at least $83,200 annually.

    Operators cannot forget to review the status of exempt employees.  Under AB 1228, fast-food industry employers covered under the law must pay exempt employees at least $83,200 on a salary basis (a monthly salary equivalent to no less than two times the minimum wage for full-time employment). Given the higher salary requirement, many employers are re-classifying previously exempt managers as non-exempt. Employers may do this for any at-will employee (as there is no contract requiring employers to continue to pay employees at a given rate), but there needs to be some advanced notice to employees who are being reclassified as non-exempt.

    With the enactment of Senate Bill 553 and the upcoming implementation of California Labor Code section 6401.9 on July 1, 2024, California employers will be required to implement additional measures for workplace safety. This legislation compels most non-health care related businesses to review and develop certain workplace violence measures by mandating the creation, execution, and ongoing maintenance of a Workplace Violence Prevention Plan (WVPP). Below, we outline five critical steps that employers must take to align with these new requirements, emphasizing development, risk assessment, training, and compliance documentation to meet these new requirements by the July 1 deadline:

    1. Determine if your business is a covered employer that must develop a WVPP

    The new requirements under SB 552 apply to all employers, employees, places of employment, and employer-provided housing, except for the following:

    1. Employees teleworking from a location of the employee’s choice, which is not under the control of the employer.
    2. Places of employment where there are less than 10 employees working at the place at any given time and that are not accessible to the public, if the places are in compliance with Section 3203 of Title 8 of the California Code of Regulations.
    3. Health care facilities, service categories, and operations covered by Section 3342 of Title 8 of the California Code of Regulations.
    4. Employers that comply with Section 3342 of Title 8 of the California Code of Regulations in the health care setting.
    5. Facilities operated by the Department of Corrections and Rehabilitation, if the facilities are in compliance with Section 3203 of Title 8 of the California Code of Regulations.
    6. Employers that are law enforcement agencies that are a “department or participating department,” as defined in the California Code of Regulations and meet other requirements.

    The exceptions are vary limited, and most employers in California will need to take steps to comply with SB 553’s requirements by July 1, 2024.

    2. Conduct risk assessments

    For covered employers under AB 553, an essential first step in violence prevention is conducting comprehensive risk assessments to identify potential hazards that could lead to workplace violence. Factors such as working conditions, the nature of the employment, and interactions with the public can all contribute to risk. Employers need to evaluate these factors meticulously to develop targeted prevention strategies.

    3. Develop and implement a WVPP

    Covered employers must craft a detailed WVPP that outlines the responsibilities of all parties involved, incorporates employee and representative involvement, and establishes clear protocols for handling and responding to incidents of workplace violence. This plan should include procedures for emergency responses, effective training programs, and methods for identifying, evaluating, and mitigating violence hazards.

    Cal/OSHA published a model written Workplace Violence Prevention Plan for General Industry (Non-Health Care settings), which is available as a resource guide for employers.  Employers may download the model form as a Word document here. 

    4. Engage in training and communication

    Employers are required to develop and provide effective training for all employees, focusing on recognizing, preventing, and responding to potential violence in the workplace. This training should be part of an ongoing dialogue between employers and employees and needs to be documented.

    5. Maintain and review compliance records

    Compliance with the new legislation includes thorough documentation and record-keeping related to the WVPP. Employers must keep detailed records of all violence prevention efforts, including hazard identification and mitigation, training sessions, incident responses, and investigations. These records are vital for evaluating the effectiveness of the WVPP and for demonstrating compliance with these new regulations.

    For more information about complying with the requirements for employers to develop a WVPP, join my firm for our webinar discussing the new law on Thursday, March 28, 2024 at 10 a.m. PST.  You may register here. 

    In legal disputes, five primary challenges can significantly complicate the defense of an employment lawsuit:

    1. Failure to document routine employment issues.
    In any employment litigation, whether it’s wage and hour claims, leave issues, or harassment claims – the amount of documentation an employer has dramatically increases the odds of prevailing in litigation. I would even go as far as to say there is a relationship in place here (similar to Moore’s law in the computing industry) that the likelihood of avoiding a devastating judgment is proportionate to the amount of documentation the employer has regarding the particular employee or group of employees involved in the litigation.

    What should employers document? Conversations with employees, reviews, days absent and the reason for the absence, performance issues (both good and bad – see below), among other items.  With email and the ability to scan documents or take pictures of documents on a phone, there is almost no excuse not to have everything documented. The only issue preventing employers from documenting issues is not stressing the need to do document, and the press of business.

    2. Not maintaining the proper time records.
    Employers have the burden to record and maintain accurate time records under California law. If the employer knows employees are not properly recording their time, the employer needs to enforce a policy to have employees accurately record their time, even if it requires disciplinary action.  Some examples of inadequate time records by employers:

    • The records that do not record the employee’s actual time working. For example, the employee records their start and stop time and the same time every day even though the employer knows it changes.
    • Not keeping time records long enough. The statute of limitations can reach back four years in wage and hour class actions, and these records will be the primary evidence in most cases.
    • Not recording all required information. For example, employers are required to record employee’s meal periods under the IWC Wage Orders (see section 7 – Records).
    • Not keeping the time records in a manner that is usable. Maintaining records in a form that makes reviewing the records almost impossible is almost equivalent to not maintaining them in the first place. Some thought should be put into how an employer is keeping old time record information and how that data could efficiently be reviewed in the future if needed.

    3. Loss of institutional knowledge.
    It’s crucial that knowledge about the company’s employment policies, including their implementation and modifications, is not held by a single individual. This institutional knowledge should be well-documented and accessible to multiple people within the organization to ensure continuity and compliance.

    4. Inconsistent communication of goals and expectations.
    Regular and accurate performance reviews are fundamental.  They play a crucial role in cases of wrongful termination, discrimination, or retaliation. Accurate documentation of performance reviews and clear communication of expectations are vital.  Addressing performance issues in writing is not only necessary for improvement but critical in defending against claims.

    5. Lack of written policies.
    Operating on unwritten policies can lead to significant risks.  Clear, written policies in an employee handbook or another formal document are essential.  This ensures that policies are applied consistently and protects against claims of arbitrary discipline based on non-existent policies.

    Addressing these five areas can significantly strengthen an employer’s position in employment litigation, emphasizing the importance of thorough documentation, proper record-keeping, shared institutional knowledge, clear communication, and formalized policies.

    Being named as a defendant in a Private Attorneys General Act (PAGA) or class action lawsuit can be overwhelming, especially for a quickly growing company. However, with planning, a company can minimize the impact of the litigation on its existing operations and put forth the best defense.

    A lawyer who has experience in employment law and class actions should be contacted as soon as possible. There are certain deadlines that begin to run when a lawsuit is filed, and any delay could adversely affect the company’s defense. If the company does not know of an employment lawyer, a good start is to reach out to trusted advisors for recommendations, such as the company’s corporate lawyer or accountant. Wage and hour litigation, especially in California, is very unique and it is recommended that the company utilize a lawyer that has experience in this area. Here are five additional items a company can do as part of this planning process when it is first notified of an existing lawsuit:

    1. Review allegations with counsel to see if the safe harbor provision of the PAGA could apply.
    With the advice of counsel, there should be a review of the allegations in the complaint, and if the Plaintiff is seeking damages under PAGA, the PAGA notice sent to the Labor Workforce & Development Agency (“LWDA”). PAGA provides the employer a short window of time (33 days from receiving the PAGA notice) to “cure” any alleged violations. If the employer cures the deficiencies within the time period, the plaintiff cannot recover penalties under PAGA. Whether or not any items can or need to be cured, and the process for utilizing this safe harbor should be reviewed closely with counsel.

    2. Gather time records and personnel files for the Plaintiff, handbooks, and policies that were in effect during the last four years.
    The personnel file for the named Plaintiff will have to be produced early in the case. In addition, the information in the personnel file will (hopefully) document any performance issues or other possible defenses the company has to the Plaintiff’s allegations. Also, if the company has implemented an arbitration agreement, it will be important to determine if the Plaintiff has signed it and whether or not there is an argument that in signing the agreement the Plaintiff cannot bring a class action.

    The litigation will likely revolve around what policies the company had in place, and whether the policies were legally compliant. The company’s counsel will have to review these policies and handbooks. It is also likely that the company will have to produce these early in the litigation as well.

    3. Begin constructing a list of all employees who have worked in similar positions as the Plaintiff during the last four years (which is likely the statute of limitations).
    In California, the statute of limitations for most wage and hour class actions is four years from the date the complaint is filed. Therefore, the employees who have worked in the same or similar positions as the Plaintiff will likely be the group of employees the Plaintiff is seeking to represent in the class action. It is important to know how many of these employees there are. For example, if there are too few this could be a defense to class certification.

    4. Review any applicable insurance policies.
    The company should review all insurance policies it has to see if any of them could potentially cover the litigation. Most employment practices liability insurance (“EPLI”) policies exclude class action lawsuits from coverage, but there may be coverage for defense costs, or there may be something unique about the litigation facing the company that triggers coverage. It is also important to assess whether the lawsuit needs to be tendered to the insurance company.

    5. Develop a plan about how to communicate the existence of the class action with current employees.
    Word usually starts to spread quickly among the employees about the existence of the lawsuit. The company, with advice from counsel, should determine whether it wants to be proactive about communicating with the employees about the lawsuit, as well as what can and cannot be said to employees. At the minimum, a person within the company should be designated to handle any questions about the lawsuit. This will ensure a consistent message is used.

    In recent developments across the United States, a significant shift is underway regarding the value and necessity of college degrees. At the heart of this transformation are legislative and executive efforts aimed at reevaluating the traditional emphasis on bachelor’s degrees for job eligibility. Amidst these governmental actions to potentially limit employer’s ability to require a bachelor’s degree, a new question is also arising: are college degrees becoming obsolete? With industry giants like Google and Apple moving away from stringent degree requirements, and figures like Gary Vaynerchuk challenging the traditional valuation of college education, the debate intensifies. This article delves into these pivotal changes, exploring the evolving landscape of employment qualifications, the role of legislation in shaping hiring practices, and the ongoing discourse on the relevance of college degrees in today’s workplace.

    1. Federal “Opportunity to Compete Act” proposed bill.

    On the federal level, in October 2023, a bill was introduced by Representatives Raja Krishnamoorthi (D-Ill.) and John James (R-Mich.) to amend the Fair Labor Standards Act (FLSA) to prohibit large employers from utilizing automated systems from automatically discarding applicants without a bachelor’s degree.  The bill is termed the “Opportunity to Compete Act” would prohibit employers from using computerized hiring systems that discard applicant who do not have a bachelor’s degree, but would permit the applicant to substitute years of experience, community college, and training programs in lieu of a four-year degree. 

    While not law at this time, the proposed bill illustrates the considerations by legislators regarding potentially regulating this issue. 

    2. California Executive Order to remove any degree requirements that are not related to the job duties for State positions.

    In California, Governor Newsom signed an Executive Order in August 2023, that directed the California Department of Human Resources to update its policies to ensure that any state position that requires a bachelor’s degree “remains a job-related educational requirement, explicit analysis of whether a bachelor’s degree is necessary for successful performance in the position and, if it is determined necessary, supporting data that demonstrates the necessity.”  The Executive Order only applies to state jobs, the measure is indicative of the consideration being given to the topic by legislators.

    3. Are college degrees becoming obsolete anyway?

    Is legislation required to address this issue?  There are trends already in the workforce where employers are not requiring college degrees.  For example, large employers such as Google, Bank of America, and Apple are moving away from requiring college degrees. 

    Gary Vaynerchuk is vocal on this point, and has been making the case for a few years now that college degrees are becoming obsolete.  Vaynerchuk points out, “You can get better “courses” on the internet and you can take that money and travel the world for 40k as an eighteen year old. Plus, you would really learn…the big argument is, you grow up in college and you meet people. As if that’s the only way one gets life experience and meets people. I think if you’re crafty as shit, there’s a way better way to spend 50,000 dollars a year.”

    Vaynerchuk makes a valid point that where someone attend school is becoming less relevant today, “I have no clue where some of my employees went to school. If they all said community college, or they didn’t go at all, or they went to Harvard–it all would have landed the same way.”

    4. Companies should be the final arbiter for requirements to work for them. 

    I do not agree with any legislation that would attempt to regulate what standards an employer sets for its workforce.  It is too subjective to effectively legislate anyway – I could make the case that a college degree is required for nearly almost any job that requires the use of a computer.  On the other hand, one could argue that nearly everyone coming out of high school understands how to use a computer, or could learn the required skills on YouTube, and this should not be a requirement.  It is just too subjective – and employers should be the final arbiter of what they require from their workforce. 

    5. My stance on college: Everyone that has the desire should attend but keep costs as low as possible. 

    I believe college degrees are still important to have.  I’ve changed my position on college degrees a lot over the last few years, and can see the argument that a degree is not necessary in today’s economy.  However, I still think that the generation that is making the hiring decisions still value applicants having a college degree.  But the exception to this is, like Vaynerchuk mentions above, where someone received their degree does not matter.  Unless someone has a clear path in mind to attend law school, medical school, or obtain some other advance degree, young students need to obtain a degree with as little to no dept as possible.  The fact that students cannot declare bankruptcy against school debt is insane, and illustrates how serious this debt will be for students for the rest of their lives.  Large amounts of college debt will limit a person’s opportunities and likely force them to remain in jobs they do not like or limit their ability to take a risk and start their own company.  The cost-benefit analysis for attending college that requires loans of more than $20,000 a year is quickly changing.  Many people are realizing that obtaining a bachelor’s degree through a community college with no debt has more advantages than a student with $250,000 of debt from a notable college. 

    An issue that constantly plagues the service industry is what to do about tips and the challenges that come with mandated tip pooling and mandatory service charges. We still routinely counsel restaurant clients on the intricacies regarding tips, mandatory tip pools, and service charges. This simple concept, which should be relatively easy, becomes complex under California law.  Here are five issues employers should understand about tips, tip pools, and service charges in California.

    1) Who owns a tip?

    California law is clear that voluntary tips left for an employee for goods sold or services performed belong to the employee, not the employer. Labor Code section 351 provides, “No Employer or agent shall collect, take or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron…. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.”

    2) Is employer-mandated tip pooling legal?

    Yes, generally tip pooling is legal in California as long as it is fair and reasonable (and owners/managers/supervisors are not involved in the tip pool as discussed below). In Leighton v. Old Heidelberg, Ltd., the court held that an employer’s practice of tip pooling among employees was not prohibited by section 351 because the employer did not “collect, take, or receive” any part of a gratuity left by a patron, and did not credit tips or deduct tip income from employee wages. The court relied upon the “industry practice” that 15% of the gratuity is tipped out to the busboy and 5% to the bartender, which was “a house rule and is with nearly all Restaurants.”

    There must be a reasonable relationship between tip pooling arrangements.  The following examples of mandatory tip pooling percentages have been approved by a court, the DLSE or DOL:

    • A policy in which 80 percent of tips were allocated to waiters, 15 percent to busboys and five percent to bartenders
    • A policy in which cocktail service must give one percent of tips to bartenders
    • The Department of Labor responsible for enforcing Federal law has stated that a policy that requires servers to share 15 percent of their tips with other employees is presumptively reasonable
    • A policy in which a server contributes 15 percent to a tip pool, and other employees in the chain of service receive a portion of these tips based on the amount of hours they worked

    The following examples were tip pooling policies disapproved by courts or the DLSE and therefore employers cannot legally establish them:

    • A policy providing 90 percent of tips to hostesses who spend only a small amount of time seating customers
    • A policy requiring food server to share 10 percent of tips with floor managers

    3) Who can share in the tip pool?

    Employees in the chain of service:

    Generally, employees who are in the “chain of service” may partake in a mandatory tip pool. In Etheridge v. Reins International California, Inc., the servers challenged the inclusion of employees, such as kitchen staff, bartenders, and dishwashers, who do not provide direct table service in the mandatory tip pool. The California Court of Appeals confirmed that employees who do not provide direct table service but are in the “chain of service,” such as kitchen staff, bartenders, and dishwashers, are allowed to participate in mandatory tip pools. The Court reasoned that this would encourage all staff in the chain of service to give their best service, regardless of whether the customers personally see them performing the work.

    Managers, owners, or supervisors:

    Labor Code section 351 prohibits agents from keeping a share or any portion of gratuities left or given to one or more employees by a customer. However, the California Court of Appeal in Chau v. Starbucks Corp. found that a service employee who is also an agent, such as the shift supervisor, can participate in tip pools for tips left in a collective tip box for all service employees. While Chau permitted employers to include supervisors in tip pools, that case addressed a very specific set of facts, and employers must approach the issue of including supervisors in tip pools with caution.

    4) Do tips change an employee’s minimum wage or regular rate of pay for overtime calculations?

    No. Because tips are voluntarily left by customers to employees, tips do not increase an employee’s regular rate of pay used to calculate overtime rates.

    Additionally, California law does not allow employees to “credit” an employee’s tips towards the minimum wage. Therefore, employers should still ensure to pay employees the state (or local) minimum wage.

    In addition, Labor Code section 351 requires that employers pay the employee any tips that a patron paid by a credit card no later than the next regular payday.  Also, employers may not deduct any credit card processing fees from the amount of the tip left for the employee on the credit card. 

    5) Are mandatory service charges the same as a tip?

    No. A tip is voluntarily left by the patron, while a mandatory service charge is a mandatory charge to the patron by the employer.

    While a tip is considered the employee’s property, a mandatory service charge is considered the employer’s property. Thus, unlike with tips, an employer may distribute all or part of the service at their discretion. However, this freedom comes with strings: the amounts paid to employees as a mandatory service charge must be considered when calculating the employee’s regular rate to calculate overtime rates. As a reminder, to calculate an employee’s regular rate of pay, the employer must divide all compensation for the week by the total number of hours worked by the employee.