An employer is not required to allow employees to use medical marijuana as a reasonable accommodation under California’s Fair Employment Housing Act (FEHA). The California Supreme Court held that it is not a violation of California law for an employer to terminate an employee who tests positive for marijuana, even though the employee was prescribed the marijuana for medical purposes under California’ Compassionate Use Act of 1996.

The case, Ross v. Ragingwire Telecommunications, Inc., addressed the conflict between California’s Compassionate Use Act, (which gives a person who uses marijuana for medical purposes on a physician’s recommendation a defense to certain state criminal charges and permission to possess the drug) and Federal law (which prohibits the drug’s possession, even by medical users). Ragingwire terminated plaintiff’s employment based on a positive test for marijuana even through the plaintiff provided a doctor’s note explaining that he was prescribed marijuana to alleviate back pains.

The Supreme Court explained that the employer’s decision to terminate plaintiff was not illegal:

Nothing in the text or history of the Compassionate Use Act suggests the voters intended the measure to address the respective rights and duties of employers and employees. Under California law, an employer may require preemployment drug tests and take illegal drug use into consideration in making employment decisions. (Loder v. City of Glendale (1997) 14 Cal.4th 846, 882-883.)

Plaintiff’s position might have merit if the Compassionate Use Act gave marijuana the same status as any legal prescription drug. But the act’s effect is not so broad. No state law could completely legalize marijuana for medical purposes because the drug remains illegal under federal law (21 U.S.C. §§ 812, 844(a)), even for medical users (see Gonzales v. Raich, supra, 545 U.S. 1, 26-29; United States v. Oakland Cannabis Buyers’ Cooperative, supra, 532 U.S. 483, 491-495). Instead of attempting the impossible, as we shall explain, California’s voters merely exempted medical users and their primary caregivers from criminal liability under two specifically designated state statutes. Nothing in the text or history of the Compassionate Use Act suggests the voters intended the measure to address the respective rights and obligations of employers and employees.

The Court also provided that a reasonable accommodation, as required under California’s FEHA, does not include an employer’s permission to use illegal drugs:

The FEHA does not require employers to accommodate the use of illegal drugs. The point is perhaps too obvious to have generated appellate litigation, but we recognized it implicitly in Loder v. City of Glendale, supra, 14 Cal.4th 846 (Loder). Among the questions before us in Loder was whether an employer could require prospective employees to undergo testing for illegal drugs and alcohol, and whether the employer could have access to the test results, without violating California’s Confidentiality of Medical Information Act (Civ. Code, § 56 et seq.). We determined that an employer could lawfully do both. In reaching this conclusion, we relied on a regulation adopted under the authority of the FEHA (Cal. Code Regs., tit. 2, § 7294.0, subd. (d); see Gov. Code, § 12935, subd. (a)) that permits an employer to condition an offer of employment on the results of a medical examination. (Loder, at p. 865; see also id. at pp. 861-862.) We held that such an examination may include drug testing and, in so holding, necessarily recognized that employers may deny employment to persons who test positive for illegal drugs. The employer, we explained, was “seeking information that [was] relevant to its hiring decision and that it legitimately may ascertain.” (Id. at p. 883, fn. 15.) We determined the employer’s interest was legitimate “[i]n light of the well-documented problems that are associated with the abuse of drugs and alcohol by employees — increased absenteeism, diminished productivity, greater health costs, increased safety problems and potential liability to third parties, and more frequent turnover . . . .” (Id. at p. 882, fn. omitted.) We also noted that the plaintiff in that case had “cite[d] no authority indicating that an employer may not reject a job applicant if it lawfully discovers that the applicant currently is using illegal drugs or engaging in excessive consumption of alcohol.” (Id. at p. 883, fn. 15.) The employer’s legitimate concern about the use of illegal drugs also led us in Loder to reject the claim that preemployment drug testing violated job applicants’ state constitutional right to privacy. (Id. at pp. 887-898; see Cal. Const., art. I, § 1.)

(footnote omitted).

The plaintiff also alleged a cause of action for wrongful termination in violation of public policy. Generally, at-will employees can terminate or be terminated from their job at any time, but an employer cannot terminate an employee for reasons that violate a fundamental public policy of the state. The Court rejected plaintiff’s position that there was a fundamental public policy that permitted him to use medical marijuana and be under its influence while at work. The Court stated, “Nothing in the [Compassionate Use Act’s] text or history indicates the voters intended to articulate any policy concerning marijuana in the employment context, let alone a fundamental public policy requiring employers to accommodate marijuana use by employees."

A further clarification that medical marijuana use is not protected under disability laws came in 2012 from a Ninth Circuit Court of Appeals that held individuals seeking to stop cities from closing medical marijuana dispensaries under Title II of the ADA were not protected by under the ADA.  The case is James v. City of Costa Mesa, which held that the ADA does not protect against discrimination on the basis of marijuana use, even though permitted under certain circumstances under California law, marijuana use is not authorized by federal law, and therefore is not protected under the ADA. It is therefore likely that a court would also recognize that a patron does not have a right under Title III of the ADA, which applies to public accommodations, to use medical marijuana in public establishments, like restaurants.

This will be one of our most attended webinars, and there is still time to sign up. The webinar will cover legal issues facing California employers under the new Labor Code section prohibiting employers from asking applicants and employees for social media passwords, privacy issues when conducting background checks, alternatives to social media policies, and when policies addressing these issues are necessary. It is taking place at 10:00 a.m. PST January 15. Visit our website for registration information.

California passed a new law taking effect January 1, 2013 that prohibits employers from “requiring or requesting” employees and applicants to provide their passwords to social media accounts. This law was passed after a few cases made the news where employers were actually asking for this information. As I argued before, this law was probably not necessary as California law probably already prohibited this type of conduct to begin with.

However, now that the law is taking effect, there are also new questions that employers are facing under the law. For example, if an employer has the right policies in place that limit an employee’s expectation of privacy, it is pretty well established that the employer may monitor the employee’s internet use and record this. However, under the new law, what if an employee accesses their social media accounts during work? Or on a break? Can employers still monitor employees and record the employee’s login and password information?

I would argue that employers can still monitor employees’ internet use as long as they have made the proper disclosures through a handbook or policies that limit the employees’ expectation of privacy in using the company network or computers. The new law only prohibits employers from requiring employees to divulge their passwords. If the employer notifies the employees that it is recording all activity by the employees on the company network or computers, then the employees have made a voluntary decision to continue to access their account knowing that their employer is monitoring and/or recording the activity. Granted, the law is just going into effect next week, so obviously there is no case law to rely upon in making this argument, so employer will have to wait to see how the law is ultimately interpreted by the courts. 

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There was a good reminder to everyone over Christmas about online “privacy.” Randi Zuckerberg, the sister of Facebook co-founder and CEO Mark Zuckerberg posted a picture of her and her family on FB, and it was shared by another person on twitter. The photo was one of the Zuckerberg family using Facebook’s new Poke functionality (which by the way, is a way to send pictures through Facebook that are deleted from the recipient’s machine after a set period of time). A third party posted Randi’s photo online, and Randi’s apparently did not like the fact that the photo was reposted. Randi did not know how the third party got a copy of the picture, but it became apparent that the third party was connect to Randi through a mutual friend and saw the picture posted in her newsfeed. After the issue of how the picture was shared and it was not the result of some underhanded means to gain access to the picture, Randi still commented that people should “always ask permission before posting a friend’s photo publicly.”

I think there is another lesson here that I’ve preached about before: everything you post on the internet is public – even if you think you are only sharing it with your “friends.” However, there is a dichotomy of views that is becoming more apparent. Even though posting items on the internet makes them public to a lot of people to see – maybe even more people than you imagine as Randi’s case shows – there is still an increasing sense that people have a privacy interest in their information posted on the internet. For example, California’s new law (Labor Code section 980) making it illegal in a couple of days for employers to ask applicants or employees for their social media passwords in order to conduct a background check on the applicant/employee. This is also apparent in Randi’s comment that her picture, posted on Facebook and which her “friends” could see, still thought she has some privacy expectation in the photo. Mathew Ingram at Gigaom believes that privacy online is becoming more complicated. I have to agree – with laws being passed like California’s law prohibiting employers from asking for social media passwords, what could be considered private online is becoming more complex.

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I will be conducting a webinar on January 15, 2013 on legal issues of social media in the workplace. The presentation will cover everything a California employer needs to know about social media in the modern workplace of 2013:

  • Discussion on the new law (Labor Code section 960) that prohibits employers from asking applicants and employees for their social media passwords taking effect on January 1, 2013.
  • How to avoid invading employees’ privacy rights when using social media for background checks.
  • Developments on how the NLRB held that some social media policies restrict an employee’s right to “engage in concerted activities.”
  • How to use the Internet to properly conduct a background check for applicant.
  • Discussion on whether your company needs a social media policy.
  • Evaluating whether an employer may be held liable for failing to use social media and the Internet to conduct a background check.
  • Alternatives to social media policies.

The cost is $150 (this is waived for clients). You may register below, or send me an email if you are a client.

This webinar has been preapproved by HRCI for 1 recertification credit hour. 

"The use of this seal is not an endorsement by the HR Certification Institute of the quality of the program. It means that this program has met the HR Certification Institute’s criteria to be pre-approved for recertification credit."

I wanted to let readers know that a friend of the firm, Krost, Baumgarten, Kniss & Guerrero will be hosting a restaurant seminar at the Roosevelt Hotel in Hollywood for restaurant operators.  The seminar covers invaluable and informative topics such as restaurant financial analysis, profit and loss systems, tax issues, menu analysis, payroll controls, and upcoming trends in the industry.  It is a great way for operators to learn how to become more profitable in the restaurant industry.  More information about the event can be found here (PDF). 

Time: Monday January 28, 2013 beginning at 9 a.m. to 5 p.m.

Readers of the Employment Law Report are eligible to receive a discount of $25 per person.  To register, contact Daryle at Krost, Baumgarten, Kniss & Guerrero. 

California employers face a law (AB 2674) taking effect on January 1, 2013 (click here for a list of other new employment laws effective in 2013), which changes their duties to maintain and provide personnel records to current and former employees.  The law amends Labor Code section 1198.5 pertaining to "personnel records".  When discussing this new law, I am getting the question of what documents should be included in an employee’s personnel file, and what exactly are "personnel records" under this Labor Code provision. To many employers’ surprise, although the term “personnel file” or “personnel records” is used throughout the Labor Code, the term is never explicitly defined.

The Labor Code provides some guidance for employers by setting for what employees are not entitled to inspect. Labor Code section 1198.5, which provides the employee with certain rights regarding inspection of “personnel records”, does exclude certain records from this right to inspection. Under this section, employees do not have the right to inspect (1) records relating to the investigation of a possible criminal offense; (2) letters of reference; (3) ratings, reports, or records that were: obtained prior to the employee’s employment, prepared by identifiable examination committee members, or obtained in connection with a promotional examination.

Without the terms “personnel records” or “personnel file” ever being defined, there is considerable ambiguity about what documents should be keep in an employee’s personnel file.

While not legally binding on employers, there is some guidance from the Division of Labor Standards Enforcement’s (“DLSE”) website (caution: at the time of this writing, the DLSE has not updated its website to reflect the new changes in the law):

Categories of records that are generally considered to be "personnel records" are those that are used or have been used to determine an employee’s qualifications for promotion, additional compensation, or disciplinary action, including termination. The following are some examples of "personnel records" (this list is not all inclusive):

  1. Application for employment
  2. Payroll authorization form
  3. Notices of commendation, warning, discipline, and/or termination
  4. Notices of layoff, leave of absence, and vacation
  5. Notices of wage attachment or garnishment
  6. Education and training notices and records
  7. Performance appraisals/reviews
  8. Attendance records

It is important to keep in mind why an employer would ever have to produce a personnel file – to support its employment based decisions. Therefore, employers should typically maintain personnel files with the following documents:

  • Signed arbitration agreements
  • Sexual harassment compliance records for supervisors
  • Sign acknowledgements of policy by employee (for example, confidentiality/proprietary information agreements, meal and rest break acknowledgments, handbook acknowledgments)
  • Wage Theft Protection Act notice
  • If commissioned employee, written commission agreement signed by both the employer and employee beginning January 1, 2013.
  • Warnings and disciplinary action documents.
  • Performance reviews
  • Documents of any grievance concerning the employee
  • Documents pertaining to when the employee was hired
  • Records pertaining to last day of work and documenting reason for departure from employment

Employers typically should not keep the following information in an employee’s personal file:

  • Form I-9s
  • EEOC and DFEH charges of discrimination
  • Workers’ compensation information
  • Private medical information
  • Any information obtained prior to offering the employee a position

Given the ambiguity about the definition of personnel file, employers should take time to consider their operations and industry to develop a system ensures the same documents for each employee are maintained in their personnel files, and what other files need to be established for employees. Also, employers need to design and implement a personnel file retention policy that will maintain the critical documents that would be relevant should the need to defend an employment claim arise. It is important that this process be established in order to survive any potential change in management and/or the human resource functions in the company.

There are some significant changes regarding California employers’ duties in 2013. This list is an overview of the major changes that employers should consider and be aware of at the beginning of 2013.  

Employers Cannot Ask Applicants Or Employees For Social Media Passwords – AB 1844
This law created Labor Code section 980, which is effective 1/1/2013. The law prohibits employers from asking employees or applicants for passwords to their social media accounts, accessing their accounts in the presence of the employer, or divulging any personal social media. There are two exceptions to this: (1) if the request is made to a current employee as part of an investigation of allegations of employee misconduct or violation of law, and the request is based upon a reasonable belief that the information is relevant, and (2) to devices issued by the employer.

Commission Agreements Must Be In Writing – AB 1396 and 2675
Beginning 1/1/2013, when an employee is paid commissions, the employer must provide a written contract setting forth the method the commissions will be computed and paid. The written agreement must be signed by both the employer and employee. Commission wages are “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” Commissions do not include (1) short-term productivity bonuses, (2) temporary, variable incentive payment that increase, but do not decrease, payment under the written contract, and (3) bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.

Breastfeeding is added to definition of “sex” under the Fair Employment and Housing Act – AB 2386
The new law clarifies that the definition of sex under the FEHA includes breastfeeding and any medical conditions relating to breastfeeding. This amendment makes breastfeeding and the related medical conditions, a protected activity and therefore employers cannot discriminate or retaliate against employees on this basis under California law. While the amendment is effective 1/1/13, the law states that the amendment simply is a statement of existing law, and therefore employers should treat this amendment as existing law immediately.

New Religious and Dress Standards – AB 1964
The new law clarifies that religious dress and grooming practices are protected under FEHA. The law explains that “religious dress practice” is “shall be construed broadly to include the wearing or carrying of religious clothing, head or face coverings, jewelry, artifacts, and any other item that is part of the observance by an individual of his or her religious creed.” The law continues in defining religious grooming as: “Religious grooming practice shall be construed broadly to include all forms of head, facial, and body hair that are part of the observance by an individual of his or her religious creed.” The law also states that it is not a reasonable accommodation it the action requires segregation of the individual from the public or other employees.

Changes in Calculating Employees’ Regular Rate of Pay – AB 2103
The new law revises Labor Code 515(d) to clarify that “payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee’s regular, nonovertime hours, notwithstanding any private agreement to the contrary.” Therefore, overtime must be paid above any nonexempt employee’s agreed upon salary. This law was in response to the court opinion in Arechiga v. Dolores Press. The legislature history described the opinion in Arechiga as follows:

In the Arechiga case, a janitor and his employer agreed that payment of a fixed salary of $880 a week would provide compensation for 66 hours of work each week. The Court of Appeal held that this method of payment comported with California overtime law, and that no additional overtime compensation was owed. The Court rejected the employee’s contention that existing Labor Code Section 515(d) prohibits any sort of agreement that would allow a fixed salary to serve as a non-exempt employee’s compensation for anything more than a 40 hour workweek.

New Penalties For Violations On Itemized Wages Statements – SB 1255
The new law provides that employees are deemed to have suffered injury for purposes of assessing penalties pursuant to Labor Code 226(a), if the employer fails to provide accurate and complete information. Furthermore, a violation occurs if the employee cannot easily determine from the wage statement alone the amount of the gross or net wages earned, the deductions the employer made from the gross wages to determine the net wages paid, the name and address of the employer or legal entity employing the employee, and the name and only the last 4 digits of the employee.

New Requirements On Retention And Inspection of Itemized Wage Statements and Personnel Files– AB 2674
Under Labor Code 226, employers must keep copies of employees’ itemized pay statements for at least three years, at the site of employment or at a central location within the state of California. The new law, effective 1/1/13, clarifies that the term “copy” means either a duplicate of the statements provided to employees, or a computer generated record that shows all information required under Labor Code 226. In addition, the law sets a new deadline for employers to either provide a copy or permit the employee to inspect the personnel file within 30 days after the employer receives the request. The employer and employee may only agree to extend this time period out to 35 days. The employer may also redact the names of any non-supervisory employees in the file. It is important to note, this requirement does not change the 21 day time period to produce or make available for inspection an employee’s itemized wage statements under Labor Code 226(c).

Itemized Wage Statements And Wage Theft Notices For Temporary Service Employers – AB 1744
This new law requires temporary service employers to provide wage statements that list the rate of pay and total hours worked for each temporary assignment. A “temporary service employer” is defined in Labor Code 201.3(a)(1) as a company that contracts with customers to supply workers to perform services for the customer. This is effective 7/1/2013. Furthermore, the law requires temporary services employer to provide Wage Theft Notices required under 2810.5 and include additional information regarding the name, the physical address of the main office, the mailing address if different from the physical address of the main office, and the telephone number of the legal entity for whom the employee will perform work, and any other information the Labor Commissioner deems material and necessary. This requirement is effective on 1/1/2013.

The judgment against the defendant for $1,347,000 in Faigin v. Signature Group Holdings, Inc. should be a good reminder for companies to have well drafted executive agreements. Faigin worked as General Counsel and Chief Legal Officer for Fremont General, a parent corporation. Defendant had various subsidiary companies that Faigin also worked for during his employment. Faigin entered into an employment contract with Fremont General. The agreement set forth that Faigin would be entitled to certain benefits if he was involved in an “involuntary termination.” If he was involuntarily terminated, as defined in the agreement, the company agreed to pay Faigin a lump sum equal to three years of his base salary.

After entering into the agreement with Fremont General, Faigin was appointed to interim President and Chief Executive Officer of FRC, a subsidiary of Fremont General. A short time after assuming these roles, Faigain was replaced at FRC. Faigin argued that his dismissal from his roles at FRC resulted in an involuntary termination under the term of his employment contract, entitling him to three years of his salary which exceeded $400,000 per year.

At trial, FRC argued that the employment agreement entered into with Fremont General did not apply to the situation arising out of Faigin’s employment with FRC because the agreement was only entered into with Fremont General, not FRC. The trial court agreed, and excluded any evidence of the employment agreement between Faigin and Fremont General. However, Faigin presented evidence that FRC created an implied-in-fact employment contract that he would only be terminated for good cause. As the court noted, an implied-in-fact employment contract can be established by showing the following:

The existence and content of such an agreement are determined from the totality of the circumstances, including the employer’s personnel policies and practices, the employee’s length of service, actions and communications by the employer reflecting assurances of continued employment, and practices in the relevant industry. The question whether such an implied-in-fact agreement exists is a factual question for the trier of fact unless the undisputed facts can support only one reasonable conclusion.

An implied-in-fact agreement to terminate only for good cause cannot arise if there is an express writing to the contrary, such as a written acknowledgement that employment is at will or an at-will provision in a written employment agreement. “There cannot be a valid express contract and an implied contract, each embracing the same subject, but requiring different results. [Citations.]”

(Citations omitted). The court stated that because the employment agreement with Fremont General fixed the term of employment at three years and did not provide that Faigin’s employment was at-will, this written agreement is not inconsistent with the jury’s finding of an implied-in-fact agreement existed.

The case shows how careful employers need to be in drafting executive compensation agreements, and especially if the executive is working for different subsidiaries of a parent company.

It is time to start planning for how the Patient Protection and Affordable Care Act, otherwise known as ObamaCare, will effect your business.  Peterson Milaney Associates, will be hosting a webinar on the new law and what employers need to start planning for now.  The webinar is taking place on Monday, December 3, at 10:00 a.m. 

The webinar is free for readers of the blog.  Registration is here.