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H.R. Alert

Employment Law Update 2008

Today’s Topics:



Meals and Rest Periods

Brinker v. Sup Ct.

On July 22, 2008, the Court of Appeal issued its decision in Brinker Restaurant Corp. v. Superior Court.

Brinker Restaurants was hit with a class action that contained claims for alleged meal and rest period violations.

While denying class certification, Brinker held that employers are not obligated to ensure that employees actually take meal and rest periods.

The obligation to provide employees with meal periods means that employers must make meal periods available to employees.

The Court noted that requiring employers to ensure that meal periods are taken would allow employees to manipulate the process by skipping unpaid meal periods and demanding one hour premium pay.

Employers are not liable for meal and rest period violations unless employees are forced by the employer to forgo these periods.

Timing of the Meal Period

Brinker v. Sup Ct.

LC 512 establishes an obligation only to provide an employee with a meal period if he or she works more than five hours per day, but does not specify when that meal period must be taken.

Brinker rejected the "rolling five" theory regarding the timing of meal periods.

Brinker makes clear that employers are not required to provide employees with meal periods within their first five hours of work.

It is sufficient that each employee is provided with a meal period sometime during his or her shift.

Employers must provide a second meal period to employees only when they work in excess of 10 hours on a shift.

Rest Periods

Brinker v. Sup Ct.

Employers cannot be liable for missed rest periods unless the employer did something to impede, discourage or dissuade employees from taking their rest periods.

Employers are not obligated to ensure that employees actually take rest periods.

Rest periods need not be provided in the middle of each work period if to do so would be impractical.

If employers make rest periods available to employees, and strive, where practicable, to schedule them in the middle of the first four hour work period, employers are in compliance with California law.

Effect on Wage and Hour Class Actions

Brinker v. Sup Ct.

Substantially more difficult for employees to obtain class certification on meal and rest period claims.

Absent a class-wide policy prohibiting meal and rest breaks, or evidence that an employer impeded or discouraged employees from taking breaks through a uniform practice, class certification will likely not be appropriate.

Time records alone are not enough to justify class certification. Additional evidence showing why the meal or rest periods were missed is required.

Brinker also discussed the same problems with "off the clock" class action claims.

The Future?

Brinker v. Sup Ct.

Brinker represents a welcome relief to California employers. The Brinker Court’s holding takes into account how businesses are actually run in the real world.

Employers should not rejoice just yet!

It is almost certain that the California Supreme Court will weigh in on this critical decision.

Petition for review was filed on August 29, 2008, and the decision to grant review will likely come by October 15, 2008.

Employers are recommended to take a conservative approach and wait until the final word on this issue from the California Supreme Court before making significant changes to their meal and rest period policies or practices.

CFRA

Avila v. Continental Airlines

On August 11, 2008, the California Court of Appeal issued its opinion in the case of Avila v. Continental Airlines.

Continental had a "no fault absence policy," which provided that an employee would be terminated if he or she had seven or more "recordable absences" in a rolling twelve month period.

Absences due to protected leaves, such as those qualifying under the CFRA, did not count as "recordable absences."

Avila was hospitalized for acute pancreatitis. Upon his return, Avila provided two medical forms from the hospital stating only that he had been hospitalized.

He claimed to have told about "50 persons" that he had been sick. He did not tell his supervisors.

Avila exceeded the allowable number of "recordable absences," and so Continental terminated his employment.

Avila sued, claiming that Continental both discriminated against him based on a disability and retaliated against him for taking leave protected pursuant to the CFRA.

The Court of Appeal held that Avila failed to provide evidence establishing that the people who make the decision to terminate him knew that he had a disability.

The medical forms Avila provided to Continental simply stated that he was unable to work due to an unspecified condition and was hospitalized.

Although Avila testified he told a number of his "close friends" he was sick, he did not testify that he told any of his managers he was sick nor did he provide evidence the decision-makers knew of his illness.

Because Continental’s decision-makers had no knowledge that Plaintiff had a qualifying disability, they could not have acted with "discriminatory intent."

The trial court properly dismissed Plaintiff’s disability discrimination claim.

The Court of Appeal next examined Avila’s allegation that Continental unlawfully retaliated against him for taking CFRA protected leave.

If the employer does not have sufficient information to determine whether an employee’s leave qualifies as CFRA protected leave, the employer bears the burden of making the appropriate inquiries and determining whether the leave is protected.

The hospital forms may have constituted a valid request for CFRA qualifying leave.

Employers should carefully evaluate whether employees who "call in sick" and submit medical forms have in fact made a valid request for leave under the CFRA.

McCarther v. Pacific Telesis: Kincare

McCarther v. Pacific Telesis Corp., 163 Cal. App. 4th 176 (2008)

In McCarther several employees were absent from work to attend to family members who were ill. The absences qualified as "Kincare" time under Cal Labor Code section 233.

The company counted the absences as "occurrences" under its attendance policies.

Employees claimed that California Kincare prohibited the employer from disciplining them for the absences.

The Court held that the Kincare statutes (Labor Code sections 233 and 234) do not prohibit an employer from administering Kincare leave in the same way as regular sick leave.

If an employee’s absence would be counted as an "occurrence" or otherwise held against an employee under the employer’s normal sick leave rules, it can also be held against the employee when used for Kincare purposes.

The California Supreme Court granted review of the case on August 20, 2008.

McCarther is no longer good law, but employers should carefully monitor the California Supreme Court’s decision in this case.

Non-Competition Agreements

Edwards v. Arthur Andersen

In Edwards v. Arthur Andersen, the California Supreme Court reaffirmed California’s strong public policy against covenants not to compete.

Edwards was a CPA working for Arthur Andersen when the company announced that it would cease its accounting practices in the United States and began selling off its practices.

As part of his employment contract, Edwards signed a non-compete agreement prohibiting him, for a period of eighteen months, from working with any client he worked with at Arthur Andersen eighteen months before his departure.

It also prohibited him, for a period on one year, from soliciting any client of Arthur Andersen’s Los Angeles office.

The Supreme Court stated that any time an agreement restricts an employee’s "ability to practice his profession" in any way, is void.

However, the Court expressly did not address the "trade secrets exception" long recognized by California Courts. Nor did it address covenants not to solicit employees.

The Court also indicated that employers need not specifically except "non-waivable rights" from their general releases.

As a general matter, employers should not have their employees sign post-employment non-compete agreements unless advised to do so by competent legal counsel.

Employee Privacy

Quon v. Arch Wireless

The Ninth Circuit’s June 18, 2008 decision in Quon v. Arch Wireless serves as a reminder that employers can inadvertently waive the benefits of "Computer Usage, Internet and E-mail Policies."

In Quon, the City of Ontairo had contracted with Arch Wireless for text-messaging services.

The City had a typical "Computer Usage, Internet and E-mail Policy" that applied to all employees.

Under the City’s contract with Arch Wireless, each pager was allotted 25,000 characters, after which the City was required to pay overage charges.

The lieutenant in charge of the contract implemented an informal policy by telling employees that if they paid the overage on their assigned pager, then he would not have to audit the messages to determine whether the messages were work-related or personal.

The plaintiffs had gone over the monthly character limit a few times and had paid the City for the overages.

The lieutenant decided that he was tired of being a bill collector for the City when employees exceeded the allotted number of characters on their text pagers.

The Chief of Police ordered the lieutenant to request transcripts of the pagers for auditing purposes.

That audit found that many of the plaintiffs’ messages were personal in nature and were often sexually explicit.

The Court held that in light of the lieutenant’s informal policy that he would not audit a pager if the user paid the overage charges, the plaintiffs had a reasonable expectation of privacy in their text messages as a matter of law, notwithstanding the City’s written policies to the contrary.

This case cautions employers that it is possible to lose the benefits of their written computer and email policies.

Employers wishing to maintain their inspection rights should ensure that managers and supervisors do not inadvertently undermine the policies by adopting inconsistent practices or making inconsistent promises to employees.

Same-Sex Marriage

On May 15, 2008, the California Supreme Court held that California laws limiting marriage to opposite-sex couples violated the rights of same-sex couples under the California Constitution.

Discrimination

Before this decision was issued, employment discrimination on the basis of marital status and registered domestic partner status were both prohibited to the same extent in California.

This decision does not change or expand the protections available to same-sex couples under these laws.

Employment discrimination on the basis of sexual orientation has long been prohibited under California’s Fair Employment and Housing Act.

What is new is that same-sex couples can now claim protection via the same mechanism as opposite-sex couples - marriage!

Now is a good time to ensure that training materials, employee policies and employee handbooks are updated with same-sex marriage in mind.

Have you conducted your required sexual harassment prevention training?

Note: Our firm provides this training in English, as well as Spanish, and we have a separate 1-hour presentation just for employees, as well as the required 2-hour presentation under AB 1825 for supervisors if you have over 50 employees.

Benefits

Employers should keep in mind that they should not impose greater burdens on same-sex couples with respect to providing claimed marital status, than they do for opposite-sex couples.

Same-sex couples married in other jurisdictions

Before this decision, same-sex couples who were married in other jurisdictions, that recognize same-sex marriage, were not considered "married" and were not entitled to the protections or benefits available to married persons in California.

As a result of this decision, same-sex marriages validly entered in other jurisdictions are now automatically recognized in California.

Relocating persons married in another jurisdiction now qualify for the benefits and protections extended to domestic partners and spouses without having to register as domestic partners or get married again in the State of California.

Proposition 8

An initiative measure on the 2008 California General Election ballot which would amend the California Constitution to read "only marriage between a man and a woman is valid or recognized in California."

If the amendment passes, it would override the California Supreme Court’s ruling but would not likely be retroactive.

The status of pre-November 2008 same-sex marriages will be unclear if it passes.

San Francisco Commuter Benefit Ordinance

Effective Date: On or about December 8, 2008

Covered Employers: Employers with 20 or more employees (anywhere, not just in San Francisco)

Eligible Employees: Non-exempt employees who perform 10 or more hours of work per week in San Francisco.

Under the ordinance the employer must either:

Exemption for Computer Professionals

Assembly Bill 10 ("AB 10") was signed into law on September 23, 2008.

AB 10 is urgency legislation and went into effect immediately upon signing.

AB 10 amends Labor Code § 515.5 which sets forth the requirements for the Computer Professional Exemption.

Section 515.5 now gives employers the option of paying their computer professionals an annual minimum salary, or paying a minimum hourly wage to fill-time computer professionals.

Employers who opt to may the minimum annual salary no longer must track the employee’s hours.

2008 annual salary minimum is $75,000.00 (not less than $6,200 per month).

2008 hourly minimum is $36.00.

2009 minimums will be set on October, 1 2008.

Medical Marijuana

On January 24, 2008, California Supreme Court decided Ross v. RagingWire Telecomm.

The Court held that no duty existed under the Fair Employment and Housing Act to "reasonably accommodate" medical marijuana use as treatment for a "disability."

The Court also held the plaintiff could not bring a claim for wrongful termination in violation of public policy under California’s Compassionate Use Act, aka Prop. 215.

AB 2279 would overturn this ruling if it becomes law.

Temporary Employees

In California, wages must be paid immediately upon an employee’s discharge and within 72 hours if an employee quits, subject to certain exceptions.

SB 940, which was signed into law on July 22, 2008 clarifies the difference between the end of a temporary assignment and a discharge.

Temporary employees are now held to be paid in a timely manner following the end of an assignment if they are paid weekly by a temporary staffing firm.

Relief from the weekly pay provisions are available to some industries that have workers on longer-term assignments, such as workers in the technical and healthcare sectors.

IRS Mileage Rates

On July 1, 2008, the optional standard mileage rate increased from 50.5 cents per mile to 58.5 cents per mile for determining the reimbursed amount of employee expenses in operating an automobile for business purposes.

The revised standard mileage rates apply to mileage allowances that are paid both (1) to an employee on or after July 1, 2008, or (2) with respect to transportation expenses paid or incurred by the employee on or after July 1, 2008.

The 50.5 mileage rate continues to apply (1) to mileage rates paid to employees prior to July 1, 2008, and (2) with respect to transportation expenses paid or incurred by the employ before July 1, 2008.

Retaliation

On May 27, 2008, the U.S. Supreme Court issued two decisions clarifying additional ways for employees to pursue retaliation claims against employers.

CBOCS West v. Humphries

A former assistant manager of a Cracker Barrel restaurant alleged that the restaurant dismissed him (1) because he was black, and (2) because he complained to managers that a fellow assistant manager had dismissed another black employee for race-based reasons.

Humphries filed suit charging that these actions violated both Title VII of the Civil Rights Act of 1964 and 42 U.S.C. § 1981, which gives "all persons.... The same right...to make and enforce contracts...as enjoyed by white citizens."

In CBOCS, the U.S. Supreme Court held that § 1981 covers retaliation claims where an employee suffers retaliation because he or she tried to help a co-worker suffering direct racial discrimination.

The Court also affirmed that the overlap between Title VII and § 1981 is not an impermissible circumvention of the administrative exhaustion requirement to Title VII.

Unlike claims brought under Title VII, § 1981 does not have an administrative exhaustion requirement.

§ 1981 claims have a four-year statute of limitations.

Title VII claims have a 180-day or 300-day statute of limitations.

Gomez-Perez v. Potter

A 45-year old postal worker filed suit claiming that her employer had violated the federal-sector provision of the Age Discrimination in Employment Act of 1967 (ADEA) which requires that "all personnel actions affecting employees... at least 40 years of age... be made free from any discrimination based on age."

Gomez-Perez alleged her employer subjected her to various forms of retaliation after she filed an administrative ADEA complaint.

The U.S. Supreme Court held that the ADEA prohibits retaliation against a federal employee who complains of age discrimination.

While employers should always appropriately address initial complaints of discrimination or harassment, employers should also seriously monitor how the employee is treated after making her / his complaint, as this post-complaint treatment could lead to the basis for a retaliation lawsuit.

Individual Liability for Retaliation

A decade ago, in Reno v. Baird, the California Supreme Court held that individual employees could not be held personally liable for discrimination under the California Fair Employment and Housing Act.

Until March, however, the law regarding whether individual employees could be held liable for retaliation was unsettled.

In Jones v. The Lodge at Torrey Pines Partnership, the Supreme Court of California clarified that, as in discrimination cases, only employers and not individual employees can be held liable for retaliation.

This decision is significant to all supervisors and employees who make employment decisions as they no longer face the threat of a potential liability in this area.

Personal Liability for Un-Paid Wages

On April 16, 2008, a California Appellate Court decided Bradstreet v. Wong, holding that the shareholders, officers or managing agents of the employers could not be held personally liable for violations of the Labor Code arising out of the employers’ failure to pay wages.

The Court also held that individual defendants were not required to pay unpaid wages as restitution under California’s Unfair Competition Law.

Holiday Premium Pay

In June, a California Appellate Court decided Advanced-Tech Security Services, holding that the Labor Code does not require an employer increase overtime compensation for overtime hours worked on a work day when an employee already receives a premium pay rate.

The Court found nothing which prohibited an employer from crediting premium pay for a holiday against weekly overtime.

In other words, the Court concluded that premium pay is not considered a "regular rate" of pay an employee receives for a normal workday.

The Court did, however, leave open the possibility that the plaintiff could pursue a breach of contract claim against Advanced-Tech based on the plaintiff’s allegation that Advanced-Tech’s Employee Handbook had set the regular rate at a higher amount than she was paid.

Employers should therefore be careful in how they define "regular wage" in their Employee Handbook to avoid any claim that the "regular rate" on a certain work day equals premium pay.

Veterans with Disabilities

Between October 1, 2001 and February 2008, more than 30,000 veterans returned home with service-connected disabilities.

USERRA and the ADA provide numerous and important protections for these individuals.

USERRA requires employers to go further to assist returning veterans than the ADA.

USERRA requires employers to make reasonable efforts to assist veterans returning to employment my helping them become qualified for a job, including providing training or retraining.

USERRA applies to all employers regardless of size.

Be advised of your obligations under these laws, and seek the advice of counsel when faced with employment decisions regarding covered veterans.

Note: Be sure to check the EEOC’s website on a regular basis. For example, the EEOC has issued recent guidance on avoiding religious discrimination.

ADA Amendments Act

On June 25, 2008, the House of Representatives passed the ADA Amendments Act (ADAAA) by an overwhelming vote.

On September 25, 2008, President Bush signed it into law.

The ADAAA becomes effective January 1, 2009.

Among other things, the Act would reverse the rulings of four major U.S. Supreme Court cases on the definition of what is a covered "disability."

The ADAAA also, for the first time, provides a list of per se "major life activities," and greatly expands the situations when an employee is "regarded as" disabled, although it limits the "reasonable accommodations" that must be offered in some instances.

Arbitration Agreements

Although the advantages and disadvantages of arbitration will continue to be debated, the California Supreme Court has now provided parties with an option that makes arbitration more attractive.

One of the chief disadvantages of arbitration was that there was limited appellate review.

On August 25, 2008, in Cable Connection v. DirecTV, the California Supreme Court held that parties to an arbitration agreement can agree to have an arbitrator’s decision reviewed for errors of law if the parties provided for such review in advance in their agreement.

This decision may make arbitration a more attractive option. To take advantage of this ruling, the parties must use a clearly and properly drafted arbitration agreement.

On April 1, 2008, in Metters v. Ralphs Grocery, the California Appellate Court provided guidance on what constitutes an enforceable arbitration agreement.

Samuel Metters was an employee alleging racial discrimination and harassment against his employer, Ralph’s Grocery.

He claimed that a "resolution dispute form" with a binding arbitration clause was not enforceable contract, despite his having signed it. The Court agreed.

The Court determined that Metters had not been aware that he was agreeing to mandatory arbitration, and thus could not be bound by the dispute form.

Some of the factors the Court considered were that the "resolution dispute form" did not resemble a contract, and that the form’s title did not alert Metters to the nature of the document.

Because the arbitration policy required an employee to submit a "resolution dispute form" for the Company to respond, "an employee had no real choice to avoid arbitration if he wanted some action taken on his complaint,"

Thus, the Court did not find it persuasive that Metters had signed the arbitration agreement, despite its language clearly stating that he was not required to sign it in order for his complaint to be investigated.

The Appellate Court made it clear that the totality of the circumstances determined whether an arbitration agreement was binding.

Employers will want to review this case to evaluate whether their own arbitration agreements are enforceable.

Pearson v. Superior Court: in some cases, an employer can reasonably require employees to submit claims to arbitration in a timely manner or else they are deemed waived.

Caution: Before revising your arbitration agreements, seek the help of competent legal counsel.

Independent Contractors

In Antelope Valley Press v. Poizner, the Court of Appeal found that event though newspaper carriers has signed a contract indicating they were independent contractors, they truly functioned as employees and were entitled to protection under California’s workers’ compensation laws.

The Court reiterated the numerous factors a court will look to when evaluating whether an independent contractor relationship exists between parties, including:

The right to control the manner and means of accomplishing the desired result of the service.

Who provides the tools and place of work.

Whether the work is part of the principal’s regular business.

The case is yet another reminder to employers to evaluate any ongoing independent contractor relationships.

Uniforms

O’Connor v. Starbucks Corp.

The U.S. District Court for the Northern District of California recently considered whether a Starbuck’s employee should have been reimbursed for the costs of laundering his apron.

As a general rule, if an employer requires employees to wear uniforms, the employer must provide them.

In some cases, employers must also compensate employees for the time spent washing uniforms if they require more than minimal care.

Here, the Court determined that there is no obligation to reimburse employees for the time they choose to spend washing uniforms or having them laundered when they require only "minimal care."

Although the employee claimed he needed to have the apron professionally laundered, there was insufficient evidence presented that appropriate upkeep required anything more than minimal care.

Now is a good time to ensure that your handbooks and policies, as well as the tags on your uniforms indicate that no professional laundering is required and they can be machine washed.

Tip Pooling

In March, Starbucks was found liable for more than $100 million in back tips and interest that they had paid to shift supervisors.

Remember rules regarding lawful tip-pooling, including requirements of direct table service, fair and reasonable allocation, and prohibition of manager / supervisor participation.

Wage Statements

Just last month, Governor Schwarzenegger signed into law AB 2075 to make it a misdemeanor for an employer to require an employee, as a condition of payment of wages, to sign a statement of hours worked that the employer knows to be false.

Before this amendment, Labor Code Section 206.5 only prohibited employers from requiring employees to execute a release of wage claims, unless payment of the wages occurred.

Now, "executing a release" has been extended to encompass requiring an employee to execute a statement of hours worked during a pay period which the employer knows to be false.

The new law goes into effect January 1, 2009.

Be careful if you have employees sign a standardized time sheet with a certain number of hours every pay period which does not accurately reflect employees’ total hours worked.

Genetic Information Nondiscrimination Act of 2008

On May 21, 2008, President Bush signed into law a bill forbidding employers from discriminating against an individual based on their genetic information.

Advocates of the Genetic Information Nondiscrimination Act, aka "GINA" contend that it is "the first major civil rights act of the 21st century."

GINA expands Title VII which already bans discrimination by race and gender to prohibit employers from discriminating against employees on the basis of "genetic information" in hiring, firing, and other activities.

Note: already on California’s list of protected categories.

"Genetic Information" for the law’s purposes, not only include tests that determine variations in a person’s DNA, but also information regarding family history of a particular disease.

GINA also prohibits employers from collecting genetic information from their employees, except for rare circumstances such as testing for adverse effects to hazardous workplace exposures, and requires strict confidentiality of genetic information obtained by employers.

It also provides that no person shall retaliate against an individual for opposing an act or practice made unlawful by GINA.

Currently, GINA does not prohibit discrimination once someone already has a disease.

Bill also amends FLSA to increase penalties for child labor violations by 10%.

The FLSA amendment is effective immediately. The increased penalties apply to violations and deaths or serious injuries of minors that occur after May 21, 2008.

Most of the other provisions in the act, pertaining to discrimination in employment on the basis of genetic information take effect November 21, 2009.

No Match Letters

Through increased fines and proposed regulation defending its "no-match letter" program, the federal government continues to enforce the prohibition against illegal employment.

Earlier this year, Department of Homeland Security (DHS) and the Department of Justice (DOJ) increased civil fines for employers that violate immigration laws.

The increased penalties are the result of an "inflation adjustment," the first since 1999.

These regulations target employers that knowingly employ unauthorized aliens or violate specified acts pertaining to the employment eligibility verification process (Form I-9).

Under the regulations, the minimum civil penalty for knowingly employing an unauthorized alien increased from $275 to $375.

The maximum civil penalty for first-time violations by employers rose from $2,200 to $3,200.

In addition, the maximum amount that employers can be penalized for multiple violations increased from $11,000 to $16,000.

These penalties are determined on a per unauthorized worker basis, meaning that a fine will be imposed for each unauthorized worker that an employer knowingly employs or continues to employ.

Moreover, employers can also face criminal penalties, which may result in additional fines and / or imprisonment.

In addition, the DHS is continuing to defend its proposed "no-match letter safe harbor" program.

This program further defines "constructive knowledge" and provides guidelines for how employers should respond to "no-match" letters in order to avoid being found to have "constructive knowledge."

"No-match" letters are letters which are sent to employers when information submitted on behalf of an employee does not match the information of the Social Security Administration (SSA).

In August 2007, the ACLU, the AFL-CIO, and other labor and "immigrant rights" groups challenged the "no-match letter safe harbor" program claiming that it violated workers’ rights, imposed burdensome obligations on employers, and caused discrimination against workers perceived as immigrants.

In October 2007, a U.S. District Court for the Northern District of California issued a preliminary injunction preventing the "no-match letter" program from going into effect.

Under the originally proposed "no-match letter" program, employers that received a "no-match" letter had 30 days to verify that the mismatch was not the result of a record keeping error on the employer’s part before approaching the employee.

If the discrepancy was not resolved, the employee was asked to resolve the issue with the SSA. If the mismatch could not be resolved within 90 days, a new Form I-9 was to be completed by the employee within 3 days.

The new Form I-9 was to be completed using identification documents other than those initially created the mismatch. Employers that were unable to confirm authorized employment using these procedures risked liability for knowingly continuing to employ unauthorized persons.

In an attempt to dissolve the preliminary injunction, the federal government issued a supplemental proposed rule which recently underwent a 30-day public-comment period.

The supplemental proposed rule gives further justification and clarification to the originally proposed "no-match letter" program.

Because the public-comment period on the supplement proposed rule is now closed, the DHS must now review the comments, publish a final rule, and then go back to court to attempt to dissolve the injunction.

Until then, the rule remains at a standstill.

As a result, employers and employees must continue to wait and see what comes of the federal government’s "no-match letter safe harbor" program.

Sincerely yours,


Larry Levy

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