Federal Law Preempts California’s Meal and Rest Break Laws for Commercial Drivers

Judge George H. Wu of the United States District Court for the Central District of California recently dismissed meal and rest break claims brought under the California Labor Code in a class action against motor carrier U.S. Xpress.

In Anthony Ayala v. U.S. Xpress Enterprises, Inc. et al, Judge Wu granted U.S. Xpress’ motion for partial summary judgment, stating that he did not possess the authority to review the merits of the case since the Federal Motor Carrier Safety Administration (“FMCSA”) determined that California’s meal and rest break rules are preempted by federal law.

By way of background, on December 28, 2018, the FMCSA published a Notice Granting Petition for Determination of Preemption in the Federal Register stating:

[T]he FMCSA concludes…(3) the MRB [California meal and rest break] [r]ules have no safety benefit; (4) the MRB Rules are incompatible with the FMCSA’s HOS [Hours of Service] Rules; and (5) enforcement of the MRB Rules would cause an unreasonable burden on interstate commerce. Accordingly, the FMCSA grants the petition for preemption…California may no longer enforce the MRB Rules with respect to drivers of property-carrying CMVs [commercial motor vehicles] subject to FMCSA’s HOS rules (emphasis supplied).

The Ayala case represents the first challenge to the FMCSA Preemption Determination before a California district court.

Currently, several petitions challenging the FMCSA’s preemption determination are working their way through the Ninth Circuit. These petitions are expected to briefed within the next few months. However, as of now, federal district courts are bound by the FMCSA order unless it is invalidated by the Ninth Circuit.

If you have any questions about this case or about compliance with California wage and hour laws, please contact Sehreen Ladak, Hazel U. Poei, or the Jackson Lewis attorney with whom you regularly work.

Employers, Politics, and Free Speech

With political campaigns well underway, the protection of “free speech” and concerns that regular political discourse could create potential liability are mounting.  Notably, within the last year, California’s Fair Employment and Housing Commission expanded upon a number of definitions and specific employment practices prohibited under the Fair Employment and Housing Act (“FEHA”). Not listed among them is any specifically identified protection applicable to political speech or beliefs. (See Government Code § 12940(a)[“It is an unlawful employment practice…[f]or an employer, because of the race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation, or military and veteran status of any person…”] and definitions per Government Code § 12926).

California’s laws addressing political discourse to this end are vague. California Labor Code § 1101 prohibits employers from implementing “any rule, regulation, or policy” (1) “forbidding or preventing employees from engaging or participating in politics or from becoming candidates for public office” or (2) “controlling or directing, or tending to control or direct the political activities or affiliations of employees.” California Labor Code § 1102 provides “[n]o employer shall coerce or influence or attempt to coerce or influence his employees through or by means of threat of discharge or loss of employment to adopt or follow or refrain from adopting or following any particular course or line of political action or political activity.” To this end, employers cannot enact policies limiting employees’ political activities or affiliations or in essence “force” employees to follow the employer’s political leanings.

On the contrary, political “beliefs” or “views” are not a specifically protected category under California’s discrimination laws. Nothing in either of the two Labor Code provisions above directly addresses discrimination or retaliation on the basis of expressed political views. Nor does the First Amendment serve to provide any further guidance. With limited exceptions, the U.S. Constitution’s guarantee of “freedom of speech” applies only to government action and not private employers/employees. The Civil Service Reform Act of 1978 prohibits political affiliation discrimination against federal employees only.

Based upon the narrow scope of protected categories and the vague and uncertain guidelines provided by the applicable California statutes, we would recommend California employers seek counsel in advance of crafting any such handbook policy. Please contact Shaina L. Kinsberg, Hazel U. Poei, or the Jackson Lewis attorney you regularly work with for further guidance.

Plaintiff Succeeds in Claiming Unpaid Reimbursements for More Than 20,000 Miles

After a one-day bench trial, a sales representative for a security company successfully established that his employer had failed to reimburse him for mileage expenses, using only his odometer reading as the basis to calculate the owed mileage. Plaintiff was a “High Volume Sales Representative,” meaning that he worked almost exclusively in the field making sales to new customers, canvassing neighborhoods, meeting with residential developers, and hosting promotion events.

The employer had a mileage reimbursement program that reimbursed employees for miles driven. Employees could receive either fixed monthly allowance or a per-mile reimbursement. Employees who wanted to be reimbursed on a per-mile basis had to enter every trip into an online system. Plaintiff testified the system would reject the entry if it did not recognize the address entered and that it would take him more than 20 hours to enter a month’s worth of trips.

At the beginning of his employment, Plaintiff’s manager told him his vehicle was too old to qualify for the employer’s mileage reimbursement program, so Plaintiff bought a new vehicle. During the bench trial, Plaintiff testified that he used the vehicle exclusively for work and used his wife’s vehicle for personal trips and errands. He testified that he noticed the mileage recorded on the program was inaccurate and that the process of entering every single trip was so laborious that he eventually opted to forgo the mile-based reimbursement and instead receive the fixed monthly allowance.

After ending his employment, Plaintiff sued for unpaid reimbursements under California Labor Code section 2802. The only records he had showing his alleged mileage was the reading on his odometer. The employer argued that Plaintiff could not meet his burden of proof with only an odometer reading, but the court disagreed. The employer had not required Plaintiff to maintain physical documentation of his mileage and Plaintiff had testified that he used the vehicle exclusively for work. The court did acknowledge that there was some discrepancy between the mileage Plaintiff had entered during the time period before he switched to taking the flat amounts, doubting that the more than 30,000 miles on his odometer was purely for work purposes. The court therefore applied a 20% reduction.

This case serves as a reminder that employers should evaluate their mileage reimbursement policies to not only ensure they are requiring employees to keep records of their mileage but also that they are providing employees with an effective, easy-to-use way to report those miles. Otherwise, employers may find themselves in a similar situation where it is difficult to refute the number of miles employees are claiming they have driven.

If you have any questions about this case, please contact Ashley Evans, Casey Curran, or Dale Kuykendall in Jackson Lewis’ Sacramento office, or the Jackson Lewis attorney with whom you regularly work.

Wage Statements May Contain Fictitious Business Names, California Court of Appeal Affirms

While best practices would be to use the employer’s registered name, a recent Court of Appeal opinion has upheld an employer’s use of its fictitious business name in its wage statements.

California Labor Code section 226 lists information that must be included in every employee’s wage statement. Pursuant to subsection (a)(8), one piece of information required is “the name and address of the legal entity that is the employer.” Employers can face substantial penalties if they do not provide accurate information.

In Savea v. YRC Inc., a plaintiff alleged is employer violated subsection (a)(8) by failing to include the company’s name as registered with California’s Secretary of State, as well as not including a “mail stop code” or the ZIP+4 code on employees’ wage statements. The employer’s name registered with the Secretary of State was “YRC Inc.” However, the wage statements listed the employer name as “YRC Freight,” which was the employer’s recorded fictitious business name. The employer moved to dismiss the plaintiff’s complaint on the grounds that its fictitious business name was used “to transact all regular business in California” and the listed address was the employer’s correct mailing address. The employer argued there was no authority or requirement to include a “mail stop code” or the ZIP+4 code in an employer’s address. The trial court agreed with the employer, and the plaintiff appealed the dismissal.

On the alleged improper employer name, the appellate court recognized the employer’s name on the wage statement matched the actual recorded fictitious business name at the time the employer issued the wage statements. The court noted that California’s Business and Professions Code permits companies to transact business and to initiate a lawsuit (or to be sued) under its fictitious business name. The court also said there was no confusion over the employer’s identity, the employee was not required to reference any other documents to determine the employer’s identity, and the fictitious business name was properly recorded at all relevant times.

On the alleged improper employer address, the appellate court noted the statute requires nothing more than the employer provide its “address.” The plaintiff was unable to dispute the employer provided the proper address. He also could not identify any authority for the proposition a mail stop code or a ZIP+4 code was required. The court also took notice that the agency tasked with enforcing California’s Labor Laws (the Division of Labor Standards Enforcement) had previously issued a wage statement template. In that template, the model address does not include a mail stop code or a ZIP+4 code. Thus, the court found the employer’s given address was proper.

In short, this case represents a small victory for employers. Historically, use of the employer’s registered name ensured compliance with the Labor Code 226(a)’s name requirement. This case supports the use of an employer’s fictitious business name as well.

If you have any questions about this case or wage statement compliance, please contact the Jackson Lewis attorney with whom you regularly work.

Car Wash Employees CLEAN Up with Help of California Department of Labor

The Labor Commissioner fined a Southern-California car wash for more than $2.36 million for alleged wage and hour violations. These fines included both civil penalties and wages owed to employees. This appears to be a continuation of the agency’s enforcement actions against commercial car washes from 2012 and 2015.

In addition to fining the company, the Labor Commissioner held both the company president and general manager jointly and separately liable (under Labor Code section 558.1) for these violations. (Individual liability means a manager or officer, or anyone else acting on behalf, of the company who violates or causes a violation of the Labor Code could be liable for paying out a lawsuit.)

The company’s activities affected at least 64 employees. This enforcement action was not triggered by employee complaints. Rather, the agency received information of potential violations from CLEAN, a non-profit corporation set up to assist employees of the car wash industry. The non-profit focuses its effort around targeting car washes in the Los Angeles area.

Employees of Centinela Car Wash Inc. and Playa Vista Car Wash recovered damages for violations of waiting time, split shifts, and overtime violations. The employees claimed their employer forced them to wait around the facility, without pay, before being told if they would be working that day. Further, employees claimed they worked more than eight hours without receiving overtime pay and alleged they failed to receive premium pay for split shifts. The employees also complained of improper recordkeeping practices.

The car wash also was fined for failing to register with the Labor Commissioner’s office as required under Labor Code Section 2054. In the past, failing to register had been only an initial trigger for an investigation.

If you have any questions about compliance with California wage and hour law, or other legal compliance issues, please contact the Jackson Lewis attorney(s) with whom you regularly work.

CAL/OSHA Proposes Emergency Regulation on Smoke-Protection after Destructive Wildfire Season

In the wake of the most destructive wildfire season in California history, California’s Department of Industrial Relations, Division of Occupational Safety and Health (“DOSH”), has issued a proposed emergency regulation intended to protect workers from wildfire smoke. On April 15th, 2019, DOSH released the proposed regulation and scheduled a hearing to discuss the regulation for May 8th, 2019 in Oakland. Please find the rest of this article on our OSHA Law Blog here.

Assembly Bill Codifying Dynamex Moves Forward, with Notable Exemptions

On March 26, 2019, proposed Assembly Bill 5, which would codify the California Supreme Court’s controversial Dynamex decision, was amended to exempt certain types of licensed workers. Just as noteworthy as the types of workers identified as exempt from the standard are the types of employees who were not identified. For example, the exemption does not appear to cover trucking companies and gig economy transportation companies. If there are specific statutory exclusions, it will be difficult for courts to find exclusions in the common law.

By way of background, on April 30, 2018, the California Supreme Court issued the Dynamex decision, an alarming decision for California employers utilizing independent contractors. In the opinion, the Court applied the “ABC Test” in determining whether an individual is an employee or independent contractor under the Wage Orders. Instead of the longstanding multi-factor Borello test, the Court found that the hiring entity has the burden to establish all of the following elements:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact

(B) The person performs work that is outside the usual course of the hiring entity’s business; and

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Part B of the test is particularly problematic for a number of industries, especially those with established business models reliant upon the use of contractors.

After the decision, courts grappled with how to apply the decision and the State Capitol was bombarded with lobbyists. Three relevant bills have been proposed. AB 71 seeks to codify the longstanding Borello standard, AB 233 seeks to exempt insurance salespeople and AB 5 seeks to codify Dynamex.

On March 26th, AB 5 was amended to provide that the Borello factor test (and not the ABC Test) would apply to:

  1. Persons or organizations licensed by the Department of Insurance;
  2. licensed physicians or surgeons;
  3. securities broker-dealers or investment advisers or their agents and representatives that are registered with the SEC or FINRA or licensed by the State; and
  4. direct salespeople under Unemployment Insurance Code § 650 (licensed salespeople whose compensation is directly tied to the sale, such as real estate salespeople).

On Wednesday, April 3, AB 5 will be before the Assembly Labor and Employment Committee and AB 233 will be before the Assembly Insurance Committee.

The Dynamex decision has sent shockwaves through business community in California; and the legislature appears to be attempting to provide some clarity. Regardless of the outcome, the resulting legislation will have a significant impact on how companies do business in California. In the meantime, tracking the progress of the legislation may help companies prepare accordingly.

Payroll Company Not Liable Under Third Party Beneficiary Doctrine

On February 7, 2019, the California Supreme Court determined that an employee cannot sue a payroll company for breach of contract under the third party beneficiary doctrine, and that it is inappropriate to impose a tort duty of care upon a payroll company with regards to the obligations owed to an employee under the applicable labor statutes and wage orders.

After filing a civil complaint against her former employer alleging causes of action for wrongful termination, breach of contract, violations of the Labor Code and related claims, the plaintiff filed several amended complaints that included causes of action against her employer’s independent payroll service provider (“ADP”) based on the payroll company’s alleged status as a joint employer. The trial court subsequently sustained ADP’s demurrer to all causes of action directed against it, without leave to amend. While the Court of Appeal agreed with prior appellate decisions that a payroll company cannot properly be considered an employer of the hiring business’ employee that may be liable under the Labor Code for failure to pay wages (see Futrell v. Payday California, Inc. (2010) 190 Cal.App.4th 1419), it nonetheless held that the employee could maintain causes of action for unpaid wages against the payroll company for breach of the payroll company’s contract with the employer under the third party beneficiary doctrine, as well as negligence and negligent misrepresentation. The Supreme Court disagreed and dismissed the plaintiff’s causes of action against the payroll company without leave to amend.

First, the Court concluded that the plaintiff should not be viewed as a third party beneficiary of the contract between her employer and ADP because, even if the plaintiff was likely to benefit from the contract (which was not clearly alleged in the amended complaint): (i) the motivating purpose behind the contract was to provide a benefit to the employer, not the third party plaintiff, and (ii) permitting employees to name the payroll company as an additional defendant in wage and hour lawsuits would not be consistent with the objectives of the contract and the reasonable expectations of contracting parties. Accordingly, the third party beneficiary doctrine was inapplicable and the employee could not maintain an action against the payroll company for an alleged breach of the contract between the employer and ADP with regard to the payment of wages. Second, the Court decided that it is neither necessary nor appropriate to impose upon a payroll company a tort duty of care with regard to the obligations owed to an employee under the applicable labor statutes and wage orders, and consequently that the negligence and negligent misrepresentation causes of action lack merit.

New TSCA Labelling Requirements for Composite Wood Products to go into Effect March 22, 2019

Employees can sue for unsafe work environment. At Jackson Lewis, we pride ourselves in providing advice to employers on how to prevent or minimize workplace related claims. Employers are obligated to warn consumers and employees of any risks involved with exposure to products or space exhibiting certain levels of chemicals. This article addresses the new TSCA rules that employers should look into to protect themselves from notice of violations and claims, not only from consumers, but from their own employees who might be exposed to chemicals.

On December 12, 2016, a final rule to implement the Formaldehyde Standards for Composite Wood Products Act, which added Title VI to the Toxic Substances Control Act (“TSCA”) was published in the Federal Register. The purpose of TSCA Title VI is to reduce exposure to formaldehyde emissions from certain wood products produced domestically or imported into the United States. The EPA worked with the California Air Resources Board (“CARB”) to help ensure the final national rule was consistent with California’s already existing requirements, including labelling requirements, for similar composite wood products, i.e. hardwood plywood, particleboard, and medium density fiberboard.

Included in TSCA Title VI were new labelling requirements for fabricators of finished goods that contain composite word products. These labelling requirements have a two-stage implementation. First, beginning on June 1, 2018, composite wood products sold, supplied, offered for sale, manufactured, or imported in the United States are required to be labeled as CARB ATCM Phase II or TSCA Title VI compliant. The practical impact of this first stage was minimal, in that products only needed to be labelled consistent with already existing California CARB labelling requirements in order to comply with TSCA Title VI.

However, on March 22, 2019, the second stage comes into effect. Beginning on this date, composite wood products must be labeled as TSCA Title VI compliant, and just having a label indicating California CARB II compliance is no longer sufficient.

In order to be compliant with the new TSCA Title VI labelling requirements, fabricators of finished goods that contain composite wood products must label every finished good they produce, or every box or bundle containing finished goods.

Finished goods that comply with TSCA Title VI and are labeled as TSCA Title VI compliant will be accepted as being compliant with California CARB’s standards, because the TSCA Title VI and CARB standards are identical. However, CARB recommends labeling panels and finished goods offered for sale in California as being compliant with both sets of regulations, because retailers and consumers are familiar with the CARB Phase II label already.

In order for a label to be both California CARB II and federal TSCA Title VI Compliant as of March 22, 2019, it is recommended that both the finished good and/or its box is labelled as follows:

  1. The label may be applied as a stamp, tag, or sticker;
  2. The label must include, in legible English text:
    1. Fabricator’s name;
    2. The date the finished good was produced (in month/year format);
    3. A statement that the finished goods are TSCA Title VI compliant, i.e. “TSCA Title VI Compliant” or similar;
    4. A marking to denote that the finished goods are CARB Phase II Compliant, i.e. “California 93120 Phase 2 Compliant for Formaldehyde” or similar;
    5. If all of the composite wood product used in the finished good was made with no-added formaldehyde-based resins, or ultra low-emitting formaldehyde resins it shall be labelled as such, e.g. “Produced with all NAF-based products” or “Produced with all ULEF-based products.”

The regulations specify the minimum information required for a label, but do not specify the format, color, size, or font for the label. These choices are left to the fabricator of finished goods to allow flexibility to meet the needs of individual companies. The required information may be on a separate label or incorporated into other existing labels. Individual companies may include any additional information they deem necessary. The label should be in a location that is easily accessible.

Importers, distributors, and retailers must leave intact labels on finished goods, including component parts sold separately to end users. However, they do not have any additional labelling requirements, as long as they have not modified the finished goods.

If you have any questions regarding these new requirements, please contact Leila Nourani and Zoe E. Tremayne, who have expertise in this area.

Disability Discrimination and Reasonable Accommodation under California’s Fair Employment and Housing Act (FEHA) [1]

If your business has five or more employees, your business is one of the millions in California that has a duty to provide reasonable accommodations for its employees with known disabilities.

A duty to provide reasonable accommodation arises when the employer knows of the employee’s disability. While the employer undoubtedly becomes aware of the disability when the employee directly informs the employer, the duty is also triggered if the employer learns of the disability from someone else or by observation.

Once the employer knows of the disability, the employer must enter into the “interactive process” with the employee to determine an appropriate accommodation. While the term “interactive process” may sound like it’s riddled with formalities, but it is actually quite informal and simple to accomplish. Engaging in the “interactive process” is basically an informal discussion with the employee (or his/her representative) in which the employer makes an effort to identify a reasonable accommodation that will allow that employee to continue to perform the essential function of the job he/she was hired to perform. This can be as simple as a brief, morning check-in, but must be done and should be memorialized in writing.

As part of this discussion, and if the disability is not obvious, the employer may ask for supporting medical documentation. However, this does not entitle the employer to a free-for-all of the employee’s medical records, and the employee must still be afforded his/her right to privacy. This means that if the employee chooses to remain private about his/her medical condition, managers and supervisors who need to know of the disability to meet the employee’s work restrictions, should be the only individuals privy to the employee’s disability. Any information and records obtained as part of the interactive process, should be maintained separate from the employee’s personnel file and kept confidential.

However, before the interactive process takes place, it is important for the employer to have a firm grasp on what constitutes the essential functions of the employee’s job. Once that is determined and within a reasonable time of the employer learning of the employee’s disability, the employer and employee can engage in a meaningful dialogue about how the employee’s disability can be reasonably accommodated to allow him/her to continue to perform his/her job – the keyword here being “reasonably”.

An accommodation is reasonable when changes are made so that the employee with disabilities can perform the essential functions of the job, unless the employer can demonstrate that granting an accommodation creates and undue hardship to the business operation. In such a scenario, the accommodation would be considered unreasonable, and the employer would not be required to accommodate the employee.

An “undue hardship” is defined as an action requiring “significant difficulty or expense”. (California Gov’t Code section 12926 (u).) While the determination of what constitutes an “undue hardship” is extremely fact-specific, the courts will use the following factors to determine whether an undue hardship exists:

  1. The nature and cost of the accommodation needed, taking into consideration the availability of tax credits and deductions and/or outside funding;
  2. The overall financial resources of the facilities involved in providing the reasonable accommodations, the number of persons employed at the facility and that effect of the accommodation on expenses and resources or on the operations of the facility, including the impact on other employees’ ability to perform their duties and the facility’s ability to conduct business;
  3. The overall resources of the covered entity, the overall size of the business with respect to the number of employee, and the number, type, and location of the covered entity’s facilities;
  4. The type of operations of the employer entity, including the composition, structure and functions of its workforce; and
  5. The geographic separateness, administrative or fiscal relationship of the facility or facilities involved. (California Gov’t Code section 12926 (u).)

As mentioned, whether an accommodation is reasonable, and whether it creates an undue hardship on the employer, is fact-specific. Therefore, it requires an individualized analysis, which considers factors like, the employee’s disability, the cost of the accommodation, and the employer’s ability to pay for it. This kind of an analysis can be done internally, but is much better suited for experienced employment counsel.

If this is a situation your business has come across or is currently dealing with, or if you prefer a proactive approach, and have additional questions, please contact the author of this blog or your favorite Jackson Lewis attorney.

[1] It is important to note that the duty to reasonably accommodate arises under FEHA and under the Americans with Disabilities Act (ADA) and that FEHA protections against disability discrimination are independent of those the ADA provides. The FEHA provides broader protection than the ADA in certain important areas, including the employer’s duty to accommodate.