Santa Monica to Implement New Minimum Wage Law

It’s summertime in the City of Santa Monica and with sunny days and cool ocean breezes also comes an increase in the minimum wage commencing on July 1, 2018.  Each year on July 1, Santa Monica employers must comply with the City’s minimum wage law, which was enacted in 2016 and currently runs through 2021. On July 1, 2018, Santa Monica’s new minimum wage will increase to $12 per hour for employers with 25 or fewer employees; to $13.25 per hour for employers with 26 or more employees; and $16.10 per hour for hotel workers. Santa Monica’s minimum wage law for hotels and businesses operating on hotel property was enacted to match City of Los Angeles minimum wage rates.  Santa Monica employers must also post in a conspicuous place minimum wage notices in English, Spanish, and any other language spoken by at least 5% of its employees.

For employers not operating in Santa Monica, summertime also serves as a reminder to check your local city government sites to ensure compliance with any mid-year minimum wage increases that might affect your business. 


Fair Employment Housing Commissions Publishes New National Origin Discrimination Regulations; Limits “English-Only” Rules and Expands Protections for Immigration Status

On May 17, 2018, California’s Fair Employment and Housing Commission (“FEHC”) published the final text of its “Regulations Regarding National Origin Discrimination” (to be codified at 2 Cal. Code Regs. §§ 11027 & 11028). The regulations, which become effective July 1, 2018, expand the definition of “national origin” for purposes of the Fair Employment and Housing Act (“FEHA”).  Among the more notable changes, the new definition includes all “physical, cultural and linguistic” attributes of a national origin group.  The definition also now specifically includes anyone who is a member of or attends an organization, school, or religious institution associated or identified with a national origin group.  The new regulations prohibit English only policies except in certain circumstances and prohibit any inquiries into an applicant or employee’s immigration status unless an employer can demonstrate by “clear and convincing evidence” that such inquiry is required by federal law.

The new “national origin” definition incorporates the following six categories: (1) physical, cultural, or linguistic characteristics associated with a national origin group; (2) marriage to or association with persons of a national origin group; (3) tribal affiliation; (4) membership in or association with an organization identified with or seeking to promote the interests of a national origin group; (5) attendance or participation in schools, churches, temples, mosques, or other religious institutions generally used by persons of a national origin group; and (6) name that is associated with a national origin group. The regulations also clarify that “national origin group” includes any ethnic groups, geographic places of origin, and countries that are not presently in existence. Over the objections of many commentators who felt the Commission had overstepped, the Commission added that height and weight restrictions would be unlawful if they disproportionately affected members of one national origin group and were not justified by business necessity.

The new regulations also expand the list of “Specific Employment Practices” prohibited under the FEHA. In a change from the prior law, all language restrictions are presumed unlawful. Employers must demonstrate that any such restrictions are narrowly-tailored and justified by business necessity. For a policy to be a “business necessity” it must be necessary to the safe and efficient operation of the business and “effectively fulfill[] the business purpose it is supposed to serve.” Employers must also demonstrate there is no effective alternative to the language restriction – for example, posting signage in multiple languages. Employers may not discriminate against employees based on their level of English proficiency unless the employer can demonstrate that English proficiency is necessary for the employee’s particular job duties. Discrimination based on accent is unlawful unless it “interferes materially” with the employee’s ability to do his or her specific job.

Finally, the new regulations limit practices for verifying work eligibility. Employers may not make any inquiry into an applicant’s immigration status, including requiring documentation, unless the employer can show by clear and convincing evidence that such inquiry is required by federal law. Employers also cannot take adverse action against an employee for updating his or her name, social security number or employment documents. The regulations now specify that threatening to contact immigration or federal law enforcement authorities may be a form of harassment and/or retaliation. Under the federal Immigration Reform Control Act (IRCA), employers cannot knowingly hire, refer, recruit or employ unauthorized immigrants. IRCA mandates procedures for assuring that all employers meet requirements of verifying employment eligibility during the Form I-9 process by checking all employees’ identification documentation that establishes both identity and employment eligibility to ensure they are eligible to work in the U.S.   In addition, under IRCA if you employ four or more people, you cannot discriminate against any individual who is employment authorized on the basis of nationality origin and citizenship status, so the federal statute exempts certain small employers. Consequently, there are protections against treating immigrants unfairly that are contained in various overlapping federal and California statutes. Also, bear in mind that California recently enacted a series of laws labeling it a “sanctuary state” that created stringent protections for the work force during worksite immigration enforcement by DHS. For more information, see Surge of ICE Raids Expected in California Following State Adoption of Immigration Laws, discussing The California Values Act, and the Immigrant Worker Protection Act published on 02/15/2018. Despite concerns from commentators that the new regulations were both unnecessary and overbroad, the FEHC opined in its Statement of Reasons that the new regulations were necessary to clarify employer’s obligations.

In light of the new regulations, employers with English-only rules should review their policies to ensure that they are both narrowly tailored and necessary for a particular position. Employers should also review their employment verification practices to ensure that any work authorization inquiries are only for purposes of complying with federal law.

If you have any questions about these regulations, please contact Shannon Bettis Nakabayashi, Brian Schield, or the Jackson Lewis attorney with whom you regularly work.

Court of Appeal Affirms “Waiting Time” Penalties Where Employer Unaware of Wage Law Amendment

In its May 24, 2018 opinion in the matter of Diaz v. Grill Concepts Services, Inc. (Case no. B280846, 2nd Dist.), the California Court of Appeal shed further light on the standard to impose so-called “waiting time penalties” on employers who neglect to pay wages due upon discharge or resignation.  Diaz affirmed the maxim that “ignorance of the law is no excuse,” holding that an employer’s failure to investigate a change in the local wage scale constituted a “willful” failure to pay, exposing it to waiting time penalties under the Labor Code. Diaz also held that courts do not have discretion to relieve the employer from such penalties on equitable grounds.

Diaz arose from a class action brought by current and former employees of a Daily Grill restaurant near LAX airport, and located within the City of Los Angeles’ “Airport Hospitality Enhancement Zone.”  Restaurants within the Zone were required to pay their employees according to a living wage formula set by the City.  In 2010, the City amended this formula to require a higher wage payment.  Although the restaurant got wind of the coming amendment and learned during a call with the City Attorney that changes were “in process,” it made no effort to follow-up.  As a result, when the increase went into effect in July 2010, the restaurant was ignorant of the adjustment and, accordingly, shortchanged its employees.

The plaintiffs then filed their class action, demanding not only unpaid wages but also waiting time penalties under Labor Code section 203 for employees who had resigned or been discharged since July 2010.  Section 203 provides, “[i]f an employer willfully fails to pay…any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days.”  Although the restaurant then reimbursed all current and former employees for unpaid wages, it disputed that waiting time penalties were appropriate, arguing that its failure to pay was not “willful” under section 203, but was instead a good-faith mistake. It argued further that the court should exercise discretion to waive or reduce these waiting time penalties on an equitable basis.

Diaz rejected both arguments. It first held that a “willful failure to pay wages” under section 203 requires only that the employer have acted voluntarily in a manner which fell short of its legal obligations, and does not require any blameworthy, malicious, or fraudulent conduct.  Unless the law was itself uncertain, or there was a good-faith mistaken belief coupled with factual or legal support, the violation will qualify as willful and penalties of up to 30 days continuing wages will issue.  Because the City’s wage formula was clear, and the restaurant did not perform a diligent investigation into the July 2010 amendment, its ignorance was no excuse.  Finally, Diaz concluded that the language of section 203 (“‘the wages of the employee shall continue as a penalty’ for up to 30 days”) and its intent to protect employees left no discretion for courts to reduce the waiting time penalties properly owed.

Diaz serves as another reminder of the care employers must exercise to ensure they pay all earned wages to employees who are discharged or resign.  If any wages remain unpaid, the employer will have a high bar to satisfy to demonstrate that its failure to pay was not “willful” within the meaning of Labor Code section 203, and courts do not have discretion to reduce these penalties even where it might seem fair to do so.  Please contact your local Jackson Lewis office if you wish to receive more detailed guidance on this, or any other employment issue.

Class Action Waivers Remain Inapplicable to PAGA Claims

The U.S. Supreme Court’s recent ruling that class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA) does not extend to claims under the California Private Attorneys General Act (PAGA). Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP et al. v. Morris et al., No. 16-300; National Labor Relations Board v. Murphy Oil USA, Inc., et al., No. 16-307 (May 21, 2018); Iskanian v. CLS Transportation Los Angeles (2014) 59 Cal.4th 348.

Last week’s much anticipated U.S. Supreme Court ruling that class action waivers in employment arbitration agreements are enforceable sent waves across both sides of the employment bar.  The decision favors the implementation of arbitration agreements for employers that do not yet have them and updating arbitration agreements for employers that do.  But the Supreme Court’s decision does not extend to claims under the PAGA.  Under the  PAGA, employees can recover civil penalties for violations of the California Labor Code.  Seventy-five percent of the civil penalties are recoverable by the State, with the remaining amount recoverable by employees.  The rationale underlying the carve-out for PAGA claims from class action waivers is that PAGA claims are brought on behalf of the State, and the State is not a party to the arbitration agreement.  Therefore, PAGA claims remain exempted from class action waiver provisions in arbitration agreements.  Whether or not PAGA claims may be brought on a class-wide basis in arbitration or whether they must be decided by a court remains an open question in California.


Does The De Minimis Defense Apply To California Labor Code Claims?

The California Supreme Court recently heard the case of Troester v. Starbucks Corporation which could significantly increase employers’ exposure to claims by hourly paid employees for small pre-shift and post-shift tasks that are currently treated as insignificant and not compensable.

The de minimis doctrine, an established defense under the Fair Labor Standards Act (“FLSA”), permits employers to disregard time spent by employees on minor pre-shift and post-shift tasks (generally, to the extent less than 10 minutes).  The applicability of the de minimis defense is dependent upon factors such as: (a) the practical difficulty the employer would encounter in recording the additional time; (b) the total amount of compensable time; and (c) the regularity of the additional work.  This defense usually applies to the minimal amount of time spent by employees, for example, in logging onto a computer or donning and doffing safety equipment.

Specifically, in this case, Douglas Troester was a non-exempt supervisor at a Starbucks store. He filed a lawsuit against Starbucks alleging that it failed to pay him wages for time spent performing certain tasks at closing, such as activating the store alarm, locking the front door and walking co-workers to their cars. The federal district court granted summary judgment in favor of Starbucks and found that, while Troester’s closing activities occurred regularly,  they only took 4 to 10 minutes per day and were administratively difficult to track and compensate. Troester appealed this decision to the Ninth Circuit Court of Appeals which certified for decision by the California Supreme Court the question of whether the de minimis defense is available to wage claims under the California Labor Code.

During oral argument before the California Supreme Court, the justices noted that, while the defense is recognized in FLSA regulations, no corresponding reference to it exists under the California Labor Code or in the Wage Orders.  On the other hand, the justices also seemed concerned that striking down the defense would cause an increase in the filing of costly lawsuits over very small amounts on unpaid time worked.

Pending a decision from the California Supreme Court, employers should consult with counsel regarding the review and implementation of their timekeeping policies and procedures for de minimis off-the-clock work.

A decision is expected from the California Supreme Court within the next 90 days.

California Supreme Court Applies “ABC” Test When Assessing Independent Contractor Status

The California Supreme Court, in Dynamex Operations v. Superior Court, held that for purposes of claims under the California Wage Orders “engage, suffer or permit to work” determines employee status, thus requiring a defendant who disputes that a worker is an employee (rather than an independent contractor) to prove (A) the worker is free from control and direction of the hirer in connection with performing the work, both under contract and in fact; (B) the worker performs work outside the usual course of the hiring entity’s business; and (C) the worker customarily engages in an independently established trade, occupation, or business of the same nature as the work performed for the hirer.

With its decision, the High Court provides further clarification to employers in determining whether a worker may be classified as an independent contractor rather than an employee, which has substantial economic and legal implications for employers across California.

A more detailed analysis can be found on our publications page.

Sacramento County “Panic Button” Ordinance

The Sacramento County Board of Supervisors has approved an Ordinance requiring hotel and motel operators in Sacramento County to provide employees with a panic button or notification device that can be used to call for help when an employee reasonably believes sexual harassment activity is occurring in the employee’s presence. The panic button is designed to be used in emergency situations to summon hotel security or other appropriate staff to the employee’s location.

The Ordinance, officially titled The Sacramento County Hotel Worker Protection Act of 2018, requires panic buttons be provided to each employee who works in guest rooms at no cost to the employees.  It also requires affected hotels and motels to develop, maintain, and comply with a written sexual harassment policy.  The sexual harassment policy must be designed to encourage employees to immediately report instances of alleged sexual assault and sexual harassment by guests to the hotel licensee.  The policy must also describe the procedures that the complaining employee and the hotel are to follow when instances of sexual assault or sexual harassment arise.

The Ordinance only applies to hotels and motels subject to licensure in the unincorporated area of Sacramento County with 25 or more rooms. This is estimated to effect 24 hotels and motels, or approximately seventy-five percent, of Sacramento County’s existing licensed hotels and motels.

A similar Bill, AB 1761, was introduced to the California Legislature in January 2018. This Bill would require hotel employers state-wide to provide employees with a panic button to call for assistance when working alone in a guest room.  The Bill would also require a hotel employer to compile and maintain a list of guests who have been alleged to have committed an act of violence or harassment against employees at that hotel, and to decline service to any person on that list for a period of three years.  If this Bill were approved, it would make California the first state in the Nation to have a state-wide law requiring hotels to provide panic buttons to employees that work alone in guest rooms.

If you have any questions about this case, please contact Cary Palmer or Kaitlyn Lavaroni in Jackson Lewis’ Sacramento office, or the Jackson Lewis attorney with whom you regularly work.

Sexual Harassment Bills to Watch Before the California Legislature

Several significant employment law bills relating to sexual harassment are pending before the California legislature which could significantly affect employer practices.

SB-1343 seeks to amend current sexual harassment prevention training for employers.  Under current law, employers with 50 or more employees must provide sexual harassment training to supervisors within six months of the supervisor’s assumption of the role, and once every 2 years thereafter.  Under the proposed law, employers with 5 or more employees must provide at least 2 hours of sexual harassment training to all employees by January 1, 2020, and once every 2 years after. The proposed law would also require the Department of Fair Employment and Housing (DFEH) to develop a 2-hour training video.  Employers may use the DFEH’s training video, or develop their own 2-hour training program to fulfill its obligations under this bill.

AB-1867 would require employers with 50 or more employees to maintain records of employee complaints of sexual harassment for 10 years following the date of the filing.  The proposed law would authorize the DFEH to seek an order requiring the employer to comply.  It will be interesting to see whether the final bill is amended to include penalties for violations in order to give the bill some teeth.

AB-2366 seeks to amend Labor Code sections 230 and 230.1, which currently bars employers from discharging, discriminating, or retaliating against victims of domestic violence, sexual assault or stalking for requesting or taking related leave.  Current law requires employers with 25 or more employees to accommodate requests for leaves for related purposes.  The proposed amendment seeks to extend these same protections to employees who are victims of sexual harassment as well, and to protect immediate family members of the victims who take time off from work to provide assistance to victims who seek relief or counseling as a result of the abuse.

The above bills are being reviewed by the Legislature, and if approved, will likely make their way to the Governor by year’s end. If you have any questions about the bills, please contact Phoebe Vu or Cary Palmer in Jackson Lewis’ Sacramento office, or the Jackson Lewis attorney with whom you regularly work.

Employers Cannot Consider Prior Salary History to Justify Wage Gap under the Federal Equal Pay Act

On April 9, 2018, the Ninth Circuit Court of Appeals issued its opinion in Rizo v. Yovino, holding that employers cannot consider an employee’s prior salary either alone or in combination with other factors to justify salary differentials between men and women for the purposes of the federal Equal Pay Act.

Aileen Rizo was hired by the Fresno County Superintendent of Schools (the “County”) as a math consultant. During the hiring process the County asked for Rizo’s recent, prior salary. When the County offered Rizo a position, it was about five percent higher than what she previously earned, but was the lowest rung of the county’s salary schedule. Rizo accepted the position, but later learned that she was being paid less than her male counterparts. She then sued under the federal Equal Pay Act.

The County argued at summary judgment that its pay schedule was determined solely by an applicant’s prior pay, not gender. Within the meaning of the federal Equal Pay Act, the prior pay was a “factor other than sex.” In denying summary judgment, the U.S. District Court warned that setting salary and wages based solely on prior pay carries a high risk of perpetuating the discriminatory wage disparity between men and women. Even if motivated by a non-discriminatory business consideration, such a practice cannot be allowed to continue.

The Ninth Circuit Court of Appeal, sitting en banc, affirmed the District Court’s ruling. Prior salary, the panel held, simply cannot be used solely or even as part of multiple other factors to justify differential pay between men and women. The Court reasoned that holding to the contrary would allow employers to benefit from the ongoing wage gap, enabling that gap to perpetuate indefinitely.

Judges Margret McKeown and Mary Murguia concurred with the panel’s decision that County’s sole reliance on Rizo’s prior pay was impermissible, but noted that the majority may have gone too far in holding that any consideration of prior pay as a factor in setting salary is not allowed under the Equal Pay Act. Likewise, Judges Consuelo Callahan and Richard Tallman agreed that prior salary cannot be the sole basis for setting salary, but stated there may be times when consideration of prior pay with other factors may be permissible. To hold otherwise, in their view, ignored the simple realities of business.

The State of California has already taken a similar approach with the 2015 amendments to the California Equal Pay Act (A.B. 1676), signed by Governor Brown, and effective January 1, 2016.  However, the Court’s decision here explicitly overturned the Court’s 1982 prior holding in Kouba v. Allstate Insurance Co., 691 F.2d 873 (9th Cir. 1982), which held that an employee’s prior pay was a factor other than sex for the purposes of the federal Equal Pay Act and can therefore be considered. This new ruling also contradicts the holdings of other federal circuits. Whether the U.S. Supreme Court will be called upon to reconcile the various holdings remains to be seen.

For the time being, employers within the Ninth Circuit may be in violation of both the federal Equal Pay Act and the California Equal Pay Act if any consideration is given to an employee’s prior salary.

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

Balancing Client Needs with Employee Needs

A decision out of the Northern District of California serves as a reminder that service industries need to carefully balance their commitment to client care with wage and hour obligations. A case manager at a large medical facility filed a class action claim under the California Private Attorneys General Act (“PAGA”) against the facility for multiple violations of federal and California law, including failure to pay overtime wages and failure to provide meal and rest breaks.  The crux of her complaint was that she and other employees felt pressured to work off-the-clock in order to adequately tend to a larger number of patients after “cost-cutting measures” increased each employee’s workload.

The plaintiff alleged that the medical staff had to work through meal and rest periods and after their shifts ended to fulfill their duties for each patient. They would continue inputting patient notes and processing insurance claims after clocking out. According to the plaintiff, the defendant has electronic record systems that capture the time at which patient information is entered, showing that employees regularly enter patient notes and insurance claims after clocking out for the day. The plaintiff claimed that employees also regularly worked more than five hours without a meal because their performance reviews were largely dependent on dedication to timely patient care.

When the defendant medical center moved to dismiss the overtime and meal and rest break claims, the court denied the motion, repeatedly citing plaintiff’s allegations that the facility’s employees felt “required” to work off-the-clock. The defendant attempted to argue that the complaint failed to state why the plaintiff did not clock her overtime for the additional time she spent inputting patient data.  Although a plaintiff is not actually required explain exactly why she did not clock overtime, the court emphasized plaintiff’s allegations that employees felt required to do so after budget cuts resulted in a higher patient-to-employee ratio. When the medical facility also attempted to argue that the complaint failed to explain “how or why Plaintiff and the proposed class were deprived of meal breaks,” again the court referenced the plaintiff’s allegations regarding the budget cuts.  Additionally, the court cited the claims made about the facility’s policies, holding that the plaintiff sufficiently alleged that the defendant “discouraged taking rest and lunch breaks by emphasizing in performance reviews and policies that patient care should be the priority.”

It is important for employers to ensure that their employees are able to timely and successfully complete their duties, especially if considering reducing staff due to budgetary concerns. Employees in service-based industries such as healthcare may feel compelled to miss a meal or rest period or work off-the-clock to help a client or patient or for fear of poor performance reviews.

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