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.

California Appellate Court Rejects Legislative Attempt to Circumvent Federal Arbitration Act on Claims Involving the Ralph Act and Bane Act

In Saheli v. White Memorial Medical Center (B283217, Cal. Ct. App., March 14, 2018), the Court of Appeal for the Second Appellate District addressed for the first time whether restrictions on arbitration agreements contained in the Ralph Act and Bane Act are preempted under the Federal Arbitration Act (“FAA”).

“The Ralph Act broadly provides that all persons ‘have the right to be free from any violence, or intimidation by threat of violence, committed against their persons or property’ because of, among other things, the person’s race, religion, national origin, sex, sexual orientation, or position in a labor dispute.” The Bane Act, enacted 10 years after the Ralph Act, “was ‘intended to supplement the Ralph Civil Rights Act as an additional legislative effort to deter violence’” and “provides that if a person interferes, or attempts to interfere, by threats, intimidation, or coercion, with the exercise or enjoyment of the constitutional or statutory rights of ‘any individual or individuals,’” they may be “‘sue[d] for damages[.]’”

Those familiar with the Ralph Act and Bane Act know that they can provide a parallel remedy in harassment or discrimination cases in which the conduct alleged could also be construed as a “hate crime.”

After a careful analysis, which included an in-depth analysis of the California legislature’s hostility towards arbitration, the Court held that the Acts were preempted to the extent the enforceability of arbitration agreements were conditioned on special requirements not applicable to contracts generally.

In 2014, the Ralph Act and Bane Act were amended to limit the circumstances under which an individual could waive their rights under the Ralph Act or Bane Act, or waive their rights to bring such claims in a judicial forum. The amendments invalidated any agreements or waivers entered into on or after January 1, 2015 that did not meet certain requirements.

On June 7, 2016, plaintiff Gezel Saheli signed an arbitration agreement in connection with a medical residency program at White Memorial Medical Center. The agreement that did not meet the requirements set forth in the Ralph Act and Bane Act.  Less than a year later, Saheli filed a complaint that contained claims under the Ralph Act and Bane Act.  White Memorial Medical Center successful compelled all claims to arbitration with the exception of the Ralph Act and Bane Act claim, which the trial court denied because the arbitration agreement did not comply with the 2014 amendments to the Ralph Act and Bane Act.  White Memorial Medical Center appealed.

On Appeal, the Court addressed two primary issues: (1) whether the parties intended to incorporate state law that are potentially preempted by federal law; and (2) whether the Ralph Act and Bane Act are preempted, in part, by the FAA. As to the first issue, the arbitration agreement provided that the parties agreed not to arbitrate claims that are not arbitrable under “applicable state law.”  Plaintiff argued that this phrase meant “applicable state law notwithstanding any preemptive effect of federal law.”  The Court rejected this argument, finding that the ordinary meaning of the phrase “applicable state law” would not encompass preempted state law.  As to the second issue, the Court noted that the 2014 amendments “represent a hostility to arbitration and their purpose is primarily, if not exclusively, to discourage arbitration of Ralph Act and Bane Act claims.”  The Court remarked in a footnote that the legislative history suggested the amendments were specially tailored to attempt to avoid federal preemption under the FAA.  However, since the FAA preempts state rules discriminating against or disfavoring arbitration agreements, the Court held that 2014 amendments were preempted to the extent they created special requirements that were not applicable to contracts generally.  The Court ordered the trial court to reverse its order and send all claims to arbitration.

This decision is positive news for employers who have arbitration agreements or are deciding whether to compel arbitration of a Ralph Act and/or Bane Act claim. This decision makes clear employers will not need to revise their arbitration agreements in order to comply with the Ralph Act or Bane Act’s special requirements.  This decision also provides controlling authority for trial courts asked to rule on a motions to compel arbitration concerning the Ralph Act or Bane Act.

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

Sick Leave Entitlements on the Rise in CA? A Pending CA Bill Is Looking to Do Just That.

Just three years after the enactment of California’s paid sick leave law under the Healthy Workplace Healthy Family Act of 2014 (AB 1522), a new bill has been introduced seeking to increase the amount of sick leave employers must provide employees under California law. The bill, AB 2841, was introduced on February 16, 2018, by Assemblywoman Lorena Gonzalez Fletcher. Assemblywoman Gonzalez Fletcher authored California’s existing paid sick leave law. Please find the rest of this article in our Disability, Leave & Health Management blog here.

Southern District Court of California Affirms that Employees Are Not Entitled to Multi-Month, Indefinite Medical Leaves of Absences

California employers can breathe a sigh of relief in light of a recent decision from the Southern District Court of California. In Ruiz v. ParadigmWorks Group, Inc., the Court held that an employer is not required to extend an employee’s “multi-month” medical leave of absence where the employee is totally disabled and cannot provide a definite end date to her leave. The Ruiz decision comes just seven days after the Ninth Circuit ruled in Markowitz v. United Parcel Services, Inc. that an employer may discharge an employee “if the employee is unable to perform his or her essential duties even with reasonable accommodation.”

In Ruiz, Plaintiff worked as a student outreach and admissions counselor and became unable to perform her essential job duties following an accident at home. As an accommodation, the Company granted her three consecutive leaves of absences that totaled fourteen weeks. When Plaintiff requested an additional six weeks of leave without any assurance of her return-to-work date, the Company terminated her employment and invited her to apply to open positions when she fully recovered. Instead, six months later, when she was able to work again, Plaintiff sued the Company for disability discrimination under both federal and California law.

The Court found in the Company’s favor in entirety. In doing so, the Court rejected Plaintiff’s argument that she was entitled to any further accommodation in the form of an approved leave of absence. The Court emphasized that there was “no dispute” that Plaintiff was totally disabled and that “no accommodation would have allowed her to perform her job.” As a result, the Court explained, the Company was not required to extend Plaintiff’s medical leave indefinitely. Thus, termination of her employment was an appropriate and legitimate business decision.

Importantly, the Court’s ruling applied in federal and state contexts, respectively under both the Americans with the Disabilities Amendments Act of 2008 (“ADAAA”) and the Fair Employment and Housing Act (“FEHA”). See Ruiz v. ParadigmWorks Group, Inc., 16:CV-2993-CAB-BGS (February 22, 2018).

Calculating Overtime Value of Flat-Sum Bonus Must Be Based on Actual Non-Overtime Hours Worked, California High Court Holds

The California Supreme Court has held that, under state law, when an employee earns a flat sum bonus during a pay period, the overtime pay rate will be calculated using the actual number of non-overtime hours worked by the employee during the pay period. Alvarado v. Dart Container Corp., 2018 Cal. LEXIS 1123 (Cal. Mar. 5, 2018).

In so holding, the Court reversed a lower court of appeal decision that had rejected policy guidance issued by the California Department of Labor Standards Enforcement (DLSE). Please find the rest of this article in our Publications page here.