On January 7, 2016, Governor Brown’s office submitted a 22-page Budget Change Proposal for 2016-2017 (http://web1a.esd.dof.ca.gov/Documents/bcp/1617/FY1617_ORG7350_BCP474.pdf) in an effort to “stabilize and improve the handling of Private Attorneys General Act cases.”

Background

Enacted in 2003, the Private Attorneys General Act (PAGA) enables private parties to recover penalties for certain Labor Code violations that could previously only be pursued by the Labor Commissioner or other divisions within California’s Department of Industrial Relations (DIR). Following a 2004 amendment, PAGA requires employees or their representatives to initiate a case by first sending written notice to the employer and the Labor and Workforce Development Agency (LWDA) identifying the alleged violations and setting forth specific supporting facts. 
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The recent death of conservative Justice Antonin Scalia will give public sector unions a short respite in Friedrichs v. California Teachers Association et al., a case that was likely to limit public sector unions’ ability to require mandatory fees from public workers. Following last month’s oral arguments before the High Court, many legal analysts expected a 5-4 opinion in Friedrichs, striking down mandatory union fees for public workers. Now, it is possible that the lower court ruling upholding the fees will remain in place.
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Denying an employer’s motion to compel individual arbitration of a wage and hour class action, a California federal court ruled that the employer’s dispute resolution program violated its employees’ right to engage in concerted action under the National Labor Relations Act (“NLRA”). Totten v. Kellogg Brown & Root, LLC. Notably, this ruling departs from the established trend of federal courts declining to follow the precedent set in In re D.R. Horton, Inc. (“Horton I”) and has significant implications for employers contemplating whether to remove a class action involving the enforcement of arbitration agreements to federal court.

Kellogg Brown & Root LLC’s (“KBR”) hired David Totten (“Totten”) in 2012. During his new hire orientation, Totten signed an agreement to participate in KBR’s Dispute Resolution Program (“DRP”) as a condition of his employment. The DRP required employees to arbitrate any claims against KBR that related to, or arose out of, their employment. The DRP also prohibited “KBR, employees and applicants from pursuing claims on a class, collective, or representative basis…” KBR terminated Totten’s employment in June 2014. Approximately one month later, Totten filed a class action against KBR for alleged wage and hour violations and unfair business practices.
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Waiting time penalties imposed under Section 203 of the California Labor Code are not “wages” for purposes of federal income or employment taxes, according to a Chief Counsel Advice Memorandum issued by the Internal Revenue Service. Although the Memorandum is not precedential, it provides guidance regarding the IRS’s current views on the taxability of such payments. The California Department of Industrial Relations (DIR) has long taken the position that waiting time penalties are not wages.
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Employers’ risk of liability for the misclassification of workers continues to grow, as employee misclassification remains a top enforcement priority for the U.S. Department of Labor (“DOL”), and class actions asserting misclassification claims are filed almost daily in federal and California state courts. Employers regularly using independent contractors should examine those relationships periodically to ensure that the classification remains defensible.
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The California Court of Appeal reversed a $1 million judgment against the City of Los Angeles in a racial discrimination, harassment and retaliation case brought by a firefighter under the California Fair Employment and Housing Act. Jumaane v. City of Los Angeles. After 12 years of litigation and two jury trials, the Court ruled that the firefighter’s claims occurred outside the one-year statute of limitations period and that the “continuing violation” exception to the statute of limitations did not apply.
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Effective January 1, 2016, an employee’s request for an accommodation for a disability or for religious reasons is considered to be “protected activity” for a retaliation claim under the Fair Employment and Housing Act (“FEHA”).

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On October 26, 2015, a California Court of Appeal held that the Federal Arbitration Act (“FAA”) does not apply to interstate truck drivers, and as a result, it ruled that an employer’s class action waiver was unenforceable as a matter of public policy under the California Gentry rule. Garrido v. Air Liquide Industrial U.S. LP, No. B254490 (Cal. Ct. App. Oct. 26, 2015). This case is significant because it expands the scope of the “transportation worker” exemption under the FAA. Practically, numerous employers who physically distribute their own goods interstate will now be prevented from compelling individual arbitration of class action lawsuits.

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On August 24, 2015, the California Senate passed measure AB-465 which prevents employers from requiring employees to sign an arbitration agreement as a condition of employment. The Senate approved this measure by a vote of 22-15. In support of this measure, Democratic Assemblyman Roger Hernandez stated, “No worker should be forced to choose between a job and giving up core labor rights and procedures.” 
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A California federal judge dismissed a putative employment collective action last week, brought by individuals who wrote reviews on Yelp, a popular online business rating website predicated on user-reviews, holding that an individual who acts for personal pleasure without a promise of pay does not have a claim for wages under federal labor law. Jeung, et al., v. Yelp, Inc., Case No. 15-cv-02228-RS, U.S.Dist. (N.D. Cal. 2015).
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