California Governor Brown has announced he will sign AB 10 tomorrow, in LA and Oakland, which will increase the CA state minimum wage effective July 1, 2014. See Brown’s statement: http://gov.ca.gov/news.php?id=18221. Since many employers are engaged in budgeting for 2014 and beyond, this new development should be factored into such plans.

A radio program employee who faced substantial liability arising from a tragic on-air “water drinking contest” that ended in a tragic death was named an individual defendant in the survivors’ lawsuit.  The employer offered to defend the employee with a competent attorney of its choosing.  However, the employee took the position that Labor Code section 2802 required his employer to pay him for the attorney of his choice, insisted on hiring his own attorney and proceeded to so.  After a settlement and dismissal, he sought indemnity for more than $800,000 in costs and attorneys’ fees.  The trial court declined his request and the Court of Appeal affirmed, holding that employees do not have an absolute right to pick the attorney of their choice to represent them at the expense of their employer under section 2802, and the mere fact the employee may face potential punitive damages or criminal charges does not change this rule.  Thus, the employer met its burden by offering to defend the employee with competent independent counsel.  Carter v. Entercom Sacramento, LLC, No. C066751 (Cal. Ct. App. Sept. 3, 2013). Click here for more information.

So asked a class of security guards who sought payment for all on-call time, including time spent on-call over weekend nights in company provided trailers.  The company did not pay them for an 8 hour period during which employees could sleep and refresh while on-call unless they were directed to conduct investigations during the on-call period.  In Mendiola v. CPS Security Solutions, Inc., No. B240519 (Cal. Ct. App. Jul. 3, 2013), the California Court of Appeal upheld much of the plaintiffs’ on-call claim but reversed part of the trial court’s judgment which would have required the employer to pay the guards for 24 hours of work performed during 24 hour weekend shifts even though they were free to sleep up to 8 hours during such shifts.  California law permits employers and employees to agree to exclude up to 8 hours per day for sleep time when employees work 24 hour shifts, and the employees had entered an enforceable on-call agreement to do so. Click here for more information.

With increasing frequency, California courts (especially federal district courts) are enforcing binding arbitration agreements between employers and employees.  In Richards v. Ernst & Young, No. 11-17530 (9th Cir. Aug. 21, 2013), the Ninth Circuit recently reversed a denial of the employer’s motion to compel arbitration of the employee’s wage and hour claims.  In so doing, the Court: (1) found the employee was not prejudiced by a significant delay by the employer in moving to compel arbitration; and (2) rejected the employee’s argument that the Court should refuse arbitration based on the NLRB’s decision in  D.R. Horton, 357 N.L.R.B. No. 184 (Jan. 3, 2012).  The Court observed:  “the only court of appeals, and the overwhelming majority of the district courts, to have considered the issue have determined that they should not defer to the NLRB’s decision in D.R. Horton because it conflicts with the explicit pronouncements of the Supreme Court concerning the policies undergirding the Federal Arbitration Act.” Click here for more information.

In another pro-arbitration decision, Vasquez v. Sears Roebuck & Co., Case No. 13cv680-WQH (S.D. Cal. 2013), the Southern District of California recently enforced an arbitration agreement, and made at least three significant holdings in doing so.  First, the court severed unconscionable substantive provisions on the award of attorneys’ fees and confidentiality rather than invalidate the entire agreement.  Second, the court found that the California Supreme Court’s decision in Gentry v. Superior Court, 42 Cal. 4th 443, 463 (2007), which had held class action waivers in employment arbitration agreements could not be enforced if a class action provided a significantly more effective tool for vindicating the plaintiffs’ rights, was no longer good law in California given the U.S. Supreme Court’s decision in Concepcion v. AT&T Mobility LLC, 131 S. Ct. 1740, 1745 (2011).  Lastly, the Court enforced the plaintiff’s waiver of class action and Private Attorney General’s Act (“PAGA”) claims.  The Court again cited the U.S. Supreme Court in Concepcion: “[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” Concepcion, 131 S. Ct. at 1747…. “States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.” Id. at 1753; cf. Am. Exp. Co. v. Italian Colors Rest.,133 S. Ct. 2304, 2308 (2013) (holding that the FAA prohibits courts “to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim”). In ruling that the Federal Arbitration Act required enforcement of the plaintiff’s PAGA and class action waivers, the Court directly refuted a contrary state court decision in Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489 (2011).

In Bain v. Tax Reducers, Inc., 6th App. Dist. Case No. H037452 (2013), the Court of Appeals upheld most of a Santa Clara Superior Court judgment finding that Bain, who worked as a tax preparer and provided other bookkeeping services for clients of Tax Reducers, Inc., was an employee rather than an independent contractor.  The Court applied the longstanding multi-factor test for independent contractor status set by the California Supreme Court in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341.  Companies who use independent contractors to provide such professional services should be familiar with the Borello factors, and consult legal counsel if they have questions about the proper classification of independent contractors.  The Bain court also held that wage loss claims under Labor Code sections 202, 203 and 1194 were not time-barred because the limitations period was equitably tolled while Bain pursued his administrative claim before the Labor Commissioner. However, the Court reversed the award of statutory penalties to Bain under Labor Code section 1194.2 because the penalties were subject to a one-year limitations period and Bain’s complaint was not filed within one year from the date his Labor Commissioner action became final.

In Harris v. City of Santa Monica, 56 Cal. 4th 203 (Cal. 2013), the California Supreme Court ruled that, to prevail in a mixed motive employment discrimination action, the employee must show that unlawful discrimination was a substantial factor motivating the adverse employment decision.  Further, in mixed motive cases, if the employer proves that it would have made the same decision absent such discrimination, a court may not award damages, back pay, or order reinstatement, leaving only declaratory and injunctive relief, as well as attorney’s fees and costs as possible remedies.  (For additional information regarding Harris, please see our article, California Supreme Court Requires Discrimination as Substantial Motivating Factor in Mixed Motive Cases, Limits Damages Available to Employees.  One of the first post-Harris decisions teaches that Harris is a double-edged sword.  In Alamo v. Practice Management Information Corp., the Court of Appeal followed Harris and held that the plaintiff was required to prove her pregnancy was a “substantial motivating reason” for her termination, not merely a “motivating reason.” Alamo v. Practice Management Information Corp., No. B230909 (Cal. Ct. App. Sept. 5, 2013).  The Court thus reversed a verdict in favor of the plaintiff.  However, the Court also ruled that the employer had waived its right to a Harris mixed motive instruction (i.e. that it would have taken the same employment action regardless of the employee’s pregnancy) because it failed to plead that defense in its answer.  Thus, while Harris heightens the standard for discriminatory intent, employers must insure their answers affirmatively plead the mixed motive defense to make use of it at trial.  Click here for more information.

If the California state minimum wage changes, are you ready?  Employers may need to review the salaries of certain exempt employees to ensure compliance with the minimum salary basis test under the Executive, Administrative, and Professional overtime exemptions. On September 16, 2013, AB 10, the California state minimum wage increase legislation,  was enrolled meaning it has passed both the California Senate and Assembly and is ready for signature by Governor Jerry Brown.  AB 10 could soon amend Section 1182.12 of the California Labor Code to read:

“Notwithstanding any other provision of this part, on and after July 1, 2014, the minimum wage for all industries shall be not less than nine dollars ($9) per hour, and on and after January 1, 2016, the minimum wage for all industries shall be not less than ten dollars ($10) per hour.”

In addition to possible implications for employers with collective bargaining agreements, all private employers with exempt employees in California must determine whether they will remain in compliance.  For employees to be properly classified as exempt under the Executive, Administrative, and Professional Exemptions of most of the California Wage Orders, the employee must earn a monthly salary equivalent to no less than two (2) times the state minimum wage for full-time employment (40 hours per week).  If this legislation is signed, the minimum salary test for the Executive, Administrative, and Professional Exemptions would increase from $33,280 to $37,440 annually.  Employers should review whether their exempt employees will still meet the salary requirement by July 1, 2014 and again by January 1, 2016 if the bill is signed. Keep watch on whether the Governor will sign it this week or next.

A bill regarding an increase in the California state minimum wage could become a reality in the near future. On Thursday, September 12, 2013, the California state Senate approved AB 10, sending legislation back to the Assembly for a final vote before it goes to Governor Jerry Brown.  There is a good chance the bill could become law as Governor Brown has already indicated he would sign the bill.

AB 10 would be the first increase in California’s state minimum wage in six years and would give California one of the highest statewide rates in the nation.  If signed into law, the bill would raise California’s minimum wage from the current $8.00 an hour to $9.00 by July 1, 2014 and to $10.00 by January 1, 2016.

Employers with collective bargaining agreements in California should be certain to determine whether they will remain in compliance in light of the pending rate change.  Under most California Wage Orders, employers and unions are permitted to negotiate for overtime premiums different from those required by the Wage Order so long as their employees are covered by a valid collective bargaining agreement designating wages, hours of work, and working conditions and the employees’ regular hourly rate of pay is not less than 30 percent more than the state minimum wage. If AB 10 is signed into law, employers should be sure to review whether their union contracts or other procedures are affected.

Ketchikan Drywall Services v. Immigration and Customs Enforcement, No. 11-73105 (9th Cir. Aug. 6, 2013):  Ouch, the U.S. Court of Appeals for the Ninth Circuit upheld $172,000 in penalties against the employer for failing to maintain correctly completed I-9 Forms.  The employer argued that it substantially complied with the law by copying the relevant documents and attaching them to incomplete I-9 Forms.  It argued:  “it is senseless to require employer and employees to waste the time necessary to transcribe information onto I-9 Forms when that information is already available on an attached copy of the relevant document.”

The Court did not see it that way, stating:  “But requiring that the parties take the time to copy information onto the I-9 Form helps to ensure that they actually review the verification documents closely enough to ascertain that they are facially valid and authorize the individual to work in the United States . . . It is neither arbitrary nor capricious to require that employers actually complete their I-9 Forms.”

For more on the Court’s decision, click here.

On Wednesday the United States Supreme Court issued two decisions that expand same-sex marriage rights. In the first, United States v. Windsor, the Court ruled unconstitutional a law denying federal recognition of legally-married same-sex couples. In the second, Hollingsworth, et al. v. Perry, the Court…   Click here to read the full article.