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.

In a welcome decision, University of Texas Southwestern Medical Ctr. v. Nassar, No. 12-484 (June 24, 2013), the U.S. Supreme Court ruled yesterday that retaliation claims under Title VII of the Civil Rights Act of 1964 must be established using a “but-for” causation standard, denying the argument asserted by plaintiff and the EEOC that the more easily satisfied “motivating factor” test should be used in determining causation in retaliation cases.  Employers thus can successfully defend retaliation claims under Title VII unless an employee can show they would not have taken the adverse action in question but for the alleged retaliatory intent. For more on the Supreme Court’s decision in Nassar, click here.

Not surprisingly, current California law would call for a different result. As one Court of Appeal has observed, “[I]t is well established that a plaintiff in a retaliation case need only prove that a retaliatory animus was at least a substantial or motivating factor in the adverse employment decision.” (George v. California Unemployment Ins. Appeals Bd. (2009) 179 Cal.App.4th 1475, 1492 [102 Cal.Rptr.3d 431].) In contrast to the “but-for” causation standard adopted by the U.S. Supreme Court in Nassar, California’s “substantial or motivating” factor test offers a greater chance for employees to successfully assert retaliation claims even when the evidence shows the employer would have taken the adverse action in question with or without any alleged retaliatory intent.

 

In Vance v. Ball State University, No. 11-556 (June 24, 2013), the United States Supreme Court defined “supervisory” authority under Title VII of the Civil Rights Act of 1962 as requiring the power to make “a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.” The Court rejected the Equal Employment Opportunity Commission’s broader definition of supervisor which includes authority to direct other employees as a basis for finding supervisor status. Plaintiff Vance argued that her co-worker, who allegedly slapped, threatened and used racial epithets towards her, had authority to “direct her work” and thus was a supervisor for whose actions her employer could be held vicariously liable. The Court disagreed, and held that an employee can be a “supervisor” for purposes of imposing vicarious liability on an employer under Title VII of the Civil Rights Act of 1964 only if the employee is empowered by the employer to take tangible employment actions against the victim. For more on the Vance v. Ball State decision, click here.

California courts applying California law would likely reach the opposite result. The California Fair Employment and Housing Act adopts a broader definition of supervisor and specifically includes “the responsibility to direct employees” as a basis for finding supervisor status so long as that individual exercises independent judgment. Cal. Govt. Code Section 12926(s), Chapman v. Enos (2004) 116 Cal.App.4th 920, 930. In Vance v. Ball State, the Court viewed the authority to direct daily work activities as “nebulous,” “ill-defined” and overly fact specific whereas it deemed its “tangible employment action” test to be an “easily workable” “brightline” rule that makes determining supervisor status something that can be “readily determined” based on documentation and addressed at the summary judgment stage or earlier.  California employers defending  harassment claims under the FEHA may wish to consider asserting the same logical argument, but should first carefully evaluate the issue with counsel.

 

The California Supreme Court has just ruled that Los Angeles County must provide the union representing its employees under an “agency shop” agreement with the home addresses and telephone numbers of all county employees, including non-union employees. County of Los Angeles v. Los Angeles County Employee Relations Comm’n (Serv. Employees Int’l Union, Local 721), No. S191944 (Cal. May 30, 2013). Although the Court recognized that non-union employees have a right to privacy in their home addresses and telephone numbers under the California Constitution and their disclosure would constitute a serious invasion of that right, the Court determined the union’s interest in communicating with employees significantly outweighed their privacy rights. For more on why the Court elevated union over individual rights, click here.

Score one for Washington in a recent dispute between competing employers from Washington and California.  In Meras Engineering, Inc. v. CH20, Inc., a Northern District of California Court enforced a forum selection clause designating Washington as the venue for all disputes — rejecting the California parties’ argument that litigating in Washington would defeat California’s strong public policy against covenants not to compete.  The mere possibility that a Washington Court might subsequently apply Washington law instead of California law failed to move the Court — at least in this case.   This case strengthens the hand of employers who incorporate choice of venue provisions in their employment agreements and carries obvious implications for California and Washington employers alike.  Click here for more on Meras Engineering v. CH20.

Most litigation over whether employees are classified properly as exempt from overtime turns on whether employees spend the majority of their work time performing exempt duties. However, employers should not forget the salary basis requirement. In Negri v. Koning & Associates, No. H037804 (Cal. Ct. App. May 16, 2013), the California Court of Appeal assumed that an insurance adjuster performed more than 50% of his time performing exempt duties, but still found he had been misclassified as exempt because he was paid an hourly rate based solely on the number of hours he worked processing claims and was not guaranteed a minimum salary. Labor Code Section 515(a) exempts an employee from overtime pay eligibility only if s/he is “primarily engaged in the duties that meet the test of the exemption, customarily and regularly exercises independent judgment and discretion in performing those duties and earns a monthly salary no less than two times the state minimum wage for full time employment.” In Negri, even though the employee’s hourly rate significantly exceeded two times the state minimum wage, his wages did not constitute a salary. Consequently, the employer wound up paying 20 hours of overtime for all 66 weeks the employee worked for the company.  For more on Negri, click here http://www.courts.ca.gov/opinions/documents/H037804.PDF.

California law prohibits “use it or lose it” vacation policies and, under Section 227.3 of the California Labor Code, requires all accrued vacation to be paid on termination of employment, “unless otherwise provided by a collective bargaining agreement.” Examining the meaning of the collective bargaining exception for the first time, the California Court of Appeal ruled that the employer was liable for unpaid pro rata vacation because the union agreement did not “clearly and unmistakably waive” the employees’ rights under Section 227.3. Choate v. Celite Corp., No. B239160 (Cal. Ct. App. May 2, 2013). However, the Court reversed the judgment imposing waiting time penalties against the employer because the employer did not act willfully in its vacation payment practices.  For more on Choate, click here .