An employer who is strategic and proactive in California wage and hour compliance can avoid hundreds of thousands of dollars in potential liabilities and defense costs. For example, there is significant litigation regarding employment applications in California especially the limitations regarding criminal convictions set forth at California Labor Code Section 432.7, et seq. and Section 432.8. Look at the course of events involving an employer’s employment application which failed to properly exclude inquiries regarding certain marijuana convictions more than 2 years old.

Three individuals brought a class action against Starbucks Corporation (“Starbucks”) alleging more than $26 million in statutory penalties on behalf of an estimated 135,000 job applicants based on Starbuck’s employment application. In Starbucks Corp. v. Superior Court (2008) 168 Cal.App.4th 1436, the court held plaintiffs did not have standing to represent the proposed class because none had any marijuana convictions to disclose.

Subsequently, a court permitted plaintiffs to file a first amended complaint to include only job applicants with marijuana convictions and permitted class counsel to conduct further discovery to find a “suitable” class representative. Incredibly, Starbucks was ordered to review applications until it identified job applicants with prior marijuana convictions and then was ordered to disclose their names to class counsel. The employer appealed the discovery order. On April 25, 2011, the Fourth Appellate District Court reversed the discovery order since the order violates the “reform legislation the class action purports to enforce” – to avoid disclosure of certain marijuana convictions. See, Starbucks Corp. v. Super. Ct. (CA4/3 G043650 4/25/11)

In light of this chain of events, employers should consider being proactive and strategic by reviewing your employment application, forms and handbooks for California law.

A recent California Appellate Court upheld an employer’s right to terminate an employee for misconduct involving violent acts or threats of violence even if caused by a disability under the California Fair Employment and Housing Act (“FEHA”). In Wills v. Superior Court., No. G043054 (4th Appellate District April 13, 2011), the Court dismissed the employee’s disability discrimination claim against Orange County Superior Court (“OC”). Linda Wills (“Wills”), the employee, suffered from bipolar disorder. At one point during her employment, Wills allegedly had a severe manic episode and threatened employees that they would be on her kill list. A short time later, Wills’ was provided a leave of absence. During the leave, she allegedly sent coworkers ring tones that included threatening statements and also sent threatening emails. 

The Court dismissed the cause of action for disability discrimination because OC provided a legitimate non-discriminatory reason for its actions. The Court held that an employee may be terminated for disability-caused misconduct involving threats of violence or violence against a coworker. It found that this strikes the appropriate balance between the employer’s duty not to discriminate based on disability and at the same time provide a safe working environment.

The Court distinguished the Ninth Circuit case of Gambini v. Total Renal Care, Inc. (9th Cir. 2007) 486 F. 3d 1087, where the Ninth Circuit held that conduct cause by a disability is part of the disability and cannot be a separate basis to terminate an employee.  In Gambini, the plaintiff was terminated because her outbursts generally frightened coworkers.  The Appellate Court  distinguished Gambini  case by noting that the plaintiff in that case was not terminated for making threats but for frightening coworkers.  Employers should be mindful of this difference.  It will be interesting to see if the California Appellate Court’s refinement of the much criticized Ninth Circuit Decision in Gambini will withstand possible appeal by the plaintiff.

California Department of Fair Employment and Housing (DFEH) Director Phyllis W. Cheng, speaking at the Jackson Lewis LLP-sponsored Association of Corporate Counsel (ACC) Labor and Employment Committee Meeting on Feb. 22, 2011, told the gathering of business lawyers that the agency would continue to pursue high-impact cases of “systemic discrimination” under the Fair Employment and Housing Act (FEHA) and the California Family Rights Act (CFRA) as a means of leveraging its resources in a time of government austerity.

The DFEH established a Special Investigation Unit to pursue such cases potentially through class actions and multi-plaintiff  litigation. According to Cheng, the DFEH has transformed itself under the state’s fiscal crisis measures to become more effective and efficient. Doing more with less, Cheng said the DFEH now targets “systemic discrimination” with case grading, special investigations, group and class actions, mediation, and education.

Employers who operate in California face unique challenges. California continues to expand the rights of employees. Even well-intentioned employers, for lack of appropriate guidance, can find themselves at risk for violations of the law.  As Cheng eloquently stated, the lessons are clear for employers: “Complying with workplace laws is good for business and productivity." For more information, see   Calif.’s Canary In The Employment Mine Shaft

As a perquisite to file a civil lawsuit under the California Fair Employment & Housing Act ("FEHA"), a current or former employee must file a charge of discrimination with the Department of Fair Employment and Housing ("DFEH") within one year of the alleged adverse act. Gov’t Code § 12960(c). If the DFEH chooses not to pursue a claim on behalf of the aggrieved employee or the employee requests to pursue his or her civil remedies without the DFEH’s assistance, the DFEH will issue a right-to-sue notice. The right-to-sue notice entitles the employee to bring a civil suit against the employer within one year. The question is whether the statute of limitations to file a civil suit is triggered upon issuance or receipt of the right-to-sue notice? A California appellate court recently answered this question.

In Hall v. Goodwill Industries of California, 193 Cal. App. 4th 718 (2011), a former employee filed a charge of discrimination with the DFEH and received an immediate right-to-sue notice. The employee became incapacitated during the period after the DFEH issued his right-to-sue notice, and was allegedly unaware that the DFEH sent the notice until almost a year later. He filed a civil complaint one year after the DFEH sent the right-to-sue notice, but less than one year after receipt of the right-to-sue notice.  Interpreting the plain language of Government Code section 12965(b), the appellate court confirmed that the date of issuance—not the date of receipt—triggers the running of the statute of limitations to file a civil complaint.　

Notably, the appellate court’s interpretation of the statute of limitations under FEHA is different from federal interpretations of a similar, but not identical, statute of limitations under Title VII. Under Title VII, a civil lawsuit must be filed 90 days after receipt of the right-to-sue letter.

A divided panel of judges at the Ninth Circuit held a plaintiff must demonstrate some statistically significant evidence in support of his or her disparate impact claim under the Americans with Disabilities Act and the California Fair Employment and Housing Act, even though such evidence may be very difficult to obtain. Lopez v. Pacific Maritime Assoc., No. 09-55698 (9th Cir. Mar. 2, 2011). 

A former addict alleged her potential employer’s “one-strike” rule discriminated against recovering addicts who seek employment after previously failing its pre-employment drug test.  The employer enforces a “one-strike” rule for all applicants seeking positions as longshore workers under a collective bargaining agreement.  The rule “eliminates from consideration any applicant who tests positive for drug or alcohol use during the pre-employment screening process.”  Applicants receive at least seven days’ advance notice of the tests.  Applicants who fail the screening are disqualified, automatically and permanently, from consideration for future employment with the association’s employers. The Court rejected the former addict’s argument with respect to disparate impact claims because the individual failed to support his contention with anything other than a “bald assertion” that the rule adversely impacted recovering drug addicts.

 

Since federal and California laws strictly regulate drug and alcohol testing policies, employers must consult with legal counsel  prior to promulgating a new policy. Moreover, the division in the panel of three judges who decided the case at the Ninth Circuit suggests this is an issue that could be subject to review by the full Ninth Circuit court, and may ultimately be headed for the U.S. Supreme Court.  For details about the case, please see Ninth Circuit Divided on Applicable Proof for Disparate Impact ADA Claim Brought by Former Addict

The Ninth Circuit rules that an employer has the burden of proving it had a legitimate reason for not reinstating an employee to her former position after taking a leave pursuant to the federal Family and Medical Leave Act (“FMLA”). The Court also found that the employee need not demonstrate her employer lacked a reasonable basis for its refusal.  Sanders v. City of Newport, No. 08-35996 (9th Cir. Mar. 17, 2011).
 
While an employee normally should be reinstated “to her original (or an equivalent) position” within the 12 week leave period under FMLA, the right of reinstatement is not absolute.  The U.S. Department of Labor (“DOL”) regulations provide that     “[i]f the employee is unable to perform an essential function of the position because of a physical or mental condition . . . the employee has no right to restoration to another position under the FMLA.”  29 C.F.R. § 825.214(b). The regulations do not specify which party bears the burden of proof, and the Court had not previously addressed this issue.  In the case, the Ninth Circuit found the burden of proof is on the employer to show it had a legitimate reason to deny reinstatement. 

The Sanders decision illustrates that, while the right to reinstatement from FMLA leave is not absolute, an employer who denies reinstatement to an employee must be prepared to prove the employee had no such right. For more information, please see Employers Must Prove Reasons for Denying Reinstatement after FMLA Leave, Ninth Circuit Rules 

The California Court of Appeals has held that a California employer did not owe overtime to an employee because it had entered into an explicit mutual wage agreement that provided for base compensation and overtime in one lump sum.  Arechiga v. Dolores Press, Inc., No. B218171 (Cal. Ct. App. Feb. 7, 2011).  Carlos Arechiga (“Arechiga”) and Dolores Press, Inc. (“DPI”) agreed that Arechiga would work 11 hours a day, six days a week, for a total of 66 hours per week, consisting of 40 straight-time hours and 26 overtime hours.  DPI paid Arechiga a lump sum of $880.00 a week. Arechiga and DPI later entered into a written employment agreement stating that Arechiga would be paid a “salary/wage of $880.00.”

Arechiga argued that Labor Code Section 515(d) prohibited explicit mutual wage agreements for nonexempt employees based on the California’s Division of Labor Standards Enforcement’s Enforcement Policies and Interpretations Manual.  The Court rejected Arechiga’s argument, noting that the DLSE’s Manual was “non-binding” on the courts because it was not properly adopted under the Administrative Procedures Act.  Further, California case law recognized such agreements for non-exempt employees.  The Court concluded that explicit mutual wage agreements remained valid under California law and that the trial court properly upheld the parties’ agreement.

 The use of explicit mutual wage agreements for non-exempt employees should be entered into carefully and employers should work with counsel to ensure that they comply with applicable law.  For additional information click on California Court Rules Employer Not Required to Pay Overtime under Explicit Mutual Wage Agreement

Governor Brown announced that Julie Su has been appointed as head of the California Division of Labor Standards Enforcement. 

Here is the text of the announcement from the Governor’s website: “Julie Su, 41, of Cerritos, has been appointed Chief of the Division of Labor Standards and Enforcement. Su has worked at the Asian Pacific Legal Center in Los Angeles since 1994, where she currently serves as Director of Litigation. Su has devoted her career to serving the public interest as a civil rights attorney, specializing in representing low-wage workers. Su earned a Bachelor of Arts degree from Stanford University and a Juris Doctor degree from Harvard University. This position requires Senate confirmation, and the compensation is $138,546. Su is a Democrat.” See link to announcement

 What does this mean for California employers and how will it affect, if at all, the California Division of Labor Standards Enforcement’s administrative enforcement position on hot button wage and hour issues? At least one person Jackson Lewis spoken with at the DLSE speculated they would not be surprised if the DLSE’s meal-period enforcement position changed. It will be important to closely monitor the DLSE web site and any upcoming speeches Ms. Su may deliver for any developments. 

 

Jonathan Siegel

Citing the administrative burden placed on the State Labor Commissioner, Governor Schwarzenegger has announced his veto of Assembly Bill 2468. This bill would have permitted an employer to use the designation “Mother-Friendly Worksite” in its promotional materials, if it submitted its workplace breast-feeding policy to the Labor Commissioner and the Labor Commissioner determined the employer’s policy provided for specified criteria. Also, the bill would have required the Labor Commissioner to post a list of “Mother-Friendly” worksites on its website.

The Governor’s veto message succinctly states:

“Existing California law establishes protections for lactating mothers. This bill would do nothing to augment or improve these existing laws pertaining to a lactating mother’s right to express milk in the workplace. Instead, the bill would create additional responsibility for the Labor Commissioner, without any indication that the new requirements are either warranted or necessary.”
 

Inquires from a number of companies and recent headlines about arrests of company executives, celebrities and their companions and the resulting fall out, including job loss, raises an issue that many California employers may not be aware of. The state Labor Code prohibits employers from taking adverse action against applicants and employees for an arrest when the arrest does not lead to a conviction. While employers can ask about pending arrests, the statute (Labor Code Section 432.7) prohibits an employer from using arrest status as a basis for imposing discipline or other terms and conditions of employment. Indeed, some years ago an employee successfully sued his employer, a school district, because it demoted him after receiving notice that he had been arrested.

All is not lost, however. Employers confronted with this situation should investigate the allegations. The statute permits employers to inquire about pending arrests, but not act upon the arrest status. Discipline that is imposed as a result of an investigation or the employee’s failure to cooperate in it should be permissible. In conducting an investigation, be sure to ask the employee what happened and if he committed the crime. You may be surprised – he could confess! The investigation likely should meet the legal standards for establishing a termination for good cause – a good faith belief the employee committed misconduct. The employee should not be faulted if he cannot provide a copy of the police report because it has not been released or if the authorities fail to cooperate in the investigation. Also, remember that the adverse action may need to be job related and consistent with business necessity or it could open the door to a discrimination claim.