What is a disability under the Fair Employment and Housing Act? When are employers on notice to provide employees leave under the California Family Rights Act?  These were some of the questions addressed in the California Court of Appeals (Second Appellate District) November 15, 2016 decision, Soria v. Univision Radio Los Angeles, Inc. 

Click here to read the full article about this decision on our Disability, Leave & Heath Management Blog.

All California employers should know by now that if they have a paid vacation policy, the vacation benefits constitute a form of “wages” under California law. (See Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1103; Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 784.)  California employers are also likely readily familiar with the requirements of Labor Code section 226(a), which require employees’ wage statements to contain certain information, including gross wages earned.

But absent a vacation pay-out upon the termination of the employment relationship, are employers required to include the monetary value of accrued vacation time in employees’ wage statements under Section 226(a)? The answer is no, as held by the Court of Appeal on October 20, 2016 in Soto v. Motel 6 Operating, L.P.

In so holding, the Court of Appeal found that neither the statutory language of section 226 nor its statutory purpose supported the position that employers are required to list the monetary amount of earned vacation pay on each itemized wage statement.

The court first noted that despite the fact that section 226(a) was highly detailed and contained nine separate categories of information that must be included on wage statements, the section did not identify accrued paid vacation as one of these categories. It rejected the argument that an accrued vacation benefit fell within the definition of “gross wages earned” and “net wages earned” categorized in section 226(a), because courts recognized that although vested vacation time vested as labor was provided, unused vacation time did not become a quantifiable vacation wage until the employee separated from employment.  (Church v. Jamison (2006) 143 Cal.App.4th 1568, 1576-1577.)

The court also found support for this principle in the language of Labor Code section 227.3, which required all vested vacation to be paid to the employee “as wages” at his final rate upon termination, which lead to the reasonable inference that prior to termination, accrued vacation pay was not a “wage.” The court further observed that before separation, the amount of vacation pay to which the employee might be entitled was not ascertainable, since the amount of unused vacation and an employee’s final rate may change.

Additionally, the court looked at the provisions of section 226(a) as a whole, instead of focusing solely on the statutory term “wages.” These provisions stated that at the time of each payment of wages, the employer must furnish an accurate itemized statement of these earned wages.  Since unused vacation pay was not paid to the employee until the termination of the relationship, and the monetary value of the unused vacation pay could not be determined until the termination date, the court found it illogical to extend the requirement that an employer identify earned “wages” to accrued vacation benefits.

Finally, the court reviewed the statutory purpose of section 226(a), which was to document the paid wages to ensure the employee was fully informed regarding the payment of those wages.  Requiring the employer to identify items that were not part of the employee’s current monetary compensation did not further this legislative purpose.

On October 7, 2016, Dependable Highway Express filed a petition asking the California Supreme Court to review a decision to allow a non-disabled employee to pursue his claim of association based disability discrimination.

Click here to read the full article and implications of the case at our Disability, Leave & Heath Management Blog.

It is common practice for employers to utilize forum selection and choice of law provisions in employment agreements in order to require employees to have employment-related disputes adjudicated outside of California and/or under the law of a state other than California. There are a myriad of compelling reasons an employer would seek to include such provisions in its employment law contracts, such as the desire to have disputes adjudicated in a state with laws that are more favorable to employers or a preference to litigate in the state where an employer’s principal place of business is located.

However, starting January 1, 2017, Senate Bill 1241 (“SB 1241”) will prohibit employers from requiring an employee who resides and works in California to agree, as a pre-requisite to employment, to adjudicate disputes outside the state and/or under the law of a state other than California. Accordingly, any provisions in contracts entered into, modified or extended on or after January 1, 2017 that violate SB 1241 are voidable at the request of the employee and any dispute regarding a voided provision must be adjudicated in California under California law. What’s more, if an employee elects to enforce his rights under Labor Code Section 925, the statute provides a basis from which the employee can be awarded attorneys’ fees.  The goal of SB 1241 is to ensure that employees working in California are not deprived of the “substantive protection of California law with respect to a controversy arising in California.” SB 1241.

Notably, SB 1241 does not apply to contracts entered into with an employee who is individually represented by legal counsel in negotiating the terms of an agreement containing forum selection and choice of law provisions.

In advance of 2017, employers who have contracts with employees who live and work in California should audit their employment agreements in order to ensure they do not contain provisions that would violate SB 1241.

California voters have decided on a number of important Propositions yesterday. Of the Propositions receiving majority support, California employers may particularly wonder about the potential impacts of Proposition 64, which will legalize the recreational use of marijuana.  Below are some potential impacts of Prop 64 on Employers in California:

  • Proposition 64 is not expected to affect an employer’s workplace drug policies. Proposition 64’s primary component is the decriminalization of recreational marijuana use, not banning or restricting an employer’s ability to regulate marijuana usage in the workplace.
  • Proposition 64 explicitly allows public and private employers to enact and enforce workplace policies pertaining to marijuana.
  • Proposition 64 explicitly provides it does not amend, repeal, affect, restrict, or preempt “the rights and obligations of public and private employers to maintain a drug and alcohol free workplace or require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale, or growth of marijuana in the workplace, or affect the ability of employers to have policies prohibiting the use of marijuana by employees and prospective employees, or prevent employers from complying with state or federal law.”
  • Under the Controlled Substances Act, Marijuana remains a Schedule I drug (a designation for controlled substances prone to abuse and psychological/physical dependence). Hence, employers can still rely on federal law to refuse to hire applicants who tested positive for marijuana use.
  • In the meantime, employers should review their drug policies to ensure that potential applicants and employees clearly understand the expectations on marijuana use.

The California employment law landscape is ever-evolving. Watch a recording of our California Legal Update Webinar Series to learn about the latest changes and how they affect employers.

  • California Legislative Update
    This presentation covers employment laws that have been enacted in California over the last year and proposed bills that, if passed, will affect California employers. Learn about the impact these laws will have on companies across California.
  • California Paid Sick Leave Update
    Paid sick leave is proliferating across the country, and California is no exception.  Here we will explore the ins and outs of California’s state sick leave law, plus City of Los Angeles, San Diego, San Francisco, Oakland, and other local sick leave ordinances.  In addition, we will discuss strategies for complying with this patchwork quilt of California sick leave laws.
  • California Wage and Hour Update
    This session will cover the upcoming Dec. 1, 2016 Department of Labor Final Rule salary basis test minimum increase going into effect; California minimum wage increases; the California salary basis test; updates on misclassification and overtime; independent contractor misclassification; and class actions/PAGA; and California’s Fair Pay Act.

On September 7, 2016, the California Department of Fair Employment and Housing (“DFEH”) announced modifications to its proposed regulations originally promulgated on February 19, 2016, governing the use of criminal history in employment decisions.  The new regulations are intended to prevent disparate impact discrimination against protected classes such as gender, race, and national origin.  If passed, the new modified regulations will impose more restrictions on employers, including a burden shifting test.

The September 2016 proposed regulations provide that a policy or practice of basing employment decisions on criminal records having an “adverse impact” on an applicant or employee must be “both job-related and consistent with business necessity.”

The Applicant or Employee’s Burden: “Adverse Impact”

Under the proposed regulations, the applicant or employee must show “adverse impact.”  “Adverse impact” is defined as “disparate impact” under the EEOC (i.e., a disproportionately adverse effect on members of a protected class compared to non-members of the class).  The proposed regulations add that, if the applicant or employee can show “substantial disparities in the conviction records of one or more” protected categories such as gender, race, or national origin, those statistics are “presumptively sufficient to establish an adverse impact.”

The Employer’s Burden: Job Relationship and Business Necessity

Under the proposed regulations, once the affected individual shows adverse impact, the burden shifts to the employer to prove the decision is both job-related and consistent with business necessity.  The employer must show the policy or practice bears a “demonstrable relationship to successful performance on the job and in the workplace and measure the person’s fitness for the specific job, not merely to evaluate the person in the abstract.”

To establish job-relatedness and business necessity, the employer must demonstrate that the policy or practice is “appropriately tailored to the job for which it is used as an evaluation factor.”  This requires taking into account at least the following three factors:

(1) the nature and gravity of the offense;
(2) the time passed since the offence or completion of the sentence; and
(3) the nature of the job held or sought.

The employer must also use one of the two following tests to determine whether the policy or practice is “appropriately tailored:”

(1) a “bright-line, across the board” conviction disqualification which would not depend on individual circumstances; or
(2) an individualized assessment of the circumstances and qualifications of the individuals excluded by the conviction screen.

Under the “bright line” test, the employer must show (1) that its test can properly distinguish between individuals who do and do not pose an unacceptable level of risk, and (2) that the convictions being used as the basis have a direct and specific negative bearing on the person’s ability to perform the duties or responsibilities necessarily related to the employment position.  The “bright line” test is subject to a rebuttable presumption if the conviction is over 7 years old.

Under the individualized assessment method, the employer must investigate the circumstances or qualifications of individuals excluded by the conviction screen.  After conducting the individualized assessment, the employer must then take three additional steps:

(1) provide specific notice to the affected individuals that they have been screened out because of a criminal conviction;
(2) provide a reasonable opportunity for the individuals to demonstrate that the exclusion should not be applied to their particular circumstances; and
(3) consider any additional information provided.

Under both the “bright-line” and “individualized assessment” tests, the employer must give impacted individuals notice of the disqualifying conviction and a reasonable opportunity to present evidence that the information is factually inaccurate.  If inaccuracy is demonstrated, that record cannot be used in an employment decision.

The inquiry does not end there.  Even if an employer demonstrates that its policy or practice is job-related and consistent with business necessity, impacted individuals may still prevail if they can demonstrate that there is a less discriminatory policy or practice that serves the employer’s goals as effectively as the conviction screen.  These may include, for example, a more narrowly targeted list of convictions or another form of inquiry that evaluates job qualification or risk as accurately without significantly increasing the cost or burden on the employer.

Jackson Lewis attorneys are available to help employers navigate these issues.  Should you have any questions about the proposed regulations, please feel free to contact Heath Havey at heath.havey@jacksonlewis.com, or the Jackson Lewis attorney with whom you regularly work.

For employers with California employees, there seems to be no way to avoid California’s complicated and protective employment laws, and things just got a bit more complicated.

On September 25, 2016, Governor Brown signed into law SB 1241, which prohibits employers from requiring California employees to litigate or arbitrate employment disputes outside of California or under the laws of another state.

SB 1241 applies to any contract entered into, modified, or extended on or after January 1, 2017. The new law prohibits so called “choice of law” and “forum selection” clauses that require employees who live and work in California to bring their employment claims in jurisdictions other than California or under the laws of another state.  Any provisions of a contract that contain prohibited choice of law and forum selection clauses are voidable by an employee, meaning that the dispute will be decided in California under California law.  The law also provides that the court can award the employee attorney’s fees, in addition to an injunction, when an employee successfully challenges the prohibited choice of law and forum selection clauses.

Key Limitations of SB 1241

Despite its broad impact, the law is subject to a number of key limitations.

  1. It does not apply to existing contracts unless they are modified or extended on or after January 1, 2017.
  2. It only applies to employees who “primarily” reside and work in California.
  3. Therefore, non-California choice of law and forum selection clauses may be permissible for employees who primarily reside outside of California even though they do work in California.
  4. It only applies when agreement to the choice of law and forum selection clauses are a “condition of employment.”
  5. Although the law is not clear, presumably contracts dealing with ancillary issues such as job benefits, bonus programs, etc., may not be covered.
  6. Only the choice of law and forum selection provisions, not the entire contract, are voidable.
  7. The law does not apply to contracts where the employee is individually represented by an attorney in negotiating the terms of the agreement.

Best Practices for Employers

Employers should review their employee agreements to determine if they require, as a condition of employment, choice of law and forum selection clauses, which are prohibited by the new law. If so, employers should modify those agreements to provide an express exemption for California employees with respect to the choice of law and forum selection clauses and ensure that the remaining portions of the agreements are consistent with California law.

Jackson Lewis attorneys are available to help employers navigate these issues.  Should you have any questions about the new law, please feel free to contact Sander van der Heide at sander.vdheide@jacksonlewis.com, Dale R. Kuykendall at Kuykendd@jacksonlewis.com, or the Jackson Lewis attorney with whom you regularly work.

On September 30, 2016, California Governor Jerry Brown signed into law two bills designed to address ongoing concern of pay inequity. A.B. 1676 amends the California Fair Pay Act by prohibiting employers from relying on an employee’s prior salary to justify a disparity between the salaries of similarly situated employees.  S.B. 1063 extends the Fair Pay Act by providing additional protections on the basis of race and ethnicity.  A.B. 1676 and S.B. 1063 are effective January 1, 2017.

The Legislature was concerned that the practice of using an applicant’s salary history as a basis for current salary unfairly affects women candidates who may have taken time out of the workforce, or who are already unfairly affected by the gender pay gap. Left unaddressed, the Legislature believes such practices will, even unintentionally, perpetuate pay disparity between men and women who perform substantially similar work.  Accordingly, under A.B. 1676, prior salary history alone is no longer sufficient to justify pay disparity between men and women who perform substantially similar work.

Along with A.B. 1676, Governor Brown signed S.B. 1063, the Wage and Equality Act of 2016. S.B. 1063 prohibits employers from paying employees of one race or ethnicity less than employees of different races or ethnicities who perform substantially similar work.  S.B. 1063 is an extension of the requirements of last year’s Fair Pay Act.

Under the Fair Pay Act, employers can no longer rely on the notion of equal pay for equal work. Instead, employees alleging pay disparity must now only show “substantially similar work when viewed as a composite of skill, effort and responsibility.”  This allows employees and the courts to compare wages of employees who perform similar work, even if the job title is different.  Likewise, comparisons are no longer limited to the “same establishment,” but rather may be a comparison at any of the employer’s locations. While the Fair Pay Act specifically addressed gender, its requirements now apply equally to race and ethnicity under S.B. 1063.

California already has stringent laws regarding equal pay. Employers should review their policies and practices to ensure compliance with the Fair Pay Act.  With the passage of A.B. 1676 and S.B. 1063, California employers must be careful in assessing employee salary.

Jackson Lewis attorneys are available to help employers navigate these issues.  Should you have any questions about the new law, please feel free to contact Shane R. Larsen at shane.larsen@jacksonlewis.com, Cary G. Palmer at palmerc@jacksonlewis.com, or the Jackson Lewis attorneys with whom you regularly work.