The Federal Motor Carrier Safety Administration (FMCSA) recently announced that it was exercising its authority under federal law to rule that California’s meal and rest break laws are preempted and cannot be enforced against interstate motor carriers. The FMCSA’s ruling was in response to a petition filed by the American Trucking Associations (ATA) and the Specialized Carriers and Rigging Association (SC&RA).  A big win for the trucking industry, this decision helps define regulatory standards for interstate carriers.

California state laws require employers to provide breaks for their employees for meals and rest. Employees working more than five hours in a day are entitled to receive a 30 minute meal break and, if work extends beyond 10 hours a day, they must receive an additional 30 minute break. Further, every four hours the employee must receive a 15 minute break. For years, interstate motor carriers have argued that these laws, as well as other similar state laws, should not be enforced against them because they are governed by separate hours of service regulations set by the FMCSA.

The ATA and SC&RA first fought the state laws in court, arguing that the provisions of the FAAAA, 49 USC 14501(c), which generally preempts state laws that regulate the routes, prices and services of motor carriers. These cases failed in the Ninth Circuit. See, e.g., Dilts v. Penske Logistics, LLC. The carriers advanced their arguments to Congress, supporting a bill that would have expressly confirmed that California’s laws are preempted. This bill passed in the House but failed in the Senate. Finally, the ATA and SC&RA petitioned FMCSA to use its authority under 49 U.S.C. 31141 to find that the state laws are preempted because they (1) have no safety benefit; (2) are incompatible with federal regulations; or (3) would cause an unreasonable burden on interstate commerce.

On December 21, 2018, the FMCSA announced that it would grant the petition and find the meal and rest break laws preempted. The agency concluded that the laws met all three criteria— they had no safety benefit, were incompatible with federal regulations and caused an unreasonable burden on interstate commerce. The FMCSA’s action was a big win for the ATA and SC&RA, who, in addition to filing the petition that led to the agency’s action, also lobbied extensively for it to be granted. With California’s meal and rest break laws preempted, carriers now have one standard to comply with: federal hours of service. Additionally, carriers are freed from the extensive damages they have faced in cases such as Dilts, in which class action plaintiff attorneys have collected for alleged violation of the now-preempted labor laws.

Unsurprisingly, not everyone is happy with the FMCSA’s decision. The Teamsters Union has already filed suit to block its implementation, arguing that the agency’s findings are arbitrary and not supported by facts. The Teamsters specifically characterized FMCSA’s finding that California’s laws have no safety benefit as “ludicrous.” Notably, the union’s suit is filed in the same court—the Ninth Circuit—that previously ruled in Dilts that federal law did not preempt the state laws. However, that decision was on a blank slate, while the new ruling by the FMCSA must be upheld unless deemed entirely unreasonable.

If they can keep it, the FMCSA’s decision is undoubtedly a win for carriers and another recognition that transportation is a national industry that should not be subject to a patchwork of inconsistent state laws and regulations.

Anyone who pays attention can tell you that California employment law changes constantly. So we’re continually updating Doing Business in California: A Guide for Employers. This 15-page guide provides clear summaries of California’s unique requirements for employers. You can download a PDF of the Guide here. If you subscribe to that whole “ounce of prevention” theory, this is a great way to see if your company is complying with California’s overly complicated employment law requirements. On the other hand, if you’re more of the “ignorance is bliss” type, well, good luck in court.

Special thanks to Nancy Yaffe, Tyreen Torner, Sahara Pynes, and Cristina Armstrong for their work on earlier versions of this guide.

A number of new requirements for California settlement and separation agreements took effect on January 1, 2019. Two of them stem from the #MeToo movement. These are:

  • Assembly Bill (AB) 3109 prohibits language in contracts or settlement agreements that bars anyone from testifying in administrative, legislative or judicial proceedings concerning alleged criminal conduct or sexual harassment. I think that those provisions would have been void under prior law, but there’s no doubt that they’re void now.
  • Senate Bill (SB) 820 prohibits non-disclosure provisions in settlement agreements related to civil or administrative complaints of sexual assault, sexual harassment, and workplace harassment or discrimination based on sex. The bill expressly authorizes provisions that (i) preclude the disclosure of the amount paid in settlement and (ii) protect the claimant’s identity and any fact that could reveal the identity, so long as the claimant has requested anonymity and the opposing party is not a government agency or public official. Settlement agreements signed after January 1, 2019 should be reviewed by counsel to ensure compliance with the new restrictions.

A third bill (SB 1431) has received less attention. This bill changes the language of the ubiquitous Civil Code § 1542 waiver. As of January 1, 2019, the language required to waive unknown claims is:

 

“A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.”

It’s not a huge change (adding “or releasing party” and “or released party”). But if you plan to ask anyone to release claims, you should include the current language.

As the new year begins and I trade my ski boots for my office heels, I’m committed to getting organized for 2019. Specifically, I have compiled a list of issues to keep on my radar for the upcoming year, and I thought I would share them.

1) Keeping up with Local Developments- Though California municipalities, especially San Francisco, have led the way in passing more employee-protective local laws, such ordinances are popping up all over the country…and in unexpected places. If you hire outside the state, don’t assume California’s protective laws will automatically cover you.  Do the research or find local counsel to assist, so you don’t botch the fact that, for example, Michigan has a new sick leave law, Philadelphia passed a new fair workweek bill or Connecticut prohibits salary history inquiries!

2) Independent Contractor Classification- This is a widespread issue across industries that is still evolving.  The effects of the Dynamex case still remain to be seen, as under the Dynamex court’s ABC test, very few workers typically classified as contractors will pass the test.  Unless all three prongs of the new test are met, employers are at risk for misclassification penalties.  Last month alone, several clients have called lamenting that workers they classified as 1099 contractors filed for unemployment, thereby putting the Employment Development Department on notice of a potential misclassification issue and potentially triggering an audit.

3) Addressing Marijuana at Work- While marijuana is still an illegal substance under federal law and the Americans with Disabilities Act does not protect its use, even for medicinal purposes, state laws are in flux and new case law is trickling in. In 2018, courts in Rhode Island, Massachusetts and Connecticut have offered workplace protections for employees utilizing medical marijuana and I expect this trend to continue.

4) Leave law Interactions- We get calls on the intricacies of leave law interactions every day.  With the plethora of local paid sick leave laws, the new Parental Leave Act and the old, but always confusing, PDL, CFRA and FMLA leaves, every leave of absence is unique.  The growing trend of expansive reasonable accommodations that can extend an employee’s leave of absence is another reason to keep this issue top of mind and keep current on emerging case law.

5) New Anti-Harassment Training- All California employers with five or more employees need to conduct mandatory harassment prevention training in 2019.  Even if your supervisors completed training in 2018, the new law requires both supervisory and non-supervisory employees to be trained (or retrained) by January 1, 2020.  Find out how to book one of our Fox attorneys to satisfy your interactive training requirement.

6) Adequate Investigations Post #MeToo- The past year, a side effect of the #TimesUp initiative has resulted in cases of wrongful termination following an inadequate investigation.  As detailed here, employers have certain obligations to both an accuser and an accused when investigating claims of harassment in the workplace.  Failure to complete a fair, prompt and thorough investigation could lead to liability beyond the initial harassment complaint.

It’s that time of year again. Time for holiday parties, ugly sweaters, and summaries of legal developments.

The #MeToo movement has resulted in a slew of new bills addressing sexual harassment in the workplace. They include:

  • Assembly Bill (AB) 3109 prohibits language in contracts or settlement agreements that bars anyone from testifying in administrative, legislative or judicial proceedings concerning alleged criminal conduct or sexual harassment. I think that those provisions would have been void under prior law.
  • Senate Bill (SB) 820 prohibits non-disclosure provisions in settlement agreements related to civil or administrative complaints of sexual assault, sexual harassment, and workplace harassment or discrimination based on sex. The bill expressly authorizes provisions that (i) preclude the disclosure of the amount paid in settlement and (ii) protect the claimant’s identity and any fact that could reveal the identity, so long as the claimant has requested anonymity and the opposing party is not a government agency or public official. Settlement agreements signed after January 1, 2019 should be reviewed by counsel to ensure compliance with the new restrictions.
  • SB 1300 significantly expands liability under the Fair Employment and Housing Act.  The law lowers the burden of proof to establish harassment and provides stricter guidance on what constitutes “severe or pervasive” conduct that rises to the level of unlawful harassment (e.g. rejecting the “stray remark” doctrine that previously required more than one offensive remark to succeed on a claim).  It expands FEHA protection to any harassment by contractors, rather than just sex harassment.  It bars a prevailing defendant from being awarded attorney’s fees and costs unless the court finds the action was frivolous, unreasonable, or groundless. This bill also prohibits release of claims under FEHA in exchange for a raise or a bonus or as a condition of employment or continued employment, but presumably not in separation agreements.  These changes take effect at the start of the new year and we will monitor interpretations or guidance of these new and expansive provisions.
  • SB 1343 expands the requirements relating to sexual harassment training. Current law requires all employers with 50 or more employees to provide two hours of sexual harassment prevention training only to supervisors. The new law now mandates training for all employers with five or more employees and becomes effective in 2020.
  • The FEHA already protects employees and applicants from harassment in the employment relationship. SB 224 expands that reach to individuals who may not be employers, but hold themselves “out as being able to help the plaintiff establish a business, service, or professional relationship with the defendant or a 3rd party.” This would potentially include doctors, lawyers, investors, landlords, elected officials, lobbyists, directors, and producers.
  • Defamation laws make certain communications privileged. In other words they cannot support a slander or libel claim unless they’re made with malice. AB 2770 says that those privileged communications include complaints of sexual harassment by an employee to an employer that are made without malice and are based on credible evidence. This bill would also protect employers who (again, without malice) answer questions about whether they would rehire an employee and whether that decision is based on a determination that the former employee engaged in sexual harassment.

Other bills that address sex, gender, and pregnancy discrimination include:

  • AB 1976 deals with lactation accommodation. Employers were already required to provide a reasonable amount of break time to accommodate an employee desiring to express breast milk for her baby and make reasonable efforts to provide a private place for the employee to do so, in close proximity to the employee’s work area, other than a toilet stall. AB 1976 says its not enough that the location is not a toilet stall. Now it can’t be in a bathroom.
  • AB 2282 clears up lingering issues from last year’s ban on salary history inquiries in the interview process. Our own Nancy Yaffe explains it all in this post.
  • While not strictly employment-related, SB 826 requires public companies based in California to have at least one woman on their board of directors by the end of next year. The requirement rises to two female board members by 2021 if the company has five directors, or to three if the company has six or more directors.

There were even some new employment related bills that had nothing whatsoever to do with sex harassment or discrimination.

  • SB 970 requires 20 minutes of classroom or other interactive training regarding human trafficking awareness to hotel and motel employees whom the law deems “likely to interact or come into contact with victims of human trafficking.” This includes any “employee who has reoccurring interactions with the public, including, but not limited to, an employee who works in a reception area, performs housekeeping duties, helps customers in moving their possessions, or drives customers.”
  • AB 2610 creates an exception to the rule that meal periods must begin before the end of the fifth (or in certain conditions sixth) hour for certain drivers transporting nutrients and byproducts from a licensed commercial feed manufacturer to a customer located in a remote rural location.
  • In November California voters approved Proposition 11, which was a reaction to the California Supreme Court’s 2016 decision in Augustus v. ABM Security Services, Inc. As we explained at the time, the decision announced that employees were not “relieved of all duties” for meal and rest breaks if they were required to carry a communications device. Under Proposition 11, the Augustus decision won’t apply to emergency ambulance workers in the private sector. Toni Vranjes wrote an article for the Society of Human Resource Management about Prop 11 in which she interviewed me and other employment lawyers.

What lies ahead? Last April’s California Supreme Court decision in Dynamex Operations West Inc. v. Superior Court threw employers for a loop by announcing a new test for determining independent contractor status. Competing bills seek either to roll back the decision (AB 71) or codify it (AB 5). This is an issue where many workers who appreciate the flexibility of their freelance status have sided with employers in seeking to return to the earlier test.

What else lies ahead? More change, more surprises, more unpredictability. That’s what makes California employment law both aggravating and fascinating.

No lazy Sunday for Governor Jerry Brown!  Today he signed four new bills into law, taking major steps to combat sexual harassment in the wake of the #MeToo and #TimesUp movements. Here is a brief overview of the new laws and what they mean for California employers:

  • Senate Bill 820 prohibits non-disclosure provisions in settlement agreements related to civil or administrative complaints of sexual assault, sexual harassment, and workplace harassment or discrimination based on sex. The bill expressly authorizes provisions that (i) preclude the disclosure of the amount paid in settlement and (ii) protect the claimant’s identity and any fact that could reveal the identity, so long as the claimant has requested anonymity and the opposing party is not a government agency or public official. Settlement agreements signed after January 1, 2019 should be review by counsel to ensure compliance with the new restrictions.
  • Senate Bill 1300 significantly expands liability under the Fair Employment and Housing Act (“FEHA”).  The law lowers the burden of proof to establish harassment and provides stricter guidance on what constitutes “severe or pervasive” conduct that rises to the level of unlawful harassment (e.g. rejecting the “stray remark” doctrine that previously required more than one offensive remark to succeed on a claim).  It expands FEHA protection to any harassment by contractors, rather than just sex harassment.  It denies a prevailing defendant from being awarded attorney’s fees and costs unless the court finds the action was frivolous, unreasonable, or groundless. This bill also prohibits release of claims under FEHA in exchange for a raise or a bonus or as a condition of employment or continued employment, but presumably not in separation agreements.  These changes take effect at the start of the new year and we will monitor interpretations or guidance of these new and expansive provisions.
  • Senate Bill 1343 expands the requirements relating to sexual harassment training. Current law requires all employers with 50 or more employees to provide two hours of sexual harassment prevention training only to supervisors. The new law now mandates training for all employers with five or more employees and becomes effective in 2020.  In addition, employers must ensure similar training in multiple languages for all workers so they know what sexual harassment is and what their rights are under the law.
  • While not employment-related, Senate Bill 826 requires public companies based in California to have at least one woman on their board of directors by the end of next year. The requirement rises to two female board members by 2021 if the company has five directors, or to three if the company has six or more directors.

Governor Brown did veto one of the most high-profile sexual harassment measure of the year, Assembly Bill 3080, which would have banned mandatory arbitration agreements.  Brown vetoed similar legislation on 2015 and the law, if passed, likely would have faced challenges that it was preempted by the Federal Arbitration Act.

Stay tuned for more in-depth coverage of these new laws.

I was in court last week for a status conference in a wage-and-hour class action, and was talking to my opposing counsel, an active litigator in this arena.  I asked him if the new California Supreme Court case rejecting the de minimis standard was going to be big business for him.

His candid response surprised me, so I thought I’d share it.  He opined that it really isn’t hard to prevent class action lawsuits in California and the de minimis argument really isn’t necessary.  All an employer has to do is:

  • Pay per actual time punches; don’t round at all.
  • Require a 45 minute or one hour meal break; don’t bother with 30 minutes.
  • Provide meal breaks at the 4th hour (always way before the end of the 5th hour worked).
  • Have a fully compliant rest break policy and a strict policy against working off the clock.

To his list I would add:

  • Don’t schedule 6-hour shifts with a 6-hour or less meal wavier; schedule 5 hour shifts or just schedule the meal break.
  • Don’t rely on-duty meal waivers.
  • Update your handbooks every year, it really is cost effective in the long run.
  • Train your managers not to mess things up (even inadvertently), and keep records of that training.

He said that an employer who consistently does all of these things makes taking a class action case very un-interesting for plaintiff’s attorneys like him.

58097900 – class action, 3d rendering, rough street sign collection

Easy enough, right?  Well, it sounds a little bit expensive to me, and it also might create some employee relations issues.  But then again, it might  be worth a try….

In Epic Systems v. Lewis, the U.S. Supreme Court recently approved the use of arbitration agreements that include class action waivers. So this seems an opportune time to reassess the pros and cons for employers of using mandatory workplace arbitration agreements.

The Pros

  1. There are no runaway, emotion-fueled jury verdicts. Arbitration awards can be high, but they tend to be more closely rooted in reality.
  2. The procedures (including discovery) are more streamlined than cases in court.
  3. Although plaintiffs can still publicize what they want, arbitrations are generally more private than court trials.
  4. The cases settle more cheaply. 
  5. The cases usually resolve more quickly in arbitration than in court.
  6. The attorneys’ fees are usually lower.
  7. If you win, the other side’s opportunity to appeal is very limited.
  8. It is now clear that you can require employees to waive the right to pursue class actions.

The Cons

  1. It’s easier for unrepresented parties to bring weak claims.
  2. Forum and arbitrator costs are higher and, in California and many other jurisdictions, the employer bears the vast majority of those costs.
  3. While Epic Systems resolved the issue of class action waivers, the California Supreme Court has said “no” to mandatory arbitration of Private Attorney General Act claims. Eventually, the U.S. Supreme Court may need to address that issue. Also, there have been repeated efforts in Congress to outlaw the practice.
  4. Employees generally don’t like losing access to jury trials. Lately, there have been concerted attempts by some to argue that arbitration agreements protect sexual harassers. However, any remedy that an employee can recover in court against a harasser is available to the same extent in arbitration.
  5. If you lose at arbitration, your opportunity to appeal is very limited.
  6. It can be harder to get cases out on dismissal or summary judgment.
  7. While it hasn’t been my experience, some say that arbitrators tend to “split the baby.” (How I hate that cliche! I don’t like “throwing out the baby with the bath water” either. Leave the poor baby alone!)
  8. As our friends at Wage & Hour – Developments and Highlights point out, plaintiffs’ lawyers who previously filed class actions may now start filing multiple individual arbitrations for wage and hour violations, which could subject employers to burdens and expenses that rival class actions.

The Deciding Factor:

Having tried and arbitrated dozens of cases for employers over the years, I believe that – for most employers – the pros outweigh the cons. Most cases end up settling and cases subject to arbitration tend to settle more cheaply. The fact that there’s no risk of an emotion-fueled jury verdict changes the whole settlement calculation. Employees and their attorneys can’t base their negotiation position on the fact that, if they just get before a jury, they have a shot at a windfall. So if you’re an employer who doesn’t have arbitration agreements with your workers, seriously consider whether it’s time to develop one.

Digital On Air sign, indicating broadcastingOn Fox’s entertainment industry-focused Pay or Play blog, associate Laurie Baddon wrote a post covering recent reports on employment agreements signed by news anchors working at television stations owned by Sinclair Broadcast Group. Laurie breaks down the controversial elements of the agreements, and examines them in the context of California employment law.

To get a better sense of the legal aspects of this national news story, we invite you to read Laurie’s post on Pay or Play.

The Fair Labor Standards Act now permits back-of house employees to participate in mandatory tip pools, provided no tip credit is taken against minimum wage.  The Consolidated Appropriations Act, 2018 budget bill effectively amends the FLSA to clarify two important points: back of house employees MAY participate in certain tip pools however supervisor/manager/owners MAY NOT participate in tip pools.

How does that affect employers doing business in California?

Labor Code section 351 permits mandatory tip pooling for an employee who provides “direct table service” or who is in the “chain of service.”  In 2009, the court in Etheridge v. Reins International California, Inc. (2009) 172 Cal.App.4th 908, 922 held that kitchen staff contribute to the “chain of service” and could receive tips under section 351.

In 2011, the DOL issued a regulation prohibiting back of house employees from participating in tip pools regardless of whether a tip credit was taken.  There was litigation over whether the DOL had authority to issue such a regulation, however the Ninth Circuit in Oregon Restaurant and Lodging Association v. Perez, 816 F.3d 1080 (9th Cir. 2016) held that the DOL acted within the scope of their power, effectively invalidating Etheridge and Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010).

Now that the DOL regulations have been reversed by the recently passed budget bill and FLSA amendment, it seems as though the holdings of Etheridge and Woody Woo are back, clearing the way for back of house employee inclusion in tip pools.

But, we are exercising caution before advising clients to change their tip pools.  Still pending is an appeal to the Supreme Court in the Oregon Restaurant and Lodging Association case as well as a still valid DLSE Opinion Letter from September 8, 2005 that does not include kitchen staff as part of the “chain of service.”  Making changes to your California tip pool at this juncture seems premature as we don’t want you to be the test case.