We recently updated a 15-page Employer’s Guide to Doing Business In California. The guide provides clear summaries of California’s unique requirements for meal and rest periods, the Fair Pay Act, paychecks and wage statements, the various leaves of absence, and more. 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 unique employment law requirements. You can download a pdf of the Guide here.

Spending a little time to determine if your company is sufficiently protected is a lot quicker and cheaper than waiting for a lawsuit and learning first hand why California ranks as the number one judicial hellhole.

Copyright: ibreaker213 / 123RF Stock Photo
Copyright: ibreaker213 / 123RF Stock Photo

Special thanks to Cristina ArmstrongTyreen Torner, and Sahara Pynes for their work updating prior versions of the guide.

Last Friday, the US Supreme Court agreed to hear cases from the 9th,  7th, and 5th Circuits in which the courts are split on the issue whether class action waivers in employee arbitration agreements violate Section 7 of the National Labor Relations Act by inhibiting employees’ rights to engage in “concerted activity”.  The NLRB has been promoting this novel theory for the past few years, under which the arbitration agreement can be invalidated notwithstanding the fact that it is otherwise enforceable under the preemptive effect of the Federal Arbitration Act.  Readers of this blog will recall that the California Supreme Court rejected that theory in Iskanian v. CLS. The defendant in that case argued that a class action does not necessarily involve “concerted” action at all.  A class action merely requires one employee with a complaint and a lawyer to file the case.  Only in the world of legal fiction can such a case automatically constitute “concerted activity”.  That legal fiction is a far cry from the scenario — several employees standing around the water cooler griping about wages and talking about unions and strikes —  envisioned by Congress in 1935 when the phrase “concerted activity” was coined.

Now, the US Supreme Court will settle the issue, and the lower  courts and particularly the NLRB will finally be bound by the result.  The cases will be briefed and argued later in the year.  By then, there will likely be a full complement of nine Justices on the Court.  The current Court may be split 4-4 on this issue.  The new Justice, assuming she or he is confirmed over what  is likely to be fierce opposition in the Senate,  will thus probably  be the deciding vote in these casesThe cases are Morris v. Ernst&Young (9th Cir.), Lewis v. Epic Systems (7th Cir.), and Murphy Oil v. NLRB (5th Cir.).  In these cases, and other employment cases likely to come before the Supreme Court in the near future, the stakes are high and the issues profound.  As we have said before, what a difference an empty chair makes.

Let’s pick up where we left off. In our last post of 2016, I was complaining about the California Supreme Court’s decision in Augustus v. ABM Security Services, Inc. The majority opinion in that case said that employees who were required to carry phones or pagers on their rest breaks, even if they didn’t get called or paged, were deprived of their statutory breaks and were therefore owed a one-hour penalty. While I found plenty to complain about in that decision (I’m good that way), there’s another issue I want to address.

Copyright: bruno135 / 123RF Stock Photo
Copyright: bruno135 / 123RF Stock Photo

The third sentence of the decisions says: “During required rest periods, employers must relieve their employees of all duties and relinquish any control over how employees spend their break time.” The language comes from Brinker Restaurant Corp. v. Superior Court, which dealt with meal periods. But what does it mean? Are employees exempt from substance abuse, dress code, firearm possession, and harassment prevention policies during breaks? Stated differently, is the employer powerless if workers use their break time to get drunk, strip off their clothes, and chase co-workers around the workplace with guns demanding sexual favors? I’d like to think that the answer is “no,” but Augustus, in interpreting the wage orders, urges us to give language its “plain and commonsense meaning,” If that’s what we’re supposed to do, it would be nice if the courts chose their words with a little more care. The penalties for not complying with wage and hour laws are draconian enough without the laws being too vague for employers to know what’s expected.

The worst aspect of California employment law is the way it combines unclear requirements with exorbitant penalties for noncompliance. So employers can’t necessarily tell what the law requires and, if they get it wrong, face crippling financial penalties. The latest illustration of that principle comes from the California Supreme Court’s December 22, 2016 opinion in Augustus v. ABM Security Services, Inc.

The plaintiffs in this consolidated class action worked as security guards and were required to keep their pagers and radio phones on during their 10-minute rest periods and to respond when needs arose. ABM argued that it was providing a sufficient rest period. But the trial court disagreed and decided on plaintiffs summary judgment motions that they were not relieved of all duty and that they were therefore entitled to $90 million in damages, interest, and penalties (the penalty for missing a 10-minute rest period being an hour of pay).

ABM appealed and the Court of Appeal reversed, holding that being on call does not constitute performing work. Then the California Supreme Court granted review and reversed the Court of Appeal, reinstating the $90 million judgment.

The Industrial Welfare Commission Wage Orders clearly state that employees must be “relieved of all duty” during meal periods. But there is no corresponding language in the rest period requirement. Instead, the majority opinion intuited that employees must be relieved of all duties during rest periods from analyzing the definition of “rest.” The court also looked at Labor Code §226.7, which prohibits employers from requiring employees to work during rest periods. Finally, the court focused on the fact that the Wage Orders make provisions for on-duty meal periods, but not for on-duty rest periods. That being the case, it reasoned, on-duty rest periods must not be allowed.

Copyright: twinsterphoto / 123RF Stock Photo
Copyright: twinsterphoto / 123RF Stock Photo

All of this begs the question whether being required to carry a radio or pager constitutes work. The majority opinion states that employees are not relieved of all duties if they’re required to be on call. This conclusion, it notes, is the most consistent with its interpretation of the Wage Orders and Labor Code and with the axiom that those sources should be construed in a manner to protect employees.

A two-justice dissenting opinion explained that the “the bare requirement to carry a radio, phone, pager, or other communication device in case of emergency does not constitute ‘work’ in any relevant sense of the term.” This was especially true, the dissent noted, given the lack of any evidence that any guards’ rest breaks ever were, in fact, interrupted. The dissent also explained that the majority opinion creates further ambiguity by saying that the employees in question were deprived of their rest periods where they were required to “remain on call, vigilant, and at the ready during their rest periods.” If requiring employees to be “vigilant” and “at the ready” is part of what made these rest periods inadequate, the dissent asked, shouldn’t the court explain what that means? Or do we need another decade’s worth of class-action litigation to sort that out, too?

Here are steps employers should take now to comply with this decision:

  • Prohibit employees from carrying employer-provided pagers, radio phones, or similar communication devices at work.
  • In most situations, you should not prohibit employees from using their personal mobile phones on rest breaks, since the time is their own and they must be free from employer control. But you should not require them to monitor their phones.
  • If an employee’s rest period is interrupted with work requirements, either provide a different uninterrupted 10-minute rest period (you could start the 10 minutes running again after the interruption) or pay the penalty.
  • If, as the employer, you exercise any control over what employees can do during their rest periods, consult counsel as to whether that practice is still defensible.

On January 1, 2017, the California minimum wage will increase for businesses with more than 25 employees from $10 per hour to $10.50 per hour. This is another step toward a $15 per hour minimum wage on January 1, 2022. You can see a schedule of the planned increases here. The legislation allows the governor to pause increases for a year if budget or economic factors dictate.

Copyright: svlumagraphica / 123RF Stock Photo
Copyright: svlumagraphica / 123RF Stock Photo

In addition, more than 20 cities and counties, three ports, and various business zones have their own minimum wage/living wage ordinances (which the good folks at UC Berkeley (Go Bears!) have been kind enough to track for you here).

Businesses subject to the state increase (i.e. those with more than 25 employees) will see a corresponding increase in the minimum salary required for the executive, administrative, and professional exemptions to $43,680. That’s not so bad considering that, up until last week, we thought that number would be $47,476 under federal legislation that would have taken effect tomorrow but for a Texas judge granting a temporary injunction.

What will the end result be? Over-priced burritos? Robots taking over entry level jobs and developing the skills that will ultimately lead to cyborg attacks? Or just a constantly changing mishmash of laws so confusing that full compliance is all but impossible?

Many employers have taken steps to comply with the US Department of Labor’s Final Overtime Rule that was set to take effect on December 1st. But yesterday, a District Court judge in Texas issued a temporary injunction barring the rules from taking effect nationwide. You can read our take on the issue here.

Copyright: rangizzz / 123RF Stock Photo
Copyright: rangizzz / 123RF Stock Photo

Here’s your annual roundup of new California employment laws. Since we’ve discussed many of these laws when they were enacted, I’m including links to those earlier discussions.

In addition to statewide legislation, local ordinances continue to proliferate. These include paid parental leave in San Francisco and numerous cities that have enacted their own minimum wage and paid sick leave requirements.

Copyright: alexraths / 123RF Stock Photo
Copyright: alexraths / 123RF Stock Photo

What can employers do to get ready?

  • Review pay practices to identify potential disparities based on race and ethnicity, as well as gender.
  • Ensure that applications do not elicit information on prior salary or juvenile convictions.
  • Obtain and install appropriate signage for single-user restrooms.
  • Make sure that human resources staff, hiring managers, and supervisors understand the changes affecting them.
  • Wonder what surprises the legislature has for us in the year ahead!

With briefs due next week, we anxiously await the California Supreme Court’s review of the de minimus doctrine.  Under the doctrine, employers are not obligated to pay employees for small increments of off-the-clock time spent preparing for or ending a shift, provided such time amounted to approximately 10 minutes or less of work.

12350701 - blue clock face, close upWhile we wait to hear the CA Supreme Court’s take on this, it’s worth noting that even under the FLSA, courts nationwide have had varied results on what constitutes non-compensable time under the de minimus doctrine. Many of the recent cases involve minimal time spent checking e-mails or texts that are work related. And while courts employ a fact-specific analysis of employment policies and practices, the following factors will weigh against a finding that the time is de minimus:

  1. If the time is a regular and necessary component of the work day or work week;
  2. Employer compulsion to complete the tasks at issue; and
  3. If the time can be recorded easily for payroll purposes

 My colleague Mark Tabakman spoke about this topic today and offered the following advice to employers:

-Consider eliminating or limiting access to work-related email and systems for non-exempt workers during non-work hours

-Develop a comprehensive policy requiring non-exempt employees to record their after-hours time with a clear process for reporting such time

-Train managers on how and when to communicate with non-exempt staff after hours

-Pay for after-hours work performed, while utilizing disciplinary measures if the after-hours work was unauthorized

Until we have more consistent application from the courts, this issue continues to be a ticking time bomb for employers.

Last week, Nancy Yaffe and I hosted approximately 30 Human Resources professionals in the hospitality industry in our Century City office for a working group discussion on the challenges of the Los Angeles Citywide Hotel Worker Minimum Wage Ordinance.

The hoteliers and restaurateurs who participated each had their own operational and financial challenges, but there were some common themes we thought we would share.

34347220 - hotel building, 3d images

 

Operational Challenges:

  1. Disciplining for Absences:  Group consensus is to discipline when the absence is not covered by sick time or hotel ordinance covered time; some have found employees quickly exhausting their time before they accrue additional protected time off.  Some hotels have converted separate sick and vacation to a combined PTO.  This is easy to administer, but makes it hard to discipline because there is so much paid and somewhat protected time off.  Other hotels have kept a separate sick bucket (frontloading 48 hours in compliance with LA Ordinance) with a separate vacation/PTO bucket to meet the 96 hour requirement under hotel ordinance.  This allows hotels to discipline employees for not following call-in protocols after first 48 hours used, and to deny some PTO requests that are not illness based.
  1. Wage Scale Issues:  Many hotels reported employee relations issues because more tenured employees want higher wages than new employees. One option is to provide certain extra benefits based on seniority (such as paid parking).  But, remember, any non-discretionary wage related benefits are included in the overtime rate.

 

Cost-Savings:

The Hotel Ordinance requires an hourly wage of $15.37 (and that is likely to go up in July 2017 based on a cost of living increase).  Accordingly, implementing cost savings measures was a hot topic.  Some ideas included:

  1. Eliminating certain employee benefits like paid parking, dry cleaning, shift premium.
  2. Start charging for meals or eliminate the employee cafeteria.
  3. Eliminate paid holidays or include paid holidays in PTO time.
  4. Eliminate other paid days off:  Bereavement, jury duty.
  5. Stop drug testing all applicants/new hires.
  6. Eliminate commissions for sales and catering — instead pay per performance and meeting quota or quarterly goals.
  7. Outsource to third parties.  Although this may or may not save costs/lower risks.  Be careful about joint employment liability; negotiate for proper indemnification language in vendor contracts.

Service Charges:

  1. Some hotels are eliminating service charges and paying higher wages to banquet servers.
  2. If a service charge is in effect, 100% must be shared equally to the employees who performed the tasks (e.g. room service or delivery) or worked an event, so tracking these hours to ensure proper payment has become cumbersome. It’s still okay to pool tips/gratuities (but not service charges).
  3. Any service charge or administrative fee must be clear on who it goes to.  Any ambiguity could prompt an unfair business practice claim.
  4. Be careful before jointly deciding to implement any new surcharge to offset hotel ordinance fees.  A recent anti-trust class action was just filed against a group of restaurants that got together to institute a 3% surcharge.

Compliance with this type of local ordinance is challenging, so if you would like to part of any future working discussion groups, we would love to have you… just let us know.

When you draft employment arbitration agreements, it’s not enough to know what the law is. You should also know what the law will be at the time that someone challenges the agreement. Since this area of law changes continuously, that’s pretty hard to do without a crystal ball.

For a while, some courts in California were refusing to enforce arbitration agreements that did not attach a copy of the arbitration provider’s procedural rules. More recent cases, including Baltazar v. Forever 21, Inc., decided by the California Supreme Court in March 2016, dismiss that requirement. Now that that issue is supposedly resolved, the issue du jour is whether arbitration agreements can require employees to waive the right to bring a class action.

Last week, the Ninth Circuit issued a split opinion in Morris v. Ernst & Young saying that class action waivers violate the National Labor Relations Act. According to the two-justice majority, class action waivers violate § 7 of the Act, which states that:

“Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

While the National Labor Relations Board has taken the position that arbitration agreements are unenforceable in the non-union employment context, most courts to consider the issue have rejected that position as just another example of the Board going rogue. These include the Second,  Fifth, and Eighth Circuit Courts of Appeal. Even the California Supreme Court, in Iskanian v. CLS Transportation, approved such waivers for class actions (but not for the seemingly analogous claims under California’s Private Attorneys General Act).

Copyright: fergregory / 123RF Stock Photo
Copyright: fergregory / 123RF Stock Photo

So employees can waive their right to present employment claims to a jury individually, but not on a class-wide basis? How can that be? More importantly, what should employers drafting arbitration agreements do about class action waivers?

The split between the circuits makes it increasingly likely that the U.S. Supreme Court will eventually address the issue. When that will happen and how the Court will be composed at the time is entirely unclear. So I plan to continue including class action waivers in arbitration agreements. But I will also include language inviting a court reviewing the agreement to strike any provisions that are inconsistent with applicable law as it exists at the time the agreement is being reviewed. My crystal ball says that’s the best way to go here.