Governor Brown is in that final flurry of signing and rejecting bills sent to him at the end of the legislative session. Two of those bills that we have been following involved pay equity issues. The Governor approved one, and vetoed the other.

The Governor signed into law AB 168, which bars employers from asking job applicants about their previous salary. The stated goal of the legislation is to narrow the gender gap by preventing employers from basing offers on prior salary and thus, presumably, perpetuating historical discrimination. This will also remove the perceived gap in negotiating power between an employer and an employee who must disclose her (or his) prior salary.

The Governor used the veto pen on AB 1209 that would have required large employers (500 or more employees) to report “gender wage differentials” to the Secretary of State for publication. The legislation seemed to presume that a comparison of “mean wages” and “median wages” between men and women would result in a “differential.” This legislation would have been a powerful weapon in the hands of plaintiffs’ lawyers who are bringing cases under the California Fair Pay Act where employers bear the burden of proving that a “differential” is not the result of gender discrimination. The Governor expressed this very concern, explaining that ambiguities in the bill “could be exploited to encourage more litigation than pay equity.”

We will continue tracking and reporting on new legislation.

In 2009, a tragic accident occurred at a manufacturing plant in Orange County when a water heater exploded and killed two employees. The incident was duly investigated by Cal OSHA, and criminal charges were eventually brought against two individuals. Then the Orange County District Attorney decided to seek huge civil penalties against the employer under California’s Unfair Competition Law (“UCL”). The trial judge was prepared to allow the case to go forward, but the Court of Appeal issued a writ of mandate dismissing the case on the grounds that  federal OSHA law preempted, and did not allow an exception for, claims under the state UCL. The District Attorney appealed.

The California Supreme Court will now decide whether workplace safety issues can properly be characterized and challenged as “unfair competition”,  and, in any event, whether federal law preempts and prohibits state prosecutors’ attempts to extract monetary fines outside of the traditional OSHA enforcement mechanism. The case will be argued on November 7, 2017 in Sacramento. Fox Rothschild LLP is representing the employer.

In January of last year, we noted that the U.S. Supreme Court was poised to end compulsory union dues for California teachers and other public employees.  Then in February of last year, Justice Antonin Scalia died.  In March of last year, we blogged that the unions had breathed a big sigh of relief when the Supreme Court then split 4-4 in Friedrichs v. California Teachers Association, thus upholding the Ninth Circuit ruling denying the constitutional challenge to compulsory dues.  We say again, what a difference an empty chair makes.  Now, that chair is again occupied, and last week the Court announced that it will again take up the compulsory dues issue in Janus v. AFSCME, a case where the Seventh Circuit rejected an employee challenge to forced union dues. 

The Illinois plaintiffs in Janus argue that their First Amendment rights are violated when employers and unions take their money in the form of compulsory dues to fund political causes with which the employees may disagree.  Twenty states (including California) have allowed that practice for the past forty years since the Supreme Court decided Abood v. Detroit Board of Education.  Unions currently spend almost a billion dollars per year on their political agenda.  The consequences are thus huge as a five-Justice majority is now poised to sidestep or overrule Abood on the theory that almost everything a public sector union does is political, and that public employees cannot be forced  to put their money where their mouths aren’t.  A challenge to private sector compulsory dues in states that do not have right-to-work laws (e.g, California) cannot be far behind.

 

The California Legislature has completed its work for this session, and three bills concerning employment issues survived the process and have been sent to Governor Brown for his consideration and possible signature. All three of these prospective laws have been labeled “job killers” by the California Chamber of Commerce which is lobbying heavily against the bills. Opposing the Chamber on these issues are the state’s unions and the organized plaintiffs’ bar.

AB 1209 would require employers to report wage payments by gender. Such reporting would fuel the fires of lawsuits under the state’s recent Fair Pay Act under which a “pay gap” is presumed to be a result of illegal discrimination.

SB 33 would outlaw arbitration clauses in certain consumer agreements. This legislation is another example of the hostility of the California courts and legislature to arbitration agreements, including in the employment context. This new bill seems contrary to binding U.S. Supreme Court precedent, and would likely not survive a judicial challenge.

SB 63 would extend employee parental leave protections to employers with 20 or more workers. Currently the law applies only to employers with 50 or more workers. This law would obviously be a burden on smaller employers.

We can expect many of the bills that did not pass the legislature this year – such as required predictive scheduling for retailers and restaurants (SB 878), and universal health care — to reappear in the next session. This ever-vigilant blog, of course, will keep you posted.

Copyright: Poofy / 123RF Stock Photo
Copyright: Poofy / 123RF Stock Photo

The California Supreme Court has once again deviated from what many view as clear precedent of the U.S. Supreme Court concerning the enforcement of arbitration agreements. Last week, the California court decided McGill v. Citibank, N.A., holding that state “public policy” precludes the enforcement of arbitration agreements where a class sues for “public injunctive relief” under Business and Professions Code § 17200, California’s much abused “unfair competition” statute. This decision comes on the heels of Iskanian v. CLS, in which the California court held that a class waiver in an arbitration agreement was unenforceable to prevent a representative action under the Private Attorneys General Act, again citing “public policy.” The McGill and Iskanian decisions are at odds with recent SCOTUS opinions such as ATT Mobility v. Concepcion, and American Express Co. v. Italian Colors. In the Italian Colors case, the high court specifically rejected state “public policy” as any kind of exception to the sweeping preemption of the Federal Arbitration Act (“FAA”).

California has been in a running dog fight with the FAA since 1987. In that year, SCOTUS decided Perry v. Thomas, in which Justice Thurgood Marshal upheld the FAA under the Commerce and Supremacy clauses, and slapped down California’s attempt to undermine arbitration agreements. Thirty years later, California courts remain determined to block arbitration under PAGA and Section 17200 in the face of otherwise enforceable arbitration agreements.

Also, with today’s swearing in of Neil Gorsuch, SCOTUS returned to its full complement of nine justices. Look for the high court to grant review of California and Ninth Circuit cases that follow McGill and Iskanian in the next couple of years with an eye toward overturning those decisions. In the meantime, companies should continue to include waivers of class and representative actions in their arbitration agreements with consumers and employees, noting that the waivers are enforceable to the extent permitted by applicable law.

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.

With the same clarity as the Sacramento River delta at high tide, the California Supreme Court ruled yesterday that employers must provide suitable seating for all employees in California when it is “reasonable” to do so.

Copyright: gonewiththewind / 123RF Stock Photo
Copyright: gonewiththewind / 123RF Stock Photo

In Kilby v. CVS Pharmacy, Inc. (pdf),*  the Court was called upon to interpret language in the Industrial Welfare Commission wage orders saying that: “working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.” That language was largely ignored for decades until the Private Attorneys General Act created a vehicle for plaintiffs to bring representative actions for enforcement. The cases have worked their way up in the appeals process, and we now have what purports to be  the final word:

If the tasks being performed at a given location reasonably permit sitting, and provision of a seat would not interfere with performance of any other tasks that may require standing, a seat is called for.

The Court says that whether seating is “reasonably required” is always a question of fact involving a “totality of the circumstances approach.” The result in any given case will thus be entirely unpredictable, and summary judgment will be nearly impossible. To make things worse, “[a]n employer seeking to be excused from the requirement bears the burden of showing that compliance is infeasible….” This burden presumably also applies to “whether the physical layout [of the workplace] may reasonably be changed to accommodate a seat.” This amounts to “reasonable accommodation” to an entire class of employees (e.g., cashiers and bank tellers) who now have a “right” to sit.

The employer’s “business judgment as to whether a job requires standing” is but one factor to be considered, and it “does not allow employers unlimited ability to arbitrarily define certain tasks as ‘standing’ ones, undermining the protective purpose of the wage order.”

California employers must now brace for what may be an onslaught of class-like cases under PAGA, demanding “suitable seats” under the IWC wage orders, with potentially massive civil penalties, and, of course, attorneys’ fees awards. Few employers will be able to sit this one out.

*In the interests of full disclosure, Fox Rothschild LLP filed an amicus brief in this case on behalf of the California Retailers Association and the Retail Industry Leaders Association.

Public employee unions dodged a bulldozer yesterday when the U.S. Supreme Court announced that it had deadlocked 4 to 4 in Freidrichs v. California Teachers Ass’n, the case challenging the constitutionality of compulsory union dues for public employees. On January 12, we wrote that the Supreme Court was poised to end compulsory dues for California teachers, reversing the 9th Circuit decision in Freidrichs and overturning 40 years of the Court’s own precedent. That, of course, was before the death of Justice Antonin Scalia on February 13.

Copyright: moodboard / 123RF Stock Photo
Copyright: moodboard / 123RF Stock Photo

Oh, what a difference an empty chair makes. Scalia was certain to be the fifth vote in favor of ending compulsory dues on First Amendment grounds. Now, with a 4-4 tie, the 9th Circuit opinion stands, and in California (along with 20 other states) public employee unions can continue to force payment of dues under threat of firing.

The unions know that without government coercion, it will be impossible to maintain the cash flow and political influence they currently enjoy. In those states where compulsory dues have been abolished, union collections have dropped by as much as half when dues become voluntary. For now, however, the unions can breathe easy. It will take at least a few years for the issue to percolate back to the Supreme Court, and the result at that time will likely depend on which president fills the empty chair.

In 2012, the California legislature enacted SB 1234 that set the stage for the creation of Secure Choice Savings Plans, a state-sponsored retirement  program for private employers. The legislation created an Investment Board that has now issued its 500-page blueprint for the program (pdf). The stated goal is to create a portable IRA-like plan for the over 50% of employees in California whose employers currently do not offer any kind of retirement plan.

Any employer  with five or more employees would be required to enroll them in the in the new plan unless the employees affirmatively opt out. The automatic default contribution rate would be 5% of pay, with a maximum of $5,500 per year. The money comes directly out of the employee’s pay. There is no separate employer contribution, matching or otherwise.

Copyright: miluxian / 123RF Stock Photo
Copyright: miluxian / 123RF Stock Photo

The plans would operate like a Roth IRA – no tax deduction for contributions, but the money grows tax free and is not taxed when it is withdrawn upon retirement. There is also a provision for withdrawals because of “hardship”.  The mandatory investment vehicle would be a “diversified portfolio” in a fund created by the state. The U.S. Department of Labor has issued a proposed rule exempting such state-sponsored retirement plans from the requirements of the federal ERISA law.

Hearings on the details of the state plan will be held in various locations next month. Additional legislation will be required for final implementation. If the plan becomes final, millions of California employees may be surprised to find that their after-tax income has been automatically reduced by 5%.  Also, employers are sure to be saddled with extra expense and paperwork.  Being a California employer just seems to become more and more complicated.

Almost 40 years ago, the U.S. Supreme Court in Abood v. Detroit Board of Education ruled that states could require public employees to pay union dues. The Court, however, now seems poised to sidestep, and perhaps even overrule, that decision. On January 11, the Court heard argument in a case brought by dissident teachers in California who claim that compulsory union dues violate their First Amendment rights. In Friedrichs v. California Teachers Association,  the plaintiffs argue that when government requires one to subsidize a particular political cause – i.e., to put one’s money where one’s mouth isn’t – the principle of free speech is violated. The plaintiffs further contend that almost everything about a public employee union is political, and therefore they cannot be compelled to pay dues or even the “agency fees” the teachers’ unions have been allowed to charge non-members. Based upon the comments at the oral argument, it appears that a majority of the Justices may agree.

Copyright: 72soul / 123RF Stock Photo
Copyright: 72soul / 123RF Stock Photo

Justice Kennedy, considered by many observers to be the swing vote on this issue, seemed to tip his hand in questioning the lawyers for the union who argued that the plaintiffs were merely seeking to become “free riders” in the collective bargaining process. He responded, “The union is basically making these teachers compelled riders on issues with which they strongly disagree.”  Justice Scalia drew a distinction between private employment and public employment “where every matter bargained for is a matter of public interest.” Justices Thomas, Roberts and Allito have indicated in other decisions that they may be willing to cast aside Abood.

If the plaintiffs prevail in this case, the cash collecting ability and political clout of the public sector unions in California could be significantly diminished.  A decision is expected in June.