Healthcare Reform Update Effective January 1, 2014

October 28, 2013

New Healthcare Benefits Waiting Period Rules as of January 1st, 2014!

Starting January 1, 2014, for new group plans and at the first
renewal for those group plans renewing after January 1, 2014,
the waiting period may be no longer than 60 calendar days.
A waiting period is the amount of time an eligible employee has
to wait before coverage starts. This is for new or newly eligible
employees and applies to all fully insured medical plans regardless of employer size.

The mandate also includes a special rule about individuals in a
waiting period greater than 60 days and prior to the renewal date.
If the employee is subject to a waiting period that exceeds 60 days
and is within 60 days of the customer’s renewal date, it will no longer be valid.
The employee must then be given the opportunity to elect coverage no later than the customer’s renewal date.

This mandate is extraterritorial, which means it applies to all insurance
policies issued in the state of California and to all California residents
regardless of the state in which their insurance contract is issued.

San Francisco Adopts Family Friendly Workplace Ordinance, Increasing Cost of Employing Workers in the City by the Bay

Approximately two weeks ago, San Francisco’s Board of Supervisors unanimously adopted the Family Friendly Workplace Ordinance, giving employees the right to request flexible work schedules or other accommodations to help the employee with childcare obligations and other similar household obligations. The ordinance of course provides legal remedies to an employee whose rights under the ordinance are violated. San Francisco Mayor Ed Lee has stated that he will sign the ordinance into law, but has not yet done so. If signed into law as expected, the ordinance will take effect January 1, 2014. Thus, employers with employees in San Francisco should familiarize themselves with the newly passed ordinance.

The ordinance applies to employers who regularly employ 20 or more employees, including part-time employees, within the City of San Francisco. The ordinance grants employees with 6 or more months of service and who work at least 8 hours per week the right to request a flexible work arrangement to accommodate the employee’s caregiving responsibilities for (1) a child; (2) a parent age 65 or older; or (3) a spouse, domestic partner, parent, child, sibling, grandparent or grandchild with a serious health condition. An eligible employee may make up to two requests for accommodation per year, but may make additional requests following the birth or adoption of a child and/or an increase in the employee’s caregiving responsibilities for a family member with a serious health condition. An employee may request accommodation in the form of an alternative work schedule, telecommuting, job sharing, part-time work, or any other type of flexible work arrangement. An employee’s request must be made in writing, and must detail the accommodation requested and how that accommodation relates to the employee’s caregiving responsibilities. The request must also state the proposed commencement and duration for the requested accommodation.

An employer who receives a written request must respond both verbally and in writing. The employer must meet with the employee about the request within 21 days of receiving the request. The employer thereafter must respond to the request in writing within 21 days, explaining whether the employer will grant or deny the request. An employer who denies the request must explain, in writing, “bona fide business reasons” for the denial, such as identifiable cost of granting the request (lost productivity, rehiring or retraining costs), negative effect on ability to meet customer demands, inability to meet work demands or transfer work among employees, etc.If an employee’s request is denied, the employee then has 30 days to seek reconsideration, which requires the employer to again meet with the employee within 21 days and respond in writing thereafter within 21 days.

The new ordinance states that it shall be unlawful for a San Francisco employer to interfere with, restrain, deny the exercise of any rights granted by the ordinance. It also makes it unlawful to discharge, threaten to discharge, demote, or otherwise take adverse employment action against an employee for exercising rights under the ordinance. The ordinance grants enforcement authority to San Francisco’s Office of Labor Standards Enforcement, which can investigate alleged violations and take administrative and legal action to enforce the ordinance and remedy certain violations. The ordinance does not provide for a private right of action.

Employers will be required to post mandatory posters (not yet published) concerning the new ordinance and will also be required to maintain records of employee requests for 3 years.

Note: This may be in San Francisco but Governor Brown and the California Legislators may not be very far behind in adopting legislation for the entire state.

Two New Callifornia Laws

October 21, 2013

New California Law: One Hour of Premium Pay for Missed “Recovery Periods”

It has become painstakingly care that Governor Brown and the California legislators are continuing to open the door to employees suing their employer. Last week, the Governor signed into law SB 435, which provides for one hour of premium pay for missed “recovery periods.” This new law amends Labor Code section 226.7, which California employers know as the law providing premium pay for missed meal and rest periods. (Basically, it’s a penalty of one hour of pay for a missed break, but California courts call it a “wage” instead of a “penalty” so that the statute of limitations on the claim is three times as long). The statute has led to myriad class action lawsuits in California alleging missed meal and rest breaks and seeking premium pay under section 226.7 on behalf of proposed classes of employees. Well, with the new amendment to section 226.7, this will undoubtedly lead to a whole new category of class action lawsuits seeking premium pay—now for allegedly missed “recovery” periods. By the way, a recovery period is a cool down period of at least 5 minutes on an “as needed” basis that must be afforded to employees who work outside. Therefore, this new law does not affect all California employers, but only those with outside employees, such as construction industry employers, agricultural employers, and the like. Employers, in general, should review Cal-OSHA/Department of Industrial Relations guidance on heat illness and injury prevention.

California Supreme Court Decision: Employees can pursue claims through the Labor Board and arbitration at the same time!

The California Supreme Court issued its opinion in Sonic-Calabasas v. Moreno, holding that an employment arbitration agreement is enforceable even where an employee is pursuing administrative remedies (typically for alleged unpaid wages) through the California Labor Commissioner.

The California Supreme Court had previously held in this same case that an arbitration agreement is unconscionable to the extent it seeks to preclude an administrative hearing before the Labor Commissioner. Following that ruling, however, the United States Supreme Court issued its decision in in AT&T Mobility v. Concepcion, striking down a similar California Supreme Court ruling that had found class action waivers is consumer contracts generally unconscionable and unenforceable. The United States Supreme Court thereafter ordered the California Supreme Court to reconsider its ruling in Sonic-Calabasas in light of Concepcion.

Last week, the California Supreme Court issued its new decision in “Sonic II.” The Court held that Concepcion precludes a finding that an arbitration agreement is unconscionable simply because it requires parties to arbitrate a Labor Code dispute instead of permitting the employee to first proceed with an administrative hearing before the Labor Commissioner. Thus, an arbitration agreement now may still be enforced even in Labor Commissioner proceedings and require the parties to arbitrate their dispute. However, the California Supreme Court held that while there is no categorical unconscionability rule for arbitration agreements that preclude an administrative hearing before the Labor Commissioner, an arbitration agreement can still be deemed unenforceable if determined to be procedurally and substantively unconscionable (based on unfair terms above and beyond precluding an administrative hearing). The Court stated: “As with any contract, the unconscionability inquiry requires a court to examine the totality of the agreement’s substantive terms as well as the circumstances of its formation to determine whether the overall bargain was unreasonably one-sided.” The Court further stated that the agreement “must provide an employee with an accessible and affordable arbitral forum for resolving wage disputes.” The Court basically held that the unconscionability standards it long ago set forth in Armendariz remain good law even after Concepcion.

The Court further held that it did not have sufficient information to rule on the unconscionability issue as to the arbitration agreement between Moreno and Sonic-Calabasas. It therefore remanded the issue to the trial court to determine. The Court provided guidance to trial courts to assist in making unconscionability determinations, characterizing the inquiry as a detailed factual inquiry that still permits the court to consider (among other factors) the effect of the waiver of certain benefits of an administrative proceeding before the Labor Commissioner. The Court’s opinion basically precludes a prior decision on when an arbitration agreement will be deemed unconscionable and instead ensures that trial courts will continue to come out all over the map on these issues.

New Law Authorizing Drivers Privileges for Illegal Immigrants-The Impact on Employers

October 14, 2013

Governor Jerry Brown signed AB 60 into law on October 3, 3013. The law allows individuals without immigration status to obtain driver privileges (DP) and to obtain a DP identification from DMV. The law goes into effect on January 1, 2015 in order to give DMV sufficient time to publish regulations and procedures and to staff up to meet the expected demand.

Furthermore, the driver privilege identification will not satisfy the I-9 requirements. While a state issued driver license is an acceptable List B document, a drivers’ privilege card will not be. By definition, anybody who applies for the driver’s privilege identification is most likely not work authorized.

It is my opinion that Congress will eventually grant employment authorization documents (EAD’s) sometime during the next two years to this same population segment – however it remains to be seen when. Until then, employers are reminded to remain vigilant regarding vigilant regarding accepting proper I-9 documentation for new hires and re-verifications.

Below is the release of the exact law and the requirements of AB 60. For our out of state clients this may not apply to you immediately but trends in California have a tendency to impact changes nationally especially under the current administration in Washington D.C.


October 3, 2013

DMV Prepares to Implement AB 60 Testing, Licensing, and Insurance Requirements for Undocumented Drivers
SACRAMENTO – DMV today announced that it will begin the process of implementing AB 60 (Alejo)—the new law requiring DMV to issue driver licenses to undocumented persons—by drafting new regulations and preparing field offices to process new applications. The new law becomes operative by January 1, 2015.

“This law will improve public safety for all Californians by helping ensure that undocumented persons pass a written and driving test and obtain proof of insurance and a license before driving their vehicles in California,” said DMV Chief Deputy Director Jean Shiomoto. “Thanks to AB 60, we believe more drivers will be safer on California roads.”

To implement the new law, DMV will adopt regulations that will detail how applicants can prove identity and California residency. In drafting the regulations, DMV will follow rules set forth by the Office of Administrative Law (OAL). In general, this process will involve public notice of draft regulations, a public comment period, and a final decision by OAL. DMV will immediately begin this regulatory process by consulting with stakeholders and drafting proposed regulations.

DMV will also propose a design for the license; however the design must be reviewed by the U.S. Department of Homeland Security for compliance with federal law. DMV’s proposal will look similar to current licenses while complying with the new law by, for example, having the abbreviation “DP” for driving privilege, rather than “DL” for driver license. The new law explicitly prohibits discrimination based on this license. The new law also explicitly prohibits using the license for criminal investigation, arrest or detention based on immigration status.
In addition to drafting new regulations and designing the license, DMV will also begin preparing to process the additional applications. DMV currently processes approximately 27 million transactions per year in its offices, including about 10 million driver license related transactions. DMV also processes more than 12 million online transactions a year, such as renewing vehicle registrations and driver licenses, change of address, and notice of release of liability. DMV estimates that roughly 1.4 million undocumented persons could apply for driver licenses over the next three years once the program is implemented.

Properly Prorating Salary for Exempt Employees-Federal Perspective

October 7, 2013

As you know we have clients on a national basis. Some of my articles may appear to be more California based simply because that is where most of our clients are. However, from time to time I do post articles that are on a federal level such as the one that follows. It is important to understand that the federal laws may not be as liberal as the laws in your particular jurisdiction therefore when you have questions please consult with counsel before making any decisions especially if you are not sure.
Now, hopefully you are familiar by now with the notion that exempt employees generally must be paid their full weekly salary for all workweeks in which they perform any work. There are certain limited exceptions to this rule. For example, if an exempt employee starts or ends employment mid-workweek, the employer may prorate the employee’s salary accordingly. This calculation is easy fairly easy if the employer uses a weekly pay period – just take the regular weekly salary, divide by the number of days that salary usually covers (e.g., 5), and multiply by the number of days the employee was employed.

But what if an employer pays salaried employees semi-monthly? In that scenario, the employer divides the employee’s salary into 24 semi-monthly pay periods. However, because the pay period is no longer tied to the workweek, different pay periods can have different numbers of working days. There are at least a couple of different ways an employer could prorate an employee’s pay under these circumstances:

1. Calculate a day rate for each pay period by dividing the semi-monthly salary by the number of working days during the pay period. Then, multiply the day rate by the number of days worked during the pay period to calculate the employee’s salary.

2. Alternatively, an employer could calculate a day rate by dividing an employee’s annual salary by the 52 weeks in the year, then dividing by the number of working days per week. The day rate is then multiplied by the actual number of days worked.

Which method is correct?

That was the issue addressed in a recent decision by a federal district court in Washington State in Kirchoff v Wipro Inc. The plaintiff in that case alleged that his employer violated the Fair Labor Standards Act and the Washington Minimum Wage Act by using method 1, effectively shorting him by $41.31 for his first week of employment, and $73.43 for his final week.
The court’s conclusion? The FLSA does not mandate one specific method for prorating an exempt employee’s salary in situations where deductions are permitted. Rather, 29 C.F.R. § 541.602(c) says that an employer may “use the hourly or daily equivalent of the employee’s full weekly salary or any other amount proportional to the time actually missed by the employee.”
Because the deduction calculated using method 2 is proportional to the amount of time actually missed during a given pay period, the court held that method was permissible under the rules.
Insights for Employers

1. Yes, the plaintiff in this lawsuit literally made a federal case out of a $114.74 shortage. Why did he bother? And why would his employer pay its lawyers to take the case to summary judgment, rather than just writing the guy a check? Two words: class action. This case wasn’t about one employee, it was about however many salaried exempt employees the employer had hired over the preceding three years, and even more so, about the fees the plaintiffs’ attorneys could recover if they won or extracted a favorable settlement. Even small wage and hour issues can add up to big dollars.

2. Although Kirchoff dealt with prorating salary at the beginning and end of employment, the court’s conclusion appears to apply equally to prorating an exempt employee’s salary for other reasons permitted by the regulations, such as when an employee is absent for personal reasons.

Note: This a decision by one district court. While the court’s conclusion appears sound and should apply elsewhere, at least for purposes of federal law, results may vary in your jurisdiction. Consult your wage and hour lawyer before relying on this decision.