Criminal History: New State & Federal Regulations?

February 29, 2016

California’s Fair Employment and Housing Council has issued proposed regulations concerning the use of criminal history information in employment decisions.  The proposed regulations set forth pre-existing statutory prohibitions on using or inquiring about the following types of criminal history about an employee or applicant, when making employment decisions such as hiring, promotion, training, discipline, and termination:

  1.  an arrest or detention that did not result in conviction (Labor Code section 432.7); 2.    referral to or participation in a pretrial or post-trial diversion program; 3.    a conviction that has been judicially dismissed or ordered sealed, expunged or statutorily eradicated; or 4.    a non-felony conviction for possession of marijuana that is two or more years old (Labor Code section 432.8).

In addition to the foregoing restrictions, the proposed regulations go on to explain that consideration of other types of criminal convictions may have an adverse impact on individuals on a basis protected by the Fair Employment and Housing Act (e.g. gender, race, and national origin), depending on factors such as the type of convictions considered, the job position, and the geographic bounds of the applicant pool.  According to the proposed regulations, an adversely affected applicant or employee bears the burden of demonstrating that a policy of considering criminal convictions has a direct impact on a protected category of individuals.  If the adversely affected applicant or employee makes this showing, the burden then shifts to the employer to establish that the policy is nonetheless justifiable because it is job-related and consistent with business necessity.  The policy must bear a demonstrable relationship to successful performance on the job and in the workplace and measure the person’s fitness for the specific job (rather than merely evaluating the person in the abstract).  In order to demonstrate that the policy is job-related and consistent with business necessity, the employer must show that the policy or practice is appropriately tailored, taking into account the nature and gravity of the offense or conduct, the time that has passed since the offense and/or completion of the sentence, and the nature of the job held or sought.  Demonstrating that a policy or practice of considering criminal history is appropriately tailored to the job for which it is used requires that the employer either (1) conduct an individualized assessment of the circumstances, or (2) if the employer has an across the board conviction disqualification policy, then the employer must demonstrate that the policy can properly distinguish between applicants or employees that do and do not pose an unacceptable level of risk and that the convictions being used to disqualify 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  proposed regulations further provide that the conviction disqualification policies that do not incorporate an individualized assessment and include conviction information that is seven or more years old (measured from date of disposition, release, or parole) are subject to a rebuttable presumption that they are not sufficient tailored to meet the job-related and consistent with business necessity tests.

Even if the employer demonstrates that its criminal history consideration policy is job-related and consistent with business necessity, an applicant or employee adversely affected by the policy may still prevail on a discrimination claim under FEHA if the individual can demonstrate that there is a less discriminatory policy or practice that serves the employer’s goals as effectively as the challenged policy, such as 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.

The proposed regulations further instruct that before an employer may take an adverse action (e.g. declining to hire, discharging) against an applicant or employee based on conviction history, the employer must give the applicant/employee notice of the disqualifying conviction and a reasonable opportunity to present evidence that the information is factually inaccurate.  If the applicant/employee establishes that the record is factually inaccurate, then that record cannot be considered in the employment decision.

As the proposed regulations note, employers also must be aware of and comply with local ordinances (e.g. San Francisco) that provide additional restrictions on the use of criminal history information in the employment process.  Furthermore, state and local agency employers are prohibited from making criminal history inquiries of applicants until such time that the employer has determined that the applicant meets the minimum employment qualifications for the position.  Lastly, the proposed regulations acknowledge that in some instances, employers are subject to federal or state laws or regulations that prohibit individuals with certain criminal records from holding particular positions or occupations and that mandate criminal history screenings.  The proposed regulations state that compliance with such laws and regulations is a form of job-relatedness that is consistent with business necessity, and constitutes a defense to an adverse impact claim.

California’s adoption of proposed regulations concerning the use of criminal history in employment decisions comes on the heels of the EEOC’s fairly recent adoption of similar guidance and signals an increasing focus on this area on the part of these agencies (which is usually followed by increasing focus by the plaintiffs’ bar).  Employers should review their criminal history policies and practices to ensure compliance with this guidance and any applicable local ordinances.    Stay tuned!

Note: What to do with employees who either work or job hunt while on a leave of absence is the current topic on the Podcast. Go to and click on the Podcast.

Drugs in the Workplace? A Few Easy Steps to Follow!

February 22, 2016

The use of marijuana whether for recreational use or for medicinal purposes is clearly on the rise! As a result, marijuana has gone from being an illegal drug to being big business. Various states in recognition of this trend are now seeking to regulate the business of growing and selling legalized marijuana.

As one example, California’s Governor Jerry Brown recently signed into law three pieces of legislation (AB 243, AB 266, and SB 643) aimed at regulating the $1.3 billion medical marijuana industry in the state. The legislation, collectively called the Medical Marijuana Regulation and Safety Act, will take effect January 1, 2018.

The Act establishes a state Bureau of Medical Marijuana Regulation, which will establish and oversee standards for crop cultivation, licensing, taxation, quality control, shipping, and product packaging in this booming industry.

In 1996, California was the first state to legalize use of medical marijuana, through a voter referendum. The state has not legalized recreational marijuana use yet, but a measure is expected to be on the ballot in 2016. Californians have rejected recreational use on more than one occasion. Since that time, voters in 23 states and the District of Columbia, have fought for and gained the use of recreational marijuana. What they did not realize is their employer could terminate their services if they tested positive for its use. The U.S. Supreme has heard this issue in the past and have upheld terminations when an employee tested positive. The reasoning is simple. It is still considered a controlled substance under federal law and according to the high Court an employer does not have to permit such use whether it is for medicinal use or otherwise.  A person under the influence can create a safety issue for themselves or their co-workers.

If you’re an employer in a medical/recreational marijuana state, here are a few steps you can take to prevent your workplace from going up in smoke:

  1. Know the laws that apply to your employees. This includes substance abuse laws but also the Americans with Disabilities Act, and state and local disability discrimination laws.
  2. Adopt a substance abuse policy that includes prescription medication that may affect employees’ ability to work safely and competently.
  3. Make sure that your job descriptions designate and address “safety-sensitive” tasks.
  4. Let employees know your stance on medical and recreational use of marijuana.
  5. Review your substance abuse policy and forms, and update as needed.
  6. Train supervisors on “reasonable suspicion,” with special emphasis on marijuana and alcohol.

These are easy steps to follow. Use them!


Note: This week’s Podcast discusses: “The 5 Biggest Mistakes Employees Make During Performance Reviews.” Go to and click on “Listen Up”. It is also on iTunes just search for “Listen Up with Jim Potts.”

Can An Employer Terminate an Employee That Has Lied About Their Medical Leave? One Court Says “Yes”!

February 15, 2016

Questions about the validity of leaves of absence pepper our office every week. Managers are sometimes dubious that the employee actually has a medical issue (or family member) and with HIPPA, there is no way to verify the need. It can be very frustrating. Well, one Court of Appeals is at least offering a glimmer of hope. Case in point? In a recent decision (Mattessich v. Weatherfield Township), a depression-suffering employee was terminated for lying about his medical leave. As part of his medical leave for depression, the employee’s physician recommended that he undergo counseling. Upon his return to work, the returning employee’s supervisor asked him if he went to the recommended counseling, to which the employee responded that he had. When his old symptoms returned, however, which impacted his job performance, he admitted to lying about the counseling. Ultimately, the Township terminated his employment because of the lie. In the subsequent disability-discrimination lawsuit, the appellate court concluded that the employee’s lie was fatal to his discrimination claim.

The employee himself admitted in his own testimony before the Board of Trustees that he had in fact not been truthful. Other witnesses testified that they had heard him admit to lying during a past meeting. While he tried to argue that he had disclosed counseling from his primary care physician when he was questioned about counseling, there was repeated testimony from other individuals and the employee himself that he did lie. The court simply did not buy his argument that he had been discriminated against based on his disability especially since he had admitted under oath that he lied to his employer.

The employment relationship is one of trust (from both sides!). When that trust breaks down, the relationship is irreparably damaged. The surest way to break that trust is with a lie. If an employee lies to his/her manager, provided that the manager treats all similarly situated employees the same, a manager should be on safe ground in terminating under similar circumstances, regardless of his or her protected class.

As always, there is a caveat! California employers need to be extra careful in terminating employees who are either on a leave of absence or who have just returned. California has very strict guidelines under the Fair Employment & Housing Act. Before taking any action, be sure to contact your counsel or other advisor for such matters and get his or her blessing.


Repayment Agreements for Training Are Enforceable!

February 8, 2016

Training new employees is expensive.  That is particularly true when an employer offers to pay for an employee’s educational training.  The benefits of doing so include a more educated and well-trained workforce, as well as increased morale and employee loyalty.  The risk, of course, is that an employee may decide to take his or her employer-funded education and use it to find another job somewhere else.  Employers sometimes offset that risk by requiring the employee to sign an agreement to pay the employer back if he or she leaves for another job shortly after completing the education.  But what if the employee refuses to pay?  Is the repayment agreement enforceable?  Yes, according to a California Court of Appeal.

The Case

USS-POSCO Industries v. Case involved the above scenario.  Floyd Case entered into a voluntary three-year, employer-sponsored educational program that would allow him to become a Maintenance Technical Engineer (MTE).  He signed an agreement with his employer, USS-POSCO, that he would repay a prorated portion of the education costs if he quit his job within 30 months of completing the program.  Sure enough, two months after he finished, he quit.  USS-POSCO asked him to pay back $28,000 of the $46,000 it spent on his educational training.  Case refused, so USS-POSCO sued to collect the money.  Case responded with a cross-complaint, claiming that his fingers were crossed when he signed the repayment agreement.  Well, not really, but he did try every other argument his lawyer could imagine.  He claimed the agreement was unenforceable for lack of consideration, that it was basically an unlawful non-compete agreement, and that it violated Labor Code provisions preventing employers from passing operating expenses on to employees and mandating that employers reimburse necessary employee expenses.  Yes, the kitchen-sink defense.

The trial court rejected Case’s arguments and granted summary judgment in USS-POSCO’s favor on both the complaint and cross-complaint.  The Court of Appeal affirmed both rulings. It denied his Labor Code claims because Case’s participation in the training program was voluntary, not mandatory, in that there were other alternatives to obtaining the promotion beyond entering the training program.  For example, Case could have taken a test in lieu of the training program.  The Court also rejected Case’s claim that the agreement was effectively a non-compete agreement because Case could and, in fact, did find another job.  Makes sense, right?  Finally, the court rejected the claim that the contract lacked consideration because Case obtained valuable training and wages in exchange for agreeing to repay if he left early.

The Takeaway

Chalk this one up as a win for employers.  Repayment agreements for employer-sponsored education programs are still enforceable.  Well, usually at least.  The Court of Appeal did distinguish this case from another line of cases, In re Acknowledgment Cases, in which the same Court denied the City of Los Angeles’ attempt to recover some employer-mandated training expenses from police officers who quit early.  The key distinctions were that L.A.’s program was both mandatory and specific to the job, whereas USS-POSCO’s program was voluntary and the training was transferable to other jobs.  So, here’s the takeaway: employers can require employees to pay back educational costs if the employee quits early, so long as the educational program was both voluntary and not specific to the employer’s operations.

I should also note that the case was only partially employer-friendly.  There was one other component of the case involving attorney’s fees, and it went the other way.  Labor Code section 218.5 used to provide that the prevailing party in a wage-and-hour lawsuit was entitled to fees.  That statute was amended in 2014 so that, now, employers can only recover fees when the employee brought the claims in bad faith.  The trial court granted USS-POSCO the fees because the case predated the amended version of section 218.5.  But the appellate court threw the award out, holding that the statute is to be applied retroactively.   This means that employers must still show bad faith to get fees even if a lawsuit was filed prior to the 2014 amendment.  That’s a tough break for any employers who are still defending older wage-and-hour cases.

Employers who wish to offer to pay for employees’ educational training should consider such agreements to protect themselves in the event the employees seek other jobs.  Given the nuanced rule described above, employers should consult with their legal professional before drafting or implementing a repayment agreement.

Note: I am on LinkedIn and Twitter! Please follow me. I am putting out weekly info on those social media outlets. Yes, I have finally moved in that direction kicking and screaming!

Reasonable Reporting Rules for off-the-clock Overtime Pay

February 1, 2016

On the Federal side, it’s been a few years since a Federal Court held, in White v. Baptist Memorial Hosp., that an employer is not liable for unpaid overtime if the employee fails to follow an established, reasonable process for to report uncompensated work time. Recently, following the logic of White, another Federal Court reached a similar conclusion:

An employer who is armed with knowledge that an employee is working overtime cannot stand idly by and allow an employee to perform overtime work without proper compensation, even if the employee does not make a claim for the overtime compensation. An employee, however, cannot prevail on a Fair Labor Standards Act (FLSA) overtime claim if that employee fails to notify the employer or deliberately prevents the employer from acquiring knowledge of the overtime work.

In Fairchild v. All Am. Check Cashing, the employer had an overtime policy that prohibited hourly employees from working overtime without prior approval, and required that all employees accurately report all working hours in its timekeeping system. The plaintiff claimed that she should have been compensated for overtime that she had worked but failed to report. The court disagreed, making two important observations:

  1. Employees must follow policies: “Fairchild … ignored her employer’s policy and procedures: she neither sought authorization to work such overtime nor reported the alleged hours through All American’s timekeeping system. Indeed, Fairchild testified that she intentionally failed to report her unauthorized overtime specifically because All American prohibited such overtime. To hold that she is entitled to deliberately evade All American’s policy would improperly deny All American’s right to require an employee to adhere to its procedures for claiming overtime.”
  2. Policies trump constructive knowledge: “Fairchild counters that her computer usage reports, which allegedly show she was working after ‘clocking out,’ proves that All American had constructive knowledge that she was working overtime. We find this argument unavailing. Although All American could have potentially discovered that she was working overtime based on the usage reports, the question here is whether the employer should have known. The district court did not clearly err in holding that mere ‘access’ to this information is insufficient for imputing constructive knowledge.”

What is the lesson for employers? Fairchild, like White before it, show the importance of having a reasonable process for employees to report uncompensated work time. Under the FLSA, it is the employee’s burden to show that he or she was working during non-working time. A policy that underscores that burden by requiring employees to document times during which they are working “off-the-clock” only serves to help an employer defend against an employee’s claim for unreported, undocumented, off-the-clock time.