Pay Day Reporting: Federal & State Requirements!

September 5, 2017

Larger employers (100+ employees) have long been required to file annual Employer Information Reports (known as EEO-1 reports) with the federal government, disclosing the number of their employees by job category, race, sex, and ethnicity.  Last year, the EEOC sought to substantially expand the information required to be disclosed to include pay data and hours worked data.  The stated purpose of requiring this information was to aid the EEOC in identifying discriminatory pay practices.  The expanded, revised EEO-1 report was due to be submitted by March 31, 2018.  Not anymore.  Last week, the Office of Management and Budget (OMB) announced that it was issuing an immediate stay of the revised EEO-1 form.  In doing so, the Office explained, “Among other things, OMB is concerned that some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues.”   So, for now, employers are relieved of the obligation of complying with the pay data reporting requirements called for by last year’s revised EEO-1 report form.  Keep in mind, this does not change the former requirements that covered employers must file EEO-1 reports using the old forms.

Now the bad news for California employers. There is pending legislation (AB 1209) that would require employers with more than 500 employees in California to collect (beginning July 2019) and report to the Secretary of State (beginning July 2020) the following information concerning gender pay differentials:

(A) The difference between the mean salary of male exempt employees and female exempt employees, by each job classification or title. (B) The difference between the median salary of male exempt employees and female exempt employees, by each job classification or title. (C) The difference between the mean compensation of male board members and female board members. (D) The difference between the median compensation of male board members and female board members. (E) The number of employees used for the determination of subparagraphs (A) and (B).

The Secretary of State’s Office would then be required to publish this information on a website available to the public.  This bill has already passed the assembly and is pending before the state Senate.  I will keep you posted on this bill, and others, as the last day (September 15th) for the Legislature to pass bills approaches.


Arbitration Agreements are Enforceable for Wage & Hour Claims!

August 29, 2017

Last week, a California Court of Appeal confirmed that employment arbitration agreements require arbitration not only of employment claims filed in court but also of administrative wage claims filed before the Department of Labor Standards Enforcement (“DLSE”).  You may recall, that in 2013, the California Supreme Court held (after effectively being directed to do so by the U.S. Supreme Court) in Sonic-Calabasas v. Moreno that there is no blanket exemption for wage claims from an otherwise enforceable arbitration agreement, and that employees are not necessarily entitled to have their wage claims adjudicated in an administrative hearing (known as a “Berman hearing”) before the DLSE.  However, the California Supreme Court left some wiggle room in its opinion by qualifying it to say that if an arbitration agreement provides an “affordable and accessible” alternative forum for resolution of the wage claim, then the agreement is enforceable and applies to require the wage claim to be arbitrated.   Because of this wiggle room, lawyers continue to litigate the issue of whether administrative wage claims are subject to arbitration.  In Oto, LLC v. Kho, the court held that the answer is yes.

In Oto, the plaintiff-employee filed a wage claim with the DLSE.  The employer attended a settlement conference before the DLSE and attempted to settle the claim, but no settlement was reached.  As such, the claim was set for a hearing (to decide the merits of the claim) before the DLSE.  Just before the hearing (the same day), the employer filed a petition to compel arbitration of the claim with the Superior Court.  An employer representative showed up at the hearing and asked that it be cancelled based on the pending petition to compel arbitration.  The DLSE hearing officer refused to cancel the hearing and proceeded without the employer being present.  Unsurprisingly, the DLSE ruled in favor of the employee and awarded six figures to the employee.  The employer appealed the award.  Meanwhile, the Superior Court denied the employer’s petition to compel arbitration, finding the applicable arbitration agreement unconscionable and unenforceable.  The employer appealed.

Last week, the Court of Appeal issued its opinion agreeing with the employer that the arbitration agreement was enforceable and that the Superior Court erred in refusing to grant the employer’s petition to compel arbitration.  The court applied Sonic-Calabasas and held that under that case, the arbitration agreement should have been enforced as long as it provided an “affordable and accessible” alternative forum (arbitration) for resolving the employee’s wage claim.  The Labor Commissioner’s office, which appeared on the employee’s behalf, argued that the agreement did not provide an affordable or accessible forum and was thereby unconscionable.  The Labor Commissioner primarily argued that the agreement did not expressly say that the employer would bear the cost of the arbitration or that the employee could recover attorneys’ fees if he prevailed on his claims in arbitration.  Because of this, the Labor Commissioner argued that the employee arguably would have to pay for half of the arbitration and would have to pay for an attorney.  (The Labor Commissioner argued that it would not be practical for an employee to represent himself in arbitration, as he could in an informal DLSE hearing).  The court rejected these arguments because the arbitration agreement held that the claims would be decided under applicable law – which the employer conceded meant that it would have to bear the costs of the arbitration and that a prevailing employee on a wage claim could be awarded attorneys’ fees.

This is a positive development for employers fighting to enforce their employment arbitration agreements where wage claims are involved.

Can an Employee Be Terminated for Political Protesting?

August 21, 2017

It does not take much to turn on the news and see the amount of emotional turmoil this nation is facing. The political activist are weighing in by the thousands and Charlottesville is just another example. The issue is whether one of these political protesters can be fired if his/her face appears on the news or some social media outlet. Employers need to take a hard look at the intersection of social media, employee privacy, free speech, and an employer’s right to discipline or terminate for that speech.

Let’s keep in mind that the work environment is protected under Title VII of the Civil Rights Act of 1964. Specifically, to keep the work environment free of any type of discrimination. Now, fast forward to Charlottesville where in fact one individual’s employer saw an employee protesting on the side of a Neo-Nazi group. The employer subsequently sent the individual a notice of termination.

The times are changing. The workplace essentially now has extended beyond the walls of the workplace. Arguably, there may not be a difference than if a group of employees goes out for happy hour after work and a male employee gets too frisky with a female employee and grabs her inappropriately. If the female employee goes to HR or a supervisor sees it and does nothing, the company’s got issues.

HR has an obligation to employees that work together, whether it is a work event or not, or within the workplace or out. Social media has just broken those walls down further and maybe brought the outside world further into the workplace.

Honestly, before Charlottesville and other such political clashes there has not been a protection for political speech (with one exception if an individual worked on a political campaign).

My opinion is I disagree with the termination. The work environment is the key. As long as a person does not bring his or her ideologies into the workplace in their speech or actions I cannot endorse a termination. I will agree it could create a morale issue and cause other issues especially if, as an example, that Neo-Nazi is a manager or supervisor. Let’s face it, every action that individual takes against a minority employee would probably be viewed as racist.

With the above in mind, an employer does have the right to control morale in their workplace and could probably take action based upon that issue and not necessarily against the behavior outside of the workplace. We shall see.

NOTE: Please follow me on Twitter (JimPotts@JimPottsAuthor). I put out Tweets on different issues throughout the week.


Court Holds: No Paid Vacation in the First Year!

August 14, 2017

California has a unique law regarding vacation benefits.  Unlike the laws of many other states, California law requires an employee to be paid for all earned but unused vacation benefits at the time of termination of employment.  California law thus prohibits “use it or lose it” policies and policies that otherwise provide for forfeiture of earned vacation benefits.  That said, California law does not require employers to provide paid vacation benefits to employees, and employers generally are permitted to decide whether to provide paid vacation, how much to provide, and which employee classifications will be eligible for the benefit.  Employers may impose reasonable “caps” on the maximum carryover and accrual of vacation benefits and may control the scheduling of vacations.  Employers may also choose to pay out accrued, unused vacation benefits at the end of each year in lieu of allowing carryover of unused benefits.  As long as an employer provides clear written notice of its vacation policy terms and conditions to employees, those terms generally will be enforced – as long as they do not provide for a forfeiture of earned vacation.  This sounds simple enough, but sloppy drafting of a policy can lead to a claim that a policy operates to cause an illegal forfeiture of vacation benefits.  A recent case, Minnick v. Automotive Creations, Inc., illustrates this.

In Minnick, the employer had a vacation policy providing that employees do not earn vacation during their first year of employment.  However, once they completed their first year, they would be eligible to take one week of vacation, and after completing two years, they would be eligible to accrue up to two weeks of vacation.  The plaintiff worked for the employer for just six months.  Pursuant to its policy, the employer did not pay the plaintiff for any accrued vacation time on his final paycheck because the plaintiff had not earned any vacation.  The plaintiff sued on behalf of himself and all similarly situated employees, alleging that the employer’s policy violated California law by causing employees who worked for them for less than one year to forfeit “earned” vacation benefits.  The plaintiff’s theory was that even though the policy stated on its face that employees did not earn or accrue vacation during their first year of employment, they implicitly did, in fact, earn such vacation because the policy allowed them to take one week’s vacation upon completing their first year.  Thus, the vacation time “must have” been earned during the first year of employment and, as such, it should not have been subject to forfeiture.  The plaintiff argued that he should have been paid six months’ worth of accrued vacation benefits on termination of employment.

The trial court disagreed with the plaintiff, throwing out his claims on a motion to dismiss.  The Court of Appeal agreed with the trial court, finding that the employer’s policy was lawful and did not operate to cause an illegal forfeiture of vacation benefits.  In so holding, the court explained that an employer is free to impose conditions on the right to earn vacation benefits, including a condition that an employee be employed for at least one year before earning any vacation benefits.  The court focused heavily on the express wording of the employer’s policy and the fact that it explicitly stated that employees do not earn or accrue vacation during their first year of employment.  Based on this language, the court held that the plaintiff did not have a valid legal claim that he had earned or accrued any vacation benefits during his first six months of employment.  Also based on the clear language of the policy, the court rejected the plaintiff’s argument that the policy nevertheless “implied” that employees earn vacation during their first year of employment and that there was really just a waiting period (one year) before they could “take” the vacation they had already earned.  The court reasoned that an employer is free to “front load” vacation benefits (making the entire amount available for use at the beginning of a benefit year rather than having benefits accrue over time) and that it appeared that the employer’s policy did just that (even though the policy later talked about employees with two years of service “accruing” a “maximum” of two weeks of vacation).

Although this case resulted in a positive outcome for the employer, it still serves as a good reminder that vacation pay claims are alive and well in California, and that California has unique laws prohibiting forfeitures of earned vacation.  Careful and clear drafting of vacation policies is of critical importance to ensure that any waiting periods for vacation eligibilty (as well as certain accrual caps) are lawful and will not be deemed a subterfuge for an illegal forfeiture policy.

Follow me on Twitter (jimpotts@jimpottsauthor). I give important updates.

New I-9s Update

August 6, 2017

Sorry, there was not a Blog last week! I was on the Alaskan cruise and some technical difficulties prevented my posting.

The United States Citizen and Immigration Services (“USCIS”) has issued a new Form I-9. The only significant change is to add a new List C document, a Consular Report of Birth for a U.S. citizen board abroad. Employers must begin using the new form by September 18, 2017. The new Form I-9 is now available online.

On another note, the federal Department of Labor (“DOL”) is seeking public comment on possible revisions to the federal overtime exemption rules. As employers will recall, last year a new overtime rule was published that dramatically increased the salary threshold to qualify for exempt status under the executive, administrative, and professional exemptions to over $47,000 per year. However, just prior to the rule’s effective date, a Texas court enjoined the rule. The DOL (still under the Obama administration at that time) appealed the injunction ruling and that appeal is currently pending before the Fifth Circuit. Many wondered whether the DOL, now under the Trump administration, would abandon the appeal. It did not do so, but it did recently file a reply brief before the Fifth Circuit defending the DOL’s authority to adjust the salary level threshold for exempt status under the Fair Labor Standards Act, but stating that it did not intend to enforce the $47,000 salary threshold set forth in the challenged 2016 rule. Instead, the DOL indicated that it intended to solicit public comment on a different salary threshold and to propose a new rule. It is unclear how the Fifth Circuit ultimately will rule.
In the meantime, the DOL recently issued its request for public comment on both the 2016 rule and on other possible revisions to the overtime exemption rules. The request seeks comments on several topics, including whether the salary threshold should be adjusted for inflation and, if so, what the measure of inflation should be; whether changes to the duties test are warranted; whether exempt status should be determined solely based on a duties test and not on a salary threshold; whether there should be multiple salary thresholds that vary depending on employer size and/or locale; the impact of the 2016 rule changes on employers; and whether the compensation level for the highly compensated employee exemption should be indexed to inflation.
Employers may submit comments electronically or by mail between now and September 24, 2017. Send comments to the U.S. Department of Labor.

Drugs on the Job: What employers need to know!

July 24, 2017

California voters have made the use of marijuana in California legal, but this raises significant questions as to how companies can adopt policies that prohibit using cannabis at work. The California Drug-Free Workplace Act and other legislation gives employers the right to enforce their policies, even when an employee uses marijuana products outside of work which do not impair performance on the job.  Generally, an employer’s anti-cannabis policy should explain why the restriction promotes the legitimate business interests of the company

California legalized the use of marijuana for medical purposes under the Compassionate Use Act of 1996.  In November 2016, Californians passed Proposition 64, a ballot measure allowing the possession and use of moderate amounts of marijuana for recreational purposes. In June 2017, California enacted the Medical and Adult Use Cannabis Regulation and Safety Act, which effectively repealed the Medical Marijuana Regulation and Safety Act.

The current laws permit employers to enforce workplace policies pertaining to marijuana.” The laws state that the legalization of cannabis use does not (i) restrict the rights of employers to maintain a drug free workspace, (ii) require an employer to permit or accommodate cannabis use in the workplace, or (iii) affect the ability of employers to have policies prohibiting the use of cannabis by employees and prospective employees

In Loder v. City of Glendale, the California Supreme Court ruled that employers have the right to undertake pre-employment drug testing “[i]in light of the well-documented problems that are associated with the abuse of drugs and alcohol by employees – increased absenteeism, diminished productivity, greater health costs, increased safety problems and potential liability to third parties, and more frequent turnover.” The ruling held that the California Fair Employment and Housing Act does not require employers to accommodate the use of illegal drugs.

In 2008, the California Supreme Court found that neither the Compassionate Use Act nor the accommodation requirements of the Fair Employment & Housing Act and that an employer could fire an employee who failed a pre-employment drug test after he disclosed that, at his physician’s recommendation, he was using medicinal marijuana for back spasms as a result of injuries suffered while serving in the Air Force.  Ross v. RagingWire Telecommunications, Inc., 42 Cal.4th 920 (2008).

Despite the enactment of laws permitting companies to prohibit marijuana use among employees, employers should carefully consider incorporating language into their policies that expresses the rationale behind their prohibition.  An examination of factual, scientific evidence of the impact of being under the influence at work, rather than mere speculation, should precede policy development.

On July 17, 2017 the Massachusetts Supreme Court ruled that an employee taking lawfully prescribed marijuana to alleviate effects of Crohn’s disease and was terminated for being under its influence at work may pursue a civil remedy.  In Barbuto v. Advantage Sales and Marketing LLC, the plaintiff used medicinal marijuana at home on two to three nights a week.  When asked to take a drug test, she i\told her supervisor that she would test positive.  After a human resources officer reviewed the test results, she was fired.  She sued.  The Massachusetts Supreme Court held that the plaintiff could seek a civil remedy under the state’s handicap discrimination law, but not under the Massachusetts voter initiative permitting the use of marijuana which does not permit a private lawsuit.

Most municipalities expressly prohibit the consumption of cannabis on the premises of cannabis businesses. For example, the City of Los Angeles has proposed commercial cannabis regulations.  If adopted, the regulations will require businesses to monitor employee conduct to assure that employees do not consume cannabis on the premises and within the parking areas and require employers to post “No…Smoking of Cannabis” signs in and outside the business.

In the meantime, California employers may conduct pre-employment drug testing and refuse to employ individuals who test positive for marijuana use.  While a few cases allow employers to terminate an employee when the drug test is administered after the employee is on the payroll, the better practice is to conduct the test prior to on-boarding the candidate.  Random testing of current employees, however, must be justified by compelling employer interests.  Failure to articulate such interests may expose an employer to substantial damages in post-termination litigation claiming a violation of the right to privacy.

Arthur F. Silbergeld is an employment litigation attorney at Thompson Coburn LLP and may be reached at (310) 282-9412. He has worked closely with Potts & Associates for over 35 years.



Guns at Work? Some States say “Yes”!

July 17, 2017

With the growing fear associated with domestic terrorism and violence in the workplace the issue presenting itself concerns employees bringing guns to work. More and more counties, and states, are permitting citizens to acquire consent to carry permits. The employee, of course, who has obtained the CCW feels that they can now carry on the employer’s property or leave their weapon in their car on company property. Not good!

One state has even gone so far as to have place bill into motion to include gun ownership as a protected class and therefore making it discriminatory to take any action against the weapon carrier. With all of the issues confronting our nation, why add the possibility of a disgruntled employee becoming an active shooter? This makes no sense.

The proposed law states in part:

2923.1210. (A) A business entity, property owner, or public or private employer may not establish, maintain, or enforce a policy or rule that prohibits or has the effect of prohibiting a person who has been issued a valid concealed handgun license from transporting or storing a firearm or ammunition when both of the following conditions are met:           (1) Each firearm and all of the ammunition remains inside the person’s privately owned motor vehicle while the person is physically present inside the motor vehicle, or each firearm and all of the ammunition is locked within the trunk, glove box, or other enclosed compartment or container within or on the person’s privately owned motor vehicle;           (2) The vehicle is in a location where it is otherwise permitted to be.

All signals point the House and Senate passing this bill. Logically, if a law is going to permit employees to store handguns in their cars on the employer’s property, what is a business owner to do to protect their business, its employees, customers, vendors, and others? One option is to engage in pre-work security screenings, including posting guards, installing metal detectors, and engaging in pat-down searches. The expense, however, is cost prohibitive for most businesses, and nevertheless it is the epitome of overkill. One ridiculous action deserves another? These are the times we are living in. A logical and more cost-effective starting point for most businesses is with an Active Shooter / Emergency Action Plan, so that your business knows how to respond in the event a unexpected event enters their workplace.

This issue is not going away. If you need any more information please feel free to contact us. We are now offering training in this area that includes procedures and protocols to follow, a workplace security plan and active shooter training.

Hopefully Governor Kasich of Ohio will not sign the bill but it should be noted that other states are considering the same type of law or already have them in place. There are also individual counties in California granting CCW’s as well. Employer’s need to implement a “zero tolerance” in this area and strictly enforce it.