Seyfarth Synopsis: Our mission here at Cal-Pecs is to illuminate how California employment law differs from the law that employers generally experience throughout America. In this back-to-basics piece, we provide some background and a brief catalog of stark contrasts.

In 1846, American settlers in Mexican Alta California staged the Bear Flag Revolt. They declared an independent republic, seeking freedom from Mexico. The rebels got lucky: the Mexican-American War soon intervened to dislodge the California territory from Mexican control. California, in 1850, became our thirty-first state.

The legacy of the Bear Flag Revolt continues: the state flag depicts a grizzly bear astride a patch of grass, above the logo “California Republic.” The underlying rebellious attitude has persisted as well. State politicians—especially since the 2016 election—have defiantly proclaimed California’s right to chart its own course on such vital matters as the environment, health care, immigration, and the right to use marijuana.

Perhaps nowhere is California’s independence more prominent than in the area of employment law. Federal labor law hit high tide in the 1930s, with the National Labor Relations Act and the Fair Labor Standards Act. The high tide returned in the 1960s—bringing us the Equal Pay Act, Title VII, and the Age Discrimination in Employment Act—and returned yet again in the 1990s, bringing us the Americans with Disabilities Act and the Family and Medical Leave Act.

In the Golden State, meanwhile, the waves of employment regulation have risen ever higher, even when federal regulations have ebbed. The chart below spots differences between federal and California law in key areas of interest to employers that operate both in California and in the rest of America. In each case, of course, the California version favors employees, plaintiffs, and unions, while never favoring the employer.

Issue U.S. Law & State Law Generally California Law
What’s the minimum wage? $7.25, and higher in a few states $10.50, rising to $15 by July 2022
Must that wage be paid separately for all work, including unproductive tasks? No. Employers generally can comply with an average wage that meets the minimum. Yes. This result has surprised some employers that pay piece rate or commissions.
Must employers pay non-exempt piece-rate and commission workers separately for rest breaks? No Yes
Must employers pay non-exempt employees for required travel outside regular hours? No Yes
What overtime hours generally require premium pay? Only hours worked in excess of 40 per week. Weekly overtime plus daily overtime (over 8 hours per day) plus any time on seventh consecutive workday in a workweek.
Can employers use the “fluctuating workweek method” to compute overtime pay for salaried non-exempt employees? Yes. The regular rate is salary divided by all hours worked, with a 0.5 multiplier for overtime hours. No. The regular rate is deemed to be weekly salary divided by 40, and the overtime multiplier is 1.5, not 0.50.
Is doubletime ever required? No Yes, for hours exceeding 12 per day or 8 hours on a seventh consecutive workday.
Are there civil penalties for labor law violations? Often no, and penalties that do apply are relatively modest. Yes: for many Labor Code violations penalties are typically $100 per employee per pay period.
Can plaintiffs personally sue supervisors and co-workers under anti-harassment statutes? No Yes
Are middle managers, pharmacists, and nurses typically exempt from overtime rules? Yes No
Are employees entitled to reimbursement for routine business expenses? No Yes
What statuses do employment discrimination laws protect? Race, color, religion, sex, national origin, age over 40, disability (and sexual orientation by some judicial readings of Title VII) Those plus sexual orientation, gender identity, transgender status, political affiliation, marital status, breastfeeding, HIV status, requests for disability accommodation, etc.
Can employers invoke the “undue hardship defense” for religious accommodations simply by showing a cost > de minimis, and can they accommodate grooming and dress practices by transferring employees to a more remote location? Yes and yes. No and no. The “undue hardship” defense must meet the same tough test required in disability cases. And it is categorically unreasonable to accommodate a religious dress or grooming practice by moving the employee away from the public.
Can undocumented workers recover back pay on a claim for wrongful termination? No Yes; immigration status of a worker is irrelevant to any California remedy, except reinstatement of employment if prohibited by federal law.
Can an employer fire a worker who provided a false name, SSN or information about legal status to work? Yes No; an employer cannot discharge, discriminate, retaliate or take any adverse action against an employee who updates such information based on a lawful change.
What consequences do employers suffer for denying meal or rest breaks? Breaks that are too short are counted as working time. Failure to provide specified, timely breaks can result in up to two extra hours of premium pay per day.
Are “use it or lose it” vacation plans acceptable? Yes, generally. No
Is paid sick pay required? No Yes
Do farmworkers have the right to unionize, and do unions enjoy special protections with respect to their mass picketing? No and no. Yes and yes. California’s Agricultural Labor Relations Act protects farmworkers, and its Moscone Act limits judicial power to prohibit mass picketing.

As this limited sample of comparisons might suggest, an employer used to doing business elsewhere can find California employment law a real bear. For more detailed treatment, see the 2017 edition of our Cal-Peculiarities: How California Employment Law is Different.

Seyfarth Synopsis: Automation is redefining the workplace. While some may fear that automation will displace workers, automation can enhance a company’s workforce and improve productivity. In this segment, we examine industry changes resulting from an automated workforce and identify future trends.

Many of us remember our neighborhood video store closing its doors, forever changing the way we select our Friday night entertainment. Today, we can stream a new movie release from the comfort of our own home or interact with a large red kiosk after picking up groceries at the local supermarket. Automation seems inevitable and appears to be spanning most industries.

Automation has already reduced the number of workers throughout the manufacturing industry—brightest on the radar these days being the reduction in the labor force needed by the coal industry. That trend is likely to continue. But in recent years, automation has become more widespread. Retailers are closing their brick and mortar stores to do online business. And self-checkout aisles at grocery stores are ubiquitous. Should these changes be welcomed or feared?

While recent news articles and economists’ predictions can fuel the anxiety of the American worker, there is reason to be optimistic when examining this trend as a whole. Economist David Autor reminds us that prior stages of technological growth did not devastate, but rather transformed, the U.S. labor force. If we look to the past, we can find numerous examples of when invention and improvements were feared for reasons similar to those espoused today:  mass production of the automobile, mechanical harvesting in agriculture, and more recently the advent of ATMs replacing bank tellers. Rather than displacing an entire population, these innovations improved productivity and created new job functions for workers that enabled them to increase their economic value.

Such promise appears possible with automation in the retail industry. For example, Lowes recently rolled out the “LoweBot,” an automated robot that helps customers find products. It even assists employees with inventory-related tasks. Rather than simply eliminate the store’s employees, though, Lowes states that LoweBots augment the customer service the company can provide. A LoweBot can tell a customer what aisle to find paint brushes, but staff can demonstrate their expertise and offer suggestions for customers’ at-home projects.

Meanwhile, in Japan, the sometimes frustrating self-checkout aisles are enhancing the customer’s experience by automatically reading what’s in the customer’s basket without the need to scan each item.

Anticipated Trends Resulting from an Automated Workforce

Change is inevitable, and often difficult to embrace. A fitting analogy comes from the introduction of music on television by MTV. On the one hand, it may have killed the radio star, as the Buggles so eloquently put it. But at the same time MTV made music accessible to a larger audience. To succeed, musicians had to be open to evolve and master the new visual medium. Similarly, the era of the American worker isn’t coming to an end, but it may be in transition. This new workforce, like the musicians facing a video age in the 80’s, may need to develop new specializations and skills to obtain those future positions.

Automation is here and it’s changing the labor landscape: “we can’t rewind, we’ve gone too far.” But that’s not necessarily a bad thing. Here are some trends future employers can consider as they step into the age of automation:

Potential uptick in age discrimination claims. Jobs augmented with some form of automation will likely require greater proficiency in technology. Some speculate that this will put older workers disproportionately at risk because of the belief that younger workers are more adept with technology. This perception, coupled with the aging of the baby boomer generation, may increase the number of age discrimination filings. Employers may need to monitor the latent effects of any new policies, including those relating to worker’s expectations, more closely. In choosing a qualified applicant, employers can ask questions about an applicant’s technological skills, since those questions necessarily concern the applicant’s ability to perform job-related functions. However, hiring committees should ensure their decisions are guided by business needs and not assumptions about an applicant’s grasp of technology based on their age.

Increase in workplace safety. Automation of dangerous tasks should improve safety in manufacturing, distribution and other industries, which keeps workers safe. A decrease in the number of injuries on worksites should be accompanied by a decrease in the number of worker’s compensation claims. In addition, automation should also serve to improve companies’ compliance with OSHA regulations.

Retraining or cross-training current workforce. New jobs are likely to require specialized skills to build and fix the new technology. Employers can begin to offer training programs to their workforce to ease the transition into the emerging jobs created in response to a more automated industry. This would be an efficient way for employers to retain their workforce and combat the negative effects of high-turnover and understaffing. An early investment in cross-training may both build skills that help both workers increase career mobility and allow the company to meet its demand for skilled workers.

New job types. The roll-out of new technology in the workplace is likely to generate new types of jobs with new functions and areas. Workers will be needed to maintain, fix, and repair new technology.

If you have any questions or concerns and wish to discuss, Seyfarth’s team of seasoned attorneys is available to assist you navigate the legal landscape and the future of work. We also invite you to peruse Seyfarth’s Employer’s Guide to the Future of Work.

Edited by Michael G. Cross.

Seyfarth Synopsis: The California Supreme Court, in Dynamex Operations v. Superior Court, has agreed to address the legal standard for determining whether a worker classified as an independent contractor is really an employee. The Supreme Court’s opinion is expected to be significant for anyone thinking of using independent contractors in California.

The Future of Work: A Surging Demand for Independent Contractors

Recent years have seen tremendous growth in the sharing economy, aka, the “gig economy,” which reflects the technological ability to quickly summon goods or services through a smart phone. While the new economy has grown rapidly, the relevant legal standards have not. Yet business owners continue to invest heavily into business models that have created tens of thousands of flexible jobs for workers classified as independent contractors. In the absence of legislative guidance tailored to the realities of the new economy, California courts and administrative agencies have struggled to apply the law developed during an earlier age.

The new economy is a powerful fact of life. According to Seyfarth’s “Future of Work” Outlook Survey, 45% of respondents expect their company’s demand for independent contractors to grow in the next five years. Companies in the areas of information technology and telecommunications are among those most likely to experience these developments, as opposed to companies in the areas of real estate and consumer staples. (A deeper analysis of our survey’s findings appears here.)

These survey responses provide a valuable snapshot, but employers are likely to change their tune based on the regulatory environment and any significant judicial rulings narrowing the use of independent contractors.

One such potential ruling could come in Dynamex Operations West, Inc. v. Superior Court. The California Supreme Court has agreed to review a Court of Appeal decision that stunned employers by expanding the definition of “employee.” That definition of employee arguably could encompass many individuals traditionally retained as independent contractors.

When determining whether workers were independent contractors, many companies previously considered how much control the company exerted over a worker and how much a worker economically depended on the company. This framework provided some consistency.

Taking a turn, the Court of Appeal in Dynamex adopted the Wage Order’s much-broader definition of “employ,” meaning “to engage, suffer or permit to work.” As a result, the Court of Appeal expanded the meaning of the term “employee,” arguably extending it to nearly every labor relationship a company would be likely to have with an individual. The potential ramifications of such a definition upon the future use of independent contractors cannot be overstated. Indeed, the U.S. Chamber of Commerce and California Chamber of Commerce have both warned that a decision to affirm the lower court’s expansive ruling “would effectively eliminate independent contractor status for any use in California.”

Consequences of Misclassification

Making it more difficult to properly classify an independent contractor would only increase the risks of costly litigation. By now, readers should know that misclassifying California employees as contractors has dire consequences, including statutory penalties of $5,000 to $15,000 for each “willful” violation. Failing to properly classify workers can create liability for back wages, penalties, fines, and the assessment of back taxes. Additional exposure can also arise when misclassified workers, who would otherwise be entitled to employee benefits, have not received those benefits. California state agencies in search of employment-tax revenues have increased their enforcement efforts, including audits. In fact, the California Labor and Workforce Development Agency has agreed to jointly investigate independent contractor misclassification with the IRS, reflecting both agencies’ desire to increase enforcement.

California employers with operations in other states should also note that increased misclassification enforcement is not peculiar to the Golden State. In July 2015, the U.S. Department of Labor’s Wage and Hour Division issued its Administrator’s Interpretation, concluding that “most workers are employees under the FLSA” in part due to the “expansive definition of ‘employ’ under the FLSA”; we previously observed this position to be an “unapologetic effort to restrict the use of independent contractors.” Today, it still remains to be seen whether the Trump Administration will redirect federal enforcement priorities away from independent contractor issues. But even if the federal government backs off of these issues, there is no indication that state governments and the ubiquitous plaintiffs’ bar will stop aggressively challenging independent-contractor classifications.

Scrutinize Your Existing Relationships with Independent Contractors

As always, employers should remain vigilant for new legal developments and should consult their employment counsel to scrutinize existing relationships with independent contractors.

Edited by Michael G. Cross.

Seyfarth Synopsis: California employers may not require employees to submit to random drug testing, except under very limited circumstances.

California public policy, stated in our Constitution, strongly favors the right of privacy. But employers have their own legitimate interest in maintaining a safe, drug-free work environment. So what’s the blunt truth about random drug testing in California?

As we blogged on April 12, 2017, California voters gave an enthusiastic, yet relaxed green thumbs up to recreational use of marijuana with the passage of Prop 64, but Prop 64 recognizes an employer’s right “to enact and enforce workplace policies pertaining to marijuana.” This development sparks important questions about best practices and policies to implement regarding workplace drug use and random drug testing, including how employers can best reduce the risk of litigation, and whether anything has changed in the wake of legalized marijuana. The short answer is that these rules remain the same as they were.

Way back when, in 2008, the California Supreme Court held that employers need not accommodate an employee’s medicinal marijuana use. And it remains the practice for many employers to enforce drug use policies specifying that the employer has a zero tolerance toward working under the influence of drugs, including newly legalized substances such as THC (the active ingredient in marijuana). Unambiguous drug use policies will put even the most dazed and confused employees on clear notice that these “legalized” substances are not tolerated at the workplace.

Under what circumstances may a California employer conduct a lawful random drug test?

Here’s the rub: California employers may have a legitimate interest in enforcing a drug free workplace, but our Constitutional right to privacy generally protects against a random, suspicionless drug tests. Because an employer’s right to drug test relies on a balancing test (is the employee’s privacy interest outweighed by the employer’s interest in keeping the workplace safe and drug-free?), courts commonly look to whether there are less intrusive ways than random testing to protect the employer’s interest, and typically determine that there are.

There are a few exceptions to this general rule. First, certain federal authorities require California employers to establish a controlled substances and alcohol testing program that includes random testing. This requirement essentially snuffs out the employee’s privacy interest. Federal authorities imposing such a requirement include the Department of Transportation, Federal Motor Carrier Safety Administration, Federal Railroad Administration, Federal Aviation Administration, Federal Transit Administration, Pipeline and Hazardous Materials Safety Administration, and United States Coast Guard.

Absent a federal legal mandate to conduct random testing, a California employer may engage in random testing only if the employer can make a strong case that an employee works in a safety-sensitive position and, if allowed to work under the influence of drugs, would pose some imminent safety or health threat with irremediable consequences. Note though that this is a very difficult standard to meet. Employees in the few positions that have presented such a threat have included nuclear power plant workers, correctional officers, hazardous pipeline employees, government employees with secret national security clearances, aviation personnel, and civilian employees at a chemical weapons plant. Working in those positions while under the influence could have dire consequences for these employees and everyone around them, thus causing the employer’s and the public’s interest to outweigh that of the buzzed employee.

Bay Area employers should also note that California rules come with an unusual, perhaps unsurprising, caveat: San Francisco has long restricted the drug testing of employees, and has even passed a local ordinance declaring that “[u]nder no circumstances may employers request, require or conduct random …blood, urine or encephalographic testing.” Therefore, unless this requirement is preempted by the federal mandates described above, San Francisco employers should avoid random testing.

What are the liability risks and resulting penalties?

California views the individual’s right to privacy in the strongest of terms. Conducting an unlawful random drug test of an employee creates significant risks for the employer, including claims for invasion of privacy or wrongful termination in violation of public policy if an employer takes action based on the employee’s refusal to take the test. Given the risk of litigation exposure, employers should steer clear of any random drug tests of current employees, unless the employer is confident that federal law authorizes the random drug test or unless the employee is truly performing a safety-sensitive role.

A reminder for workplace solutions.

As marijuana use for medical and recreational use becomes more prevalent, employers should assess their written policies, job applications, background check procedures, and interview materials—especially nationwide companies using form documents—to ensure compliance with California’s unique drug testing laws.

(Shameless plug: For those interested in the evolution and implementation of marijuana laws in the United States and their impact upon employers, you are encouraged to visit and subscribe to “The Blunt Truth” blog.)

Seyfarth Synopsis: The California Assembly Committee on Labor and Employment yesterday heard and approved AB 5, The Opportunity to Work Act, as it continues to move through the legislative process.

iStock_000000642401_LargeThe Opportunity to Work Act, which would require employers to offer hours to part-time employees before hiring new employees or temporary workers, yesterday cleared its first hurdle in the legislative process, receiving a go-ahead vote from the Assembly Committee on Labor and Employment. Read and watch our summaries of the bill. Next stop: Assembly Appropriations.

The bill’s co-author, Assembly member Gonzalez-Fletcher, kicked off Wednesday’s hearing by touting AB 5’s purported benefits and protections for employees in the retail and fast food industries. Conceding that the bill leaves much to be desired among members of the business community, she emphasized her desire to work with businesses to refine the bill’s language.

Opponents highlighted the ambiguities in AB 5’s language and the difficulties employers would likely face in implementing its provisions. They presented surveys and statistics that conflicted with those presented by the bill’s proponents. For example, the proponents stated that most part-time workers want to work full time, while opponents claimed that 5% of all part-time workers harbor such a desire.

Opponents posed questions such as: How exactly are employers supposed to offer additional hours in a non-discriminatory fashion? Must employers offer hours to all employees (in the same or similar position)? How are employers supposed to notify employees of the additional hours? Do the hours get awarded to the first employee to respond? What if an employee wants to work only a portion (e.g., one or two hours) of the offered shift? Must the employer then ask other employees to cover the remaining hours? Does the bill’s requirement that employers document their offers of additional hours to current employees mean that employers must keep copies of all employee communications, or require employees to sign written acknowledgements of each offer of additional hours?

These questions, Gonzalez-Fletcher assured, arise from intentional ambiguities that she wants to clarify with the help of business owners. She’s already considering amendments that would

  • delay implementation of the bill (for one year) for 501(c)(3) organizations,
  • create a carve-out for collective bargaining agreements that expressly define work hours,
  • limit the bill’s application to only the location where the additional hours are available, if the employer has locations throughout the state, and
  • provide an employee opt-out provision.

We’ll keep monitoring this bill’s progress through the legislative process and keep you updated.

Seyfarth Synopsis: Back from Spring Break, and Back to Work: Our List of L&E Bills to Watch in the remainder of the 2017-2018 California Legislative Session.

New LegislationCalifornia Legislators were, as always, very busy in the first few months of the 2017-18 Legislative Session, introducing well over 2000 bills by the February 17th bill introduction deadline. But, in comparison to prior years, the calendar has been surprisingly light for heavy-hitter labor and employment bills. The Legislature returned to work on April 17, after its spring break, and continued to push bills out of the house of origin in advance of the June 2nd deadline.

Here’s what we’re watching:

Opportunity to Work Act. Modeled after the City of San Jose’s November 2016 voter-approved Opportunity to Work Ordinance (effective April 1, 2017), AB 5 would require employers with 10 or more employees in California to offer additional hours of work to existing nonexempt employees in California before the employer may hire additional employees or temporary employees. The employer would not have to offer the hours to existing employees if those hours would result in the payment of overtime compensation to those employees. The bill would require employers to retain documents, including work schedules of all employees and documentation of offering additional hours to existing employees, prior to hiring new employees or subcontractors. The bill would also require employers to post a notice to be created by the Division of Labor Standards Enforcement (DLSE) outlining employee rights under this (proposed) new law. This Act would create a new Labor Code section, and provide for enforcement by the DLSE on its own accord or via complaint by an employee, or via employee private right of action. The Act would allow for an express CBA carve-out. The bill is scheduled for its initial hearing in the Assembly Committee on Labor and Employment on April 19. Stay tuned for an update on this bill following the hearing.

Rest Breaks. AB 817 would carve out an exception to Labor Code section 226.7’s off-duty “rest period” requirement for employers providing emergency medical services to the public. The bill would authorize those EMS employers to require employees to monitor and respond to calls for emergency response purposes during rest or recovery periods without penalty, as long as the rest break is rescheduled. The bill expressly states that it is declaratory of existing law. Likely in response to the California Supreme Court’s December 22, 2016 ruling in Augustus v. ABM Security Services, Inc. (holding that no true rest break was permitted when security guards were required to carry radios or pagers and respond to calls during rest breaks), this bill is one to watch.

Retail employees: Holiday Overtime. AB 1173 would establish an overtime exemption for “a holiday season employee-selected flexible work schedule,” requested in writing by individual nonexempt retail employees and approved by the employer. The exemption would allow the employee to work up to 10 hours per workday with no overtime pay. Hours worked between 10 and 12 in a workday, or over 40 hours in a workweek would be paid at one and one-half the regular rate of pay. All hours over 12 in a workday and over eight on a fifth, sixth, or seventh day in a workweek would be paid at double time. This bill contains a CBA carve-out, and clearly has many details to still be ironed out, as it contains a blank in the bill text for the definition of “retail industry.”

Pay Equity: salary inquiry ban. Once again, AB 168 seeks to ban employers, including state and local government employers, from asking job applicants about their salary history, as well as compensation and benefit information. The bill would also require that private employers, upon reasonable request, provide the applicant with the position’s pay scale. AB 168 brings back language that was shot down twice—first by Governor Brown in his October 2015 veto of AB 1017, then removed from 2016’s AB 1676 (fair pay legislation) before it received the Governor’s approval in September 2016.

Pay Equity: Gender Pay Gap Transparency Act. Dubbed the “Gender Pay Gap Transparency Act,” by author Assembly Member Gonzalez-Fletcher in her April 4, 2017 Equal Pay Day press release, AB 1209 would “require companies with more than 250 employees to include gender pay data as part of their annual reporting to the Secretary of State.” If passed, AB 1209 would require employers, beginning July 1, 2020, to publish and update yearly the difference between the mean salary and median salary of male exempt employees and female exempt employees broken down by job classification or title and the difference between the mean compensation and median compensation for male board members and female board members. Arguments against this bill will likely mirror those made in response to the EEOC’s revised EEO-1 rule.

Voluntary Veterans’ Preference Employment Policy Act. Dubbed the “Voluntary Veterans’ Preference Employment Policy Act,” AB 353 and AB 1477 would allow private employers to establish a veterans’ preference policy  and uniformly grant a hiring preference to veteran applicants, regardless of when the veteran served. These bills would expand Government code section 12940(a)(4), which currently allows for a veterans’ preference policy for Vietnam-era veterans only. The bill would provide that the granting of a veterans’ preference will not violate any local or state equal employment opportunity law or regulation, including FEHA, as long as the policy is not applied for the purpose of discriminating against an employment applicant on the basis of any protected classification.

Applicants: prior criminal history. The Legislature is joining the flurry of “Ban-the-Box” initiatives throughout California with AB 1008, which would make it unlawful for an employer to: 1) include on any job application questions that seek the disclosure of an applicant’s criminal history; 2) inquire or consider an applicant’s prior convictions before extending a conditional offer; and 3) when conducting a background check, to consider or disclose  various information. The bill would also require employers that intend to deny employment to an applicant because of prior convictions to perform an individualized assessment of whether the applicant’s conviction history has a direct and adverse relationship to the specific job duties, considering the nature and gravity of the offense, the time passed since the completion of the sentence, and the nature of the job. Then, the employer must notify the applicant of the reasons for the decision and provide the applicant 10 days to respond and challenge the accuracy of that information or provide evidence of rehabilitation which it must consider before making a final employment decision, in writing. This bill is substantially similar to the recent Fair Employment and Housing Council regulations, which go into effect in July 2017; and would thus largely codify what will soon be required by regulation.

Health professional interns: minimum wage. Following the recent increases in minimum wage, AB 387 would expand the definition of “employer” to include a person who employs any person engaged in supervised work experience (i.e., clinical hours) to satisfy the requirements for licensure, registration, or certification as an allied health professional. Cal Chamber opposes this bill, as it could cause internships provided for educational credit to be eliminated.

Resident apartment manager wages. AB 543 would authorize, under a voluntary written agreement, an employer that doesn’t charge a resident apartment manager monthly rent, to apply up to one-half of the fair market rental value of the apartment to meet minimum wage obligations to the apartment manager. Existing law allows employers to take a credit against minimum wage for two-thirds of the ordinary rental value, up to $564.81 per month for a single occupant and $835.49 per month for couples.

Credit Card gratuities. AB 1099 would require employers that are lodging establishments, car washes, barber shops and beauty salons, massage parlors, restaurants, and on-demand service providers such as transportation network companies that allow debit or credit card payment for services to also accept a debit or credit card for gratuities or tips. This bill would require the tip payment to be made to the employee by the next regular payday following the date the credit card authorized payment.

Overtime compensation: executive, administrative, or professional employees. AB 1565 would exempt from overtime compensation an executive, administrative, or professional employee, if the employee earns a monthly salary of either $3,956 or no less than twice the state minimum wage for full-time employment, whichever amount is higher.

Labor organizations: compulsory fee payments. AB 1174 would, beginning January 1, 2018, prohibit a person from requiring employees, as a condition of employment, to pay union dues or contribute financially to any charity sponsored by or at the behest of a labor organization.

Employer liability: small business and microbusiness. AB 442 would prohibit Cal OSHA from bringing an enforcement action for any “nonserious violation” against any employers with 100 or fewer employees and an average gross of $10,000,000 or less over the past three years, or microbusinesses  with 25 or fewer employees and an average gross of $2,500,000 or less over the past three years, without first giving the employer written notice of the violation and providing 30 days to cure. AB 442 would authorize Cal OSHA to assess a reasonable fee, up to $50, to cover its costs for enforcement.

Immigration: worksite enforcement actions. AB 450, the “Immigrant Worker Protection Act,” would impose several requirements on public and private employers dealing with federal ICE workplace raids or enforcement actions. Assemblymember Chiu has described the key components as:

  • Requiring employers to ask for a warrant before granting ICE access to a worksite.
  • Preventing employers from releasing employee records without a subpoena.
  • Requiring employers to notify the Labor Commissioner and employee representative of a worksite raid and notifying the Labor Commissioner, employees, and employee representatives of an I-9 audit (i.e., employment eligibility verification).
  • Preventing retaliation by enabling workers crucial to a labor claim investigation to receive certification from the Labor Commissioner that employee complainant or employee witness has submitted a valid complaint for violations of the Code and is cooperating in the investigation and prosecution of the violations.

The bill would authorize the Labor Commissioner to asses penalties of at least $10,000 to $25,000 for each violation against employers for failure to satisfy the bill’s requirements and prohibitions.

FEHA enforcement expansion. SB 491 would expand Government Code section 12993 and allow local jurisdictions, such as cities and counties, to enforce FEHA discrimination regulations. Cal Chamber opposes this bill.

Good faith defense: employment violations. SB 524 would permit an employer to raise an affirmative defense that, at the time of a violation, the employer was acting in good faith when the employer relied upon a valid published DLSE opinion letter or enforcement policy. SB 524 would only apply after January 1, 2018 to DLSE opinion letters or enforcement policies that are still in effect at the time of the violation. Employers would not be able to claim an affirmative defense when a DLSE opinion letter or enforcement policy has been modified, rescinded, or deemed invalid. Cal Chamber supports this bill but hearings for SB 524 have been canceled at the request of the author, Senator Vidak. We’ll keep our eye on this to see if there is any further movement.

Reproductive health. AB 569 would prohibit employers from taking any adverse employment action against an employee based on the employee or employee’s dependent’s reproductive health decisions. The bill would also prohibit employers from requiring employees to sign a waiver or any document denying an employee the right to make his or her own reproductive health care decisions, including the use of a particular drug, device, or medical service (e.g., in vitro fertilization). The bill would require an employer to include in its handbook a notice of the employee rights and remedies under this bill.

New Parent Leave Act. Likely DOA, but resurrected for another go from its 2016 veto, SB 63, the “New Parent Leave Act,” would prohibit employers with at least 20 employees within 75 miles, from refusing to allow an employee to take up to 12 weeks of parental leave to bond with a new child within one year of the child’s birth, adoption, or foster care placement. Like under CFRA, to be eligible, the employee must have more than 12 months and at least 1,250 hours of service with the employer during the previous 12-month period. The bill would require the employer to maintain and pay for the employee’s coverage under a group health plan during this leave. SB 63 would also allow—but not require—an employer to grant simultaneous leave when two employees are entitled to leave for the same birth, adoption, or foster care placement. This bill is almost identical to 2016’s SB 654, which Governor Brown vetoed, and only provided for 6 weeks of leave, rather than the 12 weeks SB 63 would provide. The Governor’s veto message expressed his concerns for impact the leave would have on small business and pointed lawmakers to explore an amendment that would have made mediation an option—which the SB 63 does not have.

PAGA: Three New Valiant Efforts. AB 281 attempts to reform PAGA by: 1)  requiring an actual injury for an aggrieved employee to be awarded civil penalties; 2) excluding health and safety violations from the employer right to cure provisions; and 3) increasing employers’ cure period to 65 calendar days from 33.

AB 1429 would limit the violations an aggrieved employee can bring, require the employee follow specific procedural prerequisites to filing suit, limit civil penalties recoverable to $10,000 per claimant and exclude the recovery of filing fees, and require the superior court to review any penalties sought as part of a settlement agreement.

AB 1430 would require the Labor and Workforce Development Agency (LWDA) to investigate alleged Labor Code violations and issue a citation or determination regarding a reasonable basis for a claim within 120 calendar days; and allow an employee private action only after the LWDA’s reasonable basis notification or the expiration of the 120 day period. Read our further analysis of PAGA proposed amendments here.

Workplace Solutions

We will continue to monitor and report on these potential Peculiarities, as well as any other significant legislative developments over the course of the 2017 Legislative Session. Contact your favorite Seyfarth attorney with any questions.

Edited by Colleen Regan.

Seyfarth Synopsis: California voters gave the green light to recreational use of marijuana with the passage of Prop 64. Marijuana users may have felt like they struck Acapulco Gold, but a review of the law on drug testing in the workplace may turn out to be a buzzkill.

California highway sign with marijuana leafWhen can an employer drug test its employees?

Last November, California voters passed Proposition 64—the Adult Use of Marijuana Act. The new law permits individuals over the age of 21 to possess up to one ounce of marijuana or eight grams of marijuana concentrates. California households, regardless of how many people reside there, can grow up to six plants at a time.

But Prop 64 also expressly protects an employer’s right “to enact and enforce workplace policies pertaining to marijuana.” In other words, despite Prop 64, employers may still prohibit their employees from using the sticky icky. This good news for employers who want to maintain drug-free workplace policies may leave some employees dazed and confused.

Employers have had the right to narrowly craft drug testing policies to meet their needs. Reinforcing that right are Prop 64’s drug-free workplace carve-out and the fact that ganja use remains illegal on the federal level. It remains the case, however, that drug testing may affect an employee’s privacy rights, which create limits on when an employer may drug test.

California courts have used a balancing test to determine whether a drug test is legal for existing employees. Courts weigh the employer’s basis for testing versus the employee’s expectation of privacy. The nature of the test, the equipment used, the manner of administration, and its reliability are factors a court may consider in determining whether a drug test is permissible.

If an employer has an objectively reasonable suspicion that an employee is using drugs, then a drug test is likely permissible, especially when there is a threat to workplace safety. California employers generally have authority to eradicate potential harm to their business and their employees’ safety.

Note: Stay tuned for next week’s blog post on random drug testing by employers.

How should the employer notify employees about its drug testing policy?

If an employer plans to drug test, it should distribute to employees a clear drug policy before employees are subject to testing. The policy should explicitly prohibit the use of marijuana and notify employees of the circumstances in which a drug test would occur. This type of notice may decrease a drug testing program’s intrusion on an employee’s privacy interests.

Some employers may choose to educate employees about how marijuana lingers in one’s body beyond the time the “high” wears off. Because cannabis remains in a person’s system longer than other drugs, it’s possible for an employee to test positive for marijuana use that occurred during non-working time. A marijuana test, unlike an alcohol test, will not indicate whether the test subject is under the influence at the time of the test. Rather, a drug test may show THC in the bloodstream that has resulted from marijuana use days, weeks, or even months before the day of the test.

Under the federal Controlled Substances Act, marijuana continues to be a Schedule I controlled substance whose use and possession is illegal. For that reason, employers remain within their rights to maintain drug free-workplaces that exclude marijuana. In addition, federal contractors, under the federal Drug-Free Workplace Act, must establish drug-free workplaces.

Employers generally have the right to institute an Employee Assistance Program (EAP), which allows an employee who has failed a drug test to attend an assistance program to help curb a substance abuse problem, or to place an employee in a supervised position and withhold certain privileges during a probationary period. Whatever policy an employer enacts, the policy should give employees clear expectations about the situations in which the employer will exercise its right to conduct a drug test for cause.

Is an employer exposing itself to risk by drug testing employees?

Drug testing employees may give rise to claims by employees for disability discrimination, invasion of privacy, and defamation. In addition, employers who fail to uniformly apply drug testing policies risk exposure to a discrimination suit under the Fair Employment and Housing Act. An employer must not single out protected categories of employees for drug testing.

How can Seyfarth help?

Employers should assess their written policies, and training and education of employees to ensure compliance with California’s drug testing laws. Seyfarth’s Workplace Solutions Group is ready and willing to help to make sure your company is in compliance.

Edited by Chelsea Mesa.

Fresh off the presses we bring to you the latest and greatest version of our beloved Cal-Peculiarities: How California Employment Law is Different, your California employment law roadmap. It is created to help private employers who do business in California steer through the nuances of California employment law. In the 2017 Edition, we continue to highlight recent court decisions and legislative developments. Don’t get caught in the driver’s seat without it!

CalPeculiarities 2017 CoverThe book is available in a convenient, searchable eBook format. Click here to order your copy today!

We also invite you to join us for a webinar on Wednesday, April 19, 2017! Seyfarth attorneys Dana PetersonKerry Friedrichs, and Jonathan Brophy, will discuss the growing list of legal developments—judicial as well as legislative—that should concern executives, managers, general counsel, and human resources professionals with employees in California, including laws related to:

  • The Amended California Fair Pay Act
  • Immigration
  • Legal Marijuana
  • The Gig Economy and Independent  Contractors
  • Local Paid Sick Leave Explosion
  • California Employment Discrimination Law (including new employee protections)
  • California Wage-Hour Peculiarities

There is no cost to attend this program, however, registration is required. Please click here to register! The webinar will be offered at the following times:

1:00 p.m. to 2:30 p.m. Eastern
12:00 p.m. to 1:30 p.m. Central
11:00 a.m. to 12:30 p.m. Mountain
10:00 a.m. to 11:30 a.m. Pacific

On behalf of your Cal-Pecs team, thank you for your continued interest in the blog.

Seyfarth Synopsis: On March 30, 2017, the California Fair Employment and Housing Council (“FEHC”) considered proposed regulations on transgender employees. The FEHC also discussed draft regulations on national origin discrimination in the workplace.

Transgender Identity. On March 30, 2017, the FEHC, convened in Sacramento for its second meeting of the year, voted unanimously to adopt proposed regulations on transgender identity and expression, which will go to the Office of Administrative Law for approval. We expect a final text in July. The FEHC first proposed these amended regulations in 2016, which we covered here.

Some highlights: the amended proposed regs would

  • prohibit employers from requiring applicants to disclose their sex, gender, gender identity or expression,
  • protect transitioning employees by expanding the definitions of gender identity and expression,
  • ensure that employees are addressed by their preferred name, gender, and pronoun, and
  • require employers to provide equal access to comparable, safe, and adequate bathrooms, locker rooms, and similar facilities.

Employers can familiarize themselves with the approved regulations now to anticipate questions that may arise in this context.

The FEHC heard public comment over a perceived conflict in bathroom signage required by the proposed regulations and pre-existing Cal-OSHA regulations. The proposed FEHC regulations, consistent with recently enacted legislation (discussed here), require that single-user bathrooms have gender-neutral signage. But the Cal-OSHA regulation, which predates both the FEHC regs and the recent legislation, calls for single-user bathrooms to be for a single gender. The conflict is one of perception only, as the Department of Industrial Relations has clarified that Cal-OSHA will not enforce its rule, and instead will follow the gender-neutral requirement found in the statute (and the proposed FEHC regs). We expect that other agencies may adopt the DIR’s approach, favoring transgender protections over conflicting pre-existing regulations.

Kevin Kish, Director of the Department of Fair Employment and Housing, confirmed the DFEH would consult with the Labor and Workforce Development Agency and Cal-OSHA to ensure consistency in the implementation and enforcement of the regulations.

National Origin Discrimination. The FEHC has also drafted proposed regulations regarding national origin discrimination in the workplace, following recommendations by Legal Aid at Work. The proposed regulations are still in their early stages; as yet, there has been no formal notice of the proposed regulations or a public hearing.

The proposed regulations largely track the EEOC’s new guidance on national origin, which we summarized in our Employment Law Lookout blog here. The draft FEHC regulations address these issues:

  • Defining national origin to include place of birth or ancestor’s place of birth, association or perceived association with a person of a national origin group or ethnicity, Native American Tribe, language, and accent.
  • Harassment and retaliation against undocumented workers.
  • Discrimination based on immigration status, accent, or English proficiency.
  • Workplace language restrictions.

Public comments have addressed the proposed provisions that would curb employer inquiry into an individual’s immigration status. The proposed regulations would permit such an inquiry only where clear and convincing evidence shows the inquiry is needed to comply with federal law. Based on further comment by Legal Aid at Work, we anticipate that further modifications may provide guidance on workplace language policies.

What’s Next? We expect to see more activity from the FEHC in the months ahead. The FEHC will likely revise its proposed regulations on national original discrimination before it issues formal notice of proposed action of the regulation. The FEHC also plans to expand its outreach efforts, seeking further comment from the public and civil rights groups to shape the FEHC’s future agenda. We will continue to monitor and report further developments.

Edited by Colleen Regan.

Seyfarth Synopsis:  The California Fair Employment and Housing Council (“FEHC”) has approved new regulations, effective July 1, 2017, to limit employers’ use of criminal history when making employment decisions.

Request for a criminal background checkNew Regulation Highlights

Updating our prior post, the FEHC has finalized new regulations on employer consideration of criminal history, largely adopting the guidance set forth by the Equal Employment Opportunity Commission (“EEOC”) in its April 2012 “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964.

  • Expanding the Types of Criminal History Employers May Consider: Employers will be prohibited from considering any non-felony convictions for marijuana possession if the conviction is more than two years old. (Current California law prohibits asking applicants to provide information concerning convictions for marijuana-related offenses that are more than two years old; detentions or arrests not resulting in conviction (except for those pending); convictions that have been judicially dismissed or ordered sealed; and information concerning a referral to or participation in a work/education program as part of probation.)
  • Requiring Notice to the Applicant/Employee of a Disqualifying Conviction and Providing a Reasonable Opportunity to Present Evidence of Factual Inaccuracy: Under the new regs, prior to taking adverse action, an employer must provide the applicant notice of the disqualifying conviction and give the applicant a reasonable opportunity to present evidence of factual inaccuracy. If the applicant produces such evidence, the conviction cannot be considered in the employment decision. The notice is only required when the criminal history is obtained from a source other than the applicant or employee (e.g., through a consumer report or internally generated search). This notice differs from the notice required by the Fair Credit Report Act (“FCRA”), which mandates notices only if the employer takes adverse action based on information contained in a third-party background check. This notice also differs from those in “Ban the Box” city ordinances, such as Los Angeles and San Francisco, where notice may be required if adverse action is taken from criminal history information from any source, including disclosure from the candidate.
  • Prohibiting Consideration of Criminal History When Doing So Will Result in an Adverse Impact on Individuals Within a Protected Class: Employers will also be prohibited from considering criminal history if doing so will result in an adverse impact (referred to by the EEOC as “disparate impact”) on individuals within a certain class (e.g., race, national origin, etc.). The regs bring California into explicit alignment with federal law on this point. Applicants bear the initial burden of proof with respect to establishing that the employer’s background screening policy has an adverse impact on a protected class, e.g., conviction statistics or other types of evidence. If adverse impact is demonstrated, the burden shifts to the employer to demonstrate that its policy is “job related and consistent with business necessity,” and tailored to the specific circumstances, taking into account factors such as those set forth in Green v. Missouri Pacific Railroad, 549 F.2d 1158 (8th Cir. 1975), i.e.,: (i) nature and gravity of the offense or conduct; (ii) amount of time since the offense or conduct and/or completion of the sentence; and (iii) nature of the job held or sought. (Bright-line disqualification policies that include convictions that are older than seven years create a rebuttable presumption that they are not sufficiently tailored.) Even if an employer can demonstrate job-relatedness and consistency with business necessity, an applicant or employee can still bring a claim if they can show that there is a less discriminatory alternative (such as a narrower list of disqualifying convictions) that advance the employer’s legitimate concerns as effectively as the current policy or practice.

Employer Outlook

Employers in California should review their policies on use of criminal history in hiring and modify any practices to ensure compliance with the new FEHC regulation (as well as the FCRA and applicable municipal Ban the Box ordinances, such as Los Angeles and San Francisco).

Pamela Q. Devata is a partner in Seyfarth Shaw’s Chicago office. Stacey L. Blecher is counsel in the firm’s New York office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Pamela Q. Devata at pdevata@seyfarth.com or Stacey L. Blecher at sblecher@seyfarth.com.