California Peculiarities Employment Law Blog

Think You Are Exempt? New FLSA Salary Thresholds Affect California Employers, Too.

Posted in 2016 Cal-Peculiarities, Wage Order Series

Seyfarth Synopsis:  Changes to the FLSA regulations increasing the minimum weekly salary for exempt employees will impact California employees who currently are being paid less than $47,476 per year. Wise employers will start planning now to make the adjustments required to ensure compliance with both state and federal exemption laws. 

If you have white-collar exempt employees in California, you know that to qualify as an exempt executive, administrative or professional employee, an employee must (among other things) be paid by a salary that is at least twice the state minimum wage. With the California minimum wage currently set at $10 per hour (at least until next January, when it will increase to $10.50/hour), a little math tells us that the California salary threshold for white-collar exempt employees is $41,600/year [40 hours per week x $10.00 = $400/week x 52 weeks = $20,800; times 2 = $41,600].

If you have been catching the national news on the Department of Labor’s recent amendments to the FLSA regulations, you know that the federal salary threshold for white-collar exemptions is going up dramatically—to $913 per week, or $47,476/year.

The federal changes will go into effect on December 1, 2016. There are a number of options for responding to the new regulations, ranging from simply raising salaries to the federally-required level to re-classifying positions to non-exempt. You can access tons of relevant, helpful and interesting information here at Seyfarth’s FLSA Exemption Resource Center.

Until now, we in the Golden State did not often worry about the federal salary minimum for exemptions, because it was so much lower than what was required here. Now, however, we must take note—and make adjustments—for any employees who are currently classified as exempt and who are not being paid at least the equivalent of $47,476 per year.

What types of employees are we talking about? Employees who are likely to fall into this category in California include the ranks of a company’s exempt staff currently being compensated at or close to the current state minimum allowable salary; in other words, those being paid at or above $41,600, but less than $47,476. Examples might include some managers, executive assistants, human resources professionals, business development or marketing professionals, teachers, accountants, engineers, and creative professionals.

Even though the FLSA amendments will not go into effect until December 1, one question has already surfaced as a Cal-Peculiarity:  what to do with part-time exempt employees? It was, and remains, permissible (if perhaps uncommon) to have exempt employees who work part-time schedules, as long as they are paid at least the salary minimum (federal and CA) for each week of work, as the federal regulations do not allow pro-ration of weekly salary. As of December 1, 2016, any part-time exempt employees will have to be paid at least $913 per week.

If paying the higher weekly amount to part-time exempt folks is not a good option for the employer, a solution (in theory) under federal law would be to convert the employee to salaried non-exempt, and pay the employee for any overtime incurred according to the fluctuating workweek method (a method of calculating the regular rate of pay that varies according to the number of hours worked in a particular week). Not so fast. This method is not permitted in California, and converting California part-time exempt to salaried non-exempt employees could have expensive, unintended consequences if overtime were incurred. So, that solution may not be your best bet under California law.

Employers in California, as elsewhere, still have time to consider their workforces and make and implement plans for any necessary adjustments to their current exempt positions. But, we recommend that you begin your review and planning now.

It’s Not Just the Bathrooms: Look Out for Amended FEHC Regulations re Transgender Employees

Posted in 2016 Cal-Peculiarities

Seyfarth Synopsis:  The California Fair Employment and Housing Council (“FEHC”) is currently drafting new regulations that define employment practices that constitute discrimination against transgender applicants and employees. On April 7, 2016, the FEHC met in Oakland to discuss and hear public comment on its new, draft proposed regulations, which are in their early stages of development. The next hearing will be on June 27, in Los Angeles.

The DFEH already publishes a guidance document, “Transgender Rights in the Workplace,” defining certain terms and answering employers’ Frequently Asked Questions about transgender employees in the workplace. (See February 24, 2016 Client Alert, “DFEH Issues Guidelines Regarding Transgender Employees”). And the new FEHA regulations that went into effect on April 1, 2016, added protections for transgender employees and applicants. Now, in a further step toward providing direction to employers and to increase protections for transgender workers, the FEHC proposes to amend the FEHA regulations again with proposed Regulations Regarding Transgender Identity and Expression. These will affirmatively require employers to make workplaces non-discriminatory by:

–     Providing “comparable, safe, and adequate” facilities (such as restrooms and locker rooms) to employees without regard to the sex of the employees;

–     Permitting employees to use the facilities that correspond to the employee’s gender identity or gender expression;

–     Using gender-neutral signage on single occupancy facilities under their control; and

–     Addressing and referring to an employee with their preferred name, gender, and pronoun.

Likewise, the proposed regs would expand discrimination against transgender workers beyond overt discrimination, such as failing to hire or terminating a transgender employee. Employers would also be in violation of the FEHA’s prohibition of discrimination against transgender workers by:

–     Requiring an employee to use a particular facility, or undergo or provide proof of any particular medical treatment to use facilities designated for use by a particular gender;

–     Requiring an employee to dress or groom themselves in a manner inconsistent with their gender identity or gender expression;

–     Requiring an applicant or employee to state whether they are transgender;

–     Considering an applicant to have been untruthful by identifying themselves on an employment application in a manner inconsistent with their assigned sex at birth;

–     Enquiring as to or requiring proof of an individual’s sex, gender, gender identity, or gender expression as a condition of employment, unless the employer demonstrates a bona fide occupational qualification or the employee initiates communication with the employer regarding adjustments to their working conditions; and

–     Discriminating against an employee for undergoing a social transition (changing their gender presentation) or a physical transition (receiving medical treatment including hormone therapy or gender reassignment surgeries).

The regulations also propose to revise current regulations regarding Bona Fide Occupational Qualifications, workplace safety, fringe benefits, and working conditions, by replacing binary gender language (i.e., “male” and “female”) with gender neutral language to indicate that the same regulations apply to transgender and gender non-conforming employees and applicants.

These new regulations are scheduled for their next round of public hearing and comment on June 27, 2016. We will provide an update on the latest developments. In the meantime, employers should familiarize themselves and their supervisors with the current guidance and proposed regulations to answer questions they may have about transgender applicants and employees and to understand the emerging standards to avoid liability for discrimination. Attorneys in Seyfarth’s California Workplace Solutions Group are available to help.

Edited by Michael Wahlander.

FEHC Proposed Criminal History Regulations Put Employers in Hot Seat

Posted in 2016 Cal-Peculiarities

iStock_000076923915_LargeSeyfarth Synopsis:  The Fair Employment and Housing Council is vetting proposed regulations to prevent employers from discriminating against applicants or employees with criminal histories. Our colleague Kate Svinarich attended a recent public hearing and filed this report. And stay tuned for a later dispatch, featuring proposed regulations on Transgender Identity and Expression, which the FEHC considered at the same meeting.  

The California FEHC appears to want to make it easier for applicants and employees with criminal histories to sue for violations of the Fair Employment and Housing Act. On April 7, 2016, the FEHC met in Oakland to hear significant public comment from advocacy groups and the formerly incarcerated about Proposed Regulations Concerning the Use of Criminal History in Employment Decisions.

The proposed regs largely incorporate federal case law and EEOC guidance holding that the use of criminal history in employment decisions (including hiring) can constitute “disparate impact” discrimination against protected groups. Promulgating the proposed regs would be consistent with the Department of Fair Employment and Housing’s increased enforcement efforts to deter discrimination based on criminal records checks (see our previous blog on the subject of “Handling Applicant Criminal Records to Avoid Disability Discrimination Claims”).

The stated objective of the proposed regs is to describe how use of criminal history in employment decisions may violate the FEHA if it has an adverse impact on applicants or employees based on a FEHA-protected category (race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation, and military or veteran status).

Two important clarifications. The proposed criminal history regs make two important clarifications to existing California law:    

          Adverse impact. The proposed regs say that, under the FEHA, “adverse impact” is synonymous with “disparate impact” as defined by the federal EEOC: even though a policy or practice is neutral on its face, it can still have discriminatory impact if it adversely affects the employment opportunities of a protected class. Historically, categorical use of rules regarding criminal history (e.g., we will not hire anyone who has ever been convicted of any crime) may result in adverse impact based on, for example, race, color, or national origin.

          Business necessity. The proposed changes also clarify that business necessity, as well as job-relatedness, is necessary to justify a policy or practice that has an adverse impact on a protected class. Although this is no change from existing law, the proposed regulations spell out that employers, to avoid liability, must consider each applicant or employee with a criminal history individually, as well as the nature and gravity of the offense, the time that has passed since the offense, when the individual completed their sentence, and the nature of the job held or sought.

Additional Obstacles to Avoiding Liability. The proposed regs would place a few more potential stumbling blocks in the path of employers than already exist by virtue of the current federal and state guidelines:

          Plaintiffs could establish a prima facie case of discrimination relying on statewide evidence correlating protected characteristics, criminal history, and failure to hire. A representative for the California Employment Lawyers Association (a group of plaintiffs’ lawyers) advocated for—and the FEHC was inclined to include in the regs—provisions that would allow a plaintiff to meet the initial burden of proving discrimination based on statewide statistics, rather than on local, regional, or industry-specific statistics. Given the stark statistics correlating protected characteristics, criminal history, and employment, the plaintiff’s burden would likely be easily met.

          Employers may be required to inform an applicant of the reason for an adverse decision by written correspondence and provide an opportunity to respond. As advocated by the National Employment Law Project, the FEHC was inclined to strengthen portions of the proposed regulations requiring employers to make individual evaluations of candidates with criminal histories by notifying individuals of the conviction that disqualified them from a position of employment, and by providing them with a reasonable opportunity for that person to respond with evidence of a factually incorrect record, with evidence of significant rehabilitation, or with evidence of other indicators that recidivism is unlikely. If the employee were to establish that the record was factually incorrect, then that record could not be used in the employment decision.

          Employers with a “bright line” policy that disqualifies candidates with a criminal history or certain type of conviction would be presumed to have violated the FEHA. The proposed regulations also would likely hamper an employer’s ability to rely on any “bright line” rule about the qualifications of candidates and employees with criminal histories. Such a “bright line” rule presumptively would not be considered “job related” or “consistent with business necessity,” and would therefore be considered unlawful. To avoid liability, the employer would then need to prove that its policy can properly distinguish candidates who “do and do not pose an unacceptable level of risk” and that the convictions “have a direct and specific negative bearing” on the applicant’s ability to perform the position’s job duties.

These new regulations are not yet in effect. It seems likely that the FEHC will adopt its final regulations regarding criminal history at its next meeting, on June 27, 2016. In light of these new proposals and the DFEH’s more proactive enforcement efforts, employers should reevaluate any practice that uses criminal history as a disqualification from employment.

Things Are About to Get Cal-Peculiar! The 2016 Edition of Cal-Peculiarities is Here

Posted in 2016 Cal-Peculiarities

#16-3380 2016 Cal Pecs Cover ImageSeyfarth synopsis:  It’s here: the 2016 edition of the popular and informative Cal-Peculiarities: How California Employment Law is Different. Order it here. Also, we report the results of our recent reader survey. Wage-hour Issues and Employment Termination were top of mind. Read on for more results.

FLEX YOUR PECS!  

We are thrilled to announce that the 2016 edition of Cal-Peculiarities: How California Employment Law is Different is available NOW! This edition, like its predecessors, aims to help California employers understand what’s different about California employment law. We continue to highlight recent court decisions and legislative developments for private employers who do business in California. The book is available in a convenient, searchable eBook format. Click here to order your copy today!

READER SURVEY RESULTS

Back in January, we surveyed you, dear readers, to capture your preferences in blog topics. The results are in! In addition to your continued desire to be equipped with the Cal-peculiar basics,  you also find it important to be on the cutting edge of everything peculiar!

90% of respondents want to read more about CA Wage-Hour Issues and Terminations of Employment.  We hear you (and are not surprised!) given the amount of litigation these areas generate.

In second place, tied at 80%, were CA Handbooks and CA Leaves (including Paid Sick Leave). Certainly, there will be more to come on these topics.

Also popular (tied at 70%), were Case Updates and New Legal Developments.

Next, at 65% of the vote, came Overtime Exemptions and Recordkeeping & Retention, followed closely by Workplace Investigations. 

No other topic garnered more than 50% of the vote. Of least interest to respondents was Arbitration, which rated a paltry 35%. Perhaps we are all a little burned out on the seemingly endless changes in judicial perspective surrounding mandatory arbitration in the employment setting.

We also received a few write in topics. Be on the lookout for future posts on drug & alcohol/medical marijuana (see also our previous blog on marijuana in the workplace and our Seyfarth blog THE BLUNT TRUTH, which chronicles the evolution and implementation of marijuana laws in the U.S.), workers’ comp/stress claims, and any California angle on use of genetic information.

Thank you for responding and thank you for your continued interest in the blog. We always love to hear from you!

UPDATE: Santa Monica Amends Minimum Wage Ordinance, Delays Sick Pay Implementation.

Posted in 2016 Cal-Peculiarities, Sick Leave Series, Work Time Series

Seyfarth Synopsis:  Santa Monica has amended its Minimum Wage Ordinance to postpone implementation of its paid sick leave entitlements, now starting January 1, 2017 instead of July 1, 2016, and create a two phase implementation process for both small and large employers.

Like many a trip to the beach, the journey of the paid sick leave portion of Santa Monica’s Minimum Wage Ordinance[1] has hit some last-minute snags. On Tuesday, April 26, the City Council accepted a package of amendment proposals. Within those proposals, instead of rushing to a July 1, 2016 implementation date of the previously adopted San Francisco-like 72-hour sick leave cap, the Council has decided that everyone should just chill out. The amended Ordinance will allow implementation to roll in like the tide, with the first wave of changes delayed to January 1, 2017, and a second wave coming in on January 1, 2018.

Under the first wave, small businesses (employers with 25 or fewer employees) must allow a rolling cap of 32 hours of paid sick time for employees, with larger businesses capped at 40 hours. The second wave will increase these caps to 40 hours for small businesses and 72 hours for larger businesses. Until January 1, 2017, Santa Monica employers can relax and continue to follow California law.

The accrual rate remains the same as required under California law (one hour for every 30 hours worked), but these accrual caps act as “point in time” caps, similar to the San Francisco ordinance. That is, Santa Monica employers would no longer be able to limit employee annual use to 24 hours after Jan 1, 2017. Instead, they will have to allow the use of whatever an employee has in his or her bank at any given time. The Ordinance also does not eliminate an employer’s obligations to follow the California statute where the California statute is more generous. So, at least until January 1, 2018 (when the accrual cap will increase to 72 hours for large employers), Santa Monica employers who provide sick time by the accrual method should still follow the 48-hour minimum accrual caps under state law. The updated proposal does imply that some kind of frontloading would be acceptable, but it’s not apparent yet how that would work. We hope that once the Ordinance itself is published, this issue will be made clear.

The Council has also reduced the period of time in which retaliation against an employee for exercising rights under the Ordinance will be presumed. The time, once 180 days, will now be 90 days (that that’s still three times longer than under the California law). So employers should be very cautious in taking actions against employees who take sick days, no matter how totally bodacious the surf report was for that day.

Please see here and here for more information.  We expect the amended Ordinance to be available at any moment.  In the meantime, please see your most tubular Seyfarth attorney for more information.

[1] The Ordinance is entitled “An Ordinance of the City Council of the City of Santa Monica Adding Chapter 4.62 to the Santa Monica Municipal Code Requiring a Minimum Wage for Employees, and Adding Chapter 4.63 to the Santa Monica Municipal Code Requiring a Living Wage to Hotel Workers.”

Vote YES! for Compliance: An Election Law Refresher for California Employers

Posted in 2016 Cal-Peculiarities, Work Time Series

Seyfarth SynopsisUnder California law, employers have a part to play in protecting employee voting rights and other political activity.  What follows is a short reminder of employer duties and obligations.

With the June 7, 2016, primary right around the corner, California employers need to be prepared for election season.  For your reference, here is a quick summary of some of the major issues California employers may face between now and Election Day.

Voting

Regardless of whether their employees are feeling the Bern or stumping for Trump, California employers must ensure that employees have an opportunity to visit the polls, which are open from 7:00 a.m. until 8:00 p.m.  California Elections Code Section 14000 requires employers to provide employees who do not have sufficient time to vote outside of their regular working hours with up to two hours of paid time off to vote at the beginning or end of their regular shift, depending upon whichever will permit the most time for voting and the least amount of time off the job.  Employers and employees also are permitted to work out a mutually agreeable schedule for Election Day that better suits their needs.

Employees cannot simply skip work to punch those ballots, however.  Instead, employees who believe by the time of the third working day before Election Day that they will need to time off to exercise their civic duty must provide their employer with notice no later than two working days before Election Day.  To ensure that employees are apprised of this right, California Elections Code Section 14001 very patriotically obligates employers to post a notice setting forth the provisions of Section 14000 in a conspicuous place ten days before Election Day.  The notice can be found here.

Political Activity

Beyond pulling the lever in the voting booth, California employers must also allow employees to exercise their fundamental right to engage in political activity without interference.  That means employers cannot restrict their employee’s political activities or affiliations, nor can they force employees to participate in any particular political activity. Cal. Lab. Code §§ 1101 and 1102.  Employers need to keep in mind that political activity means more than just casting a vote.  The meaning of “protected activity” is expansive and encompasses participation in organizations or movements advocating for political or social causes such as civil and equal rights. Gay Law Students Assn. v. Pac. Tel. & Tel. Co., 24 Cal. 3d 458, 488 (1979).  Employers who interfere with an employee’s political activities should be aware that an employee may pursue a cause of action to recover damages sustained as a result of the employer’s interference.  Lockheed Aircraft Corp. v. Superior Court, 28 Cal.2d 481 (1946).

Solicitation of Funds

Private employers also cannot force their employees to donate funds to campaigns.  They may, however, solicit campaign donations from managers, officers, or executives with policymaking authority if they have political action committees. 2 U.S.C § 441(b)(3).  However, even if they want to “make America great again,” employers cannot coerce employees to donate their personal funds for political purposes.  What this means is, under both Federal and California law, employers cannot use threats of discharge, demotion, or any other financial reprisal to pressure employees to donate. 11 CFR § 114.2 (f)(2)(iv); see also Cal. Lab. Code § 1102; Fort v. Civil Service Comm’n of the County of Alameda, 61 Cal. 2d 331, 338 (1964).  Accordingly, private employers soliciting funds must have a political action committee, seek funds only from policymakers, and ensure that contributions are entirely voluntary lest they Cruz (sic) into a potential lawsuit.

Questions

If you have any questions regarding any of your obligations or your employees’ rights to flex their political muscles, please feel free to contact your favorite Seyfarth attorney.

Edited by Chelsea Mesa.

California Court Gives Two Thumbs Down and Voids Non-Compete in Actor’s Agreement

Posted in 2016 Cal-Peculiarities, Case Update

Seyfarth Synopsis: Limitation on an actor’s ability to work in certain films struck down as an unlawful restraint of trade. 

California, mecca of the film and media production industries in the U.S., is notorious for outlawing non-compete agreements. It is one of the few states that generally prohibits the unlawful restraint of one’s profession or business, with limited exceptions. (See Cal. Bus. & Prof. Code § 16600 et seq.). Last year’s decision in ITN Flix, LLC v. Hinojosa, 2015 WL 10376624 (C.D. Cal. May 13, 2015), illustrates that courts may strike down such unlawful non-competes, even outside the traditional employer-employee context.

What is this Case About? 

In 2004, film producer Gil Medina met actor Danny Trejo, who had worked on several successful films with director Robert Rodriguez (think Sin City and the Spy Kids franchise).  Medina approached Trejo with an opportunity to star in a multiple picture action feature film franchise built around a “vigilante character” to be portrayed by Trejo. The following fall, Medina and an independent production company, ITN Flix, LLC produced the film, entitled Vengeance.

Thereafter, Trejo and Medina/ITN Flix (who went on to become the Plaintiffs in the legal case) entered into a “Master License Agreement” (“MLA”) and an “Acting Agreement” (“AA”). The contracts purported to limit Trejo in playing vigilante characters in other films or appearing in films “similar” to Vengeance, and imposed a term of “at least” eight years on these (and other) contractual obligations. The contracts also (ambiguously) paved the way for Medina/ITN Flix to recover as commission part of the proceeds of the commercial exploitation of certain rights.

Vengeance was subsequently released, but only to a few small markets. By 2009, the film still had no significant release date. Even a 2012 collaboration with Steve Wozniak (the co-founder of Apple) and his wife, Janet, whereby the Wozniaks would appear in several new scenes that would be added to the film and also be included in a mobile application game entitled Vengeance: Woz with a Coz, failed to bring commercial success to the ill-fated Vengeance.

The legal trouble began in 2010, when director Rodriguez released a film called Machete, in which Trejo starred as—wait for it—a “vigilante character.” Unlike Vengeance, Machete garnered much acclaim and commercial success. Then, in 2013, director Rodriguez released a sequel to Machete entitled Machete Kills, which was not as successful, but still raked in millions of dollars.

In November 2014, viewing the success of the Machete films as their failure, the Plaintiffs (Medina and ITN Flix) sued Rodriguez, Gloria Hinojosa (talent agent who helped broker Trejo’s appearance in the Machete films) and their affiliated entities for, among other things, intentional interference with contract, violation of the Lanham Act, and unjust enrichment. Plaintiffs argued that Trejo’s appearance in the films without Rodriguez’s and his affiliates’ disclosure of Plaintiffs’ business relationship with Trejo constituted breach of contract, and further argued that Rodriguez and had a “legal and/or contractual duty” to disclose the business relationship between Plaintiffs and Trejo to third-party investors of Machete.

Hinojosa and entities related to her requested dismissal of the entire action in early 2015, followed by Rodriguez’s Motion to Strike Pursuant to California’s Anti-SLAPP statute and Motion to Dismiss the Lanham Act claim.

How California Law Made This Case More Peculiar Than It Already Was

The court first assessed the viability of the motion to dismiss, which alleged that the MLA and AA were so vague so as to be unenforceable, and constituted unlawful restraints of trade in violation of Section 16600 of the California Business and Professions Code. In response, the Plaintiffs argued that the contracts were not vague, and insisted that Utah law governed the contracts, so the “restraint” clause was enforceable. Even if California law applied, Plaintiffs argued that it was “widely recognized” that certain reasonable exclusivity agreements could be enforceable, especially as regards contracts in the entertainment industry. The court did not buy Plaintiffs’ argument in any way, shape, or form.

            First, Section 16600 maintains that “[e]very contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extend void.” The court harkened back to the California case Edwards v. Arthur Anderson LLP, which noted that California courts have “consistently affirmed that section 16600 evinces a settled legislative policy in favor of open competition and employee mobility,” because the statute is designed to protect “the important legal right of persons to engage in businesses and occupations of their choosing.”

            Second, the court highlighted California’s peculiar approach to restraint provisions in contrast to overarching Ninth Circuit law on the topic. California does not adopt the “narrow-restraint exception” to Section 16600, as other courts in the Circuit have adopted. California courts have emphasized the public policy behind disallowing such an exception, and have maintained that the “policy of the state… should not be diluted by judicial fiat.” Instead, the court pointed out, California courts have entirely relegated to the State Legislature the task of altering the reach of Section 16600.

            Third, the court analyzed whether the restraint provision would pass muster even in a Utah court. Usually, Utah courts may uphold a covenant not to compete so long as it is reasonable. For such a covenant to be valid and enforceable, it must be supported by consideration, completely free of bad faith dealing during negotiations, and must be necessary to protect the goodwill of the business. Notwithstanding such provisions, the court found that under both California and Utah law, the contracts were unenforceable, primarily because the restraints were not reasonable or narrow, and to the extent they were, any and all restraints are illegal under Section 16600. Further, the court found it “clearly unreasonable” for Plaintiffs to place an almost decade-long restraint on Trejo’s career.

The court also considered whether the provision regarding Plaintiffs’ ability to collect commissions on commercial exploitations of its “licensed rights” (i.e., a license to Trejo’s name and likeness in “vigilante character” films) constituted a restraint on Trejo’s career, and answered affirmatively. Trejo is a particular character actor, not cast in a wide variety of types of films and is “most recognizable for portraying, characters that operate outside the justice system and dispense justice or injustice.” Such an actor, the court concluded, is particularly vulnerable to the type of restraint present in the MLA and AA contracts. Further, the court rejected the assumption that charging a fee or commission is not a “restraint” and saw no reason Plaintiffs should be able to charge Trejo a fee for engaging in conduct (i.e., acting in a particular type of movie as a particular type of character) that they could not otherwise prohibit. As such, the court found the commission provision to be an unlawful restraint on trade under both California and Utah law.

What This Means in Terms of Employee Mobility in California

ITN Flix teaches the importance of taking care to draft contract provisions that limit or purport to limit an individual’s exercise of his business or trade, regardless of the individual’s industry. Such care is needed when drafting agreements with independent contractors as well as with employees at the beginning or end of employment.

ITN Flix also illustrates that California’s general public policy against non-competes is not limited to the traditional employer-employee scenario.  Indeed, a divided Ninth Circuit Court of Appeals panel in Golden v. California Emergency Physicians Medical Group recently held that a “no re-hire” provision in a settlement agreement could, under certain circumstances, constitute an unlawful restraint of trade under California law.

Without the backstop of non-compete agreements, California employers can nonetheless employ some best practices to ensure their employees do not share any valuable information with competitors.  Such best practices include:

  • Robust confidentiality and invention assignment agreements.
  • Effective entrance and exit interview protocols.
  • Employee education programs that create a culture of confidentiality whereby employees understand the value of protecting company data.
  • Effective trade secret protection measures that take into account new technologies and threats, including cyber threats and social media/cloud computer issues.

Please see our recorded webinar on Trade Secret Protection Best Practices: Hiring Competitors’ Employees and Protecting the Company When Competitors Hire Yours for more details.

To Seat, or Not to Seat: That is the Question

Posted in 2016 Cal-Peculiarities

Seyfarth Synopsis: Seats must be provided for each location where the work reasonably permits.

It started like a bad joke. A cashier and a bank teller walk into a bar—actually, a federal court served by the Bar—and sue CVS Pharmacy and JPMorgan Chase Bank, claiming they were entitled to sit while working, under the California wage orders. They lose and appeal to the Ninth Circuit.

The Ninth Circuit looked here and there but could find no California case interpreting the seating provisions in the wage orders. No precedent defined what the wage orders mean by requiring employers to provide “suitable seating” “when the nature of the work reasonably permits.” The Ninth Circuit asked the California Supreme Court to opine. On April 4, 2016, the California high court finally did.

“Though This Be Madness, Yet There Is Method In’t.”

The Supreme Court held that the “nature of the work” requires looking at subsets of all the tasks and duties of employees by location. Courts must look at all the actual tasks performed, not simply job descriptions or expectations. The Supreme Court rejected the employers’ approach of looking at the work as a whole. The Supreme Court also rejected the employees’ approach of looking at each “single task.”

In examining the term “reasonably permits,” the Supreme Court determined that a totality of circumstances standard applies. Courts must examine

  • the tasks performed,
  • whether the tasks can be performed while seated,
  • whether seats would interfere with other tasks,
  • whether getting up and down could interfere with the work, and
  • whether seated work affects the quality and effectiveness of overall job performance.

The employer’s business judgment—including expectations regarding customer service—is relevant but not determinative. The business judgment must involve something beyond an employer’s “mere preference.” Also relevant is the physical layout of the workplace.

“This Above All: To Thine Own Self Be True.”

The Supreme Court warned employers that “suitable seating” does not mean employers can play fast and loose with the truth and circumvent the suitable seating requirement by creating a workplace environment with the purpose to deny employees a seat.

And, employers who deny seating now must prove the nature of the work did not reasonably permit the use of seating. So employers should be cautious to consider real barriers to seating in the workplace as potential options are deliberated.

“That It Should Come To This!”

Employers can no longer get away with saying, “Anon, anon.” The time is now for employers to review their seating practices based on tasks actually performed by employees, and to look at tasks performed at different “particular locations.” “Business judgment,” though a consideration, is but one factor among several, and the employer bears the burden of proving it did not have to provide suitable seating.

Employers must ask themselves, “Are our employees provided seats?” If not, it may be time to reevaluate seating needs of employees before their company becomes the beginning of the next blog, because no company can take class action lawsuits sitting down.

The cases are: Kilby v. CVS Pharmacy, Inc. and Henderson v. JPMorgan Chase Bank NA.

Edited by Coby Turner.

California Governor Brown Signs Legislation to Expand Paid Family Leave

Posted in 2015 Legislative Updates, 2016 Cal-Peculiarities, California Leaves

Seyfarth Synopsis:  Starting Jan 1, 2018, the amount of benefits paid to employees on paid family leave and state disability will increase substantially, depending on an employee’s income level.

The Legislature and Governor have been keeping very busy. On April 11, 2016, Governor Jerry Brown signed into law AB 908, which will, though effective January 1, 2017, increase, for periods of disability commencing on or after January 1, 2018, the benefits provided to individuals in the Paid Family Leave (PFL) and State Disability Insurance (SDI) programs. The new law will increase the level of benefits from the current level of 55 percent to either 60 or 70 percent, depending on the applicant’s income. The new law will also remove, effective January 1, 2018, the seven-day waiting period before which individuals would be eligible for family temporary disability benefits.

The PFL program provides up to six weeks of wage replacement benefits to workers who take time off work to care for a seriously ill or injured family member or to bond with a minor child with one year of birth or placement of the child in connection with foster care or adoption. The SDI program provides benefits to individuals who are unable to work because of their own illness or injury.

In his press release, Governor Brown was quoted as saying: “Families should be able to afford time off to take care of a new child or a member of their family who becomes ill.” The press release further touted the legislation as improving “an individual’s ability to take up to six weeks off to bond with a new child or care for an ill family member.”

The Paid Family Leave program affected by this legislation was enacted in 2002. It is funded through worker contributions and is administered by the Employment Development Department in tandem with the State Disability Insurance program.

This legislation comes on the heels of Governor Brown last week signing legislation raising California’s minimum wage, in a series of annual steps, to at least $15 per hour statewide.

New DLSE FAQs: Unequal Guidance On Equal Pay Law

Posted in 2016 Cal-Peculiarities, Wage Order Series

Seyfarth Synopsis: New FAQs from DLSE offer some guidance on California’s “new and improved” Equal Pay Act. Most helpful is discussion of factors (skill, effort, responsibility) affecting whether work by different employees is “substantially similar” enough to require equal wages. 

As Seyfarth has reported previously here, as of January 1, 2016, California has one of the most aggressive pay equity laws in the country. On April 6, 2016, California’s Division of Labor Standards Enforcement issued a “Frequently Asked Questions” on the California Equal Pay Act, as strengthened by enactment of the California Fair Pay Act of 2015.

While the FAQ provides a handy roadmap for employees wishing to sue, it provides little guidance for an employer hoping to avoid claims of unequal pay or, if a claim is made, to defend itself. The phrasing of the FAQs is employee-focused. For example, the document addresses these questions for employees:

“What do I have to prove to prevail on my Equal Pay Act claim?”

“When do I have to file my claim?”

“What do I get if I prevail?”

But the advice for employers is limited.

As a quick reminder, the CA Equal Pay Act (Labor Code section 1197.5) requires employers to pay employees of both sexes the same “wage rates” for “substantially similar work,” unless the employer proves that the wage differential is based on (a) seniority, (b) merit, (c) a system that measures earnings by quantity or quality of production, or (d) some other bona fide factor other than sex, such as education, training or experience.

In the FAQs, the DLSE recaps the key differences in the current law from its predecessor: employees can be compared even if they do not work at the same establishment or hold the “same” or “substantially equal” jobs, and employers have the burden to justify pay differentials based on a limited number of factors. Also new: employers must keep records of wages, wage rates, job classifications, and other terms and conditions for three years (rather than two), and (consistent with existing law) employers may not prohibit employees from discussing their wages.

What Employers Need To Consider In Light Of The FAQs

The DLSE leaves many questions unanswered from the employer’s perspective. Perhaps this is not surprising, given the nuanced and fact-specific nature of the questions with which employers must grapple to comply with the law. Nonetheless, there are a few nuggets of information that employers should take to heart when performing pay equity analyses.

The meaning of “substantially similar work.” As noted, the law requires employers to pay employees of both sexes the same wage rates for “substantially similar work.” The FAQs define substantially similar work to mean “work that is mostly similar in skill, effort, responsibility, and performed under similar working conditions.” (The imprecise term “mostly similar” is arguably an improvement on the “when viewed as a composite of” language used in the statute.) The FAQs go on to define (more helpfully) the terms “skill,” “effort,” “responsibility,” and “performed under similar working conditions”:

Skill = experience, ability, education, and training required to perform the job;

Effort = the amount of physical or mental exertion needed to perform the job;

Responsibility = the degree of accountability required in performing the job; and

Performed under similar working conditions = the hazards and physical surroundings of the job such as temperature, fumes, and ventilation.

How do you define “wage rates”? The FAQs do not define “wage rates”; it merely repeats what we already knew—the law refers to wages or salary paid, and other forms of compensation and benefits. Notwithstanding the lack of guidance, we think employers should consider all forms of compensation, not just base or hourly pay, and give special attention to setting starting salaries for new hires.

Employee questions about wages. As the DLSE points out, an employer cannot retaliate against employees who talk or inquire about their own wages or the wages of others. At the same time, the employer continues to have no duty to disclose wages of other employees.

Seyfarth’s Pay Equity Group Is Positioned To Assist Employers

Seyfarth has been at the forefront of assisting employers to interpret pay equity laws and conduct pay analyses. The Seyfarth Pay Equity Group, which includes experienced attorneys and analysts, regularly advise clients regarding the California Fair Pay Act. Contact your Seyfarth attorney to discuss how Seyfarth’s Pay Equity Group may benefit you.