California Peculiarities Employment Law Blog

California Moves Toward Ban On Mandatory Arbitration of Labor Claims

Posted in Arbitration

Tearing contract sheetOn August 31, the California Legislature passed AB 465, aiming to “ensure that a contract to waive any of the rights, penalties, remedies, forums, or procedures under the Labor Code”—such as an arbitration agreement—is “a matter of voluntary consent.” This bill, now before Governor Brown for his approval, raises two big questions: (1) will the Governor sign the bill, and, if he does, (2) to what extent would the new law be enforceable?

The proposed bill would add Section 925 to the California Labor Code, to

  • prohibit companies from conditioning employment offers (or renewals) on the waiver of any Labor Code-related right,
  • require that any waiver of Labor Code protections be knowing, voluntary, and in writing,
  • deem any waiver of Labor Code rights conditioned on employment to be “involuntary, unconscionable, against public policy, and unenforceable,”
  • prohibit retaliation against any person who refuses to waive Labor Code-related rights, and
  • authorize attorneys’ fees recovery for a plaintiff who enforces rights under Section 925.

The bill would not affect the enforceability of other provisions in an agreement that contains an unenforceable arbitration provision. And it would not apply to employees who are represented by counsel in negotiating the terms of such an agreement.

What? Why? How?

You wonder why this legislation is necessary (um, Armendariz)? Or how it is legal (FAA, anyone)? You’re not alone. While the bill’s supporters call it essential for worker protection, its opponents call it unnecessary, unenforceable, and counterproductive.

The bill’s author, Assembly Member Roger Hernández (D-West Covina), introduced the bill with this explanation: “No worker should be forced to choose between a job and giving up core labor rights and procedures. Existing labor laws are meaningless if workers are forced to sign away enforcement of those rights.”

Opponents, including the California Chamber of Commerce, say the bill is unnecessary in light of current law, unenforceable as preempted by the Federal Arbitration Act, and counterproductive because, as a matter of public policy, arbitration is a fair, low-cost avenue to resolve labor disputes: “AB 465 will only serve to increase litigation costs of individual claims, representative actions and class action lawsuits against California employers of all sizes until such legislation can work through the judicial process to be challenged once again.”

Hardly a Boon to Employees

The law hardly seems essential to workers’ rights. Current California law on mandatory, pre-dispute, arbitration agreements already provides these safeguards:

  • a neutral arbitrator, who is to make a written award subject to judicial review,
  • allowance of adequate discovery,
  • the remedies that would be available in court, and
  • the employee relieved of any obligation to pay any more costs than what the employee would have to pay in court.

Nor have proponents of AB 465 shown that arbitration subjects employees to worse outcomes. The bill’s opponents, meanwhile, have pointed to studies showing that arbitration offers better outcomes for employees in less time than traditional litigation.

A cynic might wonder, then, if the bill primarily serves the interests of trial lawyers.

A Textbook Case of Conflict Preemption?

Should the Governor approve AB 465, new Labor Code section 925 would face judicial challenges on preemption grounds. The Federal Arbitration Act declares that contractual agreements to arbitrate disputes are “valid, irrevocable, and enforceable.” And the U.S. Supreme Court has often reminded California about the pesky Supremacy Clause, while invoking the FAA to trump California rules that were hostile to arbitration.

In fact, one anti-arbitration rule the Supreme Court has struck down appears in a predecessor of AB 465—Labor Code section 229. Section 229 purports to invalidate arbitration agreements involving wage claims. After the Supreme Court’s 1987 ruling that the FAA preempts Section 229, that section is now a nullity except in that rare case in which the arbitration agreement does not involve transactions affecting interstate commerce.

The language of AB 465 directly contradicts Supreme Court pronouncements on FAA preemption: the bill (1) would outlaw mandatory agreements to arbitrate Labor Code claims, such as wage and hour disputes, unless that agreement is negotiated by the employee’s attorney, and (2) states that all mandatory agreements to arbitrate Labor Code claims are “unconscionable, against public policy, and unenforceable.” It’s like the Legislature has already written the preemption decision for the Court!

Workplace Solutions

AB 465 is just one step away from becoming California law. Should Governor Brown sign it, its validity will almost certainly be challenged. But with this bill closer to reality, employers should consider its potential implications on their arbitration programs, especially if they are made a condition of employment (as many are).

With that in mind, it is worth pondering:

  • Since AB 465 requires the employer to prove that the employee entered into the arbitration agreement “knowingly and voluntarily,” and that it was not a condition of employment, can the employer establish that proof simply by including a recital that the parties are voluntarily waiving the right to sue in court, and that this waiver is not a condition of employment?
  • Must the employer offer additional consideration to ensure that the arbitration agreement is truly voluntary?
  • Must employers reconsider the methods by which employees enter into arbitration agreements altogether? Is including arbitration agreements in handbooks now completely dead? Is there anything that would make clear that the employee has read and agreed to the arbitration terms?
  • What other policies, e.g., electronic signatures, opt-out methods, etc. can be used to most effectively ensure that employers can make a strong case for knowing and voluntary waiver?

If you are struggling with finding answers to these or other questions, we encourage you to consult a friendly Seyfarth attorney near you.

Edited by Julie Yap

NLRB’s New “Joint Employer” Standard: Seismic Impact for California Employers?

Posted in 2015 Legislative Updates

EarthquakeYesterday, the National Labor Relations Board issued its much-anticipated decision in Browning-Ferris Industries of California, 362 NLRB No. 186 (August 27, 2015). By a 3-2 vote, the Board announced a new standard to determine whether multiple entities are “joint employers” of a single workforce. The Board will now inquire whether there is a common-law employment relationship with the employees in question (including the “right to control” the employees). If this common-law employment relationship exists, the inquiry then turns to whether the putative joint employer possesses enough control over the employees’ essential terms and conditions of employment to permit “meaningful collective bargaining.”

The Board majority wrote that it was “restating” its joint employer test. “Restate” here means to alter dramatically, as Browning-Ferris overturns decades of precedent. Gone is the requirement of “direct and immediate” control over working conditions, and not of a “limited and routine” nature. Now, indirect control and even the reserved right to control working conditions is enough to establish joint employer status if two or more entities “share or codetermine those matters governing the essential terms and conditions of employment.” The essential terms and conditions of employment include hiring, firing, discipline, supervision, direction, “dictating the number of workers to be supplied,” scheduling, seniority, overtime, assigning work, and “determining the manner and method of work performance.” And this list is illustrative, not exhaustive.

So what does this mean for California employers? Browning-Ferris will likely have a wide-reaching impact. Any business that regularly uses contractors, such as a cleaning or janitorial services, maintenance services, caterers, or a management company to staff and operate its business could be affected. Among the entities possibly affected are:

  • hotels,
  • tech companies (from start-ups to the well-established),
  • investors, real estate holding companies, and general contractors,
  • any entity that outsources non-core work integral to its business model, such as a manufacturer that contracts with a trucking company for shipping,
  • any entity that uses a staffing agency to obtain additional or temporary help,
  • any franchisor that contracts with others via franchise agreements, and
  • any entity with a relationship to a subsidiary or other corporate entity.

The expanded definition of joint employer may result in companies unwittingly being pulled into collective bargaining negotiations (in the case of an already unionized workforce), or even union campaigns and elections with its contractors. With the advent earlier this year of expedited election rules, many companies will no doubt feel whipsawed by these unwelcome developments.

The new joint employer standard might also affect non-union settings. Employees—whether or not unionized—have the right under federal labor law to engage in protected, concerted activity. As the dissent in Browning-Ferris notes, companies who are putative joint employers may find themselves named in unfair labor practice charges with the NLRB, or the subject of increased picketing and boycott activity. Moreover, California employers have long faced unique obstacles to challenging union activity on their premises. The Moscone Act and California Labor Code section 1138.1, which the California Supreme Court has upheld against a constitutional challenge, make it very difficult to obtain injunctive relief against union trespass on private employer property. Now, more companies can expect to bear the brunt of this activity.

Workplace Solution

We have identified a number of steps companies can take to assess their risks and respond to the Board’s new joint employer standard, including broad indemnification agreements with third-parties. This last suggestion may sound familiar to many California employers in light of recent state law changes. As of the beginning of this year, as we’ve noted, Labor Code section 2810.3 requires a “client employer” to share civil liability with “labor contractors” (including pay rolling, temporary staffing, or employee leasing agencies) for (1) payment of wages of the contract employees, and (2) failure to procure worker’s compensation coverage. (This statute followed Martinez v. Combs, 49 Cal. 4th 35 (2010), which broadened the definition of “employer” in the wage-hour context.) A “client employer,” however, may contract with its “labor contractor” for indemnity. While client employers cannot avoid the Board’s new joint employer standard, a broad indemnification agreement (placing the duty to defend and hold harmless on the contractor), may ease the impact of this decision.

No More “Aliens”: Outdated Term Shipped Back to Home Planet

Posted in 2015 Legislative Updates

HiResDid you know that California law currently allows employers in certain circumstances to give preferential treatment to candidates who aren’t “aliens”? No, you didn’t miss the new Independence Day movie (what took so long?) or yet another landing at Roswell. A 1937 statute, codified in California Labor Code section 1725, has for almost 80 years defined “alien” to mean “any person who is not a born or fully naturalized citizen of the United States.” And Labor Code section 2015 currently creates a three-fold order of preference for certain California public-works applicants: California “citizens,” U.S. “citizens,” and “aliens who are within the State at the time of making application.” So current law contemplates an employment situation where non-citizens authorized to work in the United States could be cast aside in favor of naturalized or native-born citizens.

All this will change, as of January 1, 2016, because of a bill that Governor Brown signed into law on August 10, 2015. The bill repeals preferential treatment for citizens and removes from the Labor Code the characterization of foreign-born workers as science fiction characters. Senator Mendoza, who authored SB 432, recognized the term “alien” is outdated and considered derogatory to immigrant workers, and wanted to remove unfair treatment of non-citizen workers. Senator Mendoza further noted the current law is inconsistent with California laws prohibiting national origin and ancestry discrimination.

The bill’s repeal of a preference for citizen hiring is part of California’s pattern of strengthening protections for immigrant workers. Other recent examples include the law prohibiting discrimination against individuals with the type of driver’s license provided to those who cannot prove their presence in the United States is authorized, and the law prohibiting discrimination against individuals who update their personal information based on a lawful change in name, social security number, or federal employment authorization document.

As of January 1, 2016, be mindful that employers, even on public works projects, should not be using a citizens preference system in screening applicants. You must disregard citizenship status, just as you would in hiring for any other position, so long as the applicant is authorized to work in the United States. The new law does not, however, require that you hire actual aliens, regardless of their home planet or whether they come in peace.

If you have any questions regarding SB 432, or any other new employment laws, please reach out to your favorite Seyfarth attorney.

“Are We There Yet?” The Road To Arbitration

Posted in Arbitration

HiResIn this season of family road trips and every parent’s favorite question from the back seat—“are we there yet?”—California employers on the road to arbitration recently received some good directions from the Supreme Court. As explained here by our very own Pam Vartabedian, the California Supreme Court recently smoothed over some bumps in that road, holding that reasonably balanced arbitration agreements are enforceable even if they look like a “simple, old-fashioned, bad bargain.”  With this guidance, more California employers with an arbitration destination in mind may eventually get there yet.

It’s Summer! Let’s Take a Dip in the Cal/OSHA.

Posted in OSHA Series, Uncategorized

HiRes (2)As we trudge through the dog days of summer, temperatures rise, employees daydream about vacation, and, unfortunately, workplace accidents and injuries happen. This is a time to note that some Cal/OSHA District Offices take a very expansive view of injury and illness reporting requirements.  And not all District Offices take the same approach!  Thankfully, we have a team of Cal/OSHA lifeguards to help keep you above water.

Please see here for a fascinating article on the District Offices’ view, written by two Cal/OSHA experts: Mark A. Lies, II and Ilana R. Morady. With this guidance, the forecast is more likely to show clear waters ahead!

Megan’s Law: How California Limits its Use for Employment Purposes

Posted in 2015 Cal-Peculiarities, Recruiting and Hiring

Responsive Web Design Concept. VectorSince New Jersey led the way in 1994, many states have enacted so-called Megan’s Laws, which establish public online registries of individuals who have been convicted of a sex-based offense. California’s version of Megan’s Law is codified as California Penal Code § 290.46.

Section 290.46 requires all convicted sex offenders to register with the state’s sex-offender Registry. California then publishes online the names, identifying features, and, in some cases, addresses of the 83,000 registrants—all for the world to see with just a few mouse-clicks.

Why Does Megan’s Law Concern California Employers?

A curious reader might now feel the urge to visit the Megan’s Law website to test a suspicion that some acquaintances appear on the list (indeed, your Cal Pecs blog author succumbed to that very temptation while preparing this article). But employers, in particular, should exercise caution when pursuing such a curiosity.

California employers usually may not use information from the Registry to refuse to hire, fire, or demote an employee or potential employee.

  • Section 290.46 expressly prohibits employers from using Registry information for employment purposes, except as otherwise provided by statute or to “protect a person at risk.”
  • Misuse of Registry information exposes employers to potential litigation and damages, fines, and attorneys’ fees.

Are There Any Exceptions?

The statute permits employers to use Registry information “to protect a person at risk.” Cal. Pen. Code § 290.46. But this vague term generally means someone who “is or may be exposed to a risk of becoming a victim of sex offense committed by the offender.”  Cal. Pen. Code § 290.45(a)(8). The “person at risk” exception could protect some employers (e.g., day care centers, hospitals, senior centers, etc.) from liability if they use the Registry to evaluate the fitness of their employees or prospective employees. But most people—employees as well as patrons—are not obvious “person[s] at risk.” Employers, therefore, should not assume that this exception covers Registry-based adverse employment actions. It likely does not.

In addition, some employers are subject to laws that prohibit them from hiring convicted sex offenders altogether. Section 45122.1 of the Education Code, for example, forbids schools from hiring persons convicted of sex offenses (and other serious crimes). Thus, some employers have statutory protection from liability if they use the Registry as a basis for an adverse employment action.

Why Can’t I Use Megan’s Law To Keep Offenders Out Of My Workplace?

Section 290.46 expresses California’s public policy that seeks to protect offenders from “additional punishment” or “retribution” once they have paid their debt to society and have resumed their place among their fellow citizens. California is “peculiar” on this front—most other states’ Megan’s Laws do not include similar restrictions on the use of the Registry in employment contexts.

This should not come as a surprise. Preventing someone from working based solely on their criminal history is coming under increased scrutiny in California, as in many other jurisdictions. Indeed, “ban the box” movements, which demand that employers not ask prospective employees about past criminal convictions, are gaining momentum throughout California and nationally. State and local government employers in California may no longer ask for criminal record information on job applications, and as of August 2015, San Francisco private employers of 20 or more employees cannot inquire about criminal history either. (See our earlier post here.)

So, the moral of the story is . . . unless you fall under an exception to Section 290.46, or your workplace contains obvious “persons at risk,” you need to treat any person found on the Megan’s Law Registry just as you would any other employee or applicant.

Workplace Solution: Employers must balance concerns about workplace safety with the twin public policy goals of (i) not punishing someone twice for the same crime and (ii) ensuring that everyone has a chance to earn a living, regardless of past convictions.

If you have Megan’s Law-driven concerns about a current or prospective employee, refrain from making a hasty decision. As always, don’t hesitate to contact your Seyfarth lawyer if you are facing this predicament and need advice on how to proceed.

Changes to the S.F. Formula Retail Employee Rights Ordinances

Posted in 2015 Cal-Peculiarities, San Francisco Ordinances

(Photo) SF StreetBy Laura Maechtlen and Jason Allen

As our loyal CalPecs blog readers know, in November 2014, San Francisco passed two ordinances—“Hours and Retention Protections for Formula Retail Employees” and “Fair Scheduling and Treatment of Formula Retail Employees”—colloquially known, together, as the “San Francisco Retail Workers’ Bill of Rights.”  (Our most recent update and a recent Management Alert can be found here and here, respectively.)  On July 7, 2015, the S.F. Board of Supes proved that the Bill of Rights is a living document by passing an amendment to the SF Workers’ Bill of Rights on the final reading.

Most significantly, the amendment changes the definition of employers covered by the ordinances.  The amendment also modifies some of the requirements imposed on employers and clarifies some open enforcement issues.  The Office of Labor Standards Enforcement (“OLSE”) has posted information about the amendment here and here, and the text of the amendment here. In short: Continue Reading

The Expert Institute’s Best Legal Blog Competition

Posted in 2015 Cal-Peculiarities

(Illustration)CompetitionDear Friends and Loyal Readers,

We need your help!  The Cal-Peculiarities Employment Law Blog has been invited to participate in a “best legal blog competition” sponsored by The Expert Institute.   If you appreciate our weekly posts, we would very much appreciate your nominating us in the Labor & Employment category.

If our blog is selected for one of the top three prizes, any prize money will be donated to a worthy charity.

To nominate our blog, please CLICK on the below link, SCROLL down to the bottom of the page, and FILL IN the information on the RIGHT-HAND SIDE of the page.

Enter YOUR name and email
Blog address is:
From the drop-down list, choose “Labor & Employment”
State why you think our blog is the best: (e.g.,  we deliver prompt and insightful information that all CA employers need to know; we provide practical solutions to vexing CA employment law issues;  we are funny and have amusing graphics)

Thank you for your consideration and support!

AT LAST, Amendments to CA’s Paid Sick Leave Law Signed By Governor!

Posted in 2015 Cal-Peculiarities, 2015 Legislative Updates

Man signs document stamped handleBy Dana Peterson and Christopher Im

California’s Paid Sick Leave Law, AB 304, or the Healthy Workplaces, Healthy Families Act of 2014 as it is officially known, is a hot topic that we have blogged about a number of times. Eligible employees began accruing paid sick time under the new law on July 1st. However, proposed amendments to the Paid Sick Leave Law were still meandering through the Legislature until finally passed by the Senate on July 13th and signed into law by Governor Brown today.

Assembly Bill 304 was first introduced in February 2015, and underwent seven dizzying amendments. In our last blog, we discussed the June 2, 2015 version, which included for the first time an urgency clause. The urgency clause makes the amendments effective today, the day that Governor Brown signed the bill. To see the full text of the newly passed amendments, click here.

So what do the latest amendments do? The key changes relate to how employers are to calculate the payment of sick time accrued under the new law.

When the law was originally passed, the rate of pay was to be calculated based upon an employee’s hourly rate. For employees who earn different hourly rates of pay, are paid by commission or piece rate, or are nonexempt salaried employees, the rate of pay was calculated based upon the wages paid, not including overtime premium pay, and the hours worked in the full pay periods that the employee worked during the prior 90-days.

A different method of calculation was proposed in the original text of AB 304. However, to keep things interesting, subsequent amendments proposed different methods of calculation, including the final June 22nd amendment. While this left many employers scratching their heads over how to update their policies (“Should we incorporate the original method of calculation for  now?”  “Should we incorporate this version or wait and see if it’s going to be amended again?”  “What?  Another amendment?  It’s been only 3-days since the last one!  I give up!”) the good news is that the amended version signed by the Governor today contains a greatly simplified method of calculation.


a) For nonexempt employees, employers may choose one of two options: (1) calculate paid sick leave in the same manner as the regular rate of pay for the workweek in which the employee uses the paid sick time; or, (2) calculate paid sick leave by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked during the full pay periods that the employee worked during the prior 90 days.

b) For exempt employees, paid sick leave is calculated in the same manner as the employer calculates wages for other forms of paid leave time.

If you have any questions about the newly adopted amendments, you can always reach out to our California Counseling and Workplace Solutions team.

Edited by Jeffrey Berman and Colleen Regan

A “Hotbox” Of Legal Issues: California’s Workplace Marijuana Laws

Posted in 2015 Cal-Peculiarities

(Illustration) California MarijuanaBy Geoff Westbrook

With New York joining in last year, nearly half the country has laws permitting state residents to use marijuana for medical purposes, and a handful even permit recreational use. California led the movement when it passed the so-called “Compassionate Use Act” in 1996. At present, use and distribution of marijuana remain federal offenses, although unenforced per current U.S. Department of Justice policy.

The increasing accessibility of marijuana over the years, as well as its acceptance into mainstream culture, have led to serious misconceptions regarding its permissibility in the workplace. We offer here a few reminders to help clear up this this sometimes “hazy” area of California law.

  •  I can weed out marijuana users in the job application process, right? Wrong. With few exceptions for certain industries, public and private California employers may not require job applicants to disclose information concerning an arrest that did not result in a conviction or their referral to or participation in a pretrial or post-trial diversion program. Marijuana convictions older than two years are expressly off limits, as well as an applicant’s criminal history that has been expunged, sealed or dismissed. None of this criminal information may be considered in making employment decisions. Some California cities, such as San Francisco and Richmond, prohibit private employers from asking about conviction history altogether on an application via so-called “Ban The Box” laws, or until after the first live interview and the employer has determined that the applicant meets job qualifications. Significant civil and criminal penalties, in addition to attorney’s fees and costs, may serve as a major buzzkill for violating employers.
  • How about background checks to smoke out users? Employers conducting criminal background checks and considering recent marijuana convictions must be mindful of federal and state discrimination laws. Criminal background check polices that disparately impact protected groups of employees will be heavily scrutinized by the Equal Employment and Opportunity Commission and the California Department of Fair Employment and Housing. Using third-party vendors to screen job applicants and employees on the other hand triggers complex rules under the federal Fair Credit and Reporting Act and California’s more stringent counterpart. This is a smoking hot area for litigation as class action lawsuits in recent years challenge both approaches to employer background checks.
  • One toke over the line? Drug tests and positive results. In California, once a job offer has been made, employers can require job applicants to pass a drug test as a condition of employment, so long as all prospective employees are subject to the same requirement. Drug tests performed after the person has been hired are essentially prohibited without a reasonable suspicion that the worker is under the influence (certain transportation and safety-sensitive jobs have looser restrictions for when one can test), or pursuant to a narrowly-drafted post-accident testing policy. In the event of a positive test, California employers have wide discretion to decline to hire, to discipline and even to terminate employment regardless of whether the individual has a medical marijuana card due to an underlying medical condition. Neither federal nor California law prohibit making employment decisions based on marijuana use and so it is a legitimate basis to terminate. Additionally, while businesses must engage in a good faith interactive process with all disabled employees, employers are not obligated to permit continued marijuana use as a reasonable accommodation. The legality of marijuana use for medical purposes in California does not change the analysis.

The 411 on California’s “420” Laws. Employers have substantial rights with respect to keeping marijuana out of the workplace. California’s legislative endorsement of marijuana as a treatment option for certain conditions does not tie the hands of management if there is a positive test. However, marijuana-related arrests not leading to conviction and old convictions cannot be thrown into the pot when making hiring, firing and other employment decisions.

Proposed workplace solution. As marijuana use for medical purposes has become much more prevalent in California, this is an excellent time for employers to assess their written policies, job applications, background check procedures, and interview materials—especially nationwide companies using form documents—to ensure compliance with California law, where the grass is not always greener.

Edited by Chelsea Mesa