2017 Cal-Peculiarities

Seyfarth Synopsis: California’s Department of Fair Employment and Housing has just issued its Annual Report on civil rights complaints during 2016. Here are some highlights.

The DFEH hails as the largest state civil rights agency in the country, with 220 full-time employees operating out of five offices throughout California. Its annual report makes clear that its core work is litigation. It sues chiefly under the Fair Employment and Housing Act, California’s more expansive version of federal anti-discrimination law, and also sues under the Unruh Civil Rights Act, the Disabled Persons Act, and the Ralph Civil Rights Act.

The annual report comes in the DFEH’s fourth year as an active litigant. Beginning in 2013, the DFEH gained power to file lawsuits to pursue violations of the state’s anti-discrimination laws. No longer is there administrative adjudication of claims by the Fair Employment and Housing Commission (now defunct). The DFEH now has broad authority to sue California employers, housing providers, and other entities for unlimited compensatory damages, as well as attorney fees and costs. Moreover, the DFEH can launch state-wide class or representative actions for systematic or large-scale violations of state civil rights laws. And, like its big sister, the federal Equal Employment Opportunity Commission (which has always been able to sue in court), the DFEH may go beyond monetary damages and demand certain forms of “affirmative relief,” such as employee retraining, redrafting and posting of policies, and regular monitoring to ensure compliance. In short, the DFEH is now a fully operational litigation shop, employing investigators, litigators, paralegals, and mediators.

A Tidal Wave of Complaints. The DFEH received more than 23,000 general administrative complaints and inquires in 2016. The amount was on par with 2015, and significantly more than the 19,000 filed in 2014. About 93% of 2016 complaints were employment-related, 6% were housing matters; the rest involved claims under the Unruh, Ralph, and Disabled Persons Acts. About 17,000 complaints resulted in formal charges filed with the DFEH. Most of the formal charges (12,242) requested an immediate right to sue, thus bypassing the DFEH’s investigation process.

A plurality of the 2016 formal charges (6,614, or 38%) originated out of Los Angeles County. Next in order were Orange, San Diego, and San Bernardino Counties (7%, 6%, 4% respectively). Together, these four counties created most of the DFEH’s 2016 workload: SoCal employers beware! Surprisingly, Sacramento County—not San Francisco County—accounted for most charges filed in Northern California (Alameda County was the most active in the Bay Area). Placer County, with 120 formal charges, was the most litigious in 2016 in proportion to its population size.

In terms of demographics, little is known about the 2016 class of DFEH complainants. The DFEH tracked only race and national origin, on the basis of the complainants’ self-reporting. Only 51% of complainants identified their race, and 65% identified their national origin. Of those who self-reported, Caucasian individuals topped the list with 35% of complaints; American or U.S. national origin was most reported, at 52% of complaints. Individuals identifying as Hispanic or Latino filed 28% of complaints in 2016, and those identifying as African American filed 22%. The DFEH did not collect data on the complainants’ sex, gender, age, religion, marital status, household income, or other demographic information.

Most Complaints Did Not Settle. The DFEH investigated 4,799 complaints in 2016. The DFEH settled a total of 1,036 complaints (21%), and referred 118 to the Legal Division, which brought 31 civil actions. The remaining 3,700 complaints were presumably withdrawn by the complainant, settled without the DFEH’s participation, dismissed by the DFEH, or consolidated into a single lawsuit.

Moneywise, the DFEH’s Enforcement Division resolved 573 complaints for a total of $2,635,979, which was the most settlements for any division (averaging $4,600 per settlement). The Dispute Resolution Division, which conducts mediation when the parties voluntarily agree to mediate, brought in the highest dollar amounts via 417 settlements with $7,385,372 ($17,710 average). The Legal Division raised $1,553,800 by settling 46 complaints ($33,778 average). In total, the DFEH conducted 783 mediations in 2016 (up considerably from 632 in 2015 and 590 in 2014).

The DFEH Carefully Selects Which Cases To Try. Less than 1% of 2016 complaints resulted in litigation. Of the 4,799 claims the DFEH investigated, it referred only 118 (2%) to the Legal Division, which then brought only 26% of that total to litigation. As noted above, the DFEH filed 31 lawsuits for 75 complainants during 2016, while filing 36 lawsuits for 57 complainants during 2015.

One-half of the 118 complaints referred to the Legal Division were housing-related. Employment claims made up 40%, followed by Unruh Act claims at 6%, Ralph Civil Rights claims at 3%, and Disabled Persons Act claims at 1%. Substantially more employment claims had been referred to the Legal Division in 2015 (73 of 130 complaints, or 56%).

Housing-related complaints were statistically the DFEH’s priority in 2016. The annual report does not specify the total number of housing complaints, but nearly 70% of complaints involved claims for FEHA housing violations. This percentage is markedly higher than in 2015, where only 36% complaints related to housing issues. Employment complaints were king in 2015 comprising 59% of complaints, but that number decreased in 2016 to 25%. Overall, the DFEH was consistently more focused in 2015 and 2016 on FEHA violations—including employment and housing claims—than with complaints regarding the Unruh, Ralph, and Disabled Persons Acts.

Disability discrimination was the claim most frequently asserted by the DFEH in 2016 in litigated matters (as it was in 2015), appearing seven times in the employment context and 11 times in the housing context. Race and ancestry discrimination were asserted only once, sex/gender discrimination only twice, and sexual harassment only four times. Retaliation was asserted seven times against employers and five times against housing providers.

Lessons For 2017 And Beyond. The DFEH is evidently hand-picking the few complaints it takes to court each year. Only a small percentage of claims make their way to the DFEH’s Legal Division, which is the final stage before a lawsuit is filed, so employers and housing providers should consult with litigation counsel if they find themselves in that unfortunate position (or earlier).

The data and public filings, consistent with our experience with the DFEH, indicate that the DFEH did not target any particular industry or size of entity in 2016: public entities, such as high schools and cities, as well as small non-profit organizations found themselves in the DFEH’s crosshairs. And the DFEH hauled into court businesses in virtually all industries, including banking and financial services, food and agriculture, real estate, retail, hospital and healthcare, insurance, commercial carriers/airlines, manufacturing, and entertainment. Many cases were brought on behalf of multiple individuals, and we can expect that trend to continue as the DFEH appears to find multiple-complainant litigation an efficient way broaden its enforcement reach. Inasmuch as the EEOC has used systematic litigation for years as way to grab headlines and pressure employers to change their policies, we can expect the DFEH to follow suit. The DFEH went to trial on some cases, although verdict results are not summarized publicly (the DFEH has not issued any press releases of DFEH jury wins from 2016).

Finally, in that the DFEH’s focus on litigation in 2016 (and 2015) was on disability and retaliation issues in employment and housing, California companies would be wise to review policies and practices on disability accommodation over the next year. Our firm is available to assist in that process and provide recommendations on how to best avoid DFEH scrutiny, and defend any civil action by the DFEH if necessary.

Edited by Colleen Regan.

Seyfarth Synopsis: Genetic discrimination lawsuits can result in substantial costs. California employers should regularly review their hiring and employment policies and procedures to ensure that they are not exposing themselves to potential liability on the basis of genetic information discrimination.

For most of us, exposure to “DNA” dates back to high school science class or dinosaur theme park movies. Many of us would not know how to begin to explain the intricacies of the human genome, including how different nucleotides form the basis of DNA, or how they cause characteristics in multi-cellular organisms. Luckily, for purposes of California employment law, all that you need to understand are the basics of what is permissible and impermissible when it comes to the use of genetic information for employment purposes in California.

What’s the Rule?

Since January 1, 2012, the California Genetic Information Nondiscrimination Act (“CalGINA”) has prohibited genetic discrimination in employment, housing, mortgage lending, education, and public accommodations. CalGINA provides broader protections for employees than does the federal Genetic Information Nondiscrimination Act (“GINA”) of 2008, which is limited to health insurance and employment discrimination coverage. Additionally, CalGINA, unlike GINA, allows for an employee to seek unlimited damages if they have been the victim of genetic discrimination. This prospect can be scarier than a reconstituted velociraptor, and makes it significantly more important for employers to ensure that they are not using genetic information improperly.

CalGINA added “genetic information” as a basis for discrimination to California’s Fair Employment and Housing Act (“FEHA”), which now states that “[i]t is an unlawful employment practice, unless based upon a bona fide occupational qualification, or, except where based upon applicable security regulations established by the United States or the State of California … [f]or an employer, because of the … genetic information…of any person, to refuse to hire or employ the person or to refuse to select the person for a training program leading to employment, or to bar or to discharge the person from employment or from a training program leading to employment, or to discriminate against the person in compensation or in terms, conditions, or privileges of employment.” Cal. Gov’t Code § 12940 et seq.

CalGINA defines “genetic information” as (1) the individual’s genetic tests, (2) the genetic tests of family members of the individual, or (3) the manifestation of a disease or disorder in family members of the individual. This definition includes any gene or chromosome (or combination or alteration thereof) that is known to cause a disease or disorder in a person or the person’s offspring, as well as inherited characteristics that are associated with a statistically increased risk of developing a disease or disorder. The definition does not include information about a person’s age or sex.

Why should employers care?

Although discrimination on the basis of “genetic information” may seem like an obscure proposition, it is easier than an employer might think to be exposed to liability on these grounds.

Genetic employment discrimination can occur when you—as the employer or potential employer—gain information about an applicant or employee (or his or her family) related to genetic tests or family medical history, and then use that information as a factor in making an employment decision. You don’t necessarily have to have access to a medical file. Think about conditions that are generally known to have a genetic or inherited component, such as some forms of cancer, sickle cell anemia, Huntington’s disease, cystic fibrosis and Down syndrome. Once you know of such a condition, you can’t “unknow” it, so it is better to avoid being the recipient of such information, when possible.

Employers should also be very careful if they canvass social media profiles of applicants or employees. Social media sites can reveal all kinds of personal information about a candidate that would be illegal to request during the hiring process. For example, an employer could glean from a Facebook post that an applicant has a daughter or sibling with cancer. If not hired, that applicant might bring a claim for association discrimination under the ADA, the FEHA, or even the CalGINA/GINA.

What can employers do to comply with CalGINA?

Generally, employers should make sure that:

  • Policies and procedures specifically include prohibitions on discrimination, harassment and retaliation based on genetic information.
  • Applications, medical leave certifications, and other employment-related forms do not, even inadvertently, seek genetic information.
  • Pre-employment physical examinations do not inquire about family medical histories.
  • Managers and supervisors are trained on how GINA and CalGINA affect the company’s policies and procedures. For example, teach managers and supervisors how to respond to an employee who discloses family genetic information, such as “my father has cancer,” and encouraging them not to do any digging on social media on applicants or employees, lest you may discover some information you really do not want to know.

Finally, you can always reach out any of our experts at Seyfarth Shaw for more information.

Edited by Chelsea Mesa.

Seyfarth Synopsis: Summer is just getting started, and with it come special circumstances California employers should keep in mind. Vacations, hot weather, and company-sponsored events are among the summertime activities that raise employment issues. Here are some tips to beat the heat this summer.

Vacations

The kids are out of school and employees are ready to hit the road. Here’s what you need to know as to vacation pay:

Must employers provide paid vacations? Employers need not provide vacation time at all, paid or unpaid. But California employers who elect to offer paid time off should be aware that this time is considered a form of wages that is earned as work is performed.

How is vacation pay accrued? Like other wages, vacation pay accrues proportionally as the employee works. Consider an employee who is entitled to two weeks (10 business days) of vacation time each year who works 40 hours per week. She will accrue 1.538 hours of vacation time for each week. This accrued vacation time is treated as wages. When an employee leaves the company, voluntarily or involuntarily, any accrued and unused vacation time should be paid out at the employee’s final rate of pay along with the employee’s final pay check.

Can employers require that employees use their vacation time by a certain date or forfeit it? No. California does not allow a “use-it-or-lose-it” approach to paid vacation time, but our previous posts explain how employers may place a cap on the amount of vacation an employee accrues or limit the eligibility for paid time off.

How does vacation pay compare to holiday pay? Holiday pay, like vacation pay, is something that employers need not provide but often do. Holiday hours, like vacation hours, do not count as hours worked for the purpose of calculating overtime pay. If a holiday is tied to a specific event (think birthdays or national holidays), then unused holiday pay is not due when an employee leaves the company. But employers should beware of “floating holidays.”

Preventing Heat-Related Illness.

Rising summer temperatures can present serious dangers for outdoor workers. Making sure you comply with California’s regulations for heat-related illness prevention means everyone can keep their cool.

California employers must provide non-exempt employees with a paid 10-minute rest break for every four hours worked or major fraction thereof. Refresh your recollection of California’s rest break requirement here. And employers in certain industries should be mindful of their additional obligations to help outdoor workers avoid heat-related illnesses by providing water, shade, and additional rest breaks as required by California’s heat illness prevention regulations.

Who is subject to heat illness prevention regulations? Anyone with outside workers, but the list of industries commonly affected includes, and is not limited to:

  • Agriculture
  • Construction
  • Landscaping
  • Oil and gas extraction
  • Transportation or delivery

What does California require regarding outdoor places of employment? Employers must establish, implement, and maintain an effective heat illness prevention plan for outdoor workers. The Department of Industrial Relations offers detailed instructions and tips to help employers comply with state laws, but below are some of the main concerns:

Drinking Water. In addition to mandatory break periods, employees must have access to potable water that is “fresh, pure, suitably cool, and provided free of charge.”

Shade. If temperatures are greater than 80° F, then employers must maintain an area with shade at all times that is either open to the air or provides ventilation or cooling.

High-heat procedures. When temperatures exceed 95° F, employees in the industries specifically listed above must be given a minimum 10-minute cooldown every two hours. These breaks may be concurrent with meal or other rest periods when the timing aligns properly.

What should I do if a worker suffers from heat-related illness? If a worker does show any signs of heat-related illness, a supervisor should be prepared to respond with first aid or other medical intervention—and should not permit a worker showing any symptoms of heat-related illness to resume working until the worker has sufficiently recovered from the symptoms.

Employer-Sponsored Events

Summer is the time of company picnics and other social events that bring colleagues together. But employers may unwittingly find themselves obliged to pay their employees for company-sponsored social events unless they follow a few ground rules.

When is a company-sponsored event compensable? Generally, there is a 4-factor test to determine whether employees must be paid. And while the rule refers to pay for lectures, meetings, or training programs, the rules are a good guideline for determining obligations for paying an employee for a company-sponsored event. An employer need not pay if all of the following apply:

  • Attendance is outside business hours
  • Attendance is voluntary
  • The activity is not directly related to the employee’s job
  • No substantive work is performed during the activity

How can employers sponsor events that do not trigger compensation? There are options for employers to consider to ensure their events fall outside the four-factor test spelled out above:

  • Inform employees that the event is in fact voluntary (and then be mindful not to pressure them too much to attend).
  • Throw the event off-site and outside typical business hours.
  • Have any necessary work be done by exempt employees only.

With these guidelines in mind, everyone can beat the heat and enjoy the summer! As always, Seyfarth’s attorneys are available to answer your questions and address your concerns on these issues.

Edited by Chelsea Mesa.

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: 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.