Seyfarth Synopsis: While Mr. Sinatra could get away with doing things his way, California law requires that employers provide employees facing the final curtain with specific paperwork and a check on their final day. Although these various items may seem simple, failure to correctly provide them can lead to more than a few regrets for employers.

On an employee’s last day there are several things that you, the California employer, want to make sure you receive—things such as company cell phones, company laptops, office keys, and confidential files. But there are also things you must give the departing employee, including certain paperwork and a final paycheck for all wages earned through the end of employment.

Each Careful Step Along The Byway of Final Paperwork

Employers should plan their charted course and make sure they comply with both federal and state requirements for what they need to give a departing employee. Here are key examples:

  1. A COBRA notice and election form must be provided before the termination of the employee’s benefits (if you employ 20 or more employees in California and the departing employee is participating in the employer’s group health plan). Note that this paperwork typically can be obtained from your insurance provider or a third party service for providing COBRA notices.
  2. A notice of Cal-COBRA continuation rights must be provided to any covered, terminated employees. Cal-COBRA must be offered to both terminated employees of small employers (2-19 employees), and terminated employees covered under federal COBRA when their 18 months of federal COBRA coverage expires.
  3. A “For Your Benefit” (DE 2320) pamphlet from the EDD, about the unemployment benefits available to all discharged employees, must be provided no later than the effective date of termination.
  4. An Unemployment Insurance Code section 1089 written notice informing the discharged employee of a change in the relationship (i.e., it has been terminated).
  5. A Health Insurance Premium Payment (HIPP) notice (DHCS 9061) required by the DHCS to certain employees covered under the program (if you employ 20 or more employees).
  6. California Labor Code Section 2808(b) requires notification of all continuation, disability extension, and conversion coverage options under any employer-sponsored coverage for which the employee may remain eligible after employment terminates.

There may be additional documents that you need to provide depending on your industry, so you should contact counsel if you have any questions.

Face It and Stand Tall: Giving The Final Paycheck

An employee who quits and gives at least 72 hours of notice is entitled to a final paycheck at the time of separation (such an employee otherwise is entitled to the final paycheck within 72 hours of the notice).

But what should the final pay check include?

Labor Code sections 201 and 202 mandate that all unpaid earned wages are due and payable on the last day of work. “Earned wages” includes all accrued and unused vacation pay and paid time off, reporting time pay, and overtime wages. Other items such as commissions and bonuses could also be considered wages earned and would need to be included in the final paycheck or paid as soon as the amounts are capable of being determined.

How or where should I send the final paycheck?

California requires final payment at the place of termination. Normally, this is not a problem, as employees typically end their employment at their employer’s place of business. For remote workers, the final paycheck should be sent by mail, to ensure that the employee receives it by the last day of work. Consider sending the paycheck in a way that is trackable, to avert any dispute about when the final pay was sent. (Employers using authorized direct deposit can accomplish these matters electronically.)

What happens if I forget to send the final paycheck, or forget to include some of the pay?

Failure to provide final pay on the last day of work can result in penalties in an amount equal to a day’s wage for each day of delay—up to a maximum of 30 days. If an employee sues to recover unpaid wages (and penalties), the Labor Code provides for the recovery of attorneys’ fees.

So small mistakes on final pay can end up being very costly. For example, if an employer accidentally overlooks paying out one hour of PTO accrued during the last week of work, the employer may end up owing the now-departed employee as much as one month’s wages for a small oversight! (Though a claim for such an amount could, under the circumstances, be challenged as unconstitutionally excessive.) So more, much more than this, please make sure to carefully double check pay calculations before cutting a final check.

Workplace Solutions: When the end is near, employers need to be sure they provide employees with all the leaving presents that California law requires. If you have any further questions as to what that might include, please, don’t do it your way and end up with a few regrets; instead, contact the author or your favorite Seyfarth attorney.

Edited By: Coby Turner

Seyfarth Synopsis: AB 1654 provides a PAGA exemption for certain employees covered by a collective bargaining agreement. While AB 1654 is limited to the construction industry, its underlying rationale applies much more broadly, and may augur further thoughtful restrictions on PAGA’s broad scope.

California’s Private Attorneys General Act, imposing draconian penalties for even relatively trivial Labor Code violations, remains the bane of California employers. Efforts to restrict PAGA’s scope thus arise from time to time in the California Legislature, which occasionally enacts some reform. Lost in the attention received by recent high-profile employment legislation was a bill of enormous import for the construction industry specifically but also (potentially) for the future of PAGA enforcement more broadly.

AB 1654, effective on January 1, 2019, exempts “employees in the construction industry” from PAGA if employees’ collective bargaining agreements meet certain requirements. To qualify for a PAGA exemption, a CBA must

  • apply to working conditions, wages, and hours of work of employees in the construction industry,
  • ensure employees receive a regular hourly wage not less than 30% more than the minimum wage,
  • prohibit Labor Code violations redressable by PAGA,
  • contain a grievance and binding arbitration procedure to redress Labor Code violations remedied by PAGA,
  • expressly waive the requirements of PAGA in clear and unambiguous terms, and
  • authorize an arbitrator to award all remedies available under PAGA, except for penalties payable to the LWDA.

While limited to the construction industry, AB 1654 suggests the question: why are not all industries afforded this exemption option? This thought was not lost on AB 1654’s opponents, who wondered if the bill was a “camel’s nose under the PAGA tent”:

The immediate impact of this bill is limited to the construction industry. Its longer term policy implications may not be. The justification provided for the PAGA exemption proposed by this bill is that some construction industry employers have been recently targeted by frivolous PAGA lawsuits. It is not hard to imagine employers in many other sectors making the same argument.

. . .

With that in mind, a key policy question presented by this bill is whether there is sound basis for distinguishing the construction industry from other sectors of the economy in relation to the application of PAGA. If not, it may be difficult, from a policy point of view, to rationalize denying future requests for PAGA exemptions under similar circumstances.

This is indeed the key policy question, and to which there is an easy answer: there is no sound basis to single out the construction industry for special protection from PAGA lawsuits. AB 1654 undermines the PAGA defenders’ argument, adopted by the California Supreme Court in Iskanian, that a PAGA plaintiff stands in for the state and cannot waive the state’s power by private arbitration agreement. In the bill, the Legislature says otherwise. PAGA claims can be waived—in this case through a valid CBA—provided employees have redress for Labor Code violations through a grievance and arbitration procedure in the CBA. While AB 1654 applies only to the construction industry, its reasoning supports an argument employers should use to argue against the logic of Iskanian in other contexts.

By Joshua M. HendersonIlana R. MoradyJames L. Curtis, and Craig B. Simonsen

Seyfarth Synopsis: CalOSHA published a news release TODAY, on a new emergency regulation for the electronic submission of CY 2017 Form 300A on Occupational Injuries and Illnesses.  CalOSHA submitted the rule yesterday, and will allow public comments until Tuesday, October 30th, with the intention of adopting it as final by November 5th!

According to CalOSHA, businesses operating in California that would be required to submit the CalOSHA Form 300A online include all establishments with 250 or more employees, unless specifically exempted by section 14300.2 of Title 8 of the California Code of Regulations, and establishments with 20 to 249 employees in the specific industries listed on page 8 of the emergency regulation’s proposed text (including common industries such as manufacturing, grocery stores, department stores, and warehousing and storage). The reporting deadline would be December 31, 2018. Beginning in 2019, the reporting deadline would be March 2 of the year after the calendar year covered by the form(s). So, for example, CY 2018 300A Forms would be submitted by March 2, 2019.

Cal/OSHA submitted the emergency regulation amending recordkeeping sections 14300.35 and 14300.41 of Title 8 of the California Code of Regulations to the Office of Administrative Law (OAL) on October 25.  Interested persons have until “October 30 to submit comments on the proposed emergency regulation.” OAL will have until November 5 to review and adopt or deny the proposed regulation.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Workplace Safety and Health (OSHA/MSHA) Team.

Seyfarth Synopsis: Halloween is lurking just around the corner, and workplace festivities may present unusual challenges. Unsafe or offensive costumes, religious discrimination, and harassment are among the issues potentially facing employers around this time of year. Here are some tips to avoid the tricks and enjoy the treats.

Exorcise Your Right to Have Fun

It’s not uncommon to allow employees to dress up when Halloween falls on a weekday, but without proper guidelines, it can quickly lead to complications. Employers should urge employees to be mindful when choosing costumes that they are still expected to comply with any workplace anti-discrimination and anti-harassment policies. If the workplace typically requires a dress code, employers permitting Halloween costumes should announce that, while employees may dress up, they should utilize sensible judgment.

Employees should be reminded to avoid costumes that poke fun at a particular culture, that are overly sexy, or that relate to a particular religion, as employees with differing backgrounds or beliefs may take offense. Political costumes can be contentious as well, especially when, as is the case this year, Halloween occurs just before Election Day.

There are also special considerations with costumes when it comes to certain environments. For instance, costumes for healthcare professionals working with patients that conjure thoughts of death or injury, and excessively scary costumes in places catering to children, should be reconsidered. These concepts ought to be applied to any guidance pertaining to decorations as well.

If You’ve Got It, Haunt It

Halloween often prompts individuals to dress provocatively, which, in many cases, is probably against the company’s dress code. However, previous sexual harassment cases demonstrate that sometimes a costume doesn’t need to be overtly suggestive to elicit inappropriate comments.

This issue is particularly crucial given the recent spike in #MeToo lawsuits and several incoming California laws aiming to strengthen enforcement of sexual harassment laws and make it easier for victims to pursue civil claims. Therefore, employees should be reminded that, regardless of a coworker’s Halloween attire, there’s no excuse to make statements that would otherwise be unacceptable.

Oh My Gourd

While Halloween is largely celebrated as a secular holiday, religious discrimination can still be a concern, and employees should not be penalized for opting out of the festivities. This has been a common issue for the EEOC with respect to Jehovah’s Witnesses, who do not observe certain holidays. For example, this was previously addressed when an employee was fired for refusing to participate in a workplace Halloween party, after notifying her employer that it was against her religious beliefs to do so. Additionally, due to its pagan roots, some employees may believe Halloween to be a celebration of death or the occult, and take offense to any pressure to join in.

The Fair Employment and Housing Act and the California Workplace Religious Freedom Act both prohibit discrimination on the basis of religion, and require employers to accommodate employees’ religious practices and observances. Some employees (such as those who practice Wicca, for example) might consider Halloween to be a religious holiday, and request time off from work. Notably, FEHA protections apply to more than just the traditional, more commonly recognized religions, so long as the employee’s beliefs are “sincerely held.” To avoid running afoul of these regulations, employers should have a plan for responding to such requests.

Let’s Get This Party Startled

An important, but easy to overlook, concern is the potential for costumes to create a safety hazard. Loose-fitting costumes or those with pieces that hang away from the body can be dangerous to employees working with heavy machinery or driving a vehicle. And, even employees’ innocent attempts to frighten coworkers can end in injury. Employers who wish to avoid workers’ compensation claims and complaints filed with CAL/OSHA should remind employees to dress with safety in mind.

Finally, there is also a risk that certain costume pieces will result in employees feeling threatened. A realistic replica of a weapon can cause panic and accessories that can be used as a weapon may cause fear and actual harm. In order to protect the physical and mental safety of all employees, employers should discourage costumes involving weapons.

Workplace Solutions: Employers should feel free to allow some Halloween fun at work, as long as employees are made aware of expectations to comply with company policies, respect their colleagues, and maintain safe working conditions.

Edited By: Coby Turner

Seyfarth Synopsis: When confronted with a lawsuit naming an individual employee as a defendant, should California employers run from the employee or provide a defense? The duty to indemnify employees often leaves employers in a pickle, particularly as to allegations of sexual harassment.

This scenario has haunted many California companies: an employee sues the company for sexual harassment and also names the alleged harasser as an individual defendant. Particularly with today’s #MeToo movement, an employer may want to distance itself from the alleged harasser. But what are the risks? The employer certainly does not want to give the impression of ratifying the alleged misconduct. Yet this is California. Does its law require the employer to get involved? The answer, like so much in California employment law, depends.

California has a peculiarly strong public policy requiring employers to indemnify employees sued for conduct occurring as part of their employment. Labor Code section 2802 codifies this policy. California employers, thus, must indemnify employees if their conduct falls within the scope of employment.

The duty to indemnify is not, however, a duty to defend. The statute merely requires California employers to indemnify their employees. Thus, while employers can choose to offer counsel to help defend an accused employee (and for strategic reasons may want to exercise that choice), California law permits an employer to decline to defend its employee and to see if the employee’s conduct fell within the scope of employment.

The employee defendant, to claim indemnity, must show that the claim arose from the employee’s employment. If the employee makes that showing—either during the litigation or in a separate action—the employer must pay all of the employee’s necessary costs and fees, including attorneys’ fees and any judgment.

The question for California employers, particularly when faced with sensitive allegations of sexual misconduct, is when does conduct fall within the scope of employment? For this, the answer is decidedly Californian—it depends.

To answer it, courts generally hold that sexual misconduct by its nature falls outside the scope of employment. But this does not mean that employers can simply run away from employees accused of misconduct. Employers may still be on the hook for the employee’s defense costs if the employee’s defense prevails. And this might be the result for even the most egregious allegations, if they turn out to be unproven.

To avoid getting caught in this pickle, smart employers check where the ball is before they decide to run towards a particular base. They thoroughly investigate a complaint’s allegations to decide whether to stand with or run away from the employee named as a defendant. This being California, however, even the most prudent employer may not avoid liability. If a court ultimately absolves the employee, then the employer may still be responsible for the employee’s fees. But at least the employer has played the game knowing where the ball is and where the employer stands.

If you would have questions as to whether to offer defense or indemnification to an employee accused of misconduct in a lawsuit, please contact your favorite Seyfarth attorney or the authors.

Seyfarth Synopsis: The California Department of Fair Employment and Housing issues a yearly report describing its complaint and litigation trends. Below is the Reader’s Digest™ version.

The DFEH recently issued its 2017 Annual Report covering its fifth year in active litigation. In 2013, the California Legislature authorized the DFEH to file lawsuits under the Fair Employment and Housing Act (“FEHA”), California’s stricter version of federal anti-discrimination law, as well as under the Unruh Civil Rights Act, the Disabled Persons Act, and the Ralph Civil Rights Act. Over the years, the DFEH’s operations have expanded to 220 fulltime employees, including attorneys, investigators, paralegals, and mediators, working from five California offices. (That is likely bigger than most California law firms and corporate legal departments.) The DFEH is presently the largest state civil rights agency in the country, with the power to launch state-wide representative actions for uncapped damages, attorney fees and costs, and injunctive relief, such as requiring new or revised policies and employee training.

Opening the Door to More Complaints. The DFEH over the last year launched a series of initiatives making it easier to file a civil rights complaint in California. The centerpiece of the effort was a new case filing and management system, called Cal Civil Rights System (CCRS). It allows employees and tenants to file a complaint and trigger a state-led investigation process using an online platform. Now individuals, from the comfort of their living rooms, can file a complaint, schedule appointments with investigators, check on case status, submit notes and documents, request right to sue letters, and even make public records requests.

Given this new ease of access, it is no surprise that DFEH filings increased during 2017. The DFEH received nearly 25,000 administrative complaints and inquiries. That is a 5% jump from 2016 and 2015 (which had roughly the same number) and substantially more than the 19,000 filed in 2014. About 90% of 2017 complaints were employment-related, 5% were housing matters, and the remainder fell under the Unruh, Ralph, and Disabled Persons Acts. Approximately 19,000 complaints resulted in formal charges filed with the DFEH. About one-half of complaints, or 12,872, requested an immediate right to sue, thereby bypassing any investigation or vetting by the DFEH before involving the courts.

What is striking about the DFEH’s report is the number of age discrimination and retaliation complaints made in 2017. Almost 20% of employment complaints in 2017 were for age discrimination (up from 11% in 2016). The largest portion of charges requesting a right-to-sue asserted age discrimination and retaliation—totaling 30% of the bases alleged. Disability was the next most commonly asserted basis in 2017; charges asserting disability exceeded the number of ancestry, religion, national origin, marital status, color, and sexual orientation discrimination charges combined.

Los Angeles County was the most litigious region in 2017. Employees and residents of the County of Angels filled out 30% of the DFEH’s total docket. Los Angeles County also ran the board in every type of complaint within the DFEH’s jurisdiction: 21% of employment, 22% of Ralph Act, 25% of Disabled Persons Act, and 30% of housing-related complaints. Orange and San Diego Counties were the second and third most active regions, with 8% and 6% of complaints, respectively. Sacramento County—not San Francisco, Santa Clara, or other more populated areas—has surprisingly been the source of the most DFEH complaints in Northern California, for three years running. Placer County’s 139 complaints in 2017 makes it the most charge-happy county in California by population size (it also won this top-honor in 2016).

The DFEH’s report provides some demographic information on the 2017 class of complainants. Over the last year, 52% of complainants disclosed their race and 35% stated their national origin when filing with the DFEH. The largest group of reporters identified as Caucasian (32.5%) and American (52%), which is consistent with 2016 figures. Individuals identifying as Hispanic or Latino brought 28% of charges in 2017, and those reporting as African American filed 23% (also tracking 2016 statistics). The DFEH has not to date elected to track other demographic data regarding complainants, such as age, sex, gender, marital status, household income, or religion.

Investigations and Settlement Revenues Spiked. The DFEH saw a 22% increase in investigations to 6,160 in 2017. Only 888 of these complaints settled, or 14%, which is a 7% drop from 2016. The remaining 5,000 plus charges, presumably, carried over into 2018, were withdrawn by the claimant, resolved through private negotiation, dismissed by the DFEH, or consolidated with an overlapping charge.

The DFEH had a fruitful year in terms of settlement revenues. It netted 12% more in 2017, bringing $12,984,367 to state coffers. Notably, this figure does not count monies generated through settling any of the 35 civil complaints filed by the DFEH in 2017. The DFEH’s most successful year in terms of pre-lawsuit settlement revenues appears to have been in 2013, with $13,433,922.

The data suggest that the cost to settle a complaint increases as the matter moves through the DFEH’s review process. Cases settled for $8,966 on average within the Enforcement Division, the DFEH’s investigative arm. Where the parties agreed to participate in the voluntary dispute resolution process, it took $14,122 on average to resolve it. Once the matter reached a pre-suit posture, in mandatory dispute resolution, it cost employers $42,513 on average to settle. And after the case was referred to the Legal Division and DFEH attorneys got involved, the average settlement figure was $42,860. Early resolution efforts evidently pay off.

The DFEH Hand-Picks Charges It Brings to Court. The DFEH filed 35 lawsuits in 2017. That is less than 1% of the 6,160 complaints investigated by the Enforcement Division. The DFEH then referred 140 of those charges, or 2%, to the DFEH’s attorneys in the Legal Division. Only one-quarter of these matters ended up in litigation.

Complaints referred to the Legal Division split almost evenly between housing and employment matters. Housing cases made up 40%, followed closely by employment complaints at 39%, and Unruh Act charges at 24%. No Disabled Persons Act claims were sent to legal in 2017. These figures are largely in line with the DFEH’s 2016 referrals, although notably there was a 21% increase in Unruh Act charges considered for litigation in 2017. In 2015, the DFEH gave much more priority to employment matters, making up 56% of charges passed on to its lawyers.

While age discrimination complaints picked up in 2017, the DFEH did not give such claims preference. None of its lawsuits asserted a claim for age discrimination. Disability discrimination continued to be the DFEH’s focus, as it was in 2015 and 2016. The theory was asserted in 11 employment, seven housing, and eight Unruh-related lawsuits–or roughly 74% of cases. Retaliation was a close second with 10 such civil actions. Sexual harassment complaints slightly increased year over year from four to six. Discrimination based on religion, ancestry, and national origin resulted in less than a handful of suits over the last three years.

Key Takeaways. Each year the DFEH’s focus appears to shift towards litigation. Referrals from its enforcement to legal divisions have crept up over the years from 98 in 2014 to 140 in 2017. Recent technological changes to the DFEH’s claims and investigation process have brought new efficiencies within the agency and freed staff to give more individual attention to cases.

As the DFEH steps up its game, so should employers. Well-written policies and regular trainings are two ways to curtail bad employee behavior, ensure compliance with the law, and stay off the DFEH’s radar altogether (not to mention boost morale and productivity in the workplace). Los Angeles and Sacramento employers, in particular, should make this a priority given the number of charges filed each year from their own backyards.

When a complaint is made with the DFEH, get counsel involved early. The 2017 data show that claims resolve for the least amount of dough at the investigation stage. Companies that drag their feet may end up dealing with the legal department, where the chance of getting sued rockets up from 1% to 25%. Given our recent experience, it would be no surprise if this figure increased further in 2018. We will report on that next Summer, as we did on the DFEH’s report last year. Seyfarth Shaw is ready to assist in the meantime on ways to proactively avoid complaints, timely address DFEH inquires, and defend charges and litigation.

Seyfarth Synopsis: In vetoing the California Legislature’s attempt to criminalize arbitration agreements (AB 3080), Governor Brown displayed common sense and the legal learning provided by recent U.S. Supreme Court authority.

Haven’t high courts already upheld mandatory arbitration agreements?

Yes, they have. The California and U.S. Supreme Courts have repeatedly ruled that employers may require employees to enter valid arbitration agreements (waiving the right to judge and jury trial). The most recent vindication of arbitration agreements was the U.S. Supreme Court’s May 2018 decision in Epic Systems, which upheld the enforceability of an arbitration agreement that waived participation in class waivers, against an argument that such a waiver violated employee rights to concerted activity under the National Labor Relations Act.

Hasn’t the California Legislature got the message?

Apparently not yet. The Legislature has tried again and again to outlaw arbitration agreements in ever more inventive ways, notwithstanding the clear authority to the contrary. Governor Brown, meanwhile, has learned that these efforts will not pass constitutional muster. In 2014, Governor Brown signed into law AB 2617, which outlawed mandatory arbitrations for goods and services; but a March 2018 appellate decision held that the law was preempted by the Federal Arbitration Act. Meanwhile, in 2015, Governor Brown vetoed AB 465, which would have outlawed mandatory arbitration as a condition of employment. In doing so, Governor Brown noted that bans on arbitration have been consistently struck down as violating the FAA, and that California courts have made arbitrations more employee-friendly by requiring certain protections (neutral arbitrator, adequate discovery, no limit on damages or remedies, written decision subject to some review, cost limits). He even questioned whether arbitration is really less fair than traditional litigation for employees.

While Governor Brown’s learning curve has progressed, the California Legislature’s has regressed, as evidenced by AB 3080

In August 2018—just three months after the Epic Systems decision—the Legislature passed AB 3080, which banned mandatory arbitration agreements, which outlawed “opt-out” provisions (allowing employees to refuse to enter into arbitration agreements), and which even criminalized employer conduct to implement such an agreement. The legislative committee analyses argued that there must be “consent and fairness” in entering into an agreement, that the Supreme Court “has never ruled that the FAA applies in the absence of a valid agreement,” that the FAA would not preempt AB 3080 because it “regulates behavior prior to an agreement being reach[ed],” and that AB 3080 does not “outright ban or invalidate arbitration agreements.”

The apoplectic reaction to the outrage that was AB 3080

The employer community reacted strongly to AB 3080. Leading law firms urged Governor Brown to veto AB 3080. They noted that the proponents were making old, tired arguments that the U.S. and California Supreme Courts have rejected. They protested the disingenuousness of saying that arbitration agreements could not be voluntary even where employees have the right to opt out. They reminded Governor Brown of his veto of AB 465 in 2015.

Most emphatically, they pointed out that criminalizing employer conduct that the FAA so clearly protects could coerce fearful employers into abandoning arbitration agreements until the courts clearly rule AB 3080 unconstitutional. In this respect the Legislature, ironically, was engaging in something that a private party could not do without engaging in an unfair business practice. After all, an unfair business practice occurs when a party inserts an obviously unlawful provision into a contract, aiming to intimidate the other party into abiding by the unlawful provision.

Governor Brown’s veto and what’s next

On September 30, 2018, Governor Brown vetoed AB 3080. His accompanying letter rejected the Legislature’s argument that AB 3080 only regulates behavior prior to an agreement being reached. The Governor pointed out that in a 2017 Supreme Court decision, even Justice Kagan (“an appointee of President Obama”) acknowledged that the FAA “cares not only about the ‘enforcement’ of arbitration agreements, but also about their initial ‘valid[ity].’ ” Governor Brown emphatically stated that AB 3080 “plainly violates federal law.”

So what does all this mean? The lesson is that our systems of checks and balances can still work, where a governor learns not to permit a legislature to flout federal law. Will this trend continue as our great state ushers in a new governor in 2019? Stay tuned.

Webinar Reminder

Don’t forget to sign up and attend our complimentary webinar on October 10, 2018 for a discussion of all of the newly-enacted employment-related laws, and implications for employers.

Seyfarth Synopsis: California Legislators sent Governor Jerry Brown 1,217 bills to consider in his final bill-signing period as Governor—more than any California governor has seen since 2004. The final tally: 1016 signed, 201 vetoed. Below is our full, final roundup of new laws that employers must comply with, bills that fell to the Governor’s veto pen, and bills that never made it to the Governor’s desk. Even though the Governor’s veto saved California employers from some truly awful legislation (such as AB 3080’s attempted ban on employment arbitration agreements), 2019 may well bring a new Legislature just as hostile to business, and a new Governor not known for the practical caution that sometimes has characterized Governor Brown. We expect that the vetoed bills will re-emerge, and may receive a more favorable gubernatorial consideration.

Sign up for our webinar on October 10, 2018 for a discussion of these results and implications for employers.

APPROVED

Sexual Harassment Bills

Human Trafficking Awareness. SB 970 requires hotel and motel employers (excluding bed and breakfast inns), to provide—by January 1, 2020, and once every two years thereafter—at least 20 minutes of interactive human trafficking awareness training to employees likely to interact with human trafficking victims. The Department of Fair Employment and Housing can seek an order requiring an employer comply with these requirements. Adds section 12950.3 to the Government Code.

Sexual Harassment Omnibus Bill. SB 1300 adds a section to the Government Code that declares the purpose of harassment laws is to provide all Californians with equal opportunity to succeed in the workplace. To that end, the bill expressly affirms or rejects specified judicial decisions in:

  • Harris v. Forklift Systems: approving the standard in Justice Ruth Bader Ginsburg’s concurrence that in a workplace harassment suit “the plaintiff need not prove that his or her tangible productivity has declined as a result of the harassment. It suffices to prove that a reasonable person subjected to the discriminatory conduct would find, as the plaintiff did, that the harassment so altered working conditions as to make it more difficult to do the job.”
  • Brooks v. City of San Mateo: prohibiting reliance on Judge Alex Kozinksi’s Ninth Circuit opinion to determine what conduct is sufficiently severe or pervasive to constitute actionable harassment under FEHA.
  • Reid v. Google, Inc.: affirming the California Supreme Court’s rejection of the “stray remarks doctrine,” because the “existence of a hostile work environment depends on the totality of the circumstances and a discriminatory remark, even if made not directly in the context of an employment decision or uttered by a nondecisionmaker, may be relevant, circumstantial evidence of discrimination.”
  • Kelley v. Conco Companies: disapproving use of this case to support different standards for hostile work environment harassment depending on the type of workplace.
  • Nazir v. United Airlines, Inc: affirming this case’s observation that “hostile working environment cases involve issues ‘not determinable on paper.’ ”

SB 1300 also:

  • Expands an employer’s potential FEHA liability for acts of nonemployees to all forms of unlawful harassment (removing the “sexual” limitation).
  • Prohibits employers from requiring an employee to sign (as a condition of employment, raise, or bonus): (1) a release of FEHA claims or rights or (2) a document prohibiting disclosure of information about unlawful acts in the workplace, including nondisparagement agreements. This provision does not apply to negotiated settlement agreements to resolve FEHA claims filed in court, before administrative agencies, alternative dispute resolution, or though the employer’s internal complaint process.
  • Prohibits a prevailing defendant from being awarded attorney’s fees and costs unless the court finds the action was frivolous, unreasonable, or groundless when brought or that the plaintiff continued to litigate after it clearly became so.
  • Authorizes (but does not require) employers to provide bystander intervention training to its employees.

SB 1300 would have—contingent upon SB 1038 also passing—subjected employees alleged to have engaged in harassment to personal liability for retaliation, discrimination, and other adverse employment actions taken against any person who has opposed practices forbidden by FEHA or participated in a FEHA action. As SB 1038, discussed below, failed to make it out of the Legislature, this proposed amendment in SB 1300 does not become operative.

SB 1300 amends Government Code sections 12940, 12965 and adds Government Code sections 12923, 12950.2, 12964.5.

Sex Harassment Settlement Agreement Confidentiality Restrictions. For settlement agreements entered into on or after January 1, 2019, SB 820 will prohibit and make void any provision that prevents the disclosure of information related to civil or administrative complaints of sexual assault, sexual harassment, and workplace harassment or discrimination based on sex. SB 820 expressly authorizes provisions that (1) preclude the disclosure of the amount paid in settlement and (2) protect the claimant’s identity and any fact that could reveal the identity, so long as the claimant has requested anonymity and the opposing party is not a government agency or public official. SB 820 suggests that a violation of its provisions would give rise to a cause of action for civil damages. Adds section 1001 to the Code of Civil Procedure.

Banning Waivers of Rights to Testify. As to any contract or settlement agreement entered into on or after January 1, 2019, SB 3109 makes void and unenforceable any provision that waives a party’s right to testify in a legal proceeding (if required or requested by court order, subpoena or administrative or legislative request) regarding criminal conduct or sexual harassment on the part of the other contracting party, or the other party’s agents or employees.  Adds section 1670.11 to the Civil Code.

Strengthening Prohibitions Against Harassment With Respect to Professional Relationships. SB 224 gives additional examples of professional relationships where liability for claims of sexual harassment may arise and authorizes the DFEH to investigate those circumstances. Amends section 51.9 of the Civil Code and section 12930 and 12948 of the Government Code.

Requiring Sexual Harassment Education by Talent Agencies. AB 2338 requires talent agencies to provide adult artists, parents or legal guardians of minors aged 14-17, and age-eligible minors, within 90 days of retention, educational materials on sexual harassment prevention, retaliation, and reporting resources. For adult model artists only, the talent agency will be required to provide materials on nutrition and eating disorders. Talent agencies will also have to retain, for three years, records showing that those educational materials were provided. Adds Article 4 (commencing with Section 1700.50) to Chapter 4 of Part 6 of Division 2 of the Labor Code.

Expanding Scope of Required Sexual Harassment Training. SB 1343 requires an employer of five or more employees—including seasonal and temporary employees—to provide certain sexual harassment training by January 1, 2020. Within six months of their assuming their position (and once every two years thereafter), all supervisors must receive at least two hours of training, and all nonsupervisory employees must receive at least one hour. SB 1343 also requires the DFEH to make available a one-hour and a two-hour online training course employers may use and to make the training videos, existing informational posters, fact sheets, and online training courses available in multiple languages. Amends sections 12950 and 12950.1 of the Government Code.

Requiring Sexual Harassment Education for In-Home Support Services. AB 3082 requires the Department of Social Services to develop or identify—and provide a copy and description to the Legislature by September 30, 2019—(1) educational materials addressing sexual harassment of in-home supportive services (IHSS) providers and recipients, and (2) a method to collect data on the prevalence of sexual harassment in the IHSS program. Adds section 12318 to the Welfare & Institutions Code.

Non-Harassment Bills

Lactation Location. AB 1976 requires employers to make reasonable efforts to provide a room or location (that is not a bathroom, deleting “toilet stall” and inserting “bathroom”) for lactation. The also bill authorizes a temporary lactation location if certain conditions are met and provides a narrow undue hardship exemption. The Governor vetoed the similar, more onerous, SB 937, discussed below. Amends section 1031 of the Labor Code.

Pay Statement: Right to Receive. Stating it is declaratory of existing law, SB 1252 provides employees the right “to receive” a copy of—not just inspect or copy—their pay statements. Amends section 226 of the Labor Code.

Rest Breaks in Petroleum Facilities. AB 2605 exempts from rest-period requirements certain workers who hold “safety-sensitive positions,” defined as a position whose duties reasonably include responding to emergencies in the facility and carry communication devices. The exemption applies only to workers covered by a collective bargaining agreement and subject to Industrial Wage Commission Wage Order No. 1. But employers must pay exempted workers one hour of pay at the regular rate if the rest period is interrupted to respond to an emergency. Because AB 2605 is an urgency statute, these provisions took effect immediately when approved by the Governor on September 20, 2018 and will sunset on January 1, 2021. The author of this bill sought to carve out an exemption for these positions in light of the recent Augustus v. ABM Security Services, Inc. case. Adds section 226.75 to the Labor Code.

Port Drayage Motor Carries. SB 1402 requires the DLSE to post a list on its website of port drayage motor carriers with any unsatisfied judgment or assessment or any “order, decision, or award” finding illegal conduct as to various wage/hour issues, specifically including independent contractor misclassification and derivative claims. This bill also extends joint and several liability to the customers of these drayage motor carriers for their future wage violations of the same nature. Adds section 2810.4 to the Labor Code.

Contractor Liability. Passed as an urgency statute to make clarifying changes to last year’s AB 1701—which created joint liability for construction contractors and subcontractors—AB 1565 immediately repeals the express provision that relieved direct contractors for liability for anything other than unpaid wages and fringe or other benefit payments or contributions including interest owed. For contracts entered into on or after January 1, 2019,  the direct contractor must specify what documents and information the subcontractor must provide in order to withhold a disputed payment. Amends section 218.7 of the Labor Code.

Criminal History. SB 1412 requires employers to consider only a “particular conviction” (“for specific criminal conduct or a category of criminal offenses prescribed by any federal law, federal regulation, or state law that contains requirements, exclusions, or both, expressly based on that specific criminal conduct or category of criminal offenses”) relevant to the job when screening applicants using a criminal background check. Amends section 432.7 of the Labor Code.

Women on Boards. SB 826 requires California-based publicly held corporations to have on their board of directors at least one female—defined as people who self-identify as women, regardless of their designated sex at birth. The deadline for compliance is December 31, 2019. A corporation may need to increase its authorized number of directors to comply with this requirement. The bill imposes minimum seat requirements that must be filled by women, proportional to the total number of seats, by December 31, 2021. The Secretary of State must publish a report by July 1, 2019 of the number of corporations whose principal executive offices are in California and have at least one female director, and an annual report beginning March 1, 2020, detailing the number of corporations that (1) complied with requirements in 2019, (2) moved their headquarters in or out of California, and (3) were subject to these provisions during 2019, but no longer publicly traded.

For each director’s seat not held by a female during at least a portion of the calendar year—when by law it should have been—the corporation will be subject to a $100,000 fine for the first violation and a $300,000 fine for further violations. Corporations that fail to timely file board member information with the Secretary of State will also be subject to a $100,000 fine. Adds sections 301.3 and 2115.5 to the Corporations Code.

Mediation Confidentiality. SB 954 requires attorneys, except in class actions, to provide their mediating clients with a written disclosure containing the confidentiality restrictions provided in Section 1119 of the Evidence Code and obtain the client’s written acknowledgment that the client has read and understands the confidentiality restrictions. This duty arises as soon as reasonably possible before the client agrees to participate in mediation or a mediation consultation. The bill is of little consequence as an attorney’s failure to comply is not a basis to set aside an agreement prepared in or pursuant to a mediation. Amends Evidence Code section 1122 and adds Evidence Code section 1129.

Class Action Settlements. Among many other changes not directly relevant to this blog, AB 3250 revises amendments to Code of Civil Procedure section 384, which took effect immediately upon the Governor’s signing SB 847 on June 27, 2018 (SB 847 also added relevant Code of Civil Procedure sections 382.4 and 384.5). By virtue of SB 847, Section 384 requires a court, before the entry of a judgment (including consent judgment, decree, settlement agreement approved by the court) in a class action, to determine the total amount that will be payable to all class members, and set a date when the parties are to report to the court the total amount that was actually paid to the class. After the report is received, the court must amend the judgment to direct the defendant to pay the sum of the unpaid residue, plus interest on that sum at the legal rate of interest from the date of entry of the initial judgment (AB 3250 deletes this italicized language and replaces it with “that has accrued thereon”), to nonprofit organizations or foundations to support projects that will benefit the class or similarly situated persons, or that promote the law consistent with the underlying cause of action, or to child advocacy programs, or to nonprofit organizations providing civil legal services to the indigent. An attorney for a party to a class action must notify the court if the attorney has a connection to a proposed nonparty recipient of class action settlement funds that could reasonably create the appearance of impropriety. The court must transmit a copy of the judgment to the Judicial Council, identifying nonparty recipients of class action settlement funds. Amends Business and Professions Code section 6402.2, Civil Code sections 51.7, 52.1, and 54.8, Code of Civil Procedure sections 384, 1013b, 1276, 1277, and 1277.5, Health & Safety Code section 103430, and Insurance Code section 10861.03. Repeals Code of Civil Procedure section 630.30.

VETOED

Banning Contractual Limits on Disclosure and Arbitration Agreements. AB 3080 would have prohibited businesses from requiring, as a condition of employment, employment benefit, or contract (1) that a job applicant or employee waive any right, forum, or procedure (e.g., arbitration) for a violation of FEHA or the Labor Code, and (2) that a job applicant, employee, or independent contractor not disclose instances of sexual harassment suffered, witnessed, or discovered in the work place or in performance of the contract, opposing unlawful practices, or participating in harassment and discrimination related investigations or proceedings. Biting their fingernails into the night on the Governor’s signing deadline, to employers’ relief, Governor Brown vetoed the bill. The Governor stated he was compelled to veto this bill because it “plainly violates federal law.” He remained consistent with his veto of a similar bill in 2015, in which he referred to recent court decisions that invalidated state policies that impeded arbitration and stated his desire to watch future US Supreme Court decisions on the topic before “endorsing a broad ban on mandatory arbitration agreements.” He stated that the “direction from the Supreme Court since my earlier veto has been clear—states must follow the Federal Arbitration Act and the Supreme Court’s interpretation of the Act,” citing DIRECTV, Inc. v. Imburgia; and Kindred Nursing Centers Ltd. Partnership v. Clark to reject this bill’s premise “that the Act governs only the enforcement and not the initial formation of arbitration agreements.”

Expanding Record Retention. AB 1867 would have required employers with 50 or more employees to maintain records of complaints alleging sexual harassment for at least five years after the last date of employment of the complainant or alleged harasser, whichever is later. In his veto message, the Governor sagely noted this bill could lead to the retention of records for decades and could require complaints alleging sexual harassment to be maintained for the same amount of time regardless of the result of the investigative process. For those reasons, and because existing law requires personnel records, including records of complaints, be maintained “for suitable periods of time,” the Governor found the time expansion of this bill unwarranted.

Expanding Administrative Charge Filing Deadlines. AB 1870 would have extended a complainant’s time to file an administrative charge with the DFEH from one year to three years after the alleged incident for all types of FEHA-prohibited conduct, including sexual harassment. In vetoing this bill, Governor Brown found the current filing deadline, in place since 1963, “not only encourages prompt resolution while memories and evidence are fresh, but also ensures that unwelcome behavior is promptly reported and halted.”

Extending Liability for Employers and for Businesses Using Labor Contractors. AB 3081 would have amended the FEHA and Labor Code to (1) add status as a sexual harassment victim to existing prohibitions on discrimination against employees who are victims of domestic violence, sexual assault, or stalking, (2) create a rebuttable presumption of unlawful retaliation if an employer—within 30 days of notice of the victim’s status—discharges or threatens to discharge, demotes, suspends, or otherwise discriminates against a victim employee, (3) make a business jointly liable for harassment of workers supplied by the business’s labor contractor (existing law similarly extends liability for the contractor’s failure to pay wages and obtain valid workers’ compensation coverage), (4) prohibit businesses from shifting to their labor contractors duties or liabilities under the Labor Code workers’ compensation insurance provisions. Governor Brown rejected the bill on the basis that most of its provisions are unnecessary as already contained in current law, or, if new, are confusing.

Immigration Documents. AB 2732 would have subjected to penalties employers that destroy or withhold passports or other immigration documents, and required all employers to provide a “Worker’s Bill of Rights” (to be developed by the DIR) to all employees. AB 2732 also would have made various changes to the Property Service Worker Protection Act, contingent upon this bill’s and AB 2079’s passing. In a lesson to narrowly tailor bills, Governor Brown found the “provision of this bill that prohibits employers from withholding immigration documents from workers is very appropriate,” but still struck down this entire bill due to its “burdensome and unwarranted” mandate that all employers, even those having nothing to do with labor trafficking, provide the “Worker’s Bill of Rights’ to every employee in California. “This goes too far.”

Lactation Accommodations. SB 937 would have required employers to (1) provide a lactation room with prescribed features and access to a sink and refrigerator (or another cooling device suitable for storing milk) in close proximity to the employee’s workspace, (2) develop and distribute to employees a lactation accommodation policy, and (3) maintain accommodation request records for three years and allow the employee and Labor Commissioner access to the records. SB 937 would have also deemed the denial of time or space for lactation a failure to provide a rest period under Labor Code section 226.7, and required the DLSE to create a model lactation policy and a model lactation accommodation request form. Having signed AB 1976 to further “the state’s ongoing effort to support working mothers and their families,” Governor Brown vetoed this bill as not necessary.

Property Service Worker Protection Act Amendments. Governor Brown vetoed two bills (AB 2732, discussed above, and AB 2079) to amend the Property Service Worker Protection Act, which went into effect July 1, 2018 (AB 1978), and imposes requirements to combat wage theft and sexual harassment for the janitorial industry. In his veto message, the Governor urged AB 2079’s authors and sponsors to allow the Act—“the first of its kind in the country”—to be fully implemented before proposing significant changes. AB 2079 would have required (1) all employers applying for new or renewed registration to demonstrate completion of sexual harassment violence prevention requirements and provide an attestation to the Labor Commissioner, (2) the Department of Industrial Relations (DIR) to convene an advisory committee to develop requirements for, and maintain a list of, qualified organizations and peer-trainers for employers to use in providing training, and (3) employers, upon request, to provide requesting employees a copy of all training materials. AB 2079 would have also prohibited the Labor Commissioner from approving a janitorial service employer’s request for registration or for renewal if the employer had not fully satisfied a final judgment to a current or former employee for a violation of the FEHA.

Janitorial Workers Employment Classification. AB 2496 would have established a rebuttable presumption that janitorial workers who perform services for property service employers are employees, not independent contractors. Governor Brown vetoed the bill as premature, pending Legislature review of the California Supreme Court decision in in Dynamex Operations West, Inc. v. Superior Court, which recently established a new test to determine whether a worker is properly classified as an employee or independent contractor.

Veterans and Military Personnel. Governor Brown vetoed SB 1427, which would have added veterans and military personnel as a protected class under the FEHA, because the bill’s other, non-employment-related provisions went “too far.”

Construction Industry Harassment and Discrimination. SB 1223 would have required the DIR to convene an advisory committee to recommend minimum standards for a harassment and discrimination prevention policy and training program specific to the construction industry, and to report to the Legislature specific implementation recommendations. Governor Brown vetoed this bill as better placed with the DFEH—responsible for enforcing the FEHA and its harassment and discrimination prevention and training requirements—not the Labor Commissioner.

FAILED TO PASS BOTH HOUSES OF THE LEGISLATURE

Personal Liability for Retaliation. SB 1038 proposed the same amendment to FEHA as SB 1300 to impose personally liability upon an employee for retaliating against a person who has filed a complaint against the employee, testified against the employee, assisted in any proceeding, or opposed any prohibited practice. As discussed, above, since SB 1038 failed, so did the same proposed amendment in SB 1300.

Hotel Panic Button. AB 1761 would have required hotel employers to provide employees with a “panic button” to call for help in case of an emergency, post a notice of these provisions in each guestroom, provided paid time off or a reasonable accommodation to an employee who is the victim of an assault, required an employer—upon the employee’s request—to contact police, prohibited employers from taking action against any employee who exercises the protections, and imposed penalties for violations of the proposed provisions.

Employers Pay Data. SB 1284 would have required private employers with 100 or more employees and required to file an EEO-1 report to submit a pay data report to the DFEH containing specified information. This bill would have also authorized fines to be imposed on employers who fail to report, authorized the DFEH to seek an order requiring the employer to comply, and require the DFEH to maintain the records for 10 years, though no individually identifiable information could be made public.

FAILED TO PASS THE HOUSE OF ORIGIN

Victims of Sexual Harassment. AB 2366 would have extended existing law that protects employees who take time off work due to being victims of domestic violence, sexual assault and stalking, to include victims of sexual harassment. This bill would have also extended job-protected leave to family members of such victims.

DLSE Time to File Extension. AB 2946 would have extended the time to file a complaint with the DLSE from six months to three years from the date of the violation and amended California’s whistleblower provision to authorize a court to award reasonable attorney’s fees to a prevailing plaintiff.

Familial Status. AB 1938 would have limited employer inquiries about familial status during the hiring or promotional process and made it unlawful to make any non-job related inquiry about an individual’s real or perceived responsibility to care for family members.

Pay Statements. AB 2223 would have provided employers the option to provide itemized pay statements on a monthly basis and extended the time an employer has to respond to a request to inspect or copy pay statements from 21 to 28 calendar days. AB 2613 would have imposed penalties on employers who violate Labor Code provisions requiring payment of wages twice per month on designated paydays, and once per month for exempt employees.

Flexible Work Schedules. AB 2482 would have allowed private non-exempt employees, not subject to collective bargaining agreements, to request a flexible work schedule to work ten hours per day within a 40-hour workweek without overtime compensation.

Marijuana. AB 2069 would have provided that the medical use of cannabis by a qualified patient with an identification card is subject to a reasonable accommodation by an employer.

Another Failed PAGA Effort. AB 2016 would have required an employee’s required written PAGA notice to the employer include a more in-depth statement of facts, legal contentions, and authorities supporting each allegation, and include an estimate of the number of current and former employees against whom the alleged violations were committed and on whose behalf relief is sought. AB 2016 would have prescribed specified notice procedures if the employee or employee representative seeks relief on behalf of ten or more employees. The bill excluded health and safety violations from PAGA’s right-to-cure provisions, increased the time the employer had to cure violations from 33 to 65 calendar days, and provided an employee may be awarded civil penalties based only on a violation actually suffered by the employee.

Sick Leave. AB 2841 would have increased an employer’s alternate sick leave accrual method from 24 hours by the 120th calendar day of employment to 40 hours of accrued sick leave or paid time off by the 200th calendar day of employment—but not needing to exceed 80 hours. An employer would have been able to limit the amount sick leave carried over to the following year to 40 hours. This provision would have applied to IHSS providers on January 1, 2026.

Criminal History. AB 2680 would have required the CA Department of Justice to adopt a standard form that employers would have to use when seeking the consent of an applicant for employment to conduct a conviction history background check on that applicant by the department. SB 1298 would have placed limits on the criminal history reporting that DOJ would provide to employers and required DOJ to provide the subject with a copy of the information and at least five days to challenge its accuracy before releasing it to the employer. AB 2647 would have prohibited evidence of a current or former employee’s criminal history from being admitted, under specified circumstances, in a civil action based on the current or former employee’s conduct against an employer, an employer’s agents, or an employer’s employees.

With this summary, our legislative team bids you, and Governor Jerry Brown, adieu. But don’t forget to sign up and attend our upcoming webinar for our verbal tribute to this year’s L&E legislation and Governor Brown’s final acts.

Seyfarth Synopsis: The Ninth Circuit, addressing how to prove exceptions under CAFA, reminds us that removal under CAFA might be an invitation for extensive preliminary discovery battles, and prolonged motion practice. The following post highlights some procedural realities of finding an appropriate venue for litigating class actions in California.  

United States District Courts in California oversee some of the largest caseloads in the country.[1] Understandably reluctant to see their dockets expand, these courts often look for grounds to remand cases to state court. Even seemingly airtight removals under the Class Action Fairness Act, which Congress enacted to facilitate access to federal court, have resulted in remands based on certain statutory exceptions. In King v. Great American Chicken, the Ninth Circuit Court of Appeals this month addressed the evidentiary requirements for proving two primary exceptions under CAFA. This decision presented an employer-friendly interpretation of plaintiff’s burden to remand a case under CAFA, but also provided the plaintiffs with an opportunity to engage in burdensome jurisdictional discovery and multiple rounds of remand briefing.

CAFA permits defendants to remove certain class actions from state court to federal court. Congress intended CAFA to be “interpreted expansively.”[2] Under CAFA, federal courts have original jurisdiction over class actions where the aggregate amount in controversy exceeds $5,000,000, if the putative class size exceeds 100 persons and if there is “minimal diversity” between the state citizenship of a member of the plaintiff and state citizenship of a defendant.[3]

Federal courts must decline jurisdiction, however, under the “local controversy” exception (one of the two exceptions mentioned above), which applies if the plaintiff can prove, among other things, that more than two-thirds of putative class members were California citizens when the case was removed to federal court.[4] When the plaintiff in King demanded discovery of class members’ addresses, the defendant resisted but sought to finesse the demand by stipulating that at least 67% of the last known addresses were in California. Hon. George Wu of the Central District of California resolved the discovery dispute by seizing upon the offered stipulation and remanded the wage and hour putative class action to the Superior Court of Los Angeles.

On the CAFA appeal, the Ninth Circuit reversed, holding that a plaintiff must show that more than two-thirds of the putative class members were California citizens, not simply residents, and observing that the stipulation “left very little cushion, if any” to account for former workers who, for example, might have moved out of the state by the time the case was removed.[5] The Ninth Circuit provided a math lesson, moreover: “two-thirds actually translates into 66 & 2/3 percent, not 67 percent.”[6]

In addition, the Ninth Circuit reasoned that there was little margin to cover employees who may have had last-known California addresses but who did not qualify as California citizens.[7] “There was no evidentiary basis for the district court to find that subtracting those groups would not reduce the fraction of class members that were California citizens at the time of removal to a level less than the required ‘greater than two-thirds.’”[8] Finally, the Ninth Circuit noted that a person’s “residential address in California does not guarantee that the person’s legal domicile was in California.”[9] In sum, “there was no evidence to support a factual finding that the proportion of California citizens was greater than two-thirds.”[10]

While up to this point the Ninth Circuit handed a victory to the defendant, the Ninth Circuit went on to direct the district court to permit plaintiff to engage in jurisdictional discovery and renew her motion to remand.[11] The defendant’s victory thus came with the price of an order directing it to engage in burdensome, invasive, and procedurally complicated discovery.

King reinforces the plaintiff’s evidentiary burden to remand a putative class action to state court, but also allows plaintiffs to engage in jurisdictional discovery to establish an exception to CAFA jurisdiction. Defeating a motion to remand might be small consolation in light of the resources needed to expend on class-wide discovery. Class action defendants should thus be aware of the probability that removal under CAFA sometimes can be an invitation to extensive preliminary discovery battles, and prolonged motion practice.


[1] See United States District Courts — National Judicial Caseload Profile, June 2018, http://www.uscourts.gov/statistics-reports/federal-court-management-statistics-june-2018.  In terms of average civil cases per judge, the Northern, Eastern, Central, and Southern District Courts rank 11th, 4th, 11th, and 76th nationally.
[2] Ibarra v. Manheim Invs., Inc., 775 F.3d 1193, 1197 (9th Cir. 2015).
[3] 28 U.S.C. §1332(d)(2)(A), (d)(5)(B); See Serrano v. 180 Connect, Inc., 478 F. 3d 1018, 1024 (9th Cir. 2007).
[4] The local controversy exception is set forth in 28 U.S.C. § 1332(d)(4)(A); Mondragon v. Capital One Auto Finance, 736 F.3d 880, 884 (9th Cir. 2013) (denying motion to remand where plaintiff submitted no evidence regarding putative class members citizenship beyond class definition in complaint).
[5] King v. Great Am. Chicken Corp, Inc., No. 18-55911, 2018 WL 4231847.
[6] Id. at *3.
[7] Id. at *4.
[8] Id.
[9] Id.
[10]  Id.
[11] Id . at *5.

Seyfarth Synopsis: Governor Jerry Brown has already signed into law legislation covering meal period exceptions for truck drivers delivering commercial feed, adding communications to be considered as “privileged” for purposes of defamation suits, removing a reference to the seven-day waiting period for disability benefits under the paid family leave program, and clarifying salary history information.

As temperatures begin to drop, with pumpkin spiced lattes and the smells of dew in the air, things are still heating up in the Governor’s office. With only 16 days remaining in his signing period of his final term in office, the Governor has been active. This week he has been focused on bills covering climate—as he kicked off the Global Climate Action Summit on September 12 and recently signed bills blocking offshore oil drilling expansion, reducing carbon emissions, and setting a 100% clean electricity goal for the state. In addition, the Governor signed a much talked about bill, SB 954, requiring printed disclosures to mediation participants concerning mediation confidentiality.

While we’re keeping an eye on all employment bills sitting on his desk, here’s a quick recap of what he has already approved.  All these new laws take effect January 1, 2019 unless otherwise stated.

Meal Periods. Sponsored by the California Grain and Feed Association, AB 2610 carves out an exemption to Labor Code 512 by allowing truck drivers who transport commercial feed (i.e., livestock feed) to “remote, rural areas” to take a meal period after the sixth hour if their regular rate of pay is at least one and a half times the state minimum wage and the driver is subject to overtime pay.  Drivers must still be provided a second meal period at the tenth hour. The bill does not define “remote, rural areas,” but bill sponsors point to factors such as road conditions – narrow, twisting, in higher elevations or mountainous regions; limited rest stops, closed rest stops, or lack of road space to safely take a meal period; and low average speeds (e.g., 40-50 mph).

Privileged Communications. AB 2770 amends Section 47 of the Civil Code to add three types of communications regarding sexual harassment that are now considered “privileged” communications—meaning they cannot be used as a basis for defamation claim—unless they are made with malice (i.e., statements made with complete disregard for the truth or false accusations made out of spite, ill will, or hatred towards the alleged harasser). Specifically, the bill protects:

  1. Reports of sexual harassment made by an employee to their employer based on credible evidence and without malice;
  2. Communications made without malice regarding the sexual harassment allegations between the employer and “interested persons” (such as witnesses or victims); and
  3. Non-malicious statements made to prospective employers as to whether a decision to rehire, or not, would be based on a determination that the former employee engaged in sexual harassment.

Paid Family Leave. Prior legislation that went into effect on January 1, 2018 removed the seven-day waiting period before an eligible employee may receive family temporary disability benefits (under the paid family leave program, which provides wage replacement benefits to workers who take time off work to care for a seriously ill family member or to bond with a minor child within one year of birth or placement). AB 2587 removes the seven-day waiting period reference in Section 33013.1 of the Unemployment Insurance Code, since the waiting period rule has been removed.

Salary History Information. This year’s Fair Pay Act bill, AB 2282, was noted as sensible legislation that amends and clarifies ambiguities in Labor Code sections 432.3 and 1197.5 created by prior pay equity legislation—AB 1676 (Chaptered in 2016) and AB 168 (Chaptered in 2017). Read our in-depth analysis of AB 2282 here.

Immigration Status. SB 785, which went into effect upon the Governor’s signing on May 17, 2018 with a January 1, 2020 sunset date, prohibits the disclosure of an individual’s immigration status in open court in a civil or criminal action unless the party wishing to disclose the information requests a confidential in camera hearing and the judge deems the evidence relevant and admissible.

What other new laws will fall upon our Californian employers? We’ll keep our eyes and ears glued to his office anxiously waiting to see what may fall next—fueled by our PSL coffees, of course. Stay tuned for our next in-depth update coming after Governor Brown’s last day to sign or veto bills deadline of September 30th.