Seyfarth Synopsis: New statutory obligations for California employers in 2018 will include prohibitions on inquiries into applicants’ salary and conviction histories, expanding CFRA to employees of smaller employers, expansion of mandatory harassment training to include content on gender identity, gender expression, and sexual orientation, and new immigration-related restrictions and obligations.

California Governor Jerry Brown spent his last day to sign bills in this Legislative Session, October 15, approving and rejecting a number of employment-related bills. Below is our annual summary of those bills that will have—or would have had—the greatest impact on California employers. All approved bills become effective January 1, 2018, unless stated otherwise. Watch this blog for in-depth pieces on the bills below that will pose the most challenges for employers.

APPROVED

Salary Inquiry Ban. After two unsuccessful attempts, AB 168 received the Governor’s approval to make it unlawful in California law for employers, including state and local governments, to ask applicants about their prior salary, compensation, and benefits. The employer may consider prior salary information the applicant voluntarily and without prompting discloses, in setting pay. Don’t forget that Labor Code section 1197.5 already prohibits an employer from using an applicant’s salary history, by itself, to justify a pay disparity. AB 168 will also require employers to provide the position’s pay scale to a job applicant upon reasonable request. Read our in-depth piece on AB 168, and practical implications, here. Adds Section 432.3 to the Labor Code.

Meanwhile, yesterday the Governor vetoed the other pay equity bill we were watching, Gender Pay Gap Transparency Act, AB 1209. More on that bill below.

Ban-the-Box: Prior Conviction History of Applicants. With the approval of AB 1008, the Governor and California Legislature have created yet another protected class of individuals entitled to sue employers under the Fair Employment and Housing Act: applicants denied employment because of their conviction history, where the employer is unable to justify relying on that conviction history to deny employment. AB 1008 makes it unlawful for an employer to include questions seeking disclosure of an applicant’s criminal history on any employment application, inquire or consider the conviction history of an applicant before extending a conditional offer employment, or consider or distribute specified criminal history information in conducting a conviction history background check. If an employer intends to deny a position solely or in part because of the applicant’s prior conviction, the employer must make an individualized assessment of whether the applicant’s conviction history has a direct and adverse relationship with the duties of the job, consider certain topics, and allow the applicant to dispute the accuracy of the conviction history. Read our in-depth analysis, implications, and tips, of the “Scarlet Letter Act” here. Adds Section 12952 to the Government Code, and repeals Section 432.9 of the Labor Code.

New Parent Leave Act and Parental Leave DFEH Mediation Pilot Program. SB 63 extends CFRA’s protections to smaller employers (with at least 20 employees within 75 miles) and prohibits those employers from refusing to allow employees—with more than 12 months and at least 1,250 hours of service—to take up to 12 weeks of parental leave to bond with a new child within one year of the child’s birth, adoption, or foster care placement. An employer employing both parents who both are entitled to leave for the same child does need not give more than 12 weeks of leave total to the employees (which may be granted simultaneously if the employer chooses). Further, an employer can recover the costs of maintaining the health plan for employees that do not to return to work after their leave exhausts because of a reason other than a serious health condition or other circumstances beyond the employee’s control. Beginning January 1, 2018 and ending January 1, 2020, the DFEH, after receiving funding from the Legislature, will create a parental leave mediation pilot program under which an employer may request all parties to participate in mediation within 60 days of receiving a right-to-sue notice. This bill prohibits an employee from pursuing any civil action under these provisions (and tolls the statute of limitations) until the mediation is complete, meaning when either party elects not to participate, withdraws from mediation, or notifies the DFEH that further mediation would be fruitless. Adds Section 12945.6 to the Government Code.

Retaliation: Expanding The Labor Commissioner’s Authority. With the Governor’s October 3 approval of SB 306, the DLSE will be authorized to investigate an employer—with or without a complaint being filed—when, during a wage claim or other investigation, the Labor Commissioner suspects retaliation or discrimination. The bill will also allow the Labor Commissioner or an employee to seek injunctive relief (that the employee be reinstated pending resolution of the claim) upon a mere finding of “reasonable cause” that a violation of the law has occurred. That injunctive relief, however, would not prohibit an employer from disciplining or firing an employee for conduct that is unrelated to the retaliation claim. The bill also authorizes the Labor Commissioner to issue citations directing specific relief to persons determined to be responsible for violations and to create certain procedural requirements. Amends Section 98.7 and adds Sections 98.74, 1102.61, and 1102.62 to the Labor Code.

Immigration: Worksite Enforcement Actions. AB 450, the “Immigrant Worker Protection Act,” prohibits employers from allowing immigration enforcement agents to have access to non-public areas of a workplace, absent a judicial warrant, and prohibits immigration enforcement agents to access, review, or obtain employee records without a subpoena or court order, subject to a specified exception. This bill requires an employer to provide notice of an immigration agency’s inspection of I-9 Employment Eligibility Verification forms or other employment records within 72 hours of receiving the federal notice of inspection—using a template created by the Labor Commissioner—to current employees; requires an employer to provide affected employees (i.e., those who may lack work authorization or whose documents have deficiencies) a copy of the inspection notice, upon reasonable request; and requires employers to provide affected current employees, and their authorized representative, a copy of the immigration agency inspection results and written notice of the obligations of the employer and the affected employee arising from the action. The bill grants exclusive authority to the Labor Commissioner or Attorney General to enforce these provisions and requires that any penalty recovered be deposited in the Labor Enforcement and Compliance Fund. Penalties for failure to satisfy these prohibitions and for failure to provide the required notices are: $2,000 up to $5,000 for a first violation, and $5,000 up to $10,000 for each further violation. The Labor Commission may recover up to a $10,000 penalty for each instance an employer re-verifies the employment eligibility of a current employee at a time or in a manner not required by federal law. Stay tuned for a detailed analysis of AB 450 coming soon. Adds Sections 7285.1, 7285.2, and 7285.3 to the Government Code; adds Sections 90.2 and 1019.2 to the Labor Code.

Harassment Training: Gender Identity, Gender Expression, and Sexual Orientation. SB 396 requires employers with 50 or more employees to add items to already mandated biennial supervisory training to prevent sexual harassment. The new content must include practical examples to address harassment based on gender identity, gender expression, and sexual orientation. Employers must also post a DFEH-developed poster regarding transgender rights. The bill also makes changes to the Unemployment Insurance Code. Amends Sections 12950 and 12950.1 of the Government Code.

VETOED

Gender Pay Gap Transparency Act. AB 1209 would (as of July 2019) have required employers with at least 500 California employees to collect information on differences in pay between male and female exempt employees and between male and female Board members. The bill would have required employers to submit the information to the California Secretary of State by July 1, 2020, in a form consistent with Labor Code § 1197.5, and to provide an update to the Secretary of State every two years. The bill would have required the Secretary to publish the information on a public website if the Legislature provided it with sufficient funding. Yesterday the Governor vetoed the bill, stating—as many employers’ groups had pointed out—that the bill’s ambiguous wording made it unclear that the bill would “provide data that will meaningfully contribute to efforts to close the gender wage gap. Indeed, I am worried that this ambiguity could be exploited to encourage more litigation than pay equity.” He also cited the trust he has placed in his Pay Equity Task Force to provide guidance and recommendations to “assist companies around the state with assessing their current wage practices.” For more detail on implications of this bill had it passed, click through to our in-depth analysis on AB 1209.

Reproductive Health. The Governor vetoed AB 569 on October 15, stating that the FEHA “has long banned such [reproductive health-based] adverse actions, except for religious institutions. I believe those types of claims should remain within the jurisdiction of the [DFEH].” The bill would have added a provision to the Labor Code prohibiting an employer from taking adverse employment action against an employee or the employee’s dependents or family members for their reproductive health decisions, including the use of any drug, device, or medical service (e.g., birth control, abortions, or in vitro fertilization). An employer that violates this prohibition would have been subject to penalties under Labor Code § 98.6, as well as reinstatement, reimbursement of lost wages and interest, and other appropriate compensation or equitable relief. This bill would have prohibited employers from attempting to contract out of these requirements, by making null and void any express or implied agreement waiving these requirements. The bill would have required employers to include a notice of these employee rights and remedies in their handbooks.

Employee Request: Injury and Illness Prevention Program. AB 978 would have required an employer to provide a free copy of the company’s injury prevention program to an employee, or their representative, within 10 days of receiving a written request. A representative would have included a recognized or certified collective bargaining agent, attorney, health and safety professional, nonprofit organization, or immediate family member. AB 978 would have allowed an employer to take reasonable steps to verify the identity or the person making the written request and authorized an employer to assert impossibility of performance as an affirmative defense against allegations of violations of these provisions. Governor Brown found this bill to be “unnecessary and duplicative” of current regulatory proposals sitting with the Cal-OSHA Standards Board and noted that their advisory committee would be “better suited to determine how to properly implement requirements of this kind.”

BILLS THAT FAILED TO MAKE THE LEGISLATIVE CUT

Opportunity to Work Act. The notorious AB 5 would have required employers with 10 or more employees in California to offer additional hours of work to existing nonexempt employees before the employer could hire additional or temporary employees. This bill piggy-backed on the San Jose voter-approved Opportunity to Work Ordinance that, effective March 2017, would have required employers to offer part-time employees additional hours before hiring new or temporary employees. Read more on what AB 5 would have implemented herehere, and watch here.

Rest Breaks. AB 817 would have created an exception to Labor Code section 226.7’s off-duty “rest period” requirement for employers providing emergency medical services to the public. The bill would have allowed EMS employers to require their employees to monitor and respond to emergency response calls during rest or recovery periods without penalty, so long as the rest period is rescheduled.

Retail Employees: Holiday Overtime. AB 1173 would have established an employee-selected overtime exemption that would have allowed a “retail industry” employee to work up to 10 hours per day with no overtime pay during the holiday season (November through January). Overtime paid at time and one-half of the employee’s regular pay rate would have applied to over 40 hours worked in a workweek or 10 in a work day; double time would have applied to work over 12 hours per day and over eight hours on the fifth, sixth, or seventh day in a workweek. The bill would have required employees to submit a written request for the flexible work schedule for approval by the employer. The authors of this bill did not specifically define what “retail industry” would have meant.

Overtime Compensation: Executive, Administrative, or Professional Employees. AB 1565 would have exempted an executive, administrative, or professional employee from overtime compensation if the employee earns a monthly salary of $3,956 or at least twice the state minimum wage for full-time employment, whichever is greater. This bill would have had California follow President Obama’s FLSA regulations increasing the yearly salary exempt threshold from $23,660 to $47,476 for executive, administrative, and professional workers. (Those regulations have been enjoined by a federal court.)

Health Professional Interns: Minimum Wage. AB 387 would have broadened the definition of employers required to pay minimum wage to include anyone who employs any person engaged in supervised work experience (i.e., students working clinical hours) to satisfy the requirements for licensure, registration, or certification as an allied health professional. This bill would have applied only to a work experiences longer than 100 hours and would not have applied to employers with fewer than 25 allied health professionals or a primary care clinic.

Resident Apartment Manager Wages. AB 543 would have extended an exemption from Industrial Welfare Commission orders allowing employers, who do not charge rent to a resident apartment manager pursuant to a voluntary agreement, to apply up to one-half of the apartment’s fair market value (no value cap) to meet minimum wage obligations to the apartment manager. This was up from the two-thirds previously provided but capped at $564.81 per month for singles, $835.49 for couples.

Voluntary Veterans’ Preference Employment Policy Act. Both AB 353 and its almost identical twin AB 1477 hoped to revise FEHA’s existing Vietnam-Era veterans’ status provision but failed to make it out of both houses and out of the house of origin, respectively. The bills would have expanded a private employer’s authority to institute and uniformly grant a hiring preference for veterans regardless of where the veteran served. The bills stated that the hiring preference would not have violated FEHA or any local or state equal opportunity employment law or regulation. But the bill would have prohibited the use of a veterans’ preference policy for the purpose of discrimination on the basis of any protected classification.

Credit and Debit Card Gratuities. AB 1099 would have required an entity—defined as “an organization that uses online-enabled applications or platforms to connect workers with customers … including, but not limited to, a transportation network company” (e.g., Uber)—to accept tips by credit or debit cards if the entity allows customers to pay with credit or debit cards. The bill would have required that the tip be paid to the worker the next regular payday following the date the customer authorized the card payment. This bill made it out of the Assembly but the author canceled its hearing in the Senate Committee on Labor and Industrial Relations so we may see this bill again next year.

Labor Organizations: Compulsory Fee Payments. AB 1174 would have established the “California Right to Work Act of 2017” to prohibit a requirement that employees pay into a labor union, charity, or other third party as a condition of employment or continuing employment. This bill would have made California part of the list of 28 other Right to Work states in the nation.

Employer Liability: Small Business and Microbusiness. AB 442 would have prohibited Cal OSHA from bringing any “nonserious violation” against small business or microbusiness employers without first notifying the employer of the violation and the right to cure within 30 days. This safe harbor would not have applied to any willful violation. The impact of this bill would have been far reaching—nearly 70% of California employers employ only a handful of employees.

Good Faith Defense: Employment Violations. SB 524 would have allowed an employer to raise an affirmative defense that, at the time of an alleged violation, the employer was acting in good faith when relying upon a valid published DLSE opinion letter or enforcement policy. This bill would not have applied to the DLSE’s prosecution of payment of unpaid wages.

PAGA: 2017’s Three Failed Efforts. 

AB 281 attempted to reform PAGA by (1) requiring an actual injury for an aggrieved employee to be awarded civil penalties, (2) excluding health and safety violations from the employer right to cure provisions, and (3) increasing employers’ cure period to 65 calendar days, up from 33.

AB 1429 would have limited the violations an aggrieved employee can bring, required the employee to follow specific procedures prior to filing suit, limited civil penalties recoverable to $10,000 per claimant and excluded the recovery of filing fees, and required the superior court to review any penalties sought as part of a settlement agreement.

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

Workplace Solutions.

For more information on how these new Peculiarities might affect your company, read our in-depth focus blogs and contact your favorite Seyfarth attorney.

Seyfarth Synopsis: The California Legislature has just created yet another protected class of individuals entitled to sue employers under the Fair Employment and Housing Act. The new class of potential plaintiffs are applicants denied employment because of their conviction history, where the employer is unable to justify relying on that conviction history to deny employment.

We’ve reported on two January 2017 developments for California employers that use criminal records in employment decisions: (1) Los Angeles enacted a city-wide “ban-the-box” ordinance, and (2) the Fair Employment & Housing Council approved new regulations that borrow heavily from the EEOC’s April 2012 “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964.”

The trend continues. Over the weekend, on October 14, 2017, Governor Jerry Brown announced that he has signed Assembly Bill 1008, which amends FEHA to add new Government Code section 12952. This section will restrict an employer’s ability to make hiring decisions based on an applicant’s conviction records, including a “ban-the-box” provision and a prohibition against considering conviction history until the applicant has received a conditional offer of employment. (It is only scant comfort to reflect that the final version of AB 1008 was not as stringent as the originally proposed bill, which would have placed even greater restrictions on consideration of criminal history.) With a fast-approaching effective date of January 1, 2018, California employers should review their policies and procedures now to ensure compliance.

Coverage

Section 12952, like other parts of FEHA, will apply to employers with five or more employees. Section 12592 exempts from its coverage only a small handful of positions:

  • positions for which government agencies are required by law to check conviction history,
  • positions with criminal justice agencies,
  • Farm Labor Contractors as defined in the Labor Code, and
  • positions as to which the law (g., SEC regulations) requires employers to check criminal history for employment purposes or restricts employment based on criminal history.

Inquiries About Conviction History

Section 12952 will make it unlawful for California employers to

  • include on a job application any question about conviction history, unless the application is presented after a conditional offer of employment,
  • inquire into or consider an applicant’s conviction history before extending a conditional offer of employment, and
  • consider, distribute, or disseminate information about criminal history that California already prohibits employers from considering, such as (a) an arrest not resulting in a conviction (except in the limited situations described in Labor Code section 432.7), (b) referral to or participation in a pretrial or post trial diversion program, and (c) convictions that have been sealed, dismissed, expunged, or statutorily eradicated pursuant to law.

Section 12952 expressly states that it will not prevent employers from conducting conviction history checks that are not covered by the new law.

Section 12952 borrows its definition of “conviction” from Labor Code section 432.7(a)(1), (3):  “a plea, verdict, or finding of guilt regardless of whether sentence is imposed by the court.” The term “conviction history” is somewhat broader, and can include certain arrests.

Individualized Assessment 

If an employer intends to deny hire because of a prior conviction, Section 12952 will require the employer to assess whether the individual applicant’s conviction history has a “direct and adverse relationship with the specific duties of the job that justify denying the applicant the position.” This individualized assessment must consider the nature and gravity of the criminal offense, the time that has passed since the offense and the completion of the sentence, and the nature of the job sought.

The employer, may, but need not, document the required individualized assessment.

Adverse Action Based on Conviction History

If the individualized assessment leads to a preliminary determination that the applicant’s conviction history is disqualifying, then the employer must provide a written notice. Section 12952 will require more than what the federal Fair Credit Reporting Act (FCRA) requires. Specifically, the written notice that Section 12952 will require must

  • identify the conviction at issue,
  • include a copy of any conviction history report (which means the notice is required regardless of the source of the conviction history),
  • explain the applicant’s right to respond to the notice before the employer’s decision becomes final,
  • state the deadline for that response, and
  • tell the applicant that the response may include evidence challenging the accuracy of the conviction history and evidence of rehabilitation or mitigating circumstances.

The applicant has five business days to respond to a preliminary notice. The employer, in then making its final employment decision, may, but need not, explain the reasoning for its final decision. (Note that the Los Angeles ordinance, by contrast, requires employers to document the individualized assessment and to give the applicant a copy of it before making a final decision.)

If the applicant timely notifies the employer that the applicant disputes the accuracy of the conviction history and is taking specific steps to obtain evidence, then the applicant has an additional five business days to respond. The employer must consider any information the applicant submits before the employer can make a final decision.

If an employer then makes a final decision to deny employment based solely or in part on conviction history, a second written notification must be provided to the applicant, which must include:

  • the final denial or disqualification,
  • any existing procedure the employer has to challenge the decision or request reconsideration, and
  • the right to file a complaint with the Department of Fair Employment and Housing.

Again, the employer may, but need not, explain its final decision. (Under the Los Angeles ordinance, new requirements arise when the applicant provides any additional information upon receipt of the employer’s first notice and its initial completed assessment: the employer receiving that additional information must then complete a re-assessment and provide the applicant with a copy of it while notifying the applicant of the final decision.)

Remedies 

Because Section 12952 will be part of the FEHA, an aggrieved individual may sue for the full range of FEHA damages available, including compensatory damages, attorney’s fees, and costs.

Next Steps

Most immediately, California employers should determine whether they need to revise job applications, interview guidelines, and policies and procedures for criminal background checks. Many employers will need to revise their pre-adverse and adverse action letters to comply with the many laws regulating criminal background checks, and to revamp the timing of events in their hiring process.

Employers throughout the United States, and particularly multi-state employers, should continue to monitor developments in this and related areas of the law, including laws restricting the use of credit history information and the fair credit reporting laws.

 

Seyfarth Synopsis:  After two previous failed attempts, California joins seven other U.S. jurisdictions to prohibit inquiries into an applicant’s salary history.  Read on for a recap of the new law.

With Governor Jerry Brown signing AB 168 into law today, California joins Delaware, Puerto Rico, Oregon, Massachusetts, New York City, Philadelphia (currently pending legal challenge), and its own city of San Francisco in prohibiting employers from asking job applicants for “salary history information.” This term includes both compensation and benefits.

AB 168 will add section 432.3 to the California Labor Code. While Section 432.3 will prohibit employers from asking about or relying on prior salary information in deciding whether to offer a job and in deciding how much to pay, Section 432.3 will give employers a pass when an applicant, “voluntarily and without prompting,” discloses salary history information. In that case, Section 432.3 will not prohibit the employer from relying upon the volunteered information in setting the applicant’s starting salary. But note that the California Fair Pay Act (Lab. Code § 1197.5(a)(2)) forbids employers to rely on prior salary, by itself, to justify any disparity in pay.

Section 432.3 will also make California the first jurisdiction in the country to require that employers provide applicants with the pay scale for a position, upon “reasonable request.”

Section 432.3 will apply to “all employers”—both private and public—and will become effective January 1, 2018.

Seyfarth Synopsis: This post continues our blog series on the Future of Work, and discusses how, in California as elsewhere, performance management strategies continue to develop in response to the changing workplace. Access our prior Future of Work posts (on independent contractors in California and the effects of job automation) here and here.

Innovation in employee management has been a global phenomenon for the past several years. In San Diego the week of September 14th, a global knowledge-exchange network known as Talent Management Alliance put on a three day Talent Performance Management Summit. Speakers and attendees talked about the radical changes in performance management that have sprung up in recent years in answer to evolving demands of increased competition, the way companies operate, and employee expectations. A number of innovators are based in California (e.g., Gap, Adobe, Cisco). Not surprisingly, a sizeable chunk of the speakers at the San Diego TMA Summit are also from companies based in the Golden State.

Annual Performance Reviews Going the Way of the Dodo

As we all know, the traditional annual performance evaluation is used to rate employees, retrospectively, on how they did during the previous year in a number of areas (such as teamwork, amount and quality of work, quality of client service) and to justify salary increases or decreases. A required annual process has some obvious advantages, including (ideally) consistency, and use of objective criteria. The evaluation can be especially important in the event of litigation, as a contemporaneous record of supervisory impressions and corroborator of employer actions.

However, for leading edge employers in California and elsewhere, this model is outmoded. Progressives predict that the use of annual reviews will continue to decline and that more frequent, goals-oriented communications (often utilizing technology), employee training, attention to personal development, and coaching (rather than managing) will increase.

A New Performance Management Paradigm

These changes reflect updated thinking about what works to drive improvement in an employer’s bottom line. There is new emphasis on maintaining a nimble, employee oriented, data-driven corporate culture, as well as recognizing the roles of science and psychology in motivating employees. Research has shown that Millennials (aka “Gen Y”), who by 2020 will comprise almost half of the U.S. workforce, value receiving more frequent feedback, work-life balance, satisfaction in their work (as opposed to “just having a job”), and more independence and learning opportunities.

Not surprisingly, the new performance management approaches speak in these terms, using concepts like “expectations, goal-setting and feedback.” They ask how employees are measuring up against their goals/expectations, and how management can help. And they do so frequently (i.e., quarterly, if not monthly, or “continuously”). In addition to keeping their employees engaged and productive, these approaches can help employers can gain more current information to reward good work and identify emerging leaders.

Management Training (including How to Coach for Performance) is Essential

However, even with the help of workplace consultants and new generations of management and feedback software, the new performance management paradigms place intense demands on managers and supervisors to implement the changes effectively. Supervisors and managers in California already typically carry a heavy burden of overseeing non-exempt compliance with numerous wage and hour laws. No performance management model, standing alone, can ensure 100% compliance with a company’s employee management objectives, including consistent compliance with anti-discrimination laws and diversity goals. Training thus becomes more important than ever.

Workplace solution.  Employers in all industries and service sectors are developing their own approaches to managing their employees, including some using hybrid approaches that combine frequent feedback with more formal ratings. Even if you are not ready to join the talent management revolution, you should be familiar with what the discussion is about, and able to evaluate whether your organization’s processes are fulfilling your needs.

Seyfarth Synopsis: On October 1, 2017, after more than a year of waiting, the Berkeley, CA paid sick leave ordinance goes into effect. The ordinance provides extraordinarily generous paid sick leave benefits to employees beyond those provided by the California statewide paid sick leave law.

A little over a year ago, on August 31, 2016, the City of Berkeley, California enacted the “Paid Sick Leave Ordinance.” Berkeley will be the eighth California city with such an ordinance.[1] Because California’s statewide paid sick leave law does not supersede local ordinances, employers must reckon with both the state and local laws, and follow the one that most favors employees. With the October 1 effective date fast approaching, employers with employees in Berkeley should take steps now to ensure their policies and practices comply with the impending law.

Below is a detailed summary of the Berkeley Ordinance and the obligations it imposes. Among its most significant provisions are these: (i) there is no permissible cap on how much earned paid sick leave employees can use in a year, (ii) there is a 72-hour accrual cap (likely a “point-in-time” cap) for large employers, and (iii) employees without a spouse or registered domestic partner can designate an individual as to whom the employee will be eligible to take paid sick leave.

Which Employers Are Covered by the Ordinance?

The Ordinance covers all employers with at least one eligible employee working in Berkeley, and broadly defines “employers” to include anyone who—whether directly or through a staffing agency—exercises control over the wages, hours, or working conditions of any employee.

Covered employers need not provide additional earned sick leave if they provide employees with paid leave that meets or exceeds the Ordinance’s minimum standards. And Ordinance requirements may be waived in a bona fide collective bargaining agreement if the waiver appears in clear terms.

Which Employees are Covered by the Ordinance?

The Ordinance broadly defines covered employee as an individual who performs at least two hours of work within the geographic boundaries of the City of Berkeley in a calendar week and who qualifies as an individual entitled to minimum wage under the California minimum wage law.

How Much Sick Leave Can Employees Accrue?

Employees accrue one hour of paid sick leave for every 30 hours worked. Employees will begin accruing earned sick leave on the later of the Ordinance’s effective date (Oct. 1, 2017) or the employee’s commencement of employment, and can begin using accrued paid sick leave 90 calendar days thereafter.

The cap on accruals depends on how many employees the employer has. For employers with at least 25 employees working in a given week,[2] the cap on accrual is 72 hours. For employers with fewer than 25 employees working in a given week, the cap is 48 hours. While not explicitly stated in the Ordinance, it is likely that this accrual cap is a “point-in-time” or “rolling” cap, meaning that accruals cease whenever an employee’s bank of accrued, unused paid sick leave reaches 72 (or 48) hours and begin again when the employee uses sick leave.

How Much Sick Leave Can Employees Carry Over?

The amount of earned, unused paid sick leave that an employee is entitled to carry over to the next calendar year is the same as the caps on accrual: 72 hours for employers with at least 25 employees and 48 hours for employers with fewer than 25 employees.

While the Ordinance is silent on whether employers can adopt a frontloading program to avoid accrual and year-end carryover obligations, the city’s paid sick leave FAQs provide some relevant information. The FAQs state that employers can provide a lump sum of paid sick leave at the start of each year of employment. But employees must be entitled to accrue additional paid sick leave if they work enough hours to accrue the amount that was initially allocated upfront. In other words, Berkeley employers can “advance” paid sick leave accrual to their employees, but cannot adopt a frontloading system that wholly avoids accrual and removes year-end carryover of unused time.

How Much Sick Leave Can Employees Use in a Year?

The Berkeley FAQs state that employers can establish an initial one hour minimum increment of using paid sick leave. Thereafter, employees must be permitted to use paid sick leave in 15-minute increments. Both of these standards are more generous for employees (and more onerous for employers) than those under the California statewide paid sick leave law.

For employers with at least 25 employees, there is no cap on the number of accrued hours that an employee may use in a benefit year. But employers with fewer than 25 employees may limit an employee’s annual use of paid sick days to 48 hours. The interplay between unlimited paid sick leave usage and a 72-hour “point-in-time” accrual cap could mean that Berkeley employees working for employers with at least 25 employees could use more than three weeks of paid sick leave in a single benefit year.

Under What Circumstances May Employees Use Sick Leave?

After working for an employer for 90 calendar days, Berkeley employees can use paid sick leave earned under the Ordinance for any of the following reasons:

  • when the employee is ill or injured,
  • for the purpose of the employee’s receiving medical care, treatment, or diagnosis (as specified more fully in California Labor Code section 233(b)(4)), or
  • to aid or care for a covered family member who is ill or injured or receiving medical care, treatment, or diagnosis.

A “covered family member” means a child, parent, legal guardian or ward, sibling, grandparent, grandchild, spouse or registered domestic partner. A “child” includes a child of a domestic partner and a child of a person standing in loco parentis. Child, parent, sibling, grandparent, and grandchild relationships include biological relationships as well as adoptive, step, and foster care relationships.

An employee who has no spouse or registered domestic partner can designate one person as to whom the employee may use paid sick leave, to aid or care for that person. Employers must notify the employee of this right to designate by the time that the employee has worked 30 hours after paid sick leave begins to accrue. The employee then has 10 workdays to make the designation. Thereafter, the opportunity to make such a designation, including the opportunity to change a designation previously made, must be extended on an annual basis, giving employees 10 workdays to designate.

Although the California statewide paid sick leave law allows a covered employee to use paid sick leave for reasons related to domestic violence, sexual assault, or stalking, the Berkeley ordinance does not. But because Berkeley employers must comply with both the Ordinance and state law, Berkeley employees  will be able to use accrued paid sick leave for these additional purposes as well.

What Notice Must Employees Provide When Using Sick Leave?

If the need for paid sick leave is foreseeable (e.g., scheduled doctor’s appointments), then the employee must provide the employer with reasonable advance notice. But if the need for leave is unforeseeable (e.g., sudden illness), then the employee must provide notice of the need for the leave as soon as practicable.

What Documents Can Employers Ask Employees to Provide When Using Sick Leave?

Employers may take only reasonable measures to verify or document that an employee’s use of paid sick leave is lawful. Moreover, employers may not require employees to incur expenses that exceed $15 in order to prove their eligibility for paid sick leave.

Is an Employer Required to Pay Unused Time upon Employment Separation?

No. Employers are not required to cash out an employee’s accrued sick leave balance upon separation from employment. But the Berkeley FAQs state that if an employee separates from employment and returns to the employer within 12 months, then previously accrued, unused paid sick leave shall be restored.

Employer Notice Requirements

Employers must report the number of hours of paid sick leave accrued to date in any records they provide to employees at the end of each pay period.

Employers also must post in a conspicuous place at the workplace a notice published by the City, to inform employees of their paid sick leave rights under the Ordinance. The notice must be posted in any language spoken by at least 5% of the employees at the workplace or job site.

If employees do not have a regular physical location where they perform their work, the employer must provide a copy of the City notice to the employees when they are hired or assigned to complete work within the City of Berkeley.

Records Maintenance Requirements

Employers must retain payroll records pertaining to all employees for a period of four years. These records must include the amount of hours worked, wages paid, and paid sick leave accrued.

What Employers Cannot Do

Employers must not:

  • require, as a condition of taking paid sick leave, that the employee secure a replacement worker to cover the hours the employee will miss on paid sick leave,
  • interfere with, restrain, or deny the exercise of—or the attempt to exercise—any right provided under the Ordinance, or
  • discriminate in any manner or take any adverse action against any person in retaliation for exercising rights protected under the Ordinance.

Remedies and Penalties

Administrative fines range from $500 for failing to (a) post the notice, (b) maintain payroll records or allow the City access to those records, or (c) provide a wage statement to $1,000 for each employee against whom retaliatory action was taken. Repeat offenders may be subject to additional fines.

The Ordinance also gives employees a private right of action, entitling them to sue for back wages, civil penalties, reinstatement, injunctive relief, and, of course, attorney’s fees. The City itself may recover administrative costs of enforcement, reasonable attorney’s fees and any civil penalties, and may order an employer to post a notice of non-compliance.

What Should Employers Do Now?

With the Ordinance’s effective date looming, Berkeley employers should take steps now, including the following, to achieve compliance:

  • Review existing sick leave policies and either implement new policies or revise existing policies to satisfy the Ordinance.
  • Post the required notices in all applicable languages.
  • Prepare notices in all applicable languages to provide to employees at the time of hire or once the Ordinance is implemented, as required.
  • Review policies on attendance, anti-retaliation, conduct, and discipline.
  • Train supervisory and managerial employees, as well as HR, on the new requirements.
  • Ensure that payroll records adequately reflect accrual and use of paid sick leave.

With the paid sick leave landscape continuing to expand and grow in complexity, companies should reach out to their Seyfarth contact for solutions and recommendations on addressing compliance with this law and sick leave requirements generally. To stay up-to-date on Paid Sick Leave developments, click here to sign up for Seyfarth’s Paid Sick Leave mailing list.

[1] Berkeley joins Emeryville, Long Beach, Los Angeles, Oakland, San Diego, San Francisco, and Santa Monica as California cities with paid sick leave ordinances. The Long Beach ordinance establishes paid sick leave for certain hotel employers. Los Angeles has two paid sick leave ordinances, one of which—the Los Angeles Citywide Hotel Worker Minimum Wage Ordinance—applies only to certain hotel employers.

[2] The Ordinance determines the size of an employer by counting all persons performing work for compensation on a full-time, part-time, or temporary basis, including individuals made available to work through the services of a temporary services or staffing agency or similar entity.

Seyfarth Synopsis: Governor Jerry Brown has till October 15 to approve bills the Legislature sent to his desk by its Friday, September 15, deadline, including bills that would require employers to ”show us the money” for certain employees and to make “mum be the word” for an applicant’s past conviction history.

The 2017 California Legislative Session kicked off on January 4, 2017, with lawmakers introducing over 2,200 bills. Of the many employment-related bills introduced, only a small handful made the Legislative cut. But some, addressed below, could have significant impacts on employers. Will the Governor sign or veto these possible new California peculiarities? We’ll know by his October 15 signing deadline. (Wondering what bills did not make the cut? We’ll include those in our post-October 15 wrap-up.)

Gender Pay Gap Transparency Act. AB 1209—called by some the “public shaming of California employers” bill—would require employers with at least 500 California employees to, beginning July 1, 2019, collect information on differences in pay between male and female exempt employees, by job classification and title, and male and female Board members. The bill would require employers submit the information to the California Secretary of State by July 1, 2020, in a form consistent with Labor Code § 1197.5 (California’s fair pay statute), and, to provide an update to the Secretary every two years. The bill would require the Secretary to publish the information on a public website if the Legislature provides it with sufficient funding. For more detail, click through to our in-depth analysis on AB 1209.

Salary Inquiry Ban. AB 168 would prohibit employers from relying on an applicant’s salary history when deciding whether to offer employment and what salary to offer, and from seeking an applicant’s salary history. The bill expressly authorizes employers, in setting pay, to consider salary history that an applicant discloses voluntarily and without prompting, but affirms Labor Code § 1197.5’s prohibition against using salary history by itself to justify a disparity in pay. The bill would require an employer to provide a job applicant with the position’s pay scale upon reasonable request. The bill would apply to all employers but not to salary information available to the public pursuant to the California Public Records Act or the Freedom of Information Act. This bill comes on the heels of last year’s fair pay legislation AB 1676 and Governor Brown’s veto of AB 1017 (last year’s bill to prohibit salary history inquiries), which veto (he explained) was an effort to give SB 358 (the Fair Pay Act) a chance to work. The new bill also follows in the footsteps of similar legislation in San Francisco, New York City, Philadelphia (stayed pending legal challenge), Delaware, Puerto Rico, Oregon and Massachusetts.

Prior Conviction History of Applicants. AB 1008, dubbed the “Scarlet Letter Act,” by Assembly Member Kevin McCarty on the Assembly Floor, would repeal existing Labor Code § 432.9 and add a section to the Fair Employment and Housing Act (FEHA), which would prohibit an employer with five or more employees from (1) including on any employment application a question seeking disclosure of a job applicant’s conviction history, (2) inquiring into or considering an applicant’s conviction history until after extending a conditional offer of employment, and (3) while conducting a conviction history background check in connection with an employment application, considering, distributing, or disseminating information related to (a) certain arrests not followed by a conviction, (b) referral to or participation in a pretrial or post trial diversion program, and (c) convictions that have been sealed, dismissed, expunged, or statutorily eradicated.

As to an employer that intends to deny employment to a job applicant because of the applicant’s conviction history, this bill would also require the employer to:

  • Make an individualized assessment of whether the conviction history has a direct and adverse relationship with the specific duties of the job—considering the nature and gravity of the offense, the time passed since the offense and completion of the sentence, and the nature of the job held or sought.
  • Notify the applicant in writing of a preliminary decision to deny employment based on that individualized assessment, including disqualifying convictions forming the basis for rescission of the employment offer, a copy of the applicant’s conviction history report, and explanation of the applicant’s right to respond to the preliminary decision before it is final.
  • Allow the applicant specified periods of time to respond, then consider information submitted by the applicant before making a final decision, and then notify the applicant in writing of the final denial or disqualification, of any existing procedure the employer has for the applicant to challenge the decision, and of the right to file a complaint with the DFEH.

The bill’s provisions would not apply to positions with criminal justice agencies, state or local agencies required to conduct background checks, farm labor contractors, and employers required by state, federal, or local law to conduct background checks or restrict employment based on criminal history. The bill would also repeal (because this section would replace) a Labor Code provision prohibiting state or local agencies from asking an applicant for employment to disclose conviction history information.

Reproductive Health. AB 569 would add a provision to the Labor Code prohibiting an employer from taking adverse employment action against an employee or the employee’s dependents or family members for their reproductive health decisions, including the use of any drug, device, or medical service (e.g., birth control, abortions, or in vitro fertilization). An employer that violates this prohibition would be subject to penalties under Labor Code § 98.6, as well as reinstatement, reimbursement of lost wages and interest, and other appropriate compensation or equitable relief. This bill would prohibit employers from attempting to contract out of these requirements, by making null and void any express or implied agreement waiving these requirements. The bill would require employers to include a notice of these employee rights and remedies in its handbook.

This bill is the Legislature’s response to the 2012 U.S. Supreme Court case Hosanna-Tabor Evangelical Lutheran Church & School v. EEOC, to provide employees of religiously affiliated institutions the same benefits and protections as other California employees, unless the employee is the functional equivalent of minister, subject to a “ministerial exception” as developed in First Amendment case law. The Legislature agrees with Justice Alito, in his concurring opinion, that the ministerial exception should apply only to an “employee who leads a religious organization, conducts worship services or important religious ceremonies or rituals, or serves as a messenger or teacher of its faith.” Supporters of this bill cite cases of employees being fired for getting pregnant while unmarried. The bill’s author, Assembly Member Lorena Gonzalez Fletcher, stated on the Assembly floor that this bill “[is] an issue of basic health, privacy and worker rights.” The bill expressly states that it supplements, and does not limit, any right or remedy available under FEHA.

New Parent Leave Act and Parental Leave DFEH Mediation Pilot Program SB 63, the “New Parent Leave Act” would—through a new section added to the California Family Rights Act—extend CFRA’s protections to smaller employers (with at least 20 employees within 75 miles). The bill would prohibit those employers from refusing to allow employees with more than 12 months and at least 1,250 hours of service to take up to 12 weeks of parental leave to bond with a new child within one year of the child’s birth, adoption, or foster care placement. The bill would provide that an employer employing both parents who both are entitled to leave for the same child need not give more than 12 weeks of leave total to the employees (which may be granted simultaneously if the employer chooses). Further, an employer would be able to recover the costs of maintaining the health plan for employees who decide not to return to work after their leave exhausts because of a reason other than a serious health condition or other circumstances beyond the employee’s control.

SB 63 would also require the DFEH, when it receives funding from the Legislature, to create a parental leave mediation pilot program under which an employer may request all parties to participate in mediation within 60 days of receiving a right-to-sue notice. The bill would prohibit an employee from pursuing any civil action under these provisions (and toll the statute of limitations) until the mediation is complete. The mediation is considered complete when either party elects not to participate or withdraws from mediation, or notifies the DFEH that further mediation would be fruitless.

Retaliation: Expanding The Labor Commissioner’s Authority. SB 306 would authorize the DLSE to investigate an employer, with or without a complaint being filed, when retaliation or discrimination is suspected during a wage claim or other investigation being conducted by the Labor Commissioner. If the Labor Commissioner finds reasonable cause to believe a violation has occurred, the Labor Commissioner may seek injunctive relief. The bill would also allow an employee bringing a retaliation claim to seek injunctive relief upon showing that reasonable cause exists to believe the employee has been subject to adverse action for bringing the claim. The bill would provide that the injunctive relief would not prohibit an employer from disciplining or firing an employee for conduct that is unrelated to the retaliation claim. The bill would also authorize the Labor Commissioner to issue citations directing specific relief to persons determined to be responsible for violations and to create certain procedural requirements for such.

Immigration: Worksite Enforcement Actions. AB 450, known as the “Immigrant Worker Protection Act,” would prohibit employers from allowing immigration enforcement agents to have access to non-public areas of a workplace, absent a judicial warrant, and would prohibit immigration enforcement agents to access, review, or obtain employee records without a subpoena or court order, subject to a specified exception. This bill would also:

  • Require an employer to provide current employees with notices of an immigration agency’s inspection of I-9 Employment Eligibility Verification forms or other employment records within 72 hours of receiving the federal notice of inspection—using a template created by the Labor Commissioner.
  • Require an employer to provide affected employees (meaning employees who may lack work authorization or whose documents have deficiencies) a copy of the Notice of Inspection of I-9 Employment Eligibility Verification forms, upon reasonable request.
  • Require employers to provide to affected current employees, and to an employee’s authorized representative, a copy of the immigration agency notice that provides for the inspection results and written notice of the obligations of the employer and the affected employee arising from the action.
  • Grant exclusive authority to the Labor Commissioner or Attorney General to enforce the provisions of this bill and require that any penalty recovered be deposited in the Labor Enforcement and Compliance Fund.
  • Prescribe penalties for failure to satisfy the bill’s prohibitions and for failure to provide the required notices of $2,000 up to $5,000 for a first violation, and $5,000 up to $10,000 for each further violation.
  • Prohibit an employer from re-verifying the employment eligibility of a current employee at a time or in a manner not required by federal law, and authorize the Labor Commission to recover up to a $10,000 penalty for each violation.

Employee Request: Injury and Illness Prevention Program. AB 978 would require an employer to provide a copy—free of charge—to an employee, or to the employee’s representative, of the company’s injury prevention program within 10 days of a written request. A representative would include a recognized or certified collective bargaining agent, an attorney, a health and safety professional, a nonprofit organization advocate, or an immediate family member. The bill would allow the employer to take reasonable steps to verify the identity of the person making the written request. The bill would authorize an employer to assert impossibility of performance as an affirmative defense in any complaint alleging a violation of these new provisions.

Stay Tuned … check back for a full breakdown of this year’s legislative bills coming after the Governor’s October 15th deadline.

Seyfarth Synopsis: On September 11, AB 1209, the Gender Pay Gap Transparency Act, which would require larger employers in California to publish differences in pay between male and female employees and Board members, left the Legislature on route to Governor Jerry Brown’s desk for his approval or veto. A statewide salary history ban may soon be headed to his desk, as well.

In face of last month’s suspended implementation of “Component 2” of the Revised EEO-1 Report, which would have required employers with over 100 employees to submit W-2 pay and FLSA hours worked information, California moves forward with its own pay data transparency initiative.

Dubbed by Cal Chamber as the “public shaming of employers” bill, AB 1209 has undergone significant changes since Assembly Member Lorena Gonzalez Fletcher introduced it on February 17, 2017, as a nonsubstantive “spot bill” relating to wages.

After multiple amendments and the addition of coauthors from both houses, the version of AB 1209 sent to the Governor would require companies with at least 500 employees to compute differences between the wages of male and female exempt employees and board members located in California and file the report with the California Secretary of State (“SOS”). The SOS would in turn, publish this information on a public website.

What Will Employers Have to Do?

If the bill is signed by Gov. Brown, beginning on July 1, 2019, and biennially thereafter, impacted employers will have to collect and compute:

  • The difference between the wages of male and female exempt employees in California using both the mean and median wages in each job classification or title.
  • The difference between the mean and median wages of male board members and female board members located in California.
  • The number of employees used for these determinations.

This information would then be reported to the California SOS by January 1, 2020 (and biennially thereafter) on a form categorized consistent with Labor Code Section 1197.5—the California Fair Pay Act (“FPA”).

What Will the SOS Do with the Data?

The bill would have the SOS publish the reported information on a public website. While the current version of the bill would no longer require companies to publicly publish their own data, placing that duty on the SOS would be no less dangerous for employers.

As Jennifer Barrera of Cal Chamber and Kara Bush of the Computing Technology Industry Association wrote in a recent Sacramento Bee article: “Public display of the data adds insult to injury. Employers would be required to provide statistics on job duties, wages and gender, but without the factors such as experience and seniority that the law says are legitimate reasons for wage gaps. That’s propounding a half-truth—and a public relations windfall for plaintiffs’ attorneys.” Proponents of the bill contend this bill would help to close the gender wage gap. The bill’s author, Assembly Member Gonzalez Fletcher, touts the bill as giving “the public very precise data about which big companies are paying women the salaries they deserve, and which aren’t.” She also said: “Sunlight is a great way to help expose and address this [gender pay disparity] problem.”

No Per Se Violations of the California Fair Pay Act

The bill provides that “a gender wage differential in the information provided under this [new Labor Code] section [the bill would create] is not, in itself, a violation of Section 1197.5.” Nor does the bill impose any penalty or right of action by its own terms. The bill’s opponents have argued it does not need to, because it effectively forces employers to hand over to potential plaintiffs all information they might need to file a lawsuit, without any context that would explain permissible differentials.

Salary History Ban May Also be Headed to Governor’s Desk

The Governor has until October 15, 2017, to consider and sign or veto this and any other bills.

He may also have before him for consideration AB 168, which, as currently drafted, would prohibit an employer from asking for, or relying upon, an applicant’s salary history, consistent with similar bans in San Francisco, New York City, Philadelphia (stayed pending legal challenge), Delaware, Puerto Rico, Oregon and Massachusetts.

AB 168 passed the Senate yesterday, September 12th, and is headed back to the Assembly for a concurrence vote.

Will the Gov Sign One or Both of These Bills? 

Since signing the Fair Pay Act in 2015, Governor Brown has shied away from approving bills making anything other than incremental changes to that Act (last year adding race and ethnicity to gender and prohibiting prior salary alone from justifying a pay disparity), stating the FPA should be given time to work to see if stricter legislation is needed. But the Trump Administration’s pullback of the revised EEO-1 report may provide an impetus for Governor Brown to treat California’s own gender pay gap initiative more favorably.

Stay tuned for our full legislative updates in the coming weeks. For information on how this bill might affect your company, contact your favorite Seyfarth attorney or any member of Seyfarth’s Pay Equity Group.

Seyfarth Synopsis: Labor Day sales may be over, but some savvy California employers might still find a great deal. That’s because not all land inside California’s borders is actually within the legal jurisdiction of California. Rather, some areas are federal enclaves—territory California has ceded to the federal government and in which federal law largely applies. California employers operating within these enclaves are free of many peculiar California employment laws, and need only follow federal employment law. For this reason, employers who prefer federal employment law but love operating inside California’s borders—and who doesn’t?—may want to consider whether they can operate within a federal enclave.

The legal support for the federal enclave doctrine comes from the United States Constitution. Congress has the power to exercise exclusive legislation over “all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-yards, and other needful Buildings.” U.S. Const., Art. 1, § 8, cl. 17. But federal enclaves do not arise just because the federal government has bought some land from a state. Creation of a federal enclave requires an actual transfer of sovereignty from the state government to the United States.

A California employer operating within a federal enclave, may, depending on the circumstances, be free of many complex and onerous requirements imposed by California law. The extent to which California law applies within an enclave varies depending on three circumstances:

  • Reserved Jurisdiction. California law will apply to the extent the California government retained jurisdiction at the time of cession.
  • Congressional Authorization. California law will apply where Congress has specifically authorized its application within the enclave.
  • Laws In Effect At Cession. California laws in effect at the time the land became a federal enclave continue to apply within the federal enclave unless abrogated by Congress. Later-enacted California laws have no force within the enclave (though later state laws nevertheless can apply within an enclave if the “same basic scheme” was in effect at the time of cession).

As an example, both Yosemite National Park (in 1920) and  San Francisco’s Presidio (in 1897) became federal enclaves well before California created most of the statutes that have made its employment law so peculiar. Many employers operate within enclaves such as these, and as a result may be shielded from many of the laws that afflict the common run of California employers.

Alas, a federal enclave is not a viable option for most California employers. Common federal enclaves typically are in national parks and on military bases, and most employers cannot simply pick up and relocate their operations to such sites. Those employers fortunate enough to operate within a federal enclave, however, may have a meaningful defense against many California employment law claims. Employers who believe they may be operating within an enclave should confirm their enclave status and review what laws apply within that enclave. This opportunity, unlike a Labor Day sale, does not expire.

If you would like to learn more about federal enclaves and the protections they provide, please contact a Seyfarth Shaw attorney for assistance.

Edited by Chelsea Mesa.

Seyfarth Synopsis: While California courts have created annoying doctrines with respect to vacation pay, it remains the case that vacation pay is a matter of contract and that employers can avoid many problems with careful drafting of the vacation plan.

As we anticipate Labor Day weekend, note this mid-summer treat from the California Court of Appeal: its decision in Minnick v. Automotive Creations that when an employer’s vacation policy explicitly provides that employees don’t earn vacation until after their first year of employment, the policy is interpreted just like it was written, so that an employee who separated during his first year is not owed any vacation pay upon termination.

Is this holding really new? No and yes. Not new, of course, is the rule that California employers, absent a contract, need not provide any paid vacation at all. But employers that do provide paid vacation must comply with their policies and honor the principle, established by the California Supreme Court’s 1982 opinion in Suastez v. Plastic Dress-Up Co., that vacation pay, once “vested,” cannot be forfeited and must be paid (to the extent unused) when employment terminates (Lab. Code §227.3).

Also not new is the point that an employer may, by policy, impose a waiting period at the beginning of employment before vacation benefits begin to accrue. This kind of provision has been honored by the DLSE and by courts, so long as the employer implements the period consistently; that is, employers that want to avoid the accrual of paid vacation from the start of employment cannot then award vacation pay retroactively upon completion of some period of employment, but rather must provide that vacation pay does not begin to accrue at all until the waiting period is over.

What is new, and welcome, about Minnick is its definitive statement that employer policies can define how and when vacation has been “earned,” and can provide for advances of vacation pay not yet earned. For context, we harken back to Suastez, which interpreted Labor Code section 227.3 to mean that vacation pay is vested as it is “earned,” and that vested vacation pay cannot be forfeited. The vacation policy in Suastez simply provided: “One week—First Year; Two weeks—Second Year; Three weeks—Fifth Year.” The Supreme Court interpreted this language to mean that vacation pay started to accrue on day one, and was earned on a daily basis as the employee worked. Therefore, the employer violated the law when it failed to pay a pro rata share of the vacation pay earned during the year before the employee terminated, even though he had not completed the full year.

The spectre of Suastez haunts California employers when structuring vacation programs, as they strive to (a) avoid the negative of incurring potential liabilities to short-timers (in the form of accrued but unused vacation benefits) while (b) achieving the positive of offering paid vacation as soon as possible. The Court of Appeal provided additional guidance on this dilemma in its 2009 decision in Owen v. Macy’s, which recognized that an employer can lawfully fix the date on which vacation pay begins to accrue; in Owen, the employer imposed a waiting period of six months before vacation pay began to accrue. And, of course, it is common to have 90-day waiting periods for vacation accrual.

No case prior to Minnick had validated a one-year waiting period before accruals begin. Minnick notes that Suastez does not require vesting of vacation pay on day one of employment, and reasons that Suastez does not prohibit an employer from imposing a waiting period (of apparently any length):

[A]n employer may lawfully decide it will not provide paid vacation. By logical extension, an employer can properly decide it will provide paid vacation after a specified waiting period. This is similar to an employer’s authority to limit the amount of vacation pay that may be earned. If employers can lawfully restrict accrual at the back end [a la the often utilized “accrual cap” concept], it follows that employers can lawfully impose a waiting period at the front end.

Meanwhile, employers can address the desire to provide paid vacations as soon as possible by advancing unearned vacation pay (as the employer did in Minnick). (Whether unearned vacation pay could ever be recovered upon termination of employment is an issue that Minnick does not address).

The Minnick decision will be welcome news to employers who wish to impose a longer waiting period before vacation accruals start. And much of we’ve said about vacation applies equally to “paid time off” programs as well. A couple of caveats, though:

  • Drafting clear limitations on vacation accruals is crucial.
  • As to plans that use PTO to satisfy obligations to provide mandatory paid sick time under California (or local municipal) law, note that most paid sick time laws provide for accruals to begin upon employment, so imposing a waiting time for that benefit would get you in trouble.

For more information on this or any other pressing employment Cal-peculiarity, please reach out to your favorite Seyfarth attorney.

Seyfarth Synopsis: Private employers can face competing obligations when it comes to responding to employees’  expressive conduct. Employee rights may collide with employer obligations to maintain a safe and harassment-free work environment, not to mention the employer’s interest in maintaining productivity and avoiding adverse publicity. Here are some guiding principles.

“How’s work?” A common question, whether at a party, catching up with an old friend, or just as small talk. It is also a common topic of online conversation. It would be nice if work-related remarks were always positive, agreeable and civil, but, of course, they are not. The reality is that employees sometimes say offensive things about work, their employer, their co-workers, or a co-worker’s cherished political hero or ideals.

And what of the employee who attends a political rally—either as a protester or counter-protester—or does not attend, but merely posts or tweets an incendiary opinion about the event?

What is an employer’s recourse when such communications cross the line? Where is the line?

As a general rule, unless the employee is using company-owned equipment or systems, employers cannot police their employees’ expression. Various California statutes protect employees’ rights to engage in lawful, off-duty conduct (Lab. Code §§ 96, 98.6) and political activity (Lab. Code §§ 1102, 1103), to say nothing of the California constitutional right to privacy, which applies in both the public and private sectors. Meanwhile, the federal National Labor Relations Act prohibits employers from chilling employee participation in concerted activity with respect to their terms and conditions of employment.

Generally, as long as controversial comments and ideas are lawfully expressed, do not implicate a protected class (such as race, religion, gender), do not name or implicate the employer, and remain out of the workplace, they are none of the employer’s business.

The trouble starts when a controversial comment is not lawfully expressed, implicates a protected class, implicates the employer, or has a deleterious effect in the workplace. Competing against the employee rights set out above are the employer’s duties to prevent and correct harassment in the workplace and to provide a safe workplace. Failure to do so can lead to hostile work environment or retaliation claims, regardless of whether the harassment comes from a supervisor or a co-worker.

Not all offensive remarks will be cause for concern: to get from “how’s work?” to a hostile work environment claim, an employee’s comments must relate to a protected status and be sufficiently severe or pervasive to alter working conditions. But in todays’ highly charged political environment, many people look to their places of employment as the last bastion of civility and stability. Discussion of events, images, symbols, or social media memes concerning topics as varied as immigration, same-sex marriage, transgender rights, and the history of American slavery and its aftermath may, depending on the communication’s content and context, be freighted with racial or gender connotations.

For most people, perception is reality. Remarks or conduct that several years ago would not have raised an eyebrow may now lead to multiple disgruntled people in the HR office, seeking action. And while California employees are guaranteed privacy, the privacy right does not prevent an appropriate reaction from an employer in response to a public online posting, text message, or comment. As someone once said: “Freedom of speech does not mean freedom from consequences.”

There is no magic bullet to making sure your employees play nice. But there are several steps you can take to ensure that they know what will and will not be tolerated. You can set employee expectations by implementing or reminding them of your anti-harassment and anti-retaliation policy, your code of conduct, your “zero tolerance” policy regarding violence, your social media policy, and your rules concerning use of company internet and other electronic communication systems. We recommend that employers articulate a strong business purpose to justify any occasions when they must intrude on an employee’s privacy, and never intrude more than is necessary to serve that business purpose.

Interpretation of the laws around employee workplace rights and the intersection with employer duties to comply with anti-harassment and OSHA laws are constantly evolving, particularly with the ever-increasing use of social media. To help stay current, don’t hesitate to contact your favorite Seyfarth attorney.