Seyfarth Synopsis: Thinking of converting your independent contractors to employees? Not so fast. There are many implications to consider. Below we touch on one of them.

In the wake of the judicial invention of a California version of the “ABC test” to determine proper worker classifications, many companies in the gig economy are grappling with whether to reclassify their workers as employees rather than independent contractors.

While some may advocate for an automatic, across-the-board employee classification of all gig workers who might not qualify for independent contractor status under the applicable ABC test, these decisions can result in unanticipated consequences.

In determining employee classifications, one area often overlooked is the duty of loyalty—a hallmark of the traditional employment relationship. In most states, an employee owes a duty of loyalty to the employer. While the actual definition of the duty of loyalty varies by jurisdiction, the duty generally prohibits an employee from working for the employer’s competitors during the term of employment. In many jurisdictions, the duty of loyalty may also be extended beyond the term of employment, in the form of noncompete agreements.

For many gig workers, this aspect of the duty of loyalty is untenable. As compared to traditional employment, the lure of gig work is the ability to have multiple sources of income from various companies and the freedom to determine one’s own work schedule. But if a gig worker is classified as an employee, the ensuing duty of loyalty will often preclude the ability to work simultaneously for other companies that are in the same business as the employer (the employer’s competitors). For example, if the duty of loyalty applied, then employee rideshare drivers for Lyft could not take gigs with Uber, and vice-versa; and Grubhub drivers could not take gigs with DoorDash, and vice-versa.

As a result of the tension between the objectives of gig workers and the limitations arising from an employee’s duty of loyalty, classifying gig workers as employees can make recruiting more difficult in the gig economy. Employers in the gig space should give careful consideration to all of the issues implicated by worker classification decisions and the agreements that govern their worker relationships, including a decision to unilaterally release workers from their duty of loyalty, to ensure that the employer has removed a roadblock to recruitment. Employers may wish to consider releasing gig workers from certain aspects of the duty of loyalty—such as the duty to refrain from working for competitors—while preserving other aspects of the duty.

We are well-versed in the issues implicated by employee classification decisions in the gig economy and are available to work through these issues with employers who have questions in this area.

Seyfarth Synopsis: Companies marketing through social media are likely familiar with social media influencers like the Kardashian/Jenners in cosmetics, DanTDM in gaming, and Kayla Itsines in fitness. California companies using the services of such influencers must be mindful, as always, of California peculiarities when it comes to classifying these individuals as contractors or employees.

As anyone who has seen the recent Fyre Festival documentaries knows, using social media influencers is an increasingly popular way to market products. The benefits of this method are clear—social media posts by influencers can be a low-cost way of reaching an enormous audience of potential consumers. However, advertising via influencers also carries potential legal risks.

As a primary issue, companies who use influencers need to be keenly aware of Federal Trade Commission (“FTC”) guidelines on advertising and endorsements, as well as the penalties for non-compliance. In California, the risk of using influencers is further enhanced by the standard governing classification of workers as independent contractors. And if the influencers are not being paid, but instead are being treated as volunteers, potential risks multiply. Failure to properly classify and pay influencers might violate numerous California employment laws and could even result in class action litigation. Misclassifying influencers could also invite an audit from the California Employment Development Department (“EDD”) into whether employment taxes may be owed.

A company considering using influencers should carefully evaluate each of three legal risks:

  1. FTC Guidelines: FTC guidelines specify that an “endorsement” includes any advertising message that consumers are likely to believe reflects the opinions of a party other than the sponsoring advertisers. 16 C.F.R. § 255.0(b). A connection between an endorser and the seller of the product must be disclosed when that connection “might materially affect the weight or credibility of the endorsement.” 16 C.F.R. § 255.5. In the case of social media influencers, simply posting a picture of a certain product to a social media site could constitute an endorsement in the eyes of the FTC. Thus, if the influencer is paid for the post, or is asked to write a review of a free product, such a connection would have to be disclosed. Failure to do so could invite scrutiny and potential legal action from the FTC.
  2. California Classification Laws: In addition to staying on the right side of the FTC, companies should also be careful to stay on the right side of the recent California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court. That decision lays out the “ABC” test, under which a worker qualifies as an independent contractor only if the hiring entity establishes:

(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

As the first prong of the test makes clear, the degree of control the hiring entity exercises over the worker remains an important factor in determining whether or not an employment relationship exists. Depending on the degree to which the company is involved in creating social media posts, determining their content, or dictating an influencer’s review of a product, the company may run the risk of not meeting one or more of the prongs of the ABC test, which could result in creating an employment relationship where none was intended. If that occurs, the influencer may be deemed an “employee” of the company and thus misclassified. Litigation could then ensue, and an adverse determination could result in liability and penalties for unpaid minimum wages or overtime, statutory penalties, and attorneys’ fees.

  1. California Tax Laws: A determination that an influencer is an employee rather than an independent contractor (or volunteer) would implicate a host of California employment laws. The issue also implicates whether payroll taxes may be owed to the EDD for any such misclassification. In determining whether to audit potential misclassification, the EDD tends to consider whether a company is issuing 1099s to an individual, or to an LLC. If the company is issuing multiple 1099s directly to the influencer (or to a number of influencers), it could be courting an EDD audit.

Workplace Solution: The concept of influencers is still new and the governing law is developing. As a result, the guidelines for hiring and compensating influencers is limited and the risks are real. Before utilizing influencers, California companies should take time to consider the legal implications. If you would like to learn more about these issues, please contact a Seyfarth Shaw attorney for assistance.

Edited By: Coby Turner

Seyfarth Synopsis: Employer subsidized healthcare is one of the largest cost centers for small and large businesses.  This post provides a primer on what to do if you suspect that your healthcare costs are rising because your healthcare plan is under siege by fraudsters.  

With the rising costs of healthcare, some employers choose to self-insure to reduce claims and premium expenses factored into third-party claims administration, including policy overheads, assumption of risk, and underwriting profit. Using self-insurance is supposed to bring reduced costs—or so you thought. But what if the reduction in health care costs seemingly disappear overnight as the number of claims spike year after year without reason? The likely culprits are fraudsters, operating in something reminiscent of an Ocean’s 11 scheme, siphoning off the savings into a web of shell companies and making out like bandits.

Not Your Parents’ Healthcare Fraud

Gone are the days when claimants submitting fraudulent disability claims were the main perpetrators of fraud in a health care plan. Today, healthcare fraud schemes are as complex as the financial crimes that make the front page. In one recent, well-publicized case, a team of fraudsters advertised on Facebook and set up tables at a California University, offering students potential jobs if they took part in a clinical trial. The catch: the students needed to disclose their personal information to participate in the clinical trial. The fraudsters then used the personal information to submit fraudulent insurance claims. According to the court file, one podiatrist wrote 600 prescriptions, in a single day, billing $1.7 million in claims. In total, the University paid almost $12 million in fraudulent claims arising from this single scheme. And the kicker: the fraudsters did it all with information from just 500 students.

With the potential for a Las Vegas casino-sized jackpot, it is not surprising that the California Department of Insurance reported that California suffered nearly $1.4 billion in potential losses from disability and healthcare fraud in 2017 alone. That’s more than four times the estimated losses in 2010.

What Are My Options?

Step 1: Protect Your Plan. There are many administrative changes that self-insured plans can make to prevent fraud before it starts and to enable recovery under the terms of the Plan. Experienced counsel can assess potential exposure points in the administrative process and propose reasonable solutions to prevent a breach.

Step 2: Claims Analysis. Third-party administrators often employ a Special Investigations Unit to analyze claims and find signs of fraud, but law firms steeped in prosecuting these types of claims in civil court can also assist in finding fraudulent patterns through the use of data analytics.

Step 3: Engage Counsel and Contact Law Enforcement. When you suspect fraud, contact law enforcement. Contacting counsel before, or at the same time, as law enforcement is a good practice because some healthcare payors must make certain disclosures.

Step 4: Consider Joining a Government Action or Sue Independently. A number of statutes enable the government and victims of fraud to recover monetary losses from healthcare fraud. Two powerful statutes are the federal False Claims Act (FCA) and California’s Insurance Fraud Prevention Act (IFPA). Both laws permit victims of fraud to join lawsuits brought by the government or to sue independently if the government declines to take the case, subject to certain provisions, including disclosure requirements (see Step 3). In either scenario, the victim of fraud would be entitled to a monetary judgment if the prosecution is successful.

Why Litigate?

A good defense is a good offense. A robust anti-fraud program that includes a willingness to litigate will deter fraudsters who target for the most vulnerable plans. There is also the potential for a significant monetary recovery because the FCA, IFPA, and similar statutes have provisions that allow victims to recover multiples of what was lost in actual damages.

Workplace Solutions: The Seyfarth Health Care Fraud and Provider Billing Litigation Team has substantial experience in conducting comprehensive analyses of healthcare plans to determine if adequate fraud, waste, and abuse controls are in place and if the plan is being attacked by sophisticated fraudsters, as well as in litigating these issues for companies and in conjunction with governmental authorities. Please don’t hesitate to reach out to our team if you are in need!

Edited By: Coby Turner

Seyfarth Synopsis: It is important for companies to investigate internal sexual harassment complaints and take prompt, appropriate corrective action. This post provides a six-step roadmap of best practices for handling sexual harassment complaints.

1.   Plan Ahead

  • Maintain compliant harassment policies, provide regular harassment training covering all required topics (Seyfarth can help), and communicate the procedure for reporting complaints.
  • Determine in advance who will oversee the process for handling complaints.
  • Have a crisis management team in place in advance (generally legal, human resources, IT, and communications or public relations).
  • Identify and train internal investigators so they know how to conduct an investigation.

2.    Initial Steps After Receiving A Complaint

  • Determine whether there is a need to conduct a formal investigation and, if so, the appropriate scope of the investigation.
  • Consider whether to place the accused on paid administrative leave pending the investigation. Some factors to consider include whether the accused poses a potential safety risk and whether having the accused in the workplace may intimidate witnesses or otherwise impede the investigation.
  • Take appropriate interim steps to prevent harassment and retaliation. For example, it may be appropriate to separate the accused and the complainant, instruct the accused not to communicate with the complainant, or to place an upcoming performance review on hold pending the conclusion of the investigation.
  • Determine who will conduct the investigation. Choose the investigator carefully, as that person may need to testify in any legal proceeding.
    • Investigators must be free from actual or apparent bias or conflict of interest. For example, an investigator should not investigate the conduct of the investigator’s superiors or friends.
    • Determine whether to retain an outside investigator. Consider whether the investigator needs a particular expertise.
    • Evaluate whether to retain a lawyer to conduct the investigation and whether the investigation will be covered by attorney-client or attorney work product privileges. The company can decide later whether to waive a privilege and rely on the investigation as part of a litigation defense.
  • Preserve evidence that may be relevant to the investigation. The evidence may include emails, texts, and internal messages. Involve IT as necessary.
  • Develop a public relations strategy if there may be potential media coverage or publicity.

3.    The Investigation Process

  • Conduct investigations promptly. If there was misconduct, it should be corrected as soon as possible.
  • Determine an investigation plan, but remain flexible. The number of witnesses interviewed and documents reviewed should be appropriate to the situation. Facilitate the investigator’s access to the relevant witnesses and the documents.
  • An investigation is a fact-finding mission. The investigator should approach the investigation with an open mind.
  • Consider the order in which witnesses are interviewed and what information to share with witnesses. Generally a best practice is to interview the complainant first and the accused last. Witnesses should be told that the company will maintain confidentiality consistent with the need to investigate.
  • Prepare notes contemporaneously or soon after the interviews. Document key quotes and any admissions made. Be thoughtful about your notes, as they may be discoverable if the matter results in litigation. Decide whether to have the witnesses submit or sign statements.

4.    Reporting the Findings

  • Determine whether a written report is necessary for all or parts of the investigation and, if so, what level of detail is appropriate for the report.

5.   Determine Who Will Decide and Take Appropriate Corrective Action

  • Generally the decision-makers should not be lawyers.
  • Corrective action may include, for example, discipline, coaching, further training, and other steps to prevent future harassment and retaliation.

6.    Close Outs And Other Follow Up After The Investigation

  • Inform employees involved with the investigation that the investigation has concluded and that the company has taken appropriate action. The company may not be able to share more information due to privacy concerns.
  • Instruct employees to report any further concerns through the appropriate complaint channels.
  • Remind them that company prohibits retaliation. Instruct employees to report any retaliation promptly.

Workplace Solutions: While is there is no “right way” to conduct an investigation, all investigations should (1) start with an investigation plan that may include interviewing the material witnesses and reviewing key documents, (2) be conducted as promptly as reasonably possible, (3) be conducted by a trained, impartial investigator, (4) be documented appropriately, (5) be followed by appropriate corrective action and steps to prevent harassment and retaliation, and (6) appropriately inform employees when the investigation has closed.

Edited By: Coby Turner

Seyfarth Synopsis: Employers are starting to consider “on demand” pay for employees. Before considering whether to implement an “on demand” pay program, employers should consider laws on wage deduction and wage assignment as well as the administrative support needed for such a program.

Instant gratification is a fact of daily life, and there is no denying we have come to expect it. When we pay bills, we go online instead of to the post office. When we need a ride, we tap a button on our phones. When we watch movies, we go online instead of to a video store. This expectation has infiltrated our daily lives and, now, it has shown itself in the workplace.

Some gig economy companies offer “on demand” pay through a variety of technology solutions. To stay competitive, other employers are considering flexible pay structures for their own employees. But because the law treats contractors differently than employees, it is important to think through the various laws that may come into play, and to consider the administrative burdens these programs create. Below we describe some common on-demand pay programs and some key issues to consider when analyzing whether to implement on-demand pay for employees.

What is On-Demand Pay?

“On demand” pay refers to programs or “technology solutions” that allow employees to “withdraw” wages that they have already earned for work performed in a pay period before their regular pay date.

How Does On-Demand Pay Work?

On-demand pay programs come in various forms. Two main variations are (1) internal advancements directly from the employer to an employee and (2) advancements from a third party to an employee.

Under the first variation, an employer advances an employee’s wages upon request by the employee. At the end of the pay period, the amount advanced during the pay period is reconciled against the employee’s pay and the employee receives the balance of the net wages.

Under the second variation, a third party advances an employee’s wages upon request by the employee (after receiving a report from the employer). At the end of the pay period, the employer pays the employee the balance of net wages owed and pays the third party the amount previously advanced to the employee.

In addition to the above variations, some third parties have come up with creative accounting arrangements to avoid direct repayment from the employer to the third party.

Considerations?

In analyzing on-demand pay programs, employers should consider not only the administrative costs but the laws governing wage deductions and wage assignments. Legal caution is especially appropriate in California.

Wage Deduction and Wage Assignment Laws

Many states require employee authorization for deductions from pay in connection with advances or overpayments. Because of these requirements, employers should consider whether and when internal advances amount to “deductions” from wages that are subject to state law restrictions. This is an important consideration for employers with employees in many states, as wage deduction laws vary from state to state, and employers need to understand the wage deduction authorization requirements for each state (for example, in some states, a blanket authorization at the time of hire is permissible, while in other states it is not).

In California, deductions from final wages are not permissible. And that is so even if the deductions are authorized in advance by the employee! Employers considering on-demand pay must therefore closely analyze the reconciliation process (and whether the reconciliation of wages occurs at the end of a pay period or a later pay period) and build in safeguards as needed.

When advances are provided by a third party, other issues arise. Employers need to think about whether re-payment to a third party is an “assignment” of wages. California’s assignment law (Labor Code § 300(a)) prohibits employers from paying an employee’s wages to a third party, unless permitted by law.

Similar to wage deduction laws, wage assignment laws are complex and state-specific. Some states significantly limit how much money an employee can assign to a third party, or require specific authorizations. In California, an employee cannot assign more than 50 percent of wages at the time of each payment, and an assignment must be memorialized in a duly notarized writing signed by the employee and the employee’s spouse (if applicable). Such detailed regulations make wage assignment laws another important consideration to keep in mind when evaluating on-demand pay programs.

Administrative Burdens

Employers should also consider the administrative burdens that on-demand pay programs entail. These burdens can include such annoyances as obtaining required authorizations from employees, ensuring compliance with various state laws regarding deductions and advancements, and transmitting employee data to a third party.

Workplace Solutions

On-demand pay requires an analysis of many state specific laws, some of which are onerous (especially in California). Employers should also consider the administrative support needed to employ such a program safely and should weigh the benefits of such a program against the burdens imposed. We are here to help you if you have any questions or need assistance analyzing a specific program.

Seyfarth Synopsis: Workplace violence is no laughing matter. Although California law arms employers with strict laws to prevent workplace violence, no one wants to find themselves petitioning a court for emergency injunctive relief. Instead, employers should foster healthy workplaces and monitor early warning signs in order to address threats of violence before it is too late.

“If I had a gun with two bullets and I was in a room with Hitler, Bin Laden, and Toby, I would shoot Toby twice.”

Popular culture is rife with amusing expressions of office tension that can provide healthy relief to real world frustration. But as comical as some might find the antics of The Office’s Michael Scott, no one wants to witness these sort of threats in person. Although California law arms employers with strict laws to prevent workplace violence, to best protect the workplace, employers should proactively manage the possibility of violence rather than waiting for a threat to appear.

California Civil Procedure Code section 527. 8 defines workplace violence as assault, battery, or stalking, and permits employers to obtain a restraining order against “any individual” who makes a credible threat of violence that can reasonably be construed to be carried out at the workplace. It also empowers employers to obtain a court order requiring those who threaten violence to temporarily turn their weapons over to the police or sell or store their weapons with a licensed gun dealer. And if a restrained person violates the court’s temporary order, the District Attorney may press criminal charges.

But let’s face it: no one wants to get to this point. Luckily, there are several things employers can do to manage workplace violence before everyday frustrations snowball into a credible threat of violence.

“At least we care enough about our employees that we are willing to fight for them.”

First, implement a companywide workplace violence policy. According to the Bureau of Labor Statistics, over 70 percent of U.S. workplaces lack a formal policy that addresses workplace violence. Without guidance from employers on how to address troublesome coworkers, employees may unwittingly escalate the threat of violence by responding on their own. The company should maintain an environment that minimizes isolation and resentment and that fosters open communication.

Second, be on the lookout for early warning signs and encourage employees to report threats or symptoms of violence. These signs may include a recent life- or mind-threatening illness, expressions of paranoia or persecution, and the deterioration of workplace friendships. Most of all, listen to your employees. If they bring a threat posted on social media to your attention, ask Human Resources to investigate. And be sure to address and document problematic behavior as it occurs.

Third, if a credible threat is made, immediately alert security or the police, collect all relevant evidence, and seek legal advice to assist with an appropriate response, which may include petitioning the court for a temporary restraining order. At the same time, ask Human Resources to investigate (if HR has not already done so) and consider retaining an outside firm to conduct an independent threat assessment. Typically, this process involves an independent investigation into the suspect as well as a workplace inspection to identify points of vulnerability, such as unmonitored entrances into the workplace. An independent threat assessment may reveal that the suspect does not pose a credible threat. On the other hand, the assessment may reveal that serving the suspect with court papers may increase the risk of violence. Conducting a thorough threat assessment should allow the employer to put in security measures by the time any temporary restraining order is served.

Fourth, remember that workplace violence restraining orders can also protect more than the workplace and extend to threatened employees’ homes, family members, cars, and even their children’s school.

Workplace Solutions: Protective orders provide an invaluable defense to credible threats of workplace violence; but employers should proactively manage the specter of workplace violence before it occurs rather than waiting for a legitimate threat to emerge. Many incidents of workplace violence are preventable (or at least controllable) through the implementation of company policies and by remaining aware of possible warning signs. If you have any questions about workplace violence, we recommend that you speak to your favorite Seyfarth attorney, as we are well experienced in this area. We hope you never need a restraining order. But if you do, we’ll guide you through what can be a nerve-wracking experience.

Edited By: Coby Turner

Seyfarth Synopsis: With the recent partial shutdown of the federal government, many federal contractors have faced tough decisions balancing their reduced revenue with their desire to keep their workforce intact. One potential solution is to impose mandatory employee furloughs to reduce costs. This cost-saving measure has some risks peculiar to California that are worth a look.

The Partial Federal Government Shutdown

On December 22, 2018, key parts of the federal government shut down after politicians reached an impasse over budget spending. By some estimates, the shutdown, lasting until January 25, 2019, cost the economy over $10 billion. The shutdown affected not only 800,000 federal employees but several million government contractors. Shutdowns of this type—the third since January 2017—look to become a regular feature of American politics.

One obvious shutdown impact is reduced revenue for federal contractors. Companies that perform everything from janitorial services to complex Defense Department analysis are suddenly left with revenue that could be significantly lower than previous projections.

Employee Furloughs

So what do companies do when their biggest client shuts down for days, weeks, or even months? Some companies have turned to employee furloughs in an attempt to solve their revenue gap problem. Furloughs are mandatory time off work without pay. Furloughs can be seen as a good solution because the company reduces its payroll expenses while keeping its workforce in place.

Generally, furloughs fall into two categories, partial-week and full-week. We examine both types of furloughs below, as each raises peculiar issues under California law. Note that this discussion is limited to issues raised by furloughs of exempt employees. Because non-exempt employees are paid on a time-worked basis, furloughs of non-exempt employees do not raise the same legal issues as furloughs of salaried exempt employees.

Partial-Week Furloughs

Partial-week furloughs occur when the employer reduces an employee’s workweek. For example, some employers move employees to a four- or even three-day workweek. Under California law, partial-week furloughs are permissible, but care must be given to the arrangement. First, the salary reductions should be done in advance of the furlough to avoid being seen as a “deduction” from an exempt employee’s salary for missed work days. Advance reductions in salaried employee pay to reflect long-term business needs does not destroy the salary basis for an employee’s exemption. But day-to-day or short-term deductions from an employee’s salary would. Along those lines, employers should consider implementing the changes for a substantial period of time, making it look like more of an adjustment to medium or long-term economic forecasts than a short-term reaction to transitory business conditions. Second, companies must ensure that the reduced salary does not fall below the minimum monthly salary rate for exempt employees, which California currently sets at $4,160 for large employers.

Full-Week Furloughs

The California DLSE has determined that a properly executed week-long furlough of exempt employees will not result in those employee losing an exemption. To be done properly, the furlough must have the employee not performing any work during the defined workweek during the furlough. An employee who performs any work at all must be paid for the full week. Further, reasonable advance notice must be given to employees before the furlough begins. As with the partial-week furlough, the employee’s salary cannot dip below the minimum salary threshold for exempt employees.

Finally, employers should ensure that the furlough is not too long and has a clearly defined return-to-work date. If the furlough is too long or if no return date is designated, it may be deemed a termination, entitling the employee to all final wages, including vacation.

Other Issues Implicated By Furloughs

As if the wage and hour issues raised above were not enough, employee furloughs raise many other legal challenges as well. For example, do your executive contracts have severance provisions that may be triggered with salary reductions over a certain threshold? Does the company’s benefits plan include a definition of eligible employees that may be implicated by furloughs? Indeed, as we have previously discussed in this blog, employee furloughs might even inadvertently trigger California’s WARN notice requirements. All of this is to say employers are well-served by being careful and seeking experienced counsel in this area.

Seyfarth Synopsis: Employment-related cases pending before the California Supreme Court concern various questions that sometimes seem technical, but the answers they elicit will have big consequences. Questions raised by the current crop of cases include standing to sue, the availability of certain claims and remedies, federal preemption of California laws, what counts as compensable time, and—that perennial favorite—how to interpret the infernal PAGA statute.

We expect the California Supreme Court in 2019 to issue decisions addressing many important issues in private employment. Some topics easily warrant their own article or blog post, and will receive that treatment as the Supreme Court’s decisions emerge. But it’s not too soon to highlight some coming attractions.

Anti-SLAPP and Alleged Employer Motive

  • Is an employer’s anti-SLAPP motion to strike an employee’s suit affected by the employer’s alleged discriminatory motive? In Wilson v. Cable News Network, Inc., the Supreme Court has agreed to decide “whether an employee’s claims for discrimination, retaliation, wrongful termination, and defamation arise from protected activity for purposes of a special motion to strike,” and “what is the relevance of an allegation that the employer acted with a discriminatory or retaliatory motive?”

Application of CA Wage-Hour Law to Out-of-State Employers

  • Does California employment law apply to non-California residents who work in California on a transitory basis? In Ward v. United Airlines and Oman v. Delta Air Lines, the Supreme Court has accepted the Ninth Circuit’s request to address five questions:
    • (1) “Does California Labor Code section 226 apply to wage statements provided by an out-of-state employer to an employee who resides in California, receives pay in California, and pays California income tax on her wages, but who does not work principally in California or any other state?”
    • (2) Does the exemption in Wage Order 9 for collective bargaining agreements (CBA) under the Railway Labor Act bar a wage statement claim brought under California Labor Code section 226 by an employee who is covered by such a CBA?
    • (3) “Do California Labor Code sections 204 and 226 apply to wage payments and wage statements provided by an out-of-state employer to an employee who, in the relevant pay period, works in California only episodically and for less than a day at a time?”
    • (4) “Does California minimum wage law apply to all work performed in California for an out-of-state employer by an employee who works in California only episodically and for less than a day at a time?”
    • (5) “Does the Armenta/Gonzalez bar on averaging wages apply to a pay formula that generally awards credit for all hours on duty, but which, in certain situations resulting in higher pay, does not award credit for all hours on duty?

Arbitration

  • When is an arbitration remedy broad enough to preclude an employee’s resort to a Berman hearing? Under existing law, employers cannot necessarily compel employees to arbitrate wage claims unless and until employees have had the chance to bring those claims before the Labor Commissioner in a “Berman hearing.” In OTO, L.L.C. v. Kho, the Supreme Court has agreed to decide these issues:
    • “(1) Was the arbitration remedy at issue in this case sufficiently affordable and accessible within the meaning of Sonic-Calabasas A, Inc. v. Moreno (2013) … to require the company’s employees to forego the right to an administrative Berman hearing on wage claims?
    • (2) Did the employer waive its right to bypass the Berman hearing by waiting until the morning of that hearing, serving a demand for arbitration, and refusing to participate in the hearing?”

Compensability

  • Does an employee engage in compensable work while waiting for the employer to inspect a bag the employee chose to bring to work? In Frlekin v. Apple, Inc., the Supreme Court has accepted the Ninth Circuit’s request to decide this issue: “Is time spent on the employer’s premises waiting for, and undergoing, required exit searches of packages or bags voluntarily brought to work purely for personal convenience by employees compensable as ‘hours worked’ within the meaning of California Industrial Welfare Commission Wage Order No. 7?”
  • Is walking to and from a time clock compensable hours worked? In Stoetzl v. State of California, the Supreme Court has agreed to decide this issue: “Does the definition of ‘hours worked’ found in the Industrial Wage Commission’s Wage Order 4, as opposed to the definition of that term found in the federal Labor Standards Act, constitute the controlling legal standard for determining the compensability of time that correctional employees spend after signing in for duty and before signing out but before they arrive at and after they leave their actual work posts within a correctional facility?”

Liability for Wage Payment

Preemption—By the FAA and the LMRA

  • Is a PAGA suit for unpaid wages immune from arbitration? In its 2014 Iskanian case, the California Supreme Court acknowledged that the Federal Arbitration Act (FAA) preempts state laws against class-action waivers in arbitration agreements, but also held that representative PAGA actions are not subject to mandatory arbitration. Now, in Lawson v. Z.B., N.A., the Supreme Court has decide to whether a representative action under PAGA, seeking recovery of individualized lost wages as civil penalties under Labor Code section 558, falls within the preemptive scope of the FAA.
  • Does federal labor law preempt a claim for termination wages? In Melendez v. San Francisco Baseball Associates, the Supreme Court has agreed to decide this issue: “Is plaintiffs’ statutory wage claim under Labor Code section 201 subject to mandatory arbitration pursuant to section 301 of the Labor Management Relations Act because it requires the interpretation of a collective bargaining agreement?”

Remedies

  • Can an employee seeking unpaid wages use the tort of conversion? In Voris v. Lampert, the Supreme Court has agreed to decide this issue: “Is conversion of earned but unpaid wages a valid cause of action?”

Rest Breaks & Meal Periods

  • Rest breaks for ambulance attendants on 24-hours shifts. In Stewart v. San Luis Ambulance, Inc., the Supreme Court accepted the Ninth Circuit’s request to decide these issues: (1) “Under the California Labor Code and applicable regulations, is an employer of ambulance attendants working twenty-four hour shifts required to relieve attendants of all duties during rest breaks, including the duty to be available to respond to an emergency call if one arises during a rest period?: (2) “Under the California Labor Code and applicable regulations, may an employer of ambulance attendants working twenty-four hour shifts require attendants to be available to respond to emergency calls during their meal periods without a written agreement that contains an on-duty meal period revocation clause? If such a clause is required, will a general at-will employment clause satisfy this requirement?” (3) “Do violations of meal period regulations, which require payment of a ‘premium wage’ for each improper meal period, give rise to claims under sections 203 and 226 of the California Labor Code where the employer does not include the premium wage in the employee’s pay or pay statements during the course of the violations?”

Standing for PAGA Claims

  • Can a PAGA plaintiff settle his individual wage and hour claims and still pursue his PAGA action as an “aggrieved employee”? In Kim v. Reins International California, Inc., the Supreme Court has agreed to decide whether an employee bringing an action under PAGA loses standing to pursue representative claims as an “aggrieved employee” by dismissing his or her individual claims against the employer.

Workplace solution. Some of the issues raised by the above cases may seem relatively minor, technical, or limited to particular industries. Yet many a significant class action has turned upon issues no more monumental. We will keep our eyes and ears on the Court’s progress and keep readers updated with the latest developments.

Seyfarth Synopsis: While targeted social media ads may help employers find potential applicants with specific skill sets, inartfully crafted ads may open the door to discrimination claims, particularly in California.

We’ve already told you about the parade of horribles employers may face when using social media when making hiring decisions.

Well, more social media, more problems.

Micro-Targeting May Open The Door To Discrimination Claims

What is micro-targeting, you ask? Remember when you looked up discount flights to Hawaii, and then for the next three weeks, all of your feeds taunted you with ads for more flights, hotels, surf lessons in Kauai and hula skirts? Well, it’s kind of like that.

Social media platforms collect virtually endless volumes of personal data. This practice enables increasingly intricate advertising algorithms to push out content to very specific demographics. Suppose your business wants to advertise to the select group of people who have expressed an interest in the Montessori method, or who juggle, or who space travel and live in three specific zip codes. Micro-targeting was made for you.

Micro-targeting has expanded into the employment context, with some potentially problematic implications. One class action pending in California federal court alleges that Facebook ads targeted to people within certain age ranges are discriminatory. Similar claims could crop up in seemingly innocuous situations if, for example, an employer targeted ads to fellow graduates of his alma mater, which happened to be an all-male prep school.

As a result, employers who recruit via social media should proceed with caution if their ads in any way target (or exclude) persons in a legally protected category.

Particular Risks for California Employers

Federal law prohibits discrimination based on race, color, national origin, sex, disability, age, citizenship status, and genetic information. Of course, California is a bit different.  California extends its protections to prevent discrimination because of additional characteristics, including ancestry, marital status, sexual orientation, gender identity and expression, medical condition, political activities or affiliations, and military or veteran status. As a result, for example, an ad geared towards trying to recruit politically liberal or conservative candidates may raise peculiar legal issues in California.

Workplace Solutions

Employers need to understand their recruitment practices, and decide whether micro-targeting can ever be the right approach for them. When employers decide to use targeted ads, they should do so with relevant employment laws in mind and take steps to minimize potential exposure. Because HR managers or marketing departments may not be aware of the additional sensitivities that arise when advertising in the employment context (particularly in California), additional training on this subject may be helpful.

If you have any questions regarding your workplace’s online recruitment practices, your favorite Seyfarth attorney is only a few clicks away.

Seyfarth Synopsis: Agricultural employers have a hard row to hoe with the latest crop of legislation affecting overtime requirements in California. New requirements under Labor Code section 860 took effect when the rooster crowed on January 1, 2019. This law will phase in overtime pay requirements for agricultural employees covered by Wage Order 14.

Under federal law (the FLSA), “agricultural work” is exempt from the overtime rules, but in California the Industrial Welfare Commission’s Wage Order 14-2001 has entitled agricultural employees to daily overtime for hours worked in excess of ten hours in a day. Although California was thus outstanding in this field, it still did not mandate overtime protections for agricultural employees to the extent that it did for employees generally. Finding that situation udderly unacceptable, the Legislature in 2016 directed the Department of Industrial Relations to update the Wage Order so that agricultural workers will eventually be entitled to earn overtime moo-lah to the same extent as other non-exempt employees.

The phase-in process for the new law, summarized in the chart below, should alleviate some of the acres and pains it will undoubtedly cause. Starting in 2019, employers with 26 or more employees must pay overtime at 1.5 times the regular rate of pay for agricultural employees who work more than 9.5 hours per day or more than 55 hours per week. By January 1, 2022, the overtime triggers for agricultural employees will be on par with other California non-exempt employees, that is, 1.5 times the regular rate for work of more than 8 hours per day or 40 hours per week, and 2 times the regular rate for work of more than 12 hours per day. Employers with fewer than 26 employees have a more gradual phase-in process, which begins on January 1, 2022.

26+ Employees <26 Employees
Date 1.5x Reg. Rate 2x Reg. Rate Date 1.5x Reg. Rate 2x Reg. Rate
1/1/19

>9.5 hrs/day

or

>55 hrs/week

n/a 1/1/22

>9.5 hrs/day

or

>55 hrs/week

n/a
1/1/20

>9 hrs/day

Or

>50 hrs/week

n/a 1/1/23

>9 hrs/day

or

>50 hrs/week

n/a
1/1/21

>8.5 hrs/day

or

>45 hrs/week

n/a 1/1/24

>8.5 hrs/day

or

>45 hrs/week

n/a
1/1/22

>8 hrs/day

or

>40 hrs/week

>12 hrs/day 1/1/25

>8 hrs/day

or

>40 hrs/week

>12 hrs/day

The new law does not change the definition of agricultural employees under Wage Order 14-2001, which applies to workers who bring home the bacon by engaging in the following activities:

  • Preparation, care and treatment of farm land, pipeline, or ditches;
  • The sowing and planting of any agricultural (generally, farm) or horticultural (generally, garden, orchard, or nursery) commodity;
  • The care of any agricultural or horticultural commodity;
  • The harvesting of any agricultural or horticultural commodity;
  • The assembly and storage of any agricultural or horticultural commodity;
  • The raising, feeding and management of livestock, fur bearing animals, poultry, fish, mollusks, and insects;
  • The harvesting of fish for commercial sale as defined by Section 45 of the Fish and Game Code;
  • The conservation, improvement or maintenance of such farm and its tools and equipment.

Workplace Solution: Employers of agricultural employees covered by Wage Order 14-2001 should review their pay practices to ensure that they comply with the new law, but need not plow through these issues on their own. Seyfarth Shaw is outstanding in the field when it comes to wage and hour laws, and we are here to help employers navigate this maize until the cows come home.