Seyfarth Synopsis: Judge Dale Drozd in the Eastern District of California issued a standing order establishing procedures limiting the access of civil litigants as an emergency measure to deal with an onerous judicial workload amid reports of severe under-funding of judicial resources.

As you may have noticed, Washington, D.C. has not earned a reputation as the place where “things get done.” The political gridlock there is having deleterious effects on the California litigating public. For years, the Eastern District of California (EDCA) has valiantly coped with one of the highest judicial caseloads in the nation. With the EDCA’s population growing by 5.5 million people during the last 40 years, the Administrative Office of the United States Courts has recommended the creation of at least six additional EDCA judgeships. Yet Congress has declined to fund a single new judgeship, leaving the EDCA with just four full-time District Judges and four Senior District Judges (with significantly decreased caseloads). Meanwhile, the Northern District of California, with about the same population, has 14 full-time judges. Go figure.

And it gets still worse. Two full-time EDCA district judges recently took senior status, and thus have lower caseload expectations. One Senior Judge assumed senior inactive status, lowering his caseload to zero. The EDCA, already grossly overburdened, now has two vacant, full-time judgeships, waiting for Congress to act.

Sensing that enough is enough, Judge Dale A. Drozd of the EDCA’s Fresno division has taken drastic action. On February 4, 2020, he issued a remarkable standing order. While the EDCA’s judicial vacancies remain unfilled, he will follow special procedures to deal with the “ongoing judicial emergency”: (1) All new civil cases will proceed without assignment of a district judge, and will be assigned only a magistrate judge. (2) All civil motions will be decided without oral argument. (3) No new trial dates will be set in civil cases. This order supersedes EDCA Local Rule 230(g), and assigns to the designated magistrate all motions for class certification and all motions seeking approval of collective or class action settlements. Judge Drozd implemented these emergency procedures “reluctantly,” while recognizing that they are not “conducive to the fair administration of justice.”

Judge Drozd was not the first judicial officer to respond to the EDCA’s ongoing caseload crisis. Previously, the EDCA convinced the Administrative Office of the United States Courts to apportion additional magistrates to the EDCA, and to begin a court clerk program to provide each judge an additional clerk. And on June 19, 2018, then Chief Judge Lawrence O’Neill wrote the White House Counsel and California’s Senators to warn that a continuing failure to address the EDCA’s caseload crisis would result in catastrophic consequences.

Judge O’Neill’s letter, predicting dire consequences from continued inaction from Washington, D.C., was prophetic. The catastrophic consequences foretold are now laid out in Judge Drozd’s order. The people who pay for the national government’s failure to provide adequate judiciary resources are the members of the California litigating public. Here’s our note of hope that Judge Drozd’s remarkable stance will reach the ear of our national leaders.

Seyfarth Synopsis: Cal/OSHA has issued guidance on protecting workers from exposure to 2019 Novel Coronavirus (2019-nCoV or Coronavirus).

Faithful readers are already familiar with our previous dispatches, including Chinese Coronavirus Outbreak—What Employers Need to Know; Coronavirus: Employer Liability Issues; Legal Update & January 6, 2020 Webinar–Coronavirus: Employer Liability Issues; and, of course, our Coronavirus INFORMATION and FAQs.

Now, Cal/OSHA has adopted guidance that covers California-specific safety requirements under its Aerosol Transmissible Diseases (ATD) standard.  (In contrast,  federal OSHA has no specific standard for regulating Coronavirus; rather, it generally regulates the potential hazard of Coronavirus via the “General Duty Clause” of the OSH Act, which requires employers to furnish workers with a place of employment free from recognized hazards that are causing or likely to cause death or serious physical harm.)

California’s ATD standard requires covered employers to protect workers from diseases and pathogens transmitted by aerosols and droplets. The ATD standard primarily applies to health care facilities, but also applies to laboratories, public health services, police services, and other locations where employees are reasonably anticipated to be exposed to confirmed or suspected cases of aerosol transmissible diseases. Covered employers must have an “ATD Exposure Control Plan,” with procedures to identify Coronavirus cases or suspected cases as soon as possible and protect employees from infection.

California’s ATD standard also requires covered employers to protect employees from the Coronavirus through

  • training on topics such as signs and symptoms of the disease and modes of transmission,
  • engineering controls such as “airborne infection isolation rooms or areas, exhaust ventilation, air filtration and air disinfection,”
  • work practice controls such as “procedures for safely moving patients through the operation or facility, handwashing, personal protective equipment donning and doffing procedures, the use of anterooms, and cleaning and disinfecting contaminated surfaces, protective equipment, articles and linens,”
  • personal protective equipment, and
  • medical services including infection determination and treatment.

Laboratory operations are subject to additional requirements, including the CDC’s Interim Laboratory Biosafety Guidelines for Handling and Processing Specimens Associated with 2019 Novel Coronavirus (2019-nCoV).

Cal/OSHA reminds all employers and workers that any suspected cases of Coronavirus must be promptly reported to the local public health department.

The California Department of Public Health has updated information on Coronavirus and reporting requirements. The Centers for Disease Control and Prevention has also posted specific information for health care workers and laboratory settings.

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

Edited by Elizabeth Levy

Seyfarth Synopsis: A unique element of Cal/OSHA is its requirement that ALL employers have a written Injury and Illness Prevention Program (IIPP). 8 CCR 3203.

Despite the IIPP requirement being “on the books” since 1991, many employers with establishments in California still do not have an IIPP. In fact Cal/OSHA issues more citations under the IIPP standard than any other standard—thousands each year—many of them for a complete failure to have an IIPP. During a Cal/OSHA inspection, one of the first documents asked for is the IIPP, and failure to have one can carry a penalty up to $25,000.

A common misperception is that certain employers do not need an IIPP. Many of the employers making this false assumption are running low-hazard establishments, like professional-services offices, or have only a few employees. Yet ALL employers with establishments in California, regardless of size or industry, are subject to the IIPP requirement.

So what is an IIPP? It’s a simple written workplace safety program that is meant to protect your employees. But not just any written workplace safety program. Cal/OSHA requires that an IIPP include eight essential elements:

  1. Responsibility
  2. Compliance
  3. Communication
  4. Hazard Assessment
  5. Accident/Exposure Investigation
  6. Hazard Correction
  7. Training and Instruction
  8. Recordkeeping

Importantly, even if you have a general safety and health program, Cal/OSHA may say it’s not an IIPP unless it’s a written program that explicitly covers the foregoing eight elements.

Further, to be effective, your IIPP must

  • fully involve all employees, supervisors, and management,
  • identify the specific workplace hazards employees are exposed to,
  • correct identified hazards in an appropriate and timely manner, and
  • provide effective training.

The IIPP regulation provides some limited exceptions, but they pertain to the content of the program or how its implementation is documented. There is no exception to the requirement that an IIPP be established, implemented, and maintained.

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

Seyfarth Synopsis. As of January 1, 2020, AB 51 makes it unlawful for employers to impose arbitration agreements on employees as a condition of employment, even if employees are permitted to opt out. But will AB 51 withstand a legal challenge saying that AB 51 is preempted by the Federal Arbitration Act? While courts ponder that question, California employers must decide how to ring in the New Year.

‘Tis the Season to be Mindful of AB 51

As we previously reported, on October 10, 2019, Governor Newsom signed into law a host of employment bills, including AB 51, which adds Section 432.6 to the Labor Code and Section 12953 to the Government Code.

As a devoted California Peculiarities reader, you know that AB 51 prohibits employers from requiring—as a condition of employment or continued employment or receipt of an employment-related benefit—any job applicant or employee to “waive any right, forum, or procedure for a violation of any provision” of the Fair Employment and Housing Act or the California Labor Code, which is over 600 pages long. The law also prohibits employers from threatening or retaliating or discriminating against employees or applicants for refusing to waive their rights.

Arbitration agreements are clearly among AB 51’s targets. Oh, and the consequences for violating AB 51? Too numerous to recount here. But one of them is a misdemeanor, under Labor Code Section 433. Another is a lawsuit under the Labor Code or the Fair Employment and Housing Act.

The Awaited Challenge to AB 51: A Holiday Gift?

The possibility of federal preemption has cast a cloud over AB 51 since its inception. Remember how Governor Brown vetoed prior proposed legislation because bans of arbitration agreements have been consistently struck down as violating the FAA? We sure do.

As expected, AB 51 has been promptly challenged. On December 6, 2019, the U.S. and California Chambers of Commerce, along with several trade organizations, filed a complaint in the Eastern District of California. The complaint argues that AB 51 is unconstitutional because it is preempted by the FAA. The lawsuit requests declaratory and injunctive relief, and seeks to stop AB 51’s enforcement with respect to arbitration agreements governed by the FAA.

On December 9, 2019, the U.S. Chamber and the other plaintiffs filed a memorandum in support of its request for a preliminary injunction to stop AB 51’s enforcement until its legality is determined. A hearing on a temporary restraining order has been set for December 19, 2019, so there may be more guidance sooner than initially anticipated.  The hearing on the preliminary injunction currently is set for January 10, 2020.

Workplace Solutions to Help Employers Ring in the New Year

As this challenge winds its way through the courts, employers will need to carefully evaluate their arbitration programs. There is no one-size-fits-all solution that will work for every employer. Each employer’s response to AB 51 will reflect that employer’s own appetite for legal risk and its felt need to have an effective arbitration program. The most confident employers will stay the course based on the assumption that AB 51 will be held unconstitutional. The most cautious employers will suspend their arbitration programs and not proceed further down the road of arbitration until they’re sure that the coast once again is clear. If you have questions about how AB 51 may affect your arbitration program and how to avoid ending up on a naughty list, don’t hesitate to contact your favorite Seyfarth attorney.

 

Edited by Elizabeth Levy

Seyfarth Synopsis: Two new California laws are set to significantly affect the entertainment industry: one will deal a giant blow to productions and studios accustomed to hiring independent contractors; the other will give print shoot productions the opportunity to process payments with regular payroll and avoid liability for not issuing payments at wrap.

Some Not-So-Entertaining News

California’s landmark Assembly Bill 5, which requires gig economy workers to be reclassified as employees, will become effective January 1, 2020. Companies throughout California have been furiously exploring options for how their operations might need to be modified moving forward.

AB 5’s Effect on California’s Entertainment Industry

We previously addressed AB 5 as it applies generally, but here we focus on its broad and significant impact on individuals in the entertainment industry who, until now, would have been classified as independent contractors (e.g., those who are not employed full time by studios or production houses).

AB 5 is the legislative response to the California Supreme Court’s April 2018 decision in Dynamex v. Superior Court. AB 5 codifies Dynamex’s “ABC test” to determine whether a worker is an employee or an independent contractor, and in doing so AB 5 extends the ABC test to all Labor Code, Unemployment Insurance Code, and Wage Order claims.

Applying the same language as Dynamex, AB 5, slated to appear in Labor Code section 2750.3, provides that a person receiving payment for labor or services is an employee rather than an independent contractor unless the hiring entity demonstrates all of the following conditions:

  1. The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  2. The person performs work that is outside the usual course of the hiring entity’s business.
  3. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

While AB 5 provides exceptions for various occupations and relationships (these are evaluated under the test laid out in S.G. Borello & Sons, Inc. v. Department of Industrial Relations—as discussed in our previous post), it will be difficult for entertainment entities to fit many of their production crew members into these exceptions.

AB 5 likely sounds the death knell for the ubiquitous loan-out arrangement, as it will be nearly impossible to satisfy the business-to-business exemption or the professional services exemption. As one can imagine, the nature of the entertainment industry makes it difficult to identify key positions that perform work outside a hiring entity’s usual business. Moreover, most workers are not “free from the control and direction” of these entities. Nonetheless, a handful of limited exceptions may apply to at least some in the industry:

  • Photographers/photojournalists—Services provided by still photographers are exempt so long as they do not license content to a single hiring entity more than thirty-five times per year. [Note: this does not apply to work on “motion pictures,” including, but not limited to, projects produced for theatrical, television, internet streaming services, commercials, broadcast news, music videos, and live shows.]
  • Freelance writers/editors—Services of individuals who do not provide content submissions to a single hiring entity more than thirty-five times per year are exempt.
  • Graphic designers

Meanwhile, though, the freedoms associated with being independent contractors will now no longer be available to individuals working as background actors, grip and lighting crews, camera crews, assistant directors, and production assistants.

AB 5 raises several unanswered questions. Does the graphic designer exemption apply to animators or prop houses? Can screenwriters fall under the freelance writers exception? How will AB 5 apply to gig workers such as session musicians, who do not appear to have been contemplated in the same way that film and photo crews were?

But Wait, It’s Not All Rainclouds!

Although many gloomy impacts of Dynamex and AB 5 appear inescapable, the California Senate was also busy this term. A new law, Senate Bill 671, will add a thin silver lining to the cloud soon to hang over other aspects of the entertainment industry. Thanks to SB 671’s urgency clause, the bill became effective immediately upon its September 5, 2019, signing—a respite to entities that use short-term talent and crew, especially those that have faced lawsuits threatening potentially enormous liability.

How SB 671 Is Changing Print Shoot Rules

Under Labor Code section 201, employers generally must pay a discharged employee all earned wages immediately upon termination of employment, which includes the completion of a project (such as wrapping a print shoot). Employers who fail to timely pay termination wages face “waiting time” penalties in the amount of one day’s pay for each day of delay (including weekends) until final wages are paid, up to a maximum of thirty working days’ worth of pay. In recent years, advertising agencies and production companies have been hit by waiting time penalties for delays in paying terminated print models, even where the model was provided to producers, photographers, and casting directors through talent agencies or loan-out agreements.

SB 671, aka the “Photoshoot Pay Easement Act,” will create or amend Labor Code sections 201.6, 203, 203.1, and 220 and thereby create an exception to Section 201. This exception mirrors the existing Wage Order exception for motion picture employees. Now, payment of wages to “print shoot employees”—defined as individuals hired for a limited duration to render services relating to or supporting a still-image shoot for use in print, digital, or internet media—may be lawfully made on the next regular payday after the employment ends. This legislative improvement enables print shoot productions to pay talent, stylists, photo assistants, and other crew through their regular payroll processes while avoiding waiting-time penalties.

SB 671 adds another reprieve for employers, allowing them to either (1) mail final wages to employees or (2) make them available to at a location specified by the employer in the county where the employee was hired or performed labor. Such payments are deemed to have been made on the date of mailing or being made available at the specified location.

Amid California’s inevitable AB 5 adjustment period, SB 671 thus provides a reason for the entertainment industry to continue doing business in the State. Both bills will affect industry hiring, and we are closely monitoring their progress through implementation. As new developments arise, we will keep you apprised. In the meantime, please do not hesitate to reach out to your favorite Seyfarth attorneys to discuss how to approach these changes as they relate to your business.

Seyfarth Synopsis: Beleaguered California employers will soon need to comply with the California Consumer Privacy Act. See below for a link to a more comprehensive resource.

The CCPA, effective January 1, 2020, will require employers to provide employees with privacy policies. The scope and content of those policies are currently subject to some doubt, especially since the Attorney General has not yet completed relevant regulations. For an extensive discussion, please see our One Minute Memo.

Seyfarth Synopsis: Halloween was last week, and you probably thought all the scary ghouls and goblins were going to rest for another year. Do not relax just yet! This week, we discuss another process that can be scary for California employers—wage claims filed with the Labor Commissioner. We discuss the process below with the hope of providing some clarity.

I Got This “Notice of Claim and Conference”…What Do I Do Now?

The first communication from the Labor Commissioner typically is a somewhat confusing document called a “Notice of Claim and Conference.” Getting such an official notice from a government agency can be unnerving—especially if you do not know what it means. But fear not! It is a lot simpler than it looks.

This ominous-seeming document is just to tell you that an employee has filed a wage claim and that the Labor Commissioner is going to hold a meeting to discuss the claim. That meeting is called the conference. Not all cases have a conference. In those that do, the Deputy Labor Commissioner (“Deputy”), usually a non-lawyer, will usually do three main things: (1) determine the nature of the claim (to ensure there is jurisdiction); (2) determine the amount of the claim; and (3) attempt to settle the claim.

What do you do to get ready? Gather (as best you can) the information about the claim and be prepared to discuss it as needed with the Deputy. Pay special attention to what the employee is saying about the case, because often this is the first time you will hear why the employee feels entitled to more money. Remember that the conference is not a trial, so do not expect the Deputy to “throw out” the claim at the conference—even if it is completely meritless!

If the case does not resolve at the conference, then the Deputy will set the case for a hearing on the merits. The hearing will usually be a few months down the road. At this stage of the process, there are only two ways to avoid a hearing: (1) settle the claim (you can often work with the Deputy who handled your conference) or (2) send a check for the employee in the amount claimed directly to the Labor Commissioner.

What Happens Next?…The Hearing.

You decided not to settle. What now? The next step, the hearing, is the big show in this process. But it might not feel like one since you may be in a small office-like room with just two tables, some chairs, and a tape recorder. No matter how informal it might feel, you should still treat it seriously. The testimony is under oath, and the Labor Commissioner can enforce any award against an employer the same way as a judgment in court!

At the hearing, there will be a hearing officer, who functions as the judge. The hearing officer is often a lawyer (though historically has not always been required to be one) and most likely will be a different person than the Deputy who presided over the conference. Once the hearing starts, the hearing officer will first allow the employee to testify, present documents, and call witnesses. Do not worry, you will get your chance, too. The hearing officer proceeds in this order because the employee has the burden of proving the claim. You or your attorney can cross-examine the employee (and any other witness). And, after the employee finishes, the employer also gets to present its own evidence.

Do not be surprised if the hearing officer considers “everything,” because the formal rules of evidence do not apply here. “Relevancy” is the only limiting standard. This is because the hearing process with the Labor Commissioner is intended to be streamlined and efficient. At any rate, once the hearing is over, the hearing officer will issue an “Order, Decision, and Award” or “ODA,” which is a written ruling of the hearing officer’s findings. That is where you find out who won or lost.

I Lost. What Can I Do?

You open your mail from the Labor Commissioner to read the ODA, which says that the employee has prevailed and that you owe money. Yikes! Are there any options for you? Of course there are—especially if you disagree with the award. First, if you want the situation to simply be over, you can pay the amount of the award to the Labor Commissioner by the date listed in the ODA.

There are other options. You can also file an appeal of the ODA in the superior court and continue the big show of the hearing into a second act! To file an appeal, the employer must file both a notice of appeal and either (1) a bond in the amount of the judgment or (2) a cashier’s check in the amount of the judgment. Do not wait to do this. You only have 10 days after the ODA is served to file the appeal and the bond/cashier’s check!

After you file an appeal, there are two options: (1) try to settle the case with the employee and (2) go through with the appeal process.

The “appeal” is a bit different than the normal court process, and there are some risks associated with it. First, the good news. The appeal is actually a whole new trial in front of a judge.  The decision of the Labor Commissioner is given no weight, and the formal rules of evidence and trials apply. This means that there are more limitations on the evidence that can be presented and other more formal procedures must be followed.

Now for the potential downsides. If you lose (meaning that the employee is awarded any money at all), you can be liable for the employee’s attorneys’ fees. The employee may also be able to add claims that were not asserted before the Labor Commissioner, and you may have to respond to discovery (though neither is a given). In some cases, the Labor Commissioner may even appoint one of its own attorneys to represent the employee!

After the trial, there are options to appeal if you get another bad outcome. Depending on the amount of the award, the appeal may be to the appellate division of the superior court or to the Court of Appeal.

I Won, But The Employee Appealed. Now What?

You opened your mail from the Labor Commissioner and the ODA awarded the employee nothing. You won! But then, 10 days later, you get a notice of appeal from the employee. This can feel like having the rug pulled out from underneath you.

In this situation, the process is very similar, but there are some differences. The employee does not need to file a bond in order to appeal (there is no judgment against the employee). If you go through with the trial and win, the employer can actually get its attorneys’ fees! And losing employees are responsible for retaining their own counsel, too, because the Labor Commissioner does not represent employees who lost at the hearing.

Workplace Solutions

Wage claims before the Labor Commissioner can be expensive and daunting. The best way to avoid them in the first place is to have solid wage and hour practices in place. Auditing your practices and staying informed with new laws is the best way do to this. Once a claim has been filed, an attorney can be helpful to talk through the claims and any strategy involved. Attorneys are required, alas, if you proceed in court! If you would like help reviewing your wage and hour practices or need help with a recently filed wage claim, please reach out to your favorite Seyfarth attorney.

Seyfarth Synopsis: When faced with wildfires or natural disasters, California employers must keep calm, carry on, and continue to meet their obligations under California law.

Be Prepared.

All employers, not just those in California, must have an Emergency Action Plan (“EAP”) and Fire Prevention Plan (“FPP’).

California regulations state that an EAP should include (1) procedures for emergency evacuation, (2) procedures to follow for employees who remain to operate critical plant operations before they evacuate, (3) procedures to account for all employees after emergency evacuation has been completed, (4) procedures to follow for employees performing rescue or medical duties, (5) the preferred means of reporting fires and other emergencies, and (6) names or regular job titles of persons or departments to contact for further information or explanation of duties under the plan.

Employers must also establish an employee alarm system and ensure that a sufficient number of employees are trained to assist in a safe evacuation in the event a disaster strikes.

To the extent employers offer safety kits and rations for emergency situations, employers should regularly inspect and update them.

Do Employers Have To Pay For Work Missed Due To Fires?

Exempt Employees. Even without a natural disaster, employers must compensate exempt employees for a full week’s salary for any week in which any work is performed without regard to the number of days or hours worked.

For example, if a business closes in the middle of a workweek, it must pay exempt employees their full week’s salary. But if the business closes for an entire workweek and employees do not perform any work (including remote work) during the closure, there is no need to pay the week’s salary—unless the employee uses available paid leave.

Vacation, PTO, and Sick Time. Employees may choose to use PTO, vacation time or sick time, if applicable. If employers decide to provide any additional paid leave in light of a natural disaster, then the parameters of the leave available should be clearly communicated to all employees and applied consistently.

Remote Work. If employees weather the firestorm from home, employers must be mindful of the potential pitfalls of remote work. As we have noted, there are particular concerns regarding issues ranging from accurately recording time to reimbursing expenses.

Reporting Time Pay. Generally, nonexempt employees must be paid for reporting to work. Under the Wage Orders, employees who report to work for a scheduled shift, but who are sent home with less than half of the scheduled day’s work, must be paid for half of that day’s work at their regular pay rate.

These reporting-pay obligations do not apply if business operations are disrupted by such circumstances as (1) threats to employees or property, (2) public utilities failure, or (3) Acts of God. Note, though, that there is no reporting-pay exceptions for a rattled employer that shuts down the business on its own accord.

Predictive Scheduling. As we have previously reported, some California cities (including several in Northern California) have enacted predictive scheduling ordinances. While these ordinances generally include exceptions for circumstances beyond an employer’s control (e.g., an Act of God or a failure of public utilities), voluntarily closing up shop may trigger obligations under local ordinances.

On Call Requirements. Employees who must remain on an employer’s premises may be under an employer’s control and thus entitled to pay for the time on premises. The same holds true if an employee remains under the employer’s control, but is not on the employer’s premises.

Split Shifts. Employers must also consider whether they have employees working split shifts during interrupted business operations and must ensure the appropriate wages are paid.

Are Employers Required To Provide Leave?

Volunteer Firefighter and Emergency Rescue Personnel Leave. California law protects employees who serve as volunteer first responders. Other than certain healthcare workers, employees who serve as volunteer firefighters, emergency rescue personnel, or reserve peace officers do not need to provide advance notice to employers if they are taking off work to perform first-responder duties. An employer cannot discharge or discriminate against an employee for taking time off to perform volunteer emergency duties.

Employers with 50 or more employees must allow employees to take temporary leaves of absence, not to exceed an aggregate of 14 days per calendar year, to engage in fire, law enforcement, or emergency rescue training.

CFRA/FMLA/Paid Sick Leave/Local Sick Pay. The California Family Rights Act and Family and Medical Leave Act afford protections to employees who have—or whose family members have—suffered serious injury or illness (including any injury or illness resulting from a natural disaster). Employees may also qualify for paid sick leave under California’s Healthy Workplace Healthy Families Act or the myriad of local paid sick leave ordinances.

School-Related Activities. California employers with 25 or more employees must provide up to 40 hours of unpaid time off for employees to cope with school-related issues, including if an school or child care facility is closed due to a natural disaster.

California Employers Have New Special Duties To Cope With Poor Air Quality.

In July 2019, Cal/OSHA enacted an emergency regulation, Protection from Wildfire Smoke.  This regulation applies to outdoor and semi-indoor employees when the Air Quality Index for airborne particulate matter (PM 2.5) is 151 or greater, and where employers should reasonably anticipate that employees could be exposed to wildfire smoke. Read more about these requirements here.

Avoid The Heat.

California employers must ensure their emergency response policies and practices are legally compliant. Don’t hesitate to reach out to Seyfarth to help you determine how to stand on firm ground when disaster strikes.

Edited by Elizabeth Levy

Seyfarth Synopsis: California’s ban-the-box law strictly regulates how employers may obtain and consider background check information when hiring and making personnel decisions. What’s more, Los Angeles and San Francisco have their own ban-the-box ordinances. These ordinances and the California Labor Code create a patchwork of rules that put employers at risk when checking whether an applicant has a criminal record. Here are some tips on when and how may consider criminal histories in employment while avoiding liability themselves.

Before 2014, when San Francisco enacted a city-wide ban-the-box law, criminal history background checks were largely unregulated in California, except for a handful of Labor Code provisions that barred consideration of certain types of criminal records. Then, Los Angeles and the State of California joined San Francisco with their own ban-the-box laws, which markedly differ from San Francisco’s.

This blog highlights the substantive rules restricting what criminal records can be considered as well as the procedural steps employers must take if they intend to reject an applicant or dismiss an employee with a criminal record. Our blog discussing the process for ordering the background check in the first instance can be found here. As litigation against employers in this space continues to skyrocket, it is critical that California employers understand the basics of all laws affecting employment screening programs and determine what changes to policies, forms, and practices will ensure compliance and reduce the risk of claims.

How Does an Employer Know If a Criminal Record is Disqualifying?

Employers no longer can reject job applicants or discharge employees simply because they have a criminal record. More and more laws now require employers to carefully evaluate the criminal record and assess whether it relates to the position.

California’s statewide ban-the-box law (Gov’t Code § 12952) requires employers with five or more employees (subject to few exceptions) to conduct an individualized assessment of an applicant’s conviction to determine whether it has a “direct and adverse relationship with the specific duties of the job that justify denying the applicant the position.” The Los Angeles ordinance requires that as part of the assessment the employer consider the following factors, taken from the Equal Employment Opportunity Commission’s guidance:

  • the facts or circumstances surrounding the offense or conduct;
  • the number of offenses for which the individual was convicted;
  • age at the time of conviction or release from prison;
  • evidence that the individual performed the same type of work, post-conviction, with the same or a different employer, with no known incidents of criminal conduct;
  • the length and consistency of employment history before and after the offense or conduct;
  • rehabilitation efforts, e.g., education and training;
  • employment or character references and any other information regarding fitness for the particular position; and
  • whether the individual is bonded under a federal, state, or local bonding program.

Unlike the Los Angeles ban-the-box ordinance, the California law does not require employers to provide the applicant with their assessment.

A wide range of criminal records are off-limits to California employers (unless the employer qualifies for very narrow exceptions identified in the Labor Code). Records that cannot be used are:

  • arrests that did not lead to a conviction;
  • non-felony marijuana convictions that are older than two years;
  • juvenile records; and
  • diversions and deferrals.

In San Francisco, covered employers are barred from considering a separate group of criminal records, even though these records are not off-limits in other California cities. These include (i) infractions, (ii) convictions that are older than seven years (measured from the date of sentencing), and (iii) any conviction that arises out of conduct that has been decriminalized since the date of the conviction, measured from the date of sentencing (which would include convictions for certain marijuana and cannabis offenses).

What Steps Must Employers Take to Disqualify Applicants with a Criminal Record?

Once an employer decides that a criminal record is potentially disqualifying, the minefield of potential hazards grows. At the federal level, the Fair Credit Reporting Act mandates a highly technical notice process. First, before an employer relies on a background check report to take an “adverse action” (e.g., rescinding a conditional job offer or discharging an employee), the employer must provide the individual with a “pre-adverse action” notice, and include with it a copy of the report and the Consumer Financial Protection Bureau’s Summary of Rights. This notice gives the individual an opportunity to discuss the report with the employer before the adverse action. Then, once the employer is prepared to take the adverse action, it must give the individual an “adverse action” notice, containing certain FCRA-mandated text.

In California, employers that rely on criminal information for employment purposes must also consider state and local laws. Statewide, employers that believe a criminal record is disqualifying must do the following:

  • Notify the applicant of any potential adverse action based on the conviction history. The notice must identify the conviction, include a copy of any conviction history report (regardless of the source), and state the deadline for the applicant to provide additional information, such as evidence of inaccuracy, rehabilitation, or other mitigating circumstances.
  • After waiting the requisite time period, notify the applicant of any final adverse action, of any existing procedure the applicant has to challenge the decision or request reconsideration, and of the applicant’s right to file a complaint with the Department of Fair Employment and Housing.

California goes beyond the FCRA. FCRA notices are required only if an adverse decision is based on information obtained from a background check company (“consumer reporting agency).” California requires notices no matter where or how the employer learns of the criminal history (i.e., applicant self-disclosure, Google, etc.).

In addition, for jobs in the City of Los Angeles, the city’s ordinance imposes the following onerous steps on employers who have considered criminal history (regardless of the source):

  • Perform a written assessment that “effectively links the specific aspects of the Applicant’s Criminal History with risks inherent in the duties of the Employment position sought by the Applicant.” The assessment form that contains the relevant factors can be found on the city’s website.
  • Provide the applicant a “Fair Chance Process”—giving the applicant an opportunity to provide information or documentation the employer should consider before making a final decision, including evidence that the criminal record is inaccurate, or evidence of rehabilitation or other mitigating factors. As part of this process, the employer must include with the pre-adverse action notice a copy of the written assessment and any other information supporting the employer’s proposed adverse action.
  • Wait at least five business days to take adverse action or fill the position. If the applicant provides additional information or documentation, the employer must consider the new information and perform a written reassessment, which is at the bottom of the form mentioned above. If the employer still decides to take adverse action against the applicant, the employer must notify the candidate and attach a copy of the reassessment with the adverse action notice.

California Workplace Solutions

Class actions against employers for failing to follow hyper-technical requirements for background checks have come to dominate the news. Employers in California and elsewhere will want to conduct (privileged) assessments to strengthen their compliance with the myriad laws that regulate use of an individual’s criminal history. Suggested next steps include:

  • Assess coverage under the California, Los Angeles, and San Francisco ban-the-box laws.
  • Review job advertisements and postings both for unlawful and mandatory language regarding criminal history.
  • Review job application and related forms for unlawful inquiries regarding criminal history.
  • Train employees who conduct job interviews and make or influence hiring and personnel decisions, regarding inquiries into, and uses of, criminal history, including best practices for documentation and record retention.
  • Review the hiring process to ensure compliance, including the timing of criminal history background checks, the distribution of mandatory notices, and the application of necessary waiting periods.

Edited by Christopher J. Truxler

Seyfarth Synopsis: While paying employees in California is often a challenge, the regular rate of pay presents a minefield of different formulas for employers to navigate. From what amounts to include, to how the calculation should be performed, determining an employee’s overtime pay rate can be a very complicated task. We provide an overview of some regular rate basics below, although employers should be aware that more specific issues can arise depending on the industry, types of employees, and method of compensation used.

The “regular rate of pay” is the basis for overtime compensation under the FLSA and California law. Some employers may be deceived by this simple-sounding term into thinking that there is anything “regular” or straightforward about this concept. Do not be one of them!

The regular rate of pay often is a complex formula that includes all “remuneration” provided for hours worked, such as hourly pay, shift differentials, salaries, piece rates, commissions, and most bonuses. It can even include meals! The regular rate also includes amounts paid for being available to perform a duty, such as time spent on call, even where the on-call hours are not considered hours worked.

Luckily, certain amounts may be excluded from the regular rate, such as sums paid as gifts, payments for vacations, holidays, or illnesses, certain “discretionary” bonuses, and meal and rest period premiums. Below are some examples illustrating how to incorporate some common forms of pay into an employee’s regular rate of pay.

Hourly Rates / Hourly Shift Differentials

When an employee is paid on an hourly basis only, the overtime premium is calculated as 1.5 times that hourly rate of pay. That one is easy! But don’t relax just yet; it gets harder.

The calculation becomes more complicated where the employee is paid multiple forms of pay, such as different hourly rates for different types of work, or hourly pay plus an hourly shift differential for some hours. In these situations, the regular rate is calculated using the weighted average of the two rates.

Under that method, each hourly rate is multiplied by the hours worked at that rate. The total earnings from each rate are added together and divided by the total hours worked. That number is then multiplied by a half-time premium of 0.5 (which is used because the employee has already received straight-time compensation for all hours worked, including overtime). The resulting overtime rate is multiplied by the number of overtime hours worked to calculate additional overtime pay due to the employee. Remember, the overtime premium rate is doubled for overtime hours compensated as double time!

For example, if an employee works 30 hours at $15/hour, and an additional 12 hours at $16/hour (because these hours include a $1 per hour night shift differential), overtime is calculated as follows: (1) calculate total earnings: (30 hours * $15/hour) + (12 hours * $16/hour) = $642; (2) divide total earnings by total hours: $642 / 42 hours = $15.29; (3) calculate the additional overtime premium due: $15.29 * 0.5 half-time premium = $7.65; (4) calculate additional overtime pay: $7.65 * 2 overtime hours = $15.30.

Commissions and Other Production-Based Incentives

Let’s make it harder. Not all employees are paid only at hourly rates. Employees paid piece rates, commissions, or production-based (non-flat sum) bonuses will have variable earnings depending on their productivity. How do you calculate the regular rate in this situation?

For employees earning a combination of hourly pay and production-based incentives, the regular rate is calculated by dividing the total earnings for the week (including earnings during overtime hours), by the total hours worked during the week (including overtime hours). This amount is then multiplied by 0.5 to determine the additional half-time premium that must be paid for all overtime hours (the full amount of the premium is paid for overtime hours compensated as double time). As above, the half-time premium is used in this calculation because the employee has already received straight-time compensation for all hours worked in the form of commission or piece rate earnings (including all overtime hours worked).

Employers that pay employees on a commission or piece rate basis also need to ensure that employees are paid for rest period (and, when applicable, recovery period) time and any non-productive time at the correct rate.  While many employers choose to pay underlying hourly rates of pay for all hours worked to ensure minimum wage compliance for these employees, a special formula applies to rest and recovery period time for employees paid on a piece rate basis.

Salary

In the example above, the regular rate was calculated based on all hours worked. The calculation is different for non-exempt employees paid on a salary basis.

Unlike an employee paid by piece rate, commission, or non-flat sum bonus, under California law, non-exempt employees paid by salary are not receiving additional pay through their salary for any overtime hours that they work. For this reason, the regular rate of pay for salaried employees is calculated based on a maximum 40-hour workweek, rather than all hours worked. Additionally, overtime is calculated at one-and-one-half times the regular rate of pay for each overtime hour worked, instead of the half-time premium used in the example above. See Cal. Lab. Code § 515(d).

Thus, if an employee is compensated by a weekly salary of $1,000 and works 50 hours in a week, overtime pay is calculated as follows: (1) $1,000 / 40 hours = $25; (2) $25 * 1.5 overtime premium = $37.50; (3) $37.50 * 10 overtime hours = $375 in overtime compensation.

Flat-Sum Bonuses: The Latest Challenge

Had enough yet? Now we turn to the one most peculiar to California! For California employees, the additional overtime premium due for flat-sum bonuses (for example, attendance bonuses) is different than the formula applicable to production-based incentives (that increase in rough proportion to hours worked).

Instead of using the total hours worked during the bonus earning period in the denominator of the calculation, the regular rate for flat-sum bonuses is calculated by dividing the bonus by the number of non-overtime hours worked during the bonus earning period. Alvarado v. Dart Container Corp., 4 Cal. 5th 542 (2018). This amount is multiplied by 1.5 (not 0.5) and is paid for each overtime hour worked. Unfortunately for employers processing payroll for employees in multiple states, this formula differs significantly from the FLSA formula. In contrast to the California approach of dividing by the total straight-time hours and multiplying by 1.5, the FLSA formula uses the total hours worked in the denominator and requires payment of only a half-time premium. As a result, the additional overtime due on a flat-sum bonus in California is more than three times the amount due under the FLSA!

For example, an employee may work 40 regular hours in a week with two additional hours of overtime. The employee is compensated at $15/hour for the 42 hours of work and also receives a flat-sum bonus of $60 for the work done in that workweek (for a total of $690). The additional overtime premiums are calculated separately for hourly pay and the flat-sum bonus as follows:

(1) hourly pay overtime premium:  $15.00 x 0.5 = $7.50 x 2 hours = $15

(2) flat-sum bonus overtime premium:  $60/40 = $1.50 * 1.5 * 2 overtime hours = $3.00.

Thus, under California law, the total overtime pay is $18.00.  Under the FLSA, the formula would be $660/42 hours worked ($15.71) * 0.5 = $7.86 * 2 hours = $15.72.

Workplace Solutions

Your brain might be spinning after all these formulas. The important thing to remember is that the regular rate can be complicated by many factors, especially where employees receive multiple types of compensation for a given pay period. California employers must pay special attention to how they calculate overtime rates because of these regular rate complexities, as errors can lead to underpayments and severe penalties.

If you would like to learn more about the regular rate of pay, please contact a Seyfarth Shaw attorney for assistance.

Edited by Michael Wahlander