2018 Cal-Peculiarities

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

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

Each Careful Step Along The Byway of Final Paperwork

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

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

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

Face It and Stand Tall: Giving The Final Paycheck

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

But what should the final pay check include?

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

How or where should I send the final paycheck?

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

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

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

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

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

Edited By: Coby Turner

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

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

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

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

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

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

. . .

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

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

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

Exorcise Your Right to Have Fun

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

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

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

If You’ve Got It, Haunt It

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

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

Oh My Gourd

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

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

Let’s Get This Party Startled

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

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

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

Edited By: Coby Turner

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Haven’t high courts already upheld mandatory arbitration agreements?

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

Hasn’t the California Legislature got the message?

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

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

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

The apoplectic reaction to the outrage that was AB 3080

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

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

Governor Brown’s veto and what’s next

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

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

Webinar Reminder

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

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

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

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

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

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

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

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

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


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

We took a break this week, to wrap up loose ends and gear up for Labor Day. So we did not draft an original blog post. But we did retrieve, from the archives, a quick history of why we celebrate this holiday to honor the American worker. Here it is, as fodder for your contemplation over the weekend: https://www.dol.gov/general/laborday/history

Also, today (August 31) is the last day for the California Legislature to pass bills. So we have been laboring on our updated Cal-Legislative Update, coming your way next week. This piece will summarize the bills that have survived the legislative gauntlet and face review by Governor Brown.

We wish each of you a wonderful and safe holiday. Don’t work too hard.

Seyfarth Synopsis: Following a season of unprecedented outcry over persistent work-related sexual harassment, known best as the “#MeToo” movement, California lawmakers this session have considered a record number of bills that address the problem. One bill, AB 1867, recently passed by the Legislature and discussed below, will (if signed by the Governor) require large employers to keep records of all employee complaints alleging sexual harassment for at least five years. Other bills working their way through the process (as if to say “me, too”) also address this vital topic, as we briefly recap below.

Potential New Recording-Keeping Law

If signed by Governor Brown, AB 1867 will add Government Code section 12950.5 to the Fair Employment and Housing Act (FEHA). This bill would require employers of 50 or more employees to maintain internal records of complaints alleging sexual harassment for five years after the date the complainant or any alleged harasser leaves the company—whichever date is later.

AB 1867 would define an “employee complaint” as one filed through the employer’s “internal complaint process.” Existing law already requires California employers to maintain anti-harassment policies that inform employees of the complaint process available to them. The new law would permit the state Department of Labor to seek an order compelling any employer to comply with the record-keeping requirement.

In practice, this law would likely not add too much of an administrative burden to the larger employers covered by it. It is the rare—and foolhardy—California employer that does not already utilize an internal employee complaint process that takes seriously and investigates every complaint of harassment. This law would merely mandate that records of the complaints alleging sexual harassment must be maintained for the employment-plus-five-year period.

This bill raises other questions, though, for the thoughtful employer anticipating logistical issues: Would the law also mandate preservation of any investigation files? Who would have access to the preserved complaint records? What about the privacy rights of the parties involved? Would an applicant for employment at a company have a right to demand to see any complaints made alleging sexual harassment against the company? The answer to the last question should almost certainly be “No,” so long as California’s constitutional right of privacy remains intact. But it does highlight concerns about the potential use of the documents required to be maintained, which contains, by definition, only allegations of sexual misconduct.

Related Legislation

AB 1867 is not the only potential new law in this summer of #MeToo. Also heading to the Governor’s desk is AB 3109, which would void any contractual provision that waives a party’s right to testify about criminal conduct or sexual harassment by the other contracting.

Also being presented to the Governor is AB 3080—which we recently highlighted here. This bill would outlaw mandatory arbitration agreements between businesses and employees or independent contractors, and thus ensure that harassment complaints get aired in public lawsuits instead of private arbitrations. Further, AB 3080 would prohibit any contractual rule against disclosing instances of sexual harassment.

Nine other bills addressing workplace harassment are currently wending their way through the Legislature, their fates still unknown:

On the Assembly Floor:

  • The potentially onerous SB 1300 would (1) amend FEHA by expanding an employer’s potential liability, (2) prohibit a release of claims under FEHA or a nondisclosure agreement (with certain exceptions) in exchange for a raise or a bonus or as a condition of employment or continued employment, and (3) prohibit a prevailing defendant from being awarded fees and costs in certain circumstances.
  • SB 1038 would impose personal liability under FEHA for retaliating against a person who has filed a complaint against the employee, testified against the employee, assisted in any proceeding, or opposed any prohibited practice.
  • SB 1343 would expand sexual harassment prevention training requirements to employers with five or more employees and would require that Department of Fair Employment and Housing (DFEH) materials be made available in multiple languages.
  • SB 820 would void provisions in settlement agreements that prevent the disclosure of facts relating to sexual assault, sexual harassment, sex discrimination, and failure to prevent sex-based harassment and discrimination.
  • SB 224 would give additional examples of professional relationships where liability for claims of sexual harassment may arise and authorize the DFEH to investigate those circumstances.

On the Senate Floor:

  • AB 2079 would expand requirements when applying to register as a janitorial business and expand sexual harassment prevention training.
  • AB 1870 would extend the period to file an administrative charge with the DFEH alleging an unlawful employment practice under the FEHA. The current deadline is one year from the time the alleged incident. AB 1870 would extend the deadline to three years.
  • AB 2338 would require talent agencies to provide to adult artists, within 90 days of retention, educational materials on sexual harassment prevention, retaliation, nutrition, and eating disorders. Talent agencies would also have to retain, for three years, records showing that those educational materials were provided.
  • AB 3082 would require the state Department of Social Services to develop or identify educational materials addressing sexual harassment of in-home supportive services (IHSS) providers, develop or identify a method to collect data on the prevalence of sexual harassment in the IHSS program, and provide a summary of those items to the Legislature by September 30, 2019.

Stay tuned for updates on which, if any, #MeToo bill will make it over the enactment finish line, adding to the body of work that makes California employment law the peculiar wonder that it is.

Seyfarth Synopsis: As of August 30, 2018, California businesses must provide the public with more information about dangerous chemicals present at the business location. Many California employers will comply with the new requirements through the Cal/OSHA-required workplace hazardous communication program. For occupational exposures that do not meet the thresholds for HazMat communications, posting new signs will meet the requirements.

California’s ubiquitous Proposition 65 warnings, which warn the public at large of the presence of known cancer-causing chemicals, are receiving a makeover. Beginning August 30, 2018, regulations enacted by the Office of Environmental Health Hazard Assessment will require businesses to provide “clear and reasonable” warnings regarding Prop 65 listed chemicals. For businesses in general, this new requirement typically will mean displaying signs advising the public of known carcinogens on site. (Technically, California does not require the use of these signs, but they provide a safe harbor for businesses because they are deemed compliant with Proposition 65; it is more risky to rely on a homegrown Prop 65 sign.)

The new signs will display the name of at least one chemical that prompted the warning; convey more directly the risk of exposure for consumer products (e.g., saying the product “can expose you to” a listed chemical, rather than that the product “contains” a chemical); and refer to a website that will provide additional, relevant information.

For employers, however, not much will change. Employers already must warn employees of hazardous exposures, as defined by Cal/OSHA standards, occurring at the workplace. Most employers satisfy that duty by implementing a hazardous communication program that complies with Cal/OSHA standards. Employers may continue to do so under the revised Prop 65 regulations. In that sense, a compliant HazCom program (which already requires information about present hazards, employee training, and the availability of safety data sheets) will continue to provide a safe harbor to employers.

Some occupational exposures to listed chemicals do not trigger HazCom threshold requirements but nonetheless are covered by Prop 65. In those cases, Cal/OSHA still permits employers to use their HazCom program to comply. Employers may choose instead to use the new Prop 65 warning signs.