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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What Will Employers Have to Do?

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

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

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

What Will the SOS Do with the Data?

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

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

No Per Se Violations of the California Fair Pay Act

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

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

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

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

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

Will the Gov Sign One or Both of These Bills? 

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

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

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

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

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

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

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

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

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

Edited by Chelsea Mesa.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Seyfarth Synopsis: California courts are often hostile towards defendants that seek to require litigious employees to honor their arbitration agreements. The defendant’s plight might seem more stark still if the defendant has not itself signed the agreement. But defendant employers still have means of enforcing such agreements, which can be especially significant in class actions claiming joint employment. 

Despite the strong federal policy favoring arbitration, it is no secret that enforcing arbitration agreements in California can be tough. The task is tougher yet for the defendant that finds itself being sued by someone with whom the defendant has never had a contractual relationship, although she has signed an employment arbitration agreement with a co-defendant. This is because, under the general rule, one must be a party to an arbitration agreement in order to invoke it.

With recent waves of litigation seeking to expand the scope of joint employment, the issue of enforcing arbitration agreements on behalf of nonsignatories has become increasingly important. One typical situation involves a staffing company being sued by an employee who, looking for a deeper pocket, also sues the staffing company’s client. In another typical situation, a franchisee’s employee sues both the franchisee and the franchisor. Suppose, in both situations, the employer and the employee have agreed to arbitrate any claims between them. But in both situations, the upstream defendant (in our situations, the client or the franchisor) has never had a chance to negotiate an arbitration agreement with the plaintiff, as the plaintiff and the upstream defendant have never had any contractual relationship at all. In those cases, the upstream defendant experiences the worst of both worlds: it is being sued as the plaintiff’s “employer” and yet, not really being the plaintiff’s employer, the upstream defendant has never had the chance to implement an arbitration agreement with the plaintiff.

As it turns out, there is hope for enforcing the arbitration agreement on behalf of the upstream defendant in these situations, even though it never signed the agreement. There are three exceptions to the nonsignatory rule. Application of the first two can depend on how the claim is pleaded. Application of the third is relatively sure, if the upstream defendant plans properly to assure itself that the arbitration agreement in place is adequate. We discuss each of the three exceptions below.

Agency

Nonsignatories may enforce an arbitration agreement under an agency theory. If the plaintiff claims that a defendant acted as the agent of a party to an arbitration agreement, then the non-party defendant may enforce the agreement. This claim often arises where the plaintiff alleges that the non-signatory defendant was a joint employer. Earlier this year, a California appellate case upheld the enforcement of an arbitration agreement under this very theory. Employers seeking to avail themselves of this theory should carefully evaluate the allegations in the complaint against them. If they meet these standards, then asserting an agency theory may be a successful way to enforce the agreement.

Equitable Estoppel

A lesser known exception available to nonsignatories seeking to enforce an arbitration agreement is equitable estoppel: a nonsignatory defendant can compel the signatory plaintiff into arbitration when the claims against the nonsignatory are “intimately founded and inextricably intertwined” with the underlying contract obligations. Equitable estoppel applies when the claims are based on the same facts and inherently inseparable from the arbitrable claims against the signatory defendant. A California court recently acknowledged this theory in the employment context, particularly because the plaintiff made no effort to distinguish between his claims against his employer (the signatory) and the non-signatory defendant.

Again, when considering raising this argument, it is important to carefully analyze the allegations in the complaint. Should they be the same against all defendants, equitable estoppel may be an option for enforcing the agreement.

Third Party Beneficiary

While the first two ways for a nonsignatory to enforce an arbitration agreement may depend on how the plaintiff pleads the case, a more certain basis for enforcement exists where the language of the arbitration agreement clearly expresses an intent to allow nonsignatories to enforce it. The intent to thus benefit a third party can appear even if the agreement does not specifically identify the third party by name. It would be enough if the third party belongs to the class of clearly identified beneficiaries.

The third-party beneficiary exception places a premium on the adequacy of the arbitration agreement’s language. The employer that signed the agreement—the staffing agency, for example, or the franchisee—will have every incentive, as a good corporate citizen, to see that its arbitration agreement benefits not just itself but also potential upstream defendants, such as the staffing agency’s client or the franchisee’s franchisor. And the potential upstream defendant, of course, will be more inclined to deal with a potential joint employer if that employer has in place an adequate arbitration agreement that properly addresses issues of enforcement and that provides, where appropriate, for waiver of class or collective or representative arbitration.

Navigating issues enforcing arbitration agreements in California can be complicated. If you would like assistance in drafting an agreement or help enforcing an agreement in the defense of a lawsuit, please contact one of Seyfarth Shaw’s attorneys.

Seyfarth Synopsis: The Trump Administration’s hard line on immigration has concerned undocumented immigrants who want to raise wage claims. The LWDA recently reaffirmed a commitment to protect workers regardless of their immigration status.

California has noticed the Trump Administration’s immigration initiatives. Here, as elsewhere, California charts its own path. The state’s labor law enforcement officials worry that the immigration crackdown has panicked undocumented workers, causing them to withhold complaints against their employers, for fear of deportation. Indeed, some undocumented workers reportedly have declined to accept unpaid wages owed to them, and have refused to cooperate with government investigations. There have been reports of ICE agents showing up at California Labor Commissioner proceedings to remove undocumented workers who are appearing to prosecute their labor claims against their employers.

On May 1, 2017, the LWDA reaffirmed its commitment to worker protections regardless of their immigration status:

Just because the federal administration has changed, our laws and policies have not. … We will not tolerate the use of immigration status as a tool of retaliation against workers who are pursuing their rights under California law. … The California Labor and Workforce Development Agency and its partner departments reiterate that we never ask for – nor do we collect – the immigration status of any worker who files a health and safety or wage theft claim with our offices. It has been longstanding state policy that our labor laws apply to all workers, regardless of immigration status, and that the immigration status of a worker is unnecessary information to enforcing our laws.

The full press release appears here.

Thus, regardless of what the Trump Administration does, the LWDA is making it clear that California’s labor protections apply to all employees – regardless of their immigration status – and that the LWDA will ensure that immigrant workers know that California workplace protections apply to them.

The LWDA’s statement reminds California employers that they can still be subject to liability, fines, and investigations for Labor Code violations no matter what the federal government does. Immigration status remains, in the view of the LWDA, irrelevant to the enforcement of California wage and hour laws. Thus, employers should not treat immigrant workers differently because of their status.

California wage and hour law can be difficult to navigate. If you would like to review your policies for compliance, you may contact one of Seyfarth Shaw’s attorneys for assistance.

Edited by Michael Wahlander.

Seyfarth Synopsis: The DLSE enforces California labor laws. In two recent enforcement actions, the DLSE collectively recovered over one million dollars, so California employers should read on to find out more about this robust administrative agency.

What Is The DLSE And Why Should Employers Care?

The California Division of Labor Standards Enforcement (aka the DLSE or the Labor Commissioner’s Office) is a recurring character in our blog. Usually we discuss new guidance the DLSE has offered. But the DLSE serves another function as well: it enforces the statutory provisions governing wages, hours, and working conditions of employees, and enforces the wage orders promulgated by the Industrial Welfare Commission. The DLSE’s mission is to “ensure a just day’s pay in every workplace in the State and to promote economic justice through robust enforcement of labor laws.”

To carry out its mission, the DLSE has free access to “all places of labor.” The Labor Commissioner can issue subpoenas to compel the attendance of witnesses and parties or the production of books, papers, and other records. And if employers do not comply with the subpoena, the DLSE can go to court to force compliance. In a nutshell, the DLSE has broad authority to inspect workplaces for wage and hour violations, investigate retaliation complaints, adjudicate wage claims, and prosecute actions on behalf of employees in civil court.

So How Does That Work?

The DLSE executes its mission through various mechanisms. During the 2015-16 fiscal year, the DLSE inspected over 2,400 worksites and issued citations for 2,100 violations. Most citations were for failure to carry workers comp insurance or to issue an itemized wage statement. The inspections led to over $18 million in penalties.

The DLSE also conducts payroll audits, to identify wage violations based on misclassification of employees or misreporting of time. Last year DLSE audits resulted in over $25 million in wage and civil penalty assessments.

What Are The DLSE’s Priorities?

Given the breadth of the DLSE’s authority, and the number of penalties it assesses, it has a wide array of enforcement priorities. We focus here on cases that the Labor Commissioner has deemed significant enough to highlight on the DLSE website.

On June 27, 2017, the DLSE announced it recovered over $48,000 in back wages for a convenience store clerk after the DLSE hearing officer found the clerk was owed minimum wage and premium pay for overtime work. The clerk, acting without an attorney, filed a wage claim in March to seek $14,520 in unpaid regular wages. The hearing officer, finding the clerk was actually owed much more, awarded him $42,980—$22,162 in regular and overtime wages, $14,707 in liquidated damages, $3,586 in interest, and $2,524 in waiting time penalties. The Labor Commissioner noted: “This case shows that when workers exercise their labor rights and come forward to report wage theft, they can do so on their own without an attorney, they can receive the wages they are owed, and in some cases even more.”

The DLSE has also recently defended a judgment it won for five truck drivers on the basis that they had been misclassified as independent contractors and were entitled to reimbursement for expenses and unlawful deductions. The defendant appealed the administrative award, arguing that the Labor Commissioner lacked authority because the claim was preempted by the Federal Aviation Administration Authorization Act. The trial court rejected that argument and found all five drivers were misclassified as independent contractors. The judgment in their favor was for $958,660 plus attorney’s fees and costs.

These cases highlight a few important reminders:

  • An employee does not need an attorney to prosecute claims for wage and hour violations.
  • The DLSE focuses on adjudicating wage and hour claims and is not afraid to pursue these claims in court.
  • California employers should ensure their wage and hour practices remain compliant and that any potential misclassification issues are properly reviewed—or risk judgment by the DLSE and the payment of attorney’s fees and costs if an adverse ruling is appealed and the DLSE succeeds in court.

Please contact your favorite Seyfarth attorney for assistance with remaining compliant with California’s labor laws.

Edited by Michael Cross.

Seyfarth Synopsis:  As if high rent and California’s peculiar laws were not enough to worry about, San Francisco employers must also comply with City-specific ordinances. Trailblazing City requirements often exceed state laws and have sometimes been harbingers of state-level enactments. One might say that San Francisco, with its distinctive laws, is to California what California is to the rest of the country. We highlight the Big Eight SFO peculiarities, below.

Minimum Wage

Minimum wage is an example of San Francisco taking the lead and inspiring changes to state law. On July 1, 2017, San Francisco’s minimum wage officially increased to $14.00 per hour; on July 1, 2018, it will jump to $15.00. The rates apply to all employees who work at least two hours per week within the City or County of SF. The City approved these rate increases years before the California Legislature followed suit in passing the Fair Wage Act of 2016, which mandated an annual state-wide increase until it reaches $15.00 in 2020. Might the City then push to exceed this amount come 2020?

Paid Sick Leave

Paid sick leave is another area where City entitlements differ from those available under state law. San Francisco says that all employees, including part-time and temporary workers, are entitled to paid sick leave when they are ill, require medical care, or need to care for their family members or designated person. While state law currently provides employees with three days (24 hours) of paid sick leave for most of the same reasons, the City offers employees significantly more protected paid time off.

San Francisco employers with fewer than 10 employees must allow workers to accrue up to 40 hours, and those with 10 or more employees must allow accrual up to 72 hours. Not only are employees thus entitled to two to three times what the state mandates, but any unused days also carry over year to year (subject to the above accrual caps). Remember that employers must comply with both state and City laws, as satisfying one does not satisfy the other. Originally enacted in 2007, the City amended its paid sick law as of January 1, 2017, so check out the City’s FAQs for additional updates.

Paid Parental Leave & Family Friendly Workplace

San Francisco has its own take on California’s family-related leave programs—with two separate but related ordinances. You may recall that California’s Paid Family Leave offers six weeks of partial pay/wage replacement (after an eight-day waiting period) to employees who are otherwise entitled or permitted to take time off to bond with a new child or to care for a seriously ill family member. The California Family Rights Act (“CFRA”) also mandates that covered employers give 12 weeks of unpaid, protected leave within a year to eligible employees for a child’s birth, adoption, or foster placement, for the employee’s own serious medical condition, or to care for a seriously ill or injured family member. To be eligible for CFRA leave, an employee must have worked for the covered employer for at least a year and have clocked 1250+ hours.

In San Francisco, by contrast, an employee needs only eight hours per week on a regular basis for six months before taking advantage of its Paid Parental Leave benefits. While matching the state’s six weeks of state (EDD) paid time for new child bonding, San Francisco requires that the employer also pay the leave in the form of supplemental compensation that, in conjunction with California’s Paid Family Leave benefits, equals 100% of the employee’s gross weekly wages. Currently, this law applies to employers with 35 or more employees (regardless of location) and employees working 40% or more of their hours in San Francisco. Beginning January 1, 2018, this law will expand to include all employers with 20 or more employees.

San Francisco has a separate ordinance that attempts to make what is often a difficult time easier for individuals who have family caregiving obligations. Employees who have worked eight hours per week for six months can request a flexible or predictable schedule to assist with these responsibilities. Specifically, the law applies to employers with 20 or more workers (regardless of location) and covers caring for children under 18, seriously ill family members, and parents of the employee who are over 65. San Francisco wants the state to know that family friendliness begins here!

Health Care Security

San Francisco’s mandatory health care law ensures that employees are cared for, too. Employers must make health care expenditure payments each quarter for every employee who has been working more than 90 days. Employers with fewer than 20 employees are exempt altogether, but employers with 20-99 employees must spend $1.76 per hour payable per each employee, while those with 100+ must spend $2.64 per hour. The City allows these payments to be made to the employee directly, to the City, or as a contribution to a reimbursement program. Under this ordinance, the City may impose several different penalties for non-compliance, so getting caught not paying these expenditures would certainly be worse than catching a cold!

Fair Chance (SF’s Version of “Ban-the-Box”)

The City does not believe that having been behind bars should necessarily bar the employment of qualified individuals. The Fair Chance ordinance aims to make work more accessible and put applicants with prior arrests or convictions on an even playing field. All employers with more than 20 employees must state in job solicitations that qualified applicants with arrest or conviction records will be considered. Employers also must not ask about such records until after a live interview or a conditional offer, at which time only arrests or convictions directly related to the ability to perform a given job may be considered in the hiring decision. An employer that chooses not to employ an applicant with a record must first allow the individual a chance to respond with evidence of inaccurate information, rehabilitation, or other mitigating factors.

California currently prohibits employers from asking about certain criminal records, including arrests that did not result in criminal convictions and convictions that have been dismissed or expunged. As of July 1, 2017 (per new FEHC regulations that we discussed here that are similar to San Francisco’s law), California employers may not consider criminal records in hiring decisions that would adversely affect individuals belonging to a protected class. If there is a disparate impact, then employers must show that their background check policy is “job-related and consistent with business necessity.” Before making a decision based on criminal records, employers must conduct an individualized assessment that allows anyone screened out by the policy to respond with proof that the background check is inaccurate or with reasons why adverse action should not be taken.

Formula Retail Employee Rights

Whether it be disrupted budgeting, inconvenience, or some other reason, employees can get upset when their work schedule suddenly changes; San Francisco has a law for that. Chain stores with 40+ locations worldwide and 20 or more people working in San Francisco must provide notice of the work schedule two weeks in advance. In addition, employers must provide “predictability pay” whenever an employee’s schedule changes with less than a week’s notice, and if an on-call employee is required to be available but is not called into work during the shift, the employer must still pay them for that time.

These same employers must offer (in writing) any available extra hours to current qualified part-time employees before they can hire someone new to cover the workload. If an establishment is sold, the successor employer must retain, for 90 days, any eligible employee who worked longer than six months before the sale. San Jose voters passed a comparable ordinance, and new legislation was recently introduced in the California legislature with aims to enact a similar law. Beware of these special laws that apply “within the City and County” soon getting a California-sized expansion!

Lactation Accommodation

In June 2017, the San Francisco Board of Supervisors approved specific legislation requiring employers to provide a private space for new mothers to pump their milk. The ordinance goes into effect January 1, 2018, and calls for a clean space that contains a chair, access to electricity, and surface space for a breast pump. In addition, the employee’s workspace must be in close proximity to a sink with running water as well as a refrigerator. Subject to certain exceptions, if such a space does not exist, then one must be constructed. Employers will be required to distribute the company’s lactation accommodation policy to all employees at the time of hiring.

While state and federal law mandate that employers make reasonable efforts to provide new mothers with lactation breaks throughout the workday, San Francisco’s more expansive legislation may very well be a predictor of what’s next to come on the state level.

We will keep you informed of updates and changes to these ordinances as violations can come with hefty penalties or result in administrative investigations and civil suits. It should be noted that some exceptions and exemptions apply, and those details and additional requirements can be found on the San Francisco Office of Labor Standards Enforcement website. To ensure your company is compliant, or if you have questions about anything mentioned here, Seyfarth’s Labor and Employment attorneys are available to assist you.

Edited by Michael A. Wahlander.

Seyfarth Synopsis: On July 17, 2017, the California Fair Employment and Housing Council (FEHC) heard public comments on its proposed regulations covering national origin discrimination under the FEHA. Discussion centered on employer-imposed language restrictions, English proficiency requirements, and immigration-related employment practices. Look for final regulations later this year. 

The FEHC kicked off its third meeting of the year, this time in San Francisco. Prominent on the agenda: the proposed and rapidly advancing national origin discrimination regulations. As stated in the FEHC’s notice of the meeting: “The overall objective of the proposed amendments is to describe how the [FEHA] applies to the protected class of national origin in the employment context, primarily by centralizing and codifying existing law, clarifying terms, and making technical corrections.”

A call to enact these regulations first came from Legal Aid at Work (an employee-oriented legal services organization formerly known as the Legal Aid Society, Employment Law Center), during the FEHC’s August 31, 2016 hearing. The FEHC quickly created a subcommittee and drafted regulations, which we previously reported on here, that largely mirrored the EEOC’s guidance on national origin discrimination.

At the July 17 hearing, public comments revolved around (a) language restrictions (“English only” rules), (b) employer requirements for English language proficiency, (c) discovery as to an individual’s immigration status during the liability phase of any lawsuit or other proceeding to enforce the FEHA’s prohibition of national origin discrimination, and (d) expanding the definition of what constitutes harassment on the basis of national origin. The only public comments received at the hearing were from employee-leaning individuals and groups.

English only. The draft regulations would make it an unlawful employment practice for an employer to adopt a policy that creates an “English only” rule, unless (1) the rule is job-related and consistent with business necessity, (2) the rule is narrowly tailored, and (3) employees get effective notice of when and where the rule applies and what consequences result from a violation.

The regulations would also provide that an English-only policy would not be valid simply for promoting business convenience or reflecting customer preference. Representatives of Legal Aid at Work emphasized at the hearing that the latter should be amended to state a co-worker preference, not the customer’s.

Further, the regulations would explicitly presume that English-only rules violate FEHA unless the employer can prove “business necessity”—defined narrowly as “an overriding legitimate business purpose” that is necessary to the safe and efficient operation of the business, where the policy effectively serves that purpose, and where there is no alternative to the language restriction that would serve the business purpose as well, with less discriminatory impact. One commentator at the hearing argued that the FEHC should expand this presumption to find a violation if there is no effective employee notification about the language restrictions. Legal Aid at Work also called for the FEHC to draft a new section to address how an English-proficiency requirement relates to an employee’s ability to perform the job. These folks would like CA to distinguish itself from the reasoning of Garcia v. Rush-Presbyterian-St. Luke’s Medical Center, in which the court approved an employer’s requirement for verbal and written English proficiency in part because English was the dominant language in the area.

Discovery of Immigration Status. The FEHC also heard public comments to clarify the complex rule about when discovery into an individual’s immigration status is allowed during the liability phase of a proceeding. The proposed regulations would permit such discovery “only when the person seeking to make the inquiry has shown by clear and convincing evidence that such inquiry is necessary to comply with federal immigration law.” The commentators argued that mere possession (or lack) of a driver’s license would not constitute “clear and convincing evidence,” as all California residents are eligible to receive a license, regardless of immigration status.

Expansion of “harassment.” A representative of the California Employment Lawyers Association (a group of plaintiffs’ lawyers calling themselves an employee-rights group) called for expansion of the harassment portion of the regulations, to include specific reference to banning creation of a hostile work environment on the basis of national origin. Speakers also asked that the FEHC expand what would constitute as per se harassment to include deportation threats against an individual’s blended family members (i.e., step-parents, step-aunts and uncles, and step-children).

The comment period for the proposed regulations closed at 5 p.m. on July 17th. We anticipate the FEHC will consider all comments before issuing a final statement of reasons and potentially revising the proposed regulations.

We will keep you apprised of what the FEHC opines next on the topic of national origin regulation. For advice on how these regulations may affect your business, reach out to your favorite Seyfarth attorney.

Edited by Colleen Regan.