By: Philip A. Toomey, Esq.
Being an employer with a few, or many, California employees can be confusing, frustrating and difficult. California’s employment laws are unique, complex and sometimes contradictory to the federal rules, or rules followed in the overwhelming majority of other states. Many companies either have California-based employees or, despite having business operations centered in other states, have foreign state residents regularly performing employment duties in California. California will consider any activities carried on in California as being subject to its employment laws.
If 2018 follows previous state trends, as unemployment rates fall (California is currently at 4.9%), claims against employers will likely rise.
“Most Favored Nation” Status
As a starting point, California employees may claim the most favorable protection and benefits provided by either federal, state, or local rules, or rights granted within a collective bargaining agreement (“CBA”). As an example, an employee working in Santa Cruz can assert she was the subject of impermissible discrimination under the federal Equal Opportunity Employment Act (“EEOA”), California’s Fair Employment and Housing Act (“FEHA”), or the city’s Anti-Discrimination Ordinance. Whichever gives more money or affords greater protection is the law that will apply. A disabled employee in San Francisco can assert claims, in the alternative or collectively, under the federal Americans With Disabilities Act (“ADA”), FEHA or the city’s Discrimination Prohibition Ordinance. San Diego employees claiming they have not been paid required wages or overtime can assert claims under the federal Fair Labor Standards Act (“FLSA”), the California Labor Code (“Code”) or that city’s Minimum Wage Ordinance (27 cities, eight (8) counties and one (1) town have adopted some version of a “living wage” ordinance). A Los Angeles hotel worker in the vicinity of the Los Angeles International Airport can claim benefits under that specific industry/overlay district ordinance. A Berkeley worker can assert her employer violated the federal Family Medical Leave Act (“FMLA”), the California Family Rights Act (“CFRA”) or that city’s Family Friendly and Environment Friendly Workplace Ordinance. A San Jose union employee can choose the greater rights afforded under his CBA, or that city’s Opportunity to Work Ordinance. Convicted felons denied employment in Los Angeles or San Francisco can assert their rights were violated under the EEOA, FEHA or those cities’ Fair Chance Ordinances. And after January 1st, Santa Cruz employers who may have “unauthorized” workers may face claims that they failed to comply with the federal Immigration and Control Act, California’s new Immigrant Worker Protection Act (“IWAP”), or that city’s own Anti-Discrimination Ordinance.
Whichever law favors the employee more will be the law that is applied.
Finally, while California is an “at will” state, an employer also must comply with policies set forth in their employee handbook (such as progressive discipline). These policies are afforded “implied-in-fact” contractual status. Known to plaintiff lawyers by the Latin term “gotcha,” many multi-state employers are often surprised to find their handbooks, written to a “nationwide standard” or once written not updated, become a contractual sword instead of a litigation shield.
Joint Employer Liability
California also has its own approach when defining and assessing liability on “joint” employers (expanded even further in 2017). The term “joint employers” implies common ownership or control.
In the Golden State, if an employer obtains workers to perform tasks normally done in that employer’s “usual course of business” from a “labor contractor” (a.k.a “temporary help agencies”, “HR outsourcing” or “professional employee organizations”), the employer unfortunately shares all responsibility and liability for the payment of wages (including overtime) as well as valid worker’s compensation coverage for the assigned employees. In addition, the employer cannot shift to the labor contractor any duties or liabilities under Cal-OSHA. So, in California it is simply untrue an employer can hire Administaff/AccountTemps/Insperity and “contract away” wage and hour, workers’ compensation or workplace safety liability. And if any companies find themselves in the unfortunate position of being a general construction contractor, both the Legislature and the courts have a special “add-on” to the normal problem of getting subcontractors to show up on the job site (see below).
Workplace Privacy and Personnel Records
Although not alone, California is unique in its approach to applicant, employee and workplace privacy, including privacy of personnel and medical records maintained within personal files. California has a specific constitutional provision protecting employees’ “right to privacy.” The easiest way to summarize this area is to say the employee can pretty much say anything they want about the employer on social media. The employer’s response, however, must always be “By law, personnel records of an employee are protected. We can neither confirm nor deny the accuracy of any such statements.”
Covenants Not to Compete
Can a California employee who has been released from work due to sustained unethical work-performance behavior, walk out the door, go up the street to a competitor, and immediately start calling on the very customers or accounts he called on while employed by our client? The short answer is “Of course, why do you even ask?” While most states permit an employer, as a condition of employment, to require employees to sign and comply with reasonable covenants not to compete, California says “nay-nay.” With only certain narrow exceptions (exempli gratia, “none”), covenants not to compete (including non-solicitation agreements that have a similar effect) are unenforceable. In one case, a court seeking to “enforce public policy,” held a requirement to sign a non-enforceable covenant as a condition of employment violated California’s expansive unfair business competition law. Once again, multistate employers have painfully discovered “standard” or “uniform” policies, practices and agreements not only are unenforceable, but provide profitable fodder for California’s class-action harvest.
Disabilities and the Interactive Process
Another important distinction between California state law and federal law involves the “interactive process” for a qualified worker claiming a disability. Under California law, a covered employer must engage in the interactive process. Failure to do so, even if it is ultimately determined no reasonable accommodation could be made to allow the worker to perform the essential functions of their job, amounts to a statutory violation (i.e., fines and penalties). And while Massachusetts has determined an employer is required to allow employees to use medical marijuana as a reasonable accommodation (Barbuto v. Advantage Sales and Marketing (2017) 477 Mass. 456), for at least now California has held an employer is not so required (Ross v. Ragingwire Telecommunications (2008) 42 Cal.4th 920).
Number of Employees
In California, we say if you set up your own company and hire only yourself, you can sue yourself. California-based employers may try to limit the number of employees by having separate operating units. As you might have already guessed, California’s “joint employer” approach requires affiliated business to be combined to total up the number of employees. Some laws, especially local municipal laws involving wage and hour or benefits, have special rules requiring minimum hours worked within a jurisdiction’s territorial limits. For some, there is no definition and no limitation, leaving it to the courts to determine extent and scope of application.
Some laws apply to any employers having one (1) California-based employee. Those include disability insurance, domestic violence, sexual assault and stalking victims leave rights, Cal-OSHA, FEHA, immigration control, injury and illness prevention plans, independent contractors, military leave, required postings and notices, unemployment insurance and workers’ compensation. The remainder of state laws are phased in as the employee counts grows to the astronomical numbers of 2, 4, 5, 15, 16, 20, 25, 50, 75 and 100.
2018 California Law Update
Below are the most significant employment law changes for 2018.
Posting and Notice Requirements
In addition to updates of existing pamphlets on paid family leave, all employers must now provide written notice about the rights of victims of domestic violence, sexual assault and stalking to take protected time off for medical treatment and legal proceedings. All California employers must also post the new transgender rights poster developed by the DFEH.
Recruiting and Hiring
California regulations were adopted that specifically prohibit employers from making any inquiry that directly or indirectly identifies an individual on the basis of sex, gender, gender identity or gender expression. Employers with 5 or more employees are banned from asking about conviction history information on job applications, and from inquiring about or considering conviction history at any time prior to making a conditional offer of employment. Employers are now prohibited from asking an applicant about salary history, or from relying upon salary history in making hiring decisions. An applicant’s salary history may no longer be used to set starting pay. Employers are also now obligated to honor an employee’s stated preference related to gender, name or pronoun on all employment documentation. Residents may choose from three (3) equally recognized gender options- female, male or non-binary.
Exemption from Overtime Pay
The minimum salary threshold for executive, administrative and professional exemptions increased in 2018, together with the minimum earnings requirement for inside salespersons and certain professionals.
Eligibility to Work
In addition to a revised Form I-9, a new law makes it unlawful for California employers to re-verify employment eligibility of certain employees in any manner not allowed under federal law. The IWPA provides California workers with protection from immigration enforcement while on the job. Employers cannot provide worksite access to immigration officials without following specific legal requirements, including requiring warrants.
Wage and Hour Violations by Subcontractors
The California Labor Commissioner recently fined a general contractor $249,879 for wage and hour violations (unpaid overtime, minimum wage, final pay and rest period violations) committed by its drywall and framing subcontractors. The 2017 Labor Commissioner trend expanded “joint employer” liability.
Personnel Records and Privacy
California employers now face restrictions on when they can provide federal immigration enforcement agents access to their business and to employee records. Employers may not voluntarily allow federal immigration enforcement agents to enter any non-public area of the business without a warrant, nor may they give consent to an agent to access, review or obtain employee records. The IWPA also imposes notice obligations to employees and union representatives when the employer faces an inspection. After an inspection takes place, the employer within 72 hours must provide “affected employees” specified information. New FEHA regulations prohibit employers from considering criminal information in employment decisions if doing so would have an “adverse impact” on a protected class, unless the employer can prove the information is job-related and consistent with business necessity.
Drugs, Alcohol and Smoking in the Workplace–
California continues to prohibit smoking in the workplace (irrespective of Prop 64). The federal Department of Transportation has issued a final ruling indicating that state recreational marijuana laws, such as California’s, have no bearing on its regulated drug testing programs.
Wage and Hour Law
The California Department of Industrial Relations updated wage orders to reflect increases in minimum wage. Under the amended wage orders, the Labor Commissioner’s authority to investigate complaints of discrimination or retaliation for protected conduct has been greatly expanded.
Wages, Salaries and Other Compensation
California’s minimum wage is $10.50 per hour for employers with less than 25 employees, $11 per hour for employers with more than 25. The state minimum wage will continue to increase until it reaches $15 per hour. As discussed above, some local municipalities have their own minimum wage ordinances that set a higher hourly rate. In 2017, a court decision held commission sales employees must be paid separately for mandatory rest periods. In the construction industry, general contractors on certain private construction contracts are liable for unpaid wages, benefits or contributions owed by a subcontractor to its employees. Janitorial employers must register annually with the Labor Commissioner, and provide mandatory sexual-harassment pamphlets.
Hours of Work and Recording Time Worked
In 2017, the California Supreme Court ruled a day of rest is guaranteed for each workweek. In 2018, the California Supreme Court will decide if store workers must be paid for time spent undergoing security checks at the end of their shifts. Finally, in 2017 the California Supreme Court issued an important decision holding an employer may not require employees to remain “on-call” during rest periods, even if the employees don’t actually perform any work.
State Disability and Paid Family Leave
Employers with 20 or more employees must provide eligible employees with a total of 12 weeks of time off for baby bonding.
All California employers are required to electronically report.
Health and Retirement Benefits
Employers with 20 or more employees must provide up to 12 weeks of leave to eligible employees and continue health coverage during those leaves. In 2017, a court ordered the EEOC to reconsider rules related to the ADA and the Genetic Information and Nondisclosure Act (GINA). The EEOC has indicated it will issue a notice of proposed rulemaking by August 2018.
Family Medical and Parental Leave
California’s NPLA establishes a two-year mediation pilot program administered by the DFEH to mediate parental leave disputes between employers and employees. Employers with 20 or more employees must provide eligible employees with 12 weeks of unpaid, job protected parental leave.
Vacation, Paid Time Off and Holidays
An employee must be allowed to accrue vacation or paid time off during the period of parental leave provided under the NPLA.
Ensuring Workplace Safety
Employers that have designated cleaning products in their workplace must obtain safety data sheets from the manufacture, and make those safety data sheets available to employees. California’s Proposition 65 requires employers with 10 or more employees to warn any person prior to their exposure to a chemical known by the state to cause cancer, birth defects or reproductive harm. Penalties for non-serious and repeat safety violations were substantially increased. Cal-OSHA will issue a heat illness and injury prevention standard for indoor workers in 2018.
Violence in the Workplace
A new law requires employers to provide immediate support from a nurse case manager when there is an act of domestic terrorism, such as a mass workplace shooting. Cal-OSHA has enacted new workplace violence prevention regulations applicable to healthcare facilities. Healthcare employers must keep a “violent incident log,” and covered employers must establish a workplace violence prevention plan. By April 1, 2018, certain covered employers must provide all necessary personal protective equipment and training on workplace violence.
A new law changes when officers, directors and working partners are excluded from an employer’s worker’s compensation policy. An employer is now required to provide certain written notices to terror attack victims.
A recent 9th Circuit Court of Appeal decision held a California employee could demonstrate discrimination by showing the replacement employee was significantly younger and had inferior experience. DFEH is deleting all gender specific personal pronouns in FEHA. Employers covered by mandatory supervisor harassment prevention training must ensure that any training includes a discussion of harassment based upon gender identity, gender expression and sexual orientation. The DFEH has issued new regulations relating to the use of restrooms and other facilities. The California Fair Pay Act has been extended to cover public employers. Members of the armed services have expanded protection in terms conditions and privileges of employment. Hotels, motels, bed and breakfast inns and other hospitality businesses are now required to post a model human trafficking notice. Bona fide occupational qualifications may no longer include customer preference, association between sex and height, physical agility or strength (i.e., “Gold’s Gym”), and traditional job roles. California employers must post a DFEH notice regarding transgender rights.
A recent 9th Circuit Court of Appeals decision ruled that in some circumstances, hugging can create a hostile work environment if unwelcomed and pervasive. An employer’s poor response to misconduct may support a hostile work environment claim, even if the conduct occurred after hours and was completely unrelated to work. Anti-harassment trainers or educators must have knowledge or expertise in the areas of harassment based on gender identity, gender expression and sexual orientation. Sexual harassment prevention training for agricultural industry employees must be provided in a language understood by that employee.
Disabilities in the Workplace
In 2017, the EEOC obtained a $2 million settlement on behalf of disabled employees who are allegedly fired when they reached 12-months of leave, and the employer failed to engage in the interactive process.
Prior to 2017, the NLRB issued a series of decisions that restricted the ability of an employer to include class action waivers in a workplace arbitration procedure. The 9th Circuit follows the NLRB approach, holding mandatory arbitration agreements that require all claims be brought by employees on an individual basis violate the NLRA. In October 2017, the U.S. Supreme Court heard oral argument on the combined appeals. It is anticipated in 2018, guidance will be provided regarding the use of such waivers in arbitration agreements.
Leech Tishman’s Employment Practice Group can help clients ensure compliance with California’s complex and technical employment laws and can assist clients with defending against civil or administrative actions.
If you have any questions regarding California’s unique employment laws or these employment law updates, please contact Philip Toomey. Phil serves as Leech Tishman’s West Coast Business & Employment Client Relations Partner and practices in the firm’s Employment, Corporate, Litigation and Real Estate Practice Groups. Phil is based in the Leech Tishman’s El Segundo, CA office. He can be reached at 424.738.4400 or firstname.lastname@example.org.
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Leech Tishman Fuscaldo & Lampl is a full-service law firm dedicated to assisting individuals, businesses, and institutions. Leech Tishman offers legal services in alternative dispute resolution, aviation & aerospace, bankruptcy & creditors’ rights, construction, corporate, employee benefits, employment, energy, environmental, estates & trusts, family law, government relations, immigration, insurance coverage & corporate risk mitigation, intellectual property, international legal matters, litigation, real estate, and taxation. Headquartered in Pittsburgh, PA, Leech Tishman also has offices in El Segundo, CA, Chicago, Los Angeles, New York, Sarasota and Wilmington, DE.