Overtime Pay Laws – California Supreme Court Takes on Department of Labor

July 11, 2016 by

Overtime Pay LawsOvertime pay laws. Five employees filed a claim against Encino Motorcars, LLC because they were denied overtime pay. According to their claim, they were required to work from 7 AM to 6 PM at least five days a week. They argued that under the Fair Labor Standards Act they were entitled to receive at least one-and-a-half times their regular salary for any time they worked over 40 hours per week.

The plaintiffs worked as service advisors, which means that they encouraged the dealership’s customers to buy services, accessories, and replacement parts for their vehicles. Whether such employees are eligible for overtime has been a matter of contention for quite some time.

Overtime Pay Laws – A Long History of Governmental Indecision

Congress passed overtime pay laws legislation in 1961 that exempted auto dealership employees from overtime pay. Then in 1966, Congress repealed that overtime pay laws exemption, and replaced it with a smaller exemption, which applied to “any salesman, partsman, or mechanic primarily engaged in selling or servicing” vehicles.

The U.S. Department of Labor (DOL) issued an overtime pay laws regulation in 1970 that included a definition of “salesman.” It clarified that service advisors and service salesman are not exempt from the overtime statute. In 1978, the DOL reversed its position and issued a ruling asserting that service advisors could be exempt. In 2008, the DOL proposed a rule stating that service advisors are covered by the exemption.

In 2011 the DOL took the opposite stance and chose not to proceed with the rule. Instead, the DOL issued a rule which stated that the term “salesman” refers only to an employee who sells automobiles, trucks, or farm implements – which would mean that service advisors are entitled to overtime pay.

The Overtime Pay Laws Case

At trial, the U.S. District Court for the Central District of California sided with the employer. It held that under the statute passed by Congress, service advisors are exempt from overtime. On appeal, however, the Ninth Circuit overturned the ruling and agreed with the DOL’s position that the overtime exemption does not include service advisors.

When the case went to the Supreme Court, the Court was presented with the issue of how much deference should be given to the DOL’s interpretation of the overtime exemption statute. In its ruling, Encino Motorcars, LLC v. Navarro, the majority held that the DOL failed to meet its duty to provide a “reasoned explanation” as to why it reversed its stance. The opinion points out that the industry had relied on the prior policy to determine whether employees were exempt, and holds that while the DOL was required to show that it had good reasons for reversing its course, it instead said “almost nothing.”

The case was remanded to the Ninth Circuit. The Court of Appeals was instructed to reconsider the issue without showing deference to the DOL’s interpretation. [Read more…]

Filed Under: Overtime Violations Tagged With: , , , , , , ,

Wrongful Termination Complaint Thomsen v. Georgia-Pacific

July 6, 2016 by

Wrongful Termination ComplaintWrongful termination complaint Thomsen v. Georgia-Pacific Corrugated, LLC. How far must an employer go to accommodate a worker’s disability? Jan Thomsen worked at a corrugated container plant in Madeira, California for approximately 23 years. He sustained a shoulder injury on the job in 2012 and returned to work in 2013 after undergoing surgery. He informed his employer, Georgia-Pacific Corrugated, LLC, that he was now unable to perform the responsibilities of his previous position as a cut and die operator. He also provided verification from his doctor that his condition prevented him from performing certain responsibilities such as carrying anything that weighs more than 30 pounds.

Thomsen was then assigned a position as an assistant end gluer, which he believed would be a good match for his capabilities. However, after performing the job, Thomsen told his employer that the duties of the new position would need to be modified to accommodate his disability. He was told by an HR employee to return to his doctor, to determine whether additional restrictions were necessary.

Thomsen did not return to his doctor. He was fired shortly afterward, for refusing to work an overtime shift. Thomsen then filed a wrongful termination complaint against Georgia-Pacific. One of his claims was that his employer violated California’s Fair Employment and Housing Act (FEHA) by failing to provide reasonable accommodation for his disability. At trial, Georgia-Pacific moved to dismiss this claim.

Many employers would look at these facts and conclude that Georgia-Pacific clearly had the law on its side. After all, when Thomsen was unable to perform his old job due to his injuries, Georgia-Pacific assigned him a new one – one that Thomsen agreed was within his capabilities. And when Thomsen asserted that he was unable to perform his new job, Georgia-Pacific’s response was to ask for documentation, rather than firing or suspending him.

But according to a federal court, it is not that simple. The U.S. District Court for the Eastern District of California rejected Georgia-Pacific’s motion to dismiss Thomsen’s claim that Georgia-Pacific failed to accommodate his disability. The court found that a reasonable jury could find that Georgia-Pacific was obligated to engage with Thomsen to assess whether modifications to the position were possible.

Wrongful Termination Complaint – An “Interactive Process”

In reaching its conclusion, the court pointed to two particular allegations of Thomsen’s wrongful termination complaint.

  • Thomsen’s wrongful termination complaint alleged that his new position required him, at times, to lift more than 30 pounds – which his doctor had already confirmed was too much for him to handle.
  • Thomsen’s wrongful termination complaint also alleged that a machine operator he worked with refused to accommodate his needs, and kept the machine running even when it was backed up.

Under FEHA, an employer must “engage in a timely, good faith interactive process with the employee or applicant to determine effective reasonable accommodations, if any” after an employee requests reasonable accommodations due to a disability or known mental condition. The court held that a reasonable jury could conclude that after Thomsen expressed concerns about the requirements of his new position, Georgia-Pacific was obligated to engage in a dialogue with him before deciding that he must return to his doctor. [Read more…]

Filed Under: Disability Discrimination Tagged With: , , , , ,

New Fed Regulations Make Workers Eligible for Overtime Pay

June 14, 2016 by

Overtime PayUnder California law, pay to employees whose positions are considered to be executive, administrative, or professional are exempt from overtime pay if their salaries are at least twice the full-time minimum wage. With the current minimum wage in California being $10 per hour, the necessary overtime pay salary level is $41,600 a year. This is a significantly higher level than the overtime pay exemption level under federal law, which is currently $23,660 a year.

However, new federal regulations recently announced by the U.S. Department of Labor will greatly decrease the number of workers who are exempt from overtime pay. Beginning December 1, 2016, the Fair Labor Standards Act will stipulate that full-time workers are not eligible for this exemption unless they make $47,476 per year or more. Thus, many California executive, administrative and professional workers will become eligible for overtime under federal law, even though California law does not currently require it. (As the California minimum wage increases to $15 an hour, however, California’s exemption level will once again become higher than the federal level.)

The regulations also make several other significant changes, including the following:

A New Definition of “Highly Compensated” Employees

The FLSA establishes a salary level at which an employee is considered “highly compensated.” If an employee has a salary that is at this level or higher, and the employee performs at least one duty of “an executive, administrative or professional employee,” then he or she will be considered a highly compensated employee who is exempt from the overtime requirements. (The FLSA clarifies that an employee’s primary duty must include office or non-manual work in order to be exempt as a highly compensated employee.)

This salary level is currently specified as $100,000 per year. However, starting on December 1, that number will increase to $134,004. According to the White House, this change is being made because employees at this salary level are more likely to perform the kinds of job duties that would make them exempt.

Inclusion of Bonuses

One change that will likely please employers is that non-discretionary bonuses, incentive payments, and commissions can now be included when determining whether an employee meets the salary level requirement. If an employer is tabulating an employer’s salary to determine his or her exemption status, these types of income can account for up to 10 percent of the total salary.

For example, if an employee has a salary of $45,000, and also earns $6,000 in bonuses, then the employee’s salary would be tabulated as $50,000. (The full $6,000 would not be counted, because only 10%  of the employee’s income can consist of bonuses, incentive payments, or commissions.) The employee would thus be exempt, so long as he or she meets the other requirements. [Read more…]

Filed Under: Wage and Hour Law Tagged With: , , , , , , , , ,

Can Vicarious Liability Extend to Employee After Hour Activity?

June 7, 2016 by

Liability, Vicarious LiabilityCan Vicarious Liability extend to what your employees do after hours? Employers do not generally concern themselves with what their employees do after they punch out at the end of the day. But a recent $1.5 million jury verdict may cause California employers to pay close attention to what their employees do if they choose to remain on the premises after the ends of their shifts – particularly if they run establishments that serve alcohol.

The case in question involves an employee of the restaurant chain On the Border. Vincent Quintanilla worked at the On the Border located in Mission Valley, San Diego. On the evening of December 8, 2012, some of his fellow employees held a birthday celebration for him. After he finished his shift, he had drinks with his coworkers at the restaurant for several hours, and then drove away.

Later that night, Quintanilla’s vehicle collided with a skateboarder named Kai-Yen Cheng. Cheng suffered a broken leg, as well as other injuries. After the incident, Quintanilla fled the scene. Authorities later determined that Quintanilla was responsible. He was arrested, and eventually pleaded guilty to felony hit-and-run driving.

Cheng sued On the Border for his injuries, arguing that Quintanilla was acting within the scope of his employment when the accident took place. The attorneys representing On the Border argued that Quintanilla was a customer at the time, and that the restaurant would therefore not be liable for his actions. The jury sided with Cheng, and awarded him $1.5 million.

“Respondeat Superior” and Vicarious Liability in California

The concept of an employer being held responsible for the tortious actions of its employees when they are acting within the scope of their employment is called “respondeat superior.” California’s policy on respondeat superior is laid out in the case of Kephart v. Genuity, in which a family sued an internet services company after a “road rage” incident caused by one of its employees.

The employee forced the Kephart family’s vehicle off the road before heading to an airport for a business trip. Genuity argued that the employee was far removed from his employment at the time of the accident, and so the company should not be held responsible for its employee’s actions. A jury agreed and found that Genuity was not liable.

In upholding the jury’s decision, a California Superior Court ruled that employers may be considered vicariously liable for the tortious actions of their employees, if the actions result or arise from pursuing their employers’ interests. The Court also states that the relevant issue was whether the employee was acting within the course and scope of his employment. (The opinion holds that the jury was reasonable in determining that the employee’s misconduct did not occur within the course and scope of his employment with Genuity.)

In the case involving On the Border, the plaintiff’s attorneys argued that Quintanilla became intoxicated in the course and scope of his employment because his employer regularly allowed its employees to consume alcohol on its premises and received a monetary benefit for doing so. If the case is not overturned on appeal, it could have serious consequences for California businesses. [Read more…]

Filed Under: Employment Law Tagged With: , , , , , ,

Do Your Employees Have a Right to Sit?

May 17, 2016 by

Right To SitThe right to sit. California business owners who require their employees to stay standing throughout the workday may need to rethink their policies. In the case of Kilby v. CVS Pharmacy, Inc., the Ninth Circuit Court of Appeals has ruled in favor of an employee who filed a class action complaint because she and other employees were not allowed to sit down while doing their jobs.

The case dealt with the language of Wage Order 7-2001 of California’s Industrial Welfare Commission. This order contains a provision that all working employees “must be provided with suitable seats when the nature of the work reasonably permits the use of seats.”

The Right to Sit

CVS argued that in order to determine whether the nature of the work reasonably permits the use of seats, a court must consider all of the employee’s tasks, and determine whether the position should be classified as a “sitting” job or a “standing” job. The Ninth Circuit disagreed, holding that this type of “all-or-nothing” approach is too strict.

The Court held that if an employee spends a substantial portion of a workday at one location doing tasks that can reasonably be done while sitting down, the employee should be allowed to sit while performing those tasks – even if some of the employee’s other tasks must be performed while standing. According to the ruling, when courts consider whether the use of seats would be reasonable, they must examine the employee’s tasks by subsets based on the location in the workspace in which they are performed.

Additional Holdings

CVS argued that courts should accord deference to an employer’s “business judgment” regarding whether tasks should be performed while an employee is standing. The plaintiffs argued that business judgment should not be a factor in the right to sit. The Court held that while employers are allowed to define their employees’ duties, their “mere preference” that an employee perform a task while standing is not a proper factor.

The plaintiffs argued that the physical layout is irrelevant to whether the use of seats is reasonably permitted. The Court disagreed, holding that the layout can be relevant in that it may inform the expectations of what an employee’s job duties will be. However, the Court also held that an employer may not “unreasonably design” a workspace in order to prevent an employee from sitting. (Also, the Court ruled that evidence of seats being used in similar workspaces may be relevant to an inquiry.)

The parties disagreed on whether an employee’s physical characteristics may be taken into consideration of the right to sit. The Court held that the emphasis should be on the nature of the work itself, and not the nature of the employee.

The Court held that there is not a burden on an employee to prove that a particular seat is suitable. The ruling states that the burden instead lies on an employer who argues that there is no suitable seating. [Read more…]

Filed Under: Employee Rights Tagged With: , , , , , , , ,

San Francisco to Require Fully Paid Parental Leave

May 13, 2016 by

Paid Parental LeaveThe San Francisco Board of Supervisors has approved a new paid parental leave law that will allow employees to take up to six weeks of fully paid time off from work to be with a new child. The new paid parental leave legislation is the broadest of its kind in the United States.

What the Fully Paid Parental Leave Law Entails

Some of the most important features of the legislation are as follows:

Covered employees will be able to take the six weeks of fully paid leave to spend time with a newborn child, a newly adopted child, or a new foster child.

The law is intended to supplement the benefits that employees receive through California Paid Family Leave. California Paid Family Leave allows covered employees to receive 55% of their pay for as much as six weeks of family leave. The new legislation compensates employees with the remaining 45% of their salaries during that period.

Employees will not be covered unless they began working for their employers at least 180 days before the beginning of their leave periods, and they work at least 8 hours per week within the city of San Francisco, and they are eligible for California Paid Family Leave for the purpose of “bonding with a new child.” (If an employee’s work hours fluctuate from week to week, a determination will be made based on the average number of hours he or she has worked per week throughout the past three months.)

If an employee works for more than one employer, the employer’s share of that employee’s benefits under the new parental leave law will be based on how much of the employee’s salary is paid by each employer. (This means that if a covered employee earns 60% of his or her salary from a particular employer, that employer will be required to pay 60% of the employee’s supplemental benefits.)

If an employee voluntarily quits a position less than 90 days after the end of his or her leave period, the employee must reimburse the employer for the full amount of the benefits that the employee received under the new law. In addition, before receiving these benefits, an employee must sign a form agreeing to pay back the full amount of the benefits if he or she quits within 90 days of the end of the leave period.

The law will go into effect on January 1, 2017 for employers with 50 or more employees. It will go into effect on July 1, 2017 for employers with 35-49 employees, and on January 1, 2018 for employers with 20-34 employees.

Covered employers will be required to post a notice explaining the law’s provisions. The notice must be written in English, Spanish, Chinese, and any other language that is spoken by at least 5% of the employees at the location. [Read more…]

Filed Under: Parental Leave Tagged With: , , , , , , , , , ,

Employment Discrimination Case Davis v. Farmers Insurance Exchange

April 29, 2016 by

Employment Discrimination CaseWhat happens in an employment discrimination case, if a jury finds that the employer had a discriminatory motive for firing an employee, but also finds that the employer had legitimate reasons and would have fired the employee even without the discriminatory motive?

Courts have long struggled with how to properly resolve these types of cases. The Supreme Court of California laid out its standard in 2013, in the case of Harris v. City of Santa Monica, in which Wynona Harris, a bus driver, alleged that the city improperly fired her because of her pregnancy. The Court ruled that if illegal discrimination is a substantial factor motivating an employee’s firing, but the employer can prove that it would have made the same decision without that motive, then it is improper for a court to award the employee with damages or back pay – or to require the employee’s reinstatement.

However, the Court also held that employers in such cases may still be on the hook for their employees’ attorneys fees and costs. Also, it may be appropriate for a court to take action against the employer to prevent further discrimination in the future by issuing an injunction or declaratory relief.

Employment Discrimination Case – The Davis Ruling

While some forms of relief are available for plaintiffs like Harris, they are not guaranteed. This was reinforced in the 2016 case of Davis v. Farmers Insurance Exchange, in which a California appeals court has applied the rules of the Harris decision.

William A. Davis filed a complaint against Farmers after being terminated from a district manager position. He alleged that Farmers had discriminated against him on the basis of his age, in violation of public policy. When his case was pending, the Harris decision was issued, which led the trial court to instruct the jury that Farmers is not liable for damages if Davis would have been fired even without the presence of age discrimination.

The jury found that age discrimination was a substantial motivating factor in his firing, but also found that Farmers would have fired him anyway for legally permissible reasons. Accordingly, the trial court dismissed the case without awarding Davis any damages. The court also ruled against Davis’s requests for declaratory relief, injunctive relief, and attorney’s fees.

On appeal, the Supreme Court of California ruled that the jury instructions were proper under Harris. Davis had argued that Harris only applied to cases under California’s Fair Employment and Housing Act (FEHA), but the Court held that the jury instructions related to causation and motivation apply to both FEHA cases, and cases involving wrongful termination in violation of public policy.

The Court held that Davis was ineligible for declaratory or injunctive relief because he failed to seek these forms of relief in his complaint, and there was no threat that the wrongful conduct would continue to harm Davis in the future. The Court held that Davis was not entitled to attorney fees, either, because the jury’s verdict did not “result in the enforcement of an important right affecting the public interest,” and it did not provide a significant benefit to others. (The case was remanded for retrial, however, on a separate wage claim.)
 [Read more…]

Filed Under: Employment Discrimination Tagged With: , , , , , , , ,

Forever 21 Arbitration Agreement Upheld by California Supreme Court

April 19, 2016 by

Arbitration AgreementCalifornia Supreme Court clarifies what counts as an “unconscionable” Arbitration Agreement. When Maribel Baltazar took a job with the clothing retailer Forever 21, she signed an employment application that contained an arbitration agreement. The agreement stated that any employment-related disputes she might become involved in would be resolved via arbitration. It also included specific examples of disputes that would be subject to arbitration, such as wage claims, breach of contract claims, and discrimination claims.

In 2011, Baltazar quit her job, and filed a claim against Forever 21 in superior court, alleging discrimination based on sex and race, verbal and physical harassment, and retaliation. Forever 21 moved to compel arbitration, as specified by the arbitration agreement. Baltazar argued that the arbitration agreement was unconscionable, and thus could not be enforced.

The case made its way to the California Supreme Court, and on March 28, 2016, the Court ruled in favor of Forever 21. The decision,  Maribel Baltazar v. Forever 21 Inc. et al., sets important precedents regarding when an arbitration agreement should be considered unconscionable.

The Court’s Arbitration Agreement Reasoning

Baltazar initially won at trial. The trial court ruled that the arbitration agreement in the contract was an unconscionable contract of adhesion, being as it was written on a preprinted form and offered on a take-it-or-leave-it basis. However, both an appeals court and the California Supreme Court disagreed on the issue of unconscionability. The Supreme Court pointed out that while it was a contract of adhesion, it was not unconscionable because there was no element of surprise involved in the agreement, and that Baltazar was not lied to, place under duress, or manipulated into signing it.

One of Baltazar’s arguments was that the arbitration agreement should be considered invalid because it allowed the parties to seek temporary restraining orders or preliminary injunctions. She claimed that this clause was unfair because her employer was more likely than an employee to seek a restraining order or a preliminary injunction. The Supreme Court held that the clause did not confer an advantage on either party because it simply confirmed rights that the parties hold under California law.

Another argument Baltazar made in favor of the agreement being unconscionable was that it listed examples of what kinds of claims are subject to arbitration, and the only examples cited were employee claims. The Supreme Court held that it is acceptable for an employer to list only these types of claims as examples, so long as the wording of the contract makes it clear that all employment-related claims are subject to arbitration. The Court pointed out that the arbitration agreement stated that the claims subject to arbitration “include but are not limited to” the examples given. [Read more…]

Filed Under: Binding Arbitration Tagged With: , , , , , , , ,

California Minimum Wage Hike: Is it Set in Stone?

April 7, 2016 by

California Minimum WageCalifornia minimum wage changes. By the year 2022, some California employers will be required to pay their workers a minimum wage of $15 per hour. Governor Jerry Brown announced on March 28, 2016 that he had reached a deal with the state legislature that will gradually increase the state’s minimum wage.

California Minimum Wage – The Specifics

Pursuant to the deal, California’s minimum wage will rise from its current rate of $10 per hour to $10.50 per hour on January 1, 2017, but only for companies with 26 or more employees. It will then climb to $11 per hour for the year of 2018, then to $12 per hour for 2019, then to $13 per hour for 2020, $14 per hour for 2021, and $15 per hour for 2022.

The minimum wage will remain at $10 per hour for companies with 25 or fewer employees until January 1, 2018. The minimum wage for those companies will climb to $11 per hour for the year of 2019, then to $12 per hour for 2020, $13 per hour for 2021, $14 per hour for 2022, and $15 per hour for 2023.

Is This California Minimum Wage Schedule Certain?

The increases are not guaranteed to take place at these times. As part of the deal, there will be two ways that the increases can be delayed.

The first way is related to the economy. At any point, the governor can “pause” an increase if the state’s economy is bad enough. This can occur if seasonally adjusted statewide job growth has been negative over the past three months, or over the past six months – and if retail sales receipts for the prior 12 months have been negative.

The second way is related to the state’s budget. The governor will be able to pause the increase if at any point in time, the current budget year, or the year after that, or the year after that, is forecasted to be in deficit when the next scheduled increase is taken into account. This is referred to as a “budget off-ramp,” and there is a specification that it may only be used twice.

The deal will also introduce sick leave for in-home supportive services workers. In July 2018, in-home supportive services workers will be guaranteed one sick day. A second sick day will be added in the first July following the implementation of a $13 per hour minimum wage for businesses with 26 or more employees. A third sick day will be added after the minimum wage rises to $15 per hour. [Read more…]

Filed Under: Wage and Hour Law Tagged With: , , , , , , , , ,

California “Gig Economy” Bill Introduced

March 30, 2016 by

Gig EconomyA “Gig Economy” is an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements. Legislation proposed by California Assembly Member Loretta Gonzalez (D – San Diego) would make it easier for some workers currently classified as independent contractors to be regarded as employees. The bill, known as the California 1099 Self-Organizing Act, would create a rebuttable presumption that a worker is an employee if the worker performs services that require a license under the Contractors’ State License Law (or if the worker performs the services for someone who is required to obtain such a license.)

If the bill is passed, the burden of proof will be shifted, so that workers participating in the “gig economy” (that is, who work through hosting platforms such as Uber or Lyft) will be regarded as employees unless their employers are able to prove that the workers are actually independent contractors. It does not, however, grant the workers official employee status, or lay out any rights that the workers must receive.

How the Gig Economy Burden Can Be Overcome

The bill specifies how an employer would go about demonstrating that a worker is an independent contractor. To overcome the presumption that a worker is an employee, the employer would have to show that the following factors have all been met:

  • That the worker has the right to control the performance of the contract, and discretion as to how the contract is performed, and that the primary factor being bargained for is the result of the work (rather than the means by which the work is done),
  • That the worker is “customarily engaged in an independently established business,” and
  • That the worker is genuinely an independent contractor, and that the employer is not just trying to avoid giving the worker employee status.

If you are wondering how an employer could meet the third requirement, and show that the worker is genuinely an independent contractor, the proposed bill includes a list of factors that could be seen as evidence of independent contractor status. This list includes the following factors:

  • Whether the worker has control over when and where the work is performed
  • Whether the worker holds a license pursuant to California’s Business and Professions Code
  • Whether the worker has a substantial investment in the business other than personal services
  • Whether the worker is held out as being in business for himself or herself.

Before introducing the legislation, Gonzalez stated in an editorial in the Sacramento Bee that the legislation is intended to give workers in the gig economy the right to collectively bargain, and the right to form associations. The editorial includes an estimate that 2 million Californians are part of the gig economy. [Read more…]

Filed Under: Employment Law Tagged With: , , , , , ,
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