California Employment Law Update

California Legislature Mulls New Package Of “Job Killer” Bills

By Anthony J. Oncidi and Nayirie Kuyumjian

The California Chamber of Commerce has just identified a new raft of recently introduced “job killer” bills that have been proposed in the California Legislature.

This year’s list of 27 proposed laws includes measures that would impose additional penalties for an employer’s failure to pay wages; increase the personal income tax for the highest earners in California; ban settlement agreements for claims arising under the Fair Employment and Housing Act (FEHA) and the California Labor Code; and prohibit arbitration of claims arising under FEHA and the California Labor Code.

As in years past, these bills are being pushed by the special interest groups that have the greatest sway in Sacramento: Labor unions and plaintiffs’ lawyers.  CalChamber President and CEO Allan Zaremberg said, “Each bill on this year’s job killer list poses a threat to certainty for employers and investors in our state.”

  • Assembly Bill 2613 (Reyes; D-Grand Terrace) New Wage Statement Penalties — would revise the California Labor Code to impose additional penalties (above what is already imposed under the Private Attorneys General Act) payable to each affected employee per pay period on an employer or other individual acting as an agent or employee of another who fails to pay or causes a failure to pay specific wages of employees. In short, the bill could impose individual liability on managers and employees for the non-payment of wages.
  • Assembly Bill 2069 (Bonta; D-Oakland) Medical Marijuana in Employment — creates a new protected category under FEHA for the use of medical marijuana.
  • Assembly Bill 2351 (Eggman; D-Stockton) Targeted Tax on High Earners — increases the personal income tax rate from 13.3% (already the highest rate in the country) to 14.3% for the highest earners in the State (the top 1% already pay half of all income taxes in the State of California).  This increase in income taxes could lead to a further loss of high-income taxpayers.
  • ACA 22  (McCarty; D-Sacramento) “Middle Class Fiscal Relief Act” – more than doubles California’s 8.84% corporate tax rate (already one of the highest rates in the nation) to 18.84%.
  • Assembly Bill 2765  (Low; D-Campbell) Portable Benefits For The “Gig Economy” — seeks to add “digital marketplace” companies to be covered under FEHA and thereby expand the reach of the anti-discrimination statute to workers in the “gig economy” (i.e., contractors typically hired for on-demand single projects). The bill also includes “familial status” as a new protected classification under FEHA for workers in the digital marketplace. In addition, the bill adds uncertainty to the classification of independent contractors by providing that marketplace contractors will be treated as independent contractors for purposes of the bill, but leaving open how those contractors would be classified for other state/federal laws.
  • Assembly Bill 3080 (Gonzalez Fletcher; D-San Diego) Ban on Settlement Agreements and Arbitration Agreements — bans settlement agreements related to claims arising under FEHA and the California Labor Code and prohibits arbitration agreements as a condition of employment for any claims arising under FEHA or the California Labor Code, including class action waivers. (If enacted, this law will certainly be attacked on federal preemption grounds under the Federal Arbitration Act.)
  • Senate Bill 1284  (Jackson; D-Santa Barbara) Disclosure of Company Pay Data — requires California employers to submit pay data to the state Department of Industrial Relations. A number of factors are associated with pay criteria, which would not be reflected in the data submitted to the Department, thus subjecting employers to a potential of increased litigation, including baseless allegations related to discrimination or unequal pay.
  • Senate Bill 1300  (Jackson; D-Santa Barbara) Removes Legal Standing and Prohibits Release of Claims — removes the requirement that a plaintiff must prove standing in alleging claims related to failure to prevent harassment or discrimination. Thus, a plaintiff would not be required to demonstrate that he or she suffered from sexual harassment or discrimination prior to bringing a lawsuit. In addition, the bill prohibits a general waiver or release of claims in exchange for a bonus, raise, or condition of continued employment and also prohibits the inclusion of non-disparagement provisions in settlement or employment agreements.

We will continue to track the progress of these and any other “job killer” bills as they move through the Legislature. For more information on how these proposed bills may impact you, contact your Proskauer relationship attorney.

Ninth Circuit Changes Federal Pay Equity Rules

By Anthony J. Oncidi and Nayirie Kuyumjian

 

 

 

 

 

On Monday, the Ninth Circuit issued a significant opinion, Rizo v. Yovino, 2018 WL 1702982 (9th Cir. April 9, 2018), authored by the late “liberal lion” Judge Stephen Reinhardt, holding that an employer’s consideration of prior salary information cannot serve as a justification for sex-based wage differentials under the federal Equal Pay Act.

The lawsuit was brought by Aileen Rizo, a California math consultant who alleged that the Fresno County Superintendent of Schools violated the Equal Pay Act by improperly setting the salary of employees based on adding 5% to new hires’ prior salary. In its 52-page decision, the Court focused on the catchall exception to wage differentials under the Equal Pay Act—“a differential based on any other factor other than sex.”  Through interpreting the statutory text and legislative history of the Act, the Court concluded that prior salary does not fall under the catchall exception by emphasizing that the exception only applies to legitimate job-related factors (e.g., experience, educational background, ability, prior job performance) and does not apply to factors “that are simply good for business.”

The Court explained that prior salary “is not a legitimate measure of work experience, ability, performance, or any other job-related quality” and that it had an attenuated relationship with “legitimate factors other than sex such as training, education, ability, or experience.” The opinion rejects a 2017 decision of a three-judge panel of the Ninth Circuit in the same case and overrules Kouba v. Allstate Ins. Co., 691 F.2d 873 (9th Cir. 1982), in which the Court had found that past salary information is a factor employers could consider in setting a salary structure.  In their concurrence, Judges Callahan and Tallman stated that the majority “unnecessarily ignores the realities of business and, in doing so, may hinder rather than promote equal pay for equal work.”

The Ninth Circuit issued the Rizo decision less than two weeks after the California Superior Court in San Francisco refused to dismiss a putative class action, Kelly Ellis et al. v. Google, LLC, Case No. CGC-17-561299 (Mar. 27, 2018), in which former female employees of Google claim that the company does not compensate women as highly as men in violation of the California Equal Pay Act.  The Complaint alleges that Google has a policy of connecting women’s pay to their past salary and places and keeps women in lower paying job positions.

These rulings come at a time when states across the nation are enacting new laws to bolster pay equity protections for employees consistent with California’s Equal Pay Act.   That law already prohibits employers from relying on information regarding past pay to justify sex-based pay difference.  Cal. Lab. Code § 1197.5(b)(3) (“Prior salary shall not, by itself, justify any disparity in compensation”).  California also recently enacted a statewide salary history inquiry law  prohibiting employers from asking applicants about salary history information. Cal. Lab. Code § 432.3.

In light of the increasing focus on pay equity as it relates to prior salary history, employers should take immediate steps to address pay equity issues in the workplace, including conducting internal audits (preferably with the assistance of counsel so that the attorney-client privilege may be invoked) and analyzing pay practices and policies with a focus on specific categories of positions and job levels.

March 2018 California Employment Law Notes

We invite you to review our newly-posted March 2018 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

Federal Government Challenges California’s “Sanctuary State” Status

 

On Tuesday, the United States of America filed a lawsuit in federal court in Sacramento, naming California Governor Jerry Brown and Attorney General Xavier Becerra as defendants, and claiming that California’s proclaimed status as a “sanctuary state” puts federal agents in danger.

Specifically, the lawsuit targets three state laws that became effective on January 1, 2018 that the federal government claims undermine federal immigration law: one prohibiting local governments from contracting with for-profit companies and the Bureau of Immigration and Customs Enforcement (“ICE”) to hold immigrants; one preventing police officers from asking questions regarding someone’s immigration status during routine interactions; and one prohibiting employers from allowing immigration agents to enter worksites or view employee files without a subpoena or warrant (AB 450).

We previously blogged about California’s becoming a sanctuary state with the enactment of AB 450.  If past experience in the immigration context is any guide, this case is destined for the Ninth Circuit and ultimately the United States Supreme Court.

“Inclusion Riders” On The Storm

Image: Craig Sjodin/ABC

 

Last night, Oscar-winner Frances McDormand ended her acceptance speech  with a reference to two words – “Inclusion Rider” – that sent many Oscar viewers scrambling to Google her cryptic message. But the term, and its legal implications, are somewhat more complicated than several news and entertainment outlets are reporting today. The term “inclusion rider” was coined a few years ago by Dr. Stacy Smith, the founder and director of the Annenberg Inclusion Initiative  at USC. Dr. Smith delivered a Ted Talk in 2016 describing an inclusion rider as a potential solution to ongoing diversity issues and concerns in Hollywood. Specifically, she described the idea of having A-list actors demand provisions in their contracts that call for all the roles in whatever project they are working on to reflect broader demographics.

There is likely nothing wrong with a narrowly-tailored and creative provision like the one Dr. Smith described in her Ted Talk. Creative types already have in some instances exercised considerable leeway in setting their own casting criteria, and one need look no further than the hit Broadway musical “Hamilton” with its famously diverse casting to understand that under the rubric of creative choice, such standards can pass muster (although they may still face opposition).

Notwithstanding what may happen in the creative/artistic space, explicit demands or requirements based on race, religion, gender, or any other protected characteristic could run into challenges. In an interview backstage last night, McDormand told reporters “I just found out about this last week. It means you can ask for and/or demand at least 50 percent diversity in, not only casting, but also the crew.”  When it comes to a film or television crew, although an actor may request that good faith efforts be undertaken to hire a diverse crew, demanding that certain race or gender quotas be met could run afoul of Title VII of the 1964 Civil Rights Act and comparable state law, which generally bans employment discrimination and quotas by private employers.

An inclusion rider like the one described by Dr. Smith might work in the entertainment industry based on First Amendment and creative license protections. But employers, both in the entertainment industry and outside of it, should be wary of agreeing to riders demanding that specific quotas be met. Those demands, no matter how well-intentioned, could be challenged as being discriminatory.

 

California Labor Commissioner Issues $500,000 Citation Against Los Angeles Restaurant For Labor Code Violations

The California Labor Commissioner issued a press release this week announcing a $500,000 citation against Los Angeles restaurant Shrimp Lovers, arising from wage theft allegations made against the restaurant by employees who claimed they were paid far below the minimum wage. Although relatively rare, the Labor Commissioner does occasionally bring charges against California employers for these and other types of violations. Over the entire course of 2017, for example, the Labor Commissioner announced citations against five California employers.

The common thread between these cases appears to be that the investigations into these employers were launched as a result of complaints brought by employees. Although we do not know how many complaints submitted to the Labor Commissioner do not result in investigations and citations, employers should be aware that the potential exists for employees to complain to, and subsequently involve, the Labor Commissioner with regard to labor code violations.

 

Dark Day For Hollywood – Law Prohibiting Online Publication Of Actors’ Ages Is Unconstitutional!

A federal court has struck down as unconstitutional a California law (AB 1687) that prohibits commercial online services from publishing actors’ ages without their consent.  The law, which the California legislature enacted in 2016, was undoubtedly one of the best things to happen to Hollywood since the invention of BOTOX.  Now, however, a court has ruled that the statute is “clearly unconstitutional” and granted summary judgment in favor of the film and movie website Internet Movie Database (IMDb).  IMDb.com, Inc. v. Becerra/SAG-AFTRA. The law requires database sites like IMDb to remove an actor’s age if requested, with the stated goal of preventing age discrimination in casting.  In the suit, IMDb argued that the law violated the First Amendment by “chill[ing] free speech and undermin[ing] public access to factual information” without actually addressing age discrimination.  SAG-AFTRA joined the case in support of the State of California and the legislation.  Ruling that “regulation of speech must be a last resort,” the district court found that the state should have attempted less invasive options, such as strengthening existing discrimination laws, rather than “censor[ing] a source of truthful information.”  The court acknowledged that fighting discrimination against women was a more appropriate target for legislation in the entertainment industry, asserting that age bias in Hollywood is “at root . . . far more a problem of sex discrimination” and stating: “The defendants barely acknowledge this, much less explain how a law preventing one company from posting age-related information on one website could discourage the entertainment industry from continuing to objectify and devalue women.  If the government is going to attempt to restrict speech, it should at least develop a clearer understanding of the problem it’s trying to solve.”

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