California Employment Law Update

Los Angeles Court Orders Employer To Pay Whistleblower $2.3 Million In Attorney’s Fees On Top Of $24 Million Judgment

A California judge has ordered Farmers Insurance to pay almost $2.3 million in attorney’s fees to the lawyers of a successful whistleblower/former in-house attorney who claimed his role as a potential witness in a sex bias class action got him fired. The underlying judgment in favor of the whistleblower was $24.36 million – after the Judge reduced the punitive damages award by more than $131 million.

The employee’s attorneys had sought $6.7 million in prevailing-party attorney’s fees, including a “multiplier” of 2 times the actual fees incurred. The employer, on the other hand, recommended an award of approximately $1 million. On Jan. 20, 2023, Los Angeles Superior Court Judge Ruth A. Kwan awarded the employee’s lawyers $2,266,704, “inclusive of a modest multiplier of 1.1.”

Judge Kwan found the employee’s attorneys’ hourly rates to be excessive. The Judge conducted an analysis of “what amount of fees would be ‘reasonable’ in light of the relative extent or degree of the party’s success in obtaining the results sought.” The lead lawyer for the employee sought an hourly rate of $1,425, hourly rates of up to $1,100 for other senior lawyers and up to $850 for associates who had worked on the case.  The Judge reduced these hourly rates across the board in part because they reflected a mix between current and past rates that were in place when the case was first filed in August 2016. The hourly rates for the lead lawyer were reduced to $1,050 and for the other lawyers who worked on the case to a maximum of $825.

In addition, Judge Kwan made an across-the-board reduction of 10% to the attorney’s fees due to perceived duplicative billing. “Excessive billing was evident” from several attorneys who billed for days at trial without “meaningfully contributing.” This 10% reduction in fees also covered challenges regarding “excessive travel time.”  Judge Kwan did note, however, that a 1.1 multiplier was appropriate in this case in light of the attorneys’ “exceptional skill” in successfully advocating on behalf of an older white male during the height of the “Me Too” movement.

We previously reported about this case in December 2021, when a Los Angeles jury rendered the eye-popping $155.4 million verdict in favor of the employee, including $150 million in punitive damages. However, in May 2022, Judge Kwan determined that the punitive damages award was excessive and significantly reduced it to $18.945 million (resulting in an approximate 3.5:1 ratio of punitive to compensatory damages). Although the employee accepted the reduced award in lieu of a new trial, Farmers Insurance appealed the reduced verdict, and the employee has since filed an appeal as well.

The appeal is pending in the California Court of Appeal, Second Appellate District, Rudnicki v. Farmers Ins. Exch., et al., Docket No. B321691 (Cal. Ct. App. Jun 27, 2022).

(Link to appeal docket: California Courts – Appellate Court Case Information)

Click here to access the minute order from the trial court.


Court Puts New Controversial Fast-Food Worker Law on Hold

On January 13, 2023, a Sacramento County Superior Court judge issued a preliminary injunction to stop the controversial Fast Food Accountability and Standards Recovery Act or “FAST Recovery Act” (AB 257) from taking effect, pending a vote by California voters.  Previously, on December 30, 2022, the court had issued a temporary restraining order against the new law, which was signed by Gov. Newsom in September 2022.

As we previously reported here, if allowed to take effect, the FAST Recovery Act would have established a Fast Food Council (“Council”), consisting of 10 unelected members, to determine minimum wages and workplace standards for fast food industry workers.  The controversial law was challenged by a coalition entitled Save Local Restaurants, comprised of small business owners, restaurateurs, franchisees, employees, consumers and community-based organizations.

In addition to this legal challenge, Save Local Restaurants is backing a statewide effort to overturn the FAST Recovery Act through a referendum on the California ballot in November 2024.  If and when the referendum challenging AB 257 qualifies for the ballot, the law will be put on hold until voters have a say in November 2024.  The current freeze will remain in effect unless and until (1) county election officials and the Secretary of State determine that the referendum petition failed to contain sufficient valid signatures to qualify for the ballot; or (2) AB 257 is approved by a majority of California voters if the referendum petition qualifies for the ballot.

We will continue to monitor the FAST Recovery Act and provide any relevant updates.

New Era of Noncompetes May Shake Up Hollywood Contracts

Labor Co-Chair Tony Oncidi is extensively quoted by The Hollywood Reporter — he provides cogent insights about the Federal Trade Commission’s newly proposed rules that would ban most noncompetes nationwide.

We invite you to read the full article here.

IRS Increases Mileage Rate for 2023

On January 1, 2023, the IRS mileage rate increased to 65.5 cents per mile for driving done for business purposes.  This is a three (3) cent increase from the rate set for the second half of 2022.  According to the IRS, this rate applies “to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles” and was calculated “based on an annual study of the fixed and variable costs of operating an automobile.”

As a reminder, California Labor Code section 2802(a) requires employers to reimburse employees “for all necessary expenditures or losses incurred…in direct consequence of the discharge of [their] duties…”  Employees operating their vehicles for business purposes trigger expense reimbursement obligations under California Labor Code section 2802(a).  Failure to reimburse business expenses can give rise to lawsuits which may result in significant penalties and attorneys’ fees.

Employers should ensure they are updating their policies and practices to reflect reimbursement of the new mileage rate in order to avoid costly consequences down the line.  While the IRS mileage rate is deemed reasonable by the Division of Labor Standards Enforcement (DLSE), this is not the only permissible way to reimburse vehicle-related business expenses in California, as long as employees are being fully reimbursed for their expenses.  Employers are encouraged to reach out for assistance in updating their expense reimbursement policies and practices.

Congress Adds Additional Protections for Pregnant Workers

In the recent $1.7 trillion Omnibus Spending Bill passed by Congress and signed into law by President Biden, two measures were included aimed at providing additional workplace protections for pregnant employees.

The first measure is the Pregnant Workers Fairness Act (the “PWFA”) which applies to employers with 15 or more employees. The PWFA extends the framework of the Americans with Disabilities Act (ADA) to employees with known limitations related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions regardless of whether the condition meets the definition of a disability specified in the ADA (a “qualified employee”).

Thus, employers receiving accommodation requests from qualified employees must engage in the interactive process and offer a reasonable accommodation if it does not result in an undue hardship to the employer. The PWFA also makes it an unlawful employment practice to deny employment opportunities to qualified employees if the denial is based on the need for a reasonable accommodation.  Further, an employer may not force an employee to take a leave if another reasonable accommodation can be provided. Finally, the PWFA prohibits retaliating against an employee for requesting or using a reasonable accommodation.

Also in the spending bill is the Providing Urgent Maternal Protections for Nursing Mothers Act (the “PUMP Act”). Currently, the FLSA requires that employers provide unpaid, reasonable break time and a place shielded from view and free from intrusion (not a bathroom) for non-exempt employees to express breast milk up to 1 year after the child’s birth.  There are similar laws in some states, including California. The PUMP Act expands this requirement to all employees covered under the FLSA including exempt (i.e., salaried) employees and also includes a new anti-retaliation provision. In addition to the existing exemption for employers with 50 or fewer employees if it would impose an undue hardship, there are also new exemptions for air carriers and a limited exemption for rail carriers.

Employers should review their existing accommodation procedures to ensure they are in compliance with the new laws. Employers should also look for forthcoming EEOC regulations within one year of passage of the PWFA and the Pump Act. The PWFA will be effective on June 27, 2023 (180 days after enactment) and parts of the PUMP Act will be effective immediately with the full law coming into effect on April 28, 2023 (120 days after enactment).

Layoffs Accelerate As Employers Struggle with Record Inflation

As the economy continues to struggle amidst the ravages of 40-year-high inflation, employers are finding it increasingly difficult to maintain their current staffing levels.

While the tech industry has been the epicenter for layoffs thus far, a growing number of industries are being affected as well, including banking, financial, and legal services, and media outlets.

The trend for mass job cuts appears to be accelerating. Although the number of overall layoffs has been relatively steady throughout 2022, “mass layoffs” (i.e., cuts of over 100 jobs) began to accelerate toward the end of 2022. While 125,000 jobs were lost as a result of mass layoffs in all of 2022, November alone accounted for 46,000 of those job cuts or about 37% of the annual total.  With several employers announcing mass layoffs for January, early warning signs indicate that this acceleration may continue into 2023.

Employers contemplating layoffs should consider the associated legal risks and obligations. Several federal laws may be implicated such as the Worker Adjustment and Retraining Notification Act (WARN Act), the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA). California employers also should be aware of the California WARN Act (approximately 9 states have similar “mini-WARN” acts on the books).

Twitter’s experience may provide a cautionary tale:  A class action lawsuit has been filed against the company for allegedly failing to give the required 60-day notice in violation of both the federal and California WARN Acts.

As always, it’s prudent for employers to consult with counsel to ensure compliance with applicable federal, state, and local laws.

California Labor Commissioner Releases Pay Transparency FAQs

As we previously reported here, California employers with 15 or more employees are required to post salary ranges on job postings as of January 1, 2023 (i.e. next week!). The Labor Commissioner has provided additional guidance as to how these requirements will be interpreted.

The law requires employers to post pay scales on all job postings even if the employer engages a third party to promote or publish the job posting. The FAQs emphasize that the pay range must be included in the posting; thus, a QR code or hyperlink that takes the applicant to another page with the pay range is not sufficient.

As more employers offer remote positions that could be performed in another state, the FAQs also clarify that the law applies even if the position only might be filled in California, while specifically noting the requirement applies to both in-person and remote positions.

Additional clarification was also given to the meaning of “pay scale,” which the law defines as the salary or hourly wage range the employer reasonably expects to pay for the position. For fixed-pay positions, the employer should post the fixed wage or salary. If applicable, the pay scale must also include piece rate and/or commission wages; however, an employer need not post additional compensation (e.g. bonuses, tips, or other benefits).

Employers uncertain how to count employees should look to the Labor Commissioner’s guidance on counting employees for the 2017-2023 minimum wage phase in requirements. In short, employers should err on the side of posting the pay ranges because the courts will generally look for a reasonable interpretation that is most favorable to workers and an incorrect decision could lead to costly penalties. Note, however, that “bona fide” independent contractors do not count towards the 15-employee minimum threshold.

Overall, California employers should carefully review the FAQs and/or consult with counsel to ensure they are in compliance with the new pay transparency law.

California’s Civil Rights Department Adds More Detail to Regulations Regarding Consideration of Applicants’ Criminal History

In the weeks and months since it changed its name from the Department of Fair Employment and Housing to the California Civil Rights Department (“CRD”), the agency has been busy.  Most recently, the CRD released proposed modifications to the regulations under the Fair Employment and Housing Act (“FEHA”) related to the use and consideration of criminal history information in employment decisions—a process that is already exceedingly complicated thanks to overlapping privacy laws (e.g., the California Consumer Privacy Act), the Investigative Consumer Reporting Agencies Act, and local “ban the box” ordinances in Los Angeles and San Francisco.

Mercifully for employers, the latest set of proposed changes, mostly, help clarify their obligations—although they do impose some additional burdens on the process.  The latest round of proposed changes includes the following:

  • The caveat that employers, with limited exceptions, generally do not have a legal obligation to check the criminal history of an applicant or current employee; however, if they choose to do so, they must abide by the legal limitations described in the regulations.
  • Clarifying what it means for the employer or the employer’s agent to be “required by law” to conduct a criminal background check such that the exemption from the prohibition against inquiring about or using any criminal history before a conditional offer of employment has been made applies. Specifically, the new regulations clarify that  “[a] state, federal, or local law requiring another entity, such as an occupational licensing board, to conduct a criminal background check will not exempt an employer from the prohibition[].”
  • Supplementing the level of detail of the individualized assessment an employer must undertake before taking an adverse action based solely or in part on the applicant’s conviction history, by including non-exhaustive considerations for each factor of the analysis.
  • Adding a description of evidence of rehabilitation or mitigating circumstances that an applicant voluntarily may provide, including:
    • when the conviction led to incarceration, the applicant’s conduct during incarceration, including participation in work and educational or rehabilitative programming and “other prosocial conduct;”
    • the applicant’s employment since the conviction or completion of sentence;
    • the applicant’s community service and engagement since the conviction or completion of sentence, including but not limited to volunteer work for a community organization, engagement with a religious group or organization, participation in a support or recovery group, and other types of civic participation; and/or
    • the applicant’s other rehabilitative efforts since the completion of sentence or conviction or mitigating factors not captured above.
  • A requirement that employers maintain any forms, documents, or information used to complete the forms described in the subsection on the Work Opportunity Tax Credit (“WOTC”) in confidential files separate from the applicant’s general personnel file and not use or disseminate these forms, documents, or information for any purpose other than applying for the WOTC.
  • An expansion of the definition of “employer” to include “any direct and joint employer; any entity that evaluates the applicant’s conviction history on behalf of an employer, or acts as an agent of an employer, directly or indirectly; any staffing agency; and any entity that selects, obtains, or is provided workers from a pool or availability list.”

The CRD will accept written comments on these further proposed modifications until December 30, 2022.  We will continue to monitor these regulations and provide any relevant updates.

California Mandatory Postings and Pamphlets – What’s New for 2023

California employers are required to post several notices and distribute various pamphlets informing employees of their employment rights.  Effective January 1, 2023, eight (8) out of eighteen (18) of these required notices will be updated.  The eight (8) notices that will be updated are the following:

1. California Minimum Wage;

2. Family Care and Medical Leave and Pregnancy Disability Leave;

3. Your Rights and Obligations as a Pregnant Employee;

4. California Law Prohibits Workplace Discrimination and Harassment;

5. Transgender Rights in the Workplace;

6. Know Your Rights: Workplace Discrimination is Illegal;

7. Your Rights Under USERRA; and

8. Safety and Health Protection on the Job (Cal/OSHA).

In addition, two required pamphlets will also be updated, effective January 1, 2023:

1. Unemployment Insurance; and

2. Sexual Harassment.

While many of the new posters are not yet available, they are likely to reflect the 2023 changes to California law with respect to an increase in the minimum wage and new protected categories (e.g. reproductive health decision-making).  However, the Equal Employment Opportunity Commission has already released its updated “Know Your Rights: Workplace Discrimination is Illegal” poster, as detailed in our previous post.

Because these notices and pamphlets are required, California employers should make sure they have updated versions by the January 1, 2023 deadline.  As a reminder, even fully remote employees must receive copies of these required postings and pamphlets.  More information can be found on the websites for the California Department of Industrial Relations, California Civil Rights Department, Department of Labor and the Equal Employment Opportunity Commission.

We will continue to monitor updates and we encourage employers to reach out if they need assistance with compliance regarding these updated notices and pamphlets.

California Minimum Wage Increases for 2023

Effective January 1, 2023, California employers will be required to meet new minimum wage requirements, at both the state and local level.  This increase in the minimum wage affects not only non-exempt employees, but also the minimum annual salary requirement for overtime exempt employees.

Increase and Consolidation of the California Minimum Wage

Previously, the State of California employed a two-tiered minimum wage system, requiring employers with 25 or more employees to pay a higher minimum wage than employers with fewer than 25 employees.  Beginning on January 1, 2023, all employers, regardless of size, must provide their employees a minimum wage of not less than $15.50 per hour.

Increase to the Minimum Annual Salary for Overtime-Exempt Employees

California law provides that overtime-exempt employees must receive a salary that is not less than two times the state minimum wage.  In light of the new increase to the state minimum wage, effective January 1, 2023, the minimum annual salary for overtime-exempt employees will also increase to $64,480.

A Higher Minimum Wage for Employees Working in Select California Cities

Select California cities will raise the minimum wage for non-exempt employees working within city limits.  Non-exempt employees working within one of these cities must be paid the local minimum wage when greater than the California state minimum wage.  However, overtime-exempt employees working in one of these cities need not be paid more than the California state minimum annual salary of $64,480.  The following list contains the local minimum wage rate, effective January 1, 2023, for non-exempt employees working in each of the California cities listed below:

Jurisdiction Minimum Wage Rate
Belmont $16.75/hour
Burlingame $16.47/hour
Cupertino $17.20/hour
Daly City $16.07/hour
East Palo Alto $16.50/hour
El Cerrito $17.35/hour
Foster City $16.50/hour
Half Moon Bay $16.45/hour

$16.34/hour (26 or more employees)

$15.50/hour (1-25 employees)

Los Altos $17.20/hour
Menlo Park $16.20/hour
Mountain View $18.15/hour

$16.32/hour (100 or more employees, including people employed outside the city)

$16.07/hour (26-99 employees)

$15.53/hour (1-25 employees)

Oakland $15.97/hour
Palo Alto $17.25/hour
Petaluma $17.06/hour
Redwood City $17.00/hour
Richmond $16.17/hour
San Carlos $16.32/hour
San Diego $16.30/hour
South San Francisco $16.70/hour
San Jose $17.00/hour
San Leandro Current $15.00/hour rate expected to increase on 1/1/23, as it will be below the state minimum wage.
San Mateo $16.75/hour
Santa Clara $17.20/hour
Santa Rosa $17.06/hour

$17.00/hour (26 or more employees, including those working outside the city)

$16.00/hour (1-25 employees)

Sunnyvale $17.95/hour
West Hollywood

$17.50/hour (50 or more employees)

$17/hour (1-49 employees)

California employers should work with their payroll providers to increase the relevant minimum wage for affected exempt and non-exempt employees, and ensure that the new rate is paid and properly recorded on employee pay stubs by January 1, 2023.



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