California Employment Law Update

New California Law Imposes Strict Quota on Warehouse Distribution Centers (This Means You, Amazon!)

A new California law, effective January 1, 2022, closely regulates productivity quotas for warehouse distribution centers.  AB 701 applies to employers of 100 or more employees at a single warehouse distribution center or 1,000 or more employees at one or more warehouse distribution centers in the state and purports to address warehouse safety concerns by imposing the following:

  • Requires employers to provide a written description of each quota to which an employee is subject and any potential adverse employment action that could result from failure to meet the quota;
  • Prohibits employers from requiring that workers meet a quota that prevents them from taking meal or rest breaks or complying with other health and safety laws;
  • Prohibits adverse action against an employee for failure to meet a quota that has not been disclosed or does not allow a worker to comply with meal and rest break or occupational health and safety laws;
  • Allows a current or former employee (who believes their rights have been violated due to a quota) to request one written description of each quota to which the employee is subject and a copy of the most recent 90 days of the employee’s own personal work speed data. An employer must abide by this request and there shall be a rebuttable presumption of unlawful retaliation if an employer in any manner discriminates, retaliates, or takes any adverse action against any employee within 90 days of the employee requesting quota information or making a complaint related to a quota;
  • Authorizes a current or former employee to bring an action for injunctive relief to obtain compliance with specified requirements, and that employee may, upon prevailing in the action, recover costs and reasonable attorney’s fees in that action;
  • Requires the Labor Commissioner to enforce these provisions and the Division of Occupational Safety and Health or the Division of Workers’ Compensation to notify the Commissioner if a particular worksite or employer is found to have an annual employee injury rate of at least 1.5 times higher than the warehousing industry’s average annual injury rate.

The California Chamber of Commerce initially placed AB 701 on its “job killer” list.  Although it was removed from this list, opponents warned that it would adversely impact small businesses, consumers and farmers by increasing costs for everyday goods, creating disruptions across vital supply chains and making it more challenging to keep goods on shelves.  This law also risks encouraging frivolous lawsuits by creating new causes of action under the Private Attorneys General Act of 2004 (PAGA).

The author of this new law, Assemblywoman Lorena Gonzalez (D-San Diego), is the same legislator who brought us Assembly Bill 5 (which largely outlawed independent contractors in California).  Assemblywoman Gonzalez is the former CEO and Secretary-Treasurer of the San Diego and Imperial Counties Labor Council, AFL-CIO.  She received approximately 40 percent of all of her campaign contributions last year from organized labor.

We will continue to monitor this new law and provide any relevant updates.

Employers Beware! 1 in 3 Americans Admit They Lied on Their Resumes

A recent ResumeBuilder survey found that 32% of Americans admit to lying on their resume.  In the current highly active labor market, with 65% of employees searching for a new job according to the PwC US Pulse Survey, employers should carefully review incoming resumes.

Interestingly, the ResumeBuilder survey found: 1) resume lies are most frequent among higher earners and 2) the most common lies surround years of experience and education.  Other key survey findings include:

  • 80% of workers who lied were hired by the employer to which they lied, but almost half had the job offer rescinded after the new employer caught the lie
  • Lying on resumes is most prevalent in the technology and finance sectors
  • Men lie on resumes twice as often as women
  • The most common reason for lying on resumes was to improve chances of getting hired (72%); lacking the necessary qualifications for the job (44%); and covering up parting on bad terms from a previous employer (41%).

Employers should review their hiring practices to ensure they are vetting resumes – whether through checking references, utilizing appropriate skills tests, behavioral or probing interview questions to expose resume dishonesty, formal background checks, internet and social media searches, and/or internal or external verification services.

September 2021 California Employment Law Notes

We invite you to review our newly-posted September 2021 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

View PDF

California Jury Awards Employees $7.6 Million in Latest Gargantuan Wrongful Termination Verdict

A Los Angeles jury has ordered an apartment building owner and property management company to pay $7.6 million to two former live-in apartment managers who claimed to have been wrongfully terminated and discriminated against based upon a medical condition and disability (thyroid cancer).

Albert Garcia and his wife Stephanie Garcia sued Gresham Apartments Investors, owners of a Canoga Park apartment building, and the property managers, Seltzer-Doren Management Co. Inc. dba Sierra Management, for: (1) violation of the employment provisions of the Fair Employment and Housing Act (FEHA) based upon a physical disability; (2) violation of FEHA – housing discrimination; and (3) wrongful termination.  Plaintiffs alleged they had been wrongfully terminated shortly after Mr. Garcia was diagnosed with thyroid cancer and requested accommodations and time off from work.  Upon termination, the Garcias alleged they had to leave their rent-free apartment unit, which was provided to them as part of their compensation.

After six hours of deliberation, the jury sided with the Garcias. The jury awarded Albert Garcia $2.35 million in compensatory damages for lost wages and emotional distress and $4 million in punitive damages and Stephanie Garcia $30,725 in compensatory damages and $1.25 million in punitive damages for a total verdict of $7,633,650. Added to that will likely be a substantial amount of prevailing-party attorney’s fees.

 

California Encourages Mandating Employee COVID-19 Vaccinations

Due to the recent increase in COVID-19 cases, California officials are recommending that private employers require their employees to be vaccinated against COVID-19 or face regular testing.  In an article in the Sacramento Business Journal, Governor Gavin Newsom’s senior advisor and director of the Governor’s Office of Business and Economic Development, Dee Dee Myers, called on private employers, urging them to follow the state’s lead and mandate COVID-19 vaccinations or regular testing to make way for economic recovery.  This recommendation comes despite hesitancy that the COVID-19 vaccination has only been authorized for emergency use by the Food and Drug Administration.  However, Acting Assistant Attorney General, Dawn Johnsen, has indicated that this does not present a barrier for those businesses wishing to mandate vaccinations.

In related news, the Food and Drug Administration today approved the Pfizer-BioNTech COVID-19 Vaccine for the prevention of COVID-19 disease in individuals 16 years of age and older.

In light of this recommendation, California legislators are considering introducing a bill to impose a vaccine mandate or regular testing requirement on private sector employers.

Currently, many private employers have been slow to heed this advice.  Although, Facebook, Microsoft, Google and Kaiser Permanente are ahead of the curve and have begun mandating COVID-19 vaccinations.

In order to incentivize mandating vaccinations, business leaders have made various demands including that the state provide tax credits for the cost of increased testing and remove extended paid sick leave for workers who are not vaccinated.

Further information may be found in our colleagues’ posts on Proskauer’s Law and the Workplace blog which summarized the DFEH’s guidance for mandating vaccinations as well as other considerations.

Federal Court in California Greenlights Drug Testing of Job Applicants

A U.S. District Court recently dismissed the lawsuit of a former employee who claimed disability discrimination after he was terminated for testing positive for marijuana in a pre-employment drug test.  Espindola v. Wismettac Asian Foods, Inc., Case 2:20-cv-03702 (C.D. Cal. Apr. 28, 2021).  The Court held that an employer can condition an offer of employment on passing a pre-employment drug screening, including a test for marijuana (the recreational use of which has been legal in California since 2018).  The Court further held that an employer does not have any obligation to engage in the interactive process before terminating an employee under such circumstances.

Here, the employer contacted the employee to schedule a pre-employment drug screening, which the employer required of all prospective employees after they are offered a position and before starting work.  The test was postponed until after employment began at the employee’s request.  The employee then completed a “personnel information sheet” on which he indicated he was not “disabled,” and he signed a drug testing consent form and disclosed for the first time that he had “chronic back pain” and had been “prescribed” marijuana to treat his condition.

Importantly, the employee did not provide any details or documentation to substantiate the nature of his condition or to explain any limitations on his ability to perform his job.  The employee forwarded Human Resources his medical marijuana card (which he obtained after he learned of the impending drug test), took the required drug test, and tested positive for marijuana.  His employment was then terminated based on the results of the drug test.  In response, the employee filed a lawsuit for retaliation and disability discrimination under the California Fair Employment and Housing Act (“FEHA”) as well as claims for wrongful termination, failure to accommodate a disability, and failure to engage in the interactive process.

Judge John W. Holcomb granted the employer’s summary judgment motion and ruled that the employee failed to establish he suffered from a disability given the lack of detail or documentation submitted to the employer.  The Court held that chronic back pain “without more” does not qualify as a disability under FEHA and that “an employer does not have to accept an employee’s subjective belief that he is disabled.”  Regardless, the employer established a legitimate, nondiscriminatory reason for the employee’s termination (i.e., the failed drug test), and it was under no obligation to engage in the interactive process before the employee passed the test.

Relying upon Pilkington Barnes Hind v. Superior Court, 66 Cal. App. 4th 28 (1998), the Court further concluded that the employee could not rely upon his own delay in submitting to the drug test to argue that he was no longer an applicant at the time of the test, thus giving him greater privacy rights as an employee.

New Restriction on Background Checks in California

The California Court of Appeal has ruled that date of birth and/or a driver’s license number cannot be used to identify individuals in an electronic search of the criminal index of court records.  All of Us or None v. Hamrick.  This ruling complicates and further restricts how and even whether (from a practical standpoint) employers can conduct lawful background checks on job applicants and employees.

By ordering the Riverside Superior Court to remove birthdates and driver’s license numbers as data that can be used to identify individuals with a criminal record, the ability of employers (and others) to conduct criminal background checks will be further impeded if not made impossible.  With the use of only a first and last name to conduct the search, the search results of a particular applicant or employee may show the criminal history of perhaps dozens of other people with the same or a similar name.

The focal point of this case is California Rule of Court 2.507(c), which governs electronic access to court calendars, indexes and registers of actions:  In addition to driver’s license number and date of birth, Rule 2.507(c) requires the following data to be excluded from court calendars, indexes and registers of actions: (1) social security number; (2) financial information; (3) arrest warrant information; (4) search warrant information; (5) victim information; (6) witness information; (7) ethnicity; (8) age; (9) gender; and (10) government-issued identification card numbers.

Here, the question was whether members of the public using the Riverside Superior Court’s public website should be permitted to search the court’s electronic index by inputting an individual’s name as well as his/her date of birth and/or driver’s license number.  The Riverside Superior Court contended that it did not violate the rules because it did not disclose this information publicly, but rather allowed individuals who already possessed such information to use it as a data point to filter their search.

However, the Court of Appeal was not persuaded by the search versus disclosure distinction urged by the lower court.  Finding the Riverside Superior Court to be in violation of Rule 2.507(c), the Court concluded:  “In authorizing such searches, defendants may reasonably be said to have failed to ‘exclude’ … date of birth and driver’s license number in the Riverside Superior Court’s index as is required [by the Rule], even assuming that defendants are not disclosing this information.”

As a reminder and as covered previously here, California law already prohibits an employer with five or more employees from inquiring into or considering the conviction history of an applicant until after the applicant has received a conditional offer of employment.  The Fair Chance Act (Assembly Bill No. 1008), effective January 1, 2018, also prohibits such employers from considering, distributing, or disseminating information related to specified prior arrests, diversions, and convictions that have been sealed, dismissed, expunged, or statutorily eradicated when conducting a conviction history background check.

After making a conditional offer of employment, employers may conduct a criminal history check, but the law requires an individualized assessment—the nature and gravity of the criminal history, the time that has passed since the conviction, and the nature of the job held or sought.  If the employer decides the applicant’s criminal history is a basis upon which to rescind the offer of employment, the employer must notify the applicant in writing of the disqualifying conviction(s), provide a copy of the conviction history report, and give the applicant at least five business days to respond before the employer may make a final decision.

California employers should review their background check policies and consult with counsel to ensure they scrupulously comply with the individualized assessment and notice requirements of the law.

July 2021 California Employment Law Notes

We invite you to review our newly-posted July 2021 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

View PDF

California Supreme Court Holds That Meal And Rest Break Premiums Must Include All Forms Of Remuneration (Not Just Base Hourly Rate)

On July 15, 2021, the California Supreme Court issued its decision in Ferra v. Loews Hollywood Hotel, LLC, in which it held that meal and rest break premiums required under California Labor Code section 226.7 (“Section 226.7”) must be paid at non-exempt employees’ regular rate of pay—not merely their base hourly rate.  The decision, which applies retroactively, requires that employers promptly adjust their pay practices.

Background

Like the federal Fair Labor Standards Act (“FLSA”), Labor Code section 510 (“Section 510”) requires that employers pay non-exempt employees overtime at their “regular rate[s] of pay.”  Under a different section of the Labor Code and the Industrial Welfare Commission’s (“IWC”) Wage Orders, employers also must provide non-exempt employees with unpaid meal and paid rest breaks at set intervals, depending on how many hours the employees work.  Under Section 226.7, if an employer fails to provide an employee with a compliant meal or rest break, the employer must “pay the employee one additional hour of pay at the employee’s regular rate of compensation.”  Cal. Lab. Code § 226.7(c) (emphasis added).

Since the language in Section 226.7 is different from that in Section 510 (“regular rate of compensation” versus “regular rate of pay”), employers had long understood that the meal and rest break premiums were to be paid at non-exempt employees’ base hourly rates (i.e., the premiums did not have to include other forms of compensation above and beyond the base hourly rate).  That is, until Ferra.

Ferra

Ferra was a wage and hour class action brought by a former hotel bartender, Jessica Ferra (“Ferra”), against Loews Hollywood Hotel, LLC (“Loews”).  In addition to her hourly rate, Loews had paid Ferra certain nondiscretionary bonuses.  In her lawsuit, Ferra claimed that Loews violated California law by failing to include nondiscretionary bonuses when calculating meal and rest break premiums.

Both the trial court and the Court of Appeal held in favor of Loews, deciding that the “regular rate of pay,” as used in Section 510, was not synonymous with “regular rate of compensation,” as used in Section 226.7.  The California Supreme Court saw things differently, however.

In an opinion authored by Associate Justice Goodwin Liu, the Court held that “regular rate of compensation,” as used in Section 226.7, means the same thing as an employee’s “regular rate of pay” for purposes of overtime.  Recognizing that the Labor Code provided no definition of “regular rate of compensation” under Section 226.7, the Court began by examining the legislative history of both Section 510 and Section 226.7.  As to the former, the Court noted that both California’s Division of Labor Standards Enforcement (“DLSE”) and courts had long understood Section 510’s definition of “regular rate” to have the same meaning as the phrase does under the FLSA, under which nondiscretionary amounts (and most other types of compensation) must be included in the overtime calculation.

As to Section 226.7’s history, Loews had argued that because “regular rate of pay” was an “established term of art” by the time Section 226.7 was enacted, the fact that the Legislature used a different phrase in Section 226.7 meant that it did not intend “regular rate of pay” and “regular rate of compensation” to have the same meaning.  However, the majority rejected that argument, deciding that the modifiers “of pay” and “of compensation” were irrelevant.  In support of its interpretation, the Court noted that “the Legislature used the terms ‘pay’ and ‘compensation’ interchangeably in the very text of [S]ections 226.7(c) and 510(a).”  The Court also pointed out that the terms had been used interchangeably by a number of federal appellate courts – including the U.S. Supreme Court – in interpreting the FLSA.

Finally, and most troublingly, the Court rejected Loews’ argument that its opinion should apply only prospectively.  Therefore, the Ferra decision applies retroactively.

Practical Implications

Ferra will have significant consequences for any employer with non-exempt employees in California.  Although Ferra only concerned nondiscretionary bonuses, its holding almost certainly applies more broadly to other types of remuneration that must be included in an employee’s regular rate for purposes of overtime (e.g., commissions).  Employers immediately must ensure that they pay meal and rest break premiums based on employees’ regular rates of pay under Section 510—not merely their base hourly rates.  Further, employers with questions about how to address Ferra’s retroactive application should consult legal counsel as soon as possible.

President Biden Signs Executive Order Targeting Noncompetition Agreements

On July 9, 2021, President Biden signed an Executive Order on Promoting Competition in the American Economy (the “Order”), which, among other things, “encourage[s]” the “Chair of the [Federal Trade Commission (the “FTC”)] . . . to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority . . . to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”  To be clear, the Order does not impact the current state of the law or enforceability of noncompetition agreements in any context, including those between an employer and its employees, partners, or in the context of the sale of a business.  Rather, it “encourage[s]” the FTC to “consider” using its authority to “curtail the unfair use of non-compete clauses.”  While there was much fanfare that the Order could amount to a ban on noncompetition agreements, the text of the Order and President Biden’s remarks make it clear that is simply not the case.

According to White House Press Secretary Jen Psaki, “roughly half of private sector businesses require at least some employees to enter non-compete agreements, affecting over 30 million people.”  Prior to publication of the Order, Ms. Psaki noted that it seeks to address noncompetition agreements that “affec[t] construction workers, hotel workers, many blue-collar jobs, [and] not just high-level executives.”  This is consistent with President Biden’s comments upon executing the Order that it is not just highly paid workers or scientists who know an employer’s “secret formula” who are subjected to noncompetition agreements, but rather ordinary, low wage workers, such as those working in the fast-food industry, who should have protection from such agreements.

Read the full post on Proskauer’s Law and the Workplace blog.

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