California Employment Law Update

Multiple Minimum Wage Increases and Salary-Related Ordinances Scheduled to Take Effect on July 1, 2018

In the immortal words of Mao Zedong:  “Let a hundred flowers blossom!”

Multiple cities and hamlets throughout California have enacted slightly differing and, of course, maddeningly confusing non-uniform minimum wage laws.  Not surprisingly, no one in Sacramento seems at all concerned about the administrative burden to California employers in having to monitor and comply with the so many different rules.

For those of you keeping track at home, here’s the current state of affairs:

Minimum Wage Increases

The following cities’ and county minimum wages are slated to increase:

City # of Employees Minimum Hourly Wage Beginning July 1, 2018 Minimum Hourly Wage Before July 1, 2018
Emeryville 56 or more employees

55 or fewer employees

$15.69

 

$15.00

$15.20

 

$14.00

Los Angeles (city) 26 or more employees

25 or fewer employees

$13.25

 

$12.00

$12.00

 

$10.50

Los Angeles (county) (unincorporated areas only) 26 or more employees

25 or fewer employees

$13.25

 

$12.00

$12.00

 

$10.50

Malibu 26 or more employees

25 or fewer employees

$13.25

 

$12.00

$12.00

 

$10.50

Milpitas $13.50 $12.00
Pasadena 26 or more employees

25 or fewer employees

$13.25

 

$12.00

$12.00

 

$10.50

San Francisco $15.00 $14.00
San Leandro $13.00 $12.00
Santa Monica** 26 or more employees

25 or fewer employees

$13.25

 

$12.00

$12.00

 

$10.50

** Hotel workers’ minimum wage will be indexed, meaning that their rates will be adjusted annually based on changes in the Consumer Price Index (CPI).

Most of these jurisdictions’ minimum wages are slated to increase again on July 1, 2019.

Belmont adopted an ordinance to establish its own minimum wage at $12.50/hour beginning July 1, 2018, with another increase set to go into effect on January 1, 2019.

Salary History Ordinance

San Francisco’s new Consideration of Salary History ordinance (also known as the Parity in Pay ordinance) will go into effect on July 1, 2018, and will prohibit employers from considering applicants’ current or past salaries when determining whether to extend an offer of employment and what salary to offer.  The ordinance also prohibits employers from asking applicants about their current or past salary, or disclosing a current or former employee’s salary history without that employee’s authorization (assuming that salary history is not publicly available).

However, it is important to remember that salary inquiry prohibitions are not unique to San Francisco – California recently enacted its own slightly different, statewide legislation that went into effect on January 1, 2018.

Employers should take care to review whether these ordinances impact their work force and ensure that they are compliant by the beginning of next month.

San Francisco Ordinance Requires Cannabis Business Permit Applicants to Enter into “Labor Peace Agreements”

Earlier this month, San Francisco’s Public Safety & Neighborhood Services Committee unanimously approved an ordinance that requires certain cannabis business permit applicants to agree to enter into a collective bargaining agreement (a “Labor Peace Agreement”) with a “Bona Fide Labor Organization” as a condition of receiving a cannabis business permit.

The measure applies to business applicants with 10 or more employees and amends San Francisco’s existing marijuana licensing law by requiring that applicants actually enter into an employee labor agreement before a permit is issued (as opposed to merely demonstrating that they will do so).

The ordinance defines “Bona Fide Labor Organization” (BFLO) as any organization, agency, employee representation committee, or related local unit, which exists for the purpose (in whole or part) of dealing with employers regarding grievances, labor disputes, wages, hours of employment, or other conditions of work, and which is not financed (in whole or part), interfered with, dominated, or controlled by the employer or any employer association.

“Labor Peace Agreements” are agreements between cannabis business permit applicants and BFLOs that, at minimum, prohibit such BFLOs and members from engaging in picketing, work stoppages, boycotts, and other economic interferences with the applicants’ business.  Under a Labor Peace Agreement, applicants also would agree not to disrupt efforts for BFLOs to communicate with, and attempt to organize and represent, the applicants’ employees.

Mayor Mark Farrell (D) approved of the ordinance on June 14, 2018, and it will become effective 30 days thereafter.

California Would Recognize “International Workers’ Day” as a New Holiday

California Assembly Member Miguel Santiago (D-Los Angeles) has introduced legislation (Assembly Bill 3042) that would recognize “International Workers’ Day” as a public holiday for students and school employees in the state.  The bill would authorize school districts and charter schools to designate May 1 as “International Workers’ Day” with schools to be closed – and employees to be paid – for the “holiday.”  Additionally, the bill would require schools that elect to observe “International Workers’ Day” to commemorate and direct students’ attention to the history of the labor movement in the United States.  The bill would eliminate “Washington Day” and “Lincoln Day” as separate school holidays and combine them into one “Presidents’ Day” in order to make room for “International Workers’ Day.”

Of course, May 1 or “May Day” is one of the most important holidays in communist countries such as the People’s Republic of China, North Korea, Venezuela, Cuba and the former Soviet bloc nations.

Despite passing two Assembly committees, the bill failed on the Assembly floor on May 10, 2018 by a vote of 22-27 with 29 members abstaining.  However, Assembly Member Santiago vows to bring AB-3042 up for another vote this summer.  Workers of the World, stay tuned!

California Enacts New Protections Against National Origin Discrimination

The California Office of Administrative Law recently approved new amendments to the California Fair Employment and Housing Act (“FEHA”), strengthening the protections afforded to applicants and employees, including individuals who are undocumented, on the basis of their national origin.  Although the FEHA already prohibits discrimination and harassment on the basis of national origin, these new regulations broaden the definition of “national origin.”  Originally defined to encompass “the individual’s or ancestors’ actual or perceived place of birth or geographic origin, national origin group or ethnicity,” these new regulations expand the definition to include an individual’s or ancestors’ actual or perceived:

(1)   Physical, cultural, or linguistic characteristics associated with a national origin group;

(2)   Marriage to or association with persons of a national origin group;

(3)   Tribal affiliation;

(4)   Membership in or association with an organization identified with or seeking to promote the interests of a national origin group;

(5)   Attendance or participation in schools, churches, temples, mosques, or other religious institutions generally used by persons of a national origin group, and

(6)   Name that is associated with a national origin group.

Additionally, the new regulations define what constitutes national origin discrimination to include the following:

(1)   Language restriction policies, including English-only policies, unless the restriction can be justified by business necessity and is narrowly tailored to further that business interest;

(2)   Discrimination based on an applicant’s or employee’s accent, unless the employer can show the accent materially interferes with the applicant’s or employee’s ability to perform the job;

(3)   Discrimination based on English proficiency, unless the employer can show that the proficiency requirement is justified by business necessity;

(4)   Height and weight requirements (as such may have a disparate impact on the basis of national origin), unless the requirement can be justified by business necessity and the purpose of the requirement cannot be met by less discriminatory means;

(5)   Recruitment, or assignment of positions/facilities/geographical area, based on national origin; and

(6)   Inquiring into an applicant’s or employee’s immigration status, or discriminating against an applicant or employee based on immigration status, unless required to do so under federal immigration law.

These new regulations are set to take effect on July 1, 2018.

Supreme Court Rules in Favor of Employers in Upholding Arbitration Agreements Containing Class Action Waivers

On May 21, 2018, the Supreme Court of the United States ruled in Epic Systems Corp. v. Lewis that employers can require employees to arbitrate disputes with the employer individually and waive their right to pursue or participate in class or collective actions against their employer. Ruling 5-4 in favor of an employer’s right to include class action waivers in its arbitration agreements, the Court rejected the National Labor Relations Board’s position in D.R. Horton that such class waivers violate employees’ rights to take collective steps for their “mutual aid and protection.” The decision puts to rest the NLRA-based objection to such agreements, and so is a significant victory for employers, but leaves open other challenges to such agreements.

The Court’s opinion, authored by Justice Neil M. Gorsuch for the majority, resolved three cases that were argued together—Epic Systems Corp v. Lewis; Ernst & Young LLP v. Morris; and National Labor Relations Board v. Murphy Oil USA—in all of which an employee who had signed an arbitration agreement containing a class action waiver sought to litigate Fair Labor Standards Act and related state law claims through class or collective actions in federal court.  The Seventh Circuit in Lewis and the Ninth Circuit in Morris had sided with the NLRB and the individual employees; the Fifth Circuit had rejected the NLRB’s view in Murphy Oil. Siding with the Fifth Circuit, the Court’s ruling requires employees who have signed arbitration agreements with their employers containing class action waivers to take their disputes to an arbitrator individually rather than as part of a putative class or collective action.  Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy, Clarence Thomas and Samuel A. Alito Jr. joined the majority opinion.

The employees had argued that the “saving clause” of the Federal Arbitration Act, which allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract,” precludes enforcement of class waivers because the National Labor Relations Act (“NLRA”) protected their right to act collectively in bringing a class action. The employers countered that the Federal Arbitration Act protects agreements requiring arbitration from judicial interference and that neither the saving clause nor the NLRA demands a different conclusion.

The Court’s opinion repeatedly acknowledged that “[a]s a matter of policy these questions are surely debatable,” but held that “as a matter of law the answer is clear.”  “In the Federal Arbitration Act,” the Court concluded, “Congress has instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings.”  Nothing contained in the NLRA overrides that requirement, the Court held, and in particular, the NLRA “does not express approval or disapproval of arbitration” and “does not mention class or collective action procedures.” Indeed, the Court held that the NLRA “does not even hint at a wish to displace the Arbitration Act—let alone accomplish that much clearly and manifestly, as our precedents demand.”

That reference to precedent included the Court’s several arbitration decisions in the last ten years, particularly AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), which had upheld class action waivers against state-law challenges.

The Court’s decision should also abrogate some state-court decisions that had followed the NLRB’s analysis, such as the New York Appellate Division’s decision in Gold v. New York Life Ins. Co. (1st Dept. 2017). It may also preempt municipal prohibitions on class waivers, such as in the administrative rules promulgated under New York City’s Freelance Isn’t Free Act.

Notably, the Court’s opinion discussed Congress’ ability to pass new legislation to reach a different result.  In fact, Justice Ruth Bader Ginsburg, reading her dissent from the bench, urged Congress to address the matter.

Even if Congress does not act, the Court’s rejection of the NLRA-based challenge does not mean that class action waivers will now be enforced uniformly. The Court acknowledged the FAA’s statutory exception, which permits arbitration agreements to be invalidated “upon such grounds as exist at law or in equity for the revocation of any contract.” The Court held that exception inapplicable here because it includes only defenses that apply to “any contract” (such as duress or fraud), and the NLRA’s arguable attack only on class action waivers does not offer a general defense to contract enforcement. But general state-law contract doctrines such as procedural and substantive unconscionability have played a greater and greater role in disputes over arbitration agreements, and the Court’s decision does not affect those debates.

Two Recent Jury Verdicts Award $6 Million and $7.97 Million To Wrongfully Terminated Employees

Two recent verdicts from California Superior Court juries have awarded former employees $6 million and $7.9 million, respectively, in compensatory damages after a finding of wrongful termination.

Martinez v. Rite Aid Corp.

On March 27, 2018, a Los Angeles County Superior Court jury found Rite Aid Corporation liable for just over $6 million after deciding that it had wrongfully terminated a 23-year employee. Plaintiff Maria Martinez had worked for Rite Aid as a licensed pharmacy technician. In 2004, Plaintiff suffered an incident at work which caused her to have an emotional reaction and be transported to the hospital.  After returning to work following medical leave, Rite Aid transferred Martinez to four different stores over a 2-1/2 year period.

In 2007, Martinez filed an administrative charge with the U.S. Equal Employment Opportunity Commission alleging workplace discrimination and harassment.  Specifically, she alleged that her direct supervisor had directed derogatory remarks toward her, calling her “crazy,” “psycho,” and “too old,” and threatened that he would “take care of her.”  Plaintiff also sent a letter to Rite Aid’s CEO detailing the alleged workplace discrimination and harassment. Four days later, Plaintiff was suspended by the company and then terminated shortly thereafter for her alleged poor work performance and attitude.

The case was originally tried in August 2010 with a jury awarding Plaintiff $3.4 million in compensatory damages and $4.8 million in punitive damages. Rite Aid appealed the verdict and the court of appeal reversed the judgment, ordering a new trial. In 2014, the jury ruled for Plaintiff again but with an award of only $321,000 in compensatory damages. Plaintiff appealed that verdict and the court of appeal again reversed the judgment and ordered a new trial on a finding that the special verdicts were inconsistent as a matter of law. The final trial resulted in this judgment from March of 2018.

Ortiz v. Chipotle Mexican Grill

On May 10, 2018, a Fresno County Superior Court jury found Chipotle Mexican Grill Inc. liable for wrongfully terminating one of its former general managers, awarding her $7.97 million in compensatory damages.  Plaintiff Jeanette Ortiz had been terminated in January 2015 for allegedly stealing $626 from the restaurant’s safe.  Chipotle claimed it had video evidence proving the theft, but when Ortiz asked to see the video, Chipotle declined to produce it – in fact, the video evidence had been taped over.  Further, there was conflicting testimony at trial as to when Ortiz allegedly stole the money with one former Chipotle employee claiming he saw the money in an envelope a day after the alleged theft took place.

After deliberating for less than one day, the jury found that Ortiz was a victim of a scheme by Chipotle to terminate her as a result of her having filed a workers’ compensation claim for a job-related wrist injury one month earlier.  Ortiz’s termination occurred while she was on medical leave for her injuries.  (By the way, this was the fourth workers’ compensation claim Plaintiff had filed while employed with Chipotle.)

The jury awarded Ortiz $1.97 million for lost past and future earnings and $6 million for alleged emotional distress damages.  Ortiz alleged that she suffered from anxiety, humiliation, loss of sleep, and a general feeling of worthlessness as a result of the termination.

Notably, the parties are scheduled to return to court on Monday, May 14, 2018, to conduct the punitive damages stage of the trial.  Plaintiff may recover punitive damages following the jury’s determination that managing agents of Chipotle acted with malice in terminating her employment.  Plaintiff was earning $70,000 annually at the time of her termination.  Chipotle has already announced plans to appeal the ruling.

May 2018 California Employment Law Notes

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

LexBlog