California Employment Law Update

Disability Discrimination, Harassment and Retaliation Claims Were Properly Dismissed

Doe v. Department of Corr. & Rehab., 2019 WL 6907515 (Cal. Ct. App. 2019)

John Doe, who worked as a psychologist at Ironwood State Prison, alleged discrimination, harassment and retaliation based upon a disability; Doe also alleged that the employer violated FEHA in that it failed to accommodate his two alleged disabilities (asthma and dyslexia) by failing to relocate him to a “cleaner and quieter office” and provide him with computer equipment he had requested. The trial court granted summary judgment to the employer, and the Court of Appeal affirmed, holding that the discrimination and retaliation claims failed because Doe had not presented evidence that he was subjected to an adverse employment action – rejecting Doe’s assertion that criticizing his work during an “interrogation-like meeting” and engaging in other “relatively minor conduct” did not satisfy the requirements of the statute.

The Court further held as a matter of law that the employer’s rejection of Doe’s accommodation requests did not constitute an adverse employment action. Similarly, the Court held there was no evidence of conduct that rose to the level of actionable harassment: “Workplaces can be stressful and relationships between supervisors and their subordinates can often be contentious. But FEHA was not designed to make workplaces more collegial.” Finally, the Court rejected Doe’s claim that the employer had failed to engage in the interactive process or accommodate an alleged disability because the doctors’ notes that Doe submitted were not sufficient to place the employer on notice that Doe suffered from a disability.

Church Affiliate Is Exempt From FEHA Liability, But Liable for $1.9 Million On Other Theories

Mathews v. Happy Valley Conference Ctr., 2019 WL 6769659 (Cal. Ct. App. 2019)

Jeremiah Mathews worked as a maintenance supervisor and cook for Happy Valley Conference Center, which is a subordinate affiliate of Community of Christ (a church). Mathews alleged his employment was terminated in retaliation for his having reported harassment of a younger male employee by Happy Valley’s female executive director. Following a trial, a jury awarded Mathews $900,000 in damages (including punitive damages) and almost $1 million in attorney’s fees. In this appeal, the Court of Appeal reversed the judgment as to the retaliation claim arising under the Fair Employment and Housing Act (“FEHA”), holding that defendants were entitled to rely upon the “religious association or corporation” exemption of Cal. Gov’t Code § 12926(d) and that they had neither waived nor were they estopped from relying upon the exemption. The appellate court otherwise affirmed the judgment in favor of Mathews, upholding the trial court’s determination that the church and Happy Valley were a single employer within the meaning of Title VII; that defendants were liable for breach of an implied contract and that they had violated the whistleblower statute (Cal. Lab. Code § 1102.5) for which Mathews was properly awarded $500,000 in punitive damages.

Court Affirms Jury Verdict Finding Safeway Manager Was Exempt From Overtime

Safeway Wage & Hour Cases, 2019 WL 6954322 (Cal. Ct. App. 2019)

Following a jury trial, the trial court entered judgment in favor of Safeway on the ground that plaintiff William Cunningham was subject to the executive exemption and was, therefore, exempt from overtime. At trial, the main dispute was whether Cunningham spent most of his work time stocking shelves and checking (i.e., doing nonexempt work) or performing managerial tasks such as supervising, training and disciplining employees, assessing store conditions and filling out financial reports (i.e., doing exempt work). The Court of Appeal affirmed the judgment in favor of Safeway, holding that “a task does not become exempt merely because the manager undertakes it in order to contribute to the smooth functioning of the store. An instruction on the consideration of the manager’s purpose, where appropriate, must inform the jury of relevant limiting principles outlined in the applicable regulations and recognized by our prior decisions. Additionally, we find no abuse of discretion in the admission of the contested expert testimony.”

Uber and Postmates File Lawsuit Challenging California’s New Independent Contractor Law (AB-5)

On Monday, Uber, Postmates and two of their drivers filed a lawsuit in federal court in the Central District of California, seeking declaratory and injunctive relief and a determination that AB-5 is unconstitutional.

AB-5 is set to become effective on Wednesday, January 1st and will have a major impact on California’s freelance workforce as well as most other companies that have workers located in the state.  Among other things, AB-5 essentially prohibits companies, including Uber and Postmates, from continuing to classify their workers as independent contractors under California state law; further, the statute provides no guidance as to how these fundamental changes to California law are to be harmonized with other important areas of state and federal law, including state income tax and benefit plan participation.

Uber, Lyft and Doordash consider AB-5 to be a sufficiently significant threat to their businesses that they have pledged $110 million dollars to fund a voter initiative for the November 2020 ballot.

In the recent lawsuit, Uber and Postmates characterize AB-5 as “irrational and unconstitutional” as well as “vague and incoherent.” They allege that AB-5 will force some employers to “fundamentally restructure their business models” and could “force them to stop doing business in California.” This newly filed complaint isn’t the only challenge to AB-5, as it is already facing other pending lawsuits from freelance journalists as well as the trucking industry. The freelance journalists are challenging AB-5 on First Amendment grounds, as the law only allows a freelance journalist to write 35 articles per year for the same publication without becoming an employee. The trucking industry is challenging the law from yet another angle, arguing that AB-5 runs afoul of federal law which prohibits states from enforcing any law related to the price, route, or service of a motor carrier. With multiple challenges from different industries, we expect this battle to continue well into 2020.

Companies with workers in California should bear in mind that, even if one of the many challenges to AB-5 is successful, the “ABC” test codified in AB-5 would still be the default for (the much more limited) purposes of California’s wage order rules per the California Supreme Court’s decision in Dynamex. To hear more about Dynamex and the California worker classification regime prior to AB-5, listen to our podcast here.

To read more about AB-5, read our in-depth discussion here.

California’s “Request Arbitration, Go to Jail” Law is Blocked Until at Least January 10, 2020

As we reported previously, the California legislature recently passed and Gov. Newsom signed into law Assembly Bill 51, which would impose criminal penalties upon employers seeking to have their employees sign arbitration agreements – it is in short the “Request Arbitration, Go to Jail” law.  Today, United States District Judge Kimberly J. Mueller granted a temporary restraining order, enjoining the state from enforcing AB 51 until a further evidentiary hearing can take place on January 10, 2020.  As predicted by most observers, the Court found that there were “serious questions regarding whether the challenged statute is preempted by the Federal Arbitration Act.”

On January 10, the Court will hear the pending motion for a preliminary injunction, which if granted, would invalidate AB 51 for the foreseeable future. We will update you on further developments after that hearing.

Adjusting To The “New Normal” With AB 5 – A World Without Independent Contractors

On January 1, 2020, California’s new worker classification law known as Assembly Bill 5 (“AB 5”), goes into effect.  AB 5 codifies the three-factor “ABC” test adopted by the California Supreme Court in its 2018 Dynamex decision.

The bulk of newly added Section 2750.3 of the California Labor Code describes the various categories of workers and businesses that were fortunate enough to negotiate an exemption from the ABC test in the waning days of the last legislative session.  These lucky few include:

  • Licensed insurance agents, doctors, dentists, veterinarians, psychologists, lawyers, architects, engineers, private investigators, accountants, direct sales salespersons, securities broker-dealers, investment advisors, or commercial fishermen;
  • Real estate licensees and repossession agencies;
  • The services provided by a human resources administrator, travel agent, graphic designer, grant writer, fine artist, photographer or photojournalist, freelance writer/editor, freelance newspaper cartoonist, esthetician, electrologist, manicurist, barber, or cosmetologist that meet certain criteria;
  • Relationships between a contractor and an individual performing work pursuant to a subcontract in the construction industry that meet certain criteria;
  • Relationships between a referral agency and a service provider that uses the referral agency to connect with clients that meet certain criteria; and
  • Bona fide business-to-business contracting relationships that meet certain criteria.

For everyone else, now is the time to make some tough decisions and weigh the legal, technical, and financial implications of compliance with the new law, which provides for retroactive enforcement.  To avoid facing potential liability for misclassification, hiring entities should consider whether: (1) certain categories of workers or business relationships are exempt; (2) it makes sense to proactively reclassify some or all current independent contractors as employees; or (3) restructuring business operations could result in compliance with the ABC test.  We recommend that you contact your California employment counsel for further guidance.

But it’s not just California employers who are facing “an existential threat” (as the Pacific Research Institute calls it).  For example, “New Jersey has been cracking down hard on the gig economy” and aims to pass a bill that would proclaim all state workers to be employees, with just a few exceptions.  Described as a “policy Petri dish,” analysts expect that other states like New York, Washington, Oregon, and Illinois will follow California’s lead.

Meanwhile, gig-reliant and ride-share business are expected to be most impacted by the new law.  It’s no secret that the primary motivating factor for the legislature’s passing AB 5 was to hand Sacramento’s labor union benefactors a vast new group of potential dues-paying union members.  After all, the bill’s author, California State Assemblywoman Lorena Gonzalez is the former CEO and Secretary-Treasurer of the San Diego and Imperial Counties Labor Council, AFL-CIO, and she received almost 33 percent of all of her campaign contributions last year from organized labor.

In response, Uber, Lyft, and DoorDash have teamed up to put a voter initiative on the ballot called the “Protect App-Based Drivers and Services Act,” pledging to spend at least $110 million dollars to help convince voters next November that AB 5 should be amended to protect the rights of app-based rideshare and delivery workers who want to work as independent contractors. The ballot measure would protect worker flexibility and independence; require delivery service companies to offer new protections and benefits for drivers, including wage and benefit guarantees; and implement new customer and public safety protections.

But what about other freelance workers who do not qualify for job or industry/sector exemptions and who lack the political clout or financial resources necessary to fight for their right to make their own hours, set their own schedule, or work multiple jobs simultaneously?  Unfortunately, there aren’t a lot of others options right now.  We will keep you apprised of any developments.