California Employment Law Update

Another Day, Another $31 Million Employee Verdict From a Los Angeles Jury

On Tuesday, a Los Angeles jury did what L.A. juries do so often these days — they awarded tens of millions of dollars to an ex-employee who claimed she had been the victim of discrimination, wrongful termination and retaliation.  Codie Rael, who worked as a materials buyer for a dental supply company, claimed that she was subjected to comments such as you are “outdated,” “a dumb female,” and that she was allegedly told “we need younger workers here.”

At the conclusion of an 8-week trial and following four days of deliberations, the jury awarded Rael $5,282 for past economic losses; $3 million for past and future emotional distress damages; and $28 million in punitive damages.  Rael worked for the company for 36 years and was 54 years old at the time of her resignation/termination.  Rael’s lawyer contended that the employer’s actions were part of a deliberate plan to replace her entire department with younger, cheaper labor.  Although Rael had given the employer notice of her resignation, the company fired her before her employment actually ended.

Does anyone still need convincing that arbitration agreements are the way to go?  See our earlier post about that.

 

Supreme Court Bars Mandatory Union Dues For Public Employees

In a highly anticipated decision, the United States Supreme Court today held that it is a violation of the First Amendment to require public sector employees who are not members of a union to pay any union dues, even when a portion of those dues is attributable to the costs of collective bargaining on behalf of all employees.  Janus v. AFSCME Council 31, 585 U.S. ___, 2018 WL 3129785 (2018).

Petitioner Mark Janus, an employee of the state of Illinois, refused to join the union because he opposes many of its positions, including those arguably taken on his behalf in collective bargaining activities.  Janus challenged the requirement that he pay any fees to the union, including that portion of the union dues attributable to collective bargaining activities (“agency fees”), arguing that such fees represent “coerced political speech” and that “the First Amendment forbids coercing any money from the nonmembers.”  In a 5-4 decision, the Court overruled its prior opinion on this issue and determined that the state’s “extraction of agency fees from nonconsenting public-sector employees violates the First Amendment.”

 

Takeaways

Importantly, this ruling applies only to public sector unions, and therefore unions operating in the private sector may still collect agency fees from non-members.  The impact of this decision on the public sector is sure to be significant.  As the majority points out, unions may experience “unpleasant transition costs,” and as Justice Kagan predicts in dissent, this also means that state and local governments that previously operated with agency fees will have to find new ways of managing their workforces.  Negotiations between parties that have a continuing relationship may become particularly contentious, as the parties can no longer rely on long-settled terms, such as agency-fee provisions, when bargaining over future agreements.

This development also may have a significant impact on political contributions across the country.  In 2016, public employee unions contributed $65 million to political candidates, 90% of which went to Democrats.

The California state legislature already has taken several affirmative steps to cushion the blow of the Janus decision for its allies in the labor movement.  Last year, the California Legislature enacted and Gov. Brown signed Assembly Bill 119, which requires public employers to provide union representatives exclusive access to new employee orientation meetings so that the union can try to convince employees that it is in their interest to join the union and pay union dues.  The new statute does not indicate whether employee attendance at such sessions is mandatory nor does it acknowledge the existence of Cal. Gov’t Code § 3502, which specifically guarantees that “Public employees also shall have the right to refuse to join or participate in the activities of employee organizations and shall have the right to represent themselves individually in their employment relations with the public agency.”

AB 119 also requires public employers to provide the union with exclusive access to the name, job title, department, work location, work and home address, personal cellular telephone number and personal email address of all newly hired employees within 30 days of their hire – and every 120 days thereafter.

More recently, the state legislature passed Senate Bill 866, which requires that state employees who wish to reduce or eliminate their mandatory union dues payments in the wake of Janus must make such a request exclusively to the union rather than their employer, and the employer must rely upon the union’s representation as to which employees have chosen to pay or not pay union dues.  Further, a public employer may not send mail or email to its employees about their right to join or refrain from joining a union unless the employer facilitates the delivery of similar messages from the union.

The California State Assembly also passed Assembly Bill 2577 (Assembly Member Adam Gray, D-Merced), which allows union members to deduct the amount they pay in union dues from their income taxes.  This statute is obviously designed to reduce the cost of paying union dues, and it is estimated that it will cost California taxpayers more than $600 million over the next three years alone.

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 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.

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