California Employment Law Update

Equal Pay Act Claim Should Not Have Been Dismissed

Allen v. Staples, Inc., 84 Cal. App. 5th 188 (2022)

Joyce Allen worked at Staples as a field sales director (FSD) reporting to area sales vice president Bruce Trahey; FSD Charles R. Narlock also reported to Trahey.  As part of a corporate reorganization in February 2019, Trahey informed Allen and several other FSDs of his decision to eliminate their positions and terminate their employment.  In her lawsuit, Allen alleged violation of the Equal Pay Act (EPA); gender discrimination and sexual harassment under the Fair Employment and Housing Act (FEHA); failure to prevent discrimination and harassment under FEHA; retaliation and wrongful termination in violation of public policy.  The trial court granted defendants’ motion for summary judgment and, in the alternative, summary adjudication of each cause of action.  The Court of Appeal affirmed dismissal of all claims except Allen’s EPA claim, including her claim for punitive damages.

Allen’s EPA claim was based on evidence showing a pay disparity between her starting salary as an FSD and, before that, an area sales manager (ASM) and Narlock’s salary when he started in those positions.  When Allen became an ASM, her base salary was set at $84,999.96; when Narlock became an ASM, his salary was set at $107,698.86 (approximately $22,000 more than Allen’s starting salary in the position).  When Allen was promoted to FSD, her annual salary was set at $86,912.46 (the same salary she was earning as an ASM); Narlock’s base salary as an FSD was $135,000 ($48,087.54 more than Allen’s salary).  Staples argued that the salary differentials between Narlock and Allen are explained by bona fide factors other than gender, namely Narlock’s time with the company and his experience before taking both the ASM and FSD positions.  However, because Staples relied on evidence of its general practices to set salaries based on factors such as seniority and merit, Staples failed to set forth the “specific factors on which Narlock’s base salary, in either position, was premised or the factors on which plaintiff’s base salaries were premised.”  Accordingly, summary adjudication of Allen’s EPA claim had to be reversed.

Work Beyond Pay Grade Can Be Grounds for Constructive Termination, Court Rules

The federal court for the Northern District of California recently declined to dismiss a former Al Jazeera International employee’s constructive wrongful termination claim against the news outlet, finding that requiring an employee to perform tasks more advanced than their pay level, without promotion, could constitute “intolerable” working conditions.

The plaintiff alleges she was working as a producer for Al Jazeera when she was offered a promotion to senior producer.  She began taking on a senior producer’s job responsibilities, and Al Jazeera arranged for her to undergo management training.  At the management training, the plaintiff discussed her experiences with gender discrimination in the workplace.  Shortly after this training, an executive producer informed her that she would not be promoted to senior producer.

Even though this promotion was revoked, the plaintiff continued to be assigned work that a senior producer would do, without increased compensation or a senior producer credit for the shows she worked on.  The plaintiff had the “sense” that she would never be promoted based on her gender and in retaliation for her comments about gender discrimination, including when she was told that a senior executive did not want her to speak about her experiences with discrimination.  A few months after she learned she would not be promoted, the plaintiff resigned.  The plaintiff then sued, alleging among other causes of action that the treatment of her constituted constructive discharge.

The court ruled the plaintiff’s complaint alleged sufficient facts to proceed; specifically, the court noted, when asked to perform a more senior position’s work “without credit, proper pay, or possibility of advancement”—and when the plaintiff reasonably believed that she would never be promoted—the plaintiff “reasonably understood her options were to either resign or be taken advantage of.”

Personnel actions like work assignment or promotion decisions typically cannot by themselves form the basis for a constructive wrongful termination claim, which requires that the working conditions themselves are “so intolerable or aggravated” that a reasonable employee “would be compelled to resign.”  The court’s ruling here is a reminder that working conditions need not necessarily be dangerous, painful, or humiliating to be “intolerable” for a reasonable employee.

With the court’s denial of Al Jazeera’s motion to dismiss, the plaintiff’s constructive termination and other discrimination-related claims may proceed—for now.  We will continue to monitor this case for any substantive updates.

Ninth Circuit Clarifies Overtime Calculation Rules for Shift Premiums and Holiday Pay Under California Law

To properly calculate the overtime rate for a non-exempt employee, employers must first calculate the “regular rate of pay.”  Under federal law, and the laws of most states, the regular rate is determined by dividing the employee’s total weekly remuneration (except for a handful of categories that are specifically excluded, such as gifts and payments for non-working hours) by the total number of hours actually worked by the employee that week.  But certain states, including California, require a different calculation—one that, depending on the nature of the compensation, can only be divided by some, but not all, of the total hours worked in the week.

In this regard, California law distinguishes between “flat-sum bonuses” and “production bonuses,” both of which may be paid on a weekly basis.  As we’ve discussed previously, the California Supreme Court, in its 2018 decision in Alvarado v. Dart Container Corporation of California, held that when calculating the regular rate for a flat-sum bonus (e.g., an attendance bonus), the employer should divide the bonus solely by the employee’s non-overtime hours in the week.  By contrast, and consistent with the federal rule, a production bonus—i.e., a bonus that varies based on output or hours worked—can be divided by all hours worked in the week (both overtime and non-overtime) to arrive at the regular rate.  Alvarado left open the question of how to apply these principles to other forms of compensation.

Earlier this month, in its decision in Bowen v. Target Corp., the Ninth Circuit examined how to calculate the regular rate for shift differentials and holiday premiums (collectively called shift premiums).  The plaintiffs in Bowen argued that shift premiums should be treated the same as flat-sum bonuses—i.e., that the denominator in the regular rate equation should be the total non-overtime hours worked, and not all hours worked.  The Court of Appeals rejected this argument, noting that—unlike flat-sum bonuses, which are not directly impacted by the number of hours worked in a week—shift premiums directly correlate to the total number of weekly hours worked and will necessarily increase as an employee works overtime.  They are therefore properly viewed as being paid in respect of all weekly hours worked, and not merely in respect of non-overtime hours.

Although Bowen is unpublished, the well-reasoned decision may provide guidance to California employers and, hopefully, other courts.

The Ninth Circuit Adopts Broad View of Whistleblower Retaliation Claim under the California Whistleblower Protection Act

In the continuously evolving whistleblower retaliation standard we previously reported on earlier this year here and here, the Ninth Circuit has now weighed in on California Labor Code section 1102.5 in Killgore v. Specpro Pro. Serv., LLC, No. 21-15897.

In holding that a consultant on an environmental project for the U.S. Army Reserve Command raised a genuine dispute of fact over whether he was fired for disclosing what he believed to be information about a government environmental assessment project’s noncompliance with federal law, even if the supervisor lacked authority to correct the issue, the Ninth Circuit “predict[ed] that the California Supreme Court would hold that section 1102.5(b) prohibits employers from retaliating against employees who disclose potential wrongdoing to any one of several enumerated avenues: government or law enforcement agencies, a person with authority over the employee, other employees with authority to investigate, discover, or correct the violation or noncompliance, or any public body conducting an investigation, hearing, or inquiry.”

This broad view will likely make it even more difficult for employers to prevail in whistleblower retaliation cases both at the summary judgment and trial phases of a case.

Read the full post on Proskauer’s Whistleblower Defense blog.

California Court of Appeal Dismantles Rounding Where Accurate Timekeeping Records Exist

A decade ago, a California Court of Appeal held that employers lawfully could round employees’ time punches if the rounding policy was neutral on its face and as applied. See See’s Candy Shops, Inc. v. Super. Ct., 210 Cal. App. 4th 889 (2012). In arriving at this conclusion, the See’s Court relied on regulations under the federal Fair Labor Standards Act (“FLSA”) and the California Division of Labor Standards Enforcement’s (“DLSE”) enforcement position, as no Labor Code provision or Wage Order addressed the issue. And, in the years since See’s, it was generally accepted that rounding was permissible, so long as the policy conformed to the standard set forth in See’s. However, things started to change last year. 

In February 2021, in Donohue v. AMN Services, LLC, 11 Cal. 5th 58 (2021) (discussed here), the California Supreme Court held that rounding was not permissible with respect to meal periods. As we noted at the time, although the Donohue court did not rule that all time rounding was unlawful, it questioned whether the practice could be justified given technological advances in timekeeping and payroll.

On October 24, 2022, the Court of Appeal for the Sixth Appellate District took the next step toward dismantling rounding altogether in Camp v. Home Depot U.S.A., Inc., Case No. H049033, 2022 WL 13874360 (Cal. Ct. App. 2022). In the published opinion, the Court reversed summary judgment for an employer that had a facially neutral quarter hour rounding policy where the employer “could and did track the exact time in minutes that an employee worked each shift and [where] those records showed that [the employee] … was not paid for all the time he worked.”

Camp involved a putative class action by two non-exempt employees, Delmer Camp and Adriana Correa, who alleged that Home Depot’s rounding policy resulted in unpaid wages. Although Home Depot’s timekeeping system recorded employees’ work times to the minute, the company’s payroll system rounded each shift to the nearest quarter hour. While Home Depot’s records demonstrated that Correa had been overpaid over time, they also indicated that Camp was underpaid by 470 minutes. Nonetheless, there was evidence that employees were paid accurately or overpaid the majority of shifts, and that Home Depot’s rounding resulted in overpayment in almost half of all pay periods.

Relying on See’s, the trial court granted Home Depot summary judgment. While the Court of Appeal dismissed Correa’s appeal, it reversed summary judgment as to Camp. Relying heavily on the California Supreme Court’s decisions in Troester v. Starbucks Corp., 5 Cal. 5th 829 (2018) (discussed here) and Donohue, the Court remarked that the application of See’s should be reexamined in circumstances where employee’s work can be captured and has been captured to the minute and, as a result of a rounding system, the employee is not compensated for all time actually worked. Notably, the Court limited its ruling to the facts of the case, and explicitly stated it was not addressing whether: (1) neutral rounding was permissible due to an inability to capture the actual minutes an employee worked; or (2) whether an employer who has the ability to capture an employee’s minutes would be required to do so. However, the Court of Appeal “invited” the California Supreme Court to provide guidance on the propriety of time rounding by employers.

In light of Camp, employers with timekeeping systems that record time worked to the minute should promptly cease any rounding practices that result in potential underpayment of wages.

Five New Employment Laws that Every California Employer Should Know

A new year brings new employment laws for California employers.  California employers will want to begin revising employee policies and handbooks now, so that they are prepared to comply with these new laws when the majority of them go into effect on January 1, 2023.  Here are five new employment laws that every California employer should know:

AB 1041 (Expanded Definition of “Family Member” for Medical and Sick Leave)

Through AB 1041, the California legislature amended Government Code section 12945.2 and Labor Code section 245.5 to expand the definition of “designated person” for purposes of employee medical and sick leave.  Section 12945.2 provides qualifying employees with up to 12 workweeks in any 12-month period for unpaid family care and medical leave.  Section 245.5 relates to California paid sick leave.  Both sections permit an employee to take protected leave to care for a “family member,” which is currently defined as a child, parent, grandparent, grandchild, sibling, spouse, or domestic partner.  With the passage of AB 1041, the Legislature added a “designated person” to this list of “family members” for whom an employee may take protected leave.  For family care and medical leave, a “designated person” is defined as “any individual related by blood or whose association with the employee is the equivalent of a family relationship.”  For paid sick leave, a “designated person” is defined as “a person identified by the employee at the time the employee requests paid sick leave.”  In light of these broad definitions, employers should be prepared to provide employees with leave to care for a wider range of persons.  An employee may identify his or her designated person at the time of requesting protected leave.  However, an employer may limit an employee to one designated person per 12-month period.

AB 1949 (Bereavement Leave)

AB 1949 adds section 12945.7 to the Government Code, in order to provide employees with protected leave for bereavement.  Under this new law, eligible employees may request up to five days of bereavement leave upon the death of a qualifying family member.  Family member is defined as a spouse, child, parent, sibling, grandparent, grandchild, domestic partner, or parent in law.  Although the employee must complete bereavement leave within three months of the family member’s death, the employer may not require that the five days be used consecutively.  Statutory bereavement leave is unpaid, but the employer must allow the employee to use any accrued and unused paid vacation, personal leave, sick leave, or other paid time off for this purpose.  Section 12945.7 prohibits discrimination, interference or retaliation against an employee for taking bereavement leave; also, the employer must maintain confidentiality when an employee takes bereavement leave. Finally, section 12945.7 does not apply to certain union employees, with an existing agreement regarding bereavement leave.

SB 1162 (Posting Pay Ranges and EEO Reporting Requirements)

SB 1162 modifies Government Code section 12999 and Labor Code section 432.3 to require employers to provide candidates with salary ranges on job postings, report employee compensation and demographic information to the California Civil Rights Department (formerly the DFEH) on an annual basis, and retain relevant records.  For job postings (including those posted by third parties), employers with 15 or more employees will be required to include a pay range, which is defined as the salary or hourly wage range that the employer reasonably expects to pay for the position.  In addition to the current requirement that, upon request, the employer must provide a candidate a pay range, the employer must now also provide existing employees with a pay range, when requested.  Failure to comply with the pay range disclosure or record retention requirements can result in penalties of up to $10,000 per violation.

The new reporting requirement concerns annual employer pay data reports.  Employers must now report the median and mean hourly rate by each combination of race, ethnicity, and sex, within each job category, with the first report due on May 10, 2023, based on 2022 pay data.  Employers with 100 or more employees hired through labor contractors must now produce data on pay, hours worked, race/ethnicity, and gender information in a separate report.  Employers who fail to timely file these required reports face civil penalties of up to $200 per employee.

Finally, employers must retain records of job titles and wage rate histories for each employee for the duration of the employee’s employment and three years after termination.  Failure to comply with these retention requirements can result in penalties of up to $10,000 per violation.

AB 2188 (Off the Job Cannabis Use Protection)

Effective January 1, 2024, AB 2188 adds section 12954 to the Government Code, which prohibits employers from discriminating against a person because of cannabis use while off the job, with some exceptions.  Employers may take action against a person who fails a pre-employment drug test, or other employer-required drug test, that does “not screen for non-psychoactive cannabis metabolites.”  This is because, according to the California Legislature, cannabis “matabolites do not indicate impairment, only that the individual has consumed cannabis in the last few weeks.”  The employer may administer a performance-based impairment test, and terminate any employee who is found to be impaired in the workplace.  This new law does not apply to employees in the building or construction industry, or in positions requiring a federal background investigation or clearance, and does not preempt state or federal laws that require employees to be tested for controlled substances.

AB 152 (COVID-19 Supplemental Paid Sick Leave Extension)

AB 152 modified Labor Code section 248.6 and 248.7 in order to extend COVID-19 Supplemental Paid Sick Leave (SPSL), previously blogged about here, which was expected to expire on September 30, 2022.  This new modification allows California employees to use any remaining SPSL through December 31, 2022.  It does not provide employees with new or additional SPSL.  In a departure from the original version of the law, when an employer requires an employee to take a COVID-19 test five days or later after a positive test result, the employer is now permitted to require the employee to submit to a second diagnostic test within no less than 24 hours.  If the employee refuses, the employer may decline to provide additional SPSL.  The employer obligation to cover the cost of any employee COVID-19 tests remains in effect.

We will continue to monitor and post about these and other forthcoming California employment laws as they develop.

 

October 2022 California Employment Law Notes

We invite you to review our newly-posted October 2022 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

View PDF

California Employment Laws Passed and Pending

It just wouldn’t be Fall without the passage of a flurry of new laws, shaking up the employment landscape in California.  As of the close of the legislative session on August 31, several “job killer” bills (so called by the California Chamber of Commerce as reported here and here) passed the state legislature and are awaiting action by Governor Gavin Newsom.

While Governor Newsom lost no time signing some of these bills, including AB 257 (Holden; D-Pasadena) regulating non-unionized fast food workers’ wages and working conditions (as discussed here), and AB 2188 (Quirk; D-Hayward), prohibiting employer “discrimination” against off-the-job use of cannabis, other “job killer” bills still await the Governor’s approval or veto, including:

Data Reporting and Publication

  • SB 1162 Publication of Pay Data (Limón; D-Goleta) expands upon the legislation enacted two years ago requiring employers with 100 or more employees to report specific pay data annually. This bill imposes civil penalties on employers that fail to report required pay data.  SB 1162 also would require covered employers to provide pay scale information to job applicants.  The initial bill was amended to eliminate the requirement to publish individual pay data reports online.  While CalChambers still opposes the bill, it removed the “job killer” tag after this amendment.

Labor Relations

  • AB 2183 Agricultural Labor Relations (Stone; D-Scotts Valley) changes union election procedures for agricultural employees by essentially eliminating a secret ballot election and replacing it with the submission of representation cards signed by over 50% of the employees. AB 2183 also limits employers’ ability to challenge the submitted ballot cards, forcing employers to post a bond, and includes a presumption of retaliation if an employer disciplines, suspends, demotes, lays off, terminates, or otherwise takes adverse action against a worker during a labor organization’s representation ballot card campaign.  The Chamber continues to oppose this bill and it has maintained its “job killer” tag.

State of Emergency

  • SB 1044 State of Emergency (Durazo; D-Los Angeles) allows employees to leave work or refuse to show up if they feel “unsafe.” It prohibits employers from taking any adverse action against employees who decide to leave the premises or not arrive at work during a state of emergency or emergency condition.  Initially, the bill did not define the term “unsafe.”  The bill was amended to define “a reasonable belief that the workplace or worksite is unsafe” to mean a reasonable person, under the circumstances known to the employee at the time, would conclude there is a real danger of death or serious injury if that person enters or remains on the premises.  The existence of any health and safety regulations specific to the emergency condition and an employer’s compliance or noncompliance with those regulations will be a relevant factor if this information is known to the employee at the time of the emergency condition.  Notably, the term “emergency” does not include a health pandemic.  After the amendments, the Chamber removed its “job killer” designation from the bill and has taken a neutral stance.

Other significant bills passed by the Legislature this session and on the Governor’s desk include several related to job protected leaves:

  • AB 152 COVID-19 Relief: Supplemental Paid Sick Leave (Committee on Budget) would extend the current iteration of the Supplemental Paid Sick Leave (“SPSL”) requirement for COVID-19-related leave from September 30, 2022 through the end of the year. Importantly, it will not entitle employees to a new bank of SPSL.  SB 152 also establishes a new grant program for specified small business to provide up to $50,000 in grants to cover some of the costs of SPSL provided in 2022.
  • AB 1949 Bereavement Leave (Low; D-Palo Alto) would make it unlawful to refuse to grant eligible employees up to 5 days of bereavement leave upon the death of a family member (as defined under the California Family Rights Act, including spouse, child, parent, sibling, grandparent, grandchild, domestic partner, or parent-in-law). The bill will require the leave to be completed within 3 months of the date of death.  In the absence of existing policy, the leave may be unpaid, but an employee can use other available paid time such as vacation, personal, or sick leave.  The leave will only be available to employees who have worked for the employer for at least 30 days prior to the commencement of the leave.
  • AB 1041 Family Leave for “Designated Persons” (Wicks; D-Oakland) would expand CFRA to permit an employee to take job-protected leave to care for a “designated person.” The bill defines “designated person” as any individual related by blood or whose relationship with the employee is the “equivalent of a family relationship.”  The bill provides that the employee may designate a “designated person” in advance and that an employer may limit an employee to one designated person per 12-month period.

Governor Newsom has until Friday, September 30 to sign or veto the bills passed by the Legislature.  We will continue to track the final outcome of these bills.

In This Tight Labor Market, Interest in Funeral Services Work is Growing

As in other sectors of the economy, there is a labor shortage in the funeral industry.  However, unlike other fields in which the demand for workers is outpacing supply, the interest in joining the ranks of the funeral services business is booming.  The American Board of Funeral Service Education (“ABFSE”), the national academic accreditation agency for college and university programs in Funeral Service and Mortuary Science Education, reported that in 2021 there was a 24% increase in total enrollment as compared to 2020.  The majority of new students in mortuary science programs are now women.  Today’s graduates are 72% female based on ABFSE’s numbers.  This stands in contrast to the nearly 2 million women who left the job market during the COVID-19 pandemic.  According to California’s Employment Development Department, the number of Morticians, Undertakers, and Funeral Directors is expected to grow much faster than the average growth rate for all occupations.  Perhaps this increased interest in the funeral services profession can help fill the job vacancies for at least one critical (and possibly recession-proof) industry.

California Creates Unelected Council to Set Minimum Wages/Working Conditions of 500,000 Fast Food Workers

On September 5, 2022, Governor Gavin Newsom signed the Fast Food Accountability and Standards Recovery Act or FAST Recovery Act (AB-257).  In a breathtaking move, the state government, which is dominated at all levels by union-friendly politicians, will appoint a 10-member Council composed of employees, employers and “union activists” to set the minimum wages and working conditions of fast food workers in the state – however, the new Council will only have jurisdiction over non-unionized fast food restaurants.

Since unionized restaurants will be exempted from the law, they will be free to pay their employees lower wages and benefits than those set by the Council.  In short, the law is nothing but a blunt instrument designed to punish non-unionized workplaces.

The new legislation applies to “fast food chains” with 100 or more restaurants nationwide.  It defines a “fast food restaurant” as establishments that provide food for “immediate consumption either on or off the premises” for customers who select and pay for items before eating, and where the restaurant prepares items in advance.  The law does not apply to restaurants with table service.  In addition, certain bakeries and grocery establishments are exempted from the FAST Recovery Act.

The 10-member Council will be empowered “to establish sectorwide minimum standards on wages, working hours, and other working conditions adequate to ensure and maintain the health, safety, and welfare of, and to supply the necessary cost of proper living to, fast food restaurant workers and to ensure and effect interagency coordination and prompt agency responses regarding issues affecting the health, safety, and employment of fast food restaurant workers.”

California’s minimum wage (already the highest in the nation) is currently $15/hour.  The newly constituted Council has authority to raise the minimum wage of fast food workers by 47% next year to $22/hour.  Starting in 2024, the Council can increase the minimum wage by up to the lesser of 3.5% or the adjusted Consumer Price Index for Urban Wage earners.  Further, the FAST Recovery Act creates a cause of action for discrimination or retaliation against any fast food worker and establishes the right to reinstatement.

It’s worth noting that the FAST Recovery Act was originally authored by the once and future AFL-CIO labor leader Lorena Gonzalez who briefly served in the California legislature long enough to sponsor the deeply unpopular AB 5 on behalf of the unions, which essentially eliminated independent contractors in the state; she also sent out a controversial “F*ck Elon Musk” tweet not long before Musk moved Tesla’s headquarters from California to Texas.  The FAST Recovery Act was heavily supported by the Service Employees International Union (the SEIU) and is obviously designed to induce fast food establishments to unionize or pay the price.  The bill exempts fast food establishments where the workers are covered by a valid collective bargaining agreement and the regular hourly rate of pay is not less than “30 percent more than the state minimum” for such workers.

Restaurant owners have already mobilized in opposition to the FAST Recovery Act and, on September 6, 2022, filed a “Request for Title and Summary for Proposed Referendum” with the California Attorney General.  Once a request for title and summary has been submitted, the Attorney General’s Office will facilitate a 30-day public review process and then prepare a circulating title and summary.  When the official circulating title and summary is complete, the Senate and Assembly may conduct public hearings on the proposed initiative measure but cannot amend it or prevent it from appearing on the ballot. The next step will be preparing the petition then, finally, circulating the petition and gathering signatures.  If enough signatures are obtained, the FAST Recovery Act will be stayed until it is decided by California voters either this November or in the 2024 election. The total number of signatures required to qualify a referendum is 623,212.

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

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