The California Supreme Court recently issued an important opinion clarifying employers’ obligations to provide employee rest periods. Specifically, in Augustus v. ABM Security Services, Inc., 2 Cal.5th 257, the Court reinstated a trial court order awarding approximately $90 million to a class of employee plaintiffs and held that employers (1) must relieve their employees of all duties during rest periods, and (2) must relinquish any control over how employees spend their break time. This Bulletin discusses the background and additional considerations addressed by the Augustus Court in this critical decision.
ABM Security Services employs several thousand security guards throughout California. A large class of the guards sued, claiming ABM failed to provide proper rest periods in compliance with California law. More specifically, the guards claimed ABM required them to keep their pagers and radios on during rest periods and to “remain vigilant” and responsive to calls when needs arose, including escorting tenants to parking lots, notifying building managers of mechanical problems and responding to emergency situations.
The Los Angeles Superior Court granted a motion for summary judgment brought by the employees and awarded them approximately $90 million in damages. The Court of Appeal reversed this order, finding that simply being “on call” did not constitute “performing work” and therefore did not violate California’s rest period laws.
The Applicable Law
California law, set forth in Cal. Labor Code Sections 226.7, 512 and Industrial Welfare Commission (“IWC”) Wage Order No. 4-2001, requires that employers provide a paid 10-minute rest period every four (4) hours of work (or fraction thereof) to any employee who works more than three-and-one-one-half hours per day. The law stipulates that employees should not be required “to work” during this break.
The California Supreme Court Opinion
The Supreme Court disagreed with the reasoning of the Court of Appeal and reversed, reinstating the $90 million damages award. It did so by adhering to the plain language of the Wage Order, which simply requires employees be relieved of all work-related duties and employer control during 10-minute break periods. The Court also found support for its position in what it termed the “practical realities” of rest periods. While a policy requiring employees to remain on an employer’s premises during rest periods does not establish employer control, requiring employees to carry devices or otherwise remain reachable during a break suggests impermissible employer control.
The Court recognized that employers do have options if an exigency arises and the employee is needed during his or her break. First, it said, “Nothing in our holding circumscribes an employer’s ability to reschedule a rest period when the need arises.” Additionally, the employer may provide employees with another rest period to replace one that was interrupted or pay the employee the premium pay required under the applicable IWC Wage Order and Labor Code Section 226.7. This premium equates to one additional hour of pay at the employee’s regular rate of pay for each day that a rest period is not provided.
What Should Employers Do in Light of the Augustus Opinion?
California employers have collectively paid hundreds of millions of dollars in verdicts, settlements and administrative claims as a result of failing to strictly adhere to the rest period requirements. The Augustus opinion should serve as a wake-up call to any employer who does not already comply with this law. At a minimum, employers should not only review their policies to ensure that employees receive 10-minute rest periods free from duties and employer control, but also take steps to ensure that managers are properly trained to implement this policy.
Employers with lingering questions concerning their rest period policies should not hesitate to contact their experienced employment law counsel.
Among the major issues decided by California voters this past November was Proposition 64, the Adult Use of Marijuana Act, which legalized recreational use of marijuana by adults. While our state has permitted limited marijuana possession and use for medical reasons for roughly 20 years, expanding legalization to recreational use could further compound what may already seem a murky area for California employers. This post aims to help employers understand the new law and offers guidance as to how to deal with challenges employers may face.
Understanding Proposition 64
Proposition 64 legalizes possession and recreational use of up to 28.5 grams of marijuana and up to 8 grams of concentrated marijuana for adults 21 years old and over. Adults are also permitted to grow up to six marijuana plants at home in a locked area that is not visible from a public place. The law also imposes a 15% excise tax on marijuana sales and establishes a regulatory framework for the sale of marijuana.
However, marijuana remains an illegal Schedule I substance under the federal Controlled Substances Act. Even under California law, smoking or ingesting marijuana in public will remain unlawful, as will smoking or ingesting marijuana in places where smoking tobacco also is prohibited. Similarly, driving under the influence of marijuana remains illegal.
Does Proposition 64 Limit an Employer’s Power to Prohibit Marijuana?
No. The new law expressly says that nothing in the statute should be construed to affect the “rights and obligations of public and private employers to maintain a drug and alcohol free workplace or require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale, or growth of marijuana in the workplace, or affect the ability of employers to have policies prohibiting the use of marijuana by employees and prospective employees…”
Therefore, even with the passage of Proposition 64, employers may continue to prohibit use, possession and impairment at work. In fact, certain employers are required to maintain a “drug-free” workplace, and the new law does nothing to change this. These include employers contracting with the government or who engage in commercial transportation.
California employers may continue to conduct pre-employment drug testing of all applicants before hire and deny employment if the drug test comes back positive, even if the applicant was legally using marijuana under the state’s Compassionate Use Act.
What Should Employers Do in Light of Proposition 64?
California employers should review and update workplace policies to ensure they clearly state the company’s drug-free workplace policy. With the new law, this should include a specific prohibition of possession or use of marijuana, in any form, in the workplace. Employees should also be reminded that impairment on the job will not be tolerated, even if the impairment resulted from use of an otherwise legal substance (alcohol, marijuana) off site.
If an employer’s policies include pre-employment drug testing, applicants should be informed that they will also be tested for marijuana use.
We recommend the drug-free workplace policy be followed evenly. Making exceptions for one employee tends to undermine the effectiveness of a zero-tolerance policy and may also provide support for disparate treatment claims.
Employers with lingering questions concerning their policies with Proposition 64 should not hesitate to contact their experienced employment law counsel.
Increased Statewide Minimum Wage
Senate Bill (SB) 3 provides for six stepped annual statewide increases in the minimum wage, currently $10 an hour, for employers with 26 or more employees. The minimum wage will increase, beginning on January 1, 2017, as follows:
Employers with 25 or fewer employers have an extra year to comply with each new wage rate. Bear in mind that individual municipalities may set minimum wage rates that exceed this schedule.
Employers Cannot Choose Venue or Law in Employment Contracts
Some employers have historically included choice of venue or law clauses in employment contracts. Such clauses dictate where an employee can bring a civil lawsuit or what state (or federal) law would apply in deciding disputes. New California Labor Code Section 925 prohibits employers from including contract provisions as a condition of employment that require application of another state’s law or dictate that suits must be filed in another state court. This law will apply to employment contracts signed, modified or extended on or after January 1, 2017.
Notification of Certain Leave Rights
Assembly Bill (AB) 2337, effective January 1, 2017, will require employers to inform each worker of his or her employment leave rights as a possible victim of domestic violence, sexual assault, or stalking, by providing that information in writing to newly hired employees. Existing employees are entitled to such information upon request.
Restriction on Use of Applicant’s Juvenile Records in Employment Decisions
AB 1843, also effective January 1, 2017, will prohibit employers from inquiring about and considering information concerning “an arrest, detention, process, diversion, supervision, adjudication, or court disposition” that occurred while an applicant or employee was under the jurisdiction of the juvenile court.
Legislative Approval of California Secure Choice Retirement Savings Program
Under SB 1234, employers with five or more employees that do not already offer an employer-sponsored retirement plan will be required either to offer an employer-sponsored retirement plan or to automatically enroll their employees in Secure Choice by creating a payroll contribution to the employee’s personal California Secure Choice Retirement Savings account. The legislation was intended to saddle employers with only minimal administrative burdens. They will be required to: (1) enable employees to make an automatic contribution from their paycheck into their Secure Choice Account; (2) transmit the payroll contribution to a third-party administrator to be determined by the Board; and (3) potentially provide state-developed informational materials about the program to employees.
Extension of Equal Pay Protections to Race and Ethnicity
Readers of this Bulletin will recall that, last year, the California Equal Pay Act was amended to require employers to pay the same wage as between a male and female employees who perform substantially similar work. On September 30, 2016, Governor Brown signed the Wage and Equality Act of 2016, SB 1063. Effective January 1, 2017, this will extend the protections provided by the Equal Pay Act to employees of different races or ethnicities. Thus, employees who perform substantially similar work must be paid equally, regardless of differences in gender, race or ethnicity.
As with the Equal Pay Act, pay differential between workers of different races or ethnicities may be allowed if it is based on a reasonably applied factor such as a seniority system, merit system, system that measures earning by quantity or quality of production, or some bona fide factor other than race or ethnicity.
Employers with questions concerning any of these new or amended California employment laws should not hesitate to contact their experienced employment law counsel.
The first new poster, “Employee Rights Under The Fair Labor Standards Act” poster, contains new information about the rights of nursing mothers under the FLSA to take reasonable breaks to express milk for a period of one year following birth of their child. It also instructs them that their employer must provide a workplace location shielded from view and free from intrusion. The location may not be a bathroom.
The new FLSA poster also contains a new section about independent contractor misclassification, as well as information in the “tip credit” section that instructs employers of tipped employees who meet certain conditions that they may claim a partial wage credit based on tips received. The poster, available in 10 different languages, is available at: https://www.dol.gov/whd/regs/compliance/posters/flsa.htm.
The second revised poster is the “Employee Rights—Employee Polygraph Protection Act” poster. The only substantive change to this poster was the removal of a reference to the amount of possible penalties. The new poster also contains new contact information for the DOL. This poster, available in English and Spanish, is available at: https://www.dol.gov/whd/regs/compliance/posters/eppa.htm.
Finally, for employers with 50 or more employees, the Department of Labor previously released an updated Family and Medical Leave Act (FMLA) poster in April, 2016. Unlike the FLSA and Employee Polygraph Protection Act posters, the updated FMLA poster contains substantial revisions. This revised poster, available in English and Spanish, is available at: https://www.dol.gov/whd/regs/compliance/posters/fmla.htm.
Employers with questions concerning workplace posters mandatory under federal and state laws should not hesitate to contact their experienced employment law counsel. We can assist.
California Assembly Bill 2535, signed on July 22, 2016 by Governor Brown, amends California Labor Code Section 226. Prior to this amendment, employers were required to track and record hours worked for exempt outside sales persons and executives who are not paid solely by salary. This meant that such tracking was required, even where an employee was not compensated for hours worked, but received commissions, bonuses or stock options.
AB 2535 amends Labor Code Section 226 to eliminate this anomaly. Employers are no longer required to record hours for employees exempt from payment of minimum wage and overtime. Specifically, the law adds section (j) to Section 226, which, effective January 1, 2017, will provide:
“(j) An itemized wage statement furnished by an employer pursuant to subdivision (a) shall not be required to show total hours worked by the employee if any of the following apply:
(1) The employee’s compensation is solely based on salary and the employee is exempt from payment of overtime under subdivision (a) of Section 515 or any applicable order of the Industrial Welfare Commission.
(2) The employee is exempt from the payment of minimum wage and overtime under any of the following:
(A) The exemption for persons employed in an executive, administrative, or professional capacity provided in any applicable order of the Industrial Welfare Commission.
(B) The exemption for outside salespersons provided in any applicable order of the Industrial Welfare Commission.
(C) The overtime exemption for computer software professionals paid on a salaried basis provided in Section 515.5.
(D) The exemption for individuals who are the parent, spouse, child, or legally adopted child of the employer provided in any applicable order of the Industrial Welfare Commission.
(E) The exemption for participants, director, and staff of a live-in alternative to incarceration rehabilitation program with special focus on substance abusers provided in Section 8002 of the Penal Code.
(F) The exemption for any crew member employed on a commercial passenger fishing boat licensed pursuant to Article 5 (commencing with Section 7920) of Chapter 1 of Part 3 of Division 6 of the Fish and Game Code provided in any applicable order of the Industrial Welfare Commission.
(G) The exemption for any individual participating in a national service program provided in any applicable order of the Industrial Welfare Commission.”
Employers with any questions about wage statement requirements are encouraged to contact their experienced employment law counsel. We’re here to help.
Los Angeles Mayor Eric Garcetti signed an ordinance that increases the minimum wage of employees who work in the City of Los Angeles for at least two hours in a particular week. Employers with 26 or more employees will pay $10.50 per hour effective July 1, 2016. Employers with fewer than 26 employees will continue to pay the state minimum wage of $10.00 until July 1, 2017, when their applicable minimum wage will climb to $10.50.
Los Angeles employers must also provide Paid Sick Leave up to 48 hours per year, which can be provided in a “front load” method, or an accrual method, accruing 1 hour of PSL for every 30 hours worked. This is twice the annual PSL required under California state law. Additionally, Los Angeles employers must allow employees to carry over accrued, but unused, sick leave up to a limit of 72 hours. Unlike the statewide PSL law, the Los Angeles ordinance expressly allows employers to require reasonable documentation of an absence from work for which PSL will be used.
There are stiff fines for noncompliance, including a $500 fine for failing to post the required notice.
On June 7th, voters in San Diego voted to increase the city’s minimum wage to $10.50 immediately upon certification of the election results by the San Diego City Clerk, which could occur anytime. The minimum wage will increase to $11.50 per hour effective January 1, 2017. Further increases, keyed to San Diego’s Consumer Price Index, will occur beginning Jan. 1, 2019.
The ordinance also requires employers to provide employees with one hour of Paid Sick Leave for every 30 hours worked within the city limits. While employers may limit an employee’s use of PSL to 40 hours per year, they may not cap sick leave accrual.
As with Los Angeles, there are stiff penalties for noncompliance. Employers who fail to comply may face a civil penalty of up to $1,000. Failure to comply with the notice requirement face a penalty of $100 per employee, up to $2,000.
What you should do: Employers with any employees in the cities of Los Angeles or San Diego should immediately ensure their pay practices, sick leave practices and posted notices comply with the new ordinances. Your employment law counsel can help.
Most employees are entitled to receive overtime premium pay when they work beyond a certain number of hours in a day or week. Under both state and federal law, certain employees, because of their job duties and compensation, can be considered “exempt” from overtime. The most common exemptions are the so-called “White Collar” exemptions, for executive, administrative and professional employees.
On May 18, 2016, the US Department of Labor published its Final Rule updating the Fair Labor Standards Act (FLSA) to increase the minimum compensation required for an employee to be properly classified under one of the White Collar exemptions. The Final Rule increases the minimum salary level from its present $455 per week ($23,660 annualized) to $913 per week ($47,476 annualized). Employers can count nondiscretionary bonuses and commissions toward up to 10% of this annual minimum.
Importantly, all of the other stringent “duties” requirements for an employee to be considered exempt remain unchanged. Finally, the Rule, which becomes effective December 1, 2016, provides for automatic increases in the salary levels every three years (beginning January 1, 2020).
What you should do: This is an excellent time to evaluate whether exempt employees are properly classified. This means, not only determining whether they will meet the increased salary requirements, but equally important is evaluating whether their job duties meet the specifications set forth under the FLSA (and California Wage Orders). We encourage you to involve your employment law counsel in this important analysis.
In Castro-Ramirez v. Dependable Highway Express, the California Court of Appeal for 2nd Appellate District, which includes the Los Angeles Superior Courts, held for the first time that an employer has a duty to reasonably accommodate an applicant or employee who is related or associated with a disabled person who needs the applicant/employee’s assistance.
The facts underlying the case are interesting. Luis Castro-Ramirez was a driver for Dependable Highway Express (DHE). His son required dialysis. Before accepting DHE’s job offer, Castro- Ramirez explained that he would need to leave work early enough to go home and operate his son’s dialysis machine. Although DHE initially accommodated this request, scheduling early routes, a new supervisor refused and warned Castro-Ramirez that if he did not take a later route he would be fired. Castro-Ramirez refused and was fired.
The trial court ruled in favor of DHE, reasoning that Castro-Ramirez could not show that the termination was motivated by his association with his disabled son. The Court of Appeal reversed, holding that California’s Fair Employment and Housing Act (FEHA) creates a duty on the part of employers to accommodate employees who are associated with a disabled person.
At this juncture, Castro-Ramirez is only binding in the 2nd Appellate District. It is likely DHE will seek review of the decision by the California Supreme Court, which could result in a reversal. However, until such review, if it occurs, other appellate courts throughout California could find the court’s reasoning persuasive and follow it.
What Employers Should Do Given This Ruling
Disability discrimination, including claims of failure to reasonably accommodate a known or perceived disability, is a particularly thorny area for California employers. Castro-Ramirez further complicates matters. Employers must take care whenever a request is made for accommodation of a disability or medical condition. When in doubt, it is wise to seek the advice of employment law counsel.
In Kilby v. CVS Pharmacy, the California Supreme Court clarified when employers must provide employees with seating at work. The applicable California state wage orders require employers to provide suitable seats to employees when the “nature of the work reasonably permits the use of seats.” Prior to the Kilby case, there was a lack of controlling precedent about the meaning of the phrase “nature of the work.”
To place the dispute into perspective, the employers argued that the decision whether seating was needed required analysis of an employee’s duties as a whole during a complete shift, as well as the layout of the workplace and the employer’s own business judgment. The employees’ position, by contrast, was that each particular task had to be examined; if any task could be performed while seated, the employer should be required to provide seating.
The Supreme Court adopted a middle ground. It held that the “nature of the work” element referred to the actual tasks performed by an employee at a particular location, rather than the “holistic” analysis urged by the employers. Focusing on the actual work done at a particular location would, according to the Court, enable courts and, presumably, employers, to determine objectively whether the “nature of the work reasonably permits the use of seats” based on a totality of the circumstances test. The circumstances to be considered include the frequency and duration of tasks as well as the feasibility and practicability of providing seating.
What Employers Should Do Given This Ruling
Recognizing the Kilby opinion is riddled with legalese and provides little clear guidance, California employers with employees who may be entitled to seating—particularly if a request has been made—should seek advice from their employment counsel.
Effective April 1, 2016, significant amendments to the California Fair Employment and Housing Act (FEHA) will take effect. These impact every employer, including out of state employers, with at least 5 workers in California. Here are the critical highlights of these amendments.
Mandatory Written Anti-Discrimination/Harassment Policy
Of greatest import, the amendments require every covered employer to have a written policy that:
In order to ensure that employees receive the written policy, employers may publish the policy through various means. These include: providing a copy to existing employees and during the hiring process, posting it in the workplace, and obtaining a written acknowledgement. Translation of the policy is required into every language that is spoken by at least 10% of the workforce.
The amendments also contain definitions that are important in the context of gender discrimination.
Employers with 50+ employees are required to provide sexual harassment prevention training to supervisors at least every 2 years. The amendments require employers to retain materials related to this training, including sign-in sheets and course materials, for at least 2 years.
What Employers Should Do
Covered employers (5+ employees) should immediately review their policies to ensure they are in compliance with the amended regulations before April 1st. If you have any doubt whether your business is in compliance, we recommend you contact your qualified employment law counsel.