2011 California Employment Law Update

Dear Clients and Friends:

I hope that this letter finds you well and prospering in this Spring of 2011. Our annual Employment Law Update has been a bit delayed this year due to a combination of moving our offices to the historic Bard Memorial Building in Downtown Ventura and the good fortune of being busy. Nonetheless, I know that there are those among you anxiously awaiting this epochal missive. Hence, our Update; albeit late.

I do want to start out by assuring you that it is extremely unlikely that the delay in this publication has caused you to miss a vital change in the law. Our Legislature was apparently too busy arguing over the budget to make many changes in employment law. Similarly, there was a dearth of landmark court decisions during this period. So when I say that what follows constitutes the “highlights” of the changes in employment law, you will understand the context. Here they are!

Organ and Bone Marrow Donor Leave

California employers with 15 or more employees must now provide the following paid leaves to employees who choose to donate organs or bone marrow:

  • Organ donors — must be provided a 30-day (workdays) leave of absence in any one-year period
  • Bone marrow donors – must be provided a leave of absence up to five workdays in any one-year period Employers must continue to provide health insurance for the employee during the leave, and the employee must be reinstated to the same or equivalent position as he/she had prior to the leave. An employer can require that the employee use up to five (5) days accrued vacation or vacation time for bone marrow donation, and up to two (2) weeks for organ donation leave.

Genetic Information Nondiscrimination Act (“GINA”)

On November 9, 2010, the Equal Employment Opportunity Commission (“EEOC”) issued its final regulations interpreting the employment provisions of Genetic Information Nondiscrimination Act of 2008 (“GINA”). GINA applies to private employers with 15 or more employees, as well as employment agencies, labor organizations, and training programs. GINA generally prohibits use of genetic information to make decisions about health insurance and employment, and restricts the acquisition and disclosure of genetic information.

It is important to note that GINA goes beyond simply outlawing discrimination and makes it illegal to”request, require, or purchase genetic information.” Importantly, the regulations interpret what it means to improperly “request” genetic information. The EEOC broadly interpreted what constitutes a “request” and found that it includes “conducting an Internet search on an individual in a way that is likely to result in a covered entity obtaining genetic information; actively listening to third-party conversations or searching an individual’s personal effects for the purpose of obtaining genetic information; and making requests for information about an individual’s current health status in a way that is likely to result in a covered entity obtaining genetic information.” 29 C.F.R 1635.8.

Accordingly, under the new regulations, an employer does not have to directly ask an employee for genetic information to violate GINA. It can violate GINA by seeking that information through an internet search, searching personal effects, or even actively listening to a third-party conversation.

Other important provisions of the regulations include limited protection for an employer that “inadvertently” requests or obtains genetic information, as well as a safe harbor provision for employers that take the proactive step of asking health care providers not to produce genetic information when making otherwise lawful requests for employee medical information.

Sample language that can be included in any request for medical information in order to prevent a possible violation is included in the regulations.

Cal/OSHA Heat Illness Regulations Revised

A revised Heat Illness Prevention standard for outdoor places of employment went into effect November 4, 2010. In addition to revisions related to shade and other safety precautions, the new standard includes changes to training requirements for both supervisory and nonsupervisory employees. Such training is now required to be given before employees begin work that “should reasonably be anticipated to result in exposure to the risk of heat illness.”

San Francisco Ordinance — Minimum Wage

The San Francisco 2011 city minimum wage increased to $9.92 per hour, effective January 1, 2011. Employers must provide employees who work within the geographic boundaries of the City and County of San Francisco no less than the Minimum Wage. This applies to all employers, regardless of where they are located, who have employees who work in San Francisco. The ordinance also requires a poster that must be displayed in each workplace in English, Spanish, Chinese and any other language spoken by at least five percent of the workforce.

New NLRB Posting Requirements

Executive Order 13496 requires federal contractors and subcontractors to inform employees of their rights under federal labor laws. Pursuant to the Department of Labor final regulation implementing the Executive Order, all contracts resulting from solicitations issued on or after June 21, 2010, must contain provisions requiring the federal contractor to display a notice to employees explaining their rights under federal labor laws during the term of the contract.

Federal contractors operating under such contracts must display the notice for the duration of the contract in “conspicuous places in and about its plants and offices” at all locations where employees “engage in activities relating to the performance of the contract.” There are limited exceptions for entities with contracts that fall below the simplified acquisition threshold of $100,000 or where work under the contract is performed entirely outside the United States. Subcontracts for amounts under $10,000 are also exempt from the regulation’s requirements. Aside from these limited exceptions, the rule is intended to broadly cover all entities performing work for and with the federal government.

Unpaid Internships: Do They Violate the FLSA?

The U.S. Department of Labor (“DOL”) is cracking down on unpaid internships, finding that few “for-profit” employers can offer such internships without violating the Fair Labor Standards Act (“FLSA”). The DOL issued a “Fact Sheet” to help employers determine whether their unpaid internship programs comply with the FLSA.

If the following six elements are satisfied, an employment relationship most likely does not exist and thus the intern does not need to be paid: (1) The internship is similar to training which would be given in an educational environment; (2) The internship experience is for the benefit of the intern; (3) The intern does not displace regular employees but instead works under close supervision of existing staff; (4) The employer providing the training derives no immediate advantage from the activities of the intern; and on occasion, its operations may actually be impeded; (5) The intern is not necessarily entitled to a job at the conclusion of the internship; and (6) The employer and the intern understand that the intern is not entitled to wages for the time spent at the internship.

Department of Labor Extends FMLA Coverage to Same-Sex, Non-Traditional Parents

On June 22, 2010, the U.S. Department of Labor issued a clarification of definitions under Section 101(12) of the Family and Medical Leave Act (FMLA) designed to ensure all employees who care for children are eligible for parental rights to leave under the Act—even when the employee lacks a legal or biological relationship to the child.

The change requires employers to provide FMLA leave to employees caring for children who were previously uncovered by the Act, particularly gay and lesbian parents and “non-traditional” parents who care for children but are not those children’s legal stepparents or guardians. The change is a clarification from the Department about its new interpretation of the FMLA, rather than a statutory or regulatory change to the law. Nevertheless, all employers should take note of the Department’s new guidelines with an eye towards compliance.

California Supreme Court Considering Whether Employers Must Ensure Meal Breaks Are Taken Or Merely Make Breaks Available

California employers are still awaiting a decision on Brinker Restaurant v. Superior Court of San Diego, which the California Supreme Court agreed to review in October 2008. This case should resolve the issue of whether an employer needs to only provide (i.e., authorize and permit) rest and meal periods, or needs to actually ensure that employees actually take them.

Employer Must Take Corrective Action to Cure Third-Party Harassment

In Turman v. Turning Point of Central California, a California Court of Appeals recently confirmed an employer’s duty to take corrective measures to prevent a hostile work environment caused by third parties – even when this type of harassment or hostile work environment may be “inherently part of the job.” The plaintiff was a resident monitor at a halfway house for the defendant employer, who alleged that she was sexually harassed by the male residents of the halfway house.

This case is a good reminder to employers that they must address complaints of harassment and hostile work environment even when the harassment is perpetrated by third parties, and even in the unusual situation where the hostile work environment may be an expected and inherent part of the job.

California Court of Appeal Allows Lawsuit Against An Employer For Allegedly Failing To Provide An Employee With “Suitable” Seating

In Bright v. 99¢ Only Stores, a California Court of Appeals held that an employee could sue her employer, 99¢ Only Stores, for failure to provide “suitable” seating during her employment. The plaintiff was employed as a cashier by 99¢ Only Stores. She alleged that she was not provided with a seat when she worked, and brought a lawsuit seeking penalties for alleged violation of Labor Code Section 1198 under the Private Attorneys General Act of 2004 (“PAGA”).

The Court of Appeal held that a failure to provide “suitable” seating could constitute a violation of both the Wage Order and Labor Code Section 1198, and held that Plaintiff could seek penalties under PAGA. In light of this case, employers are encouraged to review their seating policies to ensure they provide employees with suitable seating in appropriate circumstances, and should consult counsel with any questions.

Employers May Be Liable For Honoring An Unenforceable Non-Compete Agreement With A Prior Employer

In Silguero v. Creteguard, Inc., a California Court of Appeals held that a subsequent employer can be liable for wrongful termination in violation of public policy for firing a new employee when her prior employer attempted to enforce an unenforceable non-compete agreement.

This case reminds employers that it does not matter whether they are the company entering in to the non-compete agreement with an employee, or the subsequent employer subsequently enforcing that non-compete agreement. If an adverse employment action is taken against an employee based upon a non-compete or no-hire agreement prohibited by California law, both the prior and now the current employer may be liable for wrongful termination claims.

Ninth Circuit Finds Employment Agreement Ambiguous As To Whether An Employee’s “Ideas” Were Assigned To Employer

In Mattel, Inc. v. MGA Entertainment, Inc., the Ninth Circuit Court of Appeals vacated the trial court’s judgment awarding Mattel ownership rights to the Bratz brand of dolls. This decision was reached, in part, on a finding that the trial court erred in ruling that the employment agreement between Mattel and former employee Carter Bryant, assigned Bryant’s “ideas” to Mattel. Bryant had entered into an employment agreement with Mattel that assigned ownership of all Byrant’s inventions during his employment to Mattel. The issue was whether the language of the employment agreement included all of Bryant’s “ideas.”

The Ninth Circuit found that there was ambiguity in the employment agreement about whether Bryant’s “ideas” would also be owned by Matter and that extrinsic evidence regarding the parties’ intent should have been considered during the trial. The Ninth Circuit vacated the trial court’s judgment and remanded the case for a retrial. The lesson from this case is that employers that typically include an assignment of inventions or intellectual property in their employment agreements should revise those assignments to specifically include the employee’s “ideas” so as to remove any ambiguity from the assignment provision.

Ninth Circuit Applies California Law Despite Choice-Of-Law Clause in Independent Contractor Agreement

In Narayan v. EGL, Inc., the Ninth Circuit held that California law applied in interpreting independent contractor agreements between California plaintiffs and the employer, which was a global transportation company. The plaintiffs sued in California for, among other things, unpaid overtime. The Ninth Circuit did not apply Texas law (as required by the independent contractor agreement) in deciding whether the California plaintiff was an employee, holding that the claims for unpaid benefits arose under the California Labor Code.

The lesson from this case is that employers cannot rely on choice-of-law provisions contained in their independent contractor agreements in order to avoid the requirements of the California Labor Code. The determination of whether an individual is an independent contractor or an employee is a question which arises under the California Labor Code itself and, therefore, it is outside the scope of a contract between the individual and an employer.

Accordingly, California’s multi-factor test for employment will apply to determine whether an employer-employee relationship exists for purposes of claims under the California Labor Code.

Laws Protecting Union Picketing Held Unconstitutional

Two separate California appellate courts have held that laws that largely prohibit courts from enjoining union picketing during a labor dispute are an unconstitutional interference with the rights of property owners. Specifically, the appellate courts ruled that the Moscone Act (Cal. Code of Civil Procedure Sec. 527.3) and Labor Code section 1138.1 are unconstitutional for favoring speech relating to labor disputes over speech relating to other matters.

Federal & California Required Posters

There are new 2011 versions of the required federal posters, including but not limited to, “Federal Minimum Wage,” “Equal Employment Opportunity is the Law,” and “Safety and Health Protection on the Job.”

Additionally, there are new 2011 versions of California required posters such as “California Minimum Wage,” “Your Rights Under USERRA (Veterans Benefits),” and “Notice Employee Polygraph Protection Act” posters, among others. All employers must have these posters displayed at each work site in an area accessible to all employees and applicants.

Employers should make sure they’re posting the updated versions of the required posters, and can order the 2011 Required Notice Poster from the Chamber of Commerce.

Workers’ Compensation Notice Requirements

The posting and notice requirements were amended in 2010 to require additional information about Managed Professional Networks (MPNs). Employers with MPNs that provide treatment for workers’ compensation claims must display the required workers’ compensation poster (Notice to Employees – Injuries Caused by Work) as well as additional information about the MPN(s) the employer uses. The workers’ compensation pamphlet must also include information about MPNs.

Mileage Rates And Reimbursement

Effective January 1, 2011, the reimbursement rate was raised to 51 cents per mile. Deductible medical and moving expenses are now 19 cents a mile (up 2.5 cents a mile). The rate for providing services for charitable organizations is 14 cents a mile. The standard automobile costs in 2010 may not exceed $26,900 for automobiles and $28,200 for trucks and vans.

Healthcare Reform

Last, but not least, I should mention the Affordable Care Act (“ACA”) signed into law this time last year. While its requirements phase in through 2018 and its key provisions, such as insurance exchanges for individuals and small businesses and the “individual mandate” do not apply until 2014, there are some immediate impacts on employers.

For instance, IRS Forms W-2 must state the value of healthcare and employees may request such forms upon termination, even if mid-year. Wellness grants and simple cafeteria plans are also now available for small employers. If you have specific questions that your insurance broker is unable to answer, let us know. We are still learning about the ACA and you can expect a more detailed report later in the year. I hope this information is helpful.

As always, feel free to call me to discuss any additional questions or concerns. Stop by our new offices if you are in the area and have a great 2011 (at least what is left!).

– Tony Strauss