We are excited to continue our video series – Tips from the Table. In these monthly videos, members of LCW’s Labor Relations and Negotiations Services practice group will provide various tips that can be implemented at your bargaining tables. We hope that you will find these clips informative and helpful in your negotiations.
As 2017 kicks off, employers should be aware that a number of new state-wide laws and local ordinances begin taking effect. In this blog, we highlight just a few that California’s public employers should now be implementing.
Seeing Green in Twenty-Seventeen: Minimum Wage Increases for California Employees
Regardless of potential changes to Federal wage and hour requirements in the wake of a new presidential administration, California employers are now required to follow the state’s new minimum wage. As of January 1, 2017, the minimum wage for California employees increased to $10.50 per hour. This new wage will apply to all California employers, including the state, political subdivisions of the state, and municipalities, with the following exceptions:
- Employers with 25 or fewer employees. These employers will have until January 1, 2018, to raise wages to $10.50 per hour;
- When increase is temporarily delayed by the Governor for certain specified economic or state budgetary reasons, as certified by the Director of Finance; and potentially
- Counties and charter cities. Legal authority provides strong arguments to counties and charter cities that they are not covered by state minimum wage. This is based on those agencies’ constitutional authority to set employee compensation. (In some limited instances, a matter of statewide concern can potentially supersede a county’s or charter city’s ability to set compensation for its employees.)
As reported in our 2016 Legislative Roundup, the state minimum wage will continue to increase every year, until it reaches $15.00 per hour. After that, the state minimum wage will be adjusted annually based on a consumer pricing index.
Stick to the Basics! State Employers Cannot Exceed Federal Law Requirements to Verify Employment Eligibility.
Federal law requires employers to verify the employment eligibility of their employees through the use of a Federal I-9 form. As part of that process, employees are required to present documentation affirming their identity and employment authorization. However, employees must only present either a document listed as acceptable under “List A” of the form, or by presenting one document from “List B” and one document from “List C.” Employees have the discretion to choose which combination of documents to provide.
New state legislation, codified at Labor Code section 1019.1, prohibits California employers from requesting more or different immigration status documents than those required by federal law. Employers are also prohibited from refusing to honor documents that on their face reasonably appear to be genuine. Moreover, they cannot refuse to honor documents or work authorization based upon the specific status or term of status that accompanies the authorization to work. For example, a person could be authorized to work, even temporarily, based on a pending application for asylum, student status, a familial relationship, or for many other reasons. Under the law, employers cannot give preference to hiring a person because that person is authorized to work based on a familial relationship rather than a pending asylum application. In short, if an employee is authorized to work, employers must consider the authorization sufficient.
Employers are also prohibited from attempting to reinvestigate or re-verify an incumbent employee’s authorization to work. An employer who violates these new prohibitions may be assessed a $10,000 penalty – per violation – and may be liable for equitable relief (e.g. back pay).
Violating Labor Code section 1019.1 may additionally constitute, and/or support, claims of unlawful discrimination.
Voting “No” on Sexual Harassment: Elected Officials to Receive Training to Prevent Sexual Harassment
AB 1825, meet AB 1661. When perpetrated by an appointed official, elected Mayor, or Local Agency Commissioner, sexual harassment is not only offensive and unwelcome, but often also results in humiliation and bad press for everyone involved, including the target/victims of the conduct. Moreover, when the member of a legislative body engages in sexually harassing conduct, such conduct appears “tolerated,” if not encouraged by the agency at large.
Effective January 1, 2017, all members of local agency legislative bodies and elected local agency officials (collectively referred to as “local agency officials”) must receive sexual harassment prevention and education training if the agency provides “any type of compensation, salary, or stipend” to any of its officials. Like agency supervisors subject to AB 1825, local agency officials are required to receive the training within the first six months of taking office and, at least, every two years thereafter. Even before local officials assume their new positions, agencies are required to provide them with written recommendations as to courses that will meet the training requirements.
Agencies must also retain records of the dates local officials satisfy training requirements and of the entity that provided the training. They must keep such records for at least five years following the training. These records will be subject to disclosure under the Public Records Act.
If your agency already requires appointed and elected officials to complete AB 1825 training (within six months of taking office and every two years thereafter), the agency should already be well on the way to compliance with AB 1661.
Public Records Act Request? Visit Us Online! – Public Agencies Can Now Direct Individuals to Website Information Responsive to a Public Records Act Request
Effective January 1, 2017, public agencies are allowed to direct individuals who request public documents to such records posted on the agency’s website. If the documents are not posted to the agency’s website, it may add them in response to the request, and direct the responder to the site. An agency will only then be required to provide the requestor with a copy of the records if the requestor is unable to access or reproduce the records from the website directly. In such cases, public agencies will be allowed to request payment of fees covering direct costs of duplication, or a statutory fee, if applicable.
As a number of public agencies have been in the practice of maintaining public documents online, this updated provision should provide some relief in time and resources spent responding to PRA requests.
Gender-Neutral Relief! Law Requires Equal Access to Single Occupancy Restrooms.
Gone (I hope) are the days of long lines outside of the single-occupancy, female-designated restroom, while a male-designated restroom remains empty. The “should we, or shouldn’t we?” question of those who have considered defying gender-based bathroom signage in years past is now answered by law – yes, you should! While gender-based bathroom wars wage on in other states, California further ensures that restrooms be made available for all people, regardless of gender. Starting March 1, 2017, any “single-user” toilet facilities maintained by a business establishment, place of public accommodation, state or local government agency, must be identified as “all-gender” toilet facilities, with compliant signage. Such facilities must be designated for use by no more than one occupant at a time or for family or assisted use.
In addition to complying with state law, be sure to consult local ordinances for appropriate restroom designations. Some cities, such as San Francisco, also have gender-neutral restroom requirements, which may include additional direction or recommendations for appropriate signage.
Mind the Wage-Gap: Prior Salary Cannot be Used to Justify a Disparity in Compensation
As of 2016, California Labor Code section 1197.5 was amended to prohibit employers from paying an employee wage rates less than rates paid to employees of the opposite sex for “substantially similar work.” (Previously, the statute referred to “equal work.”) This amendment meant a mere title differential was not sufficient reason to pay a female employee less than a male colleague or predecessor, if, in fact, the work she performs is substantially similar in nature.
Continuing its efforts to reduce discriminatory wage gaps, the California legislature has again amended section 1197.5. Effective January 1, 2017, Labor Code section 1197.5 codifies existing law and specifies that a person’s prior salary cannot, by itself, justify a disparity in compensation based upon sex, ethnicity, or race. The legislature enacted this change, finding that pay based on prior salary to set pay rates contributes to gender, race, and ethnicity-based wage gaps by perpetuating wage inequalities. Accordingly, California employers should immediately scrutinize practices in which they ask employees what they were paid in prior positions.
For more about new laws effective this New Year, check out LCW’s 2016 Legislative Roundup.
California has statutorily prohibited unequal pay on the basis of sex since 1949. As a previous blog post explained, that law was amended in 2016 to formally change the standard for equal pay claims based on sex. Instead of requiring equal pay for “equal” work, the statute now requires equal pay for “substantially similar work when viewed as a composite of skill, effort, and responsibility, performed under similar working conditions.”
Effective January 1, 2017, the protection of the California Fair Pay Act also applies to race and ethnicity, following Governor Jerry Brown’s signing of S.B. 1063, titled the “Wage and Equality Act of 2016.” This statute provides another avenue for employees to bring pay fairness claims, but is not a massive change to the employer’s obligations, as discrimination in pay is already prohibited under the FEHA.
While disparities in pay based on sex, race, or ethnicity are prohibited, the Fair Pay Act specifically allows employees to be paid differently based on:
- A seniority system
- A merit system
- A system that measures earnings by quantity or quality of production
- A bona fide factor other than sex, race, or ethnicity; such as education, training, or experience. This factor shall apply only if the employer demonstrates that the factor is not based on or derived from a sex, race, or ethnicity-based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity. For purposes of this provision, “business necessity” means an overriding business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve. This defense does not apply if the employee demonstrates that an alternative business practice exists that would serve the same business purposes without producing the wage differential.
Another amendment to the Fair Pay Act, A.B. 1676, also effective January 1, 2017, prohibits employers from relying solely on an employee’s prior salary to justify a disparity between the salaries of similarly situated employees. Employers routinely consider a new hire’s previous salary as part of crafting a competitive package to attract the employee; however, as the Legislature noted, “When employers make salary decisions during the hiring process based on prospective employees’ prior salaries or require women to disclose their prior salaries during salary negotiations, women often end up at a sharp disadvantage and historical patterns of gender bias and discrimination repeat themselves, causing women to continue earning less than their male counterparts.”
Employers may continue to consider a new hire’s previous salary; however, it may not be the only justification for compensating that employee differently than an employee of a different sex, race, or ethnicity performing the same or substantially similar work. This factor may be taken into consideration along with frequently related factors such as differences in experience, skill, or qualifications. (See Green v. Par Pools, Inc. (2003) 111 Cal.App.4th 620, 629-30.)
Finally, the California Fair Pay Act may not be applicable to public agency employers. The Fair Pay Act is part of the Labor Code, and courts have held that provisions of the Labor Code that are not made expressly applicable to public agencies do not apply. (Johnson v. Arvin-Edison Water Storage Dist. (2009) 174 Cal.App.4th 729, 736; Division of Labor Law Enforcement v. El Camino Hospital Dist. (1970) 8. Cal.App.3d Supp.30, 34.) As noted above, other statutes that are clearly applicable to public agency employers prohibit discrimination in pay.
Employers can protect themselves against claims under the Fair Pay Act by auditing their pay practices, reviewing and revising job descriptions, and ensuring that articulable justifications exist for any disparities between employees performing similar work.
This blog post was authored by Jeffrey C. Freedman.
California law requires employers in most private businesses to allow employees to take breaks, or rest periods, of at least ten minutes for roughly each four hours of work. Can an employer require employees during their breaks to keep their pagers and radio phones on, and remain vigilant and responsive to calls when need arises? According to a five-member majority of the California Supreme Court in Augustus v. ABM Security Services decided on December 22, 2016, the answer is no. (This decision will have limited impact on public agency employers. See the comments at the end of this article.)
ABM Security Services provides security guards at residential, retail, office, and industrial sites across California. The number of guards it employs statewide is in the thousands. The primary duty of the guards is to provide “an immediate and correct response to emergency/life safety situations” and “physical security for the building, its tenants and their employees. . . by observing and reporting all unusual activities.” This includes patrolling the premises where assigned, responding to emergencies, identifying and reporting safety issues, etc.
Several class actions were filed on behalf of the security guards alleging that ABM had failed to provide true rest periods because the company required the guards to remain on call during their breaks, and in essence on duty, because they were obligated to keep their radios and pagers on in case an incident arose and they were required to interrupt their break and respond to a need for service. The trial court granted summary judgment for the guards and awarded a judgment totaling about $90 million. The Court of Appeal reversed, but the Supreme Court sided with the guards and reinstated the trial court’s decision.
The California Labor Code (§ 226.7) reads in part: “An employer shall not require an employee to work during a meal or rest or recovery period mandated pursuant to an applicable statute, or applicable regulation, standard, or order of the Industrial Welfare Commission.” Wage Order 4, applicable to the security guards, in section 12, includes: “Every employer shall authorize and permit all employees to take rest periods, which insofar as practicable shall be in the middle of each work period. The authorized rest period time shall be based on the total hours worked daily at the rate of ten (10) minutes net rest time per four (4) hours or major fraction thereof. However, a rest period need not be authorized for employees whose total daily work time is less than three and one-half (3 1/2) hours. Authorized rest period time shall be counted as hours worked for which there shall be no deduction from wages.” Both the Labor Code and Wage Order provide for daily penalties against employers who fail to provide the required rest periods.
The security guards alleged, and the Supreme Court majority ruled, that ABM’s requirement that the employees remain vigilant during their breaks, by having to leave their pagers and radios in service, and end the break early and respond to needs for service, meant they were not relieved of all duty during the breaks and were in essence still working. The Court noted the requirement in the Labor Code section that the employer “shall not require an employee to work” during a rest period. The Court held that, because a guard was required to remain on call during breaks, and be vigilant to what might come over their pager or radio phone, they were still working and did not have full use of their break time for personal use. The Court distinguished break time (i.e., rest period time), which must be “on the clock”, from meal periods, which can be unpaid if the employee is relieved of all duty. If an employee is called back to work during a lunch break, the time thereby becomes compensable. Rest breaks, however, are by definition always paid time anyhow. Therefore, if an employee has to work during a break, the employer gets that work for free.
In reaching its decision the Court several times referenced the shibboleths that Labor Code and Wage Order provisions are liberally construed to favor the protection of employees and that interpretations articulated by the state agency that enforces Wage Orders are granted “considerable judicial deference.” The two dissenters argued that the “bare requirement” of carrying a radio, phone or pager in case of emergency did not constitute “work” and did not render ABM in violation of its obligation to provide the guards with a rest period relieved of all work.
The Court majority responded to the understandable employer concern that the ruling prohibited the company from ever recalling employees to work from a rest period when the need arises. The Court replied that the company could reschedule the break for a later time in the same shift to replace the one that was interrupted. Alternatively, the employer could apply to the state agency for an exemption from the requirement. Apparently ABM had twice received one year exemptions. Finally, the company could simply pay the employees the one hour penalty pay called for in both the Labor Code and Wage Order for each day the required break was not provided.
Most of the Wage Orders by their own terms are specifically made inapplicable to public agencies, and it is generally the rule that Labor Code provisions are also not applicable to public employers unless they contain language providing that public employers must comply. Public agencies should check with legal counsel, however, to see if any Wage Order provision on meal and rest periods does apply to them. For example, the Wage Order 9 provisions on meal and rest breaks do apply to public agency bus drivers.
There is no provision of federal law requiring meal or rest periods for local public agency employees. However, if an agency provides unpaid meal or rest periods for its employees, and were to impose restrictions on employee free use of those breaks, a court considering a lawsuit brought by employees under the Fair Labor Standards Act could look to the decision in Augustus v. ABM Security Services for guidance and apply it by analogy. Accordingly, any such agency should check its current procedures to ensure it is not at risk of incurring liability.
On December 20, 2016, we reported that CalPERS was poised to decrease the assumed rate of return following the study and recommendations of the CalPERS’ Finance and Administration Committee. On December 21st, CalPERS reported that it adopted a decrease in the assumed rate of return from 7.5% to 7.0%, which will result in higher employer contributions.
Simply put, the discount rate, or assumed rate of return, is the percentage of expected returns on investments made by CalPERS. Generally, the higher expected return, the lower employer contributions tend to be. The problem arises, though, that if CalPERS’ investments do not meet the expected return rate, this creates risk and greater unfunded liabilities because the employer contribution rates are based on that expected return.
In 2012, CalPERS reduced the discount rate from 7.75% to 7.5% which resulted in a considerable increase in employer contribution rates. Recently, CalPERS’ Finance and Administration Committee undertook a study of decreasing the discount rate. As a part of this, the Committee surveyed and received information from over 600 contracting agencies, as well as public school districts, in addition to receiving feedback from employee, employer and retiree organizations. Of those surveyed, 76% of contracting agencies and 52% of school districts, are keeping track of CalPERS’ return on investments. 29% are prefunding pension liabilities while 61% are planning for a reduction in the discount rate through budget forecasting out three and five years. Employers were also asked what would be the level of impact to the agency if there was another drop in the discount rate. 72% indicated that the impact will be high to extremely high.
On December 20, 2016, the CalPERS Board of Administration heard the Committee’s findings and recommendations. The Committee indicated that “achieving the current 7.5% expected rate of return over the next 10 years will be a significant challenge.” The CalPERS Board voted and adopted a reduction in the discount rate to 7.0%, phased-in over two years for contracting agencies and public schools, including community college districts. The phase-in will begin in the 2018/2019 fiscal year with a reduction to 7.25% and a reduction to 7.0% effective 2019/2020.
CalPERS estimates that with a reduction in the rate of return to 7.0%, most employers could expect a 1% to 3% increase in the normal cost for miscellaneous plans and up 2% to 5% for safety plans. Bottom line: employer contributions toward their unfunded accrued liability payment, and as a percentage of payroll for normal costs, will increase.
Contracting agencies, public K-12 and public community college districts should prepare now for the impending reduction in the assumed rate of return and higher employer contributions by including this prospect in budget forecasting, as well as in labor negotiations.
CalPERS agencies still reeling from the increase in employer contribution rates beginning 2013/2014 may very well experience yet another increase in the next couple of years due to a further reduction in the “discount rate” or rate of return. Simply put, the discount rate or rate of return is the percentage of expected returns on investments made by CalPERS. Generally, the higher expected return, the lower employer contributions will likely be. The problem arises, though, that if CalPERS’ investments do not meet the expected return rate, this creates risk and greater unfunded liabilities because the employer contribution rates were based on that expected return. This further results in volatile employer contribution rates.
In 2012, CalPERS reduced the discount rate from 7.75% to 7.5% which resulted in a considerable increase in employer contribution rates. Now, CalPERS seems poised to potentially decrease that discount rate even further. CalPERS’ Finance and Administration Committee undertook a study of decreasing the discount rate. As a part of this, the Committee surveyed and received information from over 600 contracting agencies, as well as public school districts, in addition to receiving feedback from employee, employer and retiree organizations. Of those surveyed, 76% of contracting agencies, and 52% of school districts, are following CalPERS’ return on investments. 29% are prefunding pension liabilities while 61% are planning for a reduction in the discount rate through budget forecasting out three and five years. Employers were also asked what would be the level of impact to the agency if there was another drop in the discount rate. 72% indicated that the impact will be high to extremely high.
On December 20, 2016, the CalPERS Board of Administration will hear the Committee’s findings and recommendations. The Committee’s Agenda Report indicates that “achieving the current 7.5% expected rate of return over the next 10 years will be a significant challenge.” The Committee estimates that with a reduction in the rate of return to 7.25%, most employers could expect up to a 2% increase in the normal cost for miscellaneous plans, and up to 3% for safety plans. Should the rate of return be reduced to 7%, employers could expect an increase in the normal cost of up to 3% for miscellaneous, and up to 5% for safety plans. Bottom line: employer contributions toward their unfunded accrued liability payment and as a percentage of payroll will increase.
The Committee recommends that any reduction in the rate of return (and increase in employer contributions) begin with the 2017-2018 fiscal year for public school districts, and 2018-2019 for contracting agencies. The Committee indicated that the reduction in the rate of return is critical for the long-term health of the pension system. The Board of Administration will decide if, when and how any reduction in the rate of return will be implemented.
Employers should prepare now for a likely further reduction in the rate of return and higher employer contributions by including this prospect in budget forecasting. Employers may also want to consider pre-funding trusts.
This post was authored by Danny Y. Yoo
This year has kept many agencies on their toes when it comes to complying with the Fair Labor Standards Act. This summer, the Ninth Circuit issued its Flores v. City of San Gabriel decision and changed the way many agencies calculate their regular rate of pay. You can read about Flores here and here. Also in the summer, the federal Department of Labor (“DOL”) issued new regulations that would change the salary basis test for FLSA overtime exemptions. These regulations were supposed to go into effect on December 1, 2016, but they have been put on hold by a temporary injunction. You can read about the regulations and the injunction.
As we look toward 2017, there is yet another wage and hour compliance issue that many California public agencies should take note of: minimum wage. Earlier this year, we discussed Senate Bill 3, which will increase California’s minimum wage each year so that it will reach $15 per hour in 2022. Effective January 1, 2017, the minimum wage in California will be $10.50 per hour. (The federal minimum wage is still $7.25 per hour.)
Does this new California minimum wage apply to your public agency?
Effective January 1, 2017, Labor Code section 1182.12 expressly states that for the purposes of California’s minimum wage, “employer” includes the “state, political subdivisions of the state, and municipalities.” Thus, we recommend that general law cities comply with the state minimum wage requirements.
However, for counties and charter cities, there is a strong argument that the state minimum wage does not apply to those agencies because those agencies have exclusive rights under the state constitution to set compensation for their own employees. In some limited instances, a matter of statewide concern can potentially supersede a county’s or charter city’s ability to set compensation for its employees. Counties and charter cities must, of course, comply with any minimum wage that they have set for themselves. For example, the City of Santa Clara’s minimum wage will be $11.10 per hour, effective January 1, 2017. For counties and charter cities, legal counsel should be consulted in determining whether the minimum wage law applies to them.
What should our agency do about it?
If the state minimum wage applies to your agency, ensure compliance by reviewing the pay schedule for your employees, including part-time and seasonal workers. The following chart is a guide for the minimum pay that complies with the new California minimum wage of $10.50 per hour:
|Hours Per Week||Weekly Minimum||Monthly Minimum||Yearly Minimum|
If your agency pays employees around or below these thresholds, we recommend that you carefully review the hourly rate at which your agency is paying them. Please note that if your agency does need to raise the hourly rate for a particular employee or class of employees, you may have to negotiate with the appropriate employee bargaining unit because this directly affects their members’ wages.
Will the DOL regulations regarding the threshold salary for exempt employees affect compliance with the California minimum wage?
No. The DOL regulations only address the threshold salary for employees who are exempt from FLSA overtime. Employers are still required to pay minimum wage to these employees, regardless if they are exempt from overtime. As a practical matter, however, the minimum salary thresholds for FLSA overtime exemptions ($455 per week) are higher than the state minimum wage requirements for a 40-hour employee ($420 per week). Therefore, if an employee is properly classified as exempt from FLSA overtime, then he or she is being paid at least the state minimum wage.
Does this apply to independent contractors or interns?
No. This only applies to employees. Agencies should be cautious, however, on relying on the classification of independent contractor or intern and should conduct an independent review of whether contractors and interns may actually be classified as employees. On that point, we do not recommend employers changing an employee’s title to a “contractor” or an “intern” in an attempt to avoid paying minimum wage.
Ready or not, the holidays are here. Not only are the holidays a time to reflect on the passing year, but also a time full of fun, festive celebrations. As you get ready for this season’s festivities at work, make sure to keep in mind following tips that can help your agency stay in the festive mood without the post-holiday hangover of a lawsuit.
Religious Holiday Accommodations
For many, the holidays are a time for religious observance. For example, a Christian employee working the night shift may ask for the evening off to attend Christmas Eve mass or a Jewish employee may request time off to observe Hanukah. Both federal and state discrimination laws require employers to accommodate their employees’ sincerely held religious beliefs, practices, and observances. Thus, employers who are confronted with requests for time off should try to accommodate them unless doing so would impose an undue hardship. Accommodating an employee may mean changing the employee’s schedule or allowing the employee to switch shifts with a co-worker.
Workplace and Workspace Decorations
Before decking the halls, employers should consider the location of holiday decorations. Employers who plan to decorate common work areas should strive to avoid the appearance of endorsing one religion over another. For example, if a nativity scene is displayed in the reception area or lunch room, the employer may be perceived as favoring the Christian religion. Some employees may this find offensive. Therefore, employers who wish to decorate the workplace should use non-religious, winter themed decorations such as snowflakes, candy canes, holly and gingerbread houses.
Since non-religious decorations are permissible, there is always debate over whether a Christmas tree is a religious symbol. While a decorated tree may have religious connotations for some people, the U.S. Supreme Court has determined that a Christmas tree is a secular nonreligious symbol. This view was also adopted by the EEOC. Thus, employers may include Christmas trees among their decorations even if an employee objects. However, for purposes of promoting positive employee relations, employers should be sensitive to the diversity of their workplace. Thus, even if you have a tree, ornaments with religious connotations, such as crosses, angels, or nativity references should not be allowed.
Employees who wish to decorate their own personal workspaces with Christmas, Kwanzaa or Hanukah themed decorations present a more difficult question. Prohibiting employees from displaying religious holiday themed decorations in their own workspaces may give rise to claim of violation of free speech and religious expression. Because the law requires employers to accommodate religious beliefs, employers should not try to suppress religious expression in an employee’s personal workspace unless it creates an undue hardship on business operations.
Finally, mistletoe should never be allowed in any area of the workplace including individual workspaces because it could lead to sexual harassment or hostile work environment claims.
Holiday Gift Exchanges
The traditional holiday gift exchange where one “Secret Santa” employee gives a gift to a randomly assigned employee has largely been replaced by the “white elephant” gift exchange. Employees favor this type of gift exchange because it is fun and the gifts up for grabs are often humorous. However, this game can easily turn into blood sport as employees become competitive and even downright vicious towards each other in their quest for the best gift.
In order to ensure fun for all employees, the announcement of a gift exchange should include language reminding employees to select gifts appropriate for the workplace. For example, employees should be discouraged from buying items that contain profane, graphic or sexual content. In addition, employees should be reminded that the gift exchange is a festive occasion where everyone should be treated respectfully. A very modest limit on the cost of such gifts should be established, such as $10 or $15.
The two biggest concerns for employers about holiday parties are potential legal liability from sexual harassment and drinking and driving. Because employees typically “let their hair down” during these events, they may not conduct themselves the same way they do at work. Also, alcohol clouds judgment. A luncheon rather than an evening event is more prudent for all these reasons. If a festive evening is the preferred celebration, employers may want to consider taking the following preventative steps to reduce liability.
Employees should be reminded of the employer’s discrimination, harassment and alcohol and drug policies. In addition, employers should designate a supervisor or manager to provide discrete oversight over employees during the party. For example, if an employee appears to have had too much to drink, a supervisor or manager can intervene and make arrangements for the employee to get home safely. If alcohol is served, employers should limit the amount consumed by either issuing drink tickets to employees or stopping the service of alcohol well before guests start leaving the party. Finally, if a harassment complaint is made after the party, employers should make sure they promptly investigate it.
On Tuesday, November 22, 2016, Judge Amos Mazzant of the U.S. District Court in the Eastern District of Texas (a 2014 Obama-appointee) issued a preliminary injunction barring implementation of the U.S. Department of Labor’s (DOL) new rule (“Final Rule”) raising the salary threshold for certain overtime exemptions under the Fair Labor Standards Act (FLSA). The Final Rule was set to go into effect in less than two weeks – on December 1, 2016. The Court’s order halting implementation applies “nationwide,” i.e. to all states, and is effective immediately absent further judicial order. It remains to be seen whether the DOL will appeal or seek other relief, or what final position it will take on the effectiveness of the order.
As we reported in prior blog posts, in May of this year, the DOL issued a Final Rule that raises the federal salary basis for exempt employees to $47,476 per year, effective December 1, 2016. The Final Rule increases the salary threshold level for the highly compensated employee exemption from $100,000 per year to $134,004 per year, and adjusts salary levels automatically every three years. The Office of Management and Budget estimated the new rule will extend overtime coverage to more than 4 million employees nationwide.
The November 22, 2016 Order calls the Final Rule into question. California public and private employers will have to await further developments in the coming days to determine whether the DOL can mount an effective litigation strategy to overturn the order, or concede that it will have to forego implementing the Final Rule for the time being.
Background – The Judicial Challenge
On September 20, 2016, two federal lawsuits were filed in the Eastern District of Texas against the DOL seeking to overturn the Final Rule. The lawsuits – one filed by a coalition of twenty-one states (State of Nevada et al. v. U.S. Department of Labor) and the other filed by a coalition of business groups (Plano Chamber of Commerce et al. v. U.S. Department of Labor) – advance numerous legal theories to challenge the rule, including that the DOL failed to follow proper procedures when adopting the new salary threshold and that the automatic indexing for upward adjustments runs contrary to the terms of the FLSA. The lawsuit filed by the states also argues that the Final Rule is unconstitutional because the DOL does not have the power to dictate how state governments pay their employees and spend state resources. The states’ lawsuit argues further that the FLSA delegates too much power to the DOL and that the 1986 decision extending the FLSA to the states, Garcia v. San Antonio Metro. Transit Authority, should be overruled. The lawsuits also ask the courts to block enforcement of the rule.
On October 12, 2016, the state plaintiffs moved for an emergency order that temporarily enjoins (or halts) the implementation and enforcement of the Final Rule pending further judicial review. Shortly thereafter, the lawsuits were consolidated. Oral arguments on the plaintiffs’ emergency stay were held November 16, 2016.
The November 22, 2016 Decision
To prevail on their motion for preliminary injunction, the plaintiffs were required to demonstrate a number of factors, including that there is a substantial likelihood that their case will succeed on the merits and that the plaintiffs are likely to suffer irreparable harm if the injunction is not granted.
In its evaluation of whether the plaintiffs’ lawsuit would succeed on the merits, the Court first examined plaintiffs’ argument that the FLSA has been unconstitutionally applied to the states. Although the Court found persuasive plaintiffs’ argument that the Supreme Court’s Garcia decision may have been implicitly overruled, the Court ultimately concluded that Garcia has not been specifically overruled thus the FLSA applies to the states.
However, the Court agreed with the plaintiffs in finding that the Final Rule’s new salary threshold conflicts with the statutory text of the FLSA because it gives too much weight to the salary component of the exemption, i.e. doubling the salary threshold in effect made that test “supplant” the statutorily-mandated “duties test.” The Court reasoned that, because the DOL promulgated regulations that conflict with the text of the FLSA, the Final Rule is contrary to Congressional intent and therefore likely to be declared unlawful. As for irreparable harm, the Court agreed with the plaintiffs that implementation of the Final Rule would increase costs, which, for the states, means a detrimental effect on government services that benefit the public. The Court also found that the balance of hardships weighs in favor of granting the preliminary injunction because the defendants failed to articulate any harm suffered by delaying implementation of the Final Rule. The Court further found that the public interest is best served by an injunction because the legality of the Final Rule should be determined with finality prior to implementation.
Finally, citing, in part, to an August 2016 decision by another Texas Federal Judge that issued a nationwide injunction to ban enforcement of the Department of Education’s rule related to transgender bathroom policies, the Court determined that proper scope of the injunction is nationwide because the Final Rule is applicable to all the states.
The full text of the Order is available here.
In a written statement released after the November 22, 2016 Order was issued, the Department of Labor stated “[w]e strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work…We are currently considering all of our legal options.” It remains to be seen whether the DOL will appeal the order or seek other relief. The appeal would be heard by the Fifth Circuit Court of Appeals, which is generally regarded as one of the more conservative Circuit Courts. Moreover, it is possible that Congressional action to overturn or amend the DOL regulations will gain momentum if legislation reaches President-elect Trump’s desk with the regulation placed on hold by the Courts.
What Should Be Done Now?
The state of the law is uncertain in all regards. Legal counsel should be consulted about steps to take. Any employer who has been planning to raise compensation levels per the new regulations should hold off on taking concrete action pending further developments. We will report on further significant developments as we learn them.
Yes, these are real cases involving real people.
Everyone in Southern California Would Need to be Accommodated If This Were a Disability
A former employee in New Jersey sued her employer for wrongful termination after she requested an accommodation for her disability: an inability to drive in rush hour traffic due to anxiety and depression. According to the employee, her condition was aggravated by heavy rush hour traffic. (I think we can all relate!) When she asked for a schedule that would allow her to avoid rush hour traffic, claiming she needed an accommodation due to her disability, the company approved shorter work days. Not long after the company agreed to accommodate the employee, she received a poor performance review, demotion, and ultimately was terminated. Oddly, she may have a case if she is able to prove retaliation or disability discrimination. Based on the employer’s decision to accommodate the employee, it is reasonable to infer that the employer accepted that she was disabled or regarded her as disabled. In California, when an employer “regards” an employee as disabled, it has the same legal effect as if the employee actually was disabled—the employee can sue for, among other, things disability discrimination and failure to accommodate.
Don’t Mix Dune Buggies and Alcohol Because Workers’ Compensation May Not Be There For You
Evidently, dune buggies still exist and consist of large wheels, wide tires, and are for use on sand dunes. Alcoholic beverages may impair your ability to drive. A “traveling employee” (not to be confused with gypsy Travelers) is covered by workers compensation in all places while traveling for work. If an employee is pursuing “normal creature comforts and reasonably comprehended necessities,” he may be covered. But, if he engages in “strictly personal amusement ventures,” he has left the scope of employment. When an employee was injured after wrecking a dune buggy while driving intoxicated, workers compensation was denied because driving a dune buggy while intoxicated was not a normal or reasonably comprehended necessity during work travel. Go figure.
You Will Have a Positive Attitude At Work! Or Not.
The National Labor Relations Board (NLRB) ruled that a company could not have a policy that required employees to “maintain a positive work environment by communicating in a manner that is conducive to effective working relationships.” The union complained that the policy was too broad and vague and would inhibit employees from complaining about working conditions. The NLRB agreed, striking down “the rule to restrict potentially controversial or contentious communications and discussions” because employees may fear that “the [employer] would deem [such discussions] to be inconsistent with a ‘positive work environment.’” However, this is not to be confused with the employer’s right to have work rules that prohibit insubordination or a negative attitude that is disruptive to the workplace.
Come on Down! The Price is Right!
An important tip for employees—don’t tell your employer that you are unable to stand, sit, kneel, squat, climb, bend, reach or grasp, but then spin the big wheel on The Price is Right, twice. The former postal worker, who had been on workers’ compensation for several years before her appearance on The Price is Right, raised her arm above her head, grabbed the wheel, and sent it spinning. Hopefully, she won prizes because she is going to need them after she pled guilty to workers compensation fraud. She also probably should not have gone ziplining while on a cruise. Workers compensation fraud is serious and employers should be proactive in working with the claims administrators to recognize potential fraud.
An Employee’s Argument Unbelievably Has Come Down To This…
The general rule is that employees are entitled to receive a legal defense from the public agency employer if they acted within the scope of employment. Not surprisingly, when a jail guard thought it would be funny to serve a “penis-tainted” sandwich to an inmate, he was subsequently sued by the offended inmate. The guard demanded that his employer provides him a legal defense in the lawsuit. You may be wondering, what did he argue? This is a good one.
The guard said it was common for jokes and pranks to occur in the jail and, while not condoned, such acts were not discouraged. The guard claimed he was just playing one of those “jokes and pranks” when he took a sandwich, opened the sandwich, had an inmate place his penis in the sandwich, photographed the inmate’s penis in the sandwich, and served the sandwich to a different inmate. The genius then showed the penis photograph to the inmate who had eaten the sandwich. Isn’t he hilarious? The guard also claimed he was entitled to a defense because he was acting within the course and scope of his employment by giving a sandwich to an inmate. The court disagreed with the guard, stating that “[a]lthough serving food to inmates is part of [the guard’s] job duties . . . the meal served was one plainly unauthorized by [the employer] and obviously outside of [his] authorized duties.”
Until next year!