California Public Agency Labor & Employment Blog

California Public Agency Labor & Employment Blog

Useful information for navigating legal challenges

Religion in the Public Sector Workplace

Posted in First Amendment

MP900289067Christianity, Judaism, Islam, Buddhism, and Hinduism are typically cited as the major religions of the world, although there are many others that have tens of millions of adherents or more.  The United States has no official established religion, and instead since its founding has guaranteed its citizens the right to free choice and exercise of religion.

For state agencies and local governments, these principles are not just abstractions but can come up in daily work.  In fact, public employers often face situations in which the religious beliefs of their employees become a major issue.  As a legal matter, the U.S. Constitution, the California Constitution, and state and federal statutes all demark boundaries that can guide public agencies in how to address these issues.  Unfortunately, lines in this area are often blurry.  Also, the scenarios can involve firmly held, personal beliefs on matters ranging in significance from the timing of daily religious practices to the very meaning of life.  Accordingly, workplace conflicts in this area can quickly escalate into matters of high emotional intensity that affect morale and harm productivity, and can easily develop into a grievance or lawsuit.

The following is a brief question and answer that explains the primary legal doctrines and addresses some commonly-occurring factual scenarios.

  1. What if employees seek to proselytize in the public sector workplace?

What if an employee spends a substantial amount of time in the government workplace talking to co-workers about religion?  What if he or she uses the email system to invite co-workers to church events or to explain positions on matters of faith?  These questions involve all of the sources of law mentioned above.  In particular, the First Amendment of the U.S. Constitution prevents the government from creating an “establishment” of religion, from prohibiting the “free exercise” of religion, and from abridging freedom of speech (including certain speech in the government workplace).  The California Constitution contains similar provisions.  Title VII, a federal civil rights statute and California’s Fair Employment and Housing Act (“FEHA”) prohibit employers (both public and private) from discriminating against employees on the basis of religion, and require reasonable accommodation of employee religious practices.

As is evident from this list, the laws sometimes appear to conflict – public employers cannot use their resources to promote religion (under the Establishment Clause) but cannot discriminate against employees on the basis of religion (under Title VII and the FEHA) and are restricted in their ability to allow expression of some viewpoints but not others (under constitutional free speech law), including views on matters of faith.

Given these potentially contradictory requirements, how does a public employer respond to employees who wish to speak, e-mail, or otherwise communicate about religion in the workplace?  One approach many employers use is to establish a policy limiting employees’ use of work time and the employer e-mail system to work-related matters only (typically with an allowance for incidental personal use, and a carve-out for use mandated by labor relations laws).  Pursuant to this type of rule, employees may freely express their views on their own time as long as they do not interfere with the work of others.  But if an employee spends too much time at work talking with co-workers about non-work-related matters, including religion, then this can be addressed as a violation of the personnel rule.  The same is true of the employer’s email system.  Lengthy emails on religious topics can be found to violate the policy, not because of the viewpoint expressed, but because of the lack of relationship to work.  The issue can certainly become more complicated, for example, if the religious themes interweave with matters that relate to work, or if the employer does not have this type of rule in place, and freely allows employees to use the email system for purposes that do not relate to work.  It is prudent to consult legal counsel in these circumstances.

  1. What if employees seek to take time out for prayer meetings in the public sector workplace – during the work day or on the agency’s property?

This type of scenario raises the same concerns as the previous one.  The First Amendment and the California Constitution limit a public agency’s ability to curb employee free speech and association.  But again, the use of government property to promote religion can infringe principles of separation of church and state, and violate the First Amendment’s Establishment Clause.  A public employer’s making special accommodations for, and expending resources to support, prayer meetings can be problematic, because it could easily be viewed as the government promoting religion.

To navigate these challenges, many government employers adopt an approach similar to that described in the previous section.  They allow employees to use a break room or facility to talk about basically any topic, on their own time.  Employees can then use the break room for prayer to the same extent employees are allowed to use the room to talk about any other type of topic.   For example, if employees are allowed to use empty areas to congregate on their own time and plan social events, employees should not be prohibited from using the area just because their speech happens to be on religion.

This is the simple answer – many circumstances will not present issues that are easily resolved.  If organized religious activities by some employees tend to create a hostile environment for other employees, this will raise concerns under state and federal laws that prohibit workplace harassment.  Also, as described in the next section, an employee may reasonably come forward and explain that his religion requires prayers at particular times during the workday, and claim a particular type of accommodation is necessary.  Federal and state statutes require reasonable accommodation of religious practices, and the employer will have to evaluate the situation carefully to comply with those laws.

  1. What if employees request workplace accommodations for religious dress or practices?

One the most important and sometimes confusing obligations employers face is responding to requests for workplace accommodations based on religion.  Requests can include those relating to religious dress, for examples, headscarves, turbans, or burqas.  Others can be more difficult: what if an employee requests for religious reasons to carry a kirpan, a Hindu ceremonial knife that is supposed to be worn at all times, in the workplace, even in areas where weapons are prohibited?  What if an agency employee asks to have religious icons or images in offices or cubicles visible to the public whom the employee serves?  Similar issues can arise relating to Christmas or other holiday decorations, Bible quotes or religious content as part of workplace communications, refusals to take certain oaths, or requests not to work certain days of the week.

California law is the first place to look for answers.  In general, it requires reasonable accommodation of employees’ religious grooming and practices, unless accommodation would impose an “undue hardship.”  California’s FEHA sets forth specific requirements as follows.  It makes it unlawful for an employer “to refuse to hire or employ a person or . . . to discharge a person from employment or . . . discriminate against a person in compensation or in terms, conditions, or privileges of employment because of a conflict between the person’s religious belief or observance and any employment requirement, unless the employer . . . demonstrates that it has explored any available reasonable alternative means of accommodating the religious belief or observance . . . , but is unable to reasonably accommodate the religious belief or observance without undue hardship . . . .”  (Emphasis added.)  This obligation includes the employer’s exploring “the possibilities of excusing the person from those duties that conflict with his or her religious belief or observance or permitting those duties to be performed at another time or by another person.”  (Government Code section 12940(l)(1).)  Under the FEHA, undue hardship means “an action requiring significant difficulty or expense,” when considered in light of factors such as the “nature and cost of the accommodation needed,” financial resources of the facilities and of the employer, the size of the business, and the type of operations.  (Gov. Code section 12926(u).)

The applicable federal anti-discrimination law, Title VII, 42 USC sections 2000e-2(a)(1), 2000e(j), imposes its own accommodation requirement on employers, including public employers, and is in many ways similar to California law, although its accommodation requirements are considered not as extensive.  (The federal Equal Employment Opportunity Commission provides some helpful guidance on how to navigate the accommodation process under federal law.)

In practice, applying these standards often depends very much on individual facts and circumstances.  An employer should be proactive and diligent in considering accommodations, and cautious in asserting the defense of undue hardship.  Undue hardship can often be shown where accommodation of the employee’s religious practice would require significantly more than ordinary, administrative costs, impair workplace safety, cause co-workers inordinately to assume burden of work, or conflict with statute or regulation.

Finally, constitutional considerations can enter the analysis.  If a public employee demands, as an accommodation, to be able to display religious icons to the public in discharging work responsibilities or to proselytize to the public in some way, this could well create First Amendment Establishment Clause or other constitutional concerns.  In turn, this would support a public employer’s defense of undue hardship.

  1. What if an Employee invents his or her own religion?

If an employee invents his or her own religion, that employee can actually benefit from statutory anti-discrimination laws.  A religion in this context does not need to have existed for any length of time, or have any particular number of adherents.  It must, however, meet a definition of “religion” that has been thoughtfully constructed by the Courts.  In 2002, the California Court of Appeal in Friedman v. Southern Cal. Permanente Medical Group, interpreting the protections to individuals on the basis of religion that are afforded by the FEHA set forth a three-part test.  The test is designed to assure that the “beliefs, observances, or practices” at issue occupy in the person’s life “a place of importance parallel to that of traditionally recognized religions.”  The Court in Friedman described the three factors as follows: “First, a religion addresses fundamental and ultimate questions having to do with deep and imponderable matters.  Second, a religion is comprehensive in nature; it consists of a belief-system as opposed to an isolated teaching.  Third, a religion often can be recognized by the presence of certain formal and external signs,” meaning for example “teachers or leaders; services or ceremonies; structure or organization; orders of worship or articles of faith; or holidays.”  (The Court in Friedman, applying this test, found that veganism is not a religion.)

The test set forth above is California’s statutory test for defining a religion.  Under the U.S. Constitution, however, the test for what qualifies as a “religion” is more conservative, and based on history and tradition.  In Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah, the U.S. Supreme Court concluded that Santeria, a hybrid African/Catholic faith mandating animal sacrifice, constituted a “religion” entitled to First Amendment protection, based in part on the “historical association between animal sacrifice and religious worship.”

In conclusion, in terms of practicalities, legal issues relating to religion in the workplace can have a strong emotional dimension for those concerned. Sensitivity and tolerance are extremely important in crafting solutions to these issues.  Also, management should consider at the outset that employees asking for accommodation of religious beliefs or practices will likely understand what is at stake for management and their co-workers, and will likely help management arrive at a way to resolve the issue.  Finally, working with legal counsel is very important in resolving disputes that arise in this complex area of the law.

The Fourth Circuit Holds that Fire Captains Are Non-Exempt Employees Under the FLSA Because Their Primary Job Duty Is Being a First Responder

Posted in Wage and Hour

hourglass-small.jpg

This blog post authored by Alison R. Kalinski.

The United States Court of Appeals for the Fourth Circuit (covering such east coast states as Virginia, West Virginia, and Maryland) recently held that a group of fire Captains are entitled to overtime under the FLSA because their primary duty is being a first responder.  The case, Morrison v. County of Fairfax, Virginia, was decided June 21, 2016

In Morrison, over 100 current and former fire Captains sued Fairfax County for denial of overtime pay.  The Captains fell into two groups:  (1) Shift Commanders and Safety Officers, and (2) Station Commanders and Emergency Medical Service Supervisors (“EMS Supervisors”).  The trial court granted summary judgment to the County finding that all of the Captains were exempt executives under the FLSA.  In reaching its conclusion, the trial court held that 29 C.F.R. §541.3, the “first responder regulation,” only applied to blue collar workers and did not apply to the Captains.  The Fourth Circuit reversed.

The Fourth Circuit’s analysis is based on the first responder regulation in 29 C.F.R. §541.3.  This regulation was passed to clarify whether the overtime exemptions for administrative, executive, and other white collar employees found in 29 C.F.R. §541 (the “white collar exemptions”) would apply to first responders and manual laborers.  29 C.F.R. §541.3(b)(1) provides that the white collar exemptions “do not apply to … fire fighters … regardless of rank or pay level, who perform work such as preventing, controlling or extinguishing fires of any type; rescuing fire, crime or accident victims … or other similar work.”  Section (b)(2) goes on to explain that “[s]uch employees do not qualify as exempt executive employees because their primary duty is not management of the enterprise in which the employee is employed.  Thus, for example, a … fire fighter whose primary duty is to … fight fires is not exempt … merely because the… fire fighter also directs the work of other employees in … fighting a fire” (emphasis added).  The Fourth Circuit determined that under this regulation, whether the Captains are exempt employees depends upon whether their primary duty is management or administrative work directly related to management.  Four factors are considered in determining whether exempt duties comprise the primary duty of an employee:

  1. The importance of the exempt duties compared to other duties;
  2. Amount of time spent performing exempt work;
  3. Amount of freedom from direct supervision; and
  4. Comparison of the employee’s salary and with wages paid to other employees for non-exempt work.

In Morrision, the Fourth Circuit found that the evidence failed to show that the Captains’ primary duty was management-related.  Rather, the Court found that the Captains’ primary job duty was responding to emergency calls.  The Captains lacked discretion to refuse to respond to emergency calls, which take priority over all other aspects of their job.  The Captains respond to every emergency call that comes in during their shift and is assigned to their engine.  “[A]n engine cannot leave the station without its Captain on board.”  At the scene, Station and Shift Commanders work side-by-side with subordinates to fight fires and rescue victims.  EMS Supervisors and Safety Officers also have no discretion to refuse to respond to calls and are responsible for transporting equipment and rendering emergency care at the scene.

Like most firefighters, the Captains only spend a small amount of their time actually fighting fires.  Most of their time goes to training for their responder duties and physical fitness training.  The Court, however, rejected the County’s argument that the Captains were exempt because they spent only a small portion of their time actually responding to emergency calls.  It did so for three reasons.  First, the nature of first-responder work is to wait for an emergency, not only to respond to emergency calls.  Thus, the significant time spent waiting cannot be ignored.  Second, the regulation focuses not on the time spent doing non-exempt work, but on the time spent performing exempt work.  Just because a Captain only spends a small amount of time actually engaged in first responder work does not mean that he or she is spending that remaining time engaged in exempt work.  Third, the Captains’ training, which is the same as all firefighters, is to enable them to perform their first responder work and “underscores the importance of those direct response duties.”

The evidence showed that while the Captains do have some tasks that are distinct from their first-responder duties, such as completing annual evaluations, reporting disciplinary infractions and administering discipline, updating station policies, and creating wish lists of supplies.  The Court reasoned, however, that all of these tasks combined take at most 25 hours out of 2600 hours of work per year.  The Captains also have no responsibility for setting or controlling the budget, hiring/firing employees, setting staffing levels, changing work schedules, or approving overtime.

Nor did the evidence show the Captains were free from direct supervision.  The Captains’ role was to carry out their supervisors’ orders, and they were in constant contact with their supervisors.  Finally, there was no significant pay gap between the Captains and non-exempt Lieutenants just below them in rank.

Application to California Fire Departments:

Morrison is from outside of California and the Ninth Circuit (the federal appellate court covering California), and is not controlling authority in this state.  Nevertheless, it provides guidance on how fire departments in California should consider treating their employees under the FLSA.  For any exempt firefighters, regardless of their rank or pay, the fire department should evaluate whether the employee’s primary duty is to fight fires or act as first responder, regardless of the amount of hours the employee actually spends engaged in those tasks.  In addition, the focus of any inquiry should be the amount of time the employee is engaged in exempt work (such as managerial or other administrative tasks), rather than the amount of time spent being a first responder.  If the primary duty is fighting fires or being a first responder, the employee likely will not be exempt under the FLSA.

 

IRS Releases Proposed Regulations Regarding the Affordable Care Act’s Calculation of Coverage Affordability for Employers Offering Opt-Out Payments

Posted in Healthcare

Healthcare.jpgThis Special Bulletin was authored by Heather DeBlanc and Shardé Thomas.

On July 8, 2016, the Internal Revenue Service (IRS) released proposed regulations implementing some of the rules previously announced in IRS Notice 2015-87.  The proposed regulations will apply for taxable years beginning after December 31, 2016.

Among other topics, Notice 2015-87 introduced a rule that employers offering opt-out payments (also known as “cash-in-lieu”) must add the cash amounts to each employee’s premium contribution when calculating coverage affordability for the Affordable Care Act’s (“ACA”) employer mandate.

Notice 2015-87 distinguished between “unconditional” and “conditional” opt-out arrangements.  Unconditional opt-out arrangements are those in which the opt-out payments are conditioned solely on an employee declining the employer-sponsored coverage (i.e. an employee declines coverage and gets cash).  Conditional opt-out arrangements are those in which the opt-out payments are conditioned on an employee declining coverage and satisfying some other meaningful requirement related to the provision of health care, such as a requirement to provide proof of coverage by a spouse’s employer (i.e. an employee declines coverage, but to get the cash he/she must provide proof of alternative group health coverage).

The proposed regulations clarify that employer contributions to a Section 125 Plan that may be used by an employee to purchase minimum essential coverage are not opt-out payments subject to these rules.  However, an employer offering cash-in-lieu under a Section 125 Plan still may face affordability issues under the employer mandate.  For more information on this, see our prior article at: http://www.lcwlegal.com/IRS-Releases-Further-Guidance-on-Application-of-the.

The most notable employer impact created by these proposed regulations is a new requirement that if an employer offers cash-in-lieu, the offer must be made under an “eligible opt-out arrangement” to avoid increasing an employee’s premium contribution by the cash amount when the employer calculates affordability for the employer mandate.

Determining Affordability with an Unconditional Opt-Out Arrangement

For employers offering unconditional opt-out payments, the proposed regulations adopt the rule that an employee’s required premium contribution includes the amount the employee could receive if he or she had declined coverage.  In other words, the cash an employee could receive for declining coverage will be added to the employee’s premium toward the lowest cost plan when the employer runs the affordability calculation.  The proposed regulations analogized the scenario to a salary reduction and reasoned that, in both situations, an employee must forego a specified amount of cash compensation to enroll in coverage.  Therefore, the opt-out payment effectively increases the employee’s required contribution.

For example, XYZ offers employees the lowest cost health plan at a total premium of $400 per month.  Employees must contribute $80 toward the premium if they enroll in coverage.  However, employees who opt-out of coverage get $350 per month.  The IRS will consider this to be an unconditional opt-out arrangement because the employee automatically gets cash for opting out without having to satisfy any additional condition.  When XYZ calculates affordability, the employee contribution toward the lowest cost health plan will be $430 ($350 + $80), thereby making the coverage unaffordable.  XYZ will have exposure to potential penalties for offering unaffordable coverage under the ACA’s employer mandate.

Determining Affordability with an Eligible Opt-Out Arrangement

Notice 2015-87 stated that employers with a conditional opt-out arrangement were not required to add the cash opt-out amount to the employee’s premium contribution when calculating affordability.  According to this Notice, it appeared that an employer who required employees to provide proof of alternative group health coverage in order to receive cash-in-lieu would not have to add the cash amounts to the affordability determination.

However, the new proposed regulations state that only an arrangement that qualifies as an “eligible opt-out arrangement” will escape the requirement that the cash be added to the employee’s premium contribution.  An “eligible opt-out arrangement” means an arrangement that requires the following:

  1. The employee must provide proof of minimum essential coverage (“MEC”) through another source (other than coverage in the individual market, whether or not obtained through Covered California). This requirement includes government sponsored programs such as most Medicaid coverage, Medicare part A, CHIP, and most TRICARE coverage;
  2. The proof of coverage must show that the employee and all individuals in the employees expected tax family have (or will have) the required minimum essential coverage. An employees expected tax family includes all individuals for whom the employee reasonably expects to claim a personal exemption deduction for the taxable year(s) that cover the employer’s plan year to which the opt-out arrangement applies;
  3. The employee must provide reasonable evidence of the MEC for the applicable period. Reasonable evidence may include an attestation by the employee;
  4. The arrangement must provide that the evidence/attestation be provided every plan year;
  5. The evidence/attestation must be provided no earlier than a reasonable time before coverage starts (e.g. open enrollment). The arrangement can also require the evidence/attestation to be provided after the plan year starts; and
  6. The arrangement must provide the opt-out payment cannot be made (and the employer must not in fact make payment) if the employer knows that the employee or family member doesn’t have the alternative coverage.

If these conditions are met, the opt-out arrangement is an “eligible opt-out arrangement,” meaning that the amount of the opt-out payment is excluded from the employee’s required premium contribution for the affordability calculation.  Employers who wish to maintain cash-in-lieu arrangements outside of a Section 125 Plan should start revising the terms of the arrangement to meet the “eligible opt-out arrangement” definition.

Eligible Opt-Out Arrangement Rules Continue to Apply if Alternative Coverage Terminates before End of Plan Year

In some cases, an employee’s or a member of the employee’s expected tax family’s alternative coverage may terminate before the end of the employer’s plan year.  The proposed regulations provide that, in such cases, an employer may continue to exclude the amount of the opt-out payment from the affordability determination for the remainder of the plan year as long as the reasonable evidence rule is satisfied.

Opt-Out Payments under Collective Bargaining Agreements Get Some Relief

The proposed regulations adopt the general transition relief provided in Notice 2015-87.  All employers are not required to increase the amount of the employee’s contribution by the opt-out amount until the January 1, 2017 plan year, as long as the employer maintained the arrangement prior to December 16, 2015.

Employers with collective bargaining agreements (CBA) now have additional relief.  Employers are not required to increase the amount of an employee’s required premium contribution by opt-out payments that do not qualify under an eligible opt-out arrangement, until the later of: (1) the beginning of the first plan year that begins following the expiration of the CBA in effect before December 16, 2015 (disregarding any extensions on or after December 16, 2015), or (2) the applicability date of the regulations.  The proposed regulations clarified that there will not be a permanent exception for opt-out arrangements provided under CBAs.

Individual Mandate & Exchange Rules

The proposed regulations also contain information regarding the Individual Mandate and exchange coverage.  Some of the ways in which the proposed regulations will impact individuals are as follows:

  • Until the IRS issues final regulations, individuals may treat their employer’s opt-out payments under any opt-out arrangement as increasing their required premium contribution for purposes of the individual mandate and to determine subsidy eligibility.
  • When an individual declines to enroll in employer-sponsored coverage for a plan year and his/her employer fails to offer the opportunity to enroll in future plan years, the exchange will treat him/her as ineligible for employer-sponsored coverage during those future plan years. The individual could receive a subsidy and trigger employer penalties.

Employers who offer cash-in-lieu should also be aware that cash payments made to employees in lieu of health benefits must be included in the regular rate for overtime purposes under the FLSA.  For more information, see http://www.lcwlegal.com/files/144107_June%202016%20-%20Flores.pdf.

We previously detailed IRS Notice 2015-87 in the Client Update.  The article can be found here http://www.lcwlegal.com/IRS-Releases-Further-Guidance-on-Application-of-the.

The complete text of the proposed regulations can be accessed here https://www.federalregister.gov/articles/2016/07/08/2016-15940/premium-tax-credit.

If you have questions about this issue, please contact Heather DeBlanc or Shardé C. Thomas at 310.981.2000 or our Los Angeles, San Francisco, Fresno, San Diego, or Sacramento office.

Tips from the Table: Establishing Rapport During Negotiations

Posted in Labor Relations, Negotiations

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.

FBOR ‘Performance of Official Duties’ – Seibert v. City of San Jose Addresses What this Provision Means, Although Questions Remain

Posted in Employment, Public Safety Issues

Fire-Helmet.jpgRecently, the California Court of Appeal published its first case interpreting the unique provision of the Firefighters Procedural Bill of Rights Act (FBOR) limiting the statute’s procedural employee protections “to the events and circumstance involving the performance of official duties.”  Although the clarification is welcome, it is limited.

In Seibert v. City of San Jose, a civil service commission upheld the termination of a firefighter/paramedic for five charges of misconduct: two related to salacious e-mails sent to a 16-year-old during duty hours, and three related to allegedly harassing conduct toward another firefighter.  The trial court reversed the commission, finding that there was not sufficient evidence to support four of the charges, and that the fifth charge, while it might support some discipline, did not justify termination.

The California Court of Appeal reversed the trial court and remanded the case for further proceedings.

Grant Seibert, a firefighter/paramedic engaged in a salacious email exchange with a 16-year-old girl during duty hours.  The email exchange was the basis of two of the disciplinary charges for which Seibert was terminated.  Seibert was charged with misconduct because he knew or should have known the girl was a minor and because he sent the emails during duty hours, irrespective of the girl’s age.

The Court of Appeal determined that Seibert’s emails, excluding consideration of the girl’s age, could not sustain a charge for a violation of any policy.  First, the court opined that the City’s sources of authority for discipline, including its code of ethics, municipal code, and the fire department’s regulations, were vague, and that the City could not adequately explain how those policies were violated by a firefighter engaging in sexual conversations with (hypothetically) a consenting adult.  The court rejected the City’s argument that Seibert’s on-duty status made the sexual email exchange improper, pointing to the wide range of activities in which firefighters commonly engage during idle time on-duty, including watching movies, online banking, online dating, and personal phone calls and emails.  The appellate court also upheld the trial court’s rejection of the City’s argument that the sexual emails brought discredit to the department because they included sexual double-entendres about Seibert’s duties as a paramedic.

The trial court had also found that the evidence was insufficient to establish that the emails (without considering the girl’s age) violated any City policy, but nonetheless found that charge would support some discipline less severe than termination because of the potential for embarrassment to the City.  The appellate court criticized the trial court’s ruling, stating that it was uncertain whether an “abstract ‘risk of embarrassment’” without a policy violation could be grounds for discipline.  However, the court noted that the parties had not addressed that aspect of the trial court’s decision and left it for the trial court to decide on remand whether Seibert could be disciplined on this charge without even any finding of a policy violation.

The City also charged Seibert with misconduct for exchanging sexual emails with a minor, whom he knew or should have known was a minor, while on-duty.  The civil service commission sustained this charge, but the trial court overturned the commission, finding the evidence that Seibert knew or should have known the girl’s age was less plausible than the contrary evidence.  On this point, the standard of review was crucial.  The Court of Appeal found that there was sufficient evidence to support a finding that Seibert knew, or should have known, the girl was probably underage.  However, in this context, the Court of Appeal only reviews the trial court’s decision to determine if it was supported by “substantial evidence” – which does not mean that the Court of Appeal must agree that the Superior Court was correct.  The Superior Court, however, was not required to give the same level of deference to the commission – the Superior Court applies its “independent judgment” and although it is required to give a “strong presumption of correctness” to the commission’s decision, it is not bound by the factual determinations made by the commission if it believes they are inaccurate.

The City also charged Seibert with unwelcome touching of, and inappropriate communications to, a colleague at the training center to which he was assigned during the investigation of the salacious emails.  Seibert’s colleague testified that she did not support the discipline and claimed not to remember the facts she had described to the City’s investigator.  The trial court found the colleague’s investigative interview statements to have not been properly authenticated by testimony and to be inadmissible hearsay, and therefore refused to consider the City’s evidence of Seibert’s misconduct.  The Court of Appeal reversed these rulings, noting that Seibert had not objected on this authentication grounds before the commission, and that the transcripts were within exceptions to the hearsay rule for prior inconsistent statements and recorded past recollections.  Therefore, the appellate court ordered the trial court to consider the transcripts on remand.

The FBOR provides certain procedural protections to firefighters with respect to disciplinary actions.  However, unlike the Peace Officers’ Procedural Bill of Rights Act (“POBR”), the FBOR protections only “apply to a firefighter during events and circumstances involving the performance of his or her official duties.”  Also, unlike the POBR, one of these protections is that the appeal must be heard by an administrative law judge or, if the agency and the union have agreed in a memorandum of understanding, a neutral arbitrator as part of binding arbitration.

The Court found that alleged unwelcome touching of a fellow firefighter while at a training center is within the scope of the FBOR.  However, the Court of Appeal found it “debatable” whether (1) sending allegedly harassing voice and text messages to the same colleague while off the premises and (2) sending salacious email messages to a minor while on-duty were covered by the FBOR.

In deciding whether the FBOR applied to Seibert’s discipline, the appellate court determined that when an employee is terminated based on charges that are joined together (such as in a single notice of termination), where some charges are governed by the FBOR and some are not, the appeal must proceed in accordance with the FBOR as to all charges rather than limiting the appeal to charges that “involve[e] the performance of official duties.”

The key lesson from the Seibert decision is that the mere fact that a firefighter was on-duty and in the fire station when the alleged misconduct occurred is not necessarily enough to entitle him or her to FBOR protections.  Agencies are reminded to consult with legal counsel to determine whether the Act applies in a particular set of circumstances.  Further, this decision is a reminder to have clear policies and, in imposing discipline, to articulate how those policies were broken.

 

Reinstated CalPERS School and Local Agency Members May be Able to Recover Service Credit and Compensation Earnable under AB 2028

Posted in Retirement

Retirement-Sign.jpg

This blog post was authored by Liara A. Silva.

On February 16, 2016, Assembly Member Cooper introduced Assembly Bill 2028.  If passed, the bill will allow reinstated CalPERS school and local agency members to receive service credit and compensation earnable as though they were never terminated.

The current version of the bill addresses a gap in existing law.  Existing law allows state employees that have been subject to an involuntary termination that has been subsequently overturned to receive service credit retroactively, but this does not apply to employees of a contracting agency.

AB 2028 addresses this by making the proposed changes to the Public Employees’ Retirement Law which would:

  • Apply to a CalPERS member who is involuntarily terminated on or after January 1, 2017.
  • Apply where an involuntary termination is set aside in any administrative, arbitral or judicial proceeding.
  • Require service credit and credit for compensation earnable be granted to CalPERS members who are employed by any agency, if the member was involuntarily terminated, effective as of the date from which retroactive salary is awarded.

AB 2028 would also require employers to notify CalPERS of a final decision ordering reinstatement within five days of the decision becoming final.  That notice must include the date of involuntary termination, the date on which the employee was reinstated, and any additional information CalPERS may require to implement the bill.

LCW will keep you updated on any developments regarding Assembly Bill 2028.

Righting Wrongs Before It Costs Serious Dough – How Affordable Care Act Audits Can Help Employers Avoid Steep Reporting Penalties

Posted in Healthcare

iStock_000066252725_LargeAt the beginning of each calendar year  all employers who are considered “Applicable Large Employers” (“ALE”) under the Affordable Care Act (“ACA”) Employer Mandate Regulations will be required to file with the Internal Revenue Service (“IRS”) annual information returns concerning the health care coverage offered to full-time employees.  Employers may be assessed penalties for failures to offer minimum essential coverage (“MEC”) to substantially all of their full-time employees or for failures to timely file correct returns.

Although the IRS issued its final ACA regulations (“Final Regulations”) in February 2014, this area of the law is consistently evolving as the IRS continues to issue guidance on the regulations.  In the last year, the IRS has issued Notices 2015-17 and 2015-87, attempting to clarify questions left open by the Final Regulations.  The IRS also issued its final instructions regarding ALE reporting obligations.  Whether you are starting to set up operational guidelines and policies to ensure that you are ACA-compliant or finalizing your reporting processes, there may be some information that is new to you.  Here are a few examples of some nuances you may not have considered:

Offers of Coverage

  • Are you allowing employees to opt out of coverage? Did you know that if you require an employee to enroll in your health plan, the plan must be affordable under the Federal Poverty Line Safe Harbor, otherwise the IRS will not count your “offer” as a valid offer?
  • How are you dealing with COBRA? If you have adopted the Look Back Safe Harbor and an employee has a COBRA qualifying event due to a reduction in hours, if that employee’s status is full-time during a stability period, you should continue to offer coverage until the end of the stability period to avoid potential penalties.
  • Are you offering employees who change employment status coverage at the right time? If you have adopted the Look Back Safe Harbor, did you know that an employee who begins work with your agency as a part-time, seasonal or variable hour employee, but who has a “change in status” during his or her initial measurement period to become a full-time employee need not be offered coverage on the day that he or she becomes full-time?  The regulations provide that when an employee transitions to full-time status, an employer need only offer that employee coverage no later than the first day of the fourth full calendar month of employment.  It is not that simple though.  If the employee changes to full-time status during his or her initial measurement period, and the initial measurement period ends sooner than the end of the employee’s first full three months of full-time status, the employer must offer the employee minimum essential coverage by the first day of the first month following the end of the initial measurement period, or risk penalties.
  • If you have adopted the Look Back Safe Harbor, are you including paid leave when determining Hours of Service? Whether an employee is full-time under the ACA requires an employer to calculate “Hours of Service,” not just hours worked.  Hours of Service include hours paid for the performance of duties, hours an employee is entitled to pay for the performance of duties and hours an employee is paid or entitled to pay for time off, such as vacation, holiday, paid sick leave, jury duty, military duty and disability.  Furthermore, if your agency has adopted a Look Back Safe Harbor, “Special Unpaid Leave” must be considered in averaging calculations.  “Special Unpaid Leave” is defined as leave under the federal Family and Medical Leave Act (FMLA), the federal Uniformed Services Employment and Reemployment Rights Act (USERRA), and unpaid jury duty leave.  For example, if an employee goes out on FMLA leave for a period of eight (8) weeks, the averaging method requires an employer to subtract the eight weeks of special unpaid leave from the measurement period, average the employee’s hours of service over the remaining time period and either (1) credit the average hours of service per week to each of the eight weeks or (2) apply the average over the entire measurement period.  In other words, even if an employee does not hit 1560 hours over a measurement period, that employee may still qualify as full-time because of the averaging method.

Affordability

  • Are you including contributions to an HRA account or flex contributions to a Section 125 cafeteria plan in your affordability calculations? Did you know that even if you pay 100% of your employee’s premium, coverage may still not be considered affordable if you are contributing money into an HRA account or flex contributions into a cafeteria plan?  IRS Notice 2015-87 clarifies that certain employer contributions must be included in calculations when determining whether anALE has made an offer of affordable minimum value coverage.For example, HRA contributions will only count toward the employee’s required contribution if (1) the HRA can be integrated into the employer-sponsored major medical group health plan and (2) the funds the employer makes available under the HRA may be used by the employee to pay his or her share of contributions for major medical coverage or pay the employee’s share of the contributions for major medical, cost-sharing, or other health benefits not covered by the plan in addition to premiums.  Other limitations may also apply.Flex contributions will only make premiums affordable and offset the amount the employee pays toward his or her premium if the contributions qualify as a “health flex contribution.”  A “health flex contribution” is an employer contribution that meets the following requirements:   (1) the employee may not opt to receive the amount as a taxable benefit, (2) the employee may use the amount to pay for minimum essential coverage, and (3) the employee may use the amount exclusively to pay for medical care.  If the flex contribution can be taken as cash or used for expenses other than medical care it is not a “health flex contribution,” and therefore, cannot be used to reduce the employee’s premium contribution when calculating affordability under the Employer Mandate.
  • Do you provide employees with cash in lieu incentives to opt-out of employer-sponsored health care coverage? Did you know that cash in lieu incentives cannot be taken into account when calculating affordability?  In fact, the IRS has indicated that it may treat such incentives as salary reductions if receipt of the cash in lieu is not conditioned upon proof of other group health coverage.  This would make premiums even less  The IRS plans to issue further guidance on these opt-out payments.

Reporting

  • Are you properly reporting your seasonal employees? Did you know you do not have to file form 1095-C for seasonal employees who work three or fewer full months during your agency’s measurement period, even if they were reasonably expected to be full-time on their date of hire? However, for the months in which the full-time seasonal employee was an employee of the agency, he or she would be included in the total employee count and reported on Form 1094-C.    
  • Are you properly accounting for full-time employees who return to work after extended absences? Did you know that if you have an employee return to work after an extended absence – a “break in service” of at least 13 weeks (or 26 weeks for educational institutions) – that employee will be considered a new employee when returning from work?  In such instances, employers must conduct the reasonable expectation analysis upon the employee’s return.  If the employee is reasonably expected to be full-time, it must measure these “new” employees on a monthly basis until that employee has been employed for one full standard measurement period.

It is a great time to ensure that your agency is in full compliance now to avoid possible future penalties later, by auditing current policies and practices.  Audits may include determinations of employee eligibility for offers of coverage; affordability determinations; determinations of compliance with group health plan mandates; reviews of ACA policies, including personnel rules and memoranda of understanding; and reviews of reporting practices.  You may also want to explore how the ACA impacts the terms of your collectively bargained agreements.  Audits may be performed internally or with the assistance of counsel.

For more information on any phase of an ACA audit, please feel free to contact Heather DeBlanc at (310) 981-2028 or hdeblanc@lcwlegal.com.

Tips from the Table: Sidebars in Labor Negotiations

Posted in Labor Relations, Negotiations

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.

The Ninth Circuit Holds that Cash Payments Made to Employees in Lieu of Health Benefits Must be Included in the Regular Rate for Overtime Purposes under the FLSA

Posted in FLSA

NewsOn Thursday, June 2, 2016, the Ninth Circuit issued a long-awaited decision in a case called Flores v. City of San Gabriel, which involved a group of police officers who sued their City employer for three years of unpaid overtime and liquidated damages under the Fair Labor Standards Act.  The primary issue on appeal was whether the FLSA required the City to include cash payments made in lieu of health benefits into its regular rate calculation for overtime pay purposes.  Four years after the lawsuit was filed, the Ninth Circuit has now held that such payments must be included in the regular rate for overtime purposes under the FLSA.

Although highly-technical and an issue of first impression for the Ninth Circuit, the Flores decision may have far-ranging and significant impacts on the way your agency compensates employees and provides benefits.

Background

Under the FLSA, overtime hours must be compensated at a rate that is at least one-and-a-half times the employee’s hourly “regular rate.”  (29 U.S.C. sec. 207(a)(1).)  The FLSA “regular rate” is the hourly rate equivalent to what the employee was actually paid per hour for the normal, non-overtime workweek for which s/he is employed.  (29 C.F.R. sec. 778.108, citing Walling v. Youngerman-Reynolds Hardwood (1945) 325 U.S. 419.)  Generally speaking, all forms of remuneration or compensation for employment paid to an employee are included in the regular rate except for certain specifically excluded payments.  (29  U.S.C. sec. 207(e).)

The Flores Facts

The City of San Gabriel provided a “Flexible Benefits Plan” to employees under which a designated monetary amount was furnished to each employee for the purchase of medical, vision, and dental benefits.  Although employees were required to use the Plan’s funds to purchase vision and dental benefits, they could decline the purchase of medical benefits upon proof of alternate medical coverage.  An employee that elected to forgo medical benefits received the unused portion of the designated monetary amount as a cash payment added as a separate line item in the employee’s regular paycheck.  This cash payment is referred to as “cash in lieu.”  Of the total amount the City paid on behalf of its employees pursuant to its Flexible Benefits Plan, between 42% and 47% of that amount was paid directly to employees as cash in lieu benefits each year.  Between 2009 and 2012, the monthly payment paid to employees who declined medical coverage was between approximately $1,000 and $1,300 per month.

The Issue Raised by the Officers

Since enacting the Flexible Benefits Plan many years ago, the City treated the cash in lieu payments as benefits, not compensation, and thus excluded the payments from employees’ regular rate of pay for overtime purposes.  This meant the cash in lieu payments were not incorporated into the City’s calculation of employees’ FLSA overtime rate.  In 2012, a small group of the City’s police officers brought suit, alleging the cash in lieu payments were compensation for hours worked that must be included in the City’s regular rate calculation for overtime payments.  The officers also alleged the City failed to legally establish a partial overtime exemption for law enforcement (known as the 207(k) work period), and that the City’s failure to include the cash in lieu payments was willful, entitling them to three years of back pay.  The officers also sought liquidated damages (i.e., double damages, the statutorily imposed remedy for an FLSA violation).

The Ninth Circuit’s Holding On Inclusion of Cash In Lieu Benefits in the Regular Rate

The primary issue on appeal was whether the City’s cash in lieu payments were properly excluded from the City’s regular rate.  In its June 2, 2016 opinion, the Ninth Circuit held that cash payments made to employees in lieu of health benefits must be included in the hourly “regular rate” used to compensate employees for overtime hours worked.  The City argued that the cash in lieu payments were not payments made as compensation for hours of employment and were not tied to the amount of work performed for the employer, and therefore were excludable from the regular rate of pay as are payments for leave used and expenses.  The Ninth Circuit disagreed, finding the payments were “compensation for work” even if the payments were not specifically tied to time worked for the employer.

The Ninth Circuit also held that the cash in lieu payments could not be excluded from the regular rate as payments made irrevocably to a third party pursuant to a bona fide benefit plan for health insurance, retirement, or similar benefits pursuant to section 207(e)(4) of the FLSA since those payments were paid out directly to employees.  Thus, those payments must be added into the employee’s regular rate of pay for the time period that they cover for purposes of determining the employee’s FLSA overtime rate.

Finally, the DOL interpretations state that a benefits plan can only pay out an incidental part of its benefits as cash to be considered a bona fide benefits plan.  (29 C.F.R. sec. 778.215.)  In 2003, the DOL issued an opinion letter that defined cash in lieu benefits as “incidental” if they amount to no more than 20% of the employer’s total contribution to the benefit plan.  The Ninth Circuit rejected the DOL’s 20% rule as unpersuasive, but nevertheless held that the City’s cash in lieu payments to employees were not incidental as they amounted to too great of a percentage of the City’s total benefits contribution (42-47%).  Since the cash in lieu payments were not “incidental,” the plan does not qualify as a bona fide plan under section 778.215.  Thus, the City must also include all amounts that it paid into the flexible benefits plan for employees in their regular rate of pay, not just the cash in lieu payments.  The Ninth Circuit acknowledged that this decision could force employers to discontinue cash in lieu plans, but stated that is a policy decision for Congress or the DOL – not the courts – to address.

Other Holdings of the Decision

  • The Ninth Circuit affirmed that a City may establish a 207(k) work period for its public safety employees without specifically referencing the term “207(k),” as long as the work period is otherwise established and regularly recurs.
  • The fact that the City’s payroll department consulted the human resources department to categorize the cash in lieu payments as a “benefit” instead of compensation was insufficient to establish the City’s good faith defense to liquidated damages.
  • The officers proved the City’s exclusion of the cash in lieu payments was “willful” under the FLSA, entitling the officers to three years of back overtime pay (rather than the standard two-year period) because the City did not take affirmative steps to determine whether the payments should be included in the regular rate of pay. In an unusual concurring opinion, a majority of the panel noted that the willfulness standard adopted by the Ninth Circuit in  Alvarez v. IBP, Inc. in 2003 is “off track” with the standard for willfulness previously established by the Supreme Court.  However, the judges felt compelled to find willfulness based solely on the Alvarez decision.

Next Steps

If your agency provides cash payments to employees who opt-out of a health insurance plan, your agency should carefully evaluate the impact of Flores on payroll practices and FLSA liability.  This decision could require either the cash in lieu amount or all plan benefits to be included in employees’ regular rate of pay for FLSA overtime purposes.  Many agencies provide contractual overtime in excess of FLSA minimum overtime requirements, such as overtime for working beyond scheduled hours in a workday (as opposed to overtime for working more than 40 hours in a week).  It is important to remember that the requirement to include cash in lieu or benefit plan amounts in the regular rate of pay only applies to FLSA overtime hours, not contractual overtime hours.  Finally, the holdings on good faith and willfulness reiterate the importance of conducting and documenting regular reviews of all aspects of FLSA compliance for your agency.

Employers who offer cash-in-lieu may also face potential penalties under the Patient Protection and Affordable Care Act.  For more information on this topic, see our article here .

For specific advice on how Flores and the decision to offer cash-in-lieu of health benefits may impact your agency, please contact one of the attorneys at any of our offices statewide.

Note:

Brian P. Walter and Alex Y. Wong of Liebert Cassidy Whitmore’s Los Angeles Office represented the City of San Gabriel in the appeal before the Ninth Circuit.  If your agency is interested in providing amicus support for the City’s future appeals of this decision, please contact them.

Revisiting Transgender Employment Issues

Posted in Employment

Quite a bit has changed since we last visited this topic generally in 2014.  Approximately eighteen states and over 200 municipalities ban gender identity discrimination.  Indeed, for several years, California’s Fair Employment and Housing Act has prohibited discrimination on the basis of “sex, gender, gender identity, [and] gender expression.”  As to federal law, this year, the Obama Administration issued guidelines explaining that federal law also bans gender identity discrimination.  In response to the recent federal guidelines, several states and school districts filed a lawsuit in May against the United States and its departments of education, justice, and labor, the equal employment opportunity commission, and individual defendants.  According to the plaintiffs, the “[d]efendants have conspired to turn workplaces and educational settings across the country into laboratories for a massive social experiment” and “radical changes” have been “foisted” on the nation.

Presently, some federal courts interpret the federal anti-discrimination laws as protective of transgender employees, and some do not.  The inconsistent treatment of transgender employees in federal courts can lead to confusion regarding the scope of transgender employee rights.  While California state law specifically protects transgender employees, federal law, by contrast, is a morass of various interpretations and decisions.  This stems from the fact that Title VII itself does not specifically state gender identity or expression or transgender individuals are protected from discrimination.

An example of an inconsistent interpretation of “sex” under Title VII is illustrated in two cases from the same federal appellate jurisdiction in the Northeast.  On March 18, 2016, the United States District Court for the District of Connecticut decided Fabian v. Hospital of Central Connecticut.  In that case, the plaintiff, a prospective employee of a hospital, claimed she was not hired after she disclosed her identity as a transgender woman.  The hospital argued that Title VII does not protect transgender individuals from discrimination.  The court disagreed with the hospital and stated that “employment discrimination on the basis of transgender identity is employment discrimination ‘because of sex’ and constitutes a violation of Title VII of the Civil Rights Act.”

Just days before the Fabian decision, however, the United States District Court for the Southern District of New York in Christiansen v. Omnicom Group, Inc., reached the opposite result, finding that although the conduct alleged in the case was “reprehensible,” discrimination based on sexual orientation does not violate Title VII.  The Court evaluated whether the plaintiff’s claim was for sexual stereotyping or sexual orientation, the latter of which it considered not specifically protected under Title VII.  The Court stated it was constrained by applicable precedent in applying this distinction, and went on to criticize why the distinction should make any difference.  The Court observed “the futility of treating sexual orientation discrimination as separate from sex-based considerations.”  Indeed, the distinction can lead to anomalous results: a female employee fired for not deferring to men could state a claim for sex discrimination under Title VII, whereas, a female employee who is fired for dating women could not.  Although the court was critical of the distinction, it nonetheless abided by it and found that the plaintiff in the case before it did not state a Title VII claim.

Since North Carolina enacted legislation requiring persons to use the restroom that corresponds to their sex at birth, the matter of transgender rights has become increasingly politicized and a frequent topic in the media.  With the conflicting interpretations of the law and with employers experiencing uncertainty in how to handle transgender issues, such as use of restrooms, some direction from the federal government is clearly needed.  Luckily, there has been some.  The U.S. Department of Labor’s Occupational Safety and Health Administration offers guidance to employers in its “A Guide to Restroom Access for Transgender Workers,” which is available here.  As always, when in doubt, or when creating new policies, it is prudent to consult with legal counsel.