California Public Agency Labor & Employment Blog

California Public Agency Labor & Employment Blog

Useful information for navigating legal challenges

Due Process and Disability: What Due Process Must Be Provided to Disabled Employees

Posted in Retirement

Retirement-Sign.jpgThis blog post was authored by Connie Almond

More than 2/3 of the discrimination claims filed in California allege disability as the protected category at issue.  California’s complex disability laws are compounded for public agencies by constitutional due process requirements and PERS and ’37 Act requirements which are triggered when the public agency is contemplating separating the employee based on an inability to accommodate.

When a public agency has exhausted the interactive process and reached the conclusion that it cannot accommodate an employee’s medical restrictions, the agency must find out whether the employee agrees that separation is the next step.  If the employee does not agree, then the employee’s due process rights kick in.   As we’ve previously discussed, under Bostean v. Los Angeles Unified School District (1998) 63 Cal.App.4th 95, an employer must provide Skelly-like due process rights before placing a property interest employee on unpaid leave or separating the employee.

In addition, if the employee has enough service credit to be eligible for a PERS or a ’37 Act retirement system disability retirement, separation is more difficult, if not impossible.  The agency is required to apply for a disability retirement on the employee’s behalf.   Government Code sections 21153 and 31721 require PERS agencies and ’37 Act agencies, respectively, to apply for a disability retirement if the employee is “believed to be disabled” and the employer cannot accommodate the employee’s medical/psychological restrictions while maintaining the employee in the same classification with the same salary, benefits, and real promotional opportunities.  Both statutes prohibit separating the employee because of the disability.

The public agency’s obligation to apply for a disability retirement is well established.  The murkier issue is the employee’s pay status while the disability retirement application is pending.  For ’37 Act employers, the employer must keep the employee “on the books” and can allow the employee to use accrued leave balances.  Under Stephens v. County of Tulare, if the employee exhausts his/her leave balances, the employer is not required to keep the employee on a paid status pending resolution of the retirement application.

PERS agencies, on the other hand, must reckon with the California Court of Appeal decision in Riverside Sheriffs’ Assoc. (Sanchez) v. County of Riverside.  In the Riverside case, the Court found that the PERS employer’s placement of the employee on unpaid leave pending resolution of a disability retirement application was a “disciplinary action” because it denied the employee wages and benefits.  The employee consequently had the right to appeal the unpaid leave decision.  In light of this case, before forcibly placing employees on unpaid leave, PERS agencies should consider the risks which may arise by stopping the employee’s pay – and this includes even allowing the employee to exhaust his/her own accrued leave balances.

Ultimately, there is no simple way to handle disability or disability retirement issues, and there are no short cuts.  Each employee, each medical/psychological  issue, and each agency is unique.   Public agencies should examine each situation separately and ensure compliance with each of the interweaving laws.

It’s Not FMLA Unless I Say So!

Posted in FMLA

hourglass-small.jpg This blog post was authored by Jennifer Rosner.

In a recent decision of the U.S. Court of Appeals, the Ninth Circuit Court in California held that an employee can affirmatively decline to use leave under the Family Medical Leave Act (“FMLA”).  However, buyer beware!  If an employee affirmatively declines to use FMLA that he/she would otherwise be entitled to, the employer may be shielded from a lawsuit if it takes an adverse employment action against the employee based on that leave.

The FMLA provides job protection to an eligible employee who takes leave (up to 12 workweeks per year) to care for the employee’s spouse, child or parent with a serious health condition.  However, in Escriba v. Foster Poultry Farms, an employee declined to use FMLA when she took an extended leave of absence to care for her ill father.  When the employee was terminated for failing to comply with the company’s absence policy, she filed a lawsuit claiming that her termination was an unlawful interference with her FMLA rights.  The Court held that the termination was lawful because the employee had expressly declined to have her time off count as FMLA leave and therefore, was not entitled to job protection.

Maria Escriba worked at a Foster Farms processing plant for 18 years.  On November 19, 2007, she met with her immediate supervisor to request two weeks vacation leave to care for her ailing father in Guatemala.  Her supervisor asked if she needed more time in Guatemala to care for her father, and Escriba responded that she did not.  The supervisor told her that if she later decided to request more than two weeks leave, she would need to visit Human Resources.  Escriba then went to the Foster Farms facility superintendent and told him she was going to Guatemala because her dad was very ill.  She told him she was using two weeks of vacation time and asked her for an additional two weeks as a “favor.”  The superintendent told Escriba to send a note or documentation to Human Resources for the extra time.  He did not instruct Escriba regarding her rights and obligations under FMLA and did not take any steps to designate her time off as FMLA.  Escriba never requested any additional time from Human Resources.

Escriba then traveled to Guatemala to care for her father.  While there, she decided that returning to work after two weeks would not be practical but she failed to make contact with her employer to extend her leave.  Sixteen days after she was supposed to return to work, Escriba called her union representative who informed her that she was going to be terminated under Foster Farm’s “three day no-show, no-call rule.”  Under this policy, an employee is automatically terminated if absent for three work days without notifying the company or without seeking a leave of absence.  Escriba then sued Foster Farms, claiming that the company interfered with her right to take FMLA leave.

To establish a case of FMLA interference, an employee must establish that 1) he/she was eligible for FMLA protection; 2) the employer was covered by the FMLA; 3) the employee was entitled to leave under the FMLA; 4) the employee provided sufficient notice of intent to take leave; and 5) the employer denied the employee FMLA benefits to which he/she was entitled.  Here, the Court found that Escriba elected not to take FMLA leave after telling her supervisor that she only wanted vacation time and that she did not need additional time off.  She also knew that her supervisor only handled requests for vacation whereas Human Resources had handled her past fifteen requests for FMLA leave.  Moreover, Escriba had intended to take vacation time and not family leave.  Accordingly, Escriba did not express intent to take leave under FMLA.

Thus, this case demonstrates that an employee cannot have it both ways – the employee cannot decline to use FMLA (even if the leave qualifies for FMLA) and then try to hide behind FMLA protections after the fact.  Accordingly, once an employee declines to use FMLA, the employee assumes the risk of the decision.  Thus, as in this case, if an employee declines FMLA leave, and goes on an unauthorized leave of absence, the employee can be lawfully terminated (consistent with agency policies).  Because the FMLA does not require that an employee expressly ask for “FMLA leave” to fall under its protections, we recommend that the employer should inquire of the employee if it is necessary to determine whether FMLA is being sought by the employee and obtain the necessary details of the leave to be taken.

Court Rules That ‘37 Act Employers Retain The Right To Discontinue Paying Employee Member Contributions After PEPRA

Posted in Retirement

Breaking-News.jpgAn employer subject to the County Employees Retirement Law of 1937 (“’37 Act”) maintains the unilateral right to discontinue picking-up the member contributions of its employees after exhausting all collective bargaining obligations.  This was the decision of the San Bernardino County Superior Court on April 11, 2014 in denying a Petition for Writ of Mandate filed by the San Bernardino County Public Attorneys Association (“SBCPAA”), a labor organization, against the County of San Bernardino.  (San Bernardino County Public Attorneys Assn. v. County of San Bernardino, et. al., Case No. CIVDS1304516.)

The County, represented by Steven M. Berliner, partner in our Los Angeles office, and Frances Rogers, associate in our San Diego office, unilaterally implemented terms and conditions of employment after satisfying all meet and confer obligations.  Those terms included eliminating the County’s pick-up of a portion of its employees’ member contributions to the county retirement system.  SBCPAA filed a lawsuit challenging this action, arguing that a statute enacted as part of the California Public Employees’ Pension Reform Act of 2013 (“PEPRA”) actually required the County to continue the pick-ups absent the employees’ agreement to the change.  Amicus Curiae briefs were filed by the State of California, the California State Association of Counties, and the California Special Districts Association.

Government Code section 31631 of the ’37 Act was enacted as part of PEPRA.  Section 31631 states, in relevant part, “Notwithstanding any other law, a board of supervisors or the governing body of a district may, …without a change in benefits, require that members pay all or part of the contributions of a member or employer, or both, for any retirement benefits …For members who are represented in a bargaining unit, the payment requirement shall be approved in a memorandum of understanding…”

The intent of this statute is to provide an avenue for employees to share a part of the employer’s contribution rate, provided employees agree in a memorandum of understanding.  SBCPAA argued, however, that this statute also requires agreement of employees to pay any contributions, including their normal member contributions.

The Court found that the plain language of section 31631 requires employee agreement to pay their own member contributions.  However, that part of the statute is completely inapposite to other parts of the ’37 Act, the intent of PEPRA, and the intent of the Meyers-Milias-Brown Act (“MMBA”).  It is also unconstitutional under the California Constitution.

Prior to PEPRA, section 31581.2 of the ’37 Act permitted employers to pick-up all or a portion of the member contributions of its employees and to discontinue doing so at any time after exhausting all meet and confer obligations under the MMBA.  PEPRA did not repeal section 31581.2, although it was amended to prohibit employer pick-ups for “new members” as defined under PEPRA.  The intent of PEPRA is to ensure public pension systems are sustainable. Among its provisions, PEPRA prohibits employers from picking up the contributions required of “new members,” discourages employers from doing the same for classic members, and encourages all employees to share a portion of the employer’s normal cost to fund pension benefits.

The Court observed that the overall statutory schemes of the ’37 Act, PEPRA and MMBA did not grant labor organizations the power to compel employees to continue to pick up employee contributions by simply refusing to agree to pay their own normal contributions to the retirement system.

Moreover, the Court found that because the plain, clear language of section 31631 requires employee agreement in a memorandum of understanding in order for them to pay their own member contributions, the provision of section 31631 at issue is unconstitutional in violation of the “Home Rule” Doctrine.  Under Article XI, Sections 1 and 11 of the California Constitution, the board of supervisors of any county has the sole authority to determine the compensation of its employees and control county money.  The California Supreme Court previously held that the Legislature may not enact a law that places the authority in another person or entity to determine the compensation of county employees. (County of Riverside v. Superior Court (2003) 30 Cal.4th 278.)

The Court also rejected SBCPAA’s argument that employer pick-ups are a constitutionally-protected “vested” right.  The law is clear that employer pick-ups of employee member contributions are an employment benefit, not a retirement benefit and as such, are not vested and constitutionally protected post-employment benefits.

This decision is an important victory, not only for the County of San Bernardino, but for all employers who maintain a retirement system under the ’37 Act.  Although this is a trial court decision which does not create precedential law, it signals the direction of courts in a post-PEPRA landscape. A similar lawsuit involving the County of Orange, also handled by Steven M.  Berliner and Frances Rogers, is set to be heard at the end of May.

Liebert Cassidy Whitmore’s Retirement Practice Group handles a wide array of retirement law matters, including litigation, administrative proceedings, and providing advice and counsel.  For more information visit:  www.lcwlegal.com/retirement.

Treasury Issues Final Regulations Governing Employer Reporting Requirements

Posted in Healthcare

Healthcare.jpg This blog post was authored by Jessica Frier

In 2016, the Internal Revenue Service will require large employers with 50 or more full-time employees, including full-time equivalents, to annually report monthly data concerning the health coverage offered to full-time employees.  These reporting requirements are set forth in Internal Revenue Code (“IRC”) section 6056 (for large employers) and section 6055 (for insurers and sponsors of self-insured plans).  Large employers will also need to provide a written statement to each employee it identified in the reporting specifying the information reported. The annual reporting will be based on data from the prior year.  Therefore, it is important for employers to plan ahead now to meet these reporting requirements.  Large employers must provide the written statements to employees by January 31 and submit reports to the IRS by February 28 (or by March 31 if e-filed).

Self-Insured Plans:    The final regulations allow employers that sponsor self-insured plans to combine the reporting required under IRC section 6055 and IRC section 6056 into a single, consolidated form, Form 1095-C.  The combined form will have two sections: the top half includes the information needed for IRC section 6056 reporting, while the bottom half includes the information needed for IRC section 6055.  Large employers that self-insure health benefits should complete both sections of Form 1095-C.

Fully-Insured Plans:  Large employers that are subject to the ACA’s employer shared responsibility provisions because they employee 50 full-time (or full-time equivalent) employees but are not self-insured will complete only one section of the combined Form 1095-C in order to fulfill their reporting requirements under IRC section 6056.

Information Reported:  Employers must report on each employee who was full-time for one month or more during the year.  The report will contain the following information:

  • The name, address, and EIN of the employer;
  • The name and telephone number of the employer’s contact person;
  • The calendar year being reported;
  • A month by month certification of whether the employer made an offer of coverage to each full-time employee (and dependent children up to age 26);
  • The months during which coverage was available;
  • The employee’s required contribution to the lowest cost, self-only monthly premium, by month;
  • The number of full-time employees in each month;
  • The name, address, and tax identification number of the full-time employee and the months during which the employee was covered.

Simplified Option:  If employers make a “qualifying offer” (an offer of minimum value coverage at a self-only cost to the employee of no more than 9.5 percent of the Federal Poverty Level (about $1,100 in 2015) as well as an offer of minimum essential coverage to the employee’s spouse and dependents) for all 12 months of the year, they do not have to report month-by-month information for those employees.  They will still report the following information:

  • Names, addresses, and taxpayer identification numbers (TINs); and
  • Confirmation that the employees received a full-year qualifying offer.

If employers make a qualifying offer, as defined above, for fewer than all 12 months of the year, (for example, when an employee starts or is terminated partway through the year) employers must still report the month-by-month information required under the general method.

Employee Statements:  By January 31st of each year, large employers must also provide full-time employees identified on the IRS return with written statements containing:

  • Employer information (EIN, contact details, etc.); and
  • All information required to be shown on the IRS reporting with respect to that employee.

Optional 2015 Phase-In:  Reporting is voluntary in 2015 (regarding 2014 data).  Solely for 2015, an employer may certify that it made a qualifying offer, as defined above, to at least 95% of full-time employees and their families.  Employers electing to use this alternative reporting will file IRS Form 1095-C and provide the employee’s name, tax ID number, and address, and may include employees who did not receive a qualifying offer for the full year, without providing month-by-month details.  The employer must also provide a simplified statement to employees in a format designated by the IRS.

Employers That Offer Coverage to Virtually All Employees:  Employers that certify that they offered affordable, minimum value coverage to at least 98 percent of employees and their dependent children may use the simplified reporting method but will not be required to identify or specify the number of full-time employees.

Penalties for Non-Compliance:  The penalty for failure to timely file a correct return to the IRS is $100 per return (up to $1,500,000 per year), and the penalty for failure to timely provide a correct written statement to an employee is $100 per statement (up to $1,500,000 per year).  For 2016 reporting only (regarding 2015 data), the IRS has indicated that it will not impose penalties for incorrect or incomplete information if an employer makes a good faith effort to comply with the reporting requirements.

The final regulations are available at http://www.gpo.gov/fdsys/pkg/FR-2014-03-10/pdf/2014-05051.pdf and http://www.gpo.gov/fdsys/pkg/FR-2014-03-10/pdf/2014-05050.pdf.

For more information on the Final Regulations Relating to the IRS’ Information Reporting Requirements for Large Employers, register here for our upcoming webinar taking place on May 28, 2014.

NLRB Ruling to Allow Northwestern University Football Players to Unionize May Have Broad Implications

Posted in Labor Relations

football

The National Labor Relations Board (NLRB) recently ruled that Northwestern University football players who receive grant-in-aid scholarships and have not exhausted their playing eligibility are “employees” under the National Labor Relations Act, and therefore have the right unionize and engage in collective bargaining with their “employer.”  (Northwestern University v. College Athletes Players Association (CAPA))  This represents a huge change in the current relationship between student-athletes and universities.

Northwestern has indicated it will appeal the ruling, and some members of Congress have indicated they may seek to take legislative action to address it, so this battle is far from over.  The current ruling applies only to Northwestern, but, should it ultimately stand, it will establish precedent for scholarship football and basketball players at all private universities.  (The NLRB does not have jurisdiction over public universities.)

More broadly, the ruling could have wide ranging implications and create many complicated issues regarding how unionization and the employer/employee relationship would play out in the context of college athletics.  For example, the ruling only applies to players who receive grant-in aid scholarships.  This means that “walk-ons” – players who do not receive such scholarships – are not employees.  As a result, some of the football team will be considered employees and some not.  So, presumably, the scholarship players will be subject to the panoply of complications that arise in the employer/employee relationship, and the walk-ons will not.   Also, how will Title IX and state law requirements for gender equality be applied?  Will a female scholarship volleyball player whose university program operates in the red also be considered an employee?  How will this impact competitive balances in conferences?  Northwestern is the only private school in its conference (the Big 10).  None of its competitors will be subject to this decision.  (Here on the West Coast, Stanford and USC are the only private universities in their conference (the Pac-12).)

If players successfully unionize, can they be required to pay union dues?  Can they be subject to a union activity provision that would require their university to kick them off the team if they refuse to pay dues?  If they are employees for other purposes, will they pay taxes on their income (i.e. the value of their scholarships and other benefits)?  Will they be entitled to workers’ compensation rights?  Will they be subject to federal and state wage and hour laws that require minimum wage and overtime?   Will they be entitled to protected leaves of absence under the Family and Medical Leave Act (FMLA) and comparable state law requirements?  If so, how will that work?  Will the athletes have their eligibility extended by the length of any leave?  Will the universities be subject to wrongful termination claims if they release a player from the team for poor athletic performance?

This ruling is remarkable in that it raises many new employment questions that likely will take many years and many legal challenges to play out.

Ferreting Out Family Medical Leave Act Fraud: Practical Ways to Discover and Prevent FMLA Misuse

Posted in FMLA

AnotherGavel.jpgDo you have that employee who takes intermittent Family Medical Leave Act (FMLA) leave and is usually out on Mondays and Fridays?  What about the employee on an extended FMLA leave who is going to school full-time?  Is it possible for employers to verify FMLA abuse and prevent it?  Although FMLA leave is highly protected by a complicated statutory and regulatory scheme, there are ways for employers to handle FMLA misuse and fraud without violating the employee’s rights.

It is paramount that employers provide standard notice to all employees of their FMLA rights.  This includes general notice posted in conspicuous places, timely and proper notice to employees who may be eligible for FMLA leave, rights and responsibilities notice, and the designation of leave notice.  The most relevant notice in preventing fraud and abuse is the rights and responsibilities.  The federal regulations specifically require employers to provide “written notice detailing the specific expectations and obligations of the employee and explaining any consequences of a failure to meet these obligations.”

Oftentimes, employers do not include expectations and consequences in their FMLA policies.  A policy statement FMLA misuse, abuse or fraud will result in discipline, including termination, provides a significant benefit to employers.  In 2011, the United States Ninth Circuit Court of Appeals considered an employee’s appeal following his termination for FMLA misuse.  Although Boecken v. Gallo Glass Company is not published, it provides insight for employers as to how a court may decide similar issues.  The employee claimed his termination was not lawful because his employer did not provide adequate notice of which activities were not acceptable during FMLA leave.  The court disagreed with the employee, stating there is no requirement for employers to identify each and every unacceptable use of FMLA leave, but the employer is obligated to identify the consequences of FMLA misuse and fraud.

In the Boecken case, the employer had a progressive discipline policy but immediately terminated the employee for dishonesty related to the FMLA misuse.  The court determined a dispute existed between the employer and employee regarding adequate notice of the consequences for FMLA misuse.  Although no employer is guaranteed protection from litigation, this employer might have been in a better position if it had a written policy describing the consequences of FMLA misuse.

Beyond the notices to employees, employers can further prevent and detect FMLA fraud and misuse by consistently and diligently requiring employees provide complete and sufficient certification for the leave.  For an employee on leave for his own serious health condition, employers are legally required to request the medical certification and evaluate the content.

How do you know the certification is complete and sufficient?  According to the U.S. Department of Labor, certification is incomplete if one or more of the applicable entries on the form is not completed, and it is insufficient if the information is “vague, unclear, or nonresponsive.”

What if you have complete and sufficient information, but the employee is likely abusing, misusing, or committing fraud in connection with the FMLA leave.  What steps can the employer take at this junction?  If the certification is in doubt, the employer may require the employee to obtain a second opinion from a health care provider chosen by the employer, and possibly a third chosen jointly by the employee and employer if the first and second opinions are conflicting.

What happens if you suspect fraud but did not ask for a second opinion?  The employer can still take steps to determine fraud or misuse without obtaining a second opinion.  In a U.S. Court of Appeals decision from the mid-west, the employer did not ask for a second opinion, but the court nonetheless agreed the employer rightfully terminated the employee for FMLA fraud.  The employee was on a second round of intermittent FMLA leave when co-workers found pictures of her on Facebook attending a local festival.  The next work day, the employee called in to use her FMLA leave.  The employee’s defense was that no one told her attending the festival was prohibited.  She also could not explain the discrepancy between her eight hour trip to the festival and her subsequent and immediate incapacitation that prevented her from reporting to work.

If you still suspect fraud or misuse but there is no clear evidence to contradict the employee’s claim, employers are entitled to request recertification of the serious health condition every 30 days, which must be paid for by the employee.  However, the employer cannot ask for second or third opinions on recertification.

Another tool to combat FMLA fraud and misuse is a private investigator.  However, hiring a private investigator to surveil an employee should be considered as a last resort.  Another Court of Appeals decision held that it is not unlawful for an employer to hire an investigator to determine whether FMLA leave fraud or misuse has occurred.  In that case, the employee’s husband owned a lawnmower business.  When the employee was observed mowing lawns on an FMLA leave day, the employer terminated her.  The court found the termination was justified under the circumstances because the employer had an “honest suspicion” or “honest belief” the employee’s leave was fraudulent.

It is important for employers to understand they are not hostages to the FMLA.  When an employer suspects abuse, it has the right to ferret out the fraud as long as it operates within the parameters of the FMLA’s legal requirements.

Public Records Act Update: What Happens on a Personal Device (May) Stay on a Personal Device

Posted in Privacy, Public Sector

Breaking-News1.jpgThis blog post was authored by Heather Coffman

The California Court of Appeal recently issued a decision that may give some relief to public agencies responding to requests under the California Public Records Act (“PRA”).  The Court found that the PRA does not require public agencies to produce communications sent or received by public officials and employees on their exclusively private electronic devices using their private accounts.  (City of San Jose v. Superior Court (March 27, 2014) — Cal.Rptr.3d —-.)

In 2009, Ted Smith presented the City of San Jose with a PRA request for communications regarding a development project for the City.  Specifically, Smith sought voicemails, emails or texts sent or received on personal electronic devices used by the mayor, city council members and staff.  The City agreed to produce records stored on its servers and those transmitted to or from private devices using City accounts, but did not produce communications from the individuals’ personal electronic accounts that were stored solely on personal devices or servers.

Smith filed a successful action for declaratory relief in Superior Court which found that the City was required to produce the requested communications notwithstanding the fact that the communications were not directly accessible by the City having been sent from and received on private devices using private accounts.  The City appealed.

On appeal, the Court of Appeal addressed the issue whether private communications, which were not stored on City servers and not directly accessible by the City, are public records under the PRA (Government Code section 6250 et seq.).

The Court of Appeal held that the requested records were not public records, agreeing with the City and the League of Cities that the PRA’s reach is limited to records that are “prepared, owned, used, or retained” by the public agencies that are the subject of the Act.  While the Court acknowledged concerns voiced by Smith and the news media that City employees and officials could conduct business out of public review by using personal accounts and personal devices, the Court said that was a concern to be addressed by the Legislature.

How does this decision affect your agency? 

First, Smith may seek review of this decision by the state Supreme Court, so this may not be the last word on the matter.  If the Supreme Court were to overturn or amend this Court of Appeal’s decision, public agencies would be subject to that higher court’s ruling.

Second, the Court of Appeal reaffirmed that the PRA only applies to writings that are “prepared, owned, used, or retained by any state or local agency.”  The Court held that communications sent to/ received by public employees and officials on exclusively private devices using private accounts are not public records.  However, the public meeting requirements of the Brown Act can still apply and private records may still be discoverable in civil or criminal litigation or as the result of other court action.

Third, it cannot be overlooked that the City of San Jose did produce records sent from/ received on private devices that were stored on the City’s servers.  Thus, it remains possible that some seemingly “private” communications may still be subject to disclosure.  For instance, if a councilmember uses a personal laptop to log into a city network to send/receive emails, then a private email sent from the council member’s Gmail account and stored on city servers would potentially be subject to disclosure under the Act.

Finally, PRA requests continue to raise complicated legal questions regarding whether records are public records and/or exempt from disclosure.  A failure to timely comply with the PRA can result in an order to disclose records as well as an order to pay attorney’s fees.  We therefore recommend that agencies designate one or more individuals to receive in-depth training and to regularly respond to PRA requests to minimize the risks associated with non-compliance.

Hiring CalPERS Retirees—Changing Rules Are Like Watching a Game of Chess

Posted in Retirement

CapitolThis blog post was authored by Randy Parent

Employers who may seek to employ a CalPERS retiree to fill a particular need should keep an eye on the move-counter move strategy that is in play in Sacramento.  It appears that the legislature may have taken issue with the latest CalPERS Circular Letter providing guidance to employers in determining whether or not it is permissible to employ a retired annuitant under various circumstances.

As background, the Public Employees’ Retirement Law (the “PERL”) regulates post-retirement employment of CalPERS retired annuitants at Government Code section 21220, et seq.  Government Code 21220 prohibits public entities from employing CalPERS retirees unless a statutory exception applies.  (For exceptions, see Gov. Code, sections 21221(h), 21224, and 21229.)  

The Public Employees’ Pension Reform Act of 2013 (the “PEPRA”) took effect on January 1, 2013.  PEPRA added further restrictions on the post-retirement employment of CalPERS annuitants.  Where there is a conflict, provisions in the PEPRA prevail over the PERL.  However, it was unclear whether some provisions of the PERL were in conflict with the PEPRA and whether or not the provisions in the PERL continued to be valid.

CalPERS issued Circular Letter No. 200-002-14 on January 14, 2013, and we published our summary analysis of the Circular Letter on January 17, 2014.  We reported that it had been unclear if PEPRA and Government Code section 21221(h) were in conflict.  (Section 21221(h) permits a governing body to appoint a retiree to fill a vacant position on an interim basis during recruitment for a permanent appointment.)  However, CalPERS provided guidance in the Circular Letter indicating its interpretation that section 21221(h) remained valid after PEPRA.  Glad to have that clarified, but maybe not for long…

Just a month later on February 20, 2014, Senator Norma Torres, the Chair of the Senate Public Employment and Retirement Committee, introduced Senate Bill 1219.  SB 1219 is written to repeal Government Code sections 21220 et seq. and replace the section with new provisions that conform to the requirements of the PEPRA.  In particular, the new provisions omit the language in section 21221(h) that permits governing body appointment of retirees on an interim basis during recruitment for a permanent replacement.  Rather, the proposed new provisions would permit employment of a retiree during an emergency to prevent stoppage of public business or because the retired person has skills needed to perform work of limited duration.  This language mirrors the language in Government Code sections 21224 and 21229, which CalPERS has interpreted to prohibit hiring a retiree to fill any vacant position.  Rather, under CalPERS interpretation, this language has permitted employment of a retiree only to perform work in the nature of “extra help.”

We will keep a close watch on SB 1219 and any other legislation or further guidance from CalPERS that may impact the authority of employers to hire CalPERS retirees.  Stay tuned…

President Obama Plans Revisions To Federal Overtime Rules

Posted in Employment, FLSA, Wage and Hour

hourglass-small copy.jpgThis blog post was authored by Jeffrey C. Freedman and Brian P. Walter

Did you hear last week from the White House that the President plans to ask the U.S. Department of Labor to change the Fair Labor Standards Act regulations on overtime? Unless you were out of the country or asleep, it was hard to avoid hearing about this as well as the predictable comments from the various sides of the political spectrum.

What is this all about? When the FLSA was enacted in 1938 it exempted from the overtime requirement “any employee employed in a bona fide executive, administrative or professional capacity” but left the authority to define these terms to the Department of Labor (“DOL”.) As a result, a thick volume of regulations was adopted in which these exemptions were fleshed out, and a body of case law developed by the courts to interpret the exemptions further.  The exemption regulations have not been  revised for ten years.

Adoption and amendment of federal regulations does not require congressional action as do statutes. Rather, regulations can be adopted or amended by a federal agency after a publication and hearing process described in the U.S. Administrative Procedures Act. Once actual draft regulatory amendments are proposed, the public is invited to comment on the regulations, the DOL must consider the comments and hold hearings, and the procedure could take months or even years before any new provisions are adopted and take effect. 

The press releases of President Obama and DOL Secretary Thomas Perez stated that the updates to the regulations are primarily intended to increase the salary levels required for employees to be classified as overtime exempt.  Currently an employee must earn a salary of at least $455 per week, and also perform executive, administrative or professional duties, in order to be legitimately classified as overtime exempt under the FLSA.  President Obama and Secretary Perez cited gas station managers, and retail, fast food and janitorial workers as examples of employees who might currently be classified as overtime exempt but who do not actually earn wages above the poverty line for a family of four.  Both press releases noted that the salary basis requirement has not kept pace with inflation.

The press releases also expressed a desire to simplify the overtime regulations to make them easier for both employees and employers to understand and implement.  The press releases did not offer any specific details on the anticipated content of the proposed regulations.  Rather, President Obama simply instructed the DOL to create proposed regulations in accordance with the general guidelines laid out in his press release.

The impact of the proposed changes to the DOL regulations on public agencies is unclear at this time.  Most public sector employees who are classified as exempt from overtime earn far above the $455 weekly salary requirement in the current regulations.  Current California overtime law – which does not apply to public agencies – contains a weekly salary requirement of double minimum wage, or $640 per week, which will increase to $720 per week on July 1 and to $800 per week in 2016.  Various news reports suggested that the DOL may seek an overtime exemption salary requirement that is similar to California law or even as high as $1,000 per week.

Another change that the DOL is purportedly considering is to the definition of an employee’s primary duty for exemption purposes.  Under current rules, an employee can be an exempt executive if supervision is the employee’s “primary” job duty regardless of whether performing that duty consumes a majority of the employee’s work time. Thus, a municipal golf course superintendent could be exempt as an executive if he was the only manager on duty and had the authority to hire, fire and discipline. This employee could potentially be exempt under the current regulations and case law even if he spent 90% of his time performing non-management work. The proposed DOL regulations will purportedly seek to apply a quantitative standard similar to current California law, which would require employees to spend at least 51% of their time performing exempt duties.

As noted, the procedure for adopting changes in federal regulations can be lengthy.  This round of regulations is likely to take many months and to be met with vigorous opposition from employers.  The public must be invited to comment on the proposed regulations and the DOL must consider the comments and may revise the regulations based upon the public comments.

The last round of revisions to the overtime regulations, in August 2004, took nearly 18 months to complete and included substantial revisions to the draft regulations that were initially proposed in March 2003. Those regulations were supposed to simplify and substantially overhaul the overtime exemption regulations, but after extensive public comment the DOL significantly revised and “watered down” its proposed changes.  Now, once again, the DOL is being instructed by the President to simplify the overtime regulations.  LCW submitted comments to the DOL on behalf of public employer organizations in 2003 and will again submit comments on behalf of public employers once the proposed regulations are issued.

If you know your history, you will remember that FLSA was adopted nine years into the Great Depression and one of the reason for its enactment was to encourage employers to hire more people by making overtime expensive by requiring time and one half for hours worked in excess of 40 in a week. The goal was to reduce unemployment. Unemployment is high again but whether the changes proposed by the President lead to more hiring remain to be seen.

U.S. Supreme Court Will Review Whether Employee Time Spent Going Through Security Checks Is Compensable

Posted in FLSA, Wage and Hour

Security-Check.jpgThis blog post has by James E. Oldendorph Jr.

On March 3, 2014, the U.S. Supreme Court agreed to hear a case which questions whether employees of companies such as Amazon.com, and companies that provide staffing services to Amazon.com, must be paid for time spent going through security screenings similar to those found in airports, sporting venues, courthouses and correctional facilities prior to or at the end of their shifts.

Jesse Busk and Laurie Castro were employees of Integrity Staffing Solutions, Inc., a company which provides warehouse space and staffing to clients such as Amazon.com.  Busk and Castro worked at Nevada warehouses filling orders placed by Amazon customers.  In 2010, Busk and Castro sued Integrity seeking back pay, overtime, and double damages under the Fair Labor Standards Act for time spent in security screenings after the end of their work shifts.  Busk and Castro alleged that they waited up to 25 minutes to be searched, remove their wallets, keys, and belts; and pass through metal detectors prior to leaving work.  The clearances were required to minimize employee theft. 

The United States District Court in Nevada dismissed the claims, finding that security screenings are “preliminary” or “postliminary” activities that are not compensable under the FLSA pursuant to the Portal-to-Portal Act of 1947.  Busk and Castro appealed the dismissals to the U.S. Ninth Circuit Court of Appeals which reversed the District Court’s decision, holding that time spent in security screenings is compensable under the FLSA because it is “necessary to [the employees’] primary work as warehouse employees.” The Ninth Circuit’s holding conflicted with decisions from two other federal appeals courts which held that time spent in security screenings is not subject to the FLSA because it is not “integral and indispensable” to employees’ principal job duties.  Integrity filed a petition for review by the U.S. Supreme Court which has now agreed to hear the case.  The question for the Supreme Court is whether time spent in security screenings is compensable under the FLSA.

While this case deals with a private sector employment situation, the Supreme Court’s eventual ruling may also have a far-reaching impact on public agencies which require employees, in this post-9/11 era, to go through security screenings and/or metal detectors while arriving at work and/or while leaving work.  Security screenings regularly take place at courthouses and other government buildings.  Perhaps the facilities likely to be the most affected by the Supreme Court’s ultimate ruling will be correctional facilities where employees might have to go through extensive security checks to get to or leave their assigned worksites.  For example, county jail facilities require deputies to go through a series of security gates in order to exit the facility depending on the location of their worksite.  Persons employed at correctional facilities may argue that they must be compensated for time spent going through the process in which they enter or exit the facility.  The question is whether this security screening is “integral and indispensable” to the employees’ principal job duties.  Can a security screening be considered “work” under the FLSA which requires compensation?  The Supreme Court will have to make these determinations. 

If the Court agrees with the Ninth Circuit’s interpretation of the FLSA, liability may be created for employers who require their employees to pass through various types of security screenings at the workplace. We will monitor this case and update you as it proceeds.