California Public Agency Labor & Employment Blog

California Public Agency Labor & Employment Blog

Useful information for navigating legal challenges

The U.S. Supreme Court Lets Stand an Important FLSA Case on Cash Paid in Lieu of Health Benefits and Overtime Rates

Posted in Wage and Hour

Courthouse 7On Monday, May 15, 2017, the U.S. Supreme Court denied the City of San Gabriel’s petition for review of Flores v. City of San Gabriel, a 2016 decision by the U.S. Court of Appeals for the Ninth Circuit that offered new interpretations of the Fair Labor Standards Act (FLSA). Therefore, Flores remains the governing law in the eight states within the Ninth Circuit Court of Appeals, including California.  The primary holding of Flores is that amounts paid to employees in lieu of health benefits must be included in employees’ regular rate for purposes of calculating FLSA overtime. The holdings of the case will remain the law of this Circuit unless and until (1) Congress acts to amend the FLSA to provide relief to employers, or (2) another Circuit Court rules differently than the Ninth Circuit on the same issue or issues and the Supreme Court grants review of that case and rejects Flores.

How Did We Get Here?

In 2012, Danny Flores and other police officers working for the City of San Gabriel filed a lawsuit seeking to recover back overtime pay under the FLSA. After a decision by the trial court, both parties appealed the decision to the U.S. Court of Appeals for the Ninth Circuit. The Ninth Circuit issued its decision on June 2, 2016. The holdings of the decision are discussed below. On June 16, 2016, the City sought a rehearing by the Ninth Circuit (“en banc review”). The request was denied by the Ninth Circuit on August 23, 2016. In January 2017, the City filed a petition for writ of certiorari with the U.S. Supreme Court, asking the Supreme Court to review and overturn the Flores case. Two amicus curiae briefs were filed in support of the City’s petition, including a brief from seven different public sector organizations that demonstrated the wide impact of the Ninth Circuit’s decision. On May 15, 2017, the Supreme Court denied the City’s petition, thus terminating the possibility of further judicial review of the Flores decision. The Flores decision remains the law of the Ninth Circuit and is binding upon California employers.

A Review of the Three Main Holdings of the Flores Case

Cash in Lieu

The clearest mandate arising from the Flores case is that cash payments to employees for waiving health insurance or not using their entire health allowance (“cash-in-lieu”) must be included in the employees’ FLSA “regular rate of pay,” which is the hourly rate used to compensate non-exempt employees for FLSA overtime hours. The FLSA regular rate requirements apply to FLSA overtime hours, but not other types of contractual overtime. Many labor agreements provide overtime more generously than required by the FLSA – such as treating paid leave time as hours worked, or paying overtime for working on holidays. The FLSA regular rate requirements do not apply to those “non-FLSA” contractual overtime hours.

For employers who pay employees significantly in excess of minimum FLSA overtime requirements, an inclusion of cash-in-lieu in the FLSA regular rate of pay may not result in additional FLSA overtime liability because of the various offsets against FLSA overtime liability that are available to those employers. This is particularly true for public safety employees for whom the employer has adopted a section 207(k) work period. For employers with high cash-in-lieu amounts or contractual overtime practices that more strictly follow the FLSA, implementing this aspect of the decision will likely result in higher overtime costs. Before making changes to a regular rate calculation because of Flores or other similar issues, employers should carefully evaluate whether inclusion of cash-in-lieu in the FLSA regular rate of pay will require them to pay more than their current contractual overtime obligations.

Bona Fide Plans

Per Flores, if the aggregated amount of cash-in-lieu an agency pays to employees is more than 40% of total plan payments (total plan payments means cash-in-lieu and other plan contributions), the employer’s plan is not bona fide under the FLSA. This means the value of all plan payments must be included in the FLSA regular rate of pay. There is no bright line rule as to a percentage that will ensure an employer’s plan is bona fide. Indeed, the Ninth Circuit in Flores threw out the formerly-applicable 20% test but offered no guidance as to what the test should be. Accordingly, employers that offer cash-in-lieu should work with legal counsel to evaluate whether their plans are bona fide under the Ninth Circuit standard. If an employer’s benefits plan is not bona fide, overtime costs will undoubtedly rise since the FLSA regular rate for non-exempt employees will increase.

Willfulness

Now that Flores is final, the current Ninth Circuit standard on willfulness is the following: in the words of the Court, an employer’s violation of the FLSA is willful when the employer is “on notice of its FLSA requirements, yet [takes] no affirmative action to assure compliance with them.”  A willful violation subjects an employer to liability for three years of back pay (instead of two). This “willfulness” standard places a burden on employers who have any awareness of their FLSA obligations to be proactive in their FLSA compliance efforts. We recommend employers work with legal counsel to ensure sufficient active steps to achieve FLSA compliance are taken and – importantly – documented on a regular basis.

Final Thoughts

The Flores decision illustrates the challenge of FLSA compliance for employers. The FLSA was enacted 79 years ago and the statute and the Department of Labor regulations and interpretations have not kept pace with the realities of the twenty-first-century workplace, such as payments to employees for opting out of health insurance. This is especially true in the public sector, where employers have a myriad of different types of employees and pay requirements. In light of those challenges, the decision reiterates the importance of conducting and documenting a careful review of FLSA overtime payment practices, to not only ensure compliance, but also to prevent a willful violation and be able to prove a good faith defense.


LCW-WebinarLCW Webinar: The Flores Decision is Here to Stay – What Do California Public Employers Need to Know?

Join us for a webinar, as our wage and hour experts will discuss the significance of this decision and the way it will impact California’s public employers.

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Tips from the Table: Negotiations: The Timing and Order of Settlements

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 Collective Bargaining 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.

It’s (Almost) Summertime, but the Livin’ is not Always Easy for Employers

Posted in Employment

SummerMany kids and adults alike look forward to summer all year. Summer means longer days, more ice cream, and no school. However, summer can also mean challenges for employers. Though the issues discussed below can come up any time of year, employers often find that they crop up more frequently during the summer months. The tips below will help employers get ahead of potential problems, and make summer feel like a day at the beach.

  1. Dress Codes

As the weather gets warmer, employees may be tempted to wear clothing and shoes that are not appropriate for the workplace. Therefore, now is the time to review and update your agency’s dress code or create a written policy governing employee dress if one is not already in place.

California law allows for employers to establish reasonable dress and grooming standards based on legitimate business concerns, which can include workplace safety and professionalism generally. It follows that employers should tailor dress codes to employee job requirements. For instance, more restrictive policies may be appropriate for employees who have contact with the public than for employees who are always behind the scenes.

Additionally, employers should be prepared to make reasonable accommodations as necessary, unless doing so would create an undue hardship for the agency. For instance, though an agency’s dress code may prohibit employees from wearing hats, it may be a reasonable accommodation of an employee’s religious practice to allow, for example, a Sikh man to wear a turban or a Muslim man to wear a skullcap. Similarly, sneakers and athletic shoes might be prohibited under a dress code, but an employee with a foot condition might be allowed to wear them as a reasonable accommodation.

As with all policies, it is critical that dress codes be applied equally to all employees. Treating employees differently with respect to the administration of this type of policy can open the agency up to claims of harassment, discrimination, or retaliation.

  1. Interns

Many high school and college students on summer break are looking for work experience, including experience through unpaid internships. Employers may view internships as a win-win – the student gains work experience at no cost to the employer.

However, the fact that a position is designated as an “internship” is not sufficient to establish that it is properly an unpaid position. Agencies should take great care to ensure that a court would not consider their “interns” to be employees who are entitled to wages and overtime under the Fair Labor Standards Act (“FLSA”).

The Department of Labor has created a list of six factors that are critical to determining whether a person is appropriately labeled an “intern.” Though this list is not legally definitive, nearly all courts examining this issue look at these factors to some degree. The factors are:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Given the fact-specific analysis that is required, agencies wishing to utilize unpaid interns should work with counsel to ensure that they are complying with all applicable wage and hour requirements.

  1. Vacation Requests

Many employers experience a significant uptick in employee vacation requests during the summer months. To avoid a last-minute rush of requests, supervisors should take time now to review the agency’s vacation or paid time off policy with their subordinates. Supervisors should be sure to specify to whom employees should direct their vacation requests and how far in advance requests should be made.

In addition, this is another area where a uniform application of the agency’s policy is critical. It is not uncommon for multiple employees to request to take vacation during the same time period, which may not be possible from an operational standpoint. Strict adherence to the agency’s policy regarding vacation requests will help avoid the perception of preferential treatment.


Man-in-front-of-computerIs it Time to Update Your Personnel Policies? 

California’s labor and employment laws are changing every year. It is essential for public agencies to continuously review and update their personnel handbooks to make sure that they are legally compliant. This is why we launched the Liebert Model Personnel Policy Portal (LMP3) – an online one-stop shop for all personnel policy needs.  Its mission is to serve as a reliable resource throughout the personnel rules audit process. LMP3 offers online access to mandatory and essential model personnel policies, as well as important commentary and legal references that explain and provide context behind the policies. Subscribers will also receive updated policies that reflect recent changes in the law. Explore all of the benefits >

Retirement for Disability – Latest Developments in CalPERS’ Requirements

Posted in Retirement

Breaking-News1.jpgRetirement for disability can already be a cumbersome and confusing process. The California Public Employees’ Retirement System’s (CalPERS) new and additional mandates – as set forth in its March 30, 2017 Circular Letter – raises the ante. The Letter informs all contracting public agencies of the following six requirements pertaining to the disability retirement of local safety members:

  1. Submission of a disability retirement application;
  2. An eligibility determination when a member is facing pending discipline or was terminated for cause;
  3. Information that must be included in a resolution or certification of delegate in support of an application for disability retirement;
  4. Determination of when a disability is “extended and uncertain” in duration;
  5. Requirement of competent medical evidence of continuous disability;
  6. Medical qualifications for disability retirement; and
  7. Disability re-evaluation procedures for members under the minimum age for service retirement.

While local agencies are likely familiar with some of the requirements described in the Letter, we highlight here those stated requirements that are likely new or little known, to local agencies.

CalPERS recently announced that it will be conducting an audit into the industrial disability retirement (IDR) process for 60 contracting agencies. It is our understanding that the scope of the audit will include requesting medical records to assess the validity of IDR claims and seek disclosure of safety officer personnel records to ensure legal compliance. In addition, CalPERS indicates it will audit to see whether members granted IDR who are younger than 50 are being re-evaluated to determine if the member is still eligible for IDR.

Duty to Provide Relevant Personnel and Medical Records

According to CalPERS “[a]n employer must forward all relevant personnel documents and medical records to CalPERS and obtain CalPERS’ determination that the member is eligible to apply for disability retirement before an employer starts the process of a disability determination for any of the following circumstances:

  • Disciplinary process underway prior to the member’s separation from employment.
  • The member was terminated for cause.
  • The member resigned in lieu of termination.
  • The member signed an agreement to waive his or her reinstatement right as part of a legal settlement (i.e., Employment Reinstatement Waiver).
  • The member has been convicted of or is being investigated for a work-related felony.

CalPERS relies on Government Code sections 20128, 20221 and 20223 for the proposition that CalPERS may require a member (and its employer) to provide information it deems necessary to determine entitlement to benefits and information affecting his or her status as a member.

Evidence of Continuous Disability

A qualifying disability must be permanent or “extended and uncertain.” CalPERS indicates that extended and uncertain means the disability will last at least twelve consecutive months from the date of the application for a disability retirement.  In the past, CalPERS used an unofficial six-month measurement.

CalPERS will require medical records of the member’s physical or mental incapacity to perform the duties of their position from one year before their last day of physical work to the present in order to establish a continuous disability.  There must be medical evidence from the last day of physical work to the present, with no gaps in the medical treatment of more than six months.

Confirmation of a Permanent and Stationary Date for Industrial Disability Retirement

In cases of an industrial disability retirement preceded by a workers’ compensation claim wherein there is a dispute concerning the date on which the member became permanent and stationary, the employer or member must now make a “Petition for Finding of Fact” before the Workers’ Compensation Appeals Board (WCAB) in which the WCAB must certify the date on which the member’s condition became permanent and stationary.  This date then becomes the effective date of the member’s retirement.

The problem will inevitably arise, however, that members who otherwise qualify for an industrial disability retirement may be denied an IDR if the member has not been found permanent and stationary by the qualified or agreed-upon medical examiner.  In some cases, a member’s workers compensation case may go on for years.  This means employers may find themselves providing advanced disability pension payments for much greater periods of time.

Duty to Re-Evaluate Disability Retirees

The Circular Letter also requires that a contracting agency conducts regular re-evaluations of determinations for disability retirees who are under voluntary service retirement age. The purpose “is to verify whether the recipient remains physically or mentally disabled from the position which they disability retired for the condition(s) that they were approved for.” CalPERS recommends gathering the following information:

  • Is the retiree currently employed?
    • What type of work is he/she doing? Is he/she working within his/her work restrictions?
    • Obtain a duty statement and physical requirements of the job for comparison.
    • When an independent medical examination is deemed necessary, submit these documents for the examiner’s review.
  • Is the retiree currently being treated for his/her disability?
    • If so, obtain a list of his/her treating physician(s) and contact information, and request his/her medical records since retirement.
  • If the retiree is not currently being treated or the medical records received from the treating physician do not substantiate a continuous disability, the member should be evaluated by an Independent Medical Examiner.
  • If indicated, consider surveillance.

To support requiring re-evaluation, CalPERS relies on Government Code section 21192, which gives authority to the employer from whose employment a person was retired to require any recipient of a disability retirement allowance under the minimum age for voluntary retirement for service applicable to members of his or her class to undergo a medical examination.

How This Affects Your Agency

A. Disclosure of Peace Officer Personnel Records

CalPERS has and will continue to demand the disclosure of peace officer personnel records to determine a member’s eligibility for disability retirement in the event the officer was terminated or discipline is pending. But Penal Code section 832.7 establishes that peace officer personnel records (or information obtained therefrom) are confidential and may not be disclosed in any criminal or civil proceeding without the peace officers written consent or a Pitchess motion: the discovery procedure required to access peace officer personnel records. (See People v. Superior Court (Johnson) (2015) 61 Cal.4th 696 [California Supreme Court held that even prosecutors must comply with the Pitchess procedures if they seek information from confidential peace officer personnel records]). Thus, there is a potential conflict between CalPERS’ right to these records under the Government Code and the prescribed discovery procedures required under Pitchess.

Agencies should avoid unilaterally disclosing peace officer records without first notifying the officer concerning the request and obtaining his or her consent/waiver in writing. If the officer decides not to provide consent to disclosure, the agency should consult with legal counsel.

B. Disclosure of Medical Records

Confidentiality of Medical Information Act

Under California’s Confidentiality of Medical Information Act (CMIA), an employer is generally prohibited from using, disclosing, or knowingly permitting its employees or agents to use or disclose medical information pertaining to an employee unless the employer first obtains written authorization from the employee. There are several important exceptions to the requirement for written authorization. For example, medical information may be used in a lawsuit, arbitration, grievance, or other claim or challenge to which the employer and employee are parties and in which the employee has placed in issue his or her medical history, mental or physical condition, or treatment. In addition, medical information may be used exclusively for purposes of administering and maintaining employee benefit plans, including healthcare plans and plans providing short-term and long-term disability income, and workers’ compensation. Accordingly, when an employee applies for disability retirement and CalPERS is administering disability benefits for the employee, an authorization may not be required under the CMIA. Nonetheless, agencies should obtain consent with a written waiver and authorization for release of the medical records.

Health Insurance Portability and Accountability Act (HIPAA)

HIPAA’s privacy rule applies to covered entities: health plans, health care clearinghouses or health care providers conducting certain health care transactions electronically. Also affected by HIPAA are hybrid entities whose business activities include both covered and non-covered functions and health plan sponsors.

CalPERS maintains that member consent and a HIPAA release are not required because it is not a covered agency. However, agencies should be careful not to unilaterally disclose medical records to CalPERS without first notifying the employee and obtaining written consent.

C. Duty to Re-Evaluate Retirees

CalPERS will require all contracting agencies to periodically re-evaluate retirees under the voluntary service retirement age of 50 years old. CalPERS justifies this new requirement based on the combination of Government Code sections 21192 and 20221. Section 21192 gives authority to the board or governing body of the employer from whose employment a person was retired to require any recipient of a disability retirement allowance under the minimum age for voluntary retirement for service applicable to members of his or her class to undergo a medical examination. Section 20221 provides that each employer must provide CalPERS with any information concerning any member that CalPERS requires in the administration of the System.

If an agency chooses not to re-evaluate, CalPERS has other recourse available: it can re-evaluate a retiree on its own under Government Code sections 20128 and 20223.

Although CalPERS asks agencies to re-evaluate disability retirees, neither CalPERS nor the Government Code requires the employer to hire back the retiree if he/she is found to no longer qualify for a disability retirement.

The issues presented here are not exhaustive so please consult with legal counsel as to the appropriate response to CalPERS’ circular letter and any pending or future related audit.

Application of the U.S. Civil Rights Act to Sexual Orientation Discrimination

Posted in Discrimination

Gavel-and-Books.JPGTitle VII of the U.S. Civil Rights Act of 1964 (hereafter “Title VII”) has long prohibited discrimination on the basis of sex in the terms, conditions or privileges of employment. One question of ongoing statutory interpretation has not been definitively answered: what constitutes “sex” for the purposes of employment discrimination? Are the terms “sex” and “gender” interchangeable under the law? And does the prohibition of discrimination on the basis of sex extend to a prohibition of discrimination on the basis of sexual orientation?

In 1989, the U.S. Supreme Court, in Price Waterhouse v. Hopkins, determined that Title VII’s prohibition of discrimination on the basis of sex extended to discrimination on the basis of sex-stereotyping; i.e. a person’s perceived failure to comply with socially constructed gender norms.  But, the Court has not to date proclaimed that the prohibition of discrimination on the basis of sex stereotyping prohibits sexual orientation discrimination. Neither has Congress amended Title VII to explicitly include “sexual orientation” as a protected classification. (“Sexual orientation” discrimination is expressly prohibited by California’s Fair Employment and Housing Act (“FEHA”)).

Absent a position by the Supreme Court, the Equal Employment Opportunity Commission (“EEOC”), the federal agency that administers Title VII, issued a bulletin in 2015 proclaiming that the agency interprets and enforces Title VII’s prohibition of sex discrimination as “forbidding any employment discrimination based on gender identity or sexual orientation,” regardless of any contrary state or local law.  Also in 2015, the EEOC issued an administrative decision that “sexual orientation” discrimination is discrimination based on sex and therefore violates Title VII.  In Baldwin v. Dep’t of Transportation, the EEOC explained:

Discrimination on the basis of sexual orientation is premised on sex-based preferences, assumptions, expectations, stereotypes, or norms. “Sexual orientation” as a concept cannot be defined or understood without reference to sex. A man is referred to as “gay” if he is physically and/or emotionally attracted to other men. A woman is referred to as “lesbian” if she is physically and/or emotionally attracted to other women. Someone is referred to as “heterosexual” or “straight” if he or she is physically and/or emotionally attracted to someone of the opposite-sex. [citations omitted.] It follows, then, that sexual orientation is inseparable from and inescapably linked to sex and, therefore, that allegations of sexual orientation discrimination involve sex-based considerations.

The EEOC then concluded, “[s]exual orientation discrimination is sex discrimination because it necessarily entails treating an employee less favorably because of the employee’s sex.”

On April 4, 2017, the U.S. Court of Appeals for the Seventh Circuit (headquartered in Chicago) became the first federal appeals court to agree with the EEOC that Title VII’s prohibition against sex discrimination includes discrimination on the basis of sexual orientation as a “form of” sex discrimination.  In Hively v. Ivy Tech Community College of Indiana, the Court explained that “all gay, lesbian and bisexual persons fail to comply with the sine qua non of [i.e. inseparable from] gender stereotypes – that all men should form intimate relationships only with women, and all women should form intimate relationships only with men.”  In this decision, the Court endeavored to clean up an outstanding contradiction that resulted from the Supreme Court’s 2015 decision in Obergefell v. Hodges where the Court determined that the due process and equal protection clauses of the U.S Constitution protect the right of same-sex couples to marry.  Obergefell, in conjunction with prior federal appeals court decisions that refused to recognize sexual orientation discrimination as sex discrimination under Title VII, created a “paradoxical legal landscape in which a person can be married on Saturday and then fired on Monday for just that act.”  Looking to the Supreme Court’s decision, the Seventh Circuit issued its ruling in consideration of “what the correct rule of law is now.”  It concluded, there is no line between a gender nonconformity claim and a claim based on sexual orientation:

Any discomfort, disapproval, or job decision based on the fact that the complainant—woman or man—dresses differently, speaks differently, or dates or marries a same-sex partner, is a reaction purely and simply based on sex. That means that it falls within Title VII’s prohibition against sex discrimination, if it affects employment in one of the specified ways…The logic of the Supreme Court’s decisions, as well as the common-sense reality that it is actually impossible to discriminate on the basis of sexual orientation without discriminating on the basis of sex, persuade us that the time has come to overrule our previous cases that have endeavored to find and observe that line.

As noted, California’s FEHA explicitly prohibits discrimination on the basis of sexual orientation (as well as gender identity and gender expression).  However, the Ninth Circuit Court of Appeals (covering California) has not explicitly applied Title VII to sexual orientation discrimination. Indeed, its rulings on this issue leave open an opportunity for further exposition.

For example, in Schwenk v. Hartford the Ninth Circuit in 2000 relied on Title VII cases to conclude that violence against a transsexual person was violence because of gender under the Gender Motivated Violence Act.  The Court proclaimed that the term “sex,” as used in Title VII, means both “sex” (then described as the biological difference between men and women) and “gender” (described as an individual’s sexual identity, or socially constructed characteristics.)  Therefore, the Court concluded, discrimination based on sex included discrimination based on socially constructed gender characteristics.

Without precluding the possibility that Title VII could apply to sexual orientation discrimination, the Ninth Circuit in 2002 held that an employee’s sexual orientation was “irrelevant for purposes of Title VII.”  In Rene v. MGM Grand Hotel, Inc., the Court explained that Title VII “neither provide[d for] nor preclude[d] a cause of action for sexual harassment.” The Court determined that the fact that an alleged harasser was, or may have been, motivated by hostility based on sexual orientation was similarly irrelevant to a sexual harassment claim.  The Court explained that it is enough to assert a cause of action under Title VII based on allegations that the harasser engaged in “severe or pervasive unwelcome physical conduct of a sexual nature.”  Whether that conduct was “because of” the victim’s sexual orientation, a personal vendetta, misguided humor, or boredom, was beside the point.

Later, in 2011, the Northern District Court for California (the federal trial court headquartered in San Francisco) re-asserted that neither Title VII nor any other federal law protects against discrimination on the basis of sexual orientation. Accordingly, it dismissed a plaintiff’s “failure-to-promote claim” based on alleged sexual orientation discrimination. See Johnson v. Eckstrom. More recently, in 2015 the Central District Court for California (headquartered in Los Angeles) rejected the Northern District ruling and concluded that claims of sexual orientation discrimination are gender stereotype or sex discrimination claims covered by Title VII (and Title IX, which applies specifically to federally supported education). See Videckis v. Pepperdine University.  Also, see Nichols v. Azteca Rest. Enters., Inc., a 2001 decision of the Ninth Circuit holding that discrimination against either a man or a woman on the basis of gender stereotypes is prohibited.  Like the recent Seventh Circuit decision, the California Central District in its 2015 decision in Videckis v. Pepperdine University concluded that sexual orientation discrimination is not a category distinct from sex or gender discrimination. Rather, it held, “claims of sexual orientation discrimination are gender stereotype or sex discrimination claims.”

Based on the Ninth Circuit’s varying application and interpretation of Title VII’s application to sexual orientation discrimination, the split reasoning regarding its application by the lower District Courts, and based on the Seventh Circuit’s more complete exposition of sexual orientation discrimination as a form of gender discrimination, this issue is likely ripe for the Ninth Circuit’s review.  Indeed, given the split among U.S. Courts of Appeal, the issue may well be ripe for Supreme Court consideration.

New Regulations Give Applicants and Employees with Criminal History a Fresh Start; Employers Should Take a Fresh Look at their Decision-Making Practices

Posted in Employment

InterviewCalifornia’s Department of Fair Employment and Housing (“DFEH”) revised an existing regulation and adopted a new regulation regarding employers’ use of employees’ and applicants’ criminal history in employment decisions, effective July 1, 2017.

Restrictions that are specific to the use of criminal records were moved from California Code of Regulations, Title 2, Section 11017 to the new regulation, Section 11017.1.  Importantly, these regulations do not override state or federal laws or regulations prohibiting persons with certain convictions from holding particular jobs, or requiring a particular criminal background screening process for them, such as peace officers, individuals employed at health facilities where they will have regular access to patients and/or controlled substances, and employees supervising children.

First, the regulation prohibits employers from seeking or requesting the following information when making employment decisions such as hiring, promotion, training, discipline, layoff and termination, regardless of whether there is an adverse impact on a protected class:

  • Arrests or detention that did not result in a conviction.
  • Referral to or participation in a pretrial to post-trial diversion program.
  • Convictions for which the record has been judicially ordered sealed, expunged, or statutorily eradicated. (Note: This prohibition was identical in the old regulation; however the new regulation eliminates a previous prohibition on considering misdemeanor convictions for which probation has been successfully completed or otherwise discharged.)
  • Any arrest, detention, processing, diversion, supervision, adjudication, or court disposition that occurred while a person was subject to the process and jurisdiction of juvenile court law. This adds a prohibition on considering unsealed juvenile records that was not contained in the old regulation.
  • Any non-felony conviction for marijuana possession that is two or more years old.

Further, employers who consider convictions can be found to have discriminated against employees or job applicants where a use of that information has an adverse impact based on a protected classification.  The new regulation, Section 11071.1 specifies that it is the applicant or employee’s burden to prove an adverse impact; however, it also provides that state- or national-level statistics showing substantial disparities in the conviction records of one or more categories enumerated in the FEHA are “presumptively sufficient to establish an adverse impact.” In its Final Statement of Reasons for the new regulation, the DFEH specifically cited such statistics published by the EEOC, the California Attorney General’s Criminal Justice Statistics Center, and its OpenJustice initiative. The employer may rebut this presumption by making a showing that there is “a reason to expect a markedly different result after accounting for any particularized circumstances such as the geographic area encompassed by the applicant or employee pool, the particular types of convictions being considered, or the particular job at issue.”

If an employee or applicant establishes an adverse impact, the employer can avoid liability by demonstrating that using the conviction information was job-related and consistent with business necessity.  The regulation states, “in order to establish job-relatedness and business necessity, any employer must demonstrate that the policy or practice is appropriately tailored,” and requires that the employer consider at least the following three mandatory factors: the nature and gravity of the offense or conduct; the time that has passed since the offense or conduct and/or completion of the sentence; and the nature of the job sought.

In order to demonstrate that a policy or practice of considering conviction history is appropriately tailored, and therefore job-related and consistent with business necessity, the employer must either:

  • Demonstrate that any “bright line” consideration of conviction information can properly distinguish between applicants and employees that do and do not pose an unacceptable level of risk and that the convictions considered have a direct and specific negative bearing on the persons’ ability to perform the duties or responsibilities necessarily related to the employment position. DFEH will presume that any “bright-line” rule that relies upon convictions that are more than seven years old is not job-related and consistent with business necessity.  An employer may rebut this presumption with evidence.

or,

  • Demonstrate that it conducts individualized assessments of the circumstances and qualifications of applicants or employees excluded by the conviction screen. This individualized assessment must include notice to the employee or applicant that they have been screened out because of a criminal conviction discovered through research, and give them a reasonable opportunity to demonstrate that the exclusion should not be applied due to their particular circumstances.  The employer must then consider that information, and determine whether the policy as applied to the individual employee or applicant is job-related and consistent with business necessity.

Finally, even if an employer demonstrates that its policy or practice of considering conviction history is job-related and consistent with business necessity, it may still be liable if an employee or applicant can demonstrate that there is a less discriminatory policy or practice that serves the  employer’s goals as effectively as the challenged policy or practice, such as a more narrowly tailored list of convictions or another form of inquiry that evaluates job qualification or risk as accurately without significantly increasing the cost or burden on the employer.

If your agency, special district, or school considers criminal background information in employment decisions, you should review your practices prior to July 1, 2017, to ensure compliance with the new regulations, and contact employment counsel if you have any questions or concerns.

Apples and Oranges: Daily Meal Expenses Properly Excluded from the Regular Rate

Posted in Wage and Hour


ManThis post was authored by Juliana Kresse

Many agencies provide their employees with per diem stipends while the employee is traveling for work.  Is your agency including this amount when calculating the regular rate of pay for overtime under the FLSA?  In Sharp v. CGG Land, Inc. (10th Cir. 2016) 840 F.3d 1211, the Tenth Circuit confirmed that agencies may properly exclude per diem stipends from the regular rate calculation.

Background

In the Tenth Circuit case, the employer, CGG Land Inc. (“CGG”), provided seismic mapping services in remote areas around the United States.  To provide these services, CGG required its employees to travel to and stay at, or near, a job site for four to eight weeks.  While traveling, CGG employees often worked more than 40-hour weeks and CGG calculated their overtime based on the regular rate of pay.  CGG provided its employees, who traveled for work, with a $35 per day stipend for meals.  CGG did not include this stipend when calculating the employee’s regular rate of pay.

A group of CGG employees filed a collective action, alleging that CGG had violated the FLSA by underpaying their overtime hours because it had improperly excluded the daily meal expense from the regular rate.

Court’s Analysis

In analyzing the employees’ claim, the Court looked first at the language of the FLSA and the applicable regulations to see how the regular rate is defined.  The Court affirmed that the regular rate is all remuneration paid to, or on behalf of, an employee, subject to eight exceptions.  One of those exceptions is travel expenses, which the regulations define as “living expenses” incurred while the employee is “traveling over the road for his employer’s business.”  In other words, travel expenses do not have to be calculated into the regular rate.

The employees argued that the meal stipend did not fall under the travel expenses exception because (1) meals are not a living expense; (2) once at the job site the employee is no longer “traveling over the road”; and (3) the per diem stipend is a “scheme” to pay an artificially low hourly rate to keep overtime pay low.

Meals are a living expense.  The Court disagreed with the employees and found that meals and the cost of food while traveling for work are a “living expense.”  The Court relied primarily on U.S. Department of Labor opinion letters that had already analyzed this issue and determined that eating a meal away from home is an additional expense incurred by the employee for the employer’s benefit.

While at a job site, employees are traveling.  The Court also declined to adopt the employees’ hyper-literal interpretation of the term “traveling over the road” in the regulations.  The employees essentially argued the plain language of the regulations only excluded travel expenses incurred while in transit, and that once they reached a job site, they were no longer “traveling,” and any per diem stipends paid while they were at the job site should be included in the regular rate.  The Court held that “traveling” included more than just time spent in transit from one job site to another, but more broadly includes time away from home.

Per Diem Stipends are not a Scheme.  Lastly, the Court held that CGG’s meal stipends were not a scheme to underpay workers by setting an artificially low hourly wage.  This holding was based, one, on the fact that the employees had agreed that the stipends were a reasonable amount that approximated their meal expenses and, two, on the fact that the stipends were not tied to amount of hours the employee worked.

Conclusion

Per diem stipends for meals may be excluded when calculating the regular rate under the FLSA.  Even though this is a Tenth Circuit case, it is likely that California courts (which are in the Ninth Circuit) will follow this decision in light of the Court’s sound conclusion and reasoning.

In this case, CGG was calculating the regular rate correctly, but is your agency doing the same?  If you are a Human Resources, Payroll, or Finance employee for your agency, it is important to stay on top of the latest legal developments that impact what should be included in the regular rate and what may be properly excluded.  Take this opportunity to look at your agency’s overtime practices and consult an attorney to find out if your FLSA calculations comply with the law.

 


FLSA-Guide-CoverLiebert Cassidy Whitmore recently updated the 2017 Fair Labor Standards Act: A Public Sector Compliance Guide, a publication that provides California’s public employers with the important information they need to know to ensure that your agency’s employment policies and procedures are in compliance with the Fair Labor Standards Act. Learn more >

 

CalPERS School and Local Agency Members May Now Recover Service Credit and Compensation Earnable Upon Administrative, Arbitral or Judicial Reversals of Terminations

Posted in Retirement

CashCalPERS contracting agencies and schools should be aware that effective January 1, 2017, if an employee’s termination is overturned on appeal, back pay is not the only thing the employee will be able to recover. On June 21, 2016, we reported that Assembly Member Cooper introduced a new bill, AB 2028, which if passed, would allow CalPERS school and local agency members reinstated by administrative or judicial order following an involuntary termination to retroactively receive service credit and compensation earnable as though they were never terminated. The Legislature enacted, and Governor Brown signed, AB 2028 this past Fall.  The new law went into effect on January 1, 2017.

AB 2028 permits CalPERS members who were involuntary terminated from employment on or after January 1, 2017, and subsequently reinstated pursuant to an administrative, arbitral or judicial proceeding (collectively, a “proceeding”) to receive service credit and compensation earnable as though they were never terminated. The Bill clarifies that administrative proceedings include proceedings before the governing board of a school district, a charter school, a county office of education, or a community college district.  The reinstatement of these benefits will be effective as of the date from which retroactive salary is awarded in the proceeding.

AB 2028 addresses a gap in existing law, where state employees who have been subject to an involuntary termination that is subsequently overturned receive service credit retroactively.

However, such a mechanism did not, until AB 2028, apply to employees of a CalPERS contracting local agency or school. While pre-AB 2028 law allowed all CalPERS members who retired after an involuntary termination and who were subsequently reinstated to their employment to receive retroactive benefits, CalPERS school and contracting local agency members who did not retire after involuntary terminations were not eligible to receive retroactive benefits upon reinstatement.

Under AB 2028, contributions to the CalPERS system (the “System”) must be made for any period for which salary is awarded in the proceeding in the amount that the CalPERS member would have contributed had his or her employment never been terminated.  The Bill does not expressly state who is responsible for paying the retroactive contributions into the System, i.e. the agency, the reinstated employee or both.  However, the legislative history suggests that because the Bill is intended to make an employee whole, as if he or she had never been terminated, the contribution obligations would mirror the agency and members’ regular contribution practices.

Finally, AB 2028 requires employers to notify CalPERS of a final decision ordering reinstatement within five (5) 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.  The new law does not require contracting agencies to provide an employee with additional retirement benefits that the employee would not otherwise have been entitled to had he or she not been involuntarily terminated.

Policymaking Employees and the First Amendment

Posted in Constitutional Rights, First Amendment

iconic-collumn.jpgA newly-elected official is going to want to fill top posts in their organization with persons committed to the official’s vision for the future.  In the same way, a top official after a period of months or years may want to change key lieutenants because of political differences.  Indeed, this ability to pick and choose among key advisers and high-level posts in a public organization has long been a traditional element of politics.

But sometimes, these notions come into a conflict with well-established job protections of public employees.  One of these is the First Amendment, which in a number of circumstances prohibits public agencies from taking adverse actions against employees based on their speech or political associations.  For most public employees, their speech and even their criticism of their own agency can have protection under the First Amendment if particular conditions are met.  Under principles of constitutional law, a public employee can assert a First Amendment retaliation claim against his or her employer if:

  1. the employee suffers an adverse employment action because of the employee’s speech,
  2. that speech was on a matter of public concern,
  3. the speech was outside the employee’s “official duties,” and
  4. a balancing test of certain respective interests favors the employee.

Of course, public employees often have numerous other protections against adverse employment actions, including due process rights, contractual “for cause” standards, and protections in collective bargaining agreements.

As far as the First Amendment is concerned, however, for some key employees, there is in fact room for what can appear to be arbitrary action or “patronage” dismissals.  The United States Supreme Court has created a “policymaker exception” to First Amendment protection, recognizing that an elected official must be able to appoint some high-level politically loyal individuals who will help him or her implement the goals or programs for which the public voted.  See Branti v. Finkel.  The U.S. Court of Appeals for the Ninth Circuit (covering California) described in a 1997 case titled Fazio v. City of San Francisco that if an employee is “a policymaker, then . . . his government employment could be terminated for purely political reasons without offending the First Amendment.”  The Court described the following factors a Court must consider in identifying a “policymaking” position:

  • “vague or broad responsibilities,”
  • “relative pay,”
  • “technical competence,”
  • “power to control others,”
  • “authority to speak in the name of policymakers,”
  • “public perception,”
  • “influence on programs,”
  • “contact with elected officials,” and
  • “responsiveness to partisan politics and political leaders.”

In a 2012 decision, Hunt v. Orange County, the Ninth Circuit added some refinements to the “policymaker” test.  The Court held that the exception turned essentially on an overarching factor of whether political considerations had sufficient significance in the job duties of the employee in question.  “The essential inquiry” the Court described “is whether the hiring authority can demonstrate that party affiliation is an appropriate requirement for the effective performance of the public office involved.”  (Emphasis added.)  In the Hunt case, the Ninth Circuit found that Orange County Sheriff Michael Carona could not rely on the policymaker exception to demote a particular high-ranking employee, William Hunt, who had run against him for Sheriff.  Hunt was the Chief of Police Services for the City of San Clemente, which contracted with Orange County Sheriff’s Department for police work.  The Court reasoned: “Here, the record fails to establish that Hunt’s party affiliation or political outlook were relevant to the effective discharge of his professional duties.”  Instead, the factual findings were that “Hunt’s political statements—which were the basis of his demotion—did not cause, and could not have been reasonably predicted to cause, a disruption in the efficient operation of the department.”  The Court’s opinion interprets the applicable test in a way that appears to make it more difficult for employers to invoke the exception.

District court cases decided after Hunt provide examples of what types of employees were considered policymakers.  In 2013, in Wittenberg v. Public Utility Dist. No. 1 of Skamania County, the U.S. District Court for the Western District of Washington determined that a general manager of a public utility district, selected by three elected officials, was a policymaker.  In 2015, in Summers v. City of McCall, a District Court in Idaho determined that a City Chief of Police in that case met the definition.  In 2016, in Kaelble v. Tulare County, the District Court for the Eastern District of California found that a Supervising Deputy District Attorney to be a policymaker where each of the relevant criteria was satisfied.

In conclusion, deciding that an employee meets the definition of a policymaker can obviously have important ramifications for the employee – and for the agency, if it makes a politically motivated decision as to someone whose job does not actually meet the definition.  Accordingly, it is best to obtain legal advice if there is any doubt.

Discontinuation of a Long-Standing Practice of Accommodating Disabled Employees through Light-Duty May Be a Violation of FEHA

Posted in Public Safety Issues, Retirement

Police-Cars.jpgThis post was authored by Jennifer Rosner

In a recent decision by a California Court of Appeal, a Court held that it was not unreasonable for the City of Los Angeles to assign temporarily injured recruit officers to light-duty administrative assignments in light of the City’s past policy and practice of doing so.

Plaintiffs were recruit police officers and entered the Police Academy shortly after they were hired.  During the Academy training, each of the three officers suffered injury.   The City had a policy whereby if a recruit became injured while at the Academy,  the City placed him or her in the Recycle program, which provided recruits with light-duty administrative jobs until their injuries were healed and they could return (or recycle back) to the Academy.  While in the Recycle program, recruits received full compensation and benefits.  In accordance with this policy, Plaintiffs were assigned to light-duty administrative positions.

The City’s Recycle program (of allowing police recruits to remain in the Recycle program indefinitely) conflicted with Penal Code section 832.4 and regulations issued by the California Commission on Peace Officer Standards and Training (POST), which require recruits to complete their training and the 12-month probationary period within two years.  Thus, in an attempt to ensure compliance with this rule, the Department revised its Recruit Officer Recycle Policy to provide “any recruit officer with a work restriction(s) or any other condition that precludes them from fully participating in all aspects of the Basic Course, which has or will extend beyond six calendar months, is no longer eligible to remain in the POST Basic Course.”

When the City required the Plaintiffs to return or resign from their employment because they were not able to return after six months of injury, they filed this lawsuit alleging, in relevant part, disability discrimination and failure to accommodate under the Fair Employment and Housing Act (FEHA).  As to their claim for disability discrimination, FEHA makes it unlawful for an employer to discriminate against an employee because of the employee’s disability.  However, FEHA specifically limits the reach of FEHA by “excluding from coverage those persons who are not qualified, even with reasonable accommodation, to perform essential job duties.”  Here, the Court found that Plaintiffs were unable to show that they were “qualified individuals” because they could not perform the essential functions of a police recruit even with reasonable accommodation.  The Court stated that in determining whether the Plaintiffs were “qualified individuals,” the City was not required to eliminate an essential function of the position of police recruit, such as modifying the Academy training program or requirement, waiving the POST certification requirement, or eliminating from a recruit officer’s job duties the ability to make forcible arrests and control suspect.

However, the Court rejected the City’s argument that the plaintiffs, as trainees, were not entitled to reassignment to the Recycle program as a reasonable accommodation as a matter of law and as such, the City was liable for failure to reasonably accommodate.  The Court stated that FEHA protects “probationary” employees, including by requiring reassignment, where such reassignment is reasonable.  The Court found that reassignment to the Recycle program, until the plaintiffs healed or became permanently disabled, was not unreasonable under the facts of this case, especially where the Department had a long-standing practice of allowing injured recruits to remain in the Recycle program indefinitely until they healed and could return to the Academy or until their disabilities became permanent.

While the Court did not question the legitimate reasons the City had for discontinuing the Recycle program, it held that “having created the Recycle program and allow[ing] past recruit officers to stay in the program until they recovered or became permanently disabled, the City could not deny the same accommodation to the plaintiffs, who entered the program before the City’s change in policy.”

While FEHA does not require employers to temporarily accommodate injured employees indefinitely or to convert a temporary position into a permanent one, to the extent an employer’s policies and practices indicate such accommodations are reasonable, an employer may violate FEHA by not making those accommodations available to all employees.  Thus, in determining reasonable accommodation, employers should review their policies and past practices to make sure that they are consistent in their application (or discontinuation) of any light-duty assignments that they may make.