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California Public Agency Labor & Employment Blog

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Top 10 Questions about Senate Bill 866 – New State Legislation Impacting How Public Employers Communicate with Employees and Manage Employee Organization / Union Membership Dues

Posted in Labor Relations

The post was authored by Erin Kunze.

On June 27, 2018, Governor Brown signed into law the Final State Budget, along with budget trailer bill, Senate Bill 866. In brief, though there is little comment in the Bill’s legislative analysis, it is clear that Senate Bill 866 is a direct response to the Supreme Court’s anticipated, and now adopted, holding in Janus v. AFSCME.  As noted in our related Special Bulletin, the Supreme Court’s decision in Janus v. AFSCME overturned forty-plus years of case law that authorized agency shop – or mandatory union service fees – in public sector employment.  The Court’s decision in Janus v. AFSCME means that public agency employers and unions that represent public employees can no longer mandate as a condition of employment that employees pay a service fee (or comparable religious objector charitable contribution) for the portion of union dues attributable to activities the union claims are “germane to [the union’s] duties as collective bargaining representative.”

While public employers and public employee organizations (i.e. unions or local labor associations) can no longer mandate these fees as a condition of continued employment, Senate Bill 866 amends and creates new state law regulating: (1) how public employers and employee organizations manage organization membership dues and membership-related fees; and (2) how public employers communicate with employees about their rights to join or support, or refrain from joining or supporting employee organizations.  It also prohibits public employers from deterring or discouraging public employees and applicants for public employment from becoming or remaining members of employee organizations (a declaration of existing law).  Finally, Senate Bill 866 expands employee organization access to employee orientations by making such orientations confidential.

Below, we outline the top 10 questions arising from Senate Bill 866:

  1. Does Senate Bill 866 Apply to My Public Agency?

Yes. Senate Bill 866 applies to all public agencies, though it does not apply to all public agencies in the same manner.  For example, for the purposes of salary and wage deductions in relation to employee organization membership dues and related fees, the Bill defines a “public employer” as the state, Regents of the University of California, the Trustees of the California State University, as well as the California State University itself, the Judicial Council, a trial court, a county, city, district, public authority, including transit district, public agency, or any other political subdivision or public corporation of the state, but not a “public school employer or community college district.”

But while public schools and community college districts are not included in the definition of “public employer” for the purposes of salary and wage deductions, they are not exempt from Senate Bill 866. Instead, separate provisions apply to those agencies.  The provisions that apply to public school and community college district employers largely reflect those that apply to other public employers regarding the management of employee organization membership dues and related fees, though there are some distinctions.

Provisions governing wage and salary deductions for public employers, other than public schools and community college districts, are now codified at Government Code sections 1152, 1153, 1157.3, 1157.10, and 1157.12. (Section 1153 applies to state employers only, and section 1157.10 applies only to state employees of public agencies.)

Provisions governing wage and salary deductions applicable to public schools and community college districts are codified at Education Code sections 45060, 45168, 87833, and 88167 (reflecting deductions for public school certificated and classified employees, and community college district academic and classified employees).

2. What Should I do if an Employee Asks My Agency to Discontinue the Employee’s Union / Employee Organization Membership Dues Deduction? Can I Respond?

You can respond, but your response is limited to referring the employee back to the employee organization.  With the passage of Senate Bill 866, public employers as well as public school and community college district employers are required to direct employee requests to cancel or change authorizations for payroll dues deductions or other membership-related fees to the employee organization.  Employee organizations are responsible for processing these requests.

Distinct from employee organization / union membership dues and membership-related fees, the Supreme Court’s holding in Janus v. AFSCME, requires employers to immediately stop withholding involuntary service fees; but employers should also notify and meet and confer with any employee organizations regarding the negotiable effects of that change as soon as possible.  Though Senate Bill 866 does not specify how agencies respond to employer inquiries about service-fees, it may also be appropriate to direct the question to the employee organization (e.g. if an employee asks whether he/she can voluntarily pay the union something other than membership dues).  This assessment should be made on a case-by-case basis.

3. Must My Agency Rely on an Employee Organization’s Statement Regarding an Employee’s Organization Membership?

Yes. Public employers are required to honor employee organization requests to deduct membership dues and initiation fees from their members’ wages.  Public employers are also required to honor an employee organization’s request to deduct their members’ general assessments, as well as payment of any other membership benefit program sponsored by the organization.  Public employers must additionally rely on information provided by the employee organization regarding whether deductions for an employee organization have been properly canceled or changed.  Consequently, because public employers will be making these deductions in reliance on the information received from employee organizations, employee organizations must indemnify public employers for any claims made by an employee challenging deductions.

Public school and community college district employers are similarly required to rely on information provided by employee organizations regarding whether deductions for the organization have been properly canceled or changed. However, as with public employers, the employee organization must indemnify the public school or community college district employer for any claims made by an employee challenging deductions.

4. Can My Agency Demand that the Union / Employee Organization Provide the Agency with a Copy of an Employee’s Written Authorization for Payroll Deductions?

No, except in very limited circumstances. As an initial matter, public employers must honor employee authorizations for deductions from their salaries, wages or retirement allowances for the payment of dues, or for any other membership-related services.  Deductions may be revoked only pursuant to the terms of the employee’s written authorization.  Similarly, public school and community college district employers must honor the terms of an employee’s written authorization for payroll deductions.  However, public employers that provide for the administration of payroll deductions (as required above, or as required by other public employee labor relations statutes), must also rely on the employee organizations’ certification that they have the employee’s authorization for the deduction.  A public employer is prohibited from requiring an employee organization to provide it with a copy of an individual’s authorization, as long as the organization certifies that it has and will maintain individual employee authorizations. The only exception is where a dispute arises about the existence or terms of the authorization.

Similarly, public school and community college district employers must rely on an employee organization’s certification that it has an employee’s authorization for payroll deductions. Upon certification, public school and community college district employers are prohibited from requiring the employee organization to provide it with a copy of the employee’s written authorization.  As with public employers, a public school or community college district employer can only request a copy of the employee’s written authorization if a dispute arises about the existence or terms of the authorization.  Again, because employers will be making deductions in reliance on the information received from employee organizations, employee organizations must indemnify employers for any claims challenging these deductions.

5. Can I Discourage or Deter Employees from Becoming or Continuing in Union / Employee Organization Membership? Can I Discourage or Deter them from Enrolling in Automatic Membership Dues Deductions?

No to both questions. Public employers remain prohibited from deterring or discouraging public employees, or applicants, from becoming or remaining members of employee organizations.  They are similarly prohibited from deterring or discouraging public employees or applicants from authorizing representation by an employee organization, or from authorizing dues or fee deductions to such organizations.  The statute provides that this is a declaration of existing law.

Notably, for the purposes of this provision, a public employer is any employer subject to the Meyers-Milias Brown Act (MMBA), the Ralph C. Dills Act, the Judicial Council Employer-Employee Relations Act (JEERA), the Educational Employment Relations Act (EERA), the Higher Education Employer-Employees Relations Act (HEERA), the Trial Court Employment Protection and Governance Act, the Trial Court Interpreter Employment and Labor Relations Act, the Los Angeles County Metropolitan Transportation Authority Transit Employer-Employee Relations Act, and Employers for in-home supportive services (IHSS) providers (pursuant to Welfare and Institutions Code section 12302.25). This provision also applies to public transit districts with respect to their public employees who are in bargaining units not subject to the provisions listed above.

6. Does Senate Bill 866 Prohibit My Agency from Informing Employees about the Cost of Being a Union / Employee Organization Member? 

Yes. This could be seen as deterring or discouraging an employee from becoming an employee organization member or authorizing dues or fee deductions to an employee organization.  As noted in response to question 5, this conduct is prohibited.  In addition, as discussed in question 7 below, employers are prohibited from sending mass communications to employees about employee organization membership without first meeting and conferring with the organization about the content of the communication.

7. Can My Agency Still Send Mass Communications to Employees about Union / Employee Organization Membership?

Yes, but only if the agency first meets and confers about the content of the communication with the recognized employee organization.

A public employer that chooses to send mass communications to their employees or applicants concerning the right to “join or support an employee organization, or to refrain from joining or supporting an employee organization” must first meet and confer with the exclusive representative about the content of the mass communication. If the employer and exclusive representative do not come to an agreement about the content of the communication, the employer may still choose to send it.  If it does, however, it must also include with its own communication, a communication of reasonable length provided by the exclusive representative.  Notably, this requirement does not apply to a public employer’s distribution of a communication from PERB concerning employee rights that has been adopted for the purposes of this law.

For the purposes of mass communication provisions, a public employer means any employer subject to the Meyers-Milias Brown Act (MMBA), the Ralph C. Dills Act, the Judicial Council Employer-Employee Relations Act (JEERA), the Educational Employment Relations Act (EERA), the Higher Education Employer-Employees Relations Act (HEERA), the Trial Court Employment Protection and Governance Act, the Trial Court Interpreter Employment and Labor Relations Act, the Los Angeles County Metropolitan Transportation Authority Transit Employer-Employee Relations Act, and Employers for in-home supportive services (IHSS) providers (pursuant to Welfare and Institutions Code section 12302.25). This provision also applies to public transit districts with respect to their public employees who are in bargaining units not subject to the provisions listed above.

8. Just What is a “Mass Communication” for the Purposes of Senate Bill 866?

For the purposes of Senate Bill 866, a “mass communication,” means a written document, or script for an oral or recorded presentation or message, that is intended for delivery to multiple public employees regarding an employee’s right to join or support or not to join or not to support an employee organization. This includes email communications.

9. With Whom Can I Share Information about Employee Orientations?

Senate Bill 866 requires that new employee orientations be confidential. In addition to existing law that provides exclusive representatives with mandatory access to new employee orientations following the passage of AB 119 last year, the “date, time, and place of the orientation shall not be disclosed to anyone other than the employees, the exclusive representative, or a vendor that is contracted to provide services for the purposes of the orientation.”

10. When Does Senate Bill 866 Take Effect?

Today! As a budget trailer bill, Senate Bill 866 is considered “urgency legislation.”  This means it goes into effect immediately upon the Governor’s signature.  As noted above, Governor Brown signed Senate Bill 866 into law on June 27, 2018.  Accordingly, the time to comply with the new law is now!

 

Mandatory Agency Shop Fees Ruled Unconstitutional in Janus v. AFSCME

Posted in Labor Relations

 This post was authored by Kevin J. Chicas.

The United States Supreme Court today, on Wednesday June 27, 2018, reversed the Seventh Circuit Court of Appeals in Janus v. AFSCME, and held that mandatory agency shop service fees are unconstitutional under the First Amendment of the U.S. Constitution.

Under an agency shop arrangement, employees within a designated bargaining unit who decline membership in a labor organization (i.e., a union or local labor association) must pay a proportionate “fair share” agency shop fee to the labor organization. These agency shop fees are different from dues, which are voluntarily deducted typically through an employee authorization form.  In theory, the agency shop fees are meant to cover the labor organization’s  representation costs for collective bargaining activities conducted on unit members’ behalf.

Mark Janus challenged this theory, claiming he was being compelled to pay agency shop fees, which labor organizations could use to advance political speech to which he disagreed.  The U.S. Supreme Court ruled against AFSCME 5-4, and specifically held that public agencies and “public-sector unions may no longer extract agency fees from nonconsenting employees.”  The Court also held that compelling employees to pay agency fees “violates the First Amendment and cannot continue.  Neither an agency fee nor any other payment to the union may be deducted from a nonmember’s wages, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay. By agreeing to pay, nonmembers are waiving their First Amendment rights, and such a waiver cannot be presumed … Rather, to be effective, the waiver must be freely given and shown by ‘clear and compelling’ evidence.”

How does Janus affect your agency and how to address its impacts?

Public agencies should first understand that Janus is now the prevailing law in the country.  The U.S. Supreme Court made clear that public agencies are immediately prohibited from mandating and collecting agency shop fees from employees.  Given the Court’s holding, public agencies will likely need to account for various competing obligations when implementing Janus.

Additionally, the following are some key steps agencies should consider and plan to implement to address the Janus decision.

  1. The first step to address the immediate impacts of Janus is to determine if your public agency has an agency shop arrangement with a local labor organization.

For local public agencies governed by the Meyers-Milias-Brown Act (MMBA), agency shop arrangements are established by agreement with the labor organization or by a vote of the applicable bargaining unit. (Government Code section 3502.5)  For public school agencies governed by the Educational Employment Relations Act (EERA), agency shop arrangements are set up after the labor organization provides notice to the employer to deduct the agency shop fees.  (Government Code section 3546.)

Therefore, your agency should review your payroll systems and each collective bargaining agreement, paying particular attention to provisions related to processing service fee (i.e., agency shop fees) wage deductions.

If your collective bargaining agreement has a severability or savings provision which identifies what happens if a provision of the agreement is determined to be unlawful, you need to follow that provision. Many agency shop arrangements are contained in collective bargaining agreements.  As of today, since agency shop has been declared unconstitutional, agency shop provisions will likely trigger your severability or savings provisions.

  1. Public agencies should then identify employees who are dues payers, service fee and religious or conscientious objector payers, and discontinue service fee and religious objector deductions. Janus does not directly impact labor organization member employees because they are voluntarily paying dues to be a member of the labor organization.  The U.S. Supreme Court ruled, however, that mandatory agency shop fees are unconstitutional.  Therefore, Janus directly impacts the agency’s service fee payers and any bargaining unit members who have a religious objection, but are required to donate their wage deductions to a charitable organization.

To determine which category each bargaining unit member falls within, public agencies should review the election forms on file for each employee. In conjunction with this, employers can also review payroll records that use separate deduction codes to help identify who, historically, has been a dues, service fee and religious/conscientious objector payer.

As described further below, S.B. 866 (signed by Governor Brown today this morning and signed into law as urgency legislation, meaning it goes into effect immediately) may impact this process if, for example, an agency cannot determine the categories of unit employees, and will need to rely on certifications from labor organizations regarding which employees have authorized dues deductions.

While Janus may impact labor organizations on a greater scale, agencies with an agency shop may be required to make administrative changes to their payroll practices as soon as possible.  Once you identify your employee categories, agencies should develop an action plan with the appropriate departments to identify payroll cutoff deadlines for cessation of specific deductions.  Your agency should take steps to both immediately implement changes mandated by Janus, and to notify and meet and confer with any labor organizations regarding negotiable effects of the changes as soon as possible.  Regardless of the meet and confer obligations, effective immediately, your agency is precluded from making a deduction from the wages of any employee who has been a service fee payer or religious objector. This means today, June 27, 2018, regardless of whether today is in the middle of your pay period. 

  1. Public agencies should then notify the impacted labor organizations regarding the planned changes to the deduction of service fees, and then plan to meet and confer over the negotiable impacts of those changes. Public agencies may receive push-back in implementing Janus, but they should understand complying with the requirements of the law is their legal obligation.  Regardless, public agencies need to meet and confer over the negotiable effects of the decision.

After notifying the labor organization and/or during negotiations, the labor organizations may identify various effects in discontinuing service fee deductions.  The obligation to negotiate over effects includes the obligation to consider the proposals in good faith within the parameters of the law.

  1. In a post-Janus world, public agencies will need to be ready to address inquiries from employees and labor organizations regarding issues, such as how to withdraw from the labor organization or how to revoke dues authorizations.  As discussed above, Janus does not prohibit voluntary dues deductions, so this practice should continue consistent with applicable law, the agency’s collective bargaining agreements and employer relations rules. You should review this information right away so that you know the answers.  In responding to employee inquiries, employers may provide factual information to employees, but they cannot do so in a manner that would discourage employees from joining or remaining labor organization members.  (Government Code section 3550.)  Additionally, S.B. 866 provides for additional substantial restrictions on issuing “mass communications” to multiple employees and requirements to direct labor organization membership inquiries to the labor organization. Public agencies should no longer send employees any mass communication about the Janus decision without meeting and conferring with exclusively recognized representatives about the content of such communications.  Public agencies should also defer membership inquiries to labor organizations.

Janus is a landmark decision, with far-reaching impacts. So is S.B. 866.  Based on the current state of the law and the considerations above, public agencies should coordinate internally to develop action/contingency plans to address any and all legal obligations.  LCW is available to assist and has been following Janus and actively advising public agencies on how to best prepare and handle the decision the day it comes out. That day has come! As part of LCW’s coverage of the Janus decision and related state legislation, LCW will be providing the following services to our clients:

LCW’s Special Bulletin discussing CA’s new legislation, S.B. 866 is available here.

Overpaid Pensioners Lose on All Grounds

Posted in Pension

This post was authored by Erin Kunze.

In a Fourth District appellate case, Krolikowski v. San Diego City Employees’ Retirement System,  issued in May 2018, the Court found that two overpaid retirees had no valid defense against the San Diego City Employees’ Retirement System (“SDCERS”) in recouping payments made to the retirees for 7 to 12 years.  The two former San Diego City employees began collecting pensions from SDCERS in 2001 and 2006.  At the time of retirement, SDCERS calculated the monthly payments due to each former employee as their SDCERS pension.  Unfortunately, at the time of calculation, SDCERS used incorrect retirement factors, corresponding with inaccurate retirement dates and, as to one retiree, the wrong annuity factor.  The incorrect calculation also relied on a mistaken assumption about individuals’ participation in social security.

In 2013, SDCERS conducted an audit and learned that it had made these mistakes. As a result of its mistakes, SDCERS concluded that it had overpaid the two retirees $17,049.48 and $18,783.99 between the dates the retirees began receiving pension benefits and the date of the audit (not accounting for interest).  Within months of discovering the error, SDCERS sought to recoup payments from the two retirees, with interest.  One retiree reimbursed the system under protest, while the other was subject to an involuntary monthly pension reduction to make the system whole.

The two retirees brought suit against SDCERS after failing to obtain favorable results through the System’s administrative process. In their lawsuit, the retirees brought a number of claims against SDCERS, including a claim of estoppel and a claim that the Code of Civil Procedure’s three-year statute of limitations should apply.  The retirees also argued that the System was not legally authorized to take unilateral action to recoup an overpayment of pension benefits.

Ultimately, the Court rejected these, and all claims made by the retirees. With respect to estoppel, the Court found that the retirees did not “meet their burden” of demonstrating that SDCERS was “apprised of the facts” at issue prior to 2013, nor that they sufficiently demonstrated that they had “sustained an injury” in reliance on SDCERS’s failure to earlier inform them of the calculation error.  The Court additionally noted the extra burden required to bring an equitable estoppel claim against a government entity.  Specifically, it explained that the government “may not be bound by an equitable estoppel…unless, ‘in the considered view of a court of equity, the injustice which would result from a failure to uphold an estoppel is of sufficient dimension to justify any effect upon public interest or policy which would result from the raising of an estoppel.’”  A high burden.

With respect to the Code of Civil Procedure’s three-year statute of limitations, the Court first noted that it did not apply to this matter because SDCERS sought recovery of overpayments through an administrative action, not through the Civil law system. Unlike other pension systems (such as CalPERS, STERS, and some County Retirement systems), nothing in City of San Diego’s law establishing the scope of SDCERS’s authority to administer the City’s pension system prevents SDCERS from seeking recoupment of overpayments through an administrative process in excess of three years.  Moreover, the Court explained, even if the Code of Civil Procedure statute of limitations were applicable, it would not help the retirees in this case.   Code of Civil Procedure section 338, subdivision (d) provides that “an action for relief on the grounds of fraud or mistake . . . is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.”  Here, the court determined that the 2013 audit would be the applicable point of discovery.  In short, even though the overpayments were the System’s mistake in 2001 and 2006, the statute of limitations would not have started until the System discovered the mistake it made.  This begs the question, if the System has not discovered the mistake in the 2013 audit, would any later audit be considered the point of “discovery,” initiating a statute of limitations?  The Court rejected the notion that the System’s initial duty to set a correct pension benefit would sufficiently trigger the Civil Code limitation.  It additionally upheld the trial court’s decision to exclude evidence that the System acted unreasonably in making the mistake, by failing to audit or double check its calculations in a prompt manner.

Finally, regarding the System’s unilateral authority to withhold pension payments from retirees, the Court found that SDCERS has this authority. While pension benefits may not be levied or attached by a “judgment creditor” under state law, the Court explained that the public pension system itself is not a judgment creditor. When it recoups overpayments, it is “not levying or attaching any funds to satisfy a money judgment.” On the contrary, the Court found that the System was required to take this action because it lacked the authority to provide benefits in excess of amounts authorized by the City.

While some portions of this holding will not relate to other retirement systems (e.g. where SDCERS law and CalPERS, STERS, and other City and County retirement system laws deviate), the decision reflects the strong position of pension systems in seeking, and retaining, reimbursements when they determine such reimbursements are owed.

Have you audited your agency’s pension payments and reporting? If not, doing so now – and acting affirmatively to correct errors – may help avoid the accrual of interest and overpayments (or underpayments of pension contributions prior to retirement) that may become substantial over time.

Tips from the Table: Negotiating Personnel Rules

Posted in Labor Relations, Tips from the Table

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.

Don’t Click “Block” Just Yet: Judge Rules Public Officials, Including the President, Can’t Block People on Twitter

Posted in Social Media

This post was authored by Ashley Bobo.

It was only this past June that the Supreme Court emphasized the impact of social media on the modern world. The court made it clear in Packington v. North Carolina that social media sites like Facebook and Twitter exist as some of “the most powerful mechanisms available to a private citizen to make his or her voice heard. They allow a person with an Internet connection to ‘become a town crier with a voice that resonates farther than it could from any soapbox.…’”

The Supreme Court’s rhetoric has now been extended in a well-publicized federal case, Knight First Amendment Institute v. Trump, that was decided just last week by the U.S. District Court for the Southern District of New York.  In this case, several individuals were “blocked” by President Trump from his Twitter page after posting comments criticizing the President and his policies. The individuals sued under the First Amendment, arguing that the President’s Twitter page constituted “a kind of digital town hall” or “public forum” similar to that of parks and sidewalks, where First Amendment speech is protected regardless of viewpoint.

The District Court agreed, and ruled that a public official may not “block” a person from their Twitter account in response to the political views that person has expressed. The ruling crucially determined that while ordinary Twitter users can block other Twitter users, the President’s account, @realDonaldTrump, is a space operated by the government for government business, despite the fact that the account is composed of the President’s own free speech. While the President attempted to argue that he retained a “personal First Amendment interest in choosing the people with whom he associates and retains the right not to engage with,” the court rejected this notion and critically analyzed the way that the President used his personal Twitter page.  Specifically, the court noted that “President Trump uses @realDonaldTrump, often multiple times a day to announce, describe, and defend his policies; to promote his Administration’s legislative agenda; to announce official decisions; to engage with foreign political leaders; to publicize state visits; to challenge media organizations whose coverage of his Administration he believes to be unfair; and for other statements, including on occasion statements unrelated to official government business.” That is, the President presents the @realDonaldTrump account more often than not, as being a presidential account as opposed to a personal account.

Given that many public agencies, cities, counties, and educational institutions, along with public officials themselves, host social media sites, agencies must be more vigilant than ever in ensuring that members of the public are given the opportunity to exercise their First Amendment rights on these sites; even when the commentary is critical. As the Supreme Court noted in Pleasant Grove City v. Summum, “there may be situations where it is difficult to tell whether a government entity [or official; is speaking on [their] own behalf,” but agencies must take special care to do a specific analysis of the way that their social media sites are being used and the policies that they develop concerning citizens’ ability to interact with those pages.

Courts have only just begun to analyze the role that the internet and social media platforms will play in the rights guaranteed under the First Amendment, and we will continue to monitor this newly evolving area of law. For more information on your agency’s role in protecting the First Amendment, visit www.liebertlibrary.com to find our Free Expression workbook on the Liebert Library.

Employers May Soon Be Required to Accommodate Employee Use of Medical Marijuana

Posted in Discrimination, Legislation

This post was authored by Megan Lewis.

Since recreational marijuana was legalized in 2016, many have assumed that employment protections for marijuana users would likely expand, either via legislation or though litigation.

We are already seeing small steps in that direction. For instance, San Francisco recently amended its ban-the-box ordinance to, among other things, prohibit employers from taking action against applicants or employees for marijuana offenses related to conduct that has since been legalized in California (such as certain offenses for non-commercial use and cultivation of marijuana).

A recent bill, known as AB 2096, would go much further and protect current medical marijuana users from discrimination in employment.

Currently, 11 states (Arizona, Arkansas, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New York, Pennsylvania, and Rhode Island) provide some level of employment protection to individuals who use medical marijuana, though the level of that protection varies from state to state.

California, which was the first state to legalize medical marijuana, has no such protections. But that would change if AB 2096 becomes law. In its current form, the proposed bill would amend the Fair Employment and Housing Act (“FEHA”) to require employers to engage in the interactive process, and reasonably accommodate, the use of medical marijuana when the use is by a qualified patient or person with an identification card (as defined in the Health and Safety Code) and the use is to treat a known physical or mental disability or known medical condition.

The FEHA would be amended to state that the Legislature intends to “make it unlawful for an employer to discriminate against a person in hiring, termination, or any term or condition of employment or otherwise penalize a person” based on his or her status as a medical marijuana patient or “the use of cannabis by those persons for medical purposes.” However, the bill does not go so far as to make use of medical marijuana a protected classification under the FEHA (i.e., like sex, race, religion, age, etc.). A previous version of the bill added “status as, or positive drug test for cannabis by, a qualified patient or person with an identification card, as those terms are defined in Section 11362.7 of the Health and Safety Code” to the list of protected characteristics of applicants and employees under the FEHA, but that language has been stricken from the current draft of the bill.

The bill includes two critical limitations on these new protections.

First and foremost, AB 2096 explicitly states that employers can still discipline or terminate an employee who “is impaired” at work or during work hours because of the medical use of cannabis. However, as a practical matter, it may be difficult for employers to prove whether an employee was under the influence of marijuana at work because the tests that are currently available are not sensitive enough to determine when the marijuana was consumed and/or whether someone is currently under the influence.

The bill also acknowledges that marijuana, including medical marijuana, is still illegal under federal law. Employers can refuse to hire or terminate a medical marijuana user if hiring or continuing to employ that person would “cause the employer to lose a monetary or licensing-related benefit under federal law or regulations.”

If AB 2096 passes, it will be the first time employers have been required to alter their policies and procedures to conform to the changing landscape in California regarding marijuana use. LCW will continue to monitor the bill’s progress through the Legislature and report back regarding future developments.

Preparing for Janus: What Local Agencies Can Do In Anticipation of the Most Important Public Sector Case of the Year

Posted in Labor Relations

This post was authored by Erik M. Cuadros.

Public-sector employers and unions anxiously await the outcome of Janus v. AFSCME Council 31, a case currently pending before the United States Supreme Court. Janus challenges agency shop arrangements and public sector unions’ right to collect what are known as “service” or “fair share” fees.  In an agency shop arrangement, all employees in a particular bargaining unit are required – as a condition of their continued employment – to become union members or, alternatively, pay mandatory service fees, regardless of whether the employee agrees with the union’s positions.  In theory, the service fees cover the local union’s collective bargaining and representation costs.

Court observers anticipate that the U.S. Supreme Court will strike down the practice of requiring non-members to pay service fees. If the U.S. Supreme Court holds that agency shop service fees are unconstitutional, public agencies will not have the authority to continue deducting those service fees.  Rather, they would likely be obligated to discontinue deducting and transmitting service fees upon the effective date of the decision or as otherwise indicated by the Court.

Liebert Cassidy Whitmore anticipates that the U.S. Supreme Court will issue its Janus decision in June 2018.  Although it is impossible to forecast the results with absolute certainty, LCW recommends that all public agencies, their employees, and unions be prepared to immediately respond to the decision.  The following strategies will better prepare public agencies to comply with Janus’ anticipated ruling and to fulfill their duties to meet and confer in good faith should any changes to their bargaining agreements, policies, and practices be necessary.

  1. Identify Janus’ Potential Scope of Impact Upon Your Agency

Public agencies can begin by identifying the potential scope of impact of the Janus decision.  More specifically, your agency must first review each collective bargaining agreement to determine whether any of the agreements include an agency shop or other wage deduction arrangement.  If your MOU’s do not include agency shop, it is less likely that your agency will be immediately impacted by Janus.  If one or more of your MOU’s includes such provisions, you will want to focus on those bargaining units because additional preparation will be required.

For those MOU’s that include agency shop, you should review all relevant provisions, including those related to processing service fee wage deductions. Unions typically collect both union dues and service fees through wage deductions via the agency’s Payroll Department.  Therefore, while Janus may impact unions on a greater scale, agencies with agency shop will likely be required to make administrative changes to their payroll practices.  For example, you should familiarize yourself with the amount, timing, and frequency of when your agency’s service fees are deducted.  Depending on Janus’ effective date, public agencies may not have sufficient time to notify and meet and confer with affected unions over any changes.  Your agency should be ready to both immediately implement any Court-mandated changes, if any, and to notify and meet and confer with any impacted unions regarding negotiable impacts of the changes as soon as possible.

2. Identify Contract Provisions Possibly Subject to Effects Bargaining

After this initial review, you may find it helpful to create union-specific spreadsheets or tables identifying all relevant provisions in your MOU’s, particularly if your agency has different agency shop arrangements with multiple unions. If the U.S. Supreme Court rules that agency shop is unconstitutional, your agency should be prepared to bargain over any negotiable effects of the decision.

The unions may identify various effects associated with discontinuing service fee deductions. For example, they may ask to negotiate MOU side letters or amendments regarding how or when bargaining unit employees are notified of any deduction changes, whether service fee payers should be given authorizations to participate in voluntary wage deductions, etc.

In preparation for these negotiations, we recommend that you review the impacted MOU’s to familiarize yourself with any additional release time, union access, and employee orientation benefits. Under the MMBA, release time is only permitted for negotiations and not for employees to prepare for negotiations over Janus or to meet with union membership to rally support for union causes.  Although you are not obligated to provide any more release time than otherwise required by law, your MOU may provide additional release time benefits.  On a related note, the Human Resources Department should also review its access rules and employee orientation agreements with impacted department heads and supervisors to ensure that the entire agency follows these policies consistently.

Finally, you may also wish to review any management rights, zipper, reopener, and/or severability clauses to determine whether any of these provisions apply. Once the U.S. Supreme Court issues its decision, your next steps will be more effective if you have already determined which actions are necessary to amend or eliminate MOU provisions contrary to the anticipated Janus decision.

3. Identify the Agency’s Union Dues, Service Fee, and Religious or Conscientious Objector Payers

After identifying the unions who have agency shop, your agency should develop a spreadsheet identifying each union’s members, service fee payers, and religious or conscientious objectors. This will be both the most labor intensive and absolutely critical element of your Janus preparation.

Janus will not directly impact union member employees because they are voluntarily paying union dues. However, if the U.S. Supreme Court rules that mandatory agency shops are unconstitutional, the decision will directly impact the agency’s service fee payers and any bargaining unit members who have a religious objection but are required to donate their wage deductions to a charitable organization.  To determine which category each bargaining unit member falls within, you should review the election forms in each employee’s personnel file.  Alternatively, you may review your payroll records but only if the Payroll Department uses separate deduction codes for each bargaining unit member category.  If the Payroll Department uses a master code without differentiating between the three categories or other employee donations related to union benefits, you could inadvertently misclassify an employee’s bargaining unit status.

On Janus’ effective date, your agency may be required to immediately cease all deductions from service payer and religious objector wages.  Therefore, once you identify your employee categories, you must work with the Payroll Department to establish an action plan if the U.S. Supreme Court’s decision is as anticipated.  Your Human Resources Director should send the Finance Director an official notice advising him or her of the Janus case and the potential cessation of specific deductions.  The notice should also ask that the Payroll Department identify any payroll cutoff deadlines so that your agency may plan for any potential contingencies.  Thereafter, the agency should develop an administrative plan to instantaneously modify the payroll program, including any internal procedures or plans to contact external payroll vendors.  If the Payroll Department identifies all three categories of employees under a master payroll code, it should prepare to turn off each applicable employee’s deduction on an individual basis.  Alternatively, if the Payroll Department utilizes separate payroll codes for each category of employee, this process will be easier.

4. Conclusion

Public agencies should take all advance steps within their control to plan for the immediate cessation of periodic service and religious objector fee deductions to the extent Janus requires.  They must also be prepared to immediately engage in any necessary effects bargaining.  By taking these proactive internal steps, your agency will be better prepared to address any mandatory changes to its bargaining agreements after the U.S. Supreme Court publishes its Janus decision.

We remind you, however, that while the U.S. Supreme Court is anticipated to declare agency shop arrangements unconstitutional, our analysis and advice is provided prior to publication of the Janus decision.  The final consideration of these issues ultimately depends on what the Janus decision holds and we caution public agencies against making any dramatic changes in anticipation of Janus for this reason.

Liebert Cassidy Whitmore will continue to monitor this important case and will be publishing guidance on Janus as soon as the U.S. Supreme Court issues its anticipated decision.  In the meantime, we stand ready to help guide our clients through their agency-specific preparations for Janus.  Please contact us immediately if we can be of any assistance.

California Supreme Court Adopts New “ABC Test” for Classification of Independent Contractors: Potential Risk and Impact on Public Agencies

Posted in Wage and Hour

This post was authored by Richard C. Bolanos and Michael J. Le.

On April 30, 2018, the California Supreme Court issued a decision in the case of Dynamex Operations West, Inc. v. Superior Court (S222732), in which it established a new and more streamlined legal test to determine whether a worker should be classified as an independent contractor or employee.  This test applies to California’s Industrial Welfare Commission (IWC) Wage Orders which regulates wages, hours, and working conditions.

The Court rejected the application of the longstanding and flexible multifactor standard in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal. 3d 341, which was used by California courts for years.

The new worker-friendly standard presumes all workers are employees and places the burden on an employer to establish that a worker satisfies the three independent conditions of the “ABC Test” for an independent contractor.

Factual Background and the “ABC Test”

Dynamex is a national same-day courier service that operates a number of business centers in California.  The company hires delivery drivers to transport letters and packages to its customers.  Initially, Dynamex classified its California drivers as employees, but then later converted all of its drivers from employees to independent contractors in an effort to save costs.  This lawsuit was subsequently filed by Dynamex drivers alleging that the company misclassified them because their job responsibilities as independent contractors were the same as when they were classified as employees.

Following an extensive analysis of California case law on the legal test for determining whether a worker is an employee or, instead, an independent contractor, the Supreme Court held that is was appropriate for employers to look to a standard commonly referred to as the “ABC test,” that is utilized in other jurisdictions.  Under that test a worker is properly considered an independent contractor to whom a wage order does not apply, only if the employer establishes:

  • A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
  • B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
  • C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

Failure to establish all of the above three factors results in a determination that a worker is an employee and thus not an independent contractor.

How Is It Relevant to Public Agencies?

The Dynamex decision affirms the general legal rule that it is the employer’s responsibility to correctly classify a worker as an independent contractor.  Failure to meet the legal test will expose your agency to back pay and fines for failure to pay federal Social Security and payroll taxes, unemployment insurance, workers compensation benefits, and for violation of various federal and state statutes and regulations governing retirement, wages, hours, and working conditions.  And while the Dynamex ruling is limited to an analysis of the California Wage Orders (Cal. Code Regs. § 11010 et seq.), it provides clear guidance for applying the independent contractor test.  Public agencies are well advised to review all independent contractor arrangements under the “ABC test” and reclassify such arrangements if necessary.   LCW is available to assist your agency in conducting such a review.

A #MeToo Legislative Reckoning is Coming to California in 2018

Posted in Discrimination, Harassment

This post was authored by Stefanie K. Vaudreuil.

There are a number of bills pending in the California Legislature this year that employers should be watching closely.

SB 1038 California Fair Employment and Housing Act: personal liability

Under existing law, individuals may be liable under the California Fair Employment and Housing Act (FEHA) for acts of unlawful harassment. SB 1038, if passed, will add individual liability for retaliation. According to the Senate Judiciary Committee’s analysis, “[f]ear of retaliation is a major reason why victims choose not to report discrimination and harassment. Yet current California law does not clearly hold individuals accountable for retaliation.” The bill’s author further states the change in the law is necessary because it will discourage individuals from retaliating against employees who exercise their rights under FEHA by complaining of discrimination and harassment. The California Association of Joint Powers Authorities opposes the bill, stating that “[t]his measure puts public taxpayer dollars at risk by holding public entities financially responsible for employee’s retaliatory actions that were completely outside of the employer’s knowledge, influence or ability to stop . . . Although seemingly a deterrent for retaliatory actions, it is the public employer who pays the liability of the employee, even if the employer has no reason to know of an employee’s retaliatory act.”

AB 1870 Employment discrimination, unlawful employment practices

Presently, a complaint must be filed with the Department of Fair Employment and Housing (DFEH) within one year from the date of the alleged unlawful employment action. This bill proposes to extend that time from one to three years. The bill’s author argues that the extension of time will allow “additional time to resolve grievances outside of court, without feeling compelled to file a claim in order to meet the short filing deadline.” Opponents of the bill believe that the extension should apply only to sexual harassment claims and that it should be no more than two years.

AB 2946 Division of Labor Standards Enforcement limitations period

Like AB 1870, this bill seeks to extend the time to file a complaint of retaliation with the Division of Labor Standards Enforcement (DLSE). The current time limitation is six months. This bill also would allow a prevailing employee to claim attorney’s fees for whistleblower claims. No statutory entitlement exists that would allow a prevailing plaintiff to an award of attorney’s fees for claims brought pursuant to Labor Code section 1102.5. The California Chamber of Commerce opposes the bill, citing the “one sided attorney’s fee provision” will “incentivize further litigation.”

AB 1867 Employment discrimination, sexual harassment records

Employers are required to maintain employee personnel records for at least three years after the employee’s separation from employment. However, due to the recent rise in sexual harassment allegations and claims, the bill’s author believes it is necessary to change the law in this regard. The bill provides that employers with 50 or more employees would be required to maintain records of internal sexual harassment complaints and investigations for a period of 10 years from the date of the filing of the complaint. The California Chamber of Commerce opposes the bill as unclear and overly burdensome for employers.

CalPERS Issues Circular Letter Regarding Employer Obligations for Out-of-Class Appointments, But Many Questions Remain

Posted in Retirement

This post was authored by Michael Youril.

On April 27, 2018, the California Public Employees’ Retirement System (“CalPERS”) issued Circular Letter No.: 200-021-18, which discusses limitations imposed on “out-of-class appointments” by Assembly Bill 1487, which added Government Code section 20480.  The Circular Letter also provides direction to employers for reporting hours for out-of-class appointments and attaches an Out-of-Class Appointment Employer Certification form  for employers to fill out.  Unfortunately, many ambiguities concerning the application of Government Code section 20480 and the reporting requirements remain.

Legal Requirements for Out-of-Class Appointments Under Government Code Section 20480

Under Government Code section 20480, “out-of-class appointments” to a “vacant position” are limited to 960 hours per fiscal year. The statute provides specific definitions for some key terms under the statue.  An “out-of-class appointment” is “an appointment of an employee to an upgraded position or higher classification by the employer or governing board or body in a vacant position for a limited duration.”  A “vacant position” is defined as “a position that is vacant during recruitment for a permanent appointment.”  The definition of “vacant position” excludes a “position that is temporarily available due to another employee’s leave of absence.”

CalPERS agencies are required to track and report the number of hours worked in the “out-of-class appointment” and report the hours to CalPERS no later than 30 days following the end of the fiscal year. The compensation for the appointment must also be stated in a collective bargaining agreement or a publicly available pay schedule.

An employer that violates Government Code section 20480 must pay penalties to CalPERS in an amount equal to three times the employee and employer contributions that would otherwise be paid to CalPERS for the difference between the compensation paid for the out-of-class appointment and the compensation paid and reported to CalPERS for the member’s permanent position for the entire period the member serves in the out-of-class appointment. The employer must also reimburse CalPERS for administrative expenses incurred by CalPERS in responding to the violation.  Although the statute did not provide the amount of administrative expenses, the Circular Letter states that the fee will be $200.  The penalties and fees are not credited to the employer or the employee’s individual account and the employer may not pass the penalties or fees onto the employee.

Employer’s Obligations Under the Circular Letter on Out-of-Class Appointments

The Circular Letter provides the following list of employer responsibilities under Government Code section 20480:

  • Tracking out-of-class hours worked in each vacant position per fiscal year.
  • Reporting hours worked in vacant position(s) to CalPERS by July 30. Until CalPERS makes system enhancements to allow online reporting, public agencies are to use the Out-of-Class Appointment Employer Certification form to submit the required information to CalPERS Employer Account Management Division.
  • Making timely payments for penalties generated in accordance with Government Code section 20480.
  • Ensuring that the out-of-class appointment is pursuant to a collective bargaining agreement or a publicly available pay schedule.

The Circular Letter also states that CalPERS will send two notification letters to CalPERS employers. An Annual Notice will be sent in June to provide the employer with a reminder of the July 30 reporting requirements for out-of-class appointments.  A Second Notice will be sent in September informing the employer that CalPERS has not received the Out-of-Class Appointment Employer Certification.  According to the Circular Letter, failure to report the information may result in penalties under Government Code section 20480 and notification to CalPERS Office of Audit Services to initiate an audit of the employer’s records.

Outstanding Issues Regarding the Out-of-Class Appointment Employer Certification

Agencies may encounter some ambiguities when completing their Out-of-Class Appointment Employer Certification. For example, Government Code section 20480 went into effect on January 1, 2018.  However, the statute says that the out-of-class appointment “shall not exceed a total of 960 hours in each fiscal year.”  The Out-of-Class Appointment Employer Certification also asks for the total hours worked in the fiscal year.  For CalPERS purposes, the fiscal year began on July 1, 2017, which predates the enactment of the law.  It is unclear whether, for this fiscal year, the employer is only required to report hours worked on or after January 1, 2018.  The Circular Letter does not address this ambiguity.  Moreover, since a certification form only needs to be completed for out-of-class appoints that exceed 960 hours in a fiscal year, it may be unclear whether a certification is even required.  This ambiguity leaves many employers wondering if they will be on the hook for penalties.

Under Government Code section 20480, in order to trigger the statute, the appointment must be to a “vacant” position “during recruitment for a permanent appointment.” The phrase “during recruitment” is not defined in Government Code section 20480 and is not further defined in the Circular Letter.  This leaves some uncertainty about when application of the statute begins.  For example, it is unclear whether the employer starts counting hours if an employee is appointed to a vacant position in March, but the employer does not actually post recruitment materials to fill the position until July.  What if the governing body authorizes a recruitment, but it is not implemented by staff for several more weeks?  The Out-of-Class Appointment Employer Certification form has a box for the employer to check that asks if the out-of-class appointment is “in a recruitment.”  The answer to that question may be “yes” on the date of the certification, but it is not clear whether hours before the “recruitment” began would be excluded.

Employers have three months before they are required to report the hours worked in qualifying out-of-class appointments to CalPERS. Absent further guidance from CalPERS, we suggest reviewing your out-of-class appointments to determine if they are of the type covered by the statute.  If so, the employer should consider making staffing changes now to avoid reporting obligations and potential penalties and expenses.

Please contact us if you have any questions about a particular appointment.