California Public Agency Labor & Employment Blog

California Public Agency Labor & Employment Blog

Useful information for navigating legal challenges

A Step Back For Equal Pay? Supreme Court Vacates 9th Circuit’s Decision in Rizo v. Yovino

By Megan Lewis on Posted in Wage and Hour

This post was authored by Megan Lewis.

The United States Supreme Court has vacated the decision of Ninth Circuit U.S. Court of Appeals (which covers all of California) in Rizo v. Yovino, which established that employers cannot rely on an applicant’s prior salary history to justify paying one employee differently than another employee of the opposite sex for similar work.

The Ninth Circuit’s Decision

The key issue in Rizo was the meaning of an exception to the federal Equal Pay Act.  This Act requires that, where an employer is paying an employee less than an employee of the opposite sex for work requiring the same skill, effort, and responsibility, which is performed under similar working conditions, the employer must be able to demonstrate that the disparity is based on one of the following: (1) a seniority system; (2) a merit system; (3) a system which measures earnings by quantity or quality of production; or (4) a differential based on any other factor other than sex.  The first three exceptions are fairly straightforward, but the fourth (known as the “catchall” exception) has often been the subject of litigation, as it was in the Rizo case.

The Ninth Circuit held that the only “factor[s] other than sex” employers can use to justify a wage disparity are “legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance.  The Ninth Circuit stated that allowing salaries that were the result of “endemic sex-based wage disparities” to play a role in future salaries would, “perpetuate rather than eliminate the pervasive discrimination at which the Act was aimed.”

The U.S. Supreme Court’s Decision to Vacate

When we last reported on this decision, a petition for writ of certiorari was pending asking the high court to review the matter.  Jim Yovino, the Fresno County Superintendent of Schools, had asked the Court to review the Ninth Circuit’s decision because the U.S. Courts of Appeal in other parts of the Country had issued diverse opinions on whether prior salary is a “factor other than sex.”

The Court granted certiorari, but did not reach the merits of the Ninth’s Circuit’s ruling.  Instead, the Court vacated the decision and returned the case to the Ninth Circuit because Judge Stephen Reinhardt, who had authored the majority decision, died before the decision was issued.  Though the Ninth Circuit’s opinion noted that the judges voted and completed their opinions before Judge Reinhardt died, the Supreme Court set aside the ruling.  According to the Court, “federal judges are appointed for life, not for eternity.”

What Happens Next?

The Ninth Circuit was unanimous in ruling in favor of Rizo, and that outcome is unlikely to change when a new ruling is issued.  However, the panel was split on the reasoning behind the ruling, so we could see a different rationale behind the decision when the Ninth Circuit issues its new ruling with another judge taking Reinhardt’s place

As a practical matter, this ruling does not impact California employers because there is California law (Labor Code § 432.3) that already restricts the ability of employers to gather applicant salary history information or consider such information when determining whether to offer employment to an applicant and/or what salary to offer.

We will provide an update when the Ninth Circuit issues its new ruling.

Smell the Bouquet of Legal Issues

By Guest Author on Posted in Disability

This post was authored by Sarah R. Lustig.

A recent case is a good reminder to employers that scent and chemical sensitivities can indeed be considered a disability subject to the protections of the Americans with Disabilities Act (ADA) and/or the Fair Employment and Housing Act (FEHA).  John Barrie (Barrie) suffers from allergic sensitivities and reactions to multiple chemicals.  He informed his supervisor of his disability when he was hired by the California Department of Transportation in 2005 (DOT).  The DOT informally accommodated his disability during the first five years of his employment.  After Barrie started reporting to a new supervisor in 2010, he began finding chemicals in his office.

Barrie made numerous written and verbal complaints.  These complaints led to hostility and retaliation at work.  Barrie filed suit after supervisors repeatedly ignored management directives to keep perfumes and cleaning chemicals, like Windex and Comet, away from him.  Barrie claimed his supervisor called him an “idiot” and a “jerk” and that, after his desk was moved, he would sometimes find his things soaked in perfume.  After a 12-day trial, a jury found in favor of Barrie agreeing he had a physical disability of chemical sensitivity, his supervisors harassed, discriminated, and retaliated against him because of that disability and his complaints, and the DOT failed to reasonably accommodate his disability.  In May of 2017, the jury awarded Barrie over $44,000 in economic damages for lost earnings and $3 million in noneconomic damages for emotional distress.

The DOT contested the jury’s figure and the trial court judge found the award excessive and lowered the award to $350,000 as fair and reasonable.

Barrie appealed.  On March 28, 2019, California’s Third District Court of Appeal unanimously reinstated the jury’s original verdict. (Barrie v. California Dept. of Trans. (2019) Cal. 3rd Crt. App. Case No. C085175.)

This large verdict is not an anomaly.  In May 2005, a jury awarded a deejay $10.6 million for her employer’s failure to accommodate her allergy to a co-worker’s perfume, ignoring her complaints. (Weber v. Infinity Broad. Corp. (E.D. Mich. Dec. 14, 2005).)  The award was eventually reduced to $1.25 million, along with attorneys’ fees of approximately $424,000. In 2010, the City of Detroit agreed to pay a senior city planner with Multiple Chemical Sensitivity, $100,000, revise its ADA handbook and training, and to post notices about the fragrance-free policy to settle a perfume allergy lawsuit.  The employee complained when a new coworker wore heavy perfume and used a room deodorizer.  The coworker agreed to unplug the room deodorizer at the employee’s request, but refused to stop wearing perfume.  The employee appealed to her supervisor and to human resources, but the city misinformed the employee that her coworker had a constitutional right to wear perfume to work.

Under the FEHA, a disability is having a physical or mental impairment that limits one or more major life activities.  Major life activities include, among other things, breathing, concentrating, thinking, and working.  All of these activities can be impacted by a severe allergic reaction.  Employers should understand their obligations to engage in the good-faith, interactive process, and provide reasonable accommodations.  The accommodations analysis should address three issues:

  • Reasonableness: Is the requested accommodation reasonable?
  • Effectiveness: Is the request effective? Will this requested accommodation effectively allow the employee to perform the essential functions of his or her job?
  • Undue Hardship: Does the request pose an undue hardship?

Moreover, to minimize risk and liability, employers should be vigilant in monitoring the effectiveness of any accommodation.

Court of Appeal Issues First Published Decision on Senate Bill 1421 and Retroactivity

By Guest Author on Posted in Special Bulletin

This Special Bulletin was authored by J. Scott Tiedemann & Lars T. Reed

Over the past three months, since California Senate Bill 1421 went into effect on January 1, 2019, numerous public agencies across California have been involved in litigation over whether the new law applies to records created before 2019. After conflicting decisions from various superior courts, some of which we discussed in a previous blog post, the California Court of Appeal has now issued the first published decision addressing this issue.

The ruling comes in Walnut Creek Police Officers’ Association v. City of Walnut Creek et al., which was a consolidated appeal of six different lawsuits brought by peace officer unions against various public agencies in Contra Costa County.  The unions had each petitioned for injunctive relief limiting SB 1421 disclosures to records created after January 1, 2019. The superior court denied the petitions, and the unions challenged the ruling in the Court of Appeal.

In a decision published on March 29, 2019, the Court of Appeal, First Appellate District, upheld the superior court’s decision. The Court ruled that applying SB 1421 to older records does not make the law impermissibly retroactive: “Although the records may have been created prior to 2019, the event necessary to ‘trigger application’  of the new law—a request for records maintained by an agency—necessarily occurs after the law’s effective date.” The Court also explained that the new law “does not change the legal consequences for peace officer conduct described in pre-2019 records. … Rather, the new law changes only the public’s right to access peace officer records.”

As a published appellate court decision, the Court’s ruling in this case is binding precedent in all superior court proceedings across California unless or until there is a contrary opinion published by a different Court of Appeal, or by the Supreme Court.

DOL Proposes Changes to the Rules Governing Payments to Exclude from the Regular Rate

By Lisa S. Charbonneau on Posted in Special Bulletin

This Special Bulletin was authored by Lisa S. Charbonneau

On March 29, 2019, the Department of Labor (DOL) published proposed new rules on the Regular Rate requirements (i.e., the rate at which overtime must be paid) under the Fair Labor Standards Act (FLSA).  The proposed rules may be found here.  The comment period for the proposed rules closes on May 28, 2019.

The most significant part of the proposed new rules is an update to Part 778 of the Code of Federal Regulations (CFR), which governs Overtime Compensation under the FLSA.  In particular, the bulk of the proposed rules update a subpart titled “Payments that May be Excluded from the ‘Regular Rate,’” which provides guidance on various types of compensation excluded from the regular rate.  Relevant here, the subpart addresses the following payments in some detail: Extra Compensation for Overtime (see 29 CFR sections 778.201-207), Bonuses (see 29 CFR sections 778.208-215), and Payments Not for Hours Worked (see 29 CFR sections 778.216-224).  This bulletin will focus on the changes proposed to the subsection entitled “Payments Not for Hours Worked,” which provides guidance on items of compensation excluded from the regular rate under 29 USC 207(e)(2).

The proposed changes are not final.  By seeking comments on their proposed regulatory changes, the DOL is seeking public input into what it has proposed.  If final rules are issued (which is likely) they may be the same, similar or completely different from the proposed rules.  As such, employers should not change current pay practices to align with the proposed rules.  Rather, before modifying how you calculate overtime, you should wait to see what is included in the final rules, if, and when, they are issued. 

Background on the Regular Rate

Under the FLSA, an employee is entitled to time and one-half his or her “regular rate” for all hours worked in excess of the applicable FLSA overtime threshold, which is generally forty hours in a seven-day workweek.  The Act defines the regular rate as including “all remuneration for employment” except compensation specifically excluded under one of eight exclusions set forth in the Act at 29 USC 207(e).

One such exclusion is a significant focus of the proposed new rules: 29 USC 207(e)(2), which excludes the following from the regular rate:

  • “payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar cause;”
  • “reasonable payments for traveling expenses, or other expenses, incurred by an employee in the furtherance of his employer’s interests and properly reimbursable by the employer; and”
  • “other similar payments to an employee which are not made as compensation for his hours of employment.”

Much of the DOL’s proposed rules apply this provision to the 21st-century workplace.   Indeed, most of Part 778 of the regulations was issued in 1950 and the most recent substantive update to the Part was in 1968.  Due to the significant changes in the workplace and employee compensation since that time, the proposed rules are a helpful guide for applying the FLSA to the 21st-century workplace.

Specific Guidance from the Proposed New Rules on Payments Not for Hours Worked that are Excludable from the Regular Rate

Instead of providing a comprehensive summary of the entirety of the DOL’s proposed changes to Part 778, we have identified certain proposed updates that are particularly relevant to employers.

Holiday, Vacation & Sick Leave Cash Outs

Many employers provide various forms of paid leave that may be used or if unused, converted into cash payments paid directly to employees.  Under the proposed new rules, the DOL would consider cash-outs of accumulated vacation, holiday, and/or sick leave (also referred to as leave sell-backs or buybacks) excludable from the regular rate – regardless of whether the leave is used contemporaneously or cashed-out in a lump sum at a later date.  However, the proposed rules make a distinction between sick leave cash outs not tied to the use of sick leave, which the DOL would consider excludable from the regular rate, and payment of an attendance bonus for nonuse of sick leave, which the DOL would consider included in the regular rate.  As the final rules are issued, we will monitor carefully this distinction drawn by the DOL.  Depending on how this issue is resolved in the final rules, employers may need to closely examine how they characterize their employees’ right to cash out sick leave. Per the proposed rules, the characterization (is it based on sick leave usage or not?) could make the difference between whether the cash out may or may not be excluded from the regular rate.

Wellness Programs, Gym Memberships, On-Site Treatment by Medical Specialists, and Similar Payments

Employers are increasingly providing significant “wellness” benefits to employees.  Such benefits take many unique forms.  Pursuant to the proposed new rules, the employer cost of furnishing any of the following may be excluded from the regular rate: treatment provided on-site from specialists such as chiropractors, massage therapists, physical therapists, personal trainers, counselors, or Employee Assistance Programs; gym access, gym memberships, fitness classes and recreational facilities; wellness programs, such as health risk assessments, biometric screenings, vaccination clinics, nutrition classes, weight loss programs, smoking cessation programs, stress reduction programs, exercise programs, and coaching to help employees meet health coals; and discounts on employer-provided retail goods and tuition benefits not tied to quantity or quality of work performed.  While this proposed new rule does not necessarily announce new law, if it becomes part of the final rules it would be a welcome clarification that employers may offer these sought-after benefits without concerns for their regular rate impacts.

Employer Contributions to Accident, Unemployment, or Legal Services Benefits Plans

Although not pertaining to the exclusion found at 29 USC 207(e)(2), the proposed new rules also clarify that employer contributions to accident, unemployment, or legal services benefit plans are excludable from the regular rate.  If this proposed new rule becomes part of the final rules, employers will have more freedom to provide such benefits to their employees without fear that such contributions must be included in the regular rate.

Per Diems

Per diems are allowances for lodging, meals and incidental expenses provided to employees traveling on employer business.  Pursuant to the proposed new rules, per diems may be excluded from the regular rate when they are less than or equal to the per diems permitted under the Federal Travel Regulation System, 41 CFR Subtitle F.  Current federal per diem rates for various California localities may be found here.  Note that higher per diems may also be excludable from the regular rate if they are reasonable, but under the proposed rules, following the federal rates will best ensure the per diem amounts are excludable from the regular rate.  If this proposed change becomes part of the final rules, employers will no longer have to guess what is “reasonable” for purposes of excluding a per diem payment from the regular rate.

Call Back, Call Out Pay and Similar Extra Payments

Many employers provide minimum call back or call out pay for employees required to return to work due to an emergency or other unforeseen circumstance.  Under the proposed new rules, when callbacks or call outs are “so regular that they are essentially prearranged,” the entire minimum payment for callbacks or call-outs must be included in the regular rate – even if actual hours worked are less than the minimum callback or call-out amounts.  The example of a regular, essentially prearranged call back provided by the proposed new rules is an employee called back during the busiest part of the day for six weeks out of two months in a row.  The practical effect of this proposed guidance requires evaluation on a case-by-case basis depending on an employer’s specific callback / call out policies and practices.  Most employers (and their payroll systems) do not require employees to record actual hours worked when they are called back and receive minimum callback pay.  Rather, they record all hours as hours worked.  Existing law provides that minimum call back payments (e.g., an employee is paid a minimum of four hours for being called back even though the employee may only be called back for two hours) are excludable from the regular rate.  If the proposed change becomes part of the final rules, employers may wish to consider ensuring that their payroll systems distinguish between actual hours worked and the minimum payments made for callbacks and only include minimum callback payments in the regular rate if they meet the proposed test of being “so regular that they are essentially prearranged.”

Paid Meal Breaks

Although not required under the FLSA, some employers provide paid meal breaks to their employees.  The proposed new rules clarify that payments for bona fide meal periods (where no work is performed) may be excluded from the regular rate.  This clarification was designed to reflect existing law, including a 2004 Ninth Circuit case, Ballaris v. Wacker Siltronic Corp., which held that payments for lunch periods are excluded from the regular rate.

What Is Next?

Until May 28, 2019, members of the public are invited to comment on the DOL’s proposed rules prior to their adoption into what will be the final rules.  Comments must be written and submitted on or before May 28, 2019.  Electronic comments may be submitted here.  After the comment period closes, the DOL will review the comments along with the published proposed rules, and at some point in the future, will likely issue the rules in final form.  At that time, the new rules will become the official guidance of the DOL.  Liebert Cassidy Whitmore is following this matter and will provide updates as needed.

If you have questions about the applicability of these proposed rules, please consult with wage and hour counsel for answers.  But note, until the rules are in final form, they have no legal effect and are only indicative of the intent of the DOL.

Heroic Acts by California Peace Officers During the 2017 Las Vegas Shooting Inspire New California Law Allowing Employers to Extend Workers’ Compensation Protections to Peace Officers for Out-of-State Off-Duty Conduct

By Alysha Stein-Manes on Posted in Public Safety Issues, Wage and Hour

This blog was authored by Alysha Stein-Manes.

On October 1, 2017, several peace officers from the Orange County Sheriff’s Department were in attendance at the 91 Harvest Music Festival when a gunman opened fire on the crowd.  Fifty-eight people were killed and over 800 injured.  Several of these peace officers brought other festivalgoers to safety and continued to provide assistance to the local police immediately following the shooting.  Reports further indicate that peace officers from other California agencies were also present at the Festival and provided assistance.

Following the Las Vegas shooting, several Orange County peace officers filed workers’ compensation claims for injuries arising from their off-duty conduct, but their claims were denied because the California Labor Code did not extend workers’ compensation protections for such out-of-state conduct.

In response to the deputies’ experiences, an assembly member introduced Assembly Bill (AB) 1749 to amend the California Labor Code governing workers’ compensation benefits.  Following unanimous support from both Legislative houses, then-Governor Jerry Brown signed AB 1749 into law in the Fall of 2018.  The law specifically amends the Labor Code to permit public agencies to accept liability for workers’ compensation of a peace officer, if the peace officer “is injured, dies, or is disabled from performing his or her duties as a peace officer by reason of engaging in the apprehension or attempted apprehension of law violators or suspected law violators, or protection or preservation of life or property, or the preservation of the peace,” whether peace officers engage in such conduct in-state or out-of-state.  A public agency may accept such liability if the agency determines that providing workers’ compensation serves the agency’s public purpose.  Importantly, the law extends the timeline for peace officers who were injured in the Las Vegas shooting to file workers’ compensation claims by statutorily setting their “date of injury” as January 1, 2019.  By setting their date of injury as January 1, 2019, these peace officers may take advantage of the statute’s one-year statute of limitations.

The new law also clarifies that an agency’s acceptance of workers’ compensation liability does not affect any determination of whether a peace officer acted within the course and scope of their employment for any other purpose.  This additional language may be intended to protect agencies from liability for alleged legal violations arising from a peace officer’s off-duty conduct.

AB 1749 does not create a mandate that a public employer accept workers’ compensation liability under the circumstances described above.  Rather, the law expressly states that an employer may accept liability “at its discretion or in accordance with written policies adopted by resolution of the employer’s governing body.”

Agencies should consider if and how they wish to implement this new law.  On the one hand, adoption of a written policy can protect an agency against accusations that decisions to accept or deny liability are made for arbitrary, discriminatory, retaliatory or other improper reasons.  Written policies are generally a best practice.  On the other hand, the ability of an agency to make ad hoc non-discriminatory and non-retaliatory decisions regarding accepting such liability provides agencies with flexibility where it may be difficult to define what triggers coverage under this new law.  We recommend that agencies consult with their legal counsel to consider their options and discuss the drafting of a policy that will best serve a particular agency’s needs.

While this new law applies only to peace officers, the Legislature is currently considering a bill, AB 932, which would extend similar protections to California’s firefighters when the firefighter engages in fire-suppression or rescue operation or the protection or preservation of life or property outside of California.  We will continue to monitor AB 932 as it makes its way through the legislative process and provide updates.

White House Issues Executive Order On Free Speech In Higher Education

By Guest Author on Posted in Special Bulletin

This Special Bulletin was authored by David Urban.

On March 21, 2019, the White House issued an Executive Order requiring federal agencies to withhold certain types of funds from higher education institutions that fail to comply with the First Amendment or federal laws, regulations, or policies on free inquiry.  The Executive Order does not change existing free speech law on campus.  It requires colleges and universities to comply with existing laws and policies, and depends on specified federal agencies to enforce it.  We expect the Executive Order will have little actual effect on free speech on campus, because it does not change the law.  The Executive Order could have more substantial impact eventually as federal agencies take concrete steps to implement it and develop processes to determine whether colleges and universities follow free speech requirements.

The Executive Order, titled “Improving Free Inquiry, Transparency, and Accountability at Colleges and Universities,” contains provisions on two topics, (1) free speech, and (2) requiring the U.S. Department of Education to publish data on student incomes, including earnings, debt, and default rate on loans, and related reporting and policy requirements.  In fact, most of the Executive Order relates to this second topic.  The provisions on free speech are shorter and more general.  They are as follows.

Section 1 sets out the purpose of the Order, and states that the Administration:

seeks to promote free and open debate on college and university campuses.  Free inquiry is an essential feature of our Nation’s democracy, and it promotes learning, scientific discovery, and economic prosperity.  We must encourage institutions to appropriately account for this bedrock principle in their administration of student life and to avoid creating environments that stifle competing perspectives, thereby potentially impeding beneficial research and undermining learning.

Section 2(a) of the Order states that it is the policy of the federal government to

encourage institutions to foster environments that promote open, intellectually engaging, and diverse debate, including through compliance with the First Amendment for public institutions and compliance with stated institutional policies regarding freedom of speech for private institutions . . . .

The operative language from Section 3(a) requiring institutions to comply with existing law is vague, and leaves much room for debate about how it will apply and which particular laws and rules will be involved.  Section 2(a) is more clear that at a minimum the Executive Order concerns public institutions complying with the First Amendment, and private institutions (to which the First Amendment does not apply) complying with their “stated institutional policies regarding freedom of speech.”  Often these stated policies at private institutions will mirror First Amendment requirements for permitting student and community member expression and regarding academic freedom.

Section 3(c) makes clear that the Executive Order does not affect federal financial aid.

Whether the Executive Order will have an impact in the area of free speech law on campus depends on what choices federal agencies make in implementing it.  The fact that the Executive Order does not change existing law suggests it will not have substantial impact, but some commentators and activists argue that many higher education institutions are out of step with the First Amendment in policies and practices, and that private institutions do not abide by their own policies.  The threat of withdrawal of federal funding could have significant consequences.

Institutions can take the Executive Order as a reminder to look at free speech issues on their own campus.  Common areas for free speech challenge include:

  • student codes of conduct and civility that supposedly chill student expression;
  • participatory government processes; collective bargaining agreement language that often includes free expression and academic freedom provisions;
  • policies that limit students and outside groups wishing to engage in free expression to small speech areas on campus; and
  • policies that impose burdensome advance notice or have advance approval requirements for organized speech.

Common areas in which private institutions can face challenges are:

  • policies that have vague terminology;
  • policies that confer expansive free speech;
  • academic freedom rights that clash with existing civility code or conduct code language; and
  • requirements that fail to correspond to actual practices.

Institutions should take the time now to review their policies, and most importantly their practices, to avoid issues with federal agencies under the Executive Order.

New DOL Opinion Letter Addresses Employers’ Obligation to Designate FMLA Leave

By Lisa S. Charbonneau on Posted in FMLA, Wage and Hour

This blog was authored by Lisa S. Charbonneau.

Should your agency permit employees to use their available paid leave accruals prior to designating leave as Family Medical Leave Act (FMLA)-qualifying, even if your agency knows the leave is FMLA qualifying from the start?  A new Department of Labor (DOL) Opinion Letter issued by the Acting DOL Wage & Hour Administrator explains that employers that delay designation of FMLA-qualifying leave more than five days violate the FMLA.  Consistent with the new DOL Opinion Letter, employers should run FMLA once on notice of an FMLA qualifying event.

 What is the FMLA?

Generally speaking, the FMLA provides employees with the right to take up to twelve weeks of unpaid, job-protected leave per year to treat their own serious health condition or for various family care reasons, or up to twenty-six weeks to care for a covered service member.  An employee’s accrued paid leave may run concurrently with an employee’s otherwise unpaid FMLA leave.

The New DOL Opinion Letter

Issued March 14, 2019, a new DOL Opinion Letter addresses an employer’s obligation to designate leave as FMLA leave.  Specifically, the Opinion Letter explains that once an FMLA-eligible employee communicates a need to take leave for an FMLA-qualifying reason, neither the employee nor the employer may decline FMLA protection for that leave.  That is, once an employer determines the employee’s reason for leave is FMLA-qualifying, the leave is FMLA protected, must be designated as FMLA, and thus counts toward the employee’s FMLA leave entitlement.  As the DOL Opinion Letter explains, an employer “may not delay designating leave as FMLA-qualifying, even if the employee would prefer that the employer delay the designation.”  The Opinion Letter also rescinds any prior statements in previous opinion letters that are inconsistent with the new opinion.

Application to California Employers

For California employers, the new DOL Opinion Letter clarifies employer responsibilities – especially after the Ninth Circuit case, Escriba v. Foster Poultry Farms, in which the Court held that an employee may affirmatively decline to use FMLA leave, even if the underlying reason for seeking the leave would have invoked FMLA protection.  Importantly, the Escriba case did not hold that an employer may delay designation of FMLA leave when an employer is on notice of an FMLA-qualifying event.  Rather, the case dealt with a scenario in which an employee did not request FMLA leave and did not give sufficient information that the purpose of the leave was FMLA-qualifying.  Because the employer was not on notice that the leave was FMLA-qualifying, it did not have an obligation to designate the leave as FMLA.

The new DOL Opinion Letter is clarification that once an employer determines that a leave qualifies as FMLA, the employer should designate an FMLA-qualifying leave as FMLA leave within five days.  Even if an employee wishes to take accrued paid leave at the outset, if the employer is on notice that the leave is FMLA qualifying, the leave will necessarily count toward the employee’s FMLA entitlement and will not expand that entitlement.

What About the California Family Rights Act?

The California Family Rights Act (CFRA) follows the FMLA to the extent the laws are not inconsistent.  On this issue, CFRA is not inconsistent with the FMLA so the principles discussed above should extend to CFRA leave designations as well.

Applying leave laws is challenging.  If you have questions on how to apply the various state and federal leave laws that apply to your agency, seek advice and counsel of an experienced employment law attorney to ensure you are in compliance.

Department Of Labor Proposes to Increase the Minimum Salary to Qualify for FLSA Overtime Exemptions

By Guest Author on Posted in FLSA, Special Bulletin

This Special Bulletin was authored by Tony G. Carvalho.

On March 7, 2019, the Department of Labor (DOL) published a Notice of Proposed Rulemaking that, if implemented, will affect the minimum wage and overtime-exempt status of many employees under the Fair Labor Standards Act (FLSA). The proposed changes concern the “salary basis test” applicable to the “white collar” exemptions for executive, administrative, and professional employees. The changes will also alter the test for “highly compensated employees.”

To qualify as exempt from the FLSA’s minimum wage and overtime requirements pursuant to a white collar exemption, an employee must first meet the salary basis test. Part of that test is a minimum salary the employee must receive. Since 2004, the salary basis test required the employee to receive a minimum salary of $455 per week, or $23,660 per year[1].  By this proposed rulemaking, the DOL proposes to increase this minimum to $679 per week, or $35,308 per year.

Another proposed change to the white collar exemptions is an amendment to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level. Under the new proposal, these qualifying bonuses/incentive payments can be paid annually or more frequently.

The DOL also proposes an increase to the minimum total annual compensation requirement for exempt “highly compensated” employees. Currently, to meet the FLSA overtime exemption as a highly compensated employee, an employee’s total annual compensation must be at least $100,000. The new minimum proposed by the DOL will be $147,414 total annual compensation. This “total annual compensation” must include at least $679 per week paid on a salary basis. Total annual compensation may include commissions, nondiscretionary bonuses, and other nondiscretionary compensation.

Finally, although not a part of the current proposal, the DOL announced its intent to issue further proposals to update the salary thresholds for the white collar and highly compensated employee exemptions once every four years.

The DOL has requested comments on these proposed changes. The comment period will begin once the Notice of Proposed Rulemaking is officially published in the Federal Register and will remain open for 60 days thereafter. Those interested can submit their comments online here: https://www.regulations.gov/  using Regulatory Information Number (RIN) 1235-AA20.

LCW will continue to monitor the comment period and will provide further updates as the final rulemaking unfolds. Please visit our website at lcwlegal.com for regular briefings on the FLSA.

 

[1] The current minimum salary to meet the salary basis test ($455 per week) is actually lower than California’s minimum wage of $12,00 (or $480 per week).

California Supreme Court Holds That Air Time is Not a Vested Right, Passes on Reexamining “California Rule”

By Frances Rogers and Guest Author on Posted in Special Bulletin

This Special Bulletin was authored by Frances Rogers & Amit Katzir.

The California Supreme Court issued a long-awaited decision in Cal Fire Local 2881 v. CalPERS, a case addressing whether the Legislature’s elimination of “air time” as an optional benefit for members of CalPERS unconstitutionally impaired a vested contractual right.  Holding that the air time benefit was not entitled to constitutional protection, the Court took a pass on reviewing a much bigger question:  Whether the so-called “California Rule” for modifying pension benefits should remain intact.

In 2003, the California Legislature enacted Government Code section 20909, providing eligible CalPERS members the option to purchase up to five years of non-qualifying service credit.  This optional benefit is commonly referred to as “air time.”   CalPERS members choosing to exercise this option did so by paying an amount arrived at by actuarial estimates to cover the member and employer’s liability for the additional service credit. The legislative intent was that such a purchase would not impose any cost on the employer, though as time would tell, employers were burdened with additional costs when the amount paid by the member for the purchase was based on faulty actuarial estimates.

Within a decade, the Legislature reversed course, eliminating a member’s option for the air time benefit as part of the California Public Employees’ Pension Reform Act of 2013 (PEPRA).  However, the change only applied prospectively, and any member who exercised their option to purchase air time while it was available retained the additional service credit.

In response to PEPRA’s elimination of the air time benefit, state firefighters brought suit through their union, asserting that the opportunity to purchase air time was a vested right protected by the contract clause of the California Constitution and could not be eliminated during their employment.  The lawsuit did not challenge the validity of eliminating the option to purchase air time for persons who were not employed by the state at the time of PEPRA’s enactment.

Ordinarily, the protection of the contract clause to statutory terms and conditions of public employment only arises where the statute or ordinance establishing the benefit and the circumstances of its enactment clearly evince a legislative intent to create contractual rights.  However, courts of this state historically extended the protection of the contract clause to public employee pension benefits even in the absence of a clear manifestation of legislative intent. Moreover, case law evinces a vested protection not only for pension benefits already earned by the public employee, but also the employee’s expectation that the same pension benefits can continue to be earned for the remainder of employment.  This latter part became known as the “California Rule,” which holds that public employee pension benefits vest on the first day of service and cannot be reduced at any time during employment absent the introduction of an equally advantageous benefit.

The Cal Fire case presented two issues.  The first issue was whether the opportunity to purchase air time was a constitutionally protected vested right.  The second and potentially broader issue was whether PEPRA’s elimination of the air time benefit constituted an unconstitutional impairment of public employees’ contractual rights, if such contractual rights existed in the first instance.

Many were hopeful that in analyzing the second issue, the Court would reexamine the California Rule, either modifying, abandoning, or affirming it.  However, the Court did not get that far.

Taking up only the first of the two issues presented, the Court held that the opportunity to purchase air time was not a vested right protected by the constitutional contract clause.  The Court found that the 2003 statute did not reflect an intent by the Legislature to create a contractual right for public employees or that the option for air time would not be subject to repeal.

In addition, although public employees may hold an implied vested right to deferred compensation that is attributable to the performance of service, the Court found that the air time benefit was not connected to any actual service.  The option for air time was not, unlike ordinary pension benefits, a contractually binding offer to induce an employee’s service to the state. Pension benefits, the classic example of deferred compensation, flow directly from a public employee’s service, and their value is roughly proportional to the time of that service.  The Court found no basis to conclude that the opportunity to purchase air time was granted as deferred compensation for an employee’s work during any period of employment prior to an election to purchase the service credit. The amount of additional credit was at the employee’s discretion and not dependent on corresponding service to the state.

In its decision, the Court stated that “[w]e have never held, however, that a particular term or condition of public employment is constitutionally protected solely because it affects in some manner the amount of a pensioner’s benefit.”  In doing so, the Court reaffirmed prior decisions holding that “a term and condition of public employment that is otherwise not entitled to protection under the contract clause does not become entitled to such protection merely because it affects the amount of an employee’s pension benefit.”

Because the Court held that the opportunity to purchase air time was not a vested right, it did not reach the issue of whether PEPRA’s elimination of the air time benefit unconstitutionally impaired the contractual rights of public employees.  As for the California Rule, the Court held that its holding “precludes such a re-examination.”  Therefore, for the time being, the California Rule remains untouched.

A number of additional cases involving the California Rule are awaiting review by the California Supreme Court, including Marin Association of Public Employees v. Marin County Employees’ Retirement Association, Alameda County Deputy Sheriff’s Association v. Alameda County Employees’ Retirement Association, and Hipsher v. Los Angeles County Employees Retirement Association.  Although the Court decided the Cal Fire case narrowly, the California Rule may be front and center in a later case.

Courts Begin To Weigh In On Senate Bill 1421 and the Release of Police Records

By Guest Author on Posted in Public Safety Issues

This post was authored by Geoffrey S. Sheldon & Lars T. Reed.

Immediately after California Senate Bill 1421 went into effect on January 1, 2019, public agencies across California began receiving requests for public records relating to certain high-profile categories of peace officer misconduct. As we described in a previous Special Bulletin, SB 1421 does not explicitly state whether it applies to records created before the new law’s effective date. Several police labor organizations have taken the position that SB 1421 was not intended to apply retroactively to records that are in an agency’s possession but were created before January 1, 2019. This question is the subject of multiple parallel lawsuits across the state. Over the past three weeks, court rulings have begun to weigh in.

The first ruling came from Contra Costa Superior Court, where the court denied six police unions’ petitions to limit SB 1421 disclosures to records created after January 1. The court had previously issued temporary restraining orders barring release of pre-2019 records pending full consideration on the merits of the petitions. After a hearing, the court denied the unions’ petitions for injunctions, concluding that the new law only applies to public records requests received after January 1, 2019, and only requires disclosure of records maintained by a public agency at the time the agency receives a request. Therefore, the court ruled that law does not act retroactively, but nonetheless requires the release of pre-2019 records if those records are in the agency’s possession at the time it receives a request.  However, the court stayed its ruling, extending the temporary restraining order, to allow the unions time to appeal. The unions filed an appeal on February 15, 2019, and the First District Court of Appeal granted a stay of the superior court’s order that same day.

A second ruling came from Ventura County Superior Court, which ruled in favor of the Ventura County Deputy Sheriff’s Association, issuing a preliminary injunction that prevents the County from releasing records of pre-2019 incidents. The court did not issue a ruling on the merits of the legal question, but blocked the release of records pending a ruling from a higher court on whether pre-2019 records are covered by the new law.

The most recent ruling comes from Los Angeles County Superior Court, in a case brought by the Los Angeles Police Protective League against the City of Los Angeles. On Tuesday, February 19, 2019, the court ruled against the union, concluding that SB 1421 does not operate retroactively even if applied to older records, and that there is no evidence of legislative intent to preclude pre-2019 records. The Court also ruled that peace officers did not have a “vested right” to privacy that would preclude the Legislature from stripping pre-2019 records of confidentiality. The Court stayed its ruling until March 1, 2019, extending a prior temporary restraining order to allow time for the union to appeal. The same judge that heard the Police Protective League’s case is also reviewing similar petitions brought against the County of Los Angeles by the Association for Los Angeles Deputy Sheriffs and the Professional Peace Officers Association.

Because each of these rulings come from the Superior Courts, they are not binding except for the parties to each case. As of the date of this post, there is no definitive answer to whether SB 1421 requires disclosure of pre-2019 records. LCW has a designated team of attorneys closely following developments in the new law, and we will continue to post updates on new rulings as they occur. Recognizing that this area of the law will remain unsettled until there is a ruling from either a Court of Appeal or the California Supreme Court, we believe that the appellate courts will more likely than not interpret SB 1421 to require disclosure of at least some pre-2019 records that predate 2019. We therefore recommend that agencies work closely with trusted legal counsel to decide how to address public records requests made pursuant to SB 1421.