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

By Guest Author on March 8, 2019 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 March 4, 2019 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 February 28, 2019 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.

The Legislature Introduces Clean-Up Bill SB 778 to Fix SB 1343 Harassment Training Requirements – What This Means for Your Agency

By Gage Dungy on February 27, 2019 Posted in Harassment

This Special Bulletin was authored by Gage C. Dungy.

NOTE: This update incorporates further amendments to SB 778 and serves to remind clients that these are only proposed fixes to the existing SB 1343 harassment prevention training requirements that are not yet law. SB 778 is subject to change again before becoming law. If SB 778 becomes law, we will notify you immediately. In the meantime, employers must comply with the training requirements and deadlines imposed by SB 1343, which took effect January 1. We have taken the unusual step of updating you about the status of pending legislation because we are aware that many clients are currently assessing whether and when to re-train their employees.

On December 6, 2018, LCW published a Special Bulletin titled, “DFEH Provides Guidance on Impact of New SB 1343 Harassment Training Requirements: Some Questions Answered, Many Still Remain – Including Possibility that ALL Supervisory and Nonsupervisory Employees Need to Be Trained or Retrained Again in 2019”. That bulletin informed clients that the DFEH published still valid guidance regarding SB 1343, including a mandate that all nonsupervisory employees to undergo harassment training in calendar year 2019, even if they received the training in 2018. The Legislature is now considering SB 778, clean-up legislation introduced on February 26, 2019, to address employer concerns about some of the onerous requirements of SB 1343, as interpreted by the DFEH. The proposed bill language is available at: http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200SB778

If SB 778 Passes in Its Current Form, Compliant Harassment Prevention Training Provided After January 1, 2018 Will Suffice Until Calendar Year 2021.

The DFEH published a notice in November 2018, titled “Sexual Harassment and Abusive Conduct Prevention Training Information for Employers”, that said all covered employees would be required to undergo harassment prevention training by the end of calendar year 2019. The DFEH premised this mandate on the following language in Government Code section 12950.1(a):

“An employer who has provided this training and education to an employee after January 1, 2019, is not required to provide training and education by the January 1, 2020, deadline.”

Unfortunately, this awkward statutory language, and the interpretation given to it by the DFEH, requires any employer who already provided otherwise compliant harassment prevention training in 2018 to re-train the same employees again in 2019.

SB 778, in its present form, would replace the above-referenced sentence in Government Code section 12950.1(a) with the following sentence:

“An employer who has provided this training and education to an employee after January 1, 2018, is not required to provide refresher training and education until after December 31, 2020.”

There is Strong Indication that SB 778 Will Become Law

SB 778 is a “committee bill” in the State Senate, meaning all of the members of the Senate Labor, Public Employment and Retirement Committee, including legislators from both parties, approved of the bill. At this point, there is no indication of any opposition to the bill and all signs point to it passing.

SB 778 does not include an “urgency” clause that would allow it to take immediate effect upon signature of the Governor. As presently worded, the legislation would not take effect until January 1, 2020. There is some support in the Legislature for an urgency clause to be added, but urgency legislation requires 2/3 approval of both the Senate and Assembly. Nevertheless, the fact that SB 778 is a committee bill with bi-partisan support leaves open the possibility that could happen.

While SB 778 is Not Yet Law, Here’s What Agencies Should Do Now:

Employers Who Provided Harassment Prevention Training in Calendar Year 2018 May Consider Waiting to Reschedule Training This Year

SB 778 will hopefully be welcome news to employers who were confronted with the awkward result from SB 1343 requiring follow-up refresher training this year when already provided last year in 2018. While not yet law, the fact that SB 778 has bipartisan support is a good indicator that it will become law. Therefore, employers who provided otherwise compliant harassment prevention training in 2018 may wish to consider delaying refresher training until SB 778’s fate is determined in the Legislature. LCW will publish updates on SB 778 on its blog as information becomes available.

Assuming that SB 778 becomes law, employers should consider scheduling future training for supervisory and non-supervisory employees on the same two-year track to ensure that employees are receiving consistent training to the extent possible.

Employers Who Either 1) Are On a Two-Year Track to Provide Supervisory Employees Harassment Prevention Refresher Training in Calendar Year 2019, or 2) Did Not Provide Non-Supervisory Employees With Compliant Harassment Prevention Training in 2018 Still Need to Still Provide Such Training in 2019.

Employers who did not provide otherwise compliant harassment prevention training in 2018 still need to provide the training this year. SB 778 would not provide any relief for such employers.

Provide Harassment Prevention Training to New Hires Within Six Months.

Importantly, employers must provide new employees with harassment prevention training within six (6) months of hire. Therefore, regardless of whether your agency provided harassment prevention training to employees in 2018, any new supervisory or non-supervisory employees would still need to receive this training within 6 months of their hire date if that timeline falls in calendar year 2019.

LCW, which has offered effective harassment prevention training for decades, offers SB 1343 training. For more information on our training programs, contact our Training Coordinator Anna Sanzone-Ortiz at asanzone@lcwlegal.com or (310) 981-2051 or Director of Marketing and Training Cynthia Weldon at cweldon@lcwlegal.com or (310) 981-2000.

If you have any questions about this Special Bulletin, please contact attorneys in our Los Angeles, San Francisco, Fresno, Sacramento, or San Diego offices for further guidance.

Is Minimum Wage a Matter of Statewide Concern? The Second Appellate District Says Yes, Applying the State Minimum Wage to Charter Cities (and Counties).

By Lisa S. Charbonneau on February 26, 2019 Posted in Special Bulletin, Wage and Hour

This post was authored by Lisa S. Charbonneau.

On February 25, 2019, the California Second Appellate District Court of Appeal issued a decision in the case Marquez, et al. v. City of Long Beach, holding that the state minimum wage applies to charter cities because minimum wages are a matter of statewide concern. The holding should be construed to apply to all counties (charter and general law) as well.

What does this mean for charter cities and counties (charter and general law)? The practical effect of Marquez is that charter cities and all counties must ensure that their non-exempt employees are paid no less than the state minimum wage for all hours worked. An agency that pays any non-exempt employee less than the state minimum wage should take immediate steps to increase those wages right away. We recommend consulting with legal counsel on how to take those steps.

Currently, the state minimum wage is $12.00 per hour for any employer with more than twenty-five employees and $11.00 per hour for employers with 25 employees or less. The state minimum wage is statutorily set to increase yearly until it reaches $15.00 for all employees in 2023 (2022 for employers with more than 25 employees). Click here for a chart on the state minimum wage phase-in.

Note that Marquez decision does not affect general law cities, which are subject to the state minimum wage.

Background

Beyond the impact on day-to-day wage rates, the Marquez decision is notable for its discussion of why the state minimum wage applies to charter cities and counties. A bit of background will be helpful here. Under the California Constitution at Article XI, Sections 4 and 5, charter cities and counties (charter and general law) have exclusive authority to regulate and determine their own municipal affairs. These provisions have given rise to what is known as the home rule or municipal affairs doctrine. Under the doctrine, charter cities and counties (charter and general law) have plenary power over their own municipal affairs exclusive of state interference. In contrast, the state legislature has the power to regulate matters of statewide concern. Click here to read more about the home rule doctrine.

Over the years, courts have been asked to determine what is a municipal affair, what is a matter of statewide concern, and in what cases may the state legislate municipal affairs. In the context of employee compensation, courts have ruled, for example, that the state’s workers’ compensation law is a matter of statewide concern, as is the statewide rights of public employees to join a union, thus the constitution permits those laws to apply to charter cities and counties despite conflicting local laws. In contrast, courts have found that setting the wages of charter city employees, capping those wages, and outsourcing the determination of such wages to a third party were all municipal affairs not subject to state interference. (Marquez, *18.)

In the Marquez case, the court was tasked with evaluating whether the state’s minimum wage law is a matter of statewide concern applicable to charter cities (like workers’ compensation or the right to join a union) or unconstitutionally interfered with purely municipal affairs of those entities.

The State Minimum Wage Is a Matter of Statewide Concern

In applying the state minimum wage law to charter cities (and all counties), the Marquez court analyzed the purpose of the law itself, holding that the law and its legislative history evidences the Legislature’s intent to broadly apply the state minimum wage to all employees throughout the state in every industry – private and public. Moreover, the state minimum wage law protects Californians by keeping California “families above the poverty line.” (Marquez, *28.) That is, like workers’ compensation law, the statewide minimum wage serves the “fundamental purpose of protecting health and welfare of workers,” which is a matter of statewide concern. (Id.) The court also noted the state is more likely to provide state-funded public assistance to employees receiving wages below the statutory minimum. (Marquez, *25.) For all these reasons, the court concluded that the state minimum wage law is a matter of public concern and may be applied to charter cities (and all counties).

The Marquez court was careful to distinguish minimum wage laws from prevailing wage laws, which have been struck down by the California Supreme Court as unconstitutional numerous times, most recently in State Building & Construction Trades Council v. City of Vista. According to the Marquez court, the Supreme Court struck down prevailing wage laws because they effectively set wages and salaries at the prevailing rate, which has a greater impact on local control than minimum wage laws, which only set “as a floor the lowest permissible hourly rate of compensation.” (Marquez, *29.)

Charter Cities and Counties Retain Authority to Provide Wages Above the Minimum

Importantly, the Marquez court wrote, “the minimum wage law does not deprive the City completely of its authority to determine wages. The law sets a floor based on the Legislature’s judgment as to the minimum income necessary for a living wage in this state. The City retains authority to provide wages for its employees above that minimum as it sees fit.” (Marquez, *32.) Thus, charter cities and counties should not rely on Marquez to follow wage and hour laws that are not the state minimum wage. Agencies are cautioned to consult legal counsel to evaluate whether California wage and hour laws apply.

What Should You Do Right Now?

You should ensure that if you are a charter city or a county (general or charter) that all of your employees (including part-time and unrepresented employees) are paid at least the current state minimum wage.

It is not known whether the City will appeal the decision to the California Supreme Court. Regardless, LCW is following this case and will provide updates on any new developments.

U.S. Supreme Court Unanimously Rules Civil Asset Forfeitures are Subject to Eighth Amendment

By Paul D. Knothe on February 26, 2019 Posted in Constitutional Rights

This post was authored by Paul Knothe.

On February 20, 2019, the U.S. Supreme Court decided Timbs v. Indiana, holding for the first time that the Eighth Amendment to the U.S. Constitution’s prohibition of excessive fines applies to civil forfeiture by state law enforcement agencies. It did not, however, decide how large a forfeiture constitutes an unconstitutionally “excessive” fine.

The term “civil asset forfeiture” refers to the practice of law enforcement agencies seizing property, such as cars, weapons, or cash from crime suspects when there is probable cause to believe the assets are being used for criminal activity. Under certain circumstances, agencies have been able to retain the value of those assets, and for some agencies, civil asset forfeiture has become a significant source of funding. In recent years, this practice has garnered increased public attention and controversy, centered largely on the fact that the standard for seizing property does not require a criminal conviction.

In the Timbs case, plaintiff Tyrone Timbs was arrested for selling heroin, and the police seized his Land Rover, which he had recently purchased for approximately $42,000 with the proceeds of his father’s life insurance policy. Timbs subsequently pleaded guilty and was sentenced to one year of home detention and five years of probation, including a court-supervised addiction treatment program.

Following Timbs’ guilty plea, the trial court denied the State of Indiana’s action for forfeiture of the Land Rover. The court found that the vehicle had been used to facilitate Timbs’ crime. However, it noted that the maximum monetary fine available under state law for Timbs’ conviction was $10,000, and that seizing the vehicle, worth more than four times that amount, was grossly disproportionate and therefore violated the Excessive Fines clause of the Eighth Amendment of the federal constitution. The Eighth Amendment provides: “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” The Court of Appeals of Indiana affirmed this ruling.

The Indiana Supreme Court, however, reversed the ruling, holding that the Excessive Fines clause applies only to the federal government, and not to the states. When the U.S. Constitution was originally drafted, the Bill of Rights only applied to the federal government. Following the Civil War, the Due Process clause of the Fourteenth Amendment extended application of most of the Bill of Rights to the states. The Supreme Court had not yet answered whether this included the Excessive Fines clause.

The U.S. Supreme Court unanimously held that the excessive fines clause does apply to the states. Justice Ruth Bader Ginsburg authored the main opinion of the Court, expressly stating that the Excessive Fines Clause is incorporated by the Due Process Clause of the Fourteenth Amendment. Justices Gorsuch and Thomas each wrote separately, arguing that the Excessive Fines Clause should instead be incorporated through the Privileges or Immunities Clause of the Fourteenth Amendment.

Although the Supreme Court held that the Excessive Fines clause does apply to the states, it did not decide whether the seizure of the Land Rover constituted an excessive fine. Instead, it remanded that question to the Indiana Supreme Court. Under existing law, a forfeiture constitutes an unconstitutional fine if it is “grossly disproportionate” to the offense, determined by reference to four factors: (1) the nature and extent of the crime, (2) whether the violations was related to other illegal activities, (3) the other penalties that may be imposed for the violation, and (4) the extent of the harm caused. (See People v. Estes (2013) 218 Cal.App.4th Supp. 14, 21; U.S. v. Bajakajian (1998) 524 U.S. 321, 337-40.)

The Timbs decision does not dramatically change the landscape for California agencies, because the California Constitution also prohibits excessive fines. However, given the public attention being paid to this topic, we expect further development of the law on the question of what constitutes an excessive fine in the asset forfeiture context.

EEOC Removes Final Rules that Permitted Employers to Offer Incentives to Encourage the Disclosure of Health Information in Connection with an Employer Wellness Program

By Guest Author on February 21, 2019 Posted in Disability

This post was authored by Carla McCormack.

In December 2018, the Equal Employment Opportunity Commission (“EEOC”) removed Final Rules that permitted employers to offer incentives to encourage the disclosure of health information in connection with an employer wellness program. This change is effective January 1, 2019.

An employer wellness program, generally offered through an employer-provided health plan, is intended to help employees improve their health and also to reduce healthcare costs for the employer. These programs sometimes seek to use medical questionnaires or health risk assessments (“HRA”) to determine a person’s health risk factors, such as body weight, cholesterol, blood glucose, and blood pressure levels. They implicate several legal provisions in their request for information.

One such provision, the Americans with Disabilities Act (“ADA”), prohibits employment discrimination because of disability. The other provision, the Genetic Information Nondiscrimination Act, prohibits employment discrimination because of genetic information. These laws generally prohibit an employer from obtaining and using information about employees’ health conditions or the health conditions of the employees’ family members.

However, these laws allow employers to ask health-related questions and conduct medical examinations if the employer is providing health or genetic services as part of a “voluntary” wellness program. In May of 2016, the EEOC issued Final Rules expressing its position on when participating in an employer wellness program is “voluntary” under the ADA and GINA.

The EEOC’s Final Rules permitted an employer to offer incentives (up to 30 percent of the total cost of self-only coverage) to encourage employees to answer disability-related questions or undergo medical examinations as part of the wellness program. They also permitted an employer to offer inducements (up to 30 percent of the total cost of self-only coverage) to encourage an employee’s spouse to provide information on the spouse’s current health status by completing a HRA as part of the wellness program.

Shortly thereafter, in October 2016, the American Association of Retired Persons (“AARP”) filed suit against the EEOC. It alleged that the incentive portion of the Final Rules violate the ADA and GINA and were not voluntary. The 30% incentive “pressured” employees to “divulge” “confidential health information” about themselves and “confidential genetic information” about their spouses as part of an employee wellness program. The incentive acted as a “penalty” if the employees choose to keep their medical information private and not participate in the program.

After some initial filings, in August 2017, the court denied the EEOC’s motion to dismiss and granted the AARP’s motion for summary judgment. The court found that the EEOC failed to provide a “reasoned explanation” for the 30 % incentive in the ADA and GINA rules. Because the court believed that vacating the incentive rules would be disruptive in the middle of the plan year, it decided not to vacate the rules “for the present.” Instead, it remanded the rules to the EEOC for reconsideration.

In December 2017, the AARP requested that the court alter or amend its decision not to vacate the incentive rules. One reason for the request was the representation of the EEOC that it intended to issue its new final rule in October 2019 that would be applicable “at the earliest” in 2021. The court granted AARP’s motion and vacated the incentive rules. The court also stayed when the ruling would take effect until January 1, 2019 to avoid the potential for disruption.

In December of 2018, and shortly before the court’s order would take effect, the EEOC removed the two Final Rules challenged by the AARP. The EEOC also has represented its intent to issue proposed rules addressing the concerns of the court in June of 2019. This leaves a gap of almost six months without guidance from the EEOC on this issue.

We will keep you apprised of the proposed new rules when the EEOC issues them. In the meantime, employers should be aware that there are risks to offering incentives to encourage the disclosure of health information in connection with an employer wellness program. Such incentives potentially affect the voluntary nature of the program. Employers should contact legal counsel to discuss these risks and on what to do in the interim.

The text of the original rules can be found at:

ADA
GINA

The text of the EEOC’s removal of the challenged rules can be found at:

ADA
GINA

A copy of the AARP complaint, and the court decisions referenced in this blog, can be found at:

The text of the EEOC’s anticipated June 2019 date to issue the new proposed rules can be found at:

ADA
GINA

Democracy in Action

By Melanie Chaney on February 19, 2019 Posted in Democracy

Photo Credit: Saadia Mahdi

This post was authored by Melanie L. Chaney.

As a proud American citizen, I want to instill a healthy respect for American government and democracy in my child. I have a son who has an interest in American government that belies his seven years on this earth.

You may have read in the Washington Post about the 17 African-American women who were all elected to the judiciary in Harris County, Texas this last November bringing the total number of African-American women judges in the County to 19.

Earlier this month, my son Carson and I had the opportunity to attend the swearing in ceremony of one of the newest Harris County judges, the Hon. Dedra Davis, who happens to be a dear friend of mine for the last 30 years. I brought Carson to the ceremony because I wanted him to see democracy in action first hand and witness what can be accomplished when one chooses to be an active participant in democracy and works hard towards a goal, even when the chances of success seem bleak. It might sound cliché, but I want him to know that as he grows up, he does not have to wait on the world to change. Rather, he can choose to be the change that he might want to see in his world and his government.

Carson was asked to lead the Pledge of Allegiance for the ceremony and he rose to the occasion. He proudly led the Harris County bench, numerous elected officials and many other notable Harris County citizens in the Pledge of Allegiance without fear or hesitation.

It was a proud moment for me as a friend, as a parent and as a participant in democracy that I wanted to share!

Tips from the Table: Constructive Receipt

By Guest Author on February 14, 2019 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.

Will the Supreme Court Prohibit Employers From Considering Salary History in Setting Pay?

By Megan Lewis on February 5, 2019 Posted in Wage and Hour

This post was authored by Megan Lewis.

The United States Supreme Court may be gearing up to decide whether, under the Equal Pay Act, employers can consider an employee’s previous salary history when setting the employee’s rate of pay. In doing so, the Court could clarify an area of the Equal Pay Act that has been interpreted differently by the various Circuit Courts of Appeal.

Under the federal Equal Pay Act, if 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:

seniority system;
a merit system;
a system which measures earnings by quantity or quality of production; or
a differential based on any other factor other than sex.

The first three exceptions are fairly straightforward, but the fourth (which is also known as the “catchall” exception) has often been the subject of litigation.

In April 2018, the Ninth Circuit ruled in Rizo v. Yovino that salary history is not a “factor other than sex” for purposes of the Equal Pay Act, meaning 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 held that the only “factor[s] other than sex” that 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.”

Jim Yovino, the Fresno County Superintendent of Schools, filed a petition for writ of certiorari asking the U.S. Supreme Court to review the Ninth Circuit’s decision because the Circuit Courts of Appeal do not agree on whether prior salary is a “factor other than sex.” The Eleventh Circuit, like the Ninth Circuit, has held that the “factor other than sex” exception to the Equal Pay Act is limited to “job-related factors.” The Seventh Circuit, on the other hand, has reached the exact opposite conclusion and held that employers can consider prior salary in setting pay. The Second Circuit lands somewhere in the middle, holding that the “factor other than sex” exception applies to “business-related reasons,” which is likely less restrictive than the approach taken by the Ninth and Eleventh Circuits.

The Court is likely to decide the fate of Yovino’s petition in the coming weeks, possibly as soon as later this month.

If the Supreme Court ultimately affirms the Ninth Circuit’s decision in Rizo, the Ninth’s Circuit’s standard (under which only “job-related factors” can be a “factor other than sex”) could become the nationwide standard. However, even if the Court were to overturn Rizo, state and local legislation regarding the right of employers to consider salary history in setting pay would remain in effect. For instance, California employers would still be required to comply with the provisions of AB 168, which restricts the ability of employers to gather applicants’ salary history information or consider such information when determining whether to offer employment to an applicant and/or what salary to offer. The same is true for employers in other states (Massachusetts, Delaware, and Oregon) and cities (New York, San Francisco, Boston, and Philadelphia) that have passed similar legislation.

We are watching this case closely, and we will provide updates as soon as they become available.

California Public Agency Labor & Employment Blog

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