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Since the 2018 United States Supreme Court decision in Janus v. AFSCME prohibited public sector labor unions from charging agency fees to non-members, public sector labor unions have sought methods to incentivize union membership. For example, the state legislature recently amended the Meyers Milias Brown Act permitting labor unions who represent public safety officers to charge non-members for the cost of individual representation in a discipline, grievance, arbitration, or administrative hearing.

Another method for incentivizing union membership is to offer certain benefits only to union members, excluding non-members from coverage.

While permissible in certain circumstances, public agencies must be cautious when contributing to the cost of benefits exclusively for union members.

Benefits funded directly from the union’s resources (e.g., a union providing additional insurance, legal assistance, or exclusive benefits from its own funds or paid for by union dues) are generally allowed. Such benefits are voluntary, available through union membership, but not funded by public money. However, if a government agency directly funds or administers benefits exclusively for union members while excluding non-members in the bargaining unit, this can lead to potential legal challenges. For example:

  • Employer Interference: A public agency’s paying for a benefit that exclusively goes to union members, and not to non-members, could be considered employer interference under California labor laws. Under the Meyers Milias Brown Act, public agencies are prohibited from interfering with, restraining, or coercing employees in their right to join or not join a union. If a public employer funds a benefit that only union members receive, it could be held to interfere with employee choice by financially incentivizing union membership over non-membership.
  • Union Failure of Duty of Fair Representation: Public-sector unions are required to represent all bargaining unit members fairly, in good faith, and without discrimination, regardless of union membership status. If an agency-funded benefit is part of a collective bargaining agreement and applies only to union members, excluding non-members in the same bargaining unit, the union might be violating its duty of fair representation to non-members. In such instance, non-member employees could potentially file an unfair labor practice charge with PERB against the union for failure to fairly represent all employees.
  • First Amendment Violation: As Janus v. AFSCME reinforces that public employees cannot be financially coerced into joining a union, exclusive benefits funded by public money could raise constitutional concerns.

The Public Employment Relations Board (PERB) has adopted federal precedent as the public sector test for interference, acknowledging that the act of paying benefits to one group of employees and not another group of employees who are distinguishable only by their participation in concerted activity, can constitute interference. If an employer’s discriminatory conduct is facially or inherently discriminatory, no proof of antiunion motivation is needed and PERB can find an unfair labor practice, even if the employer introduces evidence that the conduct was motivated by business considerations. In those instances, the employer’s conduct will be excused only on proof that it was occasioned by circumstances beyond the employer’s control and that no alternative course of action was available.

On the other hand, if the adverse effect of the discriminatory conduct on employee rights is comparatively slight, the employer can produce evidence of legitimate and substantial business justifications in defense of the conduct, and the burden then shifts to the charging party (the union or an employee) to demonstrate that the employer had a motivation of interference.

Agencies that extend benefits exclusively to union members risk violating state labor law by effectively penalizing non-members and creating an unlawful incentive to join a union. Rather, any benefit funded by public funds should apply equally to all represented employees, regardless of membership status.

For public agencies, the lesson is clear: union membership should not be a prerequisite for workplace benefits. As a general rule, if the agency funds the benefit – even if it payments are made through the union to a third party – all employees represented by the bargaining unit (members and non-members) should be eligible. If the benefit is exclusive to union members, it should be funded by the union itself, not funded by public funds. Like the iconic Members Only jackets of the 1980s, these exclusive perks might seem appealing—but they can quickly go out of style in the eyes of the law.

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As we cruise into 2025, LCW has received a number of questions regarding Senate Bill 1100, the new law that prohibits including a driver’s license requirement in job postings and applications unless the employer reasonably expects that driving is a job function of the position. This blog post addresses some FAQs regarding compliance with SB 1100, including tips for analyzing whether driving is a job function of a position, the law’s relationship to DMV Employer Pull Notices, and reimbursement for transportation. 

Determining Whether Driving is a Job Function of a Position

Effective January 1, 2025, California employers may not include statements about the need for a driver’s license in job advertisements, postings, applications, and similar employment materials, unless: (1) the employer reasonably expects driving to be one of the job functions for the position, and (2) the employer reasonably believes that satisfying those job functions using an “alternative form of transportation” would not be comparable in travel time or cost to the employer. An “alternative form of transportation” includes, but is not limited to ride-hailing services (e.g., Uber or Lyft), taxi, carpool, biking, and walking. (See Government Code section 12940.)

Employers should review all job descriptions and application materials that include a driver’s license requirement and analyze whether the position meets the exception in SB 1100. Some factors to consider include, but are not limited to:

  • Approximately how often does the employee need to travel? If the need to drive arises only rarely or sporadically, it may not be reasonable to expect that driving is a job function of the position. Commuting to and from a worksite is not a job function of a position.
  • What is the distance the employee has to travel?
  • Does the employee need to transport supplies, such that loading an Uber/Lyft would be impractical?
  • How time-sensitive are the employee’s transportation-related duties? I.e., could delays in obtaining alternative transportation interfere with operations or the employee’s ability to fulfill their duties?

DMV Employer Pull Notice (EPN) Program

SB 1100 raises additional questions for employers that have a practice of enrolling all employees in the Department of Motor Vehicles’ EPN Program, which allows employers to receive updates about an employee’s driving record.

Enrollment in the EPN Program is mandatory for those employed for the operation of a vehicle for which they are required to have a Class A license, a Class B license, or certain types of Class C licenses, or if they operate large passenger vehicles. (See Veh. Code, § 1808.1.) Some employers choose to voluntarily enroll all or some employees in the EPN Program, even if the position does not require the employee to possess a special license.

If an employer determines that SB 1100 prohibits it from requiring a driver’s license for a position, the employer should likewise avoid stating in job posting and application materials that enrollment in the EPN program is required. That said, SB 1100 does not preclude the employer from providing a prospective employee or new hire with DMV EPN program forms to fill out if they do possess a driver’s license. Employers who choose to provide the forms to applicants to positions that do not meet the SB 1100 exception should clearly communicate that the forms do not amount to a driver’s license requirement.

Reimbursement for Alternative Forms of Transportation

The exception to SB 1100 directs employers to consider whether alternative methods of transportation (e.g., Uber/Lyft or taxi) are “comparable in travel time or cost to the employer.” So what exactly is the cost?

While Labor Code section 2802 generally requires employers to reimburse costs incurred in the course and scope of employment, including transportation costs, some case law suggests that section 2802 may not apply to public agencies and the issue will likely be decided in the appellate courts soon. Nonetheless, it is prudent to take into account the requirements of section 2802 in the meantime—and also for an agency to keep in mind any reimbursement policy it has.

If an employee uses alternative methods of transportation in connection with their job duties—for example, if they take an Uber to travel from their primary worksite to a different location to perform a work-related task during the workday—the employer should reimburse the employee for the cost of the Uber. Employers can factor in potential reimbursement costs when they assess whether a position meets the exception under SB 1100. We note that commuting to and from the employee’s primary workplace is not compensable and does not require reimbursement (unless the employer has a policy to the contrary).

For specific question about how SB 1100 applies to particular positions or circumstances, consult with experienced employment counsel.

This blog was originally authored in August 2019 but has been reviewed and updated for January 2025. 

Applying the different California Public Employees’ Retirement System (“CalPERS”) rules related to Temporary Upgrade Pay, out-of-class appointments, and non-reportable extra-duty pays can be unnerving.  For classic employees, compensation for appointments meeting the definition of Temporary Upgrade Pay are reportable to CalPERS and is included in pension benefits.  For out-of-class appointments, the Government Code establishes a 960-hour per fiscal year limit, regardless of whether the employee is a classic or new member.  Some compensation is reportable as Temporary Upgrade Pay and the hours are reportable as an out-of-class appointment.  Other appointments might meet the definition of Temporary Upgrade Pay but do not meet the definition of an out-of-class appointment. And, whether the employee is a new member subject to the California Public Employees’ Pension Reform Act (“PEPRA”) or a classic member might change the answer.

As discussed in more detail below, for classic members, where an appointment meets the definition of Temporary Upgrade Pay, but not out-of-class appointments, the compensation is reportable to CalPERS and included in the employee’s pension benefits.  However, the hours are not reportable for the purposes of the 960-hour limit on out-of-class appointments.  For a classic member, where an appointment meets the definition for Temporary Upgrade Pay and out-of-class appointments, the compensation is reported to CalPERS and included in pension benefits, and the hours are reported to CalPERS for the purposes of tracking the 960-hour limit for out-of-class appointments.  For new members, compensation for Temporary Upgrade Pay is not reportable to CalPERS for the purpose of inclusion in pension benefits, but the hours may be reported to CalPERS for the purpose of tracking the 960-hour limit if the appointment meets the definition of an out-of-class appointment.

Few items of special compensation reportable to CalPERS have caused as much confusion as Temporary Upgrade Pay.  CalPERS even had difficulty determining whether Temporary Upgrade Pay would be reportable for CalPERS new members after PEPRA was enacted.  Initially, CalPERS indicated in a circular letter that Temporary Upgrade Pay would not be reportable for new members who were subject to PEPRA.  CalPERS later reversed course and indicated that Temporary Upgrade Pay would be reportable for new members.  Finally, after a brief standoff with then-Governor Brown, CalPERS excluded Temporary Upgrade Pay from reportable compensation for new members under its final regulation.

Temporary Upgrade Pay is an item of “special compensation” that is reported to CalPERS for the purpose of inclusion in CalPERS pension benefits for classic members.  Under the applicable regulation, Temporary Upgrade Pay is defined as follows:

Compensation to employees who are required by their employer or governing board or body to work in an upgraded position/classification of limited duration.

In a 2014 Circular Letter, CalPERS noted that many agencies were incorrectly reporting certain assignments as Temporary Upgrade Pay.  Specifically, CalPERS takes the position that when an individual maintains the duties of their current position and takes on some or all of the duties of an upgraded position, the compensation for taking on the additional duties is non-reportable overtime.

For example, many agencies have “out-of-class” or “acting” pay in their MOUs that provide an employee with additional compensation for taking on a portion of the duties of an upgraded classification.  In some cases, multiple employees will split the duties of a higher position and receive additional compensation.  Under CalPERS’ interpretation, since the individual retains the duties of their current position, the compensation is not reportable to CalPERS for new or classic members.

To complicate matters further, on January 1, 2018, Government Code section 20480 went into effect. This new law places limits on certain out-of-class appointments, and provides for penalties on out-of-class appointments that exceed 960 hours in a fiscal year.  As with Temporary Upgrade Pay, an out-of-class appointment under the Government Code has a specific definition.  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.” If the appointment meets the definition of an out-of-class appointment, the hours must be reported to CalPERS, but the compensation is only reportable if the appointment meets the definition of Temporary Upgrade Pay and only if the employee is a classic member.

It would have been convenient for the definition of Temporary Upgrade Pay under the regulations and out-of-class appointments under the Government Code to have the same definition, but that would be too easy.  As the definitions above illustrate, an appointment might meet the definition of Temporary Upgrade Pay without meeting the definition of an out-of-class appointment.  For example, if a CalPERS classic employee is placed in an upgraded position while the permanent employee is on an extended leave of absence, assuming the technical requirements in the regulation are met as they relate to all items of special compensation, the compensation would be reportable as Temporary Upgrade Pay.  However, the appointment would be expressly excluded from the definition of an out-of-class appointment and the hours would not have to be reported in my|CalPERS for the purposes of tracking the 960-hour limit.  Similarly, if an individual serves in an upgraded position, but the agency is not recruiting to fill the position, the additional compensation may be reported as Temporary Upgrade Pay, but does not meet the definition of an out-of-class appointment.

With the mix of overlapping and divergent definitions for Temporary Upgrade Pay, out-of-class assignments, and non-reportable extra-duty pays, it is important to apply each definition separately to the appointment and compensation when reporting compensation as Temporary Upgrade Pay or reporting the hours for out-of-class appointments.  Agencies should also audit any out-of-class, upgrade pays, interim pays, acting pays and extra-duty pays to determine whether these pays are reportable as special compensation, and when they may meet the definition of out-of-class appointment for the purposes of tracking the 960-hour limit.

We are excited to continue our video series – Tips from the Table. In these 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.

This blog was originally published in December 2013 but has been reviewed and updated for 2025. 

It’s that time of year again to reflect on this year’s achievements and set goals for the new year. With the beginning of 2025 upon us, we encourage managers, supervisors, and human resources personnel to add the following five resolutions to their 2025 goals.

  1. Update Personnel Rules, Policies and Regulations

The California legislature was customarily active in 2024 in passing new obligations for employers. There also were several changes to federal employment laws over the last few years. For example, SB 1100 amends the Fair Employment and Housing Act (“FEHA”) to place restrictions on the ability of employers to include statements on the need for a driver’s license in job postings and similar materials. SB 1137 also amends the FEHA to prohibit discrimination based on a combination (e.g. intersectionality) of any two or more protected statuses. These two recent changes alone will require employers to update their policies, job descriptions and hiring-related documents. Therefore, public employers are encouraged to audit all policies to ensure they reflect current law.

  1. Adopt an AI Policy

Artificial Intelligence (“AI”) tools and technology are becoming ubiquitous in our society. Indeed, the federal Equal Employment Opportunity Commission and Department of Labor have issued guidance on AI in the workplace that address topics such as tracking hours worked and biased AI resume screening tools. As AI tools become more widely available, public employers should adopt AI policies that set forth the parameters on employees’ use of AI to perform their job duties. Such policies should address responsible and effective use of AI that will help agencies enhance their services to the public.

  1. Audit Your Agency’s MOUs

Heading into negotiations? Take some time in 2025 to audit your labor agreements. A labor agreement audit is a legal compliance review and internal analysis of contract language. Agencies should regularly audit their agreements to ensure legal compliance, which can help avoid litigation and potential fines. For example, CalPERS and FLSA compensation often overlap and auditing a labor agreement for compliance on both issues is an efficient way to avoid costly errors in the future. Labor agreement audits can also help identify ambiguous language that may be subject to multiple interpretations. Identifying these gaps allows both parties to negotiate clarifying provisions in upcoming negotiations.

  1. Evaluate Your Agency’s Handling of Disability-Related Issues

Employee disability-related issues are among the most complicated and confusing that employers face. It is critical that employers understand their obligations under disability laws. This includes understanding the interaction between the disability interactive process, workers’ compensation, FMLA/CFRA, pregnancy-related laws, fitness for duty examinations, and CalPERS disability retirement. Knowing the differences between these laws and how to comply with each of them will help employers navigate through employee disability-related issues.

  1. Document, Document, and Document

The importance of good documentation cannot be emphasized enough. Whether you have just completed a disability interactive process meeting or counseled an employee on performance issues, it is critical to create and maintain documentation of these interactions. When writing annual performance evaluations, employers should make sure they accurately and honestly reflect the employee’s work over the preceding 12-month period. Regular documentation of communications with and actions taken towards employees can be used to support discipline. It can also be used as tool to give feedback to and motivate employees.

Following through on these five resolutions will go a long way towards strengthening your agency and reducing the risk of lawsuits and unfair practice charges. If your agency needs assistance with implementing these resolutions, our offices are ready to help.

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As we usher in 2025, California employers face a range of new legal requirements aimed at enhancing protections against workplace discrimination and improving employee rights. From expanding anti-discrimination protections to refining leave policies, the following legislative updates demand attention. Here’s what employers need to know about Assembly Bills (“AB”) 672, 1815, and 2499, as well as Senate Bills (“SB”) 1100, 1137, and 1340.

1. Expanding Anti-Discrimination Protections

SB 1137: Recognizing Intersectionality
California continues to lead the nation in addressing nuanced forms of discrimination. SB 1137 amends the Fair Employment and Housing Act (“FEHA”) to state that it explicitly includes “intersectionality” as a basis for discrimination claims. “Intersectionality,” a concept introduced by American civil rights advocate Kimberlé Crenshaw, describes the interconnected nature of various forms of discrimination and inequality such as race and gender. Rather than viewing them as separate or isolated, it emphasizes how they overlap and intersect to create complex and compounded experiences of oppression. This means employers must recognize that employees can experience unique forms of discrimination based on overlapping protected characteristics.

The bill states that the change is declaratory of existing law, but underscores the concept of intersectionality as a concern of the FEHA. It confirms that an individual can experience discrimination under the FEHA based on a combination of protected characteristics (e.g., being a gender of a certain race) where they might not have experienced discrimination based on a single protected characteristic alone.

AB 1815: Hair Discrimination Clarification
Building on the CROWN Act, AB 1815 amends the definition of “race” under FEHA by removing the term “historically” from the definition, so that the term includes traits associated with race, including, but not limited to, hair texture and protective hairstyles like braids, locs, and twists. This amendment reinforces that grooming or appearance policies targeting such hairstyles can constitute racial discrimination.

SB 1100: Driver’s License
SB 1100 amends FEHA to make it an unlawful employment practice for an employer to include statements about the need for a driver’s license in job advertisements, postings, applications, and similar employment material unless the following conditions are met:

  1. The employer reasonably expects driving to be one of the job functions for the position.
  2. The employer reasonably believes that using alternate forms of transportation, including but not limited to ride-hailing services, carpooling, taxis, walking, and bicycling, would not be comparable in travel time or cost to the employer. 

2. Strengthening Leave Protections for Employees who are Crime Victims

AB 2499: Safe Time for Crime Victims
Labor Code sections 230 and 230.1 prohibit employers from discharging or discriminating against employees who are victims of crime or abuse. This includes protections for appearing as a witness in court, seeking prescribed relief as a victim, or requesting workplace accommodations for safety. Employers must provide reasonable accommodations to victims of domestic violence, sexual assault, or stalking and cannot retaliate against employees for taking time off to seek medical attention or services related to the crime. Discrimination or retaliation complaints can be filed with the Division of Labor Standards Enforcement (DLSE).

AB 2499 expands and revises these provisions, categorizing them as unlawful employment practices under the Fair Employment and Housing Act (FEHA) and placing enforcement authority with the Civil Rights Department (CRD). Key updates include:

  • Broadened Definition of “Qualifying Act of Violence”: Replaces “crime or abuse” with “qualifying act of violence,” which includes:
    • Domestic violence
    • Sexual assault
    • Stalking
    • Acts causing bodily injury or death
    • Display, use, or threat of a firearm or dangerous weapon
    • Threats or perceived threats to use force causing physical injury or death
  • Expanded Leave Protections: Employees can now use vacation, personal leave, paid sick leave, or compensatory time off to assist family members who are victims of domestic violence, sexual assault, or stalking. Covered family members include parents, children, grandparents, grandchildren, siblings, spouses, domestic partners, or designated persons. Leave can be used to support family members in accessing services, attending court, or addressing other needs arising from these incidents.
  • Employer Notification Requirements: Employers must inform employees of their rights under the law at the following times:
    • Upon hire
    • Annually
    • Upon request
    • When an employee notifies the employer that they or a family member is a victim

AB 2499 strengthens protections for victims and expands employer obligations, ensuring employees can access necessary support without fear of discrimination or retaliation.

3. Promoting Fair Employment Practices

AB 672: Expanding the role of Civil Rights Department
Existing law authorizes the Civil Rights Department (“CRD”) to provide assistance to communities in resolving disputes, disagreements, or difficulties relating to discriminatory practices, but only upon the request of an appropriate state or local public body, or upon the request of a person directly affected by a dispute, disagreement, or difficulty.

AB 672 authorizes the CRD to offer its services instead of having to wait until its services are requested.

SB 1340: Local Enforcement of Discrimination Laws
FEHA makes it unlawful for an employer to engage in specified discriminatory employment practices based on certain protected characteristics. Additionally, existing law expressly authorizes only the CRD to receive, investigate, conciliate, mediate, and prosecute complaints alleging employment discrimination.

SB 1340 allows cities and counties to enforce any local anti-discrimination laws that are as or more stringent than the state’s anti-discrimination laws, subject to certain requirements.

Under SB 1340, any city or county can enforce any local law that prohibits employment discrimination if all four of the following requirements are met:

  1. The local enforcement concerns an employment complaint filed with the CRD;
  2. The local enforcement occurs after the CRD has issued a right-to-sue notice under Government Code section 12965;
  3. The local enforcement commences before the expiration of time to file a civil action specified in the right-to-sue notice;
  4. The local enforcement is pursuant to a local law that is at least as protective as the FEHA.

SB 1340 also tolls the one year time to file a complaint, under existing law, when a city or county commences an enforcement action.

Conclusion

California’s 2025 legislative updates reflect the state’s commitment to fostering inclusive and equitable workplaces. By understanding and implementing any necessary changes in response to these laws, employers can not only ensure compliance but also build trust and goodwill with their workforce. For tailored guidance on navigating these legal changes, consult with experienced employment counsel.

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Bonuses are a common form of employee compensation that can incentivize and reward performance to retain high quality employees. On the flip side, employers must navigate legal risks and challenges to ensure compliance with federal and state laws.  

As with any matter that concerns payment of wages, bonuses implicate a plethora of legal subjects. This discussion aims to alert employers of some potential issues, but a full and periodic legal review of an agency’s compensation procedures is always prudent.

Familiar Issues

Employers tend to be familiar with discrimination which falls under the Fair Employment and Housing Act and Title VII. Such discrimination may manifest as “disparate treatment” or “disparate impact.

Disparate Treatment

Disparate treatment is intentional discrimination as to similarly situated individuals based on a protected classification, such as race, sex, gender, religion, national origin, or disability. While it would be difficult to “audit” whether a supervisor is doling out bonuses discriminatorily, the employer can minimize the risk of disparate treatment by establishing clear, objective, and written criteria for an employee’s eligibility for a bonus. The employer should encourage employees to report potential unlawful or perceived unlawful conduct to any member of management. Employers should also require management employees to promptly and appropriately address such complaints or face disciplinary action themselves.

Disparate Impact

Disparate impact discrimination occurs when a facially neutral employment practice disproportionately affects members of a protected class, even with no intent to discriminate. A complainant must show that the practice resulted in a significant adverse effect on a protected class, typically through statistical evidence showing a disproportionate exclusion of members of a protected class.

The EEOC applies a general rule-of-thumb known as the “four-fifths rule” to determine if an employment practice has a disproportionate impact. In the context of a bonus, if the ratio between the bonus for one group is less than 80% (four-fifths) of the bonus received by another group, this may indicate a disparate impact.

For example, if a school’s female teachers receive an average bonus of $7000 and its male teachers receive an average bonus of $10,000, the female teachers are receiving less than 80% of their male counterparts’ bonus compensation:

Ratio = $7,000 / $10,000 = 70%

Employers need not wait for a complaint to determine whether its bonus system has a disproportionate impact on a protected classification. Agencies can consult with legal counsel to proactively detect potential disparities.

The Equal Pay Act (“EPA”)

The federal Equal Pay Act prohibits pay disparity between employees conducting substantially similar work on the basis of sex. The California Equal Pay Act similarly mandates equal pay for equal work, but with an expanded scope to include gender, race, and ethnicity.

Essentially, employees of a protected class cannot be paid at a rate less than the rate paid to employees of a different protected class. Employers may defend against an EPA claim by showing that the disparity is the result of (a) a seniority system; (b) a merit system; (c) a system that measures earnings by quantity or quality of productions; or (4) a bona fide factor other than sex, race, or ethnicity such as education, training, or experience. Notably, employers cannot rely on the employee’s prior salary to excuse the disparity.

How to Spot an EPA Issue

Similar to the disparate impact analysis, employers should also proactively investigate whether their bonus systems have resulted in pay disparity between members of different protected classifications. Generally, members of the same job classification should receive bonuses measured under the same metrics regardless of their protected classification. If an employee within a job classification is performing substantially different work, which thereby results in an apparent pay disparity, the employer should consider moving the employee out of class.

Keep in mind that prior salary is never a defense to an alleged pay disparity. This may become an issue if employees within a job classification receive different bonus rates based on their salary step.

For example, a bonus system could establish that employees at step 1 of the salary scale receive a bonus of 5% for satisfactory performance while employees at step 2 receive a bonus of 7% for also satisfactory performance; such bonus systems are not inherently unlawful. However, if the system results in pay disparity between protected classifications, the employer cannot defend the disparity by asserting that the employees were simply at different salary steps. The employer must demonstrate different objective criteria, such as a non-discriminatory reason for placing the employees at different salary steps in the first place (e.g., employees with less than 2 years of experience are at step 1 while employees with more than 2 years of experience are at step 2).

To effectively defend potential legitimate, nondiscriminatory disparities in pay between members of protected classifications, employers should endeavor to detail as thoroughly as possible the objective criteria of their bonus system.

Leave a Paper Trail

As noted above, these are just a few of the several issues employers may encounter when providing bonus compensation. Generally speaking, an employer cannot go wrong documenting its legal activities, and this is true with bonuses. Ideally, agencies should document the reason for any employee’s bonus pay based on written procedures for objective evaluations adopted by its governing body. Clear documentation and adherence to established procedures not only ensure compliance but also foster transparency and fairness in bonus compensation practices.

We are excited to continue our video series – Tips from the Table. In these 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.

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On November 15, 2024, a federal judge in the Eastern District of Texas blocked the Department of Labor’s (“DOL”) newly issued salary rules for exempt status under the Fair Labor Standards Act (“FLSA”).

The new rules, which took effect July 1, 2024, increased the minimum salary threshold required in order to qualify for overtime-exempt status, thereby increasing the number of employees who are eligible for overtime. The Court’s action on November 15 enjoins, or stops, the DOL rule change nationwide.

Consequently, the salary thresholds for exempt status under the FLSA return to the levels in effect as of June 30, 2024: $684 per week executive, administrative, and professional (“EAP”) employees or $107,432 per year for the highly compensated employees (“HCE”).

What Were the DOL’s 2024 Salary Rules?

The DOL’s 2024 salary rules increased the “standard salary level” minimum for exempt EAP employees from $684 per week ($35,568 per year) to $884 per week ($43,888 per year), effective July 1, 2024. On January 1, 2025, the standard salary level minimum will be set to increase again to $1,128 per week ($58,656 per year).

The 2024 salary rules also increased the minimum “total annual compensation” for employees exempt under the HCE exemption from $107,432 per year to $132,964 per year effective July 1, 2024 and to $151,164 per year on January 1, 2025.

The new rule also included an automatic indexing mechanism that would increase the minimum salary levels in the future.

In sum, under the new rules, employers would have to pay higher salaries to employees in order to avoid paying those employees overtime.

November 15, 2024 Eastern District TX Decision

Shortly after the DOL finalized the new rules, various business groups as well as the State of Texas sued, arguing that the new rule exceeded the DOL’s authority.

In its November 15 decision, the Eastern District of Texas agreed, holding that the 2024 salary rule was an unlawful exercise of the DOL’s authority because the salary threshold was set so high and would increase so frequently that the test for exemption would turn on salary only, and not account for an employee’s job duties. As the Court stated of the EAP exemptions, citing the U.S. Supreme Court, “Congress elected to exempt employees based on the capacity in which they are employed. It’s their duties and not their dollars that really matter.” (Emphasis added.)

Accordingly, the court nullified the 2024 salary rules.

The court’s ruling returns the salary thresholds for FLSA exemptions to the levels effective on June 30, 2024:

EAP Standard Salary LevelHCE Total Annual Compensation
$684 per week ($35,568 per year)$107,432 per year; including at least $684 per week

It is possible that the DOL appeals the decision to the Fifth Circuit Court of Appeals. However, given the upcoming changes in the Executive Branch with the incoming Trump administration, DOL may elect not to do so. Further, even if the DOL appealed the decision to the Fifth Circuit, it is likely that the Fifth Circuit would uphold the decision given the Fifth Court’s composition and conservative predisposition. Thus, for the foreseeable future, the salary thresholds in effect on June 30, 2024 will likely remain in effect and control employee eligibility for overtime.

What Does This Mean For Your Agency

Given that changes to employee compensation may be warranted at your agency, you should consult with legal counsel and your agency’s labor relations team to consider FLSA overtime implications. LCW attorneys will continue to closely monitor developments in this area of the law and will provide updates as needed.

The case is State of Texas, Plano Chamber of Commerce, et al. v. United States Department of Labor, et al. (E.D. TX) Civil Case No. 4:24-CV-499-SDJ, November 15, 2024.

Liebert Cassidy Whitmore attorneys are closely monitoring developments in relation to this Special Bulletin and are able to advise on the impact this could have on your organization. If you have any questions about this issue, please contact our Los Angeles, San Francisco, Fresno, San Diego, or Sacramento office.

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In Ramirez v. City of Indio, the Court of Appeal held that a city manager had the authority to affirm, revoke, or modify the arbitrator’s advisory findings and recommendations under the Memorandum of Understanding’s appeals procedure.  This case confirms that, absent sufficient contractual language to the contrary, when an MOU provides for advisory arbitration, the final decision-maker (e.g., a city manager) has the discretion to evaluate the totality of an employee’s conduct, even when certain allegations are not sustained, and the authority to make final decisions on disciplinary matters, even when an arbitrator recommends a different outcome.

Background

This case arose from the termination of a former police officer at the City of Indio Police Department.

Following an internal affairs investigation and pre-disciplinary conference, the Chief issued a final notice to terminate based on the officer’s admissions that he drove under the influence of alcohol, and the preponderance of evidence that the officer engaged in dishonest behavior and showed poor judgment that embarrassed the City and Indio Police Department. The officer appealed his termination through the appeals procedure set forth in the Memorandum of Understanding.

The appeals procedure included an advisory arbitration and the city manager was vested with power to affirm, revoke, or modify the arbitrator’s advisory findings and recommendations.

The arbitrator overturned the City’s decision to terminate, and recommended reinstatement. The arbitrator found that the City failed to prove that the officer drove under the influence of alcohol, the officer presented credible and uncontradicted evidence that officers are routinely instructed to reset their phones when they turn in their department-issued phones, and the officer “credibly testified” in explaining differences in his statements during his internal affairs investigation and his testimony in a trial.  

The city manager, however, issued a final written decision rejecting the arbitrator’s advisory recommendations and upheld the termination. This decision was based on the officer’s poor judgment and conduct unbecoming an officer. Additionally, the city manager disagreed with the arbitrator, and agreed with the Chief’s findings that the City established that the officer drove under the influence, reset his department-issued phone with the intent to prevent discovery of incriminating information, and made dishonest and/or inconsistent statements during the internal affairs investigation and trial.  The city manager also looked to the totality of the conduct, including matters the arbitrator found lacked relevance.

The officer challenged the city manager’s final administrative decision and petitioned the superior court for a writ of mandate directing a reversal of the decision. The officer argued that the city manager failed to defer to the arbitrator’s findings on credibility and weight of evidence. The superior court denied the writ petition.

Court of Appeal

The officer appealed the superior court’s denial, continuing to challenge the procedural fairness of the City’s decision. In a published and precedential decision, however, the Court of Appeal affirmed the superior court’s ruling, focusing on due process and the scope of the city manager’s authority.

1. Due Process

The court found that the disciplinary procedures, including the advisory arbitration, provided the officer with adequate due process. Importantly, the MOU explicitly granted the city manager final decision-making authority. The Court of Appeal emphasized that due process requires a fair hearing and opportunity to respond, not a particular decision-maker.

2. Scope of City Manager’s Authority

The Court rejected the officer’s argument that the city manager was bound by the arbitrator’s factual findings. The Court held that the city manager appropriately based the termination on charged conduct including drunk driving and dishonesty, and the totality of the circumstances. The Court rejected the officer’s argument that the procedures set forth in the City’s particular MOU mandated the city manager pay deference to the arbitrator’s decision.

Case: http://sos.metnews.com/sos.cgi?1024//D082997

Citation: Ramirez v. City of Indio, No. D082997 (Cal. Ct. App. Sep. 13, 2024)