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The California Supreme Court Makes It More Difficult to Classify Workers as Independent Contractors – Assumes all Workers are Employees

By Ryan Abernethy on Posted in Employment Contracts and Agreements, Labor Law, New Legislation and Regulations, Wage & Hour

On April 30, 2018, the California Supreme Court applied an expansive definition of independent contractor in a ruling that is sure to have a dramatic impact on many California businesses, and the burgeoning gig economy in particular.

In the case of Dynamex Operations W. v. Superior L.A. County, a class action was brought on behalf of a group of delivery drivers who were classified as independent contractors by delivery company, Dynamex. Dynamex argued that the drivers were properly designated as independent contracts under the totality-of-the-circumstances standard set forth in the Borello case—utilized by California businesses since 1989—which concentrated primarily on the degree of control the employer exercised over the worker. Dynamex’s drivers provided their own vehicles, paid their own transportation expenses (fuel, tolls, vehicle maintenance, and insurance), set their own schedules, and were generally free to choose the sequence in which they made deliveries and the routes they would take. They were also allowed to simultaneously work for other delivery companies.  

The Supreme Court sided with the drivers, concluding that a worker is presumed to be an employee unless the company can establish that each of three factors exist under the “ABC” test: (A) that the worker is sufficiently free from the control and direction of the company; and (B) that the worker performs work that is outside the usual course of the company’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

The Court said it wasn’t enough that Dynamex didn’t prevent the drivers from engaging in other work; it had to prove that the drivers actually performed delivery services for other companies. In addition, Dynamex was a “delivery company,” so its delivery drivers were performing the essential functions of the business. They were not comparable in that regard to an electrician or plumber who might do business with Dynamex as independent contractors.

This ruling, with its newly drawn legal parameters, is expected to significantly affect California’s freelance industry and gig economy. Businesses offering web-based food delivery services, courier and ridesharing services that are based on independent contractor workforces will likely be the most impacted. But this landmark ruling warrants an analysis across the board of many positions that were previously classified as independent contractors.

Are You Doing it Right? California Supreme Court Clarifies Overtime Rate Calculations

By Charles L. Post on Posted in Labor Law, Wage & Hour

It is an old joke that the world can be divided into people who are good at math and those who go to law school.  Whether you believe the joke or not, math – or in this case, simple arithmetic – can be at the heart of many wage and hour questions.  On March 5, 2018, the California Supreme Court issued an opinion in Alvarado v. Dart Container Corp.  The Court articulated a rule on how an employee’s overtime pay rate should be calculated when the employee has earned a flat sum bonus during a single pay period.  Please be aware of the emphasized language:  flat sum bonus.

The Supreme Court’s decision in Alvarado details the procedure for applying a “flat sum bonus” in determining the regular rate of pay for purposes of overtime.  The “regular rate of pay” is the pay rate which is multiplied by the applicable overtime premium (time and a half or double time).   The Court relies heavily on the Department of Labor Standards Enforcement (“DLSE”) Enforcement Manual.  That manual divides the world of regular rate calculations involving bonus and incentive payments into two categories:  (1) those that are “production or commission based;” and (2) those that are paid as a flat sum.  In Alvarado, the flat sum bonus was an attendance bonus paid by the employer to employees who met the company’s attendance incentive goals.  

The question was how are these non-hourly rate wages properly included in calculation of the regular rate.  The DLSE Enforcement Manual outlines acceptable approaches for including such bonus and incentive payments into the regular rate calculation.  Simply put, the law requires periodic bonus commission payments earned in a particular pay period be included in the determination of the “regular rate of pay” prior to calculating the overtime premium payment.  These sums are added to the regularly earned wages and then divided by a divisor to determine the “regular rate of pay.”  The question considered by the Alvarado Court is to what that divisor should be.  As the Court put it:

Specifically, we consider whether the divisor for purposes of calculating the per-hour value of the bonus should be (1) the number of hours the employee actually worked during the pay period, including overtime hours; (2) the number of nonovertime hours the employee worked during the pay period; or (3) the number of nonovertime hours that exist in the pay period, regardless of the number of hours the employee actually worked.

The Court concluded that the divisor should be the second of these options.  That is, dividing the flat sum bonus received in the pay period by the number of non-overtime hours the employee worked during the pay period.

The case did not consider how production based or non “flat sum” bonuses should be included in calculation of the regular rate of pay. The Court’s rationale in Alvarado, however, lends credence to the methods of calculation outlined in the DLSE Enforcement Manual at section 49.2.1.2. :

Compute the regular rate by dividing the total earnings for the week, including earnings during overtime hours, by the total hours worked during the week, including the overtime hours.

News you can use summary:

What this means is that if employees receive a flat sum bonus – one not tied to productive activity or sales activity (such as commissions) the total earnings for the pay period are divided by the total hours of regular work in the week (excluding overtime).  A different rule applies for production bonus workers or commission workers which requires that all wages for the pay period be divided by the total hours worked during the pay period, including overtime hours.

Medical Cannabis Users May Soon be Protected Under FEHA – AB 2069

By Katie Collins on Posted in Employee Privacy Rights, Employment Contracts and Agreements, Labor Law, New Legislation and Regulations, Retaliation and Wrongful Termination, Wage & Hour

Assembly Bill (“AB”) 2069 was introduced by the California Assembly on February 7, 2018. Currently, California employers can deny employment or impose discipline on cannabis users, regardless of whether such use is for medical purposes. AB 2069 would amend the Fair Employment and Housing Act (“FEHA”) to make it an unlawful practice for an employer to take adverse action against an applicant or employee because of a positive drug test for cannabis (by a medical cannabis card holder) or because of one’s status as a medical cannabis card holder.

Employers would be permitted to take corrective action against employees who are impaired on employer premises because of medical cannabis use. Cannabis can be detected days or even weeks following consumption depending on the duration and frequency of use. As such, there is no empirical way to pinpoint how recently the employee used the drug. Thus, in order to take corrective action against an employee using medical cannabis, the employer would have to have a clear indication that the employee was in fact impaired on the employer premises at a specific point in time. Employers would also be permitted to deny employment to a medical cannabis card holder “if hiring the individual or failing to discharge the employee would cause the employer to lose a monetary or licensing-related benefit under federal law or regulations.” AB 2069 would not protect recreational cannabis users. Therefore, employers could still take corrective action against employees who test positive for cannabis use that do not hold a medical cannabis card.

AB 2069 is currently pending in the California State Legislature. If the bill is successful, it will affect California employer’s drug testing policies and policies for how California employers treat applicants and employees who test positive for cannabis use. California employers should keep an eye out as this bill progresses through the legislature and be ready to consult legal counsel to revise policies regarding medical cannabis use should the bill get signed into law. If you would like to track the bill click here.

WEBINAR: Worker’s Compensation and Employment Law – Preventing Claims from Turning into Employment Lawsuits

By Ramona Carrillo on Posted in FMLA and Other Leaves of Absence, Labor Law, New Legislation and Regulations, Wage & Hour

Navigating a worker’s compensation claim in California can be challenging, to say the least. It involves a detailed understanding of several statutory schemes and steps along the way. Yet, processing the claim, insurance, and proper documentation can just be the start. Wary employers should carefully consider the labor and employment implications of a worker’s compensation claim.  This complimentary webinar will discuss important topics to help employers manage these laws followed by an extended Q&A, including:

  • What to do and how to prepare Pre-Injury and Day of Injury;
  • What to do upon receipt of first medical report or work status providing restrictions;
  • How to concurrently navigate an employee’s time off of work under workers’ compensation, disability accommodation, and statutory leaves of absence; and
  • What happens when an employee has reached Maximum Medical Improvement with Permanent Disability/Work Restrictions.

Join attorneys Lukas Clary and Darrel White, along with guest speaker Joshua Mauras for this informative session.

Date:   Wednesday, April 25, 2018

Time:  12:00 p.m. to 1:00 p.m.

To RSVP for this webinar, please email: marketing@weintraub.com.

Approved for one (1) hour MCLE. This program will be submitted to the HR Certification Institute for review. Certificates will be provided upon verification of attendance for the entirety of the webcast.

Have You Ever Disagreed With An Employee About How They Should Do Their Work?

By Charles L. Post on Posted in Discrimination, FMLA and Other Leaves of Absence, Harassment, Labor Law, Retaliation and Wrongful Termination, Wage & Hour

Beware.  Routine criticisms of job performance when directed to employees engaged in a caring profession, may subject you to retaliation and whistleblower claims.

So you hire an employee, call her a brick layer.  She is a horrible brick layer.  You get in constant arguments with her concerning the quality of her brick laying.  You say that the bricks must be square and aligned and she says, no they look better if they are crooked, uneven and “rustic.”  Firing that employee for discharging her duties as a brick layer in a way the employer finds unacceptable is, in almost all cases, a low risk decision.  Subjective dislike of an employee’s work performance is a time honored and well recognized “legitimate nondiscriminatory, nonretaliatory,” reason for termination.

But what if you employ professionals engaged in a helping profession (doctors, nurses, teachers, social workers, psychologists, etc.) or professionals engaged in activities that may affect public health (epidemiologists, doctors, certain engineers, etc.)?  An employer of teachers who grows unhappy with a teacher’s performance of his teaching duties or an employer of doctors or nurses who grow unhappy with those health professionals discharge of their professional duties may not have the same protections that the employer of the brick layer enjoys.  Why?  Because California statutes and regulations recognize and protect certain professions against retaliation or interference with such professional work.  For example, Business and Professions Code section 2056 protects health practitioners from retaliation for “advocating appropriate medical care,” and numerous regulations and laws similarly protect teachers.  California Education Code section 56046 prohibits any employer from taking adverse action against a teacher for having advocated on behalf of a student or assisting parents in seeking or obtaining services or accommodations for students with exceptional needs.  Such workers may also have substantial protections under the U.S. Constitution and section 504 of the federal rehabilitation act.

What this means is that employers who employ helping professionals should familiarize themselves with statutes, regulations and laws that may cloak an employee’s disagreement over what to do for their patient, student, or the public with “protected activity” status.  Prior to taking any “he/she does a bad job” action against a helping professional or, anyone engaged in compliance activities, employers should carefully scrutinize whether their action could be viewed as interference with an employee’s protected “whistleblower” activities or opposition to improper teaching, medical, or public health activities by the employer.

 

 

Protecting Your Religious Entity Exemption Under The FEHA While Complying With Other Laws

By Shauna N. Correia on Posted in Discrimination, Harassment, Labor Law, New Legislation and Regulations, Retaliation and Wrongful Termination, Wage & Hour

We all understand the common meaning of the word “employer.” In California, “employers” need to keep track of the various rules and regulations, all of which have their own definitions of the word.  Most frequently, the number of employees dictates whether a given statute or ordinance applies to the employer.  In addition, California’s Fair Employment and Housing Act (“FEHA” or the “Act”), exempts certain “employers” from the application of the anti-discrimination laws found within the Act.

This blog post focuses on protecting the so-called “religious entity” exemption from the FEHA.

Employer versus Employer versus Employer – Various Definitions

The FEHA prohibits discrimination, harassment, and retaliation on a large list of protected class statuses, and is more expansive than the federal analog, Title VII.  FEHA’s anti-discrimination provisions apply to “employer” – defined as any person who employs five or more persons, subject to certain exceptions.  Relevant to this blog, Cal. Gov. Code § 12926(d) a “religious association or corporation not organized for private profit” is not an “employer” for the “unlawful practices” provisions of FEHA.

FEHA, Cal. Gov. Code § 12950, also requires “all” employers, impliedly using the section 12926 definition and impliedly subject to the religious entity exemption – to post notices regarding employees’ rights under FEHA.  But, most employers – including religious entities – are required to post a variety of other notices (minimum wage, payday notices, unemployment insurance, worker’s compensation, whistleblower rights, etc.) pursuant to various Labor Code, Unemployment Insurance Code, federal law, local ordinances, and the Department of Industrial Relations requirements.  There are several vendors who supply “all in one” posters, updated annually. Most HR professionals and in-house counsel order these “all in one” posters from reputable sources, relying on them to be accurate.

FEHA also has a mandatory training component (commonly referred to as “AB 1825” training).  For this purpose, an “employer” is defined in the FEHA regulations – Ca. Admin Code 11024 – as “any person engaged in any business or enterprise in California, who employs 50 or more employees to perform services for a wage or salary or contractors or any person acting as an agent of an employer, directly or indirectly.”  Notably, there is NOT an express “religious entity” exemption from FEHA regulations.  Such “employers” are required to conduct bi-annual anti-harassment training to educate supervisors on the prohibitions against harassment and discrimination in FEHA and Title VII – apparently, even if those “employers” are otherwise exempt from FEHA.

The Unresolved Question since 2002 – is a Nonprofit Religious Corporation Operating a School exempt from FEHA?

Certain religious entities have long been exempt under Cal. Govt. Code section 12926(d).  But effective January 1, 2002, section 12926.2(f) was added, expanding the definition of “employer” to include religious non-profit educational institutions that are (1) non-profit public benefit corporations; (2) formed by, or affiliated with a particular religion; and (3) operate an educational institution as its sole or primary activity. However, the amendment left intact the ability for such institutions to restrict employment in all categories of employment to adherents of the religion, regardless of whether the duties of the positions are connected to a religious function.

There has only been one case interpreting the 2002 amendment to preserve the exemption for a school organized as a Nonprofit Religious Corporation, Henry v. Red Hill Evangelical Lutheran Church (2011) 201 Cal. App. 4th 1041.  In that case, the Court seemed to find it relevant that the school was part of the church’s ministry, did not exist as a separate legal entity, was on church property and was adjacent to the church.  Until 2017, no case had expressly protected the religious entity exemption for a school that is separately incorporated, is not on church grounds, but is nevertheless a religiously affiliated school organized as a Nonprofit Religious Corporation.

The good news for religious entities, especially nonprofit religious schools.

In December 2017, the San Francisco Superior Court ruled on an issue of first impression, and decided that a private high school, organized as a California Nonprofit Religious Corporation primarily for religious and educational purposes, is exempt from FEHA.

The judge correctly interpreted the 2002 FEHA amendment (§12926.2(f)(2)) that narrowed the exemption for public benefit corporations operating schools as applying only to public benefit corporations, not to all schools including those organized and incorporated as nonprofit religious corporations.

This may seem axiomatic based on the plain language of the statute, but it was a hard-fought issue at trial because of three facts: (1) the school was, for a time, incorporated as a public benefit corporation (and reincorporated after to the 2002 amendment), (2) unlike the school in Red Hill, this high school is a distinct corporate entity from any church and is not on church grounds, and (3) the school teaches secular (as well as religious) subjects. Continue Reading

Trap for the Unwary: Elimination of the Position as Opposed to Termination for Cause

By Charles L. Post on Posted in Labor Law, Reductions in Force, Retaliation and Wrongful Termination

Employers sometimes see a position elimination or reduction in force as a way of terminating employees that is kinder and gentler than termination for cause.  Position eliminations and reductions in force allow an employer to say goodbye to an employee without having to lay out the reasons for the separation on the employee’s door step.  It is, after all, easier to say the “business won’t support your continued employment,” than it is to say, “we don’t like your work.” While some people may embrace confrontation, my experience has been that most employers don’t like to frankly tell their employees that their work performance is inadequate.  Employers or managers can feel nitpicky, impolite, and discourteous, when they document an employee’s performance deficiencies.

This discomfort can result in inflated job performance evaluations (giving, for example,  a marginal employee a satisfactory rating and a satisfactory employee a “walks on water” rating).  But real dangers can arise when employers try to avoid an honest communication with employees.  That is because employment cases are less about “what” an employer did.  It is lawful to fire an employee.  It is unlawful to fire an employee for unlawful reasons (such as the employee’s race or religion).  As a result, the question in most wrongful termination cases is: Did the employer have a legitimate lawful reason for the termination?   Courts can’t open up the employer’s head and find the reason, so courts look to surrounding facts and circumstances to determine the employer’s motives.

In order to prevail in a discrimination claim against a defendant, a plaintiff must establish, for example, that she was adequately performing her job, that she is a member of a protected class, that she suffered an adverse job action, and some additional fact or facts would suggest that the plaintiff’s protected class status was a factor in the employer’s adverse employment action.

The burden then shifts to the defendant to state a legitimate nondiscriminatory non-retaliatory reason for the adverse employment action.  (Something like, “his performance was inadequate,” or “he stole money from the cash drawer,” etc.)  The burden then shifts back to the plaintiff to present evidence that the stated legitimate reason for the termination or adverse employment action is a pretext for illegal discrimination.  Often plaintiffs can do this by pointing to the fact that similarly situated persons not in a protected class or who engaged in the same conduct were not fired or did not suffer the same adverse employment action as the plaintiff.

Another way for a plaintiff to meet the burden of establishing pretext is by showing that the stated reason is a false reason.  That is the hidden danger of claiming the need for a reduction in force or a business restructure in lieu of terminating an employee for cause.  Employers often think, mistakenly, that simply saying your position has been eliminated can avoid all the messiness and explanation required of a termination for cause.  This just isn’t true. Employers can still be challenged by an employee who claims that the reduction in force is merely a pretext for a discriminatory (and illegal) termination of employment.  Reductions in force can be complicated things.  After a company makes a decision to reduce the number of full-time positions, it will have to establish or demonstrate a legitimate business objective (to reduce costs, reduce or eliminate losses, etc.) and to demonstrate that its selection of the plaintiff for the position elimination was not itself discriminatory.  Many employers who rely on a position elimination don’t bother to do the ground work of establishing a neutral selection criteria that results in the selection of candidates for a reduction in force. Without that ground work being done, employers can end up with egg on their faces when a plaintiff says “okay, you had to eliminate a position, but why my position?”  Another danger is that employers will claim a reduction in force may re-fill the position that they told the plaintiff they were eliminating.  Such a fact, if proven, could easily support a claim that the employer’s stated reason for termination was a pretext for discriminatory intent.

Finally, you should recall that an employer who has to change reasons for an adverse employment action is already helping a plaintiff prove that the stated reason is a pretext for an illegal reason for termination.

California Fair Pay Act Confusion – Understanding California Labor Code Section 1197.5

By Charles L. Post on Posted in Labor Law, Wage & Hour

The following discussion concerns the California Fair Pay Act, and how to apply it.  If you are unfamiliar with the Act, you may wish to begin by reading this blog.

I get calls from employers asking: “When I group my employees by substantial similarity of work, how do I know that I am doing it correctly?”  These employers fear that someone – a Court, a plaintiff, or an employee – will come along and challenge the employer’s determination of who among its employees are engaged in “substantially similar” work.

The statute affirmatively requires employers to engage in that grouping.  Unlike earlier equal pay act legislation, California’s Fair Pay Act puts the burden of proving compliance with the statute on the employer.  Many employers are understandably concerned that their categorization of employees into groups of “substantial similarity” will be subject to criticism and attack.

The statutory language itself provides some relief to this anxiety.  The section says:

(a) An employer shall not pay any of its employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions, except where …”

Although a lot can be said about what follows section (a), the first step of the analysis required by the statute requires grouping of workers into groups of substantially similar work.  The statute requires the employer to view the work performed by its employees as “a composite of skill, effort and responsibility, and performed under similar working conditions ….”  The statute stays, “when viewed as a composite…”.  It doesn’t say “a composite as defined by law” or “a composite as approved by the Court,” or “a composite as determined by the administrator” ….  Instead, it simply says that the employer is required to view the substantially similar work of its workers as “a” composite of skill, effort and responsibility.  And while this may seem like  a lot to place on a single article, “a,” the use of the article can be fairly read as expressing the legislature’s intent.   The legislature is requiring employers to view the workforce or the positions performed by its workforce as a composite of the listed attributes.

Suppose we can read into that phrase the duty to make the composite reasonable and based upon an honest and fair assessment of the skill, effort and responsibility required to perform the work.    The logical conclusion from that language, is that if the employer does the analysis required by the statute reasonably, that composite should be viewed by a court as dispositive, or at least as persuasive.  Although there are no published cases under this statute as of this writing, this statutory language would support, in my view, a forceful argument that the employer gets to define a reasonable composite of skill, effort and responsibility and, that composite must be viewed favorably by courts as determinative of “substantial similarity “ of the work involved.

Attorney Beth West Testifies Before the California Legislature

By Ramona Carrillo on Posted in Discrimination, Harassment, Labor Law, New Legislation and Regulations, Retaliation and Wrongful Termination, Wage & Hour

Weintraub Tobin Shareholder, Beth West, shared her expertise and testified before the California Legislature’s Subcommittee on Sexual Harassment Prevention and Response on February 15, 2018. The hearing focused on the legal issues surrounding sexual harassment and Ms. West’s testimony identified challenges employers face in having effective anti-harassment programs in place, as well as some legal challenges employers face when complaints are filed.

Ms. West is a shareholder in the Labor and Employment Group at Weintraub Tobin and has over 18 years of experience representing employers in all aspects of their employment relationship with their employees.  She is an experienced trainer in the prevention of harassment, discrimination, and retaliation, and also an employment mediator and neutral workplace investigator.  Ms. West also uses her extensive knowledge of harassment law as a contributing editor of the Harassment Chapter in The Rutter Group’s California Employment Litigation treatise, which is used by employment attorneys throughout California.  Weintraub Tobin is proud of Ms. West’s work to assist the California Legislature in its efforts to address the issue of sexual harassment at the State Capitol. To view/hear part of Ms. West’s testimony, please click here.

California Labor Commissioner and Attorney General Jointly Answer “Frequently Asked Questions” on Immigration Sweeps

By Lukas Clary on Posted in Employee Privacy Rights, Labor Law, New Legislation and Regulations, Wage & Hour

In case you haven’t noticed, immigration has been a hot topic of discussion in the news lately. While debates over Dreamers and the wall have dominated those discussions, the workplace has been swept into it all as well. On the one hand, the federal government’s efforts to curb illegal immigration have reached the workplace via frequent raids of businesses suspected of employing undocumented workers.  On the other hand, California has deemed itself a “sanctuary state” and pushed back on these immigration sweeps via laws that punish employers who cooperate with federal authorities carrying out the raids.  The collateral damage in that fight may just be the employers who are stuck in the middle.  Employers who allow ICE agents into their business risk violating California law, but employers who turn the same agents away could find themselves in hot water with federal authorities.  What to do?   Fortunately, the state Labor Commissioner and Attorney General have jointly issued some guidance to aid employers in navigating these treacherous waters.

The Immigration Worker Protection Plan

As a brief reminder, beginning January 1, 2018, California’s Immigration Worker Protection Act, Assembly Bill 450, took effect.  We previously blogged about the Act here.  In a nutshell, the new law prohibits all California employers from (1) granting “voluntary consent” to an immigration enforcement agent to enter any “nonpublic area” of the workplace without a warrant and (2) voluntarily consenting to the agents’ accessing, reviewing, or obtaining employment records without a warrant or subpoena. The Act also requires employers to provide their workforce with 72-hours’ notice of any I-9 Employment Eligibility Verification Inspection. Employers who violate these laws can face fines up to $10,000.

While California’s Sanctuary State laws are well intentioned, they raise several questions for employers seeking to comply with both state and federal laws.  What does it mean to grant voluntary consent? Are employers required to take physical measures to stop an overbearing enforcement agent?  What constitutes a nonpublic area? How does an employer provide proper notice to employees of an upcoming 1-9 inspection?  These are just some of the questions employers are tasked with when digesting the new law. Continue Reading