New California Employment Laws for 2007: and Enforcement Issues
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New California Employment Laws for 2007: Essential Update on Laws, Cases, Regulations, and Enforcement Issues February 27, 2007 Los Angeles, California Today’s Presenters Thomas H. Petrides Jennifer L. Wayne Thomas H. Petrides Jennifer L. Wayne K&L Gates 10100 Santa Monica Blvd., Ste. 700 Los Angeles, CA 90067 (310) 552-5077 thomas.petrides@klgates.com K&L Gates 10100 Santa Monica Blvd., Ste. 700 Los Angeles, CA 90067 (310) 552-5084 jennifer.wayne@klgates.com Seminar Overview New California employment laws for 2007 Proposed new California regulations for 2007 New Federal employment law developments State and Federal case law developments Q&A session Significant New California Employment Laws for 2007 Increase of State Minimum Wage (AB 1835) Revisions to Paycheck Reporting Requirements (AB 2095) Amendment to AB 1825 – Harassment Training (AB 2095) Limitation on Cell Phones while Driving (SB 1613) San Francisco Paid Sick Leave Ordinance Vetoed Legislation Increase to State Minimum Wage (AB 1835) Effective 1/1/07, State minimum wage was increased from $6.75 to $7.50 per hour Effective 1/1/08, will increase to $8.00 per hour For exempt employees under California law, must now earn weekly salary of at least $600 per week (2x minimum wage) = $31,200 per year Effective 1/1/08, $640 per week = $33,280 per year For Commission exemption, 1.5 x minimum wage Employers required to post amended Wage Order Paycheck Reporting Requirements (AB 2095) Labor Code §204 provided that overtime earned in one payroll period could be paid by the employer during the next payroll period. However, Labor Code §226(a) required the employer to provide employees at the time of payment with an itemized statement showing the total hours worked by the employee during that payroll period. This created a conflict §226(a) provides for significant penalties to the employer for non-compliance. (§226(a) also sets forth other reporting requirements) Paycheck Reporting Requirements (continued) AB 2095 amends Labor Code §204 by providing that: “An employer is in compliance with the requirements of subdivision (a) of Section 226 relating to total hours worked by the employee, if hours worked in excess of the normal work period during the current pay period are itemized as corrections on the paystub for the next regular pay period. Any corrections set out in a subsequently issued paystub shall state the inclusive dates of the pay period for which the employer is correcting its initial report of hours worked” (emphasis added) Paycheck Reporting Requirements (continued) Will mostly just affect employers with paydays and payroll periods ending on the 15th and last day of the month Employers with weekly or bi-weekly payroll periods with paydays later in the week should normally already include in the wage statement all overtime hours worked during the payroll period Labor Code §204 provides that the terms of a collective bargaining agreement will control if it provides for different pay arrangements from §204 Amendment to Harassment Training (AB 2095) Effective 7/1/05, California law (AB 1825 – Gov. Code §12950.1) required employers to provide at least two hours of mandatory sexual harassment prevention training to all supervisors. However, the law was unclear as to whether this applied to supervisors located out of state who supervised California employees AB 2095 amended the statute to make it clear that only supervisors actually located in California are required to receive the training Limitation on Cell Phone Use While Driving (SB 1613) Effective 7/1/08, the hand-held use of a cell phone while driving will be against the law and will subject the driver to tickets Only phones that allow for hands-free listening and talking will be permitted while driving Employers with employees who drive as part of the job should start taking steps in 2007 to prepare for this change and reduce potential liability for noncompliance San Francisco Paid Sick Leave Ordinance Passed by SF voters in the November 2006 election Became effective 2/5/07 According to language of the ordinance, it applies to all employers who have employees who perform work in San Francisco County or City What Does the Ordinance Require? Employees working in San Francisco shall accrue one hour of paid sick leave for every 30 hours worked (no partial hour accruals) For employees on the payroll as of 2/5/07, accrual began 2/5/07 For employees hired after 2/5/07, accrual begins 90 days after the hire date How Does Accrual Work? Employers with 10 or more employees (regardless of where all employees are employed) must permit accrual of up to 72 hours of sick leave Employers with less than 10 employees must permit accrual of up to 40 hours of sick leave Temporary (even from a staffing agency) and part time workers count and are eligible Accrued, unused sick leave carries over year to year (subject to the cap, if the employer utilizes the cap) Unused, accrued sick leave is not paid out at termination (unless pursuant to a combined leave bank that includes vacation) Paid Leave Accounts Combined accounts, such as PTO which combine sick time with vacation, and allow accrual at least equal to the Ordinance, appear to comply with the law Employers who did not previously provide paid sick leave but did provide for vacation accrual may be able to comply by renaming vacation a combined account and ensuring to permit at least the levels of accrual required by the Ordinance For What Can the Paid Sick Leave Be Used? Employee’s own illness/injury Family members’ illness/injury (including spouse, step relation, foster relation, adopted relation, and registered domestic partner) Designated person where employee does not have spouse or registered domestic partner Must be allowed to designate no later than after 30 hours are worked after accrual begins and must be given 10 working days Must be permitted to change the designation annually Form for designation is available at the following url: http://www.sfgov.org/site/olse_index.asp?id=49389 Further Requirements Employees must give reasonable notice of need for leave when possible Employers cannot require employees to find a replacement Employers may only take reasonable measures to verify or document that an employee’s use of paid sick leave is lawful Notice and Posting Employers must post the official poster, available at http://www.sfgov.org/site/olse_index.asp?id=49389, in English, Spanish, Chinese, and any other language spoken by at least 5% of the employees at the workplace or job site Recordkeeping Employers are required to keep records of hours worked and paid sick leave taken on an annual basis, to be maintained for four years Agency is permitted, on notice, to review the records Presumed violation for failure to keep adequate records Question of how record keeping requirement will square with the permitted use of “PTO” Retaliation No adverse employment action is permitted against any person for exercising rights under the Ordinance Persons complaining of violation by mistake, but in good faith, are protected Leave taken under the Ordinance cannot count towards attendance control policies which may lead to any adverse action Rebuttable presumption of retaliation if adverse action is taken against any employee within 90 days after the employee complained, told another of his/her rights, cooperated in an investigation by the Office of Labor Standards Enforcement (OLSE), or opposed an unlawful policy or practice Enforcement OLSE is required to promulgate regulations but has been unable to do so and has no estimated date on which it will begin Violations may result in reinstatement, back pay with benefits, unspecified penalties In some instances, penalties payable to the employees may be a one-time $250 payment or treble the paid sick leave withheld, whichever is greater Some violations may result in a payment of $50 per day for each employee whose rights were violated (while the violation occurred or continued), and another $50 per day for the OLSE Civil actions in court are authorized Additional Points The requirements of the Ordinance may be waived in a Collective Bargaining Agreement, but waiver must be expressly stated Employers may provide for more generous policies on sick leave than required by the Ordinance Ordinance Fraught with Ambiguity Are workers who are based elsewhere but perform some services periodically in San Francisco eligible to accrue? If so, are only the hours working in San Francisco counted toward the 30 hours? May paid sick leave be taken in less than one hour increments? What documentation may an employer require to verify legitimate use of paid sick leave? And how often? Move to Delay Enforcement County Board of Supervisors considered a motion by two County Supervisors to delay enforcement of the Ordinance at a Special Meeting on 2/8/07, detailed in a proposed amendment to the ordinance calling for a “Transition Period” through 6/5/07 At the meeting, the Chair indicated his intent to entertain a motion to send the proposed amendment to the entire Board of Supervisors as a Committee Report on 2/13/07 Amendment to Sick Leave Ordinance Section 12W.17 was added by unanimous vote of the Board of Supervisors at its 2/13/07 meeting Section 12W.17 provides for a Transition Period through 6/5/07 Employers are not required to pay for sick leave under the Ordinance during the Transition Period, but must accrue the time No award of administrative penalties, compensatory costs to San Francisco, liquidated damages, or attorneys’ fees (under sections 12W.8(b) or (c) may be made by OLSE or a court for failure to provide paid sick leave during the Transition Period Vetoed Legislation (Selected Key Measures) SB 840 – Bill to create state-sponsored universal health care system to be principally funded by employers and individual contributions AB 2555 – Would have significantly increased penalties for violations of gender equal pay laws SB 1747 – Would have added “victims of domestic violence” as protected class for discrimination laws AB 1884 – Would have permitted an employee who is “locked out” during labor dispute to receive Unemployment Insurance benefits New Proposed California Regulations for 2007 Proposed Regulations regarding mandatory harassment prevention training for supervisors Proposed Regulations regarding employee travel expense reimbursement requirements Mandatory Training for Supervisors – AB 1825 Passed in 2004, mandating compliance by 1/1/06 and thereafter Covers Employers with 50 or more employees or contractors, whether full time, part-time or temporary, and whether employed inside or outside of the State Two hours of classroom or interactive training for all supervisors/managers by 1/1/06 Requires two hours of classroom or interactive training every 24 months thereafter and within 6 months after hiring or promoting new supervisor/manager located in California (per AB 2095) Proposed FEHC Regulations On 12/15/05, the California Fair Employment and Housing Commission (“FEHC”) issued proposed Regulations regarding the training requirements The proposed Regulations were modified on multiple occasions in 2006 following public comment, and were then adopted by the FEHC on 11/14/06 Proposed Regulations Rejected by OAL The Regulations were then sent to the Office of Administrative Law (“OAL”) for review and approval However, the proposed Regulations were rejected by the OAL on 1/31/07, because several definitions used by the FEHC were not acceptable The FEHC is now revising the Regulations and will issue them again on 2/27/07 at its next meeting Following a 15 day public comment period, the FEHC will then reconsider for adoption on 3/27/07 Required Training Contents – per Regulations Definition of unlawful sexual harassment under the state (FEHA) and federal (Title VII/EEOC) laws. (May also cover other forms of unlawful harassment under the state FEHA) FEHA and Title VII statutory provisions and case law principles concerning the prohibition against and the prevention of unlawful sexual harassment in employment The types of conduct that constitutes sexual harassment Remedies available to victims Required Contents (continued) Strategies to prevent sexual harassment in the workplace “Practical examples”…which illustrate sexual harassment, discrimination and retaliation using training modalities such as role plays, case studies and group discussions The limited confidentiality of the complaint process Resources for victims of unlawful sexual harassment, such as to whom they should report any alleged sexual harassment Required Contents (continued) The Employer’s obligation to conduct an effective workplace investigation of a harassment complaint Training on what to do if the supervisor is personally accused of harassment The essential elements of an anti-harassment policy and how to utilize it if a harassment complaint is filed Other Subjects Covered in Regulations Include Various definitions Discussion of “effective interactive training” Classroom, webinar or e-learning Frequency, tracking and documenting the training Qualification of trainers as “subject matter experts” FEHC issued remedies for failure to comply “Safe Harbor” provision for substantial, good faith effort by employer to comply with Statute prior to effective date of Regulations DLSE’s Proposed Regulations on Travel Expense Reimbursements Labor Code § 2802 requires employers to indemnify employees for all they incur as a result of the discharge of their duties for their employer There has been no specific procedure or method mandated by DLSE to determine an employer’s compliance with its obligation DLSE believes promulgating such regulations will force more uniform compliance and aid in enforcement Current status: written comment period closed 2/7/07. The only scheduled public hearing was held on 2/7/07 Mileage Reimbursement for Employee Use of Personal Vehicle for Employer’s Business (as Proposed) IRS mileage reimbursement rate is presumed accurate Employer has the burden of proving actual costs of employee to operate employee’s own vehicle for the employer’s business are less than the IRS rate Employee has the burden of proving actual costs of employee to operate employee’s own vehicle for the employer’s business is greater Factors considered include: gas purchases, oil purchases, lease payments, garage rent, repairs, tires, vehicle depreciation for the relevant time period, DMV registration fees, cost to insure, and licenses Proposed Employer-Provided Vehicle Cost Employer must reimburse all expenses incurred by employees when using an employer-provided vehicle for work Expenses include: gas purchases, oil purchases, lease or purchase payments, garage rent, repairs, tires, vehicle depreciation for the relevant time period, DMV registration fees and licenses, and cost to insure the vehicle Proposed Reimbursement for Travel Employees must be reimbursed for the necessarily incurred cost of regular meals Incidental expenses must be reimbursed (tips, fees, etc.) Lodging must be reimbursed Per diem (as stated in IRS publication 1542) may be used in lieu of actual costs of meals, lodging, as long as employee is notified prior to traveling Other Travel Expenses Tolls Parking (except for parking associated with an employee’s regular work location) Rental vehicles (employers may impose reasonable cap) Laundry, cleaning, pressing of clothing Mailing Telephone charges (including fax) for business calls Shipping Transportation Proposed Recordkeeping Requirement Employers must keep daily mileage records for miles driven by employees for work in their personal vehicles (and may require employees to record and submit those records in indelible form) All expense information must be maintained by the employer The employer may require receipts Records must be kept for three years Records must be available for employee and DLSE inspection upon reasonable request Reimbursement must be paid at least once each month and itemized statement showing time period covered, miles driven, rate used, and other itemization for other expenses must be included Reimbursement must be made in month expenses are incurred unless the employee fails to provide the information necessary, in which case reimbursement must be made by the following month Enforcement Employee may file a claim with the Labor Commissioner or in court, or, the DLSE may initiate an enforcement action in court Remedies include recovery of the reimbursements due, costs of suit, and attorneys’ fees New Federal Employment Law Developments OFCCP record keeping requirements for internet applicants New EEO-1 reporting form for 2007 SSN “No Match Letters” and proposed regulations Proposed legislation – minimum wage hike DOL to review FMLA provisions OFCCP – Internet Applicant Protocol Federal contractors (those with contracts of at least $50,000 or more with the federal government and who have 50 or more employees) are subject to numerous employment reporting, nondiscrimination, and affirmative action requirements Among the data federal contractors must track is “applicant flow” data, including job openings and applicant data for such openings (including race and gender, preferably through self-identification) Internet Applicant Protocol (continued) In October 2005, the Office of Federal Contract Compliance Programs (OFCCP) issued its final rule defining “internet applicant” The definition is important because federal contractors must now report and maintain (for at least two years, longer if there is an investigation) employment data concerning internet applicants Who is Considered an Internet Applicant? An applicant is defined as an individual who Submits an expression of interest, either through the Internet or related technologies, or through traditional means, during the time that the position is open (posted) for submission of applications, and such submission indicates that the applicant possesses the basic qualifications for the position Is considered by the Company for a particular position Who is Considered an Internet Applicant? (continued) Resides within the geographic area being considered for the position; however, applicants who apply for upper level jobs that are recruited nationally do not have to satisfy this criteria At no point prior to receiving an offer of employment from the employer, removes himself or herself from further consideration or otherwise indicates that he or she is no longer interested in the position Who is NOT Considered an Internet Applicant? Individuals who fail to timely respond to an employer’s inquiry pursuant to the employer’s application procedures Individuals who post résumés to résumé banks Individuals who repeatedly submit unsolicited résumés to specific employers generally would not be considered applicants unless all of the above criteria are satisfied What Does the New Rule Require? Employers must retain records of all internet-based “expressions of interest” where the employer considered the individual expressing the interest for a particular position Such records must be maintained even if the person was not an “applicant” or “internet applicant” Required so that OFCCP can determine if the employer complied with the definition of “internet applicant” Practical Considerations Identify the positions for which internet expressions of interest will be considered Establish protocol so expressions of interest which do not meet basic qualifications for the position are not considered Be careful! Must be consistent Merely reading the content of the expression of interest constitutes “consideration” Practical Considerations (continued) Establish protocol by which employer refrains from considering expression of interest not submitted with respect to particular position (unsolicited resumes) Information collection and protocols should be reviewed carefully to ensure no intentional or unintentional discrimination Use a voluntary self-identification protocol for gender and race Do not screen based on criteria that could have an adverse impact (e.g., screening based on geographic criteria with no clear, valid business reason resulting in exclusion of applicants from location with large minority population) EEO-1 Reporting: What is it? EEO-1 Report is a form by which employers report employment data pertaining to their workforce by race, gender and EEO Category Generally, Employers choose a pay period between July and September and report numbers of incumbents in EEO listed job categories by race and gender EEO-1 Report is required by law; it is not voluntary Uses of EEO-1 Report Used by Equal Employment Opportunity Commission (EEOC) to support civil rights enforcement efforts Used by Office of Federal Contract Compliance Programs (OFCCP) to determine which employer facilities to select for compliance evaluations Who Must Report? Any Employer who employs 100 or more employees Employers with federal government contracts equal to $50,000 or more and who employ 50 or more employees New EEO-1 Report Employers must begin using the new EEO-1 Report for 2007 reporting year Inform & train key HR personnel New changes Rename “Black” as “Black or African American” Rename “Hispanic” as “Hispanic or Latino” Divide “Asian or Pacific Islander” into two categories: “Asian” & “Native Hawaiian or other Pacific Islander” Extend EEO-1 data collection by race & ethnicity in Hawaii Classify business & financial advisors as Professionals Divide Officials & Managers category Executive/Senior Level Office Manager First/Mid Level Office Manager New EEO-1 Report (continued) Instructions and further information are available on EEOC website at www.eeoc.gov/ee01/index.html EEOC now prefers electronic or on line submission of EEO-1 reports Employer SSN No-Match Letters Employers have independent obligation to make good faith effort to confirm validity of SSN False social security cards are easy to obtain, agency records keeping problems result Where there is a mismatch, Code V mismatch letters are sent to the employer Dilemma for Employers Receipt of Code V letter not a basis for firing, not a comment on immigration status, and does not mean the employee has no legal right to work Letter warns against discrimination, but If employee admits falsification, employee must reverify with other documents Employer may fire for falsified records Absent admission by employee, employer in a bind: risk fines by IRS for failure to provide accurate information, and risk charges for discrimination if employee is fired Risks of Knowingly Employing Unauthorized Worker Conflict between knowing employment and prohibition against refusing to honor facially valid documents Post 9/11, agencies are becoming increasingly difficult Each situation is different, and requires high level of legal expertise and judgment New Proposed Immigration and Customs Enforcement (ICE) No Match Regulations Published 6/14/06 Affects employer response to either SSA or ICE No Match Letters Redefines when an employer will be found to have constructive knowledge of unauthorized employee Failure to properly respond to SSA or ICE No Match Letters will be deemed constructive knowledge Appropriate Response to SSA No Match Letter Confirm no internal clerical error Require employee to take steps to resolve discrepancy with other documents, clarify with SSA, and take similar steps If the issue is not resolved, take further steps to verify eligibility as described for ICE No Match Letters Appropriate Response to ICE No Match Letters Try same response as with SSA No Match Letters Complete a new I-9 with a different SSN, and a more limited number of documents than are authorized under the I-9 instructions Use Basic Pilot Employment Verification Program Voluntary program by agreement with SSA and ICE Free internet based system providing access to SSA and Department of Homeland Security (DHS) data bases Available to limited states in 1997, available to all states as of December 2004 Allows employers to verify SSNs from SSA and immigration status and work authorizations from DHS ICE Mutual Agreement between Government and Employers (IMAGE) New program announced in July 2006 Purportedly allows government and private employers to work together to strengthen hiring practices and reduce unlawful employment of illegal aliens Participation is by formal agreement but is voluntary Employer must submit to I-9 audit Employer must agree to use the Basic Pilot Employment Verification Program Employer must develop and adhere to program of best practices in hiring to reduce risk of hiring unauthorized aliens Enforcement/Hiring Prohibitions and Verification Procedures Agency (ICE or DOL) investigates (own initiative or based on information from third party) Agency may issue a warning or Notice of Intent to Fine Employer may request a hearing within 30 days of receiving Notice of Intent to Fine. If no hearing is timely requested, the Notice is final Penalties Pattern and practice of knowingly hiring illegals: criminal fine of up to $3,000 per illegal, six months imprisonment, or both ICE is emphasizing criminal sanctions, with over 400 criminal charges initiated in 2006 alone Civil penalties for knowingly hiring illegals range from $275 to $2,200 per illegal for first offense, $2,200 to $5,500 per illegal for second offense, $3,300 to $11,000 per illegal for subsequent offenses Civil penalties for violation of verification processes range from $110 to $1,100 per individual, depending on many factors Injunction from further violations Proposed Federal Minimum Wage Hike On 1/10/07, House passed (by 315 to 116) a bill to increase Fed minimum wage from $5.15 to $7.25 over 2 years On 2/5/07, Senate passed by 94 to 3 a bill to make the same increase over 2 years, but with attached tax cuts for small businesses as a condition for passing. On 2/20/07, House approved a version of the tax cuts, 360 to 45 Would be first increase to minimum wage in 10 years Will be subject to further debate/politics to reconcile the House and Senate versions of the bills DOL to Review FMLA Regulations On 12/1/06, the Department of Labor officially solicited public comment and views on the FMLA in order to assess the overall effectiveness of the FMLA regulations and the DOL’s enforcement of the law The public comment period has been extended from 2/2/07 until 2/16/07 No “agenda” has been announced, but it is anticipated that proposed changes to the FMLA Regulations may occur as a result of this review California and Federal Case Law Developments Case law update on vacation pay issues Case law update on meal and rest period “penalty” issues Federal case law update on ADEA age release issues State case law update on “unfair competition” and “restrictive covenant” issues Update on Vacation Pay Issues Two recent, significant cases Conley v. Pacific Gas and Electric Company, 131 Cal. App. 4th 260 (2005), relating to deductions from salary for exempt employees for partial days of vacation Church v. Jamison, 143 Cal. App. 4th 1568 (2006), relating to statutes of limitation and accrual of right to obtain payment of, among other things, vacation wages Conley Relevant Case Facts Class Action in which a purported class of exempt employees claimed they were misclassified as exempt because the employer violated the salary basis test under California law Salary basis test requires that exempt employees be paid their entire weekly salary for any week in which any work is performed, and that employers may not reduce the salary in a given week based upon the quantity of work performed Employers may deduct an entire day of wages for any full day in the week in which the employee did not perform any work because, for example, the employee was on vacation Issue in Conley The employer deducted from the employees’ vacation leave banks for absences of less than one full day, but not more than four hours per company policy (i.e., time off from four to eight hours) The affected employees contended that the practice by PG&E constituted a reduction in the amount of compensation purportedly exempt employees were receiving based upon the quantity of work they performed. As a result, they claimed, none of them met the requirements of the salary basis test Court Holding in Conley Court held that substituting vacation pay for partial day absences of four hours or more in place of salary does not violate the salary basis test Court reasoned that the affected employees still realized the same pay Court further reasoned there was nothing in California law that precluded PG&E from following the federal FLSA that permitted substitution of paid leave for absences of less than one full day for exempt employees Effect on State Enforcement DLSE amended its Enforcement Policies and Interpretations Manual in March 2006 and included a revision to section 51.6.15, specifically referencing the court’s holding in Conley DLSE now specifically permits substitution of vacation time for exempt employee absences of four hours or more BUT, local enforcement may still be “spotty” as evidenced by our recent “test” of DLSE’s email channels Church Case Relevant Facts Plaintiff was employed by an employer for three years. During the first year, he earned 10 days of vacation time. He never took the vacation time. He did not claim he earned any vacation time after the first year of employment Plaintiff’s employment ended in May 2001. He was not paid for any of his unused vacation time In April 2002, plaintiff sued his former employer. In December 2002, plaintiff amended his lawsuit to include, specifically, a claim that his employer failed to pay his earned vacation at the time of termination In April 2003, on demurrer, the trial court ruled that the claim for unpaid vacation wages was “untimely” Decision in Church At issue on appeal was whether plaintiff’s claim for unpaid vacation was time-barred The appellate court, citing Labor Code section 227.3, determined that a claim for payment of accrued, unused vacation does not accrue until the date an employee’s employment ends. Prior to termination of employment, an employee has no right to insist that his vacation time be paid out (absent a contract or employer policy permitting or requiring such pay out) Decision in Church (continued) Amicus arguing for the employer asserted that the statute of limitations should also be applied to limit the years for which vested vacation must be paid on termination The argument asserts that if, for example, the applicable statute of limitations is three years, and an employee whose employment ended in 2005 files an action to recover for unpaid vacation time in 2007, the court should consider only the vacation time that accrued within three years prior to the filing of the complaint (in other words, look back only to vacation accrued from 2004 through the termination in 2005) Decision in Church (continued) Amicus arguments were based on provisions in the DLSE Enforcement Policies and Interpretations Manual that had been determined void by prior courts The court further rationalized its rejection of the argument because no other courts have applied such an application of the statute of limitations, the argument is premised on the idea that an employee has an obligation to use vacation when it is earned, and it is based on the erroneous premise that the statute of limitations begins to run when the employee earns vacation, as opposed to the date on which the employer has an obligation to pay for earned vacation Decision in Church (continued) Holding of Church confirms a claim for unpaid vacation wages does not accrue until the date an employee’s employment ends Did not decide which statute applies (two years for oral contracts, four years for written contracts, or three years for statutory obligation) Meal and Rest Period “Penalty” Issues The rule: Employers must provide employees with a meal period (no later than the fifth hour of work) and the opportunity for a rest break; if they don’t, the employee is entitled to one hour of pay Subject of many recent claims and class actions Creates scheduling problems for both employers and employees The issue: Whether the payment of an hour of pay is a “wage” or a “penalty” Why it matters: Wage claims may be brought for three years; penalty claims are limited to one year. Also, no LC 203 “waiting time” penalties on a “penalty” Meal and Rest Period “Penalty” Cases Court of Appeal decisions ruling a Penalty Murphy v. Kenneth Cole (12/2/05) Mills v. Superior Court (1/27/06) Court of Appeal decision finding a Wage (“Statutory Remedy”) Nat’l Steel & Shipbuilding v. Godinez (1/20/06) Meal and Rest Period “Penalty” Cases (continued) Murphy v. Kenneth Cole under review by the California Supreme Court (review granted 2/22/06); decision will provide a final resolution to the “wage” vs. “penalty” question Oral argument has been scheduled for 3/7/07 in San Francisco ADEA Age Releases – Syverson v. IBM (9th Cir.) Syverson was involuntarily let go by IBM and he signed a standard IBM severance and release agreement. The Agreement provided that Syverson would release all claims and it also contained a “covenant not to sue” The Agreement was ambiguous as to whether the covenant not to sue applied to the ADEA release of age claims or not The 9th Circuit held that there is a difference between a “release,” which is permissible under the ADEA and OWBPA, and a “covenant not to sue,” which is not permissible ADEA Age Releases – Syverson v. IBM (continued) The 9th Circuit also held that the distinction between a “release” and a “covenant not to sue” would likely not be fully understood by the average individual Also, the ambiguity with respect to whether the age release was exempted from this covenant or not rendered the Agreement invalid and unenforceable under the “plain meaning” requirement of OWBPA The Court set aside the Agreement and permitted the employee to sue for age discrimination ADEA Age Releases – Lessons to be Learned ADEA and OWBPA requirements are technical and if not properly followed, can result in an invalid release Employers should carefully review all releases to ensure compliance California “Restrictive Covenants” B&P §16600 prohibits any agreement that “restrains trade.” This has long been held to prohibit an employee “covenant not to compete” However, some courts have held that a “narrow restraint” of trade would not violate the provisions of §16600 In Edwards v. Arthur Anderson, a California Court of Appeal squarely rejected this concept and held that any restraint of trade, even a “narrow restraint,” would violate 16600 California “Restrictive Covenants” (continued) However, the California Supreme Court has granted review of this decision, so a clarification of this important issue should hopefully be coming in the near future In the interim, employers in California need to be very careful with any agreement that restricts an employee, even if just from soliciting, unless it protects a legitimate trade secret or confidential information of the company Questions & Answers
