Thursday, October 20, 2016

Court of Appeal: Wage Statements Need Not Include Vacation and PTO Balances

Labor Code section 226 explains in detail what information must be included in an itemized wage statement, which must accompany paychecks in California.  Here are the section's requirements:
(1) gross wages earned, 
(2) total hours worked by the employee, except for any employee whose compensation is solely based on a salary and who is exempt from payment of overtime under subdivision (a) of Section 515 or any applicable order of the Industrial Welfare Commission, 
(3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis, 
(4) all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item, 
(5) net wages earned, 
(6) the inclusive dates of the period for which the employee is paid, 
(7) the name of the employee and only the last four digits of his or her social security number or an employee identification number other than a social security number, 
(8) the name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name and address of the legal entity that secured the services of the employer, and 
(9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee and, beginning July 1, 2013, if the employer is a temporary services employer as defined in Section 201.3, the rate of pay and the total hours worked for each temporary services assignment.
The deductions made from payment of wages shall be recorded in ink or other indelible form, properly dated, showing the month, day, and year, and a copy of the statement and the record of the deductions shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California. For purposes of this subdivision, “copy” includes a duplicate of the itemized statement provided to an employee or a computer-generated record that accurately shows all of the information required by this subdivision.
Oh, but if you pay a piece rate, you also have to comply with section 226.2:
(a) For employees compensated on a piece-rate basis during a pay
period, the following shall apply for that pay period: * * *  
(2) The itemized statement required by subdivision (a) of Section 226 shall, in addition to the other items specified in that subdivision, separately state the following, to which the provisions of Section 226 shall also be applicable: 
(A) The total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period.
(B) Except for employers paying compensation for other nonproductive time in accordance with paragraph (7), the total hours of other nonproductive time, as determined under paragraph (5), the rate of compensation, and the gross wages paid for that time during the pay period.
So, do you see vacation or PTO balances there?  Me neither.  Neither did the Court of Appeal, which rejected the plaintiff's claim in Soto v. Motel 6 Operating LP (opinion here).  The Court wrote:

section 226(a) is highly detailed, containing nine separate categories that must be included on wage statements, and the code section does not identify accrued paid vacation as one of these categories. (See fn. 2, ante.) When a statute omits a particular category from a more generalized list, a court can reasonably infer a specific legislative intent not to include that category within the statute's mandate. (See Blankenship v. Allstate Ins. Co. (2010) 186 Cal.App.4th 87, 94.)
*  *  *  *
[V]acation pay cannot be fairly defined as "gross wages earned" or "net wages earned" under section 226(a)(1) or (a)(5) until the termination of the employment relationship. The employee has vested rights to paid vacation or vacation wages during the time of his employment, but these rights do not ripen and become an entitlement to receive the monetary value of the benefit as wages until the separation date. (Church, supra, at pp. 1576-1577, 1583; see Suastez, supra, 31 Cal.3d at p. 784.) Further, before separation, the amount of vacation pay to which the employee is entitled is not ascertainable. An employee is entitled to obtain the value of unused paid vacation at his or her "final rate." (§ 227.3, italics added.) Because the amount of unused vacation and an employee's final rate may change, an employee's accrued vacation balance depends on the particular circumstances at the employment termination date.
This will help employers not only with claims that vacation / PTO belong on the wage statement, but also with other items not included in section 226.  Section 226 also requires employers to provide a copy of payroll records that include only the above 9 items.  Plaintiff lawyers argue that section 226 requires more than what is listed. This decision in Soto should put that issue to rest. 

One more tip:  employers have to report paid sick leave on the wage statement (or in a separate document) per  Labor Code section 246, subd. (h):
(h) An employer shall provide an employee with written notice that sets forth the amount of paid sick leave available, or paid time off leave an employer provides in lieu of sick leave, for use on either the employee's itemized wage statement described in Section 226 or in a separate writing provided on the designated pay date with the employee's payment of wages.
Therefore, employers that rely on PTO in lieu of mandatory paid sick leave might well have to provide the PTO balance on the wage statement (or in the separate document).  Apparently that was not the case in the Soto case, or no one brought it up.   

Be careful out there.

Wednesday, October 12, 2016

New Laws for 2017 - Shaw Valenza's Annual Employment Law Update

We're not publishing here on the blog as regularly as we'd like. And there are just too many new laws to cover.

The California legislature was very busy last year.  Everything from a separate retirement plan for employees without an employer 401k, to expanding the equal pay law to race and "ethnicity," to a phased in $15.00 minimum wage, to penalties for mishandling I-9 verification, and more.  Long quiet, the federal government is going after employers as well, with agency decisions and regulations.    Joint employer rules, paid sick leave for federal contractors,  Let's not forget the many court decisions that shape the law in new and exciting ways (unrelated to class action certification or arbitration, even).

With the blog publishing less frequently, where o where can one get accurate summaries of the important employment law changes that will affect HR and business people in 2017?

Thank you for that excellent question.  The answer is:  SV's annual employment law update. We've been doing it for years and years.  No lie: the live sessions almost always sell out.  The webinar is available, but live is always better.

As of now, we have a live session in Sacramento now set for December 1. Get info here.
Our first webinar is set for January 19, 2017. Info is here.

Please tell your friends too.  They'll thank you, assuming they have some interest in employment law. Otherwise, they'll probably be annoyed.


Thursday, September 29, 2016

Federal Contractors: Federal Paid Sick Leave Final Regulations Are Here

California employers have to provide paid sick leave.  How much paid leave, and how to administer it, depends where your business is located within the Golden State.  There is a statewide law, and a growing list of local ordinances.  San Francisco, Oakland, Emeryville, and Los Angeles are some of the localities that have passed ordinances.  Employers trying to harmonize state and local law must  provide leave on whatever terms are most generous.  That can cause some traps, particularly with respect to how the leave accrual is counted.  And don't forget the posters!

Sure, California could pass a law preempting the local ones to make life easier for employers and still provide employees with leave. But making things easier for employers is just not job 1 at the Legislature.

Now, there is yet another law that requires employers' attention. Back in September 2015, President Obama issued an Executive Order, No. 13706, in which he ordered employers with federal contracts to provide employees working on those contracts with paid sick leave.  The US Department of Labor issued proposed regulations, which are now final.

A summary of the regulations, the comments and the final regulations are in this very long PDF. 

To break it down,

 - the first 10 pages contain a summary of the various regulations
- the next 394 pages are a detailed analysis including responses to the 35,000 comments that were submitted regarding this regulation.
- Page 404 of the PDF is where the regulations begin.

What is  a Contractor and What Contracts are Covered? 

Section 13.2 (p. 406 of the PDF) of the new regulation defines who is a federal contractor, covered by the rule:
Contractor means any individual or other legal entity that is awarded a Federal
Government contract or subcontract under a Federal Government contract. The term contractor refers to both a prime contractor and all of its subcontractors of any tier on a contract with the Federal Government. The term contractor includes lessors and lessees. The term employer is used interchangeably with the terms contractor and subcontractor in various sections of this part.

Of note, the term "employee" is defined (pp. 410-411 of the PDF) as limited to those who work on federal contracts. So, employers that have operations that are separate from servicing the federal contract are not covered by this rule.

The coverage of the types of contracts that the regulation applies to is explained in section 13.3, at pp.  417 et seq. of the PDF.

What Is the Sick Leave Entitlement?

That's explained in section 13.5 of the regulation, beginning at page 420 of the PDF.
a contractor shall permit an employee to accrue not less than 1 hour of paid
sick leave for every 30 hours worked on or in connection with a covered contract. A contractor shall aggregate an employee’s hours worked on or in connection with all covered contracts for that contractor for purposes of paid sick leave accrual.

A contractor may choose to provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year rather than allowing the employee to accrue such leave based on hours worked over time.

So, like California and other jurisdictions, the sick pay accrues at one hour for every 30 hours worked.  More generous than California, the federal entitlement maxes out at seven, eight-hour days.
And the employer can front-load 56 hours to the employee rather than accrue over time.

There are rules regarding "carrying over" at page 423-24 of the PDF.

Pages 425-428 include the terms of the leave, documentation the employer may require, and more.

Pages 428-431 cover the medical certification the employer may require.

The regulation provides for no private enforcement of the paid sick leave law.  Employees claiming a violation of the regulation must proceed through the Department of Labor.

The DOL will investigate and try to address any violations. However, the DOL may sue an employer or seek "debarment" from federal contracts.

  Section 13.5 of the regulations require employers to maintain a record of the sick leave employees have accrued and used, and furnish information to employees with the paycheck or online.
 Section 13.25 (page 441 of the PDF) requires contractors to keep a variety records for three years.
That section also requires employers to keep detailed records if they wish to segregate employees' hours worked on federal contracts versus non-contractor work.

Of course. Section 13.26 describes the obligation to post a notice prepared by the DOL.

*  *  *
Unless Congress or the new president rescinds this rule, it will go into effect.  So, employers with federal contracts, please get ready for the new sick leave obligation, create policies, and determine how you will address sick leave for employees who are not working on the contract.

Finally, I tried my best to summarize 460 pages of rule making and analysis.  If I left anything out important to you or your business, please accept my apologies.  It's best if you click the link above and read the rules along with your employment counsel!

Now please excuse me, I'm feeling a little sick.  SWIDT?

Wednesday, September 28, 2016

CA Employers: Learn Your I-9 Rules or Pay Up to $10,000

The employment of more undocumented immigrants, formerly known as illegal aliens, remains a top priority for the California legislature.  Whatever you think of that, the policy creates a dilemma for employers. 

The dilemma is that it remains illegal under federal law for employers to knowingly hire or retain those who are not authorized to work in the U.S.  So, employers are supposed to follow immigration law. But the California Legislature does not want employers to follow it too hard, you know? 

This year's disincentive for employers to follow immigration law is called AB 1001 (here).  It will be Labor Code section 1019.1.  

First, this law provides it is unlawful for an employer, while doing its duty under federal immigration law, to 
(1) Request more or different documents than are required under Section 1324a(b) of Title 8 of the United States Code.
So, that means that the employer is limited to asking for what the I-9 authorizes. So far so good.  Employers should be doing that anyway. 

Second, the law makes it illegal for an employer to:
(2) Refuse to honor documents tendered that on their face reasonably appear to be genuine or 
(3) Refuse to honor documents or work authorization based upon the specific status or term of status that accompanies the authorization to work.
Who gets to decide what "reasonably appears to be genuine"? And what does (3) even mean? We should call a lawyer!  Anyway, this section will create an incentive for employers to let false documents pass.  Of course, if a federal I-9 audit reveals the employer should have caught the false documentation, well that's not part of the calculus.

Third,  if an employer learns that someone has falsified information or is illegal to work, or if the authorization documents expire, employers are supposed to re-verify authorization, no?  Not so fast, employers.  It's now illegal for an employer to 
(4) Attempt to reinvestigate or reverify an incumbent employee’s authorization to work using an unfair immigration-related practice.
Ok, I'll bite: What's an "unfair immigration-related practice" and how does one know she is engaging in that practice?

So, what are the consequences for violating section 1019.1? 
 - an applicant or a representative of the applicant, such a union, presumably, can file a complaint with the Labor Commissioner;
- The Labor Commissioner can make an order of "equitable relief."  Yes, back pay is a form of equitable relief.  So is reinstatement. 
- AND, the Labor Commissioner can assess a penalty of up to $10,000.

So, employers must ensure they are complying with the I-9 rules to the letter. Deviations regarding documentation and re verification can lead to heavy financial penalties under state law, in addition to penalties possible under federal law for being too lax. 


Tuesday, September 27, 2016

A Couple of New California Employment Laws that Require Attention

Here are two recently signed laws that will go into effect 1/1/17.

First, the Legislature re-drafted the Labor Code provision that prohibits asking applicants about arrests, convictions that have been expunged, or about misdemeanor marijuana possession charges more than 2 years old, etc.

The new bill, numbered AB 1843 (here) makes it unlawful to ask applicants to disclose
an arrest, detention, processing, diversion, supervision, adjudication, or court disposition that occurred while the person was subject to the process and jurisdiction of juvenile court law.
Is a "court disposition" a conviction?  Don't know.  But the statute also cryptically says:

For purposes of this section, “conviction” does not include, and shall not be construed to include, any adjudication by a juvenile court or any other court order or action taken with respect to a person who is under the process and jurisdiction of the juvenile court law.
There are also special provisions regarding conviction / arrest inquiries applicable to public sector police / peace officer applicants, the health care industry, and certain occupations. So, read the law carefully and ask your lawyers for more detail.

And now, a mini-rant! I know that's why you come here.   

I'm not sure who's writing these statutes nowadays. But "does not include" and "shall not be construed to include" is entirely unnecessary repetition. And why say "court disposition" when they could say something more clear?  These California employment laws are getting longer and less comprehensible. Good for me; good for plaintiff lawyers; bad for our clients.

Anyway, you'll have to ensure conviction inquiries on application forms etc. are modified. 

* * * 

The second law could be a game changer for out of state and multi-state employers. 

SB 1241 (here) prohibits employers from requiring, as a condition of employment, that an employee agree to 

- litigate or arbitrate a dispute outside of California. For example a NY-based employee cannot require an employee to litigate or arbitrate his or her dispute in NY court.  This is a prohibition on "choice of venue" or "forum selection clauses." 

- a "choice of law" clause that requires another state's law to apply to a dispute.   So a multi-state employer that has a confidentiality / trade secret agreement cannot provide for another state's law to apply in the case of a dispute. 

Note - though that the law is applicable only to an employee who "primarily" resides AND works in California.  In wage-hour law, primarily means more than 50%.  Here, however, that term is not defined.  The law, then, will not apply to employees who do not primarily live in California.  It also will not apply to employees who work in more than one state, if California is not the "primary" state. 

The bill says that the provision is "voidable" by the employee, which means it is not illegal as written, but the employee can object to it and have it struck.  If it is struck then the matter must be litigated in California under California law. 

The new law also allows employees to challenge these provisions and receive an award of attorney's fees. However, the fee provision is "one way" and employers therefore will not be awarded fees if they win. 

Finally, this new law does not apply if a lawyer represented the employee when the employee agreed to the choice of law / venue provisions in the employment agreement. 

The law takes effect January 1 and applies not only to new agreements, but also to any agreement "modified" or "extended" after that date. 

So, the new law does not appear to apply to post-hire agreements unless modified or extended after 1/1/17. But it  will apply if  employment is conditioned on the agreement (e.g., the employee is fired if s/he doesn't agree).  It also does not appear to apply to separation agreements. 

This new law, however, will affect offer letters, confidentiality agreements, bonus plans, and restrictive covenants.  

Tuesday, September 06, 2016

California Department of Industrial Relations and Labor Commissioner Create Complaint Hotline

Employees who think their employer is not paying wages or following other California labor laws can now lodge complaints with the Department of Industrial Relations, which includes the state Labor Commissioner's office.  See the press release here.

This new system allows workers to fill out an online form (here) to report violations.  The report does not constitute a claim for the employee's own wages, which would have to be filed separately.   However it is unclear what the agencies will do with the reported info.

The online system ensures that employees do not harass employers by filing bogus complaints, or makes reports about matters that have nothing to do with the Labor Commissioner.  Ha, I kid.  Of course disgruntled employees will use the system to beat on their former employers.

So, forewarned is forearmed.  Despite my cynical comment above, most employees do not want to turn their bosses in.  So, it's important to keep up on the wage-hour requirements, pay your employees in accordance with the law, etc.

But it's also important to give employees a way to raise concerns internally, so they do not go to external resources.  If employees have no recourse within your organization, they'll find another way.

Monday, August 22, 2016

Ninth Circuit Holds Class Action Waivers in Employment Agreements Violate the National Labor Relations Act

A panel of the Ninth Circuit Court of Appeals held 2-1 that class action waivers in arbitration agreements violate the National Labor Relations Act.

In an opinion by Chief Judge Sidney Thomas, the divided panel's majority decided that the National Labor Relations Board correctly decided that class action waivers violate the National Labor Relations Act because they require employees to give up "concerted activity" - joining together in a group to address wages, hours, and other terms and conditions of employment.

The majority's rationale is that a class action waiver is a waiver of the right to act in concert - a substantive right under the NLRA. Therefore, the employee is not merely waiving the right to a class action; the employee is waiving the right to section 7 of the Act.  And that's not legal.  Because it's not legal, the arbitration provision is not enforceable, notwithstanding the Federal Arbitration Act.
The Court took special pains to emphasize that it was not holding that a class action waiver is illegal because it requires arbitration.  The opinion emphasizes that any class action waiver - even one that did not require arbitration at all - would be illegal.

So, never mind that
- Many employees who might be subject to an arbitration agreement with a class action waiver,  such as supervisors,  are not covered by the NLRA;
- Many employees who might be subject to an arbitration agreement with a class action waiver are former employees who are not engaging in protected, concerted activity to improve working conditions;
- There was no such thing as a class action in 1937 when Congress passed the NLRA;
- a class action is a procedural tool, the Supreme Court has held, not a substantive right;
- a class action is frequently asserted by one employee on behalf of a putative class, the members of which have no rights as parties and often do not even know someone filed the lawsuit;
- The Fifth, Second, and Eighth Circuits, and the California Supreme Court for that matter, have held that the NLRB got it wrong; and
- The Supreme Court has held that class action practice is incompatible with arbitration. 
None of that makes any difference. Judge Ikuta discussed some of these points and others in her dissent.

The court left open the possibility that the parties could arbitrate the class action if the employer desired.  The court also held that nothing in the decision limited arbitration of the claims asserted in the case.  The employees, however, would not be precluded from proceeding as a putative class if the district court decides to "sever" the class waiver.

So, the Supreme Court is going to have to take a look at this issue.  Until then, class action waivers are on shaky ground in the 9th Circuit.

Two things, however:

1. The California Supreme Court has held that the NLRB was wrong and the NLRA does not preclude class waivers.  So, state courts probably have to follow the California Supreme Court unless or until that Court changes its mind.

2. The Ninth Circuit held in Johnmohammadi v. Bloomingdale's, Inc. 755 F.3d 1072 (9th Cir. 2014), that an employer does not violate the NLRA when it gives employees the chance to opt-out of an arbitration agreement containing a class waiver.  Here's what the Court said:
We can quickly dismiss any notion that Bloomingdale’s coerced Johnmohammadi into waiving her right to file a class action. Bloomingdale’s did not require her to accept a class- action waiver as a condition of employment, as was true in In re D.R. Horton, Inc., 357 N.L.R.B. No. 184, 2012 WL 36274 (Jan. 3, 2012), enforcement denied in part, 737 F.3d 344 (5th Cir. 2013). Bloomingdale’s gave her the option of participating in its dispute resolution program, which would require her to arbitrate any employment-related disputes on an individual basis. As the district court found,
Johnmohammadi was fully informed about the consequences of making that election, and she did so free of any express or implied threats of termination or retaliation . . . 
Therefore, at least in the 9th Circuit, and at least for now, it is necessary to include an opt-out provision and to explain the consequences of the arbitration provision containing a class waiver.  Good drafting, therefore, can save the class waiver. 

This case is Morris v. Ernst & Young LLP and the opinion is here.