Thursday, July 19, 2018

Federal Court Enjoins Portions of AB 450

Sacramento Federal Courthouse
AB 450 was part of the "Sanctuary State" measures signed into law by Governor Brown on October 5, 2017. (The other measures were SB 54, restricting the sharing of information by law enforcement agencies, and AB 103, dealing with oversight of detention facilities). AB 450 imposed four restrictions on employers. Unless otherwise provided by federal law, employers:

  1. Were prohibited from providing voluntary consent to an immigration enforcement agent to enter nonpublic areas of a place of labor unless the agent provides a judicial warrant.
  2. Were prohibited from providing voluntary consent to an immigration enforcement agent to access, review, or obtain the employer’s employee records without a subpoena or court order, subject to a specified exception.
  3. Were required to provide a current employee notice of an inspection of I-9 Employment Eligibility Verification forms or other employment records conducted by an immigration agency within 72 hours of receiving the federal notice of inspection.
  4. Were prohibited from reverifying the employment eligibility of a current employee at a time or in a manner not required by specified federal law.

In March 2018, the U.S. Justice Department filed a lawsuit against the new laws in the federal district court in Sacramento. California moved to dismiss the lawsuit, and the Justice Department asked for a preliminary injunction against enforcement of the laws. Earlier this month, Judge John Mendez (1) granted a preliminary injunction barring enforcement of Items 1, 2 and 4 of AB 450, (2) denied the preliminary injunction motion as to Item 3, and (3) dismissed the portions of the lawsuit related to SB 54 and AB 103.

The district court has created a page on its website with links to the critical documents in the lawsuit, including these recent decisions. Access the page here.

Tuesday, May 1, 2018

The ABC's of Employment

The California Supreme Court has handed down an important decision that explains how to distinguish between an employee and an independent contractor, for purposes of enforcing California's wage orders. In Dynamex Operations West, Inc. v. Superior Court, Case No. S222732 (Apr. 30, 2018), the Court adopted the "ABC" test. That test assumes an individual who does work for another person is an employee of that person, unless the person proves (A) that the worker is free from the other person's control and direction in connection with the performance of the work, and (B) that the worker is performing work that is outside the usual course of the other person'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 California wage orders adopted by the Industrial Welfare Commission are quasi-legislative regulations that have the force of law. Among other things, they establish the overtime rules, and define the exemptions from those overtime rules. All but one of the 17 contains the following definitions: "employ" means "to engage, suffer, or permit to work;" "employee" means "any person employed by an employer;" and "employer" means "any person as defined in Section 18 of the Labor Code, who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person." All the wage orders may be accessed from this page on the website of the Department of Industrial Relations.

The Dynamex opinion discusses three earlier Supreme Court opinions that dealt with the distinction between employees and independent contractors.

  1. S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 241. The narrow ruling in this case was that farmworkers hired by a grower to harvest cucumbers under a "sharefarmer" agreement were employees for purposes of the Workers' Compensation Act. Many decisions since Borello have cited that case as applying the common law test for employee. The decision identified a number of factors to be considered in making that determination. Those have come to be known as the "Borello factors," and have routinely been applied in a number of contexts, including wage and hour litigation, to determine whether or not an individual is an employee. For a recent example, see Linton v. DeSoto Cab Co., Inc. (2017) 15 Cal.App.5th 1208. The Dynamex decision says that Borello should be understood as adopting a "statutory purpose standard," rather than a universally applicable multi-factor test.
  2. Martinez v. Combs (2010) 49 Cal.4th 35. Seasonal agricultural workers sued a strawberry grower and produce merchants who bought strawberries from the grower for failure to pay minimum wage and overtime. The Supreme Court stated that the wage orders contain three alternative definitions of employment: (1) to exercise control over the wages, hours or working conditions, (2) to suffer or permit to work, or (3) to engage, thereby creating a common law employment relationship. The produce merchants could not be considered employers under any of the definitions.
  3. Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522. Newspaper carriers claimed that a newspaper company had misclassified them as independent contractors. Because both sides had agree that the Borello test was the applicable standard, the Supreme Court did not consider the scope of the definition of employment in the wage orders.

Saturday, April 21, 2018

Discouraging Employee Departures

Because employers invest money in hiring, training and developing their employees, they would like their employees to remain in their employ. You know how it goes. You spend time and money on recruiting the best candidates. Then, you teach the ones you hire how to do their jobs. Just as the best one of the bunch gets to the point where she is ready to contribute to the enterprise, she up and leaves to join the competition. What does the law allow employers to do to retain employees?

The best way to retain employees is to offer competitive pay and benefits, an enjoyable working environment, and a job that matches the employees skills. So as long as you do not discriminate on the basis of a prohibited characteristic, the law allows you to offer whatever incentives you like to encourage employees to stay. This how-to guide from The Wall Street Journal has some ideas about how to hang on to your employees.

Disincentives are another story. For example, California law is quite clear that you may not require an employee to sign a non-compete clause that bars her from quitting to join the competition. Business and Professions Code section 16600 provides that, with few exceptions, "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."

Although you might be tempted to charge departing employees for the investment you made, there are restrictions on that, too. Labor Code section 2802 requires employers to absorb all the regular costs of doing business, including recruiting and training employees to do their jobs. If the employer pays for voluntary training or education that is not required for the job, the employer may charge that back to the employees. For discussions of the distinction, see USS-Posco Industries v. Case (2016) 244 Cal.App.4th 197 and In re Acknowledgment Cases (2015) 239 Cal.App.4th 1498. To implement such a program, you will need a written agreement that the employee signs before receiving the training.

There is also room within the law for tying some aspects of compensation to a commitment to sticking with the employer. In Schachter v. Citigroup, Inc. (2009) 47 Cal.4th 610, the Supreme Court upheld an incentive plan that allowed employees to receive part of their compensation in the form of discounted restricted stock, which had a two-year vesting period. If an employee voluntarily terminated employment or was terminated for cause before the end of the two-year period, the restricted stock would be forfeited. That same concept can be applied to payment of relocation expenses, and signing bonuses. The idea is that the employee has not earned the payment, until she has worked the specified amount of time for the employer. Keep in mind that the Schachter case involved only a two-year delay in receiving the compensation. Imposing a requirement that the employee remain employed for an extended length of time might render the plan unlawful.

Tuesday, March 27, 2018

Joint Employer Responsibility for Meal Periods

A recent decision from the California Court of Appeal explains how a staffing agency may satisfy its obligation to its employees to provide meal periods in accordance with the California wage orders. See Serrano v. Aerotek, Inc., Case No. A149187 (1st Dist. Ct. App. 3/9/2018).

Aerotek was a staffing agency that placed temporary employees with its clients. Its contract with the client stated that the client was responsible for the work environment, and the the client would comply with applicable federal, state and local laws. The client set the work schedules for the temporary employees, and managed their breaks. Aerotek had a handbook for temporary employees assigned to clients, which contained a meal period policy that complied with California law -- that is, that employees were to be provided with an uninterrupted 30-minute off-duty meal break by the end of the fifth hour of work.

One of the temporary employees filed a class action complaint against Aerotek and the client, alleging that the client did not actually provide meal periods in accordance with the law. Aerotek had a manager at the client's workplace, who declared that no Aerotek employee had ever complained to him that he or she had been from taking a meal period, even though Aerotek's policy required them to notify Aerotek if they believed they were being prevented from taking meal breaks. In written discovery, the temporary employee conceded that she was unaware of any actions by Aerotek that prevented her from taking her meal periods.

Employers are not required to police meal breaks. They need only provide a reasonable opportunity for employees to take their breaks, and refrain from impeding or discouraging them from doing so. See Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004. Aerotek fulfilled that obligation by establishing a policy that followed California law, and by not interfering with the taking of meal breaks. Even if Aerotek was aware that its temporary employees were not actually taking meal periods by the end of their fifth hour of work, it would not violate the meal period requirement. It did not have to make sure that the employees actually took their meal periods. The Court of Appeal affirmed the trial court's grant of summary judgment to Aerotek.

Tuesday, January 16, 2018

DOL Abandons 6-Factor Internship Test

The U.S. Department of Labor has updated its fact sheet on internship programs to adopt the
"primary beneficiary" test followed by the Second, Sixth, Ninth and Eleventh Circuit Courts of Appeals. It previously used a six-factor text that refused to allow unpaid internships under the Fair Labor Standards Act if the employer derived any immediate advantage from the relationship. The new seven-factor test adopts a flexible approach, with no single factor being determinative. The seven factors are:
  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
The Department relied on the following Court of Appeal decisions in formulating its test:

Solis v. Laurelbrook Sanitarium and School, Inc., 642 F.3d 518 (6th Cir. 2011).
Schumann v. Collier Anesthesia, PA, 803 F. 3d 1199 (11th Cir. 2015).
Glatt v. Fox Searchlight Pictures, Inc., 811 F. 3d 528 (2nd Cir. 2015).
Benjamin v. B & H Education, Inc., Case No. 15-17147 (9th Cir. Dec. 19, 2017).