Overview of Critical 2010 Developments
Squire, Sanders & Dempsey L.L.P. Brian E. Shield Casey J.T. McCoy Stacie D. Yee
[email protected] [email protected] [email protected]
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Wage and Hour/Class Action Updates
Casey J.T. McCoy
Squire, Sanders & Dempsey L.L.P.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Tips on Tips
• Cumbie v. Woody Woo held that mandatory tip pools did not violate the FLSA so long as no tip credit is taken by the employer.
• Lu v. Hawaiian Gardens Casino held employees do not have a private right of action under Labor Code § 351 but observed that tort
remedies such as conversion may be available.
• Stay tuned for a lot more claims related to how money is calculated and paid as the number of exemption-based wage and hour cases
starts to diminish.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Off Site Work and Data Transmission
• Rutti v. Lojack – Technician sued for payment for travel time and time spent before and after driving to his jobs. The Court found the driving time was not compensable, nor time spent mapping out each days’ route but did say the employer might be liable for time spent at the end of the day transmitting reports because it may have taken more than 10 minutes per day.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com A Meal is a Meal
• McFarland v. Guardsmark – Employee sued for unprovided duty free second meal breaks arguing that if the first meal break is an on-duty break, that is akin to a waived meal break so the employer cannot get employee waiver of the second break. This interpretation was supported by the DLSE Manual. The Court rejected this argument and rejected the Manual on the ground that it is a “void regulation.”
• BE WARY OF THE DLSE MANUAL.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Individuals May Be Liable Under the FLSA
• Boucher v. Shaw – Chairman/CEO, CFO and Head of HR could be “employers” within the meaning of the FLSA and therefore liable for unpaid wages.
• Under FLSA, “[w]here individual exercises control over the nature and structure of the employment relationship . . . that individual is an employer within the meaning of the Act, and is subject to liability.”
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Most Ridiculous Case of the Year
• Morgan v. United Retail – Employee sued because wage statements issued by the employer listed the total number of regular hours and OT hours separately and did not provide their sum as a separate line item. Court rejected the argument finding that employer complied with Labor Code Section 226’s requirements showing actual hours worked by employee.
• See Kirby v. Immoos – Employer may recover its attorney’s fees for successful defense of claim for failure to provide rest periods as required under wage orders
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Class Action Developments
• Faulikenbury v. Boyd & Assoc., Inc. - Appellate Court partially reverses certification of OT and Meal/Rest
Period Class on the ground that while common issues predominated OT issue, individual issues predominated break claims.
• Vinole v. Countrywide Home Loans, Inc. – Appellate Court affirms denial of class certification on motion filed
by defendant prior to discovery cut-off and before plaintiffs filed their class certification motion
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Class Action Developments (cont.)
• Clark v. American Residential Servs. – Strict scrutiny of class action settlements; court must have sufficient information to make an informed evaluation of the fairness of the settlement
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Discrimination/Harassment Updates
Stacie D. Yee
Squire, Sanders & Dempsey L.L.P.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Discrimination/Harassment Updates
• Nov.’09 to April ’10: 60% INCREASE in discrimination claims filed – WHY?
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Age Discrimination – RFOA Test
• New proposed EEOC definition of what “reasonable factors other than age” means for purposes of disparate impact cases.
• New rule will emphasize a case-by-case approach to determining reasonableness of practice.
• “Objectively reasonable when viewed from the position of a reasonable employer under like circumstances, both in its design and the way it is administered.”
Squire, Sanders & Dempsey L.L.P. | www.ssd.com RFOA Test: “Prudent Employer” Standard
• Common business practice • Related to stated business goal • Defined accurately and applied fairly • Assessed adverse impact on older workers • Severity of harm (number affected, degree of injury) versus corrective steps
• Failure to pursue other available options • Extent supervisors had unchecked discretion to assess employees subjectively
• Extent supervisors were to evaluate employees based on factors known to be subject to age-based stereotypes
• Extent supervisors were given guidance or training on how to apply factors and avoid discrimination
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Expanded EEOC Enforcement of ADA
• New EEOC cases target alleged discrimination against individuals with diabetes, cancer and severe arthritis.
– Employer took stool away from arthritic cashier – Two employees selected for RIF after completing health survey
identifying themselves as diabetic and hypertensive
– Employee being treated for cancer asked to work part-time and was fired because he had exhausted his permitted leave time
• HIV positive status qualifies as a disability under broader ADA standards
• 9th Circuit: duty to accommodate employee’s limitations in getting to and from work
Squire, Sanders & Dempsey L.L.P. | www.ssd.com New GINA Regulations
• Effective January 8, 2011
• All requests for medical information should now include the following:
The Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits employers and other entities covered by GINA Title II from requesting or requiring genetic information of an individual or family member of the individual, except as specifically allowed by this law. To comply with this law, we are asking that you not provide any genetic information when responding to this request for medical information. "Genetic information" as defined by GINA, includes an individual's family medical history, the results of an individual's or family member's genetic tests, the fact that an individual or an individual's family member sought or received genetic services, and genetic information of a fetus carried by an individual or an individual's family member or an embryo lawfully held by an individual or family member receiving assistive reproductive services.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Supreme Court to Review “Cat’s Paw” Theory
• Referring to 17th century French fable, theory applies when a biased party uses an unbiased party to perpetrate discrimination under the
disguise of a neutral decision or policy.
• U.S. Supreme Court to review the theory arising from a Seventh Circuit decision granting summary judgment to an employer.
• Justice Kagan recused so 8 justices to hear this case.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Supreme Court to Review Third Party Retaliation Theory
• Woman complains of harassment; her fiancée is fired and he sues for retaliation.
• District Court grants summary judgment on basis that statute does not protect people merely associated with a
whistleblower.
• Sixth Circuit reversed
• En banc panel reinstated summary judgment for the employer.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Supreme Court to Review Whether Oral Complaint is Protect Activity for Retaliation
• Employee complains to supervisors that placement of employer’s time clocks violated FLSA
• District Court granted summary judgment for employer
• 7th Circuit held an employee does not “file” a complaint when he submits a complaint in purely unwritten form, and denied rehearing en banc
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Supreme Court Slams Door on Another Employee Challenge to Arbitration
• Court reviewed agreement that stated the arbitrator was to decide “gateway” issues of enforceability.
• Supreme Court held that to be two agreements to arbitrate – one to arbitrate gateway issues and one to
arbitrate the substantive claims.
• Supreme Court held District Court to decide “gateway” issues such as unconscionability only when the issue
goes to the parties specific agreement to arbitrate gateway issues.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Some Sins May Never Go Away
• Supreme Court held that each time an employer acted based on an old practice that had a discriminatory disparate impact, there was a new violation that triggered a 300-day window to file a charge.
• 1995 civil service test having a disparate impact on African Americans gave rise to a claim in 2006 and later, each time the City referred back to 1995 test results in its hiring.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Courts Officially Rejecting Equal Opportunity Harasser Defense
• Managers sued for making harassing slurs against women could not defend themselves on the basis that they would make slurs against anybody, at any time.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Good Faith Mistake About Request for OT Pay May Insulate Employee From Termination
• Employee received complaints that he and his co- workers were shorted two hours of OT.
• The Employee reported this to management so the group was paid.
• Employer later learned from security tapes that the employees were wrong and fired the spokesperson for
falsifying records (despite fact he offered to pay back the money). • Appellate Court reversed summary judgment on the ground that the whistle blower’s good faith mistaken
belief is protected from employer retaliation.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Darned if you do and darned if you don’t!
• Employer got a letter from a competitor notifying it that a new hire was bound by a non-compete agreement. • The employer believed it was not enforceable but decided it was not worth the likely litigation so it elected to terminate the employee and move on. • The employee sued the employer. • Court of Appeal held that employee could sue employer under Bus. & Prof. Code 16600 for acting based on agreement between employee and third party.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Viability of “Stray Remarks” Doctrine
• Google argues application of the “stray remarks” doctrine is an important tool for trial courts to dispose of unmeritorious claims on summary judgment
• CA Supreme Court disagrees. It is jury’s responsibility to decide what weight to give the remarks at trial.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Kin Care Inapplicable to Uncapped Leave Policies
• If Sick Leave policy does not provide for cap on number of days, Kin Care law does not apply.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Paying Employees
• IRS Rate Change for Mileage – went down to $.50 from $.55 on January 1, 2010. Check for further changes at the end of the year.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Federal Developments
• PPACA includes federal requirement for employers to provide reasonable break time and space for nursing mothers.
• FMLA extended to cover same-sex and non-traditional parents.
• DOT/OSHA partnership combating distracted driving in the workplace
• Dodd-Frank Wall Street Reform and Consumer Protect Act: whistleblower protecting
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Federal Laws On the Horizon
• Bill to reverse Gross regarding mixed-motive theories in age discrimination.
• Prohibit discrimination based on employee credit scores and history.
• Prohibiting discrimination based on sexual orientation and gender identity.
• Beware: FY 2001 budget includes $$ to curb independent contractor misclassification
Squire, Sanders & Dempsey L.L.P. | www.ssd.com State Signed Legislation and Regs
• Mandatory 3-day bereavement leave. • Employees who have exhausted sick leave may take 30- day leave for organ donation. • Clarify that meal periods must be taken before end of 6th hour worked and standards for on-duty meal periods. • Exempts employees in construction, commercial drivers and security from meal periods IF THEY HAVE A CBA covering the topic. • DWC regulations: Notice to Employees- Injuries Cause by Work
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Vetoed Bills Passed by Legislature
• Prohibiting employers from using consumer credit reports for employment purposes (passed by legislature) • Increasing liquidated damages for minimum wage violations to twice the unlawfully unpaid wages and interest • Awarding attorneys’ fees in all FEHA cases, even when nominal damages are awarded and even if case improperly filed in court of unlimited jx
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Immigration: Updates and Changes on the Horizon
Brian E. Schield
Squire, Sanders & Dempsey L.L.P.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com OVERVIEW OF TOPICS
• Developments in enforcement and immigration compliance • Current adjudication trends
• Possible changes: administrative and legislative
• Impact on specific industries
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Immigration: The Debate Continues
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Enforcement: Refocused
2500
2000
1500
I-9 Inspections 1000
500
0 FY 09 FY 09 FY 10 Source: DHS 2010
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Enforcement: Ratcheted Up
• Since January 2009, more than 3200 employers audited • Since January 2009, ICE has issued over $50 million in fines against employers for I-9 violations • 180 employers criminally charged in FY 2010 • Final orders of Notice of Fines up 300% from FY 2009 • Abercrombie & Fitch fined $1,047,110 for I-9 violations – ICE “uncovered numerous technology-related deficiencies” – No indication of knowing hire/employment of unauthorized workers
– Initial inspection commenced in 2008; predated new regulations covering electronic storage of I-9s
Squire, Sanders & Dempsey L.L.P. | www.ssd.com I-9 Electronic Signature and Storage
• Final rule effective 8/23/10 • Clarifies that employers must complete I-9 within 3 business (not calendar) days from hire
– USCIS guidance advises not to count day of hire, but no official recognition from ICE, the enforcer
• May use paper, electronic systems or combo • Fully accessible with indexing system • Permissible to change electronic systems • Audit trail not required for form viewing, but audit trail must show creation, completion, updates, modifications, alterations and
corrections to I-9 • Not required to provide to employee unless requested
Squire, Sanders & Dempsey L.L.P. | www.ssd.com E-Verify - Update
• Now used by 225,000 + employers (almost two-fold from last year) • Pilot program with funding through 9/30/2012 • States requiring for all employers: – Arizona
– Mississippi
– South Carolina
– Utah
• Required for public employers and state contractors in: Colorado, Georgia, Idaho, Minnesota, Missouri, Nebraska, North Carolina,
Oklahoma, Rhode Island and Virginia • Six other states considering E-Verify legislation • DHS expected to institute self check program within few months
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Target: Federal Contractors?
• Federal Contractors: Litigation settled and since September 2009, all federal contractors to enroll with FAR E-Verify clause: – Applies to contracts of 120 days performance and value of $100,000 – Exceptions include: • Sub-contracts under $3000 • Commercially Available Off-the-Shelf (COTS) items • Contracts for work performed outside the US and territories – Unlike standard E-Verify, prospective and existing employees working on contract must be verified in system
• 225 federal contract employers debarred in FY 2010 due to immigration violations – Entered into the Excluded Parties List System (EPLS) – Immediate suspension and barred from competing on all federal government contracts
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Here to Serve? Adjudicators now the Enforcers
• Administrative Site Visit and Verification Program (ASVVP) [Fraud Detection and National Security Division – FDNS] – Investigators and contractors (Site Inspectors) dispatched to H-1B and L-1 employers without warning – Random or targeted fraud investigations – Verifying existence of petitioner, legitimate business, beneficiary working and being paid consistent with petition • USCIS using extrinsic sources: verification or “gotcha”? – Dunn & Bradstreet, Google and others
– Social Networking Memo – “provides an excellent vantage point for FDNS to observe the daily life of beneficiaries and petitioners” • DOL/WHD continuing with H-1B/LCA audits – August 2010, computer consulting company in GA fined nearly $1million for back wages and interest
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Adjudication Challenges
• Scrutiny of L-1A and L-1B petitions continues at USCIS and Consulates – USCIS personnel changes at California Service Center • H1-B Neufeld Memo on Employer-Employee relationship
– Applies “conventional master-servant” analysis to establish right of control over employee – Targeted against outsourcing but wider application – If beneficiary owns majority stake in petitioner, memo intimates no employer-employee relationship – New documentary requirements to establish eligibility, incl. pay stubs, W-2s, work schedules, time sheets, work product, job offer letters, itineraries, employment contracts and other employment history records – Some required to produce contracts, statement of work, work orders between petitioner and clients if beneficiary will work at client premises – Spill over to other visa categories
Squire, Sanders & Dempsey L.L.P. | www.ssd.com H-1B Cap Update
• Congressionally mandated cap at 65,000 per USCIS fiscal year – 20,000 additional allocated to US Advanced degrees – 6,800 additional visas allocated to US-Singapore and US Chile Free Trade Agreements
• USCIS fiscal year begins 10/1 and ends 9/30 • Earliest filing date is April 1st prior to start of FY: – FY 2008 cap reached on 4/2/2007 – FY 2009 cap reached on 4/1/2008 – FY 2010 cap reached on 12/21/09 – FY 2011 (as of 11/05/10) 46,800
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Errata
• Effective 11/23/10 USCIS fees increasing 5 – 30% • Employment-based immigrant visa backlog expected to endure through of next year
• I-94w eliminated for Visa Waiver applicants, now ESTA • $14 ESTA filing fee (valid for 2 years) • Additional filing fees for H-1B ($2000) and L-1 petitions ($2250) if:
– Employ 50 or more in US – More than 50% of US employees in H-1B, L-1A or L-1B status
• USCIS processing has slowed due to above • DOL’s PERM processing has improved
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Legal Challenges: Federal vs. Local
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Arizona: Ground Zero of Immigration Debate
• SB1070 – made AZ state crime to be in US illegally: – Required police to determine immigration status of those stopped, detained or arrested if “reasonable suspicion”
unlawfully present
– Crime for failing to carry immigration status documents – US District Court issued preliminary injunction in August 2010 preventing key provisions from taking effect
– Set for hearing before 9th Circuit Court of Appeal in November
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Comprehensive Immigration Reform Act of 2010
• Latest CIR proposal introduced by Senators Menendez (D-NJ) and Leahy (D-VT)
• Similar to previous proposals and includes: – Border enforcement “triggers” must be met before legalization
– Enhances penalties for fraud and misuse of visas, passport and social security numbers – Mandates an E-Verify system within 5 years for all employers – Creates new fraud-resistant social security card and shores up accuracy of SSA database – Creates commission to monitor labor market and need for temporary workers through H-2C (guest worker) visa – Recruitment requirements for H-1B and L-1 sponsors and caps at 50% of US workforce – Legalization of undocumented – Lawful Prospective Immigrant (LPI)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com But Who Needs Congress . . . Possible Administrative Remedies
• Leak of recent internal memos discussing administrative alternatives to CIR
• Possible registration and work authorization of undocumented • Expansion of EB-5 (Immigrant Investor Visa) to foster economic growth
• Path to green card easier for F, O, TN, P, and E visa holders (dual intent)
• Extend work authorization for H-4 dependents • EADs for 2 years and automatic work authorization upon renewal
Squire, Sanders & Dempsey L.L.P. | www.ssd.com THANK YOU
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Plan/Prevent/Protect: How to Find and Fix Wage and Hour Issues
Alexandra A. Bodnar Casey J.T. McCoy Squire, Sanders & Dempsey L.L.P . [email protected] [email protected]
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Minimum Wage
• Back to Basics: – California = $8.00 – Federal = $7.25 • Advanced : – San Francisco = $9.79 – Other living wage ordinances (LAX)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Hours Worked: Back to Basics
• All time an employee is suffered or permitted to work, whether or not required to do so, and subject to control of an employer – Employer knows or has reason to believe – Unauthorized OT: if you have a policy, you can discipline employee, but still have to compensate if know or have reason to believe OT worked
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Hours Worked: Advanced
• On Call/Standby Time – Controlled Standby • Employee is on the premises or is engaged by the employer to wait; the employee cannot use time for personal pursuits
• Must be counted as working time for purposes of OT calculation
– Uncontrolled Standby • Employee is not required to wait on employer’s premises; • Employer need not pay employee for uncontrolled standby time and it is not considered hours worked for OT calculation
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Hours Worked: Advanced (cont.)
• Preparatory and concluding activities (“donning and doffing” and start up and shut down times) – Bamonte v. City of Mesa (9th Cir. 2010) 598 F.3d 1217
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Hours Worked: Advanced (cont.)
• Travel time – Commuting and worksite to worksite time: • Rutti v. Lojack, Corp. (9th Cir. 2010) 596 F.3d 1046 – Other Travel: • Federal: travel time outside of normal working hours spent traveling and performing no duties need not be counted
• California: all travel time counts, whether during or outside normal working hours, and whether or not performing work
duties; can establish a different rate of pay for travel time
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Hours Worked: Advanced (cont.)
• Lectures, Meetings and Training – Hours worked unless all of the following are met: • Attendance is outside regular hours • Attendance is voluntary • The program is not directly related to the employee’s job (as distinguished from learning new and additional skills that can be transferred) • The employee must not perform any productive work during such attendance
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Timekeeping: Back to Basics
• CA law: Must keep record of hours of non-exempt employees – When employee begins workday – When employee begins meal period (DLSE position) • Cannot have time clock automatically deduct a meal period
– When employee ends meal period (DLSE position) – When employee ends the workday • Exception: when all employees leave at once (e.g. dismissal bell)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Timekeeping: Advanced
• Off the clock allegations
• Off-site work – Taking work home – After work calls – Remote access
• Blackberries
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Meal Periods: Back to Basics
• 30 minutes duty free
• ≤ 5 hours: no meal period • > 5 but ≤ 6 hours: 1 meal period (waivable) • > 6 but ≤ 10 hours: 1 meal period (not waivable) • > 10 hours: 2 meal periods (second waivable if first was not) • > 12 hours: 2 meal periods (second not waivable)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Meal Periods: Advanced
• On Duty Meal Period: – Nature of the work prevents the employee from being relieved of all duty (tough standard to meet)
– Voluntary written agreement – Employee has right to revoke – Employee permitted to eat while on duty – Is an on duty meal period the same as a waived meal period?
• McFarland v. Guardsmark LLC, 528 F. Supp 2d 1209 (N.D. Cal. 2008), affd, 588 F.3d 1236 (9th Cir.
2009)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Meal Periods: Advanced (cont.)
• Must the meal period be taken before the 6th hour of work? – Pending before CA Supreme Court • What does it mean to “provide” a meal period? – Brinker Restaurant v. Superior Court • Class Certification Issues – Faulkinbury v. Boyd & Associates, Inc. 185 Cal. App. th 4 1363 (2010) • Pending Legislation to Create Exemptions
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Rest Periods: Back to Basics
• Less than 3.5 hours – not legally entitled to rest period • 3.5 hours to 6 hours – one ten-minute rest period • More than 6 hours to 10 hours – two ten-minute rest periods • Over 10 hours – three ten-minute rest periods
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Rest Periods: Advanced
• Issue re Additional Rest Breaks Pending before CA Supreme Ct. • Penalty if employer fails to authorize and permit a rest break • Lactation Accommodation
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Overtime Exemptions: Back to Basics
• Employee Classifications: – Non-Exempt = entitled to overtime – Exempt = not entitled to overtime • White Collar Exemptions : – Both California and the FLSA provide an exemption from overtime pay for employees who are employed in bona fide:
• Executive; • Administrative;
• Professional; or
• Outside sales capacity
– Certain computer employees also may qualify as exempt under FLSA and California law.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Overtime Exemptions: Back to Basics (cont.)
• White Collar Exemption Tests: – Salary level • CA: Certain computer professionals = minimum fixed salary of $79,050 per year or $37.94 per hour (as of today) – Salary basis • Deductions
• Must be paid the full salary for any week in which the employee performs any work (subject to certain limited exceptions) – Job duties • Primarily engaged in exempt work that requires exercise of discretion and independent judgment • “Primarily” – more than 50% of work time • Actual job duties
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Overtime Exemptions: Advanced
• Executive Exemption: – Is it a customarily recognized department or subdivision? – Arenas v. El Torito Restaurant, Inc. (2010) 183 Cal.App.4th 723 • Professional Exemption: – Is it a field of learning customarily acquired by a prolonged course of specialized instruction?
– Is it work that is original and creative in character in a recognized field of artistic endeavor?
• Administrative Exemption: – Pellegrino v. Robert Half Int’l (2010) 181 Cal.App.4th 713
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Overtime Exemptions: Advanced (cont.)
• Highly Compensated Employee Test (Federal) • Computer Professional Exemption (California) • Outside Sales – D’Este v. Bayer Corp. (9th Cir. 2009) 565 F.3d 1119 • Inside Sales
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Deductions for Absences: Back to Basics
• Deductions From Salary – “No-Docking Rule”: – An employee is not paid on a salary basis if deductions from the predetermined salary are made for absences occasioned by the employer or by the operating requirements of the business – If the employee is ready, willing and able to work, deductions may not be made for the time when work is not available
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Deductions for Absences: Advanced
• Permitted Salary Deductions: – Absence from work for one or more full days of personal reasons, other than sickness or disability
– Absence from work for one or more full days due to sickness or disability if deductions made under a bona fide plan, policy or practice of providing wage replacement benefits for these types of absences – To offset any amounts received as payments for jury fees, witness fees or military pay
– Proportionate part of employee’s full salary may be paid for time actually worked in the first and last weeks of employment
– Unpaid leave taken pursuant to the Family and Medical Leave Act (but not clear in California)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Other Deductions: Back to Basics
• Cash Shortage, Breakage, Loss: – Employers must not deduct from wages for any cash shortage, breakage or loss of equipment that was not caused by a
dishonest or willful act or by gross negligence • Uniforms, Tools – Employers must provide and maintain uniforms and tools
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Other Deductions: Advanced
• Deposits • What’s a Uniform? • Agreed-Upon Deductions (Loans)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Overtime: Back to Basics
• Overtime: California’s 5 Zones – Time and one-half • Over eight hours in a single workday
• Over 40 hours in a single workweek
• First eight hours on seventh consecutive day in a workweek
– Double time
• Over 12 hours in a single workday
• Over eight hours on the seventh consecutive day in a workweek
– Anti-Pyramiding
• You are not required to pay for both hours over eight in a workday and hours over 40 in a workweek; You pay the greater of the two • Easy Method: Keep two columns but do not lose track of double time
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Overtime: Back to Basics (cont.)
The Regular Rate • Overtime computed on basis of employee’s “regular rate” of pay • Employee’s “regular rate” is computed as an hourly rate but might not be the employee’s hourly rate of pay – If hourly non-exempt employee paid solely at a single hourly rate, the “regular rate” is the employee’s hourly rate
– If salaried non-exempt employee, divide employee’s weekly salary by total number of hours salary intended to cover up to
maximum of 40 hours (CA law; under Federal law divide by total hours worked)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Overtime: Advanced
• Employees paid multiple rates – Weighted average • Other compensation is included in the regular rate – Non-discretionary Bonuses – Commissions
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Overtime: Advanced (cont.)
Exclusions from the Regular Rate: • Gifts and special-occasion payments • Payments for hours not worked (vacation, holiday, illness, etc.) • Uncontrolled standby • Pay for duty-free meal periods • Call-back minimum guarantee • “show up” or “reporting” pay • Discretionary bonuses • Other benefit plan contributions • Extra compensation paid for overtime • Extra compensation paid for weekends, holidays and days of rest
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Wage Statements: Back to Basics
• Labor Code 226: – Gross wages – Total hours – Number of piece rate units earned/piece rate – Deductions – Net wages – Inclusive dates – Name and last four digits of SSN – Name and address of employer – All applicable hourly rates and corresponding hours
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Wage Statements: Advanced
• Morgan v .United Retail Inc. (2010) 186 Cal.App.4th 1136 • Damages? • Out of state employer issues • Employee right to inspect and copy
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Pay Day Rules: Back to Basics
• Current Employees – Semi Monthly – Bi-weekly – Weekly – Monthly (Exempt Employees) • Separated Employees – Immediately upon termination/resignation – Grace period for resignation without notice
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Pay Day Rules: Advanced
• Temporary employees – One day assignment – On-call employee
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Wage and Hour Best Practices
• Be Proactive in Ensuring Compliance • Review Payroll Practices and Policies • Timekeeping/Recordkeeping • Provide Wage and Hour Training to Managers • Review Exempt and Non-Exempt Classifications • Monitor Compliance with Meal and Rest Break Policies – Employee Affirmation/Certification • Thoroughly Review All Independent Contractor Relationships
Squire, Sanders & Dempsey L.L.P. | www.ssd.com The Wage and Hour Audit
• An independent assessment of a company’s compliance with current employment and labor laws
• Assessment can include: – A review of job descriptions
– Interviews with employees and supervisors
– Analysis of interview results
– A report of results to the company
– Recommendations of corrective measures
– Suggestion of ongoing strategies and solutions to avoid future
misclassification
• Independent review of policies in employee handbook – If you have out-of-state employees, consider more than one handbook
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Health Care Reform: What Employers Need to Know
Gregory J. Viviani Squire, Sanders & Dempsey L.L.P.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Health Care Reform
• Patient Protection and Affordable Care Act (P.L. 111- 148, March 23, 2010)
• Health Care and Education Reconciliation Act of 2010 (P.L. 111-152, March 30, 2010)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Application of the PPACA
• Laws apply to medical and prescription drug plans. Do not apply to separate dental and vision plans
• Law does not to apply to a separate retiree only plan
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Provisions Effective First Plan Year After September 23, 2010
• No Lifetime or Annual Dollar • Nondiscrimination Rules Limits • Group Health Plan Reporting • No Pre-Existing Conditions Requirements
(children under age 19) • Appeals Process • Extension of Dependent • Standard Benefit Summaries Coverage to age 26 • Plan Transparency Rules • Required Preventive Care
• Patient Protections • Rescission
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Provision Effective in 2014 Plan Year
• Limitations on Waiting Periods (90 days)
• No Pre-Existing Conditions (everyone)
• Expansions of Prohibited Discrimination Based on Health Status and New Wellness Plan Rules
• No Discrimination Against Health Care Providers
• Required coverage for clinic trial volunteers
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Insurer Rules
• Insurer Rebates – Effective for the first plan year after September 23, 2010.
• Restrictions on Insurer Rate Designs in the Small Group and Individual Market – Effective in 2014.
• Insurers must make coverage available to all applicants in the small group and individual markets. Effective in 2014.
• Insurers must provide guaranteed renewability of coverage in the small group and individual markets. Effective in 2014.
• Insurers in the small group and individual market are required to offer insurance that has an “essential health benefits” package of
coverage. In addition, cost-sharing for plan participants and policy
holders cannot exceed certain limits. Effective in 2014.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Impact on Collective Bargaining Agreements
• No broad-based PPACA exemption for collectively bargained plans
• If CBA ratified before March 23, 2010, all PPACA effective dates are delayed until the day after day the collective bargaining agreement
terminates
• Exception appears to only apply to the bargaining employees
• Not clear whether an extension of the CBA would extend the PPACA effective dates
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Grandfather Plans
• Definition of Grandfathered Plan
A plan that provides coverage to at least one participant and was in existence on March 23, 2010
Rules apply separately to each Benefit Package – e.g. PPO, HMO and indemnity arrangements
Requirements to maintain grandfather status • Documentation Requirements • Disclosure Requirements
• Continuing Enrollment
• Anti-Abuse Rules – Grandfathered Plan Status Lost
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Laws That Do Not Apply to Grandfathered Plans
• Preventive Care. • Nondiscrimination Rules. • Group Health Plan Reporting Requirements. • Appeals Process. • Patient Protections. • Prohibited Discrimination Based on Health Status. • No Discrimination Against Health Care Providers. • Required coverage for clinic trial volunteers. • Restrictions on Insurer Rate Designs in the Small Group and Individual Market.
• Plan “disclosure” rules pertaining to a wide range of things, such as claims payment policies, enrollment, cost-sharing, etc.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Grandfathered Plans: Changes That Could Result in Loss of Status
• Current regulations would cease to be grandfathered if policy or certificate is changed or non-renewed. Agencies considering modifying this rule.
• Elimination of all or substantially all benefits to diagnose or treat a particular condition.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Grandfathered Plans: Changes That Could Result in Loss of Status
• Any increase in a percentage cost-sharing requirement (as of March 23, 2010) e.g. a co-insurance percentage
• An increase in a fixed amount copayment that exceeds the greater of:
– $5, medical inflation indexed from March, 2010. – A “maximum percentage increase” - 15% + the percentage rate
of medical inflation since March of 2010.
• An increase in a fixed-amount cost-sharing requirement that is other than a co-payment.
– E.g. deductibles and out-of-pocket limits. – A “maximum percentage increase” - 15% + the percentage rate
of medical inflation since March of 2010
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Grandfathered Plans: Changes That Could Result in Loss of Status
• Decrease in the “employer contribution rate”.
¾ Rate based on the COBRA cost for the coverage period including March 23, 2010. ¾ Rate based on employer paid percentage ¾ Reduction in the percentage cannot be more than 5 percentage points (e.g. 90% down to 85%)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Coverage of Children to Age 26
• Without regard to dependent status • Does not require any type of children to be covered (e.g. stepchildren) • Uniform plan terms – cannot charge an employee more for an over age child • 30 day enrollment period • If Plan grandfathered, prior to 2014, do not have to cover if other employer coverage is available
Squire, Sanders & Dempsey L.L.P. | www.ssd.com No Lifetime or Annual Dollar Limits
• Very high transitional rule for annual limits ($750,000 in 2011). Phased out completely in 2015. • Applies to “essential health benefits” • 30 day enrollment period for employees or dependents previously excluded • notice to employees required
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Preventive Care
• No cost-sharing • Various government agencies to provide a list of types of care • In-network may be required • Plan may still regulate frequency, method, treatment and setting
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Rescission
• Rules apply after coverage has begun • No retroactive termination unless ¾ Fraud ¾ Intentional misrepresentation
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Elimination of Pre-Existing Conditions
• Children under age 19 – first plan year after September 23, 2010 • All others – 2014 Plan year • Would apply when changing insurance coverage
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Claims Appeals
• Follow current DOL Regulations, with modifications • Fuller disclosure of what diagnosis, treatment and denial codes mean
• External Review ¾ Not for eligibility to participate in the plan ¾ Conducted by an independent review organization • Notices and other communications in Non-English language
¾ Under 100 participants – 25% literate only in the non-English language ¾ 100 or more participants – if lesser of 10% or 500 participants literate only in the non-English language
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Employer Mandate Tax
• Effective in 2014
• Applies to Employers with 50 or more full-time employees – Full-time employees = 30 or more hours per week
– Count part-time employees as full-time equivalents.
¾ Each month aggregate all hours of all part-time employees and divide by 120 – Have to consider all employees within a controlled group of companies under IRC Section 414
– Examine number of employees on business days in the preceding calendar year
– Predecessor employer rules will apply – Seasonal worker exception
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Employer Mandate Tax
• Examines whether the employer plan – Is offered to full time employees and their dependents. Dependents – not defined in the law
¾ Common law spouses?
¾ Domestic partners? ¾ Stepchildren? – Has Minimum Essential Coverage (comprehensive medical coverage)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Employer Mandate Tax
• If the employer does not have a plan or does not have a plan that provides minimum essential health benefits to all full-time employees and their dependents – $2,000 tax triggered with respect to full-time employees • Amount is $166.67 per month ($2,000.00 annually) x the total
number of full-time employees over 30
– Penalty excludes first 30 employees • E.g., employer with 70 full-time employees that fails to offer
insurance would pay a penalty of $80,000 annually – 40 employees * $2,000 = $80,000
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Employer Mandate Tax
• If the employer does have a plan that provides minimum essential health benefits for all full-time employees and their dependents
– $3,000 tax can be triggered with respect to certain full-time employees who opt out of the plan and buy coverage through an Exchange ¾ Amount is $250.00 pre month ($3,000.00 annually) for most employees who opt out – Exception - Tax only applies if the employee is eligible for tax credits when buying insurance from the Exchange ¾ Employee not eligible for credits if (1) the employer plans pays for 60% of the cost, and (2) the employee does not have to pay more for coverage than 9.5% of the employee’s household income ¾ Employee not eligible for credits if household income exceeds 400% of the poverty line
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Employer Mandate Tax
• Notes about the tax ¾ Tax penalties for failing to provide coverage do not apply in relation to part-time employees (under 30 hours per week) ¾ Controlled group rules do not appear to apply for purposes of determining the tax. Each employer appears to be separately subject to the tax, even if that employer is part of a larger controlled group. Not clear if this result was intended.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com DEFENDING EMPLOYMENT LITIGATION: LOOKING FOR INSURANCE COVERAGE IN ALL THE RIGHT PLACES Marc J. Shrake Stacie D. Yee Squire, Sanders & Dempsey L.L.P.
[email protected] [email protected]
Squire, Sanders & Dempsey L.L.P. | www.ssd.com Format
• Basic principles of insurance coverage
• Selected coverages
• Employee disputes and finding coverage
• Case law applications
• Questions and answers
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 104 What you’ll learn
• What’s on your shelf . . .
. . . and when you should reach for it
• Insurance policies = Assets
• Optimistic and aggressive
• Recognize, preserve, and make claims
• Maximize your recovery of insurance proceeds
• When to fold.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 105 Claims we will discuss
• Wage and hour examples including class actions • Claims against you brought by a contractor’s employees • Discrimination/Harassment • Retaliation/Whistleblowing • FMLA/medical rights related claims • Molestation (?!) • Breach of employment contract • Trade secret misappropriation • Government investigations (EEOC and OSHA)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 106 Lawsuit? Incident? Insured Event? Wrongful Act? Claim? Proceeding?
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 107 Lawsuit? Incident? Insured Event? Wrongful Act? Claim? Proceeding?
• Find a defense lawyer?
• Find insurance coverage! – Employment Practices Liability Insurance (EPLI) – Commercial General Liability Insurance (CGL) – Errors and Omissions Insurance (E&O) – Directors and Officers Insurance (D&O) – Property Insurance – Umbrella or Excess coverage -- dropdown? – Homeowners Insurance
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 108 Shoot first. Talk later.
• Call your broker
• Call your coverage lawyer
• Provide insurers with notice
• All liability insurers
• Property insurers if damage to property, or related loss
• Do not assume “no coverage.”
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 109 Insurance basics
• Read the policy (or have someone do it for you).
– Every policy is different (even year to year, same insurer). – Policy is a contract. The words really do matter.
• Two overarching concepts:
1. Duty to Defend: Potential for coverage based on allegations, extrinsic information, evidence.
2. Duty to Indemnify: Actual coverage based on evidence.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 110 Insured has policy duties
• Provide written notice to insurer
• Cooperate with insurer
• Provide information
• Do not lie or conceal
• Do not to settle or make voluntary payments
• Settle.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 111 Insured’s duties: Provide written notice
•Snooze and lose
•When?
“Claim,” “Incident,” “Wrongful act,” “Lawsuit” “As soon as practicable,” “Immediately,” “60 days”
•What?
Written advice + Complaint + Any policy requirements.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 112 Insured’s duties: Cooperate
•Cooperation
•COOPERATION
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 113 Use your compliance with duties
• Advantages
– Substantive
– Strategic
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 114 Insurer’s duties
• Acknowledge and communicate
• Investigate
• Review claim with an eye for coverage
• Respond
• Defend? Indemnify for defense expenses?
• Let insured choose counsel?
• Indemnify for “Loss”? Indemnify for damage?
• Act in good faith.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 115 Talking later
• Covered
• Reservation of rights letter
• Denial of coverage
• Delay
• Selection of counsel
• Can Insurer recover defense expenses paid for non-covered claims?
• Can Insured recover expenses to obtain coverage?
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 116 Selected coverages
• Employment Practices Liability Insurance (EPLI)
• Commercial General Liability Insurance (CGL)
• Errors and Omissions Insurance (E&O)
• Directors and Officers Insurance (D&O)
• Property Insurance
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 117 EPLI: Preliminary issues
• May be packaged with another coverage
• “Claims made,” “claims made and reported”
• Extended reporting period? “Prior acts” coverage?
• Who is an “Insured”
• Limits = indemnity + defense expenses (usually)
• Defense obligation? Choose your own counsel?
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 118 EPLI: Finding coverage
• “Workplace Tort”
“Employment Practices Wrongful Act”
“Employment Practices Violations”
• “Loss” or “Loss Amount”
• “Exclusions” and exceptions
• Endorsed coverages
• “Defense.”
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 119 CGL
• Covers Insured’s liability for damage or injury to an other’s property, body, or person, or an other’s business through an advertising injury
• Not designed to cover pure economic loss by that other
• “Occurrence based” (“occurrence” = accident)
• Limits = indemnity expenses, not defense expenses
• Insuring Agreements A. Property Damage and Bodily Injury B. Personal and Advertising Injury.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 120 CGL: Finding coverage
• “A” Coverage has exclusion for “Employers’ liability (bodily injury)”
• Under “B” Coverage, subject to exclusions, “Personal and advertising injury” includes liability for damages for:
False arrest, detention, or imprisonment Slander or libel, or disparagement Oral or written publication of material that violates a person’s right of privacy
• Does not cover injuries expected or intended by the insured
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 121 CGL: Employment-Related Practices Exclusion
• Standard exclusion in CGL policies
• Excludes coverage for termination, refusal to employ, and any employment-related practices, policies, acts or omissions (e.g.,
coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation or discrimination)
• BUT, in some policies, applies only to “bodily injury” (Coverage A), and not to “personal injury” (Coverage B)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 122 CGL: Abuse/Molestation Exclusion
Excludes coverage for:
• Actual or threatened abuse or molestation of anyone in Insured’s care, custody or control
• Negligent employment, investigation, supervision, reporting or failing to report to authorities, or retention of
person whose engages in such conduct.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 123 CGL: Communicable Disease Exclusion
• You don’t want this
• Excludes coverage for damages from injury arising from the direct or indirect transmission of a communicable disease:
1. by any insured or any employee of any insured, or 2. resulting or arising from the ownership, operation, maintenance or use of Insured’s premises, or
3. resulting or arising from activities necessary or incidental to the ownership, maintenance, operation, or
use of Insured’s premises (whether occurring on or off such premises!).
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 124 E&O
• Designed to cover economic loss that results from Insured’s products or services and is caused by an error or omission during policy period (possible retroactive date)
• Generally, Insurer has “right and duty to defend”
• Generally, limits = indemnity + defense expenses
• Employment-related claims usually not covered (not based on product or service; contract; intentional acts; statutory violations).
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 125 D&O
• A Coverage: Pays for “losses” resulting from “claims” for "wrongful acts" against directors and officers, in their official capacities
• B Coverage: Reimbursement of insured Company for “loss” where Company is required/permitted to indemnify directors or officers for “claims”
• C Coverage (elective): Pays for “losses” resulting from claims for “wrongful acts” against Company (money demands, civil proceedings, criminal proceedings)
• "Wrongful Acts" = actual or alleged error, omission, breach or neglect of duty, misstatement, not otherwise excluded
• Generally, limits = indemnity + defense expenses
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 126 Property
• Insures against physical damage to Insured’s property, and resultant time element losses, caused by non-excluded or named perils
– All Risk or Named Peril – Employee Dishonesty – Trade Secrets – Accounts Receivable – Valuable Books and Papers
• Actual cash value or replacement cost
• Causation, concurrent causation, excluded and non-excluded perils
• Number of occurrences
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 127 Property: Employee Dishonesty Coverage
Covers loss, and loss from damage to, “Money,” “securities,” “property other than money and securities,” resulting directly
from “Employee Dishonesty.”
“Employee Dishonesty” means only dishonest acts committed by an “employee,” identified or not, acting alone or in collusion with other persons, except you or a partner, with the manifest
intent to (a) cause you to sustain loss; and also (b) obtain financial benefit.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 128 Property: Trade Secrets Protection
Insures against loss of earnings directly resulting from theft of Insured's customer list or applicant/employee list, as defined in the policy as a TRADE SECRET, by an employee, acting alone or in collusion with others.
TRADE SECRET means the customer list, including the names, addresses and identity of all Employees or Customers who have listed job orders with Insured within a period of 180 days prior to the separation of any employee from Insured.
No liability shall attach to, and no cause of action shall arise from, the use of a customer list of Insured by a former Employee more than one year immediately following termination of his employment.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 129 Real world examples
•Wage and hour examples including class actions •Claims against you brought by a contractor’s employees •Discrimination/Harassment •Retaliation/Whistleblowing •FMLA/medical rights related claims •Molestation (?!) •Breach of employment contract •Trade secret misappropriation •Government investigations (EEOC and OSHA)
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 130 Wage and hour (donning & doffing, meal & rest breaks, tip sharing)
• Does EPLI cover wage and hour actions? • Not usually. But...!
• Professional Security Consultants v. United States Fire
Insurance Company (C.D. Cal. Sept. 22, 2010): Court rejected insurer’s motion to dismiss. Motion based on EPLI exclusions for FLSA claims. Court says defense coverage exists because of allegations of “misrepresentation,” which is a covered claim, even if misrepresentations made exclusively in connection with FLSA claims, which are excluded. • Need to look at policy, complaint, and extrinsic information and evidence.
• Vozzcom, Inc. v. Great American Ins. Co. (S.D. Fla. June 23, 2009) FLSA coverage under EPLI policy. No FLSA exclusion.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 131 Potential Coverage for Wage and Hour Claims
• Key: crucial for “insurance buff” to read and aggressively interpret policy language. Why the different results? • Payless Shoesource, Inc. v. Travelers Companies, Inc. (2009) 585 F.3d 1366. EPLI exclusion: “Insurer shall not be liable for Loss on account of any Claim made against any Insured . . . Or for any actual or alleged violation of the Fair Labor Standards Act . . . any workers’ compensation, unemployment insurance, social security, or disability benefits law, other similar provisions of any federal, state, or local statutory common law or any amendments, rules or regulations promulgated under the foregoing.” Held: claims under California Labor Code excluded • SWH Corp. v. Select Ins. Co. 2006 Cal.App.Unpub. LEXIS 8694. D&O policy exclusion: insurer not liable for loss in connection with any claim for violation of duties imposed by (1) any law governing workers’ compensation, unemployment insurance, social security, disability benefits or similar law; (2) the Fair Labor Standards Act . . . (7) . . . Or similar provisions of any federal, state or local statutory law or common law. Held: coverage for settlement of California wage & hour claims
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 132 Coverage for Claims Brought by Employees of an Independent Contractor?
•Yes! •North American Building Maintenance, Inc. v. Fireman’s Fund Insurance Company (2006) 137 Cal.App.4th 627.
–CGL policy with exclusion for employment-related claims –Insured sued in class action by employees of subcontractor, which provided janitorial services to insured, asserting wage and hour claims and false imprisonment
–EPL exclusion applied “whether insured is liable as employer or in any other capacity.” – Held: exclusion did not apply to claims by employees of an independent contractor.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 133 Discrimination and harassment: age, sex, and race
• Sex: Melugin v. Zurich Canada (1996) 50 Cal.App.4th 658. CGL policy covering personal injury including discrimination. Insured sued for sex discrimination. Insurer denied defense. Issue: whether Cal. Ins. Code Sec. 533 bars coverage. It states, “An insurer is not liable for a loss caused by the wilful act of the insured.” Here, allegations found not to hinge on wilful conduct. Here, even if the supervisor’s acts were wilful, the company was still entitled to defense in the event liability was purely on a strict liability basis. Also, insurer cannot deny defense on the ground that, as a matter of law, the plaintiff’s claim against an insured is barred. The insurer must defend the insured in establishing defenses including filing a demurrer
• Age: American Casualty Ins. Co. v. International Creative Management, Inc., et al. (C.D. Cal. Sept. 10, 2010): Intentional age discrimination against Writers Guild members over 40. Umbrella policy dropping into CGL coverage. American Casualty denied coverage based on “Employment-Related Practices” exclusion in policy. Duty to defend found because (a) ICM was not an employer, and (b) potential for coverage based on allegations of disparate impact discrimination, which could be unintentional. BUT, no duty to indemnify found because the only age discrimination evidence was of intentional discrimination. ICM pointed to absence of evidence of any discrimination at all. Court wanted to see evidence of disparate impact discrimination, which it presumed would be in ICM’s possession. ICM said it was unaware of such evidence. Court said that ICM had to do more than point to lack of evidence in order to raise a triable issue of fact about coverage.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 134 Retaliation for whistleblowing
•Compare results:
•Health Care Industry Liability Ins. Program v. USA, et al. (C.D. IL 2008). Employee sues for unlawful retaliation based on whistleblowing; he reported fraudulent claims for Medicare and Medicaid reimbursement. CGL policy had an employment-related practices exclusion. Holding: no duty to defend because allegations, including of mental distress, related to employment relationship
•Housing & Redevelopment Ins. Exchange v. Lycoming County Housing Authority (2001 Penn.) D&O policy included duty to defend and indemnify for “wrongful acts” by the company and its directors and officers. Insurer argued this only encompasses negligent acts so declined to defend and indemnify. Plaintiff was promoted to director of operations and discovered employees received kickbacks for contracts. He was also concerned about employee welfare so told other employee to obtain advice of attorney. Held: duty to defend and indemnify. Definition of “wrongful act” did not explicitly exclude civil rights claims, constitutional torts or retaliatory filings. At best, definition is ambiguous.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 135 Medical or health related claims
•Eastwood Ins. Services, Inc. v. US Specialty Ins. Inc. (2010 9th Cir.) Employee sued for wrongful termination, violations of FMLA and CFRA. Under claims-made policy, no coverage for claims arising out of same facts/circumstances as a pre-policy claim. Pre-policy, the employee sued for sexual harassment and retaliation. Post-policy, the employee took medical leave due to depression and was fired for failure to timely provide medical certification to extend leave. Insurer denied coverage, stating the claims were interrelated. Held: The claims arose from different facts and circumstances. •H.E. Williams v. US Fire Ins. Co. (W.D. MI 1991) Employee sued for retaliation for exercising workers’ comp rights. Under commercial umbrella policy, insurer denied coverage, arguing an “occurrence” excluded personal injury, where it involved an offense comm itted with actual malice or a willful violation of a penal statute or ordinance. Held: actual malice is not an element of a claim for retaliatory discharge so claim is covered except if any portion of settlement is characterized as punitive damages. On issue of whether it is a violation of public policy to insure the question is whether the statute is meant to redress an injured employee, or penalize an employer
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 136 Molestation
•Howard v. American Nat’l Fire Ins. Co. (Cal. Ct. App. Aug. 11, 2010)-- negligent supervision of molesting priest was covered under CGL policy. Molestation probably would not be covered. American Nat’l relied exclusively on evidence to show that injury occurred outside its policy period. Court said that evidence was not limited to that which is presented in underlying case. May rely on other extrinsic information and evidence.
•Cincinnati Ins. Co. v. Oblates of St. Francis de Sales Inc. (Ohio Ct. App. Sept. 21, 2010) -- negligent supervision of molesting priest was not covered under GL policy, because conduct was “expected” (even if unintended by the Archdiocese) and therefore was not an occurrence (accident). Appellate court rejected trial court’s conclusion that coverage is barred by policy exclusion for claims arising out of sexual or physical abuse or molestation of any person.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 137 Breach of employment contract
•Applied Tech Products v. C.A. Select Ins. Co. (E.D. Penn 2004) Employee sued employer for breach of contract, breach of covenant of good faith and fair dealing, constructive discharge. Insured sought defense and coverage under D&O Liability & Private Company Indemnification policy which covered loss by insured resulting from any employment claim alleging wrongful employment practices including wrongful termination (actual or constructive) or breach of an implied contract or agreement. The policy excluded coverage for breach of contract claims. The employee alleged that insured breached a contract by changing employee’s duties and responsibilities and taking action to prevent employee from meeting goals under an Incentive Compensation Plan. •Holding: the exclusion had an exception for employment claims. The exclusion, if interpreted as advocated by the insurer to exclude all related claims, would contradict the insuring clause. Due to the ambiguity, the court found coverage; the pure breach of contract claim was excluded but the insurer would have to prove apportionment of defense costs
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 138 Government investigations
•Solo Cup Co. v. Federal Ins. Co. (1980 7th Cir.) EEOC filed class action alleging sex discrimination for unequal pay, failure to promote and alleging intentional discrimination. The General Services Administration (ensuring insured, government contractor, complied with Executive Orders) also investigated. Insurer denied coverage: no coverage for intentional acts; no duty to defend against administrative procedures. Holding: allegations were broad enough it could be disparate treatment or disparate impact. As the claims are potentially covered there was a duty to defend. Regarding the GSA review, it was not yet a suit; just an administrative proposal that insured pay backpay. There was no formal proceeding yet so no coverage (but left door open) •Commercial Underwriters Ins. Co. v. Environmental Services Ltd. (2001 7th Cir.) GL policy. Insured was named in a industrial accident suit involving lack of oxygen in an excavation pit. OSHA investigated. Insured had provided safety consulting but was not in charge of supervision of the site. Insured was aware when the site supervisor was sued, but did not tender claim. It tendered the 2 years later when the complaint was amended to name insured. Insurer argued 2 years between the accident and notice is insufficient notice; insured should have and did anticipate being added as a party. Held: insurer had duty to defend. The delay was reasonable – given the limited nature of the duties of insured’s employees with respect to the site it was not unreasonable to expect they would not be sued.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 139 Insurance Coverage Checklist for Employment-Related Litigation
What types of coverages do we have? All parts? All pages? All endorsements? Complaint, demand letter, lawsuit, observation, notification. Policy periods. Notice requirements. “Insured”? “Additional Insureds”? Limits? Sub-limits? Insuring agreement, Definitions, Exclusions and exceptions. Defense obligation? Who selects counsel? Who is it? Cooperation.
Squire, Sanders & Dempsey L.L.P. | www.ssd.com 140