10 Tips for Counseling California Employers

SESSION 805

California Calling: 10 Tips for Counseling California Employers

Bonita D. Moore Faegre Baker Daniels LLP Los Angeles, California

Daniel G. Prokott Faegre Baker Daniels LLP Minneapolis

Employment Law Institute – May 2017 Minnesota CLE’s Copyright Policy

Minnesota Continuing Legal Education wants practitioners to make the best use of these written materials but must also protect its copyright. If you wish to copy and use our CLE materials, you must first obtain permission from Minnesota CLE. Call us at 800-759-8840 or 651-227-8266 for more information. If you have any questions about our policy or want permission to make copies, do not hesitate to contact Minnesota CLE.

All authorized copies must reflect Minnesota CLE’s notice of copyright.

MINNESOTA CLE is Self-Supporting

A not for profit 501(c)3 corporation, Minnesota CLE is entirely self-supporting. It receives no subsidy from State Bar dues or from any other source. The only source of support is revenue from enrollment fees that registrants pay to attend Minnesota CLE programs and from amounts paid for Minnesota CLE books, supplements and digital products.

MINNESOTA CONTINUING LEGAL EDUCATION, INC.

Minnesota Continuing Legal Education's publications and programs are intended to provide current and accurate information about the subject matter covered and are designed to help attorneys maintain their professional competence. Publications are distributed and oral programs presented with the understanding that Minnesota CLE does not render any legal, accounting or other professional advice. Attorneys using Minnesota CLE publications or orally conveyed information in dealing with a specific client's or other legal matter should also research original and fully quoted sources of authority.

CALIFORNIA CALLING: 10 TIPS FOR COUNSELING CALIFORNIA EMPLOYERS

BONNIE MOORE DAN PROKOTT

FAEGRE BAKER DANIELS LLP

TABLE OF CONTENTS

Page A. Introduction ...... 1 B. Ten Tips ...... 1 1. Effectively Handle Hiring ...... 1 2. Classify Workers Correctly ...... 6 3. Avoid the Real Lawsuits of California (Wage / Hour Issues) ...... 8 4. Don’t Take a Break From Staying on Top of Leave Laws ...... 14 5. Yes, There is Another Local Ordinance ...... 20 6. Understand the Do’s and Don’ts of Employee Conduct Management...... 21 7. Don’t Fall Into a Termination Trap ...... 22 8. Resolve to Understand Dispute Resolution Nuances ...... 26 9. Navigate Non-Compete Agreements ...... 27 10. Know Everything Else Unique to California, Or Do Your Best… ...... 28

A. INTRODUCTION

California has many wonderful attributes, and is home to the world’s sixth-largest economy, but it is also one of the most challenging places for an employer to do business because of its many and ever-growing employee-friendly laws, usually accompanied by penalties and/or attorneys’ fee provisions that make ignorance or errors very costly. The ten tips below provide useful road signs for employers navigating in California.

B. TEN TIPS

1. EFFECTIVELY HANDLE HIRING.

a. Protected Classifications

i. California’s Fair Employment and Housing Act (FEHA) prohibits discrimination in employment based on any of the following characteristics: race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex (including pregnancy, childbirth, breastfeeding and medical conditions related to pregnancy, childbirth, breastfeeding), gender, gender identity, gender expression, age, military and veteran status, and sexual orientation.

ii. Prohibiting discrimination based on these characteristics should be included in an employee handbook and employers must distribute the Department of Fair Employment and Housing’s (DFEH) Brochure 185 on Sexual Harassment to all employees.

Cal. Gov. Code §§ 12900 - 12996

b. Arrests and Convictions

i. Employers cannot ask about, or base hiring or other employment decisions on, arrests that have not resulted in convictions (unless they are pending trial), arrests involving successful completion of a diversion program, legally expunged convictions, prior convictions judicially dismissed, or misdemeanor convictions for which probation has been completed.

Cal. Lab. Code §§ 432.7 - .8, 433

ii. Employers cannot ask about, or base hiring or other employment decisions on, certain marijuana convictions that are more than two years old. These include convictions for possession of marijuana or paraphernalia, operating a business that displays or sells marijuana, or being under the influence of marijuana.

Cal. Lab. Code § 432.8 iii. The Los Angeles “Fair Chance” Ordinance, which became effective January 1, 2017, prohibits employers with at least 10 employees who work two or more hours each week within the City of Los Angeles from asking or requiring disclosure of a job applicant’s criminal history prior to a conditional offer of employment.

Los Angeles Municipal Code § 189.000 et seq. (Ordinance No. 184652)

a) This includes a prohibition on asking any question that seeks the disclosure of a job applicant’s criminal history, such as including a criminal history “check the box” question on a job application or a question during an initial job interview.

b) Los Angeles employers covered by the ordinance also must engage in a “Fair Chance Process” before withdrawing a conditional offer of employment based on the applicant’s criminal history, which includes: (1) a notification and “written assessment” process; (2) providing the applicant five business days to respond; (3) a “written reassessment” if the applicant provides any documentation or information in response; and (4) retaining records of job applications, including the written assessments and reassessments, for three years.

c) The Fair Chance Ordinance also prohibits retaliation against an employee or applicant for reporting any alleged violation of the Ordinance or for participating in the Fair Chance Process.

d) In addition, covered employers must: (1) state in every advertisement seeking applicants for employment that they will consider qualified applicants with criminal histories; (2) prepare and post a notice informing applicants of the Fair Chance Ordinance’s provisions in a conspicuous place at any location job applicants may visit; and (3) send copies of the posted notice to every labor union with which they have a collective bargaining agreement.

e) Generally, there are no exceptions to the ordinance, unless the employer is required by law to inquire about criminal history or prohibited by law from hiring individuals who

have committed certain criminal offenses, or the position requires use of a firearm.

c. Juvenile Criminal History

Subject to certain limited exceptions (e.g., health care facilities may ask an applicant about certain juvenile offense history), employers may not ask applicants to disclose, or utilize as a factor in determining any condition of employment, “juvenile offense history:” information concerning or related to an arrest, detention, process, diversion, supervision, adjudication or court disposition that occurred while the applicant or employee was subject to the process and jurisdiction of a juvenile court.

Cal. Lab. Code § 432.7 d. Background Checks

i. California law is more stringent than the Fair Credit Reporting Act on information that can be obtained in a Consumer Report.

ii. A consumer credit reporting agency shall not report records of arrest, indictment, information, misdemeanor complaint, or conviction of a crime that, from the date of disposition, release, or parole, antedates the report by seven years.

Cal. Civil Code § 1786 et seq.

iii. In addition to the arrests and convictions limits, as well as anti- discrimination prohibitions, state law prohibits employers from using consumer credit reports unless the applicant is sought for a managerial position or for any position involving access to bank/credit card information, social security numbers, or date of birth.

Cal. Lab. Code § 1024.5; Cal. Code Regs. tit. 2 § 11016

iv. California law prohibits the state from releasing certain criminal records to employers not explicitly authorized by statute to receive such records, and prohibits those employers from receiving the records.

Cal. Lab. Code § 432.7; Cal. Penal Code § 11105

e. E-Verify

i. Employers are prohibited from using the E-Verify system to check the employment authorization status of existing employees or applicants who have not received an offer of employment, except

as required by federal law or as a condition of receiving federal funds.

ii. Employers have the right to utilize E-Verify, in accordance with federal law, to check the employment authorization status of a person who has been offered employment. iii. If the employer receives any notification issued by the SSA or the DHS containing information specific to the employee’s E-Verify case or any tentative non-confirmation notice, which indicates the information entered in E-Verify did not match federal records, the employer must provide the notification to the affected person, as soon as practicable. iv. Civil penalty of $10,000 for an employer for each violation.

Cal. Lab. Code § 2814

v. Employers in the process of verifying that workers have the necessary documentation to work in the United States are prohibited from: (1) requesting more or different documents than are required under federal law; (2) refusing to honor documents tendered that on their face reasonably appear to be genuine by an employer; (3) refusing to honor documents or work authorizations based on the specific status or term of status that accompanies the authorization to work; or (4) reinvestigating or re-verifying an incumbent employee’s authorization to work. Under this new law, employees who suffer an unfair immigration-related practice can file a complaint with the Division of Labor Standards Enforcement (DLSE), and a violation can result in a penalty imposed by the California Labor Commissioner of up to $10,000.

Labor Code § 1019.1 vi. The California Department of Motor Vehicles is authorized to issue driver’s licenses to persons who are unable to submit satisfactory proof of legal presence in the United States. These are commonly referred to as AB 60 driver’s licenses. A California driver’s license issued under AB 60 can be an acceptable List B identity document for Form I-9 purposes. Also, discriminating against a worker who presents a California driver’s license issued under AB 60 violates California’s Fair Employment and Housing Act.

Cal. Gov. Code § 12926 and Cal. Vehicle Code § 12801.9

f. New Hire Documents

i. Employers must report each new hire, rehire, or recall within 20 days of hiring, including name, address, SSN, and first date worked. Employers must transmit these reports twice a month, not less than 12, and not more than 16, days apart.

Cal. Unemp. Ins. Code § 1088.5

ii. Employers must provide each non-exempt employee with a written notice containing specified information at the time of hire, including specified information such as rate of pay, overtime rates, paydays, employer’s main office address and telephone number, and the telephone number of the employer’s workers’ compensation carrier. Notice must also include that the employee may accrue and use sick leave; has a right to request and use accrued paid sick leave; may not be terminated or retaliated against for using or requesting the use of accrued paid sick leave; and has the right to file a complaint against an employer who retaliates. The notice must be in the language the employer normally uses to communicate employment-related information to the employee.

Cal. Lab. Code. § 2810.5 (“Wage Theft Protection Act”)

iii. Employers with 25 or more employees must provide specific information in writing to new employees upon hire and to other employees upon request of their rights to take leave under Labor Code Section 230.1 (relating to victims of domestic violence, sexual assault or stalking). This law also requires that the California Labor Commissioner develop a form that employers may elect to use to comply with these provisions and to post it on the Labor Commissioner’s website. Employers are not required to comply with the notice of rights requirement until the Labor Commissioner posts such form.

Cal. Lab. Code. § 230.1

iv. There are several other specific documents that new employees in California should receive or that should be completed. Below is a table that identifies the key documents that should be given to new California employees (or, in the case of DE-34, that should be completed and submitted), as well as current links to the documents that have been created by the California regulatory agencies.

Form/Pamphlet Notice Form Links Requirements

DE-4, California New-hire http://www.edd.ca.gov/pdf_pub_ctr/de4.pdf Tax Withholding orientation DE-34, Report of Within 20 days http://www.edd.ca.gov/pdf_pub_ctr/de34.pdf New Employee(s) of hire

DE 2515, Within 5 days http://www.edd.ca.gov/pdf_pub_ctr/de2515.pdf Disability of hire Insurance Provisions

DE 2511, Paid New-hire http://www.edd.ca.gov/pdf_pub_ctr/de2511.pdf Family Leave orientation Insurance DFEH-185, Sexual New-hire http://www.dfeh.ca.gov/res/docs/publications/DFEH-

Harassment orientation 185.pdf Time to Hire/ New-hire http://www.dir.ca.gov/dwc/DWCPamphlets/TimeOfHirePa

Workers’ orientation mphlet.pdf Compensation Wage Theft New-hire https://www.dir.ca.gov/dlse/LC_2810.5_Notice.pdf; see also Protection Act orientation https://www.dir.ca.gov/dlse/FAQs-NoticeToEmployee.html (non-exempt employees only)

2. CLASSIFY WORKERS CORRECTLY.

a. Misclassification Of Nonexempt Employees

Some of the most significant class action lawsuits have been the result of misclassification of employees as exempt.

b. Strict Duties Test

In order to be considered an exempt employee in California, an employee will generally need to meet a strict duties test. For most exemptions, more than fifty percent of an employee’s time must be spent performing exempt job duties.

c. Job Title Irrelevant

Job titles do not determine a California employee’s exempt or nonexempt status. An employee with an impressive job title may not qualify as an exempt employee if his/her actual duties do not meet the requirements for

one of the exemptions. To determine whether the California employee is primarily engaged in exempt work, the California Labor Commissioner examines the work performed by the employee during the workweek. d. Salary Considerations

i. Exempt employees in California generally must earn a minimum monthly salary of no less than two times the state minimum wage for full time employment. This is something that should be reviewed each year because the state minimum wage will be rising each year through at least 2022. And of course employers must follow the federal minimum salary threshold. Paying an employee a salary does not make them exempt, nor does it change any requirements for compliance with wage and hour laws.

ii. While California law has more rigorous standards than federal law, federal law still warrants some attention. For one thing, the Department of Labor Standards Enforcement (DLSE) has indicated that, although there are differences between the state and federal exemption standards, the federal regulations may serve as a guide where there is no conflict. e. Deductions from Salary of Exempt Employees

The “salary test” required for exempt employees provides that the full weekly salary be paid for any week in which any work is performed, with only very limited exceptions. As a result, like under the FLSA, permissible deductions from the salary of an exempt employee are limited. f. Discretion and Independent Judgment

Most California employees who are classified as exempt customarily and regularly exercise discretion and independent judgment in their jobs. Discretion and independent judgment involve comparing and evaluating possible courses of action and making a decision after considering various options. g. Common Exemptions for California Employees

i. Executive Exemption

The executive exemption usually is applied to managerial employees. However, managers still have to meet the requirements for the exemption. If they do not, they must be classified as nonexempt, unless they can meet one of the other exemptions.

ii. Administrative Exemption

The administrative exemption applies to a wide variety of employees. However, not all employees whose jobs involve administrative work will meet the administrative exemption and must be classified as nonexempt.

iii. Professional Employee Exemption

Although an employee commonly may be considered a “professional,” there are specific legal requirements that must be met to qualify for the professional exemption.

iv. Computer Professional Exemption

Although federal law has exempted certain computer professionals from overtime for a number of years, state law had no corresponding exemption. California law was amended in 2000 to create an overtime exemption, similar to its federal counterpart, for computer professionals.

v. Salesperson Exemption

For purposes of defining exempt vs. nonexempt status, salespeople are grouped into two categories: outside salespeople and inside salespeople.

vi. Artist

Relatively few individuals qualify for exemption as members of artistic professions in California, since most of those who have sufficient control over the nature of their own work and over their work hours are self-employed.

3. AVOID THE REAL LAWSUITS OF CALIFORNIA (WAGE / HOUR ISSUES).

a. Overtime Pay

i. Time and a half overtime must be paid for any hours worked in excess of 8 per day and 40 per week. Also, overtime must be paid for the first 8 hours of work on the seventh day of work in a workweek.

ii. Two times pay must be paid for hours worked in excess of 12 in one day, and for hours worked in excess of 8 hours on the seventh day of the workweek.

iii. Employers cannot make employees work seven workdays in one workweek unless the nature of the work reasonably requires it, and the employee’s total hours worked in the workweek do not exceed 30 and his/her daily hours do not exceed 6.

Cal. Lab. Code § 510; Wage Order 7-2001

b. Alternative Workweeks

Hourly employees can vote to have an alternative work week that allows for 10 hours per day of work within a 40-hour work week without the payment of daily overtime. To implement such a schedule, the employer must obtain the consent of two-thirds of the hourly employees in the department or work unit and must give employees at least 2 consecutive days off each workweek. Specific requirements apply to the election by employees as well as to the manner in which an alternative work week schedule may be implemented and maintained.

Wage Order 1-2001

c. Breaks/Meal Periods

i. Employers must provide at least a 30 minute meal period if the employee works more than five hours in a day, to begin before the end of the 5th hour. The meal period can be unpaid if the employee is completely relieved of duty. If the employee does not work more than 6 hours in a day, the employee and employer can mutually agree to waive the meal period. When an employee works more than 10 hours in a day, a second 30 minute meal period must be provided, to begin before the end of the 10th hour. But if the employee does not work more than 12 hours, the second meal period can be waived by mutual agreement.

ii. If employees are not completely relieved of duty during a meal period, they must be paid. This is permitted only when the nature of the work prevents it and the parties have agreed, in writing, to paid on-the-job meal periods. If there is an agreement, it must allow the employee to revoke it at any time.

iii. Employers must permit employees to take rest periods and, as far as practicable, the period should be in the middle of their shift. The rest time must be based on total hours worked at a rate of 10 minutes rest to 4 hours work or major fraction thereof. Rest periods are unnecessary for employees working 3.5 hours or less.

iv. If meal or rest periods are not given, the employer must pay the employee denied the rest/meal period one hour’s wages for each rest/meal period that was denied up to two hours’ wages in a

workday. This pay must be in the next paycheck, and is considered wages and should be taxed and paid accordingly.

Cal. Lab. Code §§ 226.7, 512, 550-554; Wage Order 7-2001

v. Any meal break waiver arrangement should be discussed with counsel.

d. Commission Payments

i. By state law, where an employee is paid on a commission basis, the contract with that employee must be in writing and must state the method by which the commissions will be computed and paid. The employee is entitled to a signed copy of the contract.

ii. Just because an employee is paid commissions does not necessarily relieve the employer from minimum wage and overtime obligations. For example, “inside salespersons” may be exempt if they earn at least 1.5 times the minimum wage and at least 50% of their compensation from commissions, but these requirements apply in each pay period (not on average). So, an employee could be considered exempt in one pay period and not in another pay period.

iii. Employees who are paid solely on commission must be separately compensated for rest breaks.

iv. Costs attributable to the employer’s costs of doing business (e.g., unattributable returns or assistants’ salaries) may generally not be included in the commission calculations. Also, commissions may not be subject to chargebacks for defaulted orders. However, if employers make clear employees are receiving an advance against commissions, employers can reconcile such advances later. Employers cannot refuse to pay commissions if the customer does not pay for the item timely.

Cal. Lab. Code §§ 200, 204.1, 2751; Opinion Letter 1990.10.01; Steinhabel v. Los Angeles Times Communication, 126 Cal. App. 4th 696 (2005)

e. California Fair Pay Act

i. California provides equal pay protection for substantially similar work under similar working conditions regardless of gender, race or ethnicity. This is a change from the previous law, which prohibited pay differentials for female employees in the “same establishment” doing “equal work.”

ii. Employees who perform “substantially similar work” under similar working conditions must be paid equally, unless the employer can demonstrate that the wage differential is based on either: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quality or quantity of production; or (4) a bona fide factor other than sex, race or ethnicity (such as education, training or experience. Employers are required to demonstrate that these factors account for the entire pay differential). Moreover, such an affirmative defense can be defeated by an employee who shows that an employer could use an alternative business practice that would serve the same business purpose without producing a wage differential. Prior salary shall not, by itself, justify any disparity in compensation.

iii. Employers are prohibited from preventing employees from disclosing their wages or discussing the wages of others.

iv. Employers are prohibited from retaliating against employees for “invoking” or “assisting the enforcement of” the act.

v. Potential damages include recovery of wages, interest, plus an equal amount as liquidated damages and attorneys’ fees. Statute of limitations is 2 years or 3 years for willful violations.

Cal. Lab. Code § 1197.5, 1199.5 (Amended by SB 358, SB 1063, AB 1676)

f. Indemnification for Expenses

i. Employers must indemnify employees for all costs/losses the employee necessarily incurred in direct consequence of the discharge of the employee’s duties, or by following the employer’s orders (unless unlawful and the employee believed them to be unlawful).

ii. In addition to a private right of action by the employee to recover for these expenditures, the California Labor Commissioner is authorized to issue citations and penalties against employers who fail to properly indemnify employees.

Cal. Lab. Code. § 2802 (Amended by AB 970)

g. Wage Payment

i. All wages must be paid twice each month, on days designated in advance by the employer. Work performed between the 1st and 15th days must be compensated between the 16th and the 26th day of the month, and work performed between the 16th and the last

day, inclusive, of any calendar month, must be compensated between the 1st and 10th day of the following month.

ii. Salaries of executive, administrative, and professional employees of employers covered by the Fair Labor Standards Act may be paid once per month on or before the 26th day of the month during which the work was performed if the entire month's salaries, including the unearned portion between the date of payment and the last day of the month, are paid at that time. iii. If an employee is required to report to work and does report, but is not put to work or otherwise is furnished less than half of their usual day’s work, they must be paid for half of their usual or scheduled day’s work. However, they cannot be paid for less than two hours or more than four hours. If they must report a second time in a day and work less than two hours, they must be paid at least two hours. There are a few exceptions to this rule including, but not limited to: if the employee has not reported to work on time and is fired or sent home for disciplinary purposes; if the employee is unfit for work; when an act of god causes an interruption in the work; when the employer’s property is threatened or when civil authorities recommend employers not begin work. iv. Along with each wage payment, employers must provide employees an accurate itemized statement in writing showing the following:

a) Gross wages earned.

b) 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.

c) If the employee is paid on a piece-rate basis, employers must specify additional categories of information on a piece-rate employee’s itemized wage statement. In addition to the number of piece-rate units earned and any applicable piece rate: (1) the total hours of compensable rest and recovery periods; (2) the rate of compensation paid for those periods; and (3) the gross wages paid for those periods during the pay period. If employers do not pay a separate hourly rate for all hours worked (in addition to piece-rate wages), then the employer must also list (1) the total hours of other non-productive time; (2) the rate of compensation for that time; and (3) the gross wages paid for that time during the pay period.

d) All deductions.

e) Net wages earned.

f) The inclusive dates of the period for which the employee is paid.

g) 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.

h) The name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, the name and address of the legal entity that secured the services of the employer.

i) All applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.

Cal. Lab. Code §§ 204, 226; Wage Order 7-2001

h. Other Wage Payment Issues

i. Employees must voluntarily authorize direct deposit.

Cal. Lab. Code §§ 212-213

ii. Employers cannot deduct wages to pay the employer, including for cash drawer shortages, and can only deduct wages when required by law to do so, or when the employee authorizes it in writing to cover insurance premiums, hospital or medical dues, or other deductions not amounting to a rebate or deduction from the standard wage.

Cal. Lab. Code §§ 221-224

iii. If employers require a uniform or other apparel or accessories be worn, it must be provided and maintained by the employer. An employer can require a deposit as security for the return of items furnished. To do so, follow the deduction writing requirements and deduct the reasonable cost from their last paycheck. However, employers cannot deduct for normal wear and tear.

Wage Order 7-2001

iv. Employers must pay piece-rate employees for rest and recovery periods (and all other periods of “nonproductive” time) separately

from (and in addition to) their piece-rate compensation. Such rest and recovery compensation must be paid at an average hourly rate that is determined by dividing the employee’s total compensation for the workweek (not including compensation for rest and recovery periods and overtime premiums) by the total hours worked during the workweek (not including rest and recovery periods). Employers must pay piece-rate employees for other nonproductive time at a rate that is no less than the minimum wage. If employers pay an hourly rate for all hours worked in addition to piece-rate wages, then those employers would not need to pay amounts in addition to that hourly rate for the other nonproductive time.

Cal. Lab. Code §226.2

4. DON’T TAKE A BREAK FROM STAYING ON TOP OF LEAVE LAWS.

a. Vacation/PTO

i. There is no legal requirement in California that an employer provide its employees with either paid or unpaid vacation time. However, if an employer does have an established policy, practice, or agreement to provide paid vacation, then certain restrictions are placed on the employer as to how it fulfills its obligation to provide vacation pay.

ii. Earned vacation time is considered wages, and vacation time is earned, or vests, as labor is performed. Accordingly, a policy that provides for the forfeiture of vacation pay that is not used by a specified date ("use it or lose it") is an illegal policy under California law and will not be recognized by the California Labor Commissioner.

iii. An employer can place a reasonable cap on vacation benefits that prevents an employee from earning vacation over a certain amount of hours. Once a certain level or amount of accrued vacation is earned but not taken, no further vacation or vacation pay accrues until the balance falls below the cap. The time periods involved for taking vacation must, of course, be reasonable, and 1.5-2x the annual accrual rate has been found to be reasonable.

iv. Unless otherwise stipulated by a collective bargaining agreement, all earned but unused vacation/PTO time must be paid to an employee upon separation. Employers cannot deduct “advanced” vacation from an employee’s final paycheck.

Cal. Lab. Code § 227.3; Suastez v. Plastic Dress Up, 31 Cal. 3d 774 (1982); Boothby v. Atlas Mechanical, 6 Cal.App.4th 1595 (1992) b. Paid Sick Leave

i. An employee who works in California for the same employer for at least 30 days within the previous 12 months is eligible to accrue paid sick leave with that employer.

ii. Employees, including part-time and temporary employees, will: (1) accrue at least one hour of paid leave for every 30 hours worked; or (2) be “front loaded” at the beginning of a 12 month period with at least 24 hours or three days of paid sick leave to use per year. Accrual begins on the first day of employment or July 1, 2015, whichever is later.

iii. An employer may limit the amount of paid sick leave an employee can use in one year to 24 hours or three days. Accrued paid sick leave may be carried over to the next year, but it may be capped at 48 hours or six days. No carry over is required if paid sick leave is “front loaded.”

iv. Employers are permitted to use a different accrual method, as long as the accrual is on a regular basis so that employees have at least 24 hours of accrued sick time or other paid time off by the 120th day of employment each calendar year (or other 12-month basis). PTO plan must also be in writing and provide the same hours (or more) for usage and for the same purposes.

v. An employee may use accrued paid sick days beginning on the 90th day of employment and may request paid sick days in writing or verbally. An employee cannot be required to find a replacement as a condition for using paid sick days. An employee can take paid leave for the employee’s own or a family member’s diagnosis, care, or treatment of an existing health condition or preventive care or for specified purposes for an employee who is a victim of domestic violence, sexual assault, or stalking.

vi. To calculate an hourly rate for paid sick leave: for non-exempt employees, use the same regular rate used for overtime pay; and for exempt employees, use the same rate used for other forms of paid leave (such as vacation).

vii. Employers must inform employees of their balance of available paid sick time (or “unlimited” where applicable), either on a

paycheck stub or a separate writing accompanying the paycheck or paycheck stub.

viii. Employers must record and keep records of hours worked and sick time accrued and used during the last three years (but not the purposes for which an employee uses sick leave or paid time off).

Cal. Lab. Code §§ 245-249 (“Health Workplaces, Healthy Families Act of 2014”) (Amended AB 304)

ix. If an employer provides employees with sick time, they must allow the employee to use that sick time to care for the illness of a child, parent, spouse, or domestic partner but only up to the equivalent of leave time earned in a 6 month period.

x. Effective January 1, 2016, employers must allow employees to use up to one-half of their sick leave to attend to a victim of domestic violence or the diagnosis, care, or treatment of an existing health condition of, or preventive care for, the employee or the employee’s family member. Family member definition is broadened from to also include grandparents, grandchildren, and siblings.

Cal. Lab. Code §§ 227.3, 233-234 (“Kin Care”) (Amended by AB 579)

xi. See Section 5 below for more information about current local ordinances addressing sick and safe leave.

c. CFRA

i. State law (California Family Rights Act, CFRA) is similar to the federal FMLA (e.g., same threshold requirement of 1,250 hours worked and employed for 12 months, and same requirement for a serious health condition), with some differences:

a) Domestic partners are qualified persons for whom leave can be taken.

b) It does not include qualifying exigency leave.

c) It does not apply to pregnancy-related disability (but California has its own pregnancy disability leave discussed below).

d) The health care provider need not identify the serious health condition.

e) Spouses employed by the same employer can only take 12 weeks in connection with the birth, placement, or adoption of a child. But it is not applicable to parental care.

f) If an employee takes pregnancy disability leave under California law, which is also FMLA leave, and then immediately takes CFRA leave (for example, for baby bonding), the measuring period for determining the 1,250 hours worked threshold is the period prior to the PDL/FMLA.

g) Employers can only require, and employees are only entitled to, use of sick leave concurrently with CFRA leave if the leave is for the employee’s own serious health condition.

Cal. Gov. Code § 12945.1 et seq. d. PDL

i. Pregnancy Disability Leave (PDL): An employee is entitled to 4 months of PDL if she is unable to perform one or more essential functions of the job.

a) There is no minimum hours or length of service requirement.

b) Employers can require certification like under the FMLA.

c) PDL can be taken on an intermittent or reduced schedule basis.

d) Employees are entitled to use any accrued leave time concurrently.

e) Employers must reasonably accommodate pregnancy- related conditions.

f) If an employee needs PDL, that time will not run concurrently under the CFRA. Thus, after the baby is born, the employee will be entitled to an additional 12 weeks for bonding leave.

ii. PDL and FMLA run concurrently. CFRA and FMLA run concurrently. However, the PDL and CFRA do not run concurrently.

Cal. Lab. Code § 233; Cal. Gov. Code §§ 12940-12945.2; Cal. Code Regs. tit. 2, §§ 11087, 11089

e. Certain Other Leaves

i. State Disability Insurance Benefits

California’s State Disability Insurance (SDI) provides short-term disability benefits and paid family leave wage replacement benefits to eligible workers who need time off.

Cal. Unemp. Ins. Code § 2625 et seq.

ii. Jury Duty/Witness Service Leave

a) Employers may not discharge, discriminate, or retaliate against an employee who is a victim of a specified serious criminal offense for taking time off work, upon the victim’s request, to appear in court or any proceeding in which a right of the victim is at issue.

Cal. Lab. Code § 230.5 (Added by SB 288)

b) Employers must allow employees time off to serve jury duty or for court attendance as a witness or for attendance as a crime victim, but it can be unpaid. However, the employer must allow them to substitute vacation, personal, or compensatory leave. Employees must give reasonable advance notice of the leave.

c) Employees cannot be discharged for serving on a jury, taking jury leave, taking witness leave, or taking crime victim leave.

Cal. Lab. Code § 230

iii. Military Leave

a) Employers are required to provide employees who are members of the National Guard, the U.S. reserve corps, and the naval militia up to 17 days per year of unpaid leave for training. Employers must grant members of the state military reserve up to 15 days per year of unpaid leave for training.

b) Employers must reinstate full-time employees to his/her former position or to a position of similar seniority, status, and pay if the employees have been honorably discharged

and have applied for reinstatement within 40 days of discharge. They cannot discharge these employees without cause within one year of reinstatement. Employers must reinstate part-time employees who are honorably discharged and apply for reinstatement within five days of discharge from military service.

c) There are several other military leave rights under California law.

Cal. Mil. & Vet. Code §§ 394-395.10

iv. School Activities Leave

a) No employer who employs 25 or more employees working at the same location can discharge or discriminate against an employee who is a parent, guardian, or grandparent having custody, of one or more children in kindergarten or grades 1 to 12, or attending a licensed child day care facility, for taking off up to 40 hours each year, not exceeding 8 hours in any calendar month of the year, to participate in activities of the school or licensed child day care facility of any of his or her children, if the employee, prior to taking the time off, gives reasonable notice to the employer of the planned absence of the employee. Employees must use their accrued paid time off, but can also take unpaid leave if available.

b) Parents or legal guardians cannot be disciplined or otherwise discriminated against for taking leave to appear in school regarding their child’s suspension from school.

Cal. Lab. Code § 230.7 - .8 (“Family School Partnership Act”)

v. Victims of Domestic Violence Employment Leave

a) Employers, regardless of size, must provide unpaid time off for employees to appear in court to obtain a temporary restraining order or other injunctive relief to ensure the safety of the employee or his or her child due to domestic violence. Employers must also provide victims of sexual assault with time off to appear in court.

b) Employers with 25 or more employees are to provide unpaid time off for victims of domestic violence for the following reasons: (1) Seek medical attention for injuries

caused by domestic violence or sexual assault; (2) Obtain services from a domestic violence shelter, program or rape crisis center as a result of domestic violence or sexual assault; (3) Obtain psychological counseling related to an experience of domestic violence or sexual assault; or (4) Participate in safety planning and take other actions to increase safety from future domestic violence or sexual assault, including temporary or permanent relocation.

Cal. Lab. Code §§ 230-230.1

vi. Voting Leave

Employers must conspicuously post notice of voting rights at least 10 days before the election. If a voter doesn’t have sufficient time outside of work to vote at a statewide election, they can take leave to vote. Up to 2 hours must be paid. The leave must be taken at the start or end of the shift, whichever allows more time to vote. Employees must give at least 2 working days’ notice if they have reason to know of the need for leave.

Cal. Elec. Code §§ 14000 – 14002

vii. Volunteer Leave

Employers who employ 50 or more employees must permit an employee who performs emergency duty as a volunteer firefighter, reserve peace officer, or emergency rescue personnel to take specified leave of absence not to exceed an aggregate of 14 days per calendar year, for the purpose of engaging in fire, law enforcement, or emergency rescue training.

Cal. Lab. Code § 230.4 (Amended by AB 11)

5. YES, THERE IS ANOTHER LOCAL ORDINANCE.

a. Paid Sick Leave

Many California cities have passed sick and safe leave ordinances in the last decade, including: San Francisco (effective Feb. 2007; amended 2016); Oakland, San Diego, Emeryville, and Los Angeles (effective March 2015 – July 2016); Santa Monica (effective Jan. 2017); and Berkeley (effective Oct. 2017).

b. Other Ordinances

Several cities in California (most notably, San Francisco) also have passed ordinances addressing a variety of issues. For example, San Jose passed

an “Opportunity to Work Ordinance” that became effective March 13, 2017, which applies to employers with 36 or more employees and requires covered employers to offer part-time employees additional hours before the employer hires any new or temporary employees. See also the discussion of the Los Angeles “Fair Chance Ordinance” in Section 1.b.

6. UNDERSTAND THE DO’S AND DON’TS OF EMPLOYEE CONDUCT MANAGEMENT.

a. Drug & Alcohol Testing

i. Applicants can only be tested if necessary to inquire into their ability to do the job, but only after an offer has been made, and only if it is consistent with business necessity, job related, and required of all employees in the same classification.

Cal. Gov. Code § 12940

ii. There is no state statute addressing drug or alcohol testing of current employees. However, an employee or applicant might claim a state constitutional violation of invasion of privacy, at which time the interests of the employer would be weighed against the employee’s privacy interests. Therefore, the company should have a legitimate business reason for conducting such tests and provide notice to employees at the beginning of their employment.

Loder v. City of Glendale, 14 Cal.4th 846 (Cal. 1997)

iii. Employers with 25 or more employees must reasonably accommodate an employee who wants to voluntarily enter and participate in drug or alcohol rehabilitation absent an undue hardship. This does not mean a current user cannot be disciplined. Also, compensation is not required, but the employee can use sick leave.

Cal. Lab. Code § 1025

b. Smoking/Tobacco Use

Smoking in enclosed workspaces is prohibited, which essentially means everywhere except a compliant designated smoking area. Signs saying “No Smoking” or “Smoking Only in Designated Areas” must be posted at each entrance. Also remember that off-duty smoking is protected. Some cities have no-smoking ordinances that must also be followed.

Cal. Lab. Code §§ 6404.5, 6427

c. Weapons

There is no state law preventing an employer from prohibiting weapons on its premises.

d. Off-Duty Conduct

Employers cannot take adverse actions against employees for engaging in any lawful conduct that occurs during nonworking hours and off the employer’s property, nor can employers adopt a policy that forbids employees from becoming candidates for public office or that controls their political activities.

Cal. Lab. Code §§ 96(k), 1101-1102

e. Cell Phone/Distracted Driving Laws

Using a cell phone while driving is prohibited.

Cal. Veh. Code §§ 23123-23124

7. DON’T FALL INTO A TERMINATION TRAP.

a. At Will Exceptions

i. California is a presumptive employment at will state.

Cal. Lab. Code § 2922

ii. However, in addition to statutory prohibitions discussed herein, the state recognizes a public policy exception as well as claims based on an implied covenant of good faith and fair dealing.

iii. The state also allows claims for breach of implied contracts based on handbooks, conduct, or statements that create a reasonable expectation of continued employment. This can be avoided by having the employee sign an express written at will agreement with an express disclaimer reserving the company’s right to deviate from policies.

b. Final Paycheck and Notices

i. If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately. This includes accrued but unused vacation or paid time off (PTO), which is considered wages.

ii. If an employee not having a written contract for a definite period quits, the employee’s wages must be paid within 72 hours. But they must be paid immediately if the employee has given 72 hours previous notice of his intention to quit. Employees quitting without 72 hours’ notice can ask for their check to be mailed, and the mailing date will constitute the date of payment.

iii. Direct deposits of wages to an employee's bank, saving and loan, or credit union account that were previously authorized by the employee are immediately terminated when an employee quits or is discharged, and the payment of wages upon termination of employment in the manner described above shall apply unless the employee has voluntarily authorized that deposit.

iv. If an employer “willfully” fails to pay all wages due upon termination, the employer can be liable for up to 30 days’ wages as a penalty. “Willful” does not require a showing of bad faith or evil intent; the penalty applies absent a showing of a good-faith dispute that no additional wages are owed.

v. Employers must provide several types of written notices upon termination, relating to unemployment and disability insurance and health insurance/COBRA benefits. This includes providing a Notice to Employee as to Change in Relationship (like termination, layoff, or leave of absence) regardless of whether the employee requests it. The notice must be written and contain: unemployment insurance benefit rights (accomplished by providing unemployment pamphlet created by the government); the name of the employer; the name of the employee; the social security account number of the employee; whether the action was a discharge, a layoff, a leave of absence, or a change in status from employee to independent contractor; and the date of the action.

Cal. Lab. Code §§ 201-203; Cal. Code Regs tit. 22 § 1089-1; Cal. Unemp. Ins. Code § 1089; Cal. Lab. Code § 2808(b) c. Workforce Reductions

i. State law prohibits an employer that directly or indirectly owns and operates a “covered establishment” from ordering a “mass layoff, relocation, or termination” at a covered establishment unless, 60 days before the order takes effect, the employer gives written notice of the order to (a) the employees of the covered establishment affected by the action and (b) the Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs.

ii. “Covered establishment” means “any industrial or commercial facility or part thereof that employs, or has employed within the preceding 12 months, 75 or more persons.”

iii. “Mass layoff” means “a layoff during any 30-day period of 50 or more employees at a covered establishment.”

iv. “Relocation” means “the removal of all or substantially all of the industrial or commercial operations in a covered establishment to a different location 100 miles or more away.”

v. “Termination” means “the cessation or substantial cessation of industrial or commercial operations in a covered establishment.”

Cal. Lab. Code §§ 1400 - 1408 d. References

i. Employers cannot make misrepresentations to prevent a former employee from obtaining employment. A privilege arises if an employer is asked whether the employee would be rehired and the employer answers without malice and based on credible evidence.

Cal. Lab. Code § 1050; Cal. Civ. Code § 47

ii. California recognizes a theory known as “compelled self- publication” whereby an employee terminated for cause may under some circumstances sue the employer for defamation, notwithstanding that the employer has not itself communicated a defamatory statement to anyone normally thought of as a third party, but because the employee was under a foreseeably strong compulsion to disclose the defamatory statement in aid of disproving it. Employers should be cautious about how they characterize the reasons for termination and what they put in an employee’s personnel file about the reasons for their termination.

Live Oak Publishing Co. v. Cohagan, 234 Cal. App. 3d 1277 (1991); McKinney v. County of Santa Clara, 110 Cal. App. 3d 787 (1980) e. Employee Access to Personnel Files

i. All current or former employees (personally or through an employee representative) have the right to inspect and receive a copy of their personnel records relating to their performance or any grievance concerning the employee. Records must be provided within 30 days of the request, and for current employee must be made available to them where they work. Employer can charge the

actual cost of reproduction. Requests must be in writing, and the employer must create a form for employees to use for requests. Employers must maintain personnel files for 3 years. Employers don’t have to respond to more than 50 requests in one month. This right is suspended if a lawsuit is filed.

Cal. Lab. Code § 1198.5

ii. Employers must also provide upon request a copy of the employee’s wage statements (pay stubs) for at least the prior three years. Wage statements containing the information required by the Labor Code must be provided within 21 calendar days of the request.

Cal. Lab. Code § 226

f. Unemployment Compensation Disqualifications

i. Resignation:

a) Disqualified if voluntarily quit without good cause in connection with the work.

b) Not disqualified if:

a) Forced to leave to protect family from domestic violence.

b) Relocated because of spouse or domestic partner and it would be impractical to commute.

c) Left because of sexual harassment.

ii. Discharge:

a) The state presumes an employee was not discharged for misconduct and not to have voluntarily left without good cause unless the employer gives the state written notice within 10 days of receiving an unemployment notice.

b) An employee is disqualified if discharged for misconduct connected to the work. Misconduct is conduct evincing such willful or wanton disregard of an employer's interests as is found in deliberate violations or disregard of standards of behavior which the employer has the right to expect of its employee, or in carelessness or negligence of such degree or recurrence as to manifest equal culpability, wrongful intent or evil design, or to show an intentional

and substantial disregard of the employer's interests or of the employee's duties and obligations to his/her employer. Mere inefficiency, unsatisfactory conduct, failure in good performance as the result of inability or incapacity, inadvertencies or ordinary negligence in isolated instances, or good faith errors in judgment or discretion are not to be deemed “misconduct” within the meaning of the statute.

g. Release Agreements

i. Primary “unique” release issue: California Civil Code section 1542; include the following language: all rights I have under California Civil Code section 1542, which states that: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor;”

Cal. Civ. Code § 1542

ii. Other California laws to consider specifically identifying: the California Fair Employment and Housing Act, the California Unruh Act, the California Equal Pay Law, the California Family Rights Act, the California Whistleblower law, the California Constitution, the California Unfair Competition Act (California Business & Professions Code section 17200 et seq.), the California Wage Orders, and the California Labor Code.

8. RESOLVE TO UNDERSTAND DISPUTE RESOLUTION NUANCES.

a. Choice of Law and Jurisdiction (Labor Code Section 925)

i. Prohibits employers from requiring California-based employees to agree, as a condition of employment, to (1) litigate or arbitrate claims that arise in California in a non-California forum; (2) waive the protection of California law as to a controversy arising in California.

ii. Any contract, or provision therein, that violates these restrictions is voidable by the employee; any dispute arising thereunder shall be adjudicated in California under California law; and the employee is entitled to recover reasonable attorneys’ fees.

iii. If, however, an employee is represented by legal counsel in negotiating the terms of an agreement with respect to choice of law or forum, this law will not apply

Cal. Lab. Code § 925

b. Arbitration

The laws governing arbitration agreements are in flux, particularly if the agreement purports to prohibit class or representative actions or require arbitration of claims arising under statutes considered to be primarily for the public interest. Employers should have employment counsel review arbitration agreements.

9. NAVIGATE NON-COMPETE AGREEMENTS

a. General Rule

Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.

Cal. Bus. & Prof. Code § 16600

b. Sale of Business Exception

i. Any person who sells the goodwill of a business, or any owner of a business entity selling or otherwise disposing of all of his or her ownership interest in the business entity, or any owner of a business entity that sells (a) all or substantially all of its operating assets together with the goodwill of the business entity, (b) all or substantially all of the operating assets of a division or a subsidiary of the business entity together with the goodwill of that division or subsidiary, or (c) all of the ownership interest of any subsidiary, may agree with the buyer to refrain from carrying on a similar business within a specified geographic area in which the business so sold, or that of the business entity, division, or subsidiary has been carried on, so long as the buyer, or any person deriving title to the goodwill or ownership interest from the buyer, carries on a like business therein.

ii. “Business entity” means any partnership (including a limited partnership or a limited liability partnership), limited liability company (including a series of a limited liability company formed under the laws of a jurisdiction that recognizes such a series), or corporation.

iii. “Owner of a business entity” means any partner, in the case of a business entity that is a partnership (including a limited partnership or a limited liability partnership), or any member, in the case of a business entity that is a limited liability company (including a

series of a limited liability company formed under the laws of a jurisdiction that recognizes such a series), or any owner of capital stock, in the case of a business entity that is a corporation.

iv. “Ownership interest” means a partnership interest, in the case of a business entity that is a partnership (including a limited partnership a limited liability partnership), a membership interest, in the case of a business entity that is a limited liability company (including a series of a limited liability company formed under the laws of a jurisdiction that recognizes such a series), or a capital stockholder, in the case of a business entity that is a corporation.

Cal. Bus. & Prof. Code § 16601

10. KNOW EVERYTHING ELSE UNIQUE TO CALIFORNIA, OR DO YOUR BEST…

a. Sexual Harassment Training

i. Employers with 50 or more employees must provide 2 hours of sexual harassment training every 2 years to all supervisory employees located in California. Specific requirements follow:

a) New supervisors must be trained within 6 months.

b) Employers must keep training records for 2 years.

c) Training can be in the classroom or through electronic means like an e-learning training or webinar.

d) Trainers must have the ability to train on the topics required of the training (see below), and must be one or more of the following: Attorney admitted to the bar for 2 years in any state and whose practice includes employment law under state law or Title VII; HR Professionals or consultants with a minimum of 2 years of practical experience in the discrimination/harassment area; or Professors or Instructors in law schools, colleges, or universities who have a post- graduate degree or California teaching credentials and either 20 instruction hours or two or more years of experience in a law school, college, or university teaching about state employment law or Title VII.

e) Training must include: Definition of sexual harassment under state and federal law; statutory provisions and case law (state and federal) on sexual harassment prohibition, discrimination, and retaliation; types of conduct that

evinces sexual harassment; remedies available; strategies to prevent harassment; practical examples; limited confidentiality of the complaint process; resources for victim and to whom they should report complaints; information on what the supervisor accused of harassment should do; and the essential elements of an anti-harassment policy and how to utilize it—the policy must also be provided; discussion about workplace bullying and abusive conduct.

ii. Employers must post a poster on sexual harassment that the government provides, and must distribute an information sheet to employees (also provided by the government).

Cal. Gov. Code. § 12950.1; Cal. Code Regs. tit. 2 § 7288.0 (Amended by AB 2053)

b. Seats

i. All employees must be provided with suitable seats when the nature of the work reasonably permits the use of seats. When employees are not actively engaged in their duties and the nature of their work requires standing, the employer must provide an adequate number of suitable seats placed in reasonable proximity to the work area. Employers must allow employees to use the seats when doing so does not interfere with the performance of their duties. This has recently been a hot area of litigation.

ii. Employers must post Wage Order 7-2001 in an area frequented by employees and must keep a copy of the document and make it available to employees on request.

Wage Order 7-2001

c. Social Media Privacy

Employers cannot require or request that an applicant or employee: disclose a username or password for the purposes of accessing personal social media; access personal social media in the presence of the employer; or divulge any personal social media. However, employers can require divulgence of social media reasonably believed to be relevant to an investigation of employee misconduct. Employers cannot take adverse actions against employees or applicants because they didn’t comply with a prohibited request.

Cal. Lab. Code § 980

d. Whistleblower Policies

i. Employer is prohibited from making, adopting, or enforcing any rule, regulation, or policy preventing an employee from disclosing information to a government or law enforcement agency, if the employee has reasonable cause to believe that the information discloses a violation of or noncompliance with a local rule or regulation.

ii. Employer is prohibited from retaliating against an employee because the employer believes that the employee (or employee’s family member) disclosed or may disclose information to a government or law enforcement agency, or to a person with authority over the employee or another employee who has the authority to investigate, discover, or correct the violation, if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation. It also prohibits an employer from retaliating against an employee for disclosing, or refusing to participate in an activity that would result in, a violation of or noncompliance with a local rule or regulation.

Government Code §§ 19683 and 8547 et seq.; Cal. Lab. Code § 1102.5 (Amended by AB 1509).

e. Private Attorneys General Act (PAGA)

An individual aggrieved employee, acting on his or her own behalf and/or on behalf of other current and former employees, can bring a civil action for violations of the Labor Code under PAGA. An employer cannot prohibit an employee from bringing a representative action under PAGA; however, prior to filing a lawsuit, an employee must follow certain procedural steps designed to permit the Labor and Workforce Development Agency (LWDA) to investigate and/or the employer to cure certain violations. Penalties can be harsh but Courts have discretion to award lesser penalties to avoid unjust results. Aggrieved employees are entitled to 25% of awarded civil penalties, and the LWDA receives 75%.

Cal. Lab. Code § 2698 et. seq.

30 US.111122731.07