The Unanswered Question: Do “Call-In” Schedules Trigger California Reporting Time Pay Obligations?

By Cheryl D. Orr, Philippe A. Lebel and Irene M. Rizzi

On June 8, 2017, plaintiffs Mayra Casas and Julio Fernandez (“Plaintiffs”) filed an unopposed motion seeking approval of a $12 million settlement reached against defendant Victoria’s Secret Stores, LLC (“Victoria’s Secret”) in a closely watched case challenging the legality of Victoria’s Secret’s “call-in” scheduling practices. The case, Casas v. Victoria’s Secret Stores, LLC, was pending before the Ninth Circuit Court of Appeals at the time the parties’ settled the case, and was one of many currently pending class action lawsuits challenging similar practices by retailers. As a result of the parties’ settlement, the ultimate question in Casas remains unanswered: Are employees who are required to call their employer to determine if they are required to show up for call-in shifts entitled to reporting time pay?

Retail Industry Reporting Time Pay Requirements

In addition to the Labor Code, employers in California must adhere to the requirements of industry-specific Wage Orders, promulgated by the now-defunct Industrial Welfare Commission. Wage Order 7, which applies to the “mercantile” industry (i.e., retailers), requires employers to pay non-exempt employees for certain unworked but regularly scheduled time. Such compensation is known as reporting time pay. Under Wage Order 7, retailers are required to pay reporting time pay if an employee “is required to report for work and does report, but is not put to work or is furnished less than half …[of his or her] usual or scheduled day’s work.” When this occurs, the employee must be paid the greater of (1) half his or her usual or scheduled day’s work (up to four hours), or (2) two hours at his or her regular rate of pay.

In the past, most reporting time pay litigation concerned situations where non-exempt employees were called in to work for special meetings or were sent home early on regularly scheduled days of work.

Casas v. Victoria’s Secret Stores, LLC

Filed in 2014, Casas called into question the legality of call-in scheduling, a common practice among retailers. Victoria’s Secret’s call-in policy required employees to call their managers two hours before the start of certain scheduled call-in shifts to determine if the employees needed to show up for work. When employees were required to come in to work, they were paid for their work time. However, when employees were told that they did not need to report to work, they were not paid. Plaintiffs argued that this policy violated Wage Order 7 because employees “reported to work” by calling their manager and were thus entitled to reporting time pay when Victoria’s Secret failed to furnish or cut short their call-in shifts.

In December 2014, U.S. District Court Judge George H. Wu rejected Plaintiffs’ argument and dismissed their call-in claims, reasoning that both the common meaning of “report” and legislative history held that “reporting for work” entailed physically appearing for work. Thereafter, Plaintiffs took an interlocutory appeal to the Ninth Circuit.

During oral argument, the three-judge Ninth Circuit panel expressed concerns about rendering a decision on the legality of uncompensated call-in procedures, and suggested that the question might be better resolved by the California Supreme Court.

Following oral argument, but before the Ninth Circuit rendered any decision, the parties settled the case, depriving the appellate court of the ability to render an opinion. Under the terms of the proposed settlement, Victoria’s Secret will pay $12 million to settle the claims of the 40,000 putative class members.

Questions Left Unanswered

While Casas was pending, numerous other retailers (including Club Monaco, Hollister, Abercrombie & Fitch, and Zumiez) were hit with similar putative class action lawsuits challenging their respective call-in scheduling practices. Several of those cases were stayed pending resolution of Casas, and will now proceed without a definitive answer from the Ninth Circuit regarding the law.

Several large retailers, including Victoria’s Secret, have done away with call-in shifts. However, such practices remain commonplace in the retail industry. Whether employers—retailers in particular—are required to pay reporting time pay for unworked call-in shifts remains an open issue.1 We will continue to monitor case law and legislative developments in this area.


1 Several state attorneys general have put pressure on large retailers to abandon call-in scheduling and certain jurisdictions (e.g., San Francisco) have proposed and/or enacted legislation prohibiting employers from such practices. However, to date, California has not passed any state-wide legislation addressing the practice.

Do You Have At Least 20 Employees in California?

By Pascal Benyamini

Currently, if you are an employer with 50 or more employees within 75 miles, you are required, under the federal Family and Medical Act (FMLA) and the California Family Rights Act (CFRA), to provide an unpaid protected leave of absence of up to 12 weeks during any 12 month period to eligible employees for various reasons, including, for the birth or placement of a child for adoption or foster care; to care for an immediate family member with a serious health condition, or to take medical leave when the employee is unable to work because of a serious health condition.

A pending California Senate Bill (SB), if passed, would extend some of the benefits of the FMLA and CFRA to California employers with 20 to 49 employees. SB 63, aka Parental Leave, would add Section 12945.6 to the Government Code, and prohibit employers with 20 to 49 employees within a 75 miles radius from refusing to allow an employee with more than 12 months of service and at least 1,250 hours of service with the employer during the previous 12-month period, to take up to 12 weeks of parental leave to bond with a new child within one year of the child’s birth, adoption, or foster care placement.

SB 63 would also prohibit employers from refusing to maintain and pay for coverage under a group health plan for an employee who takes this leave (assuming an employer has a group health plan). Further, under proposed SB 63, eligible employees will be entitled to utilize accrued vacation pay, paid sick time, or other paid time off during the period of parental leave.

If an employer employs both parents who are eligible for leave, SB 63 would authorize, but not require, the employer to grant simultaneous leave to both employees.

This bill would also prohibit an employer from taking any adverse action, such as refusing to hire, or from discharging, fining, suspending, expelling, or discriminating against, an employee for exercising the right to parental leave or giving information or testimony as to his or her own parental leave, or another person’s parental leave, in an inquiry or proceeding related to rights guaranteed under this bill.

Finally, SB 63 would prohibit an employer from interfering with, restraining, or denying the exercise of, or the attempt to exercise, any right provided under this bill.

It remains unclear whether SB 63 will pass and be signed into law by Governor Brown. We will continue to monitor any developments on SB 63 and other pending bills that may impact employers in California.

California Cracks Down on Employers’ Use of Criminal Background Information

By Kate S. Gold and Jessica A. Burt

California employers using employees’ criminal convictions to make employment-related decisions should be aware of the recent flurry of new regulations and pending state legislation that place increased limitations on employers’ use of such information.

New FEHC Regulations Prohibit Consideration of Criminal History When Doing So Has An Adverse Impact On Individuals in A Protected Class

California’s Fair Employment and Housing Commission (FEHC) issued new regulations on employers’ use of criminal background information when making employment decisions, including hiring, promotion, discipline, and termination. The new regulations take effect on July 1, 2017, and are intended to clarify how the use of criminal background information may violate the provisions of the Fair Employment and Housing Act (“FEHA”).  The regulations prohibit employers from seeking or using any criminal history information that has an adverse impact on an individual within a protected class, such as race, national origin or gender. The new regulations provide that an adverse impact may be established through the use of state or national level statistics or by offering “any other evidence” that establishes an adverse impact.

If an employee or job applicant can demonstrate that an employer’s criminal background check policy or practice creates an adverse impact, the burden shifts to the employer to prove that the policy or practice is nonetheless justifiable because it is: (1) job-related and (2) consistent with business necessity. The criminal conviction policy or practice must bear a demonstrable relationship to successful performance on the job and measure the person’s fitness for the specific position, not merely evaluate the person in the abstract.  An employer must demonstrate that the criminal background check policy is “appropriately tailored” to the job, taking into account: (i) the nature and gravity of the offense; (ii) the amount of time that has passed since the offense and/or since the sentence for the offense was completed; and (iii) the nature of the job the employee holds or seeks.

An employer can demonstrate that its policies or practices are “appropriately tailored” to the job by either: (1) conducting an individualized assessment of the circumstances and qualifications of the applicant or employee and providing the individual with notice (before any adverse action is taken) that he or she has been excluded based on a conviction and affording the individual an opportunity to show that the criminal history exclusion should not apply due to their particular circumstances; or (2) demonstrating that a “bright line” rule regarding conviction disqualification can distinguish between those employees who actually pose an unacceptable risk and that the convictions being used to disqualify, or otherwise adversely impact the status of the employee or applicant, have a direct and specific negative bearing on the person’s ability to perform the duties or responsibilities necessarily related to the position.

The new regulations further provide that any bright-line policy that includes conviction-related information that is seven or more years old is subject to a rebuttable presumption that the policy is not specifically tailored to meet the job-related and consistent with business necessity defense.

Under the new regulations, even if an employer’s background check policy meets the new stringent standard, employers may still be liable if an individual employee can demonstrate that there is a less discriminatory policy or practice that serves the employer’s goals as effectively, such as a more narrowly targeted list of convictions or another form of inquiry that evaluates job qualification or risk as accurately.

Employers that are required to comply with federal or state laws or other regulations that mandate a criminal history screening process or require an employee or applicant to possess or obtain a required occupational license can rely on the applicable laws as a defense to an adverse impact claim.

The Regulations Require Employee Notification of an Adverse Action and Opportunity to Present Evidence of Factual Inaccuracy

The federal Fair Credit Reporting Act currently requires employers to provide notice to employees or job applicants when an adverse employment decision is made based on information obtained by an employer through a background check. In addition, the FEHC’s new regulations require that employers notify an employee or applicant of the disqualifying criminal conviction if the information was obtained from any source other than the applicant or employee (e.g., through a consumer report or internally generated search).

Under the regulations, the employee or applicant must be given a “reasonable opportunity to present evidence that the information is factually inaccurate,” and the criminal record may not be considered if the employee establishes that the information is inaccurate.

Similar Pending California Legislation

Employers should also note that pending Assembly Bill (AB) 1008 goes even further than the FEHC regulations and would make it unlawful for a California employer to: (1) include on any job application questions that seek the disclosure of an applicant’s criminal history; (2) inquire or consider an applicant’s prior convictions before extending a conditional offer of employment; and (3) when conducting a criminal background check, to consider, distribute, or disseminate information on (i) an arrest not followed by conviction, (ii) referral to or participation in a pretrial diversion program, (iii) convictions that have been sealed, dismissed, expunged, or statutorily eradicated pursuant to law, (iv) misdemeanor convictions for which no jail sentence can be imposed, or (v) misdemeanor convictions for which three years have passed since the date of conviction or felony convictions for which seven years have passed since the date of conviction.

If passed, AB 1008 would also require California employers that intend to deny employment to an applicant because of prior convictions to perform an individualized assessment of whether the applicant’s criminal history has a direct and adverse relationship to the specific job duties. The employer must then notify the applicant of the reasons for the decision and provide the applicant with 10 days to respond and challenge the accuracy of the information or provide evidence of rehabilitation, which the employer must then consider before making a final employment decision.

The bill is scheduled for a hearing before the California Committee on Labor and Employment on May 3, 2017.

Best Practices for California Employers Conducting Criminal History Checks

California employers that screen applicants and employees for criminal convictions should review and evaluate their criminal conviction policies, background check policies, and job applications for compliance with the new regulations and, potentially, for compliance with pending AB 1008.

What Retailers Need to Know About the California Transparency in Supply Chains Act

By Daniel H. Aiken, Carol F. Trevey and Brendan P. McHugh

Retail sellers and manufacturers across the country that conduct a threshold amount of business in California must comply with the California Transparency in Supply Chains Act (“Supply Chains Act” or “Act”). CAL. CIV. CODE § 1714.43. The Act, which became effective in January 2012, requires those retailers and manufacturers to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains. Id. § 1743.43 (a)(1). Specifically, those companies must disclose on their website to what extent they: (1) engage in verification of product supply chains to evaluate and address risks of human trafficking and slavery; (2) conduct audits of suppliers; (3) require direct supplies to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the countries in which they are doing business; (4) maintain accountability standards and procedures for employees or contractors that fail to meet company standards regarding slavery and human trafficking; and (5) provide employees and management training on slavery and human trafficking. Id. § 1743.43 (c).

By its terms, the Act does not require manufacturers and retailers to take affirmative action to detect or prevent slavery or human trafficking in their supply chains. It requires only that the company make the mandated disclosures. Nevertheless, manufacturers and retailers should be aware of the potential for attorney general enforcement actions, as well as enterprising litigation by consumers, based on violations of the statute.

Requirements of the Supply Chains Act

The Act applies to any company that does business in California, has worldwide annual revenues in excess of $100 million, and is either a “manufacturer” or “retail seller” as reported on the entity’s California tax return. CAL. CIV. CODE §§ 1714.43(a)(1)–(a)(2). A retail seller or manufacturer located outside of California may be considered to be “doing business in California” if it satisfies one of the following conditions: the retail seller or manufacturer in a tax year (1) has business sales in California that exceed $500,000 or 25% of the businesses’ total sales, whichever is lesser; (2) has retail property and tangible personal property in California that exceeds $50,000 in value or 25% of the business’ total real property and tangible personal property value, whichever is lesser; or (3) pays compensation in California that exceeds $50,000 or 25% of the total compensation paid by the business, whichever is lesser. Id. § 1714.43(a)(2)(D); CAL. REV. & TAX. CODE § 23101(b). Retailers and manufacturers subject to the Act are identified each year using data provided to the California Attorney General by the state Franchise Tax Board. See CAL. REV. & TAX. CODE § 19547.5.

Retailers and manufacturers subject to the Act must disclose their efforts in the following five areas: verification, audits, certification, internal standards, and employee training. In 2015, the California Attorney General issued non-binding guidance to assist companies in complying with the statute. See California Department of Justice, “The California Transparency in Supply Chains Act: A Resource Guide,” at 3 (2015) (“Resource Guide”). According to the Attorney General’s guidance, disclosures should include the following:

  • Verification. Manufacturers and retailers subject to the act must disclose whether they verify “product supply chains to evaluate and address risks of human trafficking and slavery.” CAL. CIV. CODE § 1714.43(c)(1). This disclosure should include whether a third party conducts the verifications, a description of the verification process, and whether the company assesses potential risks related to labor-brokers and third-party recruiters in its supply chain. See Resource Guide at 11–12.
  • Audits. Manufacturers and retailers subject to the act must disclose whether they audit their suppliers’ practices. CAL. CIV. CODE § 1714.43(c)(2). This disclosure must specify whether audits are independent and unannounced. Id. It also should include statistics regarding the timeline, frequency, and number of audits. See Resource Guide at 14–15.
  • Certification. Manufacturers and retailers subject to the act must disclose whether they require direct supplies to certify that materials “comply with the laws regarding slavery and human trafficking of the . . . countries in which they are doing business.” CAL. CIV. CODE § 1714.43(c)(3). This disclosure should describe the company’s certification requirements, the consequences to the supplier of any violation, and any additional action the company takes to encourage direct suppliers to comply with relevant laws. See Resource Guide at 16–17.
  • Internal standards. Manufacturers and retailers subject to the act must disclose whether they maintain “accountability standards and procedures for employees or contractors [that] fail[] to meet company standards regarding slavery and human trafficking.” CAL. CIV. CODE § 1714.43(c)(4). This disclosure should describe the company’s standards and procedures, identify the persons tasked with monitoring these standards and procedures, and identify the company’s code of conduct related to supplier standards. See Resource Guide at 18–19.
  • Employee training. Manufacturers and retailers subject to the act must disclose whether they provide “employees and management . . . training on slavery and human trafficking, particularly with respect to mitigating risks within the supply chains of products.” CAL. CIV. CODE § 1714.43(c)(5). This disclosure should identify what positions receive training and provide a description the training, including the topics presented, duration, and frequency. See Resource Guide at 20–21.

Companies subject to the Supply Chains Act must make the above disclosures on their website’s homepage “with a conspicuous and easily understood link to the required information.” CAL. CIV. CODE § 1714.43(b). The California Attorney General has suggested that to be “conspicuous and easily understood,” a link should be placed at the top or bottom of the company’s homepage and include a relevant title, such as “California Supply Chains Act,” that plainly alerts consumers to its content. See Resource Guide at ii, 5. If a company subject to the Act does not maintain a website, such company must provide a written disclosure to any consumer request within 30 days. CAL. CIV. CODE § 1714.43(b).

A. Exclusive Remedy for Violations of the Act and Uses of the Act In Litigation

The exclusive remedy for a violation of the Supply Chains Act is an action brought by the California Attorney General for an injunction. Although the Attorney General has filed few cases under the statute, it has called upon consumers to report suspected violations. In 2015, the Attorney General requested companies that may be subject to the Act’s requirements to submit information voluntarily about their current disclosures. See Press Release, California Office of the Attorney General, Attorney General Kamala D. Harris Issues Consumer Alert on California Transparency in Supply Chains Act (April 13, 2015); Informational Letter.

B. The Supply Chains Act as a Predicate of California Unfair Competition Law, False Advertising Law, or Consumer Legal Remedies Act Claims

Although the sole remedy provided for under the Supply Chains Act is an Attorney General action for injunctive relief, the Act provides that it does not “limit [other] remedies available for a violation of any other state or federal law.” CAL. CIV. CODE § 1714.43(d). Some plaintiffs have therefore attempted to rely on violations of the Supply Chain Act as predicates for liability under California’s consumer protection statutes, the Unfair Competition Law (UCL), CAL. BUS. & PROF. CODE § 17200 et seq., the False Advertising Law (FAL), CAL. BUS. & PROF. CODE § 17500 et seq., and the Consumer Legal Remedies Act (CLRA), CAL. CIV. CODE § 1750 et seq.

For example, in Sud v. Costco Wholesale Corp., the plaintiffs attempted to bring UCL, FAL, and CLRA claims based on Costco’s alleged failure to disclose on its packaging that its prawns were “derived from a supply chain tainted by slavery, human trafficking and other human rights violations.” No. 15-CV-03783-JSW, 2017 WL 345994, at *1 (N.D. Cal. Jan. 24, 2017). The plaintiffs argued that this was an “unlawful” practice under the UCL, in part because it violated the Supply Chains Act. The Northern District of California dismissed the plaintiff’s claims, holding that “[t]he Supply Chains Act does not clearly speak to product labels.” Id. at *8. The court additionally held that “to the extent Plaintiffs are attempting to suggest” that Costco’s Supply Chains Act disclosure on its website did “not comply with the requirements of the Supply Chains Act . . . Plaintiffs lack[ed] statutory standing” because they had not alleged that they “read or relied on” the disclosure. Id. at *5, *8. Because the court focused on plaintiffs’ failure to allege an actual violation of the Supply Chains Act and their failure to allege that they relied on the disclosures required by the Act—as opposed to ruling that there was no private cause of action under the Supply Chains Act—Sud leaves open the possibility that inadequate Supply Chains Act disclosures could be a basis for successful UCL, FAL, or CLRA claims.

C. The Supply Chains Act as a Defense to California Unfair Competition Law, False Advertising Law, or Consumer Legal Remedies Act Claims

Defendants have also attempted to use their compliance with the Act to defeat claims under the UCL, FAL, and CLRA. California law recognizes a “safe harbor” defense to UCL, FAL, and CLRA claims where the California legislature has either clearly permitted certain conduct or “considered a situation and concluded no action should lie.” See Loeffler v. Target Corp., 324 P.3d 50, 76 (2014). Companies defending against UCL, FAL, or CLRA actions have, therefore, successfully pointed to their compliance with the Supply Chains Act as precluding plaintiffs from pursuing UCL, FAL, or CLRA claims based on alleged human trafficking or slavery in a company’s supply chain. In several cases, the District Court for the Central District of California has determined that the Act creates a safe harbor under the UCL because the California legislature specifically considered “how much companies should disclose to consumers about the possibility of forced labor in their supply chains.” Wirth v. Mars, Inc., Case No. 1:15-cv-1470, 2016 U.S. Dist. LEXIS 14552, at *3 (C.D. Cal. Feb. 5, 2016) (concerning cat food products that may have included ingredients from forced labor); See also Barber v. Nestle USA, Inc., 154 F. Supp. 3d 954, 961 (C.D. Cal. 2015) (same).

The Northern District of California, however, has expressed skepticism toward this argument. Without reaching the merits, in McCoy v. Nestle United States, Inc., the court questioned whether the Supply Chains Act creates a “safe harbor” because the Act is merely a disclosure statute that neither bars nor clearly permits conduct. 173 F. Supp. 3d 954, 971 (N.D. Cal. 2016). Similarly, in Hodsdon v. Mars, Inc., the court, in dicta, questioned whether adequate Supply Chains Act disclosures, which cover only “human trafficking” and “slavery,” preclude liability under the UCL, FAL, or CLRA based on child labor. The Hodsdon court commented that it would be “anomalous” if businesses earning more than $100 million worldwide (the Supply Chains Act threshold) would have access to such a “safe harbor” defense while smaller businesses would not. See Hodsdon, 162 F. Supp. 3d at 1029.

* * *

Manufacturers and retailers subject to the Supply Chains Act, or who may become subject to the Supply Chains Act, should consider whether their existing disclosures comply with the Act as interpreted by the California Attorney General. However, because of the limits of the safe harbor doctrine, compliance with the Act might not be sufficient to avoid consumer protection claims based on alleged human trafficking or slavery in supply chains. If you have any questions about best practices or other aspects of the Supply Chains Act, please do not hesitate to contact the authors or your usual Drinker Biddle contacts.

Laboring Under New Laws

By Mark E. Terman

*Originally published by CalCPA in the January/February 2017 issue of California CPA — the original article can be found here.

Few things in this world can be certain, except that the California Legislature will expand regulation of employers each year and the sun will come up tomorrow. In an apparent pendulum swing, 569 bills introduced in 2016 mention “employer,” compared to 224 in 2015 and 574 in 2014. Most of those bills did not pass, and of the ones that did, most were not signed into law by Gov. Brown. Essential elements of selected bills that became law affecting private employers, effective Jan. 1, 2017, unless otherwise mentioned and organized by Senate and Assembly bill number, follow.

California Minimum Wage Ascending to $15
SB 3 sets a state minimum wage for non-exempt employees that will escalate annually over the next several years. As of Jan. 1, the state minimum wage at employers with 26 or more employees increases to $10.50 per hour, and then increases 50 cents per hour on Jan. 1 of each following year until and including 2022, when the rate will reach $15 per hour. For employers of 25 or fewer employees, state minimum wage will remain $10 per hour until Jan. 1, 2018, when it will increase to $10.50, and then escalate 50 cents per hour each year until and including 2023 when the rate will arrive at $15 per hour.

Beginning July 1, the state director of finance is to determine each year whether economic conditions can support the next scheduled increase. If conditions cannot support an increase, the governor can—no more than twice—temporarily postpone the increase schedule for a year. After the final scheduled escalation year, the state minimum wage can remain the same or increase based on any increase in consumer inflation as determined by the director.

Changes in state, but not local, minimum wage also impact classification of most exempt workers. In addition to strict“duties tests” for administrative, executive and professional wage and hour exemptions, a salary of at least twice the state minimum wage must be paid to meet the “salary basis test.” As of Jan. 1, the annualized salary rate that employers with 26 or more employees must pay to meet the exempt salary requirement will advance to $43,680, up from $41,600.

For employers with smaller workforces, the $41,600 amount of the exempt salary requirement will remain in place until Jan. 1, 2018, when it will move up to $43,680. With each escalation, the required salary also will rise. At a $15 state minimum wage, the exempt salary requirement will be $62,400.

Also affected by SB 3 is the retail, inside-sales exemption, which requires employees be paid at least 1.5 times the state minimum wage, and at least half of their other earnings be from commissions.

At the same time, the trend of municipalities creating and increasing their own minimum wage for companies that have employees working in their jurisdiction continues. For example, by July 1, the city and the County of Los Angeles require employers with 26 or more employees to raise the local minimum wage to $12 per hour, up from $10.50, and then comply with other scheduled annual increases up to $15 per hour by July 1, 2020. Los Angeles employers with fewer employees, or nonprofit corporations who obtain approval to pay a deferred rate, do not start paying more than the state minimum wage until July 1, 2018.

Minimum wage for employees in San Francisco will increase to $14, up from $13, on July 1, 2017. Many other cities—including Berkley, Oakland, Malibu, Santa Monica, El Cerrito and San Diego—have enacted local minimum wage laws. In addition, living-wage laws may require higher minimum wages be paid as a condition of contracting with local, state or federal agencies. Employers should monitor each of the requirements to assure compliance.

As of press time, a federal court enjoined implementation of a new federal rule that would have increased by Dec. 1, 2016, the salary basis requirement for exempt workers status under the Fair Labor Standards Act to $47,476. This would have been higher than the California exemption salary amount will be for at least two years. For now, California employers are not legally required to either increase salaries to satisfy this federal exemption rule or to reclassify employees as non-exempt.

No Sunset on Overtime Pay for Personal Attendant Domestic Workers
The Domestic Worker Bill of Rights (AB 241) added Labor Code Sec. 1454, effective Jan. 1, 2014, (and caused amendment to Wage Order 15-2001). It entitles a domestic work employee who is a “personal attendant” overtime pay at the rate of one-and-one-half times their regular rate of pay for hours worked in excess of nine hours in any workday or more than 45 hours in any workweek. A domestic worker who spends at least 80 percent of his or her time supervising, feeding and dressing a child or person who needs assistance due to advanced age, physical disability or mental deficiency is considered a personal attendant. SB 1015 removes a Jan. 1, 2017, sunset provision from the law. As such, these overtime rules will remain in effect into the future.

Immigration Related Unfair Practices Expanded
SB 1001 adds Labor Code Sec. 1019.1 to existing prohibitions of unfair immigration practices. This bill constrains employers, who are verifying that workers have the necessary documentation to lawfully work in the United States, from requesting of such workers more or different documents than are required under federal law, refusing to honor documents tendered that on their face reasonably appear to be genuine, refusing to honor documents or work authorization based upon the specific status or term of status that accompanies the authorization to work, or reinvestigating or re-verifying an incumbent employee’s authorization to work using an “unfair immigration practice.” Applicants and employees may file a complaint with the Division of Labor Standards Enforcement. Any person who is deemed in violation of this new law is subject to a penalty imposed by the labor commissioner of up to $10,000, among other relief available.

Wage Anti-discrimination Law Now Applies to Race and Ethnicity
Under the Fair Pay Act in effect since Jan. 1, 2016, employers are prohibited from paying an employee at wage rates less than the rates paid to employees of the opposite sex in the same establishment for equal work on jobs the performance of which requires equal skill, effort and responsibility, and which are performed under similar working conditions.

The Fair Pay Act provides for exceptions such as, the wage differential is based upon one or more of the following factors:

  1. A seniority system;
  2. A merit system;
  3. A system that measures earnings by quantity or quality of production; and
  4. A bona fide factor other than sex, such as education, training or experience.

The later factor will apply if the employer shows that the factor is not the result of a sex-based differential in compensation, is job related to the position, and is consistent with business necessity.

SB 1063 amends Labor Code secs. 1197.5 and 1199.5 to expand requirements of the Fair Pay Act to employees’ race or ethnicity, in addition to gender. In other words, the same rules now apply to prohibit wage differential based on race or ethnicity. Like existing Fair Pay Act sex-based prohibitions, the amendment bans employers from discriminating or retaliating against employees who report or assist with others’ affected by race or ethnicity-based wage differentials; provides the same enforcement rights; and includes protections for employees to disclose, inquire or discuss wages.

AB 1676 amends the Fair Pay Act (Labor Code Sec. 1197.5) to provide that an employee’s “prior salary shall not, by itself, justify any disparity in compensation” under the bona fide factors above.

Non-California Choice of Law and Forum in Employment Contracts Voidable
SB 1241 adds Labor Code Sec. 925 to prohibit employers from requiring an employee who primarily resides and works in California, as a condition of employment, to enter into agreements (including arbitration agreements) to:

  • Adjudicate claims arising in California in a non-California forum; or
  • Deprive the employee of the substantive protection of state law during a controversy arising in California.

Any provision of a contract that violates this new law is voidable by the employee, the dispute will be adjudicated in California under California law and the employee is entitled to recover reasonable attorneys’ fees incurred enforcing Sec. 925 rights. This section applies to any contract entered into, modified or extended on or after Jan. 1, 2017.

There’s an exception to Sec. 925: It does not apply to any contracts with an “an employee who is in fact individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated or the choice of law to be applied.” Thus, in the case of more executive-level employees, who often retain independent counsel to negotiate employment agreements, employers may still be able to make use of forum-selection and choice-of-law provisions.

Workplace Smoking Restricted Further
California law already prohibited smoking of tobacco products inside an enclosed place of employment for certain employers. ABX2-7 amends Labor Code Sec. 6404.5 to expand that enclosed space prohibition to all employers of any size, including a place of employment where the owner-operator is the only employee. “Enclosed space includes covered parking lots, lobbies, lounges, waiting areas, elevators, stairwells and restrooms that are a structural part of the building.” A “place of employment” does not include:

  • 20 percent of the guestroom accommodations in a hotel, motel or similar transient lodging establishment;
  • Retail or wholesale tobacco shops and private smokers’ lounges;
  • Cabs of “motortrucks” or truck tractors;
  • Theatrical production sites, if smoking is an integral part of the story in the theatrical production;
  • Medical research or treatment sites, if smoking is integral to the research and treatment being conducted;
  • Private residences, except licensed family day care homes; and
  • Patient smoking areas in long-term health care facilities.

Violations are punishable by a fine not to exceed $100 for a first violation, $200 for a second violation within one year and $500 for a third and for each subsequent violation within one year.

Overtime Pay Increasing for Agricultural Workers
Existing law affords ag workers who work more than 10 hours per day overtime pay at one-and-one-half times the regular rate of pay. AB 1066 (Phase-In Overtime for Agricultural Workers Act of 2016) amends Labor Code Sec. 554 to, among other things, provide a gradual phase-in of overtime pay expansion to agricultural workers.

For employers with 26 or more employees, beginning Jan. 1, 2019, and continuing until Jan. 1, 2022, the phase-in provides for annual reduction of the daily overtime threshold by a half-hour per day until reaching eight hours, and the weekly overtime trigger by five hours per week until reaching 40 hours. As such, on Jan. 1, 2019, agricultural workers working more than 9.5 hours per day or in excess of 55 hours in any one workweek are to receive overtime pay at one-and-half times their regular rate of pay.

By Jan. 1, 2022, the annual phase-ins will conclude with agricultural workers working more than eight hours per day or in excess of 40 hours in any one workweek receiving overtime pay at one-and-half times their regular rate of pay. In addition, beginning Jan. 1, 2022, agricultural workers working more than 12 hours per day are to receive overtime pay at twice their regular rate of pay.

Finally, this bill authorizes the governor to delay the implementation of the phase-in schedule if he or she also suspends the implementation of the scheduled increase in the California minimum wage (see, Minimum Wage Ascending, above). For employers with 25 or fewer employees, the phase-in schedule begins on Jan. 1, 2022, and continues annually through Jan. 1, 2025.

All-gender, Single-user Restrooms
By March 1, 2017, AB 1732 requires all single-user toilet facilities in any business establishment, place of public accommodation or government agency to be identified with signage as all-gender toilet facilities. For the purposes of this section, “single-user toilet facility” means a toilet facility with no more than one water closet and one urinal with a locking mechanism controlled by the user. This bill also allows inspectors, building officials or other local officials responsible for code enforcement to inspect for compliance.

More Restriction on Criminal History Inquiry of Job Applicants
Under existing law, an employer cannot ask an applicant about an “arrest or detention that did not result in conviction, or information concerning a referral ;to, and participation in, any pretrial or post-trial diversion program, or concerning a conviction that has been judicially dismissed or ordered sealed pursuant to law.”

AB 1843 amends Labor Code Sec. 432.7 to prohibit employers from asking applicants to disclose, or using as a factor in determining any condition of employment, information concerning or related to “an arrest, detention, process, diversion, supervision, adjudication or court disposition that occurred while the person was subject to the process and jurisdiction of juvenile court law.”

This bill also alters the definition of “conviction” to exclude “any adjudication by a juvenile court or any other court order or action taken with respect to a person who is under the process and jurisdiction of the juvenile court law.” In addition, this bill contains some exceptions for health care facilities involving final adjudications of recent sex crimes and specified controlled substances crimes.

More Talent Services Act Artist Protection
AB 2068 amends Labor Code secs. 1703 and 1703.4 to provide further protect of artists’ information and photographs in any form of communication, such as “an online service, online application, or mobile application of the talent service or one that the talent service has the authority to design or alter.” AB 2068 also requires:

  • The talent service to act, within 10 days, on requests of the artist made by any form of electronic communication, including text messages, to remove information or photographs from the talent service’s website, online service, online application or mobile application (collectively “electronic medium”) or an electronic medium the talent service has the authority to design or alter; and
  • That the artist may cancel the contract within 10 business days from the date of the talent service contract or the date on which the artist commences utilizing the services under the contract, whichever is longer.

Domestic Violence, Sexual Assault or Stalking
By July 1, 2017, AB 2337 requires employers with 25 or more employees to provide specific information in writing to new employees upon hire, and to other employees upon request, of their rights to take off time from work and not suffer adverse employment action from doing so under Labor Code Sec. 230.1 (relating to victims of domestic violence, sexual assault or stalking). This bill also requires that, on or before July 1, 2017, the labor commissioner develop and post on its website a compliant form of notice that employers may elect to use. Employers are not required to comply with the notice requirement until the labor commissioner posts the form.

Wage Statement Requirement for Exempt Employees
Labor Code sec. 226 requires employers to provide their employees along with each paycheck an accurate itemized statement in writing containing information listed in the statute, including hours worked, unless the employees are paid solely a salary and are properly exempt from overtime.

AB 2535 clarifies that hours worked are not required to be recorded on wage statements of employees exempt from minimum wage and overtime under a specified exemption for: executive, administrative or professional employees; the “outside sales” exception; salaried computer professionals; parents, spouses, children or legally-adopted children of the employer; directors, staff and participants of a live-in alternative to incarceration rehabilitation program for substance abuse; crew members employed on commercial passenger fishing boats; and national service program participants. This bill does not change the requirement to include total hours worked by non-exempt employees in their itemized wage statements for each pay period.

Bond Required to Contest Minimum Wage Citation
Labor Code Sec. 1197.1 authorizes the labor commissioner to issue, upon inspection or investigation, a citation against an employer who has paid its employees less than the minimum wage. The citation must specify the nature of the violation, and the labor commissioner is to take steps to enforce the citation and to recover the civil penalty assessed, wages, liquidated damages and waiting time penalties.

An employer can contest a citation through the superior court. AB 2899 amends the statute to require that, prior to contesting a citation, the employer must post a bond with the labor commissioner in an amount equal to the unpaid wages assessed under the citation, excluding penalties. The bond must be in favor of the employee and will be forfeited to the employee if the employer fails to pay the amounts owed within 10 days from the conclusion of the proceedings if the citation is not reversed.

What’s Next?
Employers should consider how these new laws impact their workplaces, and then review and update their personnel policies and practices with the advice of experienced attorneys or human resource professionals.

The California Supreme Court Rejects “On Duty” Rest Breaks

By Philippe A. Lebel

Two weeks ago, just in time for the holidays, the California Supreme Court issued its (published) decision in Augustus v. ABM Security Services, Inc. (opinion available here).  In Augustus, the Court held that California law does not permit employers to require employees to take on-duty or on-call rest breaks.

The Augustus decision will have significant impact for thousands of California employers who have employed on-duty or on-call rest breaks as part of their business operations, especially in the healthcare, security, hospitality, and retail sectors.

California’s Rest Break Requirements (In General)

Although not directly addressed in California’s Labor Code,[1] California’s Industrial Welfare Commission’s industry-specific Wage Orders require employers to authorize and permit their non-exempt employees to take a net 10 consecutive minute rest break for each four hour work period or major fraction thereof.  Insofar as practicable, the rest breaks should be taken in the middle of each four work period.[2]

Background of Augustus

In Augustus, the plaintiffs worked as non-exempt security guards for defendant ABM Security Services, Inc. (“ABM”).  The putative class worked at a variety of different locations, including residential, retail, office, and industrial sites throughout California.  Guards’ principal duties were to provide an immediate response to emergency and/or life safety situations and to provide physical security for their assigned locations.

As part of their jobs, guards were required to keep their pagers and radio phones on – including during rest breaks – and to remain vigilant and responsive to calls when needs arose. According to ABM, urgent or time-sensitive needs which required guards to remain on-duty or on-call included a variety of circumstances, including where a building tenant wished to be escorted to the parking lot, a building manager had to be notified of a mechanical problem, or the occurrence of some kind of “emergency situation.”

Plaintiffs sued ABM, alleging the company failed to provide them compliant rest breaks. The trial court granted summary judgment for plaintiffs, and awarded the plaintiffs approximately $90 million, but the Court of Appeal reversed.

Issues Presented to the California Supreme Court

Augustus presented two issues to the California Supreme Court:  (1) must rest breaks required by California Wage Orders be provided by employers on an off-duty basis; and (2) may employers require non-exempt employees to remain on-call during rest breaks.

The California Supreme Court’s Decision

The California Supreme Court began by addressing whether California law required employers to provide off-duty rest breaks. The Court noted that, unlike the section of the relevant Wage Order relating to meal periods, the section on rest breaks did not explicitly require that they be off-duty.  However, the Court’s examination of the plain meaning of the word “rest,” as well as other language in the Wage Order and Labor Code, led it to conclude that rest breaks needed to be off-duty.  In particular, the Court relied on the fact that Labor Code section 226.7 prohibits employers from requiring any employee to work during any meal or rest period.  The Court also noted that the relevant Wage Order contained language to the effect that rest breaks needed to be counted as time worked.  The Court reasoned that this language – counting rest breaks as work time – would be unnecessary if they were not intended to be off-duty.  The Court also rejected ABM’s argument that an on-duty rest break was consistent with language in the Wage Orders permitting employers – in rare instances – to require employees to take on-duty meal periods.  In the Court’s opinion, the absence of language authorizing on-duty rest breaks was telling.  Accordingly, the Court held that rest breaks must be off-duty.

The Court next considered whether employers could satisfy their obligations to relieve employees from duties and employer control during rest breaks where the employers nonetheless required employees to remain on-call. ABM attempted to distinguish situations where an employer required an employee to continue working from a situation where an employer merely required an employee to remain available if a need arose.  The Court was unpersuaded.  The majority noted that, given the practical realities of a 10-minute break period, employees were already somewhat constrained in terms of what they could do.  The Court found that the additional limitations on employees – from pagers, radios, and/or being vigilant and responsive – were “irreconcilable with employees’ retention of freedom to use rest periods for their own purposes.”  Thus, the Court held that on-call rest breaks were not compliant.

Takeaways

The Augustus decision will have significant impact on employers who employ on-duty or on-call rest breaks due to staffing shortages and/or single-employee shifts.  Employers who cannot relieve non-exempt employees of all duties during required rest breaks may need to pay rest break premiums if they cannot find a way to provide an alternative off-duty rest break.  Employers who use on-duty or on-call rest breaks may wish to consult an employment lawyer to evaluate strategies to avoid liability going forward.

 


[1] While rest break requirements are not set forth in the Labor Code, Labor Code section 226.7 makes it unlawful for an employer to require an employee to perform work during any break period.

[2] The above Wage Order rest break rules apply to the vast majority of non-exempt employees.  However, there are exceptions for employees employed in certain 24-hour residential care facilities as well as employees covered by the Wage Order applicable to the motion picture industry.