Federal Minimum Wage Increase Approved

California's minimum wage is higher than the federal counterpart. But California employers with operations in other states may be interested to know the federal minimum wage is going up. Part of an Iraq funding bill, HR 2206, the minimum wage increase to $5.85 per hour (from $5.15) takes effect 60 days from May 25, the date of its passage. 12 months later, the wage increases to $6.55, and then to $7.25 12 months after that. The text of the new federal minimum wage law is here.

The California minimum wage presently is $7.50 and will rise to $8.00 on January 1, 2008.

San Francisco's minimum wage for 2007 is $9.16 and changes (increases) every year because it is indexed to inflation.


U.S. Supreme Court Clarifies Title VII Statute of Limitations

Lilly Ledbetter claimed Goodyear discriminated against her based on her sex by setting her pay lower than male counterparts. As a result, her pay continued to be lower over time. Years after the allegedly discriminatory pay decisions, she brought a claim of sex discrimination under Title VII of the Civil Rights Act of 1964. Title VII requires plaintiffs to file administrative charges within 180 days of the discriminatory decision. But Ledbetter argued that each paycheck was a new discriminatory decision to pay her, based on the initial discriminatory setting of her pay.

The Supreme Court held (5-4) that the EEOC charge was untimely. Reviewing its prior decisions on the issue, the Court held: "The EEOC charging period is triggered when a discrete unlawful practice takes place. A new violation does not occur, and a new charging period does not commence, upon the occurrence of subsequent nondiscriminatory acts that entail adverse effects resulting from the past discrimination. But of course, if an employer engages in a series of acts each of which is intentionally discriminatory, then a fresh violation takes place when each act is committed."

Thus, the "continuing violation" doctrine has no applicability to pay cases where the initial decision resulted in lower pay, but there were no later, discriminatory decisions perpetuating the initial wrong.

The case is Ledbetter v. Goodyear.

Law Firm's Arbitration Agreement Unenforceable

O'Melveny & Myers is a giant and well respected law firm. Its arbitration agreement received no respect from the Ninth Circuit, though. Applying California law, the Ninth Circuit held the agreement failed the test for unconscionability:

- It was a take-it-or-leave-it agreement, even though it was announced three months before its effective date. An "opt out" is not procedurally unconscionable only if it permits "opting out" of the arbitration clause, not opting out of the employment relationship.

- The agreement barred all claims not asserted within a year of their occurrence. The court of appeals held that the shortened statute of limitations was unconscionable. The court distinguished a case where a shortened statute of limitations was held to be lawful - the lawful limitations period was measured as six months from the employee's termination, rather than from when the claim was discovered.

- The agreement contained a broad confidentiality clause, prohibiting disclosure that there was a claim or an arbitration. The court said this was unconscionable because it precluded employees from discovering "repeat players" before the same arbitrators, as well as "precedent" in applying the arbitration agreement.

- The agreement contained a "carve out" permitting the Firm to go to court for injunctive relief to prevent disclosure of attorney client AND other confidential information.

- The agreement precluded administrative proceedings before the U.S. DOL and the California Division of Labor Standards Enforcement, while allowing administrative charges to be filed at the EEOC and California DFEH.

So, it's time to tune up those arbitration agreements again.


Compete, Yes, But Don't Breach Duty of Loyalty

Competition is favored in California. But agents (including employees) cannot divert customers to another employer while still in an agency / employee relationship. Employees are free to leave, but while they remain employed, they owe a duty of loyalty to their employers. The Court of Appeal upheld a preliminary injunction where a business seller, retained as "managing agents" of the sold business, breached the duty of loyalty by diverting business to a third party. The case is Huong Que v. Luu.


9th Circuit: California Law Prohibits Hiring Away "For Cause" Employees

CRST is a trucking company. It had one-year contracts with new employees. CRST provided significant training to the new employees and wanted them to remain employed so they got their money's worth. CRST limited its right to terminate the employees' employment during the one-year initial agreement. In exchange, if the employees left voluntarily within the year, they refunded training costs.

Werner hired away CRST employees while they were under contract. CRST sued Werner for interference with CRST's contracts (of which Werner was aware). The Ninth Circuit held that the complaint stated a cause of action under California law governing interference with contract, and unfair business practices under California's unfair competition law. CRST Van Expedited, Inc. v. Werner Enterprises.

For employers willing to forgo "at will" employment, this case may effectively protect their investment in training and recruiting workers. The Court did not address any of Werner's potential defenses, including the privilege of competition under California law. It could be this case is another option for employers in California who cannot tie employees via non-competition agreements. Maybe employers can use renewable three-month contracts instead, so bad employees may be discharged at the end of the three-month period? The case probably has no effect when the employee chooses to leave, however. We'll see.

Proposed FEHA Amendment: "Familial Status" Discrimination

This week, the EEOC issued new "ENFORCEMENT GUIDANCE: UNLAWFUL DISPARATE TREATMENT OF WORKERS WITH CAREGIVING RESPONSIBILITIES." The EEOC recognizes it can't create new discrimination criteria not in Title VII. However, the agency explains, discrimination against those who care for family members or against those who care for individuals with disabilities may constitute discrimination. Much of this guidance deals with "work/family" conflict, and the effect of gender stereotypes associated with assumptions about familial responsibilities.

Coincidentally(?), the California Senate introduced SB 836, adding a new protected category to the Fair Employment and Housing Act: "familial status." Familial status is vaguely defined as "an individual who is or who will be caring for or supporting a family member." "Family member" means child, spouse, domestic partner, parent, parent-in-law, or grandchild.

Most of us fall (or will fall) within this new category. Congratulations. So, if the bill passes, will those ineligible for FMLA/CFRA have a new way of proving discrimination? Does "caring for" mean permanently, or just one day of care?

Stay tuned.

New California Case: Prevent Workplace Violence

Plaintiff Franklin alleged that a coworker in the workplace had threatened to have three other employees and him killed, that defendants did nothing in response to his complaint to them about the threats, that the coworker thereafter assaulted him with a screwdriver, that plaintiff reported the assault to the police, and that plaintiff was terminated from his employment as a result of his complaints to defendants and the police.

In Franklin v. The Monadnock Company, the Court of Appeal held that these allegations were sufficient to support a claim for wrongful termination in violation of public policy. The public policy? The employer's duty to provide a safe workplace.

This case will support employers' arguments that there should be little to no tolerance for violent threats or conduct. Therefore, there should not be a duty to provide a "reasonable accommodation" for violent misconduct. However, employers face some mixed signals on that point.

The best way to prevent a claim for workplace violence is training supervisors to detect and respond to workplace violence symptoms, and take them seriously, and for HR managers to learn how to conduct investigations. It also helps to better understand the obligation to accommodate those employees with bona fide disabiliies that may suggest violent tendencies.

California Court on Sexual Harassment Away from Work

When a supervisor accompanies an employee to events away from the workplace, claims for sexual harassment may still be available where the supervisor engages in misconduct. The Court of Appeal in Myers v. Trendwest Resorts reversed summary judgment in favor of the employer.

The court of appeal examined recent California Supreme Court authority and decided that Myers should be permitted to proceed against Trendwest. Myers' supervisor, Damlahki, engaged in conduct Myers claimed created a hostile work environment. The most serious allegations, however, occurred away from the workplace. Damlahki and plaintiff were on a job assignment and went to Damlahki's house. In the garage, Damlahki groped plaintiff etc. Another incident occurred at a social outing.

Trendwest's main argument was that it could not be liable for harassment that occurred outside the scope of Damlahki's employment. Trendwest argued it did not approve of the job assignment away from work, nor did it sponsor social drinking activities other than its holiday party. The Court of Appeal said that under recent case law,
The trial court erred because, in order for the employer to avoid strict liability for the supervisor’s actions under the FEHA, the harassment must result from a completely private relationship unconnected with the employment. Otherwise, the employer is strictly liable for the supervisor’s actions regardless of whether the supervisor was acting as the employer’s agent.
The employee's failure to complain, the company's anti-harassment policy, and the employee's agreement to accompany the supervisor on a weekend to Las Vegas (which did not occur), were all irrelevant. The fact that the incident in the garage occurred as the outcropping of a work-related drive was sufficient to confer liability on Trendwest. This standard is much broader than is applicable under traditional claims asserted against employers for conduct by employees. Employers must educate managers that they do not check their supervisory status at the plant gates and that their conduct away from work involving other employees may give rise to liability.

California Court: Employer Failed to Follow CFRA Requirements

The California Family Rights Act in most respects mirrors the federal FMLA. These laws have been around for some time now. But their provisions, and the interplay between them and workers' compensation and disability discrimination laws, continue to vex employers. The California Court of Appeal's decision in Faust v. California Portland Cement is a cautionary tale for employers trying to untangle this complex web of laws and regulations.

Faust worked for California Portland Cement as a "lube specialist" at a quarry. He experienced some severe stress and work and filed a worker's compensation claim. He sent in an initial note note in support of a request for leave based on depression. His psych benefits ended. He then sought an extension supported by a note from his chiropractor.

The employer questioned the adequacy of the certificate and attempted to call Faust. His wife told the HR manager that Faust was too stressed to speak with the HR manager, and she could speak with Mrs. Faust, Faust's workers' compensation lawyer, or his chiropractor. The company did not accept these options and terminated Faust's employment after seven weeks of leave. Significantly, the company also did not designate the leave as CFRA/FMLA, or notify Faust of his rights under those laws.

Faust sued for disability discrimination and harassment under the Fair Employment and Housing Act, as well as denial of CFRA leave, interference with the right to take CFRA leave, retaliation, and unfair business practices in violation of California Bus. and Prof. Code section 17200. The trial court granted summary judgment in favor of the company, holding that Faust had engaged in "insubordination" by taking unauthorized leave. The trial court's main point was that Faust did not cooperate with the company's efforts to clarify the bases for his leave.

The Court of Appeal reversed on the CFRA claims. Here are the important issues decided:

1. Interference with CFRA merely requires proof that the employee was entitled to leave and the employer denied the leave. There is no "pretext" or "shifting burdens" analysis normally applicable to discrimination claims.

2. The company's failure to demonstrate it had (1) posted the required notices regarding FMLA/ CFRA leave, and (2) notified Faust of his right to CFRA leave precluded summary judgment against Faust. The CFRA regulations expressly state the employer's failure to give notice precludes the employer from denying leave because the employee failed to give adequate notice.

3. The court would not hold that, as a matter of law, the company was privileged to insist on speaking with Faust directly, rather than his wife, doctor or workers' compensation attorney. This is significant, as employees frequently refer management to "representatives," and employers frequently (and correctly) insist on communication with their own employee. The court said that whether Faust adequately communicated is for the trier of fact (likely a jury made up of 12 employees who may not want to talk with HR.)

4. The chiropractor's note, while perhaps not adequate to constitute a medical certification, was more than sufficient to put the employer on notice that it should look further into whether the leave qualified under CFRA. The court then said that the company's efforts were insufficient because it did not seek out Faust's designated representatives, and that the company failed to give Faust notice of leave anyway.

5. The retaliation claim survived because the company's legitimate business reason was undermined by the fact that the company would not communicate with any of Faust's representatives, "particularly" his workers' compensation attorney. The court said that this failure was sufficient to permit a trial on whether the discharge was in retaliation for Faust's taking a protected leave.

6. The wrongful termination in violation of public policy claim survived because the CFRA claim survived. But the court noted in a footnote that Faust's reporting co-worker misconduct would not support that wrongful termination claim. That footnote will come in handy for employers in other contexts.

7. The court finally allowed the FEHA disability discrimination claim to proceed. With little analysis, the court relied on Faust's discrediting the company's legitimate business reason for discharging him, as discussed above.

It is always much easier to analyze these issues in hindsight. The company did try to assess Faust's entitlement to leave, and Faust did not fully cooperate. But, as this decision makes clear, the law places most of the burden on the employer to ferret out whether employees are entitled to protected leave. So, the decision might have come out better for the employer if it had (1) taken into account Faust's initial claim of a mental disability when refusing to deal with the "representatives" and (2) provided notice of CFRA leave at the outset of Faust's leave.


California Supreme Court Takes Up Unique Disability Discrimination Case

I covered Roby v. McKesson here in December. The California Supreme Court agreed to hear the case, which means the lower court's opinion no longer may be cited as precedent. Here is the issue on appeal:

This case presents the following issues: (1) In an action for employment discrimination and harassment by hostile work environment, does Reno v. Baird (1998) 18 Cal.4th 640 require that the claim for harassment be established entirely by reference to a supervisor's acts that have no connection with matters of business and personnel management, or may such management-related acts be considered as part of the totality of the circumstances allegedly creating a hostile work environment? (2) May an appellate court determine the maximum constitutionally permissible award of punitive damages when it has reduced the accompanying award of compensatory damages, or should the court remand for a new determination of punitive damages in light of the reduced award of compensatory damages?

So, the Court has agreed to decide if "harassment" is conduct separate and apart from managers' personnel decisions, or whether personnel decisions (demotion, discipline, etc.) can form part of a "harassment" claim. Check back in a couple of years for the exciting conclusion!


A Pot Pourri of Shaw Valenza's Articles Published in 2007

Here are some articles we've written since the beginning of the year, all of which are posted here on our website -

By D. Gregory Valenza, published in the San Francisco Daily Journal 4 May 2007

California employers must furnish employees with both rest periods, which are paid, and meal periods, which are not paid. These requirements first appeared in the Industrial Welfare Commission's Wage Orders in 1916. But in 2000, the Legislature imposed on employers significant financial consequences for failure to comply with rest and meal period laws.

By Jennifer Brown Shaw and Becki Graham, published in The Daily Recorder 25 April 2007

The California Constitution mandates a form of workers’ compensation outside of the common law remedies available in civil lawsuits. The Legislature has implemented this public policy so the workers’ compensation system is the preferred means to remedy employees’ work-related injuries.

By Jennifer Brown Shaw and Carolyn Burnette, published in The Daily Recorder 11 April 2007

In general, an employer may be liable for employee conduct at a social event (both negligent and intentional) whenever such conduct is “within the course and scope of employment.”

By D. Gregory Valenza and Matthew J. Norfleet, published in the San Francisco Daily Journal 6 April 2007

The eight-hour workday is a founding principle of organized labor in the United States. The famous Haymarket Square riots in Chicago in 1886 resulted in the deaths of seven police officers when one of the attendees threw a bomb at the advancing riot squad. Although there was no evidence that union leaders threw the bomb or even knew of its existence, they were executed for inciting the riot by holding a rally for an eight-hour day...

By Jennifer Brown Shaw, published in The Daily Recorder, 28 March 2007

In the past several years, California employers have struggled to understand which of their employees may be properly classified as “exempt” under California law. Those employees are “exempt” from minimum wage and overtime (and other compensation, such as reporting time and call back pay), and required to take rest breaks and meal periods. Part of the confusion stems from the fact that the requirements for exempt status under the federal Fair Labor Standards Act (FLSA) are different in many ways from the California requirements. While these differences are not new, the recent flood of class action litigation regarding which employees are properly due overtime necessarily has generated keen interest in compliance.

By Jennifer Brown Shaw, published in The Daily Recorder 14 March 2007

In a nutshell, the FMLA provides up to 12 weeks of job-protected leave to eligible employees. Eligible employees are those who have been employed for at least a year, have 1250 hours of service with the employer, and are employed at a worksite where 50 or more employees work within a 75-mile radius. The California Family Rights Act (“CFRA”) provides similar leave. In general, the laws are considered parallel. But there are significant exceptions, particularly with respect to the treatment of leave due to pregnancy disability.

By Jennifer Brown Shaw, published in The Daily Recorder, 28 February 2007

Management concerned with employment law liability should be focused on prevention: preventing lawsuits, preventing employee morale problems, and preventing the day-to-day hassles personnel issues can create. The road to success in this area is not paved with good intentions, however. Employers must understand basic human resources principles to avoid the employment law pitfalls that await.

By Jennifer Brown Shaw, published in The Daily Recorder, 13 February 2007

With the still unresolved political question of whether to “escalate” or “withdraw” from the Iraq war, America’s service men and women continue to be called away from their civil jobs to assist with the war effort. At least one source reports that, since September 11, 2001, approximately 550,000 reservists and members of the National Guard have been called to active duty. Of those, 475,000 have returned to the civilian work force.

By Jennifer Brown Shaw, published in The Daily Recorder, 30 January 2007

What can employers do to reduce their potential exposure for workplace related claims? Adopting and fairly administering lawful policies and procedures is a good start, of course. However, employers also must take the next step to train employees about what is expected of them and the options available for resolving workplace issues within the organization.

Happy reading!


California Supreme Court Upcoming Hearings

The California Supreme Court will deliver major rulings this summer.

PRACHASAISORADEJ v. RALPHS GROCERY will be heard on June 6. This case is critically important to all employers who provide employees with bonuses based on profitability. The Court is deciding if a bonus based on profits is illegal because it takes into account workers' compensation costs by necessity because such costs are included in profit calculations.

GENTRY v. S.C. (CIRCUIT CITY STORES) will be heard on June 5. This case examines whether class action waivers in employment agreements are enforceable. The court already has held in another case that class action waivers in consumer class actions are not. This case is different because of the value of the claims at issue, whcih are much higher than in the credit card fee case previously decided.

GREEN v. CALIFORNIA will be heard on May 31. This case addresses who the burden of proof in disability discrimination cases. Does the plaintiff have to prove that he or she could perform the essential functions of the job as part of the prima facie case? Or does the employer have to prove that the plaintiff could not do so as an affirmative defense?

The Court must issue an opinion within 90 days of oral argument. So, this summer will be full of opportunities for celebration or misery, depending on the opinions issued. And we will be there with blog postings, articles, and legal updates. But you knew that.