Small Employers Alert: AB 23 - Cal COBRA Amendment

Small employers - take note! Governor Schwarzenegger signed AB 23, which implements the federal COBRA amendments contained in the "stimulus" bill (ARRA) and applies it to small employers covered by Cal-COBRA. This is an "urgency statute" that took effect on May 12, when it was signed into law.

Is your head spinning? Mine too. We're a small employer, too.

Well, the good news is most small employers rely on their health plans to distribute Cal-COBRA notices. So, just check with your insurers and brokers about this, mmmkay? I hope they will have this covered.

In case they don't - The new law will require notices to be sent to anyone having a qualifying event between 9/1/08 and May 12, 2009 ASAP (May 26, even). The notices explain eligibility for premium discounts under ARRA and give those who did not elect Cal-COBRA a second chance to do so.

The premium discounts offered to Cal-COBRA-eligible employees will result in tax deductions taken by the insurance companies in the case of Cal-COBRA. There will be verification of Cal-COBRA qualifying events to ensure those electing Cal-COBRA and seeking premium discounts are eligible under ARRA.

Incidentally, if you've missed all the hullabaloo about ARRA and the COBRA amendments, you can catch up here.

Court of Appeal: Arbitrate DLSE Wage Claim

So, can an employer require employees to bring wage claims in arbitration instead of at the Division of Labor Standards Enforcement? If the arbitration agreement is otherwise drafted properly, Yes.

As explained by the court,

Frank Moreno is a former employee of Sonic, which owns and operates an automobile dealership. As a condition of his employment with Sonic, Moreno signed a predispute agreement that required both parties to submit their employment disputes to "binding arbitration under the Federal Arbitration Act, in conformity with the procedures of the California Arbitration Act (Cal. Code Civ. Proc. sec. 1280 et seq. . . .)." By its terms, the arbitration agreement applied to "all disputes that may arise out of the employment context . . . that either [party] may have against the other which would otherwise require or allow resort to any court or other governmental dispute resolution forum[,] . . . whether based on tort, contract, statutory, or equitable law, or otherwise." At some point, Moreno left his position with Sonic. In December 2006, Moreno filed an administrative wage claim with the Labor Commissioner for unpaid
vacation pay pursuant to section 98 et seq. Moreno alleged that he was entitled
to unpaid "[v]acation wages for 63 days earned 7/15/02 to 7/15/06 at the rate of
$441.29 per day."
So, why was the agreement enforceable even against the Labor Commissioner? The court of appeal decided that there was nothing precluding the substitution of the arbitrator for the deputy labor commissioner. The plaintiff argued that arbitration would not include the special stautory provisions regarding the de novo appeal to superior court after the hearing. But the court was unpersuaded. The court also found that the agreement complied with the protections of the California Supreme Court's decision in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83. The court did not analyze the agreement's provisions, though. So, we have to assume that this agreement was sufficiently "mutual," provided for the employer to bear the unique costs of arbitration, etc.

The case is Sonic-Calabassas A, Inc. v. Moreno, and the opinion is here.

California Court of Appeal: "Me Too" Declarations Admissible

"Me too" evidence is when a plaintiff attempts to prove discrimination by showing that other employees have suffered discrimination. It can come in the form of live testimony at trial, or declarations in opposition to a motion for summary judgment.

Back in 2008, the Supreme Court of the U.S. held that "me too" evidence was neither categorically admissible nor inadmissible. We posted about that here.

California's Evidence Code is similar to the Federal Rules of Evidence in a number of respects. The Court of Appeal recently decided that co-employees' declarations claiming similar discrimination was admissible to defeat a motion for summary judgment.

Basically, the plaintiff, Dewandra Johnson, claimed discrimination against her because of her pregnancy. The employer, United Cerebral Palsy / Spastic Children's Foundation etc., claimed it fired her because she falsified time records. The Court of Appeal, reversing summary judgment in favor of the employer, found several issues from which the jury could determine that the real reason was discrimination. These evidentiary submissions included declarations from co-workers that claimed the same managers who fired the plaintiff had trumped up reasons for discharging them on the basis of pregnancy. Here's what the court said:

5. Declarations from Other Employees Also Constitute Substantial Evidence That
Requires Reversal of the Summary Judgment
The challenged "me to[o]" declarations that plaintiff included in her opposition to defendant‟s motion for summary judgment constitute substantial evidence requiring reversal of the judgment. Former employees of defendant stated in their declarations that (1) they too were fired by defendant after they became pregnant, (2) they know of someone who was fired by defendant because she was pregnant, (3) they resigned
because Jimenez made their work stressful after they notified her they were trying to become pregnant, or (4) they know of occasions when employees who were
dishonest or cited for dishonesty, were not fired by defendant. These employees
worked at the same facility where plaintiff worked, they were supervised by the
same people that supervised plaintiff (Jimenez and Sandgren), and their supervisors were, in turn, supervised by Jones. This is substantial evidence sufficient to raise a triable issue of material fact as to why defendant fired plaintiff.

The Court of Appeal then surveyed the case law supporting admission of this evidence to show pretext, concluding:

The evidence sets out factual scenarios related by former employees of the defendant that are sufficiently similar to the one presented by the plaintiff
concerning her own discharge by defendant, and the probative value of the
evidence clearly outweighs any prejudice that would be suffered by defendant by
its admission. Dissimilarities between the facts related in the other employees‟ declarations and the facts asserted by plaintiff with regard to her own case go to the weight of the evidence, not its admissibility.

So, the case turns on the similarity between the plaintiff's claims and her co-workers'. Had the co-workers' evidence been less similar, the court might have decided their admissibility a different way.


DFEH Issues 2008 Annual Report

The California Department of Fair Employment and Housing enforces California's Fair Employment and Housing Act, the anti-discrimination and medical leave law. The agency just issued its annual report for 2008, which you can find here. It's graphic-heavy and mercifully short!

Of note, the DFEH noted discrimination complaints were up nearly 20% over 2007. The agency took in about 20,000 discrimination charges, almost 19,000 of which alleged employment (rather than housing) discrimination.

How does that break down? The most common form of discrimination alleged? Disability (about a third of the charges filed). Retaliation was right behind disability. Race, sexual harassment, and age discrimination constituted about 20% each of the total.

DFEH settled about 960 cases, for about $9.5 million in payments from employers and landlords to complainants.

Finally, the report highlighted the new automated charge filing system, and the new automated right to sue system. They're also working on intake filing by telephone, which should result in a lot more charges.

The best way to avoid a charge is prevention. Besides a solid policy and training, communication with employees and an effective system for complaints are the best way to prevent claims to third parties like the DFEH.


U.S. Supreme Court: Preganancy Discrimination Act Not Retroactive

AT&T's old pension plan used to provide that employees on pregnancy disability leave did not receive the same service credit as employees on leave for other disabilities. Just before Congress enacted the Preganancy Discrimination Act, in 1978, AT&T modified its service credit calculations prospectively, but still calculated pre-PDA service under its pre-PDA rules. Before the PDA, AT&T's calculations were legal under Supreme Court precedent interpreting Title VII.

Four AT&T employees sued AT&T, claiming that perpetuating the calculation of service credit violated the PDA because their pension benefits were reduced as a result of the pre-PDA calculation. The EEOC joined in, as did the Communication Workers' Union. The district court and Ninth Circuit agreed with the Plaintiffs.

However, the Supreme Court, on a 7-2 vote, reversed. The Court's decision, penned by soon-retiring Justice Souter, turned on a number of reasons, the most significant of which are:
- the prior calculation was a "seniority system" exempt from Title VII (pre-PDA);
- the calculation was considered lawful under Supreme Court precent, General Elec. Co. v. Gilbert, 429 U. S. 125 (1976); therefore, AT&T could not have intentionally discriminated by adopting the old system;
- the PDA was not retroactive;
- the Lilly Ledbetter Fair Pay Act did not save her claim because the underlying pre-PDA decision was not itself discriminatory.

Justice Stevens joined the majority, but also wrote a concurrence noting he was bound by the pre-PDA Supreme Court opinion, General Elec. Co. v. Gilbert, 429 U. S. 125 (1976), although he dissented in that case.

Justices Ginsburg and Breyer dissented. The dissent traced a history of discrimination against pregnancy in the workplace. Acknowleding that the PDA was not retroactive, the dissent in essence argued that because Gilbert was SO wrongly decided, it should not affect the decision in the present case. Here's the essence of the dissent:

The PDA does not require redress for past discrimination. It does not
oblige employers to make women whole for the compensation denied them when,
prior to the Act,they were placed on pregnancy leave, often while still ready, willing, and able to work, and with no secure right to return to their jobs after childbirth.[fn] But the PDA does protect women, from and after April 1979, when the Act became fully effective, against repetition or continuation of pregnancy-based disadvantageous treatment. Congress interred Gilbert more than 30 years ago, but the Court today allows that wrong decision still to hold sway. The plaintiffs (now respondents) in this action will receive, for the rest of their lives, lower pension benefits than colleagues who worked for AT&T no longer than they did. They will experience this discrimination not simply because of the adverse action to which they were subjected pre-PDA. Rather, they are harmed today because AT&T has refused fully to heed the PDA’s core command: Hereafter, for "all employment-related purposes," disadvantageous treatment "on the basis of pregnancy, childbirth, or related medical conditions" must cease. 42 U. S. C. §2000e(k) (emphasis added). I would hold that AT&T committed a current violation of Title VII when, post-PDA, it did not totally discontinue reliance
upon a pension calculation premised on the notion that pregnancy-based
classifications display no gender bias.

The case is AT&T Corp. v. Hulteen, and the opinion is here.

Court of Appeal: Employee's Obligations re Reasonable Accommodation

Carmine Scotch worked as an instructor for The Art Institute of California - Orange County. He had HIV. The institute's accreditation standards require instructors to have certain certification and education credentials / degrees. They allow some instructors to work towards those credentials after hire.

In 2004, the institute's management prepared for accreditation audits by identifying instructors lacking the education credentials required to maintain accreditation, including Scotch. By the end of 2005, Scotch had still not enrolled in a master's program. The institute even agreed to pay for degrees obtained at a local university.

Scotch received a poor performance review in early 2006. He disputed it, claiming it was retaliation for a leave he took during the previous winter. He also disclosed to HR that he had HIV.

By mid-2006, there was a decline in enrollment. Some instructors were laid off; others were reduced to part-time. Because the institute had more instructors than work, it decided to assign only instructors with masters degrees to upper-level courses. Therefore, Scotch's hours were reduced (along with other instructors'). Ultimately, Scotch resigned.

Scotch sued for refusal to accommodate, disability discrimination, failure to engage in the interactive process and wrongful termination. The Court of Appeal affirmed the Superior Court's grant of summary judgment on all causes of action.

Most of the opinion is not new law. The court found that the course load was reduced for legitimate reasons, and that Scotch did not demonstrate pretext. But this opinion is interesting because of the court's analysis of the accommodation claim. Scotch argued that he should have been assigned a full course load despite his failure to achieve the masters degree as a reasonable accommodation. The court found:

His proposed accommodation is not reasonable under the definition we have adopted because it is not a “modification or adjustment to the workplace” necessary to enable him to perform the essential functions of his position. Unlike the employee in Jensen, Scotch was not requesting assignment from a position he could not manage to one he could. Instead, Scotch explained the limitations created by his disability were that he needed to avoid stress and he could not pursue a master‟s degree while teaching full time and fulfilling other professional development requirements—limitations addressed by AIC‟s accommodation. Scotch‟s request of priority in assignment of lower division courses does not accommodate those limitations and was unnecessary to enable him to perform the essential functions of his position.

The opinion also addresses the "interactive process." The court found that the institute did not initiate a meeting before reducing the hours and that, perhaps, a jury would find that it should have. However, the court also found that the failure to have the meeting did not require a trial. That is because the employee must identify a potential accommodation that would have been effective to recover on the cause of action:

To prevail on a claim under section 12940, subdivision (n) for failure to engage in the interactive process, an employee must identify a reasonable accommodation that would have been available at the time the interactive process should have occurred. An employee cannot necessarily be expected to identify and request all possible accommodations during the interactive process itself because "„"[e]mployees do not have at their disposal the extensive information concerning possible alternative positions or possible accommodations which employers have. . . ."‟" (Wysinger, supra, 157 Cal.App.4th at p. 425.) However . . . once the parties have engaged in the litigation process, to prevail, the employee must be able to identify an available accommodation the interactive process should have produced: "Section 12940[, subdivision ](n), which requires proof of failure to engage in the interactive process, is the appropriate cause of action where the employee is unable to identify a specific, available reasonable accommodation while in the workplace and the employer fails to engage in a good faith interactive process to help identify one, but the employee is
able to identify a specific, available reasonable accommodation through the litigation process." (Nadaf-Rahrov, supra, 166 Cal.App.4th at p. 984.)

The case is Scotch v. Art Inst. of Orange Cty. and the opinion is here.

California Supreme Court to Review Section 203 Waiting Time Penalties

The statute of limitations for a penalty is usually one year under California law. But, Labor Code Section 203 says that the statute of limitations for "waiting time penalties" is the same as the limitations period for the underlying wage claim. So, if the underlying wage claim is three years (such as unpaid overtime), then the statute of limitations for late payment of those wages at termination is also three years.

But, what happens if the underlying wages are paid already and an employee just wants to recover penalties in a civil lawsuit? There IS no underlying claim for wages in that case. So, the court of appeal reasoned in Pineda v. Bank of Am., that the one-year statute of limitations should apply in cases where there is no accompanying claim for unpaid wages.

The court in Pineda also clarified that the unfair competition law's four year statute does not apply to waiting time penalties, since the UCL ordinarily only applies to "restitution" of the plaintiff's property, and waiting time penalties are not the employee's property.

The California Supreme Court just accepted review of Pineda on both issues discussed above. The docket is here. We posted about the court of appeal's opinion here.

Ninth Circuit Asks CA Supremes for Guidance on Wage and Hour

The Ninth Circuit has before it three cases involving pharmaceutical sales representatives. These folks visit with doctors and give them information on medications. The Ninth Circuit wants to know if these employees count as "outside salespersons" under California law. So, they asked the California Supreme Court for an opinion:

1. The Industrial Welfare Commission’s Wage Orders 1-2001 and 4-2001 define “outside salesperson” to mean “any person, 18 years of age or over, who customarily and regularly works more than half the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.” 8 Cal. Code Regs., tit. 8, §§ 11010, subd. 2(J); 11040, subd. 2(M). Does a pharmaceutical sales representative (PSR) qualify as an “outside salesperson” under this definition, if the PSR spends more than half the working time away from the employer’s place of business and personally interacts with doctors and hospitals on behalf of drug companies for the purpose of increasing individual doctors’ prescriptions of specific drugs?

If the sales representatives don't qualify as outside salespersons, because they don't take orders or actually sell the medications, the court wants to know if they qualify as "administrative" employees:

2. In the alternative, Wage Order 4-2001 defines a person employed in an
administrative capacity as a person whose duties and responsibilities involve (among other things) “[t]he performance of office or non-manual work directly related to management policies or general business operations of his/her employer or his employer’s customers” and “[w]ho customarily and regularly exercises discretion and independent judgment.” Cal. Code Regs., tit. 8 § 11040, subd. 1(A)(2)(a)(I), 1(A)(2)(b). Is a PSR, as described above, involved in duties and responsibilities that meet these requirements

The Ninth Circuit seeks guidance on the administrative test because California case law is sparse on what it means to "exercise discretion and independent judgment" for the administrative exemption, and whether the PSRs are involved in "office or non-manual work directly related ot management policies or general business operations" of Bayer's customers. The court appears to believe that California law on outside salespersons differs from the federal test under the FLSA such that reliance on FLSA cases would be of "limited" assistance.

The Supreme Court does not have to answer the questions. If the Court chooses not to, then the case will return to the Ninth Circuit for a prediction on how the Supreme Court would rule. Otherwise, this case could provide needed guidance in this area of wage and hour law.

The case is D'Este v. Bayer Corporation and the opinion/request for answers is here.

California Supreme Court Takes Tips

(Or at least they accept tip pooling cases for review. ) What's tip pooling? We blogged about it here and wrote an article here. Yeah, we're on it.

Who knew tip pooling was the new meal break? There have been about four recent appellate decisions on tip pools in recent months. The Supreme Court decided to have its say, accepting review in Lu v. Hawaiian Gardens. We'll see if they grant and hold the rest of them or leave one on the books for guidance to the bar while the Lu review is pending.