Blog

California’s new Paid Sick Leave Law, the Healthy Workplaces, Healthy Families Act of 2014 (“Act”), took effect January 1, 2015, with leave benefits to accrue starting July 1, 2015. Although the Act was already in effect, the California legislature passed additional amendments, which were signed into law by Governor Jerry Brown on July 13, 2015.

Here are some of the key amendments:

Accrual

In addition to the accrual method in which an employee gains one hour of paid sick leave for every 30 hours worked, employers have the option to use their own accrual method, provided accrual is (1) on a regular basis; and (2) the employee will have 24 hours of accrued sick leave by his or her 120th calendar day of employment.

Employers who already have their own PTO policy

Employers who had a preexisting Paid Time Off (“PTO”) policy as of January 1, 2015, may continue that policy provided: (1) PTO/PSL accrues regularly; (2) employees accrue at least one day/eight hours of PTO/PSL within 3 months of employment each calendar year; and (3) employees accrue at least 3 days/24 hours PTO/PSL within 9 months of employment.

Rate of pay for Paid Sick Leave

For nonexempt employees, pay during PSL can be calculated using one of two methods: (1) the “regular rate of pay” for the workweek in which the employee uses paid sick leave; or (2) by dividing the employee’s total wages, not including overtime premium pay, by the total hours worked in the full pay periods of the prior 90 days of employment.

Other Amendments

• If an employer provides unlimited PSL or PTO, the employer may satisfy its notice obligation by indicating “unlimited” on the employee’s wage statement.
• An employer is not required to reinstate accrued PSL to an employee who returns to the company after less than one year, if the employee was “cashed out” for unused PSL at the time of separation. (Recall there is no obligation to “cash out” accrued, but unused PSL, though there is for PTO.)
• PSL is only available for employees who have worked at least 30 days within the last year for the same California employer.

Again, California employers are encouraged to consult with their employment law counsel to ensure they are in compliance with all aspects of the new Paid Sick Leave law.

On July 15, 2015, the United States Department of Labor (DOL) issued a guidance memorandum (Administrator’s Interpretation No. 2015-1) clarifying whether workers can properly be characterized as Independent Contractors, rather than employees. This Bulletin explains this development and its implications for employers who treat any workers as Independent Contractors.

What is The DOL and Why is This Important?

The DOL is the federal agency charged with enforcing laws and regulations enacted to protect employees. The DOL’s Administrator periodically issues “guidance” memoranda interpreting a law or regulation. While these memoranda are neither law nor legally binding, they are frequently cited and given weight by courts when interpreting law in a particular case. They may also be considered in the legislative process, as federal and state laws are enacted which directly impact employers.

This guidance is also important because it provides clarity and may help employers avoid misclassifying workers as Independent Contractors. Employers who misclassify risk a costly claim or civil lawsuit by the worker claiming she did not receive overtime or rest and meal periods as a result of the misclassification.

The “Economic Realities” Test

Determination whether an employer can properly treat a worker as an Independent Contractor has long required application of the “economic realities” test. This test asks the following questions about a worker classified as an Independent Contractor:

Is the work performed by the individual an “integral part of the employer’s business”?

Does the individual’s “managerial skill” affect his or her opportunity for profit or loss?

How does the worker’s investment compare with that of the company?

Does the work performed require special skill and initiative?

Is the relationship between the worker and the company permanent or indefinite?

What is the nature and degree of the employer’s control?

What Does the DOL Guidance Add?

The DOL guidance memorandum adopts the economic realities test. But the agency makes clear that the test must be applied in the context of the definition, from the federal Fair Labor Standards Act (FLSA), of “employ,” as “suffer or to permit to work.” An individual who is “economically dependent on an employer is suffered or permitted to work by the employer,” and thus cannot be properly classified as an Independent Contractor (emphasis added).

In other words, only a worker who is financially independent of the employer can properly be classified as an Independent Contractor. In one telling sentence, the memorandum says that “Only carpenters, construction workers, electricians, and other workers who operate as independent businesses, as opposed to being economically dependent on their employer, are independent contractors.”

The guidance also clarifies that work away from the employer’s premises does not necessarily support Independent Contractor classification, since that work can still be integral to the employer’s business.

What Should Employers Do?

The issuance of this guidance is an excellent reminder for employers to work with their employment law counsel to evaluate whether they are properly classifying any worker who is treated as an Independent Contractor.

The Division of Occupational Safety and Health (DOSH), better known as CalOSHA, protects workers from health and safety hazards in almost every workplace in California. The amendments to certain CalOSHA regulations, effective May 1, 2015, will impact any business that includes an “outdoor place of employment.” The amendments require action by employers, including (1) revision of written policies covering heat illness prevention; (2) updates to training protocols and materials; and (3) adoption of expanded workplace procedures, practices and protections to better prevent heat illness from occurring.

A key amendment relates to the temperature at which shade must be provided. Previously, the regulation required a shaded area when the temperature reached 85 degrees. The threshold is now 80 degrees.

Certain industries, including agriculture, construction, landscaping, oil and gas extraction, and transportation or delivery of agricultural, construction or other heavy materials, face an even heavier burden when the temperature reaches 95 degrees. These include (1) conducting paid pre-shift safety meetings to go over the company’s high-heat procedures; and (2) implementing effective heat illness monitoring, defined as having a supervisor assigned to observe 20 or fewer employees, a mandatory buddy system, regular communication with each employee, and a designated person at the worksite authorized to call emergency services in the event of a heat illness.

Employers must also provide adequate fresh, pure and suitably cool water, at no cost, located as close as practicable to the areas where employees are working. Employers must encourage employees to take cool-down periods of at least five minutes (10 minutes every 2 hours for agricultural workers at 95 degrees).

Finally, employers must establish a written heat illness prevention plan in English and any other languages that will be understood by employees. This plan must be made available at the worksite.

The California Family Rights Act (CFRA) was established to ensure secure workplace leave rights for the birth of a child, for purposes of bonding, placement of a child in the employee’s family for adoption or foster care, for the serious health condition of the employee’s child, parent or spouse, or for the employee’s own serious health condition.

Importantly, the CFRA applies only to employers who employ 50 or more employees within a 75-mile radius. This is not new. However, the amended regulations clarify how to determine if this threshold is met for employees with no fixed worksite (i.e., work from home, etc.). The regulations now provide that such employees’ worksite is the location (1) to which they are assigned as their home base; (2) from which their work is assigned; or (3) to which they report.

CFRA leave is only available to employees who have been employed for at least 12 months and at least 1,250 hours during the preceding 12 months period. The amended regulations provide that employees who are not eligible for CFRA leave at the start of a leave because they did not meet this requirement, may become eligible for protected CFRA leave during their non-CFRA leave because their continued employment during such leave counts toward the 12 month threshold.

Formerly, employers could require an employee using CFRA leave to obtain a second opinion of the employee’s “serious health condition” if the employer had “reason” to doubt the validity of the first medical certification. This regulation has been amended to allow an employer to require a second opinion only where it has a “good faith, objective reason” to doubt the certification. Employers are also now prohibited from contacting health care providers except to authenticate a medical certification.

As amended, the regulations now provide that an employee who fraudulently uses CFRA leave is not protected for purposes of job restoration (at conclusion of leave) or health benefits.

Finally, the amended regulations require employers to post a notice explaining the CFRA and how to file a complaint with the Department of Fair Employment and Housing (DFEH).

In my last post, I highlighted a recent California Court of Appeal Decision, Nealy v. City of Santa Monica, in which the Court held that an employer is not required, as part of its duty to accommodate an employee’s disability, to eliminate an essential function of the employee’s job. At the time of my post, the case was not published, meaning it could not be cited as authority. In the interim, the case has been ordered published, meaning it is now citable authority. Good news!

The California Court of Appeal, in Nealy v. City of Santa Monica, recently provided insight about the extent of an employer’s obligation to provide reasonable accommodation to a disabled employee. Specifically, the Court addressed whether an employer is required to remove an “essential job function” as a reasonable accommodation.

Factual Background

The employee, Tony Nealy, worked for the City as a “solid waste equipment operator.” He suffered two work-related injuries, leaving him partially disabled. When the agreed medical examiner ultimately approved Nealy’s return to work, he stipulated that Nealy should be precluded from “kneeling, bending, stooping, squatting, walking over uneven terrain, running, and prolonged standing relative to the right knee, as well as climbing and heavy lifting.”

Nealy’s pre-injury job as a “solid waste equipment operator” requires workers be able to operate at least four different types of refuse collection vehicles, as well as refuse and recyclable collection/disposal duties, heavy lifting and equipment maintenance/inspection.

Nealy took the position that, even with his work restrictions, he could still work as a “solid waste equipment operator” if the job duties were altered in his case to limit his responsibility to a single refuse collection vehicle (automated side loader). When the City refused this suggestion, he sued, claiming disability discrimination and other theories.

Essential Function and Reasonable Accommodation

California law imposes on employers the obligation to make “reasonable accommodations” for known disabilities. “Reasonable accommodation” has been defined as “a modification or adjustment to the work environment that enables the employee to perform the essential functions of the job.” (Nadaf-Rahrov v. Neiman Marcus Grp., Inc., 166 Cal.App.4th 952, 974 (2008).)

An “essential function” of a given position has been defined as “the fundamental job duties of the employment position the individual with a disability holds or desires.” (Cal. Gov. Code §12926(f).) The City argued that the ability to operate multiple different refuse collection vehicles was an essential function of the job of “solid waste equipment operator” because (1) employees could be required to “fill-in” for one another, operating different vehicles, in the event of an absence; and (2) a natural disaster may dictate that larger vehicles than the automated side loader would be required to adequately clear debris.

Among the questions presented to the Court was whether the City’s duty to accommodate Nealy’s disability required it to eliminate an essential job function of a “solid waste equipment operator,” so that he would be required only to operate the automated side loader and not perform any of the other duties that fell outside his restrictions. Citing authorities, including Lui v. City and County of San Francisco, 211 Cal.App.4th 962, 985 (2012), and Dark v. Curry County, 451 F3d.1078, 1089 (9th Cir. 2006), the Court said no. Elimination of an essential function is not a reasonable accommodation of an employee’s disability.

Summary

Nealy v. City of Santa Monica is an unpublished opinion, which means it cannot be cited to a court as authority. However, it provides valuable insight into the extent of an employer’s obligation to provide reasonable accommodation to a disabled worker. Specifically, the case suggests reasonable accommodation does not require the elimination of an essential job function.

Employers facing questions of reasonable accommodation of an employee’s known disability would be wise to consult with their employment law counsel, to help reduce the likelihood of a violation of state and/or federal law.

Many employers are familiar with the fact that an employee who brings and wins a discrimination case will recover his or her attorney’s fees. In order for a winning employer to recover its attorney’s fees, by contrast, the employer is required to show that the employee’s claims were frivolous, unreasonable or groundless, which is an extremely difficult standard to meet. The policy underlying this distinction is not to discourage employees from bringing discrimination lawsuits out of fear they will, if they lose, be “on the hook” for thousands of dollars in attorney’s fees.

Notwithstanding this limitation on a prevailing employer’s ability to recover attorney’s fees, winning employers have historically been able to claim and obtain a judgment for out-of-pocket litigation costs, without a showing the claims were frivolous, unreasonable and groundless. These costs include filing fees, deposition and court transcript fees and certain witness expenses.

A case now pending before the California Supreme Court, Williams v. Chino Valley Independent Fire District, will resolve a split of authority among California appellate courts whether prevailing employers in discrimination cases will continue to be able to claim litigation costs without being required to meet the frivolous, unreasonable or groundless standard. The plaintiff bar is urging the Supreme Court to resolve the split of authority by holding that prevailing employers seeking to recover attorney’s fees or costs must prove the claim was frivolous, unreasonable or groundless.

The California Supreme Court has ruled that “hours worked” under the California Labor Code and Industrial Wage Commission (“IWC”) Wage Order No. 4-2001 includes all time spent at an employer’s workplace and under the employer’s control, including sleep time.

In Mendiola v. CPS Security Solutions, Inc. (Jan. 8, 2015), a trailer guard required to spend his night at assigned jobsites in residential trailers sued because the employer’s on-call agreement only compensated guards for on-call time spent actually responding to alarms and investigations. The Guard argued that this policy violated IWC Wage Order No. 4-2001, which requires that employers “pay to each employee . . . not less than the applicable minimum wage for all hours worked in the payroll period.”

While the trial and appellate courts agreed with the security guards with respect to weekday on-call, the California Court of Appeal held that weekend on-call time constituted non-compensable sleep time.

The California Supreme Court reversed the holding of the Court of Appeal. It held the trailer guards’ on-call time constituted compensable “hours worked” under the Wage Order because the employer exercised significant control over the guards’ activities. This included the requirement that they live onsite and they were expected to respond promptly, in uniform, to alarms. Additionally, although the guards were allowed to engage in personal activities, including sleeping and watching television, the Court found it significant that the “guards’ mere presence [at the jobsite] was integral” to the employer’s business.

California’s meal period rules generally prohibit employers from having employees work more than 5 hours without providing a meal period of at least 30 minutes. However, the Wage Orders do recognize an exception to this rule where (1) the nature of the work performed by the employee prevents him/her from being relieved of all duty; and (2) the employee and employer agree in writing to an “on-duty” meal period.

It is important to bear in mind this is not a waiver of the meal period. A couple of additional points:

• The written agreement must clarify that the employee will be paid for his/her “on-duty” meal period.
• The written agreement must expressly state that the agreement may be revoked by the employee at any time. I would also include the buzzword “voluntary” in any agreement that I drafted.

A persistent question is when does “the nature of the work” performed prevent the employee from being relieved of all duty for at least 30 minutes. Department of Labor Standards Enforcement (DLSE) opinion letters and case law suggest this determination must be made on a case-by case basis. Employers who avail themselves of this meal period exception should be wary of any kind of “blanket” application of the “on-duty” meal period for all employees, restricting its use to only those situations in which the employer can make a colorable argument that a normal, “off-duty” meal period is unrealistic.

Politicians in several states have been lobbying for years to make “bullying” in the workplace illegal. While Tennessee is the only state with such a law currently on its books, California took a step closer when Governor Brown signed AB 2053, which will require certain employers to provide “abusive conduct” training as a component of already mandatory sexual harassment prevention training for supervisory employees.

The existing requirement, found in Government Code section 12950.1, applies to employers with 50 or more employees and requires supervisory employees receive two hours of sexual harassment prevention training, within six (6) months following their assumption of a supervisory role. Follow up training is required every two years.

Here is what the amendment adds to Section 12950.1:

• Training must now include a component on the “prevention of abusive conduct.” This need not necessarily extend the length of the training beyond two hours.
• “Abusive conduct” is “conduct with malice that a reasonable person would find hostile, offensive, and unrelated to an employer’s legitimate business interests.”
• “Abusive conduct” may include repeated infliction of verbal abuse (e.g., derogatory remarks, insults, and epithets), verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating, or the gratuitous sabotage or undermining of a person’s work performance.
• “Abusive conduct” need not be based on any otherwise protected classification, such as race, age, gender, disability or religion.
• A single act does not constitute “abusive conduct” for purposes of the training, unless it is especially severe or egregious.
• The amendment takes effect January 1, 2015.

What Employers Should Do – Employers with 50 or more employees should immediately consult with their regular employment attorneys to update training to comply with the new law.