Employment Law

California Sick Leave Law Gets Updates

Why it matters

California's Healthy Workplaces, Healthy Families Act just took effect on July 1 but Governor Jerry Brown has already signed into law tweaks to the statute. The bill established that employers must provide three paid sick days per year for employees that have worked in the state for at least 30 days in a calendar year, regardless of whether they are full- or part-time workers. The new legislation provided clarification on some of the questions raised by the Act, such as whether the 30 days of work required must be for the same employer to trigger paid sick leave. Adjustments were also made to provisions on the rate of pay, with employers provided with an option on how to pay sick days for nonexempt employees as well as methods of how to accrue paid leave—in lieu of the strict 1 hour per 30 hours worked accrual, employers now have the choice to use other accrual methods within certain parameters. Employers should familiarize themselves with the changes, which offer a modicum of flexibility and breathing room on certain issues.

Detailed discussion

Last year, California joined a small but growing number of jurisdictions when it enacted paid sick leave for an estimated 6.5 million workers in the state with the Healthy Workplaces, Healthy Families Act.

Signed into law by Governor Jerry Brown last September, the Act applies to employees that have worked in the state for at least 30 days in a calendar year, allowing workers to accrue one hour of sick leave for every 30 hours worked, with sick days available to be used beginning on an employee's ninetieth day of employment.

Limited categories of employees are exempt from the law (those covered by a collective bargaining agreement, for example) which permits the use of leave for an employee's own health conditions or those of covered family members. The Act also sets forth various requirements for requesting and designating leave, accrual, and administrative tasks for employers, including posting, notice, and recordkeeping mandates.

However, questions remained. Sen. Lorena Gonzalez (D-San Diego), the Act's sponsor, drafted an amendment in Assembly Bill 304, signed into law by Gov. Brown on July 13. No substantive changes were made to the Act, but the updates include clarifications and modifications that took immediate effect.

  • Qualifying for leave. A.B. 304 clarified that an employee must work for the same employer for 30 or more days to qualify for the accrued sick leave.
  • Accrual. The amendment authorized employers to provide accrual on a basis other than the strict 1 per 30 hours worked. Provided that the accrual is on a regular basis and the employee will have 24 hours of accrued sick leave available by the 120th calendar day of employment, employers may use their own method of accrual.
  • Use of leave. As originally enacted, the Act entitled an employee to use accrued paid sick days beginning on the ninetieth day of employment and permits an employer to limit an employee's use of paid sick days to 24 hours or three days in each year of employment. Under the amendment, employers have the option to limit employees' use not just to the 24 hours and three days in each year of employment, but also within a calendar year or a 12-month period.
  • Safe harbor. If an employer already had a paid sick leave or paid time off policy in existence that satisfies the accrual, carryover, and use requirements set forth by the Act as of January 1, 2015, then the employer is not required to provide additional paid sick days, the amendment clarified.
  • Balance of accrued leave. Employers are required to provide employees with the balance of their available paid sick leave or paid time off on a pay stub or other document distributed on payday. Employers that provide unlimited time off and have been uncertain how to satisfy this requirement were provided with an option in the amendment: indicate "unlimited" on the wage statement.
  • Reinstatement of accrued leave. What if an employee is rehired within one year of separation from employment and the employer already paid out accrued leave at the time of termination, resignation, or separation? A.B. 304 explained that employers are not required to reinstate the accrued paid time off.
  • Calculating sick pay. For those employees that are paid different hourly rates, paid by commission, paid by piece rates, or are nonexempt employees earning a salary, the Healthy Workplace, Healthy Families Act mandated that employers provide sick pay at an average pay rate for the employee's prior 90 days. However, the amendment changed this formula, offering two options for employers. First, employers can calculate the average rate of pay by taking the total compensation earned during the workweek and dividing by the total hours worked. Alternatively, employers can determine a nonexempt employee's rate by dividing the employee's total wages by the total hours worked in the prior 90 days of employment. The paid sick time for exempt employees can be calculated in the same way as other forms of paid leave time.
  • Recordkeeping. For a three-year period, employers are required to keep records documenting the hours worked by each employee, the paid sick days accrued, and paid sick days used, making the records available to the Labor Commissioner upon request. In response to concerns about privacy, A.B. 304 states that employers are "not obligated" to inquire into or record the purposes for which an employee uses sick leave or paid time off.

To read Assembly Bill 304, click here.

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Return to Sender: EEOC Sues UPS for Religious Discrimination

Why it matters

Perhaps inspired by the agency's recent success before the U.S. Supreme Court in EEOC v. Abercrombie & Fitch, the Equal Employment Opportunity Commission (EEOC) filed suit against United Parcel Service alleging that the company engages in religious discrimination in the application of its grooming policy. The nation's largest package delivery company has a policy banning beards and hair that is cut below collar length for male workers that have contact with customers or hold supervisory positions. A Muslim who applied for a driver helper position in New York was told he would need to shave his beard to be hired and that "God would understand," according to the EEOC's complaint, while a Florida Rastafarian was refused an accommodation for his long hair by a manager who allegedly said he didn't want a supervisor that looked like a woman. The federal court complaint—which features dozens of other examples of alleged discrimination—seeks back pay and changes to the company policy for violations of Title VII of the Civil Rights Act dating back to 2004. The Abercrombie & Fitch case, where the justices ruled in June that actual knowledge by an employer is not necessary for a Title VII religious discrimination claim, made headlines of its own a few days after the EEOC's new suit was filed when the parties revealed they reached a settlement agreement. A spokesperson for the Commission confirmed that Abercrombie paid Samantha Elauf $25,670.53 in damages and $18,983.03 in court costs.

Detailed discussion

One of the most closely watched cases of the last U.S. Supreme Court term, EEOC v. Abercrombie & Fitch, considered religious discrimination claims under Title VII. Samantha Elauf contended that instead of accommodating her religious beliefs, she was not hired by the national retailer because she wore a hijab to a job interview.

A federal district court granted summary judgment for Elauf, but the Tenth Circuit Court of Appeals reversed, holding that the burden rests on an applicant or an employee to initially inform an employer of the religious nature of his or her conflicting practice and the need for accommodation. Elauf appealed to the Supreme Court, which granted certiorari given the split among the federal circuits.

In an 8-1 opinion authored by Justice Antonin Scalia, the Supreme Court reversed. "Abercrombie's primary argument is that an applicant cannot show disparate treatment without first showing that an employer has 'actual knowledge' of the applicant's need for an accommodation," the Court wrote. "We disagree. Instead, an applicant need only show that his need for an accommodation was a motivating factor in the employer's decision."

The justices emphasized the straightforward rule going forward: "An employer may not make an applicant's religious practice, confirmed or otherwise, a factor in employment decisions."

With the new precedent in hand, the Equal Employment Opportunity Commission (EEOC) filed suit against United Parcel Service, alleging the company engaged in discrimination nationwide against applicants and employees whose religion conflicted with UPS's Uniform & Appearance Policy.

"This discrimination includes the unlawful failure to provide religious accommodations to UPS's appearance policy, failure to hire, failure to promote, and the segregation of those individuals whose religious beliefs conflict with the appearance policy into a particular subset of positions," according to the complaint, filed in New York federal court.

The Uniform & Appearance Policy applies to all of UPS's more than 300,000 employees in positions that require customer contact (including driver and driver helper) and all employees with supervisory responsibility. The policy—which does not apply to "back" of facility positions that do not involve customer contact—prohibits covered male employees from wearing facial hair below the lip or from growing their hair below collar length.

Among the many examples of alleged discrimination listed by the EEOC were those of Bilal Abdullah and Muhammad Farhan, both observant Muslims wearing beards. Abdullah applied for a position as a driver's helper in Rochester, N.Y. in November 2005, the EEOC alleged, and was told that he would have to shave his beard to be considered. When Abdullah explained the beard was part of his religious observance, a UPS hiring official allegedly replied that "God would understand" if he shaved the beard to get a job, the DOL said. The hiring official also suggested he apply for a package handler position which did not require customer contact, but Abdullah was not hired for either job.

The second charging party, Farhann worked as a package handler at a Dallas UPS location. On his first day of training in anticipation of a promotion to the driver position, Farhan was told by the employer that he would not be permitted to work as a driver because of his beard. Farhan requested a religious accommodation, the EEOC claimed, and was informed that such an exception to the policy was not possible, a position backed up by four other UPS supervisors.

Other alleged examples of discrimination included a Florida Rastafarian who requested an accommodation to permit his dreadlocks. His manager told him he "didn't want any employees looking like women on his management team," according to the complaint, and the human resources department questioned why he was a practicing Rastafarian since he was not Jamaican. A Brooklyn Muslim who sought an accommodation for his beard was initially told no accommodations to the policy existed; several years later, UPS informed him an accommodation was possible but he needed to provide certification from his imam that wearing a beard was part of his religious observance, the EEOC alleged.

The complaint requested a permanent injunction against discrimination on the basis of religion; an order to make Abdullah, Farhan, and the other applicants and employees allegedly discriminated against whole, including back pay and other affirmative relief, as well as punitive damages and compensation for past and future nonpecuniary losses including emotional pain, suffering, humiliation, and inconvenience.

In a statement, a spokesperson for UPS said the company will fight the lawsuit. "UPS respects religious differences and is confident in the legality of its employment practices," spokesperson Susan Rosenberg said. "The company will review this case, and defend its practices that demonstrate a proven track record for accommodation."

To read the complaint in EEOC v. UPS, click here.

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Employee or Independent Contractor? DOL Offers New Guidance

Why it matters

In its continuing fight against the misclassification of employees as independent contractors, the Department of Labor (DOL) released new guidance, issuing Administrator's Interpretation 2015-1 to set forth its take on the "economic realities" test. The guidance explores the six factors in the test (including whether the work performed by the worker is an integral part of the employer's business and whether the worker is retained on a permanent or indefinite basis), emphasizing that the main focus of the inquiry should center on whether the worker is "economically dependent on the employer or truly in business for him or herself." The combination of the broad definition of "employ" found in the Fair Labor Standards Act (FLSA) combined with the totality of the circumstances considered in the test means that most workers are employees, the DOL said. The expansive reading of what constitutes an employee will likely generate an increase not only in DOL oversight but worker lawsuits as well.

Detailed discussion

Citing a continuing increase in the misclassification of employees as independent contractors and "numerous complaints from workers alleging misclassification," the Department of Labor's (DOL) Wage and Hour Division released new guidance on "The Application of the Fair Labor Standards Act's 'Suffer or Permit' Standard in the Identification of Employees Who Are Misclassified as Independent Contractors."

Misclassification has been a major focus for the DOL, which has also created partnerships to advance its efforts. In addition to memoranda of understanding with states including Alabama, Florida, and Wisconsin, the DOL announced last year grants of more than $10 million to 19 states—including California and New York—to "enhance states' ability to detect incidents of worker misclassification."

The Fair Labor Standards Act (FLSA) broadly defines "employ" as including "to suffer or permit to work," and courts commonly use a multifactor "economic realities" test when making the determination of whether a worker is an employee or an independent contractor. The result of the application of the test in view of the expansive definition of "employ" found in the FLSA: "most workers are employees," the DOL said.

To help employers reach such a determination, Administrator's Interpretation 2015-1 provides examples and explanations for each of the six factors found in the economic realities test.

"All of the factors must be considered in each case, and no one factor (particularly the control factor) is determinative of whether a worker is an employee," the DOL wrote. "Moreover, the factors themselves should not be applied in a mechanical fashion, but with an understanding that the factors are indicators of the broader concept of economic dependence. Ultimately, the goal is not simply to tally which factors are met, but to determine whether the worker is economically dependent on the employer (and thus its employee) or is really in business for him or herself (and thus its independent contractor)."

Other notes from the guidance: the "control" factor should not be given undue weight in the economic realities test analysis; the labels placed on a relationship between an employer and a worker—independent contractors, owner, partner, or member of a limited liability company, for example—are not indicative of the nature of the working relationship; and even tax filings (such as receipt of a Form 1099-MISC) do not dictate the type of worker.

"The ultimate inquiry under the FLSA is whether the worker is economically dependent on the employer or truly in business for him or herself," the DOL emphasized. "If the worker is economically dependent on the employer, then the worker is an employee. If the worker is in business for him or herself (i.e., economically independent from the employer), then the worker is an independent contractor."

With that background, the DOL turned to the six factors.

First, the parties should ask: "Is the work an integral part of the employer's business?" If the answer is "yes," it is more likely that the worker is economically dependent upon the employer, the agency explained. "A true independent contractor's work, on the other hand, is unlikely to be integral to the employer's business."

Work can be integral to a business even if the work is just one component of the business or is performed by hundreds of thousands of other workers (answering calls at a call center, for example), and work can be integral to the employer's business even if it is performed away from the employer's premises—a reflection of telework and flexible work schedules in today's economy, the DOL said.

Considering the second factor—whether the worker's managerial skill affects the worker's opportunity for profit or loss—the DOL said a worker in business for himself or herself faces the possibility not only to make a profit, but also to experience a loss. "[T]his factor should not focus on the worker's ability to work more hours, but rather on whether the worker exercises managerial skills and whether those skills affect the worker's opportunity for both profit and loss."

For example, a worker that provides cleaning services for corporate clients is not an independent contractor where he performs assignments only as determined by a cleaning company, doesn't schedule his own jobs or advertise his service, and agrees to work additional hours to earn more, because his managerial skill does not impact his profit or loss. On the other hand, a worker providing the same services who negotiates her contracts, decides what jobs to perform and when, and recruits new clients would be indicative of an independent contractor.

How does the worker's relative investment compare to the employer's investment? In the third factor, "[t]he worker should make some investment (and therefore undertake at least some risk for a loss) in order for there to be an indication that he or she is an independent business," the guidance said. "The investment of a true independent contractor might, for example, further the business's capacity to expand, reduce its cost structure, or extend the reach of the independent contractor's market."

Investing in tools and equipment is not necessarily a capital expenditure indicating the worker is an independent contractor, the DOL said, as it must be considered relative to the employer and "significant in nature and magnitude relative to the employer's investment in its overall business." Even a specially equipped truck in the range of $35,000 to $40,000 would not necessarily satisfy the standard.

A worker's business skills, judgment, and initiative—not his technical skills—will aid in determining whether the worker is economically independent, the DOL explained in factor four. Special skills are not enough to turn a worker into an independent contractor.

A highly skilled carpenter providing carpentry services to a construction firm who does not exercise her skills in an independent manner (such as the sequence of the work, ordering of materials, or bidding the next job) is simply providing skilled labor and is not demonstrating the skill and initiative of an independent contractor. Alternatively, a highly skilled carpenter who markets his own services, determines when and how many materials to order, and determines which jobs to take demonstrates the attributes of an independent contractor.

In factor five, the DOL considered whether the relationship between the worker and the employer is permanent or indefinite. The longer the length of time, the more it suggests the worker is an employee. "After all, a worker who is truly in business for him or herself will eschew a permanent or indefinite relationship with an employer and the dependence that comes with such permanence or indefiniteness," the guidance stated.

A lack of permanence does not automatically indicate an independent contractor relationship, however. "The key is whether the lack of permanence or indefiniteness is due to 'operational characteristics intrinsic to the industry' … or the worker's 'own business initiative,' " the DOL said. The difference was demonstrated in the example of an editor who worked for the same publishing house for several years in accordance with the house's editing specifications (indicative of an employment relationship) as opposed to an editor who worked intermittently with fifteen different publishing houses over several years, turning down jobs and negotiating rates for each job (indicative of an independent contractor).

Finally, the nature and degree of the employer's control should be considered in light of the ultimate determination whether the worker is economically dependent on the employer or truly an independent businessperson. The guidance emphasized that the "control" factor should not play an oversized role in the overall economic realities test, with the location of workers (at home or in the office) and the hours worked "not particularly telling" in light of technological advances and enhanced monitoring mechanisms.

"In sum, most workers are employees under the FLSA's broad definitions," the DOL said. "The very broad definition of employment under the FLSA as 'to suffer or permit to work' and the Act's intended expansive coverage for workers must be considered when applying the economic realities factors to determine whether a worker is an employee or an independent contractor. The factors should not be analyzed mechanically or in a vacuum, and no single factor, including control, should be over-emphasized. Instead, each factor should be considered in light of the ultimate determination of whether the worker is really in business for him or herself (and thus is an independent contractor) or is economically dependent on the employer (and thus its employee). The factors should be used as guides to answer that ultimate question of economic dependence."

To read Administrator's Interpretation No. 2015-1, click here.

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Something to Cheer About: Cheerleaders Declared Employees in California

Why it matters

California has taken the lead again with new legislation, this time becoming the first state to affirmatively declare that cheerleaders for professional sports teams are employees. Governor Jerry Brown signed the measure into law this month, requiring that professional teams in the state pay their cheerleaders at least minimum wage beginning January 1, 2016, making them eligible for overtime, workers' compensation, and paid sick leave, among other benefits. The bill was introduced after multiple lawsuits were filed by past and present cheerleaders, including a complaint in California state court from Lacy T., a former Oakland Raiderette. Similar suits were filed against other professional teams across the country and just like the lawsuits, California's statute has also ignited a trend, with comparable legislation recently introduced in New York.

Detailed discussion

In January 2014, a former Oakland Raiderette launched a movement to recognize cheerleaders for professional sports teams as employees. Lacy T. alleged that the National Football League (NFL) team violated state labor law by paying her a flat rate that amounted to $5 per hour for the time she worked.

Pursuant to a written employment contract, Lacy claimed she was paid a flat fee of $125 per home game or $1,250 per season. The contract set forth several requirements for the Raiderettes, from attending all preseason, regular season, and postseason home games to participating in other events or functions (on average, 10 charitable appearances), and participation in practices, rehearsals, fittings, workouts, photo sessions, and meetings. Cheerleaders were also responsible for additional expenses ranging from false eyelashes to travel costs.

The complaint, which sought payment for minimum wage and overtime violations, unpaid expenses, and meal and rest break violations, generated headlines. It also triggered copycat suits against professional sports teams across the country from New York (suits were filed against the Buffalo Bills and the New York Jets) to Florida (challenging the Tampa Bay Buccaneers' payment methods) to Ohio (asserting the Cincinnati Bengals violated state employment laws).

Lacy T. settled her suit for $1.25 million last September, with about 90 cheerleaders receiving an average of $2,500 to $6,000 per season.

A few months later, Assemblywoman Lorena Gonzalez (D-San Diego) introduced Assembly Bill 202. The measure prohibited all professional sports teams (both major and minor league levels of baseball, basketball, football, ice hockey, and soccer) that play the majority of their games in California from classifying cheerleaders as volunteers or independent contractors.

Instead, cheerleaders—individuals "who perform[] acrobatics, dance, or gymnastics exercises on a recurring basis" utilized by the team for "its exhibitions, events, or games"—are now deemed to be employees under California law and must be paid at least minimum wage. As employees, cheerleaders in the state will now be eligible for other benefits, including overtime, workers' compensation, and paid sick leave. Third parties that contract with teams for cheerleaders are also included in the law's coverage.

Governor Jerry Brown signed the bill into law on July 15 with an effective date of January 1, 2016.

Just as the California lawsuit started a trend, the legislation has already spawned imitation. In May, the Cheerleaders' Fair Pay Act was introduced in the New York legislature. That bill would add a new section to the state's labor law requiring that professional sports teams that "utilize[] the services of cheerleaders during its exhibitions or games, shall provide such cheerleaders with all of the rights, benefits and protections" conferred to employees.

To read Assembly Bill 202, click here.

To read the Cheerleaders' Fair Pay Act, click here.

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California Supreme Court Asks Labor Commissioner to Take a Seat

Why it matters

The California Supreme Court has requested assistance from the state's Division of Labor Standards Enforcement (DLSE) in a high-profile dispute over "suitable seating." The state's highest court is currently considering three certified questions from the Ninth Circuit Court of Appeals in a pair of consolidated cases brought by a CVS cashier and a teller at JPMorgan Chase Bank. The putative class actions allege that the employers violated Wage Orders 4-2001 and 7-2001 providing that "[a]ll working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of the seats." A federal district court sided with the employers. When the plaintiffs appealed to the Ninth Circuit, the federal appellate panel punted the case to the California Supreme Court. Now the court has asked for help, requesting that the DLSE submit an amicus brief on how it would respond to the questions from the Ninth Circuit. The court requested an answer by August 21.

Detailed discussion

The dispute began when Nyketa Kilby, a cashier at CVS Pharmacy, and Kemah Henderson, a teller at JPMorgan Chase Bank, brought putative class actions against their employers. Both women alleged that the defendants violated California Wage Orders by failing to provide employees with seats.

Wage Order 4-2001 covers professional, technical, clerical, mechanical, and similar occupations, while Wage Order 7-2001 applies to the mercantile industry. Both orders provide that "[a]ll working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats."

Kilby and Henderson argued that the orders are applicable to specific tasks performed by employees. So if a bank teller can accept deposits and cash checks while seated or a CVS cashier can operate a register while sitting down, then the bank and retailer must provide suitable seats, the plaintiffs told the court.

The employers advocated for a look at the bigger picture. Under this "holistic approach," courts should consider the entire range of job functions the employee is required to perform—not discrete tasks. Other considerations like the layout of the workplace and the business judgment of the employer should also be taken into account, the defendants contended.

Both federal district courts adopted the holistic approach and granted summary judgment to CVS and JPMorgan Chase. The employees appealed.

But the Ninth Circuit Court of Appeals was stumped. The wage orders do not define "nature of the work," "reasonably permits," or "suitable seats," the panel said, and while the different approaches advocated by the parties would produce drastically different results, "the text of the regulation precludes neither." Uncertain about what to do, the federal appellate panel certified three questions to the California Supreme Court.

Last March, the state's highest court accepted the case. Since then, the court has received an ever-growing pile of amicus briefs from interested parties ranging from the U.S. Chamber of Commerce to the California Employment Lawyers Association to Walmart.

Interested in the perspective of the Division of Labor Standards Enforcement (DLSE), the court recently invited the agency to file a brief expressing its views on the certified questions:

"1. Does the phrase 'nature of the work' refer to an individual task or duty that an employee performs during the course of his or her workday, or should courts construe 'nature of the work' holistically and evaluate the entire range of an employee's duties?

a. If the courts should construe 'nature of the work' holistically, should the courts consider the entire range of an employee's duties if more than half of an employee's time is spent performing tasks that reasonably allow the use of a seat?

2. When determining whether the nature of the work 'reasonably permits' the use of a seat, should courts consider any or all of the following: the employer's business judgment as to whether the employee should stand, the physical layout of the workplace, or the physical characteristics of the employee?

3. If an employer has not provided any seat, does a plaintiff need to prove what would constitute 'suitable seats' to show the employer has violated [the wage orders]?"

The California Supreme Court requested that the DLSE's brief be filed and served before August 21, 2015, allowing the parties to file answer briefs within 20 days.

To read the California Supreme Court's invitation to the DLSE in Kilby v. CVS Pharmacy, click here.

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