Employment Law

California Employers Have Special Obligations on Election Day

By Sandra King, Chair, Employment and Labor | Randall Keen, Partner, Government and Regulatory

Next Tuesday our nation goes to the polls in what pundits expect will be record numbers. California employers have special obligations on Election Day to allow employees sufficient time to vote. Employers should ensure that they have a full understanding of and plan for responding appropriately to employee requests for time off to exercise their franchise.

The polls are open from 7:00 a.m. to 8:00 p.m., providing many employees with sufficient time before or after work to vote. Pursuant to California Elections Code §§ 14000-14003, however, if an employee does not believe he or she has sufficient time outside of his or her normal working hours to vote, the employee may take off enough working time to make it to the polls to vote. Employers are required to pay up to two (2) hours of time off on Election Day to enable an employee to vote. Any additional time taken by the employee to vote would be without pay. The law requires that the time taken off by the employee has to be at the beginning or end of the employee’s regular work shift, whichever allows the most free time for voting and the least time off from the employee’s regular work hours, unless the employer and the employee otherwise agree.

Employees who know or have reason to believe on the third working day prior to Election Day that they will have to take time off from their regular workday to vote are required to provide their employers with notice of this at least two (2) working days prior to the election.

Employers are required to post a Notice in their offices regarding these election-related employee rights at least ten (10) days before every statewide election. The posting has to be placed conspicuously at the workplace, if practicable, or in a location where it can be seen as the employees come or go to their place of work. Such Notices can be downloaded from the California Secretary of State’s website in a variety of languages, or employers can call the Elections Division at (916) 657-2166 to obtain posters of the Notices.

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New York Adopts Final Regulations on Debit Card Payments

By Jessica Shpall Rosen, Employment and Labor

Why it matters

New York employers, take note: the state’s Department of Labor has adopted final regulations regarding permissible methods of payment for most non-exempt employees. Beginning March 7, 2017, employers are required to obtain written, informed consent from employees for the use of any method of payment except cash or check (such as direct deposit and payroll debit cards) and to ensure that employees are not charged fees for accessing payments. “These tough new standards protect some of our most vulnerable New Yorkers from predatory practices that seek to deny them a fair day’s pay for a fair day’s work,” Governor Andrew Cuomo said in a statement about the rules.

Detailed discussion

Employers in New York have four permissible methods of paying wages: cash, check, direct deposit, or payroll debit card. A “payroll debit card” is defined by the Department of Labor’s (DOL) new regulations as “a card that provides access to an account with a financial institution established directly or indirectly by the employer, and to which transfers of the employee’s wages are made on an isolated or recurring basis.” The new regulations provide detailed instructions regarding payment by methods other than cash.

Regarding wage payments by check, employers must ensure that the check is a negotiable instrument and that no fees are imposed on employees for using checks as a means to receive payment. For example, an employer may not charge a fee for the replacement of a lost or stolen check.

To be able to issue payment by direct deposit or a payroll debit card, an employer is required to provide adequate written notice and obtain the employee’s informed consent. The notice must include: (1) a plain language description of all options for receiving wages; (2) a statement that accepting wages by payroll debit card or by direct deposit is not required; (3) a statement that the employee may not be charged any fees to obtain access to full payment of wages; and (4) if payment is being offered by payroll debit card, a list of locations where employees can obtain wage payments at no charge “within a reasonable proximity” to the workplace or their place of residence. The term “reasonable proximity” is not defined in the regulations.

In turn, an employer offering these payment options must obtain informed, written consent from employees. Employers may not condition hiring or continued employment or take adverse action against an employee who refuses to consent to be paid through direct deposit or payroll debit card.

The notice and consent can be in electronic form as long as the employee is able to view and print the notice and consent for free while at work and the employee is notified of this right. In addition, the notice and consent must be provided in English and the employee’s primary language when the DOL makes a template available in that language.

The regulations describe additional requirements for employers who wish to make payments by payroll debit card. Employers must wait seven business days after receiving consent from the employee before issuing payment by debit card. Employers must also ensure local access to one or more automated teller machines at no cost and at least one method to withdraw up to the total amount of wages for each pay period or balance remaining on the payroll debit card without the employee incurring a fee.

The regulations also prohibit employers and their agents from charging (directly or indirectly) specific fees to employees, including fees for opening or closing an account; account inactivity or overdraft, shortage or low-balance status; access to account or balance information and customer service; account maintenance; certain declined transactions; and any fee not explicitly defined in the contract between the issuer and employer or in the terms and conditions provided to the employee. The debit card may not be linked to any form of credit.

An employer may not pass on any of its own costs associated with a payroll debit card account to an employee and must guarantee that the funds on a payroll debit card do not expire. However, the account may be closed for inactivity provided that this is spelled out in the agreement between the employer and issuer and the issuer gives reasonable notice to the employee and refunds the remaining funds within seven days. An employer must also give adequate notice before a change in the terms and conditions of the debit card, subject to certain technical requirements defined in the regulations. For workers covered by a valid collective bargaining agreement, an employer must also obtain approval from the union before paying by payroll debit card.

To read the new rule, click here.

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Employer’s Ban on Transgender Officer’s Bathroom Use Violates Title VII

Why it matters

In a victory for the transgender rights movement, a Nevada federal court ruled that a prohibition on a transgender police officer preventing the use of either the men’s or women’s bathrooms violated both state law and Title VII, granting partial summary judgment in the officer’s favor. Hired while presenting as a female, the officer held the position for 17 years until 2011, when he began identifying as a man in dressing and grooming. He also began using the men’s restrooms at work. When coworkers complained, the officer was instructed to use only gender-neutral restrooms. Despite his request to use the men’s bathroom and explanation that he was transitioning—changing his name, conforming to the men’s grooming code, and asking to be addressed using male pronouns—his employer refused. The officer filed suit under Title VII and Nevada’s anti-discrimination law. Ruling on cross motions for summary judgment, the court sided with the plaintiff. Title VII includes discrimination based on a person’s gender, the court said, and the employer’s bathroom ban was “precisely” the type of sex stereotyping the Ninth Circuit Court of Appeals has found the statute prohibits.

Detailed discussion

In 1992, the Clark County School District (CCSD) hired a campus monitor named Brandilyn Netz, who later graduated from a law enforcement academy and was then hired as a police officer by the school district. She held the position for 17 years without incident.

Beginning in 2011, Netz began dressing for work like a man, grooming like a man, and identifying himself as a man. He also started using the men’s bathrooms at work. When others complained, Netz was called into a meeting with commanding officers. At the meeting, Netz announced that he was transgender and in the process of transitioning into a man. Going forward, he told them he wanted to be known as Bradley Roberts and use the men’s bathroom.

The commanding officers instructed him not to use either the men’s or the women’s restrooms and should confine himself to gender-neutral restrooms. Roberts sent a letter with a formal request, which resulted in a second meeting and an official ban on both the men’s and women’s restrooms as well as a denial of his request to be treated as a male until he provided official documentation of a name and sex change.

A few days later, the commanding officers e-mailed the entire department about Roberts’ transition, which he said opened him up to comments from coworkers. Roberts also legally changed his name and requested that his employer update his records. It failed to do so.

Roberts filed a charge with the Nevada Equal Rights Commission (NERC) alleging gender identity discrimination and harassment. Only after NERC scheduled a public hearing did the employer issue a new bathroom policy, but the school district still did not update Roberts’ records. He then filed suit under both Nevada’s Anti-Discrimination Statute and Title VII, alleging gender discrimination and harassment as well as retaliation.

Ruling on cross motions for summary judgment, U.S. District Court Judge Jennifer A. Dorsey denied both parties’ motions with respect to the harassment and retaliation claims, finding material issues of fact remained. She did grant summary judgment in favor of Roberts on his discrimination claims, however.

The school district argued that Title VII prevents discrimination only “because of … sex” and does not prohibit gender discrimination. Roberts was treated like any other female who tried to use the men’s bathroom, the employer told the court, and therefore was not subject to the protections of the statute.

But the court disagreed.

The jurisprudential understanding of Title VII’s prohibition against discrimination based on sex has “evolved considerably” since the statute’s enactment in 1964, Judge Dorsey explained. In 1989, the U.S. Supreme Court broadened the notion of discrimination “because of sex” in Price Waterhouse v. Hopkins, establishing that Title VII protects people from all forms of “sex stereotyping,” and that “gender must be irrelevant to employment decisions.”

While some circuits have interpreted Price Waterhouse to find no protections for transgender employees, the Ninth Circuit Court of Appeals has taken a different approach, determining in Schwenk v. Hartford that “‘sex’ under Title VII encompasses both sex—that is, biological differences between men and women—and gender.” Discrimination because one fails to act in the way expected of a man or a woman is forbidden under Title VII, the Ninth Circuit held.

Applying this principle in an unpublished opinion a few years later, the Ninth Circuit ruled that a transgender female who sued her employer over a ban on use of the women’s bathroom stated a prima facie case of gender discrimination in Kastle v. Maricopa County Community College. Similar decisions have followed from the Fourth, Sixth, and Eleventh Circuits, as well as the Equal Employment Opportunity Commission.

With this background, Judge Dorsey had little problem granting summary judgment to Roberts on his discrimination claim.

“Direct evidence establishes the department’s discriminatory intent here,” she wrote. “It banned Roberts from the women’s bathroom because he no longer behaved like a woman. This alone shows that the school district discriminated against Roberts based on his gender and sex stereotypes. And the department also admits that it banned Roberts from the men’s bathroom because he is biologically female. Although CCSD contends that it discriminated against Roberts based on his genitalia, not his status as a transgender person, this is a distinction without a difference here. Roberts was clearly treated differently than persons of both his biological sex and the gender he identifies as—in sum, because of his transgender status.”

The bathroom ban was an adverse employment action, as equal access to restrooms is a significant, basic condition of employment, the court said, and the school district treated Roberts differently than similarly situated employees. Even though other females were not permitted to enter the men’s restroom, they were allowed to use the female bathroom, while Roberts was not, Judge Dorsey noted.

As the school district failed to articulate a legitimate, nondiscriminatory reason for the bathroom ban, the court granted summary judgment to Roberts on his discrimination claim. Because genuine disputes remained with regard to the claims of harassment and retaliation, as well as damages for Roberts’ discrimination claim, Judge Dorsey denied summary judgment for both parties on those issues.

To read the order in Roberts v. Clark County School District, click here.

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California Wage Statements Do Not Need Vacation Pay

Why it matters

A California employer dodged a putative class action alleging violations of the state’s Labor Code based on the failure to provide proper wage statements in a new opinion from the appellate court. Lidia Soto claimed that Motel 6 neglected to state accrued vacation and paid time off wages on the wage statements of its employees. A trial court judge tossed the suit and a state appellate panel affirmed. California law mandates that employers provide itemized statements of wages to their workers semimonthly or at the time they are paid, with certain information that must be included. But the value of earned vacation pay and paid time off is not on that list, the court concluded. “Soto’s argument reflects a misunderstanding of the nature of an accrued vacation benefit under California law,” the panel wrote. “[A]lthough vacation time vests as labor is provided, unused vacation time does not become a quantifiable vacation wage until the employee separates from the employment.” The decision saves employers from what could have been a complicated—and costly—addition to employee wage statements.

Detailed discussion

Lidia Soto worked for Motel 6 from June 2012 through January 2015. A few months later, she filed suit against her former employer in her individual capacity and on behalf of all aggrieved workers under the Private Attorneys General Act (PAGA), alleging that Motel 6 violated Labor Code section 226(a)(1) by failing to include the monetary amount of accrued vacation pay in its employees’ wage statements.

The employer demurred, arguing that the Labor Code does not require employers to itemize the monetary value of vacation balances before the employment relationship is terminated.

Emphasizing the legal principle that vacation benefits are earned and become vested during the pay period when they accrue, Soto told the court that Section 226(a) requires itemization of earned “wages” and that California courts have recognized that a “wage” includes vacation pay.

A trial court disagreed, dismissing the suit, and Soto appealed. An appellate panel affirmed, turning first to the Labor Code itself.

Section 226 mandates that employers provide accurate, itemized statements of wages to their employees, with a list of specific information that must be included on the wage statement. That list does not include paid time off or vacation pay, the court noted.

“[S]ection 226(a) is highly detailed, containing nine separate categories that must be included on wage statements, and the code section does not identify accrued paid vacation as one of these categories,” the court said. “When a statute omits a particular category from a more generalized list, a court can reasonably infer a specific legislative intent not to include that category within the statute’s mandate.”

Soto countered that vacation pay did not need to be specifically identified because it falls within the definition of the “gross wages earned” and “net wages earned” categories the statute does require. But the panel found this argument unavailing.

“Soto’s argument reflects a misunderstanding of the nature of an accrued vacation benefit under California law,” the court wrote, citing a California Supreme Court decision holding that paid vacation is a form of deferred wages for services rendered, similar to a pension or retirement benefit. “Under this view, a proportionate right to a paid vacation vests as the labor is provided.”

Consistent with this position, “the courts have recognized that although vacation time vests as labor is provided, unused vacation time does not become a quantifiable vacation wage until the employee separates from the employment,” the panel said.

“Under these authorities, vacation pay cannot be fairly defined as ‘gross wages earned’ or ‘net wages earned’ under Section 226(a)(1) or (a)(5) until the termination of the employment relationship,” the court said. “The employee has vested rights to paid vacation or vacation wages during the time of his employment, but these rights do not ripen and become an entitlement to receive the monetary value of the benefit as wages until the separation date. Further, before separation, the amount of vacation pay to which the employee is entitled is not ascertainable. An employee is entitled to obtain the value of unused paid vacation at his or her ‘final rate.’ Because the amount of unused vacation and an employee’s final rate may change, an employee’s accrued vacation balance depends on the particular circumstances at the employment termination date.”

This understanding further comports with a proper reading of the statute in its entirety, which states that at the time of each payment of wages, the employer must furnish an accurate itemized statement of the earned wages. “Because unused vacation pay is not owed to an employee and is not paid to the employee until the termination of the relationship, and the monetary value of the unused vacation pay cannot be determined until the termination date, the requirement that an employer identify earned ‘wages’ logically does not extend to accrued vacation benefits,” the court said.

The statutory purpose also supports this conclusion, the appellate panel added, as Section 226 is meant to document the paid wages to ensure the employee is fully informed regarding the calculation of those wages—not a benefit that has not been paid. “Until a vacation benefit is required to be paid, it need not be included in a wage statement under section 226(a),” the court concluded.

Even Soto’s plea to construe the wage statute broadly in favor of employees did not sway the court. “We agree, but this principle does not provide us with the authority to rewrite applicable legislation to ‘conform to [an] appellant’s view of what [the law] should be,’ ” the panel wrote. “Whether disclosure regarding unused paid vacation information should be required on a regular basis is a policy matter for the Legislature and/or the regulatory agencies, and not the courts.”

To read the decision in Soto v. Motel 6 Operating, L.P., click here.

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DOJ to Investigate No-Poach and Wage-Fixing Agreements Criminally

By Lisl Dunlop, Co-Chair, Antitrust and Competition | Sandra King, Chair, Employment and Labor

Why it matters

In case you missed it, we covered an important development from the DOJ earlier this week. Human resources professionals beware. Conversations with others in your industry regarding employee pay, benefits and no-hire agreements could land you in jail.

So, you're at a gathering of human resources professionals in your industry—or you're having an informal lunch with someone from another company in your industry—and you find yourself comparing notes regarding the salary ranges for certain positions, or other aspects of the compensation and benefits you provide to certain employees at your company. Or you and this colleague figure that, with all of the money you're spending on recruiting and training of valued employees, a "gentleman's agreement" not to poach each other's employees is an appropriate and civilized way of preventing the companies from cannibalizing each other. This shouldn't be a big issue, right? Wrong. The federal government has recently confirmed that such actions can create serious liability for both you and your company.

Detailed discussion

Over the last few years there have been several high-profile federal government antitrust investigations and litigation involving companies in the healthcare, high-tech and entertainment industries regarding agreements concerning their employees. Until now the companies in question have been subject to civil prosecution and treble damages suits only. Under new Guidance released on October 21, however, the Department of Justice Antitrust Division has indicated that, going forward, it intends to investigate "naked no-poaching or wage-fixing agreements" criminally, in the same way that it currently approaches investigations of hard-core price-fixing and bid-rigging cartels. This raises the stakes considerably for human resources professionals and others in policing hiring and compensation practices.

To read our full Client Alert from October 31, click here.

To read the DOJ’s new “Antitrust Guidance For Human Resource Professionals,” click here.

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