Employment Law

California Legislation to Consider: Mandatory Paid Sick Leave

Why it matters

Employers in California face a host of new laws set to take effect in the coming months. In the next few issues of the newsletter, we will highlight some of the key legislation and how it will impact businesses in the state. First up: the enactment of mandatory paid sick leave in the state. Joining a small but growing number of jurisdictions—including cities such as Portland, Newark, Passaic, New York City, San Francisco, and Seattle, as well as the state of Connecticut and the District of Columbia—California now mandates that employers provide three paid sick days per year for workers beginning July 1, 2015. The Healthy Workplaces, Healthy Families Act added eight new sections to the state Labor Code, amending a ninth, and includes notice and recordkeeping requirements as well as penalties for noncompliance.

Detailed discussion

Just before the legislative session ended last year, the Assembly voted 50 to 20 and the Senate approved by a 22-8 vote the Healthy Workplaces, Healthy Families Act.

Expected to cover an estimated 6.5 million workers in the state, the bill takes effect July 1. Below are some of the highlights employers need to know:

  • Who is covered: The act applies to employees who have worked in the state for at least 30 days in a calendar year and allows workers to accrue one hour of sick leave for every 30 hours worked—regardless of whether they are full—or part-time employees. Accrued sick days may be used beginning on an employee’s ninetieth day of employment.
  • Who is exempt: Four categories of employees are exempt from the law: (1) those covered by collective bargaining agreements if the agreement meets certain requirements (such as providing paid leave or paid sick days); (2) certain construction workers; (3) providers of in-home supportive services; and (4) employees of an air carrier covered by the Railway Labor Act.
  • Scope of leave: Leave can be used for an employee’s own health conditions, or those of a family member, as well as if the employee is a victim of stalking, sexual assault, or domestic violence. Family members are defined to include a spouse, registered domestic partner, grandparent, grandchild, and sibling—a broader definition than the California Family Rights Act, which does not include grandparents, grandchildren, or siblings.
  • Requesting and designating leave: A request for leave may be oral or written. The law provides that employees may determine how much paid sick leave is necessary, although employers may set a reasonable minimum increment for use, not to exceed two hours.
  • Cap on accrual, unused days: Employers are not required to pay out accrued, unused sick leave at the time of termination. They may also limit an employee’s use of paid sick days to 24 hours or three days in each year of employment and cap total accrual of paid sick days at six 8-hour workdays or 48 hours. Accrued but unused sick days must carry over into the following year, albeit subject to the 48-hour limit.
  • Retaliation: If an employer denies workers the use of sick days or takes other adverse action within 30 days of an employee exercising his or her rights, the law creates a presumption of retaliation.
  • Notice: The law includes various administrative requirements for employers, such as written notice to employees of the amount of accrued sick leave on either the employee’s itemized wage statement or in a separate writing, posting information about the act in a conspicuous location, and recordkeeping by documenting hours worked and paid sick days accrued over a three-year period.
  • Enforcement: The California Labor Commissioner has the power to enforce the act, with the Attorney General also authorized to recover civil penalties, attorneys’ fees, costs, and interest against offending employers. The potential for a Private Attorney General Act lawsuit also looms over employers’ heads.

To read the Healthy Workplaces, Healthy Families Act, click here.

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California Legislation to Consider: Time Off for Emergency Duty

Why it matters

On September 15, 2014, Gov. Jerry Brown signed into law AB 2536, which made changes to existing law to allow emergency rescue personnel to take time off to perform emergency duty. The update broadened the definition of “emergency rescue personnel” and added protections for healthcare providers to take emergency duty leave. The lesson for employers: Revisit policies and review training materials to ensure that employees that fall under the new definition of "emergency rescue personnel"—including healthcare providers—are not discharged or discriminated against for taking time off to perform emergency duty.

Detailed discussion

The unanimously enacted AB 2536 amended Section 230.3 of the Labor Code. While the law generally prohibits an employer from discharging or discriminating against an employee for taking time off to perform emergency duty as a volunteer firefighter, peace officer, or emergency rescue personnel, lawmakers tweaked the statute to protect additional categories of workers.

  • Who is covered: “Emergency rescue personnel” now includes “an officer, employee, or member of a fire department or fire protection or firefighting agency of the federal government, the State of California, a city, county, city and county, district, or other public or municipal corporation or political subdivision … or of a sheriff’s department, police department, or a private fire department, or of a disaster medical response entity sponsored or requested by this state, whether that person is a volunteer or party paid or fully paid.” The new law also added “health care provider,” defined as “any person licensed or certified” pursuant to Division 2 of the Business and Professions Code, or licensed pursuant to either the Osteopathic Initiative Act or the Chiropractic Initiative Act.
  • Who is exempt: The law does not apply to any public safety agency or provider of medical services if the employee’s absence would hinder the availability of public safety or emergency medical services.
  • Requesting and designating leave: Employees that fit the definition of “emergency rescue personnel” must notify an employer at the time he or she becomes designated as such and when he or she will be deployed as a result of that designation.
  • Enforcement and penalties: Employees that are “discharged, threatened with discharge, demoted, suspended, or in any other manner discriminated against in the terms and conditions of employment” for taking time off to perform emergency duty are entitled to reinstatement and reimbursement for lost wages and work benefits. Further, an employer that willfully refused to rehire or restore an employee determined to be eligible for leave is guilty of a misdemeanor.

To read AB 2536, click here.

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In California, Healthcare Workers Entitled to Second Meal Period for Shifts Exceeding 12 Hours

Why it matters

What happens when California’s Labor Code and wage orders collide? Considering Section 11(D) of Wage Order 5 as applied to meal periods for healthcare employees in the context of Sections 512(a) and 516 of the Labor Code, a state appellate court held that the workers cannot waive their statutory right to a second meal period when they work more than 12 hours per day. State labor law requires that employees who work more than 10 hours in a workday must receive two 30-minute meal periods, although Section 11(D) permits employees to waive the second break if the workday is not longer than 12 hours and the first period was not waived. Three former hospital employees filed a putative class action claiming that the two provisions were in conflict and that the Labor Code trumped, mandating pay for their missed meal breaks. A trial court sided with the hospital but the appellate panel reversed, holding that the more permissive wage order was partially invalid and finding that retroactive application on the issue was appropriate. Employers in the healthcare industry would be well served to review their policies on meal periods and update them in light of the decision; in addition, those employers that make use of meal period waiver agreements should check to make sure the second meal period is not waived for shifts of more than 12 hours.

Detailed discussion

Three healthcare employees filed suit against Orange Coast Memorial Medical Center, seeking to represent a class of workers that waived their rights to a second meal period on days they worked shifts of more than 12 hours.

California Labor Code Section 512(a) provides: “An employer may not employ an employee for a work period of more than 10 hours per day without providing the employee with a second meal period of not less than 30 minutes, except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of the employer and the employee only if the first meal period was not waived.”

Section 516 adds: “Except as provided in Section 512, the [IWC] may adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers.”

The plaintiffs argued that Section 11(D) of the Industrial Welfare Commission’s (IWC) Wage Order 5—which states: “Notwithstanding any other provision of this order, employees in the health care industry who work shifts in excess of eight (8) total hours in a workday may voluntarily waive their right to one of their two meal periods”—operates in conflict with the Labor Code.

The wage order sanctions second meal period waivers for healthcare employees who work shifts of more than 12 hours, the workers said, but the Labor Code permits such waivers only if the total hours worked is no more than 12 hours.

Alternatively, the hospital told the court that it utilized valid meal period waivers in compliance with state law.

But the appellate panel disagreed, reversing summary judgment for the hospital.

When the validity of an IWC wage order is conceded, courts will provide extraordinary deference. However, when the validity of a wage order is challenged, no such deference is due, the court said.

By creating an additional exception for healthcare workers to waive a second meal period even in shifts of more than 12 hours, the IWC exceeded its authority with Wage Order 5, the panel said. The wage order conflicts with the Labor Code, specifically Section 512(a), which limits second period meal waivers to shifts of 12 hours or less.

Such an additional exemption might be implied from clear legislative intent, but a review of the legislative history of Sections 512 and 516 turned up nothing to support the IWC’s stance in Wage Order 5, the panel said, citing language from the California Supreme Court’s 2012 decision in Brinker Restaurant Corp. v. Superior Court that “as to the majority of its 2001 wage orders, the IWC did not intend to impose a different meal period requirement than that spelled out in section 512.”

“We see nothing in this legislative history to support the hospital’s argument the additional regulatory exception embodied in section 11(D) for shifts longer than 12 hours is consistent with the Legislature’s intent,” the panel wrote. “To the contrary, everything in this legislative history evidences the intent to prohibit the IWC from amending its wage orders in ways that conflict with meal period requirements in Section 512, including the proviso second meal periods may be waived only if the total hours worked is less than 12 hours.”

The court rejected the hospital’s contention that Section 512 and Wage Order 5 were not in conflict and that the wage order was “final and conclusive for all purposes,” language which referred to the IWC’s purposes. Brinker itself did not confirm the validity of second meal period waivers, the court added, as that decision did not decide the current issue.

The broad powers of the IWC do not extend to the creation of additional exemptions from the meal period requirement beyond those provided by the legislature, the panel wrote, concluding that the IWC exceeded its authority and declaring that Wage Order 5 is partially invalid to the extent it authorizes healthcare workers to waive their second meal periods on shifts longer than 12 hours.

As for retroactive application, the panel said the issue should be litigated on remand—with one exception. “[E]mployers in this state have been on clear notice, pursuant to sections 512(a) and 516, they were required to provide health care workers with a second meal period when they worked more than 12 hours in a day,” the court wrote.

Despite recognizing a reluctance to punish employers for conduct “apparently authorized by the IWC,” the panel said employers have received the benefit of employees working without the statutorily mandated second meal periods and “there is nothing unfair about requiring hospitals to compensate them for that time.”

Therefore, the plaintiffs were entitled to seek premium pay pursuant to Section 226.7 of the Labor Code for any failure by the hospital to provide mandatory second meal periods within the three-year statute of limitation period.

To read the opinion in Gerard v. Orange Coast Memorial Medical Center, click here.

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Employee Validly Terminated While on Leave for Violating Company Policy

Why it matters

The California Supreme Court ruled that an employer did not violate the California Family Rights Act (CFRA) when it terminated an employee while out on medical leave because the worker engaged in conduct in violation of the employer’s policy. During his employment, the employee received an employment manual stating that outside work while on approved CFRA leave was prohibited. While still working for the employer, the employee opened a seafood restaurant. He injured his back at home in March 2008 and was placed on a CFRA medical leave of absence. But when the employer learned that the employee was working at his restaurant, he was terminated. The employee sued and a trial court sent the case to arbitration. An arbitrator determined the employee was properly terminated based on his violation of the company policy. An appellate panel reversed, but the California Supreme Court reinstated the arbitrator’s decision. Just because he was on CFRA leave, the employee had “no greater right to reinstatement or to other benefits and conditions of employment than if [he] had been continuously employed,” the court wrote.

Detailed discussion

Avery Richey was hired in 2004 by Power Toyota Cerritos. He received an employment manual stating that outside work while on approved CFRA leave was prohibited. A general understanding existed at Power Toyota that outside employment of any kind, including self-employment while on approved leave, was against company policy and that other employees had been fired for violating the rule.

In October 2007, Richey began working on plans to open a local seafood restaurant, which opened in February 2008. In March, Richey injured his back while moving furniture in his home and filed for leave under both the CFRA and the Family and Medical Leave Act (FMLA). Power Toyota granted Richey’s request for leave and extended it on multiple occasions.

While on leave, a supervisor sent Richey a letter reiterating the company’s policy that employees were not allowed to pursue outside employment and to call with any questions. Richey ignored the letter and never contacted his employer.

The employer learned that Richey was working at his restaurant while on leave, and fellow employees testified they observed him sweeping, bending over, and hanging a sign using a hammer. Richey himself admitted to having handled orders and answered the phone at the restaurant while on leave.

Power Toyota terminated Richey on May 1, 2008, prior to the expiration of his leave. The termination letter stated he was dismissed for violating company policy by engaging in outside employment while on a leave of absence.

Richey sued his former employer based on claims of racial discrimination, harassment, retaliation for taking approved leave under the CFRA, and failure to reinstate following CFRA leave. Based on the arbitration agreement signed by Richey at the time he was hired, Power Toyota moved to compel arbitration.

A trial court judge granted the motion. Following an 11-day arbitration hearing, the arbitrator rejected all of the plaintiff’s claims. The defendants moved to confirm the award in the trial court, and Richey sought to vacate the award in part.

He argued that the arbitrator applied the incorrect standard when it considered his CFRA claims by using the “honest belief” of the employer test from FMLA case law. That defense allows an employer to dodge liability under the FMLA when the allegedly discriminatory or retaliatory action is based on an honest but mistaken belief about the employee’s misconduct.

The trial court confirmed the award but an appellate panel reversed.

The CFRA was enacted in 1991 as a state counterpart to the FMLA, with many provisions mirroring the federal statute (such as the right to reinstatement), the California Supreme Court pointed out, noting that California courts often use language from the FMLA and CFRA interchangeably.

The state’s highest court said that it was unnecessary to decide whether the “honest belief” defense under the FMLA was viable in California defense law. “Even if the arbitrator erred, and even if such an error could serve as a basis for vacating an arbitration award, plaintiff has not shown the error was prejudicial,” the court said.

“Here, the arbitrator found plaintiff was fired because he violated Power Toyota’s employment policy against outside work while on approved CFRA medical leave, not because he was on approved leave,” the court wrote. “The evidence to support that finding, as reflected in the arbitrator’s factual findings, was overwhelming. Power Toyota explicitly warned plaintiff that its policy prohibited any outside employment, including self-employment, while on leave. Plaintiff knowingly ignored the warnings. Power Toyota invited plaintiff to communicate regarding his outside employment, and he deliberately avoided any such communication.”

The arbitrator’s findings indicated Richey “blatantly ignored his superiors’ clear instructions not to work at the restaurant while on CFRA leave,” the court added. “To ignore this fact and to hold that Power Toyota could not have fired plaintiff under any circumstances for violating company policy while on leave would ignore the rule that plaintiff had ‘no greater right to reinstatement or to other benefits and conditions of employment than if [he] had been continuously employed’ during the statutory leave period.”

“The arbitrator found plaintiff’s firing was based on a clear violation of company policy—a legally sound basis for upholding the arbitrator’s award—and would likely have made that finding regardless of the evidence or findings as to the employer’s honest belief plaintiff was misrepresenting his medical conditions,” the court said. “Thus, even if the arbitrator was mistaken in relying on an honest belief defense, plaintiff was not prejudiced thereby and the arbitrator’s award in defendants’ favor will stand.”

Whether the honest belief defense applies when an employer terminates an employee based on a reasonable belief that the employee is violating company policy while on CFRA or FMLA leave is an unsettled question of law in the state, the California Supreme Court noted.

To read the decision in Richey v. AutoNation, Inc., click here.

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Remaining on Call Does Not Constitute Work in California

Why it matters

Giving hope to employers reeling from a recent California Supreme Court ruling that workers must be paid for “all hours worked,” even for sleeping security guards on call, an appellate panel reversed a $90 million award to a class of security guards alleging they should have been paid for breaks when they remained on call. Security guard employees alleged they were required to remain on call during rest breaks and sought reimbursement for their time. The employer admitted that the guards were told to keep their radios and pagers on during rest breaks and “to remain vigilant” in order to respond if the need arose. A trial court certified a class and granted summary judgment for the guards, finding that the employer was liable for almost $90 million in statutory damages, interest, penalties, and attorneys’ fees. But the appellate panel reversed, holding that remaining on call does not itself constitute performing work. State law only mandates that an employee not be required to work on a rest break—not that the employee be relieved of all duties (like keeping a phone or pager handy), the court said.

Detailed discussion

Jennifer Augustus was one of thousands of security guards employed by ABM Security Services in the state of California. She filed a putative class action alleging that the employer failed to provide the rest periods required by law because the guards were not relieved of all duties during their breaks, instead being forced to remain on call.

ABM admitted that it requires its security guards to keep their radios and pagers on during rest breaks, “to remain vigilant,” and to respond if the need arises, such as if a tenant requests an escort to a parking lot, a building manager must be notified of a mechanical problem, or an emergency situation occurs.

According to the guards, the policy rendered rest periods indistinguishable from normal security work and resulted in invalid rest breaks. The class did not present evidence indicating that anyone’s rest period had ever been interrupted, however.

The employer also noted that class members regularly took uninterrupted breaks during which they performed no work but engaged in leisure activities ranging from reading to surfing the Internet. The mere risk of an interruption did not negate or invalidate a rest break, ABM argued.

A trial court judge certified a class of workers and granted summary judgment for the employees, concluding that “if you are on call, you are not on break.” The judge awarded almost $90 million to the class in statutory damages, interest, penalties, and attorneys’ fees. Not surprisingly, the employer appealed.

The appellate panel analyzed the language of Wage Order 4, specifically subdivision 12: “Every employer shall authorize and permit all employees to take rest breaks, which insofar as practicable shall be in the middle of each work period. The authorized rest period time shall be based on the total hours worked daily at the rate of ten (10) minutes net rest time per four (4) hours or major fraction thereof. However, a rest period need not be authorized for employees whose total daily work time is less than three and one-half hours. Authorized rest period time shall be counted as hours worked for which there shall be no deduction from wages.”

Although the text of the wage order does not describe the nature of the rest period, the court looked to Section 226.7 of the Labor Code, which states: “An employer shall not require an employee to work during a meal or rest or recovery period.”

Does simply being on call constitute “work”?

“We conclude it does not,” the appellate panel wrote. “The word ‘work’ is used as both a noun and verb in Wage Order 4, which defines ‘Hours worked’ as ‘the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.’ In this definition, ‘work’ as a noun means ‘employment’—time during which an employee is subject to an employer’s control. ‘Work’ as a verb means ‘exertion’—activities an employer may suffer or permit an employee to perform.”

Section 226.7 “uses ‘work’ as an infinitive verb contraposed with ‘rest.’ It is evident, therefore, that ‘work’ in that section means exertion on an employer’s behalf. Not all employees at work actually perform work,” the court said. “Remaining on call is an example. On-call status is a state of being, not an action. But section 226.7 prohibits only the action, not the status. In other words, it prohibits only working during a rest break, not remaining available to work.”

The panel noted that subdivision 11(A) of Wage Order 4, pertaining to meal periods, requires that an employee be “relieved of all duty” during a meal period. However, subdivision 12(A) contains no similar requirement. “If the [Industrial Welfare Commission (IWC)] had wanted to relieve an employee of all duty during a rest period, including the duty to remain on call, it knew how to do so. That it does not indicates no such requirement was intended,” the court said. “On the contrary, the IWC’s order that an on-duty meal period must be paid implies an on-duty rest period, which is also paid, is permissible: It would make no sense to permit a 30-minute paid, on duty meal break but not a 10-minute paid rest break.”

That the rest period was “indistinguishable” from other parts of the guard’s workday did not sway the court. “[S]ection 226.7 does not require that a rest period be distinguishable from the remainder of the workday, it requires only that an employee not be required ‘to work’ during breaks,” the panel wrote. “Even if an employee did nothing but remain on call all day, being equally idle on a rest break does not constitute working.”

“Admittedly, an on-call guard must return to duty if requested, but … remaining available to work is not the same as performing work,” the court said.

The court took a close look at Brinker Restaurant Corp. v. Superior Court, disagreeing with the class’s contention that the state’s highest court held in that case that an employer must relieve an employee of all duty on a rest break and relinquish any control over how the employee spends his or her time.

Although the court found Brinker instructive on several levels, the panel said the decision addressed the “relieved-of-all-duty requirement” in the context of meal periods only and “said nothing about an employer’s obligation to relieve an employee of all duty on a rest break.”

“In sum, although on-call hours constitute ‘hours worked,’ remaining available to work is not the same as performing work,” the court said. “Section 226.7 proscribes only work on a rest break.”

Initially released on December 31, 2014, the court made its decision public in February along with a few tweaks to its holding. The panel did not change its judgment—reversing summary judgment for the class but upholding class certification—and denied the plaintiffs’ motion for rehearing.

To read the opinion in Augustus v. ABM Security Services, Inc., click here.

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