Employment Law

California Legislation to Consider: Protections for Unpaid Interns and Volunteers

Why it matters

In this issue of the newsletter, the focus of our review of new California laws shifts from leaves of absence to protection for discrimination, harassment, and retaliation. Addressing a hot topic found in courtrooms and legislatures across the country, California enacted AB 1443, providing legal protection for unpaid interns and volunteers. Essentially, the bill extended the Fair Employment and Housing Act (FEHA) to three new categories of workers: unpaid interns, volunteers, and individuals in apprenticeship training programs. Employers should review relevant policies, procedures, and training programs quickly as the new law took effect on January 1, 2015.

Detailed discussion

California joined a growing number of jurisdictions (including Oregon, Illinois, New York, and Washington, D.C. when Governor Jerry Brown signed AB 1443 into law in September 2014.

  • Who is covered: Previously, the FEHA protected the rights of the following classifications: race, religious creed, color, national origin, ancestry, physical and mental disability, medical condition, genetic information, marital status, sex, gender, gender identity and expression, age, sexual orientation, and military and veteran status. The bill added to this list unpaid interns, volunteers and individuals in apprenticeship training programs.
  • Who is exempt: The FEHA applies to employers, labor organizations, employment agencies, and specified training programs and generally excludes religious associations or nonprofit corporations.
  • Scope of coverage: The newly added classes are now protected against “discrimination in the selection, termination, training, or other terms or treatment of that person” in an unpaid internship or another limited duration program to provide unpaid work experience for the person, as well as “the harassment of an unpaid intern or volunteer.”
  • Retaliation: Employers are also prohibited from retaliation, such as “to discharge, expel, or otherwise discriminate against any person because the person has opposed any practices forbidden under this part or because the person has filed a complaint, testified, or assisted in any proceeding under this part.”

To read AB 1443, click here.

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California Legislation to Consider: Driver’s Licenses for Undocumented Persons

Why it matters

Another group to receive new statutory protections from the State of California: undocumented individuals. In AB 1660, the state legislature amended the Vehicle Code and the Government Code to require the Department of Motor Vehicles (DMV) to issue licenses beginning on January 1, 2015, to undocumented individuals who can submit satisfactory proof of identity and California residency. In addition, the new law broadened the definition of “national origin” under the Fair Employment and Housing Act (FEHA) to include persons who hold or present such licenses, protecting them from discrimination and harassment. The new law does not impact federal documentation requirements, however. Employers should consider the circumstances under which they ask applicants or employees to show their driver’s licenses and review their policies and procedures to ensure compliance with the new law. Importantly, although California law now permits undocumented individuals to obtain driver’s licenses and prohibits discrimination based upon such licenses, employers must continue to fulfill their obligations under federal law to obtain proper documentation which confirms an employee’s ability to work in the United States.

Detailed discussion

Pursuant to AB 1660, the DMV “shall issue an original driver’s license to a person who is unable to submit satisfactory proof that the applicant’s presence in the United States is authorized under federal law if he or she meets all other qualifications for licensure and provides satisfactory proof to the department of his or her identity and California residency.” For employers, the new licenses come into play with regard to documentation requirements.

  • Who is covered: The statute amended the FEHA’s definition of “national origin” discrimination to include “discrimination on the basis of possessing” such a license and made it illegal under the statute “to discriminate against a person because the person holds or presents a driver’s license issued” pursuant to the new law. Further, AB 1660 established that discrimination against a person “because he or she holds or presents a license” issued under the new law violates the Unruh Civil Rights Act.
  • Who is exempt: If possessing a traditional driver’s license is either required by law or required by the employer and the employer’s requirement is otherwise permitted by law, AB 1660 does not apply. “Nothing in this section shall be construed to limit or expand an employer’s authority to require a person to possess a driver’s license,” according to the bill.
  • Intersection with federal law: AB 1660 recognized that “nothing in this section shall be construed to alter an employer’s rights or obligations [under federal law] regarding obtaining documentation evidencing identity and authorization for employment. An action taken by an employer that is required by the federal Immigration and Nationality Act is not a violation of law.”
  • Privacy provisions: Any driver’s license information obtained by an employer must be treated as “private and confidential” and cannot be disclosed to any unauthorized person or used for any purpose other than to establish identity and authorization to drive.

To read AB 1660, click here.

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DOL Finalizes Rules on FMLA Same-Sex Couples, SOX Whistleblowers

Why it matters

The Department of Labor (DOL) has been busy recently, issuing final rules on two different issues: same-sex couples under the Family and Medical Leave Act (FMLA) and Sarbanes-Oxley Act (SOX) whistleblowers. Pursuant to the U.S. Supreme Court’s 2013 decision in U.S. v. Windsor, the agency expanded the DOL’s definition of “spouse” under the FMLA to include eligible employees in legal same-sex marriages who take leave under the statute to care for their spouse or covered family member, regardless of whether same-sex marriage is legal in the state where they reside. The new regulations—which establish a spousal relationship based on the place of celebration, as opposed to the place of residence—take effect March 27. The DOL also published a final rule addressing retaliation against whistleblowers under SOX. Under the rule, if a covered employee believes his employer took adverse action because he engaged in a protected activity, he must file a complaint with the Occupational Safety and Health Administration (OSHA) within 180 days. The complaint—which can be oral or written—must demonstrate that the protected activity was a contributing factor to the adverse action. If OSHA concludes, after an investigation, that “reasonable cause” exists to believe a violation of the SOX whistleblower provisions has occurred, the agency will issue a preliminary order with relief it deems necessary—including possible reinstatement.

Detailed discussion

In June 2013, the U.S. Supreme Court declared in U.S. v. Windsor that Section 3 of the Defense of Marriage Act—the provision that interpreted “marriage” and “spouse” to be limited to opposite-sex couples for purposes of federal law—was unconstitutional.

Federal agencies responded with recognition of additional rights for same-sex couples. After releasing a proposal last July, the DOL finalized its new interpretation of the FMLA in light of the Windsor decision.

Going forward, residence will be irrelevant for purposes of evaluating the legality of a same-sex marriage for purposes of the FMLA. Applying instead a “state of celebration” rule, the DOL stated that as long as a same-sex couple was validly married in a state (or other jurisdiction) that legally recognizes same-sex marriage, either spouse may request leave from an employer under the FMLA. Previously, a “state of residence” rule resulted in a same-sex spouse having to live in a state that recognized his or her marital status in order to request leave under the FMLA.

For example, if an employee marries her same-sex partner in Massachusetts and moves to Texas, the employee will still receive the full benefits of the FMLA despite the fact that Texas does not currently recognize same-sex marriages.

According to U.S. Secretary of Labor Thomas E. Perez, “the basic promise of the FMLA is that no one should have to choose between the job and income they need, and caring for a loved one.” As a result of the final rule, “we extend that promise so that no matter who you love, you will receive the same rights and protections as everyone else.”

No change was made to the regulations with regard to employee documentation requirements. In order to be eligible for an FMLA leave, an employee may provide a simple statement that such a valid marital relationship exists or provide written documentation such as a court document or birth certificate. The existing provision “adequately addresses the nature of the documentation that employers may require,” the DOL stated, and “in all cases, a simple statement of family relationship is sufficient under the regulation to satisfy the employer’s request.” The new regulations take effect on March 27.

The DOL also released a final rule addressing whistleblower protections under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which amended the SOX.

Dodd-Frank tweaked the SOX whistleblower provisions by extending the statute of limitations for filing a complaint from 90 days to 180 days and expanding covered employers to include the subsidiaries and affiliates of securities companies, as well as national credit rating agencies.

The DOL’s final rule made these changes official, as well as others. The complaint process for employees of public companies, their subsidiaries, contractors and subcontractors alleging retaliation for reporting actions they believe to be violations of securities laws begins with either an oral or written complaint. The complaint must be made within 180 days from the alleged retaliation and filed with the OSHA.

After a complaint is received, and an investigation initiated, the employer has the opportunity to show by “clear and convincing evidence” that the adverse action would have been taken regardless of the protected activity. If successful, the investigation ends. If not, and OSHA concludes at the end of the investigation that reasonable cause exists to believe a violation of the SOX whistleblower provisions has occurred, the agency will issue a preliminary order.

The preliminary order will include relief the DOL deems necessary to make the employee whole. Relief can include monetary damages, as well as reinstatement (a provision on which many employers commented during the initial rule proposal stage but which was kept in the final version). Employers may object to reinstatement by filing an objection with OSHA and requesting a hearing with an administrative law judge (ALJ) but cannot avoid the reinstatement order by attempting to establish that the employee is a security risk (another change from the DOL’s earlier proposal).

If an employer can demonstrate that it did not engage in prohibited retaliation, the final rule does not allow the employer to recover wages paid during the reinstatement period. “OSHA disagrees that economic reinstatement without a mechanism for reimbursement violates the employer’s rights under the due process clause,” according to the final rule.

The final rule took immediate effect as of March 5.

To read the final FMLA rule, click here.

To read the final SOX rule, click here.

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EEOC’s Fight Against Background Checks Takes Another Hit

Why it matters

The Equal Employment Opportunity Commission’s (EEOC) efforts to crack down on employer background checks took a serious hit from the Fourth Circuit Court of Appeals when that federal appellate court affirmed dismissal of the EEOC’s complaint against Freeman Company. Since issuing guidance on the topic in 2012, the EEOC has filed a number of actions against companies for using background checks that allegedly have had an unlawful disparate impact on males and African-American applicants. In support of its case, the EEOC produced multiple expert reports based on data provided by Freeman. But in a scathing opinion, the Fourth Circuit found “an alarming number of errors and analytical fallacies” in the expert’s reports, pushing the expert’s conclusion “outside the range where experts might reasonably differ.” A concurring opinion noted that the EEOC has faced similar reactions from other courts and urged the agency to “reconsider how it might better discharge the responsibilities delegated to it or face the consequences for failing to do so.” Between the latest courtroom loss and criticism from lawmakers about the EEOC’s background check lawsuits, the suits seem to be a losing proposition for the agency.

Detailed discussion

In 2001, after experiencing problems with theft, drug use, and violence by employees, Freeman—a provider of integrated services for expositions, conventions, and corporate events—began conducting background checks of all applicants for criminal history and credit checks for “credit sensitive” positions.

Freeman later modified the criteria that would exclude applicants in 2006 and again in 2011, when it stopped conducting credit checks.

After an unsuccessful applicant complained to the EEOC in 2008, the agency launched an investigation that resulted in a complaint filed in Maryland federal court alleging that the company violated Title VII. The EEOC claimed that Freeman’s use of credit and criminal background checks had a disparate impact on black and male applicants.

As discovery progressed, the EEOC produced an expert report by Kevin Murphy, an industrial/organizational psychologist. Eight days later (after the expert disclosure deadline), the agency produced an amended report. Two other reports were later produced as well.

Freeman moved for summary judgment, arguing that the expert testimony was unreliable under Federal Rule of Evidence 702. A federal district court judge agreed and dismissed the case because the EEOC had failed to establish a prima facie case of discrimination.

Reviewing the case, the Fourth Circuit Court of Appeals agreed that the “alarming number of errors and analytical fallacies” made it impossible to rely upon Murphy’s results.

The employer produced a database of complete background check logs for thousands of applicants over the years at issue. But Murphy cherry-picked data, the court found, selecting the majority of applicants to focus on from before October 14, 2008, and using just 19 applicants after that date—only one of whom passed the checks. This approach was used despite the fact that Freeman conducted more than 1,500 criminal checks and over 300 credit investigations between October 15, 2008, and August 31, 2011.

In addition to failing to utilize an appropriately large sample size from the relevant time period—while purporting to analyze all background checks with verified outcomes—Murphy also omitted data from half of Freeman’s branch offices, the court noted.

“Most troubling, the district court found a ‘mind-boggling’ number of errors and unexplained discrepancies in Murphy’s database,” the court wrote. Taking a closer look at 41 individuals for whom the EEOC sought back pay, the court found that 29 had at least one error or omission; 7 were missing from the database altogether; another 7 lacked a race code; others were incorrectly coded as failing the check; and 9 were listed twice and double-counted in Murphy’s results.

The EEOC tried to point the finger at Freeman, telling the court that the errors were present in the original data provided by the employer, “a contention dispelled by comparing the information from the discovery materials to Murphy’s database,” the panel said. “It was in fact Murphy who introduced these errors into his own analysis.”

Murphy’s subsequent reports did nothing to fix any of the errors, and in fact managed to introduce fresh errors into the analysis, the court added. “The sheer number of mistakes and omissions in Murphy’s analysis renders it ‘outside the range where experts might reasonably differ,’ ” the panel concluded, affirming the grant of summary judgment to Freeman on the ground that the expert reports were properly excluded as unreliable under Rule 702.

Adding to the critical opinion, Judge Steven Agee wrote separately to address his concerns “with the EEOC’s disappointing litigation conduct” as a whole.

“The Commission’s work of serving ‘the public interest’ is jeopardized by the kind of missteps that occurred here,” he wrote. “And it troubles me that the Commission continues to proffer expert testimony from a witness whose work has been roundly rejected in our sister circuits for similar deficiencies to those we observe here. It is my hope that the agency will reconsider pursuing a course that does not serve it or the public interest well.”

Emphasizing the expert’s missteps like drawing broad conclusions from incomplete data, making obvious errors and mistakes, and cherry-picking relevant data, Judge Agee said Murphy not only “capriciously selected in his use of post-October-2008 data, but the high number of ‘fails’ among his few selections suggests that he fully intended to skew the results.”

These problems are bad enough on their own, but considering that the Sixth Circuit Court of Appeals reached an identical result in a background check case brought by the EEOC based on Murphy’s reports, as well as a decade of similar findings based on his testimony, the concurrence queried why the EEOC continued to defend his testimony.

“The EEOC must be constantly vigilant that it does not abuse the power conferred upon it by Congress,” Judge Agee wrote. “The Commission’s conduct in this case suggests that its exercise of vigilance has been lacking. It would serve the agency well in the future to reconsider how it might better discharge the responsibilities delegated to it or face the consequences for failing to do so.”

To read the opinion in EEOC v. Freeman, click here.

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Employee’s “Self-Serving” Evidence Doesn’t Bother 9th Circuit

Why it matters

Reversing summary judgment in favor of the employer, a panel of the Ninth Circuit Court of Appeals allowed a former employee’s discrimination suit against Sears to move forward. The suit involved an employee’s allegations that the national retailer refused to accommodate his ulcerative colitis and fired him because of his disability. According to the plaintiff’s complaint, his supervisor told him: “If you’re going to stick with being sick, it’s not helping your situation. It is what it is. You’re not getting paid, and you’re not going to be accommodated.” The federal appellate panel refuted the lower court’s concern that the employee’s evidence was “self-serving,” writing that it is “entirely besides the point that some of [the plaintiff’s] evidence was self-serving, as will often be the case in a discrimination case that an employee has something to say about what company representatives said to him or her.” Such evidence is admissible, the court said, but the weight afforded to such testimony must be assessed by a trier of fact and not determined at the summary judgment stage. The opinion serves as a reminder to employers that an employee’s allegations of discrimination—particularly at the early stages of a case—are afforded a great deal of deference by the court. Or as the Ninth Circuit wrote, “[i]t should not take a whole lot of evidence to establish a genuine issue of material fact in a disability discrimination case, at least where the fact issue on discrimination is genuine and the disability would not preclude gainful employment of a person working with accommodation.”

Detailed discussion

Anthony Nigro filed suit against Sears, Roebuck and Co. in May 2011. He alleged that the national retailer violated California’s Fair Employment and Housing Act (FEHA) in three ways: by discriminating against him on the basis of his ulcerative colitis, by declining to accommodate his disability, and by failing to engage in an interactive process to determine possible accommodations for his disability.

To support his claim, Nigro submitted a declaration stating that on June 29, 2009, he had a phone conversation with the general manager of the Carlsbad store where he worked. According to Nigro, the GM told him that “[i]f you’re going to stick with being sick, it’s not helping your situation. It is what it is. You’re not getting paid, and you’re not going to be accommodated.”

At his deposition, Nigro testified that the district facilities manager told him not to be concerned about his pay issue because a district general manager had indicated that Nigro was “not going to be here anymore.” Nigro’s direct supervisor testified that the district GM said to him, referring to Nigro, “I’m done with that guy.”

After Sears successfully moved the case to federal court, a judge granted summary judgment in the employer’s favor, writing that “the source of this evidence is Nigro’s own self-serving testimony.”

But on appeal to the Ninth Circuit Court of Appeals, the federal appellate panel rejected this analysis. Declarations are often self-serving because the party submitting it is trying to support his or her position, the court said. Instead of tossing the evidence outright, courts must consider the weight afforded to declarations and similar testimony.

“The source of the evidence may have some bearing on its credibility, and thus on the weight it may be given as a trier of fact,” the three-judge panel wrote. “But that evidence is to a degree self-serving is not a basis for the district court to disregard the evidence at the summary judgment stage.”

Similarly, the testimony from Nigro’s direct supervisor should have been allowed in as a party admission, the court added.

“Nigro’s declaration and deposition testimony, albeit uncorroborated and self-serving, were sufficient to establish a genuine dispute of material fact on Sears’s discriminatory animus,” the court said. “Because [the direct supervisor’s] statements and the evidence proffered by Nigro could allow a reasonable jury to infer that Sears terminated Nigro because of his disability, there is a genuine issue of material fact.”

The plaintiff’s claims relating to accommodation should also have survived, the panel determined. Nigro claimed that his ulcerative colitis caused him loss of sleep at night and that his direct supervisor allowed him to start his shifts at 9 a.m. instead of 6 a.m. The district court judge found that because the supervisor allowed the delayed start, Nigro had no basis for his claim that Sears failed to accommodate him.

Not so fast, the Ninth Circuit wrote. Nigro also told the court that the store’s general manager did not approve the 9 a.m. accommodation and required him to arrive at 6 a.m. “every day.” Nigro’s testimony that this unwillingness to accommodate a later start time “chilled” the “exercise of his right to request this accommodation,” and that he continued to report to work at 6 a.m. was sufficient to allow his claim to survive. “A reasonable jury could infer that [the general manager’s] unwillingness to accommodate compelled Nigro to arrive at 6 a.m. every day despite his need to arrive later, so summary judgment is improper here,” the panel wrote.

As for Nigro’s claim based on the interactive process—or alleged lack thereof—the court held that the purported statement by the general manager that he would not accommodate Nigro in the future, supported by the testimony from Nigro’s direct supervisor, “created a genuine issue of material fact that renders summary judgment improper.”

The panel took the opportunity to emphasize that “it should not take much for a plaintiff in a discrimination case to overcome a summary judgment motion. … Here, Nigro presented several state law claims that deserved trial. It should not take a whole lot of evidence to establish a genuine issue of material fact in a disability discrimination case, at least where the fact issue on discrimination is genuine and the disability would not preclude gainful employment of a person working with accommodation.”

Acknowledging that Sears put forward “substantial evidence” showing a nondiscriminatory reason for terminating Nigro’s employment, the court added that the employer could prevail at trial. “[B]ut the statements attributed to Sears’s supervisors by Nigro are, if not dispositive, sufficient to raise a genuine issue for the trier of fact,” the panel said.

“It is, moreover, entirely besides the point that some of Nigro’s evidence was self-serving, as it will often be the case in a discrimination case that an employee has something to say about what company representatives said to him or her,” the court emphasized. “Such testimony is admissible, though absent corroboration, it may have limited weight. But again, the weight is to be assessed by the trier of fact at trial, not to be a basis to disregard the evidence at the summary judgment stage.”

To read the opinion in Nigro v. Sears, Roebuck and Co., click here.

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