Staying One Step Ahead: New Employment Laws and Trends Affecting 2009

A. New California Statutes Enacted in 2008

AB 10 – Extension of the California Computer Professional Exemption

AB 10 was emergency legislation, so it took effect in September when it was signed by the Governor. This legislation modifies section 515.5 of the California Labor Code and expands the exemption for computer professionals in California. This bill modifies the salary based test. If employees pass the duties test of this exemption, they are now exempt if they earn $36 an hour or more, if paid on an hourly basis, and $75,000 or more, if paid on a salaried basis. Thus, this bill eliminates the previous requirement that computer professionals be paid on an hourly basis to be exempt. Labor Code section 515.5 also provides that these salary test threshold numbers shall be adjusted each year based on the CPI cost of living index.

Employers are cautioned to make sure that their employees pass the duties portion of this test, set forth in section 515.5, before attempting to apply it to all computer related employees who pass the salary test. In order to properly qualify for the exemption, both the duties and salary test must be met.

SB 1608 – Disability Access Legislation

This is not an employment law bill, but it will affect employers throughout California. This bill was designed to try to address the drive-by disability accessibility lawsuits being filed by certain attorneys throughout California. In these lawsuits, disabled individuals will drive by a business and if they notice that the business is not 100 percent compliant with disability access legislation, they will file a lawsuit seeking damages and remedial action. SB 1608´s most significant provisions are:

1. plaintiffs filing disability access lawsuits may only recover damages for access violations they personally encountered or that deterred access on a particular occasion; and

2. courts can consider reasonable written settlement offers made and rejected in determining the amount of reasonable attorneys' fees to be awarded after a lawsuit is resolved.
These provisions are designed to reduce litigation. They go into effect next year. It remains to be seen if these bills will actually reduce the amount of frivolous litigation being filed in this arena.

AB 2075 – Certification of Hours Worked

This bill amends section 206.5 of the California Labor Code and makes it a misdemeanor to require an employee to sign any statement, including timecards or timesheets, that the employer knows falsely represents the number of hours worked. In addition, the bill provides that any release that claims that all wages have been paid, when in fact they have not, will not be valid, and the employer will be guilty of a misdemeanor if it attempts to have an employee sign such a release. This legislation goes into effect on January 1, 2009.

SB 28 – Electronic Communications While Driving a Motor Vehicle

SB 28 is not employment legislation. The bill amends the California Vehicle Code. However, employers would be wise to enact employee policies that discourage/prohibit the conduct that is outlawed in this legislation. SB 28, which becomes effective on January 1, prohibits any person from driving a motor vehicle while using any type of electronic wireless communications device to write, send, or read a text-based communication, which is defined as manually communicating with any person using text-based communication such as text-messaging, instant messaging, and email. The bill specifies that this prohibition does not include reading, selecting, or entering a telephone number or name in an electronic wireless communications device for the purpose of making or receiving a telephone call. The risk here is not the $20/$50 fines for the violation, but instead, that an on-the-job employee violates this law and causes an accident as a result. Ironically, this bill was passed only ten days after the deadly Metrolink crash in Los Angeles where the train engineer´s decision to text message while operating a commuter train is said to have caused a crash that killed 25 passengers.

SB 940 – Wages of Temporary Staffing Employees

SB 940, effective January 1, 2009, clarifies the wage payment obligations of staffing firms doing business in California. It amends various provisions of the California Labor Code dealing with final payment of wages. The most crucial Labor Code amendment of this bill provides that the end of a temporary assignment is not a discharge from employment requiring immediate payment of wages if the employee remains eligible for reassignment. Instead, such employees may be paid on a weekly basis. There is an exception to the weekly pay requirement -- staffing firms need not pay weekly for employees on assignment in excess of 90 consecutive calendar days. Certain day laborers and labor dispute replacements must be paid daily. Temporary employees who are discharged from the staffing agency, or who are not eligible for reassignment, are not affected by this amendment and still must be paid immediately upon such termination, or within 72 hours of a voluntary resignation.


B. Important Case Law Developments Regarding California Law

Meal Break Cases (Brinker and Brinkley)

The primary issues being debated in these cases are:

1. whether the employer is required to make meal breaks available to employees or to ensure that meal periods are taken; and

2. whether the employer is required to provide the meal period within the first five hours of work.

The Court of Appeal decision in Brinker provided that employers are only required to make meal periods available to employees and not to ensure that meal periods are taken. This result was consistent with several published federal district court opinions in 2007 and early 2008 that reached the same conclusion. The Brinker Court of Appeal decision also held that the employer is not required to provide the meal period within the first five hours of work. However, Brinker was taken up by the California Supreme Court on October 22 and depublished. Shortly thereafter, on October 28, the Second District Court of Appeal issued it opinion in Brinkley v. Public Storage. In addition to holding that employers need only provide employees the opportunity to take meal breaks, the court also held that there is no requirement that meal breaks be provided within the first five hours of work, finding that "nothing in the applicable statutes or wage orders supports [this] position.&nquot; Note: On October 23, 2008, the Labor Commissioner published a memorandum (http://www.dir.ca.gov/DLSE/CourtRulingsMemo-Brinke-10.23.08.pdf) taking the position that:

1. meal periods must be made available and the employer need not ensure that they are taken; and

2. the meal period must commence before the end of the fifth hour of work.

It is unclear whether the Labor Commissioner will continue to maintain this second position in light of the Brinkley decision. Definitive answers to these issues and other related meal and rest break issues are likely to result when the California Supreme Court issues its decision in Brinker. However, that will likely not occur until late 2009 or early 2010, as the opening brief is not even due until late January of 2009. In the meantime, California employers would be wise to consult with legal counsel to decide what to do in this interim period while the law remains in flux.

Covenants Not to Complete Illegal – Edwards v. Arthur Andersen

In this important decision, the California Supreme Court held that California law prohibits agreements restraining competition, regardless of how narrow or reasonable the restraint may be. The Court flatly rejected the "narrow restraint" exception that California federal courts have in some instances applied to uphold agreements limiting an employee´s ability to compete.

The Court explained that under the "plain meaning" of California Business and Professions Code section 16600, "an employer cannot by contract restrain a former employee from engaging in his or her profession, trade, or business unless the agreement falls within one of the exceptions to the rule" [referring to statutory exceptions that allow non-compete agreements in the context of a sale or dissolution of a corporation, partnership, or limited liability company]. The Court declined to read into the statute an exception permitting narrow, reasonably tailored restraints on competition. Non-solicitation of customers agreements will still be enforceable under California law, but only to the extent that the employer can demonstrate that the customers protected from solicitation are trade secrets.

California employers who require employees to sign "non-interference" and/or "non-compete" type agreements should ensure that such agreements do not run afoul of section 16600, as strictly interpreted by the California Supreme Court.

Employers Can Not Be Silenced in Union Campaigns - United States Chamber of Commerce v. Brown

In 2000, California enacted AB 1889. That bill, codified as section 16645 of the California Government Code, provides that government employers and private employers that contract with the government are prohibited from using government funds to assist, promote, or deter union organizing. In practicality, what the bill does is prohibit public employers and private employers doing business with the California government from influencing a union campaign and allow union organizing of such employers to be done without any counter campaigning from the employer. In other words, the law acts to silence any affected employer in a union organizing campaign.

After AB 1889 was enacted, the United States Chamber of Commerce sued claiming that the law violated the Constitutional right to free speech and was preempted by the National Labor Relations Act. The suit made its way up to the United States Supreme Court. Oral arguments were held on March 19. Earlier this year, in United States Chamber of Commerce v. Brown, the United States Supreme Court issued its decision, reversing a previous Ninth Circuit ruling. In a 7-2 vote with Justices Ginsburg and Breyer dissenting, it struck down the law and held that AB 1889 is preempted by the NLRA. More specifically, the Court held that in the NLRA Congress held that there were certain areas and conduct that must be left open to free debate without regulation, and that AB 1889 was in violation of that intent.

No Individual Liability for Unpaid Wages by Corporate Shareholders or Officers – Bradstreet v. Wong, 161 Cal. App. 4th 1440 (2008)

The First District Court of Appeal held that the two owners of several garment manufacturing companies could not be held liable for unpaid wages sought under California law. This case affirms that individual liability is only applicable for federal wage and hour claims brought under the FLSA.

California CFRA Interpretations by the California Supreme Court – Lonicki v. Sutter Health, 43 Cal. 4th 201 (2008)

The plaintiff worked at a Roseville, California hospital, first in the housekeeping department and then as a certified technician in the sterile processing department. She claimed her work-related stress greatly increased when the hospital became a level II trauma center in 1997, and when she began working under a new supervisor.

In July of 1999, the plaintiff left work after her supervisor informed her that her shift was being changed and denied her request for a vacation. She claimed she was too upset to work and sought medical treatment. The plaintiff saw a doctor who gave her a note for a one-month leave of absence for "medical reasons," which she presented to her employer. The defendant hospital then directed her to see another doctor, who determined that she could return to work without any restrictions. The plaintiff also went to see her primary care physician, who referred her to a psychologist. She indicated that, based on medical advice, she would not return to work prior to August 27.

The employer determined that it would allow the plaintiff to use paid time off, but directed her to return to work by August 23 or face dismissal. On August 26, the plaintiff saw a psychiatrist who determined that the plaintiff was "disabled by major depression" and recommended that her medical leave be extended through September 26. The plaintiff brought the note to the hospital, but the human resources department informed her that she had been terminated for failure to appear at work on August 23 and 24.

The California Supreme Court held that an employer is not required to obtain a "tie-breaker" opinion when the employee´s doctor disagrees with the employer´s doctor and rejected plaintiff´s argument that the hospital was precluded from challenging that Plaintiff had a serious health condition because it had not exercised its option to obtain a third medical opinion under the CFRA´s dispute resolution procedures. The Court determined that, under the statutory language of the CFRA, an employer merely has the option to request a tie-breaking opinion if the first two doctors disagree. Failure to do so does not prevent the employer from challenging a later claim that the employee suffered from a serious health condition that rendered her unable to do her job. The court partially relied on several federal opinions reaching similar conclusions under the Family Medical Leave Act and declined to follow other federal authority to the contrary.

In a surprising decision, the California Supreme Court also held in Lonicki that an employee who performs a substantially similar job for another employer can still claim that she was unable to perform her job. During her leave from Sutter and at the time of her termination, the plaintiff worked part-time at a Kaiser hospital performing duties substantially similar to those she performed for Sutter. The trial and appellate courts in Lonicki both determined that Sutter was entitled to summary judgment on the plaintiff´s CFRA claim because the plaintiff´s ability to work part-time at another hospital performing substantially similar duties conclusively demonstrated that she could also perform her job for the defendant. In a sharply divided opinion, the Supreme Court disagreed and determined that the plaintiff could bring her claim despite holding a similar second job. The Court noted that the difference between a part-time job and a full-time job may be significant to a CFRA inquiry because an employee may be able to work a part-time job despite suffering from a "serious medical condition" that renders the employee unable to work full time. The Court also pointed out that the alleged sources of plaintiff´s job-related stress (mainly a particular supervisor) were unique to her job with the defendant. Consequently, the Court determined that the plaintiff´s ability to work part time at another hospital did not conclusively establish her ability to perform similar duties at the defendant´s hospital. As a result, the Court reversed the award of summary judgment.


The Court´s determination that holding a similar job does not prevent an employee from claiming she was unable to perform her job for a particular employer means that employers will find summary judgment harder to obtain in similar cases. It also means that employers may face liability if they terminate an employee on leave simply because the employee obtains alternative employment during that leave. Many employers have policies providing for termination of employment in these circumstances, and such policies are problematic in light of the Court´s ruling.

Additionally, employers should not interpret Lonicki as an indication that "tie-breaker" opinions are always inadvisable when faced with conflicting medical opinions regarding a claim of entitlement to leave. Because a tie-breaker opinion binds both parties, requesting the opinion may often provide a relatively inexpensive means of resolving disputes in their early stages. Consequently, employers should not adopt any blanket policy regarding whether to seek a "tie-breaker" opinion and should evaluate each case on its own facts.

Individual Managers Not Liable For Retaliation - Jones v. The Lodge at Torrey Pines Partnership

In March 2008, the California Supreme Court ruled that individual managers could not be held liable for claims of retaliation brought under the California Fair Employment and Housing Act. Jones v. The Lodge at Torrey Pines Partnership, 42 Cal. 4th 1158 (2008). Thus, under FEHA, individual liability extends only to claims for harassment as the California Supreme Court has held that individual liability does not attach for either discrimination or retaliation.

Medical Marijuana Is Not Okay in the Workplace – Ross v. Ragingwire Telecommunications Inc.

In January 2008, the California Supreme Court finally resolved the medical marijuana controversy. The Court held that an employee who was fired for failing a drug test due to medical marijuana use does not have a valid claim for disability discrimination or wrongful termination against the employer. The Court reached this conclusion despite the fact that the employee presented a doctor´s prescription. With this holding, California law is now clear that employers are not required to accommodate a medical marijuana prescription and can take adverse action against an employee who violates a valid drug testing program or drug free workplace policy due to medical marijuana use.

C. Expectations from the Obama Administration and New Congress

President Elect Barack Obama promised to bring change to the way things are done in Washington if elected. With a fairly substantial Democratic majority in Congress, it is highly likely that some of the changes that we will see will involve new laws and legislation in the labor and employment law field that will affect California employers. Below are some of the key pieces of legislation that some believe have a strong likelihood of being enacted by our new federal government in 2009 or sometime shortly thereafter:

1. Changes to Federal Labor Law

Employee Free Choice Act

The provisions of this legislation have been well documented and highly debated. If passed in its current form, the Employee Free Choice Act (EFCA) would:

a. Eliminate union recognition elections and allow unions to be certified simply by presenting signed authorization cards from a majority (50% plus one) of the proposed bargaining unit. Because employers often are not aware of union organization drives during the card authorization collection procedure, unions could be organized without any input from the employer.

b. The EFCA would also change the bargaining process. The EFCA would require parties to meet and begin collective bargaining within ten days of a certified union's request to do so. If the parties fail to reach agreement after 90 days of bargaining, either party may request mediation.

c. If the parties do not reach agreement within 30 days of the mediation request, the collective bargaining agreement shall be determined by interest arbitration and the initial contract would be imposed for two full years, without any ratification from the employees or the employer.

d. Finally, the EFCA ratchets up penalties against employers without any corresponding increase for unions that violate the terms of the National Labor Relations Act.

There is no doubt that passage of this Act would significantly increase union organizing in this country and would ultimately lead to a much higher percentage of unionization in the private sector in the United States (current percentage is about 7.5% to 9%). This bill is very high priority for unions, and many union leaders view it as the key to the long term future of their union. This legislation could be the most significant piece of labor/employment law legislation since the ADA and FMLA in the early 1990s. In many ways, it may be even more significant than those acts and on par with the Civil Rights Act of 1964.

RESPECT Act

The RESPECT Act could pass in 2009. It modifies the definition of supervisor under the National Labor Relations Act, thus allowing for greater union membership as supervisors are not eligible to join unions. The Respect Act would dramatically limit which workers the National Labor Relations Act classifies as supervisors. Unions see the legislation as a fix to a recent National Labor Relations Board ruling that clarified the definition of a supervisor and slightly increased the number of workers considered supervisors. In contrast, the RESPECT Act would substantially expand the pool of non-supervisory workers a union could organize. The unions view this bill as necessary to help them organize. Combined with the EFCA, this bill would be devastating for private sector employers. This bill will allow unions to collect tens of millions of dollars in compulsory dues from those now considered supervisors, open the door to massive litigation, and harm companies, which need supervisors without divided loyalties to run effectively.

2. Expansion of Leave Laws and Workplace Flexibility

Expansion of the FMLA

Many expect that leave laws will be expanded with the new administration and that the first modification will be the FMLA. Here are the changes that are most likely to be considered:

a. Requiring that employees working in a location where the employer has 25 or more employees within a 75 mile radius would be eligible for FMLA coverage (current requirement is 50 or more employees within 75 mile radius).

b. Elimination or shrinking of the 1,250 hour requirement. It is likely that this requirement will either be lowered or eliminated entirely as an eligibility requirement for FMLA qualification.

c. Congress will consider bills to include a certain amount of leave for parents (and perhaps other relatives) to participate in school activities for their children.

d. Expanding leave to include routine medical care appointments for children (and perhaps others).

Mandatory Sick Leave – Healthy Families Act

If Congress passes the Healthy Families Act that has been proposed in the past, employers with 15 or more employees would be required to allow their employees at least seven days of sick leave per year for employees who work 30 or more hours per week.

Working Family Flexibility Act

This legislation, originally introduced in late 2007, would make alternative work schedules much more readily available. If passed as introduced, this law would apply to employers of 15 or more employees and would:

1. allow an employee to request to modify his or her hours, schedule, or work location

2. mandate that employees and employers engage in an interactive process to discuss the employee's needs and how to address them with no or minimal disruption to the employer´s business

3. require that employers who deny a request must explain the grounds for the denial

4. provide that employees who make requests are protected from retaliation

5. provide that the Department of Labor develop regulations to smoothly administer the process, while ensuring the protection of employees' legal rights

Basically, this law would allow employees to request customized schedules and their employers would be subject to judicial review and scrutiny if they ignored them or did not have an adequate explanation for denying them. Barack Obama was a co-sponsor of this legislation.

3. Other Important Anticipated Changes

Sexual Orientation Discrimination

It is very likely that Title VII will be amended or a new related law will be enacted that expressly outlaws discrimination against individuals on the basis of sexual orientation and provides remedies similar to other anti-discrimination laws.

Arbitration Fairness Act

This legislation would ban any agreement requiring arbitration that was made prior to the parties having knowledge of the dispute. It would apply to all types of disputes and would basically outlaw pre-dispute mandatory arbitration agreements in employment, consumer transactions, and all other contexts.