A recent decision by the California Court of Appeal has basically banned unions from picketing on business property within California. In its opinion the court invalidated two California laws designed to protect union demonstrations on business property.  The reviewing court ordered the trial court to grant an injunction restraining the United Food and Commercial Workers Union (“the Union”) from picketing in front of a Sacramento warehouse store owned by Ralphs Grocery Co. (“Ralphs”). Ralphs Grocery Co. v. United Food and Commercial Workers Local 8, No. C060413 (Cal. Ct. App. July 19, 2010).

Facts: The dispute arose when several members of the Union picketed in front of Food Co., a subsidiary of Ralphs, for being a nonunion store. Ralphs sued for trespass and sought to enjoin the unauthorized picketing after an unsuccessful attempt to require the Union to follow Food Co.’s rules for speech on the property. The rules prohibited, in part, the distribution of literature, physical contact with any person, display of signs larger than two feet by three feet, and speech within 20 feet of the store entrance. Ralphs alleged that the Union didn’t follow the rules ; specifically, that the Union  was handing out flyers and enlisting supporters within five feet of the entrance.

In bringing suit, Ralphs challenged the constitutionality of California’s Moscone Act, which deprived state courts of jurisdiction to issue injunctions against “peaceful picketing or patrolling” involving any labor dispute. Ralph’s lawsuit also challenged California’s Labor Code section 1131.8, which imposed severe restrictions on a property owner’s right to obtain injunctive relief against union activities. The trial court ruled that the Moscone Act was unconstitutional because it constituted content based discrimination in violation of the First Amendment and Equal Protection Clause. The trial court, however, upheld the constitutionality of California’s Labor Code section 1138.1 in light of a prior appellate decision which held that Labor Code section 1138.1 did not violate federal and state constitutional guarantees of equal protection. Applying Labor Code section 1138.1, the trial court denied Ralphs’ motion for a preliminary injunction. Ralphs appealed.

Decision: Three questions of law were at issue on appeal:

1) Is the entrance area of Food Co., where the picketing was taking place, a public or private forum? If public, the California Constitution required that any time, place, and manner restrictions on free speech be reasonable. The court found that Food Co.’s entrance area was not a public forum, so the company was free to restrict the type of speech allowed at its entrance.

2) Is California’s Moscone Act, which limited the ability of courts to issue injunctions in labor relations cases, constitutional? The constitutionality of the Moscone Act was at issue because the Act’s selective restriction was based on the content of the speech. The court held that the Moscone Act was unconstitutional under the First and Fourteenth Amendments because it afforded preferential treatment to speech concerning labor disputes over speech about other issues.

3) Is the requirement of California’s Labor Code section 1138.1 that factual showings be made before a court is able to grant an injunction in a labor dispute constitutional (i.e., that unlawful acts have been threatened and will be committed and that substantial and irreparable injury to the property would result)? The court found that this Labor Code section was unconstitutional for the same reasons as that of the Moscone Act.

Stay Tuned: Although the decision may be subject to further appeal, this case provides important guidance for employers dealing with the issue of regulating union activity on business property. The court’s ruling is seen as a major victory for California retailers who have endured loss of business and damage to their image resulting from union picketing on their properties. A wide spectrum of businesses ranging from hospitals to retail chain stores are expected to be impacted by this decision. Employers need to have a firm grasp of what constitutes public and private forums under California law and be able to determine the types of content neutral restrictions that are enforceable on their premises.

California Labor Code §2802 requires an employer to indemnify (reimburse) its employees for all necessary expenses or losses incurred in the course of his or her duties. This includes an employee’s expenses when an employee uses their own vehicle for business purposes. Many employers reimburse their employees on a per mileage basis for use of their own vehicle during business errands.  The reimbursement is used to cover the costs (fuel, insurance, etc..) associated with the use of the vehicle for non-personal use.  However, many employers are not sure what mileage reimbursement rate they should use in making the reimbursement calculation.

While there is no specific reimbursement rate provided for in the Labor Code, there is guidance on the matter in both the Opinion Letters issued by the California Department of Labor Standards Enforcement (DLSE) and Labor Code Section 2802.

The DLSE has stated in its manual and opinion letters that it in the absence of other “evidence to the contrary” it will consider the use of the IRS mileage allowance rate as satisfying the requirement that the employer reimburse the expense’s incurred in use of an employee’s car. Businesses using the IRS mileage rate for calculating reimbursements should therefore be safe from under reimbursing their employees and violating Labor Code Section 2802.

On December 23, 2009, the Internal Revenue Service (“IRS”) issued the mileage rates used to calculate the deductible costs of operating an automobile for business purposes in 2010. Beginning on January 1, 2010, the mileage rates for the use of a car (also vans, pickups or panel trucks) will be $.50 cents per mile for business miles driven.

Failing to reimburse your employees at the proper rate subjects the business to a potential lawsuit, which could seek damages for the amount not properly reimbursed, interest from the date on which the employee incurred the necessary expenditure or loss ,and the employee may also seek all reasonable costs (including attorney’s fees incurred by the employee enforcing the rights granted by Labor Code §2802).

Double check the rates you are using when reimbursing employees for use of their personal vehicle for business purposes.

Apparently, there is a new set of class action cases that have been filed recently against several large employers for alleged “seating” violations under the California Labor Code (“Labor Code”). In these cases, plaintiffs seek to enforce Section 14 of the relevant Industrial Welfare Commission (“IWC”) Wage Orders, which until recently was a largely unnoticed provision of the Order that requires employers to provide seating for their employees under certain circumstances. While past case law gave employers some comfort, a new Northern District of California decision, Curie-White v. Blockbuster, has expanded damages available to plaintiffs in such cases, and will likely lead to further claims being filed.

Section 14 of IWC Wage Order 7 (entitled “Seats”), which is typical of several other industry specific wage orders, requires that (a) all workers shall be provided with suitable seating when the nature of the work reasonably permits it; and (b) when the nature of the work requires standing, the employer must provide reasonable seating in proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.  However, Section 14 does not contain its own penalty provision and does not address seating claims.

The new class action claims assert that employers who fail to comply with Wage Order seating requirements violate Section 1198 of the Labor Code, which makes it illegal to employ an employee under conditions that are prohibited by an IWC Wage Order.  These new seating claims have been brought under the Private Attorneys General Action of 2004 (“PAGA”), which allows recovery for violations of all provisions of the Labor Code except those for which a civil penalty is specifically provided.  PAGA penalties consist of $100 for each aggrieved employee per pay period for the first violation, and $200 for each aggrieved employee per pay period for each subsequent violation.

Prior to the decision in Curie-White v. Blockbuster, the only court opinion to address a seating claim was in Hamilton v. SF Hilton and the decision there weighed heavily in favor of the employer.   However, In Curie-White, the court significantly undermined several of the key defenses that had succeeded in the Hamilton case.  Most significantly, the court ruled that plaintiffs may seek civil penalties under PAGA because the penalty provision of the Wage Order “does not provide a penalty for the violation…specifically a failure to provide seats for employees.”

Given the conflict between the Hamilton and Curie-White decisions, it is likely that the issue will continue to be litigated in the more recent seating claims cases.  The ultimate resolution in those cases will likely determine whether the these seating claims form a new fad in class action litigation.

WHAT TO DO:

• Document any efforts that have been made to determine whether seats are necessary;

• Review and analyze current job descriptions and customer service standards to determine whether they clearly identify jobs where continual mobility and standing are essential functions of the job, and incorporate those standards into the job descriptions;

• Provide an adequate number of suitable seats in a nearby break room and allow employees to use the seats when it does not interfere with the performance of their duties.

Here is a link to Wage Order 7, which contains the relevant Seating Requirements at Section 14

Is there a new wave of Class Action cases coming in California?

In September 2009, the First Appellate District of the California Court of Appeal affirmed a Marin County trial court decision awarding an Albertson’s employee $200,000 in damages for a FEHA violation (CA Gov’t Code Sections 12900-12996).

The employee, a cashier, sued Albertson’s for failure to provide her with reasonable accommodations for her disability.   She had notified Albertson’s about one year prior to the event, due to side effects from her chemotherapy treatment, she needed to drink water constantly and, consequently, had to urinate frequently.   Albertson’s normally did not allow its employees to have beverages at the check-stand.  However, when she told the managers what she needed, she was told it was not a problem and that she was to let the duty-managers know when she needed to go to the bathroom and they would cover for her.

In February 2005, while the employee was on duty at the check-stand, only one manager was in the store, along with a courtesy clerk.  The employee called several times to the back of the store requesting a bathroom break, but was denied because the manager was too busy.   Eventually the employee, unable to control the urinary urge, and unable to leave the check-stand, urinated on herself in front of customers.  The employee left the store in tears and subsequently underwent a major depression and hallucinations of continuing body odor.  She entered a psychiatric hospital.  There is no evidence that the employee mentioned her accommodation to the on-duty manager that day, or that the on-duty manager was aware of the accommodation granted to the employee.

The jury heard evidence of the employee’s susceptibility to emotional distress.  She had grown up in El Salvador during a period of civil war, had seen people killed, had been robbed at gunpoint, and underwent a myriad of other stressful experiences.  Albertson’s position was that the employee was unusually susceptible to depression, contending that the February 2005 incident triggered a shift from general anxiety disorder to a more severe psychotic disorder.  The jury disagreed.

Albertson’s had a written procedure for processing employee requests for reasonable accommodation, and decisions about such accommodation were made by Albertson’s HR mangers for the Northern California district, not by store managers.  If a store manager granted an ongoing accommodation to an employee, a record of such should be made to pass along to a new manager, but sometimes no record was made.  None was used in the employee’s case.

Under the FEHA, an employer that fails to make reasonable accommodation for an employee’s known physical disability engages in an unlawful employment practice.  It is also an unlawful employment practice for an employer to fail to engage in a good faith interactive process with the employee to determine an effective reasonable accommodation if an employee requests one.  These two aspects are separate.  Albertson’s argued that the employee had a continuing duty to notify managers of her disability and agreed-upon accommodation.  The Court found otherwise.  Once a reasonable accommodation has been granted, then the employer has a duty to provide it.

Employers need to make sure they are providing reasonable accommodations that do not pose an undue hardship to the employer. And as this case highlights, it is also important to continue engaging in the good faith interactive process to determine whether the accommodation is working and whether your supervisory personnel are properly implementing the accommodation.

This post provides an update for an earlier post on the use of incentives in wellness programs. The EEOC’s final rules interpreting Title II of the Genetic Information Nondiscrimination Act (GINA) had been anticipated in November, but the EEOC now intends to issue a final rule on  this month, according to its Semiannual Regulatory Agenda (pdf) released online yesterday.

Title II of GINA, which prohibits genetic information discrimination in employment, took effect on November 21, 2009. The regulation applies to employers with more than 15 employees. Under Title II it is illegal to discriminate against employees or applicants because of genetic information. Title II of GINA prohibits the use of genetic information in making employment decisions, restricts acquisition of genetic information by employers and other entities covered by Title II, and strictly limits the disclosure of genetic information.

The EEOC enforces Title II of GINA (dealing with genetic discrimination in employment). The Departments of Labor, Health and Human Services and the Treasury have responsibility for issuing regulations for Title I of GINA, which addresses the use of genetic information in health insurance.

The U.S. Equal Employment Opportunity Commission (“EEOC”) announced the release of a new mandatory supplement to the “EEO Is The Law” poster, which is a required posting for private employers, state and local governments, educational institutions and labor organizations. The new supplement is available for download here.

The new poster supplement reflects updated federal employment discrimination law, including the Americans with Disabilities Act Amendments of 2008. It also contains a new section about the Genetic Information Nondiscrimination Act of 2008 (“GINA”), effective November 21, 2009, along with updated EEOC contact information. There are also revisions affecting employers holding federal contracts or subcontracts, supplementing the “EEO Is The Law” poster promulgated by the Office of Federal Contract Compliance Programs (“OFCCP”) in August 2008. These revisions include a change to the Individuals with Disabilities section, a change to the Vietnam Era, Special Disabled Veterans section, a new section regarding Retaliation, and an update to the OFCCP contact information.

Employers may comply with the new requirement by downloading the supplement and posting it alongside their September 2002 EEOC poster.

Craig Etter and Phillip Pillar of Greenberg Traurig, LLP have posted an article that suggessts IRS workplace audits will increase beginning in 2010.  A portion of their article, reprinted by the Association of Corporate Counsel, is copied below, with a link at the end of this post directing you to the complete article with footnotes.

Internal Revenue Service Will Conduct Thousands of Random Employer Audits Beginning in 2010 Internal Revenue Service (IRS) officials recently stated that the IRS will randomly audit approximately 6,000 U.S. employers for employment tax compliance and proper worker classification. According to reports, the audits will begin in February 2010 and are expected to be completed within three years.1

The IRS intends to audit employers of all sizes and types, including non-profit organizations. The audits are part of the IRS’ National Research Program and have a two-fold purpose, (1) to generate revenue from non-compliant employers and (2) to serve as a statistical sample of employers that are in compliance while identifying areas of non-compliance and techniques used to avoid employment taxes.

The IRS expects to test how much of the estimated $15 billion “tax gap” attributed to employment taxes actually exists and may be closed.2 Also, the IRS expects the statistical evidence will help determine whether legislative or enforcement changes are necessary to address common employment tax evasion techniques.3 As a result, the audits are expected to be exhaustive and will concentrate on five employment tax issues:

1. worker classification,
2. fringe benefits,
3. non-filers,
4. officers’ compensation and
5. employee expense reimbursements.4

While the audits will begin with the examination of federal employment tax returns (Forms 941), the process will involve many other documents that pertain to the employers’ practices in these five areas.

A major focus of the audit will be on employers that have improperly classified their workers as independent contractors instead of employees. There are many temptations to misclassify workers: (a) shifting the cost of employment taxes to workers, (b) avoiding employee benefit costs, and (c) eliminating responsibilities under employment laws, such as civil rights or wage and hour laws. However, employers who misclassify their workers as independent contractors risk significant tax liabilities upon detection by the IRS, even if the employee paid the employment taxes due.5

Other issues that may be raised include proper treatment of (i) fringe benefits and per diems as tax-free, rather than as compensation subject to income and employment taxes, (ii) employee expense reimbursements that must comply with accountable plan rules for exclusion from employees’ gross income and (iii) executive compensation as reasonable in amount. The wide-ranging audit program is part of a trend to crack down on employment tax non-compliance, which includes heightened enforcement at the federal level6 and an increasing number of states sharing information with the IRS regarding questionable tax practices.7 Employers of every size and type should realize that their compliance with federal employment tax obligations may be scrutinized, and that they should review their compliance programs with their tax advisors before the audits begin.

For the full article with footnotes, click here.

For tax withholding changes that were effective November 1st – check this post too.

For help with compliance check out this post on hiring outsourced general counsel.

Plaintiffs, in Stuart v. RadioShack, sought reimbursement for expenses related to use of their personal vehicles to perform inter-company store transfers, which vehicle use was known by the employer even though the employees had not followed proper internal procedures for requesting reimbursement. The issue before the court was whether an employee must first make a proper request for reimbursement with his or her employer before the employer’s duty to indemnify under Labor Code section 2802 is triggered.

California Labor Code section 2802 provides that “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.”  And Section 2804 further provides that “Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void.”

The Court addressed the question of what happens when an employee does not report the expense according to company policy, and held, in effect, that the requirements of the statute must override any internal reimbursement rules set by the employer. California employees have a right to be reimbursed for their work related expenses, such as business travel, equipment, materials, and training, when the employer knows or has reason to know that the employee has incurred the expense, even when the employee fails to follow internal reimbursement protocol established by the employer.

Employers should continue to create policies and procedures for expense reimbursement; however, they should also recognize that they remain liable to reimburse the employee’s expenses even when the employee fails to adhere to the exact terms of the reimbursement policy. Case law now provides that the employee’s failure to follow company reimbursement protocol will be an unlikely defense for employers who fail to make a valid reimbursement required under Labor Code 2802.

It’s important for employers to remember that while the default employment rule in California may be “at-will” (Labor Code §2922) there are some other factors and circumstances that can bear on your decision to move forward with the termination of an employee.

Having a termination check list can be helpful to remind you of any red flags that warrant further consideration before moving forward with a termination decision.  Below, is a list of items you will want to consider before terminating someone. This is not an exhaustive list, but includes several key factors to consider. You may also want to consult with counsel on termination decisions.

• Is there any documents (write-ups, warnings, etc..) or other objective evidence (i.e., video of employee theft) to support the termination?
• Are the managers or those who are participating in the termination all in agreement about the grounds for termination?
• Is this termination consistent with what the company has done in the past under similar circumstances or is the person being singled out for different treatment?
• Are there overlapping concerns about workers compensation leave, medical issues, or family leave rights that warrant the consultation with counsel?
• Have internal company policies been followed?
• If your company policy calls for progressive discipline (system of warning and write-ups before termination) have these steps been followed? Is there documentation to support the progressive discipline action taken before termination?
• Does the termination potentially violate any state or federal statutes prohibiting discharge under the present circumstances (i.e., can’t fire someone for filing a workers comp claim, or taking time off to serve on jury)?
• Is anyone making the termination decision based on the person’s protected class (i.e., sex, race, national origin, gender, age, family status, etc..) or because the employee engaged in a protected activity (i.e., notified a state agency of a product liability issue (whistleblowing), serves on a volunteer fire department, filed a complaint with the Dept. of Fair Employment and Housing, harassment complaint, etc..) – can’t make a termination decision based on these factors.
• Is the termination decision consistent with the performance or conduct of the employee that has been discussed or documented in the past?
• Is the termination decision consistent with previous reviews of the employee (last review was a glowing report two weeks ago and now the person needs to be fired, what changed – is it something legitimate)?
• Has the employee been talked to about the incident? Is there sufficient evidence to reject the employee’s version of events?
• Is there a contract, or were any employment promises made (i.e., how long a position will last) that converts the “at-will” employment relationship into something other than an “at-will” employment relationship? Have any alternatives to termination been considered?
• Is the employee suffering from any disability, medical condition, pregnancy, etc.. (or is employee tending to someone in the employee’s family with a medical condition)? The employer may need to consider an accommodation or other alternative to termination.

Reviewing the checklist above before you decide to terminate someone will help you avoid some common termination pitfalls.  Like I said before, this is not an exhaustive list of items to consider, but it is a good starting point. You may want to build on this list, using employment issues you have seen in the past that are particular to your place of employment.

For some help with compliance issues – check out this post too on hiring outsourced general counsel.

Employers, please remember that you need to keep on top of your non-exempt employees about taking their statutorily required meal and rest periods.  You should have a copy of the wage order that governs your place of business (get it here) and review it every now and then to be sure you are still keeping up on the wage and hour compliance issues discussed in the orders.

For meal periods: Remember that no employer shall employ any person for a period of more than five (5) hours without providing them with a meal period of not less than 30 minutes, except that when the person is working less than 6 hours a day the employee may waive the meal period. The waiver, however, must be in writing, signed by the employee and in the personnel file ahead of time. The employee has the right to revoke the wavier too.

For days when the employee will be working more than 10 hours, the wage order requires you to provide a second 30 minute meal period for the employee, except that if the total hours worked will not be more than 12 hours for the day, the employee may waive the second meal period if they actually took the first meal period and have a signed waiver in their file ahead of time.

Unless the employee is relieved of all duty during a 30 minute meal period, the meal period will be considered an “on duty” meal period and counted as time worked. An “on duty” meal period is only allowed only when the nature of the work prevents an employee from being relieved of all duty and when by written agreement between the parties an on-the-job paid meal period is agreed to. The written agreement shall state that the employee may, in writing, revoke the agreement at any time.

If you fail to provide your employee with a meal period as outlined above, you are required to pay the employee one (1) hour of pay at the employee’s regular rate of compensation for each workday that the meal period is not provided. These penalties can add up fast so you need to make sure your employees are tracking their time worked, their meal periods, and whether they missed the meal period. You should also be tracking when you paid them the one hour penalty, which should be right away after finding out about any missed meal period.

Similar to the meal periods (except rest periods are paid breaks), every employer shall authorize and direct that all employees take a rest period, which insofar as practical should 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 (31/2) hours. If you call someone off break before the get their net 10 minutes, you should give them a new 10 minute break after whatever necessity that required they be called back to duty has ended.

Like the one hour penalty in the meal period context, if an employer fails to provide an employee a rest period in accordance with the applicable provisions of the wage order, the employer shall pay the employee one (1) hour of pay at the employee’s regular rate of compensation for each workday that the rest period is not provided.

Often times the employer feels bad about disciplining the employee who works through a meal period because they are simply trying to work hard. Let them know that its nothing personal (you are not trying to punish hard work), but as the employer you can be held liable for missed meal and rest periods, so they must take them or face discipline.  You can and should discipline employees who do not adhere to company policy regarding the tracking and taking of meal and rest periods.

Employers, please remember that section 5 of most, if not all, of the Industrial Welfare Commission Wage Orders (available for download here) provides that an employee shall be paid, as Reporting Time Pay, half of their usual or scheduled day’s work (not less than two (2) hours, nor more than four (4) hours) at the employee’s regular rate of pay whenever the employee is required to report for work and is not put to work, or is given less than half of the employee’s usual or regularly scheduled day’s work.

Also, where the employee is required to report for work a second time in any one workday and is furnished less than two (2) hours of work on the second reporting, the employee should be compensated for two (2) hours at the employee’s regular rate of pay.

The Reporting Time Pay is not applicable when:

(1) Operations cannot commence or continue due to threats to employees or property; or when recommended by civil authorities; or
(2) Public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities, or sewer system; or
(3) The interruption of work is caused by an Act of God or other cause not within the employer’s control.

Reporting Time Pay is also not applicable for employee on paid standby status who are called to perform assigned work at a time other than the employee’s scheduled reporting time.

For some compliance tips on meal and rest periods – check out this post too.

Employers should be aware that as of November 1, 2009, they will be required to use a new state income tax withholding table, which increases  by 10% the amount of income taxes withheld based on existing claimed exemptions by the the employee.

For example, if state income tax withholding is currently $400 a pay period on an employee’s regular wages, come November 1st , the withholding will increase to $440.

Payroll departments should be prepared to receive employee inquires and amended w-4 forms after the effective date.

This new change was part of legislation (ABX4-17) signed by the Governor to assist in accelerating tax collection due to the budget crisis at the State level (I know,  not just at the State level).

Littler has a more exhaustive posting on the topic here if you would like more information on this tax issue.

Change in CA Tax Withholding Tables Effective November 1, 2009