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Creating the Sustainable Workplace:
Reducing Your Risk of Liability in 2012
The end of 2011 saw a number of crucial developments in legal obligations for employers and employees.  We have described some of the most important changes below, and outlined some resolutions you might consider for your workplace next year. 
In this Newsletter, you will find: 
     •     How Can We Help?
In our next issue, we begin creating a Sustainable Leaves of Absence system.
Changes You Can Make Today To Reduce Your Risk: What Did We Learn From The Courts in 2011?
Some important changes are required in 2012 as a result of court decisions in 2011.  Consider the following: 
1.    California's Overtime Laws Apply to Out-of-State Employees Who Perform Services Here.  In Sullivan v. Oracle Corporation, the California Supreme Court considered whether employees of a California-based employer are entitled to overtime according to California law, notwithstanding that their employment is based outside of California.  The Court ruled that if a non-resident employee performs services in California, even on a temporary basis, that employee may be eligible for overtime for hours worked here in California, to be paid according to California's overtime laws.  This means that if you are a California-based Company with non-resident employees performing services here, these employees are governed by California's wage and hour laws while they perform services within California's borders.  We do not know whether this decision will apply to non-California based companies with employees working temporarily in California.  The Court declined to opine on whether other California wage and hour laws would apply to individuals performing services in California on a temporary basis.  It stands to reason that the logic of Sullivan could be extended to other wage and hour laws, including minimum wage and meal and rest periods. 
2.     Employees Do Not Have a Right to Reinstatement When Their Leaves Exceed the Statutory Period of a CFRA Leave.  In the relevant case, an employee returned from work after taking a 19 week leave for stress under the California Family Rights Act ("CFRA") to learn that she was transferred to a position she considered to be a demotion.  The Court of Appeals held that she had no right to reinstatement because she had failed to return to work at the end of the 12 week CFRA-protected leave.
3.     An Employee Does Not Need to Experience All Discriminatory Conduct Personally In Order to Rely on That Conduct at Trial.  As part of her claim for discrimination and harassment, an employee wanted to introduce evidence of sexual harassment of other employees that occurred outside the employee's presence and that did not affect her working environment.  The Court of Appeals agreed that the evidence should have been introduced at trial. 
4.     An Employer That Wins a Wage and Hour Claim May Recover  Its Costs.  According to the Court of Appeals, either an employee or an employer who successfully defends a claim for overtime, meal and rest breaks, failure to maintain and furnish accurate wage statements, and unfair competition (among other claims) may recover costs expended in litigating the claim. 
5.    Employers Have Another Hurdle to Enforceable Mandatory Arbitration Agreements.   In Sonic-Calabasa A, Inc. v. Moreno, the California Supreme Court held that an arbitration agreement that required an employee to waive his or her right to file an administrative wage claim with the California Labor Commissioner was unenforceable.  In that case, the employer attempted to compel the employee to arbitrate a claim for unpaid vacation.  The Supreme Court held that requiring an employee to waive his right to the Labor Commissioner's procedural benefits as a condition of employment violated public policy and as a result made the arbitration agreement unconscionable and unenforceable.
6.     Employers May Be Able to Mandate Arbitration of Certain Class Actions.  The United States Supreme Court ruled (AT&T Mobility LLC v. Concepcion et ux) that California case law invalidating class action waivers in consumer arbitration agreements is preempted by the Federal Arbitration Act ("FAA").  In other words, it may be argued that, in California, individuals may sign waivers that preclude them from bringing claims on a class basis.   Before you get too excited, a California appellate court ruled that the Concepcion decision did not apply to representative actions brought under California's Private Attorney General Act (finding a distinction between a "representative action" like PAGA and a class action) and specifically declined to rule at this time on whether the FAA preemption rule from Concepcion applies to class action waivers in the employment context.  (Brown v. Ralphs Grocery Co.)
What Changes Do New Laws Impose on Your Workplace?
Changes in federal and California laws will affect every stage of the employment relationship in 2012.  Below are the most important changes:
1.     What to Know When Initiating an Employment Relationship.
          Use of credit reports is now limited.  Employers are prohibited from using an applicant's or employee's credit history in making employment decisions, except (a) for a managerial position; (b) for a position in the California Department of Justice; (c) for a sworn peace officer or other law enforcement personnel; (d) where the information is required by law; (e) where the relevant position has regular access to confidential information like social security numbers, dates of birth or credit card information; (f) where the relevant position can enter into finanical transactions on behalf of the employer; (g) where the position has access to confidential or proprietary information that is defined as a "trade secret" under California law; or (h) for a position that regularly involves access to cash in excess of $10,000 (of the employer or a customer or client).
        Employers must provide each employee with written notice of pay information on hire and in the event of a change.  An employer must provide non-exempt new hires with a notice of the employee's rate or rates of pay, the basis on which wages will be calculated (hourly, daily, salary, commission, piece, etc.), allowances claimed as part of the minimum wage, if any, the employer's designated payday, overtime rates, the name of the employer, including any fictitious business names, the employer's physical and mailing addresses and phone number, and the name and contact information of the employer's worker's compensation carrier.  If this information changes, the employer must advise the employee of the change in writing within seven calendar days.  No separate notice is required if the changes are reflected on a timely wage statement or other specified writing.
2.     Expansion of the Laws on Genetic Information and the Definition of "Gender." 
         California employers are prohibited from discrimination based on genetic information.  California law now more expressly prohibits employers with five or more employees from discrimination, retaliation or harassment of any employee on the basis of genetic information, which includes any request for or receipt of genetic services, or an employee's or employee's family member's participation in clinical research that includes genetic services.  The law includes a prohibition against reliance on (a) an individual's genetic tests; (b) genetic tests of an employee's family member; or (c) manifestation of a genetic disease in family members.   Remember, the federal Genetic Information Nondiscrimination Act covers employers with 15 or more employees. 
         The definition of "gender" has been expanded to include a person's gender identity and gender expression (meaning a person's gender-related appearance and behavior, whether or not stereotypically associated with the person's assigned gender at birth). 
3.     Changes to Wage and Hour Laws
         Exercise caution when you retain an individual as an independent contractor, or pay the priceEmployers are now subject to civil penalties, liquidated damages and other disciplinary action when they willfully misclassify individuals as independent contractors when they should be treated as employees, and when they make deductions from independent contractors that could not be deducted for employees.  
         Enhanced consequences for employers who fail to pay minimum wage.  Employees who are denied minimum wage may recover liquidated damages.  Additionally, the employer must pay restitution of wages to the employee.  This obviously would apply in a situation in which there was a blatant failure to pay minimum wage to an hourly employee, and also could apply to an employee incorrectly classified as "exempt," if the actual hourly rate did not meet the minimum wage requirements. 
         Commission Agreements Must Be in Writing.  Beginning January 1, 2013, all employment relationships that provide for payment of commissions must be in writing, and must include the method by which commissions are computed and paid.  Employers must sign the summary and employees must receive a copy of the signed document.  The commission plan contained in that agreement will be presumed to remain in full force until the agreement is superseded or the employment relationship terminates.   
4.     Changes to Leaves of Absence Laws 
         What is "one year" for bone marrow or organ donation leaves of absence?  As of 2011 all California employers with 15 or more employees must provide a paid leave of absence of up to 30 days in any "one year period" to employees for the purpose of donating an organ to another person, and up to 5 days paid leave during that period for bone marrow donation.  The "one year" is now defined as a rolling 12-month period, measured forward from the date an employee first takes such a leave.  This leave is measured in business, not calendar, days and is not considered a break in service for purposes of benefit accrual and seniority. 
        Employers may not "interfere" with an eligible employee's request for family or medical leave or pregnancy disability leave.  In addition to a prohibition against denying an eligible employee's request for leave to care for the employee's own serious health condition, to care for a family member with a serious health condition, to bond with a child or for disability due to pregnancy or childbirth, it is unlawful for an employer to interfere with or restrain the exercise or attempted exercise of any right provided to an employee under the California Family Rights Act ("CRFA") or the Pregnancy Disability Leave ("PDL") laws. 
        Employers must now maintain insurance for employees on pregnancy disability leave.  Employers are prohibited from refusing to maintain and pay for insurance coverage for the duration of maternity leave (up to four months).  An employer may recover insurance premiums paid during the leave if the employee fails to return from disability leave for reasons other than the employee is taking additional leave under the California Family Rights Act for a health condition that entitles the employee to leave, or for other reasons beyond the employee's control.  
5.     New Posting Obligation from the National Labor Relations Act.  Most private-sector employers are required effective January 31, 2012 to notify employees of their rights under the National Labor Relations Act by posting a notice. Copies of the notice will be available on the National Labor Relations Board ("NLRB") website and from NLRB regional offices.  The notice must be posted in English and in another language if at least 20% of employees are not proficient in English and speak the other language. The Board will provide translations of the notice, and of the required link to the Board’s website, in the appropriate languages.  Employers also must post the notice on an intranet or an internet site if personnel rules and policies are customarily posted there.
New Years' Resolutions: Decrease Your Risk of Liability and Increase Productivity Potential in 2012
We know that innocent mistakes often are the cause of unwanted and potentially expensive litigation.  Consider a few resolutions to protect your Company and enhance your workplace in this New Year. 
Is it Time to Audit Your Wage and Hour Practices?  
Are your "independent contractors" accurately characterized? 
Do your "exempt" employees satisfy the legal test for an exemption?
Are you providing employees with minimum wage?
Are you providing employees with adequate information on their rates of pay, commission schedules and method of compensation?
Are you compensating correctly any out-of-state employees who perform services in California? 
Are you Confident That Your Leave of Absence Policies and Practices Are Clear and Compliant?
Are your policies clear on the effect of leaves on benefits, seniority and pay?
Does your handbook include mandatory statutory leaves of absence? 
Is This the Year Your Managers Will Develop Greater Tools for Protecting and Enhancing Your Company? 
Remember, a company acts or fails to act when its managers act or fail to act. 
Are you providing your managers with the training they need to protect you from claims of discrimination and harassment?
Do your managers have the tools necessary to protect the Company and to encourage the best performance of their staff?  
Do your managers have the skills needed to have difficult and critical conversations on performance? 
Do Your Arbitration Agreements Satisfy the Law? 
Is mandatory arbitration the right fit for your workplace? 
If so, are you actually able to compel arbitration with your agreement, as drafted?  
How Can We Help? 
If you would like additional help, we offer the following resources:
1.     Review of Your Wage and Hour Practices.  We know that this is an area of susceptibility for many well-intentioned companies. We are happy to review your present practices and policies to ensure they are compliant with wage and hour laws.
2.    Review of Your Policies.  We are happy to review your employee handbook to make sure you have captured the changes to the law described above.
3.     Management Training to Reduce Risk and Increase Productivity.  If you would like to start your new year by providing your managers with the tools they need to have difficult conversations about performance, please let us know. 
It is our pleasure to partner with you in creating your sustainable workplace.  If we can help, give us a call at 619 906 2400 or send us an e-mail.  
Keep an eye out for next month's newsletter, where we will begin our series on creating a Sustainable Leaves of Absence system. 
Our best wishes to you for a happy, healthy and sustainable new year!

Schor Vogelzang & Chung LLP

Partnering to create your great workplace!

2170 Fourth Avenue, San Diego, CA 92101
P: 619.906.2400 F: 619.906.2401


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