Executives May be Liable for Employee Wage Claims

Posted by on Oct 3, 2022 in Newsflash | 0 comments

If an employee is owed back wages, it is common practice for the employee to bring a claim against their employer with the Division of Labor Standards Enforcement (“DLSE”) or file an action in the Superior Court. California Labor Code §558.1 states that “any employer or other person acting on behalf of an employer” who contributes to or causes a wage violation “may be held liable as the employer for such violation.” Until recently, it was not always clear which individuals might be considered one of those “other person[s] acting on behalf of an employer” under §558.1, as guidance on exactly how much involvement an individual had to have with respect to the wage and hour violations at issue was lacking. However, the California Court of Appeal recently determined that an executive of an employer may be held personally liable for any wages owed to an employee who files such a claim.[1] In Seviour-Iloff, employees had filed a claim with the DLSE alleging that they were owed back wages. The Labor Commissioner found that the employees were owed back wages and that the employer’s Chief Executive Officer was personally liable for such wages. The employer and the CEO appealed the DLSE ruling to the Superior Court, which held that the CEO was not personally liable under §558.1. The employees then appealed the Superior Court’s ruling and the Court of Appeal held that the language of §558.1 gives the employee discretion to choose whether or not to pursue wage claims against a person “acting on behalf of an employer” who causes a wage violation, in addition to pursuing claims against the employer itself. However, once that decision is made by the employee the court does not have discretion in holding such individuals personally liable for the wage violations (assuming it is established that they are in fact involved in the violations). Thus, the Court of Appeal reversed the Superior Court’s ruling, finding the CEO was in fact personally liable for the wage violations. The Court of Appeal’s ruling means that executives should be more cautious and aware of any potential wage violations because they may be held personally liable for such wage violations (if they contributed to the violations in any way). Employers and executives can help prevent wage violations by posting required notices where employees will see them and by making sure that employees take rest and meal breaks, receive proper pay statements, and do not exceed the maximum number of hours they are allowed to work without receiving overtime pay. Regularly auditing your payment and recordkeeping practices with a knowledgeable employment attorney can go a long way towards cutting off this type of liability. If you have questions or would like to discuss such an audit, please contact Navigato & Battin. [1] Seviour-Iloff v. LaPaille (2022) 80 Cal.App.5th...

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Drug Testing Employees for Marijuana to be Prohibited

Posted by on Oct 3, 2022 in Newsflash | 0 comments

Governor Newsom recently signed Assembly Bill 2188 (“AB 2188”) into law, which prohibits drug testing of employees for off-duty marijuana use. AB 2188 is an amendment to the Fair Employment and Housing Act (FEHA), which is intended to prevent employment discrimination, and is effective as of January 1, 2024. Specifically, AB 2188 prohibits an employer from discriminating against a person in hiring, termination, or any term or condition of employment based upon: (1) a person’s use of cannabis off the job and away from the workplace, except for preemployment drug screenings; or (2) an employer-required drug screening test that has found the person to have non-psychoactive cannabis metabolites in their hair, blood, urine, or other bodily fluids. AB 2188 does not prohibit all drug tests which test for marijuana, as it still allows tests which determine if an employee is currently under the influence of marijuana (as contrasted with many current types of testing, which detect relatively recent use or exposure but which do not reflect whether the employee is under the influence of cannabis based on the appearance of those non-psychoactive cannabis metabolites). Employers will also still be allowed to prohibit employees from possessing or using marijuana while they are at the workplace or otherwise working. There are certain categories of employees who are excepted from AB 2188 and who may still be tested for off-duty cannabis use. The exceptions include employees in the construction field, employees whose position requires a federal background check, employees who are required by law to be tested, and employees who work at employers that receive certain federal funding. It is important for employers to prepare for the enactment of AB 2188 by evaluating their current drug testing procedures to ensure that they comply with the new law. In addition, employers who receive federal funding should begin to determine if their employees may fall within one of the exceptions to AB 2188. Further, all employers should be aware of any laws which require their employees to be drug...

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Websites are not a Public Accommodation under the ADA

Posted by on Sep 1, 2022 in Newsflash | 0 comments

Title III of the Americans with Disabilities Act (“ADA”) prohibits public accommodations from discriminating on the basis of disability and requires such public accommodations to be accessible. Historically, making public accommodations accessible required installing ramps, handrails, and making other physical alterations to property. In recent years, ADA plaintiffs and their attorneys have more frequently asserted violations of the ADA and California’s Unruh Civil Rights Act (“Unruh Act”) based on allegations that companies’ websites were not accessible to those with visual impairments and other disabilities. Among other things, websites can be made more accessible to those with visual impairments by ensuring that the website is compatible with screen reading software. In a recent case[1], a visually impaired individual filed suit against a company alleging violations of the ADA and the Unruh Act because his screen reader software did not work with the company’s website. The company is an online-only business, meaning that it has no physical locations for the public or consumers to visit. To succeed on his claim, the plaintiff needed to prove that the company had committed intentional discrimination or had violated Title III of the ADA. The plaintiff first alleged that the company committed intentional discrimination by failing to address his complaints regarding the accessibility of the website. The California Court of Appeals held that the company’s failure to address a complaint did not constitute intentional discrimination. The Court then turned to whether the alleged inaccessibility of the website violated Title III of the ADA. In its analysis, the Court looked at the language of the ADA and the definition of “public accommodation.” In doing so, the Court noted that the definition included terms such as “place” or “facility,” which indicate a physical location as opposed to an online presence. Whether websites for online-only businesses are public accommodations has been a source of dispute, with Congress and the Department of Justice failing to provide any clarity on the issue despite recognizing the confusion in the field. The Ninth Circuit Court of Appeals, which rules on appeals from California federal courts, has held that online-only businesses are not public accommodations. The takeaway from the Martinez Court’s decision is that online-only businesses which operate in California are not currently required to comply with the public accommodation requirements under the ADA. Although it would be best practice for a business to be accessible to all, there are not any penalties for online-only businesses who fail to make their websites accessible. However, it is important that online-only businesses do not intentionally discriminate, as that would expose them to potential liability under the Unruh Act. [1]  Martinez v. Cot’n Wash, Inc., 2022 WL 3025828 (Cal. Ct. App....

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California Expected to Expand Employee Pay Transparency

Posted by on Sep 1, 2022 in Newsflash | 0 comments

Between today and September 30, 2022, Governor Newsom is expected to sign SB 1162 into law. SB 1162, which was first proposed in September 2020, will expand pay transparency in California by requiring increased reporting of hourly wages and salaries. The purpose of SB 1162 is to provide more pay transparency to potential employees while also seeking to reduce or eliminate pay or diversity gaps based on race, ethnicity, and gender. All employers would be required to provide a pay scale for a current employee’s position at the employee’s request. Currently, employers only need to provide a pay scale to potential candidates for employment upon request. In addition, all employers would be required to report the median and mean hourly rate by each combination of race, ethnicity, and gender for each job category. Failure to report such information could result in a fine of $100 per employee for a first offense and up to $200 per employee for additional offenses. The effect of the law will depend on the specific employer, with some provisions of the law dependent on the number of employees a company has. Employers with more than fifteen employees would be required to include a pay scale in all job postings, including jobs posted by third parties. An employer who fails to include a pay scale would not be punished for a first violation but would be required to update all job postings to include the pay scale. Any violation after the first violation could result in a fine between $100 and $10,000. Employers with more than one hundred employees who were hired by labor contractors (i.e., staffing agencies) would be required to produce a separate report with data on pay, hours worked, race, ethnicity, and gender information. This report would be submitted to the California Civil Rights Department. The enactment of SB 1162 could lead to potential lawsuits against employers who appear to have significant pay or diversity gaps based on the data reported under the law. In addition, it could also impact the hiring of new employees because job postings would require the inclusion of pay scale information. Employers should begin reviewing their pay and diversity data in anticipation of this law to ensure compliance and prevent penalties or...

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Testing Employees For Covid Must Be “Business Necessity”

Posted by on Aug 1, 2022 in Newsflash | 0 comments

Throughout the COVID pandemic, California employers have had broad discretion to mandate employee COVID tests. Employers were empowered with such discretion by the Equal Employment Opportunity Commission (“EEOC”). Generally, medical tests or examinations mandated by employers must be “job related and consistent with business necessity” as defined by the Americans with Disabilities Act (“ADA”). Until recently, the threat of COVID in the workplace satisfied the ADA requirements. However, on July 12, 2022, the EEOC announced updated guidelines for COVID testing and stated that requiring testing for employees must now satisfy the business necessity test. The EEOC stated that COVID testing will be considered a business necessity if it is done in accordance with the current guidance from the Center for Disease Control (“CDC”) and the Food and Drug Administration (“FDA”) as well as state and local public health authorities. Specifically, the EEOC explained that the business necessity requirement is met if the CDC, FDA, or state and local authorities recommend COVID testing or if an employee is exhibiting symptoms consistent with COVID in the workplace. Further, the EEOC noted that the likelihood of infection or transmission may also be considered. The following factors are to be considered in determining the likelihood of infection or transmission: Level of community transmission; Vaccination status of employees; Accuracy and speed of processing various types of COVID tests; Degree of breakthrough infections among vaccinated employees; Ease of transmissibility of the current variant; Possible severity of illness from the current variant; Level of contact employees have with others in the course of work; and Potential impact on operations if an infected employee enters the workplace. The EEOC explained that these updated guidelines apply only to viral testing for COVID and that employers are no longer able to mandate antibody tests because such tests do not show if an employee is currently infected. Employers are still allowed to ask screening questions to employees regarding COVID, such as asking if an employee is exhibiting COVID symptoms or if an employee has been tested. Employers who currently have a mandatory COVID testing policy should consider revising that policy in accordance with the EEOC guidelines. All employers should regularly check the CDC, FDA, and local and state health authority guidance if concerned about COVID in the workplace or if considering asking employees to...

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Only In California: An Innocent Commercial Landlord May Be Held Hostage for Its Tenant’s Failure to Pay Its Employees

Posted by on Aug 1, 2022 in Newsflash | 0 comments

Imagine this scary real-life scenario: in an effort to lease its land, a landowner (“Owner”) spends millions of dollars to construct a quick lube (or any other single-purpose building) on its property.  Owner then enters into a long-term lease with a quick lube operator (“Operator”).  Unbeknownst to Owner, Operator fails to pay its employees for overtime, meal breaks, or otherwise runs afoul of the myriad of complicated labor laws in California. The State of California, through the Department of Labor Standards Enforcement, then initiates an enforcement action against Operator which results in a multi-million judgment against Operator.  Operator cannot pay the judgment and goes out of business. Prior to the enactment of Labor Code section 200.3, this would have caused Owner the significant inconvenience. However, Owner still has its property which is improved with the quick lube facility. Eventually, Owner would find a replacement tenant and, in due time, Owner’s property and its investment in the quick lube facility would start generating cash flow again. However, following the enactment of Labor Code section 200.3, it may prove impossible for Owner to find a new tenant.  Section 200.3 creates “successor” liability for outstanding labor code violation judgments. This means that a new tenant, even a tenant with no ties to the original Operator, can be held liable for and be required to satisfy the multi-million judgment rendered against Operator as a condition of operating the same type of business from the quick lube facility on Owner’s property. Given the single purpose nature of Owner’s build-out, it would be very difficult (and expensive) to put Owner’s property to another use. The State of California is aware of this brutal consequence to Owner.  Not only is the State of California not sympathetic to Owner’s plight, it leverages its position to force Owner to resolve the judgment against the now-defunct Operator even though Owner is completely independent of Operator and played no role in Operator’s underlying labor code violations. So what can an owner do to avoid this devastating outcome?  Short of selling all property owned in California and moving to a more business-friendly state, the owner can make sure that its tenants are financially sound, responsible operators.  It can also seek and obtain indemnity agreements from the individuals responsible for a tenant’s operations.  Finally, the Owner may require its tenants to obtain and maintain EPLI insurance that covers wage and hour claims (assuming such an insurance policy is available). No matter what, it is critical that a landowner, and particularly the owner of a single-purpose property, understand that the obligations and liabilities of its tenants may significantly impact the value and marketability of its land and take whatever measures may be available to guard against the impact of Labor Code section 200.3’s successor liability...

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Increased Consumer Notifications Required for Subscription Renewals

Posted by on Jul 1, 2022 in Newsflash | 0 comments

An amendment to California’s Automatic Renewal Law (Business & Professions Code §17602) will go into effect on July 1, 2022. The amendment, which was signed into law in October 2021, requires increased notifications to consumers regarding any subscriptions or trials which automatically renew. It is important to be familiar with the existing Automatic Renewal Law, which requires businesses which offer subscriptions to do the following: Inform consumers of the cost and frequency of any automatic renewal before or during the subscription enrollment or when processing payment; Inform consumers of the details of the subscription and the applicable cancellation instructions in an email or other form of message; Inform consumers of any price changes before the subscription automatically renews; Have an easy-to-access cancellation system; and Make the above information conspicuous. The amendment which takes effect July 1 applies to free subscription trials longer than 32 days or any paid subscriptions which have an initial term of at least one year. The law will now require that an additional notification or message be sent to consumers between 3 and 21 days before renewal (for a 32+ day trial) or between 15 and 45 days before renewal (for a yearlong subscription). In addition, the new notifications must state the date of renewal, the renewal duration, and the renewal cost. Similar to the current requirements, the new notifications must include a cancellation link or instructions. Finally, the contact information for the business must also be included in the message. All of this information must be conspicuous. A company which does not adhere to these new requirements, or the existing requirements, of the Automatic Renewal Law can be subject to civil penalties from both consumers and the government. Therefore, it is important for all businesses which offer subscriptions to regularly review their automatic renewal processes for legal...

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Employees May Be Required to Arbitrate Individual PAGA Claims and Waive Non-Individualized PAGA Claims

Posted by on Jul 1, 2022 in Newsflash | 0 comments

California’s Private Attorney General Act (“PAGA”) allows employees to file claims against their employers to recover civil penalties on behalf of themselves, other employees, and the State of California for various Labor Code violations. Claims under PAGA may be individual claims (those suffered by the employee making the claim) or “representative” claims (those suffered by employees other than the employee making the claim), but an employee generally needs to have an individual claim in order to have standing to pursue representative claims. Many employment contracts contain class waivers, which prohibit an employee from filing a class action lawsuit on behalf of others. Many employment contracts also contain arbitration clauses, which require employees to arbitrate claims against their employer rather than filing a lawsuit. In PAGA cases, California courts have held that PAGA prohibits employees from waiving the right to assert representative claims, regardless of what the applicable employment contract states. This has meant that even an employment agreement with an airtight arbitration provision and class action waiver would not require an employee to arbitrate PAGA claims, providing many employees with powerful leverage to force employers into court and to assert a host of claims on behalf of others which the employee never had as an individual- all but ignoring the contractual agreement between the parties and the parties’ expectations about how issues between them would be resolved. A U.S. Supreme Court ruling has changed this arbitration v. PAGA landscape significantly. In Viking River Cruises, Inc. v. Moriana, an employee filed a lawsuit against her employer and brought individual and representative claims under PAGA. Her employment contract contained a class waiver which prohibited representative claims as well as an arbitration clause. Her employer argued that she was required to arbitrate her claims and was prohibited from bringing representative claims on behalf of her coworkers in that arbitration. The California courts ruled on behalf of the employee and held that the arbitration clause and waiver were invalid because PAGA prohibited such waivers. However, the case was appealed to the United States Supreme Court which held that the Federal Arbitration Act (“FAA”) preempted the PAGA prohibition on such waivers. In other words, the Supreme Court held that the FAA superseded PAGA, meaning that the employee was required to arbitrate her individual claims. Because she was required to arbitrate her individual claims, she no longer had standing to bring representative PAGA claims in court, and they could not be arbitrated under the arbitration provision in question. The Supreme Court’s ruling means that if an employee’s contract contains an appropriate arbitration provision relating to individual PAGA claims which contains valid class and other representative action waivers, then that employee can be forced to bring individual claims against the employer in arbitration and is prohibited from bringing a representative action under PAGA in either court or arbitration. While the ruling may very well elicit a further response from the California legislature and the courts, this is a very favorable ruling for California employers. Employment law attorneys have used PAGA claims to substantially raise the risk, scope, and cost of employment-related lawsuits for years even where employers have strong arbitration provisions in their employment contracts which require employees to waive class action and representative claims.  For the time being, this tactical advantage can be wiped out...

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California Supreme Court- Employees May Recover Additional Penalties for Failure to Pay Premium Pay for Meal and Rest Period Violations

Posted by on Jun 1, 2022 in Newsflash | 0 comments

The California Supreme Court has just overturned a Court of Appeal decision which had been seen as a significant “victory” for employers in the wage and hour arena.  That Court of Appeal decision had ruled that unpaid statutory payments owed by a California employer for meal and rest break violations were not “wages” under California law, at least for purposes of determining whether an employee who was not paid such amounts could recover “waiting time” penalties for such failure after termination and whether such penalty payments were required to be documented on an employee’s paystubs. Because such payments were not considered wages, the Court of Appeal ruled that the failure to pay such penalties could not serve as the basis for a claim by the employee for paystub violations or waiting time penalties. However, on May 23, the California Supreme Court held that an employer’s failure to pay an employee the applicable penalties for missed meal periods would give rise to claims by the employee for waiting time penalties upon termination and for failure by the employer to provide proper paystubs.[1] California law requires employers to provide non-exempt employees with an unpaid, thirty-minute meal break during each shift of at least five hours, during which the employees are not required or permitted to perform work. In addition, employers must provide non-exempt employees with a ten minute paid rest period for each four hours (or major fraction thereof) worked. If employers fail to provide either a meal break or a rest period, employees are entitled to one hour of payment at their regular rate of pay as a “penalty” for having been deprived of the statutorily-required breaks. Such payments are often referred to as “premium” payments. Prior to the Supreme Court’s Naranjo decision, there was a great deal of confusion as to whether and for what purposes these premium payments were considered wages or penalties. If premium payments were treated as penalties and not wages, employees would not be able to collect waiting time penalties where the premium payments were not made at or before termination.  Likewise, employees would not be able to pursue claims that their employers had provided them with improper or incomplete paystubs based on the failure by the employers to itemize the required premium payments on the paystubs.  Coupled with an earlier California Supreme Court decision which determined that employees could not recover attorney’s fees on meal and rest period violation claims under a statute authorizing an award of attorney’s fees and costs on “actions to recover wages,” the earlier, pre-Naranjo legal landscape took a great deal of the sting out of claims for missed meal and rest periods. That has now changed. Because the premium payments for missed meal and rest breaks are clearly determined to be wages, employees are entitled to pursue waiting time penalties for the failure of employers to include such premium payments in an employee’s final paycheck upon termination.  Likewise, the failure to provide and properly document such premium payments on each paystub covering a pay period in which they are due to be paid will constitute a separate potential Labor Code violation (subject to applicable defenses). In addition to employees being able to seek waiting time penalties and penalties related to paystub violations, the classification of premium payments as wages...

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