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New Parent Leave Act Impacts Small Employers

Senate Bill 63, California’s New Parent Leave Act, was signed into law on October 12, 2017. The new law, which goes into effect January 1, 2018, requires small business employers to provide employees with 12 weeks of unpaid, job-protected parental leave to bond with a new child. Previously, the requirement to provide bonding leave under the Family Medical Leave Act (FMLA) and California Family Rights Act (CFRA) extended only to employers with 50 or more employees.

Specifics of the New Law

The new law applies to small business employers who employ, within a 75-mile radius of the worksite, 20 or more employees. An employee becomes eligible for this leave after working for an employer for over 12 months and putting in at least 1,250 hours or work during the previous 12-month period. Small business employees will now be entitled to 12 weeks of parental leave to bond with a new child within one year of the child’s birth, adoption, or foster care placement.

Notably, the law does not expressly define the manner of calculating an employee count to determine coverage. Yet, the parental leave law states that CFRA regulations, to the extent they are within an appropriate scope and are consistent with the parental leave and other laws, will govern the new parental leave law. As such, under CFRA, an employer is covered where the required employee count is reflected in the payroll during 20 or more calendar workweeks in the current or preceding calendar year. Thus, until further guidance is provided, it is prudent to conclude that a small business employer is covered when it employs 20 or more employees for at least 20 or more calendar workweeks in the current or preceding calendar year.

Leave under this law is job-protected; as such, the law requires the employer to restore the employee to a comparable position upon return. Employees have the right to use accrued vacation pay, paid sick time, or other paid or unpaid time off negotiated with the employer, during the parental leave. An employee is also entitled to continued health coverage under a group health plan for the duration of the leave, not to exceed 12 weeks over the course of a 12-month period.

Employers subject to the new law have a continuing obligation to provide Pregnancy Disability Leave (PDL) protections. Recall that under PDL, employers of five employees or more are required to provide up to four months of unpaid leave to an employee for pregnancy-related disability, without regard for the duration of employment or hours worked. PDL leave entitlements are provided in addition leave provided under the new parental leave law and therefore do not run concurrently. This results in a potential entitlement of up to seven months of unpaid leave time. The law makes clear, however, that employees subject to the CFRA or FMLA, which includes employers with 50 or more employees, are not subject to protections under the parental leave law.

The new law establishes a requirement that the Department of Fair Employment and Housing create a parental leave mediation pilot program under which an employer may, within 60 days of receipt of a right-to-sue notice, request all parties participate and complete the Department’s Mediation Division Program.

What this Means for Small Employers

Small business owners who are impacted by this new law are advised to craft policies and procedures to address parent leave requests. The process should adequately cover the employee request, notice of rights under parent leave law, certification process, and designation notice to inform the employee of qualification for leave. Leave-related liability arises most commonly from failure to communicate effectively to the employee and from lack of written documentation to substantiate the employer’s compliance with leave law obligations. As such, employers are advised to carefully and consistently document the leave process in writing.

Further, the law expressly states that it is unlawful for an employer to retaliate against an employee for exercising rights under the new law. It is an act of retaliation for an employer to refuse to hire, discharge, fine, suspend, or discriminate against an individual who exercises the right to parental leave or who provides information or testimony as to his or her parental leave or another employee’s parental leave. It is important to keep in mind that liability may arise even when there is a mistaken or false impression regarding the law’s protections. For this reason, employers should carefully consider the timing of any adverse employment actions in relation to an employee’s exercise of or attempt to exercise any rights under new or existing leave laws.









Litigation is not always the most effective practice for resolving complex legal issues. Litigation can be stressful for clients, time-consuming, and costly. When employment issues arise, out-of-court resolution through mediation or arbitration can often optimize case outcomes, while minimizing time and cost, and reducing stress for clients. These processes also allow for flexibility in producing creative solutions.

The Importance of Neutrality

A neutral mediator or arbitrator plays a crucial role in facilitating dispute resolution outside of the courtroom. In order to be completely effective, neutral mediators and arbitrators must evaluate the most appropriate and effective strategies to reach the goals of both parties. A neutral mediator or arbitrator will encourage both parties to voluntarily reach an agreement that meets the needs of both sides. Since mediators and arbitrators play such a key role in shaping the course of a dispute, your choice of an arbitrator or mediator can significantly influence your case.

Choose a Professional with a Strong Legal Background

Arbitration and mediation are complex and continually evolving areas of law; the need for a knowledgeable and fair arbitrator or mediator is paramount. The attorneys at Palmer Kazanjian Wohl Hodson LLP are recognized as expert mediators and arbitrators by NAM (National Arbitration and Mediation).Our attorneys draw on a strong legal background in employment and labor law matters that spans over 30 years. The attorneys at Palmer Kazanjian Wohl Hodson LLP offer a well-rounded perspective; their strong analytical skills give them the ability to overcome complex legal issues and understand the consequences of the issues at hand, to develop reasoned resolutions.

The attorneys at Palmer Kazanjian Wohl Hodson LLP always take a professional approach, which has earned them a respected reputation in the legal community. If you are in need of an expert mediator or arbitrator to resolve an employment dispute, please contact the attorneys at Palmer Kazanjian Wohl Hodson LLP.










In Nakai v. Friendship House Association of American Indians, Inc., the California Court of Appeal determined whether, under the Fair Employment and Housing Act (FEHA), marital issues that spill into the workplace implicate marital status protections and an employer’s duty to investigate.

The Facts

For over 20 years, plaintiff Orlando Nakai (Nakai) worked as a counselor at the Friendship House Association of American Indians, Inc. (Friendship House). Friendship House is a drug and alcohol rehabilitation program for Native Americans. While employed at Friendship House, Nakai married the chief executive officer’s (CEO) daughter.  During Nakai and his wife’s employment at Friendship House, Nakai and his wife experienced marital difficulties that created turmoil in the workplace. In May of 2016, Nakai’s wife revealed to her mother, the CEO of the Friendship House that Nakai “had a gun, was angry with the employees at the Friendship House, was dangerous, and had relapsed on drugs.” Nakai’s wife further told her mother that she had obtained a restraining order against her husband. The next morning, the CEO of the Friendship House, Nakai’s mother-in-law, placed him on administrative leave and then, without investigating her daughter’s allegations, terminated Nakai’s employment. Nakai filed an action for wrongful termination, claiming discrimination on the basis of his marital status and failure to conduct a reasonable investigation prior to discharge. Both claims asserted a violation of the FEHA. The trial court granted summary judgment in favor of the Friendship House, determining Nakai had failed to establish a prima facie case of marital status discrimination and had failed to demonstrate that his employer had an obligation to investigate.

The Court of Appeal’s Analysis

Nakai alleged that he was discharged from the Friendship House “solely because of his status as the spouse of the complaining employee.” Although the FEHA prohibits marital status discrimination, the California Court of Appeal affirmed the trial court’s decision that Nakai could not establish a prima facie case for marital status discrimination. According to the Court, marital status discrimination laws are supposed to “prevent discrimination against classes of people.” For example, employers cannot refuse to hire single people because they are single. On the other hand, the FEHA discrimination laws are not set out to protect people based on their “status of being married to a particular person.”  Since Nakai claimed he was terminated because of his marriage to the CEO’s daughter, not on the basis of being married itself, the Court determined that there was “not a marital discrimination problem.” The Court found that the Friendship House had valid, nondiscriminatory reasons for terminating Nakai; his wife reported that he owned a gun, was allegedly angry at their employees, and was using drugs. The Court determined that because Friendship House had concerns of violence, it had legitimate reasons for firing Nakai.

Next, the Court reviewed Friendship House’s failure to investigate the claims made by Nakai’s wife before firing him. The Court of Appeal explained that Nakai was an at-will employee; therefore, the Friendship House owed him no duty to investigate the wife’s charges before firing him. The Court further explained that absent a contractual or statutory provision to the contrary, employers considering the issue of an employee accused of misconduct “may act peremptorily, arbitrarily, or inconsistently, without providing specific protections such as prior warning, fair procedures, objective evaluation, or preferential reassignment.”  Nakai did not produce a contract or even argue the presence of an implied agreement that required “good cause” for termination. Consequently, the Court of Appeal rejected Nakai’s argument that he had a contractual right to have his employer investigate his wife’s complaints.

The Court of Appeal concluded by considering whether, under the FEHA, employers are under an obligation to investigate the legitimacy of complaints made against alleged perpetrators of crimes. Although the FEHA requires an investigation when a third party accuses an employee of sexual harassment, this was not the charge here. Further, the duty to investigate runs in favor of the victim, not the perpetrator of harassment. Thus, the court determined that the FEHA does not impose a duty to investigate in regards to alleged threats of workplace violence.

Practical Tips for Employers

●This case highlights the conflicts of interest and related issues that can arise when spouses work for the same company, which is not entirely uncommon.

●This case provides guidance to employers on the meaning of marital status discrimination under the FEHA. Additionally, its ruling provides some perspective regarding an employers’ express statutory and contractual duty to investigate misconduct complaints. Unless mandated by contract or statute, there is no express legal duty to investigate.

●However, prudent employers will still consider investigating complaints before disciplining or terminating employees, as this will, among other things, ensure a reasoned decision, prevent future lawsuits, and prevent additional hostility among employees.

●Employers should work closely with expert legal counsel when determining whether to conduct a workplace investigation before disciplining or terminating an employee. If you have questions about workplace investigations or your duty to investigate, please contact the attorneys at Palmer Kazanjian Wohl Hodson LLP.




In McLane Co. Inc. v. EEOC, the U.S. Supreme Court reviewed a district court’s decision on whether to enforce a subpoena issued by the U.S. Equal Employment Opportunity Commission (EEOC). In McLane, a female employee, Damiana Ochoa filed a charge with the EEOC alleging sex discrimination (based on pregnancy) in violation of Title VII of the U.S. Civil Rights Act of 1964 (Title VII). Ochoa claimed that when she tried to return to her job following maternity leave, her employer (McLane Co.) informed her that she could not return to the position she had held for eight years as a cigarette selector, unless she passed a physical strength test. Ochoa’s job as a cigarette selector required her to lift, pack, and move large bins of products into the McLane Co. Distribution Center. McLane Co. had a company policy that required physical evaluations of all new hires and all employees returning from any leave lasting more than 30 days. Ochoa took the test three times but failed to pass and, as a result, she was fired.

As part of its investigation, the EEOC asked McLane Co. to provide them with information about the physical evaluation and individuals who had been asked to take it. Although McLane Co. willingly provided general information about the test and the individuals who had been required to take it, including gender, job class, reason for taking the test, and the score received, McLane Co. refused to disclose “pedigree information” for each test taker, including name, social security number, last known address, telephone number, and the reasons why particular employees were terminated after taking the test.

Case Outcome

After discovering that McLane Co. applied their physical evaluation policy nationwide, the EEOC broadened the scope of its investigation, both geographically and substantively. The EEOC requested McLane Co. provide information for all of the company’s locations nationwide. Additionally, the EEOC requested information beyond the original gender-related inquiries to encompass information relevant to potential age discrimination. However, McLane Co. failed to provide the “pedigree” information related to the EEOC’s expanded information request. As such, the EEOC issued subpoenas for the information. McLane Co. refused to comply with these subpoenas, so the EEOC sought enforcement in the federal district court. The district court declined to enforce the EEOC’s subpoena seeking pedigree information. The district court reasoned that, even if the EEOC had the names of employees who took the physical evaluation, or an opportunity to interview them, the information would not help determine whether McLane Co.’s use of the physical evaluation was discriminatory.

The U.S. Court of Appeals for the Ninth Circuit reviewed the district court’s decisions de novo and reversed. In rendering its opinion, the Ninth Circuit panel questioned, in a footnote, why de novo review applied, observing that other circuits reviewed subpoena enforcement decisions for abuse of discretion. The Supreme Court granted certiorari to resolve the divide between the Ninth Circuit and other circuits over the proper standard of review.

The Supreme Court held that the appropriate standard of review for a district court’s decision to enforce or quash an EEOC subpoena is abuse of discretion. Recognizing that the Title VII provision granting the EEOC subpoena power is identical to the authority granted to the National Labor Relations Board (NLRB) to issue subpoenas, the Court looked to the standard of review used in conjunction with NLRB subpoena enforcement judgments. The Court noted that virtually every circuit courts of appeals reviews EEOC subpoena enforcement cases under the abuse of discretion standard. Further, the abuse of discretion standard falls in line with longstanding practices in other contexts, including in reviewing district court decisions on evidentiary issues at trial and the scope of pretrial criminal subpoenas.

On April 3, 2017, the Supreme Court reversed the Ninth Circuit’s decision and remanded the matter back to the Ninth Circuit to reconsider the EEOC subpoena under the proper standard of review. The judgment was issued May 5, 2017. The Court specifically noted that using the abuse of discretion standard, the Ninth Circuit may, if it believes proper, consider the employer’s arguments regarding whether the EEOC’s subpoenas are unduly burdensome.

Practical Tips for Employers

  • Fighting the EEOC or other governmental entities over a subpoena can be time-consuming and expensive. Since the standard of review is specifically defined as abuse of discretion, it is unlikely there will be frequent overturning of a federal district court’s decision on appeal. Therefore, the real fight over subpoena enforcement will take place in the trial court.
  • As an employer, it is important to know that when governmental entities, like the EEOC, issue information requests that are irrelevant to the charge or appear to overstep their bounds, it is appropriate to challenge the subpoenas on grounds that they are irrelevant, overly burdensome to the employer, or are sought for an improper purpose.
  • However, if faced with an overly broad request for information from a governmental entity, it may be worthwhile to attempt to negotiate a resolution. If an agreement can be reached before a subpoena is even issued, employers may avoid the expense and publicity that could arise from a subpoena enforcement dispute in court.
  • Employers should work closely with expert legal counsel when attempting to negotiate a resolution. If you have questions about compliance with any governmental subpoenas, please contact the attorneys at Palmer Kazanjian Wohl Hodson LLP.

California Court of Appeal Upholds Car Dealership’s “Disturbing” Arbitration Agreement Over the California DLSE Process for Unpaid Wages

California Court of Appeal Upholds Car Dealership’s “Disturbing” Arbitration Agreement Over the California DLSE Process for Unpaid Wages

On August 21, 2017, the First Appellate District in California issued a decision in OTO, LLC. v. Ken Kho, granting a car dealership’s petition to compel arbitration of a complaint filed by a  former employee.

In OTO, LLC v. Kho, the California Labor Commissioner challenged a car dealership’s mandatory arbitration agreement. The agreement required employment disputes to be arbitrated under normal civil litigation rules, before a retired superior court judge, and waived the right to submit wage claims to the Labor Commissioner. The Court of Appeal expressed that it was “disturbed” by the way the employer had drafted and presented the agreement to employees. Despite this proclamation and the fact the agreement bypassed the Labor Commissioner hearing process, the Court upheld the arbitration agreement.


Ken Kho was employed as an auto mechanic for a car dealership. Three years into his employment, he was given a one and one-quarter page agreement entitled, “Employment At-Will and Arbitration.” The agreement was drafted in seven-point font and the entire agreement was contained in a single, dense paragraph. The agreement required the parties to arbitrate their disputes before a retired superior court judge under ordinary pleading, discovery, and evidence rules. Kho received the agreement at his desk from a Human Resource employee, who did not explain the meaning of the agreement or the consequences of signing the agreement to him. Kho claimed to have signed the agreement within approximately three to four minutes.

One year after receiving the arbitration agreement, Kho filed a wage claim with the Division of Labor Standards Enforcement (DLSE), which is regulated by the Labor Commissioner. The dealership filed a petition to compel Kho to arbitrate his wage claim in the Superior Court. The Labor Commissioner intervened to oppose the petition and to uphold Kho’s right to pursue his wage claim before the DLSE.

The trial court denied the dealership’s petition because the arbitration agreement was “highly” unfair and deprived Kho of the advantages an employee has in an informal hearing before the DLSE. That informal hearing, called a “Berman Hearing,” permits employees to avoid court proceedings by trying to resolve wage claims in a speedy, informal, and affordable method for employees. The dealership appealed.

The Court of Appeal’s Decision

Written agreements to arbitrate employment disputes are typically enforceable unless there is something specifically unfair about the agreement’s terms and presentation. These two types of unfairness are called procedural unconscionability and substantive unconscionability. If both forms of unfairness exist to some degree, then a court may find an arbitration agreement invalid.

The Court of Appeal agreed with the trial court that the arbitration agreement was procedurally unconscionable. Kho received the agreement on a take-it-or-leave-it basis; he could not negotiate the terms; and he was presented with it years after he had started working for the dealership. He reasonably assumed he had no choice but to sign it or quit. In addition, the agreement appeared in seven-point font within a block format and had legalistic terms that were difficult to understand without legal training. Further, Kho was not provided with a copy of the arbitration agreement after signing it and did not receive a copy of the arbitration agreement in his first language, which is Chinese. All this together made the degree of procedural unconscionability “extraordinarily high.”

The appellate court closely reviewed the agreement and ultimately ruled in favor of the employer.  The Court determined the agreement was not substantively unconscionable because the arbitration clause was not one-sided and did not overly favor the dealership. All claims between the parties were subject to arbitration and the proceeding would resemble ordinary litigation. Further, although the agreement did not explicitly state that the dealership would have to pay for arbitration, prevailing law requires such a result.

Therefore, although the Court of Appeal was “disturbed” by the way the dealership wrote the arbitration agreement and felt the way it was presented to Kho for signing was “coercive,” the agreement did allow him to pursue his wage claim in an accessible and affordable forum that resembled normal civil litigation. Those features made the agreement substantively conscionable and therefore, enforceable.

Practical Tips for Employers

-Arbitration agreements continue to be a vital tool for companies to speed up the litigation process and reduce fees and costs. However, as discussed above, enforceability of arbitration agreements remains an evolving and complex area of law and a poorly worded arbitration agreement can lead to extensive litigation over the legitimacy of the agreement itself. In order to avoid finding yourself in a prolonged legal battle over an arbitration agreement, it is crucial for employers to maintain up-to-date arbitration agreements that are consistent with recent case law.

-Employers should work closely with expert legal counsel when implementing an arbitration agreement to ensure procedural fairness.  If you have questions about your current arbitration agreement or introducing an arbitration agreement at your company, contact the attorneys at Palmer Kazanjian Wohl Hodson LLP.

Thank you for attending the 2017 Sacramento Area Human Resource Association Annual Conference!

Event Hosted by the Sacramento Area Human Resource Association, with Guest Speakers,  Larry Kazanjian, Managing Partner at Palmer Kazanjian Wohl Hodson LLP and Lukas Clary, Associate at Weintraub Tobin 

Thank you for attending the 2017 Sacramento Area Human Resource Association (SAHRA) Annual Conference, which was held September 19-20, 2017, at the Sacramento Convention Center. The 2017 SAHRA Annual Conference featured guest speakers, Larry Kazanjian, Managing Partner at Palmer Kazanjian Wohl Hodson LLP and Lukas Clary, Associate at Weintraub Tobin. We hope the presentation was informative and useful in providing you with the latest in employment and labor law compliance.

The following topics were covered:

  • Discrimination in the Workplace
  • Sexual Harassment
  • Sexual Orientation Harassment

The case discussed at the Conference is linked below:

Chipotle Mexican Grill Sued by EEOC for Sexual Harassment, Retaliation


We will be providing various seminars throughout 2017 on a variety of employment and labor law topics.  If you would like to receive legal updates and invitations to participate in our upcoming employment and labor law update seminars, please Join our mailing list.  For inquiries, e-mail or contact us at 916-442-3552.

Thank you for attending our Human Resources Policies and Updates on Health Care Reform Seminar!

Seminar Presented by Palmer Kazanjian Wohl Hodson LLP in Partnership with Eureka Insurance Solutions

Thank you for attending our Human Resources Policies and Updates on Heath Care Reform seminar, which was held on September 21, 2017, in partnership with Eureka Insurance Solutions.  We hope the presentation was informative and useful in providing you with the latest in employment and labor law compliance.

The following topics were covered:

  • Wage and Hour Updates
  • Leaves of Absence
  • Marijuana In the Workplace
  • Disciplinary Action and Termination of Employment
  • Employment Classification: Independent Contractors / Exempt Employees
  • Trade Secrets and Confidential Information

The presentation slides are available below:

PowerPoint Presentation Part I

PowerPoint Presentation Part II

PowerPoint Presentation Part III

PowerPoint Presentation Part IV

We will be providing various seminars throughout 2017 on a variety of employment and labor law topics.  If you would like to receive legal updates and invitations to participate in our upcoming  employment and labor law update seminars, please Join our mailing list.  For inquiries, e-mail or contact us at 916-442-3552.



Palmer Kazanjian Wohl Hodson LLP is pleased to announce that Larry Kazanjian, managing partner, has been awarded the “Best of the Bar honor” by the Sacramento Business Journal.

Each year, the Sacramento Business Journal recognizes local attorneys who are nominated and vetted by their peers. Nominees are awarded points based on a formula that gives equal weight to two factors. The first factor is the number of nominations received, with nominations from attorneys in different firms counting for more points than those from attorneys within the same firm. The second factor considers the opinion of 20 well-known lawyers serving on a peer-review panel. Receipt of this award confirms that Larry is held in high-esteem by his peers as a labor and employment attorney.

Larry has practiced labor and employment law for more than 30 years. He has a wide-ranging litigation practice, and he has defended employers responding to claims of discrimination, harassment, and wrongful termination. He also frequently defends wage and hour class and collective actions. His general employment practice involves providing practical advice to keep employers out of litigation and to comply with the full panoply of state and federal employment laws.

Larry also represents management in all aspects of labor relations, including proceedings before the National Labor Relations Board involving representation petitions, collective bargaining, unfair labor practice charges, contract interpretation, employee discipline disputes and Section 301 claims. Larry’s clients include construction companies, professional organizations, hospitals, retail businesses, advertisers, beverage importers and distributors, wholesale distributors, farms and food processing businesses, and insurance companies.

Larry prides himself on vigorous advocacy but maintains cordial, professional relations with opposing counsel, which is conducive to resolving disputes.

SOURCES: Sacramento Business Journal, PKWH website


September 21, 2017 Seminar: Human Resources Policies and Updates on Heath Care Reform

Date: Thursday, September 21, 2017

8:00 AM – Registration/Meet & Greet
8:30 AM – Catered Breakfast followed by Seminars
10:30 AM – Program concludes

Location: Whitney Oaks Golf Club clubhouse, 2305 Clubhouse Drive, Rocklin, CA 95765

Palmer Kazanjian will be providing a seminar on Human Resources Policies and Updates on Health CareReform in partnership with Eureka Insurance Solutions. The session will be presented by Treaver Hodson, partner at Palmer Kazanjian Wohl Hodson LLP and Ned Schaut, president of Eureka Insurance Solutions.

Human Resources Policies  

  • Wage and Hour Updates
  • Leaves of Absence
  • Marijuana In the Workplace
  • Disciplinary Action and Termination of Employment
  • Employment Classification: Independent Contractors / Exempt Employees
  • Trade Secrets and Confidential Information

Updates on Health Care Reform

  • Understanding Single-Payer Health Care
  • Bi-partisan Reform On the Horizon After Failed Repeal of the ACA


Admission is complimentary.  Seats are limited to 40 and will be issued on a first come, first served basis.  Reserve your spot today by emailing  

FEHA Criminal Background Check Updates

Amended Regulations under California’s Fair Employment and Housing Act Provide Greater Protection for Employees and Applicants with Criminal History

Friday, July 21, 2017

The California Fair Employment and Housing Council (referred to as FEHC hereafter) recently adopted regulations that add restrictions to an employers’ consideration of criminal history for employees or applicants. The updates went into effect on July 1, 2017, and are largely consistent with the recent enforcement guidance set forth by the Equal Employment Opportunity Commission (referred to as EEOC hereafter). The new regulations are aimed at mitigating the adverse impact associated with the overly broad use of criminal background history in making employment decisions. In particular, the new regulations identify circumstances in which employers may face liability for considering criminal history in the decision to hire, promote, discipline, or terminate an employee. Employers are advised to adjust company policy and practices in accordance with this regulatory update.

Existing Limitations on Consideration of Criminal History

Existing California law prohibits employers from considering the following types of criminal history:

(1) An arrest or detention that did not result in conviction;

(2) Referral to or participation in a pretrial or post-trial diversion program;

(3) A conviction that has been judicially dismissed or ordered sealed, expunged or statutorily eradicated pursuant to law; and

(4) An arrest, detention, processing, diversion, supervision, adjudication, or court disposition that occurred while a person was subject to the process and jurisdiction of juvenile court law.

The new regulations extend the prohibitions to cover non-felony convictions for possession of marijuana that are two or more years old. [1]

Consideration of Criminal History May Adversely Impact Members of a Protected Class

Employers must be mindful that consideration of criminal history may adversely affect individuals who are members of a protected class. A protected class includes, but is not limited to, race, religion, disability, sex, age, and sexual orientation.

An applicant or employee bears the burden of proving that an employers’ policy of considering criminal history has an adverse impact on a protected class. An adverse impact, is “a substantially different rate of selection in hiring, promotion, or other employment decisions which works to the disadvantage of members of a race, sex or ethnic group.” An adverse impact may be established through the use of conviction statistics demonstrating a marked disparity in conviction rates of persons within a protected class. [2]

Once the applicant or employee demonstrates an adverse impact on a protected class, the burden shifts to the employer to demonstrate the consideration of criminal history is job-related and consistent with business necessity. The consideration of a criminal history cannot be used as a basis to evaluate the person in the abstract. [3] The employers’ policy for considering criminal history must be appropriately tailored. The following factors are relevant in determining whether a policy is legitimately business related:

  • The nature and gravity of the offense or conduct;
  • The time that has passed since the offense or conduct and/or completion of the sentence; and
  • The nature of the job held or sought. [4]

Any bright-line conviction disqualification policy must have a specific and articulable relationship to the person’s ability to perform the functions of his or her position. Of note, bright-line conviction disqualification policies, including conviction-related information that is seven or more years old, are subject to a rebuttable presumption that the employers’ policy is not appropriately tailored or consistent with business necessity. [5] Alternatively, an employer may conduct an individualized assessment of the circumstances surrounding the applicant’s or employee’s disqualification by the conviction screening process.

New Notice Requirements and Opportunity to Present Information

The employers’ assessment of the individual applicants’ or employees’ conviction must involve notice of the disqualification and a chance for the applicant or employee to demonstrate the disqualification should not be applied to their particular circumstances. If an applicant or employee demonstrates the criminal history is factually inaccurate, said criminal history cannot be considered in the employers’ employment decisions. [6] Additionally, the employer should consider whether the additional information provided by the applicant or employee warrants an exception because the criminal history consideration is not job-related or consistent with business necessity. [7]

Although an employer may demonstrate that their policy of considering an individuals’ criminal history is job-related and consistent with business necessity, the applicants or employees may also challenge the employers’ policy by demonstrating that a less discriminatory policy or practice would serve the employer’s needs. [8] Accordingly, the FEHC recommends using “a more narrowly targeted list of convictions or another form of inquiry” that accurately evaluates job qualifications or risk without an undue burden on the employer.

Effect on California Employers

As a result of the new limitations on consideration of criminal history in employment decisions, employers may want to review their policies on the use of criminal history in employment decisions to ensure compliance with the new FEHC regulations. Employers should avoid bright-line conviction disqualification policies because such polices may adversely impact members of a protected class. As an alternative, an employer may want to conduct an individualized assessment of employees or applicants disqualified by the conviction screening process.

[1] These restrictions are codified in the California Code of Regulations, title 2, sections 11017 and 11017.1.

[2] California Code of Regulations, title 2, section 11017.1(d).

[3] California Code of Regulations, title 2, section 11017.1(d)

[4] California Code of Regulations, title 2, section 11017.1 (e)(1)(A)(B)(C)

[5] California Code of Regulations, title 2, section 11017.1 (e)(2)(A)

[6] California Code of Regulations, title 2, section 11017.1 (e)(3)

[7] California Code of Regulations, title 2, section 11017.1 (e)(2)(B)

[8] California Code of Regulations, title 2, section 11017.1 (g)

2017 SAHRA Annual Conference

Date: September 19, 2017 – September 20, 2017

Time: All-day event

Location: Sacramento Convention Center – 1400 J Street Sacramento CA, 95814 United States

Palmer Kazanjian Wohl Hodson LLP is pleased to announce that it has been selected, together with Weintraub Tobin Chediak Coleman Grodin Law Corporation, to present at the 2017 SAHRA Annual Conference.  Our segment will consist of a panel discussion on class action litigation issues.

Join over 250 of the region’s leading human resource professionals and service providers at the 2017 SAHRA Annual Conference. This two-day event will offer attendees the opportunity to network with peers, learn about important and innovative goods and services and stay current on industry topics through a full program of educational sessions.

For general information regarding event admission, please visit their homepage here.

2018 Generations Conference

Palmer Kazanjian Wohl Hodson LLP is pleased to announce that two firm partners, Christopher Wohl and Treaver Hodson, have been selected to present in next year’s Generations Family Business Conference. They will be presenting alongside an impressive roster of local, national and international keynote speakers who will share important lessons and inspiring personal stories about their family businesses. Our segment will consist of a panel discussion on the impact of personal private conduct on the workplace, executive agreements, ownership interest, sexual harassment and trade secret protection, with an emphasis on the balance between business interests and privacy interests.

If you are a business owner and are interested in participating in our presentation, please contact us at  or at (916) 422-3552.

For general information regarding event admission, please visit their homepage here.


What others are saying!

“My client families keep telling me how much they got out of attending this conference! I brought along members of three families who wanted to hear my presentation and attend some of the breakout sessions. All had a great time, loved learning and networking with the other families there, and reported back home on how valuable it was for them. I will enthusiastically recommend the Generations Conference in the future.”



“While every company is unique, the common themes and issues family businesses face came up again and again at the Generations conference. The conference gave me perspective on my family business that I can’t see from the inside.”



“The conference was very enjoyable. I would say that it was really valuable to me as a contributor to consider our family’s development in a structured way. This created some significant new learning, which is all you can ask of a conference of people that have never met each other before.”



“Being able to discuss the similar issues that all family business encounter with other family businesses has helped us address our challenges using real world examples, everybody is always willing to share their successes and failures.”



“The Family Business Center allows you to interact with people struggling with the same issues, communication is open and all the forums always send you away with new ideas and means to use and implement.  The resources and examples from other businesses often validate what does work, that alone is worth membership.”



Larry M. Kazanjian Honored as 2017 Sacramento Magazine Top Lawyer

Palmer Kazanjian Wohl Hodson LLP is pleased to announce that the firm’s managing partner Larry M. Kazanjian will be honored as a 2017 Sacramento Magazine Top Lawyer. Each year, Sacramento Magazine works with the national firm Professional Research Services to poll attorneys in the Sacramento region asking them who they would recommend among 56 legal specialties. Larry was nominated as one of the top labor and employment attorneys in the Sacramento region.

Mr. Kazanjian has practiced employment law for more than 25 years and has represented employers in litigation of discrimination and wrongful termination matters. His litigation experience includes dozens of jury trials in the representation of defendants. Mr. Kazanjian’s general employment law practice involves the daily rendering of practical advice assisting clients of all sizes with employment issues including wage and hour law, harassment and discrimination, compliance with ADA/FMLA requirements, compliance with INS regulations governing I-9 forms, preparation of personnel manuals, drug/alcohol policies and other preventative measures.

Mr. Kazanjian also represents management clients in all aspects of labor relations, including proceedings before the National Labor Relations Board involving representation petitions, collective bargaining, unfair labor practice hearings, contract interpretation, employee discipline disputes and Section 301 breach of collective bargaining agreements. Representative clients include construction companies, professional organizations, hospitals, retail businesses, waste disposal companies, advertisers, beverage importers, wholesale distributors, agricultural employers and insurance companies.

Mr. Kazanjian frequently speaks on employment law compliance including harassment/discrimination, wage and hour compliance, alcohol/drug policies and practices, OSHA compliance, ergonomics, discrimination/ harassment and many other employment and labor law topics. Mr. Kazanjian is admitted to practice in all California Courts.

Thank you for attending our June 15, 2017 Employment and Immigration Law Basics for Business Owners seminar!

Seminar Presented by Palmer Kazanjian Wohl Hodson LLP in Partnership with Wilner & O’Reilly, APLC

Thank you for attending our Employment and Immigration Law Basics for Business Owners seminar, which was held on June 15, 2017, in partnership with Wilner & O’Reilly, APLC.  We hope the presentation was informative and useful in providing you with the latest in employment and labor law compliance.

Immigration Law
  • How federal immigration laws apply to employment
  • Immigrant vs. non immigrant employees
  • Government entities involved- USCIS, DHS, ICE, CBP, EEOC, DOL, DOS, OSC, SSA, DFEH, FDNS
  • Visas in the workplace
  • PERM and prevailing wage
  • Wage and Hour Updates
  • Leaves of Absence
  • Disciplinary Action and Termination of Employment
  • Employment Classification: Independent Contractors/ Exempt Employees
  • Trade Secrets and Confidential Information

The presentation slides are available below:

Part I Presentation Slides

Part II Presentation Slides

We will be providing various seminars throughout 2017 on a variety of employment and labor law topics.  If you would like to receive legal updates and invitations to participate in our upcoming  employment and labor law update seminars, please Join our mailing list.  For inquiries, e-mail or contact us at 916-442-3552.  

KVIE Golf Classic


Palmer Kazanjian Wohl Hodson is pleased to support the 7th Annual KVIE Golf Classic. The event will take place on June 12, 2017 at the Serrano Country Club. If you are interested in participating in this event, the registration page can be found HERE.



Recent Sponsorships At-A-Glance


Boy Scouts of America

Palmer Kazanjian Wohl Hodson was pleased to support the Third Annual Push Dinner benefitting the Golden Empire Council of the Boy Scouts of America.  The proceeds from this dinner help provide the Scouting program to young people all over Northern California.  The dinner was held on Thursday, May 4, 2017, at McClellan Conference Center in McClellan. If you are interested in supporting Boy Scouts of America, you can find more information about upcoming events HERE.


Local Parish School

Palmer Kazanjian Wohl Hodson was pleased to support Our Lady of the Assumption’s (OLA) Eighth Annual Cougar Classic Golf Tournament. Proceeds from the event directly benefited school programs including classroom technology upgrades, sports programs, financial assistance for the annual 8th grade Washington D.C. trip, tuition assistance, and education enhancements.  The tournament was held on April 28, 2017.  If you are interested in supporting OLA you can find information about upcoming events HERE.


Sacramento County Bar Association

Palmer Kazanjian Wohl Hodson was pleased to support the Sacramento County Bar Association’s Fifth Annual Golf Tournament. Proceeds from the event directly benefit the Sacramento County Bar Association and enable the SCBA to continue providing resources to enhance the legal profession, and the community served by it. The tournament was held on Friday, May 19, 2017.  If you are interested in supporting the Sacramento County Bar Association, you can find information about upcoming events HERE.

Thank You for Attending Our May 16, 2017 Seminar!

Seminar Presented by Palmer Kazanjian Wohl Hodson LLP in Partnership with Robert Sanders, Attorney at Law

Thank you for attending our Employment Law for Health Practice Owners seminar, which was held on May 16th, 2017, in partnership with Robert Sanders, Attorney at Law.  We hope the presentation was informative and useful in providing you with the latest in employment and labor law compliance.

The following topics were covered:
  1. Employment Law Basics
  2. Practical Solutions for avoiding the hazards commonly associated with the employment relationship in health care practices
  3. Maintaining workable personnel policies and practices
  4. Valuing the independent contractor relationship
  5. Planning employee compensation, benefits, and incentives

The presentation slides are available below:

Part 1 Presentation Slides

Part 2 Presentation Slides

Part 3 Presentation Slides

We will be providing various seminars throughout 2017 on a variety of employment and labor law topics.  If you would like to receive legal updates and invitations to participate in our upcoming  employment and labor law update seminars, please Join our mailing list.  For inquiries, e-mail or contact us at 916-442-3552.  

June 15, 2017 Employment and Immigration Law Basics for Business Owners

Date: June 15, 2017

Time: Presentation: 8:30AM to 10:30AM

Location: 2277 Fair Oaks Blvd., Suite 455
Sacramento, CA 95825

Palmer Kazanjian will be providing a seminar on Employment and Immigration Law Basics for Business Owners seminar in partnership with Wilner & O’Reilly, APLC.   The session will be presented by Treaver Hodson, partner at Palmer Kazanjian Wohl Hodson LLP and Michael Wang, Managing Attorney at Wilner & O’Reilly, APLC.

The following topics will be covered:

Immigration Law
  • How federal immigration laws apply to employment
  • Immigrant vs. non immigrant employees
  • Government entities involved- USCIS, DHS, ICE, CBP, EEOC, DOL, DOS, OSC, SSA, DFEH, FDNS
  • Visas in the workplace
  • PERM and prevailing wage
General Employment Law
  • Wage and Hour Updates
  • Government Wage and Labor Audits
  • Employment Classification: Independent Contractors/ Exempt Employees
  • Leaves of Absence
  • Disciplinary Action and Termination of Employment
  • Trade Secrets and Confidential Information

Admission is complimentary. Breakfast pastries and beverages will be provided. Seats are limited and will be issued on a first come, first served basis. Please register by June 12th to attend. Limit three attendees per company. REGISTER HERE.  Please direct any inquiries to


PKWH Sponsors Local Parish School

Palmer Kazanjian Wohl Hodson was pleased to support Our Lady of the Assumption’s (OLA) Eighth Annual Cougar Classic Golf Tournament. Proceeds from the event directly benefited school programs including classroom technology upgrades, sports programs, financial assistance for the annual 8th grade Washington D.C. trip, tuition assistance, and education enhancements.

The tournament was held on April 28, 2017, but if you are interested in supporting OLA you can find information about upcoming events HERE.

Court Affirms Jury Verdict in Favor of Police Recruits Who Brought Claim Against the City of Los Angeles for Failure to Provide a Reasonable Accommodation

In Atkins v. City of Los Angeles (CA2/7 B257890 2/14/17), the California Court of Appeal for the Second Appellate District recently upheld a jury’s finding that the City of Los Angeles failed to provide reasonable accommodations to recruits from the City Police Academy in violation of the Fair Employment and Housing Act (“FEHA”).

The five recruits suffered injuries during their six-month training course which left them temporarily physically disabled.  The City had a prior practice of allowing injured recruits to join a program known as the Recycle Program, which placed recovering recruits in desk jobs until full recovery or until permanent disability.  In an effort to reduce costs and ensure compliance with a statute requiring training and probation to be completed within two years, the City terminated the Recycle Program.  The recruits, who were still recovering from their injuries at the time of the program’s termination, were notified that unless they obtained immediate medical clearance, they would have to resign or be terminated.

The jury found that the City unlawfully discriminated against the plaintiffs based on their physical disabilities, failed to provide them with reasonable accommodations and failed to engage in the interactive process required by FEHA.  The recruits were awarded economic loss damages of $12,000,000 in total for wages that would have been earned until each recruit’s hypothetical retirement.

On appeal, the Court concluded that the recruits were not “qualified individuals” under FEHA for purposes of their discrimination claim and reversed the jury’s verdict on that claim.  The Court affirmed the jury’s verdict in favor of the recruits on their claim of failure to accommodate.  The court also vacated the jury’s award of damages as “unreasonably speculative” and remanded on that issue.

Disability Discrimination

To establish their claim of disability discrimination at trial, the recruits submitted evidence of their ability to “perform the essential functions for the positions to which they sought reassignment.”  The recruits’ requested accommodations included either transfer to city positions not requiring physical exertion or continued participation in the Recycle Program.  On appeal, the Court held that the relevant question in assessing whether the recruits had been subjected to disability discrimination should have been whether the recruits “could perform the essential functions of [a police recruit] without or without reasonable accommodation.”  The Court found that the recruits did not have the ability to perform the essential functions of a police recruit and further concluded that the proposed accommodation was “unreasonable as a matter of law” because it “eliminate[d] one or more essential functions of the job of a police recruit or officer.”  Because the recruits could not perform the essential functions of the police recruit position, they were not “qualified individuals” under FEHA and therefore could not establish their claim for disability discrimination.

The Duty to Provide Reasonable Accommodation

The Court next considered whether the City met its duty to reasonably accommodate the plaintiffs.  While the question whether plaintiffs could perform the essential functions of a position to which they sought reassignment was not the relevant inquiry with respect to the plaintiffs’ claim for disability discrimination, the court held that it was “relevant to a claim for failure to accommodate under section 12940, subdivision (m), and to a claim for failure to engage in the interactive process.”

“The reasonableness of a particular accommodation,” the court explained, “must be determined in light of an employer’s policies and practices.”  Importantly, the City had a longstanding practice of allowing injured recruits to remain in the Recycle Program indefinitely until they healed and could return to the Academy or until their disabilities became permanent.  The new policy, which restricted participation in the Recycle program to six months, constituted “a significant and unprecedented change” in policy.  Considering these facts, the Court concluded that the request for reassignment to the Recycle program until full recovery or until permanent disability was not unreasonable.

Employers should note that the duty to reassign an employee as a reasonable accommodation may extend to, as found in this case, probationary or pre-probationary employees.  The City cited EEOC guidance in arguing that the recruits, who never completed their training, had never performed the essential functions of their “original position” and were therefore not qualified individuals under FEHA.  However, as observed by the Court, there was no dispute as to their ability to perform the essential functions of a police recruit at the time of hire, nor to the fact that such duties had been performed, “even if for a relatively short time.”

Affirmative Defense of Undue Hardship

Undue hardship is an affirmative defense to a claim for failure to accommodate.  The Court emphasized that “an employer must do more than simply assert that it had economic reasons to reject a plaintiff’s proposed reassignment.”  Rather, an “employer must show why and how asserted economic circumstances would affect its ability to provide a particular accommodation.” Citing FEHA, the Court defined “undue hardship” as “an action requiring significant difficulty or expense, when considered in light of the following factors:

(1) The nature and cost of the accommodation needed;

(2) the overall financial resources of the facilities involved in the provision of the reasonable accommodations, the number of persons employed at the facility, and the effect on expenses and resources or the impact otherwise of these accommodations upon the operation of the facility;

(3) the overall financial resources of the covered entity, the overall size of the business of a covered entity with respect to the number of employees, and the number, type, and location of its facilities;

(4) the type of operations, including the composition, structure, and functions of the workforce of the entity; and

(5) the geographic separateness or administrative or fiscal relationship of the facility or facilities.”

The jury considered evidence presented by the City of a City-wide hiring freeze and the City’s efforts to comply with the statutory 2-year rule for completion of the training process for police recruits, but ultimately concluded that the City failed to establish significant difficulty or expense beyond the result of “potentially lower [police officer] staffing levels.”  The Court suggested that a different conclusion might have been reached if the City had offered evidence “to show either that the expense of hiring additional recruits would have been too great in relation to the City’s financial health or that the City could not have met its public safety needs if the plaintiffs remained in the recycle program or if the City could not have hired additional recruits.”

Practical Tips for Employers

  • When instituting a policy change that no longer provides for an accommodation, employers should ensure that the policy does not result in disparate treatment of employees who were employed by the company prior to the policy change.  (In other words, the policy should apply prospectively only, and present employees may continue to receive the benefits of the prior policy).


  • Employers should implement a reasonable accommodation policy focused on appropriately assessing requests for accommodation and training management and HR personnel to engage in in timely and good faith interactive process.  Reasonable accommodation can include changing job duties or work hours, relocating the work area, providing mechanical or electrical aids and providing leave.  Although an employer is not required to create a new position, an employer must consider transferring an employee to an available position for which they are qualified.  In a previous article, we discussed the, EEOC’s Guidance on Leave as a Reasonable Accommodation.


Whether undue hardship exists involves a complex fact-based inquiry.  Courts will look to company policies and past practices in assessing whether a requested accommodation poses a significant expense.  Financial hardship is a function not only of cost itself but of how such cost affects the employer’s overall financial condition.

Employer’s Obligation to Separately Compensate Rest Periods for Commission-Based Employees

The California Court of Appeal for the Second District ruled in Vaquero v. Stoneledge Furniture LLC that workers paid on a commission basis must be separately compensated for legally required rest periods.1 Coupled with the California Supreme Court’s ruling late last year in Augustus v. ABM prohibiting on-call rest periods, it is more important than ever for employers to be vigilant about complying with rest period requirements.2

i. The Requirement to Separately Compensate Rest Periods in Piece-Rate Compensation.

The IWC Wage Orders require employers to count “rest period time” as “hours worked for which there shall be no deduction from wages.”3 In 2013, California appellate courts issued two decisions concerning the application of California’s minimum wage laws to piece-rate compensation.

In Gonzalez v. Downtown LA Motors, the Court of Appeal held that Wage Order No. 4 applied to piece-rate compensation in the same manner it [did] for hourly compensation.4 With regard to the requirement that employees be paid the minimum wage “for all hours worked,” the Court concluded piece-rate employees were entitled to “be compensated at the minimum wage for each hour worked,” rather than by averaging compensation over a period of time. Thus, the Court held that under California law, piece-rate employees were entitled to separate hourly compensation for non-productive time, including time spent waiting for tasks, attending meetings and trainings, or performing other work for an employer.5

Months later, in Bluford v. Safeway Stores, Inc., the Court of Appeal held that allowing employers to account for rest periods indirectly by negotiating a higher piece-rate violated California law because the compensation structure averaged pay to comply with the minimum wage requirement rather than separately compensating employees for their rest periods at the minimum or contractual hourly rate.6 Following the Gonzalez and Bluford decisions, California enacted Assembly Bill 1513. A.B. 1513 added section § 226.2 to the Labor Code to address the claims of piece-rate employees for recovery of wages and related damages and penalties. Section 226.2 clarified and settled the pay requirements for mandated rest and recovery breaks and other nonproductive time for piece-rate compensation agreements.

Until now, the law was unsettled as to whether employers’ obligation to pay for rest periods and other nonproductive time separately extended to other incentive pay plans. The Vaquero decision addressed that.

ii. The Requirement to Separately Compensate for Rest Periods Applies to Employees Paid on Commission

The Court in Vaquero held that Wage Order No. 7 applied equally to commissioned employees as to employees paid by piece-rate, or any other compensation system that did not directly provide compensation for rest breaks and other nonproductive time. The Court noted the commission agreement used by Stoneledge during the class period is “analytically indistinguishable” from a piece-rate system in that neither allowed employees to earn wages during rest periods.

The Court found it illogical to assume that a commission-based employee working 100 minutes more per 40 hour work week would not earn more in commissions than an employee who spent those same 100 minutes on break. This is because the employee who did not take breaks could spend those 100 minutes greeting new customers, following up with potential leads, or answering emails and phone calls relating to pending orders, which is far more likely to lead to sales resulting in pay over and above the minimum rate.

iii. Stoneledge’s Commission Agreement Did Not Separately Compensate Sales Associates for Rest Periods.

Stoneledge compensated their sales associates pursuant to a Commission Agreement. Upon termination of their employment, employees Vaquero and Schaefer filed a class action complaint alleging that Stoneledge’s Commission Agreement failed to adequately compensate them for rest periods in violation of California law.

Under the Commission Agreement, if a sales associate failed to earn a “minimum pay” of at least $12.01 per hour in commissions in any pay period, Stoneledge paid the associate a draw against future advanced commissions. The Commission Agreement explained, “[t]he amount of the draw will be deducted from future advanced commissions, but an employee will always receive at least $12.01 per hour for every hour worked.”

Stoneledge contended the Commission Agreement properly compensated employees for rest periods because an employee was guaranteed the minimum pay of $12.01 per hour. The Court reasoned, however, that such a plan was similar to Bluford in that it did not directly compensate sales associates for rest periods. Further, the Court found the advances or draws against future commissions were not compensation for rest periods because they were not compensation at all; at best, they were “interest-free loans.” The Court reasoned that taking back money paid to the employees effectively reduced either rest period compensation or the contractual commission rate, both of which violated California law.7

iv. What This Means for Employers

Taken with the decision in Augustus, employers have yet another obstacle to navigate in the already complex system of California wage and hour law. The Court held that Stoneledge’s compensation agreement was unlawful, but it did not provide guidance regarding how to appropriately structure commission compensation moving forward.

Notwithstanding, Stoneledge subsequently implemented a new commission agreement that paid sales associates a base hourly wage of $10 (the minimum wage at the time) “for all hours worked.” In addition, sales associates could earn various types of incentive payments based on a percentage of sales. Under the new agreement, no portion of a sales associate’s base pay could be deducted from or credited against incentive payments. This revised plan was not challenged by plaintiffs and, as such, may provide guidance regarding appropriate compliance moving forward.

As California law continues to become more complex, it is more important than ever for employers to ensure careful compliance. Wage and hour violations can quite easily turn into costly class action lawsuits and may carry hefty civil penalties. Before implementing any incentive based payment plans, an employer should be sure to separately and directly compensate for rest periods at the minimum wage, or as further defined by law. Anyone with an existing commission compensation plan should conduct a full audit of the plan to make sure it follows the requirements set forth in Vaquero.

1 Vaquero v. Stoneledge Furniture LLC (2017) 9 Cal.App.5th 98.

2 Augustus v. ABM (2016) 2 Cal.5th 257 (holding employers’ requirement that employees remain “on-call” during rest periods violated employer’s obligation to relieve employees of all duties during rest periods.) For further analysis of the Augustus and related decisions, click here.

3 8 CCR §11070(12)(A).

4 Gonzalez v. Downtown L.A. Motors (2013) 215 Cal. App. 4th 36, 49.

5 Gonzalez, 215 Cal. App. 4th at 40–41.

6 Bluford v. Safeway Stores, Inc. (2013) 216 Cal. App. 4th 864, 871.

7 An employer may not collect or receive from an employee “any part of wages theretofore paid by said employer. Cal. Lab. Code § 221. An employer may not withhold any part of a wage agreed upon. Cal. Lab. Code § 222. An employer is prohibited from “secretly paying a lower wage while purporting to pay the wage designated by statute or by contract.” Cal. Lab. Code § 223. An employer may not average wages across pay periods to satisfy minimum wage requirements “effectively reduces employees’ contractual hourly rate. Armenta 135 Cal.4th at 323.

May 16, 2017-Seminar: Employment Law for Healthcare Practice Owners

Article 3 picture

Date: Tuesday, May 16th, 2017

Time: Presentation: 6:30PM to 7:30PM

Location: El Dorado Hills, CA 95762

Palmer Kazanjian will be providing a seminar on Employment Law Issues for Healthcare Practice Owners in partnership with Robert Sanders, Attorney at Law, Inc.  The session will be presented by Treaver Hodson, partner at Palmer Kazanjian Wohl Hodson LLP.

The following topics will be covered:

  • Employment law basics
  • Practical solutions for avoiding the hazards commonly associated with the employment relationship in health care practices
  • Maintaining workable personnel policies and practices
  • Valuing the independent contractor relationship
  • Planning employee compensation, benefits and incentives

If you are interested in attending this seminar or our next complimentary Employment and Labor Law Update seminar, please contact us here or by phone at 916-442-3552.

PKWH Sponsors Local Historical Society

PKWH Sponsors Local Historical SocietyPalmer Kazanjian Wohl Hodson is pleased to support the Folsom Historical Society’s Third Annual Historic Golf Tournament. Proceeds for the event benefit the Folsom Historical Society’s family of museums, including the Folsom History Museum, Pioneer Village, and the Museum of Wonder and Delight.

The tournament is Friday, April 28, 2017, at the Empire Ranch Golf Club in Folsom. If you’re interested in supporting the event you can find more information HERE. Please note the deadline to register is April 16th.

Thank you for attending our April 5, 2017 Employment and Labor Law Updates Seminar!

Seminar Presented by Palmer Kazanjian Wohl Hodson LLP in Partnership with PWA Insurance Services

Thank you for attending our Employment and Labor Law Updates for 2017 seminar, which was held on April 5, 2017, in partnership with PWA Insurance Services.  We hope the presentation was informative and useful in providing you with the latest in employment and labor law compliance.

The following topics were covered:

  • Wage and Hour Updates
  • Government Wage and Hour Audits
  • Employment Classification: Independent Contractors / Exempt Employees
  • Leaves of Absence
  • Disciplinary Action and Termination of Employment
  • Trade Secrets and Confidential Information

The presentation slides are available below:

Part I Presentation Slides

Part II Presentation Slides

Part III Presentation Slides

We will be providing various seminars throughout 2017 on a variety of employment and labor law topics.  If you would like to receive legal updates and invitations to participate in our upcoming  employment and labor law update seminars, please Join our mailing list.  For inquiries, e-mail or contact us at 916-442-3552.  


April 5, 2017-Seminar: Employment and Labor Law Updates for 2017

Seminar Hosted by Palmer Kazanjian Wohl Hodson LLPPicture 1 (March)

Date: Wednesday April 5, 2017

Time: Presentation: 8:30AM to 10:30AM;  Registration and Networking: 8:00AM-8:30AM

Location: PWA Insurance Services LLC – Main Conference Room
2377 Gold Meadow Way
Rancho Cordova, CA 95670

Palmer Kazanjian will be providing its second Employment and Labor Law Updates for 2017 seminar in partnership with PWA Insurance Services LLC.  The session will be presented by Treaver Hodson, partner at Palmer Kazanjian Wohl Hodson LLP.

The following topics will be covered:

  • Wage and Hour Updates
  • Government Wage and Labor Audits
  • Employment Classification: Independent Contractors/ Exempt Employees
  • Leaves of Absence
  • Disciplinary Action and Termination of Employment
  • Trade Secrets and Confidential Information

Please register to R.S.V.P.  Seating is limited. Direct any inquiries to  Register Here.

Thank you for attending our March 1, 2017 Employment and Labor Law Updates for 2017 Seminar!

Seminar Hosted by Palmer Kazanjian Wohl Hodson LLP

Thank you for attending our Employment and Labor Law Updates For 2017 seminar, which was held on March 1, 2017, in partnership with the Cicotte Law Firm and Eureka Insurance Solutions.  We hope the presentation was informative and useful in providing you with the latest in  employment and labor law compliance.

A copy of the presentation slides is available below:

Part I: ACA Outlook 2017

Part IIBenefits Update 2017

Part III:  Employment and Labor Law Updates 2017

We will be providing various seminars throughout 2017 on a variety of employment and labor law topics.  If you would like to receive legal updates and invitations to participate in our upcoming  employment and labor law update seminars, please Join our mailing list.  For inquiries, e-mail or contact us at 916-442-3552.  

March 7, 2017-Seminar: Protecting Trade Secrets

March Legal Series Session 1: Protecting Trade Secrets

Date: Wed., March 7, 2017

Time: 8:30AM to 10:30AM

Location:  Sacramento, California

Palmer Kazanjian will be providing its Protecting Trade Secrets seminar in partnership with Sacramento Area Human Resource Association (SAHRA).  The session will be presented by Treaver Hodson, partner at Palmer Kazanjian Wohl Hodson LLP, and Lexee Asterlin, associate at Palmer Kazanjian Wohl Hodson LLP.

The presentation will begin with an overview of trade secret laws, including a detailed discussion of the California Uniform Trade Secrets Act, highlights of federal Defend Trade Secrets Act and applicable California Business and Professions Code torts.  The second portion will cover recommended workplace practices for California employers and the use of agreements to protect trade secrets and deter trade secret misappropriation.  We will conclude with a discussion of remedies available to an employer and an assessment of the balance between an employer’s need to monitor employees and an employee’s rights under the National Labor Relations Act.

If you are interested in attending our next Employment and Labor Law Update seminar, please let us know at or  contact us at 916-442-3552.

March 1, 2017-Seminar: Employment and Labor Law Updates for 2017

Cicotte and Eureka Insurance AnnouncementSeminar Hosted by Palmer Kazanjian Wohl Hodson LLP

Date: Wednesday March 1, 2017

Time: 8:30AM to 10:30AM
Location: Our Office: 2277 Fair Oaks Blvd. Ste. 455, Sacramento, CA 95825

Palmer Kazanjian will be providing its Employment and Labor Law Updates for 2017 seminar in partnership with the Cicotte Law Firm and Eureka Insurance Solutions.  The session will be presented by Treaver Hodson, partner at Palmer Kazanjian Wohl Hodson LLP, George Cicotte, founder of The Cicotte Law Firm PLLC and Ned Schaut, president of Eureka Insurance Solutions.

The following topics will be covered: 
  • Employment and Labor Law Updates for 2017
  • ACA Under the Trump Administration
  • Benefits Law Update for 2017  
Admission is complimentary. Breakfast pastries and beverages will be provided.  Seats are limited and will be issued on a first come, first served basis.  Limit two attendees per company. Please direct any inquiries to or contact us 916-442-3552.  

Please register by February 20th, 2017 to attend.  Register Here


Employment and Labor Law Updates for 2017


With the end of 2016 also came the end of yet another legislative term, providing a multitude of new laws, which took effect January 1, 2017 (unless otherwise specified). This article provides a survey of the new laws by category, including health and safety, public works, discrimination, leaves, contingent workforce, wage and hour, and employment contracts, and how these new laws may affect employers in the New Year and beyond.  We recommend all employers review the new laws and make any necessary changes to bring their businesses into compliance.

Health and Safety:

A.B. 7: Smoking in the Workplace

Effective January 1, 2017, A.B.-7 expanded the workplace smoking prohibition to include owner-operated businesses where the owner-operator is the only worker and has no employees, independent contractors, or volunteers. This bill also expanded the definition of “enclosed space” where smoking is prohibited and eliminated exemptions for hotel or motel lobbies; meeting and banquet rooms in a hotel or motel; warehouse facilities; gaming clubs; bars and taverns; employee break rooms; and businesses with five or fewer employees. Employers who allow smoking in the workplace should assure that they were not relying on any of the eliminated exemptions in allowing smoking in the workplace. If any of the now eliminated exemptions were relied upon, employers must change their policies accordingly.

S.B. 1167: Heat Regulations for Indoor Workers

This bill requires the division of Occupational Safety and Health to propose a heat illness and injury prevention standard applicable to indoor workers to the Occupational Safety and Health Standards Board. This standard is to be reviewed and adopted by January 1, 2019. This bill has very little impact on employers until the new standard is adopted. However, employers should watch for any proposed rules so policies may be brought into compliance, prior to the regulations taking effect.

A.B. 2687: Driving Under the Influence with a Passenger for Hire in Vehicle.

Effective January 1, 2018, this bill makes it unlawful for a person to drive a motor vehicle with a blood alcohol content of 0.04 or higher when a passenger for hire is in the vehicle or to cause injury to a passenger for hire while driving a motor vehicle with the specified blood alcohol content. A “passenger for hire” is defined as someone for whom consideration is contributed or expected as a condition of carriage in the vehicle, meaning someone who pays or is expected to pay money for a ride. This bill would most significantly affect drivers of ride services such as Uber and Lyft. Additionally any employer who employs these drivers should be aware of the potential vicarious liability for an offense. Employers in this industry may wish to audit their drug and alcohol policy and assure that their employees are aware of this change.

Public Works:

S.B. 954: Per Diem Wages for Employers Subject to Collective Bargaining Agreements

This bill qualifies which employer payments and benefits may be included as per diem wages for the purposes of an employer’s obligation to pay prevailing wages on public works projects where an employer is obligated to make certain payments pursuant to a collective bargaining agreement (CBA). If an employer is obligated under a CBA, he or she may include industry advancement and any administrative fees relating to a CBA in per diem wages. The purpose of this bill is to prevent employers from passing these costs to employees without the input or consent of the employees or their labor representatives. This means employers who are not subject to a CBA may not credit industry advancement payments towards the prevailing wage rate.

A.B. 1926: Prevailing Wages for Apprentices’ Pre-Employment Activities

This bill expanded the requirement that apprentices who perform work on a public works project be paid the prevailing wage rate. Under the new law, apprentices must also be paid prevailing wages for any pre-employment activities required by the contractor. Pre-employment activity includes filling out an application; testing, training, or examination; or other pre-employment process that is a condition of employment. Additionally the apprentice shall be paid for the travel time to and from the required activity. Starting January 1, 2017, employers who wish to use apprentices for public works projects should make sure to pay them the appropriate wage for these pre-employment activities.

A.B. 326: Timing of the Return of Wage and Penalty Assessments Held by Labor Commissioner

This bill shortens the amount of time the Department of Industrial Relations has to release any civil wage and penalty assessments held by the Labor Commissioner for violation of the laws regulating public works contracts, during a review or appeal of the penalty. The Department must release the money to the person or entity entitled to it within 30 days of either: (1) the conclusion of all administrative and judicial review; or (2) the department’s receipt of written notice from the Labor Commissioner of a settlement or other final disposition of an assessment. Employers should be aware that starting January 1, 2017, upon a successful judgment by the Labor Commissioner, they no longer have to wait 60 days for their bond to be returned.


A.B. 1676: Wage Discrimination Based on Gender

Effective January 1, 2017, this bill amended the equal pay act so that prior salary, by itself, is not enough to justify a disparity in compensation under the bona fide factor exception, which allows for a disparity based on any bona fide factor other than sex, such as education, training, or experience. This means that pay differentials based on prior salary, even if applied neutrally, will not be tolerated where it leads to a wage gap among similarly situated men and women. Employers using prior salary as a basis for current salary may want to consider removing that factor from consideration or, at the very least, implement an auditing system to ensure that it does not result in a discrepancy in current salary among genders.

S.B. 1063: Wage Differential Based on Race or Ethnicity

Effective January 1, 2017, this bill extends the protection against unequal pay on the basis of gender to also prohibit discrimination on the basis of race or ethnicity. Employers should note this extension would also include protection against a wage differential on the basis of prior salary, as discussed in the previous bill.

A.B. 1843: Background Checks for Employment Applications

Effective January 1, 2017, an employer is prohibited from asking an applicant for employment to disclose information concerning or related to an arrest, detention, procession, diversion, supervision, adjudication, or court disposition that occurred while the person was subject to juvenile court. An employer may not utilize any such information as a factor in determining any condition of employment. This means employers may need to edit their employment applications to exclude any of the prohibited subject matter.

A.B. 488: Harassment/Discrimination of Employees Employed Under Special License

Effective January 1, 2017, this bill expands the definition of employee pursuant to FEHA, to include individuals employed under a special license in a nonprofit sheltered workshop, day program, or rehabilitation facility. This allows employees to bring an action under the Fair Employment and Housing Act (FEHA) for prohibited harassment or discrimination.

This bill provides a defense to employers where the challenged action was permitted by statute or regulation and was necessary to serve employees with disabilities under a special license. The bill also protects employers who hire or employ a qualified individual at a wage less than the minimum wage, in conformity with a special license. This means that, aside from the narrow exceptions outlined above, it is unlawful for employers to discriminate against employees working under a special license.

A.B. 2844: Discrimination Prevention in Public Contracts

This bill applies to any person who submits a bid or proposal, proposes to enter into a contract, or renew a contract with a state agency in the amount of $100,000. Any person who falls within this definition is required to certify either at the time the bid or proposal is submitted or at the time that the contract is renewed, that they are in compliance with both the Unruh Civil Rights Act and the California Fair Employment and Housing Act. Employers who contract with state agencies should review their policies to ensure compliance with these two laws so that they can continue to submit bids in 2017.

S.B. 269: Construction Violations That Deny Full and Equal Access to Disabled Persons

A violation of the Construction-Related Accessibility Standards Compliance Act may cause a denial of full and equal access to a disabled plaintiff where he or she experienced difficulty, discomfort, or embarrassment because of the violation. Effective May 10, 2016, this bill created a rebuttable presumption that certain technical violations do not cause a plaintiff to experience difficulty, discomfort, or embarrassment, if specified conditions are met. On January 1, 2017, this bill also exempts a defendant from liability for minimum statutory damages if they resolve any violations identified within 120 days from receipt of a certified access specialist (CASp) report. This means that in the event of a violation businesses may significantly reduce their damages by expediently fixing violations.

S.B. 1001: Unfair Practices Regarding Employment Authorization Documents

Effective January 1, 2017, this bill prohibits an employer from requesting more or different employment authorization documents than are required under federal law, refusing to honor documents tendered, refusing to honor documents or work authorization based upon the specific status or the term of status accompanying the authorization, or reinvestigating or re-verifying an incumbent employee’s authorization to work. Employers should audit their employment verification procedures to ensure none of their practices fall within the expanded prohibited categories because a violation of provisions could result in civil penalties of up to $10,000 dollars per violation.


A.B. 908: Paid Family Leave

Effective January 1, 2018, this bill revises the formula for determining benefits available for unemployment compensation disability law and for the family temporary disability insurance program to provide an increase in the wage replacement rate to specified percentages. This bill also eliminates the seven (7) day waiting period before an employee begins to receive benefits. This benefit is paid for through the Unemployment Compensation Disability Fund, and therefore has little impact on employers. However, we encourage employers to be knowledgeable regarding leave laws to comply with notice requirements and provide employees with accurate information regarding protected leaves.

A.B. 2337: Leave for Victims of Domestic Violence, Sexual Assault, or Stalking

This bill requires employers (with 25 or more employees) to notify employees of their right to leave if they are a victim of domestic violence, sexual assault, or stalking. Employers must also notify employees that they will not be subject to any adverse employment action against them for taking leave for this purpose, as well as complaint procedures should employee be subject to any unlawful discrimination or retaliation for taking protected leave. Employers are to notify new employees of these rights in writing, upon hire, and any current employee upon request. The bill requires the Labor Commissioner to develop a form employers may elect to use to comply with the notice requirement and to post it on the Labor Commissioner’s Website by July 1, 2017. Employers are not required to comply with the notice of rights requirement until the commissioner posts the form, however employers should not wait for the form to begin updating their notice policy. We recommend employers update their employment handbooks to comply with this requirement, as well as other laws that took effect in 2016.

Contingent Workforce:

A.B. 1066: Overtime Exemptions for Agricultural Workers

This bill removed an exemption in current law, which prevents the payment of overtime compensation to agricultural employees after eight hours of work in a day or 40 in a week. Prior to this bill, agricultural employees were entitled to overtime pay after ten hours of work in a day or more than six days in a workweek. This bill provides that beginning January 1, 2019 (January 1, 2022 for employers with fewer than 25 employees), agricultural employees are entitled to overtime pay for more than 9 ½ hours in any one workday or more than 55 hours in any one workweek. The changes to the overtime requirements will be completely phased in by January 1, 2022, or January 1, 2025 for employers with 25 employees or less. Please note, however, that all other provisions of existing law, such as meal and rest period protections, shall apply to agricultural workers beginning January 1, 2017. Because of the complicated phasing in of this law, agricultural employers may want to seek legal counsel to ensure that they are in compliance to avoid costly penalties and potential back pay for unpaid overtime.

A.B. 1311: Weekly Pay Requirement for Temporary Service Employees

This bill extended the weekly pay requirement for temporary service employees to security guards that are employed by a temporary services provider. Please note that this was an urgency bill, which means that it took effect immediately upon being enacted on July 22, 2016. Employers who have not already updated their payment policies for these security guard employees should do so immediately because a violation of this law carries criminal penalties punishable up to a misdemeanor.

A.B. 2763: Use of Private Vehicles in Transportation Network Companies

Existing law authorizes the California Public Utilities Commission (CPUC) to regulate Transportation Network Companies (TNCs). A TNC is an organization that provides prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle (e.g., Lyft and Uber). Effective January 1, 2017, this bill defined the term personal vehicle and clarified that personal vehicles may be driven by TNC drivers and must comply with the CPUC regulations.

S.B. 1015: Domestic Worker Bill of Rights

The Domestic Worker Bill of Rights (DWBR) regulates the working hours of domestic work employees who are personal attendants and provides an overtime compensation rate for those employees. Under prior law the DWBR was set to be repealed as of January 1, 2017. This bill nullified the repeal date and extended the DWBR indefinitely. This means there is no longer an end date for overtime compensation due to domestic work employees under California law. However, due to a recent amendment to the FLSA, this change has little impact on employers because overtime is now required under federal law. For more information regarding the amendment to the FLSA and the DWBR please see our article, Final Rule Impacts Domestic and Household Workers.

Wage and Hour

A.B. 2535: Itemized Wages Statements for Salaried Employees

Currently, an employee exempt from overtime under IWC wage order is exempt from the “total hours worked” requirement on an itemized wage statement. This bill expands the total hours worked exemption to employees exempt from the minimum wage requirement. The purpose of this bill was to close any gaps in the law exposing employers to liability for omitting the total hours worked from a wage statement of an employee paid on a salary basis. This means that employers may omit this section of an itemized wage statement for employees paid on a salary basis.

A.B. 2899: Bond Requirement to Appeal of Labor Commissioner Ruling

Effective January 1, 2017, this bill requires that, prior to filing an appeal of a decision by the Labor Commissioner, relating to a violation of wage laws, employers must post a bond which covers the unpaid wages and damages owed to employees.

S.B. 3: Sick Leave for In-Home Care Workers

Effective July 1, 2018, this bill amends the definition of “employee” under the Healthy Families Act of 2014 and extends sick leave to in-home care workers. This means that all in-home care workers need to be receiving at least three (3) days or 24 hours of sick leave per year. For more information regarding the sick leave law, please see our article, Assembly Bill 304 – Urgency Amendment to the Paid Sick Leave Law.

S.B. 1234: California Secure Choice Retirement Savings Program

This bill would require eligible employers who do not offer specified retirement plans or accounts to have a payroll deposit retirement savings arrangement allowing employees to participate in the California Secure Choice Retirement Savings Program. The effective date for compliance is on a rolling basis, based on the number of eligible employees that the employer has. This bill only affects employers, with at least five employees, who do not have their own retirement savings arrangement. If you are an eligible employer and you do not have a retirement savings plan, we recommend consulting counsel to aid with compliance because of the complexity of the program’s requirements.

Employment Contracts

S.B. 1241: Forum Selection and Choice of Law Clause

This bill applies to contracts entered into, modified, or extended on or after January 1, 2017. This bill prohibits an employer from requiring an employee who primarily resides and works in California, as a condition of employment, to either: (1) agree to adjudicate a claim outside of California when that claim arose in California; or (2) deprive the employee of the substantive protection of California law with respect to a controversy arising in California. Employers should carefully review their agreements before requiring an employee to sign. Any provision in violation is voidable by the employee, and any adjudication will automatically occur in California, pursuant to California law. This means violation renders choice of law and forum selection moot as the bill defaults forum and choice of law to California. Lastly, while there are no penalties assessed for a violation, an employer may be liable for attorney’s fees, which could add up quickly if the employer recycles a deficient agreement.

California On-Duty Meal Period and Rest Period Update

Recent California court decisions provide additional guidance regarding the propriety of offered meal and rest periods in California.  In general, employers are required to authorize and provide meal and rest periods to non-exempt employees.  Under the applicable California Industrial Welfare Commission (IWC) Wage Orders, employers must provide a paid rest period of at least ten minutes for every four hours of work and a 30-minute, off-duty meal period prior to the end of the fifth hour of a work shift.  A rest period is not required if an employee’s total daily working time is less than three and one-half hours. An employee whose work period does not exceed six hours in a day may waive the required meal period by mutual consent of the employee and employer.

Where the employee works longer than ten hours in a day, the employer must provide a second off-duty, 30-minute meal period. However, this second meal period may be waived by mutual consent of the parties when the employee works less than twelve hours in a day and has not waived the first meal period.[1]  When the employer fails to provide an employee with a meal period or rest break, a “premium” of one additional hour of pay at the employee’s regular rate must be paid for each day missed.[2]

On-Duty Meal Periods

A limited exception to the above meal period rules allows an employee to remain “on-duty” during the required period.  An employee may sign an on-duty meal period agreement if the nature of the work prevents an employee from being relieved of all duty. The on-duty meal period agreement must be a written agreement allowing for an on-the-job paid meal period as between the employer and employee.[3] Such on-duty meal periods must be paid at the employee’s regular rate of pay.[4]

The Division of Labor Standards Enforcement (DLSE) has set forth the following three prongs in assessing whether an on-duty meal period is permissible: [5]

  1. The nature of the work must prevent the employee from being relieved of all duty during the meal period;
  2. The employee and employer must have previously entered into a signed agreement authorizing an on-duty meal period; and
  3. The signed agreement must expressly state that the employee may, in writing, revoke the agreement at any time.

Often misconstrued as a meal period waiver, an on-duty meal period agreement is more aptly described as an agreement to take a paid on-duty meal break in place of an unpaid, off-duty meal break. To illustrate, it is permissible for an employee working an eleven-hour shift to take an on-duty meal break and waive the second meal break, assuming all requirements of the exception and waiver are met.  Importantly, an employer not subject to the on-duty meal break exception, either because the nature of business work falls outside of the exception or because an employee has declined to enter into such an agreement, must compensate an employee for any missed meal periods and associated premium pay.[6]

In consideration of the wide array of industry practices, the DLSE applies a “multi-factor objective test” to determine whether the nature of the work justifies an on-duty meal period:

  • The availability of other employees to provide relief to an employee during a meal period;
  • The potential consequences to the employee if an employee is relieved of all duty;
  • The ability of the employer to anticipate and mitigate these consequences; and
  • Whether the work product or process will be destroyed or damaged by relieving the employee of all duty.

Recently, in Driscoll v. Granite Rock Company,[7] the California Court of Appeal clarified an employer’s duty with respect to meal periods. Factually, Granite Rock Company was engaged in the manufacture and transportation of concrete, and plaintiffs were “mixer-drivers” whose duties were to assist in the loading of concrete into mixer trucks and delivery of freshly-mixed concrete to customers. The plaintiffs alleged the employer had (1) failed to provide them with proper off-duty meal periods; (2) failed to pay the meal period “premium” for an additional hour of pay for each day missed; (3) “forced, expected, or trained [the employees] involuntarily to sign [on-duty meal period agreements] or miss off-duty meal periods against their will;” and (4) fostered on-duty meal period agreements that were invalid as written.[8]

At trial, evidence was introduced showing that a certain number of employees entered into an on-duty meal period agreement which provided that the employee understood his or her right to revoke the agreement at any time “by providing at least one (1) working day’s advance” notice to the employer. The trial court found the one-day revocation notice provision failed to satisfy the requirements of the applicable Wage Order by allowing the employee to revoke the on-duty meal period agreement at any time. As such, the on-duty meal period agreement was invalid as a matter of law.

With respect to the claim of defendant’s failure to provide proper off-duty meal periods, the Court reiterated that an employer’s only duty is to provide for timely, off-duty meal periods; the employer is not obligated to police meal breaks to ensure they are taken. Moreover, the Court highlighted that “what will suffice [for an employer’s obligations to provide timely meal breaks] may vary from industry to industry.” The Court found defendant had provided a legally compliant Employee Handbook, which advised employees of their right timely meal periods. Defendant had properly posted the applicable Wage Orders advising employees of such rights. Further evidence was presented at trial in which employees acknowledged that they received, reviewed, and were aware of their rights under the policy. Some employees testified that they refused to take off-duty periods in favor of continuing work. No evidence was presented showing that defendant ever denied any employee’s request for a timely meal period.

As for the claims of defendant’s failure to pay appropriate meal period premiums, the Employee Handbook advised that special pay, equivalent to that of a meal period premium, would be paid to employees who refused or revoked the on-duty meal period agreement and who missed a timely off-duty meal period. In fact, three employees had revoked their on-duty meal period agreement and received the premium pay. Moreover, all employees who had entered the on-duty meal period agreement were paid consistent with policy. Therefore, the Court found no violations.

The Court acknowledged that defendant’s meal period policies were “particularly appropriate” in the context of the ready-mix concrete industry because employees were charged with managing rolling drums of freshly batched concrete at any time throughout their work day. As such, the employee’s lunch period depended upon the state of concrete in his or her truck. Because of this, the nature of concrete mixing and delivering made scheduling off-duty meal periods in advance nearly impossible. The Court reiterated that an employer was not required to affirmatively schedule meal periods, but rather, to only make them available as appropriate.

Lastly, the Court found plaintiffs had failed to prove they were forced to sign the on-duty meal period agreements involuntarily; rather, plaintiffs were given the opportunity either sign the on-duty meal period agreement or refuse to sign and be paid the meal premium equivalent.

Legality of On-Call Rest Periods

The California Supreme Court recently assessed whether employers are required to provide off-duty rest periods and whether employers may require employees to remain “on-call” during rest periods in Augustus v. ABM Securities Services, Inc.[9]  In that case, the plaintiffs were employed as security guards and alleged their employer failed to provide proper rest periods.  The plaintiffs were required and instructed to “remain vigilant and responsible to calls when needs arose,” including during rest periods.

Labor Code section 226.7 prohibits an employer from requiring an employee to work during a meal or rest period. As noted previously, the applicable Wage Order provisions governing meal periods require that employees be relieved of all duties during a meal period.  However, no such requirement is expressly found in the provision relating to rest breaks. Based on this, the Court of Appeal inferred that the off-duty requirement was not intended for rest periods.

The California Supreme Court reversed the decision, holding instead that employers are required to “… relieve their employees of all duties and relinquish any control over how employees spend their break time.” The Court pointed to the absence of any language in the applicable Wage Order expressly authorizing on-duty rest periods in support of its determination.

The Court went on to address whether the obligation to relieve an employee of all duties is met when an employee is required to remain on-call.  In a clear departure from the fact-specific approach taken in prior cases to assess whether on-call time constitutes working time, the majority concluded that on-call rest periods were strictly impermissible.  The Court reasoned that allowing courts to address whether an on-call obligation unreasonably interferes with an employee’s opportunity to take an uninterrupted rest break would result in “less clarity and considerably greater administrative complexities.”

Impact Upon Employers

An on-duty meal period agreement is generally valid where:  (1) it is justified by the nature of work; (2) it is compensated; (3) it is a written agreement between the employer and employee; (4) it is revocable at any time by the employee; (5) the employee is apprised his or her statutory right to off-duty meal breaks; and (6) the employee has voluntarily entered into the agreement.  Employers are advised to carefully assess whether the nature of an employee’s job duties warrants application of the on-duty meal period agreement.

With respect to rest periods, the California Supreme Court has ruled that employers must relieve an employee of all duties for the duration of rest breaks, including the duty to remain on-call.  Notably, for situations in which it is “especially burdensome” for an employer to relieve an employee of all duties during rest periods, the Court has set forth the option to either:  (1) provide an employee with another rest period to replace the interrupted rest period or (2) provide premium pay for each workday that a rest period is not provided.

The rules concerning meal and break periods will continue to evolve as case law develops.  Employers should stay abreast of the latest developments, as failure to provide meal and rest breaks in accordance with California law can result in costly premiums, penalties and other potential damages under the California Labor Code and California Business and Professions Code.  The first step in avoiding such liability is to ensure that all employment policies and handbooks are compliant with applicable wage and hour laws and to develop and effectively implement regular self-audit procedures.

[1] Cal. Lab. Code § 512(a).

[2] Cal. Lab. Code § 226.7(c).

[3] IWC Wage Order No. 1-2001, subd. 11(C).

[4] Bono Enterprises, Inc. v. Bradshaw (1995) 32 Cal.App.4th 968.

[5] Dept. Industrial Relations, DLSE Opn. Letter No. 2002.09.04 (2002).

[6] Lab. Code § 226.7(c); Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal. 4th 1094.

[7] Driscoll v. Granite Rock Co., No. H037662, 2016 WL 6994923 (Cal. Ct. App. Nov. 30, 2016), as modified (Dec. 22, 2016).

[8] Driscoll v. Granite Rock Co., No. H037662, 2016 WL 6994923 at *2.

[9] Augustus v. ABM Security Services, Inc., (Cal., Dec. 22, 2016, No. S224853) 2016 WL 7407328, at *8.

Texas Judge Issues Nationwide Injunction Blocking Expansion of the Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) requires employees to be paid the federal minimum wage for all hours worked and overtime pay for all hours worked exceeding forty in a week. The FLSA also contains a number of exemptions to the overtime requirement. The most common exemption involves “any employee employed in a bona fide executive, administrative, or professional capacity.”[1]

Under the 2004 regulations to the FLSA (which are currently in effect), an employee must meet three criteria to qualify for this exemption. First, the employee must be paid on a salary basis (the “salary-basis test”). Second, the employee must be paid at least the minimum salary level established by the regulations (the “salary-level test”). Third, an employee must perform executive, administrative, or professional duties (the “duties test”).[2]

In 2014, President Obama directed the Secretary of Labor to update the overtime regulations to modernize and streamline the existing overtime regulations for executive, administrative, and professional employees because the 2004 regulations “have not kept up with our modern economy.”[3] As a result of this directive, The Department of Labor published the Final Rule on May 23, 2016. The Final Rule increases the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $921 per week ($47,892 annually).[4] The Final Rule was originally scheduled to go into effect on December 1, 2016.

However, prior to the implementation of the Final Rule, Nevada and twenty other states filed suit against the Department of Labor. The lawsuit contends the Obama Administration exceeded its statutory authority by raising the overtime salary limit in such a significant fashion. The Plano Chamber of Commerce and over fifty other business organizations also filed a lawsuit challenging the Final Rule.[5] The two cases were consolidated into State of Nevada, et al. v. United States Department of Labor, et al.[6] On October 12, 2016, Plaintiffs moved for an Emergency Preliminary Injunction.[7]

On November 22, 2016, U.S. District Court Judge Amos Mazzant granted Plaintiffs’ Motion for Emergency Preliminary Injunction.[8] This injunction prevented the Final Rule from going into effect pending further order from the Court. This results in the 2004 regulations remaining as the effective standards governing the subject exemption.

What This Means for Employers?

For the time being, the implementation of the Final Rule is in stasis. To the extent that employers have not already increased exempt employees’ salaries or converted them to non-exempt positions, the injunction allows employers to postpone these changes.

The situation is more complex for those employers who have already implemented changes in anticipation of the new rules or informed employees of anticipated changes. These employers should proceed with caution. Such employers are encouraged to seek legal guidance regarding whether any implemented salary increases can or should be reversed. In addition, if an employer plans to postpone these changes, legal guidance is encouraged regarding the best means to communicate to employees regarding the deferment of the previously announced changes. In addition to the legal considerations, employers must be mindful of potential morale issues that could accompany the postponement of previously announced changes.

Employers must also be aware the injunction may not be permanent. The Department of Labor has expressed its intention to appeal the injunction. If the injunction is appealed and the appeal is successful, the Final Rule will be implemented. However, in such an event, it is foreseeable that the Department of Labor would give employers a grace period to prepare for and implement the change. However, there is no guarantee as to how long any grace period would last.

Ultimately, employers must pay close attention to the status of the Final Rule to avoid potentially costly penalties for misclassification and unpaid overtime.

[1] 29 U.S.C. 213(a)(1).

[2] Klem v. County of Santa Clara, Calif. (9th Cir. 2000) 208 F3d 1085, 1090.

[3] Presidential Memorandum, Updating and Modernizing Overtime Regulations, 79 Fed. Reg. 18737 (Mar. 13, 2014).

[4] 81 FR 32391, 32391-32552

[5] Plano Chamber of Commerce et al. v. Perez et al. (E.D. Tex. Sept. 20, 2016) 4:16-CV-00732.

[6] State of Nevada, et at v. United States Department of Labor, et al (E.D. Tex. Nov. 22, 2016) 4:16-CV-00731

[7] Ibid. A preliminary injunction is a provisional remedy issued prior to the final disposition of litigation. Its function is to preserve the status quo and to prevent irreparable loss of rights prior to judgment. Sierra On-Line, Inc. v. Phoenix Software, Inc. (9th Cir. 1984) 739 F2d 1415, 1422.

[8] Ibid.

Final Rule Impacts Domestic and Household Workers

When the federal Fair Labor Standards Act (FLSA) was enacted, it did not apply to workers who were employed directly by households and performed domestic service work, such as cooking, housekeeping, cleaning, and gardening. In 1974, Congress explicitly extended many of the protections of the FLSA to “domestic service” employees. However, Congress left exempt from the Act’s minimum wage and overtime protections, those domestic service employees who provide “companionship services” for the elderly or persons requiring assistance caring for themselves as a result of an illness, injury, or disability, and any employee who resides in the household for which he or she provides service.

Since the federal Department of Labor published its initial regulations interpreting the FLSA in 1975, the home care industry has undergone a dramatic transformation. In the 1970s, individuals in need of significant care generally received those services from institutional facilities such as nursing homes. Over time, there has been a significant shift from expensive institutional facilities to private home care subsidized by Medicare and Medicaid. This shift allows individuals in need of care to remain in their homes and communities.

As more individuals choose to receive services at home, rather than in nursing homes or other institutions, workers who provide home care services perform increasingly skilled duties. In 2013, the Department of Labor revised the regulations to better reflect the substantial increase of skilled medical attendants in the home care industry and workforce. Those regulations (the “Final Rule”) went into effect earlier this year.

Under the Final Rule, “direct care workers” are employed as certified nursing assistants, home health aides, personal care aides, and caregivers. Today, direct care workers are not the unskilled workers that Congress envisioned when it enacted the companionship services exemption in 1974, but are instead professional caregivers. As such, the Department of Labor amended the regulations to reflect Congress’ initial intent in extending the FLSA to home care workers.

The Final Rule makes several significant changes of which employers should be aware. First, the tasks that comprise “companionship services” are more clearly defined. Second, the exemptions for companionship services and live-in domestic service employees are limited to the individual, family, or household using the services. Lastly, the recordkeeping requirements for employers of live-in domestic service employees are revised. These requirements must be read in conjunction with the California requirements for domestic care workers.

Companion Services:

Employees who perform companion services are exempt from the minimum wage and overtime protections provided under FLSA. The original regulations exempted workers who performed companion services for elderly people or persons who require assistance caring for themselves because of an illness, injury or disability. This definition was very broadly construed by courts and resulted in many skilled, professional caregivers falling into the exemption.

To remedy this, the new regulations more narrowly define “companionship services” as the provision of fellowship and protection. Companionship services may also include the provision of care if the care is provided in conjunction with the provision of fellowship and protection, and does not exceed 20 percent of the total hours worked per person and per workweek.

Fellowship means to engage the person receiving services in social, physical, and mental activities. Protection means to be present with the person receiving services in his or her home or to accompany the person when outside of the home to monitor the person’s safety and well-being. Fellowship and protection may include activities such as conversation; reading; games; crafts; and accompanying the person on walks, on errands, to appointments, or to social events.

Care is limited to assistance with activities of daily living (ADLs) and instrumental activities of daily living (IADLs). ADLs may include activities such as dressing, grooming, feeding, bathing, toileting, and transferring. IADLs are tasks that enable a person to live independently at home. These activities may include meal preparation, driving, light housework, managing finances, assistance with the physical taking of medications, and arranging medical care. If the direct caregiver spends more than twenty percent (20%) of his or her total weekly hours performing ADLs or IADLs they do not qualify for the companion services exemption and must be paid minimum wage and overtime.

Live-in Domestic Service

A live-in domestic service employee is exempt from the minimum wage and overtime protections provided under FLSA. The new law does not change the definition of a live-in domestic service worker. However workers who work several consecutive twenty-four (24) hour shifts are often confused with live-in employees. Therefore an employer should pay close attention to the actual definition of a live-in worker to properly distinguish between these workers and those who work consecutive twenty-four (24) hour shifts.

A live-in domestic service employee is defined as a worker who resides in the private home where he or she works on a permanent basis or for an extended period of time. On a permanent basis means that the worker works and sleeps on the employer’s premises seven days per week and therefore has no home of his/her own other than the one provided by the employer. Extended periods of time means that the worker works and sleeps on the employer’s premises for five days a week (for a total or 120 hours or more) or works and sleeps on the employer’s premises for five consecutive days or nights. Therefore, any live-in domestic service employee who works and sleeps on the employer’s premises for at least five consecutive days or nights will be exempt from the minimum wage and overtime requirements of the FLSA.

Who Can Claim the Exemptions?

Under the previous rule, all home care workers providing companionship services or live-in domestic services were exempt. Under the new rules, third party employers may no longer claim these exemptions and are required to pay all home care workers minimum wage and overtime. Third party employers include home care agencies, public agencies, or not-for-profit organizations.  However individuals, families, or households may still claim the exemptions, provided that the criteria (discussed above) are met.

Recordkeeping Requirements:

Under the new rules, the employer must also keep accurate records of all time actually worked by live-in domestic workers. The employer may shift responsibility for creating and submitting records to the employee. However, the employer is ultimately responsible for maintaining the records. An employer and a live-in domestic service worker may enter into an agreement regarding the employee’s meal, sleep, and other breaks or in other words, time for which the employee is completely free of work. The employer should keep a copy of this agreement.

How Does This Compare to California Law?

In 2013, California passed the Domestic Worker Bill of Rights (DWBR), which took effect on January 1, 2014. The DWBR provides overtime for domestic workers, including live-in domestic workers, who are personal attendants. Employees who work in the home but are not a personal attendant are not covered by the DWBR, which means that overtime requirements are governed by California Wage Order Number 15. The Wage Orders provide different overtime protections depending on whether the work performed is live-in or non-live-in.

A personal attendant is any person employed by a private householder or by any third party employer recognized in the health care industry to work in a private household to supervise, feed, or dress a child or person who needs supervision because of advanced age, physical disability, or mental deficiency. General personal attendant duties include feeding, bathing, dressing, and direct supervision of any person under care. If a domestic worker spends more than 20 percent of his or her time performing work other than supervising, feeding, and dressing a child or person who needs supervision, he or she is not considered a personal attendant. Non-attendant duties generally include making beds, housecleaning, cooking, laundry, or other duties related to the maintenance of a private household or the premises. Employers must pay personal attendants overtime for all hours worked over nine in a workday or over forty-five hours in a week.

There are several exceptions, including, but not limited to, certain family members, workers employed by a licensed healthcare facility, persons performing services through the In-Home Supportive Services, and persons employed pursuant to a voucher. If employees fall into any of these exceptions they are not covered under the DWBR, and their overtime entitlements are governed by the IWC Wage Orders.

What This Means For Employers:

The DWBR took effect in 2014, which means that the effect of the FLSA updates should not be as shocking to California employers. The most significant impact of the Final Rule is on third party employers who are no longer entitled to claim the companion services and live-in domestic service exemptions. However, California domestic worker registry or referral agencies were already required to comply with overtime requirements. Therefore the FLSA amendments will have the biggest impact on out of state employers or employers that also have agencies out of state. These employers must be sure to comply with all applicable overtime and minimum wage laws.

Under the FLSA amendments individuals, families, or households are also subject to shifting regulations. Employers must conduct a factually intensive analysis to ensure that the direct service provider hired actually falls within the exemption. If worker provides: (1) medical services typically performed by trained medical personnel; (2) services primarily for the benefit of the household instead of the elderly or injured person; or (3) spends more than 20% or his or her time assisting with ADLs or IADLS, the worker will not qualify for the exemption and must be paid minimum wage and overtime. California employers attempting to use this exemption should also make sure that employees are not entitled to overtime under California law.

Further, if you employ a live-in domestic service worker, review and (if necessary) revise your record keeping system. If an employee records his or her own time, it is recommended that appropriate safeguards are implemented to ensure the employee complies with lawful policies and procedures. You, as the employer, will be liable for violations even if it was actually the employee who did not keep adequate records

EEOC’s Guidance on Leave as a Reasonable Accommodation

On May 9, 2016, the Equal Employment Opportunity Commission (“EEOC”) issued a resource document in an effort to address continued EEOC “charges indicating that some employers may be unaware of Commission positions about leave under the Americans with Disabilities Act (“ADA”).” (EEOC, Employer-Provided Leave and the Americans with Disabilities Act, May 9, 2016, available at The EEOC enforces Title I of the ADA, which became law in 1990, and prohibits discrimination against individuals with disabilities in employment, housing, public accommodations, health services education and access to public services. The resource document clarifies existing law regarding an employer’s obligation to offer reasonable accommodation and engage in the good faith interactive process with an employee who has a disability.

Leave of Absence as Reasonable Accommodation

The ADA requires, generally, that covered employers (employers with 15 or more employees) provide reasonable accommodations to applicants and employees with disabilities. A reasonable accommodation is, “any change in the work environment or in the way things are customarily done that enables an individual with a disability to enjoy equal employment opportunities.” (29 Code Fed. Regs. § 1630.2.) That can include an employer’s provision of leave when needed for a disability, regardless of whether employer policy would otherwise so permit.

Many employers offer paid and unpaid leave as a benefit of employment. Some employers have general paid time off policies, under which employees may take leave for any reason they desire. Other employers maintain discrete policies providing a certain number of leave days designated as annual leave, sick leave, or “personal days.” If an employer receives a request for leave because of an employee’s disability and the leave falls within the employer’s established paid time off policies, it must treat the employee requesting the leave in the same manner as an employee who requests leave for reasons unrelated to disability. For instance, if a company’s leave policy does not require documentation, it cannot discriminatorily request documentation of employees who wish to use the leave for disability-related reasons. Similarly, an employer who permits employees to use paid annual leave for any purpose and without explanation, cannot require an employee seeking to use paid annual leave for disability-related purposes to use sick leave instead.

Moreover, employers may be required to make modifications to existing leave policies to enable employees with disabilities to work. This is the case even if the employer does not offer leave; the employee is not eligible for leave; or the employee has exhausted all available leave. Indeed, even those employers who have nondiscriminatory leave policies that establish the maximum amount of leave an employer will provide to any employee may be required to grant leave beyond this amount as a reasonable accommodation to employees who require it because of a disability, unless the employer can show that it doing so will cause an undue hardship. The EEOC resource document makes unequivocally clear: “[t]he purpose of the ADA’s reasonable accommodation obligation is to require employers to change the way things are customarily done to enable employees with disabilities to work. Leave as a reasonable accommodation is consistent with this purpose when it enables an employee to return to work following the period of leave.”


Employers are also required to consider job reinstatement or reassignment as reasonable accommodation. Reinstatement refers to the placement of an employee back in his or her work position following an extended period of illness or disability. If an employer determines that holding open a disabled employee’s job while that employee is on leave will cause undue hardship, the employer may instead reinstate the employee in a different position for which he is qualified. In some cases, the requested reasonable accommodation will be reassignment to a new job that better suits the employee in light of the employee’s disability.

It is in violation of ADA for an employer to institute a “100% Healed Policy” in which the employer requires an employee with a disability to return to work without any medical restrictions. An employer may not claim that an employee with medical restrictions poses safety a risk unless he or she can show a “direct threat” of “substantial risk of substantial harm to self or others.” In assessing whether a medical restriction poses a direct threat, employers should look to whether the restriction affects the employee’s “essential and marginal functions.”

Undue Hardship

Despite the above, an employer must only grant a reasonable accommodation, including in the form of paid or unpaid leave, to an employee with a disability to the extent that it does not create an undue hardship for the employer. If an employer determines that providing the requested accommodation would impose an undue hardship on its operations and finances, it is not required to grant the leave. The following factors are generally considered in assessing whether providing leave would result in undue hardship to the employer:

(1) The amount and/or length of leave required
(2) The frequency of the leave during the work week
(3) Whether there is any flexibility with respect to the days on which leave is taken
(4) Whether the need for intermittent leave on specific dates is predictable or unpredictable
(5) The impact of the employee’s absence on coworkers and on whether specific job duties are being performed in an appropriate and timely manner
(6) The impact on the employer’s operations and its ability to serve customers and clients appropriately and in a timely manner

While indefinite leave generally constitutes an undue hardship, the EEOC notes that undue hardship is not necessarily imposed in a situation where an employee taking time off due to disability provides the employer with approximate return dates that are subject to modification in light of changing circumstances. Employers should evaluate such situations on a case-by-case basis. The employer may consider leave that has already been taken in assessing the impact of a requested accommodation leave. For instance, where an employee has used up the amount of leave permitted by the Family Medical Leave Act, Worker’s Compensation and the company’s leave policy, the impact of any additional time off will be assessed by looking at the total amount of time taken off. Bear in mind that employers are not, under any circumstances, required to provide paid leave beyond what it provides as part of its paid leave policy.

Employers should carefully document any analysis undertaken in consideration of whether providing leave would result in undue hardship. Moreover, employers who use “form letters” to inform employees of remaining leave balance or to instruct employees to return to work by a certain date or face termination should make clear that leave as an accommodation for disability may be permitted, provided that it does not produce an undue hardship.

Communication: The Interactive Process

The “interactive process” is a procedure designed to enable the employer to assess the feasibility of providing leave as a reasonable accommodation without causing undue hardship. Employers may use this process to request additional information to confirm that a condition experienced by an employee qualifies as a disability under ADA. Most of the focus will on (1) the specific reason the specific reason the employee needs leave; (2) whether the leave will be a block of time or intermittent; and (3) when the need for leave will end. During this preliminary phase, an employer may obtain information regarding the need for leave from the employee’s health care provider, provided there is employee consent. The interactive process may continue throughout the leave, up until employee’s return to work if the granted leave does not have a fixed return date or if the leave is extended. The employer may not request periodic updates where the return date is fixed. Importantly, employers who use third-party administrators or human resource department personnel to handle leave requests must ensure that a procedure is in place to ensure compliance with the interactive process.

Developing Joint Employment Under Federal Labor Laws

Earlier this year, the Department of Labor’s Wage and Hour Division (“WHD”) issued Administrator’s Interpretation No. 2016-1, an interpretive memorandum (“memorandum”) providing clarification to employers on whether a joint employment relationship exists when two or more businesses share the same worker.  The memorandum provides the WHD’s opinion of when employers may be considered joint employers under the Fair Labor Standards Act (“FLSA”) and the Migrant and Seasonal Agricultural Work Protection Act (“MSPA”), thereby creating joint and several liability between joint employers for compliance violations. The WHD’s memorandum is particularly important because in the event of joint employment, an employee’s hours worked for each of the joint employers during the workweek are aggregated and considered as a single employment relationship for purposes of calculating overtime premiums and related hours of work. Not surprisingly, this interpretive memorandum comes in response to employers’ increasingly widespread practice of sharing employees and the use of third party management companies, independent contractors, staffing agencies and labor providers.

The WHD addresses two potential forms of joint employment which it refers to as “horizontal” and “vertical” joint employment. If one or both of these forms of joint employment exist, the joint employers will be jointly and severally liable for violations under both the FLSA and the MSPA.

Horizontal Joint Employment

The WHD provides that horizontal joint employment may exist “where the employee has employment relationships with two or more employers and the employers are sufficiently associated or related with respect to the employee such that they jointly employ the employee.” The primary focus of horizontal joint employment is on the relationship between the employers. This type of joint employment may be present, for example, where two separate restaurants, which share economic ties, have the same managers controlling both restaurants, share staff, and have common management. The WHD provides several factors which may be relevant in assessing whether a horizontal joint employer relationship exists, such as:

  • who owns the potential joint employers (i.e., does one employer own part or all of the other or do they have any common owners)
  • do the potential joint employers have any overlapping officers, directors, executives, or managers;
  • do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs);
  • are the potential joint employers’ operations inter-mingled (for example, is there one administrative operation for both employers, or does the same person schedule and pay the employees regardless of which employer they work for);
  • does one potential joint employer supervise the work of the other;
  • do the potential joint employers share supervisory authority for the employee;
  • do the potential joint employers treat the employees as a pool of employees available to both of them;
  • do the potential joint employers share clients or customers; and
  • are there any agreements between the potential joint employers.

Vertical Joint Employment

Distinguished from horizontal joint Employment, the WHD provides that vertical joint employment may be found when an employee is economically dependent on an employer who, via an arrangement with an intermediary employer, is benefitting from the work. This form of vertical joint employment typically exists when a potential joint employer has contracted for workers that are directly employed by an intermediary employer (usually a staffing agency, subcontractor, labor provider, or other intermediary employer), and those workers are economically dependent on the potential employer. The WHD points out that the threshold question in a joint employment case is whether the intermediary employer (who may be an individual or company responsible for providing labor) is actually, as a matter of economic reality,  an employee of the potential joint employer. See Rutherford Food Corp. v. McComb, 331 U.S. 722, 729-30 (1947). (Depending on the industry, the “intermediary employer” could be, for example, a staffing agency, farm labor contractor, or any individual or company that is dependent on the grower as a matter of economic reality).  If an intermediary employer is actually determined to be an employee of the potential joint employer, all employees of the intermediary employer will also be considered employees of the potential joint employer and no vertical joint employment analysis need even occur.  Therefore, the existence of a vertical joint employment relationship focuses on the employee’s relationship with the employers.

The MSPA provides some specific factors of “economic realities” to consider when determining whether an economic dependency exists between a worker and a potential joint employer who is benefiting from the employee’s work, thus creating a vertical joint employment relationship. While these factors are specific to the MSPA, they are helpful when performing a similar analysis under the FLSA as the FLSA uses the same “economic realities” standard. These factors include:

  • does the potential joint employer direct, control, or supervise the work performed by the employee;
  • does the potential joint employer control employment conditions;
  • is there is permanent, full-time, or long-term relationship by the employee with the potential joint employer;
  • is the nature of employee’s work for the potential joint employer repetitive and rote;
  • is employee’s work an integral part of the potential joint employer’s business;
  • is the work by the employee performed on premises owned or controlled by the potential joint employer; and
  • does the potential joint employer perform administrative functions for the employee that are commonly performed by employers.

 What This Means for Employers

While the WHD’s memorandum serves merely as guidance and does not carry the force of law, it is indicative of the WHD’s sweeping efforts to find joint employment relationships in FLSA and MSPA cases. Additionally, courts, administrative agencies, and government enforcement officer will often rely on such interpretations of the law when making decisions.  Moreover, this broad view of the joint employment relationship is indicative of an expansive and growing effort on the part of many state and federal governmental agencies to define the employment relationship broadly and reduce the alternatives the modern workforce has developed and embraced.    Similar expansive interpretations have been aimed at the independent contractor relationships and the franchisor/franchisee relationship.  As such, employers should be proactive in determining if they are in a potential joint employment relationship and, if so, take steps to structure their current practices to avoid or reduce potential liability. At a minimum employers who have entered these types of relationships need to recognize the risks associated with the joint relationship and take appropriate precautions through contractual arrangements, including the proper use of indemnification, access, due diligence, insurance, and termination provisions.

If you have additional questions about joint employment or any other employment or labor related matters, we encourage you to reach out to one of our attorneys. For additional employment and labor updates, you can also visit our website at

Recommended Employment Practices to Minimize Risk and Liability

GavelTo Our Clients and Business Associates:

Over the years, as we have represented employers and management in labor and employment related legal matters, we have discovered a few practices that help keep employers from costly disputes and litigation. With this in mind, we share a few practices that may assist you in maintaining compliance with current labor and employment laws.

Although at certain times modifications may be more frequent, we generally recommend employers update employment handbooks and written policies at least every two years, conduct regular labor audits, and consider obtaining appropriate Employment Practices Liability Insurance (“EPLI”) to guard against unanticipated liability. In addition to reviewing employment policies and labor audits, our firm offers, at no charge, regular training seminars and monthly articles on current labor and employment laws and trends. If you haven’t already, we recommend you sign up to receive these articles and notice of our seminars.  More information is available at our website: Also, please find us on Facebook and LinkedIn where regular updates and access are available.

Employee Handbooks

Last year, the National Labor Relations Board issued a Report Concerning Employer Rules. The report attempted to provide guidance on whether employee handbook policies were considered lawful or unlawful.  The report prompted many employers to revise their employment policies and practices. Employers should consider reviewing applicable policies and rules to ensure compliance with these guidelines and other current legal amendments and trends, such as the recently adopted regulations from the California Department of Fair Employment and Housing, which have necessitated changes to prohibited harassment policies and the statutory sick leave requirements that took effect in 2015, which significantly changed how many employers structure their sick leave and other paid time-off policies.

In many instances, clearly defined employment policies and handbooks have been instrumental in protecting employers. For example, the California Supreme Court in Guz v. Bechtel National, Inc. advised that employers who want to ensure their at-will employment relationship with their employees should include correct at-will language in all written communications, including employee handbooks. The court stated, “[W]ritten employer communications to employees are the best evidence of the company’s intentions about at-will or for-cause terminations.” Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317.

In another case, a federal court found that the language in the employer’s handbook, coupled with the employee’s signed acknowledgement that she read and understood the provision in the handbook, was “strong evidence” that the parties did not intend to enter into any agreement to the contrary.  Bianco v. H.F. Ahmanson & Co. (C.D. Cal. 1995) 897 F.Supp. 433, 440. See also Eisenberg v. Alameda Newspapers, Inc. (1999) 74 Cal.App.4th 1359, 1388, (holding that the employer’s written personnel policies and employee’s acknowledgement provided overwhelming evidence in support of the presumption that employment was at-will). In a recent landmark case, the Supreme Court of California denied class action certification for off-the-clock work, in part, based on the employer’s formal written handbook policy disavowing such work consistent with the law. Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1017.

So, handbooks should be updated regularly to reflect major changes in the law or in the workforce.  Also, from time to time, employers determine that some policies are not effective and wish to consider options that may be more suitable for a productive workforce.  We regularly review and revise employment policies and practices and are able to provide meaningful insights as you consider and develop strong employment procedures.

Labor Audits

We recommend employers be proactive about ensuring compliance in their employment practices. It is a good practice to periodically audit employment practices.  Because employment law continues to evolve, regular labor audits can keep you up to date and help you modify aspects of your employment practices to comply with applicable laws. Additionally, employers should be aware that many state and federal governmental agencies have the right to conduct audits at any time (with little notice), so it is prudent to regularly conduct self-audits with an eye toward compliance and maintenance of sound practice.

To be proactive, we recommend employers consider performing labor audits which may include review of the following:

  • Recruitment and Hiring Policies and Practices
  • Performance Evaluations; Promotions and Transfers Policies and Practices
  • Discipline and Termination Policies and Practices
  • Recordkeeping/Personnel Files/Job Descriptions
  • Existence and Components of Safety and Training Programs
  • Employee Handbook /Written Policy Review
    • Communication of Policies and Practices
    • Wage and Hour Compliance
    • Leaves of Absence Policies and Practices
  • Individual Contracts
    • Employment
    • Independent Contractor

Employment Practice Liability Insurance (EPLI)

We have seen a growing trend in the use of EPLI.  EPLI protects an insured against major litigation costs and the liabilities associated with claims of wrongful termination, harassment, discrimination, and retaliation. Additionally, some EPLI policies include limited coverage for other claims such as leaves of absence and wage and hour issues.  Although EPLI continues to develop, some of our clients have secured favorable results when properly insured.  So, as a firm, we encourage clients to consider obtaining appropriate EPLI coverage.

In making this recommendation, we also note that EPLI has some restrictions.  For example, some clients were unaware, and quite surprised to find, that their EPLI coverage restricted their right to select their own legal counsel.  For these particular clients, provisions in their EPLI policies gave the insurance company full authority to select the client’s legal representative, even when that legal counsel (hand-picked by the insurance company) may not have had the client’s best interests or preferences at heart.  We believe selection of your legal representation should be your choice, not the insurance company’s.

So, if you decide to obtain EPLI coverage, or if you are renewing your existing EPLI policy, consider asking your broker about choosing your own lawyer.  At your request, many EPLI insurance companies will include a “choice of counsel” provision that expressly permits you to choose your own legal counsel – so long as the lawyer is experienced and qualified in employment law.  We have seen that retaining this right to choose your own legal counsel can be critical to resolving a matter consistent with your objectives and values.

These are just a few practical solutions we believe can help you avoid employment law disputes and legal actions.  If you have any questions, you are welcome to contact us directly.  Contact information is available at our website:  We would be happy to discuss any or all of these topics with you in greater detail.  We look forward to our continued relationship.  We truly appreciate and value your confidence in our firm.

Very truly yours,

Palmer Kazanjian Wohl Hodson

California’s Minimum Wage Increase

In the wake of several recent changes to California’s employment landscape, Governor Brown signed Senate Bill No. 3 (“SB3”) into law on April 4, 2016, making it California’s latest mandated increase in minimum wage. This new law incrementally increases the state-wide minimum wage to $15 per hour by the year 2022. SB3 amends California Labor Code Section 1182.12 which recently raised California’s minimum wage to $10.00 per hour for 2016.

Currently, California’s minimum wage is already one of the highest in the nation, with many of its cities implementing even higher minimum wages throughout the state. Now under SB3, California’s minimum wage is set to increase incrementally each year, beginning in 2017. SB3, however, does allow for a delayed schedule for businesses with 25 employees or less, giving these employers an additional year to comply with each annual increase.

For businesses with 26 or more employees, the minimum wage increase will be as follows:

  • Beginning January 1, 2017 – $10.50
  • Beginning January 1, 2018 – $11.00
  • Beginning January 1, 2019 – $12.00
  • Beginning January 1, 2020 – $13.00
  • Beginning January 1, 2021 – $14.00
  • Beginning January 1, 2022 – $15.00

*(For businesses with 25 employees or fewer, the complete schedule is delayed by one year.)

After the minimum wage has been increased to $15 for all employers by 2023, SB3 also allows for the minimum wage to be increased each year thereafter at a rate tied to inflation. If, however, the annual rate of inflation increases beyond a predetermined percent prior to the first scheduled incremental increase, SB3 allows for an acceleration of the incremental increases for all employers, including those with 25 or fewer employees.

SB3 also provides, in part, that “to ensure economic conditions can support a minimum wage increase” certain thresholds must be met. Each year, beginning in 2018 and until the minimum wage reaches $15, each wage increase must be justified by the Director of Finance, certifying to the Governor that the economic condition of the state will support the next scheduled increase.

To justify the wage increase each year, conditions relating to unemployment, tax revenue, and the fiscal condition of the state’s General Fund must be met. If these economic conditions do not support the next scheduled wage increase, the Governor may temporarily suspend the minimum wage increase for the following year, delaying the entire schedule by one year. While there is no limit on the amount of times the Governor may delay the scheduled increases for reasons related to unemployment and tax revenue, SB3 does limit the amount of times the scheduled increases can be delayed due to the fiscal condition the state’s General Fund to “no more than two times.”

So, while SB3 provides a seemingly straight forward minimum wage schedule, the future minimum wage requirements for all employers are not set in stone as SB3 also provides for potential accelerations, delays, and adjustments.  To ensure you are up to date on your company’s minimum wage requirements and other important employment and labor related matters, visit our website at or reach out to one of our attorneys.



Must an Employee Ever Honor an Obligation to Repay the Employer?

In general, California law requires an employer to reimburse its employees for business-related expenses incurred on behalf of the employer.  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 or of his or her obedience to the directions of the employer[1].” This section only applies to expenditures made or losses sustained by the employee and only then when they are necessarily incurred.[2]  Therefore when faced with a demand for reimbursement for employee expenditure, an employer should ask:

  1. Did the employee actually make expenditures or incur losses?
  2. Were the expenditures or losses incurred in direct consequence of the discharge or the employee’s duties or obedience to the employer’s directions?
  3. Were the expenditures or losses necessary?[3]

If the answer to any of these questions is no, then reimbursement will not be required under section 2802 – although reimbursement may be required when an employer makes a contractual commitment to reimburse beyond the statutory requirement.

Conversely, some employers may incur conditional costs that aim to benefit both parties.  For example, an employer may agree to pay an employee’s educational or training pursuits on the condition that the employee remains employed with the employer for a specified period of time after the education/training is complete.  In this way the employer benefits from its expenditure through the employee’s continued work and performance.  Of course, the penalty for failing to remain employed for the promised duration is typically a demand that the employee reimburse the employer for the educational expenditure.

As such, a question arises whether the employer may demand reimbursement for the educational expenditure when Labor Code section 2802 requires the employer to pay for expenditures incurred in the employment relationship.  This issue is compounded by the protections found in Labor Code section 2804, which provides that an employee’s right to indemnification cannot be waived by contract.[4]

This particular issue was addressed by a California court in USS-Posco Industries v. Case,[5] which upheld summary judgment in favor of the employer who demanded repayment when an employee left the job only two months after he completed the employer-sponsored education program. USS-Posco Industries (UPI) faced a shortage of Maintenance Technical Electrical (MTE) workers. To remedy this, UPI implemented a voluntary Learner Program to train current employees to be MTEs. The Learner Program was a three-year training program at the end of which, after passing the exam, employees would fill one of the vacant MTE positions. Employees who participated in the program were required to enter into a repayment agreement stating that they would reimburse UPI in the event they voluntarily terminated employment within 30 months of completing the program.

The employee, Floyd Case, completed the Learner Program and then quit UPI two months later to work for Lawrence Livermore National Laboratory as a high voltage electrician. Case refused to reimburse UPI for the Learner Program as required by the reimbursement agreement. Case claimed he was entitled to indemnification[6] and that he could not waive that right by entering into the reimbursement agreement.[7]

In analyzing section 2802, the court held that Case did not make any expenditure or suffer any loss in direct consequence of the discharge of his duties by participating in the Learner Program, and thus was not entitled to indemnification. Rather, the court found he received a benefit because UPI fronted the costs of his voluntary undertaking of the advanced training. Further, even if Case were found to have made a qualifying expenditure or incurred loss, such expenditure or loss was not necessary. First, the program was entirely voluntary. And, second, there were at least three ways to secure an MTE position: (1) pass the MTE test without any training; (2) self-study; or (3) participate in the Learner Program. Case voluntarily chose the third option and thus was not entitled to indemnification.  The court ordered Case to honor his obligation to repay UPI subject to the terms in the reimbursement agreement.

In summary, an employer must indemnify (reimburse) employees for the business-related expenditures incurred on behalf of the employer.  However, when an employee enters an agreement for his own benefit on a voluntary basis, the employer may, in limited circumstances, obligate the employee to reimburse the employer if all the conditions of the benefit are not met.  Employers should proceed cautiously in this area.  Only in these limited circumstances would an employee be obligated to reimburse the employer.  The obligation is almost always the reverse with the employer obligated to reimburse the employee.  Still, employers have certain rights and, when properly documented in an enforceable agreement, can demand employees comply with lawful promises and conditions.

[1] Cal. Lab. Code § 2802(a).

[2] Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554, 567.

[3] Cassady v. Morgan, Lewis & Bockius LLP (2006) 145 Cal.App.4th 220, 230.

[4] Cal. Lab. Code § 2804.

[5] Contra Costa County Super. Ct. No. MSC1102781

[6] Cal. Lab. Code § 2802(a).

[7] Cal. Lab. Code § 2804.

The Enforceability of Class Action Claim Waivers in Arbitration Agreements

Arbitration has become a widely used mechanism for resolving legal disputes, due in part to the increased efficiency and cost-effectiveness it affords employers. The Federal Arbitration Act (“Act”) embodies the “liberal federal policy of favoring arbitration agreements,” and at its core, provides a medium by which disputes can be privately resolved through a neutral third party.  The Act also establishes the legal framework for an enforceable and valid arbitration agreement as well as the grounds upon which an award is vacated or enforced.  The steady increase in the use of mandatory arbitration agreements in employment contracts has been met with controversy, particularly surrounding the enforceability of class action claim waiver clauses.

Enforceability of Class Action Waivers in Arbitration Agreements Not Subject to the NLRB

For over a decade, the courts have grappled with the question of whether a state law that restricts the enforcement of an arbitration agreement is preempted by the Act.  In Conception, the United States Supreme Court endorsed the enforceability of a customer’s agreement to waive the right to file a class action.  Specifically at issue was whether the Act preempted a California state law that deemed class action waivers in adhesive consumer arbitration agreements unenforceable on the basis of unconscionability.  Two AT&T customers brought suit against AT&T mobility alleging that the company had “engaged in false advertising and fraud by charging sales tax on phones it advertised as free.”  The lower courts applied the unconscionability argument articulated in Discover Bank v. Superior Court and ruled that enforcement of the waiver would not allow for appropriate adjudication.  On review, the United States Supreme Court disagreed, concluding that Discover Bank’s rule “interfere[ed]” with fundamental attributes of arbitration” and was therefore preempted by the Act.

California aligned itself with Conception in 2014 when it confirmed that under state law, express class action waivers in employment arbitration agreements are enforceable and specifically that refusal to enforce waivers on grounds of public policy or unconscionability is preempted by the Act. (Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348, 359, 327 P.3d 129, 133 (2014)).  Turning to the issue of whether an employee’s right to bring a representative action under the Private Attorneys General Act of 2004 (PAGA) may be waived, the court determined that such waivers are “contrary to public policy and unenforceable as a matter of state law.”  Recall that PAGA allows employees to bring an action on behalf of the state for Labor Code violations committed against the employee and other similarly situated employees.  It is not a class action, but rather a representative action.  The court was unpersuaded by the contention that PAGA disturbed “the principle of separation of powers under the California Constitution” and maintained that PAGA representative actions fall outside the scope of disputes that the Act seeks to protect.

Enforceability of Class Action Waivers in Arbitration Agreements Subject to the NLRB

Independently of case law to the contrary, the National Labor Relations Board (“NLRB”) has long held that arbitration agreements requiring employees to waive their right to file a class action as a condition of employment are in violation of Section 7 of the National Labor Relations Act and are invalid.  (D.R Horton (2012).  Murphy Oil USA, Inc.).  However, for the most part, federal courts have taken a different stance, with the 5th, 2nd, and 8th Circuit Courts ruling contrary to D.R Horton.   In addition, the California Supreme Court in Iskanian specifically rejected the argument that the act of participating in a “class proceeding to address wage violations” amounts to “concerted activity under section 7 of the NLRA.”  In light of the disparity between federal and state courts and the NLRB, it is only a matter of time before the issue is taken to the United States Supreme Court.

Class Action Waivers Falling Outside the Scope of the Act

Gentry, the controlling authority in California prior to these rulings, may still have some limited application.  It held class action waivers to be invalid where allowance of the class action leads to “a less comprehensive enforcement of overtime laws” for aggrieved employees.  Gentry considered four factors in making that determination: “[1] the modest size of the potential individual recovery, [2] the potential for retaliation against members of the class, [3] the fact that absent members of the class may be ill informed about their rights, and [4] other real world obstacles to the vindication of class members’ rights to overtime pay through individual arbitration.”  While the court in Iskanian referenced Gentry’s holding as having been “abrogated by recent United State Supreme Court precedent,” it is important to note that Gentry may still be good law in situations where the arbitration agreement is not governed by the Act.

For example, in Garrido v. Air Liquide Industrial, an employee truck driver brought an action against Air Liquide Industrial (ALI) alleging that the company committed a series of wage-related labor code violations and unfair business practices.  The employee opposed ALI’s motion to compel arbitration under reasoning that the Act was not applicable to “transportation workers under 9 United States Code section 1.” The Court of Appeals concluded that while the ADR was not governed by the Act there was nothing to prohibit governance by the California Arbitration Act.  This was of particular significance in that “Gentry could still apply.” Accordingly, the court applied the four factors set forth in Gentry and concluded that a class proceeding in this case would “be a significantly more effective way of allowing employees to vindicate their statutory rights.” Thus, the court affirmed the trial courts order denying Air Liquid’s motion to compel individual arbitration.

What This Means for Employers

This area of the law remains in a state of flux.  Employers who are not subject to the NLRB can rest assured that arbitration agreements barring class actions will likely hold, since class waivers have been deemed enforceable by both, the United States Supreme Court in Conception and the California Supreme Court in Iskanian. It is also important to note that while state laws prohibiting class action claim waivers in an arbitration agreement are preempted by Act, PAGA representative action waivers are not.  Already, the Ninth Circuit has issued a decision in which it upheld the rule established in Iskanian.   As case law on the enforceability of PAGA waivers continues to evolve, employers may wish to err on the side of caution by excluding any representative PAGA action waivers from their arbitration agreements or limiting their application through appropriate language in the arbitration agreement.

Finally, employers subject to the NLRB who are unwilling to absorb the potential costs of litigating matters at the federal administrative and appellate levels may consider excluding the class waiver provision from their arbitration agreements or, again, limiting its application through appropriate language in the arbitration agreement.  However, please recognize that as discussed in a previous article (“Growing Section 7 & 8(a) (1) Violations Pose A Threat To Arbitration Employment Agreements”), recent NLRB decisions demonstrate that a provision making the class waiver optional does not necessarily safeguard the provision.

Still, despite the instability currently demonstrated by the administrative agencies and courts on this issue, arbitration agreements remain a viable option for employers to seriously consider as a means of limiting employment-related claims and actions to a forum that permits more privacy and to a process that is more expeditious and cost-effective.

Updated 2015-16 California Labor and Employment Laws

The new year brought a multitude of new laws that took effect on January 1, 2016 (unless otherwise noted). Here are some of the most notable changes employers need to be aware of.

AB 1513: This bill repealed sections 77.7, 127.6, and 138.65 and added Labor Code section 226.2. This new law sets forth requirements for the payment of a separate hourly wage at or above specified minimum hourly rates for rest and recovery periods and for “other nonproductive time” worked by piece-rate employees. It also defines “other nonproductive time” as time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis. Additionally, employers must specify the following on a piece-rate employee’s itemized wage statement: (1) the total hours of compensable rest and recovery periods, (2) the rate of compensation paid for those periods, and (3) the gross wages paid for those periods during the pay period. Employers should note that the bill provides an affirmative defense and safe harbor for employers who, by December 15, 2016, fully compensate their specified employees for all under-compensated or uncompensated rest periods, recovery periods, or unproductive time between July 1, 2012 and December 31, 2015. Please be aware this bill took effect on January 1, 2016.

AB 304: This legislation was an amendment to AB 1522 that passed in 2014. AB 304 was urgency legislation that went into effect on July 13, 2015. The purpose of the urgency legislation was to provide clarification regarding which workers were covered, how paid time off accrued, and how it affected employers that already have a paid sick leave policy in place. Under AB 304 an employee can accrue sick leave after 30 days of employment in California for the same employer and is eligible to use the sick leave after 90 days. An employer may use an accrual method or front loading method, so long as it provides at least 3 days or 24 hours per year. Additionally, employers who already have a Paid Time Off (PTO) policy in place may rely on that for compliance, so long as it meets the minimum requirements of the new leave law.

SB 358: This bill significantly modified California Labor Code § 1197.5, California’s equal pay statute, by relaxing the burden of proof for a plaintiff’s claims while weakening an employer’s defense. Prior law prohibited an employer from paying an employee at a wage rate less than an employee of the opposite sex in the same establishment. However under prior law an employer had a defense if the pay differential was based on a seniority system, merit system, a system based on quantity or quality of work, or another bona fide factor other than sex. This legislation eliminated the requirement that the wage differential be within the same establishment and instead would prohibit a wage differential for substantially similar work. The new legislation weakens an employer’s defense by requiring that the employer affirmatively show the wage differential was based on one of the previously mentioned factors and that that factor relied upon was applied reasonably. This legislation further weakens an employer’s rights by preventing the  employer from prohibiting an employee’s disclosure of the employee’s own wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging any other employee to exercise his or her rights under these provisions. Additionally, employers should make themselves aware of heightened record keeping requirements. Please be aware this bill took effect on January 1, 2016.

AB 987: Under existing law, the California Fair Employment and Housing Act (FEHA) protects the rights of employees to be free from discrimination and harassment based on their membership in a protected class. Additionally FEHA requires an employer to provide reasonable accommodations for a person’s disability and religious beliefs and prohibits discrimination against any person because he or she has opposed any practices forbidden under the act or because the person has filed a complaint. This bill provides additional protection by preventing an employer from retaliating or discriminating against an employee for requesting an accommodation, regardless of whether the accommodation request was granted. This legislation is of special importance to employers who are not subject to Title VII, which already provides for this protection. Please be aware this bill took effect on January 1, 2016.

AB 1506: Under the Private Attorney General’s Act (PAGA), an aggrieved employee may bring a civil action to recover specified civil penalties that would otherwise be assessed and collected by the Labor and Workforce Development Agency. PAGA is limited to certain serious Labor Code violations, including but not limited to those in §226 of the Labor Code relating to pay stub violations. This legislation does provide employers the opportunity to cure certain pay stub defects before the employee is entitled to bring a PAGA claim, specifically the inclusive dates of the pay period as well as the name/address of the employer. Employers should note that this bill limits the employer’s right to cure any defect to only once in a 12-month period. Additionally, employers should be aware that this was urgency legislation, meaning that it took effect immediately upon being signed on October 2, 2015.

City of Sacramento Approves Measure to Increase the Minimum Wage

Earlier this year, the Assembly Appropriations Committee announced its decision not to take up Senate Bill 3, which sought to increase the minimum wage to $13 by 2018. The postponement, according to the Assembly Committee on Labor and Employment, was in part due to an effort to preserve local control by allowing for collaborative agreements on a local level to take place as opposed to mandating wages. The past couple years have been characterized by a wave of local minimum wage increases throughout California. In step with San Francisco and Oakland legislatures, the City of Sacramento has finalized its minimum wage proposal. In a 6-3 vote on October 27th, 2015, the Sacramento City Council approved Ordinance No. 2015-0036 raising the minimum wage from the statewide rate of $10 (effective Jan. 1, 2016) to $12.50 in the next four years, with inflationary adjustments to be determined by the city manager thereafter.

Beginning January 1, 2016, employers will be required to pay the increased minimum wage amount for each hour that an employee works within the geographic boundaries of the city in a particular workweek. However, an employee must perform at least two hours of work in a particular workweek within the geographic boundaries of the city for the minimum wage provision to be applicable.

For employers with more than 100 employees, the minimum wage increases are set to occur in four increments, starting with an increase to $10.50 in 2017, $11 in 2018, $11.75 in 2019 and $12.50 in 2020. In an effort to mitigate the financial strain on smaller companies with fewer than 100 employees, the ordinance allows for smaller companies to implement the minimum wage increases one year later than larger businesses. A company’s number of employees is to be determined based on the average number of people employed during each pay period of the previous calendar year, excluding people who have been employed for 90 consecutive days or less (5.158.030. Sec. D). Further, new companies who do not have record of having provided employment during the previous year are subject to the timeline that applies to companies of 100 employees or less.

The final plan identifies two (2) classes that are exempt from the minimum wage requirement. First, employers are not required to pay the minimum wage to participants of a nonprofit corporation-run or government agency-run youth training program who are 25 years of age or younger (5.158.050. Subsection A). Secondly, an employee working in “an occupation in which he or she has no previous, similar or related experience,” referenced as a “learner,” is also exempt from the state minimum wage. Pursuant to Order 14-2001 of the Industrial Welfare Commission of the State of California, learners may be paid “not less than 85 percent of the state minimum wage” during their first 160 hours of employment “rounded to the nearest nickel” (5.158.050. Subsection B).

Healthcare Credit

A provision of the plan that is likely to spark controversy provides for a “health credit” incentive plan that allows for employers who pay at least $2 per hour per employee toward the premium cost of the employee medical benefits plan to pay the employees a reduced minimum wage. In order to qualify for the health credit, the employee medical benefits plan must provide “a level of coverage equivalent to a bronze level plan under the Federal Patient Protection and Affordable care Act (Public Law 111-148),” which amounts to 60 percent coverage by the employer. For qualifying employers, a specified reduction amount is allowed depending on the minimum wage rate: Minimum wage rates of $10.50, $11.00, $11.75, and $12.50 will see a reduction of $0.50, $1.00, $1.50, and $2.00, per hour, respectively (5.158.060. Subsections A-D). Starting in 2022, the healthcare credit system is to be adjusted “in direct proportion to the percentage change in the Consumer Price Index based on data from the preceding year (5.158.060. Subsections E).

Other Provisions
• Notice and Posting: Employers are required to post an announcement of the minimum wage increase in a conspicuous location within each workplace and ensure accessibility to all employees. The city each year publishes a notice that may be used by employers that can be accessed on the City of Sacramento webpage (5.158.040).

• Waivers Are Prohibited: A waiver by an individual to be paid at least the minimum wage rate is considered “contrary to public policy” and thus unenforceable (5.158.070).

• Payroll Inspections: As part of ensuring compliance with this ordinance the city may, upon reasonable notice and at an agreed upon time, inspect employer records (5.158.080).

• Investigations: Section 5.158.090 of the ordinance holds that “any person may report to the city” a suspected violation or failure of the employer to pay the required minimum wage. The city is authorized to investigate purported violations which may include an inspection of the workplace, interview of employees, and inspection of payroll records. Where an employer fails to produce adequate documentation or refuses the city access to pertinent records, an employee’s account of underpayment “shall be presumed to be accurate, absent clear and convincing evidence otherwise (5.158.100).

• Retaliation Prohibited: An employer may not “discharge, penalize, take adverse action on, or discriminate in any manner against any person in retaliation” in response to an employee reporting a violation to the city in good faith. Further, if within 90 days of the employee reporting a violation or exercising any rights under this chapter an employer takes adverse action against the employee, a “rebuttable presumption that the action was taken in retaliation for the exercise of such rights” will be raised (5.158.110).

Growing Section 7 & 8(a)(1) Violations Pose A Threat To Arbitration Employment Agreements

Growing Section 7 & 8(a) (1) Violations Pose A Threat To Arbitration Employment Agreements

A rise in the number of employers opting to handle employment disputes through arbitration has been paired with increased scrutiny by the National Labor Relations Board (Board), specifically with regard to provisions threatening rights protected under Section 7 of the National Labor Relations Act (Act).   Section 7 of the Act provides that employees have the right to organize, form, join, assist a labor organization, bargain collectively, or engage in other “concerted activities for mutual aid or protection.” Section 8(a)(1) prohibits “interference with, restraint, or coercion” of employees in the exercise of such rights.

In D.R. Horton v. NLRB (2012), the Board ruled that it was a violation of the Act to require “employees covered by the Act,” as a condition of their employment, to sign an agreement barring them from “filling joint, class, or collective claims addressing their wages, hours, or other working conditions against their employer.” Not long thereafter, in a highly anticipated 2-1 decision, the Fifth Circuit of Appeals reversed the Board’s holding.  On review, the Fifth Circuit concluded that the Board’s decision “did not give proper weight to the Federal Arbitration Act.”  Proponents of employment arbitration hoped this case would turn the tide in their favor, but subsequent decisions have demonstrated unwillingness by the Board to change their stance. Two recent cases, On Assignment Staffing Services Inc. and Arnella M. Freeman (2015) and Leslie’s Poolmart Inc. v. Keith Cunningham (2014), have arguably expanded the Board’s holding in D.R. Horton to include arbitration agreements that contain an “opt-out” procedure for employees and which are silent on the issue of collective class claims, respectively.

The Board’s Refusal to Revise Its Position on Class Action Waivers

In Leslie’s Poolmart, Inc., the respondent required employees, as a condition of employment, to enter into individual arbitration agreements that were allegedly intended to waive their right to pursue class, collective, or representative actions. While such provision was not expressly stated in the contract, the Board concluded that the agreement, paired with the respondent’s motion to compel arbitration of Cuningham’s individual claims, had the effect of barring class or collective claims. Thus, taken together, it was found that the agreement constituted an interference with Section 7 rights protected under the NLRA. Leslie’s Poolmart moved for dismissal of the case on the grounds that:  (1) D.R. Horton was inapplicable due to being contrary to controlling Supreme Court precedent and the Federal Arbitration Act; (2) the Board lacked jurisdiction at the time when it decided D.R. Horton, Inc.; and (3) the Fifth Circuit’s reversal of D.R. Horton had rendered its holding invalid.  The Board, unmoved by these arguments, concluded that the company had indeed “engaged in certain unfair labor practices.” The court ordered affirmative action to effectuate the policies of the Act, a cease and desist, and reimbursement of the respondent’s litigation fees.

Thus, the present case did more than simply uphold the D.R. Horton decision; it expanded the decision to employment agreements that, in combination with a motion to compel, prohibited class or collective action, even in the absence of express language targeting class and collective actions.

Opt-Out Procedures

Employers looking to shield themselves of Section 8(a)(1) liability through the use of certain contractual maneuvers are cautioned to do so under competent advice.  As the following case demonstrates, opt-out provisions do not legitimize an arbitration agreement containing a class action waiver.  The dispute in On Assignment Staffing Services, Inc. arose when an employee of On Assignment Staffing Services Inc. alleged that the company’s dispute resolution agreement, in binding employees to a waiver of their rights to participate in collective and class litigation, “interfered with employees’ Section 7 rights to engage in collective legal activity.”  The issue was whether the employer could legally require its employees to be bound to an agreement limiting resolution of all employment-related claims to individual arbitration where employees retained the option to opt out of the agreement within the proscribed time frame.  The company argued that the opt-out option rendered the agreement voluntary and that the claim, for that reason, fell outside the scope of D.R. Horton’s ruling which had to do with mandatory agreements required as a condition of employment.  The Board made no distinction between the two, maintaining that the procedure “reasonably tended to interfere with its employees’ exercise of Section 7 rights.  Specifically, the opt-out procedure, they held, violated their Section 7 rights in that it: (1) placed a burden on employees to comply with a specific procedure in order in preserve their rights; and (2) required employees to make known to the employer their support for or rejection of concerted activity.

What this Means for Employers

Arbitration affords employers a more cost-effective and efficient method of resolving employment disputes, but as the referenced cases show, the risks of litigating before the Board or appealing a Board decision should be taken into consideration.  In light of the Board’s decisions, employers are advised to assess their risk and consider a new review of their arbitration agreements to ensure that provisions do not improperly restrain protected collective and class actions.  Of course, the D.R. Horton decision has been met with considerable opposition; already, the Fifth, Second, and Eighth Circuit courts have rejected the Board’s position.  Notwithstanding, the Board has made clear that it does not give deference to any court other than the U.S. Supreme Court.   As the issue of enforceability of class action waivers in arbitration agreements remains unresolved, it is only a matter of time before the appeals process is exhausted and the issue is taken to the U.S. Supreme Court.

Larry Kazanjian Invited Guest Speaker at NBI Seminar

Human Resource Law From Start to Finish Seminar

Session Hosted by: National Business Institute ™  | Date: Wednesday, November 18, 2015

Location: Courtyard Sacramento Midtown
4422 Y Street
Sacramento, CA 95817

Larry Kazanjian has been invited to be a guest speaker at the National Business Institute’s upcoming Human Resource Law From Start to Finish Seminar November 18, 2015.

This program will get you up to speed on human recourse compliance so you can return to work confident in your abilities. Know the fundamentals of human resources: from hiring to firing and everything in-between.

Seminar details and pricing information can be found on the NBI website.

Joint Employer Standards

National Labor Relations Board Expands the Joint Employer Standard in Browning-Ferris Decision

A majority decision by three National Labor Relations Board (“Board”) appointees overturned a Regional Director’s finding that Leadpoint Business Services, a Phoenix-based staffing firm, was the sole-employer of workers it supplied to one of Browning Ferris’s (BFI) recycling plants.  The decision overturns 30 years of case law that served to define the employment relationship as one requiring “immediate and direct” control over employees.  In a sweeping decision, the Board found that BFI’s direct and indirect control over the essential employment terms and conditions of Leadpoint workers was sufficient to establish BFI as a joint-employer with Leadpoint, rendering BFI answerable to Leadpoint employees for unfair employment practices or violations under the National Labor Relations Act.  The Board points to the “changing economic circumstances,” and in particular, “the recent dramatic growth in contingent employment relationships” as necessitating a departure from the current “unjustifiably narrow” standard.

The dispute arose from an effort by Leadpoint employees and Teamsters Local 350, a signatory to Leadpoint, to bring BFI to the bargaining table. The Regional Director held that BFI was not a joint employer, stating that BFI lacked direct control over, among other essential terms of the employment relationship, their wages, termination, recruitment, daily work, and instruction.  In response to the union’s request for review, the Board called on the parties and interested amici to consider whether the present joint-employer standard is consistent with the Act’s policy of “encouraging the practice and procedure of collective bargaining.”

The Board maintains that it is not introducing a new standard, but rather that it is returning to its traditional pre-1984 joint-employer standard.  Whether two statutory employers are “joint employers of the same statutory employees,” the Board explains, depends on a two-prong test.  The first looks at the extent to which employers “share or co-determine those matters governing the essential terms and conditions of employment” as to “hiring, firing, discipline, supervision, and direction.”  The second weighs the degree to which “a putative joint employer possesses sufficient control over the employee’s essential terms and conditions of employment to permit meaningful collective bargaining.

Key to distinguishing the old standard from the new is the Board’s interpretation of “control.” While the Board emphasizes that control is central to both inquiries, it distinguishes the new standard from the old, specifying that the new standard “will no longer require” that a joint employer, in addition to possessing control, exercise it.  Further, the Board says that it is “sufficient” for the control to be exercised indirectly through an intermediary.  Notably, the ruling “expressly overrules, TLI, Laerco, Airborne Express and AM Property.”

The two dissenting appointees argue that the new standard “threatens to cause substantial instability in bargaining relationships” that could end up imposing undue burden, risk, and litigation expenses on employers, employees, and unions alike.  For one, they contend that the decision threatens to upend protections that have afforded “neutral employers” secondary boycott protection.  They also reject the majority’s notion that the decision represents a “return to the traditional test,” asserting, rather, that “under common law,” an indication of “indirect control is probative only to the extent that it supplements and reinforces evidence of direct control.”  The dissent lists business relationships that are expected to be most affected by this decision, including the “user-supplier, lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, and contractor-consumer” relationships.

Indeed, this decision comes on the heels of another ruling by the Board’s General Counsel to issue unfair labor practice complaints against one of the country’s largest fast food chains.  The Board found that McDonald’s Corp. engaged in sufficient control over its franchisee’s operations” through its use of “tools, resources, and technology,” to qualify as “joint-employer.” Moving forward, it is not yet certain how Browning-Ferris will impact the present case against McDonald’s Corp. and franchisees or how the courts will decide cases under the new and broader joint employer theory moving forward.  This decision is but one in a string of more activist undertakings by the Board.  Employers should anticipate continued Board rulings that may change the business landscape in the coming years

Labor & Employment Law Seminar

Session Hosted by Palmer Kazanjian Wohl Hodson LLP

Date: Thursday, November 19, 2015
Time: 8:00AM to 9:30AM
Location: Our Office: 2277 Fair Oaks Blvd. Ste. 455, Sacramento, CA 95825
Free Admission

Topics covered:
  • Independent Contractor: The Increasing Risk Associated with Misclassification
  • Implications of an Activist National Labor Relations Board
  • Joint Employer Liability: Expansion and Consequences
  • Understanding California’s New Sick Leave Law
  • Continued Legal Uncertainty Under Private Attorney General’s Act (PAGA) Claims
  • The Impact Remote Access has on Employee Compensation and Hours Worked



The California Fair Pay Act (SB 358)

On October 6, 2015, Governor Brown signed into law SB 358, the California Fair Pay Act. This act is an amendment to California Labor Code Section 1197.5. The new law is considered to be one of the strictest in the nation.  The previous law under the Labor Code prohibited employers from paying employees at a wage less than the rates paid to employees of the opposite sex in the “same establishment” for equal work on jobs which required the same degree of skill, effort, and responsibility and which were performed under the same conditions.

SB 358 Amends The California Equal Pay Act (EPA) In The Following Ways:
  • Clarifying the employee’s and employer’s burdens of proof under the EPA; (Cal. Lab. Code 1197.5).
  • Ensuring that employees performing substantially equivalent work are paid fairly by requiring equal pay for work “of comparable character” and eliminating the “same establishment” requirement; (Cal. Lab. Code 1197.5(a)).
  • Modifying the poorly defined catch-all affirmative defense of “factors other than sex” to include “bona fide factors other than sex”; (Cal. Lab. Code 1197.5(a)(1) emphasis added).
  • Ensuring that any legitimate, non-sex related factor(s) relied upon are applied reasonably and account for the entire pay differential; (Cal. Lab. Code 1197.5(a)(2)-(3)).
  • Prohibiting retaliation or discrimination against employees who disclose, discuss, or inquire about their own or co-workers’ wages for the purpose of enforcing their rights under the EPA. (Cal. Lab. Code 1197.5(j)(1)-(2)).
What This Means For Employers:

This amendment makes it easier for employees to prevail in litigation because it lowers the standard from equal pay for equal work to equal pay for comparable work. Therefore the new law could lead to employers being burdened with an increase in litigation. Employers sued by workers would have to show that the wage difference are due to factors other than sex, such as merit or seniority, that they are job related, reasonable, and that they are not due to discrimination.

However, due to already existing prohibitions against gender discrimination, found in both federal and state anti-discrimination laws, this law may have minimal practical effect or be duplicative of already existing prohibitions and mandates. Therefore, employers who are already in compliance with existing laws are likely compliant with this new legislation. Regardless, it may be prudent for employers to take this opportunity to conduct an audit of employee pay scales to ensure compliance with the new standards.

Additionally the amendment contains a record keeping requirement for employee wages and wage rates, job classifications, and other terms and conditions of employment to a period of three years. (Cal. Lab. Code § 1197.5(d)). Employer record keeping practices should be reviewed to ensure compliance with this minimum standard.

Rise in Union Elections under Newly Amended Election Rules

On December 15, 2014 the National Labor Relations Board (“NLRB”) adopted new rules regarding the procedures applicable to processing representation cases. These new rules went into effect on April 15, 2015. The new rules are an effort by the NLRB to streamline and modernize the representation case procedures, while increasing transparency and standardizing the NLRB process. The NLRB explained that the purpose of the amendment was to remove unnecessary barriers to the fair and expeditious resolution of representation cases by simplifying the process and providing more transparent and uniform elections.

Notable Changes Under the New Rules:
  • Permits electronic filing and transmission of election petitions/other documents;
  • Employer is required to post a Notice of Petition for Election containing more detailed information on the filing of the petition and employee rights within two days of service of the petition.
  • Employers are required to provide additional contact information (personal telephone numbers and email addresses) in voter lists, to the extent that information is available to the employer, in order to enhance a fair and free exchange of ideas by permitting non-employer parties to communicate with voters about the election using modern technology;
  • The non-petitioning party is required to respond to the petition, to generally state their positions before the pre-election hearing opens. The petitioner is required to respond to the issues raised at the opening of the hearing.
  • Only issues necessary to determine whether an election should be conducted will be litigated in a pre-election hearing. The regional director may defer all other issues to the post-election stage.
Practical Effect of the New Rules:

One of the stated purposes of the new rules was to keep employers from delaying the election process and thereby discourage union activity. To accomplish this goal, the amendments have severely restricted an employer’s ability to make pre-election challenges.

According to a recent analysis of election cases, in the first 90 days after the rules took effect, 755 petitions had been filed, which was up from 687 during the same period last year. Interestingly, the number of elections actually conducted during the same period decreased from 255 to 234. The average length of time between filing a petition and conducting an election dropped from 37 to 27 days. The rate at which unions won elections held steady at around 64 percent.

One of the potential explanations for the increase in petitions, but decrease in elections, is that unions are filing petitions in order to obtain the personal information of the employees to use later. However, employers must still deal with the petitions that are filed, which is increasingly difficult under the new rules because employers have less time to articulate their positions; this means employers need to be prepared in advance. The new rules also disadvantage employees, who have less time to examine and weigh all of the facts as to whether supporting the union is in their best interests.

Because the rules are still new and most of the decisions remain unpublished, it is unclear if the trends found in the preliminary statistics will continue or greatly impact union success in the long term. However, what is clear is that the new rules have placed significant hurdles in front of employers attempting to challenge unlawful conduct committed by unions prior to an election

DOL Plans to Stamp Out Independent Contractor Misclassification


On July 15th, 2015, the U.S Department of Labor Wage and Hour Division (DOL) issued a sweeping informational memorandum (“Administrator’s Interpretation No. 2015-1” (link 1)), announcing its long-anticipated plan to make changes to the Fair and Labor Standards Act. The DOL’s efforts to curtail misclassification come in response to the growing problem of “misclassification of employees as independent contractors,” which they attribute in part to the “larger restructuring of business organizations.” The memo provides additional guidance to the public regarding the “Economic Realities Factors” and how they play into FLSA’s broad definition of employment (link 2). The distinction is of interest because independent contractors are not subject to state minimum wage and overtime protection laws, including coverage by worker’s compensation, right to family leave, unemployment insurance, right to unionize, and protection against employer retaliation.

The Economic Realities Test

The “Economic Realities Test” is a set of factors used by federal courts to determine whether a worker should be classified as an employee or independent contractor. The question is whether the worker is economically dependent on the employer. A worker that is found to be economically independent is more likely classified as an “independent contractor.”

The DOL breaks down its interpretation of each factor as follows:
  • The extent to which the work performed is an integral part of the employer’s business. An employer who performs work that is “integral to the employer’s business” is more likely to be “economically dependent” on the employer and thus likely to fall under the category of “employee.” As courts have held, this determination is dependent on the nature of the work performed by the worker and whether such work is primary to business operations with respect to the industry.
  • The worker’s opportunity for profit or loss depending on his or her managerial skill. A worker is more likely to be classified as an employee if his or her managerial skill “can affect his or her profit and loss.” This determination is based on, among other factors, the worker’s freedom to solicit new clients, advertise services, reduce costs, and choose when and where assignments will be perform.
  • The extent of the relative investments of the employer and the worker. Does the worker bear a risk of loss? Investments are part of an independent business’s operating expense. A worker who has the ability to invest in expansion, make decisions about its cost structure, or extend his market reach demonstrates that he is on “similar footing” as the employer in terms of economic independence. Courts look not only to whether the worker has made an investment, but to the “relative investment of the worker in comparison to employer’s investment;” thus, if the worker’s investment does little to further a business beyond that particular job, then it is unlikely to provide support for an independent contractor classification
  • Whether the work performed requires special skills and initiative. A showing of “special skills” by a worker, taken on its own, is insufficient to render independent contractor classification. A worker’s specialized skills are not necessarily indicative of independent contractor status unless “such skills are exercised in an independent manner.” Accordingly, a worker’s highly specialized technical skills must be paired with the ability to exercise “managerial and business skills.”
  • The permanency of the relationship. “Permanency or indefiniteness in the worker’s relationship with the employer suggests that the worker is an employee.” An independent contractor will typically work on a non-continuous basis for the duration of an assignment, whereas an employee will work “until they quit or are terminated.” However, the key is being able to establish that the lack of permanence is due to the independent business initiative of the worker or the “operational characteristics that are intrinsic to the industry.”
  • The degree of control exercised or retained by the employer. In our ever-changing technological environment, employers are now able to remotely “maintain stringent control over aspects of the workers’ jobs,” an advancement that the DOL suggests may encourage employers to misclassify workers as independent contractors. Where a worker controls “meaningful aspects of the work performed such that it is possible to view the workers as a person conducting his or her own business,” it is indicative of an employment relationship. Thus, the level of control that a worker exerts must be analyzed as part of determining whether a worker is “economically dependent on the employer.” Control may be manifested in several ways, including the ability to control the number of clients or to negotiate wage rate, schedule, and other elements of the relationship.

What Does this Mean for Employers?

The application of the “Economics Realities Test” in the context of the Act’s expansive view of “employ” has led to the finding that “most workers are employees under the FLSA.” While it remains to be seen whether courts will adhere to the DOL’s interpretation, employers are best-advised to understand it, in case courts use the DOL guidance in determining a worker’s classification.

The DOL’s interpretation points to the increasingly aggressive pursuit of enforcement actions against companies that use independent contractors. California, perhaps more so than any other state, has led in the efforts to eliminate misclassification of workers. In May of 2011, Governor Jerry Brown signed A.B 459 (link 3), a bill which called for the prohibition of willful misclassification and attached to each violation a heavy civil penalty ranging from $5,000-$25,000. This was followed by the passage of A.B 1897 (link 4), earlier last year, which extended liability to client employers who obtained workers from third party labor contractors.

On the legal front, the Ninth Circuit ruled earlier last year that FedEx had misclassified its drivers (link5) as independent contractors; not long thereafter, Fedex agreed to settle the matter for $228 million—one of the largest settlement cases in history. In June of this year, the California’s labor commissioner ruled that an Uber driver was an employee, and not a contractor. While the decision is not binding on all Uber drivers, it is anticipated to spark additional lawsuits. Already, three Uber drivers claiming to have been misclassified secured class-action status against Uber (link 6) on September 2nd. The decision by U.S District Judge Edward Chen to grant class-action status allows for the inclusion of all drivers who have contracted with Uber directly in California since 2009.

With federal agencies and courts increasing their scrutiny, the issue of worker misclassification continues to extend and intensify. Employer and business owners are prudent to carefully consider any contractor relationships to determine whether the classification meets the current standards established by the DOL and other reviewing agencies and courts.








Rise in Wage Statement Claims

Rise in Wage Statement Claims Following Amendment to California Labor Code Section 226

Prior to a 2013 amendment to the Labor Code, it was common for employees to add secondary claims, alleging inaccurate wage statements, to other more substantial claims against an employer. However, prior to the amendment these secondary claims, typically based on technical violations, were generally under-valued or even ignored in the defense of the more substantive claims. The pre-amendment version of the statute held employers to be in violation of Labor Code section 226 only when there was a “knowing and intentional failure” to comply with the key information that was required on wage statements. It also required the employee to show harm from the deficiency.

With the amendment, the current version of Section 226 has significantly lowered the standard by which an employer may be found in violation. Now an employer violates the statute when it fails to provide any wage statement at all or the wage statement fails to provide “accurate and complete” information. See Lab. Code § 226(e)(2)(A)-(B). A wage statement is not “accurate and complete” if an employee is unable to “promptly and easily” ascertain the required key information solely from the wage statement. See Lab. Code § 226(e)(2)(C). Also, the employee no longer has to prove that he or she was actually harmed by the defect in wage statement because the injury is presumed by the statute, making it much easier for an employee to succeed on his or her claim.

What This Means for Employers:

Of late, we have begun to see these “secondary” claims for wage statement violations become increasingly prominent and prolific. Because the amendment made it easier for an employee to succeed on a wage statement claim, employer compliance is more important than ever. Employers must take reasonable steps to ensure compliance and be cautious of relying solely on third party payroll services to ensure that wage statements contain all proper information required by the statute.

The statute caps damages at $4,000.00 per employee for wage statement violations; however in a class action with hundreds or even thousands of employees, wage statement violations may quickly become quite costly. In addition, employers may be subject to PAGA penalties. “PAGA” is the Private Attorneys General Act, which allows aggrieved employees to bring civil actions to recover penalties for violations under the Labor Code when the State declines to act. These PAGA claims broaden the enforceability of the statutory violations and provide additional penalties where no other penalty is specified. In our experience, employees will seek all available penalties under the Labor Code to enhance their primary claims and causes of action.

Moreover, we anticipate that employers will see increased wage statement claims due to the new sick leave law that took effect in July 2015. Sick leave accrual is not required on wage statements (even though Labor Code section 246 encourages its inclusion and requires appropriate notice with the paycheck). Still, employees may claim harm, not only from an employer’s failure to provide the required sick leave, but also from its failure to provide proper notice in the wage statement or with the wage payment. PAGA claims seem likely to follow.

As such, it is important for employers to know and comply with the statutory wage statement obligations. Pursuant to amended Labor Code section 226 a wage statement is in compliance if it includes an accurate itemized statement in writing showing:

  1. Gross wages earned;
  2. Total hours worked by the employee (expect for salaried employees who are exempt from overtime pay);
  3. The number of piece-rate units earned (if the employee is paid on a piece-rate basis);
  4. All deductions;
  5. Net wages earned;
  6. The dates of the period for which the employee is paid;
  7. The name of the employee and only the last four digits of the employee’s social security number;
  8. The name and address of the employer (or legal entity that is the employer); and
  9. All applicable hourly rates in effect during the pay period and numbers of hours worked at each hourly rate by the employee.