Businesses are constantly challenged by the ever-evolving landscape of labor and employment law, with new legislation and judicial developments occurring almost daily fueling a seemingly never-ending stream of litigation. For companies operating in multiple states, complying with this patchwork of federal, state, and local laws and developments can be daunting. Knowing these issues are a top concern for management and in-house counsel, Morrison Foerster keeps pace with this rapidly evolving landscape. MoFo ELC equips our clients with the most up-to-date and relevant information on employment and labor law issues covering key judicial, litigation and legislative developments, their implications for employers, and strategies to ensure compliance and avoid lawsuits.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Co-Chair, Global Employment and Labor Practice

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Andrew Turnbull represents companies on a broad range of labor and employment litigation and counseling matters. He has successfully defended clients in complex employment litigation before federal and state courts and administrative agencies. A primary focus of his practice involves helping companies navigate the unique employment issues that arise when doing business with the federal government, including advising on all aspects of OFCCP compliance, creating and implementing affirmative action plans, defending OFCCP audits and onsite investigations, conducting mock pay equity audits, drafting and developing business ethics policies and programs, and complying with the Service Contract Act, E-Verify, and the Drug Free Workplace Act.

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MoFo ELC equips our clients with the most up-to-date and relevant information on employment and labor law issues, covering key judicial, litigation, and legislative developments, their implications for employers, and strategies to ensure compliance and avoid lawsuits. To learn more about our capabilities, please visit the <a href="https://www.mofo.com/capabilities/employment-labor" target="_blank">Employment + Labor</a> practice page and read about our <a href="https://www.mofo.com/people?practices=Employment%20%2B%20Labor" target="_blank">Team</a>.

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Fourth Circuit Stays Injunction of Trump DEI Executive Orders

President Trump Rescinds Affirmative Action for Federal Contractors and Requires Enforcement Plan to End Unlawful DEI at Private Companies

FAR Council Withdraws “Pay Equity and Transparency” Proposed Rule

The “Preventative Duty”: New Law Places Active Duty on Employers in the UK to Prevent Sexual Harassment in the Workplace

Good News for Employers: Texas Court Blocks FTC’s Non-Compete Ban

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A California federal court has given employers a New Year’s gift, issuing a temporary restraining order preventing Assembly Bill 51—the law barring employers from requiring employees to enter into agreements to arbitrate FEHA and California Labor Code claims—from going into effect. The order will remain in place until the court rules on the pending motion for a preliminary injunction, which is set to be heard on January 10, 2020.Background on AB 51On October 10, 2019, Governor Gavin Newsom signed into law Assembly Bill 51 (AB 51). When (or if) it takes effect, AB 51 will prohibit employers from entering into new agreements—or extending previous ones—that require employees or applicants to arbitrate claims arising under the California Labor Code or the California Fair Employment and Housing Act (FEHA). Specifically, AB 51 will amend the Labor Code to provide, “A person shall not, as a condition of employment, continued employment, or the receipt of any employment-related benefit, require any applicant for employment or any employee to waive any right, forum, or procedure for a violation of any provision of the” FEHA or Labor Code.[1] These rights, forums, and procedures include “the right to file and pursue a civil action or a complaint with, or otherwise notify, any state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity of any alleged violation.”[2]AB 51 also bars opt-out provisions, a common way to provide a choice of whether to enter into an arbitration agreement, stating that any “agreement that requires an employee to opt out of a waiver or take any affirmative action in order to preserve their rights” is deemed to impose “a condition of employment.”[3] Noncompliance with AB 51 is itself an unlawful labor practice and can be punishable as a crime.[4]AB 51 includes a few exceptions. As discussed further below, it is not “intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act.”[5] In addition, it applies only prospectively to agreements “entered into, modified, or extended” after the law’s effective date (January 1, 2020).[6]Governor Brown Twice Vetoed Similar Legislation Because It Is Preempted by the FAAAB 51 is at least the third attempt by the California legislature to bar arbitration agreements in the employment context. Former Governor Jerry Brown twice vetoed similar bills. In 2015, Governor Brown vetoed AB 465, <a href="https://leginfo.legislature.ca.gov/faces/billStatusClient.xhtml?bill_id=201520160AB465">reasoning in part</a> that “a blanket ban on mandatory arbitration agreements is a far-reaching approach that has been consistently struck down in other states as violating the Federal Arbitration Act.”Three years later, the legislature passed a substantially similar bill, AB 3080, which Governor Brown again <a href="https://leginfo.legislature.ca.gov/faces/billStatusClient.xhtml?bill_id=201720180AB3080">vetoed because</a> it “plainly violate[d] federal law.” He explained that “[t]he direction from the Supreme Court since my earlier veto has been clear – states must follow the Federal Arbitration Act and the Supreme Court’s interpretation of the Act.” “By its terms, . . . the Act cares not only about the ‘enforce[ment]’ of arbitration agreements, but also about their initial ‘valid[ity]’—that is, about what it takes to enter into them. Or said otherwise: A rule selectively finding arbitration contracts invalid because improperly formed fares no better under the Act than a rule selectively refusing to enforce those agreements once properly made.”Pending Legal Challenge to AB 51As widely anticipated, the U.S. Chamber of Commerce, the California Chamber of Commerce, the National Retail Federation, and other organizations filed a Complaint for Declaratory and Injunctive Relief in federal court challenging the statute.[7] Preemption is the gravamen of the complaint: “AB 51’s limits on arbitration agreements conflict with federal law. Those limits are therefore preempted and invalid under the Supremacy Clause of the Constitution of the United States.”[8] Plaintiffs rely on the legislative analysis and the provisions of AB 51 itself in alleging that AB 51 “is specifically targeted to preclude the use of arbitration agreements as a condition of employment” in violation of the FAA.[9] Plaintiffs further allege that the attempted carve out for agreements otherwise enforceable under the FAA does not avoid this result because the U.S. Supreme Court has confirmed that the FAA bars state laws that create a barrier to entering into arbitration agreements.[10]Plaintiffs ask that the court: a) declare AB 51 preempted by the FAA; and b) preliminarily and permanently enjoin the California AG and other state officials from enforcing AB 51 for arbitration agreements governed by the FAA.The Motion for a Temporary Restraining OrderOn December 16, 2019, the plaintiffs moved for a temporary restraining order (TRO) to delay enforcement of the new law while the parties litigate plaintiffs’ motion for preliminary injunction.[11] In support of their request, plaintiffs argued that:(1) they are likely to succeed on the merits: “[t]he preemption question is not a close call” because “the Supreme Court has repeatedly held that state laws disfavoring arbitration agreements are preempted”;(2) businesses face irreparable harm if the law goes into effect, either because they will have to forego their federal protected rights to enter into arbitration agreements with employees if they comply with AB51 or because they face potential enforcement actions if they do not comply; and(3) the balance of hardships and public interest “strongly support” issuance of the requested TRO.[12]The defendants countered that “AB 51 does not run afoul of . . . the FAA.”[13] Because AB 51 applies to all forms of alternative dispute resolution, the defendants contend, it does not discriminate against arbitration. They further argue that AB 51 will prohibit only unilateral, employer-imposed arbitration provisions; it “does not prevent parties from entering into arbitration agreements voluntarily.”[14] According to defendants, AB 51 is consistent with the FAA principle that arbitration “is a matter of consent, not coercion.”[15]Absent preemption, defendants argue, there is no irreparable harm, and plaintiffs cannot show that the balance of hardships weights in their favor.On December 30, 2019, Judge Kimberly J. Mueller issued an order granting the TRO, enjoining the state from enforcing AB 51 pending resolution of the pending motion for preliminary injunction.[16] The court found that plaintiffs “raised serious questions regarding whether the challenged statute is preempted” by the FAA and agreed with plaintiffs that there was a risk of irreparable harm if AB 51 were to go into effect even briefly, because employment agreements would be disrupted if AB 51 is eventually deemed preempted, “particularly given the criminal penalties to which violators of the law may be exposed.”[17] The court will hear the motion for preliminary injunction on January 10, 2020.We will continue to monitor the lawsuit and will report on further developments.[1] Cal. Lab. Code § 432.6(a) (2020).[2] Id.[3] Id. § 432.6(c).[4] Id. § 433; Cal. Gov’t Code § 12953.[5] Cal. Lab. Code § 432.6(f).[6] Id. § 432.6(h).[7] Complaint, Chamber of Commerce of the United States v. Becerra, No. 2:19-cv-02456-KJM-DB (E.D. Cal. Dec. 9, 2019), ECF No. 1.[8] Id. ¶ 15.[9] Id. ¶ 43.[10] Id. ¶¶ 61–63.[11] Motion for a Temporary Restraining Order, filed Dec. 16, 2019, ECF No. 8.[12] Memorandum of Law in Support of Plaintiffs’ Motion for a Temporary Restraining Order, filed Dec. 16, 2019, ECF No. 8-1 at 4–5, 8.[13] Defendants’ Opposition to Motion for Temporary Restraining Order, filed Dec. 20, 2019, ECF No. 14 at 7.[14] Id. at 6 (emphasis omitted).[15] Id. at 1 (quoting Stolt-Nielson S.A. v. AnimalFeeds Int’l Corp. 559 U.S. 662, 681 (2010)).[16] Order Granting Temporary Restraining Order and Setting Expedited Hearing on Preliminary Injunction, filed December 30, 2019, ECF No. 24.[17] Id. at 2.

Temporary Reprieve for Employers During Challenge to AB 51, New California Law Barring Mandatory Employment Arbitration Agreements

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Temporary Reprieve for Employers During Challenge to AB 51, New California Law Barring Mandatory Employment Arbitration Agreements

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A California federal court has given employers a New Year’s gift, issuing a temporary restraining order preventing Assembly Bill 51—the law barring employers fr

California employers will be impacted by several new laws signed by Governor Newsom during this past legislative session. Employers should review their policies and procedures in light of these developments, most of which will be effective January 1, 2020. Minimum wages will also increase for California employers to $13.00 per hour for employers with 26 or more employees and $12.00 per hour for employers with 25 or fewer employees. A. AB 5 Codifies the “ABC Test” Set Forth in the Dynamex Decision AB 5 codifies the 2018 decision of the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court of Los Angeles. Prior to Dynamex, California courts analyzed independent contractor misclassification under the test set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations. Under the Borello test, whether an individual is properly classified as an independent contractor turns on various factors that focus primarily on whether the entity engaging the individual exercised control over the manner and means by which the work was performed.In Dynamex, the California Supreme Court announced a new “ABC Test” for determining whether workers were properly classified as independent contractors in claims under California wage orders. Under the test, employers must prove that workers meet all three of the following factors to classify workers as independent contractors:1. The worker was free from the control and direction of the hiring entities’ business in connection with the performance of the work, both under the contract for the performance of such work and in fact;2. The worker performed work that was outside the usual course of the hiring entity’s business; and3. The worker was customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.AB 5 codifies the “ABC Test” and makes that test applicable to claims under California wage orders, unemployment insurance, and workers compensation. Given incorporation of the ABC Test into the California Labor Code, employers may now be subject to the Private Attorney General Act of 2004 (PAGA) representative actions brought by independent contractors claiming to be misclassified under the new law. Notably, workers in several industries, such as investment advisors, lawyers, and certain professional service providers are exempt from the reach of AB 5. Instead, those industries will remain subject to the Borello factors and other criteria included in the statute.  Claims under the California wage orders and unemployment insurance will be subject to AB 5 starting on January 1, 2020. Workers’ compensation claims will be covered by the new law starting on July 1, 2020. Businesses engaging independent contractors in California should review those relationships in light of this new law.B. SB 688 Expands the Labor Commissioner’s Authority on Unpaid WagesSB 688 expands the California Labor Commissioner’s authority to issue citations to an employer to recover restitution for failing to pay wages set by contract in excess of the minimum wage. Previously, the California Labor Commissioner could only cite employers for failing to pay at least the minimum wage set by law. As a result, employers should notify employees of any change in their compensation. C. AB 673 Permits Employees to Bring Actions for Statutory Penalties for Late Payment of WagesAB 673 provides employees with a private right of action to recover civil penalties for unpaid wages that were previously recoverable only by the California Labor Commissioner. Employees, however, are not permitted to recover civil penalties under both AB 673 and under PAGA for the same violation. Instead, employees can recover only under one of the statutes for a particular violation. Penalties under AB 673 include initial fines of $100 for each failure to pay each employee and fines of $200 and 25% of the amount unlawfully withheld for each subsequent violation or any willful or intentional violation.D. AB 51 Bans Employers From Requiring Arbitration of Employment Disputes as a Condition of EmploymentAB 51 seeks to ban employers from requiring applicants or employees to enter into mandatory arbitration agreements for employment claims under the California Fair Employment and Housing Act (FEHA) and the California Labor Code. Employers will no longer be able to require applicants or employees as a condition of employment, continued employment, or the receipt of any employment-related benefit to agree to waive any right, forum, or procedure, including the right to file or pursue a claim in court, for a violation of FEHA or other specific California statutes governing employment claims. An agreement requiring employees to opt out of a waiver or take any other action to preserve their rights is still deemed “a condition of employment.” Employers can face claims if they threaten, retaliate or discriminate against, or terminate “any applicant for employment or any employee because of the refusal to consent to the waiver of any right, forum, or procedure for a violation” of FEHA or the California Labor Code. In addition to other available remedies, plaintiffs who enforce their rights under AB51 can obtain injunctive relief and reasonable attorneys’ fees. A violation of AB 51 will also constitute a misdemeanor under Labor Code section 433.The law will not apply retroactively to existing arbitration agreements. Instead, it is limited to agreements entered into, modified, or extended on or after January 1, 2020. Post-dispute settlement agreements or negotiated severance agreements are also exempted from this new law. So AB 51 will not prohibit employers from having settlement or severance agreements with employees that require arbitration of employment claims. While AB 51 expressly states that it does not invalidate any agreement governed by the Federal Arbitration Act, a business coalition led by the U.S. Chamber of Commerce and the National Retail Federation filed a declaratory judgment action on December 6, 2019 seeking to invalidate the law on preemption grounds, arguing that the law penalizes employers by exposing them to criminal liability. Employers with mandatory arbitration programs will need to consider whether to suspend those programs in 2020 and wait until the current lawsuit is resolved or scale back their arbitration programs to exclude FEHA and Labor Code claims.E. SB 707 Treats an Employer’s Failure to Timely Pay Arbitration Fees as a Waiver of the Right to Compel ArbitrationSB 707 requires employers who draft arbitration agreements to pay the costs and fees associated with arbitration of employment claims. An employer’s failure to pay those costs and fees within 30 days of the due date constitutes a “material breach” and “waives its right to compel arbitration.” In addition, an employee can withdraw the claim from arbitration and file his or her claim in court. F. AB 749 Prohibits No-Rehire Provisions in Settlement AgreementsAB 749 provides that settlement agreements with employees entered into on or after January 1, 2020 can no longer prohibit the employee from working for the employer in the future. The law includes some notable exceptions, including where the employer has made a good faith determination that the individual engaged in sexual harassment or assault or “if there is a legitimate non-discriminatory or non-retaliatory reason for terminating the employment relationship or refusing to rehire the person.”G. AB 9 Extends the Statute of Limitations for FEHA ClaimsAB 9 extends the time an employee has to file an administrative complaint with the California Department of Fair Employment and Housing (DFEH) from one year to three years. Under current law, an employee seeking to bring an action against his or her employer for harassment, discrimination, or retaliation in violation of FEHA has one year to file a complaint with the DFEH. Although this law significantly extends the time limit for employees to file their administrative complaints, it will not revive claims that have lapsed under the current law. Employers should keep in mind that employees will continue to have one additional year to file a civil action in court after receipt of a right-to-sue letter from the DFEH. H. SB 188 Clarifies Race Discrimination Protections Include HairstylesSB 188, also known as the CROWN Act,<a href="file:///C:/Users/axr34/AppData/Roaming/OpenText/DM/Temp/SAN_FRANCISCO-#4145454-v10-Nov_ELC_2020_Legislative_Recap_DRAFT.docx#_ftn1">[1]</a> clarifies that the definition of “race” under FEHA is inclusive of traits historically associated with race, including, but not limited to, hair texture and “protective hairstyles,” which include hairstyles such as braids, locks, and twists. Employers should review their workplace dress code and grooming policies in light of this new law. I. SB 778 Establishes Harassment Training RequirementsSB 778 provides that employers with five or more employees (including temporary and seasonal workers) will now have additional time to comply with the statutory requirements under SB 1343 regarding bi-annual sexual harassment prevention training. Under SB 1343, the initial compliance deadline was January 1, 2020. SB 778 gives covered employers until January 1, 2021 to provide two hours of sexual harassment prevention training to supervisors and one hour of sexual harassment prevention training to other employees. Note that under current law, employers with 50 or more employees are already required to provide supervisors with two hours of sexual harassment prevention training. The new law does not extend the compliance deadlines for those obligations. However, the law clarifies that supervisors who were provided training in 2018 do not need to be trained again until 2020. J. SB 142 Expands Employer Lactation Accommodation RequirementsEmployers with 50 or more employees will have new obligations under SB 142 for providing lactation accommodations to employees. Employers were previously required to make reasonable efforts to provide employees with the use of a lactation room or other location (other than a bathroom) close to the employees’ work area to express breast milk in private. Under the new law, employers are required to provide a lactation room or other location for expressing breast milk that complies with the following requirements:1. Is safe, clean, and free of hazardous materials, as defined in Section 6382;2. Has a surface to place a breast pump and personal items;3. Has a place to sit; and4. Provides access to electricity or alternative devices, including, but not limited to, extension cords or charging stations, needed to operate an electric or battery-powered breast pump.Employers are also required to provide access to a sink with running water and a refrigerator suitable for storing milk close to the employees’ workspace. If a refrigerator cannot be provided, employers are permitted to provide another cooling device suitable for storing milk. Employers with fewer than 50 employees may be granted an exemption if they are able to show that they would suffer an undue hardship.  The new law also provides for additional penalties in the event of violations. For example, employers could be subject to a civil penalty of up to $100 per day for each day an employee is denied adequate space to express milk. Previously, the law permitted a $100 penalty per violation. <a href="file:///C:/Users/axr34/AppData/Roaming/OpenText/DM/Temp/SAN_FRANCISCO-#4145454-v10-Nov_ELC_2020_Legislative_Recap_DRAFT.docx#_ftnref1">[1]</a> The Create a Respectful and Open Workplace for Natural Hair Act.

California Issues A New Round Of Employment Laws

Andrew co-chairs the firm’s Global Employment and Labor Group. He represents companies on a broad range of labor and employment litigation and counseling matters, successfully defending clients in number complex matters before federal and state courts and administrative agencies.

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California Issues A New Round Of Employment Laws

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California employers will be impacted by several new laws signed by Governor Newsom during this past legislative session. Employers should review their policies

<p style="background-color: transparent;box-sizing: border-box;color: rgb(82, 83, 87);font-size: 16.93px;font-style: normal;font-variant-ligatures: normal;font-variant-caps: normal;font-variant-numeric: normal;font-variant-east-asian: normal;font-weight: 400;letter-spacing: normal;line-height: 27.08px;margin-bottom: 20px;margin-left: 0px;margin-right: 0px;margin-top: 0px;orphans: 2;text-align: left;text-decoration-line: none;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;text-indent: 0px;text-transform: none;webkit-text-stroke-width: 0px;white-space: normal;word-spacing: 0px;overflow-wrap: normal;padding-top: 0px;padding-right: 0px;padding-bottom: 0px;padding-left: 0px;">Andrew Turnbull, Employment + Labor Of Counsel, and Victoria Dalcourt Angle, Government Contracts Associate, co-wrote a blog post detailing the Trump Administration's decision to revoke <a href="https://www.govinfo.gov/content/pkg/DCPD-200900039/pdf/DCPD-200900039.pdf" target="_blank">Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts</a> (“EO 13495”), removing the requirement for federal service contractors to offer employment to employees of predecessor contractors.<p style="background-color: transparent;box-sizing: border-box;color: rgb(82, 83, 87);font-size: 16.93px;font-style: normal;font-variant-ligatures: normal;font-variant-caps: normal;font-variant-numeric: normal;font-variant-east-asian: normal;font-weight: 400;letter-spacing: normal;line-height: 27.08px;margin-bottom: 20px;margin-left: 0px;margin-right: 0px;margin-top: 0px;orphans: 2;text-align: left;text-decoration-line: none;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;text-indent: 0px;text-transform: none;webkit-text-stroke-width: 0px;white-space: normal;word-spacing: 0px;overflow-wrap: normal;padding-top: 0px;padding-right: 0px;padding-bottom: 0px;padding-left: 0px;">Read more on the <a href="https://govcon.mofo.com/labor-employment/in-a-long-anticipated-move-the-trump-administration-revokes-executive-order-13495-giving-service-contractors-more-flexibility-when-hiring-predecessor-contractor-employees/">Government Contracts Insights</a> blog.

In a Long-Anticipated Move, the Trump Administration Revokes Executive Order 13495, Giving Service Contractors More Flexibility when Hiring Predecessor Contractor Employees

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In a Long-Anticipated Move, the Trump Administration Revokes Executive Order 13495, Giving Service Contractors More Flexibility when Hiring Predecessor Contractor Employees

In a Long-Anticipated Move, the Trump Administration Revokes Executive Order 13495, Giving Service Contractors More Flexibility when Hiring Predecessor Contractor Employees 

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Andrew Turnbull, Employment + Labor Of Counsel, and Victoria Dalcourt Angle, Government Contracts Associate, co-wrote a blog post detailing the Trump Administra

For decades, many employers have categorically prohibited marijuana use given its illegal status under federal law. With a growing number of state and localities legalizing marijuana and creating protections for marijuana users, many employers have been left wondering whether they can continue to lawfully fire or refuse to hire employees and applicants who use marijuana. This Commentary discusses the seeming conflict between federal and state law regarding marijuana and the increasingly shaky grounds for federal preemption in the employment context.Federal Stance on MarijuanaUnder federal law, use and possession of marijuana is illegal, even for medical purposes. In 1970, the Federal Controlled Substances Act (CSA) established five schedules of controlled substances, ranging from schedule I (most potential for abuse) to schedule V (least potential for abuse).[1] The CSA has always categorized marijuana as a schedule I drug—i.e., as a drug with “no currently accepted medical use in the United States,” “no currently accepted medical use in treatment in the United States,” and “a high potential for abuse.”[2] Heroin, ecstasy, and peyote are three examples of other drugs listed on schedule I.[3]In addition to the CSA, certain federal contractors and recipients of federal grants are subject to the Drug-Free Workplace Act of 1988 (DFWA). The DFWA requires covered companies to prohibit employees from engaging in the “unlawful manufacture, distribution, dispensation, possession, or use of a controlled substance” in the workplace, including any location where the work is done “in connection” with a covered contract or grant.[4] The DFWA requires contractors to take direct action against employees who violate the DFWA, which can include terminating their employment or requiring satisfactory participation in a drug-abuse assistance or rehabilitation program. Contractors who fail to comply with the DFWA can face harsh penalties, such as cancellation of their federal contracts or grants.Using or possessing marijuana may also jeopardize an individual’s ability to obtain a security clearance, which is necessary for some employees to access classified information.[5]Workplace Drug TestingMany employers have drug testing programs that screen for marijuana. Testing might include pre-employment testing, testing employees based upon reasonable suspicion of drug use, and, where permitted, random drug testing. Companies have good reason to test for drugs, including ensuring a safe and productive workplace, reducing possible claims of negligent hiring, and even obtaining discounts on workers’ compensation premiums in certain states.If testing complies with applicable law, employers have typically been able to lawfully decline to hire applicants or terminate employees who test positive for marijuana. The Americans with Disabilities Act (ADA) does not add any protection for marijuana users. Although the ADA protects employees from being disciplined or terminated for taking legally prescribed drugs in accordance with their prescriptions, the ADA does not protect individuals who use schedule I drugs under the CSA, which means it does not protect medical marijuana users.Unlike alcohol tests, current marijuana tests are not sophisticated enough to determine whether someone is under the influence at the time of test. Instead, marijuana tests typically show whether someone has used marijuana during the weeks leading up to the test. Given the difficulty of determining whether a positive test is the result of marijuana usage during work or during non-work hours, some employers have found it easier to ban marijuana use outright.A Growing Chorus of States Legalize Marijuana for Medical and Recreational UseOver the last decade, a growing number of states have legalized marijuana use. Thirty-three states and the District of Columbia have approved comprehensive medical marijuana legislation, and thirteen states have legalized the use of “low THC, high cannabidiol (CBD)” products for medical reasons in limited situations or as a legal defense.[6] Recreational use of marijuana has also been legalized by eleven states (Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington) and the District of Columbia.[7]While the majority of these state laws do not address whether an employer can take adverse action against employees for marijuana use, fourteen states so far have gone a step further by limiting an employer’s ability to discipline or terminate employees for off-duty medical marijuana use.[8] For example, New Jersey law prohibits employers from taking adverse employment action against an employee or applicant “based solely on the employee’s status” as a registered medical marijuana patient.[9] The law also requires employers to give employees or applicants an opportunity to provide a “legitimate medical explanation” if they test positive for marijuana before taking any adverse action.[10] Other states, such as Illinois,[11] Maine,[12] and Nevada,[13] impose even stricter limitations by prohibiting employers from rescinding job offers or taking adverse action for off-duty marijuana use—even recreational use.New York City and Nevada also recently passed legislation barring employers from testing applicants for jobs in those jurisdictions for marijuana. Both laws are subject to certain exceptions. For example, the New York City law, which will go into effect on May 10, 2020, exempts certain jobs that have the potential to impact the health or safety of employees or the public, such as commercial drivers and medical staff, or if such testing is required by federal contracts, grants, or other laws. Whether other jurisdictions will follow suit remains to be seen.Reconciling Federal and State Laws on MarijuanaAlthough the CSA does not expressly preempt state law “unless there is a positive conflict” with the state law,[14] some courts have found that the CSA preempts state laws permitting medical marijuana use.[15] For example, in Emerald Steel Fabricators, Inc. v. Bureau of Labor & Indus.,[16] an employee who used medical marijuana to manage pain from his sinus cancer and inoperable brain tumor claimed that his employer violated the Oregon Medical Marijuana Act (OMMA) by terminating him for testing positive for marijuana. The employer argued that the OMMA was preempted by the CSA. The Supreme Court of Oregon agreed, finding that the employer did not discriminate against the employee because he was engaged in the illegal use of drugs under federal law.A handful of more recent cases, however, have gone the other way. In Noffsinger v. SSC Niantic Operating Co., LLC,[17] the employer argued that the federal law preempted an employee’s claim that it violated Connecticut’s Palliative Use of Marijuana Act (PUMA) by terminating him for testing positive for marijuana, despite him allegedly using marijuana to treat post-traumatic stress disorder. Distinguishing Emerald Steel, the court held that PUMA, unlike OMMA, explicitly barred employment discrimination for marijuana use by providing that no “employer may refuse to hire a person or may discharge, penalize or threaten an employee solely on the basis of such person’s or employee’s status as a qualifying patient” under the law.[18] A federal court in Arizona reached a similar conclusion when it found that a plaintiff terminated for a positive marijuana test could claim discrimination because, like PUMA, Arizona’s medical marijuana law had an anti-discrimination provision.[19]Even where state medical marijuana laws did not have those same protections, some courts have found that taking adverse action against employees or applicants for marijuana use could violate state disability discrimination laws. In Barbuto v. Advantage Sales & Marketing, LLC, [20] for instance, an employee who used medical marijuana to treat her Crohn’s disease filed suit after being terminated for failing a drug test. The Massachusetts Supreme Court found that she could pursue a claim for handicap discrimination under Massachusetts disability law. The court held that federal law did not preempt state law, stating:[t]o declare an accommodation for medical marijuana to be per se unreasonable out of respect for Federal law would not be respectful of the recognition of Massachusetts voters, shared by the legislatures or voters in the vast majority of States, that marijuana has an accepted medical use for some patients suffering from debilitating medical conditions.[21]Similarly, in Wild v. Carriage Funeral Holdings, Inc., [22] the New Jersey appellate court held that an employee who was fired after testing positive for medical marijuana he used to treat pain caused by his cancer could sue his former employer for disability discrimination under New Jersey law for failing to accommodate his medical marijuana use during “off-work hours.”Companies covered by the DFWA should also proceed cautiously before relying on the DFWA to terminate employees testing positive for marijuana. For example, in Noffsinger, the court found that the DFWA did not require the employer to rescind a job offer to the plaintiff. The court reasoned that the “DFWA does not require drug testing. . . . Nor does the DFWA prohibit federal contractors from employing someone who uses illegal drugs outside the workplace, much less an employee who uses medical marijuana outside the workplace in accordance with a program approved by state law.”[23]Practical TakeawaysGiven the trend of states and courts limiting employers’ ability to take adverse action against employees for marijuana use, employers should continue to monitor developments in this area and reexamine their drug-free and drug testing policies. Employers may need to allow for flexibility. Testing for marijuana should be eliminated for applicants and employees in jurisdictions prohibiting such testing, unless there is a clear exception under the law. Even where there are no outright bans, employers should consider allowing exceptions to their policies for employees using marijuana for documented medical reasons.Marijuana use is also on the rise, particularly in states allowing recreational use. Given the tight labor market, employers may want to consider whether testing for marijuana might hinder their ability to recruit talent.Morrison & Foerster associate Alison Frost has contributed to the writing of this post. [1] 21 U.S.C.S. § 812(a).[2] <a target="_blank" href="https://www.deadiversion.usdoj.gov/schedules">https://www.deadiversion.usdoj.gov/schedules</a>; 21 U.S.C.S. § 812(b)(1); 21 C.F.R. § 1308.11.[3] 21 C.F.R. § 1308.11.[4] Federal Acquisition Regulation (FAR) subpart 23.5 implements the prohibitions of the DFWA, and the subpart’s implementing clauses are incorporated into government contracts. FAR 23.505; 52.223-6.[5] Bradley Wine and Steven Cave, “Don’t mean to harsh your mellow, but … contractors and the Drug-Free Workplace Act,” Thomson Reuters (Jan. 16, 2018), <a target="_blank" href="https://media2.mofo.com/v3/assets/blt5775cc69c999c255/bltc5c17497d0464a1b/627316214886af2aa2be107a/180116-contractors-drug-free-workplace.pdf">https://media2.mofo.com/v3/assets/blt5775cc69c999c255/bltc5c17497d0464a1b/627316214886af2aa2be107a/180116-contractors-drug-free-workplace.pdf</a>.[6] National Conference of State Legislatures, State Medical Marijuana Laws (2019), http://www.ncsl.org/research/health/state-medical-marijuana-laws.aspx.[7] National Conference of State Legislatures, Marijuana Overview (2019), http://www.ncsl.org/research/civil-and-criminal-justice/marijuana-overview.aspx.[8] States that prohibit adverse actions against employees for off-duty use of marijuana are Arizona, Arkansas, Connecticut, Delaware, Illinois, Maine, Massachusetts, Minnesota, Nevada, New Jersey, New York, Oklahoma, and Rhode Island.[9] The New Jersey Jake Honig Compassionate Use Medical Cannabis Act, 9(a).[10] The New Jersey Jake Honig Compassionate Use Medical Cannabis Act, 9(b).[11] H.B. 1438, 101st Gen. Assembl., Reg. Sess. (Ill. 2019).[12] Me. Rev. Stat. Ann. tit. 7, § 2454 (repealed 2018).[13] Assemb. B. 132, 80th Sess. § 2 (Nev. 2019).[14] 21 U.S.C. § 903.[15] See, e.g., Ross v. RagingWire Telecomms., Inc., 42 Cal. 4th 920, 926 (2008) (dismissing claim under California’s Fair Employment and Housing Act, Government Code, § 12900 et seq., for employer’s refusal to accommodate employee’s use of medical marijuana pursuant to the California Compassionate Use Act of 1996, Health & Safety Code, § 11362.5 and finding “[n]o state law could completely legalize marijuana for medical purposes because the drug remains illegal under federal law”); Brandon Coats v. Dish Network, LLC, 2015 CO 44 (Colo. 2015) (dismissing wrongful discharge claim because employee’s medical marijuana use did not fall within “lawful” activities under Colo. Rev. Stat. § 24-34-402.5 in light of its illegal status under federal law); Garcia v. Tractor Supply Co., 154 F. Supp. 3d 1225, 1230 (D.N.M. 2016) (“To affirmatively require [Defendant-Employer] to accommodate [Plaintiff-Employee’s] illegal drug use would mandate [Defendant-Employer] to permit the very conduct the CSA proscribes.”).[16] 348 Ore. 159 (2010).[17] 338 F. Supp. 3d 78 (D. Conn. 2018).[18] Noffsinger v. SSC Niantic Operating Co. LLC, 273 F. Supp. 3d 326, 334-35 & n.2 (“The very different question presented in Emerald Steel was whether the CSA more generally preempted a provision of Oregon law that authorized the use of medical marijuana. Here, by contrast, the question is whether the CSA preempts a provision that prohibits an employer from taking adverse action against an employee on the basis of the employee’s otherwise state-authorized medicinal use of marijuana.”).[19] Whitmire v. Wal-Mart Stores Inc., 359 F. Supp. 3d 761, 780-81 (D. Ariz. 2019).[20] 477 Mass. 456 (2017).[21] Id. at 465-66.[22] 458 N.J. Super. 416, 433-34 (N.J. Super. Ct. App. Div. 2019), cert. granted, No. C-1043, 2019 N.J. LEXIS 926 (N.J. July 11, 2009).[23] See Noffsinger, 338 F. Supp. 3d at 84.

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As State Cannabis Approval Grows Higher, When Can You Fire?

For decades, many employers have categorically prohibited marijuana use given its illegal status under federal law.  With a growing number of state and localiti

As State Cannabis Approval Grows Higher, When Can You Fire?

Whatever good intentions its proponents may claim, the Labor Code Private Attorneys General Act of 2004 (PAGA) created perverse incentives for plaintiff’s lawyers to file representative actions seeking civil penalties for violations of the California Labor Code on behalf of all “aggrieved employees” of the named plaintiff’s employer.  The named plaintiff often does not know she is being used for purposes of bringing a PAGA action.  The alleged violations are often hyper-technical or trivial, if a violation at all – “gotcha” claims, as plaintiff’s lawyers like to call them.  The “aggrieved employees” – who can number in the tens of thousands if the target is a large employer – most often have suffered no injury.  The employer, facing potentially business-destroying liability, too often settles for an amount of money bearing no relationship to the violations allegedly committed.  And the plaintiff’s lawyers pocket 30-35 percent of the settlement for themselves.This article addresses some of the pressing issues around PAGA, in three parts.  First, it provides an overview of salient aspects of PAGA and the case law interpreting it.  Next, it discusses a recently-filed lawsuit that seeks to have PAGA declared unconstitutional.  Finally, it offers suggestions for warding off a PAGA action or winning the action if brought.The takeaway:  In today’s climate, virtually every California employer is vulnerable to a PAGA attack and taking steps to avoid or defeat PAGA liability should be given high priority.PAGA:  An OverviewPAGA deputizes an “aggrieved employee” – any person employed “by the alleged violator and against whom one or more of the alleged violations was committed”[1] – to file suit as proxy for the State of California to recover civil penalties on behalf of himself and other “aggrieved employees” for alleged violations of the Labor Code.  Seventy-five percent of any penalties recovered in the action, whether by settlement or judgment, go to the State, and the remaining 25 percent go to the alleged aggrieved employees.[2]  While a single penalty for a single violation suffered by a single individual may be trifling, when aggregated across an entire workforce for multiple alleged violations, the amount of these penalties can be staggering.  And, attorneys’ fees are awardable to the plaintiff employee who prevails in the action, but not to the prevailing employer.[3]Starting in 2009, a number of court decisions eliminated several defenses theretofore available to employers defending PAGA actions.  Notably among them, in Arias v. Superior Court,[4] the California Supreme Court held that PAGA actions are not subject to state-law requirements for a case to be certified as a class action.  In Iskanian v. CLS Transportation Los Angeles, LLC,[5] the Supreme Court held that an arbitration agreement waiving representative PAGA claims is unenforceable as a matter of California public policy.  In light of Arias and Iskanian, plaintiff’s lawyers increasingly join class action claims with PAGA claims or solely allege PAGA claims in their complaints.  In the past year, two additional court of appeal decisions addressing the scope of PAGA have emboldened plaintiffs’ lawyers to interpret it even more broadly, resulting in increasingly expansive – and expensive – PAGA suits.[6]THE CONSTITUTIONAL CHALLENGEApparently deciding enough is enough, a recently-organized association holding itself out as representing California-based employers filed suit against the State of California on November 28, 2018, seeking to have PAGA declared unconstitutional on separation of powers, procedural and substantive due process, excessive fines and unusual punishment, and equal protection grounds.[7]  The association’s complaint is well-researched, thorough, and thoughtful.  The opening paragraphs sum up its position:“Are California business owners who inadvertently make a payroll error equivalent to the worst perpetrators of hate crimes?  That’s the twisted logic that, more than a decade ago, led the state legislature to pass a harmful law called the Private Attorneys General Act (PAGA).“PAGA was conceived as a means to help employees right workplace wrongs without further burdening the state bureaucracy.  Trial attorneys quickly discovered that they could use the law for their own benefit; today, thousands of PAGA complaints are filed annually against large and small businesses, nonprofit charities, and even labor unions.“PAGA, as written and practiced, is unconstitutional.  With this complaint, we’re asking the state to enforce its own laws – rather than transferring the state’s power to private attorneys who operate for their own personal gain.”[8]This author wishes the association success in overturning PAGA.  But best case, it will take years to achieve that result.  What does an employer do in the meanwhile?  That question is addressed next.AVOIDING OR DEFEATING A PAGA ACTIONThere are many things an employer can do to minimize the risk of getting sued in a PAGA action, and many ways to successfully defend itself if sued; surveying all of them is beyond the scope of this article.  Rather, we focus on two important issues.An Ounce of PreventionGiven the ever increasing number of new PAGA filings, it is critical that employers have policies and practices that comply with the Labor Code and the IWC Wage Order applicable to the employer’s business.  Periodically conducted audits to ensure that these policies and practices remain legally compliant are advised.  Human resource professionals must stay current on legal developments to address any needed updates.  PAGA makes unique the challenges a California employer faces, and these challenges should not be underestimated.  While perhaps trite, it is no less true:  an ounce of prevention is worth a pound of cure.Defeating a PAGA Action as UnmanageablePAGA empowers an “aggrieved employee” only to sue on behalf of other employees who are “aggrieved,” i.e., employees “against whom one or more alleged violations was committed.”[9]  California trial courts are increasingly striking PAGA claims where the experience of every allegedly aggrieved employee would be required to show that they were, in fact, aggrieved, rendering the claim unmanageable because countless mini-trials would be necessary before the aggrieved employees were known and the claim could proceed.[10]  So too are federal district courts striking PAGA claims when they cannot be manageably tried.[11]  Consistent with this emerging body of law, the California Supreme Court recently recognized the common-sense fact that PAGA actions must be “manageable.”[12]Unmanageability has thus emerged as a powerful weapon in defendants’ arsenal.  It is the plaintiff’s burden to show how her PAGA action can be manageably tried, and if she fails to meet her burden, the action cannot go forward.  While unmanageability may not apply in a particular case, it should at least be considered in every case, in the course of devising a winning strategy.[1] Cal. Lab. Code, § 2699, subd. (c).[2] Id., § 2699, subd. (i).[3] Id., § 2699, subd. (g)(1).[4] (2009) 46 Cal.4th 969.[5] (2014) 59 Cal.4th 348.[6] Atempa v. Pedrazzani (2018) 27 Cal.App.5th 809, review den. Jan. 16, 2019; Huff v. Securitas Security Services USA, Inc. (2018) 23 Cal.App.5th 745, rehg. den. June 13, 2018, review den. Aug. 8, 2018.[7] California Business & Industrial Alliance v. Becerra, Orange County Superior Court Case No. 30-2018-01035180-CU-JR-CXC (filed Nov. 28, 2018).[8] Id., Complaint at 2.[9] Cal. Lab. Code, § 2699, subd. (c).[10] See, e.g., Sanchez v. McDonald’s Restaurants of California, Inc. (Los Angeles Super. Ct., Dec. 15, 2016, No. BC499888) Court Ruling at pp. 4-5 [striking PAGA representative allegations]; and see Banta v. American Medical Response Inc. (Los Angeles Super. Ct., Apr. 25, 2018, No. BC393113) Order [same]; Martinez v. California Pizza Kitchen, Inc. and Hernandez v. California Pizza Kitchen, Inc. (Los Angeles Super. Ct., Mar. 30, 2015, Nos. BC373758, BC441231) Orders [same]; Bright v. 99 Cents Only Stores (Los Angeles Super. Ct., Dec. 7, 2011, No. BC415527) Order [same]; Munoz v. Acapulco Rest., Inc. (Los Angeles Super. Ct., Oct. 21, 2010, No. BC393912) Order [same].[11] See, e.g., Amiri v. Cox Communications California, LLC (C.D. Cal. 2017) 272 F.Supp.3d 1187, 1195 [striking PAGA claims as unmanageable where the alleged Labor Code violations were based on the plaintiff’s experience rather than on policies or practices common to “aggrieved employees,” and “liability determinations will require individualized inquiries”]; Salazar v. McDonald’s Corp. (N.D. Cal., Jan. 5, 2017, No. 14-cv-02096-RS) 2017 WL 88999, at *9 [granting defendant’s motion to strike representative PAGA claim]; Brown v. American Airlines, Inc. (C.D. Cal., Oct. 5, 2015, No. CV 10-8431-AG (PJWx)) 2015 WL 6735217, at *4 [“Court finds manageability issues exist regarding PAGA overtime claims here.  There appears to be too many individualized assessments to determine PAGA violations concerning overtime pay.”]; Raphael v. Tesoro Ref. and Mktg. Co. LLC (C.D. Cal., Sept. 25, 2015, No. 2:15-CV-02862-ODW) 2015 WL 5680310, at *3 [“Court would have to engage in a multitude of individualized inquires making the PAGA action unmanageable and inappropriate.”]; Bowers v. First Student, Inc. (C.D. Cal., Apr. 23, 2015, No. 2:14-CV-8866-ODW (Ex)) 2015 WL 1862914, at *4 [same]; Litty v. Merrill Lynch & Co. (C.D. Cal., Nov. 10, 2014, No. CV 14-0425 PA PJWx) 2014 WL 5904904, at *3 [same]; Ortiz v. CVS Caremark Corp. (N.D. Cal., Mar. 19, 2014, No. C-12-05859 EDL) 2014 WL 1117614, at *3-4 [same].[12] Williams v. Superior Court (2017) 3 Cal.5th 531, 559.

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PAGA: A Call To Arms

What the Supreme Court’s “Epic”  Decision Means for Employers

elcblog-may- 2018

Whatever good intentions its proponents may claim, the Labor Code Private Attorneys General Act of 2004 (PAGA) created perverse incentives for plaintiff’s lawye

PAGA:  A Call To Arms

A California bill that has emerged from the #MeToo movement and is likely to increase employers’ costs and exposure in defending harassment claims will take effect on January 1, 2019.  As briefly discussed in our <a href="https://elc.mofo.com/topics/annual-california-legislative-recap.html">October 2018 Employment Law Commentary</a>, California Governor Jerry Brown signed into law SB 1300, amending the California Fair Employment and Housing Act (FEHA) in a manner that impacts employers in both the workplace and the courts.  This Commentary discusses in more detail SB 1300’s changes to FEHA, the likely impact it will have on California employers, and the key issues defendants should keep in mind when facing harassment and discrimination claims brought by current or former employees under FEHA.The #MeToo Movement’s Recent ImpactEven before the rise of the #MeToo movement, California was one of the most employee-friendly forums—if not the most employee-friendly one—in the country for protections against harassment and discrimination in the workplace.  Over the past year, the public and media outcry over high-profile examples of sexual harassment in the workplace have led numerous companies voluntarily to change their workplace policies and practices to protect alleged victims of sexual harassment.For example, some employers require employees to sign mandatory arbitration agreements requiring employees to bring any employment claims in arbitration, including claims of sexual harassment.<a href="file:///C:/Users/mls13/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/NSCWOFQJ/FINAL%20DRAFT%20-%20Dec%20ELC%20-%20SB%201300%20Article-1404327%20track%20changes.docx#_ftn1">[1]</a> Given the recent MeToo movement, such mandatory arbitration agreements covering sexual harassment claims have come under attack.  Google and Facebook, two of the largest employers in California, recently announced that they would no longer require employees to arbitrate sexual harassment and assault claims.<a href="file:///C:/Users/mls13/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/NSCWOFQJ/FINAL%20DRAFT%20-%20Dec%20ELC%20-%20SB%201300%20Article-1404327%20track%20changes.docx#_ftn2">[2]</a>  eBay, Airbnb, and others promptly followed suit.  Still other California employers may soon face public pressure to carve out certain types of claims from their arbitration provisions.  Absent an arbitration requirement, employees will be able to litigate their sexual harassment claims in a public forum, file claims on behalf of similarly situated employees based on allegedly common harassment practices in the workplace, and potentially use the media and other forms of public pressure to their advantage.Further, last month, in response to the allegations asserted against former Chief Judge of the Ninth Circuit Alex Kozinski, the Ninth Circuit announced that it had created a new position of director of workplace relations to address workplace harassment issues in its courts.<a href="file:///C:/Users/mls13/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/NSCWOFQJ/FINAL%20DRAFT%20-%20Dec%20ELC%20-%20SB%201300%20Article-1404327%20track%20changes.docx#_ftn3">[3]</a>  With the Ninth Circuit taking this unprecedented step to prevent and resolve workplace harassment within its workforce, Ninth Circuit judges may very well expect the same from private employers appearing in its courts.  It also can reasonably be expected that the California federal courts will take plaintiffs’ claims of harassment and discrimination even more seriously than before.Protections Against Harassment for Employees Under SB 1300SB 1300 is part of the California legislature’s efforts to ensure that as many California employers as possible provide more robust and expansive protections for their employees in the workplace.  While many employers want to protect their employees against sexual harassment, SB 1300 greatly increases the potential liability from harassment and discrimination claims than ever before.SB 1300 Lowers the Plaintiffs’ Burden of Proof Under FEHASB 1300 lowers the burden and standard of proof for plaintiffs to prevail on sexual harassment as well as other forms of harassment under FEHA.  SB 1300 adds new Government Code § 12923 to FEHA, making it easier for plaintiffs to prove harassment claims in several significant ways.  Instead of drafting explicit statutory language to address the particular issue, SB 1300 made the following legislative “findings”:<ul><li>It affirms the standard set forth by Justice Ruth Bader Ginsburg in her concurrence in Harris v. Forklift Systems (1993) 510 U.S. 17 that a plaintiff does not have to prove “tangible productivity has declined as a result of the harassment”; rather, a plaintiff only need prove “a reasonable person” would find such “harassment so altered working conditions as to make it more difficult to do the job.”<a href="file:///C:/Users/mls13/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/NSCWOFQJ/FINAL%20DRAFT%20-%20Dec%20ELC%20-%20SB%201300%20Article-1404327%20track%20changes.docx#_ftn4">[4]</a></li><li>It rejects the Ninth Circuit’s opinion in Brooks v. City of San Mateo (2000) 229 F.3d 917, by recognizing that “[a] single incident of harassing conduct” can establish a hostile work environment “if the harassing conduct has unreasonably interfered with the plaintiff’s work performance or created an intimidating, hostile, or offensive working environment.”</li><li>It affirms the rejection of the “stray remarks doctrine” in Reid v. Google, Inc. (2010) 50 Cal.4th 512, by noting that “[t]he existence of a hostile work environment depends upon the totality of the circumstances and a discriminatory remark, even if not made directly in the context of an employment decision or uttered by a non-decision-maker, may be relevant, circumstantial evidence of discrimination.”</li><li>It rejects Kelley v. Conco Companies (2011) 196 Cal.App.4th 191, and finds that “[t]he legal standard for sexual harassment should not vary by type of workplace.”</li><li>Finally, in a way summarizing the impact of the entirety of Government Code § 12923, the legislature affirms the decision in Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, and states: “Harassment cases are rarely appropriate for disposition on summary judgment.”</li></ul>Although legislative findings and declarations are generally not binding on courts, the California legislature’s largely unprecedented act of adding a standalone code section to FEHA for the sole purpose of expressing its understanding of the appropriate legal standards surrounding harassment claims may have more force than usual.  As we have seen over the past year, increased media, public, and legislative attention on workplace conditions arising from the #MeToo movement has time and again led to significant change.  At a minimum, plaintiffs will rely heavily on Government Code § 12923 and the cases explicitly affirmed by the legislature in support of their harassment claims, especially when opposing summary judgment motions from employers.  While a defendant’s likelihood of success in defending against harassment claims will, to a certain extent, still come down to the judge, arbitrator, or administrative agency official assigned to the case, it is hard to imagine how overall SB 1300 will not result in increased costs and exposure for employers facing harassment claims in California.SB 1300 Expands Employer’s Liability for Nonemployee ActionsBefore SB 1300, employers could be liable for the acts of nonemployees with respect to sexual harassment only.  SB 1300, however, amends Government Code § 12940(j)(1) to now expose employers to potential liability for the actions of nonemployees for all forms of harassment. In light of this change, employers should heed the implicit recommendations by the Legislature in Government Code § 12950.2 authorizing employers to provide bystander intervention training in order to motivate bystanders to take action when they observe problematic behaviors in the workplace.  The development and provision of this type of bystander intervention training may be costly for employers in the short run, but also could result in significant savings in costs, time, and resources down the road by preventing the filing of lawsuits.SB 1300 Eliminates the Ability for Defendants to Recover Attorneys’ FeesBefore SB 1300, courts were authorized under FEHA and California Code of Civil Procedure § 998 to award the prevailing party in a lawsuit—whether the plaintiff or the defendant—reasonable attorneys’ fees and costs, including expert witness fees.  SB 1300, however, makes the award of attorneys’ fees now one-sided.  Beginning January 1, 2019, prevailing defendants are prohibited from being awarded fees and costs unless the court finds that the action was “frivolous, unreasonable, or groundless when brought, or the plaintiff continued to litigate after it clearly became so.”  Gov. Code § 12965(b).  Needless to say, this is an extremely high standard for employers to meet to recover attorneys’ fees and costs, and SB 1300 therefore effectively eliminates the advantages to defendants of making Code of Civil Procedure § 998 offers to plaintiffs in FEHA cases.  SB 1300 Prohibits Certain Releases and Nondisparagement AgreementsFinally, the impact of SB 1300 does not just extend to the courtroom.  Beginning January 1, 2019, employers will be prohibited from requiring employees to sign either releases of FEHA claims or nondisparagment agreements, in exchange for a bonus, a raise, employment, or continued employment.  Gov. Code § 12964.5.  This prohibition, however, does not apply to negotiated settlement agreements between an employer and employee to resolve a lawsuit, administrative agency complaint, or internal complaint.  Nevertheless, employers will have to ensure that their standard agreements comply with these new prohibitions, and can no longer take certain pre-litigation actions to try to avoid the filing of lawsuits by current and former employees.What Steps Should Employers Take in Response to SB 1300With SB 1300 taking effect on January 1, 2019, employers should think hard about how these significant changes to FEHA could impact the way they litigate harassment claims in California courts.  Being less likely to prevail on summary judgment of harassment claims, employers may want to reconsider how they approach settlement with current and former employees bringing harassment claims under FEHA.  Employers should keep in mind, however, that the 2017 Tax Cuts and Jobs Act passed by Congress amended the Internal Revenue Code so that no deductions can be made for either (1) settlements or payments related to sexual harassment or sexual abuse claims if they are made subject to a nondisclosure agreement, or (2) attorney’s fees related to such settlements or payments.But employers should not stop there.  The best defense against harassment and other FEHA-related claims is to try to prevent as many problems from arising in the workplace as possible.  With the increased costs of litigation that SB 1300 will usher in, employers should ask whether the harassment and discrimination trainings provided are sufficient, analyze whether their employee handbooks, internal complaint procedures, and other policies are sufficiently robust, and ensure that their agreements and business practices are in full compliance with SB 1300 and other recently enacted employment laws in California.<a href="file:///C:/Users/mls13/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/NSCWOFQJ/FINAL%20DRAFT%20-%20Dec%20ELC%20-%20SB%201300%20Article-1404327%20track%20changes.docx#_ftn5">[5]</a><a href="file:///C:/Users/mls13/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/NSCWOFQJ/FINAL%20DRAFT%20-%20Dec%20ELC%20-%20SB%201300%20Article-1404327%20track%20changes.docx#_ftnref1">[1]</a> Employers’ use of mandatory arbitration agreements also seems to be on the rise given the Supreme Court’s approval of the use of class action waivers.  See, e.g., Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018); <a href="https://media2.mofo.com/v3/assets/blt5775cc69c999c255/blt0535e6c5e90a7d6f/62731617220ab5285f519049/180529-employment-law-commentary.pdf">May 2018 Employment Law Commentary</a>.<a href="file:///C:/Users/mls13/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/NSCWOFQJ/FINAL%20DRAFT%20-%20Dec%20ELC%20-%20SB%201300%20Article-1404327%20track%20changes.docx#_ftnref2">[2]</a> Google, Company Announcements: A note to our employees, available at https://www.blog.google/inside-google/company-announcements/note-our-employees/; Douglas MacMillan, “Facebook to End Forced Arbitration for Sexual-Harassment Claims,” Wall Street Journal, Nov. 9, 2018, available at https://www.wsj.com/articles/facebook-to-end-forced-arbitration-for-sexual-harassment-claims-1541799129.<a href="file:///C:/Users/mls13/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/NSCWOFQJ/FINAL%20DRAFT%20-%20Dec%20ELC%20-%20SB%201300%20Article-1404327%20track%20changes.docx#_ftnref3">[3]</a> United States Courts for the Ninth Circuit, News Release: Ninth Circuit Announces Appointment of First Director of Workplace Relations, http://cdn.ca9.uscourts.gov/datastore/ce9/2018/05/21/R2_Judicial_Council_Workplace_Initiative.pdf.<a href="file:///C:/Users/mls13/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/NSCWOFQJ/FINAL%20DRAFT%20-%20Dec%20ELC%20-%20SB%201300%20Article-1404327%20track%20changes.docx#_ftnref4">[4]</a> 510 U.S. at 26.<a href="file:///C:/Users/mls13/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/NSCWOFQJ/FINAL%20DRAFT%20-%20Dec%20ELC%20-%20SB%201300%20Article-1404327%20track%20changes.docx#_ftnref5">[5]</a> See, e.g., SB 820, SB 826, SB 1343, AB 2770, AB 3109.

California Says #MeToo with SB 1300: The Impact on Employers

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California Says #MeToo with SB 1300: The Impact on Employers

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A California bill that has emerged from the #MeToo movement and is likely to increase employers’ costs and exposure in defending harassment claims will take eff

The Fourth District Court of Appeals in San Diego on November 1, 2018, issued AMN Healthcare Inc. v. Aya Healthcare Services Inc., in which it called into question the continuing viability in California of employee non-solicitation clauses found in many employment contracts and proprietary information, invention assignment, and confidentiality agreements.  This was a question that had been left open in Edwards v. Arthur Anderson (2000) 44 Cal. 4th 937, the California Supreme Court decision that had swept away any judicially created “narrow restraint” exceptions to California’s Business and Professions Code § 16600’s basic dictate that all non-competition provisions in employee contracts are void.  Edwards confirmed that the only exception to Section 16600 are the narrow exceptions under § 16601 (sale of goodwill of a business), § 16602 (dissolution of a partnership), and § 16602.5 (dissolution of LLC or termination of LLC interest).  Edwards did not address employee non-solicitation agreements because they were not before the court.  Accordingly, employee non-solicitation agreements were still generally understood to be enforceable in California under Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268, which had not been overturned by Edwards.  While based on a unique factual record, AMN Healthcare nonetheless questioned whether Moyes was reliable authority to support employee non-solicitation agreements in light of the California Supreme Court’s decision in Edwards.FactsAMN Healthcare, Inc. and Aya Healthcare Services, Inc. are competing providers of healthcare professionals, in particular travel nurses, to medical care facilities throughout the country.  The individual defendants were travel nurse recruiters who had left AMN to join Aya.  The individual defendants had signed confidentiality and non-disclosure agreements that included provisions preventing them from “soliciting any employee of AMN to leave the service of AMN for at least a one year period.”  It was undisputed that the travel nurses were employees of AMN while on temporary assignment to hospitals around the country.The individual defendants left AMN to work for Aya, performing the same recruiting duties they had for AMN.  AMN then filed a complaint against Aya and seven individual defendants alleging a number of different theories, including violation of their employee non-solicitation agreements.  Aya and the individual defendants claimed the employee non-solicitation clause was an unenforceable restraint of trade under section 16600 and thus was void.  AMN filed a summary judgment motion arguing that the employee non-solicitation provision was valid under the Loral Corp. v. Moyes case.  The trial court ruled that the non-solicitation of employees provision violated section 16600 because it prevented individual defendants from engaging in their lawful trade or profession – soliciting and recruiting travel nurses on temporary assignments with AMN – for at least one year post termination, making it essentially a non-competition clause.AnalysisThe facts in AMN Healthcare are arguably unique and some may say could have led to a narrower ruling from the appeals court.  As recruiters, the employees’ actual jobs were to solicit employees and other persons for employment with the particular hospitals served by their employer.  The appeals court also pointed out that travel nurses generally work a 13-week schedule and thus, with a one-year non-solicitation agreement, there were four periods of 13 weeks during which the recruiters working for the new recruiting company would not be able to contact certain employees.  This is distinguishable from the executive in the Moyes case, who moved to another company as an executive subject to an agreement prohibiting him from soliciting employees from his former employer.  The executive in Moyes was still able to pursue his occupation as an executive even with the employee nonsolicit, whereas the nonsolicit provisions for the travel nurse recruiters in AMN Healthcare precluded them from doing the essence of their job.  Of course, this is, from the court’s perspective, exactly what B&P § 16600 and Edwards say is unlawful in California.Thus, as noted above, the appeals court could have limited its decision to the individual facts of this case since the employee non-solicitation clause restricted the individual defendants from pursuing the core of their employment, unlike the executive in Moyes, who just couldn’t solicit former employees but could do his job as an executive.  However, the court did not do this.  Some may say it was dicta, but others may argue that the discussion and reasoning in the case should apply to all employee non-solicitation agreements found in employment agreements and proprietary information and confidentiality agreements, even where the employee is still able to perform his or her new position.Current StatusAMN Healthcare is not necessarily final.  The case was only recently issued, and a request for reconsideration could be made to the appeals court or a petition for review to the California Supreme Court could be filed.  Another possibility is that the case will be “depublished,” which would limit the decision to the individual parties in the case without precedential value to attack employee non-solicitation clauses in other cases.Practical ConsiderationsGiven the lack of finality and the peculiar facts in AMN Healthcare, it may be premature to predict the ultimate impact of the case.    Even if the decision stands as written, the case law must further develop to determine whether the Moyes decision has been definitively overruled or limited to the unique circumstances of AMN Healthcare.  The AMN Healthcare court simply said that after Edwards, it was hard to see how Moyes was still “viable.”    The California Supreme Court may accept the case to determine if employee non-solicitation clauses are still legal in California under B&P § 16600.  Such action would remove any precedential value of AMN Healthcare pending review.  Thus, Moyes would remain an authoritative case for employee non-solicitation clauses until the California Supreme Court rules.We will keep you posted.

Are Employee Non-Solicitation Clauses Still Legal In California?

Of Counsel

Lloyd Aubry

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Are Employee Non-Solicitation Clauses Still Legal In California?

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The Fourth District Court of Appeals in San Diego on November 1, 2018, issued AMN Healthcare Inc. v. Aya Healthcare Services Inc., in which it called into quest

Another year has passed in the California Legislature, with new laws and amendments affecting California employers.  Among the more significant changes, bills prompted by the #MeToo movement, including the new requirement that corporate boards of directors include women, have been passed.  Other changes include amendments to the Fair Pay Act regarding potential employees’ salary history and amendments potentially increasing the number of international commercial disputes brought in California. On the federal side, we are seeing regulatory changes as Trump appointees reverse Obama-era policies and regulations. This Commentary helps companies navigate these changes, all of which are effective January 1, 2019, unless otherwise noted.California State Laws and AmendmentsSB 826 – Corporations: Women on Boards of DirectorsWith the signing of SB 826, California becomes the first state to require that corporate boards include women.  This bill adds Sections 301.1 and 2115.5 to the Corporations Code, mandating that a publicly held domestic or foreign corporation whose principal executive offices are located in California have a minimum of one female director on its board.  Corporations can increase the number of directors on a board to comply with this rule. In a letter addressing his decision to sign SB 826, Governor Brown acknowledged the “potential flaws that indeed may prove fatal to [the bill’s] ultimate implementation,” but noted that “it’s high time corporate boards include the people who constitute more than half of the ‘persons’ in America.”SB 1300 – Unlawful Employment Practices: Discrimination and HarassmentSB 1300 is part of the package known as the “#TakeTheLead” bills, a group of what some have called the “boldest” anti-sexual harassment bills in the country. The bill amends the California Fair Employment and Housing ACT (FEHA) to make it unlawful for an employer—in exchange for a raise or bonus, or as a condition of employment or continued employment—to require the signing of a nondisclosure agreement or waiver of the right to file claims.  SB 1300 also expands the scope of FEHA to include nonemployees with respect to any type of harassment prohibited under FEHA—not just sexual harassment.  The bill also prohibits awarding fees and costs to a prevailing defendant unless the court finds the action was frivolous, unreasonable, or groundless. AB2334 – Worker Safety MandatesIn 2016, the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) adopted the “Improve Tracking of Workplace Injuries and Illnesses” rule. This rule sought to improve workplace safety through expanded access to injury-and illness-related information. In 2017, OSHA announced its intent to relax the workplace injury and illness reporting requirements. Seemingly in response to this announcement, California passed AB 2334, which requires Cal/OSHA to monitor rulemaking and implementation of the rule.  If Cal/OSHA determines that OSHA has “eliminated” or “substantially diminished” the requirements for employers to submit injury and illness data, Cal/OSHA is required to convene a committee to evaluate how to implement the changes necessary to protect the goals of the rule. Effectively immediately, AB 2334 also changes the statute of limitations for citations or violations regarding recordkeeping requirements from six months after the occurrence of the violation to either the date the violation is corrected or the date the division discovers the violation.AB2587 – Disability Compensation: Paid Family LeaveUnder California’s paid family leave law, an employer may require an employee to take up to two weeks of earned but unused vacation before, and as a condition of, the employee’s receipt of disability benefits. Prior to AB 2587, the law required one week of this vacation leave to be applied to the seven-day waiting period before the receipt of benefits. Because the waiting period was previously eliminated, AB 2587 amends section 3303.1 to make the statutes consistent.  AB 2455 – Home Care ServicesFollowing strong opposition, and a veto of similar legislation in October 2017, Governor Brown signed AB 2455 amending the Home Care Services Consumer Protection Act, which requires licensure and regulation of home care organizations. The bill notes that “[h]ome care aids who are organized [by labor organizations] are more likely to have higher wages, greater access to training, and lower turnover rates.” To achieve that goal, the new provisions require the State Department of Social Services to provide personal information of the home care organizations to labor organizations for the purpose of organizing and representing home care aids. The new provisions apply only to newly registered home care aides and prohibit a labor organization from using this information for any purpose other than employee organizing, representation, or assistance activities.AB2770 – Privilege: Sexual HarassmentAB 2770—a sexual harassment bill that passed the Legislature with unanimous bipartisan support--protects employers and sexual harassment victims from potential defamation suits. Under existing law, employers’ responses to reference checks from prospective employers regarding a former or current employee’s job performance or qualifications were protected from libel or slander claims as privileged, as long as the communications were made without malice.  AB2770 extends the privilege to complaints of sexual harassment by an employee, without malice, to an employer. AB 2770 also allows employers to inform potential employers about the sexual harassment investigation and findings. AB 2770 protects employers from defamation claims by allowing employers to inform prospective employers during reference checks of an employee’s past harassing conduct, including providing information about sexual harassment investigation and findings.AB 3109 – Contracts: WaiverStemming from the #MeToo movement, AB 3109 adds a new section to the Civil Code making waivers in contracts or settlement agreements void and unenforceable to the extent they waive a party’s right to testify in an administrative, legislative, or judicial proceeding concerning alleged criminal conduct or sexual harassment if the party has been required or requested to attend the proceeding pursuant to a court order, subpoena, or written request from an administrative agency or the legislature. SB 820 – Settlement Agreements: ConfidentialityAnother result of the #MeToo movement, SB 820 prohibits provisions in settlement agreements that prevent the disclosure of factual information relating to certain claims of sexual assault, sexual harassment, or harassment or discrimination based on sex, that are filed in a civil or administrative action. The bill also makes such a provision void as a matter of law and against public policy. The bill creates an exception for a provision that shields the identity of the claimant and all facts that could lead to the discovery of his or her identity, if the provision is included at the request of the claimant.AB 1976 – Lactation AccommodationsBefore AB 1976, employers were required to make reasonable efforts to provide an employee with the use of a room or other location, other than a toilet stall, for lactation purposes. AB 1976 now requires employers to make reasonable efforts to provide an employee with a room or other location, other than a bathroom, for these purposes.  Employers may seek an exemption if they can demonstrate that making a space available outside of a bathroom would pose an undue hardship. SB 1402 – Joint Liability for Motor Carrier ServiceBeginning in 2019, motor carrier service providers in California may be jointly and severally liable for unpaid wages, unreimbursed expenses, damages and penalties, and interest, for workers supplied by labor contractors. Supported by the California Trucking Association, the bill amends the Labor Code to add provisions requiring that a customer that engages or uses a port drayage motor carrier will share joint and several liability with the motor carrier. SB 1412 – Criminal Background ChecksIn the past, employers were generally prohibited from seeking particular conviction history information of an applicant, with some exceptions, such as when an employer is required by law to obtain information regarding a criminal conviction of an applicant or when an individual who has been convicted is prohibited by law from holding the position sought by the applicant.  To avoid conflicts with federal law, SB 1412 clarifies how employers can use conviction history to screen job applicants.  For example, the new law allows employers to consider a “particular conviction” relevant to the job when screening applicants. The new changes leave the exceptions in place but include additional clarifications.  For instance, an employer may also obtain information regarding a particular conviction, regardless of whether that conviction has been expunged, judicially ordered sealed, statutorily eradicated, or judicially dismissed. AB 1565 – Liability for SubcontractorsUnder section 218.7 of the Labor Code, a direct contractor is liable for subcontractors for unpaid wage liabilities. Effective immediately, AB 1565 repeals the previous provisions of section 218.7 that relieved direct contractors for liability for anything other than unpaid wages and fringe or other benefit payments or contributions including interest owed. AB 1654 – Exceptions to PAGASome employers in the construction industry may find reprieve following passage of AB 1654. Under the Labor Code Private Attorneys General Act of 2004 (PAGA), aggrieved employees are entitled to file private lawsuits to recover civil penalties for alleged violations of the Labor Code. AB 1654 will prohibit employees in the construction industry from recovering civil penalties under PAGA if the employees are subject to collective bargaining agreements in effect any time before January 1, 2025 that contain a grievance and binding arbitration procedure to redress violations. SB 766 – Representation in International Commercial ArbitrationSince the 1998 California Supreme Court case Birbower v. Superior Court of Santa Clara County, 949 P2d 1(Cal. 1998), California has been a disfavored jurisdiction for international arbitration.  Under previous law, foreign lawyers were not permitted to appear in international arbitrations in California without engaging local co-counsel. Under the new law, however, lawyers who are not members of the California bar may now appear in California and represent their clients without engaging local counsel. These individuals must be admitted to practice law in a state or territory of the U.S. or D.C. or be a member of a recognized legal profession in a foreign jurisdiction. The individuals must also be in good standing in every jurisdiction in which he or she is admitted or otherwise authorized to practice. These individuals will be subject to disciplinary jurisdiction of the State Bar.  This development is likely to result in an increase in international arbitration in California.AB 2282 – Amendments to the Fair Pay ActJust last year, Labor Code § 432.3 was enacted, prohibiting employers from relying on salary history as a factor for determining whether to offer employment or make pay decisions. To continue addressing disparities in pay equity, AB 2282 amends Labor Code §§ 432.3 and 1197.5 to:<ul><li>Define previously undefined terms, including “applicant,” “pay scale,” and “reasonable request”; </li></ul><ul><li>Clarify that, while an employer cannot ask for salary history, an employer may ask for salary expectations;</li></ul><ul><li>Prohibit using prior history to justify any disparity in compensation; and</li></ul><ul><li>Permit compensation decisions based on a current employee’s existing salary, as long as the wage differential is justified based one or more of the following factors: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; and (4) a bona fide factor other than race or ethnicity, such as education, training, or experience.</li></ul>AB 2610 – New Exception to Meal Period RequirementsAB 2610 creates an exception to current law that prohibits an employer from employing an employee for a work period of more than five hours without providing the employee with a meal period of not less than 30 minutes. Now, a commercial driver employed by a motor carrier transporting nutrients and byproducts from a commercial feed manufacturer to a customer located in a remote rural area may commence a meal period after six hours of work, if the regular pay of the driver is no less than one and one-half times the state minimum wage and the driver receives overtime compensation.SB 1500 – Expanded Protections to Service MembersSB 1500 amends Section 394 of the Military and Veterans Code to prohibit businesses from barring U.S. Armed Forces members because the member is wearing his or her military uniform.FederalWith Congress gridlocked, the most significant changes are occurring in regulatory agencies as Trump appointees have supplanted Obama appointees. For instance, as we wrote about in our September issue, we have already begun to see changes in National Labor Relations Board decisions and rulemaking following President Trump’s appointment of a new General Counsel as well as new members to replace Obama-appointed members whose terms expired. For instance, to address the Obama Board’s decision in Browning-Ferris, 362 NLRB No. 186 (2015), which loosened the standard for determining whether two separate employers should be considered “joint employers” and thus share each other’s labor law liability and bargaining obligations to a union, the Trump Board has proposed a rule that will reverse this decision and return the law on joint employer to its traditional form.The Department of Labor’s Wage and Hour Division also plans to make changes to the overtime rule under the Fair Labor Standards Act (FLSA).  On August 27, 2018, the Department announced that it would hold public “listening sessions” for those members of the public who are interested in changes to the overtime rule. By way of background, the Obama Administration had previously issued a rule to be effective in late 2016 that raised the threshold in the salary basis test to $47,476, which essentially doubled the prior threshold required to qualify for the executive, administrative, or professional exemptions.  A Texas federal judge enjoined the rule which has never taken effect. The Trump Department of Labor, while rejecting the Obama rule, has stated that it plans to update the overtime rule, including raising the threshold but not anywhere near to where the Obama Administration intended to set it.  Other potential changes include indexing the level, lower regional levels for low-cost areas, and lower levels for non-profits. We are likely to see more regulatory changes as Trump appointees continue to reverse Obama-era policies and regulations.

Annual California Legislative Recap

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Annual California Legislative Recap

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Another year has passed in the California Legislature, with new laws and amendments affecting California employers.  Among the more significant changes, bills p

On May 21, 2018, the United States Supreme Court issued its decision in Epic Systems Corp. v. Lewis, holding that waivers of class and collective actions in arbitration agreements are enforceable under the Federal Arbitration Act (FAA).  The Supreme Court’s decision resolves a circuit split that has been brewing for several years on whether such waivers contained in pre-dispute employment arbitration agreements violate the National Labor Relations Act (NLRA) by preventing employees from acting in concert to pursue claims against their employers.  Writing for the majority in a 5-4 decision, Justice Neil Gorsuch found that arbitration agreements requiring employees to arbitrate their claims individually are enforceable under the FAA and the NLRA. This decision marks a significant win for employers who have arbitration agreements with these waivers as it reduces their risk of having to litigate employment claims on a class and collective basis.  Although these waivers are now enforceable, employers must still review their arbitration agreements and programs to ensure they are carefully crafted to avoid contractual challenges, such as finding the agreements are unconscionable, and be mindful that not all class claims will be covered.  Employers who do not currently use pre-dispute arbitration agreements should consider whether it makes sense for them to adopt such agreements in light of this ruling. BackgroundMany companies require their employees, as a condition of employment, to enter arbitration agreements that require them to arbitrate any future claims against the company, rather than litigate those claims in court.  As part of these arbitration agreements, companies also commonly require employees to arbitrate their employment claims individually and prohibit arbitration on a class or collective basis.  Such waivers have long been enforced pursuant to the FAA.  In 2012, however, the National Labor Relations Board (the “Board”) ruled in D.R. Horton Inc., 357 NLRB No. 184 (2012), that employers violate the NLRA when they require employees to enter pre-dispute arbitration agreements containing class or collective action waivers.  The Board essentially reasoned that such waivers contravened employees’ rights under Section 7 of the NLRA to engage in “concerted activities” in pursuit of “mutual aid or protection.”  In 2013, the Fifth Circuit Court of Appeals rejected the Board’s position in D.R. Horton and later confirmed that same ruling in Murphy Oil USA, Inc. v. NLRB.  In 2016, the Seventh Circuit Court of Appeals in Lewis v. Epic Systems Corp. and the Ninth Circuit Court of Appeals in Morris v. Ernst & Young, held that class action waivers in mandatory, pre-dispute arbitration agreements between employers and employees violate the NLRA by restraining employees’ right to engage in concerted activity.  Those courts found that the FAA’s savings clause—which provides arbitration agreements are unenforceable if grounds exist at law or in equity for their revocation—rendered the agreements unlawful because they violate the NLRA. To resolve this circuit split, the Supreme Court granted certiorari and consolidated Epic, Murphy Oil, and Ernst & Young to determine whether an employment arbitration agreement containing a class and collective action waiver violates the NLRA or is permitted by virtue of the FAA.The Supreme Court’s DecisionThe Supreme Court majority held that class action waivers are enforceable.  The Court found that the FAA has a strong policy in favor of arbitration that requires enforcement of arbitration agreements, including enforcing the terms selected by the parties.  Although the FAA’s savings clause allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract,” the Court reasoned that the savings clause only recognizes “generally applicable contract defenses, such as fraud, duress, or unconscionability.”  The Court rejected the employees’ position because they were challenging the agreements on procedural terms in the agreements requiring their claims be heard on an individual basis rather than attacking the agreements on contractual grounds, such as asserting the agreements are unconscionable.The Court also held that the NLRA did not preempt the FAA to render class and collective action waivers unlawful.  While recognizing the NLRA provides employees with the right to engage in “concerted activities,” the Court found that right did not include a right to engage in class or collective action procedures.  The Court reasoned that Congress could not have intended the NLRA to address class and collective waivers as the NLRA was enacted well before class action procedures had been adopted in the Federal Rules of Civil Procedure and even several years before the Fair Labor Standards Act codified its collective action provision.  As Justice Gorsuch noted, “[i]t’s more than a little doubtful that Congress would have tucked into the mousehole of Section 7’s catchall term an elephant that tramples the work done by these other laws. . . .” The Court also found that it did not need to defer to the Board’s position on class and collective waivers.  The Board had to interpret not only the NLRA, but also the FAA to find that such waivers were unlawful.  Because the NLRB has no power to interpret or administer the FAA, it was due no deference.  Deference was also particularly unwarranted in the Court’s view because the Board and the U.S. Department of Justice took opposing views on the issue.Writing for the dissent, Justice Ginsberg contended that class and collective waivers were protected by the NLRA.  Noting that Congress enacted the NLRA to protect employees’ right to engage in concerted activity, she found that class and collective action waivers illegally subvert that right by barring employees from banding together to seek mutual aid and protection.  Accordingly, the dissent found the waivers to be unenforceable under the FAA’s savings clause.Practical TakeawaysIn light of this decision, employers should review their arbitration agreements and consider modifying them to include class action waivers if they are not already included.  Companies operating in multiple jurisdictions that have created different versions of their arbitration agreements to address the uncertainty caused by the circuit split should now consider standardizing the waiver language in their arbitration agreements. Despite this significant victory, arbitration agreements are still subject to challenge.  For example, as the Supreme Court found, traditional contract defenses, such as unconscionability, can make a class or collective waiver unenforceable.  Consequently, it is critical to ensure arbitration agreements and programs are carefully crafted to avoid enforceability issues on these grounds.In addition, some states have laws expressly precluding class waivers.  For example, class action waivers are not allowed under California’s Private Attorneys General Act (PAGA).  Courts have found that PAGA is not preempted by the FAA and is procedurally distinct from many other class claims as it is a representative action where an employee acts as the state’s proxy.  In addition, some federal laws prohibit certain types of claims from being arbitrated, such as retaliation claims under the Sarbanes-Oxley Act of 2002 and certain contractors of the Department of Defense cannot have pre-dispute arbitration agreements covering sexual harassment or assault claims.  Given recent attempts by state legislatures to attack arbitration agreements covering sexual harassment and assault claims in light of the MeToo movement, some states may seek to revise their laws to circumvent the Supreme Court’s decision.  Although these state laws would be susceptible to FAA preemption challenges, employers should pay close attention to these developments and might consider preemptively limiting their arbitration programs to cover only certain types of claims, such as wage and hour claims.Employers without pre-dispute arbitration agreements may be encouraged by the Supreme Court’s decision to adopt an arbitration program or mandate that certain employees sign arbitration agreements as a condition of employment.  Although arbitration has a number of benefits, it is not right for all companies. The benefits of arbitration generally include that it can be a less costly forum than litigating in court, leads to faster resolutions than court actions, and provides a confidential forum out of the public purview.  Despite these benefits, arbitration has several drawbacks that companies should consider before implementing mandatory arbitration agreements or programs.  In some instances, arbitration can be more expensive.  Most arbitration agreements require the employer to pay both the employer’s and the employee’s share of the arbitrator’s expenses and fees, including initial filing fees and hourly billing rates of the arbitrator, to avoid the risk of a court invalidating the arbitration agreement on unconscionability grounds for imposing a cost or fee splitting requirement.  Employers can also face increased costs and fees associated with having to move in court to compel arbitration or defend challenges to the enforceability of the arbitration agreement.  Another possible drawback is that some arbitrators are less likely than courts to grant dispositive motions.  The right to file dispositive motions is not guaranteed in arbitration like it is in court.  And, unlike court judges who have an interest in eliminating cases that lack merit from their docket, arbitrators are paid by the hour and may be more disinclined to grant dispositive motions.

What the Supreme Court’s “Epic” Decision Means for Employers

What the Supreme Court’s “Epic” Decision Means for Employers

On May 21, 2018, the United States Supreme Court issued its decision in Epic Systems Corp. v. Lewis, holding that waivers of class and collective actions in arb

Managing employees’ leaves of absence is a tricky business for employers. While laws like the Family and Medical Leave Act (FMLA) and the California Family Rights Act (CFRA) provide a set amount of leave protection and are generally easy to follow, courts and agencies have said that anti-discrimination statutes such as the Americans with Disabilities Act (ADA) and the disability provisions of the California Fair Employment and Housing Act (FEHA) may require an employer to provide additional leave beyond the full extent of the leave laws as a reasonable accommodation of an employee’s disability. This result is paradoxical; courts have consistently held that attendance is an essential job function, which an employee on an extended leave obviously cannot perform. Nonetheless, the law has generally been that an extended leave may be a reasonable accommodation if it would likely be effective in allowing the employee to return to work at the end of the leave. To terminate employment under these circumstances could thus expose an employer to liability for disability discrimination, failure to accommodate and failure to engage in the interactive process, unless the employer can make the arduous showing that extending the leave would pose an undue hardship or that the leave is essentially open-ended, either explicitly or implicitly.In a welcome development for employers in Illinois, Indiana and Wisconsin, the Seventh Circuit reached a different result in the second half of 2017. It held that an employee on an extended leave of absence is beyond the protection of the ADA and that leaves of absence are the province of the FMLA, not the ADA. At the end of the year, however, the Ninth Circuit reminded us that this is not the law in California.  Employers here still need to consider extending leaves well beyond the FMLA and CFRA entitlements in order to avoid running afoul of the ADA and FEHA.The Seventh Circuit:  “The ADA is an antidiscrimination statute, not a medical-leave entitlement.”The Seventh Circuit caused ripples last September with its Severson v. Heartland Woodcraft, Inc. opinion, concluding that a multi-month leave of absence was beyond the scope of a reasonable accommodation under the ADA.The relevant facts are straightforward. The plaintiff had been employed by a wood fabricator since 2006 in various physically demanding positions. He had suffered from back pain since 2005 and, in 2010, was diagnosed with a chronic back condition, which did not hamper his ability to work except when he experienced severe “flare-ups.” In June 2013, the plaintiff wrenched his back at home, which aggravated his preexisting condition and caused him to miss work. He requested and received FMLA leave and, throughout the summer, underwent treatment that proved generally ineffective. The plaintiff remained in touch with the defendant’s human resources (HR) manager and submitted periodic doctor’s notes explaining his continued inability to work and requesting leave extensions, which were approved.  In mid-August, the plaintiff told the employer that he had scheduled back surgery on what was the last day of his 12-week FMLA leave. He needed an additional two months to recover after surgery and requested an extension of his leave during this time. In late August, just a day before the plaintiff’s scheduled surgery date, the HR manager informed the plaintiff his employment would end when his FMLA leave expired and invited him to reapply after he recovered from surgery and was medically cleared to work. The plaintiff had the surgery as planned and, when he was cleared to work without limitations three months later, sued the employer for ADA discrimination for failing to accommodate his disability by refusing to allow a two- or three-month leave of absence.The district court granted the employer summary judgment on the ground that the plaintiff’s proposed accommodation was not reasonable.  The plaintiff appealed, and the U.S. Equal Employment Opportunity Commission (EEOC) filed an amicus brief in support of reversal.The Seventh Circuit affirmed the award of summary judgment for the employer.  In affirming the judgment, the court noted that “[t]he ADA is an antidiscrimination statute, not a medical-leave entitlement.” For this reason, “[a] multimonth leave of absence is beyond the scope of a reasonable accommodation under the ADA.” The court explained that a reasonable accommodation, by its statutory definition, is one which allows a disabled employee to perform the essential functions of his position. A long-term leave of absence cannot be a reasonable accommodation because it does not give a disabled individual the means to work but rather excuses his not working. Unlike intermittent time off or a short leave of absence, “a medical leave spanning multiple months does not permit the employee to perform the essential functions of the job” and removes the employee from the class of persons protected by the Act.The Seventh Circuit specifically rejected the EEOC’s argument that a long-term medical leave should qualify as a reasonable accommodation when it is (1) of a definite, time-limited duration, (2) requested in advance and (3) likely to enable the employee to perform the essential job functions when he returns. Such a rule would effectively transform the ADA into a medical-leave statute and would amount to an “open-ended extension of the FMLA.” That can’t be the law, the Seventh Circuit concluded, because the ADA applies only to those who can do the job and long-term medical leave is the domain of the FMLA.The Ninth Circuit:  “A leave of absence can constitute a reasonable accommodation.”Of course, the Seventh Circuit’s Severson opinion is not the law in California. A decision at the end of the year, Villalobos v. TWC Administration LLC, is a timely reminder of that unfortunate fact.As in Severson, the relevant facts in Villalobos are not complicated. The plaintiff was employed by defendant for 24 years as a direct sales representative.  In May 2013, the plaintiff initiated a leave of absence based on a claimed disability, which he identified as stress, anxiety and insomnia. He exhausted his protected medical leave in late July but requested (and received) an extension of this leave until early September as an accommodation of his claimed disability. When this extension expired, the plaintiff’s doctor sent a note requesting a second extension of his leave until early October. The employer approved this request too but noted that it might be unable to accommodate a further extension. The plaintiff returned to work in early October and worked for approximately five weeks before initiating another leave of absence due to his alleged insomnia, depression and anxiety. The employer sent ADA paperwork to the plaintiff in mid-November, who returned it about a month later requesting a leave of absence until late January 2014.  The employer granted the request but noted that any further extension would need to be evaluated. In early February, the plaintiff requested yet another extension of his leave, until mid-March. This time, the employer determined it could no longer accommodate the plaintiff’s continuing leave requests and terminated his employment in late February.The plaintiff sued the employer, in relevant part, for disability discrimination, failure to reasonably accommodate and failure to engage in the interactive process, all in violation of FEHA. He also alleged wrongful termination derivative of these claims.  The district court granted the employer’s motion for summary judgment.The Ninth Circuit reversed. The court opined that the plaintiff was not outside of FEHA’s protection simply because he was unable to work at the time of his termination, “because one form of reasonable accommodation can be an extended leave of absence that will, in the future, enable an individual to perform his essential job duties.” More specifically, a leave of absence can be a reasonable accommodation “‘where it appears likely that the employee will be able to return to an existing position at some time in the foreseeable future.’” Although courts consider whether a requested leave was finite or indefinite in evaluating reasonableness, the plaintiff’s planned return to work in March 2014 meant there was a triable issue of fact as to whether the requested leave was finite. The plaintiff’s multiple extension requests might prove dispositive in determining whether the plaintiff’s request for yet another extension was reasonable, but this too was a factual issue for trial and not summary judgment, per the Ninth Circuit. There was likewise a triable issue as to whether granting the requested further extension would pose an undue hardship because the employer had allegedly allowed at least two other employees to take similar extended leaves. The Villalobos decision does not address the Seventh Circuit’s Severson decision in any way. But the starting point in Villalobos—supported by a body of Ninth Circuit and California authority—is that an extended leave of absence may be a form of reasonable accommodation. This is completely inconsistent with the Seventh Circuit’s rationale in Severson. What lessons can California employers learn from the Severson and Villalobos decisions?The Severson and Villalobos decisions point to several lessons for California employers seeking to manage leaves of absence without violating the ADA and FEHA:<ul><li>An extended leave of absence, beyond the time provided under the FMLA and CFRA, may be a reasonable accommodation in California. Of course, this is not a new legal development, but it is the most important takeaway for employers from the Severson and Villalobos decisions. Even after an employee has exhausted his protected leave under the FMLA and CFRA, the ADA and FEHA may nonetheless require a California employer to provide additional leave as an accommodation for an employee’s disability.</li><li>Even in California, indefinite leaves of absence are not reasonable. As a general matter, an employer is not required to wait indefinitely for an employee’s condition to improve. However, Villalobos teaches that an employee’s repeated requests to extend an ongoing leave is not the same thing as an indefinite leave, at least for purposes of summary judgment. If it includes a proposed return-to-work date, an employee’s request is most likely not a request for “indefinite” leave as a matter of law. Relatedly, an employer generally need not provide repeated leaves of absence for an employee with a poor prognosis of recovery, but the mere fact that a medical leave has been repeatedly extended does not mean that it would continue indefinitely.</li><li>Whether an extended leave of absence is reasonable depends in part on the employee’s prognosis. According to Villalobos, an extended leave of absence is not a reasonable accommodation under FEHA if it is not “likely” the employee would be able to return to an existing position at some point in the foreseeable future.  Other case law suggests a less rigorous standard. In Humphrey v. Memorial Hospitals Association, for example, the Ninth Circuit noted that “the ADA does not require an employee to show that a leave of absence is certain or even likely to be successful to prove that it is a reasonable accommodation.” Rather, the employer must attempt an accommodation so long as it “could have plausibly enabled a handicapped employee to adequately perform the job.” Under either standard, however, it is relevant to an employer’s reasonableness determination how likely or plausible are an employee’s post-leave chances of being able to return to an existing position. If the employer is not certain about an employee’s prognosis for recovery, the employer should seek clarification from the employee or the employee’s medical provider.</li><li>Even Severson says that intermittent time off or short-term leaves can be reasonable accommodations.  The Seventh Circuit noted that intermittent time off or short-term leaves may be analogous to part-time or modified work schedules, which are statutory examples of what a reasonable accommodation may include under the ADA. These statutory examples are equally operative in the Ninth Circuit, and California employers should recognize that intermittent time off or short-term leaves may be forms of reasonable accommodation.</li><li>The employer’s duty to engage in the interactive process is continuing. In finding triable issues of fact as to the employer’s alleged failure to engage in the interactive process, the Villalobos court emphasized employers’ “affirmative” duty to engage in the interactive process on a “continuing” basis, “which is not exhausted by one effort.” Despite granting all of the plaintiff’s earlier requests to extend his leave of absence, the employer in Villalobos was denied summary judgment because it denied the employee’s final request. The court also faulted the employer for not communicating with the employee between the date of his final extension request and the date he was terminated and for not telling him he would be terminated if he failed to return to work by the end of his most recent accommodation. The lesson here appears to be that employers should never stop communicating with employees on leave and that the interactive process requires the employer to keep considering additional potential accommodations throughout the process. A corollary observation is that extended leaves of absence are often just one of many potential accommodations an employer and employee should consider as they engage in the interactive process. </li><li>Arguing that a requested leave would pose an undue hardship can be undermined by evidence that other similar leaves have been granted. The employer in Villalobos was denied summary judgment of its undue hardship defense because of evidence it had provided similar extended leaves to other employees. In determining whether to grant a requested leave extension, employers should consider how it compares to other leave requests they have granted or denied.</li><li>Talk to your lawyer. This last lesson is the most important.  Employers should always consult counsel when managing extended leaves of absence and determining whether proposed accommodations would be reasonable. In this evolving and fact-intensive area of law, seemingly minor differences between two situations can be outcome determinative.</li></ul>ConclusionThe Seventh Circuit’s Severson opinion is not the law of the Ninth Circuit. Unless the Ninth Circuit reconsiders, the likeliest route for relief for California employers is review by the U.S. Supreme Court, which often takes cases where the Circuit courts are split on an important point of law. Meanwhile, California employers must continue to consider extended leaves of absence as potential reasonable accommodations under the ADA and FEHA, separate and apart from an employee’s leave entitlement under the FMLA or CFRA. We can help as you navigate the challenging issues that abound in this area.

Whatever the Seventh Circuit Says, Extended Leave
May Be a Reasonable Accommodation in California

elcblog-january-_2018.jpg

Whatever the Seventh Circuit Says, Extended Leave May Be a Reasonable Accommodation in California

Whatever the Seventh Circuit Says, Extended Leave May Be a Reasonable Accommodation in California

elcblog-january- 2018

Managing employees’ leaves of absence is a tricky business for employers. While laws like the Family and Medical Leave Act (FMLA) and the California Family Righ