United States: California Employers Face More Onerous Employment Laws

Co-written by Allison Michael, Harry Johnson And Scott Lidman

California's stringent employment laws became even more onerous for employers at the start of the new year as a result of numerous new laws and amendments enacted by the state's Legislature. The principal changes are summarized below.

The new amendments make sweeping changes in the requirements imposed on employers by the FEHA. In enacting these changes, the Legislature expressly declared that the FEHA provides protections in addition to those in the federal American Disabilities Act ("ADA"), and that the ADA merely provides a floor of protections for employees.

Expanded Definition of Mental Disability. The definition of "mental disability" has been substantially expanded to bring within the protection of the FEHA many individuals who previously would not have been considered disabled. These are the principal changes:

• The term "mental disability" previously applied to a mental or psychological "disorder." The amendments broaden the definition to include any mental or psychological "condition."
• Under the new definition, the disorder or condition must only "limit" a major life activity, unlike the ADA, which requires a "substantial limitation" on such an activity. Moreover, contrary to the standard under the ADA, this determination will be made without regard to mitigating measures, such as medications, assistive devices, or reasonable accommodations (unless the mitigating measure itself limits a major life activity). Furthermore, a limitation will now be deemed to exist if the disorder or condition "makes the achievement of the major life activity difficult."
• The term "major life activity" is intended to be broadly construed; it includes physical, mental, and social activities, and working. "Working" is considered to be a major life activity, regardless of whether a limitation on working implicates a particular employment, or a class or broad range of employments.
• The new definition also includes any mental or psychological disorder or condition that requires "special education or related services."
• The new definition also applies to (1) a person who has a record or history of a disorder or condition of the type described above that is known to the employer; (2) a person who is regarded or treated by the employer as having, or having in the past, a disorder or condition that has no present disabling effect, but may become a mental disability; or (3) a person who is regarded or treated by the employer as having, or having in the past, a mental condition that makes achievement of a major life activity difficult (this is intended to provide protection when the employer mistakenly believes that a person has a mental condition that limits a major life activity).
• The previous definition provided that the unlawful use of controlled substances or other drugs did not constitute a mental disability. This exception has been limited to psychoactive substance use disorders resulting from the current unlawful use of controlled substances or drugs.
• Expanded Definition of Physical Disability. The amendments also expand the definition of "physical disability." These are the principal changes:
• As in the past, this definition applies to a physical condition specified in the statute that "limits" a major life activity. However, the Legislature has emphasized that this term is to be interpreted in a broader manner than the term "substantially limits," as used in the ADA.
• Contrary to the ADA, whether a physical condition "limits" a major life activity will now be determined without regard to mitigating measures such as medications, assistive devices, prosthetics, or reasonable accommodations (unless the mitigating measure itself limits a major life activity). Moreover, the condition will be deemed to "limit" a major life activity if it makes the achievement of that activity difficult.
• The term "major life activity" is intended to be broadly construed; it includes physical, mental, and social activities, and working. As noted above, "working" includes a particular employment, as well as a class or broad range of employments.
• The new definition adds another category that expands the concept of a physical disability — being regarded or treated by the employer as having, or having in the past, any physical condition that makes achievement of a major life activity difficult. The intent of this change is to provide protection when an employer mistakenly believes that a person has a condition that limits a major life activity.

Expanded Definition of Medical Condition (Cancer). As a separate category apart from disability discrimination, the FEHA prohibits discrimination based on "medical condition." In the past, this term has been narrowly defined as (1) a health impairment related to or associated with a diagnosis of cancer for which the person has been rehabilitated or cured, or (2) genetic characteristics. This amendment broadens the first part of the definition to include an existing diagnosis of cancer, or a record or history of cancer.

Reasonable Accommodation of Disability/Medical Condition. This amendment expands the "reasonable accommodation" requirement to include the accommodation of a "medical condition" (see above regarding the limited scope of this term). In addition, the amended law now requires the employer to engage in a timely, good-faith interactive process with an employee or applicant to determine an effective reasonable accommodation, if any, in response to a request by an employee or applicant who has a known physical or mental disability or medical condition.

Inquiries and Physical Examinations of Employees/Applicants. The amendments add new restrictions on the questions employers may ask of applicants and employees, and the circumstances under which they can require applicants and employees to submit to physical examinations:

• The FEHA previously allowed employers to rely on federal EEO guidelines and regulations in making inquiries of employees or applicants, or in printing or circulating publications. This exception has been eliminated.
• The FEHA previously allowed employers, unless prohibited by the ADA, to ask job applicants for information regarding their physical fitness, medical or physical condition, or medical history, if the inquiry was directly related to the position being applied for, or directly related to whether the applicant would endanger his or her health or safety or that of others. This exception has also been eliminated.
• The amended FEHA completely prohibits (1) requiring a medical or psychological examination of a job applicant; (2) making a medical or psychological inquiry of an applicant; (3) asking whether an applicant has a mental or physical disability or medical condition; or (4) asking about the nature or severity of a physical or mental disability or mental condition. However, an employer is permitted to inquire into the ability of an applicant to perform job-related functions, and to respond to an applicant's request for a reasonable accommodation. In addition, an employer is permitted to require a medical or psychological examination, or to make a medical or psychological inquiry, after an employment offer has been made, but before commencement of employment duties. However, the examination or inquiry must be job-related and consistent with business necessity, and all entering employees in the same job must be subject to the same examination or inquiry.
• The amendments also prohibit subjecting employees to an examination or inquiry of the type described above, unless it is job-related and consistent with business necessity. However, an employer is allowed to conduct voluntary medical examinations, including medical histories, as part of an employee health program.

Coworker Sexual Harassment. This amendment provides that a nonsupervisory employee may be held personally liable under the FEHA for prohibited harassment. This liability will exist whether or not the employer knows or should have known of the conduct, and fails to take immediate and appropriate corrective action.

This new law prohibits the recipients of state funds from using the funds to discourage unionization. In an effort to achieve the appearance of legislative balance, the statute was made applicable to the use of state funds to "assist, promote or deter" union organizing. However, the intent and practical effect of the law is to prohibit any recipient of state funds from opposing efforts to organize its employees. It applies to employers in the following categories:

State Contractors. State funds may not be used to reimburse a state contractor for any costs used to deter union organizing. A contractor will be liable for any violation in the amount of the funds obtained from the state plus a civil penalty of twice that amount. Moreover, a state contractor may not deter union organizing by employees who are performing work on a service contract, including a public works contract, for the state. The penalty for a violation is $1,000 per employee per violation. In addition, a state contractor that receives funds in excess of $50,000 under a contract with the state may not use those funds to deter union organizing. A contractor will be liable for any violation in the amount of funds expended to deter organizing plus a civil penalty of twice that amount.

Grant Recipients. An employer that receives a grant of state funds may not use those funds to deter union organizing. Moreover, any funds that are not designated by the state for a specific expenditure will be allocated on a pro rata basis to all expenditures that support the program for which the grant is made. A grant recipient will be liable for any violation in the amount of the funds expended to deter organizing plus a civil penalty of twice that amount.

Employers Conducting Business on State Property. An employer conducting business on state property under a contract or concession agreement, or a subcontractor, may not use state property to hold a meeting with employees or supervisors if the purpose is to deter union organizing (unless the property is available without charge to the general public for holding meetings). The penalty for a violation is $1,000 per employee per meeting.

Public Employers. A public employer receiving state funds may not use any of those funds to deter union organizing. A public official who authorizes such use of state funds will be liable for the amount of the funds.

Private Employers Participating in a State Program. A private employer that receives state funds in excess of $10,000 per year from participation in a state program may not use any of those funds to deter union organizing. An employer will be liable for any violation for the funds expended to deter organizing plus a civil penalty of twice that amount.

Any expense — including legal and consulting fees and the salaries of supervisors and employees — incurred for research, preparation, planning, coordination, or carrying out of an activity to deter union organizing must be treated as being paid for that activity. Furthermore, if state funds and other funds are commingled, any expenditure to deter union organizing must be allocated between state funds and other funds on a pro rata basis.

In the event of a violation, the Attorney General or any state taxpayer may sue for injunctive relief, damages, and civil penalties. In addition, a prevailing plaintiff, or a prevailing taxpayer who intervenes in such a lawsuit, may recover attorney's fees and costs.

White Collar Exemptions. This amendment expands the exemption requirements for executive, administrative, and professional employees by providing that the employee must customarily and regularly exercise discretion and independent judgment in performing exempt duties.

Registered Nurses. The state wage-hour law provides that registered nurses engaged in the practice of nursing may not be treated as exempt professional employees. However, this amendment authorizes the IWC to treat certified nurse midwifes, certified nurse anesthetists, and certified nurse practitioners as exempt professionals if they are primarily engaged in performing duties for which their certification is required under state law.

Computer Software Exemption. This amendment creates a new overtime exemption for employees in the computer software field if the following requirements are met:

• The employee must be primarily engaged in work that is intellectual or creative and requires the exercise of discretion and independent judgment, and primarily engaged in computer-related duties specified in the statute.
• The employee must be highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering. An employee's job title will not determine whether the exemption applies.
• The employee's rate of pay must be at least $41 per hour. This minimum rate is to be adjusted effective January 1 of each year to reflect changes in the California Consumer Price Index.
• The computer software exemption does not apply to trainees, employees in entry-level positions, employees who have not attained the level of skill and expertise necessary to work independently and without close supervision, and employees working in various technical occupations specified in the statute.

Enforcement. This amendment strengthens the enforcement of California's wage-hour laws by:

• Increasing the interest rate on unpaid wages,
• Providing that an employer appealing a decision of the Labor Commissioner must post a bond in the amount of the disputed award.
• Expanding to all employers the penalty of up to 30 days' wages for the intentional payment of wages by a bad check, which previously applied only to construction industry employers.
• Providing that an employer can no longer recover attorney's fees and costs as the prevailing party in a lawsuit brought to recover unpaid wages.

Itemized Wage Statements. This amendment provides that an employer is not required to disclose an exempt salaried employee's total hours on the required itemized wage statement. However, it requires that an employer disclose on the statement the number of piece-rate units earned, and the applicable piece rate, for an employee paid on that basis. Moreover, an employer is now required to disclose on the statement all applicable hourly rates in effect during the pay period, and the number of hours worked by the employee at each rate. In addition, the amendment increases the penalties for intentional noncompliance with the itemized wage statement requirement.

Meal and Rest Periods. This amendment prohibits an employer from requiring an employee to work during a meal or rest period mandated by an order of the Industrial Welfare Commission. Moreover, it requires payment of one hour's pay at the regular rate of compensation for each workday that a meal or rest period is not provided.

In addition, the Legislature has withdrawn from the IWC its previous discretion to adopt orders that deviate from the statutory meal period requirements. On the other hand, the amendment authorizes the IWC to adopt an order permitting meal periods to commence after six hours of work, instead of after five hours.

Tipped Employees. This amendment deletes an exception that previously allowed an employer to receive tips intended for an employee, or to deduct them from the employee's wages, if no charge was made to the patron for the services, and if the employee had a guaranteed wage of not less than the minimum wage under federal and state law. In addition, it requires an employer to pay the employee the full amount of the gratuity indicated on a credit card slip, without deduction for processing fees or costs charged by the credit card company. The payment must be made by the next regular payday following the date of the credit card purchase.

Recordkeeping. This amendment requires an employer to keep payroll records of the number of piece-rate units earned by employees, and the piece rate paid to them.

National Service Program Exemption. This amendment adds an exemption to the state wage-hour laws for participants in a national service program. However, they must be informed of any requirement to work overtime, and they must be permitted to opt out of the program. In addition, they may not be discriminated against or denied participation in the program for refusing to work overtime for a legitimate reason.

Private-sector employees in California have had a right to inspect the "personnel files" used to determine their "qualifications for employment, promotions, additional compensation, termination or other disciplinary action." The only exceptions have been records relating to the investigation of a possible criminal offense and letters of reference.

This amendment arguably broadens the requirement by extending it to the inspection of "personnel records," suggesting that the inspection right goes beyond the employee's "personnel file" to encompass other records maintained by the employer. At the same time, however, the amended statute applies only to records relating to the "employee's performance or to any grievance concerning the employee." The reference to grievances suggests a further expansion of the right, but the reference to the employee's "performance" arguably narrows the scope of the requirement.

An employer previously had the option of keeping a copy of an employee's personnel file where the employee reports to work, or making it available there within a reasonable period after a request to inspect the file. Under the amendment, the employer has the further option of permitting the employee to inspect the records at the location where it stores them, with no loss of compensation to the employee.

The amendment provides that the employer is not required to make records available at a time when the employee is required to render service to the employer. As noted above, however, there must be no loss of compensation to the employee if the employer makes the records available where it stores them.

Public-sector employees previously were excluded from this law, but they had similar rights under other California statutes. In order to standardize the law, the other statutes have been repealed, and the employees of public agencies now have the same inspection rights as private sector employees. School district employees, however, while being covered under that statute, also retain additional inspection rights.

In addition to the exceptions to the inspection right noted above, the amendment has added an exception for ratings, reports, or records that were (1) obtained prior to the employee's employment, (2) prepared by an examination committee member, or (3) obtained in connection with a promotional examination. Also, there are specialized exceptions applicable to certain public-sector employees.

The right of employees to inspect personnel records is limited to "reasonable" times and intervals. The amendment authorizes the Labor Commissioner to adopt regulations for this purpose, but the regulations will apply only to private sector employers, not to public agencies.

The Labor Code requires an employer to indemnify its employees for all necessary expenditures or losses incurred in direct consequence of the discharge of their duties, or as a result of obeying the employer's directions. This amendment includes in the term "necessary expenditures or losses" all reasonable costs, including attorney's fees incurred by the employee in enforcing rights under the statute. Furthermore, the amendment mandates that awards for reimbursement of necessary expenditures carry interest at the same rate as judgments in civil actions, accruing from the date the necessary expenditures or losses were incurred.

California law has prohibited discharging or discriminating or retaliating against a victim of domestic violence who takes time off from work to obtain an injunction or other relief to help ensure the health, safety, or welfare of the victim or his or her child. If an unscheduled court appearance was required, the employer could not take any action against the employee if he or she provided evidence within a reasonable time from the court or prosecuting attorney of the appearance in court.

This protection has been expanded to include any unscheduled absence from work, if the employee provides one of the following within a reasonable time:

• A police report indicating that the employee was a victim of domestic violence.
• A court order protecting or separating the employee from the perpetrator of domestic violence, or other evidence from the court or prosecuting attorney that the employee has appeared in court.
• Documentation from a medical professional, domestic violence advocate, health care provider, or counselor that the employee was undergoing treatment for physical or mental injuries or abuse resulting from domestic violence.

In addition, employers are required, to the extent allowed by law, to maintain the confidentiality of an employee who requests a leave for this purpose.

Furthermore, if an employer has at least 25 employees, the protections described above have been extended to domestic violence victims who take time off from work for any of the following reasons:

• To seek medical attention for injuries caused by domestic violence.
• To obtain services from a shelter, program, or rape crisis center as a result of domestic violence.
• To obtain psychological counseling related to an experience of domestic violence.
• To participate in safety planning and take other actions to increase safety from future domestic violence, including relocation.

This additional protection does not create a right to take unpaid leave that exceeds the leave allowed under the Family and Medical Leave Act.

Private and public entities that receive services from an independent contractor and are required to report the contractor's compensation to the Internal Revenue Service now have an additional obligation to file a report under state law. If the entity pays the independent contractor at least $600 in any year, or enters into a contract to make payments in that amount, it must submit a report to the Employment Development Department. The information may be used only to enforce child support obligations or tax laws.

This amendment broadens the legal protection of employees who serve as volunteer firefighters. They continue to be protected against discharge or other adverse employment action when they take time off to perform emergency duty. In addition, if the employer has at least 50 employees, the law now requires that a volunteer firefighter be permitted to take leaves of absence, up to 14 days per year, for fire or law enforcement training.

In addition, the protection of firefighters who take time off to perform emergency duty has been extended to reserve police officers and emergency reserve personnel.

The California prevailing wage law generally requires that contractors and subcontractors on public works projects pay the "prevailing rate of per diem wages," as determined by the state Department of Industrial Relations. This amendment substantially revises the enforcement procedure for this law.

Previously, the government agency awarding the contract for public work withheld payments from the contractor in the event of a violation, and the contractor's remedy was to file a lawsuit against that agency. Now the awarding agency is required to report suspected violations to the Labor Commissioner. If the Labor Commissioner issues a civil wage and penalty assessment, the contractor's remedy is to request a review of the assessment at an administrative hearing. If the assessment is upheld after the hearing, the contractor can obtain judicial review by filing a petition in the superior court.

If the unpaid wages are not paid within 60 days after the civil wage and penalty assessment is issued, the contractor will be liable for liquidated damages in an amount equal to the unpaid wages, unless the assessment is set aside, or the contractor had substantial grounds for believing that it was in error.

The awarding agency has the option of enforcing the law itself by withholding any contract payments due to the contractor. If this approach is followed, the withholding of contract payments is subject to judicial review in the same manner as an order of the Labor Commissioner, as described above.

The amendment also contains technical changes in the definition of "per diem wages," and in the documents that must be filed to support prevailing wage determinations.

Prior law required a state agency that contracts for services by janitors, housekeepers, custodians, food service workers, laundry workers, window cleaners, or security guards to require the contractor to provide employee benefits equal in value to at least 85 percent of the cost of providing comparable benefits to state employees performing similar duties. This amendment allows contractors to give cash payments in lieu of benefits.

State agencies are required to provide in every procurement contract that foreign-made equipment, materials, or supplies will not be produced by forced labor, convict labor, or indentured labor under penal sanction. This amendment expands the requirement to prevent abusive forms of child labor, or exploitation of children in sweatshop labor. In addition, the contractor must now certify that foreign-made items have not been produced under prohibited conditions, and state officials must be given access to the contractor's records, employees, and premises to determine compliance.

This new law requires that an employer of "community health care workers" keep a record of any violence committed against such an employee, and file a copy with the state Division of Labor Statistics and Research. This applies to any employee who provides health care or related services to clients in a home setting. "Violence" means a physical assault or a threat of such an assault.

Important changes have been made in the collective bargaining law that governs public agencies in California, except school districts and state agencies:

Agency Shop. Under prior law, a public agency and a recognized union could negotiate an "agency shop" agreement, under which employees are required either to join the union or pay a service fee equivalent to the union's standard initiation fee, periodic dues, and general assessments. This amendment requires that an agency shop "arrangement" be placed in effect — without a negotiated agreement — if a majority of the employees approve it in a secret ballot election. In order to have such an election, at least 30 percent of the employees must sign a petition.

Dues Checkoff. Prior law recognized the right of public employees to have union dues deducted from their wages. This amendment extends that right to service fees under an agency shop agreement. Moreover, it requires a public agency to deduct these dues or fees whenever there is an agency shop "arrangement" (see above). This requirement exists independent of any agreement between the employer and the union.

PERB Jurisdiction. In the past, the Meyers-Milias-Brown Act has been implemented by rules adopted by each public agency, subject to judicial review for consistency with the statute. This amendment gives the Public Employment Relations Board (an existing agency with responsibility for enforcing other public sector labor laws) jurisdiction over the Meyers-Milias-Brown Act. PERB jurisdiction does not extend to the City of Los Angeles or the County of Los Angeles, which have their own employee relation commissions. Moreover, it does not apply to management employees (who are permitted to unionize under this statute), or to peace officers.

PERB is required by the amendment to make unit determinations and process representation petitions in accordance with rules adopted by the public agency. However, the outcome of representation elections must be determined by a majority of the votes cast by the employees in the appropriate unit. Prior law that provided for mediation of disputes over the appropriateness of a unit for representation has been repealed.

Implementation of Final Offers. This amendment provides that, after an impasse is reached in negotiations, a public agency that is not required to submit the dispute to arbitration may implement its last, best, and final offer. However, it may not implement a memorandum of understanding (the public-sector version of a collective bargaining agreement).

This new law provides that police officers and firefighters are not permitted to engage in strikes that endanger the public safety. However, it establishes a procedure for binding arbitration to resolve an impasse in negotiations. The law applies to police and firefighters employed by any governmental entity, except the state government and any city or county governed by a charter that provides for binding arbitration.

The scope of arbitration under the new law is limited to economic issues. It does not include disciplinary matters, law enforcement policies (such as community-oriented policing), or issues protected by "management rights," as defined by state law.

The new law mandates the use of "final offer" arbitration, in which each party submits its "last best offer" for settlement of each of the unresolved issues, and the arbitration panel selects one of the two offers on each issue without any modification. In the alternative, the parties can each submit a "package" last best offer, and the panel selects one of the "packages" without any modification.

The law provides detailed criteria for the selection of the arbitration panel, as well as criteria to use in reaching its decision, and procedures to be followed in implementing the decision.

This new law protects employees of public schools and community colleges who report improper governmental activities. If an employee who makes such a report is retaliated against, the person responsible can be subject to a criminal fine of up to $10,000 and imprisonment for up to one year, as well as punitive damages in a civil action.

A series of new laws and amendments were enacted to protect farm workers. The principal changes:

• Establish a Farm Labor Contractor Special Enforcement Unit; increase bonding requirements and license fees for such contractors; require contractors to furnish growers with a payroll list of employees; increase educational requirements for contractors; and improve complaint processing.
• Prohibit the operation of unsafe farm labor vehicles; and establish criminal penalties and allow the impoundment of vehicles in the event of a violation.
• Prohibit the transportation of farm workers in an enclosed camper; and require seatbelt compliance and other safety measures.
• Establish a Farm Workers Wellness Program and related programs to provide health care, housing, and other needed family services for farm workers.

This amendment exempts from the state unemployment insurance law any participant in a national service program, such as AmeriCorps.

In addition to the laws enacted by the Legislature, California voters approved Proposition 36 in the last election. This amendment of state law provides that any person convicted of a nonviolent drug possession offense must receive probation, and, as a condition of probation, complete a drug treatment program.

Of special interest to many employers, if the drug offender successfully completes the treatment program and complies with the conditions of probation, the conviction must be set aside, and the arrest will be deemed never to have occurred. Furthermore, with limited exceptions, the drug offender may indicate in response to any question concerning a prior criminal record that he or she was not arrested or convicted for the offense; and a record pertaining to the arrest or conviction may not be used to deny employment.

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