New California Training Law Strengthens Legal Mandate for All Employers

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1 Winter 2005 All We Do Is WorkSM A BULLETIN ON EMPLOYMENT, LABOR, BENEFITS AND IMMIGRATION LAW FOR CLIENTS AND FRIENDS OF JACKSON LEWIS LLP New California Training Law Strengthens Legal Mandate for All Employers Under California s new law designed to prevent sexual harassment in the workplace (AB 1825, ß of the Government Code), a covered employer must provide classroom or other training and education regarding sexual harassment to all supervisory employees. The new law will reach even employers who have just a few employees in California and may set the standard for judging when an employer has met the state's requirements for preventing sexual harassment. AB 1825, modeled after a similar Connecticut statute, is intended to augment California s Fair Employment and Housing Act, which requires employers to post sexual harassment information posters at the workplace and obtain and make available an information sheet on sexual harassment. During the fiscal year, 4,231 sexual harassment cases were filed with the Department of Fair Employment and Housing; that number equals 22% of all cases filed at DFEH. Which Employers Are Covered? The new law defines a covered employer as one that employs 50 or more persons, including temporary service employees and independent contractors. The law does not specify that the 50 employees must be within California. That means that an employer with 50 total employees may be covered by the law, even if just a few workers are in California. What Training Is Required? The law provides general guidance concerning the scope of the training. The training must include information and practical guidance regarding federal and state laws that prohibit sexual harassment, including prevention and correction of harassment, and remedies available to victims. The statute specifically requires employers to use practical examples aimed at preventing harassment. The training must be presented by trainers or educators with knowledge and expertise in the prevention of harassment, discrimination, and retaliation. Significantly, the training must be in a classroom or an equally effective interactive environment. Because of the term interactive, a video presentation alone without questions and answers, role playing, or other interactive methods may be insufficient. WHAT IS INTERACTIVE TRAINING AND EDUCATION? Although AB 1825 requires anti-harassment education and training to be interactive, the new law does not specifically define the term. In conversation with DFEH, as well as the state s Fair Employment and Housing Commission, Jackson Lewis has learned that interactive training does not require live instruction. Additionally, both the DFEH and Commission believe that the training need not be conducted by an attorney. An HR professional, for example, familiar with applicable laws, would meet the knowledge and expertise test. At this time, neither the Department nor the Commission has plans to issue a memorandum or other publication to explain employer responsibilities under AB The Commission may issue regulations to provide clarification of the new law s requirements and has asked Jackson Lewis for suggestions as to what the regulations would entail INSIDE THIS ISSUE: New California Training Law Strengthens Legal Mandate for All Employers California Backs Off Meal Break Rules after Public Opposition Benefits from Golden State s Paid Family Leave Program Are Taxable on Federal Returns LITIGATION Supreme Court Keeps Hands Off Berkeley Wage Law Jury May Consider If Employer s Creative Necessity Defeats Sexual Harassment Claim PACIFIC NORTHWEST NEWS AND VIEWS Top Washington Court Rules Arbitration Agreement May Be Severed to Be Enforceable New Minimum Wage Levels in Alaska, Oregon and Washington California Workplace Law Breakfast Series: March - September Continued on page 2 1

2 EDITORIAL BOARD: Michael J. Lotito, Esq Robert Pattison, Esq., , Jennifer Brown Shaw, Esq., , Margaret R. Bryant, Esq., , This Update is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between Jackson Lewis LLP and any readers or recipients. Readers should consult counsel of their own choosing to discuss how these matters relate to their individual circumstances. Reproduction in whole or in part is prohibited without the express written consent of Jackson Lewis LLP. Jackson Lewis LLP represents management exclusively in workplace law and related litigation. Our attorneys are available to assist employers in their compliance efforts and to represent employers in matters before state and federal courts and administrative agencies. For more information, please contact the attorney(s) listed above or the Jackson Lewis attorney with whom you regularly work. 2005, Jackson Lewis LLP Who Must Receive Training? The law will cover most employees who have some supervisory authority. The Fair Employment and Housing Act defines supervisor broadly to include any individual having the authority... to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or the responsibility to direct them, or to adjust their grievances, or effectively to recommend that action, if, in connection with the foregoing, the exercise of that authority is not of a merely routine or clerical nature, but requires the use of independent judgment. When Must Training Be Completed? The law requires ongoing training after January 1, 2006, for all supervisors; they must receive at least two hours of anti-harassment training every two years. For those supervisors employed as of July 1, 2005, the initial two hours of training must be completed by January 1, Supervisors who have received training after January 1, 2003 need not be re-trained by January 1, (Future bi-annual training will still be required). Supervisors hired or promoted into supervisory positions after July 1, 2005 must complete training within six months of hire or promotion to a supervisory position. Liability Under the New Law The new law provides that employers who fail to conduct the training as required may be ordered to do so by DFEH. The law also says that providing training in accordance with AB 1825 is not a defense to a sexual harassment claim. Conversely, California Backs Off Meal Break Rules after Public Opposition In apparent response to a significant number of complaints from a vocal opposition, the California Division of Labor Standards Enforcement withdrew its December 10, 2004, proposed emergency regulations clarifying and revising meal-period requirements for California employees. Under the DLSE s prior interpretation of the law, employees who work five hours must receive an uninterrupted meal period of at least 30 minutes, and the meal period must begin before the sixth hour of work; employees who work no more than six a supervisor's failure to receive training does not establish liability for harassment under FEHA. Nevertheless, plaintiffs' lawyers likely will argue that the failure to comply with this law should be evidence in favor of an award of punitive damages, as it shows reckless disregard for the law. Finally, the law makes clear that it sets minimum standards and employers are free to implement more rigorous or frequent preventive measures. This provision also means employers will no longer be considered proactive for merely conducting supervisory training every two years, since the law requires such training. What Should Employers Do? Employers have until January 1, 2006, to make arrangements to implement AB Before then, we recommend that employers take these steps: Purchase or develop live or other interactive training (through the Internet or other interactive technology). Develop a means to monitor compliance and ensure that new supervisors are trained within six months of hire or promotion, and every two years thereafter. Ensure there is a system for recordkeeping to demonstrate compliance. Update policies and procedures to include reference to and documentation of adequate training. Ensure that executives are aware of this requirement and that they account for the time and financial commitment that will be involved to comply with the new law. hours in a day may waive their right to a meal period. A second uninterrupted meal period must be provided to employees who work more than 10 hours in a day, but the second meal period may be waived, if the first meal period was not waived and the employee works no more than 12 hours in the day. Employers are required to pay an employee one hour of additional pay for each day the employee did not receive a required meal period. Instead of pursuing emergency regulations, the DLSE submitted its proposed regulations (with some modification) to the normal public review process. Among other things, the proposed regulations: (1) specify that meal periods could start before completion of the sixth hour of work unless otherwise required by an Industrial Welfare Commission Wage Order; (2) provide that an employer will be deemed to have provided a required meal period by making the meal period available to the employee 2

3 JACKSON LEWIS/ WORKPLACE ANSWERS OFFER TRAINING SOLUTIONS With the enactment of the California sexual harassment prevention training law, the mandate for workforce training as the cornerstone of a dispute and litigation prevention strategy has been strengthened. Jackson Lewis assists employers in developing blended training strategies to meet legal compliance obligations and corporate objectives. Through dynamic and practical programs, we can help organizations prepare successfully to manage a wide range of employment issues, prevent costly lawsuits, promote productivity, and preserve human and financial resources to enhance profitability. Many organizations are seeking blended educational solutions that address a variety of needs for the entire workforce and enhance the McGinnis avoidable consequences defense, 1 says Michael Lotito, who has 28 years of management education and employee training experience on behalf of Jackson Lewis. Our strategic alliance with San Francisco-based Workplace Answers provides an effective Web-based training platform considered the gold standard in online education for workplace law. Together we offer a one-stop solution to comply with the law and meet the unique needs of the organization. Our learning management technology is designed by people who know and understand the law, employing practical insights to actually change behavior. For more information, please contact Jackson Lewis partners Michael J. Lotito in San Francisco, (415) , LotitoM@jacksonlewis.com; or Jennifer Brown Shaw in Sacramento, (916) , ShawJ@jacksonlewis.com. 1 Under the avoidable consequences doctrine, an employee will be unable to recover any damages that could have been avoided with reasonable effort by the employer s internal complaint procedures. Employers may dramatically decrease their exposure to damages if they take appropriate steps to educate and train employees on harassment prevention policies and practices. For example, employees should be provided copies of the employer's equal employment opportunity and harassment prevention policies immediately after hire and on a regular basis thereafter. All employees, not just managers and supervisors, should be trained on appropriate workplace behavior and the proper procedures for reporting violations of the employer s policies. And recall that California requires employers to distribute the Department of Fair Employment and Housing s sexual harassment information brochure to all employees. and providing the employee with the opportunity to take it, posting the applicable IWC wage order and keeping accurate time records as required by the posted IWC wage order; and (3) clarify that the one hour of additional pay imposed for not providing a required meal period is a penalty (thereby subjecting such claims to a one-year statute of limitation rather than the three-year statute of limitation applicable to wage claims or a four-year statute of limitation to recover wages under an unfair business practices theory of liability). The DLSE also announced it was withdrawing a number of informal opinion letters addressing meal period requirements in response to an October 2004 court opinion that found one of the opinion letters to be an illegal underground regulation. Public hearings on the proposed regulations will be held during February and March. Employers that believe the proposed regulations would benefit them and their employees by permitting greater flexibility in scheduling meal periods may wish to submit comments supporting the proposed regulations. The written comment period closes at 5 p.m. on Wednesday, March 2, All comments must be submitted in writing (by mail, fax, or ) and received by that time at the DLSE's headquarters office. Submit comments to: Allen Perlof, Senior Deputy Labor Commissioner, Division of Labor Standards Enforcement, 9th Floor West, Post Office Box , San Francisco, CA 94142; dlsecomments@dir.ca.gov; fax: (415) Because the last public hearing is scheduled for early March, we do not expect the DLSE regulations on meal periods to be enacted before the end of that month. Continued on page 4 3

4 Continued from page 3 WHAT EMPLOYERS SHOULD DO: THE NECESSITY OF AN INTERNAL AUDIT In light of the ongoing uncertainty over meal period requirements, employers are advised to continue following the DLSE s prior interpretation of the meal period requirements and ensure that employees begin any required uninterrupted meal period before the fifth hour of work is completed. The DLSE has the authority to interpret the law for enforcement purposes and to investigate employment records and worksites to determine if employers are complying with the meal period requirements. It is therefore critically important that employers be prepared for a DLSE examination of their records and personnel practices. By conducting an internal audit of wage and hour law compliance before an investigator knocks at the facility door, employers can address and remedy vulnerabilities that an audit might reveal. As part of an internal audit, the employer s policies and procedures should be reviewed for compliance with current law and regulations, those areas identified as hot spots should be closely examined, and any irregularities should be corrected. Jackson Lewis attorneys are available to assist employers conduct an internal compliance audit of wage-hour practices and to modify practices and policies that create vulnerabilities. Employers who wish further information on wage-hour audits or meal period requirements should contact the Jackson Lewis attorney with whom they regularly work, or partners Jamerson Allen (San Francisco Office; ; AllenJ@jacksonlewis.com), Robert Pattison (San Francisco Office; ; PattisonR@jacksonlewis.com), Jonathan Siegel (Los Angeles Office; ; SiegelJ@jacksonlewis.com), Robert Vogel (Los Angeles Office; ; VogelR@jacksonlewis.com; or Jennifer Brown Shaw (Sacramento Office; ; ShawJ@jacksonlewis.com). Benefits from Golden State s Paid Family Leave Program Are Taxable on Federal Returns The Internal Revenue Service has ruled that the payments received under California s Paid Family Leave insurance program are taxable for federal income tax purposes. According to the IRS, Family Temporary Disability Insurance payments (also known as Paid Family Leave) are in the nature of unemployment compensation under Section 85 of the Internal Revenue Code. California s Employment Development Department must report the FTDI payments to the IRS on a Form 1099G and, for federal tax purposes, FTDI payments must be included in a claimant's gross income. The benefits, however, are not subject to California income tax under Revenue and Taxation Code [EDD News Release 04-51, 12/14/04]. Recipients of benefits under the Paid Family Leave program received a letter with their benefits checks informing them that the IRS might consider the payments taxable income. Additional steps are being taken to notify claimants that the Forms 1099 they receive this year will reflect the taxable income. For some, the fact that the Paid Family Leave program is employee-funded may reduce the amount of FTDI payments that must be included in the gross income of the claimant (IRS regulation 26 Code of Federal Regulations (b)(1)(iii)). Claimants should contact the IRS or their tax advisor to obtain additional information. The Paid Family Leave Program California s Paid Family Leave program was enacted in 2002 and is part of the State Disability Insurance program covering approximately 13 million workers. Employees began contributing toward Paid Family Leave in January 2004 and became eligible to collect benefits July 1, The program pays up to six weeks of benefits in a 12-month period to workers who take time off work to care for a seriously ill child, spouse, parent, or domestic partner, or to bond with a new child. Parents are eligible for benefits within one year of the birth, adoption, or foster care placement. Individuals cannot receive Paid Family Leave while receiving SDI, unemployment insurance, or workers compensation benefits. 4

5 Paid Family Leave is funded through employee contributions to the SDI program. To cover the initial cost, the SDI employee contribution rate increased by.08 percent on a worker s taxable wages in 2004 and The program does not provide job protection or return rights. However, claimants may be protected under the federal Family and Medical Leave Act and the California Family Rights Act, if they have worked for their employer for a least one year, and the business has 50 or more employees within 75 miles of their work site. Jackson Lewis California PFL Task Force If your company has questions about PFL or the integration of PFL into its current leave management practices, please contact one of the members of our California PFL task force listed below, or the Jackson Lewis attorney with whom you regularly work. San Francisco: Michael J. Lotito, (415) , LotitoM@jacksonlewis.com; Jamerson C. Allen, (415) , AllenJ@jacksonlewis.com; Nancy L. O Neill, (415) , OneillN@jacksonlewis.com. Los Angeles: Mark R. Attwood, (213) , AttwoodM@jacksonlewis.com; Angela M. Duerden, (213) , DuerdenA@jacksonlewis.com. Sacramento: Jennifer Brown Shaw, (916) , ShawJ@jacksonlewis.com. LITIGATION Supreme Court Keeps Hands Off Berkeley Wage Law In January, 2005, the U.S. Supreme Court, without comment, declined to review a 2-1 decision of the U. S. Court of Appeals for the Ninth Circuit, allowing the City of Berkeley to extend its living wage ordinance only to businesses in the City s marina employing at least six workers and having gross annual sales of $350,000. The extension drew cries of unconstitutionality from the only business it affected RUI One Corporation s Skates on the Bay restaurant, a nonunion concern. All other marina tenants were unionized and therefore exempt from the ordinance [RUI One Corp. v. City of Berkeley California, No ]. Although the minimum wage in California is $6.75 per hour, Berkeley s living wage ordinance entitled workers with health insurance to $9.75 per hour and workers without such insurance to $11.37 per hour. RUI One accused Berkeley of amending the ordinance to provide support to a union involved in a labor dispute at the Marina. Jackson Lewis filed a friend of the court brief on behalf of a coalition of business associations, and argued that a local government s motivation is relevant when it passes a law targeting one or a few select businesses. San Francisco managing partner D. Gregory Valenza, who prepared the brief, is concerned that the Ninth Circuit ruling may give local governments carte blanche to single out a particular business for adverse treatment. As he told the San Francisco Chronicle, stretched to its conclusion, the decision could result in quite a bit of mischief since it casts a shadow upon the ability of businesses to rely on the terms of contracts with state and local governments. For more information on this litigation, please contact D. Gregory Valenza, at (415) , ValenzaD@jacksonlewis.com. Jury May Consider Employer s Creative Necessity Defense Against Sexual Harassment Claim Considering an unusual defense to a sexual harassment claim, the California Court of Appeal ruled an employee need not show the harassing conduct was directed at the employee personally, but must prove only that she or he witnessed the harassing conduct and it was in her or his immediate work environment. However, if the acts otherwise constituting harassment are within the scope of necessary job performance, a jury may consider the employer s creative necessity argument as a factor in deciding whether a hostile work environment existed. [Lyle v. Warner Brothers Television Productions, 117 Cal. App. 4th 1164, 12 Cal. Rptr. 3d 511 ( )]. The case arose from the television show Friends after an African-American woman was hired to work as a writer s assistant. She had complained there were no black characters and that the writers 5

6 subjected her to racial and sexual harassment through offensive and bigoted comments and jokes. Following her termination for poor job performance, the producers and writers maintained that even if she could prove offensive and bigoted comments and jokes were made in her presence during writers meetings, the comments and jokes weren t pervasive or severe enough to create a hostile work environment. The producers and writers also claimed that lewd, crude, and vulgar jokes and comments in the writers room were indispensable to writing for the television show. The terminated employee subsequently sued various organizations and individuals involved in the production and writing of Friends under the California Fair Employment and Housing Act, claiming race and gender discrimination, racial and sexual harassment, retaliation for opposing racial discrimination, and wrongful termination. The trial court ruled in favor of the defendants without sending the case to trial, holding the plaintiff could not factually establish her claims of racial and gender discrimination, retaliation, or harassment as to any defendant. The California Court of Appeal reversed the trial court s finding relating to the sexual harassment claim. The court rejected the defendant s argument that to establish sexual harassment, the woman must be able to show that the allegedly harassing conduct was directed at her personally. According to the appellate court, a woman may be the victim of sexual harassment if she is forced to work in an atmosphere of hostility or degradation of her gender. In this case, the woman s job demanded that she attend meetings in the writers room where the alleged harassment occurred. The court said that all she had to do to state a cause of action for sexual harassment was establish that she witnessed the harassing conduct and that it was in her immediate work environment. The court also rejected the defendants claim that their treatment of her just like one of the guys was not discrimination based on her sex. The FEHA, said the court, is not a fault-based scheme, and unlawful sexual harassment can occur even when the harassers do not realize the offensive nature of their conduct nor intend to harass the victim. Unique Argument The writers and producers admitted that, while they were in the writers room, they used vulgar and crude language, talked about their sex lives and fantasies, and made crude bodily gestures to indicate self-gratification. However, in what the court called an argument unique in the annals of sexual harassment litigation the defendants said they were just doing their jobs which involved generating ideas for stories, jokes, and dialogue, often containing sexual innuendos and adult humor. The court said this argument was not entirely without merit and that the defendants might be able to convince a jury the artistic process necessitated conduct that might be unacceptable in other contexts but was within the scope of necessary job performance. Accordingly, the court sent the case back for determination by a jury. Pacific Northwest News and Views Top Washington Court Rules Arbitration Agreement May Be Severed to Be Enforceable In a pair of decisions that should gratify Washington employers, the state s highest court has ruled that substantively unconscionable provisions in a mandatory arbitration agreement may be severed, and the remainder of the agreement enforced, if the unconscionable provisions do not pervade the agreement. The court reached its decision in two companion employment discrimination cases involving employees who signed mandatory arbitration agreements as a condition of their employment [Zuver v. Airtouch Communications, Inc., Wash. Sup. Ct. No ( ) and Adler v. Fred Lind Manor, Wash. Sup. Ct. No ( )]. In the Zuver case, the plaintiff was diagnosed with fibromyalgia before joining the company as a sales representative. Her condition worsened after she was hired, and she requested an accommodation to work part time from her home. She was permitted to work part time but not at home. When her condition deteriorated, she went on medical leave, but subsequently was terminated from employment. 6

7 In the Adler case, a Polish immigrant worked as a maintenance man at a senior citizens living center for nine years when he injured his back on the job. After sustaining additional injuries and filing a claim with the state s Department of Labor and Industries, he was fired for inability to perform all maintenance aspects and was replaced by a younger male employee. Both individuals ultimately sued their employers for a variety of discriminatory employment practices under the Washington Law Against Discrimination in superior court. Both employers maintained that the claims had to be submitted to arbitration and moved to compel arbitration and stay the proceedings. The trial court granted both employers motions to end the litigation, after which both plaintiffs sought discretionary Supreme Court review, contending that their respective arbitration agreements were unenforceable because they were procedurally and substantively unconscionable. The Washington Supreme Court noted the difference between agreements that are unconscionable based on substance and unconscionable based on procedure. Applying each line of analysis, the high court rejected the disability claimant s argument that the agreement was procedurally unconscionable. The court found she had a meaningful choice as to whether to sign the agreement: the agreement s terms were fully disclosed, and she had a reasonable opportunity to consider them. The court then found the agreement s confidentiality provision and punitive or exemplary damages provisions were substantively unconscionable. However, the agreement contained a severability clause that limited the unenforceability of the agreement to the invalid provisions. Ultimately, the court ruled the severability provision should be given effect, the unconscionable provisions excised, and the remainder of the agreement enforced. In the second case, the maintenance man argued that the arbitration agreement with his former employer was both procedurally and substantively unconscionable. The court found the agreement s attorney fees and 180-day limitations provisions were substantively unconscionable but that the invalid provisions could readily be severed and the remainder of the arbitration agreement enforced. In addition, the court sent the case back to the trial court to resolve whether the agreement contained procedurally unconscionable provisions. The end result was that, despite the unconscionable provisions in both arbitration agreements, the invalid portions were severable, and both parties ultimately were compelled to arbitrate their discrimination claims. For more information, or if you have questions, please contact Kathryn Bradley in our Seattle office, at (206) , BradleyK@jacksonlewis.com. New Minimum Wage Levels in Alaska, Oregon and Washington The start of 2005 marks increased minimum wages for several West Coast states: Alaska As of January 1, the state s minimum wage rose to $7.15. Oregon The minimum wage as of January 1 is $7.25. The rate is adjusted annually for inflation by a calculation using the U.S. City Average Consumer Price Index (CPI). Washington Effective January 1, 2005, the minimum wage increased to $7.35. The State s Department of Labor and Industries adjusts the minimum wage each year based on changes in the federal CPI for Urban Wage Earners and Clerical Workers during the 12-month period ending each August 1. The state minimum wage applies to agricultural and nonagricultural jobs. Federal Minimum Wage The federal minimum wage is presently $5.15 per hour for covered, nonexempt employees. Under the Fair Labor Standards Act, when federal and state laws differ, the higher standard applies. 7

8 California Workplace Law Breakfast Series The Jackson Lewis Workplace Law Breakfast Series offers interactive workshops for all decision makers with employee relations responsibilities. In-house counsel, human resources and employee relations professionals, and risk management executives should plan to attend and discuss issues specific to their needs and concerns. All of the following workshops will be held from 8:00am to 10:30am PT, on the dates and locations indicated. California Compliance Du Jour: Wage-Hour, Mandatory Sexual Harassment Training and EPLI Implications This interactive two-hour workshop will cover: - Developing a Strategy for Complying With California's New Mandatory Sexual Harassment Training - The Most Common California Labor Code Violations: Developing a Self-Audit To Ensure Your Organization Is Compliant - Best Practices for Recordkeeping, Timekeeping and Handbook/Policy Reviews - EPL Insurance Implications Sacramento, March 2 Berkeley, March 8 Santa Monica, March 23 Details at /events/event.cfm?elid=374 Presents WORKPLACE LAW Critical Issues in Employment Law BREAKFAST Sacramento Mar. 2, Jun. 7, Sept. 13 Berkeley Mar. 8, May 17, Sept. 20 Santa Monica Mar. 23, May 24, Oct. 24 Each program has been approved for 1.5 recertification credit hours toward PHR and SPHR recertification through the Human Resource Certification Institute (HRCI). For more information about certification or recertification, please visit the HRCI homepage at SERIES California Leaves and the New Workers' Compensation Reforms This workshop will deal with The California Family Rights Act (CFRA) and Pregnancy Disability Leave (PDL): - Is Your Organization Properly Managing Medical Leaves? - AB 205 and Domestic Partner Coverage: Do You Understand the Impact of AB 205 on Your Organization s Leave Policies? - Paid Family Leave (PFL): Where Does it Fit In and What Are Your Obligations? - Workers Compensation Reform: What Does it Mean to Your Organization? Berkeley, May 17 Santa Monica, May 24 Sacramento, June 7 Details at /events/event.cfm?elid=378 Collective Actions Against California Employers: How to Avoid Them This workshop will cover: - Class Action Update: Changes Made to California's Unfair Competition Law, and What's Left of California's Bounty Hunter Law Sacramento, September 13 Berkeley, September 20 Santa Monica, October 4 Details at /events/event.cfm?elid=381 For more information on these workshops or to register, contact Laurie Armstrong, Jackson Lewis LLP. Phone: (415) , Fax: (415) , ArmstrongL@jacksonlewis.com. 8