EMPLOYMENT LAW BRIEFING 2014

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1 SILICON VALLEY EMPLOYMENT LAW BRIEFING 2014 Presenters: Amie Aldana, Associate, Palo Alto Mark Boxer, Partner, San Francisco David Durham, Partner, San Francisco Margaret Keane, Partner, San Francisco Ute Krudewagen, Partner, East Palo Alto Katharine Liao, Associate, Los Angeles DLA Piper January 16, 2014 *This presentation is offered for informational purposes only, and the content should not be construed as legal advice on any matter.

2 Roadmap California trends and updates: what you need to know for 2014 Class actions and arbitrations: Trends and hot topics Health care reform and your bottom line National Labor Relations Board trends and organized labor activity The mobile workforce: BYOD and beyond American Disabilities Act: Website accessibility Turnover, workforce mobility and non-solicitation Global workforce issues 2

3 Minimum wages rising California minimum wage After 5 years at $8.00 per hour, California joins 13 other states in raising its minimum wage (21 states will now exceed the federal minimum wage of $7.25) This is largely a response to public pressure (e.g., well publicized national fast food strikes) $9.00 per hour Effective: July 1, 2014 Later, to $10.00 per hour Effective: January 1, 2016 As a result, min. exempt employee salary goes from $2, per month to $3,120 on Jul. 1, 2014, and then to $3, on Jan. 1,

4 Minimum wages rising Local minimum wages California cities joining the trend of increasing local minimum wages (e.g., SeaTac to $15.00 an hour!) San Francisco: From $10.55 to $10.74 per hour San Jose: From $10.00 to $10.15 per hour Effective: January 1,

5 Minimum wages rising Computer software minimum wage Non-exempt workers are not the only ones who will be more expensive in 2014, computer software workers will also get a minimum wage boost. Min. hourly wage: From to $40.38 Min. monthly salary: From $6, to $7, Effective January 1, 2014 Min. annual salary: From $83, to $84,

6 Discrimination and retaliation Sexual harassment Effective : January 1, 2014 Redefines harassment because of sex under the Fair Employment and Housing Act to include: Sexual harassment Gender harassment Harassment based on pregnancy, childbirth, or related medical conditions Specifies that harassment does not need to be motivated by sexual desire Expands scope of sexual harassment and the type of behavior that will subject employer to liability 6

7 Discrimination and retaliation New protected classes Victims of stalking Extends protections available to domestic violence and sexual assault victims to victims of stalking Prohibits discharge, retaliation, discrimination Requires implementation of reasonable accommodations/safety measures as long as the accommodations do not create undue hardship for the business Military and veteran status Enacted as part of wave of new legislation to assist veterans Military and veteran status is new protected class under the Fair Employment and Housing Act Using military and veteran status for the purpose of awarding veteran s preference is permitted Effective : January 1,

8 Discrimination and retaliation Preferential hiring: veterans and disabled Who does it apply to? VEVRAA: Federal contractors with contracts of $100,000 or more Section 503: Federal contractors with contracts of $10,000 or more Hiring goals VEVRAA Hiring Benchmark: 8% or TBD by contractor Section 503 Goal: 7% Consequences of failure to comply Revise sourcing and recruiting strategy Section 503: Action oriented programs Other requirements: Data collection Record retention Reasonable accommodation policy Notice and posting Effective : March 24,

9 Discrimination and retaliation Retaliation: wage and hour, immigration Effective : January 1, 2014 Wage and hour Labor Code amended to prohibit retaliation or adverse action against employees for exercising their rights under the Labor Code Definition of protected conduct in Code expanded to prohibit retaliation against employees who make written or oral complaints alleging unpaid wages Civil penalties of up to $10,000 per employee for each violation Immigration Employers prohibited from engaging in any unfair immigration-related practice Sanctions: Up to 90-day suspension of business license Civil damages 9

10 Discrimination and retaliation Updates to employee policies Effective : January 1, 2014 Emergency services Prohibits policies that prevent an employee from providing emergency medical services What policies are permitted? Prohibition of providing emergency medical services if person in need expresses that he/she does not want intervention Authorizing trained employees to provide emergency medical services 10

11 Discrimination and retaliation Preview Whistleblower protections Expansion of protection Privacy Background checks Credit checks 11

12 Expanding rights to leaves of absence Paid family leave Existing law entitles eligible employees to receive up to 55% of weekly wages during leave(s) up to 6 weeks to care for seriously ill spouses, domestic partners, children, and parents. This law does not provide leave or return rights, but rather income replacement. Expansion of covered relationships to now include seriously ill: Grandparents Grandchildren Siblings Parents-in-law Effective July 1,

13 Expanding rights to leaves of absence SF Familyfriendly workplace ordinance Employers must now consider providing flexible scheduling for workers with caregiving responsibilities upon request Right to Request flexible and/or predictable working schedules includes, among other things: Adjusted start/end times Telecommuting, etc. Employers must meet with an employee within 21 days of written request; then, must provide written response within another 21 days. Must have bona fide business reason for denying and then give notice of right to request reconsideration Effective January 1, 2014 Will need to consider interplay with FMLA, CFRA and other protected leaves 13

14 Litigation mechanics Attorney s fees Labor Code 218.5: prevailing party in action for non-payment was entitled to an award of reasonable attorney s fees Effective : January 1, 2014 Now, in order for the employer to recover reasonable attorney s fees and costs, it must be shown that an employee brought an action in bad faith. Applies to the following actions: Nonpayment of wages Fringe benefits Health and welfare or pension fund contributions 14

15 CLASS ACTIONS AND ARBITRATIONS: TRENDS AND HOT TOPICS

16 Class and collective actions: trends and hot topics Fewer class actions The trend predates Dukes & Brinker Dukes & Brinker provide defenses Plaintiff s bar believes the pendulum is swinging back we disagree Shifting of claims - more focus on company practices Time spent on community events or time ancillary to work Expenses Attacks on unique compensation systems Off the clock specific to PDA and work outside of work hours Defeats at early pleading stages PAGA has not been fully utilized 16

17 PAGA Seeing some pure PAGA cases, but not yet big numbers Included more often in class action filing Can wind up with a pure PAGA case when class claims are defeated Procedure is still unclear Practical tips to attack PAGA: Challenge the pleadings Force plaintiff to show the actual violation against him/her before they can represent other aggrieved employees Challenge the exhaustion with the LWDA 17

18 Class and collective actions: more hot topics CEOs may be deemed the employer and held personally liable in FLSA wage/hour collective actions -- according to the Second Circuit. Irizarry v. Catsimatidis Why, besides upsetting CEOs, is this important? Adds pressure to be in compliance and avoid claims 18

19 Class and collective actions: looking into the crystal ball Cases that will continue to be prevalent: Independent contractor misclassification Compensable time (e.g., off the clock) Claims based on recent or new laws: Wage Theft Act Notice Commission agreements New minimum wage Misclassification based salary basis test (new minimum wage) 19

20 Class litigation risks Classification and compensation contingent workers Independent contractor or employee? Exempt or non-exempt - classification continues to challenge Time records, meal breaks, vacation time Commissions and termination pay Background checks Accessible websites Genetic information ADA violations 20

21 Arbitration Arbitration is not necessarily a silver bullet Arbitration can be just as (or even more) expensive than litigation, and there is no right to an appeal However, arbitration can be more confidential - you get to choose your judge Larger employers are increasingly focused on class waivers in arbitration agreements, and there have been some key developments here: American Express v. Italian Colors Restaurants: arbitration agreement precluding class claims enforceable even though it may have been economically infeasible for plaintiffs to pursue claims individually Fifth Circuit reversed D.R. Horton: Rejected NLRB position that mandatory arbitration agreements waiving class action impermissibly chill protected concerted activity. 21

22 Arbitration Need to avoid overkill when drafting arbitration agreements. The Ninth Circuit and California Supreme Court see unconscionability as grounds to invalidate Chavarria v. Ralphs Grocery Co.: complete terms not provided until 3 weeks after signing; employer would always get to select arbitrator; no use of JAMS or AAA; arbitration costs evenly split between employer and employee Sonic-Calabasas, Inc. v. Moreno (Sonic II): held arbitration wavers can apply to claims that might otherwise be brought before the Labor Commissioner (e.g., unpaid vacation pay), but created an escape hatch with unconscionability remand 22

23 Arbitration Arbitration developments to watch in 2014 Iskanian v. CLS Transp. Los Angeles: will decide whether claims that could otherwise be brought under the Private Attorneys General Act (PAGA) can be subjected to class waivers in arbitration agreements In December 2013, the Consumer Financial Protection Bureau (CFPB) published a study on pre-dispute arbitration clauses which indicates it is likely to start issuing regulations limiting the use of pre-dispute arbitration clauses 23

24 Whistleblowing Amendments to California s Whistleblowing Statute Already prohibits retaliation against employees for reporting violation(s) of state or federal law to a government or law enforcement agency Now, employees are covered when they report (or, are believed to be reporting) internally (at their company) to someone with authority over the employee OR someone with ability to investigate/discover/correct the issue), OR to any public body doing an investigation or hearing Now, there is potential liability when anyone acting on the employer s behalf retaliates against a whistleblower Now, whistleblowers whose very job duties are discovering and investigating illegal activity are also covered (e.g., compliance officers) Liability: damages plus penalties up to $10,000 per violation 24

25 HEALTH CARE REFORM AND YOUR BOTTOM LINE

26 Who is subject to the mandate? Businesses subject to the mandate How to calculate whether you have 50 full-time equivalent employees Special rules for seasonal employees Total number of full-time employees + Total hours worked by part-time employees = Total number of full-time equivalent employees

27 Determining full-time employees Who must be offered coverage determining full-time employees Penalty amount turns on who is considered a full-time employee How to make the calculation of full-time employee Hours of service rules 27

28 Full-time employees, Cont d Determining full-time status optional safe harbor Look-back measurement period Administrative period Stability period Transition relief Variable hour employees Interplay between shared responsibility rules and waiting period rules 28

29 Employer mandate Effective in 2015 and After Employer mandate tax penalty for large employers that don t offer minimum essential coverage to full-time employees (and their dependents) A large employer (employer with 50 or more full-time equivalent employees) is subject to penalty if at least one fulltime employee receives a subsidy for exchange coverage and the employer: Fails to offer coverage to substantially all fulltime employees (and their dependents) (the no coverage penalty ); or Coverage is unaffordable (employee contribution must be less than 9.5% of income) or does not provide minimum value (the inadequate coverage penalty ) 29

30 Inadequate coverage penalty Penalty amounts Inadequate coverage penalty: $3,000 per year, per full-time employee for whom coverage is unaffordable or does not provide minimum value and who receives a subsidy to purchase coverage through an exchange 30

31 Offer of coverage Cost and value Affordability general rule Safe harbors W-2 wages Rate of pay Federal poverty line Minimum value Plan must pay at least 60% of cost of benefits Actuarial test Based on standard population 31

32 New fees and notice Reinsurance contribution $63 per year for each covered person Paid for 3 years beginning in 2014 Patient-centered outcomes fee $1 per year for each covered person Paid for 7 years beginning in 2012 Health insurance industry fee Only affects insured plans 2 2.5% of premium in 2014 Permanent, annual fee Notice of state exchanges Due October 1, 2013 Two model-notices one for employers who offer a health plan and one for employers who don t Model notices available at 32

33 New market reforms Additional mandates No pre-existing condition exclusions 90-day limit on waiting periods Limits on cost-sharing Clinical trial coverage Wellness programs Incentive will increase to 30% (50% for tobacco programs) 33

34 60-day notice of material modification and automatic enrollment 60-Day Notice of Material Modification Effective September 23, 2012 Part of SBC Regulations Notice provided if change occurs other than at time of renewal of coverage, affects the SBC and change not reflected in the SBC Restated SBC Penalty - $1,000 for each failure each covered individual equals a separate offense Automatic enrollment delayed Auto enrollment applies to employers with over 200 employees Auto enroll all new employees and dependents and re-enroll those already enrolled 34

35 Small employer provisions Provisions of the ACA affecting small employers SHOP exchange: Small businesses with fewer than employees (depending on state) can select and pay for coverage through special insurance marketplace. Exchange will manage administration for employers Small employer tax credit: A small employer tax credit may be available to small employers with fewer than 25 FTEs with average wages of less than $50,000 per FTE if the employer provides coverage and pays at least half of the cost of employee-only premium 35

36 Steps for employers COMPLIANCE STEPS FOR EMPLOYERS All employers were to distribute exchange notice by October 1 Employers with health plans to ensure compliance with 2014 market reforms and pay fees Determine whether business is subject to mandate and penalties Determine number of full-time employees Large employers to review health insurance offerings and determine whether employer will incur a penalty consider substantial compliance rule, dependents and spouses, affordability, minimum value Large employers to determine the amount of the penalty versus cost of coverage, and decide whether to pay or play 36

37 Same-sex marriage issues As a consequence of the Windsor decision, all federal tax provisions will apply where marriage is a factor, including filing status, employee benefits, IRA contributions, earned income and child tax credits etc., where ever the employee lives Federal tax benefits do not apply to domestic partners unless the domestic partner is considered a dependent Prior to September 16, 2013, employers who provided health benefits to same-sex partners withheld federal payroll taxes from imputed income, including federal income and the employee s Social Security and Medicare (FICA taxes). Employers also paid their own share of FICA taxes on imputed income and FUTA Employers and employees may file for refunds for overpayments made in 2013 and prior years 37

38 NATIONAL LABOR RELATIONS BOARD TRENDS AND ORGANIZED LABOR ACTIVITY

39 NLRB trends Looking to boost its relevance and impact, the National Labor Relations Board sees non-union employers as low-hanging fruit Understands realities of current workforce Many employers do not realize so-called Section 7 Rights already extend to many non-union workers So, what are they looking for? Discipline and discharge: Beyond social media cases, any instances of adverse action against employees for concerted activities (from griping about wages, to breaks, to lack of toilet paper in the bathroom) Investigations: Overbroad imposition of confidentiality Class arbitration waivers: Including them in agreements and policies 39

40 NLRB trends But the NLRB has not forgotten about unionized (or likely to unionize) employers Flurry of major decisions in past year will help unions get a foot in the door; and then, once they are there (or if they already are), help them leverage for richer collective bargaining agreements How? Access rights: information, organizing drives, meetings Dues check-off: keep funds flowing Micro units: do not accidentally recognize a union! Notice posting: On Jan. 6, 2014, NLRB raised the white flag in announcing it will not seek review of appellate courts invalidation of employee rights notice posting rule 40

41 Union trends What are private sector unions up to these days? Continued focus on health care sector (especially with its increasing industry consolidation) Kaiser: in May, SEIU won war with NUHW for 44,919 dues-paying workers in California Expect battles in ongoing county privatization efforts More secondary pressure (pickets, hand billing) Tech Companies (Google, Twitter) Retailers (Walmart) More high-profile media events SEIU as new political animal union model Will be careful in light of opinion backlash post-bart strikes 41

42 Putting upcoming labor news in context Wiping the slate: 318 NLRB decisions going back to Aug could be erased in 2014 by the Supreme Court in Noel Canning ABHOW (witness statements); DR. Horton (arbitration); WKYC-TV (dues checkoff); COSTCO (social media); MARRIOT (off duty access); ALAN RITCHEY (bargaining re disc.); BANNER HEALTH (investigations) So what? Minimal long-term impact, Board likely remand and/or renew (albeit over a period of time) as it did in New Process Steel in 2010 Upcoming DOL Persuader Rule regulatory change Indirect pressure for neutrality agreements 42

43 Key action items Preparing the labor law front: Do not consider concerted activity in misconduct investigations; if present, disclaim and neutralize When performing confidential investigations, explain the reasons why you are requiring/providing confidentiality Do not bargain with groups of employees; you might actually be recognizing a union or otherwise committing an Unfair Labor Practice Be creative and proactive: when facing litigation, you may be able to resolve a lawsuit via preemption under the National Labor Relations Act 43

44 THE MOBILE WORKFORCE: BYOD AND BEYOND

45 The future is here Sir Arthur C. Clarke, the author of 2001: A Space Odyssey, describing the future in 1964: We could Sir Arthur be in C. instant Clarke, the futurist contact and sci-fi with writer each best known other for his.. novel. where 2001: we can A Space Odyssey contact our friends anywhere on earth, even if we don t know their actual physical location. It will be possible in that age, perhaps only 50 years from now, for a man to conduct his business from Tahiti or Bali just as well as he could from London. 45

46 Depression-era laws meet the mobile workforce Google CEO and Co-Founder Larry Page You know, Sir Arthur if you C. Clarke, look the at futurist different and sci-fi writer kinds best of known laws for his we novel make, 2001: A Space Odyssey and things like that, they re very old. I mean, the laws when we went public were 50 years old. Law can t be right if it s 50 years old. Like, it s before the Internet. 46

47 What do you do when you first wake up? Always Connected, IDC Study, Sponsored by Facebook, March

48 Policies affected by mobility: mobile apps permeate Data privacy and security Harassment, discrimination and EEO Workplace safety Time recording and overtime Acceptable use of technology Compliance and ethics Records management Litigation holds Confidentiality and trade secret protection 48

49 Mobile device risks Loss of control over corporate data Violation of regulatory compliance obligations, e.g. SEC, HIPAA, GLBA, FINRA Security breaches Misappropriation of trade secrets and confidential information HR/employment risks Off the clock wage and hour claims Potential privacy-based claims, particularly with medical information Workplace safety issues, including distracted driving Records management and e-discovery challenges 49

50 BYOD policies BYOD and COPE policies User policies that govern ownership and use User policies that govern payment for the service plan, technology allowances or reimbursement Information security policies that attempt to manage risk HR policies to address impact of mobile devices on workplace behavior Selection, installation and deployment of mobile device management software Applicable disciplinary procedures for non-compliance Significant privacy implications Training re: all of the above 50

51 BYOD: employee privacy Issuing a remote wipe command get consent Employees have a reasonable expectation of privacy in their personal device All 50 states have computer trespass laws Potential liability under the Computer Fraud & Abuse Act if the unauthorized access causes damages > $5,000 Accessing an employee s personal or cloud account Access to medical information, personal financial information and life choices Lifestyle statutes 51

52 Implications of technology use Mobile device management software: Allows corporate IT to manage use of mobile devices regardless of ownership Encryption Lock down end user s ability to use specific device features or apps, such as cameras or icloud Enable remote locking or wipe of device Enforce use of strong passwords Prevent users from jailbreaking device or disabling or altering security settings on devices Device locator Consider the use of containerization technology 52

53 Implications of technology use Options for managing wage and hour concerns Limit non-exempt employees from accessing or making work-related calls outside of scheduled hours Limit access/program participation to employees who are exempt from OT Create process for reporting work performed outside of working hours Training Employees Managers Compliant policy requiring pay for all hours worked Must pay for all time worked, approved or not Can treat time worked without authorization as a disciplinary issue Address questions of who pays for device and expenses 53

54 Responsible use of social media in recruiting, hiring and promotions Build a process for lawful use of social media data Determine how to use in recruiting candidates Determine when on-line searches will be used in hiring and promotion process (ex. after initial screening interviews) Determine scope of review: what sources will be checked and what information will be collected? Decide whether to inform applicants about on-line searches and whether to ask for addresses, user names and blog posts Give notice and obtain consent where needed and comply with FCRA if using third parties to conduct search Do not engage in unauthorized access to password-protected sites, shoulder surf or require users to disclose passwords unlawfully Isolate protected class information from the decision maker Update forms for recording information, maintain contemporaneous documentation and comply with applicable retention requirements 54

55 EEOC recommended best practices EEOC s view of employer best practices for background checks Eliminate blanket exclusions based on any criminal record Develop narrowly tailored written policy/procedures excluding individuals from particular jobs based on a criminal history record (1) Identify essential job requirements (2) Identify specific offenses tied to unfitness for job (3) Identify time limits applicable to exclusion (4) Document research/consultations to support policy/procedures (5) Provide for individualized assessment before final hiring decision When asking questions about criminal records, limit inquiries to records job related/consistent with business necessity Make inquiries of criminal record post application (e.g. ban the box approach) Train managers, hiring officials, and decision-makers on how to implement the policy and procedures consistent with Title VII Maintain confidentiality of criminal records 55

56 Fair Credit Reporting Act overview Applies to reports prepared by a third party that regularly assembles or evaluates credit or other information on a consumer ( consumer reporting agency or CRA ) and includes background screening companies Covers any inquiry for employment purposes bearing on an individual s credit, general reputation, personal characteristics, or mode of living Criminal history checks, credit checks, sex offender registry, motor vehicle record checks, employment and education verification Regulates public records, including criminal records, and is not limited to traditional credit reports Does not regulate purely in-house investigations, such as reference checks made by internal human resources personnel 56

57 Why worry about FCRA? FCRA remedies Cases can be based on failure to use FCRA disclosure and authorization forms; failure to give adverse action notices Minimum statutory damages of $100 to $1,000 for willful violations Class action-friendly remedy where CRAs and employer follow standard procedures Low damages add up when multiplied against large applicant pools Actual damages for negligent violations Attorney s fees to a successful plaintiff No statutory cap on defendant s exposure 57

58 New life for workplace privacy: password protection statutes Numerous states have enacted legislation to prohibit employers from asking applicants or employees for social media passwords or other log-in credentials, including CA, CT, CO, HI, IL, MD, MI, NV, NM, OR, UT, VT and VI. Others have pending legislation and federal legislation has also been introduced. California s statute provides an exception that permits employers to request an employee to divulge personal social media reasonable believed to be relevant to an investigation of allegations of misconduct. California also has an exception for usernames and passwords used to access employer-issued devices. Be aware of tensions between state laws and FINRA obligations to supervise and retain records. 58

59 Geolocation tracking and telematics FTC: Geographic location is sensitive information CA Penal Code 637.7: No person or entity in this state shall use an electronic tracking device to determine the location or movement of a person Tread carefully, legal support for limitations on use of location data is growing Source: CTIA The Wireless Association, Best Industry Practices and Guidelines for providers of location based services 59

60 AMERICAN DISABILITIES ACT: WEBSITE ACCESSIBILITY

61 ADA and website accessibility Advocates for disabled Americans have declared that companies have a legal obligation to make their websites as accessible as their stores, and they ve filed suits across the country to force them to install the digital version of wheelchair ramps and self-opening doors Wall Street Journal, Disabled Sue Over Web Shopping (Mar. 21, 2013) Case in point H&R Block is being sued in Boston Federal Court by the National Federation of the Blind (which represents estimated 25 million adults) for having an inaccessible website; the DOJ has intervened in the suit as well 61

62 ADA and website accessibility Title III of the ADA states: No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation. Why this matters to you: if you use your website for recruiting and hiring functions, and applicant could be a plaintiff. Similarly, any employee who can t access your website to register for benefits, check payroll information or find information needed to do their job could be a Plaintiff. 62

63 ADA & website accessibility DOJ has issued Advance Notice of Proposed Rule Making which will likely lead to the publishing of regulations (and then vigorous enforcement) As precursor, Title II final regulations (for state and local governments) were expected by the end of 2013, and could be issued any day now. Liability: for Title III violations, individuals may seek an injunction, attorney s fees and costs; and the DOJ may obtain damages and penalties of up to $55,000 for first violations and $110,000 for subsequent violations DOJ enforcement has been aggressive 63

64 ADA and website accessibility Web content accessibility Guidelines (WCAG) 2.0 Perceivable -- Operable -- Understandable -- Robust What will this mean for your website? Text alternatives: Provide text alternatives for any non-text content so that it can be changed into other forms people need, such as large print, braille, speech, symbols or simpler language. Adaptable: Create content that can be presented in different ways (for example simpler layout) without losing information or structure. Distinguishable: Make it easier for users to see and hear content including separating foreground from background. Keyboard accessible: Make all functionality available from a keyboard. Predictable: Make web pages appear and operate in predictable ways. Input assistance: Help users avoid and correct mistakes. Compatible: Maximize compatibility with current and future user agents, including assistive technologies Guidelines promulgated by W3C 64

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