As most California employers have learned by now, it is getting more and more difficult to own a business in California due to the ever-increasing employee-friendly laws that make “extortion” lawsuits convenient and perfunctory, even with the most justified of terminations.  To minimize exposure, it is important for employers to understand and comply with what, for most, is a complicated area of law.  A large part of this strategy requires that employers stay up to date on new legislation and case authority in the realm of labor and employment law.   The following is non-exhaustive summary of new laws and cases that will affect most employers.  An employer in need of guidance as to which new laws affect it and/or whether its current polices, procedures and structure are in compliance with the law, should contact a qualified labor and employment attorney for additional information.

NEWLY ENACTED LEGISLATION

The Governor has signed several employment-related bills into law this year.  Most will go into effect on January 1, 2012.  They include:

CREDIT INFORMATION ABOUT APPLICANTS OR EMPLOYEES: ASSEMBLY BILL 22 prohibits employers or prospective employers from obtaining credit information about applicants or employees, unless the information contained in the report is substantially job-related and the position sought such as in one of the following circumstances: (1) a managerial position; (2) a position in the State Department of Justice; (3) a sworn peace officer or other law enforcement position; (4) a position for which the information contained in the report is required by law to be disclosed; (5) a position that involves regular access to specified personal information for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment; (6)  a position in which the person is or would be a named signatory on the employer’s bank or credit card account, or authorized to transfer money or enter into financial contracts on the employer’s behalf; (7) a position that involves access to confidential or proprietary information; or (8) a position that involves regular access to $10,000 or more of cash.  The law requires written notice by the employer informing the person for whom a consumer credit report is sought along with the specific reason for obtaining the report.

FAMILY MEDICAL LEAVE: ASSEMBLY BILL 592 adds language to the California Family Rights Act and the Pregnancy Disability Leave law bringing them in line the federal Family Medical Leave Act, making it unlawful to interfere with or in any way restrain the exercise of rights under these laws.

COMMISSION AGREEMENTS: ASSEMBLY BILL 1396 requires that, by January 1, 2013, any commission agreement between an employer and its employee be in a written contract that sets forth the method by which the commission is calculated and paid.  A copy of the contract must be provided to the employee and the employer must also retain a copy of the executed agreement.

NOTICE TO NEW HIRES: ASSEMBLY BILL 469 requires employers to provide new hires with a written notice containing wage and business-related information, such as: the rate pay and basis thereof (i.e., hourly, daily, weekly); allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances; the employer’s regular payday; the name of the employer including any dba’s used; the physical address of the employer’s main office or principal place of business; the employer’s telephone number; information relating to the employer’s workers’ compensation insurance carrier; and “any other information the Labor Commissioner deems material and necessary”.  The good news is that the law requires the Labor Commissioner to prepare a template and make it available.  You will likely find the template on the Labor Commissioner’s website, once it becomes available: http://www.dir.ca.gov/dlse/.

GROUP HEALTH COVERAGE EXTENDED FOR PREGNANCY LEAVE: SENATE BILL 299 requires an employer to maintain and pay for coverage under a group health plan for an employee who takes Pregnancy Disability Leave, up to the entire four month duration of the leave, and under the conditions that coverage would have been provided had the employee remained continuously employed.  The extension of health coverage will apply even if there is not entitlement under the federal Family Medical Leave Act.  This has effectively eliminated the twelve-week cap on employer paid benefits that applied to combined Pregnancy Disability Leave/California Family Rights Act leave.

NEW CASE LAW

Pantoja v. Anton (2011) 198 Cal. App. 4th 87. The Fifth District Court of Appeal ruled that evidence of sexual harassment towards individuals other than the plaintiff is admissible to show discriminatory intent under Evidence Code Section 1101(b), to impeach defendant’s credibility or to rebut factual claims made by defense witnesses. The court previously ruled that such “me too” evidence of harassment of other employees is barred for the purpose of establishing the defendant’s propensity to harass. Beyda v. City of Los Angeles (1988) 65 Cal. App. 4th 511.  While the Court of Appeal acknowledged this prior ruling, it noted that in Pantoja, the evidence was being offered for a different purpose and was therefore admissible.  This pro-employee case will undoubtedly expand the scope of discovery in employment cases, as well as the types of evidence found to be admissible at trial.

Lopez v. Pacific Maritime Association (9th Cir. 2011) 657 F.3d 762.  In Lopez, the Ninth Circuit Court of Appeals held that an employer’s rule that permanently denied employment to a drug-addicted applicant who tested positive during a pre-employment screening did not violate the Americans with Disabilities Act of 1990.  The court found that the employer’s rule did not facially discriminate against recovering or recovered drug addicts because the triggering event for purposes of the one-strike rule was a failed drug test, not an applicant’s drug addiction.

Leek v. Cooper (2011) 194 Cal. App. 4th 399.  In this case, the Third District Court of Appeal held that a plaintiff is required to prove an “alter ego” relationship to hold the owner of a closely-held corporation liable for employment discrimination. In Leek, employees of a car dealership sued the dealership and its sole shareholder for age discrimination.  The plaintiffs argued that the level of shareholder control exercised by the sole shareholder over the employment made him personally liable.  The Court disagreed, holding that an employee may recover against the sole shareholder of an employer corporation for discrimination in violation of state law only where the employee can demonstrate that the shareholder was an “alter ego” of the employer.  According to the court, mere control is not enough and the sole shareholder could be held liable only if the plaintiffs proved all the traditional elements of “alter ego” liability, including a “unity of interest” between the shareholder and the corporation and the inequity of treating the alleged discrimination as an act of the corporation alone.

Wal-Mart Stores, Inc. v. Dukes (2011) 131 S. Ct. 2541.  Class certification of 1.5 million putative class members was denied.  The proposed class consisted of female employees and alleged that Wal-Mart discriminated against women in violation of Title VII of the Civil Rights Act of 1964 in regards to pay and promotions.  The Supreme Court held that the certification of the proposed nation-wide class was not consistent with Federal Rule of Civil Procedure, Rule 23(a), which requires the party seeking class certification to prove that the class has a common question of law or fact.  The Court further held that the claims for backpay were improperly certified by the lower court under FRCP, Rule 23(b)(d), because claims for monetary relief cannot be certified under that provision when the monetary relief is not incidental to the requested injunctive or declaratory relief.  This ruling is great for large companies, as they are likely to have varied and decentralized job practices that will preclude class certification. Dukes is also beneficial for smaller employers, as it makes clear that only those employees who have a genuine common legal claim and who can provide rigorous proof that every single putative class member suffered from exactly the same sort of bias, will be permitted to proceed as a class.

NEW CALIFORNIA DEPARTMENT OF FAIR EMPLOYMENT & HOUSING PROCEDURAL REGULATIONS

Last but not least, there have been a few noteworthy changes to the Department of Fair Employment & Housing (“DFEH”) Regulations, that went into effect in October of 2011.   These changes make it even easier for an employee to file a complaint, initiate a DFEH investigation and obtain a Right-to-Sue Notice.  Specifically:

1.         The DFEH no longer requires a claimant to sign the complaint, but instead, permits the claimant’s attorney or any other person whom the claimant has designated to sign on his or her behalf.

2.         The DFEH will also now accept an unsigned complaint when neither the claimant nor an authorized representative is able to sign it before the statue of limitations expires.

3.         The “liberal construction of complaints” is now codified to extend to all claims that are or could have been asserted based on the facts alleged.  So, where the claimant checks only the box for discrimination, but the facts alleged could support a harassment claim as well, the DFEH will construe the complaint to include both claims.  This may make it more difficult  for employers to successfully argue a failure to exhaust administrative remedies and obtain an early dismissal of those claims not expressly alleged in the administrative complaint at the litigation stage.

4.         In yet to be defined circumstances, the DFEH may now accept complaints filed after the one-year statute of limitations period.  The new regulations provide that “where there is doubt about whether the statute of limitations has run [the complaint will be accepted and timeliness] investigated and analyzed” during the investigation.  As a majority of employees immediately request a Right-to-Sue Notice, rather than await an investigation, it is likely that fewer complaints will be rejected as untimely and any deferral to an investigator to determine timeliness will be useless.  Depending on the circumstances, this may make it more difficult for employers to establish a statute of limitations bar.

Again, the foregoing is not intended to be an encyclopedia of new laws and regulations.   Employers are advised to contacted a labor and employment law specialist to thoroughly vet any existing policies and procedures to ensure compliance and avoid future litigation – to the extent possible.