California Supreme Court Holds that Employers May Terminate Employees For Use of Medical Marijuana

Last week, the California Supreme Court held that it is not a violation of California law for an employer to terminate an employee who tests positive for marijuana, even though the employee was prescribed the marijuana for medical purposes under California’ Compassionate Use Act of 1996.

The conflict in Ross v. Ragingwire Telecommunications, Inc. was between California's Compassionate Use Act, (which gives a person who uses marijuana for medical purposes on a physician’s recommendation a defense to certain state criminal charges and permission to possess the drug) and Federal law (which prohibits the drug’s possession, even by medical users). The employer in this case terminated plaintiff’s employment based on a positive test for marijuana even through the plaintiff provided a doctor’s note explaining that he was prescribed marijuana to alleviate back pains. 

The Supreme Court explained that the employer's decision to terminate plaintiff was not illegal:
Nothing in the text or history of the Compassionate Use Act suggests the voters intended the measure to address the respective rights and duties of employers and employees. Under California law, an employer may require preemployment drug tests and take illegal drug use into consideration in making employment decisions. (Loder v. City of Glendale (1997) 14 Cal.4th 846, 882-883.)
Plaintiff’s position might have merit if the Compassionate Use Act gave marijuana the same status as any legal prescription drug. But the act’s effect is not so broad. No state law could completely legalize marijuana for medical purposes because the drug remains illegal under federal law (21 U.S.C. §§ 812, 844(a)), even for medical users (see Gonzales v. Raich, supra, 545 U.S. 1, 26-29; United States v. Oakland Cannabis Buyers’ Cooperative, supra, 532 U.S. 483, 491-495). Instead of attempting the impossible, as we shall explain, California’s voters merely exempted medical users and their primary caregivers from criminal liability under two specifically designated state statutes. Nothing in the text or history of the Compassionate Use Act suggests the voters intended the measure to address the respective rights and obligations of employers and employees.
The Court also provided that a reasonable accommodation, as required under California’s FEHA, does not include an employer’s permission to use illegal drugs:
The FEHA does not require employers to accommodate the use of illegal drugs. The point is perhaps too obvious to have generated appellate litigation, but we recognized it implicitly in Loder v. City of Glendale, supra, 14 Cal.4th 846 (Loder). Among the questions before us in Loder was whether an employer could require prospective employees to undergo testing for illegal drugs and alcohol, and whether the employer could have access to the test results, without violating California’s Confidentiality of Medical Information Act (Civ. Code, § 56 et seq.). We determined that an employer could lawfully do both. In reaching this conclusion, we relied on a regulation adopted under the authority of the FEHA (Cal. Code Regs., tit. 2, § 7294.0, subd. (d); see Gov. Code, § 12935, subd. (a)) that permits an employer to condition an offer of employment on the results of a medical examination. (Loder, at p. 865; see also id. at pp. 861-862.) We held that such an examination may include drug testing and, in so holding, necessarily recognized that employers may deny employment to persons who test positive for illegal drugs. The employer, we explained, was “seeking information that [was] relevant to its hiring decision and that it legitimately may ascertain.” (Id. at p. 883, fn. 15.) We determined the employer’s interest was legitimate “[i]n light of the well-documented problems that are associated with the abuse of drugs and alcohol by employees — increased absenteeism, diminished productivity, greater health costs, increased safety problems and potential liability to third parties, and more frequent turnover . . . .” (Id. at p. 882, fn. omitted.) We also noted that the plaintiff in that case had “cite[d] no authority indicating that an employer may not reject a job applicant if it lawfully discovers that the applicant currently is using illegal drugs or engaging in excessive consumption of alcohol.” (Id. at p. 883, fn. 15.) The employer’s legitimate concern about the use of illegal drugs also led us in Loder to reject the claim that preemployment drug testing violated job applicants’ state constitutional right to privacy. (Id. at pp. 887-898; see Cal. Const., art. I, § 1.)
(footnote omitted).

The Plaintiff also alleged a cause of action for wrongful termination in violation of public policy. Generally, at-will employees can terminate or be terminated from their job at any time, but an employer cannot terminate an employee for reasons that violate a fundamental public policy of the state. The Court rejected plaintiff’s position that there was a fundamental public policy that permitted him to use medical marijuana and be under its influence while at work. “Nothing in the [Compassionate Use Act’s] text or history indicates the voters intended to articulate any policy concerning marijuana in the employment context, let alone a fundamental public policy requiring employers to accommodate marijuana use by employees."

The opinion can be viewed at the Court’s website (WRD) (PDF).

CNN Reports On Overtime Liability

CNN reports that many companies across the U.S. are encountering wage and hour issues that California companies are all too familiar with.  The article reports:
Rod Cotner, owner of Jericho Mortgage in Lancaster, Ohio, was shocked when the U.S. Department of Labor showed up at his door to investigate a wage-and-hour lawsuit filed on behalf of his 54 loan officers and sales managers.

His company was growing - sales exceeded $4 million that year - and his employees were profiting: "Some of the staffers named in the lawsuit were making over $150,000," he says. "After working in the industry for years, I'd never heard of this happening. Everyone pays their officers on a commission basis. How can someone who makes six figures a year demand back wages for his time?"
In 2006 the U.S. Department of Labor collected $172 million in back wages from employers, which is reported to be 3.6 percent higher than 2005.

Also, the article illustrates that while these laws were intended to protect employees, the laws often times have the opposite effect.  This is especially true in California where the meal and rest break laws are so rigid that the employees cannot enter into agreements with their employer to skip meal breaks when needed for family issues.  The article quotes Don Turner, the owner of the Golden Bear Inn in Berkeley:
"I had an employee who wanted to watch his child's Little League game at four, but he was scheduled to get off at 4:30," he says. "He asked me if he could work through his lunch break instead, and I had to refuse him - the overtime law just wouldn't let me."
The article concludes with a very appropriate caution to employers:
For now, the best that a small-business owner can do to avoid overtime lawsuits is keep painstaking payroll records for nonexempt employees and consult an employment lawyer to verify workers' status. And make sure to keep a sharp eye out for the kind of dedicated worker who might be tempted to skip lunch.
As a final warning, California employers need the advice of an attorney well versed in California labor and employment law - California law is more restrictive than federal law in almost every aspect.  Courts apply the law that provides employees with the most protection, which means that California law applies in almost every case.

Hidden Risks of Using Facebook, MySpace, and Other Websites to Scope Out New and Prospective Hires

On February 26, 2008, I will be presenting a nation-wide teleconference entitled “Hidden Risks of Using Facebook, MySpace, and Other Websites to Scope Out New and Prospective Hires" through BLR. More information can be found at BLR’s website here.

During this 90-minute audio conference, I will cover the legal pros and cons of relying on online data when you screen potential and current employees – with a special emphasis on information found via Google, Facebook, MySpace, and other social networking sites. I will also cover the following topics:
  • The most common mistakes employers make when they check applicants and current employees on the Web
  • Which online sites pose the greatest legal threats for employers when used for HR purposes
  • When it’s legal to use information found online to evaluate applicants and workers – and what types of online details you must never use or keep (no matter how damaging or relevant it may seem)
  • How you can decide whether the information you’ve found online is accurate
  • The steps you should take if an applicant or employee claims that your online searches constitute an illegal invasion of privacy
  • When your Facebook, MySpace, or Google searches may cross the line into discrimination
  • The red flags that you may have violated the Fair Credit Reporting Act when surfing the Web to learn more about applicants or employees – and how to protect yourself
In preparing for the conference, I am interested in specific questions anyone would like addressed, problems companies have encountered in this area, or any other comments you have about this topic. Please email me at azaller[at]

A bit off topic, but related to social networking sites, please feel free to connect with me or view my profile on Linkedin. Click here for my Linkedin profile

New Case Decision On Witness Contact Information Disclosure In Class Action Litigation

On January 15, 2008, the Court of Appeal in Puerto v. Superior Court (Wild Oats) [PDF] [Word], concluded that an opt-in notice established by the trial court as a process to obtain witnesses' residential contact information "unduly hampered" plaintiffs' in conducting discovery.

In October 2006, Plaintiffs filed suit against Wild Oats alleging they were misclassified as exempt employees, and are seeking recovery for overtime compensation, compensate for all hours worked, and unfair business practices.

Plaintiffs served written discovery on Wild Oats that included Form Interrogatory No. 12.1, which requested that Wild Oats: “State the name, ADDRESS, and telephone number of each individual: [¶] (a) who witnessed the INCIDENT or the events occurring immediately before or after the INCIDENT; [¶] (b) who made any statement at the scene of the INCIDENT; [¶] (c) who heard any statements made about the INCIDENT by any individual at the scene; and [¶] (d) who YOU OR ANYONE ACTING ON YOUR BEHALF claim has knowledge of the INCIDENT (except for expert witnesses covered by Code of Civil Procedure section 2034).”

Wild Oats disclosed between 2600 and 3000 names and positions in the responses to Interrogatory No. 12.1.  However, Wild Oats withheld the individuals’ residential telephone numbers and addresses, citing privacy rights on behalf of the individuals listed.

After plaintiffs brought a motion to compel disclosure of the individuals’ contact information, the trial court approved a process by which a third party administrator would send a letter to each of the individuals informing them of plaintiffs’ request for their contact information. The letter contained an opt-in provision that stated, “The court has ordered the parties to send this letter to you so that you may decide whether or not you wish to disclose this information to the Plaintiffs’ attorneys. If you consent to the disclosure of your contact information, please complete and return the enclosed postcard to the Third-Party-Administrator . . . .”

The Court of Appeal found that the trial court’s use of the opt-in procedure was an abuse of discretion that exceeded the protections necessary to safeguard the legitimate privacy interests in the addresses and telephone numbers of the witnesses. The Court of Appeal stated:
While the trial court here implicitly found that a serious invasion of privacy would result unless an opt-in notice was used, we believe that conclusion is unsupported by facts or law. Here, just as in Pioneer, the requested information, while personal, is not particularly sensitive, as it is merely contact information, not medical or financial details, political affiliations, sexual relationships, or personnel information. [citations] This is basic civil discovery. These individuals have been identified by Wild Oats as witnesses. Nothing could be more ordinary in discovery than finding out the location of identified witnesses so that they may be contacted and additional investigation performed. [citation] As the Supreme Court pointed out in Pioneer, the information sought by the petitioners here—the location of witnesses—is generally discoverable, and it is neither unduly personal nor overly intrusive. [citation] In some respects, the potential intrusion here is even less significant than that in Pioneer, because here the requested disclosure does not involve individuals’ identities, which had already been disclosed by Wild Oats prior to the filing of the motion to compel. There simply is no evidence that disclosure of the contact information for these already-identified witnesses is a transgression of the witnesses’ privacy that is “sufficiently serious in [its] nature, scope, and actual or potential impact to constitute an egregious breach of the social norms underlying the privacy right.” [citation]
It is important to note that the court also recognized that the employer has a duty to protect employee’s contact information and “[s]hould any individual identified as a witness later feel that there has been an unnecessary invasion of his or her privacy, this will become an issue between the employee and [the employer], not the employee and [plaintiffs].”

The Court of Appeal did, however, still leaves open alternative discovery avenues to limit public disclosure of employee contact information:
This is not to say that the trial court was without the ability to enter a protective order limiting the dissemination of the witnesses’ contact information: Certainly the trial court may require that the information be kept confidential by the petitioners and not be disclosed except to their agents as needed in the course of investigating and pursuing the litigation. Moreover, should the trial court find that the record evidences discovery abuse warranting a protective order as to the manner and means of contacting witnesses, the trial court always retains the discretion to impose such an order.

2008 California Law Update and Supreme Court Cases To Watch

Below is a brief summary of some of the more relevant employment laws taking effect in 2008 and a summary of the Supreme Court cases that will have great ramifications for employers in 2008.

Minimum Wage Increase

As written about previously here, the California minimum wage will be increased to $8 per hour starting January 1, 2008. Employers will also have to re-examine the pay rates for their exempt employees. One of the items California law requires for an employee to qualify as exempt (which means they are not entitled to overtime) the employee must earn at least two times minimum wage, base on a forty hour workweek. Therefore, the increase in the minimum wage means that the minimum salary for exempt employees will increase from to $31,200 in 2007 to $33,280 as of January 1, 2008.

In addition, employers should also review their pay rates for commissioned inside sales employees. For an employee to qualify as a commissioned inside sales employees who are exempt from overtime under Wage Order Nos. 4 and 7, the employee must earn at least 1.5 times the minimum wage for all hours of work to maintain the exemption. The employee must meet other requirements to qualify for this exemption, but the salary level is a bright-line rule that must be met in order for the exemption to apply.

IRS Mileage Rate Increase and Expense Reimbursement
The IRS announced the standard business mileage rate for 2008 is 50.5 cents per mile. California's DLSE has maintained that employers are required to reimburse employees for business miles driven at the IRS mileage rate in order to comply with California Labor Code section 2802. However, this year, the California Supreme Court ruled in Gattuso v. Harte-Hanks (as discussed here) that the reimbursement rate does not have to be the IRS mileage rate but can be negotiated by parties as long as it fully reimburses the employee. The Gattuso Court stated:
We agree that, as with other terms and conditions of employment, a mileage rate for automobile expense reimbursement may be a subject of negotiation and agreement between employer and employee. Under section 2804, however, any agreement made by the employee is null and void insofar as it waives the employee’s rights to full expense reimbursement under section 2802.

California Computer Professionals Hourly Rate Decreased
California Labor Code section 515.5 provides that computer programmers who perform specific computer-related duties are exempt from the overtime requirements in Labor Code section 510. In addition to meeting a duties test, computer professionals must earn a statutorily specified minimum pay rate to be considered exempt. The Division of Labor Statistics and Research revised the hourly rate downward for 2008 to $36.00 per hour or $74,880.00 per year.

Employee Social Security Numbers
California Labor Code section 226(a) was amended to provide greater security against identify theft. Beginning January 1, 2008, employers may ONLY list the employee’s last four digits of an employee’s Social Security Number (or alternatively use the employee’s identification number) on the wage statements provided to employees.

Unpaid Leave for Military Spouses
Governor Schwarzenegger signed California Assembly Bill (AB) 392 into law. The bill creates a new leave of absence right for spouses of military personnel while those personnel are on a leave of absence from deployment.
Specifically, the military spouse law provides that:
  • Employers with 25 or more employees in the United States to allow eligible employees to take up to 10-days off from work, on an unpaid basis, when his/her spouse is on leave from deployment during a period of military conflict;
  • Eligible employees are defined as employees who work at least an average of 20 hours per week and whose spouse is a member of the United States Armed Forces, National Guard, or Army Reserve on active duty in an area of military conflict;
  • Employees must provide notice to the employer within 2 business days of receiving official notice that his/her spouse will be on a leave from deployment.
It is important to note that it does not appear there are any circumstances under which an employer would be permitted to deny an employee's leave request. Accordingly, employers should be extremely careful in dealing with requests for leave under this new law.

Hands Free Devices Required For Cell Phones While Driving
Bill SB 1613 makes it illegal as of  July 1, 2008, to drive a motor vehicle while using a wireless telephone, unless that telephone is designed and configured to allow hands-free listening and talking operation, and is used in that manner while driving. This offense would be punishable by a base fine of $20 for a first offense and $50 for each subsequent offense.

Supreme Court Cases to Watch in 2008:

This case presents the following issues: (1) Does a worker's assignment to the worker's union of a cause of action for meal and rest period violations carry with it the worker's right to sue in a representative capacity under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, sec. 2698 et seq.) or the Unfair Competition Law (Bus. & Prof. Code, sec. 17200 et seq.)? (2) Does Business and Professions Code section 17203, as amended by Proposition 64, which provides that representative claims may be brought only if the injured claimant "complies with Section 382 of the Code of Civil Procedure," require that private representative claims meet the procedural requirements applicable to class action lawsuits?

This case presents the following issues: (1) Is a non-competition agreement between an employer and an employee that prohibits the employee from performing services for former clients invalid under Business and Professions Code section 16600, unless it falls within the statutory or judicially-created trade secrets exceptions to the statute? (2) Does a contract provision releasing "any and all" claims the employee might have against the employer encompass non-waivable statutory protections, such as the employee indemnity protection of Labor Code section 2802?

Case Status: review granted/brief due Issues: Petition for review after the Court of Appeal granted and denied petitions for peremptory writ of mandate. This case presents the following issue: Do claims adjusters employed by insurance companies fall within the administrative exemption (Cal. Code Regs, tit. 8, section 11040) to the requirement that employees are entitled to overtime compensation?

Case Status: submitted/opinion due Issues: Petition for review after the Court of Appeal reversed a judgment notwithstanding the verdict and an order granting a new trial in a civil action.
The court limited review to the following issue: May an individual be held personally liable for retaliation under the California Fair Employment and Housing Act (Gov. Code section 12900 et seq.)?

San Francisco's Health Care Mandate Given Green Light By Appellate Court

The Golden Gate Restaurant Association (GGRA) challenged certain provisions of the newly enacted San Francisco Health Care Security Ordinance, contending that they are preempted by the federal Employee Retirement Income Security Act of 1974 (“ERISA”). Part of the Ordinance was scheduled to go into effect on January 1, 2008. On December 26, 2007, the district court handed the GGRA a win by granting summary judgment in favor for the GGRA and placed a hold on the implementation and enforcement of the disputed provisions of the Ordinance.

However, Defendant City and County of San Francisco and Intervernor labor unions quickly appealed the judgment of the district court. They asked the appellate court to stay the judgment of the district court, thereby allowing the Ordinance to go into effect pending a final decision on the merits of the appeal. On January 9, 2008, in handing San Francisco’s businesses a serious blow, the appellate court agreed with the City and the labor unions and granted a stay of the district court’s judgment, therefore allowing the Ordinance to go into effect. The appellate court’s decision can be read here.

The court stated, “It is clear that otherwise avoidable human suffering, illness, and possibly death will result if a stay is denied.” In making this ruling, the court had to address whether the Golden Gate Restaurant Association would likely prevail on the merits of their case, and found that the city’s arguments in favor of implementing the Ordinate have a “strong likelihood of success on the merits.”

In conclusion, the court stated:
There may be better ways to provide health care than to require private employers to foot the bill. But our task is a narrow one, and it is beyond our province to evaluate the wisdom of the Ordinance now before us. We are asked only whether we should stay the judgment of the district court pending resolution of the appeal on the merits. We conclude that the City and Intervenors have a probability, even a strong likelihood, of success in their argument that the Ordinance is not preempted by ERISA. We further conclude that the balance of hardships tips sharply in favor of the City and the Intervenors. Finally, we conclude that the public interest will be served by a stay. We therefore order that the district court’s judgment be stayed pending resolution of the appeal.
Therefore, employers in San Francisco should ensure that they are taking steps to comply with the new law.   Employers should visit the website established by the City to learn about the requirements of the Ordinance: Healthy San Francisco

Also, the text of the Ordinance can be read here.