Five Common Mistakes In Sexual Harassment Policies

Rush Nigut wrote recently about five common mistakes he see employers make in drafting sexual harassment policies.  Rush makes very good points, here are a few highlights:
  • The written policy does not provide and communicate in writing multiple channels for the complaint procedure. Employees should be able to report harassment to more than one person within the company. The complaint process should be clearly defined in your employment manual.
  • Supervisors are not trained each year and supervisors are not required to report harassing conduct. Consequently employers often miss out on a possible defense in any lawsuit.
  • Once notified of harassing conduct employers fail to take immediate action to investigate. Employers have the attitude that the employee must "deal with it." Complaints of harassment are often not taken seriously.
Rush's post is a good reminder for employers, and the entire post can be read here.  Don't forget, California employers with 50 or more employees must provide two hours of sexual harassment prevention training to their supervisors and managers every two years.  This requirement started in 2005.

IRS Mileage Rate To Increase 8 Cents July 1, 2008

The IRS announced yesterday that the IRS mileage rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008.  Click here to see the IRS press release.  This is an increase of eight cents from the 50.5 cent rate in effect for the first six months of 2008. Click here to read a Washington Post article on the topic.

What does this mean for California employers?

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, just last year, the California Supreme Court ruled in Gattuso v. Harte-Hanks (as discussed previously on our blog here) that the reimbursement rate does not have the be the IRS mileage rate but can be negotiated by parties as long as it fully reimburses the employee. The 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.
So if employers wish to reimburse employees at an amount lower than the IRS mileage rate, it is recommended that the agreement be documented and that the employer take into account any facts that would either increase or decrease the amount needed to fully reimburse the employee. 

U.S. Supreme Court Issues Three New Employment-Related Decisions Today

The United States Supreme Court has just issued a 5-4 ruling on an age discrimination issue in Kentucky Retirement System v. EEOC and a 6-1-2 ruling on an ERISA issue in Metropolitan Life Insurance Co. v. Glenn.   In addition, the Court also ruled on a burden-of-persuasion issue on an age discrimination claim in Meacham v. Knolls Atomic Power Laboratory. We will be updating the blog after we have a chance to review the decisions. In the meantime, click here for the Kentucky Retirement opinion; here for the Metropolitan decision; and here for the Meacham decision.

Attorney's Letter or DFEH Charge Triggers Employer's Duty to Tender Claim to Insurance Carrier Even if No Lawsuit Filed

Westrec Marina Management, Inc. v. Arrowood Indem. Co., contains some important lessons for employers who believe they have insurance coverage for employment claims.

In Westrec, an employee’s attorney sent a letter on June 24, 2003 to the Company asserting that his client had been sexually harassed by supervisory employees, and inviting the Company to engage in a settlement discussion. The Company apparently did not take up the offer and the employee filed a lawsuit six months later, in December.

At this point the employer probably took comfort from the fact that it had a “directors and officers” insurance policy, which would at least defray the cost of defending the case. The carrier, however, refused to defend the case on the ground that the “claim” should have been tendered before the lawsuit was even filed. The Court agreed. 

The reason is that the policy covered only claims which were first made during the policy period and were “reported within 30 days after the expiration of the policy.” The original policy had a coverage period of July 1, 2003 to July 1, 2004. Although the employer had renewed its coverage at the expiration of this original period, the first policy had nevertheless technically “expired” on July 1, 2004. 

As a result, the court held that: (a) the first policy period expired on July 1, 2004 – and the attorney letter should therefore have been tendered within 30 days of that date; (b) the lawsuit and the letter were the same “claim” for purposes of determining insurance coverage; and (c) the time to report the claim under the policy had therefore expired before the lawsuit had even been filed. 

The lessons for employers are clear. First, you must carefully read the language of your policy. Businesspeople who are not versed in the intricacies of insurance law generally concentrate on the seemingly broad grants of coverage in the first portion of the policy, without examining all of the ways in which this coverage is whittled down by the exclusions, definitions, and reporting requirements. (It is no coincidence that insurance carriers do not draft their policies in “plain English.”) Second, when in doubt -- immediately tender everything that even resembles a potentially covered claim.

Schwarzenegger and Sacramento Republicans Look at Reforming Meal Period Rules

The California Legislature has once again missed its budget deadline. This is more of an annual tradition than news. But this year the deficit is particularly large and the resulting budget fight will therefore be especially brutal. For example, state Republicans want to put everything on the table, including non-budget items such as a reform of meal break rules. According to the LA Times, “GOP lawmakers hope to use their leverage over the state budget, which cannot pass without some of their votes, to roll back landmark policies implemented by Democrats,” such as “rules dictating when employers must provide lunch breaks for workers.”

But don’t bet the ranch on this particular reform. Democrats have a prohibitive lock on the Legislature and meal breaks have become a high-profile issue backed by unions, consumer attorneys and other key constituent groups.

Motion To Strike Class Certification Allegations Upheld By Appellate Court

Three Plaintiffs filed two separate class actions against AZ3, Inc., doing business as BCBG Maxazria (BCBG), on behalf of all managers and assistant managers in BCBG’s California stores. The complaints alleged causes of action for failure to pay overtime compensation (Lab. Code, §§ 1194, 1197) and disgorgement of unpaid wages (Bus. & Prof. Code, § 17200 et seq.). The three Plaintiffs filed a coordinated complaint against BCBG in March 2005.

The coordinated complaint sought to recover overtime for all managers and assistant managers on the basis that they were misclassified as “exempt” employees. The plaintiffs alleged that BCBG had a policy of operating stores to minimize employee overtime, which resulted in the managers and assistant managers working over forty hours per week and “spend over fifty percent of their working hours performing the duties delegated to non-exempt employees.”

In a “preemptive strike” against the Plaintiffs, BCBG filed a motion to strike the class action allegations from the complaint alleging that the purported class was not amendable to class treatment. This motion was filed in January 2007, before Plaintiffs filed their motion for class certification.

In support of the motion to strike the class action allegations, BCBG explained the nature of its business as:
an haute couture design house for French-American styled women’s clothing. . . . In California, BCBG has maintained approximately 32 business locations with a variety of differing operating scenarios – for instance, some boutiques are small, stand-alone shops, others are large destination locations; some other[s] are small outlet/discount locations, while others are large (even multi-level) locations in malls; still others are incorporated as part of outdoor shopping plazas.
BCBG also noted the differences between the 32 locations: the stores do not carry the same merchandise; stores each have different target markets, requiring different marketing efforts; and the staffing and hours of operation differ from store-to-store. BCBG submitted declarations of 25 current or former managers and assistant managers from various California stores supporting its contention that managers are not assigned uniform duties and spend more than 50 percent of their time on non-managerial work.

The Plaintiffs opposed the motion, contending it was an improper attempt to circumvent the class certification process. The trial court granted BCBG’s motion to strike the class action allegations from the complaint, which prevented Plaintiffs' from continuing with the case as a class action.  Plaintiff’s appealed the trial court’s ruling.

In holding that BCBG’s motion to strike the class allegations was proper, the appellate court noted that any party can file a motion for class certification, and that trial courts should determine whether the action should be maintained as a class action “[a]t an early practicable time after a person sues or is sued as a class representative….” (citing Federal Rules Civ. Proc. Rule 23 (c)(1).)

The Plaintiffs’ argued that the motion to strike was premature, and that they did not have enough time to conduct adequate discovery into whether the class issues. The appellate court disagreed:
BCBG’s motion was filed 22 months after the filing of Plaintiffs’ coordinated complaint, 33 months after Denkinger’s complaint, and four years after Williams and Thornhill’s complaint. During the time between the filing of the coordinated complaint and the motion, Plaintiffs had, as Deckinger puts it, been engaged in “an extensive law and motion battle regarding the identity of members of the putative class and the declarations filed in support of Respondent’s Motion . . . .”
BCBG evidently was contacting former and current putative class members to have them sign an optout agreement from the class action. The Plaintiffs’ argued that this was unfair, as they did not have the names and telephone numbers for the putative class members and, therefore, could not contact the same people. The appellate court did not give Plaintiffs' argument any merit:
Plaintiffs did not have contact information for the putative class members and had been unsuccessful in discovery attempts to obtain it from BCBG. Plaintiffs suspected that BCBG might be giving the putative class members misinformation to induce them to settle their potential claims. The [trial] court remarked, “[T]his is frankly when a class rep ought to be out there dialing for dollars, talk[ing] to their friends and former employees, . . . and saying what’s going on out there, what have you heard. And that’s the kind of investigative work that would really, to me, make a class rep worth their weight in gold.”
The opinion, In re BCBG Overtime Cases, can downloaded from the court's website in Word or PDF.

U.S. Supreme Court Turns Down Employer's Appeal Regarding FMLA Rights

The United States Supreme Court rejected an appeal by Progress Energy, Inc. regarding the waiver of an employee’s rights under the Family and Medical Leave Act (“FMLA”). In Progress Energy v. Taylor, the Court rejected – without comment – Progress Energy’s appeal from a 4th Circuit Court of Appeal ruling that held an employer cannot induce to waive their rights under the FMLA. The 4th Circuit based their ruling on a 1995 Labor Department rule that said employees cannot waive their rights under the act, nor can employers encourage them to do so. On appeal, Progress Energy argued that the Labor Department ruling only applied to the waiver of future rights, not to the settlement of past claims. Click here for more information on the case.

Although the Bush Administration agreed with Progress Energy’s position, it encouraged the Supreme Court to turn down the case because the Labor Department is issuing a new rule that makes clear that the waiver prohibition only applies to prospective rights, rather than past claims.

Amaral v. Cintas Corporation: The Wide World of Local Wage Laws

The recent decision in Amaral v. Cintas contains a full plate of legal issues involving a city’s authority to regulate conduct outside its borders, employer’s duties to keep records, and a court’s discretion to reduce an employer’s potential penalties under the Labor Code Private Attorney General Act of 2004 (“PAGA”).     Perhaps the main message lesson for employers, however, is that the effect of local “living wage” ordinances can spread far beyond the jurisdiction of the actual city itself. 

In this case, Cintas signed a seemingly straightforward contract to provide laundry services to the City of Hayward, a city of approximately 147,000 residents in the San Francisco Bay Area.  Hayward, however, had passed a local wage ordinance (LWO) that required city contractors to pay at least $9.25 to “any individual employed by a service contractor on or under the authority of any contract for services with the City.” Cintas apparently paid the specified rates to its employees who worked within the City of Hayward. But Cintas also took laundry from inside the city to a centralized plant in another city, where laundry from various clients was comingled for processing. 

A class action lawsuit was filed on behalf of all employees at the plant who claimed that they, too, were entitled to earn the higher wage rate. Cintas argued that the local Hayward ordinance only required higher wage rates for hours worked on the city contract itself. The Court, however, gave the ordinance an extremely broad reading – finding, in effect, that every employee who ever touched the city of Hayward’s laundry was entitled to be paid $9.25 an hour on every other project that he or she worked on. As the Court explained:

A contractor with many employees might choose to limit its obligations by segregating City contract work and assigning this work to a smaller subset of employees. That it did not occur to Cintas to do so does not require us to reach a different interpretation of the ordinance.

As a result of this simple failure to segregate the city contract work, Cintas received an adverse judgment for restitution, penalties, attorney fees, and interest that was probably greater than the entire gross receipts of its contract with the city. This should serve as a cautionary tale for any employer doing business with a governmental entity that has a so-called “living wage” or “prevailing wage” requirement. 

President Bush Signs Executive Order Requiring Federal Contractors to Use E-Verify System to Confirm Work Eligibility and Immigration Status

President Bush has signed an executive order requiring all federal contractors to use the federal E-Verify system to confirm that new hires are eligible to work in the United States.   E-Verify is a Web-based database that will report the status of an employee based on his or her SSN. For more information about using E-Verify  visit the U.S. Citizenship and Immigration Services' website.  The move is part of the administration’s effort to enforce federal immigration laws in the wake of Congress’s failure to move forward on comprehensive immigration reform legislation. 

Critics of the system claim that it is rife with errors, is misused by employers, and will lead to discrimination against legal workers who are perceived as potential “illegal aliens” (or “undocumented immigrants” if you prefer). As reported in the LA Times today, the administration is claiming that the E-Verify system has been much improved from earlier pilot programs and is now 99.5% accurate.

While the executive order has no legal effect on non-government contractors, mainly are already voluntarily using the system. The existence of the executive order does tend to bolster the argument that using the system is proper and should constitute a safe harbor against any potential fines for “knowingly” employing an illegal alien/undocumented immigrant.

Warning to Employers: Following the Terms Of A Collective Bargaining Agreement Is No Defense To Employee Claims For Overtime, Meal and Rest Periods

Many employers believe that union and non-union labor law are two entirely different universes. In some respects this is understandable. After all, there is an extensive decades-old body of federal labor law regulating the relationship between management and organized labor. The purpose of this regime is to ensure that the terms and conditions of employment will be determined by a freely negotiated bargain struck between equal bargaining powers.   So once this bargain is finally struck and reduced to a written collective bargaining agreement (“CBA”), shouldn’t it be the final word in determining the wages that must be paid to union employees?

The answer is no. 

While a union and employer are permitted to bargaining over most workplace issues, federal labor law does not permit unions to bargain away “non-negotiable minimum labor standards” established by state law. For example, a union could not agree to allow its members to work for less than the California minimum wage. Nor, with one exception, may a CBA waive the right to collect all overtime pay authorized by the California Labor Code.

This exception is contained at Labor Code section 514, which provides:

[California overtime requirements] do not apply to an employee covered by a valid collective bargaining agreement if the agreement expressly provides for the wages, hours of work, and working conditions of the employees, and if the agreement provides premium wage rates for all overtime hours worked and a regular hourly rate of pay for those employees of not less than 30 percent more than the state minimum wage.

Many employers are generally aware of this exemption but mistakenly believe that it exempts all employees covered by a CBA from state overtime requirement. The exemption is actually very narrow.   For example, employees are exempted from state overtime only if their CBA provides a premium wage rate for “all overtime hours worked.” In California all hours worked in excess of eight per day are considered “overtime.” Thus, a CBA which only provides premium pay for hours in excess of 40 per week would not qualify for the exemption. Likewise, any employee whose regular straight time rate under the CBA is less than $9.75 would not qualify for the exemption and would be entitled to state law overtime payments.

In the 2005 case of Valles v. Ivy Hill Corp, the Ninth Circuit also held that federal labor law does not permit a CBA to waive California’s meal and rest break requirements. Thus, all employees must receive meal and rest breaks – and receive one hour of compensation for each missed meal or rest period – regardless of whether they are in a union or are covered by a CBA.    

U.S. Supreme Court Rules Against Public Employee

The United States Supreme Court ruled against an individual public employee who invoked the equal protection clause of the Constitution in support of her claim. The Court ruled, in a 6-3 decision, that individual public employees have a variety of protections from personnel actions, however, the equal protection clause of the Constitution is not one of them.

In Engquist v. Oregon Department of Agriculture, the plaintiff lost her job with the Oregon Department of Agriculture and claimed that her dismissal was for "arbitrary, vindictive and malicious reasons." The Supreme Court agreed with the 9th Circuit in ruling that the plaintiff's claim involved an area of law where the rights of public employees should not be as expansive as those of ordinary citizens. Chief Justice Roberts stated that the Court has "often recognized that government has significantly greater leeway in dealing with citizen employees." Accordingly, unlike private employees who may bring an equal protection claim as a "class of one,"
public employees' rights are more limited in this context.

In reaching its ruling, the Court agreed with the Bush Administration which warned that a contrary ruling would mean that federal courts would have to referee run-of-the-mill decisions in the public workplace. Such an undertaking, of course, would be substantial as the federal government currently employees approximately 2.7 million civilian employees.

"Holiday Pay" Is Not Considered An Employee's "Regular Rate Of Pay" For Calculating Overtime

In Advanced-Tech v. Superior Court, Ester Roman worked as a security guard for Advanced-Tech Security Services, Inc. (Advanced-Tech). Ms. Roman brought a class action lawsuit against Advance-Tech for violations of Labor Code sections 510, 1194, and 1198, as well as failure to provide accurate itemized statements to her in accordance with section 226 and unfair business practices in violation of Business and Professions Code 17200.

At issue in this case is the interpretation of Labor Code section 510, subdivision (a) that requires that an employer pay an employee time and one-half of the employee’s “regular rate of pay” for (1) more than 8 hours of work in one workday, (2) more than 40 hours of work in any workweek, and (3) for the first eight hours worked on the seventh consecutive workday. Any work over 12 hours in one day must be paid at twice the regular rate of pay, as well as work longer than eight hours on the seventh consecutive day of work.

Advance-Tech provided its employees with “holiday pay” at time and one-half for hours worked on designated holidays pursuant to the Employee’s Handbook. Ms. Roman worked 12 hours on Labor Day in 2006, and argued that the 4 hours of daily overtime should have been paid at time and one-half of her higher “holiday” rate of pay, instead of at her normal, non-holiday rate of pay. Therefore, Ms. Roman asserted that the time and one-half she was paid for working on Labor Day should be considered her “regular rate of pay” and that she was entitled to be paid one and one-half times the premium holiday rate for the hours she worked on Labor Day.

The court disagreed with Ms. Roman’s interpretation of Labor Code section 510. The court held that premium holiday pay is not considered as a “regular rate” of pay an employee receives for a normal workday. An employer is allowed to credit the time and one-half premium pay on holidays against the overtime owed to the employee.

Side Note:  Generally, there is no obligation for employers to provide a higher rate of pay for work completed on holidays.  As done by Advance-Tech in this case, an employer may voluntarily agree to pay a higher rate of pay to incentivize and/or reward employees to work on holidays.  However, employers' policies (as set forth in the employee handbook or elsewhere) could arguably create a contractual right for the employee to receive the higher pay rate promised, and employers should use caution when drafting such policies. 

Blogging - As American As Apple Pie?

I read this post by Kevin O'keefe recently that challenges lawyers to blog.  Normally, I would have simply agreed and moved on with the next item on my list to do.  However, my brother was in China recently, and we spoke over the phone at one point and  I told him that he should check out a personal blog post I wrote about a trip my son and I took to see the Red Bull Air Race in San Diego.  My brother told me that he would have to wait until he made it back to the U.S. to read it - the Chinese government won't allow its citizens to read blogs.

This really took me back.  To me, this was an indicator of how much people are relying upon blogs for news and information - and of course the Chinese government wants to control this information in order to control its people.  Then, reading Kevin's post that blogging lawyers are educating and opening the legal system up to citizens -  it hit me - blogging lawyers are giving Internet readers a lot of power.

Blogs allow clients looking for a lawyer to actually read the analysis and thoughts of the lawyer they are considering to hire.  Also, through blogs, the entire legal process is now becoming truly open to the public - citizens can obtain details about how cases proceed through the legal system, learn about the particular judge their case has been assigned to, read differing views of new court decisions, and, fundamentally, come to a more fuller understanding of their legal rights.  All of this without leaving their home - and this is why the Chinese government does not allow blogs.

Thompson v. North American Stainless, LP: Anti-Retaliation Protection is Expanded to Include Friends, Relatives and Anyone "Closely Associated" with a Complaining Employees

In Thompson v. North American Stainless, LP, the plaintiff alleged he had been fired because his wife -- who had previously worked for the same employer –filed a charge of discrimination against it with the EEOC. The trial court granted summary judgment against the husband on the ground that he himself had never engaged in any of conduct protected by Title VII – such as opposing the alleged discrimination or participating in the government investigation. 

In a very significant March 31, 2008 opinion, the Sixth Circuit court of appeals reversed and allowed his suit to go forward. As the majority acknowledged, “a literal reading of [Title VII] section 704(a) suggests a prohibition on employer retaliation only when it is directed to the individual who conducted the protected activity.”  It concluded, however, that the language of the statute itself should not be controlling because “tolerance of third-party reprisals would, no less than the tolerance of direct reprisals, deter persons from exercising their protected rights under Title VII.” 

Thus, the Court followed the position urged by the EEOC by extending statutory protection to any third party that is deemed to be “so closely related to or associated with the person exercising his or her statutory rights that it would discourage that person from pursuing those rights.” (citing the EEOC Compliance Manual.)

In construing the rights provided by the California Fair Employment and Housing Act (FEHA), California courts typically follow the interpretations that federal courts have given to analogous provisions of Title VII. As a result, it is a safe bet that California courts will begin applying Thompson in state court FEHA actions at the first opportunity.

Employers must therefore recognize that action affecting “associated” individuals will now be subjected to increased scrutiny. For example, imagine a small employer who is being sued for wrongful termination while the plaintiff’s spouse continues to work in the same office – perhaps in a sensitive position with access to confidential information. The employer may rightly feel that the spouse is a “security risk” who may funnel confidential information to the other side, or that her loyalty must inevitably be tainted by her disgruntled spouse. Under these circumstances, it would be tempting to terminate or transfer the remaining spouse. Under Thompson this would be a very dangerous course of action.