Wednesday, April 16, 2014

California Court of Appeal: Fitness for Duty OK after Reinstatement from FMLA Leave

Susan White was an investigator for the LA County District Attorney. She makes a number of errors and acted erratically over the course of several months.  She was making her co-workers nervous about her judgment. She was in a dangerous job, sometimes involving arrest warrants and the like.  She had problems giving testimony at trials, resulting in a defense lawyer filing perjury charges against her.

In 2011, White sought a month of medical leave for her own health condition: her mental health problems.  She provided medical certification and the DA approved her leave under the Federal Family and Medical Leave Act. The court's opinion does not mention the California Family Rights Act.   

Stop me if you've heard this before.  As it turned out, White's doctor was a little overly optimistic about the duration of leave. He extended and extended the leave until the FMLA period expired. The 12 weeks of FMLA were up in August. 

White's doctor finally wrote that she could return to work in September 2011.   The County approved the extended leave.  Then, in September, the County reinstated White to her job, but assigned her to paid leave at home. They had to investigate the misconduct alleged against her before she left. 

The County also required White to attend a fitness for duty examination.  White refused to attend, claiming that the FMLA required her to be reinstated without anything other than her health care provider's certification. 

White sought an injunction against the district attorney, who had sought her medical examination. The trial court granted the injunction, but the Court of Appeal reversed. 

The appellate court said that the County was required to reinstate White to her job upon expiration of the leave based only on her own doctor's certification.  But the court said that the County did just that.

The fitness for duty was to occur after the reinstatement.  White argued that requiring her to undergo this examination was tantamount to interference with her FMLA rights. But the court of appeal was having none of it. 

The court held the County was justified under the ADA to conduct a fitness for duty examination that was job-related and consistent with business necessity. Here, White had engaged in odd behavior in a job requiring good judgment to avoid serious injuries or death.  There was little doubt that the County had the right to examine her under the ADA.  

Here is the money quote:

There is a second reason we reject White’s arguments . . . that a single health care provider’s opinion (i.e., that of the employee’s health care provider) that an employee can return to work from a particular illness or disability is conclusive, and cannot subsequently be questioned by the employer in a FFDE. Public policy rebels at such a thought. The FMLA itself acknowledges that medical professionals can disagree on whether an employee’s serious health condition renders the employee unable to work; it provides for a second opinion on whether an employee qualifies for FMLA leave (29 U.S.C. § 2613(c)) and a third opinion if the first and second opinions are not in agreement (29 U.S.C. § 2614(d)). As such, it is unlikely that Congress intended an employee’s health care provider’s opinion to be conclusive on the employee’s fitness for work. Instead, the FMLA should be interpreted to render the employee’s health care provider’s opinion conclusive on the issue of whether the employee should be immediately returned to work, but to permit the employer to thereafter require a FFDE, if it has a basis to question the employee’s health care provider’s opinion.
So, takeaways:

- reinstate to the original position first; then request the examination
- have an objective reason to doubt the medical certification's clearance to return to work.
- ensure a medical fitness for duty complies with the ADA and FEHA's prohibitions against unlawful medical inquiries.
- if an employee's leave request comes during an employer's investigation into potential misconduct, it is ok to follow through with the investigation when the leave is over.

This case is White v. County of LA and the opinion is here. 

Friday, April 11, 2014

California Chamber's Job Killer List - Employment Law

Contrary to what you may think, the California Legislature has not finished perfecting the laws governing the California workplace.  But, they persevere.

Our friends at the California Chamber of Commerce track the bills  they affectionately call "job killers."   Sure, more employment laws might drive up costs, reduce competition, increase unemployment, and increase prices.  Never you mind that. These bills give me more to complain advise employers about in the months to come.  And more lawsuits are sure to follow.  So, these bills really are  job creators.  For lawyers.

The Chamber's list of pending California employment law job killers are summarized here.  The description is the Chamber's. You can read the bill and check its status by clicking the links.

Please note:  1.  This is not a complete list of pending employment bills; only the California Chamber's job-killer list.  2. These bills are still wending their way through the Legislature. So, they could fail to pass or the Governor might not sign them even if they do pass.  

• AB 1522 (Gonzalez; D-San Diego) Paid Sick Leave — Increases employer mandates by requiring all employers, large and small, to provide all employees in California with paid sick leave, and threatens employers with statutory penalties as well as litigation for alleged violations.
• AB 2604 (Brown; D-San Bernardino) Exposes Employers to Disproportionate Workers’ Compensation Penalties — Dramatically increases penalties and costs for delayed payments and will result in disproportionate penalty awards that are significantly greater than the amount of the delayed payment.
• SB 935 (Leno; D-San Francisco) Minimum Wage — Unfairly increases employer costs by increasing the minimum wage to $13 by 2017 and then increased thereafter according to the Consumer Price Index.
 AB 2416 (Stone; D-Scotts Valley) Unproven Wage Liens — Creates a dangerous and unfair precedent in the wage and hour arena by allowing employees to file liens on an employer’s real or personal property, or property where work was performed, based upon alleged yet unproven wage claims.
• AB 2617 (Weber; D-San Diego) Interference with Arbitration Agreements and Settlement Agreements— Unfairly prohibits the enforcement of arbitration agreements or pre-litigation settlement agreements that require the individual to waive their right to pursue a civil action for the alleged violation of civil rights.

• SB 404 (Jackson; D-Santa Barbara) Expansion of Discrimination Litigation — Makes it virtually impossible for employers to manage their employees and exposes them to a higher risk of litigation by expanding the Fair Employment and Housing Act to include a protected classification for any person who is, perceived to be, or associated with an individual who provides medical or supervisory care to a listed family member.

There are several other job-killers not directly related to employment law. The entire list of job killer bills is here.

Tuesday, March 25, 2014

U.S. Supreme Court: Severance is Wages; California Employers Take Note

Quality Stores laid off many employees as part of a bankruptcy. The Company paid severance, duly withheld taxes, and duly reported the severance on employees' W-2 forms.  Then the Company sought a refund of the "FICA" taxes paid on behalf of employees (and presumably the employer's portion of the FICA paid as well).

Everyone with a paycheck knows that FICA is a mandatory withholding from employees' paychecks, which goes towards funding social security.  "FICA" is the Federal Insurance Contributions Act.  As explained by the Court:
FICA taxes “wages” paid by an employer or received by an employee “with respect to employment.” 26 U. S. C. §§3101(a), (b), 3111(a), (b) . . . . FICA defines “wages” as “all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash.” §3121(a). The term “employment” encompasses “any service, of whatever nature, performed . . . by an employee for the person employing him.” §3121(b).

So, that's a broad definition.  Does it include severance payments to laid off employees?  Yes, said the Court.  (Unanimous opinion, except Justice Kagan was recused):

Under this definition, and as a matter of plain meaning, severance payments made to terminated employees are“remuneration for employment.” Severance payments are,of course, “remuneration,” and common sense dictates that employees receive the payments “for employment.” Severance payments are made to employees only. It would be contrary to common usage to describe as a severancepayment remuneration provided to someone who has not worked for the employer. Severance payments are made in consideration for employment—for a “service . . . performed” by “an employee for the person employing him,”per FICA’s definition of the term “employment.” Ibid.

(emphasis mine).

Caveat for California employers: 

Some severance plans are covered by ERISA.  If so, then federal law governs the payment  of severance, the timing, and the conditions.  However, the Division of Labor Standards Enforcement may decide that a severance claim is not subject to ERISA. The DLSE will consider whether there is a plan in place, the discretion involved in calculating the eligibility and formula for payment, and other factors. 
If ERISA does not apply, California law may consider severance to be in the form of a deferred payment of wages.  Wages must be paid timely under California law. 

Employers should therefore ensure that they pay severance when it is earned in accordance with the contract (severance agreement or plan).  For example, if ERISA does not apply, a promise to pay a lump sum severance, without any conditions such as the signing of a release, may require payment on the date of termination.  

On the other hand, if the employer requires the employee to sign a release to "earn" the severance, then the severance is not due until earned.  (That is another good reason to require signing a release before severance is earned.)

This case is U.S. v. Quality Stores, Inc. and the opinion is here.

Friday, March 21, 2014

Court of Appeal: Employers Cannot Shorten Statutes of Limitations in FEHA Discrimination Cases

The employment relationship is contractual (e.g., I'll work for you and you will pay me).  Statutes of limitations generally can be shortened by contract, even in California.  Now forget all of these general rules. An agreement shortening the California Fair Employment and Housing Act's statute of limitations is void, said the Court of Appeal in Ellis v. U.S. Security Associates.

Ashley Ellis sued her employer and manager for sexual harassment, retaliation and failure to prevent discrimination / harassment / retaliation under the Fair Employment and Housing Act.  She agreed in her employment application to bring any claim against the employer within six months, notwithstanding any law to the contrary.

The trial court enforced the provision. The Court of Appeal reversed.  The Court was particularly concerned that the six-month statute would impede the Fair Employment and Housing Act's administrative charge process.  (By statute, the employee has a year from the discriminatory event to file a charge with the Department of Fair Employment and Housing, and then a year from the end of the administrative process to file a lawsuit.  The DFEH itself has a year to investigate.)  The six-month limitation would limit the DFEH's ability to investigate, which the court found troubling.

So, the Court went about distinguishing and casting aside contrary authority in other jurisdictions and other legal contexts to hold that limiting the statute of limitations in FEHA cases to six months is unenforceable as "unreasonable and contrary to public policy."

We do not know what the Court would have done if the employer had limited to six months the time to file the administrative charge with the DFEH (instead of the year employees normally are allowed), or if the employer had limited to six months the time to file a lawsuit from the receipt of the "right-to-sue letter."  Perhaps a court will address a more generous statute of limitations in a later case.  For now, though, employers who shorten limitations periods should carve out FEHA-based claims.

The case is Ellis v. U.S. Security Associates and the opinion is here.

Wednesday, March 19, 2014

9th Circuit: Employer's Credit for Paid Overtime Calculated Week by Week

So, the Ninth Circuit decided that Los Angeles mis-classified certain employees as "engaged in fire protection."  Under the FLSA, those "fire protection" employees are due overtime only after 212 hours worked in a 28-day work period (or 204 hours worked in a 27-day period).  Employees who are not "engaged in fire protection" are due the normal overtime pay for work > 40 hours in a workweek (unless another exemption applied).

These county fire dispatchers and air paramedic employees worked standard hours of 9 X 24 hour shifts in a 27 day work period, or 216 hours.  So, because they were mis-classified, overtime is due each workweek for each hour worked > 40.

Anyway, I know most of you are not running a city or fire protection operations and are not concerned with the above. But wait.  There's more.

After the district court found in favor of the employees, the parties disagreed on how to calculate the overtime due. LA argued that it was entitled to offset overtime already paid, as it was paying employees for the hours worked > 204 in a 27-day work period.

For example, under the normal rule, if an employee worked  60 hours per week for 4 weeks, that would be 20 hours per week of overtime, times 4 weeks = 80 hours of overtime premium pay due.   Under the exemption for fire protection, the overtime due for 240 hours worked in 28 days would be approximately 36 hours.  (Assuming 28 instead of 27 days).  So, big liability.

The city argued that it dutifully had been paying overtime for > 204 hours in the 27 day period Therefore, the city argued, it should be liable only for overtime hours not already paid for during that same 27-day period.  Meaning, the overtime paid during the entire work period would be offset against what was still owing.  The city  argued in the alternative it should be given  an offset for all overtime paid in the three year period of the lawsuit, with the amount paid credited against the total overtime owed.

No, said the Ninth Circuit.  The employer would be allowed to credit / offset overtime only for the workweek in which the overtime was paid.

Under the FLSA, 29 U.S.C. § 207(h)(2), an employer may credit overtime payments already made to employees against overtime payments owed to them under the FLSA. The statute, however, does not specify the method to be used to calculate these overtime payments. The statute simply states that “[e]xtra compensation . . . shall be creditable toward overtime compensation payable pursuant to this section.” 29 U.S.C. § 207(h)(2).
* * *
The district court correctly applied a week-by-week approach. Section 207(a) sets forth the basic overtime standard, set at forty hours in a seven-day workweek and time and one-half for overtime. To determine the overtime owed for each workweek, the total hours worked over forty is multiplied by one and one-half the regular rate. Then, under § 207(h), the overtime already paid by the employer is determined and credited against the overtime owed. While § 207(h) does not state whether credits must be determined on a workweek basis, it must still be read within the context of the overtime due under § 207(a), which is calculated on a workweek basis. Under this reading, compensation already paid for work done within one workweek should not be transferrable and offset against overtime due in another workweek. This makes sense because Plaintiffs are owed what they should have been paid had the City obeyed the law.
This decision adds to a split in the circuit courts.  The Supreme Court eventually may decide this issue. Until then, in the Ninth Circuit, employers will not be able to offset overtime already paid, except on a work week by workweek basis.

Although this is an FLSA case, California wage-hour laws track the FLSA unless there's a reason in the California law to depart from federal law.  In this instance, California courts are likely to follow the FLSA on this point, because it is the calculation method that is most generous to employees.

This case is Haro v.  City of Los Angeles and the opinion is here. 

Monday, March 17, 2014

CA Supreme Court Will Answer Ninth Circuit's Suitable Seating Questions

We wrote an article about the California wage orders' "suitable seating" requirement here.

We blogged about the Ninth Circuit's certified questions to the California Supreme Court here. 

Turns out the California Supreme Court just agreed to answer the 9th Circuit's questions.  You can sign up to follow the case here.
The questions presented are: For purposes of IWC Wage Order 4-2001 § 14(A) and IWC Wage Order 7-2001 § 14(A), "(1) Does the phrase 'nature of the work' refer to an individual task or duty that an employee performs during the course of his or her workday, or should courts construe 'nature of the work' holistically and evaluate the entire range of an employee's duties? (a) If the courts should construe 'nature of the work' holistically, should the courts consider the entire range of an employee's duties if more than half of an employee's time is spent performing tasks that reasonably allow the use of a seat?
(2) When determining whether the nature of the work 'reasonably permits' the use of a seat, should courts consider any or all of the following: the employer's business judgment as to whether the employee should stand, the physical layout of the workplace, or the physical characteristics of the employee? 
(3) If an employer has not provided any seat, does a plaintiff need to prove what would constitute 'suitable seats' to show the employer has violated Section 14(A)?

We'll keep you posted....

U.S. Supreme Court: The Sarbanes-Oxley Act's Retaliation Protection

Extends to private companies' employees.

Remember Enron?  Me neither.  That was one stock I somehow failed to buy.  And it was before the iPad .Anyway, those of you who do remember know that Enron resulted in a big financial mess.  There were Enron employees who attempted to uncover the fraud the management was perpetrated. They suffered retaliation by Enron's management.  Allegedly. Employees of Enron's auditors and lawyers who tried to blow the whistle on corrupt Enron managers. But these employees experienced retaliation by their employers as well. (Allegedly).

So, after the Enron debacle, Congress passed the Sarbanes-Oxley Act which, in part, protects whistleblowers from retaliation for reporting fraud by public companies.

As it turns out, mutual funds are public companies and, therefore, covered by SOX. But they typically have no employees.  Mutual funds hire private companies to act as "investment advisers." The advisers have the employees. The funds just hold the stocks, bonds, etc.

So, Lawson worked for an "adviser" to a mutual fund, which was a privately held company.  She allegedly complained about certain mutual fund accounting practices she believed were illegal.
The question for the Supreme Court in Lawson v. FMR LLC was whether the SOX anti-retaliation provision applies only to the employees of the publicly traded company (the mutual fund itself).  Or, did the anti-retaliation protections also apply to employees of non-publcly traded companies who blow the whistle on public corporation fraud (Lawson's employer, the investment advisor).

The Supreme Court decided to extend protections to non-public companies.
The prohibited retaliatory measures enumerated in §1514A(a)—discharge, demotion, suspension, threats, harassment, or discrimination in the terms and conditions of employment—are commonly actions an employer takes against its own employees. Contractors are not ordinarily positioned to take adverse actions against employees of the public company with whom they contract. FMR’s interpretation of §1514A, therefore, would shrink to insignificance the provision’s ban on retaliation by contractors.The dissent embraces FMR’s “narrower” construction. See post, at 2, 3, 4, 7.
The dissent (Sotomayor, Kennedy, and Alito) opined that the whistleblower protections apply only to the employees of the public employer, not to employees of the private companies who may "contract" with the public company.

This is Lawson v. FMR LLC and the opinion is here.

Saturday, March 15, 2014

President Calls on DOL to Revise Exemption Regulations

He doesn't expressly say how:

I hereby direct you to propose revisions to modernize and streamline the existing overtime regulations. In doing so, you shall consider how the regulations could be revised to update existing protections consistent with the intent of the Act; address the changing nature of the workplace; and simplify the regulations to make them easier for both workers and businesses to understand and apply.
The memorandum is here.

So, what will this mean to employers?  The White House's  "Fact Sheet" about the memorandum, which is longer and more detailed than the memo itself, provides some clues:
Workers who are paid hourly wages or who earn below a certain salary are generally protected by overtime regulations, while those above the threshold who perform executive, professional or administrative duties are not. That threshold has failed to keep up with inflation, only being updated twice in the last 40 years and leaving millions of low-paid, salaried workers without these basic protections. Specifically: 
In 1975 the Department of Labor set the threshold below which white collar workers were entitled to overtime pay at $250 per week.
In 2004 that threshold was set at $455 per week (the equivalent of $561 in today's dollars). 
This is below today’s poverty line for a worker supporting a family of four, and well below 1975 levels in inflation adjusted terms. 
Today, only 12 percent of salaried workers fall below the threshold that would guarantee them overtime and minimum wage protections (compared with 18 percent in 2004 and 65 percent in 1975). Many of the remaining 88 percent of salaried workers are ineligible for these protections because they fall within the white collar exemptions. Many recognize that these regulations are outdated, which is why states like New York and California have set higher salary thresholds.

If you haven't heard, the administration is pushing hard to raise the minimum wage to $10.10 per hour, which is equivalent to a full time salary of $21,008 or so.  (They have not invented a pajama boy for the minimum wage - yet- but they're still pretty committed.)  Under the current regulations, the salary basis minimum is just over $23,000.  So, raising the salary basis threshold is another way of raising the "minimum wage," at least for those workers who qualify as "exempt" under federal law.

As for the duties tests, the DOL revised them in 2004, which addressed some outdated regulations and terms.  The DOL also simplified certain exempt tests, particularly when workers earned more tha $100,000 per year.  So "simplification" must mean "tougher exemptions." For example, the executive exemption might be changed to require supervision of more than the current two employees.  The administrative exemption could be reserved to senior administrative employees with greater discretion.  The professional exemption might be revised to include the salary test (hi, contract lawyers).  The duties test could be turned into a quantitative measure of time spent on exempt work (a la California) rather than a qualitative test.  Etc.

So, by now, some of you may be concerned that these regulations are going to happen and soon. The press and seminar sellers write articles etc. as though this is just around the corner.   I don't think any changes are nigh, or imminent, even.

First, it will take years to draft, vet, re-draft, re-vet, and finally promulgate these regulations.  Because that's how the DOL issues regulations.  Second, although it is true that this administration has issued gobs of regulations, it also has failed to issue others (Hi, NLRB poster, NLRB quickie election rules, etc.).   Third, I hear there's an election in 2016.  The outcome could affect whether and to what extent any proposed changes are implemented.  Even the 2014 election could shift the winds.  Who knows?

Finally, as the White House memo points out, California employers already must apply exemptions that are much stricter than federal law.  So, don't expect much impact on California employers' practices unless the DOL regulations are incredibly onerous.

Feel better?  Go look at pajama boy again.