2017 LABOR & EMPLOYMENT SEMINAR

Transcription

1 Hanson Bridgett Presents: 2017 LABOR & EMPLOYMENT SEMINAR SAN FRANCISCO I SACRAMENTO HansonBridgett.com

2 HANSON BRIDGETT LABOR & EMPLOYMENT SEMINAR Table of Contents Agenda and Contact Sheet 1 Presentation Slides 2 Department of Labor v. Oracle 3 A Year In Review: Notable Cases And New Laws For California Employers 4 In an effort to minimize waste, the cases covered in this year s Labor Seminar will not be included in these written materials. If you wish to review any particular case in detail, please contact your Hanson Bridgett Labor & Employment attorney. Thank you.

3 HANSON BRIDGETT LABOR & EMPLOYMENT SEMINAR Agenda 8:00 am 8:50 am Registration, Breakfast and Networking 8:50 am 9:00 am Introduction and Welcome Remarks 9:00 am 9:50 am New Legislation and Regulations at the Federal, State, and Local Levels 9:50 am 10:20 am Update from Employee Benefits and Compensation 10:20 am 10:30 am Break 10:30 am 11:20 am Federal, State, and Administrative Labor Law Case Update 11:20 am 12:10 pm Race and Gender Pay Equity: Hot Topics for :10 pm 1:10 pm Lunch 1:10 pm 2:00 pm 2016 Class Action Decisions and Trends 2:00 pm 2:10 pm Break 2:10 pm 3:00 pm The New Trump Administration and Its Possible Impact on Labor and Employment Laws and Regulations

4 HANSON BRIDGETT LABOR & EMPLOYMENT SEMINAR Contact Information Ed Bernard Angela Clements Dan Clinton Jahmal Davis Jenny Foldvary Daniel Lentz Kyle Mabe Diane Marie O Malley domalley@hansonbridgett.com Jennifer Martinez jmartinez@hansonbridgett.com Gilbert Tsai gtsai@hansonbridgett.com Kurt Franklin kfranklin@hansonbridgett.com Pat Glenn pglenn@hansonbridgett.com

5 2017 California Legislative Updates Gilbert Tsai, Partner Hanson Bridgett LLP T: Daniel Lentz, Associate Hanson Bridgett LLP T: Jenny Foldvary, Associate Hanson Bridgett LLP T:

6 Agenda 1. Employer Wage and Leave Obligations 2. Discrimination and Retaliation 3. Background Checks 4. Required Notices 5. Federal Contractors 6. Health and Safety 7. Trade Secrets 8. Employment Contracts 9. Employee Training

7 California Minimum Wage Increases Effective January 1, 2017, California s minimum wage increased to $10.50 per hour for employers with 26 or more employees. SB 3 also increases California s minimum wage each year through January 1, 2022 for employers with more than 26 employees to a maximum of $15.00 per hour. The increases are delayed for one year for employers of 25 or fewer employees. Exempt employees must earn no less than 2x the state minimum wage for full-time employment to maintain their status as exempt (~$43,680/yr.) Year Medium & Large Employers (26 or more employees) Small Employers (25 or fewer employees) 2016 $10.00 $10.00 Jan. 1, 2017 $10.50 $ $11.00 $ $12.00 $ $13.00 $ $14.00 $ $15.00 $ TBD $15.00

8 Local Minimum Wage Increases in 2017 Locality Minimum Wage Eff. 1/1/2017 Berkeley $13.75 (Eff. October 1, 2017) El Cerrito $12.25 Los Altos $12.00 Los Angeles $12.00 (Eff. July 1, 2017) Mountain View $13.00 Oakland $12.86 Palo Alto $12.00 Richmond $12.30 Santa Clara $11.10 San Diego $11.50 San Jose $10.50 (Eff. January 6, 2017) San Mateo $12.00 Sunnyvale $13.00

9 Other Changes to Employer Wage Obligations AB 2535 (Itemized Wage Statements) Amends Section 226 of the Labor Code, which sets forth itemized wage statement ( pay stub ) requirements. Employers do not need to report total hours worked on a pay stub for employees who are exempt from overtime requirements. The bill became effective January 1, AB 1066 (Agricultural Workers) Amends Section 554 of the Labor Code, which previously exempted agricultural workers from overtime requirements. The bill will raise overtime wages for agricultural employees over a four-year period beginning January 1, 2019.

10 Paid Family Leave and State Disability Benefits AB 908 amends Unemployment Insurance Code to increase paid family leave and state disability payments, beginning January 1, State Paid Family Leave (PFL) and State Disability Insurance (SDI) wage-replacement benefits will increase from 55 percent to percent, depending on the participant s wages. Effective July 1, 2018, the seven-day waiting period for PFL benefits will be eliminated.

11 San Francisco Paid Parental Leave Ordinance ( PPLO ) Effective January 1, 2017, the PPLO requires San Francisco employers with 50 or more employees to provide Supplemental Compensation to eligible employees who are receiving PFL payments for purposes of new child bonding, so that the employees receive 100 percent of gross weekly wages (up to a $2,133 maximum) for up to six weeks. Employers must post a notice created by the Office of Labor Standards Enforcement, and provide the SF Paid Parental Leave Form to its employees. Available here: Covered employees must have worked for 6 months, and must work at least 8 hours per week / 40% of working hours in San Francisco. Employers with 35 or more employees are covered beginning July 1, 2017; employers with 20 or more employees are covered beginning January 1, The PPLO also contains anti-retaliation provisions.

12 Other Changes to Employer Leave Obligations San Francisco Paid Sick Leave Ordinance Proposition E amended the San Francisco Paid Sick Leave Ordinance (PSLO) to include protections that largely parallel state law. Covered employers must still comply with both San Francisco and California law. This change makes it easier to do so. The amendment became effective on January 1, 2017.

13 Administrative Agency Updates AB 2899 (Challenges to Minimum Wage Violations) Amends Section of the Labor Code Requires that any employer, before appealing a decision by the Labor Commissioner relating to a violation of wage laws, must file a bond that covers the total amount of any minimum wages, liquidated damages, and overtime compensation owed. This bill effectively increases the cost of challenging Labor Commissioner decisions.

14 Discrimination and Retaliation Protections (Effective January 1) AB 488 (FEHA Anti-Discrimination Expansion) Adds Government Code Section Previously, the Fair Employment and Housing Act (FEHA) did not protect individuals with disabilities that were granted special licenses to work at less than the minimum wage. AB 488 extends FEHA protections to include these individuals. SB 1001 (Unfair Immigration-Related Practices) Adds Labor Code Section SB 1001 makes it an unlawful employment practice to: request more or different documents than required under federal law to verify that an individual is not an unauthorized immigrant, refuse to honor documents that on their face reasonably appear to be genuine, refuse to honor documents or work authorization based on specific status or term, or attempt to reinvestigate or re-verify an incumbent employee s authorization to work using an unfair immigration-related practice. Violation of these provisions can result in a penalty of up to $10,000.

15 EEOC Guidance on Retaliation On August 29, 2016, the U.S. Equal Employment Opportunity Commission (EEOC) issued its final Enforcement Guidance on Retaliation and Related Issues. Topics explained in the new guidance include: The scope of employee activity protected by the law. Legal analysis to be used to determine if evidence supports a claim of retaliation. Remedies available for retaliation. Rules against interference with the exercise of rights under the Americans with Disabilities Act (ADA). Detailed examples of employer actions that may constitute retaliation. Available here:

16 Pre-Hiring Background Checks 1. Ban The Box Campaign 2. Juvenile Convictions 3. Transportation Network Companies

17 Pre-Hiring Background Checks What Is Ban The Box? A civil rights campaign aimed at removing from hiring applications the "check box" that asks if applicants have a criminal record. Typically prohibits employers from making a conviction history inquiry until after a live interview or conditional offer. Ban the Box laws may also require employer to consider mitigating factors for those with a criminal history: Nature of conviction; relationship of conviction to the job; rehabilitation and good conduct; time elapsed since conviction

18 Pre-Hiring Background Checks Current Ban The Box Landscape Legislation varies widely by state, county and city 2007: Alameda County 2007: Oakland 2008: Berkeley 2011: Richmond 2012: Santa Clara County 2014: State of California 2014: San Francisco Fair Chance Ordinance 2017: Sacramento City Code Chapter : Los Angeles Fair Chance Initiative

19 Pre-Hiring Background Checks Ban the Box Landscape Location Private Employer Vendors Public Employer Background checks only for some positions Background checks after conditional offer EEOC Criteria Notice (N); Copy of record (C); Appeal (A) California X Alameda Cnty X Berkeley X X X Los Angeles X X X X X N, C, A Oakland X X X X N, C, A Richmond X X X Sacramento X San Francisco X X X X N, C, A Santa Clara Cnty X Source: National Employment Law Project

20 Pre-Hiring Background Checks Juvenile Convictions AB 1843: Amends Labor Code Section Former Rule: Unlawful for employer to consider: Arrest or detention that did not result in conviction; Pretrial or post-trial diversion program; or Conviction that has been judicially dismissed or sealed. New Rule: Broadens information employers cannot ask or consider: Arrest, detention, process, diversion, supervision, adjudication, or court disposition that occurred while applicant or employee was subject to the process and jurisdiction of juvenile court law. Removes juvenile adjudications from the definition of conviction.

21 Pre-Hiring Background Checks Juvenile Convictions - Exception Health Care Facilities can still ask applicants to disclose juvenile court adjudication in the last five years for a felony or misdemeanor offense under: Penal Code Section 290 Sex registration law. Health and Safety Code Section Registered controlled substance offenders. Note: If seeking disclosure of information in this exception, Health Care facility must provide applicant with list that describes offenses for which disclosure is sought.

22 Pre-Hiring Background Checks Transportation Network Companies AB 1289: Background Check for Uber and Lyft Drivers Transportation Network Company ( TNC ): provides prearranged transportation for compensation using online platform connecting passenger with drivers using their personal vehicles. Now required to conduct local and national criminal background checks on each participating driver. TNCs are also now barred from contracting with or retaining drivers: 1. Currently registered on U.S. DOJ s National Sex Offender Website; 2. Convicted of certain terrorism-related or violent felonies; or 3. Convicted of misdemeanor assault or battery, domestic violence, or driving under the influence over the last 7 years.

23 Required Notices and Poster 1. Federal 2. State 3. Local

24 Required Notices Employee Polygraph Protection Act (EPPA) Poster Notice Requirement Every employer subject to EPPA shall post on its premises a notice explaining the ACT. Such notice must be posted in a prominent and conspicuous place in every establishment of the employer where it can be observed by employees and applicants. Two versions (B&W and color) are available on the U.S. DOL website at: New Features of Notice Removed the civil penalty limit of $10,000 from the prior version Changed the toll-free phone number Added a teletypewriter (TTY) number Revised version required as of August 1, 2016

25 Required Notices Federal Minimum Wage Poster Notice Requirement Every employer of employees subject to FLSA shall post on its premises a notice explaining the federal minimum wage. Notice must be posted in a prominent and conspicuous place in every establishment of the employer where it can be observed by employees and applicants. Four versions (large and small B&W; large and small) are available on the U.S. DOL website at: New Features of Notice Removed specific civil monetary penalty amounts in Enforcement section Now includes section about the rights of nursing mothers to receive reasonable break time to express breast milk Cut out some text under Child Labor section

26 Required Notices Revised Smart Form I-9 Scope New I-9 Form must be used by January 22, 2017 It expires on August 31, 2019 Features Validations of certain information [i.e., correct number of digits on SSN] Drop-down lists and calendars Embedded instructions for completing each field Buttons allowing users to access, print, and clear form to start over Additional spaces to enter multiple preparers or translators New Citizenship/Immigration Status field Dedicated area to enter additional information currently notated in the margins, like Temporary Protected Status Matrix barcode to streamline enforcement audits BUT this Smart I-9 form is still not an electronic I-9 form

27 Required Notices Notice of Domestic Violence Leave and Accommodation Rights (AB 2337) Employers with 25+ employees: Provide written notice to new employees, and current employees on request, of leave and accommodation rights under Labor Code Sections 230 and Labor Code Section 230 and Provides right to take protected time off, without threat of termination or retaliation, for domestic violence, sexual assault, or stalking. Labor Commissioner will develop a template for notice by July 1, 2017 Compliance is not required until the template is posted on Commissioner s website. Note: many employers already provide this information via Handbook.

28 Required Notices New California Income Tax Credit Notice (AB 1847) California employers who provide unemployment insurance already must notify all employees that they are eligible for the federal Earned Income Tax Credit (EITC). AB 1847 now requires employers to provide written notification that these employees may be eligible for the California EITC, in addition to the federal EITC. Notice must be provided within one week of the employer providing the employee his/her annual wage summary, such as Form 1099 or W-2s. Notice must be effectuated by handing it to the employee directly or mailing it to the employee s last known address. Posting a notice or sending through office mail is insufficient.

29 Required Notices New Posters San Francisco Health Care Security Ordinance (HCSO) Available through SF Gov website at: Paid Sick Leave Ordinance (PSLO) Available through SF Gov website at: Paid Parental Leave Ordinance (PPLO) Available through SF Gov website at: Minimum Wage Ordinance (MWO) Available through SF Gov website at:

30 Federal Contractors

31 Federal Contractors The Blacklisting Rule Fair Pay and Safe Workplaces Executive Order (13673) Requires federal contractors to self-report labor law violations Also requires covered federal contractors to provide detailed wage statements to their employees Prohibits contractors with goods/services contracts worth more than $1 million from requiring employees to enter mandatory arbitration for Title VII, sexual harassment, or assault claims. Injunction and Uncertain Future October 24, 2016: E.D. Texas Court issued injunction enjoining the disclosure and arbitration elements of the rule Unclear how Trump administration will proceed

32 Federal Contractors Paid Sick Leave for Federal Contractors Executive Order Parties that enter covered contracts with Federal government must provide covered employees up to 7 days of paid sick leave annually, including paid leave allowing for family care. Covered contracts: New or replacement contracts on or after Jan 1, 2017; Procurement contracts for services under the Davis Bacon Act Concessions contracts under the Service Contract Act Contracts in connection with federal property or lands and relating to services for federal employees, their dependents, or the general public Covered employees Person engaged in work on the covered contract, and whose wages are governed by the DBA, SCA, or FLSA (including those who are exempt from FLSA overtime).

33 Health & Safety 1. All-Gender Restrooms 2. Restrictions on Smoking 3. Proposition 64: Legalized Marijuana

34 All-Gender Restrooms AB 1732 has added Health and Safety Code section to require that all single-user toilet facilities in any business establishment, place of public accommodation, or government agency be identified as all-gender toilet facilities. Single-user toilet facility means a toilet facility with no more than one water closet and one urinal with a locking mechanism controlled by the user. Effective March 1, 2017

35 Restrictions on Smoking AB X2-7 expands smoke-free workplace protections in Labor Code section by: Eliminating most of the previous exemptions that allowed for smoking in certain work environments; Prohibiting designated smoking break rooms for employees; and Eliminating the exceptions for small businesses (5 or fewer employees) and owner-operated businesses SB-5 prohibits smoking e-cigarettes and vaporizers in any place where smoking other tobacco products is restricted (amends Business and Professions Code section , et seq., among others) Both laws effective January 1, 2017

36 Proposition 64: Legalized Marijuana Permits the recreational use of marijuana for adults 21+ years old under state law, including: Smoking or ingesting marijuana in a private home; Possessing small amounts of nonmedical marijuana; Growing small amounts at home for personal use; and Purchasing and consuming marijuana at a licensed business (effective Jan. 1, 2018) Prohibited conduct: Smoking while driving a vehicle; Smoking in all public places; and Smoking anywhere that smoking tobacco is prohibited Marijuana possession, use, and sale are still illegal under federal law Employers may maintain their drug-free workplace policies regardless of whether their employees use marijuana for medical or recreational purposes. Employers may still test workers for marijuana use before hiring them, or at any point during their employment in a safety-sensitive job if there is a reasonable suspicion of impairment.

37 Trade Secrets

38 Defend Trade Secrets Act (DTSA) On May 11, 2016, President Obama signed the Defend Trade Secrets Act (DTSA), which gives employers a federal private right of action for misappropriation of trade secrets to pursue claims against employees for damages related to trade secret theft CA has already adopted the Uniform Trade Secrets Act (UTSA) (Civil Code sections ) DTSA is not preempted by other trade secret protection laws, like CA s UTSA Key Provisions: Ex parte application for seizure of property to prevent dissemination Available remedies: injunction, compensatory and exemplary damages, attorneys fees Whistleblower protection (must be specified in handbook and agreements) 3 year statue of limitations

39 Employment Contracts

40 Choice of Law and Forum in Employment Contracts SB 1241 adds Labor Code section 925, which prohibits employers from requiring that an employee who lives and works in California agree, as a condition of employment, to a provision that would: (1) Require the employee to adjudicate outside of California a claim arising in California, or (2) Deprive the employee of the protection of California law with respect to a controversy arising in California. Applies to contracts entered into, modified, or extended on or after January 1, Any provision that violates the statute is voidable by the employee, and the matter would be adjudicated in CA under CA law. The prohibition does not apply where the employee was individually represented by legal counsel in negotiating the choice or law or forum provisions in the contract.

41 Employee Training

42 Sexual Harassment Prevention Training for Local Officials AB 1661 adds Government Code section 53237, et seq., which requires local agency officials to receive two hours of training and education on sexual harassment prevention within the first six months of taking office or commencing employment. Local agency includes any city, county, city and county, charter city, charter county, charter city and county, or special district that provides any type of compensation, salary, or stipend to local agency officials. Local agency officials are any member of a local agency legislative body and any elected agency official. AB 1661 builds on AB 1825 (see Government Code section , effective Jan. 1, 2005), which established the same training requirement for supervisory employees in both public and private workplaces. Local agencies are allowed to require any of its employees (not just supervisory employees) to receive sexual harassment prevention training or education under this statute.

43 Questions?

44 Employee Benefits Update Key Employer Issues 2017 Ed Bernard, Partner Hanson Bridgett LLP T:

45 Affordable Care Act

46 IRS Issues Updated ACA Guidance and Extends Form 1095-C Deadline Effective for 2016 plan years, possible penalty tax on Applicable Large Employers (ALEs) who don t offer qualifying health plan coverage to their full-time employees and dependents ALEs must annually report information about the health coverage offered to their full-time employees to the IRS and provide copies of the reports to their full-time employees The IRS uses this information to assess whether the penalty tax applies Forms 1094-C (transmittal to IRS) and 1095-C (individual employee report) are used to meet the reporting requirements ALE: generally those with 50 or more full-time employees or full-time equivalents

47 IRS Issues Updated ACA Guidance The IRS recently updated its online FAQs re ACA information reporting by employers Clarifies reporting for employees who decline the employer s offer of coverage, are in a limited assessment period, or must be treated as full-time under the look-back measurement method Incorporates recent guidance on calculating the employee s required contribution for purposes of the affordability test Provides new information for employers with self-insured plans Gives additional guidance on reporting offers of COBRA and retiree coverage The IRS has also updated its online FAQs on IRC 6056 reporting (offers of health insurance coverage) and the employer shared responsibility penalties

48 IRS Extends Deadline for Providing Forms 1095-C to Employees ALEs must generally Furnish copies of Forms 1095-C to employees by January 31 of the following year, and File Forms 1094-C and 1095-C with the IRS by February 28 (March 31 if filing electronically) of the following year Notice Extends the 2017 deadline for providing Forms 1095-C to employees by 30 days from January 31, 2017 to March 2, 2017 Does NOT extend the 2017 deadline for filing Forms 1094-C and 1095-C with the IRS BUT, as in previous years, employers may obtain an automatic 30-day extension by filing Form 8809 before the deadline AND an additional 30-day extension may be requested if hardship conditions apply

49 IRS Extends Deadline for Providing Forms 1095-C to Employees Extends good-faith transitional penalty relief for failure to comply with the reporting requirements Employers are generally subject to a penalty of $260 per return up to a maximum of $3,193,000 for failure to timely file/furnish correct information returns and employee statements due in 2017 Extends the transition relief from these penalties for employers who can show they made good faith efforts to comply with the reporting requirements for 2016 Relief applies only to incorrect or incomplete information on the return/statement, not failure to file or late filing

50 IRS Publishes Revised Forms 1094-C and 1095-C and Instructions The new instructions provide: The 2016 indexed percentage (9.66%) used to determine whether the employer s offer of coverage is affordable The penalties for failure to file/furnish correct information returns/statements due in 2017 ($260 per form up to a maximum of $3,193,000) Additional information about reporting offers of COBRA and retiree coverage and calculating the employee s required contribution on Line 15 also included in the updated FAQs

51 IRS Extends Effective Date for Opt-Out Payment Rules Possible penalty tax on an ALEs who don t offer at least 95% of their full-time employees and their dependents minimum essential coverage that provides minimum value and is affordable Penalty A failure to offer Penalty B failure to offer minimum value or affordable coverage Penalty B: Affordability General rule: coverage is affordable if employee contribution for self-only coverage under the employer s lowest cost plan that provides minimum value does not exceed 9.5% (indexed) of employee s household income

52 IRS Extends Effective Date for Opt-Out Payment Rules ALE receives certification that at least one full-time employee is enrolled in an Exchange and eligible for a federal subsidy Penalty B generally, $3,000 (indexed) X [the number of fulltime employees receiving federal assistance] (smaller than Penalty A) Opt-out Payment Rules Opt-out payments payments to employees who waive employer coverage Two types (Notice ; proposed regulations): Unconditional payments made if the employee merely declines employer coverage Conditional available only if the employee satisfies a meaningful requirement related to the provision of healthcare to employees e.g., proof of alternative coverage

53 IRS Extends Effective Date for Opt-Out Payment Rules These two types are treated differently for affordability The value of unconditional opt-out payments must be added to the employee s required contribution Example: employee s share of premium for self-only coverage under lowest-cost minimum value plan = $200 Employer provides $100 unconditional opt-out payment to employees who waive coverage Employee s required contribution for affordability test = $300 The value of conditional opt-out payments need not be added to the employee s required contribution if part of an eligible opt-out arrangement

54 IRS Extends Effective Date for Opt-Out Payment Rules Eligible opt-out arrangement The opt-out payment is made only to employees who attest that they, and all members of their tax family, will have minimum essential coverage, other than individual coverage, for the plan year to which the payment relates The opt-out arrangement must provide that no payment will be made if the employer knows, or has reason to know, that the employee or any of his or her tax dependents will not have alternative coverage

55 IRS Extends Effective Date for Opt-Out Payment Rules Effective date extended by final regulations Proposed regulations likely to take effect for plan years beginning on or after January 1, 2017 Final regulations The opt-out payment rules will be separately finalized later Until that time, an employer is only required to increase an employee s required contribution by the value of an opt-out payment under an unconditional opt-out arrangement that is adopted after December 16, 2015

56 DOL Issues New Guidance re HRAs/EPPs Health Reimbursement Arrangement (HRA) an arrangement that reimburses medical expenses Employer payment plan (EPP) an arrangement that reimburses the cost of individual market coverage HRAs and EPPs are group health plans subject to the ACA s market reform requirements prohibition against annual dollar limits and preventive services requirements Generally, an HRA or EPP will automatically fail to satisfy these requirements, subjecting the employer to possible excise taxes, unless it is integrated with another group health plan

57 DOL Issues New Guidance re HRAs/EPPs An HRA or EPP may be integrated with a group health plan sponsored by another employer e.g., a spouse s employer only if all employees covered by the HRA or EPP are actually enrolled in MV group coverage (Notice , Q&A-4) BUT an HRA or EPP that reimburses spouse or dependent medical expenses may not be integrated with self-only coverage under the employer s other group health plan (Notice , Q&A-4) What if, in the case of a family HRA, the employee is enrolled in self-only coverage and his or her spouse or dependents are enrolled in coverage under the spouse s employer s plan?

58 DOL Issues New Guidance re HRAs/EPPs New DOL FAQs provide A family HRA may be integrated with a non-hra MV group health plan sponsored by the spouse s employer if that plan covers all of the individuals covered by the family HRA and the other integration requirements are met A family HRA may be integrated with a combination of: Employee self-only coverage under a non-hra MV group health plan sponsored by the employee s employer, and A non-hra MV group health plan sponsored by the spouse s employer covering all other family members covered by the HRA

59 Repeal and Related Legislation Introduced Repealing Obamacare is the Republicans highest priority Complete repeal is unlikely Republicans don t have a supermajority in the Senate and Democrats could filibuster such a bill Budget reconciliation process filibuster-proof requires only a simple majority BUT limited to spending and revenue-related matters Repeal and related legislation recently introduced includes: S. 58 / H.R. 173 The Middle Class Health Benefits Tax Repeal Act - bicameral legislation introduced in the Senate and the House to repeal the Cadillac Tax - 40% excise tax on high-cost employer-sponsored healthcare coverage, the effective date of which was already delayed until 2020

60 Repeal and Related Legislation Introduced H.R. 285 Healthcare Tax Relief and Mandate Repeal Act to amend the Internal Revenue Code of 1986 to repeal the individual and employer health insurance mandates, effective January 1, 2014 S. Con. Res. 3 the Repeal Resolution currently being debated in the Senate, would use the filibuster-proof budget reconciliation process, but is limited to budget and revenuerelated provisions S. 28 / H.R. 247 Health Savings Account Expansion Act expands the use of HSAs to include health insurance payments and increase the dollar limit for contributions to HSAs H.R. 277 American Health Care Reform Act of 2017 to repeal the ACA, related reconciliation provisions and other purposes.

61 Presidential Action to Stop Enforcement, Delay Regulations, or Alter Subregulatory Guidance On January 20, President Trump signed the Executive Order entitled Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal. To the maximum extent permitted by law orders The Secretary of HHS and the heads of all other executive agencies with ACA authority, to waive, defer, grant exemptions from, or delay the implementation of any ACA provision that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, healthcare recipients, health insurance purchasers, or makers of medical products.

62 President s Executive Order to Ease the Economic Burden of the ACA Pending Repeal The head of each department or agency with responsibilities relating to healthcare or health insurance shall encourage the development of a free and open market in interstate commerce for the offering of healthcare services and health insurance, with the goal of achieving and preserving maximum options for patients and consumers. To the extent that carrying out the directives in this order would require revision of regulations issued through notice-andcomment rulemaking, the heads of agencies shall comply with the Administrative Procedure Act and other applicable statutes in considering or promulgating such regulatory revisions.

63 Proposals to Replace the ACA / Impact on Employers The ACA is still controlling law Uncertainty still unclear what will change and when President Trump and Congressional Republicans have offered few details about what will replace the ACA Proposals include: capping the employer-provided health benefit tax exclusion expanding the use of Health Savings Accounts ("HSAs") by increasing contribution limits and other means encouraging the use of health reimbursement arrangements ("HRAs") Employers considering, implementing or negotiating significant changes to their health benefit programs may want to re-think their strategies now

64 Fiduciary Rule

65 Fiduciary Rule DOL rule issued April 2016; generally effective April 2017 (with delayed effective date to January 1, 2018 for some provisions) Unclear if change in administration will delay implementation Greatly expands the activities that makes someone a fiduciary Likely to have impact on brokers and service providers Requires all persons who provide investment advice for a fee to put client s interests ahead of profit and to disclose conflicts of interest Applies to ERISA-covered employee benefit plans with an investment component 401(k) plans and HSAs

66 Fiduciary Rule Parties providing investment advice to plan sponsors, plan participants and IRA owners must either structure payment to avoid conflict of interest OR enter into contractual relationships (BICE) Carve outs: Seller s exception Platform provider exception Investment education exception DOL will continue providing guidance in series of FAQs published on website

67 Fiduciary Rule Fiduciary rule is expected to have little effect on large plan sponsors (at least $50M in assets) DOL expectation is that plan sponsors or acknowledged fiduciaries have oversight responsibility that protects the large plan and the large plan participants H.R. 355 introduced in House would delay the effective date of the definition of the term Fiduciary and the Conflict of Interest Rule Retirement Investment Advice by two years

68 IRS Proposed Section 457(f) Regulations

69 IRS Proposed Section 457(f) Regulations Section 457(f) generally applies to nonqualified deferred compensation plans of state and local governments and taxexempt entities that do not qualify as eligible plans under Section 457(b) The IRS published proposed 457(f) regulations in June 2016 that provide long-awaited guidance Plans subject to 457(f) A plan is subject to Section 457 only if it defers compensation Deferred compensation the participant has a legally binding right to compensation in a year that is payable in a later year

70 IRS Proposed Section 457(f) Regulations Plans excepted from 457(f) (no deferred compensation) Short-term deferrals Payment received within 2½ months after the end of the calendar year in which the benefit vests Bona fide severance pay plans Benefits payable only upon involuntary termination or under a window or voluntary early retirement incentive program Includes good reason terminations Benefit limited to two times the participant s annualized compensation (annual rate of pay for the preceding calendar year) Not two times the IRS annual compensation limit (409A regulations) Benefit must be paid by the end of the second calendar year after termination

71 IRS Proposed Section 457(f) Regulations Bona fide sick and vacation leave plans Facts and circumstances determination Generally bona fide if the plan s primary purpose is to provide paid time off for sickness, vacation or personal reasons Other factors Could the employee reasonably be expected to use the amount of leave in the normal course? Limits on cash-outs, exchanges for other benefits, and accruals The amount and frequency of cash-outs or exchanges for other benefits Prompt payment after termination or paid over time? Broadly available or limited to certain employees?

72 IRS Proposed Section 457(f) Regulations Bona fide death and disability plans Social Security definition of disability Recurring part-year compensation if The plan does not defer payment beyond the end of the 13 th month after the beginning of the service period for which the compensation is paid, and The compensation does not exceed the IRS annual compensation limit for qualified plans ($270,000 for 2017)

73 IRS Proposed Section 457(f) Regulations Substantial risk of forfeiture Benefit subject to tax upon vesting IRC 457(f) To avoid immediate tax, risk of forfeiture must be substantial. A SRF exists if entitlement to the compensation is conditioned on: The future performance of substantial services, or The occurrence of a condition that is substantially related to the purpose of the compensation, provided the possibility of forfeiture is substantial A SRF exists if entitlement to compensation is conditioned on involuntary termination without cause if the possibility of forfeiture is substantial

74 IRS Proposed Section 457(f) Regulations A noncompetition covenant is an SRF if The right to the compensation is expressly conditioned on the employee refraining from performing future services pursuant to an enforceable written agreement, The employer consistently makes reasonable efforts to verify compliance with all noncompetition agreements to which it is a party, and The employer has a substantial bona fide interest in preventing the employee from competing, and the employee has a bona fide interest in engaging, and the ability to engage, in the prohibited competition

75 IRS Proposed Section 457(f) Regulations Generally, no rolling risk of forfeiture. The new proposed regulations recognize an extension of a SRF, but only if: The benefit is at least 25% more; The executive must perform at least two years of substantial future services ; and The parties agree in writing to the extension at least 90 days before the executive would have vested under the existing schedule.

76 IRS Proposed Section 457(f) Regulations Amount subject to tax The present value of the deferred compensation when the participant obtains the legally binding right to the compensation or the compensation vests, if later The amount deferred includes any earnings on the deferred compensation as of that date Any earnings after the deferred compensation is taxed when paid or made available to the participant If the amount paid is less than the amount taxed (e.g., because of investment losses), the participant may take a deduction in the year of the loss equal to the loss

77 Audits

78 IRS Audits-New Developments 2017 Priorities for Employee Plans: Large plans, multiemployer plans, 403(b)/457 plans, cash balance plans; merger/consolidations/transfers/spinoffs related to Form 5310A filings; terminated and partially terminated plans; unusual assets in plan 2017 Priorities for FSLG (Employment Tax Audits): Full scale audits, emphasizing employers with greater than $10M annual gross wages; Compliance Initiative Projects (focused audits) on specific areas e.g. early retirement, PTO/vacation cash-outs, worker classification, wage items reported on 1099 instead of W-2, fringe benefit issues

79 IRS Audits-New Developments Effective April 1, 2017: New Process for Employee Plans/Employment Tax Audits Tight Timelines! Information Data Requests (IDRs) will be discussed in first telephone call from examiner Prior to mailing the IDR, parties must agree on response date. If not, examiner assigns reasonable date If response is incomplete, examiner must determine in 5 days whether to grant an extension Examiner can give only one 15-day extension Second 15-day extension requires manager approval If information not returned after second extension, examiner begins Enforcement Process

80 IRS Audits-New Developments New Enforcement Process If Information Not Returned After Second 15-Day Extension Next Step: Delinquency Notice manager must approve if more than 10 days allowed to respond If no response or incomplete response, examiner discusses with Group Manager and Area Counsel Next Action: proposal of adjustment, summons, or proposal of revocation These actions can have very serious consequences It will become increasingly difficult and expensive to achieve a successful outcome

81 IRS Audits-New Developments New Enforcement Process Intended to respond to IRS backlogs and slow processes but introduces significant issues and increased risk for employers Make sure employees know to immediately notify a designated person as soon as contacted by IRS Seek help from someone with experience in tax audits Initial interactions are now key to avoiding automatic enforcement actions that can make achieving any successful outcome much more expensive

82 CalPERS Audits-New Developments Circular Letter , October 21, 2016 announced changes to CalPERS participating employer audit process More audits: previously 125 per FY; 2016/2017 will be 4-6 cycles with employers in each cycle (possible 480 a year) Targeted audits: more in depth review of single compliance requirement (list of requirements below) Final Report covers all employers in the same cycle: intended to decrease review cycle time but probably cuts down ability to influence final report Appeal rights remain the same

83 CalPERS Audits-New Developments Beginning with FY 2017, CalPERS audits will be more in depth review of a single compliance requirements such as these (see Circular Letter ) Pay schedule Salary and compensation Contributions Excluded and optional positions Temporary and/or part-time employees (CalPERS may determine to be eligible employees of the participating agency) Rehired annuitants (compliance with PEPRA requirements) Employees of affiliated entities (CalPERS may determine whether or not they are common-law employees of the participating agency) Retiring member unused sick leave certifications Health benefits Accuracy of data reported in myicalpers Processes related to disability retirement determinations

84 CalPERS Audits-New Developments Appeal Right and Process Remains the Same Because new process provides a single Final Report, it may adversely affect agency s ability to obtain truly independent treatment of its circumstances regarding the targeted compliance area Depending on financial and other business implications of audit findings, appeals may become more important under this new format Appeals process is complex, but in our experience can be successful depending on the unique facts of the agency s situation and the importance of the issue to the agency s operations

85 IRS Determination Letter Program

86 IRS Confirms Elimination of Periodic Determination Letters for Individually Designed Plans Determination Letters IRS opinion regarding whether a written plan document satisfies the qualification requirements Five-Year Cycles IRS Rev. Proc Confirms changes previewed by the IRS in Ann Effective 1/1/2017, eliminates determination letter program for IDPs based on five-year cycles Employers in Cycle A (EIN ends in 1 or 6) may still submit determination letter applications until 1/31/2017 Special rule for controlled groups and affiliated service groups that previously made Cycle A elections

87 IRS Confirms Elimination of Periodic Determination Letters for Individually Designed Plans Effective 1/1/2017, eliminates interim amendment requirement for IDPs Determination letters are still available only upon: Initial qualification Plan termination Possibly other limited circumstances to be announced Extends the remedial amendment period for IDPs New plans the 15 th day of the 10 th month after the initial plan year end or the due date (including extensions) for the employer s tax return for the year the plan is first established, if later Amendments to existing plans the end of the second full calendar year after the amendment is effective or adopted, if later

88 IRS Confirms Elimination of Periodic Determination Letters for Individually Designed Plans Change in qualification requirements the end of the second full calendar year after IRS publishes its annual Required Amendments List A transition rule extends the remedial amendment period for IDPs until 12/31/2017 Amendment deadline: Required amendments (law changes) the end of the RAP Discretionary amendments Non-governmental plans the end of the plan year in which the amendment is effective Governmental plans 90 days after the end of the second regular legislative session of the legislative body with authority to amend the plan that begins on or after the amendment is effective

89 IRS Confirms Elimination of Periodic Determination Letters for Individually Designed Plans Last Chance Cycle A (EIN ends in 1 or 6, some controlled groups and affiliated service groups) may submit from 2/1/2016 to 1/31/2017 Audit risk burden on employers to ensure plans remain in compliance What should plan sponsors do now? Apply for letter in Cycle A, if eligible (not much time) Consider adopting a pre-approved M&P or VS plan, if possible Review plans annually based on Required Amendments List, and adopt required amendments by the applicable deadlines

90 2017 IRS Limits Health and Welfare Plans

91 2017 IRS Limits Health and Welfare Plans

92 2017 IRS Limits Retirement Plans

93 2017 IRS Limits Retirement Plans

94 Questions?

95 Federal, State and Administrative Labor Law Case Update Diane Marie O Malley, Partner Hanson Bridgett LLP T: Dan Clinton, Partner Hanson Bridgett LLP T:

96 Brief Agenda Supreme Court Takes on the NLRB s Opposition to Class Action Waivers Interesting California Cases to Watch in 2017 How Social Media Policies Are Doing These Days The EEOC s Attacks On Wellness Programs

97 Class and Collective Action Waivers are they valid? The NLRB Says No - The U.S. Supreme Court Has Decided to Tell Us If the NLRB is Right. On January 13, the U.S. Supreme Court agreed to hear three cases that are on both sides of the issue: Murphy Oil USA Inc. (Fifth Circuit) Patterson v. Raymours Furniture Co. (Second Circuit) Ernst & Young (Ninth Circuit)

98 Class and Collective Action Waivers are they valid? The NLRB Says No - The U.S. Supreme Court Has Decided to Tell Us If the NLRB is Right. In D.R. Horton, Inc., 357 NLRB No. 184 (2012), the NLRB ruled that requiring employees to agree to a class and collective action waiver in an arbitration agreement violates the National Labor Relations Act because it deprives employees of the right to engage in protected concerted activity.

99 Class and Collective Action Waivers are they valid? The Fifth Circuit reversed the NLRB in the D.R. Horton case. See D.R. Horton, 737 F.3d 344, 361 (5th Cir. 2013). Undeterred, the NLRB ruled again in a later case, Murphy Oil USA, Inc., 361 NLRB No. 72 (2014), and the Fifth Circuit again rejected the NLRB s decision. Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015).

100 Class and Collective Action Waivers are they valid? The Second and Eighth Circuits also have concluded that the NLRA does not invalidate collective action waivers in arbitration agreements. See Cellular Sales of Missouri, LLC v. NLRB, 824 F.3d 772 (8th Cir. 2016); Sutherland v. Ernst & Young LLP, 726 F.3d 290, 297 n.8 (2d Cir. 2013). Patterson v. Raymours Furniture Co.

101 Class and Collective Action Waivers are they valid? Epic Systems Corp. (Seventh Circuit) The Seventh Circuit disagrees with the Fifth Circuit. In Lewis v. Epic Sys. Corp., 823 F.3d 1147, 1155 (7th Cir. 2016), the court affirmed a September 2015 district court ruling denying Epic's motion to dismiss a class action for overtime wages that Technical Writers brought. Seventh Circuit rules Epic cannot ban class actions by forcing its employees to arbitrate their claims individually for unpaid wages. ( A contract that limits Section 7 rights that is agreed to as a condition of continued employment qualifies as interfer[ing] with or restrain[ing].... employees in the exercise of those rights in violation of Section 8(a)(1). )

102 Class and Collective Action Waivers are they valid? Ernst & Young (Ninth Circuit) Not surprisingly, the Ninth Circuit agrees with the Seventh Circuit. In Morris v. Ernst & Young, LLP, Case No , 2016 WL (9th Cir. Aug. 22, 2016), the court invalidated an arbitration agreement that included a class action waiver.

103 Class and Collective Action Waivers are they valid? Question U.S. Supreme Court will decide as phrased in Patterson: Whether a provision in an employment arbitration agreement that prohibits employees from seeking adjudication of any workrelated claim on a class, collective, joint, or representative basis in any forum is invalid and unenforceable under Sections 2 and 3 of the Norris-LaGuardia Act, 29 U.S.C. 102, 103, and Sections 7 and 8(a)(1) of the National Labor Relations Act, 29 U.S.C. 157, 158(a)(1), because it interfere[s] with the employees statutory right to engage in... concerted activities for the purpose of... mutual aid or protection.

104 Class and Collective Action Waivers are they valid? Question U.S. Supreme Court will decide as phrased in Morris: Whether the collective-bargaining provisions of the National Labor Relations Act prohibit the enforcement under the Federal Arbitration Act of an agreement requiring an employee to arbitrate claims against an employer on an individual, rather than collective, basis.

105 Class and Collective Action Waivers are they valid? Question U.S. Supreme Court will decide as phrased in Murphy: Whether arbitration agreements with individual employees that bar them from pursuing work-related claims on a collective or class basis in any forum are prohibited as an unfair labor practice under 29 U.S.C. 158(a)(1), because they limit the employees right under the National Labor Relations Act to engage in concerted activities in pursuit of their mutual aid or protection, 29 U.S.C. 157, and are therefore unenforceable under the saving clause of the Federal Arbitration Act, 9 U.S.C. 2.

106 Interesting Cases To Watch in 2017: 1. Mendoza v. Nordstrom, Inc., 778 F.3d 834 (9th Cir.). A former employee sued Nordstrom in 2009 in a Private Attorneys General Act suit claiming that it violated the California Labor Code by permitting employees to work seven or more days in a row. Cal. Lab. Code sec. 551 provides that [e]very person employed in any occupation of labor is entitled to one day's rest therefrom in seven. Nordstrom removed the case to federal court where the district court dismissed the suit on the grounds that plaintiff had voluntarily worked the additional shifts. The plaintiff appealed and the case is currently pending in the federal Ninth Circuit, which has certified three questions for the California Supreme Court to answer:

107 Mendoza v. Nordstrom, Inc. (1) Is the required day of rest calculated by the workweek, or is it calculated on a rolling basis for any consecutive seven-day period? (2) Section 552 provides that an employer may not cause his employees to work more than six days in seven. What does it mean for an employer to cause an employee to work more than six days in seven? (3) Section 556 exempts employers from providing a day of rest when the total hours of employment do not exceed 30 hours in any week or six hours in any one day thereof. Does that apply when an employee works less than six hours in any one day of the work week, or only when an employee works less than six hours in each day of the week?

108 2. Troester v. Starbucks Corp., S (9th Circ. No ; C. D. Cal.; 2:12-cv GAF-PJW.) This case is another Ninth Circuit request under California Rules of Court, rule 8.548, to the Cal. Supreme Court to decide the following question of California law: Does the federal Fair Labor Standard Act s de minimis doctrine apply to claims for unpaid wages under California Labor Code sections 510, 1194, and 1197? Review granted August 17, 2016.

109 Troester v. Starbucks Corp. Facts: Troester involved an employee s time closing up the shop. The employee claimed that they should be paid for such time. Starbucks claimed it was de minimis time, not subject to compensation.

110 Troester v. Starbucks Corp. Facts: Specifically, Plaintiff claims that he performed unpaid work during shifts at the end of the business day closing shifts. According to Plaintiff, he was responsible for using the store computer to transmit sales data to Starbucks headquarters, a process called the close store procedure. The close store procedure consisted of selecting close store with the computer s mouse or keyboard, entering a password, and then pressing the Y key. Immediately after running the close store procedure, Plaintiff set the store alarm by typing a numeric code on the alarm panel located near the computer. Plaintiff contends that the STAR software required that he clock out on the POS system before initiating the close store procedure.

111 Troester v. Starbucks Corp. Federal District Court Holding: The few minutes that Plaintiff spent closing the store at the end of his shift were far from substantial and fall well within the 10-minute de minimis benchmark. Accordingly, the de minimis defense applies here and prevents Plaintiff from surviving Defendant s motion for summary judgment with respect to his first claim for unpaid wages.

112 3. Dynamex Operations West, Inc. v. Superior Court, 230 Cal.App.4th 718 (rev. granted) - California Supreme Court will decided which employee test determines whether a court should certify a class to determine whether a group independent contractors was misclassified; the IWC definition of employee (Martinez v. Combs, 49 Cal. 4th 35), or the common law test (S.G. Borello & Sons, Inc., 48 Cal.3d 341).

113 Dynamex Operations West, Inc. v. Superior Court, 230 Cal.App.4th 718 (rev. granted) The Court of Appeal held that the IWC Wage Order definition of "employer" in Martinez v. Combs, 49 Cal.4th 35 (2010), applies to claims that fall within the scope of the Wage Order, but that the multi-factor test in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989), applies to claims that fall outside the scope of the Wage Order.

114 4. Alvarado v. Dart Container Corp of California, 243 Cal. App. 4th 1200 (rev. granted). California Supreme Court will decide what is the correct way to calculate the rate of overtime pay when a non-exempt employee receives a flat sum bonus? Federal or state rule? Why should we care?

115 5. DOL v. Oracle (January 2017) (complaint filed with the Office of Administrative Law Judges attached): AUDITS! Department of Labor s Office of Federal Contract Compliance Programs (OFCCP) has filed a discrimination lawsuit against Oracle America, Inc. alleging the company has a systemic practice of paying Caucasian male workers more than their counterparts in the same job title, which led to pay discrimination against female, African American and Asian employees. The suit also challenges Oracle s alleged systemic practice of favoring Asian workers in its recruiting and hiring practices for product development and other technical roles, which resulted in hiring discrimination against non- Asian applicants.

116 DOL v. Oracle (January 2017) (complaint attached) The lawsuit is the result of an OFCCP s 2014 compliance review of Oracle s EEO practices at its Redwood Shores headquarters. Oracle allegedly refused to comply with the agency s requests for employment data and records. OFCCP claims Oracle refused to provide prioryear compensation data for all employees, complete hiring data for certain business lines, and employee complaints of discrimination. OFCCP claims it attempted for almost a year to resolve Oracle s alleged discrimination violations before filing the suit.

117 DOL v. Oracle The complaint asks the court to enjoin Oracle permanently from discriminating against females, African Americans and Asians in compensation practices, and against African American, Hispanic and Caucasian applicants in hiring practices. OFCCP is also seeking complete relief for the affected class including lost wages, stock, interest, front wages, salary adjustments, promotions, and all other lost benefits of employment and a reform of discriminatory policies. In response, Oracle claims the OFCCP statements are untrue.

118 Employer Handbooks and Social Media Policies The NLRB Test Could the language/policy cause employees to reasonably construe the rule as prohibiting protected activity? Does the language/rule chill the exercise of Section 7 rights? Unionized and non-unionized employers.

119 Employer Handbooks and Social Media Policies (Cont d.) 1. Novelis Corp., 364 NLRB No. 107 (2016) Facebook post disparaging fellow employees in vulgar terms. Social media policy violated the NLRA. Required employees to represent the employer to the community in a positive and professional manner.

120 Employer Handbooks and Social Media Policies (Cont d.) 2. G4S Secure Solutions, 364 NLRB No. 92 (2016) Social media policy violated the NLRA. Prohibited making public statements about the activities and policies of the employer. Prohibited commenting on work-related matters without permission. Prohibited posting photos, images, and videos of employees in uniform or at a place of work. Language excepting NLRA insufficient.

121 Employer Handbooks and Social Media Policies (Cont d.) 3. Chipotle Services, 364 NLRB No. 72 (2016) Social media policy violated the NLRA. Prohibited posting incomplete, confidential or inaccurate information. Prohibited disparaging, false, or misleading statements. Unless made with knowledge of its falsity or with reckless disregard for the truth. Prohibition on harassing or discriminatory statements not a violation.

122 Employer Handbooks and Social Media Policies (Cont d.) 4. Component Bar Products, 364 NLRB No. 140 (2016) Handbook violated NLRA. Prohibited boisterous or disruptive activity, and disrespectful conduct.

123 Employer Handbooks and Social Media Policies (Cont d.) 5. T-Mobile, 364 NLRB No. 171 (2016) Handbook rule requiring employees to behave in a professional manner that promotes efficiency, productivity and cooperation. Required employees to communicate in a manner conducive to effective working relationships. Violation of NLRA.

124 EEOC and Wellness Programs EEOC Guidelines in effect January 1, Attempt to balance ADA concerns with wellness program incentives. Participation must be voluntary. No adverse action for non-participation. Participation incentives permissible with some limitations even if required to provide some medical information as perquisite (e.g., a health risk assessment). Only applies to incentives where medical information requested or required. Wellness programs and information to employees should be reviewed for compliance with these regulations.

125 Questions?

126 Race and Gender Pay Equity: Hot Topics for 2017 Jahmal Davis, Partner Hanson Bridgett LLP T: Angela Clements, Associate Hanson Bridgett LLP T:

127 Fair Pay Act: Labor Code Fair Pay Act (a) An employer shall not pay any of its employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions Fair Pay Act (b) An employer shall not pay any of its employees at wage rates less than the rates paid to employees of another race or ethnicity for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions...

128 Pay Disparities In 2015 the gender wage gap in California was 84% of average salary. Greater wage inequality based on race and ethnicity Asian American Women.90 African American Women.64 Hispanic or Latina Women.54 African American Men 75% of average salary Women of color are disproportionately represented among female minimum wage workers

129 Equal pay for substantially similar work Key differences between old law and new eliminates the requirement that the jobs that are compared must be located at the same establishment; replaces a comparison of equal work with a comparison of substantially similar work; individual's prior salary cannot, by itself, justify any disparity in compensation (AB 1676, effective 1/1/2017); adds new express anti-retaliation protections for workers that assist employees with bringing claims under the Act; provides that an employer cannot prohibit workers from disclosing their wages, discussing the wages of others, or inquiring about others wages

130 DLSE Guidance (April 2016) Substantially similar = work that is mostly similar in skill, effort, responsibility, and performed under similar working conditions. Skill = experience, ability, education, and training required to perform the job; Effort = the amount of physical or mental exertion needed to perform the job; Responsibility = the degree of accountability required in performing the job; and Performed under similar working conditions = the hazards and physical surroundings of the job such as temperature, fumes, and ventilation. See

131 Recent Enforcement Actions Farmers Insurance: $4 million settlement and agreement to adjust future salaries for women) Oracle: DOL (OFCCP) action alleging racial and gender pay disparities against women, Asians, and African-Americans across 80 job titles at headquarters in Silicon Valley. ( Roughly one in a trillion chance that pay disparity for female product developers, including programmers, could be explained by anything other than discrimination. DOL statistician) LexisNexus: $1.6 million settlement for gender pay disparities

132 Employer defenses Employers must prove that difference in pay for substantially similar work is due to: seniority; merit; a system that measures production; and/or a bona fide factor other than sex or race Bona fide factor other than sex or race job-related; consistent with a business necessity Business necessity = overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve Examples: education, training or experience Factors must be applied reasonably and account for the entire difference in wages.

133 Records and Complaints Must maintain records for 3 years: Wages Wage rates Job classifications Other terms and conditions of employment No retaliation For any action taken to invoke or enforce this law Cannot prohibit discussion of wages But not obligated to disclose wages Complaints Labor Commissioner Civil action No double recovery under federal law and state law

134 Other Pay Equity Obligations Don t Forget Your EEO-1 Reporting Obligations: New EEO-1 Forms Beginning 2017 Requires employers to provide salary and pay information in 12 pay bands Requires employers to report total hours worked by employees in 12 pay bands Report of pay data and hours worked begins with January 1, 2017 payroll 2017 Reporting will be due March 31, 2018

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136 Key Takeaways Implement system for central review of pay decisions Document every reason for any salary decision Employers should consider all forms of compensation, not just base or hourly pay, and give special attention to setting starting salaries for new hires. Train managers who have influence over compensation and benefits (including bonuses) Consider updating data collection system for EEO-1 reporting Conduct pay equity audit Can you explain 100% of any difference in pay between genders by a seniority system, merit system, production system, or other bona fide factor? Protect the privilege: assistance of counsel Review compensation policies and job descriptions for accuracy

137 Questions?

138 California Class Actions Kurt Franklin, Partner Hanson Bridgett LLP T: Kyle Mabe, Associate Hanson Bridgett LLP T:

139 Plaintiffs Bar True Believers For others in the plaintiffs bar, the reason for filing class or collective actions is that they re a powerful tool to promote social and economic justice, to create change, and to remedy civil rights violations.

140 Plaintiffs Bar Entrepreneurs For some in the plaintiffs bar, the reason for filing class or collective actions is to convert an otherwise economicallyunviable lawsuit into an economically viable one by aggregating numerous claims. This allows the plaintiffs bar to view the lawsuit as worthwhile to pursue.

141 California Employment Class Actions by the Numbers Federal Court Class Action Filings 2016: Approx. 582 State Court Class Action Filings 2016: Approx. 1190

142 Federal Actions: Majority are filed in the Northern and Central Districts Northern: 223 Central: 240 State Actions More than HALF of State Class Action filings are in Los Angeles 663 Class Actions Filed in LA in 2016 Second Place: Orange County (195)

143 Why should you care? A class action requires as few as 20 people Defense is EXPENSIVE Cases can take years If one is filed against you, more will likely follow

144 Class Action Basics Class Actions are (supposedly) about EFFICIENCY Requirements for Class Actions Numerosity Typicality Commonality Adequacy of Class Representative

145 Filing Answering (or Attacking the Pleading) Discovery Summary Judgment Class Certification Trial

146 What does it mean if the court grants class certification? What does it mean if the court denies class certification? What is a virtual class action? Or viral mass action?

147 Class Actions Frequently Settle Trial is rare Litigating a class action is expensive Risk is high Even the most sophisticated employers likely have exposure Defeating class certification is only a partial win Plaintiffs appeal Cost v. Benefit Wouldn t you rather invest your money in something other than legal fees?

148 What are employers sued for? Wage and hour claims Federal Labor Standards Act (FLSA) California Labor Code Violations (meal and rest breaks, overtime wages, regular rate of pay, wage statements, misclassification) Private Attorneys General Act (PAGA) and Unfair Competition Law (UCL) Fair Credit Reporting Act (FCRA) Background check forms Discrimination Age, Race, Disability, Gender, and Sexual Orientation Travel Pay Reimbursements

149 What are employers being sued for? (Cont.) Staffing, Professional Employer Organizations, Leased Employees, and Contingent Workers (Joint Employer) New Demand Economy ( Gig Jobs and Independent Contractors) Prevailing Wage Claims (Public Works Projects) Equal Pay Claims Benefits Employee Retirement Income Security Act (ERISA) Public Sector Benefits Litigation Other Civil Rights Violations ADA Titles I (public agencies only) ADA Title III (private sector ) Website Accessibility Other Civil Rights Violations Impact Litigation

150 Class Actions Are Trending Less focus on single plaintiff cases Much higher value for plaintiffs attorneys High liability risk for employers = higher settlements for plaintiffs Relatively easy to find wage and hour law violations Rarely (if ever) go to trial Plaintiffs attorneys have learned the labor code FCRA actions on the rise Penalty of up to $1,000 per person and Punitive damages Costs and attorneys fees Spokeo maybe not as great as it seems

151 Recent Developments In The Law Kilby v. CVS Suitable Seating when determining whether seating is required, must look to totality of circumstances, including business judgment and workspace layout Augustus v. ABM Employees must be relieved of ALL duty during rest breaks (employees can no longer be on call ) Rodriguez v. E.M.E., Inc. Employer must meet high standard to combine rest breaks McDonald s Case(s) Harder for franchisors to get out early Flores v. City of San Gabriel, Cash in lieu of benefits must be included in regular rate of pay calculation Briseno v. ConAgra Foods, Inc. Ascertainability NOT a requirement for class certification

152 How can we protect ourselves against class actions? Arbitration agreements Audits Employee classifications Meal and rest periods Paid time and off the clock Paystub and payment process Handbooks, policies, and procedures Contracts with vendors that supply contingent workers Evaluate Employment Practices Liability Insurance Policy Be respectful with departing employees

153 Questions?

154 The New Trump Administration And Its Possible Impact on Labor and Employment Laws and Regulations Pat Glenn, Partner Hanson Bridgett LLP T: Jennifer Martinez, Senior Counsel Hanson Bridgett LLP T:

155 What can employers expect under the new Trump administration? - Change of direction at the National Labor Relations Board (NLRB)? - Changes at the Equal Employment Opportunity Commission (EEOC)? - Repeal of new Department of Labor (DOL) overtime regulations? - Supreme Court appointment(s)? - Changing enforcement of immigration laws? - Shifting priorities at the Department of Labor? - Increased action from state and local legislative bodies?

156 NLRB Leadership Currently, the NLRB has a 2-1 Democratic majority, with two vacant seats. The terms of Republican board chairman, Philip Miscimarra, and the Democrat-appointed General Counsel, Richard Griffin Jr., also expire near the end of Trump is likely to nominate more conservative members to the NLRB, which may lead to more business-friendly decisions.

157 A new Board with a Republican majority is likely to revisit recent NLRB rules and decisions, including those covering: 1. Class action waivers (now before the U.S. Supreme Court in Murphy Oil, Epic Systems Corp., and Ernst & Young cases); 2. Joint employers (Browning-Ferris); 3. Inclusion of temporary workers in bargaining units with an employer s regular workers; 4. Quickie elections; 5. Expansion of protected concerted activity (e.g., its impact on workplace policies); and 6. Definition of appropriate bargaining units.

158 The new Board also may not make additional changes that the current Board would make, for example: Extending Weingarten rights to non-union workplaces Making misclassification of employees as independent contractors a separate violation of the National Labor Relations Act (NLRA)

159 In October, the EEOC published its strategic enforcement plan, which outlined the agency's priorities for , including: Eliminating barriers in recruitment and hiring; Protecting immigrant and migrant workers; Ensuring equal pay for all workers; Preserving access to the legal system; Preventing systemic harassment; and Addressing emerging issues, such as inflexible leave policies that discriminate against individuals with disabilities, accommodating pregnancy-related limitations, and protecting transgender individuals from sex discrimination.

160 Changes to EEOC Leadership Personnel EEOC general counsel, David Lopez, departed the agency in late 2015; he was never replaced. EEOC Chair Jenny Yang s term will expire in July, giving the new administration an opportunity to appoint individuals that could alter the agency s direction and priorities. Consolidation of authority Under Obama, the agency delegated much of its enforcement authority to regional offices, which had a lot of discretion as to what suits they would bring; the Trump administration may consolidate authority and have more active oversight as to the type of cases that are filed.

161 Changing EEOC Enforcement Priorities? Interpretation of Title VII sex-discrimination provisions under Obama, those provisions have been extended to lesbian, gay, bisexual, and transgender job applicants and employees Pay equity enforcement under Obama, EEOC expanded reporting requirements on EEO-1s to include requirements about employee compensation

162 EEOC Budget Cuts The current SEP pledges to continue pursuing systemic investigations large-scale, high-profile matters that can have a broad impact on an industry, profession, company, or geographic area. Under Trump, the agency could face budget cuts, which could mean less systemic litigation, in favor of cheaper options.

163 Possible Employment-Related Immigration Reforms H-1B Visa System Trump messaging: I will end forever the use of the H-1B as a cheap labor program. Potential changes Prevailing wage requirement may be raised May shift priorities in lottery system

164 Possible Employment-Related Immigration Reforms (cont.) Retention of foreign students educated in the U.S. Trump messaging: When foreigners attend our great colleges and want to stay in the U.S., they should not be thrown out of our country. F-1 OPT Program Mandatory E-Verify participation

165 Changing DOL Enforcement Priorities? Proposed Secretary of Labor Andy Puzder, CEO of CKE Restaurants (Carl s, Jr., Hardee s) Frequency and extent of pay equity audits Potential new regulations on the gig economy Amendment to the Federal Aviation Administration Authorization Act Electronic submission of workplace injury and illness reports

166 Changing DOL Enforcement Priorities (cont.) Repeal of Obama changes to FLSA overtime regulations is likely new regulations raised the minimum salary threshold for exempt status to $47,476 per year and created an index for future increases; overtime eligibility threshold for highly compensated workers was also raised from $100,000 to about $134,000 The regulations were scheduled to go into effect on December 1, 2016, but a federal judge in Texas entered a nationwide preliminary injunction blocking the DOL from implementing or enforcing the regulations.

167 Changing DOL Enforcement Priorities (cont.) The persuader regulations under the Labor-Management Reporting and Disclosure Act (LMRDA) may be revisited The persuader rule requires employers and their advisors to disclose their relationship for any advice that indirectly persuades employees regarding union organizing or collective bargaining. A district court in Texas issued a nationwide permanent injunction, blocking the Department of Labor s implementation of its union persuader rule. The court s preliminary injunction order is currently on appeal before the Fifth Circuit.

168 Expansion of State and Local Laws Into Traditionally Federal Territory Expanded protected categories under anti-discrimination and anti-harassment statutes Proliferation of local ordinances on mandatory paid sick leave or family leave Minimum wage set by local ordinance

169 Supreme Court Appointment(s) A more conservative Court could mean changes in any number of areas: Class action waivers in arbitration agreements Application of Title VII anti-discrimination provisions to LGBTQ individuals Equal pay laws

170 Questions?

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180 MARCH 23, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP No Fooling: New FEHA Regulations Go Into Effect April 1, 2016 Significant amendments to the Fair Employment and Housing Act (FEHA) regulations take effect on April 1, The amendments mandate detailed written policies against harassment, discrimination, and retaliation, update sexual harassment training requirements, and provide new definitions for certain protected characteristics. Mandatory Written Policy Against Harassment, Discrimination, and Retaliation Under the new regulations, all employers must have a written harassment, discrimination and retaliation prevention policy that lists all current protected categories under the Fair Employment and Housing Act and informs employees that they will not be exposed to retaliation. The policy must specify that employees are protected from illegal conduct from any workplace source, including third parties who are in the workplace. The policy must create a complaint process to ensure that complaints are: by Emily Leahy & Paul B. Mello & Dorothy S. Liu Designated as confidential, to the extent possible; Responded to in a timely manner; Investigated in a timely and impartial manner by qualified personnel; Documented and tracked for reasonable progress; Provided appropriate options for remedial actions and resolutions; and Closed in a timely manner. The amended regulations also instruct employers to include in the policy a complaint mechanism that does not require an employee to complain directly to his or her immediate supervisor. Further, the policy must require supervisors to report any complaints of misconduct to a designated company representative.

181 PG 2 Employers must ensure that employees receive and acknowledge the policy by one of the following methods: (1) printing and providing a copy to all employees with an acknowledgment form for the employee to sign and return; (2) sending the policy via with an acknowledgment return form; (3) posting current versions of the policies on a company intranet with a tracking system ensuring all employees have read and acknowledged receipt of the policies; (4) discussing policies upon hire and/or during a new hire orientation session; or (5) any other way that ensures employees receive and understand the policies. Translation of Policy Required? The amended regulations further require that the policy be translated under the following circumstances: [A]ny employer whose workforce at any facility or establishment contains 10 percent or more of persons who speak a language other than English as their spoken language shall translate the policy into every language that is spoken by at least 10 percent of the workforce. New Definitions The amended regulations define gender identity, gender expression, and transgender, and explain that gender discrimination includes sex stereotyping. Training Requirements Mandatory sexual harassment prevention training requirements for employers with 50 or more employees, have been updated with: (1) new documentation and recordkeeping requirements; and (2) new content requirements, including: addressing the negative effects of abusive conduct in the workplace; supervisors obligations to report misconduct; and the steps that can be taken to correct and remedy harassing behavior. What Should Employers Do? In light of these amendments, California employers should review and revise their policies and procedures to ensure compliance, and disseminate any amended policies. This publication was written by Emily Leahy and the Labor Section Client Services Team. For more information, please contact:

182 PG 3 Emily Leahy, Counsel ELeahy@hansonbridgett.com Paul B. Mello, Partner pmello@hansonbridgett.com Dorothy S. Liu, Partner dliu@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

183 APRIL 27, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP Two Rest Breaks Are Better Than One, According To A New California Appellate Court Decision by Emily Leahy & Dorothy S. Liu For the first time, a California court of appeal holds that an employer cannot combine two 10-minute rest breaks into one 20- minute rest break to comply with California s rest break requirement for non-exempt employees. According to the court in Rodriguez v. E.M.E., Inc., 16 C.D.O.S (Cal. Ct. App. April 25, 2016), rest breaks in an eight hour shift should fall on either side of the meal break, absent factors rendering such scheduling impracticable. The Facts The employer provided employees working an 8-hour shift with a combined 20-minute rest break that either preceded or followed a 30-minute meal break. The plaintiff claimed that a single, combined rest period violated California s IWC Wage Order No. 1, which applies to the manufacturing industry. The employer argued that its practice complied with the Wage Order because employees received the requisite total amount of rest time namely, 20 minutes and that employees preferred a 20-minute rest break, which increased productivity. The trial court had granted summary judgment in favor of the employer, ruling that its practice of providing a combined 20- minute rest period before or after the meal break was lawful. The appellate court disagreed and reversed. The Appellate Court s Opinion Wage Order 1 states: Every employer shall authorize and permit all employees to take rest periods, which insofar as practicable shall be in the middle of each work period. The authorized rest period time shall be based on the total hours worked daily at the rate of ten (10) minutes net rest time per four (4) hours or major fraction thereof. Relying on the California Supreme Court s decision in Brinker Restaurant Corp. v. Superior Court, 53 Cal.4 th 1004 (2012) (which dealt with identical language in Wage Order 5 applicable to the public housekeeping industry), the appellate court found that Wage Order 1 requires employers to provide a 10-minute rest break in the middle of work periods occurring before and after the 30-minute meal break absent an adequate justification

184 PG 2 why such a schedule is not capable of being put into practice or is not feasible as a practical schedule. The court concluded that a departure from the preferred schedule (i.e., an exception to the rest break timing requirement) is permissible only when the departure (1) will not unduly affect employee welfare and (2) is tailored to alleviate a material burden that would be imposed on the employer by implementing the preferred schedule. In other words, in order to deviate from the rest break timing requirement, an employer must show facts demonstrating that the timing requirement would impose a material burden on the employer and show that the deviation or departure is necessary to alleviate such burden. A departure from the preferred schedule that is merely advantageous to the employer cannot satisfy the Wage Order s rest break timing requirement. Employer Take Away Because the IWC Wage Orders contain virtually identical language regarding the timing of rest breaks, with few exceptions, employers with a California workforce should review their rest break policies and practices in light of the new Rodriguez decision. Please contact your Hanson Bridgett attorney with any questions regarding rest breaks. This publication was written by Emily Leahy and the Labor Section Client Services Team. For more information, please contact: Emily Leahy, Counsel ELeahy@hansonbridgett.com Dorothy S. Liu, Partner dliu@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

185 APRIL 8, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP Employers May Be Obligated To Provide Suitable Seating To Employees by Emily Leahy & Lisa M. Pooley In Kilby v. CVS Pharmacy, Inc., the California Supreme Court clarified an employer's obligation under California Wage Orders to provide "suitable seats when the nature of the work reasonably permits the use of seats." The Court answered three questions posed by the Ninth Circuit Court of Appeals, which is considering two appeals of class actions decisions concerning suitable seating. First, the Court considered whether the phrase "nature of the work" refers to individual tasks performed throughout the workday, or to the entire range of an employee's duties performed during a given day or shift. The Court took a middle-ofthe-road approach and concluded the phrase refers to the tasks an employee performs at a given location for which the employee is claiming a right to a suitable seat, and not to "the entire range of an employee's duties anywhere on the jobsite during a complete shift." According to the Court, if an employee's tasks at a given location reasonably permit sitting, and provision of a seat would not interfere with performance of any other tasks that may require standing, a seat is called for. Second, the Court articulated factors that should be considered when determining whether the nature of the work "reasonably permits" use of a seat. According to the Court, whether the nature of the work reasonably permits sitting is a fact-specific question to be determined objectively based on the totality of the circumstances. An employer's business judgment and the physical layout of the workplace are relevant, but not dispositive, factors. An individual employee's physical characteristics should not be considered. With respect to "business judgment," the Court found that an employer's mere preference for standing should not be considered. The Court, however, recognized that an employer's reasonable expectations regarding customer service and its role in setting job duties should be considered. In undertaking this analysis, consideration must be given to the feasibility of providing seats. Feasibility considerations may include: (1) whether providing a seat would unduly interfere with other standing tasks; (2) whether the frequency of transition from sitting to standing may interfere with the work; or (3) whether seated work would impact the quality and effectiveness of overall

186 PG 2 job performance. Finally, the Court held that if an employer seeks to be excused from the seating requirement, the employer has the burden of proving that compliance is not feasible because no suitable seating exists. Employer Takeaways In light of this California Supreme Court decision, employers should examine the nature of their employees' job duties and work environments to determine whether certain types of work and work locations are amenable to seated employees. This publication was written by Emily Leahy and the Labor Section Client Services Team. For more information, please contact: Emily Leahy, Counsel ELeahy@hansonbridgett.com Lisa M. Pooley, Partner lpooley@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

187 MAY 13, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP New Law Should Limit Disability- Access Litigation in California by Emily Leahy & Kurt A. Franklin More disability-access lawsuits are filed in California than in any other state. In part, this increased quantity results from state law (the Unruh Act and the California Disabled Person s Act) supplementing the federal Americans with Disabilities Act (ADA) to allow persons with disabilities to collect damages if they encounter a barrier that causes them to suffer difficulty, discomfort or embarrassment. On May 11, 2016, in an effort to curb ADA litigation that does not measurably improve access for Californians with disabilities, Governor Jerry Brown signed SB 269. The new law, effective immediately, provides a short grace period for small businesses to resolve certain construction-related barrier claims. In addition, it declares that certain barriers without a greater showing by the claimant do not cause persons with disabilities to suffer difficulty, discomfort or embarrassment. Now, high-volume ADA plaintiffs will have a harder time seeking damages and attorneys' fees for technical violations like faded paint on parking lot stripes or the color of disabled parking spot signs. The new law provides small businesses with 15 days following a complaint under the ADA to correct alleged violations. If corrected, small businesses would not be subject to statutory penalties and attorneys' fees. Small business is defined to include those businesses that employ 25 or fewer employees on average over the past three years and have average annual gross receipts of less than $3.5 million over the previous three years. Further, the new law provides businesses with 120 days from the receipt of a Certified Access Specialist (CASp) report to resolve any violations identified, without being subject to statutory penalties or litigation costs. Businesses may find a list of Statelicensed CASps on the Division of State Architect s website. Before hiring a CASp, however, businesses should consult with experienced ADA-defense counsel as (1) CASps have different skillsets and experience and (2) because of these differences, the business may want to hire the CASp through counsel so as to maintain privilege. A non-privileged report prepared by an inexperienced CASp can create unnecessary hardships that may be difficult to overcome. Moreover, the new law also impacts city and county permitting by

188 PG 2 requiring local agencies to provide businesses with materials relating to the requirements of the ADA or similar materials developed by the California Commission on Disability Access. It also requires local agencies to expedite review of projects for which the applicant provides a copy of a disability-access certificate. In sum, the new law may help curb the volume of ADA litigation in California that is geared toward technical violations, rather than improved access. For more information, please contact: Emily Leahy, Counsel ELeahy@hansonbridgett.com Kurt A. Franklin, Partner kfranklin@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

189 MAY 13, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP The Defend Trade Secrets Act Opens Federal Courts To Claims Of Misappropriation Of Trade Secrets California, like most other states, has adopted the Uniform Trade Secrets Act (UTSA). However, California's version of the UTSA, like many other states, is a modified version of the UTSA, creating a patchwork of trade secret laws nationwide. On May 11, 2016, President Obama signed the Defend Trade Secrets Act (DTSA), which gives employers a federal private right of action for misappropriation of trade secrets and will help create a nationwide body of trade secret law. Using subject matter jurisdiction, employers now will be able to pursue claims against employees for damages related to trade secret theft in federal court. The following provisions of the DTSA are particularly notable: Seizure Provision by Emily Leahy & Kurt A. Franklin The DTSA s seizure provision, which has no state law corollary, is particularly significant. Under this provision, a party may - on an ex parte basis - apply for and secure an order of the court providing for seizure of property necessary to prevent the propagation or dissemination of the trade secret at issue in the litigation. Such an order will allow for removal of the trade secret information from the alleged misappropriator s possession until an evidentiary hearing can be held. As a safeguard, the seizure provision also creates a cause of action for wrongful or excessive seizure, the meaning of which has yet to be defined. Preemption The DTSA does not preempt other trade secret protection laws. This means that employers still may seek relief under state law, which may be preferable where the definition of trade secrets is broader under state law or where state law provides a stronger remedy. Remedies The DTSA provides for the following damages and remedies: (1) injunctive relief, (2) compensatory damages, including awards

190 PG 2 based on principles of unjust enrichment, (3) exemplary damages (not to exceed twice the amount of the actual damages awarded), and (4) attorneys fees (awardable to either party upon a showing of bad faith ). Whistleblower Protection The DTSA also protects employee whistleblowing activity. It provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (a) in confidence to a federal, state, or local government official, either directly or indirectly; (b) to an attorney, provided that it is disclosed solely for the purpose of reporting or investigating a suspected violation of law; or (c) in a complaint or other document filed in a lawsuit or other proceeding filed under seal so that it is not disclosed to the public. Employers must give notice of these immunity provisions in any contract or agreement with an employee that governs the use of a trade secret or other confidential information. If an employer does not comply with this notice requirement, the employer is prohibited from recovering attorneys fees and exemplary damages under the DTSA. Additional Features of the DTSA Provides uniform definitions for trade secrets and misappropriation that are generally consistent with the Uniform Trade Secrets Act, but with a few differences; Provides that district courts have original jurisdiction over civil actions brought under the DTSA, allowing for a uniform set of procedural and evidentiary rules; Limits injunctive relief that can be awarded to avoid conflicts with state law limitations regarding noncompete contracts and other restraints of trade; Has a three-year statute of limitations that applies a discovery rule; and Addresses international trade secret theft and economic espionage. Is Federal Court Better and Will This Give Employers More Choice When it Comes to Forum? Employers typically are defendants in litigation with their employees, and generally prefer federal court. The benefits of being in federal court include: (1) a more structured and limited discovery process; (2) assignment to a single judge who oversees the case from beginning to end and who may be more likely to grant a motion to dismiss or a motion for summary judgment; (3) federal judges are appointed for life by the President and go through the Senate confirmation process, in contrast to state judges who must run for election (or re-election if initially appointed by the Governor) on a county-by-county basis; (4) federal jury decisions must be unanimous; (5) by virtue of the larger geographic range of the jury pool, federal jury members come from multiple counties, including rural counties; and (6) in terms of staffing and personnel, federal courts currently are better funded than California state courts. Unfortunately, under current Supreme Court case law, a DTSA counterclaim against an employee will not be an independent basis for removal of a lawsuit to federal court that an employee initially files in state court. Employer Take Away The DTSA highlights the need for employers to review their procedures for protecting trade secrets. This includes, among other things, the need to review and possibly revise handbooks and proprietary

191 PG 3 information, confidentiality and/or non-disclosure agreements to comport with the new law's requirements and to ensure proprietary information is protected. Additionally, employers should take steps to confirm that new employees do not bring proprietary documents with them from their prior employer. The DTSA also will impact many practical and strategic decisions at the outset of employee-related trade secret cases. For more information, please contact: Emily Leahy, Counsel ELeahy@hansonbridgett.com Kurt A. Franklin, Partner kfranklin@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

192 MAY 9, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP NLRB Continues To Eviscerate Workplace Civility Policies In New Handbook Decision In T-Mobile U.S.A., Inc., 363 NLRB No. 171 (2016), the National Labor Relations Board continued its trend in aggressively policing Employee Handbooks. It has issued a decision that finds a series of workplace rules in T-Mobile s and MetroPCS' Employee Handbooks unlawful, including provisions requiring positive workplace behavior and prohibiting workplace recordings. The Board concluded that those workplace rules would reasonably tend to chill employees in the exercise of their NLRA Section 7 rights, which give employees the right to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection. Background The Board s intrusion into workplace policies is the result of its decision in Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004). Under the standard set in Lutheran Heritage, a work rule is unlawful if the rule explicitly restricts activities protected by Section 7. If the work rule does not explicitly restrict protected activities, it nonetheless will violate the NLRA if: (1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights. by Emily Leahy & Patrick M. Glenn & Lisa M. Pooley The Board s Decision In T-Mobile, the Board acknowledged that the rules at issue did not explicitly restrict protected activities and were not promulgated in response to or applied to restrict Section 7 activities. Nonetheless, the Board found the following rules unlawful because employees would reasonably construe them to prohibit their Section 7 rights: A policy that stated the employer s expectation that all employees behave in a professional manner that promotes efficiency, productivity, and cooperation and maintain a positive work environment by communicating in a manner that is conducive to effective working relationships with internal and external customers, clients, co-workers, and management ; A policy that prohibited employees from recording people or

193 PG 2 confidential information using cameras, camera phones/devices, or recording devices in order to prevent harassment, maintain individual privacy, encourage open communication, and protect confidential information ; A provision that the handbook is a confidential and proprietary document that must not be disclosed to or used by any third party without the employer s written consent; A rule that requires employees to maintain the confidentiality of the names of employees involved in internal investigations as complainants, subjects, or witnesses; A rule that requires employees to contact a manager, an HR business partner, or the integrity line if they feel they have not been paid all wages or pay owed to them, believe that an improper deduction was made from their salary, or feel they have been required to miss meal or rest periods; A rule that requires employees to refer all media inquiries to the employer without comment; A rule that prohibits employees from using its information or communications resources in ways that could be considered disruptive, offensive, or harmful to morale; A rule that prohibits employees from using the company s information or communications resources to advocate, disparage, or solicit for political causes or non-company-related outside organizations; A rule that requires employees to sign a restrictive covenant and confidentiality agreement that classifies employee wage and salary information as confidential and proprietary information not subject to disclosure; A rule that prohibits employees from disclosing employee information that is defined to include employee addresses, telephone numbers, and contact information and prohibits employees from accessing such information without a business need to do so and without the employer s prior authorization or the consent of employees; A rule that prohibits employees from disclosing employee information, such as employee addresses and other contact information, except in the proper performance of their duties, and suggests that employees may be disciplined or subject to legal action for violating the rule; A rule that prohibits employees from making detrimental comments about the employer or its customers, products, services, or employees. Employer Take Away This decision serves as a reminder for employers to carefully review their Employee Handbooks as the NLRB continues to scrutinize workplace policies and expand the language that it believes employees "would reasonably construe as prohibiting protected concerted activity. It is now clear under this standard, Employee Handbooks that prohibit employees from criticizing their employer, discussing or disclosing wage or benefit information, or that admonish employees to protect the names and other contact information of employees, or to behave professionally or collegially in the workplace will not survive NLRB scrutiny. For more information, please contact: Emily Leahy, Counsel ELeahy@hansonbridgett.com Patrick M. Glenn, Partner pglenn@hansonbridgett.com Lisa M. Pooley, Partner

194 PG lpooley@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

195 APRIL 19, 2016 HANSON BRIDGETT TECHNOLOGY PRACTICE GROUP Is Your Online Business Accessible To Persons With Disabilities? Disability Access Advocates Are Using the Americans with Disabilities Act to Push for Better Access to Web- and App-Based Businesses by Kurt A. Franklin & Jennifer A. Foldvary If brick-and-mortar establishments must be accessible to persons with disabilities, do online companies have to be accessible too? This is a hot topic among the business and disability rights advocate communities, and is becoming a focus of class action attorneys, the courts and the U.S. Department of Justice (DOJ). Potential plaintiffs include persons who are blind or have low vision, persons who are deaf or hard of hearing, and persons who have physical disabilities affecting manual dexterity. Companies with websites or mobile applications must be aware that their accessibility obligations will be increasing in the near future. The underlying question in the website and app accessibility debate is whether, and to what extent, online and mobile companies must provide additional ways for disabled individuals to access their content and services. Title III of the Americans with Disabilities Act (ADA) guarantees individuals with disabilities "full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation." 42 USC 12182(a). Historically, places of public accommodation have included physical establishments like retail stores, theaters, restaurants and bars, places of lodging, schools, and hospitals. So far, the courts have not yet set a clear legal standard regarding website accessibility. Some courts have distinguished between online-only businesses (e.g., Netflix, ebay) and brickand-mortar businesses that have an online presence (e.g., Gap), while others have acknowledged that the two categories should be treated the same. In the DOJ consent decrees, full and equal access has included closed captioning for video, special programming to ensure compatibility with screen readers or other assistive technologies, special labeling of photographs and other visual displays (text alternatives for non-text content). But in its formal law-making capacity, the DOJ the federal agency charged with regulating Title III has postponed until 2018 finalizing regulations setting forth guidance on how companies can make their websites accessible. Although these regulations are not set to be final for two more years, the DOJ has generally defined the appropriate level of website accessibility by referencing the Web Content Accessibility Guidelines 2.0 ("WCAG 2.0") Levels A and AA, prepared by the

196 PG 2 Website Accessibility Initiative of the World Wide Web Consortium ("W3C"). For now, we can be sure of two facts: (1) the internet and mobile apps are here to stay; and (2) advocacy groups and class action lawyers will use the courts to make sure persons with disabilities have access to web- and app-based services. With the rise of Amazon, Uber, AirBnB, and the like, there has been a fundamental shift in the way that consumers do business. At a minimum, companies should begin reviewing their contracts with their website and app developers and insurance companies to ensure sufficient indemnity provisions are in place. Companies can also inquire whether their web and mobile platforms are compatible with adaptive software, such as "screen-reader technology" or navigation through keyboard interface. These initial steps will help companies understand the changes they need to make to increase their accessibility once the courts and the DOJ provide more definite directives. In summary, following WCAG 2.0 is a good start and demonstrates effort towards web- and app - accessibility. For further information regarding accessibility, please contact Kurt Franklin, Jennifer Foldvary, or your Hanson Bridgett attorney. For more information, please contact: Kurt A. Franklin, Partner kfranklin@hansonbridgett.com Jennifer A. Foldvary, Associate JFoldvary@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

197 JUNE 13, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP Ninth Circuit Rules That Cash-In-Lieu Of Benefits Payments Must Be Included In Regular Rate Of Pay by Patrick M. Glenn & Dorothy S. Liu & Emily Leahy In Flores v. City of San Gabriel, 2016 WL (9 th Cir. June 2, 2016), the Ninth Circuit ruled in a case of first impression that the employer (a California city) improperly excluded cash payments made to employees in lieu of health benefits from their regular rate of pay under the Fair Labor Standards Act (FLSA). This ruling will affect employers that provide a cash benefit to employees who waive the employer's health coverage. The payment of unused benefits must be included in the regular rate of pay for purposes of calculating overtime compensation. Facts The City provided to its employees a Flexible Benefits Plan (a cafeteria plan under Section 125 of the Internal Revenue Code) and made contributions for each employee for the purchase of medical, vision, dental and other benefits, such as disability insurance. Employees were required to purchase the City's dental and vision coverage using the City's contributions, but could waive the City's health coverage if they provided proof of other coverage. Employees who waived the City's health coverage, and those whose coverage elections cost less than the amount of the City's contribution, received a taxable cash payment of the excess amount each month. The City designated its cash-in-lieu of benefits payments as "benefits" that were excluded from its calculation of the employees' regular rate of pay for purposes of overtime compensation. Cash-In-Lieu Of Benefits Payments Were Improperly Excluded From The Regular Rate Of Pay The City argued that its cash-in-lieu of benefits payments were subject to Section 207(e)(2) of the FLSA, which excludes from the regular rate of pay such items as vacation pay, reimbursable travel expenses and "other similar payments to an employee which are not made as compensation for his hours of employment." The City argued that the payments qualified for the exception because payments to employees of unused benefits were not tied to hours worked by employees and hence were not compensation for hours worked.

198 PG 2 The Ninth Circuit disagreed. Relying on Department of Labor regulations, the Court held that a payment may not be excluded from the regular rate of pay if it is generally understood as compensation for work, even though the payment is not directly tied to specific hours worked by an employee. (Slip Op. pp ) The Ninth Circuit explained that the question is whether the payment is a form of compensation for performing work; not whether a particular payment is tied to an hourly wage. The Court also rejected the City s contention that its cash-in-lieu of benefits payments could be excluded under Section 207(e)(4), which excludes from the regular rate of pay "contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing health insurance and similar benefits. But, because the City paid the unused benefits directly to its employees and not to a third party or trustee, the Ninth Circuit held that the cash-in-lieu of benefits payments could not be excluded under Section 207(e)(4). The Ninth Circuit further concluded that the City s Flexible Benefits Plan was not a bona fide plan under Section 207(e)(4). The cash payments (which constituted 40 percent or more of the City s total contributions paid directly to employees rather than received as benefits) could not be deemed an incidental part of the cafeteria plan. Because the City's cafeteria plan was not a "bona fide" plan, the City's payment of unused benefits must be included in the regular rate of pay for overtime purposes. FLSA Violation Was Deemed "Willful," Even In The Absence Of Controlling Authority Significantly, the Ninth Circuit held there was no evidence demonstrating that the City and its human resources department in particular had taken any affirmative steps to determine that the cash-in-lieu of benefits payments were classified appropriately as a "benefit" under the FLSA for exclusion from the regular rate of pay. Without such a showing, the City failed to establish that it acted in good faith to comply with the FLSA. Moreover, the Ninth Circuit deemed the City's FLSA violation to be "willful." The Court was not persuaded by the fact that there was no controlling case authority in this circuit regarding the proper treatment of cashin-lieu of benefits payments. Rather, the Court stated that "the absence of controlling case authority cannot be dispositive when the City has put forth no evidence that it ever looked to see whether such authority existed." (Slip. Op p. 29.) Because the City's FLSA violation was deemed to be willful and without any showing of good faith compliance, the plaintiffs were entitled to an extended 3-year statute of limitations as well as liquidated damages. Employer Take Away The calculation of employees regular rate of pay may be subject to more scrutiny as a result of Flores. Employers that provide cash payments to those who waive the employer's health insurance coverage must include such payments in the employees regular rate of pay for overtime purposes. In addition, employers must act with caution with their human resources departments when making determinations to exclude any payments from the regular rate of pay. For more information, please contact: Patrick M. Glenn, Partner

199 PG 3 pglenn@hansonbridgett.com Dorothy S. Liu, Partner dliu@hansonbridgett.com Emily Leahy, Counsel ELeahy@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

200 JULY 13, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP McDonald s On The Hook For Class Certification Of Wage And Hour Claims Under Ostensible Agency Theory by Emily Leahy & Raymond F. Lynch Despite finding that as a matter of law McDonald s was not directly liable as a joint employer, a California federal judge granted class certification to McDonald s workers, saying the claims against McDonald s Corp. can proceed on a classwide basis under a theory of ostensible agency. Under this theory, McDonald s could be liable because employees reasonably believed they were employed by McDonald s. The Facts The workers filed the class action in 2014, alleging a variety of wage and hour violations by defendant the Edward J. Smith and Valerie S. Smith Family Limited Partnership ( Smith ), which owns and operates five restaurants in California under a franchise agreement with McDonald s. Plaintiffs also sued McDonald s on direct and vicarious liability grounds. McDonald s moved for summary judgment on the grounds that it was not a joint employer. The Court granted summary judgment on plaintiffs direct liability theories, finding that McDonald s is not directly liable as a joint employer with the Smiths, but denied it on the issue of whether McDonald s may be liable on an ostensible agency basis. Ostensible agency exists where (1) the person dealing with the agent does so with reasonable belief in the agent s authority; (2) that belief is generated by some act or neglect of the principal sought to be charged, and (3) the relying party is not negligent. Kaplan v. Coldwell Banker Residential Affiliates, Inc., 59 Cal. App. 4th 741, 747 (1997). Plaintiffs then settled with the Smiths, leaving the McDonald s entities as the last standing defendants. Plaintiffs moved for certification of a class to pursue claims for: (1) miscalculated wages; (2) overtime; (3) meals and rest breaks; (4) maintenance of uniforms; (5) wage statements; and (6) related derivative claims. Ostensible Agency Not A Bar To Class Certification McDonald s argued that allegations of ostensible agency are incapable of being resolved on a classwide basis because they involve individualized questions of personal belief and reasonable

201 PG 2 reliance on an agency relationship. The court disagreed, holding that ostensible agency does not demand unique or alternative treatment, and certainly does not stand entirely outside Rule 23 as impossible to adjudicate on a classwide basis. The court then reviewed the evidence to determine whether to allow classwide adjudication against McDonald s. Plaintiffs tendered substantial and largely undisputed evidence that the putative class was exposed to conduct in common that would make proof of ostensible agency practical and fair on a class basis. For example, plaintiffs submitted declarations showing that they were required to wear McDonald s uniforms, packaged food in McDonald s boxes, received paystubs, orientation materials, shift schedules and time punch reports all marked with McDonald s name and logo, and in most cases applied for a job through a McDonald s website. The fact that each employee spent every work day in a restaurant heavily branded with McDonald s trademarks and name was also informative. These facts were shared in common across the proposed class and made classwide adjudication of ostensible agency against McDonald s a suitable and appropriate procedure. On this record, the court found that plaintiffs did enough to show that the ostensible agency issue can be litigated on a classwide basis, although the court noted that whether plaintiffs will ultimately prevail or fail in their proof of agency is for the trier of fact to decide and not for the court to resolve in determining certification. Class Certification The court ruled that the plaintiffs provided evidence of commonality and typicality for their claims of miscalculated wages and overtime violations, as well as on maintenance of uniform claims. However, the court held that there was insufficient commonality for missed meal and rest period claims to support a class. The plaintiffs did not tender any evidence of a standard policy or practice, formal or informal, of denying workers their meal and rest breaks. Instead, plaintiffs said only that crew members were subject to a manager-directed break policy. In that context, determining whether a crew member was denied her rights as an employee would necessarily turn on individualized inquiries into the managers actions and decisions. Employer Take Away This decision gives plaintiffs two bites at the apple: under a direct liability joint employer theory as well as an ostensible agency theory. This opens the possibility of two different legal theories to hold a potential joint employer liable in wage and hour class actions, increasing the litigation risk in alleged dual employment situations. For more information, please contact: Emily Leahy, Counsel ELeahy@hansonbridgett.com

202 PG 3 Raymond F. Lynch, Partner rlynch@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

203 AUGUST 5, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP Employers Scramble To Comply With New DOL Minimum Wage And Employee Polygraph Protection Act Posting Requirements On July 26, 2016, the federal Department of Labor revised the Minimum Wage poster (applicable to all employers) and Employee Polygraph Protection Act poster (applicable to private employers). The Department of Labor gave little notice to employers, stating that revised posters were to be posted starting August 1, Changes to the Minimum Wage poster include: New section relating to the rights of nursing mothers to receive reasonable break time to express breast milk; Revised information relating to tip credits; Revised information regarding enforcement by the DOL; and Additional information regarding incorrectly classifying workers as independent contractors. Note that the federal minimum wage did not change. The Employee Polygraph Protection Act poster was updated to change the DOL s telephone number and to delete mention of the penalty amount for violation of the law. by Lisa M. Pooley & Emily Leahy The Secretary of Labor can bring court actions and assess civil penalties for failure to post the current Employee Polygraph Protection Act poster. There is no stated penalty for failure to post the current Minimum Wage poster. Employers will need to update their posters (available here and here For more information, please contact: Lisa M. Pooley, Partner lpooley@hansonbridgett.com Emily Leahy, Counsel

204 PG 2 ELeahy@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

205 SEPTEMBER 2, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP After Almost 20 Years, The EEOC Has Issued New Guidelines On Retaliation On August 29, 2016, the EEOC released its final Enforcement Guidance on Retaliation and Related Issues, to replace the retaliation section in its 1998 Compliance Manual: www1.eeoc.gov//eeoc/newsroom/release/ cfm? renderforprint=1 The guidance also addresses the separate "interference" provision under the Americans with Disabilities Act (ADA), which prohibits coercion, threats, or other acts that interfere with the exercise of ADA rights. Topics explained in the new guidance include: The scope of employee activity protected by the law. Legal analysis to be used to determine if evidence supports a claim of retaliation. Remedies available for retaliation. Rules against interference with the exercise of rights under the ADA. Detailed examples of employer actions that may constitute retaliation or interference. In the guidance, the EEOC takes a broad approach to retaliation. Participation in EEO Process by Dorothy S. Liu & Lisa M. Pooley & Emily Leahy Of note, the guidance explains that participation in an EEO process extends to participation in an employer's internal EEO complaint process, even if a charge of discrimination has not yet been filed with the EEOC. Protected Activity The guidance also extends protection to an applicant or employee for communicating opposition to a perceived EEO violation. For statements or actions to be considered protected, opposition from an employee or applicant need only be based on the individual s reasonable good-faith belief that a matter violates equal employment opportunity law. This means that it can be reasonable to complain about behavior that is not yet legally harassment, or for an employee to believe that conduct violates the EEO laws even if the EEOC has adopted that interpretation even if some courts disagree.

206 PG 2 Importantly, the guidance acknowledges that employees are not shielded from the consequences of poor performance or misconduct if they raise an internal EEO allegation or file a discrimination claim with an enforcement agency. Adverse Action The EEOC points out that retaliation includes any employer action that is materially adverse, which means it can be an employer action that is work-related, or one that has no tangible effect on employment, or even an action that takes place exclusively outside of work, as long as it may well dissuade a reasonable person from engaging in protected activity. The action can be materially adverse even if it does not stop the employee from asserting her EEO rights. ADA Interference The guidance explains that under the ADA's interference provision, it is unlawful to coerce, intimidate, threaten, or otherwise interfere with an individual's exercise of ADA rights, or with an individual who is assisting another to exercise ADA rights. Examples of interference include: coercing an individual to relinquish or forgo an accommodation to which he or she is otherwise entitled; intimidating an applicant from requesting accommodation for the application process by indicating that such a request will result in the applicant not being hired; threatening an employee with loss of employment or other adverse treatment if he does not "voluntarily" submit to a medical examination or inquiry that is otherwise prohibited under the statute; issuing a policy or requirement that purports to limit an employee's rights to invoke ADA protections; interfering with a former employee's right to file an ADA lawsuit against the former employer by stating that a negative job reference will be given to prospective employers if the suit is filed; and subjecting an employee to unwarranted discipline, demotion, or other adverse treatment because he assisted a coworker in requesting reasonable accommodation. Promising Practices For Employers Finally, the guidance suggests that employers consider the following promising practices to minimize the likelihood of retaliation violations: Maintain a written, plain-language anti-retaliation policy, and provide practical guidance on the employer's expectations with user-friendly examples of what to do and not to do; Train all managers, supervisors, and employees on the employer's written anti-retaliation policy, and send a message from top management that retaliation will not be tolerated; Provide managers and supervisors alleged to have engaged in discrimination with guidance on how to handle any personal feelings about the allegations when carrying out management duties or interacting in the workplace; Check in with employees, managers, and witnesses during the pendency of an EEO matter to inquire if there are any concerns regarding potential or perceived retaliation; and Require decision-makers to identify their reasons for taking consequential actions, and ensure that necessary documentation supports the decision. For more information, please contact:

207 PG 3 Dorothy S. Liu, Partner dliu@hansonbridgett.com Lisa M. Pooley, Partner lpooley@hansonbridgett.com Emily Leahy, Counsel ELeahy@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

208 SEPTEMBER 30, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP Palo Alto, Los Altos, and San Mateo Raise Minimum Wage In June 2016, the Cities Association of Santa Clara County recommended a regional minimum wage increase to $15.00 by 2019 ( $15 by 19 ), which is an accelerated version of the State's minimum wage increase to reach $15.00 by Following this lead, Palo Alto, Los Altos, and San Mateo have now passed minimum wage ordinances that reach $15.00 by Other Bay Area cities, including Campbell and Cupertino, are also considering a similar $15 by 19 ordinance. Sunnyvale and Mountain View have already adopted accelerated ordinances that increase the minimum wage to $15 by Palo Alto Minimum Wage Ordinance On September 26, 2016, the Palo Alto City Council voted to increase minimum wage for work performed within the geographic boundaries of the City of Palo Alto, as follows: Date Minimum Hourly Wage January 1, 2017 $12.00 January 1, 2018 $13.50 January 1, 2019 $15.00 by Dorothy S. Liu & Diane Marie O'Malley & Emily Leahy The minimum wage requirements can be waived through collective bargaining. Otherwise, the ordinance applies to employers including corporate officers and executives who directly or indirectly through any other person, including through the services of a temporary employment agency, staffing agency, or similar entity employs or exercises control over the wages, hours, or working conditions of any employee, and who is either subject to Palo Alto s business registry requirements, conducts business in Palo Alto, or maintains a business facility in Palo Alto. Employee is defined as any person who performs at least two hours of work in a calendar week for the employer. The ordinance does not apply to state, federal, and county agencies, including school districts, when the work performed is related to their governmental function. However, for work that is not related to their governmental function, including, but not

209 PG 2 limited to: booster or gift shops, non-k-12 cafeterias, on-site concessions, and similar operations, minimum wage is required. Lessees or renters of facilities or space from an exempt organization also are required to pay minimum wage. Employers are required to post, in a conspicuous place at any workplace or job site where any employee works, a notice informing employees of the current minimum wage rate and of their rights. Employers must post such notices in any language spoken by at least five percent of the employees at the workplace or job site. Employers must also provide each employee, at the time of hire, with the employer's name, address, and telephone number in writing. Los Altos Minimum Wage Ordinance On September 27, 2016, the Los Altos City Council voted to increase minimum wage for work performed within the geographic boundaries of the City of Los Altos, as follows: Date Minimum Hourly Wage January 1, 2017 $12.00 January 1, 2018 $13.50 January 1, 2019 $15.00 The ordinance applies to employees who work perform at least two hours of work in a calendar week for an employer. Employer is defined as any person (including corporate officers or executives, who directly or indirectly through any other person, including through the services of a temporary employment agency, staffing agency or similar entity) employs or exercises control over the wages, hours, or working conditions of any employee and who is either subject to Los Altos s business license requirements or maintains a business facility in Los Altos. The minimum wage requirements can be waived through collective bargaining. Governmental agencies (including federal agencies, state agencies, school districts, and auxiliary organizations) are exempt from the minimum wage requirements under the principle of governmental immunity when the work performed is related to the agency s governmental function. Commissions or guaranteed gratuities, not including discretionary tips, may be counted toward payment of the minimum wage when the commissions or guaranteed gratuities are earned and paid together with other compensation paid to an employee, and are equal to or greater than the current minimum wage. For each pay period, employers must pay the employee an amount that equals or exceeds the current hourly minimum wage. Employers may offset a portion of the minimum wage for housing and meal costs if there is a prior voluntary agreement between employer and employee. Employers must post in a conspicuous place, at any workplace or job site where any employee works, a notice informing employees of the current minimum wage rate and of their rights. The notice must be posted in the top three languages spoken in Los Altos. Employers are also required to provide each employee, at the time of hire, with the employer s name, address, and telephone number in writing.

210 PG 3 San Mateo Minimum Wage Ordinance On August 15, 2016, the San Mateo City Council adopted a Minimum Wage Ordinance which also requires annual increases above and beyond the wage required by the State. The increases are as follows: Date Minimum Hourly Wage 501(c)(3) Nonprofit January 1, 2017 $12.00 $10.50 January 1, 2018 $13.50 $12.00 January 1, 2019 $15.00 $13.50 The minimum wage requirements can be waived through collective bargaining. The ordinance applies to employers who are subject to the City of San Mateo Business License Tax, or who maintain a facility in the City of San Mateo, and employees who perform at least two hours of work per week in the City of San Mateo. Employers must give written notification to each current employee (and to new employees at the time of hire) of the employee s rights under the Minimum Wage Ordinance. The employer must post the official notice prominently in the areas at the work site where it will be seen by all employees. Employers also must provide each employee, at the time of hire, with the employer s name, address, and telephone number in writing. Failure to post such notice will be a violation of the ordinance. Retaliation and Penalties The Palo Alto, Los Altos, and San Mateo ordinances prohibit retaliation for exercising rights such as filing a complaint or informing any person about any party's alleged noncompliance, or informing any person of his or her potential rights and assisting him or her in asserting such rights. Penalties for violation of each of the three ordinances include: Back wages; interest; reasonable attorneys' fees and costs; a civil penalty in the amount of fifty dollars ($50) to each employee or person whose rights were violated for each day that the violation occurred or continued; and reimbursement of the city's administrative costs of enforcement and reasonable attorney's fees. For more information, please contact: Dorothy S. Liu, Partner dliu@hansonbridgett.com Diane Marie O'Malley, Partner domalley@hansonbridgett.com Emily Leahy, Counsel ELeahy@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

211 NOVEMBER 17, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP Federal Court Permanently Blocks DOL s Persuader Rule A federal district court in Texas has issued a nationwide permanent injunction, blocking the Department of Labor s implementation of its union persuader rule. As we previously reported, the persuader rule requires employers and their advisors to disclose their relationship for any advice that indirectly persuades employees regarding union organizing or collective bargaining. The court concluded that such a rule is unlawful, converting the preliminary injunction it issued in June 2016 into a permanent injunction with nationwide effect. The court s preliminary injunction order is currently on appeal before the Fifth Circuit. For more information, please contact: Dorothy S. Liu, Partner dliu@hansonbridgett.com Lisa M. Pooley, Partner lpooley@hansonbridgett.com by Dorothy S. Liu & Lisa M. Pooley & Emily Leahy Emily Leahy, Counsel ELeahy@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

212 NOVEMBER 17, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP New California and Federal Employment Laws for 2017 by Dorothy S. Liu & Lisa M. Pooley & Emily Leahy At the close of the legislative session, Governor Brown signed a number of new employment-related laws into effect. Unless otherwise noted below, these new laws are effective on January 1, Paid Family Leave Expansion (AB 908): Effective January 1, 2018, the amount of wage-replacement benefits paid to employees on paid family leave and state disability leave will increase to either 60 or 70 percent of the employee's wages (from the current level of 55 percent), depending on income level. AB 908 also removes the 7-day waiting period for these benefits. (See Unemployment Insurance Code sections 2655, , 3303.) Choice of Law and Forum in Employment Contracts (SB 1241): SB 1241 prohibits employers from requiring that an employee who lives and works in California agree, as a condition of employment, to a provision that would: (1) require the employee to adjudicate outside of California a claim arising in California or (2) deprive the employee of the protection of California law with respect to a controversy arising in California. Any contract provision that violates the statute is voidable by the employee, and the matter would be adjudicated in California under California law. Courts are authorized to award attorney s fees to employees enforcing their rights under this statute. The prohibition does not apply, however, where the employee was individually represented by legal counsel in negotiating the choice or law or forum provisions in the contract. The law applies to contracts entered into, modified, or extended on or after January 1, (See Labor Code section 925.) Juvenile Criminal History (AB 1843): AB 1843 prohibits employers from asking applicants to disclose, or from utilizing as a factor in determining any condition of employment, information concerning or related to an arrest, detention, processing, diversion, supervision, adjudication, or court disposition that occurred while the person was subject to the process and jurisdiction of juvenile court law. The bill makes an exception for employers at healthcare facilities, providing that these employers can inquire into an applicant s juvenile criminal background if a juvenile court made a final ruling or adjudication that the applicant had committed a felony or misdemeanor relating to sex crimes or

213 PG 2 certain controlled substances crimes within five years prior to applying for employment. However, these employers cannot inquire into an applicant s sealed juvenile criminal records. (See Labor Code section ) Unfair Immigration-Related Practices (SB 1001): SB 1001 makes it unlawful for an employer to do any of the following when verifying authorization to work: (1) request more or different documents than are required under federal law (under the I-9 process), (2) refuse to honor documents tendered that on their face reasonably appear to be genuine, (3) refuse to honor documents or work authorization based upon the specific status or term of status that accompanies the authorization to work, or (4) reinvestigate or reverify an incumbent employee s authorization to work using an unfair immigration-related practice. The bill authorizes applicants and employees to file a complaint with the DLSE and provides that a violation can subject employers to a penalty of up to $10,000. (See Labor Code section ) Sexual Harassment Training for Government Officials (AB 1661): AB 1661 requires local agency officials to receive sexual harassment prevention training and education if the local agency (including any city, county, city and county, charter city, charter county, charter city and county, or special district) provides any type of compensation, salary, or stipend to those officials. Local agency officials are any member of a local agency legislative body and any elected agency official. Additionally, local agencies will be allowed to require employees to receive sexual harassment prevention training or information. (See Government Code section 53237, et seq.) Notice of Domestic Violence Protections (AB 2337): AB 2337 requires employers to inform in writing each new employee (and other employees upon request) of the rights afforded to employees affected by domestic violence. The Labor Commissioner is required to develop a notice form by July 1, Employers are not required to comply with the notice requirement until the Commissioner posts the form. (See Labor Code section ) Wage statements for exempt employees (AB 2535): AB 2535 amends Labor Code 226 to clarify that employers are not required to list the number of hours worked on wage statements for employees exempt from payment of minimum wage and overtime under specified statutes or any applicable order of the Industrial Welfare Commission. (See Labor Code Section 226.) Minimum Wage Violation Challenges (AB 2899): AB 2899 requires that, before appealing a Labor Commissioner decision relating to failure to pay minimum wages, employers must file a bond in favor of the unpaid employee in the amount equal to the unpaid wages, liquidated damages, and overtime compensation assessed, excluding penalties. The bill further provides that the proceeds of the bond, sufficient to cover the amount owed, are forfeited to the employee if the employer fails to pay the amounts owed within 10 days from the conclusion of the proceedings. (See Labor Code section ) Amendments to Fair Pay Act (SB 1063 and AB 1676): AB 1676 amends the Fair Pay Act to prohibit employers from using an individual's prior salary as the sole justification for any disparity in compensation. SB 1063 expands the Fair Pay Act s gender pay equity protections to include race and ethnicity. It prohibits employers from paying employees at wage rates less than the rates paid to employees of another race or ethnicity for substantially similar work. (See Labor Code sections and ) Overtime for Agricultural Workers (AB 1066): AB 1066 removes Labor Code Section 551 and 552 s exemption for agricultural employees regarding hours, meal breaks, and other working conditions. It also creates new overtime requirements for agricultural workers that will gradually decrease, from 2019 until 2022, the daily and weekly hours that an agricultural worker must work to receive overtime pay. (See Labor

214 PG 3 Code sections 554 and 857, et. seq.) Single-User Restrooms (AB 1732): Effective March 1, 2017, all single-user toilet facilities in any business establishment, place of public accommodation, or state or local government agency must be identified by signage as "all-gender" toilet facilities, rather than designated as male or female. These single-user toilet facilities also must be designated for use by no more than one occupant at a time or for family or assisted use. (See Health and Safety Code section ) Private Pension (SB 1234): SB 1234 enacts the California Secure Choice Retirement Savings Trust Act, which would create the California Secure Choice Retirement Savings Trust. It applies to private sector employers with five or more employees, that do not offer an employer-sponsored retirement plan. Such employers will be required to offer either an employer-sponsored retirement plan or a payroll deposit retirement savings arrangement so that eligible employees can contribute a portion of their salary or wages to a retirement savings program account in the California Secure Choice Retirement Savings Program. Each eligible employee shall be enrolled in the program unless the employee elects not to participate. (See Government Code sections 20139, , et seq.) Federal Overtime Rule: The U.S. Department of Labor s (DOL) final rule updating the Fair Labor Standards Act ( FLSA ) overtime regulations regarding the executive, administrative and professional exemptions goes into effect on December 1, The Final Rule: (1) sets the minimum salary level for FLSA White Collar Exemptions at $913 per week ($47,476 annualized); (2) sets the total compensation level for highly compensated employees (HCE) at $134,004 annually; (3) provides for automatic increases in the salary levels every three years (beginning January 1, 2020) with the minimum salary level indexed to the 40th percentile of salaries for full-time workers in the lowest wage census region (currently the south region), and the HCE level indexed to the 90th percentile of salaries for national full-time salary workers; and (4) allows employers to count nondiscretionary bonuses and other incentive payments, including commissions, paid on at least a quarterly basis, for up to 10% of the minimum salary level. [Note that there have been legislative efforts to stall the Final Rule, including a bill passed by the House of Representatives. Also, unlike the federal rule, California does not have a HCE exemption.] Federal Contractor Blacklisting Rule: A portion of the controversial federal Blacklisting Rule, which would have gone into effect October 25, 2016, has been enjoined by a federal district court. The enjoined portion of the rule would have required certain federal contractors to disclose alleged labor violations of 14 federal labor laws and equivalent state law for the past 3 years. However, the district court upheld the portion of the rule requiring that contractors improve paycheck transparency. This means that starting January 1, 2017, companies bidding on federal contracts for goods and services worth more than $500,000 must inform workers about their independent contractor status and provide other wage and benefit details. Federal Contractor Paid Sick Leave: Beginning January 1, 2017, covered federal contractors will be required to provide employees with up to 56 hours of paid sick leave per year, pursuant to the Department of Labor s final rule implementing Executive Order The Final Rule applies to new contracts and replacements for expiring contracts with the Federal Government that result from solicitations issued on or after January 1, 2017 (or that are awarded outside the solicitation process on or after January 1, 2017). It covers four major categories of contractual agreements: (1) procurement contracts for construction covered by the Davis-Bacon Act (DBA); (2) service contracts covered by the McNamara-O Hara Service Contract Act (SCA); (3) concessions contracts; and (4) contracts in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public. Furthermore, any subcontract of a covered contract (like the upper-tier contract) that falls into one of these four categories is subject to the paid sick leave requirements. DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

215 NOVEMBER 30, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP Reminder: Minimum Wage Increases Effective January 1, 2017 Effective January 1, 2017, California s minimum wage will increase to $10.50 per hour for employers with 26 or more employees, with further increases scheduled for the next five years in order to reach a minimum wage of $15.00 by the year Following the state s lead, a number of local California cities and counties have passed their own minimum wage ordinances with a more aggressive schedule of minimum wage increases. While some cities and counties already implemented incremental increases in July and October 2016, others are set to increase on January 1, 2017, as follows: Locality Minimum Wage Eff. 1/1/2017 by Dorothy S. Liu & Emily Leahy & Diane Marie O'Malley California $10.50 (26 or more employees) El Cerrito $12.25 Los Altos $12.00 Mountain View $13.00 Oakland $12.86 Palo Alto $12.00 Richmond $12.30 Santa Clara $11.10 San Diego $11.50 San Jose (all employers) $10.50 San Mateo $12.00 San Mateo (501(c)(3) nonprofit) $10.50 Sunnyvale $13.00 Employers that have employees working in any of these cities even on a temporary basis should prepare for the minimum wage increases and implement any necessary changes for compliance purposes, such as recordkeeping and notice requirements. Recall also that because most exempt employees working in California must make at least twice the state minimum wage on an annual basis, the current minimum salary threshold for exempt employees who work for employers having more than 25 employees will increase from $41,600 to $43,680 effective January 1, If you have any questions about the applicability of these

216 PG 2 minimum wage increases or how the minimum wage increases may affect your business, please contact your Hanson Bridgett attorney. For more information, please contact: Dorothy S. Liu, Partner dliu@hansonbridgett.com Emily Leahy, Counsel ELeahy@hansonbridgett.com Diane Marie O'Malley, Partner domalley@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

217 NOVEMBER 23, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP Court Issues Preliminary Injunction Blocking Immediate Implementation of New Federal Overtime Rules On November 22, 2016, a federal judge in Texas entered a nationwide preliminary injunction blocking the Department of Labor (DOL) from implementing or enforcing the new federal overtime rule. The court found that the rule improperly created a de facto salary test for determining which workers fall under the Fair Labor Standards Act s (FLSA) so-called white collar exemption, irrespective of their job duties and responsibilities and thus in direct conflict with Congress' intent when it enacted the FLSA. The court questioned the statutory authority for the DOL s salary level under the rule and the rule s automatic updating mechanism. The judge determined that the 21 states challenging the rule had shown a likelihood of success in their challenge, as well as irreparable harm if it went into effect, while the DOL failed to show it would be harmed if the rule were delayed. The new federal overtime rule was scheduled to go into effect on December 1, However, in light of this decision, employers can hold off making any changes pursuant to the rule pending further order of the court. For more information, please contact: by Emily Leahy & Dorothy S. Liu & Lisa M. Pooley Emily Leahy, Counsel ELeahy@hansonbridgett.com Dorothy S. Liu, Partner dliu@hansonbridgett.com Lisa M. Pooley, Partner lpooley@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

218 DECEMBER 29, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP California Supreme Court Confirms that Labor Code Section and IWC Wage Order No. 4 Prohibits On- Duty and On-Call Rest Periods On December 22, 2016, in Augustus v. ABM Security Services, Inc., Case No. S224853, the California Supreme Court issued a split decision on rest periods. In a decision in which four justices concurred, and two concurred and dissented, in part, the Court held that employers must relieve their employees of all duties and relinquish any control over how employees spend their break time. The decision has ramifications for employers operationally and administratively as they should consider revising their Employee Handbooks to provide an affirmative statement that employee rest periods are to be uninterrupted and duty free. Background ABM Security Services employs thousands of security guards at sites throughout California. The company required its security guards to keep their pagers and radios on and remain responsive to calls when needs arose, even during rest periods. The plaintiff filed a class action in 2005 on behalf of all ABM security guards in California, arguing that ABM s on-call policy unlawfully denied the security guards their statutory duty free rest periods. by Raymond F. Lynch & Diane Marie O'Malley & Emily Leahy The trial court granted summary judgment in favor of plaintiffs, and awarded the class $90 million in damages. The Court of Appeal reversed the trial court, concluding that state law does not require employers to provide off-duty rest periods, and moreover, simply being on call does not constitute performing work. In so holding, the Court of Appeal performed an exhaustive review of the difference between California s meal period and rest period language. The Decision The Supreme Court reversed the Court of Appeal, apparently disagreeing fundamentally with the appellate court's reading of the statutory language and instead finding that ABM s rest period policy did not comply with the California Labor Code and Wage Order No. 4. In so holding, the Supreme Court found that the practice of compelling the security guards to remain at the ready, tethered by time and policy to particular locations or communications devices, could not be squared with the

219 PG 2 requirement to relieve employees of all work duties and employer control during 10-minute rest periods. The Supreme Court based its decision on the language of Wage Order 4, which provides, in relevant part. Every employer shall authorize and permit all employees to take rest periods Authorized rest period time shall be counted, as hours worked for which there shall be no deduction from wages. The Supreme Court interpreted this language to evoke, quite plainly, a period of rest, and found that this language only makes sense if employees are relieved of duties. In so holding, the Supreme Court distinguished this language from the language of Wage Order 5 (applicable to employees with direct responsibility for children who receive 24 hour residential care and employees of 24 hour residential care facilities for elderly, blind or developmentally disabled individuals), which allows that employees "may, without penalty, [be required] to remain on the premises and maintain general supervision of residents during rest periods if the employee is in sole charge of residents. Another rest period shall be authorized and permitted by the employer when an employee is affirmatively required to interrupt his/her break to respond to the needs of residents. (Wage Order 5, subd. 12(C)). According to the Supreme Court, that language in Wage Order 5 appears to authorize on-duty rest periods, but only in starkly limited circumstances. The Court inferred from the absence of similar language in Wage Order 4 that there was no exception for employers and thus, ABM could not require its employees to be on-call. Most Wage Orders have language similar to Wage Order 4. The Supreme Court did acknowledge that because rest periods are 10 minutes in length, they impose practical limitations on an employee s movement and employees will ordinarily have to remain onsite or nearby. However, the Supreme Court concluded that the additional restraints imposed by on-call arrangements carrying a device or otherwise making arrangements so the employer can reach the employee during a break, responding when the employer seeks contact with the employee, and performing other work if the employer so requests are irreconcilable with employees retention of freedom to use rest periods for their own purposes. ABM argued that a conclusion that on-call rest periods is impermissible under the Wage Order would be radical because it would categorically prohibit an employer from recalling its employees to work while they are on rest breaks, regardless of the exigency. The Supreme Court disagreed, and suggested that employers can still reasonably reschedule a rest break when the need arises. The Dissent Justices Kruger and Corrigan agreed with the Majority Opinion that an employer must provide "off-duty rest periods, but dissented from the Majority Opinion regarding whether carrying a pager and other device violated the off-duty nature of the rest period. Both Justices believed that a bare requirement to carry a radio, phone, pager, or other communications device in case of emergency does not constitute work in any relevant sense of the term. They instead urged an approach that focuses on whether the employer has imposed restrictions that interfere with the employee s ability to use the time for his or her own purposes. Employer Take Away The Supreme Court decision is disappointing. The Court decided that employers must relinquish any control over how employees spend their rest period time, and relieve their employees of all duties. A rest period, in short, must be a period of rest. For practical purposes, this means that employers should treat paid rest periods in the same manner as off-duty unpaid meal breaks.

220 PG 3 The Augustus v. ABM Security Services decision complicates how employers manage rest periods and raises questions as to whether employers should revise the rest period language in their Employee Handbooks to address the Augustus v. ABM Security Services holding. Please consult your Hanson Bridgett attorney about how this decision may impact your business operations. For more information, please contact: Raymond F. Lynch, Partner rlynch@hansonbridgett.com Diane Marie O'Malley, Partner domalley@hansonbridgett.com Emily Leahy, Counsel ELeahy@hansonbridgett.com DISCLAIMER: This publication does not constitute legal advice. Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented. Copyright Hanson Bridgett LLP

221 Employer Wellness Programs Face Challenges Diane O Malley April 11, 2016 Incentives to get workers healthy are growing, but the EEOC says some of them violate the ADA. Employer wellness programs provide employees access to weight control programs, exercise routines and more. Healthier employees reduce health care claims and employer health care costs. These employees also tend to be absent less and more productive. In 2000, the Equal Employment Opportunity Commission sanctioned wellness programs provided they included voluntary medical examinations and activities that were part of an employee health program. "A wellness program is "voluntary" as long as an employer neither requires participation nor penalizes employees who do not participate," the EEOC said in its July 27, 2000, "Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act." Wellness programs have flourished since then. However, the EEOC has challenged program incentives as violating the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). On April 18, 2015, the EEOC issued a proposed rule addressing the ADA's interaction with wellness programs and clarified what constitutes a permissible program in light of the ADA's prohibition from requiring employees to submit to medical examinations and inquires. The rule lists requirements for participation in wellness programs to be considered voluntary. An employer may not require employees to participate; deny access to health coverage; limit coverage for nonparticipation; take adverse action or retaliate against employees who do not participate or fail to achieve certain health outcomes. The maximum allowable incentive an employer may offer employees for program participation or for achieving certain health outcomes, and the maximum allowable penalty an employer can impose on employees who do not participate or achieve certain health outcomes, is 30 percent of the total cost of employee-only coverage. SEFF V. BROWARD COUNTY The rule is prompted, in part, by EEOC legal actions and lawsuits alleging ADA violations. In Seff v. Broward County, a case decided by the U.S. Court of Appeals for the Eleventh Circuit in 2012, Bradley Seff brought a class action alleging that the wellness program of Broward County, Florida, violated the ADA. The county's insurer sponsored a program that consisted of a biometric screening and a health risk assessment form. Employees who exhibited diseases had an opportunity to participate in a disease management program after which they became eligible to receive co-pay waivers for medications. The county charged a fee to employees who enrolled in health care coverage but did not participate in the wellness program. Seff, a former employee who was charged the fee, brought

222 a class action claiming the screening and form were illegal medical examinations and disabilityrelated inquiries. The Eleventh Circuit found that the county's wellness program came under the ADA's "safe harbor" provision, which provides that certain ADA provisions "shall not be construed to prohibit" organizations, such as health insurers, from establishing or sponsoring a bona fide benefit plan that is based on underwriting risks, classifying risks or administering such risks. Despite Seff, the EEOC brought three lawsuits in 2014 alleging that wellness programs violated the ADA and GINA. EEOC V. ORION ENERGY SYSTEMS INC. In August 2014, the EEOC brought a suit alleging ADA violations in regard to Orion's wellness program. Orion covered 100 percent of the health care costs for employees who participated in the program, according to the EEOC's complaint. And employees who did not participate paid 100 percent of the premiums plus a $50 monthly penalty, the suit claimed. The case is pending in the U.S. District Court for the Eastern District of Wisconsin. EEOC V. HONEYWELL INTERNATIONAL INC. In October 2014, the EEOC tried to enjoin Honeywell from implementing its program, claiming Honeywell violated the ADA and GINA by penalizing employees for not participating in biometric screenings. The penalties included a $500 surcharge if an employee did not complete the screening and no entitlement to a Health Savings Account contribution that persons who completed the test received. The District of Minnesota rejected the EEOC's request for a temporary restraining order and seemed to applaud Honey well's efforts through its wellness program to "raise awareness of important health indicators among its employees" while at the same time "supporting one of the primary goals of health care reform: reducing overall health care costs." The court did allude to the struggles employers face in this area, noting that the EEOC's recent lawsuits "highlight the tension" between laws that encourage these programs and the ADA. The court expressed a need that many employers are seeking "clarity in the law so that corporations are able to design lawful wellness programs and also to ensure that employees are aware of their rights under the law." According to the court's docket, the case closed on the date of the court's decision. EEOC V. FLAMBEAU INC. In September 2014, the EEOC claimed that Flambeau, a manufacturer and seller of plastic products, violated the ADA by conditioning participation in its employee health insurance plan on completing a health risk assessment and a biometric screening test. If employees did not complete the testing and assessment, Flambeau shifted premium cost responsibility to the employee. Employees who performed the testing and assessment were only required to pay 25 percent of their premium cost.

223 In December 2015, the Western District of Wisconsin agreed with Seff that the ADA's safeharbor protection enables employers to design insurance benefit plans that require otherwise prohibited medical examinations as a condition of enrollment. Of particular importance for employers, the Flambeau court rejected the EEOC's own interpretation of its rule. In its April 2015 rule, the EEOC specifically called out Seff and stated that it did not believe that ADA's safe-harbor provision applicable to insurance "is the proper basis for finding wellness program incentives permissible." The court disagreed, noting that the EEOC rule speaks only to the safe harbor's application to "wellness program incentives." The court pointed out that the rule says nothing about the safe harbor's applicability to medical examinations that are part of a wellness program and are used to administer and underwrite insurance risks associated with an employer's health plan. In light of these cases, employers should review and adhere to the EEOC's rule on wellness programs. They should also administer these programs as part of full insurance programs. Diane O Malley is a partner at Hanson Bridgett in San Francisco. She counsels employers on discrimination, contract and wage-and-hour claims and class actions. Reprinted with permission from the April 11, 2016 edition of The National Law Journal 2016 ALM Media Properties, LLC. All rights reserved.

224 APRIL 8, 2016 HANSON BRIDGETT LABOR & EMPLOYMENT PRACTICE GROUP San Francisco Delivers New Paid Parental Leave San Francisco's Board of Supervisors approved an ordinance that will provide employees with six weeks of fully paid parental leave, making it the first city in the United States to do so. Currently, employees taking parental leave in California are allowed to receive up to 55 percent of their wages for six weeks through the state's disability insurance program, but California law does not otherwise obligate employers to provide any paid parental leave to make up the difference. Once San Francisco's new law takes effect on January 1, 2017, employers with workers in San Francisco will be required to pay for the remainder, which would provide parents with full wages for six weeks. Who Must Comply? As of January 1, 2017, the ordinance will apply to all private employers doing business in San Francisco who regularly employ 50 or more employees, regardless of location. Employers doing business in San Francisco with 20 employees or more, regardless of location, must comply after July 1, If an employer provides benefits that equal or exceed this requirement, the ordinance does not apply. by Emily Leahy & Lisa M. Pooley & Dorothy S. Liu The ordinance does not apply to the City or any other governmental entity. In addition, rights under the ordinance can be waived through collective bargaining. Who Is Eligible? The ordinance applies to employees who are receiving Paid Family Leave benefits through the State for the purpose of new child bonding, including the birth of a child or placement of a child through adoption or foster care. Full-time, part-time, and even temporary employees are eligible to receive full pay under the ordinance, although employees must work an average of at least eight hours a day and spend an average of at least 40% of his or her weekly hours worked for the employer within San Francisco to be eligible. The employee must commence work with the employer at least 90 days prior to the start of leave. Where an employee's hours fluctuate from week to week, employers must use the average of the employee's weekly