NEWS Archive - Castle Publications, LLC

CALIFORNIA’S NEW HEAT ILLNESS PREVENTION STANDARD FOR INDOOR WORKPLACES IS NOW EFFECTIVE

The March 2024 edition of the ALERT provided an update on the status of California’s proposed “Heat Illness Prevention in Indoor Places of Employment” standard. Following revisions to the regulation, it was adopted by California’s Occupational Safety and Health Standards Board on June 20, 2024, and became effective on July 23, 2024. The new regulation applies to most California workplaces where the indoor temperature reaches 82°F or higher (e.g., warehouses, distribution centers, manufacturing plants, and restaurants). The standard requires those employers to implement a written indoor heat illness prevention plan that includes procedures for accessing water and cool-down areas, acclimatization, training employees, and emergency response measures. Covered employers who have not already drafted and implemented their plan should do so immediately.

1. Approval Of The Standard

The adoption of an indoor heat illness prevention standard has been on the “to-do list” of California’s Division of Occupational Safety and Health (“Cal/OSHA”) for a long time. After exempting state-run correctional facilities, the Department of Finance allowed the regulation to proceed to a vote. In addition to approving the “Heat Illness Prevention in Indoor Places of Employment” standard (California Code of Regulations, Title 8, section 3396) (“Section 3396”), the Board requested that the Office of Administrative Law (“OAL”) (1) expedite approval of the new indoor heat illness prevention standard and (2) make the standard become effective immediately after approval due to increased safety concerns stemming from higher summer temperatures. On July 23, 2024, the Office of Administrative Law obliged the Board’s request, issuing its approval and making the regulation effective immediately.

2. Covered Employers

The language in Section 3396 that determines whether an employer’s workplace is covered by the new regulation can be confusing. Ultimately, there are two main temperatures that matter for employers under the new regulation: 82°F and 87°F. The requirements that apply under the new regulation depend on those temperatures, which can result in two different situations.

a. Indoor Workplaces that Are 82°F or Higher

Employers with an indoor workplace where the temperature/heat index is 82°F or higher when employees are present must implement a written Indoor Heat Illness Prevention Plan that includes procedures for accessing water and cool-down areas, acclimatization, and emergency response measures. Additionally, training must be provided to all employees (and their supervisors) who perform “work that should reasonably be anticipated to result in exposure to the risk of heat illness.”

b. Indoor Workplaces that Are 87°F or Higher and Certain Workplaces that Are 82°F or Higher

On top of complying with the above, employers must comply with additional requirements where the temperature/heat index is 87°F or higher, or where the temperature/heat index is 82°F but employees are (1) wearing clothing that restricts heat removal or (2) working in high radiant heat areas. The standard defines what qualifies as “clothing that restricts heat removal” and “radiant heat”. The extra requirements include measuring and recording the temperature and heat index and implementing control measures where feasible, as discussed below.

c. Exceptions on Compliance

The requirements under Section 3396 do not apply in the following situations:

• Workplaces with brief or incidental heat exposure where an employee is exposed to a temperature/heat index at or above 82°F and below 95°F for less than 15 minutes in any 60-minute period. This exception does not apply to vehicles without effective/functioning air-conditioning.

• Employees who telework from a location of the employee’s choice that is not under the control of the employer.

• Emergency operations directly involved in the protection of life or property.

3. Written Indoor Heat Illness Prevention Plan Requirement

Section 3396 mandates that covered employers establish, implement, and maintain an Indoor Heat Illness Prevention Plan (“IHIPP”) with specific required elements and procedures. The IHIPP must be in writing and in the language understood by the majority of the employees. It must be made available at the worksite to employees and to Cal/OSHA upon request. The IHIPP may appear as a standalone section in the employer’s Injury and Illness Prevention Program or as a separate document. If utilizing a separate document, the IHIPP procedures can be combined with an employer’s existing Heat Illness Prevention Plan for outdoor workplaces.

The IHIPP must include the following procedures:

• Provision of Drinking Water: Covered employers must give employees free access to clean, cool drinking water as close as practicable to their work area. If a continuous water supply is not possible, employers must provide enough water (i.e., one quart of drinking water per hour) for each employee.

• Provision of Cool-Down Rest Periods: Covered employers must allow and encourage employees to take a “preventative cool-down rest” in a cool-down area when employees feel the need to do so to protect themselves from overheating. Access to cool-down areas must be permitted at all times and employers must ensure there are one or more cool-down areas that are maintained at a temperature below 82°F, blocked from direct sunlight, and shielded from other high radiant heat sources to the extent feasible. The standard instructs that employees must not be ordered back to work until any signs or symptoms of heat illness have abated, and in no event less than five minutes in addition to the time needed to access the cool-down area. Notably, employers who fail to provide a preventative cool-down rest must provide employees with one hour of premium pay at the regular rate of pay, similar to where an employer fails to authorize or permit a compliant rest period.

• Acclimatization: Acclimatization is the process of allowing individuals to adjust to hot environments over time, reducing their risk of heat-related illnesses. Covered employers must closely observe employees who are newly assigned to high heat conditions for signs of heat stress during their first 14 days of work in these conditions. Additionally, during a heatwave, if employers cannot reduce indoor heat using methods like air conditioning or fans, they must have a supervisor closely observe employees for any heat-related issues.

• Emergency Response Procedures: Covered employers must have a plan for responding to symptoms and/or signs of heat illness and heat illness related emergencies.

4. Assessment and Control Measures for Certain Indoor Workplaces

Where the indoor temperature/heat index is 87°F or higher, or where the temperature/heat index is 82°F but feels hotter because employees are (1) wearing clothing that restricts heat removal or (2) working in high radiant heat areas, employers also must comply with the following requirements:

• Temperature and Heat Index Assessment: When it is “reasonable to suspect” that the temperature/heat index either reaches 87°F (or 82°F with employees wearing heat restrictive clothing or working in a high radiant heat area), employers must measure and record the temperature and heat index, noting the higher of the two, along with the date, time, and place of each reading. Measurements must be taken again when they are reasonably expected to be 10 degrees or more above the previous measurements. Employers must maintain these records for 12 months or until the next measurements are taken, whichever is later. The records must be made available to employees, designated representatives, and Cal/OSHA upon request. However, employers do have the option of bypassing the requirement to measure the temperature and heat index by assuming that the threshold temperature/heat index has been reached and moving on to implementation of control measures to minimize the risk of heat illness.

• Evaluation and Implementation of Control Measures: Employers must use control measures to minimize the risk of heat illness. The selection of control measures must be based on the environmental risk factors for heat illness present in the work area. Control measures may include engineering controls (e.g., installing air conditioning, adding heat-reducing insulation, using reflective coatings or materials to block heat radiation from equipment or the sun) and/or administrative controls (e.g., adjusting work schedules to avoid the hottest parts of the day, rotating employees to cooler tasks to limit heat exposure, increasing the frequency and duration of breaks in cool areas). If both feasible engineering and administrative controls are not enough to decrease the temperature and minimize the risk of heat illness, then “personal heat-protective equipment” should be provided (e.g., vests filled with ice packs, uniforms with fabrics that wick away sweat and allow ventilation, providing portable battery-operated fans).

5. Required Employee Training

Section 3396 requires employers to provide comprehensive training on the IHIPP and heat illness risk factors to supervisory and non-supervisory employees “before the employee engages in work that should reasonably be anticipated to result in exposure to the risk of heat illness.” Specifically, the training must cover:

• The environmental and personal risk factors for heat illness;

• The employer’s procedures for complying with the standard’s requirements;

• The importance of frequent consumption of small quantities of water;

• The concept, importance, and methods of acclimatization;

• The different types of heat illness, the common signs and symptoms of heat illness, and appropriate first aid and/or emergency responses to the different types of heat illness;

• The importance of reporting symptoms or signs of heat illness; and

• The employer’s procedures for responding to signs or symptoms of possible heat illness, contacting emergency medical services, transporting employees to a point where they can be reached by an emergency responder if necessary, and ensuring that clear and precise directions to the worksite can and will be provided as needed to emergency responders.

Employers must provide additional training for supervisory employees on the following topics:

• How the supervisor is expected to comply with the standard’s requirements as determined by the employer;

• The procedures the supervisor is to follow when an employee exhibits signs or reports symptoms consistent with possible heat illness, including emergency response procedures; and

• Where the work area is affected by outdoor temperatures, how to monitor weather reports and how to respond to hot weather advisories.

6. Cal/OSHA Guidance

Presumably in support of the push to expedite the standard’s effective date, Cal/OSHA already published guidance for employers, including a comparison of the outdoor and indoor standards. The guidance also includes a combined indoor and outdoor heat illness prevention model plan and FAQ guidance. Importantly, the FAQ guidance notes that an IHIPP that “is little more than a restatement of the safety orders does not satisfy the standard; instead, it must be specific and customized to the employer’s operations.”

7. Next Steps

Employers who have not done so already should measure the temperature and heat index in the workplace to determine if the new standard may apply. If it does, the employer should begin to take active steps to ensure compliance by:

• Reviewing employees’ access to water and cool-down areas, the need and process for acclimatization, and applicable emergency response procedures;

• Identifying how to measure and maintain temperature/heat index records and what control measures to implement (if these additional requirements must be satisfied);

• Drafting the written IHIPP; and

• Preparing and conducting training for supervisors and employees.

Employers with any questions or concerns about compliance should consult with experienced employment law counsel.

To read more articles like this one, subscribe to the ALERT Newsletter today!

About The Author

Robert K. Foster is an Associate with Sheppard, Mullin, Richter & Hampton LLP in the firm’s San Diego (Del Mar) Office. Mr. Foster represents employers in various types of employment litigation, including class action wage and hour claims; PAGA claims; and discrimination, wrongful termination, harassment and retaliation lawsuits. In addition, he also provides strategic advice to employers on a wide range of employment issues, including wage and hour compliance, employee classification, and OSHA matters. He is a frequent contributor to the California Labor and Employment ALERT Newsletter and several other articles and is the co-author of the Employer’s Guide to Workplace Violence Prevention.

Robert litigates actions involving trade secret claims, unfair competition and enforcement of restrictive covenants and non-competes. He also handles various commercial litigation disputes, including breach of contract, breach of fiduciary duty, fraud, tortious interference with contract, unfair competition and shareholder derivative claims.

EEOC ISSUES FINAL REGULATIONS UNDER PREGNANT WORKERS FAIRNESS ACT

On December 20, 2022, President Biden signed the Pregnant Workers Fairness Act (“PWFA”) into law, 42 U.S.C. § 2000gg. The PWFA requires covered employers to provide reasonable accommodations to a qualified employee’s or applicant’s known limitation related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions, absent undue hardship on the operation of the employer’s business. The PWFA directed the Equal Employment Opportunity Commission (“EEOC”) to promulgate regulations to implement its provisions.

1. The Final Regulations

In response to this directive, the EEOC proposed regulations on August 11, 2023, and published final regulations on April 15, 2024. The final regulations will appear in 29 C.F.R. Part 1636 and were published in the Federal Register on April 19, 2024 (89 Federal Register 29096 -29219). They exceed 400 pages and include interpretive guidance construing the law. The regulations and PWFA apply to employers covered by Title VII, including public and private employers with 15 or more employees, unions, employment agencies, and the federal government. The interpretive guidance accompanying the regulations contains numerous examples to illustrate provisions in the regulations.

a. The Regulations Survey Many Topics

The final regulations appear in 29 C.F.R. Part 1636 and include eight broad sections addressing (1) the purpose of the law, (2) general definitions, (3) definitions specific to the PWFA, (4) nondiscrimination with regard to reasonable accommodations related to pregnancy, (5) remedies and enforcement, (6) waiver of state immunity, (7) relationship to other laws, and (8) severability. These provisions are followed by Appendix A to Part 1636, which is entitled “Interpretive Guidance on the Pregnant Workers Fairness Act.”

b. The Regulations Identify Eight Rules In The PWFA

An introduction to the massive document laying out the regulations and the law is embodied in 29 C.F.R. Section 1636.1. That section describes the “purpose” of the regulations. It lists the following eight pivotal points about the PWFA:

(1) it requires employers to make reasonable accommodations to the known limitations of a qualified employee related to pregnancy, childbirth, or related medical conditions, absent undue hardship;

(2) it prohibits a covered employer from requiring a qualified employee to accept an accommodation, other than a reasonable accommodation arrived at through the interactive process;

(3) it prohibits the denial of employment opportunities based on the need of the employer to make reasonable accommodation to the known limitations related to the pregnancy, childbirth, or related medical conditions of a qualified employee;

(4) it prohibits an employer from requiring a qualified employee to take leave if another reasonable accommodation can be provided to the known limitations related to the pregnancy, childbirth, or related medical conditions of the employee;

(5) it prohibits an employer from taking adverse actions in terms, conditions, or privileges of employment against a qualified employee on account of the employee requesting or using a reasonable accommodation for known limitations related to pregnancy, childbirth, or related medical conditions;

(6) it prohibits discrimination against an employee for opposing unlawful discrimination under the PWFA or participating in a proceeding under the PWFA;

(7) it prohibits coercion of individuals in the exercise of their rights under the PWFA; and

(8) it provides remedies for individuals whose rights under the PWFA are violated.

c. The Definitions Broadly Define Pregnancy, Childbirth, And Related Medical Conditions

One of the definitions that has drawn attention is contained in Section 1636.3(b), which defines “pregnancy, childbirth or related medical conditions.” The term related medical conditions is defined, by way of example, to include “termination of pregnancy, including via miscarriage, stillbirth, or abortion.”

2. The PWFA Is Intended To Fill Gaps Left Open By Title VII And The ADA

Appendix A to the regulations provides interpretive guidance on the PWFA. The Appendix begins with an introduction that describes the PWFA and its requirement that employers provide reasonable accommodations to a qualified employee’s and applicant’s known limitation related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions, absent undue hardship on the operation of the employer’s business.

It then explains the interrelationship between the PWFA and other federal statutory rules that afford independent protections of one kind or another to pregnant employees and job applicants, including prohibitions against discrimination, termination, and retaliation. It states that employees affected by pregnancy, childbirth, or related medical conditions have certain rights under existing civil rights laws, including Title VII of the Civil Rights Act of 1964, as amended by the Pregnancy Discrimination Act of 1978, and the Americans With Disabilities Act of 1990.

These laws prohibit employers from firing or otherwise discriminating against job applicants or employees on the basis of pregnancy, childbirth, or related medical conditions. Congress nonetheless determined that the legal protections offered by these statutes, particularly as interpreted by the courts, were “insufficient” to ensure that pregnant workers receive the accommodations they need.

3. Reasonable Accommodations

The PWFA focusses on accommodations for applicants and employees affected by pregnancy, childbirth, and related medical conditions. Critical terms used in the PWFA are defined in the regulations, including the term “reasonable accommodations.” The regulations also provide examples. As an illustration, the regulations describe reasonable accommodations or changes in the work environment or the way things are done at work.

Examples of reasonable accommodations under the PWFA include:

a. Additional, longer, or more flexible breaks to drink water, eat, rest, or use the restroom;

b. Changing food or drink policies to allow for a water bottle or food;

c. Changing equipment, devices, or workstations, such as providing a stool to sit on, or a way to do work while standing;

d. Changing a uniform or dress code or providing safety equipment that fits;

e. Changing a work schedule, such as having shorter hours, part-time work, or a later start time;

f. Telework;

g. Temporary reassignment;

h. Temporary suspension of one or more essential functions of a job;

i. Leave for healthcare appointment;

j. Light duty or help with lifting or other manual labor; or

k. Leave to recover from childbirth or other medical conditions related to pregnancy or childbirth.

4. Remember California Law

There is no question that the enactment of the PWFA represents a highly significant development on the federal level. It creates a series of new rules and employer obligations that exceed the protections previously afforded pregnant women under other federal laws. It is, however, less significant for California employers for several reasons.

First, the existing California law, the California Fair Employment and Housing Act (“FEHA”), applies to a broader universe of employers, including those with just five or more employees. The PWFA applies to employers with 15 or more employees. Second, in addition to prohibiting discrimination and retaliation, the FEHA regulations and caselaw already require covered employers to make reasonable accommodations for pregnant job applicants and employees. While the PWFA regulations are certainly very long and elaborate, as is often the case, the introduction of federal regulations in this area is another belated effort by the federal government to catch up and copy California law. Third, the remedies available under the FEHA are potentially far greater than those available under federal law and can include uncapped punitive damages. As a result, plaintiffs typically find it far more attractive to file actions under California law when they have the choice.

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About The Author

Richard J. Simmons is a Partner in the law firm of Sheppard, Mullin, Richter & Hampton LLP in Los Angeles. He represents employers in various employment law matters involving litigation throughout the country and general advice regarding state and federal wage and hour laws, employment discrimination, wrongful discharge, employee discipline and termination, employee benefits, affirmative action, union representation proceedings, and arbitrations. Mr. Simmons received his B.A., summa cum laude, from the University of Massachusetts, where he was a Commonwealth Scholar and graduated in the Phi Kappa Phi Honor Society. He received his J.D. from Berkeley Law at the University of California at Berkeley where he was the Editor-in-Chief of the Industrial Relations Law Journal, now the Berkeley Journal of Employment and Labor Law.

Mr. Simmons argued the only case before the California Supreme Court that produced a victory for employers and business in 2018. He was recently recognized as the Labor and Employment Attorney of the Year by the Los Angeles Business Journal and was inducted into the Employment Lawyers Hall of Fame. He has lectured nationally on wage and hour, employment discrimination, wrongful termination, and other employment and labor relations matters. He is a member of the National Advisory Board to the Berkeley Journal of Employment and Labor Law, published by Berkeley Law at the University of California at Berkeley. He was also appointed by the California Industrial Welfare Commission as a member of three Minimum Wage Boards for the State of California.

QUICK REFERENCE GUIDE TO I-9 FORMS

1. Overview Of The Challenges

In 1986, Congress put the burden on employers to confirm an employee’s authorization to work in the United States. The I-9 rules are tricky and it is not always clear when someone satisfies the authorization standards. Indeed, the I-9 Handbook is 130 pages long notwithstanding that it only purports to provide assistance in understanding a four-page form. In addition, the U.S. Department of Justice Immigrant and Employee Rights Division is aggressive about holding employers strictly liable for innocent mistakes. Employers are encouraged to reach out to counsel whenever an unusual situation arises.

2. New I-9 Form Was Released In August 2023

On August 1, 2023, the Department of Homeland Security (“DHS”) released a new Form I-9. It became mandatory on November 1, 2023.

3. Quick I-9 Tips

• Paper I-9s: These still require a wet signature from the employee and employer, and retention of the original paper I-9.

• Digital I-9s: These are acceptable as long as the software complies with ICE protocols regarding the creation of a digital audit trail.

• New Remote Hires: E-Verify employers may use the new video procedure. Employers that are not on E-Verify must use a remote authorized signatory to complete Section 2 of the I-9.

• Remote Verification: E-Verify employers can check off a box in Section 2 or on the Reverification Supplement B to indicate they used a video session for remote verification of I-9 identity and work authorization documents.

• Supplement A: This is used when the employee is assisted with preparing Section 1 and/or needs translation.

• Supplement B: This is used for reverification and rehires.

• Non Citizen: USCIS replaced the term “alien” with non-citizen.

4. Wet Signatures Are Still Required Unless Using Digital Software

Unless an employer is using a digital I-9 software that is ICE compliant, employers must obtain a wet signature for all employee and employer sections of the paper I-9. Enrolling in E-Verify will not waive the wet signature requirement for a paper I-9.

5. Checklist For E-Verify Employers Seeking Remote Verification Of New Hires

Employers enrolled in E-Verify are now allowed to follow a new flexible procedure for remote verification of I-9 identity and work authorization documents for new hires.

• Step 1: The employer sends the new hire access to the digital I-9 from their system. If the employer is still using paper I-9s, then they e-mail a blank I-9 to the remote employee to complete Section 1.

• Step 2: The new hire or employee copies or photographs their I-9 identity and work authorization documents (front and back) and e-mails them to the employer (or texts or uploads them).

• Step 3: The employee or new hire reviews and signs Section 1 of the I-9. If the I-9 is on paper, then it requires a wet signature, and the employee will need to overnight courier it back to the employer. Or, the employer can overnight courier the I-9 to the employee and include a self-addressed overnight courier envelope.

• Step 4: The employer conducts a live video interaction (i.e., Zoom, Teams, Google Meet, FaceTime, etc.) with the employee or new hire to ensure that the documentation relates to them. During the video session, the employee or new hire must present the same documents previously submitted to the employer. The employer examines the copies of the documents to ensure the documents appear to be genuine.

• Step 5: The employer marks the alternative procedure box of Section 2 of the new I-9 form.

• Step 6: Employer completes Section 2 of the I-9 and retains the supporting documents (paper or digital) and attaches them to the I-9. (In the past, only List A documents were copied. With the new remote flexibility, the E-Verify employer must now copy and retain all List A, or List B and C documents.)

6. Avoiding Liability For Discrimination With I-9s And E-Verify

Employers should be mindful of the following key issues:

• E-Verify is only to be used on new hires. The only exception is employees working on a covered federal contract that requires mandatory E-Verify.

• An I-9 should never be completed until an offer is made and E-Verify should never be used until the I-9 is completed.

• Employers cannot verify the information in Section 1 by requesting additional documents (e.g., you cannot request the Social Security card to confirm the Social Security number).

7. DOJ Enforcement Actions – Immigrant & Employee Rights (IER) Unit

While employers should always strive to have perfect I-9s, if they have any doubts as to whether someone is work authorized (either a new hire or someone on an automatic extension) they should consult with counsel. The Department of Justice will hold employers strictly liable for any inadvertent denial of employment due to a misunderstanding of whether an employee is work authorized. Along with that comes a burdensome Civil Investigation Demand, mandatory training, fines, and public shaming.

To read more articles like this one, subscribe to the ALERT Newsletter today!

About The Author

Greg L. Berk is a Partner in the law firm of Sheppard, Mullin, Richter & Hampton LLP in the firm’s Orange County office. He leads the Firm’s immigration practice and is a Certified Specialist in Immigration and Nationality Law by the State Bar of California Board of Legal Specialization. He has over 25 years of experience advising on all aspects of U.S. immigration matters. He assists employers worldwide with the hiring and retention of foreign national executives and highly talented individuals that are needed in their U.S. workforce. He also works with investors on E-2, L-1, and EB-5 matters. He also handles I-9 and other immigration compliance matters.

Greg frequently lectures on immigration issues and is a regular contributor to the California Labor and Employment ALERT Newsletter and Sheppard Mullin’s Labor & Employment Law blog. Mr. Berk received his J.D. from Western State University College of Law, his M.B.A. from George Washington University and his B.A. from California State University.

CAL/OSHA ISSUES LONG-AWAITED GUIDANCE AND MODEL WORKPLACE VIOLENCE PREVENTION PLAN

The November 2023 edition of the ALERT provided an overview of SB 553, California’s new workplace violence prevention law, and the January 2024 edition of the ALERT identified practical considerations of the new law for employers. The latest update on the new law comes from California’s Division of Occupational Safety and Health (“Cal/OSHA”), the agency responsible for enforcing the new law’s requirements, which released its “Cal/OSHA Workplace Violence Prevention Guidance and Resources” webpage. The webpage contains guidance and educational materials on the new law and workplace violence prevention, a model WVPP, fact sheets, and other resources for employers and employees.

1. General Impact Of Cal/OSHA Guidance

Cal/OSHA frequently publishes guidance, including model plans, to assist employers with compliance on safety regulations that require written plans and programs (such as California’s Injury and Illness Prevention Program regulation). Although employers are not required to use the model plans, they can serve as a “fillable template” and provide the basic framework for various required procedures and policies. That said, the plans usually are written in a way to make them broadly applicable to all employers. Moreover, because they are written with employee safety as the ultimate focus, some provisions may go above and beyond what regulations require.

2. Summary Of Cal/OSHA’s Guidance

The newly created Cal/OSHA Workplace Violence Prevention Guidance and Resources webpage on Cal/OSHA’s website contains various types of guidance and educational materials on the new law and workplace violence prevention. The website also includes FAQs on the new requirements of SB 553 and other related information.

Cal/OSHA’s model WVPP is nineteen pages long and includes the following:

• A brief overview of the new law;

• Directions on drafting the plan;

• The WVPP itself, including definitions for key terms and various sections covering the requirements of the new law; and

• A Violent Incident Log form.

Cal/OSHA also published two fact sheets: one for employers and one for employees. The employer fact sheet is a three-page document that provides an overview of the various requirements for employers under SB 553 (codified as new California Labor Code Section 6401.9). Specifically, the employer fact sheet lists the various items employers must include in their WVPP, information that employers must include in their violence incident logs, training topics, additional employer responsibilities, and related regulations. Cal/OSHA also created a Cal/OSHA Workplace Violence Prevention for General Industry (Non-Health Care Settings) webpage that contains much of the same information. The fact sheet for employees explains what constitutes workplace violence and identifies the four types of workplace violence. It also identifies training that employers must provide, explains how employees can help prevent workplace violence, and identifies what rights employees have under the new law.

3. Substantial Customization Of The Model WVPP Is Necessary

In some instances, an employer can utilize Cal/OSHA’s model plan without having to add much. However, Section 6401.9 requires employers develop and implement various procedures to respond to and investigate workplace violence incidents, acts, threats, concerns, and emergencies. The type of response and risk of potential exposure to workplace violence can vary by workplace, location, industry, etc. Consequently, the model WVPP contains suggestions, questions, and examples for employers to consider as they assess potential risks in their workplaces. For example, the model WVPP includes a lengthy list of hazards (e.g., whether employees have cash on hand, whether employees are exposed to hostile situations) and potential corrective action (e.g., installation of surveillance systems, controlling access by non-employees). Cal/OSHA notes that an employer’s use of the model WVPP by itself does not ensure compliance with Section 6401.9 and that employers are still liable for any violations of Section 6401.9 regardless of their use of the model WVPP. In other words, the model WVPP is merely a starting point for employers to build upon, and employers still must identify, add, and implement sufficient procedures themselves.

4. Some Areas Of Focus In Cal/OSHA’s WVPP

Notably, the model WVPP asks employers to describe procedures involving employees, specifically: (i) how employees can report concerns or incidents; (ii) how employees will be trained; (iii) how employee compliance will be ensured; (iv) how investigation findings will be delivered to employees; (v) how anything related to workplace violence will be communicated to employees; and (vi) how employees will be rewarded for contributing to making the workplace more secure. Thus, a WVPP that generically addresses the requirements of Section 6401.9 without providing any specifics may result in further investigation by Cal/OSHA.

The model WVPP also places a large emphasis on employees’ involvement in developing the WVPP, likely stemming from the law’s requirement that the WVPP include “[e]ffective procedures to obtain the active involvement of employees and authorized employee representatives in developing and implementing the plan, including, but not limited to, through their participation in identifying, evaluating, and correcting workplace violence hazards, in designing and implementing training, and in reporting and investigating workplace violence incidents.” As such, employers should ensure they do not just pay that requirement lip service and actually take some steps to involve employees in the process of developing their WVPP.

5. Conclusion

Although California employers still have a few months until Section 6401.9 becomes effective on July 1, 2024, they should begin drafting their WVPP soon if they have not done so already. The model WVPP reflects that the procedures required by Section 6401.9 are industry and worksite-specific, and thus an employer’s WVPP will be unique and require some level of attention and customization to ensure compliance. Employers with any questions or concerns about compliance should consult with experienced employment law counsel.

For more information on this new legislation and guidance on creating a workplace violence prevention plan, readers can consult the new 2024 Employer’s Guide to Workplace Violence Prevention by Richard J. Simmons and Robert K. Foster of Sheppard Mullin.

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About The Author

CALIFORNIA’S MINIMUM WAGE INCREASE FOR HEALTH CARE WORKERS IS ON THE HORIZON

On June 1, 2024, nearly all health care facilities in California will be required to increase the minimum wage paid to health care workers, ranging anywhere from $18 per hour up to $23 per hour depending on the type of health care facility. Below we address the key questions these facilities should be asking to evaluate their current and future compliance with this new law.

1. Is your entity a covered health care facility?

Almost all health care facilities in California are covered, including general acute care hospitals, psychiatric hospitals, integrated health care delivery systems, urgent care clinics, physician groups, skilled-nursing facilities that are owned, operated or controlled by a hospital or integrated health care delivery system, dialysis clinics, surgical clinics, outpatient clinics, and even a patient’s home when health care services are being provided by an entity owned or operated by a general acute care hospital or acute psychiatric hospital. There are very few health care facilities excluded from coverage. These include hospitals owned, controlled or operated by the Department of State Hospitals and certain tribal clinics.

2. Does your covered health care facility have employees subject to the new minimum wage?

Like a “covered health care facility,” a “covered health care employee” is also defined broadly and is not limited to employees performing patient care services. A person is a covered health care employee if they are an employee of a facility that provides patient care, health care services, or other services supporting the provision of health care. This includes not only patient care employees such as nurses, physicians, caregivers, medical residents, interns, and fellows, but also employees providing support services to the provision of health care, such as janitors, housekeepers, groundskeepers, guards, clerical workers, nonmanagerial administrative workers, food service workers, gift shop workers, technical and ancillary services workers, medical coding and medical billing personnel, schedulers, call center and warehouse workers, and laundry workers.

Additionally, contracted and subcontracted workers and temporary service workers contracted through a temporary services employer may also be covered if the health care facility is controlling their wages, hours, or working conditions, or the worker is performing work primarily on the premises of the facility to provide health care services or services supporting the provision of health care.

There are very few workers who are excluded from the definition of a covered health care employee. These include those employed as outside salespersons, those who perform work in the public sector where the primary duties performed are not health care services, those who perform delivery or waste collection work if certain requirements are met, and those who perform medical transportation services if certain requirements are met.

3. What is the new minimum wage for your covered health care employees?

Under the new law, health care facilities are divided into the following four categories: (1) health care facilities that employ 10,000 or more full-time employees; (2) hospitals with a high or elevated governmental payor mix, and rural independent health care facilities; (3) clinics; and (4) other health care facilities. The applicable minimum wage depends upon which type of health care facility employs the workers.

• With respect to health care facilities in the first category, covered health care employees must be paid at least $23/hour beginning on June 1, 2024. Thereafter, the minimum wage will increase by $1/hour annually, ultimately reaching $25/hour on June 1, 2026. Starting January 1, 2028, the minimum wage will increase annually at the lesser of 3.5% or the Consumer Price Index.

• For health care facilities in the second category, beginning June 1, 2024, covered health care employees must be paid at least $18/hour. Thereafter, the minimum wage increases annually by 3.5%, reaching $25/hour on June 1, 2033. Starting January 1, 2035, the minimum wage will increase annually at the lesser of 3.5% or the Consumer Price Index.

• With respect to health care facilities in the third category, beginning June 1, 2024, and continuing to May 31, 2026, covered health care employees must be paid at least $21/hour. Between June 1, 2026 and May 31, 2027, these employees must be paid at least $22/hour. And starting on June 1, 2027, these employees shall be paid at least $25/hour. Starting January 1, 2029, the minimum wage will increase annually at the lesser of 3.5% or the Consumer Price Index.

• For health care facilities in the fourth category, beginning June 1, 2024, and continuing to May 31, 2026, covered health care employees must be paid at least $21/hour. Between June 1, 2026 and May 31, 2028, these employees must be paid at least $23/hour. And starting on June 1, 2028, these employees shall be paid at least $25/hour. Starting January 1, 2030, the minimum wage will increase annually at the lesser of 3.5% or the Consumer Price Index.

Health care facilities should review the Department of Health Care Access and Information page to determine which of the above categories applies to them. Importantly, health care facilities in the first category include both individual facilities with 10,000 or more full-time employees, as well as health care facilities that are part of a health care system that collectively employs 10,000 or more full-time employees. Those who believe they have been misclassified must file a request to be reclassified with the Department no later than January 31, 2025.

4. What if you have covered health care employees who are exempt, salaried workers?

Health care employees paid on a salary basis shall be paid a salary of no less than 150% of the applicable health care minimum wage, or 200% of the generally applicable state minimum wage per Labor Code Section 1182.12, whichever is greater. For health care facilities in the first category above, employees must make at least $71,760 annually (i.e., 1.5x health care minimum wage of $23/hour) to be considered exempt in 2024. On the other hand, health care facilities in the second, third and fourth categories must pay employees at least $66,560 annually (i.e., 2x the state minimum wage of $16/hour) to be considered exempt in 2024. It is important for health care employers to check this amount annually to ensure all exempt employees are satisfying the salary basis test.

5. What if a local government creates a higher minimum wage for covered health care employees?

SB 525 prevents a local government from passing a higher minimum wage for covered health care employees through January 1, 2034. However, a local government may pass a higher minimum wage that would apply uniformly to all employees (including non-health care employees) across all industries at any time, and that higher minimum wage would apply.

6. Can you seek a waiver from the new minimum wage?

Certain covered health care facilities may be able to seek a waiver of the minimum wage increase from the Department of Industrial Relations. However, the facility will be expected to demonstrate that compliance with the new law would raise doubts about its ability to continue to operate.

7. Takeaways

In light of this convoluted new law, health care employers should consult legal counsel to ensure that they are appropriately classifying themselves and their workers, as this determination will drive the type or category of minimum wage increase that will apply to them. Once it is determined which minimum wage increase applies, health care employers should continue to work with their counsel to implement a compliance plan as necessary before June 1, 2024. Health care employers may also consider whether they qualify for a waiver, and should be cognizant of the timing of each wage increase in the coming years.

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About The Authors

Kristi L. Thomas is an associate in the Labor and Employment Practice Group with the law firm of Sheppard, Mullin, Richter & Hampton LLP in the firm’s Orange County office. Kristi’s practice involves representing employers in the defense of complaints for class action and single-plaintiff matters. Kristi has handled all aspects of civil litigation defense, including taking and defending depositions, law and motion practice, mediation, arbitration, and second-chairing multiple trials to defense verdict. Kristi also provides day-to-day counseling on a wide variety of labor and employment law issues, including wage-and-hour issues, disability and family/medical leave issues, discipline, and termination. She conducts supervisor and non-supervisor trainings on behalf of clients regarding sexual harassment and workplace behavior.

Kristi received her J.D. from Widener University School of Law, and her B.A. from University of Pittsburgh.

Tyler J. Johnson is an associate in Sheppard Mullin’s Labor and Employment Practice Group in the firm’s Los Angeles office. Mr. Johnson represents employers in every stage of the litigation process, from prelitigation disputes to class certification hearings and trials. He represents businesses of every size, and has extensive experience in the healthcare, agricultural, fashion, and temporary staffing industries. Tyler defends employers against claims of discrimination, harassment, and retaliation, and has prevailed at trial in a pregnancy discrimination case. Tyler also routinely represents businesses in complex litigation, including proposed class actions and representative actions under the Private Attorneys General Act. Tyler has defeated class certification in a number of cases and frequently obtains summary judgment for employers.

Tyler is a co-author of the Private Attorneys General Act (PAGA) Litigation and Compliance Manual as well as a contributing author of the ALERT Newsletter.

BRIEFING COMPLETED IN TIME ROUNDING CASE

In Camp v. Home Depot, the case currently before the California Supreme Court that is set to decide whether rounding employees’ time is lawful, all briefing is complete. Home Depot filed its reply brief on September 25, 2023, and several amici curiae filed briefs in support of the parties’ positions on October 25, 2023. One of these briefs was filed by Sheppard Mullin to advance the position of employers that rounding should be allowed.

As a refresher, in October 2022, the Sixth District of the California Court of Appeal found Home Depot’s “total time” rounding practice for its non-exempt employees was unlawful. In so holding, the court held, “if an employer, as in this case, can capture and has captured the exact amount of time an employee has worked during a shift, the employer must pay the employee for ‘all the time’ worked.” Camp v. Home Depot U.S.A., Inc., 84 Cal.App.5th 638, 660 (2022). The court rejected at least half a dozen prior appellate opinions approving of neutral rounding systems, which date back to the 2012 Court of Appeal decision in See’s Candy Shops, Inc. v. Superior Court, 210 Cal.App.4th 889 (2012).

The California Employment Law Council and the Employers Group are employer trade associations that advocate on behalf of employers. They hired Richard J. Simmons and Tyler J. Johnson of Sheppard Mullin to draft the employer-side amicus brief in Camp. This brief was filed on October 25, 2023. It advocates that rounding should be permissible based on the federal rules and standards established since 1955. Rounding has been recognized across the country as a practical and efficient method to effectively calculate work time and pay employees fairly. Contrary to the Court of Appeal’s reasoning in Camp, there have not been any technological advances or changes in the law that compel the conclusion that rounding should be outlawed. Certainly, the law was not amended since See’s Candy approved rounding in 2012 and the state and federal enforcement agencies authorized it.

Now that briefing is complete, the next step is for the California Supreme Court to set oral argument. Based on data from past years, the average amount of time between the close of briefing and oral argument is approximately 250 days. This would put the oral argument around the beginning of July 2024. The ALERT will report further developments.

To read more articles like this one, subscribe to the ALERT Newsletter today!

About The Author

Tyler is a co-author of the Private Attorneys General Act (PAGA) Litigation and Compliance Manual as well as a contributing author of the ALERT Newsletter.

Mr. Johnson received his law degree from the Pepperdine Caruso School of Law and his undergraduate degree from University of Maryland.

EEOC UPDATES GUIDANCE ON WORKPLACE HARASSMENT

On October 2, 2023, the Equal Employment Opportunity Commission (“EEOC”) issued “Proposed Enforcement Guidance on Harassment in the Workplace” (the “Guidance”). If finalized, the Guidance will mark the first time the EEOC has updated its guidance on workplace harassment in nearly 25 years.

The EEOC continues to treat harassment as a serious workplace concern. According to the EEOC, between 2018-2022, 35 percent of the charges of employment discrimination filed with the EEOC included an allegation of harassment based on race, sex, disability, or another protected characteristic. The Guidance accounts for changes in the law and workplaces over the last two decades, and supersedes five earlier versions of EEOC guidance.

Now that the comment period has closed, employers should take note of the detailed Guidance and actively ensure that they taking the necessary steps to prevent harassment.

1. Federal EEO Laws

In 1986, the U.S. Supreme Court held in Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57 (1986), that workplace harassment can constitute unlawful discrimination under Title VII of the Civil Rights Act of 1964. The Guidance presents a legal analysis of standards for harassment and employer liability applicable to claims of harassment under the federal equal employment opportunity (“EEO”) laws that prohibit discrimination by employers, including Title VII, the Americans with Disabilities Act, the Age Discrimination in Employment Act, and the Genetic Information Nondiscrimination Act.

As the Guidance emphasizes, these EEO laws prohibit work-related harassment based on sex, race, national origin, color, religion, disability, genetic information, and age (40 or over). For more information regarding state and federal laws relating to discrimination and best practices, readers can consult the Employment Discrimination and EEO Practice Manual by Richard J. Simmons of Sheppard Mullin.

2. Guidance On Sex-Based Harassment

Traditionally, harassment based on sex was largely understood to include unwanted sexual attention or coercion, such as demands or pressure for sexual favors, sexual assault, or sexual remarks/epithets. The Guidance makes clear that the EEOC also considers sex-based harassment to include harassment based on (i) sexual orientation and gender identity, including how that identity is expressed; and (ii) pregnancy, childbirth, or related medical conditions.

a. Sexual Orientation And Gender Identity

The U.S. Supreme Court’s decision in Bostock v. Clayton Cnty., 140 S.Ct. 1731 (2020), held that Title VII’s prohibition on sex discrimination includes discrimination based on gender orientation and sexual identity. In the EEOC’s view, while Bostock only concerned allegations of discriminatory discharge, its reasoning “logically extends” to claims of harassment.

Examples of harassment based on sexual orientation or gender identity include:

•Physical assault;

•Harassment because an individual does not present in a manner that would stereotypically be associated with that person’s gender;

•Intentional and repeated use of a name or pronoun inconsistent with the individual’s gender (misgendering); or

•Denial of access to a bathroom or other sex-segregated facility consistent with the individual’s gender identity.

In fact, under the Guidance, harassment against an employee by “customers” who “intentionally misgender” the employee may be considered as part of an employee’s harassment allegation against the employer, particularly where the employer “did not address the harassment and instead reassigned her to duties outside of the view of customers.”

b. Pregnancy, Childbirth, And Related Medical Condition

The Guidance reiterates that harassment based sex may be based upon pregnancy, childbirth, or related medical conditions, which includes lactation. This may also include harassment based on a woman’s reproductive decisions, such as decisions about contraception or abortion. The EEOC explains that harassment based upon abortion-related decisions can include adverse employment actions against an employee based upon her decision not to have, or to have, an abortion.

3. Guidance On Genetic Information Harassment

In the Guidance, the EEOC states that harassment on the basis of genetic information includes harassment based on a complainant’s, or a complainant’s family member’s, genetic test or family medical history. As examples, the EEOC deems harassing an employee because the employee carries the BCRA gene, which is linked to an increased risk of breast and ovarian cancer, or because the employee’s mother has cancer, as harassment based on genetic information.

4. Guidance On Causation

To establish harassment, the complainant must demonstrate that harassing conduct was because of the complainant’s characteristic(s). This is a critical component of a harassment charge, as the EEO statutes do not prohibit harassment that is not based on a protected characteristic.

The EEOC instructs that in determining whether harassment is based on a protected characteristic, it is necessary to examine the “totality of the circumstances.” Certain indicators of harassment because of a protected characteristic as set out in the Guidance include:

•Facially discriminatory conduct, which explicitly insults or threatens an individual based on a protected characteristic, such as a racial or sex-based epithet or graffiti;

•Stereotyping, or harassing conduct based on social or cultural expectations be they positive, negative, or neutral regarding how persons of particularly protected groups usually act or appear. This includes sex-based assumptions about family responsibilities or suitability for leadership roles or the expression of sexual orientation or gender identity.

•Contextual clues, such as harassment that begins or escalates after the harasser learned of the protected status and disparate treatment between individuals in different protected groups.

5. Guidance On Hostile Workplace Harassment

For an employer to be liable under an EEO statute for workplace harassment based on a protected trait, the harassment must affect a “term, condition, or privilege” of employment. This can take the form of (1) an explicit change to the terms or conditions of employment that is linked to harassment based on a protected characteristic, such as firing an employee because the employee rejected sexual advances; or (2) conduct that constructively changes the terms or conditions of employment by creating a “hostile work environment.”

To create a hostile work environment, the harassment must, as a whole, be “sufficiently severe or pervasive,” both objectively and in the mind of the complainant. Whether conduct creates a hostile work environment depends on the totality of the circumstances, and no one factor is determinative.

a. Single Incident Hostile Work Environment

The Guidance sets out certain examples of a hostile work environment based upon a “single incident” of harassment:

•Sexual assault;

•Physical violence or the threat of physical violence;

•The use of symbols of violence or hatred, such as a swastika, image of a Klansman’s hood, or a noose;

•The use of animal imagery that denigrates individuals sharing a protected characteristic;

•A threat to deny job benefits for rejecting sexual advances; and

•A supervisor’s use of a racial epithet in the presence of an employee in that protected class.

b. Objectively Hostile Conduct

In addition to be “subjectively hostile,” that is, conduct the complainant personally believes is hostile, to be actionable, the conduct must also be “objectively hostile.” Again, the EEOC instructs employers to consider the impact of conduct in the context of “surrounding circumstances, expectations, and relationships.” This determination, the EEOC explains, requires “an appropriate sensitivity to social context.”

In the context of religious expression, employers must balance their duty to accommodate with their duty to avoid a hostile work environment. While employers must accommodate employees’ sincerely held religious beliefs and practices absent undue burden, the Guidance clarifies that they are not required to accommodate religious expression that creates a hostile work environment. For instance, if a religious employee attempts to persuade another employee of the correctness of his beliefs, the conduct is not necessarily objectively hostile. But, if the employee objects to the discussion yet the other employee nonetheless continues or escalates, that could be found to be hostile conduct.

c. Technology And The Virtual Work Environment

A hostile work environment claim may include conduct that occurs in a work-related context outside an employee’s regular workplace. The Guidance provides that conduct also occurs within the work environment if it is conveyed using work-related communication systems, such as e-mail, video technology, or instant messaging systems. Conduct within the virtual work environment, such as a video meeting, is no different in the EEOC’s eyes than conduct in the physical work setting.

Harassing conduct in the virtual work context can include:

•Sexiest comments during a video meeting;

•Racist imagery that is visible in an employee’s workspace while the employee participates in a video meeting; or

•Sexual comments made during a video meeting about a bed being near an employee in the video image.

The Guidance further sets out how conduct that does not occur in a work-related context, such as on personal social media pages, can affect terms and conditions of employment by impacting the workplace. As an example, if an employee is the subject of ethnic epithets that a coworker posts on a personal social media page, and either the employee learns about the post directly or other coworkers see it and discuss it at work, then that post can contribute to a racially hostile work environment.

6. Guidance On Effective Anti-Harassment Policy

The EEOC emphasizes how an employer’s ability to demonstrate that it exercised reasonable care to prevent and correct promptly any harassment and that an employee unreasonably failed to use those preventative measures can provide a defense to liability or damages in many types of harassment cases. To help satisfy the employer’s duty to show reasonable care that the employee failed to use, the Guidance considers the existence of an effective anti-harassment policy to be a critical factor.

The Guidance also lays out the EEOC’s views on what makes an anti-harassment policy effective:

•It defines the prohibited conduct;

•It is widely disseminated;

•Is comprehensible to workers;

•Requires that supervisors report harassment they are aware of;

•Offers multiple avenues to report harassment;

•Clearly identifies accessible points of contact to whom reports should be made; and

•Explains the employer’s complaint process, including anti-retaliation and confidentiality protections.

But beyond an effective policy, the Guidance discusses how additional factors go into evaluating whether an employer implemented reasonable and effective measures to prevent and correct harassment, such as: regularly providing effective training on the policy, removing barriers to filing complaints, promptly investigating complaints of harassment, taking appropriate corrective action, ensuring no retaliation, and monitoring the workplace to ensure ongoing adherence to the policies.

7. Guidance On Temporary Employment Agencies

The Guidance also addresses the differing responsibilities an employer has where an individual is assigned by a temporary employment agency to work for a client. If the worker complains about harassment to the client and temporary employment agency, the EEOC instructs that both entities would be responsible for taking corrective action, but do not need to take duplicative action.

As to temporary employment agencies, the EEOC’s Guidance directs that corrective action may include:

•Ensuring the client is aware of the alleged harassment;

•Insisting the client conduct an investigation and take appropriate corrective action on its own;

•Working with the client to jointly conduct an investigation and/or identify appropriate corrective measures;

•Following up and monitoring to ensure that corrective measures have been taken; and

•Providing the worker with the opportunity to take another job assignment at the same pay rate, available.

8. Conclusion

The EEOC’s Guidance is not yet final and still technically subject to change. Even so, the Guidance provides employers with insightful information and detail from the federal agency charged with enforcing federal EEO laws on how it understands, enforces, and interprets those very laws. Employers should take heed of the agency’s Guidance and actively ensure that they have strong, effective, and lawful anti-harassment policies and procedures in place.

To read more articles like this one, subscribe to the ALERT Newsletter today!

About The Author

Tyler Z. Bernstein is a Partner with Sheppard, Mullin, Richter & Hampton LLP in the firm’s Orange County Office. Mr. Bernstein represents employers of all industries in state and federal court. Tyler’s practice extends to the business law context, as he has extensive experience successfully defending against “bet the company” commercial litigations and arbitrations. Tyler regularly defends employers in wage and hour class actions and representative litigations and has extensive experience defending against claims of discrimination, harassment, retaliation, wrongful termination, breaches of contract, and other related matters. Tyler also provides general preventative advice and counseling to employers relating to labor and employment issues.

CALIFORNIA SUPREME COURT CONCLUDES “GOOD FAITH BELIEF” BARS PENALTIES FOR PAY STUB VIOLATIONS

California law requires employers to furnish itemized wage statements (aka pay stubs) to employees that list nine items of information specified in Labor Code Section 226. This includes listing gross and net wages earned, even if such wages are unpaid. It also authorizes an award of penalties for a “knowing and intentional” failure to report required information. The Supreme Court recognized a defense to penalties in its May 6, 2024 decision in Naranjo.

1. Employers Must Promptly Pay And Report Missed-Break Premiums

In 2022, the California Supreme Court examined the requirements of Labor Code Sections 203 (the waiting time penalty statute) and 226 (the wage statement statute) in Naranjo v. Spectrum Security Services, Inc. The employer failed to promptly pay missed-break premiums that were owed when employees separated or report the premiums that were earned but not paid on employees’ wage statements. The Supreme Court found violations of the final pay rules in Labor Code Sections 201 – 203 and the wage statement rules in Section 226, but that did not necessarily mean the employer was liable for penalties. To make that determination, it was still necessary to see whether the employer owed either (1) waiting time penalties under Section 203 for a “willful” violation of the final pay rules or (2) wage statement penalties for a “knowing and intentional” violation under Section 226(e)(1).

2. Penalties Are Not Always Owed For Violations

In the May 6, 2024 decision in Naranjo v. Spectrum Security Services, Inc., __ Cal.5th __ (2024), the Supreme Court recognized defenses to penalty claims under Sections 203 and 226. It concluded, “if an employer reasonably and in good faith believed it was providing a complete and accurate wage statement in compliance with the requirements of section 226, then it has not knowingly and intentionally failed to comply with the wage statement law,” even if that belief was mistaken. Thus, it is not liable for penalties under Section 226(e)(1).

In reaching this conclusion, the Supreme Court recognized a “good faith belief” defense to penalties exists under both Sections 203 and 226. Although the Supreme Court has created a sea of exposure for employers in its wage-hour decisions, Naranjo is certainly a positive development for employers. It identifies potential defenses to wage statement and waiting time penalties that are significant. It also adds a layer to the analysis of potential liability in class action cases that can be cited by employers when opposing class certification.

3. Background

a. The Penalty Feature Of Section 226

Labor Code Section 226 requires employers to provide employees with written pay stubs listing gross and net wages earned, hourly pay rates, hours worked, and other information examined in Section 13.8 of the Wage and Hour Manual for California Employers by Attorney Richard J. Simmons of Sheppard, Mullin, Richter & Hampton. A plaintiff who brings a claim under Section 226 can seek injunctive relief and an award of costs and attorney’s fees.

If an employer is found guilty of a “knowing and intentional” failure to comply, the law provides for statutory penalties of up to $4,000 or the employee’s actual damages if they are higher. Naranjo presented the question of whether an employer has “knowingly and intentionally” failed to comply with Section 226’s requirements when the employer has a good faith, yet erroneous, belief that it was in compliance.

b. The Need To Promptly Pay And Report Missed-Break Premiums

In 2022, the Supreme Court issued a decision in the same case confirming that employers must treat missed-break premiums for depriving meal or rest breaks as wages “earned” both for purposes of (1) penalizing the willful failure to timely pay wages to former employees under Labor Code Section 203 (the final pay/waiting time penalty statute) and (2) the knowing and intentional failure to report wages earned in compliance with Labor Code Section 226 (the wage statement statute). The earlier decision in Naranjo v. Spectrum Security Services, Inc., 13 Cal. 5th 93 (2022) held that employers are required to treat missed-break premium pay as earned wages.

The decision arose from a class action involving meal period claims. It focused on the final pay, waiting time penalty, and wage statement claims arising from missed-break premiums. Even though the employer owed the missed-break premiums, it did not pay them when employees separated and did not report them on wage statements as “gross wages earned” and “net wages earned.” The 2022 decision found that the employer had an obligation to report the wages even though they had not been paid.

c. The Good Faith Belief Defense

The 2024 decision in Naranjo examined the next question – whether the employer was liable for penalties under Section 226 for a “knowing and intentional” violation of the wage statement requirements. The Supreme Court concluded that a good faith belief that the employer provided a compliant wage statement barred penalties under Section 226 just as a good faith belief that the employer paid all wages owed at separation precluded waiting time penalties under Section 203.

The extension of the “good faith belief” defense previously recognized as a bar to Section 203 penalties to Section 226 claims is unquestionably good news for employers and important. Employers are advised to consider the impact of this development in all pending and future lawsuits.

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About The Author

U.S. DOL ISSUES NEW SIX-FACTOR TEST FOR DETERMINING IF WORKERS ARE INDEPENDENT CONTRACTORS

On January 10, 2024, the U.S. Department of Labor (“DOL”) issued its Final Rule for determining whether a worker is properly classified as an independent contractor under the Fair Labor Standards Act (“FLSA”). The Final Rule is set to take effect on March 11, 2024. According to the DOL, the new rule is in line with the economic realities test developed by courts over decades. Under this Final Rule, the ultimate inquiry is whether, as a matter of economic reality, the worker is economically dependent on the employer for work (and is thus an employee) or is in business for themself (and is thus an independent contractor). This inquiry is based on a totality of the circumstances, with no one factor having more weight than the others.

The Final Rule rescinds an independent contractor rule issued under former President Donald Trump that focused more narrowly on only two factors of the economic realities test. The DOL made clear that this Final Rule does not adopt the ABC test, which is a test used by several states, including California. The ABC test, which requires workers to meet three enumerated elements to be classified as independent contractors, is more difficult to satisfy and favors a finding that a worker is an employee.

The Final Rule’s six factors include: (1) a worker’s opportunity for profit or loss; (2) investments made by the worker and the potential employer; (3) the degree of permanence of the work relationship; (4) the degree of control an employer has over the work; (5) the extent to which work performed is integral to the employer’s business; and (6) the use of a worker’s skill and initiative. Additional factors may be considered if they are relevant to the question of economic dependence.

The DOL discussed each factor in depth. With the first factor, the DOL set forth a list of facts that may be relevant, including whether the worker can negotiate the pay for the work, whether the worker can choose to decline a job, or whether the worker hires others and purchases materials and equipment. For the second factor, it should be considered whether the costs incurred by the worker generally support a separate business, or whether they are just tools or equipment to perform work. For the third factor, a non-exclusive or project-based job, as opposed to an indefinite assignment, would weigh in favor of the worker being an independent contractor. For the fourth factor, the focus is on the nature and degree of control exerted by the potential employer, rather than the control exerted by the worker. For the fifth factor, the DOL considers whether the potential employer could function without the service performed by the worker. Finally, with the sixth factor, the DOL explained that a worker who lacks specialized skills is likely an employee under the test; however, the ultimate question for this factor is whether the worker uses their specialized skills in connection with a business-like initiative.

While not controlling, the DOL’s new Final Rule can be cited as persuasive authority for federal courts considering classification issues. It sets forth the DOL’s current (and more pro-employee) interpretation of prior court decisions on the subject. Because the Final Rule explicitly does not adopt the ABC test, it is of limited value as authority in California.

To read more articles like this one, subscribe to the ALERT Newsletter today!

About The Author

He has written a number of articles for the Sheppard Mullin Labor and Employment Blog and is a contributing author of the ALERT Newsletter.

Mr. Johnson received his law degree from the Pepperdine Caruso School of Law and his undergraduate degree from University of Maryland.

CALIFORNIA SUPREME COURT HOLDS COURTS LACK INHERENT AUTHORITY TO STRIKE PAGA CLAIMS ON MANAGEABILITY GROUNDS

The Private Attorneys General Act of 2004 (“PAGA”) is arguably the most impactful and draconian legislation ever added to the California Labor Code’s wage and hour provisions. It was purposely designed by pro-plaintiff advocates in 2003 to make the playing field uneven with a stacked deck of lopsided anti-employer rules. Without adding a single new substantive legal requirement, like new meal period, rest period or overtime rules, it created new enforcement and procedural standards that are fundamentally unfair to employers of all sizes and include enormous financial burdens for employers to defend themselves even if they have committed no violations of state law.

1. PAGA’s One-Sided Approach To Wage-Hour Enforcement

By creating a stacked deck that includes formulaic statutory penalties, a one-sided attorneys’ fee provision that allows employees to recover fees whenever they prevail while preventing employers from doing the same, PAGA is a poster child for oppressive California employment laws. It creates obvious impediments to fair and just outcomes while providing plaintiffs’ lawyers a simple means to file thousands of boilerplate PAGA claims to suck millions of dollars in fees from employers, often based on hyper-technical or made-up claims. Thus, while employees individually receive modest recoveries under the statute, often when employers are bludgeoned into compromising claims to avoid disastrous defense costs, the lion’s share of every recovery goes to plaintiffs’ attorneys and the State of California. Yes, the State has an incestuous relationship with plaintiffs’ lawyers bringing PAGA actions because it receives 75% of all penalties awarded. Employees typically receive a small portion of the balance because much of the remaining 25% pot, often 30% of the settlement or more, is paid to attorneys and third parties that administer settlements.

2. The Supreme Court’s Decisions Uniformly Support Aggressive PAGA Litigation

The California Supreme Court has repeatedly aligned itself with anti-business and anti-employer factions that have used PAGA, a unique California law that has not been copied in any other state, to savagely attack small and giant companies alike. Plaintiffs’ lawyers file an average of one to three dozen new PAGA claims every day in California. The cost of defense, even for tiny employers, can spell economic death for a company, even if no violation has ever been proven or has ever been committed. The Supreme Court’s anti-business bias is so apparent that it has never issued a decision interpreting PAGA that favors a business or employer.

The most recent example of this pattern appears in the Supreme Court’s January 18, 2024 decision in Estrada v. Royalty Carpet Mills, Inc., Cal.5th (2024), ironically a case that quotes from the authors’ publication (California’s Private Attorneys General Act (PAGA) – Litigation and Compliance Manual, by Richard J. Simmons, Ryan J. Krueger and Tyler J. Johnson) criticizing the one-sided features of PAGA that make the defense of PAGA claims prohibitively expensive for employers.

Estrada itself examined conflicting decisions of two California courts of appeal that reached contrary conclusions as to whether trial courts have the inherent authority to strike a PAGA claim on manageability grounds. Compare Estrada v. Royalty Carpet Mills, Inc., 76 Cal.App.5th 685 (2022), with Wesson v Staples the Office Superstore, LLC., 68 Cal.App.5th 746 (2021). After granting review to consider the conflict, the Supreme Court concluded that, unlike the authority that exists to bar class action claims, ‘trial courts lack inherent authority to strike PAGA claims on manageability grounds.” It added, “while trial courts may use a vast variety of tools to efficiently manage PAGA claims, given the structure and purpose of PAGA, striking such claims due to manageability concerns – even if those claims are complex or time intensive – is not among the tools trial courts possess.”

In conducting this analysis, the Supreme Court also addressed due process considerations raised in the lawsuit while declining to decide the hypothetical questions of whether a defendant’s right to due process can ever support striking a PAGA claim and, if so, the narrow circumstances under which such striking would be appropriate.

3. Background In Estrada Case

The employer, Royalty Carpet Mills (“Royalty”), operated two facilities. An employee who worked at one of those facilities, Estrada, filed a complaint alleging various claims, including claims relating to meal periods and PAGA penalties for various alleged Labor Code violations. The trial court initially certified a class of non-exempt employees. Following a bench trial, the trial court decertified two meal period subclasses because there were too many individualized issues to support class treatment. The trial court also dismissed the PAGA claim seeking penalties for alleged meal break violations with respect to persons other than the named plaintiffs, finding it was unmanageable. The court of appeal then reversed the order dismissing the PAGA claims and directed the trial court to hold a new trial on the claims. It left it to the trial court’s discretion to determine whether additional witnesses or other evidence should be allowed.

Royalty appealed the decision, claiming that California trial courts have inherent authority to strike PAGA claims on manageability grounds. It also argued that retrial of the plaintiffs’ representative PAGA claim would violate its right to due process. Royalty asserted that trial courts must have discretion to strike PAGA claims in order to preserve the due process rights of defendants.

4. Supreme Court’s Review Of PAGA

The Supreme Court provided a general overview of some of PAGA’s provisions along with a description of its purpose. It began by noting that PAGA provides for civil penalties for various Labor Code violations and authorizes “aggrieved employees,” acting as private attorneys general, to recover those penalties, i.e., in “representative” enforcement actions. Notably, a PAGA plaintiff may seek penalties for violations involving aggrieved employees other than the plaintiff.

Without commenting on the inherent problems raised by the State of California’s enormous financial stake in large recoveries, the Supreme Court observed that civil penalties recovered on a PAGA claim are split between the state and aggrieved employees, with 75% of civil penalties going to the state and 25% going to aggrieved employees. While suggesting that employers should take any gripes to the California Legislature regarding PAGA’s unfair provisions, it overlooked the fact that the state reaps hundreds of millions of dollars from PAGA lawsuits.

5. Comparison Of PAGA Actions With Class Actions

Few in California understand the significant differences between PAGA litigation and class action litigation as many assume PAGA actions are simply a type of class action. One of the most valuable passages in the Estrada decision entails the Supreme Court’s explanation that there are material differences between class actions and PAGA actions that the public fails to understand.

It explained that a class action plaintiff can raise a multitude of claims because he or she represents a multitude of absent individuals. In contrast, a PAGA plaintiff represents a single principal, the California Labor and Workforce Development Agency (“LWDA”), that has a multitude of claims. Because PAGA actions do not adjudicate individually held claims, the Supreme Court observed that due process rights of third parties are not paramount. While non-party employees as well as the government are bound by the judgment in a PAGA action as to a claim for civil penalties, non-party employees are not bound with respect to remedies other than civil penalties.

And PAGA does not make other potentially aggrieved employees parties or clients of a plaintiff’s counsel, does not impose on a plaintiff or plaintiff’s counsel any express fiduciary obligations, and does not subject a plaintiff or plaintiff’s counsel to scrutiny with respect to the ability to represent a large class. On the other hand, the adequacy of a plaintiff and plaintiff’s counsel raise important considerations germane to class certification. As a bottom line, while plaintiffs must meet the burden of demonstrating they satisfy the requirements of Section 382 of the Code of Civil Procedure to certify a class claim, those requirements need not be satisfied to pursue a PAGA action. This is one reason why PAGA actions are easier for plaintiffs’ attorneys to bring and litigate. And employees cannot be hit with attorneys’ fee awards under PAGA, even if their case is baseless.

6. Manageability

Manageability issues frequently receive significant attention in cases where plaintiffs seek to certify a proposed class action. As explained by the Supreme Court, the term “manageability” encompasses two related but distinct concepts. First, the term refers generally to the degree to which techniques may be used before and during trial to fairly and efficiently adjudicate an action.

Second, the term may be used more specifically to refer to a factor utilized in determining whether a class may be certified. This factor looks to whether issues pertaining to individual proposed class members may be fairly and efficiently adjudicated. Under federal law, manageability refers to the rule that a court consider “the likely difficulties in managing a class action” in determining whether the class action certification requirements of predominance and superiority are met. The Supreme Court has instructed courts to consider the manageability of a class action in determining certification, as in Duran v. U.S. National Ass’n., 59 Cal.4th 1 (2014).

a. Affirmative Defenses Must Be Addressed

In certifying a class action, a court must conclude that litigation of individual issues, including those arising from affirmative defenses, can be managed fairly and efficiently. Whether in a given case affirmative defenses should lead a court to approve or reject certification will hinge on the manageability of any individual issues. The Supreme Court reiterated the importance of this principle in wage and hour cases. Where a plaintiff “seeks class certification based on allegations that the employer consistently imposed a uniform policy or de facto practice on class members, the party must still demonstrate that the illegal effects of this conduct can be proven efficiently and manageably within a class setting.”

b. The Power Of Trial Courts To Dismiss Claims Is Very Narrow

Royalty argued that the power to strike a claim is an inherent power of the court in every case. The Supreme Court rejected this assertion, stating that a trial court’s power to dismiss claims in the name of judicial economy is limited and operates in circumstances that were not present in the case before it. This led the Supreme Court to state that trial courts possess only a narrow inherent authority to dismiss claims based on limited circumstances such as cases (1) involving a failure to diligently prosecute an action, (2) where the complaint has been shown to be fictitious or a sham such that the plaintiff has no valid cause of action, i.e., frivolous claims, or (3) where there is egregious misconduct. While these scenarios recognize that courts may dismiss some types of egregiously inappropriate claims, the circumstances where that is allowed are tightly constrained and narrow.

c. Class Action Manageability Requirements Cannot Be Grafted Onto PAGA Claims

The Supreme Court specifically rejected Royalty’s argument that trial courts possess the power to dismiss PAGA claims on manageability grounds – just as they do with class claims. It recognized, once again, that class claims differ significantly from PAGA claims in ways that make it inappropriate to impose a class action-based manageability requirement on PAGA actions.

First, it explained that manageability bears upon questions of superiority and the predominance of common issues. These are requirements unique to the class action context. In determining whether a class action may be maintained, courts consider whether common issues predominate and whether a class action is a superior method of adjudication. However, an employee’s representative action seeking penalties under PAGA need not satisfy class action requirements. For instance, there is no authority suggesting that superiority is a requirement for a representative PAGA action.

Second, unlike class claims, PAGA claims are effectively administrative enforcement actions and imposing a manageability requirement would impede the effectiveness of such actions. In response to Royalty’s contention that different incentives exist in privately brought PAGA actions as compared to government enforcement actions, the Supreme Court showed little agreement or sympathy, noting, for example, that the one-way attorney’s fee provision in PAGA incentivizes litigation.

The Supreme Court responded that such a concern is better addressed to the Legislature, citing Simmons, et al, California’s Private Attorneys General Act (PAGA) – Litigation and Compliance Manual, § 1.2, published by Castle Publications, LLC. It noted that the book discusses PAGA’s attorney’s fees provision and stated, “The perception of PAGA thus varies based on the prism through which it is examined.” It was further quoted to observe, “plaintiffs are able to leverage PAGA’s one-way attorney’s fee provision and penalty structure to their advantage because they have no concern regarding an adverse fee award,” and “as a result, many employers encounter pressure to settle PAGA cases, even when they believe they have done nothing wrong, because they wish to avoid the substantial costs of defending litigation that presents a risk of paying both sides’ attorney’s fees.”

Third, unlike with class actions, PAGA’s specific statutory provisions make it inappropriate to impose a manageability requirement on PAGA claims.

7. The Due Process Issues Raised In PAGA Actions Will Be Resolved In Future Cases

The Supreme Court identified the due process issues raised by Royalty, but declined to resolve them because they were “hypothetical” due process claims that were not presented by the facts of the case before it. It did, however, stakeout certain ground and remark generally about some due process rights.

In a significant passage, it responded to Royalty’s argument that defendants, including employers in class and representative actions, have a due process right to present their affirmative defenses. The Supreme Court agreed, stating that “defendants must have an opportunity to present proof of their affirmative defenses.” It then pointed out there are limitations, noting that the right to present an affirmative defense does not carry with it a concomitant right to present the testimony of an unlimited number of individual employees in support of such affirmative defense. Rather, such adjudication is to occur “within whatever method the court and the parties fashion to try these issues.” The defendant must be permitted to introduce its own evidence, both to challenge the plaintiffs’ showing and to reduce overall damages. No case has yet addressed the right to litigate an affirmative defense as to each individual class member in a class claim.

The Supreme Court declined to express any opinion as to the hypothetical questions of whether, and under what circumstances, a defendant’s right to due process might ever support striking a PAGA claim. It thus left open the possibility that it could.

8. While Trial Courts Cannot Strike A PAGA Claim Entirely On Manageability Grounds, They Do Have Other Tools To Manage PAGA Cases

The Supreme Court explained that trial courts have “numerous tools” to manage complex cases generally, and PAGA cases in particular, that do not involve striking a PAGA claim. It also made clear that all of those case management tools remain undisturbed by the Estrada decision. It pointed out that the Judicial Council has described many of the tools that courts may use in managing discovery, other pretrial proceedings, and the trial of complex cases, including cases involving PAGA claims.

The Supreme Court also emphasized that the holding that trial courts lack inherent authority to strike a PAGA claim on manageability grounds does not preclude trial courts from limiting the types of evidence a plaintiff may present or using other tools to assure that a PAGA claim can be effectively tried. It also intimated that a trial court can limit the evidence to be presented at trial or otherwise limit the scope of the PAGA claim without striking the claim altogether.

Interestingly, the Court observed the implications of the fact that the plaintiff has the burden of proving a PAGA claim. Because of this burden and the ability of a trial court to limit the presentation of evidence, “it behooves the PAGA plaintiff to ensure that trial of the action is manageable so the maximum number of potential violations may be established.” The trial court’s power to limit the presentation of evidence may encourage plaintiffs’ counsel to be prudent in their approach to PAGA claims and ensure they can efficiently prove alleged violations to unrepresented employees. “If a plaintiff alleges widespread violations of the Labor Code by an employer in a PAGA action but cannot prove them in an efficient manner, it does not seem unreasonable for the punishment assessed to be minimal.” Further, a trial court may issue substantive rulings, including those on demurrer, or on motions for summary judgment or judgment notwithstanding the verdict to efficiently adjudicate an action in cases in which a plaintiff pleads the claim in such an overbroad or unspecific manner that the plaintiff is unable to prove liability as to all or most employees.

The Supreme Court summed up this discussion by stating it did not foreclose the possibility that a defendant could demonstrate that a trial court’s use of case management techniques “so abridged the defendant’s right to present a defense”, that its right to due process was violated. However, that showing had not been made in the case before it.

Finally, the court offered a gratuitous statement regarding the impact of PAGA actions on judicial resources. It stated: “In considering the potentially large amount of judicial resources that it may take to manage a single representative PAGA action, one must also bear in mind that such action may reduce the judicial resources that would otherwise be expended to manage many individual PAGA claims and prevent the underenforcement of California law.”

9. Conclusion

The Supreme Court’s conclusion acknowledged the challenges presented by complex cases, including representative PAGA actions. It left undisturbed various case management tools designed to ensure that such cases are efficiently, fairly, and effectively tried. It affirmed the court of appeal’s judgment and confirmed it had properly reversed the trial court’s order dismissing, on manageability grounds, the PAGA claim.

There is no question that plaintiffs’ attorneys will herald the Estrada decision as yet another victory in a long line of California Supreme Court decisions that exhibit an anti-business bias. The suggestion that employers direct any concerns regarding state laws to the Legislature is tantamount to asking Stephen King, the author of horror and suspense novels, to compose children’s bedtime stories. Fixing California laws to reduce hardships for employers is not what the Legislature does. That is why businesses have initiated a protracted referendum process in hopes of achieving some relief. In the meantime, Estrada will have the predictable effect of increasing PAGA litigation, driving up settlement costs, and placing greater burdens on employers. This will, in turn, discourage businesses from coming to or growing workforces in California.

While the proponents of PAGA steadfastly maintain it is deigned to benefit employees and reduce the burdens of government enforcement agencies created and heavily funded to enforce state laws, the 20-year history of PAGA demonstrates beyond question that the primary beneficiaries are plaintiffs’ attorneys. For those naively suggesting that requests for relief from PAGA’s one-sided rules should be directed to California’s Legislature, that has proven to be an act of futility for employers. Sadly, it has become clear that the plaintiffs’ bar, state appellate courts, and Legislature are aligned in their efforts to use PAGA as one of many platforms to undermine businesses, not afford them relief. One must wonder whether the gigantic revenue PAGA provides the State of California obscures any objective assessment of its overall impact on the business communities’ interest in growing California’s economy.

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