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

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.

BRIEFING COMPLETED IN TIME ROUNDING CASE BEFORE SUPREME COURT

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 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.

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 ROLLS OUT UPDATED BACKGROUND CHECK RULES AND ONLINE GUIDE

In 2018, California enacted the Fair Chance Act (“FCA”) to make it illegal for employers with five or more employees to ask applicants to self-report or perform a background check of the applicant’s criminal record before a job offer is made. Employers must now update their background check and criminal history review process to comply with new FCA regulations. Additionally, the Civil Rights Department (“CRD”) announced the launch of a new online interactive guide to help individuals better understand when the FCA’s protections apply.

1. Expanded Definition Of Employer

The new FCA regulations amend Title 2, Section 11017.1 of the California Code of Regulations. They expand the definition of “employer” to include more than a direct employer or labor contractor. The definition now applies to “any direct or joint employer, any entity that evaluates the applicant’s conviction history on behalf of an employer, or acts as an agent of an employer, directly or indirectly; any staffing agency; and any entity that selects, obtains, or is provided workers from a pool or availability list.”

2. Expanded Definition Of Applicant

An “applicant” includes any individual who files a written application or who otherwise indicates a specific desire to be considered for employment. It also includes the following: (1) existing employees who have applied for or indicated a specific desire to be considered for a different position with their current employer; and (2) existing employees who are subjected to a review and consideration of criminal history because of a change in ownership, management, policy or practice.

3. Changes To Job Posting Language And Use Of Voluntary Disclosures

The new regulations made two changes that impact previous “work-arounds” that employers may have used to circumvent the FCA’s requirements: (1) employers are prohibited from including statements that no persons with criminal history will be considered for hire (e.g., employers cannot state “No Felons” or “Must Have Clean Record.”) in job advertisements, postings, applications, or other materials; and (2) employers cannot consider any criminal history information that an applicant voluntarily discloses prior to receiving a conditional offer.

4. Changes To Individualized Assessment Process

Under the FCA, if an employer intends to rescind a conditional employment offer based solely or in part on the applicant’s conviction history, the employer must first conduct an individual assessment of whether the applicant’s conviction history has a direct and adverse relationship with the specific duties of the job that justify denying the applicant the position. The employer’s assessment must consider the following three factors with regard to any criminal history:

• The nature and gravity of the offense or conduct;

• The amount of time that has passed since the offense or conduct and/or completion of the sentence; and

• The nature of the job held or sought.

In addition to clarifying that the assessment must be a “reasoned, evidence-based determination,” the new regulations require employers to perform a more in-depth analysis before making a decision based on an individual’s criminal conviction history. The new regulations added the following guidance for each of the above three factors regarding specific items that employers should consider:

The Nature and gravity of the offense or conduct: Consideration of this factor now may include but is not limited to:

o The specific personal conduct of the applicant that resulted in the conviction;

o Whether the harm was to property or people;

o The degree of the harm (e.g., amount of loss in theft);

o The permanence of the harm;

o The context in which the offense occurred;

o Whether a disability, including but not limited to a past drug addiction or mental impairment, contributed to the offense or conduct, and if so, whether the likelihood of harm arising from similar conduct could be sufficiently mitigated or eliminated by a reasonable accommodation, or whether the disability has been mitigated or eliminated by treatment or otherwise;

o Whether trauma, domestic or dating violence, sexual assault, stalking, human trafficking, duress, or other similar factors contributed to the offense or conduct; and/or

o The age of the applicant when the conduct occurred.

The amount of time that has passed since the offense or conduct and/or completion of the sentence: Consideration of this factor now may include but is not limited to:

o The amount of time that has passed since the conduct underlying the conviction, which may significantly predate the conviction itself; and/or

o When the conviction led to incarceration, the amount of time that has passed since the applicant’s release from incarceration.

The nature of the job held or sought: Consideration of this factor now may include but is not limited to:

o The specific duties of the job;

o Whether the context in which the conviction occurred is likely to arise in the workplace; and/or

o Whether the type or degree of harm that resulted from the conviction is likely to occur in the workplace.

The new regulations also require employers to consider as part of their individualized assessment “any evidence of rehabilitation or mitigating circumstances” that “is voluntarily provided by the applicant or by another party at the applicant’s request, before or during the initial individualized assessment.

Because some of the information above may not be readily available, employers should consider requesting any pertinent information upon learning of a past criminal conviction and before conducting the initial individualized assessment. If any requested information is provided, the employer should ensure it reviews and considers that information when making its determination.

5. Updates To Notification Process

The FCA requires that if an employer is considering rescinding an offer after completing its initial individualized assessment, it must notify the applicant in writing and give the applicant at least five business days to respond with additional information and documents, including rehabilitation efforts or mitigating circumstances. The new regulations provide employers with the following guidelines to determine when the five business day period starts in situations where the employer cannot establish when the letter was received:

• If the notice is sent by email, it is deemed received two business days after it was sent.

• If the notice is sent by mail, the notice is deemed received as follows:

o 5 calendar days from the mailing date if sent to a California address;

o 10 calendar days from the mailing date if sent to a U.S. address outside of California; and

o 20 calendar days from the mailing date if sent to an address outside of the U.S.

Although the FCA already required employers to consider evidence of rehabilitation and mitigating circumstances provided from the individual, the new regulations contain an extensive list of examples of such evidence that employers should consider. If, after receiving and considering any new information or a lack of response, the employer decides not to hire the individual, it must send a written notice to the applicant regarding its decision and notify the applicant of their rights, including the right to file a charge with the CRD.

6. CRD’s New Online Interactive Guide To The FCA

On September 6, 2023, the CRD launched its new online interactive guide. The guide allows users to anonymously assess whether they may have experienced a violation of the FCA by asking detailed questions to help users understand whether the type of job they are applying for is covered under the FCA and whether their experience may have violated FCA regulations. The guide creates an individualized downloadable report with general information about the FCA, a list of possible violations based on the specific responses provided, and information on how to get support and file a charge with the CRD.

7. Next Steps

In light of these new changes, employers should reexamine related forms, policies and materials. This should include a review of job postings and advertisements, applications, background check authorization forms, and other documents that are part of the applicant screening and background check process to ensure they remain compliant.

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 a contributing author to the Employer’s Guide to COVID-19 and Emerging Workplace Issues.

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.

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

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.

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.

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.

MODIFICATIONS TO CALIFORNIA’S CRIMINAL HISTORY RULES TAKE EFFECT OCTOBER 1, 2023

California’s Fair Chance Act, which is also known as the “ban the box” law, generally prohibits California employers from asking job candidates about their criminal history prior to making a conditional job offer. It also imposes several other requirements on employers that consider criminal history information when making employment decisions.

In December 2022, the California Civil Rights Council proposed significant modifications to the regulations regarding the Fair Chance Act. On July 24, 2023, California’s Office of Administrative Law approved several of the proposed modifications. Specifically, the Civil Rights Council approved amendments to regulations: (1) pertaining to the consideration of conviction history prior to a conditional offer of employment; (2) pertaining to consideration of certain types of conviction records; (3) governing what employers must do when they intend to rely on criminal records to rescind a conditional job offer; (4) covering labor contractors, union hiring halls, and client employers; (5) prohibiting disparate treatment; (6) used to determine adverse impact; (7) outlining procedural requirements; (8) covering situations when an employer seeks the Work Opportunity Tax Credit provided under Section 51 of the Internal Revenue Code; and (9) defining terms used in Section 11017.1 of Title 2 of the California Code of Regulations.

The new regulations take effect October 1, 2023. The key modifications are summarized below:

Expanded Definition Of “Applicant” – Employers are prohibited from inquiring into and considering criminal history information of an applicant until after the employer has made a conditional offer of employment. The new regulations clarify that “applicant” includes “existing employees who have applied or indicated a specific desire to be considered for a different position with their current employer; and an existing employee who is subjected to a review and consideration of criminal history because of a change in ownership, management, policy, or practice.”

Expanded Definition Of “Employer” – The new regulations clarify that “employer” includes “any direct and joint employer; any entity that evaluates the applicant’s conviction history on behalf of an employer, or acts as an agent of an employer, directly or indirectly; any staffing agency; and any entity that selects, obtains, or is provided workers from a pool or availability list.”

Job Advertisements – Employers cannot state in job advertisements, postings, applications or other materials that individuals with a criminal history will not be considered for hire.

Exemption – The regulations currently exempt employers who are required by law to conduct a criminal background check. However, the new regulations clarify that the exemption does not apply if the law requires another entity, such as an occupational licensing board, to conduct the criminal background check.

Voluntary Disclosure Of Criminal History May Not Be Considered – If an applicant voluntarily discloses their criminal history prior to receiving a conditional offer, the employer must not consider the information. Additionally, an employer is prohibited from considering any other conviction history information until after making a conditional offer of employment, unless an exception applies.

Individualized Assessment Factors – The current law requires an employer’s individualized assessment to include consideration of the following factors: (a) the nature and gravity of the offense or conduct, (b) the time that has passed since the offense or conduct and/or completion of the sentence, and (c) the nature of the job held or sought. The new regulations provide clarity regarding these factors by listing several examples of what may be considered as part of the assessment.

Consideration Of Rehabilitation/Mitigating Circumstances – Currently, the law requires employers to consider evidence of rehabilitation or mitigating circumstances, if the individual provides such evidence. The new regulations provide a broad list of examples of such evidence.

Time Period To Respond To Pre-Adverse Action Notice – If an employer sends a written notice of the employer’s preliminary decision (e.g., pre-adverse action letter) to the applicant or employee, the applicant or employee has at least 5 days from the date of receipt of the notice to respond. The new regulations clarify that if the notice if transmitted through a format that does not provide a confirmation of receipt (e.g., mailing the notice without tracking delivery), the notice shall be deemed received 5 calendar days after the mailing is deposited for delivery for California addresses, 10 calendar days after the mailing for addresses outside of California, and 20 calendar days for addresses outside of the United States. If notice is provided through email, the notice is deemed received 2 business days after it is sent.

Work Opportunity Tax Credit – An employer seeking the Work Opportunity Tax Credit (“WOTC”) is not exempt from the regulations. An employer may require an applicant to complete IRS form 8850 (“Pre-Screening Notice and Certification Request for the Work Opportunity Credit”) before making a conditional offer, as long as the information gathered is only used for the purpose of applying for the WOTC. Additionally, an employer may not inquire as to an applicant’s basis of their qualification for the WOTC. An employer may require an applicant to complete the U.S. Department of Labor Employment and Training Administration form 9061 (“Individual Characteristics Form (ICF) Work Opportunity Tax Credit”) only after a conditional offer has been made. Any information relating to the WOTC application must be maintained in a confidential file separate from the personnel file.

With the October 1, 2023 effective date fast approaching, California employers should consult with their legal counsel to review their policies, procedures and new-hire documentation and applications and update them accordingly in order to comport with the new regulations, which add many new restrictions for employers and expand the reach of the Fair Chance Act.

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About The Author

Bryanne Lewis is an attorney in the law firm of Sheppard, Mullin, Richter & Hampton LLP in Los Angeles. She represents employers in employment matters, including wage and hour class and representative actions, and discrimination, harassment, retaliation and wrongful termination actions. Bryanne also counsels employers on a broad range of employment-related issues, including wage and hour issues, leaves of absence and accommodations, and personnel decisions. Ms. Lewis received her B.A. from Loyola Marymount University and her J.D. from Loyola Law School, cum laude, Order of the Coif.

Bryanne is a frequent contributor to the ALERT Newsletter as well as Sheppard Mullin’s Labor and Employment Law Blog.

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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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.

SUPREME COURT EXTENDS LIABILITY FOR EMPLOYMENT DISCRIMINATION TO BUSINESS ENTITIES ACTING AS EMPLOYER’S AGENT

The California Fair Employment and Housing Act (“FEHA”) generally prohibits “any employer” from making a medical or psychological inquiry of an applicant. It also states that the term “employer” includes any person regularly employing five or more persons, or any person acting as an agent of an employer, directly or indirectly.

On August 21, 2023, the California Supreme Court addressed a question posed by the Ninth Circuit Court of Appeals regarding the scope of potential liability under the FEHA in Raines v. U.S. Healthworks Medical Group, __Cal. 5th __ (2023). Specifically, the Ninth Circuit asked the following question: “Does California’s Fair Employment and Housing Act, which defines “employer” to include “any person acting as an agent of the employer permit a business entity acting as an agent of the employer to be held directly liable for employment discrimination?” The Supreme Court concluded that an employer’s business-entity agent can be held directly liable under the FEHA for employment discrimination in appropriate circumstances when the agent has at least five employees and carries out FEHA-regulated activities on behalf of an employer.

1. Facts

Two plaintiffs, Kristina Raines and Darrick Figg, filed a proposed class action alleging that they received offers of employment that were conditioned on the successful completion of pre-employment medical screenings to be conducted by U.S. Healthworks Medical Group (“USHW”), who was acting as an agent of the plaintiffs’ prospective employers. The plaintiffs claimed that as part of its medical screenings, USHW required job applicants to complete a written health history questionnaire that included numerous health-related questions having no bearing on the applicant’s ability to perform job-related functions. The plaintiffs complained these questions covered details of the applicant’s health history, including whether the applicant has, and/or has ever had, (1) venereal disease, (2) painful or irregular vaginal, discharge or pain, (3) problems with menstrual periods, (4) irregular menstrual period, (5) penile discharge, prostate problems, genital pain or masses, (6) cancer, (7) mental illness, (8) HIV, (9) permanent disabilities, (10) painful/frequent urination, (11) hair loss, (12) hemorrhoids, (13) diarrhea, (14) black stool, (15) constipation, (16) tumors, (17) organ transplant, (18) stroke, or (19) a history of tobacco or alcohol use.

Kristina Raines received an offer from Front Porch Communities and Services for a position as a food service aide, but the offer was conditioned on her passing the pre-employment medical screening conducted by USHW. Raines alleged that she responded to most of the questions on the written questionnaire, but she declined to answer the question about the date of her last menstrual period. She alleged that the exam was then terminated and Front Porch revoked its offer of employment.

Darrick Figg received an offer from the San Ramon Valley Fire Protection District to serve as a member of the volunteer communication reserve, but his offer, too, was conditioned on his passing the pre-employment medical screening conducted by USHW. Figg alleged that he answered all the questions, successfully passed the screening, and was hired for the position.

Raines filed a state court action against Front Porch and USHW. The defendants removed the action to federal court. The operative complaint alleged claims under the FEHA, the Unruh Civil Rights Act, the unfair competition law, and common law right of privacy. The district court granted the defendants’ motion to dismiss, concluding that the FEHA does not impose liability on the agents of a plaintiff’s employer. The plaintiffs appealed the dismissal. After holding oral argument, the Ninth Circuit asked the California Supreme Court to answer the question described above.

2. The Issue Presented

The Supreme Court viewed the case as presenting a question regarding the proper interpretation of the definition of “employer” in the FEHA. Based on its examination of the indicators of legislative intent, the Supreme Court concluded that the agent-inclusive language in Government Code Section 12926(d) permits a “business-entity agent” of an employer to be held directly liable for violation of the FEHA when it carries out FEHA-regulated activities on behalf of an employer. Notably, the Supreme Court recognized the value of federal authorities and cited numerous federal anti-discrimination statutes and cases that supported its conclusion.

3. Holding

The Supreme Court answered the Ninth Circuit’s question as follows: “The California Fair Employment and Housing Act, which defines “employer” to “include[]” “any person acting as an agent of an employer” . . . permits a business entity acting as an agent of an employer to be held directly liable as an employer for employment discrimination in violation of the FEHA in appropriate circumstances when the business-entity agent has at least five employees and carries out FEHA-regulated activities on behalf of an employer. We do not decide the significance, if any, of employer control over the act(s) of the agent that gave rise to the FEHA violation, and we also do not decide whether our conclusion extends to business-entity agents that have fewer than five employees. We base our conclusion on our interpretation of the FEHA’s definition of employer (§ 12926, subd. (d)); we express no view of the scope of a business-entity agent’s possible liability under the FEHA’s aider and abettor provision (§ 12940, subd. (i)).”

The Raines decision has potentially far-reaching significance on FEHA liability and the potential exposure faced by “business-entity agents” of employers who carry out FEHA-regulated activities. It also reminds readers of the adage that “bad facts make bad law.” The Supreme Court made a point of quoting the list of questions posed in the pre-employment health history questionnaire that was made a condition of employment even though the questions themselves played no direct role in deciding whether USHW was an “employer.” It also emphasized the harsh consequences of an individual’s unwillingness to answer highly personal questions having nothing to do with the ability to perform job-related functions. In reading the decision, it quickly became clear that the Supreme Court wished to send a message and was prepared to take steps to make the agent who posed those questions accountable. It did exactly that.

Raines reminds employers to exercise caution when delegating roles to other entities to carry out functions relating to the hiring process, such as pre-employment screening and background checks. If an applicant loses an employment opportunity because of the FEHA-regulated activities of an agent, the prospective employer cannot shield itself from accountability simply by claiming it did not pose the questions directly or it did not know the applicant’s rights were being violated. It is evident that the potential significance of the decision is not limited to preemployment activities. Further, neither the employer nor its business-entity agent will be able to escape accountability by claiming that the agent will not directly employ the applicant or some unlawful discrimination allegedly occurred in connection with a post-hire action.

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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.

U.S. SUPREME COURT CLARIFIES RELIGIOUS DISCRIMINATION AND UNDUE HARDSHIP STANDARDS

Title VII of the Civil Rights Act of 1964 requires employers to accommodate the religious practices of their employees, unless doing so would impose an “undue hardship on the conduct of the employer’s business.” Based on the U.S. Supreme Court’s 1977 landmark decision in Trans World Airlines, Inc. v. Hardison, 432 U.S. 63 (1977), many lower courts interpreted “undue hardship” to mean any effort or cost that is “more than . . . de minimis.” On June 29, 2023 the Supreme Court “clarified” what Title VII requires in the unanimous decision in Groff v. DeJoy, Postmaster General, 143 S.Ct. 2279 (2023), without overruling its 1977 decision in Hardison.

1. Background

The litigation was initiated by Gerald Groff, an Evangelical Christian who believes for religious reasons that Sunday should be devoted to worship and rest, not “secular labor” and the transportation of “worldly goods.” Groff began his employment with the United States Postal Service (“USPS”), which has more than 600,000 employees. He became a rural carrier associate, a job that required him to assist regular carriers in the delivery of mail.

When he took the position, it generally did not involve Sunday work. But within a few years, that changed. In 2013, USPS entered into an agreement with Amazon to begin facilitating Sunday deliveries, and in 2016, USPS signed a memorandum of understanding (“MOU”) with the union that set out how Sunday and holiday parcel delivery would be handled. During a two-month peak season, each post office would use its own staff to deliver packages. At all other times, Sunday and holiday deliveries would be carried out by employees (including rural carrier associates like Groff) working from a regional hub.

The MOU specifies the order in which USPS employees are to be called for Sunday work outside the peak season. With Groff unwilling to work on Sundays, USPS made other arrangements. During the peak season, Sunday deliveries that would have otherwise been performed by Groff were carried out by the rest of the staff, including the postmaster, whose job ordinarily does not involve delivering mail. During other months, Groff’s Sunday assignments were redistributed to other carriers assigned to the regional hub. Throughout this time, Groff continued to receive “progressive discipline” for failing to work on Sundays. Finally, in January 2019, he resigned.

2. The Lower Court Decisions

Groff filed suit under Title VII, asserting that USPS could have accommodated his Sunday Sabbath practice “without undue hardship on the conduct of USPS’s business.” The district court granted summary judgment to USPS, and the Third Circuit Court of Appeals affirmed, construing Hardison to mean “that requiring an employer to bear more than a de minimis cost to provide a religious accommodation is an undue hardship.” The Third Circuit concluded that exempting Groff from Sunday work “imposed on his coworkers, disrupted the workplace and workflow, and diminished employee morale.” The Supreme Court agreed to review the decision, recognizing that the case presented the Supreme Court’s first opportunity in nearly 50 years to explain the contours of Hardison.

3. The Supreme Court Vacated The Third Circuit’s Decision

The Supreme Court held that merely showing “more than a de minimis cost” does not suffice to establish undue hardship or a defense to religious discrimination under Title VII. Instead, in determining an employer’s undue hardship defense, Hardison referred repeatedly to “substantial” burdens, and that formulation better explains the decision. The Supreme Court described Hardison to mean that “undue hardship” is shown when a burden is substantial in the overall context of an employer’s business. A fact-specific inquiry is required to make this determination.

4. Substantial Increased Costs Must Be Shown

The Supreme Court stated it is enough to say that what an employer must show is that the burden of granting an accommodation would result in substantial increased costs in relation to the conduct of its particular business. Courts must apply the test to take into account all relevant factors in the case at hand, including the particular accommodations at issue and their practical impact in light of the nature, size, and operating cost of an employer.

The Court declined to adopt the elaborations of the applicable standard that the parties suggested, either to incorporate Americans With Disabilities Act caselaw or opine that the EEOC’s construction of Hardison had been basically correct. Even though the Court recognized that a “good deal” of the EEOC’s guidance was sensible, it found it imprudent to ratify in toto a body of EEOC interpretations that has not had the benefit of the clarification adopted by the Court in Groff.

5. Additional Clarifications Of Recurring Issues

The Supreme Court hastened to add clarifications regarding several “recurring issues.” First, it observed that Title VII requires an assessment of a possible accommodation’s effect on “the conduct of the employer’s business.” Impacts on coworkers are relevant only to the extent those coworker impacts go on to affect the conduct of the business. Further, a hardship that is attributable to employee animosity to a particular religion, to religion in general, or to the very notion of accommodating religious practice, does not provide a defense because it cannot be considered “undue.” Bias or hostility to a religious practice or accommodation thus cannot supply a defense.

Second, Title VII requires that an employer “reasonably accommodate” an employee’s practice of religion, not merely that it assess the reasonableness of a particular possible accommodation or accommodations. Faced with an accommodation request like Groff’s, it would not be enough for an employer to conclude that forcing other employees to work overtime would constitute an undue hardship. Consideration of other options, such as voluntary shift swapping, would also be necessary.

6. Conclusion

The Supreme Court clarified the Title VII undue-hardship standard. It then determined it was appropriate to leave the context-specific application of that clarified standard to the lower courts in the first instance. Because the Third Circuit assumed that Hardison prescribed a “more than a de minimis cost” test, it may have misled the court to dismiss a number of possible accommodations, including those involving the cost of incentive pay or the administrative costs of coordination with other nearby stations with a broader set of employees.

The Supreme Court did not foreclose the possibility that USPS will prevail, but thought it appropriate to leave to the lower courts to apply its clarified context-specific standard, and to decide whether any further factual development is needed. It vacated the judgment of the Third Circuit Court of Appeals and remanded the case to the Third Circuit for further proceedings consistent with its opinion.

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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.

NEW YORK MAKES WAGE THEFT A CRIMINAL LARCENY IN NEW AMENDMENT TO ITS PENAL LAW

On September 6, 2023, New York Governor Kathy Hochul signed legislation amending the New York Penal Law making wage theft a criminal larceny. Under the New York Penal Code: “[a] person steals property and commits larceny when, with intent to deprive another of property or to appropriate the same to himself or to a third person, he wrongfully takes, obtains or withholds such property from an owner thereof.” The amendment adds “compensation for labor services” to the definition of “property” applicable to larcenies.

Moreover, the penal code’s definition of “larceny” now also includes “by wage theft.” Specifically, “[a] person obtains property by wage theft when he or she hires a person to perform services and the person performs such services and the person does not pay wages, at the minimum wage rate and overtime, or promised wage, if greater than the minimum wage rate and overtime, to said person for work performed.”

The amendment permits the prosecution for wage theft to aggregate all nonpayments or underpayments to one employee into one larceny count. Similarly, the prosecution may aggregate nonpayments or underpayments from a “workforce” into a single larceny count. The amendment also now defines “workforce” as “a group of one or more persons who work in exchange for wages.” Larceny offenses are felonies when an offense involves at least $1,000.

Notably, the New York Labor Law already deemed wage theft as a misdemeanor for the first offense and a felony for the second or subsequent offense within six years of a conviction for a prior offense. An employer guilty of a misdemeanor for the first offense of wage theft is fined between $500 to $20,000 or imprisoned for not more than one year. Similarly, those guilty of a felony for the second or subsequent offense are subject to the either of the same penalties or both.

The amendment took effect on September 6. New York employers must be cautious to pay their employees appropriately, maintain accurate pay records demonstrating that they properly paid wages to their employees for all time worked, review all payroll and wage policies, and provide accurate wage statements. We will continue monitoring developments on how this amendment is prosecuted and any additional guidance, and provide updates as new information becomes available.

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About The Authors

Sean Kirby is a partner in Sheppard Mullin’s Labor and Employment Practice Group in the firm’s New York office. Mr. Kirby’s practice encompasses the defense of single plaintiff and class action discrimination, wrongful discharge and wage/hour claims, in addition to employment contract, restrictive covenant, whistleblower, sexual harassment, and related claims. He regularly represents clients in labor and employment litigations in federal and state courts, in arbitrations before the American Arbitration Association and the Financial Industry Regulation Authority, and in proceedings before various administrative agencies, including the Equal Employment Opportunity Commission, the U.S. Department of Labor and state agencies throughout the United States.

Mr. Kirby received his law degree from Fordham University and his undergraduate degree from LeMoyne College.

Maria A. Gomez is an associate in Sheppard Mullin’s Labor and Employment Practice Group in the firm’s New York office. Maria’s practice focuses on representing employers in a wide array of labor and employment subject areas including: wage/hours claims, the defense of single plaintiff and class action discrimination, harassment, retaliation, wrongful termination, and related claims. Maria also advises and counsels clients on various employment practices, such as new hire issues, terminations, employee classification, and restrictive covenants.

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

Ms. Gomez received her law degree from St. John’s University and her undergraduate degree from the State University of New York at Buffalo.