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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.

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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.

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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 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. 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.

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

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.

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.

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.

CALIFORNIA SUPREME COURT HOLDS REPRESENTATIVE PAGA CLAIMS MAY REMAIN IN COURT WHILE INDIVIDUAL CLAIMS, INCLUDING INDIVIDUAL PAGA CLAIMS, ARE ARBITRATED

No one who pays attention to the federal and state court systems would be surprised to learn that the U.S. Supreme Court and the California Supreme Court view the world differently. As the familiar narrative goes, the U.S. Supreme Court is controlled by conservative justices while the California Supreme Court is packed with liberal judges who are widely regarded as judicial policy-makers who repeatedly exhibit an anti-business and anti-employer bias. One need only review the employment law decisions published by each court in recent years to see the obvious trends and leanings.

The contrast between the two courts was on display on July 17, 2023, when the California Supreme Court issued its long-awaited decision in Adolph v. Uber Technologies, Inc., _ Cal. 5th _ (2023), a case involving the collision between the rights created under a California law, the Private Attorneys General Act of 2004 (“PAGA”), and the rights of parties to arbitration agreements who have expressly agreed to refer all matters arising from employment disputes to arbitration on an individual-only basis. Such agreements often include provisions that specifically waive the ability to bring or participate in class, collective, or representative actions.

1. The Conflict Between The Adolph And Viking River Decisions

In June of 2022, the U.S. Supreme Court examined the enforceability of such arbitration agreements in its decision in Viking River Cruises, Inc. v. Moriana, 142 S.Ct. 1906 (2022). There, the U.S. Supreme Court determined that a 2014 California Supreme Court decision (Iskanian) was preempted by the Federal Arbitration Act (‘FAA”) where it concluded that a plaintiff could not split off an individual PAGA claim that could then be ordered to arbitration on an individual basis. It also construed California law to provide that an individual ordered to arbitrate an individual PAGA claim lacked standing to pursue a non-individual (representative) claim under PAGA in court. As a result, the Supreme Court observed that plaintiff-Moriana’s non-individual claim should be dismissed so it could not remain in court.

In Adolph, the California Supreme Court had no choice but to defer to the U.S. Supreme Court’s decision regarding preemption of Iskanian’s anti-splitting rule under federal law, the FAA. However, it disagreed with Viking River’s conclusion that a plaintiff loses standing to pursue non-individual (representative) PAGA claims in court once the plaintiff’s individual claims are ordered to arbitration. Concluding that it had “the final word” on the meaning of California law, it found that a plaintiff’s non-individual claim can be stayed and remain in court while the individual claims are resolved in arbitration.

2. The Issue Raised In Adolph

The holding in Adolph that an employee’s PAGA claim can be stayed in court rather than dismissed will have a widespread impact on other PAGA cases. It will also influence the manner in which arbitration agreements and their severability provisions are written. While the decision includes a detailed review of PAGA’s purpose and legislative history, the Supreme Court limited the holding to a review of the question of PAGA standing where an employee is subject to an arbitration agreement that provides for individual-only adjudication.

The question before the California Supreme Court was whether an “aggrieved employee” who has been compelled to arbitrate claims under PAGA that are premised on Labor Code violations actually sustained by the employee maintains statutory standing to pursue PAGA claims arising out of events involving other employees in court. The Supreme Court held that the answer is yes.

To have PAGA standing a plaintiff must be an “aggrieved employee.” There are only two requirements. The plaintiff must (1) have been employed by the alleged violator, and (2) have suffered at least one of the alleged Labor Code violations. Where a plaintiff has brought a PAGA action that includes individual and non-individual claims, an order compelling arbitration of the individual claims does not strip the plaintiff of standing as an aggrieved employee to litigate PAGA claims in court on behalf of other employees.

3. Background Facts

Erik Adolph worked as a driver for Uber Technologies, Inc., delivering food to customers through the company’s Uber Eats platform. As a condition of his employment, Adolf was required to accept the technology services agreement. Because he did not timely opt out, he became bound by the arbitration provision in that agreement. The arbitration provision required Adolph to arbitrate, on an individual basis only, almost all work-related claims he might have against Uber.

a. The Arbitration Agreement

With regard to PAGA actions, the agreement stated: “To the extent permitted by law, you and Company agree not to bring a representative action on behalf of others under the [PAGA] in any court or in arbitration.” This was referred to as the “PAGA Waiver.”

The agreement also included a severability clause that stated if the PAGA Waiver was found unenforceable or unlawful for any reason, (1) the unenforceable provision would be severed from the arbitration provision; (2) severance of the unenforceable provision would have no impact whatsoever on the arbitration provision or the parties’ attempts to arbitrate any remaining claims on an individual basis pursuant to the arbitration provision; and (3) any representative actions brought under PAGA must be litigated in a civil court of competent jurisdiction.

b. The Litigation

In October 2019, Adolf sued Uber in superior court, alleging individual and class claims under Labor Code Section 2802 and California’s Unfair Competition Law. Adolph claimed that Uber misclassified him and other delivery drivers as independent contractors rather than as employees and, as a result, wrongfully failed to reimburse them for necessary business expenses. In February 2020, Adolph amended his complaint to add a claim under PAGA.

In July 2020, the trial court granted a motion by Uber to compel arbitration of Adolph’s individual Labor Code claims and dismissed Adolph’s class action claims. Adolph later amended his complaint to eliminate his individual Labor Code and class claims and retain only his PAGA claim for civil penalties.

4. The California Supreme Court’s Analysis

The Supreme Court devoted a significant part of its analysis to a review of the history of PAGA, its one year statute of limitations, the effect of a PAGA settlement, and the inability to waive the right to bring a PAGA action.

a. PAGA Waivers

It stated that its decision in Iskanian v. CLS Transportation Los Angeles, 59 Cal. 4th 348 (2014), held that a pre-dispute categorical waiver of the right to bring a PAGA action is unenforceable. Iskanian also held unenforceable an agreement that, while providing for arbitration of alleged Labor Code violations sustained by the plaintiff employee (what Viking River called “individual claims”), compels waiver of claims on behalf of other employees (i.e., “non-individual claims”). Whether or not an individual claim is permissible under PAGA, a prohibition of representative (non-individual) claims frustrates PAGA’s objectives.

b. The Viking River Decision

Adolph disagreed with Viking River’s determination that Moriana’s non-individual PAGA claims should be dismissed. The California Supreme Court cited California decisions finding that Viking River did not disturb Iskanian’s rule that an arbitration agreement purporting to waive an employee’s non-individual claims is unenforceable as a matter of state law. It deferred to Viking River’s holding that the FAA preempted the rule of Iskanian insofar as it foreclosed the division of PAGA actions into individual and non-individual claims pursuant to an agreement to arbitrate. Viking River explained that such an anti-splitting rule is impermissible. Thus, it conceded that “Viking River requires enforcement of agreements to arbitrate a PAGA plaintiff’s individual claims if the agreement is covered by the FAA.” However, as noted below, it did not defer to Viking River’s finding that the non-individual PAGA claims should be dismissed rather than stayed.

c. The Court Focused On The Plaintiff’s Statutory Standing

After reviewing judicial precedents and the legislative history of PAGA, the Supreme Court addressed the narrow issue before it: whether an aggrieved employee who has been compelled to arbitrate individual claims premised on Labor Code violations actually sustained by the plaintiff maintains statutory standing to pursue non-individual PAGA claims arising out of events involving other employees in court. Viking River concluded that a PAGA plaintiff loses standing in this situation. Thus, it found that plaintiff-Moriana lacked standing to continue to maintain her non-individual claims in court and the correct course was to dismiss her remaining claims.

d. California Courts Have The “Final Word”

After framing the key issue in the case, the California Supreme Court chose to deviate from Viking River’s conclusion. It stated that the highest court of each state remains the final arbiter of what is state law. In other words, California courts will have the last word. Having given itself permission to resolve the issue it framed, the California Supreme Court declared that it was its obligation to ascertain the intent of the California Legislature so it could then effectuate the purpose of the enactment. It interpreted that intent in a manner that conflicted with the U.S. Supreme Court’s views in Viking River regarding PAGA standing.

5. Conclusion

The Supreme Court unanimously held that a plaintiff who files a PAGA action with individual and non-individual claims does not lose standing to litigate the non-individual claims in court simply because the individual claims have been ordered to arbitration. The Supreme Court reversed the judgment of the court of appeal and returned the case for further proceedings consistent with its opinion. It expressly limited its review to the question of PAGA standing and expressed no view on the parties’ other arguments regarding the proper interpretation of the arbitration agreement.

a. Class Claims, But Not PAGA Claims, Can Be Dismissed

Notably, the decision did not disagree with Viking River’s holding that employees can be compelled to arbitrate their individual claims, including their individual PAGA claims, when their arbitration agreement is subject to the FAA and provides for adjudication of claims on an individual-only basis. Nor did it disagree that the plaintiff’s class claims should be dismissed based on such an agreement. However, the Adolph decision preserves the ability of a PAGA plaintiff to pursue non-individual (representative) PAGA claims on behalf of other aggrieved employees in court. In short, the class claims can be dismissed while the PAGA claims can be pursued if the plaintiff is found to be an aggrieved employee.

b. The Significance Of The Arbitrator’s Decision

As a practical matter, this underscores the significance of the arbitrator’s determination of whether the plaintiff is or is not an aggrieved employee on the representative claims that are stayed in court. After the arbitrator issues a decision, any party may petition the court to confirm or vacate the arbitration award under Section 1285 of the Code of Civil Procedure.

Employers may therefore find it prudent to assess the potential outcome before deciding to compel arbitration. If the arbitrator finds the plaintiff is an aggrieved employee, i.e., the employee was employed by the employer and suffered at least one of the alleged Labor Code violations, that finding (if confirmed and reduced to a final judgment) would be binding on the court. Thus, the plaintiff would continue to have standing to litigate the non-individual (representative) claims in court. Conversely, if the arbitrator finds the plaintiff is not an aggrieved employee and the court confirms that determination and reduces it to a final judgment, the court would give effect to that finding. In that case, the plaintiff could no longer prosecute the non-individual claims due to lack of standing.

c. Moving Onwards

Employers are advised to consult with knowledgeable employment counsel regarding the combined impact of the Adolph and Viking River decisions. The decisions will have a widespread impact on pending and new PAGA cases and how they will be adjudicated in arbitration and in court. They will also influence the way arbitration agreements are drafted and enforced. Particular attention will be focused on provisions that contain class, collective and representative action waivers and severability clauses. One thing appears certain. It can be expected that arbitrators will be extremely busy. (For a detailed understanding of PAGA, readers are encouraged to review the publication, California’s Private Attorneys General Act (PAGA) Litigation And Compliance Manual by Attorneys Richard J. Simmons, Ryan Krueger, and Tyler Johnson of Sheppard Mullin. The book is available from Castle Publications, LLC.)

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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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EMPLOYERS FACE IMPORTANT DECISIONS AS SUPREME COURT BRIEFING IN CAMP V. HOME DEPOT TIME-ROUNDING CASE MOVES FORWARD

Employers in California and other states have used time-rounding practices for many decades based on principles announced by the U.S. Department of Labor (“DOL”), the California Division of Labor Standards Enforcement (“DLSE”), and state and federal court decisions. Although different kinds of time-rounding practices exist, the most common practice involves rounding time entries recorded on employees’ time records to the nearest five minutes or the nearest one-tenth or one-quarter of an hour. Such practices have normally been found lawful under California and federal law, provided they averaged out over a period of time, did not result in a failure to compensate employees properly for all time actually worked, and met additional standards.

More than 10 years ago, a leading California case allowing time rounding based on these principles was published in See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012). Numerous subsequent opinions construing California and federal law reached the same conclusion. (The topic is examined in Section 7.18 of the Wage and Hour Manual for California Employers, 26th Edition, by Attorney Richard J. Simmons of Sheppard Mullin.)

A more recent California Court of Appeal decision raises questions about these earlier decisions and the validity of time-rounding practices under California law. This new case should prompt employers to reevaluate time-rounding policies and practices and the risks they may present.

1. The Camp v. Home Depot Decision

In 2022, a California Court of Appeal disagreed with earlier decisions in finding that an employer violated California law in a case where the employer rounded total time for each workday, Camp v. Home Depot, 84 Cal. App. 5th 638 (2022). The Camp decision is fundamentally at odds with the principles followed for decades by the U.S. DOL and California DLSE and many state and federal cases that had construed California law.

The California Supreme Court has agreed to review the Camp decision. If the Supreme Court determines that the court of appeal correctly decided the case, it could cause a seismic shift in California law that leads to a new wave of class action, PAGA and single plaintiff lawsuits. Worse yet, an adverse decision by the Supreme Court could be applied retroactively.

2. The Briefing Schedule

The Supreme Court has established a briefing schedule under which the parties are currently required to submit briefs between June 1 and the end of July. Amicus briefs will be due shortly thereafter. A hearing date has not yet been scheduled. Richard Simmons and Tyler Johnson of Sheppard Mullin have been retained to file employer-side amicus briefs in support of Home Depot. The authors of the ALERT are therefore able to offer a unique perspective on the case and will update readers regarding important developments.

3. Employers Should Consider Their Options While The Case Is Pending

Many practitioners and employers are skeptical about the possible outcomes the Supreme Court could reach in the Camp decision given its track record of reaching decisions in employment cases that are adverse to employer interests. Undoubtedly, some anticipate that the Supreme Court’s decision is a “forgone conclusion” and that it will find all or most kinds of time rounding impermissible under California law, even if it is lawful under federal law, the Fair Labor Standards Act. The possibility of such an outcome certainly exists. Thus, the Supreme Court might simply outlaw rounding in any form, regardless of whether it involves total-time rounding at the end of each day (like the practice found impermissible in Camp) or a system where each time punch is separately rounded. It might also determine that its decision should apply retroactively. Employers who believe this is likely or simply wish to limit their risk may consider ending their rounding practices as soon as possible, if they have not already ended them.

a. Weighing Possible Outcomes

Despite the possibility that the Supreme Court could issue a bad decision for employers, there are other possible outcomes. Under a more refined analysis, employers may wish to determine first whether they utilize rounding practices and, if so, what system is used. For instance, they can ascertain whether they round all time entries, including meal period punches, or just in and out punches at the start and end of a shift.

Rounding meal period punches is particularly risky in light of Donohue v. AMN, 11 Cal. 5th 58 (2012), but even that practice requires an analysis of an employer’s meal period policies. For example, rounding time when employers provide 30-minute meal periods is considerably more risky than rounding time for 60-minute meal periods, i.e., because employees generally receive over 30 minutes even after rounding. And, some employers lawfully do not record meal periods at all because of the exemption that exists in the Wage Orders where an employer’s operations cease entirely during meal periods, such as when the power is shut off in a work area or a bell system is used to signal the start and end of a meal period.

Employers should also be mindful that the Supreme Court could surprise everyone and either affirm the permissibility of some types of time rounding under specific circumstances. Remember, while many argue that California has no de minimis doctrine because it rejected the federal standards in Troester v. Starbucks Corp., 5 Cal. 5th 829 (2018), Justice Krueger articulated standards that resemble a refined California de minimis standard that is more narrow than the federal standards. While many think it is unlikely, something of this nature could be cobbled together in Camp for time rounding so it is permitted, but only if tightly written conditions are met. Other practitioners may believe the Supreme Court will side with the See’s Candy Shop decision and affirm the permissibility of rounding practices that meet the standards set forth in that case.

b. Consult Your Attorneys

Some employers may simply want a recommendation from their attorneys of a “best and safest practice.” If so, it can be provided. Others will want a more in-depth discussion. Practitioners must be prepared to outline the potential outcomes in Camp, assess the employer’s level of risk tolerance and concerns about retroactivity of any decision, and ask how and why each employer rounds. For instance, did the employer implement rounding because it never considered alternatives to rounding, because of a study or economic analysis it performed, or for some other reason? These motivations may inform an employer’s decision of what steps are best in light of the upcoming decision in Camp and the possible outcomes that can occur. Suffice it to say that it is unlikely that all employers will choose the same path in addressing Camp’s possible outcomes. Employers are encouraged to consult experienced employment attorneys to consider their risks and options.

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EMPLOYEE TERMINATED AFTER FAILING TO RETURN FROM EXTENDED PREGNANCY LEAVE LOSES DISCRIMINATION, WRONGFUL TERMINATION, AND RELATED CLAIMS

A California Court of Appeal recently decided one of the most elaborate pregnancy discrimination and wrongful termination claims asserted under California law. The case included a number of claims based on the Fair Employment and Housing Act (“FEHA”). In Lopez v. La Casa De Las Madres, 89 Cal. App. 5th 365 ( 2023), the court of appeal affirmed summary judgment in favor of the employer who granted an employee several extensions of her pregnancy disability leave. However, the employer did not make accommodations that either were not needed due to a pregnancy-related condition or accommodations that were not enough to enable her to perform the essential functions of her position. The decision is historically significant. In reaching its conclusion, the court entered unchartered territory regarding California’s pregnancy and disability discrimination statutes.

1. Background

Gabriela Lopez filed an employment discrimination and wrongful termination lawsuit against La Casa de Las Madres (“La Casa”), a nonprofit organization that provides services to women and children who are victims of domestic violence. Lopez worked for La Casa at various times between 2002 and 2017 and became the shelter manager at La Casa’s residential center for domestic violence victims in 2014. She gave birth in September 2016, and did not return to work due to a series of events that gave rise to her lawsuit.

The trial court entered judgment in favor of La Casa following a bench trial. On appeal, Lopez argued the trial court misapplied provisions of the FEHA that require an employer to provide reasonable accommodations for a pregnancy-related condition. The court of appeal affirmed the trial court’s judgment. It concluded a cause of action under the FEHA, Government Code Section 12945(a)(3)(A), requires proof that: (1) the plaintiff had a condition related to pregnancy, childbirth, or a related medical condition; (2) the plaintiff requested accommodation of this condition with the advice of her health care provider; (3) the plaintiff’s employer refused to provide a reasonable accommodation; and (4) with the reasonable accommodation, the plaintiff could have performed the essential functions of the job.

The court of appeal determined that the trial court applied a correct understanding of these four elements. Further, contrary to the plaintiff’s contention, the trial court properly placed the burden on the plaintiff to prove that she had a “condition” related to pregnancy, and that she was able to perform the essential functions of her job with reasonable accommodation.

2. The Trial Court’s Decision

The trial court found that Lopez failed to carry her burden of proving one or more elements of each claim she pursued at trial. This included (a) her pregnancy discrimination and failure to prevent discrimination claim, (b) her disability discrimination claim, (c) her failure to accommodate disability claim, and (d) her wrongful termination claim.

Her pregnancy discrimination claim was based on a statute that makes it unlawful for an employer to refuse to provide reasonable accommodation for an employee for a condition related to pregnancy, childbirth, or a related medical condition, if the employee so requests, with the advice of the employee’s health care provider. The trial court found that Lopez failed to establish three elements it considered essential to this claim: that she (1) had a condition related to pregnancy; (2) could perform the essential functions of her job; and (3) was denied a reasonable accommodation, as requested on the advice of a health care provider. The court concluded that Lopez failed to establish that the condition for which she sought an accommodation (depression) was pregnancy related.

Further, even though clinical depression and post-partem depression are mental disabilities under the FEHA, Lopez failed to prove her claim because she did not prove that she was otherwise qualified to perform the shelter manager job given her need to avoid stressful duties. The trial court found that the elements of a failure to accommodate claims are: (1) the plaintiff has a disability covered by the FEHA; (2) the plaintiff can perform the essential job functions of the position; and (3) the employer failed reasonably to accommodate the plaintiff’s disability.

Finally, the trial court found that the claim Lopez was wrongfully terminated in violation of public policy (the policies in the FEHA) failed because the employer did not violate the FEHA.

3. The Significance Of The 2013 Decision In Sanchez v. Swissport

a. Providing Four Months Leave May Not Be Enough

The Supreme Court previously held that “an adverse employment action on the basis of disability is not prohibited [by the FEHA] if the disability renders the employee unable to perform his or her essential duties, even with reasonable accommodation. The court of appeal found the decision in Sanchez v. Swissport, Inc., 213 Cal. App.4th 1331 (2013), extremely important for several reasons. First, Sanchez did not support the employer’s argument that once an employee receives four months of pregnancy disability leave, she has no further right to any other accommodation under the FEHA. The court found that the issue was never addressed in Sanchez since the only accommodation the Sanchez plaintiff requested was for an additional period of disability leave.

b. The Employee Must Be Qualified To Perform Essential Job Duties

Second, Sanchez confirms the settled principle that “the FEHA does not prohibit an employer from discharging an employee with a physical or mental disability or medical condition who is unable to perform his or her essential duties, even with reasonable accommodations, or cannot perform those duties in a manner that would not endanger his or her health or safety, or the health or safety of others, even with reasonable accommodations.” Thus, the case did not support Lopez’s contention that she was not required to show that she was otherwise qualified to perform the essential functions of her job. Because it rejected her contention, the court of appeal disagreed that the trial court had committed any reversible error.

c. A Request For A Flexible Or Shortened Work Schedule Is Not A Request For Time Off For Therapy

The court also disagreed with Lopez’s claim that her employer failed to accommodate her request to take time off to attend therapy. The trial court determined that her employer would have accommodated her request to take time off for therapy, but she had submitted forms containing incomplete information. The forms she submitted recommended that, for an indefinite period, Lopez would require a flexible or shortened work schedule so she could leave work when she experienced stress.

4. The Court Rejected The Claim That A Request For A Modified Work Schedule Is A Reasonable Accommodation As A Matter Of Law

The court disagreed with Lopez’s claim that employers must always grant a request for a modified work schedule. Lopez sought to use this argument to challenge the trial court’s determination that the modification of “flexible/shortened workdays” was not a reasonable accommodation. Because the shelter manager needed to be available to make important decisions at any time and in an inherently stressful environment, the court found that an accommodation permitting Lopez to leave work whenever she experienced stress or anxiety was not a reasonable accommodation.

Likewise, the trial court justifiably determined that the offer of a temporary assignment to a data-entry position was a reasonable accommodation. It was an offer of a temporary reassignment until Lopez recovered from her unspecified disability.

Finally, the court rejected her claim that La Casa failed to prove its undue burden defense. The court concluded that the undue burden defense is an affirmative defense that only comes into play after a plaintiff has established that a specific requested accommodation was reasonable and thus required in the first place. Here, Lopez failed to prove she was denied a reasonable accommodation.

5. Conclusion

The court of appeal’s decision in Lopez covered significant new ground in the pregnancy and disability discrimination arena. Based on its analysis, the court affirmed the judgment of the trial court in favor of the employer. It also awarded the employer its costs.

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