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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.

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.)

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

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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.

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.

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

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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.

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.

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

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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.

Employee handbooks often play a significant role in a variety of cases filed against employers. This includes wage-hour cases (such as meal and rest period, reporting time pay, vacation, and sick pay claims) as well as employment discrimination, wrongful termination and retaliation cases. Experience teaches that employee handbooks can either help employers defend such lawsuits or provide harmful evidence if policies are not properly drafted.

In the recent decision in Noumoff v. Checkers Drive-In Restaurants Inc., ___ F. Supp.2d ___, Case No. 1:20-cv-395 (S.D. Ohio Jan. 31, 2023), a federal district court in Ohio granted an employer summary judgment on a former employee’s gender discrimination and retaliation claims under Title VII of the Civil Rights Act of 1964 and Ohio law. The court cited the employer’s honest belief that the employee had committed multiple violations of its employee handbook provisions as a basis to deny the employee’s discrimination and retaliation claims.

1. Background

The action raised the question of whether the defendant, Checkers Drive-In Restaurants, discriminated against and mistreated the plaintiff, Patra Noumoff, during her employment and subsequent termination. The employer operated 265 restaurants across the country and owned the Rally’s Restaurant in Spring Grove, Ohio. The plaintiff was the general manager of the restaurant.

The employer had an employee handbook for all its locations. Multiple sections of the handbook were relevant to the litigation, including provisions titled “what we can expect from you,” “employee conduct and work rules” that provide examples of infractions that can result in discipline or termination, progressive discipline, “time keeping and pay,” and employee benefits provisions relating to taking vacation.

The plaintiff was terminated for several reasons, including making inappropriate adjustments to the time records of two lower employees, insubordination for taking vacation without proper approval, and other alleged misconduct. The plaintiff then filed a discrimination complaint with the Equal Employment Opportunity Commission, alleging gender discrimination and retaliation in violation of federal and Ohio law. She later filed a lawsuit asserting these claims.

2. The Employer’s Summary Judgment Motion

The employer moved for summary judgment, arguing that no genuine issue of material fact existed and that it was entitled to summary judgment on each claim as a matter of law. The federal district court in Ohio agreed that the employer was entitled to summary judgment on the employee’s gender discrimination claim as a matter of law. It began the analysis by stating that Title VII makes it unlawful for an employer to discriminate against any individual because of such individual’s, race, color, religion, sex, or national origin. So does Ohio law.

a. The McDonnell Douglas Analysis

The employee attempted to prove her gender discrimination claim with indirect evidence. Because she relied on indirect evidence, the court was required to apply the McDonnell Douglas Corp. v. Green, 411 U.S. 792 (2007) burden-shifting framework to her claim. Under this framework, the plaintiff has the initial burden to prove a prima facie case of gender discrimination. If the plaintiff satisfies her initial burden, the burden shifts to the defendant to articulate some legitimate, nondiscriminatory reason for the adverse employment action. Lastly, if the defendant satisfies its burden, the plaintiff must prove by a preponderance of the evidence that the stated reasons were pretext for discrimination.

To establish a prima facie case of gender discrimination, the plaintiff has the burden of showing: (1) she was a member of a protected class, (2) she was subject to an adverse employment action, (3) she was qualified for the position, and (4) others, similarly situated and outside the protected class were treated differently.

b. The Employee Handbook

After assuming the plaintiff established a prima facie case for gender discrimination, the court recognized that the burden shifted to the defendant. That burden is one of production, not persuasion. The court found that the employer met its burden. It provided evidence of multiple employee handbook violations committed by the plaintiff, who was a general manager. She received a written warning for her alleged failure to be courteous, a final warning for insubordination for taking vacation that was not previously approved, and allegedly violated the handbook by manipulating two employees’ time and thus their pay. “All alleged Handbook violations are grounds for termination.” Because the employer’s burden is only one of production, it satisfied its burden to establish that it had legitimate, nondiscriminatory reasons to terminate the employee.

That resulted in the transition of the burden to the plaintiff to establish that such reasons are pretext. She failed to do so. As the court pointed out, “the Defendant honestly believed that Plaintiff violated the Handbook on numerous occasions thereby warranting termination, and Plaintiff did not produce evidence to the contrary other than her own testimony and opinions.” Thus, she failed to establish any genuine issue of material fact as to whether the employer’s proffered reasons for the adverse employment actions were pretextual. The employer was therefore entitled to summary judgment on the gender discrimination and retaliation claims.

3. Practical Observations

Ultimately, the court concluded that the employer prevailed on the employee’s gender discrimination and retaliation claims. On a practical level, the employer’s good faith, honest reliance on multiple provisions of its employee handbook that cited examples of inappropriate conduct and rules for taking vacation proved extremely helpful to the employer. It demonstrates that drafting and administrating employee handbooks in a fair and logical manner can be invaluable.

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

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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.

Throughout the COVID-19 pandemic, the California government has required employers to follow the most robust COVID-19-related laws and regulations in the country. However, California’s COVID-19 state of emergency officially ended on February 28, 2023. Shortly thereafter, the California Department of Public Health (“CDPH”) announced its vaccination and masking requirements for healthcare workers will expire on April 3, 2023. Despite these changes, Cal/OSHA’s COVID-19 prevention non-emergency regulations (the “Permanent Standard”) and other COVID-19 related laws remain in effect.

1. Cal/OSHA’s Permanent Standard

As detailed in the January 2023 edition of the ALERT, the Permanent Standard replaced Cal/OSHA’s COVID-19 Emergency Temporary Standards (“ETS”). The Permanent Standard eliminated multiple protocols required under the ETS, including employee screening (such as temperature and symptom checks) and exclusion pay. The Permanent Standard also limits the requirement for employers to make testing available to close contacts in the workplace and as required under outbreak protocols. But, employers still must notify close contacts of potential exposure “as soon as possible” and follow the worksite notification requirements under Labor Code Section 6409.6 (which remains in effect until January 1, 2024). Employers also must treat COVID-19 as a workplace hazard under Cal/OSHA’s IIPP regulations and therefore must address COVID-19 in their written IIPP (or a separate document), perform a COVID-19 hazard assessment, provide COVID-19 training, and investigate and respond to workplace exposures. The Permanent Standard became effective on February 3, 2023, and will remain in effect through February 3, 2025.

2. COVID-19 Leave Laws

As many employers know, California’s supplemental paid sick leave law expired at the end of 2022. Although multiple local supplemental paid leave ordinances initially remained in effect at the start of year, the majority have either ended or will end soon.

• Los Angeles: The City of Los Angeles rescinded its local emergency on February 1, 2023, which caused its supplemental paid sick leave requirement to sunset on February 15, 2023.

• Long Beach: The City of Long Beach voted to sunset its local supplemental paid sick leave effective February 21, 2023.

• Unincorporated Los Angeles County: On February 28, 2023, the Los Angeles County Board of Supervisors voted to end its COVID-19 emergency effective March 31, 2023, which means its supplemental paid sick leave and paid vaccine leave will expire April 14, 2023.

• Oakland: The City of Oakland has yet to announce the end of its local COVID-19 emergency and therefore its local supplemental paid sick leave obligations remain in effect.

• San Francisco: Employers with 100 or more employees worldwide must provide Public Health Emergency Leave (“PHEL”) of up to 80 hours to their San Francisco-based employees. Currently, COVID-19 still qualifies as a “public health emergency.”

3. New CDPH Orders And Guidance

On March 3, 2023, the CDPH issued orders modifying the state’s vaccination and masking requirements for healthcare workers and the state’s isolation guidance.

• Rescinding Of Vaccination Requirement: Effective April 3, 2023, California will no longer require COVID-19 vaccination for healthcare workers, including those in adult care, direct care, correctional facilities, and detention centers. Federal rules will continue to ensure that most health care workers remain vaccinated for COVID-19. Additionally, the EEOC’s guidance remains unchanged and contemplates an employer’s ability to have a generally applicable vaccination requirement, which appropriately accommodates medical conditions and sincerely held religious beliefs.

• Rescinding Of Masking Requirement: Effective April 3, 2023, California will no longer require masks in indoor high-risk and health care settings, including hospitals, long-term care, and correctional facilities. The CDPH explained that the reason for the delay is to allow local health departments and individual health care facilities to develop and implement plans customized to their needs and local conditions. Thus, healthcare employers still may continue to mandate masking based on individual factors such as their facility, patient demographics and community transmission rates.

• Updated Isolation Guidance: Effective March 13, 2023, an employee who tested positive for COVID-19 may end isolation after five days if symptoms are not present, or are mild and improving, and the employee is fever-free for 24 hours. Under the previous guidance, employees could return before ten days only if they tested negative on the fifth day or later. Because the Permanent Standard follows the CDPH’s isolation guidance, employers should modify their IIPP/COVID-19 prevention plan to incorporate the new guidance.

4. Conclusion

Although the COVID-19 state of emergency in California has ended, compliance with the state’s COVID-19 regulations and laws that remain in effect is still a concern for many California employers. Thus, employers should continue to monitor developments and modify their practices and procedures accordingly.

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

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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.

The Department of Homeland Security (“DHS”) announced on July 21, 2023 they will publish a revised version of Form I-9 on August 1, 2023. DHS also announced an enhanced remote verification flexibility using video for E-Verify employers, both for clean-up of I-9s created during the pandemic and going forward.

Key Changes To The I-9 Form To Be Published On August 1

• Employers can use the current Form I-9 (10/21/19) through Oct. 31, 2023

• Starting Nov. 1, 2023, all employers must use the new Form I-9

• Reduces Sections 1 and 2 to a single-sided sheet

• Supplement for Preparer/Translator Certification

• Supplement for for Reverification and Rehires

• Additional Acceptable Documents and guidance for automatic extensions

• For E-Verify employers, includes a box to indicate the special remote verification of documents

New Alternative Procedure Permitting Remote Verification For E-Verify Employers Only

Starting August 1, 2023, employers enrolled in E-Verify will be allowed to follow a new flexible procedure for remote verification of I-9 supporting documents.

• Step 1: Applicant (post-offer) or Employee copies or photographs their I-9 supporting documents (front and back) and e-mails them to the employer (or via another form of transmission).

• Step 2: Employer examines the documents to ensure the documents reasonably appear to be genuine.

• Step 3: Employer conducts a live video interaction (i.e., Zoom, Teams, Google Meet, FaceTime, etc.) with the applicant or employee to ensure that the documentation reasonably relates to them. Applicant or employee must present the same documents already transmitted to the employer a second time during the live interaction.

• Step 4:Employer marks the alternative procedure box of Supplement B of the new I-9 form for new employees hired on or after August 1, 2023. Or if the employee was hired during the pandemic, then the employer notates “Alternative Procedure” in the Additional Information Box of the prior I-9 form and completes this task by August 30, 2023.

• Step 5:Employer retains the supporting documents (paper or digital) and attaches them to the I-9. (In the past, only List A documents were copied. With the new remote flexibility, the E-Verify employer must now copy and retain all List A, or List B and C documents.)

Cleanup Of Pandemic I-9s For E-Verify Employers – Due August 30

Employers who were participating in E-Verify and created an E-Verify case for employees whose documents were remotely examined during the COVID pandemic (March 20, 2020 to July 31, 2023), may now choose to use the new alternative live video procedure starting on August 1, 2023 to satisfy the physical document examination requirement by August 30, 2023.

The employer must notate “alternative procedure” with the date of video examination in the Additional Information Box on Page 2 of the older version I-9. The employer should not create a new case in E-Verify.

E-Verify employers hiring remote employees on or after August 1, 2023 should use the new I-9 form and complete the Supplement B designating the alternative procedure.

Non E-Verify Employers Cleanup Of Pandemic I-9s Due August 30

Employers who were not enrolled in E-Verify during the COVID-19 flexibilities must complete an in-person physical examination by Aug. 30, 2023 for any employees hired during the pandemic.

Avoiding Discrimination With The Use Of E-Verify

Employers should be mindful of the following key issues:

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

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

• Employers that were not enrolled in E-Verify at the time they initially performed a remote examination of an employee’s documents under the COVID-19 flexibilities between March 20, 2020 and July 31, 2023 may not use the qualified video flexibility on employees hired since that time unless the employee was hired after the employer enrolled in E-Verify.

• A remote employee may elect to come into the employer’s office for in-person examination of their I-9 documents.

• All employers that enroll in E-Verify and are using a digital I-9 software program that interfaces with E-Verify are required to have all users participate in mandatory anti- discrimination training. https://www.e-verify.gov/book/export/html/3802

DOJ Immigrant & Employee Rights (IER)

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

Consult With Counsel

When you encounter any unusual I-9 issues, consult with experienced employment counsel to avoid creating liability, both as to onboarding as well as terminations.

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

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About The Authors

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

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

Lisa M. Harris is a Partner in the Labor and Employment Practice Group with the law firm of Sheppard, Mullin, Richter & Hampton LLP in the firm’s Orange County and New York offices. Lisa’s practice focuses on Labor and Employment and Diversity, Equity and Inclusion counseling and compliance. Ms. Harris counsels and represents management in both employment and traditional labor matters. She regularly conducts and advises on high-level investigations and trains HR professionals on how to conduct such investigations internally. She also advises on diversity, equity and inclusion best practices. As a member of the firm’s ESG and Sustainability Industry Team, Ms. Harris supports clients in addressing the social aspects of ESG through development and promotion of a healthy and equitable workplace.

Lisa received her J.D. from St. John’s University, Dean’s List, and her B.A. from University of California, Berkeley.

Christine L. Doyle is Special Counsel in the Labor and Employment Practice Group with Sheppard, Mullin, Richter & Hampton LLP in the firm’s Orange County office. Christine has experience in a broad range of immigration law, with a focus on employment-based immigrant and nonimmigrant visa petitions. She has numerous years of experience counseling employers and their employees on U.S. immigration, global immigration, and I-9 compliance matters.

Christine is a regular contributor to the California Labor and Employment ALERT Newsletter and Sheppard Mullin’s Labor & Employment Law, French Desk Law, and Latin American Law blogs. She received her J.D. from Pepperdine University and her B.A. from Boston College. She also served as an extern at the Los Angeles Immigration Court and Department of Justice.

Andrew J. Desposito is Special Counsel in the Labor and Employment Practice Group with Sheppard, Mullin, Richter & Hampton LLP in the firm’s Orange County office. Andrew’s practice focuses on business immigration including I-9 compliance, EB1A, EB1B, National Interest Waivers, H1B, and E-2 and L1 matters.

Andrew frequently lectures on immigration issues and is a regular contributor to the California Labor and Employment ALERT Newsletter and Sheppard Mullin’s Labor & Employment Law, French Desk Law, and Latin American Law blogs. He received his J.D. from the California Western School of Law and his B.A. from the Loyola University of Chicago.

On January 10, 2023, the U.S. Equal Employment Opportunity Commission (“EEOC”) released a draft of its Strategic Enforcement Plan (“SEP”) for the years 2023 through 2027. The final SEP is meant to establish the EEOC’s enforcement priorities and goals for the years to come and the final plan is subject to approval by a vote of the EEOC. However, before the SEP is finalized, the public can submit comments on the draft through February 9, 2023 at the website regulations.gov. Thus, employers might benefit from reviewing the topics the EEOC intends to focus on to determine if providing any public comments may serve their interests.

In its current form, the draft SEP indicates that the EEOC will focus on the following topics or “subject matter priorities” over the next four years:

1. Recruitment And Hiring, Including The Use Of Artificial Intelligence

The EEOC intends to focus on recruitment and hiring practices and policies that discriminate against racial, ethnic, and religious groups, older workers, women, pregnant workers and those with pregnancy-related medical conditions, LGBTQI+ individuals, and people with disabilities.

The SEP notes that this will include a focus on the use of artificial intelligence or machine learning to target job advertisements, recruit applicants, or make or assist in hiring decisions. Similarly, this focus would include reviewing screening tools or requirements that disproportionately impact workers based on their protected status. The EEOC also intends to review job advertisements that might exclude or discourage certain demographic groups from applying.

Relatedly, the EEOC intends to focus on policies or practices that limit access to on-the-job training, pre-apprenticeship or apprenticeship programs or other job training opportunities based on a protected status.

The SEP also explains that the EEOC is particularly concerned with the lack of diversity in certain industries such as “construction and high tech” and industries that benefit from substantial federal investments, indicating the EEOC may focus on recruitment and hiring in these particular industries.

2. Protecting Vulnerable Workers

The EEOC also noted that it intends to focus on certain vulnerable workers and persons from underserved communities who may be impacted by employment discrimination or harassment, including the following categories of individuals: immigrant and migrant workers; people with developmental or intellectual disabilities; individuals with arrest or conviction records; LGBTQI+ individuals; temporary workers; older workers; individuals employed in low wage jobs, particularly teen-aged workers employed in such jobs; Native Americans/Alaska Natives; and persons with limited literacy or English proficiency.

3. Protecting Individuals Affected By Pregnancy

The EEOC will also prioritize “emerging and developing issues,” which includes protecting individuals affected by pregnancy, childbirth, and related medical conditions under the Pregnancy Discrimination Act. The EEOC also intends to focus on enforcing the newly enacted Pregnant Workers Fairness Act, which requires employers to make reasonable accommodations for those affected by pregnancy, childbirth, and related medical conditions.

4. Discriminatory Acts In Response To Global Events

The EEOC also flagged discrimination influenced by or in response to local, national or global events as another “emerging and developing issue.” The SEP notes that this category currently includes African Americans, individuals of Arab, Middle Eastern, or Asian descent, Jews, Muslims, and Sikhs. However, the EEOC acknowledged that these designations may change based upon current events.

The EEOC also explained that it will continue to focus on discriminatory acts associated with the COVID-19 pandemic and other threats to public health. The SEP takes note of the significant pandemic-related stereotyping and discrimination targeting certain groups, including persons of Asian descent, older workers, and persons with disabilities.

5. Equal Pay

The EEOC will continue to focus on combatting pay discrimination in all its forms, including on the basis of sex under the Equal Pay Act and on other protected bases covered by federal anti-discrimination laws. The EEOC stated that it will continue to use directed investigations and Commissioner Charges to facilitate enforcement of equal pay laws.

6. Employer Agreements

The EEOC also announced its intention to focus on policies and practices that purportedly limit substantive rights, discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or impede the EEOC’s efforts. To that end, the EEOC intends to target the following types of agreements: settlement agreements and releases, non-disclosure agreements, non-disparagement agreements, and arbitration provisions.

7. Systemic Harassment

The EEOC noted that over 34% of its recent charges include harassment allegations. Accordingly, the EEOC stated that it will continue to focus on combatting systemic harassment in all forms. This priority focuses on widespread patterns or practices of harassment, even if a claim is brought by an individual, if there is some relation to a widespread pattern. The EEOC states that it will accomplish this goal by focusing on strong enforcement with appropriate monetary relief and targeted equitable relief to prevent future harassment.

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

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About The Author

Rachel Patta Howard is an associate in Sheppard Mullin’s Labor and Employment Practice Group in the firm’s Century City office. Ms. Howard represents employers in a variety of industries including financial services, banking, retail, healthcare, manufacturing, and entertainment. She has successfully litigated and favorably resolved cases involving allegations of discrimination, retaliation, harassment, failure to accommodate, wrongful termination, trade secret misappropriation, and defamation, as well as wage and hour cases, including representative and class actions. Additionally, Rachel advises and counsels clients on day-to-day employment issues including internal investigations, discipline and terminations, leaves of absence, the interactive process, reasonable accommodations, personnel policies, and other wage and hour compliance issues.

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. Howard received her law degree, as well as her undergraduate degree, from the University of California, Los Angeles.

The Department of Homeland Security (“DHS”) announced on May 4, 2023 a planned end to the COVID-19 remote I-9 flexibility. The flexibility ends on July 31 and prior pandemic I-9s must be remediated by Aug 30, 2023. Therefore, employers should act quickly to review and remediate I-9s that were verified remotely in the past three years.

Recommended Procedures For Remediating I-9s Completed Remotely:

• Create a list of all of the company’s new hires from March 20, 2020 to date. Pull all of their I-9s and determine which ones had their documents verified remotely.

• Also pull all of the I-9s from March 20, 2020 of existing employees that were reverified (i.e., expiring EAD work permits, expiring I-94s for H-1B and other visa holders, etc.) and determine which ones were remotely verified.

• Then arrange to have the employee come into the office with their original work authorization documents or authorize an individual who lives near them to complete the task on behalf of the company.

• Either way, Section 2 should be updated with a notation in the Additional Information Box: “Original documents viewed in person on x date” with their signature.

Best Efforts And Risk Assessment:

Of course, your company will want to do the best you can and try to reach 100% compliance. Since achieving perfect compliance may be difficult for some employers, it is helpful to consider the larger risk assessment. Specifically, I-9 audits by U.S. Immigration and Customs Enforcement (“ICE”) are very rare. Statistically, probably 1 in 1,000 companies are audited. While nobody knows how ICE will handle an audit which also involves I-9s created during the pandemic, it seems unlikely that ICE will take a punitive approach toward a company that did not reverify in person. DHS does have a proposed rule to make remote verification via e-mail, fax, or video permanent. But, the rule is not final yet, so that is why the agency is telling employers to finish the verification task under the old rule.

DHS Has Proposed To Make The Remote I-9 Pandemic Rule Permanent:

The proposed rule may become final as soon as August. While nobody knows for certain what the final rule will look like, our guess is that DHS will indicate that the rule applies only to new I-9s moving forward and not formally make it retroactive.

Vendors To Assist With Remote Verifications:

As to brand new hires going forward that are 100% remote or those hired during the pandemic, the ideal practice is to authorize someone living in that city to act on behalf the company as an authorized signatory to review the original I-9 work authorization documents in the field and then complete Section 2 or 3 of the I-9 in the field. There are a few vendors now providing this service. In addition, the large payroll providers have started a network for remote I-9 assistance. In some situations, a notary may be willing to assist as well. However, in California, notaries cannot do so unless they are also bonded immigration consultants.

Historical Perspective – The I-9 Was Created In 1986 Before Remote Work:

It’s nice that USCIS has proposed a regulation to make remote I-9 verification permanent. This would be beneficial for several reasons.

First, of course, is the growing wave of remote employment where the employee is not able to come to the office where the company’s human resources department is located.

Second, the requirement of in-person verification was created in 1986 by the legacy INS as part of the IRCA I-9 requirement. The rule was well intended – namely that the employer would look at the documents and determine if they are real. At the time, there were only fax machines, and the quality of a fax of a work authorization document was not very clear.

However, in the 1990s the ability to create false documents that looked very real became rampant. Then came scanners, crystal clear PDFs, high-quality e-mail, video calls, etc. Therefore, today whether the documents are reviewed in person or remotely, an employer never really knows for sure if the documents are real. They can only attest that they look real and that the person’s documents confer work authorization. Therefore, the proposed rule allowing remote verification is a good practical solution in light of technological advancements.

Strategies To Minimize Risk With I-9s:

I-9 Software: Purchasing a digital I-9 software system that is compliant with ICE protocols can be very helpful in minimizing I-9 completion errors. Being ICE compliant means that the software provides a complete audit trail of who touches the I-9, when, and what was done. Digital software will flag many errors at the time of completion. Please note that merely scanning a paper I-9 into an Adobe PDF will not comply with ICE requirements.

Training: Any individual that is involved in the I-9 process should be properly trained.

DOJ Immigrant & Employee Rights (“IER”): The IER unit at the Department of Justice (“DOJ”) is very aggressive. If an employer erroneously denies employment to someone who they didn’t think was work authorized, no matter how well intended, DOJ will issue a large civil investigation demand, name and shame the company, and fine them.

Consult With Counsel: When you encounter any unusual I-9 issues, consult with experienced employment counsel to avoid creating liability, both as to onboarding as well as terminations.

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

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About The Authors

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

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

Christine L. Doyle is Special Counsel in the Labor and Employment Practice Group with Sheppard, Mullin, Richter & Hampton LLP in the firm’s Orange County office. Christine has experience in a broad range of immigration law, with a focus on employment-based immigrant and nonimmigrant visa petitions. She has numerous years of experience counseling employers and their employees on U.S. immigration, global immigration, and I-9 compliance matters.

Christine is a regular contributor to the California Labor and Employment ALERT Newsletter and Sheppard Mullin’s Labor & Employment Law, French Desk Law, and Latin American Law blogs. She received her J.D. from Pepperdine University and her B.A. from Boston College. She also served as an extern at the Los Angeles Immigration Court and Department of Justice.

Andrew J. Desposito is Special Counsel in the Labor and Employment Practice Group with Sheppard, Mullin, Richter & Hampton LLP in the firm’s Orange County office. Andrew’s practice focuses on business immigration including I-9 compliance, EB1A, EB1B, National Interest Waivers, H1B, and E-2 and L1 matters.

Andrew frequently lectures on immigration issues and is a regular contributor to the California Labor and Employment ALERT Newsletter and Sheppard Mullin’s Labor & Employment Law, French Desk Law, and Latin American Law blogs. He received his J.D. from the California Western School of Law and his B.A. from the Loyola University of Chicago.

1. The Camp v. Home Depot Decision

On October 24, 2022, a California Court of Appeal decided a time-rounding decision that could be extremely troublesome. In Camp v. Home Depot USA, Inc., 84 Cal. App. 5th 638 (2022), the court opined that no provision in the Labor Code or Wage Orders expressly allows or prohibits time rounding. It observed that the California Supreme Court had not directly decided the precise rounding issues raised in the case before it and determined that the “total time” rounding practices in issue were not permissible.

The court did not stop there. After stating that the rounding of the plaintiff’s total time was inconsistent with public policy, it urged the Supreme Court to address both the narrow rounding issues raised in the Home Depot case and conduct a broader examination of rounding practices allowed in other decisions.

a. Earlier Cases Approved Specific Rounding Practices

The Home Depot decision is at odds with the 2012 decision in See’s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012). In See’s the California Court of Appeal held that time rounding policies are lawful under California law if they are neutral on their face and as applied and meet other specified standards. Federal cases throughout the country have also recognized the validity of time rounding practices that meet these standards. Since 2012, numerous courts have followed the See’s Candy decision and applied it in other contexts to a variety of time rounding policies and practices.

The Home Depot court invited the Supreme Court to consider the validity of the rounding standard articulated in See’s Candy where an employer captured all the minutes an employee has worked before applying a quarter-hour rounding policy. It also invited the Supreme Court to address the legality of neutral time rounding by employers and provide guidance on the general propriety of time rounding in view of the “technological advances” that now “help employers to track time more precisely.”

b. The Supreme Court Will Review Rounding

The Supreme Court agreed in February to review the Home Depot decision because the Supreme Court may express views on rounding that reverberate beyond the Home Depot decision itself and touch upon principles established in other cases, including See’s Candy, the case may have broad-ranging significance to all California employers. Furthermore, because the Supreme Court’s decisions ordinarily apply retroactively, employers who utilize rounding practices would be prudent to examine them with their employment counsel as soon as possible.

It bears noting that Richard J. Simmons, Daniel McQueen and Tyler Johnson of Sheppard Mullin have been asked to file an amicus brief with the Supreme Court laying out the employer-side perspective for the California Employment Law Council (“CELC”) and the Employers Group.

2. Background

The plaintiffs, Delmer Camp and Adriana Correa, filed a proposed class action for unpaid wages against Home Depot USA, Inc. They alleged that Home Depot’s electronic time-keeping system captured each minute worked by employees; however, due to Home Depot’s quarter-hour rounding policy, some employees were paid for less time than reflected in the timekeeping system. In actuality, employees had different personal experiences. For example, Correa was overpaid under Home Depot’s practices while Camp was underpaid.

a. The Rounding System Resulted In Overpayment Of One Plaintiff And Underpayment Of The Other

One of the plaintiffs, Correa, agreed that Home Depot’s rounding system did not cause her to be underpaid. Rather, because it resulted in the overpayment of wages in her case, she dropped her claim. In contrast, according to Home Depot’s own evidence, the other plaintiff, Camp, lost a total of 470 minutes over approximately 4 1/2 years due to the rounding policy. Home Depot moved for summary judgment, arguing that its rounding policy was neutral on its face, neutral as applied, and otherwise lawful under the principles set out in See’s Candy. The trial court agreed and granted Home Depot’s summary judgment motion.

b. The Employee’s Appeal

On appeal, Camp contended that notwithstanding See’s Candy, neither the Labor Code nor the relevant Wage Order authorizes time rounding that results in an individual employee failing to receive compensation for all time worked. Based on the particular facts of the case and in view of the guidance provided by more recent Supreme Court opinions in Troester v. Starbucks Corp., 5 Cal. 5th 829 (2018), and Donohue v. AMN Services, LLC, 11 Cal. 5th 58 (2021), the court of appeal reversed the judgment and directed the trial court to enter a new order denying summary judgment. It concluded that, in relying on its quarter-hour rounding policy, Home Depot did not meet its burden by showing that there was no triable issue of material fact regarding Camp’s claims for unpaid wages where Home Depot tracked the exact time in minutes the employee worked each shift and its records showed that Camp was not paid for all the time he worked. Disregarding principles embraced in other cases, the court looked at Camp’s individual claim and disregarded the fact that his co-plaintiff, Correa, had been overpaid based on the same rounding policy.

c. The Court Limited Its Opinion

The court was careful to limit its analysis and holding to the specific facts before it. It made clear that it did not reach the issue of whether employer time rounding practices in other contexts comply with California law. For example, it did not address the application of See’s Candy and its progeny to other circumstances, such as when an employer uses a neutral rounding policy due to the inability to capture the actual minutes worked by an employee. The court emphasized that it did not reach the issue of whether an employer who has the actual ability to capture an employee’s minutes worked is required to do so.

In order to understand the scope of the court’s decision, it is important to consider the rounding practices that were in dispute, a practice where the employer recorded time to the minute and then rounded total time. Yet, despite the court’s attempt to underscore the limitations on its holding, it can be anticipated that the case will generate uncertainty in the area that will persist until the Supreme Court speaks on the topic.

3. Home Depot’s Rounding Policy

Home Depot presented evidence describing its time-keeping and rounding practices. It utilized an electronic software system, “Kronos,” to record hourly employees’ time punches. Hourly employees punched in and out at the beginning and end of their work shifts, as well as for meal breaks. The Kronos system then captured the punch time through the minute.

Unlike a rounding system that looked at each time punch individually, Home Depot rounded total shift time. Specifically, each employee’s total shift time was rounded to the nearest quarter-hour to calculate his or her pay for that period. When total shift time falls between the quarter hour, a time increment of seven minutes or less is rounded down to the nearest quarter hour, while a time increment of eight minutes or more is rounded up to the next quarter hour. For example, if the total shift time was recorded as six hours and three minutes, the time was rounded down to a total of 6.00 hours. If the total shift time was six hours and eight minutes, the shift time was rounded up to 6.25 hours, i.e., 6 1/4 hours.

Camp worked for Home Depot as a non-exempt employee since March 2015. His time and pay records showed that between March 30, 2015 and October 20, 2020, he worked 1,240 shifts. At various points in time, he gained minutes or lost minutes due to rounding. During the entire period, however, the evidence submitted by Home Depot with its summary judgment motion showed he personally suffered a total net loss of 470 minutes, or approximately 7.83 hours over the 4 1/2 year period, due to rounding.

4. The Court’s Description Of The 2012 See’s Candy Decision

In See’s Candy, the appellate court concluded that employer time rounding policies may be lawful in California. The employer’s timekeeping software system required employees to punch into the system at the beginning and end of their shifts, as well as for lunch breaks. The Kronos punch showed the actual time (to the minute) when the employee punched into the system. Pursuant to the time rounding policy, in and out punches were rounded (up or down) to the nearest 10th of an hour (every six minutes beginning with the hour mark). The time punches were thus rounded to the nearest three-minute mark.

The court of appeal observed that although California employers had long engaged in time rounding, there was no California statute or case law specifically authorizing or prohibiting the practice. It then examined the federal regulations promulgated under the federal Fair Labor Standards Act. Notably, the federal standards had been adopted by the California Division of Labor Standards Enforcement.

The See’s Candy court ultimately held that “the rule in California is that an employer is entitled to use the nearest-tenth rounding policy if the rounding policy is fair and neutral on its face” and “it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” In the decade since the See’s Candy opinion was filed in 2012, numerous other courts have found time rounding lawful under California law. (It bears noting that the employer in See’s Candy rounded individual time punches. In contrast, Home Depot rounded total shift time.)

5. The Discussion Of Troester v. Starbucks Corp.

Troester was decided in 2018, six years after See’s. The Supreme Court considered an employee’s claim for unpaid wages where the employer required employees to work off the clock several minutes per shift. The Supreme Court held that the federal de minimis doctrine did not apply to state law claims for unpaid wages in the circumstances addressed. The de minimis doctrine may in some circumstances excuse the payment of wages for small amounts of otherwise compensable time upon a showing that the bits of time are administratively difficult to record. The Supreme Court referenced the See’s Candy case in Troester, but did not directly analyze the propriety of employer time rounding.

Even though Troester did not reject the principle of time rounding, the Home Depot court found it probative as to several points. For example, Troester did discuss the aggregate effect of failing to pay an employee for a few extra minutes of work each day because the time can add up. In Troester, for instance, the plaintiff sought payment for 12 hours and 50 minutes of compensable work over a 17-month period, which amounted to $102.67 at a wage of $8 per hour. The Supreme Court also commented that employers are in a better position than employees to devise means to track small amounts of regularly occurring worktime. Further, Starbucks had restructured the work so that employees would no longer have to work before or after clocking out. Finally, the Supreme Court observed that “technological advances” may help with tracking small amounts of time.

6. The Discussion Of Donohue v. AMN Services, LLC

In Donohue, the Supreme Court addressed the issue of time rounding in the specific context of meal periods. It explained that California’s meal period provisions are designed to prevent even minor infringements on meal period requirements, and rounding individual meal punches is incompatible with that objective. In fact, small rounding errors can amount to a significant infringement on an employee’s right to a 30-minute meal period. The court in Home Depot carefully selected passages in Donohue that it believed supported a new view on the permissibility of time rounding, even outside of the meal period context.

7. The Court’s Analysis

After reviewing the caselaw in the area, the Home Depot court began its analysis. It noted that Home Depot chose to pay nonexempt employees, such as Camp, by the hour. Where an employer has agreed to pay compensation, as measured by a unit of time, none of the authorities cited by Home Depot indicates that an employer may round captured work minutes where it results in the failure to pay an employee for all minutes worked. Under the guidance and direction of Troester and Donohue, “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.” Because Home Depot did not show there was no triable issue of material fact regarding the claim for unpaid wages, it should not have been granted summary judgment.

The court observed that it had been well settled for nearly a decade that neutral time rounding is lawful under California law. However, it noted that the Supreme Court has never decided the validity of the rounding standard articulated in See’s Candy. It thus reasoned that the application of See’s Candy should be re-examined in circumstances “where employee worktime in minutes can be captured and has been captured by the employer and, as a result of a quarter-hour rounding system, the employee is not compensated for all actual worktime.

8. Additional Resources

The Supreme Court has agreed to review the Home Depot decision and the question: “Under California law, are employers permitted to use neutral time-rounding practices to calculate employees’ work time for payroll purposes?” It is not yet clear whether it will confine its review to the narrow issues resolved in Home Depot or whether it will examine rounding principles on a broader basis.

Employers that use rounding practices should understand and discuss the significance of the Home Depot decision with their employment attorneys. For more information regarding state and federal laws relating to timekeeping and rounding practices, readers can consult Section 7.18 of the Wage and Hour Manual for California Employers (26th Edition) by Richard J. Simmons of Sheppard Mullin. The new edition of the publication is available from Castle Publications, LLC.

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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.