Announced July 1, 2009, the US Immigration and Customs Enforcement (ICE) Agency sent Notices of Inspection to 652 businessess nationwide, to review their I-9 and related employment records to determine compliance with Immigration laws.  By comparison, ICE sent only 503 of these notices to employers for the entire year of 2008.  As always, the stated purpose is to reduce the demand for illegal employment and protect employment opportunities for workers who have a legal right to work in the United States.

As for those employers who will receive these Notices, apparently they have been targeted by ICE, rather than simply being chosen at random.   ICE reports that it has strategically selected these employers for audits, reportedly based on information and reports that ICE has received that the employers have allegedly hired illegal workers.  ICE has announced its actions as part of an overall, nationwide enforcement strategy designed to concentrate and direct its resources towards companies that knowingly employ illegal workers.   This appears to be a much more aggressive strategy than it has employed in the past.  

It is yet another reminder to employers to complete and maintain proper I-9 records to insure compliance with immigration mandates.

In a decision published July 2, 2009, the California Supreme Court has stated that the same legal standards currently used to determine sexual harassment in the workplace, under both Title VII and California’s Fair Employment and Housing Act, also apply to liability determinations for alleged sexual harassment in business, service and professional relationships, which is prohibited by California Civil Code § 51.9.  (Hughes v. Pair, S157197 (7/2/09)).

This Civil Code section prohibits sexual harassment outside the employment context, where the defendant is in a business, service or professional relationship as a physician, dentist, psychotherapist, attorney, real estate agent, appraiser, accountant, banker, trust officer, financial planner, loan officer, collection service, building contractor, loan officer, executor, trustee or administrator, landlord, property manager, teacher, or in a relationship that is substantially similar to the above.  

The Court has made it clear that the same standards used to determine sexual harassment in the workplace are equally applicable to determine whether a professional has engaged in sexual harassment during the course of the business or professional relationship.  In this case, the Supreme Court ruled that an isolated instance of inappropriate behavior by the defendant did not constitute sexual harassment under either a quid pro quo or hostile environment  theory.  However, the ruling should serve as a grim reminder to professionals that, in California at least,  there can be serious, legal and financial consequences when a client asserts that a professional’s behavior is out of bounds. 

A reader recently asked me for an update on this issue and, I am always willing to accommodate a reader’s request.  First, for further information on the Employee Free Choice Act, I suggest that you go “Employer Links” on my website, and then click “Employee Free Choice Act” on the dropdown menu.

As for new developments on this issue, Congress has been rather silent.  There has been such a pushback from the business community on the issue of card-check recognition, that the measure has been losing key senate votes that it would need to pass, such as Sens. Feinstein and Specter.  An alternative for a shortened election cycle, in place of card check recognition, is being floated to resurrect and achieve ultimate passage of legislation.  Stay  tuned.

In 2006, Lisa Owen, a former sales associate sued Macy’s, alleging that the store did not pay her all of the accrued, vested vacation pay to which she claimed that she was entitled.  (Ms. Owen had previously worked for Robinson’s-May, which was acquired by Macy’s.)  The Robinson’s employee handbook stated that “all eligible sales associates earn and vest in paid vacation after they have completed six months of continuous employment.” In other words, Robinsons made new employees wait six months before they began to earn any vacation.  Ms.  Owen asserted that this delayed vacation accrual policy somehow violated California’s Labor Code.  Both the trial court and the court of Appeal disagreed, with judgment for Macy’s affirmed on appeal.  Owen v. Macy’s, Inc. (filed June 29, 2009) B207719 (Los Angeles Sup. Ct. No. BC 355629).

The Appellate Court, Second Appellate District,  made clear that the law permits an employer (1) to offer no vacation time whatsoever; (2),  adopt a policy specifying the amount of vacation pay that an employee is entitled to be paid as wages; (3) that a company has complete discretion to determine the point at which vacation benefits begin to accrue; (4) and that employers may also warn employees, in advance, that employees will cease to accrue vacation time in excess of an announced limit (a no additional accrual policy).  The Appellate Court stated that none of these policies violates California Labor § 227.3, in which vacation pay vests as its earned and cannot be taken away subsequently by an employer.  Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774.  This case highlight the employer’s legal right to determine the timing and extent of vacation benefits when choosing to provide vacation benefits to its employees.  And, these are prudent, cost-containment features that should be incorporated into any vacation pay policy in California.

On June 2, 2009, the California Court of Appeal for the Fourth Appellate District, Division One, dramatically reversed an $86 million dollar judgment previously entered against Starbucks in a class action lawsuit by a San Diego trial court.   The Appellate Court determined that Starbucks did not violate California Labor Code § 351 by requiring an equitable distribution of  tips specifically left in a collective tip box for its service team comprised of both baristas and shift supervisors. (Jou Chau, et al. v. Starbucks Corporation (6/2/09) D053491 (Super.Ct.No.GIC836925)).

Jou Chau, a former Starbucks barista, brought a class action against Starbucks Corporation challenging its policy which permitted shift supervisors to share in tips that customers place in a collective tip box.  At trial, the Court agreed that Starbucks’ tip allocation policy violated California Labor Code § 351, which prohibits an employer’s “agent” from taking any portion of a tip that is left for an employee.  The Appellate Court sharply disagreed, stating even if shift supervisors were the employer’s agents, as defined by California Labor Code § 350, Starbucks did not violate California Labor Code § 351 by permitting shift supervisors to share tip proceeds that customers left in collective tip boxes for both baristas and  shift supervisors.

In its reasoning, the Appellate Court relied on undisputed facts establishing that 90-95% percent of the time, shift supervisors perform the same tasks as baristas, that both baristas and shift supervisors work as a team to serve the customers coffee, that shift supervisors have very limited authority to control and/or direct the work of baristas, that shift supervisors have no authority to hire, fire or discipline employees, that when placing tips in the tip box, the customer actually intends that the tip be shared with the service team, which includes shift supervisors, that Starbucks has an equitable tip distribution policy to apportion tips among team members and, finally, that assistant store managers and store managers are not permitted to participate in the tip sharing process.

In a ruling tailored to the specific facts of this case, the Appellate Court specifically determined that California Labor Code § 351 did not prevent shift supervisors from sharing in the proceeds placed in collective tip boxes.  But, the Court was also careful to distinguish its ruling in this case from previous, tip-pooling cases, where employers unlawfully forced servers to share tip proceeds with the employer’s supervisors and managers.  It remains to be seen whether the California Supreme Court will accept review of this decision which likely will be appealed.

Here is another extreme example of the costs an employer may incur if its pay policies violate California law.  If you have a tip pooling or tip allocation policy in place, it might be advisable to seek a legal review of that policy to verify that it is in conformity with California law.

In its May/June, 2009 editions, California Bar Journal is reporting the following million dollar plus verdicts against California employers:

• $2,812,000.00 verdict against Toyota Motor Corporation, resulting from the unlawful termination of a Chinese woman due to pregnancy, maternity leave and ethnicity (Sun v. Toyota Motor Corp., Los Angeles County Superior Court);
• $1,200,000.00 verdict against the City of Newport Beach for unlawful retaliation against a Newport Beach Police Officer, who reportedly was discriminated against for reporting alleged misdeeds of fellow officers and for a perception that the officer was a homosexual (Harvey v. City of Newport Beach, Orange County  Superior Court);
• $17,500,000.00 verdict awarded to a former RV salesman, at least in part for reportedly unpaid commissions, following his termination (Trealoff v. Forest River, In., San Bernardino County Superior Court).
• $11,441,559.00 verdict awarded to a physician, allegedly resulting from a wrongful termination. (Martinucci v. Southern California Permanente Medical Group, Los Angeles County Superior Court).

These are the ultimate, negative outcomes that every employer absolutely wants to avoid.  A pro-active approach to resolution of labor and employment relations disputes is essential if you wish to eliminate these disputes at the earliest opportunity.   At your request, I am ready to review any labor and employment issues which may be of concern to you and discuss how I might best assist and support your Company.  

By affirming the Trial Court’s decision to sustain a Water District’s Demurrer to a class-action complaint, the Appellate Court for the Fifth Appellate District has clearly stated that unless Labor Code provisions are specifically made applicable to public employers, they only apply to employers in the private sector.  Randell Johnson v. Arvin-Edison Water Storage District (Filed 6/3/09) F056201 (Super.Ct.No. S-1500-CV-261871).

Appellant-employee, Randy Johnson, filed a class action complaint against Arvin-Edison Water Storage District, alleging unpaid overtime and missed meal periods as the class representative.   Sustaining the demurrer, the trial court dismissed the lawsuit.  In its decision to uphold this ruling, the Appellate Court specifically concluded that California Labor Code § 510, defining an employer’s duty to pay overtime, as well as California Labor Code § 512, regulating daily meal periods, do not apply to public entities, including this Water District.   The Appellate Court also stated that, as a Municipal Corporation, the Water District was exempt from the requirement to pay all wages due immediately at the time of termination, otherwise required of private employers under California Labor Code §§ 201-203.

From a purely philosophical standpoint, this appears to a be a classic example of the expression that, while everyone is equal, some are more equal than others.  Imagine that, the State exempting itself from the very statutes that it imposes upon all other employers in the private sector-what a surprise?

In Chindarah v. Pick Up Stix (Feb. 26, 2009) 171 Cal. App. 4th 796 and now, Watkins v. Wachovia Corporation, et al (Apr. 16, 2009)  the Appellate Courts for the Second (Watkins) and Fourth (Chindarah) Appellate Districts approved employer settlement agreements with individual, putative class members, effectively ending class-action litigation that alleged employee misclassification and unpaid overtime as issues common to the class.  The Courts concluded that California Labor Code § 206.5  only prohibits employers from coercing settlements by withholding wages concedely due, not settlements arising from bona fide disputes as to whether wages are actually owed.  

California Labor Code § 206.5 states that ” An employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. A release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee.  Violation of this section by the employer is a misdemeanor.”  

However, the Appellate Courts in these cases concluded that a “bona-fide dispute” existed as to whether wages were actually “due.” Therefore, the signed releases were not “null and void” or a violation of California Labor Code § 206.5.  Where a good-faith, bona fide dispute exists as to whether wages are owed, then wages are not considered “due.”  Therefore, a settlement of these claims would not violate California Labor Code § 206.5, or California Labor Code § 1194, which is construed as an unwaivable, statutory right to receive overtime pay.  Finally, the Chindarah Court refused Plaintiffs’ request to void these releases as a violation of the Federal Fair Labor Standards Act (FLSA).  While such releases might be prohibited under the FLSA, the Appellate Court in Chindarah noted that there is no requirement to impose this Federal standard upon California’s wage and hour laws.  

These decisions provide employers and defense counsel with an alternative means to end class action, wage and hour litigation via settlement with putative class members, with or without the consent or participation of class counsel or the Court and, without violating California law.  This will be an approach that will be utilized in the future, as an effective means to destroy class action, wage and hour claims in California.

I recently submitted an editorial reply to The Herald News, in Fall River, MA., in opposition to an article written by Sen. John F. Kerry. To review Sen. Kerry’s article in its entirety, readers should refer to the  following citation:  (www.heraldnews.com/opinions/x955247878/GUEST-OPINION-Free-choice-and-small-business-02-07-09) My opposition to Sen. Kerry’s article now follows:

I had occasion to read an article published in the Herald News on February 7, 2009, entitled, “Free Choice and Small Business,” written by the Hon. Sen. John F. Kerry. In his article, the Senator promotes the Employee Free Choice Act (EFCA) as a down payment on a “fairness agenda” for the American People.

Is this really about “fairness?” What is fair about a law that completely eliminates a government supervised, secret ballot election process that, for decades, has successfully protected an employee’s right to choose or reject union representation? The Employee Free Choice Act is the proverbial wolf in sheep’s clothing. It threatens small business. And, it may become law. Democrats again introduced the EFCA in Congress on March 10, 2009. If passed in Congress, President Obama will certainly sign this legislation into law.

Let’s scrutinize the Senator’s promotion of this pro-union, anti-business legislation by subjecting his stated rationale to a True-False test. Here are the “three key reasons” why Sen. Kerry assures us that small business owners need not fear the Employee Free Choice Act. Let’s take a look….

1. True or False?: Sen Kerry: “In the decades when our labor laws protected workers’ free choice to join unions, small business thrived…”

My Response:   Sen. Kerry writes in the past tense, as is to infer that federal labor law has somehow mysteriously changed; as if workers now might no longer have the right to choose or reject union representation. In fact, the opposite is true. Under current federal labor law, the National Labor Relations Board still conducts secret ballot elections in the workplace, as it has for decades, to safeguard the employees’ absolute right to choose or reject union representation. But, this process has not led to favorable outcomes for unions. 2009 estimates suggest that union representation has shrunk to only 5% of the private-sector workforce, from a high of 35% in the 1950′s. In fact, this ever-shrinking percentage of union-represented workers might offer some explanation why small business has thrived, as Sen. Kerry asserts. The EFCA would eliminate this secret ballot election process altogether.

2. True or False?: Sen Kerry: The Employee Free Choice Act “….makes no changes to the small business exemptions under our nation’s labor laws. Small businesses…would still be exempt and completely unaffected.”

My Response:  In fact, current federal, jurisdictional standards demonstrate that the government’s intent is to make most businesses subject to federal labor law. As just one example, under current federal law, any non-retail business with interstate revenues (not profits, just revenues) in excess of $50,000.00 would be subject to the EFCA. Clearly using just this standard, many small employers would NOT be exempt from the EFCA. One reported estimate is that 1.8 million small businesses, employing 31 million Americans, would be subject to the EFCA (Source: Labor Pains.Org-Posted Entry dated 2/17/09).

3. True or False?: Sen. Kerry: “The economic benefit of unions to all businesses, large and small, is well-established. Unions help reduce costs….”

My Response:   COME ON NOW…Does any sensible individual really believe that a business derives economic benefit from unionization? That will come as news to many unionized businesses that no longer exist. Is Sen. Kerry suggesting that unions make business more competitive in the marketplace? Does he really believe that unions help reduce the operating costs of business? Do unions even care about employers’ costs associated with unionization? Unionized employers incur significant, legal costs as well as economic costs associated with collective bargaining, arbitration of grievances, strikes, defense of unfair labor practice charges filed by unions against employers and other related costs. Union-free employers do not incur these costs. Unionized employers lose flexibility in the management and control of their enterprise. Union-free employers retain the flexibility needed to compete and win in the marketplace, providing real job security to their employees. How many small businesses will actually be able to absorb these additional operating costs of unionization? If this law passes, we will soon find out.

Do not doubt for a moment that the Employee Free Choice Act targets small business. After all, this is a numbers game. If the EFCA passes, small employers will be subjected to an onslaught of union organizing activity. Under this law, a small employer with limited resources to opose unionization becomes an inviting target. Under the EFCA, the unionization of any small business could literally occur within days or weeks after union-organizing activity begins. Small employers will be given little opportunity to respond. Their operating costs will skyrocket. There is no doubt that this law will financially benefit unions. As for workers and small business, don’t hold your breath.

On January 29, 2009, the Lilly Ledbetter Fair Pay Act (Public Law 111-01) became the first bill signed into law by President, Barack Obama.  There are two principal effects of the law:  1). Employees will now have repeated opportunities to file charges and recover damages against their employers for equal-pay violations, because the employers’ acts will be construed as a continuing violation of federal equal pay rights existing under Federal, anti-discrimination laws.  2).  The effective date of the Ledbetter Act is retroactive to May 28, 2007, which means that any pending federal pay discrimination lawsuits filed after May 27, 2008 will be subject to this new law.  

Under existing, Federal anti-discrimination laws, a pay discrimination claim can be made on the basis of race, color, religion, sex, national origin, disability and age.  The Ledbetter Act amends these laws, including Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Rehabilitation Act of 1973 as well as the Americans with Disabilities Act of 1990.  The Ledbetter amendments makes these significant changes:

More Lawsuits Against Employers-The Per Paycheck Violation Rule:  To allege pay discrimination under Federal Laws, employees are first required to file a charge of pay discrimination with the Equal Employment Opportunity Commission (EEOC) within 180 days (or 300 days for those states with equal opportunity agencies, such as California) of the alleged, discriminatory pay practice.  Now, with the Act’s amendments, each time an employer pays wages, benefits or other compensation to an employee, the clock resets and the employee has a new opportunity to file a charge of  pay discrimination.   The Act reversed the Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 US 618 (2007).  The Court had ruled that the time period for filing a charge began immediately after a discriminatory pay decision was first made and communicated to employees, not each time the employer paid compensation to employees.  This decision had the practical effect of excluding many pay discrimination claims as untimely.  For civil rights activists and employee rights groups, this decision became the driving force to change the law to its present form.

Family Members May Sue Employers?:  According to the Act’s language, when “any individual is affected by application of a discriminatory compensation decision or other practice,” they may file a claim pursuant to the provisions of the Act.  This statutory language would seem to suggest that spouses and children might become eligible plaintiffs in a pay discrimination lawsuit if they claim to be adversely “affected” by the pay practice in question.

A Federal, Two Year, Wage Recovery Window:  Pursuant to the provisions of the Act, the person seeking compensation may now seek recovery of compensation for a period of up to two years preceding the filing of the charge of pay discrimination.  

Effect on California Equal Pay Claims:  California law provides equal pay protection under the Fair Employment and Housing Act (FEHA, California Government Code §§ 12940, et seq) and also its equal pay statutes (California Labor Code 1197.5).  Because Federal law now states that a new, equal pay violation may occur each time an employer pays compensation or benefits to an employee, California courts will no doubt evaluate and consider that federal precedent as a clear example of a continuing violation of equal pay act protections under California law.  Predictably, plaintiffs’ attorneys will be encouraged to file more pay discrimination suits in California.  

And, in California, an employee would seem to have greater rights and remedies available for recovery on a claim of pay discrimination than under Federal law.  Under existing laws in California, an employee already has at least a (2) two year window of opportunity to commence a civil action  for recovery of back pay due to the alleged, discriminatory pay practice and, up to three years to commence litigation for a willful violation of these laws (California Labor Code § 1197.5(h)).   None of this is good news for California’s employers.  

Because of this potential financial exposure, a prudent employer might consider a comprehensive review of its current pay practices, policies and procedures to insure that it remains in compliance with both state and federal equal pay act statutes.