• Crossing the Rubicon into Year 2003: Is it Sink or Swim for Employers?
  • August 14, 2003 | Author: Diane Marie O'Malley
  • Law Firm: Hanson Bridgett LLP - San Francisco Office
  • Just when employers thought that they might have mastered the complicated overlap of disability laws, employee leaves, and workplace privacy issues, the California Legislature was busy this year on these and other fronts, enacting a number of bills that impact employers and further muddy the employee entitlement waters. We have highlighted those bills that warrant special attention as well as one -- while not effective until 2004 -- that should be mentioned.

    SB 1471: Has the Legislature Turned Employer Voluntary Sick Leave Policies into Mandatory Time off?
    Employers may remember that, in 1999, the Legislature added section 233 to the Labor Code -- a section informally called the "kin care" statute. Section 233 (a) provided that an employer who maintained sick leave for employees had to allow an employee to use the employee's accrued and available sick leave entitlement, in an amount not less than the sick leave that would be accrued during six months, to attend to an illness of a child, parent, spouse, or domestic partner.

    The statute seemed benign enough because many employers, either intentionally or by lax enforcement of their rules, already permitted employees to use their own sick leave to be absent from work to care for sick family members.

    SB 1471: The New Law
    As we advised in 2000, the kin care statute did not appear to disrupt enforcement of "no fault attendance" or "attendance control" policies, so long as employers did not discriminate against employees who took kin care. Ultimately, the Labor Commissioner allowed that he agreed with that interpretation. This did not sit well with labor unions and other employee advocates. Accordingly, the new statute, adding section 234 to the Labor Code, now "clarifies" that, if an employer counts a kin care absence against the employee under an absence control policy, the employer discriminates against the employee for taking kin care leave.

    SB 1471 provides that any absence control policy that charges employees who take sick leave (up to the maximum allowed under the statute) for kin care purposes is a per se violation of the law. In other words, the employer must ignore kin care absences in the application of these policies.

    Impact
    Kin care leave was a sleeper of a statute for most employers. With this new bill, however, the legal landscape has substantially changed. To maintain occurrence based attendance control policies in the future, employers will need to devote substantial administrative attention to tracking kin care leave use and documenting that such absences are not charged against the employee. It is worthy noting that the kin care statute, unlike the family leave statutes, does not require that the family member's illness be serious, or that the absence be supported by medical certification. Kin care is available so long as a covered family member has an "illness," which causes a need for the employee to be absent. Employers can expect increases in unscheduled absences, perhaps additional overtime costs, and little effective ways to manage or control what began as an employer's voluntary sick leave policy.

    For private sector employers with collectively bargained absence policies, an issue presented by this bill is whether the National Labor Relations Act preempts its application; that is, whether California is seeking to regulate activity that Congress intended to be protected and reserved for the jurisdiction of the National Labor Relations Board -- conduct that is either protected or prohibited by the Act.

    Questions of NLRA preemption are customarily resolved according to the principles set forth in the nearly half century old United States Supreme Court decision San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959). While preemption issues are rarely straightforward, if the Garmon principles were applied here, it would seem that California's regulation of the use of sick leave in this manner -- establishing a minimum standard that must be allocated to employees with no effect on the employee's employment -- would not be preempted. Mandated use of sick leave does indirectly effect the collective bargaining process but neither encourages nor discourages employees' collective bargaining rights protected by the NLRA. Moreover, it would not seem to further the purposes of the NLRA to allow employers and Unions to bargain for terms of employment that a state law forbids. And finally, regulating the terms and conditions of the workplace is a common exercise of a state's regulatory powers. Thus, it is likely that California's prohibition against counting kin care absences toward employee discipline would not be preempted. Nonetheless, it is a question open for debate and we may see some challenges to the law on the ground of preemption as the year 2003 unfolds.

    What is clear, however, is that charging an occurrence to an employee for a kin care absence under an attendance control policy is a per se violation of the law. Both private and public sector employers that have collectively bargained attendance control policies, as well as those with non-unionized work forces, should separately consider kin care absences and not apply them directly to attendance control as they would other absences.

    Employers should assure, as best they can, at the time, that the absence is or is not a kin care absence -- cutting off later protestations from an employee facing discipline for absenteeism that prior absences were kin care protected. Counsel should be consulted before any discipline is issued to an employee where this new area is implicated.

    AB 2957: Warning Employees of Business Closures
    Up to now, California employers were subject to the general guidelines of the federal WARN act, which required a 60-day notice to employees before layoff or plant closure. WARN generally covered employers with 100 or more employees that lay off 50 or more employees.

    The new California counterpart requires covered employers to give notice to employees and government officials at least 60 days prior to a mass layoff, relocation, or termination of its business, unless the business can show that it was seeking financing to stay in business during that period. The state law covers employers with 75 or more employees -- thus a lower threshold than the federal law.

    Impact
    The obvious impact is that the new bill covers a host of business establishments that now are not covered by the federal law -- those that have a total number of employees greater than 75 but less than 100. Those unfamiliar with the notice requirements of the federal WARN Act are well served to contact counsel if a possible lay off of 50 or more employees is anticipated.

    AB 1599: A New Age for Age Discrimination
    In response to a 2001 appellate court ruling, recently affirmed by the California Supreme Court, the Legislature has amended California's discrimination statute to add age discrimination as a protected class for all purposes. In so doing, the Legislature essentially overruled Esberg v. Union Oil Co. (2002) 28 Cal.4th 262, where the Supreme Court found that it was not age discrimination for an older employee to be excluded from participation in the employer's education assistance program. Union Oil had denied the 53 year old plaintiff tuition reimbursement benefits toward an MBA although it granted those same benefits to a 42 year old employee.

    The Court based its decision on the oft times forgotten fact that Government Code section 12940 does not prohibit employment discrimination on the basis of age. Section 12940 prohibits discrimination in the "terms, conditions, or privileges of employment" because of an employee's "race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, or sexual orientation." The age discrimination statute, found in Government Code section 12941, prohibits only discrimination in employment related to hiring, discharges, promotions, reductions, demotions and suspensions. Thus, the Esberg decision rested on the fact that the Government Code section 12941 ban on age discrimination did not explicitly extend to participation in an educational assistance program, and thus, the court ruled in favor of the employer.

    AB 1599, drafted in response to the Esberg case, amends the broader Government Code section 12940 to add age discrimination as a protected status. Employers will no longer be able to discriminate against employees on the basis of age in the furnishing of benefits, such as tuition reimbursement programs. This decision may be quite significant to plaintiffs in the future as they can take advantage of the broader statute to receive the same benefits as younger co-workers can.

    Impact
    This legislation should have less impact than others passed this year as many employers already treat "age status" the same as other protected classes of employees. Nonetheless, employers should check their policies to make sure that none of the programs that they offer employees bar older workers from eligibility. Those programs -- once found to be legal by the California Supreme Court -- will no longer be valid after January 2003.

    AB 1068: To Check or not
    to Check References for Job Applicants?
    Many employers conduct routine background/reference checks on applicants for employment. Some employers use the services of one of the many investigative agencies available to perform this task while others perform the task internally.

    Employers may recall that California's Investigative Consumer Reporting Agencies Act was amended only one year ago to add Civil Code section 1786.53. The new section presumably required disclosure, to the applicant or employee, of any information received by an employer about the employee or applicant whether the employer used an outside investigative agency or its own employees to perform reference and background checks. There was also some concern that the law may apply to information obtained from routine reference checks.

    AB 1068: The New Law
    The recent amendments to Civil Code section 1786.53 that appear in AB 1068 clarify a number of gray areas that lingered after the addition of section 1786.53.

    First, an employer must provide a "clear and conspicuous" notice that it is obtaining a report on the individual's character, general reputation, personal characteristic and mode of living.

    Second, the individual must authorize, in writing, the procurement of the report, before an employer may obtain the information.

    Third, the individual must reveal to the applicant the results of the report that are matters of public record that were obtained by the investigative reporting agency.

    An important distinction applies if the employer conducts background investigations but does not use the services of an outside investigative agency.

    If the employer does not use the services of an investigative consumer-reporting agency, it must include in its job application form, an opportunity for the applicant to check a box indicating whether the applicant wants to receive a copy of any public record obtained during a background/reference check.

    If the employee declines receipt of a copy, an employer need not disclose the public record results of its investigation unless the receipt of that information results in adverse action -- a denial of employment. In the case of a denial, however, the employer must disclose the information, regardless of any waiver.

    It should be noted that the notice provisions do not apply to reports procured by the employer as part of an investigation into employee wrongdoing or misconduct. However, if the reports result in adverse action against that employee, the results of the report must be disclosed.

    Impact
    Employers are well advised to perform reference checks on job applicants. To the extent that an employer utilizes an outside investigative agency, it should utilize one based in California or at least one that is familiar, not only with the federal counterpart statute, but also with California's Consumer Credit Reporting Agencies Act, as damages for a misstep can be significant. It pays to review the contract between the outside agency and the employer as well, because many form agreements require the employer to indemnify the agency in the event of legislation. That may not always be in the employer's interest. Employers should also review their current application forms to make sure that its application form meets the notice standards in the Act.

    This law takes effect immediately.

    AB 2868: The Companion Legislation to AB 1068
    The legislature also amended Civil Code section 47. Employers probably remember that this section provided a qualified immunity protecting employers when they communicate to a prospective employer about employees or former employees so long as those communications are "concerning the job performance or qualifications of an applicant." AB 2868 amends Civil Code section 47 to permit an employer specifically to state whether its current or former employee is eligible for rehire.

    According to the August 6, 2002 legislative analysis of the bill from the state Judiciary Committee:

    "This bill would extend the qualified immunity to such statements."

    Thus, it would appear that the bill was not intended to limit what the employer can say to prospective employers but specifically to extend the immunity provided. Nonetheless, employers should always proceed with caution when asked to respond to a reference check, especially where the response will be negative.

    SB 1818: More Twists for Employers and Undocumented Workers
    Perhaps more than any time in history since World War II, we have seen a resurgent emphasis on immigration law, our borders and undocumented workers. On March 27, 2002, the United States Supreme Court, in Hoffman Plastic Compounds v. NLRB, a 5-4 decision, overturned a National Labor Relations Board decision that awarded back pay to an undocumented alien employee. The employee was not legally authorized to work in the United States and the employer had terminated the employee for his union activity. However, the Supreme Court found that, to award the employee back pay was contrary to federal immigration policy of combating the employment of illegal aliens as expressed in the Immigration Reform and Control Act. In Hoffman, the Supreme Court decision did not address back pay for undocumented workers for work previously performed, only back pay for work not performed.

    SB 1818: The New Law
    Presumably, no employer would view the Hoffman decision as an invitation to employ undocumented workers with impunity. Nonetheless, the California legislature's reaction to Hoffman was swift. In May 2002, the Senate proposed to add section 3339 to the Labor Code specifically "to limit the potential effects of a recent U.S. Supreme Court decision on the state's labor and civil rights laws. . ." To ensure that the employer is not free to employ undocumented workers with no consequences, as the legislature presumes happened in the Hoffman decision, SB 1818 establishes that the immigration status of an employee may not be the subject of inquiry in any proceeding to enforce state labor law unless it is shown by clear and convincing evidence that such information is necessary for federal immigration policy. It further states, "All the remedies available under state law, except any reinstatement remedy prohibited by federal law, are available to all individuals regardless of immigration status."

    Impact
    It is difficult to predict what a court will do when faced with a claim by an undocumented worker that he or she in entitled to a back pay award -- an award purportedly not permitted under federal law. Any award arguably should be pre-empted by the same principles that resulted in the Hoffman decision.

    In light of the uncertainty created by this new law, and in light of the federal penalties imposed for employing undocumented aliens, continued diligence in the hiring of properly documented workers cannot be understated.

    To Infinity and Beyond: Year 2004 and Paid Family Leave
    SB 1661, effective January 1, 2004, provides that California employees are entitled to six weeks of personal leave in a 12-month period, paid at a percentage of their weekly salary, to take care of a seriously ill child, spouse, parent, domestic partner, or to bond with a new child. The law provides disability compensation for any individual, not only one who is unable to work due to the employee's own sickness or injury, but now also due to the sickness or injury of a family member, or the birth, adoption or foster care placement of a new child.

    Most notably, the legislation effectively and radically changes the concept of the "disability" program -- which has always been aimed at providing employees wage replacement while the employee is suffering from an illness and or injury. Now an employee is entitled to receive such "disability" benefits to bond with a newborn despite the fact that neither the child nor the employee is ill or injured.

    Three obvious concerns immediately come to mind with this bill: the cost to smaller employers of replacing those employees for six weeks by hiring temporary workers or paying overtime to existing workers; the impact on workflow from an increased number of employees taking extended leaves; and the administrative cost and sheer burden of complying with this law amidst the myriad of other protected leave provisions.

    SB 1661: The New Law
    Who is paying for this leave? This is an employee-paid tax deducted from employee wages. A family temporary disability insurance program will be established within the state disability insurance program, effective January 1, 2004. Employees will pay an increase in taxes to the State Disability Insurance Fund.

    Who is entitled to take this leave? Employees may take paid family leave beginning July 2004. Any employee is entitled to these benefits immediately upon employment, assuming they are otherwise eligible. Unlike the federal Family Medical Leave Act, there is no length of service requirement, although the law does provide for a seven-day waiting period. An employer may, by policy, require the employee to take up to two weeks of paid vacation before becoming eligible for the paid benefits.

    Which Employers Are Covered? This law will cover most business establishments, regardless of size. Again, unlike the state and federal family leave laws, which provide 12 weeks of unpaid leave to eligible employees of businesses with 50 or more employees; there is no minimum employee requirement. As the bill creates a program within the state disability program, each employer that is subject to disability program is covered.

    What Doesn't the Law Do? Unlike other laws, the new legislation does not expressly require employers to hold a job open or continue benefits for an employee while on leave. In other words, eligible employees may have no job protection or benefit continuation if they are not otherwise covered under federal and state family leave or disability laws. However, this provision would appear to be of little use to employers, as most employees would also be entitled to FMLA and CFRA leave. In addition, it is quite likely that a court would find that an employer was preventing, or at least discouraging, an employee from exercising his or her rights under the Act if it terminated that employee after or during a leave.

    Impact
    This new law raises questions related to its interplay with other leave statutes, employer policies and new sick leave legislation. For example, is SDI integrated with employer paid sick leave? Employers with 50 or more employees are required to give up to 12 weeks of unpaid time off for employees who have worked 1,250 hours in a 12-month period. Is time off under this new program counted toward that eligibility requirement?

    These overlapping leave laws raise a specter of administrative questions and headaches. Most likely, there will be much more written about this new law before it actually takes effect. While employers may believe that they have a long time to begin thinking about implementation, it would be wise to revisit handbooks and software programs with this new law in mind.