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California Narrows Workers Who Will Qualify as Independent Contractors for Wage-Hour Purposes

Reprinted from an article that appeared in the Labor & Employment Blog by Robin E. Largent Yesterday, the California Supreme Court issued its decision in Dynamex Operations West, Inc. v. Superior Court (Lee), adopting a very broad view of the workers who will be deemed “employees” as opposed to “independent contractors” for purposes of claims alleging violations of California’s Wage Orders.  This is a surprising decision that magnifies the risk of classifying workers as independent contractors in California and is likely to lead to increased claims challenging such classifications in this state.  This is particularly true because the Court’s decision makes it easier for plaintiffs to succeed in getting a class certified in an independent contractor misclassification case. Background Dynamex is a delivery company that provides delivery services for retail stores and for consumers.  Dynamex historically classified its delivery drivers as employees but then reclassified them as independent contractors because it was more economical.  [Note to employers: this is generally a bad idea, particularly where improving the bottom line is the stated purpose for the reclassification.]  The drivers basically performed the same work but were permitted to provide services for other companies and were permitted to hire other workers to assist them. They also had some control over the details of their delivery schedules and routes. A driver who worked for Dynamex for 15 days filed this class action lawsuit (which is now in its 13th year of litigation) alleging various wage and hour violations stemming from the independent contractor classification.  Some of the claims alleged violations of the California wage order applicable to transportation industry employees, such as... read more

Ninth Circuit Reverses Its Own Precedent and Newly Holds That Prior Salary History Cannot Justify a Pay Disparity Between Men and Women

You may recall that last year, we reported on a Ninth Circuit case, Rizo v. Yovino, wherein the Court of Appeal held that an applicant’s prior salary history is a “factor other than sex” that an employer may rely on, either alone or in combination with other factors, in setting pay rates–even though the use of that factor may result in men and women being paid different rates of pay for similar work. In so holding, the Court of Appeal relied on its own prior precedent (dating back to 1982), Kouba v. Allstate, wherein the Court expressly held that this was permissible and could not support a federal Equal Pay Act violation. Well, after issuing its decision in Rizo v. Yovino last year, the Ninth Circuit granted a petition for en banc review, and yesterday the Court issued a new decision reversing itself and overruling its own prior precedent in Kouba. Now, the Ninth Circuit has newly ruled that an applicant’s prior salary history is not a “factor other than sex” that an employer may rely on, either alone or in combination with other factors (e.g. experience, education), to justify paying an employee differently than an employee of the opposite sex for similar work. Under the new generalized rule announced by the Court, an employer may not rely on prior salary history as a factor in setting a newly hired employee’s wages. If an employer does so, and this results in a pay disparity along gender lines, the affected employees may have a valid Equal Pay Act claim against the employer. The Ninth Circuit reasoned: “Prior salary . .... read more

San Francisco Passes Ordinance Banning Salary History Inquiries

San Francisco’s Board of Supervisors has passed an ordinance that will ban employers from inquiring about an applicant’s prior salary history.  The Parity in Pay Ordinance, which is expected to be signed into law shortly by the City’s Mayor, will become operative July 1, 2018. The stated purpose of the Ordinance is to narrow the wage gap between men and women, by eliminating the practice of setting current pay rates based on prior pay rates that reflect historical gender pay differentials. The Ordinance will apply to any person applying for employment where the work will be performed within the geographic boundaries of San Francisco (including temporary or seasonal work, part-time work, contracted work, and work through a temp agency) and whose application, in whole or in part, will be solicited, received, processed, or considered in San Francisco. The Ordinance will prohibit employers from (1) directly or indirectly asking an applicant about his or her salary history, (2) considering an applicant’s salary history in making hiring decisions, or (3) considering an applicant’s salary history in deciding what salary to offer the applicant. However, if the applicant voluntarily and without prompting discloses his or her salary history, the employer may consider that information in setting the applicant’s salary (recognizing, of course, that under California’s Equal Pay Act, salary history by itself cannot be used to justify paying an applicant less than employees of another gender or race for doing substantially similar work). There will of course be monetary penalties for non-compliance and the threat of civil litigation.  The City’s Office of Labor Standards Enforcement will enforce the Ordinance, and will publish Notices... read more

California Supreme Court issues its opinion in Mendoza v. Nordstrom, clarifying California’s day of rest requirements

On 5/08/17, the California Supreme Court issued its opinion in Mendoza v. Nordstrom, clarifying California’s day of rest requirements.  These requirements are set forth in Labor Code sections 551 and 552. Section 551 provides that “every person employed in any occupation of labor is entitled to one day’s rest therefrom in seven,” and Section 552 prohibits employers from “causing their employees to work more than six days in seven.”  However, Section 556 exempts employers from the duty to provide a day of rest “when the total hours of employment do not exceed 30 hours in any week or six hours in any one day thereof.”  While these provisions do not appear too complicated or hard to follow at first blush, compliance has been challenged in wage and hour litigation, raising several questions of what these provisions technically mean.  Questions that have arisen include the following: What does it mean to “cause” an employee to work more than six days in seven? Is it enough to “allow” the employee to work seven days in a row, or must the employer require the employee to work more than six days in a row to be found in violation of the statute? Is the day of rest required for any consecutive seven-day work period on a rolling basis, or is it measured based on the employer’s workweek (the definition of which varies from employer to employer and may not match a calendar week)? Does the exemption from the day of rest requirement apply where the employee works 6 or less hours on at least one day during the workweek, or must the... read more

San Francisco’s Paid Parental Leave Ordinance takes effect on January 1, 2017

On January 1, 2017, San Francisco’s Paid Parental Leave Ordinance went into effect for employers with 50 or more employees. It will be phased in for smaller employers on July 1, 2017 (35+) and January 1, 2018 (20+). The law requires private employers to provide “Supplemental Compensation” to make up the difference between a covered employee’s regular wages and the partial wage-replacement benefits provided under California’s Paid Family Leave program, administered by the Employment Development Department, when the employee takes leave to bond with a new child. The San Francisco Office of Labor Standards Enforcement (OLSE) has released rules clarifying Supplemental Compensation obligations, along with a new workplace poster, employee request form, and calculation... read more

California Supreme Court: On-Call Rest Breaks Are Not Permissible

Dec. 22 2016 Today the California Supreme Court issued a decision in Augustus v. ABM Security Services, Inc., holding that employers cannot require employees to remain “on-call” during rest breaks, even though these short breaks are part of the employees’ paid hours worked.  The Court held that the same standard that applies to off-duty meal breaks applies to paid rest break time.  More specifically, California law requires that during unpaid, off-duty meal breaks, employees must be relieved of all duties and free from employer control as to how they spend their time.  The Court today held that this is also true for paid rest break time and that an employer does not comply with this standard if it requires employees to remain “on-call,” i.e. viligant and available for possible interruption during rest breaks.  This ruling results in the potential reinstatement of a $90 million verdict against the security company, whose security guards remained on-call during rest breaks and carried radios or other communication devices in the event they needed to return to work.  Even though the record showed that breaks were rarely interrupted and that this on-call requirement was tied to the nature of the work as a security guard, the Court held that the on-call requirement invalidated the rest breaks. The Court reasoned: “Because rest periods are 10 minutes in length (Wage Order 4, subd. 12(A), they impose practical limitations on an employee‘s movement. That is, during a rest period an employee generally can travel at most five minutes from a work post before returning to make it back on time. Thus, one would expect that employees will... read more

Assembly Bill 1513 signed into law by Governor Brown.

AB 1513 significantly changes the requirements governing payment of piece-rate compensation and non-productive time in California beginning January 1, 2016. AB 1513 creates Labor Code section 226.2 which sets forth requirements for the payment of a separate hourly wage for rest and recovery periods and for “other nonproductive time” worked by piece-rate employees.  AB 1513 defines “other nonproductive time” as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.” Calculating Compensation Under AB 1513 The compensation provisions of AB 1513 require employers to separately compensate rest and recovery time and “other nonproductive time” as follows: 1. Compensate employees for rest and recovery periods at a regular hourly rate that is no less than the higher of either the applicable minimum wage or an “average hourly rate.” The “average hourly rate” is calculated as follows: [(total workweek compensation) – (rest/recovery compensation + overtime premium compensation)] ÷ [(total workweek hours worked) – (rest/recovery periods)]. 2. Compensate employees for all “other nonproductive time” at an hourly rate that is no less than the applicable minimum wage. Affirmative Defense (Safe Harbor) Labor Code section 226.2 will provide a limited safe harbor for employers that (1) have not been sued for wages, damages, liquidated damages, statutory penalties, or civil penalties based solely on the employer’s failure to compensate for rest and recovery periods and “other nonproductive time” for time periods prior to March 1, 2014, (2) come into compliance with all of the obligations described in section 226.2 by December 31, 2015, and (3) pay actual or liquidated damages by December... read more

California Fair Pay Act Signed Into Law – Governor Brown signed the California Fair Pay Act into law requiring California employers to pay women and men the same wages for similar work.

SB 358 by Senator Hannah-Beth Jackson (D-Santa Barbara) – Conditions of employment: gender wage differential Existing law regulates the payment of compensation to employees by employers and prohibits an employer from conditioning employment on requiring an employee to refrain from disclosing the amount of his or her wages, signing a waiver of the right to disclose the amount of those wages, or discriminating against an employee for making such a disclosure. Existing law generally prohibits an employer from paying an employee at wage rates less than the rates paid to employees of the opposite sex in the same establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions. Existing law establishes exceptions to that prohibition where the payment is made pursuant to a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex. Existing law makes it a misdemeanor for an employer or other person acting either individually or as an officer, agent, or employee of another person to pay or cause to be paid to any employee a wage less than the rate paid to an employee of the opposite sex as required by these provisions, or who reduces the wages of any employee in order to comply with these provisions. This bill would revise that prohibition to eliminate the requirement that the wage differential be within the same establishment, and instead would prohibit an employer from paying any of its employees at wage rates less than... read more

New law recognizes request for accommodation on the basis of religion or disability constitutes protected activity.

New Law: Requesting Accommodation Constitutes Protected Activity Under the FEHA On July 15, 2015 Governor Brown signed into law AB 987, reversing the holding of Rope v. Auto-Clor System of Washington, Inc. (2013) 220 Cal.App.4th 635, where the Court of Appeal had held, among other things, that the Plaintiff could not state a retaliation cause of action under the FEHA because his request for leave did not constitute protected activity.  AB 987 adds subsections (1)(4) and (m)(2) to Government Code section 12940, providing that a request for reasonable accommodation on the basis of religion or disability constitutes protected activity, regardless of whether the request was... read more

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