Led by the National Labor Relations Board, there is a trend to hold multiple parties accountable, not only for their own employees, but also for the employees of their contractors, franchisees and others with whom they do business. This results from an apparent shift in public policy, and the corresponding expanding definition of and greater reliance on “joint employer liability” across administrative agencies, legislative bodies and the courts.

In August 2015, the NLRB issued a decision in Browning-Ferris Industries of California, et al. v. Sanitary Truck Drivers, 362 holding that it was no longer necessary to exercise direct, immediate control over workers to be deemed a joint employer. Rather, if an employer exercises “indirect control” over working conditions or if it has “reserved authority” to do so, it is the joint employer, even over a staffing agency’s employees.

Some states like California have gone even further expanding the scope of liability for employers who contract with temporary staffing agencies. Under California Labor Code Section 2810.3, affected California employers now “share” civil responsibility and liability with their “labor contractors” regarding wages and workers compensation coverage of assigned temporary workers.

Even though the Browning-Ferris ruling involved a contractual relationship between a staffing agency and an employer and not a franchisor-franchisee relationship, there are many parallels between the two. In fact, using similar reasoning, the NLRB has filed complaints against McDonald’s USA with respect to employees of certain of its franchisees, contending that McDonald’s should be held to be a joint employer.

Employees of McDonald’s franchisees have also sued McDonald’s Corporation and McDonald’s USA alleging joint employment liability. While typically relying on traditional common law theories of joint employment liability, these cases are surviving summary judgment under the ostensible agency theory: “Ostensible agency exists where (1) the person dealing with the agent does so with reasonable belief in the agent’s authority; (2) that belief is ‘generated by some act or neglect of the principal sought to be charged’; and (3) the relying party is not negligent.”

There are a number of steps hotel owners, franchisors and managers can take to reduce the risk of liability. In the next part of this series, we address some of these steps.

Arthur Chinski and Ruth L. Seroussi are attorneys with Buchalter Nemer in Los Angeles.

On May 18, 2016, the United States Department of Labor (“DOL”) announced its much-anticipated final overtime exemption rule under the Fair Labor Standards Act (“FLSA”), as tasked to do by President Obama in 2014. The DOL received more than 270,000 comments since it published its Notice of Proposed Rule Making on July 6, 2015, which helped shape the final rule. Ultimately, the DOL issued a new overtime exemption rule that promises to have a profound impact on employers and employees alike when it takes effect on December 1, 2016.

The new changes to the rule are the first changes since 2004, which was the only update since 1970. This time, the DOL’s new rule promises to be more significant than the 2004 update. The new rule is expected to extend overtime protection to 4.2 million more Americans who are not currently eligible for overtime under federal law. It is further expected to increase wages for workers by $12 billion over the next 10 years. It is anticipated that mid-level positions such as store managers, assistant managers and front line supervisors will be substantially affected by the new rule. The new rule is also going to have a substantial financial impact on employers, particularly on small businesses subject to the FLSA. Although the new rule is likely to have the greatest effect on industries such as the hospitality, retail, fast food and food service industries, employers across all industries should, in consult with legal counsel, take steps now to address this impact.

Current Overtime Exemptions Under the FLSA

Currently, to qualify for an exemption from overtime under the FLSA, a “white collar” employee must:

1. be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the “salary basis test”);
2. be paid at a specified weekly salary level, which is at least $455 per week (the equivalent of $23,660 annually for a full-year worker) (the “salary level test”); and
3. primarily perform executive, administrative, or professional duties, and satisfy other requirements related to their duties, as defined in the Department’s regulations (the “duties test”).

There are some employees who are not subject to either the salary basis or salary level tests (e.g., doctors and lawyers). The DOL also exempts from overtime certain highly compensated employees (“HCE”) who earn above a higher total annual compensation level (currently $100,000) and satisfy a minimal duties test.

The DOL’s New Overtime Exemption Rule

The new rule more than doubles the current salary level in the salary basis test — from $455 per week or $23,660 per year to $913 per week or $47,476 per year. It guarantees overtime for employees who do not meet this new salary threshold, regardless of whether the employees meet the duties test.

A few additional key components of the DOL’s new overtime exemption rule are:

1. The new salary level for the federal overtime exemption under the FLSA is set to update automatically every three years, and it will be indexed to the 40th percentile of all salaried workers in the lowest wage Census region at that time. The salary level is expected to increase to more than $51,000 at the first automatic adjustment on January 1, 2020. The DOL will publish all updated rates in the Federal Register at least 150 days before their effective date, and it also will post them on the Wage and Hour Division’s website.
2. Employers may now use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new salary threshold under the FLSA. For employers to credit nondiscretionary bonuses and incentive payments toward this 10 percent of the new salary threshold, such payments must be paid on a quarterly or more frequent basis. The new rule permits an employer to make a “catch-up” payment, provided that this payment is made within a certain time frame.
3. The rule raises the total annual compensation requirement for highly compensated employees from $100,000 to $134,004 under the FLSA. These employees are exempt if they meet this new compensation level and a minimal duties test.
4. The new rule does not impact the “duties test.” The DOL considered modifying the FLSA’s duties test by moving toward a more “quantitative” test, but after seeking comments on this topic did not revise the FLSA duties test. Both the standard duties test and the HCE duties test remain unchanged. The DOL reasoned that as a result of the change to the salary level, the number of workers for whom employers must apply the duties test to determine exempt status is reduced, thus simplifying the exemption.
5. The Department also is updating the special salary level for employees in American Samoa (to $767 per week) and the special “base rate” for employees in the motion picture industry (to $1,397 per week), and then automatically every three years.

Consequences for Failing to Comply with the New Federal Overtime Exemption Rule

Employers who do not comply with the DOL’s new rule may face the following:

1. Lawsuits by the DOL or by employees either individually or through collective action to recover back pay, liquidated damages, interest, attorneys’ fees and court costs.
2. Independent or complaint-driven administrative investigations, charges and audits by the DOL.
3. Administrative injunctions, including injunctions on the shipment of goods in interstate commerce if the goods were produced in violation of the FLSA (which includes a violation of overtime rules).
4. Civil fines for willful and repeated violations, including up to $1,100 per violation.
5. Criminal charges for willful violations, which could include up to $10,000 in fines, imprisonment for up to six months or both.

How the DOL’s New Rule Stacks Up Against California’s Overtime Exemptions

The new salary level for the federal overtime exemption is nearly $6,000 more than California’s minimum annual salary threshold of $41,600. To be exempt from overtime, California’s “white collar” employees must earn a minimum monthly salary of no less than two times the state minimum wage for full-time employment, as well as satisfy California’s stringent duties requirements. This amounts to $3,466.67 per month or $41,600  per year based on California’s current $10 an hour minimum wage.

That federal law under the DOL’s new overtime exemption rule is going to be more protective of California employees than California law with respect to the salary threshold is significant. It denotes one of the first times in a very long time that this has occurred, and its impact is far reaching. California has the most workers of any state potentially affected by the DOL’s new rule – more than 392,000, amounting to nearly 10% of the total number of workers affected nationwide. Given this widespread impact, ensuring compliance with both California and federal rules, including the DOL’s new rule, is sure to keep employers and their legal counsel on their toes. California employers must comply with both laws, satisfying the requirements of the law that affords the most protection to employees.

Note that there are other significant differences between the DOL’s new rule and California’s overtime exemption requirements, such as the following:  Unlike the new federal rule, California does not allow employers to use nondiscretionary bonuses and incentive payments to satisfy any portion of its salary threshold.  Moreover, California does not have a special exemption for “highly compensated employees.”  Further, California quantitatively caps the amount of non-exempt work that employees may perform, whereas the FLSA exemption does not have a hard-and-fast quantitative requirement.

Preparing for the Increase in the Federal Salary Threshold Requirement

Although there are challenges to the DOL’s new rule, employers should prepare for its implementation on December 1, 2016. Given the consequences noted above, employers do not want to be out of compliance. At a minimum, employers may wish to take the following measures:

1. Become familiar with the new rule and identify which employees will be impacted. Employers should review exempt/non-exempt classifications. If employees are exempt, employers should review each employee’s salary, including its highly compensated employees’ salaries, to see if they meet the minimum salary threshold requirements to qualify for the overtime exemption under the DOL’s new rule.
2. Identify whether any of its employees who are currently classified as exempt are paid nondiscretionary bonuses or incentive payments (including commissions). Under the DOL’s new rule, this compensation may be used to satisfy up to 10% of the new salary threshold of $47,476 per year.
3. Reclassify employees who do not meet the minimum salary level by December 1, 2016 or raise the salaries of these employees to ensure that they meet the minimum threshold requirements under the new DOL overtime exemption rule.
4. Provide education and training to human resources, compensation and payroll, managers and supervisors regarding the new rule and its requirements, as well as its implications for the work force, including its impact on formerly exempt employees who are now reclassified as non-exempt.
5. Train managers, supervisors and non-exempt employees on wage and hour policies and practices, such as clocking in and out before and after the shift and meal periods, tracking overtime and obtaining pre-approval from managers prior to working overtime, recordkeeping requirements, schedules, business hours and hours of work.
6. Communicate any changes, such as changes to classification, compensation, schedules, hours of work and rules regarding time off from work, to accounting, payroll, compensation, human resources, managers, supervisors and newly reclassified non-exempt employees impacted by the new DOL rule.
7. Determine whether or not the employer can reallocate work or adjust schedules to minimize overtime.
8. If a policy does not already exist, establish one that requires non-exempt employees to obtain pre-approval from a supervisor for overtime hours.
9. Check for the 150-day advance announcements of the automatic salary updates to the DOL’s rule, which will take place every three years commencing on January 1, 2020.
10. Make certain that non-exempt employees comply with any state law requirements, such as in California.

The foregoing list is by no means exhaustive, and only time will tell the true impact of the DOL’s new overtime exemption rule under the FLSA. The important thing is for employers to take advantage of the window of time prior to December 1, 2016 to ensure compliance with this new rule. Employers should consult with legal counsel to familiarize themselves with the new rule, and to determine its applicability and the employer’s best course of action.

Do you know the pitfalls and technical measures that you should take to protect your intellectual property? Startup or not, these tips from Buchalter Nemer provide a valuable checklist to help protect your IP. Explore the nuances of California’s laws around the ownership of intellectual property and be sure you have a thorough understanding of California’s laws regarding competition. A few topics covered in this article are:

• Using Confidentiality Agreements
• Including “Trade Secret” Information in Confidentiality Agreements
• Pay Attention to Labor Code Provisions
• Know the Pitfalls of Employing a “Bring Your Own Device” Option

Most importantly discover what leads to most data theft and know your options for protection.

Read the article here.

EMPLOYEES MAY TURN TO PERSONAL SOCIAL MEDIA accounts or private chat rooms to vent about the workplace without realizing that these communications may be read by their employers. The law recognizes that employers have legitimate interests in disciplining employees, safeguarding trade secrets, preventing disparagement of their business, and ensuring a work environment free of discrimination, harassment, and abusive conduct. At the same time, federal and state courts, state legislatures, and the National Labor Relations Board (NLRB) have recognized broad protections for employees in their internet communications. Attorneys should advise employers that disciplining an employee for private communications about the workplace on social media may run afoul of federal or state law, including the National Labor Relations Act (NLRA) and the federal Stored Communications Act (SCA).

Although the law on social media use is still developing, there are two principal ways the courts, legislatures, and NLRB have limited an employer’s ability to regulate an employee’s personal social media communications: 1) by restricting an employer’s access to an employee’s personal social media account, and 2) by expanding the scope of “concerted protected activity” on social media. Employers should be aware of the restrictions on accessing and regulating the personal social media use of employees and implement clear, narrowly tailored policies that balance the employer and employee rights in social media use. Overly broad social media policies, even if they are not enforced, may be interpreted as chilling or prohibiting protected concerted activity by employees and deemed an unfair labor practice.

Restricting Access

Years before the advent of social media, the federal government enacted the SCA, aimed at protecting the privacy of Internet communications.3 The SCA prohibits anyone—not just employers— from accessing electronic communications on a third-party service provider without authorization. In recent years, some states have enacted SCA-like statutes restricting an employer’s ability to access an employee’s personal social media site.4 In California, Labor Code Section 980 prohibits employers from requiring or even requesting an employee or applicant to: 1) disclose a username or password for the purpose of accessing personal social media, 2) access personal social media in employer’s presence, or 3) divulge any personal social media. The only exception occurs when the employer reasonably believes that the employee’s personal social media account is relevant to an investigation of allegations of employee misconduct or violation of law.

There are no reported cases interpreting Labor Code Section 980 or the carve-out for investigations of misconduct. However, a number of courts have found employers liable under the SCA for accessing the personal social media communications of employees. In Pietrylo v. Hillstone Restaurant Group, an employee of Hillstone maintained a personal chat group on Myspace during nonwork hours that was accessible only by electronic invitation from the plaintiff, and if accepted, a personal password to access the group.6 The site included language that indicated the group was private and a place where Hillstone employees could discuss the “crap/drama/and gossip” related to their workplace. Employees posted sexual and profane comments, jokes about Hillstone’s customer service “specs,” drug use, and a new wine list given to employees. No Hillstone upper manager was invited to join the group, and members accessed the site only during nonwork hours and on noncompany computers.

An employee member of the chat group showed the communications to her manager, who, in turn, asked the employee for her password to the account. The employee reluctantly provided the password, believing she would be in trouble if she did not. The manager accessed the chat group several times and showed it to other managers. Hillstone then fired the chat group founder and another employee for posting critical comments that it deemed offensive and violating the company’s core values. The two terminated employees sued, and the jury found Hillstone liable for violation of the SCA. The plaintiffs won compensatory and punitive damages. The jury found that the employee who reluctantly turned over her password to the manager had not done so voluntarily and had not authorized Hillstone management to access the chat group multiple times without her permission. While the jury found that the employer violated the SCA, it also concluded that the employer was not liable for invasion of privacy, finding that the plaintiffs had no reasonable expectation of privacy in the MySpace group.

Although the SCA and Labor Code Section 980 prohibit unauthorized access to employee social media accounts, they do not bar employers from viewing employee social media communications altogether. So long as the employer has done nothing unlawful to access or view the social media communications, there is no violation of these laws. In Ehling v. Monmouth-Ocean Hospital Service, a nurse maintained a private Facebook account on which she friended only other employees, not managers.8 One of the nurse’s supervisors friended her and saw a post by the nurse about a recent shooting at a holocaust museum in Washington, D.C., that stated “I blame the DC paramedics. I want to say 2 things to the DC medics. 1. WHAT WERE YOU THINKING? and 2. This was your opportunity to really make a difference! WTF!!!! And to the other guards…go to target practice.” The supervisor turned over the post to a hospital manager, and the nurse sued the hospital for violation of the SCA. The court ruled for the hospital because the manager had not accessed the nurse’s account and was shown the post by someone the nurse had authorized to view it.

While it may be tempting to gain consent to access an employee’s personal social media site by sending or accepting friend requests, employers should avoid friending, following, or connecting with employees on social media and maintain policies prohibiting, or at least discouraging, managers from doing so. Social media sites are filled with a wide range of personal information about employees, such as their sexual orientation, medical issues, religion, age, national origin, or other informa – tion protected by antidiscrimination statutes. If an employer later disciplines or terminates an employee who is social media friends with a manager, the employee may claim (and may establish at least a prima facie case) that the employment decision was based on the protected information the manager learned from the social media site, and not on job-related criteria.

employee of the Library of Congress sued the library and his former supervisor, alleging that he was harassed and humiliated by his supervisor and terminated after the supervisor’s daughter became Facebook friends with him. TerVeer liked a page that supported a same-sex parent campaign against bullying. The supervisor’s daughter commented on the post: “Don’t tell me you’re weird like that.” TerVeer alleged that before the post, he had a great relationship with his supervisor, who had even set him up with his daughter. After his post, however, the supervisor began to harass him, mock diversity, and lecture him on the “sin” of homosexuality. The library filed a motion to dismiss, and the District Court partially denied the motion, ruling that TerVeer stated claims for sex and religious discrimination, retaliation, and hostile work environment.11 This recently settled case illustrates the potential consequences of learning private information about an em – ployee through their personal social media.

Social Media as Concerted Activity

The National Labor Relations Act provides that “[e]mployees shall have the right to selforganization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”12 The act also makes it an unfair labor practice for an em – ployer to interfere with, restrain, or coerce employees in the exercise of these rights.

Many states, including California, have enacted similar laws protecting employees from retaliation by employers for engaging in concerted activity. California Labor Code Sections 232 and 232.5 prohibit employers from requiring employees to refrain from disclosing the amount of their wages or working conditions or discharging, disciplining, or discriminating against employees who disclose the amount of their wages or their working conditions. Section 232.5, however, specifically provides that the statute is not intended to permit an employee to disclose an employer’s proprietary information, trade secret information, or information that is otherwise subject to a legal privilege without the consent of his or her employer.

In recent years, the NLRB has been actively prosecuting employers for violations of the rights of employees to engage in concerted activities, including those of a nonunionized employee on social media. As a recent article in the New York Times put it, the NLRB is intervening in social media to “expand its power” and “remain relevant as private-sector unions dwindle in size and power.”14 The NLRB, however, claims that social media sites are the new “virtual water coolers” and that it is “merely adapting the provisions of the Na tional Labor Relations Act, enacted in 1935, to the 21st century workplace.”15 Either way, employers should understand that, under certain circumstances, an employee’s expression of dissatisfaction in the workplace on social media may be protected concerted activity under the NLRA, even if the employees are not union members and there is no effort to unionize and no explicit reference to hours, pay, or other working conditions.

For example, in NLRB v. Karl Knauz Motors, Inc. d/b/a Knauz BMW, a car salesman posted a sarcastic comment on Facebook criticizing his employer for serving cheap food at a BMW sales event, and posting pictures of colleagues handing out hot dogs and water.16 Later that day, another dealership owned by the employer let a 13-year-old sit in the driver’s seat of a car, and the child accidentally drove the car into a pond. The salesman posted photos of the accident on Face – book, commenting: “This is your car. This is your car on drugs.” The salesman was fired one week later for the posts. The NLRB filed a complaint on the salesman’s behalf, contending that the Facebook posts were protected activity. The administrative law judge concluded that the first post was protected because the terminated employee and other salespersons shared communications about the cheap food, which could have impacted sales, and thus their commissions.17 The judge concluded that the second post was not protected concerted activity because it did not discuss terms and conditions of employment and, on that basis, upheld the employer’s decision to terminate the salesman.

In NLRB v. Three D, LLC d/b/a Triple Play Sports Bar and Grille, a Second Circuit case, two current employees responded to a Facebook post by a former employee regarding the employer’s mistakes in withholding taxes, which caused the employees to owe additional state taxes.19 One employee liked the former employee’s initial post. The second employee, whose privacy settings permitted only her friends to view her posts, posted one comment: “I owe too. Such an a** hole.

Both employees were terminated when the employer saw the posts. The administrative law judge recognized there is a balance to be struck between the rights of em ployees and legitimate employer interests in protecting its reputation but concluded that the employees’ posts were protected concerted activity because they were not so disloyal, disparaging, reckless, defamatory, or maliciously untrue so as to lose protection under the NLRA and were not directed at the general public.

In NRLB v. Design Technology Group, LLC d/b/a Bettie Page Clothing, a group of employees complained to their supervisor and the owner about working late hours in an unsafe neighborhood. Later that night, the employees engaged in a discussion on Facebook complaining about their employer without explicitly referring to their complaints about working late hours. One employee posted that she would be bringing a “Cali fornia Worker’s Rights” book to work the next day and that her mother worked for a law firm specializing in labor law. Another employee showed the posts to the manager, who terminated the employees. The NLRB ruled against the employer, holding that the posts were conversations for mutual aid and protection and “concerted protected activity.”

Although the NLRB has adopted a broad interpretation of “protected concerted activity” in the social media context, mere griping about the workplace is not enough to fall within the protections of the NLRA. In Tasker Healthcare Group d/b/a/ Skinsmart Derm – atology, an employee and nine other former and current employees participated in a private group chat on Facebook.23 After discussing a social event, the employee began venting about a supervisor, used profanity, and wrote: “FIRE ME…Make my day.” Later that morning, one of the employees in the chat showed the post to the employer. The employer terminated the employee, stating she obviously was no longer interested in working there. The NLRB concluded that the post was not protected activity as it did not involve shared employee concerns over terms and conditions of employment. Rather, the post was mere griping by an employee who failed to look forward to any action.

While the NLRB has not established a bright line rule for what constitutes protected concerted activity, social media communications among employees concerning any condition or aspect of the workplace and contemplating future action are likely protected activity. If, however, the communications are disloyal, disparaging, reckless, defamatory, or maliciously untrue, they may lose protection under the NLRA, especially if they are directed at the general public. If an employee is merely griping about the employer and not discussing forward-looking group activity among em – 14 Los Angeles Lawyer February 2016 ployees, the comments are not protected.25 Because each case is different, em ployers should exercise caution and seek counsel before taking action against an employee for his or her content on personal social media.

Free Speech

Public employee communications on social media may also be protected by the First Amendment. In Bland v. Roberts, the sheriff of Hampton, Virginia ran for re-election. During the campaign, one of the deputy sheriffs liked the Facebook page of the sheriff’s electoral opponent. The sheriff won re-election and fired the deputy sheriff and five other employees of the department who had shown support for the sheriff’s opponent. The employees sued, claiming that the sheriff retaliated against them because they supported his opponent, and the firings violated their right of free speech. The trial court ruled that a Facebook like did not constitute protected speech, but the Fourth Circuit reversed, holding that the Facebook like was in fact protected by the First Amendment.26 Although private sector employees have tried to bring claims against their employers for violation of the First Amendment arising out of their social media use, courts have rejected these claims because they do not involve state action and relate to private employment matters.

Ownership of Social Media Accounts

As social media proliferates, more employers are hiring employees to create and maintain company social media sites. While it may seem clear to the employer that it owns the social media sites established by and operated for the business, employees may not necessarily agree. In Phone Dog v. Kravitz, an em – ployee established and operated a Twitter account for his employer under the Twitter handle @phonedog_noah. Over time, the Twitter account grew to approximately 17,000 followers, and advertisers paid for advertising space on the Twitter account, generating revenue for the employer. When the employee left Phone Dog, he changed the Twitter account name to @noahkravitz. Phone Dog sued, arguing that it owned the Twitter a – ccount and login information. The case settled before any ruling on the merits, but the dispute underscores the importance of maintaining a clear policy that the employer owns all company social media sites, along with their usernames and passwords.

In a similar case in England, Whitmar Publications Ltd v. Gamage, four senior em – ployees set up a competing business while still employed with the plaintiff.29 They used their employer’s Linkedin groups to promote their new company and refused to turn over the login information after leaving. The British court issued injunctions against the former employees, ruling that the Linkedin account and login information were Whitmar’s protected confidential and proprietary information. The ruling in Whitmar emphasizes the need for clear policies stating that the em – ployer owns all social media sites, accounts, and login information.

Recommended Policies

Given the current state of the law, the best way for an employer to avoid disputes with employees over social media use is by drafting clear, narrowly tailored employment policies that balance the employer’s and employees’ legitimate interests. Among other things, social media policies should prohibit:

• Discrimination, harassment, and abusive conduct on social media.
• Disclosure of the employer’s trade secrets and confidential and proprietary information.
• Use of personal social media during work hours.
• Management requests that employees provide access to, or information from, their personal social media accounts.
• Friend requests from managers to employees, along with management’s following employees on social media sites or otherwise attempting to insert themselves into employee social media communications without clear, written employee consent.
• Management’s acceptance of friend requests or other invitations to follow or link with employees on social media sites.

A social media policy should also clearly state that the employer owns all social media sites established, maintained, accessed, or operated by employees for the company for business purposes during their employment, including all passwords and login information. Employers should avoid any language in a social media policy that could be interpreted as prohibiting or chilling the right of employees to engage in concerted activity and, in particular, discussions over wages, hours, and working conditions. While em – ploy ers may be permitted to discipline an employee for mere griping about the employer on social media, a social media policy should avoid broadly prohibiting communications by employees on social media that are “inappropriate,” “disparaging,” “confidential,” or “embarrassing” to the company.

Finally, employers should be aware of a recent ruling concerning employee e-mail use. In Purple Communications, the NLRB reversed its longstanding position and ruled that an employer may not maintain a policy prohibiting employees who are given company e-mail accounts from using those ac – counts during nonworking hours to engage in concerted activity and discuss wages and working conditions with other employees. An employer may only restrict these communications if they substantially disrupt or interfere with production and productivity.30 As the cases above indicate, employers face restrictions on accessing and regulating the social media posts of employees. While an em ployer may guard its trade secrets and business reputation, as well as act to prevent abusive employee conduct, an employer cannot prohibit the legally protected social media act – ivities of employees. Employers that are too heavy-handed in their monitoring of the social media activities of employees may find themselves liable under state and federal law.

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This article was first published in Los Angeles Lawyer Magazine

In past years the Governor of California has enacted new laws related to employment that place additional burdens on employers, while granting additional rights to employees. This year is no exception. Although there is some minimal relief to employers, Governor Brown has enacted a number of employee-friendly laws, most of which go into effect on January 1, 2016. This is a brief synopsis of the new employment laws that we believe are the most likely to affect your businesses, California employers.

The Fair Pay Act

One of the most notable new laws is an amendment to Section 1197.5 of the California Labor Code by SB 358—the Fair Pay Act (“FPA”).  The FPA replaces the current “equal work” standard with a new “substantially similar” standard. Prior to the FPA, Section 1197.5 prohibited an employer from paying an employee of one sex less than an employee of the opposite sex for equal work on jobs requiring equal skill, effort and responsibility, and performed under similar working conditions. Under the FPA, Section 1197.5 now prohibits employers from paying an employee of one sex less than an employee of the opposite sex for “substantially similar work when viewed as a composite of skill, effort, and responsibility under similar working conditions.” Whereas courts have been able to at least look to the federal Equal Pay Act for assistance in interpreting Section 1197.5 due to the similarity of the language, courts and employers are now left on their own to guess as to what constitutes “substantially similar work when viewed as a composite of skill, effort, and responsibility.”

Moreover, prior to the FPA, employers were only prohibited from paying opposite sex employees differently when they did equal work at the same establishment. The FPA has deleted the “same establishment” requirement, and now prohibits wage differentials for opposite sex employees doing substantially similar work in any of the employer’s establishments.

The FPA did not amend away an employer’s affirmative defenses and ability to protect itself. Section 1197.5 still authorizes employers to pay employees of the opposite sex who do substantially similar work differently where the employer is able to demonstrate that the wage differential is based upon a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or upon a bona fide factor other than sex, such as education, training, or experience. However, the FPA specifically emphasizes that such a bona fide factor (1) may not be based on or derived from a sex-based differential in compensation, (2) must be job related with respect to the position in question, and (3) must be consistent with a “business necessity.” This defense will not apply if the employee is able to show that “an alternative business practice exists that would serve the same business purpose without producing the wage differential.”

The FPA also adds a retaliation provision, prohibiting employers from discharging, discriminating, or retaliating against any employee for bringing or assisting with a claim under Section 1197.5. Further, while employers are not required to disclose the wages of one employee to another employee, they may not prohibit employees from disclosing their own wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging any other employee to exercise his or her rights under Section 1197.5.

Finally, prior to the FPA, employers were required to keep records of the wages and wage rates, job classifications, and other terms and conditions of employment of persons employed for a period of two years. Under the FPA, employers are now required to keep these records for three years.

Piece-Rate Compensation

Existing law prohibits an employer from requiring an employee to work during any meal, rest or recovery period, and requires these periods to be treated as hours worked. Existing law also requires employers to furnish accurate, itemized written pay statements that show specified information, such as gross and net wages earned, total hours worked, and all deductions. For employees paid on a piece-rate basis, the number of piece-rate units earned and any applicable piece rates also are required.

AB 1513, which adds Section 226.2 to the Labor Code, requires employers to compensate piece-rate employees for rest and recovery periods and “other nonproductive time” separately from any piece-rate compensation. It also requires employers to include additional items on pay statements for piece-rate employees.

Specifically, piece-rate employees must be compensated separately for rest and recovery periods at an hourly rate that is no less than the higher of (1) an average hourly rate determined by dividing the total compensation for the workweek, exclusive of compensation for rest and recovery periods and any premium compensation for overtime, by the total hours worked during the workweek, exclusive of rest and recovery periods, and (2) the applicable minimum wage.  (Special payment terms apply to employees who are paid on a semi-monthly basis.) Piece-rate employees must be compensated for other nonproductive time at an hourly rate that is no less than the applicable minimum wage.

With respect to itemized pay statements, Section 226.2 requires employers to state the following items separately: (1) the total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those rest and recovery periods during the pay period, and (2) the total hours of “other nonproductive time,” the rate of compensation, and the gross wages paid for “other nonproductive time” during the pay period.

An employer that pays an hourly rate of at least the applicable minimum wage for all hours worked, in addition to paying any piece-rate compensation, is not required to compensate employees separately for “other nonproductive time,” or to include these separate items for “other nonproductive time” on pay statements.

Moreover, Section 226.2 establishes an affirmative defense to certain claims for recovery of wages, damages, liquidated damages, statutory penalties, civil penalties or premium pay that are based solely on the employer’s failure to pay timely compensation due for rest and recovery periods and other nonproductive time for time periods prior to and including December 31, 2015, if the employer complies with all of the following:

• The employer makes payments to each of its employees (except where valid releases are in place prior to specified dates) for previously uncompensated or undercompensated rest and recovery periods and other nonproductive time from July 1, 2012 to December 31, 2015, inclusive, using one of two prescribed formulas.
• By no later than July 1, 2016, the employer provides a specified written notice to the Department of Industrial Relations of the employer’s election to make these payments to its current and former employees, which the Department will post on its website until March 31, 2017.
• The employer begins making the payments to the affected employees as soon as reasonably feasible after providing the notice to the Department, and completes the payments no later than December 15, 2016.
• The employer provides the affected employees with an accompanying statement regarding certain details of the payment.

Meal Periods for Health Care Employees

Section 512 of the Labor Code requires that employers provide two meal periods for work in excess of 10 hours, with employees being allowed to waive the second meal period if their total hours of work are no more than 12 hours. Despite this general rule, Section 11(D) of Wage Order 5 allows employees in the health care industry to waive one of their meal periods on shifts exceeding 8 hours.  Employers and employees in the health care industry relied on Section 11(D) to allow these employees to waive one of their two meal periods if their shift exceeded 12 hours.

An appellate court decision in 2015 held that Section 11(D) of Wage Order 5 is invalid because it conflicts with Labor Code Section 512.  SB 327, which amends Section 512, effective October 5, 2015, effectively overrules that appellate court decision retroactively and makes it clear that healthcare workers have been able, and continue to be able, to waive one of their meal periods if their shift exceeds 12 hours.

Maximum Wage Garnishments

Under SB 501, which amends Section 706.050 of the Code of Civil Procedure effective July 1, 2016, the maximum amount of disposable earnings of an individual judgment debtor for any workweek that is subject to levy under an earnings withholding order must not exceed the lesser of (1) 25% of the individual’s disposable earnings for that week, or (2) 50% of the amount by which the individual’s disposable earnings for that week exceed 40 times the state minimum hourly wage in effect at the time the earnings are payable.

Private Attorneys General Act: Additional Rights to Cure

The California Private Attorneys General Act (“PAGA”) authorizes an aggrieved employee to bring a civil action to recover specified civil penalties, which otherwise would be assessed and collected by the California Labor and Workforce Development Agency, on behalf of the employee and other current and former employees for the violation of certain provisions of the Labor Code.  PAGA currently provides the employer with the right to cure certain violations before the employee may bring a civil action. For other violations, PAGA does not provide the employer with a right to cure, but only requires the employee to follow specified procedures before bringing a civil action.

Section 226(a) of the Labor Code requires employers to provide certain specific information on the pay statements it provides to its employees with their wages, such as their gross and net wages, total hours worked and deductions. PAGA does not currently provide a cure period with respect to an employer’s failure to include any of this required information on the pay statements of its employees.

AB 1506 adds the following two required items of information specified in Section 226(a) to the list of violations that are subject to a cure period: (1) the inclusive dates of the period for which the employee is paid, and (2) the name and address of the legal entity that is the employer. A violation either of these sections is considered to be cured upon a showing that the employer has provided a fully compliant, itemized wage statement to each aggrieved employee.  Note that AB 2074 limits this right to cure to once in a 12-month period.

 E-Verify System

The federal E-Verify system enables participating employers to use the system, on a voluntary basis, to verify that the employees they hire are authorized to work in the United States. Existing law prohibits states and other government entities from requiring a private employer to use an electronic employment verification system (including E-Verify), except when required by federal law or as a condition of receiving federal funds. Existing law also prohibits an employer (or any other person or entity) from engaging in defined unfair immigration-related practices against any person for the purpose of retaliating against the person for exercising specified rights.

AB 622, which adds Labor Code Section 2814, expands the definition of an unlawful employment practice to prohibit an employer (or any other person or entity) from using the E-Verify system at a time or in a manner not required by a specified federal law or not authorized by a federal agency memorandum of understanding to check the employment authorization status of an existing employee or an applicant who has not received an offer of employment, except as required by federal law or as a condition of receiving federal funds.

AB 622 also requires an employer that uses the E-Verify system to provide the affected employee with any notification issued by the Social Security Administration or the United States Department of Homeland Security containing information specific to the employee’s E-Verify case or a tentative non-confirmation notice (i.e., a notice indicating that the information submitted into the E-Verify system did not match the information in the federal system). There is a civil penalty of $10,000 to an employer for each violation.

AB 622 does not affect an employer’s right to use E-Verify to verify that an applicant is authorized to work in the United States after the employer has made an offer of employment to the applicant.

Minimum Wage and Related Matters

The minimum wage in California will increase from $9.00 per hour to $10.00 per hour on January 1, 2016. In addition, the minimum wage in San Francisco will increase from $12.25 per hour to $13.00 per hour on July 1, 2016. This is important not only to companies that employ lower-wage workers, but also because it affects the standard for exempt status. For example, in order to be exempt from being paid overtime under the executive, administrative and professional exemptions, the employee must be paid at least twice the minimum wage per month. This means that in 2016 the minimum annual salary to be considered an exempt employee in California will rise to $41,600. With respect to certain computer software employees, their overtime exemption in Labor Code Section 515.5 will require them to receive a minimum of $41.85 per hour, or a salary of $87,185.14 per year, effective January 1, 2016.  Lastly, employers should take note that the U.S. Department of Labor is scheduled to release its proposed final rule regarding amendments to the federal Fair Labor Standards Act in 2016.  It is anticipated that, among other things, the DOL will raise the weekly salary required for exempt status from $455 to $970, which equates to an annual salary of $50,440. This would create the rare exception where federal law is less friendly to employers than California law.

Discrimination and Retaliation Protections Extended to Family Members

Currently, Labor Code Sections 98.6, 1102.5 and 6310 prohibit an employer from discharging, discriminating, retaliating, or taking any adverse action against any employee or applicant because the employee or applicant has engaged in protected conduct, such as filing a complaint with the Labor Commissioner regarding unpaid wages, or disclosing an employer’s violation of a statute or regulation to a government agency. Effective January 1, 2016, AB 1509 amends Sections 98.6, 1102.5 and 6310 to extend the protections of these provisions to an employee who is a family member of a person who is engaged in, or who is perceived to be engaged in, conduct protected by these provisions. Thus, both the employee who engaged in the protected category and the family member of the employee will be entitled to reinstatement and reimbursement for lost wages if they were improperly discharged or suffered an adverse action. Any employer who violates these provisions is subject to a civil penalty of up to $10,000 per violation and may be charged with a misdemeanor if the employer willfully refuses to reinstate or otherwise restore an employee or the employee’s family member.

Employee Time Off             

Labor Code Section 230.8 applies to employers with 25 or more employees. Existing law prohibits employers from discharging or discriminating against any employee who is a parent, guardian, or grandparent having custody of a child enrolled in a K-12 school or a “child day care facility” for taking up to 40 hours of unpaid time off each year for the purposes of participating in school activities, subject to specified conditions. SB 579 broadens Labor Code Section 230.8 by revising “child day care facility” to “child care provider,” and by defining “parent” to include the following: parents, guardians, stepparents, foster parents, grandparents, or persons standing in loco parentis to, a child. Under SB 579, employees who are “parents” may take unpaid time off to enroll or reenroll their children in a school or with a licensed child care provider.

SB 579 also amends Labor Code Section 233 (“Kin Care”) to align with the Healthy Workplaces, Healthy Families Act of 2014 (“HWHFA”) (Labor Code Section 245, et seq.). Section 233, which applies to all employers, will now provide that employees may use their paid sick leave for any of the purposes specified in HWHFA, which includes the following: for their own illness or injuries, for the diagnosis, care or treatment of an existing health condition of, or preventive care for, the employee or the employee’s family member, or if the employee is a victim of domestic violence, sexual assault, or stalking.  In addition, SB 579 redefines “family member” to have the same meaning as defined in HWHFA.

Labor Commissioner’s Power to Enforce Judgments and Individual Liability

SB 588 bestows on the Labor Commissioner the right to use any of the existing remedies available to a judgment creditor and to act as a levying officer when enforcing a judgment.  That is, effective January 1, 2016, a Labor Commissioner can place a lien or levy on an employer’s property, bank accounts and/or accounts receivable to collect on wages owed and attorneys’ fees. SB 588 also provides that a new business will be considered the “same employer” for purposes of liability if (1) the employees of the successor employer are engaged in “substantially the same work in substantially the same working conditions under substantially the same supervisors,” or (2) the new entity “has substantially the same production process or operations, produces substantially the same products or offers substantially the same services, and has substantially the same body of customers.”

Moreover, SB 588 adds Labor Code Section 558.1, which states that any “other person acting on behalf of an employer” (defined as a natural person who is an “owner, director, officer, or managing agent of the employer”) who “violates, or causes to be violated, any provision regulating minimum wages or hours and days of work in any order of the Industrial Welfare Commission, or violates [certain designated sections of the Labor Code], may be held liable as the employer for such violation.” This new section thus expands the potential liability of the specified individuals beyond the civil penalty described in Labor Code Section 588.

Accommodation Requests for Disability or Religious Purposes

AB 987 is in response to several recent California appellate court decisions holding that the act of requesting an accommodation is not considered to be a protected activity.  (See Nealy v. City of Santa Ana (2015) 234 Cal.App.4th 359; Rope v. Auto-Chlor Sys. Of Washington, Inc. (2013) 220 Cal.App.4th 645).  AB 987 is intended to overturn these court decisions by amending the Fair Employment and Housing Act to prohibit an employer or covered entity from retaliating or otherwise discriminating against a person for requesting accommodation for his or her disability or religious beliefs, regardless of whether the accommodation request was granted.

Disability Benefits Waiting Period

Under existing law, a disabled individual is eligible to receive state disability benefits only after a waiting period of seven consecutive days of being unemployed and disabled. If an employee returns to work after a period of temporary disability for more than two weeks before experiencing a reoccurrence of the same condition, the employee is required again to serve a seven consecutive day waiting period before being eligible for benefits. Effective July 1, 2016, SB 667 waives the seven day waiting period for an individual who has already served a seven day waiting period for the initial claim when that person files a subsequent claim for disability benefits for the same or related condition within 60 days after the initial disability benefit. SB 667 further provides that if an individual receives two consecutive periods of disability benefits due to the same or a related cause or condition, and if the periods are not separated by more than 60 days, they are considered as one disability benefit period.

Vetoed Bills

In addition to the above bills that were signed into law, there were a number of bills that were vetoed by Governor Brown, the most notable of which are as follows:

AB 465 would have made it unlawful for an employer to discharge, discriminate, or retaliate against an employee for refusing to sign an arbitration agreement as a condition of employment. Because AB 465 was vetoed, California law still permits an employer to mandate that its employees sign arbitration agreements as a condition of employment.

AB 676 is the California Legislature’s second attempt at making “unemployment status” a protected category. Had AB 676 been signed by Governor Brown, employers would have been prohibited from either (1) posting a job opening stating that unemployed persons are not eligible for the job, or (2) asking applicants to disclose their current employment status.  Like he did last year, Governor Brown vetoed the bill because “nothing has changed,” and the bill does “not provide a proper or even effective path to get unemployed people back to work.”

In AB 1017, the California Legislature tried to add a provision to the Labor Code that would prohibit an employer from seeking salary history information from an applicant for employment. Proponents of the bill stated that AB 1017 is meant to combat the effects of past discrimination due to gender or other immutable characteristics.  Although Governor Brown vetoed the bill, in so doing, he stated that AB 1017 may not be necessary due to the enactment of the Fair Pay Act, and that there is little evidence that AB 1017 would ensure more equitable wages.

SB 406 is the California Legislature’s attempt to broaden the scope of the California Family Rights Act of 1993 (“CFRA”). Currently, CFRA provides that a qualified employer must allow an eligible employee to take up to 12 weeks of unpaid protected leave to take care of the employee’s parent, spouse, or child who has a serious health condition. SB 406 would have expanded CFRA by also allowing eligible employees to take up to 12 weeks of unpaid leave to care for siblings, grandparents, grandchildren, domestic partners and parents-in-law with serious health conditions. Governor Brown vetoed SB 406 because the bill conflicted with the federal Family and Medical Leave Act and would in certain circumstances unfairly “require employers to provide employees up to 24 weeks of family leave in a 12 month period.”

Employers should audit their current policies and practices, and make any necessary changes to ensure that they are in compliance with these new laws.

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