NOVEMBER 2002

I. LEGISLATIVE/REGULATORY UPDATE
Pending Legislation

New Minimum Hourly Rates for Exempt Computer Professionals and Doctors

The California Department of Industrial Relations (DIR) has issued new hourly minimum rates that employers must pay to certain computer professionals if those individuals are to qualify as exempt from overtime. The rate has been adjusted to reflect changes in the California Consumer Price Index. Effective January 1, 2003, the minimum hourly rate will increase 2.2%, from $42.64 to $43.58.

The DIR has also adjusted the minimum hourly rate employers must pay to certain exempt licensed physicians and surgeons who are compensated on an hourly basis. Effective January 1, 2003, the rate will increase from $55.00 to $56.21.

"Minimum hourly rate" is just one factor to consider when determining whether employees may be exempt from overtime. Employers must also consider the duties the employees perform and the degree of discretion they apply to the job. In addition, the employees must meet the tests outlined in California Labor Code sections 515.5 and 515.6.

To ensure compliance, employers should confirm that all employees classified as exempt from overtime meet both the compensation and duties tests applicable to their exemptions. Employers should also review the compensation of exempt computer professionals and hourly paid physicians and surgeons and adjust their rates as necessary to comply with the January 1, 2003 new minimums.

DLSE Clarifies Workplace Closure

The California Division of Labor Standards Enforcement ("DLSE") recently issued an opinion letter stating that an employer may shut down its operations for a full workweek and not pay its exempt employees any salary for that period without affecting their exempt status. The letter further states that although employees generally have a right to use their vacation or personal time off ("PTO"), the right to use such benefits during weeklong shutdowns will depend on their employment agreement or the employer's policy.

The exempt status of a particular employee is determined by evaluating whether his or her duties and salary comport with state and federal requirements. Under California law, an employee is paid a "monthly salary" if he or she regularly receives a predetermined amount each pay period on a weekly, or less frequent, basis which constitutes all of part of his or her compensation that cannot be reduced because of variations in the quality or quantity or work performed. The DLSE has clarified that it does not interpret the "monthly salary" language to prevent employers from imposing a weeklong shutdown without pay.

The DLSE also clarified that an employer must rely on individual employment agreements and its workplace policies regarding the use of accrued vacation or PTO to determine whether exempt employees can use accrued PTO to receive payment for the week at the employee's discretion. The opinion letter further states that an employer generally cannot require its exempt employees to use accrued PTO for the shutdown week. According to the DLSE, however, two exceptions exist: (1) if an employment contract requires employees to take vacation or PTO time during a specified period of the year (i.e., the week of Christmas) and the shutdown occurs during those weeks; and (2) if the employer establishes a policy mandating the use of accrued vacation or PTO and provides employers with nine months notice before the week(s) in which the time must be taken.

II. JUDICIAL UPDATE

Employees Cannot Sue if Harassed by Customers

A California appellate court recently ruled that employers are not liable for sexual harassment of their employees by clients and customers. In Salazar v. Diversified Paratransit Inc., Raquel Salazar ("the Employee") worked as a driver for her company, which transports developmentally disabled adults and children from homes to care providers. The Employee sued the company after she was assaulted in 1997 by one of its adult male clients. The Employee claimed that the California Fair Employment and Housing Act ("FEHA") created employer liability for employees sexually harassed by clients. The court of appeal declared that the FEHA gives the Employee no such cause of action. "The Legislature rejected an amendment," the court wrote, "that would have expanded statutory employer liability in this way, and this court defers to that legislative policy determination."

Notwithstanding this ruling, employers should continue to take all reasonable steps to ensure employees are not subjected to harassment by clients or customers. The Salazar case does not interpret Title VII of the Civil Rights Act of 1964. Under the Equal Employment Opportunity Commission's regulations interpreting Title VII, an employer may be held responsible for acts of nonemployees in the workplace if the employer knows or should have known of the conduct and fails to take appropriate corrective action.

Federal Law Supersedes State Restriction On Employer Speech

In Chamber of Commerce of the United States et al. v. Bill Lockyer, et al., a federal district court ruled that the National Labor Relations Act ("NLRA") supersedes the restrictions on employer speech concerning union representation imposed by California law.

A California law that took effect in 2001 (enacted by Assembly Bill 1889) applies to any private employer who receives at least $10,000 from any state program or enters into contracts with the state for goods or services. It prohibits the use of those funds to assist, promote, or deter unionization. Among other things, the law requires employers to return any state funds used in violation of these restrictions and imposes civil penalties equal to twice the amount of those funds. Either the Attorney General or private citizens may bring enforcement actions. Employers are required to certify compliance with the law and produce detailed records showing that state funds have not been used for prohibited purposes.

Employer groups argued that the law violates the right of free speech under the federal and California constitutions as well as provisions of the NLRA. Section 8(c) of the NLRA states that "the expressing of any views, argument, or opinion, or the dissemination thereof . . . shall not constitute or be evidence of an unfair labor practice . . . if such expression contains no threat of reprisal or force or promise of benefit." While the court did not rule on the constitutional arguments, it agreed that the NLRA supersedes portions of California law because it interferes with the rights of employers and employees to communicate about the pros and cons of union representation.

This year has already resulted in several new laws and cases which will have a significant impact on California employers in the years to come. All new laws and trends will be reviewed in our annual Employment Law Symposium on January 16, 2003. Additional details and registration information are available by clicking here.

If you would like to discuss these or any other employment law matters, please do not hesitate to contact any member of Klinedinst's Employment Law Department.

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