JANUARY 2003

I. LEGISLATIVE/REGULATORY UPDATE
Pending Legislation

New California Legislation

A number of bills that may impact California's employers in 2003 and beyond have already been introduced in this legislative session. These include:

AB 17 (Kehoe) - This bill would prohibit a state agency from entering into a contract for the acquisition of goods and services with a vendor or contractor who does not offer benefits to employees with domestic partners that are equal to the benefits offered to employees with spouses.

AB 18 (Leno) - This bill would provide that California's Fair Employment and Housing Act ("FEHA") should not be construed as prohibiting a city, county, or other political subdivision of the State from providing stricter protections against discrimination than those provided by FEHA.

AB 46 (Simitian) - AB 46 would prohibit an employer from requiring an employee to use his or her social security number for any purpose other than taxes.

SB 2 (Spier) - This bill would declare the intent of the Legislature to develop an employer based health care coverage system that provides insurance for every employee in California.

As the 2003 legislative session unfolds, we will continue to keep you up-to-date regarding pending bills and new laws.

Bill to Rescind Legislation Introduced in Extraordinary Session

A bill that will roll back some of the more cumbersome legislation passed in recent years was recently introduced in the Legislature's first extraordinary session. SBX1 1 (Poochigian) would suspend several bills passed in recent years until the end of the recession.

The bills SBX1 1 calls for suspending are: AB 749 (Calderon), the workers' compensation benefit increase; AB 2509 (Goldberg), legislation allowing local jurisdictions to establish and enforce local versions of labor laws; SB 975 (Alarcón), 2001 legislation requiring prevailing wages to be paid on any private project that receives assistance from the state; SB 1156 (Burton) and AB 2596 (Wesson), legislation requiring binding arbitration for agricultural employers; AB 60 (Knox), the eight-hour overtime legislation enacted in 1999; and AB 2816 (Shelley), requiring temporary employee placement services to provide workers' compensation insurance based on the modification rate of their client and not the job safety record of the employment company.

Jobless Benefit Costs to Increase

For the first time in seven years, most employers in California will pay more in unemployment insurance premiums.

According to the state Employment Development Department, over the last year, the state's unemployment trust fund has declined 23% to $4.3 billion. Under a formula in state law, employer premium rates are automatically adjusted each year based on the total amount of benefits paid out to jobless workers.

In addition to a rising number of unemployed workers, California's system also is being strained by higher benefits. In 2003, the top weekly benefit will increase to $370 for a maximum of 26 weeks.

New Cal/OSHA Fine

AB 2837 (Koretz) passed the Legislature and was signed into law by Governor Davis in 2002. AB 2837 puts in place a law mandating a minimum $5,000 fine for employers that fail to immediately report to Cal/OSHA any death, serious injury, or illness of an employee.

Prior California regulations required an employer to submit a report within 24 hours to the nearest Cal/OSHA district office if any job-related death, serious injury, or illness. An injury or illness is " serious" if the employee is hospitalized for more than 24 hours other than for observation, an employee loses any part of the body, or an employee suffers permanent disfigurement.

Prior regulations required that reporting must be as soon as practicable but no later than 24 hours after the employer knows, or should have known, of the death, serious injury, or illness. The new requirement for immediate reporting appears to eliminate the 24-hour grace period.

Telephone calls and telegraphs are specifically permitted methods of communication. The new law does not specifically include or exclude facsimile transmittals or e-mails.

According to existing and new regulations, employers must include the following information in their report to Cal/OSHA:

• Time and date of the accident;
• Employer's name, address, and telephone number;
• Name and job title or badge number of the person reporting the accident;
• Address where the accident or event occurred;
• Name of person to contact at the accident site;
• Name and address of the injured employee(s);
• Nature of injury(ies);
• Location where the injured employee(s) was (were) moved;
• Identification of law enforcement agencies present at the site of the accident; and
• Description of the accident and whether the accident scene or any of the equipment or machinery has been altered.

Post Annual Injury and Illness Report by February 1, 2003

California employers covered by Cal/OSHA record keeping requirements must post their 2002 Summary of Work-Related Injuries and Illnesses form (Cal/OSHA Form 300-A) by February 1, 2003. The form must be posted in a conspicuous place where notices to employees are customarily posted through April 30, 2003. The Form 300-A summarizes the information recorded in the Log 300. Employers are not required to post the Log 300 itself, but must maintain the Log 300 and concurrent summary for five years. Moreover, employers are not mandated to file the completed forms with Cal/OSHA unless specifically asked to do so.

II. JUDICIAL UPDATE

California Cannot Void Work Contracts in Other Places

A ruling by the California Supreme Court has brought into question whether California's policy against non-competition agreements will withstand scrutiny when confronted with situations involving citizens from states that allow non-compete agreements.

In Advanced Bionics Corp. v. Medtronic Inc. (2002) 29 Cal.4th 697, Advanced Bionics tried to prevent Medtronic from seeking to enforce its two-year non-compete agreement with a former Medtronic employee ("the Employee") in a Minnesota court. Advanced Bionics argued that Minnesota's non-compete law violated California's law and public policy.

Both companies were involved in the manufacture of implantable medical devices. The agreement the Employee signed when with Medtronic prohibited him from working for any competitor for two years after leaving Medtronic and stipulated that Minnesota law would govern the contract.

The court of appeal upheld the California trial court's temporary restraining order that prohibited Medtronic from taking any further steps in a suit it had filed in Minnesota. The court of appeal also said California courts should decide the dispute.

By a unanimous vote, however, the California Supreme Court reversed, citing judicial restraint and comity - the latter by which courts in one jurisdiction may accede to the courts of another.

"California courts have the same power as other courts to issue orders that assist in protecting their jurisdiction," Justice Ming Chin wrote. "However, enjoining proceedings in another state requires an exceptional circumstance that outweighs the threat to judicial restraint and comity principles. The circumstances of this case do not provide sufficient justification to warrant our court's issuing injunctive orders against parties pursuing the Minnesota litigation."

Plaintiff's Own Sexual Conduct Admissible in Hostile Environment Case

In Rieger v. Arnold (2002) 104 Cal.App.4th 451, a small law firm ("the Employer") decided it was time to institute an office policy on sexual harassment. The Employer's legal secretary, Melanie Reiger, ("the Employee") found the policy to be unnecessary because the employees were "all adults." However, after learning there would not be any holiday bonus coming her way, the Employee complained to the firm about an incident during which attorney Arnold touched her while comparing her waist to his wife's for clothing size. After later being dismissed from the firm, the Employee filed suit claiming discrimination, wrongful termination, and hostile work environment sexual harassment based on the incident with Arnold and a female office manager's allegedly improper behavior.

At trial, the admissibility of evidence of the Employee's own prior sexual conduct was debated. A California court of appeal found evidence of most of the Employee's own sexual conduct admissible, and not surprisingly affirmed judgment for the Employer and the individually named defendants on the harassment issue.

Court Preserves Employer Opportunity to Investigate Employee Injury

In Honeywell v. Workers' Compensation Appeals Board 2002 Daily Journal DAR 14417, a California court of appeal addressed employers' obligations to investigate workers' compensation claims. In the case, William Wagner ("the Employee") visited Honeywell's ("the Employer") medical clinic on July 20, 1998. He complained that management was prejudiced against him. The Employee further stated that he had lost 30 pounds, was anxious and agitated, and that his personal physician had prescribed medications for work stress. Five months later, the Employee was admitted to a psychiatric hospital and his wife advised the Employer that the hospitalization was due to the conduct of his immediate supervisor and others at work.

On January 10, 1999, the Employee faxed a medical leave request to the Employer claiming that he was experiencing work-related stress injuries. The next day the Employer sent the Employee a workers' compensation claim form and pamphlet. The Employer denied the Employee's claim on March 31, 1999, relying on its psychologist's opinion that the Employee's psychiatric condition was caused by good faith personnel actions.

The California court of appeal ruled that unless an employer deliberately or intentionally refuses to provide a required claim form or makes false statements to an employee to prevent or delay filing a claim, an employer's 90-day period to investigate a workers' compensation claim starts with the actual receipt of the claim form or knowledge of an injury. Moreover, unlike the Employee attempted to argue in the Honeywell case, negligent failure to provide the claim form is not sufficient to start the 90-day period.

The Honeywell case reminds employers to provide a claim form and the injured worker pamphlet to any employee (1) who suffers an injury requiring more than first aid, (2) who loses time from work other than on the date of the injury, or (3) whose injury results in a loss of consciousness, hospitalization for more than 24 hours, or may return to work only under medically supervised restrictions. Employers should also report employees' injuries to their workers' compensation carriers by filing the Employer's Report of Occupations Injury or Illness (Form 5020) within five working days of knowledge of the injury. Finally, employers should advise their workers' compensation carriers promptly if they have good reason to delay the claim during the 90-day investigative period.

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.

Join us for the Klinedinst Employment Symposium on January 16, 2003.

This is a critical event for all businesses, large and small.

Click here for more details!

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