JANUARY 2004

I. LEGISLATIVE/REGULATORY UPDATE
Pending Legislation

President to Expand Rights for Illegal Immigrants

President Bush has proposed an immigration reform measure that would provide temporary legal status to millions of undocumented immigrant workers in the United States. If approved by Congress, the plan would allow workers currently in the country illegally to pay a fee and register in a temporary worker program if they can prove that they are currently employed in the United States. It would also permit foreigners to come to the United States as “temporary workers” if they have a job offer from an employer who demonstrates that no U.S. worker could be found for the job. Such temporary worker status would last three years and could be renewed for an additional three years.

It is anticipated that the President Bush’s proposal will generate much debate in Congress. Many modifications to the proposed law will be considered.

Governor Urges Workers’ Compensation Reform

California Governor Arnold Schwarzenegger has imposed a March 1 deadline upon the California legislature to pass significant workers’ compensation insurance reform, aimed at drastically reducing workers’ compensation insurance costs. Claiming that the tremendous increases employers have seen in their workers’ compensation insurance premiums during the past several years has driven businesses and jobs out of the state, Schwarzenegger has threatened that if such legislation is not enacted by March 1st, he will ensure that a workers’ compensation reform will be placed before the voters on the November ballot.

New Harassment Laws for 2004

Gender Harassment (AB 196): Permits employees to appear or dress consistently with their “gender identity,” so long as they adhere to reasonable workplace appearance and grooming standards which conform with state and federal law. The new law, which is codified in California Government Code sections 12926 and 12949, defines “gender” as the employee’s “actual sex” or the employer’s perception of the employee’s sex, and includes the employer’s perception of the employee’s identity, appearance, or behavior, regardless of whether that identity, appearance, or behavior is different from that traditionally associated with the employee’s sex at birth. AB 196 therefore makes it illegal to discriminate (for example) against a male worker or job applicant because he appears feminine, whether in clothing, hairstyle, make-up, grooming, speech, personality, mannerisms, or demeanor if he “identifies” with being a female.

Sexual Harassment (AB 76): AB 76, which amends California Government Code section 12940(j), provides that, under the Fair Employment and Housing Act, an employer will be liable for failing to take immediate or appropriate corrective action to prevent harassment of an employee by vendors, customers and clients of the employer, once the employer knows or should reasonably know of the harassment. The employer’s liability in such instances, however, may be limited depending upon how much control the employer can exert over the harassing non-employee. It should be noted that federal law has long held that employers may be held liable for harassment by non-employees.

Payroll Tax Rates for 2004

The following payroll tax rates will be utilized during 2004:

• FICA (Social Security): FICA contributions for both employers and employees will remain at 7.65%, comprised of 6.2% for the OASDI (Old-Age, Survivors, and Disability Insurance) program and 1.45% for the Medicare HI (Hospital Insurance) program. The taxable earnings base for OASDI will be the first $87,900.00 the worker earns (a $900.00 increase from 2003). The 1.45% Medicare portion of the tax will be applied to the worker’s entire salary.
  
• FUTA (Federal Unemployment Tax Act): The FUTA tax rate for 2004 will remain at 0.8%, paid by employers on the first $7,000.00 paid annually to each employee. (The total maximum payment remains $56 per employee.)
  
• SDI (State Disability Insurance): In 2004, the rate of contribution payable by employees for SDI will rise from 0.9% to 1.18%. This rate includes the .08% surcharge required to fund California’s new paid family leave program. The SDI taxable wage rate base will rise from $56,916.00 to $68,829.00. The maximum contribution per employee will increase from $512.24 to $812.18.
  
• ETT (Employment Training Tax): The ETT rate will remain at 0.1% in 2004; the taxable wage limit remains at $7,000.00.
  
• SUI (State Unemployment Insurance): The State Unemployment Insurance tax rate that an employer must pay in 2004 will depend on that employer’s own unemployment insurance rating (which was to be provided by the EDD to all employers in December). The SUI taxable wage base will remain at $7,000.00 for 2004.

II. JUDICIAL UPDATE

Gender-Based Verbal Harassment Deemed Sexual in Nature

In Hayut v. State University, the Second Circuit Court of Appeals held that a New York college professor could be held liable for sexual harassment after he repeatedly called a student “Monica” in reference to Monica Lewinsky. Professor Alex Young of the State University of New York at New Paltz repeatedly called one of his students “Monica” in front of other students and professors. On several occasions he asked her about her “weekend with Bill” and occasionally attempted to silence her in class by saying “Be quiet, Monica.” And “I will give you a cigar later.”

The Second Circuit held that the student could proceed in her sexual harassment claims under federal law because “a reasonable jury could find the Monica statements were more than mere joking comments or occasional vulgar banter, but was sexually charged and designed by Young to convey certain images about [the student].”

This case underscores the fact that verbal comments do not necessarily need to be sexual in nature to constitute harassment under Title VII. The fact that the comments were based upon the student’s gender is enough to sustain a sexual harassment/gender discrimination claim.

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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