DECEMBER 2004

I. LEGISLATIVE/REGULATORY UPDATE
Pending Legislation

California Division of Labor Standards Enforcement Proposes Regulations to Relieve Harshness of Meal and Rest Period Laws

Finally, there appears to be relief on the horizon for California employers in regard to providing meal and rest periods to non-exempt employees. On December 10, 2004, the California Division of Labor Standards Enforcement proposed to adopt some much-needed emergency legislation to ease the harshness of California Labor Code sections 226.7 and 512.

Under current law, all employers are required to ensure that all non-exempt employees who work at least five hours take a 30-minute, uninterrupted meal period. If those employees work more than five, but fewer than six hours, the employee is permitted to waive the 30-minute period. If the employee does not take the 30-minute meal period, even if it is by the employee’s own choice, the employer is required to pay the employee one hour of wages as a penalty for the employee not taking the legally-mandated meal period.

There has been a great deal of controversy regarding the definition of certain terms contained in the current law, such as what is meant by the requirement that an employer “provide” an employee with a meal period, and what is meant by the various time parameters in which meal periods can and must be taken.

When enacted, the proposed emergency regulation will answer these questions in a manner that will ease the harshness of this law, particularly in situations in which the employer allows the employee to take the meal period, but the employee elects not to do so.

Under the proposed emergency regulation, an employer will be deemed to have provided the required meal period if three conditions have been met:

1. The employer makes the meal period available and affords the employee the opportunity to take it;
   
2. The employer posts the applicable Industrial Welfare Commission wage order and;
   
3. The employer maintains accurate time records for covered employees.

Further, an employer establishes that meal periods have been provided if the employer informs the employee of the circumstances in which the employee is entitled to take the meal period and the employee acknowledges in writing that the employee understands those rights.

The proposed regulation also clarifies when the meal periods, first and second, must commence. The initial meal period may commence at any time before the start of the sixth hour of work. However, the employer will not be prohibited from allowing the employee to start a meal period after the start of the sixth hour as long as the employee was provided a meal period before the sixth hour of work begins. A second meal period must be provided if the work period after the end of the first meal period exceeds five hours, but the second meal period may be waived by mutual consent if the employee has not waived the first meal period and the second work period ends before the beginning of the sixth hour of the work period.

Finally, the regulation explains that any penalty owed and paid by an employer to an employee under Labor Code section 226.7 is considered a penalty, not wages. Since this is interpreted to be a penalty, not a wage, a one-year statute of limitations (rather than a three year statute of limitations if it was a wage) will apply. Moreover, plaintiffs would not be permitted to recover attorneys’ fees, costs, and interest under Labor Code section 218.5 or 218.6.

Because this proposal was made in direct response to Governor Schwarzenneger’s directive to immediately promulgate regulations to clarify existing law and provide parameters for employers to proceed, it is likely that the regulation will be adopted. Maintaining accurate records is key. It is recommended that employers consider inserting verification language on time records wherein employees state that they are aware of the meal and rest period requirements and have taken all meal and rest periods for which they are eligible.

Hourly Wage for Exempt Computer Professionals Changes January 1, 2005

Labor Code section 515.5 provides that certain computer software employees shall be exempt from overtime compensation requirements pursuant to Labor Code section 510 if certain criteria are met. One of the required criteria is the employee’s hourly rate of pay must not be less than a certain threshold dollar amount. The Division of Labor Statistics and Research is responsible for adjusting this pay rate on October 1 of each year to be effective on January 1 of the following year, by an amount equal to the percentage increase in the California Consumer Price Index for urban wage earners and clerical workers. Beginning January 1, 2005, to qualify for exemption, computer professionals must earn an hourly wage of at least $45.84 per hour.

EEOC Issues Guidance on Hiring Employees with Intellectual Disabilities

The U.S. Equal Employment Opportunity Commission (“EEOC”) has published written guidance for addressing issues employers face in hiring, accommodating, and preventing harassment of employees with intellectual disabilities. The EEOC undertook the project to advance the goals of the Bush administration’s “New Freedom Initiative” announced in 2001. The goals of the initiative include expanding educational and employment opportunities for individuals with disabilities.

The EEOC defines the term “intellectual disability” to include individuals with:

(1) an IQ below 70-75;

(2) significant limitations in adaptive skill areas (basic skills needed for everyday life); and

(3) a disability that originated before the age of 18.

Employers should also note that such disabilities will not necessarily be obvious from an individual’s appearance. While the EEOC emphasizes that individuals with intellectual disabilities often have other impairments as well, such as cerebral palsy, seizure disorders, and hearing and vision impairments, such impairments must be considered in isolation, as well as in combination with the intellectual impairment to determine whether they rise to the level of a disability under the Americans with Disabilities Act (“ADA”) or under California’s Fair Employment and Housing Act (“FEHA”), which maintains a very different legal definition of disability than the ADA.

The EEOC cautions that employers may not ask during the hiring process prior to making a job offer whether an applicant has an intellectual disability, takes medication, has been hospitalized, or is currently receiving psychiatric treatment. Nor may an employer ask a third party, such as a family member, social worker, or job coach, any questions it could not ask the applicant directly. Of course, it remains acceptable to ask whether a candidate can perform specific, job-related tasks.

In addition, if an employer learns that a job candidate has a child with an intellectual disability, the employer may not deny employment because of a belief that the child’s disability will cause the employee to be absent from work frequently. This would be an “association” form of disability discrimination prohibited under the ADA and FEHA.

After an offer of employment is made, the employer may ask questions about the applicant’s health or disability and may require a medical examination, as long as all applicants are treated the same in this regard. During employment, employers must keep medical information regarding the person’s intellectual disability confidential in the same manner that any other medical information is kept confidential to comply with the ADA.

The EEOC also notes that persons with intellectual disabilities may need reasonable accommodations of various types in order to apply for, interview for, or perform a job. Accommodations might include:

• altering the interview process to allow a candidate to demonstrate skills he/she may not be able to describe verbally;
  
• reading or interpreting application materials for a person with limited ability to read or understand complex information as a result of an intellectual disability;
  
• exchanging non-essential job functions between employees;
  
• providing additional time and/or guidance for skills to be learned during job training;
  
• allowing the employee to use a job coach who: provides monitoring, training and support to the employee, encourages appropriate social interaction, and assists the employer and employee in determining an appropriate reasonable accommodation;
  
• modifying work station placement to maximize the employee’s ability to concentrate;
  
• provide help in understanding job evaluations by allowing the employee to bring another person along to a job evaluation or disciplinary meeting to assist with understanding the result of or the purpose of the meeting.

As with other disabilities under the ADA, an employer is required to initiate a discussion about the need for an accommodation if the employer: (1) knows that the employee has an intellectual disability, (2) knows, or has reason to know, that the employee is experiencing workplace problems because of that disability, or (3) knows, or has reason to know, that the disability prevents the employee from requesting a reasonable accommodation.

The EEOC notes that people often misperceive that employees with intellectual disabilities are more susceptible to workplace accidents and pose an increased safety risk. However, employers may not refuse to hire a disabled person unless the person in fact poses a direct threat to his/her own health or safety or that of others in the workplace. An employer’s assessment of “direct threat” must be based on objective evidence and not fears, myths, or stereotypes. An evaluation of objective evidence could include an examination of: (1) the duration of the risk, (2) the nature and severity of the potential harm, (3) the likelihood that it will occur, (4) the imminence of the potential harm, and (5) whether a reasonable accommodation will reduce the risk of harm. Mere speculation is insufficient.

The EEOC confirms that employers may discipline persons with intellectual disabilities for misconduct as they would other workers. However, conduct rules must be job-related and consistent with business necessity, and must be uniformly enforced.

A large percentage of ADA discrimination claims brought by persons with intellectual disabilities allege harassment based on disability. Acts of harassment may take the form of verbal abuse, graphic and written statements, or physically threatening or humiliating conduct that are sufficiently severe or pervasive as to be subjectively hostile to the recipient and to a reasonable person.

In sum, accommodating intellectually disabled individuals poses some fairly unique issues for employers, particularly with respect to the interactive process. The EEOC’s Q&A offers useful general guidance concerning these and related issues, but each situation should be assessed on an individualized and fact-specific basis. Additionally, employers should:

• review job descriptions -- to ensure they list all of the essential functions, including intellectual abilities, as appropriate;
• review the company’s accommodation protocols and policies -- to ensure they comply with applicable law and incorporate best practices;
• review anti-harassment and discrimination policies -- to ensure they include mental and physical disabilities as protected characteristics; and
• provide appropriate training regarding these and related issues.

Text of the full, 20-page guidance, including examples of conduct the EEOC would determine to be discriminatory, can be found on the EEOC’s website.

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II. JUDICIAL UPDATE

Amendment to FEHA Imposing Personal Liability Does Not Apply Retroactively

In McClung v. Employment Development Department, the California Supreme Court held that the Legislature’s amendment of the California Fair Employment and Housing Act (“FEHA”), which imposed personal liability on individual employees for workplace harassment, does not apply retroactively.

Lesli Ann McClung (“the Employee”) filed a claim of hostile work environment harassment against the Employment Development Department (“the Employer”) and Manuel Lopez (“the Coworker”). The trial court granted summary judgment for both the Employer and the Coworker, but the court of appeal reversed as to the Coworker. In doing so, it held that the Coworker was indeed a coworker, not a supervisor, and applied an amendment to FEHA that imposes personal liability on coworkers even though the amendment postdated the allegations in the lawsuit.

The California Supreme Court reversed. The Court noted that in Carrisales v. Department of Corrections (1999) 21 Cal.4th 1132, it interpreted FEHA as imposing “on the employer the duty to take all reasonable steps to prevent . . . harassment,” but determined that FEHA did not impose “personal liability for harassment on nonsupervisory coworkers.” Subsequently, the California Legislature amended FEHA, Government Code section 12940(j), to provide that coworkers could be personally liable. The amendment also stated that it is “declaratory of existing law.”

In McClung, the California Supreme Court held that the amendment effected a change in the law, rather than merely clarifying it, by overruling a decision of the Court. The Court stated that the Carrisales decision finally and definitively interpreted FEHA as not imposing personal liability on nonsupervisory coworkers and that the Legislature, therefore, had no power to decide that the later amendment merely “declared existing law.” The Court held that the amendment does not apply retroactively to alleged harassment in the workplace occurring before the amendment.

Waiting Time Penalties under the Labor Code

In Smith v. Superior Court (2004) 123 Cal.App.4th 128, Amanda Smith (“the Employee”) was hired by L’Oreal (“the Employer”) to work one day as a hair model in a show presented by the Employer. For this work, the Employee was to be paid $500. The Employee completed her one-day assignment, but was not paid until nearly two months later. On behalf of herself and other similarly situated hair models, the Employee filed a class action lawsuit alleging several causes of action, including violation of Labor Code sections 201 and 203. These sections require the immediate payment of wages to an employee upon the employee’s “discharge,” and impose “waiting time” penalties for the failure to timely pay.

The trial court granted summary judgment in favor of the Employer, concluding that the Employee was not “discharged” from her employment, as required to trigger the provisions of the Labor Code authorizing a “waiting time” penalty. The Employee then sought review from a California court of appeal. The court of appeal, however, agreed with the trial court, explaining that the statutory language of Labor Code sections 201 and 203 demonstrates that “discharge” requires an affirmative action of an employer that will be generally involuntary on the part of the employee. There is no “discharge” where an employee resigns, quits, or completes the scope of the task that he or she is hired to perform. Thus, because the Employee was not “discharged,” she was not entitled to any “waiting time” penalties under the Labor Code.

Of course, it is important to note that this decision will not allow an employer to wait an unreasonable amount of time to pay an employee who resigns, quits, or completes the scope of the task that he or she was hired to perform. An employee may still seek redress from a court for such conduct. Smith merely limits the circumstances under which employees may recover “waiting time” penalties.

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.