The Letter of the Law: January 2015


EMPLOYMENT LAW: Year in Review – 2014 Key Employment Legislative Laws

EMPLOYMENT LAW: Blurred Lines: Maintaining Separateness Between Companies

INSURANCE LAW: Excluded Drivers in Nevada

Year in Review – 2014 Key Employment Legislative Laws

Employment related legislation was big in 2014. The Legislature once again passed a number of pro-employee bills that are worth reading about. While this list is not exhaustive, it provides an overview of the key legislation employers should be aware of. In case you are tempted to skip this article, remember that the State of California expects employers to know and understand all laws that are passed that may affect your employees. So keep reading!

Bills Related to Discrimination

AB 1660 – Drivers’ Licenses & Non-Discrimination – The DMV is now required, per AB 60, to issue a driver’s license to individuals that are unable to submit satisfactory proof of the individual’s right to be present in the United States, assuming of course that the individual meets other qualifications for licensure and provides proof of his or her identity and California residency. Licenses issued under AB 60 will say on the license, “Federal Limits Apply.”

AB 1660, makes it a violation of the Fair Employment & Housing Act (“FEHA”) for an employer to discriminate against an individual because he or she presents a driver’s license that indicates “Federal Limits Apply.” Discrimination on the basis of national origin now includes, but is not limited to, discrimination on the basis of processing a driver’s license granted under these provisions. Employers must continue to comply with the federal Immigration & Nationality Act by only accepting documents that meet with the requirements set forth on Form I-9.

AB 1443 – No Discrimination of Unpaid Interns – Per the FEHA, individuals seeking and obtaining employment should be free from discrimination or harassment based on age, race, religious creed, color, ancestry, national origin, disabilities, medical and genetic conditions, marital status, sex, gender, including gender identity and expression, sexual orientations and military status.

This law expands the applicability of the FEHA to unpaid internships. Unpaid interns will now be subject to the protections against discrimination or harassment, including during the hiring process, termination and course of employment.

AB 2053 – Education & Training Regarding Abuse Conduct – Hopefully employers with more than 50 employees are well aware of the law requiring them to conduct sexual harassment training for its supervisors. Effective January 1, 2015, employers will have to include anti-bullying training within the 2-hour training curriculum. The new law defines “abusive conduct” as:

. . . conduct of an employer or employee in the workplace, with malice, that a reasonable person would find hostile, offensive, and unrelated to an employer’s legitimate business interests. [It] may include repeated infliction of verbal abuse, such as the use of derogatory remarks, insults, and epithets, verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating, or the gratuitous sabotage or undermining of a person’s work performance.

Kring & Chung can provide this mandatory training to your supervisors. Please contact us for more information about the specialized training session.

AB 2288 – Child Labor Protections Against Discrimination – AB 2288 strengthens current law to protect children from child labor abuses by providing additional remedies. Specifically, the statute of limitations for a child labor violation will be tolled until the child reaches the age of 18. AB 2288 specifies that this provision is declarative of existing law, meaning it applies retroactively. Also, AB 2288 allows treble damages, the recovery of three times the amount of actual financial losses suffered. Finally, this new bill will strengthen civil penalties in class “A” violations, the most serious violations and will increase the civil penalty from $5,000 – $10,000 to $25,000 – $50,000 for each labor practice violation involving minors less than 12 years of age.

AB 2617 – Waiver of Civil Rights – Under existing law, individuals are protected from any violence or threat of violence committed against them due to their political affiliation, position in a labor dispute, or any other protected category.

AB 2617 prohibits a person from requiring a waiver of these protection as a condition to enter into a contract for goods and services, including the right to file and pursue a civil action or complaint with any public prosecutor, the Department of Fair Employment & Housing (DFEH) or any other governmental agency. Any waiver of these protections must be made knowingly and voluntarily in writing, and expressly not made as a condition of entering into the contract or as a condition of providing or receiving goods or services.

This bill only applies to contracts entered into, altered, modified, renewed, or extended after January 1, 2015. This legislation does not apply to general discrimination claims under FEHA, but only to waivers under specified civil rights statutes, such as the Ralph Civil Rights Act or the Bane Civil Rights Act.

Leaves of Absence

Perhaps the hottest and most publicized employment related bill is AB 1522, commonly referred to as the Healthy Workplaces, Healthy Families Act of 2014. This act now requires employers to provide three paid sick leave days a year. California and Connecticut are the only two states in the nation that now make it a law to provide paid sick days. Kring & Chung advises that employers look at their current sick leave or PTO policies to make sure that they are in compliance with the new law.

AB 1522 – Paid Sick Days – Effective July 1, 2015, employers are now required to provide three (3) paid sick days (up to 24 hours) to all employees working in California. While the Act establishes minimum requirements, employers have the option to provide more time off than the minimum required three days. This Act applies to all employers, regardless of size. It also applies to all employees, regardless of whether they work part-time or full-time, exempt or non-exempt. Specifically it applies to employees that have worked in California for 30 or more days within a year from the commencement of employment. That means that temporary or seasonal employees may be covered if they spend enough time working in California. Under the Act, an employee can use paid sick leave for the diagnosis, care, or treatment of an existing health condition, or preventive care, for themselves or a defined family member. Remember, that if an employee asks to use sick leave, employers cannot ask the specific reason why. To do so may lead to exposure for discrimination.

Employers can choose three options in calculating and satisfying the requirement to provide employees with paid sick leave: 1) Statutory Mandated Accrual Method; 2) Lump-Sum Approach; or 3) the Employer Policy Meeting the Minimum Requirements. The latter two methods are the easiest to incorporate. The following is a very brief summary of the three methods. Please seek legal counsel for more detailed information about the three methods.

1) Statutory Mandated Accrual Method: Under this method, an employee earns one hour of sick pay for every thirty (30) hours worked. Eligible employees will begin to accrue on July 1, 2015. Both regular and overtime hours are counted toward accrual. Policies that don’t permit accrual of paid sick leave during the introductory period are not allowed. Any accrued but unused time must carry over to the following year of employment. However, an employer can cap the employee’s total accrued amount at 48 hours or six days. Important to note, an employer does not need to pay out accrued but unused sick leave when an employee leaves employment, unless the employer wraps the paid sick leave days into a paid-time off (PTO) program.

2) Lump Sum Method: With this method, the employer grants the full amount of leave, three days or 24 hours at the beginning of each year. This method takes out the painstaking time and attention that the accrual method requires. If using a lump-sum method, carry over is not allowed. There is no requirement to pay out any unused leave at the end of the employment.

3) Employer Paid Leave and PTO Plans Meeting Minimum Requirements: This method applies to employers that already have a paid sick leave, PTO or other leave policy, that covers the requirement of at least three paid leave days. If an employer already provides for at least three paid leave days, employers do not have to provide for any additional time in order to comply with the new law.

Wage & Hour Laws

AB 1723 – Waiting Time Penalties Available to Citation by Labor Commissioner – Currently, the Labor Commissioner lacks the statutory authority to recover “waiting time” penalties as part of a citation for a minimum wage violation. Waiting time penalties occur when an employer willfully fails to pay any wages of an employee who is discharged or who quits. The wages of the employee continue as a penalty for up to 30 days.

AB 1723 provides that, in a citation by the Labor Commissioner for failure to pay minimum wage, an employer who fails to pay the minimum wage shall be subject to any applicable “waiting time” penalties under existing law in addition to existing civil penalties, restitution of wages, and liquidated damages.

AB 2074 – Three-Year Statute of Limitations on Liquidated Damages Claim – Existing law authorizes employees to bring a civil lawsuit seeking liquidated damages for failing to pay minimum wage. Liquidated damages are “an amount equal to the wages unlawfully unpaid and interest.” However, an issue arose in deciding how back the employees’ claims stretch. A claim for unpaid wages has a three-year statute of limitations while a claim for penalties is subject to a one-year statute of limitations.

AB 2074 provides that a claim for liquidated damages arising out of an employer’s failure to pay minimum wages is subject to a three-year statute of limitations.

SB 266- Prevailing Wage Determination – Existing law seeks to streamline the determination process for public works projects to ensure that workers receive the legally mandated prevailing wage.

SB 266 clarifies the procedure by outlining the steps for furnishing the proper documentation to the Labor Commissioner (LC). Current law states that a notice of completion must be provided to the LC in a manner determined by the LC. SB 266 clarifies the notice of completion process, including a ten-day deadline for furnishing the documents requested by the LC.

SB 1360 – Rest or Recovery Periods Are Compensable Time – Existing law prohibits an employer from requiring employees to work during a meal, rest or recovery period. Failure to provide an employee with a meal, rest or recovery period entitles the employee to one additional hour of pay at his/her regular rate of compensation for each workday that the meal, rest or recovery period is not provided. There was some ambiguity as to whether or not these periods are counted as hours worked, and thus required to be compensated.

SB 1360 clarifies that a legally mandated rest or recovery period is counted as hours worked and thus employees shall be required to be compensated. This bill requires employers to pay for rest or recovery periods. It defines a recovery period as a cool down period afforded to an employee by law to prevent heat illness. SB 1360 states that it is “declaratory of existing law” which means it is effective immediately and applies retroactively. For those employers that pay their employees on a piece-rate basis only, employers must be careful to ensure that they are paying employees for rest breaks. Some employers only pay employees for productive time and not for non-productive time. If an employee takes a rest break during unpaid non-productive time, that practice would be against the law. It is advisable to speak with an attorney about piece rate and rest breaks if you have any questions about the new laws.

Blurred Lines: Maintaining Separateness Between Companies

By: Laura C. Hess

An issue that sometimes arises in the employment cases we handle concerns whether an employer/employee relationship really exists between the parties. The reason this comes up is because the employee sues not only the employer, but also all of the companies who are affiliated with the employer, such as parent companies, franchisors, or other businesses owned by the same family. The employer wants to carve these affiliated entities out of the case and shield them from the lawsuit.

Unless the companies are the alter egos of one another, the employee can only sue the affiliated entity if he or she can establish an employer/employee relationship with it. The question of whether an employer/employee relationship exists comes down to how much control that company exerts over the employee.

A recent case highlights the importance of this determination. In Patterson v. Domino’s Pizza, LLC (2014) 60 Cal.4th 474, a Domino’s Pizza employee sued for sexual harassment. She sued both the franchisee and the franchisor, under the theory that the harassing supervisor acted as the agent of the franchisor.

The case made its way all the up to the California Supreme Court. The issue was whether the franchisor can be held liable as a matter of law for the actions of its franchisee’s supervisor. The Supreme Court focused its inquiry on the amount of control that the franchisor exerts over the day-to-day aspects of the employment and workplace behavior of the franchisee’s employees. In determining the franchisor was not liable, the Court noted the franchisor did not hire, supervise, or set the sexual harassment policies for the franchisee’s employees. If the franchisor did so, or retained the ability to do so, then the result would likely have been different.

The employer/employee lines blur in situations where a parent company is set up as a separate entity on paper, but it still exerts some control over a subsidiary’s policies and procedures (for instance, where the parent company provides the subsidiaries with a common employee handbook.) Another scenario we see is where a family owns multiple businesses, but the employees of one sometimes perform duties for the other. Examples of this are a centralized human resources department or a shared in-house attorney.

We can provide you with advice and counsel if you have concerns about whether you are truly maintaining separateness between companies. Please contact us if you have any questions.

Excluded Drivers in Nevada

By: Melissa Bright

In Nevada, although an individual is expressly excluded as a driver in an insurance policy, if the excluded individual drives the car with the owner’s permission, the insurance company must cover at least the statutorily required minimum coverage.

Pursuant to Nevada Revised Statute 485.3091, an insurance policy for motor vehicles must provide the statutory minimum coverage for both owner and any person who uses the vehicle. In Federated American Ins. Co. v. Granillo (1992) 108 Nev.560, the insured’s son was expressly excluded in the insurance policy. The owner chose to exclude his son so that he could obtain a cheaper premium. If his son was included, the premium would be double.

The Court determined that the insurance company was required to reimburse for the injuries caused by the insured’s son. Specifically, the Court cited to Nevada Revised Statute 485.3091(1) which states liability insurance must insure the named person and any individual using the vehicle with the “express or implied permission of the named insured.” The coverage must insure “against loss from the liability imposed by law for damages arising out of the ownership, maintenance or use of such motor vehicle.” The Court so reasoned due to Nevada having a “strong public policy interest in assuring that individuals who are injured in motor vehicle accidents have a source of indemnification.” Further, Nevada’s “financial responsibility law reflects Nevada’s interest in providing at least minimum levels of financial protection to accident victims.” The Court concluded that in Nevada, an insurance company is required to cover “all persons who drive an insured’s car with the insured’s permission regardless of whether the permissive driver has been explicitly excluded from coverage.”

However, a policy containing exclusions is valid if the policy covered an out of state resident, provided that the exclusion was valid in the applicable state where the policy was written. In Progressive Gulf Ins. Co. v. Faehnrich, (2014) 327 P.3d 1061 a mother and her minor children, new residents of Nevada, were in an accident injuring the minor children. The vehicle still carried Mississippi registration, license plates and the mother had a Mississippi driver’s license.

The insurance policy excluded coverage of bodily injury to any “person residing in the same household as [insured], and related through blood, marriage or adoption.” The Court reasoned that if the policy was delivered “in Nevada, to a Nevada resident owning a car principally garaged in Nevada, then-existing case law would have invalidated the household exclusion to the extent it eliminate[d] the statutorily mandated . . . minimum coverage.” Here, the exclusion was valid because Mississippi law had the strongest ties to the transaction and the policy was applied for, delivered and renewed in Mississippi by Mississippi residents. The Court concluded that Nevada’s public policy does not preclude giving effect to a choice-of-law provision in an insurance contract that was negotiated, executed, and delivered while the parties resided outside of Nevada.


Michelle Philo Elected as OCBA Young Lawyer’s Division Chair-Elect

Michelle Philo has been elected as the Orange County Bar Association Young Lawyer’s Division Chair-Elect. The Young Lawyer’s Division represents over 800 of Orange County’s young lawyers with up to 5 years’ experience in the profession. When Philo rises to the position of Chair in 2016, she will serve as the voice of the Young Lawyer’s Division to the Orange County Bar Association’s Board of Directors.

Ms. Philo is an attorney in our Irvine, CA office. Her practice includes general civil litigation; business transactions, including formations, maintenance, mergers, dissolutions; estate planning and probate. Philo’s litigation cases have included partnership disputes, contract disputes, employment disputes, and personal injury cases.