Articles Posted in Employment Issues

California employment law prohibits discrimination against employees and job applicants on the basis of sex or gender. In the Northern California tech industry, gender discrimination has been a subject of numerous recent allegations and complaints. Last fall, a group of women employed by Google filed a class action alleging disparities in wages based on sex. Ellis, et al. v. Google, Inc., No. CGC-17-561299, complaint (Cal. Super. Ct., San Francisco Cty., Sep. 14, 2017). The company is also facing another discrimination lawsuit with a different, but related, angle. This lawsuit, filed in January 2018 by a male former employee, alleges discrimination on the basis of sex and political viewpoint. Damore, et al. v. Google, LLC, No. 18CV321529, complaint (Cal. Super. Ct., Santa Clara Cty., Jan. 8, 2018). California is one of the few states with an employment discrimination statute that addresses employees’ “political activities or affiliations.” Cal. Lab. Code § 1101 et seq. The plaintiff alleges that he experienced California employment discrimination as a male employee with politically conservative views.

The California Fair Employment and Housing Act (FEHA) generally prohibits discrimination on the basis of sex, gender, and other factors. Cal. Gov’t Code § 12940(a). The California Equal Pay Act (EPA) more specifically prohibits disparities in pay based on gender when the work, working conditions, and qualifications are “substantially similar.” Cal. Lab. Code § 1197.5(a). The statute makes exceptions when a pay disparity is based on certain “bona fide factor[s] other than sex,” including merit- or seniority-based systems and systems that base pay on “quantity or quality of production.” Id.

The statute dealing with employees’ political views prohibits employers from “[c]ontrolling or directing…the political activities or affiliations of employees,” id. at § 1101(b); and from using the “threat of discharge or loss of employment” to compel an employee to follow, or not follow, “any particular course or line of political action or political activity,” id. at § 1102. The California Supreme Court ruled that this statute allows private civil actions for alleged violations in Lockheed Aircraft Corp. v. Superior Court, 28 Cal.2d 481 (1946). The court later affirmed a claim of political viewpoint discrimination based on employees’ advocacy for “the struggle of the homosexual community for equal rights,” when claims of sexual orientation discrimination were not tenable under state law. Gay Law Students Assn. v. Pacific Tel. & Tel. Co., 24 Cal.3d 458, 488 (1979).

California sexual harassment has gained unprecedented attention in recent months, starting in Hollywood and expanding to include nearly every type of employer in the country. Sexual harassment is considered a form of sex discrimination under both federal and state laws. It can take two main forms. Quid pro quo sexual harassment occurs when a supervisor or manager makes sexual conduct of some sort a condition of employment, such as when an employee will receive better shift assignments if they date the boss. A hostile work environment occurs when the sexually inappropriate conduct of one or more other people in the workplace interferes with the ability to do one’s job. Federal and state laws require proof that the allegedly offensive conduct was “pervasive or severe.” See Cal. Civ. Code § 51.9(a)(2). A California state senator held a hearing in January 2018 to consider whether this standard is too stringent, looking at New York City’s employment statute for possible revisions to state law that could affect many California employers.

The U.S. Supreme Court has defined the “severe or pervasive” standard for hostile work environment claims under federal law as requiring evidence of “an environment that a reasonable person would find hostile or abusive.” Harris v. Forklift Systems, Inc., 510 U.S. 17, 21 (1993). California courts apply the same standard for hostile work environment claims under the California Fair Employment and Housing Act (FEHA). See, e.g., Hughes v. Pair, 46 Cal.4th 1035, 1048 (2009). Determining whether the alleged offensive conduct was “severe or pervasive” has both a subjective and an objective component. It requires consideration of “a constellation of surrounding circumstances, expectations, and relationships,” rather than “a simple recitation of the words used or the physical acts performed.” Lyle v. Warner Bros. Television Prod., 42 Cal.Rptr.3d 2, 16 (2006).

A dissenting appellate court justice in the Hughes case cited above criticized the “severe or pervasive” standard, noting that the statute that uses that language, the Unruh Civil Rights Act (UCRA), “is not an employment discrimination statute,” and nothing indicates that the state legislature intended to mix this statute and the FEHA. Hughes v. Pair, 65 Cal. Rptr. 3d 619, 632 (Cal. App., 2d Dist. 2007) (Armstrong, Acting P.J., dissenting). The justice advocated for an “interpret[ation] based on the plain and ordinary meaning of the words” in the statute. Id. at 633. Other critics of the “severe or pervasive” standard point to the reportedly high percentage of sexual harassment complaints dismissed by the courts, arguing that the standard imposes too high a burden on complainants.

Federal law protects the right of workers to organize for the purpose of collective bargaining with their employers, more commonly known as unionizing. The National Labor Relations Act (NLRA) outlines these rights and prohibits employers from interfering with employees engaging in protected activities. The National Labor Relations Board (NLRB) investigates alleged violations of workers’ rights and, in some cases, pursues legal claims on behalf of aggrieved workers. Throughout 2017, employees of Tesla, a Northern California technology company that designs, manufactures, and sells electric cars, have been involved in efforts to form a union. Multiple workers filed complaints with the NLRB. In August, the NLRB consolidated five of these California employment cases into a single complaint, which alleges various acts of coercion and restraint against employees involved in union organizing. Tesla, Inc. and Sanchez, et al., Nos. 32-CA-197020, 197058, 197091, 197197, 200530, cons. complaint (NLRB Reg. 32, Aug, 31, 2017).

The NLRA provides broad protections for employees’ “right to self-organization,” which includes “form[ing], join[ing], or assist[ing] labor organizations.” 29 U.S.C. § 157. It also protects employees’ “right to refrain from any or all of such activities” if they choose. Id. The statute prohibits “unfair labor practices,” including any “interfere[nce] with, restrain[t], or coerc[ion of] employees” in relation to their rights. Id. at § 158(a)(1). Unions are subject to similar prohibitions against coercing or restraining employees, such as in situations regarding their right not to participate in protected activities.

A recurring dispute with regard to unions involves the question of whether employees who do not wish to join a union may still be required to pay fees to unions that represent them. Some states allow employees to opt out of union membership through “right to work” laws. California is not a “right to work” state. Opponents of right to work laws note that collective bargaining agreements usually apply to all employees, regardless of whether they are dues-paying members of the union. Supporters tend to argue that employees should have the choice of whether to join and pay fees to a union.

Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) in 2010. The statute amended existing statutes like the Securities Exchange Act of 1934, and it referenced other major financial reform laws like the Sarbanes-Oxley Act of 2002. Dodd-Frank requires businesses to make a wide variety of disclosures about their financial activities, and it offers incentives to company insiders, or “whistleblowers,” to report violations. It penalizes employers that retaliate against whistleblowers. The Ninth Circuit Court of Appeals recently ruled in favor of a whistleblower in a retaliation claim that is relevant to future California employment cases. Somers v. Digital Realty Trust, Inc., 850 F.3d 1045 (9th Cir. 2017). The case depended on Dodd-Frank’s ambiguous use of the word “whistleblower.” The ruling conflicts with at least one other appellate court’s interpretation of the statute. As a result, the U.S. Supreme Court has agreed to hear the case in November 2017.

Dodd-Frank’s language regarding whistleblower retaliation is ambiguous. It prohibits employers from retaliating against whistleblowers who make reports to the Securities and Exchange Commission (SEC) as required by Dodd-Frank or other statutes, including but not limited to Sarbanes-Oxley. 15 U.S.C. § 78u-6(h)(1)(A). This would seem to include reports to other agencies besides the SEC, as well as internal reports to company management. The ambiguity is due to the word “whistleblower,” which is defined in an earlier subsection specifically as anyone “who provide[s] information relating to a violation of the securities laws to the [SEC].” Id. at § 78u-6(a)(6). The statute does not make it clear whether the anti-retaliation provision refers to the statute’s narrow definition of a whistleblower or uses a broader plain-language meaning.

The SEC’s regulation implementing the anti-retaliation provision, first promulgated in 2011, appears similarly ambiguous by repeating much of the language of the statute. 17 C.F.R. § 240.12F-2. The agency clarified, however, that it did not interpret “whistleblower” broadly to “include[] individuals who report to persons or governmental authorities other than the [SEC].” 76 Fed. Reg. 34299, 34304 (Jun. 13, 2011); see also 80 Fed. Reg. 47829 (Aug. 10, 2015). In court disputes over the ambiguity in the statute, how the court will rule depends on whether it follows the Chevron doctrine, which holds that courts should give deference to agency interpretations of statutes. See Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984).

The California Labor Code states that employers must provide at least one day off per week, but the “day-of-rest statute” does not provide an unambiguous statement of employees’ rights and employers’ obligations. A federal lawsuit alleging violations of this statute raised multiple questions of interpretation. In 2015, the Ninth Circuit Court of Appeals sent three certified questions to the California Supreme Court, seeking to clarify several provisions. Mendoza v. Nordstrom, Inc. (“Mendoza I”), 778 F.3d 834 (9th Cir. 2015). The California Supreme Court ruled on the questions earlier this year, hopefully providing more clarity for both employers and employees. Mendoza v. Nordstrom, Inc. (“Mendoza II”), No. S224611, slip op. (Cal., May 8, 2017).

The day-of-rest statute, unlike many laws, is not wordy. The fact that a statute does not stretch on for many pages, however, does not imply that it is easy to understand or interpret. This statute provides that anyone “employed in any occupation of labor” has the right “to one day’s rest…in seven.” Cal. Lab. Code § 551. It further states that an “employer of labor” cannot “cause his employees to work more than six days in seven.” Id. at § 552. These provisions do not apply, however, when an employee works no more than 30 hours in a week, or no more than six hours in a day. Id. at § 556. The three sentences that comprise these three code sections raise multiple questions of interpretation.

The plaintiffs in the underlying lawsuit allege that the defendant scheduled them to work for more than six consecutive days, in periods of seven to 11 consecutive days. They claimed that this violated California’s day-of-rest statute. They appealed to the Ninth Circuit after the district court dismissed their claims.

Businesses that employ multiple people may be subject to employment statutes at multiple levels of jurisdiction, from city ordinances to state and federal statutes. Employers may not discriminate against employees or job applicants on the basis of multiple factors. In many jurisdictions around the country, this includes limitations on how employers may inquire about and consider criminal history during the hiring process. While employers may be reticent about hiring someone with a criminal record, California law seeks to ensure that past mistakes do not unreasonably burden people who need a job. California businesses and business owners should be aware of recent amendments to the state regulation that addresses access to and use of criminal history during the hiring process.

Laws that restrict employer inquiries about criminal history are sometimes known as “Ban the Box” (BTB) laws. They generally prohibit employers from asking about criminal history at the beginning of the job application process. Some application forms include a box that applicants must check “yes” or “no,” indicating whether they have ever been arrested or convicted of a crime. BTB laws often prohibit employers from asking about or considering criminal history—the aforementioned “box”—until an applicant has cleared the first hurdles of the process.

Some employers may see any criminal history as cause for automatic rejection of that applicant, and there are a number of valid business reasons for this view. For job applicants, however, this sort of practice makes it more difficult—and sometimes nearly impossible—for someone to find a job. This can have negative effects on society as a whole, since people with criminal records might be more likely to return to crime if no one will offer them a job. BTB laws try to ensure that criminal history only affects job applicants when the past crime directly relates to the job.

California imposes numerous responsibilities on businesses, particularly in their capacity as employers. These include requirements regarding the payment of wages and the maintenance of employment records. Employers are also prohibited from various types of discrimination under state and federal laws, including discrimination on the basis of race. A putative class action pending in a California federal court alleges race discrimination and various wage and hour violations against a designer clothing retailer. Sampino v. Versace USA, Inc., No. 3:16-cv-07198, am. complaint (N.D. Cal., Apr. 19, 2017).

In addition to general requirements that employers pay their workers for the full amount of compensation that they have earned, California sets numerous additional standards. For example, employers must maintain records of their employees, including payroll records showing the number of hours worked and the wages paid. Cal. Lab. Code § 1174. They must also provide itemized statements to their employees with each paycheck. Id. at § 226. A failure to meet these requirements may result in civil fines and liability to aggrieved employees.

California law prohibits employers from discriminating against employees and job applicants on the basis of race and multiple other factors. Cal. Gov’t Code § 12940(a). It further prohibits an employer, or anyone acting on an employer’s behalf, from “aid[ing], abet[ting], incit[ing], compel[ling], or coerc[ing]” any unlawful acts of discrimination. Id. at § 12940(i). Retaliating against an employee for complaining about prohibited conduct, either internally or to state regulators, also violates state law. Id. at § 12940(h).

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The U.S. financial system depends on competition in order to maintain efficiency and fairness. Federal and state antitrust laws prohibit a wide range of anti-competitive activities in order to protect the public against monopolistic behaviors. This applies not only to commercial activities like buying and selling goods and services but also features of employment like hiring and salary decisions. When a group of employers makes anticompetitive agreements that harm workers, those workers may have recourse in court. A putative class action in California alleges that two companies entered into an unlawful “anti-poaching” agreement, by which each company agreed not to hire employees of the other company. Frost et al. v. LG Corporation et al., No. 5:16-cv-05206, consol. class action complaint (N.D. Cal., Nov. 8, 2016).

The main federal antitrust law in the U.S. is the Sherman Act of 1890, 15 U.S.C. § 1 et seq. It prohibits various anticompetitive activities, and it empowers the federal government to investigate businesses that have amassed significant market power, sometimes known as “trusts.” California’s Cartwright Act, Cal. Bus. & Prof. Code § 16720 et seq., contains similar provisions. A business does not violate antitrust law solely by attaining a monopoly in a particular market. A company that attains a monopoly by suppressing competition from others does violate antitrust law, however, as does a company that legitimately attains a monopoly and then suppresses competition in order to keep it.

Examples of anticompetitive activities prohibited by the Sherman and Cartwright Acts include price-fixing or boycott agreements between businesses that are otherwise competitors, as well as contractual terms that require customers or vendors to do business exclusively with a particular company. In the context of employment, employers may violate antitrust laws by making agreements to keep wages below a certain level for their employees, as well as anti-poaching agreements that keep employees from changing jobs within their field.

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Laws at the federal and state levels regulate multiple aspects of the employer/employee relationship. Federal law sets certain minimum standards for many employers nationwide, such as a minimum wage of $7.25 per hour and a prohibition on specific types of discrimination. State laws may add to these minimum requirements, but they cannot reduce the standards set by the U.S. Congress. California has augmented the protections afforded to employees in many ways, including a state law prohibiting wage disparities based on gender. Several bills recently enacted by the California Legislature have further added to these provisions. Employers in the Bay Area and throughout California should understand how these amendments might affect them.

Prior to the 2015 session of the California Legislature, the California Labor Code prohibited employers from paying workers of different genders at different rates for “equal work” performed “in the same establishment.” The law defined “equal work” as work that “requires equal skill, effort, and responsibility” and is “performed under similar working conditions.” Cal. Lab. Code § 1197.5(a) (2014). Pay disparities were permissible if they were based on systems of seniority, merit, “quantity or quality of production,” or another “bona fide factor other than sex.” Id. Penalties for violations of these provisions included the amount of underpaid wages, along with “an additional equal amount as liquidated damages.” Id. at § 1197.5(b).

The California Legislature passed SB 358 in 2015, and it took effect on January 1, 2016. The bill amended § 1197.5 to expand the prohibition on wage disparities based on gender. Whereas an employee previously had to show a disparity in pay among workers “in the same establishment,” SB 358 allowed comparisons among all employees performing “substantially similar work.” Cal. Lab. Code § 1197.5(a) (2015). The assessment of whether the work is substantially similar is based on “a composite of skill, effort, and responsibility…under similar working conditions.” The same exceptions, such as a seniority- or merit-based system, still apply, except that the statute now addresses “bona fide factor[s] other than sex” in far greater detail. Id. at § 1197.5(a)(1)(D).

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