Historically, employees have only been able to receive partial wage replacement for absences related to their own injury or illness, whether work-related (workers' compensation) or not (state disability insurance ("SDI")). However, with the advent of SB 1661, signed into law September 23, 2002, employees will soon be eligible to receive -- under certain circumstances -- up to six weeks of partial wage replacement when absent from work for the injury or illness of a spouse, parent, domestic partner or child or for the purpose of bonding following a birth, an adoption or the placement of a foster child. While the new family temporary disability insurance program ("FTDI"), administered by the Employment Development Department (the "EDD"), does not require employers to contribute to the insurance fund, it likely will have a financial impact on employers statewide as employees take advantage of the new program, thereby increasing the number of leave requests each year. This expected rise in absenteeism will certainly hit hardest smaller employers who are unable to easily accommodate absent workers. This Commentary is meant to provide a basic overview of the new FTDI program for employers, including new notification obligations. [fn1]

What FTDI Doesn't Do

FTDI does not create any new or additional right to family care leave, nor does it create any additional rights related to the employee's return to work (e.g., guaranteed job restoration or protections from discrimination or retaliation for utilizing the leave). That means, where (a) the employer is not covered by the Family Medical Leave Act ("FMLA") or the California Family Rights Act ("CFRA"); or (b) the employer is covered but the employee does not meet the eligibility requirements under these acts (e.g., has not worked 1,250 hours in the preceding twelve months); or (c) the employer is covered and the employee is eligible but the reason for the leave is not protected under FMLA or CFRA, employers are encouraged but are not required to offer leave to employees wishing to take advantage of the FTDI program. For example, although the qualifying absences under FTDI (described below) substantially overlap those provided under FMLA and CFRA, neither FMLA nor CFRA allows employees to take protected leave time for the care of a domestic partner or child of a domestic partner. Thus, an employee wanting to take leave to care for a sick domestic partner can qualify for wage replacement under FTDI but not be entitled to any protected leave time under FMLA or CFRA. In such a case, whether the employee will be allowed to take leave (and, therefore, take advantage of the FTDI program) depends on the particular employer's personnel policies and practices.

Where the employee is entitled to FTDI benefits and leave under FMLA/CFRA, the employer can require that the FTDI benefits period runs concurrently with the FMLA/CFRA leave. If the employer chooses to exercise this option, it should amend its policies and procedures to include this requirement.

Covered Employees

All employees currently covered by SDI will be covered by FTDI. This includes most employees of private employers, regardless of size. Additionally, some public employees may also qualify for benefits if they contribute to the FTDI program or if they have collected earnings from a private employer during the base earnings period (defined below).

Employee Contributions

By October 31 each year, the director of the EDD is responsible for establishing and publishing the employee contribution percentage for the next calendar year. The employee contribution percentage is based on a statutory formula. The EDD has already set the contribution level for FTDI for 2004 and 2005 at .08% of the employee's taxable wage limit. The taxable wage limit for 2004 is $68,829, and for 2005 it's $79,418. Therefore, the most an employee will be obligated to contribute for 2004 is $55.06, and for 2005, $63.53. Payroll deductions will commence January 1, 2004.

Eligibility Requirements

There is no length-of-service requirement under FTDI [fn2]; however, the employee will have a one-week waiting period before benefits are payable. Thereafter, benefits are payable for any day (up to six weeks in any twelve-month period) in which an employee is unable to perform his or her regular customary work due to a qualified absence (defined below); however, employees are not eligible for benefits on any day for which the employee is receiving unemployment, workers compensation or SDI benefits or on any day that another family member is able and available to provide the required care for the same period of time. [fn3] Except as otherwise provided by a collective bargaining agreement, employers may require employees to first use two weeks of earned, unused vacation time before receiving FTDI benefits; the first week of which satisfies the one-week waiting period.

Qualifying Absences

Leave taken for the following events constitutes qualifying absences:

1. care related to the serious health condition (defined below) of the employee's child, including a biological, adopted, or foster child, a step child, a legal ward, a child of a domestic partner (defined below), or a child to whom the employee stands in loco parentis;
2. care related to the serious health condition of the employee's parent (biological, foster, adoptive, or step) or legal guardian or any other person who stood in loco parentis to the employee when the employee was a child;
3. care related to the serious health condition of a spouse or domestic partner; or
4. bonding related to a birth, an adoption or the placement of a foster child, including the child of a domestic partner, during the first year after the birth or placement of the child. [fn4]

SB 1661 defines "serious health condition" as any illness, injury, impairment or physical or mental condition that involves inpatient care in a hospital, hospice, or residential health care facility, or continuing treatment or continuing supervision by a health care provider. [fn5] A domestic partnership is established where, inter alia, two consenting adults live in an intimate and committed relationship of mutual caring, sharing a residence and basic living expenses, and have filed a Declaration of Domestic Partnership with the Secretary of State. [fn6]

Medical Certification

An employee wanting to take advantage of the FTDI program will be required to file a claim for benefits with the EDD [fn7] and, where the reason for leave is the serious health condition of a family member, domestic partner or child, a medical certification from a treating physician or practitioner. The medical certification must include: (a) the medical reason for the leave; (b) the date the condition commenced; (c) the likely duration of the condition; (d) the amount of time the employee will likely be needed to care for the family member, domestic partner or child; and (e) a statement that the serious health condition warrants the participation of the employee in the provision of care. As to this last element, "warrants the participation of the employee" includes, but is not limited to, providing psychological comfort and arranging third-party care, in addition to directly or indirectly participating in the medical care. [fn8] Where the leave is for child bonding, the employee will be required to submit an EDD claim form along with a completed EDD certification form attesting that the purpose of the leave is child bonding.

Benefits

Employees with qualifying absences beginning on or after July 1, 2004, will be eligible to receive up to 55% of their earnings -- up to a cap of $728 per week in 2004 and $840 per week in 2005 -- for up to six weeks during any twelve-month period. The benefits will be based on earnings shown in a base period of approximately five to seventeen months before the leave commences. For example, an employee taking leave in 2004 and earning at least $17,200 in a calendar quarter during the base earnings period will be eligible for the maximum weekly benefit of $728. The cap on weekly benefits for future years is expected to be adjusted. The employee must earn at least $300 in wages in the base period to qualify for the minimum available benefit, $50 per week.

Notice Requirements

Unlike FMLA and CFRA, which require up to 30 days' advance notice of requested leaves where practical, SB 1661 has no notice requirements. Accordingly, employers are advised to amend their policies and procedures to require advance notice where practical for employees utilizing FTDI.

False Claims

Filing false claims for FTDI benefits, e.g., falsifying medical certifications, constitutes a criminal offense and carries a penalty of 25% of the benefits received.

Employer Notification Rules

By January 1, 2004, the EDD will publish and distribute to employers informational brochures advising employees of the FTDI program and benefits as well as their rights associated with SDI for the employee's own nonwork-related injury or illness. [fn9] Employers will be required to provide the EDD notices to all employees hired on or after January 1, 2004, and to all employees taking qualifying leaves under FTDI or SDI on or after July 1, 2004. Additionally, employers will be required to provide employees taking qualifying leave for the purposes of child bonding with the EDD's child bonding certification form.

Employer Voluntary Plans

Those employers maintaining voluntary plans for disability insurance related to the employee's own illness or injury must include paid family leave in their plans.

What Employers Should Do To Prepare For FTDI

Employers should take several steps to prepare for the advent of the FTDI program. First, employers should review their personnel policies to determine when leave time is currently being provided -- particularly where it is not mandated by FMLA or CFRA. Because employees will now have the financial option of taking such leave without pay (and, thus, will be more likely to take advantage of it), employers may want to revise their nonmandated leave policies, e.g., to require that FTDI leave run concurrently with any protected leave under FMLA or CFRA or to limit the availability of such leaves. [fn10] Second, employers should take steps to ensure that the employee contributions will be properly deducted as of January 1, 2004. Third, employers should consult the EDD's website (http://www.edd.ca.gov) for the publication of the required informational brochure and claim forms, as well as for the final regulations once they have been adopted. Finally, the employer's human resource professionals should become familiar with the FTDI program and its requirements so as to provide correct responses to employees' inevitable questions regarding when the program applies and how they can participate.

Kathryn Davis is an associate in our San Francisco office and can be reached at (415) 268-6451.

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Age Discrimination: A Tale of Two Cases

By Kathryn Davis

Two recent decisions by the California Second District Court of Appeals offer two tales for employers with respect to age discrimination claims: one liberating, one cautionary.

In the first case, Gibbs v. Consolidated Services, the Second District Court of Appeals held that where "an employer modifies its workforce for business reasons, it has no obligation to transfer an employee to another position within the company." Gibbs v. Consolidated Services, 4 Cal. Rptr. 3d 187, 191 (Aug. 27, 2003) (http://caselaw.lp.findlaw.com/data2/californiastatecases/b160988.pdf (last visited September 24, 2003)). In Gibbs, Consolidated Disposal Services acquired an existing company, Atlas Transport, where the 57-year-old plaintiff, Gibbs, worked as an operations manager. Id. at 188. Knowing that Consolidated intended to integrate existing Atlas positions, including his operations manager position, into Consolidated's own organizational structure, Gibbs requested a demotion to his prior position as a driver both before and immediately after the merger of the two companies. Id. at 188-89. Shortly after Gibbs's second request to be transferred/demoted was refused, Consolidated restructured Gibbs's position to match its preexisting operations manager positions, which included job duties Gibbs could not perform. Id. at 189. Consolidated, thereafter, determined that Gibbs was not qualified for the restructured position and terminated his employment. Id. At the time of his termination, Gibbs again requested the transfer but was told there were no driver positions then available, although it was later discovered during litigation that there was one driver position open at the time. Id. Gibbs sued for age discrimination, arguing that Consolidated's failure to grant him the requested transfer was on account of his age. In support of his claim, Gibbs alleged that when he requested the transfer to driver following the merger, the supervisor who subsequently terminated him responded, "Maybe you're getting too old." Id.

The court rejected Gibbs's claim, holding that as a matter of law employers modifying their workforce for legitimate business reasons have no obligation to transfer existing employees to other positions in the company. [fn11] Id. at 191. In addition, where an employer voluntarily assumes such an obligation, e.g., by offering to transfer employees impacted by workforce changes, the employer's decision not to offer a transfer to a particular individual raises an inference of discrimination only where it can be shown that others in nonprotected classes were treated more favorably. Id. Looking to the facts, the court found no evidence that either the decision to restructure the operations manager position or the determination that Gibbs was not qualified for it stemmed from anything other than a legitimate business purpose, i.e., the merging of the two businesses' operational structures. Id. As to the supervisor's remark ("Maybe you're getting too old"), the court determined that the remark was nothing more than a stray comment, as the supervisor's opinion that Gibbs was too old to drive played no role in the decision that Gibbs was not qualified for the restructured position. Id.

This decision is good news for employers restructuring organizations to meet legitimate business objectives. Such employers need no longer fear discrimination claims for failing to relocate employees in protected categories, such as age, where their positions would otherwise be eliminated or terminated for legitimate reasons, even where other positions are open and available. [fn12]

The second case, Herr v. Nestle, offers less favorable news. Herr v. Nestle, 109 Cal. App. 4th 779 (June 12, 2003) (http://caselaw.lp.findlaw.com/data2/californiastatecases/b143831.pdf (last visited September 24, 2003)). There, the Second District Court of Appeals upheld a trial court's decision on a single plaintiff's unfair competition claim, under Business and Professions Code Sections 17200 et seq. (the "Unfair Competition Law" or "UCL"), enjoining the employer from discriminating on the basis of age in promotions and ordering the employer to disseminate to all employees a repudiation of certain statements indicating an age-related bias. Id. at 781-82. In challenging the injunctive relief, the employer argued that there was no evidence of a continuous pattern of age discrimination warranting employer-wide relief and that the Unfair Competition Law is intended to protect consumers and competitors, not employees, and thus is inapplicable to plaintiff's age claims. Id. at 789.

As to the first contention, the court rejected the employer's argument, finding substantial evidence supporting the jury's determination that the employer discriminated against the individual plaintiff and that the employer had a practice favoring younger workers in promotions to management. Id. For example, evidence adduced at trial included (a) comments by managers regarding the average age of employees (43) and the employer's policy to promote young, energetic people into management positions; (b) the employer's direction that the company "[c]ontinue hiring, identifying and developing younger workers to have in the long-term enough resources of future management"; and (c) the conspicuous omission of age as a protected category in the employer's EEO statement. Id. at 782-83.

As to the second contention, the court rejected the employer's assertion that the UCL was not intended to be used to benefit employees in employment-related suits. The court noted that Section 17205 expressly provides that the UCL's remedies were intended to be cumulative with other available remedies or penalties, such as those available under the Fair Employment and Housing Act ("FEHA"), and that a UCL action for injunctive relief can be maintained by any "person acting for the interests of itself, its members or the general public" even if the person bringing the action has not been personally harmed or aggrieved. Id. at 789, citing Section 17204 and Perdue v. Crocker National Bank, 38 Cal. 3d 913, 929 (1985). As for the employer's argument that age discrimination was an "intra-company" issue not affecting competitors or consumers and thus could not form the basis of a UCL action, the court upheld the trial court's conclusion that an actual injury to competition was not required, merely a showing that the entity had engaged in an "unlawful" business act or practice. Id. at 790. Further, the court agreed with the trial court's analysis that discriminating employers, nonetheless, did have a competitive edge because older employers were more likely to be highly compensated in comparison to their younger co-workers. Id. Thus, employers discriminating against older workers were able to avoid employing more expensive employees, while employers complying with FEHA could not. Id. Accordingly, the court ruled that an employer engaging in conduct prohibited under FEHA was subject to additional injunctive relief under the UCL.

Accordingly, while Gibbs teaches us that employers have no additional obligations to retain protected category workers where their jobs would otherwise be eliminated or terminated pursuant to legitimate business purposes, Nestle demonstrates that where discrimination is found, employers may face additional claims for relief on behalf of all employees under the UCL, even where there is no evidence that the practice has an impact on competition.

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Footnotes

1: The statutory provisions addressed in this Commentary can be found at Cal. Unemp. Ins. Code §§ 984, 2116, 2601, 2613, 2708, 3254, and 3300-3305. See http://www.leginfo.ca.gov/cgi-bin/calawquery?codesection=uic&codebody=&hits=20.

2: As compared with FMLA and CFRA, which require that the employee has worked for the employer for at least twelve months and has worked at least 1,250 hours in the preceding twelve-month period. Again, employers, in accordance with their own leave policies, may preclude employees from taking leave (and thereby accessing FTDI benefits) until they are eligible for FMLA or CFRA leave.

3: The proposed regulations suggest that "able and available" will be read to include "ready and willing" as well. Thus, where another family member is objectively able and available to provide the necessary care but is not willing to do so, the employee will still be entitled to the benefit. It is unclear from the proposed regulations just how EDD will monitor whether another family member is ready and willing and able and available. Most likely, the EDD will be left to rely on a duplication of claims (e.g., both the employee and the able and available family member submit a claim for the same period of time related to the same qualifying leave) to trigger the enforcement of this provision. See Proposed Regulations at http://www.edd.ca.gov/prtopa2706-2.htm (last visited September 24, 2003).

4: As noted above, currently neither FMLA nor CFRA allows employees to take protected leave time for the care of a domestic partner or the care of or bonding with a child of a domestic partner. See "What FTDI Doesn't Do" above.

5: For examples of what conditions may qualify as a "serious health condition" under SB 1661, see the EDD's proposed regulations at http://www.edd.ca.gov/prtopa2706-2.htm (last visited September 24, 2003). The proposed regulations explicitly exclude ordinary illnesses (absent complications) such as the common cold, influenza, earaches, upset stomachs, minor ulcers, headaches other than migraine, routine dental or orthodontia problems, and periodontal disease.

6: For additional requirements for establishing a domestic partnership, see Cal. Fam. Code § 297 (last visited September 24, 2003).

7: Currently, the EDD expects that the FTDI claim form will be available in March 2004. See Proposed Regulations at http://www.edd.ca.gov/prtopa2706-2.htm (last visited September 24, 2003).

8: The EDD has proposed regulations explaining what is meant by "warrants the participation of the employee." These proposed regulations provide, "When a serious health condition renders the care recipient unable to attend to his or her medical, hygienic, or nutritional needs or safety, or to transport himself or herself to the doctor, then the health condition warrants the participation of the claimant to provide care for that care recipient by physically assisting him or her to accomplish these tasks. Providing reassurance and emotional support ... is another form of acceptable care.... A care recipient's serious health condition may also warrant the claimant's participation in situations where the claimant is needed to substitute for others who are caring for the care recipient, or to make arrangements for care, such as transfer to a nursing home." See http://www.edd.ca.gov/prtopa2706-2.htm (last visited September 24, 2003).

9: Currently, the EDD expects that this informational brochure will be available in October 2003. See the EDD's proposed regulations at http://www.edd.ca.gov/prtopa2706-2.htm (last visited September 24, 2003).

10: As always, any revision of an existing policy which offers benefits to employees should be done with caution and with the advice of counsel. Under Asmus v. Pacific Bell, 23 Cal. 4th 1 (2000), personnel policies constituting unilateral contracts may be modified or terminated unilaterally by an employer only after the policy has been in place for a reasonable amount of time, with reasonable notice to the employees, and without interfering with employees' vested benefits. While there is little guidance as to how courts will apply Asmus to changes in leave policies, Asmus likely requires that employers not alter leave policies to the detriment of employees already on approved leaves of absence under those policies.

11: Gibbs raised no claim that he was entitled to the transfer pursuant to any written policy or procedure or any collective bargaining agreement.

12: It should be noted that the court's holding is limited to situations where the employer has not voluntarily taken on an independent obligation to transfer employees, such as under a collective bargaining agreement or an existing personnel policy.