It was a busy year in the California Legislature. California became the first state in the nation to pass legislation creating paid family leave. While not effective until July 1, 2004, it undoubtedly will help build momentum for similar legislation in other states. The Governor also signed legislation creating a state WARN Act similar to the federal legislation. Arbitration, age discrimination, workers' compensation and more were addressed by the Legislature this year.

Paid Family Medical Leave (SB 1661)

SB 1661 establishes California as the first state to provide paid family disability insurance benefits. Under this new legislation, employees who are eligible to take time off from work, pursuant to the Family Medical Leave Act ("FMLA") or the California Family Rights Act ("CFRA"), to care for a seriously ill child, spouse, parent, domestic partner, or to bond with a new child, are eligible to receive up to six weeks of wage replacement benefits for leave taken after July 1, 2004. The legislation mandates a seven-day waiting period. The benefits will not be paid by the employer, but instead, 100 percent of the funding will be provided through employee contributions to a new family temporary disability insurance program through the state disability insurance program. The benefit replaces approximately 55% of the employee's wages. Paid leave runs concurrently with any leave taken by the employee pursuant to the FMLA or CFRA. Employers may require employees to use up to two weeks of accrued but unused vacation before receiving benefits.

California "Baby" WARN Act (AB 2957)

AB 2957 establishes the California equivalent to the federal Worker Adjustment and Retraining Notification Act ("WARN"). (See Employment Law Commentary, March 2001, regarding the federal WARN Act.) California commercial or industrial facilities that employ or have employed at least 75 employees over the past year are now required to provide 60 days notice prior to taking any of the following actions: (1) a "mass layoff": the layoff of 50 or more employees within a thirty-day timeframe; (2) a "relocation": the removal of all or substantially all of the operations of the employer to a location at least 100 miles away; or (3) a "termination": the cessation or substantial cessation of the industrial or commercial operations of the employer. [2]

However, the new California notice requirements do not apply to the following: (1) a closing or layoff that is a "result of the completion of a particular project or undertaking of an employer" that is covered by the Wage Orders 11, 12, or 16, in which the affected employees were hired with the understanding that their employment was limited to the duration of the project or undertaking; or (2) seasonal employees who are hired with the understanding that their work is temporary and seasonal in nature.

If the situation involves a "relocation" or "termination" but not a "mass layoff," the California notice requirements are not applicable if the Employment Development Department ("EDD") determines the following conditions are met: (1) at the time notice was required, the company was actively seeking capital or business, (2) had the capital or business been obtained, the company could have avoided or postponed the relocation or termination, and (3) the employer reasonably and in good faith believed that giving notice would have precluded it from obtaining the needed capital or business. In order to qualify for this exception, the employer must provide the EDD with documentation relating to the employer's efforts to seek capital or business and an affidavit verifying the content of the documents.

If the employer takes action which triggers the notice requirements, the employer must provide such notice to its affected employees, the EDD, the local workforce investment board and the top elected official in each city and county in which the termination, mass layoff or relocation takes place. The new legislation does not actually set forth the elements required for the notice, but instead indicates only that the employer "shall include in its notice the elements required by the federal Worker Adjustment and Retraining Notification Act."

Failure to give the proper notice under this new law will result in a civil penalty of up to $500, imposed on the employer for each day it is in violation of the act. [3]

Moreover, an affected employee may bring a civil action for a violation of this act and may recover damages including back pay and the value of benefits the employee was entitled to receive, including the cost of any medical expenses incurred by the employee that would have been covered under the employee's benefit plan, for a period not to exceed 60 days. A prevailing employee in a civil action may also be awarded reasonable attorneys' fees.

Expanded Definition Of Age Discrimination (AB 1599)

AB 1599 expands the FEHA protections for individuals based on age and overrules the recent decision in Esberg v. Union Oil Co. of California. (See Employment Law Commentary, July 2002.) The amendment now makes it an unlawful employment practice, subject to certain exceptions, for an employer on the basis of the person's age to: (1) refuse to select the person for a training program leading to employment; (2) to bar or discharge the person from employment or a training program leading to employment; or (3) to discriminate against a person in compensation or terms, conditions or privileges of employment. The new amendment does not preclude promotions on the basis of experience and training or hiring under specified established recruiting programs. An employer or employment agency is prohibited from printing or circulating any publication or non-job related inquiry that expresses directly or indirectly any limitation based on age. However, the amendment does not prohibit employers or employment agencies from inquiring into the age of an applicant or specifying age limitations where compelled or authorized by law.

Internal Investigations Exempted From California Credit Reporting Act (AB 1068)

AB 1068 clarifies California's complicated Investigative Consumer Reporting Agency Act ("ICRA") that imposes obligations on California employers regarding consumer investigations of applicants and employees. (See Employment Law Commentary, February 1998 and March 2002.) AB 1068 amends last year's legislation which placed significant and onerous disclosure requirements on employers conducting investigations. Effective immediately, for every investigative consumer report sought, AB 1068 requires an employer requesting the report to provide written disclosure to the consumer containing: (1) the fact that an investigative consumer report may be obtained; (2) the permissible purpose for which it is obtaining the report; (3) the fact that the report may include information on the consumer's character, general reputation, personal characteristics and mode of living; (4) the name, address, and telephone number of the investigative consumer reporting agency conducting the investigation; and (5) the fact that the consumer must authorize the procurement of the report in writing on the disclosure form.

Despite the expansion of the general disclosure requirements, AB 1068 actually relieves employers engaged in routine investigations of wrongdoing from certain of the statute's prior disclosure obligations: (1) employers are no longer required to provide notice or to disclose investigative reports to the consumer if the investigation concerns suspected misconduct or wrongdoing; and (2) employers are now only required to disclose internal or in-house investigation when the information obtained is a matter of public record. In other investigations involving outside investigation services, employers must provide notice and obtain consent whenever an investigative report is sought.

For these other non-internal investigations, AB 1068 requires the employer to provide a check box on either the disclosure and consent form or on a separate document that permits the consumer to affirmatively indicate whether he or she wants to receive a copy of any report obtained by the employer within three days of the report being provided to the employer. This new legislation also makes the duty to provide the consumer with a report delegable so that an employer can now agree with its consumer reporting agencies that the agency will send a copy of the report directly to the consumer.

Internal Investigations Part II (AB 2868)

AB 2868 modifies both the ICRA and Civil Code section 47 concerning the privileged nature of communications regarding job performance and qualifications. The legislation clarifies that the qualified privilege protecting employers from defamation for communications regarding an employee's job performance and qualifications also applies to applicants for employment. AB 2868 specifically indicates that a statement by a current or former employer or agent of the employer as to whether or not the employer would rehire a current or former employee is within the privilege.

AB 2868 also provides that a consumer report may contain otherwise prohibited information (e.g., certain bankruptcies, lawsuits, unsatisfied judgments, unlawful detainer actions, paid tax liens, accounts placed for collection or charged to profit, records of arrest, indictments, misdemeanors, convictions and other adverse information that antedates the report by more than seven years) when an employer is (1) explicitly required by a governmental regulatory agency to check for such records, and (2) is reviewing a consumer's qualifications for employment.

Limitations On Absence Control Policies (SB 1471)

Labor Code section 233 provides that any employer who provides sick leave must permit employees to use one-half of that sick leave to care for an ill child, parent, spouse or domestic partner. This statute prohibits retaliation based upon use of such leave and provides damages for violations of this provision. SB 1471 enacts Labor Code section 234, which specifically provides that any absence control policy which counts sick leave taken pursuant to section 233 as a basis for discipline, is a per se violation of section 233 and an employee affected by such policy is entitled to the legal and equitable relief available under section 233.

Arbitration Data (AB 2656)

AB 2656 requires that any private arbitration company that administers, or is otherwise involved in a consumer arbitration, collect, publish on a quarterly basis, and make available to the public, the following information regarding each consumer arbitration that has occurred within the preceding five years: (1) the name of the non-consumer party if it is a corporation or other business entity; (2) the type of dispute involved including goods, banking, insurance, healthcare, and employment; [4] (3) who the prevailing party was in the arbitration; (4) the number of occasions the non-consumer party has been a party to an arbitration or mediation administered by the private arbitration company; (5) whether the consumer party was represented by counsel; (6) the date the private arbitration company received the demand for arbitration, the date an arbitrator was appointed, and the date of disposition by the arbitrator or private arbitration company; (7) the disposition of the dispute including withdrawal, abandonment, settlement, award after hearing, award without hearing, default, or dismissal without hearing; (8) the amount of the claim, the amount of the award, and any other relief granted; (9) the name of the arbitrator and his or her total fee for the case including the percentage of the fee allocated to each party. A private arbitration company shall not have any liability for collecting, publishing, or distributing the information required by the new legislation. This section shall apply to any consumer arbitration commenced on or after January 1, 2003.

Financial Disclosure Of Arbitration Companies (AB 2574)

AB 2574 prohibits any private arbitration company from administering a consumer arbitration or providing any other services related to a consumer arbitration, if the company has, or within the preceding year has had, a specified financial interest in any party or attorney for a party. The new legislation operates prospectively and does not prohibit the administration of consumer arbitrations on the basis of financial interests that were held prior to January 1, 2003.

Disqualification Of Arbitrators (AB 2504)

Under existing law, a proposed neutral arbitrator is required to disclose the existence of grounds for disqualification. AB 2504 expands the disclosure requirements to include whether the proposed arbitrator: (1) has a current arrangement concerning prospective employment or other compensated service as a dispute resolution neutral; and/or (2) is participating in, or within the last two years has participated in discussions regarding such prospective employment or other service with a party to the proceeding.

Waiver Of Arbitration Fees (AB 2915)

AB 2915 prohibits a neutral arbitrator or private arbitration company from administering any consumer arbitration that requires a non-prevailing consumer, who is a party to the arbitration, to pay the opposing party's costs or fees. The bill requires a private arbitration company to waive the fees and costs of arbitration, exclusive of the arbitrator's fees, for any consumer party having a gross monthly income that is less than 300% of the federal poverty guidelines. The bill does not affect the ability of a private arbitration company to shift fees that would otherwise be charged or assessed upon a consumer party to a non-consumer party. The private arbitration company shall also provide written notice of the right to obtain a waiver to a consumer or prospective consumer. A consumer requesting waiver of fees or costs may establish his or her eligibility by providing a declaration under oath stating his or her monthly income and the number of persons living in his or her household. A private arbitration company may not require a consumer to provide any further statement or evidence of indigence. The new legislation requires that the private arbitration company keep confidential and not disclose any information about a consumer's identity, financial condition, income, wealth or fee waiver requests to any adverse party or any non-party to the arbitration. However, a private arbitration company may not keep confidential the number of waiver requests received or granted or the total amount of fees waived.

Tolling Of FEHA Claims (AB 1146)

AB 1146 amends the California Fair Employment and Housing Act ("FEHA") to allow for the tolling of the statute of limitations for claims made pursuant to the FEHA in situations where the following criteria are met: (1) a charge of discrimination or harassment is timely filed with both the Department of Fair Employment and Housing ("DFEH") and the Equal Employment Opportunity Commission ("EEOC"), (2) the investigation into the charges is deferred by the DFEH to the EEOC, and (3) either the DFEH issues a right-to-sue letter to the charging party at the time of the deferral, or, after the DFEH concludes its investigation and issues a determination, the EEOC agrees to perform a substantial weight review of the DFEH determination or conduct its own investigation. Under these limited circumstances, the time for a charging party to file a civil lawsuit under the FEHA is tolled. However, even if tolled, the time limit for a charging party to file a civil action pursuant to the FEHA expires when the federal right-to-sue period for commencing a civil action expires or one year from the date of the right-to-sue notice by the DFEH, whichever is later.

Remedies And Immigration Status (SB 1818)

In March 2002, the U.S. Supreme Court issued its opinion of Hoffman Plastics Compounds, Inc. v. N.L.R.B., 122 S.Ct. 1275 (2002). In Hoffman, the Supreme Court held that an illegal alien, not legally authorized to obtain employment in the United States, was prohibited from receiving an award of back pay from his employer even though the employer was found to have violated the National Labor Relations Act ("NLRA"). The Court indicated that Congress did not intend to award back pay to an illegal alien subjected to unfair labor practices at a job to which he was never legally entitled. While the Court's holding was limited to enforcement of the NLRA, the California legislature took swift action by passing SB 1818 to limit the Supreme Court's ruling as much as possible in California. SB 1818 establishes that all protections, rights and remedies available under state law, unless prohibited by federal law, are available to any individual who has applied for employment or who is or had been employed in California regardless of their immigration status. The law does not permit any inquiry into a person's immigration status for purposes of establishing liability when enforcing state labor, employment, civil rights, and employee housing laws.

Extend Time For Filing Wrongful Discharge Claims (SB 688)

SB 688 extends the statue of limitations for filing a civil action for personal injury (tort) claims to two years. Such personal injury claims encompass claims for wrongful termination in violation of public policy, intentional infliction of emotional distress, defamation and invasion of privacy. This legislation also amends the notice period required for filing a motion for summary judgment, extending the notice period from 28 days to 75 days, to allow for additional discovery to be conducted after the filing of the motion.

Domestic Violence Protection Expanded (AB 2195)

In 2001 the Labor Code was amended to protect the rights of victims of domestic violence to take time off from work to attend to issues arising out of domestic violence, subject to the employee fulfilling certain requirements for providing notice and confirmation to the employer. It also provided that any employer violating its provisions was guilty of a misdemeanor and subject to claims for retaliation. AB 2195 expands the protections currently afforded to victims of domestic violence under Labor Code sections 230 and 231 to cover victims of sexual assault as well.

Payroll Records Inspection Rights (AB 2412)

California employers are required to provide employees with certain specified payroll information pursuant to Labor Code section 226 and to allow employees and former employees to inspect such records upon request. AB 2412 amends the statute to require that any request for access to payroll records by a current or former employee be honored within 21 days from the date of the request. Employers are required to allow employees to inspect and copy the records. The bill also provides for a civil penalty in the amount of $750 against an employer who fails to provide for the requested inspection within the 21-day time frame.

Enforcement Of Local Labor Standards (AB 2509)

AB 2509 authorizes local governments including city, county, district or agency or any subdivision thereof, to enforce their own labor standards with respect to state funded programs, as long as those standards do not conflict with and are not preempted by state law.

Protection Against Employee Disclosures (AB 2895)

Section 232 of the Labor Code protects employees from discharge, discipline, and discrimination with respect to job advancement for disclosing the amount of their wages. AB 2895 amends section 232 to expand the protections so that an employer may not discharge, discipline or discriminate against any employee who discloses his or her wages or discloses information about the employer's working conditions.

Extended Coverage Under Cal/COBRA (AB 1401)

AB 1401 revises certain provisions of the California COBRA program. Effective September 1, 2003, this bill requires health care service plans and health insurers to offer individuals who (1) begin receiving continuation coverage on or after January 1, 2003 and (2) have exhausted their continuation coverage under federal continuation coverage provisions, an opportunity to extend their coverage to 36 months. In addition, under a new pilot program, health care service plans and health insurers will be required to offer a standard benefit plan based on benefit designs offered through the California Major Risk Medical Insurance Board.

Prohibit Increase In Premium/Co-Pay Rates (AB 2052)

AB 2052, with limited exceptions, prohibits a group health plan from changing premium rates, co-payments or deductibles (1) after the group contract holder or policyholder has accepted the contract or policy in writing, (2) after the start of the employer's open enrollment period or (3) after receipt of the premium payment for the first month of coverage.

Diversity Reaffirmed (AB 1045)

AB 1045 reaffirms diversity as a public policy goal in public employment and public contracting. It authorizes governmental agencies to engage in various general recruiting and outreach programs and focused outreach activities to increase diversity in public employment and public contracting. It also requires each state agency or department awarding a contract or obtaining goods or services to collect information and report annually to the Governor and the Legislature on the participation level of minorities, women, and disabled veteran-owned business enterprises in these contract and procurement activities.

New Cal/OSHA Penalties (AB 2837)

AB 2837 authorizes a civil penalty of not less than $5000 against any employer who fails to file a report involving a serious injury, illness, or death to the Division of Occupational Safety and Health ("Division"). It also creates a new penalty for employers, officers, management officials, and supervisors who knowingly fail to report a death to the Division or induce another to fail to report a death. The penalty for failure to report a death is up to one year in jail and up to $15,000 or both. If the violator is a corporation or a limited liability corporation, the monetary penalty imposed is up to $150,000. This amendment also requires the Division to ensure that non-English speaking or limited English speaking persons are able to communicate effectively with the Division and prepare a progress report on this requirement by July 30, 2004.

Increased Workers' Compensation Benefits (AB 749)

After three consecutive years rejecting bills aimed at increasing workers' compensation benefits, Governor Gray Davis approved AB 749. AB 749 which was considered and approved earlier this year, significantly increases the workers' compensation benefits injured workers will receive over the next four years. The major effects of AB 749 on employees will be to: (1) increase maximum weekly workers' compensation benefits for temporarily and permanently disabled workers from $490 to $602 for injuries occurring on or after January 1, 2003, to $728 for injuries occurring on or after January 1, 2004, and to $840 for injuries occurring on or after January 1, 2005; (2) in 2006 increase the maximum weekly workers' compensation benefits by an amount equal to the percentage increase in the state average weekly wage and continue to do so annually thereafter; (3) increase permanent disability benefit minimums in 2004, 2005 and 2006; (4) increase aggregate death benefit and life pension benefit maximums in 2006; (5) subject weekly life pension and permanent total benefits to an annual cost of living adjustment beginning with injuries occurring in 2003.

Collective Bargaining Agreements In Agriculture (SB 1156 and AB 2596)

SB 1156 and AB 2596 create a new five year, 75 case pilot mediation program for labor disputes arising between agricultural employers and labor organizations representing agricultural employees. The measure applies only to first time collective bargaining agreements and to farms with 25 or more agricultural workers. The new legislation permits either the employer or the union engaged in the collective bargaining process to file declarations with the Agricultural Labor Relations Board ("ALRB"), indicating the parties have failed to reach a collective bargaining agreement and request an order directing the parties to mandatory mediation of the issues in dispute. The ALRB is required to appoint a mediator who must conduct a mediation and then issue a report to determine any contract issues that remain unresolved after the mediation and set forth the final terms for a collective bargaining agreement. Either party may then petition the ALRB to review the mediator's report. If the ALRB does not accept the petition for review, the ALRB must issue a report confirming the mediator's report and order the report recommendations become effective immediately. If the ALRB does accept the petition for review, the ALRB must issue a decision and may modify the report or mandate additional mediation and a second report. Either party may file an action to enforce the mediator's report or seek a writ of review in the California Court of Appeal or in the California Supreme Court.

Vetoed Bills

Outlaw Mandatory Pre-Dispute Arbitration (SB 1538)

SB 1538 would have invalidated existing mandatory pre-dispute arbitration agreements between employers and employees for claims arising under the FEHA, such as discrimination, harassment and retaliation. The bill would have made it an unlawful employment practice for an employer to take any adverse employment action against any person for refusing to enter into such an agreement to waive rights provided under the FEHA. The bill would also have required that after January 1, 2003, any waiver or arbitration agreement to waive rights under the FEHA be knowing, voluntary and not made as a condition of employment or continued employment, placing the burden of proof on the employer. The employer would have been saddled with the burden of demonstrating that the agreement was voluntary.

Mandatory Severance (AB 2989)

AB 2989 would have required employers with more than 100 employees to pay severance in the amount of one week's wages for each year of employment to all employees that were affected by the termination of the operations of the employer or the relocation of the employer's business operations.

Rebuttable Presumption for Retaliation Claims (AB 2990)

AB 2990 would have amended section 98.6 of the Labor Code to create a rebuttable presumption that an employer unlawfully retaliated against an employee if the employer discharges, demotes, suspends or reduces the work hours or pay of any employee within 90 days of the same employee exercising his or her rights under the Labor Code.

Ergonomic Standards (AB 2845)

AB 2845 would have required the Occupational Safety and Health Standards Board to adopt a revised ergonomic standard concerning repetitive motion injuries on or before July 1, 2004.

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