Employment Law Developments & Potential Employment Issues for 2018

February 12, 2018

Employment Law Developments & Potential Employment Issues for 2018

By: James L. Pagano, Esq.

I. Overview of the Changes to Employment Law in 2018:

Some potentially far-reaching developments in California's legal landscape for small businesses occurred during the legislative session that ended late last year. The three (3) most important developments for small business employers appear to be the adoption of the (a) so-called "ban-the-box" prohibition concerning employment applications for most employers, (b) prohibition on requesting salary history before considering an employment application and setting salary, and ( c) increase in the number and type of employers subject to obligations imposed by the California Family Rights Act ("CFRA"). Additionally, both the State of California minimum wage and the minimum wage for employees performing work within certain municipalities within the State have increased, effective January 1, 2018, or will increase later this year relatively substantially. And there is at least one major United States Supreme Court decision in the offing that could substantially change the rights of employees to collectively challenge the terms and conditions of their employment.

A. Ban-The Box Prohibition

In our 2017 version of this memo, we reminded that California law prohibits employers from asking applicants and existing employees about many past criminal arrests and detentions that do not end up in a criminal conviction. We also explained that, with a few exceptions, principally, in the child care and health care sectors, effective in 2017, no juvenile adjudication - a conviction in the juvenile court system - may be inquired about or, if discovered, may be considered in hiring, discipline, and for other employment-related issues. We also pointed out that certain local governments had enacted laws that prohibit the use of any job application that requires an applicant to disclose a criminal conviction until after a tentative decision to hire has been made, i.e., the so-called "ban the box" ordinances.

Effective on January 1, 2018, the "ban-the-box" ordinances have become a statewide law prohibiting most California employers from inquiring about an adult criminal conviction until after a conditional offer of employment has been made. Thus, that rule will, effectively, prohibit an employer from using an investigative service(s) to check into the background of a prospective employee until the offer has been made. It is true that the offer can be conditioned upon the applicant passing a background check, but the withdrawal of a previously made offer based upon a criminal conviction will, likely, need to include an explanation identifying that history as the disqualifying basis and will have to provide a copy of what it is the investigation uncovered so the applicant can seek to refute it (Refutation of a criminal conviction cannot be that the employee obtained post-conviction relief from the sentencing court because she performed her probation and was released from probation and has not re-offended, as is permitted by applicable California law; rather it appears that refutation will have to take the form of providing competent evidence that the prospect did not suffer the conviction that disqualified her for the position). And if the offer is withdrawn because of a criminal conviction, the employer will have to be ready to establish that the conviction was for a matter that had some reasonable connection with the performance of the position for which the applicant was being considered, such as an applicant convicted of embezzlement who is conditionally offered a position where she is responsible for handling money for the employer.

1) Prospective Consequences:

While the underlying motives for the new law are, undoubtedly, well-intentioned, the issue for the small employer will often times be to place it between the proverbial rock and a hard spot: what happens if the prospective employee is on probation for a conviction and her probation officer wants the employer to monitor the employee's conduct and report any issue such as drug or alcohol use to the officer? The employer may have a legal obligation to do that. And what about a misdemeanant convicted of assault who will have regular contact with members of the general public? What will the liability of the small employer be should that individual revert to prior form and strike a customer or client since the employer hired the person knowing of the prior assaultive behavior? What if the offer is revoked because of a fear that the prospect will re-offend? How does the employer justify the revocation without major expense? These possible issues - and we trust there are many more that you can think of- will, likely, have to be addressed over time, with the small employer, probably, bearing the brunt on both sides, including, perhaps, most importantly, the potential for exclusions for coverage for the consequences from such misconduct from the employer's liability insurer(s).

The most immediate issues for the small employer, however, include changing the job application that is used so that direct or indirect questions that could reveal information about convictions are deleted. And the persons that are involved with interviewing applicants will also need to be instructed about the new rules so that questions about prior convictions are not asked. Further, the application process needs to be updated so that an inadvertent referral for a background check too early in the process will not occur. (By the way, the law makes no distinction between a recent conviction and a decades-old conviction.)


2) Our Advice:

If training in the proper manner to conduct a pre-employment interview/investigation under the current law is important - as it now should be (and see discussion below about the Equal Pay Act issues below) - we can certainly assist. We can also help the small employer address a claim(s) that is based upon a withdrawal of an offer letter due to a criminal record. Should you wish for us to assist you with such matters, please let us know and we will be most happy to assist you.

B. Expansion of the Equal Pay Act

California's version of the Equal Pay Act ("EPA"), as we reported last year, is much more robust than either the federal law or other state's laws tend to be. In an evident effort to boost the enforcement of the equal pay requirements even further, the California Legislature enacted a number of changes to that law that became effective on January 1. Amongst the most significant to the small employer are the following:

  • The employer may not rely on prior salary history of an applicant for a job in making an offer of employment or setting a starting salary, except in the instance where the applicant ". . . voluntarily and without prompting" [our emphasis] discloses that history.
    • Consistent with the foregoing, an employer may not offer evidence of prior salary as a basis upon which the employer justifies a disparity in compensation to individuals who perform "substantially similar work."
  • Additionally, claims of wage disparities under the EPA may now be based upon race and ethnicity, in addition to gender. 1) Our Advice:

All applications used from January 1, 2018 should delete reference to prior salary received and interviewers must be educated to avoid those sorts of what, in the past, were routine questions. It also is the better practice not to inquire of a prior employer the rate of pay or salary paid to an applicant. While, as noted, should an applicant volunteer past salary history - without being prompted to do so (and, though it is not yet clear, we are confident the employer will have the burden of proof on that issue) - this information can still not be acted on if the employer wishes to stay in compliance.

Should an situation involving this sort of issue arise, we will be available to assist. Just let us know!

C. CFRA

Prior to January 1, 2018, the CFRA did not apply to employers that employed 49 or fewer individuals. By virtue of the enactment of what is known as the "New Parent Leave Act," as of January 1, an employer employing 20 or more persons within 75 miles of each other became subject to the CFRA.

The CFRA requires the employer to permit an employee that has worked for the employer at least 1,250 hours during the prior 12 months to take up to 12 weeks to bond with a new child within the first year after the child's birth, adoption, or foster care placement. However, if the employees-parents work for the same employer, only 12 weeks of leave are required to be given to both of them. This 12 weeks, however, can be split and taken consecutively or concurrently, at the option of the parents. Thus, an employer could have two key employees out at the same time for up to six weeks.

It is also an unlawful employment practice to refuse to hire, discharge, or make any other adverse employment decision based, at least in part, upon the employee seeking to exercise her rights under the CFRA and it is unlawful to retaliate against an employee who provides information, including testimony, in support of a co-employee's effort to secure such leave. Thus, the employee cannot lose her employment or be subjected to any other lesser adverse job consequence, e.g., demotion, reduction in pay, forfeiture of a bonus, due, in any way, to the employee's taking of CFRA leave.

1) Prospective Consequences

Small employers will bear a potentially large expense to temporarily replace a key employee, especially at the wrong time of the year, when a key employee exercises her CFRA rights. The theory has always been - and until last year prevailed - that the overwhelming number of small employers in this State would be adversely affected by having to train a temporary replacement to perform the position a long-time key employee performs, including having to potentially re-train her when she returned following the leave. And, unlike under other protective employment laws, e.g., the Americans with Disabilities Act, where the employer can be freed from its mandates by demonstrating compliance would impose an "undue hardship," the CFRA does not permit such an exemption. Rather, the sole defense to a claim that an employer took an adverse job action against the affected employee during or after her leave is to show that the decision was not caused, in any way, by the employee having taken the qualifying leave.

2) Our Advice

If your employee handbook does not contain statements about the employee-parent leave rights granted by the enactment of the New parent leave Act because you employed less than 50 employees and the law, therefore, did not apply to you before January 1, you will now need to update the handbook to include such language. If you are interested, please contact us and we can provide you with the language to be included in your handbook that will comply with the CFRA and fulfill your legal obligations to your employees. And, should you find yourself facing a claim of liability for failing to fulfill the statutory mandate, we will work with you to mitigate that liability as well.

D. Minimum Wages

Effective January 1, 2018, the following are the minimum wages payable to employees in the following Bay Area municipalities:

County/ CityMinimum Wage 12/31/2017Minimum Wage 1/1/2018
Berkely$13.75/hr$13.75/hr (increase to $15/hr 10/1/18)
Cupertino$12.00/hr$13.50/hr
El Cerrito$12.25/hr$13.60/hr
Emeryville$14.00/$15.00/hr (Fewer than 55 & more than 56, respectively)$15.00/ $15.60(est) (Changes take effect 7/1/18)
Los Altos$12.00/hr$13.50/hr
Milpitas$11.00/hr$12.00/hr (increse to $13.50/hr 7/1/18)
Mountain View$13.00/hr$15.00/hr
Oakland$12.86/hr$13.23/hr
Palo Alto$12.00/hr$13.50/hr
Richmond$12.30/hr$13.41/hr
San Francisco$14.00/hr$14.00/hr (increase to $15/hr 7/1/18)
San Jose$12.00/hr$13.50/hr
San Leandro$12.00/hr$12.00/hr (increase to $13/hr 7/1/18)
San Mateo$12.00/hr$13.50/hr (as of 1/1/18 non-profit public benefit corporations need to pay $12/hr)
Santa Clara$11.10/hr$13.00/hr
Sunnyvale$13.00/hr$15.00/hr

(Should you have an employee(s) who works in a jurisdiction outside of the Bay Area and wish to know of a prevailing minimum wage rate in that locality, please contact us and we can advise what the present minimum wage for that location is.)

Please Note: All employers affected by a municipal ordinance generally have to post the municipal ordinance, rather than the California minimum wage notice, to be in compliance with the law. Please advise should you desire our assistance in preparing such a notice(s).

Please Note #1-A: If there is a relatively substantial, i.e, 10% or more, group of your work force in a particular location that are not English speakers, the notices should be in all of the languages that all of those diverse employees can speak and read.

II. An Important Upcoming Court Decision Regarding the FutureOf Binding Arbitration and Class Action Waivers:

Ernst & Young, et al. v. Stephen Morris and Related Cases:

Last year, we identified this lawsuit as potentially dramatically changing employment law for it, effectively, serves to outlaw the use of mandatory arbitration of all work-related claims and requires that en employee be permitted to join with other employees to sue over conditions of employment. The Court reasoned that such language barred "collective actions" in violation of a provision of the National Labor Relations Act ("NLRA") that explicitly prohibits placing limits on employees joining together to challenge conditions of their employment.

In the update last year, we noted that the United States Supreme Court had granted a petition for certiorari of the Case on January 13, 2017 and would hear the case. Oral argument of the Case- with a couple of other similar cases, decided differently - was held on the first argument day of the Supreme Court's 2017-2018 term. It should be decided and an opinion(s) issued by the end of the term on June 29.

While prognosticating about the Supreme Court is always a less than exact science, our educated belief is that the Court will split 6-3 in favor of the employers - in this Case, Ernst&Young --- by upholding the principle that requiring an employee to sign a waiver of her right to sue in a court and to bring a class or collective action for complaints about working conditions in a non-union workplace does not violate any provision of the NLRA. Thus, we advise that you retain such provisions in an application and an employee handbook(s) presently, albeit awaiting what we expect will be confirmation by the Supreme Court.

III. Summary:

The foregoing constitute what we believe are the potentially most important matters about which small employers in California need to be aware going forward. If there is a question(s) and/or concern(s), which you wish to discuss with us, please advise and we will make ourselves available.

We appreciate the opportunity we have been provided to be able to advise and otherwise work with your Company and you.