Governor Brown Signs AB 802 Requiring Arbitration Companies to Disclose Private Arbitration Stats

On  September 30, 2014, California Governor Jerry Brown signed AB 802.  Under this new law, which takes effect on January 1, 2015, private arbitration companies (e.g., AAA, JAMS) will be required to collect and publish certain information about private arbitrations they administer.  The previously private information which must now be made publicly available includes:

1.  Whether the arbitration was demanded pursuant to a pre-dispute contractual clause.

2.  The name of the non-consumer party and whether that non-consumer party was the initiating party or the responding party.

3.  The nature of the dispute involved, to be listed as one of the following: goods; credit; other banking or finance; insurance; health care; construction; real estate; telecommunications, including software and Internet usage; debt collection; personal injury; employment; or other.

4.  Whether the consumer or non-consumer party was the prevailing party.

5.  The total number of occasions, if any, the non-consumer party has previously been a party in an arbitration administered by the private arbitration company.

6.  The total number of occasions, if any, the non-consumer party has previously been a party in a mediation administered by the private arbitration company.

7.  Whether the consumer party was represented by an attorney and, if so, the name of the attorney and the full name of the law firm that employs the attorney, if any.

8.  The date the private arbitration company received the demand for arbitration, the date the arbitrator was appointed, and the date of disposition by the arbitrator or private arbitration company.

9.  The type of disposition of the dispute, if known, identified as one of the following: withdrawal, abandonment, settlement, award after hearing, award without hearing, default, or dismissal without hearing.

10.  The amount of the claim, whether equitable relief was requested or awarded, the amount of any monetary award, the amount of any attorney’s fees awarded, and any other relief granted, if any.

11.  The name of the arbitrator, his or her total fee for the case, the percentage of the arbitrator’s fee allocated to each party, whether a waiver of any fees was granted, and, if so, the amount of the waiver.

Under AB 802, this information must be provided in a searchable format and must be accessible from a conspicuous link on the arbitration company’s website.

You can find the full text of the new law here.

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Governor Brown Signs AB 1522 Granting Paid Sick Leave to California Employees

Earlier today, Governor Jerry Brown signed AB 1522 guaranteeing paid sick leave to most California employees.  The new law, which is entitled the “Healthy Workplaces, Healthy Families Act of 2014,” goes into effect on July 1, 2015 and covers all employers in California.  Here’s a quick summary of the new law’s major provisions:

1.  California employees will accrue 1 hour of paid sick leave for every 30 hours worked in California.

2.  California employees will be allowed to use their accrued sick leave for the diagnosis, care, or treatment of an existing health condition, or for preventative care, for themselves or a “family member” (which includes a child, parent, spouse, registered domestic partner, grandparent, grandchild, or sibling).

3.  Although sick leave accrues from the first date of employment, the right to use paid sick leave begins only at 90 days of employment.

4.  California employers may limit an employee’s use of paid sick leave to 24 hours (3 days) in each year of employment.

5.   Accrued but unused sick leave carriers over from year-to-year, but the employer may place a “cap” on further accruals at 48 hours (6 days).

6.  At termination, accrued but unused sick leave is not paid to the employee.

7.  The new sick leave law works in conjunction with California’s “Kin Care Law.”  Thus, an employee who has accrued and available paid sick leave may use that leave (up to a maximum amount equal to half of his or her annual accrual amount at the then-current rate of entitlement) to care for his or her child, parent, spouse, or domestic partner.

8.  If a California employer currently has a sick leave or PTO plan that allows an employee to take sick leave on terms at least as generous as the new law’s, then the employer has no obligation to offer any additional sick leave.

9.  California employers cannot discriminate or retaliate against employees who request/use paid sick leave.

10.  California employers must give each employee a statement of accrued and available sick leave on the employee’s pay stub or wage statement.  Employers must also update their Wage Theft Prevention Act notice to include a discussion of employee rights under the new sick leave law.  In addition, employers must also post a new workplace poster regarding the new law.

11.  The new law exempts certain employees from coverage.  For example, certain employees covered by collective bargaining agreements are not covered.  Nor are certain employees in the in-home support industry or airline flight deck or cabin crew employees who are already provided with compensated time off equal to or exceeding the law’s requirements.

12.  The new sick leave law has no private right of action, so employers cannot be sued by employees for alleged violations.

13.  However, the new sick leave law will enforced by the Division of Labor Standards Enforcement (DLSE) and the California Attorney General.  If an employer is found to have violated the law, the employer will face a maximum administrative penalty of $4,000 per aggrieved employee plus all other legal remedies “as may be appropriate to remedy the situation,” including reinstatement, back pay, payment of sick days unlawfully withheld, and attorneys’ fees.

You can find the full text of the new law here.

Employers who lack a leave policy will need to adopt a new sick leave policy that meets the new state law’s minimum requirements.  Employers who lack a sick leave policy but who have a PTO policy will need to review their existing PTO policy to see if it meets the minimum requirements of the new law.  Similarly, employers who have an existing sick leave policy will need to review that policy to ensure that it meets the minimum requirements of the new law.  Finally, employers in San Francisco who are already subject to the City’s Paid Sick Leave Ordinance will need to integrate the new state law’s minimum requirements into their existing city-mandated policy.

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“Wage Theft” a Nationwide Problem?

“Wage theft” occurs when an employer confiscates an employee’s tips or otherwise fails to properly pay an employee.  It has long been recognized as a problem in California.  That’s why Governor Brown signed one of the nation’s first wage theft laws, AB 469, back in 2011.  You can find my prior blog post about that law, and what requirements it imposes on California employers, here.

Fast-forward several years and now everyone is talking about “wage theft.”

A story in yesterday’s New York Times discusses a “flood of recent cases” across the country accusing employers of violating minimum wage and overtime laws, erasing work hours, and wrongfully taking employee’s tips.  The story includes a quote from California’s Labor Commissioner, Julie Su, who said, “My agency has found more wages being stolen from workers in California than any time in history.”  Employers and their advocates disagree, of course.  They claim that most employers operate with great integrity and that, therefore, “wage theft” is actually a rare phenomenon.  The increase in lawsuits, they claim, has nothing to do with actual “wage theft” and everything to do with greedy, “opportunistic” trial lawyers.  You can find the full New York Times story here.

Interestingly, the New York Times comes only a few months after California launched it’s “Wage Theft is a Crime” campaign.  That campaign, which is aimed at educating workers and employers about California’s labor standards, includes campaign-specific websites in English (www.wagetheftisacrime.com) and Spanish (www.robodesueldoesuncrimen.com) that provides details on how to identify and report wage theft.   You can find the California Labor Commissioner’s press releases announcing this new campaign here.

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Employers Who Require Employees to Use Personal Cell Phones Must Pay a “Reasonable Percentage” of the Employees’ Cell Phone Bills

California Labor Code 2802(a) requires an employer to indemnify an employee for all “necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer.”  This statute essentially forces employers in California to reimburse employees for all work-related costs and expenses.

In Cochran v. Schwan’s Home Service, the Court addressed whether Labor Code 2802(a) required an employer to reimburse an employee for mandatory work-related calls made on the employee’s personal cell phone.  The Court’s answer was a definite “yes.”  According to the Court, for an employer to be in compliance with Labor Code 2802(a), if the employee is required to use his or her personal cell phone for work-related matters, then the employer is required to reimburse the employee a “reasonable percentage” of the employee’s personal cell phone bill.

This duty to reimburse applies even if the employee has an unlimited data plan and, thus, incurs no additional charges due to the work-related calls.  In other words, it is irrelevant what arrangement the employee has with his or her cell phone company.  It is also irrelevant if an employee has an arrangement with a family member or other third party to pay the employee’s cell phone bill.  If work-related calls are required by the employer, then the employer must pay a “reasonable percentage” of the employee’s cell phone bill…period.

What constitutes a “reasonable percentage?”  The Court gave no bright-line rule.  Instead, the Court concluded that what constitutes a “reasonable percentage” will depend on the facts and circumstances of each particular case.

Bottom line:  to comply with this new decision, employers who require employees to use their personal cell phones for work-related calls should immediately implement an appropriate reimbursement policy.   

If you are interested in reading the full opinion in Cochran v. Schwan’s Home Service, you can find it here.  

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Q1 2014 “Halo Report” Shows California Leading in Total Angel Deals

Silicon Valley Bank, the Angel Resource Institute, and CB Insights just released their Q4 2014 “Halo Report.” The report generally confirms that angel investment is increasing, with the median round size ($980K) up 31% from Q4 2013 levels ($750K). Other notable findings include:

  • Internet, healthcare, mobile, and telecom deals constituted almost 72% of all deals closed;
  • Internet deals enjoyed the largest increase in round size, increasing to $1.85M from $1.03M in Q4 2013;
  • The median pre-money valuation of early-stage angel deals increased slightly to $2.7M;
  • Most angels continue invest close to home, with 75% of all deals closing in their home state;
  • The Great Lakes region has the highest total angel dollars invested (24.6%); and
  • California leads all states and regions in terms of total angel deals (17.7%).,

You can find the full report here.

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Banks Making More Small Business Loans

A recent New York Times article points to signs that the lending environment is improving for small business.  According to Keri Gohman, an Executive Vice President and head of small business banking for Capital One who is quoted in the article, “It’s actually a really great time to access small business capital.”

The article notes that the banks have been easing credit terms for smaller businesses since mid-2012 and now seem more eager to loan than small businesses are to borrow.  Demand for small business loans is still only about 50% of what it was before the Great Recession.

Nevertheless, if you own a small business and need some operating capital, this is good news.  Now may be the best time in years to apply for a small business loan.

You can find the full New York Times article here.

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CA Supreme Court Rules Employee Can Sue Employer and Collect Damages Even Though Employee Used Fraudulent Social Security Number to Get Hired

Yesterday, the California Supreme Court ruled in Salas v. Sierra Chemical Co. that an employee who uses a false Social Security number to fraudulently obtain his job may still sue his employer for discrimination and recover damages.

At issue was whether a California state statute granting employment law rights to all California residents “regardless of immigration status” conflicted with — and, thus, was preempted by — federal immigration law.  The Supreme Court ruled that the California state statute was not preempted because complying with both laws was possible up to the time when the employer discovered the employee’s fraud.

So now in California an employee can obtain a job using false and fraudulent means…but after he’s terminated he can sue his employer for employment discrimination…and he can recover lost wages from the time of termination up to the point where the employer discovered the fraud.  Plus, the employee can recover emotional distress damages, penalties, and attorneys fees.  All this is possible even though the employee admitted to using false and fraudulent documents to get his job and, thus, never had the legal right to work in the first place.

You can find the California Supreme Court’s opinion in Salas v. Sierra Chemical Co. here.

Note:  In reaching its result, the California Supreme Court explicitly reversed the Court of Appeal’s prior ruling that the employee’s claims were barred by the after acquired evidence doctrine and the unclean hands doctrine.  You can find my blog post about the Court of Appeal’s ruling here.

 

 

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CA Supreme Court Upholds Class Action Waivers

In 2007, the California Supreme Court ruled in Gentry v. Superior Court that class action waivers in employment arbitration agreements are invalid under certain circumstances.  Four years later, however, the United States Supreme Court reached a seemingly opposite conclusion in AT&T Mobility LLC v. Concepcion, holding that “requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the [Federal Arbitration Act].”

As a result of these two decisions, employment lawyers across California have been asking since 2011 — does the Gentry ruling and rationale survive in light of Concepcion?  That is, are employment arbitration agreements that contain mandatory class action waivers still illegal in California, or do they fundamentally interfere with the Federal Arbitration Act (“FAA”) such that they must be enforced?

Yesterday, the California Supreme Court answered that question in Iskanian v. CLS Transportation.   Continue reading

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Obama Extends Family Leave Benefits to Married Gay Couples

Yesterday, the federal government announced several regulatory changes that extend marriage benefits to same-sex couples.  This announcement — and the legal changes that come with it — are the result of last year’s historic Supreme Court decision in U.S. v. Windsor striking down Section 3 of the Defense of Marriage Act (“DOMA”) which previously prohibited the federal government from recognizing the validity of same-sex marriages.

As a result of the Windsor decision, President Obama ordered Attorney General Eric Holder to review the government’s regulations to ensure that same-sex married couples were being treated similarly to opposite-sex married couples across the broad spectrum of federal benefits.  Yesterday, Attorney General Holder issued a formal memorandum summarizing the many ways in which the Windsor decision had been implemented throughout the federal government to ensure the equal treatment of same-sex married couples.  You can find the Attorney General’s memorandum here.

Most relevant to California employers, the Department of Labor announced yesterday a proposed rule that would change the definition of “spouse” under the federal Family & Medical Leave Act (“FMLA”). This change will allow gay or lesbian employees in California (and all 50 states) to take a family leave of absence under FMLA to care for their same-sex spouse or other family member. You can find yesterday’s announcement about the proposed new FMLA rule here.  

This decision by the Department of Labor comes after similar decisions by other federal agencies.  These include the IRS allowing same-sex married couples to file joint tax returns; the Department of Defense allowing same-sex spouses of military service members to receive the same benefits as opposite sex spouses; the Department of Justice allowing same-sex couples to refuse to testify against each other and to file joint bankruptcy petitions; the Department of Homeland Security treating same-sex marriages identically to opposite-sex marriages for purposes of immigration; and the same-sex spouses of all federal employees now being eligible for health insurance and other benefits to the same extent as opposite-sex spouses.

 

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Delivery Drivers are Employees, Not Independent Contractors

In yet another example of the challenges and difficulties involved in using independent contractors, today the Ninth Circuit ruled in Ruiz v. Affinity Logistics that delivery drivers for Affinity are employees rather than independent contractors.

In reaching this decision, the Ninth Circuit reversed the lower court’s ruling which concluded that the drivers were employees.  The lower court based its decision on the fact that the drivers (a) established their own individual businesses with their own federal employee identification numbers, (b) could hire helpers or secondary drivers, and (c) signed independent contractor agreements.

But that wasn’t enough for the Ninth Circuit.  Relying on the landmark 1989 California Supreme Court case, S.G. Borello & Sons, Inc., the Ninth Circuit concluded that the “right to control work details” is the most important consideration.  The Court then cited the list of “secondary factors” that must also be considered, including:

  • whether the one performing services is engaged in a distinct occupation or business;
  • the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
  • the skill required in the particular occupation;
  • whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
  • the length of time for which the services are to be performed;
  • the method of payment, whether by the time or by the job;
  • whether or not the work is part of the regular business of the principal; and
  • whether or not the parties believe they are creating the relationship of employer-employee.

Continue reading

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I.R.S. Bars Employers From Dumping Employees into Health Exchanges

The Affordable Care Act requires employers with 50 or more employees to provide health coverage for their employees or face stiff fines.  To comply with the new law, many employers were canceling their group health plans, dumping their employees into the health exchange (which is Covered California in this state), then reimbursing those employees for some or all of the employee’s cost of purchasing individual coverage, and then claiming a tax deduction for the amount of the reimbursement.

This practice is now illegal, according to a new ruling from Internal Revenue Service (“I.R.S.”), and could subject employers to a penalty of $100 a day — or $36,500 per year — under Section 490D of the Internal Revenue Code for each affected employee.

When an employer reimburses an employee for individual health coverage, that employer creates an “employer payment plan.”  The new I.R.S. ruling concludes that all “employer payment plans” will be considered “group health plans” subject to all of the provisions and requirements of the Affordable Care Act, including the requirement to provide certain preventive care (like mammograms and cancer screenings) without co-payments or other costs.  Obviously, employer reimbursements plans do not meet these requirements because they are not providing any care at all.

As a result, any employer who is currently covered by the new healthcare law and who is also reimbursing its employees for some or all of their insurance costs should contact their accountant or legal advisor for more information.  If you are interested in reading the I.R.S. notice, you can find it here.

 

 

 

 

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Wall St. Invading the P2P Lending Space?

Peer-to-peer (“P2P”) lending started about a decade ago to allow individuals and other small investors to lend money to each other over the internet.  By going P2P, banks were cut out of the process, resulting usually in lower interest rates and more funds available for the small businesses looking for cash.  In return, individual investors earned single-digit returns, which were often higher than what they could have earned elsewhere in the market.  As envisioned, it was a true win-win:  a way for individual investors to make a local, real-world impact while also making some money.

However, yesterday the New York Times reported that the P2P industry has been infiltrated by the very institutions it was designed to shut out.   Today, major financial institutions have invaded the space and are using their massive resources and sophisticated technologies to suck up the best deals.

But is their presence necessarily bad?  Maybe not.  These institutions respond by pointing to the benefits of scale.  They claim they are providing much-needed scale to the market — that is, making more funds available, with faster deal close times and more transparency, than would otherwise be possible in a market of individuals.  On the other hand, the defenders of classic P2P claim the massive Wall St. presence makes the P2P market have less “resonance with the public.”  It also makes the P2P market less stable, they say.  In short, critics claim, P2P is now a different animal entirely — more akin to “online consumer finance.”

In any event, it’s an interesting article that discusses the P2P industry, its players, and how it’s changing.  It also discusses how small investors are trying to claw their way back into the P2P game.  You can find the article here.

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