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Employment Law Update – February 14, 2020

CALIFORNIA’S MANDATORY ARBITRATION BAN SUSPENDED. On January 31, 2020 a California federal court granted a preliminary injunction to enjoin enforcement of AB 51 – which purported to severely restrict the ability of employers to require employees to arbitrate most types of employment disputes – pending a decision by the court on whether the law is preempted by the Federal Arbitration Act.  The new California law was set to apply to all employment contracts entered into, modified or extended on or after January 1, 2020.  However, before the law took effect, a business coalition led by the California Chamber of Commerce sued the State of California to prevent its enforcement.  A temporary restraining order had been issued on December 29, 2019, and the preliminary injunction now blocks enforcement of the law pending resolution of the preemption issue by the courts.

DENYING ACCOMMODATION REQUESTS NOT DISCRIMINATORY. At the end of last year a California appellate court issued an instructive decision in Doe v. Department of Corrections and Rehabilitation concerning when employer conduct rises to the level of disability discrimination, retaliation, or harassment in violation of California’s Fair Employment and Housing Act (FEHA).  The court held that an employer did not engage in discrimination or retaliation based on physical disability just because it rejected an employee’s requested accommodations.  The court further held that harsh criticism during an “interrogation-like meeting” did not rise to the level of unlawful harassment because FEHA was not designed to ensure stress-free or collegial workplaces.  Supervisors instead have considerable leeway to perform their official duties, even in ways perceived to be “negative or malicious.”

PERKS NOT FACTORED IN OVERTIME. The Department of Labor (DOL) recently issued new overtime regulations clarifying the benefits and perks included in employees’ “regular rate of pay” when calculating overtime.  Typically, the regular rate of pay consists of employees’ hourly rate and additional compensation such as non-discretionary bonuses and commissions.  The DOL has now clarified that, effective January 15, 2020, benefits and perks like gym memberships, parking passes, and gifts, among others, do not need to be included in employees’ regular rate of pay so long as they are not dependent on the quality or quantity of employees’ work.  A list of illustrative examples can be found here.  California employers are encouraged to consult with experienced employment counsel about the impact, if any, the DOL’s overtime regulations have on the calculation of “regular rate of pay” in California.

DOL ISSUES NEW JOINT-EMPLOYER RULE. A new DOL rule regarding joint-employer status under the Fair Labor Standards Act (FLSA) becomes effective March 16, 2020.  The rule narrows the circumstances under which franchising and contracting businesses are liable as joint-employers under the FLSA.  Businesses will not be considered joint-employers solely because they utilize these business models.  Rather, the rule creates a balancing test that examines whether businesses: (1) hire or fire employees; (2) supervise and control their schedules or conditions of employment to a substantial degree; (3) determine rates and methods of payment; and (4) maintain employment records.  Additionally, the rule clarifies that an employee’s “economic dependence” on a business does not determine whether it is a joint employer.  California employers should proceed with caution as the federal DOL’s rule regarding joint-employer status under the FLSA has limited effect in California, where most wage and hour claims are brought under state law.

USCIS RELEASES NEW I-9 FORM. United States Citizenship and Immigration Services (USCIS) published a new version of Form I-9 on January 31, 2020.  Employers can continue to use the prior version of the form until April 30, 2020.

For further information please contact your SRC employment attorney.