1. By: Jennifer Brown Shaw, Esq., and Jasmine Anderson, Esq.
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Employers faced more lawsuits in 2012 than 2011, according to international legal services firm Fulbright &
Jaworski’s newest Litigation Trends Survey, with labor and employment disputes and contract litigation at the
forefront. Employers also sought assistance from outside counsel in increased numbers to comply with stricter
regulatory requirements, the survey found.
Employers should not expect these trends to slow in 2013.
In recent months, courts issued important decisions that impact California employers. In addition, new regulations
under both California and federal law will increase compliance obligations. Finally, the U.S. Equal Employment
Opportunity Commission (EEOC) recently issued its Strategic Enforcement Plan for Fiscal Years 2013-2016. The
EEOC’s top priorities include eliminating barriers in recruitment and hiring, protecting immigrant, migrant and
other vulnerable workers, and enforcing equal pay.
This white paper summarizes key developments in employment law and provides practical steps employers
should take to ensure compliance.
Page 1 | Disability Discrimination and Reasonable Accommodations
Page 2 | Discrimination
Page 3 | Retaliation
Page 3 | Wage and Hour
Page 5 | Arbitration Agreements
Page 6 | Regulatory Enforcement
Disability Discrimination and Reasonable Accommodations
Appropriately addressing employee disabilities and providing effective reasonable accommodations can be
challenging. However, courts provided some good news in this area for employers.
The Ninth Circuit ruled that a retail store manager was not a “qualified individual with a disability” protected by
California’s Fair Employment and Housing Act (FEHA). The employee admitted that her disability prevented her
from performing the “essential functions” of her position (hiring, training and supervising sales staff; overseeing
and developing customer relations; administrating stocking and inventory; cleaning; creating store displays; and
preparing sales reports). The court ruled that her inability to perform those functions was a legitimate reason for
firing her. Lawler v. Montblanc North America, LLC, 704 F.3d 1235 (9th Cir. 2013)
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Employment Law Trends
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The Ninth Circuit ruled that an employer is not obligated under the Americans with Disabilities Act (ADA) to
excuse an employee from complying with its attendance policy, if regular attendance is an “essential function”
of the job. Regular attendance may be an “essential function” if a job requires: (1) the employee to work as part
of a team; (2) face-face interactions with other employees, clients or customers; or (3) on-site use of items and
equipment. In this case, because the employee was a neo-natal intensive care nurse and part of a patient delivery
team, the court determined that regular attendance was an essential function of her job. Samper v. Providence
St. Vincent Medical Center, 675 F.3d 1233 (9th Cir. 2012)
These cases demonstrate that employers must communicate expectations and remain flexible when considering
potential accommodations for employees with disabilities.
Explain the “Essential Functions” of the Position. An employer must provide an accommodation only if it will
allow the employee to perform the “essential functions” of the position. Courts will look to current, accurate job
descriptions and other employer-initiated documents, such as performance reviews reflecting an employee’s job
duties, to determine which functions are essential.
Consider All Potential Accommodations. An employer must offer an accommodation that is reasonable and
effective, but is not necessarily obligated to offer the specific accommodation an employee requests. Employers
should think broadly and flexibly about all potential accommodation options, in addition to considering the
employee’s stated preference.
The California Supreme Court recently answered a question that has long confounded California employers:
Is an employer legally liable for a decision to terminate an employee if the employer has both a legitimate,
nondiscriminatory reason for the decision and an arguably discriminatory reason? This is generally referred to as
a “mixed motive” case.
In Harris v. City of Santa Monica, the employee claimed she was fired because she was pregnant (an illegal
reason), which she believed primarily based on her supervisor’s negative reaction when she told him the news.
The employer contended that it would have made the same decision based on her poor performance, regardless
of her pregnancy.
The court ruled that under the FEHA, an employee in a “mixed motive” case cannot recover damages or backpay
and is not entitled to reinstatement, but can obtain declaratory or injunctive relief and attorneys’ fees. The court’s
ruling encourages employers to comply with the law, but prevents employees from obtaining a “windfall” because
the employer would have made the same decision, anyway. Harris v. City of Santa Monica, 56 Cal.4th 203 (2013)
The court also specified that an employer is not liable for “discrimination in the air.” So, even if the supervisor in
Harris had a discriminatory motive, the employer would not be liable if the supervisor’s statements were unrelated
to the termination decision. The Harris case highlights the importance of ensuring employment decisions are not
influenced by a discriminatory motive.
Conduct Equal Employment Opportunity Training. Employers must train supervisors and managers on basic
EEO principles so they respond appropriately to situations that could lead to liability, such as notification of a
problem employee’s pregnancy.
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Provide Policies. Current, clear policies provide useful guidance to supervisors, managers and employees, and
help ensure consistent, fair employee discipline.
California courts recently provided employers with important guidance about the limits of “retaliation” claims when
employees file a complaint or participate in an investigation of a complaint:
• The Second District Court of Appeals dismissed an employee’s retaliation claim after he was fired for filing a
false harassment complaint against another employee. The court ruled that participating in the investigation
did not insulate the employee from discharge for conduct that warranted termination (i.e., lying or making
false accusations). Joaquin v. City of Los Angeles, 202 Cal.App.4th 1207 (2012)
• The Sixth Appellate District ruled that an employer could lawfully terminate an employee who refused to
participate in or cooperate with an internal investigation. The court reasoned that employees are protected for
revealing information, not for refusing to reveal it. McGrory v. Applied Signal Technology, Inc., 212 Cal.App.4th
• The Second District Court of Appeals ruled that the close proximity of an employee’s complaint to an adverse
action does not automatically suggest retaliation. In the court’s view, the employer had a legitimate reason for
firing an employee with a history of poor work performance. The fact that the employee complained of “race
discrimination” days before his discharge, on its own, did not suggest that the employer retaliated against
him. Baker v. Mulholland Security and Patrol, Inc., 204 Cal.App.4th 776 (2012)
Taken together, the cases illustrate that employers should make legitimate employment decisions, even in the
face of employee complaints.
Explain Investigatory Obligations. Employers should explain their commitment to investigating complaints, as
well as the consequences for dishonesty or failing to participate meaningfully.
Make Consistent Personnel Decisions. Employers should not be dissuaded from taking legitimate action
simply because an employee complains or participates in an investigation. Instead, employers can prevail in
retaliation claims when they show adverse actions are consistent and fair.
Wage and Hour
Wage-and-hour claims continue to create significant risk for employers, but courts provided some relief in this
area in the last year. A few important decisions relating to wage-and-hour issues are summarized below.
Meal and Rest Breaks
The California Supreme Court ruled that employers must “provide” off-duty meal periods to non-exempt
employees but need not “ensure” they take them. The court ruled that employers satisfy their obligation by: (1)
relieving employees of all duty; (2) relinquishing control over their activities; (3) permitting a reasonable opportunity
to take an uninterrupted 30-minute meal period; and (4) not impeding or discouraging employees from taking a
The court also explained the required timing of meal periods: the first meal period must begin before the end
of the fifth hour of work, with a second meal period (if applicable) beginning before the end of the tenth hour of
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Employers must also “authorize and permit” rest breaks of at least 10 minutes for every four hours worked or
“major fraction thereof,” which is more than two hours. However, an employer need not provide a rest period if
an employee works a total of three and half hours or less. As to the timing of rest breaks, the court held generally,
“one rest break should fall on either side of the meal break” for employees working an eight-hour shift. Brinker
Restaurant Corporation v. Superior Court, 53 Cal.4th 1004 (2012)
Improperly classifying employees as exempt from wage-and-hour laws can be a costly mistake. Luckily, courts
continue to provide useful guidance to help employers understand these exemptions:
• The U.S. Supreme Court ruled that pharmaceutical sales representatives may be properly classified as outside
salespeople under the Fair Labor Standards Act, even though they are legally prohibited from selling their
products to their clients (doctors). In so doing, the Court rejected a contrary position taken by the federal
Department of Labor. Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156 (2012)
• The Fourth District Court of Appeals ruled that employment recruiters may be properly classified as outside
salespeople. The recruiters in this case spent most of their time recruiting candidates for clients (“selling”)
and engaging in activities that were prerequisites to selling, such as searching for candidates and reviewing
resumes. The court further ruled that the exemption does not require that an employee’s commission be a
direct percentage of the employer’s profits. Muldrow v. Surrex Solutions Corporation, 202 Cal.App.4th 1232
• The Fourth Appellate District ruled that an employee may be exempt as a “personal attendant” under Wage
Order 15 even if the employee performs a few “health-related tasks,” such as taking vital signs and testing
blood sugar levels, as long as the employee does not spend more than 20 percent of work time performing
duties other than supervising, caring for and feeding the supervised person. Cash v. Winn, 205 Cal.App.4th
In three significant decisions for California employers, courts upheld the employers’ pay practices:
• California’s Wage Orders provide that if an employee reports for a usual or scheduled shift and works less
than half the shift, he or she is entitled to a minimum of at least two hours of “reporting time” pay. The Second
District Court of Appeals ruled that employees who report to work for regularly scheduled short meetings,
such as a 30-minute staff meeting, are entitled to be paid only for the hours they work, even if it is less
than two hours. Such employees are entitled to reporting time pay only if they “work” less than one-half the
shift (for example, less than 15 minutes for a 30-minute meeting). The court also explained how to properly
calculate when an employee is due a “split shift” premium (an extra hour of pay at minimum wage) when an
employee works two separate periods in one day. The court clarified that the employer need only pay the
premium when the employee’s compensation for the entire day is less than the minimum wage plus one
additional hour at the minimum wage. Aleman v. AirTouch Cellular, 209 Cal.App.4th 556 (2012)
• The Fourth Appellate District ruled that employers may implement a timekeeping policy that “rounds”
employee time to the nearest one-tenth of an hour so long as the policy is fair, neutral on its face and will not
unfairly favor the employer over time. See’s Candy Shops, Inc., v. The Superior Court Of San Diego County,
210 Cal.App.4th 889 (2012)
• The Second Appellate District ruled that an employer may lawfully pay vacation time at a reduced rate. The
court reasoned that such a practice does not violate the law because employers are not required to provide
vacation. However, the court also ruled that the employer could not refuse to pay employees for accrued but
unused vacation because vacation, once earned, is a vested “wage.” Bell v. H.F. Cox, Inc., 209 Cal.App.4th
5. Commission Agreements
Employers with commissioned employees must be aware of two recent developments in California law.
Effective January 1, 2013, California law requires written commission agreements signed by the employee and
the employer. However, the law generally does not apply to short-term productivity bonuses, temporary variable
incentive payments that increase but do not decrease under a written contract (e.g., special, short term sales
incentive programs), or bonus and profit-sharing plans. Labor Code sec. 2751
The Second District Court of Appeals ruled that commission “charge back” agreements are lawful. The
employer’s commission plan allowed it to recover (or “charge back”) commission payments to cell phone
salespeople if a customer disconnected his or her service during a specified period of time (the “charge back
period”). The court ruled that the commission payments were advances that did not become wages until the
conditions in the agreement were satisfied, including expiration of the charge back period. DeLeon v. Verizon
Wireless, LLC, 207 Cal.App.4th 800 (2012)
Know the Law. Because wage and hour laws change frequently and the potential risks of collective employee
lawsuits (such as class action lawsuits) are serious, employers must keep abreast of changes in this area.
Audit Wage Practices. To ensure compliance and take advantage of favorable new rulings, employers should
regularly audit their wage practices, either internally or with the help of experts in this field.
Employers continue to face resistance when attempting to enforce arbitration agreements in California. Unless
an agreement is clear, unambiguous and conspicuously presented to the employee, it will not be enforceable in
• The Third District Court of Appeals ruled that arbitration agreements contained in employment applications
are unenforceable. Wisdom v. AccentCare, Inc., 202 Cal.App.4th 591 (2012)
• The Second Appellate District ruled that employees are not bound by an arbitration clause contained in an
employee handbook that the employees never saw or agreed to. Sparks v. Vista Del Mar Child and Family
Services, 207 Cal.App.4th 1511 (2012)
• The Second Appellate District also ruled that independent contractors are not bound to agreements to
arbitrate claims under the California Labor Code. Elijahjuan v. The Superior Court of Los Angeles County, 201
Cal.App.4th 15 (2012)
The California Supreme Court recently granted review of several employment arbitration agreement cases,
including Wisdom, and will hopefully provide more guidance in this area.
Evaluate the Benefits and Costs of Arbitration. Although employers hope arbitration will resolve employee
disputes efficiently, they face increased costs when employees challenge the validity of the agreements.
Moreover, some employers find that even when they proceed to arbitration, the costs can meet or exceed the
cost of litigation.
Carefully Draft Arbitration Agreements. Given the difficulty of drafting enforceable arbitration agreements,
employers should work with expert legal counsel when doing so.
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6. Regulatory Enforcement
Several regulatory agencies, including the California Fair Employment and Housing Commission (FEHC), the
federal Department of Labor (DOL), the National Labor Relations Board (NLRB) and the California Department of
Industrial Relations (DIR), recently issued regulations or decisions that will create a significant impact on California
New Pregnancy and Disability Regulations
In December 2012, California’s FEHC (now replaced by the Fair Employment and Housing Council) issued
regulations addressing the state’s pregnancy disability leave (PDL) law and disability discrimination law.
Some of the significant revisions related to pregnancy include:
• An explanation of how employers must calculate the “four-month” period of leave guaranteed by the PDL law.
• A broader definition of when a woman is “disabled by pregnancy.”
• Changes to the written notices that employers are required to post and provide to employees who are
affected by pregnancy.
• Broader protections to pregnant employees, requiring not only time off but also transfer or other reasonable
• Mandatory reinstatement in almost all cases, and requiring employers to notify employees of available
vacancies for 60 days if they deny reinstatement.
• Clarifying that an employee who takes leave under the PDL law and leave under the California Family Rights
Act (CFRA) is entitled to continue health benefits through the entire PDL leave and the entire CFRA leave.
Some of the significant revisions related to disability discrimination include:
• An emphasis on potential accommodations and responsibilities, not on whether an employee is “disabled.”
• Broader definitions of terms “physical” and “mental” disability.
• Clarification that an employee has the burden in a discrimination case of proving that he or she is “qualified”
(i.e., can perform essential functions of the position, with or without accommodation).
• An explicit prohibition against requiring an employee to take leave as a reasonable accommodation when
another accommodation would be effective.
• A mandate to permit service animals in the workplace as a reasonable accommodation, including emotional
• A description of the interactive process and an explanation of the employer’s and employee’s obligations
as part of the process, including the affirmative obligation to engage in the process before denying an
Protected Leave Under the Family and Medical Leave Act (FMLA)
The federal DOL recently published new FMLA regulations, primarily impacting leave for military caregivers,
military servicemembers and airline flight crew employees.
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7. The new regulations:
• Extend military caregiver leave to eligible family members of recent veterans with a serious injury or illness
incurred in the line of duty.
• Extend military caregiver leave to cover serious injuries or illnesses for current service members and veterans
that result from aggravation of pre-existing conditions during service.
• Extend “qualifying exigency leave” to eligible employees with covered family members in the regular Armed
Forces, but require that servicemembers must be serving in foreign countries.
• Change the hours of service requirements for airline flight crew employees to qualify for FMLA.
• Provide specific rules for calculating the amount if FMLA leave used by flight crew employees.
The DOL also issued an “Administrator’s Interpretation” explaining the conditions under which an employee can
take FMLA leave to care for an adult child with a disability. The Interpretation provides that the broad definition of
“disability” under the Americans with Disabilities Amendments Act of 2008 also applies to FMLA leave to care for
a disabled adult child.
The DOL also clarified that the age of the child at the onset of the disability is not relevant for determining an
employee’s eligibility for leave.
NLRB Guidance for Non-Union Employers
The federal NLRB continues to issue guidance and rulings that affect non-union employers. However, the status
of recent NLRB rulings is in flux because in Noel Canning v. NLRB, a District of Columbia court invalidated the
appointments of some NLRB members. Although some legal experts believe the Noel Canning ruling invalidates
all NLRB rulings by those members, the NLRB takes the position that the ruling applies only to the specific case.
Social Media Policies
In May 2012, the NLRB released a report invalidating several employer social media policies because the policies
violated the National Labor Relations Act (NLRA). The NLRB explained that a social media policy violates the
NLRA if employees would reasonably construe the policy to prohibit “protected concerted activity” about the
terms and conditions of employment (called Section 7 activity); the policy was promulgated in response to union
activity; or the policy was applied to restrict employees from exercising their Section 7 rights.
The report includes a two-and-a-half page social media policy that the NLRB found did not violate the NLRA.
Employers seeking to avoid the NLRB’s scrutiny of their social media policies should consider using this NLRB-
approved policy. As this is an ever-changing area of the law, employers may also wish to seek the advice of legal
The NLRB approved the policy because its language:
• Prohibits using social media for “harassment, bullying, discrimination or retaliation.”
• Informs employees that they are “more likely” to resolve complaints by speaking with a co-worker or going
through company’s complaint procedure, rather than posting complaints online.
• Gives examples of “inappropriate postings,” such as specific threats of violence or discriminatory remarks.
• Instructs employees not to reveal trade secrets or confidential information, and defines what information is
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8. Internal Investigations
The NLRB found that requiring employees to not discuss with their co-workers information shared during an
internal investigation may violate Section 7. An employer may not impose a blanket rule requiring confidentiality in
all investigations, and must decide whether to require confidentiality on a case-by-case basis, taking into account
factors such as whether witnesses need protection; whether evidence may be destroyed; whether witnesses may
fabricate evidence; or there is a need to prevent a cover up. Banner Health System, 358 NLRB No. 93 (July 30,
Finally, the NLRB found that overbroad “at-will” disclaimers may infringe upon Section 7 rights because
employees may believe they cannot negotiate the terms of their employment. Thus, the NLRB invalidated an
at-will disclaimer stating that the employment relationship could not be “amended, modified, or altered in any
way,” but upheld one that allowed specific individuals within a company, such as the president, to alter the at-will
California’s “Underground Economy”
The DIR recently commissioned the Labor Enforcement Task Force (LETF) to combat California’s “underground
economy.” The underground economy is “unlawful business activity done ‘off the books’ to avoid providing
workers’ compensation insurance coverage, paying taxes and complying with basic safety requirements that
The LETF, in conjunction with Cal/OSHA and other regulatory agencies, increased inspections of businesses to
ensure compliance with California’s workplace laws.
In 2013, employers can anticipate that the courts and regulatory agencies will continue to break new ground in
interpreting and enforcing employment laws.
Because of the ever-changing landscape of employment law, employers must keep abreast of recent
developments, craft comprehensive compliance strategies, update policies and make sure to train staff regularly.
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