2004 LABOR AND EMPLOYMENT LEGAL UPDATE

1. 2004LABOR AND EMPLOYMENTLEGAL UPDATE Presented by: Jeffrey A. Dinkin Sheppard, Mullin, Richter & Hampton LLP

2. NEW LAWS FOR 2004 WAGE AND HOUR LEGISLATION

3. SB 796: Labor Code Private Attorney General Act of 2004 a/k/a The Bounty Hunter Bill

4. SB 796: The Bounty Hunter Bill • Effective January 1, 2004 • Provides a private right of action • For any provision of the Labor Code that provides for a civil penalty to be assessed and collected by the Labor Commissioner • Penalties may now, as an alternative, be recovered through a civil action brought by an aggrieved employee • On behalf of him/herself and other current or former employees

5. SB 796: The Bounty Hunter Bill • Adds a penalty to all Labor Code sections that do not already have a penalty provision • Penalty varies by number of employees at the time of the alleged violation: • if no employees - $500 • one or more employees: • $100 per employee per pay period for the initial violation • $200 per employee per pay period for subsequent violations

6. SB 796: The Bounty Hunter Bill • Successful plaintiff may recover reasonable attorneys’ fees and costs • Where the penalty goes: • If no employees– 50% to General Fund and 50% to the Labor and Workforce Development Agency • One or more employees – 50% to General Fund, 25% to Labor and Workforce Development Agency, 25% to the aggrieved employee(s)

7. SB 796: The Bounty Hunter Bill • So what does this mean? • Lawsuits for technical or trivial violations of the Labor Code • LC Section 431 (failing to file an application with the DLSE) • LC Section 432.5 (forcing employee to sign a document with a condition that is prohibited by law, e.g., a non-compete provision) • LC Section 1198.5 (inspection of personnel file)

8. SB 796: The Bounty Hunter Bill • So what does this mean? • Motivation for employees and attorneys to bring lawsuits for Labor Code violations • Employees get 25% of the penalties awarded • Their attorneys get their attorneys fees awarded • Collective actions that may not need to satisfy the typical requirements for a class action • More costly lawsuits for California employers

9. SB 796: The Bounty Hunter Bill • So what should employers do? • Review handbooks and policies for Labor Code compliance • Review practices for compliance • Educate and train supervisors • Don’t delay in correcting problems • Bill may be challenged as form of impermissible tax legislation

10. AB 223: New Rule for DLSE Appeals

11. AB 223: New Rule for DLSE Appeals • Effective January 1, 2004 • Overturns 2002 California Supreme Court decision (Smith v. Rae-Venter Law Group) • Labor Code Section 98.2 • Either party may appeal a Labor Commissioner decision • If the party seeking appeal is unsuccessful, must pay other side’s costs and attorneys’ fees

12. AB 223: New Rule for DLSE Appeals • Old Rule - Appealing party is only “successful” if court’s ruling on appeal is more favorable to the appealing party • Example: • Employer appeals award of $500 to employee • Court awards $300 to employee • Employer is “successful” and does not pay employee’s fees and costs

13. AB 223: New Rule for DLSE Appeals • New Rule - Employee who appeals is “successful” if the court awards an amount greater than zero • Examples: • Employee appeals $100 award to employee • Employee recovers $105 - employee is successful and will be awarded fees and costs • Employee recovers $10 - employee is successful and will be awarded fees and costs • Employee recovers ZERO - employee is unsuccessful and will not be awarded fees and costs

14. AB 223: New Rule for DLSE Appeals • New Rule - Employer that appeals is “successful” only if court award is zero • Examples: • Employer appeals $100 award to employee: • Employee gets $105 on appeal - employer is unsuccessful and must pay employee’s fees and costs • Employee gets $10 on appeal - employer is unsuccessful and must pay employee’s fees and costs • Employee gets ZERO on appeal - employer is successful and is not required to pay employee’s fees and costs

15. AB 223: New Rule for DLSE Appeals • So what does this mean? • Employers should carefully consider whether to appeal a DLSE award • Employers should strongly defend all claims at the DLSE hearing stage • Do not wait for appeal to make your best arguments!

16. AB 276: Increased Labor Code Penalties

17. AB 276: Increased Labor Code Penalties • Effective January 1, 2004 • Amends various Labor Code Sections to provide for increased penalties • LC Section 210 – penalties for violation of Sections 204, 204b, 204.1, 204.2, 205, 205.5, 1197.5 (payment of wages requirements) • old penalty - $50/$100 • new penalty - $100/$200

18. AB 276: Increased Labor Code Penalties • LC Section 225.5 – penalties for violation of Sections 212, 216, 221, 222, 223 (failure to properly pay wages) • old penalty - $50/$100 • new penalty - $100/$200 • LC Section 1197.1 – failing to pay minimum wage • old penalty – $50 per employee per pay period • new penalty – $100 per employee per pay period • subsequent violations – remains $250 per employee per pay period

19. AB 276: Increased Labor Code Penalties • Amends Labor Code Section 226 (itemized wage statements furnished to employees) • Itemized statements must not only be provided, but now must also be “accurate” • Does not change penalties: • $50 per employee per pay period for initial violations • $100 per employee per pay period for subsequent violations • aggregate maximum penalty of $4,000 • $750 penalty for failure to provide requested records

20. AB 276: Increased Labor Code Penalties • So what does this mean? • Employers must continue to be vigilant in complying with California’s wage and hour provisions • Wage statements must satisfy all nine requirements in Labor Code Section 226

21. SB 179: Liability for Companies Entering Into Service Contracts

22. SB 179: Liability for Companies Entering Into Service Contracts • Applies to companies or individuals who enter into labor contracts for construction, farm labor, garment, janitorial or security guard services • Liability and civil penalties if knew or should have known that contract does not provide funds sufficient to allow the labor contractor to comply with all applicable laws or regulations governing the labor or services to be provided under the contract.

23. SB 179: Liability for Companies Entering Into Service Contracts • Rebuttable presumption that no violation of law where the contract meets 10 requirements. • These 10 requirements must be contained in a single written documents and are: 1. Name, address and telephone number of contracting parties;

24. SB 179: Liability for Companies Entering Into Service Contracts • Description of services to be provided and statement of when services to be commenced and completed; • Contractor’s employer identification number; • Contractor’s workers’ compensation insurance policy number and carrier’s name address and telephone number;

25. SB 179: Liability for Companies Entering Into Service Contracts • Vehicle identification number of any vehicle owned and used by contractor in connection with contract services and information about vehicle liability insurance policy; • Address of any real property used to house workers in connection with contract; • Total number of workers to be employed under contract, total amount of all wages to be paid, and dates when wages are to be paid;

26. SB 179: Liability for Companies Entering Into Service Contracts • Amount of commission or other payment made to contractor; • Total number of persons to be utilized under contract as independent contractors and list of their license numbers; and • Signatures of contracting parties and date contract signed.

27. SB 179: Liability for Companies Entering Into Service Contracts • So what does this mean? • Ensure that future labor contracts for construction, farm labor, garment, janitorial, or security guard services contain the 10 essential provisions for the rebuttable presumption

28. New Rates Effective 2004 • IRS Mileage Reimbursement Rate • 37.5¢ per mile (up from 36¢) • Minimum Pay for Exempt Computer Software Employees • $44.63 per hour (up from $43.58) • Minimum Pay for Exempt Licensed Physicians • $ 57.56 per hour (up from $56.21)

29. SB 420: Medical Marijuana and the Workplace • Employers are not required to accommodate the medical use of marijuana at the workplace or during work hours • Health insurers are not required to provide reimbursement for the medical use of marijuana

30. NEW LAWS FOR 2004 INSURANCE LEGISLATION

31. SB 2: Health Insurance Act of 2003

32. SB 2: Health Insurance Act of 2003 • Mandated health insurance coverage paid for by employers. • Will affect about 860,000 employees and dependents of companies with 50 or more employees • About 18% of 4.5 million uninsured Californians • Cost estimate $1.3 billion (CMA) to $11.3 billion (Employment Policies Institute)

33. SB 2: Health Insurance Act of 2003 • Effective dates: • January 1, 2006 for employers with 200 or more employees • January 1, 2007 for employers with 50 to 199 employees • January 1, 2007 for employers with 20 to 49 employees (goes into effect only if tax credit in place)

34. SB 2: Health Insurance Act of 2003 • “Pay or Play” System • Requirements for large employers (200+) • Pay fee to EDD to provide health coverage for each employee and qualified dependent • Qualified dependents include spouses, dependent children and domestic partner • Or provide appropriate healthcare coverage for employees and qualified dependents

35. SB 2: Health Insurance Act of 2003 • Requirements for medium-sized employers (50-199; 20-49 if tax credits) • Pay fee to EDD to provide health coverage for each employee • Or provide appropriate healthcare coverage for employees • Exemption for small employees with less than 20 employees

36. SB 2: Health Insurance Act of 2003 • Eligibility requirements • Coverage must be provided or fee paid if employee worked • Minimum of 3 months; and • At least 100 hours per month • Average of 23 hours per week

37. SB 2: Health Insurance Act of 2003 • Employee Costs • Employees can be required to pay up to 20% of premium costs • Exception where employees make less than 200% of Federal Poverty Level • Can only be required to contribute up to 5% of wages • Exception where coverage provided for employee and dependents and employer pays more than 80% of employee coverage costs • Can require employee to pay more than 20% of coverage costs

38. SB 2: Health Insurance Act of 2003 • Actual implementation of SB 2 not certain • Referendum sponsored by Chamber of Commerce • State litigation based on unlawfully imposed tax without required 2/3rd vote in legislature • Federal litigation based on ERISA preemption • Legislative action

39. AB 226: Life Insurance Policies for Non-Exempt Employees

40. AB 226: No Employer-Owned Policies for Non-Exempt Employees • Effective January 1, 2004 • Employers can no longer purchase life insurance designating the employer as the beneficiary for current or former non-exempt California employees • Existing policies will remain in effect only if no premium payments need be made after January 1, 2004, and then only remain in effect until January 1, 2010 • Notice required to affected non-exempt employees

41. AB 226: No Employer-Owned Policies for Non-Exempt Employees • So what does this mean? • Determine status of existing insurance policies covering non-exempt employees • Confirm exempt status of employees covered by employer-owned life insurance policies

42. NEW LAWS FOR 2004 TIME OFF LEGISLATION

43. SB 1661: Paid Family Leave

44. SB1661: Paid Family Leave • New program – Paid Family Leave (PFL) • a component of State Disability Insurance (SDI) • Provides up to 6 weeks of State payments for individuals unable to work due to: • need to care for sick or injured child, spouse, parent, domestic partner, or • need to care for new child (birth, adoption, foster care placement) • includes birth of domestic partner’s child

45. SB1661: Paid Family Leave • January 1, 2004 • Law goes into effect • Employees start contributing • .08% on first $68,829 of wages • In addition to 1.1% SDI employee contribution • New notice must be given to employees hired after January 1, 2004. • Form DE 2511 (“Paid Family Leave”) • go to: www.edd.ca.gov/direp/difla.htm

46. SB 1661: Paid Family Leave • July 1, 2004 • Individuals can begin receiving PFL benefits • Notice must also be provided to each employee who leaves work to care for a seriously ill family member or to bond with a new child

47. SB1661: Paid Family Leave • Limits on benefits • No PFL if receiving other benefits from State (unemployment, disability, etc.) • No PFL if another family member is able and willing to provide care • 7 day waiting period • Employers can require employees to use 2 weeks accrued vacation

48. SB1661: Paid Family Leave • Benefit right, not a leave of absence right • PFL provides benefits where an individual is unable to work because of a need to care for family member • PFL does not require employers to grant leaves of absence • Employee’s right to a leave of absence will depend on state and federal leave laws (FMLA. CFRA, PDL, etc.) or an employer’s policies

49. SB1661: Paid Family Leave • So what does this mean? • Print out copies of the Notice and start providing to new employees as of January 1, 2004, and employees leaving work for family reasons as of July 1, 2004 • Revise handbook to address PFL issues • Vacation, sick leave coordination, overlap with FMLA/CFRA, notice, return to work • Make sure your payroll is ready to start making tax deductions as of January 1, 2004

50. SB 478: Time Off to Attend Judicial Proceedings