New California Employment Laws for 2003

By Emilio G. Gonzalez
[December 2002]

Legislation signed by Governor Davis this year will markedly expand the rights and benefits of California workers. The new laws make California the first state in the nation to provide paid leave to employees taking time off to care for a sick family member or bond with a new child. New legislation also makes certain absenteeism policies automatically illegal, and imposes additional obligations on California employers undergoing mass layoffs or terminations. Summary judgment procedures have been toughened for moving parties (usually the employer), which may increase the risks and expense of protracted litigation.

Here is a summary of new laws most likely to place additional burdens on, and create pitfalls for, California employers, followed by suggestions on how to ensure compliance and minimize the risk of violations:

Sick Leave: New Limitations on Absentee Reduction Policies (Senate Bill ("SB") 1471, amending Labor Code Section 232)

Under existing law, employers who provide sick leave must allow employees to use the sick leave the employee would accrue in a six-month period each year to take care of an ill child, parent, spouse or domestic partner. New Labor Code section 234 makes it automatically illegal for an employer to count these "protected" sick leave days as an absence that may lead to discipline, demotion, discharge or suspension.

• Paid sick leave under this new statute encompasses any paid time off, including vacation days and personal days where the employer's policy allows employees to use that time off to care for an employee's personal illness or injury. Thus, employees may abuse this new law by labeling a personal day or a vacation day as "protected" sick leave under this statute, thereby undermining an employer's absence control policy. Employers may want to specifically state that vacation days are not to be used for personal illness or injury.
• Since the law only prohibits "discipline, demotion, discharge or suspension," employers should be free to count sick days off for the purpose of determining, and rewarding, good attendance.

Family Leaves: Employees Entitled to Paid Leave to Care for Sick Family Members and to Bond with a New Child (SB 1661, adding Unemployment Insurance Code sections 3300 - 3305 and amending Sections 984, 2116, 2601, 2613, 2708, and 3254)

California is the first state in the nation to establish family temporary disability insurance, or FTDI, to provide up to six weeks of wage replacement benefits to workers who take time off to care for a seriously ill child, spouse, parent, or domestic partner, or to bond with a new child. These additional benefits, which will be available for leave taken on or after July 1, 2004, will apply to all employers, regardless of the number of employees, and will be funded through an increase in the amount contributed by employees to the State Disability Insurance fund.

• Employees entitled to leave under the FMLA and the CFRA must take such leave concurrently with the paid leave and employers must continue to hold the job open while the employee is on leave. However, employers not subject to the FMLA and CFRA (such as employers with fewer than 50 employees) will not be required under this new law to hold a job open for the individual taking the paid time off. Also, employers will be allowed to require employees to use up to two weeks of earned but unused vacation or paid time off prior to that employee's use of these additional benefits.

Statutes of Limitations: Employees Granted More Time to Bring Lawsuits; Employers Given Less Time to Build Their Defense (SB 688, adding Code of Civil Procedure Sections 3351.1 and 340.10, and amending Section 437c; and Assembly Bill ("AB") 1146, amending Section 12965 of the Government Code)

Two bills extend the time within which employees may file civil lawsuits. AB 1146 allows an employee to file a suit more than one year after receiving a right to sue letter from the Department of Fair Employment and Housing (DFEH) in certain situations if the employee also filed a claim with the Equal Employment Opportunity Commission (EEOC). Prior to the enactment of this legislation, employees were required to file a civil action within one year of their receipt of the right to sue letter. The second bill, SB 688, doubles the statute of limitation for personal injury claims, including employment-related claims, from one year to two years. In addition to the statute of limitations extension, SB 688 also requires summary judgment motions to be filed 75 days (instead of 28 days) prior to the hearing date.

• These changes will make defending employment lawsuits more challenging for employers. In some instances, an employer will not be alerted to the existence of a claim until up to two years after the incident triggering the lawsuit. This may make it more difficult to find favorable fact witnesses, since such witnesses may no longer be employees and may be difficult to reach.
• Documenting employment decisions or complaints of wrongdoing thoroughly and objectively becomes all the more important with these new, longer statutes of limitations. Employers should also make sure that their personnel record retention policies account for the extra time given to employees to bring their claims, since the employee who sues the employer is entitled to the presumption that personnel records destroyed by the employer contained information favorable to the employee's case.
• The new summary judgment rules will dramatically accelerate the discovery phase of litigation since the longer notice period will shorten the amount of time employers will have to prepare their cases for summary judgment by requiring that such motions be filed at least 105 days prior to the trial date. (Hearings on summary judgment motions must be heard at least 30 days before trial.) The 75-day notice period will also give the plaintiffs' attorneys substantial additional time to conduct discovery specifically directed at defeating the motion for summary judgment.

Discrimination: Older Workers Obtain Added Protection Under FEHA (AB 1599, amends Government Code sections 12940 and 12941.1, and deletes section 12941)

AB 1599 overturns the California Supreme Court's decision in Esberg v. Union Oil Company, which narrowly interpreted the age discrimination prohibitions of FEHA to permit issuing tuition reimbursement to selected employees based on age. The new law expands FEHA's protections based on age to all terms, conditions and privileges of employment. It also deletes Government Code section 12941, which required that an employee be over 40 years old to establish a prima facie case of age discrimination.

• Despite the fact that the new law specifies its goal is to protect "older workers" as individuals and as a group, AB 1599 seems to open the door for employees of any age to bring an action for age-based discrimination. For example, younger employees may be able to argue that they were victims of adverse actions based on their youth. Employers should review all employee benefits to make sure that they are age-neutral, and should avoid age-oriented comments.

WARN: California Law Imposes Duty to WARN on Employers of 75 or More (AB 2957, adds Chapter 4 (commencing with Section 1400) to Labor Code, Div. 2, Part 4)

This new bill adopts requirements broader than those existing in the federal Worker Adjustment and Retraining Notification Act (or WARN). Federal law requires that businesses who employ 100 or more employees (as defined by statute) must give 60 days' notice of any plant closing or mass layoff that will affect 50 or more employees at a single site within any 90-day period. California law now requires that employers of 75 or more employees (as defined by the statute) provide 60 days' written notice prior to a "mass layoff," "relocation" or "termination" of business that will affect 50 or more employees within a 30-day period. Under the new California law, a parent corporation is included in the definition of "employer" as to any covered establishment and is thus obligated to ensure that its qualifying subsidiaries (i.e., subsidiaries with 75 or more employees) comply with the new law regarding mass layoffs.

• The new law provides for damages in the form of back pay and lost benefits, and a civil penalty of $500 per day for each day of violation. Attorney's fees also are potentially recoverable. The California law does not apply in certain specified circumstances, including the completion of projects in certain industries, in the event that workers were specifically hired as temporary employees, or where a business is sold and the employees are retained in their positions by a company of a different name. If your company employs more than 75 people, you should consult an employment lawyer several months before laying off workers, relocating workers, or terminating your business.

Record Retention: Employers Required to Provide Payroll Records Within 21 Days (AB 2412, amending Labor Code Section 226)

While Section 226 of the California Labor Code currently requires an employer to permit current and former employees to inspect and copy certain payroll records, it does not specify a time within which to provide such access. Section 226 is amended to require employers to comply with a request to view payroll records within 21 calendar days from the employee or ex-employee's written or oral request.

• The new law subjects employers who fail to comply with this new obligation to a $750 penalty. The bill also allows an employee to recover actual or statutory damages, sue for injunctive relief, and recover costs and reasonable attorneys' fees associated with a suit to enforce rights under this statute.

Benefits: Cal-COBRA Extends Continuation of Coverage of Health Benefits for Employees to 36 Months (AB 1401, adding and amending several Health and Safety Code Sections)

AB 1401 expands Cal-COBRA in several respects. Effective for all individuals who begin receiving Cal-COBRA coverage on or after Jan. 1, 2003, all qualifying events (termination, disability, divorce, etc.) will entitle the employee or dependent to up to 36 months of continuation coverage. Also, employees who commence federal COBRA coverage on or after Jan. 1, 2003 and exhaust their federal continuation coverage (which in some instances may last only for 18 months after termination of employment) must be given the opportunity to extend their coverage to a total of 36 months. In addition, the law requires group contracts issued after Sept. 1, 2003 to include a right to convert to individual coverage, and makes it the employer's responsibility to notify employees of the availability of this conversion right.

• One likely result of the extension created by this legislation is that it may increase insurance rates for employers. Every study has shown that COBRA beneficiaries' claims run about 50 percent higher than the average for active employees. So if plans have to cover COBRA beneficiaries for longer periods, presumably it will raise the cost of coverage for the employer.

Privacy: Employer Not Always Obligated to Provide Employee with a Copy of an Investigative Report (AB 1068, amending Civil Code Section 1786.53)

One of the few developments easing obligations on employers, this amendment, effective as of Oct. 1, 2002, clarifies the obligations of employers who obtain information on an employee without going through an outside investigative agency. Now, employers who conduct their own background checks (instead of using a consumer reporting agency) do not need to provide a copy of the report or information to the employee unless the information is a public record, such as a DMV report or criminal conviction history.

• Prior to the amendment, an employer that prepared its own investigative report, or "background check," on an employee was required to provide the employee with a copy of that report. Although this amendment brings California's Investigative Consumer Reporting Agencies Act closer to the federal Fair Credit Reporting Act (FCRA) which requires that the employer provide only a written disclosure of the "nature and scope of the investigation requested" upon a written request by the employee), there are still significant differences between FCRA and California law. Employers should consult with counsel prior to initiating any background checks.

Leave Law: Employers Must Grant Special Leave to Sexual Assault Victims (AB 2195, amends Labor Code sections 230 and 230.1)

Labor Code section 230, which prohibits employers of 25 or more employees from taking adverse action against employees who are victims of domestic violence (and who take time off from work to seek medical attention, counseling or other assistance to deal with issues arising from such violence), has been expanded to provide the same protections to victims of sexual assault.

• Covered employees are required to provide reasonable notice of their need for leave and must provide documentation to support unforeseen absence. Leave granted under this section may not exceed the 12 weeks provided by the Family and Medical Leave Act.

OTHER NEW STATUTES AFFECTING CALIFORNIA EMPLOYERS

References: Employers Free to State Whether or Not They Would Re-Hire Current or Former Employee (SB 2868, amending Civil Code Section 47)

Under existing law, employers are protected from libel or slander suits for statements made without malice regarding the job performance or qualifications of a current or former employee. As amended, Section 47 of the Civil Code extends the protection from civil action to employers by specifically providing that an employer, if asked, may inform a prospective employer whether or not it would rehire an employee.

Privacy: Electronic Data Security Breach (SB 1386)

Employers that own or license computerized data containing personally identifiable information on employees or customers (such as Social Security Numbers) must notify employees of any security breach of electronic files containing information on their employees.

Immigration: Undocumented Workers Protected (SB 1818)

In March 2002, the U.S. Supreme Court ruled that federal immigration law precluded back pay awards to undocumented workers, even though they might be the victims of unfair labor practices. This new law protects the rights of undocumented workers as employees and applicants for employment for the purpose of enforcing state labor, employment, and civil rights laws, limiting the effect of the U.S. Supreme Court decision.

Privacy: Working Conditions May No Longer Be Kept Secret (AB 2895, amends Labor Code section 232 and adds section 232.5)

Under existing law, employers are prohibited from requiring employees to keep confidential the amount of their wages, or from taking adverse action based on any such disclosure. The new law extends this same protection to information about working conditions and prohibits employees from waiving their right to disclose such information. Under the new law, any adverse action based on these reasons is prohibited, whether or not it adversely affects an employee's advancement in his or her job.

Occupational Safety (AB 2837)

Creates new obligations and penalties for failure to report industrial accidents on a timely basis that resulted in serious injury or death.

REMINDER: Certain Licensed Physicians and Surgeons and Computer Software Employees Are Exempt From the State's Overtime Requirements

As of Jan. 1, 2003 computer software employees earning more than $43.58 per hour and physician and surgeon employees earning more than $58.46 per hour are exempt from California's overtime requirements.

Any questions about this Advisory should be directed to:

Emilio G. Gonzalez, Los Angeles, (213) 633-6800, emiliogonzalez@dwt.com
Stuart W. Miller, San Francisco, (415) 276-6584, stuartmiller@dwt.com

This Employment Law Advisory is a publication of the Employment Law Department of Davis Wright Tremaine LLP. Our purpose in publishing this Advisory is to inform our clients and friends of recent developments in employment law. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations. Copyright © 2002, Davis Wright Tremaine LLP.

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