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Significant New California Employment Laws for
2004
By Stuart
W. Miller
[Dec. 2003]
Prior to his recent replacement by Governor Schwarzenegger, former
Governor Gray Davis signed numerous bills which will impact California
employers. Key bills are as follows:
Mandatory Health Care Coverage for Employees (SB 2)
The Health Insurance Act of 2003 requires that employers provide
health insurance to employees or make contributions to a state entity
that will obtain insurance. Eligible employees must work at least
100 hours per month and have worked for the employer for at least
three months.
Employers with 200 or more California employees must pay at least
80 percent of the health insurance premiums for those workers and
their dependents by Jan. 1, 2006 or contribute amounts yet to be
determined to the State Health Purchasing Program. Employers with
20 to 199 employees working in the state must provide such insurance
benefits or make payments to the Program, for employees but not
their dependents, by January 1, 2007. However, employers with between
20 and 49 employees in the state need not comply unless the Legislature
authorizes a tax credit equal to 20 percent of the employer's net
cost of the fee. Employees with fewer than 20 employees in California
are exempt.
The employee contribution may not exceed 5 percent if his or her
wages are less than 200 percent of federal poverty guidelines. An
employer with 50 to 199 California employees may require an employee
to contribute more than 20 percent of the cost of coverage if (a)
the employer’s insurance program includes coverage for dependents,
and (b) the employer’s contribution exceeds 80 percent of
the cost of coverage for an individual employee.
The California Chamber of Commerce, which vigorously opposed SB
2, is seeking a statewide voter referendum on the new law and also
intends to legally challenge SB 2 as preempted by ERISA.
For additional information about SB 2, see "The
Health Insurance Act of 2003:
California's "Pay or Play" Universal Health Coverage."
Employer Liability for Sexual Harassment by Non-Employees (AB 76);
New Employer Defense under FEHA to Sexual Harassment by Supervisors
Employers are now liable for sexual harassment of their employees
or contractors providing services in the workplace, committed by
non-employees including customers and suppliers, if the employer,
or its agents or supervisors, knows or should have known of the
harassment and fails to take immediate and appropriate corrective
action. In evaluating such claims, the court must consider the extent
to which the employer has control over, and any legal responsibility
for, the conduct of the non-employee harasser.
On a related matter, the California Supreme Court recently held
in State Department of Health Services v. Superior Court
that although an employer is strictly liable under the state Fair
Employment and Housing Act (FEHA) for hostile environment sexual
harassment by a supervisor, the employer may avoid or reduce a damage
award based on the doctrine of avoidable consequences.
This requires the employer to prove each of the following: (1)
the employer took reasonable steps to prevent and correct workplace
sexual harassment; (2) the employee unreasonably failed to use the
preventive and corrective measures that the employer provided; and
(3) reasonable use of the employer’s procedures would have
prevented at least some of the harm that the employee suffered.
This new decision and AB 76 reconfirm the importance of taking,
as required by FEHA, “all reasonable steps to prevent harassment
from occurring,” including periodically training all supervisors
and other employees about the employer’s anti-harassment policy,
and taking prompt, appropriate corrective action to address actual
or suspected acts of harassment.
Family Temporary Disability Insurance; New Withholding Rate Takes
Effect January 1, 2004
Enacted in 2002, this law provides up to six weeks of wage replacement
benefits in a 12 month period 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. The statute is described in our Employment
Law Advisory, “New
California Employment Laws for 2003.”
This benefit is available for leaves taken on or after July 1,
2004. However, the benefit is funded through an increase in the
amount contributed by employees (not by employers) to the State
Disability Insurance (SDI) Fund starting Jan. 1, 2004. That increase
is 0.08 percent for 2004 and 2005. The State Employment Development
Department (EDD) has announced an SDI withholding rate for 2004
of 1.18 percent, which includes 0.08 percent for Family Temporary
Disability Insurance. The EDD’s website (www.edd.ca.gov)
currently states that the EDD will combine the Unemployment Insurance
(UI), Employment Training Tax (ETT) and SDI rates in a single Notice
of Contribution Rates and Statement of Unemployment Insurance Reserve
Account, to be mailed to employers in December 2003.
Protection for Whistleblowers (SB 777)
SB 777 is modeled on the federal Sarbanes-Oxley Act. It prohibits
employers from retaliating against an employee for disclosing information
to a governmental or law enforcement agency, if the employee has
reasonable cause to believe that the information discloses a violation
of a state or federal statute or regulation. SB 777 also prohibits
an employer from retaliating against an employee for refusing to
participate in an activity that would result in such a violation.
The statute imposes penalties of up to $10,000 per violation. It
requires the State Attorney General to establish a whistleblower
hotline to receive calls from persons who have information about
possible violations of state or federal statutes or regulations,
or violations of fiduciary responsibility by a corporation to its
shareholders, investors or employees. The Attorney General must
refer calls to the appropriate governmental authority for review
and possible investigation.
SB 777 requires employers to prominently display, in lettering
larger than size 14 pica type, a list of employee rights and responsibilities
under the statute, including the telephone number of the whistleblower
hotline, (800) 952-5225. The California Chamber of Commerce’s
new multi-part “California 2004” poster for employers
includes a section describing those rights and responsibilities
and stating the hotline number.
Labor Code Private Attorneys General Act of 2004 (SB 796)
This new law should more accurately be entitled the “Plaintiffs’
Employment Attorneys’ Full Employment Act of 2004.”
It authorizes aggrieved employees to file lawsuits, on their own
behalf and on behalf of coworkers, against employers who violate
any provision of the voluminous California Labor Code, excluding
matters governed by the workers’ compensation system, and
to recover attorneys’ fees and a portion of the civil penalties.
If the Labor Code provision at issue does not set forth a civil
penalty (as is frequently the case), the statute imposes a penalty
of $100 for each aggrieved employee per pay period for an initial
violation, and $200 for each subsequent violation. The statute is
more fully addressed in a recent DWT
Employment Law Advisory.
Penalties Doubled for Failing to Pay Wages Due or for Unlawfully
Withholding Wages (AB 276)
AB 276 doubles the penalty, from $50 to $100 for a first violation,
and from $100 to $200 for a subsequent or intentional violation,
if an employer fails to pay or unlawfully withholds wages due. There
are other more substantial penalties under the Labor Code for wage
and hour violations, including those in the Labor Code Private Attorneys
General Act of 2004 (discussed above) and “waiting time penalties”
equal to 30 working days’ wages (typically six weeks’
wages) for failing to pay all wages due immediately upon termination
of employment.
Recovery of Attorneys’ Fees and Costs on Appeal of Labor Commissioner
Awards (AB 223)
The California Labor Code provides that either party may appeal
to Superior Court from a decision by the Labor Commissioner concerning
a claim for wages. The appeal is a “de novo” appeal,
which means that the parties get a fresh start with the court, and
the findings and record before the Labor Commissioner must be disregarded
on appeal. However, the Labor Code states that if the appealing
party is unsuccessful on appeal, it must pay the other party’s
costs and reasonable attorneys’ fees incurred in the appeal.
In 2002, the California Supreme Court construed that provision
to mean that an employer is “successful” on appeal if
the court’s award to the employee is any amount less than
the Labor Commissioner’s award. However, AB 223 reverses that
decision by changing the statute to provide that “[a]n employee
is successful if the court awards an amount greater than zero.”
In other words, if the Labor Commissioner awards the employee $50,000
and the court, after an appeal by the employer, awards only $10,
the employee is nevertheless deemed to be “successful”
and is entitled to recover all of the employee’s reasonable
attorney’s fees and costs incurred in connection with the
appeal.
Time Off for Victims of Crime or Family Members (SB 478)
This statute requires an employer to allow an employee who is the
victim of certain crimes, or the immediate family member of the
victim, or a registered domestic partner of the victim, to be absent
from work in order to attend judicial proceedings related to that
crime. The statute places no cap on the duration of the absence,
and applies to violent felonies, felony theft and embezzlement and
other serious felonies. An employer may not discriminate against
an employee who is absent from work for this reason. The employee
may elect to use vacation, PTO or sick leave that is otherwise available,
or unpaid leave time.
For further information about this new legislation or other
California employment law matters, please contact:
Stuart
W. Miller, San Francisco, (415) 276-6584, stuartmiller@dwt.com
Emilio
G. Gonzalez, Los Angeles, (213) 633-6829, emiliogonzalez@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 © 2003, Davis Wright Tremaine
LLP.
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