The New Year brings with it a cavalcade of new statutes and cases that California employers will need to understand and incorporate to avoid the ever growing minefield of employer liability. Below is a summary of the key developments, followed by suggestions on how to ensure compliance and minimize the risk of violations.

EMPLOYMENT RELATED STATUTES EFFECTIVE 2002

"NO MAS" ENGLISH-ONLY (AB 800)
Section 12951 of the Government Code makes it unlawful for an employer to adopt or enforce a policy that prohibits the use of any language in the workplace. Although there is an exception where the prohibition is based on a "business necessity," the definition of a business necessity is strict and narrow and will apply only where English-only is necessary for safety reasons and there is no reasonable alternative to the language restriction.

• English-only policies will be strictly scrutinized and employers who have expressly adopted an English-only policy should check with counsel to make sure that it qualifies as a business necessity. Also, employers should also make sure that none of their managers are enforcing an "unwritten" English-only policy.

BAD BEHAVIOR OUTSIDE OF WORK NO BASIS FOR TERMINATION (AB 1015)
Employers may not terminate an employee who engages in "objectionable" behavior outside of the workplace if the behavior is not unlawful. There is an exception for conduct that is "actually in direct conflict with the essential enterprise-related interests of the employer" where the conduct "would actually constitute a material and substantial disruption of the employer's operation." (See Section 98.6 of the Labor Code.)

• It is unclear how courts will interpret "direct conflict" and "material and substantial disruption." While it is probably safe to say that a restaurant may not fire a waiter if he moonlights as a stripper, it is a closer call where a substance abuse counselor may also work as a bartender. An employer who wants to discipline or fire an employee for conduct or activities outside of work that it deems objectionable, and in direct conflict with its enterprise, should first consult with counsel.

BAD BEHAVIOR OR PRIOR CLAIM NO BASIS FOR REJECTION OF EMPLOYMENT APPLICANT (AB 1015)
A second amendment to section 98.6 of the Labor Code (discussed above) prohibits employers from discriminating against a job applicant who has previously filed a complaint with the Labor Commissioner or has engaged in any lawful conduct which the prospective employer finds objectionable.

• Again, there is the same exception for "direct conflict with the essential enterprise of the employer" and "material and substantial disruption of the employer's operation", and the same uncertainty as to how those terms will be interpreted by the courts. Employers should avoid asking questions or making statements during the interview process that may give rise to an inference that the failure to hire the applicant was related to the conduct discussed. Employers can require applicants and employees to sign provisions agreeing not to do anything that directly conflicts with their "essential enterprise."

POTENTIAL PENALTY FOR EMPLOYERS OF DEAD-BEAT PARENTS
Increasingly, employers may bear the burden for irresponsible employees. Employers who willfully fail to comply with an earnings assignment order (issued by a court to enforce child support payments by an employee) or have otherwise failed to comply with the assignment order 3 times within a 12-month period, may be ordered to allow automatic electronic payments directly from the employer's bank account. In addition, the amendment to Section 5241 of the Family Code subjects employers to a civil penalty of up to 50% of the support amount that has not been received by the obligee. Such order may be obtained by child support obligee or the local child support agency.

• Employers should have a procedure by which they can keep track of, and comply with, any earnings assignment order, as even a good-faith mistake may result in automated withdrawals and a penalty. If there is any uncertainty as to the need to make a payment, the employer should contact counsel.

DON'T USE THAT NUMBER: LIMITATIONS ON THE USE OF SOCIAL SECURITY NUMBERS (SB 168).
A new law aimed at protecting consumers from identity theft will prohibit businesses from many current uses of Social Security numbers. Section 1798.85 is added to the Civil Code to prohibit any person or entity from, among other things, posting an individual's Social Security number publicly, printing it on a letter (or a bill) to the individual, or requiring it for access to products or services. (This law does not prevent the use of Social Security numbers as required by state or federal law or the use of a Social Security number for internal verification or administrative purposes.) This law has various implementation schedules (beginning July 1, 2002) and permits continued use of SSNs for those already doing so until July 1,2002 under specified conditions involving continuity and disclosure. A specific implementation schedule is provided for hospitals (which tend to use SSNs to identify their patients), with a later initial implementation date for hospitals of January 1, 2003.

• This is a complex and vague law that raises a plethora of questions regarding continued permissive use of Social Security numbers and the scope of the "internal administration" and "administrative purpose" exceptions. Employers who use Social Security numbers as employee identification numbers should consider converting to a different identification system. Contact counsel for a more thorough analysis of how this new law may impact you.

DOMESTIC PARTNERS TO BE TREATED AS SPOUSES (AB 25)
Employers now have a legal obligation to extend certain benefits to unmarried couples who have registered as domestic partners. Amendments to Civil Code Section 1714.01 may result in significant additional administrative burdens and expenses for many employers. For example, an employer must allow an employee to use sick leave to attend to an ill domestic partner or child of a domestic partner. Domestic partners are now eligible for continued health coverage upon the death of the employee or annuitant if the domestic partner is receiving a beneficiary allowance. A domestic partner is now allowed to make a disability claim on behalf of a mentally disabled partner. The new law also makes the act of accompanying one's domestic partner to a place from which it is impractical to commute and to which a transfer by the employer is not available "good cause" for quitting a job and thus not grounds for disqualification from receiving unemployment benefits. The domestic partnership law covers not only same-sex couples, but also heterosexual couples over 62 years old.

• Employers should make sure that any benefit request or application forms include language necessary to allow domestic partners the benefits provided by this new law. Employers may also want to communicate the extended coverage to their employees in their policies and handbooks in order to ensure that individuals are not inadvertently denied the benefits of this new law. However, such communication should avoid questions regarding sexual preferences that may be deemed invasive.

CHILD MOLESTERS NOT ALLOWED TO WORK WITH CHILDREN (AB 1192)
A person required to register as a sex offender because of a conviction for a crime where the victim was a minor under 16 years of age may not serve as an employee or volunteer with any person, group, or organization, where the registrant would be working directly and in an unaccompanied setting with minor children. See Penal Code section 290.95.

• Employers whose enterprise services children may have an affirmative duty to run thorough background checks on applicants in order comply with this common-sense rule. Such employers should also use an application form that allows an applicant to identify himself or herself as a registered sex offender.

EMPLOYER MUST PROVIDE LACTATION ACCOMMODATION (AB 1025)
Sections 1030 - 1033 are added to the Labor Code to require employers to provide a reasonable amount of break time, and adequate place, to employees desiring to express milk. Employers who violate these provisions are subject to a civil penalty in the amount of $100 for each violation. However, an employer is not required to provide break time if to do so would seriously disrupt the operations of the employer.

• Again, what constitutes "serious disruptions of operations" remains to be seen. The best practice is to allow such accommodation if at all possible.

MINIMUM WAGE INCREASE
California's minimum wage increases to $6.75 an hour from $6.25. This increase is the second part of a previously passed law that called for a $1 increase to be phased in over two years.

• This means that for the purpose of qualifying for administrative, executive and professional exemptions, employees must be paid a salary of no less than $540 per week (which is equivalent to $28,080 per year).

STATUTES SPECIFIC TO THE HEALTH CARE INDUSTRY

FEHA NOW APPLICABLE TO NONPROFIT RELIGIOUS HEALTH CARE FACILITIES (SB 1475)
Section 12940 of the Government Code is amended to extend protection under the FEHA to employees of nonprofit religious health care facilities who perform other than religious duties at a health care facility operated by the religious corporation.

PHYSICIANS EXEMPT WHEN PAID $55 OR MORE PER HOUR
Physicians and surgeons paid an hourly wage of $55 or more are exempted from the provisions in Labor Code section 510 relating to payment for overtime work. This exemption does not apply to an employee employed in a medical internship or resident program or to a physician employee covered by a valid collective bargaining agreement. (Section 515.6 of the Labor Code.)

REMEMBER, LIMITATIONS ON THE USE OF SOCIAL SECURITY NUMBERS (SB 168)
The impact on SB 168 (discussed above) on the health care industry will be significant. Employers should review, with counsel, the time by which specific uses of the Social Security number are prohibited by this law.

RECENT CASES IMPACTING EMPLOYERS

The law of arbitration continues to evolve. The United States Supreme Court held that the Federal Arbitration Act applies to most employment contracts and that agreements to arbitrate employment disputes are generally enforceable. Circuit City v Adams, 121 S.Ct. 1302 (2001). This holding reinforced the California Supreme Court's conclusion, in Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83 (2000), that pre-dispute arbitration agreements for statutory claims are enforceable, provided they contain certain "minimum procedural requirements." A recent appellate decision, Little v. Auto Stiegler, Inc., 92 Cal. App. 4th 329 (2001), held that the procedural requirements in Armendariz need not apply to arbitration agreements when an employee's claims (breach of contract, tortious demotion and termination in violation of public policy) did not encompass statutorily protected employee rights.

While the Little case suggests that, in certain cases, employers may enforce arbitration provisions that do no meet the procedural safeguards articulated in Armendariz, it is good practice to draft arbitration provisions that would pass muster under Armendariz in order to avoid the expense of litigating the enforceability of the arbitration provision. Employers should have their arbitration clauses reviewed by counsel to ensure that the Armendariz safeguards are met.

Old discrimination and harassment claims may haunt employers. Generally, the law does not allow a plaintiff to sit on his rights, but requires him to file a claim within a certain amount of time after the allegedly unlawful conduct has occurred. In the employment context, that period is one year. Two recent employment cases have articulated the standard for the application of the continuing violation doctrine, which allows the employee to offer evidence of, and hold the employer liable for, conduct occurring outside the statute of limitations period. In Richards v. CH2M Hill, Inc., 26 Cal. 4th 798 (2001), the California Supreme Court found that evidence of an employer's persistent failure to accommodate an employee's disability is a "continuing violation" if the acts are (1) sufficiently similar in kind; (2) have occurred with reasonable frequency; and (3) and have not acquired a degree of permanence. This third factor is key. In short, the statutory time is not triggered unless (and until) it is clear to the employee that the employer will take no further action to accommodate the employee and thus any further efforts to remedy the harassment or discrimination would be futile. In Birschtein v. New United Motor Manufacturing, Inc., 92 Cal. App. 4th 994 (2001), the appellate court applied the Richards continuing violations rule to sexual harassment claims.

These two cases highlight the importance of conducting a thorough investigation of any allegedly harassing acts. An employer's investigation of a complaint should include a follow-up interview with the complainant to inform him or her of the results of the investigation, ensure that the alleged harassing or discriminatory behavior has stopped and that there has been no retaliation for the allegations, and to ensure that the complainant has no additional allegations. The employer should clearly communicate to the employee what it has done, or will do, in response to the allegations.

Such follow-up would be evidence of a firm date triggering the employee's obligation to file a complaint if the employee is unsatisfied with the employer's response, and could limit an employee's ability to argue that he had no idea that the employer had taken all the steps it intended to take in response to the allegations.

Employers should check with counsel to make sure any investigation of allegations of harassment or discrimination is sufficiently thorough. Employers should also, with the guidance of counsel, implement yearly anti-harassment training. Pro-active steps to prevent harassment or discriminatory behavior is particularly important in light of a recent case confirming that employers are strictly liable for a supervisor's sexual harassment under FEHA.

Although the Supreme Court recently articulated a high standard in determining whether a person is disabled within the meaning of the American with Disabilities Act (ADA), California employers will unlikely obtain much relief. In Toyota Motor Mfg v. Williams (U.S. Supreme Court 01/08/2002), the Court held that in order to fall under the ADA's definition of disabled, the individual must have an impairment that prevents or severely restricts him from doing activities that are of central importance to most people's daily lives, not merely an impairment that limits his ability to perform tasks at work.

Employers should keep in mind that federal standards differ significantly from California standards (under the FEHA, the disability need not severely limit the employee's life activities, it need only limit it and make it difficult). The FEHA expressly states that this distinction is intended to result in broader coverage under the FEHA than under federal law. See Cal. Gov. Code section 12926.1(c). Employers should check with counsel to review California standards regarding employee disabilities and an employer's accommodation obligations.

WAGE AND HOUR ISSUES

Employers may furlough exempt employees for full weeks without waiving the employee's exempt status. You may recall that on May 30, 2001, Miles Locker, then-Chief Counsel of the California Division of Labor Standards Enforcement, issued an opinion letter regarding the Labor Commission's policy as it relates to the salary basis requirement for exempt employees. The letter caused a great deal of confusion and controversy because, among other things, it suggested that failure to pay an exempt employee a full-month's salary if the employee worked any amount during that month would result in a waiver of the employee's exempt status. The letter was withdrawn by the Labor Commissioner. Previous opinions suggested that the measurement should be by the week, not the month. At its October 29th meeting, the Industrial Wage Commission (IWC) approved an amendment of the Statement as to the Basis of Wage Order 5, rejecting the interpretation of the Wage Orders that required employers to pay exempt employees a full month's salary for any work performed during a month to maintain the exempt status. The IWC believes that the amendment will make clear that employers are required to pay exempt employees their full predetermined salary for any week, not any month, in which any work is performed, with limited exceptions.

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