Employers Can Require Arbitration Agreements

On September 20, 2003, the Ninth Circuit Court of Appeals, in EEOC v. Luce, Forward, Hamilton & Scripps, ruled that employers can now require employees to sign arbitration agreements as a condition of employment. In doing so, the Court overturned a prior decision that forbid employers from requiring employees to arbitrate discrimination claims under Title VII and the Fair Employment and Housing Act. Employers in California can now rescind an offer of employment if an applicant or employee refuses to sign an arbitration agreement. Employers, however, must prepare and present their employees with arbitration agreements that provide for discovery and require the employer to pick up the tab for the bulk of the costs associated with arbitration. For those of you who have been following the flurry of new bills presented to Governor Davis, please note that he recently vetoed AB 1715, the bill that would have legislatively overturned this recent case.

New Category of Sexual Harassment for Employees

AB 76, signed by Governor Davis, and effective January 1, 2004, amends the California Fair Employment and Housing Act (“FEHA”) to make employers liable for sexual harassment of employees by any person while the employee is on the job and when the employer knew or should have known about the harassment. The new law responds to the Second District Court of Appeal’s ruling in Salazar v. Diversified Paratransit, Inc., (2002) 103 Cal. App. 4th 131, which held an employer could not be liable for harassment of a bus driver employee by a passenger. In light of the new statute, we recommend that employers now treat employee reports of harassment by non-employees (including clients, customers, vendors, or visitors) with the same seriousness that applies to supervisor or co-worker harassment. Employees should be notified of their ability to report such complaints to the employer and the correct reporting channels. Policies should be updated to ensure they are current and effective for preserving important defenses. Likewise, employers should investigate claims of non-employee harassment and take such “immediate and appropriate corrective action” as may be warranted to protect employees. At the bottom line, failure to adapt existing policies, practices and procedures to the new law could result in significant employer liability.

Provision Added to California Labor Code

Senate Bill 796, known as the Labor Code Private Attorneys General Act of 2004, goes into effect on January 1, 2004. The law adds a provision to the California Labor Code that allows any employee to file an action in civil court on behalf of himself or herself and other current or former employees seeking penalties for a violation of the California Labor Code. The law also allows the suing employee to collect 25% of the amount of the penalty awarded. The employee may also recover reasonable attorneys’ fees and costs for the action. The remaining 75% of the penalties shall be divided 50% to the state’s general fund and 25% to the California Labor and Workforce Development Agency for education of employers and employees about their rights and responsibilities under the Labor Code.

In the event a Labor Code section does not provide a penalty for violation, SB 796 establishes a penalty in the amount of $100 for each aggrieved employee per pay period for the initial violation and $200 for each aggrieved employee per pay period for each subsequent violation. The law does not alter the exclusive remedy provisions of the Workers’ Compensation Act. Thus, Workers’ Compensation claims are still handled under the Workers’ Compensation process and may not be filed in civil court.

The new law permits employees to bring individual or class action lawsuits against employers for violations of the Labor Code that would previously have been handled through administrative procedures, such as Labor Commission claims. With the availability of attorneys’ fees and costs, it also creates the potential that civil suits will be filed over relatively small Labor Code violations that will now become class action type suits for multiple employees seeking recovery of penalties. The 25% recovery by the suing employee creates a personal incentive for filing these suits.

Employer-Provided Health Care

One of the most radical bills signed by Governor Davis against the objection of California business was Senate Bill 2 which mandates employer-provided health care coverage for California workers. We expect this statute to be amended, expanded or repealed over the next couple of years; we will watch for the changes and provide more reports as the implementation deadlines approach. The Health Insurance Act of 2003 (SB 2), as adopted, requires large employers (those with more than 200 employees), to provide both worker and family health insurance coverage by 2006. Medium-sized employers, with between 20 and 199 employees, must provide health benefits for workers by 2007 if a tax credit is later passed. Employers with less than 20 employees are currently exempt. A Managed Risk Medical Insurance Board will be established to manage the program. Employers must pay at least 80% of the cost of benefits. For certain low income workers, employers must pay 95% of the premium. Employers who provide acceptable medical coverage will avoid paying fees to a health insurance pool. Employees will be eligible for benefits after working 100 hours per month for a minimum of 3 months for one employer. There are special provisions for seasonal workers and workers with multiple employers.

Whistle Blow Bill Vetoed

If, like us, you’ve been worried about the bill that would have created a presumption of retaliation if an adverse employment action was taken within 60 days of an employee’s “whistle blow,” you will be glad to know the bill was vetoed.