1. MAJOR DEVELOPMENTS IN FEDERAL AND CALIFORNIA LABOR, EMPLOYMENT, AND WAGE AND HOUR LAWS PRESENTED BY CHARLES H. GOLDSTEIN OF THE GOLDSTEIN LAW FIRM 1

2. Major Developments in Federal and California Labor, Employment and Wage and Hours Laws” I. Introduction: A. In the last three (3) years there were over 10,000 wage and hour class actions lawsuits filed in the Courts of California. A wage and hour class action lawsuit, if successful can put some smaller and moderate size employers out of business or force the filing of bankruptcy petitions. In mid size and larger companies it can not only force a change in productive business operations, but create a significant unfunded liability. 2

3. Introduction (Cont.) B. Individual wrongful termination discrimination claims coupled more and more with wage and hour claims are still on the rise. An employer who can purchase EPLI insurance can usually insure against a mega judgment in a discrimination or wrongful discharge case. However, there is no real insurance for wage and hour class actions. I know that Scottsdale Insurance Company and some other EPLI covers wage and hour violations, I believe up to $100,000. This is “tip money” in the types of wage and hour class actions that are being routinely filed not only against large employers, but against smaller and moderate employers in the State. 3

4. Introduction (Cont.) C. Labor, employment and wage and hours laws at the federal level have remained constant due to a Republican Congress. President Obama has issued executive orders that apply only to federal contractors and some major decisions of the National Labor Relations Board became effective in 2015. I will be briefly discussing the NLRB decisions. However the major developments for California employers were in decisions of the federal courts, including the U.S. Supreme Court that relate to the legality of pre- dispute arbitration agreements; employee waivers of the right to file class actions; and the California courts attempt to limit a California employer’s right to require its employees to sign pre-dispute arbitration agreement using the California doctrine of unconscionability to override the Federal Arbitration Act, as recently interpreted by the U.S. Supreme Court. 4

5. Introduction (Cont.) D. More importantly the California Legislature continues to pass laws under the guise of “worker fairness” or the prevention of “wage theft” or to attempt to redress pay equity issues that continue to make California one of the most business unfriendly states with the best climate in the world. E. Today, I will be discussing some of the major developments in Federal and California Labor, Employment and Wage and Hour Laws and what I believe employers must do to comply with these laws and to take preventive steps to protect your companies from liability for violating these new laws. 5

6. Federal Developments That Could Effect All California Non-Government Employers 1. Unions represent approximately 7 % of the workforce nationally and in California the private sector rate of unionization is 6.7%. 2. The NLRB in August 2015 by a 3-2 vote overruled the NLRB’s joint employer standard since 1984. 3. This decision could have a dramatic effect in the relationship between franchisors and franchisees. 6

7. The NLRB’s New Test Two or more statutory employers are joint employers of the same statutory employees if they “share or codetermine those matters governing the essential terms and conditions of employment. If a common law employment relationship exists, the inquiry then turns to whether the putative joint employer possess sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining. We will no longer require that the joint employer not only possess the authority to control employees terms and conditions of employment.. Nor will we require that, to be relevant to the joint employer inquiry, a statutory employer’s control must be exercised directly and immediately. If otherwise sufficient control exercised indirectly– such as through an intermediary may establish joint control. 7

8. The NLRB’s New Test Could Be Used As Precedent by Plaintiff Employee Lawyers To Expand Liability In the franchisor-franchisee relationship i.e. McDonald’s and its franchisee because the NLRB believes that McDonalds exercises in direct control over the franchisees it found the franchisee and the franchisor to be joint employers. The NLRB looked at the degree of “ indirect control and the leverage that the franchisor had over its franchisees. How many business relationships does your company have where you are exercising indirect control over the employees of a vendor or service provider? One of the ways to protect your company from becoming a joint employer for NLRB purposes is to have well drafted agreements that clearly show that you do not exercise any control directly and or indirectly over the employees of the other company. 8

9. California Has Already Made All Employers with 25 of More Employees Joint Employers of Temp Employees California law, Labor Code Section 2810.3, makes employers with 25 or more employees liable for workers’ compensation and wage compliance if the temp agency does not have workers’ compensation and/or does not properly pay the temp employees’ wages. 9

10. Employers That Use Temp Agencies Should 1. Have written agreements (a) in which the temp agency agrees to maintain workers’ compensation insurance covering the classifications of employees that they are sending you to work at your business and to provide you with a valid workers compensation certificate showing coverage and that can be verified; (b) that gives you the right to inspect all wage and hour documents to make certain that all wage and hour laws, wages and overtime have been properly paid; and (c) holds your company harmless and indemnifies your company for any unpaid wages and or workers compensation claims. 2. Still these protections would not prevent liability and unless the temp agency is financial solvent your written agreement will mean nothing. Don’t do business with weak temp companies. 10

11. California Developments of 2015 Effective January 1, 2016, the California State Minimum Wage increased to $10.00 per hour and in order to qualify for the white color salary exemption the minimum employee salary increased to $3,466.6667 or $41,600 annually. 11

12. City of Los Angeles Minimum Wage B. Employers with 26 or more Employees shall pay a wage of no less than the hourly rates set forth: 1. On July 1, 2016, the hourly wage shall be $10.50. 2. On July 1, 2017, the hourly wage shall be $12.00. 3. On July 1, 2018, the hourly wage shall be $13.25. 4. On July 1, 2019, the hourly wage shall be $14.25. 5. On July 1, 2020, the hourly wage shall be $15.00. C. Employers with 25 or fewer Employees shall pay a wage of no less than the hourly rates set forth: 1. On July 1, 2017, the hourly wage shall be $10.50. 2. On July 1, 2018, the hourly wage shall be $12.00. 3. On July 1, 2019, the hourly wage shall be $13.25. 4. On July 1, 2020, the hourly wage shall be $14.25. 5. On July 1, 2021, the hourly wage shall be $15.00. 12

13. City of Los Angeles Minimum Wage (Cont.) D. On July 1, 2022, and annually thereafter, the minimum wage will increase based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the Los Angeles metropolitan area (Los Angeles-Riverside- Orange County, CA), which is published by the Bureau of Labor Sfiafistics. The DAA sha[I announce the adjusted rates an Jan€~ary 1St and publish a bulletin announcing the adjusted rates, which shall take effect on July 1 of each year. 13

14. Implementing the California Paid Sick Leave Law- after 6 Months Labor Code 245 et. seq. Healthy Workplaces, Healthy Families Act of 2014 that became effect July 1, 2015. The Purposes for Which Paid Sick Leave may be granted: “Diagnosis, care, or treatment of an existing health condition of, or preventive care for, an employee or an employee’s family member, for a victim of domestic violence, sexual assault or stalking. 14

15. Basic Requirement of the CA Paid Sick Leave Law 1. Applies to all employees, part-time, full-time, exempt employees. 2. After 30 days of employment accrue up to one hour of paid sick leave for each thirty(30) hours of work up to twenty-four (24) hours of paid sick leave per year. 3. Employee can take paid sick leave after ninety(90) days of employment. 4. Employers must keep records for 3 years of paid sick leave that must be shown on paystubs. 15

16. Basic Provisions of CA Paid Sick Leave Law 5. CA Paid Sick Leave is not paid out on termination, voluntary or involuntary. 6. Employers can require employees take paid sick leave in 2 hour increments. 7. Employers can be sued for retaliation because “An employer shall not deny an employee the right to use accrued sick leave days, discharge, threaten to discharge, demote, suspend, or in any manner discriminate against an employee for using accrued sick days. 16

17. How Do You Control Absenteeism? Under Labor Code Section 246. 5 (2) There shall be a rebuttable presumption of unlawful retaliation if an employer denies an employee the right to use accrued sick leave, discharges, threatens to discharge, demotes, suspends, or in any manner discriminates against an employee within 30 days of any of the following: (A) The filing of a Complaint with the Labor Commissioner alleging a violation of the CA Paid Sick Leave Law; (B) The cooperation of an employee with an investigation or prosecution of an alleged violation of the CA Paid Sick Leave Law; (C) Opposition by the employee to a policy, practice, or act that is prohibited by the CA Paid Sick Leave Law. 17

18. Other Issues Raised By the CA Paid Sick Leave Act 1. Can we offer more sick leave to one group of employees than another without being successfully charged with discrimination? 2. Can we avoid the bookkeeping hassle and give all employees three (3) days of California Paid Sick Leave at the beginning of the year or their employment? 3. Can we require medical proof or other documentation that the employee was actually using CA paid sick leave for an illness of the employee or a family member or for any other purposes permitted under the Act? 18

19. Other Issues Raised By the CA Paid Leave Act Can we require that an employee who is out for more than 3 days provide a medical certificate that they are fit for duty? Can you discipline an employee who fails to advise the company of his or her absence in a timely manner as required by Company policy or for three consecutive days? Can you discipline an employee who fails to advise the company of his or her absence in a timely manner as required by Company policy or for three consecutive days? 19

20. Some of My Recommendations For Comply With the CA Paid Sick Leave Law 1. Revise your employee handbook to reflect the provisions of the CA Paid Sick Leave Law. 2. Modify restrictive provisions that might violate the Act, such as a provision that states that if an employee is absent more than three (3) days without notifying the employer they are considered to have automatically abandoned their job or considered to be a voluntary termination. 3. If you provide more than 3 days of leave, in my opinion, you can require employees to follow more restrictive rules regarding the additional sick leave days then the law allows under the CA Paid Leave Law. i.e. require medical verification or other documentation. 20

21. The CA Equal Pay Act 1. Equal Pay for Equal Work Regardless of Sex Has Been Federal Law Since 1963. 2. Title VII of the Civil Rights Act of 1964 does not allow employers to set pay based on sex(or race or other unlawful protected criteria) 3. California FEHA mirrors Title VII. 4. California Labor Code 1197.5 bars paying any individual in the employer’s employ at wage rates less than the rates paid employees of the opposite sex in the same establishment for equal work on jobs the performance of which require equal skill, effort, and responsibility, and which are performed under similar working conditions, except where the payment is made pursuant to a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex. 21

22. New CA Pay Equity Law New Labor Code Section 1197.5 (a) An employer shall not pay any of its employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work(What does this mean???), when viewed as a composite of skill, effort, and responsibility and performed under similar working conditions, except where the employer demonstrates: New Labor Code Section 1197.5 (a) An employer shall not pay any of its employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work(What does this mean???), when viewed as a composite of skill, effort, and responsibility and performed under similar working conditions, except where the employer demonstrates: 22

23. Employer’s Burden of Proof The wage differential is based upon one or more of the following factors: (A) A seniority system. (B) A merit system. ( C ) A system that measures earnings by quantity or quality of production. (D) A bona fide factor other than sex, such as education, training, or experience. This factor shall apply only if the employer demonstrates that the factor is not based on or derived from a sex based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity. 23

24. Business Necessity Defined To Defend Against Pay Equity Claim For the purpose of this law, business necessity means an overriding legitimate business purpose it is supposed to serve. This defense shall not apply if the employee demonstrates that an alternative business practice exists that would serve the same business purpose without producing the wage differential. Each factor relied upon is applied reasonably. Each factor relied upon is applied reasonably. The one or more factors relied upon account for the entire wage differential. The one or more factors relied upon account for the entire wage differential. 24

25. What Are the Key Changes That Employers Have to Be Aware When Implementing the new CA Pay Equity Law? 1. The key change in existing law is the law goes from “ equal pay for equal work” to “substantially similar work.” What does substantially similar work when viewed as a composite of skill, effort and responsibility” really mean? We will have to wait for courts to interpret this standard. 2. The employee can compare her wages with males at other facilities. 25

26. What Are the Keys Changes Employers Have to Be Aware When Implementing the CA Pay Equity Law? (Cont.) If an employer pays different rates of pay at different facility locations this may give rise to pay equity claims. Pay differentials based on geographic differentials are still lawful, but make certain that pay differentials based on geography are applied in a non- discriminatory manner. Pay differentials based on geographic differentials are still lawful, but make certain that pay differentials based on geography are applied in a non- discriminatory manner. 26

27. What Are the Keys Changes That Employers Have to Be Aware When Implementing the CA Pay Equity Law? (Cont.) Employers have to prove that wage disparities are based on factors “other than sex, such as education, training or experience are job related, consistent with business necessity, and that the employee cannot prove a less discriminatory alternative. Employers have to prove that wage disparities are based on factors “other than sex, such as education, training or experience are job related, consistent with business necessity, and that the employee cannot prove a less discriminatory alternative. A court or jury get to decide if the employer’s reason for wage disparities are reasonable in the absence of an arbitration agreement. The employer must prove the entire wage disparity is due to one or more defenses, i.e. Education, experience, training, pay based on quality or quantity. 27

28. Other Changes in the Law 1. Record keeping goes from 2-3 years. 2. The new law prohibits employers from preventing employees from “inquiring about another employee’s wages” or “aiding or encouraging any other employee to exercise his or her rights under the new law.” 3. The new law says that it does not require the employer to disclose others’[employees’] wages. There is no exception for payroll or HR employees who may discuss wages of others” under the new law. However, such disclosure would clearly violate the employees’ right to privacy under CA law. 4. The new law carries on the march to the Court house by Plaintiffs’ lawyers for wage and hour violations, rather employees seeking relief through the California Labor Commissioner’s office. 28

29. Major Developments in California Wage and Hour Laws 1. Thanks to a U.S. Supreme Court decision, California employers can secure class action written waivers from their employees. See Direct T.V. Inc. v. Imburgia. 2. Thanks to other U.S. Supreme Court decisions, California employers can require that wage and hour claims be arbitrated instead of being decided by a court and jury. 3. The California Supreme Court seems to have finally recognized the supremacy of federal law, the Federal Arbitration Act over California and has resisted the plaintiffs’ bar’s challenges to employers requiring employees to submit their claims to final and binding arbitration. 29

30. Major Developments in California Wage and Hour Laws 4. However, the California Supreme Court did rule that while employees could waive their right to participate in class actions, the employee could not waive the right to file a PAGA representative claim. PAGA being the Private Attorney General Act claims for violations of the Labor Code that carries penalties and attorneys’ fees with 75% of the penalties going to the State and 25%. 5. Also, the Court has held where wage and hour claims and PAGA claims are filed the employees first had to go to arbitration on their wage claims before having the court decide their PAGA claims. 30

31. IT’S ALL ABOUT THE MONEY – Its not a matter of justice or fairness. 31

32. California Courts, The California Labor Commissioner and Federal Courts in California Are Dealing Body Blows to Long Cherished Claims of Wage and Hour Law Exemptions for Independent Contractors and Other Traditional Exemptions- Potential Areas of Vulnerability? 1. Misclassification of employees as salaried exempt even though they do not meet the tough CA definition for exemption of executive/supervisory employees, professional employees, administrative employees. 2. Misclassification of employees as exempt outside sales employees. 3. Misclassification of employees as independent contractors. Labor Code§2750.5; §2753; §226.8 (b) – penalty $5,000 to $15,000; (c) pattern or practice not less than $10,000 and not more than $25,000 for each violation. Liability of person who advises employer to treat employee as an independent contractor. 32

33. Avoiding Points of Vulnerability 4. Failure to pay overtime over 8 and 40. 5. Paying for overtime at straight time in cash or failing to calculate the regular rate of pay upon which overtime is based. 6. Failing to keep accurate time and payroll records. 7. Failure to provide duty free meal periods and rest breaks. 8. Failure to reimburse employees for business related expenses under Labor Code§ 2802. 9. Failure to pay employees all monies due when they are fired and or resign. 10. Donning and doffing cases. 33

34. Avoiding Points of Vulnerability 11. 11. Knowing that employees work off the clock without paying them. 12. 12. Automatic deductions for meal periods. 13. 13. Tight schedules for drivers and other employees that do not allow them to regularly take meal and rest periods. 14. 14. Improperly making someone an independent contractor who as a matter of law is an employee. 15. 15. Paying an employee a flat amount for expense reimbursement, regardless of the actual expenses incurred by employees in the performance of their work. 16. 16. Paying employee a daily flat rate that includes overtime 34

35. Avoiding Points of Vulnerability. 17.Failing to pay employees in a timely manner when they are fired or quit. 18. Failing to properly calculate an employee’s hourly wage by including bonuses earned through productivity into the hourly wage. 19. Using improper rounding up and rounding down times in calculating work time to be paid the employee. 20. Failing to make certain employees are permitted a meal period of at least 30 minutes without any work and two 10 minute rest periods on the clock in an 8 hour day. 21. Failing to have all necessary items on employee paystubs including CA paid sick leave accrual. 35

36. Conclusion 2016 is an election year. I believe that that there will be no new federal labor, employment and/or wage and hour legislation. At the state level I can see the California Legislature ignoring economic realty and attempting to expand paid leave laws, increase paid sick leave, hobble binding arbitration even though most attorneys believe such laws would be invalidated by the federal courts and perhaps even the California Supreme Court. In order to comply with new laws and decisions presently in existence employers (1) must have policies that are updated yearly with an eye toward protecting the employer in the event of litigation; (2) have fair and uniformly imposed arbitration agreements; (3) provide training to managers on a regular basis; (4) timely accessible legal advice to proactively avoid becoming a victim of a costly wage and hour class action or wrongful termination/discrimination lawsuit. With a limited labor market employees who lose their jobs, even for very legitimate reasons will challenge employer decisions in the courts, administrative agencies or by filing abusive lawsuits and workers compensation claims. 36

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