Mid-Year Employment Law Update for California Employers


Summary of Developments

California employers should heed and assure their policies and practices comply with new or revised regulations and administrative guidance that recently took effect or take effect on July 1, 2017, and recent cases.  Here’s a summary (with a more detailed explanation following):

  1. New Protections for Transgender Employees: Employers should make sure that they respect the gender identity and expression of transgender employees, that they are not limiting access to employment positions based on transgender status, and that they permit use of restroom facilities accordingly and protect transitioning employees from discrimination based upon their transitioning process.
  2. New Restrictions on Use of Criminal Background in Employment Decisions: Employers are prohibited from using any forms of criminal history that have an adverse impact on a protected class, absent a showing that the information is job-related and consistent with business necessity.  The regulations also impose other limitations and procedural requirements that are described in detail below.  Bottom line: Employers must make sure that any criminal background information used for decisions on an employee or applicant for a position bears a strong relationship to the duties of the position.
  3. Guidelines Clarifying Leave Restrictions under PTO Policies in Effect When Paid Sick Leave Law Passed: Guidelines issued in March 2017 by the California Labor Commissioner clarify that paid time-off policies in effect when the paid sick leave law was enacted need not grant additional paid sick leave days if the PTO policy otherwise complies with the law.  And an employer may discipline an employee for unscheduled absences that are not for a purpose for which paid sick leave is available and used.
  4. New DFEH Guide on Workplace Harassment: On May 2, 2017, the California Department of Fair Employment and Housing issued a guide for California employers to assist them in complying with the obligations California law imposes on them to prevent and correct workplace harassment and to notify employees of their rights with regard to such harassment.
  5. U.S. DOL Withdrawal of Informal Guidance on Joint Employer Duties and Independent Contractor Status: The U.S. Secretary of Labor has withdrawn informal, non-binding, guidance issued by the Department of Labor in the Obama Administration, which had suggested expanded criteria for establishing (a) a joint-employer relationship and (b) employee, rather than, independent contractor, classification.  Because the guidance was non-binding, its withdrawal is not likely to impact employers.  Even if, after more judges and National Labor Relations Board members are appointed by the current President, the tightened standards that are likely to be adopted will not impact employers who are subject to California’s broader standards for establishing a joint-employer relationship as well as employee rather than independent contractor status.
  6. California Supreme Court Clarifies Applicability of Law Requiring Seventh Day of Rest:  The Labor Code provisions requiring employers to grant a day of rest after six days of work apply by work week, not on a rolling seven-day basis.  The exemption from the day of rest requirement applies only for employees who have not worked more than six hours on any day in a work week and not more than 30 hours over the initial six days of the work week.  While an employer may not require or induce an employee to work a seventh day in a work week, the employer may permit the employee to choose to do so, provided the employee is apprised of his or her rights to rest.

New Regulations Strengthen Protections for Transgender Employees

The California Fair Employment and Housing Council has issued revised regulations strengthening protections of transgender employees in California.  The definitions of “gender expression” and “gender identity” are expanded to include the “perception of” a person’s gender-related appearance or behavior, and a person’s “internal understanding of their gender,” which “may include . . . combination of male and female” or “neither male nor female”.  The regulations also contain a new definition, of “transitioning”.

Employers may not use an employee’s “transgender or gender non-conforming” status as a bona fide occupational qualification defense, and they must “permit employees to perform jobs or duties that correspond to the employee’s gender identity or gender expression ….”

The revised regulations bolster requirements that employers (1) permit employees to use facilities corresponding to an employee’s gender identity or gender expression, (2) use gender-neutral signage for single-occupancy facilities and (3) provide feasible alternatives to protect the privacy of all employees, such as locked toilet stalls and staggered shower schedules.  Employers may not require an employee to undergo a medical treatment or procedure or provide identification, to use facilities designated for a particular gender.  But an employer may make a “reasonable and confidential inquiry of an employee for the sole purposes of ensuring access to comparable, safe and adequate multi-user facilities.”

Employers are prohibited from making inquiries that “directly or indirectly identify an individual on the basis of sex, including gender, gender identity or gender expression,” unless the employer establishes a permissible defense, such as that gender is a BFOQ, business necessity or job-related.  An employer must use the preferred gender, name or pronoun requested by an employee.  An employer may not require an employee to submit documentation or proof of an employee’s gender, gender identity or gender expression, absent a permissible defense.

If an employee initiates communication about the employee’s sex, gender identity or gender expression, with regard to the employee’s working conditions, the employer and employee may discuss that topic.  Employers are prohibited from discriminating against an employee who is transitioning or perceived to be doing so.

New Regulations Restricting Criminal History Checks

The California Fair Employment and Housing Council has also issued new regulations, effective July 1, 2017, further restricting employers’ ability to impose criminal background checks in making hiring decisions.  The Council adopts as binding regulations non-binding guidelines that had been published by the Equal Employment Opportunity Commission.

Under the regulations, employers are prohibited from using “forms of criminal history in employment decisions” that “would have an adverse impact on” a protected class, unless the employer can prove that such use “is job-related and consistent with business necessity,” and even then, the use is prohibited if the affected employee or applicant demonstrates “a less discriminatory alternative means of achieving the specific business necessity as effectively.”  In showing that use of criminal history is job related and consistent with business necessity, the employer must show that it is “bear[s] a demonstrable relationship to successful performance on the job and in the work place and measure[s] the person‘s fitness for the specific position(s) .  .  . .”  The employer may not justify the policy merely by showing it is needed “to evaluate the person in the abstract.”  The employer must also show that the policy “is appropriately tailored, taking into account, among other factors, the following: (1) the nature and gravity of the offense or conduct, (2) the time that has passed since the offense or conduct and/ or the completion of the sentence served, and (3) the nature of the job held or sought.

If an employer uses a “bright line” policy disqualifying an employee or applicant based upon certain convictions, the employer must demonstrate (1) that the policy “can properly distinguish between applicants or employees that do and do not pose an unacceptable level of risk and (2) that the conviction being used to disqualify, or otherwise adversely impact the status of, the employee or applicant, has a direct and specific negative bearing on the person’s ability to perform the duties or responsibilities necessarily related to the employment position.”  A bright-line policy that is based upon “conviction-related information that is seven or more years old” is subject to a rebuttable presumption that “it is not sufficiently tailored to meet the job-related and consistent with business necessity affirmative defense”, unless the position is subject to federal or state law or regulation that requires criminal history screening.

If an employer is not using a “bright-line” policy, then it must conduct “an individualized assessment of the circumstances and qualification of the applicants or employees excluded by a conviction screen.”  That assessment must involve (1) notice to any adversely impacted employee or applicant, before adverse action is taken, that he or she has been screened out because of a criminal conviction, (2) a reasonable opportunity to demonstrate that the exclusion should not be applied because of his or her circumstances, and (3) the employer’s consideration regarding whether the additional information the person provides or otherwise obtained by the employer warrants an exception to the exclusion because the policy as applied to the employee or applicant is not job-related and consistent with business necessity.

Whether an employer uses a bright-line policy or individualized assessment, the employer, before taking adverse employment action based upon criminal history, must give the affected applicant or employee an opportunity “to present evidence that the information is factually inaccurate.”

The regulations prohibit the use of certain types of criminal history as a basis of making employment decisions, regardless of adverse impact, including (1) an arrest that did not result in a conviction, (2) referral to a diversion program, (3) expunged or sealed convictions, (4) juvenile arrests or dispositions, (5) non-felony convictions for marijuana possession more than two years in the past.  Employers also need to abide by more restrictive local ordinances that limit use of criminal records.

New Guidelines on California Paid Sick Leave

On March 29, 2017, the California Labor Commissioner issued new guidance on California’s paid sick leave law.  The guidance focuses on how the law impacts paid time off (“PTO”) policies of employers that predate the law and how it impacts employer disciplinary policies related to unexplained absences.

Initially, the guidance clarifies that, where a PTO policy that was in effect when the paid sick leave law went into effect provides at least as many paid sick days as under the paid sick leave law and is no less restrictive in terms of use of the leave than under the law, the employer need not provide additional paid sick days.  And while the paid sick leave law requires that such leave be paid at the regular rate of pay of the employee taking the leave, the law does not impact the rate of pay that an employer pays its employees for days taken under an existing PTO policy for reasons other than those covered by the paid sick leave law.

The guidance also explains that, while the law prohibits an employer from taking disciplinary action against an employee for being absent from work for purposes covered by the paid sick leave law and for which accrued paid sick leave is available and used by the employee, the law does not restrict the discipline that an employer may impose on an employee for an unscheduled absence unrelated to the purposes stated in the law or where the employee does not have or does not use accrued paid sick leave.

New DFEH Workplace Harassment Guide for California Employers

On May 2, 2017, the California Department of Fair Employment and Housing released a guide for California employers on fulfilling their obligation to take reasonable steps to prevent and correct workplace harassment.  The guide is available in brochure form and as a poster.  An employer may use either publication to fulfill its obligation to provide employees an information sheet regarding sexual harassment in accordance with the Fair Employment and Housing Act.  The DFEH-issued information describes how sexual harassment is illegal, the different kinds of sexual harassment (quid pro quo and hostile work environment. It also explains the potential liability of employers for sexual harassment and their duty to take action to prevent and promptly correct any harassing conduct.  Employers should carefully review their duties as described in the brochure and consult with employment counsel with any questions regarding their duties under the FEHA.

U.S. DOL Withdraws Guidance Issued by the Obama DOL on Joint Employer Duties and Independent Contractor Status

On June 8, 2017, the DOL issued a brief press release that the Secretary of Labor has withdrawn informal guidance memoranda that the Secretary under the Obama Administration had issued in 2015 and 2016 on circumstances that establish joint employer liability and on independent contractor or employee classification.  The guidance had used expanded criteria to determine whether a company that used employees of another company for particular functions could be found to be a joint employer of the employees and also whether a worker was an employee rather than an independent contractor.  Because informal guidance is not enforceable, the withdrawal of the guidance does not change the state of the law on these issues, which continue to be governed by rulings of the National Labor Relations Board and court decisions.  If and when President Trump nominates appointees to fill vacancies on those bodies, it is likely that these standards will be tightened.  In addition, the withdrawal of the guidance has little impact on employers in California, which has its own broad laws and regulations governing these relationships.

California Supreme Court Clarifies Exemption from Rule Requiring the Seventh Day Off after an Employee Works Six Days

In a decision filed May 8, 2017, in Mendoza v. Nordstrom, Inc., the California Supreme Court clarified when the rule prohibiting a seventh workday and when the exemption from that prohibition apply.

Sections 551 and 552 of the Labor Code prohibit California employers from requiring an employee to work a seventh day in a week in which the employee has worked the previous six days.  The California Supreme Court clarified that the seven-day week is not a rolling week, but an established work week for an employee.  If an employee’s work week is from Monday to Sunday, and the employee has worked every day from Monday through Saturday, the employer may not require the employee to work on Sunday.  If that same employee is off on Monday and works every day Tuesday through Sunday, the employer need not give the employee the following Monday off, because Monday starts a new work week.

Section 556 of the Labor Code exempts an employer from the requirement to give an employee who has worked six consecutive days the seventh day off, where the employee did not work more than 30 hours in the work week and no more than six hours in any day.  The California Supreme Court clarified (1) that this exemption applies only if the employee has not worked more than six hours in any day of the work week, and (2) that the employee worked no more than 30 hours in that week.  Therefore, if an employee works more than six hours on even one day of the work week, he or she must be given the seventh day off after working six consecutive days.  And, even if the employee works no more than six hours each day of the work week but works more than 30 hours that week, the employee must be given the seventh day off after working six consecutive days.

The Supreme Court also clarified that section 552 of the Labor Code, which provides that an employer may not “cause his employee to work more than six days in seven,” means that an employer may not “induce” an employee to forgo the day of rest.  But, provided the employee is “apprised of the entitlement to rest, the employer may permit the employee to choose to work the seventh day.