Changes To California Law Warrant Revisions To Employer Policies and Practices

In addition to changing the overtime and sick leave laws, (See Footnote 1) the California State Legislature recently made some important changes to the Fair Employment and Housing Act ("FEHA") and California Labor Code that will be effective January 1, 2000. The new laws expand the categories of protected individuals, and grant already-protected individuals greater rights and remedies. Most of these changes will present new risks of litigation and liability for employers. All of them give employers further incentive to create, implement, update and abide by strict policies against workplace discrimination and in compliance with the new leave laws.

Amendments to the Fair Employment and Housing Act

Age Discrimination

Under the FEHA, it is an unlawful employment practice for an employer to discriminate on the basis of age. However, in Marks v. Loral Corporation, the California Court of Appeal expressly held that basing employment decisions on salary did not constitute age discrimination, stating that under either the federal Age Discrimination in Employment Act ("ADEA") or the FEHA, employers may "prefer workers with lower salaries to workers with higher ones, even if the preference falls disproportionately on older, generally higher paid workers." The court explained: "An employer is entitled to choose employees with lower salaries, even though this may result in choosing younger employees. If the choice is based on salary, there is not age discrimination." (See Footnote 2.)

The Legislature has explicitly rejected the holding in Marks and declared that "the use of salary as the basis for differentiating between employees when terminating employment may be found to constitute age discrimination if use of that criterion adversely impacts [workers over the age of 40] as a group." (See Footnote 3.)

Perceived Membership And Associational Rights

Effective January 1, the FEHA is significantly broadened to prohibit discrimination not only based on an individual's membership in a protected group, but also based on an individual's perceived membership in a protected group, or on an individual's association with another who is a member of a protected group. (See Footnote 4.) For example, under the new amendment, an employer will be liable if the employer terminates a Caucasian woman because she was dating an African American man.

Reasonable Accommodation For Pregnant Employees

It has been an unlawful employment practice to refuse to transfer a pregnant female employee temporarily, upon her request, to a less strenuous or hazardous position for the duration of her pregnancy, where the transfer could be reasonably accommodated. (See Footnote 5.) The FEHA now additionally will require employers to grant requests for reasonable accommodation made by an employee, on the advice of a health-care provider, for pregnancy, child-birth or related medical conditions. (See Footnote 6.) The Legislature intended "to allow pregnant employees to remain in their current positions for longer time periods without the need for transfer" and gave examples of accommodation as "permitting more frequent restroom breaks or rest periods." (See Footnote 7.) Even as amended, the FEHA does not require an employer to accommodate a pregnant employee by creating an additional job, discharging another employee, transferring an employee who has more seniority, or promoting an unqualified employee. (See Footnote 8.)

Harassment by "Supervisors"

California courts construing the FEHA have held that employers are strictly liable for harassment by a supervisor, (See Footnote 9) but the statute has not defined the term "supervisor" until now. As amended, the FEHA defines "supervisor" as "any individual having the authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward or discipline other employees," as well as any individual with responsibility to "direct" other employees, or to "adjust their grievances, or effectively to recommend that action." The exercise of such authority must not be "merely routine or clerical" in nature; it must involve the use of "independent judgment." (See Footnote 10.)

Harassment of Independent Contractors

In addition to employees, job applicants and people compensated by temporary service agencies, the Legislature further has expanded the FEHA to protect people "providing services pursuant to a contract" from harassment (but not discrimination) on the basis of race, religion, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age and (as of January 1) sexual orientation. A person "providing services pursuant to a contract" is a person who 1) has the right to control the performance of the contract; 2) has discretion as to the manner of performance; 3) has control over the time and place the work is performed; 4) is customarily engaged in an independently established business; 5) supplies the tools and instruments used in the work; and 6) performs work that requires a particular skill not ordinarily used in the course of the employer's work. For harassment purposes, an "employer" means any person regularly employing one or more people providing services under a contract, or anyone acting as an agent of an employer, directly or indirectly, the state or any political or civil subdivision. (See Footnote 11.)

Sexual Orientation Discrimination

The California Labor Code has prohibited discrimination or different treatment by employers employing five or more people in any aspect of employment, or opportunity for employment, based on actual or perceived sexual orientation. (See Footnote 12.) Under this Labor Code provision, employees alleging sexual orientation discrimination could file a complaint with the Department of Labor Standards Enforcement within 30 days of the alleged discriminatory incident, or file a civil lawsuit alleging wrongful discharge in violation of public policy within one year of the date of discharge. (See Footnote 13.)

Effective January 1, the FEHA will explicitly prohibit sexual orientation discrimination and the prohibition in the Labor Code is repealed. Under the FEHA, "sexual orientation" is defined to include heterosexuality, homosexuality and bisexuality, and protects people based on their actual or perceived sexual orientation. Employers with five or more employees are subject to the FEHA's sexual orientation anti-discrimination provisions, though employers of one or more people are subject to the FEHA's prohibition against harassment on the basis of sexual orientation. An employee must file a complaint of sexual orientation discrimination with the Department of Fair Employment and Housing ("DFEH") within one year from the alleged discriminatory act. The employee can then file a civil action within one year of receiving a "right-to-sue" letter from the DFEH. (See Footnote 14.)

The Consequences For Employers

• Employers must be very careful about what factors they consider in making termination decisions and should avoid considering salary. Given that older employees generally may have higher salaries, a salary-based termination decision could have an adverse impact on older workers, and could be a violation of the FEHA.

• Employers involved in mergers, reorganizations and downsizing should be especially careful when terminating employees, because cost can be an important issue in such circumstances. Employers should develop and document the criteria that will be used in making lay off decisions, make sure that the criteria are consistent with any labor contracts, employment contracts or company policies already in effect, and follow up to ensure the criteria are followed consistently by those who make the lay off decisions.

• Before finalizing a reduction in force, an employer should examine how the layoffs will statistically impact employees 40 years of age or older and adjust the criteria if necessary. To prevent potential litigation, employers may consider offering narrowly tailored, voluntary severance packages as an exit incentive. Voluntary early retirement packages may include extended health care coverage, social security supplements or the vesting of stock options. Any offers of early retirement must be accompanied by an assurance that employees are free to decline the offer.

• Employers should consider obtaining signed releases of potential age discrimination claims from older employees who accept exit incentives. Waivers should be carefully crafted and accompanied by additional consideration.

• To the extent they do not already do so, employers should include sexual orientation as a protected category in the employers' written policies, discussions, training and postings regarding unlawful discrimination and harassment. Employers should teach supervisors and employees that discrimination on the basis of sexual orientation is as serious as other forms of unlawful discrimination, and that the employer will not tolerate any such discrimination or harassment.

• When conducting training sessions, employers should explain that associational discrimination is prohibited, as is discrimination on the basis of perceived membership in a protected group. Employers also should modify their postings and written policies on discrimination and harassment accordingly.

• If the Fair Employment and Housing Commission promulgates reasonable accommodation guidelines for pregnant employees, they should be used when considering requests for pregnancy accommodation. Until then, employers at least should take the following into account when making accommodation decisions: 1) the type of work performed by the pregnant employee who requests accommodation (e.g., office work or manual labor); 2) the nature of the employee's work environment (e.g., heavy lifting, sitting for extended hours, etc.); 3) documentation from the employee's health-care provider; and 4) accommodations that have been made for other employees.

• Given the explicitly broad scope of the FEHA's definition of "supervisor," employers should ensure their harassment training programs address all individuals who may qualify under the new definition. Employers also may want to vest fewer individuals with the authorities set forth in the FEHA as a means of limiting potential liability.

• All independent contractors should be provided copies of the company's anti-harassment policy and complaint procedures, and sign an acknowledgement that they have received and read these policies.

New Leave Policies

Domestic Violence Leave Policy

Effective January 1, employees must be permitted to use any available vacation time, personal leave, compensatory time (if applicable) or take unpaid leave to protect themselves and/or their child(ren) from domestic violence. (See Footnote 16.) While the language of the law focuses on time necessary to appear in court (and is contained within the provisions regarding Jury Duty), the law is broadly worded to allow an employee to take time off to "obtain any relief" relating to domestic violence. The law does not limit the amount of time that may be taken. As with other leave laws, employees may not be discriminated or retaliated against for taking time off pursuant to this policy.

Jury Duty Policy

While many employers already provide paid time off for jury duty, all employers must permit their employees to use available vacation, personal or compensatory time (if applicable) for jury duty, effective January 1. (See Footnote 17.)

Consequences for Employers

• Employers should add an explicit domestic violence leave policy to their handbooks, written policies and postings, mirroring the language of the law.

• To the extent employers do not already provide paid time off for jury duty or explicitly allow their employees to use available vacation, personal or compensatory time (if available) for jury duty, employee handbooks, written policies and postings should be revised to reflect the new law.

• Employers should ensure that their domestic violence leave and jury duty policies explicitly state that employees will not be discriminated against or discharged for taking time off under each policy.

• Supervisors should be trained about these changes and the provisions of the laws to ensure that they respond appropriately to requests for leave under these provisions.

Labor Code 96: Employees' Activities Off The Job

While the impact of this vague provision remains to be seen, the Legislature has amended the authority of the Labor Commissioner to consider claims by employees for "loss of wages as the result of demotion, suspension or discharge from employment for lawful conduct occurring during nonworking hours away from the employer's premises." (See Footnote 18.) Given a very broad interpretation, this provision could be construed to mean that employers may not prohibit their employees from working for competitors, dating employees of a competitor, accepting gifts from potential contractors or any other conduct so long as it is legal in and of itself. Narrowly interpreted, this provision is simply a reiteration of the intended purpose of Labor Code Sections 1101 and 1102 regarding employees' freedom to engage in political activities or affiliations without fear of employer reprisal, adding the right of action before the Labor Commissioner that previsouly did not exist. The new law does not create a new cause of action in a civil proceeding and is limited to claims with the Labor Commissioner, though plaintiffs' attorneys likely will argue that a new public policy claim has been created.

Consequences for Employers

• Employers need not abandon their well-reasoned policies prohibiting such off-the-job conduct as employment with a competitor, dating competitor's employees, gift and tip prohibitions and the like, where these policies specifically are related to the employer's success and employees' ability to perform their jobs.

• As in all cases, employers should ensure that they carefully review any termination or discipline decisions that arise because of an employee's off-the-job conduct. Employers should be careful to determine that their actions do not invade employees' privacy rights, including rights to political association and activity, and that the decisions are related to the employees' ability to perform their jobs, and not any unrelated criteria.

1/ These California laws were addressed in Client Alerts previously issued by Paul, Hastings, Janofsky & Walker LLP in August and September 1999. return

2/ 57 Cal. App. 4th 30, 36, 42 (1997). return

3/ Cal. Gov't Code § 12941.1 (2000). return

4/ Id. § 12926(m). return

5/ Id. § 12945(c)(2). return

6/ Id. § 12945(c)(1). return

7/ California Assembly Comm. On Judiciary, Hearing: A.B. 1670, at 10-11 (May 11, 1999). return

8/ Cal. Gov't Code § 12945(c)(3). return

9/ E.g., Kelly-Zurian v. Wohl Shoe Co., 22 Cal. App. 4th 598 (1994). return

10/ Cal. Gov't Code § 12926(r). return

11/ Id. § 12940(h)(3)(A)-(4)(C). return

12/ Cal. Lab. Code § 1102.1; repealed 1999 Cal. Legis. Serv. Ch. 592, Sections 1, 12 (A.B. 1001) (West). return

13/ See Cal. Lab. Code § 98.7(a); Leibert v. Transworld Sys., 32 Cal. App. 4th 1693 (1995) (holding that public policy wrongful discharge claim may be based on sexual orientation discrimination); Cal. Civ. Proc. Code § 340(3) (one year statute of limitations). return

14/ Cal. Gov't Code §§ 12926(m), (q), (d); 12940(h)(3)(A); 12960; 12965(a)-(b). return

15/ These laws are in addition to the new sick leave law allowing time off to care for a child, parent or spouse (Cal. Lab. Code § 233), addressed in PHJ&W's September 1999 Client Alert. return

16/ Cal. Lab. Code § 230 (2000). return

17/ Id. return

18/ Id. § 96(k). return