'We're Not In Kansas Anymore' California Employment Law for the Non-California Employer - Part 1

Contents

The California Employment Law Minefield

The Scope of California Employment Law

Wage/Hour Law and Payment of Wages

Employment Discrimination

California Paid Family Leave ("PFL")

"Kid Care" (Labor Code Section 233)

Whistle Blower Protections

Non-Competition and Other Restrictive Agreements

California WARN Act

Arbitration Agreements

Mandatory Health Insurance

Employment Cases Pending Before the California Supreme Court

Conclusion.

Table Of Authorities

Cases

Application Group Inc. v. Hunter Group Inc.

61 Cal. App. 4th 881 (1998)

Armendariz v. Foundation Health Psychcare Services Inc.

24 Cal. 4th 83 (2000)

Barnhill v. Robert Saunders & Co.

125 Cal. App. 3d 1 (1981)

Bell v. Farmer's Insurance Exchange

115 Cal. App. 4th 715 (2004)

Boothby v. Atlas Mechanical Inc.

6 Cal. App. 4th 1595 (1992)

Campbell v. Arco Marine Inc.

42 Cal. App. 4th 1850 (1996)

Circuit City Stores v. Adams

532 U.S. 105 (2001)

Colmenares v. Braemar Country Club

29 Cal. 4th 1019 (2003)

D'Sa v. Playhut Inc.

85 Cal. App. 4th 927 (2000)

Diamond Woodworks v. Argonaut Insurance Company

109 Cal. App. 4th 1020 (2003)

Green Tree Financial Corp. v Randolph

531 U.S. 79 (2000)

Grinzi v. San Diego Hospice Corp.

120 Cal. App. 4th 72 (2004)

Honeywell v. Workers' Compensation Appeals Board

104 Cal. App. 4th 829 (2002)

Hudgins v. Neiman Marcus Group, Inc.

34 Cal. App. 4th 1109 (1995)

Jasmine Networks, Inc. v. Marvell Semiconductor, Inc.

117 Cal. App. 4th 794 (2004)

Kerr's Catering Service v. Department of Industrial Relations

57 Cal. 2d 319 (1962)

Loral Corp. v. Moyes

174 Cal. App. 3d 268 (1985)

Lyle v. Warner Brothers Television Productions

117 Cal. App. 4th 1164 (2004)

Mackey v. Department of Corrections

105 Cal. App. 4th 945 (2003)

Prachasaisoradej v. Ralphs Grocery Co., Inc.

122 Cal. App. 4th 29 (2004)

Prilliman v. United Airlines Inc.

53 Cal. 4th 935 (1997)

Ralphs Grocery Co. v. Superior Court (Swanson)

112 Cal. App. 4th 1090 (2003)

Reeves v. Hanlon

33 Cal. 4th 1140 (2004)

Reno v. Baird

18 Cal. 4th 640 (1998)

Reynolds v. Bement

107 Cal. App. 4th 738 (2003)

Robinson v. Fair Employment and Housing Commission

2 Cal. 4th 226 (1992)

Sav-On Drugstores, Inc. v. Superior Court

34 Cal. 4th 319 (2004)

State Farm Mutual Automobile Insurance Company v. Campbell

538 U.S. 408 (2003)

Suastez v. Plastic Dress-Up Co.

31 Cal. 3d 774 (1982)

Thompson v. Impaxx, Inc.

113 Cal. App. 4th 1425 (2003)

Varian Medical Systems, Inc. v. Delfino

113 Cal. App. 4th 273 (2003)

Yanowitz v. L'Oreal USA

106 Cal. App. 4th 1036 (2003)

Statutes And Codes

California Business and Professions Code

Section 16600

California Government Code

Section 12926(D)

Section 12926(I)

Section 12926(k)

Section 12926(m)

Section 12926(q)

Section 12926(r)

Section 12926.1

Section 12940(a)

Section 12940(j)(3)

Section 12940(j)(4)(A)

Section 12940(k)

Section 12941

Section 12945

Section 12945(c)

California Labor Code

Section 98.6

Section 201

Section 203

Section 221

Sections 221 through 224

Section 226.7

Section 226.7(b)

Section 233

Section 512

Section 1102.5

Section 1400 et seq

Section 3751

Section 5401

Section 5402

Other Authorities

California Assembly

Bill 1825

Bill 2222

California Senate

Bill 1809

Bill 2

I. The California Employment Law Minefield.

California has, over the past several decades, developed a unique body of employment law that distinguishes it from virtually any other state. These changes have arisen from statutes, court decisions and administrative regulations. They have one thing in common: private sector employees in California have far more protections in almost any area of employment law than their counterparts in other states. Conversely, employers in California, regardless of the state where the employer is headquartered, face a daunting challenge in complying with California laws that are inconsistent with corresponding federal law or the law of many other states. This is true even when one compares California employment law to that of other large, industrial states such as New York, Illinois or Pennsylvania.

This paper will identify the principal areas in which California employment law is different from the law non-California employers generally are familiar with. This paper is not a detailed or exhaustive examination of the topic. Any employer doing business in California, but based elsewhere, should consult with an experienced human resource consultant or labor counsel regarding virtually any significant employment decision affecting a California-based employee.

II. The Scope of California Employment Law.

Generally speaking, California's employment laws apply to employees living and working in California. However, the California Division of Labor Standards Enforcement ("DLSE" or the "Labor Commissioner") contends that California's Labor Code (which includes its unique wage and hour laws), applies to California-based employees who may temporarily work out of state (even as to periods when they may be out of the state).

California's Fair Employment and Housing Act ("FEHA", which is a broad-based employment discrimination statute, applies to all California-based employees, regardless of where the employer is headquartered. However, it does not apply to nonresidents of California who are employed outside the state, even though the employer may be headquartered here. Campbell v. Arco Marine Inc., 42 Cal. App. 4th 1850 (1996)

As a rule of thumb, an out of state employer should assume that California's employment laws will apply to any person living in California and performing a significant portion of his/her duties here. The employer should also assume that any employee temporarily transferred to California will be covered by California employment law while he/she is based in California.

III. Wage/Hour Law and Payment of Wages.

California has extremely detailed requirements for payment of wages to employees and for wage/hour (minimum wage and overtime) law. The following are the most significant differences between California law and corresponding federal law:

A. California Statutory and Regulatory Scheme.

Most of the California wage/hour requirements are found either in the Labor Code or the Wage Orders issued by the California Industrial Welfare Commission ("IWC").1 Attached to this paper as Exhibit 1 is a copy of IWC Order No. 4, which is applicable to employees in mechanical, technical, clerical and similar occupations, unless the employer is not governed by a different wage order. The IWC has issued 16 wage orders, most of which are for specific industries.2 The IWC's wage orders are currently very similar with respect to most, but not all areas of significance.

The California Labor Code and the Wage Orders contain no exemption for small employers. Employers having even a handful of employees must comply with these requirements.

The California wage/hour requirements are especially dangerous for two additional reasons: (1) the California Supreme Court has permitted class actions, on a state-wide basis, to enforce overtime rules, Sav-On Drugstores, Inc. v. Superior Court, 34 Cal. 4th 319 (2004) and (2) substantial penalties are available for Labor Code violations, in addition to unpaid wages, interest, attorneys' fees and court costs.

B. The California Labor Code Private Attorneys General Act.

The California Labor Code Private Attorneys General Act ("PAGA") went into effect on January 1, 2004. This statute was amended by California Senate Bill 1809, effective August 11, 2004. PAGA creates a penalty for any violation of the Labor Code which did not previously have a penalty provision. It permits private employees or former employees to recover penalties whether or not the state labor relations agency (the Labor and Workforce Development Agency or "LWDA") is also authorized to recover the penalty. In essence, PAGA is a "bounty hunter" statute that substantially raises the ante for any Labor Code violation. PAGA arguably imposes penalties even if the violation is technical and causes no direct economic harm. It also contemplates class actions or other collective actions for the collection of such penalties.3

PAGA was passed by the Democrat-controlled California Legislature and signed by former Governor Gray Davis shortly after he lost the recall election in 2003. Almost immediately, numerous PAGA suits were filed by employees or former employees, seeking huge amounts of penalties for sometimes trivial or technical Labor Code violations. For example, Amgen, Inc. was sued in a case seeking more than...