Labor & Employment: 2003 California Employment Law Amendments

Article by William J Emanuel, Robert Ford, Patricia Kinaga, Allison Michael, Sue Stott

The California Legislature once again has made sweeping changes in the state's employment laws. The new laws and amendments described in this report generally became effective on January 1, 2003, except where other effective dates are noted.

Cal-WARN (AB 2957)

California has enacted its own version of the Worker Adjustment and Retraining Notification Act ("WARN"), the federal law that requires employers to give 60-day notices before ordering a plant closing or mass layoff. A detailed description of this new state law is available at the Publications section of Jones Day's Web site, www.jonesday.com.

Family Temporary Disability Leave (SB 1661)

California has long maintained a State Disability Insurance ("SDI") program for employees who are unable to work because of sickness or injury that is not work-related. The program is financed by employees through payroll deductions. This new law expands SDI to include a Family Temporary Disability Insurance ("FTDI") program. The new program will provide up to six weeks of wage replacement benefits to workers who take time off from work to care for a seriously ill child, spouse, parent, or domestic partner, or to care for a new child. As under the SDI program, these benefits will be financed by employees through payroll deductions. The new program will be effective on January 1, 2004, but benefits will be payable for FTDI leave starting on July 1, 2004.

Eligibility for Benefits. Employees will be eligible for FTDI benefits if they are unable to perform their customary work because of a need to care for (1) a new child during the first year after birth or after placement for adoption or foster care, or (2) a seriously ill child, parent, spouse, or domestic partner. However, there will be a waiting period of seven consecutive days before benefits are payable. In addition, an employee will not be eligible for these benefits if another family member is available to provide the care, or if the employee is entitled to receive other benefits specified in the statute.

Maximum Benefits. Benefits will be capped at 55 percent of wages, but they will not exceed the maximum temporary disability benefit under the state workers' compensation law. No more than six weeks of benefits will be paid within any 12-month period.

FMLA/CFRA. The new law states that an employee who is entitled to a leave under the Family and Medical Leave Act ("FMLA") or the California Family Rights Act ("CFRA") must take FTDI leave concurrently with leave taken under those statutes.

Employer's Vacation Option. As a condition of the initial receipt of FTDI benefits during any 12-month period, the employer can require the employee to take up to two weeks of earned but unused vacation leave before receiving the benefits. In that event, the first week of the vacation will be applied to the seven-day waiting period.

Notice to Employees. A notice informing workers of their rights under the SDI and FTDI programs will be provided to employers by the state Employment Development Department ("EDD"). The notice must be given to (1) employees hired on or after January 1, 2004, and (2) employees leaving work on or after July 1, 2004, due to pregnancy or nonoccupational sickness or injury, or the need to provide care for a sick or injured family member or a new child.

Benefit Claims. As under the SDI program, an employee will be required to establish FTDI eligibility by filing a claim for benefits with the EDD. The claim must be supported by a medical certificate establishing the condition of the family member that warrants the care of the employee. In addition, the EDD will develop a certification form for an employee taking leave for the birth or placement of a child. Employees falsely certifying a medical condition are subject to the assessment of a penalty by the EDD.

Voluntary Plans. As under the SDI program, employers will have the option of adopting a "voluntary" plan in lieu of participating in the state FTDI program, provided that the rights accorded to covered employees are greater than those available under the state FTDI program.

Leaves of Absence. The new law does not expressly provide a right to a leave of absence for employees who are eligible to receive FTDI benefits. However, it does include a definition of "family care leave." Moreover, as noted above, it states that an employee who is entitled to leave under the FMLA and the CFRA "must take Family Temporary Disability Insurance (FTDI) leave concurrent with the leave taken under" those statutes. In addition, it requires the EDD to develop a certification form for an employee "taking leave" related to the birth or placement of a child. But it does not state that an employer must grant a leave of absence when an employee is absent for reasons that entitle the employee to benefits under the law. Nevertheless, employers should be cautious not to run afoul of other legal obligations under these circumstances. In many cases, an employee will be entitled to a leave of absence under the FMLA or the CFRA, or under a union contract or the employer's personnel policies. In addition, if an employee is terminated for taking time off while receiving FTDI benefits, it could lead to a claim of wrongful termination in violation of public policy.

Payroll Deductions. The new program is financed by an increase in the worker SDI contribution rate, as determined each year by the EDD, of 0.08 percent for 2004 and 2005. The cap for worker contributions is raised to 1.5 percent, up from 1.3 percent.

Sick Leave (SB 1471)

Under California law, an employer that provides paid sick leave must permit an employee to use, in any calendar year, the amount of sick leave that accrues over six months to attend to an illness of the employee's child, parent, spouse, or domestic partner. This amendment provides that it will be a per se violation of the statute if an employer maintains an absence control policy that counts sick leave taken for that purpose as an absence that may lead to discipline, discharge, demotion, or suspension. In addition, the amendment generally provides that an employee "working under" such a policy is entitled to appropriate relief under the statute. One of the penalties for a violation is actual damages or one day's pay, whichever is greater. Since any employee "working under" the policy is entitled to relief, plaintiffs are likely to contend that, if an employer maintains such a policy, every employee on its payroll would be entitled to one day's pay as a penalty.

Fair Employment And Housing Act

Age Discrimination (AB 1599). Under previous California law, it was a violation of the Fair Employment and Housing Act ("FEHA") for an employer to refuse to hire or employ, or to discharge, dismiss, reduce, suspend, or demote, any individual over 40 because of age. However, it was not a violation for an employer to discriminate against a person in compensation, or in terms, conditions, or privileges of employment, because of age. Thus, unlike the federal law, an employer could discriminate on the basis of age in granting benefits without violating the state law. The California Supreme Court so held last year in Esberg v. Union Oil Co. of Calif., 28 Cal. 4th 262 (2002).

This amendment was enacted to overrule the Supreme Court's decision in the Esberg case. Under the amended statute, employers may not discriminate in compensation, or in terms, conditions, or privileges of employment, on the basis of age. However, in the process of making that change, the Legislature also reorganized the FEHA, and in doing so it made several other substantive changes.

First, the previous law contained a broad exception for cases where the law compelled or provided for action on the basis of age. This exception has been narrowed by the amendment. Under the amended version of the FEHA, an employer is not prohibited from (1) refusing to employ an individual because of age, if the law compels or provides for that refusal, or (2) inquiring into the age of an applicant, or specifying age limitations, if the law compels or provides for that action.

Second, the prior law provided that it was not unlawful to reject or terminate employment on the basis of age if the applicant or employee failed to meet bona fide requirements for the job or position sought or held. There is no comparable statement in the amended law, except the general exception in the FEHA for bona fide occupational qualifications.

Third, it is now unlawful for an employer to refuse to select a person for a training program leading to employment, or to bar or discharge a person from such a program, because of age.

Fourth, the prior law stated that the ban against age discrimination did not preclude physical and medical examinations of applicants and employees to determine fitness for the job sought or held. This language has been deleted.

Finally, the prior law stated that it did not limit the right of an employer to select the better-qualified person from among all applicants for a job, and it further stated that the burden of proving a violation was on the person claiming that it occurred. This language has also been deleted.

Statute of Limitations (AB 1146). As a general rule, a person who wishes to file a lawsuit under the FEHA must do so within one year after a "right-to-sue" notice is issued by the Department of Fair Employment and Housing ("DFEH"). The amendment generally provides that this statute of limitations will be tolled in cases where (1) the DFEH has deferred its investigation to the federal Equal Employment Opportunity Commission ("EEOC"), or (2) after the DFEH investigates the complaint, the EEOC either performs a "substantial weight" review of the DFEH's determination, or conducts its own investigation.

Job References Defamation (AB 2868)

The California law of defamation (libel and slander) includes an...