Since the first half of 2016 was full of labor and employment developments, including new legislation, we thought a “Summer Update” would be helpful. We suggest that employers take note of and develop action items to address the following issues given the many new obligations that are being imposed on employers.
San Francisco Employers Must Provide Paid Parental Leave to Employees
New York State Paid Family Leave Law Enacted and Effective in 2018
DOL and DFEH Issue New Workplace Posters
New FEHA Regulations Impose Additional Policy and Training Requirements on Employers
Federal Defend Trade Secrets Act Necessitates Changes to Employee and Contractor Agreements
Proposed Rule Would Require Addition of Pay Data to Annual EEO-1 Reports
Increasing Disapproval of Non-Competes at Federal Level
Fact Investigation Conducted by Outside Counsel Privileged Despite No Legal Advice Provided
San Francisco employers with twenty or more employees should review their parental leave policies in light of the new city ordinance, which requires these employers to cover 45% of the cost of parental leave for up to six weeks (up to $924 per week under the 2016 supplemental compensation rate). The ordinance is intended to provide wage supplementation for employees who otherwise receive 55% wage replacement for up to six weeks through the California Paid Family Leave program. The ordinance covers all employees (full-time, part-time, and temporary) (1) who began employment at least 180 days prior to the start of the leave period, (2) who work at least eight hours per week for the employer within the geographic boundaries of San Francisco, (3) at least 40% of whose total weekly hours worked for the employer are within the geographic boundaries of San Francisco, and (4) who are eligible to receive state paid family leave compensation for the purpose of bonding with a new child. The ordinance will phase in gradually based on employer size – January 1, 2017 (50 or more employees), July 1, 2017 (35 or more employees), and January 1, 2018 (20 or more employees).
In addition to San Francisco, employers with New York operations should begin thinking about their parental leave policies in light of a new law providing up to twelve weeks of partially paid family leave. The leave system will be financed by small paycheck deductions from employees; no employer contributions are required. Like the San Francisco ordinance, the New York state law will be phased in gradually. Beginning in 2018, workers will get up to eight weeks of leave per year and 50% of their average weekly wage (capped at 50% of the statewide average weekly wage). The benefit will eventually increase – in 2021, workers will receive up to twelve weeks of leave per year and 67% of the worker’s average weekly wage (capped at 67% of the statewide average weekly wage). Workers will be eligible for benefits after six months of service with their employer. The law also provides job protections, entitling an employee who returns from leave to be restored to the same or a comparable position, and requires that employers maintain existing health benefits for employees while they are on leave.
Companies should check to ensure that they have the most updated versions of required employment posters posted in their workplaces. For example, the federal Department of Labor (“DOL”) issued an updated Family and Medical Leave Act (“FMLA”) notice for employers to post at their workplaces. The DOL also published a helpful guide for employers about how to administer and comply with the FMLA. In addition, the California Department of Fair Employment and Housing issued a new notice regarding the rights of pregnant employees under California law.
Employers should review their applicable policies and training practices for compliance with new California Fair Employment and Housing Act regulations that went into effect this year. Although there were several changes (found on the California Department of Fair Employment and Housing website), the most important changes focused on new requirements for anti-harassment policies and related supervisor training.
Companies should update their employee invention assignment agreements and contractor agreements in light of the new federal Defend Trade Secrets Act (“DTSA”) (summarized previously here). The DTSA requires employers to provide notice of whistleblower immunity in any contract or agreement with an employee or independent contractor that governs the use of trade secret or other confidential information if the employer wishes to avail itself of the ability to recover exemplary damages and attorneys’ fees (among other benefits) under the DTSA. We recommend consulting with counsel to discuss how to best implement these changes.
The Equal Employment Opportunity Commission (“EEOC”) proposed a rule in February of this year that EEO-1 reports must include employee W-2 earnings and hours worked broken down by gender and race/ethnicity and across 12 pay bands starting from the EEO-1 reports due on September 30, 2017. Such data would be available both to the EEOC and the Office of Federal Contract Compliance for enforcement purposes. The rule was subject to a 60-day notice and comment period, which ended in April 2016. On July 13, 2016, the EEOC released a revised (although substantively similar) proposal for further comment, which adopted specific suggestions provided by commenters, such as moving the due date for the report from September to March 31, 2018, but still requires the disclosure of earnings and hours across pay bands. If adopted, these new reporting obligations will require very substantial data gathering and analysis by companies; as a result, there has been a storm of employer opposition. We will continue to follow this proposed rule and keep you informed.
Although non-competes outside of California are typically enforceable (subject to each state’s laws), the White House issued a report this summer discussing what it believes to be misuse of non-competes, particularly in low-wage fields where they are less likely to have valid uses, or with workers who do not have access to information that would rise to the level of trade secrets. The White House, Treasury, and the Department of Labor intend to convene a group of experts in labor law, economics, government, and business to facilitate discussion on non-competes and their consequences, the goal being to identify key areas where implementation and enforcement of non-competes may present issues, to examine promising practices in states, and to put forward a set of best practices and call to action for state reform. There has been activity regarding non-competes at the state level as well – the state of Washington recently tried, but failed to pass a bill seriously limiting the use and enforceability of non-competes. Given the ongoing scrutiny of non-competes, great care should be exercised in their use, keeping each state’s individual requirements in mind.
Employers should carefully consider how they handle investigations by outside counsel and non-attorneys in light of a California appellate court decision in City of Petaluma v. the Superior Court of Sonoma County. In this case, a female firefighter/paramedic working for the City of Petaluma filed an EEOC charge claiming sexual harassment and retaliation, and thereafter, resigned. The employee’s EEOC Charge was the first time the City had become aware of her allegations. In response to the employee’s charge, the City retained outside counsel to investigate her claims. The retainer agreement between the City and outside counsel specified that the investigation would be subject to the attorney-client privilege and that counsel would not “render legal advice as to what action to take.”
During the trial court proceeding, the employee sought outside counsel’s investigation files. The City refused to produce the files, claiming that they were privileged. While the trial court ordered the files to be produced, the appellate court disagreed and found that the files were protected by the attorney-client privilege and work product doctrine since the “dominant purpose” of engaging outside counsel was to determine the facts, and to assist with the defense in the anticipated litigation. This ruling underscores the importance of carefully consulting with counsel about how to maintain privilege and work product protections regarding the investigation of claims and any resulting report, especially if employers are conducting the investigation on their own using internal resources (e.g., human resources) or engaging an outside professional to conduct an investigation.