California Employment Law Watch

11.1.13

California employers should take note of employment laws recently enacted related to minimum wage and Paid Family Leave income replacement under State Disability Insurance (SDI).  In addition, the United States Supreme Court has started its 2013-2014 term and will be considering a couple of stand-out cases on its docket that private employers may want to follow.  These cases will address important employment issues including what constitutes “changing clothes” under the Fair Labor Standards Act and the interpretation of Sarbanes-Oxley Act’s whistleblower provision.

Minimum Wage

Gov. Jerry Brown signed Assembly Bill 10 on Wednesday, September 25 that will raise California’s minimum wage to $10 per hour over the next three years.  Minimum wage will go from $8 to $9 per hour effective July 1, 2014, and from $9 to $10 per hour effective January 1, 2016.

The new law also affects exempt employees who are paid on a salary-basis.  In California, in order to be treated as exempt, the employee must be paid at least twice the minimum wage.  Thus, employers should review exempt employee rates prior to the increase in minimum wage to ensure continued compliance.

Family Leave Extension

On Tuesday, September 24th, Gov. Jerry Brown signed a bill to extend California’s Paid Family Leave program under SDI.  Currently, Paid Family Leave provides up to six weeks of wage replacement benefits to workers who pay into SDI and take time off to care for a seriously ill child, spouse, parent, or domestic partner; or to bond with a minor child within one year of the birth or placement of the child in connection with foster care or adoption.  The expanded law now extends those same rights to workers who need time to care for siblings, grandparents, grandchildren, and parents-in-law.

Sandifer v. United States Steel Corp.

Currently, under Section 203(o) of the Fair Labor Standards Act (“FLSA”), an employer is not required to compensate a worker for time spent “changing clothes” if that time is excluded from compensable time under a collective bargaining agreement. The Sandifer case asks the Supreme Court to determine what constitutes “changing clothes.”

United States Steel Corporation (“U.S. Steel”) workers argue that putting on and taking off mandatory safety wear does not constitute “changing clothes” within the meaning of FLSA § 203(o) because safety wear is not “clothes,” and therefore should be compensable time. The district court sided with U.S. Steel finding that such time is not compensable, and the United States Court of Appeals for the Seventh Circuit affirmed. The Supreme Court will consider whether employers and employees in unionized industries will be permitted to negotiate on whether time spent changing into and out of protective gear is compensable and will determine how much deference to give the Department of Labor's interpretation of changing clothes. The Supreme Court will hear argument on this issue on November 4, 2013.

Lawson v. FMR LLC (Fidelity Investments)

Section 1514 of the Sarbanes-Oxley Act (“SOX”) prohibits certain public companies and their contractors from retaliating against an “employee” who engages in protected activity, including employees who report violations of Securities and Exchange Commission regulations or any provision of federal law relating to fraud against the shareholders.  Lawson v. FMR LLC asks the Supreme Court to determine whether an employee of a privately-held contractor or subcontractor of a public company is protected from retaliation by the SOX whistleblower provision.  

In short, Petitioners made repeated complaints regarding their employers' practices to company executives and, for one Petitioner, to the Securities and Exchange Commission; each was thereafter subjected to adverse employment action. They contend that they are protected by Section 1514A of SOX. On the other hand, Respondents argue that the “employees” protected from retaliation are limited to employees of public companies themselves, and do not include those who work for private contractors of a public company.

The district court found for the Petitioners, but was reversed by the United States Court of Appeals for the First Circuit. If the interpretation urged by Petitioners is adopted, any employer doing business with a public company could potentially become covered by SOX's whistleblower provision, a significant expansion of SOX. Lawson is set to be heard on November 12, 2013.

We hope you have found this information helpful.  Should you have any additional questions, please please contact Ross Schwartz, Dick Semerdjian or Sarah Evans at 619.236.8821.