Blog: The California Workplace Advisor

Now that we have reviewed the laws that are affecting California employers beginning in 2014, we cast an eye forward to examine employment issues that could impact your workplace in the New Year.  Based on our review of what’s developing from the State Capitol to the boardroom, these are five hot topics that we think are worthy of watching:

1.  WILL “BAN THE BOX” MEASURES AFFECT YOUR WORKPLACE?

“Ban the box” laws are gaining steam across the country.  Generally, ban the box initiatives eliminate the question about criminal convictions from a job application or interview.  Instead, an employer may only ask about an applicant’s criminal history once it determines the applicant is qualified for the position.  Advocates for these measures argue that by delaying the inquiry, employers are not automatically disqualifying candidates based solely upon a criminal history.  Some ban the box measures require the employer to consider the nature of the conviction and the relationship of the conviction to the job before disqualifying the employee due to a criminal background.  Ban the box laws, advocates argue, reduce barriers to employment for individuals with criminal histories, decrease unemployment in communities with concentrated numbers of previous offenders, and ensure fairness for those with outdated or minor convictions.

Currently over 50 jurisdictions, including states, counties and cities, have taken steps to limit an employer’s consideration of criminal history and convictions in the hiring process.  Six states have enacted some type of ban the box measure in 2013 alone.  Here in California, Governor Brown signed AB 218, adding Section 432.9 to the California Labor Code, in October 2013.  Effective on July 1, 2014, Section 432.9 prohibits government agencies from asking job applicants about criminal convictions until the agency has determined that the applicant meets minimum qualifications for the job.  The new law applies only to public employers.  The City of Richmond in Northern California took a bigger step to ban the box by passing a local ordinance effective in September 2013 that prohibits city contractors from ever inquiring about applicants’ criminal histories. The Richmond ordinance states that private companies with city contracts and more than nine employees cannot ask about an applicant’s criminal record.  If employers ask, they stand to lose their city contracts.  The ordinance makes exceptions for jobs that the city government deems sensitive and allows criminal background checks for certain positions, such as those within the police department and schools, for which federal or state law requires them.

With the passage of AB 218, California joins nine other states in adopting ban the box laws. Hawaii, Massachusetts, Minnesota and Rhode Island are the four states that have banned private employers from inquiring about an applicant’s criminal background until the applicant is deemed qualified for the position.  Some criminal reform advocates view AB 218 as a harbinger of the California legislature taking action to bar private employers from asking about any criminal convictions in the hiring process.

The use of criminal background checks in employment has also come under fire by the Equal Employment Opportunity Commission as we earlier discussed, although the federal agency has not been wholly successful in arguing criminal backgrounds checks are discriminatory.

What To Do In 2014:  Stay tuned and watch this space, as more ban the box laws are expected in the coming year.

2.  DO YOU USE INDEPENDENT CONTRACTORS IN YOUR WORKPLACE?

Another hot topic worthy of attention is the governmental crackdown on the misuse of independent contractors and the increase in the number of class actions seeking millions of dollars in wages and penalties related to the misclassification of employees as independent contractors.  The press is monitoring these developments, and the New York Times recently published an opinion piece about the effect of misclassification on the individual worker.

In November 2013, U.S. Senator Bob Casey (D-PA) introduced the Payroll Fraud Prevention Act of 2013, which was similar to a federal bill introduced, but not enacted, in 2010.  The legislation is designed to make the misclassification of employees as independent contractors a specific violation of the Fair Labor Standards Act.  Currently, the Fair Labor Standards Act only allows workers who should have been classified as employees to recover minimum wages that they should have paid, including overtime, and penalties.  Senator Casey’s proposed bill would enable the U.S. Department of Labor (DOL) to clamp down on companies that misclassify workers as independent contractors to reduce payroll and tax obligations.  The bill would also impact companies that unintentionally misclassify workers, and enable the DOL to increase audits of companies operating in industries, like construction, where misclassification commonly occurs.  Lastly, employers would be liable if they discriminate against a person who has opposed any practice or filed a complaint relating to misclassification.

Even if the Payroll Fraud Prevention Act does not ultimately become federal law, it is clear that federal and state agencies are focusing their resources on investigating worker misclassification.  In November 2013, the DOL entered into partnership agreements with New York state agencies to allow the federal and state agencies to coordinate investigations and joint enforcement activities, exchange investigative leads, complaints and referrals of possible violations, and share confidential unemployment compensation information, all designed to find improperly classified workers.  New York became the fifteenth state to enter into such an arrangement with the DOL.  California’s Secretary of Labor and the DOL signed a similar agreement in December 2011.  In addition, the DOL is actively pursuing wage claims on behalf of those who have been misclassified.  In December 2013, the federal agency filed a lawsuit against a Georgia restaurant and the restaurant’s owner seeking $2 million in wages and liquidated damages for servers who were wrongly misclassified as independent contractors and thus were not paid minimum wage and overtime.  The IRS has expressed its intent to focus on misclassification issues, and the resulting loss of federal payroll taxes, beginning in the first quarter of 2014.

The plaintiff’s bar has taken notice as well.  High profile misclassification class action cases include a California lawsuit against AT&T, Apple and a staffing agency by customer service representatives who claimed they were misclassified as independent contractors, ending in a $1.24 million settlement in early 2013.  Two months ago, a Massachusetts federal judge approved a $7.5 million class action settlement for claims that an office cleaning company misclassified employees as independent contractors.  Liability for misclassification results not only from regulatory enforcement, but expensive class action lawsuits when companies improperly classify an entire category of workers.

What To Do In 2014:  With the increased focus on classification issues, companies should be proactive in periodically evaluating workers’ classifications to ensure they comply with federal and state law.  Improper misclassification can expose a California employer to claims of unpaid wages, unpaid overtime, pay for missed meal and rest breaks, and substantial penalties.

3.  DOES YOUR WORKPLACE OFFER EMPLOYEE WELLNESS PLANS?

The Patient Protection and Affordable Care Act (ACA) – often called “Obamacare” – creates new financial incentives for employers to implement or build upon existing wellness programs. Many employers already offer wellness plans for their employees.  However, the offering of wellness plans is expected to surge in 2014 as employers will be able to give larger rewards under the ACA, including the reduction of insurance premiums, to participating employees.  Looking ahead, employers who offer wellness plans should be mindful of the potential legal issues arising under these plans.

There are two types of wellness plans: participatory wellness programs and health-contingent programs.  The DOL has adopted rules governing the implementation of the wellness plans. Participatory wellness programs are the most popular and are available without regard to an individual’s health status.  Examples include reimbursement for gym membership fees, a reward for attending free health education or nutritional seminars, or a program rewarding employees who complete a health risk assessment without requiring further action.  The employee need only complete the program to obtain the reward. The reward is not outcome-based.  To ensure participatory plans are nondiscriminatory and comply with the ACA, they must be made available to all similarly situated employees without regard to health status.

On the other hand, health-contingent wellness programs generally require individuals to either meet a specific standard related to their health or complete an activity to obtain a reward.  Examples of health-contingent wellness plans include rewards for those who successfully complete smoking cessation programs or achieve a particular cholesterol level, weight or other biometric standard.  Employers should be mindful of the DOL’s rules in developing nondiscriminatory health-contingent wellness programs. As we discussed here, there are uncertainties surrounding the implementation of health-contingent wellness programs that comply with the discriminatory and privacy provisions of several laws, including the ACA, Title VII of the Civil Rights Act, the Americans with Disabilities Act, and the Genetic Information Non-Discrimination Act.

What To Do In 2014:  While we wait for more guidance from federal agencies on avoiding discrimination claims in the use of health-contingent wellness plans, employers should consider offering reasonable accommodations, absent undue hardship, to employees who cannot meet wellness plan requirements due to a disability.  To avoid exposure for discrimination claims in this period of uncertainty, employers may wish to offer incentives to encourage healthy behaviors, rather than penalize employees for failing to meet certain health goals.

4.  ARE YOU READING FACEBOOK OR OTHER SOCIAL MEDIA WEBSITES TO MAKE HIRING DECISIONS?

Use of social media to share photographs, personal details, thoughts, and opinions on each and every subject is prevalent.  And, there is no question that employers regularly review social media postings and other online sources as part of the hiring process.  A recent study from Carnegie Mellon University concluded that employers use social networks to find evidence of unprofessional behavior, including complaints about previous employers or discussion of drug use.

As of January 2013, the California Labor Code prohibits employers from requesting or requiring applicants or employees to (1) disclose social media log-in credentials; (2) access personal social media in the employer’s presence; or, (3) divulge any personal social media, except in limited cases.  California joins eleven other states that regulate an employer’s ability to request passwords to individuals’ social media accounts and prevent an employer from demanding that an applicant or employee log on to a social media profile to allow the employer to “shoulder surf” and review the information contained in those profiles.

Still, questions persist about the propriety of social media in the hiring process when candidates have not made their social media profiles “private.”  In those instances, an employer may lawfully check online photographs and profiles observing how candidates spend their time, what they like or dislike, and other items that may reveal a candidate’s race, ethnicity, marital status, disability status, or other information that you would not dream about asking in a job interview.  Simply reading this publicly-available information does not violate employment laws.  It is what you do with the information you either intentionally or inadvertently discover that can cause headaches.  Of course, making employment decisions based on an individual’s protected characteristic, such as marital status, age, perceived or actual disability, race, veteran status, etc., will run afoul of equal employment laws.  But, what if you learn of a particular characteristic, like a disability, and allow that to influence your employment decision?

On balance, checking social media websites as part of the hiring process is rife with legal risks.  Even if you do not make a decision based upon an impermissible reason, it is difficult to defend a hiring decision when in the process of reading social media, you learn of a characteristic you would not typically know from an employee interview, such as an employee’s religion, disability, or marital status.  Using social media to research candidates may increase the risk of an applicant claiming discrimination in the hiring process and expose you to unintended legal liabilities.

What To Do In 2014:  If you must “Google” an applicant or scan his or her Facebook public profile, consider the following steps to limit exposure:

• First, ask yourself why are you researching this individual online?  Is it integral to the hiring process? Can you obtain the necessary information from interviews and reference checks, or other materials?
• Interview the applicant first before reviewing social media profiles. This will allow you to focus on the applicant’s qualifications and experience.
• If you are conducting a background check prior to hiring, you should disclose to the applicant that the background check will include review of social media websites.
• It is prudent to have someone other than the final decision-maker (ideally, a third-party provider who is in the business of performing background checks) to consult the social media websites equipped with a specific list of information to legally consider.  The reviewer should not make notes of information that may relate to a protected characteristic.  If you use a third-party provider, ensure that you are complying with the Fair Credit Reporting Act and the California Consumer Credit Reporting Agencies Act.
• If you utilize a background check policy that includes consultation of social media, be sure to apply that policy evenly and consistently with all candidates to avoid claims of differential treatment.
• It is a good idea to keep all records, including the webpages you reviewed, of your hiring decision.  These records will support your defense to any possible claim that you failed to hire someone based on a discriminatory or unlawful reason.

5.  DOES YOUR WORKPLACE NEED A “BRING YOUR OWN DEVICE” (BYOD) POLICY?

A Cisco study published in 2013 found that 90% of Americans use their own smart phones for work purposes.  Workers prefer to use their own personal devices that may be more cutting edge and user-friendly then equipment provided by the company.  Or, workers are reluctant to carry multiple laptops and telephones, some designed for personal use and others for work purposes.  When employees wish to perform work activities on their own personal mobile devices, like laptops, iPads, and iPhones, how do companies minimize the risk of disclosure of sensitive confidential information, data breaches, or other issues regarding access to private employer data on an employee’s personal device?  What happens if your employee leaves his personal iPad that contains proprietary research and development on an airplane?  How does a company respond when its sensitive data is on the employee’s personal device when the employee leaves, particularly if the employee is moving to a competitor?  If your employees elect to use their own mobile device to access sensitive company data, then there is no easy, straightforward way to keep your company’s data safe.  Against this backdrop, more companies are evaluating the implementation of a “BYOD” or bring your own device policy.

What To Do In 2014:  In considering a BYOD policy, determine the company’s overall objectives.  Identify which employees or jobs truly need to have access to work portals on their personal devices in order to improve productivity.  Ascertain how your employees use their mobile devices for work purposes in order to understand the best way to protect company data.  Work with your I.T. department or an I.T. consultant to identify the appropriate software that will allow your employees access on mobile devices, while providing security measures to protect that data.  Consider using remote data-wiping technology that allows the employer to erase data or disable access if the employee loses the device or leaves the company.  Inform employees of your expectations of data protection and provide a written BYOD policy to employees.  A comprehensive exit interview and off-boarding process will help ensure that all company proprietary information is returned to the employer and wiped clean from the employee’s personal device.

Whether you seek an opinion as to if your worker is properly classified as an independent contractor, wish to explore a BYOD policy, or would like to discuss if you are properly using social media in screening candidates, feel free to call us.  Hirschfeld Kraemer LLP is available to help you with the above issues and any other labor and employment legal question that may arise in the New Year.

For more information, please contact Kristin Oliveira at koliveira@HKemploymentlaw.com or at (415) 835-9051.