DFEH Issues New Workplace Harassment Guidance

By Anthony Amendola and Justine Lazarus

Since April 1, 2016, California employers subject to the Fair Employment and Housing Act (“FEHA”) have been required to comply with a number of amendments to the FEHA regulations that were adopted by the California Fair Employment and Housing Council (“FEHC”).  FEHA imposes an affirmative duty on employers to “take all reasonable steps to prevent discrimination and harassment from occurring.”  To effectuate that duty, the amended FEHA regulations expressly require employers to develop a written harassment, discrimination and retaliation prevention policy. More detailed information regarding the 2016 FEHC may be found here.

To aid employers in complying with their obligations under the FEHA and the 2016 FEHC amendments, the California Department of Fair Employment and Housing (“DFEH”) recently released a “Workplace Harassment Guide for California Employers,” which provides recommended practices for preventing and addressing workplace harassment.  The publication is intended to help employers develop effective anti-harassment programs, investigate reports of harassment, and understand what remedial measures they might pursue.  In short, the Guide discusses the following:

  • What is included in an effective anti-harassment program;
  • The basic steps required to conduct a fair investigation;
  • Confidentiality of investigations;
  • Timing of investigations;
  • Recommended practices for conducting workplace investigations, including impartiality, investigator qualifications and training, type of questioning, making credibility determinations, burden of proof, legal conclusions, and documentation;
  • Special issues, such as what to do if the target of harassment asks an employer not to do anything, investigating anonymous complaints, and retaliation; and
  • Implementing effective remedial measures.

The Workplace Harassment Guide for California Employers is available here. (more…)

Dissecting the TC Heartland Ruling – What Does This Mean for Patent Owners?

By Alesha M. Dominique

In an 8-0 decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341, the U.S. Supreme Court placed tighter limits on where a patent owner may file a suit for patent infringement by holding that “a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute.”  The Court’s decision reverses Federal Circuit precedent that allowed a patent owner to file suit anywhere a defendant made sales.

In TC Heartland LLC, Kraft Foods Group Brands LLC (“Kraft Foods”) brought a patent infringement suit against flavored drink mix maker TC Heartland LLC (“TC Heartland”) in the U.S. District Court for the District of Delaware.  TC Heartland, organized under Indiana law and headquartered in Indiana, moved to transfer venue to the U.S. District Court for the Southern District of Indiana, arguing that under the patent venue statute, 28 U.S.C. § 1400(b), it did not “resid[e]” in Delaware and had no “regular and established place of business” in Delaware.  TC Heartland based its arguments on the Supreme Court’s decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957), where the Court concluded that for purposes of § 1400(b) a domestic corporation “resides” only in its State of incorporation.

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And On The Seventh Day…

By Anthony Amendola and Justine Lazarus

In Mendoza v. Nordstrom, Inc., the California Supreme Court answered some unsettled questions regarding the state’s day of rest statutes.  In short, these provisions of the California Labor Code provide that employees are entitled to at least one day’s rest out of seven.  Specifically, section 551 of the Labor Code states that “[e]very person employed in any occupation of labor is entitled to one day’s rest therefrom in seven.”  Section 552 states that “[n]o employer of labor shall cause his employees to work more than six days in seven.”  Section 556 provides an exception to sections 551 and 552, stating that they “shall not apply to any employer or employee when the total hours of employment do not exceed 30 hours in any week or six hours in any one day thereof.”

At the behest of the federal Ninth Circuit Court of Appeals, the Supreme Court considered three questions, each of which is discussed below.

(1) “Is the day of rest required by sections 551 and 552 calculated by the workweek, or does it apply on a rolling basis to any seven-consecutive-day period?”

Considering the text and history of sections 551 and 552, the Industrial Welfare Commission’s (“IWC”) wage orders, and the statutory scheme of the day of rest provisions, the Supreme Court concluded that employees are entitled to one day of rest each work week (as defined by the employer) rather than one day in seven on a rolling basis.  Thus, the Court acknowledged that an employee could be required to work up to twelve consecutive days without violating sections 551 and 552.  For example, if an employer defines a workweek as Sunday through Saturday, then an employee could be given a day of rest on the Sunday of Week 1, could be required to work 12 consecutive days, and then could be given off the Saturday of Week 2.

(2) “Does the section 556 exemption for workers employed six hours or less per day apply so long as an employee works six hours or less on at least one day of the applicable week, or does it apply only when an employee works no more than six hours on each and every day of the week?”

With respect to this question, the Court held that the exemption set forth in Section 556 applies only to those employees who never exceed six hours of work on any day of the workweek.  If on any one day an employee works more than six hours, a day of rest must be provided during that workweek. (more…)

Romaine Calm: FSVP is Approaching

By Susan Kohn Ross

Does FSVP Apply to You?

Are you the importer, consignee, or agent for food imported into the United States?  If so, the Foreign Supplier Verification Program for Importers of Food for Humans and Animals (FSVP), a key element of the Food Safety Modernization Act (FSMA), likely applies to you.  Implementation of the FSVP will begin on May 30, 2017, but categories of companies or foods may be subject to later compliance deadlines.  Where do you fit?

The FSVP regulations aligns with key components of the FDA’s overall food safety plan for facilities that manufacture, process, pack or hold food which must now establish and follow the regulations regarding current good manufacturing practice (CGMP) and hazard analysis and risk-based preventive controls for human food and animal food (Preventive Controls or PC).

What Is FSVP? (more…)

Can Charitable Remainder Trusts Avoid the Self-Dealing Rules?

By: David Wheeler Newman

A pillar of the conventional wisdom of planning with charitable remainder trusts (CRTs) is that these very flexible split-interest trusts are subject to the private foundation excise tax on self-dealing transactions.  But a recent IRS ruling has shaken that pillar and questioned the conventional wisdom.

Some (but not all) of the private foundation excise taxes apply to CRTs pursuant to Internal Revenue Code section 4947(a)(2), which provides that in the case of a trust which is not exempt under Code section 501(a) (i.e. a tax-exempt organization), not all of the unexpired interests which are devoted to one or more charitable purposes (i.e. a split-interest trust like a CRT) and which has amounts in trust for which a charitable deduction was allowed, Code section 4941 (excise tax on self-dealing) shall apply as if such trust were a private foundation.

In Private Letter Ruling 201713003, the grantor established a charitable remainder unitrust, but did not claim a charitable income tax deduction under section 170.  The IRS ruled that because no charitable deduction was allowed, section 4947(a)(2) does not apply and the CRT is therefore not subject to any private foundation excise taxes, including self-dealing.

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NYC Says Salary Inquiries are DOA

May 10,2017

By Erica Parks

In August 2016, we alerted you that the New York City Council was considering an initiative that would prohibit employers from seeking an applicant’s salary history, and from using salary history to determine pay under most circumstances. Recently, the Council approved the legislation, which was signed into law by Mayor de Blasio last week.

The new law, which can be read in full here, amends the New York City Human Rights Law by making it an “unlawful discriminatory practice” to inquire about or seek an applicant’s salary history, including by searching publicly available records. Employers also will be prohibited from using salary history to determine pay “at any stage in the employment process” unless the applicant “unprompted, willingly disclosed such salary history” or disclosure is otherwise authorized under federal, state, or local law. Salary history is broadly defined and includes current and prior wages, benefits, and “other compensation.” The new law does not, however, prohibit employers from discussing with applicants  their expectations with respect to salary, benefits, and other compensation, including equity, nor does it prohibit employers from asking about “objective measures” of their performance history, such as “revenue, sales, or other production reports.”

Employers who violate the new law can face civil penalties of up to $250,500, back pay, compensatory damages, and attorneys’ fees.

As we previously alerted you last August and October, similar legislation has been passed in several other states, including California and Massachusetts, which may indicate a growing trend towards restricting employers from seeking or relying on an applicant’s wage history.

Ask MSK

Q: What Does This Mean For New York and Multi-State Employers?

A: Employers in the City of  New York must take steps to ensure that their hiring practices conform to the new law. Moreover, multi-state employers should review any centralized recruiting systems or multi-state employment applications and hiring materials for any request for salary history and consider revising to exclude New York City-based positions and, given the growing trend of prohibiting salary history inquiries, even omitting such requests nation-wide.

 

 

Due Your Duty

By Susan Kohn Ross

With the ever-increasing scrutiny being brought to compliance and the payment of duties on imported goods by Customs and Border Protection (CBP), it is worth commenting that any duties which are due when an entry liquidates may, in fact, end up having to be paid even if the related protest remains pending due to the legal and contractual relationship between the importer and his surety company.  Simply put, if a surety insists on receiving payment of any amounts demanded by CBP upon liquidation, the importer does not have any solid grounds to object.  Why would the surety do so if a protest is pending? Because the surety is looking to mitigate its risk. If the importer does not pay, the surety will have to do so, at least up to the face amount of any bonds it has written, and sureties try their best not to be put in that position. (more…)

Buy American Executive Order

By Susan Kohn Ross

On April 18th, President Trump issued an Executive Order (“EO” or “Order”) focused on the Buy American  laws and regulations. See Buy American EO.  This EO directs federal government entities to review their procurement rules so that, to the extent legally permitted, preference is given to American made goods.  Section 2 specifically states: “[i]t shall be the policy of the executive branch to buy American and hire American”.  At the same time,  the EO confirms:  “[n]othing in this order shall be construed to impair or otherwise affect … existing rights or obligations under international agreements”.  So, what does this EO mean to the private sector when it comes to government contracting?

First, it is important to keep in mind the review triggered by this Order applies only to federal procurement. States and other governmental entities have their own rules. They cannot contradict the federal rules, but they can be different.

Next, nothing in this Order has any impact on privately funded projects. The typical example given in the general press is the Keystone Pipeline. Nonetheless,  the point is you are only impacted if you are providing or intend to provide goods to a U.S. government entity. (more…)

Where’s The Rest Of My Pay?

Commission-Only Employees Must Be Paid Separately for Rest Periods

April 18, 2017

By Brian M. Ragen

In Vaquero v. Stoneledge Furniture LLC, a California Court of Appeal recently held that inside sales employees who are paid on a 100% commission basis must be separately compensated for their rest periods.

Though inside sales persons are exempt from overtime (provided they earn at least 1.5-times minimum wage and earn more than half of their compensation from commissions), they are not exempt from California’s meal and rest period requirements.  Thus, the Court’s logic was as follows:  Inside sales employees must receive at least one paid rest period of 10 minutes for every four hours worked.  If 100% of an employee’s pay is attributable to commissions, then he or she is not being compensated for rest periods—i.e., an employee cannot earn a commission while “resting,” so an employee paid only commissions must not be receiving pay for rest periods.

Notably, the Court’s reasoning applies even where an employee receives a minimum amount each pay period, if that minimum amount is treated as a “draw” or an “advance against commissions.”  (For example, in order to preserve the overtime exemption, it is common to ensure that inside salespersons receive at least 1.5-times minimum wage every pay period, but later to treat those payments as advances against earned commissions.)  Indeed, in Vaquero, the sales employees were paid on a 100% commission basis, but if they failed to earn at least $12.01 per hour in any given pay period, they received “Minimum Pay” of $12.01 per hour as a “draw” against future commissions. (At the time, this amount exceeded 1.5 times the then-applicable $8 per hour minimum wage.)  The commission agreement explained, “The amount of the draw will be deducted from future [commissions], but an employee will always receive at least $12.01 per hour for every hour worked.”  With respect to meal periods, the Court disapproved of this arrangement, finding that an employee who was paid 100% commissions could not possibly be receiving pay for rest periods, noting, “[T]he purpose of a rest period is to rest, not to work.”

In reaching its conclusion, the Court relied heavily on a line of cases involving piece-rate workers (i.e., employees who are paid a fixed rate for each task they complete, such as sewing a garment, or changing the oil on a vehicle).  In that context, it is clear that employees who receive only their piece rate are not being compensated for rest periods, because no work towards completing a “piece” can be accomplished during rest periods.  Despite their differences, the Vaquero Court found that commission pay systems and piece-rate systems were essentially identical in their treatment of rest breaks:  “The commission agreement used by Stoneledge . . . is analytically indistinguishable from a piece-rate system in that neither allows employees to earn wages during rest periods.”

Ask MSK:

Does Vaquero mean that we need to revise our commission plan?

If your sales employees are paid 100% commission—even if they receive a minimum “draw” or “advance against commissions” each pay period—it is virtually certain that you will need to revise your commission plan.  If your inside sales employees receive a base salary plus commissions, it would be wise to ensure that the base salary is sufficient to cover all rest periods, and to state expressly in your commission plan that the base salary is intended to include rest period pay.

If we pay rest periods separately, what hourly rate should we use?

This remains unclear after Vaquero.  Arguably, nothing prevents employers from paying rest periods at 1.5 times minimum wage—regardless of how much the sales employee earns in commissions during the pay period.  But when similar cases arose in the piece-rate context (requiring employers to pay piece-rate employees separately for their rest periods), the California Legislature quickly introduced Labor Code section 226.2, which requires employers to pay piece-rate employees for rest periods at their “regular rate,” i.e., their total compensation for the pay period divided by their hours worked for the pay period.  The Division of Labor Standards Enforcement may apply a similar rule with respect to commissioned employees or the Legislature could pass similar legislation in the commission context in light of Vaquero.

I thought sales persons were exempt from most wage and hour rules. What gives?

Outside sales persons are exempt from overtime and meal and rest period requirements.  To qualify for this exemption, the employee must spend more than half of his or her time outside of the office engaged in sales activities.

 

What’s In Your Arbitration Agreement?

California High Court Finds Another Exception to Enforcing Arbitration Agreements As Written

April 13, 2017

By Suzanne Steinke and Mazen Khatib

Many employers enter into pre-dispute arbitration agreements with their employees so that any future claims or disputes between the employer and the employee get resolved through binding arbitration, rather than a court of law. The United States Supreme Court has traditionally favored the enforcement of such arbitration agreements as written. This has included approving agreements that contain a waiver of the right to bring a class action in any forum, meaning that an employer and an employee must resolve all disputes in arbitration and on an individual, not class-wide, basis. This class action waiver is significant for employers because an employee is stopped from bringing any claim in court or arbitration to benefit and on behalf of any employees other than herself.

California courts have been reluctant to fully embrace pre-dispute arbitration agreements, even though they are generally required to follow U.S. Supreme Court pronouncements in this area. Although California’s highest court has finally accepted that class action waivers in arbitration agreements are enforceable, with its recent decision in McGill v. Citibank, it once again shows its willingness to find exceptions to avoid fully enforcing these agreements as written. (more…)